Null

F. James Handley

Editors' Summary: Congress, through the 1986 Superfund Amendments and Reauthorization Act (SARA), has succeeded in promoting CERCLA settlements between potentially responsible parties (PRPs) and the government. But the growing number of settlements have resulted in increased litigation between settling and nonsettling PRPs, in part due to uncertainties about SARA's contribution provisions. SARA clarified that settling PRPs may seek contribution from other liable parties, and obtain protection from contribution actions related to matters addressed in their settlements. Unfortunately, Congress left unclear the extent to which settlements limit nonsettlors' liability, which settlement "matters" are accorded contribution protection, and how contribution protection applies to PRPs who settle at different times and over different issues. The author analyzes CERCLA's contribution provisions, their legislative history, and the apparent inconsistencies in key court decisions shaping their application. He explores the effect of contribution protection on nonsettling parties and private cost recovery actions, and the impact of PRP settlement timing on contribution claims and protection. The author concludes that Congress intended to punish nonsettling parties by saddling them with disproportionate liability. His analysis of cases interpreting CERCLA's contribution provisions supports recovery of private response costs voluntarily incurred, even against those parties with contribution protection. The author also concludes that the scope of contribution protection in de minimis settlements should generally be broad to provide final resolution of claims against de minimis parties.

Mr. Handley, who holds an LL.M. in environmental law from George Washington University, a J.D. from the University of Houston, and a Bachelor of Chemical Engineering from the University of Delaware, is an attorney in EPA's Office of Enforcement, Superfund Division. The views expressed herein are solely those of the author and do not necessarily reflect those of EPA or the United States Government.

[22 ELR 10542]

Settlements under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)¹ have increased markedly since 1986, when Congress amended the statute, including the addition of § 113(f)(2).² As the number of settlements has increased, so has litigation between settling and nonsettling parties. Section 113(f)(1) provides that potentially responsible parties (PRPSs) who are liable to the government have a right to seek contribution from other liable parties.³ However, § 113(f)(2) also provides that PRPs who have resolved their liability to the government are not liable in contribution for matters addressed in their settlements.⁴ Thus, settling PRPs expect to be protected from private party contribution suits, at least as to matters addressed in their settlements, while retaining the right to seek contribution from those who have not settled. Consent decrees between PRPs and the United [22 ELR 10543] States, which follow the CERCLA model consent decree,⁵ explicitly refer to § 113(f)(2).

Contribution rights and the applicability and scope of contribution protection determine whether a PRP has a claim or a defense in a private party CERCLA action. But what if the government settles with a PRP for too little? Should nonsettling PRPs be saddled with the shortfall? And what are "matters addressed"⁶ in a settlement for which CERCLA provides contribution protection? Moreover, how does a PRP's contribution protection affect the claims of private parties who have performed response actions at a site? And what happens to settling parties' contribution claims when potential contribution defendants settle with the government and obtain contribution protection?

How CERCLA's contribution provisions are interpreted significantly affects the amount and costs of private party CERCLA litigation. An examination of CERCLA's contribution provisions, their legislative history, and the case law that has interpreted them provides a basis for answering these questions.

The Effect of Contribution Protection on Nonsettling Parties

While CERCLA § 113(f)(2) provides settling parties with the advantage of contribution protection for matters addressed in their settlements, it places nonsettling parties at a disadvantage. Settlements under § 113(f)(2) only reduce "the potential liability of [nonsettling PRPs] by the amount of the settlement."⁷ This limitation has significant implications for PRPs that choose not to settle with the government.

In City of New York v. Exxon Corp.,⁸ the district court was asked to approve a settlement between the City of New York and a number of defendants concerning the defendants' illegal disposal of hazardous wastes at five city landfills. Exxon, and other defendants that decided not to participate in the settlement, argued unsuccessfully that CERCLA § 113(f)(2) did not apply.⁹ After reviewing cases decided both before and after the enactment of the Superfund Amendments and Reauthorization Act of 1986 (SARA),¹⁰ the Exxon court concluded that the settling parties would be protected from contribution claims even under pre-SARA law.¹¹

The Exxon court then reviewed the settlement to see whether it was fair, adequate, reasonable, and consistent with the U.S. Constitution and the mandate of Congress.¹² The nonsettling parties asserted that the settlement was unfair to them, because § 113(f)(2) would allow settling defendants, to the extent that they paid more than their shares of liability, to seek contribution from the nonsettlors.¹³ Moreover, the nonsettling parties feared that if the settling parties paid less than their proportionate shares, the nonsettling parties could be forced to absorb the shortfall.¹⁴ While the court agreed that § 113(f)(2) would have these effects,¹⁵ it noted that the possibility of a contribution suit by the settling parties was foreclosed because they had agreed to forgo all claims against the remaining parties.¹⁶ To the extent that nonsettling parties were disadvantaged in other ways, such as by being liable to the government for any shortfall, Judge Conboy observed that their dispute was with Congress.¹⁷ By providing that settlements reduce the liability of nonsettlors by the amount of the settlement, the Exxon court concluded that Congress had intended to hold nonsettling parties accountable for any shortfall.¹⁸

The effect of contribution protection on nonsettlors arose again in United States v. Cannons Engineering Corp.¹⁹ As in Exxon, nonsettling parties in Cannons opposed the entry of consent decrees that, by implication, determined the share of liability allocated to the nonsettling PRPs.²⁰ The nonsettling PRPs first argued that the proposed consent decrees were unfair because they failed to account for the relative [22 ELR 10544] fault of the nonsettling parties. Judge Wolf found that the consent decrees were fair, reasonable, and consistent with the U.S. Constitution and the mandate of Congress.²¹ He then examined CERCLA § 113(f)(2) and concluded that Congress intended that settlements would reduce the potential joint and several liability of the nonsettling parties by the amount of the settlement, not by the liability share of the settling parties.²² The court concluded that Congress, by expressly providing in § 113(f)(2) for the reduction of nonsettlors' potential liability by the amount of the settlement, made a conscious choice to adopt the approach taken in § 4 of the Uniform Contribution Among Tortfeasors Act (UCATA).²³ The UCATA provides that settlement with one party "reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, … or in the amount of the consideration paid for it, whichever is greater …."²⁴ The Cannons court observed that in adopting the UCATA principle, Congress rejected the principles of the Uniform Comparative Fault Act (UCFA),²⁵ which reduces the nonsettlors' joint and several liability by the settling party's share of liability, rather than by the amount the settlor paid.²⁶ Thus, the court held that nonsettling parties would be jointly and severally liable for any remaining claim, regardless of whether the settling parties had paid their fair share.²⁷ In other words, nonsettling parties are liable for their proportional share and any shortfall not recovered by the government in prior settlements.²⁸

