Keeping Track – Company recordkeeping practices in the context of CERCLA liability

Keeping Track – Company…

One of my clients, a regional transportation company, was recently granted dismissal on summary judgment in a multi-million dollar mass-action environmental lawsuit under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Under CERCLA, the Environmental Protection Agency (EPA) can designate a site where substantial hazardous waste leakage has occurred as a Superfund site, and then can compel “potentially responsible parties” (PRPs) who generated, arranged for the disposal of, or (after having an active role in selecting the disposal site) transported hazardous waste to that site strictly liable for cleanup costs. CERCLA then creates a private right of action for the named PRPs to sue other PRPs that were not named in an EPA proceeding to contribute to cleanup costs. Named PRPs have three years from the EPA enforcement action to sue non-named PRPs for contribution (in legal terms, this is called a “statute of limitations”). CERCLA lawsuits are especially scary for companies as (1) CERCLA does not require proof of intent, and (2) companies can be held liable for waste they generated but did not transport or, alternatively, waste they did not generate but did transport.

As a result of CERCLA’s strict liability, plaintiff PRPs often bring hundreds, if not thousands, of companies into the lawsuit as defendants. As is often the case with mass-action lawsuits, identifying, locating, and serving each company that may have contributed material to the Superfund site can be an arduous task, sometimes taking years. In this case, the plaintiff filed the initial complaint within the three-year period, but only served some of the defendants. Then, after the three-year statute of limitation expired, the plaintiff first amended the complaint to add more defendants, and then served the amended complaint against everyone.

The plaintiff here argued that the amended complaint “related back” to the first complaint, under a complicated and nitpicky series of rules, regulations, and case law that this article will not address. However, the court held that a core part of the “relation back” analysis was whether or not the defendant had “notice” of the facts of the original complaint within the statutory period. This notice could come in one of two forms. First, the defendant could have actual notice of the lawsuit (e.g., by service of the complaint). Second, the defendant could have “constructive notice,” meaning they were aware or should have been aware of the lawsuit against them – in this case that the defendant was being pursued by the EPA and/or other PRPs for contributing waste to the underlying Superfund site.

The plaintiff attempted to argue that all of the named companies should have been aware of the Superfund site, the EPAs enforcement action against named PRPs, and the potential lawsuit against non-named PRPs as it was a matter of local, if not national, significance that any company that did business in the area knew or should have known about. In response, we provided (among other things) evidence that my client was not headquartered in the region and did not regularly operate locally. The court rejected the plaintiff’s broad interpretation of “notice,” and instead held that the plaintiff needed to demonstrate specific evidence for each company as to why they knew or should have known about the lawsuit. Specifically, the court ruled (in simplified form) that the plaintiff had failed to demonstrate any evidence that my client, a company that was not headquartered near the Superfund site, would have any reason to believe that it had transported any material that ended up in a Superfund site, that the EPA had pursued other companies for contributing material to that Superfund site, or, most importantly, that a named PRP was pursuing a claim against it. However, the court reserved the possibility (albeit tentatively) that a future plaintiff could demonstrate that a company had notice of the claim if it was headquartered in the region, worked regularly in and around that area (and, specifically, the Superfund site), and would have reason to know about legal developments relating to the EPA enforcement action. This raises the possibility (however small) that (in very specific circumstances) a company could be held responsible in a CERCLA lawsuit after the statute of limitations has expired.

What does this mean for you as a company? As with most legal issues, it is essential that companies have adequate recordkeeping practices to ensure they keep track of the where, when, who, and what of their business activities. In any civil lawsuit, although the plaintiff bears the burden of proof, the plaintiff also has the first opportunity to craft the case’s narrative before a judge. The more detail a company can provide on whatever claim a plaintiff is attempting to make, the easier it is for an attorney to craft arguments – either from a technical standpoint (such as where the company has operations per the notice / statute of limitations example illustrated here) or on the merits of a potential case (such as whether the company participated in the site selection process). This is true in a broad range of contexts, from sales disputes (who initiated the sales contract, where was it signed, what conversations occurred before and after the sale occurred), to employment discrimination disputes (who was present at company meetings, what did each participant say, what steps did the company take to resolve the dispute internally), to personal injury lawsuits (who was working on the day the injury occurred, when was the floor last inspected and cleaned, what other complaints did the front desk receive and how did they resolve those complaints).

It can be difficult for a company to self-analyze the legal efficacy of its recordkeeping practices from a purely business perspective. Depending on your company’s industry, there can be factual information that may (a) be utterly irrelevant to your company’s ability to operate from a business standpoint but (b) be critical to defending against a potential lawsuit. As such, it can be helpful to have an attorney, whether inside or outside counsel, be involved in the development, oversight, and review of your recordkeeping practices. If you are interested in talking more about how I or the other commercial attorneys at Setliff Law can assist, please do not hesitate to reach out to me, Matthias Kaseorg, at or (804) 377-1273 or Steve Setliff at or (804) 377-1261.