Toxic Tort Litigation Blog : Toxic Tort Lawyer & Attorney : Epstein Becker Green Law Firm : Product Liability, Contamination, Pollution

On February 24, 2010, the Second Circuit issued an important CERCLA contribution decision in Niagara Mohawk Power Corp. v. Chevron USA, Inc., 2010 WL 626064. Over the last 100 years, the site at the heart of the decision, the Water Street Site in Troy, New York has, according to the Court, “played host to various industrial activities including a coke plant, a steel manufacturing facility, a manufactured gas plant and a petroleum distribution facility,” all of which uses “led to the release or disposal of toxic substances, many subject to liability under CERCLA.” In its holding, the Second Circuit ruled that a contribution plaintiff need not establish the precise amount of hazardous material discharged or prove with certainty that a PRP defendant discharged the hazardous material to get their CERCLA claims past the summary judgment stage. Has the Second Circuit significantly raised the bar for defendants seeking summary judgment in private cost recovery cases? That is the thesis of Steven G. Jones in an article titled, “Second Circuit Makes Summary Judgment More Difficult to Obtain for Defendants in CERCLA Contribution Actions,” dated March 5, 2010. Jones contends that some CERCLA defendants, faced with a long and complex trial, may be more inclined to resolve their cases in mediation if it is less likely that a CERCLA defendant will be able to obtain dismissal through summary judgment prior to trial. In reversing the federal district court in the North District of New York, the Second Circuit relied on its prior precedent in United States v. Alcan Aluminum Corp., 990 F.2d 711, 721 (2d. Cir. 1993), which decision represented what the court described as a purposeful lowering of the liability to be a PRP and a relaxed CERCLA liability standard. It also cited the Tenth Circuit’s holding in Tosco Corp. v. Koch Indus., Inc., 216 F.3d 886, 892 for the proposition that “CERCLA liability may be inferred from the totality of the circumstances as opposed to direct evidence.” Thus, in my view, Niagara Mohawk is less an expansion of existing CERCLA case law in the Second Circuit as much as it is a rebuke to the trial judge, who arguably did not apply the correct standard in the first instance.   

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Innis Arden Country Club is a well-run country club located on beautiful acreage in Old Greenwich, CT. that has operated for over 100 years. Close friends of mine are members--the food is good, the golfers congenial, and laughing children run barefoot across the pool deck in good weather.  Club members had been stunned to learn in 2004 that PCB contamination had been discovered on the golf course property, not far from where an industrial company, Pitney Bowes, had once conducted operations on an adjacent parcel in Stamford.  The country club's environmental consultants determined that Pitney Bowes was the source of the contamination, which Pitney Bowes denied, and that PCBs from the Pitney Bowes property had migrated by way of storm water and surface water runoff to Innis Arden.  What no one could dispute was that the country club had not placed the PCBs on the golf course--it was what CERCLA characterizes as an "innocent landowner". On June 26, 2009, the federal district court in Connecticut dismissed Innis Arden's complaint prior to trial and affirmed a prior sanctions award against the country club. Innis Arden Golf Club v. Pitney Bowes, Inc. et al. Case No. 3:06 cv 1352 (JBA), 2009 U.S. Dist. LEXIS 54135.  Something had gone terribly wrong!  But what?

Pitney Bowes retained Hunton and Williams, a law firm with a strong reputation in environmental litigation to defend the case.  In a July 2009 Client Alert, the law firm attributed Innis Arden's dismissal to its consultant having destroyed the key evidence that allegedly linked the PCB's at the country club to their client.  Without being able to perform tests on the actual soil samples the consultant had taken, Pitney Bowes would be unable to refute the consultant's claim that the PCB's on the golf course were identical to PCB's identified on the Pitney Bowes' site, it alleged.  As the Alert points out, the Court's spoliation ruling is a strong reminder of the obligations of parties and their experts to impose a litigation hold and to ensure that tangible evidence, such as as a soil sample taken to the lab for testing, is preserved.  Central to the court's ruling was that the soil sampling in question had been undertaken in preparation for litigation.  As the Magistrate Judge had earlier ruled "......counsel was actively involved in the investigation and analysis of the samples in preparation for legal action......"  Sanctions were awarded even though the Court concluded that Innis Arden had not intended to destroy evidence or to disadvantage Pitney Bowes.  In the Bow Tie Law Blog, the author opines that Innis Arden's "toxic mess" was created in part by deposition testimony that made it clear to the Court that plaintiff had taken no steps to prevent the destruction of electronic and tangible evidence as early as 2005, by which time it was clear that plaintiff recognized the importance of that evidence in its future litigation. 

