Agere Systems, Inc. v. Advanced Environmental Tech. Corp

Apr 12: In the U.S. Court of Appeals, Third Circuit, Case No. 09-1814. The appeal arises from nearly three decades of involvement by U.S. EPA at the Boarhead Farms Superfund Site in Bucks County, Pennsylvania. At issue in the underlying case was the disposal of millions of gallons of toxic waste, over a six-year time period, by more than twenty parties, with millions of dollars of cleanup costs at stake. Along with the factual issues, the case implicates the "still developing distinctions" between liability under § 107(a) and § 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986 (SARA),

codified together at 42 U.S.C. §§ 9601-9675 (collectively CERCLA).

 

    On June 18, 2002, five plaintiffs -- Agere Systems, Inc. (Agere), Cytec Industries, Inc. (Cytec), Ford Motor Company (Ford), SPS Technology, LLC (SPS), and TI Automotive Systems LLC (TI) (collectively plaintiffs or appellees) -- filed the present suit against twenty-three defendants for cost recovery and contribution under CERCLA and the Pennsylvania Hazardous Sites Cleanup Act (HSCA), to recover costs that the plaintiffs had paid to the EPA pursuant to certain consent decrees or that they had provided as a consequence of the cleanup of hazardous substances at the Boarhead Site. All of the defendants except one, Carpenter Technology Corporation (Carpenter), settled their liabilities with the plaintiffs or were otherwise dismissed from the suit after a bench trial.

 

    On August 22, 2008, the United States District Court for the Eastern District of Pennsylvania entered judgment against Carpenter, finding it liable for 80% of the costs paid by the plaintiffs as of December 31, 2007, plus prejudgment interest. The Court also entered a declaratory judgment that Carpenter is liable for 80% of all cleanup costs that the plaintiffs may incur after January 1, 2008. The District Court denied Carpenter's motion to alter or amend the judgment, and Carpenter filed this appeal.

 

    The Appeals Court vacated the District Court's judgment and remand for proceedings consistent with its opinion. The Appeals Court made four request of the District Court in its reconsideration: [1] ". . .we ask the District Court to make a clear and unequivocal finding, if possible, as to when the EPA completed its removal action. To the extent the District Court decides it must reopen the record in order to make that finding, it may do so. . . [2] permit TI. . . and Agere. . . to go forward with their § 107(a) cost recovery claims to recoup costs paid as part of the shared expense of cleaning up the Boarhead Site. . . [3] . . .because we hold that Cytec, Ford, and SPS, as well as TI (with regard to OU-2), are shielded from contribution counterclaims under § 113(f)(2) and therefore do not have § 107(a) claims for costs incurred pursuant to the consent decrees, the District Court should again proceed solely under § 113(f) as to those claims. . . [4] while proceeding under § 113(f) to allocate liability among the parties, the District Court may not consider the June 23rd stipulation as evidence against Carpenter, at least not without addressing the evidentiary problems noted herein. . ."

 

    With regard to item #1 above, the Appeals Court said, ". . .whether there is a time-bar to plaintiffs' recovering the approximately $7 million they paid to reimburse the EPA for past costs. Further, if the District Court finds that the EPA initiated 'on-site physical construction' of the remedial action within three years of the completion of its removal action, it may apply the six-year statute of limitations exception contained in § 113(g)(2)(B). If the District Court finds that the EPA's December 6, 2001 suit was not time-barred, and that the plaintiffs are able to recover for past costs, the Court should make a more exact finding as the amount that the plaintiffs paid to reimburse the EPA for past costs."

 

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West Bend Mutual Ins v. Federated Mutual Ins

Mar 25: In the U.S. Court of Appeals, Seventh Circuit, Case No. 09-2519. Plaintiff-appellant West Bend Mutual Insurance Company (West Bend) appeal from the grant of summary judgment in favor of appellees, who consist of a group of insurance companies that includes the United States Fidelity and Guaranty Company (Fidelity) and Federated Mutual Insurance Company (Federated). West Bend initially sued the defendants for breach of contract because Federated declined to defend a mutual insured in a class action alleging that insured's gas station contaminated groundwater in a residential neighborhood.

