Good-Bye to Joint and Several Liability in Private CERCLA Actions
By Kenneth Kilbert – September 10, 2012
The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) empowers the government or private plaintiffs to force “responsible parties” to pay for the costs of cleaning up contaminated sites. Usually a site has multiple responsible parties, and typically the cleanup costs end up being shared among them based on equitable factors. Not infrequently, however, some of the responsible parties are now insolvent, dead, or defunct and hence cannot pay their shares of the cleanup costs. Who must pay those “orphan shares”?
In CERCLA § 107 actions brought by federal or state governments, defendants traditionally have been subject to joint and several liability, meaning that the plaintiff may recover all of the site cleanup costs from any one of the multiple defendants. Although Burlington Northern & Santa Fe Ry. v. United States (Burlington Northern), 556 U.S. 599 (2009) made the availability of joint and several liability less automatic in governmental CERCLA actions, joint and several liability remains the rule rather than the exception in such cases. The availability of contribution under CERCLA § 113 can lessen the harshness of joint and several liability, by allowing the defendant to force other responsible parties to pay their fair shares of the site-cleanup costs. But where other responsible parties are insolvent, dead, or defunct, the original defendant can be left to shoulder the orphan shares alone.
In CERCLA actions by private plaintiffs, courts have gone back and forth on whether defendants are subject to joint and several liability. For many years, private responsible parties could not sue under CERCLA § 107 and were limited to bringing contribution actions under CERCLA § 113. A defendant in a section 113 claim was not subject to joint and several liability; rather, it would only be liable for an equitable share of the cleanup costs. As a result of Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), and United States v. Atlantic Research Corp., 551 U.S. 128 (2007), however, more private plaintiffs now are able to bring section 107 claims. In the wake of those Supreme Court decisions, lower courts routinely are subjecting defendants to joint and several liability in private CERCLA § 107 actions, raising the specter that such defendants may have to bear all the orphan shares—even where the plaintiff may be more culpable.
The main thrust of this article is that joint and several liability has no place in private CERCLA litigation. Instead, courts should adopt a uniform scope of liability that allows for equitable allocation of all response costs and orphan shares among all viable parties, regardless of whether the claim is brought under section 107 or section 113.
Background: CERCLA and Joint and Several Liability
Four categories of responsible parties are subject to liability under CERCLA: current owners or operators of a facility; past owners or operators at the time hazardous substances were disposed of at the facility; generators or others who arranged for the disposal of hazardous substances at the facility; and transporters of hazardous substances to the facility. 42 U.S.C. § 9607(a). Liability is expansive, as well as strict and retroactive, and it is common for there to be multiple responsible parties at one site.
CERCLA, enacted in 1980, does not expressly provide that liability under section 107 is joint and several. Courts in governmental cases uniformly have looked to the Restatement (Second) of Torts when determining whether multiple defendants are subject to joint and several liability. In short, two or more defendants are jointly and severally liable where the harm caused by the defendants is indivisible or not reasonably capable of apportionment. See Restatement (Second) of Torts § 433A; United States v. Chem-Dyne Corp., 572 F. Supp. 802 (S.D. Ohio 1983). The burden of proving divisibility or reasonable basis of apportionment is on the defendants, and prior to Burlington Northern it was quite rare for a liable defendant to succeed in escaping joint and several liability in a governmental CERCLA action. The Supreme Court in Burlington Northern signaled greater willingness to find a reasonable basis of apportionment, but courts continue to adhere to the Restatement (Second) approach and the general rule of joint and several liability in governmental CERCLA actions.
Private CERCLA Claims
Two CERCLA sections authorize private actions: section 107, which contemplates private as well as governmental cost-recovery actions; and section 113, which provides for contribution claims whereby response costs are allocated among responsible parties based on equitable factors. 42 U.S.C. §§ 9607(a), 9607(f). It is extremely rare for a private CERCLA action to be brought by a non-liable, innocent party. Current owners are liable and there is no incentive for non-liable parties to do a cleanup, because the only relief is reimbursement of response costs, and cost-recovery litigation is no sure thing. Accordingly, virtually all private CERCLA claims are by responsible parties. See Atlantic, 551 U.S. at 136.
During CERCLA’s first two decades, there was considerable litigation over whether a responsible party could maintain a section 107 action for cost recovery. Plaintiffs tended to argue “yes,” seeking to take advantage of the joint-and-several-liability precedents in governmental cases. Defendants tended to argue “no,” urging that responsible party plaintiffs should be limited to section 113 contribution claims in which a defendant would be liable only for its equitable share of response costs. District-court decisions in CERCLA’s early years went both ways. Compare Charter Twp. of Oshtemo v. Am. Cyanamid Co., 910 F. Supp. 332 (W.D. Mich. 1995) (allowing section 107 claim) with Reynolds Metals Co. v. Ark. Power & Light Co., 920 F. Supp. 991 (E.D. Ark. 1996) (disallowing section 107 claim). But by the dawn of the new millennium, the courts of appeals unanimously had decided that a responsible party could sue only under section 113. See Aviall, 543 U.S. at 169.
