Local Governments: Opportunities to Recover for Natural Resource Damages

Joseph J. Maraziti Jr.

Joseph J. Maraziti Jr. practices with the Morristown, New Jersey, law firm of Maraziti, Falcon & Gregory. Mr. Maraziti served as plaintiff's counsel in Mayor of Boonton v. Drew Chemical Corp., 621 F. Supp. 663, 16 ELR 20328 (D.N.J. 1985), analyzed below.

[17 ELR 10036]

[R]emember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.

Judge Learned Hand¹

In two recent cases,² key federal district courts have concluded that municipalities may sue for damages to natural resources under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).³ Previously, it was widely assumed that only federal and state authorities could sue for natural resource damages.⁴ This cause of action is potentially of very great importance to financially hard-pressed cities and towns faced with tight budgets and the need to respond to hazardous waste contamination.

The two recent cases are significant to local governments for at least three reasons. First, although plaintiffs in both cases were municipalities, their reasoning applies to the full range of local government entities, including counties and special purpose authorities in appropriate cases.⁵ Thus, the scope of potential plaintiffs seeking to recover for damages to natural resources has been enormously expanded. Secondly, as the result of the recent amendments of CERCLA (The Superfund Amendments and Reauthorization Act of 1986, SARA),⁶ natural resource damage claims are destined to become a prominent component of the national effort to effectively heal the environment from the scars left by decades of abuse. Recoveries for natural resource damage are likely to be very large and will, in some cases, far outweigh cleanup costs. Finally, the statute of limitations in CERCLA, which barred many actions not filed before December 11, 1983, has been extended by SARA;⁷ the earliest termination date will now occur in 1989 or later. Accordingly, local governments now enjoy renewed opportunities to assert natural resource damage claims.

Natural resources are broadly defined in CERCLA to mean "land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States … [or] any State or local government …."⁸ Responsible parties are liable for "damages for injury to, destruction of, or loss of natural resources, including the reasonable cost of assessing such injury, destruction, or loss."⁹ These damages are recoverable in addition to the recovery of cleanup costs incurred in responding to the contamination.¹⁰

Natural resource damages are designed to compensate the plaintiff for the residual injury remaining after a response action has been completed. They are thus intended [17 ELR 10037] to augment the cost of cleanup and represent a recognition by Congress that cleanup actions will often be unable to restore the environment to its prepolluted status. The calculation of such damage may also include a component to compensate for the lost use of the resource, not only in situations where it cannot be restored or replaced, but also where access to the resource has been made difficult or impossible because of the contamination.¹¹

The dimension of the importance of the natural resource damage provisions of CERCLA, and the financial impact this remedy may have on both plaintiffs and defendants, is fully appreciated only when it is viewed in the context of the extraordinary liability provisions of the Act, which, together with case law interpretations, are truly remarkable: almost anyone who controls hazardous substances that are released to the environment and cause the incurrence of response costs is retroactively strictly liable for cleanup costs and natural resource damages. Furthermore, this liability is imposed jointly and severally on all such responsible parties. Available defenses are so limited that some have observed that it is more accurate to describe liability under the Act as absolute and unlimited.¹²

Local Governments as Plaintiffs

Statutory Language of CERCLA

The provisions of CERCLA regarding parties who may recover for natural resource damages are neither explicit nor straightforward,¹³ and are scattered throughout the Act.

CERCLA provides that liability should be to the "United States Government and to any State for natural resources within the State or belonging to, managed by, controlled by or appertaining to such State."¹⁴ However, natural resources include those "belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States … [or] any State or local government."¹⁵ Section 9607(f)(1) provides that "the President or the authorized representative of any State, shall act on behalf of the public as trustee of such natural resources to recover for such damages."¹⁶ Finally, CERCLA's definition of "State" is expansive rather than restrictive; unlike most CERCLA definitions, which are introduced by the word "means," CERCLA provides that "state" shall "… include the several States of the United States."¹⁷

Case Law

In Mayor of Boonton v. Drew Chemical Corp.,¹⁸ the court held that municipalities have standing to recover for damages to natural resources owned by them based on two alternative and independent lines of reasoning.

First, the court rejected the argument, urged by the defendant, that Congress intended to exclude municipalities from the class of parties which can recover for natural resource damages because the definition of "State" omitted a specific reference to political subdivision of states, while other nonapplicable provisions of the Act explicitly included one.

On the contrary, the court concluded that the definition's use of the word "includes" in CERCLA § 101(27) "explicitly contemplates an expansion of the illustrative list by the courts to the fullest extent where to do so would be consistent with the remedial intent of the Act."¹⁹ Adopting the widespread judicial view that CERCLA should be given a broad and liberal construction, the court observed that Congress has often defined "state" in other contexts to include municipalities and other subdivisions of states.

