Atlantic Research: Good Decision, Bad Outcome, and Ugly Results

James Barnette and Matthew Bostick published an opinion on the case United States v. Atlantic Research Corp., which dealt with superfund litigation. The opinion is as follows:

Superfund
Atlantic Research: Good Decision, Bad Outcome, and Ugly Results
By James D. Barnette and Matthew Bostick

While the authors of this article believe United States v. Atlantic Research Corp. was decided correctly, they fear the Supreme Court's ruling will open the floodgates for yet another wave of superfund litigation and recommend Congress step in and clarify, once and for all, the liability rules under the Comprehensive Environmental Response, Compensation, and Liability Act. The authors suggest Congress amend Sections 107 and 113 of the superfund law to make clear that a settlement with the government completely insulates a party from future liability. If Congress does not, the authors argue, it takes the risk that much more money will go to lawyers than to environmental cleanups.

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James D. Barnette is a partner at Steptoe & Johnson in Washington, D.C., where he focuses on government relations. Matthew Bostick is an associate in Steptoe & Johnson's litigation department. The authors appreciate the guidance of Seth Goldberg, chairman of the firm's Environment and Chemical Regulatory Practice, in preparing this article. The views expressed herein are purely their own.

The opinions expressed here do not represent those of BNA, which welcomes other points of view.

The U.S. Supreme Court deserves kudos for its straightforward opinion in United States v. Atlantic Research Corp., 127 S. Ct. 2331, 64 ERC 1835 (2007). Writing for a unanimous court, Justice Clarence Thomas held that the clear language of Section 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act provides a clear right of action by one liable party against another liable party. This issue, in various forms, has been kicking around in the courts since CERCLA was enacted in 1980.

Unfortunately, after nearly three decades of litigation, the court's sound reasoning has the potential to open the floodgates on yet another wave of superfund litigation. That is not the court's fault; Atlantic Research was decided correctly. But Congress should step in and clarify, once and for all, CERCLA's liability rules. If it does not, it takes the risk that much more money will go to lawyers than to environmental cleanups.

Background
Superfund's liability provisions have a somewhat tangled history. Liability under CERCLA is strict, retroactive, and joint and several.¹ CERCLA provides that federal and state governments as well as private parties who have performed remedial work can sue potentially responsible parties associated with a particular site.² There are four classes of potentially responsible parties under Section 107(a): current owners and/or operators, past owners and/or operators, "arrangers," and transporters.³ They are 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."⁴ 

SARA Amendments
In 1986, Congress enacted the Superfund Amendments and Reauthorization Act (SARA)⁵. SARA provided for an express right of contribution by and among Section 107(a) litigants where none had existed before⁶ As enacted, SARA's final language provides that, "[a]ny person may seek contribution from any other person who is liable or potentially liable under section 9607(a), during or following any civil action under section 9606 of this title or under section 9607(a) of this title."⁷

SARA, therefore, attempted to make clear that contribution rights were available for and among PRPs, but unfortunately did not end the debate in the courts. Courts that had read Section 107(a) to impliedly authorize a private party that had incurred cleanup costs to seek contribution from other PRPs were now presented with Section 113(f)'s express contribution right.⁸ Thomas writes in Atlantic Research, "[a]fter SARA's enactment ... some Courts of Appeals believed it necessary to 'direct traffic between' §107(a) and §113(f)."⁹ Many did so by holding that Section 113(f) was the exclusive remedy for PRPs.¹⁰

Thomas notes that in favoring Section 113(f)'s express contribution right over that implied from Section 107(a), many courts "expanded §113(f) to allow PRPs to seek 'contribution' even in the absence of a suit under §106 or §107(a)."¹¹ The Supreme Court halted that trend by overturning the U.S. Court of Appeals for the Fifth Circuit in Cooper Industries, holding that a private party could seek contribution from other liable parties only after having been sued under CERCLA Section 106 or 107(a).¹² However, the court in Cooper Industries declined to settle what was arguably the more pressing issue that divided the Courts of Appeals-- whether potentially responsible parties also have contribution rights under Section 107(a)(4)(B).

All of this litigation and uncertainty set the stage for the Court's opinion in Atlantic Research.

