Authored by: Andrew M. Thompson

When an in-house lawyer receives a call from one of the company’s facilities reporting that someone has found contamination in the groundwater beneath the facility, you know that, at a minimum, it is bad news. When sample test results soon discover contamination in the drinking water wells of a large number of the residences within a two-mile radius, you fear the worst. However, in this particular instance, what started as every client’s worst nightmare with hundreds of angry local residents filing lawsuits and the local press publishing incriminating articles, ultimately ended with a successful cost recovery action. This article will discuss over six years of twists and turns that involved (1) a class action defense in a federal court and numerous lawsuits involving over 750 individual plaintiffs and requiring defenses in a state court; (2) years of negotiations with the state environmental agency on how to appropriately respond to and investigate the groundwater contamination; and (3) a CERCLA cost-recovery action prosecution.

The Beginning of the Legal Saga

In late 2004, Metso Paper reported to the Pennsylvania Department of Environmental Protection that the chlorinated solvents tetrachloroethene (PCE), trichloroethylene (TCE), and their daughter products, such as cis-1,2-dichlorothene and vinyl chloride, had been detected at levels above reporting limits in the groundwater beneath a Metso facility located in the Ivy Industrial Park outside Scranton, Pennsylvania. Testing detected the contaminants in groundwater monitoring wells installed on-site as part of environmental due diligence conducted by Metso when it acquired the Ivy Park facility from Beloit Corporation during Beloit’s Chapter 11 bankruptcy proceedings. Relatively soon after reporting the groundwater contamination to the Pennsylvania Department of Environmental Protection, Metso tested drinking water wells in and around Ivy Park finding PCE, TCE, their daughter products, or combinations of these in many water wells within an approximately two-mile radius of Ivy Park. By late August 2005, the local newspaper, The Scranton Times, reported almost daily about the Ivy Park groundwater contamination and concerned citizens in the vicinity of Ivy Park had mobilized, forming citizen groups that had started to lobby local, state, and federal elected officials regarding the response to the contamination. In addition, on learning of the detection of chlorinated solvents in nearby drinking water wells, Metso voluntarily began providing bottled water to area residents.

Because the bottled water only offered a temporary solution, Metso also voluntarily began to install carbon-based water filtration systems in residences that relied on potable wells for their home water supply and that revealed PCE or TCE. The water treatment systems removed volatile organics, before the organics encountered exposure points, and either Metso or another company maintained and tested them on a monthly basis. Ultimately approximately 235 properties within the affected area received water treatment systems. During the initial years of the response activities, Metso installed, maintained, and tested the filtration systems in half of the properties. The Pennsylvania Department of Environmental Protection identified the owner and operator of another manufacturing facility located within Ivy Park as a potentially responsible party, and that party installed, maintained and tested the treatment systems in the other half of the properties in the affected area.

The Importance of Productive Negotiations with the Relevant Regulatory Agency

Given the impact of the groundwater contamination on drinking water wells in the vicinity of Ivy Park and the resulting public and political pressure, the Pennsylvania Department of Environmental Protection quickly and aggressively began to investigate the Ivy Park groundwater contamination. Because the contamination was first discovered in the groundwater underneath Metso’s facility, the Pennsylvania Department of Environmental Protection initially focused on investigating Metso. In addition to responding to document and information requests from the Pennsylvania Department of Environmental Protection regarding the operations of and historical and current use of chemicals at Metso’s facility, Metso voluntarily initiated a thorough investigation into potential sources of the groundwater contamination. Metso’s source investigation activities, outlined in a November 2005 consent order executed with the Pennsylvania Department of Environmental Protection, included soil sampling in numerous areas on Metso’s property, the installation and sampling of groundwater monitoring wells both on and off Metso’s property, sampling of drinking water wells in the area of Ivy Park to assist with delineating the groundwater plume, and periodic written reporting to the state agency. In addition, for many years, Metso representatives attended periodic “Unified Command Meetings” involving state and local elected officials, technical experts from the Pennsylvania Department of Environmental Protection and the U.S. Environmental Protection Agency (EPA), and representatives of other potentially responsible parties.

