Indiana Supreme Court Issues Ruling on Indiana's Environmental Legal Action Statute and Common Law Claims for Cleanup

The Indiana Supreme Court in Cooper Industries v. The City of South Bend found that the City of South Bend could maintain its claim under Indiana's Environmental Legal Action statute (ELA) against Cooper Industries, the corporate successor to Studebaker. There was a dispute about whether the city was too late when it filed its cost recovery lawsuit in 2003 based on when the statute of limitations on South Bend's claims against Cooper began to run. Cooper argued that any cause of action to recover response costs should begin to run against South Bend as soon as the city knew or should have known about the contamination at the former Studebaker facility. This argument is potentially detrimental to brownfields redevelopment because often a city or party seeking to remediate the blighted area will know about the presence of contamination years before cleanup and cost recovery begin.

The Supreme Court reversed the Court of Appeals and held that South Bend timely filed its claim under the ELA but upheld the decision in that South Bend was too late with the filing of its common law claims of negligence, public and private nuisance, and trespass. The Supreme Court said that the six-year statute of limitations for injury to real property applies to the common law causes of action and that it begins to run when a claimant knows or reasonably should have known of the contamination.

In the world of environmental cost recovery, there is a dispute about how long a party has to bring a claim under the ELA. Is the time limit six years based on Indiana's statute of limitations for injury to real property found at Ind. Code § 34-11-2-7? Or is it 10 years under the general statute of limitations, found at Ind. Code § 34-11-1-2(a), which for example, has been used as the statute of limitations for claims under the Underground Storage Tank Act? The Supreme Court declined to identify which limitations period was appropriate, finding that South Bend's claim was timely under either. The question of which statute of limitations is appropriate goes to whether the ELA is a statute allowing direct cost recovery for injury to real property or contribution from other responsible parties. The answer of the Supreme Court in Cooper seems to be that the ELA is both. Therefore, the court didn't expressly or implicitly answer the question about which limitations period applies to the ELA. The Supreme Court, however, noted that unlike a CERCLA §107(a) cost recovery action, the ELA did not require a claimant to be an innocent landowner.

There is also a dispute about what triggers the running of the statute of limitations. Does the standard discovery rule apply such that the limitations period for a party seeking cost recovery begins when it knew or should have known about the contamination? Should the trigger for the statute of limitations be when response costs are incurred? Or when a cleanup is ordered by IDEM or the EPA and why does it matter? For purposes of brownfields redevelopment or clean up of historically contaminated sites, if the trigger for the statute of limitations was when a party "knew or should have known" about the contamination, the limitations period could run long before anyone begins remediating the property and seeks to recover response costs from the potentially responsible parties.

The Court in Cooper Industries v. The City of South Bend held that the statute of limitations isn't triggered until a cause of action is complete and the City of South Bend, which had environmental reports going back to the mid-1990s and allegedly knew or should have known about the contamination at that time, didn't have a cause of action until the Environmental Legal Action (ELA) was enacted in February 1998. This determination preserved South Bend's claim against Cooper which was filed in 2003 – within either six or 10 years from the date of enactment. The Supreme Court in Cooper suggests that the discovery rule standard, "knew or should have known," may be applied to trigger the running of the limitations period for historical contamination discovered after the date of enactment of the ELA. While the result was extremely favorable to the City of South Bend and the redevelopment of the Studebaker Corridor, its general application to other ELA claims is somewhat limited.