Section 107(a) Cost Recovery Claims Given New Life: Consolidated Edison Company of New York, Inc. v. UGI Utilities, Inc.

Client Advisory

October 24, 2005
by Michael Davis and Jean McCarrol

On September 9, 2005, the Second Circuit rendered its decision in Consolidated Edison Company of New York, Inc. v. UGI Utilities, Inc., Docket No. 04-2409-cv (2d Cir. 2005) (the “Decision”), holding that Con Ed—despite the fact that it is itself potentially liable under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)—could bring a cost recovery action against UGI pursuant to CERCLA section 107(a).  This decision represents a substantial departure from recent jurisprudence and drastically alters the manner in which CERCLA cost recovery claims will be litigated in the Second Circuit.


Consolidated Edison Company of New York, Inc. (“Con Ed”) sued UGI Utilities, Inc. (“UGI”) to recoup/allocate costs Con Ed voluntarily incurred, and would incur, cleaning up certain contaminated property Con Ed owns or operates.  UGI or its predecessors allegedly operated these properties in the past.  After filing suit, Con Ed entered into a “Voluntary Cleanup Agreement” with the New York State Department of Environmental Conservation (“DEC”) to clean up these properties; no other judicial or administrative decrees or orders compelled Con Ed to take action. 

After the parties had completed briefing before the Second Circuit, the U.S. Supreme Court issued its decision in Cooper Industries, Inc. v. Aviall Services, Inc., 125 S. Ct. 577, 543 U.S. 157 (2004), holding that a party may pursue a contribution claim under CERCLA section 113(f)(1) only during or following specified civil actions against that party.  Because Con Ed brought suit under section 113(f)(1) and no civil action had been filed against Con Ed, the Second Circuit requested briefing on whether it had subject matter jurisdiction. 

CERCLA Cost Recovery

The Second Circuit recognized that CERCLA’s primary goals include “encouraging the timely cleanup of hazardous waste sites,” “placing the cost of that cleanup on those responsible for creating or maintaining the hazardous condition,” and inducing potentially responsible parties “voluntarily to pursue appropriate environmental response actions.”  Decision at 5-6 (internal citations and brackets omitted).  In order to achieve these goals, there exist three provisions authorizing parties to recover their cleanup costs: “(1) section 107(a), which permits the general recovery of cleanup and prevention costs; (2) section 113(f)(1), which creates a contribution right for parties liable or potentially liable under CERCLA; and (3) section 113(f)(3)(B), which creates a contribution right for parties that have resolved their liability by settlement against parties who did not participate in the settlement.”  Id. at 6.  For subject matter jurisdiction to exist, Con Ed’s claims must arise under one of these provisions.

Section 113(f)(1)

Con Ed was unable to bring a claim under section 113(f)(1).  That section creates a contribution right for parties liable or potentially liable under CERCLA, stating that “[a]ny person may seek contribution from any other person who is liable or potentially liable under [section 107(a)], during or following any civil action under [section 106] or under [section 107(a)].”" 42 U.S.C. § 9613(f)(1).  In Cooper Industries, the Supreme Court concluded that the “natural meaning” of section 113(f)(1) “is that contribution may only be sought subject to the specified conditions, namely, ‘during or following’ a specified civil action.Cooper Industries, 125 S. Ct. at 583, citing 42 U.S.C. § 9613(f)(1) (emphasis added). 

No civil action was filed against Con Ed concerning the property at issue.  Therefore, it could not bring a claim under that section.

Section 113(f)(3)(B)

The Second Circuit held Con Ed could not assert claims under section 113(f)(3)(B) as Con Ed had not settled or otherwise resolved its CERCLA liability.  Section 113(f)(3)(B) creates contribution rights for specified settling parties.

Con Ed argued that its Voluntary Cleanup Agreement with the DEC constituted a section 113(f)(3)(B) administrative settlement.  The Second Circuit disagreed.  It held that this section creates a contribution right “only when liability for CERCLA claims, rather than some broader category of legal claims, is resolved.”  Decision at 8.  Because the only liability that could potentially be resolved under the Voluntary Cleanup Agreement is liability for state law—not CERCLA—claims, Con Ed could not bring a claim under section 113(f)(3)(B).[1]  See id. at 10-11.

Section 107(a) and Bedford Affiliates v. Sills 

In a departure from recent case law, the court held that Con Ed may bring suit under section 107(a).   See Decision at 12.  Put most generically, it held that section 107(a) permits a party that has not been sued or made to participate in an administrative proceeding, but that, if sued, would be held liable under section 107(a), to recover necessary response costs voluntarily incurred from parties liable under section 107(a).  See Decision at 20-21.

Section 107(a) does not grant to parties against whom liability has been imposed an express right to sue other parties for contribution.  However, the court noted that, “[d]espite the omission of express contribution language,” many courts held, before the enactment of section 113(f)(1), that section 107(a) permitted contribution actions.  Decision at 12-13.  After section 113(f)(1) was added to CERCLA in 1986, creating an express cause of action for contribution under specified circumstances, the Second Circuit, in Bedford Affiliates v. Sills, 156 F.3d 416 (2d Cir. 1998), considered the relationship between section 107(a) and section 113(f)(1). 

