Matter of Bell Petroleum Services, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 91-8080
_____________________
IN THE MATTER OF: BELL PETROLEUM SERVICES,
INC.,
Debtor.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,
Appellee,
versus
SEQUA CORPORATION AND CHROMALLOY AMERICAN
CORP.,
Appellants.
______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
BELL PETROLEUM SERVICES, INC., REGAL
INTERNATIONAL, INC. and JOHN R. LEIGH,
Defendants,
SEQUA CORPORATION and CHROMALLOY AMERICAN
CORP.,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court for the
Western District of Texas
_________________________________________________________________
September 28, 1993
Before JOLLY and DUHÉ, Circuit Judges, and PARKER*, District Judge.
*
Chief Judge of the Eastern District of Texas, sitting by
designation.
E. GRADY JOLLY, Circuit Judge:
The Environmental Protection Agency (EPA) seeks to recover its
response costs under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) because of a discharge of
chromium waste that contaminated a local water supply. Sequa
Corporation appeals from the imposition of joint and several
liability, challenges the EPA's decision to provide an alternate
water supply system to the area in which the groundwater was
contaminated by the chromium discharge, and contests the
calculation of prejudgment interest and the application of the
proceeds of the EPA's settlement with its co-defendants. We
REVERSE the portion of the judgment imposing joint and several
liability, and REMAND for further proceedings. Our review of the
administrative record has convinced us that the EPA's decision to
provide an alternate water supply was arbitrary and capricious;
accordingly, we REVERSE the portion of the district court's
judgment allowing the EPA to recover the costs of designing and
constructing that system, and REMAND for deletion of those amounts
and recalculating prejudgment interest.1
I
In 1978, a citizen in the Odessa, Texas area complained about
discolored drinking water. The Texas Water Commission conducted an
investigation. It ultimately focused on a chrome-plating shop that
1
Sequa also appealed an award of sanctions against it, but
advised us after oral argument that the matter had been resolved.
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was operated successively from 1971 through 1977 by John Leigh,
Western Pollution Control Corporation (hereinafter referred to as
Bell), and Woolley Tool Division of Chromalloy American Corporation
(which later merged with Sequa), at 4318 Brazos Street, just
outside the city limits of Odessa. The investigation showed that
during the chrome-plating process, finished parts were rinsed, and
the rinse water was pumped out of the building onto the ground.
In 1984, the EPA designated a 24-block area north of the
Brazos Street facility as a Superfund site--"Odessa Chromium I."
It authorized a response action pursuant to its authority under
CERCLA § 104, 42 U.S.C. § 9604, and entered into a cooperative
agreement with the State of Texas. The State was to perform a
remedial investigation, feasibility study, and remedial design work
for the site, with the EPA reimbursing the State for ninety percent
of the costs. The remedial investigation revealed that the Trinity
Aquifer, the only source of groundwater in the area, contained
elevated concentrations of chromium.2
A "focused" feasibility study (FFS) was undertaken to evaluate
the need to provide an alternative water supply pending completion
of the remaining portion of the feasibility study and
implementation of final remedial action.3 The FFS concluded that
2
Chromium is a "hazardous substance" as defined in CERCLA. 42
U.S.C. § 9601(14).
3
The EPA estimated that a final remedy would be in place in
10-15 years. A "remaining portion" feasibility study was
conducted, and the EPA selected a final remedial action in March
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the City of Odessa's water system should be extended to provide
service in the Odessa Chromium I area. On September 8, 1986, the
EPA Regional Administrator issued a Record of Decision (ROD),
finding that city water service should be extended to the site.
Pursuant to the cooperative agreement, the State, through its
contractor, designed and constructed the system, which was
completed in 1988.
II
In December 1988, the EPA filed a CERCLA cost-recovery action
against Bell, Sequa, and John Leigh, which was consolidated with an
adversary proceeding the EPA had filed against Bell in Bell's
bankruptcy case. The EPA sought to recover direct and indirect
costs it incurred in studying, designing, and constructing the
alternate water supply system.
In July 1989, the district court entered a case management
order providing that the case would be decided in three phases:
Phase I--liability, Phase II--recoverability of the EPA's response
costs, and Phase III--"responsibility." In September 1989, the
district court granted in part, and denied in part, the EPA's
motion for summary judgment as to liability. In its memorandum
opinion, it stated that the relative culpability of the parties and
the "divisibility of liability" issues would be decided during
Phase III. Although the district court ruled that CERCLA did not
1988. Those activities are not at issue in this appeal.
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require the EPA to prove causation, it held an evidentiary hearing
and made alternative findings and conclusions addressing causation,
holding that "Leigh, Bell and Sequa caused the contamination."4 In
March 1990, the district court granted the EPA's motion for
clarification of the September 1989 summary judgment, holding that
its previous opinion had provided that the defendants were jointly
and severally liable. It also entered a declaratory judgment as to
the defendants' liability for future response costs.
The Phase II proceeding on recoverability of response costs
was handled through cross-motions for summary judgment. The
district court held that the defendants had not met their burden of
proving that the EPA's decision to implement an alternate water
supply was arbitrary and capricious, and held that they were liable
4
Approximately a month after the district court entered its
findings of fact and conclusions of law on causation, our court
decided Amoco Oil Co. v. Borden, Inc., 889 F.2d 664 (5th Cir.
1989). In Amoco, we noted that, "in cases involving multiple
sources of contamination, a plaintiff need not prove a specific
causal link between costs incurred and an individual generator's
waste." Id. at 670 n.8. Other courts have likewise concluded that
proof of causation is not required in CERCLA cases. E.g., United
States v. Alcan Aluminum Corp. (Alcan-PAS), 990 F.2d 711, 721 (2d
Cir. 1993) (the government is not required to "show that a specific
defendant's waste caused incurrence of clean-up costs"); United
States v. Alcan Aluminum Corp. (Alcan-Butler), 964 F.2d 252, 266
(3d Cir. 1992) ("the Government must simply prove that the
defendant's hazardous substances were deposited at the site from
which there was a release and that the release caused the
incurrence of response costs"); United States v. Monsanto Co., 858
F.2d 160, 170 (4th Cir. 1988) (liability is subject only to the
causation-based affirmative defenses set forth in CERCLA § 107(b);
"Congress has, therefore, allocated the burden of disproving
causation to the defendant who profited from the generation and
inexpensive disposal of hazardous waste.").
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for the EPA's direct and indirect response costs, plus prejudgment
interest from the date such costs were incurred.
On March 2, 1990, the EPA sought approval of a proposed
consent decree, in which it settled its claims against Bell for all
costs, past and future, for $1,000,000. Sequa objected to the
settlement, contending that Bell was not being required to pay its
fair share. The district court granted Sequa's request for a
hearing on the fairness of the proposed consent decree, and entered
an order providing that a Phase III hearing regarding apportionment
of liability was to be conducted before it ruled on the motion for
entry of the consent decree. In response to the EPA's motion for
clarification of the scope of the hearing, the court ruled that the
hearing would be limited to determining the relative contributions
of Bell, Sequa, and Leigh to the contamination. After the Phase
III hearing in June 1990, Sequa filed a motion for reconsideration
on the issue of joint and several liability. On July 24, the
district court denied that motion, and approved the consent decree.
It held that the evidence at the Phase I and Phase III hearings
demonstrated that there was no method of dividing the liability
among the defendants which would rise to any level above mere
speculation, because each of the proposed apportionment methods
involved a significant assumption factor, inasmuch as records had
been lost, and because each of the apportionment methods differed
significantly. In the alternative, it concluded that, based on
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equitable factors, responsibility should be divided as follows:
Bell--35%; Sequa--35%; and Leigh--30%.
In December 1990, the district court entered an order
approving another consent decree, pursuant to which the EPA settled
its claims against Leigh for past and future costs--for $100,000.
In sum, the district court held that Sequa is jointly and
severally liable for $1,866,904.19, including the costs of
studying, designing, and constructing the alternate water supply
system. In addition, Sequa is jointly and severally liable for all
future costs incurred by the EPA in studying, designing, and
implementing a permanent remedy.5
III
Statutory Background
CERCLA was enacted in 1980, and amended in 1986 by the
Superfund Amendments and Reauthorization Act (SARA). Its purpose
is to facilitate the prompt clean-up of hazardous waste sites.
See, e.g., United States v. R. W. Meyer, Inc., 889 F.2d 1497, 1500
(6th Cir. 1989). CERCLA § 104, 42 U.S.C. § 9604, authorizes the
President (who has delegated most of his authority under CERCLA to
the EPA) to use Superfund money to respond to any threatened or
actual release of any hazardous substance that may pose an imminent
and substantial public health threat. CERCLA § 107, 42 U.S.C. §
5
Although the costs of final remedial action are not at issue
in this appeal, we note that the settlements with Bell and Leigh
encompassed those costs.
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9607, provides for the recovery of response costs from all persons
responsible for the release of a hazardous substance. Response
actions include both "remedial" and "removal" actions. Removal
actions generally are immediate or interim responses, and remedial
actions generally are permanent responses. See Voluntary
Purchasing, Inc. v. Reilly, 889 F.2d 1380, 1382 n.4 (5th Cir.
1989).
The National Contingency Plan ("NCP"), 40 C.F.R. Part 300,
promulgated by the EPA as mandated by CERCLA § 105, 42 U.S.C. §
9605, guides federal and state response activities. The NCP
identifies methods for investigating the environmental and health
problems resulting from a release or threatened release and
criteria for determining the appropriate extent of response
activities. See Daigle v. Shell Oil Co., 972 F.2d 1527, 1533 n.4
(10th Cir. 1992); United States v. R. W. Meyer, Inc., 889 F.2d at
1500.
IV
Joint and Several Liability
Since CERCLA's enactment, the federal courts have struggled to
resolve the complicated, often confusing, questions posed by the
concept of joint and several liability, and its application under
a statute whose provisions are silent with respect to the scope of
liability, but whose legislative history is clear that common law
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principles of joint and several liability may affect liability.6
The issue is one of first impression in this Circuit.
A
Common Law: The Restatement of Torts
Although joint and several liability is commonly imposed in
CERCLA cases,7 it is not mandatory in all such cases. United
States v. Monsanto Co., 858 F.2d at 171. Instead, Congress
intended that the federal courts determine the scope of liability
in CERCLA cases under traditional and evolving common law
6
For a discussion of the legislative history regarding the
deletion of joint and several liability provisions from the statute
prior to its enactment, see United States v. Chem-Dyne Corp., 572
F. Supp. 802 (S.D. Ohio 1983); United States v. A & F Materials
Co., Inc., 578 F. Supp. 1249 (S.D. Ill. 1984); and Colorado v.
Asarco, Inc., 608 F. Supp. 1484 (D. Col. 1985).
7
Many of the cases in which joint and several liability has
been imposed involve hazardous waste sites at which numerous
substances have been commingled. See, e.g., United States v.
Stringfellow, 661 F. Supp. 1053, 10609 (C.D. Cal. 1987); United
States v. South Carolina Recycling & Disposal, Inc., 653 F. Supp.
984, 994 (D.S.C. 1986), aff'd in part & vacated in part, United
States v. Monsanto Co., 858 F.2d 160 (4th Cir. 1988); United States
v. Ottati & Goss, Inc., 630 F. Supp. 1361, 1396 (D.N.H. 1985). In
such cases, determining the contribution of each cause to a single
harm will often require a very complex assessment of the relative
toxicity, migratory potential, and synergistic capacity of the
hazardous wastes at issue. See Monsanto, 858 F.2d at 172 & n.26.
Under such circumstances, it is hardly surprising that defendants
have had difficulty in meeting their burden of proving that
apportionment is feasible. See O'Neil v. Picillo, 883 F.2d 176,
178-79 (1st Cir. 1989) ("The practical effect of placing the burden
on defendants has been that responsible parties rarely escape joint
and several liability, courts regularly finding that where wastes
of varying (and unknown) degrees of toxicity and migratory
potential commingle, it simply is impossible to determine the
amount of environmental harm caused by each party."), cert. denied,
493 U.S. 1071 (1990).
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principles, guided by the Restatement (Second) of Torts. Alcan-
Butler, 964 F.2d at 268; O'Neil v. Picillo, 883 F.2d at 178; Allied
Corp. v. Acme Solvents Reclaiming, Inc., 691 F. Supp. 1100, 1116
(N.D. Ill. 1988); Chem-Dyne, 572 F. Supp. at 810.
Section 433 of the Restatement provides that:
(1) Damages for harm are to be apportioned
among two or more causes where
(a) there are distinct harms, or
(b) there is a reasonable basis for
determining the contribution of each cause to
a single harm.
(2) Damages for any other harm cannot be
apportioned among two or more causes.
Restatement (Second) of Torts, § 433A.
The nature of the harm is the key factor in determining
whether apportionment is appropriate. Distinct harms--e.g., where
two defendants independently shoot the plaintiff at the same time,
one wounding him in the arm and the other wounding him in the
leg--are regarded as separate injuries. Although some of the
elements of damages (such as lost wages or pain and suffering) may
be difficult to apportion, "it is still possible, as a logical,
reasonable, and practical matter, ... to make a rough estimate
which will fairly apportion such subsidiary elements of damages."
Id., comment b on subsection (1).
The Restatement also discusses "successive" harms, such as
when "two defendants, independently operating the same plant,
pollute a stream over successive periods of time." Id., comment c
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on subsection (1). Apportionment is appropriate, because "it is
clear that each has caused a separate amount of harm, limited in
time, and that neither has any responsibility for the harm caused
by the other." Id.
