On February 14, 2020, the D.C. Circuit Court of Appeals determined that the government of Guam was unable to recover money from the U.S. Navy under the cost recovery sections in the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court determined that CERCLA § 107(a) was inapplicable because a previous Consent Decree (Consent Decree) resulting from a federal Clean Water Act (CWA) claim resolved some of the liability. Since the liability had been resolved, only § 113(f)(3)(B) was a viable means of recovery; however, recovery was impermissible because the statute of limitations for this section had run. [Government of Guam v. United States of America, ___F.3d___, Case No. 19-5131 (D.C. Cir. Feb. 14, 2020).]
Factual and Procedural Background
Between 1903 and 1950, the United States treated Guam as a US Naval ship—the “USS Guam”—and maintained military rule over the island. In the 1940s, the Navy constructed and began operating a landfill, called the Ordot Dump, where municipal and military waste was disposed. In the 1950s the United States began forming a civilian government, but even after relinquishing sovereignty, the Navy used the Ordot Dump for the disposal of munitions and chemicals, allegedly including Dichlorodiphenyltrichloroethane—DDT—and Agent Orange, throughout the Korean and Vietnam wars. Despite the dump’s extensive use for both military and civilian needs, there were few environmental safeguards implemented. It was unlined at the bottom and uncapped on top which allowed the rain to mix with the chemicals and contaminate the soil and ground water.
Starting in 1986, the U.S. Environmental Protection Agency (EPA) repeatedly ordered Guam to contain the environmental impacts at Ordot Dump. In 2002, the EPA sued Guam under the CWA asserting that Guam violated the Act when water flowed from the Ordot Dump into the Lonfit River without a permit. To avoid litigation, Guam and the EPA entered into a Consent Decree in 2004, which required Guam to pay a civil penalty, close the dump, and install a cover over the dump.
In 2017, Guam initiated an action under CERCLA, asserting that the Navy was responsible for the Ordot Dump’s contamination, and seeking to recover costs caused by closing the land fill and cleaning the area. Guam brought two causes of action: a CERCLA § 107(a) “cost recovery” claim seeking “removal and remediation costs” related to the landfill, and, alternatively, a § 113(f) “contribution” action.
The U.S. moved to dismiss the claims, arguing, first, that the 2004 Consent Decree resolved the United States’ liability for a response action, and therefore Guam had to proceed under § 113 rather than § 107. Second, the United States argued that because CERCLA § 113 “imposes a three-year statute of limitations on contribution claims” that runs from a consent decree’s entry, Guam was time-barred by the three-year statute of limitations from pursuing a § 113 contribution claim.
The U.S. District Court found that the § 107(a) claim was not barred by the Decree because it did not sufficiently resolve the liability of the Ordot Dump and denied the motion to dismiss. The United States sought interlocutory appeal of the district court’s order.
The D.C. Circuit’s Decision
Two CERCLA sections are at issue in this case: § 107(a) and § 113(f)(3)(B). Section 107(a) provides a cost recovery action with a six-year statute of limitations that is permissible if liability has not been resolved. Section 113(f)(3)(B) provides a contribution action available to recover paid funds from a nonparty as a result of a § 107(a) action, settlement, or other contribution action with a three-year statute of limitations.
Cost Recovery and Contribution Claims are Mutually Exclusive
The court first considered whether CERCLA §§ 107(a) and 113(f)(3)(B) were mutually exclusive. That is, if a party incurs costs pursuant to a settlement and therefore has a cause of action under § 113, is it precluded from seeking cost-recovery under § 107? The court reasoned that the purpose of § 113(f)(3)(B) is to allow private parties to seek contribution after they have settled their liability with the government. Allowing recoupment of costs through a § 107 cost-recovery claim would render § 113(f)(3)(B) superfluous.
Triggering Section 113(f)(3)(B) Through a Non-CERCLA Claim
The court next considered whether the 2004 Consent Decree resolved Guam’s liability for a response action within the meaning of § 113(f)(3)(B), thus triggering Guam’s right to seek contribution and precluding it from seeking cost-recovery under § 107. In order to trigger CERCLA § 113(f)(3)(B), a party must resolve 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 a judicially approved settlement. Guam argued the 2004 Consent Decree could not qualify as a settlement under CERCLA because it settled an action brought by EPA under the CWA, not CERCLA.
The court determined that § 113(f)(3)(B) did not require a CERCLA specific settlement. Because other subsections in § 113 specifically required a CERCLA claim and 113(f)(3)(B) does not, this implied that Congress did not intend to place this restriction on the subsection when drafting CERCLA.
Consent Decree Resolves Liability
After determining that a settlement agreement under the CWA could trigger 113(f)(3)(B), the court examined the terms of the 2004 Consent Decree. The court determined that the ordinary meaning of the phrase “resolved its liability” meant that the liability must be decided in part by the agreement with the EPA. The Consent Decree required Guam to take actions against further contamination, which constituted a response action.
Guam unsuccessfully argued that the Consent Decree did not resolve liability in this context for multiple reasons. First, Guam argued that the Consent Decree did not resolve liability because it explicitly reserved the right to pursue other claims against Guam that arose from the circumstances. The court determined that complete resolution was not necessary as 113(f)(3)(B) only required some response action, which was present when Guam agreed to work to cover the Ordot Dump in the Consent Decree.
Second, Guam argued that the Consent Decree did not trigger § 113(f)(3)(B) because liability under the decree due to ongoing performance requirements. The court rejected this argument, reasoning that such a position would produce the absurd result that Guam’s cause of action under § 113 would not accrue until after the statute of limitations ran. Because this created a timing inconsistency that was impossible to resolve, the court found that Congress could not have intended for the liability to accrue only after performance had been completed.
Third, Guam argued that the disclaimer in the Consent Decree, which asserted there was no “finding or admission of liability,” prevented the liability from being resolved as required by § 113(f)(3)(B). Here, the court determined that disclaimer did not overcome the substantive portions of the Consent Decree. Because the Consent Decree caused Guam to assume obligations consistent with finding liability, this was sufficient action to trigger § 113(f)(3)(B).
Fourth, Guam argued that the Consent Decree was outside of CERCLA because the document was only about violations to the CWA and “non-CERCLA pollutant discharges only.” The court determined this to be irrelevant because the instructions regarding the cover asserted that the system was designed to “eliminate discharges of untreated leachate” which was an action specifically identified in CERCLA as a remedial action.
Finally, Guam argued that denying § 107(a) recovery violated the due process clause by not providing notice that the Consent Decree also triggered CERCLA. Since this argument was not raised originally in the District Court, the Circuit Court found that it was forfeited.
Conclusion and Implications
This case brought the D.C. Circuit in line with the Third, Seventh, and Ninth Circuit Courts who have ruled that § 107(a) and 113(f)(3)(B) are mutually exclusive. This case also shows that CERCLA § 113(f)(3)(B) can be triggered by actions taken by the EPA under other statutes and is triggered as soon as the settlement, not the performance, occurs. Lastly, any disclaimers or rights to take other actions reserved in a Consent Decree do not necessarily prevent § 113(f)(3)(B) from being triggered.
(Anya Kwan, Rebecca Andrews)
