CERCLA Sections 107/113 Implications and Related Settlement Considerations

The purported Congressional intent of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §9601 et seq., was to foster the prompt cleanup of sites contaminated by hazardous waste and to make those responsible for such contamination liable for the costs of cleanup. However, CERCLA, known for its poor draftsmanship, vague definitions and inconsistent language, has spawned a plethora of issues related to the claims of liability asserted against "potentially responsible parties" ("PRP"). One of those issues, which defendants in private-party actions began to assert more strenuously in the early 1990s, was the distinction to be drawn between direct cost recovery actions under Section 107(a) (which are more akin to a plaintiff's suit for indemnification) and claims for contribution (whereby cleanup costs are apportioned between all parties, including the plaintiff) under Section 113(f). The resolution of this particular issue has significant implications when a private-party plaintiff sues to recover cleanup costs under Sections 107(a) and Section 113(f).

The Section 107 Versus Section 113 Debate

The prevailing appellate view is that a claim by a "liable" plaintiff against another liable or potentially liable party, regardless of how it is styled, is a claim for contribution and not a claim for direct cost recovery. The question, however, is whether a party must first either admit liability or be adjudged liable to be limited to a contribution action or whether PRP status alone is sufficient to preclude an action under Section 107.

Additionally, whether a claim may be asserted under Section 107 or Section 113 dictates whether liability attaches as joint and several or merely several. That determination, in turn, may govern how orphan shares will be allocated among PRPs. Moreover, analysis of the statute of limitations under CERCLA depends, in part, on the characterization of the action. The defenses to liability differ when the claim is one for "indemnification" under Section 107 as compared to a contribution claim under Section 113. And, the availability of declaratory relief may be related to whether the cause of action is instituted under Section 107 or under Section 113.

Even if a "liable" private-party plaintiff successfully establishes a CERCLA liability-claim, the next hurdle it may face is how to approach partial settlement in a multi-party case. Aside from weighing the transaction costs of pursuing litigation until final resolution against the potential benefits of garnering a "pot of money" to cover past and future cleanup costs, a plaintiff must be cognizant of the potential pitfalls that may arise when it reaches settlement with some, but not all, defendants. The question then becomes either who bears the risk that the plaintiff failed to reach an adequate settlement or who should profit by the plaintiff's ability to recoup from other parties an amount in excess of what is required to allocate costs. The effect of partial settlements on non-settlors is determined by the application of principles under either the Uniform Comparative Fault Act ("UCFA") or the Uniform Contribution Among Tort Feasors Act ("UCATA").

The first portion of this paper examines the significance of the distinctions between claims asserted under Section 107 and 113. The second portion reviews how courts have resolved issues surrounding partial settlements and the practical consequences to the plaintiff and nonsettling defendants.

Statutory Provisions

As originally enacted in 1980, CERCLA did not contain a specific provision granting a right to seek contribution. Section 107(a), however, provides that, subject to certain enumerated defenses, "covered persons" (also known as PRPs) are liable for, inter alia, "any . . . necessary cost of response incurred by any other person consistent with the national contingency plan." Clearly, Section 107 was not limited, on its face, to actions by "innocent" plaintiffs. However, while some courts found that Section 107 included an implied right of contribution, others indicated an unwillingness to permit such an action by a party itself liable or potentially liable under CERCLA.

In 1986, CERCLA was amended by the Superfund Amendments and Reauthorization Act ("SARA"), which, among other things, specifically added Section 113(f) to provide for a right of contribution:

Any person may seek contribution from any other person who is liable or potentially liable under section 9607(a) . . . during or following any civil action under section 9606 . . . or under section 9607(a) . . . . In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate. Nothing in the subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section 9606 . . . or section 9607 . . . .

A primary objective of Section 113(f) was to "clarif[y] and confirm[] the right of a person held jointly and severally liable under CERCLA to seek contribution from other potentially liable parties." Hence, although the SARA amendments did not specifically preclude a "liable" party from asserting a cause of action for damages under Section 107(a), that result appeared to be a necessary consequence of extending an express right of contribution under Section 113(f).

