16 September 2020

Third Circuit Limits CERCLA Liability Shield

On September 8, 2020, in New Jersey Department of Environmental Protection (NJDEP), et al. v. American Thermoplastics Corp., et al., the U.S. Court of Appeals for the Third Circuit limited the liability shield a potentially responsible party (PRP) receives when it settles a cost recovery action with a state under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court held that “a settling-PRP is protected only insofar as a consent decree and a contribution action address the same matters. In effect, our decision encourages a PRP to settle with both the relevant State and Federal Governments.”

In NJDEP, Compaction Systems Corporation of Connecticut, Inc. and Compaction Systems Corporation (collectively, Compaction) resolved claims related to a Superfund site where it previously conducted operations with New Jersey and the United States, including a consent judgment of $26 million it is obligated to pay if it recovers at least $11 million in CERCLA contribution actions against other PRPs. Following this settlement, Compaction sued another PRP, Carter Day Industries (Carter Day), seeking contribution under CERCLA. Carter Day had previously resolved the state’s claims regarding the site in a settlement with New Jersey Department of Environmental Protection (NJDEP Settlement).  Based on that settlement, Carter Day moved for summary judgment, relying on Section 113(f)(2) of CERCLA, which provides that “[a] person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement.” The district court agreed and granted summary judgment.

The Third Circuit reversed the district court on appeal. The court found that because Carter Day’s settlement did not discharge liabilities to the United States, its “interpretation of the scope for the ‘matters addressed,’ as well as CERCLA’s purpose and procedures, tell us the NJDEP Settlement cannot protect Carter Day from contribution actions by other PRPs related to federal liability.” The court held that even though the “decision here could affect a PRP’s incentive to settle, ultimately it vindicates CERCLA’s goal of equitably distributing liability without extinguishing incentives to settle.”

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