superfund and natural resource damages litigation committee

1Superfund and Natural Resources Damages Litigation Committee, November 2014

November 2014Vol. 10, No. 1

Superfund and Natural Resource Damages Litigation Committee Newsletter

MESSAGE FROM THE CHAIRRuss Randle, Squire Patton Boggs (US) LLP, Washington, D.C.

Dear colleagues—Superfund turns 35 years old next year. This law has spawned thousands of reported cases, resulted in billions of dollars in environmental cleanup, and has infl uenced commercial real estate transactions for at least 30 years, as owners and lenders learned they might be buying liability along with real estate unless they looked very carefully. It has been a major focus of many of our law practices for over three decades.

On the plus side, it has triggered thousands of environmental cleanups and given strong incentives to handle hazardous substances much more carefully than before 1980. Far fewer sites are waiting to explode or catch fi re than in 1980; the “wild west” pursuit of midnight dumpers in woods, mines, sewers, and creeks is now very rare. People are safer and the environment is cleaner.

These real improvements cost more and took longer than they should have. These problems arose for many reasons, including the law’s hasty enactment, the politicization of its early implementation, and the resulting adoption of doctrinaire policies in response, such as the misguided preference for incineration in the late 1980s.

Major changes to this law are unlikely any time soon, so our challenge as advocates—and as

members of the environmental bar—is to help see that this law is used to achieve faster, cheaper, and better cleanups in a way that the public and our clients can easily understand and support. To that end, we are preparing “A Citizen’s Guide to Superfund: What to Do with the Site in Your Backyard,” to be published on the web to aid ordinary citizens. Marc Davies has graciously agreed to oversee this effort, for which we need many contributors. Superfund discussions use so much jargon that we might as well be speaking a foreign language. Our fellow citizens deserve a clear, concise, and accurate guide about how the site cleanup process works.

For our own members, we plan to sponsor programs (including webinars and conference calls), on the following topics important to practitioners:

Confl icting Superfund Settlement Approval Standards. The recent and confl icting Ninth and Tenth Circuit decisions suggest that courts may start applying different standards to approving settlements, cutting across the country.

Changing Standards and Final Cleanups. Recent changes in the ASTM standard for due diligence mean that review of contaminated properties focuses more on potential vapor intrusion hazards than was true in the past.

Continued on page 3

2 Superfund and Natural Resource Damages Litigation Committee, November 2014

Copyright © 2014. American Bar Association. Allrights reserved. No part of this publication may bereproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic,mechanical, photocopying, recording, or otherwise,without the prior written permission of the publisher.Send requests to Manager, Copyrights and Licensing, at the ABA, by way of www.americanbar.org/reprint.

Any opinions expressed are those of the contributorsand shall not be construed to represent the policiesof the American Bar Association or the Section ofEnvironment, Energy, and Resources.

Superfund and Natural Resource Damages Litigation Committee NewsletterVol. 10, No. 1, November 2014Carolyn McIntosh and Kirk O’Reilly, Editors

In this issue:

Message from the ChairRuss Randle .............................................1

Message from the EditorsCarolyn McIntosh and Kirk O’Reilly ..............................................3

Early Settlement of Natural Resource Damage Claims at Unremediated Superfund SitesKaren L. Reed .........................................4

A Review of EPA’s First Environmental Justice Analysis at a CERCLA SiteAlexandra Gilliland ..............................10

Expert Discovery in CERCLA Cases: What You Need to Know About the Effect of the 2010 Amendments to Rule 26Andrew Schulkin and Eric Weslander ......................................15

Successfully Bringing a Superfund Subrogation ClaimCarolyn L. McIntosh and Christa Lee Rock ..................................19

Fourth Circuit Tips Its Hand: Only 113(f) Contribution Claims Available for PRPs That Resolve LiabilityBrian Block .............................................25

November 25, 2014Impacts of Fracking on Property ValuationCLE WebinarPrimary Sponsor: Section of State and Local Government Law

January 23-25, 2015Winter Council MeetingDana Point, CA

March 4, 2015Key Environmental Issues in U.S. Environmental Protection Agency Region 4Georgia State Bar Conference CenterAtlanta, GA

March 26-28, 201544th Spring Conference: The ABA Superconference on Environmental LawThe Palace HotelSan Francisco, CA

April 15-17, 2015Section of Litigation’s Annual ConferenceNew Orleans, LAPrimary Sponsor: Section of Litigation

April 16-17, 2015ABA Petroleum Marketing Attorneys’ MeetingThe Loews Madison HotelWashington, DC

June 3, 201533rd Water Law ConferenceDenver, CO

AMERICAN BAR ASSOCIATION

SECTION OF ENVIRONMENT, ENERGY, AND RESOURCES

For full details, please visit www.ambar.org/EnvironCalendar

CALENDAR OF SECTION EVENTS


Continued from page 1

That change, together with possible changes in the trichloroethene standard (the most frequently detected hazardous substance at National Priorities List sites), suggests that many site cleanups may be reopened.

Streamlining Natural Resource Damage (NRD) Disputes. NRD issues can prevent resolution of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cases, even where parties would pay a big premium for early settlement. Methods to streamline and standardize NRD assessments will be the focus. Financial Assurance Rules and Mining Sites. The Environmental Protection Agency (EPA) was sued in August 2014 to force it to issue fi nancial assurance rules under CERCLA, which it is decades late in doing. EPA has focused mainly on the mining industry, raising questions about bond and restoration requirements under other federal and state laws, as well as whether such rules should apply to other industry sectors.

Congressional Role in CERCLA Controversies? Members of Congress are often asked to intervene in CERCLA disputes, given the large amounts at stake and important local interests in cleanups and NRD restoration. What effect do they have?

Finally, we will be starting reporting on Superfund developments from an EPA regional perspective, to help provide more current and helpful information to our colleagues as practitioners and residents. Watch for our “regional reporter” efforts soon on our website. If you are interested in contributing, please let me know.

Please give us your comments and suggestions about programs, policies, and cases we should highlight and publicize for our members.

MESSAGE FROM THE EDITORSCarolyn McIntosh, Squire Patton Boggs (US) LLP, Denver, ColoradoKirk O’Reilly, Exponent Inc., Bellevue, Washington

Thanks to a number of active Section members, this issue of the newsletter is information-packed. As a prelude to the upcoming program on streamlining natural resource damage (NRD) disputes, our fi rst article provides a case study of an early NRD settlement. Our second article discusses EPA’s fi rst environmental justice analysis, issued in connection with the proposed remediation of the Lower Duwamish Waterway in Seattle. Next, the authors examine judicial decisions from the last four years interpreting the 2010 amendments to rule 26 to provide practical guidance for working with experts and expert disclosures. Our last two articles examine developments concerning two CERCLA provisions—sections 112 and 113. We hope you enjoy!

We are now soliciting articles for the next Superfund and Natural Resource Damages Litigation Newsletter—what we hope will be a holiday edition. Please contact us with topic ideas or articles: [email protected] and [email protected]. Authors need not be SFNRD Litigation Committee members. Initial deadline for submissions: early December.

Visit the committee webpage:www.ambar.org/EnvironCommittees


EARLY SETTLEMENT OF NATURAL RESOURCE DAMAGE CLAIMS AT UNREMEDIATED SUPERFUND SITESKaren L. Reed, Ring/Bender, Portland, Oregon

Abstract

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) has two overarching purposes: cleanup of sites contaminated by releases of hazardous substances and compensation of the public for injuries to natural resources resulting from these releases. The latter purpose is accomplished through the natural resource damage assessment and restoration process. Originally, the cleanup of contaminated sites and the restoration of injured natural resources proceeded sequentially, and section 113(g)(1) of CERCLA was interpreted to preclude natural resource damage settlements at Superfund sites prior to selection of the fi nal remedy. In practice, this sequencing resulted in lost synergies between the cleanup and restoration processes and in long delays in natural resource restoration while responsible parties litigated cleanup liability.

In recent years, natural resource damage claims at several signifi cant Superfund sites have been settled prior to selection of the fi nal remedy. This paper examines the legal bases for these settlements, discusses their diffi culties and benefi ts, and describes their potential application at complex contaminated sediment sites.

Introduction

In 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9675 (1980) (CERCLA), commonly called “Superfund,” to address the nation’s many legacy sites contaminated by releases of hazardous substances. Recognizing that cleaning up contaminated properties does not by itself fully compensate the public, Congress included provisions in

CERCLA addressing the recovery of natural resource damages (NRDs) for injuries to natural resources held in trust by federal, state, and tribal governments for the benefi t of the public, 42 U.S.C. § 9607(a)(4)(C), and providing for the restoration of the injured resources by these governments’ natural resource trustees (trustees), 42 U.S.C. § 9607(f).

The remedial, or cleanup, process is initiated by a site being listed on the National Priorities List. 42 U.S.C. § 9605(a)(8)(B). After listing, the U.S. Environmental Protection Agency (EPA) conducts a remedial investigation (RI) and feasibility study (FS), commonly called the “RI/FS,” which determines the extent and magnitude of contamination and develops alternatives for a permanent cleanup, called the “remedy.” 40 C.F.R. § 300.430. EPA specifi es the selected remedy in a record of decision (ROD). Id.

The NRD recovery process begins with the appropriate trustee(s) conducting an optional preassessment screen to determine whether a full natural resource damage assessment (NRDA) is warranted and, if so, to develop a plan for conducting the NRDA and a preliminary estimate of NRDs. See 43 C.F.R. §§ 11.20–.38. The next phase, which, depending on site conditions can be lengthy and complicated, involves conducting the NRDA. See 43 C.F.R. §§ 11.40.84. As with the preassessment screen, the NRDA procedures specifi ed in the applicable rules are optional, but trustees that conduct an NRDA in compliance with these rules obtain the benefi t of a rebuttable presumption of validity. 42 U.S.C. § 9607(f)(2)(C). All funds recovered as a result of the NRDA process must be used to restore, replace, or acquire the equivalent of the injured natural resources. 42 U.S.C. § 9607(f).

Background

The limitation on NRD settlements prior to the issuance of a ROD is contained in section 113(g)(1) of CERCLA, which provides:

In no event may an action for damages under


this chapter with respect to such a vessel or facility [at which a remedial action under this chapter is scheduled] be commenced . . . before selection of the remedial action if the President is diligently proceeding with a remedial investigation and feasibility study under section 9604(b) of this title or section 9620 of this title (relating to Federal facilities).

42 U.S.C. § 9613(g)(1).

For about ten years after CERCLA’s enactment in 1980, this provision was generally understood as an absolute prohibition on NRD settlements at Superfund sites prior to EPA’s selection of a remedy by issuance of a ROD. As explained by a federal district court:

[C]ustomarily, natural resource damages settlements follow or are contemporaneous with cleanup settlements. This is so because, customarily, natural resource damages are viewed as the difference between the natural resource in its pristine condition and the natural resource after the cleanup, together with the lost use value and the costs of assessment. As a residue of the cleanup action, in effect, they are thus not generally settled prior to a cleanup settlement.

