Ninth Circuit Holds That Under CERCLA, Declaratory Relief Is Not Available If Past Costs Are Not Established Under Section 107

In City of Colton v. American Promotional Events Inc.-West, et al., No. 06-56718 (9th Cir. Aug. 2, 2010), the Ninth Circuit considered the issue of whether a CERCLA plaintiff’s failure to establish liability for its past costs precludes its bid to obtain a declaratory judgment as to liability for its future costs as a matter of law, an issue of first impression in the Ninth Circuit. The court concluded “that declaratory relief is available only if liability for past costs has been established under [CERCLA] section 107.”

The litigation relates to perchlorate contamination in the Rialto-Colton groundwater basin, from which the City of Colton (“Colton”) draws its water supply. After low detections of perchlorate in three wells, Colton took the wells out of service and instituted a wellhead treatment program. Colton brought suit against numerous entities that had engaged in industrial activities in the area. Colton alleged that investigating the contamination and implementing the program cost $4 million, and asserted claims for cost recovery and contribution under CERCLA §§107(a) and 113(f), a claim for declaratory relief as to liability for future costs, and various state law claims. The future costs were estimated to be between $55 and $75 million.

A number of defendants filed a motion for summary judgment, and the district court held that (1) Colton could not recover past costs associated with the wellhead treatment program because it failed to comply with the national contingency plan (“NCP”), as required for recovery of response costs under CERCLA §107(a)(4); and (2) that Colton’s claim for declaratory relief failed as a matter of law. Colton appealed both holdings.

The Ninth Circuit quickly addressed the first issue, affirming the district Court’s denial of past response costs because Colton conceded that it failed to comply with the NCP. Regarding the second issue of declaratory relief for future costs, the court stated that it appeared to be an issue of first impression in the Ninth Circuit, while other circuits appear to be split. The court reasoned that since Congress expressly provides a particular remedy in CERCLA §113(g)(2), the court would not read other remedies into it. CERCLA §113(g)(2) provides that a declaration of liability for past costs has a preclusive effect on future proceedings as to future costs. The court reasoned that Congress’s omission of a provision for declaration of liability for future costs evinced its intention, and therefore the court concluded that such relief is available only if liability for past costs has been established under CERCLA §107.

Colton attempted to argue that denying declaratory relief for future liability would discourage private parties from further clean-up at hazardous sites if it failed to comply with NCP in its past actions. The Court disagreed, stating:

CERCLA’s goal, however, is not simply to encourage private response, but rather to “make the party seeking response costs choose a cost-effective course of action to protect public health and the environment” and to achieve “a CERCLA-quality cleanup.” Carson Harbor [Village Ltd. v. County of Los Angeles, 433 F.3d 1260, 1265 (9th Cir.2006)] (internal quotation marks omitted). Providing declaratory relief based on mere assurances of future compliance with the NCP would create little incentive for parties to ensure that their initial cleanup efforts are on the right track. See [In re] Dant & Russell, 951 F.2d at 250 (noting that premature relief under CERCLA can create perverse incentives).

Moreover, awarding declaratory relief before a plaintiff has incurred any recoverable costs would undermine the very purpose of declaratory relief, which is to “economize[] on judicial time.” PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610, 616 (7th Cir. 1998). A court would have to make complicated determinations as to which defendants are responsible for what proportion of the release, without any assurance that the plaintiff would ever “meet its burden of proving in an adversary proceeding that its expenses were necessary and incurred in a manner consistent with the national contingency plan.” Stanton Road Assocs. v. Lohrey Enters., 984 F.2d 1015, 1021 (9th Cir.1993).

We conclude that CERCLA’s purposes would be better served by encouraging a plaintiff to come to court only after demonstrating its commitment to comply with the NCP and undertake a CERCLA-quality cleanup.

The court therefore concluded: “[w]here, as here, the plaintiff fails to establish section 107 liability in its initial cost-recovery action, no declaratory relief is available as a matter of law.”