In a precedent-setting decision, the 9th Circuit Court of Appeals on Monday ruled in favor of Pyro Spectaculars, Inc. (PSI) and 16 other defendants, dismissing a lawsuit filed by the City of Colton, California, which sought up to $124 million in past and future environmental cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The 9th Circuit Court also affirmed the dismissal of Colton’s declaratory relief claim and reinstated PSI’s CERCLA cost-recovery claims against other potentially responsible parties.

“This decision makes it clear to governmental entities seeking to recover tens of millions of dollars in costs that they must play by CERCLA’s rules,” said PSI’s attorney, Brian Zagon of Hunsucker Goodstein & Nelson PC.

The decision upheld a lower court’s 2006 summary judgment ruling against Colton, agreeing that Colton failed to show that $4 million in incurred cleanup costs were necessary and consistent with CERCLA’s National Contingency Plan requirements.

In 2005, Colton filed a lawsuit claiming that PSI and other defendants had contaminated local wells with perchlorate, seeking $4 million in reimbursement for incurred cleanup costs and declaratory relief for future costs to remove low levels of the chemical from wellheads. Estimates by some of the parties of the future clean up costs are in the range of $120 million. The US District Court for the Central District of California granted summary judgment against Colton and dismissed the case in 2006. The lower Court also dismissed CERCLA cost recovery claims sought by PSI and other defendants, a decision which the 9th Circuit Court reversed on Monday.

This is the first time that the 9th Circuit Court has considered whether a plaintiff who failed to prove a defendant’s liability for past cleanup costs can obtain a declaratory judgment for future costs against that defendant.

9th Circuit Court Judge Diarmuid O’Scannlain wrote the opinion affirming the lower court’s ruling, stating that “CERCLA’s purpose would be better served by encouraging a plaintiff to come to court only after demonstrating its commitment to comply with the [National Contingency Plan] and undertake a CERCLA-quality cleanup.”

PSI was represented in the matter by attorneys Philip Hunsucker and Brian Zagon of Hunsucker Goodstein & Nelson PC; an environmental litigation firm with offices in California, Indiana, and Washington, DC.