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Legal Watch: Volume 4
Prepared by William H. BodeCase Summary: A recent decision by the U.S. Supreme Court interpreting the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") is of potential importance to terminal operators. Aviall Services purchased four Texas properties from Cooper Industries in 1981. After operating the facilities for several years, Aviall discovered that it and Cooper Industries had polluted the property as a result of multiple underground petroleum storage tank releases.
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PROPERTY OWNER DENIED CONTRIBUTION FROM PRIOR POLLUTER BECAUSE CLEAN UP WAS VOLUNTARY, AND NOT IN RESPONSE TO EPA LAWSUIT OR SETTLEMENT
Upon discovering the pollution, Aviall notified the Texas Natural Resources Conservation Commission ("TNRCC"). TNRCC directed Aviall to clean-up the property, and threatened to pursue a formal enforcement action if Aviall did not undertake remediation. Neither TNRCC nor the EPA pursued an enforcement action, and Aviall voluntarily cleaned-up the property at a cost of more than $5,000,000. Aviall then sued Cooper Industries under "contribution" provisions in CERCLA permitting parties who clean-up polluted sites to recover remediation costs from all parties contributing to the pollution.
In December 2004, the Supreme Court of the United States ruled that Aviall was not entitled to contribution from Defendant under CERCLA because the remediation was voluntary and not performed in response to a civil action or settlement. The Court stated that CERCLA § 113(f)(1) provides for contribution from potentially responsible parties ("PRPs") when a party is ordered to remediate a polluted site a result of an EPA civil action. The Court also stated that CERCLA § 113(f)(1) provides for contribution from PRPs when a party is ordered to remediate a site pursuant to an EPA or state settlement. Because the clean-up was done voluntarily, Aviall was not entitled to any contribution from Cooper Industries. Had Aviall cleaned-up the sites pursuant to an EPA civil action, or an EPA or state settlement, Aviall would have been entitled to contribution from Cooper Industries because it contributed to the pollution. As a result of the Supreme Court's ruling, however, a party does not have a right to contribution from PRPs under CERCLA when remediation is undertaken "voluntarily," even under the threat of EPA or state civil action.
LESSON: This Supreme Court decision limits a party's ability to recover remediation costs from other liable parties who contributed to the pollution at a site. If pollution is discovered at a site, the terminal operator should investigate and identify all potentially responsible parties. Whenever other potentially responsible parties exist, the terminal operator should attempt to obtain their participation in the clean-up. When other liable parties refuse to participate, the terminal operator must enter into an EPA or state settlement, or even request an EPA civil action, before it can force these parties to pay their fair share of remediation costs under CERCLA. These other responsible parties can be sued for contribution under CERCLA within three years after an EPA civil action or EPA or state settlement. (Cooper Industries, Inc. v. Aviall Services, Inc.)
INSURANCE COMPANY PARTIALLY LIABLE FOR CERCLA CLEAN-UP COSTS AT OIL RECLAMATION SITES
LESSON: If a company voluntarily contributes to a clean-up in the absence of an existing EPA enforcement action, or before a lawsuit is filed, the company loses any entitlement to insurance coverage. In cases where coverage is available, the company should not be deterred by a contention from the insurance company that the claim is "untimely." A claim filed years after the loss can trigger coverage unless the insurance company can show actual prejudice by the delay.
Please address any comments or questions to Mr. Bode at 202-862-4300 or email@example.com
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