Fifth Circuit Reverses Course in Aviall

Thomas H. Milch
Thomas I. Anderson

On Nov. 14, 2002, sitting en banc, the Fifth Circuit Court of Appeals reversed the earlier rulings of a Texas federal district court and a divided three-judge appellate panel in Aviall Services, Inc. v. Cooper Industries, Inc., 2002 WL 31521595. The Fifth Circuit’s opinion reaffirms the right of private parties to seek recovery of contaminated property cleanup costs in federal court without previous federal government action at the site in question. The earlier rulings, Aviall Services Inc. v. Cooper Industries, Inc., 2000 WL 31730 (N.D.Tex. Jan. 13, 2000), affirmed 263 F.3d 134 (5th Cir. 2001), had caused a substantial ruckus among Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) defendants who do proactive cleanups, because they threatened to limit substantially their contribution rights against more recalcitrant responsible parties. Here is some history and context for the most recent ruling.

As originally enacted, CERCLA allowed private parties to bring claims for the recovery of cleanup costs under Section 107, but it did not explicitly include a provision allowing responsible parties who paid more than their equitable share of cleanup liability to seek contribution from other responsible parties. Nevertheless, many courts implied such a right in the statute and allowed contribution claims. See, e.g., City of Philadelphia v. Stepan Chem. Co., 544 F. Supp. 1135 (E.D.Pa. 1982). As part of the Superfund Amendments and Reauthorization Act (SARA) amendments in 1986, Congress enacted the provision in Section 113 of CERCLA at issue in Aviall precisely to clarify the availability of a contribution claim under CERCLA. Section 113 grants federal courts broad equitable powers to apportion costs among responsible parties in a contribution action, and those actions have become a regular feature of CERCLA litigation.

Although SARA clarified the right to contribution under CERCLA, it led to a simmering controversy by failing to differentiate clearly between those private parties entitled to bring a claim for cost recovery under Section 107 and those confined to a contribution claim under Section 113. The distinction is important, because Section 107 is broader in scope. Since it allows for joint and several liability, Section 107 permits a cleanup party to shift substantial costs, even those attributable to orphans or other parties not present in the case, to the defendant. Consequently, most private parties seeking CERCLA cost recovery brought claims under both sections, and courts were forced to decide who was entitled to maintain claims under each.

Over time, the vast majority of circuit courts resolved the Section 107 vs. Section 113 controversy by allowing claims for joint-and-several cost recovery under Section 107 only by parties who are not themselves responsible for contamination of the property. See, e.g., Bedford Affiliates v. Sills, 156 F.3d 416 (2nd Cir. 1998). This approach limited most CERCLA plaintiffs to a Section 113 contribution action. Thus, a Section 113 contribution claim is often the only cost recovery claim available to parties who qualify as responsible parties under CERCLA, even parties whose equitable share of the cleanup liability is small.

Against this backdrop came the Fifth Circuit’s now vacated panel decision in Aviall, which would have upset this scheme by placing a critical pre-condition on the maintenance of a CERCLA contribution claim. The original decision would have restricted contribution claims to only those private parties who were themselves the subject of a prior or pending cost recovery claim under Sections 106 or 107 of CERCLA. Thus, parties who accepted responsibility for all or part of a cleanup without federal administrative or judicial compulsion would have been left without a federal statutory remedy to recover costs from other responsible parties. Notwithstanding that they were proactive about undertaking the cleanup, they would be “too liable” to bring a Section 107 claim but not quite liable enough to bring a CERCLA contribution claim. As the facts of the Aviall case demonstrate, this situation is not at all unusual, and the en banc reversal comes as a relief to many who feared the loss of a critical incentive for voluntary and cooperative cleanups.

The Aviall Facts
Aviall Services, the CERCLA contribution plaintiff, owned and operated an aircraft engine maintenance business in Texas throughout the 1980s. Aviall had purchased the business, including three separate maintenance facilities, from Cooper Industries in 1981. Both Aviall and Cooper used similar materials in their engine maintenance businesses, and each of the three facilities were found in the early 1990s to be contaminated by leaking underground storage tanks and surface spills.

