Superfund’s Biggest Mess May Be in the Courthouse : Litigation: Toxic cleanup has been slowed by a morass of costly lawsuits. Legal reform plan draws wide support.

In the lucrative world of corporate law, the word inspires dreams of shiny new BMWs, of vacations to Cancun and of billable hours mounting year after prosperous year.

The word is Superfund. It is the nickname given the 1980 law designed to clean up thousands of polluted sites across the nation--from abandoned landfills to manufacturing sites, mines and even federal facilities.

For many lawyers, who have been called “wizards of ooze” because of their roles in litigating Superfund cases, the law has been mother’s milk.

By the best available estimate--that of the Santa Monica-based RAND Corp. think tank--fully 40 cents of every dollar spent on such projects has gone not to clean up toxic waste but to pay lawyers’ fees and other costs of litigation. And those dollars are staggering: The federal government alone spends nearly $1.6 billion annually on Superfund. And private industry is believed to spend several times that amount.

Even more demonstrative of the problem: The House Banking, Finance and Urban Affairs Committee estimated in 1990 that the insurance industry and its clients spend about $500 million in legal costs annually wrangling over liability for Superfund cleanups.

Critics of the system--including the Clinton Administration--contend that the slow pace of the work is directly attributable to the tangled web of litigation that can stall progress on a project for years while it ensnares the federal government, corporate polluters, insurance companies and--occasionally--hapless bystanders.

So far, only 237 of the 1,344 toxic waste sites deemed in need of emergency cleanup have been declared clean and safe. In coming weeks, Congress, prodded by the Administration, is moving to complete a sweeping reform of Superfund law. And while the effort is designed to tackle an array of perceived problems, the primary focus is on stemming unintended legal costs.

The purveyors of reform argue that the stakes are enormous.

One out of four Americans lives within four miles of a toxic waste site slated for cleanup under the program. California, with 96 sites on the Superfund list, has one of the largest shares of polluted sites in the country.

Besides the health of citizens, jobs also hang in the balance--not just for high-priced lawyers but for entire communities, the Administration contends. Almost 20% of Superfund projects are located in urban areas. But even after such sites have been declared clean, they remain legally poisonous to many potential buyers because, under current Superfund law, purchasers of such sites assume liability for past pollution.

As a result, most of these sites remain fenced off, while surrounding neighborhoods--many in minority communities--go without the jobs they need desperately. Meanwhile, businesses looking for operating sites are moving out to suburban “greenways,” where woods and open farmland are cleared--and then lost--to establish new industrial sites.

Horror stories about the legal entanglements of Superfund cases abound.

* In Kalamazoo, Mich., the Upjohn Co., a major pharmaceuticals firm, was named by the Environmental Protection Agency as the party responsible for the $20-million cost of cleaning up a toxic landfill.

Hoping to spread the cost among other polluters, Upjohn wrote letters threatening to sue 741 parties that had dumped trash in the landfill. They ranged from Flipse’s Flower Shop to the Milwood Little League. Even the mother of William Parfet, Upjohn’s president at the time, couldn’t escape the company’s dragnet. Martha Parfet, chairwoman of Gilmore Bros. department store in downtown Kalamazoo, received a letter from Upjohn notifying her that the trash the store had put out on the curb could make it liable for a share of the cleanup.

* In the case of the Hardage Landfill in Criner, Okla., attorneys for a group of 350 firms held responsible for the cleanup stretched across the nation and read like a “Who’s Who” of Superfund law, according to one participant. The cleanup itself was expected to cost $70 million. But over nearly a decade, lawyers earned more than $45 million in legal fees in the case and several suits are still unresolved.

At one point, a tiny office of the Oklahoma State District Court became a defendant in the case. Its alleged misdeed? The office had disposed of a box of poisoned cookies--crumbs of evidence in an old criminal case--in the landfill.

* At one of the earliest and most notorious Superfund sites--a 63-acre landfill in New Jersey--more than 400 parties have sued and countersued, hoping to spread the $52-million cleanup cost. Attorneys involved in the case spent more than $80,000 a year on Federal Express deliveries alone, according to congressional testimony.

* At a Superfund site in Long Island, N.Y.--a four-acre chemical storage area that leaked dangerous chemicals into ground water and seawater--the EPA identified 257 polluters which it determined should pay for the $7.7-million cleanup. At least 136 law firms were hired to handle the original legal work. Four of the 257 polluters sued 442 insurance companies, which in turn engaged the work of 72 more law firms. The owner of the site sued another 101 parties that he believed contributed to the pollution, prompting the hiring of many other lawyers.

For a flower shop or a Little League team, the prospect of such suits can be frightening--and expensive. And for the communities whose health may be endangered by toxic sites, getting a voice in the process--which usually means hiring a lawyer who can penetrate this legal morass--is downright daunting.

