Norman Bernstein v. Patricia Banker , 702 F.3d 964 ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 11-1501 & 11-1523
N ORMAN W. B ERNSTEIN , et al.,
Plaintiffs-Appellants/
Cross-Appellees,
v.
P ATRICIA A. B ANKERT, et al.,
Defendant-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
2 Nos. 11-1501 & 11-1523
Before K ANNE and W ILLIAMS, Circuit Judges, and
D EG UILIO , District Judge. Œ
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. Addressing both ap-
Œ
The Honorable Jon E. DeGuilio, Judge of the United States
District Court for the Northern District of Indiana, sitting
by designation.
Nos. 11-1501 & 11-1523 3
peals, we reverse in part and affirm in part. The case is
remanded for further proceedings on the reinstated claims.
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 north-
east—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 operations.
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,
4 Nos. 11-1501 & 11-1523
surface water samples collected by the EPA in 1988 from
nearby Finley Creek showed elevated levels of VOCs
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 realign-
ment 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
Nos. 11-1501 & 11-1523 5
Respondents” and one dealing with “Premium Respon-
dents.” The Non-Premium Respondents agreed to under-
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
oversight 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 com-
plied with fully to its completion. In 2001, subsequent
to approving the work done under the 1999 AOC, the
EPA issued an Enforcement Action Memorandum
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
6 Nos. 11-1501 & 11-1523
Action Memorandum. For the most part, the 2002 AOC
tracked the form of the 1999 AOC. It included separate
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-à-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 empow-
ered to hold and manage funds; to retain engineers and
others to carry out the work to be performed 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 appellees 1 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
1
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.
Nos. 11-1501 & 11-1523 7
District of Indiana with six counts: Count I, a CERCLA
cost recovery action pursuant to 42 U.S.C. § 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,2 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’
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’
motion claiming preclusion to a motion for summary
judgment and permitted the parties to conduct discovery
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 sum-
mary judgment on statute of limitations grounds. The
Trustees responded, and the Bankerts replied. On Decem-
ber 10, 2009, the Trustees moved to strike a portion of
2
For reasons unknown to us, the Complaint did not include
a “Count VI.”
8 Nos. 11-1501 & 11-1523
that reply or, in the alternative, for permission to file
supplemental briefing. The district court heard 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 purported 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, invalidated the
declaratory judgment request contained in Count II.
Finally, the district court found that the statute of limita-
tions 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 controversy 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 defen-
dants, dismissing Count VII as moot consistent with the
parties’ positions. The Trustees filed a timely notice of
Nos. 11-1501 & 11-1523 9
appeal on March 3, 2011, and Auto Owners cross-appealed.
We take up each appeal in turn.
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
We begin with the Trustees’ CERCLA claims. In Count I
of their Complaint, the Trustees sought to recover funds
which the Bankerts allegedly owed to the Third Site Trust
pursuant to obligations created by the 1999 and 2002
AOCs. The Trustees characterized Count I as a claim
for cost recovery under 42 U.S.C. § 9607(a), but the
district court held that a § 9607(a) claim was unavailable
to the Trustees; that their claim must therefore be one
10 Nos. 11-1501 & 11-1523
for contribution under § 9613(f); and that the limitations
period for a contribution claim had run. Count II, seeking
a declaratory judgment of liability, is essentially a deriva-
tive claim; once the 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
Nos. 11-1501 & 11-1523 11
U.S.C. §§ 9601-9675, in response to the serious environ-
mental and health risks posed by industrial pollution.
Burlington N. and Santa Fe Ry. Co. v. United States, 556
U.S. 599, 602 (2009) (citing United States v. Bestfoods,
524 U.S. 51, 55 (1998)). To put it mildly, 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 N., 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 en-
courage private parties to assume the financial responsi-
bility of cleanup by allowing them to seek recovery
from others.”). 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
associated 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’ CERLCA claim falls before deter-
mining whether it is time-barred.
Section 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
12 Nos. 11-1501 & 11-1523
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
liable for “all costs of removal or remedial action 3
3
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
environment, 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 otherwise 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.
(continued...)
Nos. 11-1501 & 11-1523 13
incurred by the United States Government or a State or
an Indian tribe not inconsistent with the national con-
tingency plan[,]” 4 § 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 defendant’s
liability—although strict—need not be joint and several.
