Limitation Periods for Cost Recovery and Contribution Claims Under CERCLA

 

By Christopher R. Reeves, Esq.

The Finley Firm, P.C.

 

© 2008 Christopher R. Reeves

 

Actions arising under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (“CERCLA”), can present cumbersome statute of limitations issues.  This article provides a framework to analyze these issues.

 

 

Limitations Period for CERCLA Remedial Cost Recovery Actions is Six Years From Physical Initiation of Construction of a Remedial Action or Three Years After Completion of a Removal Action

CERCLA was enacted in 1980. “[A]s originally enacted in December 1980, CERCLA did not have a statute of limitations governing a cost recovery action….” Velsicol Chemical Corp. v. Enenco, Inc., 9 F.3d 524 at 528 (6th Cir. 1993).

In 1986, CERCLA was amended by the Superfund Amendments and Reauthorization Act, Pub. L. 99-499, 100 Stat. 1613 (1986) (“SARA”). The provision governing recovery for direct cost recovery action by the government (so called 107 actions) states that:

An initial action for recovery of the costs … must be commenced … for a remedial action, within 6 years after initiation of physical on-site construction of the remedial action, except that, if the remedial action is initiated within 3 years after completion of the removal action, costs incurred in the removal action may be recovered in the cost recovery action brought under this subparagraph. 42 U.S.C. Section 9613(g)(2)(B).

 

The Supreme Court has not yet been called upon to analyze 42 U.S.C. Section 9613(g)(2). However, the Supreme Court generally favors a broad construction of statutory limitations provisions in favor of the government. See, e.g., Bardaracco v. Commissioner, 464 U.S. 386, 391, 104 S. Ct. 756, 78 L.Ed.2d 549 (1984) (“statutes of limitation sought to be applied to bar rights of the Government, must receive a strict construction in favor of the Government.”)(internal quotation omitted). This general principle has caused several courts to give CERCLA’s statute of limitations broad construction favorable to the government. For example, the Sixth Circuit has acknowledged that CERCLA’s limitation provisions “are to be broadly construed.” Kelley v. E.I. DuPont de Nemours & Co., 17 F.3d 836, 843 (6th Cir. 1994) (citing Reardon v. United States, 947 F.2d 1509, 1519 (1st Cir. 1991)).

SARA divides cost recovery actions into removal actions and remedial actions. See generally 42 U.S.C. Section 9613(g)(2). A cost recovery claim based upon a removal action must be filed within three years “after completion.” Id. “Although the cases on this issue tend to be highly fact-specific, certain principles emerge … removal actions generally are immediate or interim responses, and remedial actions are permanent responses.” Geraghty and Miller, Inc. v. Conoco, Inc., 2000 Lexis 31831, Page 8 (5th Cir. 2000).

Permanent remedial actions tend to be more expensive than interim removal actions. Accordingly, determining what actions trigger the six year limitations period for remedial costs is critical. The Seventh Circuit’s decision in United States v. Navistar Intern. Transp. Corp., 152 F.3d 702 (7th Cir. 1998) rehearing denied (Oct. 16, 1998), directly confronts the issue of what actions are sufficient to trigger CERCLA’s six year statute of limitations governing remedial costs.

Because the primary remedial action was construction of a clay cap, Navistar urged the Seventh Circuit to conclude that various pre-Record of Decision (“ROD”) events constituted commencement of construction sufficient to trigger CERCLA’s statute of limitation. Id. at 711. Navistar focused on the placement of the first clay layer which it stated was “(1) physical (2) initiation (3) on site (4) of the construction (5) of the remedial action.” Id. Therefore, Navistar claimed that the limitations period expired on September 18, 1996, six years after commencement of construction of the first layer of the clay cap.

In opposition, EPA argued that “initiation of construction of the ‘remedial action’ can never begin … until the EPA issues final, written approval of the remedial design for the site at issue.” Id. at 711. EPA claimed that “remedial action” was a term of art. According to EPA, remedy selection under CERCLA is proscribed by an administrative process that culminates in a ROD which is formal written approval. In EPA’s view there was no ‘remedial action’ until the formal approval is issued.

Id. at 712. Moreover, EPA urged the Seventh Circuit to adopt a “bright line rule” triggered only by written formal approval. “The benefit of such a rule, in the government’s view, is that it would conserve judicial resources because it would limit the inquiry of the on-site actions that may have initiated construction of the remedial action to those that occur after final design approval has been issued.” Id.