The impetus for the Section 107 versus Section 113 debate was defendants' realization that if a private plaintiff was also a "liable" party, there should be different rules governing the plaintiff's cost recovery action. By arguing that a "liable" plaintiff is limited to a Section 113 action for contribution, rather than indemnity in a cost recovery action under Section 107, defendants also could argue that their liability is several only and that the plaintiff's action is governed by a three-year statute of limitations period. The recognition of the distinction between a cost recovery action and an action for contribution became a new weapon in a rather limited defense arsenal.

Defendants challenging a private-party plaintiff's ability to pursue a cost recovery under Section 107 offered various statutory construction and public policy arguments. For example, they argued that interpreting CERCLA to permit a "liable" party to prosecute a cost recovery claim under Section 107 would effectively eviscerate a majority of Section 113. Defendants claimed that if a "liable" party was entitled to indemnity or a full cost recovery under Section 107, the express contribution right under Section 113 would be unnecessary. Similarly, they argued that Section 113(f)(3), which authorizes a settling party to bring an action for contribution against nonsettling PRPs in governmental actions, would be superfluous. Defendants also asserted that strategically, in both governmental and private-party cases, a PRP would seek full reimbursement from other PRPs under Section 107, rather than only an equitable portion of its costs. In the same vein, a settling PRP could circumvent Section 113(f)(3)(C), which subordinates a settling PRP's contribution claim to the government's claim in suits against nonsettling PRPs, by filing a Section 107 action.

Moreover, defendants claimed that in a governmental action a non-settling PRP could avoid the "contribution protection" afforded settling PRPs pursuant to Section 113(f)(2) if the nonsettlor characterized its claim as one for "indemnity" rather than as one for "contribution." Thus, according to the defendants that challenged a PRP plaintiff's ability to pursue a Section 107 action, the incentive for PRPs in multi-party governmental actions to settle, vis-B -vis contribution protection, would be lost.

Case Law

Early in the debate, some courts found that a "liable" party could institute an action pursuant to Section 107, but that recovery would be governed by Section 113. By implication, those courts reached the same ultimate result by allocating the response costs incurred by a private plaintiff who instituted a claim under Section 107 among all PRPs. Others simply indicated that a "liable" plaintiff's action was a two-step process whereby it was required to prove liability of a defendant under Section 107 and then liability would be apportioned pursuant to Section 113. Hence, a "liable" plaintiff could style its action as arising under both Sections 107 and 113.

The prevailing appellate view is that only "innocent" parties may bring a Section 107 action to recover costs incurred for cleanup. As one court explained:

Together, §§107 and 113 provide and regulate a PRP's right to claim contribution from other PRPs. . . . The contours and mechanics of this right are now governed by §113. Put another way, while §107 created the right of contribution, the "machinery" of §113 governs and regulates such actions, providing the details and explicit recognition that were missing from the text of §107. . . . §§107 and 113 work together -- the first section creating the claim for contribution between PRPs, and the second qualifying the nature of that claim. [Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298, 1301- 02 (9th Cir. 1997) (citations omitted).]

Some courts, however, cling to the notion that a "potentially liable" plaintiff should be permitted to maintain a Section 107 cost recovery action. These courts rely on the plain language of Section 107, which permits "any other person" to sue for response costs. Further, these courts have found that the defenses enumerated in Section 107(b) do not distinguish between innocent and culpable plaintiffs. Moreover, they rely on the fact that while Section 113 provides an express right of contribution, it does not indicate that contribution is the exclusive remedy of a "liable" party. These courts also seem to be concerned that, if a "liable" plaintiff is precluded from asserting a Section 107 action, the incentives either to perform a cleanup or settle as expeditiously as possible would be lost.

Some of these courts also have relied on those cases where the plaintiff either admitted its liability or was adjudged liable to distinguish a "liable" plaintiff from a "potentially liable" plaintiff, whereby the former, but not the latter, is precluded from asserting a Section 107 claim. Unlike the statutory construction and policy arguments espoused by the "minority view" courts, the "liability status" approach appears to be favored by most courts. However, even under this favored approach there is inconsistency as to the exact "liability status" required to preclude a private-party plaintiff from pursuing an action under Section 107.

