Atlantic Richfield Company v. NLI Holdings, Inc. et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 1:20-cv-00234-RMR-KLM
ATLANTIC RICHFIELD COMPANY,
Plaintiff and Counterdefendant,
v.
NL INDUSTRIES, INC. and
NL ENVIRONMENTAL MANAGEMENT SERVICES,
Defendants, Counterclaimants, and Third-Party Plaintiffs,
v.
THE UNITED STATES OF AMERICA, et. al
Third-Party Defendants.
_____________________________________________________________________
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
_____________________________________________________________________
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Plaintiff’s Opposed Motion to Amend the
Complaint [#153] 1 (the “Motion”). Defendants NL Industries, Inc. and NL Environmental
Management Services (collectively, “NL”) filed a Response [#158] in opposition to the
Motion, and Plaintiff filed a Reply [#159]. 	The Court has reviewed the Motion, the
Response, the Reply, the entire case file, and the applicable law, and is sufficiently
advised in the premises. For the reasons set forth below, the Court RECOMMENDS that
the Motion [#153] be GRANTED.
1 “[#153]” is an example of the convention the Court uses to identify the docket number
assigned to a specific paper by the Court’s case management and electronic case filing system
(CM/ECF). This convention is used throughout this Recommendation.
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I. Background2
Between 1925 and 1927, Rico Mining and Reduction Company (“RMRC”), a
predecessor 	of 	Defendants, 	owned 	and 	operated 	various 	mining 	operations 	near
Telluride, Colorado. 	Compl. [#1] ¶¶ 13-14. 	The specific mining location at issue in this
suit is within the Rico-Argentine Site, near Rico, Colorado (the “Site”). 	Id. ¶ 1. 	The
relevant portions of the Site are a tunnel (the “St. Louis Tunnel”) and connected crosscuts,
drifts, raises, and other underground mine workings as well as a series of settling ponds,
some of which are backfilled and some of which contain sludge material. Id. ¶ 13.
St. Louis Smelting and Refining Co. (“St. Louis”) acquired all of RMRC’s assets
and liabilities in 1927 and operated mining properties formerly owned by RMRC. 	Id. ¶¶
7, 14-15. 	St. Louis constructed the St. Louis Tunnel to collect and transfer acid mine
drainage (“AMD”), which was then drained into the Dolores River watershed. 	Id. ¶ 16.
Two other construction projects were similarly connected to the St. Louis Tunnel, creating
further conveyances for the release, transport, and disposal of AMD into the Dolores
River. Id. ¶¶ 17-20. St. Louis abandoned and relinquished all of its assets at the Site in
1943 and was dissolved in 1948. Id. ¶ 21. St. Louis’s assets, property, debts, obligations,
and liabilities were distributed to and expressly assumed by National Lead Company. Id.
In 1971, National Lead Company changed its name to NL Industries, Inc. 	Id. ¶ 8.
Defendant NL Environmental Management Services is a wholly owned subsidiary of
Defendant NL Industries, Inc. Id. ¶ 9.
In December 2010, the United States Environmental Protection Agency (“EPA”)
drafted an Action Memorandum (the “Memo”) requesting a removal action to address
2 The information recited in this section is based on the allegations of the currently
operative complaint [#1].
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environmental concerns at certain locations and facilities at the Site. Id. ¶ 22. The goal
of the Memo, according to the EPA, was to “minimize or prevent the on-going release and
potential release of hazardous substances being discharged from the St. Louis Tunnel
and the associated settling ponds into the Dolores River and surrounding wetlands.” Id.
Pursuant 	to 	its 	authority 	under 	Section 	106(a) 	of 	the 	Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42
U.S.C. § 9606(a), the EPA issued a Unilateral Administrative Order (“UAO”) on March 23,
2011, 	which 	required 	Plaintiff 	to 	implement 	a 	removal 	action 	addressing 	these
environmental concerns at the Site (the “Removal Action”) and which set forth a detailed
workplan with a completion schedule. Id. ¶¶ 3, 23. In the Complaint [#1], Plaintiff states
that “the EPA [has] alleged that [Plaintiff] is a successor to prior owners and operators of
facilities at the Site including the Rico Argentine Mining Company.” Id. ¶ 5. It is unclear
from the Complaint [#1] whether Plaintiff contests the EPA’s allegation or, if not, when
Plaintiff obtained its interest in the Site. Regardless, in response to the UAO, Plaintiff has
made substantial clean-up progress, spending an amount in excess of $63.7 million
dollars. Id. ¶ 25.