Utah v. Kennecott Corp., 801 F. Supp. 553, 568 (D. Utah 1992) (quoting In re Acushnet River, 712 F. Supp. 1019, 1035 (D. Mass. 1989)), appeal dismissed, 14 F.3d 1489 (10th Cir. 1994).

This prohibition made practical sense for RI/FS processes limited in scope to few potentially responsible parties (PRPs) and in duration to several years. See H.R. Rep. No. 99-253(III), at 20 (1985) (“The Committee believes that cost recovery and damages actions should be brought at the most appropriate time in light of the response action taken. . . .”), reprinted in 1986 U.S.C.C.A.N. 3038, 3043. However, as these limited-scope sites were addressed, complex sites, such as contaminated sediment sites like the Portland Harbor Superfund site, came to the forefront. These

complex sites may involve hundreds of PRPs, and the RI/FS process, even if pursued with reasonable diligence, can last decades. For example, EPA has identifi ed 349 PRPs in connection with the Portland Harbor Superfund site, for which the RI/FS process was initiated in 2001 and remains incomplete. In this context, waiting decades to settle NRD claims and implement restoration projects became untenable for both PRPs and trustees.

Consequently, in the late 1980s, parties began lodging NRD settlements with courts for approval prior to remedy selection. For example, in Acushnet River, 712 F. Supp. at 1038, the district court approved settlement of an NRD claim prior to and independent of the cleanup and remediation process, provided that the consent decree include a reopener for NRD liability arising out of conditions that were unknown at the time of entry of the consent decree. In City of New York v. Exxon Corp., 697 F. Supp. 677 (S.D.N.Y. 1988), which involved several contaminated landfi lls, the district court approved a global settlement of remedial and NRD liabilities prior to their apportionment among the several hundred defendants, id. at 683, and prior to the proposal or selection of a remedial plan, id. at 690.

These consent decrees allow early restoration to be implemented and provide funds for the trustees to prepare full injury assessments and to pursue other PRPs, through both cooperative processes and litigation. Thus, all the parties involved benefi t from early settlement—the public is compensated sooner; the NRDs stop accruing, which limits the PRPs’ liability; and the trustees gain vital funding that otherwise might be unavailable to support their NRD assessment and recovery efforts. However, parties not involved in the settlement, typically nonsettling PRPs and environmental advocacy groups (often called “nongovernmental organizations” or “NGOs”), may oppose a pre-ROD NRD settlement, and parties that lack standing have an opportunity to submit comments in support of and in opposition to the proposed settlement during the public comment period, 28 C.F.R. § 50.7.


Procedural Compliance with Section 113(g)(1)Before a court can approve a settlement under CERCLA, it must fi nd both procedural and substantive compliance with CERCLA’s requirements. United States v. Montrose Chemical Corp., 827 F. Supp. 1453, 1458 (C.D. Cal. 1993), vacated on other grounds, 50 F.3d 741 (9th Cir. 1995) (“Montrose I”). One of the procedural requirements is compliance with section 113(g)(1) of CERCLA, 42 U.S.C. § 9613(g)(1). At least two different approaches to analyzing this compliance have been used.

One district court distinguished prosecuting an NRD action from settling an NRD claim, fi nding that CERCLA did not prohibit the latter.

Of course, the bar [in section 113(g)(1) of CERCLA, 42 U.S.C. § 9613(g)(1)] would not preclude the suit forever, but simply until there was a remedial action selected for the Montrose Site. Plaintiffs correctly point out, however, that nothing precludes the parties from settling claims even when they are potential claims.

Montrose I, 827 F. Supp. at 1457 (emphasis added); see also State of Idaho v. Howmet Turbine Component Co., 814 F.2d 1376, 1380 (9th Cir. 1987) (explaining the distinction in CERCLA between “claims” and “actions”).

In other cases, the U.S. Department of Justice has taken the position that it has authority to commence an action pursuant to NRD recovery authority provided in section 311(f) of the Clean Water Act, 33 U.S.C. § 1321(f), and then settle the case under CERCLA, taking the position that CERCLA only precludes the commencement of an action prior to selection of a remedy and not its settlement. Telephone Commc’n with Michael J. McNulty, U.S. Dep’t of Justice (Feb. 7, 2013). Trustees prefer to settle under CERCLA, rather than the Clean Water Act, because CERCLA provides for recovery of a broader range of NRDs. See generally Kennecott Utah Copper Corp. v. U.S. Dep’t of Interior, 88 F.3d 1191, 1226–28 (D.C.

Cir. 1996). Consequently, modern NRDA consent decrees typically cite all of the available authority for the settlement. See, e. g., Consent Decree ¶ D at 2, United States v. Boeing Co., No. CV-10-758 RSM (W.D. Wash. Dec. 14, 2010). This approach would not be available, however, in a case that did not trigger NRD liability under the Clean Water Act. In those cases, NRD claims under state common law might suffi ce. See, e. g., N.J. Dep’t of Envtl. Prot. v. Exxon Mobil Corp., 22 A.3d 1 (N.J. Super. 2011) (recognizing strict liability common law NRD claims based on public nuisance and trespass); but cf. New Mexico v. Gen. Elec. Co., 467 F.3d 1223, 1247–48 (10th Cir. 2006) (fi nding partial, but not complete, preemption by CERCLA of state law public nuisance and negligence theories of recovery for NRDs).

At sites involving multiple PRPs, only some of which enter into an NRD settlement, the nonsettling PRPs often have a strong incentive to contest the settlement, in part because the settling PRPs are granted protection under section 113(f)(2) of CERCLA, 42 U.S.C. § 9613(f)(2), against claims by nonsettling PRPs for contribution. As federal courts more regularly found procedural compliance of pre-ROD NRD consent decrees with section 113(g)(1) of CERCLA, nonsettling PRPs and NGOs began asserting challenges to these settlements’ compliance with CERCLA’s substantive requirements.

Substantive Review of Pre-ROD NRD Settlements

Once a court fi nds that a pre-ROD NRD settlement complies procedurally with section 113(g)(1) of CERCLA, it must conduct a substantive review, which involves determining whether it has “suffi cient information to intelligently evaluate the settlement.” City of New York, 697 F. Supp. at 692. “Before approving a CERCLA settlement, the Court must be convinced that it is fair, adequate, and reasonable, and consistent with the Constitution and the mandate of Congress.” Id.; see also United States v. Montrose Chemical Co., 50 F.3d 741, 746 (9th Cir. 1995) (“Montrose


II”). Ultimately, the court must strike a balance “between the policies favoring settlements and the need to safeguard the public interest. ”City of New York, 697 F. Supp. at 693.

In the early 1990s, federal courts began developing practical guidelines for applying these legal standards to contested pre-ROD NRD settlements. Traditionally the measure of residual NRDs is dependent upon the remedy that is selected and implemented, see 43 C.F.R. § 11.15(a)(1), and a settlement negotiated prior to EPA’s issuance of a ROD necessarily cannot rely upon the fi nal remedy in developing a measure of the NRDs. Consequently parties needed specifi city regarding the type and amount of technical information that would support such a settlement suffi ciently to pass judicial muster.

In Montrose II, 50 F.3d 741, the Ninth Circuit Court of Appeals rejected a proposed NRD settlement between the federal and state trustees and a group of PRPs consisting of local governmental entities when corporate co-defendants objected. A court-appointed special master supervised the settlement negotiations. Id. at 745.

At the Special Master’s instruction, the [natural resource trustees] created and disclosed to the Special Master alone an overall monetary framework for early settlement of the entire litigation, including specifi c allocations among the defense groups, based on the [trustees’] estimates of potential damages and individual liability, and taking into account the costs and risks of litigation.

Id. The special master recommended approval of the consent decree to the district court in a report. Id. The report did not disclose the total NRDs that the trustees had estimated for the entire site, but rather stated that the proposed settlement had a reasonable relationship to this total. Id.

The Ninth Circuit found that “the district court could not adequately evaluate the fairness and

reasonableness of the proposed consent decree without having before it at least an estimate of the projected total natural resource damages at issue in this case.” Id. at 743. Estimating residual site-wide NRDs involves comparing the background condition of the natural resource to the remediated condition of that resource. 43 C.F.R. § 11.70(c). Prior to issuance of a ROD, the remediated condition of the resource is unascertainable, which necessitates developing alternative methods to estimate site-wide NRDs.

Despite CERCLA’s strong policy in favor of settlement, Acushnet River, 712 F. Supp. at 1028, courts have rejected pre-ROD NRD settlements when the record contains insuffi cient information to estimate site-wide liabilities because the court must ensure that the settlement is fair to the nonsettling PRPs and the public. The district court in Kennecott Corp., 801 F. Supp. 553, rejected a proposed settlement between the state of Utah and Kennecott Corporation for injuries to groundwater resources resulting from mining and milling operations. The proposed consent decree was lodged prior to the commencement of the RI/FS process, and in assessing the NRDs the state did not adhere to the procedures set forth in the applicable federal rules, 43 C.F.R. part 11, so the court did not afford its injury assessment the rebuttable presumption of validity contained in section 107(f)(2)(C) of CERCLA, 42 U.S.C. § 9607(f)(2)(C).

Following the public comment period, the Kennecott Corp. court heard arguments from the parties’ counsel. 801 F. Supp. at 561. The court declined to approve the consent decree at that time and instead took the unusual step of holding an evidentiary hearing, id., perhaps because preparing groundwater injury assessments involves complex modeling and a substantial amount of professional judgment, see id. at 556–60, and no generally accepted methodology has yet emerged, see, e.g., Gen. Elec. Co., 467 F.3d 1223. Moreover, trustees have begun estimating injuries to groundwater resources fairly recently and do not have the same


depth of experience in doing so as with other natural resources.

After the evidentiary hearing, the Kennecott Corp. court disapproved the consent decree and found numerous defi ciencies in the injury assessment, including “[f]ailure to develop suffi cient factual foundation to support the State’s determination that contaminated ground waters cannot be restored,” 801 F. Supp. at 568, and “fail[ure] to adequately study possible [remedial] alternatives,” id. at 571. In addition, the assessment did not address the likelihood of the contamination migrating outside the assessment area, id. at 563, nor did it account for the fact that the state had not achieved source control with respect to ongoing releases by Kennecott Corporation, id. at 565.

Under recent persuasive authority, in addition to information regarding site-wide liabilities, the court must be provided suffi cient information to estimate each settling PRP’s individual liability. In Arizona v. Raytheon Co., 761 F.3d 1005 (10th Cir. 2014), the Ninth Circuit reversed the district court’s approval of a group of de minimis remedial liability settlements under CERCLA. In a split panel decision, the majority held that the district court erred in approving the consent decrees when, among other things, the court did not independently evaluate each settling PRP’s estimated remedial liability in light of the total cleanup cost to determine whether each settlement amount was “fair, reasonable, and consistent with CERCLA’s objectives.” Id. at 1015 (quoting Montrose II, 50 F.3d at 748). Instead, the district court deferred to the state of Arizona’s determination that the individual settlements were fair and reasonable. Id. at 1013.

