Superfund lawyers often confront vexing problems in allocating responsibility among parties jointly and severally liable under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Litigation cost is prominent among those problems. With no statutory limitations on what “equitable factors” might matter to an allocation, see 42 U.S.C. § 9613(f)(2), literally any fact could be relevant, and discovery can become daunting.

In a November 2021 column, I suggested that phasing litigation could save significant time and expense if an early phase – one before intensive fact discovery into who disposed of how much of what substance under which circumstances – resolved the allocation “methodology.” An allocation is a single list of numbers that add up to 100%. Suppose the court found every relevant fact, the methodology is the formula or algorithm or spreadsheet that converts those facts into the single list of numbers adding to 100%.

If the parties know the methodology, the case may be settleable without more. If not, knowing the methodology will typically identify the factual or legal questions that really swing the numbers. Case management can defer all the discovery into other, less salient, issues, and the parties can likely settle on an allocation after resolving the important questions and without having to grind through all the phases to the end.

There is an alternative path to establish an allocation through private processes. Sometimes parties can reach an allocation with less time and expense by retaining an allocation professional who will convene an alternative dispute resolution process. Those private allocations typically allow parties to craft their own discovery processes, often limiting fact discovery to answering a questionnaire and producing documents. They avoid depositions entirely.

In principle, the same early phase that resolves the allocation methodology could focus the private ADR on only those facts that matter. William Hengemihle of FTI Consulting, a prominent private allocator, and I discussed these questions for our E2 Law Podcast. That conversation raised a number of additional points, of which I highlight two here.

First, arriving at an allocation methodology entirely in the abstract can result in a methodology that poses excessive (or impossible) data demands. If the formula requires facts that are unknowable with any level of confidence or unknowable without a huge fact-gathering effort, it may be worse than a less comprehensive or less precise methodology.

Second, there is a disagreement over whether one can test the reasonableness of an allocation methodology by looking at the allocation outcome. On the one hand, an extreme or unexpected allocation may cause a challenge to the methodology or it may make settlement impossible. On the other hand, if you already know what allocation is “fair,” then you may not need the methodology in the first place. The methodology is what allows a party to say that one allocation is more “fair” than another in a contested case. In any event, if you need the application of the methodology to choose the methodology, you can’t litigate (or resolve in ADR) the methodology ahead of full fact discovery. So, cost savings from case or ADR phasing may not be available.