Norman Bernstein v. Patricia Bankert ( 2013 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 11-1501 and 11-1523
N ORMAN W. B ERNSTEIN , et al.,
Plaintiffs-Appellants/Cross-Appellees,
v.
P ATRICIA A. B ANKERT, et al.,
Defendants-Appellees,
AND
A UTO O WNERS M UTUAL INSURANCE C OMPANY,
Defendant-Appellee/Cross-Appellant.
Appeals from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:08-cv-00427—Richard L. Young, Chief Judge.
A RGUED O CTOBER 31, 2011
D ECIDED D ECEMBER 19, 2012
A MENDED JULY 31, 2013 1
1
Judges Flaum, Tinder, and Hamilton did not participate in
the consideration of the request for rehearing.
2 Nos. 11-1501 and 11-1523
Before K ANNE and W ILLIAMS, Circuit Judges, and
D EG UILIO , District Judge. 2
D EG UILIO , District Judge. This appeal is the latest
chapter in the story of the Environmental Chemical and
Conservation Company (“Enviro-Chem”), a defunct
Indiana corporation with an expensive environmental
legacy. Enviro-Chem conducted waste-handling and
disposal operations at three sites north of Zionsville,
Indiana, until it closed its doors in the early 1980s, and
it left considerable amounts of pollutants behind. The
plaintiffs in this action are the trustees of a fund created
to finance and oversee the cleanup project at one of
those three sites. The defendants are the former owners
of the site, their corporate entities (including Enviro-
Chem), and their insurers, none of whom have paid into
the trust despite an alleged obligation to do so. The
plaintiffs sued to recover cleanup costs under the Com-
prehensive Environmental Response, Compensation and
Liability Act (“CERCLA”), the Indiana Environmental
Legal Actions Statute (“ELA”), and more. The district
court dismissed all claims at the summary judgment
stage, and the plaintiffs appealed. In response, one of the
insurance companies targeted by the plaintiffs filed a
conditional cross-appeal, hoping to preserve a favorable
outcome even in the event of a reversal of the district
court’s final judgment.
2
The Honorable Jon E. DeGuilio, Judge of the United States
District Court for the Northern District of Indiana, sitting by
designation.
Nos. 11-1501 and 11-1523 3
On December 19, 2012, this panel decided both
appeals, affirming in part and reversing in part the
district court decision and remanding the case for
further proceedings on the reinstated claims. Bernstein v.
Bankert, 702 F.3d 964 (7th Cir. 2012). The defendants-
appellees requested a panel rehearing, and the Environ-
mental Protection Agency joined their request as amicus
curiae. While we conclude that the arguments advanced
by the parties do not warrant reconsideration of
our decision, we grant rehearing, in part, to address
some issues raised by the EPA. Specifically, the EPA
identified certain passages of our original opinion which
suggested that a party may never structure a settlement
agreement with the EPA in such a way as to resolve
their liability immediately upon execution of that agree-
ment. That is not the case. A party responsible for
an instance of environmental contamination may
obtain an immediately effective release from the EPA
in a settlement, or it may obtain only a performance-
dependent conditional covenant not to sue with an ac-
companying disclaimer of any liability. Whether,
and when, a given settlement “resolves” a party’s liability
to the EPA within the meaning of 42 U.S.C. § 9613(f)(3)(B)
is ultimately a case-specific question dependant on the
terms of the settlement before the court. In this case,
the terms of the administrative settlement did not
provide for a resolution upon entering into the agree-
ment. The following constitutes this panel’s amended
opinion superseding our prior opinion and resolving
the appeals in both Nos. 11-1501 and 11-1523.
4 Nos. 11-1501 and 11-1523
BACKGROUND
The appellants—plaintiffs below—are the trustees of
the Third Site Trust Fund (“Trustees”). Third Site is a
CERCLA site located about five miles north of Zionsville,
Indiana. Along with two other CERCLA sites in close
proximity—the Enviro-Chem Site to the north and the
Northside Sanitary Landfill (“NSL”) to the northeast—
Third Site was owned and operated by the Bankert
family and their corporate entities at all times relevant
to this litigation. Up until the early 1980s, Enviro-Chem,
one of those entities, was engaged in brokering and
recycling industrial and commercial wastes at all three
sites. It is undisputed that Enviro-Chem’s operations
extended to Third Site; historical aerial photographs
depict Third Site being used for tank and drum storage,
and former Enviro-Chem employees have indicated
that Third Site hosted waste handling and disposal opera-
tions.
Enviro-Chem ceased operations in 1982, and shortly
thereafter the United States Environmental Protection
Agency (“EPA”) undertook an extended effort to clean
up the mess it left behind. The cleanup initially focused
on the Enviro-Chem Site and the NSL, but in 1987 and
1992 consultants collected soil, groundwater, seepage
soil and seepage water samples from Third Site. The
samples indicated elevated concentrations of volatile
organic compounds (“VOCs”) and semi-volatile organic
compounds (“SVOCs”) in the areas tested. Similarly,
surface water samples collected by the EPA in 1988 from
nearby Finley Creek showed elevated levels of VOCs
Nos. 11-1501 and 11-1523 5
immediately adjacent to and downstream from Third
Site. These results were consistent with additional
samples collected in 1985 and 1986 from surface seeps
discharging from Third Site and into Finley Creek. In
short, Third Site was polluted, and it was transferring
its pollutants to Finley Creek. Finley Creek flows south
into Eagle Creek Reservoir, and Eagle Creek Reservoir
supplies a portion of the drinking water for the City
of Indianapolis. The pollution of Finley Creek was there-
fore cause for real concern.
In 1996, the EPA countered the threat by issuing
a Unilateral Administrative Order (“UAO”) outlining
a plan to realign Finley Creek. The plan called for elim-
inating an oxbow, the top of which touched areas of
high contamination at Third Site, and for rerouting
the creek away from the site and to the south. The re-
alignment project was designated a time-critical removal
project, and the respondents to the UAO completed
it in September 1996. Subject to periodic maintenance
inspections, the EPA approved their performance.
Having averted any significant corruption of the drink-
ing water supply, the EPA turned its attention to
cleaning up Third Site itself. In October 1999, the EPA
entered into an Administrative Order by Consent (“AOC”)
with a number of respondents, each of whom was desig-
nated a potentially responsible party (“PRP”) for con-
tamination at the site. The 1999 AOC was divided into
two separate parts: one dealing with “Non-Premium
Respondents” and one dealing with “Premium Respon-
dents.” The Non-Premium Respondents agreed to under-
6 Nos. 11-1501 and 11-1523
take an Engineering Evaluation and Cost Analysis
(“EE/CA”) of removal alternatives for Third Site. They
also agreed to settle a trust—the Third Site Trust, of
which the appellants are Trustees—and to fund it to
the extent necessary to bankroll the EE/CA and any
additional necessary work. Through the Trust, they
would reimburse the EPA for past response and over-
sight costs as well as future oversight costs incurred
in conjunction with the EE/CA project. The Premium
Respondents, on the other hand, were alleged to be
de minimis contributors to the contamination at Third
Site. They were entitled to settle out with a defined, one-
time monetary contribution to the Trust consistent with
42 U.S.C. § 9622(g).
The Non-Premium Respondents met their obligations
under the 1999 AOC and obtained EPA approval of the
final EE/CA report on October 24, 2000. No copy of the
EPA notice of approval was included in the record, and
we only know of it through affidavits submitted with
the parties’ summary judgment briefs. But, in any case,
the parties do not dispute that the 1999 AOC was
complied with fully to its completion. In 2001, sub-
sequent to approving the work done under the 1999
AOC, the EPA issued an Enforcement Action Memoran-
dum selecting one of the removal actions for the site
identified by the EE/AC and outlining cleanup objectives.
In November 2002, the parties entered into a second
AOC to perform the work called for by the Enforcement
Action Memorandum. For the most part, the 2002 AOC
tracked the form of the 1999 AOC. It included separate
Nos. 11-1501 and 11-1523 7
provisions addressing the responsibilities of Premium
and Non-Premium Respondents and contained the
same reservation of rights and conditional covenants not
to sue. Furthermore, the Non-Premium respondents
maintained the same responsibilities vis-a-vis the Trust,
which was once again assigned to manage the removal
effort. At the time this lawsuit was filed, the work to be
performed under the 2002 AOC was still ongoing, and
no EPA notice of approval had issued.
Under the terms of the 1999 and 2002 AOCs and
the corresponding Trust Agreement, the Trustees are
empowered to hold and manage funds; to retain
engineers and others to carry out the work to be per-
formed under the AOCs; to project future costs; to
obtain additional funds as needed from the settlors (i.e.,
the Non-Premium Respondents); and, subject to prior
approval, to bring suit against those who do not meet
their obligations to the Trust. The Bankert appellees3
were listed as Non-Premium Respondents under the
1999 and 2002 AOCs, but have not met their obligations
by paying into the Trust or otherwise.
On April 1, 2008, the Trustees filed a Complaint
against the Bankerts and their various insurers in the
Southern District of Indiana with six counts: Count I, a
CERCLA cost recovery action pursuant to 42 U.S.C.
3
We use “the Bankerts” to refer collectively to Patricia A.
Bankert, both individually and in her capacity as personal
representative of the estate of Jonathan W. Bankert, Sr.;
Jonathan W. Bankert, Jr.; Gregory Bankert; and Enviro-Chem.
8 Nos. 11-1501 and 11-1523
§ 9607(a); Count II, seeking a declaratory judgment
under CERCLA of the defendants’ joint and several
liability; Count III, a cost recovery action under the ELA,
codified at I.C. § 13-30-9-2; Count IV, negligence; Count V,
nuisance; and Count VII,4 seeking a declaratory judg-
ment of coverage against the insurers.
On May 30, 2008, one of the Bankerts’ former insurers,
Auto Owners Mutual Insurance Company (“Auto Own-
ers”), moved to dismiss the Trustees’ Complaint against
it pursuant to Federal Rules of Civil Procedure 12(b)(6)
and 12(d). The coverage provisions of Auto Owners’s
policies with the Bankerts were previously litigated in
connection with cleanup efforts at the Enviro-Chem Site
in the 1980s, and Auto Owners argued that the favorable
judgment it obtained in that case precluded a finding
of coverage in this case. On September 17, 2008, the
district court converted the portion of Auto Owners’s
motion claiming preclusion to a motion for summary
judgment and permitted the parties to conduct dis-
covery and submit additional briefing. On March 16, 2010,
the district court entered an order denying the motion.
On September 22, 2009, the Bankerts moved for
summary judgment on statute of limitations grounds.
The Trustees responded, and the Bankerts replied. On
December 10, 2009, the Trustees moved to strike a
portion of that reply or, in the alternative, for permission
to file supplemental briefing. The district court heard
4
For reasons unknown to us, the Complaint did not include
a “Count VI.”
Nos. 11-1501 and 11-1523 9
oral argument on August 3, 2010. On September 29, 2010,
the district court denied the Trustees’ motion to strike
and granted summary judgment in the Bankerts’ favor.
First, the district court found that the Trustees could
not bring a CERCLA cost recovery claim under 42 U.S.C.
§ 9607(a), which is what Count I of the Complaint pur-
ported to do. Instead, the district court construed
the Trustees’ CERCLA claim as one for contribution
pursuant to 42 U.S.C. § 9613(f). Next, the district court
found that the statute of limitations applicable to
that kind of CERCLA claim had run. This, in turn, invali-
dated the declaratory judgment request contained
in Count II. Finally, the district court found that the
statute of limitations had run with respect to each of the
Trustees’ state law claims against the Bankerts. Counts I
through V were dismissed.
Next, the district court asked the parties to report on
the status of Count VII, which sought a declaratory judg-
ment of coverage against Auto Owners and the other
insurers. All parties conceded that it was moot;
insurance coverage was a non-issue without a con-
troversy over the underlying liability. On October 13,
2010, the Trustees moved the court to reconsider the
grant of summary judgment with respect to the ELA
claim and to certify the question to the Indiana
Supreme Court. On February 3, 2011, the district court
denied that motion and entered final judgment in favor
of the defendants, dismissing Count VII as moot
consistent with the parties’ positions. The Trustees filed
a timely notice of appeal on March 3, 2011, and Auto
Owners cross-appealed. We take up each appeal in turn.
10 Nos. 11-1501 and 11-1523
THE TRUSTEES’ APPEAL
The Trustees appeal the district court’s dismissal at the
summary judgment stage of their CERCLA and ELA
claims, as well as the dismissal of their declaratory judg-
ment claim against Auto Owners. They also appeal the
district court’s denial of their motion to strike a portion
of the Bankerts’ summary judgment reply. They have
not appealed the district court’s dismissal of their state
law negligence and nuisance claims, and as a result
those claims are lost. We find that the Trustees have, in
fact, pled a timely CERCLA cost recovery claim, although
the scope of their recovery will be limited. As a result,
Counts I and II must be reinstated. Count III, claiming
contribution under the Indiana ELA, is timely as well.
Reinstating those claims means there is a live con-
troversy over liability, and so we must reverse the
district court’s dismissal of Count VII as moot.
I. Counts I and II: CERCLA Claims
In Count I of their Complaint, the Trustees seek to
recover funds which the Bankerts allegedly owe to the
Third Site Trust pursuant to obligations created by the
1999 and 2002 AOCs. The Trustees characterize Count
I as a claim for cost recovery under 42 U.S.C. § 9607(a),
but the district court held: (1) that a § 9607(a) claim
was unavailable to the Trustees; (2) that their claim
must therefore be one for contribution under § 9613(f);
and (3) that the limitations period for a contribution
claim had run. Count II, seeking a declaratory judgment
of liability, is essentially a derivative claim; once the
Nos. 11-1501 and 11-1523 11
district court concluded that Count I was not timely,
Count II had to be dismissed as well.
