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CERCLA Plaintiff’s Failure to Establish Past Costs Liability Precluded Declaratory Judgment as to Future Costs Liability

By Rachel C. Loftspring

In a case of first impression, the Ninth Circuit ruled on August 2, 2010, that a plaintiff’s failure to establish defendants' liability for plaintiff's past costs, because they were not incurred consistent with the National Contingency Plan,  “necessarily dooms” its attempt to obtain a declaratory judgment as to liability for future costs.  City of Colton v. American Promotional Events, Inc., D.C. No. CV-05-01479-JFW.

In Colton, the City of Colton, California (“Colton”), sued industrial entities that had been active in the Rialto-Colton groundwater basin, where Colton draws its water supply, claiming they had caused the release of percholorate into the groundwater.  As a result of the percholorate, Colton removed three water wells from service and spent an alleged $4 million to investigate the contamination and implement a wellhead treatment program.  In its suit, Colton asserted, among other claims, cost recovery and contribution under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) as well as a claim for declaratory relief as to liability for future costs, estimated to be between $55 and $75 million.

On a motion for summary judgment by defendants, the district court held that because Colton could not show that the remedial measures it had implemented had been necessary and consistent with the national contingency plan (“NCP”), it could not recover past costs.  The district court further held that because Colton could not establish that it was entitled to recover its past costs, its claim for declaratory relief as to its future costs necessarily failed.  The district court granted summary judgment, and Colton timely appealed.

On appeal, the Ninth Circuit affirmed the denial of recovery of past costs, based on Colton’s concession that it had failed to comply with the NCP in its past response action.  With past costs denied, the Ninth Circuit then considered whether Colton’s failure to establish that it was entitled to recover past costs precluded it from obtaining a declaratory judgment as to liability for its future costs, an issue of first impression.  The Ninth Circuit began its consideration by noting a split among the circuits as to the issue: the Eighth Circuit, U.S. Supreme Court, and Second Circuit have held or suggested that recoverable past costs are essential for declaratory relief under CERCLA, while the First and Tenth Circuits have held or suggested that declaratory relief may be available even without recoverable past costs.

Looking to the CERCLA provision for declaratory relief, Section 113(g)(2), the Ninth Circuit reasoned that only those CERCLA plaintiffs who successfully establish liability for incurred response costs sought in an initial cost-recovery action are entitled to a declaratory judgment on present liability binding on future response costs.  Accordingly, the Ninth Circuit found that because Colton failed to comply with the NCP, it failed to establish a present right to recover past costs from defendants, and without the ability to show that defendants were liable for past costs, declaratory relief for future liability was unavailable to Colton as a matter of law.  Thus, the Ninth Circuit affirmed the district court’s denial of Colton's complaint for declaratory relief as to future costs.