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G Environmental Alert January 2005 Contribution Confusion Redux By Michael David Lichtenstein, Esq. and Todd M. Hooker, Esq. wo recent federal court decisions raise TNRCC nor the United Sates Environmental T doubts about traditional

  1. G Environmental Alert January 2005 Contribution Confusion Redux By Michael David Lichtenstein, Esq. and Todd M. Hooker, Esq. wo recent federal court decisions raise TNRCC nor the United Sates Environmental T doubts about traditional approaches to Protection Agency (EPA) took judicial or addressing and resolving issues of administrative measures to compel cleanup of the contribution under the Comprehensive sites. Environmental Response, Compensation and Liability Aviall eventually cleaned up the properties Act (CERCLA). First, the United States Supreme pursuant to Texas’ Voluntary Cleanup Program, Court limited the parties who may bring a direct and thereafter sued Cooper for contribution under action for contribution under §113 of CERCLA. both §107 and §113 of CERCLA. The district Cooper Indus., Inc. v. Aviall Services, Inc., WL court dismissed Aviall's lawsuit ruling that Aviall 2847713 (Dec. 13, 2004). Second, a federal had abandoned its §107 claim and could not district court in New Jersey ruled that a PRP advance a §113 claim because it was never sued by defending a CERCLA §113 action may not EPA under CERCLA §107 or §106. The Fifth commence a third-party action against other PRPs Circuit initially affirmed the district court’s for contribution. Reichhold, Inc. v. United States dismissal of Aviall's §113 claim, but subsequently Metals Refining Co., v. Port Reading-Carteret, reversed en banc reasoning that the last sentence of LLC, et al., Civ. Action No. 03-453 (D.N.J. Oct. §113 (“nothing in the section shall ‘diminish’ any 27, 2004). person’s right to bring a contribution action in the absence of a section 106 or section 107(a) action”) Cooper Indus. v. Aviall Services authorized Aviall’s statutory contribution claim against Cooper. The Aviall case concerned four contaminated sites in Texas. Cooper Industries, Inc. (Cooper) The Supreme Court reversed the Fifth Circuit owned and operated the sites for many years and and affirmed the district court’s dismissal of Aviall’s thereafter sold them to Aviall Services, Inc. claim. Justice Thomas, writing for a seven justice (Aviall). Aviall subsequently determined that both majority, explained that the first sentence of §113, it and Cooper had contaminated the sites when “the enabling clause that establishes the right of petroleum and other hazardous substances were contribution, provides: ‘Any person may seek released from underground storage tanks and other contribution . . . during or following any civil action spills. under section 9606 of this title or under section 9607(a) of this title. . . .’” Justice Thomas then Although the Texas Natural Resource concluded that “[t]he natural meaning of this Conservation Commission (TNRCC) informed sentence is that contribution may only be sought Aviall that it was violating State law, neither the This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