By November 2006, Metso’s environmental consultant delivered a lengthy source investigation report to the Pennsylvania Department of Environmental Protection reporting that the extensive soil sampling conducted on Metso’s property had not detected PCE, TCE, or the contaminants of concern and the levels of such contaminants in the groundwater wells on Metso’s property did not indicate that a release came from Metso’s property or a contaminating source originated there. Because of the results of Metso’s source investigation activities and because Metso proactively investigated its potential role, another potentially responsible party assumed responsibility for sampling and maintaining the residential water filtration systems installed by Metso in early 2007. As a result, Metso was able to significantly reduce its continuing response costs relatively early in the process.

Although by November 2006 Metso and its consultant had concluded that none of the Ivy Park groundwater contamination originated with Metso, the Pennsylvania Department of Environmental Protection continued to request that Metso conduct additional soil and groundwater sampling on and around Metso’s property. Metso’s consultant did not always technically agree with the additional investigatory activities requested by the Pennsylvania Department of Environmental Protection, however, Metso continued voluntarily to cooperate with the agency and to conduct sampling and other work relevant to the agency’s source investigation. By 2011, Metso’s investigative activities included, among other things, soil sampling in over 100 different locations on Metso’s property and periodic sampling of 30 groundwater monitoring wells that it had installed.

Navigating the Defense of a Federal Class Action and State Mass Tort Actions

By late 2005, Metso faced (1) a putative class action filed in Pennsylvania state court in September 2005 seeking certification of a class consisting of “all individuals who reside, have resided, and/or own real property within the plume of potential contamination caused by release of TCE and PCE,” and alleging a state common law negligence claim and a claim under the Pennsylvania Hazardous Sites Cleanup Act (PHSCA), 35 P.S. §6020.702; and (2) a number of multi-plaintiff mass tort actions filed in Pennsylvania state court in November 2005 and involving hundreds of current and former property owners and residents in the area of Ivy Park asserting state common law claims for negligence, nuisance, and trespass and PHSCA violations claims. In both the class action and individual mass tort actions, the plaintiffs sought to recover medical monitoring costs, property diminution damages, environmental testing, cleanup and monitoring costs, and other damages. At no point in time did any plaintiff allege that exposure to groundwater contamination caused a personal injury.

The interplay between the putative class action and the multi-plaintiff mass tort actions created an interesting dynamic because different sets of lawyers represented the plaintiffs in the putative class action and the mass tort actions. The plaintiffs’ lawyers who filed the putative class action won the “battle” and the proverbial race to the courthouse by filing their action first, but the win became a bit of a hollow victory when another group of plaintiffs’ lawyers methodically signed up over 750 individual plaintiffs who would ultimately opt out of the class action settlement.

Reliance on the Newly Enacted CAFA for Removal to Federal Court

Although the attorneys filed the putative class action in Pennsylvania state court, Metso removed the case to federal court based on the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. §1332(d), which had recently become law. The putative class action satisfied the CAFA jurisdictional requirements, 28 U.S.C. §1332(d)(2), in that the plaintiffs sought certification of a purported class, and it appeared from the allegations in the complaint and the relief sought that the aggregate amount in controversy exceeded $5,000,000 and at least one member of the purported plaintiffs’ class was a citizen of a state different from Metso. Nevertheless, the plaintiffs’ attorneys filed a motion to remand the case to state court arguing that the “local controversy” and “home state” exceptions in CAFA applied to the case.

The local controversy exception to CAFA requires, among other things, that greater than two-thirds of the members of a putative class be citizens of the state in which the action originally was filed. 28 U.S.C. §1332(d)(4)(A). Metso argued in response to the plaintiffs’ remand motion that (1) because the plaintiffs could not challenge the original jurisdiction provided by CAFA, the plaintiffs bore the burden of proving the applicability of the local controversy exception, and the plaintiffs could not show that greater than two-thirds of the members of the putative class were Pennsylvania citizens because it was virtually impossible to determine conclusively the residency of the members of the purported class for two reasons. First, the plaintiffs’ proposed class definition failed to limit the scope of the purported class based on time or geography by seeking to include all individuals who “have resided” within an indeterminate “plume of potential contamination.” Second, Metso generated evidence to make a prima facie showing that, more probably than not, greater than one-third of the members of the purported class resided outside of Pennsylvania, which demonstrated that the plaintiffs failed the two-thirds Pennsylvania citizenship threshold. Specifically, title history research on a representative sample of properties within the area of the alleged “plume of potential contamination” showed that almost 80 percent of the properties had been transferred multiple times during the relevant time period so many of the former owners and residents of the properties were no longer Pennsylvania residents.

