ELR Citation: ELR 20486
No(s). 00-14975 (11th Cir. Mar 1, 2002)

The court affirms in part and reverses in part a district court decision in a breach of contract and CERCLA cost recovery and contribution case between an environmental engineering firm and a city. After the U.S. Environmental Protection Agency filed a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) complaint against the city for groundwater contamination due to a leaking landfill, the city hired the engineering firm to conduct cleanup. The contract between the city and the firm contained a pay-when-paid clause in recognition of the fact that the city was depending on reimbursement from the state environmental agency to pay the firm for the cleanup work. During the course of the firm's work at the site, a contractor under the supervision of the firm illegally dumped fill into wetlands causing additional cleanup costs. Moreover, the firm deficiently performed tests for a hydraulic barrier and then used the results of the faulty test in the design of the barrier. The city ultimately fired the firm and refused to pay the firm for some of its work. During this time, the city brought two separate lawsuits to recover the costs of the cleanup from those who had caused the pollution in the first place. The firm eventually sued the city under breach of contract, CERCLA, and state law for failure to pay for work done under the contract. The city brought counterclaims for professional malpractice, breach of contract, and CERCLA contribution.

The court first holds that the district court correctly set off against the city's counterclaim award the sum the city had recovered when it settled its previous CERCLA lawsuit. The damages the city sought in its previous CERCLA lawsuit overlapped with its counterclaim award in its lawsuit with the firm. The court also holds that the district court's decision to award prejudgment interest was within the range of legitimate choices given the applicable law and the circumstances of the case. The court next holds that the district court erred in failing to reduce the amount of the prejudgment interest. The maximum amount on which prejudgment interest should have been awarded is the portion of the firm's award it would have recovered if the city's counterclaim had been subtracted from that award instead of being erased by the setoff. The court additionally holds that the firm forfeited its right to have the court consider its post-trial motion for judgment as a matter of law that the city's professional malpractice claim was barred by the statute of limitations because the firm failed to make a motion for judgment as a matter of law at the close of all the evidence. The court then holds that the district court erred in preventing the firm from recovery under CERCLA on the basis of the contract's pay-when-paid clause. The city asserted the existence of the clause as a defense to CERCLA §107(a) liability, but §107(a) bars the assertion of equitable defenses to CERCLA liability. The pay-when-paid clause is similar to an impermissive equitable defense, and, as such, it cannot prevent the firm from recovering from the city.

Counsel for Plaintiff
Kirk L. Burns
White & Case
200 S. Biscayne Blvd., Miami FL 33131
(305) 371-2700

Counsel for Defendant
Ridgway M. Hall
Crowell & Moring
1001 Pennsylvania Ave. NW, Washington DC 20004
(202) 624-2500

Carnes, J. Before Barkett and Kravitch, JJ.