On August 1, 2014, the Ninth Circuit Court of Appeals handed down a decision in Arizona v. Raytheon Co., No. 12-15691 (9^th Cir. Aug. 1, 2014), that may give trial courts some pause before approving future CERCLA settlements.  At issue was whether the trial court failed to adequately scrutinize consent decrees entered into between the Arizona Department of Environmental Quality (the “ADEQ”) and twenty-two Potentially Responsible Parties (“PRPs”) allegedly liable under CERCLA for contamination at the Broadway-Patano Landfill Site.  The majority opinion held that the trial court’s deference to the AQED’s judgment that the settlements were fair and reasonable was impermissible, and sent the case back down for a more thorough fairness hearing.   However, the more important aspect of the decision may be that, in dicta, the Court concluded that “[e]ven if EPA had been a party to the proposed consent decrees in this case, the district court would have failed to fulfill its duty to independently scrutinize the parties’ agreements.”  Id. at 21.

By way of background, the motion for approval of the consent decrees was initially filed without any supporting evidence.  Because non-settling PRPs would be foreclosed from pursuing contribution claims against the settling parties, a number of them intervened in the action to object, arguing that the AQED did not provide enough information to evaluate whether the settlements were “fair, reasonable, and consistent with CERCLA’s objective.”  Id. at 9.   Subsequently, the Motion was supplemented by an affidavit from an ADEQ chemical engineer providing the total cost estimate for the remediation, the total amount of the twenty-two settlements, and the methodology used to reach the individual settlement amounts.  This was sufficient for the trial court, which  approved the settlements relying entirely on the affidavit and without any discussion of its specific contents or the terms of the settlements. 

The majority opinion from the Ninth Circuit focused on whether a state agency such as the ADEQ is entitled to the same level of deference as is routinely given to the EPA, holding that it is not.  Among other things, the Court reasoned that the deference afforded to the EPA arises from the fact that CERCLA is a federal law and Congress delegated authority to the EPA to interpret and enforce CERCLA, something not true of state agencies.  The majority acknowledged that the states "have a role" in CERCLA enforcement, but argued that they do not have the same level of experience, nor were they directly entrusted by Congress to carry out CERCLA's goals.  For this reason, the Court concluded that while courts may give "some" deference to state agencies' discretion to settle clean-ups, it is not the same level of deference as should be granted to EPA. 

Circuit Judge Callahan dissented from the Court’s decision.  In a dissent more lengthy than the majority opinion, Judge Callahan highlighted the the critical role that states play in environmental clean-ups and enforcement, noting that the vast majority of contaminated sites are managed by the states, not EPA.  In addition, the dissent contended that greater deference may be given to EPA in interpreting CERCLA, but CERCLA settlements rarely involve statutory interpretation but, instead, are fact specific.  In that regard, the dissent notes that all of the reasons that a court would defer to EPA hold just as true for state agencies, and thus the trial court did not abuse its discretion in approving the settlements.

Arizona v. Raytheon Co. is one of less than a handful of cases that even touch on the issue of whether a settlement with a state agency is entitled to deference, and it appears that only one other case, City of Bangor v. Citizens Communications Co., 532 F.3d 70 (1^st Cir. 2008),  expressly discussed whether the state agency should be afforded the same level of deference as might be given to the EPA.  In that decision, the Court held that Maine’s Department of Environmental Protection was entitled to “some deference,” but “not the same amount of deference we would accord to the EPA.”  Id. at 94.  The Third Circuit held similarly in Commissioner v. Esso Standard Oil, 326 F.3d 201 (3rd Cir. 2003), affirming a settlement entered into with the Virgin Islands’ Dept. of Planning and Natural Resources and giving “some deference” to the state agency’s decision to enter into the settlements, but without comparing it to the standard that would be applied to an EPA settlement.  Whether other courts will now follow the lead of the Ninth Circuit in more strictly scrutinizing CERCLA consent decrees, particularly those to which EPA is not a party, remains to be seen.

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