The final situation discussed by the Restatement in which
apportionment is available involves a single harm that is
"divisible"--perhaps the most difficult type of harm to
conceptualize. Such harm, "while not so clearly marked out as
severable into distinct parts, [is] still capable of division upon
a reasonable and rational basis, and of fair apportionment among
the causes responsible.... Where such apportionment can be made
without injustice to any of the parties, the court may require it
to be made." Id., comment d on subsection (1). Two examples of
such harm are described in the comment. The first is where cattle
owned by two or more persons trespass upon the plaintiff's land and
destroy his crops. Although "the aggregate harm is a lost
crop, ... it may nevertheless be apportioned among the owners of
the cattle, on the basis of the number owned by each, and the
reasonable assumption that the respective harm done is
proportionate to that number." Id. The second example involves
pollution of a stream by two or more factories. There, "the
interference with the plaintiff's use of the water may be treated
as divisible in terms of degree, and may be apportioned among the
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owners of the factories, on the basis of evidence of the respective
quantities of pollution discharged into the stream." Id.8
Apportionment is inappropriate for other kinds of harm, which,
"by their very nature, are normally incapable of any logical,
reasonable, or practical division." Id., comment on subsection
(2). Examples of such harm are death, a single wound, the
destruction of a house by fire, or the sinking of a barge. "Where
two or more causes combine to produce such a single result,
incapable of division on any logical or reasonable basis, and each
is a substantial factor in bringing about the harm, the courts have
refused to make an arbitrary apportionment for its own sake, and
each of the causes is charged with responsibility for the entire
harm." Id.
Apportionment is also inappropriate in what the Restatement
describes as "exceptional" cases, "in which injustice to the
plaintiff may result." Id., comment h on subsection (1). For
example, "one of two tortfeasors [may be] so hopelessly insolvent
that the plaintiff will never be able to collect from him the share
of the damages allocated to him." Id. Where the court deems it
unjust to require the innocent plaintiff to bear the risk of one of
8
The Restatement points out that apportionment also is
appropriate where part of the harm is the result of an innocent
cause, id., comment e on subsection (1), or where the plaintiff is
responsible for a portion of the harm. Id., comment f on
subsection (1).
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the tortfeasors' insolvency, it may refuse to apportion damages in
such a case. Id.
In sum, the nature of the harm is the determining factor with
respect to whether apportionment is appropriate. Ultimately, the
decision whether to impose joint and several liability turns on
whether there is a reasonable and just method for determining the
amount of harm that was caused by each defendant (or, in some
cases, by an innocent cause or by the fault of the plaintiff). The
question whether the harm to the plaintiff is capable of
apportionment among two or more causes is a question of law.
Restatement (Second) of Torts, § 434(1)(b). Once it has been
determined that the harm is capable of being apportioned among the
various causes of it, the actual apportionment of damages is a
question of fact. Id., § 434(2)(b) & comment d.
Section 433B of the Restatement sets forth the burdens of
proof. As a general rule, the plaintiff must prove that the
defendant's tortious conduct caused the harm. Id., § 433B(1). As
we have already noted, however, this rule does not apply in CERCLA
cases. See note 4, supra. Nevertheless, subsection (2) of § 433B,
which sets forth the burdens of proof with respect to
apportionment, does apply and provides as follows:
Where the tortious conduct of two or more actors
has combined to bring about harm to the plaintiff,
and one or more of the actors seeks to limit his
liability on the ground that the harm is capable of
apportionment among them, the burden of proof as to
the apportionment is upon each such actor.
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As explained in the comment, this rule applies only to "a proved
wrongdoer who has in fact caused harm to the plaintiff." Id.,
comment d on subsection (2). Thus, the rule stated in subsection
(2) will not permit a defendant to escape liability altogether, but
only to limit its liability, if it can meet its burden of proving
the amount of the harm that it caused. If it is unable to do so,
it is liable for the full amount of the harm. According to the
Restatement, the typical case to which this rule applies "is the
pollution of a stream by a number of factories which discharge
impurities into it." Id., comment c on subsection (2).
Comment e notes that there is a possibility that the rule
stated in subsection (2) may cause disproportionate harm to
defendants where each of a large number of them contributes a
relatively small and insignificant part to the total harm. For
example, "if a hundred factories each contribute a small, but still
uncertain, amount of pollution to a stream, to hold each of them
liable for the entire damage because he cannot show the amount of
his contribution may perhaps be unjust." Id., comment e on
subsection (2). The comment, however, expresses no conclusion with
respect to the applicability of this illustration, noting that such
a case had not arisen.
CERCLA is a strict liability statute, one of the purposes of
which is to shift the cost of cleaning up environmental harm from
the taxpayers to the parties who benefited from the disposal of the
wastes that caused the harm. See, e.g., Chem-Dyne, 572 F. Supp. at
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805-06. "The improper disposal or release of hazardous substances
is an enormous and complex problem of national magnitude involving
uniquely federal interests." Id. at 808. Often, liability is
imposed upon entities for conduct predating the enactment of
CERCLA, and even for conduct that was not illegal, unethical, or
immoral at the time it occurred. We recognize the importance of
keeping these facts in mind when attempting to develop a uniform
federal common law for CERCLA cases. We also recognize, however,
that CERCLA, as a strict liability statute that will not listen to
pleas of "no fault," can be terribly unfair in certain instances in
which parties may be required to pay huge amounts for damages to
which their acts did not contribute. Congress recognized such
possibilities and left it to the courts to fashion some rules that
will, in appropriate instances, ameliorate this harshness.
Accordingly, Congress has suggested, and we agree, that common-law
principles of tort liability set forth in the Restatement provide
sound guidance. In applying those principles to this CERCLA case,
we think that it will be helpful to examine briefly some of the
relevant CERCLA jurisprudence.
B
The Jurisprudence
The first published case to address the scope of liability
under CERCLA is United States v. Chem-Dyne Corp., 572 F. Supp. 802
(S.D. Ohio 1983), which was cited approvingly in the legislative
history of the SARA amendments to CERCLA. In that case, 24
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defendants, who allegedly generated or transported hazardous
substances located at Chem-Dyne's treatment facility, sought "an
early determination" that they were not jointly and severally
liable for the EPA's response costs. Id. at 804. After examining
the statute and its legislative history, the court concluded that
provisions for joint and several liability were deleted from CERCLA
"in order to avoid its universal application to inappropriate
circumstances." Id. at 810. It relied on the Restatement for
guidance in applying federal common law. Id.
The court described the nature of the "fairly complex factual
determination" involved in deciding whether the defendants were
jointly and severally liable as follows:
The Chem-Dyne facility contains a variety of
hazardous waste from 289 generators or
transporters, consisting of about 608,000 pounds of
material. Some of the wastes have commingled but
the identities of the sources of these wastes
remain unascertained. The fact of the mixing of
the wastes raises an issue as to the divisibility
of the harm. Further, a dispute exists over which
of the wastes have contaminated the ground water,
the degree of their migration and concomitant
health hazard. Finally, the volume of waste of a
particular generator is not an accurate predictor
of the risk associated with the waste because the
toxicity or migratory potential of a particular
hazardous substance generally varies independently
with the volume of the waste.
Id. at 811. The court concluded that the defendants had not met
their burden of demonstrating the divisibility of the harm and the
degree to which each was responsible, and denied their motion for
summary judgment. Id.
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United States v. Ottati & Goss, Inc., 630 F. Supp. 1361
(D.N.H. 1988), was a cost recovery action against operators and
former operators of drum reconditioning businesses, property
owners, and generators of wastes contained in the drums that were
sent to the site for reconditioning. The evidence showed that
chemical substances leaked or spilled from drums and were mixed
together. Although the generators satisfied their burden of
proving approximately how many drums each brought to the site, the
court nevertheless imposed joint and several liability, because
"the exact amount or quantity of deleterious chemicals or other
noxious matter [could not] be pinpointed for as to each defendant[,
and] [t]he resulting proportionate harm to surface and groundwater
[could not] be proportioned with any degree of accuracy as to each
individual defendant." Id. at 1396.
A similar situation existed in O'Neil v. Picillo, 883 F.2d 176
(1st Cir. 1989). The site at issue there was a Rhode Island pig
farm that had been used as a waste disposal site. The site was
described as having "massive trenches and pits `filled with free-
flowing, multi-colored, pungent liquid wastes' and thousands of
`dented and corroded drums containing a veritable potpourri of
toxic fluids.'" Id. at 177. The defendants argued that it was
possible to apportion the removal costs, because there was evidence
of the total number of barrels excavated during each phase of the
clean-up, the number of barrels in each phase attributable to them,
and the cost of each phase. Id. at 181. There was testimony that,
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of the approximately 10,000 barrels excavated, only 300-400 could
be attributable to a particular defendant. Id. at 182. The court
concluded that because most of the waste could not be identified,
and the defendants had the burden of accounting for the
uncertainty, the imposition of joint and several liability was
appropriate.9
On the other hand, the Third Circuit reversed a summary
judgment in favor of the EPA, and remanded the case for further
factual development on the scope of liability, in United States v.
Alcan Aluminum Corp. (Alcan-Butler), 964 F.2d 252, 255 (3d Cir.
1992). This case involved the Butler Tunnel Site, a network of
approximately five square miles of underground mines, tunnels,
caverns, pools, and waterways, drained by the Butler Tunnel into
the Susquehanna River in Pennsylvania. During the 1970s, millions
of gallons of liquid wastes containing hazardous substances were
disposed of through a borehole that led directly into the mine
workings. In 1985, 100,000 gallons of contaminated water were
released from the site into the river.
The government filed a cost-recovery action against 20
defendants; all but Alcan settled. The district court granted
9
The court noted that, even if there had been evidence of the
number of barrels attributable to each defendant, more would be
required to demonstrate that the removal costs were capable of
apportionment, because the cost of removing barrels varied
depending upon their contents. Furthermore, the costs of removing
contaminated soil, in which the wastes had commingled, "would
necessarily be arbitrary." Id. at 183 n.11.
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summary judgment for the government, holding that Alcan was jointly
and severally liable for the response costs. The Third Circuit
held that the "intensely factual nature of the `divisibility'
issue" highlighted the district court's error in granting summary
judgment without conducting a hearing. Id. at 269. It remanded
the case in order to give Alcan the opportunity to limit or avoid
liability by attempting to prove its personal contribution to the
harm to the Susquehanna River. Thus, under the Third Circuit's
approach, Alcan could escape liability altogether if it could prove
that its "emulsion did not or could not, when mixed with other
hazardous wastes, contribute to the release and the resultant
response costs." Id. at 270.
The Third Circuit noted that the analysis involved in
apportioning several liability is similar to that involved in
apportioning damages among jointly and severally liable defendants
in an action for contribution, because both focus on what harm was
caused by the defendant. Id. at 270 n.29. However, it stated that
the issue of joint and several liability should be resolved at the
initial liability stage, rather than at the contribution stage.10
It noted that drastic consequences could result from delaying that
determination, because "a defendant could easily be strong-armed
10
Because contribution is only available among jointly and
severally liable tortfeasors, the imposition of several liability
for all defendants would obviate the necessity for a contribution
phase. See, e.g., Environmental Transportation Systems, Inc. v.
Ensco, Inc., 969 F.2d 503, 508 (7th Cir. 1992).
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into settling where other defendants have settled in order to avoid
being held liable for the remainder of the response costs." Id.
It also noted that contribution would not be available from
settling defendants, pursuant to CERCLA § 113(f)(2).11 Id.
The Second Circuit essentially adopted the Third Circuit's
approach to joint and several liability in another case involving
Alcan, United States v. Alcan Aluminum Corp. (Alcan-PAS), 990 F.2d
711 (2d Cir. 1993). That case involved a waste disposal and
treatment center operated during the 1970s by Pollution Abatement
Services (PAS). Alcan used PAS for the disposal or treatment of
4.6 million gallons of oil emulsion. The government brought a
cost-recovery action against 83 defendants. As in Alcan-Butler,
all of the defendants except Alcan settled. The Second Circuit
reversed a summary judgment in favor of the government, stating
that "Alcan should have the opportunity to show that the harm
caused at PAS was capable of reasonable apportionment." Id. at
722. It held that Alcan was entitled to "present evidence relevant
to establishing divisibility of harm, such as, proof disclosing the
relative toxicity, migratory potential, degree of migration, and
synergistic capacities of the hazardous substances at the site."
Id.
11
That section provides that "[a] person who has resolved its
liability to the United States in an administrative or judicially
approved settlement shall not be liable for claims for contribution
regarding matters addressed in the settlement." 42 U.S.C. §
9613(f)(2).
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The court stated that Alcan could escape liability if it could
prove that its oil emulsion, when mixed with other hazardous
wastes, did not contribute to the release and resulting clean-up
costs. It acknowledged that "causation is being brought back into
the case--through the backdoor, after being denied entry at the
frontdoor--at the apportionment stage." Id. However, it pointed
out that causation was "reintroduced only to permit a defendant to
escape payment where its pollutants did not contribute more than
background contamination and also cannot concentrate." Id.
With respect to the timing of the joint and several liability
inquiry, the Second Circuit stated that it preferred the Third
Circuit's "common sense approach." Id. It ultimately concluded,
however, that "the choice as to when to address divisibility and
apportionment are questions best left to the sound discretion of
the trial court in the handling of an individual case." Id. at
723.
