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Basic Contract Principles Apply to CERCLA Subcontractor's Claim

By Gabriella Khorasanee, JD | Last updated on

The Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") was enacted to provide a framework for the cleanup of hazardous waste, and to allocate the cost of cleanup to those who create or maintain hazardous conditions. The question before the Second Circuit was a novel one: whether CERCLA creates a subcontractor's right of recovery against a landowner, when the landowner has already paid the contractor in full.

The Cleanup

Norampac discovered that the soil at the one of its sites was contaminated with lead, so Norampac contracted with AAA Environmental, Inc. for the cleanup. AAA subcontracted with Price Trucking, and Price Trucking completed all of its work.

Norampac paid AAA directly, until Price Trucking informed Norampac that it was not receiving payments. Price insisted that Norampac pay Price directly, which from that moment it did. Norampac, between its payments to AAA and Price, paid for the cleanup in full.

The Magistrate's Report and District Court

AAA allegedly went out of business, and Price was not able to recover from AAA, so Price sued Norampac for unpaid bills related to cleanup of its site. Because CERCLA essentially creates strict liability because of the hazardous substances involved, Price argued that CERCLA not only required that Norampac pay for the cleanup in general, but that the Act requires "Norampac to ensure that Price is made whole for its work."

The Magistrate Judge's report contained a recommendation to find for Price, and the district court agreed. The court granted Price's motion for summary judgment on the liability issue. Norampac appealed.

Second Circuit's Analysis

The Second Circuit disagreed with the lower court and stated, "Once these payments are made, and the cleanup is complete, [Norampac's] liability under the statute is discharged." The court added, "There is no need -- and CERCLA is not designed -- to hold the responsible party perpetually liable as a surety in any dispute relating to the cleanup between or among contractors, subcontractors, employees, or suppliers."

This case is a reminder that statues are read very strictly, and especially in factual circumstances that are atypical, a law will not be read in a way that it was not intended. Furthermore, when there is strong state common law -- here, basic contract principles -- a statute must be explicit if it's going to be read in way that would do away with hundreds of years of common law.

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