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Ninth Circuit, in Narrow Holding, Limits Amount Recoverable in CERCLA Contribution Claim to Response Costs Already Incurred

In ASARCO v. Atlantic Richfield, No. 18-35934 (9th Cir. Sept. 14, 2020), ASARCO entered into a consent decree under which ASARCO agreed to pay $111.4 million. ASARCO then sought contribution from Atlantic Richfield. The district court found Atlantic Richfield to be responsible for 25% of ASARCO’s response costs. The Ninth Circuit upheld the district court’s allocation but rejected the court’s finding that all $111 million could, at present, be considered necessary costs of response recoverable in contribution by ASARCO.

Although certain costs have already been expended, the Ninth Circuit considered whether the full settlement could be considered necessary response costs eligible for contribution. The cleanup method had not been determined. Nevertheless, the district court was “convinced that the balance of the approximate $50 million in the trust will most likely be expended to achieve the mandated remediation results.” Under that reasoning, the district court found all $111 million was eligible to be recovered in contribution by ASARCO.

The Ninth Circuit disagreed. The Court found that the expert opinion offered by ASARCO, which did not identify the final remedy but instead opined that “something at some point is going to have to be done,” was too speculative and based on conjecture to allow a finding that all $111 million were necessary costs of response recoverable – at present – in contribution. Under the Court’s holding, ASARCO is able to recover those necessary costs of response that have been incurred and also is entitled to a declaratory judgment that “establishes liability and an allocation for those costs that have not been incurred yet, but may be incurred in the future.”

As with the Third Circuit opinion we recently posted about, this settlement was in the context of a bankruptcy, and the Ninth Circuit acknowledges that the unique facts here make the holding “a narrow one.” The settlement here was a global settlement for several contaminated sites. In 2005, ASARCO filed a Chapter 11 bankruptcy petition and in 2009, ASARCO, the United States, and the state of Montana reached two settlement agreements and two consent decrees, which resolved ASARCO’s liabilities at several Montana sites, including the one at issue in this case. One of those consent decrees created a custodial trust for the sites, and identified EPA as the lead agency responsible for authorizing all work performed and funds expended from the trust.

Any unused funds from remediated sites are diverted to other sites, so the Ninth Circuit’s concern that not all $111 million would be expended at this site was based on the terms of the settlement itself. In addition, the projected costs of the remediation at the site were based on a pump-and-treat remedy, which “now appears extremely unlikely to come to fruition.” For those reasons, the Ninth Circuit emphasized the narrowness of its holding.

Although the Ninth Circuit’s holding is a narrow one, it emphasizes again the need for specificity in settlement agreements. That may not always be possible in the context of a global settlement like the one in ASARCO v. Atlantic Richfield. This case is another in a long series of cases that demand care in the accounting that supports or defends a CERCLA contribution claim. Parties may want to devote attention early to what costs are at issue, whether those costs are sufficiently concrete to be reallocated, who incurred those costs, and whether the contribution plaintiff has or will incur more than its fair share of those costs under at least someone’s theory of the case.

©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume X, Number 260

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About this Author

Caleb Holmes, Greenberg Traurig Law Firm, Philadelphia, Environmental Law Litigation Attorney
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Caleb J. Holmes focuses his practice on environmental and commercial litigation. He has a wide range of experience in environmental transaction and regulatory counseling matters.

Caleb represents businesses in state and federal courts in environmental and commercial litigation matters. He advises and represents industrial and state clients on environmental issues arising in permitting, compliance activities, as well as business and real estate transactions generally. Caleb represents natural gas exploration and production companies and midstream...

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