Type: Law Bulletins
Date: 07/20/2015

Federal District Court Rules That Parties Cannot "Slice and Dice" Their Cleanup Costs Between CERCLA Sections 107 and 113

In Ford Motor Co., et al. v. Mich. Consolidated Gas Co., et al., Case No. 08-13503, E.D. Mich. (Feb. 10, 2015), the U.S. District Court for the Eastern District of Michigan rejected a party’s attempt to “slice and dice” its cleanup costs between Sections 107 and 113 of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Citing existing case law, the court concluded that if a party is eligible to bring a Section 113 contribution claim, then that party can only bring a Section 113 claim and cannot separately pursue its allegedly “voluntary” costs under Section 107.

In Ford Motor Co., the plaintiff landowners in Dearborn, Mich., sued Michigan Consolidated Gas Company (“MichCon”) to recover past and continuing cleanup costs for historical contamination at several parcels of land. The plaintiffs sued MichCon under both CERCLA Section 107(a) (allowing recovery for costs “voluntarily” incurred by a potentially responsible party beyond its equitable share) and Section 113(f)(3) (allowing a party to bring a contribution claim after it has incurred cleanup costs as a result of being sued under CERCLA Sections 106 or 107). MichCon filed counterclaims against the plaintiffs under Section 107 (for voluntary response costs that it incurred in monitoring the subject site) and Section 113 (for any potential liability stemming from the plaintiffs’ Section 107(a) claim against it).

The plaintiffs later amended their complaint to add cost recovery and contribution claims against the United States government, alleging that the U.S. Army Corps of Engineers had worsened the contamination when it rechanneled a river through the subject land. The plaintiffs also added a new contribution claim against MichCon. In response, MichCon filed a third-party complaint against the United States that sought: (1) cost recovery under Section 107(a); and (2) contribution under Section 113(f)(1). When the United States sought dismissal of MichCon’s Section 107 and Section 113 claims, MichCon acknowledged that its Section 113 claim was barred (due to language in a consent decree between the plaintiffs and the United States), but MichCon disputed that its Section 107 claim for “voluntary” costs was barred.

The United States argued that MichCon’s Section 107 claim should be dismissed because Sections 107 and 113 are mutually exclusive remedies. According to the United States, since MichCon was subject to the plaintiffs’ Section 107(a) claim when it brought its third-party complaint against the United States, MichCon could only bring a Section 113(f)(1) contribution claim against the United States. In response, MichCon argued that its costs should be separated between its Section 113 costs (which it admitted were barred) and its Section 107 costs (which it argued were “voluntarily” incurred and were not barred).

The court disagreed with MichCon’s arguments and ruled that because MichCon was subject to a Section 107 claim at the time it filed its third-party complaint against the United States, MichCon’s sole remedy for all of its costs was under Section 113. The court relied on Hobart Corp. v. Waste Management of Ohio, Inc., 758 F.3d 757 (6th Cir. 2014) and other Circuit Court decisions in ruling that CERCLA Sections 107(a) and 113(f) “provide for mutually exclusive remedies.” According to this line of cases, if a potentially responsible party is eligible to bring a contribution action under Section 113, then that party can only bring a contribution claim (thus precluding a Section 107 claim). Based on MichCon’s lack of supporting case law, the court held that MichCon could not “slice and dice” its costs between Section 113 contribution costs and Section 107 “voluntary” costs. In fact, the court noted that existing case law actually held that parties are prohibited from such “slicing and dicing.”

The Ford Motor Co. decision is another important example of courts refusing to let a party re-characterize Section 113 costs as Section 107 costs. The case also illustrates the importance of the procedural posture of a case when determining whether a Section 107 or Section 113 claim is appropriate.

For more information on this decision, please contact Chase Dressman or any member of Taft’s Environmental group.

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