A "moderate" approach to joint and several liability was
adopted in United States v. A & F Materials Co., Inc., 578 F. Supp.
1249 (S.D. Ill. 1984). That case involved a disposal site at which
over 7,000,000 gallons of waste were deposited. The court
concluded that a rigid application of the Restatement approach to
joint and several liability was inappropriate. Under the
Restatement approach, a defendant who could not prove its
contribution to the harm would be jointly and severally liable.
The court thought that such a result would be inconsistent with
-21-
congressional intent, because Congress was "concerned about the
issue of fairness, and joint and several liability is extremely
harsh and unfair if it is imposed on a defendant who contributed
only a small amount of waste to a site." Id. at 1256.
The court concluded that six factors delineated in an
unsuccessful amendment to CERCLA proposed by Representative (now
Vice President) Gore could be used to "soften" the modern common
law approach to joint and several liability in appropriate
circumstances. Under this "moderate" approach, a court has the
power to impose joint and several liability upon a defendant who
cannot prove its contribution to an injury, but it also has the
discretion to apportion damages in such a situation according to
the "Gore factors":
(i) the ability of the parties to demonstrate
that their contribution to a discharge[,] release
or disposal of a hazardous waste can be
distinguished;
(ii) the amount of the hazardous waste
involved;
(iii) the degree of toxicity of the hazardous
waste involved;
(iv) the degree of involvement by the parties
in the generation, transportation, treatment,
storage, or disposal of the hazardous waste;
(v) the degree of care exercised by the
parties with respect to the hazardous waste
concerned, taking into account the characteristics
of such hazardous waste; and
(vi) the degree of cooperation by the parties
with Federal, State, or local officials to prevent
any harm to the public health or the environment.
Id. at 1256. The court stated that its moderate approach would
promote fairness by allowing courts to be sensitive to the inherent
-22-
unfairness of imposing joint and several liability on minor
contributors, and to make rational distinctions based on such
factors as the amount and toxicity of a particular defendant's
contribution to a waste site. Id. at 1257.
In Allied Corp. v. Acme Solvents Reclaiming, Inc., 691 F.
Supp. 1100 (N.D. Ill. 1988), a private cost recovery action in
which the government was not a party, the court adopted the A & F
moderate approach to joint and several liability. However, it
expressed no opinion on the propriety of that approach in cost
recovery actions involving the government as plaintiff. Id. at
1118 & n.12.
The A & F moderate approach, to the extent it is inconsistent
with the Chem-Dyne approach to joint and several liability, was
rejected in United States v. South Carolina Recycling and Disposal,
Inc., 653 F. Supp. 984 (D.S.C. 1986), aff'd in part and vacated in
part, United States v. Monsanto Co., 858 F.2d 160 (4th Cir. 1988).
That case involved a site at which there were "thousands of
corroded, leaking drums ... not segregated by source or waste type.
Unknown, incompatible materials commingled to cause fires, fumes,
and explosions." 653 F. Supp. at 994. The district court
concluded that the harm was indivisible, because all of the
substances at the site contributed synergistically, and it was
impossible to ascertain the degree or relative contribution of each
substance. Id. The court rejected volume as a basis for
apportionment, finding that it "is not an accurate predictor of the
-23-
risk associated with the waste because the toxicity or migratory
potential of a particular hazardous substance generally varies
independently of the volume." Id. at 995 (quoting Chem-Dyne, 572
F. Supp. at 811). The court concluded that "[s]uch arbitrary or
theoretical means of cost apportionment do not diminish the
indivisibility of the underlying harm, and are matters more
appropriately considered in an action for contribution between
responsible parties after plaintiff has been made whole." Id.
On appeal, the Fourth Circuit affirmed the imposition of joint
and several liability. 858 F.2d at 173. It noted that the
generator defendants had presented no evidence of a relationship
between the volume of waste, the release of hazardous substances,
and the harm at the site. Because the substances had commingled,
apportionment was impossible "without some evidence disclosing the
individual and interactive qualities of the substances deposited
there." Id. at 172. Because "[c]ommon sense counsels that a
million gallons of certain substances could be mixed together
without significant consequences, whereas a few pints of others
improperly mixed could result in disastrous consequences," the
court concluded that evidence of the relative toxicity, migratory
potential, and synergistic capacity of the various substances was
both relevant and necessary. Id. at 172 & n.26. The court noted,
however, that under other circumstances, volume could be a
reasonable basis for apportioning liability, in a situation in
-24-
which independent factors had no substantial effect on the harm to
the environment. Id. at 172 & n.27.
The Fourth Circuit apparently agreed with the district court's
rejection of the A & F moderate approach, stating that, while
equitable factors are relevant in an action for contribution,
"[t]hey are not pertinent to the question of joint and several
liability, which focuses principally on the divisibility among
responsible parties of the harm to the environment." 858 F.2d at
171 n.22. Other courts have similarly concluded that equitable
factors, such as those listed in the Gore amendment, have no place
in making the decision whether to impose joint and several
liability, but are appropriate in an action for contribution among
jointly and severally liable defendants. See Alcan-Butler, 964
F.2d at 270 n.29 ("the contribution proceeding is an equitable one
in which a court is permitted to allocate response costs based on
factors it deems appropriate, whereas the court is not vested with
such discretion in the divisibility determination"); United States
v. Western Processing Co., Inc., 734 F. Supp. 930, 938 (W.D. Wash.
1990) ("defendants may ... bring contribution actions for ultimate
allocation of damages among the responsible parties where it is
entirely appropriate to utilize the Gore Factors to determine the
burden each party must bear"); United States v. Stringfellow, 661
F. Supp. at 1060 ("the Court's discretion in apportioning damages
-25-
among the defendants during the contribution phase does not
[a]ffect the defendants' liability").12
To summarize, our review of the jurisprudence leads us to
conclude that there are three distinct, although closely-related,
approaches to the issue of joint and several liability. The first
is the "Chem-Dyne approach," which relies almost exclusively on the
principles of the Restatement (Second) of Torts. Under that
approach, a defendant who seeks to avoid the imposition of joint
and several liability is required to prove the amount of harm it
caused.
The second approach, the "Alcan approach," is adopted by the
Second and Third Circuits. Although that approach also relies on
the Restatement, it recognizes that, under the unique statutory
liability scheme of CERCLA, the plaintiff's common law burden of
proving causation has been eliminated. Under the Restatement, the
plaintiff must first prove that the defendant's conduct was a
substantial factor in causing the harm; the defendant may limit its
liability by proving its contribution to the harm. In contrast,
the Alcan approach suggests that a defendant may escape liability
altogether if it can prove that its waste, even when mixed with
12
Our court has also held that the Gore factors are relevant
in apportioning damages in an action for contribution. Amoco v.
Borden, Inc., 889 F.2d at 672-73. See also Environmental
Transportation Systems, Inc. v. Ensco, Inc., 969 F.2d at 507-09;
United States v. R. W. Meyer, Inc., 932 F.2d 568, 571 (6th Cir.
1991); O'Neil v. Picillo, 883 F.2d at 179.
-26-
other wastes at the site, did not cause the incurrence of response
costs.
The third approach is the "moderate" approach taken in A & F.
Under that approach, the court applies the principles of the
Restatement in determining whether there is a reasonable basis for
apportionment. If there is not, the court may impose joint and
several liability; the court, however, retains the discretion to
refuse to impose joint and several liability where such a result
would be inequitable.
Although these approaches are not entirely uniform, certain
basic principles emerge. First, joint and several liability is not
mandated under CERCLA; Congress intended that the federal courts
impose joint and several liability only in appropriate cases,
applying common-law principles. Second, all of the cases rely on
the Restatement in resolving the issues of joint and several
liability. The major differences among the cases concern the
timing of the resolution of the divisibility question, whether
equitable factors should be considered, and whether a defendant can
avoid liability for all, or only some portion, of the damages.
Third, even where commingled wastes of unknown toxicity, migratory
potential, and synergistic effect are present, defendants are
allowed an opportunity to attempt to prove that there is a
reasonable basis for apportionment (although they rarely succeed);
where such factors are not present, volume may be a reasonable
means of apportioning liability.
-27-
With respect to the timing of the "divisibility" inquiry, we
believe that an early resolution is preferable. We agree with the
Second Circuit, however, that this is a matter best left to the
sound discretion of the district court. We also agree with the
majority view that equitable factors, such as those listed in the
Gore amendment, are more appropriately considered in actions for
contribution among jointly and severally liable parties, than in
making the initial determination of whether to impose joint and
several liability.13 We therefore conclude that the Chem-Dyne
13
In adopting the majority view, we do not intend to imply that
concerns for fairness and avoiding injustice should never be
considered in deciding whether joint and several liability is
appropriate. In this respect, we note that the legislative history
of the SARA amendments to CERCLA, which created an express
statutory right of contribution, cites the A & F decision for the
proposition that the Gore factors may be considered in determining
whether to grant apportionment in an action for contribution; see
H.R. Rep. No. 253, 98th Cong., 2d Sess., pt. 3, at 19 (1985), 1986
U.S.C.C.A.N. 2835; the legislative history also cites Chem-Dyne for
the proposition that the party seeking apportionment has the burden
of establishing that it should be granted. Both of those
decisions, however, deal with apportionment in terms of whether
joint and several liability should be imposed, rather than in terms
of contribution among jointly and severally liable parties.
Considering CERCLA's "well-deserved notoriety for vaguely-drafted
provisions and an indefinite, if not contradictory, legislative
history," we do not view these citations as a basis for courts to
determine joint and several liability based on those factors. See
Amoco, 889 F.2d at 667.
As discussed in the Restatement comments, there may be
exceptional cases in which it would be unjust to impose several
liability, such as when one of the defendants is so hopelessly
insolvent that the plaintiff will be unable to recover any damages
from it. We believe, however, that consideration of such factors
will rarely be appropriate or necessary in CERCLA cases, especially
when the plaintiff is the government. Under CERCLA's strict
liability scheme, the deck of legal cards is heavily stacked in
favor of the government. The legislative history shows that
because Congress was concerned about the potential harshness or
-28-
approach is an appropriate framework for resolving issues of joint
and several liability in CERCLA cases. Although we express no
opinion with respect to the Alcan approach, because it is not
necessary with respect to the issues we are faced with in this
case, we nevertheless recognize that the Restatement principles
must be adapted, where necessary, to implement congressional intent
with respect to liability under the unique statutory scheme of
CERCLA.14
unfairness to defendants, it refused to adopt mandatory joint and
several liability in order to give courts the ability to ameliorate
such results in appropriate cases. We do not consider the
financial condition of Leigh or Bell to be relevant to the decision
in this case. The EPA entered into its settlements with those
defendants with full awareness of Sequa's opposition to the
settlements, as well as to the imposition of joint and several
liability.
14
The dissent's proposal for an "equitable divisibility" phase
is indeed creative. Notwithstanding our respect for so fertile a
mind, we do not believe that the plain language of CERCLA will
support the application of such equitable factors in determining
liability. Under CERCLA, a defendant has contribution rights only
against other defendants who have not resolved their liability in
an administrative or judicially approved settlement. CERCLA §
113(f), 42 U.S.C. § 9613(f). No provision of CERCLA grants a
defendant a right to hold the EPA liable for eliminating its
contribution rights by entering into consent decrees with other
jointly and severally liable defendants. In sum, CERCLA simply
does not contemplate a proceeding in which a jointly and severally
liable, non-settling defendant can force the EPA to bear the costs
resulting from settlements that, although judicially approved, are
later thought, for equitable reasons, to be unfair or otherwise
inadequate. Because the EPA settled with Bell and Leigh (pursuant
to judicially-approved consent decrees which are not before us on
appeal), there can be no action for contribution. We cannot agree
that the EPA "bargained" for the risk that its consent decrees with
Bell and Leigh would be undermined in such a manner.
-29-
C
Application of Joint & Several Liability
We now turn to consider the application of these traditional
and evolving common law principles of joint and several liability
to the facts of this case.
First, we conclude that the district court erred in
determining that there is no reasonable basis for apportionment.
We reject the EPA's assertion that the clearly erroneous standard
of review applies to these findings of the district court.
According to the Restatement, "the question whether the harm to the
plaintiff is capable of apportionment among two or more causes is
a question of law." Restatement (Second) of Torts, § 434.
In the district court, the EPA contended that there was no
reasonable basis for apportionment, because the harm to the Trinity
Aquifer was a single harm, and a that single harm is the equivalent
of an indivisible harm, thus mandating the imposition of joint and
several liability. Apparently now recognizing the lack of support
for that position,15 the EPA on appeal acknowledges that
apportionment is available, at least theoretically, when there is
a reasonable basis for determining the contribution of each cause
to a single harm. It asserts, however, that Sequa failed to meet
its burden of proof on that issue. Sequa responds that the
15
The Second and Third Circuits have rejected similar arguments
by the EPA. See, e.g., Alcan-PAS, 990 F.2d at 722 (rejecting the
EPA's contention that "commingled" waste is synonymous with
"indivisible" harm); Alcan-Butler, 964 F.2d at 270 n.29 (same).
-30-
district court was misled by the EPA's incorrect view of the law,
and erroneously required it to prove a certain--as opposed to
reasonable--basis for apportionment.
