The ELA Statute of Limitations: A Legislative Response to Cooper Industries
As first appeared in the April 2014 Res Gestae.
In the past several years, the Indiana legislature, like many other states, enacted statutory causes of action to address the recovery of environmental costs. One statute, Ind. Code § 13-23-13, the Underground Storage Tank Act ("USTA"), was enacted in 1987 and then amended in 1991. The USTA permits parties to clean up sites voluntarily and then seek reimbursement of the cost of a corrective action.[i]
After the 1991 amendment, the USTA permits a contribution action regardless whether the third party was "solely liable for the contamination."[ii]
The USTA, however, only addresses contamination caused by underground storage tanks; thus it is limited in its applicability.
In 1997, the General Assembly added a new chapter to the Indiana Code creating a statutory cost recovery claim called an environmental legal action ("ELA").[iii]
The ELA's stated purpose was "the rescue and redevelopment of brownfields."[iv]
The ELA was created to "shift the financial burden of environmental remediation to the parties responsible for creating contaminations."[v]
The ELA created a "[financial] incentive for potential buyers of contaminated land who might be deterred by the substantial costs to clean up the land, thus preventing not only the cleanup but also redevelopment and economic renewal."[vi]
While these new laws were well-intentioned, the USTA and ELA had a major flaw. Prior to 2011, there was no specific statute of limitations for these claims. This issue created significant disruption to USTA/ELA litigation. Defendants argued that claims filed against them were untimely based on Ind. Code § 34-11-2-7, Indiana's six-year statute of limitations for claims based on damage to real property. Plaintiffs countered that their claims were in the nature of contribution or cost-recovery claims, arguing that Indiana's ten-year catch-all statute, Ind. Code § 34-11-1-2(a), applied to the ELA and USTA. Disputes also ensued over how such claims accrued, i.e., when the statute of limitations clock started ticking.
Guidance from the Indiana Supreme Court
Beginning in late 2007, Indiana environmental litigators eagerly anticipated a resolution to these questions. Two cases were set for decision by the Indiana Supreme Court. The first case, Pflanz v. Foster
, 888 N.E.2d 756 (Ind. 2008), involved a claim under the USTA. The second case, Cooper Industries, LLC v. City of South Bend,
899 N.E.2d 1274, 1283-1284 (Ind. 2009), involved an ELA claim. Oral argument occurred about a month apart and the two decisions, it was believed, would resolve issues regarding statute of limitations for both the USTA and ELA.
In June 2008, the Indiana Supreme Court decided Pflanz.
The Court noted that it had previously affirmed application of the ten-year catch-all limitations period to a USTA contribution claim.[vii]
Thus, the only remaining issue for the Court was a determination of how the statutory period was triggered. The defendant argued it was triggered when a party "knew or should have known about the contamination" at issue.[viii]
The Court rejected this argument and held that the USTA's contribution claim "is not a claim for damage to the property itself."[ix]
Rather, [plaintiffs] seek to recover for the cleanup costs IDEM required, which resulted from [defendant's] use of the land."[x]
Based on this conclusion, the Court held that the USTA "statute of limitation did not begin to accrue until after the Pflanzes were ordered to clean up the property" and rejected the statute of limitations defense.[xi]
The environmental bar waited several additional months for the Cooper
decision. But after it was issued in January 2009, environmental litigators learned that Cooper
would not resolve the ELA's statute of limitations issues.[xii]
Because the complaint in Cooper Industries
was filed in March 2003, less than six years after the ELA was enacted, the Indiana Supreme Court decided that the case was filed "within even the shortest arguable limitation."[xiii]
Thus, the court did not decide the parties' dispute regarding the time period for ELA claims (i.e., whether the ELA was subject to the six-year limitations period or the ten-year catch-all period).[xiv]
Nor did the Court determine the basis for when ELA actions accrue (i.e., when a party knows of the contamination at the property or when costs are incurred to cleanup up a site).[xv]
In short, Cooper
merely decided that claims filed within six years of the ELA's enactment in 1998 were timely. Thus, lower courts could quickly dispose of statute of limitations defenses in litigation filed on or before February 2004. But this did not decide the issue for claims filed on or after February 2004. For those claims the arguments remained, but each side of the issue argued that Cooper
supported their position. Plaintiffs argued that the state's highest court would ultimately endorse a ten-year limitation period for ELA claims, triggered by the date costs or obligations are incurred. They were buoyed by statements in the decision that plaintiffs "will be in the same position under the ELA as they would be under the USTA."[xvi]
Defendants argued that Cooper
had adopted (for all future cases) "six years as the applicable time period."[xvii]
Thus, many ELA claims, filed after February 2004, continue to have disputes over the applicability of a statute of limitations defense.
