News and Events Involving Environmental Law, Published by Chicago Environmental Attorney Dave Scriven-Young
of Peckar & Abramson, P.C. -- (312) 881-6309

Seventh Circuit Finds Superfund Liability Limited by Release Signed in 1920

The Seventh Circuit Court of Appeals recently held that a 95-year old agreement released a defendant from contribution costs under the Superfund statute.  In Peoples Gas Light & Coke Company v. Beazer East, Inc., Peoples Gas sued to recover costs it had incurred in conducting environmental investigation and removal activities at a property that it partially owned.  At issue in this case was the following language contained in Section 107(e)(1), of the Superfund statute, 42 U.S.C. §9607(e)(1):

“No indemnification, hold harmless, or similar agreements or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section.  Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section.”

The Seventh Circuit has in the past reconciled the two sentences in the above provision by construing them to mean that “responsible parties may not transfer their CERCLA liability, but may obtain indemnification for that liability.”

The issue in this case was whether an indemnification agreement signed in 1920 could relieve the defendant of its liability for contribution under Superfund statute, even though that agreement was signed well before the Superfund law was passed.  The court held that “where such a contractual assignment of liability pre-dates CERCLA, courts will look to seek whether an indemnification provision is either specific enough to include CERCLA liability or general enough to include any and all environment liability which would, naturally, include subsequent CERCLA claims.”

In this case, the Seventh Circuit agreed with the District Court’s conclusion that the 1920 agreement contained language that was broad enough to absolve the defendant of liability from contribution costs.  Most importantly, the agreement explicitly stated that the defendant’s obligation to operate or supervise the operation of the Coke plant was assumed “without liability of any character on the part” of the defendant “except as expressly assumed under the terms of this contract.”  According to the Seventh Circuit, “this is precisely the kind of broad and general release language that has been construed by courts to encompass CERCLA liability.”  Therefore, the Seventh Circuit affirmed the District Court’s conclusion that the language of the 1920 agreement barred Peoples Gas’ claim for CERCLA contribution.


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