Retrospective Application of the Superfund Recycling Equity Act: A Brave New World for the Recycling Industry
by William W. Funderburk, Jr. and Lisa J. Morelli
© Copyright 2000 by Matthew Bender & Co., Inc. Reprinted with permission from the August 2000 issue of the CALIFORNIA ENVIRONMENTAL LAW REPORTER (Matthew Bender).
The District Court for the Eastern District of California recently handed recyclers a victory in Department of Toxic Substances Control v. Interstate Non-Ferrous Corp. et al. [(No. CV-F-97-5016 OWW LJO) (May 25, 2000)], finding that CERCLA § 127 the recently enacted Superfund Recycling Equity Act [P.L. 106-113] applies to all parties and all transactions in this pending case. This decision is the first interpretation by a federal court addressing whether CERCLA § 127 applies retrospectively to pending cases not filed by the United States.1 Given the high stakes involved for parties found liable under CERCLA, courts from around the country which have pending before them actions involving the alleged CERCLA liability of entities and/or persons that engaged in recycling transactions are likely to address the district court's analysis in the Interstate Non-Ferrous case.
Citing CERCLA's broad remedial purpose, federal courts have broadly interpreted CERCLA's provisions, and many of these courts have ruled that arranging for recycling constitutes an "arrangement for disposal" under CERCLA [See, e.g., Catellus Development Corp. v. United States (9th Cir. 1994) 34 F.3d 748, 1994 CELR 299 (holding that "disposal" necessarily includes the concept of waste, and because spent batteries could be defined as waste, battery recycler could be held liable for arranging for their disposal);2 State of California v. Summer del Caribe, Inc. (N.D. Cal. 1993) 821 F. Supp. 574, 1993 CELR 317 (can manufacturer arranged for disposal of "solder dross")].3 Although some courts attempted to strike a balance between the goals of recycling and the "polluter pays" concept of CERCLA, the ever-present threat of liability had a negative impact on the recycling industry and created a market distortion favoring virgin feedstock materials over recycled feedstock materials.
Heeding the recycling industry's mantra that "scrap is not waste," President Clinton on November 29, 1999, signed into law the Superfund Recycling Equity Act, which exempts certain "generators" and "transporters" who recycle material in accordance with the Act from liability under CERCLA. This is only the third time in 20 years that Congress has significantly changed CERCLA.4 The Superfund Recycling Equity Act is significant not only to the recycling industry, but to all other parties potentially liable under CERCLA for cleanup costs of contaminated sites. By exempting scrap dealers that satisfy the Act's criteria from CERCLA liability, the Act effectively imposes greater potential liability on other industry groups, such as manufacturers and mining and waste companies, that are not subject to any CERCLA liability exemption.5 The latter industry groups may now be allocated a greater share of cleanup costs in CERCLA actions, since there may be fewer principally responsible parties ("PRPs") among whom to spread costs. Further, remaining defendants will no longer be able to seek contribution for cleanup costs from recyclers exempt under the Act.
Following the enactment of Section 127, the California Department of Toxic Substances Control ("DTSC") filed a motion for partial summary judgment that the statute does not apply to the pending CERCLA case filed by the DTSC in January 1997.6 The act expressly provides that: "The exemptions provided in this section shall not affect any concluded judicial or administrative action or any pending judicial action initiated by the United States prior to enactment of this section" [Section 127(i)]. This provision does not expressly address pending judicial actions filed by parties other than the United States. In a detailed and comprehensive 71-page opinion, the district court held that the Act applies to pending lawsuits brought by the State of California, and thus applies to the Interstate Non-Ferrous case.I. Retrospective v. Retroactive Application of New Statutes
In addressing the DTSC's motion, the district court began its analysis with a discussion about terminology. The court noted that in the Ninth Circuit, the term "retrospective" is used to describe the application of a statute to events preceding its enactment. The term "retroactive" is reserved to describe a statute that has "retroactive effect," that is, one that attaches new legal consequences to conduct or transactions already completed. Laws that have no "retroactive effect" when applied to pending cases are deemed, in the Ninth Circuit, "retrospective" laws.II. Landgraf and Lindh
After clarifying the "retrospective" vs. "retroactive" terminology, the court turned to the method of analysis outlined in Landgraf v. USI Film Products [(1994) 511 U.S. 244] for determining the retroactivity of statutes in deciding whether CERCLA § 127 applies to the DTSC-filed action. The Supreme Court in Landgraf outlined a two-part analysis to guide this inquiry. The first step is to examine the statutory text in order to "determine whether Congress has expressly prescribed the statute's proper reach" [511 U.S. at 280]. If it has, then the court will give effect to Congress' will, subject only to constitutional constraints. If the statute does not clearly specify its own temporal reach, the court must then determine "whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." If the statute does operate retroactively, "our traditional presumption teaches that it does not govern absent clear congressional intent favoring such a result" [511 U.S. at 280].