The Atlantic Research Decision
Respondent Atlantic Research leased property from the U.S. Department of Defense at which it retrofitted rocket motors for petitioner United States.¹³ The work contaminated soil and groundwater at the site, and Atlantic Research cleaned up the site voluntarily.¹⁴ The company then sought to recover some of its costs by suing the government under both Section 107(a) and Section 113(f).¹⁵ Id. The U.S. District Court for the District of Arkansas granted the United States' motion to dismiss on grounds that Section 107(a) does not allow PRPs that undertook voluntary cleanups to recover costs.¹⁶ The U.S. Court of Appeals for the Eighth Circuit reversed, holding that Section 113(f) does not provide a mechanism by which potentially responsible parties can recover cleanup costs, although potentially responsible parties that have been subject to Section 106 or Section 107 enforcement actions can employ Section 113.¹⁷

Meaning of 'Other Person.'
This was an easy decision for the court, which in a unanimous ruling held that the plain language of Section 107(a)(4)(B) allows a potentially responsible party to recover costs from other potentially responsible parties, and therefore the statute provided Atlantic Research with a cause of action.¹⁸ The parties' dispute centered around the meaning of "other person[s]" in Section 107(a)(4)(B).¹⁹ The government argued that it referred to any person not identified as a potentially responsible party in Sections 107(a)(1)-(4), while Atlantic Research countered that when properly read in relation to subparagraph (A), "other person" means any person other than the United States, a State, or an Indian tribe--the persons listed in subparagraph (A).²⁰

The court agreed with Atlantic Research that the government's interpretation made "little textual sense."²¹ Applying the maxim that statutes are to be read as a whole, it held that "the language of subparagraph (B) can be understood only with reference to subparagraph (A)," given that the provisions "are adjacent and have remarkably similar structures."²² Thus, the court held, Section 107(a) by its plain terms authorizes cost-recovery actions by any private party, including potentially responsible parties.²³

As a matter of straightforward statutory construction, the court's decision was not surprising. No less unexpected, however, will be the increased litigation among PRPs that we can expect to follow.

The Effect on Settlements
As crafted as part of SARA, Section 113(f) provides a "carrot and stick" approach to encourage settlement. It authorizes settlors to file contribution actions against other PRPs who have not settled, and shields them from future contribution actions.²⁴ The statute further provides that unless the settlement terms provide otherwise, a settlement does not discharge the liability of any of the non-settling potentially responsible parties, and a settlement reduces the potential liability of non-settlors only by the amount of the settlement rather than by the settling parties' proportionate share of the liability.²⁵

Consistent with its ambiguity on numerous other parts of the statute, however, Congress failed to shield settlors from cost-recovery actions under Section 107(a). With Atlantic Research now holding clearly that all are liable under that section, the superfund world is once again thrown into disarray. Seeming almost to apologize for the result, the court writes that it "doubt[s] this supposed loophole would discourage settlement."²⁶ We are not so sanguine.

The court lists three reasons why the result of the decision-- and Congress's failure to enact a clear statute --will not discourage settlement, but each is flawed (through no fault of the court's):

1. "A defendant PRP may trigger equitable apportionment by filing a §113(f) counterclaim."²⁷ While this is true, it does not help the small business owner who simply is trying to extricate himself from the superfund quagmire by agreeing to a de minimis settlement with the government instead of enduring federal court litigation.²⁸
2. "The settlement bar continues to provide significant protection from contribution suits by PRPs that have inequitably reimbursed the costs incurred by another party."²⁹ This does nothing more than state the obvious--Section 113(f)(2) continues to shield settlors against Section 113(f)(1) contribution suits--but begs the question (now answered in the opinion itself) of the persisting exposure under Section 107(a).
3. "Settlement carries the inherent benefit of finally resolving liability as to the United States or a State."³⁰ This benefit may exist, but the fact is that the SARA settlement bar was intended to offer protection against future suits by the government or other PRPs--otherwise it offers nothing at all.

Thus, in practice, the court's decision is likely to completely undermine the settlement incentives of Section 113. If settlement with the government brings no certainty with respect to future litigation, businesses that in good faith are prepared to contribute their fair share to a cleanup are more likely to stay on the sidelines. There is absolutely no incentive for a potentially responsible to settle its liability--if you settle with the government, another liable party can come after you; if you settle with a major potentially responsible party, nothing stops the government from suing you in the event of bankruptcies, cost overruns, or other unforeseen events. In short, no one is safe from litigation and the associated costs, regardless of their good faith in settling potential liabilities.

