Court decision shows no good deed goes unpunished.

In its recent decision in Cooper Industries Inc. v. Aviall Services Inc., the United States Supreme Court held that a private party who has not been ordered by the government to clean up a contaminated site pursuant to [section] 106 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or Superfund) or sued under CERCLA [section] 107 to repay response costs incurred by the government or certain private parties for a cleanup may not bring a contribution claim under CERCLA [section] 113(f)(1) against another party that may be responsible for the cleanup (otherwise called a "potentially responsible party" or "PRP").

The impact of this decision is that private parties who voluntarily clean up a contaminated site without first having been subject to such an order or suit cannot seek contribution for their response costs from other PRPs under CERCLA unless they can persuade the State or Federal government to bring an enforcement action against them. The Supreme Court's ruling appears to have given validity to the adage that, "no good deed goes unpunished."

In this case, Cooper Industries sold four aircraft maintenance sites to Aviall Services. After operating the sites for several years, Aviall discovered that both it and Cooper had contaminated the properties. Aviall notified the state environmental agency of the contamination. The agency directed Aviall to clean up the properties and threatened to sue if it did not. However, neither the agency nor the Federal government took judicial or administrative measures to compel Aviall to cleanup the sites. Aviall commenced a cleanup under the agency's supervision in 1984. After eleven years, Aviall sold the properties to a third party. However, Aviall retained liability for approximately $5 million in cleanup costs. Aviall then sued Cooper to recover its costs.

The lower court held that Aviall could not recoup its cleanup costs from Cooper because Aviall had never been sued under [section] 106 or [section] 107 of CERCLA. The appellate court eventually reversed, holding that CERCLA did allow Cooper to recoup its costs regardless of whether it had been sued or not. The Supreme Court subsequently reversed and held that a private party that has not been sued under [section] 106 or [section] 107 may not obtain contribution under CERCLA from other PRPs.

The Supreme Court's decision may result in discouraging private parties from voluntarily remediating contaminated sites because such parties will not be able to recoup their costs from other PRPs under CERCLA. Rather, such parties will be relegated to asserting common law claims. In order to preserve their right to seek contribution from other PRPs under CERCLA, private parties may be apt to wait for government to either (1) compel a cleanup of the site or (2) remediate the site and sue to recover its response costs. Given the government's limited resources and the less-than-aggressive posture of the Bush Administration (which submitted a brief supporting the prevailing party's decision) in environmental enforcement, property owners will not have the same degree of access to the Federal courts to recoup cleanup expenses.

Richard Leland is chair of Kramer Levin Naftalis & Frankel LLP's Environmental Department and Chairman of the Environmental Committee for REBNY. Toni Finger, as associate with Kramer Levin Naftalis & Frankel LLP, assisted in the development of this article.