The Interstate court observed that Landgraf did not examine the rules for determining whether a statute contains an "express command" or "unambiguous directive."7 It noted, however, that in the subsequently decided case of Lindh v. Murphy [(1997) 521 U.S. 320], the Supreme Court stated that "in determining a statute's temporal reach generally, our normal rules of construction apply" [521 U.S. at 327].8 Thus, the court opined that in construing CERCLA § 127's temporal reach, direct or implied evidence of legislative intent may be discerned from the statute's structure, legislative history, and the context in which the statute was passed. Citing United States v. Olin Corp. [(11th Cir. 1997) 107 F.3d 1506, 1512-1513], the court stressed that "even absent explicit statutory language mandating retroactivity, laws may be applied retroactively if courts are able to discern 'clear congressional intent favoring such a result.'"
III. The Landgraf Analysis
A. Determination of Section 127's Temporal Reach
The district court concluded that CERCLA § 127 did not contain an "express command" or "unambiguous directive" as to its temporal reach. At the same time, the court rejected the DTSC's argument that for a new statute to apply to a pending case, it must affirmatively so state, noting that Lindh had expressly rejected this same argument
Defendants argued that Section 127(i)'s language confirms that the statute applies to all actions pending at the time of enactment except those initiated by the United States. They reasoned that Congress had no reason to identify actions to which Section 127 does not apply unless it intended the Act to apply to all other pending cases. The DTSC responded that this interpretation was analogous to the negative inference used by the Lindh court to infer that Congress did not intend to apply the subject act retrospectively. The court disagreed, but noted that in any event, Landgraf did not preclude all future use of a negative inference analysis in support of retroactive intent. Rather, the court concluded that defendants sought application of a "positive inference," that is, the absence of language specifying that Section 127 applies to pending actions means Congress intended it to apply. The court did not otherwise address the parties' "positive" and "negative" inference arguments, however, concluding that at bottom, "the language of the Act alone does not contain an express command or unambiguous directive that the statute is to be applied retrospectively to pending judicial actions brought [by] a State." Although the court found the statute did not expressly proscribe its reach, relying on United States v. Olin [(11th Cir. 1997) 107 F.3d 1506] it reasoned that laws nonetheless may be applied retrospectively if there is "clear congressional intent" favoring such a result. In examining whether such intent existed, the court employed traditional tools of statutory construction, looking to the structure of the statute and the legislative history.
With respect to the statute's structure, the court examined a number of factors: the historical retrospectivity of CERCLA and the Superfund Amendments and Reauthorization Act ("SARA"); the statute's use of the past verb tense; various statute headings indicating the law was intended as a "clarification" of CERCLA; the act's stated purpose of promoting recycling of scrap material, creating greater equity in the statutory treatment of recycled versus virgin materials, and removing the disincentives and impediments to recycling created as an unintended consequence of CERCLA; and express prospective language concerning the different criteria recyclers must satisfy under the act depending on when the recycling transaction occurred. The court found all of these factors "evidence of intent" that favored retrospectivity, and in particular it found that repeated use of the word "clarification" in the headings of Section 127 constituted "clear, unambiguous, and commanding evidence in favor of retrospectivity."
With respect to the statute's legislative history, the court noted the dearth of such history here: there was no pre-enactment committee, House or Senate floor debate of record, nor was there any committee report on the bill. The Conference Report included only the text of the Act, not any commentary about it. The only "legislative history" consisted of remarks introduced into the Congressional Record as legislative history by Senator Lott, the bill's primary sponsor. At the end of his remarks, Senator Lott requested "unanimous consent that the legislative history be inserted into the [Congressional] Record." It was.
Relying on Federal Energy Administration v. Algonquin SNG, Inc. [(1976) 426 U.S. 548, 564], which directed that an explanation provided by the legislation's sponsors during floor debate "deserves to be accorded substantial weight in interpreting the statute," the court concluded that the statements of all of the statute's sponsors in the Senate should be considered, notwithstanding the absence of any floor debate. The court also cited Mount Graham Red Squirrel v. Madigan [(9th Cir. 1992) 954 F.2d 1441, 1453-1454] as standing for the proposition that where other statutory interpretative tools are not determinative, "legislative statements can be helpful to determine statutory meaning and Congressional intent." Given the reasoning of these cases, the court determined that all legislative statements, including those by non-sponsors, should be considered. The court thus rejected the DTSC's contention that the remarks of sponsoring legislators (including Senator Lott) should be ignored or given little weight.
