ELR Citation: ELR 21275
No(s). s. CIV-S-91-768 DFL, -1167 DFL (E.D. Cal. Mar 31, 1995)

The court holds that the United States and California are not immune from several counterclaims and third-party claims that the corporate successor to a prior owner of a copper, gold, pyrite, and zinc mine subject to a federal cleanup filed against them under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The mine released acid mine drainage (AMD), a hazardous substance, into Spring Creek, on which the United States constructed a dam and power plant. Spring Creek Dam releases AMD-tainted water into the Sacramento River between the federally constructed and operated Shasta and Keswick Dams. The court first turns to the successor's claims that the United States is liable for response costs associated with the release of AMD from the mine because if the United States had not built the dams and power plant, the natural flow of the watershed would have diluted the AMD and there would have been no response costs. The Court holds that the United States is immune from these claims under §3 of the Flood Control Act (FCA). Under a Ninth Circuit text, if the waters behind the dams are not "wholly unrelated" to a flood control project, immunity will apply if these waters are a substantial factor in bringing about the injury that the AMD caused even if the purpose of some of the water releases was for a reason other than flood control. Immunity does not hinge on a showing that the damage was caused by a particular release of water for the purpose of flood control. The court holds that the successor's claims readily fall within the FCA's immunity. The dams are part of the Central Valley Project, which Congress authorized for flood control purposes, and all of the injury the successor claims is attributable, or at least not wholly unrelated, to waters collected and released as part of a federal flood control project. The immunity covers the injury resulting from the decision to build the Sacramento River dams, with the consequent limitation on river flows and the buildup of tainted sediment behind one of the dams, because the sediments are carried by flood waters and the buildup and concentration of the sediments are directly related to the use of a flood control project. Similarly, the alleged use of tainted soils to build the Spring Creek Dam is within the §3's scope because the damage is caused by the release of waters that are managed for flood control and because the dam itself was constructed as part of the Central Valley Project. And the injury that the power plant allegedly caused is not "wholly unrelated" to a flood control project, because it is the combination of water from the power plant and from the dam that causes surges of water that stir up contaminated sediments that travel into the river. Moreover, the power plant is part of the Central Valley Project; thus, releases of water from the power plant are related to a flood control project. The court holds that the United States may be liable only if CERCLA supersedes this immunity. The court holds that CERCLA §§107 and 120(a)(1) expressly waive any immunity that the United States could claim including FCA §3 immunity. Section 120(a)(1) subjects the United States to liability under §107 just like a private party, and §107 has a broadly worded waiver of any limitation on liability and a specific limitation of defenses to those expressly stated in the statute. The government's reliance on the Federal Tort Claims Act (FTCA) is not compelling in the context of CERCLA, because there is no language in the FTCA comparable to that contained in §107 and because CERCLA contains no comparable provision to the FTCA's revocation provision, which did not include FCA §3. The court thus finds that although the immunity in §3 applies to the operation and construction of the dams and power plant, Congress waived this immunity in §§107 and 120(a)(11)of CERCLA. The court denies the government's motion to dismiss on the basis that §3 bars these claims.

The court next rejects the U.S. and California's claim that CERCLA recognizes an immunity from suit for government entities when they act in a regulatory or remedial role, and that they are therefore immune from the successor's claims regarding their operation of the dams. The court holds that CERCLA's plain language does not incorporate such an immunity, and declines to create such an exemption in the face of clear statutory language subjecting government entities to liability. In what the U.S. Supreme Court describes as an unequivocal waiver of immunity, §120(a)(1) provides that the United States shall be subject to that chapter in the same manner and to the same extent as any nongovernmental entity, including liability under §107. Similarly, the states' Eleventh Amendment immunity is abrogated by the inclusion of the states within the definition of "person" and by §101(20)(D), which provides that states shall have the same liability as any nongovernmental entity, including §107 liability. The court holds that the statutory scheme suggests that there is no overarching, unexpressed remedial immunity for state or federal agencies. The defenses to liability that §107 recognizes do not include immunity for a governmental entity acting in a remedial capacity, and where Congress saw fit to provide greater protection to governmental entities for remedial actions, CERCLA expressly provides for such limitation on liability.

