Second Circuit Clarifies Trigger Date for CERCLA Cost Recovery Statute of Limitations

On July 23, in MPM Silicones, LLC v. Union Carbide Corp., No. 17-3468(L), 17-3669(XAP), slip op., -- F.3d -- (2d Cir. 2020), the U.S. Court of Appeals for the Second Circuit reversed the District Court’s dismissal of plaintiff’s claim under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for remedial action costs. It concluded that the District Court incorrectly ruled that, regardless of circumstance, there can be only one remedial action at a site, and the statute of limitations for claims relating to that and any subsequent remediation starts to run with the first remedial action. Instead, the Court of Appeals required the District Court to closely examine whether the initial remedial action was part of the same remediation for which plaintiff sought cost recovery or the two remedial actions were distinct. On remand, the answer to that fact-specific question will determine when the statute of limitations was triggered and whether plaintiff’s cost recovery claim is time-barred. 

Case Background

Plaintiff is the owner of a manufacturing facility in Friendly, West Virginia (Facility). Defendant previously owned the Facility for decades, manufacturing a variety of chemical products there. Defendant’s operations generated a substantial quantity of polychlorinated biphenyls (PCBs) waste, some of which was deposited into neutralization tanks and lime pits at the Facility. When the lime pits reached capacity, defendant moved the PCB-laden sludge to other areas of the Facility, including a 5.5-acre landfill. MPM Silicones, slip op. at 6-7.

Defendant stopped using PCBs in 1972. Thereafter, it took a variety of soil and groundwater samples, which led to an internal conclusion that “[a]lthough no definitive evidence can be found, it is possible that up to 250,000 pounds of PCB[s] are buried at [the Facility.]” Id. at 9-10. However, in later memoranda, defendant downplayed this conclusion as mere speculation. Indeed, in its 1981 Resource Conservation and Recovery Act (RCRA) permit application, defendant did not disclose to the U.S. Environmental Protection Agency (EPA) its prior use and disposal of PCBs at the Facility. Id. Thus, defendant’s RCRA permit had no PCB-related requirements. In 1992, defendant, with EPA approval, performed remedial activities at the Facility, which included capping the on-site landfill and constructing a surface water diversion ditch. Defendant’s remedial activities did not address the PCB contamination. Id. at 14-16.

Plaintiff acquired the Facility in 2003, and during a 2008 construction project, it uncovered PCB-saturated soil. Id. at 18, 21-22. Plaintiff subsequently notified the West Virginia Department of Environmental Protection (WVDEP), and in 2011, it filed a CERCLA action against defendant seeking, among other things, past and future remedial and removal action costs relating to the PCB contamination. Id. at 23-24. Although at this point neither WVDEP nor the EPA has required plaintiff to perform further remedial action, plaintiff anticipates being required to excavate and dispose of PCB-laden soils at the Facility in order to complete its construction project. Id.

Defendant moved for summary judgment, arguing that plaintiff’s claim for past and future remedial action costs was time-barred because the landfill capping and diversion ditch construction in 1992 triggered CERCLA’s six-year statute of limitations. See 42 U.S.C. 9613(g)(2). Although defendant’s prior remedial activity did not address PCBs, the District Court granted defendant’s motion, relying on the Second Circuit’s statement in New York State Electric and Gas Corp. v. FirstEnergy Corp., 766 F.3d 212, 235 (2d Cir. 2014) (NYSEG), that “there can only be one remedial action at any given site.” The District Court interpreted that statement to mean that the prior remedial activity undertaken by defendant triggered the statute of limitations, which had expired before plaintiff filed its 2011 action. MPM Silicones, slip op. at 27-30. The District Court then held a bench trial on plaintiff’s remaining claims and held defendant to be 95 percent liable for plaintiff’s future removal costs. The parties cross-appealed the District Court’s various rulings. Id. at 30-33.