The Cannons defendants appealed and the First Circuit affirmed, adopting the reasoning of the district court.²⁹ The court concluded that as an integral part of the statutory plan, Congress intended to disadvantage nonsettlors by saddling them with "[d]isproportionate liability, a technique which promotes early settlements and deters litigation for litigation's sake."³⁰ Although several pre-SARA decisions applied comparative fault principles,³¹ post-SARA decisions have consistently agreed with the First Circuit in Cannons that nonsettlors must bear any shortfall in accordance with the principles of the UCATA.³²

Are Private Cost Recovery Actions Precluded by Contribution Protection?

In United States v. Hardage,³³ the Hardage Steering Committee sought to recover its response costs from de minimis parties that had previously settled with the United States. Faced with broad contribution protection language in the de minimis parties' decree, the Hardage Steering Committee argued, in essence, that the decree between the United States and the de minimis parties could not address private response costs incurred by the members of the Steering Committee, because this cause of action was not the government's to settle.³⁴ Further, the Committee argued that its CERCLA § 107 cost recovery claim was not barred by CERCLA § 113(f)(2) contribution protection.³⁵ Judge Phillips, apparently persuaded by the latter argument, reasoned that "a cost recovery claim is an original claim to recover money that private party defendants have spent for their own response measures."³⁶ In contrast, the court held that a "contribution claim is a derivative claim in which a defendant attempts to transfer to a third party some of the liability asserted against it by the plaintiff."³⁷ The court then held that the United States had no statutory authority to protect de minimis defendants from the Committee's independent response claims³⁸ and interpreted the de minimis consent decree not to discharge the Committee's claims.³⁹ The court felt that "to rule otherwise … would provide a disincentive … to private parties to begin cleanup activities on their own."⁴⁰

The conflict between private party cost recovery and contribution protection arose again in Burlington Northern Railroad v. Time Oil Co.⁴¹ The parties own adjacent properties within the Well 12A Superfund site in Tacoma, Washington.⁴² In 1985, Burlington Northern and the Environmental Protection Agency (EPA) entered into a partial consent decree in which Burlington Northern removed contaminated soil and performed other remedial action on its [22 ELR 10545] property.⁴³ In 1986, Time Oil entered into a consent decree, after being sued by the United States and the State of Washington,⁴⁴ in which the company agreed to pay $8.5 million plus interest to reimburse EPA and Washington for their costs in remediating the site.

In July 1989, Burlington Northern filed a complaint against Time Oil seeking contribution for response costs it incurred, or would incur, in performing the cleanup required by its 1985 consent decree.⁴⁵ Time Oil, relying on CERCLA § 113(f)(2), sought summary judgment asserting that the provision protected it, as a party who had resolved its liability to the United States, from contribution liability. Burlington Northern responded that because it had performed a remedial action at the site and was seeking indemnity for its costs, its claim was not in contribution, but was for cost recovery under CERCLA § 107(a), which was not precluded by the provisions of CERCLA § 113(f). Further, Burlington Northern argued that its claims against Time Oil were not matters addressed in Time Oil's settlement. Time Oil countered that there was no difference between a cost recovery action and a contribution action and that construing CERCLA § 113(f) to permit cost recovery claims, while barring contribution claims, would allow parties who had performed response actions to recast their contribution claims as cost recovery claims, thus defeating the congressional purpose of providing finality to parties who enter into good faith settlements with the government.⁴⁶

The court denied Time Oil's motion for summary judgment on three grounds.⁴⁷ First, the court held that Burlington Northern's claim was not within the matters addressed in Time Oil's settlement.⁴⁸ The complaint filed against Time Oil by the State of Washington and the federal government was for the recovery of costs incurred by the government at the Well 12A site, and neither the complaint nor the Time Oil consent decree provided specific reference to Burlington Northern's costs sufficient to be considered as matters addressed.⁴⁹ Second, the court noted that because the contribution protection provisions of CERCLA § 113 were enacted after Burlington Northern had entered into its consent decree with the United States, Burlington Northern had settled with the expectation that it could recover its costs from Time Oil.⁵⁰ Finally, the court applied statutory construction principles to conclude that cost recovery claims, such as Burlington Northern's, were not precluded by CERCLA § 113(f) because Congress provided a separate avenue of cost recovery⁵¹ under CERCLA § 107 that is not limited by CERCLA § 113 contribution protection.⁵²

In Key Tronic Corp. v. United States,⁵³ Key Tronic generated hazardous substances that it disposed of at the Colbert Disposal site in Spokane County, Washington. Key Tronic also performed response actions, such as investigating the level and types of contamination at the site, providing alternative drinking water supplies, and performing PRP search activities. Thereafter, Key Tronic and other parties entered into a consent decree to help finance the final remedial action plan.⁵⁴ Concurrently, the United States Air Force entered into an interagency agreement in which it agreed to help finance the remedial action.⁵⁵ In the agreement, which treated the Air Force as a de minimis party subject to CERCLA § 122(g)(1)(A), EPA released the Air Force from further liability at the site and provided for contribution protection under CERCLA § 122(g)(5).⁵⁶

