Refined Metals Corporation v. NL Industries Inc. ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-3235
REFINED METALS CORPORATION,
Plaintiff-Appellant,
v.
NL INDUSTRIES INC.,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:17-cv-02565 — Sarah Evans Barker, Judge.
____________________
ARGUED MARCH 25, 2019 — DECIDED AUGUST 22, 2019
____________________
Before WOOD, Chief Judge, and FLAUM and SYKES, Circuit
Judges.
WOOD, Chief Judge. This is a case about who should bear
the costs of cleaning up a contaminated lead smelter site in
Beech Grove, Indiana, a suburb of Indianapolis. Plaintiff Re-
fined Metal Corporation (“Refined”) has owned the site since
1980, when it acquired it from defendant NL Industries Inc.
(“NL”). After years of litigation involving both the federal En-
2 No. 18-3235
vironmental Protection Agency (“EPA”) and the Indiana De-
partment of Environmental Management (“IDEM”), Refined
entered into a settlement with both agencies in 1998. The 1998
Decree, as we will call it, required Refined to close the site,
pay a $210,000 fine, and remedy the contamination. For their
part, EPA and IDEM agreed not to bring suit against Refined
on at least some of their potential claims (though the parties
dispute the scope of those covenants). These covenants not to
sue took effect immediately upon the entry of the 1998 Decree.
In 2017, almost 19 years later, Refined sued NL to recoup
some of the cleanup costs for which it is responsible.
A delay of 19 years is a long time to keep an entitlement to
reimbursement up in the air. The question before us is
whether it is so long that Refined lost its statutory right to
bring this action. The district court found that Refined’s claim
qualified as a “contribution action” under section 113(f)(3)(B)
of the Comprehensive Environmental Response, Compensa-
tion, and Liability Act (“CERCLA”), 42 U.S.C. § 9613(f)(3)(B).
Contribution claims are subject to a three-year statute of lim-
itations, and so the court dismissed the suit on that ground. It
also relinquished supplemental jurisdiction over Refined’s
state law claims. On appeal, Refined argues that its suit is in-
stead a “cost-recovery” action under section 107(a) of
CERCLA, 42 U.S.C. § 9607(a), and that it would be timely un-
der that subsection’s more permissive limitations period. NL
contends that it wins no matter which CERCLA provision ap-
plies, given that the statute of limitations applicable to section
107(a) is only six years and, as NL sees things, that clock be-
gan running and expired long ago.
No. 18-3235 3
It matters, in our opinion, whether this is a section
113(f)(3)(B) contribution action or a section 107(a) cost-recov-
ery case. If it were the latter, we would need to conduct a
searching examination of what actions to clean up the site an-
yone has taken, and when. But we can skip that inquiry, be-
cause we agree with the district court that this is a section
113(f)(3)(B) contribution action, and the limitations period
had expired by the time Refined filed suit. We therefore affirm
the decision of the district court.
I
CERCLA, commonly known as the Superfund Act, “shifts
the cost of [an environmental] cleanup to the parties respon-
sible for creating the hazard and away from taxpayers, who
otherwise would be left to pick up the bill.” NCR Corp. v.
George A. Whiting Paper Co., 768 F.3d 682, 689 (7th Cir. 2014).
The statute identifies who may be held liable; they are called
“potentially responsible parties” or PRPs in the jargon of en-
vironmental law. If a PRP believes that it has paid or may be-
come liable for paying “cleanup costs in excess of its fair
share,” id., the statute permits it to seek compensation from
other PRPs.
There are two such routes available to someone seeking to
recover from a PRP: a section 107(a) “cost-recovery” action
and a section 113(f) “contribution” action. Bernstein v. Bankert,
733 F.3d 190, 206 (7th Cir. 2013). A plaintiff such as Refined
will often prefer to proceed under the cost-recovery provision
in section 107(a), because it not only contains a longer statute
of limitations, but it also bars defendants from asserting equi-
table defenses. NCR Corp., 768 F.3d at 690. These plaintiff-
friendly provisions make sense: section 107 generally, if not
always, operates as an avenue for recovering “costs incurred
4 No. 18-3235
during a self-initiated environmental cleanup” rather than
one spurred by a lawsuit or settlement. Id. But if either statu-
tory trigger for a section 113(f) contribution action is pre-
sent—a qualifying lawsuit under section 113(f)(1) or a quali-
fying settlement under section 113(f)(3)(B)—the plaintiff may
proceed only under that provision. See Bernstein, 733 F.3d at
206 (“[A] plaintiff is limited to a contribution remedy when
one is available.”).