We review a district court’s grant of summary judg-
ment based on a statute of limitations de novo. Stepney
v. Naperville Sch. Dist. 203, 392 F.3d 236, 239 (7th Cir.
2004). To the extent we are called upon to review the
district court’s interpretation of the statute, the standard
of review is likewise de novo. Storie v. Randy’s Auto
Sales LLC, 589 F.3d 873, 876 (7th Cir. 2009). We are
mindful, too, of the deference typically accorded to
the summary judgment non-movant with respect to the
resolution of factual issues, but note that this dispute
is almost entirely a legal one, with the underlying
facts undisputed: the Bankerts argue that the Trustees
have advanced one type of CERCLA claim, and that it is
barred by the statute of limitations; the Trustees argue
that they have advanced another type of claim, and that
it is not. They are both partially correct, but the net
result is that the district court must be reversed with
respect to Count I. That, in turn, is enough to revive
Count II. Finally, we find no abuse of discretion in the
district court’s denial of the Trustees’ motion to strike
portions of the Bankerts’ summary judgment reply.
A. CERCLA and SARA Statutory Scheme
In 1980, Congress enacted the Comprehensive Environ-
mental Response, Compensation, and Liability Act, 42
U.S.C. §§ 9601-9675, in response to the serious environ-
mental and health risks posed by industrial pollution.
Burlington Northern and Santa Fe Ry. Co. v. United States,
12 Nos. 11-1501 and 11-1523
556 U.S. 599, 602 (2009) (citing United States v. Bestfoods,
524 U.S. 51, 55 (1998)). CERCLA is not known for its
clarity, or for its brevity. Exxon Corp. v. Hunt, 475 U.S. 355,
363 (1986) (noting CERCLA provisions are “not . . .
model[s] of legislative draftsmanship,” and its statutory
language is “at best inartful and at worst redundant”).
But its purpose, at least, is straightforward: the act was
designed to promote the timely cleanup of hazardous
waste sites and to ensure that the costs of such
cleanup efforts were borne by those responsible for the
contamination. Burlington Northern, 556 U.S. at 602 (citing
Consol. Edison Co. of N.Y. v. UGI Util., Inc., 423 F.3d 90, 94
(2d Cir. 2005)); Key Tronic Corp. v. United States, 511 U.S.
809, 819 n. 13 (1994) (“CERCLA is designed to encourage
private parties to assume the financial responsibility
of cleanup by allowing them to seek recovery from oth-
ers.”). Relevant to this case, two CERCLA sections—42
U.S.C. §§ 9607(a) and 9613(f)—afford rights of action
to private parties seeking to recover expenses associ-
ated with cleaning up contaminated sites. Actions under
§ 9607(a) and § 9613(f) are governed by different statutes
of limitation, and we must decide under which section
the Trustees’ CERCLA claim falls before determining
whether it is time-barred.
42 U.S.C. § 9607(a), the first of the two sections in ques-
tion, is the “cost recovery” provision of CERCLA. It
identifies four categories of potentially responsible
parties relative to any instance of contamination based
on their relationship to the contaminated site. See
§ 9607(a)(1)-(4). When a release or threatened release
of hazardous substances occurs, the PRPs are strictly
Nos. 11-1501 and 11-1523 13
liable for “all costs of removal or remedial action 5
incurred by the United States Government or a State or
5
The terms “removal action” and “remedial action” represent
the two primary forms of response contemplated by CERCLA:
(23) The terms “remove” or “removal” means the cleanup or
removal of released hazardous substances from the environ-
ment, such actions as may be necessary taken in the event
of the threat of release of hazardous substances into the
environment, such actions as may be necessary to monitor,
assess, and evaluate the release or threat of release of
hazardous substances, the disposal of removed material,
or the taking of such other actions as may be necessary
to prevent, minimize, or mitigate damage to the public
health or welfare or to the environment, which may other-
wise result from a release or threat of release.
***
(24) The terms “remedy” or “remedial action” means those
actions consistent with permanent remedy taken instead
of or in addition to removal actions in the event of a
release or threatened release of a hazardous substance
into the environment, to prevent or minimize the release
of hazardous substances so that they do not migrate to
cause substantial danger to present or future public
health or welfare or the environment.
42 U.S.C. § 9601(23)-(24). Practically speaking, “removal actions
are ‘those taken to counter imminent and substantial threats to
public health and welfare,’ while remedial actions ‘are longer
term, more permanent responses.’ ” Morrison Enters., LLC v.
Dravo Corp., 638 F.3d 594, 608 (8th Cir. 2011) (quoting Minnesota
v. Kalman W. Abrams Metals, Inc., 155 F.3d 1019, 1024 (8th
Cir. 1998)).
14 Nos. 11-1501 and 11-1523
an Indian tribe not inconsistent with the national con-
tingency plan[,] 6 ” § 9607(a)(4)(A), as well as for “any
other necessary costs of response incurred by any
other person consistent with the national contingency
plan.” § 9607(a)(4)(B). The phrase “any other person,” as
used in § 9607(a)(4)(B), has been read literally to mean
any person other than the United States, a State, or an
Indian tribe—in other words, any person other than
the entities listed in subpart (A). See United States v. Atl.
Research Corp., 551 U.S. 128 (2007). Thus, § 9607(a)(4)(B)
grants one PRP the same rights as an innocent party to
sue another PRP for cleanup costs incurred in a
removal or remedial action. Id. In such cases, the defen-
dant’s liability—although strict—need not be joint and
several. See Burlington Northern, 556 U.S. at 613-14.
Judicial apportionment is proper so long as the
defendant can demonstrate that there is a reasonable
basis for determining the contribution of each cause to a
single harm. Id. (citing United States v. Chem-Dyne Corp.,
572 F.Supp. 802, 810 (S.D. Ohio 1983); RESTATEMENT
(SECOND) OF T ORTS § 433A(1)(b), p. 434 (1963-1964)).
42 U.S.C. § 9613(f), on the other hand, is the “contribu-
tion” provision of CERCLA. Added to the statute by
the Superfund Amendments and Reauthorization Act
6
“The national contingency plan specifies procedures
for preparing and responding to contaminations and was
promulgated by the Environmental Protection Agency[.]”
United States v. Atl. Research Corp., 551 U.S. 128, 135 n. 3 (2007)
(citing Cooper Indus., Inc. v. Aviall Servs., Inc., 543 U.S. 157, 161 n.
2 (2004)); see also 40 C.F.R. § 300.1 et seq.
Nos. 11-1501 and 11-1523 15
of 1986 (“SARA”), it creates two distinct rights to con-
tribution, each subject to its own prerequisites. The first
is codified at 42 U.S.C. § 9613(f)(1):
Any person may seek contribution from any other
person who is liable or potentially liable under section
9607(a) of this title, during or following any civil
action under section 9606 of this title or under section
9607(a) of this title.
(emphasis added). In Cooper Indus., Inc. v. Aviall Servs., Inc.,
543 U.S. 157 (2004), the Supreme Court held that the
italicized phrase has a limiting effect. “The natural mean-
ing of this sentence is that the contribution may
only be sought subject to the specified conditions[.]” Id.
at 166 (emphasis added). To read the clause more ex-
pansively would render the italicized phrase super-
fluous, which the Court was loathe to do. Id. (citing Hibbs
v. Winn, 542 U.S. 88, 101 (2004)). In short, “[t]here is no
reason why congress would bother to specify conditions
under which a person may bring a contribution claim,
and at the same time allow contribution actions absent
those conditions.” Id. After Cooper, a contribution action
under 42 U.S.C. § 9613(f)(1) must be pre-dated by the
filing of a civil action pursuant to § 9606 or § 9607(a).
The second contribution right of action is codified at
42 U.S.C. § 9613(f)(3)(B):7
7
One could reasonably conclude, based solely on the physical
structure of § 9613(f), that § 9613(f)(3)(B) does not create a
distinct, second cause of action for contribution, instead
(continued...)
16 Nos. 11-1501 and 11-1523
A person who has resolved its liability to the United States
or a State for some or all of a response action or for some
or all of the costs of such action in an administrative or
judicially approved settlement may seek contribution
from any person who is not party to a settlement
referred to in paragraph (2).8
(emphasis added). As the Supreme Court did with
respect to § 113(f)(1), supra, we read the italicized phrase
as a limiting provision: a § 9613(f)(3)(B) contribution
claim is only available to a person who has “resolved its
liability . . . in an administrative or judicially approved
settlement.” See also Consol. Edison Co., 423 F.3d at 95(holding that the resolution of CERCLA liability is a
prerequisite to a § 9613(f)(3)(B) contribution action). To
7
(...continued)
simply modifying or further describing the conditions
under which a § 9613(f)(1) contribution action might be avail-
able. But the Supreme Court has foreclosed that reading.
See Cooper, 543 U.S. at 163 (“SARA also created a separate
express right of contribution, § 113(f)(3)(B) . . .”).
8
“Paragraph (2)” is CERCLA’s “contribution bar” provision,
stating:
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. Such settle-
ment does not discharge any of the other potentially
liable persons unless its terms so provide, but it reduces
the potential liability of the others by the amount of the
settlement. 42 U.S.C. § 9613(f)(2).
Nos. 11-1501 and 11-1523 17
read the section as affording the same remedy to one
who has not resolved his liability would be nonsensical,
and it would render the limiting language superfluous.
The Supreme Court has long insisted that result should
be avoided wherever possible. See Cooper, 543 U.S. at 166;
United States v. Nordic Village, Inc., 503 U.S. 30, 35-36
(1992) (referencing the “settled rule that a statute must, if
possible, be construed in such fashion that every word
has some operative effect.”); Louisville & Nashville R. Co. v.
Mottley, 219 U.S. 467, 475 (1911) (“We must have regard
to all the words used by Congress, and as far as
possible give effect to them.”).
In summary, each CERCLA right of action carries with
it its own statutory trigger, and each is a distinct
remedy available to persons in different procedural
circumstances. See Atl. Research, 551 U.S. at 139 (citing
Consol. Edison Co., 423 F.3d at 99); see also Niagara
Mohawk Power Corp. v. Chevron USA, Inc., 596 F.3d 112, 122
(2d Cir. 2010). Where a person has been subjected to a
civil action under 42 U.S.C. §§ 9606 or 9607(a), he may
attempt to recover his expenditures through a contribu-
tion suit under 42 U.S.C. § 9613(f)(1). Where a person
has resolved his liability to the United States, or to a
state, for some or all of a response action or for some
or all of the costs of such action in an administrative or
judicially approved settlement, he may attempt to
recover his expenditures in a contribution suit pursuant
to 42 U.S.C. § 9613(f)(3)(B). If neither of those triggers
has occurred, a plaintiff does not have a claim for con-
tribution under CERCLA. That does not mean he has no
remedy, however. Any time a person has incurred “neces-
18 Nos. 11-1501 and 11-1523
sary costs of response . . . consistent with the national
contingency plan[,]” CE RCLA provides for a
§ 9607(a)(4)(B) cost recovery action. These are the plain
terms of the statute.
B. Classifying the Trustees’ CERCLA Claim
The next step is to apply the statutory scheme to the
facts to determine which sort of claim, or claims, the
Trustees have advanced, and whether it is barred by the
applicable statute of limitations. In Count I of the Com-
plaint, the Trustees seek to recover the costs they
incurred pursuant to the 1999 and 2002 AOCs. In
order to determine which kind of CERCLA claim Count I
states, we must take a closer look at the undisputed
documentary evidence presented, particularly the
AOCs themselves. In doing so, we find that the Trustees
have stated a cost recovery claim under § 9607(a), but
only with respect to costs incurred pursuant to the
2002 AOC. At this point, costs incurred pursuant to the
1999 AOC could only be recovered through a contribu-
tion claim, which is time-barred.
1. The 1999 AOC
Under the 1999 AOC, the Non-Premium Respondents
took on significant responsibilities. They agreed to under-
take the EE/CA study of removal alternatives for Third
Nos. 11-1501 and 11-1523 19
Site, to develop and submit an EE/CA report to the EPA,9
and to settle and fund the Third Site Trust. They also
agreed to reimburse the federal government for the
EPA’s past response and oversight costs, for any future
oversight costs incurred in conjunction with the EE/CA
project, and for an amount certain to be expended by
the Department of the Interior in addressing natural
resource damages at Third Site. The 1999 AOC laid out
deadlines for the Non-Premium Respondents to meet
their obligations, and made clear that no release from
CERCLA liability would occur until those obligations
were met:
Except as expressly provided in Section XIII
(Covenant Not to Sue), nothing in this Order consti-
tutes a satisfaction of or release from any claim or
cause of action against the Respondents or any
person not a party to this Order, for any liability
such person may have under CERCLA, other statutes,
or the common law, including but not limited to
any claims of the United States for costs, damages
and interest under Sections 106(a) or 107(a) or
CERCLA, 42 U.S.C. §§ 9606(a), 9607(a).1 0
9
An EE/CA is classified as a “removal action” by the EPA.
See 40 C.F.R. § 300.415(b)(4)(i).
10
Both the case law and the administrative materials
addressing CERCLA frequently switch back and forth between
referring to sections of the act by their section number, as
enacted, and their section number, as codified. “Section 107(a)”
(continued...)
20 Nos. 11-1501 and 11-1523
The covenants not to sue referred to in the disclaimer
above were expressly conditioned on the Respondents’
fulfillment of their obligations under the Order:
Except as otherwise specifically provided in this
Order, upon issuance of the [Notice of Completion],
U.S. EPA covenants not to sue Respondents for
judicial imposition of damages or civil penalties or to
take administrative action against Respondents for
any failure to perform actions agreed to in this Order[.]
***
[I]n consideration and upon Respondents’ payment
of [the EPA’s response costs], U.S EPA covenants
not to sue or take administrative action against Re-
spondents under Section 107(a) of CERCLA[.]
And, most explicitly, as modified by the attached errata
sheet:
These covenants are conditioned upon the complete
and satisfactory performance by Respondents of
their obligations under this Order.