See Burlington N., 556 U.S. at 613-14. Judicial apportion-
ment is proper so long as the defendant can demon-
strate that there is a reasonable basis for determining
the contribution of each cause to a single harm. Id.
3
(...continued)
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)).
4
“The national contingency plan specifies procedures for
preparing and responding to contaminations and was promul-
gated 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.
14 Nos. 11-1501 & 11-1523
(citing United States v. Chem-Dyne Corp., 572 F.Supp. 802,
810 (S.D. Ohio 1983); Restatement (Second) of Torts
§ 433A(1)(b), p. 434 (1963-1964)).
Section 9613(f), on the other hand, is the “contribu-
tion” provision of CERCLA. Added to the statute by the
Superfund Amendments and Reauthorization Act
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 condi-
tions 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).
Nos. 11-1501 & 11-1523 15
The second contribution right of action is codified at
42 U.S.C. § 9613(f)(3)(B):5
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 judi-
cially approved settlement may seek contribution from
any person who is not party to a settlement referred
to in paragraph (2).6
(emphasis added). As the Supreme Court did with respect
to § 9613(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 . . .
5
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 simply
modifying or further describing the conditions under which a
§ 9613(f)(1) contribution action might be available. 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) . . . .”).
6
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).
16 Nos. 11-1501 & 11-1523
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 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 possi-
ble, be construed in such fashion that every word has
some operative effect”); Louisville & Nashville R.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.”).
Furthermore, the phrase “resolved its liability . . . in an
administrative . . . settlement,” used as a trigger in
§ 9613(f)(3)(B), has a specific meaning within the
CERCLA framework. Any time the United States settles
with a PRP under CERCLA, it does so through the author-
ity conferred by 42 U.S.C. § 9622. The effect of any
such settlement on the settling parties’ liability is
governed by § 9622(c)(1):
Whenever the President has entered into an agree-
ment under this section, the liability to the United
States under this chapter of each party to the agree-
ment, including any future liability to the United
States, arising from the release or threatened release
that is the subject of the agreement shall be limited
as provided in the agreement pursuant to a covenant
Nos. 11-1501 & 11-1523 17
not to sue in accordance with subsection (f) of
this section.
The “subsection (f)” to which the quotation refers provides:
(1) Discretionary covenants
The President may, in his discretion, provide any
person with a covenant not to sue concerning any
liability to the United States under this chapter, in-
cluding future liability, resulting from a release
or threatened release of a hazardous substance ad-
dressed by a remedial action, whether that action
is onsite or offsite, if each of the following conditions
is met:
(A) The covenant not to sue is in the public inter-
est.
(B) The covenant not to sue would expedite re-
sponse action consistent with the National Contin-
gency Plan under section 9605 of this title.
(C) The person is in full compliance with a
consent decree under section 9606 of this title
(including a consent decree entered into in ac-
cordance with this section) for response to the
release or threatened release concerned.
(D) The response action has been approved by
the President.
***
(3) Requirement that remedial action be completed
A covenant not to sue concerning future liability to the
United States shall not take effect until the President
18 Nos. 11-1501 & 11-1523
certifies that remedial action has been completed
in accordance with the requirements of this chapter
at the facility that is the subject of such covenant.
42 U.S.C. § 9622(f).
Thus, reading the statutory scheme as a whole, as we
are bound to do, see King v. St. Vincent’s Hosp., 502 U.S. 215,
221 (1991), we see that an administrative settlement
between the United States and PRP does not, and cannot,
automatically resolve that PRP’s liability. It does so only
through the operation of a subsection (f) covenant not
to sue. And, under the plain terms of the statute, a sub-
section (f) covenant not to sue cannot possibly take
effect, thereby actually releasing the settling PRP from
liability, until the PRP has satisfactorily discharged its
obligation under the agreement and the President has
certified its completion. See § 9622(f)(1), (3). The end
result is that a § 9613(f)(3)(B) contribution action, predi-
cated as it is on the resolution of liability, is not available
simply because a settlement has occurred. The trigger
is the resolution of liability through that settlement,
which, pursuant to the statute, does not occur until satis-
factory performance has been certified.
