Lesson of Ninth Circuit CERCLA Decision: Prepare to Prove Recoverable Costs

Introduction

Over several years, various courts have interpreted the interplay of CERCLA’s two liability provisions: CERCLA’s response cost remedy under section 107, and its contribution provision in section 113. The Ninth Circuit’s most recent foray into this issue in Whittaker Corporation v. United States², concluded that responsible parties may recover under either provision, depending on the nature of the damages they seek. While this interpretation does not represent a significant shift in the law, it may result in increased scrutiny by courts of the costs sought by CERCLA claimants. Accordingly, this case presents a reminder that CERCLA responsible parties should undertake careful accounting and documentation of their remedial activities and the associated costs, and should endeavor to utilize CERCLA language in describing those activities whenever possible.

Response Costs Versus Contribution

CERCLA Section 107 provides a claim for any person to recover “necessary costs of response” from four categories of CERCLA responsible party: (1) current owners and operators of a CERCLA facility, (2) owners and operators at the time of disposal of a hazardous substance at a CERCLA facility, (3) transporters of hazardous substances, and (4) persons who arrange for the treatment or disposal of hazardous substances. Liability under section 107 is joint and several and may be subject to a six year statute of limitations.³

In contrast, section 113(f) contains a statutory right to contribution under two circumstances. Section 113(f)(1) provides that “any person” can seek contribution from “any other person who is liable or potentially liable” under section 107, “during or following any civil action” under section 106 or 107.⁴ In addition, contribution is available under section 113(f)(3)(B) to 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 … from any person who is not a party to the settlement.”⁵ Liability for contribution under section 113 is several, and is subject to a three year statute of limitations.

Given the differences in available remedies and potentially applicable statutes of limitations, there are obvious incentives for parties to endeavor to recover under section 107. However, the U.S. Supreme Court has ruled that “cost recovery” under section 107, and “contribution” under section 113, are distinct remedies.⁶ Thus, they are not interchangeable at the desire of the plaintiff. The Ninth Circuit explained the distinction as follows: “A party uses contribution to get reimbursed for being made to pay more than its fair share to someone else, and uses cost recovery to get reimbursed for its own voluntary cleanup.”⁷ Despite this rule, every court to address the question prior to Whittaker determined that a party who may bring a contribution action—i.e., if it meets the statutory trigger for a 113 claim because it has been named in a 106 or 107 action—must bring a contribution action, even when a response cost claim would be more favorable.⁸ But none of these decisions addressed how this rule applies when the two actions address different costs. In Whittaker, the issue was whether a party who settles a 107 claim for certain offsite costs is limited to a 113 claim to recover different onsite costs arising from the same contamination. The Ninth Circuit, following the Supreme Court, determined it was not so limited. Rather the nature of the claim is to be decided based on the nature of the remedies sought.

The Whittaker Decision

Whittaker, a long-time defense contractor for the United States, owned and operated a munitions manufacturing facility in Santa Clarita, California (“Bermite Site”). Whittaker began investigating the release of hazardous substances at the site in the early 1980s, and was then sued by the Castaic Lake Water Agency and other water providers for cost recovery under CERCLA section 107 resulting from contamination of nearby water supplies. Summary judgment was entered in favor of the Castaic Lake plaintiffs. Both sides appealed, and Whittaker and its insurers then settled with the Castaic Lake plaintiffs in 2007. Under the settlement, Whittaker and its insurers agreed to reimburse the Castaic Lake plaintiffs for costs they had incurred to remove contamination from their wells and to purchase replacement water. Whittaker was not ordered to clean up the Bermite Site by the EPA, nor was site cleanup part of the settlement agreement. Rather, Whittaker was named in cleanup orders by the California Department of Toxic Substances Control (DTSC) and directed to undertake onsite remediation, which it did. These activities pre-dated the Castaic Lake action and settlement by many years.

Download: Lesson of Ninth Circuit CERCLA Decision: Prepare to Prove Recoverable Costs

1. This decision confirms that a CERCLA responsible party is not necessarily limited to a claim for CERCLA contribution under section 113.
2. Whittaker Corp. v. United States, No. 14-55382 (9th Cir. June 13, 2016).
3. The applicable statute of limitations depends on the type of costs sought. Claims to recover costs for a removal action must be sought within three years after completion of the removal action, but costs for a remedial action are generally subject to a six year statute of limitations following the initiation of physical on-site construction of the remedial action. 42 U.S.C. § 113(g).
4. 42 U.S.C. § 113(f)(1).
5. 42 U.S.C. § 113(f)(3)(B).
6. See Cooper Indus., Inc. v. Aviall Servs., Inc., 543 U.S. 157, 163 (2004).
7. Whittaker at p. 11 (citing Aviall at 139, n. 6.)
8. Id.