The plaintiffs similarly failed to satisfy CAFA’s “home state controversy” exception, which directs a federal court to decline to exercise jurisdiction over a purported class action in which “two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.” 28 U.S.C. §1332 (d)(4) (B). In addition to failing to meet the two-thirds Pennsylvania citizenship threshold, the plaintiffs could not establish that the “primary defendants” were Pennsylvania citizens because two out of the three defendants were not citizens of Pennsylvania. Rather than fighting the remand issue, the plaintiffs voluntarily withdrew their motion to remand after receiving Metso’s response to the motion, and the putative class action proceeded in the U.S. District Court for the Middle of Pennsylvania.

The Many Hurdles for Class Certification in a Mass Tort Action

The importance of removing the case to federal court became clear as the parties began preparing for the battle related to the plaintiffs’ motion for class certification. In cautioning against class certification in the mass tort context, federal courts have repeatedly emphasized that “individualized issues can become overwhelming in actions involving long-term mass torts (i.e., those which do not arise out of a single accident).” Georgine v. Amchem Prod., Inc., 83 F.3d 610, 628 (3d Cir. 1996). See, e.g., Barnes v. American Tobacco Co., 161 F.3d 127, 142 (3d Cir. 1998). In Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S. Ct. 2231 (1997), the Supreme Court explained that, although the text of Federal Rule of Civil Procedure 23 “does not categorically exclude mass tort cases class certification,” the advisory committee for the 1966 revision of the rule noted that

‘mass accident’ cases are likely to present ‘significant questions, not only of damages but of liability and defenses of liability affecting the individual in different ways.’… And the Advisory Committee advised that such cases are ‘ordinarily not appropriate for class treatment….The Committee’s warning, however, continues to call for caution when individual stakes are high and disparities among class members great.

Amchem Products, 521 U.S. at 625, 117 S. Ct. at 2250 (emphasis added) (citations omitted). See, e.g., Blyden v. Mancusi, 186 F.3d 252, 270 (2d Cir. 1999) (explaining that the Supreme Court’s analysis in Amchem Products “sharply curtailed the ability to certify a class action pursuant to Rule 23(b) (3) in the mass tort context”).

This caution was particularly apt in the Ivy Park groundwater contamination case because it exemplified the archetypal “long-term mass tort”: individual issues of liability, causation, exposure, and damages predominated over the common issues. For example, the Ivy Park matter involved multiple releases and plumes of contamination, no fewer than five potentially responsible parties, and widely divergent levels and periods of exposure among the putative class members. Moreover, the plaintiffs’ proposed class “consisting of all individuals who reside, have resided, and/or own real property within the plume of potential contamination caused by release of TCE and PCE” not only would have included persons with widely divergent levels and periods of exposure and properties with widely divergent levels of groundwater contamination, but also would have included persons who absolutely did not experience exposure and properties on which testing had not detected any groundwater contamination. In addition, the levels of exposure for a particular member of the proposed class and the extent of groundwater contamination for a particular property would vary significantly based on the length of time that the class member had resided in the relevant area; whether the class member only owned property but did not reside in the relevant area, or the reverse; whether the class member and property relied on public water versus a private well; whether testing of the private well had detected TCE, PCE, or both; and whether detected TCE or PCE levels fell above or below safe drinking water standards.