During its ownership of the facilities, Aviall discovered some of this contamination and ultimately reported it to the Texas Natural Resource Conservation Commission (TNRCC). In response, the TNRCC compelled Aviall, through a series of letters threatening enforcement action and a Corrective Action Directive issued in 1993, to investigate groundwater contamination at the facilities and submit cleanup plans. As part of this process, Aviall entered one of the facilities in the Texas Voluntary Cleanup Program, a state-run program offering TNRCC oversight of voluntary cleanups as an alternative to enforcement action. The United States Environmental Protection Agency (EPA) had no involvement in the cleanup, and Aviall was neither the recipient of a Section 106 order nor a defendant in a Section 107 cost recovery action. Aviall sold the facilities in 1995 and 1996, but retained the obligation to remedy environmental contamination existing before the sale.

In 1997, Aviall filed a complaint in federal court in Texas, seeking recovery from Cooper of costs associated with cleanup of the facilities purchased from Cooper in 1981. The complaint sought cost recovery under Section 107 of CERCLA, as well as several state-law tort and contract claims. Apparently recognizing the evolution of the Section 107 vs. Section 113 controversy, Aviall subsequently amended its complaint to drop the Section 107 claim, substitute a claim for contribution under Section 113 of CERCLA, and add a statutory contribution claim under the Texas Solid Waste Disposal Act. The district court dismissed the CERCLA contribution claim, finding that where a plaintiff cannot allege any prior or pending CERCLA enforcement action against it, it is precluded from seeking contribution in federal court pursuant to Section 113(f)(1) of CERCLA. With no remaining federal claims, the district court exercised its discretion to dismiss the state statutory and common law claims without prejudice.

The Original Fifth Circuit Panel Decision
On appeal to the Fifth Circuit, a divided panel affirmed the district court’s interpretation of Section 113. After reviewing the legislative history of SARA, which added the contribution provisions of Section 113 to CERCLA, the majority ruled that the language of the statute permitted contribution actions only “during or following” an action under Section 106 or 107. The portion of Section 113 at issue reads as follows:

Any person may seek contribution from any other person who is liable or potentially liable under [§ 107(a)], during or following any civil action under [§ 106] or under [§ 107(a)]…. Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under [§ 106] or [§ 107(a)].” 42 U.S.C. § 9613(f)(1) (emphasis added).

Aviall argued that the savings clause found in the final sentence of Section 113(f)(1), providing that “nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under [Section 106 or 107],” demonstrated that Congress had not intended such an interpretation. However, the majority reasoned that the addition of the contribution provision in the SARA amendments was intended only to clarify the right of parties subject to government or private cost recovery actions under CERCLA to seek contribution from other potentially responsible parties, and the savings clause was meant to confirm that parties not subject to such actions still could seek contribution under state law.

To the majority of the Aviall panel, this reading was clear from the plain language of CERCLA and its legislative history. After all, if the savings clause means that the existence of a civil action under Section 106 or Section 107 is irrelevant, then the words “during or following” would be rendered meaningless, a result that would in turn be inconsistent with the rules of statutory construction. Moreover, there is legislative history that can be read to support the majority’s opinion, although the language from Senate and House conference reports does not explicitly rule out a claim in Aviall’s circumstances. However, judicial decisions have long noted that the limited legislative history of CERCLA is far from clear. See, e.g., Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86, 91 (3d Cir. 1988). Moreover, nowhere did the panel majority come to grips with another CERCLA principle frequently used to resolve legislative ambiguities: that the statute should be construed to ensure that responsible parties pay for contamination they caused. See, e.g., Dedham Water Co. v. Cumberland Farms Diary, Inc., 805 F.2d 1074, 1081 (1st Cir. 1986).

Beyond the legislative history and language of the statute, the panel majority found support for its position in the prior holdings of two appellate decisions which suggested in dicta that a party cannot file a CERCLA contribution claim unless it is itself a defendant in a federal cost recovery or administrative action. See Rumpke of Ind., Inc. v. Cummins Engine Co., 107 F.3d 1235, 1241 (7th Cir. 1997); OHM Remediation Serv. v. Evans Cooperage Co., 116 F.3d 1574 (5th Cir. 1997). Although Rumpke and OHM both indicate that the language of Section 113 requires that contribution actions can be brought only following a Section 106 or 107 action, neither case actually addresses the precise question presented in Aviall. Each decision allowed the Section 113 claim at issue to proceed, and the OHM court explicitly declined to express any opinion as to whether a party might bring a Section 113 claim before being sued under CERCLA.

