OPINION:
The competition and creative destruction that fuels capitalism traditionally means that new companies are constantly edging out old ones by coming up with innovative ways to make things better, faster and cheaper. Nowadays, of course, this frequently means making them cleaner and more sustainable, too.
In practice, this means that as new companies take over old factories or manufacturing plants, they’re not just upgrading infrastructure and sustaining local economies. They’re also acting as cleanup crews, investing millions to remediate any contamination and otherwise comply with new environmental rules and regulations. Often, they do this even before it’s determined who was legally, and thereby financially, responsible for the original environmental impact.
But the Supreme Court is about to decide whether to take a case that, if it goes the wrong way, could radically undermine one of the most effective environmental regulations we have, dramatically reducing the incentives for companies to clean up toxic sites around the country.
At issue is an esoteric provision of the Comprehensive Environmental Response, Compensation and Liability Act, more commonly known as the Superfund law. The law gives companies that take over contaminated sites incentive to clean them up as quickly as possible by giving them legal mechanisms to recoup any costs that extend beyond their fair share of responsibility.
But a circuit split in the case pending before the Supreme Court, Georgia-Pacific Consumer Products LP v. International Paper Co., could gut these provisions, meaning that companies trying to do the right thing could go broke for their trouble.
In the case at hand, when the plaintiff, Georgia-Pacific, took over a paper mill sitting on a Superfund site along Michigan’s Kalamazoo River and Portage Creek tributary in 1990, the company made a commitment to clean up chemicals that had been discharged into the river in the decades before it took over.
Georgia-Pacific did this even though there had been no legal determination about which of the previous owners were responsible for the contamination. That’s because it often takes years — or in this case, decades — to fully determine the causes of environmental contamination, especially in large geographic areas where multiple sites and multiple actors contributed to the problem.
Eventually, Georgia-Pacific identified other liable parties and filed suit, seeking court judgments to compel them to pay their fair share. But upon appeal in one of those cases, the 6th U.S. Circuit of Appeals ruled that the plaintiff was too late, that something called a “bare declaratory judgment” issued by a lower court years earlier had triggered a statute of limitations on such actions that had since expired.
Under the 6th Circuit’s bizarre interpretation, even though this bare declaratory judgment didn’t award any damages or determine responsibility for the cleanup, it created a ticking clock that in practice would have required Georgia-Pacific to file suit years before it actually incurred any costs and long before it could have been established who was actually liable.
The 1st U.S. Circuit of Appeals agreed that this made no sense, and in a separate ruling held that a bare declaratory judgment did not trigger the statute of limitations. This created a “circuit split” in interpreting the relevant law, which is one of the surest ways to get a case heard by the Supreme Court.
That’s where things stand now, with the high court due to rule on whether to hear the case any day. The justices certainly should, because if the 6th Circuit’s ruling stands, corporations will have little incentive to take early and voluntary responsibility for cleaning up hazardous waste or contamination unless they are compelled to do so.
That would be bad for business and bad for the environment.
Even die-hard free-marketeers recognize the need for some level of regulation to limit what economists call negative externalities — costs or other negative impacts imposed on Party C by an economic transaction between Parties A and B.
Environmental contamination like the kind you find at Superfund sites are classic negative externalities, and smart, tightly tailored rules can help prevent or ameliorate them without hamstringing growth, by identifying the responsible parties and setting a price on their behavior.
But in the 6th Circuit’s interpretation, companies such as Georgia-Pacific that make good-faith stewardship efforts could be saddled with enormous costs as punishment for their own diligence.
For what it’s worth, in a brief to the Supreme Court, the solicitor general — the federal government’s top litigator — agreed that Georgia-Pacific is right and the 6th Circuit is wrong. Anyone who cares about sustainability, or about American innovation, should be rooting for the Supreme Court to say the same.
• Christian Josi is a veteran political strategist and frequent columnist. He is founder and managing director of C. Josi & Co., a media relations and public affairs firm.
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