EnviroNotes

By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

A U.S. District Court for the Southern District of Texas held that participation in a Texas Voluntary Cleanup program did not allow the participant to recover its costs under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) because its participation in the program did not resolve its own CERCLA liability. In Differential Development – 1994 Ltd. v. Harkrider Distributing Co. No. H-05-3375, (Jan. 9, 2007, S.D. Tex.), the owner of a shopping complex, Differential Development – 1994 Ltd (“Differential”), who had entered into a voluntary cleanup program administered by the Texas Commission on Environmental Quality brought claims against a former dry cleaning chemical supplier and a waste management company claiming they were responsible for the contamination and that Differential was entitled to recover its cleanup costs under Sections 107 and 113 of CERCLA.

CERCLA contains two provisions which ostensibly give parties who have performed cleanup efforts the right to recover the costs of that cleanup from other responsible parties. Section 113(f) expressly authorizes a cause of action among responsible parties for contribution for the response costs associated with the cleanup of contaminated property under certain circumstances. Section 113(f) allows a responsible party to recover an equitable share of its response costs incurred if it was the subject of a civil action under Sections 106 or 107(a) of CERCLA (42 U.S.C. § 113(f)(1)) or if the responsible party had “resolved its liability to the United States or a state for some or all of a response action in an administrative or judicially approved settlement” (42 U.S.C. § 113(f)(3)(B)).

Section 107(a) also allows for cost recovery. Section 107(a) states that a responsible party

(4)…shall be liable for—
…
(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan; … 42 U.S.C. § 9607(a)(4) (emphasis added).

The Texas court, following the U.S. Supreme Court decision in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), held that because Differential had not been the subject of a civil action under Sections 106 or 107(a) of CERCLA it was not entitled to bring a contribution action under Section 113(f)(1). The court noted that the voluntary cleanup program agreement states that it is not an admission of liability and does not state that it resolves any claim under CERCLA; therefore, the court held that the voluntary cleanup agreement was not an administrative or judicially approved settlement that resolved Differential’s liability to the United States or a State under CERCLA and that Differential could not recover its cleanup costs using a Section 113(f)(3)(B) claim.

The court also denied Differential’s cost recovery claim under Section 107(a) holding that Section 107(a) only allowed cost recovery by “any other person” which did not include other responsible parties. (Differential was a responsible party as it was the current owner of the property. See, 42 U.S.C. § 9607(a)(1)).

Because this case was decided by the District Court for the Southern District of Texas, it will not be binding on Indiana courts or the Seventh Circuit. Further, the Seventh Circuit held on January 17, 2007 that § 107(a) allows a cause of action for responsible parties to recover voluntary cleanup costs against other responsible parties. See, Metropolitan Water Reclamation District of Greater Chicago v. North American Galvanizing & Coatings, Inc., No. 05-3299 (7th Cir. 2007).

The Seventh Circuit held that the plain language of § 107(a)(4)(B) allows “any other person” to bring an action to recover necessary response costs. The court held that “any other person” means any person other than the government of the United States or a state or Indian Tribe. In reaching this decision, the court relied on the “savings clause” of § 113(f)(1) which states that § 113(f) shall not diminish the right of any person to bring an action for contribution in the absence of a § 106 or § 107(a) enforcement action. The court also relied on the U.S. Supreme Court’s statement in Aviall that the savings clause “rebuts any presumption that the express right of contribution provided by [§ 113(f)] is the exclusive cause of action” for contribution available to a responsible party.

In so holding, the Seventh Circuit joins the Second and Eight Circuits in concluding, post Aviall, that § 107(a) provides a cause of action for responsible parties who have not been subject to a civil action under § 106 or § 107(a) and who have not entered into a settlement with the government. Only the Third Circuit has held that § 113(f) provides the only cause of action for a responsible party. It should also be noted that the U.S. Supreme Court agreed to review this issue on January 19, 2007.

If the Supreme Court agrees with the Differential court and the Eighth Circuit and holds that § 107(a) does not provide a cause of action for responsible parties to recover from other responsible parties, then a participant in Indiana’s Voluntary Remediation Program must carefully consider whether the Voluntary Remediation Agreement entered into with the Indiana Department of Environmental Management ("IDEM") provides a cause of action as an administrative or judicially approved settlement that resolves its CERCLA liability. The U.S. EPA Region V has entered into a Memorandum of Understanding with Indiana stating that upon successful completion of the Voluntary Remediation Program it will not plan or anticipate any federal action under CERCLA (except in exceptional circumstances where the site poses an imminent and substantial threat to human health and the environment). Although Indiana’s template Voluntary Remediation Agreement contains a nonadmission provision similar to the one addressed in Differential, it also contains a provision which states, “the parties agree that this Agreement constitutes an administrative settlement for purposes of [Section 113(f)(3)(B)], under which the applicant has resolved the liability it may have to the State to the extent provided in the Covenant Not to Sue.” This provision should allow IDEM’s Voluntary Remediation Program participants to proceed under a § 113(f) cause of action.

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