Moreover, the panel majority reached its conclusion in the face of substantial contrary authority. There have been numerous appellate decisions permitting CERCLA contribution claims in the absence of a pending or completed civil action under Sections 106 or Section 107. See, e.g., Amoco Oil Co. v. Borden, Inc., 889 F.2d 664 (5th Cir. 1989); PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610 (7th Cir. 1998); Sun Co., Inc. v. Browning-Ferris, Inc., 124 F.3d 1187 (10th Cir. 1997). Although no appellate court had expressly considered the question presented in Aviall, CERCLA contribution actions brought in the wake of state cleanups have been a regular aspect of cost recovery litigation for many years.

In a well-articulated dissent, Judge Wiener took issue with the majority’s interpretation of the legislative history of the savings clause. He stressed that if Congress so clearly intended to limit the savings clause to state contribution actions, it could have said so explicitly. He also correctly pointed to a number of other aspects of the ruling in which the majority, while nodding to strict statutory construction, engrafted its own policy judgments on the language itself. Most significant, the statute refers to Section 106 or Section 107 “civil actions,” yet the majority ruled that a unilateral Section 106 order would be sufficient to trigger a Section 113 action. Of course, a Section 106 order is not itself a civil action, an entirely separate statutory cause of action that EPA largely abandoned after experiencing success with expansive use of its Section 106 order authority.

Judge Wiener also embraced the key policy argument in favor of a liberal approach to statutory construction here. He recognized the “overarching” policy need to encourage parties to do cleanups “without waiting for the hammer of litigation to drop.” 263 F.3d at 155. The majority’s opinion, he stressed, ran directly counter to CERCLA’s goal of prompt cleanups and would encourage responsible parties to dodge remediation. Certainly the case law, and the experience of many practitioners, would support the view that a statutory mechanism for recovering from other liable parties encourages voluntary cleanups. See, e.g., Control Data Corp. v. S.C.S.C. Corp., 53 F.3d 930, 935 (8th Cir. 1995); Adhesives Research, Inc. v. American Inks & Coatings Corp., 931 F. Supp. 1231, 1246 (M.D. Pa. 1996).

Rehearing En Banc
The Fifth Circuit granted a rehearing en banc in December 2001, responding to a petition by Aviall that was supported by the American Petroleum Institute, the American Chemistry Council, and the Texas Oil and Gas Association as amici curiae. Following oral argument en banc, the Fifth Circuit took the highly unusual step of ordering the United States to file an amicus brief setting out the position of the Government on the issue. After what was reported to be protracted internal debate concerning both the substance of the Government’s position and the constitutional propriety of the Fifth Circuit’s order, the Department of Justice filed a 21-page brief supporting the reasoning of the original panel decision. The Justice Department brief relied primarily, as had the panel majority, on the language of Section 113, and concluded that the important CERCLA policy implications were irrelevant in the face of this language.

The position of the Justice Department was inconsistent with longstanding EPA practice of encouraging voluntary cleanups, and EPA reportedly had urged DOJ to support this position in its brief. Some have argued that the Justice Department position was driven by Bush administration appointees committed to principles of strict statutory construction.

The En Banc Decision
Whatever the source of the DOJ position, it was ultimately rejected by the majority of the Fifth Circuit in an opinion that largely adopts Judge Wiener’s dissent. Most importantly, the court takes on the “plain meaning” issue forcefully. The en banc majority persuasively shows that there is nothing clearer about the panel’s narrow interpretation of the statute than a broader interpretation of the same language. Essentially, in order for the panel’s view to make sense, the word “only” has to be implied in the statutory language not withstanding the failure of Congress to use the word itself. Moreover, the decision of the panel to stretch the language further to sweep in Section 106 orders, even though issuance of an order manifestly does not constitute a civil action, reflects the contortions that the panel had to go through in order to fashion something workable out of a stricter interpretation.

