Landowners seeking restoration damages in state courts, at sites where there is a cleanup remedy previously selected by EPA, may pursue such claims only if they first obtain EPA approval for the proposed restoration work. Atlantic Richfield Co. v. Christian (No. 17–1498, April 20, 2020).
The Atlantic Richfield decision may have the effect of avoiding collateral attacks on EPA cleanup decisions by placing EPA in the role of gatekeeper for state lawsuits seeking restoration damages. In the present case, EPA stated that the landowners’ restoration plan, if implemented, would interfere with EPA’s approved cleanup by, for example, digging up soil that has been deliberately capped in place. The court’s decision in Atlantic Richfield may also have the effect of avoiding the award of windfall profits in cases where plaintiffs seek huge “restoration damages” that go well beyond actual compensatory damages they have suffered.
For many years EPA worked with Atlantic Richfield, the current owner of a former smelter, to implement a cleanup plan expected to continue through 2025 for remediation of contaminated soil. A group of 98 landowners sued Atlantic Richfield in Montana state court for common law nuisance, trespass, and strict liability, seeking restoration damages. The damages sought by plaintiffs were based on a proposed restoration plan that went beyond the measures that EPA found appropriate to protect human health and the environment. The trial court granted summary judgment to the landowners on the issue of whether CERCLA precluded their restoration damages claim, and the Montana Supreme Court affirmed. The US Supreme Court reversed and remanded.
The Supreme Court first needed to decide whether CERCLA deprived the Montana courts of jurisdiction. The landowner’s claims for trespass and nuisance arise under Montana law not CERCLA, the Court held, and thus are not barred by Section 113(b) of the Act, which provides that federal District Courts have exclusive original jurisdiction “over all controversies arising under this chapter.” Similarly, the Court held that a suit in Montana state court is not precluded by CERCLA §113(h), which states that “[n]o Federal court shall have jurisdiction under Federal law . . .to review any challenges to removal or remedial action” selected under CERCLA. In short, §113(b) deprives state courts of jurisdiction over cases arising under CERCLA, while §113(h) deprives federal courts of jurisdiction over certain challenges to Superfund remedial actions.
The parties conceded that under §122(e)(6) of CERCLA, when EPA or a responsible party has initiated a remedial investigation and feasibility study for a particular facility, no potentially responsible party may undertake any remedial action at the facility unless such remedial action has been authorized by EPA. The court in Atlantic Richfield held that because arsenic and lead are hazardous substances that have “come to be located” on the plaintiffs’ properties, the plaintiffs are potentially responsible parties under §107(a) of CERCLA. Therefore, under the statute, the plaintiffs claim for restoration damages may proceed only if the landowners first obtain EPA approval for the restoration work they seek to implement.
What are the implications of the Court’s ruling? Justice Gorsuch, joined by Justice Thomas dissented, stating that the Court’s reading of the Act endorses “paternalistic central planning” and turns a cold shoulder to “state law efforts to restore state lands.” This argument was not compelling to the majority because, as the Court’s opinion notes, cleanup plans generally must comply with applicable or relevant and appropriate state environmental standards and, moreover, states have opportunities for involvement in developing and selecting cleanup plans. The court’s ruling in Atlantic Richfield may also head off what are, in effect, collateral attacks on EPA’s remedial decisions and the confusion and delay threatened by such lawsuits.
The Atlantic Richfield decision may serve to avoid unjust awards of windfall profits to plaintiffs who seek so-called restoration damages that go beyond any actual damages. Indeed, litigation in Montana illustrates the basis for such concern. In Sunburst School District No.2 v. Texaco, 165 P.3d 1079 (2007), the Montana Supreme Court approved an award of damages that Texaco claimed would exceed the value of the property allegedly damaged and thus would result in a windfall. The Court recognized the problem identified by Texaco, citing Montana law that an injured party should be made whole but not profit. However, the court in Sunburst found that the general rule in favor of diminution in value as the appropriate measure of damages can be overcome where the record shows that an award of restoration damages will actually be used to repair the damaged property rather than simply paid to plaintiffs.
The Supreme Court’s decision in Atlantic Richfield may avoid the need for a trial court to deal with “windfall profit” issues in cases where plaintiffs are responsible parties, EPA has selected a CERCLA remedy, and EPA has not authorized the restoration plan. In Atlantic Richfield, EPA represented that the landowners’ restoration plan would dig up soil that has been deliberately capped in place under the EPA approved remedy found to be protective. In such a case, one can understand why EPA would not authorize the restoration plan.
The Court’s decision in Atlantic Richfield does not address “restoration damage” claims where the plaintiffs are not potentially responsible parties, e.g. parties owning property that is not contaminated but present common law claims such as diminution of value. Although “restoration damage” suits were infrequent in the past, the Atlantic Richfield decision may serve to prompt an increase in such claims under state law. Adjacent landowners could sue for “cleaner than clean” restoration damages, i.e. providing more (and much more expensive) remediation than required under state environmental requirements. Trial courts in such cases will presumably be mindful of the fact that plaintiffs have other remedies under state law for compensatory damages measured by diminution of value. Moreover, defendants, aware of potential “windfall profit” concerns, may ask the trial court to require periodic reimbursement by defendants of actual restoration costs — instead of a lump sum — to deal with concerns that plaintiffs may decide to pocket the damage award rather than implement all or most of the restoration plan presented to the court.