The statutory trigger at issue in this case is the one spelled
out in section 113(f)(3)(B), which creates a right to contribu-
tion for a party that has “resolved its liability to the United
States or a State for some or all of a response action or for some
or all of the costs of such action in an administrative or judi-
cially approved settlement.” (A “response” is a term of art in
CERCLA that encompasses both short-term “removal” ac-
tions and more permanent “remedies” or “remedial actions.”
42 U.S.C. § 9601(25)). The district court found that the 1998
Decree resolved enough of Refined’s liability to qualify as “an
administrative or judicially approved settlement” under sec-
tion 113(f)(3)(B). Since the three-year clock for contribution
suits starts when the settlement is entered, the district court
ruled that the statute of limitations ran out in 2001 and this
suit was time-barred.
On appeal, Refined advances nine issues, which we have
reorganized into three principal arguments, in support of its
contention that the 1998 Decree did not trigger a section
113(f)(3)(B) contribution claim. If it is correct, and if other con-
ditions were satisfied, then it would be able to pursue a sec-
tion 107 cost-recovery claim. First, Refined asserts that its re-
fusal to admit liability in the 1998 Decree meant that the De-
cree did not actually “resolve[] its liability to the United States
No. 18-3235 5
or a State for some or all of a response action,” as the statute
requires. Second, Refined argues that only settlements that re-
solve liability for CERCLA-specific violations qualify as pred-
icates for section 113(f)(3)(B) claims. As Refined reads it, the
1998 Decree included only covenants from the agencies not to
sue Refined under other statutes—in particular, the Resource
Conservation and Recovery Act (RCRA) and the Clean Air
Act—and left Refined’s CERCLA liability open. Refined asks
us to find that this is an independent reason that the 1998 De-
cree could not have triggered a contribution action. Third, Re-
fined argues that it could not have sought a “contribution”
from NL because, in its view, NL and Refined are not “joint
tortfeasors.” We address its arguments in that order.
A
In determining whether the 1998 Decree qualified under
section 113(f)(3)(B), Refined urges us to focus on the presence
or absence of an admission of liability. But that is not the cen-
tral inquiry. We recognize that in Bernstein, we found that a
settlement had not resolved enough of the PRP’s liability to
trigger a section 113(f)(3)(B) claim, but the circumstances are
important. We reached this result when (1) the settlement ex-
pressly stated that the defendant companies did not admit
any liability or the validity of the EPA’s findings; and (2) the
covenants not to sue were not immediately effective, but in-
stead were conditional on complete performance of the terms
of the settlement. 733 F.3d at 212. The district court in this case
found it “clearer than a remediated stream” which of the two
factors the Bernstein court found dispositive: the lack of an im-
mediately effective covenant not to sue. The Bernstein court
emphasized that “if the EPA had included an immediately ef-
fective promise not to sue as consideration for entering into
6 No. 18-3235
the agreement, the situation would be different.” Id. at 213 (em-
phasis added). We have in this case that “different” situation.
Bernstein also noted that it was “very difficult to say, in light
of [a section from the settlement in which the defendant com-
panies refused to admit liability], that the agreement between
the parties constituted a resolution of liability.” Id. at 212.
And we do not need to guess what effect each of the two
factors Bernstein identified would have in isolation, because
we have revisited this topic. In NCR Corp.—a case Refined
does not even cite in its opening brief—we found that a settle-
ment’s inclusion of an immediately effective covenant not to
sue meant that a PRP had “resolved its liability … for some or
all of a response action,” which in turn started the clock on a
contribution claim. 768 F.3d at 682. In its reply brief, Refined
points out that “the NCR Court makes no mention of a non-
admission clause, an issue raised in Bernstein.” But that is pre-
cisely why NCR dooms Refined’s argument. In NCR, the only
factor that the court explicitly discussed as a reason for distin-
guishing the settlement from the one in Bernstein was the im-
mediate effectiveness (as opposed to conditional nature) of
the covenant not to sue. Granted, the court noted that the set-
tlement before it “diverge[d] in every meaningful way from
the one in Bernstein that left section 107(a) liability available.”
768 F.3d at 692. Yet its reasoning leaves no doubt that the im-
mediately effective covenant not to sue was the dispositive
point. Because that factor is present in this case, the mere fact
that Refined refused to admit liability is not enough to exempt
the 1998 Decree from the reach of section 113(f)(3)(B).
