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October 9, 1996

Interaction of Toxic Tort and CERCLA Litigation

Toxics Law Reporter
Owners, operators, and others associated with contaminated properties are frequently subject to at least two kinds of legal attacks-by residents or neighbors who bring toxic tort actions, typically under state common law, and by government agencies or others who sue under the federal Comprehensive Environmental Response, Compensation, and Liability Act or its state equivalents.
Toxic tort actions and CERCLA actions interact in complex ways, creating both opportunities and perils for defendants as well as plaintiffs. This article discusses the strategic implications of several of these interactions.
CERCLA requires the U.S. Environmental Protection Agency to maintain a National Priorities List of sites that pose the most significant threat to human health and the environment as a result of hazardous substance contamination. Many states have similar lists.
Listing as a Superfund site is economically catastrophic for the site owner because it repels potential buyers and lenders. It also sets in motion a lengthy and costly remediation process, including the preparation of a remedial investigation/feasibility study (RI/FS), public hearings, a formal record of decision by the government, and remedial design and construction. This process generates a large volume of information, including exhaustive chemical sampling data, that is invaluable to toxic tort plaintiffs.
How to Stay Off Lists
For this and many other reasons, site owners will very much want to keep their property off the Superfund lists. There are three primary ways to do this.
The first is through the use of state "voluntary cleanup" programs, which are burgeoning nationwide in the wake of the fervor to redevelop "brownfield" sites. These programs typically allow owners to bypass at least some of the normal CERCLA processes and clean up their land with less onerous studies and approvals than would otherwise be required, often to less stringent cleanup levels. The state programs are new and experimental; most of the procedures are relatively untested. The state programs also vary greatly in the extent to which sites must, may, or may not be listed on the Superfund lists in order to be eligible.
For example, New York does not have a statutory or regulatory system for voluntary cleanups, but the New York State Department of Environmental Conservation ("DEC") has an evolving, informal program in place. The proposed 1996 bond act would formalize aspects of the program.
The second way to keep sites off the list is through do-it-yourself cleanups. In many states (including New York) it is not always necessary to report to the government every finding of contamination, and it is not always necessary to secure government clearance before undertaking a cleanup, provided that all contaminated materials are discarded in facilities with the proper permits to receive that kind of materials, and certain other requirements are met (such as the use of properly licensed haulers and the observance of applicable Occupational Safety and Health Administration rules).
A do-it-yourself cleanup avoids the relatively untested but possibly extended approval processes involved in a voluntary cleanup, but it does not lead to the kind of certificate of satisfactory completion and liability release that can often be obtained after a voluntary cleanup.
However, such certificates and releases are frequently so hedged and conditional that they fall far short of the "clean bill of health" that most owners would find ideal.
The third option is to challenge a proposal by EPA or the state to put a site on the Superfund list. A listing decision is usually considered a "rulemaking" and is thus subject to the federal or state administrative procedure acts. Several listing decisions have been successfully challenged, typically because the government had insufficient evidence to conclude that the site posed a significant threat.
Health Assessments
CERCLA created the Agency for Toxic Substances and Disease Registry, a unit of the U.S. Public Health Service, which conducts assessments of public exposure to hazardous substances and writes toxicological profiles of chemicals. When it was strengthened by the 1986 amendments to CERCLA, most observers predicted it would assist toxic tort plaintiffs by helping them establish the health effects of contaminated sites. However, closer to the opposite has occurred.
Several ATSDR studies have found that fears of certain health risks were baseless, contributing to the dismissal of several toxic tort lawsuits. ATSDR studies are particularly potent because they are immune from judicial review during CERCLA response actions; government health assessments like these receive special deference in court.
Thus an owner whose experts believe the site poses little or no health risk might do well to request an ATSDR study.
Joinder of Claims
CERCLA allows for recovery by persons who have incurred "response costs" -- typically the cost of investigating and cleaning up contamination. Personal and property damages are not available under CERCLA. Instead, plaintiffs seeking such damages must usually proceed under state common law. Plaintiffs with both CERCLA and common law claims will typically bring a CERCLA claim in federal court and then seek pendent jurisdiction over the state claims. Most courts have granted such pendent jurisdiction, though a few have not (largely because state law issues were found to predominate).
Once an action has been brought, case management orders can be utilized to require plaintiffs to make out a detailed prima facie case before the beginning of discovery. Such orders have often led to the dismissal of certain claims at an early stage in the litigation.
It should also be noted that CERCLA extends the commencement date in state statutes of limitations in certain toxic exposure cases to the date plaintiff knew, or should have known, that the personal injury or property damage was caused or contributed to by the hazardous substance or pollutant concerned. CERCLA also allows EPA, in settling the liability of a potentially responsible party (PRP) at a site, to give the PRP protection from third-party claims concerning remediation of the site.
Timing of Settlements
Challenging timing issues often arise when both CERCLA and toxic tort claims are present at the same site. It may be advantageous to PRPs to settle the toxic tort issues before completion of the RI/FS, which will develop considerable data about the site and its effects. However, for multi-party sites, resolving allocation issues among the defendants that early in the process is usually very difficult.
PRPs have an interest in working together in tort defense rather than doing the plaintiffs' work for them by attacking each other. PRPs also have an interest in cooperating to remediate commingled contamination. However, PRPs have adverse interests in apportionment of remediation and tort liabilities. The settlement of apportionment matters would remove each PRP's incentive to use remediation efforts to collect data that will harm other PRPs' apportionment positions, but this can be difficult to achieve.
