Sunday, September 28, 2014

Seventh Circuit Issues Two Decisions Involving Cleanup of Wisconsin’s Lower Fox River and Green Bay Superfund Site

On September 25, the Seventh Circuit (Wood, Kanne, Tinder) issued decisions in two related cases—NCR Corp. v. George A. Whiting Paper Co., No. 13-2447, and United States v. P.H. Glatfelter Company, No. 13-2436—both arising out of the cleanup of the Lower Fox River and Green Bay Superfund Site in northeastern Wisconsin.  These are both lengthy decisions raising numerous issues that are likely to be important precedent in other future CERCLA cases.

The Whiting Paper case involved a CERCLA contribution claim brought by NCR Corporation, one of the potentially responsible parties (PRPs) for the Site, against other PRPs.  The other PRPs, in turn, brought contribution counterclaims against NCR.  The district court held that NCR was not entitled to equitable contribution from the other PRPs, and that the other PRPs were entitled to equitable contribution from NCR.  The court of appeals, in an opinion authored by Judge Wood, addressed at least seven significant issues, many of which were important questions of CERCLA law.

1.   Cost recovery vs. contribution. 

a.   The court of appeals held that NCR was limited to a contribution (as opposed to cost recovery) claim, because NCR’s costs were incurred during or following government suits and administrative consent orders to enforce EPA administrative orders. 

b.   Another company, Appvion, presented a thornier issue, apparently an issue of first impression post-Atlantic Research.  Appvion was initially identified as a PRP and paid response costs in that capacity, then later was determined not to be liable under CERCLA, but is liable as an indemnitor of NCR.  Appvion sued to recover response costs it paid while it was regarded as a PRP.  The court of appeals, citing Chubb Custom Insurance Co. v. Space Systems/Loral, Inc., 710 F.3d 946 (9th Cir. 2013), noted that normally indemnitors are limited to proceeding through their indemnitees.  But that rule did not apply to Appvion, because it was seeking to recover for costs incurred as a PRP, not as an indemnitor. 

2.   Equitable allocation.  As to the district court’s equitable allocation of costs amongst NCR and the other PRPs, the court of appeals held that the district court had abused its discretion in focusing entirely on one equitable factor—knowledge of the danger posed by PCBs—and in limiting discovery to that factor, in the process excluding other potentially relevant equitable factors such as relative volume of PCBs.  The court distinguished the district court’s impermissible consideration of only certain factors from a situation in which a court may permissibly ultimately decide to allocate costs based on a single factor, after considering other factors as well.

3.   Arranger liability.  The court held that NCR’s predecessor, Appleton Coated, was not liable as an arranger for selling “broke” carbonless paper—essentially scrap paper—because its purpose was to sell a useful product at a market price, not just to get rid of it.  The court contrasted United States v. General Electric Co., 670 F.3d 377 (1st Cir. 2012), in which GE nominally sold PCB-containing material but actually was simply trying to get rid of the material.

4.   Insurance offsets.  With respect to the issue whether Glatfelter’s (another PRP) contribution claims against NCR should be offset by insurance proceeds that Glatfelter obtained, the court held that the collateral source rule does not apply to CERCLA contribution actions and that the court could take the insurance proceeds into account.  The court of appeals approved of the district court’s method for taking the proceeds into account, which allocated the payments between liability coverage (which should offset Glatfelter’s contribution claims against NCR) and defense costs (which should not). 

5.   Natural resource damages.  As to liability for natural resource damages, the court held that CERCLA contribution claims can include natural resource damages. 

6.   Preemption of common-law counterclaims.  The court of appeals held that CERCLA preempted state-law counterclaims of negligence, strict liability, and public nuisance against NCR, on the ground that allowing such claims would effectively reapportion costs among the PRPs in a manner contrary to CERCLA.

7.    Other issues.  The court of appeals also addressed two other case-specific issues, involving Glatfelter's claims based upon discharges at Portage, Wisconsin, and the potential preclusive effect of the district court’s holding that Appvion is not a PRP.

The issues in the Glatfelter case are considerably narrower.  This case involved a claim brought by the United States against potentially responsible parties (PRPs), including Glatfelter and NCR Corporation, to enforce EPA’s 2007 administrative order.  After the district court ruled in favor of the government and against the PRPs, Glatfelter and NCR appealed.  The Seventh Circuit, in a decision authored by Judge Tinder, affirmed in part and reversed in part.  Of the seven issues in the case, one is a significant legal issue.  The district court had enjoined the defendants to comply with EPA’s administrative order.  The Seventh Circuit held that this was in error, and that a permanent injunction is an inappropriate mechanism to enforce a CERCLA administrative order. 

The remaining issues were more case-specific, although they may form important precedent for other cases raising similar facts.  As to those issues, the court of appeals held (a) that EPA did not unlawfully delegate responsibility for the cleanup to the Wisconsin Department of Natural Resources, because the two agencies entered into a cooperative agreement under CERCLA § 104 (without deciding that such an agreement was required); (b) that the agencies reasonably decided to maintain a preference for dredging in the selected remedy; (c) that the agencies appropriately increased their estimates of the cost of the cleanup in 2010 based on new information by publishing an explanation of significant differences rather than amending the Record of Decision; (d) that the district court appropriately held Glatfelter liable for response costs based on its liability for the Site generally instead of proof that it had a causal connection to the specific operable unit in question; (e) that the district court incorrectly rejected NCR’s argument that the response costs could be apportioned based on the mass of hazardous substances attributable to each PRP; and (f) that the district court correctly rejected Glatfelter’s argument that it caused none of the contamination in the relevant operable unit.

—Todd Aagaard

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