Subsequent to the settlement, Key Tronic sued the Air Force, and several other parties seeking contribution for the costs it had incurred prior to entry of the consent decree.⁵⁷ The court viewed this as a claim for the response costs that Key Tronic had directly incurred, rather than a contribution claim to recover what Key Tronic had paid to EPA.⁵⁸ The Key Tronic court [22 ELR 10546] distinguished the Cannons⁵⁹ district court case and Central Illinois Public Service Co. v. Industrial Oil Tank and Line Cleaning Service,⁶⁰ which held that CERCLA contribution protection precluded contribution claims that were "re-cast" as claims for equitable indemnity. The court reasoned that because Key Tronic's claims were for the recovery of costs incurred "directly at its own initiative," and not for "indemnity from settling PRPs for prospective liability to the United States,"⁶¹ they were not precluded by CERCLA's contribution protection provisions.⁶²

Taken together, the Hardage, Burlington Northern, and Key Tronic decisions create an inconsistency in the relationship between contribution and cost recovery. The Hardage court emphasized that although PRPs' claims that are derivative of their liability to the United States are really contribution claims subject to contribution protection, independent response claims are not precluded by contribution protection. The Burlington Northern court went further, articulating that § 107 provides a separate avenue of recovery that is not subject to § 113(f)(2) contribution protection. And the Key Tronic court distinguished between actions to recover costs that PRPs incur at their own initiative, and actions to recover for liability to the United States or a state.

If we accept that Congress intended to create separate causes of action for contribution and private party cost recovery, how can parties determine the applicability of these provisions? On one hand, contribution under CERCLA § 113(f)(1) is available "during or following any civil action" under § 106 or § 107.⁶³ Thus, any party sued for CERCLA liability, or against whom administrative action is taken, has a contribution cause of action.⁶⁴ On the other hand, a cost recovery action under § 107(a) is available to persons who have incurred necessary response costs.⁶⁵ To the extent that these persons perform necessary response actions in response to a civil action, they arguably have both a cause of action for contribution and one for cost recovery.

If contribution protection did not preclude such cost recovery actions, parties who performed response actions would be in a better position to assert claims against other PRPs than parties who were sued and made payments for government response actions. Moreover, parties who refused to settle and who performed response actions pursuant to unilateral administrative orders would also be entitled to cost recovery against settling PRPs under this theory. It is difficult to discern any congressional purpose that is served by providing an advantage to parties who perform response actions rather than paying for governmental response costs, and it is even more difficult to find any wisdom in providing a cost recovery mechanism to recipients of unilateral administrative orders, particularly in light of Congress' expressed intent to provide finality to those who settle with the government.⁶⁶

An alternative interpretation of these cases focuses on the voluntary nature of the response actions. Under this rationale, only parties who perform voluntary response actions would be entitled to cost recovery actions. Moreover, parties who perform response actions pursuant to a settlement would have contribution rights but no cost recovery rights, while parties who respond to unilateral orders would have neither contribution nor cost recovery rights.⁶⁷ This would resolve the apparent conflict between the private cost recovery provisions of § 107(a) and the contribution protection provisions of § 113(f)(2), and is consistent with the congressional objectives of encouraging voluntary cleanups and providing incentives for settlements.

Limiting § 107(a) cost recovery actions to parties performing response actions independent of any settlement or order by the government is consistent with Hardage, wherein the court was concerned about preserving the incentives for voluntary cleanup. Similarly, the Key Tronic court focused on the fact that the company's response costs were incurred at its own initiative.⁶⁸ But in Burlington Northern, the railroad's cleanup was performed pursuant to a consent decree, and was thus not voluntary.⁶⁹ However, the Burlington Northern court's discussion of the cost recovery rationale is arguably dicta, because the court also reasoned that Time Oil's subsequent settlement did not address the matters covered by Burlington Northern's settlement.⁷⁰

[22 ELR 10547]

Another possible conclusion is that the Hardage, Burlington Northern, and Key Tronic courts incorrectly distinguished CERCLA's cost recovery and contribution provisions. Although CERCLA's legislative history and the case law interpreting CERCLA's make a distinction between contribution claims that are precluded by contribution protection, and contractual indemnity claims which are not, cost recovery under § 107 does not easily fit within the rubric of contractual indemnity.

As a part of CERCLA's legislative history, the House Judiciary Committee noted that contribution protection was not intended to preclude contractual indemnification claims.⁷¹ Similarly, the district court in Cannons distinguished between contribution and indemnity in concluding that in the context of CERCLA, no equitable reason exists for recognizing equitable indemnification claims.⁷² On appeal,⁷³ the First Circuit, while not expressly acknowledging an exception for indemnity claims, construed the term "contribution" broadly and the term "indemnification" to mean contractual indemnification.⁷⁴

Thus, while both the House Judiciary report and the Cannons opinions recognize that contribution protection does not bar suits for contractual indemnity, they treat the concept of indemnity narrowly, as contractual indemnity arising out of a special relationship between the parties rather than as an alternative to contribution.⁷⁵ Neither the House Judiciary Committee report nor the Cannons court specifically deals with the idea of cost recovery, but their discussion of indemnity seems premised on the existence of a contractual relationship, which does not exist in the private cost recovery situation.

Moreover, the district court's rationale in Cannons, that parties should not be permitted to recast contribution claims as claims for indemnity in order to circumvent contribution protection,⁷⁶ tends to negate an interpretation exempting cost recovery actions from contribution protection, particularly in light of Congress' desire to encourage finality.⁷⁷ Even where parties voluntarily perform response actions at a site, they are reducing their potential CERCLA liability to the government. Thus, their actions to recover costs from other parties are, in that sense, derivative of their liability to the government and arguably should be treated as contribution claims subject to contribution protection.

The Effect of Settlement Timing on Contribution Claims and Protection

Following a settlement with less than all the PRPs at a site, the government often obtains further settlements in the course of enforcement actions against the nonsettling PRPs. Because the later settlements also provide contribution protection, the question arises whether PRPs that previously settled are precluded from recovering in contribution against those who later settle with the government. This problem was debated prior to enactment of SARA, when the conference committee adopted the House Judiciary's contribution protection provisions, which made contribution protection applicable to both administrative and judicial settlements.

