S.C. Dept. of Health v. Commerce & Indus. Ins.

372 F.3d 245

SOUTH CAROLINA DEPARTMENT OF HEALTH AND ENVIRONMENTAL CONTROL; Ameristeel; Roanoke Electric Steel Corporation; Owens Electric Steel; Nucor Steel; Nucor Yamato; The Federal Metal Company; I. Schumann & Company; Cp Chemicals, Incorporated; Kerr-Mcgee Chemical Llc; Lucent Technologies, Incorporated; Mueller Brass Company, Plaintiffs-Appellants, and Gaston Copper Recycling Corporation, Plaintiff, v. COMMERCE AND INDUSTRY INSURANCE COMPANY; United States Fire Insurance Company; Jefferson Insurance Company; The South Carolina Property And Casualty Insurance Guaranty Association, a/k/a Mutual Fire Marine and Inland Insurance Company, Defendants-Appellees Complex Insurance Claims Litigation Association, Amicus Supporting Appellees.

No. 03-1329.

United States Court of Appeals, Fourth Circuit.

Argued: December 3, 2003.

Decided: June 8, 2004.

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ARGUED:

David Oscar Ledbetter, Hunton & Williams, Richmond, Virginia for Appellants. Brian Christopher Coffey, Cohn & Baughman, Chicago, Illinois, for Appellees.

ON BRIEF:

Andrea W. Wortzel, Hunton & Williams, Richmond, Virginia; Lawrence J. Bracken, II, Hunton & Williams, Atlanta, Georgia; James L. Werner, Ellzey & Brooks, L.L.C., Columbia, South Carolina; Claron A. Robertson, III, Robertson & Hollingsworth, Charleston, South Carolina; Jacquelyn S. Dickman, Office of General, Department of Health & Environmental Control, Columbia, South Carolina, for Appellants. Michael J. Baughman, Cohn & Baughman, Chicago, Illinois; R. David Howser, Andrew E. Haselden, Howser, Newman & Besley, L.L.C., Columbia, South Carolina; Timothy A. Domin, Clawson & Staubes, L.L.C., Charleston, South Carolina; Richard S. Kuhl, Ngoc H. Lam, Jackson & Campbell, P.C., Washington, D.C.; Charles J. Baker, Davis S. Yandle, Buist, Moore, Smythe & McGee, Charleston, South Carolina, for Appellees. Laura A. Foggan, Gary P. Seligman, Wiley, Rein & Fielding, L.L.P., Washington, D.C., for Amicus Curiae.

Before WIDENER and KING, Circuit Judges, and RICHARD D. BENNETT, United States District Judge for the District of Maryland, sitting by designation.

Affirmed by published opinion. Judge KING wrote the opinion, in which Judge WIDENER and Judge BENNETT joined.

OPINION

KING, Circuit Judge:

The appellants, consisting of South Carolina's Department of Health and Environmental Control, Kerr-McGee Chemical LLC, and certain businesses involved in the manufacture and transportation of fertilizer production materials, seek reinstatement of their civil action against four liability insurers for cost recovery, contribution, restitution, and declaratory relief. By its Judgment Order of February 14, 2003, the district court for South Carolina dismissed the lawsuit's two direct action claims against the insurers, one seeking cost recovery and one seeking contribution, for failure to state claims upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6). The court also dismissed the appellants' common law claim for restitution, and it declined to exercise jurisdiction over two declaratory judgment claims. S.C. Dep't of Health & Envtl. Control v. Commerce & Indus. Ins. Co., No. 2:00-1582-12 (D.S.C. Feb. 14, 2003).

This appeal concerns the application and interplay of two major federal environmental protection statutes. The first is the Resource Conservation and Recovery Act ("RCRA"), which authorizes the pursuit of civil actions directly against insurers¹ who have provided RCRA-mandated evidence of financial responsibility to owners and operators of RCRA-regulated hazardous waste facilities. 42 U.S.C. § 6901 et seq. The second is the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA," commonly known as "Superfund"), which in proper circumstances authorizes the pursuit of claims for cost recovery and contribution against parties potentially responsible for contaminating CERCLA-regulated facilities. 42 U.S.C. § 9601 et seq. In their complaint, the appellants rely on the direct action provision of RCRA (42 U.S.C. § 6924(t)(2)) to seek cost recovery and contribution under CERCLA. The primary issue in this appeal is whether RCRA's direct action provision may be utilized to pursue these CERCLA claims. The appellants contend that it can be so utilized and that the district court, in dismissing their complaint, misconstrued the RCRA direct action provision. As explained below, we affirm.

I.