The court made the following analytical observation, which is one of the compelling arguments in support of the view that the Boonton ruling has survived SARA not only unscathed, but, strengthened:

It would be anomalous for this far reaching remedial statute to give states a cause of action for damages to natural resources owned by the State but for it to exclude cities from access to such a cause of action while expressly including resources owned by "local governments" within the scope of the protected subject of Section 9607(a)(4)(C).²⁰

In addition to holding that local governments are proper claimants on their own behalves for natural resource damages under CERCLA, as the result of the inherent logic and intent of the Act, the court discussed an independent basis for such a conclusion. The language of § 9607(f), providing that "the authorized representative of any State" shall recover for natural resource damage, led the court to consider whether the identity of the "authorized representative" is a matter to be determined by state law. In this regard the court discussed provisions of the New Jersey Constitution which require all laws relating to thepowers of municipalities to be liberally construed²¹ and of [17 ELR 10038] the New Jersey Home Rule Act similarly conveying the fullest powers to municipalities over its internal affairs.²²

The court left unresolved the issue whether federal or state law applies to determine the selection of the "authorized representative." Instead, the court relied on two key factual elements of the Boonton case in finding that the town is, in fact, the authorized representative of the state; first, that the contaminated site is owned by the municipality rather than the state, and second, that the New Jersey Department of Environmental Protection directed the town to take action regarding the contamination of the park.

The reasoning in City of New York v. Exxon²³ is similar to that in Boonton. New York City alleged damage to natural resources managed and controlled by it, including Jamaica and Eastchester Bays, Richmond Creek, and aquifers containing present and potential water supplies for its citizens. The contamination resulted from the alleged disposal of chemicals in the city's landfill (a scenario unfortunately duplicated many times over throughout the country). As in Boonton, the New York court also considered two lines of reasoning to conclude that a municipality is a proper plaintiff. First, it looked to the "clear purpose and intent of the Act to ensure prompt cleanup of hazardous waste and the restoration of the environment."²⁴ The court had no patience with the argument that the reference in § 107(f) to "State" necessarily excluded the City, observing that an "overly literal" reading of the statute "makes a fortress out of the dictionary."²⁵ Thus the New York court concurred with Boonton that cities are included within the ambit of potential plaintiffs as a result of the intended definition of the term "State."

Alternatively, the New York court observed that the Act specifically provided that an action on behalf of the state could be maintained by the "authorized representative of any State." The implication of this reasoning, and that on the same point in the Boonton case, is that even if an action is maintainable only by one of the fifty states, as the defendant argued, CERCLA envisions circumstances in which the state may "authorize" a municipality to act on its behalf. The New York court held that the determination of the existence of an "authorized representative" is a factual question. Although the court did not explain its reasoning, it seems obvious that the court was alluding to situations like that discussed in Boonton, where the state had directed the town to take action regarding the pollution of the site and such directive was tantamount to the designation of the town as its "authorized representative" to that extent.²⁶

Impact of SARA

The impact of the Superfund Amendments and Reauthorization Act of 1986 (SARA) on local governments' opportunities to seek natural resource damages results more from the Congressional decision not to take action on the subject, rather than from the inclusion of any new provision in the Act itself. Close scrutiny of the legislative record on the subject reveals tacit congressional concurrence in the result of Boonton and New York cases.

The analysis of the effect of SARA on the role of local governments centers on a comparison of the House of Representatives' definition of "State," with the final draft developed by the Conference Committee and signed into law by the President. The legislation adopted by the House of Representatives amended the definition to exclude units of local governments; the Senate legislation did not contain that provision.²⁷

Not only did the final Conference Report omit the House language and leave the definition unchanged, but the Joint Explanatory Statement of the Committee of Conference contains the following explanation of the Conference substitute:

The conference substitute does not include the House amendment to the definition of "State" leaving it to the court's interpretation of this provision.²⁸

The Conference Report was adopted by overwhelming margins in both the House and Senate.²⁹ Both the Boonton and New York decisions interpreting the definition of "State" to include local governments had been rendered and published prior to the adoption of SARA. The conclusion of the district courts in these cases, holding that the term "State" may also refer to political subdivisions thereof, has undisputedly received congressional endorsement. No other court cases interpret this provision. One of the significant aspects of this development is that it renders moot further analysis of the "authorized representative" provision of § 107(b) which formed an independent basis upon which both the Boonton and New York courts grounded their conclusion. The expanded definition of "State" obviates the need to rely on the "authorized representative" provision.