 

    The case revolves around "whether the pollution exclusion contained in Federated's policy effectively limited coverage for gasoline spills under Indiana law." The district court found that a clause in Federated's policy excluded coverage for this type of claim and granted summary judgment in favor of Federated, Fidelity, and other insurers. West Bend appealed the judgment as it applies to Federated and the Appeals Court, in a 2-1 split decision, affirmed the district court decision.

 

    The majority Appeals Court said, ". . .despite weak wording, the Federated products-hazard clause covered only knowingly completed market transactions and abandoned product. . . There is no doubt that the Bowens action was predicated on accidental leak of gasoline from MDK's storage tanks and West Bend never contended that the gas station abandoned its product. Therefore, the Federated Umbrella policy does not provide an independent source of recovery for the appellants."

    The dissenting Justice indicated, "I agree with my colleagues that the pollution exclusion in Federated's 2001-2003 CGL policy bars coverage under that policy. I do not agree, however, that the Indiana Supreme Court's decision in B & R Farm Services, Inc. v. Farm Bureau Mutual Insurance Co., 483 N.E.2d 1076 (Ind. 1985), precludes coverage under Federated's 2001-2002 umbrella policy.

That policy provides additional insurance for losses covered under '[t]he 'products-completed operations hazard' anywhere in the world.'"

   

    Access the complete opinion (click here). [Please Note: The 7th circuit has a temporary web hyperlink nomenclature system. If the link does not work click on this link and enter the case number above (click here).] 

Niagara Mohawk Power Assn. v. Chevron U.S.A., Inc.

Feb 24: In the U.S. Court of Appeals, Second Circuit, Case No. 08-3843. As explained by the Appeals Court, Niagara Mohawk Power Corporation (NiMo) commenced this action to recover costs pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and the Superfund Amendments and Reauthorization Act of 1986 (SARA) from the defendants for cleanup of properties previously owned by NiMo and once either owned, leased, or used by the defendants. In the appeal, NiMo challenges orders of the United States District Court for the Northern District of New York which denied NiMo's motion for summary judgment, granting summary judgment in favor of the defendants, and denying NiMo's motion for reconsideration.

 

    We are called upon to determine whether NiMo, as a potentially responsible party under CERCLA, can seek response and cleanup costs under either § 107(a)(4)(B) or § 113(f)(3)(B), after having settled its CERCLA liability with the New York State Department of Environmental Conservation (DEC) but not with the Environmental Protection Agency (EPA), where the EPA has not expressly authorized the DEC to settle CERCLA liability relating to the property at issue.

 

    The Appeals Court said, "We hold that NiMo may seek contribution costs under § 113(f)(3)(B) because NiMo has settled with the DEC, but consequently NiMo may not seek reimbursement for response costs under § 107(a). We hold that the district court erred in granting summary judgment for the defendants because there are genuine issues of material fact with regards to their respective liabilities.

 

    Additionally, the Appeals Court ruled, "We hold that the district court erred by holding that NiMo did not comply with the National Contingency Plan. We hold that the district court erred in part by dismissing NiMo's New York Navigation Law claims. Finally, we hold that the district court erred in dismissing Chevron's third party action against the County of Rensselaer and others. We affirm, however, the district court's dismissal of NiMo's state contribution, indemnity, and unjust enrichment claims because they are preempted by CERCLA."

 

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Gintis v. Bouchard Transportation Co.

Feb 23: In the U.S. Court Appeals, First Circuit, Case No. 09-1717. In this case, a fuel barge owned and operated by defendants discharged a substantial amount of oil into the waters of Buzzards Bay in southeastern Massachusetts. Plaintiffs are owners of residential waterfront property on the bay who brought suit as individuals and as members of a proposed class. The district court denied class certification, but the Appeals Court said, ". . .because the court did not subject the parties' contentions to the plenary analysis that precedent requires, we vacate the judgment and remand."

 

    The  Appeals Court provided more detail and said, "It is enough to say here that Bouchard's arguments in this appeal appear to show that substantial and serious common issues would arise over and over in potential individual cases. Indeed, the only apparent mitigation of this prospect of duplicative litigation lies in the possibility that not many individual actions would be brought if separate actions were the only course, and this implicates the second condition for certification under paragraph (3), that class litigation be

superior to a string of individual plaintiffs going alone. While superiority is a separate base to be touched, it is addressed by many of the considerations that inform a trial court's judgment call about how clearly predominant the common issues must be. . .