Essentially, the question whether there is a reasonable basis
for apportionment depends on whether there is sufficient evidence
from which the court can determine the amount of harm caused by
each defendant. If the expert testimony and other evidence
establishes a factual basis for making a reasonable estimate that
will fairly apportion liability, joint and several liability should
not be imposed in the absence of exceptional circumstances. The
fact that apportionment may be difficult, because each defendant's
exact contribution to the harm cannot be proved to an absolute
certainty, or the fact that it will require weighing the evidence
and making credibility determinations, are inadequate grounds upon
which to impose joint and several liability.16
Our review of the record convinces us that Sequa met its
burden of proving that, as a matter of law, there is a reasonable
basis for apportionment. This case is closely analogous to the
Restatement's illustrations in which apportionment of liability is
appropriate. For example, where cattle owned by two or more
defendants destroy the plaintiff's crops, the damages are
16
Of course, making such apportionment decisions should not be
difficult for any factfinder that has been called on to apportion
fault under comparative negligence statutes. Such decisions are
rarely, if ever, made on the basis of evidence showing to a
certainty the proportion of each party's fault.
-31-
apportioned according to the number of cattle owned by each
defendant, based on the reasonable assumption that the respective
harm done is proportionate to that number. Thus, the Restatement
suggests that apportionment is appropriate even though the evidence
does not establish with certainty the specific amount of harm
caused by each defendant's cattle, and even though there is a
possibility that only one of the defendant's cattle caused all of
the harm, while the other defendant's cattle idly stood by.
Likewise, pollution of a stream by two or more factories may be
treated as divisible in terms of degree, and apportioned among the
defendants on the basis of evidence of the respective quantities of
pollution discharged by each.
As is evident from our previous discussion of the
jurisprudence, most CERCLA cost-recovery actions involve numerous,
commingled hazardous substances with synergistic effects and
unknown toxicity. In contrast, this case involves only one
hazardous substance--chromium--and no synergistic effects. The
chromium entered the groundwater as the result of similar
operations by three parties who operated at mutually exclusive
times. Here, it is reasonable to assume that the respective harm
done by each of the defendants is proportionate to the volume of
chromium-contaminated water each discharged into the environment.
Even though it is not possible to determine with absolute
certainty the exact amount of chromium each defendant introduced
into the groundwater, there is sufficient evidence from which a
-32-
reasonable and rational approximation of each defendant's
individual contribution to the contamination can be made. The
evidence demonstrates that Leigh owned the real property at the
site from 1967 through 1981, and conducted chrome-plating
activities there in 1971 and 1972. In 1972, Bell purchased the
assets of the shop and leased the property from Leigh. It
continued to conduct similar, but more extensive, chrome-plating
activities there until mid-1976. In August 1976, Sequa purchased
the assets from Bell, leased the property from Leigh, and conducted
similar chrome-plating activities at the site until late 1977. In
response to the EPA's motion for summary judgment, Sequa introduced
evidence regarding chrome flake purchases during each operator's
tenure. It also introduced evidence with respect to the value of
the chrome-plating done by each, as well as summaries of sales.
Given the number of years that had passed since the activities were
conducted, the records of these activities were not complete.17
However, there was testimony from various witnesses regarding the
rinsing and wastewater disposal practices of each defendant, and
the amount of chrome-plating activity conducted by each.18
17
Sequa's records prior to 1977 had been destroyed pursuant to
its records-retention policy.
18
The evidence is conflicting on some points, such as the date
Sequa installed a wastewater tank and how many times that tank
overflowed. Of course, such credibility determinations and
resolution of conflicts in the evidence are for the district court.
-33-
During the Phase III hearing, Sequa introduced expert
testimony regarding a volumetric approach to apportionment. The
first expert, Henderson, calculated the total amount of chromium
that had been introduced into the environment by Leigh, Bell, and
Sequa, collectively and individually. The second expert, Mooney,
calculated the amount of chromium that would have been introduced
into the environment by each operator on the basis of electrical
usage records.
In addition to rejecting apportionment because of competing
theories, the district court also rejected volume as a basis for
apportionment, because there was no method of dividing the
liability among the defendants which would rise to any level of
fairness above mere speculation. It stated that each of the
proposed apportionment methods involved significant assumption
factors, because records had been lost, and because the theories
differed significantly.
The existence of competing theories of apportionment is an
insufficient reason to reject all of those theories. It is true,
as the district court noted, that the records of chrome-plating
activity were incomplete. However, under the facts and
circumstances of this case, and in the light of the other evidence
that is available, that factor may be taken into account in
apportioning Sequa's share of the liability. Finally, the fact
that Sequa's experts relied on certain assumptions in forming their
opinions is not fatal to Sequa's ability to prove that there is a
-34-
reasonable basis for apportionment. Expert opinions frequently
include assumptions. If those assumptions are well-founded and
reasonable, and not inconsistent with the facts as established by
other competent evidence, they may be sufficiently reliable to
support a conclusion that a reasonable basis for apportionment
exists.19
In sum, we conclude that the district court erred in imposing
joint and several liability, because Sequa met its burden of
proving that there is a reasonable basis for apportioning liability
among the defendants on a volumetric basis. We therefore remand
the case to the district court for apportionment.
19
The dissent's assertion that we are advocating a standard of
proof of less than a preponderance of the evidence is incorrect.
Sequa is, of course, required to prove its contribution to the harm
by a preponderance of the evidence. Our point is that such proof
need not rise to the level of certainty; evidence sufficient to
permit a rough approximation is all that is required under the
Restatement. Although the dissent acknowledges that certainty is
not required, the evidence it would require Sequa to adduce in
order to escape joint and several liability rises far above the
level necessary to satisfy the preponderance of the evidence
standard. We seriously doubt that any CERCLA defendant would ever
be able to satisfy the dissent's rigorous proof requirements--which
would be the equivalent of a mandate of joint and several liability
in all CERCLA cases. Congress clearly had no such intention. In
any event, the district court, apparently misled by the EPA's
erroneous argument that a single harm cannot be apportioned, never
had an opportunity to apply the appropriate legal principles to the
factual questions of apportionment. As we have noted, the district
court had already decided that the defendants were jointly and
severally liable long before the Phase III hearing, at which the
bulk of the evidence regarding divisibility was introduced.
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V
Alternate Water Supply System
Sequa also challenges the EPA's decision to provide an
alternate water supply (AWS) as an interim measure pending the
completion of final remedial action. The scope of our review of
the EPA's selection of the AWS is governed by the 1986 amendments
to CERCLA, which provide that such review is "limited to the
administrative record." 42 U.S.C. § 9613(j)(1). We are to uphold
the EPA's decision "unless the objecting party can demonstrate, on
the administrative record, that the decision was arbitrary and
capricious or otherwise not in accordance with law." 42 U.S.C. §
9613(j)(2).
The scope of review under the "arbitrary and
capricious" standard is narrow and a court is not
to substitute its judgment for that of the agency.
Nevertheless, the agency must examine the relevant
data and articulate a satisfactory explanation for
its action including a rational connection between
the facts found and the choice made.... In
reviewing that explanation, we must consider
whether the decision was based on a consideration
of the relevant factors and whether there has been
a clear error of judgment.
Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile
Ins. Co., 463 U.S. 29, 43 (1983) (citations and internal quotation
marks omitted).
Sequa challenges the EPA's decision to provide the AWS on a
number of grounds, including that: (1) the administrative record
demonstrates that the EPA failed to recognize that "substantial
danger to public health or the environment," as specified in the
-36-
National Contingency Plan, is the standard against which the
decision to implement an alternative water supply system must be
measured; (2) there is no analysis of why the EPA believed the
public health was at risk and required protection at the subject
site; (3) the Safe Drinking Water Act's maximum contaminant level
for chromium is based on a lifetime (70-year) exposure, but the
alternate water supply system was merely a short-term (10-15 year)
response; further, the administrative record contains no discussion
of whether chromium presents a danger to humans on the basis of
short-term exposure; and (4) the EPA failed to analyze the
likelihood that the contaminated water would be ingested.
The EPA's defense of its decision to implement the alternate
water supply system is, we think, singularly weak. The EPA
contends primarily that we should defer to its technical expertise.
It argues that the existence of chromium at levels exceeding the
maximum contaminant level allowed under the SDWA presumptively
establishes that its response was appropriate. We cannot agree.
Although the arbitrary and capricious standard of review is
very lenient on the agency, and we will not substitute our judgment
for that of the agency, "[j]udicial review `must be based on
something more than trust and faith in EPA's experience.'"
American Petroleum Institute v. E.P.A., 661 F.2d 340, 349 (5th Cir.
1981) (quoting Appalachian Power Co. v. Train, 545 F.2d 1351, 1365
(4th Cir. 1976)). Our determination of whether the EPA's decision
was arbitrary and capricious must be made on the basis of the
-37-
rationale relied on by the EPA as contained in the administrative
record. We will not accept the EPA's post-hoc rationalizations in
justification of its decision, nor will we attempt to supply a
basis for its decision that is not supported by the administrative
record. See State Farm, 463 U.S. at 50.20
After thoroughly reviewing the administrative record, we
conclude that the EPA's decision to furnish the AWS was arbitrary
and capricious. In vain we have searched the over 5,000 pages of
administrative record, and found not one shred of evidence that
anyone in the area was actually drinking chromium-contaminated
water. Amazingly, the EPA made no attempt to learn whether anyone
was drinking the water, or whether anyone intended to utilize the
AWS, until after it had made its decision to construct the AWS.
One would think that surely such information was essential in order
to reach an informed, rational decision as to whether an AWS was
necessary, and whether it would reduce any significant threat to
public health. The administrative record reveals that the
chromium-contaminated wells in the area all served commercial
establishments, which the EPA prohibited from connecting to the
AWS. Moreover, the EPA did not require residents to connect to the
20
For this reason, the dissent's reliance on the EPA's 1986
decision. The same is true with respect to the August 19, 1987,
Record of Communication quoted by the dissent in footnote 6 is
inappropriate, post-hoc rationalization. The only information
relevant to our determination of whether the EPA's decision was
arbitrary and capricious is the information that the EPA relied on
in making that decision. Events occurring subsequent to the
decision cannot be relied upon to support it.
-38-
system, and did not prohibit them from using contaminated water
from their wells. Thus, on the basis of the administrative record,
it appears that the AWS did not even reduce, much less eliminate,
any public health threat. No technical expertise is necessary to
discern that the EPA's implementation of the AWS was arbitrary and
capricious, as well as a waste of money.21
VI
All Costs?
Having determined that the EPA's decision to implement the AWS
was arbitrary and capricious, we must now decide whether the EPA
nevertheless is entitled to recover its costs for designing and
constructing the AWS.
CERCLA § 107 provides for the recovery of the following costs:
(A) all costs of removal or remedial action
incurred by the United States Government or a State
or an Indian tribe not inconsistent with the
national contingency plan;
(B) any other necessary costs incurred by any
other person consistent with the national
contingency plan;
(C) damages for injury to, destruction of, or
loss of natural resources, including the reasonable
21
The dissent criticizes our performance of what we perceive
to be our proper role of judicial review, because we have not
meekly deferred to EPA's scientific expertise regarding the need
for an alternate water supply system. But even the dissent
recognizes that CERCLA requires the EPA to take measures that will
minimize threats to public health and the environment. The dissent
has not explained how any potential threats to the public health
were minimized by the alternate water supply system, when the EPA
did not require residents to connect to the new system and did not
prohibit them from using contaminated water from their wells.
-39-
costs of assessing such injury, destruction, or
loss resulting from such a release; and
(D) the costs of any health assessment or
health effects study carried out under section
9604(i) of this title.
42 U.S.C. § 9607(a)(4) (emphasis added).
Sequa contends that the EPA is authorized to recover only
reasonable and necessary costs, relying on the statutory language
as well as federal procurement laws and regulations. The EPA takes
the position that it is entitled to recover all costs--even if
unreasonable or unnecessary22--unless Sequa proves that such costs
are inconsistent with the National Contingency Plan.23 The district
22
Other courts apparently have agreed with EPA's interpretation
of CERCLA § 107(a)(4)(A). In United States v. Northeastern
Pharmaceutical & Chemical Co., Inc., 810 F.2d 726 (8th Cir. 1986),
the court noted that § 107(a)(4)(A) does not refer to "all
reasonable costs" but simply to "all costs," and concluded that
"`all costs' incurred by the government that are not inconsistent
with the NCP are conclusively presumed to be reasonable." Id. In
United States v. Hardage, 982 F.2d 1436 (10th Cir. 1992), the court
likewise stated that, "[a]s long as the government's choice of
response action is not inconsistent with the NCP, its costs are
presumed to be reasonable and therefore recoverable." Id. at 1443.
Cf. United States v. R. W. Meyer, Inc., 889 F.2d at 1504 (emphasis
added) ("to the extent cleanup actions are necessary, ... the
statute contemplates that those responsible for hazardous waste at
each site must bear the full cost of cleanup actions").
23
A majority of courts have held that, under § 107(a)(4)(A),
the defendant has the burden of proving that the government's costs
are inconsistent with the NCP. E.g., Hardage, 982 F.2d at 1442;
Northeastern, 810 F.2d at 747; Ottati & Goss, 630 F. Supp. at 1395;
United States v. Conservation Chemical Co., 619 F. Supp. 162, 186
(W.D. Mo. 1985); United States v. Ward, 618 F. Supp. 884, 899
(E.D.N.C. 1985). In contrast, under § 107(a)(4)(B),
nongovernmental entities are required to prove that their response
costs are necessary and consistent with the NCP. County Line
Investment Co. v. Tinney, 933 F.2d 1508, 1512 & n.8 (10th Cir.
