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May 2005
01
May 01, 2005

Supreme Court Decision Places New Limits on Environmental Lawsuits

The Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as CERCLA, allows the federal government to bring a lawsuit to require a legally responsible party to clean up environmental contamination (CERCLA Section 106), or to require the party to repay the government or an innocent party the costs incurred when it cleaned up the problem (CERCLA Section 107). Many polluted properties, however, are cleaned up without any such lawsuit being filed, often as a result of cooperation between the parties involved and government authorities. Regardless of the procedure followed, parties who foot the bill for the cleanup have traditionally been permitted to seek recovery of a fair share of the costs incurred from other parties who shared in the responsibility for the pollution through an action for contribution under CERCLA Section 113.

The United States Supreme Court opinion in Cooper Industries, Inc. v. Aviall Services, Inc., 125 S.Ct. 577 (2004), issued on December 13, 2004, significantly changed the law with respect to these contribution claims. In Cooper Industries, the Supreme Court held that a party who has not been sued under Sections 106 or 107 of CERCLA may not bring a contribution action under the most commonly relied-upon provision of CERCLA Section 113. The Supreme Court's decision is contrary to most prior decisions from the lower courts, and significantly alters the landscape for parties seeking to bring contribution claims under CERCLA.

The Cooper Industries case involved cleanup costs associated with four contaminated aircraft engine maintenance facilities located in Texas. The defendant, Cooper Industries, Inc., owned and operated the facilities until 1981, at which time it sold them to the plaintiff, Aviall Services, Inc. Aviall then operated the facilities for a number of years. Aviall ultimately discovered that both it and Cooper Industries had contaminated the facilities with hazardous substances that had spilled onto the ground or leaked from underground storage tanks, contaminating the soil and groundwater at the sites.

Aviall notified the Texas Natural Resource Conservation Commission of these facts. The Commission instructed Aviall to clean up the sites and threatened to pursue enforcement action if Aviall did not do so. No judicial or administrative actions of any kind were taken, however, to compel the cleanup. Aviall proceeded to clean up the properties under the state's supervision, incurring approximately $5 million in cleanup costs. Additional costs were expected in the future as well.

The Supreme Court ruled that CERCLA Section 113 did not authorize Aviall's suit. The Supreme Court noted that the first sentence of the contribution provision at issue states: "Any person may seek contribution . . . during or following any civil action under [Section 106] or [Section 107]." The Court concluded that "[t]he natural meaning of this sentence is that contribution may only be sought subject to the specified conditions, namely, 'during or following' a specified civil action."

The immediate impact of the Cooper Industries decision is that plaintiffs like Aviall, who have engaged in purely voluntary cleanups, cannot pursue a contribution claim. Already several courts applying Cooper Industries have dismissed contribution claims because of the lack of a prior or pending civil action under Section 106 or 107. The decision also casts doubt on the viability of contribution claims by parties who clean up properties under administrative orders issued by the Environmental Protection Agency (as opposed to a court order). One court has already dismissed such a claim based upon Cooper Industries.

For businesses already embroiled in environmental litigation, the Cooper Industries decision creates a new defense for parties from whom contribution is sought - and a new potential problem for the party bringing the claim. The decision also dictates that parties proceed with caution in ongoing or future cleanup efforts, since it is now clear that the failure to follow the right procedures could cost you your right to recover expenses from other potentially responsible parties in a contribution claim.

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Dean F. Pacific is a partner in our Grand Rapids office. He specializes in the areas of civil litigation, including environmental litigation, and may be reached at 616.752.2424. Warner Norcross & Judd is a full-service law firm with offices in Grand Rapids, Holland, Metro Detroit and Muskegon. Because each business situation is different, this information is intended for general information purposes only and is not intended to provide legal advice.

West Michigan Commercial Development & Real Estate Quarterly

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