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CERCLA 9/30/2009 2:31:10 PM EST For CERCLA settlement purposes and contribution bars, a city is not a state and thus CERCLA 113(f)(2) cannot be invoked as a result of settling with a city Partner, Ropers Majeski Kohn & Bentley A lawsuit was filed in Federal Court asserting Federal and State causes of action concerning contamination and remediation of two adjacent sites in Emeryville, California. In November 2000, a settlement agreement was reached between plaintiffs and The Sherwin-Williams Co.; the settlement was approved by the District Court in February 2001. Pursuant to the settlement, Sherwin-Williams paid Emeryville a lump-sum of $ 6.5 million. Sherwin-Williams also agreed to share future costs "in connection with ongoing groundwater Response actions arising from groundwater at, on, under, or emanating from" part of the site. As part of the case defendant The Sherwin-Williams Company moved to enforce a settlement agreement between itself and plaintiffs, the City of Emeryville and the Emeryville Redevelopment Agency (collectively "Emeryville"). Sherwin-Williams also sought dismissal with prejudice of claims filed against it by the Emeryville Redevelopment Agency in state court, and of cross-claims for contribution and/or indemnity filed by other defendants in that state-court action.
In City of Emeryville et al v. Elementis Pigments, Inc., et al, 2008 U.S. Dist. LEXIS 109751 (N.D.CA. 2008), the District Court considered the issues. The key language in the settlement that was at issue was the following: “[T]he Parties further agree to release one another from any and all claims, demands, actions, and causes of action arising from or related to the Site, including without limitation, claims arising from the release(s) of hazardous substances and/or contaminants at, on, under or emanating from the Site, whether presently known or unknown, suspected or unsuspected. In giving this release, each Party expressly waives any protection afforded by Section 1542 of the California Civil Code, which provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” This is common release language modeled on California State law.
The Court found that the language was sufficiently broad to encompass a release by plaintiffs of not only the specific portion of the site in question (“Site A”)noted in other aspects of the settlement, but also to release Sherwin-Williams from liability for contaminants that move from other portions of the site (“Site B”) to the area covered by the settlement (Site A).
The settlement further provided as follows: “All matters that are the subject of the releases in Section VII and all matters alleged in the Complaint filed in the Action are defined to be ‘covered matters’ within the meaning of CERCLA. With regard to any claims for costs, damages, or other relief asserted against the Settling Defendants by persons not party to this Agreement on account of the release(s) of hazardous substances at the Site, the Parties agree that Settling Defendants are, and each of them is, entitled to such protection as is provided in Section 113(f) of CERCLA, 42 U.S.C. § 9613(f), California Code of Civil Procedure Sections 877 and 877.6, and any other applicable provision of federal or state law, as well as an order dismissing the cross-claims asserted in the Action and barring contribution or equitable indemnity claims.” Sherwin-Williams contended that this provision should be interpreted to erect a contribution bar against all cross-claims asserted against it in relation to actions involving other portions of the site (Site B) not covered by its settlement. Plaintiffs and the cross-complaining defendants argued that neither CERCLA nor California Code of Civil Procedure Sections 877 and 877.6 erect a contribution bar in this case. First, they asserted CERCLA's contribution bar is available only to parties who have settled with the "United States" or "a State" and that Emeryville qualifies as neither. Second, they argued that both the federal and state contribution bars protect only against claims by non-parties who received notice of the settlement and had an opportunity to object before the settlement became effective. The Court noted that it was undisputed that neither Sherwin-Williams nor any other party to the Site A action provided notice to any Site B property owner or other Site A neighbor.
The Court properly noted that CERCLA 113(f)(2)’s contribution bar does not apply to a City, which is not a “state” as defined in the statute. The Court thus concluded that plaintiff Emeryville does not qualify as a state for purposes of Section 113(f) and no notice was provided to non-parties of the instant settlement agreement. The Court concluded that for both reasons, CERCLA's contribution bar does not protect Sherwin-Williams against claims by those non-parties for contribution and/or indemnity. The Court also held that the California good faith settlement statutes similarly, under these circumstances, did not protect Sherwin-Williams.
The Court thus found that “To be sure, this outcome lacks symmetry, meaning that Sherwin-Williams is entitled to the benefit of the release as against Emeryville but it is not entitled to a contribution bar as against others who have now sued, at least in part, for the same tort. This outcome is, in part, due to Sherwin-Williams' own failure to give notice to the parties it now seeks to disadvantage before the settlement was approved. There being enough blame to go around, all motions for sanctions and attorney's fees are denied.”
This case makes two key points. Settlements with Cities or City Entities are not settlements with a state for CERCLA purposes. Also, it is key to give comprehensive notice of a potential settlement in order to bind those that may be disadvantaged if the contribution protection provisions are to be invoked through an approved settlement. Create an account or login to post comments.
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