Sixth Circuit Holds That Settling PRPs at Superfund Sites Are Limited to Contribution Claims Against Other PRPs

The interplay of two remedies for recovery by Potentially Responsible Parties (PRPs) of their cleanup costs at contaminated sites has been a lively topic of debate ever since Congress added Section 113(f) in 1986, clarifying the right of parties held jointly and severally liable for cleanup costs to seek recovery of a share of those costs from other PRPs who had not contributed toward cleanup. In 2007, the Supreme Court in United States v. Atlantic Research Corp. held that both Section 113 contribution claims and the pre-existing remedy under Section 107 for cost recovery were available to PRPs, depending on the circumstances. The Court, in that case, held that a PRP who incurs cleanup costs without having been sued by or settled with EPA could seek cost recovery under Section 107.  It declined to rule whether a PRP who has settled with EPA can recover costs under Section 107.

Since Atlantic Research, circuit courts that have ruled on the subject have agreed that Sections 107 and 113 provide mutually exclusive remedies. On July 14, the Sixth Circuit joined the ranks of those courts, but, differing from a previous decision of the Seventh Circuit, held that the appellants in Hobart Corp., et al v. Waste Management of Ohio, et al who had entered Administrative Orders on Consent (AOCs) were limited to contribution claims under Section 113.  The distinction is important because Section 107 provides “a broader avenue of recovery” (as the Sixth Circuit described it), and because the statute of limitations for claims under Section 107 is longer (6 years) than under Section 113 (3 years).  Because the decision turned in part on the language of the AOC, PRPs should closely evaluate their recovery options before entering into an AOC or other settlement with EPA or a State.

In the case, Hobart and other PRPs negotiated and entered into an AOC with EPA for cleanup of the South Dayton Dump and Landfill Site in Ohio. They sued Waste Management of Ohio and others to recover those costs. However, the suit was not filed within the 3-year statute of limitations applicable to Section 113 claims. Hobart and other appellants argued that the AOC was not an “administrative settlement” within the meaning of Section 113(f)(3)(B) and that therefore they had not resolved their liability with EPA and could not file a Section 113(f) contribution claim. Hobart relied upon an earlier Sixth Circuit case, ITT Industries v. BorgWarner (6th Cir. 2007) and the Seventh Circuit’s decision in Bernstein v. Bankert (7th Cir. 2013). Waste Management and other appellees, joined by EPA in an amicus brief, argued that allowing PRPs to seek cost recovery under Section 107 after entering into an AOC would create a disincentive for PRPs to settle with EPA at Superfund sites, causing them to delay cleanups and litigate instead of settling.

Based on the language of EPA’s updated AOC used in the Hobart case, the Sixth Circuit differentiated the Hobart AOC from the AOC entered into in the ITT case, and held that the Hobart AOC “resolves the Appellants’ liability and, therefore, that the agreement is an administrative settlement under 113(f)(3)(B).”  Because Hobart and the other Appellants could, therefore, have sued for contribution, they were precluded from suing under Section 107 for cost recovery.

For further information regarding contaminated site settlement strategies and cleanup costs, contact Steve O’Day or Dave Moore.

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