The Seventh Circuit has been cited as having first recognized an exception to the general rule that claims by one PRP against another must be for contribution under Section 113. In Akzo Coatings, Inc. v. Aigner Corp., the court, in holding that the plaintiff's suit constituted a "quintessential claim for contribution" regardless of how it was labeled, also suggested that an "innocent landowner" may be entitled to bring a cost recovery action. The court reasoned:

Akzo argues that its suit is really a direct cost recovery action brought under section 107(a) rather than a suit for contribution under section 113(f)(1) . . . . Yet, Akzo has experienced no injury of the kind that would typically give rise to a direct claim under section 107(a) > it is not, for example, a landowner forced to clean up hazardous materials that a third party spilled onto its property or that migrated there from adjacent lands. Instead, Akzo itself is a party liable in some measure for the contamination ....

Notwithstanding the Akzo court's recognition that PRPs are limited to actions for contribution, it failed to address how its "innocent landowner" exception could be reconciled with the language of Section 107(a)(1), which contains no qualification that current owners or operators must have contributed in some fashion to the contamination in order to be a PRP under CERCLA.

In AM Internat'l, Inc. v. Datacard Corporation, DBS, Inc., the Seventh Circuit relied on its "innocent landowner" exception to find that a purchaser of contaminated property, who the court presumed paid a reduced purchase price to reflect the cost of cleanup, could pursue an action to recover response costs under Section 107. The court explained the basis for its holding:

In this case, Datacard presumably paid less for Dbs because it knew it was buying into an expensive cleanup. While that may have rendered Datacard a little less "innocent" than the landowner described in Akzo, Datacard did not take part in the manufacture of [a cleaning solvent]. Instead, Datacard -- like a party forced to clean up contamination on its property due to a third party's spill -- faces liability merely due to its status as a landowner. As a result, Datacard qualifies under Akzo's exception and can directly pursue its response costs under §107(a)(4)(B).

As in Akzo, the AM Internat'l court failed to explain what, if any, limitations it would place on a landowner PRP. However, in Rumpke of Indiana, Inc. v. Cummins Engine Co., decided only eight days after AM Internat'l, the Seventh Circuit attempted to resolve the question of whether a landowner PRP [may] bring a direct liability suit for cost recovery under §107(a) against other PRPs ... if it contributed nothing to the hazardous conditions at the site, or is the Akzo exception available only to a narrower group of parties, such as the landowner who discovers someone surreptitiously dumping wastes on its land?

In Rumpke, the Seventh Circuit made it clear that it would distinguish those cases involving a party who sues to recover for "direct injury to its own land" where such party did not attempt to apportion costs between itself and other PRPs from those situations where the plaintiff also "injured" the property and the suit is a "dispute about who pays how much." According to the Rumpke court, a landowner suit under Section 107(a) would result in one of the following:

either the facts would establish that the landowner was truly blameless, in which case the other PRPs would be entitled to bring a suit under 113(f) within three years of the judgment to establish their liability among themselves, or the facts would show that the landowner was also partially responsible, in which case it would not be entitled to recover under its §107(a) theory and only the §113(f) claim would go forward.

The Seventh Circuit then found that neither result would be inconsistent with CERCLA's promotion-of-allocation scheme.

In addition to the Seventh Circuit, other appellate courts have been cited as having acknowledged the possibility that there may be some circumstances under which a private-party plaintiff could pursue a Section 107 cost recovery action. For example, in United Technologies v. Browning-Ferris Ind., the First Circuit commented in a footnote that a "PRP who spontaneously initiates a cleanup without governmental prodding might be able to pursue an implied right of action for contribution under [Section 107]." However, the court refused to decide whether the law permitted such an implied right.