 

    Here there is evidence that may well go to the very reason for Rule 23(b)(3), mentioned before (i.e., to make room for claims that plaintiffs could never afford to press one by one), since the record contains one estimate that potential individual recoveries are probably in the $12 to $39 thousand range. Given the elements of injury, causation and compensation on which Bouchard intends to join issue, there is a real question whether the putative class members could sensibly litigate on their own for these amounts of damages, especially with the prospect of expert testimony required. Like predominance, the issue of superiority is thus a serious one in these circumstances and should be addressed thoroughly."

 

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John Dubinsky v. Mermart

Feb 10: In the U.S. Court of Appeals, Eighth Circuit, Case No. 09-2072. John Dubinsky, et al (Subordinate Bondholders) invested in a refinancing venture for a real estate development. They sued the developer of the project, Mermart, L.L.C. (Mermart), alleging breach of contract and demanding equitable accounting for failure to pay interest under the financing documents, as well as alleging unjust enrichment, negligence, and fraudulent misrepresentation based on alleged representations that the project was free from environmental hazards. The district court dismissed the contract claims, finding that the Subordinate Bondholders failed to obtain written consent of UMB Bank, N.A. (UMB Bank), the Senior Mortgagee, as required by the financing documents. The district court also dismissed the negligence, unjust enrichment, and fraudulent misrepresentation claims because the economic loss doctrine precluded recovery. The Appeals Court affirmed the district court ruling.

    The Appeals Court said further, "We agree with the district court that the negligence claim is an enforcement action under the Subordination Agreement. Id. Similarly, we find that, like the negligence claim, the failure to make interest payments due to the characterization of the lead paint remediation as an "upgrade expense," is a matter that arises out of the Financing Documents. . . We affirm the dismissal of the negligence and unjust enrichment claims because the Subordinate Bondholders did not obtain written permission to sue. . .

    "Finally, the Subordinate Bondholders argue that Mermart made fraudulent misrepresentations pertaining to the absence of lead-based paint. Mermart counters that any such alleged statements are also covered solely by contractual duties. . . we find that the claimed fraudulent misrepresentation is also a matter that arises out of the Financing Documents. Again, we affirm the dismissal of this claim because the Subordinate Bondholders did not first obtain the written permission from the Senior Mortgagee to sue."

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In re: W.R. Grace & Co.

Dec 31: In the U.S. Court of Appeals, Third Circuit, Case No. 08-3697/3720. In the case, W.R. Grace & Co. (Grace) and the State of Montana appeal an order from the United States District Court for the District of Delaware affirming an order from the District’s Bankruptcy Court denying Grace’s motion to expand a preliminary injunction. The proposed expansion would have enjoined claims against the State of Montana arising from Grace’s mining operations near Libby, Montana. Both the District Court and the Bankruptcy Court determined that the Bankruptcy Court lacked jurisdiction under 28 U.S.C. §§ 1334(b) and 157(a) to expand the injunction to enjoin those claims and, therefore, denied the motion. The Appeals Court agreed and affirmed the lower courts' decisions. This appeal is the fourth to be considered by the Third Circuit from Grace’s ongoing efforts to reorganize under Chapter 11 of the Bankruptcy Code, efforts which began in 2001 when Grace sought shelter from liabilities associated with asbestos litigation.

The Appeals Court said, "In conclusion, our precedent dictates that a federal bankruptcy court does not have related-to jurisdiction over a third-party lawsuit if that lawsuit would affect the bankruptcy proceeding only through the intervention of yet another lawsuit. Grace will not be bound by a judgment against Montana unless there is an additional adjudication. Accordingly, we affirm the judgment of the Bankruptcy Court and the District Court that subject matter jurisdiction does not exist to expand the § 105(a) injunction to include the Montana Actions."

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Raytheon Aircraft Co. v. U.S.