The court then proceeded to examine the remarks made by each of the sponsoring Senators. Senators Lott and Lincoln both introduced remarks prior to the President signing the bill into law on November 29, 1999. Senator Lott's remarks explicitly provided for Section 127's retrospective application to judicial proceedings brought by private parties and to administrative actions brought by "any governmental agency," such as the DTSC. Although Lott's remarks did not address pending judicial actions brought by any governmental agency, the court found it "reasonable to infer" that retrospective treatment should be afforded to both pending administrative and judicial actions, since both types of proceedings implicate the same or similar liability considerations. Senator Lincoln's remarks explicitly stated that only those actions brought by the United States prior to enactment "will remain viable."
By contrast, Senator Daschle did not comment on the bill until January 26, 2000, nearly two months after the bill became law. The court considered his remarks, but emphasized that such post-enactment legislative history "is generally considered to be of minimal assistance in interpreting a statute" (citation omitted). Thus, although Senator Daschle apparently disagreed with Senator Lott's legislative history about the availability of relief in pending cases, he did not set forth any contrary interpretation, and the court concluded his statements were of "minimal assistance."
The court also rejected Senator Daschle's suggestion that an earlier bill from the 103rd Congress be used as an interpretative tool, noting that Landgraf disavowed reliance on introduced bills or even bills passed by prior Congresses, but not enacted [Landgraf, 511 U.S. at 263]. The court also noted that under pre-Landgraf Ninth Circuit law, only "clear" legislative histories of prior bills that are identical to the law being interpreted are entitled to "some weight."
Apart from Senator Daschle's "late comments," no other legislative history, sponsor statement, or other legislative comment suggested Section 127 is not retrospective. The court accordingly concluded that Senator Daschle's comments did not diminish the fact and substance of Section 127's pre-enactment "legislative history" favoring retrospectivity, nor the post-enactment statements of Senators Lott and Lincoln to the same effect.
Finally, while noting that the remarks of individual, non-sponsor legislators are not accorded "great weight," the court nonetheless found that such remarks "are relevant indica as to unity, or lack of it, as to interpretation" (citation omitted). The court opined that in this case, the non-sponsor statements did not detract from the "retrospectivity-favoring legislative intent." The court found that "on balance, the statements of all individual legislators weigh heavily in favor of retrospectivity."
Concluding the first part of the Landgraf analysis, the court held that together, the evidence of intent statutory language and discernable legislative intent indicated that Section 127 is retrospective, and that such evidence was interpretable as an "express command" as to its temporal reach.B. Determination of Retroactive Effect
Although it found the first Landgraf inquiry satisfied, the district court nonetheless analyzed whether the statute has retroactive effect. The court concluded it does not, rejecting DTSC's argument that its "rights" would be impaired because the statute potentially eliminates a CERCLA claim that previously existed. The court reasoned that recyclers that satisfy the requirements of Section 127 should not have been liable in the first place under pre-Section 127 law. Further, DTSC did not suggest that its liability for past conduct would be increased, or that it would be subject to new duties with respect to transactions already completed by retrospective application of Section 127.9IV. Clarification v. Change Analysis
The court next embarked on an "analytical approach" "separate" from the Landgraf analysis for determining whether a new statute can be applied to pending cases, premised on whether the statute is a clarification or a change of existing law. Citing Piamba Cortes v. American Airlines, Inc. [(11th Cir. 1999) 177 F.3d 1272, cert. denied, 120 S.Ct. 980 (2000)] as a leading example of this alternative approach, the court observed that a new statute that is a clarification "accurately restates the prior law" and thus there is no need for a Landgraf analysis because the statute has no retroactive effect.
