The Centredale Manor Restoration Project Superfund Site
The Centredale site, now home to two apartment buildings, is the former home of Metro-Atlantic, Inc., a chemical company and corporate predecessor to Emhart, and New England Container Corporation (NECC), a now-defunct barrel reclamation company. The EPA has alleged that in the 1950s and 1960s, those companies contaminated the nine-acre site, along with substantial portions of the adjacent Woonasquatucket River and downstream ponds. The site, river sediments, and floodplain soils are contaminated with dioxins (more specifically, 2,3,7,8-TCDD) and other contaminants.
The remedy, initially set forth in the EPA’s 2012 Record of Decision (ROD), involves capping the site and removing contaminated soils and sediments to achieve a level as low as 15 parts per trillion for dioxin (the background concentration for dioxin at the site).
The Litigation
Emhart sued NECC in 2006, alleging that the contamination was caused by NECC’s barrel-cleaning operations. NECC filed a counterclaim, alleging that the dioxin contamination was caused by releases from Metro-Atlantic’s hexachlorophene manufacturing operations. In 2011, Emhart sued the military defendants, alleging that two military bases sent drums containing dioxin-contaminated residues to NECC for reconditioning. The government then brought claims and counterclaims for the EPA’s past and future response costs. In 2012, NECC and the government brought third-party claims against companies alleged to have sent drums to NECC for reconditioning. The court stayed those claims while focusing on the liability of Emhart, NECC, and the military defendants. Emhart asserted similar claims against third parties, but not until 2017.
In 2014, the EPA issued a unilateral administrative order (UAO) requiring Emhart to implement the remedy set forth in the ROD. Emhart declined to comply with the UAO. Following a mediation in 2014 and early 2015, the EPA settled with NECC in an ability-to-pay settlement, but Emhart and the government proceeded to trial. In the first phase, tried in 2015, the court found Emhart jointly and severally liable for conditions at the site. The court also dismissed Emhart’s claims against the military defendants, holding “that Emhart had not proved by a preponderance of the evidence that the barrels that the Department of Defense sent to the Source Area contained toxic substances.” Emhart Indus. Inc. v. U.S. Dep’t of the Air Force, 988 F.3d 511, 519-20 (1st Cir. 2021). In the second phase, concluded in early 2017, the court held that certain aspects of the EPA’s chosen remedy were arbitrary and capricious. The court therefore declined to penalize Emhart for not complying with the UAO, holding that “Emhart’s challenge to the UAO up to this point has been pursued in objective good faith.” Emhart Indus., Inc. v. New England Container Co., Inc., 274 F. Supp. 3d 30, 80 (D.R.I. 2017).
Consent Decree
While appeals of the Phase II decision were pending, Emhart and the government agreed to a consent decree obligating Emhart to pay the EPA’s past costs and implement the remedy. In addition, the EPA settled with the military defendants for $550,000, providing them with contribution protection against claims asserted by other parties, such as the third-party defendants. The district court approved the consent decree in April 2019 after hearing the objections of certain third-party defendants (former customers of NECC). Those third-party defendants appealed. On February 17, 2021, the First Circuit issued its decision, affirming Judge Smith’s approval of the consent decree.
The First Circuit began by noting that the district court decision is entitled to a “double layer of swaddling.” Emhart Indus., Inc. v. U.S. Dep’t of the Air Force, 988 F.3d 511, 522–23 (2021) (internal citation omitted). First, the district court affords a certain level of deference to the agency’s expertise and the parties’ agreement. Second, the appellate court should only overturn a district court’s decision to approve a consent decree with the United States if it finds an abuse of discretion.
The appellants argued that the judge should not have approved the consent decree because it included a remedy that he previously found arbitrary and capricious. They pointed out, for example, that the decree requires Emhart to install an RCRA Subpart C impervious cap even though the district court previously invalidated that requirement. (In Phase II, the district court held that the EPA’s classification of groundwater as a potential source of drinking water, one of the reasons for requiring the cap, was arbitrary and capricious.)
