June 16, 2014

U.S. Supreme Court Holds that CERCLA Does Not Preempt State Statutes of Repose

Arnold & Porter Advisory

The U.S. Supreme Court held last week in CTS Corp. v. Waldburger that Section 309 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9658, preempts only states' statutes of limitations -- but not statutes of repose -- for state tort law claims arising from a release of hazardous substances.

Section 309 imposes a "discovery rule" on more restrictive state statutes of limitations -- meaning that the time period in which a plaintiff must file suit does not begin to run until the plaintiff knew or should have known that the damages were caused by the release. In holding that Section 309 also does not graft this "discovery rule" onto state statutes of repose, the Court left intact certain states' legislative decisions to provide defendants a date certain at which their exposure to tort liability arising from a release of hazardous substances ends.

The immediate effect of the Court's direct holding will likely be somewhat limited, as relatively few states appear to have adopted statutes of repose applicable to state tort law claims arising from a release of hazardous substances. However, the Court's opinion likely will have additional ramifications that environmental and toxic tort litigants and members of the regulated community should be aware of, including the need to address statutes of repose as a separate and distinct legal concept in tolling agreements and transactional documents.

I. Statutes of Limitations Versus Statutes of Repose

If it is not readily apparent what statutes of repose are and how they differ from the more familiar statutes of limitations, you are not alone. Even Justice Scalia acknowledged in oral argument that: "To tell you the truth, I've never heard of this distinction between statutes of repose and statutes of limitations."1

The Court in Waldburger explained that "[s]tatues of limitations and statutes of repose both are mechanisms used to limit the temporal extent or duration of liability for tortious act. . . . But the time periods specified are measured from different points, and the statutes seek to attain different purposes and objectives."2 Statutes of limitations impose a time limit based on "when the injury occurred or was discovered"3 and seek to motivate plaintiffs to prosecute claims diligently and before "evidence has been lost, memories have faded, and witnesses have disappeared."4 "A statute of repose, on the other hand, puts an outer limit on the right to bring a civil action" based on "the date of the last culpable act or omission of the defendant"5 and reflect "a legislative judgment that a defendant should 'be free from liability after the legislatively determined period of time.'"6

II. Factual and Procedural Background

The Court's need to analyze the difference between statutes of limitations and statutes of repose arose from alleged contamination related to a former CTS Corporation electronics plant in Ashville, North Carolina (Property). CTS operated the plant from 1959 to 1985 and stored chemicals on the Property, including trichloroethylene (TCE). CTS sold the Property in 1987 to a developer, who in turn sold portions of the Property to various individuals.

In 2011, two such property owners and other nearby residents brought a state tort law claim against CTS, seeking monetary damages and remediation related to the alleged contamination of their well water with TCE and other chemicals. CTS moved to dismiss, arguing that its last act on the Property occurred in 1987 when it sold the Property, and therefore Plaintiffs' claim was time barred under North Carolina's ten-year statute of repose for real property claims. N.C. Gen. Stat. § 1-52(16). Plaintiffs countered that CERCLA Section 309 grafted the discovery rule onto this North Carolina statute, causing the ten-year period to begin to run in 2009 when the Plaintiffs first discovered the contamination arising from a release of TCE and other chemicals and not in 1987.

III. Section 309

Section 309 provides that, for state law claims "for personal injury, or property damages, which are caused or contributed to by exposure to any hazardous substance, or pollutant or contaminant, released into the environment from a facility," the "commencement date" for "the applicable limitations period for such action" shall be the later of either:

  1. "the applicable limitations period for such action (as specified in the State statute of limitations or under common law);" or
  2. "the federally required commencement date."7

Section 309 defines "federally required commencement date" as "the date plaintiff knew (or reasonably should have know) that the personal injury or property damages . . . were caused or contributed to by the hazardous substance or pollutant or contaminant concerned"8 -- i.e., the discovery rule.

Congress enacted Section 309 in response to a study it commissioned to evaluate "the adequacy of existing common law and statutory remedies in providing legal redress" for exposure to hazardous substances" (Study).9 The Study found that, in those states that have not adopted the discovery rule, causes of action with long latency periods "will usually be time barred when the plaintiff discovers his hurt."10 The Study recommended that states adopt the discovery rule to counteract this concern.11 Congress subsequently adopted Section 309 to "address[] the problem identified" in the Study, explaining that Section 309 establishes "a Federally-required commencement date for the running of State statutes of limitations . . . ."12

IV. Court's Opinion

The district court agreed with CTS that Section 309 did not graft the discovery rule onto the North Carolina statute, and therefore held that the Plaintiffs' claim was time barred.13 However, a divided panel of the Fourth Circuit Court of Appeals reversed and thereby deepened an already existing circuit split.14

In a 7-2 decision authored by Justice Kennedy, the Court reversed the Fourth Circuit panel's decision, holding that Section 309 did not preempt statutes of repose, such as the North Carolina statute. The Court rejected the Fourth Circuit's reliance on CERCLA's "remedial purpose" "as a substitute for a conclusion grounded in the statute's text and structure."15

Section 309's text and structure, explained the Court, demonstrated that Section 309 did not preempt statutes of repose in part because: (1) Section 309 is structured as a narrow exception to the application of state tort law; and (2) certain aspects of Section 309 do not make sense when applied to statutes of repose (e.g., the definition of "applicable limitations period," equitable tolling "for minors and incompetent plaintiff[s]").16

