The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, was enacted by Congress to promote the expeditious cleanup of sites contaminated with hazardous substances. Through CERCLA, Congress attempted to achieve this goal by, among other things, providing funding to federal agencies, primarily EPA, to clean up certain contaminated sites and authorizing the agency to sue responsible parties for reimbursement after the site is cleaned up. Private parties may clean up a site and seek reimbursement from other responsible parties under CERCLA as well.
Historically, a private party could recoup costs from the cleanup of a contaminated site in one of two ways: First, under Section 107, any person that has incurred costs remediating a contaminated site may bring what is known as a cost-recovery action against another responsible party; or Second, a party that has been sued by, or has settled with, the United States or a state may seek contribution from other responsible parties in what is known as a Section 113 CERCLA contribution action.
Because Section 107 has a longer statute of limitations and provides for joint and several liability, as opposed to Section 113 which provides only for the equitable distribution of costs, private parties would likely prefer to bring a Section 107 cost recovery action against other responsible parties instead of a Section 113 contribution action. But a long line of cases dating back to a Supreme Court case from the mid-2000s has held that where a party is eligible to seek contribution under Section 113 (in other words, where a party has been sued by, or has settled with, the United States or a state), it must do so under Section 113, and may not avail itself of Section 107 cost recovery rights. These recovery provisions are mutually exclusive. This means that that parties who voluntarily execute any sort of settlement agreement with the United States or a state – be it a judicial consent decree or administrative orders on consent calling for the cleanup of a site – may only avail themselves of a Section 113 contribution action when seeking reimbursement from other parties. As many commentators have noted, these decisions have had the “unfair” or “weird” result of penalizing parties who voluntarily enter into cleanup agreements with the United States or a state; an underlying purpose of CERCLA’s enactment is to promote such settlements, thereby having parties fund the cleanup, saving Superfund resources for orphan sites.
Unfortunately, this line of cases had led to a recently issued opinion from the Southern District of New York holding that a party’s entry into New York’s Brownfield Clean Up Program (BCP) (by its execution of a Brownfield Site Clean Up Agreement (BCA)) constitutes a “settlement” that has the effect of limiting a private party’s recovery rights to a Section 113 contribution action.
In that case, HLP Properties, LLC v. Consolidated Edison Company, the plaintiffs were a group of developers who agreed to spend millions of dollars to clean up a former gas manufacturing site in Manhattan and who sued Consolidated Edison Company (“Con Ed”) under CERCLA Section 107 because of its prior ownership of the site. Plaintiffs, who appeared to have had no role in the contamination of the site and only sought to redevelop it, wanted Con Ed, the prior owner, to share jointly and severally in the response costs they had incurred.
Plaintiffs had sought to obtain tax credits for certain costs pertaining to their remediation and redevelopment at the site and were ultimately accepted into the BCP. To enter into the BCP and avail themselves of these tax credits, plaintiffs entered into a BCA with the New York State Department of Environmental Conservation (NYSDEC) that outlined their remediation responsibilities at the site. The BCA was a purely voluntary agreement entered into by the plaintiffs to facilitate their redevelopment of the site, and the plaintiffs were not required to enter into the BCA, nor were they otherwise facing suit by the United States or New York State. In many ways, plaintiffs entry into the BCP and their execution of the BCA achieved the underlying goal of CERCLA – to facilitate the expeditious cleanup of contaminated sites without the use of Superfund resources.
Included in the BCA was language stating that “the remedial party shall be deemed to have entered into an administrative settlement of liability and to have resolved its liability to the state for purposes of contribution protection provided by CERCLA. . . ” This language proved fatal to plaintiffs’ Section 107 cost recovery claim against Con Ed.
Con Ed argued that the language in the BCA prevented plaintiffs from pursuing a Section 107 cost recovery claim, and that the claim should be dismissed. The Southern District of New York agreed with Con Ed. According to the Southern District, this language was enough to constitute a settlement with the State of New York and warranted dismissal of plaintiffs’ Section 107 cost recovery action against Con Ed. So, while the BCP facilitated a good result – the cleanup of the site – it came at a high cost to the developers, who were left with only the Section 113 route to cost recovery.
Parties who intend to enter the BCP should be mindful of this decision in their decision-making process and negotiations with NYSDEC, and understand the potential impact on future cost recovery options.