Declaratory Judgments an Important Tool for Establishing Liability Early in CERCLA Litigation

Attorneys representing Potentially Responsible Parties (“PRPs”) in CERCLA litigation need to consider the use of a declaratory judgment action to establish liability early in the process in order to save their clients money and, in many cases, avoid the burden of unnecessary litigation altogether.

As one commentator has described, declaratory judgment claims provide "a speedy means of resolving a dispute with a rifle shot, rather than employing the full artillery of a protracted lawsuit, and if the lawyer acts quickly, it can be deployed before a full-blown war has erupted." [1]

Declaratory judgments are particularly useful in CERCLA cases because the broad scope of activity that makes entities potentially responsible parties (PRPs) often leads to the presence of a number of parties in a case that are not actually liable under CERCLA. A declaratory judgment action can provide these parties with a way to get out of the case relatively quickly, before discovery begins regarding the extent and sources of contamination, costs of remediation or removal and other complex technical matters, which can drag on for years and be very expensive.

In addition, a declaratory judgment action can be useful in pursuing insurance coverage in connection with a claim by establishing early in the litigation that a policyholder is liable.

Under CERCLA, §113(g)(2), declaratory judgments are mandatory as to future response costs or damages, but only for §107 actions. Accordingly, some courts have outright rejected claims by PRPs for a declaratory judgment in §113 contribution actions. E.g., Ceramicas Industriales, S.A. v. Metropoloitan Life Ins. Co., 2009 WL 331262 (S.D.N.Y. 2009) (CERCLA does not authorize a declaratory judgment to be brought under § 113(f)(3) action).

However, the U.S. Court of Appeals for the First and Sixth Circuits have held that declaratory judgments are also available in §113 actions seeking contribution. See GenCorp, Inc. v. Olin Corp., 390 F.3d 433, 450 (6th Cir. 2004); United States v. Davis, 261 F.3d 1, 46-47 (1st Cir. 2001). And, in a recent opinion, the Second Circuit agreed, though it didn’t find it necessary to determine whether the authority for the declaratory judgment action derived directly from CERCLA. See New York v. Solvent Chem. Co., Nos. 10-2026 et al., 2011 U.S. App. LEXIS 25141 (2d Cir. N.Y. Dec. 19, 2011) (finding that the Declaratory Judgment Act, 28 U.S.C. § 2201(a), provides sufficient, independent authority for entry of a declaratory judgment in contribution action).

In other words, declaratory judgments are available in CERCLA actions, regardless of whether the authority for them derives from CERCLA itself or from the Declaratory Judgment Act.  PRPs and their attorneys should consider a declaratory judgment claim early in a CERCLA case as a means of minimizing costs or—potentially—avoiding unnecessary litigation altogether.

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[1] John W. Amberg, Overview of Declaratory Judgments, NITA Commentary, 28 US NITA prec § 2201 (2011).