The court next holds that it must decline to follow federal district court decisions that have recognized immunity for regulatory or remedial activity, because they are fundamentally at odds with CERCLA's language. The court holds that the cases' reasoning that government entities should be treated differently from private parties because private parties do not clean up pollution caused by others while governmental bodies will step forward in such circumstances is unconvincing. CERCLA encourages private cleanup of pollution that others caused by exposing current owners to liability and providing them with a cause of action for recovering their costs. The court rejects the cases' argument that imposing negligence liability under CERCLA on governmental entities responsible for releasing pollution would thwart Congress' intent to ensure that those who benefit financially from a commercial activity should internalize the health and environmental costs of that activity into the costs of doing business. This does not accurately express CERCLA's principal purpose. The court also rejects the cases' argument that Congress intended all challenges to remedial activities to be addressed as part of a determination for consistency with the national contingency plan (NCP). The affirmative defense of inconsistency with the NCP would not provide a remedy where private parties that cleaned up a site that a negligent government cleanup had contaminated were forced to bear the expense of the government's dereliction because their contribution claims were blocked by a remedial exception to liability. The court also rejects the argument that to permit a claim for governmental negligence at a cleanup site would be tantamount to creating a new negligence defense to CERCLA liability. A claim against another responsible party is not fairly viewed as a defense. The court also rejects the argument that sovereign immunity bars a cause of action against the government acting in a remedial or regulatory capacity because CERCLA does not clearly authorize such a cause of action. CERCLA does provide for a claim against governmental agencies and, in a few instances, provides some greater protection to government bodies acting in a sovereign capacity. The court holds unpersuasive the argument that §107's provision for liability of remediators when costs or damages result from negligence does not authorize actions against them under CERCLA, but only clarifies that CERCLA does not preempt actions against them under state law. The provision refers to costs or damages under CERCLA, not state law, which is never mentioned. Such a reading would also render other sections of CERCLA superfluous. The court holds that Congress' rejection of an amendment that would have added government misconduct and negligence as a defense to CERCLA does not suggest that it intended to exempt the government from all liability for its proportionate share. Based on the foregoing, the court holds that there is no remedial or regulatory exception to CERCLA liability, and denies U.S. and California's motions to dismiss on that basis.

The court next turns to the successor's claims that the United States is liable for response costs at the mine because of its involvement in the mine during and after World War II. The court holds that the complaint does not state a cause of action for "operator" liability under CERCLA. Although the United States certainly played the role of a very interested consumer during the war, the counterclaim is bereft of any allegations that the United States was involved in the hands-on, day-to-day management of the mine. Purchasing a product and encouraging its production are not the same as controlling cause of the contamination or managing the mine. The court next holds that the allegations regarding post-war operation of the mine also fall short of establishing operator liability. The successor does not allege that the government's exploration for new ore resulted in any production or release of hazardous wastes, and the mining had finished by the end of the war. The court next holds that the successor's allegations do not support a finding of "arranger" liability under CERCLA. Arranger liability is predicated on ownership or possession of the hazardous substances; however, the complaint does not allege that the government operated the mine in such a way that it could be said to possess the waste from the mine. And there are no additional allegations that would suggest that the government ever possessed the mining waste. The successor does not allege that the United States owned or supplied to the mine any materials that contained any hazardous substances, nor that the United States actually knew about, had immediate supervision over, or was directly responsible for arranging for the transportation and disposal of the hazardous waste.

Turning to the successor's "operator" and "arranger" claims against California, the court holds that the successor's allegations that the state actively participates in operating the dams are sufficient to state a claim for operator liability. The successor has pled facts indicating that the state is involved in the day-to-day control of the dams and has authority to determine the timing and quantity of releases from them, especially from Spring Creek Dam—activity that allegedly determines the concentration of sulfuric acid in the Sacramento River. The court next holds that the successor's "arranger" claim is deficient because the successor has not adequately alleged that the state owned or possessed the hazardous waste in question. The court next turns to the successor's state-law recoupment counterclaims. The court holds that adopting the theory of recoupment in the context of a CERCLA action would result in extraordinary exposure to governmental entities. Whereas CERCLA provides that certain actions of the federal government are to be reviewed under a negligence or arbitrary and capricious standard, state law could impose strict liability or some other standard. A state could be exposed to suit in federal court for state-law claims that would normally be barred by the Eleventh Amendment and state sovereign law. The court holds that there is nothing in CERCLA that addresses a recoupment remedy or suggests that by bringing a CERCLA action a government agency exposes itself to claims under other state or federal statutory and common-law schemes. The court declines to extend the recoupment doctrine as developed in federal tax cases to CERCLA. Waivers of sovereign immunity may not be implied; moreover, there is no compelling need for application of the doctrine in government cost recovery actions, because CERCLA allows defendants to seek contribution and make claims against the government. The court holds that there is nothing in CERCLA that can be read to exact a waiver of governmental sovereign immunity from claims under other laws as to which it is immune as the price of bringing a cost recovery action under CERCLA. The court thus dismisses all the successor's state-law recoupment claims.

[Decisions in a related case are published at 23 ELR 20651 and 20661.]

Counsel for Plaintiff
Robert B. Stewart
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Paul B. Galvani
Ropes & Gray
One International Pl., Boston MA 02110
(617) 951-7000