Moreover, just as the EPA refused to give up its rights
to sue the Respondents, the Respondents refused to
consider the Order to be an admission of liability on
their part:
10
(...continued)
of CERCLA, for example, was codified at 42 U.S.C. § 9607(a);
“Section 113(f)” corresponds to § 9613(f), etc. For ease of
reference, we refer to CERCLA sections by their designa-
tion within the United States Code.
Nos. 11-1501 and 11-1523 21
Respondents’ agreement to comply with and be
bound by the terms of this Order and not to contest
the basis or validity of this Order or its terms shall
not constitute any admission of liability by any (or
all) of the Respondents nor any admission by Re-
spondents of the basis or validity of U.S. EPA’s find-
ings, conclusions or determinations contained in
this Order.
Under the plain language of the AOC, with respect to
the Non-Premium Respondents, the EPA’s covenants
not to sue—and the accompanying release from CERCLA
liability—would take effect when they had seen the
EE/AC project through to its completion and provided
the Trust with sufficient funds to meet its monetary
commitments pursuant to the AOC, and no sooner. It
is undisputed that the Non-Premium Respondents
did meet those obligations, as the EPA approved their
performance of the 1999 AOC on October 24, 2000.
a. The Trustees have a § 9613(f)(3)(B) contribution
claim for costs incurred under the 1999 AOC.
By the terms of the AOC, when the Non-Premium
Respondents completed performance of their obligations
under the 1999 AOC and obtained a notice of approval
from the EPA, the conditional covenants not to sue con-
tained therein went into effect. At that point, the Non-
Premium Respondents, and by extension the Trust, had
“resolved [their] liability to the United States . . . for some
or all of a response action or for some or all of the costs
of such action” through an administrative settlement,
22 Nos. 11-1501 and 11-1523
thus satisfying the prerequisites for a contribution
action pursuant to 42 U.S.C. § 9613(f)(3)(B). Specifically,
the Trust had resolved its liability to the United States
with respect to the execution of the EE/CA and with
respect to the reimbursement of government response
and oversight costs incurred prior to and in conjunction
with the EE/CA project. As a result, they were entitled
to recover the costs they incurred in accomplishing
those tasks through a contribution action.
Of course, the Trustees also incurred necessary costs
of response consistent with the national contingency
plan. They did not simply reimburse the EPA for a
removal action it had already performed; they funded
and executed the removal action themselves. In that
sense, the trigger for a § 9607(a) cost recovery action
was also met. This brings us to one of the questions
raised in the briefs: are there any circumstances under
which a plaintiff may bring both a cost recovery and a
contribution claim under CERCLA? The Supreme Court
left that possibility open in Atlantic Research:
We do not suggest that §§ 107(a)(4)(B) and 113(f)
have no overlap at all. Key Tronic Corp. v. United States,
511 U.S. 809, 816, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994)
(stating the statutes provide “similar and somewhat
overlapping remed[ies]”). For instance, we recognize
that a PRP may sustain expenses pursuant to a
consent decree following a suit under § 106 or § 107(a).
See, e.g., United Technologies Corp. v. Browning-Ferris
Industries, Inc., 33 F.3d 96, 97 (1st Cir. 1994). In such
a case, the PRP does not incur costs voluntarily but
Nos. 11-1501 and 11-1523 23
does not reimburse the costs of another party. We
do not decide whether these compelled costs of re-
sponse are recoverable under § 113(f), § 107(a), or both.
551 U.S. at 139 n. 6.
Most circuits, after Atlantic Research, have not allowed
a plaintiff to pursue a cost recovery claim when a con-
tribution claim is available. See Solutia, Inc. v. McWane,
Inc., 672 F.3d 1230, 1236-37 (11th Cir. 2012); Morrison
Enters., LLC v. Dravo Corp., 638 F.3d 594, 603 (8th Cir. 2011);
Lyondell Chem. Co. v. Occidental Chem. Corp., 608 F.3d
284, 291 n. 19 (5th Cir. 2010) (acknowledging, and not
disturbing, district court’s implicit decision that plaintiff
could not pursue both remedies); Agere Sys., Inc. v. Ad-
vanced Envtl. Tech. Corp., 602 F.3d 204, 229 (3d Cir. 2010);
Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596
F.3d 112, 128 (2d Cir. 2010); ITT Indus., Inc. v.
BorgWarner, Inc., 506 F.3d 452, 458 (6th Cir. 2007). Two
justifications are usually given for reaching that conclu-
sion. First, courts have noted that, despite its passing
acknowledgment of a possible overlap in Atlantic
Research, the Supreme Court has repeatedly emphasized
the procedural “distinctness” of the CERCLA rights of
action. See, e.g., 551 U.S. at 138; Niagara Mohawk, 596 F.3d at
128; ITT Indus., 506 F.3d at 458. Second, some courts have
concluded that permitting a party who has already re-
solved his own liability through a settlement to pursue
a § 9607(a)(4)(B) action would allow him to exploit
CERCLA’s “contribution bar” provision to shift full
liability onto the target of his suit, a result antithetical
to the purpose of the statute. See, e.g., Solutia, 672 F.3d
at 1237; Agere Sys., Inc., 602 F.3d at 228-229.
24 Nos. 11-1501 and 11-1523
The “contribution bar” argument, although common
in the case law, is based on a faulty premise. The argu-
ment is that a § 9607(a) cost recovery suit imposes joint
and several liability on its target, whereas a contribu-
tion defendant only faces equitable apportionment. At
the same time, pursuant to § 9613(f)(2), a party 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.” Several courts
have concluded that allowing a party who has resolved
its liability through settlement—and who thus meets the
prerequisites for a § 9613(f)(3)(B) contribution action,
as well as for protection under § 9613(f)(2)—to pursue
a cost recovery action instead would allow that party
to impose joint and several liability on a defendant
without any fear of a counterclaim, due to the operation
of § 9613(f)(2). Solutia, 672 F.3d at 1237; Agere Sys., Inc.,
602 F.3d at 228-229. Theoretically, one PRP could shift
full liability onto another PRP and escape all liability
himself. Given that CERCLA is intended to distribute
the costs of environmental correction among all
of those who bear responsibility for an instance of con-
tamination, see Burlington Northern, 556 U.S. at 602, such
gamesmanship seems inappropriate.
The problem, of course, is that § 9607(a) does not
always impose joint and several liability. Apportionment
is proper on a cost recovery claim where there is a rea-
sonable basis for determining the contribution of each
cause to a single harm. Burlington Northern, 556 U.S. at
614. Apportionment is likewise the remedy for a con-
Nos. 11-1501 and 11-1523 25
tribution claim. As a result, counterclaim or no counter-
claim, there is not more risk that a defendant could
be gamed into shouldering full liability, or more than
his fair share, by a plaintiff with a § 9607(a) cost
recovery action than by a plaintiff with a § 9613(f)(3)(B)
contribution action. After Burlington Northern, the “contri-
bution bar” argument is not persuasive.
The other justification usually offered for limiting a
plaintiff to one form of CERCLA action—the procedural
distinctness of the remedies—is more compelling. As
the Second Circuit has observed, “[t]o allow [a qualifying
contribution plaintiff] to proceed under § 9607(a) would
in effect nullify the SARA amendment and abrogate
the requirements Congress placed on contribution
claims under § 9613.” Niagara Mohawk, 594 F.3d at 128.
“ ‘When Congress acts to amend a statute, [courts]
presume it intends its amendment to have real and sub-
stantial effect.’ ” Id. (citing Stone v. INS, 514 U.S. 386, 397
(1995)). We agree with the sentiments expressed by the
Second Circuit. Through SARA, Congress intentionally
amended CERCLA to include express rights to contribu-
tion, subject to certain prerequisites. If § 9607(a) already
provided the rights of action contemplated by the
SARA amendments, then the amendments were just
so many superfluous words. The canons of statutory
construction counsel against any interpretation that
leads to that result. See Hibbs, 542 U.S. at 101.
In short, with respect to the 1999 AOC, the Trustees
have a contribution action under § 9613(f)(3)(B). Although,
giving the words their plain meaning, they have
26 Nos. 11-1501 and 11-1523
also incurred “necessary costs of response,” see
§ 9607(a)(4)(B), as is required to sustain a cost recovery
action, we agree with our sister circuits that a plaintiff
is limited to a contribution remedy when one
is available. The next step is to determine whether the
Trustees’ recovery, on a contribution theory, for costs
incurred pursuant the 1999 AOC is time-barred.
b. The Trustees are time-barred from recovering
costs expended pursuant to the 1999 AOC.
The statute of limitations for CERCLA contribution
actions can be found at 42 U.S.C. § 9613(g)(3):
No action for contribution for any response costs or
damages may be commenced more than 3 years after—
(A) the date of judgment in any action under
this chapter for recovery of such costs or
damages, or
(B) the date of an administrative order under
section 9622(g) of this title (relating to de minimis
settlements) or 9622(h) of this title (relating to
cost recovery settlements) or entry of a judicially
approved settlement with respect to such costs
or damages.
The Bankerts argue that because the de minimis parties,
also known as the Premium Respondents, settled out
pursuant to § 9622(g), the three year limitations period
Nos. 11-1501 and 11-1523 27
began to run on the date the AOC was executed.1 1
The Trustees argue in response that it certainly did with
respect to any claims that the de minimis parties might
advance, but that none of the § 9613(g)(3) triggers
have occurred with respect to their own claims. The
Trustees argue that their claims fall within a “gap” in
the statutory coverage, and that the gap should be
filled with the limitations period applicable to actions
under U.S.C. § 9607(a). An “initial action for the
recovery of costs” under § 9607(a) must be filed:
(A) for a removal action, within 3 years after com-
pletion of the removal action, except that such cost
recovery action must be brought within 6 years after
a determination to grant a waiver under section
9604(c)(1)(C) of this title for continued response
action; and
(B) for a remedial action, within 6 years after
initiation of physical on-site construction of the reme-
11
Although the Bankerts failed to raise the issue, an argument
can also be made that the 1999 AOC was “an administrative
order . . . under § 9622(h)[,]” to the extent that the Non-
Premium Respondents agreed to reimburse response costs
incurred by the federal government pursuant to that section.
That would provide an additional basis for starting the
three year clock on the day the AOC was executed. In its
amicus brief, the EPA suggests that by making note of this
potential wrinkle we “addressed” the issue and reached a
conclusion that was “incorrect.” [EPA amicus brief, pp. 12-13).
In fact, we neither address it nor reach any conclusion at all;
we have relied on it in no way in reaching our decision.
28 Nos. 11-1501 and 11-1523
dial action, except that, if the remedial action is initi-
ated within 3 years after the completion of the re-
moval action, costs incurred in the removal action
may be recovered in the cost recovery action
brought under this subparagraph.
42 U.S.C. §§ 9613(g)(2)(A)-(B).
We need not resolve the “coverage gap” dispute with
respect to the work performed under the 1999 AOC,
because the outcome is the same either way. Assuming
for the moment that we agree with the Trustees that
the limitations period for a cost recovery action should
apply, we note that an EE/CA is a “removal action.”
See 40 C.F.R. § 300.415(b)(4)(i). That means that §
9613(g)(2)(A) would apply to any attempt to recover
the costs incurred in executing the EE/CA. Under that
standard, the limitations period began running when
the EE/CA project was completed in October of 2000.
The Complaint in this case was filed on April 1, 2008,
significantly more than three years later. Recovery is time-
barred. Assuming, on the other hand, that we agree
with the Bankerts and apply the statute of limitations
for contribution actions, we would mark a start date for
the limitations period on the date the AOC was exe-
cuted. Pursuant to § 9613(g)(3)(B), the Trustees had three
years from that date—in 1999—in which to file an action.
They missed the deadline by approximately six years;
recovery is time-barred. Under either party’s theory, it is
too late for the Trustees to recover the costs they incurred
in carrying out the 1999 AOC.
Nos. 11-1501 and 11-1523 29
2. The 2002 AOC
After approving the work done under the 1999 AOC,
the EPA issued an Enforcement Action Memorandum
selecting a removal action and cleanup objectives
from among the options detailed in the EE/CA. In Novem-
ber 2002, the parties entered into the second AOC to
implement those solutions. The 2002 AOC included
identical conditional covenants not to sue and an
identical disclaimer of liability on the part of the Respon-
dents; its structure was largely parallel to that of the
1999 AOC. To the extent that the Trustees’ suit seeks to
recover expenses arising out of their performance of
the 2002 AOC, it is not a contribution action. The
Trustees have been subjected to no civil action under
§§ 9606 or 9607, so a contribution action under § 9613(f)(1)
is unavailable. On the other hand, under the plain terms
of the AOC, they could not have “resolved [their]
liability to the United States . . . for some or all of [the
work performed under the 2002 AOC] or for some or all
of the costs of [the work performed under the 2002 AOC]
in an administrative . . . settlement” at any time before
satisfactory discharge of their obligations under the
2002 AOC. Since the work to be performed under the
2002 AOC was ongoing when this action was filed, and
no notice of approval had issued which would trigger
the conditional covenants not to sue, a contribution
action under § 9613(f)(3)(B) is likewise unavailable. What
the Trustees have done, with respect to the work called
for by the 2002 AOC, is incur costs of response con-
sistent with the national contingency plan, as is required
to file a cost recovery action under § 9607(a).
30 Nos. 11-1501 and 11-1523
So, a plain reading of the statute and a sober look at
the facts make it clear that a cost recovery action is avail-
able. Nonetheless, between the Bankerts and the EPA
writing as amicus in support of rehearing, three different
reasons have been advanced why this court should
find that the Trustees are limited to a contribution
action for costs incurred pursuant to the 2002 AOC. The
first, championed primarily by the Bankerts, is that
“compelled” costs incurred pursuant to an AOC must,
as a matter of law, be recovered in a contribution ac-
tion. The second, argued by both parties, is that the
mere act of signing a settlement agreement amounts to
a resolution of liability for purposes of the statute.
