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Ninth Circuit Holds Non-Settling Potentially Responsible Parties Have Right to Intervene to Oppose CERCLA Consent Decree July 6, 2010 by Cassie N. Aw-yang cawyang@somachlaw.com |
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On June 2, 2010, the Ninth Circuit Court of Appeals (Ninth Circuit) issued a decision that is likely to change the landscape of early settlement negotiations in cases brought under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). In U.S. v. Aerojet General Corp. (9th Cir. 2010) 2010 WL 2179169 (Aerojet), the Ninth Circuit held that CERCLA allowed the non-settling potentially responsible parties (PRPs) to intervene in litigation to oppose a consent decree between the federal government and settling PRPs. The decision rested on the consent decree’s effect of barring the non-settling PRPs from seeking contribution from the settling PRPs for CERCLA-related liability and the non-settling PRPs’ inability to protect their financial interests absent intervention. CERCLA Congress enacted CERCLA as a means to fund and ensure the cleanup of hazardous-waste sites and releases of hazardous substances. Through various enforcement tools (e.g., a consent decree), the Environmental Protection Agency (USEPA) obtains and recovers financial contributions from PRPs, the parties responsible for the environmental contamination. CERCLA allows PRPs to seek contribution from one another to facilitate equitable apportionment of the cleanup costs. However, CERCLA bars contribution claims against PRPs that have administratively or judicially approved settlements with USEPA. The Controversy and District Court Proceedings In 1984, USEPA designated much of the San Gabriel Basin, a groundwater reservoir in eastern Los Angeles County, as a CERCLA National Priorities List site for investigation and cleanup. The Aerojet litigation concerns the South El Monte Operable Unit (SEMOU) of the site. The total cost to clean up SEMOU’s groundwater contamination was estimated at $87 million. In October 2007, USEPA filed suit against ten PRPs, lodging a proposed consent decree whereby the PRPs agreed to pay a collective sum of $8.1 million for cleanup costs. In March 2008, a group of non-settling PRPs (Applicants) objecting to the consent decree filed an application to move to intervene as a matter of right. The district court denied the intervention and entered the consent decree. The Ninth Circuit’s Ruling Applicants appealed the district court’s ruling to the Ninth Circuit, arguing that non-settling PRPs may intervene in litigation to oppose a consent decree delineating CERCLA liability. Two factors required for intervention as of right were in dispute: (1) that Applicants had a significantly protectable interest; and (2) that the consent decree would, as a practical matter, impair or impede Applicants’ ability to protect their interests. Finding that Applicants had a right to intervene to protect their interests with regard to contribution and the fairness of the proposed consent decree, the Ninth Circuit reversed the district court’s decision. The Ninth Circuit held that Applicants had a significantly protectable interest since the settlement would directly affect Applicants’ ability to recover costs from the settling PRPs. The court found CERCLA’s language unambiguous, stating that the right to contribution arises irrespective of a finding of liability, and that CERCLA does not restrict intervention by non-settling PRPs. The court explained that the consent decree would make Applicants liable for the entire amount of response costs less the amount paid in settlement. Therefore, Applicants’ ultimate financial exposure would depend on the size of the settlement amount. Because the settlement cut off Applicants’ contribution right, CERCLA gave Applicants the right to intervene upon timely application. Further, the Ninth Circuit found that Applicants’ interests were impaired because the consent decree left them with no other means to protect themselves against potential financial responsibility for the remaining costs. Neither the notice and comment procedure after publication of the consent decree nor participation in other SEMOU cases provided Applicants with a direct opportunity to challenge the fairness of the settlement prior to its entry as a consent decree. Therefore, Applicants did not have any means other than intervention sufficient to protect their interests, and the consent decree would impair or impede Applicants’ ability to protect those interests. Conclusions and Implications In ruling that Applicants had a right to intervene to oppose the consent decree, the Ninth Circuit has likely changed how future PRPs and USEPA will approach settlement negotiations related to CERCLA liability. The decision may also result in increased litigation of proposed consent decrees, which may potentially delay the cleanup of sites contaminated by hazardous wastes. With this decision, the Ninth Circuit follows the Eighth and Tenth Circuit Courts of Appeals which reached similar conclusions in recent CERCLA cases. For more information on U.S. v. Aerojet General Corp. (9th Cir. 2010) 2010 WL 2179169, or the rights of PRPs under CERCLA, please contact Cassie Aw-yang at cawyang@somachlaw.com. Somach Simmons & Dunn provides the information in its Environmental Law & Policy Alerts and on its website for informational purposes only. This general information is not a substitute for legal advice, and users should consult with legal counsel for specific advice. In addition, using this information or sending electronic mail to Somach Simmons & Dunn or its attorneys does not create an attorney-client relationship with Somach Simmons & Dunn. |
