In thе Matter of BELL PETROLEUM SERVICES, INC., Debtor. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Appellee, v. SEQUA CORPORATION and Chromalloy American Corp., Appellants. UNITED STATES of America, Plaintiff-Appellee, v. BELL PETROLEUM SERVICES, INC., Regal International, Inc. and John R. Leigh, Defendants, Sequa Corporation and Chromalloy American Corp., Defendants-Appellants.
No. 91-8080.
United States Court of Appeals, Fifth Circuit.
Sept. 28, 1993.
3 F.3d 889 | 62 USLW 2222, 23 Envtl. L. Rep. 21,474
Albert M. Ferlo, Jr., Dirk D. Snel, U.S. Dept. of Justice, Appellate Section, Env. & Natural Resources Div., Washington, DC, for appellee.
W.B. Browder, Jr., Stubbemann, McRae, Sealy, Laughlin & Browder, Inc., Midland, TX, for Regal.
Michael T. Morgan, Morgan & Wald, Midland, TX, for Leigh.
Eugene B. Labay, Kevin M. Beiter, Cox & Smith, San Antonio, TX, for Bell.
Appeals from the United States District Court for the Western District of Texas.
Before JOLLY and DUHE, Circuit Judges, and PARKERs, District Judge.
E. GRADY JOLLY, Circuit Judge:
The Environmental Protection Agency (EPA) seeks to recover its response costs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) because of a discharge of chromium waste that contaminated a local water supply. Sequa Corporation appeals from the imposition of joint and several liability, challenges the EPA‘s decision to provide an alternate water supply system to the area in which the groundwater was contaminated by the chromium discharge, and contests the calculation of prejudgment interest and the application of the proceeds of the EPA‘s settlement with its co-defendants. We REVERSE the portion of the judgment imposing joint and several liability, and REMAND for further proceedings. Our review of the administrative record has convinced us that the EPA‘s decision to provide an alternate water supply was arbitrary and capricious; accordingly, we REVERSE the portion of the district court‘s judgment allowing the EPA to recover the costs of designing and constructing that system, and REMAND for deletion of those amounts and recalculating prejudgment interest.1
I
In 1978, a citizen in the Odessa, Texas area complained about discolored drinking water. The Texas Water Commission conducted an investigation. It ultimately focused on a chrome-plating shop that was operated successively from 1971 through 1977 by John Leigh, Western Pollution Control Corporation (hereinafter referred to as Bell), and Woolley Tool Division of Chromalloy American Corporation (which later merged with Sequa), at 4318 Brazos Street, just outside the city limits of Odessa. The investigation showed that during the chrome-plating process, finished parts were rinsed, and the rinse water was pumped out of the building onto the ground.
A “focused” feasibility study (FFS) was undertaken to evaluate the need to provide an alternative water supply pending completion of the remaining portion of the feasibility study and implementation of final remedial action.3
The FFS concluded that the City of Odessa‘s water system should be extended to provide service in the Odessa Chromium I area. On September 8, 1986, the EPA Regional Administrator issued a Record of Decision (ROD), finding that city water service should be extended to the site. Pursuant to the cooperative agreement, the State, through its contractor, designed and constructed the system, which was completed in 1988.
II
In December 1988, the EPA filed a CERCLA cost-recovery action against Bell, Sequa, and John Leigh, which was consolidated with an adversary proceeding the EPA had filed against Bell in Bell‘s bankruptcy case. The EPA sought to recover direct and indirect costs it incurred in studying, designing, and constructing the alternate water supply system.
In July 1989, the district court entered a case management order providing that the case would be decided in three phases: Phase I—liability, Phase II—recoverability of the EPA‘s response costs, and Phase III—“responsibility.” In September 1989, the district court granted in part, and denied in part, the EPA‘s motion for summary judgment as to liability. In its memorandum opinion, it stated that the relative culpability of the parties and the “divisibility of liability” issues would be decided during Phase III. Although the district court ruled that CERCLA did not require the EPA to prove causation, it held an evidentiary hearing and made alternative findings and conclusions addressing causation, holding that “Leigh, Bell and Sequa caused the contamination.”4
In March 1990, the district court granted the EPA‘s motion for clarification of the September 1989 summary judgment, holding that its previous opinion had provided that the defendants were jointly and severally liable. It also entered a declaratory judgment as to the defendants’ liability for future response costs.
The Phase II proceeding on recoverability of response costs was handled through cross-motions for summary judgment. 734 F.Supp. 771 (W.D.Tex.1990). The district court held that the defendants had not met their burden of proving that the EPA‘s decision to implement an alternate water supply was arbitrary and capricious, and held that they were liable for the EPA‘s direct and indirect response costs, plus prejudgment interest from the date such costs were incurred.