The third argument is based on policy considerations
and on the theory that withholding a contribution
action until liability is actually resolved will discourage
future polluters from settling early with the PRP. None
of these arguments are factually or legally convincing,
and they do not warrant a different result.
a. The voluntary/compelled costs dichotomy
The Bankerts’ first argument focuses on a distinction
between voluntary and compelled costs: they claim that
the Supreme Court drew a line in the sand in Atlantic
Research and that in the current legal environment a
cost recovery action is available only to plaintiffs who
incurred costs “voluntarily”. “Compelled” costs, on the
other hand, may only be recovered through a contribu-
tion action. Since the Trustees were “compelled” to
clean up the site by the administrative settlement
Nos. 11-1501 and 11-1523 31
process, the Bankerts argue that they are limited to a
contribution action. There are three significant prob-
lems with this argument.
The first problem with the Bankerts’ argument is that
it has no basis in the text of the source case. In Atlantic
Research, the Court was asked to decide whether the
phrase “any other person” in § 9607(a)(4)(B) provides
PRPs, in addition to “innocent” parties, with a right to
recover response costs from other PRPs. 551 U.S. at 131.
Arguing against that result, the United States suggested
to the Court that allowing one PRP to maintain a § 9607(a)
cost recovery action against another PRP would give
it license to “cause shop” between an action for cost
recovery and an action for contribution, choosing which-
ever section offered a perceived advantage under
the circumstances of the case.
In response to the government’s concern, the Court
emphasized the procedural distinctness of the remedies.
The Court contrasted a plaintiff who seeks to recover
expenditures he himself incurred in cleaning up a site
with a plaintiff who seeks to recover the cost of reim-
bursing another person’s expenditures pursuant to a
settlement agreement or judgment. 551 U.S. at 139. The
former is a typical cost recovery claim, whereas the
latter is a typical contribution claim under § 9613(f)(1). Id.
Under the circumstances as hypothetically defined, the
Court saw no room for choosing between the two: “[B]y
reimbursing costs paid to other parties, the PRP has not
incurred its own costs of response and therefore cannot
recover under § 107(a). As a result, though eligible to seek
32 Nos. 11-1501 and 11-1523
contribution under § 113(f)(1), the PRP cannot simulta-
neously seek to recover the same expenses under § 107(a).”
Id. The Court concluded that the government’s cause-
shopping worries were thus unfounded. But before
moving on, the Court recognized the limitations of its
own conceptual illustration in a footnote, which we
have quoted once already:
We do not suggest that §§ 107(a)(4)(B) and 113(f) have
no overlap at all. Key Tronic Corp. v. United States,
511 U.S. 809, 816, 114 S.Ct. 1960, 128 L.Ed.2d 797(1994) (stating the statutes provide “similar and
somewhat overlapping remed[ies]”). For instance,
we recognize that a PRP may sustain expenses pursu-
ant to a consent decree following a suit under § 106
or § 107(a). See, e.g., United Technologies Corp. v.
Browning-Ferris Industries, Inc., 33 F.3d 96, 97 (1st Cir.
1994). In such a case, the PRP does not incur costs
voluntarily but does not reimburse the costs of
another party. We do not decide whether these com-
pelled costs of response are recoverable under § 113(f),
§ 107(a), or both. For our purposes, it suffices to dem-
onstrate that costs incurred voluntarily are recov-
erable only by way of § 107(a)(4)(B), and costs of
reimbursement to another person pursuant to a
legal judgment or settlement are recoverable only
under § 113(f). Thus, at a minimum, neither remedy
swallows the other, contrary to the Government’s
argument.
551 U.S. at 139 n. 6.
The Bankerts conclude, based on the quoted footnote,
that only parties who voluntarily incur response costs can
Nos. 11-1501 and 11-1523 33
bring an action for cost recovery under § 9607(a), and that
parties who are “compelled” to incur response costs
because of an enforcement action or a government settle-
ment must proceed under § 9613(f) instead. But the
Court said “costs incurred voluntarily are recoverable only
by way of [§ 9607(a)(4)(B).]” Id. (emphasis added). That
is not the same as saying that only voluntarily incurred
costs are recoverable by way of § 9607(a)(4)(B). The
latter implies the exclusion of costs of any other type; the
former does not. The Supreme Court said, and meant,
the former. In fact, the Court explicitly left open the
possibility that parties who were “compelled” to incur
costs—including parties who incurred costs subsequent
to government settlements—might proceed under § 9607(a)
nonetheless. Id.
The second problem with the Bankerts’ position is
that they have produced no legal authority in support of
it. The cases they cite which did hold that PRPs who
incurred cleanup costs under government settlements
were bound to pursue a contribution claim did so
because the statutory triggers for contribution claims
were met, not because the costs were compelled as op-
posed to voluntary. See Niagara Mohawk, 596 F.3d 112(holding that the plaintiff had a contribution claim
under § 9613(f)(3)(B), because the plaintiff had resolved
its CERCLA liability through an administrative settle-
ment); Appleton Papers Inc. v. George A. Whiting Paper Co.,
572 F.Supp.2d 1034, 1043 (E.D. Wis. 2008) (dismissing a
§ 9607(a) cost recovery claim where a § 9613(f)(1) con-
tribution claim was available to plaintiffs by virtue of
a previous EPA lawsuit, and noting that “[d]espite the
34 Nos. 11-1501 and 11-1523
courts’ use of the terms ‘voluntary’ and ‘involuntary’
to distinguish between payments recoverable under
§ 107(a) and those recoverable under § 113(f), the
operative principle appears to be that § 107(a) is available
to recover payments only in cases where § 113(f) is not.”).
The cases cited by the Bankerts with different outcomes
simply reinforce the straight-forward application of the
statutory scheme. See ITT Indus., Inc., 506 F.3d 452 (plain-
tiff’s § 9613(f)(3)(B) claim was dismissed where the
AOC did not resolve plaintiff’s liability, as would be
statutorily necessary to support a § 9613(f)(3)(B) action);
Chitayat v. Vanderbilt Assocs., 702 F.Supp.2d 69 (E.D.N.Y.
2010) (dismissing a § 9607(a) claim because, in the
court’s eyes, the plaintiff never “incurred” costs, as is
necessary for a cost recovery action). At least one case
directly refutes the Bankerts’ argument that costs
incurred pursuant to a settlement cannot be recovered
under § 9607(a). In W.R. Grace & Co.-Conn. v. Zotos In-
tern., Inc., 559 F.3d 85 (2d Cir. 2009), a landfill owner
brought an action to recover costs it incurred in the
investigation and remediation of a contaminated
landfill site pursuant to a government settlement agree-
ment. Despite the existence of the settlement agreement,
the court held that the plaintiff could recover its
cleanup costs under § 9607(a) because neither contribu-
tion trigger had occurred. The settlement had not
resolved CERCLA liability (§ 9613(f)(3)(B)) and no civil
action had been filed (§ 9613(f)(1)). In short, not a
single one of these cases treated the voluntary/
compelled costs dichotomy as dispositive.
The third, and most obvious, problem with the
Bankerts’ argument is that they are asking us to impose
Nos. 11-1501 and 11-1523 35
a requirement that appears nowhere in the statutory
text. Imposing a requirement not evident on the face of
the statute arguably violates fundamental rules of
statutory construction. See E.I. DuPont de Nemours and Co.
v. United States, 508 F.3d 126, 133 n. 5 (3d Cir. 2007). As
outlined in detail above, CERCLA does not ask whether
a person incurs costs voluntarily or involuntarily. It
asks whether a person incurred costs of response
consistent with the national contingency plan, whether a
person has previously been subjected to a civil action
under § 9606 or § 9607(a), and so on. The Bankerts
have advanced no persuasive reason, and we can think of
none, why we would flatly disregard the terms of the
statute and replace them with a new scheme of the
Bankerts’ choosing, especially one with so little to rec-
ommend it in the case law.
b. Equating signing a settlement agreement
with the resolution of liability
The Bankerts’ second argument is that the phrase
“resolved its liability . . . in an administrative or judicially
approved settlement[,]” as a statutory prerequisite to a
contribution suit under § 9613(f)(3)(B), really just means
“entered into an administrative or judicially approved
settlement,” even where the settlement may or may not
lead to a resolution of liability depending on future
events. In its amicus brief in support of rehearing, the EPA
argued the same. The EPA summarized its argument
as follows:
36 Nos. 11-1501 and 11-1523
Unlike “discharge,” “release,” or “satisfy,” the word
“resolve” is not a term of art in contract law and is not
defined in Black’s Law Dictionary. Congress therefore
did not intend to require a PRP to completely extin-
guish its liability before obtaining contribution
rights. Rather, Congress provided contribution rights
to a PRP who “has resolved its liability . . . in an
administrative or judicially approved settlement.” 42
U.S.C. § 9613(f)(3)(B). Given that context, Congress
meant that the settlement agreement needs to
resolve a PRP’s liability, not that the release,
covenant, or other liability-resolving term in the
agreement must be effective for contribution rights
to arise. In the AOCs, the settling PRPs promised to
perform certain removal actions and EPA promised
not to sue concerning those actions. The AOCs there-
fore are “settlement[s]” that resolved the PRPs’
liability for response actions within the meaning of
[§ 9613(f)(3)(B)] and thus triggered contribution
rights upon their effective dates.
The argument, as stated in the passage above and ex-
plained in more detail throughout the EPA brief, is not
legally persuasive. The EPA ignores traditional rules of
statutory interpretation and jumps immediately from its
observation that “resolve” is not a “term of art” to
a discussion of House Reports and other evidence of
legislative intent extrinsic to the statutory text. That
path of analysis is not correct.
When a statute itself does not define a term, “we con-
strue the term ‘in accordance with its ordinary or natural
Nos. 11-1501 and 11-1523 37
meaning,’ a meaning which may be supplied by a dictio-
nary.” Carmichael v. The Payment Center, Inc., 336 F.3d
636, 640 (7th Cir. 2003) (quoting FDIC v. Meyer, 510 U.S.
471, 476, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994)). This is
because “the plain language of a statute is the best evi-
dence of legislative intent.” Senne v. Village of Palatine, Ill.,
695 F.3d at 597, 612 (7th Cir. 2012) (Flaum, J., dissenting)
(citing United States v. Clintwood Elkhorn Mining Co., 553
U.S. 1, 11 (2008) (“The strong presumption that the
plain language of the statute expresses congressional
intent is rebutted only in rare and exceptional circum-
stances.”) (internal markup omitted)). Of course, while
“[w]e frequently look to dictionaries to determine the
plain meaning of words,” Sanders v. Jackson, 209 F.3d
998, 1000 (7th Cir. 2000), we always do so with caution,
sensitive to the need to consider the meaning of those
words in context and to the reality that many words in
our language are susceptible of multiple “ordinary or
natural” meanings. United States v. Costello, 666 F.3d
1040, 1043-44 (7th Cir. 2012); see also Trs. of Chicago Truck
Drivers, Helpers, and Warehouse Workers Union (Indep.)
Pension Fund v. Leaseway Transp. Co., 76 F.3d 824, 828
(7th Cir. 1996). If the ordinary meaning of a word is
totally ambiguous, then resort to legislative materials of
the type referenced by the EPA is sometimes warranted.
But even then, “where . . . the interpretation urged by
[a party] is not supported by common usage, dictionary
definition, or court decision, such interpretation cannot
be upheld.” Torti v. United States, 249 F.2d 623, 625 (7th
Cir. 1957) (quoting Gellman v. United States, 235 F.2d 87,
93 (8th Cir. 1956)). In short, it is what Congress says,
38 Nos. 11-1501 and 11-1523
not what Congress means to say, that becomes the law
of the land. Statutory interpretation is therefore an
exercise best grounded in the text of the statute itself.
The statute at issue in this case provides some
context clues as to the meaning of the phrase “resolved
its liability[.]” § 9613(f)(3)(B). First, “resolved” clearly acts
as a verb and takes an object—“liability.” That eliminates
the various dictionary definitions covering “resolve”
used as an intransitive verb or as another part of speech
entirely. A variety of potential meanings still remain,1 2
12
The Oxford English Dictionary entry on “resolve” is rather
extensive, but the section titled “to untie; to answer, solve; to
decide, determine” seems most applicable to this statutory
context. That section includes, inter alia, “[t]o answer (a ques-
tion); to solve (a problem of any kind); to determine, settle, or
decide upon (a point or matter regarding which there is doubt
or dispute)”; as well as “to settle (a dispute or argument); to
reconcile opposing elements or tendencies within (a conflict,
contradiction, etc.)[.]” Oxford English Dictionary, available at
http://www.oed.com/. The New Oxford American Dictionary
defines “resolve,” when used as a transitive verb in a non-
specialized context, as “settle or find a solution to (a problem,
dispute, or contentious matter)[.]” N EW O XFORD A MERICAN
D ICTIONARY (Angus Stevenson et al., eds., 3d ed. 2010). Merriam-
Webster contains several potentially applicable definitions:
(1) to deal with successfully: clear up ; (2) to find an answer to; (3) to make clear or under-
standable; and (4) to reach a firm decision about . Merriam-
Webster, available at http://www.merriam-webster.com
(continued...)
