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The Environmental By Stuart N. Roth, Erich P. Rapp, and Douglas A. Littlejohn Recovering CERCLA Costs from the U.S. Government ince its enactment by Congress in 1980, the Superfund statute has ushered in an era of envi- Sronmental legal warfare between the federal government and companies with cleanup costs that have escalated into the hundreds of millions of dollars.1 In some cases, the result has been the death or near-death of companies throughout America. If your company is paying these costs, then you may want to consider examining your company’s history and the country’s 42 ACCA Docket September 2003 Legacy of history as a strategy for making claims against another potentially responsible party (“PRP”): the U.S. government. Companies responding to claims by the Environmental Protection Agency (“EPA”) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Superfund statute, may be able to seek contribution from the fed- eral government because of federal ownership or operation of industrial and manufacturing facilities and equipment during World War II.2 This step requires little more than researching your company and the government’s wartime records. Reprinted with permission of the author(s) and the American Corporate Counsel Association as originally appeared Stuart N. Roth, Erich P. Rapp, and Douglas A. Littlejohn, “The Environmental Legacy of World War II: Recovering CERCLA Costs from the U.S. Government,” ACCA Docket 21, no. 8 (September 2003): 42–59. Copyright © 2003 Stuart N. Roth, Erich P. Rapp, Douglas A. Littlejohn, and the American Corporate Counsel Association. All rights reserved. For more information or to join ACCA, call 202.293.4103, ext. 360, or visit www.acca.com. September 2003 ACCA Docket 43 nation. Moderna Corp. has owned the facility for Stuart N. Roth is vice president, regulatory audit, the past 20 years, but did not build it. The plant, and deputy general counsel of Olin Corporation along with a number of other industrial facilities in Norwalk, CT. He formerly worked for the U.S. Environmental Protection Agency as an along the river, dates back to World War II. enforcement attorney. He is available at You know that some of the constituents in the [email protected]. riverbed contamination are consistent with produc- tion activities during Moderna’s ownership of the plant. But because of current environmental laws and regulations that limit discharges into the river, Erich P. Rapp is a partner at Kean, Miller, you believe that most of the contamination had Hawthorne, D’Armond, McCowan & Jarman, occurred before Moderna purchased the facility. L.L.P., in Baton Rouge, LA. He represents compa- nies in toxic tort and environmental litigation and Nonetheless, you are very concerned about two focuses on claims against the government and lagoons on company property immediately north of defenses available to government contractors. He the manufacturing facility. is available at [email protected]. Both you and the EPA know that the facility deposited waste products in these lagoons during the initial years of its operation. Moderna, however, has Douglas A. Littlejohn is an associate at Kean, not discharged anything into them. Notwithstanding Miller, Hawthorne, D’Armond, McCowan & your misgivings at the time, Moderna Corp. chose Jarman, L.L.P., in Baton Rouge, LA. He practices in environmental litigation, focusing on claims to purchase all of the property, including the against the government, toxic tort defense, and lagoons, with a partial indemnity from the previous general litigation. He is available at [email protected]. owner, Wargoods Industries, Inc. Wargoods was associated with the manufacturing facility from its wartime construction until its sale to your company. When the lagoons overflowed, a neighboring landowner sued Moderna Corp., claiming that his Often, companies do not realize that sites where property had been contaminated. At the time of this costly remedial actions are taking place were at one lawsuit, the EPA demanded that controls be installed time the sites of war production and that the to prevent contamination from escaping out of the release of hazardous substances that led to such lagoons. Wargoods paid for part of the cost of set- cleanups was often in part the result of wartime tling the litigation and for adding the new controls. federal activities. The benefits to your company can Unfortunately, because of the shaky financial status be enormous. For example, Dow Chemical Co. of Wargoods, Moderna Corp. also contributed sev- reaped the benefits of asserting a CERCLA contri- eral million dollars toward settlement of the case bution claim against the federal government when a and installation of the pollution controls. At the court assigned to the federal government 100 per- time, you were not aware of any other party that cent of the costs of cleaning up a former synthetic might be potentially responsible for liability associ- rubber facility built and owned by the government ated with the lagoons. and