In a lengthy dissent, Judge Callahan criticized the majority’s opinion for going too far in requiring the district court to conduct a detailed review of each settling PRP’s estimated remedial liability, particularly given the “enforcement-sensitive nature” of the information necessary to support this review. Id. at 1016. Judge Callahan concluded

that, contrary to CERCLA’s policy favoring consent decrees, the majority’s decision was likely to discourage them. Id. at 1027. Although Raytheon addressed remedial consent decrees, the majority’s analysis is equally applicable to NRDA consent decrees, as are Judge Callahan’s concerns. Although the NRDA process does not have an enforcement component, data necessary to estimate a PRP’s NRDs often overlap with data used for enforcement purposes. As a result of Raytheon, PRPs may now be faced with the diffi cult choice of whether to forgo an early NRDA settlement to protect sensitive information from public disclosure.

Trustees and settling parties now have guidance regarding the factual record development needed to obtain approval for pre-ROD NRD settlements. In general, there must be reliable estimates, supported by suffi cient data, of the settling PRP’s NRDs and site-wide NRDs and explanations of how these estimates were derived and the relationship between them. The injury assessment must include at least a preliminary analysis of potential remedial alternatives and outcomes and must evaluate the potential for the injuries to change over time, particularly as a result of contributions from ongoing sources of hazardous substances.

Modern Approaches to Developing Supportable Settlements

In recent years, trustees have become more so-phisticated in their approaches to assessing NRDs. Pre-ROD NRD settlements, while not the norm, are emerging as a viable alternative to protracted ad-ministrative processes and litigation. One approach to assessing NRDs in the absence of a remedy is to assume that no remedy will be implemented or that EPA will select the least protective remedy proposed in the RI/FS. This approach was used to support a pre-ROD NRD settlement proposal for groundwater contamination resulting from mining operations at the Chevron/Molycorp molybdenum mine near Questa, New Mexico. See generally New Mexico Offi ce of Natural Resources Trustee


et al., Preassessment Screen and Determination, Molycorp Site, Taos County, New Mexico (Aug. 15, 2003).

This approach results in an overcompensation of the public by a PRP that is willing to pay a premium to obtain an early exit from the NRDA process. Since this early exit includes contribution protection, see, e.g., Consent Decree ¶ 55 at 39, Boeing Co., which prevents other PRPs from suing the settling party after the consent decree approval is fi nal and unappealable, it can be quite valuable. Moreover, an early exit typically allows the settling party to avoid substantial transactional costs from continued defense activities in administrative and judicial proceedings, which may last for many years. This fi nality and cost savings may justify the payment of substantial early settlement premiums, which the trustees may then use for additional natural resource restoration.

When successful source control measures have been implemented as early actions, pre-ROD NRD settlements become more feasible. This is particularly true of contaminated sediment sites, which typically involve multiple sources over an extended time period. Trustees should coordinate with early actions and the RI/FS process in developing injury assessments because much of the data collected to support remedial activities also are relevant to the assessment of NRDs. In addition, this coordination provides trustees with access to the remedial information needed to support early NRD settlements.

An additional benefi t of pre-ROD NRD settlements is the opportunity to coordinate implementation of the remedy with the construction of natural resource restoration projects, which can result in substantial restoration cost savings. This benefi t is lost if the NRDA process is not initiated until after the remedial process is completed. Settling parties should explain specifi c opportunities for such coordination to courts when seeking approval of pre-ROD NRD settlements, as these opportunities

and the resultant cost savings constitute compelling public policy reasons to approve such settlements.

Conclusion

Pre-ROD NRD settlements, which were once thought to be impossible, are beginning to gain more widespread acceptance among trustees, PRPs, and federal courts. Nonetheless, proponents of these settlements need to be careful to develop the factual record suffi ciently for the reviewing court to evaluate the appropriateness of the recovery amount with respect to the settling party, the nonsettling PRPs at the same site, and the public. An estimate of the total site-wide NRDs is essential, and this estimate must include consideration of a potential or proposed remedy. Particularly at complex sites such as sites with contaminated sediments, consideration also should be given to potential contaminant migration and source control measures. The reviewing court also must be provided with suffi cient information to ensure that the estimate of each settling PRP’s liability is fair and reasonable. When properly supported, these settlements can obtain judicial approval and confer substantial benefi ts to the trustees, settling PRPs, and the public.

Karen L. Reed was a founding partner of Ring Bender McKown & Castillo LLLP, where she practices environmental and natural resource law in the fi rm’s Portland, Oregon, offi ce, with a focus on natural resource damage assessment, restoration, litigation, and settlement. She has represented both natural resource trustees and potentially responsible parties at a variety of Superfund and other contaminated sites, including complex sediment sites, mining facilities, petroleum spill sites, and radioactive waste sites. She can be reached at [email protected].


II. History and Dynamics of the Lower Duwamish Waterway

A. Background of the Waterway and Its Myriad UsesThe Duwamish is a 12-mile urban estuary that fl ows through heavily industrialized areas and empties into Puget Sound. In 2001, EPA added the Lower Duwamish Waterway Superfund site to the National Priorities List to target sediment contaminants accumulated over the past century. There are four primary contaminants of concern (COCs) at the site: polychlorinated biphenyls (PCBs), dioxins/furans, carcinogenic polycyclic aromatic hydrocarbons (cPAHs), and arsenic. An additional 41 chemicals are also listed as COCs.

The Duwamish serves diverse interests that coexist uneasily. Until the mid-19th century, Native American tribes occupied the area, and they continue to use its resources today. Two federally recognized tribes have treaty rights to fi sh in the waterway, and the Duwamish tribe and other locals also fi sh its waters. The Duwamish is a rich fi shing resource; it is home to 53 species of fi sh, as well as shellfi sh, crustaceans, and benthic invertebrates, which are particularly susceptible to in-sediment contaminants.

The region is not solely industrial; it includes residential neighborhoods that are home to sizeable low-income and minority populations, especially when compared to the Seattle area as a whole. Minority groups make up 55.4 percent of the South Park neighborhood as compared to 30.5 percent of the Seattle population. Exec. Order No. 12,898 at 12. The most recent U. S. census found that the average per capita income in South Park was $18,575 and $40,868 for Seattle. Id. There is also an education discrepancy: in the Duwamish Valley, 20.1 percent of residents lack a high school diploma as opposed to 8.2 percent within King County. Id.

B. Dangers Posed by the Current ConditionsContaminated sediments in the Duwamish are

A REVIEW OF EPA’S FIRST ENVIRONMENTAL JUSTICE ANALYSIS AT A CERCLA SITEAlexandra Gilliland, Foster Pepper PLLC, Seattle, Washington

Twenty years after an executive order requiring the consideration of environmental justice issues in federal policymaking, the Environmental Protection Agency (EPA) issued its fi rst environmental justice analysis of the proposed remediation of a Superfund cleanup site—the Lower Duwamish Waterway in Seattle, Washington. The river presents unique considerations; EPA had to balance continued subsistence fi shing, the disparate health impacts suffered by local residents, and ongoing industrial interests in the river. The analysis could infl uence the design of the fi nal remediation plan, impact ongoing local debates about fi sh consumption rates, and serve as a blueprint for future Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) environmental justice analyses (EJA).

I. Introduction to Federal Environmental Justice Policy

In 1994, President Clinton ordered every federal agency to make the pursuit of “environmental justice” part of its mission and obliged agencies to “identify and address” the effects of policies on minority and low-income populations as they related to human health and the environment. Exec. Order No. 12,898, 3 C.F.R. 859 (1994–1995). The directive refl ected concern that marginalized populations suffered disproportionate adverse health and environmental effects from policy changes. It specifi cally targeted water quality problems and concerns about contaminated fi sh consumption by disadvantaged populations. Despite the sweeping requirements, substantive changes were sporadic, and there was little guidance on integrating environmental justice considerations into projects. However, under President Obama’s administration, agencies have renewed the focus on environmental justice.


dangerous to the health of individuals consuming fi sh and shellfi sh from the river. The tissue of these species accumulates toxins from continuous pollution exposure. Because of the risks of consuming contaminated fi sh, the Clean Water Act requires states (or EPA, in the absence of state action) to develop water quality standards that ensure waters remain fi shable. Id. at 13. To comply, states and EPA estimate average human fi sh consumption rates—one of the variables used to establish water quality guidelines. Ideally, these regulations should keep contaminants at levels that prevent excessive exposure to toxins for humans consuming fi sh.

Washington does not have a state-specifi c fi sh consumption rate tailored to the habits of its residents. Instead, it relies on EPA’s default rate of 6.5 g of fi sh/day (approximately one seven-ounce meal per month). However, surveys of local residents indicate that actual consumption rates in the area are much higher than predicted by the federal models. Some studies show that rates for local tribes relying on the Duwamish may be as high as 584.2 g of fi sh/day, excluding salmon. See,Windward Environmental, LLC, East Waterway Operable Unit Supplemental Remedial Investigation/Feasibility Study, HHRA Technical Memorandum (Mar. 2010). Other non-tribal, minority rates can reach as much as 51.5 g fi sh/day, with a preference for shellfi sh. R. Sechena et al., Asian and Pacifi c Islander Seafood Consumption Study, EPA 910/R-99-003 (1999). Concentrations of the COCs identifi ed at the site greatly exceed the permissible levels established by EPA. So, even if the federal consumption rates accurately refl ected the habits of locals, the ongoing fi shing in the area mean these populations are highly vulnerable to excessive contamination exposure.

In response, the Washington Department of Health issued standing “Do Not Eat” fi sh advisories in 2004 and 2005 with little effect. Fishing continues to be popular; crabbing remains especially prevalent, which has an elevated risk, because shellfi sh are more likely to have

PCB concentrations of up to 20 times that of indigenous fi sh. Other benthic invertebrates in the waterway also pose heightened risks, because they are particularly susceptible to COCs. They are frequently bottom dwellers, and they pass on pollutants in increased concentrations because the COCs are bioaccumulative.

III. Integrating an Environmental Justice Analysis into a Remediation Plan

A. An Overview of EPA’s Approach to Analyzing Environmental Justice IssuesEPA issued its draft EJA in February 2013 in conjunction with its fi nal proposed plan. A public comment period followed, closing in June 2013, after which EPA was expected to review the public responses and draft a fi nal EJA and record of decision (ROD), which will detail the remediation plan for the site.