Dec 29: In the U.S. Court of Appeals, Tenth Circuit, Case No. 08-3237. The case involves an appeal from a judgment in favor of the United States in a cost recovery action under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). At trial, the parties disputed the degree to which each is liable for trichloroethylene (TCE) contamination near Hangar 1 and Hangar 4 at Tri-County Public Airport in Herington, Kansas. The United States Army used the airfield from 1942 to 1945. Raytheon Aircraft Company is a successor to Beech Aircraft Corporation, which operated the airfield during the 1950s. According to the Appeals Court, the United States and Raytheon agree they are the only two potentially liable parties.

Raytheon appealed the district court’s finding that it is solely liable for contamination at Hangar 1, as well as the court’s decision to award the United States costs associated with its attempts to list the site on the National Priorities List (NPL). The Appeals Court affirmed the district court’s decision.

The Appeals Court ruled, ". . .this court concludes Raytheon has failed to rebut the presumption that the EPA’s efforts to list the site on the NPL were consistent with the national contingency plan. Because Raytheon has presented no evidence to support a
determination that the EPA’s actions were arbitrary and capricious, the district court’s judgment must be affirmed."

In developing its decision, the Appeals Court reasoned, "Were this court to adopt Raytheon’s view that the decision to abandon a good faith attempt to list a site on the NPL makes that attempt arbitrary and capricious as a matter of law, the EPA would be forced to continue expending efforts and funds in support of a listing in order to recover its costs, even where the results of the ESI [expanded site inspection] itself ultimately reveal the contamination is not serious enough to warrant the listing. Such a result is untenable."

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Boston & Maine Corp. v. Massachusetts Bay Transportation

Nov 24: In the U.S. Court of Appeals, First Circuit, Case No. 09-1185. The Appeals Court explains that on June 30, 1983, the Boston and Maine Corporation (B&M), a railroad operator, was discharged from bankruptcy by a Consummation Order stating that it was "free and clear of all claims." The Order was pursuant to § 77 of the Bankruptcy Act of 1898, 11 U.S.C. § 205 (repealed 1978). B&M was the operator of what is now known as the MBTA Commuter Rail Maintenance Facility (the Terminal), a thirty-four-acre railroad terminal in the greater Boston area used for refueling diesel trains. In 1983, the Terminal was owned by the Massachusetts Bay Transportation Authority (the MBTA), having been purchased by the MBTA from B&M in 1976; B&M had operated the Terminal under bankruptcy protection from 1970 to June 1983 and had owned the Terminal since the late 1920s. B&M continued to operate the Terminal under an agreement with and for the benefit of the MBTA until December 31, 1986.

The MBTA asserted no claims against B&M regarding environmental matters before B&M's June 1983 discharge from bankruptcy, pursuant to the Consummation Order. The MBTA did, however, assert a claim on May 4, 2004, almost 21 years later, against B&M. The claim was for 95 percent of $15,340,810 for past costs and 95 percent of all future costs, as contribution, under state environmental law, the Massachusetts Oil and Hazardous Material Release Prevention and Response Act (Chapter 21E), for certain cleanup activities the MBTA had undertaken at the Terminal.

The Appeals Court ruled, "We hold that the MBTA's contribution claims under Chapter 21E for contamination prior to the 1983 discharge from bankruptcy are barred as a matter of law by the Consummation Order. We reverse and direct entry of judgment on these claims for B&M." Further the Appeals Court concluded, "Both sides have been ably represented by counsel; the facts and the law require rejection of the MBTA's arguments. The MBTA's contribution claims arising out of pre-June 30, 1983, conduct by B&M are barred by the Consummation Order, so B&M is entitled to an order enjoining the MBTA from pursuing claims for investigation or remediation costs for contamination at the Terminal occurring before June 30, 1983."

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U.S. v. Albert Investment Co.

Nov 10: In the U.S. Court of Appeals, Tenth Circuit, Chase No. 08-6267. Union Pacific Railroad Co. (Union Pacific) appealed from the district court’s denial of its motion to intervene in an action brought by Plaintiffs-Appellees (United States and the State of Oklahoma) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Appeals Court ruled, "Because Union Pacific has an interest in the underlying action, and a statutory right to intervene, we reverse and remand."

The Union Pacific Railroad Company acquired the Double Eagle Superfund Site in 2003, as part of its merger with the Missouri Pacific Railroad Company. The Appeals Court concluded, "Because Union Pacific has demonstrated all four requirements for intervention as of right -- timeliness, interest, impairment, and inadequate representation -- the district court erred in denying the motion for intervention as of right, and on remand Union Pacific shall be allowed to intervene. Because we find that Union Pacific has a right to intervene, we do not reach the district court’s denial of the motion for permissive intervention."