1991); Northeastern, 810 F.2d at 726. In Alcan-PAS, 990 F.2d at
-40-
court held that the EPA could recover all of its response costs, so
long as they were not the product of "gross misconduct" by the
agency.
Although we approve of the district court's attempt to impose
some restraints on the EPA's ability to recover costs from private
parties, we find no statutory basis for its "gross misconduct"
limitation. Nevertheless, we are troubled by the implications of
the EPA's position on this issue. Sequa contends that, under the
EPA's interpretation, defendants will be liable even if the EPA
allows a contractor to pay its officers and other employees
unjustified millions and allows each of them a Rolls-Royce for
transportation. Interestingly, the EPA did not attempt to refute
Sequa's assertion, either in its appellate brief or at oral
argument. Instead, the EPA asserts a policy reason to support its
interpretation:
By refusing to permit defendants to defend against
cost recovery actions by engaging in detailed
attacks on the "reasonableness" of individual
government cost items, Congress provided an
incentive to those defendants to conduct the
necessary response actions themselves. Where
defendants refuse to conduct the appropriate
response actions, CERCLA allows the Government to
undertake the response actions it deems necessary
and appropriate without being constrained by the
possibility that each line item of the costs of
these actions will be challenged in cost recovery.
719-20, the Second Circuit stated that the government must
establish that the costs it incurred conform to the NCP; however,
in support of that proposition, it cited B. F. Goodrich Co. v.
Murtha, 958 F.2d 1192, 1198 (2d Cir. 1992), a private cost-recovery
action under § 107(a)(4)(B).
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In addition, the EPA asks us to take comfort in the fact that,
through internal agency audits and other forms of self-policing,
costs will be controlled.
Acceptance of the EPA's position would effectively prohibit
judicial review of the EPA's expenditures. In short, we would give
the EPA a blank check in conducting response actions.24 We
seriously doubt that Congress intended to give the EPA such
unrestrained spending discretion.25 Moreover, such unbridled
discretion removes any restraint upon the conduct of the EPA in
exercising its awesome powers; if the EPA knows there are no
24
We note that CERCLA requires that remedial (permanent)
actions be cost-effective; however, there is no corresponding
requirement with respect to removal (interim) actions. 42 U.S.C.
§ 9621(b). The NCP implements this statutory directive by
requiring the EPA to consider cost with respect to remedial
alternatives, and to select a cost-effective remedial measure. See
Hardage, 982 F.2d at 1443. The Tenth Circuit has held that a
contention that an individual cost is excessive or unreasonable
does not demonstrate inconsistency with the NCP; instead, a
defendant "must show that the government acted arbitrarily and
capriciously in failing to consider cost, or in selecting a
remedial alternative that is not cost-effective." Id.
25
Because challenges to EPA's response actions are not subject
to judicial review outside the context of a cost-recovery or
administrative enforcement action, the EPA has control over the
timing of judicial review. See 42 U.S.C. § 9613(h); Voluntary
Purchasing Groups, Inc. v. Reilly, 889 F.2d 1380 (5th Cir. 1989).
Thus, the EPA may complete a response action, and wait to seek
recovery of its costs after they have already been incurred. If
EPA's decision to incur costs is later determined by a court to be
arbitrary and capricious, or inconsistent with the NCP, the
Superfund will not be reimbursed for EPA's expenditures. Even if
Congress contemplated that all of EPA's decisions would be upheld,
we would be reluctant to conclude that it gave the EPA the
authority to waste Superfund money simply because such funds could
later be recovered from the pockets of private parties.
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economic consequences to it, its decisions and conduct are likely
to be less responsible.
We do not have to decide the question in this case, however,
because the only costs Sequa challenges as unreasonable and
unnecessary are those associated with implementation of the
alternate water supply system, a decision that we have already
concluded was arbitrary and capricious. The Tenth Circuit recently
held that, "[t]o show that the government's response action is
inconsistent with the NCP, a defendant must demonstrate that the
EPA acted arbitrarily and capriciously in choosing a particular
response action to respond to a hazardous waste site." Hardage,
982 F.2d at 1442. We find this reasoning persuasive, as well as
adequate for resolving the issue before us, and therefore adopt
it.26 Because the decision to implement an AWS was arbitrary and
capricious, it is inconsistent with the NCP. Accordingly, the EPA
is not entitled to recover the costs of designing and constructing
the AWS.
We realize that, as a result of our decision disallowing the
EPA's costs for the AWS, those costs will have to be borne by the
Superfund. Although regrettable, this is the inevitable result of
arbitrary and capricious EPA decisionmaking. Without knowing, or
even attempting to learn, whether the AWS would serve to protect
the safety and health of anyone, the EPA officiously ignored the
26
We express no opinion on whether § 107(a)(4)(A) permits the
EPA to recover unreasonable, unnecessary, or excessive costs.
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comments of Bell and Sequa, and the results of its own remedial
investigation, and stubbornly proceeded to spend over $300,000 to
furnish a water supply system that was not needed, was not allowed
to be used by the commercial establishments whose wells (according
to the administrative record) were the only ones with chromium
contamination in excess of the SDWA standards, and did very
little--indeed, if anything--to reduce any perceived public health
threat posed by the chromium-contaminated groundwater. We can only
assume that the EPA was not concerned about the cost of the AWS,
because it believed that it could recover whatever was spent from
Sequa. Although the EPA's powers under CERCLA are indeed broad,
Congress has not provided that private parties must pay for the
consequences of arbitrary and capricious agency action.
VII
Settlement Credit
CERCLA § 113(f)(2), 42 U.S.C. § 9612(f)(2), provides that a
settlement by one defendant "reduces the potential liability to the
others by the amount of the settlement." Bell and Leigh settled
with the EPA for a combined total of $1.1 million. Sequa contends
that the district court (1) improperly refused to credit that
amount against the total recovery obtained by the government; and
(2) erred in allocating the Bell settlement proceeds, $1,000,000,
first to amounts for which Bell was severally liable (litigation
costs incurred by the EPA in the Bell bankruptcy adversary
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proceeding before suit was filed against Sequa), and then toward
costs for which Bell and Sequa were jointly and severally liable.
Because § 113(f)(2) logically can be applied only to reduce a
defendant's joint and several liability, which we have decided is
inappropriate in this case, we need not address this issue.
VIII
Prejudgment Interest
CERCLA § 107(a)(4) provides for the recovery of prejudgment
interest, which "shall accrue from the later of (i) the date
payment of a specified amount is demanded in writing, or (ii) the
date of the expenditure concerned." 42 U.S.C. § 9607(a)(4). The
district court awarded prejudgment interest calculated from the
date of expenditures.
Sequa contends that the statute requires a written demand for
a specified amount of response costs before any prejudgment
interest may be awarded. The EPA does not contest Sequa's
assertion that a written demand is required, but contends that the
notices sent to Sequa, advising it generally that the United States
considered it to be potentially liable for response costs,
satisfied that requirement. The EPA further contends that the 1986
ROD to install the alternate water supply system put Sequa on
notice of the potential cost of that decision. Finally, the EPA
asserts that the complaint constitutes the necessary written
demand.
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The statute plainly requires a written demand for specified
response costs as a prerequisite to an award of prejudgment
interest. Neither the notices informing Sequa that generally the
EPA would look to it for potential reimbursement "at some future
time," nor the ROD satisfy that requirement. Although the
complaint does not specify an exact amount, we conclude that it
constitutes a sufficient written demand for payment. We therefore
hold that, with respect to costs incurred before the complaint was
filed, prejudgment interest should be assessed from the date the
complaint was filed. With respect to costs, if any, incurred after
the complaint was filed, prejudgment interest should be assessed on
those costs from the date of the expenditures.
IX
The judgment of the district court is REVERSED insofar as it
imposes joint and several liability and allows recovery of the
costs of designing and constructing the AWS; the portion of the
judgment awarding prejudgment interest is VACATED; and the case is
REMANDED for further proceedings consistent with this opinion.
REVERSED in part, VACATED in part, and REMANDED.
Parker, District Judge,*************** concurring in part and
dissenting in part:
I concur in the majority's thorough and reasoned approach to
the difficult questions addressed in Parts IV (A) and IV (B) of its
***************
Chief Judge of the Eastern District of Texas,
sitting by designation.
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opinion. I concur also in the majority's holding regarding the
prejudgment interest issue. However, I must dissent in substantial
part from the majority opinion, for the following reasons.
I
Joint and Several Liability
I cannot agree with the majority's holding on the joint and
several liability/quantitative apportionment issue in this case.
I do agree that the determination of whether the type harm involved
in this case is capable of quantitative apportionment is a question
of law. And the majority is correct that the single chromium harm
suffered by the Trinity Aquifer is the sort theoretically capable
of apportionment. However, while Sequa met its legal burden of
establishing that the type harm involved is capable of
apportionment, it failed to meet its factual burden relative to
apportionment. If proof exists by which the fact-finder could
determine, on a reasonable basis, the extent of environmental
injury attributable to a party, then certainly that party is
entitled to escape the heavy hand of joint and several liability
and to have its liability restricted to its actual, quantitative
contribution to the single harm. The majority correctly places the
burden of proof on the party seeking such a finding, to produce
credible evidence to meet its burden. But the majority confuses
the distinction between the legal burden that the single harm at
issue caused is of a type capable of apportionment, and the factual
burden of proving the amount of harm attributable to a particular
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47
party. See majority opinion at ____ ("Our review of the record
convinces us that Sequa met its burden of proving that, as a matter
of law, there is a reasonable basis for apportionment." This case
is closely analogous to the Restatement's illustrations in which
apportionment of liability is appropriate.").
The gist of the majority opinion is this legal fallacy:
because the evidence is clear that Sequa did not cause 100% of the
harm to the aquifer, Sequa must be entitled to a finding by the
district court apportioning the amount of harm attributable to it
under the Restatement (Second) of Torts, § 433. We are not to
approach our analytical task from that end. The majority's "rule
of thumb" miscasts the role of the district court and eviscerates
the very concept of joint and several liability.
I agree with the majority that certainty is not required.
What is required is proof by a preponderance of the evidence. The
majority properly embraces the applicability of the Restatement
(Second) of Torts to this case, but then seeks to divorce itself
from the applicable preponderance of the evidence standard of proof
so as to mandate that the district court "pick a number"
apportioning liability.
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48
Civil cases are decided by a preponderance of the evidence
because such proof affords a reasonable basis for decision. In
other words, while certainty of proof is not required in civil
cases, probability is. Evidence by "fifty-one percent," or to the
extent of "more likely than not," is deemed sufficiently reliable
for resolution of civil disputes. But proof by less than this
amount is unacceptably speculative; and amounts to mere
possibility, not probability. Dean William Prosser said it well in
his influential treatise:
On the issue of the fact of causation, . . . [the one
bearing the burden of proof by a preponderance of the
evidence] must introduce evidence which affords a
reasonable basis for the conclusion that it is more
likely than not that [the causation exists]. A mere
possibility of such causation is not enough;[ ] and when
the matter remains one of pure speculation or
conjecture,[ ] or the probabilities are at best evenly
balanced,[ ] it becomes the duty of the court to direct
a verdict for the defendant. Where the conclusion is not
one within the common knowledge of laymen, expert
testimony may provide a sufficient basis for it, [ ] but
in the absence of such testimony it may not be drawn.1
If proof by a preponderance of the evidence is to be abandoned in
CERCLA apportionment cases, the district court is at least entitled
to guidance regarding the level of possibilities that is
1
William L. Prosser, THE HANDBOOK OF THE LAW OF TORTS (2nd ed.
1955), § 42 (Causation and Joint Torts), at 222 (citations omitted)
(emphasis added).
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49
acceptable. Will 10% do? 20%? 30%?2
The majority quotes the Restatement's § 433:
(1) Damages for harm are to be apportioned among two or
more causes where
(a) there are distinct harms, or
(b) there is a reasonable basis for determining the
contribution of each cause to a single harm.
(2) Damages for any other harm cannot be apportioned
among two or more causes.
The majority proceeds to quote comment d on subsection (1) of this
Section, to the effect that a single harm that is conceptually
divisible, "while not so clearly marked out as severable into
distinct parts, [is] still capable of division upon a reasonable
and rational basis, and of fair apportionment among the causes
responsible . . . . Where such apportionment can be made without
injustice to any of the parties, the court may require it to be
made." The majority discusses two examples of such harm given in
this comment: the first being where cattle owned by two or more
persons trespass upon another's land and destroy the other's crops;
and the second involving the pollution of a stream by two or more
2
The majority, in a footnoted dissent to my dissent, asserts
that it has adhered to the preponderance of the evidence standard.
To the contrary, the majority has not done so. Also in its
"majority dissent," the majority calls the standard I have
articulated a "rigorous" one, "far above the level necessary to
satisfy the preponderance of the evidence standard." The second
part of this "majority dissent" assertion is also just not so. The
first part of it (about it being "rigorous") is so only to the
extent the majority finds the fundamental civil case standard of
preponderance of the evidence too "rigorous" to be applied in this
case.
