Advisories & Insights

Sixth Circuit strictly construes CERCLA three-year statute of limitations for contribution suits

July, 2007

A recent decision from the Sixth Circuit Court of Appeals creates uncertainty for parties seeking contribution from other responsible parties (PRPs) under CERCLA. In RSR Corp. v. Commercial Metals Co. ("RSR"),[i] decided July 18, 2007, the Sixth Circuit held that a party has three years from the date of settlement with the United States to file a contribution action, even if the settlement does not fall clearly within the CERCLA §113(g)(3) framework, or future cleanup costs are unknown.[ii] The Sixth Circuit's decision, which closes a statute of limitations loophole in CERCLA contribution actions that had allowed PRPs to argue the CERCLA §113(g)(3) limitations period either did not apply, or had not been triggered, is likely to result in PRPs filing contribution suits earlier than they may otherwise have brought them, simply to protect their contribution rights. Indeed, in circuits that have not decided the issue, parties may have reason to act sooner in order to protect their interests.

Background

The case arose out of the cleanup of a former lead battery reprocessing facility located just outside Arcanum, Ohio. Beginning in the 1960's Arcanum Iron and Metal (AI&M) split battery casings at the 4.5 acre site (Site) to extract lead cores for smelting.[iii] AI&M's reprocessing of plastic and black rubber battery casings generated lead oxide sludge that collected on the ground at the Site.[iv] Drained battery acids also collected in a low area onsite. The United States Environmental Protection Agency (EPA) listed the Site on the National Priorities List in 1983, and began cleaning up the Site that same year. EPA filed a cost recovery action against AI&M's operator, Shane, in 1989. RSR Corp. and Commercial Metals Co. were two of the 444 PRPs that provided batteries reprocessed at the Site.[v] Over the next nine years, EPA's cost recovery action expanded to include other PRPs, and in 1993 RSR Corp. was joined as a defendant by another PRP.

In April 1999, the United States and RSR Corp. entered into a consent decree. Under the terms of the consent decree, RSR Corp. agreed to reimburse the United States for EPA's past and future response costs, to "finance and perform" the remedial work needed to finish the cleanup of the Site, and to post a bond of $5.8 million, which was EPA's estimate of the cost of cleanup.[vi] In exchange, RSR Corp. received protection from further enforcement actions and the right to seek contribution from other PRPs. Attached as an exhibit to the consent decree was a volumetric ranking of all known contributors to the Site, including Commercial Metals Co.[vii] The U.S. district court retained jurisdiction over the parties under the consent decree until remediation of the Site was complete. The Site cleanup was completed in July, 2001. Thereafter, EPA removed the Site from the NPL.

In 2003, eighteen months after remediation was complete, but three years and nine months after RSR entered into the consent decree with the United States, RSR Corp. filed a contribution action against Commercial Metals Co. Commercial Metals Co. moved to dismiss the action on the ground that the suit was barred by CERCLA §113(g)(3)'s three-year statute of limitations, which was triggered by the entry of RSR Corp.'s consent decree for future cleanup costs. RSR Corp. appealed.[viii]

First and Tenth Circuit Authority

CERCLA §113(g)(3) provides 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 under section 9622(g) of this title (relating to de minimis settlements) or 9622(h) of this title (relating to cost recovery settlements) or entry of a judicially approved settlement with respect to such costs or damages."

Although the question presented in RSR was novel to the Sixth Circuit Court of Appeals, both the First and Tenth Circuit Courts of Appeal have addressed the question of the applicable limitations period for cases where the statutory triggers of CERCLA §113(g)(3) have not clearly occurred, such as unilateral administrative orders (UAOs), agreed orders on consent (AOCs), or settlements that do not specifically identify or include costs of future cleanup.

For example, in American Cyanamid Co. v. Capuano,[ix] the First Circuit allowed a PRP to file a "rolling" three year claim, holding that the statute of limitations is not triggered for future costs that are not listed in the settlement or judgment.[x] The First Circuit decision allows for the cleanup and the payment for that cleanup to occur in phases, as a PRP incurs costs beyond its pro rata share.[xi]

In Sun Co. v. Browning-Ferris Inc,[xii] the Tenth Circuit concluded that the shortened statute of limitations contained in CERCLA §113(g)(3) only applies when one of the triggering events identified in the statute - a judgment, an administrative order under CERCLA §§122(g) or 122(h) or the entry of a judicially-approved settlement for costs and damages - has occurred.[xiii] In the case of a CERCLA §106 UAO compelling a PRP to clean up a site, the Tenth Circuit borrowed from CERCLA §113(g)(2), the cost recovery statute of limitations, and held that such PRPs must commence contribution actions within six years after the initiation of physical on-site construction of the remedial action, or three years after completion of a removal action.[xiv]