By the time  the spoliation sanctions issue came before Judge Atherton on a motion for reconsideration, Innis Arden was in even deeper trouble.  The Magistrate Judge had also awarded sanctions against Innis Arden for discovery abuses--the most egregious that the Magistrate Judge had seen during over twenty years on the federal bench.  Worse, Judge Atherton concluded after hearing Daubert motions that Innis Arden's trial experts were not sufficiently reliable to be permitted to testify at trial.  On the basis of that ruling, she granted summary judgment to the defendants and dismissed the plaintiff's complaint.  At the end of the day, the Court did not have to reconsider the Magistrate Judge's spoliation ruling because the issue was now moot!  Still the "innocent landowner", Innis Arden's complaint has been dismissed and may yet have to pay the defendants' sanctions for discovery abuses.   

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On June 22, 2009, after an six-week bench trial in the U.S. District Court for the District of New Jersey, we achieved a resounding victory for our client, Reichhold Inc., in an environmental cost recovery litigation. Reichhold v. USMRC et al, 2009 U.S. Dist. LEXIS 52471. The case addressed claims relating to the cleanup of a contaminated chemical plant site formerly owned by Reichhold in Carteret, New Jersey along the Arthur Kill. The case was brought pursuant to the federal CERCLA and New Jersey Spill Act statutes, as well as a 1994 settlement agreement between the parties.

Defendant United States Metals Refining Co. ("USMRC"), which owned the site prior to Reichhold, had argued that the settlement agreement prohibited Reichhold from bringing the claims in the instant lawsuit. The Court rejected USMRC's argument and held that, because virtually all of Reichhold's claims constituted "New Environmental Obligations" under the settlement agreement, they were actionable. The Court also dismissed every defense to liability raised by the defendant, including the defense that Reichhold's claims were time-barred.

In its Final Judgment, the Court awarded Reichhold $1,209,719 for investigation and cleanup costs that Reichhold had incurred while addressing metals contamination caused by USMRC's industrial operations. The Court also entered a declaratory judgment requiring USMRC to pay certain of Reichhold's future cleanup costs.

Our success at trial was attributable, in part, to our being able to discredit the expert testimony of USMRC's experts. In conjunction with an aerial photogrammetrist, USMRC's environmental engineering expert used historical aerial photographs of the site taken over a 60-year period to develop computer-generated surface contour maps that purported to depict Reichhold's excavation and fill activities at the site over time. Because of these topographical maps, USMRC's experts argued that Reichhold had caused extensive metals contamination at the site in the 1960's and 1970's by using contaminated fill in low lying areas of the property. On the basis of the cross-examination of defendants' experts by me and my partner, Sheila A. Woolson, the Court rejected the experts' testimony and held that the conclusions based on the photogrammetry performed were unconvincing. Consequently, the Court placed no reliance on the cut and fill evidence presented. In contrast, the Court accepted the testimony of Reichhold's witnesses that Reichhold had not disposed of any metals containing contamination at the site.

Over the last several months, federal and state environmental regulatory agencies have devoted substantial regulatory attention to New Jersey waterways and rivers in the northwestern portion of the state that have been contaminated with metals, declaring some of them to be federal Superfund sites. In light of these events, the judicial determination that the metals contamination on the southern edge of the property was solely due to our adversaries’ prior disposal activity was timely. The Opinion is perhaps the first trial court decision to apply the apportionment principles articulated in the Supreme Court's May 2009 decision in Burlington Northern.   

