Tenth Circuit Affirms Dismissal of NRD Claims Against Firm Client General Electric

November 2, 2006

The U.S. Court of Appeals for the Tenth Circuit unanimously affirmed a grant of summary judgment and dismissal of multi-billion dollar natural resource damages claims brought by the State of New Mexico against Firm client General Electric Company.  In a strongly worded opinion, the Tenth Circuit held that the State’s theory of recovery, in which it sought monetary damages for its general treasury (and for payment of fees to private plaintiff attorneys retained by the State Attorney General) conflicted with and was preempted by CERCLA’s comprehensive natural resource damages scheme, which requires that any recoveries must be used exclusively for restoration or replacement of the alleged damaged resources. The Court held that “CERCLA’s comprehensive NRD scheme preempts any state remedy designed to achieve something other than the restoration, replacement, or acquisition of the equivalent of a contaminated natural resource.  We reach this conclusion notwithstanding CERCLA’s saving clauses because we do not believe Congress intended to undermine CERCLA’s carefully crafted NRD scheme through these saving clauses. . . . [P]ermitting the State to use an NRD recovery, which it would hold in trust, for some purpose other than to “restore, replace, or acquire the equivalent of” the injured groundwater … (for example, [for] attorney fees) … would undercut Congress’s policy objectives in enacting 42 U.S.C. § 9607(f)(1).”

The Court also dismissed parts of the State’s claim for want of jurisdiction, because the State’s theory of damages challenged the adequacy of an ongoing CERCLA remediation, in contravention of CERCLA Section 113(h).  “Despite the State’s contrary assertion, its expert-intense argument that the remedial phase of the cleanup does not address the entirety of the contamination and will not restore the groundwater to beneficial use as drinking water is, in all respects, a challenge to an EPA-ordered remediation.  Because the State’s lawsuit calls into question the EPA’s remedial response plan, it is related to the goals of the cleanup, and thus constitutes a ‘challenge’ to the cleanup under § 9613(h). . . . We will not permit the State to achieve indirectly through the threat of monetary damages, which would be available only to restore or replace the injured natural resource, what it cannot obtain directly through mandatory injunctive relief incompatible with the ongoing CERCLA-mandated remediation.”

Finally, the Court agreed with General Electric that the State had failed to present evidence necessary for its loss of use claim that anyone had suffered any loss of drinking water services from the groundwater contamination at issue.  “If a contaminated natural resource such as groundwater can be replaced in a timely manner pending restoration, we have difficulty envisioning any significant loss-of-use damage.  Thus, the district court properly entered summary judgment in favor of GE and ACF on the State’s loss-of-use damage theory.”

For more on proceedings leading up to dismissal, see Court issues opinion dismissing $4B claim brought by State of New Mexico against General Electric.