  2. G subject to the specified conditions, namely, ‘during under §107(a) a proportionate share of its costs or following’ a specified civil action.” from Cooper in an action for contribution. Justice Thomas rejected the Fifth Circuit’s The implications of Aviall are potentially far reliance on the third sentence of §113 writing that reaching. It is now the law that private party PRPs “[t]he sole function of the [third] sentence is to may not bring §113 actions without first being clarify that §113(f)(1) does nothing to ‘diminish’ subjected to a CERCLA §106 or §107 action, or any cause(s) of action for contribution that may settling their liability with EPA. For some, this may exist independently of §113(f)(1). The sentence serve as an incentive not to settle or participate in … does not itself establish a cause of action; nor cleanups where a cooperating party is already does it expand §113(f)(1) to authorize contribution conducting the work. In short, parties that prefer actions not brought ‘during or following’ a §106 or to “hide in the weeds” have been given another §107(a) civil action.” Justice Thomas also relied on reason to continue to do so. Moreover, PRPs the fact that §113 does not contain a statute of currently undertaking or contemplating a limitation for contribution actions that do not flow voluntary or brownfields cleanup of contaminated from either the date of judgment in a civil action property, even under the supervision of state or (§113(g)(3)(A)) or the date of settlement federal environmental authorities, must presume at (§113(g)(3)(B)). present that they will not be able to maintain a CERCLA contribution action against other PRPs. The Supreme Court left open the possibility that Aviall might proceed against Cooper by advancing Reichhold v. USMRC v. PRC a contribution claim under §107(a). While acknowledging that the federal courts of appeal Aviall was not the only important §113 decision have almost uniformly held that a private party that to come down in recent weeks. In Reichhold, the is itself a PRP may not pursue a §107(a) action United States District Court for the District of New against other PRPs for joint and several liability, the Jersey ruled in an unpublished decision that a Court refused to address this issue - - preferring private party PRP who is sued under §113 for instead to remand the issue to the district court for contribution cannot bring a third party complaint further consideration. The Supreme Court also against other PRPs for contribution. Reichhold, refused to decide whether Aviall may proceed with Inc. v. United States Metals Refining Company et an “implied” right of contribution under §107(a), a al. v. Port Reading-Carteret et al., Civil Action No. reference to the contribution rights previously 03-453 (October 27, 2004). implied by federal courts from provisions of Reichhold, Inc. (Reichhold) sued United States CERCLA and common law. Metals Refining Company (USMRC) for Justice Ginsberg, in dissent, reasoned that the contribution under both CERCLA and the New Supreme Court has already decided that §107(a) Jersey Spill Compensation and Control Act (the creates a right of contribution among private party Spill Act) for cleanup costs incurred pursuant to an PRPs in Key Tronic Corp. v. United States, 511 U.S. agreement with the New Jersey Department of 809 (1994). Relying on this decision, Justice Environmental Protection (NJDEP) to remediate Ginsberg would have held that Aviall can recover

  3. G properties in and around Carteret, New Jersey. over what constitutes their appropriate USMRC brought a third party complaint against “proportionate share.” Ironically, Aviall dictates Port-Reading Carteret (PRC) and others seeking that Reichhold’s §113 claim against USMRC contribution under CERCLA §113 and §58:10- should be dismissed. 23.11f(a)(2) of the Spill Act. Conclusions In dismissing USMRC’s third party complaint against PRC, the Court reasoned that under Neither Aviall nor Reichhold limit a PRP’s right CERCLA and the Spill Act, USMRC was only to seek contribution pursuant to applicable state severally liable to Reichold. As such, USMRC law, as long as the party seeking contribution has could only be liable to Reichhold for its incurred costs beyond it’s “proportionate share” of proportionate or “fair share” of cleanup costs, and liability. In New Jersey, for example, the Spill Act USMRC had no basis for seeking contribution from provides for a direct cause of action for such claims. PRC. Stating the rule generally, the Court, quoting It remains to be seen whether federal circuit courts the Third Circuit, reasoned “when there is no will now permit a PRP to file a §107(a) action. question that joint and several liability is lacking, PRPs contemplating or conducting voluntary [a] claim for contribution must then, as a matter of cleanups should reevaluate the viability of pending law, fail.” or planned contribution claims against third Reichhold does not address how this rationale parties. will apply at a site where all of the parties are not If you would like to discuss the issues addressed in financially solvent, i.e., where there is an “orphan this Alert, please contact Michael David Lichtenstein of share” of liability. And, as with the Aviall decision, Lowenstein Sandler’s Environmental Law & Litigation by making it more difficult to pursue CERCLA Practice Group at 973.597.2408 or §113 claims, Reichhold creates a disincentive for mlichtenstein@ lowenstein.com or Todd M. Hooker at PRPs to participate in early settlement and 973.597.2420 or thooker@ lowenstein.com. encourages them to lay back and wait for other private parties to do the work, and then to argue

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