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50
factories. But in both of these examples, as the Restatement's
comment explains, a reasonable, factual basis for division must
exist in order for the court to actually draw the possible
apportionment. In the cattle example, the comment explains that,
although "the aggregate harm is a lost crop, . . . it may
nevertheless be apportioned among the owners of the cattle, on the
basis of the number owned by each, and the reasonable assumption
that the respective harm done is proportionate to that number." In
the stream pollution example, the comment makes it plain that "the
interference with the plaintiff's use of the water may be treated
as divisible in terms of degree, and may be apportioned among the
owners of the factories, on the basis of evidence of the respective
quantities of pollution discharged into the stream." If the
Restatement (Second) of Tort's term, "reasonable basis," as used in
the majority opinion, means something other than preponderance of
the evidence, the majority should at least say so, and why.
"As other courts have noted, apportionment itself is an
intensely factual determination." United States v. Alcan Aluminum
Corp., 990 F.2d 711, 722 (2nd Cir. 1993) (citing e.g., United
States v. Chem-Dyne Corp., 572 F. Supp. 802, 811 (S.D. Ohio 1983)).
The example used by the majority is a good one. If cows belonging
to Farmers A and B damage another's crop, that is the type harm
that as a matter of law is capable of apportionment. However, to
evade joint and several liability, Farmer A or B must meet the
burden of proving that apportionment is reasonable on some basis,
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51
such as the number of cows in the field belonging to each farmer or
the amount of time each farmer's cows were in the field. Proof
that each farmer had some unknown number of cows in the field, or
that an established number of cows belonging to each farmer were in
the field for some unknown period of time, is not enough -- because
under such circumstances the fact-finder is left to speculate on
the question of the amount of harm reasonably attributable to each
farmer's cows.
In this case an experienced and careful district judge heard
and reviewed the quantitative apportionment testimony and exhibits
in this case, and it possessed opportunities to assess their
convincingness far superior to those of this (appellate) court.
The district court found Sequa failed to meet its quantitative
apportionment burden of proof by a preponderance of the credible
evidence. That finding is reviewable at the Court of Appeals only
on the basis of whether it was clearly erroneous. The district
court's finding was not clearly erroneous.
The district court afforded Sequa its full apportionment due
-- the opportunity to avoid joint and several liability by meeting
its burden of proof through the presentation of credible evidence
persuading the district court that the amount of harm caused by
Sequa can be apportioned to a level of knowledge that is
sufficiently reliable (i.e., by a preponderance of the evidence).
Sequa simply failed to meet its burden. The majority opinion
notwithstanding, there is no reason to believe Sequa's appellate
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52
claim that the district court applied the wrong standard for
apportionment (i.e., a standard of certainty, as opposed to the
appropriate standard, of a reasonable basis). Rather, the district
court's analysis, in the record, demonstrates that court's clear
understanding of and application of the appropriate reasonable
basis standard for apportionment questions like the one it faced.
See e.g., District Court Order of May 9, 1990 (emphasis added here)
("this Court is of the opinion the chromium contamination found in
the ground waters below the Odessa I Site is not divisible. The
evidence at both the Phase I and Phase III hearings clearly
demonstrated there is no method of dividing the liability among the
Defendants which would rise to any level of fairness above mere
speculation. * * * Having heard the evidence adduced at trial of
Phase III, this Court is of the opinion none of the [defendants'
proffered methods of actual quantitative apportionment] offer
viable methods for dividing liability among John Leigh, Bell or
Sequa.").
The majority remands the case to the district court for a
finding apportioning liability on a volumetric basis. Such was,
however, precisely the purpose of Phase III of the trial. In Phase
III of the trial, the district court heard approximately 400 pages
of testimony from 19 witnesses, 3 of whom were experts. The
district court reviewed over 150 exhibits: 80 new exhibits were
admitted during Phase III of the trial; and the district court
-53-
53
allowed for the more than 70 exhibits from Phase I to also be used
during Phase III.
A review of the record reveals that Sequa attempted to climb
the preponderance hill by focusing on several potential methods of
achieving a reasonable basis for quantitative apportionment of
liability on a volumetric basis.
Under one proffered method of such apportionment by a Sequa
expert, the expert assumed that Sequa's electrical usage for
plating operations was 30% of its total electrical usage, while, in
contrast, he attributed to both Bell and Leigh a plating percentage
of 50% of their respective total electrical usages. But the bases
for this expert's electrical percentage assumptions were
effectively refuted by other evidence in the case.
Sales records served as the springboard for another proffered
method of apportionment. The sales record approach suffered
fatally from Sequa's ability to produce only scattered invoices.
An attempt was then made to compare the defendants' expense
records. However, the only expense records for Sequa demonstrated
that it purchased 3,500 pounds of chromic acid flake within a three
month period in 1977. Sequa's other records were destroyed. Any
attempt to extrapolate from the three month period in 1977 would
have been at best speculative.
A Sequa expert also assumed that Sequa had no waste disposal
after the installation of a catch tank. The credibility of this
assumption was fatally eroded by contrary evidence -- of
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54
substantial overflows, spills of plating solution, leaks in the
plating tanks, and plating solution dumped by Sequa.
Indeed, the only evidence the district court could view with
any comfort was evidence of relative times of facility ownership
and the periods of plating activity by the defendants. Yet, the
apportionment import of even this evidence was reduced to mere
speculation when attempts were made to prove the actual level, or
quantity, of plating activity conducted during the known periods of
time. In the language of the majority's cited example of cows in
the field: the defendants evidenced what periods of time each
farmer had cows in the field, but failed to demonstrate to any
degree above speculation how many cows each farmer had in the
field.
This case is a simple one by CERCLA standards. But it is
nonetheless quite typical of CERCLA-apportionment cases: years
after the pollution at issue, it is very difficult for a defendant
to prove by a preponderance of the evidence even its rough share of
responsibility for the single harm caused by pollution. This is
why the equitable (contribution) phase of CERCLA response cost
proceedings is so important -- as Congress expressly recognized in
the 1986 amendments to CERCLA (SARA). See H.R. No. 99-253(I), 99th
Cong., 2d Sess. 79, reprinted in 1986 U.S.C.C.A.N. 2835, 2861 (SARA
"confirms" federal right of contribution under CERCLA); see also
United States v. Alcan Aluminum Corp., 990 F.2d 711, 724 (2nd Cir.
1993) ("In [SARA] courts are granted implicit authority, using
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55
appropriate equitable factors, to 'allocate response costs among
liable parties.'") (emphasis added) (quoting O'Neil v. Picillo, 883
F.2d 176, 179 (1st Cir. 1989)). Sequa's evidence will not improve
upon remand. There is no more apportionment evidence available.
Unless the district court's view of the evidence on remand is
somehow "enlightened" by the majority's view of the evidence, the
district court will have to apply a standard of proof of less than
a preponderance of the evidence in order to reach a decision in
conformity with the apportionment result mandated by the majority.
Actually, the district court did attempt to "apportion" the
defendants' liability on a basis other than a reasonable, amount
of contribution basis -- by making alternative findings on a purely
equitable basis taking into account the facts that: Bell occupied
the site for the longest period of time; Sequa gained access to the
site with knowledge that chromium contamination was a problem and
measures to correct the contamination were necessary; and Leigh
accrued the least financial gain from the chrome plating venture,
but cooperated with the government in the government's efforts to
discover the sources of the contamination. The district court
apportioned the defendants' equitable responsibility for costs at
35% each to Bell and Sequa, and 30% to Leigh. See District Court
Order of May 9, 1990 ("this Court is of the opinion the liability
of the parties for contamination of the Chromium I Site is
indivisible other than by equitable means. * * * In the
alternative [to accepting the proposed Partial Consent Decree
-56-
56
attacked by Sequa on quantitative apportionment and equitable cost
allocation grounds], this Court is of the opinion the
responsibility for costs should be divided roughly equally among
the parties with Bell and Sequa shouldering 35% of the burden each
and john [sic] Leigh shouldering 30%. The reasons for such
division are purely equitable, as Bell occupied the Site for the
longest period of time and Sequa gained access to the Site with
knowledge that chromium contamination was a problem and measures to
correct the contamination were necessary." John Leigh accrued the
least financial gain from his chromium-plating venture and has
cooperated at every juncture with the Government in the
government's efforts to discover the sources behind the chrome
contamination.").
The adoption of the Chem-Dyne approach in Part IV (B) of the
majority opinion precludes such equitable apportionment except as
part of a contribution claim proceeding. I agree with the
majority's embrace of the Chem-Dyne approach. But I think we
should address the impact of the Leigh and Bell consent decrees
upon Sequa's SARA-bestowed contribution rights -- in light of the
alternative, equitable divisibility determinations already rendered
by the district court after its "Phase III" hearing on the issue of
the "relative contributions of Bell, Sequa and John Leigh to the
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57
contamination at the . . . Site."3 In my opinion, the following is
the appropriate appellate court approach to this case.
First, we should hold that the district court was not clearly
erroneous in its finding that Sequa failed to meet its burden of
proof on the factual, quantitative apportionment issue -- of
Sequa's proportionate responsibility for the single chromium harm
suffered by the aquifer. Then, we should reject the district
court's conclusion that, in this case, it did not need to consider
the fairness of the proposed consent decrees relative to Sequa's
SARA-bestowed, equitable cost allocation rights. See 42 U.S.C. §
9613 (f)(1). I think we must address the impact of the consent
decrees on the defendants' statutory equitable cost allocation
rights -- in light of the alternative, equitable "apportionment"
finding reasonably rendered by the district court. This approach
is consistent with the caselaw on appropriate contribution
analyses.4 And my approach certainly offers a much better prospect
3
District Court Order of May 9, 1990.
4
See e.g., Amoco Oil Co. v. Borden, 889 F.2d 664 (5th Cir.
1989), which recognized that under CERCLA's contribution provision:
a court has considerable latitude in determining each
party's equitable share. * * * Possible relevant
factors include: "the amount of hazardous substances
involved; the degree of toxicity or hazard of the
materials involved; the degree of involvement by parties
in the generation, transportation, treatment, storage, or
disposal of the substances; the degree of care exercised
by the parties with respect to the substances involved;
and the degree of cooperation of the parties with
government officials to prevent any harm to public health
or the environment."[ ] Additionally, the circumstances
and conditions involved in the property's conveyance,
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58
for bringing this protracted and expensive litigation to an end
than does a remand to the district court for more (essentially
redundant) proceedings.
Equity and 42 U.S.C. § 9613
As the majority has noted, after concluding that Sequa had
failed to meet its burden of demonstrating a reasonable fact basis
for apportionment of the relative responsibilities of the
defendants, the district court rendered an alternative, purely
equitable "apportionment" determination. In reaching its
alternative conclusion, the district court considered the following
equitable facts: that Bell occupied the site for the longest
period of time; that Sequa gained access to the site with knowledge
that chromium contamination was a problem and measures to correct
the contamination were necessary; and that Leigh accrued the least
financial gain from the chrome plating venture, but cooperated with
the government in the government's efforts to discover the sources
of the contamination. The district court "apportioned" the
defendants' equitable responsibility for costs at 35% each to Bell
and Sequa, and 30% to Leigh. While the district court's
alternative equitable findings are not articulated as a
"contribution claim" adjudication, I would hold that they satisfy
including the price paid and discounts granted, should be
weighed in allocating response costs.[ ].
Amoco Oil Co., 889 F.2d at 672-673 (quoting Amendments Report, pt.
III, at 19, reprinted in 1986 U.S.C.C.A.N. at 3042; other citations
omitted; emphasis added).
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59
the essential requirements of CERCLA § 9613 (f)(1), and that they
are consistent with this Circuit's decision in Amoco Oil Co. v.
Borden, 889 F.2d 664 (5th Cir. 1989) -- and thus, that they are
sufficient to constitute contribution findings based in equity.
In light of the procedural posture of this case and, in
particular, in light of the district court's reasonably based, 35%
- 35% - 30%, "purely equitable" "apportionment" findings, the
parameters of Sequa's equity rights are plainly such that it would
be inequitable and violative of the contribution claims provision
of SARA, 42 U.S.C. § 9613 (f)(1), for those rights to be destroyed
by the Leigh and Bell consent decrees.
Consistent with CERCLA § 9613 (f)(1) and § 9613 (f)(2), I
would hold that when, in a case such as this one, the EPA finds it
advantageous to enter into a settlement with jointly and severally
liable defendants, thereby shielding the settling defendants from
contribution liability (by operation of CERCLA § 113(f)(2)), the
EPA must bear the risk of its bargain being proved less than
satisfying upon district court resolution of a non-settling
defendant's, consent decree-attacking, § 9613 (f)(1) equitable cost
allocation claim. Under the facts of this case, the EPA cannot
have it both ways. It cannot enjoy the benefits of joint and
several liability and at the same time enter into consent decrees
with the otherwise jointly and severally liable defendants to
destroy a non-settling defendant's statutory right to an equitable
allocation of costs under 42 U.S.C. § 9613 (f)(1). The majority's
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sanctioning of such enjoyment by the government improperly allows
the government to smelt what is plainly intended by Congress to be
a defendant's rights provision (42 U.S.C. § 9613) into a
governmental sword against defendants.