On March 2, 1990, the EPA sought approval of a proposed consent decree, in which it settled its claims against Bell for all costs, past and future, for $1,000,000. Sequa objected to the settlement, contending that Bell was not being required to pay its fair share. The district court granted Sequa‘s request for a hearing on the fairness of the proposed consent decree, and entered an order providing that a Phase III hearing regarding apportionment of liability was to be conducted before it ruled on the motion for entry of the consent decree. In response to the EPA‘s motion for clarification of the scope of the hearing, the court ruled that the hearing would be limited to determining the relative contributions of Bell, Sequa, and Leigh to the contamination. After the Phase III hearing in June 1990, Sequa filed a motion for reconsideration on the issue of joint and several liability. On July 24, the district court denied that motion, and approved the consent decree. It held that the evidence at the Phase I and Phase III hearings demonstrated that there was no method of dividing the liability among the defendants which would rise to any level above mere speculation, because each of the proposed apportionment methods involved a significant assumption factor, inasmuch as records had been lost, and because each of the apportionment methods differed significantly. In the alternative, it concluded that, based on equitable factors, responsibility should be divided as follows: Bell—35%; Sequa—35%; and Leigh—30%.
In sum, the district court held that Sequa is jointly and severally liable for $1,866,904.19, including the costs of studying, designing, and constructing the alternate water supply system. In addition, Sequa is jointly and severally liable for all future costs incurred by the EPA in studying, designing, and implementing a permanent remedy.5
III
Statutory Background
CERCLA was enacted in 1980, and amended in 1986 by the Superfund Amendments and Reauthorization Act (SARA). Its purpose is to facilitate the prompt clean-up of hazardous waste sites. See, e.g., United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1500 (6th Cir.1989). CERCLA Sec. 104,
The National Contingency Plan (“NCP“),
IV
Joint and Several Liability
Since CERCLA‘s enactment, the federal courts have struggled to resolve the complicated, often confusing, questions posed by the concept of joint and several liability, and its application under a statute whose provisions are silent with respect to the scope of liability, but whose legislative history is clear that common law principles of joint and several liability may affect liability.6
The issue is one of first impression in this Circuit.
A
Common Law: The Restatement of Torts
Although joint and several liability is commonly imposed in CERCLA cases,7
it is not mandatory in all such cases. United States v. Monsanto Co., 858 F.2d at 171. Instead, Congress intended that the federal courts determine the scope of liability in CERCLA cases under traditional and evolving common law principles, guided by the Restatement (Second) of Torts. Alcan-Butler, 964 F.2d at 268; O‘Neil v. Picillo, 883 F.2d at 178; Allied Corp. v. Acme Solvents Reclaiming, Inc., 691 F.Supp. 1100, 1116 (N.D.Ill.1988); Chem-Dyne, 572 F.Supp. at 810.
Section 433 of the Restatement provides that:
(1) Damages for harm are to be apportioned among two or more causes where
(a) there are distinct harms, or
(b) there is a reasonable basis for determining the contribution of each cause to a single harm.
(2) Damages for any other harm cannot be apportioned among two or more causes.
Restatement (Second) of Torts, Sec. 433A.
The nature of the harm is the key factor in determining whether apportionment is appropriate. Distinct harms—e.g., where two defendants independently shoot the plaintiff at the same time, one wounding him in the arm and the other wounding him in the leg—are regarded as separate injuries. Although some of the elements of damages (such as lost wages or pain and suffering) may be difficult to apportion, “it is still possible, as a logical, reasonable, and practical matter, ... to make a rough estimate which will fairly apportion such subsidiary elements of damages.”
The final situation discussed by the Restatement in which apportionment is available involves a single harm that is “divisible“—perhaps the most difficult type of harm to conceptualize. Such harm, “while not so clearly marked out as severable into distinct parts, [is] still capable of division upon a reasonable and rational basis, and of fair apportionment among the causes responsible.... Where such apportionment can be made without injustice to any of the parties, the court may require it to be made.”
Apportionment is inappropriate for other kinds of harm, which, “by their very nature, are normally incapable of any logical, reasonable, or practical division.”
Apportionment is also inappropriate in what the Restatement describes as “exceptional” cases, “in which injustice to the plaintiff may result.”
In sum, the nature of the harm is the determining factor with respect to whether apportionment is appropriate. Ultimately, the decision whether to impose joint and several liability turns on whether there is a reasonable and just method for determining the amount of harm that was caused by each defendant (or, in some cases, by an innocent cause or by the fault of the plaintiff). The question whether the harm to the plaintiff is capable of apportionment among two or more causes is a question of law. Restatement (Second) of Torts, Sec. 434(1)(b). Once it has been determined that the harm is capable of being apportioned among the various сauses of it, the actual apportionment of damages is a question of fact.
Section 433B of the Restatement sets forth the burdens of proof. As a general rule, the plaintiff must prove that the defendant‘s tortious conduct caused the harm.
Where the tortious conduct of two or more actors has combined to bring about harm to the plaintiff, and one or more of the actors seeks to limit his liability on the ground that the harm is capable of apportionment among them, the burden of proof as to the apportionment is upon each such actor.
As explained in the comment, this rule applies only to “a proved wrongdoer who has in fact caused harm to the plaintiff.”