The Rumpke court cited the Eleventh Circuit's decision in Redwing Carriers, Inc. v. Saraland Apartments as another example of a court acknowledging that "a class of cases might remain in which a PRP might sue under §107(a)." However, the Third Circuit in New Castle County v. Halliburton NUS cites Redwing Carriers for the proposition that a PRP "who disavows liability in [a] consent decree is still required to pursue [a] contribution claim under section 113 and not section 107." But what neither the Rumpke court nor the Halliburton NUS court apparently recognized was that while the plaintiff in Redwing Carriers denied liability in the consent orders, it did not appeal the trial court's summary judgment ruling finding it to be a responsible party. Indeed, in Redwing Carriers the Eleventh Circuit said that "[t]o bring a cost recovery action based solely on §107(a), [the plaintiff] would have to be an innocent party to the contamination of the ... Site." Thus, whether the Eleventh Circuit would recognize the Seventh Circuit's "innocent landowner" exception, or any other exception, is not clear.

In Halliburton NUS, the Third Circuit commented that under certain circumstances it may be possible for a private-party plaintiff to bring a Section 107 action. However, it declined to decide under what circumstances such a possibility existed. Moreover, it also declined to determine whether it would "endorse any of the exceptions for 'innocent' landowners suggested by [other appellate] courts." Rather, what the Halliburton NUS court did hold was that "a potentially responsible person under section 107(a), who is not entitled to any of the defenses enumerated under section 107(b), may not bring a section 107 action against another potentially responsible person." Thus, in the Third Circuit, if the plaintiff and defendant are both "non-innocent," any suit to reapportion costs is an action for contribution under Section 113.

The Ninth Circuit has held that "[b]ecause all PRPs are liable under the statute, a claim by one PRP against another PRP necessarily is for contribution." And like certain of its sister courts, the Ninth Circuit has not decided whether to adopt the exception to this general rule recognized in the Seventh Circuit for those "PRPs" who did not contaminate the subject site.

Notwithstanding the prevailing appellate view, the question which remains somewhat unclear is whether a private-party plaintiff must be a truly "innocent" party in order to institute a Section 107 cost recovery action. For example, should an "innocent" party include a PRP who can successfully assert one of the statutory defenses to liability or a "technical" PRP who did not cause the contamination (i.e., the Seventh Circuit's innocent landowner exception). Further, what specific "liability status" precludes a private-party plaintiff from asserting its cause of action under Section 107; i.e., whether a plaintiff first must be adjudged liable or must it, either expressly or impliedly, admit liability, or is it sufficient merely to otherwise resolve any potential liability through settlement? Given that a Section 107(a) cost recovery action allows a plaintiff to fully recover its costs from PRPs who will be jointly and severally liable for the award, the fundamental question is whether that should occur under any circumstance where the plaintiff is a Section 107(a) "liable" party. Section 113 indicates that the answer should be no.

Joint and Several Liability or Several Liability and Orphan

It is well accepted that a Section 107 action imposes strict liability upon PRPs. And, in general, such an action results in joint and several liability for PRPs. However, if there is a reasonable basis for determining the contribution of each cause to a single, divisible harm, a Section 107 defendant may be able to escape joint and several liability. Notwithstanding this exception to the imposition of joint and several liability in a Section 107 action, as the Tenth Circuit succinctly stated, "[R]esponsible parties rarely escape joint and several liability." The harsh results of strict, joint and several liability coupled with the next-to-impossible task of establishing a reasonable basis for divisibility of harm provided an incentive for many defendants to assert that their liability, if any, should be limited to their "fair share" of cleanup costs, i.e., several liability only.

Section 113(f)(1) provides, in part, that to resolve contribution claims "the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." It is the plain language of Section 113(f) upon which courts have relied to hold that a CERCLA "contribution" action results in the imposition of several liability only. As explained by the Third Circuit in In re: Reading Company.:

As its plain language indicates, §113(f) is concerned with contribution. Although "contribution" is nowhere defined within CERCLA, it is a term with a familiar and readily acceptable meaning. Black's Law Dictionary defines "contribution" as the recovery of "portional shares of judgment from other joint tort-feasors whose negligence contributed to the injury and who were also liable to the plaintiff . . . . The sharing of a loss or payment among several[;] [t]he act of any one or several of a number of co-debtors, ... in reimbursing one of their number who has paid the whole debt or suffered the whole liability, each to the extent of his proportionate share."

