On February 10, 2004, the United States Court of Appeals for the Ninth Circuit held that the six-year limitations period for bringing a Section 107 suit for recovery of remedial action costs under CERCLA cannot accrue until at least the final approval of the remedial action plan submitted under the statute. State of California v. Neville Chemical Company (No. 02-56506, February 10, 2004). The opinion is consistent with decisions from the Fifth and Seventh Circuit Courts of Appeal.
In Neville Chemical, the defendant corporation (the "company") manufactured various chemical compounds, including solvents, insecticides and lubricants, at its Santa Fe Springs, California facility, resulting in on-site soil and groundwater contamination. With oversight provided by the Department of Toxic Substances Control (DTSC), the company conducted a remedial investigation and initiated a groundwater removal action in April 1994 that included extraction wells, an on-site treatment system, and an effluent disposal system. In December 1994, the company submitted a final Feasibility Study, followed by a draft Remedial Action Plan (RAP). On May 8, 1995, following public comment, DTSC approved the company's RAP. On September 21, 2000, DTSC filed a Section 107 suit against the company, seeking recovery of the agency's remedial costs.
Section 113(g)(2) of CERCLA provides that a Section 107 remedial cost recovery action must be brought "within 6 years after initiation of physical on-site construction of the remedial action." According to defendant, because the extraction wells constructed in April 1994 as part of its removal action were also subsequently used as part of the final remedial action for the site, Section 113(g)(2)'s six-year limitations period required California to file suit no later than April 2000. Since California did not file until September 2000, the company claimed that California was out of time. The Ninth Circuit disagreed. According to Judge Berzon, "'the initiation of physical on-site construction of the remedial action' can only occur after the final remedial action plan is adopted." Neville Chemical, 04 C.D.O.S. 1208 at 4. The extraction wells cited by the company could have only been part of a "permanent remedy" – the hallmark of a remedial action – once a permanent remedy was adopted, and the first point when the parties knew what that remedy was, was when the RAP was approved. Accordingly, the six-year limitations period did not commence until at least May 8, 1995, bringing California's September 2000 filing within the statute of limitations.
Neville Chemical clarifies a significant provision of one of the few defenses available to Section 107 litigants. For more information on this ruling, please contact Derrick Watson at 415.954.4931 or dwatson@fbm.com, or visit our Environmental Law Department's home page for more information on any of the more than 25 environmental law specialists at Farella Braun + Martel.