A substantial portion of the waterflow and discharge targeted by the EPA comes
from the St. Louis Tunnel and other facilities where Defendants’ predecessors also
conducted mining operations. Id. ¶¶ 31-32. Due to these mining actions and the resultant
costs incurred under the UAO by Plaintiff, Plaintiff presents two claims for relief against
Defendants in the initial, currently operative Complaint [#1]: (1) cost recovery pursuant to
CERCLA § 107(a), and (2) declaratory relief pursuant to CERCLA § 113(g)(2). Id. ¶¶ 34-
49.
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Plaintiff initially filed the claim under CERCLA § 107 based on Defendants’
purported joint and several liability with Plaintiff for the costs Plaintiff has incurred and will
continue to incur under the UAO. 	Motion [#153] at 2. 	However, before the initial
scheduling conference in August 2020, Plaintiff advised the Court and Defendants that
Plaintiff had begun negotiations with the EPA for an Administrative Settlement and Order
on Consent for Removal Action (the “AOC”). Id. Plaintiff advised that, once the AOC was
signed, it would be required as a matter of law to amend its Complaint [#1] to add a
CERCLA § 113 claim for contribution and remove the CERCLA § 107 claim for joint and
several liability. 	Id. 	Defendants then filed a Motion for Summary Judgment [#97]
regarding Plaintiff’s CERCLA § 107 claim, which remains pending. Thereafter, the Court
granted Defendants’ request for a stay pending resolution of the Motion for Summary
Judgment [#97]. 	Order [#151]. 	Since that time, the anticipated AOC has been signed
between Plaintiff and the EPA. Motion [#153] at 3. As a consequence of the AOC, in the
present Motion [#153] Plaintiff seeks leave to amend its Complaint [#1] to add the
CERCLA § 113 contribution claim and remove the initially pled CERCLA § 107 joint and
several liability claim.
II. Analysis
A. 	Rule 15(a)(2)
As an initial matter, because no pretrial deadlines have yet been set, including a
deadline for amendment of pleadings, the Motion [#153] is timely, and the Court thus
turns directly to Rule 15(a). See Lopez v. Next Generation Constr. & Env’t, LLC, No. 16-
cv-00076-CMA-KLM, 2017 WL 10311221, at *2 (D. Colo. Nov. 13, 2017). 	Under Rule
15(a)(2), the Court has discretion to grant a party leave to amend its pleadings. Foman
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v. Davis, 371 U.S. 178, 182 (1962); see also Fed. R. Civ. P 15(a)(2) (“The court should
freely give leave when justice so requires.”).
In the absence of any apparent or declared reason—such as undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue prejudice to
the opposing party by virtue of allowance of the amendment, futility of the
amendment, etc.—the leave sought should, as the rules require, “be freely
given.”
Foman, 371 U.S. at 182 (quoting Fed. R. Civ. P. 15(a)(2)).
Here, Defendants argue that the proposed amendment would be futile. Response
[#158] at 2-3; see also Reply [#159] at 1-2. 	An amendment is futile only if it would not
survive a motion to dismiss. 	See Bradley v. Val-Mejias, 379 F.3d 892, 901 (10th Cir.
2004) (citing Jefferson Cnty. Sch. Dist. v. Moody’s Investor’s Servs., 175 F.3d 848, 859
(10th Cir. 1999)). 	In other words, “the futility question is functionally equivalent to the
question whether a complaint may be dismissed for failure to state a claim.” 	Gohier v.
Enright, 186 F.3d 1216, 1218 (10th Cir. 1999). 	When examining whether a party has
failed to state a claim, courts look to “the sufficiency of the allegations within the four
corners of the complaint after taking those allegations as true.” Mobley v. McCormick, 40
F.3d 337, 340 (10th Cir. 1994).
Plaintiff argues that the proposed amendment would not be futile because Plaintiff
is required by CERCLA jurisprudence to amend and remove its § 107 claim and add a §
113 claim due to Plaintiff’s settlement agreement with the government. Motion [#153] at
4. Plaintiff states that the Court and the parties, particularly Defendants, were aware of
Plaintiff’s negotiations with the EPA and Plaintiff’s intent to amend after an AOC was
executed. Id. at 5.