Nos. 11-1501 and 11-1523 39
but certain commonalities can be discerned. All of them
seem to involve the concept of a conclusive determination
of some kind. An issue which is “resolved” is an issue
which is decided, determined, or settled—finished, with
no need to revisit. This sense of the word is consistent
with a common sense understanding of its role in the
statutory text, and is also consistent with the way the
term is regularly used by courts of law in unrelated
contexts. See, e.g., Guzman v. City of Chicago, 689 F.3d
740, 745 (7th Cir. 2012) (question of liability was “resolved”
by the district court’s determination, at the summary
judgment stage, that the defendant was liable); Shepherd
v. C.I.R., 147 F.3d 633, 635 (7th Cir. 1998) (suggesting
that to “resolve” a taxpayer’s liability, in the refund suit
context, means to make a final determination of the
issue); Baylor Heating & Air Conditioning, Inc. v. Federated
Mut. Ins. Co., 987 F.2d 415 (7th Cir. 1993) (noting that
plaintiff’s “contested liability was resolved” when the
Seventh Circuit conclusively found against him in an
earlier declaratory judgment action); Deimer v. Cincinnati
Sub-Zero Prods., Inc., 990 F.2d 342, 344 (7th Cir. 1993)
(characterizing a legal claim as “resolved” on summary
judgment where it was conclusively decided). The cited
cases suggest that, as a matter of common parlance,
12
(...continued)
(entries renumbered to eliminate inapplicable, specialized or
obsolete definitions). “Dictionary.com” provides one
potentially applicable definition: “to come to a definite or
earnest decision about; determine[.]” It also provides “confirm”
as a synonym.
40 Nos. 11-1501 and 11-1523
courts consider liability to be “resolved” when the issue
of liability is decided, in whole or in part, in a manner
that carries with it at least some degree of certainty
and finality.
Accordingly, having surveyed the statutory context,
the dictionary definitions, and the common use of
similar terms by the federal courts more generally, we
believe the “ordinary or natural” meaning of the phrase
“resolved its liability . . . in an administrative or judicially
approved settlement” is clear and unambiguous. To
meet the statutory trigger for a contribution action
under § 9613(f)(3)(B), the nature, extent, or amount of a
PRP’s liability must be decided, determined, or settled, at
least in part, by way of agreement with the EPA. As a
matter of simple, observable fact, that did not happen
here. Yes, the Non-Premium Respondents “settled”
with the EPA. They agreed to perform certain actions
in order to remedy an instance of environmental con-
tamination. But they did not settle the issue of liability
for that contamination—which is what the statute
requires—at all. The parties do not need to take this panel’s
word for it. They can refer to the language which they
themselves chose to include in the 2002 AOC:
Respondents’ agreement to comply with and be
bound by the terms of this Order and not to contest
the basis or validity of this Order or its terms shall
not constitute any admission of liability by any (or
all) of the Respondents nor any admission by Re-
spondents of the basis or validity of U.S. EPA’s find-
ings, conclusions or determinations contained in
this Order.
Nos. 11-1501 and 11-1523 41
It is very difficult to say, in light of the quoted passage,
that the agreement between the parties constituted a
resolution of liability.
The attempts by the EPA and the Bankerts to argue
otherwise depend on the assertion that “[i]n the AOCs,
the settling PRPs promised to perform certain removal
actions and EPA promised not to sue concerning those
actions.” But while the Non-Premium Respondents did
indeed promise to perform certain removal actions, the
EPA only conditionally promised to release the Non-Pre-
mium Respondents from liability. The condition which
had to be met was complete performance, as well
as certification thereof. If the EPA’s covenant not to
sue is the contemplated “resolution of liability” in
this case—and the argument advanced by the EPA and
the Bankerts seems to agree that it is—then, by the terms
of the AOC itself, the resolution of liability would not
occur until performance was complete, which is the
first time at which the covenant would have any effect.
In fact, the EPA expressly reserved its right to “seek[]
legal or equitable relief to enforce the terms of
[the] Order” at any time before those covenants went
into effect.
Of course, if the EPA had included an immediately
effective promise not to sue as consideration for
entering into the agreement, the situation would be
different. That is exactly what occurred in RSR
Corporation v. Commercial Metals Co., 496 F.3d 552 (6th
Cir. 2007). In that case, as a term of the AOC, “the
United States agreed ‘not to sue or take administrative
42 Nos. 11-1501 and 11-1523
action’ that would impose additional liability on RSR
and its co-defendants[.]” Id. at 554. As a result, all
parties agreed that RSR had resolved its liability
through settlement and was therefore entitled to a
§ 9613(f)(3)(B) contribution action. Id. at 556. The Sixth
Circuit also agreed, reasoning that “RSR’s promise of
future performance was the very consideration it gave
in exchange for the United States’ covenant not to
seek further damages. RSR and its co-defendants in
other words resolved their liability to the United States
by agreeing to assume all liability (vis-a-vis the United
States) for future remedial actions.” Id. at 558 (em-
phasis original).
The Bankerts and the EPA believe this panel’s reading
of the statute conflicts with the Sixth Circuit’s decision
in RSR Corporation. However, we—like the Sixth Circuit—
simply read the statute as requiring that liability
be “resolved.” Our result differs from the result reached
by the Sixth Circuit in RSR Corporation not because
we apply a contradictory rule of law, but because of
the obvious and dispositive differences in the facts. In
that case, the consent order contained an immediately
effective release from liability. In this case, it did not. In
fact, far from immediately resolving all liability, see 496
F.3d at 558, our AOC immediately resolved none. So, the
consideration in RSR Corporation was an immediate
release from liability; the consideration in this case was
a conditional promise to release from liability if and
when performance was completed. Given the nature of
the statutory trigger, that distinction clearly warrants
a different result—a reality which the Sixth Circuit itself
Nos. 11-1501 and 11-1523 43
has openly recognized. See, e.g., ITT Indus., Inc., 506 F.3d
at 459-60 (finding that plaintiff had not “resolved its
liability” for purposes of § 9613(f)(3)(B) contribution
action when plaintiff “has not conceded the question
of liability as part of its settlement with the EPA”). The
same distinction differentiates this case from Dravo Corp.
v. Zuber, 13 F.3d 1222 (8th Cir. 1994).1 3 There is no
circuit split here.
In summary, the efforts of the Bankerts and the EPA
to equate the resolution of liability, as a legal proposition,
with the simple act of signing a settlement agreement
are not persuasive. The ordinary and natural reading
of the statute is that a contribution action becomes avail-
able when a PRP’s liability is resolved—as in decided or
determined—through settlement. Whether or not
liability is resolved through a settlement simply is not
the sort of question which can or should be decided
by universal rule. Instead, it requires a look at the terms
of the settlement on a case-by-case basis. The parties to
13
In Dravo, the EPA entered into a settlement agreement
with three PRPs containing an immediately effective
covenant “not to sue or to take any other civil or administrative
action against” the settlors. 13 F.3d at 1224. The agreement
also provided “EPA agrees that by entering into and carrying
out the terms of this Consent Order, Respondents will have
resolved their liability to the United States[.]” Id. (emphasis
added). The Eighth Circuit placed special emphasis on the
agreement’s indication that the resolution of liability was
based on “entering into” the agreement. Id. at 1227. The terms
of the AOC at issue in the case before this court are different.
44 Nos. 11-1501 and 11-1523
a settlement may choose to structure their contract so
that liability is resolved immediately upon execution of
the contract. See RSR Corporation, 496 F.3d 552; Dravo,
13 F.3d 1222. Or, the parties may choose to leave
the question of liability open through the inclusion of
reservations of rights, conditional covenants, and express
disclaimers of liability. See, e.g., ITT Indus., Inc., 506 F.3d
at 459-60 (finding that plaintiff had not “resolved its
liability” for purposes of § 9613(f)(3)(B) contribution
action when plaintiff “has not conceded the question
of liability as part of its settlement with the EPA”). In
this case, the parties clearly chose to do the latter—
a choice which the EPA typically has great weight to
influence.
c. Policy considerations
The final argument advanced by the EPA and the
Bankerts in support of their request for rehearing
suggests that this panel’s decision creates negative in-
centives which will discourage PRPs from settling with
the EPA in a timely and efficient manner. They
argue that it is the possibility of obtaining contribution
from non-settling parties as soon as a settlement is exe-
cuted which incentivizes PRPs to settle in the first place,
and that refusing to recognize that right of contribution
means a settling PRP will be stuck shouldering the full
cost of the cleanup until completion. We are sensitive
to such policy considerations, but we are not persuaded
that settlement incentives will be negatively effected by
our opinion in the way the EPA envisions. True, we
Nos. 11-1501 and 11-1523 45
hold that a settling PRP is not entitled to sue a non-
settling PRP for contribution under § 9613(f)(3)(B) until
the settling PRP’s liability is resolved. But we em-
phatically do not hold that the settling PRP has no legal
recourse until that time. As soon as the settling PRP
incurs response costs consistent with the national con-
tingency plan, and until liability is resolved, that
settling PRP has access to a cost recovery action. What’s
more, the cost recovery action is subject to a longer
statute of limitations, making it arguably the preferable
recovery vehicle for a PRP embarking on what might
well be a decade-long cleanup effort, and thus actually
creating a further positive incentive to settle. That is
exactly why the settling PRPs in this case—the very type
of people the Bankerts and the EPA claim are disadvan-
taged by our decision—are arguing in favor of classifying
their claim as one for cost recovery.
Accordingly, it is difficult to see how our holding,
properly understood, has any negative effect on settle-
ment incentives at all. But if any negative incentives are
in fact created by deferring the availability of a contribu-
tion action, then the EPA can structure its settlements
with future PRPs in such a way as to resolve liability
effective immediately upon execution. See RSR Corpora-
tion, 496 F.3d 552; Dravo, 13 F.3d 1222. In fact, the
EPA’s current model AOC has already incorporated
provisions to that effect.1 4 This opinion has no effect on
the validity of such agreements; as already stated, the
14
See http://cfpub.epa.gov/compliance/resources/policies/
cleanup/superfund/index.cfm?action=3&sub_id=1229
46 Nos. 11-1501 and 11-1523
parties to an AOC can structure the resolution of liability
in whatever way they see fit, within the bounds of the
authority granted by statute. Finally, it must be noted
that the Bankerts have spent the entirety of this litigation
arguing that giving a settling PRP access to a cost
recovery action instead of a contribution action equips
the settling PRP with some sort of unfair advantage.
They now argue that classifying a settling PRP’s
claim as one for cost recovery is so remarkably disad-
vantageous to the settling PRP that it jeopardizes
future settlement efforts.
3. Conclusion of CERCLA Issues
In summary, to the extent that the Trustees seek to
recover for costs incurred in executing the 2002 AOC,
their action is a cost recovery action. Because the
removal action called for by the 2002 AOC was ongoing
when this suit was filed, the 3-year limitations period
under 42 U.S.C. § 9613(g)(2)(A), quoted in full supra,
had not yet begun to run, let alone expired. 1 5 The Trust-
ees’ cost recovery action for expenses incurred under the
2002 AOC is timely and must be reinstated for further
proceedings at the district court level.
15
In the context of arguing that the Trustees are limited to a
contribution claim—which they did not plead—the EPA
argues that we should dismiss the claim pursuant to Rule
12(b)(6), rather than on statute of limitations grounds. Since
we find that a cost recovery claim does exist, however, it
is necessary to decide whether that claim is timely.
Nos. 11-1501 and 11-1523 47
We recognize that neither party appears to have con-
sidered splitting the Trustees’ claim in the way that we
do now. But the removal actions called for by the
AOCs were temporally discrete projects. If that were not
the case, the EPA would not have been able to certify
the first action’s completion before the second action
had even been selected. They need not be treated as
an indivisible whole. See United States v. Manzo, 182
F.Supp.2d 385 (D.N.J. 2000). The removal action contem-
plated by the 1999 AOC was completed years ago, and
supports a contribution action. The removal action con-
templated by the 2002 AOC was ongoing at the time
this suit was filed, and supports a cost recovery action.
Each is governed by a different statute of limitations, and
the fact that recovery with respect to the former is time-
barred does not legally preclude the Trustees from pur-
suing recovery with respect to the latter, which is not.
Furthermore, resolving the dispute in this manner
does not require constructing a new claim which the
Trustees did not plead. Count I, as written, is an action
for cost recovery, and we hold that it can stand as an
action for cost recovery. This ruling simply limits the
damages the plaintiff can recover. The district court is
reversed with respect to Count I to the extent that
the Trustees may seek to recover for costs incurred pur-
suant to the 2002 AOC.
Finally, we address the district court’s dismissal of
Count II, seeking a declaratory judgment of the
Bankerts’ joint and several liability. Count II is based on
42 U.S.C. § 9613(g)(2), which provides that in any action
48 Nos. 11-1501 and 11-1523
for recovery of costs “the court shall enter a declaratory
judgment on liability for response costs or damages
that will be binding on any subsequent action or actions
to recover further response costs or damages.” The
district court’s determination that the Trustees could
not bring a cost recovery action obviously rendered
§ 9613(g)(2) inapplicable. But since we have revived
part of Count I, we must revive Count II as well. We do
note, however, that the mere fact that the Trustees seek
to impose joint and several liability does not mean
they will be successful. As we have repeatedly stated,
the Bankerts will be given an opportunity to show
a reasonable basis for apportionment.
D. The District Court’s Denial of the Trustees’ Motion
to Strike
According to the Trustees, the Bankerts raised an argu-
ment in their summary judgment reply brief which
they did not raise in their original motion. More specifi-
cally, the Bankerts raised the“contribution bar” argu-
ment which we have previously discussed. The Trustees
wanted the argument struck, but the district court let
it stand. The Trustees now appeal that decision. We
review the district court’s grant or denial of a motion
to strike for abuse of discretion. Stinnet v. Iron Works
Gym/Executive Health Spa, Inc., 301 F.3d 610, 613 (7th Cir.
2002); Winfrey v. City of Chi., 259 F.3d 610, 618-619 (7th
Cir. 2001). “Normally, the decision of a trial court is
reversed under the abuse of discretion standard only
when the appellate court is convinced firmly that the
Nos. 11-1501 and 11-1523 49
reviewed decision lies beyond the pale of reasonable
justification under the circumstances.” Harman v. Apfel,
211 F.3d 1172, 1175 (9th Cir. 2000) (citing Valley Eng’rs
v. Elec. Eng’g Co., 158 F.3d 1051, 1057 (9th Cir. 1998), cert.
denied, 526 U.S. 1064 (1999)). This is not such a case. In
its decision denying the motion to strike, the district
court pointed out that the argument was derived from
Atlantic Research and other cases which the parties did
discuss at length in their earlier filings, and that it was
raised previously at oral argument. It was therefore
not “new” to the case at all. We have no reason to ques-
tion the district court’s representations, let alone to
find that they are “beyond the pale of reasonable justifica-
tion.” We find no abuse of discretion on this record.