Thus, "[a]s is the case traditionally in contribution actions between tortfeasors, CERCLA's claim for contribution creates several-only liability among PRPs."

Because Section 113 does not create any liability, but instead incorporates the provisions of Section 107(a) to establish a PRP's right under Section 107 to seek contribution from other PRPs, the two provisions must be applied in tandem. Section 107 defines who is a liable party and Section 113 creates the claim for contribution between PRPs and "qualif[ies] the nature of that claim."

The defendants who recognized the interplay between Sections 107 and 113 also argued that because a claim by a PRP-plaintiff was an action for contribution, such a plaintiff could not shift its responsibility for "orphan shares" to its defendants. A number of defendant PRPs have argued that they should have no liability with respect to orphan shares because liability under Section 113 is several and, therefore, they would be liable only for their share of the harm. However, the prevailing view appears to be that under Section113(f)(1), the cost of orphan shares may, in the court's selection of equitable factors, be allocated among all PRPs. Thus, allocation of orphan shares, like cleanup costs, among PRPs is a matter of discretion when a court applies the equitable factors it deems appropriate.

Statute of Limitations

As originally enacted in 1980, CERCLA contained no statute of limitations. The SARA amendments cured this deficiency and provided for specific and differing limitation periods for both Section 107 cost recovery actions and Section 113 contribution actions. Once again, however, the statutory provisions did little to clarify the issue. Additionally, the differences in the limitation periods added to the ongoing Section 107 versus Section 113 debate.

The statute of limitations for Section 107 actions requires that a suit for the recovery of costs associated with a "removal action" be commenced within three years after its completion, while a suit for the recovery of costs associated with a "remedial action" must be filed within six years after initiation of physical on-site construction, except that, if the remedial action is commenced within three years of completion of a removal action, the costs incurred due to the removal action may be recovered as part of the remedial action cost recovery suit. Hence, the threshold determination is whether the claim is based on a removal or remedial action.

Although the statutory definitions of a removal action and a remedial action are not very clear, courts generally have held that removal actions are short-term, emergency cleanup actions, and remedial actions are those that involve permanent solutions or alternative approaches. Notwithstanding these general definitions, there have been varying results in determining when either type of action actually is triggered.

The statute of limitations for a Section 113 contribution action requires that such action be commenced within three years after the following "triggering events":

  1. the day of judgment in any Section 113 action for the recovery of response costs or damages;
  2. the date of an administrative order under Section 122(g) for a de minimis settlement;
  3. the date of an administrative order under Section 122(h) for a Section 107 cost recovery settlement; or
  4. entry of a judicially approved settlement for any response costs or damages.

Because the prevailing view is that actions between "liable" parties are necessarily contribution actions, such actions generally are governed by the three-year contribution limitation period.

What remains unclear, however, is what statute of limitations should be applied in an action between liable parties if none of the "triggering events" has occurred. This issue is particularly troubling because it appears that if a PRP has not been a defendant in a civil action under Sections 107 or 106 there is no statute of limitations under CERCLA. Some courts have held that although the subject suits were Section 113 contribution claims, the three-year limitations period had not been triggered because consent orders to compel cleanup do not constitute "judicially approved settlement decrees." However, in Sun Company (R&M) v. Browning-Ferris, Inc., the Tenth Circuit held that if a PRP incurs cleanup costs pursuant to a civil action its claim against other PRPs is governed by the contribution three-year limitations period, but if the PRP incurs such costs in some other way, such as pursuant to a unilateral administrative order, its contribution claim is governed by the limitations periods for cost recovery actions based on removal (three years) or remedial (six years) actions.