There is a conflict between interests in settling apportionment early and in gathering data to assess respective responsibility that may have to be disclosed to regulators and possible tort plaintiffs.
The relative stances taken toward CERCLA and toxic tort actions will depend in part on which action has greater stakes. The typical NPL cleanup costs about $30 million; some are much more, others much less. Plausible damages in toxic tort cases at NPL sites may be much higher or lower than that average CERCLA figure, depending on very site-specific factors.
Moreover, the attitudes of site neighbors may powerfully influence EPA or state decisions on level of cleanup required. The difference in cost between a cleanup that could accommodate future residential land use, versus one that could accommodate only future industrial or commercial use, may be enormous. Thus, in some cases, it may be most important to a site owner to satisfy the neighbors and secure their acquiescence in a relatively inexpensive cleanup.
Confidentiality Issues
Difficult confidentiality issues arise in the joint defense of EPA actions under CERCLA. The "joint defense rule" protects privileged information that is shared in confidence among parties pursuing a "common interest," such as a joint effort to defend common litigation.
However, there may be substantial overlap between communications intended to advance joint defense interests and communications relating to apportionment of liability. Attorney-client privileged information should be protected if it is shared in joint defense strategy consultations for purposes of obtaining legal advice. Additional consultations regarding apportionment that relate to previously shared joint defense materials should not destroy the privilege. As long as the information is shared in confidence for purposes of obtaining informed legal advice, the rationale for the privilege to protect the attorney-client relationship exists. Though the parties may not be able to bar each other from using in an intramural dispute the information that they have shred, there is no reason that the existence of such a dispute between them should require disclosure to the world at large.
Wherever possible, it is best for informational exchanges among defendants to proceed informally, without the sorts of deposition notices and other formal processes that invite a plaintiff's participation.
Information generated for remediation should be managed with the possibility of tort claims in mind. The remediation process typically generated substantial data and analysis regarding contamination that must be disclosed to the regulators. The company will have to live with this information in tort cases.
Internal investigations of historical practices and responsibility should be undertaken under privilege wherever possible, or should at least be reviewed with tort actions in mind. Consultants generating data and analysis disclosed to the regulators may be fact witnesses in tort cases. It can be difficult for remediation consultants to mentally separate privileged communications and different consultants for privileged advice might be warranted.
The growing movement toward state audit confidentiality statutes comes into play here. In the wake of Colorado authorities' prosecution of Coors Brewing Co. for air pollution violations that it had voluntarily disclosed, and Pennsylvania's similar action against WMX Technologies, several state legislatures have enacted laws the shield certain voluntary environmental audits from disclosure. Some of these state laws preclude discovery of such reports or their admission in other actions. EPA is opposed to these laws and has threatened to impose sanctions on states that adopt them, by, for example, preventing those states from assuming delegated responsibility for federal environmental statutes.
Sealed settlements of CERCLA and/or toxic tort claims may preclude public release, or admissibility, of scientific studies prepared in connection with the litigation. But such sealing orders are in growing disfavor, and several state statues prohibit or discourage sealed settlements.
Compliance Issues As Sword and Shield
As a result of the ever-increasing volume and specificity of regulations, it is increasingly difficult for regulated companies to achieve full compliance. Plaintiffs can use regulatory noncompliance as a sword under the doctrine that certain violations amount to negligence per se.
On the other hand, sometimes regulatory compliance can be used as a shield. Where a complex statutory scheme requires a particular kind of corporate behavior, private plaintiffs cannot use nuisance law to challenge the effects of that behavior.
There are other opportunities to use environmental statues to protect against toxic tort litigation. A few environmental statues have been held to pre-empt private toxic torts, as least to a limited extent. The principal examples are the Atomic Energy Act and the Federal Insecticide, Fungicide, and Rodenticide Act.
Virtually every federal environmental statue allows for citizens to challenge violations of statutory requirements. Citizens may get considerable discovery rights in these lawsuits. However, state or federal environmental agencies may bring superseding actions ("overfiling") that in some circumstances will require dismissal of such citizen suits, and will cut off citizens' discover rights.
Protecting Against Liability
Environmental audits and site assessments are generally regarded as the best protection against unknown CERCLA and tort liability. The federal government has issued several official statements in favor of this approach. It is especially important to act on the results of such audits; in some cases, an owner's liability increased because it conducted an audit that recommended cleanup measures, but it did not then undertake them.
An additional reason to conduct site assessments is to take advantage of CERCLA's innocent purchaser defense, which requires that a "defendant must have undertaken, at the time of acquisition [of the site], all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability." The statue and regulations do not specify what "all appropriate inquiry" means, but several professional organizations, particularly the American Society for Testing and Materials, have developed standards that are coming into widespread acceptance.
Further incentive for protective programs comes from the United States Sentencing Commission, which established the Organizational Sentencing Guidelines pursuant to Sentencing Reform Act of 1984. These call for an "effective program to prevent and detect violations of law," described as "a program that has been reasonably designed, implemented, and enforced so that it generally will be effective in preventing and detecting criminal conduct." Organizations with such a program receive lenience if they are sentenced for certain kinds of crimes.
Finally, prompt cleanup of spills and other discharges, and prompt provision of alternative water supplies when drinking water might have been contaminated, are often warranted to forestall adverse governmental action, to garner good will from the public, and, most importantly, to reduce toxic exposure to people, including potential plaintiffs.