In an interesting portion of the overall decision, the Appeals Court says, "The notice-and-comment mechanism is not an adequate substitute for intervention, contrary to the government’s claims. . . The government solicits comments regarding proposed consent decrees as a matter of practice. . . Union Pacific submitted comments to the Attorney General within the comment period, and the Department of Justice will file them with the district court. . . As Judge Lucero observed during oral arguments, however, the government is free to ignore the comments because the notice-and comment mechanism is not statutorily mandated. The district court may also disregard Union Pacific’s comments in the absence of any requirement to consider them or any appellate review of the court’s consideration of comments. The failure to consider adequately an intervenor’s objections, on the other hand, is subject to appellate review. . . For these reasons, Union Pacific’s ability to protect its interests will be impaired if it is not a party to this action."

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AMW Materials Testing, Inc. v. Town of Babylon

Oct 19: In the U.S. Court of Appeals, Second Circuit, Case No. 08-1731. The case involved a fire at a commercial building during which hazardous materials were released into the environment. Plaintiff owners sued the local entities that responded to the emergency in the under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), New York tort law, and New York Navigation Law to recover cleanup costs. Plaintiffs appealed a judgment from the district court in favor of defendants arguing that defendants qualify as a matter of law as “operators” of the facility from which hazardous materials were released, and that emergency response actions cannot constitute an affirmative defense to liability. The Appeals Court said, "Both arguments are unpersuasive" and affirmed the district court decision in favor of defendants.

The Appeals Court summarized its decision as follows: "(1) Section 9607(d)(2) of Title 42 is an affirmative defense to CERCLA liability under § 9607(a), and, accordingly, the district court did not err in treating it as such; (2) Whether the § 9607(a) claims in this case were properly tried to a jury or to the court, on the trial record no reasonable factfinder could decline to find that defendants are entitled to the affirmative defense set forth in § 9607(d)(2); (3) The district court properly referenced the factors set forth in Cuffy v. City of New York, 69 N.Y.2d 255, 260, 513 N.Y.S.2d 372, 375 (1987), in charging the jury as to plaintiffs’ theory of defendants’ municipal liability for negligence under New York law. (4) The district court properly denied plaintiffs’ motion for judgment as a matter of law or a new trial on their claim for the discharge of petroleum under N.Y. Nav. Law § 181(1)."

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U.S. v. Starnes

Sep 24: In the U.S. Court of Appeals, Third Circuit, Case Nos. 07-3341 & 08-1691. Cleve-Allan George and Dylan C. Starnes appeal from judgments of conviction and sentence entered against them following a jury trial in the United States District Court for the District of the Virgin Islands. Although these appeals have not been formally consolidated, the Appeals Court resolved them together because they arise from a common set of facts. The Appeals Court affirmed the judgments.

Virgin Islands Housing Authority (VIHA) received a Federal grant for asbestos cleanup to be “performed in strict accordance with all federal, state and local regulations and ordinances” and eventually awarded a demolition contract to Alvin Williams Trucking & Equipment Rental, Inc. That company, with the consent of VIHA, subcontracted the asbestos abatement portion of the project to the Virgin Islands Asbestos Removal Company (VIARCO), a company owned by George. VIARCO had “joined forces” with Environmental Contracting Company (ECC), a company run by Starnes.

Among other violations, a “pressure washer” was used to dislodge asbestos-containing materials from the site’s structures. The Appeals Court said, this removal method, although time-efficient, generated a substantial amount of debris-filled wastewater, which the crew pumped into toilets and bathtubs. But those fixtures rapidly clogged, causing wastewater to pour out and accumulate on the buildings’ balconies. In response, George constructed a drainage system out of PVC pipes, which permitted the wastewater to flow off the balconies and down to the ground. When the wastewater evaporated, it left a dusty white residue clinging to the facades of the buildings and the surrounding sidewalks and grass.

