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Second Circuit Finds CERCLA Claims Ripe Regardless of EPA Enforcement Status

On August 18, 2021, the Second Circuit Court of Appeals held that a party does not need to wait until EPA decides to pursue other potentially responsible parties (“PRPs”) before it can bring claims under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) for remediation of contaminated property. In RACER Trust et al. v. National Grid USA, the Second Circuit reversed the District Court for the Northern District of New York, and revived plaintiffs’ claims against numerous polluters of Ley Creek near Syracuse, New York.

RACER Trust Brings CERCLA Claim

Revitalizing Auto Communities Environmental Response Trust (RACER Trust) is an Environmental Response Trust, that was created in the General Motor Corporation (GM) bankruptcy proceedings. RACER Trust is responsible for investigating and remediating 89 GM properties, including the Inland Fisher Guide Syracuse Site (IFG Subsite, divided into “OU-1” and “OU-2”) in Syracuse, New York. The IFG property is a subsite of the Onondaga Lake Superfund Site. RACER Trust took over the required environmental response activities of GM for the IFG Subsite pursuant to a 2015 Consent Order with the New York State Department of Environmental Conservation (NYSDEC). After NYSDEC directed RACER Trust to take environmental samples off site, resulting in widespread findings of high levels of PCB contamination, NYSDEC insisted that RACER remediate an additional 22-acre off-site area (“Expansion Site”). This additional work potentially resulted in an increase in RACER’s remedial costs from the $8.5 million budgeted to as much as $93.5 million.

After spending about $12.4 million for investigation and cleanup of OU-2 and the Expansion Site, RACER Trust, and the landowner of OU-1, RACER Properties LLC (together “RACER”), sued over 50 facility owners/operators, and entities involved in the dredging. RACER alleged that the Expansion Site was contaminated primarily by discharges from upstream facilities and the dredging and relocation of Ley Creek by Onondaga County. RACER sought recovery of its past costs of investigation and remediation pursuant to CERCLA §107, and in the alternative CERCLA §113, as well as New York State law, including Navigation Law Article 12, and common law and equitable theories.

RACER’s CERCLA Claims Were Dismissed in Error

The district court dismissed RACER’s complaint on the ground that its CERCLA §107 claim was prudentially unripe. The doctrine of prudential ripeness allows a court to decline to exercise jurisdiction over a case where it determines that it would be better decided at a later date. The district court reasoned that because the EPA was investigating other PRPs it would be best if RACER waited to pursue its claims until a determination was made as to the existence of other PRPs. The district court also dismissed RACER’s CERCLA §113 claim without prejudice, because either it was also prudentially unripe, time-barred, or failed to state a claim.

The Second Circuit vacated the district court’s decision and remanded the matter for further consideration. It concluded that the district court erred in dismissing RACER’s complaint at this early stage.

CERCLA §107 Claim is Ripe

RACER’s CERCLA §107 claim seeks to recover money it has already spent. The Second Circuit held that RACER’s claim was prudentially ripe because it was based on costs already incurred which it might not get back after the EPA investigation. Further delay in adjudicating the claim would cause RACER hardship.

Though Defendants argued that the case was prudentially unripe because the enforcement decisions of EPA and NYSDEC may change in the future, the Second Circuit found this inconsequential, as RACER had already expended funds for which it was entitled to seek recovery immediately. Similarly, the Second Circuit held that RACER did not need to wait for EPA to potentially identify other PRPs before deciding to pursue other PRPs itself.

The Second Circuit reiterated the purpose of §107 which is to allow a private party to recover response costs without first establishing the liability to a third party. Thus the fact that RACER may not have been formally ordered to investigate and remediate the Expansion Site, and arguably is doing so “voluntarily,” did not bar its claim.

Alternative CERCLA §113 Claim is Restored

Alternatively, RACER asserted a §113 claim for contribution against the 50+ PRPs. The Second Circuit held that the district court erred in dismissing this claim. As with the §107 claim, the Second Circuit disagreed that this claim was prudentially unripe. The Second Circuit also held that RACER was allowed to plead its §107 and §113 claims in the alternative.

KNAUF SHAW REPRESENTS RACER IN THIS CASE. FOR MORE INFORMATION ON RECENT DEVELOPMENTS IN CERCLA JURISPRUDENCE, PLEASE CONTACT THE ATTORNEYS AT KNAUF SHAW LLP AT WWW.NYENVLAW.COM OR CALL (585) 546-8430.

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