CERCLA is a strict liability statute, one of the purposes of which is to shift the cost of cleaning up environmental harm from the taxpayers to the parties who benefited from the disposal of the wastes that caused the harm. See, e.g., Chem-Dyne, 572 F.Supp. at 805-06. “The improper disposal or release of hazardous substances is an enormous and complex problem of national magnitude involving uniquely federal interests.”
B
The Jurisprudence
The first published case to address the scope of liability under CERCLA is United States v. Chem-Dyne Corp., 572 F.Supp. 802 (S.D.Ohio 1983), which was cited approvingly in the legislative history of the SARA amendments to CERCLA. In that case, 24 defendants, who allegedly generated or transported hazardous substances located at Chem-Dyne‘s treatment facility, sought “an early determination” that they were not jointly and severally liable for the EPA‘s response costs.
The court described the nature of the “fairly complex factual determination” involved in deciding whether the defendants were jointly and severally liable as follows:
The Chem-Dyne facility contains a variety of hazardous waste from 289 generators or transporters, consisting of about 608,000 pounds of material. Some of the wastes have commingled but the identities of the sources of these wastes remain unascertained. The fact of the mixing of the wastes raises an issue as to the divisibility of the harm. Further, a dispute exists over which of the wastes have contaminated the ground water, the degree of their migration and concomitant health hazard. Finally, the volume of waste of a particular generator is not an accurate predictor of the risk associated with the waste because the toxicity or migratory potential of a particular hazardous substance generally varies independently with the volume of the waste.
United States v. Ottati & Goss, Inc., 630 F.Supp. 1361 (D.N.H.1985), was a cost recovery action against operators and former operators of drum reconditioning businesses, property owners, and generators of wastes contained in the drums that were sent to the site for reconditioning. The evidence showed that chemical substances leaked or spilled from drums and were mixed together. Although the generators satisfied their burden of proving approximately how many drums each brought to the site, the court nevertheless imposed joint and several liability, because “the exact amount or quantity of deleterious chemicals or other noxious matter [could not] be pinpointed as to each defendant[, and] [t]he resulting proportionate harm to surface and groundwater [could not] be proportioned with any degree of accuracy as to each individual defendant.”
On the other hand, the Third Circuit reversed a summary judgment in favor of the EPA, and remanded the case for further factual development on the scope of liability, in United States v. Alcan Aluminum Corp., 964 F.2d 252, 255 (3d Cir.1992) (Alcan-Butler). This case involved the Butler Tunnel Site, a network of approximately five square miles of underground mines, tunnels, caverns, pools, and waterways, drained by the Butler Tunnel into the Susquehanna River in Pennsylvania. During the 1970s, millions of gallons of liquid wastes containing hazardous substances were disposed of through a borehole that led directly into the mine workings. In 1985, 100,000 gallons of contaminated water were released from the site into the river.
The government filed a cost-recovery action against 20 defendants; all but Alcan settled. The district court granted summary judgment for the government, holding that Alcan was jointly and severally liable for the response costs. The Third Circuit held that the “intensely factual nature of the ‘divisibility’ issue” highlighted the district court‘s error in granting summary judgment without conducting a hearing.
The Third Circuit noted that the analysis involved in apportioning several liability is similar to that involved in apportioning damages among jointly and severally liable defendants in an action for contribution, because both focus on what harm was caused by the defendant.
It noted that drastic consequences could result from delaying that determination, because “a defendant could easily be strong-armed into settling where other defendants have settled in order to avoid being held liable for the remainder of the response costs.”
The Second Circuit essentially adopted the Third Circuit‘s approach to joint and several liability in another case involving Alcan, United States v. Alcan Aluminum Corp., 990 F.2d 711 (2d Cir.1993) (Alcan-PAS). That case involved a waste disposal and treatment center operated during the 1970s by Pollution Abatement Services (PAS). Alcan used PAS for the disposal or treatment of 4.6 million gallons of oil emulsion. The government brought a cost-recovery action against 83 defendants. As in Alcan-Butler, all of the defendants except Alcan settled. The Second Circuit reversed a summary judgment in favor of the government, stating that “Alcan should have the opportunity to show that the harm caused at PAS was capable of reasonable apportionment.”
The court stated that Alcan could escape liability if it could prove that its oil emulsion, when mixed with other hazardous wastes, did not contribute to the release and resulting clean-up costs. It acknowledged that “causation is being brought back into the case—through the backdoor, after being denied entry at the frontdoor—at the apportionment stage.”
A “moderate” approach to joint and several liability was adopted in United States v. A & F Materials Co., Inc., 578 F.Supp. 1249 (S.D.Ill.1984). That case involved a disposal site at which over 7,000,000 gallons of waste were deposited. The court concluded that a rigid application of the Restatement approach to joint and several liability was inappropriate. Under the Restatement approach, a defendant who could not prove its contribution to the harm would be jointly and severally liable. The court thought that such a result would be inconsistent with congressional intent, because Congress was “concerned about the issue of fairness, and joint and several liability is extremely harsh and unfair if it is imposed on a defendant who contributed only a small amount of waste to a site.”