In connection with the clarification versus change analysis, the court examined the Act's statement of purpose (to remove the disincentives and impediments to recycling created as an unintended consequence of Superfund), various headings of the statute that use the term "clarification" (of which there are at least three), and the context in which the statute was enacted. With respect to the last factor, the court analyzed at length relevant case law construing "arranger" and "transporter" liability under CERCLA and various courts' attempts to construct a pre-Section 127 "recycling exemption." The court noted that pre-Section 127 case law addressing recycler liability is conflicting, and that the liability analysis is case specific and fact intensive. The court reasoned that CERCLA's "ambiguous" liability scheme as applied to recycling transactions corroborates a finding that Congress intended Section 127 "to clarify the criteria for and approach to liability" for such transactions. Finally, citing the remarks of Senators Lincoln and Lott, and noting the absence of any contrary remarks by Senator Daschle, the court found the legislative history likewise supported a finding that Section 127 is a clarification, rather than a change, of the law affecting recycler liability under CERCLA. The court accordingly concluded the statute is a clarification of existing law (CERCLA), and it therefore does not have a retroactive effect.V. Analogy of Actions Brought by the United States to Those Brought by the States
The court rejected DTSC's argument that the term "United States," as used in Section 127(i), should be construed to include enforcement actions brought by the states. The court stressed that a state and the United States are not functionally equivalent under CERCLA, nor was DTSC federally authorized under CERCLA § 104 to prosecute this enforcement action. As the court stated, "this is not a federal-state partnership case," and, indeed, DTSC in this case sued the United States as a potentially responsible party (PRP). Additionally, the court observed that Congress knows how to refer to a state in CERCLA when it so intends. According to the court, Congress' failure to do so in Section 127(i)'s exceptions to retrospectivity "is clear evidence that Congress did not intend the exception to 127's recycler exemption to apply to pending State or state agency-initiated actions."VI. Constitutional Considerations
With regard to retroactive legislation, there are two lines of cases: statutory interpretation cases and constitutional due process cases. Landgraf represents the first category. Constitutional constraints on retroactive laws include the Ex Post Facto Clause, which prohibits retroactive penal legislation, the Takings Clause, which prevents the taking of vested property rights without just compensation, the Contracts Clause, which prevents state legislatures from passing laws that interfere with preexisting contractual obligations, and the prohibition against Bills of Attainder, which prevents Congress from singling out people and punishing them summarily for past conduct. Courts examining these constitutional grounds, however, have generally upheld retroactive laws that explicitly provide for retroactive effect. As the Landgraf court pointed out, a deferential standard of review applies such that the constitutional impediments to retroactive civil legislation "are now modest" [Landgraf, 511 U.S. at 272]. Thus, courts simply will inquire whether the retroactive application of the legislation in question is justified by a rational legislative purpose [See, e.g., Pension Benefit Guar. Corp. v. R.A. Gray & Co. (1984) 467 U.S. 717 (upholding retroactive application of Multiemployer Pension Plan Amendments Act of 1980 [29 U.S.C. 1381, 1391] requiring that an employer withdrawing from a multiemployer pension play pay a fixed and certain debt to the pension plan)].
Here, the DTSC did not argue that retrospective application of CERCLA § 127 would violate any constitutional provisions. In any event, such an avenue of attack is not likely to succeed given the Supreme Court's deference to the legislature where retroactive intent is apparent [See, e.g., United States v. Asarco Inc. (D. Idaho 1999) 1999 U.S. Dist. LEXIS 18924 (holding that retroactive application of CERCLA to natural resource damage claims did not constitute a taking or violation of due process);10 United States v. Alcan Aluminum Corp. (N.D. N.Y. 1999) 49 F. Supp. 2d 96 (holding that retroactive application of CERCLA does not constitute an unconstitutional taking, a denial of substantive Due Process, or a violation of the Ex Post Facto provisions of the United States Constitution)]. Moreover, as noted, the district court concluded that the statute has no retroactive effect, thus precluding any need for constitutional review.VII. Implications
The district court's ruling in Interstate Non-Ferrous is an important win for the recycling industry. Given the decision's importance and the fact that it is the first to address the issue of CERCLA § 127's retrospective application, the question is not whether an appeal will be filed, but when. Indeed, the DTSC has moved to certify the court's order for interlocutory appeal, and this motion is under consideration by the court.11
Apart from any appellate proceedings, however, the decision is not the end for the recycling company defendants. Recyclers claiming Section 127's exemption from liability still must demonstrate they satisfy the criteria set forth in the statute. Barring an interlocutory appeal and stay of the litigation on CERCLA § 127 issues, the actual application of Section 127 will be the next phase of the Interstate litigation. Interstate Non-Ferrous thus may provide an early indication of the impact of Section 127 on the recycling industry.
Of course, despite the Interstate court's ruling, companies involved in the recycling business should still expect to be sued under the "arranging for treatment or disposal" prong of CERCLA's liability scheme, especially when the recycling process involves the use or generation of hazardous materials. Nevertheless, recycling companies that are presently involved in CERCLA litigation may argue, based on Interstate, that they should at least be permitted to attempt to prove they meet the exemption criteria of Section 127.Endnotes
1 The only other published decision to date addressing the application of CERCLA § 127, United States v. Atlas Lederer Company [(S.D. Ohio 2000) 97 F. Supp. 2d 830], involved a pending action by the United States. The Atlas Lederer court accordingly held that Section 127's exemption from liability expressly did not apply to the action.