According to the Tenth Circuit, although it appears that there is a gap in the limitations period with respect to contribution actions which do not follow a Section 113(g)(3) "triggering event," Congress provided "an express statute of limitations to cover all CERCLA contribution actions, regardless of how the PRPs in question incurred their cleanup costs." Thus, the court found that CERCLA really provides for two distinct types of contribution actions, each of which is governed by the equitable rules of Section 113(f) whereby parties seek to apportion the costs described in Section 107. The first type it referred to as the "initial action" for cost recovery. "Initial actions" for contribution occur whenever a PRP incurs cleanup costs, but there has been no judgment or settlement (i.e., a "triggering event"). In that event, the limitations period set forth in Section 113(g)(2) for removal or remedial cost recovery actions governs. If, however, "a contribution action is not the initial action, then by definition a previous action will have been filed, and one of the four triggering events in §113(g)(3) will occur."

In defense of its interpretation, the Tenth Circuit commented that it was not dividing contribution actions, based on the procedural position of a PRP-plaintiff, into Section 107 and Section 113 actions. Rather, the court said that its "holding merely recognizes that while all actions by and between jointly and severally liable PRPs are 'actions under §107' for purposes of liability, they are all still contribution actions governed by §113(f)."

Defenses to Liability

When defendants first argued that a suit by a PRP-plaintiff could be only for contribution and not for direct cost recovery, they also asserted that they were not limited to the narrow defenses to liability enumerated in Section 107(b). Instead, they raised various "equitable defenses" under the theory that Section 113(f) recognizes such defenses to liability. However, that section states only that "the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." Further, since Section 107 defines the contours of liability, regardless of whether the cost recovery suit is labeled as one for direct recovery under Section 107(a) or as one for contribution under Section 113(f), the only affirmative defenses to liability available are those set forth in Section 107(b). Any other issues may be raised only for purposes of apportioning liability.

Declaratory Relief

Section 113(g)(2), which establishes the limitation period for actions to recover the costs defined in Section 107, provides, in pertinent part:

In any action described in [Section 113(g)(2)], the court shall 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 cost or damages.

Applying the logic of the Tenth Circuit in Sun Company (R&M) v. Browning-Ferris, Inc., at least in one type of contribution action, the "initial action," declaratory relief is available to a PRP-plaintiff.

However, Section 113(g)(3), which sets forth the limitation period for "pure" contribution actions, does not contain a similar provision. The reason for this may be that, as a matter of practice, "pure" contribution actions would not likely be brought until the extent of the cleanup costs are determined. However, in the event cleanup costs are not fixed at the time a "pure" contribution action is filed, given the prevailing view, relative to the relationship between Sections 107 and 113, it seems likely that a court would include this as part of its consideration of "equitable factors." Moreover, since the defendant-PRP's liability is determined under Section 107, and not under Section 113, a PRP-plaintiff may be able to seek a declaration of its defendants' liability for any additional costs pursuant to the Declaratory Judgment Act.

Contribution Protection

Prior to SARA, CERCLA did not explicitly protect any party who settled with the government from contribution or recovery claims by other PRPs who had not so settled. While courts could exercise their equitable powers to protect such settling parties from having to twice pay for the same harm, the threat of claims by those who did not resolve their liability with the government and the potential incurrence of costs associated with the defense to such claims was cause for concern. The addition of Section 113(f)(2) significantly reduced the potential for non-settling PRPs to assert contribution claims against those who settled with the government.

Section 113(f)(2) provides:

A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liability persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.

In addition, Section 113(f) specifically preserves a settling party's right to seek contribution from any person who is not a party to the settlement with the government.

The key phrases of the protection afforded settling parties under Section 113(f)(2) are "claims for contribution" and "matters addressed in the settlement." PRP-plaintiffs who wanted to avoid the Section 113(f)(2) contribution protection and sue settling parties simply styled their claims as a Section 107(a) cost recovery. While this avenue is no longer available under the prevailing appellate view regarding actions by and between "liable" parties, in those jurisdictions which permit limited exceptions to this general rule a PRP-plaintiff may be able to assert claims against settling-defendants for any matter not addressed in the settlement.