Senator Stafford, concerned that settling PRPs' contribution rights could be extinguished through subsequent administrative settlements in the absence of judicial process, stated:

[The provision] is bad policy because it gives bureaucrats, often under pressure to produce settlements, the power to determine when legitimate claims on nonsettlors shall be cut off…. [I]t seems unwise to allow administrative settlements, negotiated in private and not subject to judicial scrutiny, to preemptorily extinguish any valid claims that might be made in later contribution suits …. The extension of contribution protection to administrative settlements is … flawed on constitutional [due process] grounds …. [S]ummary action of an administrative [22 ELR 10548] agency resulting in a deprivation of [contribution] rights must be subject to later judicial review.⁷⁸

Aside from Senator Stafford's concern about the possibility of an unconstitutional administrative taking, which was addressed by Congress in CERCLA § 308,⁷⁹ it appears that he interpreted the House Judiciary's contribution protection provisions to provide that later settlements could extinguish the contribution claims of prior settlors.

In Burlington Northern,⁸⁰ the court relied on three alternative rationales to conclude that Burlington Northern, which had settled with the government first, could maintain a claim against Time Oil, which had later settled, for the response costs that Burlington had incurred pursuant to its consent decree with the government. One rationale was that the matters addressed in the later consent decree with Time Oil did not include Burlington Northern's response costs. Judge Rothstein, confronted with a situation similar to the situation Senator Stafford foresaw,⁸¹ observed that § 113(f)(2) provides contribution protection that is limited to matters addressed in the later settlement.⁸² The court noted that at the time of Time Oil's negotiations with the government, Time Oil was already aware of the money spent by Burlington Northern for cleanup of the site.⁸³ Further, the court reasoned that because "[s]ettlement negotiations are presumably conducted with affected parties able to participate and work toward a joint cleanup, … [p]revious cleanup activities already conducted and paid for by private parties are not likely to be addressed by the government in negotiations of this sort."⁸⁴ Thus, the court concluded that because the matters addressed in Burlington Northern's settlement were not addressed in Time Oil's settlement, Burlington Northern's contribution suit was not precluded by Time Oil's subsequent settlement.⁸⁵

Congress also grappled with the potential conflict between parties who settle with the government for different matters at the same site. During the Senate debate, Senator Stafford explained that contribution protection attaches only to matters that the settling party has resolved with the United States or a state, but not to matters outside of the settlement.⁸⁶ While this interpretation leaves unanswered how to determine what matters are addressed in a given settlement,⁸⁷ it is clear that a partial consent decree does not necessarily protect the settling parties from all contribution claims.

The scope of matters addressed is presumably a fact question, since it depends on determining what matters are addressed in a given settlement. In Senator Stafford's example, the two settlements clearly addressed different aspects of the same cleanup. EPA often settles with one PRP, or group of PRPs, for past costs in performing the remedial investigation/feasibility study (RI/FS) at a site, and with another PRP, or group of PRPs, that agree to undertake the remedial design and undertake the remedial action. In that situation, which is arguably analogous to Senator Stafford's example, the parties to the cash settlement for past costs would not be precluded by contribution protection from asserting claims against the parties to the second settlement who agreed to perform the remedial action, and vice versa. Nonetheless, if the respective settlements approximated each settlor's share of the liability, each would be able to argue that it had paid its equitable fair share.⁸⁸

Contribution Protection and De Minimis Settlements

CERCLA § 122(g)(1) authorizes EPA to enter a de minimis settlement if it involves only a minor portion of the response costs at the facility concerned, and both the amount and the toxic or other hazardous effects are minimal in comparison to the other hazardous substances at the facility.⁸⁹ CERCLA § 122(g)(5) expressly provides contribution protection to de minimis settlors, using language parallel to that of § 113(f)(2).⁹⁰ Because the government must estimate the total response costs for a facility in order to determine a de minimis party's share of total site costs, de minimis settlements should address all matters, or the entire scope of [22 ELR 10549] response actions and costs, at each facility.⁹¹ Moreover, because one of the objectives of de minimis settlements is to provide finality to de minimis settlors, both EPA and settling parties have strong reasons to address total site costs when entering de minimis settlements. Thus, in de minimis settlements both the matters addressed and the corresponding scope of contribution protection should be interpreted broadly. In a situation where a de minimis settlement followed other settlements,⁹² the effect of the later settlement would be to cut off the rights of those who had previously settled to assert contribution claims against the de minimis parties.⁹³

The legislative history confirms that Congress intended that de minimis settlors should obtain broad contribution protection. The House Judiciary Committee stated that "de minimus [sic] settlements are intended to relieve the covered parties from prolonged and costly litigation."⁹⁴ In order to achieve the congressional objective of sparing de minimis parties the cost of litigation, they must be afforded essentially complete protection from contribution actions. This is one of the primary incentives for late de minimis settlements. Without contribution protection, such parties would face the possibility of contribution suits from any parties that had previously settled and would gain little benefit from settling with the government. Under EPA's de minimis settlement policy,⁹⁵ de minimis parties pay a premium in order to compensate for EPA's uncertainty about the cost of the remedy.⁹⁶ In the case of late de minimis settlors, the uncertainty about the total costs should normally be reduced, particularly if the remedy has been selected. But because they are buying their peace, and there by avoiding litigation costs associated with contribution claims, these parties should be willing to pay more than a court might determine to be their fair share.

The courts seem to agree that de minimis settlors should be spared the cost and inconvenience of defending contribution suits. In fact, parties who assert contribution actions against de minimis settlors may be subject to sanctions for frivolous claims. In United States v. Alexander,⁹⁷ the court was so angered by a nonsettlor's crossclaims against a group of de minimis settlors that the court dismissed the cross-claims and ordered sanctions pursuant to Federal Rule of Civil Procedure 11.⁹⁸ Malone Trucking, apparently displeased by being forced to remain in the litigation as a non-de minimis defendant, had filed crossclaims against de minimis parties who had previously settled with the government. The court viewed this as an act of bad faith and a per se violation of Rule 11,⁹⁹ in spite of Malone's arguments that its response costs were incurred prior to the enactment of CERCLA's contribution protection provisions, and that it had in good faith relied on the Burlington Northern decision in determining that its claims were not precluded.¹⁰⁰ The Alexander court distinguished Burlington Northern on the basis that Malone's claims were not for the recovery of costs previously paid, but for contribution.¹⁰¹ The court reasoned that precluding that Malone's contribution claims were dictated by the statutory incentives for settlement, that nonsettlors should be forced to absorb any shortfall¹⁰² and settlors should be protected from contribution claims.¹⁰³

