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August 11, 2020

Second Circuit Rejects Bright Line Rule for CERCLA Statute of Limitations

Potentially responsible parties of cleanup sites for which the statute of limitations has passed, including sites believed to have been remediated long ago, may now have to reconsider their potential liability for additional cleanup costs. In a potentially significant development, the Second Circuit ruled that the six-year statute of limitations for a remedial action under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) does not necessarily begin to run at the start of the first remedial activity.

The court’s ruling in MPM Silicones, LLC v. Union Carbide Corporation revisits its earlier precedent in New York State Elec. and Gas Corp. v. FirstEnergy Corp., 766 F.3d 212, 230–31 (2d Cir. 2014) (NYSEG) on what constitutes a remedial action under CERCLA and, in doing so, holds that there may be more than one “remedial action” at a site for the purpose of determining the statute of limitations.

In MPM Silicones, the owner and operator of a manufacturing facility sought to recover from the prior owner and operator the costs it incurred (and would incur) in cleaning up polychlorinated biphenyl (PCB) contamination stemming from the prior operator’s manufacturing operations that generated substantial amounts of PCB waste, which was buried in various areas of the site. The lower court found the plaintiff’s claims seeking remediation costs untimely under Second Circuit precedent that “there can only be one remedial action at any given site” (NYSEG, 766 F.3d at 235).

On appeal, the Second Circuit rejected NYSEG’s bright-line rule for purposes of determining the trigger for CERCLA’s statute of limitations at a given site and remanded the action back to the Northern District of New York for further consideration of the timeliness of the plaintiff’s claims to recover its remediation costs.

The Second Circuit clarified that “the single-remediation principle means simply and logically that the plaintiff cannot escape the six-year limitation period and endlessly postpone the bringing of a suit by characterizing subsequent phases of the initial project as new remediations.” Remediation that occurs in phases is one remedial act subject to a single limitations period when subsequent phases are foreseen at the start or at least contemplated.  

However, when a subsequent remediation is “undertaken to address a different source of contamination outside the scope of the prior remediation[,]”the remedial action may constitute a separate and distinct remediation for statute of limitations purposes. The court described three apt scenarios:

  1. Where the operator causes additional contamination by a different contaminating substance following a remediation and then transfers the site to a new owner
  2.  Where the operator discovers previously unsuspected contamination unrelated to and perhaps geographically distant from previously remediated contamination
  3. Analogous to the case being decided, where the original polluter inadequately remediates a site pursuant to regulatory approval and then holds the site for six years before transferring it to a new owner

In these situations, “[a] subsequent remediation that seeks to address a different set of problems — e.g. problems that were non-existent, unknown, elsewhere, or undisclosed to the regulators and unrevealed in an earlier remediation plan — should not be considered part of the same remediation.”

Given the growing concern over the discovery and potential impacts of ubiquitous “emerging contaminants” and other regulatory oversight at sites that have been the subject of past remedial actions, this decision is likely to have significant impact on future cost recovery of contaminated sites under CERCLA—even sites that were closed and sold long ago. In addition, the issue of what was foreseen, or at least contemplated, at the time of an original remediation is also likely to raise factual disputes for purposes of the statute of limitations and may delay judicial determinations until discovery is had regarding what was known or disclosed as part of an earlier remediation plan.

If you have questions regarding the content of this alert, please contact Yvonne Hennessey, COVID-19 Response Team leader, chair of the Environmental and Lobbying & Election Law Compliance Practice Areas, and co-leader of the Oil & Gas, Linear Infrastructure, and Energy Markets Teams, at yhennessey@barclaydamon.com; Tom Paul, counsel, at tpaul@barclaydamon.com; or Angela Sicker, associate, at asicker@barclaydamon.com.

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