EPA defi nes environmental justice as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” EPA EJA at 6. The EJA attempted to analyze whether the proposed cleanup plans would have a “disproportionately high and adverse effect or impact” on minority or low-income populations relative to the impact on the local non-minority and/or non-low-income population. Id. at 6. EPA defi ned “disproportionately high and adverse effect or impact” as “predominately borne by any [one] segment of the population” or potentially borne by a disadvantaged population and “is appreciably more severe or greater in magnitude than the adverse effect or impact” on a non-disadvantaged population. Id. To identify disproportionate impacts, EPA used a “reference community”: a population of equal size to the community of interest in surrounding area but not immediately subject to site conditions. Id. EPA also examined whether the potentially disproportionately impacted groups had the opportunity for “meaningful involvement” in decision making.


B. Disproportionate Impacts Suffered by Disadvantaged Populations Under Current ConditionsBefore turning to the proposed approaches, the EJA documented the current vulnerabilities of the Duwamish communities, including higher rates of chronic illnesses, like asthma; lower life expectancies; and slightly higher infant mortality rates. The EJA also concluded that the area had higher air, soil, and water pollution levels. Given the more concentrated minority and low-income populations, these conditions suggest a disproportionate impact on overburdened communities.

EPA also analyzed fi sh consumption patterns. As discussed, populations near the Duwamish likely have diets heavier in fi sh than predicted by established guidelines. This is especially dangerous for children and pregnant women. EPA EJA at 54. The cultural, educational, and racial diversity of the groups using the Duwamish makes communicating the extent and gravity of the risks challenging. See Daniel Pearson, The Duwamish River’s Deadly Catches, The Seattle Weekly News, Sept. 10, 2013, available at http://goo.gl/w6nTd6 (last visited Feb. 7, 2014). Given these vulnerabilities, EPA concluded that the site presents a signifi cant environmental justice concern for tribal and subsistence fi shers and that pre-cleanup conditions have an adverse disproportionate impact on these groups. EPA EJA at 34.

C. Analyzing the Proposed Remediation EffortsThe proposed cleanup targets four remedial action objectives (RAOs), one of which is reducing fi sh-consumption risks. EPA’s fi nal proposed plan includes 12 remedial alternatives designed to achieve the RAOs. The options ranged between alternative 1 to 6R. Each featured varying proportions of active remediation and cleanup technologies, including monitored natural recovery (MNR), dredging, enhanced natural recovery (ENR), and capping. Alternatives at the lower end of the range proposed less active construction,

involved smaller amounts of acreage, and relied more on MNR and ENR. Alternatives at the higher end used more dredging and had larger active construction footprints. Ultimately, each was expected to result in the same reduction in human health risks, although the timelines for completion of each varied. Also, each was projected to reduce risks related to consumption by 90 percent, but no approach was expected to meet health-based standards for tribal members or Asian/Pacifi c Islanders due to these groups’ high rates of fi sh consumption. In other words, the primary RAO will not be achieved through any proposed remedial approach.

To evaluate the alternatives, EPA reviewed long- and short-term effectiveness, permanence, reduction in toxicity, implementability, cost, and community acceptance. Feasibility Study (FS), Executive Summary at 24. However, the EJA was limited by uncertainties and variables. Also, it was diffi cult to compare options with “varying timeframes with varying levels of uncertainty at varying costs.” EPA EJA at 48. Nevertheless, EPA noted that alternatives with more dredging were easier to model because dredging removes quantifi able amounts of contaminants with known short- and long-term effects. Natural recovery depends on inestimable variables, such as source control effectiveness and re-exposure potential of embedded contaminants.

Despite these uncertainties, the EJA draws some conclusions: the options with the more intensive use of dredging, ENR, in-situ remedies, MNR, and capping resulted in the most immediate reduction in risk to human health. EPA concluded that 5C, 5C plus (EPA’s “Preferred Alternative”), and 6C resulted in the largest decrease in cancer risks in the shortest period of time. EPA also concluded that remedies 6R and 6C, which relied solely on active remediation, and had the largest cleanup footprint, would result in the fastest and most signifi cant decrease in non-cancer health risks. Remedies in the mid-range of the spectrum, 3C, 4C, and 5C, were expected to have the most minimal short-


because “different ethnic groups rely on different communication methods.” EPA EJA at 53–55. The EJA recommended short-term mitigation efforts that minimize the impacts of the active remediation. To ensure continued access to seafood, the EJA recommends underwriting transportation to other healthy local fi shing locations, delivering uncontaminated seafood from other sources, providing monetary compensation to affected populations for the loss of resources, and assisting communities to develop aquaponics and aquaculture. But even with these mitigation measures, the EJA concludes that dependence on longer-term ICs will invariably have a disproportionate impact on certain groups.

Although the EJA primarily analyzed the alternatives through the prism of health impacts, it also looked at other potential burdens and mitigation methods. It proposed using green and environmentally friendly tools and transportation during active remediation to minimize air pollution. It also favored alternatives that would benefi t the economy through job creation. Unsurprisingly, options with the longest active period and the largest cleanup footprint were expected to create the most job opportunities, but also risked longer periods of diminished air and water quality. To make these jobs accessible to locals, the EJA endorsed a training program to equip applicants with the necessary skills

IV. Conclusion: The Impact of EPA’s EJA

The fi nal proposed plan’s preferred alternative has a substantial dredging footprint and implements technologies such as ENR, MNR, and capping on a longer-term scale. It is expected to result in some immediate reductions in PCBs, but its smaller active remediation area also means less disruption of the river and a lower cost. However, it has a prolonged recovery timeline and an increased risk of contaminant re-exposure. The EJA concluded that this approach balanced “the need to reduce human health risks quickly while providing certainty that the methods used in cleanup will be effective and will remain effective

term adverse impact on local populations during the active remediation period due to the blended remedial methods.

As acknowledged in the Proposed Plan, none of the alternatives is expected to suffi ciently protect the health of individuals consuming seafood from the Duwamish, so the EJA concludes that each remediation approach will result in a disproportionate impact on certain populations. In other words, populations that continue to rely on the Duwamish will still suffer a disproportionate impact from its contamination. To ameliorate this effect, EPA suggests implementing institutional controls (ICs) to discourage excessive consumption of contaminated seafood. Common ICs include updated fi sh advisories, long-term monitoring, public outreach, engineered controls to ensure the integrity of sediment caps, and short-term mitigation during the remediation process.

The EJA found that long-term use of ICs could amount to an untenable burden for subsistence and tribal fi shers—groups that may have no other viable alternative food sources. Advisories may require signifi cantly altering the diets of certain cultural groups with possible health consequences, and it may be “akin to recommending abandonment of their cultural heritage.” Id. Nevertheless, the EJA found that these concerns must be balanced against the harms of consuming contaminated fi sh. Id.

The EJA acknowledges ICs create inequitable effects, “because they place the burden of addressing environmental contamination’s health effects on those affected, rather than those responsible for the risk.” Id. ICs also require bridging communication gaps, and local communities are particularly skeptical of ICs. To address these concerns, the EJA emphasizes several key steps to minimize the impact of ICs: (1) implement them only as a temporary solution; (2) ensure adequate funding while the ICs are in place; (3) establish a collaborative body to incorporate community input; and (4) involve community experts in outreach campaigns


the EJA was issued, at least one lawsuit has been fi led against EPA alleging violations of the Clean Water Act by “failing . . . to promulgate human health criteria based on an accurate fi sh consumption rate for Washington. . . .” Puget Soundkeeper Alliance, et al. v. EPA, et al., No. 2:13-cv-01839-JCC (W.D. Wash., fi led Oct. 11, 2013).

It will take time to gauge the lasting impact of this EJA. The degree to which the ROD incorporates suggestions from the EJA will be one measure. If some of the mitigating steps are included, their effi cacy and the support they receive from EPA will be another standard. Until then, it remains to be seen whether EPA will follow the road map it developed at other CERCLA sites. The EJA may serve as a model for surveying local populations, encouraging community input, and tailoring protective measures to the populations most impacted by site conditions and the proposed cleanup.

Alexandra Gilliland is an environmental litigator at Foster Pepper PLLC in Seattle. Her practice provides counseling and litigation support for real estate and development clients with environmental issues involving CERCLA and state Superfund statutes.

in the future.” EPA EJA at 87. However, the EJA strongly emphasized the importance of additional mitigation measures needed to counter the adverse disproportionate impacts expected to result.

Until EPA issues a ROD, the most immediately recognizable impact of this EJA for a CERCLA site is the addition of these mitigating steps. However it is questionable as to whether these additional measures will be included in the ROD or implemented in the remedy, especially given that some might signifi cantly increase costs.

Many community groups reacted to the fi nal Proposed Plan with vigorous calls for increased dredging and less capping, arguing that the Preferred Alternative does not do enough to protect human health. B.J. Cummings, Editorial, “Cleaning Up the Lower Duwamish Waterway,” SEATTLE TIMES, Mar. 18, 2013, available at http://goo. gl/37peM7 (last visited Feb. 11, 2014). However, reaction to the EJA was generally positive; a local community group used the EJA to support its calls for expanded dredging. It is unlikely that EPA will dramatically diverge from the proposed plan but it may be a testament to the power of the EJA and community activism if EPA even moderately increases the use of dredging. Additionally, since

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While a comprehensive legal framework for climate change has not emerged since the first edition of Global Climate Change and U.S. Law published in 2007, a vast body of U.S. law relevant to climate change has developed. This current examination of U.S. law as it relates to climate change completely updates and reconsiders material from the prior edition while also adding extensive new material. Recognizing that climate change is largely an energy problem, a completely new section addresses energy regulation, and other chapters focus on issues that are now of growing importance: adaptation and geoengineering. Additional chapters now address climate-related water issues, agriculture and forestry, cap and trade and the use of non-climate international agreements to reduce emissions and address climate impacts. The chapters in this updated edition is organized into five distinct categories:

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EXPERT DISCOVERY IN CERCLA CASES: WHAT YOU NEED TO KNOW ABOUT THE EFFECT OF THE 2010 AMENDMENTS TO RULE 26Andrew Schulkin, Lathrop & Gage LLP, Chicago, and Eric Weslander, Lathrop & Gage LLP, Kansas City

Introduction

It can be diffi cult to prove or defend a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cost recovery, contribution, or natural resource damages case without an expert witness to explain the scientifi c or technical issues that are invariably involved. Since Federal Rule of Civil Procedure 26 was amended in 1993 to require expert disclosures, CERCLA lawyers have grown accustomed to working with expert witnesses and providing expert reports in accordance with the requirements of the rule. Rule 26 was amended again in 2010. While the amended rule expressly expands work product protection for expert communications and draft reports and creates new disclosure requirements for non-reporting experts, court opinions from the last four years have helped to elucidate the full impact of the 2010 amendments on CERCLA litigation.