A. The Resource Conservation and Recovery Act

RCRA was enacted in October 1976, and it is codified as Chapter 82 (entitled "Solid Waste Disposal") of Title 42 of the United States Code. RCRA mandates the Environmental Protection Agency (the "EPA") to develop permitting requirements for hazardous waste facilities.² RCRA § 3004(a)(6); 42 U.S.C. § 6924(a)(6). One of those requirements is that, in seeking a permit, an owner or operator of such a hazardous waste facility must provide financial assurance to the EPA for liability relating to closure, postclosure, or corrective activities at the facility.³ 40 C.F.R. § 264.140 et seq. (establishing standards regarding applicability of financial requirements for owners and operators of hazardous waste facilities); 40 C.F.R. § 265.140 et seq. (establishing interim status standards regarding applicability of financial requirements for owners and operators of hazardous waste facilities). In demonstrating to the EPA that they possess RCRA-mandated financial responsibility for the closure and postclosure care of such facilities (40 C.F.R. §§ 264.143, 264.144), such owners and operators are obliged to provide for the compensation of third parties for certain injuries or damages resulting from spills and accidental occurrences. Id. § 264.147. The financial responsibility mandate is designated in the regulations as "financial assurance," id. §§ 264.143, 264.145, 264.147, and, according to RCRA, it may be established "by any one, or any combination, of the following: insurance, guarantee, surety bond, letter of credit, or qualification as a self-insurer." 42 U.S.C. § 6924(t)(1).

In November 1984, the scope and requirements of RCRA (Chapter 82 of Title 42) were amended by the Hazardous and Solid Waste Amendments, and a right of direct action was included in RCRA. See 42 U.S.C. §§ 6991-6991i. Pursuant to RCRA's direct action provision (the "RCRA Provision"):

In any case where the owner or operator is in bankruptcy ..., any claim arising from conduct for which evidence of financial responsibility must be provided under [42 U.S.C. § 6924 (RCRA's financial responsibility provision)] may be asserted directly against the guarantor providing such evidence of financial responsibility.

RCRA § 3004(t)(2); 42 U.S.C. § 6924(t)(2).⁴

B. The Comprehensive Environmental Response, Compensation, and Liability Act

CERCLA was enacted in December 1980, and it is codified as Chapter 103 (entitled "Comprehensive Environmental Response, Compensation, and Liability") of Title 42. 42 U.S.C. § 9601 et seq. CERCLA was a congressional response to public concern over the improper disposal of hazardous waste, and its two primary goals have been recognized as (1) the promotion of prompt and effective cleanup of hazardous waste sites, and (2) the sharing of financial responsibility among those "parties who created the hazards." Aviall Servs., Inc. v. Cooper Indus., Inc., 312 F.3d 677, 681 (5th Cir.2002). In order to attain these goals, CERCLA "generally imposes strict liability on owners and operators of facilities" from which hazardous substances were released, and it authorizes civil actions against certain statutorily-defined "responsible parties" to recover the costs incurred in cleaning up hazardous waste disposal sites. 3550 Stevens Creek Assocs. v. Barclays Bank, 915 F.2d 1355, 1357 (9th Cir.1990). Significantly, any party incurring response costs consistent with the statutorily-mandated and EPA-created National Contingency Plan ("NCP")⁵ is authorized to seek recovery of those costs from other potentially responsible parties by way of a CERCLA cost-recovery claim. 42 U.S.C. § 9607(a).

A cost-recovery claim may be asserted under section 107 of CERCLA by a government or private entity seeking to recover from a responsible party any response costs incurred in remediating a hazardous waste facility. R.M. Hall, Jr., et al., Superfund Manual: Legal and Management Strategies 4-13 (3d ed., Gov't Insts., Inc., 1988). Under CERCLA, the term "potentially responsible party" ("PRP") is deemed by the EPA to be "[t]he person or persons who may be held liable for hazardous substance contamination under CERCLA. PRPs may include the owners and operators, generators, transporters, and disposers of the hazardous substances." Orientation Manual, app. D. In October 1986, CERCLA was amended by the Superfund Amendments and Reauthorization Act, which was also codified in Chapter 103 of Title 42. As a result, Chapter 103 now expressly authorizes a CERCLA cause of action for contribution. 42 U.S.C. § 9613(f). Pursuant thereto, any party incurring response costs consistent with the NCP may seek its cleanup costs from other PRPs by way of a CERCLA contribution claim. Id.

Furthermore, CERCLA (Chapter 103 of Title 42), like RCRA (Chapter 82 of Title 42), contains a direct action provision. The CERCLA direct action provision authorizes a party to assert any claim authorized by § 9607 or § 9611 "directly against any guarantor providing evidence of financial responsibility" under CERCLA.⁶ 42 U.S.C. § 9608(c)(2). Although the EPA has promulgated regulations giving effect to the RCRA Provision by establishing financial responsibility requirements thereunder, see 40 C.F.R. § 264.140 et seq. (establishing RCRA's financial responsibility requirements), no financial responsibility regulations have been promulgated by the EPA to implement the CERCLA direct action provision with respect to "onshore" CERCLA facilities (such as the facility at issue here). CERCLA required the...