Federal District Court Allows Chevron to Proceed with a CERCLA § 107 Cost Recovery Action to Attempt to Hold Non-Settling “Smaller Responsible Parties” Jointly and Severally Liable for All Response Costs

Posted by in CERCLA, Cost Recovery, Environmental Litigation, Remediation on September 11, 2012

By Clare Bienvenu & John D. Edgcomb

The United States District Court for the Eastern District of California denied defendants’ motion to dismiss in Chevron’s CERCLA § 107 cost recovery action against them in connection with the EPC Eastside Disposal Facility site outside of Bakersfield, CA.  In June 2005, Chevron, as one of several parties deemed responsible by the California Department of Toxic Substances Control (“DTSC”) for the presence of hazardous substances at the site, entered into a Consent Order with DTSC, under which it agreed to spearhead the cleanup activities at the site.  Chevron has settled with hundreds of companies and individuals in return for contribution to the substantial cleanup costs associated with the site’s remediation. However, several “smaller responsible parties,” as they characterize themselves in the motion, have declined to settle with Chevron, and, as a result, Chevron filed suit, seeking to hold them jointly and severally liable for all response costs under CERCLA § 107.

A CERCLA § 107 cost recovery action is reserved for potentially responsible parties (PRPs) that voluntarily incur response costs and allows the plaintiff PRP to hold a defendant PRP jointly and severally liable for all response costs, unless the defendant can show there is a reasonable basis for apportionment.  In contrast, a CERCLA § 113 contribution action is appropriate where a PRP has been sued under CERCLA §§ 106 or 107, or enters into a settlement to resolve its CERCLA liability to the United States or a state.  A CERCLA § 113 contribution action enables the plaintiff PRP to hold other defendant PRPs liable only for their equitable share of response costs. In this case, the “smaller responsible parties” argued in their motion to dismiss that Chevron was not entitled to bring its § 107 cost recovery claim against them because Chevron did not voluntarily incur response costs, based on its status as a party to the Consent Order with DTSC.  Instead, they argued, Chevron was limited to a CERCLA § 113 contribution action.

The court found that since Chevron has not been sued under CERCLA §§ 106 or 107 and has not entered into a “settlement” to resolve its CERCLA liability, a § 113 contribution claim was inappropriate. Further, the court found that the Consent Order the Chevron entered into with DTSC is neither “a satisfaction or release from liability” nor a mechanism barring Chevron from acting voluntarily in the response.  Accordingly, Chevron was entitled to bring a § 107 cost recovery action against the defendants.  The court also rejected defendants’ allegation that Chevron’s assertion of the § 107  cost recovery claim was overreaching in that it threatened the defendants with joint and several liability due to their inability to reach a settlement agreement. The court pointed out that CERCLA provides protection against inequitable results, because where PRPs, such as the defendants, are sued in a § 107 cost recovery action and held jointly and severally liable, those PRPs are entitled to seek contribution from the plaintiff and others under § 113 to attempt to recover their excess costs.

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