No. 18-3235 7
B
We now turn to the scope of the covenants not to sue that
were included in the 1998 Decree. All agree that they were not
comprehensive. Both EPA and IDEM included clauses reserv-
ing their rights to file suit under particular statutes. The ques-
tion relates to both the content and the effect of those reserva-
tion clauses—in particular, their effect on Refined’s eligibility
for a contribution remedy as of the date of the Decree. Refined
asserts that the Decree left its CERCLA liability unaffected,
and that at least some of its liability specifically for a violation of
CERCLA would have to be resolved in order for the 1998 De-
cree to support a section 113(f)(3)(B) contribution action. NL
disputes both of these points. It argues that the Decree actu-
ally did resolve some of Refined’s CERCLA-specific liability,
since IDEM’s reservation clause says nothing about CERCLA,
suggesting that the state agency had given up the ability to
proceed under that statute. NL also contends that none of this
matters. As it reads section 113(f)(3)(B), a settlement need only
resolve some portion of a PRP’s liability for a cleanup—under
any statute—in order to trigger a contribution action. We
agree with the latter point: a settlement need not resolve
CERCLA-specific liability in order to start the clock on a con-
tribution action.
Multiple reasons support an interpretation of section
113(f)(3)(B) that does not limit covered settlements to those
that specifically mention CERCLA. First, the other trigger for
a contribution action—section 113(f)(1), which allows parties
to seek contribution “during or following any civil action un-
der section 9606 of this title or under section 9607(a) of this
title”—explicitly limits its applicability to civil actions
8 No. 18-3235
brought under CERCLA. “[W]here Congress includes partic-
ular language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that Con-
gress acts intentionally and purposely in the disparate inclu-
sion or exclusion.” Russello v. United States, 464 U.S. 16, 23
(1983) (internal citation and quotation marks omitted). While
this maxim should not be applied mechanically, the disparity
between these two closely related subsections in section 113(f)
is a strong indication that Congress meant for the universe of
qualifying settlements under section 113(f)(3)(B) to be
broader than those specifically mentioned in section 113(f)(1).
There is further support for this reading in the text and
structure of the Act. The trigger for section 113(f)(3)(B) en-
compasses settlements that leave at least some liability open,
given that this subpart of the statute describes a qualifying
settlement as one that “has resolved [a defendant’s] liability
to the United States or a State for some or all of a response ac-
tion or for some or all of the costs of such action.” (Emphasis
added). We have observed that CERCLA does not favor “slic-
ing and dicing of costs incurred under the same administra-
tive order … .” NCR Corp., 768 F.3d at 692. The same logic ap-
plies here. The text demonstrates Congress’s intention to en-
courage parties that have reached even a partial settlement
with respect to a contaminated site to act expeditiously in
identifying costs, seeking compensation where necessary and
completing the required cleanup.
Refined’s reading of section 113(f)(3)(B), in contrast,
would allow settling parties to drag out the process of seeking
those funds until they “initiat[ed] … physical on-site con-
struction of the remedial action”—in other words, until the
six-year statute of limitations for a cost-recovery action under
No. 18-3235 9
section 107(a) begins to run. As Refined sees things, despite
years of cleanup work on the site, that clock did not start here
until the EPA approved “final corrective measures” in 2014.
We do not need to decide whether the 1998 Decree actually
did permit Refined to wait almost two decades before under-
taking the requisite on-site construction. (Recall NL’s backup
argument that Refined long ago undertook enough work on
the site to start and eventually run out the 107(a) clock.) That
is a question of interest only to Refined and the EPA. Our con-
cern is with Refined’s right to insist that someone else—here,
NL—share that bill. In that connection, it is worth noting that
Refined’s reading of the statute would have allowed it to wait
almost 19 years before filing suit to recover any costs from NL
for any actions covered by CERCLA that were incurred in the
course of complying with the 1998 Decree.
We would need a much stronger statutory basis than we
have before we would adopt that position. As the district
court noted, it would undermine the purpose of a statute of
limitations if “a plaintiff [could] choose when a limitation pe-
riod to which it is subject begins to run.” That is effectively
the rule that Refined asks us to bless here. Short statutes of
limitations encourage swift action, and that is the regime Con-
gress chose for the settlement trigger in section 113(f)(3)(B).
The statutory text also specifically contemplates settle-
ments that resolve liability under state, rather than federal,
law. This makes it even more unlikely that Congress was con-
cerned only with liability under the federal CERCLA statute.