The Court recognized that commentators' and courts' use of the terms "statutes of limitations" and "statutes of repose" "has not always been precise," but found that "the concept that statutes of repose and statutes of limitations are distinct was well enough established to be reflected in the [Study] commissioned by Congress."17 Specifically, the Court cited the Study's recommendation that states should adopt the "discovery rule" not just for statutes of limitations, but also statutes of repose, "which, in a number of states[,] have the same effect as some statutes of limitations in barring [a] plaintiff's claim before he knows that he has one."18 The Court found that the Study "did what [Section 309] does not: It referred to statutes of repose as a distinct category. And when Congress did not make the same distinction, it is proper to conclude that Congress did not exercise the full scope of its pre-emption power" to cover statutes of repose as well.19

Accordingly, seven members of the Court held that Section 309 does not preempt state statutes of repose.20

V. Ramifications

The most immediate effect of the Court's holding in CTS Corp. v. Waldurger is that defendants faced with potential liability for historical releases in states that have enacted statutes of repose (e.g., Connecticut, Kansas, North Carolina, Oregon) may continue to rely upon statutes of repose as a defense to state law claims arising from a release of hazardous substances. Indeed, a litigant faced with such a state law claim now has a strong incentive to review immediately the relevant state's law to determine whether a statute of repose offers a viable defense. To be clear, the Court's holding and Section 309 only apply to state law claims arising from a release of hazardous substances and do not affect other state law or federal claims, including cost recovery and contribution claims under CERCLA Sections 107 and 113, respectively. Whether the Court's decision will galvanize additional states to enact statutes of repose remains to be seen.

Beyond the Court's direct holding, there are a couple of additional ramifications of which environmental and toxic tort litigants and members of the regulated community should be aware.

First, the Court's recognition of a distinction between statutes of limitations and statutes of repose counsels in favor of addressing this distinction when drafting agreements. For example, one should consider whether a tolling agreement involving state tort law claims arising from a release of hazardous substances should toll both statutes of limitations and statutes of repose. In addition, one should consider whether transactional documents that incorporate concepts of statutes of limitations (e.g., representations and warranties or indemnities offered for the duration of applicable statutes of limitations) should also address statutes of repose.

Second, the Court's decision reasserts the primacy of CERCLA's text and structure over its remedial purpose, offering future litigants a persuasive precedent with which to counter future claims to liberally interpret CERCLA's often ambiguous or inartful provisions.21

  1. Transcript of Oral Argument at 12:20-22, CTS Corp. v. Waldburger, 573 U.S. ____ (2014) (No. 13-339).

  2. CTS Corp. v. Waldburger, 573 U.S. ____ (2014) (No. 13-339), slip op. at 5.

  3. Id. (quoting Black's Law Dictionary 1546 (9th ed. 2009)).

  4. Id. at 6 (quoting Railroad Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342, 348-349 (1944)).

  5. Id. at 6.

  6. Id. at 6-7 (quoting 54 C.J.S. Limitations of Actions § 7, p. 24 (2010)).

  7. 42 U.S.C. § 9658(a)(1).

  8. Id. § 9658(a)(b)(4)(A).

  9. Id. §§ 9651(e)(1) & (e)(3)(F).

  10. Superfund Section 301(e) Study Group, Injuries and Damages from Hazardous Wastes -- Analysis and Improvement of Legal Remedies, S. Comm. on Environment & Public Works, S. Rep. No. 97-12 at 240-41 (97th Cong., 2d Sess. 1982) (Study).

  11. Id. at 241

  12. H.R. Conf. Rep. No. 99-962, at 261, reprinted in 1986 U.S.C.C.A.N. 3276, 3354 (Oct. 3, 1986).

  13. Waldburger v. CTS Corp., 1:11CV39, 2011 WL 7153937 (W.D.N.C. Oct. 4, 2011) report and recommendation adopted, 1:11CV39, 2012 WL 380053 (W.D.N.C. Feb. 6, 2012).

  14. Waldburger v. CTS Corp., 723 F.3d 434 (4th Cir. 2013); see, e.g., McDonald v. Sun Oil Co., 548 F.3d 774 (9th Cir. 2008) (holding that Section 309 preempted Oregon's statute of repose); Burlington Northern & Santa Fe Ry. Co. v. Poole Chemical Co., 419 F.3d 355 (5th Cir. 2005) (holding that Section 309 did not preempt Texas' statute of repose for products liability claims).

  15. CTS Corp. v. Waldburger, 573 U.S. ____ (2014) (No. 13-339), slip op. at 10.

  16. See id. at 10 - 15.

  17. Id. at 12 - 13.

  18. Id. at 13 (quoting the Study at pt. 1, at 256) (alterations in the original).

  19. Id.

  20. Only Justices Kagan and Sotomayor joined the portion of Justice Kennedy's opinion regarding how the Court's holding was further supported by the presumption against preemption that should be imposed because of the federalism concerns implicated in preempting state law and require "a clear and manifest purpose of Congress" to overcome. Id. at 17. Justice Scalia, joined by Chief Justice Roberts and Justices Thomas and Alito, wrote separately to argue that this presumption against preemption should not apply and that whether a federal statute expressly preempts state law is governed only by the statutory language. Justices Ginsburg and Breyer dissented from the Court's holding, arguing that Section 309 could be interpreted to apply to statutes of repose and Congress' purpose in enacting Section 309 would be thwarted if statutes of repose were unaffected and allowed to bar claims prior to discovery.

  21. E.g., Exxon Corp. v. Hunt, 475 U.S. 355, 363 (1986) (describing one CERCLA provision as "not a model of legislative draftsmanship" that "is at best inartful and at worst redundant").

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