The Aviall and Atlantic Watershed
Then in a pair of decisions the Supreme Court upended what had become settled law regarding the ability of a private responsible party to bring actions under CERCLA. First, in 2004 in Aviall, the Court restricted section 113 claims to claimants who: (a) have been sued in a civil action under CERCLA, or (b) have resolved CERCLA liability to the government via an administrative or judicially approved settlement. Second, in 2007, the Atlantic Court allowed a responsible party who “voluntarily” incurred cleanup costs to sue under section 107. Whereas before Aviall and Atlantic,a responsible party could sue only under section 113, in their aftermath it is becoming relatively common for a responsible party to maintain section 107 actions.
The Atlantic Court expressly did not decide whether defendants sued by private responsible parties under section 107 are subject to joint and several liability, but the Court assumed so. 551 U.S. at 140 n.7. Subsequently, lower courts consistently are holding that section 107 claims by private responsible parties subject defendants to joint and several liability. See, e.g., Board of County Comm’rs v. Brown Group Retail, Inc., 768 F. Supp.2d 1092 (D. Colo. 2011); Ashland Inc. v. Gar Electroforming, 729 F. Supp.2d 526 (D.R.I. 2010).
In my view, this is a problem. If courts apply classic joint-and-several-liability principles, it would mean that defendants bear all the risk of orphan shares and the plaintiff bears none, as a matter of law—even though plaintiff may be the most culpable party at the site. For example, should a longtime owner/operator of a sloppy dumpsite, whom the government is threatening to sue unless he cleans up “voluntarily,” be allowed to hold one small customer jointly and severally liable for the orphan shares of those many other customers who are now insolvent or no longer in existence?
Making the prospect of joint and several liability in private CERCLA cases depend solely on whether a plaintiff’s claim is under section 107 or section 113 seems even more arbitrary when courts are struggling to figure out which section is applicable in a variety of common scenarios. The Atlantic Court acknowledged that it was unclear which section should apply for a party who enters into a consent decree, pays the government’s past costs, and then performs the remedy. 551 U.S. at 139 n.6. Is that settler’s claim against other responsible parties under section 113 because it is asserted after resolving CERCLA liability to the government in a judicially approved settlement, or is it under both sections 113 (for costs reimbursed to the government) and section 107 (for costs incurred in doing the work)? Similar confusion reigns in other common CERCLA scenarios as well. Compare Niagara Mohawk Power Corp. v. Chevron USA, Inc., 596 F.3d 112 (2d Cir. 2010) (plaintiff’s claim following administrative consent order is governed by section 113) with ITT Industry, Inc. v. Borgwarner, 506 F.3d 452 (6th Cir. 2007) (plaintiff’s claim following administrative consent order is governed by section 107).
Uncertainty regarding when section 107 or section 113 applies, and thus whether joint and several liability applies, poses practical problems for private CERCLA litigation, too. For example, if a plaintiff fails to sue all responsible parties, should the defendant join them and seek contribution, or just point to empty chairs and blame them for the site contamination?
My proposed solution aims to achieve more equitable allocation of cleanup costs among responsible parties and minimize the complexity and uncertainties of current law. In short, courts should reject joint and several liability entirely in private CERCLA actions. Rather, courts should interpret the statute as providing a uniform system of comparative responsibility applicable in both section 107 and 113 actions so that cleanup costs and orphan shares are allocated equitably among all responsible parties, both plaintiffs and defendants.
For section 113 cases, the argument for comparative responsibility is straightforward. Section 113(f) specifically requires that response costs be allocated among responsible parties based on equitable factors. 42 U.S.C. § 9613(f)(1). Given the magnitude of orphan shares at many sites, courts cannot equitably allocate total site-response costs without equitably allocating orphan shares, too.
For section 107 cases, the argument for comparative responsibility rather than joint and several liability is equally compelling, albeit not as simple. Remember, joint and several liability is not mandated in section 107 actions. The statute says nothing about joint and several, Burlington Northern was a governmental action, and Atlantic expressly did not decide the issue. As the Supreme Court recently observed, CERCLA legislative history indicates Congress intended the scope of liability to be governed by “traditional and evolving principles of common law.” Burlington Northern, 556 U.S. at 613.
The traditional common-law rationale for joint and several liability among multiple tortfeasors is that the orphan-share burden should fall on culpable defendants rather than on the innocent plaintiff. This traditional rationale is not advanced, however, where the plaintiff is not innocent. Restatement (Third) of Torts: Apportionment of Liability § 10 cmt. a. Indeed, traditionally at common law, contributory negligence barred any recovery by the plaintiff. So traditional principles of common law do not favor joint and several liability for private CERCLA actions by responsible parties.
