23 ELR 10477 | Environmental Law Reporter | copyright © 1993 | All rights reserved
Recovery of Attorneys Fees in CERCLA Private-Party Cost Recovery Actions: Striking a BalanceKenneth A. Freeling
Mr. Freeling is a partner in the Los Angeles office of New York's Kaye, Scholer, Fierman, Hays & Handler, with a specialty in environmental litigation.
[23 ELR 10477]
A sharp conflict among the judicial circuits has emerged concerning whether private parties may recover attorneys fees in cost recovery actions under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).1 The issue centers on the meaning of CERCLA § 107(a)(4)(B), which permits private parties to recover "necessary costs of response … consistent with the national contingency plan."2 Specifically, the question is, does the phrase "necessary costs of response" include attorneys fees?
The meaning given § 107(a)(4)(B) and the answer to this question depend, in turn, on the construction of CERCLA's definition of "response." CERCLA § 101(25) defines "response" as "remove, removal, remedy and remedial action; all such terms (including the terms 'removal' and 'remedial action') include enforcement activities related thereto."3 The appropriate construction of § 101(25) hinges on a question more simply stated than answered: Is the phrase "enforcement activities," in § 101(25), sufficiently explicit to authorize the award of attorneys fees to a private party that succeeds in obtaining § 107(a)(4)(B) "response" costs?
In StantonRoad Associates v. Lohrey Enterprises,4 the Ninth Circuit answered no, holding that the phrase "enforcement activities" does not explicitly authorize payment of attorneys fees as part of response costs incurred in cost recovery actions. In an unusually blunt opinion, the court also flatly rejected the Eighth Circuit's contrary ruling in General Electric Co. v. Litton Industrial Automation Systems, Inc.,5 in which the court held that § 107(a)(4)(B) authorizes private parties to recover attorneys fees and expenses from a responsible party in an action for response costs. The Ninth Circuit stated that it was "unpersuaded by the Eighth Circuit's explanation of its holding."6 The Eighth Circuit had premised its holding on the determination that "[a]ttorneys fees and expenses necessarily are incurred in … enforcement activity [related to CERCLA response cost recovery] and it would strain the statutory language to the breaking point to read them out of the 'necessary costs' that section [107(a)(4)(B)] allows private parties to recover."7
The First and the Sixth Circuits are also deeply divided on the issue of awarding attorneys fees in CERCLA private-party cost recovery actions, as are district courts in other circuits.8 Practically the only aspect of this issue about which the disagreeing courts do concur is that its resolution depends on whether the phrase "enforcement activities" can be understood to include attorneys fees despite the absence of an explicit statutory statement that the fees are recoverable response costs. Which side is right? The answer may very well be that it depends.
[23 ELR 10478]
Alyeska, Runyon, and the American Rule
In Alyeska Pipeline Service Co. v. Wilderness Society,9 the U.S. Supreme Court applied the "American Rule" for recovery of attorneys fees, under which "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser,"10 to a claim for fees stemming from litigation surrounding the construction of the Trans-Alaska oil pipeline. The Court held that absent statutory authorization, a prevailing party in federal litigation was not entitled to recover attorneys fees, even if the party performed the services of a "private attorney general."11 The Court reaffirmed this holding in Runyon v. McCrary,12 stating "but for a few well-recognized exceptions not present in these cases, [the law of the United States] has always been that absent explicit congressional authorization, attorneys' fees are not a recoverable cost of litigation."
Thus, a question arises as to how "explicit" congressional authorization must be. Neither Alyeska nor Runyon directly addressed this issue. In neither case, however, did the Court confront a difficult statutory construction problem like the one presented by CERCLA §§ 107(a)(4)(B) and 101(25).
