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High Court to rule in pollution cleanup case

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WASHINGTON—How the U.S. Supreme Court decides a case involving what entities can be made to pay for environmental cleanups mandated by the Superfund law could impact the bottom lines of some companies.

The high court agreed last week to hear arguments in United States vs. Atlantic Research Corp. At issue is whether Atlantic Research, which is based in Gainesville, Va., can seek a contribution from the U.S. government to cover part of Atlantic Research's costs in a voluntary cleanup of a Camden, Ark., facility at which it retrofitted rocket motors for the government in the 1980s.

In 2004, the Supreme Court held in Cooper Industries Inc. vs. Availl Services Inc. that the Comprehensive Environmental Response, Compensation, and Liability Act of 1980--which created the Superfund--allowed such contributions only if the party seeking them had itself been sued under CERCLA.

Federal appeals courts, however, have been split over the right to seek contributions for voluntary environmental cleanups.

The 8th U.S. Circuit Court of Appeals, which heard the Atlantic Research case, last year ruled that parties voluntarily cleaning up a contaminated site have the right to seek compensation from other potentially responsible parties--in this case the U.S. government. Earlier, the 2nd Circuit, like the 8th, ruled that a CERCLA suit is not required for the party in a voluntary cleanup to seek compensation from pollution contributors.

However, the 3rd Circuit has also ruled that the voluntary remediator must be sued before it is allowed to sue for compensation.

"We discern nothing in CERCLA's words, suggesting Congress intended to establish a comprehensive contribution and cost recovery scheme encouraging private cleanup of contaminated sites, while simultaneously excepting--indeed, penalizing--those who voluntarily assume such duties," a three-judge panel of the 8th Circuit Court of Appeals ruled last August.

In fact, the panel added that "a contrary ruling, barring Atlantic from recovering a portion of its costs, is not only contrary to CERCLA's purpose, but results in an absurd and unjust outcome. Consider: in this, of all cases, the United States is a liable party (who else has rocket motors to clean?)."

Reacting to the Supreme Court's decision to hear the case, Laura Foggan, a partner at Wiley Rein & Fielding L.L.P. in Washington, described it as a "very interesting case...that 's going to be closely watched."

"We've maybe lost track of the fact that Superfund is a draconian remedy that imposes very substantial liability, but it does. As a result, any of these cases over sharing Superfund costs tend to be high-stakes, high-dollar matters," Ms. Foggan said.

"Certainly, the ability to force the government when it's a responsible party to share cleanup is an important issue," she said.

"The trick is that if there weren't a means for the responsible party who incurs the cost" to recover it, "the government could hold all the cards," she said. "It could decline to sue, decline to settle, kind of play the game so the party that had to undertake the cleanup" would have no right to force the government in its responsible party role to pay its share.

Not all companies will see the issue the same way, and "different companies could quite reasonably come down on different sides of that issue, and in fact have," said Russ Eggert, a partner in Mayer Brown Rowe & Maw L.L.P. in Chicago. "The circuits have split," and from the Environmental Protection Agency's "perspective, I suppose, it's more important that the issue be decided uniformly on a national basis, rather than any institutional concern on which way the issue does get decided," said Mr. Eggert.

The situation presents a dilemma for regulators, he said.

"Forcing companies to wait until they have been sued or settled with EPA would encourage more federal oversight of cleanups. On the other hand, EPA has finite resources, and if the court decided that a party could not sue to recover its contribution until it itself had been sued by EPA, fewer parties would take the initiative and start a cleanup be cause they would then not be able to get contribution from anyone else," Mr. Eggert said.