Trustees to PRPs Please Join Me in Cleaning Up This Mess

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Jun 2003

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Upon appointment to a new case, trustees occasionally find that they have come into custody of contaminated
property of the estate. A trustee's justifiable first instinct is frequently to look for a way to satisfy the standards to
activate the escape hatch suggested in the Supreme Court's Midlantic<a href="#2" name="2a">2</a> opinion.<a href="#3" name="3a">3</a>

A trustee who is unable to do so will necessarily become occupied by the task of remediation. Besides the
substantial time and effort such a response entails, the trustee may be assuming the status of a civil or criminal
target of government authorities.<a href="#4" name="4a">4</a> To maneuver through such a minefield, the trustee might engage environmental
counsel. None of this, of course, is good news to unsecured creditors who might have expected a recovery from the
other valuable assets. If possible, this nightmare was made even darker by the reluctance of one court to allow
potentially responsible parties (PRPs) to seek contribution from other responsible parties under the federal
Superfund law.<a href="#5" name="5a">5</a> Recently, however, an en banc decision of the U.S. Court of Appeals for the Fifth Circuit has
given trustees and the estates' creditors the hope that the estates' assets will not be consumed doing
non-remunerative activities.

In Aviall Servs Inc. v. Cooper Indus Inc.,<a href="#6" name="6a">6</a> Aviall purchased contaminated property in Dallas from Cooper.
Aviall cleaned it up and sued Cooper in federal district court for contribution, asserting state law and CERCLA
theories for recovery.<a href="#7" name="7a">7</a> Cooper did not deny that it had liability under CERCLA because it had contributed to the
contamination. However, it asserted that it could not be sued for contribution by Aviall pursuant to CERCLA
because Aviall had not itself been sued under §§106 or 107(a) of CERCLA.<a href="#8" name="8a">8</a> The district court agreed, granting
Cooper's motion for summary judgment and refusing to exercise supplemental jurisdiction over the Texas state law
causes of action.<a href="#9" name="9a">9</a>

A panel of the Fifth Circuit agreed. The two-to-one majority reasoned that "a PRP seeking contribution
from other PRPs under §113(f)(1) [of CERCLA] must have a pending or adjudged §106 administrative order or
§107(a) cost-recovery action against it."<a href="#10" name="10a">10</a>

Section 113(f)(1) of CERCLA provides:

<blockquote>
Any person may seek contribution from any other person who is liable or potentially liable under §9607(a) of this
title, during or following any civil action under §9606 of this title or under §9607(a) of this title. Such claims shall
be brought in accordance with this section and the Federal Rules of Civil Procedure, and shall be governed by
federal law. In resolving contribution claims, the court may allocate response costs among liable parties using such
equitable factors as the court determines are appropriate. Nothing in this subsection shall diminish the right of any
person to bring an action for contribution in the absence of a civil action under §9606 of this title or §9607 of this
title.<a href="#11" name="11a">11</a>
</blockquote>

The majority stated that the first sentence of this provision "required a PRP seeking contribution from
other PRPs to have filed a §113(f)(1) claim 'during or following' a federal CERCLA action against it" because "the
commonly accepted definition of 'contribution' requires a tortfeasor to first face judgment before it can seek
contribution from other parties."<a href="#12" name="12a">12</a> Moreover, it interpreted "may" in that sentence as "shall" or "must."<a href="#13" name="13a">13</a>

Finally, the panel read the final sentence of the section as saving only a party's right to sue for contribution
based on "state law;"<a href="#14" name="14a">14</a> otherwise, the sentence would "render superfluous the first sentence of §113(f)(1),"<a href="#15" name="15a">15</a>
thereby violating the canon of statutory construction that specific provisions trump general ones.<a href="#16" name="16a">16</a>

The Fifth Circuit granted en banc rehearing of the panel's decision and reversed, opting to follow the
dissent's rationale. The en banc majority believed that, because §113(f)(1)'s "syntax is confused, its grammar
inexact and its relationship to other CERCLA provisions ambiguous,"<a href="#17" name="17a">17</a> courts could disagree about its
interpretation. Nevertheless, it criticized the panel's contrary interpretation as strained and overly textual.<a href="#18" name="18a">18</a>

Four considerations led the court to a different outcome: (1) the case law history, before Congress amended
CERCLA to add §113(f), shed light on what Congress intended; (2) the text of the statute, read in a natural way;
(3) the fact that in numerous cases, courts had permitted contribution actions, even without prior enforcement action
against the plaintiff; and (4) the concern that creating obstacles to contribution would undercut the policy objectives
of CERCLA.

