Alert: U.S. Supreme Court Confirms that Voluntary Remediators May Pursue Other PRPs for Cost Recovery Under CERCLA

June 14, 2007

On June 11, 2007, the United States Supreme Court unanimously held that Section 107(a) of CERCLA authorizes potentially responsible parties who voluntarily incur response costs to pursue recovery of those costs from other PRPs.  In this landmark decision, United States v. Atlantic Research Corp., No. 06-562, the Supreme Court has finally resolved the uncertainty regarding whether a voluntary remediator (a party that has not been sued under Sections 106 or 107) has a right to recover response costs under Section 107(a), a question left unsettled in the Court's 2004 decision in Cooper Industries v. Aviall Services, Inc.

Here, Respondent Atlantic Research leased property at a facility operated by the U.S. Defense Department.  Atlantic Research cleaned the site at its own expense, without having been compelled to do so by a government agency or court order, and then sought to recover some of its response costs by suing the United States, a PRP at the site, under Sections 107(a)
and 113(f).  After the Court's decision in Cooper Industries foreclosed Atlantic Research, as a voluntary remediator, from recovering under Section 113(f), Atlantic Research amended its complaint to seek relief only under Section 107(a) and federal common law.  The district court granted the United States' motion to dismiss, but the Eighth Circuit Court of Appeals reversed, reasoning that Section 107(a)(4)(B) authorized voluntary PRPs to sue under Section 107(a).

This week, the Supreme Court affirmed the Eighth Circuit's holding.  The Court focused primarily on the text of Section 107(a), agreeing with Atlantic Research that the most obvious interpretation of that provision authorized a cost recovery action by any person "except the United States, a State, or an Indian tribe."  The Court reasoned that the United States' interpretation, which would have limited Section 107(a)(4)(B) cost recovery actions only to non-PRPs, "made little textual sense" and would have "reduce[d] the number of potential plaintiffs to almost zero, rendering §107(a)(4)(B) a dead letter."

With its decisions in Cooper Industries and Atlantic Research, the Supreme Court has confirmed two possible avenues by which a PRP may recover under CERCLA.  Under Cooper Industries, a PRP that was compelled to pay response costs by court judgment or settlement with the government may seek contribution from other PRPs pursuant to Section 113(f).  And thanks to the holding in Atlantic Research, a PRP that voluntarily incurred cleanup costs may seek recovery from other PRPs under Section 107(a).  According to the Court in Atlantic Research, Sections 107(a) and 113(f) "complement each other by providing causes of action to persons in different procedural circumstances."

At the same time, however, the decision in Atlantic Research will likely have a troubling effect on CERCLA settlements.  Section 113(f)(2) of CERLCA provides a so-called "settlement bar" to protect settling parties from being sued under Section 113.  That provision specifically prohibits Section 113(f) contribution claims against "[a] person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement... ."  42 U.S.C. § 9613(f)(2).  The problem is that the settlement bar does not protect a settling party from cost-recovery actions brought under Section 107(a), which will no doubt have a chilling effect on CERCLA settlements.  The Supreme Court sought to downplay this settlement bar loophole by reminding that a settling party sued under Section 107(a) could trigger equitable apportionment by filing a Section 113(f) contribution counterclaim, thus requiring a court to consider prior settlements as part of the liability distribution.  However, the reality is that settling PRPs now have much less protection against subsequent cost recovery claims.  Now, a PRP may well be forced to litigate Section 107(a) cost recovery claims notwithstanding its prior settlement with the State or Federal government.