Non-CERCLA Settlements Trigger CERCLA Contribution Claim Statute Of Limitations

October 6, 2017
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Non-CERCLA Settlements Trigger CERCLA Contribution Claim Statute Of Limitations

CERCLA 113(f)(3)(B) provides that an entity that has “resolved its liability” for “some or all of a response action or for some or all of the costs of such action” pursuant to a settlement agreement with the government may seek contribution from any person who is not party to the settlement, provided that the contribution claim is filed within three years of the settlement. The federal judiciary is split as to whether settlement agreements arising under authority other than CERCLA may give rise to CERCLA contribution claims. In the only prior appellate court decisions regarding this issue, the Second Circuit determined that the settlor was not entitled to do so, but the Third Circuit decided that non-CERCLA settlements did allow for CERCLA contribution claims.

Non-CERCLA Settlements Trigger CERCLA Contribution Claim Statute Of Limitations

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The Ninth Circuit has recently sided with the Third Circuit and held that settlement agreements that do not specifically reference CERCLA liability can give rise to a CERCLA contribution claim. In ASARCO LLC v. Atlantic Richfield Co., Asarco LLC (Asarco) and the United States entered into a settlement agreement requiring Asarco to remediate a contaminated site pursuant to RCRA and the Clean Water Act in 1998. Asarco and the government later entered into a consent decree regarding the site pursuant to CERCLA in 2009.

In 2012, Asarco asserted a contribution claim in federal district court against Atlantic Richfield, another party responsible for the contamination at issue. Atlantic Richfield moved for summary judgment, arguing that CERCLA’s three-year statute of limitations was triggered by the 1998 settlement and therefore Asarco’s contribution claim should be dismissed as untimely. Asarco responded by arguing that the 1998 settlement could not trigger the limitations period because it was based on RCRA and Clean Water Act, neither of which provide for CERCLA contribution claims. The district court dismissed Asarco’s contribution claim, holding that the 1998 settlement did enable Asarco to assert a CERCLA contribution claim and that Asarco was required to have asserted its claim within three years of that settlement. Asarco appealed to the Ninth Circuit.

The Ninth Circuit affirmed the district court’s decision that the 1998 settlement agreement triggered a CERCLA Section 113(f)(3)(B) contribution claim, noting that “[CERCLA’s] text says nothing about whether the [settlement] agreement must settle CERCLA claims in particular” and that it considered Congress’ failure to include such a CERCLA-specific predicate in the contribution provision to be “strong evidence that Congress intended no such predicate” to CERCLA contribution claims. The Ninth Circuit further concluded that its decision was consistent with CERCLA’s broad remedial purpose, stating “[a]n interpretation that limits the [CERCLA] contribution right to CERCLA settlements would undercut private parties’ incentive to settle (except, of course, where the agreement was entered into under CERCLA), thereby thwarting Congress’ objective and doing so without reaping any perceptible benefit.” The Ninth Circuit also noted that the Environmental Protection Agency (EPA) has adopted the position that “‘settlement of federal and state law claims other than those provided by CERCLA fits within § 113(f)(3)(B) as long as the settlement involves a cleanup activity that qualifies as a ‘response action’ within the meaning of CERCLA § 101(25), 42 U.S.C. § 9601(25),” and found that the 1998 settlement agreement did comport with CERCLA “response action” criteria.

Whether a Settlement Agreement Resolves Liability

Notwithstanding the fact that it affirmed the district’s court’s decision that the 1998 settlement agreement triggered Asarco’s CERCLA contribution claim, the Ninth Circuit overruled the dismissal of Asarco’s CERCLA contribution claim and determined that it was timely because Asarco’s settlement did not “resolve its liability” under CERCLA.   Finding that such resolution is a prerequisite to bringing a CERCLA contribution action, the Ninth Circuit held that “a PRP ‘resolve[s] its liability’ to the government where a settlement agreement decides with certainty and finality a PRP’s obligations for at least some of its response actions or costs as set forth in the agreement,” which is to be determined by courts on a “case-by-case analysis of a particular agreement’s terms.” The Court went on to analyze the 1998 settlement agreement and determined that it did not resolve Asarco’s liability with “certainty and finality” because it did not address Asarco’s liability for response costs and included several references to the company’s continuing legal exposure.

The Ninth Circuit next considered whether liability “resolved” where the EPA reserves certain rights, or where the party refuses to concede liability. It disagreed with the Sixth and Seventh Circuits, which previously decided that these reservations of rights prevent a court from concluding that a party has resolved its liability. As explained by the panel, adopting that position would make it “unlikely that a settlement agreement could ever resolve a party’s liability,” noting that “CERCLA prevents a covenant not to sue from ‘tak[ing] effect until the President certifies that remedial action has been completed.’” The Ninth Circuit also held that “it matters not that a PRP refuses to concede liability in a settlement agreement.” According to the court, “requiring a PRP to concede liability may discourage PRPs from entering into settlements because doing so could open the PRP to additional legal exposure.”

The Ninth Circuit summarized its decision on this issue by adopting the following standard:

[A] PRP “resolve[s] its liability” to the government where a settlement agreement decides with certainty and finality a PRP’s obligations for at least some of its response actions or costs as set forth in the agreement. A covenant not to sue or release from liability conditioned on completed performance does not undermine such a resolution, nor does a settling party’s refusal to concede liability. Whether this test is met depends on a case-by-case analysis of a particular agreement’s terms.

Message for New Jersey Businesses

ASARCO addresses two existing splits among Circuit Courts of Appeal regarding CERCLA Section 113(f)(3)(B) contribution claims.  First, the Ninth Circuit’s decision is in line with the Third Circuit’s prior determination that non-CERCLA settlements do enable settling parties to assert CERCLA contribution claims and requires that such claims be made within three year of the settlement, suggesting that a consensus may be emerging on that issue.   Second, the Ninth Circuit’s divergence from the Sixth and Seventh Circuits on the issue of what is required to “resolve liability” for purposes of CERCLA Section 113(f)(3)(B) and adoption of the “certainty and finality” standard could serve as a model for other courts considering the issue. Given the Ninth Circuit’s decision in ASARCO, New Jersey businesses entering into non-CERCLA settlement agreements that resolve environmental liabilities with “certainty and finality” should assert valid CERCLA contribution claims within three years of the settlement.

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, at 201-806-3364.