The limits of liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) with regard to property owners and subcontractors were addressed in an opinion issued by the U.S. Court of Appeals for the 2nd Circuit.  The court ruled that CERCLA does not require that the owner of a property pay a subcontractor for cleanup work after the owner had already paid the contractor in full for the same work. 

A district court had found that CERCLA’s liability provisions do indeed require that the property owner pay twice for the same work.  The 2nd Circuit reversed that ruling.

Contractor stops payment

The defendant in the case is Norampac Industries, which owned a contaminated parcel of land in Erie County, New York.  Norampac hired AAA Environmental to perform remedial work, including excavation and removal of contaminated soil.  AAA in turn subcontracted to Price Trucking to transport the contaminated media from the site and dispose of it.  Over a 1-year period, Price completed the work for which it was subcontracted.  AAA initially paid Price and then ceased payments that Price said it was owed.

Even though Norampac had paid AAA more than $3 million to complete the cleanup, Price launched a CERCLA liability claim against Norampac in the amount of $631,257.  According to Norampac, AAA is out of business.  Price was able to obtain $131,576.27 from Norampac in a lien action settled in state court.

Does CERCLA protect subcontractor?

According to the 2nd Circuit, the sole question presented in the appeal is whether CERCLA creates direct liability between owners and subcontractors with respect to cleanup on a CERCLA site when the owner has paid a general contractor in full for the subcontractor’s work.  The parties phrase their arguments in terms of whether the payments demanded by Price from Norampac constitute necessary costs of response.  “But, in simple terms, the issue in this case is not whether CERCLA requires Norampac to pay for the cleanup,” says the 2nd Circuit.  “The sole question is whether – under the circumstances presented here – CERCLA also requires Norampac to ensure that Price is made whole for its work.”

The 2nd Circuit responds that it does not.

“Norampac undisputedly accepted responsibility for the cleanup, has seen that the operation is completed, and has shouldered the costs of removing contaminated soil through its payments to AAA Environmental and direct payments to Price Trucking,” concluded the court.  “In other words, Norampac has already borne the cost of its actions.  In seeking to treat Norampac as though it were a surety to its subcontract with AAA Environmental, Price Trucking pushes the terms of CERCLA beyond their intended assignment of responsibilities.”

Role of state law

In a final note, the 2nd Circuit said that state law provides a “well-developed, if not necessarily effective, system” for resolving disputes of this nature.  The court emphasizes that CERCLA contains specific provisions for liens in favor of the United States government for unpaid response costs and provisions relating to surety bonds in public contracts.  “In light of the explicit instructions contained in these provisions regarding public contracts, it seems to us unlikely that the legislators would have displaced only implicitly the existing state law rules regarding contractors and subcontractors working for private parties,” concluded the court.

Price Trucking Corp. v. Norampac Industries, Inc.