Changes to Rule 26

The 1993 version of rule 26 presented several challenges for attorneys in CERCLA cases. First, under the 1993 rule, most courts had concluded that all documents created by or provided to a testifying expert were discoverable. Second, the 1993 rule offered no protection for drafts of expert reports. Third, while rule 26(a)(2)(B) required a written report from retained experts and a party’s employees who regularly provide expert testimony, it did not require specifi c disclosures for fact witnesses designated as experts because their testimony was likely to include opinions on scientifi c or technical matters.

The 2010 amendments to rule 26, which became effective on December 1, 2010, were intended to address these shortcomings. The advisory committee notes explain,

The Committee has been told repeatedly that routine discovery into attorney-expert communications and draft reports has had undesirable effects. Costs have risen. Attorneys may employ two sets of experts—one for purposes of consultation and another to testify at trial—because disclosure of their collaborative interactions with expert consultants would reveal their most sensitive and confi dential case analyses. At the same time, attorneys often feel compelled to adopt a guarded attitude toward their interaction with testifying experts that impedes effective communication, and experts adopt strategies that protect against discovery but also interfere with their work.

The 2010 amendments contained four signifi cant changes. First, draft expert reports are now considered work product. Fed. R. Civ. P. 26(b)(4)(B). Second, communications between counsel and testifying experts are entitled to work product protection “except to the extent that the communications: (i) relate to compensation for the expert’s study or testimony; (ii) identify facts or data that the party’s attorney provided and that the expert considered in forming the opinions to be expressed; or (iii) identify assumptions that the party’s attorney provided and that the expert relied on in forming the opinions to be expressed.” Fed. R. Civ. P. 26(b)(4)(C). Third, the phrase “data or other information” in rule 26(a)(2)(B)(ii) was replaced with “facts or data,” a change the advisory committee noted was “meant to limit disclosure to material of a factual nature by excluding theories or mental impressions of counsel.” Fourth, the 2010 amendments added a disclosure requirement for expert witnesses who are not retained by a party or are not a party’s employee who regularly provides expert testimony. Fed. R. Civ. P. 26(a)(2)(C). A party now must provide a summary of the non-reporting expert’s expected fact and opinion testimony. Id.


Most of the decisions based on the 2010 amendments are consistent with the express language of the rule. Several circuits have rejected the argument that the 2010 amendments signifi cantly broadened work product protection for expert witness documents. Republic of Ecuador v. Mackay, 742 F.3d 860 (9th Cir. 2014); Republic of Ecuador v. Hinchee, 741 F.3d 1185 (11th Cir. 2013); Republic of Ecuador v. For Issuance of a Subpoena, 735 F.3d 1179 (10th Cir. 2013). Consistent with the language of the amended rule, courts have found that draft expert reports are not discoverable, see, e.g., Holland v. National Union Fire Ins. Co., No. 12-CV-1983, 2013 WL 5934309, at *5 (E.D. Cal. Nov. 1, 2013), and that communications between counsel and expert witnesses constitute work product unless they fall into one of the 26(b)(4)(C) exceptions, see, e.g., Sara Lee Corp. v. Kraft Foods, Inc., 273 F.R.D. 416, 420 (N.D. Ill. 2011). Courts have excluded or restricted the testimony of non-reporting experts where a party failed to provide summaries of their expected testimony. Pineda v. City and County of San Francisco, 280 F.R.D. 517, 523 (N.D. Cal. 2012).

In the four years since the 2010 amendments went into effect, courts also have decided a number of issues that often arise in cases involving experts and are not specifi cally addressed in the amended rule. While none of these opinions come from CERCLA cases, the decisions provide valuable guidance for attorneys who handle CERCLA litigation. These cases include opinions on (1) the discoverability of an expert’s notes, (2) draft reports, (3) communications between experts and non-attorneys, (4) disclosure of non-reporting experts, and (5) communications with non-reporting experts.

Expert’s Notes

Since the 2010 amendments went into effect, courts have generally found that an expert’s notes about a case are not work product that is exempt from discovery under rule 26. Instead they have concluded that notes are still discoverable under

the amended rule because they are not draft expert reports or communications with counsel. In re Application of Republic of Ecuador, 280 F.R. D. 506, 513 (N.D. Cal. 2012); Dongguk Univ. v. Yale Univ., No. 08-CV-441, 2011 WL 1935865, at *1 (D. Conn. May 19, 2011). Even notes about work that an expert completed before being retained for a case may be discoverable if they relate to the subject matter of the lawsuit. See Yeda Research & Devel. Co., Ltd. v. Abbot GmbH & Co., KG, 292 F.R.D. 97, 115 (D.D.C. 2013) (plaintiff waived work product protection for expert’s notes on prior, related experiments when it designated him to testify). When one court found notes to be work product, it was because the notes were written to advise counsel on litigation strategy and not to enable the expert to prepare to testify in the case. See Int’l Aloe Science Council, Inc. v. Fruit of the Earth, Inc., No. DKC-11-2255, 2012 WL 1900536, at *2 (D. Md. May 23, 2012) (notes were not discoverable because they were drafted to help plaintiff’s counsel understand the opposing expert’s report and prepare for his deposition).

Counsel in CERCLA actions should advise their experts to be cautious when writing notes about the case. An expert should assume that her notes will be discoverable. To avoid revealing information about case strategy, it is best to keep notes to a minimum as was often done before rule 26 was amended.

Draft Expert Reports

Draft expert reports, “regardless of the form in which the draft is recorded,” are now protected from disclosure under rule 26, but the amended rule does not provide criteria for what constitutes a draft or state whether a party can seek information about a draft report through other methods of discovery. The court in Wenk v. O’Reilly, No. 12-CV-474, 2014 WL 1121920 (S.D. Ohio Mar. 20, 2014), faced the question of whether notes made by an expert in the margins of documents qualifi ed as a “draft report” or were simply notes that were subject to discovery. The court warned that construing the concept of a draft


report too broadly would lead to everything an expert wrote down being considered a “draft,” but acknowledged the possibility that an expert could set out the beginnings of a report in the margins of a document. Id. at *7. The court directed that the notes, drafts, and fi nal report be submitted for in-camera review, and stated that it would consider such factors as the amount of detail in the notes, the time elapsed between the notes and any draft, and whether language from the notes appears in a subsequent report. Id.

A court has found that it is permissible to ask an expert about a draft report even though the draft itself is not discoverable. In Tessera, Inc. v. Sony, No. C-11-043-99 EJD (HRL), 2013 WL 5692109, at *4 (N.D. Cal. Oct. 18, 2013), the court drew the distinction between a draft of a report and facts surrounding the draft’s creation, fi nding that it was improper for counsel to instruct an expert not to answer deposition questions about the circumstances of the draft’s preparation, such as whether he typed it himself. The court noted that under rule 26(b)(4)(B) work product protection applies “only to the draft itself in recorded form, not any information related to the preparation of the report.” Id.

It is still advisable for an expert to edit his report in a single electronic document because it may be diffi cult to distinguish a draft report from the expert’s notes. While it is unclear whether a court would fi nd it conclusive, marking handwritten or typewritten drafts as a “Draft Expert Report” may help preserve work product protection under rule 26(b)(4)(B). Finally, attorneys should be aware that opposing counsel may inquire into the creation of a draft report, and any irregularities in how the report was created may be exposed through discovery.

Communications Between Experts and Non-Attorneys

While communications between an expert and attorney may be protected from discovery, this protection does not extend to communications between an expert and non-attorneys involved in

the preparation of the case. Courts have ruled that communications between an expert and the party for which the expert is testifying or that party’s employee are not exempt from discovery even when they occur at the direction of counsel. In re Application of Republic of Ecuador, 280 F.R.D. at 515; Greenwood 950, LLC v. Chesapeake Louisiana, LP, No. 10-CV-419, 2011 WL 1234735, at *2 (W.D. La. Apr. 1, 2011). In Fialkowski v. Perry, No. 11-5139, 2012 WL 2527020, at *1 (E.D. Pa. June 29, 2012), the plaintiff’s expert acknowledged that he had reviewed spreadsheets and other documents that the plaintiff had prepared and provided to counsel. The court ruled that the defendants could obtain the documents through discovery because they were created by the plaintiff and not by the plaintiff’s attorney. Id. at *4. Similarly, communications between a testifying expert and other expert witnesses or consultants typically are not work product under the 2010 version of rule 26. The Eleventh Circuit in Hinchee, 741 F.3d at 1195, held that an expert’s communications with other testifying experts were discoverable, though it did allow Chevron to redact attorney opinion work product before producing the documents. In Whole Women’s Health v. Lakey, No. 14-CV-284, 2014 WL 4187152, at *4–5 (W.D. Tex. Aug. 21, 2014), the court determined that the plaintiff was entitled to communications between the defendants’ testifying experts and Vincent Rue, their consultant or consulting expert. The court stated, “Regardless of the precise nature of Rue’s involvement, it is clear that Rue is not an attorney.” Id. at *4. Most other courts have reached the same conclusion under the 2010 amendments about communications between testifying and consulting experts. See U. S. v. Veolia Environmental N.A., No. 13-MC-03, 2013 WL 5779653, at *5 (D. Del. Oct. 25, 2013) (testifying expert’s communications with consulting expert and other entities were not privileged); In re Application of Republic of Ecuador, 280 F.R.D. at 515–16 (communications between a testifying and consulting expert are not protected work product); but see Nat’l Western Life Ins. Co. v. Western Nat’l Life Ins. Co., No.


09-CA-711, 2011 WL 840976, at *2 (Mar. 3, 2011) (party is only entitled to communications between testifying and non-testifying expert if they contain facts or data relied upon by testifying expert).

In CERCLA litigation, parties often have technical staff or consulting experts who have information that may be useful to a testifying expert. A party, however, risks revealing confi dential information about its case if it allows its employees or consultants to communicate directly with a testifying expert. Even when a party has a strong case, it is benefi cial for counsel to restrict or closely supervise communications between a testifying expert and non-attorneys who are involved in the preparation of the case.

Production of Documents Instead of Summary Non-Reporting Expert’s Testimony

Some parties have tried to satisfy their obligation to summarize a non-reporting expert’s testimony under rule 26(a)(2)(C) by referring to documents that include the facts and opinions about which the expert plans to testify. In Nicastle v. Adams County Sheriff’s Offi ce, No. 10-CV-00816, 2011 WL 1674954, at *1 (D. Colo. May 3, 2011), the court determined that the defendant did not suffi ciently summarize the facts that its non-reporting experts were expected to discuss when it referred to investigation and personnel fi les containing 963 pages of documents, audio recordings, and transcriptions. The court noted, “Designation of such a prodigious volume of material does not constitute a summary of the facts to which the witnesses will testify.” Courts have adopted the same reasoning in cases where a party has tried to substitute medical records for a summary of a treating physician’s expected testimony. See, e.g., Smothers v. Solvay Chemicals, Inc., No. 11-CV-200, 2014 WL 3051210, at *5 (D. Wyo. July 3, 2014). If a party in a CERCLA case intends to obtain scientifi c or technical opinions from a company engineer, environmental agency employee, or another non-reporting expert, counsel should summarize the facts and opinions in the

witness’s expected testimony and not simply refer to reports or work plans that the witness may have authored or reviewed.