Conclusion

The SARA amendments expressly provide for contribution protection as an incentive for PRPs to settle with the government. The statutory language and the legislative history make clear that settlements reduce the joint and several liability of nonsettlors only by the amount of the settlement. Thus, nonsettlors are in the position of absorbing any amounts in excess of their proportionate liability that are not recovered in the settlement. Some courts have treated claims for recovery of privately incurred response costs as not being precluded by contribution protection, although it is not clear exactly where the line between cost recovery and contribution should be drawn. One theory that is consistent [22 ELR 10550] with the case law and legislative structure is that voluntarily incurred response costs are recoverable even against those who have contribution protection. While this preserves the incentives for voluntary cleanups, it would not entirely satisfy Congress' goal of finality for settling parties.

The scope of contribution protection depends on the matters addressed in a given settlement, which is a fact question specific to each settlement. Finally, in de minimis settlements the scope of matters addressed should generally be very broad for two reasons. First, EPA must make some evaluation of the total costs at a facility before settling in order to determine whether a de minimis party's share of the costs is minor. And second, the statutory purpose of de minimis settlements — to provide final resolution of claims against de minimis parties — is advanced by de minimis settlements in which matters addressed include the totality of response actions at the site.

1. 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA 001-075.

2. Id. § 9613(f), ELR STAT. CERCLA 039. Congress added § 113(f) to CERCLA as part of the Superfund Amendments and Reauthorization Act of 1986 (SARA), Pub. L. No. 99-499, 100 Stat. 1613, 1648. See U.S. ENVIRONMENTAL PROTECTION AGENCY, Pub. L. No. 9200.5-01B, THE SUPERFUND PROGRAM: TEN YEARS OF PROGRESS 22 (June 1991) (reporting a seven-fold increase in the total value of CERCLA settlements since 1986).

3. CERCLA § 113(f)(1), 42 U.S.C. § 9613(f)(2), ELR STAT. CERCLA 039.

4. 42 U.S.C. § 9613(f)(2), ELR STAT. CERCLA 039. Section 113(f)(2) includes contribution protection for both judicial and administrative settlements. Thus, parties that enter into consent decrees or consent orders either for payment of response costs or for performance of response actions obtain contribution protection for matters addressed in their settlements. CERCLA § 122(g)(5) provides contribution protection for de minimis settlements with language that exactly parallels the language of § 113(f)(2), and § 122(h)(4) provides contribution protection for those who enter administrative cost recovery settlements. Arguably, § 122(g)(5) and (h)(4) are redundant in light of the broad applicability of § 113(f)(2).

5. 56 Fed. Reg. 30996, ELR ADMIN. MATERIALS 35383 (July 8, 1991) (providing notice of publication of EPA's model CERCLA remedial design/remedial action (RD/RA) consent decree). Although consent decrees drafted before the RD/RA model decree may not use the exact same terminology, CERCLA's contribution protection provisions govern all administrative or judicially approved CERCLA settlements.

6. 42 U.S.C. § 9613(f)(2), ELR STAT.CERCLA 039.

7. Id.

8. 697 F. Supp. 677, 19 ELR 20332 (S.D.N.Y. 1988).

9. Id. at 681, 19 ELR at 20334. Defendants argued that the contribution provisions did not apply because their settlement was made prior to enactment of SARA, and because the settlement was with a city and thus did not resolve the parties' liability to the United States, or a state, as required by § 113(f)(2). Id. at 683, 19 ELR 20334. The court disagreed, reasoning that the city was acting as the "state" in settling the case because CERCLA's § 101(27) definition of "state," which includes the "several states of the United States," does not preclude the application of § 113(f)(2) to a settlement between a municipality and a defendant. This construction, the court reasoned, was most consistent with CERCLA's remedial purposes because it would encourage early and complete settlements. Id. at 685, 19 ELR at 20336.

10. Pub. L. No. 99-499, 100 Stat. 1613.

11. Exxon, 697 F. Supp. at 689, 19 ELR at 20338. The court cited United States v. Conservation Chem. Co., 628 F. Supp. 391, 402, 17 ELR 20158, 20162 (W.D. Mo. 1985), which was decided pre-SARA.

12. Id. at 692 and n.23, 19 ELR 20340. The court cited the House Judiciary Committee Report in SARA's legislative history as authority for this standard. H.R. REP. NO. 253, 99th Cong., 2d Sess. 3 (1986), reprinted in 1986 U.S.C.C.A.N. 2835, 3038, 3042. This standard, or slight variations of it, have consistently been applied by the courts when entering CERCLA consent decrees. See, e.g., United States v. Cannons Eng'g Corp., 899 F.2d 79, 84, 20 ELR 20845, 20847 (1st. Cir. 1990).

13. Exxon, 697 F. Supp. at 694, 19 ELR at 20340.

14. Id. The Exxon court noted that while "none of the parties have argued that the settlers should not be protected from contribution claims," the nonsettling parties "object[ed] to the possibility, apparently contemplated by the express language of § 113(f)(2) that they will have to make up the settler's shortfall in this action or in an action commenced by the State without a commensurate right to force the settlers to shoulder their fair share." Id.

15. See id. at 681 n.5, 19 ELR at 20334 n.5.

16. Id. at 694, 19 ELR at 20340. The court did not resolve whether the SARA amendments, including § 113(f)(2), applied to the settlement. However, it observed that in contrast to § 113(f)(2), New York law would reduce the releasing person's claim by "the greater of (1) the settling defendants' share of liability or (2) the settlement amount." (Emphasis in original.) Id. at 683 n.9, 19 ELR at 10335 n.9. The court observed further that New York law and the Uniform Comparative Fault Act (UCFA) would not have permitted settling defendants to seek contribution protection "for any excess paid beyond their proportionate share of liability." Id.