Similarly, as a result of class certification discovery conducted about the named plaintiffs, it became clear that the named plaintiffs did not adequately represent a medical monitoring class because they had unique medical histories and had previous workplace exposures to TCE and PCE, and the level and type of contamination detected in their drinking water wells was different from many members of the proposed class. In these circumstances, federal courts repeatedly deny motions for class certification. See, e.g., Barnes, 161 F.3d at 146–147 (holding that “the requirement that each class member demonstrate the need for medical monitoring precludes certification of medical monitoring class in mass tort context and concluding that defenses to claims of representative plaintiffs that raise individual issues preclude class certification”). In addition, the named plaintiffs’ property was not representative of the diverse types of properties within the proposed class area. Metso retained an expert in the valuation of environmentally sensitive properties who conducted a survey of the approximately 3,500 parcels of property within the proposed class area and identified the properties’ many differences in usage, size, zoning, value, and other factors, which provided grounds for denial of a property damage class. Finally, in contrast to a single accident or a single incident case involving a single source of contamination or pollution that allegedly injures many people, courts have concluded that class certification is not appropriate in cases involving multiple sources of alleged contamination because it would require evaluating individual issues applicable solely to each putative class member separately to establish the liability of different defendants or nonparties and the respective roles of the defendants in relation to each other. See, e.g., Boughton v. Cotter Corp., 65 F.3d 823, 826–28 (10th Cir. 1995) (affirming the district court’s denial of class certification based on the fact that “there was not a single source of conduct alleged to have caused the injuries, identical with respect to each plaintiff” and “plaintiffs allege that their injuries derive from more than one source, and questions of injuries and liability may differ depending upon where individual plaintiffs reside”) (emphasis in original).

Despite all of the obstacles to class certification, certification became moot as a disputed issue when the other defendants agreed to settle with the putative plaintiffs’ class. Metso was dismissed with prejudice from the federal court class action without making a payment, and the federal court approved the class settlement without objection. Black v. Metso Paper USA, Inc., et al., No. 3:05-CV-01951, 2010 WL 480222 (M.D. Pa. Feb. 4, 2010).

Complexities in Resolving Hundreds of Individual State Court Claims

By early 2010, over 750 individuals had joined the numerous lawsuits filed in Pennsylvania state court against Metso and the other defendants. The state court actions progressed at a much slower pace than the federal class action case, with much jockeying among the lawyers regarding a manageable discovery schedule, the scope of the plaintiffs’ responses to interrogatories and document requests, and an appropriate schedule and process for the defendants’ attempts to take depositions of over 750 plaintiffs. Due to the slower pace of the state court actions, by the time that significant discovery began in the state court actions, it had become clear that Metso had not had a role in the groundwater contamination. Although the counsel for the plaintiffs in the state court actions acknowledged that the sampling data did not establish that Metso had released any of the contaminants of concern, the plaintiffs would not dismiss Metso without a minimal settlement payment.

Rather surprisingly, reaching an agreement in principle to resolve the state court actions proved much simpler than the process of obtaining signed releases from the over 750 plaintiffs. The plaintiffs’ counsel faced a number of difficulties obtaining signed releases from all their clients due to the number and breadth of the individual claimants, which ranged from current property owners and residents to former employees of businesses within the affected area, individuals who previously owned property within the affected area but had long since moved away, and adult children of property owners who had only lived within the affected area for a limited period of time. In fact, once the lawyers for the parties signed a written settlement agreement, it took over a year to obtain signed releases from the vast majority of the plaintiffs, and ultimately Metso had to file an unopposed motion to dismiss the claims of 21 plaintiffs who had failed to respond to repeated inquiries from their attorneys. Although the plaintiffs’ attorneys cooperated throughout the process, it was not until July 2011 that the court entered an order granting the motion to dismiss officially, resolving the state court actions initiated against Metso.

Lessons Learned from a Cost Recovery Action Against the Responsible Parties

As the source investigations continued to fail to find evidence that Metso had released PCE or TCE, Metso began preparing to pursue a cost recovery action under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. §9601 et seq., and the Pennsylvania Hazardous Sites Cleanup Act (PHSCA), 35 P.S. §6020.101 et seq. An important first step in the process was determining Metso’s total incurred response costs and making a specific demand of another potentially responsible party to trigger the running of mandatory prejudgment interest under CERCLA and the PHSCA. See 42 U.S.C. §9607(b); 35 P.S. §6020.702(b).