Section 113(f)(3)(B) speaks of settlements that resolve liability
“to the United States or a State for some or all of a response
action.” States have an independent right of action under
CERCLA. See Niagara Mohawk Power Corp. v. Chevron U.S.A.,
10 No. 18-3235
Inc., 596 F.3d 112, 126–27 (2d Cir. 2010) (“Under CERCLA,
states have causes of action independent from the federal gov-
ernment.”). But states also have myriad environmental laws
of their own that might be implicated by an enforcement ac-
tion. See, e.g., CERCLA § 121(e)(2), 42 U.S.C. § 9621(e)(2), stat-
ing that “[a] State may enforce any Federal or State standard,
requirement, criteria, or limitation to which the remedial ac-
tion is required to conform under this chapter … .” Perhaps
there are state environmental statutes or enforcement actions
that are so far afield from CERCLA and its concerns that a de-
fendant subject only to state enforcement action would not be
on notice that a federal clock was ticking. But that is not the
case before us. Indiana settled with Refined in 1998 at the
same time as the federal government, and the EPA’s reserva-
tion clause shows that the cleanup implicated CERCLA.
Whatever the scope of the EPA’s covenant not to sue, Refined
certainly resolved its liability to “a State for some or all of [the]
response action.”
Refined expresses a practical concern about this straight-
forward reading of the statute. The 1998 Decree began a years-
long period of cleanups that required federal oversight and
approval, culminating in the EPA’s 2014 approval of “final
corrective measures.” Refined objects that a three-year statute
of limitations would require it to initiate a contribution action
long before the full scope of its liability became certain. But
that is nothing new: in tort law, the statute of limitations be-
gins running on the day of the accident, even though damages
such as the full cost of medical care and lost income often
must be estimated, since they stretch far into the future. In ad-
dition, as the district court noted, “NCR rejected as contrary
to Bernstein and common sense the notion that no settlement
‘resolves’ liability until the work under it is complete.” We
No. 18-3235 11
also agree with the district court that a declaratory judgment
could help mitigate such ex ante uncertainty. CERCLA section
113(g)(2), which governs the statute of limitations for section
107(a) actions, anticipates this problem by requiring courts to
“enter a declaratory judgment on liability for response costs
or damages that will be binding on any subsequent action or
actions to recover further response costs or damages.” 42
U.S.C. § 9613(g)(2). We see no reason why the lack of such a
mandatory provision in section 113(f) should be read to strip
courts of their discretionary power to issue declaratory judg-
ments in such cases, where appropriate.
Finally, our holding is consistent with those of the major-
ity of circuits that have considered the question. See Asarco
LLC v. Atlantic Richfield Company, 866 F.3d 1108, 1120–21 (9th
Cir. 2017); Trinity Industries, Inc. v. Chicago Bridge & Iron Co.,
735 F.3d 131, 136–37 (3d Cir. 2013). The Second Circuit ap-
pears to be an exception: it has held that a settlement must
explicitly resolve CERCLA liability to trigger a contribution
action. Consolidated Edison Co. of New York v. UGI Utilities, 423
F.3d 90 (2d Cir. 2005). On the other hand, as the district court
noted, the Second Circuit later cast serious doubt on that part
of UGI Utilities (without quite overruling it, since the issue
was not squarely presented). See Niagara Mohawk Power Corp.,
596 F.3d at 126 n.15 (noting that there was a “great deal of
force to th[e] argument” of the EPA as amicus that UGI Utili-
ties was wrongly decided). Whatever the state of the law in
the Second Circuit, we are persuaded by the view adopted by
the Third and Ninth Circuits.
12 No. 18-3235
C
Refined spends much of its brief advancing a different ar-
gument altogether for its contention that a contribution action
could not have accrued. This one is based solely on common-
law principles. Refined asserts that it could not seek anything
in the nature of “contribution” from NL because it did not
share liability with NL for the underlying “tort.” In support
of this reasoning, Refined cites the Supreme Court’s decision
in United States v. Atlantic Research Corp., 551 U.S. 128 (2007),
which notes that a contribution action under section
113(f)(1)—not the statutory trigger at issue here—requires
“common liability stemming from an action instituted under
section 106 or section 107(a).” Id. at 139. To show that it lacked
common liability with NL, it points to the Supreme Court’s
decision in Meghrig v. KFC Western, 516 U.S. 479 (1996), which
held that RCRA—one of the statutes under which the federal
government proceeded—does not provide a private cause of
action to recover costs for “the cleaning up [of] toxic waste
that does not, at the time of suit, continue to pose an endan-
germent to health or the environment.” Id. at 481.
We find this argument puzzling. First, how is it that NL
can somehow be, at the same time, not jointly liable for the
actions required under the 1998 Decree and yet still liable to
Refined once Refined “could show that its actions incurred
more than its fair share of costs for which both parties are liable”?