Sticky Statutory Construction
In construing these sections of CERCLA, those courts that have found that attorneys fees are not recoverable in a CERCLA private-party cost recovery action make a compelling point. The Ninth Circuit highlighted this point in Stanton Road, observing:
Congress has repeatedly demonstrated that it knows how to express its intention to create an exception to the American Rule. For example, in section 310(f) of CERCLA, Congress authorized courts to "award costs of litigation (including reasonable attorney and expert witness fees) to the prevailing party whenever the court determines such an award is appropriate" in citizen actions. 42 U.S.C. § 9659(f).13
Furthermore, CERCLA § 110(c), as noted by the district court in Alloy Briquetting Corp. v. Niagara Vest, Inc.,14 authorizes awards of "all costs and expenses (including the attorney's fees)" to whistleblowers.15
Indeed, "attorneys fees" has become a term of art in the legal lexicon, receiving separate treatment from all other litigation-related expenses. Despite that attorneys fees are the principal expense of litigation, they have historically been excluded from reimbursable litigation "costs," disappointing innumerable successful litigants. Tracing the antecedents of the American Rule in Alyeska, the U.S. Supreme Court found that since 1796, federal courts have followed the general rule that awards of attorneys fees are permissible only when statutorily authorized.16 Given the special meaning ascribed to the phrase "attorneys fees," it is not hard to understand why the Ninth Circuit deemed the absence of the phrase dispositive, especially because Congress included that same phrase in two different contexts elsewhere in CERCLA.
Courts adopting the Eighth Circuit's view have concluded, in effect, that the problem is less simple than it appears. On the basis of two considerations, these courts construe "enforcement activities" more expansively, thereby giving life to claims for attorneys fees. First, the courts reasoned, "enforcement activities" must include attorneys fees to be meaningful. Second, the courts uniformly express the concern that Congress' intent in enacting CERCLA would be undermined if "enforcement activities" were more narrowly construed. In General Electric, the Eighth Circuit explained its position:
[The right of recovery] by private parties of attorney fees … is consistent with two of the main purposes of CERCLA — prompt cleanup of hazardous waste sites and imposition of all cleanup costs on the responsible party. These purposes would be undermined if a non-polluter (such as GE) were forced to absorb the litigation costs of recovering its response costs from the polluter. The litigation costs could easily approach or even exceed the response costs, thereby serving as a disincentive to clean the site.17
Nonetheless, the Ninth Circuit's analysis is attractive. It has the virtue of simplicity and is supported by nearly 200 years of precedent. Moreover, the majority of district courts that have confronted the issue concur.18
Importantly, however, the Ninth Circuit did not hold that a statute must contain an explicit reference to "attorneys fees" for such to be recoverable. In fact, the Ninth Circuit in Stanton Road characterized CERCLA § 104(b), which provides that the "President … may undertake such planning, legal, fiscal, [or] economic, … to plan and direct response actions [and] to recover the costs thereof,"19 as demonstrative of Congress' ability to expressly provide for attorneys fees.20 Similarly, courts have uniformly awarded the government attorneys fees as response costs, based on the reference to "legal" in that section.21 No court applying § 104(b) to federal government claims for attorneys fees appears troubled by § 104(b)'s omission of an explicit statement about "attorneys fees," nor, for that matter, by § 101(25)'s similar omission.
In light of the Ninth Circuit's characterization of § 104(b), perhaps the Eighth Circuit's position warrants closer examination. At the very least, the Ninth Circuit might not [23 ELR 10479] have dismissed as needless a review of the legislative history on the ground that Alyeska and Runyon are dispositive.22
Few courts addressing whether attorneys fees are recoverable in a CERCLA private-party cost recovery action have parsed CERCLA's legislative history on this subject. Unfortunately, the legislative history is sparse on this point, and what little exists is confusing.
CERCLA, as originally passed in 1980, contained no language from which to infer that attorneys fees were recoverable in private-party cost recovery actions. As noted, § 101(25) limited the definition of "response" to "remove, removal, remedy and remedial action."23 Moreover, although occasional references were made to attorneys fees in the hearings on the draft legislation, no draft considered by Congress contained language contemplating that private parties bringing cost recovery actions could obtain awards of attorneys fees as part of their response costs.
The Superfund Amendment and Reauthorization Act (SARA)24 notably changed the definition of "response." The phrase "all such terms (including the terms 'removal' and 'remedial action') include enforcement activities related thereto" was added to the definition's original language.25 Unfortunately the legislative history provides little guidance as to the intended scope of "enforcement activities."
