Recovering your costs for a property cleanup

If you or your company are unfortunate enough to be named by the government environmental watchdogs as a potentially responsibly party or “PRP” in connection with contaminated property, the road to resolution is fraught with potholes and roadblocks – and there’s no reliable map to get through it.
On the one hand, federal and state hazardous waste laws provide liability for four categories of people:
1. The persons who currently own or previously owned the site.
2. The persons who currently conduct operations at the site or previously did (or otherwise control or controlled the property).
3. The persons who generated the hazardous substances that found their way to the property.
4. The persons who trucked the hazardous substances to the property.
The federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) is a strict liability statute, which means that the government does not need to prove that someone who falls into one of the previous four categories acted intentionally or negligently in contaminating the property; liability is automatic.
In addition, liability under CERCLA is joint and several – so the government can select and pursue only one party to be held liable for the entire cost of a cleanup even if that party was only one of many contributors to the pollution. Therefore, a party who disposed of only a small portion of waste at a site may be saddled with the entire cost of the cleanup.
On the other hand, the available defenses under state and federal environmental laws are very narrow. People who purchased contaminated property at full value without knowledge of the contamination and certain others may avoid liability, but otherwise the traditional defenses are limited to very rare cases in which the contamination has been caused by an act of God, an act of war or similarly singular and unusual circumstances.
To complicate matters, PRPs at a site that must conduct or pay for cleanup have limited legal avenues available to recover some or all of their cleanup costs from other PRPs. One section of CERCLA permits the party conducting the cleanup to sue PRPs above in a so-called “cost recovery” suit and hold them jointly and severally liable for the costs. Unfortunately, this section has been primarily limited by the courts to suits by the federal government, states, Indian tribes and people who can establish one of the very few CERCLA statutory defenses or exemptions.
Most disputes between PRPs have to be brought under the “contribution” provision of CERCLA. Bringing a claim under this section is less favorable to the party conducting the cleanup mostly because liability among PRPs is not joint and several. Instead, the courts will allocate liability based on equitable factors. Therefore, a party facing a contribution claim has an opportunity to raise far more defenses to defeat liability.
Until 2004, most PRPs cleaning up a site where they were only partially responsible operated under the legitimate expectation that they could later sue other PRPs for contribution. However, in 2004, a U.S. Supreme Court decision in Cooper Industries Inc. v. Aviall Services Inc. severely limited CERCLA contribution claims by permitting only parties that had been sued by the government in a civil action to seek contribution from other PRPs.
Until that decision, most PRPs voluntarily (albeit under the threat of enforcement) agreed to conduct cleanups in order to avoid being sued or receiving an administrative order from the government. So the Aviall decision impeded all the PRPs who had cooperated with the government from trying to recoup some of their losses and had a chilling effect on future settlements between polluters and the state and federal regulators.
Last April 23, however, the U.S. Supreme Court gave new hope to PRPs seeking to recover some or all of their cleanup costs from other PRPs in the case of U.S. v. Atlantic Research Corp. This case involved contaminated U.S. Department of Defense property where Atlantic Research had retrofitted rocket motors for the government.
After paying for the cleanup, Atlantic Research brought a CERCLA “cost recovery” claim against the United States under the section providing for joint and several liability without the need to prove fault. The Supreme Court rejected the United States’ argument that Atlantic Research could not bring a CERCLA claim because it was a PRP.
The court ruled that a PRP who is unable to take advantage of CERCLA’s contribution provision (because it has not been the subject of a “civil action”) may nevertheless file a “cost recovery” claim against other PRPs for reimbursement of those costs that it has incurred itself. In contrast, money that a PRP has paid to settle with the government or pay a court judgment must still be recovered through CERCLA contribution claims.
The Atlantic Research case falls far short of resolving all of the outstanding questions about environmental cost recovery suits. However, it does put PRPs back on the road to reimbursement.
Kristen W. Sherman is a shareholder at Adler Pollock & Sheehan PC in Providence, with a practice focused on environmental law and litigation. Over the past 10 years, she has handled a wide range of matters, especially in the areas of permitting, land use, wetlands, coastal development, and hazardous waste, including brownfields redevelopment.