Cost Recovery After the U.S. Supreme Court Decision in Atlantic Research

After not receiving a response to its demand, Metso filed a lawsuit in late April 2008 against one of the other potentially responsible parties in the U.S. District Court for the Middle District of Pennsylvania. Metso’s complaint included cost recovery claims under §107(a) of CERCLA and §702 of the PHSCA, as well as common law negligence and nuisance claims, and Metso sought to recover past and future response costs and prejudgment interest. The response costs sought by Metso included the costs of (1) providing bottled drinking water to private homes and businesses that relied on potable wells for their water supply, (2) installing water treatment systems on the potable wells of surrounding homes and businesses and sampling and maintaining the systems for over a year, and (3) engaging environmental consultants to monitor and respond to the groundwater contamination and to conduct an extensive investigation to determine the sources of the groundwater contamination. Metso’s response costs also included non-litigation related attorneys’ fees incurred responding to the groundwater contamination. Although litigation-related attorneys’ fees are not recoverable under CERCLA, the U.S. Supreme Court in Key Tronic Corp. v. U.S., 511 U.S. 809, 820, 114 S. Ct. 1960, 1967 (1994), held that attorneys’ fees and the fees of other professionals incurred “identifying other PRPs” and “tracking down other responsible solvent polluters” are “closely tied to the actual cleanup” of contamination and are recoverable under CERCLA.

To allow the other potentially responsible parties time to resolve the Black class action case pending in the same court, Metso agreed to a series of 90-day voluntary stays of its action until late 2009. At the end of the stay period, the defendant filed a motion to dismiss in which it argued, among other things, that Metso could not recover response costs under §107(a) of CERCLA and §702 of the PHSCA because Metso had executed a consent order with the Pennsylvania Department of Environmental Protection and thus purportedly had not “voluntarily” incurred the costs. The defendant argued that Metso should not have pursued the cost recovery action under §107(a) of CERCLA but as a contribution action under §113(f)(3)(B) of CERCLA, and the argument specifically implicated the U.S. Supreme Court decision in United States v. Atlantic Research Corp., 551 U.S. 128, 127 S. Ct. 2331 (2007), addressing the remedies available to private parties under §§107(a) and 113(f) of CERCLA.

Section 107(a)(4)(B) assigns liability to potentially responsible parties for “any other necessary costs of response incurred by any other person consistent with the national contingency plan.” 42 U.S.C. §9607(a) (4)(B) (emphasis added); Cooper Indus., Inc. v. Aviall Serv., Inc., 543 U.S. 157, 161, 125 S. Ct. 577, 580–81 (2004). In contrast, §113(f)(3)(B) establishes a “contribution” action and states that “[a] person who has resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement may seek contribution from any person who is not party to a settlement referred to in paragraph (2).” 42 U.S.C. §9613(f)(3)(B) (emphasis added). Unlike a §107(a) cost recovery claim, the contribution protection provision of §113(f)(2) can bar a contribution claim under §113(f) if a defendant resolves its liability with the EPA or with a state regulatory agency.

In Atlantic Research, the Supreme Court explained that

§107(a) permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under §107(a) without any establishment of liability to a third party. Moreover, §107(a) permits a PRP to recover only the costs it has ‘incurred’ in cleaning up a site. 42 U.S.C. §9607(a)(4)(B). When a party pays to satisfy a settlement agreement or a court judgment, it does not incur its own costs of response. Rather, it reimburses other parties for costs that those parties incurred. Accordingly, the remedies available in §§107(a) and 113(f) complement each other by providing causes of action ‘to persons in different procedural circumstances.’

Atlantic Research, 551 U.S. at 139, 127 S. Ct. at 2338. In a motion to dismiss, the defendant attempted to rely on footnote 6 from Atlantic Research in which the Supreme Court expressly left open whether
“expenses pursuant to a consent decree following a suit under §106 or §107(a)… are recoverable under §113(f), §107(a), or both.” Id. at 139 n.6.

