Supreme Court Observations: CTS Corp. v. Waldburger

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Katharine Falahee Newman, Sidley Austin LLP

On Monday June 9, the U.S. Supreme Court ruled against a group of landowners, holding that Section 309 of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9658, does not preempt North Carolina’s ten-year statute of repose. See CTS Corporation v. Waldburger, et al., No. 13-339. In a 7-2 opinion authored by Justice Kennedy, the Court determined that while CERCLA preempts state statutes of limitations it does not prevent a state from barring a lawsuit via a statute of repose.

By reaching this result, the Court upholds a state’s right to provide a measure of finality to a potential tort defendant, who otherwise could face tort liability for contamination discovered decades after the defendant’s last contributing act. Of course, the ruling does not limit a defendant’s potential responsibility under CERCLA to perform or pay for a clean up to respond to the contamination—such CERCLA liability is not subject to a state statute of repose.

The case involved a group of property owners who purchased land on or near CTS Corporation’s former plant in Asheville, North Carolina. During plant operations between 1959 and 1989, CTS manufactured and disposed of electronics and stored various chemicals, including trichloroethylene (TCE) and cis-1,2-dichloroethane (DCE). In 1987, CTS sold the property, which was eventually divided by a subsequent owner and sold to various individuals. In 2009, the landowners discovered that their groundwater and land were contaminated and in 2011, they brought suit against CTS seeking damages, 24 years after CTS’s original property sale.

North Carolina’s statute of repose states that “no cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action.” N.C. Gen. Stat. Ann. § 1-52(16). Citing this law, CTS argued that because its last act occurred in 1987 when it sold the site, it could not be subject to the suit under state law and moved to dismiss. The District Court agreed and dismissed the case, but a divided panel of the U.S. Court of Appeals for the Fourth Circuit reversed, finding that Section 309, dealing with preemption of state law, was ambiguous and preempted the North Carolina statute of repose.

Under Section 309, a state limitations period is preempted if it would bar a tort action before the plaintiff “knew (or reasonably should have known) that the injury was caused by the hazardous substance or pollutant or contaminant concerned.” 42 U.S.C. § 9658(a)(1) & (b)(4)(A). Essentially, Congress created a federal “discovery” rule, so that a tort claim would not accrue until the plaintiff discovered the contamination.

The outcome of the case, however, turned on whether Section 309 preempts both state statutes of limitations and statutes of repose. The principles behind the two types of statutes are similar, and therefore, they are often confused. Both statutes place limits on the duration of potential tort liability, and in both, the passage of time eventually becomes a barrier to a lawsuit. However, the trigger for when the clock starts running is different under the two laws. Statutes of limitations create a time limit based on when the claim accrued, or put more simply, when the plaintiff was injured or discovered the injury. In contrast, statutes of repose set an absolute time limit on when a plaintiff may bring a civil action based on the last culpable act or omission of the defendant. In many cases, these time periods may be aligned, but in this case, the distinction is factually significant. The plaintiffs filed the lawsuit 24 years after the defendant’s last act or omission, but only two years after learning about the contamination in 2009—within North Carolina’s three-year statute of limitations, but outside of the statute of repose.

The Court held that Congress understood the difference between statutes of limitations and repose when CERCLA was enacted in 1986 and unambiguously chose to exclude statutes of repose from the plain language of the statute. Justice Kennedy further noted that in the event that a preemption clause may be interpreted in multiple ways, federal courts generally disfavor preemption of state laws. The majority therefore concluded that CERCLA does not preempt North Carolina’s statute of repose, reversing the Fourth Circuit.

In dissent, Justice Ginsburg, joined by Justice Breyer, argued that Congress could not have intended to draw a distinction between statutes of repose and limitations because Section 309 was intended to remove unreasonable procedural barriers to recovery for injuries that frequently have latency periods that run for many decades. Hence, the dissent contends, the majority opinion not only misinterprets the statute, but will incentivize “contaminators” to hide the contamination they have created until after they have safely passed a state’s repose period.

The ruling is expected to impact ongoing tort cases involving Camp Lejeune Marine Corps Base in North Carolina, where the federal government has invoked the same North Carolina statute of repose to defend against claims of groundwater contamination.   The effect of the ruling on other pending or future cases will depend upon the specifics of each state’s law, but other states (such as Connecticut, Kansas and Alabama) currently have statutes of repose similar to North Carolina’s.

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