<h3>Legislative History</h3>

Although "the availability of contribution among PRPs [is] important for achieving the purposes of the
statute,"<a href="#19" name="19a">19</a> when CERCLA was enacted in 1980, there was no provision explicitly permitting contribution among
PRPs.<a href="#20" name="20a">20</a> So courts created a common-law right to contribution, even in the absence of governmental action against
the plaintiff.<a href="#21" name="21a">21</a> But early '80s decisions of the Supreme Court in other contexts "cast doubt on the ability of federal
courts to fashion implied rights of contribution under federal statutes."<a href="#22" name="22a">22</a> Congress realized that such comments by
the Supreme Court jeopardized the continued availability of contribution under CERCLA. Therefore, in 1986, as
part of the Superfund Amendments and Reauthorization Act of 1986 (SARA),<a href="#23" name="23a">23</a> Congress enacted §113(f).<a href="#24" name="24a">24</a>

"Section 113(f) was born as the 'machinery' to govern and regulate actions for contribution, 'providing the details
and explicit recognition that were missing from the text of §107.'"<a href="#25" name="25a">25</a> Citing legislative comments and a scholarly
article, the court announced that "the avowed purpose of §113(f)(1) was to give PRPs the 'explicit right to sue' for
contribution and to 'confirm' the decisions of federal courts that had so construed CERCLA."<a href="#26" name="26a">26</a>

The court acknowledged that "snippets of the legislative history suggest that Congress intended to remove
any doubt" that plaintiffs who had already been sued under CERCLA could seek contribution; that such statements
were contradicted by other statements; and that the §113(f) that these comments were directed to was far different
from the one ultimately enacted.<a href="#27" name="27a">27</a> But despite "[t]he mixed and shifting signals from legislative history," the court
noted that "it would seem odd that a legislature concerned with clarifying the right to contribution among PRPs and
with facilitating the courts' development of federal common law apportionment principles would have rather
arbitrarily cut back the then-prevailing standard of contribution."<a href="#28" name="28a">28</a>

<h3>Statutory Text</h3>

The majority had three points of disagreement with the en banc dissent as to how best to read the words of
§113(f)(1).

A. "Only." This word does not appear in §113(f)(1), as the majority opinion points out.<a href="#29" name="29a">29</a> Yet, according
to the en banc dissent, the first sentence of §113(f)(1) should be read as: "Any person may seek
contribution...ONLY during or following any civil action." Since Congress used "only" many times throughout
CERCLA, but did not do so here, the majority disagreed that the first sentence of this section was meant to be
exclusive.

B. "May" does not mean "shall." According to the panel decision, the word "may" in the first sentence of
§113(f)(1) means "shall," thus making the first sentence read, in its view: "Any person SHALL seek
contribution...ONLY during or following any civil action." To affirm the panel's decision, the en banc's dissent
found it necessary to implicitly redefine "'civil action' to include a federal administrative enforcement proceeding,
but only when the administrative order is contested or enforced in federal court."<a href="#30" name="30a">30</a> But this effort, the majority
explained, was inconsistent with the dissent's cramped reading of the concluding sentence of §113(f)(1), which
restricts the availability of contribution actions "by requiring prior initiation of a lawsuit by the federal
government."<a href="#31" name="31a">31</a> All this redefining would be unnecessary if one read the statute as written.

C. The "savings provision" refers to contribution actions under state or federal law. The majority found
the first and last sentences of §113(f)(1) to be "logically complementary." The final sentence "emphasizes" that
"nothing" shall "diminish" any other right to contribution.<a href="#32" name="32a">32</a> The court reiterated that pre-SARA case law
permitted contribution even in the absence of a pending or a concluded CERCLA action against the plaintiff.<a href="#33" name="33a">33</a> It
then explained that Congress meant this savings provision simply to confirm that the pre-SARA decisions were
correct in making available actions for contribution for CERCLA violations because, although not explicit in
CERCLA, the right was at least implied therein.<a href="#34" name="34a">34</a>

<h3>Most Courts Agree</h3>

Although few published decisions "parsed the language of §113(f)(1),"<a href="#35" name="35a">35</a> numerous courts post-SARA
have permitted plaintiffs to sue for contribution without even addressing whether the plaintiff was itself
sued under CERCLA.<a href="#36" name="36a">36</a> The fact that the issue has seen so little ink was itself impressive, opined the
majority:

<blockquote>
Given the enormous monetary exposure and the volume of litigation surrounding CERCLA mandates, one
must assume that talented attorneys have had sufficient incentive and opportunity to explore statutory
lacunae such as those created by a cramped reading of §113(f)(1). Yet all that existed before this case arose
are isolated dicta. The absence of direct precedent is like the dog that didn't bark.<a href="#37" name="37a">37</a> 
Furthermore, as the court noted at the outset of its opinion, the district court, the panel and the en banc dissent were
all out of step with the many post-SARA cases that permitted PRPs to seek contribution even though the plaintiff
had not itself been sued under CERCLA.<a href="#38" name="38a">38</a>

</blockquote>

<h3>Policy</h3>

In the court's view, a contrary reading of §113(f)(1) would result in disincentives for PRPs to promptly
engage in cleanup activities. It would "slow...the reallocation of cleanup costs for less culpable PRPs to more
culpable PRPs...discourag[e] the voluntary expenditure of PRP funds on cleanup activities, [and] diminish...the
incentives for PRPs voluntarily to report contamination to state agencies."<a href="#39" name="39a">39</a>

The dissent's suggestion that PRPs could always sue for contribution under state laws was an
unsupportable assumption, as not all states' environmental statutes provide for contribution.<a href="#40" name="40a">40</a> Moreover, Congress
evidently believed that pollution was a matter of federal concern, and that national—thereby uniform—response was
required. It would be contrary to that underlying objective to require that state law fill an interstice that simply does
not exist.<a href="#41" name="41a">41</a>

<h3>Conclusion</h3>

Fortunately for bankruptcy trustees, most courts have not agreed with the district court's reading of the
statute.<a href="#42" name="42a">42</a> Based on Aviall and the many cases in agreement, trustees should strongly consider making demand of
and ultimately bringing suit under CERCLA against PRPs for contribution toward the estate's remediation
expenses.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> Arthur Spector is a former chief bankruptcy judge in the Eastern District of Michigan and currently a
shareholder of Berger Singerman. Mr. Spector practices on the firm's Business Reorganization Team and is resident
in the firm's Ft. Lauderdale, Fla., office. Berger Singerman is a full-service commercial law firm with 43 attorneys
working from Florida offices in Fort Lauderdale, Miami and Tallahassee. <a href="#1a">Return to article</a>

<a name="2">2</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=4… Nat'l. Bank v. New Jersey Dep't. of Env'l. Protection, 474 U.S. 494 (1986)</a>. <a href="#2a">Return to article</a>

<a name="3">3</a> The Supreme Court went out of its way to narrow its holding, stating: "The abandonment power is not to
be fettered by laws or regulations not reasonably calculated to protect public health and safety from imminent and
identifiable harm." <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=4…; 474 U.S. at 507, n.9</a> (emphasis added). Trustees, therefore, argue whenever possible
that the abandonment proposed will not cause imminent harm. <a href="#3a">Return to article</a>

<a name="4">4</a> See <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2… States v. Hansen, 262 F.3d 1217 (11th Cir. 2001)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2… States v. Hong, 242 F.3d 528 (4th
Cir. 2000)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=1… States v. Hanousek, 176 F.3d 1116 (9th Cir. 1999), cert. denied, 528 U.S. 1102 (2000)</a>. <a href="#4a">Return to article</a>

<a name="5">5</a> CERCLA is the common name for <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=4… Environmental Response, Compensation and Liability
Act, 42 U.S.C. §9601</a>, et seq. (2000). <a href="#5a">Return to article</a>

<a name="6">6</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… F.3d 677 (5th Cir. 2002) (en banc)</a>. <a href="#6a">Return to article</a>

<a name="7">7</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; 312 F.3d at 679</a>. <a href="#7a">Return to article</a>

<a name="8">8</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=4… U.S.C. §§9606, 9607(a) (2000)</a>. <a href="#8a">Return to article</a>

<a name="9">9</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; 312 F.3d at 679</a>. <a href="#9a">Return to article</a>

<a name="10">10</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2… Servs. Inc. v. Cooper Indus. Inc., 263 F.3d 134, 145 (5th Cir. 2001)</a>. <a href="#10a">Return to article</a>