II. Count III: Indiana ELA Claim
We move next to the Trustees’ claim under the
Indiana Environmental Legal Actions statute (“ELA”). In
1997, the Indiana General Assembly enacted a statute
providing for an “environmental legal action” to “recover
reasonable costs of a removal or remedial action”
involving hazardous substances or petroleum. See
Cooper Indus., LLC v. City of South Bend, 899 N.E.2d
1274, 1280 (Ind. 2009) (citing IND. C ODE § 13-30-9-2). The
statute became effective on February 28, 1998. In
Count III of the Complaint, the Trustees sued under the
ELA to recover the costs of the removal actions under-
taken pursuant to the 1999 and 2002 AOCs. At the sum-
mary judgment stage, the Bankerts argued that an
ELA claim was barred by the applicable statute of limita-
50 Nos. 11-1501 and 11-1523
tions, and the district court agreed. Once again, we
review the district court’s dismissal of the claim and
its resolution of accompanying legal questions de novo.
Storie, 589 F.3d at 876; Stepney, 392 F.3d at 239.
We apply the statute of limitations of the state
whose substantive law governs the claim, which in this
case is Indiana. See Guaranty Trust Co. of N.Y. v. York, 326
U.S. 99, 110 (1945) (holding that statutes of limitations
are considered substantive law for purposes of the Erie
doctrine). When this action was filed, the ELA did not
include its own limitations provision.1 6 Accordingly, both
16
That changed in 2011, when the Indiana General Assembly
enacted I ND . C ODE § 34-11-2-11.5. That section states, inter alia:
(b) Subject to subsections (c), (d), and (e), a person may seek
to recover the following in an action brought on or after
the effective date of this section under IC 13-30-9-2 or
IC 13-23-13-8(b) to recover costs incurred for a removal
action, a remedial action, or a corrective action:
(1) The costs incurred not more than ten (10) years before
the date the action is brought, even if the person or
any other person also incurred costs more than ten
(10) years before the date the action is brought.
(2) The costs incurred on or after the date the action is
brought.
If § 34-11-2-11.5 governed this litigation, the resolution of the
ELA issue would be a simple affair. But this lawsuit was filed
on April 1, 2008, more than three years prior to the
section’s effective date, and we must apply the limitations
period that existed at the time the action commenced. See
(continued...)
Nos. 11-1501 and 11-1523 51
parties looked elsewhere in the Indiana Code to find
an applicable statute of limitations. The Trustees argue
that Indiana’s ten-year “catch-all” statute of limitations
should apply. See IND. C ODE § 34-11-1-2 (a cause of action
which arises on or after September 1, 1982, and which
is not limited by any other statute must be brought
within ten years). The Bankerts’ position has continued
to develop throughout the pendency of this appeal,
and they now argue two related points. First, the
Bankerts argue that the Trustees’ ELA claim is a claim
for property damage, and should therefore be governed
by the six-year statute of limitations for actions to
recover damages to real property.1 7 Second, whichever
statute applies, the Bankerts also dispute—and we must
determine—when the limitations period began to run.
16
(...continued)
Connell v. Welty, 725 N.E.2d 502, 506 (Ind. App. 2000) (quoting
State v. Hensley, 661 N.E.2d 1246, 1249 (Ind. Ct. App. 1996) (“the
period of limitation in effect at the time the suit is brought
governs in an action[.]”)).
17
Found at I ND . C ODE § 34-11-2-7:
The following actions must be commenced within six (6) years
after the cause of action accrues:
(1) Actions on accounts and contracts not in writing.
(2) Actions for use, rents, and profits of real property.
(3) Actions for injuries to property other than personal
property, damages for detention of personal property and
for recovering possession of personal property.
(4) Actions for relief against frauds.
52 Nos. 11-1501 and 11-1523
See Doe v. United Methodist Church, 673 N.E.2d 839, 842
(Ind. Ct. App. 1996) (“The determination of when a cause
of action accrues is a question for the court.”). The
answer to that question depends on which limitations
provision applies, as Indiana courts have held that the
time at which a plaintiff’s cause of action accrues
under each is different.
Pflanz v. Foster, 888 N.E.2d 759 (Ind. 2008), explains
the application of the ten-year catch-all statute of limita-
tions, and Peniel Group, Inc. v. Bannon, 973 N.E.2d 575(Ind. Ct. App. 2012), explains the application of the six-
year property damage statute of limitations. In combina-
tion, they provide the framework for the resolution of
this case. Pflanz v. Foster concerned a dispute between
the seller, Merrill Foster, and the buyers, Richard and
Dolores Pflanz, of a parcel of land that was previously
occupied by a gas station. When Foster sold the land to
the Pflanzes in 1984, he advised them that under-
ground petroleum tanks were present on the property,
but were not in use and had been closed. 888 N.E.2d at
758. In fact, the tanks were still open and partially filled.
Id. The Pflanzes first learned as much in 2001, when the
Indiana Department of Environmental Management
(“IDEM”) inspected the property and discovered that
the tanks were leaking. Id. IDEM ordered the Pflanzes to
clean up the property, see id. at 759, and the Pflanzes
subsequently incurred over $100,000 in cleanup costs.
Id. at 758. In 2004 and 2006, the Pflanzes filed complaints
seeking contribution from Foster. Those complaints
were dismissed on statute of limitations grounds, and
the issue made its way up to the Indiana Supreme Court.
Nos. 11-1501 and 11-1523 53
The Pflanzes’ claim was brought pursuant to the Under-
ground Storage Tanks Act (USTA), IND. C ODE 13-23-13-1
et seq. The USTA is similar to the ELA in that it creates
a cause of action for a person who “undertakes correc-
tive action resulting from a release from an
underground storage tank, regardless of whether the
corrective action is undertaken voluntarily or under an
[administrative] order[,]” to recover his expenditures
by suing a party responsible for the release. IND. C ODE § 13-
23-13-8(b)(2). In fact, the two remedies are so substan-
tively similar that the Indiana Code gives plaintiffs ag-
grieved by a release from an underground tank the
option of choosing between the two. See IND. C ODE § 13-30-
9-6; see also Peniel, 973 N.E.2d at 581 n.5 (acknowledging
the statutory option). Most importantly for our pur-
poses, however, the two are identical to the extent
that neither includes its own express statute of limita-
tions. In Pflanz, both parties and the Indiana Supreme
Court agreed that the ten-year catch-all statute of limita-
tions therefore applied to the Pflanzes’ USTA claim. See
888 N.E.2d at 758 (citing Comm’r, Ind. Dep’t of Envtl. Mgmt.
v. Bourbon Mini-Mart, Inc., 741 N.E.2d 361 (Ind. Ct. App.
2000), for the proposition that the ten-year catch-all,
as opposed to the six-year limitations period for
property damages, applies to an action for “recovery of
environmental cleanup costs”).1 8
18
The Bankerts seem to argue that the applicability of the ten-
year limitations period in Pflanz was assumed, rather than
decided, due to the agreement of the parties. That cannot be
(continued...)
54 Nos. 11-1501 and 11-1523
Next, the Indiana Supreme Court proceeded to deter-
mine when the ten-year limitations period began to run.
Under the Indiana discovery rule, “a cause of action
accrues, and the statute of limitations begins to run, when
a claimant knows or in exercise of ordinary diligence
should have known of the injury[,]” not of the mere
possibility of an injury in the future. Id. In cases in which
a party seeks to recover cleanup costs, “the damage [or
injury] at issue is the cleanup obligation assessed by [the
controlling government agency,]” not the mere fact of
contamination. Id. The latter would be the injury in a
suit to recover property damages, but suits to recover
cleanup costs are different. Id. Following this path to
its logical conclusion, the Indiana Supreme Court
held that in an environmental cleanup case governed
by the ten-year catch-all statute of limitations, the lim-
itations period does not begin to run “until after the
18
(...continued)
correct. Which statute of limitations applies to a claim is a
question of law, and it is long-settled in Indiana that a “conclu-
sion of law” is “beyond the power of agreement by the
attorneys or parties.” App v. Cass, 75 N.E.2d 543, 395 (Ind. 1947)
(citing Miller v. State ex rel. Tuthill, 171 N.E. 381, 384 (Ind. 1930)).
Put even more bluntly, “[t]here is no question that the parties
cannot agree upon the law and force a conclusion according
to their understanding or agreement.” Id. The Indiana
Supreme Court simply would not have applied the ten-year
catch-all if it was legally incorrect to do so, whether the parties
agreed to it or not. Their decision to honor the parties’ agree-
ment therefore amounted to a decision that the limitations
period agreed to was legally correct.
Nos. 11-1501 and 11-1523 55
[plaintiff is] ordered to clean up the property.” 888
N.E.2d at 759. Since the Pflanzes brought their action
within ten years of the cleanup order, their action
was timely.
In Peniel Group, Inc. v. Bannon, the Indiana Court
of Appeals confronted a different kind of claim. The
plaintiffs were the current owner and manager of a
parcel of real property. After discovering that levels of
contamination on the property exceeded limits set by the
state, thus requiring a cleanup, the plaintiffs sued the
previous owners and tenants of the parcel under the
ELA. Since the ELA did not include a limitations pro-
vision at the time the suit was filed, the Indiana Court
of Appeals was tasked with deciding which other
statute of limitations to apply. 973 N.E.2d at 581. Finding
that the plaintiffs were the owners of the real property
in question and were not themselves responsible in
any way for the contamination at the site, the court con-
cluded that the Peniel plaintiffs’ action was one for prop-
erty damage. Id. at 581-82. That being the case, the six-
year limitations period governing actions for damages
to real property was applied, and that limitations period
begins to run “when a claimant knows, or in the exercise
of ordinary diligence should have known of the injury.”
Id. at 582 (quoting Martin Oil Mktg, Ltd. v. Katzioris, 908
N.E.2d 1183, 1187 (Ind. Ct. App. 2009). Under Indiana
law, “parties are usually held accountable for the time
which has run against their predecessors in interest.” Id.(citing Cooper, 899 N.E.2d at 1279). Since the plaintiffs’
predecessors in interest knew of the damage to the
site more than six years before the action was filed, the
Court of Appeals found that the action was barred.
56 Nos. 11-1501 and 11-1523
In light of Peniel, the Bankerts now argue that the Trust-
ees’ claim must likewise be governed by the six-year
limitations period for real property damages, since it,
too, is brought pursuant to the ELA. But under these
circumstances, the statute under which the claim is
brought does not determine the limitations period.
Indeed, it cannot do so, because the statute under
which the claim was brought did not have a limitations
period. That is the root of the problem. What Peniel
shows is that the underlying nature of the claim is
what matters, a principle which is well-established in
Indiana law. See Bourbon Mini-Mart, 741 N.E.2d 361 (“The
applicable statute of limitations is determined by the
‘nature or substance of the cause of action.’ ”) (citing
Klineman, Rose & Wolf, P.C. v. North American Lab. Co., 656
N.E.2d 1206, 1207 (Ind. Ct. App. 1995), trans. denied
(1996); Monsanto Co. v. Miller, 455 N.E.2d 392, 394 (Ind. Ct.
App. 1983)). Specifically, the Peniel court found that a
property damage claim brought under the ELA—at least,
back when the ELA had no independent limitations
provision—was governed by the statute of limitations
for property damages. That makes sense, given the
nature of the claim. But not every ELA claim is one
for property damages. In this case, for example, the
Trustees have no proprietary interest in Third Site. The
Bankerts do. There is no plausible legal theory under
which we might find that the Trustees are suing the
Bankerts—who are the only parties with a proprietary
interest in Third Site—for damages to the real property
at Third Site. Neither the “nature or substance” of this
ELA claim shows that it is an action for property
Nos. 11-1501 and 11-1523 57
damages, and the property damages limitations period
therefore does not apply.
Accordingly, the Trustees’ ELA claim is not limited
by the statute under which it is brought, since no
internal limitations provision existed, and it is not
limited by the statute applicable to property damage
suits, since it is not a suit for property damages. If the
action “is not limited by any other statute[,]” see IND.
C ODE § 34-11-1-2(a), then the ten-year catch-all limita-
tions period applies. It makes no difference whether
we call the Trustees’ ELA claim a contribution action, or
a cost-recovery action, or whether we call it by some
other name. By the terms of the Indiana Code, where
no other statutory limit exists, the ten-year limitations
period applies. That is consistent with the Indiana
Supreme Court’s decision to apply the ten-year period
to a generic action for the recovery of environmental
cleanup costs in Pflanz. See 888 N.E.2d at 758. And,
once again, it makes no difference that the claim in
Pflanz was nominally brought under the USTA while
this one was nominally brought under the ELA. The
“nature and substance” controls, and the two claims are
alike in nature and substance. The Trustees are suing “not
to recover for damages to their own property, but,
instead, to allocate liability for the funds spent [ ] to clean
up the environmental contamination of the [Bankerts’]
property.” Bourbon Mini-Mart, 741 N.E.2d 361. Therefore,
“[t]he nature or substance of their claim sounds
[nearer] contribution or indemnity, and the general
ten-year statute of limitations found at IC 34-11-1-2 ap-
plies.” Id.58 Nos. 11-1501 and 11-1523
The ten-year limitations period for an action to
recover cleanup costs incurred as the result of an EPA
order did not begin to run “until after the [Trustees
were] ordered to clean up the property.” Pflanz, 888
N.E.2d at 759. But the parties’ second dispute concerns
the application of that rule. There are multiple cleanup
orders in this case, each of which inflicted an injury on
the Trustees in the form of a cleanup obligation. The
Bankerts latch onto the earliest AOC—issued in 1996 to
the Trustees’ predecessors-in-interest, see Cooper, 899
N.E.2d at 734 (“third parties are usually held accountable
for the time running against their predecessors in inter-
est[.]”) (quoting Mack v. Am. Fletcher Nat’l Bank & Trust
Co., 510 N.E.2d 725, 734 (Ind. Ct. App. 1987))—and argue
that the limitations period for any ELA claim with
respect to Third Site began to run as soon as possible
after its issuance.1 9 The Trustees, of course, disagree.