Settlement Considerations

In private multi-party CERLCA litigation, the plaintiff often will reach a settlement with some, but not all, of the defendants. In such situations the issue which may arise is who bears the risk that the plaintiff failed to obtain a settlement amount sufficient to address all cleanup costs allocated to the settling parties or which parties will benefit if the plaintiff obtained a settlement amount in excess of such costs. Courts examining this issue have developed two different approaches. The majority of courts have adopted a "pro rata" approach based upon the Uniform Comparative Fault Act ("UCFA"). Those courts which have rejected the "pro rata" approach have adopted a "pro tanto" approach pursuant to the Uniform Contribution Among Tort Feasors Act ("UCATA"). In general, the "pro rata" approach favors nonsettling defendants, while the "pro tanto" approach favors plaintiffs.

Under the UCFA, settling defendants receive complete contribution protection for the claims being settled, and the plaintiff's total damages are reduced by the equitable share attributable to each of the settling defendants. Here, the plaintiff bears the risk that it settled for less than the settlors' equitable shares, but on the other hand will benefit if the settling defendants paid more than their fair shares. Additionally, for a non-settling defendant, the greatest risk of the "pro rata" approach is that an early settlement and dismissal may cut off further discovery concerning the "equitable shares" of the settling defendants. Then, at the time of trial, when equitable shares are determined, there may be insufficient information to affirmatively establish any settling defendant's total waste-in volume. In that event, the nonsettling defendant's equitable shares most likely would increase, given that the total known waste-in volume for the site would be smaller. However, this risk is greatest when settlement is reached early in the litigation process.

Assuming there is sufficient information at trial to establish a particular defendant's equitable share and that such equitable share is based solely on volume, the "pro rata" approach should have no effect on a nonsettling defendant's damages. However, in the event the assumption is incorrect, the plaintiff runs the risk not only that it under settled, but also that it cannot defend the basis for its determination of a settling defendant's equitable share. For example, if the trial court uses a different methodology for establishing each party's equitable share, the settlement amount may not match the equitable shares assigned to settling defendants. Moreover, if a plaintiff provided the settling defendants with a discount (i.e., a reduction to reflect litigation costs or to encourage a more expeditious settlement), a court is not required to consider the amount of the discount in determining equitable shares. With the "pro rata" approach, only the plaintiff will assume the risk for any such discount.

Under the UCATA, a plaintiff's total damages are reduced by the dollar amount of the settlement rather than by the settlors' "equitable shares." Using this approach, nonsettling defendants bear the risk that the plaintiff settled for less than it should have, but such defendants stand to profit if the plaintiff settled for more than necessary. Thus, the "pro tanto" approach generally favors plaintiffs by protecting them from the risk of an insufficient settlement. However, a "fairness hearing," conducted at the time of settlement, is required to provide a means of satisfying the court that the terms of the settlement are fair and equitable to nonsettling defendants.

While it generally favors the plaintiff, the "pro tanto" approach may pose a unique risk to plaintiffs. For example, if at the time of settlement the plaintiff is not able to accurately estimate its damages, it typically will exact a premium from the settling defendants to account for this uncertainty. Because a plaintiff's damages are reduced by the "amount of settlement" under the "pro tanto" approach, nonsettling defendants will benefit from any premiums paid by the settling defendants. The higher the premium extracted from the settling defendants, the greater the benefit is to the nonsettling defendants. Thus, the nonsettling defendant benefits whenever the plaintiff is able to obtain a settlement in excess of its damages.


With the majority resolution of the CERCLA Section 107 versus Section 113 debate, defendants, whether original defendants in a direct cost recovery action by a private-plaintiff or third-party defendants sued as part of a governmental cost recovery action, have a new defense strategy for claims asserted by "liable" plaintiffs. Regardless of a plaintiff's claim of innocence or that it has not been adjudged liable, defendants can argue that the plaintiff is a "liable" or "potentially liable" party and, therefore, the plaintiff's claim is one for contribution and is governed by the parameters of Section 113. And while certain issues have not as yet been resolved with certainty, the trend appears to be one of favoring defendants rather than plaintiffs in private-party CERCLA "cost recovery" actions.

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