The Sixth Circuit Decision

RSR Corp. asserted that CERCLA §113(g)(3) did not apply because its consent decree was neither an administrative order nor a judicially approved settlement under CERCLA §122(g) or §122(h).[xv] Instead, RSR Corp. argued, its consent decree, to the extent it required RSR Corp. to finance or perform a future cleanup, was a cleanup agreement under §9622(d)(1)(A). Because CERCLA §113(g)(3) was not triggered, RSR Corp. contended, the court should apply the six year limitations period from CERCLA §113(g)(2), which governs cost recovery actions.[xvi]

RSR Corp. also argued that the district court's decision was inconsistent with the decisions of the decisions of the First and Tenth Circuits, and affirming the dismissal as time-barred would result in a split among the circuits.[xvii] Finally, RSR Corp. argued under traditional standing and ripeness principles that its limitations period had not even commenced until 2001, when it made its final payment for cleanup costs, because it was not until then that it expended more than its fair share and had standing to bring a contribution action.[xviii]

The Sixth Circuit declined to borrow from the six-year statute of limitations for cost recoveries, CERCLA §113(g)(2), and instead concluded that RSR Corp.'s consent decree fixed its liability for future costs and triggered the §113(g)(3) three-year statute of limitations period, even if the exact amount for which RSR Corp. would eventually be liable for was unknown.[xix] In doing so, the court rejected the dissent's assertion that the court's construction of the statute was not practical for complex environmental cases where future cleanup costs cannot be accurately estimated or determined and it may take years for a PRP to incur sufficient costs to warrant a contribution action.[xx]

The court also rejected RSR Corp.'s contention that a decision that found RSR Corp.'s claims were time-barred would conflict with decisions from the First and Tenth Circuits. According to the court, both it and the First Circuit in American Cyanimid held that CERCLA §113(g)(3) bars suits for contribution three years after the entry of a settlement or judgment for "such costs or damages" identified in the settlement or judgment.[xxi] RSR Corp.'s "obligation to 'finance and perform' the as-yet-unfinished remedial work at the Arcanum site" was a "cost" identified in a judicially-approved settlement, even though the first dollar of the unfinished remedial work had not been spent.[xxii]

Similarly, according to the court, although the Tenth Circuit concluded in Sun Co. v. Browning-Ferris that a UAO was not a judgment or settlement and thus the six-year limitations applied, the Tenth Circuit "agreed with the only question before [the RSR court]" which was "[i]f the PRP incurred its cleanup costs pursuant to a civil action under §§ 106 or 107, it will have three years from the date of judgment or settlement in which to bring its contribution claim."[xxiii]

RSR Corp. filed a petition for a rehearing en banc on August 1, 2007.[xxiv]

Impact of RSR on PRP-Financed or –Performed Cleanups

Based the RSR decision, PRPs in the Sixth Circuit financing or conducting cleanups following settlement with the United States must, under RSR, file a contribution suit against any non-settling PRPs within three years of settlement with the United States, even if the ultimate cost of the cleanup cannot be determined at that time. In addition, a PRP that does not conduct a PRP search sufficiently in advance of the expiration of the limitations period risks losing parties to sue.

The Sixth Circuit rejected RSR Corp.'s argument that not every settlement or consent decree fits within the statutory framework of CERCLA §113(g)(3) triggering the three-year statute of limitations. The court's decision closes a loophole that had, in the past, enabled a PRP to get around the applications of the three-year statute of limitations period by establishing that none of the §113(g)(3) triggers had occurred.

The implications for PRPs considering entering into consent decrees with the United States are these: First, consent decrees that are not written narrowly may make a PRP susceptible to the argument that liability for future, unknown costs have been included in the decree, triggering §113(g)(3)'s three-year limitations period. Second, where there are unknown PRPs that must be identified and sued within three years, it may be better to delay settlement until those PRPs have been identified. Finally, the safest course of action for PRPs that settle with the United States is to assume that §113(g)(3) applies, and file within three years of settling, even if the final costs, or all other PRPs, are not yet known.

For more information about this decision, or cleanups performed under CERCLA or its state- and tribal-law equivalents, please contact Connie Sue Martin.

Related Practice Areas

• Environmental