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
Nos. 11-1501 & 11-1523 19
recover his expenditures through a contribution 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 contribution
under CERCLA. That does not mean he has no remedy,
however. Any time a person has incurred “necessary
costs of response . . . consistent with the national con-
tingency plan[,]” CERCLA 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
Complaint, 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
20 Nos. 11-1501 & 11-1523
AOC could only be recovered through a contribution
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
Site, to develop and submit an EE/CA report to the EPA,7
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 constitutes a satis-
faction 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
7
An EE/CA is classified as a “removal action” by the EPA.
See 40 C.F.R. § 300.415(b)(4)(i).
Nos. 11-1501 & 11-1523 21
Sections 106(a) or 107(a) of CERCLA, 42 U.S.C.
§§ 9606(a), 9607(a).8
The covenants not to sue referred to in the disclaimer
above were expressly conditioned on respondents’ ful-
fillment 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 Respon-
dents 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.
8
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)”
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 designation
within the United States Code.
22 Nos. 11-1501 & 11-1523
These conditional covenants are consistent with the
statutory requirements for a release of CERCLA liability
through settlement, in that such a release cannot occur
until any obligations imposed by the settlement are
certified complete. See 42 U.S.C. § 9622(f).
For the Non-Premium Respondents, then, the EPA’s
covenants not to sue—and 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 Respon-
dents 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 statute and of the AOC itself, 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 cove-
nants not to sue contained therein went into effect. At
that point, the Non-Premium Respondents, and by ex-
tension 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, thus satisfying the prerequi-
sites 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 execu-
tion of the EE/CA and with respect to the reimburse-
Nos. 11-1501 & 11-1523 23
ment 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 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.
551 U.S. at 139 n. 6.
24 Nos. 11-1501 & 11-1523
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. Advanced 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
conclusion. 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., Inc., 506 F.3d at 458. Second,
some courts have concluded that permitting a party who
has already resolved 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 anti-
thetical to the purpose of the statute. See, e.g., Solutia,
672 F.3d at 1237; Agere Sys., Inc., 602 F.3d at 228-29.
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 contribution
Nos. 11-1501 & 11-1523 25
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). See, e.g., Solutia, 672 F.3d at 1237; Agere
Sys., Inc., 602 F.3d at 228-29. 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 contamination, see Burlington N., 556 U.S. at
602, such gamesmanship seems inappropriate.
The problem, of course, is that § 9607(a) does not have
to impose joint and several liability. Instead, apportion-
ment is proper where there is a reasonable basis for
determining the contribution of each cause to a single
harm. Burlington N., 556 U.S. at 614. Showing a
reasonable basis for apportionment is arguably easier for
a defendant than meeting the preponderance of the
evidence standard that would apply to a contribution
counterclaim. As a result, counterclaim or no counter-
claim, there is little to no danger that a defendant could
26 Nos. 11-1501 & 11-1523
be gamed into shouldering full liability, or more than
his fair share, by a plaintiff with a § 9607(a) action. After
Burlington Northern, the “contribution 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, 596 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 construc-
tion 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). And
although, giving the words their plain meaning, they
have 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 plain-
Nos. 11-1501 & 11-1523 27
tiff 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
began to run on the date the AOC was executed.9 The
9
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
(continued...)
28 Nos. 11-1501 & 11-1523
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 comple-
tion of the removal action, except that such cost re-
covery action must be brought within 6 years
after a determination to grant a waiver under sec-
tion 9604(c)(1)(C) of this title for continued response
action; and
(B) for a remedial action, within 6 years after initia-
tion of physical on-site construction of the remedial
action, except that, if the remedial action is initiated
within 3 years after the completion of the removal
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).
9
(...continued)
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.
Nos. 11-1501 & 11-1523 29
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
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 limita-
tions for contribution actions, we would mark a start
date for the limitations period on the date the AOC was
executed. 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.
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. In
November 2002, the parties entered into the second AOC
to implement those solutions. The 2002 AOC included
30 Nos. 11-1501 & 11-1523
identical conditional covenants not to sue, and its struc-
ture 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. Additionally, they could not possibly 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 obliga-
tions under the 2002 AOC. See § 9622(f)(1), (3). 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 therefore likewise unavailable.