Appellate Court Interpretations of Pflanz and Cooper
Courts also differed in their post-Cooper
approach. Two recent decisions display the disparity that has resulted. In Peniel Group, Inc. v. Bannon
, 973 N.E.2d 575 (Ind. Ct. App. 2012), the Indiana Court of Appeals concluded that an ELA claim was untimely.[xviii]
The court construed the claim as a response to damage to plaintiff's real property.[xix]
Because the ELA suit had been filed more than six years after contamination was known to be on the property, the court found the suit was time-barred.[xx]
Yet, just months later, the Seventh Circuit Court of Appeals came to the opposite result. In Bernstein v. Bankert
, 702 F.3d 964 (7th
Cir. 2012), the federal court considered the Peniel
decision, but found that "not every ELA claim is one for property damages."[xxi]
Finding the Bernstein
lawsuit was more analogous to Pflanz
, the Court applied the ten-year limitations period and reinstated the ELA litigation.[xxii]
The Legislative Response to Cooper
Prior to Peniel
, the legislature had taken up the issue of a "specific statute of limitations" for both the USTA and the ELA. On May 10, 2011, Governor Mitch Daniels signed into law Senate Enrolled Act 346 (“SEA 346”), which was codified at Section 34-11-2-11.5. The statute specifies "the statute of limitations for: (1) an environmental legal action; and (2) an action for a contribution to pay for corrective action related to a release from an underground storage tank." It further provides that a party, in all actions filed after the statute's enactment, could seek recovery of any costs incurred during the ten-year period prior to the date the lawsuit is filed under the ELA and USTA. The new statute made clear that the party seeking recovery may proceed whether or not
other (non-recoverable) costs were incurred more than ten years ago.
The new specific statute of limitation is not helpful to actions initiated in trial courts before May 10, 2011, such as Peniel
. The legislation specifically noted that it applied to any action brought on or after the effective date (May 10, 2011).[xxiii]
The statute excluded any currently pending litigation and any claims "finally adjudicated or settled" prior to May 2011.[xxiv]
Given these limitations, it is unsurprising that no appellate case has yet interpreted Ind. Code § 34-11-2-11.5. As of the time of this article, only Peniel
have cited the new statute. In Peniel
, the Indiana Court of Appeals noted the statute's enactment, but the court merely quoted the statute.[xxv]
The opinion did not offer any discussion of the new statute or its potential impact on future litigation.[xxvi]
The Seventh Circuit, however, noted that "any future ELA actions will be governed by the independent limitations period legislatively added to the ELA."[xxvii]
In that case, the panel predicted that "[i]f § 34-11-2-11.5 governed this litigation, the resolution of the [statute of limitations] issue would be a simple affair."[xxviii]
A Response to the McInerny View
In the March 2013 edition of Res Gestae
, Daniel McInerny offered an interesting take on SEA 346, Peniel
, and Bernstein
. The article posited that Ind. Code § 34-11-2-11.5 was not really a statute of limitations.[xxix]
Instead, he opined that this new law could be interpreted as merely "a limitation upon the time period for the recovery of costs."[xxx]
His article suggested that the legislature's failure to use the words "must be commenced [within X years after Y point in time]" meant that the legislature failed to create a specific statute of limitations. The article opined that Ind. Code § 34-11-2-11.5 was "missing . . . any limitation upon which the action itself must be commenced."[xxxi]
On this basis, he argued that the new statute did not resolve the statute of limitations issue.
This unique interpretation does not survive a close inspection. First, the legislature placed the new statute in Chapter 2 of Section 11, a chapter entitled "Specific Statutes of Limitation." Under the doctrine of pari materia
, each of these sections should be construed in the same way. In other words, one must treat section 11.5 as a statute of limitation, just like all of the other sections in this Chapter. Indeed, the section does provide a limitation period for ELA/USTA actions: it applies to cases "brought on or after the effective date of this section
By expressing an intent that "a person may seek to recover the following [costs] in an action" the statute demonstrates that all
ELA/USTA cases, filed after the effective date, may proceed, but only with regard to certain costs.[xxxiii]
Second, public policy does not support further argument in favor of statute of limitations defenses after Ind. Code § 34-11-2-11.5 was enacted. In Cooper
, the Court noted that the public policy underlying statutes of limitation is to "provide security against stale claims, which in turn promotes judicial efficiency and advances the peace and welfare of society."[xxxiv]
The legislature's new "specific statute of limitation" addresses this staleness concern. It limits newly-filed ELA and USTA actions to future costs and those costs incurred within the ten years prior to the filing of litigation. In selecting the ten-years of costs, the legislature balanced two equities: it protected ELA and USTA defendants from claims involving decades old environmental costs, while providing plaintiffs with a bright-line rule permitting them to file ELA and USTA actions. Arguing that Ind. Code § 34-11-2-11.5 is not a specific statute of limitations undermines the legislative balance struck by the General Assembly.
Third, it is not useful to analyze future cases based on these prior decisions. When determining statute of limitations arguments, Indiana courts first consider whether a cause of action has a specific statute of limitations.[xxxv]
Indeed the catch-all limitations statute, forming the basis for the Pflanz
decision, specifically disclaims any application to causes of action for which "a different limitation is prescribed by statute."[xxxvi]
Many courts have affirmed this principle.[xxxvii]
It is highly unlikely that courts will treat Ind. Code § 34-11-2-11.5 as simply limiting the time period for which damages
may be sought; instead this new provision distinguishes ELA and USTA cases filed after May 10, 2011, from all cases filed on or before May 9, 2011.
