On June 16, 2008, the SJC issued its much-anticipated decision in Michael D. Bank et al v. Thermo Elemental, Inc. et al., clarifying that line-by-line compliance with “every detail” of the Massachusetts Contingency Plan (MCP) is not a prerequisite to recovery of any of the response costs incurred by a property owner via the cost-recovery provisions of the MCP in MGL Chapter 21E. The SJC also confirmed that attorneys fees incurred in implementing a site cleanup – as opposed to litigation-related attorneys’ fees – are recoverable as response costs under Chapter 21E.
Chapter 21E, the state “Superfund” law, largely operates in a privatized manner. Owners of contaminated property, or other liable persons, clean contaminated property on their own initiative, following the requirements of the MCP. One of the incentives for liable parties to implement such cleanups voluntarily is the ability to recover their response costs from other liable parties. Although a private party cleaning up a site must do so in compliance with the MCP, and is subject to enforcement action by DEP should they fail to do so, it has long been a question whether a party who does not strictly comply with the MCP in performing a cleanup may nonetheless recover their cleanup costs from other private parties. The SJC has now clearly answered this question with a resounding “YES.”
Procedural and Factual Background
Bank involved a claim for contribution for response costs incurred by the owner of a property in Waltham that had been found to be contaminated with trichloroethylene (TCE). The owner of the property, leased the property to a succession of manufacturers of scientific equipment from 1963 to 1988. Between 1985 and 1988, various site investigations conducted at the request of the owner concluded that the property was contaminated with TCE . The owner began response actions at the site in 1988; these were not completed until 2000. The owner spent over $800,000 on response costs, including approximately $90,000 in attorneys’ fees.
The owner sued several of the manufacturer/lessees and corporate successors to recover these response costs. The suit was brought against nine defendants under the cost recovery provisions of MCP Chapter 21E, Section 4, 4A, 5, and 15, and against the 1988 lessee under a breach of contract claim based on the provisions of the agreement terminating the lease. At trial, the jury found in favor of the owners on both the 21E and the contract claims. The trial judge, however, granted the 1988 lessee’s motion for judgment notwithstanding the verdict on the contract claim, overruling the jury as to this claim. In a separate trial, the judge determined that the owners were entitled to reimbursement of their attorneys’ fees under Chapter 21E Section 4 and 15.
The SJC granted direct appellate review, vacated the trial judge’s judgment on the contract claim and affirmed the award of attorneys fees under the MCP Chapter 21E Section 4 and 15.
While the case presents interesting questions of contract interpretation in the face of ambiguity, relative to the indemnification provision, the most significant point is the SJC’s holding that in order to recover response costs under Chapter 21E, a responsible party need only show substantial compliance with the Massachusetts Contingency Plan, rather than proving technical compliance with every last procedural requirement of the MCP.
The Argument For Strict Compliance
The defendants had argued that the Chapter 21E, § 4 requires strict compliance with the MCP, citing the following language:
Nothing in this section shall preclude assessment, containment and removal by any person threatened or damaged by such release or thereat of release, provided such assessment, containment and removal is conducted in accordance with the Massachusetts contingency plan and consistently with the assessment, containment and removal actions conducted by the department.
The Defendants asserted that the owner’s response actions were not “in accordance” with the MCP and in fact presented evidence that DEP itself had apparently stated that some of the work was “conducted in non-compliance” with the MCP. However, the Bank decision indicates that DEP ultimately approved the plaintiff’s conclusion that the Site did not pose a significant risk.
The SJC holds That Strict Compliance Is Not Required For Cost Recovery
The Court cited to Chapter 21E, § 4, in support of its holding that cost recovery by the owner was nonetheless justified:
Any person who undertakes a necessary and appropriate response action regarding the release or threat of release of oil or hazardous material shall be entitled to reimbursement from any other person liable for such release or threat of release for the reasonable costs of such response action . . . . All claims and actions for contribution, reimbursement or equitable share . . . . shall be subject to, and brought in accordance with, the procedures set forth in section 4A.
The Court’s approach was simple. It looked at the plain language of the above-quoted section, and noted that this paragraph imposes only three requirements on a person seeking to recover cleanup costs:
The Court held that minor inconsistencies between a response action and the MCP did not disqualify the response action from cost recovery. Instead, proof of such in consistencies is evidence – though not conclusive evidence -- that some part of the costs might not be recoverable.
Finally, it is also worth noting that the SJC also confirmed that attorneys’ fees incurred in the course of implementing the cleanup are recoverable as response costs under Chapter 21E.
What It Means
The SJC’s decision in Bank is important in that it clarifies for both plaintiffs and defendants in cost recovery actions that minor deviations from compliance with the MCP will not preclude the plaintiff from recovering response costs it has incurred in cleaning up contaminated sites. It thus encourages private parties to initiate such cleanups.
It is also worth noting that the question of substantial compliance with the MCP arises in other situations under Chapter 21E. For example, an innocent owner – known as an “eligible person” under Chapter 21E – who comes to a site after the contamination has occurred has a defense to liability, including a defense to third party property damage claims, if he/she performs necessary response actions in compliance with the MCP. Chapter 21E, § 5C. There is no materiality standard in the defense stated in § 5C. Therefore, practitioners have long wondered whether a procedural or other minor deviation from strict compliance with the MCP would mean that the eligible person might no longer be able to rely the defense provided in § 5C. The SJC decision in Bank at least suggests that eligible persons may still rely on the defense provided in Section 5C, even if they deviate from strict compliance with the MCP.