Analysis

For purposes of cost recovery, CERCLA differentiates between remedial actions and removal actions, imposing different statutes of limitation for each. “Remedial actions” are “generally long-term or permanent containment or disposal programs,” State of New York v. Shore Realty Corp., 759 F.2d 1032, 1040 (2d Cir. 1985), which are taken “in the event of a release or threatened release of a hazardous substances to the environment” and are “consistent with [a] permanent remedy.” 42 U.S.C. 9601(24). “[R]emoval actions,” however, are “typically short-term cleanup arrangements,” Shore Realty, 759 F.2d at 1040, which respond to immediate threats to the environment. 42 U.S.C. 9601(23). Claims for remedial action costs have a six-year statute of limitations that begins to run “after the initiation of physical on-site construction of the remedial action,” whereas claims for removal action costs have a three-year statute of limitations that begins to run after the completion of the removal. 42 U.S.C. 9613(g)(2). In this case, the Court of Appeals concluded that the 1992 capping and diversion ditch construction constituted remedial and not removal action. The court observed in this regard that neither of these was undertaken to address an “imminent hazard” that required an “immediate response.” MPM Silicones, slip op. at 45-47, citing United States v. W.R. Grace & Co., 429 F.3d 1224, 1244 (9th Cir. 2005). Accordingly, CERCLA’s six-year statute of limitations for remedial actions applied.

In reversing the District Court’s determination that plaintiff’s claim for remedial action costs was time-barred, the Court of Appeals focused on the District Court’s misinterpretation of its holding in NYSEG. It explained that although in NYSEG it upheld a dismissal of the plaintiff’s cost recovery claim because it was associated with remedial activity that had begun more than six years prior and thus was time-barred, the holding was logical and fair because the remedial activities at issue, although broken into three phases, all were designed to address the same underlying contamination. They thus constituted “one remedial cleanup” with one statute of limitations. As a result, the District Court in that case had properly rebuffed the plaintiff’s effort to avoid the CERCLA statute of limitations by filing its cost recovery action for phase three costs only. Id. at 47-56. Because phase three was subject to the same statute of limitations as phases one and two, which had already expired, the claim was untimely.

The Court of Appeals clarified, however, that its NYSEG holding did not establish a one-size-fits-all standard that there is only one remedial action at a site, the start of which will trigger the CERCLA statute of limitations. Id. at 56-63. Such a standard, although a “reliable prescription” in some cases, would be “illogical and unfair” in many others. Id. at 56 (emphasis in original). The Court of Appeals highlighted several scenarios where such illogical and unfair results might occur, including (1) where new contamination occurs after prior contamination has been remediated; (2) where previously unsuspected contamination is discovered that is entirely unrelated to the contamination addressed by the initial remedial action; and (3) where a responsible party’s initial remedial action inadequately addressed the contamination, thus leaving the issue to be remediated by a subsequent owner of the site. Id. at 56-59. According to the Court of Appeals, in those scenarios, the “categorical single-remediation principle” adopted by the District Court would “frustrate and defeat the efficacy of cost recovery as an essential motivator” under CERCLA and RCRA by cutting off the remediating party’s ability to bring an otherwise rightful cost recovery claim. Id. at 59. Without the availability of cost recovery, such parties would have no incentive to perform the remediation in the first place, and they may in fact be compelled to conceal the contamination from regulators. Id. at 59-60. This would defeat CERCLA’s purpose of encouraging timely remediation while ensuring that the polluter pays. Id.

Accordingly, rather than a blanket application of the single-remediation principle, the Court of Appeals required a more fact-sensitive analysis for determining when the CERCLA statute of limitations is triggered. See id. at 62-63. Where multiple remedial actions occur at a site and there is a question concerning the statute of limitations trigger, a district court must consider, among other things, whether the remedial action that is the subject of cost recovery “falls within the remedial scope of the previous remediation . . .” and thus whether “[the] subsequent action is a continuation of [the prior remediation] or distinct in its remedial purpose and scope.” Id. at 64-66. The answer will determine when the statute of limitations is triggered. Where the subject remediation is a mere continuation of prior remedial activity, the statute of limitations will start to run with the first remedial activity. But where the subject remediation is distinct, the statute of limitations will start to run with its initiation and any prior remedial activity becomes irrelevant.

In MPM Silicones, the District Court failed to perform this analysis when it dismissed plaintiff’s claim for remedial action costs. The Court of Appeals thus reversed and remanded so that the District Court could properly assess the timeliness of plaintiff’s claim. Id. at 67. 

If you have any questions about the Court of Appeals’ holding or the CERCLA statute of limitations, please contact the authors of this client alert.