Recovery of Voluntary Cleanup Costs After United States v. Atlantic Research Corp.

On June 11, 2007, the United States Supreme Court ruled that responsible parties, who voluntarily incur environmental cleanup costs to remediate contaminated property, can bring a claim under Section 107 of CERCLA (also known as "Superfund") to recover those costs from one or more parties responsible for the contamination. See United States v. Atlantic Research Corp., Slip Opinion No. 06-562 (U.S. June 11, 2007). On June 18, 2007, the Supreme Court also vacated and remanded a Third Circuit federal appeals court decision for reconsideration in light of the Atlantic Research opinion. See E.I. DuPont de Nemours & Co. v. United States, Slip Opinion No. 06-726 (U.S. June 18, 2007). The lower court in that case had previously determined that private parties do not have a cause of action under Section 107 to recover cleanup costs that were voluntarily incurred. The Supreme Court instructed the lower court to re-evaluate its decision based on the binding precedent established in Atlantic Research.

The Atlantic Research decision is significant. The ability to assert claims for cost recovery can have a substantial effect on a private party’s decision to undertake a voluntary cleanup. The Atlantic Research opinion also answers a question left open three years ago in a prior United States Supreme Court decision, Cooper Industries v. Aviall Services, Inc., 543 U.S. 157 (2004).

A. CERCLA Establishes Two Provisions that Allow Private Parties to Recover Cleanup Costs

There are two cost recovery provisions in CERCLA that apply to cleanups conducted by private parties: Section 107 and Section 113. Generally, Section 107 allows certain parties to recover all cleanup costs on a joint and several basis – that is, all of the cleanup costs expended can be recovered from a responsible party regardless of fault. Section 113 by contrast allows certain parties to recover costs through a contribution action – that is, cleanup costs are allocated or apportioned among responsible parties based on equitable factors, so that each party only pays for their fair share of those cleanup costs.

B. The Cooper Decision: Parties Cannot Recover Cleanup Costs Under Section 113 for Voluntary Cleanups

In Cooper, the Supreme Court altered the Superfund landscape when it concluded that parties can only seek contribution under Section 113 of CERCLA during or following a civil lawsuit under Section 106 or 107 of CERCLA, or after resolving their liability in a settlement with the government. Thus, a party that voluntarily cleans up a contaminated property, or (as in the case of Cooper), is directed by an agency to clean up a site through some measure short of a court order or settlement (for example, a demand letter), could no longer recover all or a part of those costs from other responsible parties under Section 113. In Cooper, the Supreme Court declined to rule on the issue of whether parties conducting voluntary cleanups could recover costs under Section 107 instead.

At the time Cooper was decided, many federal appeals courts had also determined that responsible parties under CERCLA could not use Section 107 to recover costs from other responsible parties. See e.g., Centerior Serv. Co. v. Acme Scrap Iron & Metal Corp., 153 F.3d 344, 349-350 (6th Cir. 1998) (explaining that the First, Third, Seventh, Ninth, and Tenth Circuits have directly held that responsible parties "are precluded from seeking joint several cost recovery" under Section 107, and the Fifth and Eighth Circuits have also indicated that responsible parties are limited to seeking to recover costs through actions for contribution). The combination of the Cooper decision, and these earlier appeals court decisions, suggested the possibility that responsible parties who undertook a voluntary cleanup would have no legal recourse under CERCLA to seek cost recovery from other parties responsible for the site contamination.

C. The Atlantic Research Decision: Private Parties Can Recover Costs Under Section 107 for Voluntary Cleanups

In Atlantic Research, the Supreme Court concluded that the remedies available in Section 107 and Section 113 complement each other by providing causes of action "to persons in different procedural circumstances" as follows:

• Involuntary Cleanups – Section 113 Applies. When a private party is subject to a civil lawsuit under Section 106 or 107 of CERCLA, or when they settle their CERCLA liability with the government, they can bring a Section 113 contribution action against other responsible parties to recover costs based on their fair share of responsibility for the site contamination. In these situations, a party has three years after the date of judgment or settlement to bring a lawsuit for contribution before the statute of limitations will run on their claim.


• Voluntary Cleanups – Section 107 Applies. When a private party instead incurs cleanup costs voluntarily, they can bring a cost recovery action against other responsible parties under Section 107. In these situations, a different statute of limitations applies. Generally, a lawsuit for cost recovery must be brought within three years of the completion of a removal action, or six years after the initiation of on-site construction of a remedial action.