However, the First Circuit noted that the record at the time the district court considered the consent decree was different than the record during the Phase II proceedings. After Phase II, the EPA explained that there were other, independent reasons for requiring the RCRA C cap, including to protect against scour and erosion from flooding, to provide physical containment of contaminated soils, and to allow certain materials to be left in place (but only if under an RCRA C cap.) The First Circuit found that it was not an abuse of discretion for the district court to approve the decree, given the record before the district court at the time the consent decree was approved.
The appellants similarly argued that in Phase II the district court found that the EPA used inaccurate information about fish consumption in the risk assessment supporting the selected remedy. However, the First Circuit again pointed out that additional information was presented to the district court at the time it considered the consent decree. The EPA presented evidence that it recalculated the remediation goal with updated fish consumption numbers (including the numbers Emhart had pressed for in Phase II). The result of this exercise did not change the remediation goal in the remedy. The reason, the EPA explained, was because the newly calculated remediation goal was still below the background concentration for the contaminant at the site, in which case the EPA sets the remediation goal at the background concentration. This is what the EPA did in the 2012 ROD—meaning that the error discovered in Phase II had no impact on the remedy, and thus the district court did not abuse its discretion in approving the decree.
The appellants also objected to the EPA’s settlement with the military defendants, notwithstanding the fact that the district court had already ruled that the military defendants were not liable. The appellants argued that “Emhart’s failure to prove the Agencies’ liability during Phase I is not substantial evidence that the Agencies’ liability is insignificant.” Id. at 528. The First Circuit held that it was not error “for the District Court to accept the EPA’s explanation that the federal agencies’ liability was essentially nonexistent but that the agencies paid a settlement figure in order to precipitate the end of their role in the litigation.” Id.
Finally, the First Circuit rejected the appellants’ contention that the district court failed to sufficiently scrutinize the consent decree and instead simply “rubber stamped” it. Id. at 529. The First Circuit looked at a number of statements made by the district court in considering the decree before concluding that it was fair, reasonable, and consistent with the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The First Circuit concluded that
these statements indicate that the District Court carefully considered the ways in which the record before it at the time of its decision to approve the Decree differed from the record before it when it ruled in the Phase II litigation on the response action. They reflect, in other words, a reasoned judgment rather than the absence of one.
Id. at 530.
Of Note
The First Circuit made several statements in dicta that will inevitably end up in future briefs supporting CERCLA section 107 cost-recovery claims brought by one responsible party against others. For example, the First Circuit stated that “a responsible party may seek cost recovery under section 107 . . . or contribution under section 113 . . . against any other responsible party.” Id. at 517. Unfortunately, the court did not discuss the limited circumstances under which a responsible party could bring a section 107 claim rather than a section 113 claim. Instead, the court simply stated that “[s]ection 107(a) ‘allows for full recovery of response costs . . . by a responsible party from other responsible parties unless the harm can be apportioned. . . .’” Id. The court did not consider circumstances where a responsible party might be limited solely to a contribution claim under section 113.
The court also stated, in a footnote, that “the appellants have plausibly pled valid cost recovery and contribution claims against Emhart and the federal agencies that will be extinguished pursuant to the Decree. . . .” Id. at 522 n.5. Other courts have ruled that CERCLA contribution protection does not afford parties protection from section 107 cost-recovery claims. Those courts have said that the responsible party may pursue the cost-recovery claims and the defendants can counterclaim under section 113. The court will then engage in an equitable allocation in which one factor it will inevitably consider is the prior settlement giving rise to contribution protection in the first place. While the First Circuit may seemingly make sense in stating that the decree (and the contribution protection that comes with it) extinguishes a cost-recovery claim, other courts have not always interpreted the law the same way.
Finally, think about what the First Circuit would have faced had the district court rejected the consent decree. When a responsible party agrees to reimburse all of the EPA’s past costs and implement the entire remedy, how could a court find that unfair, unreasonable, or inconsistent with CERCLA?
What’s Next?
The third phase of the Centredale litigation involving Emhart’s claims against the NECC customers is now pending before the court. Perhaps those disputes will give rise to the next installment in this Centredale series. Stay tuned.