What the Trustees have done, with respect to the work
called for by the 2002 AOC, is incur costs of response
consistent with the national contingency plan, as is re-
quired to file a cost recovery action under § 9607(a). The
Bankerts offer no persuasive reason why such an
action cannot be maintained. Their argument focuses
primarily on a distinction between voluntary and com-
pelled costs: they claim that the Supreme Court drew a
new line in the sand in Atlantic Research and that, going
forward, a cost recovery action is available only to plain-
tiffs who incurred costs voluntarily. Compelled costs, on
the other hand, may only be recovered through a con-
Nos. 11-1501 & 11-1523 31
tribution action. Since the Trustees were “compelled” to
clean up the site by the administrative settlement
process, the Bankerts argue that they are limited to a
contribution action. There are three significant problems
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. See 551 U.S. at
131. Arguing against that result, the United States sug-
gested 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 whichever 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
32 Nos. 11-1501 & 11-1523
has not incurred its own costs of response and therefore
cannot recover under § 107(a). As a result, though eligible
to seek contribution under § 113(f)(1), the PRP cannot
simultaneously seek to recover the same expenses under
§ 107(a).” Id. The Court concluded that the govern-
ment’s cause-shopping worries were thus unfounded.
But before moving on, the Court recognized the limita-
tions 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 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
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. For our purposes, it suffices to demonstrate
that costs incurred voluntarily are recoverable 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.
Nos. 11-1501 & 11-1523 33
The Bankerts conclude, based on the quoted footnote,
that only parties who voluntarily incur response costs can
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-
34 Nos. 11-1501 & 11-1523
tribution claim was available to plaintiffs by virtue of a
previous EPA lawsuit, and noting that “[d]espite the
courts’ use of the terms ‘voluntary’ and ‘involuntary’
to distinguish between payments recoverable under
§ 107(a) and those recoverable under § 113(f), the opera-
tive 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 straightforward 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). Finally, 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 Int’l, 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 agreement. Despite the exis-
tence of the settlement agreement, the court held
that the plaintiff could recover its cleanup costs under
§ 9607(a) because neither contribution trigger had oc-
curred. The settlement had not resolved CERCLA liabil-
ity (§ 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.
Nos. 11-1501 & 11-1523 35
The third, and most obvious, problem with the
Bankerts’ argument is that they are asking us to impose 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 previ-
ously been subjected to a civil action under § 9606 or
§ 9607(a), and so on. The Bankerts have advanced no
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, espe-
cially one with so little to recommend it in the case law.
Beyond their characterization of Atlantic Research and
subsequent case law, the Bankerts seem to suggest that
the mere fact that the Trustees entered into a settlement
is enough to give rise to a claim for contribution under
§ 9613(f)(3)(B), thereby precluding the Trustees from
advancing a cost recovery claim instead. But the
statutory trigger for a § 9613(f)(3)(B) contribution claim
is not the fact of settlement. It is the resolution of
liability through settlement. Given the express terms of
the statute and of the AOCs in this case, there can be
no meaningful argument that the liability to the United
States of the Non-Premium Respondents, and by
extension the Trust, was resolved on the day they
signed the settlement agreement. To the extent that the
36 Nos. 11-1501 & 11-1523
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 three-year lim-
itations period under 42 U.S.C. § 9613(g)(2)(A), quoted
in full supra, had not yet begun to run, let alone ex-
pired. The Trustees’ cost recovery action for expenses
incurred under the 2002 AOC is timely.
3. Conclusion of CERCLA Issues
In summary, the Trustees cannot recover for expenses
incurred in carrying out the work performed under the
1999 AOC. At this point, that relief can only be sought
through a contribution action, and a contribution action
is time-barred, no matter which side is correct as to the
triggering event. But the Trustees can recover for
expenses incurred in carrying out the 2002 AOC. In that
respect, Count I is a claim for cost recovery and is timely.
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. The removal action con-
templated by the 1999 AOC was completed years ago,
and supports a contribution action. The removal action
contemplated by the 2002 AOC was ongoing at the
time this suit was filed, and supports a cost recovery
Nos. 11-1501 & 11-1523 37
action. Each is governed by a different statute of limita-
tions, and the fact that recovery with respect to the
former is time-barred does not legally preclude the Trust-
ees from pursuing recovery with respect to the latter,
which is not. Furthermore, resolving the dispute in
this manner does not require constructing a new claim
that the plaintiff 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. Functionally speaking,
this ruling simply limits the damages the plaintiff can
recover. The district court’s judgment is reversed with
respect to Count I to the extent that the Trustees may
seek to recover for costs incurred pursuant 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 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 rea-
sonable basis for apportionment.
