Sixth Circuit Weighs in on CERCLA Cost Recovery, Contribution Actions

By Glenn A. Harris

The U.S. Court of Appeals for the Sixth Circuit Court recently issued an important opinion, [enhanced version available to lexis.com subscribers], related to claims to recover environmental cleanup costs at an Ohio landfill. The court’s ruling in Hobart Corporation, et al. v. Waste Management of Ohio, Inc., et al., is the first decision of a Court of Appeals determining the effect of the U.S. Environmental Protection Agency's "new" model administrative consent order under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

The court examined the availability of cost recovery actions under CERCLA Section 107(a), [enhanced version available to lexis.com subscribers], and contribution actions for cleanup costs under Section 113(f)(3)(B), [enhanced version available to lexis.com subscribers], as well as the statute of limitations applicable to contribution actions. Acknowledging CERCLA’s lack of clarity, the court held, among other things, that a private party may not bring a 107 action if it has a 113 action.

The plaintiffs entered into an Administrative Settlement Agreement and Order on Consent (ASAOC) with EPA, agreeing to perform a remedial investigation and feasibility study concerning the South Dayton Dump and Landfill Site, and to reimburse EPA's future oversight cost. The plaintiffs filed a lawsuit in Hobart I against a number of defendants on May 24, 2010, and a second lawsuit, in Hobart II, against four additional defendants on June 29, 2012.

Each complaint alleged causes of action under CERCLA Section 107(a) and Section 113(f)(3)(B), and unjust enrichment under Ohio common law. The district court dismissed both actions, holding that the ASAOC gave the plaintiffs the right to bring a Section 113(f) contribution action, that they therefore did not have the right to bring a Section 107(a) cost recovery action, that neither complaint was filed within the statute of limitations applicable to contribution actions, and that the plaintiffs did not state a claim for unjust enrichment.

The Sixth Circuit affirmed, making two significant CERCLA holdings. First, the court held that the new EPA model administrative consent order into which the plaintiffs had entered resolved at least some liability to the United States, such that it constituted a settlement under Section 113(f)(3)(B). That statute gives persons the right to bring a contribution action. The federal government had changed EPA's old model administrative consent order (ACO) in 2005 precisely because some courts had held that it did not result in a 113(f)(3)(B) settlement, and the government recognized that few persons would agree to do work if they didn't have a clear path to sue other potentially responsible parties to recover costs. The U.S. Department of Justice filed an amicus brief supporting the position of the defendants on this and on the statute of limitations issue. Many differing opinions have been issued over the last 10 years concerning the legal effect of the old model ACO.

Second, the court held that there is a single CERCLA statute of limitations applicable to contribution actions—three years from the date of an ACO or from the entry of a Consent Decree—and that the plaintiffs did not timely file either complaint. The language of the CERCLA statutes of limitations applicable to 107 actions and 113 actions is less than clear, resulting in considerable litigation over the legal effect of those statutes for at least 15 years. As the Sixth Circuit says: "No one accuses CERCLA of being a well-drafted or an easy-to-follow statute." Finally, and undisputed by the plaintiffs here, the court held that a private party may not bring a 107 action if it has a 113 action. Because the plaintiffs had a 113 action, but missed the statutory filing deadline, their 107 action was dismissed as well.

Ballard Spahr’s Environment and Natural Resources Group deals extensively with Superfund and natural resource damage activity on the administrative and litigation levels. Our attorneys help clients address contamination liability issues and resolve disputes with regulators and others so that transactions or redevelopment plans can move forward.

Glenn A. Harris, a member of the Group, was the principal author of the Hobart II defendants' brief and argued the matter on behalf of all defendants. For more information about the opinion, please contact Mr. Harris at 856.761.3440 or harrisg@ballardspahr.com.

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