The Need for Congressional Action
Congress has its work cut out for it as a result of Atlantic Research. Lawmakers have a fundamental decision to make: continue to allow for the often mindless stream of litigation that has plagued the superfund program--and thrown dollars at lawyers instead of environmental engineers-- or rewrite the provisions of CERCLA Sections 107 and 113 to provide certainty for potentially responsible parties, encourage settlements, and get sites cleaned up.

CERCLA always has been a legal quagmire. Atlantic Research lays bare the folly, injustice, and complete misdirection of resources that Congress has forced on America for the last 27 years. Repeated attempts to fix superfund's problems have met with extreme partisanship. Much of that debate revolved around the issue of retroactive liability, over which, after all this time, there is no longer any serious discussion. The only result of these lengthy and expensive debates was the enactment of 2002 Brownfields Act. That legislation was a valiant attempt to help those who have been unfairly caught in superfund's liability web. Atlantic Research, however, proves that CERCLA is still broken after all these years.

Perhaps it is time to put all of the partisan battles of the past to rest. It is inconceivable that anyone in Congress could favor the litigiousness that Atlantic Research will almost certainly create over the universal desire to promote the remediation of hazardous waste sites. The solution is simple: provide finality for those who are willing to settle their alleged liability. Congress should amend Sections 107 and 113 to make clear that a settlement with the government completely insulates a party from future liability.

One can only hope that by virtue of the court's Atlantic Research decision--an opinion that is right on the law as it is written--Congress will take the opportunity to clean up its own work, and rewrite a statute that promotes environmental remediation instead of law firm profits. Senate Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.), both of whom have made the environment a critical part of their agenda, have a terrific opportunity now that does not cost the American taxpayer a dollar. They should take advantage of it.

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^{1 CERCLA §107(a), 42 U.S.C. §9607(a) (2000); see also U.S. v. Chem-Dyne Corp., 572 F. Supp. 802, 810, 19 ERC 1953 (S.D. Ohio 1983).
2 CERCLA §107(a), 42 U.S.C. §9607(a).
3 Id.
4 CERCLA §107(a)(4)(A)-(B), 42 U.S.C. §9607(a)(4)(A)-(B) (emphasis added).
5 Pub. L. No. 99-499, 100 Stat. 1613 (1986)
th See generally, e.g, Wickland Oil Terminals v. Asarco Inc., 590 F. Supp. 72, 77, 21 ERC 1640 (N.D. Cal. 1984), overruled by Wickland Oil Terminals v. Asarco Inc., 792 F.2d 887, 890-891, 24 ERC 1545 (9th Cir. 1986).
7 CERCLA §113(f)(1), 42 U.S.C. §9613(f)(1).
8 See Cooper Industries Inc. v. Aviall Services Inc., 543 U.S. 157, 161-62, 59 ERC 1545 (2004) (collecting cases); Key Tronic Corp. v. United States, 511 U.S. 809, 816, n.7, 38 ERC 1633 (1994) (same).
9 No. 06-562, slip op. at 2 (quoting United States v. Atlantic Research Corp., 459 F.3d 827, 832, 62 ERC 1993 (8th Cir. 2006).
10 See Cooper Industries, 543 U.S. at 169 (collecting cases).
11 Atlantic Research, No. 06-562, slip op. at 2 (citing Aviall Servs. Inc. v. Cooper Industries Inc., 312 F. 3d 677, 681, 55 ERC 1417 (5th Cir. 2002)).
12 543 U.S. at 161.
13 Atlantic Research, No. 06-562, slip op. at 3.
14 Id.
15 After the Court's decision in Cooper Industries, Atlantic Research amended its complaint to seek relief under Section 107(a) and federal common law. Atlantic Research, No. 06-562, slip op. at 3.
16 Id.
17 Id. at 4.
18 Id. at 4-5.
19 Id.
20 Id. at 5.
21 Id. at 6.
22 Id. at 5.
23 Id. at 6.
24 CERCLA §113(f)(3)(B), 42 U.S.C. §9613(f)(3)(B); CERCLA §113(f)(2), 42 U.S.C. §9613(f)(2) (a person "who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement").
25 Id.
26 Atlantic Research, No. 06-562, slip op. at 11.
7 Slip op. at 11.
28 The court's citation to the Restatement (Second) of Torts--and nothing more--on this point has hardened veterans of superfund litigation wondering at this point whether the Court is just poking fun at Congress. The enactment of the Small Business Liability Relief and Brownfields Revitalization Act in 2002 (Pub. L. No. 107-118) (Brownfields Act) provided some, but by no means complete, relief from superfund's unfairness.
29 Id.
30 Id.}