Statutory Right or Statutory Prohibition? Reconciling CERCLA's Contribution Protection with the Private Response Cost Recovery Action
By Daniel R. Avery
INTRODUCTION
In 1986, Congress amended CERCLA so that parties which settle their liability with the Environmental Protection Agency (EPA) are immune to contribution claims relating to any matter covered by the settlement. A party against whom the EPA has obtained a judgment for the costs of site cleanup is thus generally precluded from suing settling parties for contribution to recover any part of the judgment paid. This contribution protection provides a significant incentive for parties to settle their own liability with the EPA: The settling parties are able to achieve some semblance of finality to their liability for the site cleanup. In turn, the settlement structure enables the EPA both to avoid costly and time-consuming litigation against liable parties and to require settling parties to perform all or part of the site cleanup, thereby conserving increasingly scarce government resources.
Unresolved, however, is whether a non-settling party may, on its own initiative, undertake site cleanup before suffering a monetary judgment for cleanup costs in favor of the EPA, and then initiate the statutory private response cost recovery action against a settling party in order to recover all or part of its cleanup costs. If none of the defendants has settled with the EPA, the situation is relatively simple, and a private cost recovery action would clearly be allowed. If, for example, a private party discovers that the property has been polluted by industrial practices on adjacent land, the owner can clean up the property and sue other non-settling responsible parties under CERCLA to recover the costs of the cleanup.
A more complicated situation, and one for which there is yet no clear answer, is where at least one of the responsible parties has settled. It is not uncommon, for example, to have a situation where scores of parties, having contributed to the extensive and long-term contamination at the site, face potentially enormous CERCLA liability arising from a required cleanup. In an effort to avoid litigation, the EPA and the responsible parties, including the present property owner, could negotiate toward settlement of liability for, and the cleanup of, the polluted site. The property owner might have been involved for some time in prior discussions with the EPA, perhaps helping to identify and locate some of the other responsible parties, and might have initiated its own preliminary, but costly, cleanup activities. Under section 107, the property owner would have a statutory right to recover the costs of its cleanup from other responsible parties. However, if a responsible party has settled its own liability regarding the site with the EPA, it will vigorously argue that it is immune to a suit by the property owner to recover the cleanup costs, on the grounds that the suit is barred by CERCLA's contribution protection.
This Article examines the extent to which the contribution protection afforded settling parties under CERCLA abrogates the statute's private response cost recovery action. On one hand, courts are understandably reluctant to allow the non-settling polluter unilaterally to circumvent the intended finality of an EPA settlement by initiating a private response cost recovery action. Allowing plaintiffs to label any contribution claim a “private response cost recovery action” in order to avoid CERCLA's contribution bar threatens the very existence of the EPA settlement structure, because doing so would eviscerate the significant incentive to settlement provided by immunity to contribution claims.
On the other hand, the protection granted to settling parties under CERCLA relates specifically to claims for contribution and does not explicitly include within its parameters claims made under CERCLA's private cost recovery provisions. If a private cost recovery action cannot reasonably be considered in substance a contribution claim, then section 113(f) would not preclude a plaintiff from pursuing the action against a settling party. The statute reflects congressional intent to promote voluntary cleanup by private parties. Allowing private party response cost actions against settling parties furthers this legislative intent; at the time that a private party considers whether to undertake environmental cleanup, it would in theory be able to take into account its statutory right to recover all or part of the costs of cleanup from other liable parties.
The competing policy considerations, the poor drafting of the statute and the fragmentary legislative history make this a thorny issue with no easy resolution. Few cases have directly addressed the issue and, therefore, no judicial consensus yet exists. The pertinent cases tend to be very recent lower court decisions. Because the controversy is of great significance to the business community and to the EPA, it is only a matter of time before the conflict reaches the higher courts.
This Article will show that CERCLA's contribution bar and the private response cost recovery action are reconcilable. The proper reconciliation of these two provisions would allow a plaintiff to bring a private response cost action against a party who has entered into settlement with the EPA, but only with respect to those response costs which the non-settling plaintiff incurred voluntarily. This approach rests primarily upon the plain words of the statute: A plaintiff may not bring a contribution claim against a settling party. The statute does not explicitly include private cost recovery actions within the definition of contribution for purposes of the contribution bar.
As a general legal principle, obligors may not sue their co-obligors for contribution unless the payments made by the obligor for which contribution is sought were compulsory. A statutory action to recover costs voluntarily incurred cannot, therefore, be a suit for contribution and, thus, settling parties cannot claim immunity to such a suit. This Article proposes that the determination of whether response costs are voluntary or involuntary should focus on whether the government has given notice of its intent to exercise its enforcement authority with respect to the site or release to which the costs relate. Response costs incurred after such government notice would be presumed to have been incurred involuntarily, i.e., in response to potential CERCLA liability.
This Article will first review CERCLA's provisions for settlement, contribution and private cost recovery actions. It will then examine the legal distinctions between those provisions, focusing on statutory construction and public policy. The Article will finally present a possible solution to the apparent conflicts, employing a distinction between voluntarily and involuntarily incurred costs.