In cases like these, the EPA now determines the largest and most visible polluters of a Superfund site and splits the cleanup bill among them. Those enterprises typically turn around and sue many others in hopes of spreading the cost.

The result, said Rep. Al Swift (D-Wash.), a key proponent of Superfund reform, is a feeding frenzy of litigation that cascades down the corporate food chain.

“One of the parts of this law that has been most broke is how liability worked,” said Swift, who chairs the House Energy and Commerce subcommittee that drafted a version of Superfund reform.

“The government ate the big fish, the big fish ate the middle-sized fish and the middle-sized fish ate everything else. That has got to go. This program is enormously litigious. You’re spending an enormous amount of wealth without getting much cleanup,” Swift said.

Even one of the original designers of Superfund is exasperated by the problem: “Everybody is terrified they’re going to get sued. It’s gotten out of hand and it’s made these programs unpopular,” said Peter H. Kostmayer, a former member of Congress who helped write the Superfund law and who now, as EPA regional administrator for the mid-Atlantic states, oversees the cleanup of some 200 sites.

To be sure, not everyone believes that the program needs fixing. Besides averting scores of public health disasters, the act’s unprecedented liability features have had a dramatic effect on business, proponents say. By putting firms on notice that they may be forced to pay for the cleanup of contamination, Superfund has discouraged many from creating hazardous waste in the first place. The result has been a shift toward pollution prevention that could prove to be Superfund’s most enduring legacy.

Moreover, many attorneys swear that the lawsuits are slowing. They acknowledge that the law’s first decade was marked by confusion and a spate of litigation as companies tested the limits of the new law. But as companies have begun to learn that the courts are not likely to bail them out of their responsibilities under Superfund, many firms fingered for polluting have stopped struggling and started cleaning.

Nevertheless, President Clinton has called the Superfund program “a disaster.” And the Administration has responded with a package of reforms that are mind-numbing in their legal complexity but simple in their aim: to retain a system in which polluters are held accountable for cleaning up their messes but adding powerful new incentives for them to accept those responsibilities and proceed with the process of decontamination with a minimum of litigation.

Quite simply, said EPA Administrator Carol Browner, the reforms aim to make Superfund cleanups faster, fairer and more efficient. “America needs Superfund, but it needs a Superfund that works,” Browner said last February in unveiling the Administration’s proposal.

Those aims are largely reflected in draft House and Senate bills making their way through the congressional committee system. While the draft bills have drawn scattered opposition, they are notable mainly for the political consensus that has emerged around them. Manufacturers, insurance companies, community groups and an apparent majority of lawmakers--all of whom have bickered fiercely over the program in the past--have lined up behind the House and Senate bills.

The centerpiece of the proposed bills is a system of arbitration for the parties that played a major role in causing the contamination of a Superfund site. An EPA-approved mediator would carve up the cleanup costs and assign each party a share.

Under current law, a polluter has two stark options: It can accept its proposed share of costs and settle up--forgoing the right to sue other parties but receiving immunity from further liability for the site’s contamination--or it can reject its allocation and face months or even years of suing and being sued.

As further inducement to settle and clean up, lawmakers like Swift have sought to increase the fairness of how costs are divided.

The EPA would take responsibility for finding the smaller businesses--like Flipse’s Flower Shop--that may have contributed minutely to the contamination of a Superfund site. The agency then would have a brief period in which to settle with such parties. Organizations like the Milwood Little League would know quickly what their obligation was and, after making small payments to settle with the EPA, would be immune from further lawsuits. Purchasers of cleaned-up sites would also get explicit immunity from liability.

The EPA would also take responsibility for drawing on funds from its war chest of $1.6 billion annually to pay for pollution caused by companies that have disappeared or gone out of business. Under current law, the responsibility to pay those “orphan shares,” which are often substantial, is divided and assigned to the remaining major polluters. Many firms are so aggrieved by the perceived unfairness of this that they will pay attorneys countless billable hours to sue.

Similarly, the House and Senate reform bills would aim to reduce suits between firms responsible for cleanup costs and their insurance companies by establishing a new settlement program called the Environmental Insurance Resolution Fund. It would use taxes raised on insurance companies to make partial settlements with firms faced with Superfund cleanup costs.

While reducing the role that attorneys play in the program, Browner hopes the reforms would boost the role played by surrounding communities. The Administration’s proposal, as well as the House and Senate reform bills, include language that would give Superfund communities a strong voice in determining how the site should be used in the future and as a consequence, how far cleanup efforts should go.

“This is our chance. . . . We have to seize this opportunity and fix Superfund,” Browner recently told an audience in Cleveland. “Let’s put fair procedures in place so we can focus on getting the job done, not haggling about who owes what. Less money for the lawyers means more money for cleanup and economic development.”