operated by Dow during World War II.3 The previous owner has since gone out of busi- Although government involvement with one of your ness and cannot contribute to further remediation. company’s Superfund sites may not be so extensive, You now realize that contamination from the the following hypothetical illustrates an appropriate lagoons may have spread to the river before the situation in which to analyze the potential for such installation of the pollution controls. The EPA has a government contribution. identified and sought remediation from all of the Imagine that the EPA has demanded that your nearby industrial facilities along the river. company, Moderna Corp., remediate contamination These or similar facts set the stage for a factual found in a riverbed near one of its large manufac- investigation and legal analysis that may lead to a turing facilities. The plant sits on land adjacent to successful contribution claim against the federal the river a short distance upstream of the contami- government. Despite having contributed to the con- 44 ACCA Docket September 2003 tamination, your company may be able to avoid fur- ther liability for the remediation if you can establish that the government either owned or operated the manufacturing facility during World War II and used the lagoons for disposal of waste from the pro- duction process. A contribution or cost recovery action against the government as a PRP requires you to undertake thorough historical research into your company’s and public archives that date back to the World War II era. Most of the evidentiary materials required to pursue such a claim consist of public and private documentation. Because World War II ended more than 50 years ago, your litiga- tion costs will be further reduced because very few fact witnesses are likely to still be alive for deposi- tion testimony. At its heart, a claim against the gov- ernment for the release of wartime hazardous substances is a paper chase. In order to successfully assess this potential contribution claim, you will need to know both U.S. history and recent case law. U.S. GOVERNMENT INVOLVEMENT IN WORLD WAR II INDUSTRIES Official U.S. government World War II poster. The federal government’s effort to mobilize the U.S. economy during World War II began before the production or not. If the threat of war ended, the Japanese attack on Pearl Harbor. On May 16, guaranteed payments would be a windfall, and the 1940, President Franklin D. Roosevelt, appearing companies would be getting new or expanded facili- before Congress, stated that national defense was a ties at little cost.6 necessity and that the country should be ready to The federally created Reconstruction Finance produce at least 50,000 planes per year. The call for Corporation (“RFC”) responded to this dilemma. increased production was enormous and extended Established by Congress in 1932 by the to all industries that would be necessary for the war Reconstruction Finance Corporation Act, the RFC effort, including those producing metals, such as served as a Depression-era government corporation aluminum, steel, magnesium, tin, nickel, copper, that provided financial assistance to private banks, lead, and zinc, minerals, machine tools, natural and insurance companies, mortgage companies, agricul- synthetic rubber, radio equipment, aviation gaso- tural institutions, and railroads, at first, and then line, and industrial chemicals.4 later expanded into other business areas.7 In sum- Although private companies were willing, in mer 1940, the RFC received congressional approval most cases, to increase production for the good of to purchase and stockpile materials of strategic the country, they also were concerned about financial importance to the United States and to assist with risk.5 If they paid for the expansion of existing pro- the financing of new and expanded industrial facili- duction facilities and built new facilities, they wor- ties. After some debate, the RFC decided to pay for ried that the government might cancel its contracts the expansion of industrial capacity and to retain before they recovered the cost of their investment. ownership of the new equipment and industrial For its part, the U.S. government did not want to facilities in which it invested. Once facilities had guarantee that the companies would recover their been built, the RFC entered into lease and operat- costs regardless of whether the government needed ing agreements with private companies. The RFC 46 ACCA Docket September 2003 created a subsidiary called the Defense Plant Cor- CERCLA establishes a statutory scheme to pro- poration (“DPC”) to finance the construction of vide funds for the identification and cleanup of new industrial facilities and the expansion of exist- abandoned waste disposal sites. The statute assigns ing ones. The DPC eventually owned properties in liability for the cost of such cleanups to certain cate- nearly all states.8 See the sidebar below for a list of gories of parties.

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