Appellant’s Br. at 21 (emphasis added). Either NL has some
liability for these cleanup costs or it does not. It is beside the
point that “the 1998 RCRA Consent Decree neither finds nor
addresses any liability of NL …” Id. at 2. NL was a non-set-
tling party. The contribution provision in section 113(f)(3)(B)
No. 18-3235 13
exists to allow settling parties to seek contribution from a non-
settling party. It was for Refined to establish, in the course of
making a timely contribution claim, that NL was liable under
the statute, and for what amount. Refined failed to do so. It is
also unclear why Meghrig has anything to say about this situ-
ation. The Meghrig Court held that RCRA does not authorize
parties to seek compensation for already completed cleanup
efforts, but it explicitly recognized that CERCLA does (within
the applicable statute of limitations). 516 U.S. at 486–88. After
all, that is why Refined is here. The fact that the federal gov-
ernment brought suit and settled under RCRA tells us noth-
ing about whether, as of the date of settlement, CERCLA pro-
vided Refined with an independent mechanism for seeking
compensation.
Apart from its peculiar nature, Refined’s “common liabil-
ity” argument has another problem: Refined waived it in the
district court. Refined’s response to NL’s motion to dismiss
did not so much as mention this argument, let alone develop
it. Refined tries to dig itself out of that hole with the assertion
that its arguments on this point “flow naturally from the legal
analysis and decisions of [the cases it cited below].” Reply Br.
at 24. But citing a few cases that might (or might not) implicate
a separate line of argument is not good enough. A thorough
treatment of Refined’s argument could potentially require de-
ciding one or both of (1) how much liability NL might have
had, if any, under RCRA and the Clean Air Act; and (2)
whether the Supreme Court’s interpretation of section
113(f)(1) in Atlantic Research applies with equal force to section
113(f)(3)(B), a different subsection covering a different situa-
tion. The district court did not deal with these issues, because
Refined never briefed them. It is therefore too late for Refined
to raise them now.
14 No. 18-3235
II
There remains the question of Refined’s claims under In-
diana’s Environmental Legal Actions (“ELA”) statute. Once it
dismissed the federal claims, the district court relinquished
supplemental jurisdiction over the state-law claims. See 28
U.S.C. § 1367(c). We review this decision for abuse of discre-
tion. Montano v. City of Chicago, 375 F.3d 593, 601 (7th Cir.
2004). The district court found nothing to rebut what we have
called the “sensible presumption that if the federal claims
drop out before trial, the district court should relinquish juris-
diction over the state-law claims.” Williams Elecs. Games, Inc.
v. Garrity, 479 F.3d 904, 907 (7th Cir. 2007). Refined offers no
reason for finding an abuse of discretion here. It merely as-
serts that its claims under the ELA “should be allowed to pro-
ceed on remand to the District Court.” It has therefore waived
any challenge to the district court’s decision to relinquish its
supplemental jurisdiction.
Similarly, Refined has not explained why we should upset
the district court’s admittedly very technical ruling that Re-
fined did not properly support the existence of diversity juris-
diction under 28 U.S.C. § 1332. In the district court, Refined
alleged that “[t]he amount in controversy in this action ex-
ceeds $75,000 and is between citizens of different states … .”
But the district court found that this was “ineffective” because
Refined failed to specify that the amount in controversy ex-
ceeded $75,000 “exclusive of interest and costs,” as required
by 28 U.S.C. § 1332(a). The court cited Powers v. Fultz, 404 F.2d
50, 52 (7th Cir. 1968), for the proposition that it was proper to
dismiss a complaint for failing to address interest and costs.
This result may or may not be required by Powers, where the
complaint (unlike the one before us) also alleged that the
No. 18-3235 15
amount in dispute was exactly $10,000 (then the amount spec-
ified in the statute) rather than a claim in excess of the re-
quired amount. Here, the plaintiffs did plead an amount in
controversy in excess of the statutory minimum; they just ne-
glected to specify that the excess existed exclusive of interest
and costs.
In the end, however, we have no need to decide whether
the state claims fell within the court’s diversity jurisdiction,
because Refined has again dropped the ball. It never sought
leave to amend in the district court to cure the apparent defi-
ciency. In its opening brief to this court, Refined asserts that
“[j]urisdiction also exists based on the diverse citizenship of
the parties pursuant to 28 U.S.C. 1332” and that “[t]he amount
in controversy exceeds seventy-five thousand dollars
($75,000.00).” Nowhere does Refined tie up the loose end that
the district court identified (i.e. the failure to specify that the
required amount is satisfied without considering interest and
costs), nor does it even acknowledge the existence of an ad-
verse ruling on this question. This is waiver, and it leaves no
further basis for federal jurisdiction over the state-law claims,
which can still be pursued in state court should Refined so
desire.
III
We AFFIRM the judgment of the district court.