The District Court sentenced Starnes to thirty-three months of imprisonment, three years of supervised release, and a special assessment of $1,600. While noting the government’s position that George’s acts were more egregious than those of Starnes, the District Court nonetheless imposed on George the same sentence that it had imposed on Starnes.

The Appeals Court said, "Both defendants also argue, albeit somewhat perfunctorily, that the District Court committed significant procedural error by failing to give meaningful consideration to the sentencing factors set forth in 18 U.S.C. § 3553(a). We disagree. While a sentencing court must consider all of the § 3553(a) factors, it does not have to discuss and make findings as to each factor so long as the record otherwise makes clear that it took the factors into account."

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USA v. Apex Oil Company

Aug 25: In the U.S. Court of Appeals, Seventh Circuit, Case No. 08-3433. As explained by the Appeals Court, Apex Oil Company appeals from the grant of an injunction, at the behest of U.S. EPA and on the authority of the Resource Conservation and Recovery Act of 1976, that requires Apex to clean up a contaminated site in Hartford, Illinois. In a 178-page opinion following a 17-day bench trial, the district judge made findings that millions of gallons of oil, composing a “hydrocarbon plume” trapped not far underground, are contaminating groundwater and emitting fumes that rise to the surface and enter houses in Hartford and in both respects are creating hazards to health and the environment. The Appeals Court said, "The judge deemed it Apex’s legal responsibility to abate this nuisance because the plume was created by an oil refinery owned by a corporate predecessor of Apex. Apex challenges the findings and conclusion, but the challenge has no possible merit."

The Appeals Court indicated, "The principal question presented by the appeal is unrelated to the district judge’s findings and conclusions; it is whether the government’s claim to an injunction was discharged in bankruptcy and therefore cannot be renewed in a subsequent lawsuit -- this suit. The bankruptcy judge’s confirmation (approval) of a claim in a Chapter 11 proceeding discharges the debtor from 'any debt that arose before the date of' confirmation, with immaterial exceptions." The Appeals Court affirmed the decision and said, "There is no improper delegation to the EPA (compare United States v. Microsoft Corp., 147 F.3d 935, 955 (D.C. Cir. 1998)), because its exercise of 'oversight and approval' will be subject to the court’s override."

Access the complete opinion (click here). [Please Note: The 7th circuit has a temporary web hyperlink nomenclature system. If the link does not work click on this link and enter the case number above (click here).]

Kennedy Bldg. Assoc. v. CBS Corp.

Aug 18: In the U.S. Court of Appeals, Eighth Circuit, Case No. 07-3622. According to a court summary the district court's order finding that CBS has substantially complied with the remediation requirements imposed upon it was consistent with this court's mandate, and it did not abuse its discretion in determining that no further relief was required by the provisions of the injunction previously entered in the case. The district court was without authority under the mandate to increase the bond in the case; Kennedy's Rule 60(b)(2) motion to increase the bond was untimely.

The mandate did not preclude the district court from considering Kennedy's claim for response costs and as the court cannot determine whether the district court denied the motion on the merits or because it believed the request was outside the scope of the mandate, and the matter was remanded for further proceedings. In its final ruling the Appeals Court said, ". . .we affirm the order of the district court modifying the MERA [Minnesota Environmental Rights Act] injunction and denying Kennedy’s motion to increase the bond. We remand this case for clarification of the district court’s order denying Kennedy’s request for response costs." The Appeals Court said, ". . .we direct that the district court make the appropriate findings: (1) Which, if any, of Kennedy’s claimed response costs are compensable; and (2) The amount of money damages, if any, to which Kennedy is entitled."

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Friedland v. TIC-The Industrial Co.

May 29: In the U.S. Court of Appeals, Tenth Circuit, Case No. 08-1042. Plaintiff-appellant Robert M. Friedland filed the contribution action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) § 113(f), against defendants appellees, The Industrial Company (TIC) and GeoSyntec Consultants Inc. (GeoSyntec). The district court entered summary judgment in favor of the defendants-appellees based on its determination that Friedland already recouped all of his recoverable costs from other entities and therefore has no damages to recover in this case. Friedland appealed the decision and the Appeals Court affirmed the district court decision.

