"GET ME OUT OF THIS CASE" by Brian J. Bergman

The Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") requires liable parties to pay for the clean up of contaminated sites. CERCLA bars contribution claims against Potentially Responsible Parties ("PRPs") that have obtained administratively or judicially approved settlements with the government. Therefore, CERCLA provides a strong incentive for PRPs to settle by leaving non-settling PRPs liable for all of the response costs not paid by the settling PRPs. Early settlement is especially important in environmental matters where the costs of paying for an environmental cleanup often significantly increase over time.

In United States v. Aerojet Gen Corp., 2010 U.S. App. LEXIS 11131 (9th Cir. June 2, 1010) (full opinion available here), the Ninth Circuit addressed the question of whether a non-settling PRP may intervene in court to oppose a consent decree incorporating a settlement that, if approved, would bar contribution from the settling PRP. This issue had split the federal courts, with the Eight and Tenth circuits holding that intervention was allowed, while district courts in the Ninth Circuit and Sixth Circuit had previously held that intervention was not allowed in this circumstance.

The case arose out of the contamination of the San Gabriel Basin groundwater reserve in eastern Los Angeles County. The Environmental Protection Agency ("EPA") discovered that the basin was contaminated with both volatile organic compounds and perchlorate. Both the EPA and the entities responsible for pumping and selling the water from the San Gabriel Basin ("Water Entities") brought various legal actions against 67 PRPs. Before the cases went to trial, 10 of the PRPs reached a settlement agreement with the Water Entities, wherein the 10 PRPs would only pay $8.1 million out of a possible claimed $87 million in clean-up costs. The settlement agreement was then incorporated in a proposed EPA consent decree, which if approved by the Court, would have protected the 10 PRPs from contribution claims from the non-settling PRPs.

A group of the non-settling PRPs, concerned that the 10 PRPs were settling for less than their fair share, moved to intervene as a matter of right under FRCP 24(a)(2) and CERCLA section 113(i) in the lawsuit against the 10 settling PRPs. The District Court denied the request for intervention, and approved the EPA consent decree with the 10 PRPs. The non-settling PRPs appealed the denial of their request for intervention.

The Court restated the four part test for interventions: (1) that a motion for intervention be timely, (2) that the applicant must claim a "significantly protectable" interest relating to the property or transaction which is the subject of the action, (3) the applicant must be so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest; and (4) the applicant’s interest must be inadequately represented by the parties to the action. Applying the four part test, the Court held: (1) the non-settling PRPs motion was timely filed, (2) the non-settling PRPs had stated a "significantly protectable" interest in maintaining their right to contribution from the 10 settling PRPs, (3) the consent decree incorporating the settlement agreement between the 10 PRPs and the Water Entities would impair the non-settling PRPs interest in maintaining a contribution right against the 10 PRPs, and (4) the Court held that the non-settling PRPs interests were not adequately protected by the settling PRPs or the EPA, as the settling parties had an interest in securing approval of the settlement.

While there were policy arguments against allowing intervention to contest CERCLA settlements in order to encourage early settlement and the rapid and thorough cleanup of toxic waste sites, the Court noted that its decision would not significantly harm these goals, as PRPs would still be allowed to seek settlements that would relieve them of future contribution liability. The Court, therefore, concluded that the non-settling PRPs had a right to intervene under FRCP 24(a)(2) and § 113(i) of CERCLA to protect their interests in contribution and in the fairness of the proposed consent decree with the EPA.

The major effect of the Court’s holding will likely be that the finalization of PRP settlement agreements with government entities will take substantially more time to complete, as the parties will need to sufficiently document the basis for the PRP settlements to avoid attack from intervening non-settling PRPs.

Brian J. Bergman is an associate at Bergman & Dacey, Inc. His primary practice areas are environmental and construction litigation. He was recently chosen as a 2010 California Rising Star by Super Lawyer Magazine. Mr. Bergman can be contacted at bbergman@bergmandacey.com