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Defendants argue that CERCLA cannot be applied retroactively to them under
these circumstances and, therefore, the proposed amendment is futile. Response [#158]
at 2-3. 	Defendants maintain that any alleged damage committed by their predecessors
occurred no later than 1943 (when St. Louis abandoned and relinquished its assets at the
Site), which is more than 78 years ago and more than 37 years before CERCLA was
enacted. Id. at 9. To support their position that CERCLA cannot be applied retroactively
to them, Defendants cite three Supreme Court cases. 	Id. 	These cases note that the
Supreme 	Court 	counsels 	against 	applying 	statutes 	retroactively 	absent 	clear
congressional intent favoring such a result, that retroactivity is generally disfavored in the
law, and that the presumption against retroactive legislation is older than our Republic.
Id. at 9-10 (citing Landgraf v. USI Film Prods., 511 US 244, 280 (1994); E. Enters. v.
Apfel, 524 U.S. 498, 532 (1998); Vartelas v. Holder, 566 U.S. 257, 265-66 (2012)).
Defendants assert that granting the Motion [#153] would force them to shoulder an
enormous financial burden relating to cleanup of a property that they have had nothing to
do with since 1943, which they believe is the type of result from retroactivity which the
Supreme Court has tended to eschew.
Responding to this argument, Plaintiff asserts that there is no serious legal
question about whether CERCLA applies retroactively, as the language and legislative
history are clear that it has a retroactive effect. Reply [#159] at 2. Further, Plaintiff states
that courts in every jurisdiction which has taken up this question over the last twenty-plus
years have all concluded that CERCLA applies retroactively. 	Id. 	“At least 28 federal
district courts and seven (7) federal circuit courts by [Plaintiff’s] count, have determined
that CERCLA is retroactive.” Id at 3. In responding to Defendants’ argument regarding
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the presumption against retroactivity, Plaintiff notes that the cases cited by Defendants
do not address CERCLA but rather involve the Civil Rights Act of 1991, the Coal Act, and
the Illegal Immigration Reform and Responsibility Act. 	Id. at 4. 	Plaintiff cites several
cases addressing the retroactive scheme of CERLA and its constitutionality, all of which
have “uniformly held that CERCLA continues to pass constitutional muster.” Id. (quoting
United States v. Alcan Aluminum Corp., 315 F.3d 179, 188-190 (2nd Cir. 2003)).
Due to the presumption against retroactive legislation, the Court first examines
whether there is clear congressional intent favoring such a result. First, the Court notes
that there is no express language in either contested section of CERCLA regarding its
applicability to past conduct. However, in the language chosen deliberately by Congress
for the main liability provision of § 107, the statute refers to parties and actions in the past
tense multiple times: (1) “any person who at the time of disposal of any hazardous
substance owned or operated any facility at which such hazardous substances were
disposed of,” 42 U.S.C.A. § 9607(a)(2) (emphases added), (2) “any person who . . .
arranged for disposal or treatment, or arranged with a transporter for transport for disposal
or treatment,” 42 U.S.C.A. § 9607(a)(3) (emphases added), and (3) “any person who
accepts or accepted any hazardous substances for transport to disposal or treatment
facilities . . . selected by such person . . . .” 42 U.S.C.A. § 9607(a)(4) (emphases added).
Relating to this, § 113 states that “[a]ny person may seek contribution from any other
person who is liable or potentially liable under section 9607(a) of this title, during or
following any civil action under section 9606 of this title or under section 9607(a) of this
title. . . .” 42 U.S.C.A. § 9613(f)(1). Therefore, the Court finds that the statutory language
and use of the past tense shows that Congress intended it to be applicable to prior
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conduct, regardless of whether a claim is advanced under § 107 or § 113. 	See U.S. v.
Olin Corp., 107 F.3d 1506, 1513 (11th Cir. 1997); Franklin Cnty. Convention Facilities
Auth. v. Am. Premier Underwriters, Inc., 240 F.3d 534, 552 (6th Cir. 2001).
Next, the Court looks to the legislative history to determine Congressional intent
regarding whether CERCLA can be applied retroactively. 	The Eleventh Circuit, in
examining the legislative history of the statute, found that “[t]he chief predecessor bill to
CERCLA, S. 1480, contained no express statement regarding retroactivity. Nonetheless,
all those commenting on [it and the parallel House bill] expressed the belief that the bills
would apply retroactively to those responsible for the releases in existing waste sites.”