They concede that the limitations period, with respect to
an action to recover costs expended pursuant to the
1996 AOC, began to run on February 28, 1998. The
Trustees cannot recover for those expenditures, and
they are not trying to do so. But they do not believe
that has any effect on the limitations period for
19
The Bankerts rightly note that the limitations period for
an ELA claim could not begin to run on the date of the 1996
AOC because the ELA was not yet enacted. Accordingly, they
argue that it began to run on February 28, 1998, the date the
ELA went into effect, instead. This action was not filed until
after February 28, 2008, leading the Bankerts to argue that it
is therefore untimely.
Nos. 11-1501 and 11-1523 59
recovering the costs of the removal actions mandated
by the 1999 or 2002 AOCs. We agree with the Trustees.
This action was filed on April 1, 2008, and we find that
any injury—meaning, in this context, any costs incurred
under a cleanup obligation imposed by the EPA—which
occurred subsequent to April 1, 1998, is actionable
under the ELA and is not time-barred. This plainly in-
cludes the damages suffered through compliance with
both the 1999 and 2002 AOCs, which is all the damages
the Trustees hope to recover.
The Bankerts’ argument fails to persuade us for
several reasons. First, the cleanup obligations that the
Trustees incurred by executing the 1999 and 2002 AOCs
simply were not incurred, either explicitly or implicitly,
when the respondents to the 1996 AOC agreed to
realign Finley Creek. Neither the Trustees, who did not
yet exist in that capacity, nor the 1996 respondents, in-
curred any obligation at that time to engage in removal
or remedial efforts at Third Site itself. Generally, parties
bringing actions to recover cleanup costs “must wait
until after the obligation to pay is incurred, for other-
wise the claim would lack the essential damage element.”
Pflanz, 888 N.E.2d at 759 (internal citations omitted). It
is true, as the Bankerts and the district court observe,
that “it is not necessary that the full extent of the
damage be known or even ascertainable but only that
some ascertainable damage has occurred” for the statute
of limitations to be triggered. Doe v. United Methodist
Church, 673 N.E.2d 839, 842 (Ind. Ct. App. 1996). But
that just means an obligation to pay may be considered
an “injury” for statute of limitations purposes even
60 Nos. 11-1501 and 11-1523
before it gives rise to an actual monetary loss. It does
not, however, support conflating one obligation with
another as though they create the same injury, which
is what the Bankerts hope to do.
Furthermore, the Bankerts’ argument that the statute
of limitations began to run with respect to the Trust-
ees’ obligations under the 1999 and 2002 AOCs
before they incurred those obligations would, if applied
to other cases, lead to impractical results. What if the
EPA’s process had been more drawn out (as is often the
case), and the AOCs governing the Third Site cleanup
were not issued until 2010, or 2012? According to the
argument advanced by the Bankerts, in that case, the
statute of limitations would have run entirely on the
Trustees’ requests for relief before they had even
suffered the damages from which relief might be re-
quested. They would have been legally required to
bring their action based on nothing but speculation
about what sort of cleanup might be ordered in the
future at Third Site, what it might cost, what the present
discounted value of those potential future costs
might be, etc., or else they would lose their right to
bring an action at all. The law does not require such clair-
voyance. Furthermore, any action that was filed under
such circumstances would raise serious justiciability
concerns, thereby putting plaintiffs who have expended
their own resources in redressing environmental harms
in between a rock and a hard place. That is not a
desirable outcome, but under the Bankerts’ understanding
of the law it could be a common one.
Nos. 11-1501 and 11-1523 61
Finally, before moving on, we note that the Trustees
suggested we might certify this issue to the Indiana
Supreme Court. In deciding whether certification is
appropriate, “the most important consideration
guiding the exercise of our discretion is whether we
find ourselves genuinely uncertain about a question of
state law that is vital to a correct disposition of the case.”
Craig v. FedEx Ground Package Sys., Inc., 686 F.3d 423, 429-
430 (7th Cir. 2012) (citing Cedar Farm, Harrison Cnty., Inc. v.
Louisville Gas & Elec. Co., 658 F.3d 807, 812-13 (7th
Cir.2011)). “Certification is appropriate when the case
concerns a matter of vital public concern, where the
issue will likely recur in other cases, where resolution
of the question to be certified is outcome determinative
of the case, and where the state supreme court has yet
to have an opportunity to illuminate a clear path on
the issue.” Id. When considering certification, we are
mindful of the state courts’ already busy dockets. Id.We also consider several factors when deciding whether
to certify a question, including whether the issue “is of
interest to the state supreme court in its development
of state law.” Id. (citing State Farm Mut. Auto. Ins. Co. v.
Pate, 275 F.3d 666, 671 (7th Cir.2001)).
We see no reason to certify this question. First, we
are not genuinely uncertain about it. While it is not at all a
frivolous issue, we are confident in proceeding under the
guidance provided by existing Indiana law. Between the
settled rule that the nature or substance of an action
governs which statute of limitations applies; the fact that
this particular action plainly is not one for property
damages; and the Indiana Supreme Court’s previous
62 Nos. 11-1501 and 11-1523
application of the ten-year catch-all under substantially
similar circumstances, the appropriate resolution is
clear. Second, we cannot say this issue concerns a matter
of vital public concern. The remediation of environmental
hazards is certainly an issue of public concern, but
the limitations issues discussed herein have by this
time been resolved conclusively by legislative action in
Indiana. The limitations period in effect at the time an
action is brought governs that action, Connell, 725
N.E.2d at 506, and any future ELA actions will be
governed by the independent limitations period legisla-
tively added to the ELA. Accordingly, we can say with
certainty that this issue will not reappear in any cases
not already pending. Third, the Indiana law question is
at most only partially outcome-determinative in this
case. To the extent that the ELA claim will allow the
Trustees to seek recovery of costs incurred under the
2002 AOC, it is merely duplicative of the CERCLA cost
recovery claim we have already reinstated. To the extent
that it will allow recovery of costs incurred under the
1999 AOC, it extends farther than the CERCLA claim, but
that twist is not enough to offset the lack of genuine
concern we have about its resolution, or to independently
warrant certification. We move on to Count VIII.
III. Count VII: Seeking a Declaratory Judgment Against
the Bankerts’ Insurers
In Count VII of the Complaint, the Trustees seek a
declaratory judgment that each of the insurer defendants
are obligated to provide insurance coverage, subject to
Nos. 11-1501 and 11-1523 63
their respective policy limits, for any liabilities owed by
their policy holders to the Trustees. After dismissing
Counts I through V on statute of limitations grounds, the
district court asked the Trustees and the insurers to
report on the status of Count VII. All parties agreed it
was moot. Obviously, in light of our reinstatement of
the CERCLA and ELA claims, that conclusion is no
longer warranted. Count VII is not moot, and we
proceed to a consideration of Auto Owners’s condi-
tional cross-appeal.
AUTO OWNERS’S CROSS-APPEAL
Auto Owners Mutual Insurance Company is one of the
Bankerts’ former insurers, targeted by the Trustees in
Count VII of the Complaint. Early in this litigation,
Auto Owners filed a motion to dismiss Count VII on res
judicata and/or issue preclusion grounds. Auto Owners
previously litigated several of the insurance policies
in question during the Enviro-Chem Site cleanup in the
1980s and obtained relief in the form of a consent
decree and a default judgment. As a result, Auto Owners
believes the present claim against it is precluded. The
district court treated the motion as one for summary
judgment and denied it. To the extent that Auto Owners
prevailed regardless when Count VII was dismissed as
moot, the final judgment in the case was a favorable
one. But they filed a conditional cross-appeal to hedge
against a possible reversal, challenging the district
court’s adverse finding on the preclusion issue. The
Trustees responded by challenging the procedural propri-
64 Nos. 11-1501 and 11-1523
ety of the cross-appeal and, in the alternative, by
arguing that the district court reached the correct result.
Because we have reinstated the CERCLA, ELA, and
declaratory judgment claims originally dismissed in
the district court’s final judgment, we now reach Auto
Owners’s conditional cross-appeal.
Background
Auto Owners is a party to the case because of its role as
a Bankert insurer during the last years of Enviro-Chem
operation. From 1977 until its closure in May of 1982,
Enviro-Chem was located primarily at 865 South State
Road 431, Zionsville, Indiana—referred to earlier in this
opinion as the “Enviro-Chem Site.” The Bankert family
owned the site, and Jonathan Bankert, Sr., served as
president of Enviro-Chem. His officers and directors
were Roy Strong and David Finton. Two companies—Pratt
& Lambert, Inc., and Union Carbide Corporation—trans-
ported industrial and commercial wastes to the Enviro-
Chem Site, where they were held in tanks owned by
Wastex Research, Inc. On May 5, 1982, Enviro-Chem
ceased operations, leaving approximately 25,000 drums
and 56 bulk storage tanks at the Enviro-Chem Site. The
drums and tanks were located outside and, unfortunately,
were permitted to deteriorate and release the waste
they contained. In July of 1983, the EPA responded by
authorizing a $3 million cleanup project.
On September 21, 1983, the United States filed a com-
plaint in the Southern District of Indiana against more than
250 defendants, including Enviro-Chem, Jonathan and
Nos. 11-1501 and 11-1523 65
Patricia Bankert, Roy Strong, David Finton, Gary Watson,2 0
Wastex, Pratt & Lambert, and Union Carbide. The com-
plaint sought to recover EPA response costs and to
obtain a declaratory judgment holding the defendants
jointly and severally liable for future costs incurred by
the United States as it continued to address contamina-
tion at the Enviro-Chem Site. On the same day the com-
plaint was filed, Union Carbide and 133 other
defendants entered into a consent decree with the gov-
ernment, agreeing to clean up the surface of the
Enviro-Chem Site in order to resolve a portion of the
government’s claim against them. Then, on November 8,
1983, the settling defendants filed a cross-claim against
the non-settling defendants, a group which included
Enviro-Chem, Jonathan and Patricia Bankert, Roy Strong,
David Finton, Gary Watson, and Wastex. The cross-
claim sought to recover the approximately $3 million
the settling defendants would expend on the surface
cleanup, as well as a declaratory judgment that they
were not liable for any additional future costs related
to cleanup efforts at the Enviro-Chem Site.
While the 1983 lawsuit progressed, another was in the
works. Auto Owners had issued several insurance
policies to Enviro-Chem, the Bankerts, and two
other companies known as Technosolve and Hazardous
Materials Management, Inc., during Enviro-Chem’s last
years of operation. On April 5, 1984, Auto Owners filed
20
Gary Watson served as court-appointed receiver for Enviro-
Chem beginning on July 1, 1981.
66 Nos. 11-1501 and 11-1523
its own complaint in the Southern District of Indiana,
naming the parties on both sides of the cross-claim in
the simultaneously pending action as defendants.
Auto-Owners sought a declaratory ruling that it owed
no coverage for the potential liability of its insureds,
pursuant to an exclusion contained in the policies at issue:
No coverage is provided by this policy for claims, suits,
actions or proceedings against the insured arising
out of the discharge, disposal, release or escape of
smoke, vapors, soot, fumes, acids, alkalis, toxic chemi-
cals, liquids or gases, waste material or other irritants,
contaminants or pollutants into and upon land,
the atmosphere or any water course or body of water.
Auto Owners’s suit was resolved piecemeal. On Decem-
ber 21, 1990, the court entered a default judgment in
Auto Owners’s favor against Enviro-Chem, Roy Strong,
David Finton, Gary Watson, Technosolve, and Hazardous
Materials Management. On August 29, 1991, the court
entered an agreed judgment between Auto Owners, the
Bankerts, Union Carbide, Pratt & Lambert, and Wastex.
The default judgment simply incorporated the complaint
by reference and granted the relief requested therein,
and the agreed judgment stipulated a dismissal without
prejudice. In any case, it is undisputed that Auto Owners
was successful in avoiding any duty of indemnification
attendant to the Enviro-Chem Site litigation. Now, Auto
Owners hopes to use the 1990 default judgment and
the 1991 agreed judgment to preclude the Trustees
from obtaining a declaration of coverage for Third Site.
Nos. 11-1501 and 11-1523 67
Discussion
The first dispute concerns the propriety of the cross-
appeal. The Trustees argue that Auto Owners’s cross-
appeal should be dismissed because Auto Owners pre-
vailed in the final judgment issued by the district court.
Auto Owners argues in response that a conditional cross-
appeal is a permissible way to hedge against an
adverse finding on the main appeal. Neither party refer-
ences the actual standard in our Circuit for resolving
this sort of dispute. The dispositive question is whether
the relief sought in the cross-appeal is different from
the relief already obtained by the cross-appealing party
in the district court’s final judgment. If it is not
different, then the cross-appeal must be dismissed. See
Weitzenkamp v. Unum Life Ins. Co. of Am., 661 F.3d
323, 332 (7th Cir. 2011) (reiterating the rule that
“cross-appeals are not appropriate in routine cases like
ours that raise only alternate grounds for affirmance of
the judgment and not an independent issue[.]”). On the
other hand, “[a]n appellee who wants, not that the judg-
ment of the district court be affirmed on an alternative
ground, but that the judgment be changed,” for
example, from a dismissal without to a dismissal with
prejudice, not only should but must file a cross-appeal.
Am. Bottom Conservancy v. United States Army Corps
of Eng’rs, 650 F.3d 652, 661 (7th Cir. 2011).