Neither do evolving principles of common law. As reflected by the Restatement (Third) of Torts, the vast majority of states have adopted some form of comparative responsibility, both as between liable plaintiffs and defendants (rather than contributory negligence) and among multiple liable defendants (rather than joint and several liability). See Restatement (Third) of Torts: Apportionment of Liability §§ 7, 17.
Of course, as discussed above, Congress has expressly adopted a comparative responsibility system for CERCLA § 113 cases. There is no reason why the equitable allocation approach of section 113 should not be the rule in section 107 actions as well. Courts for years prior to the Aviall-Atlantic watershed allocated cleanup costs and orphan shares equitably where plaintiffs engaged in voluntary cleanups that would now be governed by section 107. See, e.g., Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298 (9th Cir. 1997).
Contribution Counterclaims Are Counterproductive
Even the Atlantic Court, in assuming that joint and several liability applies in private section 107 claims, reasoned that cleanup costs could be equitably allocated if the defendant asserted a section 113 counterclaim. 551 U.S. at 140. A few lower courts recently have followed up on the Atlantic Court’s suggestion, holding multiple defendants jointly and severally liable under section 107 but allocating cleanup costs and orphan shares among plaintiffs and defendants based on a section 113 counterclaim. See Litgo New Jersey, Inc. v. Martin, 2010 WL 2400388 (D.N.J. June 10, 2010). While equitable allocation of cleanup costs and orphan shares in private 107 actions is a laudable end, employing a contribution counterclaim to achieve it is a flawed means for at least three reasons.
First, it is contrary to principles of joint and several liability and rules of civil procedure. Under joint and several liability, the defendant is responsible for joining or otherwise seeking contribution from non-party responsible parties. See Restatement (Third) of Torts: Apportionment of Liability § 10 cmts. a & b. It is unclear how a section 113 counterclaim could trump the complaint such that a plaintiff becomes responsible for a share of costs attributable to non-parties. As a professor of environmental law and civil procedure has observed, “contribution counterclaim” is an oxymoron. Alfred Light, CERCLA’s Wooden Iron: The Contribution Counterclaim, 23 Toxics L. Rep. (BNA) 642 (July 24, 2008).
Second, it needlessly complicates the case. Procedurally, it adds an unnecessary round of pleading: there is no need for a counterclaim and answer thereto in section 113 cases or in my proposed uniform paradigm. Perhaps more importantly, where joint and several liability remains a possibility, courts must deal with complicated divisibility arguments by defendants seeking to evade joint and several liability, as so often occurs in governmental section 107 cases. No such divisibility arguments are necessary in section 113 cases or my proposed uniform paradigm; after parties are shown to be liable at a site, the court simply allocates response costs among the liable parties based on equitable factors.
Third, it may lead to inequitable results. Section 113(f)(2) provides contribution protection to a party who settles its CERCLA liability with the government. Contribution protection is designed to encourage settlements with the government, because the settler knows it will not be sued by other parties or have to pay more. However, Atlantic held that section 113(f)(2) protects the settler only from section 113 contribution suits, not section 107 cost-recovery actions. 551 U.S. at 140. If a plaintiff settles with the government and gets contribution protection, then sues the defendant under section 107 for costs the plaintiff incurred at the site, the defendant could be barred from asserting a section 113 counterclaim—thus making the defendant liable for 100 percent of the plaintiff’s cleanup costs and all orphan shares as a matter of law. See Agere System, Inc. v. Advanced Environmental Technology Corp., 602 F.3d 204, 228 (3d Cir. 2010).
The Supreme Court in Aviall and Atlantic ushered in a new era in private CERCLA litigation, expanding the availability of private section 107 claims. However, those cases also increased the potential for joint and several liability and defendants bearing a disproportionate response cost and orphan-share burden as a matter of law, even where the plaintiff is more culpable. This article posits that courts should discard joint and several liability in private CERCLA actions. Rather, courts should apply a uniform scope of liability in all private CERCLA actions, whether under section 107 or section 113, whereby cleanup costs and orphan shares are allocated equitably among all responsible parties, both plaintiffs and defendants, without the need for counterproductive contrivances like contribution counterclaims.
Keywords: environmental litigation, cost recovery, cleanup, orphan shares, Aviall, Atlantic
Kenneth Kilbert is associate dean for academic affairs and professor of law at the University of Toledo College of Law in Toledo, Ohio. For a more in-depth treatment of this topic, see Kenneth Kilbert, Neither Joint Nor Several: Orphan Shares and Private CERCLA Actions, 41 Envtl. L. 1045 (2011).