Supreme Court to Decide Superfund Case with Significant Implications Regarding the Timing of CERCLA Contribution Claims
The U.S. Supreme Court will once again wade into the scope and meaning of CERCLA, granting Guam’s petition for certiorari in Territory of Guam v. United States, No. 20-382, petition for cert. granted (U.S. Jan. 8, 2021). This time, the Court will address multiple circuit splits regarding what it means for a settling party to have “resolved” its CERCLA liability with the government, and the extent to which a non-CERCLA settlement agreement may give rise to a contribution action under Section 113 of CERCLA.
These questions have important implications for when the statute of limitations clock begins to tick for a claim against other parties responsible for a Superfund cleanup. These issues are of particular significance to parties who have entered into historical settlements with the government involving the remediation or cleanup of a property; the decision Guam is challenging ruled that the clock on its CERCLA contribution claim against the U.S. Navy started over fifteen years ago when Guam settled Clean Water Act claims with the United States and the contribution claim is therefore untimely.
Guam seeks to overturn a D.C. Circuit ruling that its claim for clean-up costs against the U.S. Navy regarding an old landfill are time-barred, potentially saddling the Territory with a $160 million cleanup. The Navy constructed the Ordot Dump in Guam in the 1940s, and for decades disposed of military waste at the site, allegedly containing DDT and Agent Orange. Guam became the owner/operator of the dump when it gained territorial sovereignty. In 2002, EPA sued Guam under the Clean Water Act (CWA), asserting violations of the CWA based on the discharge of untreated leachate into a nearby river. Guam and EPA entered into a consent decree in 2004, under which Guam agreed to close the dump and install a cover system.
In 2017, Guam sued the United States under CERCLA to recover remediation costs. Guam’s complaint asserted standard CERCLA claims: a cost recovery claim under § 107(a), and, in the alternative, a contribution claim under § 113(f). A key difference between the two claims is the statute of limitations, which have different lengths and different accrual rules. While EPA has identified the Navy as a potentially responsible party, the United States argued that Guam’s action was untimely because: (1) the 2004 consent decree required Guam to proceed by a contribution claim, and (2) the three-year statute of limitations for contribution claims ran from the entry of the 2004 consent decree. Guam argued that it could maintain a § 107(a) cost recovery action, which was timely. The federal District Court allowed Guam’s claim to proceed, 341 F. Supp.3d 74 (D.D.C. Feb. 28, 2019), but the D.C. Circuit reversed, agreeing with the United States that Guam’s claim was untimely, 950 F.3d 104 (D.C. Cir. Feb. 14, 2020).
Supreme Court Poised to Address Two Circuit Splits Regarding Section 113(f)
The Supreme Court’s decision, expected by the end of the 2020 term in the summer of 2021, should clarify two circuit splits affecting the availability of claims under Section 107’s six-year limitations period for cost recovery claims for remedial actions. The issues accepted for review by the Supreme Court concern the interpretation of § 113(f)(3)(B), which states:
A person who has resolved its liability to the United States or a State for some or all of a response action or 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 a party to a settlement.
Issue 1: Non-CERCLA Settlements
The first issue is whether a non-CERCLA settlement can count as resolving liability for the purposes of § 113(f)(3)(B). The 2004 consent decree resolved an action brought against Guam under a separate statute, the CWA; the consent decree did not mention CERCLA. Yet, the D.C. Circuit, and the majority of other circuits (3rd, 7th, and 9th), have held that § 113(f)(3)(B) does not require a CERCLA-specific settlement. Only the Second Circuit has held that § 113(f)(3)(B) requires a CERCLA-specific settlement.
Thus, under the rule currently embraced by the majority of circuits, a party settling non-CERCLA claims may unknowingly trigger the running of the statute of limitations on their CERCLA contribution rights.
Issue 2: What It Means to “Resolve Liability”
The second issue concerns what specific language in a settlement agreement “resolves liability.” If there is a full or partial resolution of liability for “some or all of a response action,” the three-year limitations clock will begin to run.
The D.C. Circuit held that the 2004 consent decree “resolved” Guam’s CERCLA liability because although it arose from CWA claims, the remediation activities required of Guam qualified as a “response action” as defined by CERCLA. Guam argued that several provisions in the consent decree showed that it did not resolve Guam’s liability to the United States: (1) a disclaimer that the consent decree was “without any finding or admission of liability”; (2) a reservation of rights for the United States to pursue any additional claims “unrelated to the claims in the Complaint”; and (3) a conditional release covenant, under which release of the claims was conditioned on full implementation of all of the requirements of the consent decree.
The Sixth and Seventh Circuits have held that the presence of such settlement terms indicates that a settlement does not “resolve liability.” The D.C. Circuit, however, held that none of these terms alter whether a settlement resolves liability. Guam argues in its petition that this creates a trap for the unwary where “settlements that expressly disclaim liability nevertheless resolve it.”
Guam Will Provide Critical Guidance on the Timing of CERCLA Contribution Claims
Superfund liabilities can be huge and there often are many potentially responsible parties (PRPs) that could share the liability. PRPs that enter agreements over some of the environmental liabilities at a site with government authorities need to know when the clock is ticking on their right to bring claims against other PRPs under CERCLA.
The upcoming decision in Guam should provide clarity on when a prior settlement agreement is considered to have resolved liability under CERCLA. If the Court affirms the D.C. Circuit and expands the number of settlements that may be deemed to have resolved CERCLA liability, this could force more parties to proceed under § 113 rather than § 107 in pursuing other PRPs. At the same time, such a decision could strand parties like Guam with older settlements. A reversal of the D.C. Circuit, coupled with holdings that require an express reference in settlements to the resolution of CERCLA liability, could provide a useful benchmark for settlement of claims with the government and safeguarding contribution claims.
Unless the parties modify the standard schedule, Guam’s opening brief will be due February 22, 2021, with amici briefs in support of Guam due on March 1, 2021. Argument will likely be in the spring of 2021.
For further background on Guam v. United States, and analysis from Beveridge & Diamond Principal David Weber (Seattle), see Inside EPA’s January 15, 2021 article titled “Supreme Court Case May Clarify Trigger for CERCLA Contribution Rights.”
Beveridge & Diamond’s Superfund, Site Remediation, and Natural Resource Damages group assists clients in litigation and allocation of CERCLA sites, including complex, large-scale sites. We counsel clients on developing case law and requirements under CERCLA and state-equivalent laws. For more information on this Alert, please contact the authors.