On June 5, the U.S. Court of Appeals for the Third Circuit decided a Superfund case, Commonwealth Department of Environmental Protection v. Lockheed Martin, No. 10-4078 (3d Cir. June 6, 2012). Lockheed Martin indirectly illustrates a recurring problem under the federal Comprehensive Environmental Response, Compensation and Liability Act, the Superfund statute.
Section 107(a) of CERCLA begins: “Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section,” certain persons are liable for certain costs and damages.
The problem is that statement just is not true; many provisions and rules of law create defenses to Superfund liability other than those enumerated in Section 107(b). And yet, lawyers and courts regularly cite that phrase.
Section 107(a) of CERCLA sets forth the “covered persons” who bear Superfund liability: current owners and operators; owners or operators at the time of disposal; “arrangers” for treatment or disposal; and transporters who participated in the selection of the treatment or disposal facility. It also lists four sorts of monetary liability borne by those four categories of covered persons: response costs incurred by the United States or a state; response costs incurred by “any other person”; natural resource damages; and the costs of health assessments and studies.
Section 106(a) authorizes suits for injunctive relief. Section 113(f)(1) and (3)(B) authorizes actions for contribution. In each case, the courts have held that the persons liable are the same “covered persons” under Section 107(a).
Section 107(b) lists only three defenses: act of God, act of war and act of a third party with whom the defendant has no direct or indirect contractual relationship and against whose acts or omissions the defendant took reasonable precautions. Lockheed Martin is about defenses, but none of those three.
Lockheed Martin had to do with a claim by the commonwealth under Section 107(a)(2)(A) to recover past costs incurred by the Department of Environmental Protection in connection with the Quehanna Nuclear Site in Clearfield County. Lockheed Martin counterclaimed against DEP and filed third-party claims against other commonwealth agencies, each of which Lockheed Martin claimed was responsible for the site and therefore liable to Lockheed Martin in contribution. The district court dismissed the third-party complaint on the ground that the commonwealth agencies other than DEP were immune from suit under the Eleventh Amendment, and entered that dismissal as a separate judgment under Federal Rule of Civil Procedure 54(b).
On appeal, the commonwealth conceded that all commonwealth agencies’ equitable shares of costs would be deducted from DEP’s recovery from Lockheed because of Lockheed’s contribution counterclaim and its defense of recoupment. Accordingly, the court of appeals held that the appeal had become moot.
Lockheed Martin implicitly recognizes several defenses, none of which is enumerated in Section 107(b). No one disputed that the commonwealth may assert Eleventh Amendment immunity. The Supreme Court initially held that CERCLA abrogated state sovereign immunity in Pennsylvania v. Union Gas Co., 491 U.S. 1 (1989). However, the court explicitly overruled Union Gas in an Indian gaming case, Seminole Indian Tribe of Florida v. Florida, 517 U.S. 44 (1995), and courts under CERCLA have applied the defense unless the state waives it by suing, as in Bergmann v. Michigan State Transp. Comm’n, 665 F.3d 681 (6th Cir. 2011) and Burnette v. Corothers, 192 F.3d 52 (2d Cir. 1999), cert. denied, 531 U.S. 1052 (2000).
On a related point, one can only assert a claim against an entity that is amenable to suit at all. See Witco v. Beekhuis, 38 F.3d 682 (3d Cir. 1994) (Delaware nonclaim statute precludes suit).
No one seemed to dispute that Lockheed could assert a defense of recoupment. Recoupment allows a set-off, but no affirmative recovery, to the extent that a defendant has a claim against the plaintiff that the defendant cannot assert for some reason.
Lockheed Martin explicitly holds, as it must, that mootness provides a defense. Other subject matter jurisdiction issues arise under the statute, as opposed to Article III of the Constitution, because Section 113(b) of CERCLA vests exclusive original jurisdiction in the federal district courts. Petitions for review in the courts of appeals and actions in the bankruptcy court provide some thorny issues. See, e.g., Ruud v. Dept. of Labor, 347 F.3d 1086 (9th Cir. 2003) and United States v. Gurley, 434 F.3d 1064 (8th Cir. 2006).