The court concluded that six factors delineated in an unsuccessful amendment to CERCLA proposed by Representative (now Vice President) Gore could be used to “soften” the modern common law approach to joint and several liability in appropriate circumstances. Under this “moderate” approach, a court has the power to impose joint and several liability upon a defendant who cannot prove its contribution to an injury, but it also has the discretion to apportion damages in such a situation according to the “Gore factors“:
(i) the ability of the parties to demonstrate that their contribution to a discharge[,] release or disposal of a hazardous waste can be distinguished;
(ii) the amount of the hazardous waste involved;
(iii) the degree of toxicity of the hazardous waste involved;
(iv) the degree of involvement by the parties in the generation, transportation, treatment, storage, or disposal of the hazardous waste;
(v) the degree of care exercised by the parties with respect to the hazardous waste concerned, taking into account the characteristics of such hazardous waste; and
(vi) the degree of cooperation by the parties with Federal, State, or local officials to prevent any harm to the public health or the environment.
In Allied Corp. v. Acme Solvents Reclaiming, Inc., 691 F.Supp. 1100 (N.D.Ill.1988), a private cost recovery action in which the government was not a party, the court adopted the A & F moderate approach to joint and several liability. However, it expressed no opinion on the propriety of that approach in cost recovery actions involving the government as plaintiff.
The A & F moderate approach, to the extent it is inconsistent with the Chem-Dyne approach to joint and several liability, was rejected in United States v. South Carolina Recycling and Disposal, Inc., 653 F.Supp. 984 (D.S.C.1984), aff‘d in part and vacated in part, United States v. Monsanto Co., 858 F.2d 160 (4th Cir.1988). That case involved a site at which there were “thousands of corroded, leaking drums ... not segregated by source or waste type. Unknown, incompatible materials commingled to cause fires, fumes, and explosions.” 653 F.Supp. at 994. The district court concluded that the harm was indivisible, because all of the substances at the site contributed synergistically, and it was impossible to ascertain the degree or relative contribution of each substance.
On appeal, the Fourth Circuit affirmed the imposition of joint and several liability. 858 F.2d at 173. It noted that the generator defendants had presented no evidence of a relationship between the volume of waste, the release of hazardous substances, and the harm at the site. Because the substances had commingled, apportionment was impossible “without some evidence disclosing the individual and interactive qualities of the substances deposited there.”
To summarize, our review of the jurisprudence leads us to conclude that there are three distinct, although closely-related, approaches to the issue of joint and several liability. The first is the “Chem-Dyne approach,” which relies almost exclusively on the principles of the Restatement (Second) of Torts. Under that approach, a defendant who seeks to avoid the imposition of joint and several liability is required to prove the amount of harm it caused.
The second approach, the “Alcan approach,” is adopted by the Second and Third Circuits. Although that approach also relies on the Restatement, it recognizes that, under the unique statutory liability scheme of CERCLA, the plaintiff‘s common law burden of proving causation has been eliminated. Under the Restatement, the plaintiff must first prove that the defendant‘s conduct was a substantial factor in causing the harm; the defendant may limit its liability by proving its contribution to the harm. In contrast, the Alcan approach suggests that a defendant may escape liability altogether if it can prove that its waste, even when mixed with other wastes at the site, did not cause the incurrence of response costs.
The third approach is the “moderate” approach taken in A & F. Under that approaсh, the court applies the principles of the Restatement in determining whether there is a reasonable basis for apportionment. If there is not, the court may impose joint and several liability; the court, however, retains the discretion to refuse to impose joint and several liability where such a result would be inequitable.
Although these approaches are not entirely uniform, certain basic principles emerge. First, joint and several liability is not mandated under CERCLA; Congress intended that the federal courts impose joint and several liability only in appropriate cases, applying common-law principles. Second, all of the cases rely on the Restatement in resolving the issues of joint and several liability. The major differences among the cases concern the timing of the resolution of the divisibility question, whether equitable factors should be considered, and whether a defendant can avoid liability for all, or only some portion, of the damages. Third, even where commingled wastes of unknown toxicity, migratory potential, and synergistic effect are present, defendants are allowed an opportunity to attempt to prove that there is a reasonable basis for apportionment (although they rarely succeed); where such factors are not present, volume may be a reasonable means of apportioning liability.
With respect to the timing of the “divisibility” inquiry, we believe that an early resolution is preferable. We agree with the Second Circuit, however, that this is a matter best left to the sound discretion of the district court. We also agree with the majority view that equitable factors, such as those listed in the Gore amendment, are more appropriately considered in actions for contribution among jointly and severally liable parties, than in making the initial determination of whether to impose joint and several liability.13
We therefore conclude that the Chem-Dyne approach is an appropriate framework for resolving issues of joint and several liability in CERCLA cases. Although we express no opinion with respect to the Alcan approach, because it is not necessary with respect to the issues we are faced with in this case, we nevertheless recognize that the Restatement principles must be adapted, where necessary, to implement congressional intent with respect to liability under the unique statutory scheme of CERCLA.14
Application of Joint & Several Liability
We now turn to consider the application of these traditional and evolving common law principles of joint and several liability to the facts of this case.