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Larry Schnapf recently started a blog on CommonGround concerning developments in environmental law.  Larry has been a thoughtful commentator on developments in this field for over 20 years. I look for Larry to continue providing wise counsel on thorny environmental issues.  We recently discussed the potential reach of the Supreme Court's decision in Burlington Northern, which evaluated what is necessary to establish "arranger" liability under CERCLA.  In my view, the discussion of "arranger" liability is relevant only to CERCLA 107(a)(3) claims; it has no bearing on a PRP's liability under CERCLA 107(a)(2).  In other words, a product manufacturer cannot escape CERCLA liability for contamination to the manufacturer's former property by arguing that the relelases did not constitute "intentional steps" to dispose of a hazardous substance.  The PRP's conduct in causing a release under (a)(1) or (a)(2)--whether intentional or merely negligent--is entirely irrelevant--always has been, always will be.  In contrast, in cases involving the sale of a product to a customer's location, intent will now figure into any (a)(3) analysis.  Has the Supreme Court carved out what is basically a "product exception" to CERCLA liability? 

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 Nothing in §107(a)(4)(B) references “voluntary” cleanups, and nothing in that section restricts its application to “voluntary” cleanups or actors. Sections 107(a) and 113(f) of CERCLA allow private parties to recover expenses associated with cleaning up contaminated sites. Similarly, nothing in Atlantic Research and its progeny restricts the application of cost recovery actions under CERCLA §107(a)(4)(B) to “voluntary” cleanups.  If that is the case, what is the basis for the contention that only PRPs that perform cleanups voluntarily are entitled to pursue §107 cost recovery claims?

Section 107(a) defines four categories of PRPs and makes them liable for, among other things, “(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan” and “(B) any other necessary costs of response incurred by any other person consistent with [such] plan,” §§107(a)(4)(A)-(B). This is the language on which the Supreme Court relied in its decision in Atlantic Research.Similarly,  Atlantic Research is best understood in the context of the development of the law of recovery of CERCLA response costs. Historically, some courts interpreted §107(a)(4)(B) as providing a cause of action for a private party to recover voluntarily incurred response costs and to seek contribution after having been sued. However, after the enactment of §113(f), which authorizes one PRP to sue another for contribution, many courts held §113(f) to be the exclusive remedy for PRPs. In Cooper Industries, Inc.,  the Supreme Court demonstrated the limitations of §113, and held that a private party could seek contribution under §113(f) only after being sued under §§106 or 107(a).  In Atlantic Research, the Supreme Court held that §107(a)(4)(B)’s plain language allows a PRP to recover costs from other PRPs, providing a cost recovery remedy to PRPs that had not been sued under §§106 or 107(a).

The Atlantic Research decision uses the term “voluntary” at times, but does not define the term or use it literally.  After all, only parties that do not have liability under CERCLA or other regulatory schemes truly engage in “voluntary” response actions. Rather, in Atlantic Research and its progeny the term “voluntary” is simply used to draw a contrast with private parties who have been sued under CERCLA §§106 or 107(a) and, therefore, pursuant to Cooper Industries, qualify to seek contribution from other liable parties under CERCLA §113.  Despite the Court’s use of the terms “voluntary” and “involuntary” to distinguish between payments recoverable under §107(a) and those recoverable under §113(f), the operative principle appears to be that §107(a) is available to recover payments only in cases where §113(f) is not. This is what a federal district trial court concluded recently in Appleton Papers Inc. v. George A. Whiting Paper Co., No. 08-C-16, 2008 WL 3891304 (E.D.Wis. Aug. 20, 2008).  In E.I. Dupont de Nemours & Co. v. United States, 508 F.3d 126 (3d Cir. 2007), the Third Circuit distinguished between “those who voluntarily admitted their responsibility” and those who have “in fact been held responsible (via adjudication or settlement with the EPA)” in discussing who may bring an action under CERCLA §107(f). Id at 133. Therefore, a PRP who conducts a dialog with a regulatory agency concerning how best to clean up a site does not make the PRP who admits liability and accepts responsibility any less a volunteer under CERCLA and applicable case law. In Champion Laboratories, Inc. v. Metex Corp., No. 02-5284, 2008 WL 1808309 (D.N.J. Apr. 21, 2008), the Hon. William H. Walls held that a plaintiff undergoing an ISRA  cleanup in New Jersey could pursue a CERCLA §107 claim.. The New Jersey district court clearly  did not find the pendency of an ISRA cleanup any impediment to plaintiff’s pursuit of a CERCLA §107 claim. The whole point of the Atlantic Research decision is that PRPs may, without regard to their own disposal activity, avail themselves of CERCLA §107.

