2020 Environmental Real Estate IssuesThe United States Court of Appeals for the 5th Circuit ordered dismissal of claims for contribution or cost recovery against several Texas agencies based on the doctrine of sovereign immunity.

State Agencies Allegedly Arranged for Disposal at the USOR Site
The United States Oil Recovery Site (“USOR Site”) Potentially Responsible Parties Group (the “PRP Group”), a group of companies cooperating with EPA to cleanup the USOR Site, sued several Texas agencies, alleging these agencies arranged for disposal of hazardous substances at the USOR Site.  The trial court denied a motion to dismiss based on sovereign immunity but the 5th Circuit reversed and ordered dismissal.

State Agencies Are Arms of the State
According to the 5th Circuit, CERCLA did not remove sovereign immunity as to “arms of the state.”  Indeed, no federal statute could remove this immunity because it stems from the US Constitution.  The key inquiry is to determine if these agencies are “arms of the state.”

The 5th Circuit determined these agencies were arms of the state and protected by sovereign immunity.  Their status as arms of the state comes from the statutes establishing the agencies, their inclusion in the state’s budget, and their funding largely from the state treasury’s general revenue.  Also, these agencies do not have local autonomy; they have statewide regulatory authority and state officials oversee them.

This latter distinction may be important; several other defendants not parties to this ruling are municipalities, school districts, and other local government entities, which may not be “arms of the state.”

TCEQ Involvement and State Law Claims
The 5th Circuit rejected the PRP Group’s argument that actions of the Texas Commission on Environmental Quality (“TCEQ”) in participating with EPA in the cleanup waived sovereign immunity.  The Court also dismissed claims against these agencies based on the Texas Solid Waste Disposal Act, which has CERCLA type provisions, although this dismissal may not prevent the PRP Group from pursuing those claims in state court.

For a copy of the 5th Circuit’s opinion http://www.ca5.uscourts.gov/opinions/pub/17/17-20361-CV0.pdf