First, we conclude that the district court erred in determining that there is no reasonable basis for apрortionment. We reject the EPA‘s assertion that the clearly erroneous standard of review applies to these findings of the district court. According to the Restatement, “the question whether the harm to the plaintiff is capable of apportionment among two or more causes is a question of law.” Restatement (Second) of Torts, Sec. 434.
In the district court, the EPA contended that there was no reasonable basis for apportionment, because the harm to the Trinity Aquifer was a single harm, and a that single harm is the equivalent of an indivisible harm, thus mandating the imposition of joint and several liability. Apparently now recognizing the lack of support for that position,15
the EPA on appeal acknowledges that apportionment is available, at least theoretically, when there is a reasonable basis for determining the contribution of each cause to a single harm. It asserts, however, that Sequa failed to meet its burden of proof on that issue. Sequa responds that the district court was misled by the EPA‘s incorrect view of the law, and erroneously required it to prove a certain—as opposed to reasonable—basis for apportionment.
Essentially, the question whether there is a reasonable basis for apportionment depends on whether there is sufficient evidence from which the court can determine the amount of harm caused by each defendant. If the expert testimony and other evidence establishes a factual basis for making a reasonable estimate that will fairly apportion liability, joint and several liability should not be imposed in the absence of exceptional circumstances. The fact that apportionment may be difficult, because each defendant‘s exact contribution to the harm cannot be proved to an absolute certainty, or the fact that it will require weighing the evidence and making credibility determinations, are inadequate grounds upon which to impose joint and several liability.16
Our review of the record convinces us that Sequa met its burden of proving that, as a matter of law, there is a reasonable basis for apportionment. This case is closely analogous to the Restatement‘s illustrations in which apportionment of liability is appropriate. For example, where cattle owned by two or more defendants destroy the plaintiff‘s crops, the damages are apportioned according to the number of cattle owned by each defendant, based on the reasonable assumption that the respective harm done is proportionate to that number. Thus, the Restatement suggests that apportionment is appropriate even though the evidencе does not establish with certainty the specific amount of harm caused by each defendant‘s cattle, and even though there is a possibility that only one of the defendant‘s cattle caused all of the harm, while the other defendant‘s cattle idly stood by. Likewise, pollution of a stream by two or more factories may be treated as divisible in terms of degree, and apportioned among the defendants on the basis of evidence of the respective quantities of pollution discharged by each.
As is evident from our previous discussion of the jurisprudence, most CERCLA cost-recovery actions involve numerous, commingled hazardous substances with synergistic effects and unknown toxicity. In contrast, this case involves only one hazardous substance—chromium—and no synergistic effects. The chromium entered the groundwater as the result of similar operations by three parties who operated at mutually exclusive times. Here, it is reasonable to assume that the respective harm done by each of the defendants is proportionate to the volume of chromium-contaminated water each discharged into the environment.
Even though it is not possible to determine with absolute certainty the exact amount of chromium each defendant introduced into the groundwater, there is sufficient evidence from which a reasonable and rational approximation of each defendant‘s individual contribution to the contamination can be made. The evidence demonstrates that Leigh owned the real property at the site from 1967 through 1981, and conducted chrome-plating activities there in 1971 and 1972. In 1972, Bell purchased the assets of the shop and leased the property from Leigh. It continued to conduct similar, but more extensive, chrome-plating activities there until mid-1976. In August 1976, Sequa purchased the assets from Bell, leased the property from Leigh, and conducted similar chrome-plating activities at the site until late 1977. In response to the EPA‘s motion for summary judgment, Sequa introduced evidence regarding chrome flake purchases during each operator‘s tenure. It also introduced evidence with respect to the value of the chrome-plating done by each, as well as summaries of sales. Given the number of years that had passed since the activities were conducted, the records of these activities were not complete.17
However, there was testimony from various witnesses regarding the rinsing and wastewater disposal practices of each defendant, and the amount of chrome-plating activity conducted by each.18
In addition to rejecting apportionment because of competing theories, the district court also rejected volume as a basis for apportionment, because there was no method of dividing the liability among the defendants which would rise to any level of fairness above mere speculation. It stated that each of the proposed apportionment methods involved significant assumption factors, because records had been lost, and because the theories differed significantly.
