Supreme Court Allows Private Cost Recovery Claims Under CERCLA § 107

August 16, 2007
Client Alert Newsletter August 2007

In United States v. Atlantic Research Corp., the U.S. Supreme Court on June 11 clarified that a person (such as a current property owner) who voluntarily remediates contaminated property may recover cleanup costs from other potentially responsible parties ("PRPs") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), even if the remediation is not compelled by governmental action. Until this decision, substantial uncertainty existed as to whether such claims could be brought. Indeed, in Pennsylvania, New Jersey and Delaware, such claims appeared to be foreclosed under Third Circuit case law. The Supreme Court's 2004 decision in Cooper Industries, Inc. v. Aviall Services, Inc. held that PRPs only have CERCLA § 113 contribution claims if they are or have been the subject of a § 106 or 107 action. This decision, in tandem with lower court holdings classifying private cost recovery as exclusively a claim for contribution, appeared to close the door on private cost recovery § 107 actions in most circumstances, particularly where cleanup had been initiated voluntarily.

With the Atlantic Research decision, the private cost recovery door has now swung wide open. Justice Thomas, writing for the Court, concluded that CERCLA § 107(a)(4)(B) provides for direct cost recovery "for costs of response incurred by any other person consistent with the National Contingency Plan." The Court distinguished between where a private party incurs response costs itself and where a private party has been held liable for response costs incurred by someone else. In the former situation, the Court ruled that a private party may bring a direct cost recovery claim under § 107(a), while in the latter situation, the private party is relegated to a § 113 contribution action. Procedural and substantive differences between the two types of actions exist, including statutes of limitation, burdens of proof, and remedies. The decision will influence transactions, risk allocation, settlement negotiations, and pending and future litigation. From a policy perspective, the decision restores incentives for private parties to conduct cleanups voluntarily rather than waiting to be sued by the government.