Communications Between Attorneys and Non-Reporting Experts

Although rule 26 now protects certain communications between attorneys and testifying experts, two courts have concluded that this protection does not apply to non-reporting experts. In U. S. v. Sierra Pacifi c Industries, Inc., No. S-09-2445, 2011 WL 2119078, at *1 (E.D. Cal. May 26, 2011), the plaintiff designated two government employees who had investigated a forest fi re as expert witnesses. The court determined that rule 26(b)(4)(C) only provides work product protection for communications with reporting experts. Id. at *5–6. It held that the plaintiff waived privilege and work product protection when it disclosed the government employees as 26(a)(2)(C) experts. Id. at *10.

As in Sierra Pacifi c, one of the defendants in Pacifi corp v. Northwest Pipeline GP, 879 F. Supp. 2d 1171 (D. Or. 2012), designated fi ve individuals with percipient knowledge of the facts as 26(a)(2)(C) expert witnesses. The court ruled that the defendant waived privilege by designating the witnesses as experts and had to produce communications with its non-reporting experts relating to the subject of their expert opinions. Id. at 1213–14. While it does not appear that any courts outside of the Ninth Circuit have adopted this reasoning, the decisions in Sierra Pacifi c and Pacifi corp are supported by the text of rule 26(b)(4)(C). Counsel should limit communications with any fact witnesses who are likely to be designated as experts in a CERCLA action and think carefully before designating a fact witness as an expert if the witness has already communicated with counsel about topics at issue in the case.

Conclusion

The 2010 amendments to rule 26 allow attorneys to communicate more freely with testifying


experts in CERCLA litigation. As recent court decisions show, however, many of an expert’s communications and documents remain subject to discovery. Experts still must be cautious in taking notes and drafting expert reports. Attorneys should manage and restrict communications between experts and non-attorneys and limit their own communications with fact witnesses who may be designated as rule 26(a)(2)(C) experts.

Andrew Schulkin is of counsel in the Chicago offi ce of Lathrop & Gage LLP. He has more than 12 years of experience representing clients in CERCLA, RCRA, Clean Water Act, and toxic tort litigation and administrative enforcement actions. He can be reached at [email protected].

Eric Weslander is an associate in the Kansas City offi ce of Lathrop & Gage LLP and a former newspaper, television, and multimedia journalist. Mr. Weslander’s practice includes representing clients in CERCLA litigation and regulatory matters nationwide. He can be reached at [email protected].

SUCCESSFULLY BRINGING A SUPERFUND SUBROGATION CLAIMCarolyn L. McIntosh and Christa Lee Rock, Squire Patton Boggs (US) LLP

I. Introduction

Insurance and third-party payments for response costs were considered by the drafters of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq. CERCLA § 112, 42 U.S.C. § 9612. Rights of insurers and third parties to recover for cleanup payments were included in the statute from the outset and amended in 1986. However, that a subrogation claim remedy is recognized in CERCLA does not render recovery of such a claim easy, nor well understood. Only in the last year has the case law fl eshed out the rigor required to realize recovery for a subrogation claim. This paper explores the defi nition of subrogation, CERCLA section 112, and the steps necessary to make a successful claim.

II. Elements of Subrogation

Subrogation is the “substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor.” Black’s Law Dictionary (9th ed. 2009). As a starting point, there must be two distinct entities. See US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1546 n.5 (2013). Second, the payor/subrogee must pay the debt of another, the debtor/subrogor, not its own debt. See Am. Sur. Co. v. Bethlehem Nat’l Bank, 314 U.S. 314, 317 (1941). Third, the payor/subrogee must show that it was not “primarily liable for the debt paid.” Hicks v. Londre, 125 P.3d 452, 456–57 (Colo. 2005). “An essential prerequisite to the right of equitable subrogation is that the person seeking subrogation must have made a payment of another’s obligation.” In re Wingspread Corp., 145 B.R. 784, 789 (S.D.N.Y. 1992) (emphasis in original). “A person’s payment of his own debt rather than of another’s obligation

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does not entitle the person to subrogation.” ASARCO LLC v. Union Pac. R.R. Co., 755 F.3d 1183, 1191(10th Cir. 2014) (citing In re Wingspread Corp., 145 B.R. at 789). “Subrogation simply means substitution of one person for another; that is, one person is allowed to stand in the shoes of another and assert that person’s rights against a third party.” Asarco LLC v. Goodwin, 756 F.3d 191, 204 (2d Cir. 2014) (citing US Airways, Inc. at 1546 n.5 (internal quotation marks omitted)). Subrogation is an equitable doctrine, but “a subrogation right may be expressly created by contract or statute. . . . [H]owever, [the right] cannot be contractually enlarged beyond what is granted in equity. . . . An important limit to the right of subrogation is that it is a purely derivative right—meaning that the subrogee succeeds to rights no greater than those of the subrogor.” (Internal citations omitted.) Chubb Custom Ins. Co. v. Space Sys., 710 F.3d 946, 957 (9th Cir. Cal. 2013) (“Chubb”).

Conceptually, these ideas are straightforward. However, recent Superfund subrogation cases demonstrate that it is often not clear when all three subrogation elements are met, as well as claims procedures. CERCLA section 112, “Claims Procedure,” appears to have been primarily designed to address claims made against the Fund under CERCLA section 111. To the extent such a claim is paid, the United States “acquir[es] by subrogation the rights of the claimant to recover those costs of removal or damages for which it has compensated the claimant from the person responsible or liable for such release.” CERCLA § 112(c)(1).

In the private party context, subrogation rights will most often arise under CERCLA in the case of an insurer paying the response costs of an insured. “Subrogation is a common law doctrine based in equity that permits an insurer to take the place of the insured to pursue recovery from third-party tortfeasors responsible for the insured’s loss.” Chubb, 710 F.3d at 957. A subrogation framework could also arise in an allocation dispute among potentially responsible parties (PRPs) in which

one entity, (A), has paid more than its divisible or equitable share of liability, resulting in its payment of some or all of the liability of a second entity, (B). However, determining that A paid a “debt” that “otherwise belonged to the debtor,” B, may require contribution litigation. And CERCLA jurisprudence indicates that, where there is a contribution claim, section 113 is the exclusive remedy. Lastly, subrogation may arise in a post-bankruptcy context where a newly created post-reorganization entity is obligated by the reorganization plan to pay the debts of the bankrupt debtor. This article explores these three private party subrogation scenarios by examination of several recent cases.

III. CERCLA § 112

Let us fi rst examine the relevant statutory language. CERCLA section 112(c)(2) states:

(2) Any person, including the Fund, who pays compensation pursuant to this Act to any claimant for damages or costs resulting from a release of a hazardous substance shall be subrogated to all rights, claims, and causes of action for such damages and costs of removal that the claimant has under this Act or any other law.

For purposes of this section the term “claim” means “a demand in writing for a sum certain.” CERCLA § 101(4). Case law further clarifi es the term to mean a demand by the subrogor for reimbursement of environmental cleanup costs from the Superfund or a PRP. Chubb, 710 F.3d 946, 959. CERCLA section 112(b) describes the forms and procedures for making a claim, which include “a sworn verifi cation of the claim.” “Claimant” means “any person who presents a claim for compensation under this Act.” CERCLA § 101(5). The term “Fund” means “the Hazardous Substance Superfund established by section 9507 of the Internal Revenue Code of 1986 [26 USCS § 9507].” CERCLA § 101(11). As the Supreme Court described it, the “Superfund is a CERCLA-created trust fund that fi nances cleanup activities by governmental and private parties.” Exxon Corp. v. Hunt, 475 U.S. 355, 359–60 (1986).


There are two limitations provisions—CERCLA sections 112(d)(1) and 113(g)(4)—that may apply to CERCLA subrogation rights. CERCLA section 112(d)(1) “Statute of Limitations” states: “Claims for recovery of costs. No claim may be presented under this section for recovery of the costs referred to in section 107(a) [42 USCS § 9607(a)] after the date 6 years after the date of completion of all response action.” See 112(d)(2) for the limitations period for natural resource damages. CERCLA section 112(d) establishes the deadlines for presenting claims for recovery to the Superfund or other PRPs; it does not address the limitations period for subrogation claims.

By contrast, CERCLA section 113(g)(4) “Subrogation” states: “No action based on rights subrogated pursuant to this section by reason of payment of a claim may be commenced under this title more than 3 years after the date of payment of such claim.” Since the subrogation provision is in CERCLA section 112 and CERCLA section 113 does not authorize subrogation, the language “rights subrogated pursuant to this section” (emphasis added) is confusing, but can only be referring to subrogation under CERCLA section 112. To hold otherwise would lead to an absurd result. Every court facing the issue has applied it accordingly. See Chartis Specialty Ins. Co. v. United States, 2013 U.S. Dist. LEXIS 101702, at *42 (N.D. Cal. July 19, 2013) (“Chartis”) (applying section 113(g)(4) to an insurer’s section 112(c)(2) subrogation claim to hold that the statute of limitations accrued on “the date of payment” of each insurance claim); see also Chubb, 710 F.3d at 959 (reading section 112(c)(2) in conjunction with section 113(g)(4)). Further, the legislative history of section 113(g)(4) confi rms that it was intended to apply to “rights subrogated pursuant to section 112.” H.R. 2005, 99th Cong. § 142(b) (1985) (as passed by Senate, Sept. 26, 1985); see also H.R. Rep. No. 99-253, pt. 1, at 138 (1985); S. Rep. No. 99-11, at 54–55 (1985).

IV. CERCLA § 112 Subrogation Is the Exclusive CERCLA Remedy for Subrogors

The contours of an insurance carrier’s CERCLA subrogation rights are essentially established by three cases: Cal. Dep’t of Toxic Substances Control v. City of Chico, 297 F. Supp. 2d 1227 (E.D. Cal. 2004) (“Chico”), Chubb, and Chartis. In Chico, the insurer, Century Indemnity Company (Century) had incurred $2.8 million to respond to a perchloroethylene (PCE) plume on behalf of its insureds, Noret, Inc. and its two principals (Noret). In addition to a subrogation claim, Century asserted a joint and several liability claim under CERCLA section 107(a), contending that it bore no responsibility for the cleanup. The court characterized Century’s asserted lack of liability as a “false premise,” concluding that Century “indemnifi ed Noret for Noret’s response costs. Its involvement with the Central [PCE] Plume Site is exclusively in its capacity as Noret’s insurer.” Chico at 1232. The Chico court is one of the earlier courts to recognize CERCLA’s structure of three clearly distinct remedies: section 107 joint and several liability claims; section 113 providing contribution claims for co-liable parties; and section 112(c) providing subrogation claims. The Ninth Circuit in Chubb referred to this structure as a “tripartite remedial scheme.” Chubb, 710 F.3d at 957. The court in Chico thus rejected the notion that Century had cumulative rights under section 107(a) and section 112(c) for subrogation. Rather, under federal law, Century’s statutory remedy of subrogation was exclusive and “limited to that available to the insured. . . . Thus, under a subrogation action, Century steps into the shoes of its insured, Noret, a PRP.” Id. at 1233–34. Lastly, the court applied the “made whole” doctrine, holding “federal common law requires that, absent an agreement to the contrary, an insurance company may not enforce a right to subrogation until the insured has been fully compensated, that is, has been made whole.” Id. at 1236. For this reason and the fact that Century had reserved its right to contest coverage, the court rejected Century’s claim as premature.