In 1986, Congress amended CERCLA so that parties which settle their liability with the Environmental Protection Agency (EPA) are immune to contribution claims relating to any matter covered by the settlement. A party against whom the EPA has obtained a judgment for the costs of site cleanup is thus generally precluded from suing settling parties for contribution to recover any part of the judgment paid. This contribution protection provides a significant incentive for parties to settle their own liability with the EPA: The settling parties are able to achieve some semblance of finality to their liability for the site cleanup. In turn, the settlement structure enables the EPA both to avoid costly and time-consuming litigation against liable parties and to require settling parties to perform all or part of the site cleanup, thereby conserving increasingly scarce government resources.
Unresolved, however, is whether a non-settling party may, on its own initiative, undertake site cleanup before suffering a monetary judgment for cleanup costs in favor of the EPA, and then initiate the statutory private response cost recovery action against a settling party in order to recover all or part of its cleanup costs. If none of the defendants has settled with the EPA, the situation is relatively simple, and a private cost recovery action would clearly be allowed. If, for example, a private party discovers that the property has been polluted by industrial practices on adjacent land, the owner can clean up the property and sue other non-settling responsible parties under CERCLA to recover the costs of the cleanup.
A more complicated situation, and one for which there is yet no clear answer, is where at least one of the responsible parties has settled. It is not uncommon, for example, to have a situation where scores of parties, having contributed to the extensive and long-term contamination at the site, face potentially enormous CERCLA liability arising from a required cleanup. In an effort to avoid litigation, the EPA and the responsible parties, including the present property owner, could negotiate toward settlement of liability for, and the cleanup of, the polluted site. The property owner might have been involved for some time in prior discussions with the EPA, perhaps helping to identify and locate some of the other responsible parties, and might have initiated its own preliminary, but costly, cleanup activities. Under section 107, the property owner would have a statutory right to recover the costs of its cleanup from other responsible parties. However, if a responsible party has settled its own liability regarding the site with the EPA, it will vigorously argue that it is immune to a suit by the property owner to recover the cleanup costs, on the grounds that the suit is barred by CERCLA's contribution protection.
This Article examines the extent to which the contribution protection afforded settling parties under CERCLA abrogates the statute's private response cost recovery action. On one hand, courts are understandably reluctant to allow the non-settling polluter unilaterally to circumvent the intended finality of an EPA settlement by initiating a private response cost recovery action. Allowing plaintiffs to label any contribution claim a “private response cost recovery action” in order to avoid CERCLA's contribution bar threatens the very existence of the EPA settlement structure, because doing so would eviscerate the significant incentive to settlement provided by immunity to contribution claims.
On the other hand, the protection granted to settling parties under CERCLA relates specifically to claims for contribution and does not explicitly include within its parameters claims made under CERCLA's private cost recovery provisions. If a private cost recovery action cannot reasonably be considered in substance a contribution claim, then section 113(f) would not preclude a plaintiff from pursuing the action against a settling party. The statute reflects congressional intent to promote voluntary cleanup by private parties. Allowing private party response cost actions against settling parties furthers this legislative intent; at the time that a private party considers whether to undertake environmental cleanup, it would in theory be able to take into account its statutory right to recover all or part of the costs of cleanup from other liable parties.
The competing policy considerations, the poor drafting of the statute and the fragmentary legislative history make this a thorny issue with no easy resolution. Few cases have directly addressed the issue and, therefore, no judicial consensus yet exists. The pertinent cases tend to be very recent lower court decisions. Because the controversy is of great significance to the business community and to the EPA, it is only a matter of time before the conflict reaches the higher courts.
This Article will show that CERCLA's contribution bar and the private response cost recovery action are reconcilable. The proper reconciliation of these two provisions would allow a plaintiff to bring a private response cost action against a party who has entered into settlement with the EPA, but only with respect to those response costs which the non-settling plaintiff incurred voluntarily. This approach rests primarily upon the plain words of the statute: A plaintiff may not bring a contribution claim against a settling party. The statute does not explicitly include private cost recovery actions within the definition of contribution for purposes of the contribution bar.
As a general legal principle, obligors may not sue their co-obligors for contribution unless the payments made by the obligor for which contribution is sought were compulsory. A statutory action to recover costs voluntarily incurred cannot, therefore, be a suit for contribution and, thus, settling parties cannot claim immunity to such a suit. This Article proposes that the determination of whether response costs are voluntary or involuntary should focus on whether the government has given notice of its intent to exercise its enforcement authority with respect to the site or release to which the costs relate. Response costs incurred after such government notice would be presumed to have been incurred involuntarily, i.e., in response to potential CERCLA liability.
This Article will first review CERCLA's provisions for settlement, contribution and private cost recovery actions. It will then examine the legal distinctions between those provisions, focusing on statutory construction and public policy. The Article will finally present a possible solution to the apparent conflicts, employing a distinction between voluntarily and involuntarily incurred costs.