Photo of Court C. VanTassell

This week, in a split 7-2 opinion authored by Chief Justice Roberts, the Supreme Court held that Montana state law claims brought by private landowners against Atlantic Richfield Company (“ARCO”) for alleged impacts from the Anaconda Smelter Superfund site are not preempted by CERCLA and are not precluded by ARCO’s settlement of EPA’s CERCLA claims; however, any restoration damages awarded to the landowners must be spent on actual restoration of the property, as required by Montana state law, and restoration must be conducted in a manner either approved by the EPA or consistent with the EPA’s already-approved remedial action plan.

In 2008, a group of 98 landowners whose property had allegedly been contaminated by the Anaconda Smelter site between 1884 and 1980 sued ARCO in Montana state court, alleging claims of nuisance, trespass, and strict liability, and seeking restoration damages.  Prior to the landowners’ suit, in 1983, EPA designated the Anaconda Smelter as one of the inaugural Superfund sites and, later, ARCO settled with the EPA to resolve all CERCLA claims; thus, the agency has managed the site cleanup for decades. The private landowners’ subsequent suit sought to require ARCO to pay for remediation in excess of the EPA’s selected remedial action plan. The Montana Supreme Court held, as a matter of first impression, that the landowners’ claims for restoration damages arose solely under Montana common law and were neither preempted by CERCLA nor in conflict with the remedial action approved by the EPA. ARCO petitioned for certiorari, contending that state law claims for further cleanup were preempted by CERCLA and that the cleanup proposed by the landowners could conflict with the remedial action plan selected by the EPA. The Supreme Court affirmed in part, vacated in part, and remanded the matter to the Montana Supreme Court as detailed below.

A. The Court affirmed that the landowners’ state law claims were not preempted by CERLCA, but restoration damages must actually be used to restore the property

Section 113(b) of CERCLA provides that “United States district courts shall have exclusive jurisdiction over all controversies arising under this chapter.” However, the Supreme Court reasoned that because the landowners’ common law claims of nuisance, trespass, and strict liability arose under Montana law, rather than under CERLCA, the narrowly-interpreted language of Section 113(b) did not apply and the state law claims were, accordingly, not preempted by CERCLA.

If plaintiffs were awarded any restoration damages, such funds would have to be spent actually restoring the property.  Under Montana law, property damages are measured by the difference between the value of the property before and after injury, i.e the diminution in value. However, if the property is a private residence, the plaintiff has “reasons personal” for restoring the property, and such restoration is possible, then the plaintiff may seek restoration damages in excess of the property’s diminution in value, provided that the plaintiff demonstrates that the restoration damages awarded will actually be used for restoration of the property. The Court explained further that if the residents were awarded restoration damages the funds would be held in trust to potentially be used for additional remediation, if any, beyond that required by the EPA’s selected remedial action plan.

B. The Court affirmed that state courts are not barred from challenging EPA’s selected remedial action

The Supreme Court disagreed with ARCO’s argument that CERCLA preempts state courts from challenging the remedial action selected by the EPA. Section 113(h) of CERCLA states that “[n]o Federal court shall have jurisdiction under Federal law … to review any challenges to removal or remedial action” selected under CERCLA. Even though the Supreme Court recognized that the Act is tailored to “ensure the careful development of a single EPA-led cleanup effort,” the Court again narrowly interpreted the language of the Act to conclude that, although federal courts were expressly barred, Section 113(h) did not bar state courts from challenging the EPA’s chosen remedial action plan.

C. The Court reversed the Montana Supreme Court and held that the landowners were PRPs and, accordingly, needed EPA approval to perform any remedial action

The Supreme Court reversed the Montana Supreme Court and held that the landowners, as potentially responsible parties (“PRPs”), were prohibited from taking remedial action without EPA approval. Section 122(e)(6) of CERCLA provides that once a remedial investigation and feasibility study is underway, no potentially responsible party may undertake any remedial action at the site unless such action has been authorized. The Supreme Court held that the landowners were themselves PRPs under Section 107(a) of the Act because the pollutants had “come to be located” on the landowners’ properties. The Court reached this holding, that the landowners were PRPs, even though: none of the parties had treated them as such for the more than three decades of the Superfund proceeding, the limitation period to bring suit against the landowners as PRPs had long since run, and CERCLA Section 107(q)(1)(A) expressly precludes innocent contiguous landowners from being PRP, which the Court deemed inapplicable by finding that at time of purchase the landowners knew or should have known the property could be contaminated.

As PRPs, the landowners cannot conduct any remedial action absent EPA approval. To ensure a single EPA-led cleanup effort, Section 122(e)(6) of CERCLA requires that, once a remedial investigation and feasibility study is underway, no PRP may perform any remedial action absent EPA approval. Here, EPA’s selected remedy for Anaconda Smelter Superfund site was determined to be protective of human health and the environment. Nevertheless, the landowners pursued additional restoration damages to purportedly reduce arsenic levels to 6% of the standard set by EPA, excavate to twice the depth selected by the EPA, and implement a groundwater treatment plan that the EPA previously considered and rejected as too costly and unnecessary to secure safe drinking water. Plaintiffs actions, if left unchecked, could conflict with the agency’s selected remedial action (e.g. plaintiffs could excavate contaminated soil that was deliberately capped in place). In order to avoid such conflict, any remedial action proposed by the landowners must be approved by the EPA, thereby ensuring the agency maintains ultimate authority over selection and implementation of a remedy. The Court remanded the matter for further proceedings consistent with this holding and advised that the EPA approval process could potentially ameliorate any conflict between the EPA’s selected remedial action and the additional remediation proposed by the landowners.

This case may have a chilling effect on CERCLA settlements with regulators. CERCLA is designed to incentivize settlement by capping a settling party’s liability through both covenants by the regulator not to sue and by protecting a settling party against contribution claims of other PRPs. Now that the Supreme Court has determined that a settling PRP may also be liable for private landowners’ state law claims for restoration damages in excess of that required by CERCLA and in excess of the remedial action plan selected by the EPA, incentives for a PRP to settle might likewise be reduced.

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