Olin Corp., 107 F.3d at 1514 (internal quotations omitted). Further, when examining the
scheme of CERCLA itself and the purpose for which it was passed, a clear intent to be
remedial and retroactive is shown. 	See generally H.R.Rep. No. 1016, 96th Cong., 2d
Sess., reprinted in 1980 U.S. Code Cong. & Ad. News 6119. Only a few years ago, the
Second Circuit examined the legislative history of CERCLA and found that “it is by now
settled that Congress intended CERCLA to have such retroactive effect.” ASARCO LLC
v. Goodwin, 756 F.3d 191, 200 (2nd Cir. 2014). 	Therefore, the Court finds that the
legislative history points to CERCLA having retroactive effect.
Third, the Court looks to judicial precedent to examine whether CERCLA can be
applied retroactively to Defendants in this case. 	A review of the relevant case law
indicates that CERCLA has consistently been applied retroactively throughout the nation.
The Tenth Circuit has stated that CERCLA liability need not be proven by direct evidence,
and that “[t]his is particularly true for cases involving older hazardous substance disposal,
‘as eyewitness testimony or other direct evidence concerning specific waste disposal
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practices . . . during the 1940s—well before the enactment of environmental laws—is
rarely available.’” Chevron Mining Inc. v. United States, 863 F.3d 1261, 1271 (10th Cir.
2017) (quoting Tosco Corp. v. Koch Indus., Inc., 216 F.3d 886, 892 (10th Cir. 2000)).
This is a clear indication that the Tenth Circuit interprets CERCLA to apply to conduct that
occurred even decades before the statute’s enactment. See also Commonwealth Edison
Co. v. U.S., 271 F.3d 1327, 1351 (Fed. Cir. 2001) (stating that CERCLA by its terms has
unlimited retroactivity); Olin Corp., 107 F.3d at 1513 (asserting that Congress manifested
a clear intent to reach conduct prior to enactment); Franklin Cnty. Convention Facilities
Auth., 240 F.3d at 552 (stating that CERCLA is intended to function retroactively); U.S. v.
Ne. Pharm. & Chem. Co., 810 F.2d 726, 732-33 (8th Cir. 1986) (acknowledging that there
is no express statement from Congress regarding retroactivity and that the conduct at
issue had occurred years prior to CERCLA enactment, but holding that it is manifestly
clear that Congress intended CERLCA to apply retroactively). The Court therefore finds
that judicial interpretations of CERCLA consistently find that the statute has retroactive
effect.
Lastly, the Court briefly addresses the Supreme Court cases that Defendants cite
and their relationship to CERCLA. Response [#158] at 9-10 (citing Landgraf v. USI Film
Prods., 511 US 244, 280 (1994); E. Enters. v. Apfel, 524 U.S. 498, 532 (1998); Vartelas
v. Holder, 566 U.S. 257, 265-66 (2012)). As noted, those cases do not address CERCLA
retroactivity, and other circuits have found that these cases are inapplicable in this context
based on the clear Congressional intent that the statute would apply to prior conduct. The
Eleventh Circuit found that while Landgraf v. USI Film Products does alter the way lower
courts address retroactivity, CERCLA’s structure and legislative history provide enough
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evidence to overcome this presumption. Olin Corp., 107 F.3d at 513-14. The Sixth Circuit
later addressed Eastern Enterprises v. Apfel and found its discussion of the presumption
against retroactivity to be inapplicable to CERCLA. Franklin Cnty. Convention Facilities
Auth., 240 F.3d at 552. 	The Sixth Circuit found that Apfel is not directly relevant because
no single rationale was agreed on by the Supreme Court and because Congress intended
CERCLA to reach past conduct. 	Id. 	While the Circuit Courts have not addressed the
presumption against retroactivity discussed in Vertelas v. Holder and its potential
relationship to CERCLA, the Court finds it inapplicable in this case. Vertelas involved a
dispute over the Illegal Immigration Reform and Immigrant Responsibility Act (“IIRIRA”),
and whether a lawful permanent resident who had committed a crime before the passage
of IIRIRA could then be permanently banned from re-entering the United States after
briefly visiting his family abroad after the passage of IIRIRA. Vertelas, 566 U.S. at 260-
61. Given that immigration law and environmental law are separate legal fields and that
the language and legislative history of IIRIRA and CERCLA are naturally different, the
Court finds Vertelas and its discussion of the presumption against retroactivity to be
unpersuasive in this case.
