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Court clarifies Superfund rules

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Court clarifies Superfund rules

WASHINGTON—Companies that are potentially liable for the cleanup of a contaminated site and that begin a remediation effort voluntarily can recoup some of the cost from other liable parties, the U.S. Supreme Court ruled last week in a closely watched case.

But while the decision may result in more companies voluntarily cleaning up a site, it removes a key incentive for potentially responsible parties to settle with the government, environmental attorneys say.

On June 11, the Supreme Court unanimously ruled in United States vs. Atlantic Research Corp. that potentially responsible parties that voluntarily clean up a contaminated site can sue other PRPs, including the federal government, to recover costs stemming from the cleanup under Section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980--the federal law that created Superfund.

The decision resolves uncertainty that followed the 2004 decision in Cooper Industries vs. Aviall Services Inc., in which the Supreme Court ruled that under Section 113 of CERCLA, a PRP could not seek contributions from other liable parties unless that PRP faced a related lawsuit under CERCLA.

Since then, federal appeals courts have split over whether Section 113 is the exclusive remedy for PRPs seeking to recoup costs for voluntary cleanups. While the 3rd U.S. Circuit Court of Appeals, for example, ruled that a voluntary remediator must be sued before it is allowed to sue for compensation, the 8th Circuit, which reviewed the Atlantic Research case, ruled that Section 107 of the law authorized such suits.

In upholding the 8th Circuit ruling, the Supreme Court said the plain language of Section 107 clearly granted a right of recovery to Atlantic Research, which retrofitted rocket motors for the U.S. Department of Defense in the 1980s, contaminating soil and groundwater at the government site during the process.

Atlantic Research voluntarily investigated and cleaned the contaminated site, the Shumaker Naval Ammunition Depot near Camden, Ark., at its own expense. In 2002, it sued the United States to recoup some of the cost.

The government argued that Section 107 expressly limited availability of a cost recovery to entities other than PRPs. The Supreme Court, on the other hand, said the government's interpretation of the provision made "little textural sense."

The National Chamber Litigation Center, the public policy law firm of the U.S. Chamber of Commerce, hailed the decision.

"The federal government is responsible for a large number of the polluted sites governed by the Superfund Act," said Robin Conrad, an NCLC executive vp, in a statement. The Supreme Court "decisively rejected the government's latest attempt to avoid paying its fair share. The good corporate citizens (that) voluntarily clean up polluted sites should not be left holding the government's bag."

Environmental experts had various reactions to the decision.

"I don't find it to be all that disturbing one way or the other," said Ken Ayers, managing director of Aon Environmental Services Group in Nashville, Tenn. Prior to the Aviall ruling, a number of PRPs voluntarily cleaned up sites under CERCLA and then sought contributions from other liable parties, he said. After Aviall, they stopped doing it. "Really what this is doing is reinstating the way business was up until a few years ago," he said.

The Aviall decision "gave a lot of lawyers and companies with environmental liabilities some pause because it effectively limited their ability to bring claims to cast off some potential liabilities," said Kevin P. Holewinski, head of the environmental practice and partner at Jones Day in Washington.

Now, "they no longer have to wait to be sued. They can clean up the site and bring a claim against a responsible party under Section 107," Mr. Holewinski said.

Indeed, "it takes some of the heartburn out of CERCLA actions...for parties that are willing to step up" and voluntarily remediate a contaminated site, said Bob Loewen, a partner in the environmental practice group of Gibson, Dunn & Crutcher L.L.P. in Irvine, Calif. "You'll see more voluntary cleanups" as a result.

But attorneys also note that while PRPs may be able to recoup some of their voluntary cleanup costs, the Atlantic Research ruling may make other PRPs less inclined to settle environmental claims.

A provision in Section 113 of CERCLA says those that settle with the federal or state government receive "contribution protection," meaning that once the PRP settles, no other PRP can sue the settling PRP for cleanup contributions. But with the Supreme Court's recent ruling, settling PRPs could be sued for cleanup costs by other PRPs than have not settled under Section 107, attorneys say.

"This contribution protection is one of the most, if not the most, important incentives PRPs had to settle with the government," said Tom Donnelly, an attorney with Heller Ehrman L.L.P. in San Francisco, who described the decision as "a mixed bag."

"There's no longer finality for a settling PRP," he said.

"I think it creates a bunch of uncertainty in the law that will keep a lot of lawyers busy for a long time," Mr. Loewen said, noting that PRPs may be "less inclined to settle because they're not buying peace."

In addressing the issue at the end of its ruling, the Supreme Court said while the contribution protection in Section 113 does not protect against cost-recovery liability under Section 107, "we doubt this supposed loophole would discourage settlement."

The court noted that not only does the contribution protection continue "to provide significant protection from contribution suits by PRPs that have inequitably reimbursed the costs incurred by another party," a settlement also "carries the inherent benefit of finally resolving liability as to the United States or a state."

United States vs. Atlantic Research Corp.; Supreme Court of the United States; No. 06-562; June 11, 2007.