In Alloy Briquetting, the district court observed that one House Report regarding H.R. 2817, one of the two bills drafted to amend CERCLA, explained that the addition of this language "will confirm the U.S. Environmental Protection Agency's (EPA's) authority to recover costs for enforcement actions taken against responsible parties."26 The court then stated:
Significantly, no mention is made of "enforcement actions" undertaken by private parties, and the amendment appears to relate only to cost recovery actions undertaken by the government under [107(a)(4)(A)], which imposes liability for all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe….27
The flaw in this analysis is that the additional language regarding "enforcement activities" was added to the definition of "response," which applies equally to government and private-party actions, as opposed to sections that pertain solely to government actions, such as § 104(b). Nothing in § 101(25) suggests that "response" has one meaning for government actions and another in the private-party context. In fact, a later congressional report recites that the conference committee amended the definition of "response" in § 101(25) "to explicitly include enforcement activities."28 This report further states: "This amendment clarifies and confirms that such costs are recoverable from responsible parties as removal or remedial costs under Section 107."29 Unfortunately, the legislative history of SARA provides no further detail about what "such costs" are and whether they are intended to include attorneys fees.
Regarding CERCLA's broader purposes, although letting private parties recover attorneys fees as response costs is consistent with CERCLA's "polluter pays" philosophy,30 it is questionable whether allowing such recovery fosters more rapid cleanups. A 1992 RAND study analyzing the transaction costs of CERCLA cleanups observes, for example, that CERCLA has been criticized for its "liability-based approach [which] shrouds the program in litigiousness, slowing the pace of cleanups and creating steep transaction costs."31
Getting Back to Basics
The solution of this conundrum may be simply to interpret "enforcement activities" as a layperson might. "Enforcement" means compulsion. It is a word most naturally associated with laws. Thus, a layperson might regard "enforcement activities" as thoseactivities which are taken to compel obedience to CERCLA. More specifically, a reasonable interpretation of §§ 107(a)(4)(B) and 101(25) is that to the extent that another responsible party must be compelled through litigation to contribute to a cleanup, attorneys fees incurred in that process are "necessary costs of response."32
It would follow that the recovery of attorneys fees is only triggered by a reasonable demand that is unreasonably refused. Attorneys fees incurred to enable a party to make a reasonable demand, such as documenting the basis for the other party's responsibility, may be regarded as a cost that must be incurred as a condition precedent to commencing enforcement activities. Such fees, in contrast, would not be recoverable.
This solution has several important virtues. First, it is consistent with CERCLA's ordinary meaning. Nothing in §§ 107(a)(4)(B) or 101(25) can be read to suggest that attorneys fees incurred through activities other than enforcing a party's [23 ELR 10480] statutory rights because another responsible party refuses to pay its fair share, are recoverable.33 But, to the extent a party is forced to litigate, that party's costs of "enforcement activities," which will principally consist of attorneys fees, would likely be a necessary cost of response.34
Second, this construction might promote and facilitate negotiated settlements among responsible parties, reducing the number of costly, time-consuming lawsuits. Parties seeking recovery from others might be more reasonable in their demands at the outset if their costs of litigation cannot be so easily shifted. Similarly, parties from whom investigation and cleanup costs are sought might be encouraged to participate voluntarily if provided with ample information from which to make a liability determination up front, and exposed to liability for the other side's attorneys fees only if, and to the extent, their participation must then be compelled through a lawsuit. As a consequence, transaction costs could diminish and cleanups might be planned and implemented faster, serving goals of CERCLA that everyone agrees are high priorities.
Third, the historical policy against fee shifting in the absence of statutory authorization should be given effect. An interpretation that strictly limits the recovery of attorneys fees to those incurred as "enforcement activities" does this.
In sum, the approaches of both the Eighth and Ninth Circuits have valid attributes. The Eighth Circuit's beliefs that "enforcement activities" must be given meaning and that forbidding recovery of any attorneys fees would render meaningless CERCLA § 101(25), as amended by SARA, is difficult to dismiss. Similarly, the Ninth Circuit's position that the lack of an explicit reference to "attorneys fees" in § 101(25) also appears valid. Nevertheless, the better approach may be that which, as discussed, makes recovery of attorneys fees dependent on whether litigation was necessary to compel contribution to a CERCLA cleanup.
Ultimately Congress may clarify its intentions regarding attorneys fees as CERCLA undergoes reauthorization. The reauthorization process has already begun.35 In the meantime, courts might benefit from the recommended approach, which provides a reading of CERCLA that gives both meaning to its language and is consistent with Congress' intent in enacting the statute.
1. 42 U.S.C. §§ 9601-9675, ELR STAT. CERCLA 007-075.
2. Id. § 9607(a)(4)(B), ELR STAT. CERCLA 024.
3. Id. § 9601(25), ELR STAT. CERCLA 009 (emphasis added).
4. 984 F.2d 1015, 23 ELR 20540 (9th Cir. 1993).