In Chubb, the Ninth Circuit held that, because of the additional prerequisites that section 112(c)(2) imposes on subrogation claims, Congress intended section 112(c)(2) as the exclusive means of recovering on subrogated CERCLA claims. The court also denied the insurer’s attempts to recover sums paid to its policyholder based on provisions other than CERCLA section 112(c)(2). The court concluded that CERCLA narrows the traditional subrogation right by requiring the subrogee to pay a “claimant” who had fi rst fi led its own written demands against other PRPs. Id. at 965–66. The court noted that the “defi nitions do not include to whom this demand should be made, but we have held that a ‘claim’ consistently refers to a demand for reimbursement from the Superfund, except for its fi rst appearance in the second sentence of section 112(a), where it refers more generally to a pre-claim/pre-action demand to the liable party.” Id. at 959. Holding that requiring an injured party to “fi rst request reimbursement from a liable party, if known, also furthers the overall statutory purpose of identifying PRPs and making actual polluters pay for environmental cleanups.” Id. at 960. The court affi rmed dismissal of the insurer’s subrogation action because its insured had never made a written demand against the site’s other PRPs. The Ninth Circuit specifi cally found “[a]n insurer’s subrogation right under section 112(c)(2) may be narrower than under common law principles of equitable subrogation, but it is within Congress’s right to impose such limits.” Id.

Consistent with the court in Chico, the Ninth Circuit then rejected the insurer’s attempts to sue under section 107(a) of CERCLA. Chubb relied on United States v. Atlantic Research Corp., 551 U.S. 128, 127 S. Ct. 2331, 168 L. Ed. 2d 28 (2007) and the Court’s reading there of “any other person” under section 107(a), to support its position that the phrase includes insurance companies. The Ninth Circuit disagreed, stating the “Court made the express distinction that, in contrast to section 113(f)(1), section 107(a) ‘permits a PRP to recover only the costs it has incurred in cleaning up a site.’” (Emphasis in original; internal quotations omitted.) Id. at 963. As further support for its

determination that section 112(c) provides the exclusive subrogation remedy, the court noted that allowing such a claim “would impermissibly swallow—not complement—the subrogation provision [under section 112(c)(2)]. . . . When given a choice, parties would undoubtedly choose to pursue a subrogated action under section 107(a), which does not include the ‘claimant’ requirement, thereby rendering section 112(c) meaningless.” Chubb, 710 F.3d at 965–66.

In Chartis, the insurer, Chartis Specialty Insurance, paid certain response costs directly to remediation contractors and other costs to reimburse its insured. Chartis then asserted CERCLA claims under sections 107(a) and 112(c), attempting to distinguish its situation from that in Chubb based upon its direct payment of response costs. Dismissing Chartis’s section 107(a) claim, the court found that Chubb’s

core holding is that an insurer has not “incurred” costs within the meaning of § 107(a) because it is not liable under CERCLA for remediation costs. Under this rule, the holding in Chubb applies with equal force to insurers who pay costs directly. . . . the general understanding of subrogation rights does not appear to distinguish between direct payments to third parties and payments to reimburse an insured, and this Court can see no reason why such a distinction should be read into the treatment of subrogation rights under CERCLA.

Chartis, No. C-13-1527 EMC, 2013 U.S. Dist. LEXIS 101702, at *35–36. Turning to Chartis’s section 112 claim, the court held “[t]his Court thus fi nds that [Chartis’s insured] is a ‘claimant’ within the meaning of section 112(c) because it submitted a claim to the United States requesting contribution prior to Chartis’s assertion of section 112(c) claims in the instant suit.” Id. at 41. In so holding, the court rejected the United States’s argument that the claim must have been made prior to any reimbursement by the insurer, deeming that position “overly harsh and not compelled by the holding in Chubb.” Id. Lastly, the court held that “the statute of limitations on Chartis’ § 112(c)


claims runs separately for each payment made in the course of remediation efforts.” Id. at 49. In so holding, the court relied on section 113(g)(4), which it found to be triggered based on the date of payment to the subrogee.

V. CERCLA Subrogation Outside the Insurance Context

Two recent decisions stemming from post-bankruptcy subrogation claims round out our analysis of CERCLA subrogation. Asarco LLC, the mining and refi ning company (Asarco), brought two contribution actions after it emerged from bankruptcy that included subrogation claims: ASARCO LLC v. Union Pac. R.R. Co., 755 F.3d 1183 (10th Cir. 2014) (decided June 23, 2014); and Asarco LLC v. Goodwin, 756 F.3d 191 (2d Cir. 2014) (decided June 25, 2014). In both of these actions, Asarco asserted contribution claims under section 113(f) and subrogation claims. Because Asarco had missed the statute of limitations for contribution actions under section 113(g)(2) (triggered by the date of a judicially approved settlement), it also asserted the subrogation claims to obtain a later deadline under section 113(g)(4) (triggered by the date of payment). However, Asarco did not assert its subrogation claims under section 112(c). Rather, it purported to make state law subrogation claims under sections 107(e)(2) and 113(g)(4). This “quasi-CERCLA subrogation theory” is addressed in the next section.

Asarco’s subrogation claims in both cases suffered from a fatal fl aw. Asarco argued that it, the reorganized entity, was different than Asarco the debtor (“debtor”) and that it paid the debtor’s claims without obligation to do so, thus entitling it to a subrogation claim. Asarco’s opponents argued that this violated one of the fundamental requirements for subrogation—that the subrogor be a separate entity from its subrogee. The key question became whether a pre-bankruptcy debtor or debtor-in-possession could be a different entity than the post-bankruptcy, reorganized entity. “To determine whether or not entities are the same the court must look to the substance of the

[Reorganization] Plan.” Asarco LLC v. Goodwin, 756 F.3d at 203 (citing Cross Media Mktg. Corp. v. CAB Mktg., Inc., 367 B.R. 435, 451 (Bankr. S.D.N.Y. 2007)). Asarco relied on the general bankruptcy principle that “once a plan is confi rmed and becomes effective, the ‘debtor’ ceases to exist and ‘the reorganized debtor is a new entity not subject to the jurisdiction of the bankruptcy court, except as provided in the plan.’” ASARCO LLC v. Union Pac. R.R. Co., 755 F.3d at 1192. The Tenth Circuit rejected this argument, critically analyzing the cited case law and noting “these cases dealt with bankruptcy jurisdiction, not subrogation.” Id. Both the Second and the Tenth Circuit Courts examined the express provisions of the Asarco reorganization plan. The Goodwin court held “the terms of the Plan establish that Asarco is the same legal entity as the debtor in the bankruptcy proceeding (the ‘Debtor’) and is therefore not a subrogee.” Asarco LLC v. Goodwin, 756 F.3d at 203. While the Tenth Circuit found “[n]othing in the bankruptcy plan supports the contention that there was a dissolution of one ASARCO and the formation of a new corporation named ASARCO. In fact, the bankruptcy plan points to just the opposite conclusion. As recounted by the magistrate judge, the plan has ASARCO continuing in its same corporate form after plan confi rmation.” ASARCO LLC v. Union Pac. R.R. Co., 755 F.3d at 1192–93.

VI. Other Quasi-CERCLA Subrogation Theories

In Chubb, Chartis cited section 107(e)(2) for the proposition that a subrogation claim is expressly contemplated under CERCLA and it need not be asserted solely under section 112. The Ninth Circuit disagreed, stating:

Chartis’s argument is not supported by the plain language of that provision. Section 107(e)(2) provides that “[n]othing in this subchapter . . . shall bar a cause of action that an owner or operator or any other person subject to liability under this section, or a guarantor, has or would have, by reason of subrogation or otherwise against any person.”


42 U.S.C. § 9607(e)(2). . . . irrespective of whether an insurance company qualifi es as a “guarantor,” section 107(e)(2) simply clarifi es that nothing in CERCLA shall “bar,” i.e., operate as an impediment to the assertion of proper subrogation claims. . . . this does not mean that section 107(e)(2) creates a separate right to bring a subrogated action under section 107(a).

Chubb, 710 F.3d at 966. The Ninth Circuit further held that Congress intended section 112(c)(2) as the exclusive means of recovering on subrogated CERCLA claims:

Although CERCLA should be liberally construed to effectuate the purpose of the statute, it may not be extended so far as to fashion a new right under CERCLA that Congress did not intend. Nor, a fortiori, should a right be created by application of a common law principle that not only contravenes the express language and scheme of CERCLA, but also does not further its aims.

Id. at 975. Nonetheless, in the two Asarco cases, Asarco asserted its subrogation claims under state law and sections 107(e)(2) and 113(g)(4). Given the Second and Tenth Circuit rulings that Asarco did not have a subrogation claim since the debtor and reorganized Asarco were the same entity, neither court addressed this claim.

VII. ConclusionAsserting a subrogation claim under section 112 is akin to threading a needle. All elements of

common law subrogation must be met. CERCLA subrogation is then further conscribed by the statutory prerequisites. Specifi cally, the claim must fi rst be made by the “claimant” in writing to the Fund or one or more PRPs, if known. While one court has held that the claim need not be made before any reimbursement is paid to the “claimant,” it may be prudent to do so until this issue becomes well settled. Several federal appellate courts have addressed the exclusivity of the various CERCLA remedy provisions. However, only the Ninth Circuit has found that section 112 provides the exclusive subrogation remedy. Given the later statute of limitations in section 113(g)(4), expect to see several more cases alleging subrogation under some combination of state law and sections 107(e)(2) and 113(g)(4) until the Supreme Court has defi nitively ruled.

Carolyn McIntosh is a partner in the Denver, Colorado, offi ce of Squire Patton Boggs (US) LLP where she counsels clients on complex environmental compliance matters and environmental, natural resources, and commercial litigation. Ms. McIntosh is one of our Newsletter co-chairs. Her e-mail address is [email protected].

Christa Rock is an associate in the Denver, Colorado, offi ce of Squire Patton Boggs (US) LLP. Her practice focuses on environmental and commercial litigation. In her environmental work she counsels clients on CERCLA and Clean Air and Clean Water Act matters. Ms. Rock can be reached at [email protected].

