CERCLA cases often include mediations, either court-sponsored or party-initiated, as a mechanism to achieve allocation of liability for the costs of environmental cleanup at the subject Superfund site. Because these cases often include many potentially responsible parties (“PRPs”) numbering in the scores or hundreds or more, the mediation process can be complex, lengthy and expensive. Careful attention to the structure and sequence of the mediation process components is critical for achievement of a timely, successful, and cost-effective mediation outcome.
The impetus driving the timing of the mediation is often a critical determinant of what can be accomplished in a many-party CERCLA mediation. Typically, the driving event is either an impending negotiation with EPA or the state environmental agency over performance of a response action at the site or a court deadline such as a pending trial date. The particular deadline is likely to determine the extent to which a cash-out settlement, a pay-as-you-go settlement, or an interim allocation is to be available as a mediation outcome. These deadlines are, of course, subject to varying degrees of strictness. However, as with most other mediations, the ability to successfully conclude many-party CERCLA mediations depends heavily upon the notion that opportunities to achieve favorable outcomes will expire with the mediation deadline.
The presence or absence of prior motions practice on liability-related issues is typically an important factor in these mediations. The mediating parties benefiting from earlier court decisions press the “law of the case” argument in their party-specific mediations. Of course, the mediating parties disadvantaged by prior decisions distinguish their facts from the prior decisions and assert their likelihood of achieving a more favorable decision when their motions are decided. These issues, either addressed or unaddressed in prior motions practice, provide a large portion of the subject matter of individual party mediations in the overall mediation process.
In cases involving mediations between PRP Settling Party Participating Groups (“PRP Group”) and not-yet-settled PRPs, the forcing mechanism may be a “most-favored nation” provision that promises that no subsequent settling parties will receive more favorable settlement terms than those achieved by parties settling during the mediation. In practice, these provisions can be a two-edged sword, because members of the PRP Group may have received such provisions when they settled before the mediation. This can have the effect of drastically limiting the ability of the PRP Group to compromise on issues that it has previously addressed in settlements with its members.
As a result, the not-yet-settled PRPs often experience considerable frustration in attempting to reach compromises on these “previously settled” issues that differ from the resolution reached in the intra-PRP Group negotiations. For example, a not-yet-settled PRP may experience fierce resistance from the PRP Group in seeking differing terms of the allocation between classes of PRPs such as waste generators and transporters. The PRP Group would be reluctant to re-negotiate those terms internally (to match the terms sought by the mediating party) among its members who had previously come to resolution on them and had incorporated the result into the existing most-favored-nation provisions applicable to Group members. The mediator must insist in such negotiations that the PRP Group is transparent about the terms of its most-favored-nation provisions in order to provide the mediating parties with a clear assessment of the difficulties in addressing these terms.
The sequence of mediation activities is also a critical determinant of success and efficiency in many-party CERCLA mediations. Most CERCLA mediations include PRPs from several or all of the CERCLA classes of PRPs – owners, operators, generators and transporters. In order to achieve an overall resolution in which each party knows its specific share, either in absolute or relative terms, of the overall allocation, it is necessary for each class of PRPs to receive a collective allocation for that class and it is necessary for each class of PRPs to be able to negotiate its relative share with the other classes of PRPs.
Accomplishing PRP class allocations is likely to require the mediator to conduct subordinate mediations to establish the class allocation of the respective PRP classes to determine the remaining shares to be allocated among the other PRP classes. Of particular note, the owner and operator shares are essential and often quite controversial. There is commonly considerable antipathy between the other PRP classes and the owners and operators, due to disaffection with owners’ and operators’ management of wastes at the facility. This disaffection may require a comprehensive airing of the facility operations in the context of the mediation to establish a basis for agreement on the owner-operator shares. This, in turn, may depend upon prior discovery and disclosure of information about facility operations. Similarly, negotiations between the generator and transporter classes on issues such as which party selected the disposal site may require prior discovery and disclosure about transactional details. Again, the mediator must endeavor to assure transparency of available information to facilitate these inter-class mediations. It is also necessary for the mediator to develop a critical path of issue resolution to determine the most efficient sequence for the subordinate mediations. This can be a tricky determination given that negotiating leverage may accrue to PRP classes whose issues are resolved early in the process.
Finally, the cost-effectiveness, and apparent cost-effectiveness, of the mediation process is heavily influenced by the sequence of subordinate mediations. As in most mediations, each party desires to have the opportunity to fully air its case and its issues directly with the mediator. In many-party CERCLA mediations absent subordinate mediations addressing issues common to PRP classes, these individual mediations could become very repetitive and parties with later mediation sessions could conclude that their issues were not subject to full airing if they had been resolved in prior party-specific mediations. In particular, later-mediating parties whose time with the mediator is limited due to prior resolution of their respective issues may feel cheated of their opportunity to mediate and may feel that they did not get their moneys’ worth from the mediation. It is important for the mediator to communicate the results and the contents of prior subordinate mediations to all of the parties so that they can be confident that their individual issues were fully represented and heard in the prior mediations. Mediating parties in individual mediations can thereby be aware of the considerable resources already expended on resolution of their specific issues.
Preti Flaherty attorneys E. Michael Thomas and Jeff Talbert contributed to this article.
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