2 See Commentary by Lisa J. Morelli and William W. Funderburk, Jr., regarding the district court's decision in Catellus Development Corp. v. U.S. [(N.D. Cal. 1993) 828 F. Supp. 764, which the Ninth Circuit subsequently reversed, in October 1993 issue of the California Environmental Law Reporter (Matthew Bender), page 354.
3 See also Courtaulds Aerospace, Inc. v. Huffman [(E.D. Cal. 1993) 1993 U.S. Dist. LEXIS 7360]. Courtaulds (presided over by Judge Wanger, the same judge presiding over the Interstate Non-Ferrous litigation) was a predecessor case that is directly related to the Interstate Non-Ferrous case. The district court there refused to dismiss plaintiff's CERCLA claim against the scrap metal defendants based on defendants' argument that they could not have arranged for the disposal of a hazardous substance by bringing recyclable materials to the Courtaulds site to recover the metals contained therein. The authors of this article represented the group of scrap metal defendants that filed the motion to dismiss.
4 Congress previously amended CERCLA by the Superfund Reauthorization and Amendments Act of 1986 ("SARA"), codified as amended at 42 U.S.C. § 9601 et seq., and by the Asset Conservation, Lender Liability and Deposit Insurance Protection Act of 1996, codified as amended at 42 U.S.C. §§ 9601(20)(A) and 9607(n).
5 One of the few loopholes in CERCLA is the exclusion from CERCLA's reach of contamination by petroleum substances. See 42 U.S.C. § 9601(14). This is a testament to the power and influence of the oil company lobbyists.
6 The Interstate case involves a contaminated parcel of property located in Mojave, California, known as the "Mobile Smelting" site. From approximately 1961 to 1990, Mobile Smelting operated a metal smelting plant on the property; the company's operations included the smelting or incineration of material (primarily insulated wire) for the purpose of recovering copper and aluminum. These activities created ash, which was later found to contain heavy metals (including copper and lead) and dioxins/furans. The Courtaulds site, discussed above at n. 3, was adjacent to and (generally) downwind from the Mobile Smelting site.
7 Justice Scalia wrote separately in Landgraf to object to the Court's willingness "to let that clear statement [mandating retroactive application] be supplied, not by the text of the law in question, but by individual legislators who participated in the enactment of the law, and even legislators in an earlier Congress which tried and failed to enact a similar law" [511 U.S. at 287 (Scalia, J., concurring)]. Of course, Scalia's rejection of legislative history in statutory interpretation cases is well known. See William Eskridge, Jr., 96 Mich. L. Rev. 1509 (1998), discussing Scalia's judicial opinions and "the new textualism."
8 In Lindh, the Supreme Court used a negative inference to infer that Congress did not intend to apply retrospectively certain parts of the Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA"). See 521 U.S. at 330-334. Thus, the Supreme Court held that if a congressional intent to not apply a statute retrospectively can be discerned, the courts are to follow that intent without regard to whether the statute has "retroactive effect."
9 The court also rejected DTSC's argument that retrospective application of Section 127 conflicts with the federal savings statute, 1 U.S.C. § 109. The court reasoned that because Congress indicated that Section 127 was intended to apply to pending cases by everyone except the United States, the federal savings clause did not apply.
10 Notably, the Asarco court concluded that Eastern Enterprises v. Apfel [(1998) 524 U.S. 498], in which a plurality of the Supreme Court held that the Coal Act was unconstitutional as applied to Eastern Enterprises, was not controlling authority and, moreover, was of "little precedential value" given the lack of a majority opinion. The court found that Eastern's holding was limited to its specific facts and result, and that the Eastern court did nothing more than apply "well-settled" principles of law regarding the takings clause and due process principles. Further, the Asarco court stressed that Eastern reiterated the constitutionality of a particular statute is a case by case factual determination [1999 U.S. Dist. LEXIS 18924 at *10-13]. Challenges to CERCLA's liability scheme based on Eastern Enterprises thus are unlikely to succeed any more than past efforts to challenge the constitutionality of CERCLA's retroactive liability. See, e.g., the post-Landgraf analyses in United States v. Olin Corp. [(11th Cir. 1997) 107 F.3d 1506, 1513-1515]; Nevada v. United States [(D. Nevada 1996) 925 F. Supp. 691]; and Ninth Avenue Remedial Group v. Allis-Chalmers Corp. [(N.D. Ind. 1996) 946 F. Supp. 651, 657].
11 At oral argument on July 10, 2000, the court indicated it was not inclined to certify its order for interlocutory appeal, but as of the date of this publication, the court has not rendered a final decision on this issue.
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