5. 920 F.2d 1415, 21 ELR 20453 (8th Cir. 1990).
6. Stanton Rd., 984 F.2d at 1019, 23 ELR at 20543.
7. General Elec., 920 F.2d at 1422, 21 ELR at 20456.
8. Decisions in cases holding that attorneys fees are not recoverable include In re Hemingway Transport Inc., 23 ELR 20953 (1st Cir. 1993); Key Tronic Corp. v. United States, 984 F.2d 1025, 23 ELR 20558 (9th Cir. 1993); Stanton Rd., 984 F.2d 1015, 23 ELR 20540 (9th Cir. 1993); Keystone Chem. Co. v. Mayer Pollack Steel Corp., No. CIV A 92-6000, 1993 WL 101291 (E.D. Pa. Mar. 12, 1993); United States Steel Supply, Inc. v. Alco Standard Corp., 89-C20241, 1992 WL 229252 (N.D. Ill. Sept. 9, 1992); Redland Soccer Club v. Department of the Army, 801 F. Supp. 1432, 1437 (M.D. Pa. 1992); Alloy Briquetting Corp. v. Niagara Vest, Inc., 802 F. Supp. 943 (W.D.N.Y. 1992); Leonard Partnership v. Chenango Town, 779 F. Supp. 223, 230 (N.D.N.Y. 1991); New York v. SCA Servs., Inc., 754 F. Supp. 995, 1000-01, 21 ELR 21021, 21023 (S.D.N.Y. 1991); Fallowfield Dev. Corp. v. Strunk, 766 F. Supp. 335, 338, 21 ELR 21404, 21405-06 (E.D. Pa. 1991); United States v. Hardage, 750 F. Supp. 1460, 1511, 21 ELR 20721, 20748 (W.D. Okla. 1990); T&E Indus., Inc. v. Safety Light Corp., 680 F. Supp. 696, 707-08, 18 ELR 20926, 20931-32 (D.N.J. 1988).
Decisions holding that attorneys fees are recoverable include Donahey v. Bogle, 987 F.2d 1250, 23 ELR 20527 (6th Cir. 1993); Gopher Oil Co. v. Union Oil Co., 757 F. Supp. 998, 1006-07 (D. Minn. 1991), aff'd, 955 F.2d 519, 22 ELR 21005 (8th Cir. 1992); General Elec., 920 F.2d 1415, 1422, 21 ELR 20453, 20456 (8th Cir. 1990); Chesapeake & Potomac Tel. Co. v. Peck Iron & Metal Co., Inc., 814 F. Supp. 1281, 1283-84, 23 ELR 20648, 20649, 20650 (E.D. Va. 1993); BTR Dunlop, Inc. v. Rockwell Int'l Corp., No. 90-C7414, 1993 U.S. Dist. LEXIS 1720 (N.D. Ill. Feb. 12, 1993) (report and recommendation of Magistrate Gottschall); Joy v. Louisiana Conference Ass'n of Seventh Day Adventists, No. CIV A 91-4025, 1992 WL 165670 (E.D. La. July 6, 1992); Bolin v. Cessna Aircraft Co., 759 F. Supp. 692, 710, 21 ELR 21385, 21393 (D. Kan. 1991); Shapiro v. Alexanderson, 741 F. Supp. 472, 480 (S.D.N.Y. 1990).
9. 421 U.S. 240, 5 ELR 20286 (1975).
10. Id. at 247, 5 ELR at 20287.
11. Id. at 269, 5 ELR at 20293.
12. 427 U.S. 160, 185 (1976) (footnote omitted).
13. Stanton Rd. Assocs. v. Lohrey Enters., 984 F.2d 1015, 1019, 23 ELR 20540, 20543 (9th Cir. 1993).
14. 802 F. Supp. 943, 947 (W.D.N.Y. 1992).
15. 42 U.S.C. § 9610(c), ELR STAT. CERCLA 032.
16. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 241, 249-50, 5 ELR 20286, 20288 (1975).
17. General Elec. Co. v. Litton Indus. Automation Sys., Inc., 920 F.2d 1415, 1422, 21 ELR 20453, 20456 (8th Cir. 1990).
18. See, e.g., Fallowfield Dev. Corp. v. Strunk, 766 F. Supp. 335, 338, 21 ELR 21404 (E.D. Pa. 1991); New York v. SCA Servs., Inc., 754 F. Supp. 995, 1000, 21 ELR 21021 (S.D.N.Y. 1991); T&E Indus., Inc. v. Safety Light Corp., 680 F. Supp. 696, 707-08, 18 ELR 20926 (D.N.J. 1988).