In Bedford Affiliates, negotiations between the plaintiff and the DEC had culminated in consent orders pursuant to which Bedford Affiliates agreed to clean up a site it owned.  See 156 F.3d at 421. Bedford Affiliates then sought recovery from the defendants under both section 107(a) and section 113(f)(1).  The district court denied Bedford Affiliates’ section 107(a) claim but ruled that it was entitled to contribution under section 113(f)(1). In equitably apportioning responsibility for the response costs, the district court found that Bedford Affiliates was liable for five percent of the costs and was thus limited to recovering 95 percent of what it was seeking.  See id. at 422.  Bedford Affiliates appealed.  Concluding that section 113(f) “plainly governs such contribution actions,” the court reasoned that the plaintiff “could not pursue a [section] 107(a) cost recovery claim against [the defendants] due to its status as a potentially responsible person.” Id. at 423-24.  

The court in Con Ed recognized that the rationale behind Bedford Affiliates might no longer apply after Cooper Industries limited the class of plaintiffs able to file claims under section 113(f)(1).  “Consequently, it might be argued that, in the wake of Cooper Industries, Bedford Affiliates’s section 107(a) holding can no longer stand.” Decision at 18, n.12.

Therefore, in Con Ed, the court reverted to the plain language of section 107(a): responsible parties are liable for “any other necessary costs of response incurred by any other person consistent with the national contingency plan.” 42 U.S.C. § 9607(a)(4)(B).  The court found “no basis for reading into this language a distinction between so-called ‘innocent’ parties and parties that, if sued, would be held liable under section 107(a).”  Id. at 16.  Moreover, the court reasoned that requiring responsible parties to “wait until they are sued to commence cleaning up any site for which they are not exclusively responsible because of their inability to be reimbursed for cleanup expenditures in the absence of a suit” would create an “economic disincentive.”   Id. at 17. Is Bedford Affiliates Still Good Law?

  • Despite language critical of the rationale supporting Bedford Affiliates, the court in Con Ed refused to explicitly overrule that decision.  Rather, it drew the following two distinctions between Con Ed and Bedford Affiliates:  In Bedford Affiliates the plaintiff may not have incurred “costs of response under CERCLA” because the plaintiffs in Bedford Affiliates were compelled by two consent orders with the DEC to clean up, while, in Con Ed, there was “no adjudication of Con Ed’s liability for response costs and no administrative or judicially approved settlement requiring Con Ed to incur those expenses.”  The court observed that “[i]t may be that when a party expends funds for cleanup solely due to the imposition of liability through a final administrative order, it has not, in fact, incurred ‘necessary costs of response’ within the meaning of section 107(a).”  Decision at 18-19.[2]
  • The Bedford Affiliates plaintiff “put the extent of its liability at issue by seeking recovery under both sections 107(a) and 113(f)(1).”  The court explained that “[t]o rule that in those circumstances Bedford could have proceeded under section 107(a) to seek recovery of one hundred percent of the costs, this court would have had to hold in substance that a party already adjudicated liable for a portion of the costs of response under section 113(f)(1) could circumvent that section by recovering under section 107(a) that portion of the costs attributed to it by the adjudication.”  In Con Ed, however, there were no consent orders and no proceedings apportioning costs of response.  Id. at 20.


Con Ed represents an important development in the evolving body of CERCLA case law.  While it certainly will not be the last word on the subject, it is now clear, at least in the Second Circuit, that some parties liable under CERCLA may sue other liable parties under section 107(a) for response costs voluntarily incurred.  Many issues remain to be resolved such as (i) whether the dubious distinctions between Bedford Affiliates and Con Ed will find further judicial support, (ii) whether and how defendants such as UGI may bring claims against plaintiffs like Con Ed to allocate an appropriate share of liability to the plaintiff, (iii) how orphan shares will be allocated, and (iv) how potentially conflicting statutes of limitations in sections 107 and 113 will be applied.  It is certain that these and other issues will be hotly contested in the years to come.  

Questions regarding this advisory should be addressed to Michael C. Davis (202-623-5710,, Jean M. McCarroll (212-238-8828, or Samantha Klein.


[1] In light of this holding, particular attention should  be paid to the types of claims resolved or “settled” in administrative orders on consent.  The EPA and many of its state counterparts are making, or considering, revisions to their administrative orders on consent to make clear that CERCLA liabilities are being settled and resolved pursuant to section 113(f)(3)(B).

[2] The potential ramifications of this distinction are enormous as it may to call into question the recoverability under CERCLA of costs incurred in compliance with administrative or judicially approved settlements, court orders or final judgments.  See also Decision at 20-21 (distinguishing between parties that have incurred necessary response costs voluntarily and those that did so pursuant to a court or administrative order or judgment).

Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2020 Carter Ledyard & Milburn LLP.
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