For the past three years, owners of polluted property have been living in legal limbo. The Supreme Court's 2004 decision in Cooper Industries Inc. v. Aviall Services Inc. cast doubt over the rights of landowners who discover environmental hazards on their property to sue the polluters for contribution to the cleanup costs under Superfund.

 

For years most courts had allowed such recovery, but the High Court's ruling upended that process. In Aviall, the court said Sec. 113 of the Superfund law allows the landowner to sue other polluters only when it is subject to a government enforcement action. The decision drew many voluntary cleanups to a halt and led to a flurry of lawsuits that sought alternative routes to cost recovery.

To the relief of property owners and environmental groups, a June Supreme Court decision on the issue has resolved the uncertainty and given a boost to voluntary cleanups. The High Court's ruling in U.S. v. Atlantic Research Corp. establishes that potentially responsible parties (PRPs) that do voluntary work can seek compensation from other PRPs under Sec. 107 of Superfund (formally called the Comprehensive Environmental Response, Compensation and Liability Act).

“It provides a lot more incentive for cleanups because responsible parties know they can't hide in the weeds,” says John McGahren, managing partner of the Newark, N.J., office of Patton Boggs.

Government Inaction

Atlantic Research retrofitted rocket motors under government contracts at Shumaker Naval Ammunition Depot in Arkansas throughout the 1980s. The retrofitting process contaminated soil and groundwater with burned fuel.

Atlantic Research cleaned up the contaminated site at its own expense in the 1990s and then sought to recoup some of the costs of cleaning up the pollution from the government under Sections 113 and 107 of Superfund.

Lawyers for the Bush administration argued that under the High Court's Aviall ruling, Atlantic had no right to recovery under Sec. 113 because the government had not taken an enforcement action against it. Further, the government attorneys argued that Sec. 107 does not allow PRPs to file suit to recover cleanup costs from other polluters. It maintained that the court should interpret the language of Sec. 107–which allows “other persons” to recover under Superfund–to exclude PRPs, which the statute defines as current and former owners of the property and anyone involved with disposal, treatment or transport of hazardous substances on the property.

The 8th Circuit rejected that argument, and held that Atlantic could sue under Sec. 107, falling in line with post-Aviall rulings from the 2nd and 7th Circuits which held that Sec. 107 allowed PRPs to recover voluntarily incurred costs.

The Supreme Court granted cert on the case because the 3rd Circuit and several district courts disagreed. The 3rd Circuit held in the 2006 case E. I. du Pont de Nemours & Co. v. U.S. that a PRP's only route to recovery against the government is a suit under Sec. 113 after a government enforcement action.

The business community argued that the 3rd Circuit's reasoning allowed the government to avoid liability for pollution in which it played a role by simply ignoring the mess. According to briefs filed in Atlantic Research, that situation is surprisingly common.

Avoiding Liability

Ford and General Motors filed an amicus brief stating that many automakers are still dealing with contamination from World War II-related manufacturing that was carried out under orders from the federal government. According to the brief, thousands of former or current military facilities owned by corporations require hazard remediation. Indeed, Ford spent 10 years in negotiation and litigation with the government before winning reimbursement for cleanup costs of a World War II warplane manufacturing plant in Michigan.

The 3rd Circuit's interpretation of Sec. 107 could bring voluntary cleanup of such sites to a standstill–leaving owners of land that the government polluted holding the bag.

“The government very vociferously uses all its great resources to avoid paying its fair share of cleanups,” says McGahren, who filed the automakers' brief.

Businesses urged the court to uphold the 8th Circuit for that reason. But Justice Clarence Thomas' opinion affirming the 8th Circuit focuses on the law's plain language–namely, the definition of “any other person” cited in one passage as being among those eligible for 107 actions.

“The plain language of subparagraph (B) authorizes cost-recovery actions by any private party, including PRPs,” Thomas wrote. “The Government's interpretation makes little textual sense. ?? 1/2 If PRPs do not qualify as 'any other person,' it is unclear what private party would.”

That ruling comes as a huge relief to owners of polluted properties, who had long been uncertain about their right to sue other polluters. Even before Aviall, courts wrestled with the roles of the two compensation mechanisms.

Atlantic Research makes clear that the two sections of the law complement each other, offering different remedies for different circumstances.

Sec. 107 offers joint and several liability, allowing plaintiffs to seek 100 percent of costs from a defendant that may be only partly responsible for contamination. But to qualify for Sec. 107, PRPs must have incurred cleanup costs themselves, the opinion said.

Sec. 113, on the other hand, allows a PRP to seek contribution–payment of a proportional share of the cleanup cost–from other polluters. Any PRP that pays to clean up a polluted site under a court judgment or settlement must use Sec. 113 to seek contributions from other PRPs.

“The courts still have to direct traffic [between 113 and 107], but now you have a better idea,” says Gabrielle Sigel, partner at Jenner & Block. “You have some agreed signals on whether to go to the right or the left.”