38 Nos. 11-1501 & 11-1523
C. 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, 618-19
(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
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 question
the district court’s representations, let alone to find that
they are “beyond the pale of reasonable justification.”
We find no abuse of discretion on this record.
Nos. 11-1501 & 11-1523 39
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 rea-
sonable 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 effec-
tive on February 28, 1998. In Count III of the Complaint,
the Trustees sued under the ELA to recover the costs of
the removal actions undertaken pursuant to the 1999
and 2002 AOCs. At the summary judgment stage, the
Bankerts argued that an ELA claim was barred by
the applicable statute of limitations, 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 con-
sidered substantive law for purposes of the Erie doc-
trine). When this action was filed, the ELA did not
include its own limitations provision.1 0 Accordingly,
10
That changed in 2011, when the Indiana General Assembly
enacted I ND . C ODE § 34-11-2-11.5. That section states, inter alia:
(continued...)
40 Nos. 11-1501 & 11-1523
both 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 limita-
tions 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
10
(...continued)
(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 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[.]”)).
Nos. 11-1501 & 11-1523 41
for property damage, and should therefore be governed
by the six-year statute of limitations for actions to
recover damages to real property.1 1 Second, whichever
statute applies, the Bankerts also dispute—and we must
determine—when the limitations period began to run.
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 756 (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 combination,
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
11
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.
42 Nos. 11-1501 & 11-1523
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.
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 corrective
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 substantively similar
that the Indiana Code gives plaintiffs aggrieved 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 statu-
tory option). Most importantly for our purposes,
Nos. 11-1501 & 11-1523 43
however, the two are identical to the extent that neither
includes its own express statute of limitations. In Pflanz,
both parties and the Indiana Supreme Court agreed
that the ten-year catch-all statute of limitations
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 environ-
mental cleanup costs”).1 2
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
12
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
correct. Which statute of limitations applies to a claim is
a question of law, and it is long-settled in Indiana that a
“conclusion 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 conclu-
sion 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’ agreement therefore amounted to a decision that
the limitations period agreed to was legally correct.
44 Nos. 11-1501 & 11-1523
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 gov-
erned by the ten-year catch-all statute of limitations,
the limitations period does not begin to run “until after
the [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
provision 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
Nos. 11-1501 & 11-1523 45
responsible in any way for the contamination at the site,
the court concluded that the Peniel plaintiffs’ action
was one for property 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.
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. In-
deed, 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,
46 Nos. 11-1501 & 11-1523
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 provi-
sion—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 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 I ND. C ODE § 34-
11-1-2(a), then the ten-year catch-all limitations period
applies. It makes no difference whether we call the Trust-
ees’ 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
Nos. 11-1501 & 11-1523 47
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 dif-
ference 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’] prop-
erty.” Bourbon Mini-Mart, 741 N.E.2d 361. Therefore, “[t]he
nature or substance of their claim sounds [nearer] con-
tribution or indemnity, and the general ten-year statute
of limitations found at IC 34-11-1-2 applies.” Id.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 ap-
plication 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 1279 (“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
48 Nos. 11-1501 & 11-1523
after its issuance.1 3 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 re-
covering 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
13
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 & 11-1523 49
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 otherwise
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, 673 N.E.2d at 842. But
that just means an obligation to pay may be considered
an “injury” for statute of limitations purposes even
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 Trustees’
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 argu-
ment 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-
50 Nos. 11-1501 & 11-1523
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 clairvoy-
ance. 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’ under-
standing of the law it could be a common one.
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-
30 (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
Nos. 11-1501 & 11-1523 51
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
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 environ-
mental 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
52 Nos. 11-1501 & 11-1523
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
their respective policy limits, for any liabilities owed by
their policyholders 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’ conditional cross-appeal.