17. Exxon, 697 F. Supp. at 694, 19 ELR at 20340.

18. Id. at 681 n.5, 19 ELR at 20334 n.5.

19. 720 F. Supp. 1027, 20 ELR 20159 (D. Mass. 1989), aff'd, 899 F.2d 79, 20 ELR 20845 (1st Cir. 1990).

20. Cannons, 720 F. Supp. at 1031, 20 ELR at 20161. There were two decrees, a major PRP consent decree and a de minimis party decree. Id. at 1030, 20 ELR at 20162.

21. Id. at 1037, 20 ELR at 20164.

22. Id. at 1048, 20 ELR at 20169.

23. UNIF. CONTRIBUTION AMONG TORTFEASORS ACT § 4, 12 U.L.A. 63 (1975).

24. Id.

25. UNIF. COMPARATIVE FAULT ACT §§ 1, 6, 12 U.L.A. 42 (1992 pocket part).

26. Id. Thus under the UCFA, the government would bear the shortfall in case of a settlement for less than a party's share. Under the UCATA, the nonsettlors are subject to paying any unrecovered costs.

27. Cannons, 720 F. Supp. at 1049, 20 ELR at 20170. The court cited City of New York v. Exxon, 697 F. Supp. 677, 681 & n. 5, 19 ELR 20332, 20334 & n.5 for the proposition that "if settling defendants have paid less than their proportionate share of liability, section 113(f)(2) apparently compels non-settlers to absorb the shortfall." Id.

28. Cannons, 720 F. Supp. at 1048, 20 ELR 20169.

29. 899 F.2d 79, 20 ELR 20845 (1st Cir. 1990).

30. Id. at 92, 20 ELR 20851.

31. See, e.g., Lyncott Corp. v. Chemical Waste Management, Inc., 690 F. Supp. 1049, 1418 (E.D. Pa. 1988); United States v. Conservation Chem. Co., 628 F. Supp. 391, 402, 17 ELR 20158, 20163 (W.D. Mo. 1985).

32. In addition to the Exxon and Cannons opinions, see In re Acushnet River & New Bedford Harbor: Proceedings re Alleged PCB Pollution, 712 F. Supp. 1019, 1032, 19 ELR 21210, 21216 (D. Mass. 1989) ("[T]he Congressional directive is that non-settling defendants' contribution claims will be barred, and they will be credited only with the amount of the settlement and nothing more."); United States v. Rohm & Haas Co., 721 F. Supp. 666, 677-78, 20 ELR 20127, 20131 (D.N.J. 1989) (de minimis settlement entered over objections of nonsettlors that they could be saddled with disproportionate liability).

The possible unfairness of forcing nonsettlors, who did not receive notice and an opportunity to participate in the earlier settlements, to absorb any shortfall is discussed in Neuman, No Way Out? The Plight of the Superfund Nonsettlor, 20 ELR 10295 (July 1990).

33. Hearing on Motion for Entry of Consent Decree at 66, United States v. Hardage, No. CIV-86-1401-W (W.D. Okla. Oct. 2, 1989) (transcript of proceedings held on September 22, 1989, two volumes [hereinafter Hardage Hearing].

34. Id. at 68.

35. Id.

36. Id. at 70.

37. Id.

38. Id.

39. Id.

40. Id. at 71. The court made no mention of the countervailing settlement disincentives to de minimis parties that would be created if they could not be afforded a sense of finality upon settling.

41. 738 F. Supp. 1339 (W.D. Wash. 1990).

42. EPA designated the site as the area containing the aquifer from which Well 12A, which supplies water to the City of Tacoma, draws its water.

43. Burlington Northern, 738 F. Supp. at 1340.

44. Id. Time Oil first refused to comply with an EPA administrative order issued in June 1985, and settled after EPA filed suit to enforce the order.

45. Id.

46. Id. For this proposition, Time Oil relied on the House Committee on Energy and Commerce Report, H.R. REP. NO. 253, 99th Cong., 2d Sess. 1 (1986) at 80, reprinted in 1986 U.S.C.C.A.N. at 2835, 2862, and the Joint Explanatory Statement of the Committee of Conference, H. CONF. REP. NO. 962, 99th Cong., 2d Sess. 221 (1986), reprinted in 1986 U.S.C.C.A.N. at 3276, 3314 ("[P]arties who reach a judicially approved good faith settlement with the government are not liable for contribution claims of other liable parties.")

47. Burlington Northern, 738 F. Supp. at 1343.

48. Id. at 1342. The rationale relating to the scope of "matters addressed" will be discussed in the next textual section.

49. Id. Time Oil's consent decree with Washington and the federal government did not use the phrase "matters addressed," but discussed the scope of contribution protection in terms of "covered matters," which is also the phrase that was used to define the scope of the governments' covenant not to sue. See Memorandum in Support of Time Oil's Motion for Summary Judgment at 11, Burlington Northern Railroad v. Time Oil Co., 738 F. Supp. 1339 (W.D. Wash. Apr. 18, 1990) (No. C89-913R).

50. Burlington Northern, 738 F. Supp. at 1342.

51. Id. at 1342-43. The court noted two instances where CERCLA makes a distinction between a cause of action for contribution and a cause of action for cost recovery. Section 113(g)(2), which governs statutes of limitation, provides that "actions for recovery of costs" under § 107 must be commenced within three years after completion of a removal action, or six years after initiation of physical on-site construction of a remedial action. In contrast, § 113(g)(3) requires that actions for "contribution" must be brought within three years after the date of judgment in a recovery action, or the date of an administrative order or settlement. The court also noted that CERCLA § 113(h)(1) provides that a court may review remedy selection decisions in an action "to recover response costs or damages or for contribution." (Emphasis in original.) Id.

52. Id. For the proposition that CERCLA § 107 cost recovery actions are not subject to contribution protection bars, the court relied on § 107(a), which expressly limits the defenses available in a cost recovery action to an act of God, an act of war, or an act or omission of an unrelated third party. Id.

Because the decision can be supported by the wording of the Time Oil decree's contribution protection provision, and because Burlington Northern's settlement occurred before § 113 was added by SARA, the decision is probably not strong authority for the proposition that CERCLA authorizes a separate cost recovery avenue that is not subject to contribution protection.