19. Stanton Rd. Assocs. v. Lohrey Enters., 984 F.2d 1015, 1019, 23 ELR 20540, 20543 (9th Cir. 1993) (emphasis in original) (quoting 42 U.S.C. § 9604(b), ELR STAT. CERCLA 013).
21. See, e.g., United States v. Northeastern Pharmaceutical & Chem. Co. (NEPACCO), 579 F. Supp. 823, 851, 14 ELR 20212, 20224 (W.D. Mo. 1984), aff'd in part, rev'd in part and remanded, 810 F.2d 726, 17 ELR 20603 (8th Cir. 1986), cert. denied, 484 U.S. 848 (1987).
22. Stanton Rd., 984 F.2d at 1019, 23 ELR at 20543.
23. See Comprehensive Environmental Response, Compensation, and Liability Act, Pub. L. No. 96-510, § 101(25), 94 Stat. 2767, 2771 (1980) (amended 1986).
24. Superfund Amendment and Reauthorization Act, Pub. L. No. 99-499, § 101(25), 100 Stat. 1613, 1615 (1986).
25. See CERCLA, 42 U.S.C. § 9601(25) (as amended), ELR STAT. CERCLA 009.
26. Alloy Briquetting Corp. v. Niagara Vest, Inc., 802 F. Supp. 943, 946 (W.D.N.Y. 1992) (citing H.R. REP. NO. 253, 99th Cong., 1st Sess., pt. 1, at 66 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 2848-49.
28. H.R. CONF. REP. NO. 962, 99th Cong., 2d Sess., reprinted in 1986 U.S.C.C.A.N. 3276, 3278.
30. As noted by the Eighth Circuit in its description of a principal purpose of CERCLA, "CERCLA places the ultimate responsibility for clean up on 'those responsible for problems caused by the disposal of chemical poisons.'" United States v. Aceto Agric. Chem. Corp., 872 F.2d 1373, 1377, 19 ELR 21038, 21040 (8th Cir. 1989) (quoting Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074, 1081, 17 ELR 20223, 20226-27 (1st Cir. 1986)).
31. Jan Paul Acton & Lloyd S. Dixon, Superfund and Transaction Costs: The Experiences of Insurers and Very Large Industrial Firms, RAND, R-4132-ICJ, p. ix (1992). Similarly, in discussing Superfund reform, EPA Administrator Carol Browner recently told a Senate committee that the President is concerned that "too much money is going to lawyers and not enough to cleanups." Claudia MacLachlan & Marianne Lavelle, EPA Chief Decries Legal Bills, NAT'L L.J., May 24, 1993, at 5.
32. At least one court has indicated that although recoverable, attorneys fees only may be awarded to the extent enforcement is shown to have been necessary. See Shapiro v. Alexanderson, 741 F. Supp. 472, 480 (S.D.N.Y. 1990).
33. Reimbursement for attorneys fees should not be allowed in instances in which the fees are incurred for the purpose of obtaining general advice and counsel, representing clients before regulatory agencies, making a demand on third parties for participation, ensuring compliance with the national contingency plan, or enforcing rights under state laws. But see BCW Assocs. Ltd. v. Firestone Tire & Rubber Co., No. 86-5947, 1988 WL 102641 (E.D. Pa. Sept. 30, 1988) (recovering attorneys fees incurred to respond to contamination and comply with national contingency plan, but not recovering litigation costs).
The court's statutory construction in BCW is problematic because it allows recovery of attorneys fees incurred to comply with CERCLA rather than to enforce a party's rights under the statute. It is therefore inconsistent with the language of CERCLA § 101(25). It also fails to jibe with the rule of Alyeska and Runyon, which forbids fee shifting without statutory authorization.
34. Notably, neither the Ninth Circuit nor any of the courts reaching the same conclusion as the Ninth Circuit in Stanton Rd. has attempted to construe § 101(25)'s actual language, as chosen by Congress, limiting their analysis to the absence of the phrase "attorneys fees" from that section.
35. CERCLA is up for reauthorization in 1994. Congressional hearings on CERCLA reform began in the early part of 1993.
23 ELR 10477 | Environmental Law Reporter | copyright © 1993 | All rights reserved