 

The Seventh Circuit agreed with Navistar that the limitations period began running on September 18, 1990 when first layer of clay was installed. Id. at 713. The Court found that placement of the clay cap satisfied the five elements required by the plain language of 42 U.S.C. ? 9613(g)(2) because it was (1) physical (2) initiation (3) on site (4) of the construction (5) of the remedial action. Citing with approval, California v. Hyampon Lumber Co., 903 F. Supp. 1389 (E.D. Cal. 1995)(which outlined the statutory requirement as a four part test), and United States v. Akzo Nobel Coatings, Inc., 990 F. Supp. 897 (E.D. Mich. 1998)(which distinguished between action taken for preliminary testing purposes and activities critical to implementation of the remedial action), the Seventh Circuit found that the clay installed on September 18, 1990 would play a “critical role in the implementation of the permanent remedy.” Id. at 712. Thus, the court ruled that EPA’s September 19, 1996 complaint was one day late. Id. at 713.

The Navistar court rejected EPA’s call for a ‘bright line rule.’ Id. at 712. Moreover, the Seventh Circuit “acknowledged” the general principle requiring that statutes of limitation be construed in the government’s favor in order to “avoid frustrating the salutary goals of CERCLA.” Id. at 707. Nevertheless, the court found that this rule must yield to the purpose that Congress had in mind when it adopted SARA. “Although we shall construe ambiguities in the statute in favor of the government in an effort to avoid frustrating the beneficial purposes of CERCLA, we must recognize that Congress has determined that those beneficial purposes are served by the timely filing of recovery actions.” Id. at 707.

Limitation Period for CERCLA Contribution Claims

Contribution claims among potentially responsible parties (who did not settle with the government) are governed by CERCLA Section 113. CERCLA Section 113(g)(3) states that “[n]o action for contribution for any response costs or damages may be commenced more than 3 years after: (A) the date of judgment in any action under this chapter for recovery of such costs or damages, or (B) the date of an administrative order … relating to de minimis settlements or … to cost recovery settlements or entry of a judicially approved settlement with respect to such costs or damages.” Thus, if a private PRP has incurred its response costs pursuant to a 107 action commenced by the government (or a 106 unilateral order) it will have three years from the date of judgment or settlement to bring its contribution claim.

However, the relatively straight forward language of 113(g)(3) begs the question of what limitations period applies when there is no judgment, administrative order approving a de minimis settlement or judicially approved settlement. The plain language of CERCLA simply ignores situations where a responsible party incurs costs by performing investigation or remediation without administrative or judicial action. The question presented is whether such a contribution claim is subject to the three year period in Section 113(g)(3) or the six year period governing Section 107 actions found in Section 103(g)(2).

There is a split in the case law on this issue. In United Technologies Corp. v. Browning-Ferris Industries, Inc., 33 F.3d 96 (1st Cir. 1994), the First Circuit held that any action by a responsible party to recover from another responsible party is, by definition, a contribution claim and must therefore fall within the three year period found in Section 9613(g)(3). Conversely, in Sun Co. v. Browning Ferris Inc., 124 F3d (10th Cir. 1997) the Tenth Circuit held that absent an enumerated event which would trigger the three year limitation in 113(g)(3), a CERCLA contribution action is governed by the applicable time limits for a 107 cost recovery action. Thus, PRP’s claim for remedial costs may be brought within six years after initiation of physical on-site construction of the remedial action. Id. at 1192. This “borrowing” of the 113(g)(2) limitations period in contribution actions has also recently been approved by the Fifth Circuit, See Geraghty and Miller, Inc. v. Conoco, Inc. (2000 Lexis 31831, 5th Cir. 2000).

The Third Circuit has not yet directly decided whether or not all contribution claims are to be strictly limited to a three year limitation period. However, in New Castle County v. Halliburton NUS Corp., 111 F.3d 1116 (3rd Cir. 1997), the court declined to find a basis to apply the discovery rule or to otherwise equitably toll the three year limitations period applicable to a contribution claim arising out of a judicially approved settlement. The facts in New Castle involved a judicial settlement, an event which is specifically enumerated in Section 9613(g)(3). Nevertheless, the language used by the Third Circuit suggests that it might be less receptive to borrowing the six year limitations provision than the Fourth or Tenth Circuits.

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