The existence of competing theories of apportionment is an insufficient reason to reject all of those theories. It is true, as the district court noted, that the records of chrome-plating activity were incomplete. However, under the facts and circumstances of this case, and in the light of the other evidence that is available, that factor may be taken into account in apportioning Sequa‘s share of the liability. Finally, the fact that Sequa‘s experts relied on certain assumptions in forming their opinions is not fatal to Sequa‘s ability to prove that there is a reasonable basis for apportionment. Expert opinions frequently include assumptions. If those assumptions are well-founded and reasonable, and not inconsistent with the facts as established by other competent evidence, they may be sufficiently reliable to support a conclusion that a reasonable basis for apportionment exists.19
In sum, we conclude that the district court erred in imposing joint and several liability, because Sequa met its burden of proving that there is a reasonable basis for apportioning liability among the defendants on a volumetric basis. We therefore remand the case to the district court for apportionment.
V
Alternate Water Supply System
Sequa also challenges the EPA‘s decision to provide an alternate water supply (AWS) as an interim measure pending the completion of final remedial action. The scope of our review of the EPA‘s selection of the AWS is governed by the 1986 amendments to CERCLA, which provide that such review is “limited to the administrative record.”
The scope of review under the “arbitrary and capricious” standard is narrow and a court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.... In reviewing that explanation, we must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.
Motor Vehicle Manufacturers Ass‘n v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983) (citations and internal quotation marks omitted).
Sequa challenges the EPA‘s decision to provide the AWS on a number of grounds, including that: (1) the administrative record demonstrates that the EPA failed to recognize that “substantial danger to public health or the environment,” as specified in the National Contingency Plan, is the standard against which the decision to implement an alternative water supply system must be measured; (2) there is no analysis of why the EPA believed the public health was at risk and required protection at the subject site; (3) the Safe Drinking Water Act‘s maximum contaminant level for chromium is based on a lifetime (70-year) exposure, but the alternate water supply system was merely a short-term (10-15 year) response; further, the administrative record contains no discussion of whether chromium presents a danger to humans on the basis of short-term exposure; and (4) the EPA failed to analyze the likelihood that the contaminated water would be ingested.
The EPA‘s defense of its decision to implement the alternate water supply system is, we think, singularly weak. The EPA contends primarily that we should defer to its technical expertise. It argues that the existence of chromium at levels exceeding the maximum contaminant level allowed under the SDWA presumptively establishes that its response was appropriate. We cannot agree.
Although the arbitrary and capricious standard of review is very lenient on the agency, and we will not substitute our judgment for that of the agency, “[j]udicial review ‘must be based on something more than trust and faith in EPA‘s experience.‘” American Petroleum Institute v. E.P.A., 661 F.2d 340, 349 (5th Cir.1981) (quoting Appalachian Power Co. v. Train, 545 F.2d 1351, 1365 (4th Cir.1976)). Our determination of whether the EPA‘s decision was arbitrary and capricious must be made on the basis of the rationale relied on by the EPA as contained in the administrative record. We will not accept the EPA‘s post-hoc rationalizations in justification of its decision, nor will we attempt to supply a basis for its decision that is not supported by the administrative record. See State Farm, 463 U.S. at 50, 103 S.Ct. at 2870.20
VI
All Costs?
Having determined that the EPA‘s decision to implement the AWS was arbitrary and capricious, we must now decide whether the EPA nevertheless is entitled to recover its costs for designing and constructing the AWS.
CERCLA Sec. 107 provides for the recovery of the following costs:
(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan;
(B) any other necessary costs incurred by any other person consistent with the national contingency plan;
(C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release; and
(D) the costs of any health assessment or health effects study carried out under section 9604(i) of this title.
Sequa contends that the EPA is authorized to recover only reasonable and necessary costs, relying on the statutory language as well as federal procurement laws and regulations. The EPA takes the position that it is entitled to recover all costs—even if unreasonable or unnecessary22
—unless Sequa proves that such costs are inconsistent with the National Contingency Plan.23
The district court held that the EPA could recover all of its response costs, so long as they were not the product of “gross misconduct” by the agency.
Although we approve of the district court‘s attempt to impose some restraints on the EPA‘s ability to recover costs from private parties, we find no statutory basis for its “gross misconduct” limitation. Nevertheless, we are troubled by thе implications of the EPA‘s position on this issue. Sequa contends that, under the EPA‘s interpretation, defendants will be liable even if the EPA allows a contractor to pay its officers and other employees unjustified millions and allows each of them a Rolls-Royce for transportation. Interestingly, the EPA did not attempt to refute Sequa‘s assertion, either in its appellate brief or at oral argument. Instead, the EPA asserts a policy reason to support its interpretation:
By refusing to permit defendants to defend against cost recovery actions by engaging in detailed attacks on the “reasonableness” of individual government cost items, Congress provided an incentive to those defendants to conduct the necessary response actions themselves. Where defendants refuse to conduct the appropriate response actions, CERCLA allows the Government to undertake the response actions it deems necessary and appropriate without being constrained by the possibility that each line item of the costs of these actions will be challenged in cost recovery.
In addition, the EPA asks us to take comfort in the fact that, through internal agency audits and other forms of self-policing, costs will be controlled.
