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Seventh Circuit holds that potentially responsible party cannot avoid joint and several liability under CERCLA because harm it and other companies caused is not “divisible”

In a highly-anticipated decision and a significant contribution to jurisprudence under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the U.S. Court of Appeals for the Seventh Circuit, in United States v. NCR Corp., __ F.3d __, No. 12-2069, 2012 WL 3140191 (7th Cir. Aug. 3, 2012), clarified the apportionment defense to joint and several liability under CERCLA.

Background

This case involved the long-running efforts to clean up the Fox River in Wisconsin, after years during which various companies dumped polychlorinated biphenyls (PCBs) into its waters. Since the late 1990s, the U.S. Environmental Protection Agency (EPA) and the Wisconsin Department of Natural Resources (WDNR) have been working to devise and implement an effective remedial plan for the river. One of companies that was designated as a "potentially responsible party" (PRP), and thus responsible for undertaking remedial work under CERCLA, was NCR Corporation. As required by various administrative orders, NCR performed a significant amount of cleanup. It decided, however, in 2011 that it had performed more than its share of the work and announced that it was no longer going to comply with the relevant order. In response, the U.S. and Wisconsin brought this action seeking a preliminary injunction compelling NCR to complete the remediation work scheduled for this year. The district court granted the injunction, and this appeal followed. Id. at *1.

The Court of Appeal’s Ruling

On appeal, NCR contested the propriety of the injunction on the ground that its liability was less than the costs it had already incurred and thus that it had already performed more than its share of the work. Citing Burlington Northern & Santa Fe Ry. Co. v. United States, 556 U.S. 599 (2009), it argued that the harm to the Fox River is divisible and thus that the remediation costs should be apportioned among all of the PRPs. Id. at *3.

The Court of Appeal began its analysis by noting that the " ‘universal starting point for divisibility of harm analysis in CERCLA cases’ is § 433A of the Restatement (Second) of Torts." Burlington Northern, 556 U.S. at 614 (quoting United States v. Hercules, Inc., 247 F.3d 706, 717 (8th Cir.2001)). In general courts must look to the common law to determine whether the harm in a case is divisible. And in particular, courts are instructed by Burlington Northern to use the Restatement standard, which the Supreme Court adopted in that case, quoting the following language:

[W]hen two or more persons acting independently caus[e] a distinct or single harm for which there is a reasonable basis for division according to the contribution of each, each is subject to liability only for the portion of the total harm that he has himself caused. Restatement (Second) of Torts, §§ 443A, 881 (1976); Prosser, Law of Torts, pp. 313–14 (4th ed. 1971). . . . But where two or more persons cause a single and indivisible harm, each is subject to liability for the entire harm. Restatement (Second) of Torts, § 875; Prosser, at 315–17.

Id.  (ellipses in original). United States v. NCR Corp., __ F.3d __, 2012 WL 3140191, at *4.

This analysis proceeds in two steps. The court must determine (1) whether the harm at issue is theoretically "capable of apportionment" (i.e., "divisible"), and (2) if so, how best to apportion damages among the PRPs. Id.

Here, NCR stumbled on the first step of the analysis. It was unable to prove that the harm that it and the other PRPs caused to the Fox River is theoretically "capable of apportionment" (i.e., "divisible"). It argued that the harm was divisible based on the PRPs’ volumetric contributions to the harm (i.e., the volume of PCBs that each released into the river). However, NCR’s contribution alone would have been sufficient to raise PCB levels in the river above the 1.0 parts per million (ppm) threshold that requires remediation, and such remediation would cost about the same regardless of whether the river was lightly or heavily contaminated. Id. at *4. In other words, NCR’s contributions alone would have been sufficient to require approximately the same remedial measures at approximately the same cost. In such a case, under the Restatement, NCR is jointly and severally liable for all such costs. It is analogous to the classic example, set out in the Restatement, of two separate fires converging and burning down a building, each of which would have been sufficient alone to cause such damage; each firestarter may be held jointly and severally liable for all of the damage. Id. at *5.

That is not to say that NCR is entirely without recourse; it can still pursue a CERCLA contribution action against the other PRPs if it has, indeed, paid more than its share of the costs to cleanup the river. As the Court of Appeal noted, Burlington Northern was careful to distinguish apportionment from contribution: "[A]pportionment . . . looks to whether defendants may avoid joint and several liability by establishing a fixed amount of damage for which they are liable, while contribution actions allow jointly and severally liable PRPs to recover from each other on the basis of equitable considerations." Burlington Northern, at 615 n. 9. The Supreme Court emphasized that "[e]quitable considerations play no role in the apportionment analysis; rather, apportionment is proper only when the evidence supports the divisibility of the damages jointly caused by the PRPs." Id.; United States v. NCR Corp., __ F.3d __, 2012 WL 3140191, at *8. If and when the time comes, NCR will be free to explore whatever possibilities may still be available to it for contribution to recoup any costs it should not have paid. Id. at 10.

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