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From Products Liability Law Daily, June 9, 2014

Supreme Court restricts reach of CERCLA exception to statute of limitations

By Eric Larsen

The U.S. Supreme Court has ruled that the exception from statutes of limitation provided in Section 309 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) does not apply to state laws establishing a statute of repose. In so deciding, the High Court reversed a decision by the U.S. Court of Appeals for the Fourth Circuit (sub nom Waldburger v. CTS Corp.) (CTS Corp. v. Waldburger, June 9, 2014, Kennedy, A.)

Background. The case involves releases of hazardous substances that may have occurred decades ago. It was asserted that CTS of Ashville, Inc. operated an electronics manufacturing facility in Ashville, North Carolina, and that, as part of the manufacturing operation, it used and stored various toxic solvents. In 1983, CTS of Ashville was dissolved, and CTS Corporation took over operation of the facility. CTS Corporation sold the property in 1987. The buyer then sold the undeveloped portion of the property to a developer who built homes on a mountainside overlooking the former plant.

A number of persons who purchased homes on or near the former CTS property contended that the land and groundwater beneath their homes was contaminated by chemicals left at the manufacturing facility when CTS Corporation sold the property. In 2011, the homeowners brought suit alleging that CTS Corporation had violated North Carolina’s nuisance law. The homeowners sought monetary damages and a judgment against CTS Corporation requiring the company to remediate the area around the former plant site.

The district court dismissed the case, finding that North Carolina’s statute of repose established a 10-year limit on the period when claims for damages could be pursued. Under the state’s statute, “… no cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action [N.C. Gen. Stat. §1-52(16)].” Because CTS Corporation’s last act relating to the former manufacturing site was when the company sold the electronics plant in 1987, the 10-year limit in the state’s statute of repose had long passed.

On appeal, the Fourth Circuit reversed the decision. The Fourth Circuit found that CERCLA Section 309 preempted the timeline specified in North Carolina’s statute of repose. The Fourth Circuit also found that applying a 10-year deadline from the time the last act or omission occurred would frustrate the general purpose of CERCLA. Therefore, according to the Fourth Circuit, the preemption in CERCLA Section 309 should also apply to North Carolina’s 10-year statute of repose.

U.S. High Court’s reversal of Fourth Circuit’s decision. Under CERCLA Section 309 [42 U.S.C. §9658], the statute of limitations to bring suit under state law for personal injuries or property damages which are caused or contributed to by releases of hazardous substances does not begin until a plaintiff knew or should have known that the injury or damages were caused or contributed to by the release. The time limit for bringing a claim is not restricted by provisions in state law requiring a claim to be brought within a specific period after the action leading to the injury or property damage occurs. In contrast to a statute of limitations, a statute of repose establishes a time period after which a potential defendant is no longer liable for an act or omission. The time limit begins when the act or omission occurs. The U.S. Supreme Court determined that the statutory text in CERCLA Section 309 supports the conclusion that the exception provided applies only to a state’s statute of limitations, and not state laws establishing a statute of repose. In its opinion, the High Court found relevant a study group report (report) required under CERCLA. As originally enacted, CERCLA provided a federal cause of action to recover costs of cleanup from culpable entities, but not a federal cause of action for personal injury or property damage. The report, required under CERCLA Section 301(e) [42 U.S.C. §9651(e)], was to evaluate, among other things, barriers to recovery posed by existing statutes of limitations.

The report was issued in 1982 and recommended that states revise their statutes of limitations such that a cause of action accrues when a plaintiff discovers or should have discovered the injury or disease and its cause. The report also recommended that states repeal statutes of repose, because in many cases, a statute of repose can have the same effect as statutes of limitations in that it bars a plaintiff’s claim before the plaintiff becomes aware of the injury.

In 1986, Congress amended CERCLA and added the exception to state statutes of limitations in Section 309. The question before the Supreme Court was whether the provision Congress added applied to statutes of repose, as well as statutes of limitations. The provision at issue reads:

“(a) State statutes of limitations for hazardous substance cases

“(1) Exception to State statutes In the case of any action brought under State law for personal injury, or property damages, which are caused or contributed to by exposure to any hazardous substance, or pollutant or contaminant, released into the environment from a facility, if the applicable limitations period for such action (as specified in the State statute of limitations or under common law) provides a commencement date which is earlier than the federally required commencement date, such period shall commence at the federally required commencement date in lieu of the date specified in such State statute.

“(2) State law generally applicable Except as provided in paragraph (1), the statute of limitations established under State law shall apply in all actions brought under State law for personal injury, or property damages, which are caused or contributed to by exposure to any hazardous substance, or pollutant or contaminant, released into the environment from a facility.” [CERCLA Section 309(a)(1)–(2)]

The “federally required commencement date” referred to in Section 309(a)(1) is the date the plaintiff knew (or reasonably should have known) that the personal injury or property damages were caused or contributed to by the hazardous substance or pollutant or contaminant concerned.

The Supreme Court went on to find that Congress’ use of the phrase “statute of limitations” in CERCLA Section 309(a) led to a conclusion that Congress intended the exception to apply only to statutes of limitation. According to the court, because of the 1982 report, Congress was well aware of the distinction between statutes of limitations and statutes of repose at the time the exception was added to CERCLA. Thus, Congress could have chosen to provide an exception to both statutes of limitations and statutes of repose if it so desired. As indicated by the court:

“The Report clearly urged the repeal of statutes of repose as well as statutes of limitations. But in so doing the Report did what [CERCLA] does not: It referred to statutes of repose as a distinct category. And when Congress did not make the same distinction, it is proper to conclude that Congress did not exercise the full scope of its preemption power.”

Accordingly, the Supreme Court reversed the decision of the Fourth Circuit holding that the exception from statutes of limitations provided in CERCLA Section 309 does not apply to statutes of repose.

The case number is 13-339.

Attorneys: Brian J. Murray (Jones Day) for CTS Corp. John J. Korzen (Wake Forest University School of Law) for Peter Waldburger.

Companies: CTS Corp.

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