<a name="11">11</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=4… U.S.C. §9613(f)(1) (2000)</a>. <a href="#11a">Return to article</a>

<a name="12">12</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2… Servs., 263 F.3d at 138</a>. <a href="#12a">Return to article</a>

<a name="13">13</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2…; at 138-39</a>. <a href="#13a">Return to article</a>

<a name="14">14</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2…; at 139</a>. <a href="#14a">Return to article</a>

<a name="15">15</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2…; <a href="#15a">Return to article</a>

<a name="16">16</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=2…; at 140</a>. <a href="#16a">Return to article</a>

<a name="17">17</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… Servs., 312 F.3d at 680</a>. <a href="#17a">Return to article</a>

<a name="18">18</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 681</a>. <a href="#18a">Return to article</a>

<a name="19">19</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… F.3d at 682</a>. <a href="#19a">Return to article</a>

<a name="20">20</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#20a">Return to article</a>

<a name="21">21</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#21a">Return to article</a>

<a name="22">22</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 683</a>. <a href="#22a">Return to article</a>

<a name="23">23</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=N…. No. 99-499, 100 Stat. 1613 (1986)</a>. <a href="#23a">Return to article</a>

<a name="24">24</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3… F.3d at 684</a>. <a href="#24a">Return to article</a>

<a name="25">25</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 683</a>, quoting <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=1… Creek Group vs. Newmont Mining Corp., 118 F.3d 1298, 1302 (9th Cir. 1997)</a>. <a href="#25a">Return to article</a>

<a name="26">26</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=1…;, citing H.R. Rep. No. 99-253, pt. I, at 59, 74, 79 (1985), reprinted in 1986 U.S.C.C.A.N. 2835,
2841, 2856, 2861; S. Rep. No. 99-11, at 44 (1985); 131 Cong. Rec. 24,450 (1985) (statement of Sen. Stafford);
Araiza, William D., "Text, Purpose and Facts: The Relationship Between CERCLA §§107 and 113," <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… Notre
Dame L. Rev. 193, 224-26 (1996)</a>. <a href="#26a">Return to article</a>

<a name="27">27</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; 312 F.3d at 685</a>. <a href="#27a">Return to article</a>

<a name="28">28</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#28a">Return to article</a>

<a name="29">29</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 686</a>. <a href="#29a">Return to article</a>

<a name="30">30</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 686</a>. <a href="#30a">Return to article</a>

<a name="31">31</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 687</a>. <a href="#31a">Return to article</a>

<a name="32">32</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#32a">Return to article</a>

<a name="33">33</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#33a">Return to article</a>

<a name="34">34</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#34a">Return to article</a>

<a name="35">35</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 688</a>. <a href="#35a">Return to article</a>

<a name="36">36</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; <a href="#36a">Return to article</a>

<a name="37">37</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=3…; at 689</a> (footnotes omitted). <a href="#37a">Return to article</a>

<a name="38">38</a> See <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… Oil Terminals v. Asarco Inc., 792 F.2d 887, 889 (9th Cir. 1986)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=8… Water Co. v.
Cumberland Farms Dairy Inc., 805 F.2d 1074 (1st Cir. 1986)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=1… Terminals of Conn. Inc. v. USX Corp.,

156 F.Supp.2d 203, 208 (D. Conn. 2001)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=9… Ave. Remedial Group v. Allis Chalmers Corp., 974 F.Supp. 684,
691 (N.D. Ind. 1997)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6… of New York v. Exxon Corp., 633 F.Supp. 609, 612-13 (S.D.N.Y. 1986)</a>. But, see <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=1…
v. Scotsman Group Inc., 16 F.Supp.2d 983 (C.D. Ill. 1998)</a>; <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7… Int'l. Corp. v. IU Int'l. Corp., 702
F.Supp.1384, 1389 (N.D. Ill. 1988)</a>. <a href="#38a">Return to article</a>

<a name="39">39</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6…; at 690</a>. <a href="#39a">Return to article</a>

<a name="40">40</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6…; at 691</a>. <a href="#40a">Return to article</a>

<a name="41">41</a> <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=6…; at 690</a>. <a href="#41a">Return to article</a>

<a name="42">42</a> See n. 37, <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&vr=2.0&cite=7…;. <a href="#42a">Return to article</a>

Journal Authors

Arthur J. Spector

Journal Date

Sunday, June 1, 2003 - 12:00

Bankruptcy Rule

2003