It is relatively simple to apply this analysis to the hypotheticals previously suggested by McInerny. McInerny suggested that under Pflanz
, a USTA defendant sued 13 years after a cleanup order was issued by IDEM, would argue that the plaintiff's action was barred under Ind. Code 34-11-1-2(a). As noted above, however, Ind. Code 34-11-1-2(a) does not apply to a newly filed USTA action because Ind. Code § 34-11-2-11.5 provides a “specific statute of limitation” for a USTA claim. Thus, defendants' statute of limitations challenge would not result in dismissal of the litigation. A defendant will, however, be able to challenge, under Ind. Code § 34-11-2-11.5, any costs a plaintiff incurred more than ten years before the litigation was filed.
The other suggested hypothetical involved an ELA defendant arguing that a newly filed ELA action would be barred by Ind. Code § 34-11-2-7. Under the hypothetical, the ELA suit was filed more than eight years after the plaintiff learned that the property was contaminated. The plaintiff's knowledge, however, became immaterial to ELA and USTA claims with the passage of SEA 346. The new statute demonstrates the General Assembly’s determination that ELA actions, filed after May 9, 2011, accrue based on when response costs are incurred. The statute speaks clearly that a person may seek such costs in an ELA action "even if the person or any other person
also incurred costs more than ten (10) years before the date the action is brought."[xxxviii]
The "even if" statement is a plain statement that historic cleanup efforts, more than 10 years old, performed by the same person
, will not prohibit the newly filed litigation. If the new statute was merely a description of the type of costs that may be sought, rather than express permission to bring such an action, this statutory statement would be rendered superfluous. This would produce an absurd result prohibited by the rules of statutory construction.[xxxix]
Indiana appellate courts have not resolved the interpretation of Ind. Code § 34-11-2-11.5. However, it is unlikely that courts will interpret the new provision as permitting further litigation regarding statute of limitation defenses in ELA and USTA claims. It seems much more likely that courts will agree with the Seventh Circuit's prediction that "[i]f § 34-11-2-11.5 governed this litigation, the resolution of the [statute of limitations] issue would be a simple affair."[xl]
[i] See Bourbon Mini-Mart v. Gast Fuel & Servs.
, 783 N.E.2d 253, 260 (Ind. 2003).
Ind. Code § 13-30-9-2.
[iv] Cooper Indus. LLC v. City of South Bend
, 899 N.E.2d 1274, 1280-1281 (Ind. 2009).
, 888 N.E.2d at 758 (citing Comm'r, Ind. Dep't of Envtl. Mgmt. v. Bourbon Mini-Mart, Inc.
, 741 N.E.2d 361 (Ind. Ct. App. 2000) summarily aff'd by
783 N.E.2d 253 (Ind. 2003)).
[xii] Cooper Industries, LLC
, 899 N.E.2d at 1278.
Ind. Code § 34-11-2-11.5(b).
See Ind. Code §§ 34-11-2-11.5(d) and (e).
[xxv] Peniel Group, Inc.
, 973 N.E.2d at 580 n.4.
[xxvii] Bernstein v. Bankert
, 702 F.3d 964 (7th
McInerny, The ELA Statute of Limitations: Has the Issue Really Been Resolved?
, Res Gestae, March 2013, p. 39-41.
Ind. Code § 34-11-2-11.5(b) (emphasis added).
[xxxiv] Cooper Indus.
, 899 N.E.2d at 1279.
[xxxv] See Pflanz v. Foster
, 888 N.E.2d 756 (Ind. 2008) (noting that prior cases applied "the ten-year [catch-all] statute of limitation for actions [because they were] not limited" by a specific limitation provision.).
[xxxvii] Bernstein v. Bankert
, 702 F.3d 964, 985 (7th Cir. 2012) ("When this action was filed, the ELA did not include its own limitations provision."); Pflanz v. Foster
, 888 N.E.2d 756 (Ind. 2008) (noting agreement by parties that catch-all statute applied to claim because USTA was not limited by any other statute); Comm'r, Ind. Dep't of Envtl. Mgmt. v. Bourbon Mini-Mart, Inc.
, 741 N.E.2d 361 (Ind. Ct. App. 2000); Com'l Logistics Corp. v. ACF Indus.
, 2006 U.S. Dist. LEXIS 84338 (S.D. Ind. July 18, 2006) (noting similarities between USTA and ELA, including the fact that both "omitted any reference to a statute of limitations"); McFarland Foods Corp. v. Chevron USA, Inc
., 2001 U.S. Dist. LEXIS 2679, 15-16 (S.D. Ind. Jan. 5, 2001) (holding ten year catch-all statute applies to a cause of action that "is not limited by any other statute.").
Ind. Code § 34-11-2-11.5(b)(1) (emphasis added).
[xxxix] Cooper Indus.
, 899 N.E.2d at 1283.
, 702 F.3d at 986 n.10.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.