Under the facts of this case, Sequa's equitable cost
allocation rights are not limited to 42 U.S.C. § 9613 (f)(2), which
provision focuses on providing for offset contribution. In short,
because Sequa raised its claims for an equitable, proportionate
cost allocation ruling in what amounts to a contribution claims
proceeding -- before the district court embraced the consent
decrees shielding Bell and Leigh, under 42 U.S.C. § 9613 (f)(2),
from contribution liability -- Sequa is entitled to invoke the
broader equitable response cost allocation remedy contained in 42
U.S.C. § 9613 (f)(1). Compare 42 U.S.C. § 9613 (f)(1) (emphasis
added here) ("Any person may seek contribution from any person who
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is liable or potentially liable under section 9607 (a) . . . . In
resolving contribution claims, the court may allocate response
costs among liable parties using such equitable factors as the
court determines are appropriate."), with 42 U.S.C. § 9613 (f)(2)
(emphasis added here) ("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 settlement
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.").5
II
Alternate Water Supply System
I further disagree with the majority's treatment of Sequa's
challenge to the EPA's decision to provide an alternate water
supply system (AWS) to the chromium-affected area as an interim
measure pending the completion of final remedial action. We are
supposed to uphold the EPA's decision "unless the objecting party
can demonstrate, on the administrative record, that the decision
was arbitrary and capricious or otherwise not in accordance with
law." CERCLA, § 113 (f)(2), 42 U.S.C. § 9613 (f)(2). I think it
5
Of course, at the time of a hearing considering the
appropriateness or inappropriateness of a consent decree, the
would-be settling defendant is still "potentially liable" under 42
U.S.C. § 9607(a). See also Amoco Oil Co. v. Borden, 889 F.2d 664,
672 (5th Cir. 1989) ("a court has considerable latitude in
determining each party's equitable share.").
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is clear that Sequa has again failed to meet its burden of proof.
In 1983, the Supreme Court held:
The scope of review under the "arbitrary and capricious"
standard is narrow and a court is not to substitute its
judgment for that of the agency. Nevertheless, the
agency must examine the relevant data and articulate a
satisfactory explanation for its action including a
rational connection between the facts found and the
choice made . . . . In reviewing that explanation, we
must consider whether the decision was based on a
consideration of the relevant factors and whether there
has been a clear error of judgment.
Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile
Ins. Co., 463 U.S. 29, 43 (1983) (citations omitted; internal
quotation marks omitted). A year later, in Chevron U.S.A. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the
Supreme Court further clarified that when a court has determined
the intent of Congress is statutorily vague or ambiguous with
respect to the specific issue before the court, the court must
defer to the "reasonable policy choice" of the agency charged with
administering the statute. 467 U.S. at 843-845.
State Farm and Chevron make it plain that the courts are not
to second-guess the scientific judgments of the EPA. The EPA
Administrator may apply his or her expertise to draw conclusions
from suspected, but not completely substantiated, relationships
between facts, from trends among facts, from theoretical
projections from imperfect data, from probative preliminary data
not yet certifiable as "fact," and the like. See Ethyl Corp. v.
EPA, 541 F.2d 1, 28 (D.C. Cir.) (en banc), cert. denied, 426 U.S.
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941 (1976). And, while deference to agency decisionmaking does not
require us to abdicate our judicial duty to carefully review the
record in order to ensure that the agency has made a reasoned
decision based on reasonable extrapolations from some reliable
evidence, the agency's decision need only be reasonable in light of
the facts reflected in the administrative record and under the
applicable statute(s) and regulations; it need not be the "best" or
"most reasonable" decision. See generally Chevron, supra. The
majority opinion notwithstanding: in this case, the agency's AWS
decision was both a permissible, reasonable reading of the
operative CERCLA provisions -- and the NCP -- under Chevron, and
not otherwise arbitrary or capricious under State Farm.
A
The Statutory Regime
It will most often be true that the general aims and policies
of a controlling statute will be evident from its text. United
States v. Gaubert, -- U.S. --, --, 111 S. Ct. 1267, 1274 (1991). It
is evident from CERCLA's text that CERCLA's purpose is to enable
the executive branch (i.e., the EPA) to target and clean up
hazardous waste sites in an efficient manner; and the Superfund
amendments of 1986 [SARA] have undoubtedly clarified and
strengthened the executive's CERCLA responsibilities and authority.
See J. V. Peters & Co., Inc. v. Administrator, EPA, 767 F.2d 263,
264 (6th Cir. 1985). In order to effectuate CERCLA's purposes,
Congress delegated very broad powers to the EPA -- for the agency
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to reasonably interpret the CERCLA statutory scheme and respond to
hazardous substance scenarios in accordance with such
interpretation.
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In particular, the EPA is under the broad statutory obligation
to expeditiously react to any release or threatened release of
hazardous substances that may pose harm to the public health,
welfare or to the environment. CERCLA, § 101 (23), 42 U.S.C. §
9601(23) (emphasis added). There are two types of CERCLA
reactions, or responses, envisioned by the statute: (1) removal
actions, or interim measures like the AWS at issue in this case;
and (2) remedial, or permanent measures. "Removal actions" are
defined as actions designed to effect an interim solution to a
contamination problem, but very vaguely:
"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.
The term includes, in addition, without being limited to,
security fencing or other measures to limit access,
provision of alternate water supplies, temporary
evacuation and housing of threatened individuals not
otherwise provided for, action taken under section
9604(b) of this title, and any emergency assistance which
may be provided under the Disaster Relief and Assistance
Act.
CERCLA. § 101(23), 42 U.S.C. § 9601(23) (emphasis added). See also
National Contingency Plan, 40 C.F.R. § 300.6 (Definitions) (1986).
"Remedial actions" are defined as actions designed to effect a
permanent solution to the contamination problem, but they are
defined just as vaguely:
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"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 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. The term includes, but is
not limited to, such actions at the location of the
release as storage, confinement, perimeter protection
using dikes, trenches, or ditches, clay cover,
neutralization, cleanup of released hazardous substances
or contaminated materials, recycling or reuse, diversion,
destruction, segregation of reactive wastes, dredging or
excavations, repair or replacement of leaking containers,
collection of leachate and runoff, onsite treatment or
incineration, provision of alternative water supplies,
and any monitoring reasonably required to assure that
such actions protect the public health and welfare and
the environment.
CERCLA, § 101(24), 42 U.S.C. § 9601(24) (emphasis added). See also
National Contingency Plan, 40 C.F.R. § 300.6 (Definitions) (1986).
CERCLA provides some much more specific requirements for the
EPA's response actions, as well. For example, where groundwater is
contaminated by chromium, the maximum contaminant levels allowed by
the Safe Drinking Water Act (SDWA), 42 U.S.C. 300f, are "applicable
or relevant and appropriate standards," for agency decisionmaking
if the groundwater is a potential drinking water supply. 42 U.S.C.
§ 9621(d)(2)(A). Chromium is one element for which maximum
concentration limits ("MCLs") were set under the SDWA. CERCLA
nonetheless defines a "potential drinking water supply" quite
broadly -- as "any raw or finished water source that is or may be
used by a public water system * * * or as drinking water by one or
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more individuals. 42 U.S.C. § 9601(7) (emphasis added).6 Clearly,
the agency's determination that the sole source, Trinity Aquifer
falls within the statute's drinking water supply definition was not
arbitrary or capricious, and reflects a reasonable construction and
implementation of the EPA's broad CERCLA enforcement license.
B
The National Contingency Plan
As the majority has stated, the National Contingency Plan
(NCP) guides federal and state response activities by specifically
identifying methods for investigating the environmental and health
problems resulting from a release or threatened release of
hazardous substances, and establishing criteria for determining the
appropriate extent of response activities. The 1986 NCP was the
operative one in this case.
6
It is also illuminating that CERCLA § 118, 42 U.S.C. § 9618
-- part of the 1986, SARA amendments to CERCLA -- made explicit
that the executive branch is to give high priority to contaminated
drinking water supplies. Section 118 provides:
For purposes of taking action under section 9604 or
9606 of this title and listing facilities on the National
Priorities List, the President shall give a high priority
to facilities where the release of hazardous substances
or pollutants or contaminants has resulted in the closing
of drinking water wells or has contaminated a principal
drinking water supply.
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According to the 1986 NCP:
The purpose of the . . . (NCP or Plan) . . . is to
effectuate the response powers and responsibilities
created by . . . (CERCLA) and the authorities established
by section 311 of the Clean Water Act (CWA), as amended.
* * *
§ 300.3 Scope
(a) The Plan applies to all Federal agencies and this
plan is in effect for:
* * *
(2) Releases or substantial threats of releases of
hazardous substances into the environment, and releases
or substantial threats of releases or pollutants or
contaminants which may present an imminent and
substantial danger to public health or welfare.
(b) The Plan provides for efficient, coordinated, and
effective response to discharges of oil and releases of
hazardous substances, pollutants, and contaminants in
accordance with the authorities of CERCLA and the CWA.
It provides for:
(1) Division and specification of responsibilities
among the Federal, State, and local governments in
response actions, and appropriate roles for private
entities.
NCP, 40 C.F.R. § 300.3 (1986) (emphasis added). In this case, the
EPA worked with the Texas Water Commission (TWC), and a private
environmental research, or investigatory firm -- IT Corporation.
Consistent with CERCLA, the 1986 NCP required that drinking
water supplies meet the Safe Drinking Water Act (SDWA) standards
for chromium -- a statutorily defined, "hazardous substance." 40
C.F.R. 300.68 (i), Appendix V (2). And the NCP defined a "drinking
water supply" as "any raw or finished water source that is or may
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be used by a public water system (as defined by the Safe Drinking
Act) or as drinking water by one or more individuals." NCP, 40
C.F.R. § 300.6 (Definitions) (1986) (emphasis added). The 1986 NCP
also listed, as an appropriate response "to the threat of direct
contact with hazardous substances or pollutants or contaminants,"
the provision of an alternate water supply "where it will reduce
the likelihood of exposure of humans or animals to contaminated
water." 40 C.F.R. 300.65(c)(8) (emphasis added). In short,
contrary to the majority opinion, the EPA has not been statutorily
or administratively handicapped to act only in an "all or nothing"
manner relative to threats of hazardous substance exposure; quite
the contrary.
C
The Administrative Record
The majority's contentions notwithstanding, the Administrative
Record in fact contains substantial evidence that the EPA's
provision of an alternate water supply system was not arbitrary or
capricious at the time the EPA made its AWS decision.
In accordance with the NCP's fair, established procedures, a
study was conducted to examine the alternatives available to
accomplish the task of providing safe water to those in the
affected area. Based on this study, a determination was made that
the best option was to extend the public water supply operated by
the adjacent city of Odessa, Texas to the site. Indeed, the
determination to provide this alternate water supply to those in
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the affected area was based on an extensive Administrative Record,
including in particular a two-volume Remedial Investigation report
and a Record of Decision (which incorporates by reference, among
other documents, the Remedial Investigation) -- outlining the EPA's
reasons for selecting the AWS approach to the threats posed by the
chromium-contaminated, sole drinking water source, Trinity Aquifer.
The chromium posed a threat to present and future human life
in the area. As already stated, in making its assessments of the
situation, the government was compelled by the NCP in effect at the
time to follow the standards set in the Safe Drinking Water Act
(the "SDWA"), 42 U.S.C. § 300f et seq. Chromium is one element for
which maximum concentration limits ("MCLs") were set under the
SDWA. The government found twelve of the fifteen sample wells
tested had chromium levels at or above the MCL for chromium.
Further, nine of these twelve met or exceeded the higher
recommended MCLs for chromium proposed by the EPA in the Federal
Register of November 13, 1985. Administrative Record at 3146. And
the Remedial Investigation "determined that about thirty (30)
people were presently being served by seven (7) wells that produce
the groundwater with chromium concentrations above the drinking
water standard." Administrative Record at 4015.
The Administrative Record reflects a decision "to provide the
residents and businesses in the Superfund Impacted Service Area
with an alternate water supply from the City of Odessa (City)."
Id. (emphasis added) (also stating that this alternative had "been
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given conceptual approval by the past City Council and is
contingent upon the contract being signed between the City of
Odessa and the TWC (Texas Water Commission)"). See also id.
("Concurrently [with the Remedial Investigation and the Feasibility
Study for the site], a Focused Feasibility Study (FFS) was
conducted and completed in August, 1986, to determine what
alternate methods were available to supply these people and
surrounding potentially affected areas with a safe drinking water
source.").
Sequa complains that businesses using the chromium-
contaminated wells ultimately were not "allowed" to participate in
the alternate water supply system, and argues that this
demonstrates that the decision to implement the AWS was arbitrary
and capricious. However, as already noted, and contrary to Sequa's
contention, the Administrative Record reveals that businesses were
indeed a focus of the AWS decision. The Administrative Record
further reflects that businesses could be incorporated into the
design and construction of the system if they bore their own
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administrative costs and burdens.7 Moreover, CERCLA requires the
EPA to take measures to minimize threats to public health and the
environment, not to ensure elimination of all such threats.
Accordingly, the 1986 NCP listed, as an appropriate response "to
the threat of direct contact with hazardous substances or
7
The following record of communication is found in the
Administrative Record:
It was further decided that only those who responded
"yes" on the survey [for those interested in water at
Odessa I and II -- of which there were 2 (owning 8 lots)
out of ten, and 56 out of 56 residents contacted,
respectively)] would be given the opportunity to sign a
contract for water. * * * Businesses and those who
responded "no" on the questionnaire are not being
considered for contact again. These residents can be
incorporated into the design and construction of the
system if they do their own platwork -- obtaining plat
information and get their contracts notarized [sic]. The
businesses must do their own negotiations with the city,
and they incur all expenses for construction.
Administrative Record at 4068 (Record of Communication to the EPA
from the Texas Water Commission, regarding a discussion of the
Record of Decision for Phase 2 of the Odessa AWS design; dated
8/19/87).
