On December 13, 2004, the United States Supreme Court issued a ruling that will likely impact whatever incentive private property owners may have to take the initiative with respect to costly contaminated-site remediation. In Cooper Industries, Inc. v. Aviall Services, Inc., the Court ruled that a landowner who voluntarily cleans up property contaminated by hazardous substances without having been sued in an abatement or cost-recovery action under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA, or Superfund) may not seek contribution for its environmental cleanup costs from prior owners and other potentially-responsible parties under Section 113 (f) of the Superfund law.

CERCLA § 113 (f), which was added to the Superfund law in 1986 as part of the Superfund Amendments and Reauthorization Act (SARA), allows a person to seek contribution from any other potentially-responsible party (PRP) during or after a civil action brought against that person under CERCLA. However, § 113 (f) contains a savings clause stating that “[n]othing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under [§ 106 or 107 (a)].” SARA also created a separate express right of contribution for a “person who has resolved its liability to the United States or a State for some or all of the costs of [environmental cleanup] in an administrative or judicially approved settlement.” CERCLA § 106 authorizes the federal government to require a responsible party to clean up contaminated property, while § 107 (a) allows the federal government to recover from PRPs the costs of the government’s cleanup efforts on properties contaminated or threatened by the release of hazardous substances.

The underlying litigation that led to the Supreme Court’s decision involved four properties in Texas used as aircraft engine-maintenance sites that Aviall Services, Inc. (“Aviall”) had purchased from Cooper Industries, Inc. (“Cooper”) in 1981. Aviall realized several years later that the properties were contaminated after discovering the release of hazardous substances in the soil and ground water that were attributable to its own activities as well as those of the previous owner, Cooper. Aviall notified the Texas Natural Resource Conservation Commission of its discovery. That state agency in turn directed Aviall to clean up the sites and threatened to pursue an enforcement action against Aviall if the company did not take the expected corrective measures. Despite the threat, however, neither Texas environmental regulators nor the U.S. Environmental Protection Agency (EPA) ever actually initiated any judicial or administrative enforcement actions to compel cleanup. In fact, the EPA never even designated the property as contaminated. Nonetheless, in response to prodding from state officials, Aviall cleaned the sites under state supervision and, after incurring $5 million in cleanup costs, sued Cooper to recover a portion of those costs under CERCLA § 113(f). Aviall eventually prevailed in an en banc ruling by the Fifth Circuit Court of Appeals, but the Supreme Court reversed the Fifth Circuit’s ruling in a 7-2 decision written by Justice Clarence Thomas. The Court opined that Aviall’s use of the Superfund law to sue another party for contribution was not allowed because Aviall had not been the subject of an abatement or cost recovery action under CERCLA § 106 or 107 (a).

The Court noted that the plain language of the enabling clause in § 113 (f) establishes a right of contribution only “during or following” a § 106 or 107 (a) civil action or following a settlement; both of which were legislative prerequisites that Aviall had not satisfied. As for the savings clause noted earlier, which provides that “nothing in [113 (f)] shall diminish the right of any person to bring an action for contribution in the absence of a civil action under [106] or [107 (a)],” the Court stated that the savings clause was not intended to establish new causes of action or expand the remedies available under § 113 (f) to include contribution lawsuits not brought “during or following” a CERCLA civil action. Instead, said the Court, the sole function of that provision was to clarify that any causes of action for contribution that might be available to a plaintiff independently of § 113 (f) remained unaffected by that part of the Superfund law.

In some ways Aviall is noteworthy for certain important questions that the Court intentionally left unresolved. For instance, Aviall argued that as an alternative to a § 113 (f) contribution claim it was entitled to cost recovery from other PRPs under § 107 (a), despite being a PRP itself. The federal appeals courts that have addressed this issue have usually ruled against PRP plaintiffs seeking cost recovery under § 107 (a). However, the Court declined to rule on that issue, finding the matter to be beyond the scope of both the briefing and the questions presented. The Court also declined to issue a definitive ruling as to whether a PRP in Aviall’s situation who undertakes voluntary cleanup may have an implied right of contribution under 107 (a), which is what some lower courts have held, as opposed to cost recovery. Finally, the Court discussed (but did not decide) whether a pre-enforcement cleanup “order” might qualify as a “civil action” under § 113 (f) such that voluntary compliance with that order would trigger a right of contribution. The Court instead left those questions to be addressed either on the remand of Aviall or in other ongoing cases.

For now however, for companies who voluntarily incur cleanup costs by remediating their contaminated properties and have neither been sued by the EPA, state environmental agencies, or any private party claiming standing under CERCLA § 107 (a), the message from Aviall appears to be that those companies may just be out of luck if they expect to recover any of those costs from the persons whose actions made the cleanup necessary in the first place. Yet, interestingly enough, Congress in 2002 enacted the Brownfields Revitalization and Environmental Restoration Act, which amended CERCLA to limit liability and encourage developers to voluntarily remediate and redevelop contaminated sites that the EPA does not consider sufficiently contaminated to subject the owner to a civil action. Obviously, some of the companies affected by Aviall would include PRPs that are currently participating in state “brownfields” programs along with other PRPs who, like Aviall, incur the costs of site remediation in response to state or federal agency notifications or orders that may fall short of the type of “civil action” contemplated under § 113 (f). This may explain why 23 states sided with Aviall in an amicus brief, arguing that the Superfund law does allow contribution lawsuits when private parties, on their own initiative, seek to clean their contaminated properties. What remains to be seen is what the long-term impact of Aviall will be on the state brownfields programs in the absence of Congressional action to further amend CERCLA to ensure that private parties need not wait for government agencies to become involved before being certain of what rights they have to recover at least some of their monetary output when they voluntarily perform or fund contaminated site remediation.

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Publications : Bar Bulletin: June, 2005