In light of the chosen language of the statute, its legislative history, the judicial
consistency in applying CERCLA retroactively, and persuasive authority from other
circuits specifically holding that the cases cited by Defendants do not apply to CERCLA,
the Court finds that Plaintiff’s CERCLA § 113 claim is not futile and that the complaint
may be amended. 	Accordingly, the Court recommends that the Motion [#153] be
granted and the proposed Amended Complaint [#153-2] be accepted for filing.
B. 	The CERCLA § 107 Claim
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Defendants argue in their Response that, if the Court grants the Motion [#153] and
allows Plaintiff to amend the Complaint [#1] to assert a CERCLA § 113 claim, the Court
should explicitly dismiss the CERCLA § 107 claim with prejudice. 	Response [#158] at
12-16.
At the outset, the Court notes that Plaintiff, throughout its briefs, generally speaks
of substituting the CERCLA § 113 claim in place of the CERCLA § 107 claim. Technically,
this is a misnomer. 	Although parties and even the courts occasionally use this
terminology when discussing these types of amendments, the Federal Rules of Civil
Procedure use “substitution” only with respect to substituting parties, not claims. 	See
generally Fed. R. Civ. P. 15, 17, 25. 	Thus, what Plaintiff actually seeks through
amendment is dismissal of one claim, i.e., the CERCLA § 107 claim, and the addition of
a different claim, i.e., the CERCLA § 113 claim. This means that, in granting the Motion
[#153], the CERCLA § 107 claim is technically being dismissed, which leaves the question
of whether dismissal with or without prejudice is appropriate. For the following reasons,
the Court finds that dismissal without prejudice is appropriate under the circumstances of
this case.
First, Plaintiff has conceded that it cannot pursue a CERCLA § 107 claim at this
time and it is clear from the briefs and the proposed Amended Complaint that Plaintiff is
asking to have this claim dismissed, despite generally using the “substitution” language
discussed above. The Court declines to make an advisory ruling on whether such a claim
may be viable, either procedurally or on the merits, at some time in the future under a
different 	set 	of 	circumstances. 	Relatedly, 	Defendants’ 	assertion 	that 	they 	could
“potentially be subjected to these same stale claims, again at some future date,” is pure
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speculation. Response [#158] at 12. For these reasons alone, dismissal with prejudice
is inappropriate.
Second, although the Court makes no ruling on this issue, Plaintiff makes a
colorable argument that dismissal of the CERCLA § 107 claim should be premised on
lack of standing. Reply [#159] at 5-8; see also id. at 5 (“When [Plaintiff] acquired standing
to pursue a section 113 claim, it lost its standing to bring a section 107 claim to recover
the same costs.”). Standing is a subject matter jurisdiction issue, which would therefore
require dismissal without prejudice. See Brereton v. Bountiful City Corp., 434 F.3d 1213,
1216 (10th Cir. 2006) (stating that “standing is a jurisdictional mandate,” and holding that
dismissal for lack of standing must be without prejudice)).
Accordingly, the Court recommends that Defendants’ request to premise allowing
amendment of the Complaint [#1] by dismissing the CERCLA § 107 claim with prejudice
be denied and that Plaintiff’s CERCLA § 107 claim be dismissed without prejudice.
III. Conclusion
For the reasons stated above,
IT IS HEREBY RECOMMENDED that the Motion [#153] be GRANTED, that
Plaintiff’s CERCLA § 107 claim be DISMISSED without prejudice, and that the Clerk of
Court accept Plaintiff’s Amended Complaint for filing. See [#153-2] at 2-15.
IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 72, the parties shall
have fourteen (14) days after service of this Recommendation to serve and file any written
objections in order to obtain reconsideration by the District Judge to whom this case is
assigned. 	A party’s failure to serve and file specific, written objections waives de novo
review of the Recommendation by the District Judge, Fed. R. Civ. P. 72(b); Thomas v.
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Arn, 474 U.S. 140, 147-48 (1985), and also waives appellate review of both factual and
legal questions. 	Makin v. Colo. Dep’t of Corrs., 183 F.3d 1205, 1210 (10th Cir. 1999);
Talley v. Hesse, 91 F.3d 1411, 1412-13 (10th Cir. 1996). 	A party’s objections to this
Recommendation must be both timely and specific to preserve an issue for de novo
review by the District Court or for appellate review. United States v. One Parcel of Real
Prop., 73 F.3d 1057, 1060 (10th Cir. 1996).
Dated: April 1, 2022
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