Acceptance of the EPA‘s position would effectively prohibit judicial review of the EPA‘s expenditures. In short, we would give the EPA a blank check in conducting response actions.24
We seriously doubt that Congress intended to give the EPA such unrestrained spending discretion.25
Moreover, such unbridled discretion removes any restraint upon the conduct of the EPA in exercising its awesome powers; if the EPA knows there are no economic consequences to it, its decisions and conduct are likely to be less responsible.
We do not have to decide the question in this case, however, because the only costs Sequa challenges as unreasonable and unnecessary are those associated with implementation of the alternate water supply system, a decision that we have already concluded was arbitrary and capricious.
The Tenth Circuit recently held that, “[t]o show that the government‘s response action is inconsistent with the NCP, a defendant must demonstrate that the EPA acted arbitrarily and capriciously in choosing a particular response action to respond to a hazardous waste site.” Hardage, 982 F.2d at 1442. We find this reasoning persuasive, as well as adequate for resolving the issue before us, and therefore adopt it.26 Because the decision to implement an AWS was arbitrary and capricious, it is inconsistent with the NCP. Accordingly, the EPA is not entitled to recover the costs of designing and constructing the AWS.
VII
Settlement Credit
VIII
Prejudgment Interest
IX
Joint and Several Liability
On the issue of the fact of causation, ... [the one bearing the burden of proof by a preponderance of the evidence] must introduce evidence which affords a reasonable basis for the conclusion that it is more likely than not that [the causation exists]. A mere possibility of such causation is not enough;[ ] and when the matter remains one of pure speculation or conjecture,[ ] or the probabilities are at best evenly balanced, [ ] it becomes the duty of the court to direct a verdict for the defendant. Where the conclusion is not one within the common knowledge of laymen, expert testimony may provide a sufficient basis for it, [ ] but in the absence of such testimony it may not be drawn.1
Equity and 42 U.S.C. Sec. 9613
II
Alternate Water Supply System
In 1983, the Supreme Court held:
The scope of review under the “arbitrary and capricious” standard is narrow and a court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.... In reviewing that explanation, we must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.
“remove” or “removal” means the cleanup or removal of released hazardous substances from the environment, such actions as may be necessary taken in the event of the threat of release of hazardous substances into the environment, such actions as may be necessary to monitor, assess, and evaluate the release or threat of release of hazardous substances, the disposal of removed material, or the taking of such other actions as may be necessary to prevent, minimize, or mitigate damage to the public health or welfare or to the environment, which may otherwise result from a release or threat of release. The term includes, in addition, without being limited to, security fencing or other measures to limit access, provision of alternate water supplies, temporary evacuation and housing of threatened individuals not otherwise provided for, action taken under section 9604(b) of this title, and any emergency assistance which may be provided under the Disaster Relief and Assistance Act.
“remedy” or “remedial action” means those actions consistent with permanent remedy taken instead of or in addition to removal actions in the event of a release or threatened release of hazardous substance into the environment, to prevent or minimize the release of hazardous substances so that they do not migrate to cause substantial danger to present or future public health or welfare or the environment. The term includes, but is not limited to, such actions at the location of the release as storage, confinement, perimeter protection using dikes, trenches, or ditches, clay cover, neutralization, cleanup of released hazardous substances or contaminated materials, recycling or reuse, diversion, destruction, segregation of reactive wastes, dredging or excavations, repair or replacement of leaking containers, collection of leachate and runoff, onsite treatment or incineration, provision of alternative water supplies, and any monitoring reasonably required to assure that such actions protect the public health and welfare and the environment.
The National Contingency Plan
According to the 1986 NCP:
The purpose of the ... (NCP or Plan) ... is to effectuate the response powers and responsibilities created by ... (CERCLA) and the authorities established by section 311 of the Clean Water Act (CWA), as amended.
Sec. 300.3 Scope
The Administrative Record
III
All Costs? Yes.
In passing CERCLA Congress faced the unenviable choice of enacting a legislative scheme that would be somewhat unfair to generators of hazardous substances or one that would unfairly burden the taxpaying public. The financial burdens of toxic clean-up had been vastly underestimated--in 1980 when CERCLA was enacted $1.8 billion was thought to be enough. In 1986 when the Superfund Amendments and Reauthorization Act of 1986 (SARA), Pub. L. No. 99-499, 100 Stat. 1613 (1986), was passed, $100 billion was held to be needed. It may well be more today. It is of course the public-at-large that is already bearing the economic brunt of this enormous national problem.
There are obviously discretionary acts performed by a Government agent that are within the scope of his employment but not within the discretionary function exception [to the Federal Tort Claims Act] because these acts cannot be said to be based on the purposes that the regulatory regime seeks to accomplish. If one of the officials involved in this case drove an automobile on a mission connected with his official duties and negligently collided with another car, the exception would not apply. Although driving requires the constant exercise of discretion, the official‘s decisions in exercising that discretion can hardly be said to be grounded in regulatory policy.
