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June 21, 2007Client Alert

United States v. Atlantic Research Corp.

On June 11, 2007, the U.S. Supreme Court issued a unanimous decision that allows potentially responsible parties (“PRPs”) to sue each other once more pursuant to the cost recovery provisions of CERCLA Section 107(a) rather than just the contribution remedies of CERCLA Section 113(f). The Court resolved the uncertainty following its decision in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), finding that Section 113(f) is not the exclusive remedy to recover cleanup costs for PRPs, a decision that will surely result in increased CERCLA litigation at the nation’s most contaminated sites.

In this case, Atlantic Research Corporation (“Atlantic Research”) leased property operated by the Department of Defense to perform a government contract. As a result of this contract, waste was created at the site, which Atlantic Research cleaned up at its own expense. Atlantic Research then sought to recoup some of its cleanup costs from the United States by suing pursuant to Section 107(a), CERCLA’s cost recovery provision, as well as under Section 113(f), asserting a contribution cause of action. The United States moved to dismiss the suit claiming that Section 107(a) does not allow PRPs to recover costs for voluntary cleanups.

In a unanimous decision, the U.S. Supreme Court held that the plain language of Section 107(a) permits a PRP to recover cleanup costs from other PRPs prior to a lawsuit or enforcement action. The Court recognized that two legitimate causes of action exist to recoup cleanup expenses; a Section 107(a) claim prior to civil action for voluntarily cleaning a contaminated site and a Section 113(f) contribution claim for cleaning a contaminated site during or following a lawsuit or enforcement action.

Confusion among litigants concerning the interplay of Section 107 and Section 113 of CERCLA

Section 107 provides that PRPs are liable for all government costs of removal or remediation or any other necessary response costs incurred by any other person consistent with the National Contingency Plan. 42 U.S.C. Section 9607. Congress later enacted Section 113(f), which addresses the circumstances in which a PRP may seek contribution. It provides, in pertinent part:

Any person may seek contribution from any other person who is liable or potentially liable under section 9607(a) [section 107(a)] of this title, during or following any civil action under section 9606 [section 106] or under section 9607(a) of this title.... Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action
under section 9606 of this title or section 9607 of this title.

* * *

A person who has resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement may seek contribution from any person who is not party to a settlement referred to in paragraph (2).
42 U.S.C. §§ 9613(f)(1) and (3)(B).

The enactment of Section 113(f) in 1986 led to confusion as to whether a PRP seeking recovery from other PRPs was entitled to sue for recovery under Section 107, Section 113, or both. The majority of courts, including the Seventh Circuit Court of Appeals, held that a PRP’s contribution rights against other PRPs under CERCLA were limited to claims under Section 113(f) – not Section 107. See, e.g., Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 764 (7th Cir. 1994).

In the Court’s 2004 decision in Cooper Industries, Inc. v. Aviall Services, Inc., the Court interpreted Section 113(f) and held that a private party could seek contribution from another liable party only after having been sued under Section 106 or 107(a). Id. at 160-61. Cooper did not address whether PRPs have rights relating to recovery under Section 107(a)(4)(B). See id. at 168. Cooper’s unanswered question created a circuit split – some circuits permitted PRPs to bring a Section 107(a) cause of action (see Atlantic Research Corp. v. United States, No. 05 3152, 2006 U.S. App LEXIS 20557, at *22 23 (8th Cir. Aug. 11, 2006); Consolidated Edison Co. v. U.G.I. Utils., 423 F.3d 90, 100 (2d Cir. 2005)), and other circuits did not. (See E.I. Dupont De Nemours & Co. v. United States, No. 04 2096, 2006 U.S. App LEXIS 22215 (3d Cir. Aug. 29, 2006).) The U.S. Supreme Court’s recent decision resolves this issue.

The Court also addressed the government’s concern that the Court’s interpretation would allow PRPs to choose between Section 107(a) and Section 113(f), permitting a PRP to avoid the shorter three-year statute of limitations period in Section 113(f). Id. at 8. The Court began by noting that Sections 107(a) and 113(f) provide “two ‘clearly distinct’ remedies.” Id. (citing Cooper Indus., 543 U.S. at 163 n.3). “CERCLA provides for a right to cost recovery in certain circumstances, Section 107(a), and separate rights to contribution in other circumstances, Sections 113(f)(1), 113(f)(3)(B).” Id. at 8 (emphasis in original) (quoting Cooper, 543 U.S. at 163).

The Court contrasted a Section 107(a) action as a cost recovery that “does not create a right to contribution.” Id. “A private party may recover under Section 107(a) without any establishment of liability to a third party. Moreover, Section 107(a) permits a PRP to recover only the costs it has ‘incurred’ in cleaning up a site.” Id. (citing 42 U.S.C. Section 9607(a)(4)(B)). The Court stated that:
a PRP that pays money to satisfy a settlement agreement or a court judgment may pursue § 113(f) contribution. But by reimbursing response costs paid by other parties, the PRP has not incurred its own costs of response and therefore cannot recover under § 107(a). As a result, though eligible to seek contribution under § 113(f)(1), the PRP cannot simultaneously seek to recover the same expenses under § 107(a).
Id. at 11-12.

The Court concluded that “at least in the case of reimbursement, the PRP cannot choose the 6 year statute of limitations for cost-recovery actions over the shorter limitations period for Section 113(f) contribution claims.” Id. at 10.

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