Cranbury Brick Yard is liable for cleanup

MARC – Alert – Cranbury Brick Yard

By Katherine Riopel Suell

In the case Cranbury Brick Yard, LLC v. United States, D.C. No. 3-15-cv-02789 (3d Cir. November 22, 2019), Plaintiff purchased a site that formerly housed a weapons factory which had been owned and operated by the U.S. Navy (the “Site”). The Site was subject to an Administrative Consent Order (“ACO”) entered into by the prior owner with the New Jersey Department of Environmental Protection (NJDEP) under the Comprehensive Environmental Response Compensation, and Liability Act (CERCLA). Pursuant to an Amendment executed in 2006, Plaintiff assumed the original signatory’s cleanup obligations and joined the ACO.

Upon encountering problems with the cleanup, Plaintiff sued the government, alleging that it was partly responsible for cleanup costs associated with the Site. Plaintiff asserted CERCLA contribution and cost recovery claims against the government pursuant to 42 U.S.C. §§ 9607(a), 9613(f).

The District Court held and the Third Circuit affirmed that Plaintiff’s claim for cost recovery pursuant to 42 U.S.C. § 9607(a) was not permissible because Plaintiff’s 2006 Amendment adopting the ACO immunized it from contribution liability. The Court noted that the ACO expressly provided that its signatories intended the document to constitute an administrative settlement, “for the purpose of providing protection from contribution actions or claims under CERCLA.”

The Court reasoned, citing Agere Sys., Inc. v. Advanced Environmental Tech. Corp., 602 F.3d 204, 216 (3d Cir. 2010), that since Plaintiff had no exposure to contribution liability, there was no basis upon which Plaintiff could maintain a cost recovery claim.

With regard to Plaintiff’s contribution claim pursuant to 42 U.S.C. §9613(f), the District Court held and the Third Circuit affirmed that Plaintiff’s contribution claim accrued when all parties signed the 2006 Amendment. CERCLA contribution claims, pursuant to 42 U.S.C. § 9613(g)(3), must be filed no more than three years after the date of the administrative order or judicially approved settlement.

The Court held that for the purposes of determining the statute of limitations in this case, the date of execution of the Amendment would be binding. Therefore, that Plaintiff’s contribution claim expired more than six years before Plaintiff filed its complaint in this case in 2015.

Finally, Plaintiff also claimed an entitlement to protection pursuant to CERCLA’s exemption to liability for bona fide prospective purchaser pursuant to 42 U.S.C. § 9607(r). The Government argued that Plaintiff did not qualify for that exemption, in part, because during construction at the Site, Plaintiff’s contractors ruptured an underground storage tank releasing unknown petroleum product at the site which was then excavated and stockpiled at the Site before being mixed with non-contaminated soils and used as fill on the Site. The Court found that the foregoing actions constituted disposal and therefore Plaintiff could not demonstrate that it met all eight criteria set forth at 42 U.S.C. 9601(40).

Takeaways

This case is particularly noteworthy because it clarifies a few important aspects of CERCLA, which have been subject to some uncertainty in recent years. First, the Third Circuit was absolutely unequivocal that once a PRP obtains immunity from contribution claims, it becomes ineligible to bring cost-recovery claims – contribution claims are the only avenue of recovery available.

Second, contribution claims are subject to a strict three-year limitations period. This limitations period will run from the date of entry of the judicially approved settlement or administrative order. This case revealed that even agreements, such as the 2006 Agreement in this case, which do not look or feel like traditional judicially approved settlements or administrative orders may be considered as such if they have the effect of limiting a party’s exposure to contribution claims.

If you have questions about your business’s environmental compliance, liability or exposure, contact MARC today. We have the skills and knowledge to help our clients reduce their liability and get favorable outcomes if litigation is necessary.

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