Cost Recovery Under Superfund – The Eighth Circuit Fills the Void Created by the United States Supreme Court in the Atlantic Research Decision

The Eighth Circuit recently addressed an issue which the United States Supreme Court expressly side-stepped in 2007 when it decided United States v. Atlantic Research Corp., 551 U.S. 128 (2007). In Atlantic Research, the Court left open the question whether potentially responsible parties that incur response costs pursuant to an administrative consent order or a judicially approved consent decree may pursue a cost recovery claim under §107 of CERCLA, §113 of CERCLA or both sections.

In Atlantic Research, the Supreme Court held that ARC, a private party that had incurred response costs, could bring suit under §107 of CERCLA because it had “voluntarily” incurred response costs to remediate its property. It also recognized that the costs of reimbursement paid pursuant to a legal judgment or settlement are recoverable only under §113(f) of CERCLA. The Court refused to classify other response costs that did not fit either of these categories, declining to decide whether response costs incurred pursuant to a consent decree could be recovered under §107, §113(f) or both sections of CERCLA.

This issue left open by the U. S. Supreme Court in 2007 was recently ruled upon by the Eight Circuit in Morrison Enterprises, LLC v. Dravo Corporation, No. 10-1468 (April 5, 2011, 8th Cir.). Morrison and the City of Hastings, Nebraska sued Dravo Corporation under §107 of CERCLA to recover response costs that they had incurred responding to contaminated groundwater at the Site. In 1991 and again in 1996, Morrison had entered into Administrative Orders on Consent with EPA to operate a groundwater extraction and treatment system, which began operating in 1997. Morrison also entered into a consent decree regarding the operation of the groundwater extraction and treatment system.

On July 3, 2008, the City and Morrison sued Dravo under §§107 and 113(g)(2) of CERCLA; they did not assert a claim under §113(f) of CERCLA. The City and Morrison argued that the costs incurred to construct and operate the groundwater remediation system could be recovered under §107. The District Court concluded that CERCLA §113(f) was the exclusive remedy available to a party that incurs response costs pursuant to an administrative order or a judicially approved consent decree. It also found that the City’s §107 cost-recovery claim for replacement of the City’s water system was barred by the applicable statute of limitations, and refused to allow Morrison’s motion for leave to amend its complaint to assert a claim under §113.

On appeal, the Eighth Circuit affirmed the decision of the District Court. Relying upon the Atlantic Research decision, the Court noted that §107(a)(4)(B) was only available to a private party who had voluntarily incurred response costs and that §113(f) allowed a contribution claim for a person who is liable or potentially liable under §107(a) during or following a civil action under §§106 or 107. It declined to allow a party with a §113(f) claim to also proceed under §107(a), because doing so would in effect, “nullify the SARA amendment and abrogate the requirements Congress placed on contribution claims under §113” quoting from Niagra Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112, 128 (2nd Cir. 2010). The Eighth Circuit also relied upon pre Atlantic Research cases limiting a liable party to claims under §113. See Dico, Inc. v. Amoco Oil Co., 340 F.3d 525, 531 (8th Cir. 2003). Although the Supreme Court had noted the potential overlap between §107(a) and §113(f), in not only the Atlantic Research decision but also in Key Tronic Corp. v. United States, 511 U.S. (816) (1994), the Eighth Circuit determined that there was no overlap for a liable party compelled to incur response costs pursuant to an administrative order or a judicially approved settlement.

The decision highlights the need to assert all possible bases for recovery in cost recovery cases, given the complexities of CERCLA and the divergent and oftentimes conflicting interpretations of it.