IV
Settlement Credit
In my opinion, Sequa should be provided its statutory right of equitable response cost allocation under
V
Conclusion
While I concur with much of the majority opinion, I must also dissent from much of it. Contrary to congressional intent and traditional judicial doctrines--not to mention the bedrock principle of a prudent separation of federal governmental powers--the majority has become much more than an appellate court in order to reach its rulings in this case regarding quantitative apportionment and the executive branch decision to provide the chromium-affected area with an alternate water supply system. The majority has usurped for itself the special powers of the executive agency and the trial court as well.
Notes
Notes
See e.g., Amoco Oil Co. v. Borden, 889 F.2d 664 (5th Cir.1989), which recognized that under CERCLA‘s contribution provision:
a court has considerable latitude in determining each party‘s equitable share. * * * Possible relevant factors include: “the amount of hazardous substances involved; the degree of toxicity or hazard of the materials involved; the degree of involvement by parties in the generation, transportation, treatment, storage, or disposal of the substances; the degree of care exercised by the parties with respect to the substances involved; and the degree of cooperation of the parties with government officials to prevent any harm to public health or the environment.” [ ] Additionally, the circumstances and conditions involved in the property‘s conveyance, including the price paid and discounts granted, should be weighed in allocating response costs.[ ].
Amoco Oil Co., 889 F.2d at 672-673 (quoting Amendments Report, pt. III, at 19, reprinted in 1986 U.S.C.C.A.N. at 3042; other citations omitted; emphasis added).
It is also illuminating that
For purposes of taking action under section 9604 or 9606 of this title and listing facilities on the National Priorities List, the President shall give a high priority to facilities where the release of hazardous substances or pollutants or contaminants has resulted in the closing of drinking water wells or has contaminated a principal drinking water supply.
The following record of communication is found in the Administrative Record:
It was further decided that only those who responded “yes” on the survey [for those interested in water at Odessa I and II--of which there were 2 (owning 8 lots) out of ten, and 56 out of 56 residents contacted, respectively) ] would be given the opportunity to sign a contract for water. * * * Businesses and those who responded “no” on the questionnaire are not being considered for contact again. These residents can be incorporated into the design and construction of the system if they do their own platwork--obtaining plat information and get their contracts notarized [sic ]. The businesses must do their own negotiations with the city, and they incur all expenses for construction.
Administrative Record at 4068 (Record of Communication to the EPA from the Texas Water Commission, regarding a discussion of the Record of Decision for Phase 2 of the Odessa AWS design; dated 8/19/87).
In its footnoted “majority dissent,” the majority has misconstrued my citation of the 1987 Record of Communication as an attempt to rely upon an “event” occurring subsequent to the EPA‘s initial AWS decision to support that decision. Actually, I have cited the 1987 Record of Communication simply to refute the majority‘s misguided, post hoc assertion on Sequa‘s behalf that the AWS decision must be “arbitrary and capricious” because businesses in the area were not “allowed” to participate in the AWS. The 1987 Record of Communication in fact reflects that the official decision to impose an entitlement regime upon area businesses regarding their ability to participate in the AWS--i.e., only if the businesses do their own platwork and do their own negotiations with the city and incur their own expenses for construction--was made after the initial decision to provide the AWS to the area generally.
(f) Contribution
(2) Settlement
A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.
In adopting the majority view, we do not intend to imply that concerns for fairness and avoiding injustice should never be considered in deciding whether joint and several liability is appropriate. In this respect, we note that the legislative history of the SARA amendments to CERCLA, which created an express statutory right of contribution, cites the A & F decision for the proposition that the Gore factors may be considered in determining whether to grant apportionment in an action for contribution; see H.R.Rep. No. 253, 98th Cong., 2d Sess., pt. 3, at 19 (1985), 1986 U.S.C.C.A.N. 2835; the legislative history also cites Chem-Dyne for the proposition that the party seeking apportionment has the burden of establishing that it should be granted. Both of those decisions, however, deal with apportionment in terms of whether joint and several liability should be imposed, rather than in terms of contribution among jointly and severally liable parties. Considering CERCLA‘s “well-deserved notoriety for vaguely-drafted provisions and an indefinite, if not contradictory, legislative history,” we do not view these citations as a basis for courts to determine joint and several liability based on those factors. See Amoco, 889 F.2d at 667
As discussed in the Restatement comments, there may be exceptional cases in which it would be unjust to impose several liability, such as when one of the defendants is so hopelessly insolvent that the plaintiff will be unable to recover any damages from it. We believe, however, that consideration of such factors will rarely be appropriate or necessary in CERCLA cases, especially when the plaintiff is the government. Under CERCLA‘s strict liability scheme, the deck of legal cards is heavily stacked in favor of the government. The legislative history shows that because Congress was concerned about the potential harshness or unfairness to defendants, it refused to adopt mandatory joint and several liability in order to give courts the ability to ameliorate such results in appropriate cases. We do not consider the finаncial condition of Leigh or Bell to be relevant to the decision in this case. The EPA entered into its settlements with those defendants with full awareness of Sequa‘s opposition to the settlements, as well as to the imposition of joint and several liability.