Time-Barred Claim? Fourth Circuit Invalidates State Statute of Repose in Contamination Cases

Note: this post was updated on February 14, 2014.

On July 10, 2013, a divided panel of the Fourth Circuit Court of Appeals held that the Comprehensive Environmental Response, Compensation and Liability Act (CERLCA or Superfund), the federal law redressing disposal of hazardous substances, preempts state statutes of repose. Accordingly, the plaintiffs in the case will be permitted to proceed with their nuisance action against a company that sold a 54-acre site to others more than 26 years ago.

In 2009, a group of landowners discovered that their well water contained the industrial solvents trichloroethylene (TCE) and cis-1,2-dichloroethane (DCE). They sued CTS Corporation, the company that owned the property prior to 1987 and allegedly used hazardous substances in its electroplating operations. The landowners sued in federal court based on diversity of citizenship, but their claim was based on the North Carolina common law of nuisance.

CTS moved to dismiss the case, arguing that the landowners’ lawsuit was untimely. Although they had sued within three years of their discovery of the contamination (and within North Carolina’s statute of limitations), CTS argued that the landowners’ nuisance claims were barred by North Carolina’s statute of repose, which provides that no cause of action accrues more than 10 years from the last action of the defendant giving rise to the cause of action.   The landowners’ lawsuit for nuisance, which was filed more than 23 years after CTS had sold the property, was too late, CTS argued.

The district court agreed with CTS and dismissed the case, but on appeal, a three-judge panel of the Fourth Circuit Court of Appeals reversed the district court’s decision. In a 2-to-1 ruling, the Fourth Circuit, in Waldburger v. CTS Corp., held that CERLCA preempts both state statutes of limitations and state statutes of repose in environmental contamination cases.

Statutes of limitations are generally defined as laws that bar claims after a specified period based on the date the claim accrued, such as when an injury occurred or was discovered. Statutes of limitations are designed to encourage prompt resolution of disputes. Statutes of repose, on the other hand, bar claims after a specified period based on the time the defendant acted, even if the period ends before a plaintiff suffers or discovers an injury. Statutes of repose are based on legislative considerations of the economic best interest of the public as a whole and are substantive grants of immunity that operate to extinguish liability.

Like most states, North Carolina’s statute of limitations bars plaintiffs in contamination cases from suing after the passing of a certain amount of time. In North Carolina, that period is three years. Thus, a plaintiff must bring a lawsuit within three years from when he or she knew or should have known of bodily harm or physical damage to the property. North Carolina also has a 10-year “statute of repose” that operates as an absolute bar to personal injury or physical damage claims.

In the Superfund Amendments Act of 1986, Congress added Section 9658, which established a “federally required commencement date” for the running of state statutes of limitations in hazardous substance cases. The “federally required commencement date” is the date a plaintiff knew, or reasonably should have known, that his or her personal injury or property damage was caused by exposure to a hazardous substance released from a facility. Thus, if a state statute of limitations prescribes some shorter period than the time determined by federal law, the state statute is “preempted,” or overridden by the federal law in contamination cases.

The new question presented in the Waldburger case was whether preemption applied to state statutes of repose. The Fifth Circuit Court of Appeals had ruled in 2005 that Congress intended only to preempt statutes of limitations and that state statutes of repose were still valid. The Ninth Circuit ruled the other way in 2008, holding that both statutes of limitations and statutes of repose were preempted by CERCLA. The majority of the Fourth Circuit panel agreed with the Ninth Circuit.

Interestingly, the United States filed a brief as amicus curiae in support of CTS. The U.S.  Department of Justice noted that state statutes of repose apply to claims against the United States under the Federal Tort Claims Act, and that the United States had a particular interest in the North Carolina statute of repose because of ongoing litigation involving the Camp Lejeune Marine Corps Base.

What does the decision mean for companies in the Fourth Circuit? Unless reversed on rehearing by the full Fourth Circuit Court of Appeals, the decision means a company that owned or operated a site at which hazardous substances were disposed in the past may have present liability for state law claims such as nuisance and trespass, even if the state law would have extinguished those claims.

Some of the most common state statutes of repose relate to claims for defective or unsafe construction. To the extent that CERCLA hazardous substances are involved in vapor intrusion or mold claims against developers and builders, these statutes of repose may be preempted. Most companies already know CERCLA imposes “retroactive” liability for cleanup of hazardous substances disposed many years ago. The Fourth Circuit’s decision opens the possibility of liability for personal injury and property damages under state common law theories as well.

On January 10, 2014, the Supreme Court of the United States granted CTS Corporation’s petition for writ of certiorari to review the Fourth Circuit decision. The case is scheduled for oral argument on April 23, and a decision is expected by June 2014.