U.S. Reversed on 100% Allocation to Contractor

The 9th Circuit Court of Appeals has reversed a district court decision allocating 100% of CERCLA response to costs to a U.S. military contractor, where both the U.S. and the contractor were liable parties. TDY Holdings, LLC et al. v. United States. The appellate court held that the district court had properly applied its discretion in its analysis of several factors favoring the government, but had misapplied the two most on-point circuit decisions regarding CERCLA cost allocation involving the US and WWII military contractors: United States v. Shell Oil, and Cadillac Fairview/California, Inc. v. Dow Chemical Co. In both those cases, the 9th Circuit had affirmed rulings in which the U.S., not the contractor, had been allocated 100% of response costs.

In contribution cases under CERCLA Section 113, the district court has wide discretion to apply "such equitable factors as the court determines are appropriate." The 9th Circuit’s ruling was not a wholesale dismissal of the lower court’s analysis, but rather an expression of concern that the lower court’s analysis reached a result so wholly different than that in other, similar cases. Indeed, in a short concurrence, one member of the panel stated that he thought the contractor should be held liable for something close to 100% of the costs, and that all the district court need do on remand is assign at least some of costs to the US.

If there is a lesson here, it could be the oft-cited dictum that in CERCLA cases, no one gets out of here without paying. The US has often played hardball in defending against liability under CERCLA -- the long litigation history in the Shell and Cadillac Fairview cases is illustrative. After this decision and recent liability findings against the US based simply on its ownership of land with unpatented mining claims, it might remember that dictum when considering its settlement positions, particularly in WWII related claims.