A unanimous U.S. Supreme Court on May 24 issued its ruling in Guam v. United States, which reverses the trend from several circuit courts regarding the implications of a settlement agreement—under another environmental statute—on a party’s ability to recover costs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
In Guam, the court held that a non-CERCLA settlement agreement does not give rise to a CERCLA § 113(f)(3)(B) contribution claim and trigger that provision’s three-year statute of limitations.
In light of the court’s prior rulings regarding the mutual exclusivity of claims for contribution under Section 113(f) and for cost recovery under CERCLA § 107(a), the court’s ruling in Guam—while technically finding that Guam has no right to contribution under CERCLA—actually revives the territory’s ability to pursue clean-up costs under Section 107(a).
D.C. Circuit Rejects Guam’s Claims to Recover Fed’s Share of Clean-up Costs
The U.S. Navy constructed and operated the Ordot Dump in Guam in the 1940s to dispose of municipal, chemical, and military wastes. Guam later took over the dump and operated it as a public dump. The site was place on the Superfund list in the 1980s.
In the 1990s, the Environmental Protection Agency determined that the dump posed an ecological hazard, and initiated a suit against Guam under the Clean Water Act (CWA) in 2002, alleging the discharge of pollutants into waters of the U.S. without a permit. Guam and the EPA entered into a consent decree, whereby Guam agreed to pay a civil penalty and close and cover the dump.
In 2017, Guam filed suit against the U.S. under CERCLA, alleging that the Navy’s prior operation of the dump subjected it to cleanup liability. Guam filed a cost-recovery action under Section 107(a), which allows for a state or territory to recover costs for a removal or remedial action from any party who owned or operated the facility at the time hazardous substances were disposed of at the facility.
Alternatively, Guam sought contribution under Section 113(f)(3)(B), which provides that a “person who has resolved its liability to the United States . . . for some or all of a response action or for some or all of the costs of such action in [a] settlement may seek contribution from any person who is not party to a [qualifying] settlement.”
The U.S. successfully argued before the D.C. Circuit that the 2004 consent decree had triggered Guam’s right to pursue a contribution claim under Section 113, because it had resolved Guam’s liability for part of a response action. As the Section 113 contribution claim has a three-year statute of limitations, Guam had no available remedy. The court also held that because Sections 113 and 107 are mutually exclusive, a contribution claim under Section 113 precluded a cost-recovery claim under Section 107.
Guam Appeals and Other State’s Weigh-in on Critical Public Policy Issues
Guam petitioned for certiorari, arguing that the D.C. Circuit erred in two ways: First, despite having originally brought the contribution claim under Section 113(f)(3)(B) in its complaint, Guam argued that for such a claim to exist, the 2004 settlement agreement must have resolved its CERCLA liability, which the 2004 settlement agreement did not do.
Second, Guam argued that, even if settlement of non-CERCLA liability could be sufficient, the 2004 agreement did not actually resolve liability, because Guam expressly did not admit responsibility and the settlement left Guam open to future enforcement. The U.S. Supreme Court granted certiorari on Jan. 8, 2021.
Shortly thereafter, a diverse group of states, including Wyoming and Massachusetts, filed an amicus brief in support of Guam, arguing that the D.C. Circuit decision would slow clean-ups at the vast majority of contaminated sites, which are being remediated under state supervision, resulting in a disproportionate financial burden to state governments, and impermissibly infringe on the states’ implementation of their own clean-up programs by disincentivizing responsible parties from cooperating with states to clean-up sites.
Supreme Court Embraces Contextual Reading of CERLCA and Rules for Guam
In ruling for Guam, the court examined the language of Section 113(f)(3)(B) and determined that it must be read in the context of Section 113, which broadly addresses contribution under CERCLA.
The court specifically noted the links between Section 113(f)(3)(B) and Section 113(f)(2), which provides protection for parties settling their CERCLA liability from contribution claims from other parties, and noted that it would be “rather odd to say that a party has ‘resolved its liability’ if that party remains vulnerable to a CERCLA suit.”
In so holding, the court explicitly rejected the U.S. argument that the lack of a reference to a predicate CERCLA action in Section 113(f)(3)(B) should be read to indicate Congress’ intent for the provision to apply to a broader universe of settlements.
Based on this analysis, the court determined that the “most natural reading of § 113(f)(3)(B) is that a party may seek contribution under CERCLA only after settling a CERCLA-specific liability.”
As the court acknowledged in a footnote, the most obvious implication of the court’s decision is to avoid creating a trap for the unwary out of the three-year statute of limitations for claims under Section 113(f)(3)(B). In that footnote, the court observed that if a “broad, textually undefined set of environmental settlements could start the clock on a §113(f)(3)(B) contribution action, a party who did not realize that his non-CERCLA settlement overlaps with a hypothetical CERCLA response action might fail to sue in time.”
Accordingly, the decision should trigger parties to reevaluate the viability of claims that were thought to be barred by a prior non-CERCLA settlement under the D.C. Circuit decision in Guam, and similar decisions from other circuit courts.
Critical Questions Remain
The decision, however, leaves open several questions. Specifically, the court did not address the second issue raised in Guam’s briefing regarding the implication of traditional reservation of rights settlement agreement language on parties claims under §113(f)(3)(B).
It also left open the question of how explicit settlement agreement language must be in order to be considered to settle a “CERCLA-specific liability,” which will certainly be the subject of intense argument in future cases.
Ben Machlis is a partner at the international law firm Dorsey & Whitney with extensive experience in matters involving state and federal regulations regarding solid and hazardous waste (RCRA), hazardous materials transportation (HMR), toxic chemicals (TSCA), water quality (CWA), community right-to-know laws (EPCRA) and remediation of contaminated property (CERCLA).
Kayla Weiser-Burton is an associate at Dorsey & Whitney who helps clients with permitting, operational compliance, remediation projects, and overall project development.