In denying the motion to dismiss Metso’s cost recovery claims, the U.S. District Court for the Middle District of Pennsylvania issued a March 12, 2010, order in which the court (1) relied on the plain text of CERCLA and the PHSCA, the reasoning of the Supreme Court in Atlantic Research, and the Second Circuit decision in W.R. Grace & Co.-Conn. v. Zotos Int’l, Inc., 559 F.3d 85 (2d Cir. 2009); (2) rejected a number of lower court decisions issued before Atlantic Research; (3) reasoned that allowing a party such as Metso to pursue a §107 cost recovery claim after agreeing to a consent decree comported with CERCLA’s goal of encouraging voluntary responses to, and cleanups of, contamination; and (4) concluded that Metso had acted voluntarily in incurring response costs and was permitted to seek cost recovery under CERCLA and the PHSCA. In subsequently denying the defendant’s motion for certification of an immediate interlocutory appeal under 28 U.S.C. §1292(b), the district court relied on Agere Systems, Inc. v. Advanced Environmental Technology Corp., 602 F.3d 204 (3d Cir. 2010), which was issued soon after the district court’s order denying the motion to dismiss and in which the Third Circuit provided express guidance on the interplay of §107(a) and §113(f)(3)(B).

Key Issues in Addressing an Opposing Party’s Requested Site Access for Sampling

After Metso successfully defeated the attempts to dismiss its CERCLA and HSCA cost recovery claims, the crucial litigation issue became the defendant’s efforts to undertake extensive sampling of Metso’s property in an attempt to identify a source of PCE or TCE on Metso’s property and thus allocate to Metso a significant portion of the Ivy Park response and remediation costs, which included the approximate $20 million cost of designing and constructing a public water line for the residents in the affected area. The defendant’s request to access Metso’s property was governed by Federal Rule of Civil Procedure 34(a)(2), which allows a litigant to “inspect,… test, or sample” property. However, a request to enter another’s private property imposes greater burdens and risks than other forms of discovery and thus requires a greater and heightened showing than the general relevancy standard of Federal Rule of Civil Procedure 26(b). As a result, Federal Rule of Civil Procedure 26(c) allows courts to place restrictions on the access or to deny it altogether in certain circumstances. Through a series of negotiations, discovery conferences with the presiding judge, and written access agreements, Metso was able to place important limitations on the access to Metso’s property to reduce the disruption to Metso’s business operations. We cannot overemphasize the importance of a carefully crafted written access agreement, along with court guidance on particularly contentious issues.

Key protections and limitations to include in an access agreement, or to seek through a court order, if necessary, are (1) requiring the accessing party and its consultants and contractors to indemnify the property owner for any damage and business losses caused during the access, along with proof that the consultants and contractors accessing the property possess sufficient insurance to cover any damage; (2) requiring the accessing party to provide a detailed written work plan before accessing the property and to comply with the work plan at all times; (3) requiring the accessing party to pay for the property owner’s consultant to attend all the accessing party’s sampling and testing activities on the accessed property; (4) requiring the accessing party to share data generated during the access with the property owner in a timely manner and to have the data generated by the accessing party properly validated by an accredited laboratory; (5) allowing the property owner’s consultant to split all samples taken by the accessing party; and (6) requiring the accessing party to restore the property to its preexisting condition including appropriately disposing of all investigation derived waste within a specific time period.

Moreover, it is important to require the party seeking property access to demonstrate to the court its need for the specific sampling and to ensure court involvement in an incremental approach to the sampling so that if the accessing party ultimately does not discover any evidence of a contamination source, as happened with the sampling of Metso’s property, the court knows the details of the sampling and that the sampling failed to uncover any evidence of a source. If positioned in such a manner, unfruitful sampling of the property will facilitate a resolution as happened in Metso’s cost recovery action when the parties settled the case in late 2011.

Conclusion

A complex groundwater contamination case presents many challenges from a technical perspective as well as from a regulatory and litigation perspective. Navigating those challenges has significant implications for both defending against third-party actions initiated by affected individuals and for prosecuting cost recovery actions against other potentially responsible parties. Although litigating a groundwater contamination case can become lengthy and expensive, it ultimately provides many opportunities to manage the numerous, moving parts of a case and obtain a favorable outcome for a client.