The comments of Senator Lautenberg (a member of the Conference Committee) during the floor debate provide further support for the conclusion that SARA has, in effect, codified the reasoning in the Boonton and New York cases on this subject. The Senator stated that the final version of the amendment contained in the Conference Report would "uphold the Boonton decision allowing municipalities to sue for cost recovery under the same Superfund provisions available to States, and to serve as trustees for natural resource damages. This provision permits communities to move ahead with cleanup plans on their own."³⁰

Conclusion

The federal cause of action created by CERCLA, allowing recovery of damages to natural resources, represents an expansion beyond common law theories of liability and damage calculation. The full extent of the broadening of [17 ELR 10039] such concepts has yet to be revealed in the case law, but SARA's revitalization of interest in this area of compensation is likely to stimulate increased reliance on judicial remedies by all levels of government.

This tendency should be encouraged. Local governments are often on the "front line" in dealing with the emotional, financial, and political frictions, fears, and dilemmas occasioned by the discovery of a polluted site. The past tendency to look primarily to federal and state officials to take the lead in responding to the problem has led to disappointment and frustration. It is clear that the hazardous waste problem is so great that federal and state authorities will continue to be overburdened in their attempts to respond adequately. If responsibility to recover for damages to natural resources were left exclusively with agencies whose capabilities are already strained, many claims would never be asserted. The manifest intent of CERCLA — to place the costs of pollution cleanup on the polluters — would be thwarted. Unless local governments take the litigation initiative and assert claims for both response costs and natural resource damages, many parties will escape liability altogether and municipalities will become the involuntary heirs of toxic "Frankenstein monsters."³¹

While the Boonton and New York decisions hardly resolve all the issues³² concerning recoveries by local governments for natural resource damages, given the importance of the districts from which they emanate and the compelling nature of the judicial reasoning which has been legislatively reinforced, they are likely to provide the analytical framework within which the resolution of the remaining issues will take place.

1. Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.), aff'd, 326 U.S. 404 (1945), quoted in City of New York v. Exxon Corp., 633 F. Supp. 609, 619, 16 ELR 20850, 20854 (S.D.N.Y. 1986).

2. Mayor of Boonton v. Drew Chemical Corp., 621 F. Supp. 663, 16 ELR 20328 (D.N.J. 1985); City of New York v. Exxon Corp., 633 F. Supp. 609, 16 ELR 20850 (S.D.N.Y. 1986).

3. 42 U.S.C. §§ 9601-9675, ELR STAT. 44001.

4. For discussion of other issues relating to natural resource damage claims, see Atkeson et al., An Annotated Legislative History of the Superfund Amendments and Reauthorization Act of 1986 (SARA), 16 ELR 10360, 10395 (Dec. 1986); Breen, CERCLA's Natural Resource Damage Provisions: What Do We Know So Far?, 14 ELR 10304 (Aug. 1984); Breen, Natural Resource Recovery by Federal Agencies — A Roadmap to Avoid Losing Causes of Action, 13 ELR 10324 (Oct. 1983); Menefee, Recovery for Natural Resource Damages Under Superfund: The Role of the Rebuttable Presumption, 12 ELR 15057 (1982); and Yang, Valuing Natural Resources Damages: Economics for CERCLA Lawyers, 14 ELR 10311 (Aug. 1984). On municipal actions to recover CERCLA response costs, see Thomas, Municipal and Private Party Claims Under Superfund, 13 ELR 10272 (Sept. 1983).

5. The United States has over 3,000 county governments, 19,000 municipal governments, 16,000 township governments, and 28,000 special district governments. U.S. DEPT. OF COMMERCE, BUREAU OF THE CENSUS, STATISTICAL ABSTRACT OF THE UNITED STATES 1986, 285 (1985). The sharp contrast between New York City and the small suburban town of Boonton, New Jersey, the plaintiffs in the two cases, illustrates the size of the group of potential claimants for natural resource damages. The factual settings which give rise to such claims exist in both large and small communities, and in urban, suburban, and rural areas.

6. PUB. L. NO. 99-499, 100 Stat. 1613 (1986). For a detailed analysis of the amendments, see Atkeson et al., An Annotated Legislative History of the Superfund Amendments and Reauthorization Act of 1986 (SARA), 16 ELR 10360 (Dec. 1986).

7. SARA § 113(b), CERCLA § 113(g)(1), 42 U.S.C. § 9613(g)(1), ELR STAT. 44041.

8. CERCLA § 101(16), 42 U.S.C. § 9601(16), ELR STAT. 44006.

9. CERCLA § 107(a)(4)(C), 42 U.S.C. § 9607(a)(4)(C), ELR STAT. 44024.

10. CERCLA § 107(a)(4)(A) and (B), 42 U.S.C. § 9607(a)(4)(A) and (B), ELR STAT. 44024. See City of Philadelphia v. Stepan Chemical Co., 544 F. Supp. 1135, 12 ELR 20915 (E.D. Pa. 1982), which held that a municipality could sue to recover response costs even if it were also a responsible party under CERCLA.