• When a Private Party Seeks Cost Recovery Under Section 107 for a Voluntary Cleanup, Defendants Can Assert a Section 113 Counterclaim. In Atlantic Research, the Court assumed without deciding that Section 107 establishes a joint and several liability scheme, whereby a plaintiff seeks to recover all of the costs of cleanup regardless of fault. As such, the court explained that the defendants in such an action can file a Section 113 counterclaim to ensure that they will only be held accountable for their fair share of cleanup costs. A Section 113 counterclaim is available to defendants in a Section 107 action, because, per the Cooper analysis, Section 113 claims can be brought once a party is sued by another party under Section 107. In particular, the court explained that "resolution of a §113(f) counter-claim would necessitate the equitable apportionment of costs among the liable parties, including the [party] that filed the §107(a) action."

In reaching the above conclusions, the Supreme Court reasoned that Section 107 allows a responsible party to only recover the costs it has "incurred" in cleaning up a site, and that costs are not "incurred" when a responsible party pays to satisfy a settlement agreement or court judgment. Thus, Section 107 applies when costs are voluntarily incurred, and Section 113 applies when a party is seeking reimbursement for costs it paid to satisfy a settlement or court judgment.

D. Atlantic Research Resolves Several Concerns Raised by Cooper but Raises New Ones

Many concerns were raised three years ago following the Cooper decision, which have now been resolved by the Atlantic Research decision, including, for example, that:

• the number of voluntary cleanups performed across the country would decline;


• brownfields transactions, which typically involve voluntary cleanup actions, would be discouraged (i.e., property transactions to return contaminated properties to beneficial uses);


• responsible parties who agreed to perform voluntary cleanups would be penalized and, in turn, responsible parties who refused to perform site cleanups would be rewarded for their recalcitrance;


• the United States, when it is a responsible party at a site, could avoid having to pay its fair share of cleanup costs and prevent the initiation of a Section 113 lawsuit, by declining to bring a Section 106 or 107 suit against other responsible parties at the site; and


• insurance costs might increase.

While the Atlantic Research decision resolves these concerns, it raises new ones. For example:

• Settling Parties May Receive Protection from the Government Against Future Contribution Actions, but May Still Face Cost Recovery Actions. The government argued in Atlantic Research that allowing responsible parties to seek cost recovery against other responsible parties through a Section 107 action would eviscerate the settlement bar set forth in Section 113(f)(2). That provision allows the government to offer settling parties protection against future Section 113 contribution claims brought by other responsible parties. The provision does not, however, allow the government to offer settling parties protection against cost-recovery actions filed under Section 107. The Supreme Court did not believe that its decision in Atlantic Research would discourage settlements. Further, it concluded that, even though settling parties could be subject to lawsuits by other responsible parties under Section 107, as a result of the court’s decision, they could file a Section 113 counterclaim. In those situations, the court reasoned, the district courts would apply "traditional rules of equity" in determining the settling parties’ fair share of responsibility, and "would undoubtedly consider any prior settlement as part of the liability calculus." However, whether the lower courts will conclude that a settling party’s fair share should be zero in every case where a responsible party settled early with the government, or whether the settlement will instead be treated as just one factor that may or may not reduce a settling party’s allocated share on a case-by-case basis, is yet to be determined.


• Is Section 107 Limited Exclusively to Joint and Several Liability? The court assumed without deciding that Section 107 establishes a joint and several liability scheme. It is unclear, however, whether Section 107 will be limited post-Atlantic Research to joint and several liability or, for example, whether an implied right to contribution will also be recognized under Section 107 where one responsible party seeks cost recovery against another responsible party.


• Responsible Parties Cannot Recover Costs for All Voluntary Cleanups. It is important to note that the Atlantic Research decision does not necessarily mean that responsible parties can recover costs for any and all voluntary cleanups. In order for private parties to recover costs under Section 107, the costs incurred must be "consistent with the national contingency plan" – which are the specific procedures that the EPA has established for conducting a CERCLA quality cleanup. Many state voluntary cleanup programs, however, do not require this type of CERCLA quality cleanup. Thus, parties still may be foreclosed from seeking cost recovery from other responsible parties, if they voluntarily cleanup a contaminated site, but that cleanup is not a CERCLA quality cleanup.