District Court Finds Site Owner’s Costs are Not Recoverable Response Costs under CERCLA

September 8, 2009
Client Alert Newsletter September 2009

On August 13, 2009, the U.S. District Court for the District of New Jersey rejected Champion Laboratories Inc.'s ("Champion's") cost recovery and contribution claims brought against a neighboring site owner, Metex Corp. ("Metex"), under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") in Champion Laboratories Inc. v. Metex Corp. With respect to the cost recovery claim, the Court held that Champion failed to show "that the costs it has expended are necessary costs of response consistent with the national contingency plan" finding that the costs were incurred in an effort to establish the liability of the neighboring site owner – not to further the site’s cleanup. The Court also rejected Champion's argument that the costs were recoverable under the U.S. Supreme Court decision in Key Tronic v. United States, which held that "costs incurred in tracking down other responsible solvent polluters may be recoverable costs of response if they ultimately benefit a clean up effort and serve a statutory purpose apart from the allocation of costs among responsible parties." The Court reasoned that Key Tronic was distinguishable from the circumstances before the Court in that Champion did not incur its costs in trying to track down Metex, as it had already determined Metex was the responsible party in 1995 – prior to incurring the costs it was now seeking to recover.

The Court also rejected Champion's CERCLA contribution claim based on Champion's settlement of a claim for natural resource damages ("NRDs") asserted by the state of New Jersey. The Court determined that the settlement of NRDs only discharged Champion's liability for discharges on its site, not any liability arising from off-site sources; therefore, there was no basis to seek contribution from Metex.