W W W. S H O PA B A . O R G / E N V I R O N W L

JUNE 4-5 , 2015THE FOUR SEASONS HOTELDENVER, CO

JUNE 4-5 2015

33RD ANNUAL WATER LAW CONFERENCE


FOURTH CIRCUIT TIPS ITS HAND: ONLY 113(F) CONTRIBUTION CLAIMS AVAILABLE FOR PRPS THAT RESOLVE LIABILITYBrian Block

Signed into law in the fi nal months of the Carter administration, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), Pub. L. No. 99-510, 94 Stat. 2767 (codifi ed, as amended, 42 U.S.C. §§ 9601–9675 (2014)), seeks to foster the remediation of hazardous industrial sites that pose a serious health risk. Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 602 (2009). To that end, CERCLA is designed to foist the cost of cleanup upon “those responsible for the contamination.” Id. As originally enacted, CERCLA contained only a section 107(a) “cost recovery” provision under which certain parties could proceed against potentially responsible parties (PRPs) to recover the cost of cleanup. Cooper Indus., Inc. v. Aviall Servs., Inc., 543 U.S. 157, 161 (2004); 42 U.S.C. § 9607(a). In light of interpretive diffi culties in the courts, the Superfund Amendments and Reauthorization Act of 1986 (SARA), Pub. L. No. 99-499, 100 Stat. 1613, amended the statute at section 113(f) to give PRPs an express right to “contribution” from other responsible parties. Id. at 162; 42 U.S.C. § 9613(f)(1), (f)(3)(B).

Nevertheless, the interplay between section 107(a) and section 113(f)—a function of “who pays what and why”—remains the subject of dispute. Hobart Corp. v. Waste Mgmt. of Ohio, Inc., 758 F.3d 757, 762 (6th Cir. 2014). As the Third Circuit observed, determining which of the two claims is viable in a particular case “is not simply a matter of academic interest.” Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204, 228 (3d Cir. 2010). The type of claim available to the plaintiff determines (1) the potential nature and extent of a defendant’s liability, (2) the applicable statute of limitations, and (3) the defenses available to the defendant. Alan Hanson, Note, Cost Recovery or Contribution?: An Overview and Resolution of the Controversy Surrounding Private PRP Standing Under CERCLA Sections 107(a)(4)(B) and 113(f)

(1), 10 GEO. INT’L ENVTL. L. REV. 199, 204 (1997). Because all three areas of difference greatly benefi t a plaintiff proceeding under section 107(a), if “[g]iven the choice, a rational PRP would prefer to fi le an action under § 107(a)(4)(B) in every case.” Hobart Corp., 758 F.3d at 767.

In 2007, CERCLA jurisprudence added United States v. Atlantic Research Corp. in which the Supreme Court held that section 107(a) cost recovery and section 113(f) contribution provide “two clearly distinct remedies,” and as a consequence, section 107(a) provides private parties with a cause of action to recover voluntarily incurred cleanup costs. 551 U. S. 128, 138–39 (2007). Atlantic Research, however, expressly declined to decide the following question: “whether a party who incurs direct cleanup costs pursuant to a consent decree following a CERCLA lawsuit under § 106 or § 107 may bring an action to recover those costs under § 107(a),” or is instead restricted to bringing only a section 113(f)(3)(B) contribution claim. Solutia, Inc. v. McWane, Inc., 672 F.3d 1230, 1235 (11th Cir. 2012) (citing Atl. Research, 551 U.S. at 139 n.6). The Supreme Court postulated that there could be “overlap” between section 107(a) and section 113(f) claims given that, for instance, a PRP who enters into a consent decree “does not incur costs voluntarily but does not reimburse the costs of another party.” Atlantic Research, 551 U.S. at 139 n.6. Essentially, PRPs who enter into a consent decree and seek to recover costs from other PRPs fall directly between the archetypal section 107(a) and section 113(f) actions. Hobart Corp., 758 F.3d at 767. Nonetheless, resolution of the question was left for another day.

Each circuit court of appeals that subsequently examined the question explicitly left open by Atlantic Research declined to permit a section 107(a) claim when a PRP “resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement” (i.e., an administrative order on consent or a consent decree), leaving PRPs with


only a section 113(f)(3)(B) contribution claim. Hobart Corp., 758 F.3d at 767 (Sixth Circuit); Bernstein v. Bankert, 733 F.3d 190, 206 (7th Cir. 2013); Solutia, 672 F.3d at 1236–37; Morrison Enters., LLC v. Dravo Corp., 638 F.3d 594, 603 (8th Cir. 2011); Agere Sys., 602 F.3d at 229 (Third Circuit); Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112, 128 (2d Cir. 2010); see also Lyondell Chem. Co. v. Occidental Chem. Corp., 608 F.3d 284, 291 n.19 (5th Cir. 2010) (declining to address, for lack of appeal, the district court’s implicit holding that PRP had only a contribution claim). District courts in the Ninth and Tenth Circuits concur in this approach. See, e.g., Cyprus Amax Minerals Co. v. TCI Pac. Commc’ns, Inc., No. 11-CV-0252-JED-PJC, 2013 WL 6238485, at *4–5 (N.D. Okla. Dec. 3, 2013) (relying, in part, on Tenth Circuit case law decided prior to Atl. Research); Coppola v. Smith, 935 F. Supp. 2d 993, 1006–08 (E.D. Cal. 2013) (noting that the Ninth Circuit has yet to weigh in). At most, then, the First, Fourth, Fifth, Ninth, Tenth, and D.C. Circuits have not formally decided the issue via published opinion.

Early in 2013, however, the Fourth Circuit in AVX Corp. v. United States, an unpublished decision, indicated that it would likely follow the thus-far unanimous precedent of its sister circuits. 518 F. App’x 130, 135 & n.3 (4th Cir. 2013) In AVX, the PRP, AVX Corporation, and the South Carolina Department of Health and Environmental Control (DHEC), entered into a “consent order” that traded AVX’s promise to clean up contamination for DHEC’s “covenants not to sue.” Id. at 132. Specifi cally, “[u]pon fulfi llment of the terms of the consent order, AVX’s environmental liability would ‘be deemed as resolved between AVX and [DHEC].’” Id. (alterations my own and in original, respectively). AVX brought a § 107(a) cost recovery suit against two PRPs, subsequently settled with one, and then pursued its claim against the United States as the sole remaining PRP, which itself fi led a section 113(f) contribution counterclaim. Id. at 133. The district court held, in relevant part, that the United States was not a PRP. Id. AVX appealed, claiming that the court

should have conducted a section 107(a) divisibility analysis. Id.; see generally Burlington N., 556 U.S. 599 (holding section 107(a) claims divisible where a “reasonable basis for apportionment [between PRPs] exists”).

The Fourth Circuit affi rmed, holding that “any [section 107(a)] divisibility analysis would have been improper because joint and several liability does not apply to AVX’s claim—which is essentially an action for contribution under § 113(f)(3)(B).” AVX, 518 F. App’x at 135. In a footnote immediately following, the court clarifi ed the basis for this conclusion:

[W]e doubt whether AVX, a PRP who entered into a DHEC consent order resolving its environmental liability, may sue under CERCLA § 107(a) for cost-recovery. When squarely presented with the issue, our sister circuits have uniformly held that an action for contribution under § 113(f) is the exclusive remedy for a PRP compelled to incur response costs through a consent order with a federal or state government.

Id. at 135 n.3 (citing Solutia, 672 F.3d at 1236–37; Morrison Enters., 638 F.3d at 603; Agere Sys., 602 F.3d at 299; Niagara Mohawk, 596 F.3d at 128). In sum, the panel held that only a section 113(f)(3)(B) contribution claim was available to AVX because it entered into a consent order resolving all of its environmental liability to South Carolina. Because AVX failed to prove that the United States was a PRP, an element of both 107(a) and 113(f)(3)(B) claims, there was no need for the panel to formally decide the question in a published opinion. Id. at 135 n.3, 136.

Notably, the Fourth Circuit’s holding did not determine whether it was signifi cant that the AVX-DHEC consent order resolved AVX’s liability under both CERCLA and state law, as opposed to only the latter. Id. at 132. This is a distinction that has split the courts for purposes of determining whether a PRP can pursue only a section 113(f)(3)(B) contribution claim. Compare Trinity Indus.,


Inc. v. Chi. Bridge & Iron Co., 735 F.3d 131, 136 (3d Cir. 2013) (holding that a section 113(f)(3)(B) claim exists even when liability is resolved solely under state law), with W.R. Grace & Co.-Conn. v. Zotos Int’l, Inc., 559 F.3d 85, 91 (2d Cir. 2009) (holding that a section 113(f)(3)(B) claim is non-existent where liability is resolved solely under state law), Coppola, 935 F. Supp. 2d 993 at 1006–07 (same), and Differential Dev.-1994, Ltd. v. Harkrider Distrib. Co., 470 F. Supp. 2d 727, 738–41 & n.13 (S.D. Tex. 2007) (same and collecting cases). Guidance from the Fourth Circuit (and most circuits) on this caveat must wait until a PRP brings a suit for section 113(f)(3)(B) contribution after resolving only its liability under the applicable state environmental law.

Although unpublished and thus not binding on subsequent panels, AVX provides a strong indication that the Fourth Circuit, in the appropriate case, will adopt its sister circuits’ answer to the question Atlantic Research left open. If fact, given the convincing rationale undergirding the unanimous conclusion of those circuits that have addressed the section 107(a)–section 113(f)(3)(B) dichotomy where CERCLA liability was settled,

there is a high probability that all of the remaining circuits will concur. See, e.g., Agere Sys., 602 F.3d at 228–29 (arguing that the section 113(f)(2) “contribution bar” would unfairly allow the PRP to shift the entire cleanup cost onto another PRP); Bernstein, 733 F.3d at 205–06 (disagreeing with the “contribution bar” argument given Burlington Northern apportionment and instead postulating that to allow a settling PRP to pursue a section 107(a) claim would render the SARA amendments superfl uity). Conversely, the separate question that is the subject of the Trinity Industries–W.R. Grace split may require an answer from the Supreme Court. However, the need for resolution by the high court is uncertain because as the Third Circuit points out in its Trinity Industries opinion, its sister circuit indicated that it may be ready to retreat from its current position in a future case. 735 F.3d at 137 (quoting Niagara Mohawk, 596 F.3d at 126 n.15).

Brian Block graduated from Rutgers School of Law-Camden in May 2014. He is currently a law clerk for the Honorable Anne M. Patterson, Associate Justice of the Supreme Court of New Jersey. Mr. Block can be reached at [email protected].

Roger R. Martella, Jr., and J. Brett Grosko, EditorsUntil recently, international environmental law was largely the focus of diplomatic discussions, treaty negotiations, and academic debates of interest to attorneys working for governments and international NGOs. Increasingly, understanding international environmental law is becoming a core skillset for every environmental attorney.

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