Releases, covenants not to sue and prior judgments bar subsequent litigation on the same claim under CERCLA. Indeed, Section 122 explicitly authorizes settlements with the government, and Superfund cases apply conventional issue and claim preclusion to sequential litigation. See United States v. Gurley, 43 F.3d 1188 (8th Cir. 1994), cert. denied, 516 U.S. 817 (1995) and Aliff v. Joy Manufacturing Co., 914 F.2d 39 (4th Cir. 1990). Some sequential litigation has to be permissible, however, because the limitation periods of Section 113(g)(2) and 113(g)(3) require the government typically to bring an “initial action” for the recovery of costs and a private person typically to bring a contribution claim before all of the costs have been incurred at a site.
Accordingly, the defense of “claim splitting” is tricky under this statute, but not so tricky that the government does not require it to be waived in all settlements.
The statute explicitly establishes defenses other than those in Section 107(b). As just mentioned, Section 113(a) and (b) limit jurisdiction and, to some extent, venue. Section 113(e) expands permissible service, but not beyond the limits of the due process clause. See American Telephone & Telegraph Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586 (9th Cir. 1996). In addition, there is a defense of extraterritorial reach under the statute. CERCLA does not apply to foreign sites. See Arc Ecology v. Dept. of the Air Force, 411 F.3d 1092 (9th Cir. 2005); but see Pakootas v. Teck Cominco Metals, Inc., 452 F.3d 1066 (9th Cir. 2006), subseq. appeal, 646 F.3d 1214 (9th Cir. 2011).
Section 113(g) of the statute is the statute of limitations. Courts have applied it in cases too numerous to cite here. None of those limitation periods is mentioned in Section 107(b).
The statute excludes certain parties who would otherwise have “arranged” for disposal of a hazardous substance. The EPA has at least once offered contribution defendants who arranged for disposal of very small or innocuous quantities of waste a one-dollar or zero-dollar settlement. See United States v. Keystone Sanitation, 1996 U.S. Dist. LEXIS 22573 (M.D. Pa. Apr. 29, 1996). That approach is now codified into two defenses. A party that only arranged for disposal of less than 110 gallons or 200 pounds of waste may have a defense as a de micromis arranger under Section 107(o) of CERCLA. One who only arranges for disposal of municipal solid waste from a residential property, a small business or a charity may have a defense under Section 107(p).
People who provide material to a recycler whose facility then has a release obtained have a defense under the Superfund Recycling Equity Act, now CERCLA Section 127, that sometimes applies. See Gould Inc. v. A&M Battery & Tire Service, 232 F.3d 162 (3d Cir. 2000); but see Del-Ray Battery Co. v. Douglas Battery Co., 635 F.3d 725 (5th Cir.), cert. denied, 132 S. Ct. 559 (2011).
People with overflowed or underflowed contiguous property may have a defense under Section 107(q). Purchasers of contaminated property who conduct “all appropriate inquiry” and do not discover the release have the well-known “innocent purchaser” defense set out in Section 101(35)(A). That defense is a specific instance of the act of a third-party defense in Section 107(b).
But a separate bona fide prospective purchaser defense exists under Section 107(r) for a person that conducts the inquiry, finds the contamination and then takes reasonable steps to address it.
Certain lenders have a defense under Section 101(20). Certain fiduciaries have a defense under Section 107(n). People who exacerbate contamination in the course of responding to a release have a defense under Section 107(d). Response action contractors have a defense under Section 119, and on and on.
Section 107(b) does not exhaustively list all of the defenses to either a governmental claim or a private contribution or cost recovery claim. Indeed, this column does not provide an exhaustive list. At least one court has recognized that fact, and then gone on to say that equitable defenses do not apply. See Blasland, Bouck & Lee v. City of North Miami, 283 F.3d 1286 (11th Cir. 2002).
What rule governs which defenses apply? Why is an explicit release by a buyer of a seller for pre-existing conditions a defense to CERCLA liability, but the doctrine of caveat emptor is not? Compare, e.g., Mardan v. C.G.C. Music Ltd., 804 F.2d 1454 (9th Cir. 1986), with Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86 (3d Cir. 1988), cert. denied, 488 U.S. 1029 (1989). The introductory sentence of Section 107 cannot provide that principle, because it cannot mean what it says.
One might say that a court in equity — and CERCLA primarily provides for equitable relief in the nature of an injunction or restitution — should act equitably, consistent with Congress’ purpose to clean sites up promptly and to have the “polluters pay.” That could mean that a defense not set out anywhere in the statute should apply at least some of the time — like recoupment did in Lockheed Martin — notwithstanding the first sentence of Section 107. But still, almost 32 years after Congress enacted Section 107, it is hard to know for sure. •