The en banc majority also makes effective use of the long line of case law that supports a more expansive view of Section 113. The court correctly notes that there have been many previous contribution actions in which “talented attorneys” have had plenty of opportunity to make creative arguments of statutory construction, but nowhere in the history of these cases has the panel majority’s view made any headway. The en banc majority likens this history to “the dog that didn’t bark,” suggesting that if the panel’s reading was so “plain” and “clear,” some court would have accepted the argument earlier. Although reliance on the notion that no one previously accepted the argument smacks of bootstrapping, the reality is that the panel’s view of the statute did fly in the face of experience under the statute and hardly was compelling as a matter of statutory construction.

Finally, the en banc majority accepts the key policy arguments asserted by Judge Wiener, noting in particular the weakness of the argument that contribution plaintiffs should rely on state law. Noting that the argument requires a jump from the statute itself, the majority stresses with respect to state law actions that “[t]his is surely an inferior and questionable remedy for Congress to have embraced.” Indeed, the availability of state law remedies in these cases varies widely. Of forty-eight states with some statutory mechanism addressing contaminated site cleanups, at least one-half expressly provide a private right of action to recover cleanup costs from other responsible parties. See 57 Am. Jur. Trials 1, § 40 (1996). However, contribution is not readily available in many states, as illustrated by a review of the three states briefly impacted by the Fifth Circuit’s original panel decision in Aviall. In Texas, where the Aviall case arose, the right to contribution provided under state statutes is fairly broad. See Tex. Health & Safety Code Ann. § 361.344 (Vernon 2001). The situation is not as favorable in the other two states in the Circuit. Louisiana has a more restrictive statute allowing certain parties to bring private cost recovery actions against parties who fail to respond to a state order, and Mississippi has no express statutory right of contribution for cleanup costs. See La. Rev. Stat. Art. 30:2205 (West 2000); Miss. Code Ann. 17-17-29(4). Whether a given state statute is a real alternative to CERCLA’s contribution remedy depends on the particular state law and the robustness of the case law under the statute in question. The bottom line is that in many states, the answer is far from clear, and CERCLA may offer the only real opportunity for responsible parties to bring a contribution claim for cleanup costs.

The two members of the original panel majority could rally only a single other member of the full court of appeals to join them in dissent, and they echoed the DOJ position that CERCLA policy implications were irrelevant in the face of clear statutory language. However, if there is one thing this protracted dispute has made evident, the language of this provision is anything but clear. In similar situations, courts have long resorted to CERCLA’s broad remedial goals as justification for expansive readings of the statute, and those policy goals certainly favor allowing parties who incur cleanup costs voluntarily to bring contribution claims.

Before the Fifth Circuit issued its en banc decision, the potentially broad impact of the original opinion was made clear. CERCLA contribution defendants quickly seized on the case as precedent, and at least two district courts in the Fifth Circuit relied on the Aviall panel decision to dismiss Section 113 claims brought by parties who had not been the subject of a federal action to compel cleanup. See, e.g., Chevron Envtl. Mgmt. Co. v. Helena Chem. Co., No. 3:00CV110-D-D, 2001 WL 1530355 at *2 (N.D. Miss. Oct. 15, 2001) (plaintiff entered consent order with Mississippi Department of Environmental Quality ); Marathon Oil Co. v. Texas City Terminal Rwy. Co., 172 F.Supp.2d 897, 899 (S.D. Tex. 2001) (plaintiff failed to allege it had been subject to Section 106 or 107 action). In contrast, courts outside the Fifth Circuit disagreed, even with the benefit of the Aviall panel opinion, by rejecting the reasoning of that decision and continuing to allow contribution claims without prior federal action. See, e.g., Aero-Motive Co. v. Becker, No. 1:99-CV-384, 2001 WL 1699194 at *6 (W.D. Mich. Dec. 6, 2001).

The en banc decision of the Fifth Circuit in Aviall has laid this question to rest for the time being, and CERCLA contribution claims under Section 113 should again be allowed to proceed with their lawsuits following voluntary and state mandated cleanups. Although the statutory language is unclear, this result is the right one considering the full context of the statute, the history of Superfund litigation, and the policy rationale favoring voluntary cleanups.

Thomas H. Milch (Thomas_Milch@aporter.com) is a partner at Arnold & Porter in Washington, D.C. where he specializes in environmental matters. Thomas I. Anderson (Thomas_Anderson@aporter.com) is an associate in the environmental group at the firm.