53. Order re: Motions for Summary Judgment, Inter Alia, Key Tronic Corp. v. United States, No. CS-89-694-JLQ (E.D. Wash. Aug. 9, 1990) [hereinafter Key Tronic Order].

54. Id. at 3.

55. Id.

56. Because the Air Force is part of the "unitary executive" branch of the federal government, it would arguably need counterclaim protection rather than contribution protection, since claims against it by other PRPs would in effect be in the nature of an offset against the federal government, rather than third-party actions. Because the parties in such settlements desire to resolve all potential claims and counterclaims arising from a site, the difference in protection is probably academic. Further, § 120(a) provides that federal PRPs are to be treated, for liability purposes, the same as nongovernmental entities.

57. Key Tronic Order, supra note 53 at 3.

58. Id. at 4. Key Tronic also sought to recover contribution from the Air Force for what the company paid for the remedial action under the consent decree. The court dismissed this claim after Key Tronic conceded that it was precluded by the settlement and CERCLA § 122(g). Id.

59. 720 F. Supp. 1027, 20 ELR 20159 (D. Mass. 1989).

60. 730 F. Supp. 1498, 21 ELR 20076 (W.D. Mo. 1990).

61. Key Tronic Order, supra note 53 at 7. (Emphasis in original.)

62. Id. The opinion specifically referred to § 122(g)(5), but the reasoning does not seem to depend on whether the settlement is a de minimis settlement or not, and thus would presumably also be applicable to settlements pursuant to the identical language of CERCLA § 133(f)(2).

63. 42 U.S.C. § 9613(f)(1), ELR STAT. CERCLA 039.

64. According to the Hardage court, contribution claims asserted by one tortfeasor against another are "derivative" of the plaintiff's claim. Hardage Hearing, supra note 33 at 70. (This interpretation is supported by BLACK'S LAW DICTIONARY 328 (6th ed. 1990), which defines "contribution" as the "right of one who has discharged a common liability to recover of another also liable, the aliquot portion which he ought to pay or bear.")

65. CERCLA § 107(b) provides for the recovery of response costs of "the United States Government, or a State or an Indian Tribe not inconsistent with the national contingency plan; … [and] any other necessary response costs incurred by any other person consistent with the national contingency plan." 42 U.S.C. § 9607(a), ELR STAT. CERCLA 024-025. The requirement that response costs must be necessary does not apply to the federal or state governments, or Indian tribes seeking cost recovery, since they are entitled to recover "all costs … not inconsistent with the national contingency plan." Id. at § 107(a)(4)(A), ELR STAT. CERCLA 024.

66. See H.R. REP. NO. 253, pt. I, 99th Cong., 1st Sess. 80 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 2862 (providing that contribution protection provisions are intended to "help bring an increased measure of finality from settlements [because] [r]esponsible parties who have entered into a judicially approved good faith settlement … will be protected from paying any additional response cost to other responsible parties in a contribution action.") Note that the requirement that settlements must be judicially approved was dropped and § 113(f)(2), as enacted, provides contribution protection to parties who enter administrative or judicially approved settlements.

67. However, as noted previously, de minimis parties who enter into consent orders pursuant to § 122(g), and parties who enter into administrative settlements pursuant to § 122(h), are entitled to contribution protection.

68. Key Tronic Order, supra note 53 at 9.

69. Burlington Northern, 738 F. Supp. at 1340.

70. Id. As noted previously, the opinion also developed a third rationale: that Burlington Northern's costs were incurred before the enactment of SARA, which included the contribution protection provisions §§ 113(f)(2) and 122(g)(5).

71. H.R. REP. NO. 253, pt. III, 99th Cong., 1st Sess. 19 (1985), reprinted in 1986 U.S.C.C.A.N. 3038, 3042. The Committee provided that:

[E]ntry into judicially approved settlement with the government protects a party only against the contribution claims of other potentially liable parties, and not against indemnification claims. Contribution is a statutory or comon [sic] law right available to those who have paid more than their equitable share of an entire liability. Indemnity is a right arising from a contract or a special relationship between parties. Settlement with the government under CERCLA should not abrogate independently existing rights of persons to indemnity.

Id.

72. Cannons, 720 F. Supp. at 1051, 20 ELR 20171. The court provided that:

Contribution is the method by which a tortfeasor sues a joint tortfeasor for its share of liability to an injured plaintiff. Indemnity is the device by which a tortfeasor "passes through" his entire liability to a third party whom the tortfeasor alleges is the real party responsible for the injury.

(Citations omitted.) Id. The court elaborated on the distinction, citing the RESTATEMENT (SECOND) OF TORTS § 886B cmt. c (1979), which provides:

[I]ndemnity should be granted in any factual situation in which, as between the parties themselves, it is just and fair that the indemnitor should bear the total responsibility, rather than to leave it on the indemnitee or to divide it proportionately between the parties by contribution.

Id.

73. United States v. Cannons Eng'g Corp., 899 F.2d 79, 20 ELR 20845 (1st Cir. 1990).

74. Id. at 92, 20 ELR at 20851. The First Circuit provided that:

[A]ppellants bemoan the dismissal of their crossclaims for indemnity against the settling PRPs. We are unmoved. Although CERCLA is silent regarding indemnification, we refuse to read into the statute a right to indemnification that would eviscerate § 9613(f)(2) and allow nonsettlors to make an end run around the statutory scheme. Appellants allege no contractual basis for indemnification. Their noncontractual indemnity claim, by definition and extrapolation, "is in effect only a more extreme form of [a claim for] contribution."

(Citations omitted.) Id.

75. This is consistent with terminology used elsewhere in CERCLA. See, e.g., CERCLA § 107(e), which provides that parties cannot contractually avoid CERCLA liability, while recognizing the effectiveness of agreements for contractual indemnity, including insurance arrangements.

