Bloomberg Law
Aug. 21, 2020, 8:01 AM

INSIGHT: Takeaways from the Ninth Circuit’s Recent CERCLA Contribution Ruling

Peter Keays
Peter Keays
Hangley Aronchick Segal Pudlin & Schiller

In its Aug. 10 opinion in Arconic v. APC Investment Co., the Ninth Circuit reversed a district court’s ruling regarding the triggering of the statute of limitations for contribution claims under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The opinion may impact CERCLA litigation and settlements in the Ninth Circuit and possibly beyond, including in some discrete and unintended ways.

At issue in Arconic were CERCLA Sections 113(f)(1) and 113(g)(3)(B). The former allows a party to seek contribution from other liable parties, “during or following any civil action” for cost recovery under Section 107; the latter provides, in relevant part, that “[n]o action for contribution for any response costs of damages may be commenced more than 3 years after… the entry of a judicially approved settlement with respect to such costs or damages.”

The case involves contamination from a former chemical recycling facility in Whittier, Calif. EPA developed a remedial plan that split the site into two operable units: OU-1, which encompasses contamination at the facility, and OU-2, which encompasses a large plume of groundwater contamination emanating from the facility and from other downgradient sources.

A group of companies that had sent chemicals to the facility (remediating parties) agreed to fund and implement the cleanup of OU-1 in a consent decree with EPA entered in 2001. The remediating parties entered into a similar consent decree pertaining to OU-2 in 2017.

In 2004, the remediating parties sued a number of other entities that had sent small amounts of chemicals to the facility (small parties). In 2007, the court approved a cash-out settlement under which the remediating parties assumed the small parties’ “responsibilities” for the entire site.

After beginning work on OU-2, the remediating parties commenced the Arconic litigation in 2014. They sought costs for the OU-2 work from parties associated with downgradient sources that allegedly contributed to the OU-2 plume (downgradient defendants). The remediating parties initially brought a 107 claim for cost recovery but amended the complaint to allege a 113 contribution claim after the 2017 consent decree was entered.

The district court ruled that the remediating parties’ contribution claim was time barred because the costs they were seeking were “with respect to” those covered in the 2007 settlement with the small parties, as contemplated by Section 113(g)(3)(B).

Ninth Circuit Reversal

The Ninth Circuit reversed, ruling that although the 2007 settlement covered the entire site (presumably including OU-2), it did not trigger the limitations period for the responding parties’ contribution claim against the downgradient defendants because it did not impose the specific costs now being sought by the remediating parties. The court remanded, allowing the remediating parties to pursue their contribution claim.

The reasoning supporting the court’s conclusion is significant. Specifically, the court based its ruling upon the fact that the 2007 settlement (a) did not address the downgradient defendants’ share of liability for the site, (b) “resolved neither who would pay for OU-2’s remediation nor what that effort would entail”, (c) did not impose any “response costs or remedial obligations” upon the remediating parties, and (d) “did not extinguish [the responding parties’ and downstream defendants’] common liability to the United States for OU-2.”

By contrast, the court determined that the 2017 consent decree did establish the remediating parties’ “response obligations for [OU-2] and burdened [the remediating parties] with the [downstream defendants’] share of liability to the United States”, and thus triggered the limitations period.

Arconic appears to narrow the circumstances in which CERCLA’s limitations period for contribution claims can be triggered by a settlement between private parties.

Beyond that, the court’s reasoning appears to blur the line between the question of whether a party has an actionable contribution claim, and whether the limitations period has been triggered. As a result, Arconic could have the effect of also narrowing the circumstances in which parties involved in private-party litigation and settlement can actually bring contribution claims against third parties.

High Bar

Arconic could be read as suggesting that a contribution claim is only available to a party that enters into a private-party settlement in which the party either assumes the liability for costs owed by the specific third party against whom it later seeks to bring a contribution claim, or assumes responsibility for all site costs.

This sets a very high bar, effectively requiring private-party settlements to closely resemble government settlements. Relatedly, Arconic could be interpreted as requiring private-party settlements to include a level of detail and specificity as to the settling parties’ remedial or financial obligations that is far more common (and generally easier to accomplish) in government settlements. Moreover, Arconic could be read to interpret Section 113(f)(1) as conferring a contribution claim only upon defendants (and not plaintiffs) to a Section 107 action.

In addition, Arconic could provide support to parties arguing that there are, in fact, multiple contribution claims with respect to a particular site, each associated with a different component of the work or tranche of response costs, and each governed by its own limitations period.

The decision also alludes to the question of whether a judicially-approved settlement can essentially revive a time-barred Section 107 cost recovery claim by reincarnating it as a Section 113 contribution claim. Changing one fact in Arconic, suppose the remediating parties had commenced the OU-2 work seven years before they sued the downstream defendants. Under those circumstances, the remediating parties would have had a cost recovery claim for the OU-2 work, but that claim would be time barred by the applicable six-year limitations period. It is unclear whether, by entering into the 2017 consent decree (which covered the same OU-2 work the remediating parties had begun seven years earlier), the remediating parties would be allowed to bring a contribution claim, essentially getting a second bite at the apple.

Although Arconic provides clarity in the context of the specific factual and procedural circumstances presented, it may have the opposite impact on future CERCLA litigation in the Ninth Circuit, and potentially beyond.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Peter Keays is an attorney in the Environmental Law practice group at Hangley Aronchick Segal Pudlin & Schiller in Philadelphia. He previously served as a law clerk to judges on the U.S. Court of Appeals for the Second Circuit and the U.S. District Court for the District of Montana.