In this case, the district court did not specify, either in
its separate order dismissing count six as moot or in its
final judgment, whether the dismissal of count six was
a dismissal with or without prejudice. Pursuant to
68 Nos. 11-1501 and 11-1523
Federal Rule of Civil Procedure 41(b), “[u]nless the dis-
missal order states otherwise, a dismissal under this
subdivision (b) and any dismissal not under this rule—
except one for lack of jurisdiction, improper venue, or
failure to join a party under Rule 19—operates as
an adjudication on the merits.” A dismissal on
mootness grounds is a dismissal for lack of jurisdiction.
St. John’s United Church of Christ v. City of Chi., 502 F.3d
616, 626 (7th Cir. 2007) (“ ‘when the issues presented are
no longer live or the parties lack a legally cognizable
interest in the outcome,’ the case is (or the claims are)
moot and must be dismissed for lack of jurisdiction.”
(quoting Powell v. McCormack, 395 U.S. 486, 496 (1969))).
The case law holds, consistent with Rule 41(b), that a
dismissal for lack of subject matter jurisdiction cannot
be a dismissal with prejudice. Murray v. Conseco, Inc.,
467 F.3d 602, 605 (7th Cir. 2006) (citing Fredericksen v.
City of Lockport, 384 F.3d 437, 438 (7th Cir. 2004)). The
relief Auto Owners obtained in the district court was
therefore a dismissal without prejudice.
The relief Auto Owners requests in its cross-appeal, on
the other hand—a dismissal on res judicata grounds—is a
dismissal with prejudice. Auto Owners seeks a deter-
mination that the claims before the court in this case
have previously been adjudicated on the merits; res
judicata only bars an action if there was a final judgment
on the merits in an earlier case and both the parties
and claims in the two lawsuits are the same. See Matrix IV,
Inc. v. Am. Nat’l Bank & Trust Co., 649 F.3d 539, 547 (7th
Cir.2011); Johnson v. Cypress Hill, 641 F.3d 867, 874
(7th Cir.2011). Obviously, in contrast to a dismissal
Nos. 11-1501 and 11-1523 69
without prejudice, any such determination disposes of
the claims before the court permanently. If the Trustees’
declaratory judgment claim against Auto Owners
cannot be brought in this instance due to an earlier,
binding determination of the claim or of the dispositive
issues, then it cannot be brought in any future instance
without running into the same problem. See Walliser v.
Hannig, 358 Fed. Appx. 715, 717 (7th Cir. 2009) (referring
to a dismissal on res judicata grounds as a “final judg-
ment on the merits”). The relief Auto Owners seeks in
its cross-appeal, a dismissal with prejudice, is therefore
different from the relief it won in the district court’s
disposition of the case, which was a dismissal without
prejudice. A cross-appeal is proper under the circum-
stances, see Am. Bottom Conservancy, 650 F.3d at 661, and
we proceed to the merits.
Because the prior decisions—the 1990 default judgment
and the 1991 agreed judgment—were entered by the
United States District Court for the Southern District of
Indiana, we apply federal law to determine their pre-
clusive effect. E.E.O.C. v. Harris Chernin, Inc., 10 F.3d 1286,
1290 n. 4 (7th Cir. 1993) (“Where the earlier action is
brought in federal court, the federal rules of res judicata
apply.”) (internal citations omitted); see also Havoco of
America, Ltd. v. Freeman, Atkins & Coleman, Ltd., 58 F.3d
303, 307 n.6 (7th Cir. 1995). Auto Owners argues both
issue and claim preclusion, which are doctrinally related
but are subject to different tests. Claim preclusion, which
operates to conserve judicial resources and promote
finality, applies when a case involves the same parties
and the same set of operative facts as an earlier one
70 Nos. 11-1501 and 11-1523
that was decided on the merits. See Matrix IV, Inc., 649
F.3d at 547. Issue preclusion, a narrower doctrine
than claim preclusion, prevents litigants from re-
litigating an issue that has already been decided in a
previous judgment. Hayes v. City of Chi., 670 F.3d 810, 814
(7th Cir. 2012) (citing Matrix IV, Inc., 649 F.3d at 547). The
district court found that neither doctrine precluded
this lawsuit. We review the district court’s disposition
of these questions de novo, see Johnson v. Cypress Hill,
641 F.3d 867, 874 (7th Cir. 2011) (“We review the
district court’s dismissal of a lawsuit on res judicata
grounds de novo.”); Townsend v. Vallas, 256 F.3d 661, 668
(7th Cir. 2001) (“We review a district court’s decision to
grant or deny summary judgment de novo.”), and
we agree.
I. Issue Preclusion
We begin by addressing Auto Owners’s issue pre-
clusion argument. The doctrine of issue preclusion “bars
‘successive litigation of an issue of fact or law actually
litigated and resolved in a valid court determination
essential to the prior judgment,’ even if the issue recurs in
the context of a different claim.” Taylor v. Sturgell, 553
U.S. 880, 892 (2008) (quoting New Hampshire v. Maine, 532
U.S. 742, 748 (2001)). Issue preclusion requires an
identity of issues: “the doctrine ‘applies only when
(among other things) the same issue is involved in the
two proceedings[.]’ ” Coleman v. Donahoe, 667 F.3d 835, 853-
54 (7th Cir. 2012) (quoting King v. Burlington N. & Santa
Fe Ry. Co., 538 F.3d 814, 818 (7th Cir. 2008)). Additionally,
Nos. 11-1501 and 11-1523 71
it is well-settled that issue preclusion, like claim preclu-
sion, only applies if the issue was previously determined
by a “valid and final judgment.” Bobby v. Bies, 556 U.S.
825, 834 (2009).
We need not decide whether the relief obtained by
Auto Owners in the 1984 action—a default judgment and
a consented dismissal without prejudice—constitutes a
“valid and final judgment,” and we need not decide
whether the coverage issue was “actually litigated” therein.
The issue in this case and the issue in that case are
not identical. They are not identical because the effects
of the pollution exclusion and personal injury provisions
of the Auto Owners policies on coverage for contamina-
tion at the Enviro-Chem Site and for contamination at
Third Site necessarily depend on different sets of facts.
True, nobody disputes that Third Site was contaminated
as a result of Enviro-Chem operations. But that does
not mean that Enviro-Chem’s operations at the Enviro-
Chem Site and Enviro-Chem’s operations at Third Site
were identical in all material aspects. As the district
court rightly observed, there is substantial—even undis-
puted—evidence in the record that contamination at
Third Site was caused by the release of pollutants at
Third Site, and that contamination at the Enviro-Chem
Site was caused by the release of pollutants at the Enviro-
Chem Site. It may yet turn out that the absolute pollu-
tion exclusion—to the extent that most of the policies
at issue incorporate it—will prevent the Trustees from
recovering against Auto Owners for costs they incurred
in cleaning up Third Site. But if so, that will be because
the contamination process at Third Site qualified as a
72 Nos. 11-1501 and 11-1523
“discharge, disposal, release or escape of smoke, vapors,
soot, fumes, acids, alkalis, toxic chemicals, liquids or
gases, waste material or other irritants, contaminants or
pollutants into and upon land, the atmosphere or any
water course or body of water.” It will not be because
the contamination process at the Enviro-Chem Site quali-
fied as the same, and that is what Auto Owners asks
us to conclude by finding that the coverage issues
involved in the present suit and the prior suit are identi-
cal. They are different factual questions, requiring different
discovery, etc., and Auto Owners is not entitled to issue
preclusion.
II. Claim Preclusion
Next, we turn to Auto Owners’s claim preclusion argu-
ment. The doctrine of claim preclusion, also known as
res judicata, “applies to bar a second suit in federal
court when there exists: (1) an identity of the causes
of actions; (2) an identity of the parties or their privies;
and (3) a final judgment on the merits.” Kratville v. Runyon,
90 F.3d 195, 197 (7th Cir. 1996). With respect to the
first element, “[a] claim is deemed to have ‘identity’ with
a previously litigated matter if it is based on the same,
or nearly the same, factual allegations arising from
the same transaction or occurrence.” Id. at 198. With
respect to the second, “[w]hether there is privity
between a party against whom claim preclusion is
asserted and a party to prior litigation is a functional
inquiry in which the formalities of legal relationships
provide clues but not solutions.” Tice v. Am. Airlines, Inc.,
Nos. 11-1501 and 11-1523 73
162 F.3d 966, 971 (7th Cir. 1998) (quoting Chase
Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 346 (2d
Cir. 1995)). It is a fact-specific analysis, and short-hand
terms like “virtual representation” are of little to no use
in our circuit. Id. With respect to the final element, for
the purpose of claim preclusion, the traditional rule is
that “a judgment on the merits is one which ‘is based
on legal rights as distinguished from mere matters of
practice, procedure, jurisdiction, or form.’ ” Harper
Plastics, Inc. v. Amoco Chems. Corp., 657 F.2d 939, 944
(7th Cir. 1981) (quoting Fairmont Aluminum Co. v. Comm’r,
222 F.2d 622, 625 (4th Cir. 1955)).
Regardless of whether the parties are identical or
whether the piecemeal resolution of the 1984 litigation
qualified as a “final judgment on the merits,” claim
preclusion is inappropriate because there is no “identity
of the causes of action.” Federal law defines a “cause of
action” as “a core of operative facts which give rise to a
remedy[.]” Shaver v. F.W. Woolworth Co., 840 F.2d 1361,
1365 (7th Cir. 1988) (internal citations omitted). Accord-
ingly, the test for an “identity of the causes of action” is
“whether the claims arise out of the same set of operative
facts or the same transaction.” Matrix IV, Inc., 649 F.3d
at 547 (citing In re Energy Coop., Inc., 814 F.2d 1226, 1230
(7th Cir. 1987)). “Even if the two claims are based on
different legal theories, the ‘two claims are one for pur-
poses of res judicata if they are based on the same, or
nearly the same, factual allegations.’ ” Id. (quoting
Hermann v. Cencom Cable Assocs., 999 F.3d 223, 226 (7th
Cir. 1993)). The test is an outgrowth of the rule that a
party must allege in one proceeding all claims and/or
74 Nos. 11-1501 and 11-1523
counterclaims for relief arising out of a single occur-
rence, or be precluded from pursuing those claims in
the future. Id., 840 F.2d at 1365; Fed. R. Civ. P. 13(a). But
despite the frequency with which preclusion defenses
are raised, “there is no formalistic test for determining
whether suits arise out of the same transaction or occur-
rence.” Ross ex rel. Ross v. Bd. of Educ. of Tp. High School
Dist. 211, 486 F.3d 279, 284 (7th Cir. 2007). “Instead, we
have held that courts ‘should consider the totality of
the claims, including the nature of the claims, the legal
basis for recovery, the law involved, and the respective
factual backgrounds.’ ” Id. (quoting Burlington N. R. Co.
v. Strong, 907 F.2d 707, 711 (7th Cir. 1990).
Auto Owners’s 1984 complaint sought a declaratory
judgment that it owed no coverage to the Bankerts or
any of their insured corporate entities under the
policies listed therein for environmental damages at
the Enviro-Chem Site. Supra, n. 14. The operative facts
underlying the lawsuit were that the Enviro-Chem Site
was polluted; that the EPA was engaged in a collabora-
tive process to remedy that pollution; that litigation
was underway to distribute liability for the cleanup costs
between cooperative and uncooperative PRPs; and
that Auto Owners insured the Bankerts and their
corporate entities, who had not paid for any of the
cleanup despite their PRP status, during several of the
years in which the pollution occurred.
Those facts do overlap, to some extent, with the opera-
tive facts underlying Count VII in this case. The Trustees
seek a declaration of coverage for the same insureds
Nos. 11-1501 and 11-1523 75
under the same insurance policies, although they focus
on a different coverage provision within the policies.
But there are also fundamental differences between
the factual background of this suit and the factual back-
ground underlying Auto Owners’s 1984 complaint. For
example, the same factual considerations which barred
a finding of issue preclusion come into play here. This
coverage dispute concerns whether the pollution
activities at Third Site were covered by Auto Owners’s
policies, while the previous dispute concerned whether
the pollution activities at the Enviro-Chem Site were
covered by Auto Owners’s policies. We need not
reiterate why that distinction is important. It is enough
to note that it means the claims are not identical;
the success of each depends on fitting the facts that led
to that contamination to the text of the exclusion provi-
sion in the insurance policies. After engaging in such
an analysis, the district court could come to the
conclusion that Auto Owners does owe coverage to the
Bankerts for the pollution at Third Site, for example,
without in any way contradicting the earlier finding that
it does not owe coverage at the Enviro-Chem Site. See
Harper Plastics, Inc., 657 F.2d at 944 (court looks to
“whether the judgment in a second suit would impair
rights established under the first judgment” when deter-
mining whether causes of action are identical). Again,
the district court may well find that the pollution exclu-
sion in Auto Owners’s contracts bars coverage for the
pollution activities at Third Site, but not on claim preclu-
sion grounds. We affirm with respect to both preclusion
issues.
76 Nos. 11-1501 and 11-1523
CONCLUSION
For the reasons stated, we reverse the district court’s
dismissal of Counts I, II, III, and VII. In Count I, the
Trustees have made a timely CERCLA claim, under
42 U.S.C. § 9607(a)(4)(B), to recover costs incurred
pursuant to the 2002 AOC. The Trustees’ Count II “com-
panion claim” for a declaratory judgment of CERCLA
liability is therefore also reinstated. We find that the
Indiana ELA claim contained in Count III is timely,
and that the declaratory judgment claim contained in
Count VII is not moot. The district court committed no
abuse of discretion in its handling of the summary judg-
ment briefing process. Finally, we affirm the district
court’s denial of Auto Owners’s motion for summary
judgment on preclusion grounds. The Trustees’ suit is
reinstated and remanded for further proceedings con-
sistent with this opinion.
7-31-13