Ninth Circuit holds contribution claims of intervenors are not barred by prior settlement under Sec. 113 of CERCLA

On September 15, 2010, in City of Emeryville v. Robinson, the U.S. Court of Appeals for the 9th Circuit ruled that a prior settlement under CERCLA and California law between Sherwin-Williams and the City of Emeryville for the costs to remediate contaminated property did not bar contribution claims asserted by entities that were not part of a settlement in a subsequent action for contamination that had migrated to a neighboring parcel. In the initial action, Sherwin-Williams had settled with Emeryville in a court approved settlement that Sherwin-Williams asserted provided broad protection against contribution claims based on contamination “at, on, under, or emanating from” the facility. After Sherwin-Williams had complied with its obligations to pay for past costs and contribute for future remedial costs, an action was commenced by the Emeryville Redevelopment Agency for contamination on an adjacent parcel. Cross claims were asserted in the second action by Emeryville and by recent or current owners of the second tract. Sherwin-Williams commenced an action to enforce the settlement agreement. The other parties in the Redevelopment Agency’s action moved to intervene in Sherwin-Williams’ action to enforce the settlement. The District Court ruled in favor of Sherwin-Williams. On appeal, however, the Ninth Circuit held that although the claims of Emeryville were barred, the claims by the other parties that had not been included in, or even noticed of the prior settlement, were not precluded. The court conducted a thorough analysis of the specific language of ‘113(f) of CERCLA, which included restating the significance of a the rights of a party to contribution (see, June 2010 post on 9th Circuit’s decision in United States v. Aerojet), and found that the protections of that section did not apply. The reasons included that the protection includes claims of a State or the Federal Government, neither of which apply, and that the intervenors had no actual or constructive notice of the settlement since they were neither parties to the prior suit, prior settlement, or were even involved with the properties at the time of the prior litigation and settlement. The court essentially held that it would be unfair to bar claims by such parties and noted that the overwhelming majority of courts that have enforced a CERCLA bar to contribution claims in a private party settlement have done so “only where the persons…were PRPs who were involved in or aware of the settlement discussions, or non-parties who otherwise at least had constructive notice that their contribution claims stood to be extinguished.” This case demonstrates the potential risks that may exist after the settlement of a suit for site remediation or reimbursement of cleanup costs. Although the courts do encourage settlement and are inclined to provide for contribution protection; the rights of private parties to seek contribution will not be automatically extinguished in the interest of closing the matter completely. As in other cases, the courts will endeavor to carefully analyze the language of the contribution and protection provisions under ‘ 113. Although it is not always possible to create a settlement that provides complete protection, it is essential to attempt to anticipate other claims, as well as the potential involvement of off-site migration and subsequently affected parties in any settlement agreement. DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq who heads our Environmental and Latent Injury Litigation Department

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