AUTO OWNERS’ 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
Nos. 11-1501 & 11-1523 53
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 pro-
priety 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’ 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
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 compa-
54 Nos. 11-1501 & 11-1523
nies—Pratt & Lambert, Inc., and Union Carbide Corpora-
tion—transported 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 re-
lease the waste they contained. In July 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 Patricia Bankert, Roy Strong, David Finton, Gary
Watson,14 Wastex, Pratt & Lambert, and Union Carbide.
The complaint 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 government,
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, Jona-
14
Gary Watson served as court-appointed receiver for Enviro-
Chem beginning on July 1, 1981.
Nos. 11-1501 & 11-1523 55
than and Patricia Bankert, Roy Strong, David Finton,
Gary Watson, and Wastex. The cross-claim sought to
recover the approximately $3 million the settling defen-
dants 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
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 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.
Auto Owners’ suit was resolved piecemeal. On
December 21, 1990, the court entered a default judgment
in Auto Owners’ favor against Enviro-Chem, Roy
Strong, David Finton, Gary Watson, Technosolve, and
56 Nos. 11-1501 & 11-1523
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 judg-
ment to preclude the Trustees from obtaining a declara-
tion of coverage for Third Site.
Discussion
The first dispute concerns the propriety of the cross-
appeal. The Trustees argue that Auto Owners’ cross-appeal
should be dismissed because Auto Owners prevailed 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 references 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 ob-
tained 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
Nos. 11-1501 & 11-1523 57
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 judgment 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 Federal Rule of Civil Procedure 41(b), “[u]nless the
dismissal 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
58 Nos. 11-1501 & 11-1523
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 with-
out 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 judgment 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
Nos. 11-1501 & 11-1523 59
United States District Court for the Southern District of
Indiana, we apply federal law to determine their
preclusive 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 doc-
trinally 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 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 doc-
trine 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.
60 Nos. 11-1501 & 11-1523
I. Issue Preclusion
We begin by addressing Auto Owners’ issue preclu-
sion 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,
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 contamination at the Enviro-Chem Site and for con-
tamination at Third Site necessarily depend on different
sets of facts. True, nobody disputes that Third Site was
Nos. 11-1501 & 11-1523 61
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
pollution 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 “discharge, disposal, release or escape of
smoke, vapors, soot, fumes, acids, alkalis, toxic
chemicals, liquids or gases, waste material or other irri-
tants, 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 qualified 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 identical. They are different factual ques-
tions, requiring different discovery, etc., and Auto Owners
is not entitled to issue preclusion.
II. Claim Preclusion
Next, we turn to Auto Owners’ claim preclusion argu-
ment. The doctrine of claim preclusion, also known as res
62 Nos. 11-1501 & 11-1523
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 trans-
action 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., 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 representa-
tion” 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 distin-
guished from mere matters of practice, procedure, juris-
diction, 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
Nos. 11-1501 & 11-1523 63
a remedy[.]” Shaver v. F.W. Woolworth Co., 840 F.2d
1361, 1365 (7th Cir. 1988) (internal citations omitted).
Accordingly, 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 purposes 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 counterclaims for relief arising out of a
single occurrence, 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 preclu-
sion defenses are raised, “there is no formalistic test
for determining whether suits arise out of the same trans-
action or occurrence.” 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.R. Co. v. Strong, 907 F.2d 707, 711 (7th
Cir. 1990).
Auto Owners’ 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
64 Nos. 11-1501 & 11-1523
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
operative facts underlying Count VII in this case. The
Trustees seek a declaration of coverage for the same
insureds under the same insurance policies, although
they focus on a different coverage provision within the
policies. But there are also fundamental differences be-
tween the factual background of this suit and the
factual background underlying Auto Owners’ 1984 com-
plaint. 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’ policies, while the previous dispute concerned
whether the pollution activities at the Enviro-Chem Site
were covered by Auto Owners’ 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
Nos. 11-1501 & 11-1523 65
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
exclusion in Auto Owners’ contracts bars coverage for
the pollution activities at Third Site, but not on claim
preclusion grounds. We affirm with respect to both
preclusion issues.
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 “companion
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 discre-
tion in its handling of the summary judgment briefing
process. Finally, we affirm the district court’s denial of
Auto Owners’ motion for summary judgment on preclu-
sion grounds. The trustees’ suit is reinstated and
66 Nos. 11-1501 & 11-1523
remanded for further proceedings consistent with
this opinion.
12-19-12