Nothing in CERCLA §107(a)(4)(B) or any decision post-Atlantic Research conditions a party’s eligibility to bring a cost recovery action under CERCLA §107(a)(4)(B) on that party’s response action having been purely voluntary. Any other interpretation of "voluntariness" under CERCLA, if adopted, would have the anomalous result of barring the doors of the courthouse to CERCLA plaintiffs who cannot bring a CERCLA §113 claim (having not been the prior subject of a §106 or §107 claim by the United States), but whose cleanup may not have been “voluntary” in the strictest sense. It was clearly not the intention of Atlantic Research to limit access to the courthouse to only a restricted sub-class of CERCLA §107 plaintiffs.

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In its precedent breaking decision in United States v. Atlantic Research Corporation, decided in June 2007,  the United States Supreme Court held that the plain language of CERCLA  §107(a)(4)(B) authorizes any private party, including PRPs, to commence an environmental cost recovery action.  The Supreme Court added as dictum that it  "assume[d] without deciding"  that §107(a) provided these PRP plaintiffs with the right to pursue a claim for joint and several liability.   CERCLA  §107 is a strict liability scheme that permits a plaintiff to seek joint and several liability without the burden of proving causation.  Prior to Atlantic Research, only the United States or an "innocent landowner" could wield §107's heavy club.  In the wake of Atlantic Research, any PRP (i.e. polluter) can bring a §107 claim against other PRPs to recover costs.  The only exception is that PRPs who have been defendants in actions brought against them by the United States pursuant to CERCLA  §106 or  §107 must pursue their recovery pursuant to §113, which only permits the recovery of costs on a pro rata basis via contribution.  To those unlucky plaintiffs, §107 is not available. 

Are we at the dawn of a new era of private cost recovery litigation?  In traditional §113 actions, the PRP plaintiff has the burden of demonstrating that neither plaintiff nor third parties bear any percentage allocation of responsibility for the cleanup costs at issue.  If this burden now passes from the plaintiff to defendants, defendants may be disinclined to run the risk of being held jointly and severally liable for all of a site's cleanup costs in the event that their proof falls short.  This risk factor should make defendants more willing to come to the bargaining table earlier.  The same risk consideration should motivate corporate PRP plaintiffs to file §107 suits rather than to let grass grow under their feet.

In weighing possible unfairness to §107 defendants, the Supreme Court noted that  a defendant PRP in  a §107 suit could blunt any inequitable distribution of costs by filing a §113(f) counter-claim.  Thus, once CERCLA liability is established, defendants may avoid joint and several liability by establishing that they caused only a divisible portion of harm. Of course, this course of action is easier said than done and requires a significant commitment of legal manpower to see through to the end.  One court recognized that by providing a RPP with an opportunity to pursue joint and several liability against other PRPs, §107 further encourages a PRP to quickly and voluntarily cleanup a site in the hopes that it might recover its response costs from other PRPs. Raytheon Aircraft Company v. United States, 532 F.Supp. 2d 1306, 1310 (holding that the Court’s decision to permit plaintiff-PRP to pursue joint and several liability under §107(a) found support in Atlantic Research).  In my judgment, the environmental bar should expect that a large number of cost recovery cases will be filed over the next 12 months. 

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