Lockheed Martin Corporation v. United States
2016 U.S. App. LEXIS 15229
| D.C. Cir. | 2016Background
- Lockheed operated three California rocket-production facilities whose historical disposal practices contaminated soil and groundwater; Lockheed incurred substantial remediation costs and sued the United States under CERCLA §107 for the government’s share.
- The government and Lockheed both stipulated to PRP liability; the district court allocated mixed shares (Redlands: Gov 30%/Lockheed 70%; Potrero Canyon: Gov 25%/75%; LaBorde Canyon: Gov 20%/80%).
- Prior to litigation the parties executed a 2000 Billing Agreement allowing Lockheed to treat discontinued-operations remediation costs as allocable indirect (overhead) costs charged to government contracts (the DiscOps Pool), with a crediting provision to avoid double recovery.
- Lockheed had already recovered roughly $208 million (≈72%) of past cleanup costs from the U.S. through indirect contract charges; that percentage was expected to rise as the government is Lockheed’s primary customer.
- The district court exercised equitable allocation under CERCLA §113(f): it reduced the government’s share of past costs to 0% (because the government already paid via indirect charges), reduced prejudgment interest and other amounts, and left the government responsible for a reduced minority share of future costs.
- The United States appealed, arguing it should be absolved of further CERCLA liability because it already paid (via contracts) more than its equitable share and because CERCLA §114(b) bars recovery that duplicates compensation provided “pursuant to” federal law.
Issues
| Issue | Lockheed's Argument | United States' Argument | Held |
|---|---|---|---|
| Whether the government’s prior indirect contract payments bar Lockheed’s §107 recovery under CERCLA §114(b) | Indirect overhead payments are not "compensation for removal costs pursuant to federal law" and do not bar §107 recovery | Payments via FAR/Billing Agreement constitute federal compensation for removal costs and trigger §114(b) preclusion | Court affirmed that §114(b) did not bar Lockheed’s claim; did not reach full §114(b) interplay given equitable adjustments made at trial |
| Whether equitable principles under CERCLA §113(f) require eliminating the government’s remaining liability because it already paid more than its equitable share | A CERCLA judgment will be credited and the Billing Agreement prevents double recovery; equitable allocation already adjusted past/future shares | Because the government already paid the bulk of remediation through contracts, equity requires eliminating further CERCLA liability | Court declined to absolve the government; district court’s equitable allocation (0% past, reduced future share) was not an abuse of discretion |
| Whether use of the Billing Agreement’s crediting mechanism will leave the government exposed to an unfair net overpayment | Crediting will channel CERCLA recovery back to contracting customers and prevent double recovery; parties may pay government’s CERCLA share directly going forward | Crediting benefits other Lockheed customers (not just U.S.), so government would effectively pay more than it gets back | Court held the crediting mechanism and parties’ choices do not create impermissible double recovery; any distributional effect stems from the government’s voluntary settlement choices |
| Whether the district court abused discretion in its equitable apportionment and offsets (interest, fees, profit factors) | District court properly considered equitable factors and reduced government’s share for benefits Lockheed already received | Government argued reductions were insufficient to account for overpayment through contracts | Court reviewed for abuse of discretion and affirmed the district court’s equitable allocations and offsets |
Key Cases Cited
- Bestfoods, 524 U.S. 51 (1998) (background on CERCLA’s remedial purpose and strict liability)
- Atlantic Research Corp. v. United States, 551 U.S. 128 (2007) (distinguishing §107 cost-recovery and §113 contribution; use of §113(f) counterclaims)
- Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599 (2009) (CERCLA’s goal that cleanup costs be borne by responsible parties)
- Key Tronic Corp. v. United States, 511 U.S. 809 (1994) (limits on recovery of attorney’s fees under CERCLA)
- NCR Corp. v. George A. Whiting Paper Co., 768 F.3d 682 (7th Cir. 2014) (equitable allocation doctrine and prohibition on double recovery)