11. In the Boonton case, the contaminated site was once a privately owned landfill which the town purchased in the early 1970s and converted to a neighborhood park. In such a case, various factors may be considered in calculating natural resource damages. If, even after cleanup of the site is complete, it is no longer suitable for use as a park primarily serving small children, then a claim to recover the cost of replacing the park at another location would be within the broad reach of the statutory language. Furthermore, because the site has been closed for several years, a calculation of the value of the lost use of the park in the interim would be appropriate. Quantifying natural resource damages can be difficult, depending upon the factual circumstances of each case. One optional method has been published by the Interior Department at 51 Fed. Reg. 27674 (1986), though the Interior Department procedures have been criticized as undervaluing the damage.

12. Cf. Light, A Defense Counsel's Perspective on Superfund, 15 ELR 10203 (July 1985), criticizing the government's attempt to impose "absolute" liability based on who has the deepest pockets.

13. It is clear that private parties may not assert natural resource damage claims. CERCLA § 107(f)(1), 42 U.S.C. § 9607(f)(1), ELR STAT. 44026.

14. Id.

15. CERCLA § 101(16), 42 U.S.C. § 9601(16), ELR STAT. 44006 (emphasis added).

16. CERCLA § 107(f)(1), 42 U.S.C. § 9607(f)(1), ELR STAT. 44026.

17. CERCLA § 101(27), 42 U.S.C. § 9601(27), ELR STAT. 44007 (emphasis added).

18. 621 F. Supp. 663, 16 ELR 20328 (D.N.J. 1985).

19. 621 F. Supp at 666, 16 ELR at 20329.

20. Id.

21. N.J. CONST. art. 4, § 11, par. 11.

22. N.J.S.A. 40:42-1.

23. 633 F. Supp. 609, 619, 16 ELR 20850 (S.D.N.Y. 1986).

24. 633 F. Supp. at 619, 16 ELR at 20854.

25. 633 F. Supp. at 619, 16 ELR at 20854.

26. 621 F. Supp. at 668, 16 ELR at 20330.

27. H.R. No. 962, 99th Cong., 2d Sess. 185 (1986).

28. Id. (emphasis added).

29. In the Senate the vote was 88-8. 132 CONG. REC. S14943 (daily ed. Oct. 3, 1986). In the House it was 386-27. 132 CONG. REC. H9634 (daily ed. Oct. 8, 1986).

30. 135 CONG. REC. S14912 (daily ed. Oct. 3, 1986) (statement of Sen. Lautenberg) (emphasis added).

31. See Kenney v. Scientific, Inc., 204 N.J. Super. 228, 248, 15 ELR 20403, 20407 (Law Div. 1985) where the Court stated: "A company which creates the Frankenstein monster of abnormally dangerous waste should not expect to be relieved of accountability for the depredations of its creature merely because the company entrusts the monster's care to another, even an independent contractor."

32. SARA added new action-forcing language to CERCLA § 107(f) which requires Governors to designate State trustees, thus raising a question as to whether such designation is an exclusive one, barring the right of a municipality to act as a trustee itself. Such a reading would be incorrect for several reasons: it would be contrary to the overwhelming evidence that Congress specifically intended otherwise, as demonstrated by the Conference Report discussion of the rejected amendment to the definition of "State" and the comments of Senator Lautenberg during floor debate; the Conference Report discussion of the designation provision makes no mention of an intent to require the designation of an exclusive trustee, but instead describes the provision as one which will "clarify" the gubernatorial designation authority, thus indicating that the purpose of the new provision is merely to codify previous practice; and it would run afoul of the advice of Judge Hand to focus on the object of a statute.

The proper interpretation of the new language is that it is intended as an action-forcing mechanism designed to compel states (and the President) to focus on the issue of natural resource damage recovery, and possibly to resolve the issue of whether state law or federal common law governs who may represent the state governments in natural resource damage actions.

The new language mandates the designation of "State officials who may act on behalf of the public as trustee for natural resources." § 107(F)(2)(B) (emphasis added). The selective use of the mandatory and permissive verbs reveals the intent of the provision and is dispositive of the issue; the trustee must be appointed by the Governor, but once appointed may act as the trustee, clearly denoting that others may also act in such capacity. Thus, the use of the word "State" in the designation provision refers, in that context, and as indicated by use of the word "Governors," only to the fifty states, not to the political subdivisions thereof.

For similar reasons, the availability of the rebuttable presumption, CERCLA § 107(f)(2)(C), 42 U.S.C. § 9607(f)(2)(C), ELR STAT. 44026, to local governments suing as trustees for resources under their control should continue. Logic dictates that the availability of the presumption should depend on faithful adherence to the procedures set forth for the assessment of damages, as promulgated by the Department of the Interior under § 301(c), rather than upon the identity of the party utilizing them. Accordingly, the reference to the "State" trustee in the provision creating the rebuttable presumption is intended in the broadest sense, and, in this context, includes political subdivisions of states.