In its footnoted "majority dissent," the majority has
misconstrued my citation of the 1987 Record of Communication as an
attempt to rely upon an "event" occurring subsequent to the EPA's
initial AWS decision to support that decision. Actually, I have
cited the 1987 Record of Communication simply to refute the
majority's misguided, post hoc assertion on Sequa's behalf that the
AWS decision must be "arbitrary and capricious" because businesses
in the area were not "allowed" to participate in the AWS. The 1987
Record of Communication in fact reflects that the official decision
to impose an entitlement regime upon area businesses regarding
their ability to participate in the AWS -- i.e., only if the
businesses do their own platwork and do their own negotiations with
the city and incur their own expenses for construction -- was made
after the initial decision to provide the AWS to the area
generally.
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pollutants or contaminants," the provision of an alternate water
supply -- "where it will reduce the likelihood of exposure of
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humans or animals to contaminated water." 40 C.F.R. 300.65(c)(8)
(1986) (emphasis added). It is obvious that the AWS provided to
the area (an area otherwise dependent upon a chromium-contaminated
aquifer for its sole source of drinking water) (at least) minimized
the likelihood, present and future, of exposure of humans and
animals to the contaminated water.8
In sum: the majority has erred in substituting its own, post
hoc vision of wise response action judgment for that of the agency.
The EPA's determination to install the AWS is the type of
technically expert decision to which this Court properly accords
"great deference." The agency's interpretations of its broad
CERCLA directives were reasonable. The Administrative Record
supports the agency's particular AWS determination. And the agency
determination is not inconsistent with the NCP. We should uphold
the district court's decision to grant summary judgment to the
agency on the questions associated with the executive agency
decision to provide an alternate water supply to the individuals
residing in the chromium-affected area. To so uphold the agency's
8
In light of the fact that the statutory and administrative
regime does not handicap the EPA to act in response to health and
environmental threats merely in an "all or nothing" manner, I am
unable to fathom the majority's dissenting point in its footnote 21
-- to the effect that I have "not explained how any potential
threats to the public health were minimized by the alternate water
supply system, when the EPA did not require residents to connect to
the new system and did not prohibit them from using contaminated
water from their wells." The bemoaning of the fact that an agency
did not use more of its enforcement and regulatory power strikes me
as a strange argument to be made in the course of criticizing the
very use of agency enforcement and regulatory power.
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decisionmaking and action does not amount to "meek deference" to
the EPA's scientific expertise, as the majority has asserted.
However, the scrutiny to which the majority subjects the agency's
AWS decision certainly amounts to much more than the appropriate
deferential review of the agency's action called for under the
Supreme Court's caselaw concerning agency implementation of federal
statutes. See e.g., Chevron, U.S.A., Inc. v. Natural Resources
Defense, 467 U.S. 837 (1984).
III
All Costs? Yes.
I think we should decide whether the EPA is entitled to
recover all of its costs for designing and constructing the AWS.
We should decide that it is.
As the majority has stated, CERCLA § 107 provides for the
recovery of the following costs:
(A) all costs of removal or remedial
action incurred by the United States
Government or a State or an Indian tribe not
inconsistent with the national contingency
plan;
(B) any other necessary costs incurred
by any other person consistent with the
national contingency plan;
(C) damages for injury to, destruction
of, or loss of natural resources, including
the reasonable costs of assessing such injury,
destruction, or loss resulting from such a
release; and
(D) the costs of any health assessment
or health effects study carried out under
section 9604(i) of this title.
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42 U.S.C. § 9607(a)(4) (emphasis added). I share the majority's
serious doubt that Congress intended to give the EPA completely
unrestrained spending discretion. But we are bound to pay
attention to the fact that, while CERCLA's § 6307 (a)(4)(A)
provides that the United States is entitled to recover "all costs
of removal or remedial action incurred by the United States
Government or a State or an Indian tribe not inconsistent with the
national contingency plan," other provisions of the statute --
dealing with recovery of costs by private parties under CERCLA --
state that these private parties are entitled to recover only
"reasonable costs" of certain activities. See 42 U.S.C. § 9607
(a)(4)(B).
We must presume that when Congress wants to make cost a factor
of statutory analysis it knows how to do so. See e.g., Union of
Concerned Scientists v. United States Nuclear Regulatory
Commission, 824 F.2d 108, 115 (D.C. Cir. 1987), and cases cited
therein.9 Were we to ascribe no meaning to the distinctions drawn
in CERCLA's § 9607, we would be derelict in our duty to pay close
heed to both what Congress has said and what Congress has not said
9
An example is close at hand. CERCLA requires that remedial
(permanent) actions be cost-effective; however, there is no
corresponding requirement with respect to removal (interim)
actions. 42 U.S.C. § 9621(b). (The NCP implements the remedial
action, cost-effectiveness statutory directive by requiring the EPA
to consider cost with respect to any remedial alternative, and to
select only a cost-effective remedial measure. See Hardage, 982
F.2d at 1443.)
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in the statute under review. We would be derelict in our duty to
interpret the law as plainly written by Congress.
I note also that the congressional intent reflected in
CERCLA's § 9607's "all costs" language reasonably reflects a
fundamental purpose of CERCLA -- to ensure that there be rapid
recovery of response costs from polluters, which in turn ensures
that the Superfund will be made whole quickly and that the funds
recovered can be applied to still other hazardous sites. As the
Second Circuit explained recently:
In passing CERCLA Congress faced the unenviable choice
of enacting a legislative scheme that would be somewhat
unfair to generators of hazardous substances or one that
would unfairly burden the taxpaying public. The
financial burdens of toxic clean-up had been vastly
underestimated -- in 1980 when CERCLA was enacted $1.8
billion was thought to be enough. In 1986 when the
Superfund Amendments and Reauthorization Act of 1986
(SARA), Pub. L. No. 99-499, 100 Stat. 1613 (1986), was
passed, $100 billion was held to be needed. It may well
be more today. It is of course the public-at-large that
is already bearing the economic brunt of this enormous
national problem.
United States v. Alcan Aluminum Corp., 990 F.2d 711, 716-717 (2nd
Cir. 1993).
Sequa has failed to show that the EPA's AWS action in this
case was inconsistent with the NCP guiding EPA responses at the
time of the agency's AWS decision and action. Thus, in this case
at least, Sequa's "reasonable cost" argument must fail. See United
States v. Northeastern Pharmaceutical, 810 F.2d 726, 747-748 (8th
Cir. 1986) (noting that CERCLA's § 9607(a)(4)(A) does not refer to
all reasonable costs, but simply to all costs, and concluding
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therefore that all costs incurred by the government that are not
inconsistent with the NCP are conclusively presumed to be
reasonable), cert. denied, 484 U.S. 848 (1987); United States v.
Hardage, 982 F.2d 1436, 1443 (10th Cir. 1992) ("[a]s long as the
government's choice of response action is not inconsistent with the
NCP, its costs are presumed to be reasonable and therefore
recoverable.").
Finally, I cannot join in the majority's commensuration with
Sequa over the imagined "horrible" of unbounded liability for
response costs assertedly effectuated by the district court's
ruling. As the Second Circuit discussed in Alcan Aluminum Corp.,
Congress and the courts have constructed a framework of fairness to
avoid the majority's feared "lack of limits" to the scope of CERCLA
liability. See United States v. Alcan Aluminum Corp., 990 F.2d
711, 721-722 (2nd Cir. 1993).10 The majority nonetheless finds
particularly frightening Sequa's hypothetical in which the EPA
enters into an independent contract with someone to investigate and
respond to hazardous waste possibilities, and then collects from
the defendant polluters, as among the costs of this response, a
Rolls Royce to be provided to the independent contractor as a perk
for the latter's good labors. Yet, the majority's fears are simply
10
The defendant's opportunity to demonstrate that reasonable
apportionment is possible is part of this framework. So is the
statutory availability of equitable contribution.
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unfounded. The legal reality is that this sort of grossly-
attenuated "horrible" cannot come to pass. As the United States
Supreme Court put it, in a similar context:
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There are obviously discretionary acts performed by a
Government agent that are within the scope of his
employment but not within the discretionary function
exception [to the Federal Tort Claims Act] because these
acts cannot be said to be based on the purposes that the
regulatory regime seeks to accomplish. If one of the
officials involved in this case drove an automobile on a
mission connected with his official duties and
negligently collided with another car, the exception
would not apply. Although driving requires the constant
exercise of discretion, the official's decisions in
exercising that discretion can hardly be said to be
grounded in regulatory policy.
United States v. Gaubert, -- U.S. --, --, 111 S. Ct. 1267, 1275 n.7
(1991) (emphasis added). Thus, there exist well-established
standards whereby the majority's imagined Rolls Royce "horrible"
would surely be adjudged arbitrary and capricious. In stark
contrast to the Rolls Royce "horrible" constructed by Sequa and the
majority, the EPA response action at issue in this case -- as
reflected in the Administrative Record -- is well grounded in
CERCLA regulatory policy, not to mention the plain language of the
statute, and is not arbitrary and capricious.
IV
Settlement Credit
Finally, I do not think the district court erred in crediting
the consent decree proceeds toward reimbursing the government for
the costs incurred in pursuing Bell through bankruptcy proceedings,
before allowing the leftover proceeds from the Bell settlement to
be credited toward the sum Sequa was left owing the government.
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Sequa's interpretation of 42 U.S.C. § 9613 (f)(2) is unduly narrow
and unreasonably strained.11
First, reimbursable "response costs" made the subject of the
Bell consent decree are specifically defined in the consent decree,
as including enforcement expenses -- including in particular,
attorneys' fees. And such expenses are recoverable under CERCLA --
at least in response cost recovery cases brought by the government.
See e.g., United States v. Northernaire Plating Co., 685 F. Supp.
1410, 1418 (W.D. Mich. 1988) (recoverable costs include "attorney
fees and litigation expenses incurred by the staffs of the EPA and
the Department of Justice"), aff'd sub nom. United States v. R. W.
Meyer Inc., 889 F.2d 1497 (6th Cir.), cert. denied, 494 U.S. 1057
(1990); United States v. Northeastern Pharmaceutical, 579 F. Supp.
823, 851-852 (W.D.Mo. 1984) (to the same effect), aff'd in part,
rev'd in part on other grounds, 810 F.2d 726 (8th Cir. 1986), cert.
denied, 484 U.S. 848 (1987). But cf. Stanton Road Associates v.
11
42 U.S.C. § 9613, as amended by the 1986, SARA amendments,
provides:
(f) Contribution
(2) Settlement
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 settlement 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.
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Lohrey Enterprises, 984 F.2d 1015 (9th Cir. 1993) (holding that
private parties are not entitled to recover attorneys' fees and
expenses as costs incurred in bringing CERCLA cleanup cost recovery
action), with General Electric Co. v. Litton Industrial Automation
Systems, Inc., 920 F.2d 1415 (8th Cir. 1990) (holding that private
parties are entitled to recover attorneys' fees and expenses
incurred in bringing CERCLA cleanup cost recovery action), cert.
denied, -- U.S. --, 111 S. Ct. 1390 (1991).
Moreover, the purpose of the CERCLA § 113(f)(2) settlement
offset provision is to prevent the government from obtaining
"double recoveries" in cases in which joint and several liability
has been imposed. See United States v. Northeastern
Pharmaceutical, 810 F.2d 726, 748-749 (8th Cir. 1986) ("Appellants
argue that unless the judgment is offset by the amount of the
Syntex settlement, the government will improperly receive a double
recovery of that amount from Syntax and the appellants."), cert.
denied, 484 U.S. 848 (1987). The district court's treatment of the
consent decree proceeds is fully consistent with this anti-double
recovery purpose. The district court's ruling, that the initial
crediting of the Bell settlement funds must go toward making the
government whole with respect to the enforcement expenses it
incurred in connection with pursuing Bell in bankruptcy
proceedings, does not provide the government with a "double
recovery." Indeed, an adoption of Sequa's view of the crediting
provision would provide Sequa with a "windfall" at the expense of
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the Superfund. In short, the result advocated by Sequa is contrary
to the most fundamental purposes of CERCLA.
In my opinion, Sequa should be provided its statutory right of
equitable response cost allocation under 42 U.S.C. § 9613 (f)(1).
My approach approves the district court's alternate, equitable
"appropriation" as a § 9613 (f)(1), equitable response cost
allocation. Under my approach, Sequa would be responsible for its
35% share of cost responsibility, and no more -- notwithstanding
the settlement the government has negotiated with Bell. If that
amount would, absent a crediting from the settlement proceeds,
result in the government reaping a "double recovery," then the
crediting provision should be applied to prevent that result. In
such circumstances, the money remaining from the Bell settlement
after the application of some of it toward the reimbursement of the
government for its enforcement expenses incurred against Bell in
bankruptcy proceedings may be credited to the joint and several
liability of Sequa. If, on the other hand, the combination of
Sequa's equitable allocation of response costs payment plus the
leftover settlement (crediting) proceeds still fails to make the
Superfund whole, it is my opinion that such is simply the proper
consequence of the bargain the government struck in this case; the
government must live with its bargain.
V
Conclusion
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85
While I concur with much of the majority opinion, I must also
dissent from much of it. Contrary to congressional intent and
traditional judicial doctrines -- not to mention the bedrock
principle of a prudent separation of federal governmental powers --
the majority has become much more than an appellate court in order
to reach its rulings in this case regarding quantitative
apportionment and the executive branch decision to provide the
chromium-affected area with an alternate water supply system. The
majority has usurped for itself the special powers of the executive
agency and the trial court as well.
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86