76. Cannons, 720 F. Supp. at 1052, 20 ELR at 20171. The district court in Cannons observed that the purpose of contribution protection is to encourage early settlements and concluded that "[f]ailure to provide similar protection against suits for equitable indemnity would encourage defendants to re-cast their contribution claims as indemnity claims and injure, if not destroy, the goals to be served by the express contribution protection provisions of CERCLA." Id. The court dismissed the nonsettling defendants' crossclaims.

77. See H.R. REP. NO. 253, pt. I, 99th Cong., 1st Sess. 80 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 2862.

78. 132 CONG. REC. S14904-05 (daily ed. Oct. 3, 1986) (statement of Sen. Stafford).

79. 42 U.S.C. § 9657, ELR STAT. CERCLA 066. Section 308, which voids any administrative settlement to the extent that it would work an unconstitutional taking of another's contribution rights, provides:

If an administrative settlement under section 9622 … has the effect of limiting any person's right to obtain contribution from any party to settlement and if the effect of such limitation would constitute a taking without just compensation in violation of the fifth amendment to the Constitution of the United States, such person shall not be entitled, under other laws of the United States, to recover compensation from the United States for such taking, but in any such case, such limitation on the right to obtain contribution shall be treated as having no force and effect.

Id.

80. 738 F. Supp. 1339 (W.D. Wash. 1990)

81. The issue of an administrative taking of contribution rights was not raised in Burlington Northern, since the potential taking occurred as a result of a judicially approved consent decree.

82. Burlington Northern, 738 F. Supp. at 1342.

83. Id.

84. Id.

85. Id.

86. 131 CONG. REC. S11854-55 (daily ed. Sept. 20, 1985) (statement of Sen. Stafford). Senator Stafford stated that:

Thus, in cases of partial settlements where, for example, a party has settled with the United States or a State for a surface cleanup, the settling party shall not be subject to any contribution claim for the surface cleanup to any party. The settlor may, however, remain liable in such instances for other cleanup action or costs not addressed by the settlement, such as, in this example, a subsurface cleanup.

Id.

87. EPA's model RD/RA consent decree does not expressly define the matters addressed in a given settlement.

88. The most complete protection is assured in "global" settlements where the decree is signed by all or nearly all of the PRPs, and where all of the remaining response action is to be performed or paid for. In such cases, the matters addressed by the settlement would include all response costs and actions at the site. The parties to the decree would thus have no cause of action against one another as to the work performed or paid for under the decree.

89. 42 U.S.C. § 9622(g)(1), ELR STAT. 058.

90. 42 U.S.C. § 9622(g)(5), ELR STAT. 059. As in the non-de minimis context, courts in de minimis settlements have applied the UCATA principle of placing any shortfall on nonsettlors. For example, in United States v. Rohm & Haas Co., 721 F. Supp. 666, 20 ELR 20127 (D.N.J. 1989), a nonsettlor objected to a de minimis settlement that it claimed would subject it to disproportionate liability. The court reasoned that disproportionate liability for nonsettlors was consistent with Congress' intent, and after finding that the settlement was fair, adequate, and reasonable, it entered the decree. Id. at 701, 20 ELR 20143.

91. CERCLA § 122(g) speaks in terms of the response costs at the "facility," which might be only one of many planned operable units at the site. Arguably, EPA's assessment of total response costs should include private party response costs, since private parties' claims for cost recovery against de minimis settlors would be precluded. See discussion of de minimis settlement in text accompanying footnotes 34 through 41.

92. For example, a settlement for EPA's past costs in performing a removal action or the RI/FS, and another settlement for performance of the RD/RA.

93. Senator Stafford's concern about bureaucrats cutting off the contribution rights of prior settlors without judicial process is implicated in this scenario. The concern is mitigated, however, by § 122(i), which requires Federal Register notice 30 days before proposed de minimis and administrative cost recovery settlements become final, along with opportunity for public comment. 42 U.S.C. § 9622(i)(1), ELR STAT. CERCLA 059. Under this provision, those whose contribution rights are affected would have an opportunity to be heard.

94. H.R. REP. NO. 253, pt. III, 99th Cong., 1st Sess. 31 (1985), reprinted in 1986 U.S.C.C.A.N. 3054.

95. 52 Fed. Reg. 24333 (1987).

96. Id. at 24337. EPA's guidance provides that de minimis settlements should generally include a reservation of rights for unknown conditions and natural resource damage claims. In addition the guidance specifies that in cases where the remedy has not been selected, EPA should obtain reopeners to allow additional recovery in case of cost over-runs and/or unforseen future response actions. Where the remedy has been selected, or is close to being selected, EPA may accept premium payments in lieu of the reopener for cost over-runs and future response actions, or both. Id.

97. 771 F. Supp. 830, 22 ELR 20447 (S.D. Tex. 1991).

98. FED. R. CIV. P. 11 provides for sanctions against attorneys for the filing of frivolous claims. The court ordered Malone Trucking, which had asserted the crossclaim, and its attorney, to each pay $10,000 in sanctions and the fees and expenses that the de minimis parties had expended in responding to the crossclaim.

99. Alexander, 771 F. Supp. at 841, 22 ELR 20453. The court dismissed Malone's crossclaims against all but one de minimis settlor, Union Carbide, noting that evidence had developed showing that the chemical company had a greater role at the site than had been believed at the time of the de minimis settlement. Id. at 835, 22 ELR at 20450.

100. Id. at 840, 22 ELR at 20452. In Burlington Northern, discussed previously, the court permitted Burlington Northern's claim for recovery of response costs against the later settlor based in part on the rationale that SARA was enacted after Burlington Northern had entered its consent decree for performance of response actions.

101. Id. Malone had performed no response activities, and was seeking through its crossclaims to transfer its liability to the government to other defendants.

102. Id. at 834, 22 ELR at 20449 (citing as authority United States v. Rohm & Haas Co., 721 F. Supp. 666, 20 ELR 20127 (D.N.J. 1989)).

103. Id. (citing United States v. Union Gas Co., 743 F. Supp. 1144, 21 ELR 20337 (E.D. Pa. 1990) as authority for the policy that de minimis settlors are entitled to complete protection, and that by settling they are relieved of showing in subsequent litigation that they have paid their equitable fair share).