Hi, How Can We Help You?

Ninth Circuit Requires Scrutin...

Ninth Circuit Requires Scrutiny in Approving CERCLA Settlements Under Consent Decrees With State Agencies

By Kirk Tracy

On August 1, 2014, the Ninth Circuit overturned a district court ruling that had granted approval of consent decrees between the Arizona Department of Environmental Quality (“ADEQ”) and a number of potentially responsible parties (“PRP”) under CERCLA.[1] The Ninth Circuit held that the district court failed to “independently scrutinize the parties’ agreements” and compounded the error by “deferring completely to the state agency’s judgment that the proposed agreements were fair, reasonable, and consistent with federal law.”[2] The result leaves district courts with a more affirmative duty to dig into the facts before approving a settlement and leaves parties with the responsibility of providing more evidence in the record for the trial court to work with.  Ultimately, the decision will “make it more difficult for states to play the role that Congress envisioned for them in remediating the numerous polluted sites that blight our nation.”[3]

Under CERCLA, parties who undertake cleanup actions may seek contribution from other PRPs for costs incurred.[4] However, such contribution actions are barred with respect to PRPs who have settled their liability with the United States or a State under a “judicially approved settlement.”[5] In Arizona v. City of Tucson, the Ninth Circuit reviewed the district court’s approval of consent decrees between ADEQ and twenty-two PRPs, which granted contribution protection to the those PRPs from any actions by non-settling PRPs.[6] The non-settling parties intervened, challenging the sufficiency of the district court’s analysis of the terms of the consent decrees.[7] Their primary argument was that “the State did not provide sufficient information for the parties or the court to determine whether the consent decrees were substantively ‘fair, reasonable, and consistent with CERCLA’s objective.’”[8]

The Ninth Circuit standard for approving a settlement agreement under CERCLA section 113(f) requires a district court to “independently scrutinize” the terms of a proposed consent decree.[9] Here, the Ninth Circuit further described this duty as requiring a district court to “engage in a substantive analysis of the settlements’ terms,”[10] to “gauge the adequacy of settlement amounts to be paid by settling [parties] by engaging in a comparative analysis,”[11] and to “independently assess the adequacy of the agreements and to provide a reasoned explanation for its decision.”[12]

Here, the Ninth Circuit agreed with the intervenors, noting that the district court’s “entire numerical analysis [of the consent decrees] is found in a single footnote,” which provides only a summary of the State’s analysis that the settling parties were responsible for only a de minimis portion (0.01 % to 0.2 %) of the total estimated cleanup costs of $75 million.[13] The district court went as far as to acknowledge “that the State did not provide any evidence supporting this estimated liability, or even ‘information from which the [district court could] confirm that the settling parties are [in fact] de minimis contributors.’”[14] The Ninth Circuit held that, in its cursory review and approval of the summary analysis provided by the State, not only did the district court “fail[] to independently scrutinize the terms of the agreements, [it also] afforded undue deference to . . . ADEQ” by doing so.[15] The court reasoned that the district court, rather than engaging in the analysis required by Montrose, “merely accepted the State’s representation that the settlements were substantively fair and reasonable.”[16] Thus, the Ninth Circuit vacated the district court’s decision and remanded for further determination of the adequacy of the settlement agreements.

In addition to the independent scrutiny requirement, the Ninth Circuit further held that the district court gave undue deference to ADEQ, a state agency, “concerning its interpretation of CERCLA’s mandate.”[17] The court held that state agencies are entitled to “some deference” with regards to their area of expertise, such as interpretation of environmental data, but no deference is afforded to a state agency’s interpretation of federal statutes.[18] The court held that, by deferring to ADEQ’s judgment that the agreements satisfied the requirements of Montrose, the district court had improperly abdicated its responsibility.  However, the court did not discuss how much deference would be appropriate to meet the “some deference” standard.  The point seems slightly mooted by the court’s dicta in its conclusion, in which the court reasoned that even had EPA been a party to the proposed consent decrees, “the district court would have failed to fulfill its duty to independently scrutinize the parties’ agreements, as required by Montrose.”[19] Although the dissent argued that the majority opinion actually ruled strictly on a “no deference” standard,[20] it seems that the amount of deference granted would have made no impact on the district court’s duty to independently scrutinize the agreements.

The end result will require a court to do some minimum amount of factual and comparative analysis and reasoning in its opinion in granting a consent decree.  This will, in turn, require parties to submit more substantive evidence in the record than ADEQ and the settling parties did here.  Exactly where these lines will be drawn remains to be determined.

[1] Arizona v. City of Tucson, No. 12-15694, 2014 WL 3765569, at *1 (9th Cir. Aug. 1, 2014).

[2] Id. at *7.

[3] Id. (Callahan, J., dissenting).

[4] Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) § 113(f)(1), 42 U.S.C. § 9613(f)(1) (2012).

[5] Id. § 9613(f)(2).

[6] 2014 WL 3765569, at *1 (majority opinion).

[7] Id. at *2.

[8] Id. (citing United States v. Montrose Chem. Corp. of Cal., 50 F.3d 741, 748 (9th Cir. 1995)).

[9] Id. at *1 (citing Montrose, 50 F.3d at 747).

[10] Id. at *2.

[11] Id. at *5 (quoting Montrose, 50 F.3d at 747) (internal quotation marks omitted) (edits in original).

[12] Id.

[13] Id. at *5.

[14] Id. (edits in original).

[15] Id. at *1.

[16] Id. at *5.

[17] Id. at *6.

[18] Id. (quoting Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1495 (9th Cir. 1997)).

[19] Id. at *7.

[20] Id. (Callahan, J., dissenting).

Share Post

Leave a Reply

Visit Us
Follow Me