The Appeals Court concluded, "The district court correctly concluded that the collateral source rule does not apply in this CERCLA contribution action. The court also properly determined that the alleged injury and damages in this lawsuit are the same as those addressed in the USF&G and Travelers settlements. We therefore affirm the entry of summary judgment against Mr. Friedland. We grant the appellees’ motion to file their response brief under seal and Mr. Friedland’s motion to file his reply brief under seal."

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High Court Rules 8-1 On Superfund Liability Issues

May 4: The U.S. Supreme Court decided the consolidated cases of Burlington No., & Santa Fe R. Co., v. United States, (Docket No. 07-1601); and Shell Oil Co., v. United States (Docket No. 07-1607) on appeal from the U.S. Court of Appeals, Ninth Circuit [See WIMS 2/25/089]. The 8-1 opinion was delivered by Justice Stevens and supported by Justices Roberts, Scalia, Kennedy, Souter, Thomas, Breyer and Alito. Justice Ginsburg filed a dissenting opinion. In these cases involving cleanups under the Comprehensive, Environmental, Response, Compensation, and Liability Act (CERCLA), the High Court explained that the cases "raise the questions whether and to what extent a party associated with a contaminated site may be held responsible for the full costs of remediation."

The law allows the government to obtain reimbursement for the costs of remediating hazardous waste sites from the owners and operators of land on which a disposal of hazardous substances has occurred. However, because even passive landowners may be subjected to CERCLA liability, Congress removed language from early CERCLA bills mandating joint and several liability for multiple defendants who own or operate a particular site. In the Burlington case, the Ninth Circuit nevertheless imposed joint and several liability for the entire cost of a facility's remediation on two landlords, even though they owned only a portion of the overall site for a fraction of its period of operation. In the Shell Oil case, the questions presented are whether liability for "arranging" for disposal of hazardous substances under CERCLA may be imposed upon a manufacturer who merely sells and ships, by common carrier, a commercially useful product, transferring ownership and control to a purchaser who then causes contamination involving that product.

In the Ninth Circuit, the final opinion concluded, "The district court erred in determining that the harm in this case could be apportioned on this record. Given the district court’s erroneous approach and the paucity of record evidence, there is no reasonable basis for apportioning the damages attributable to the Railroads’ activity. Shell’s liability is a closer call, but the evidence on the record in that regard is also insufficient to support apportionment. The district court followed the proper analysis in finding that Shell is liable as an arranger. Shell arranged for the sale and transfer of chemicals under circumstances in which a known, inherent part of that transfer was the leakage, and so the disposal, of those chemicals."

The Supreme Court concluded, "that the Court of Appeals erred by holding Shell liable as an arranger under CERCLA for the costs of remediating environmental contamination at the Arvin, California facility. Furthermore, we conclude that the District Court reasonably apportioned the Railroads’ share of the site remediation costs at 9%. The judgment is reversed, and the cases are remanded for further proceedings consistent with this opinion." In her dissent, Justice Ginsburg said, "Although the question is close, I would uphold the determinations of the courts below that Shell qualifies as an arranger within the compass of the. . . CERCLA."

Access the complete 23-page majority opinion and dissent (click here). Access the transcript of the oral arguments (click here). Access the Supreme Court docket for 07-1601 (click here). Access the Supreme Court docket for 07-1607 (click here). Access the various merit and amicus briefs filed by the parties (click here, scroll down to February 24). Access more information on the SCOTUS Wiki (click here). Access links to various media reports on the case (click here).

U.S. Bank National Association v. U.S. EPA

Apr 20: In the U.S. Court of Appeals, Sixth Circuit, Case No. 08-3083. Eagle-Picher Technologies, LLC (EP Tech), an electronics manufacturer, filed for Chapter 11 bankruptcy in 2005. The United States, on behalf of U.S. EPA and the Department of Interior, filed a claim in the bankruptcy proceeding against EP Tech under CERCLA -- the Comprehensive Environmental Response, Compensation and Liability Act of 1980. The Appeals Court indicates that under CERCLA, the federal government may recover the cost of cleaning up hazardous waste from the parties responsible for its release.

Over the objections of U.S. Bank, the bankruptcy trustee, the bankruptcy court found EP Tech liable for $357,246 of already-incurred costs and $8,735,434 in estimated future costs for the clean-up of groundwater and soil contamination near a now-vacant manufacturing plant in Socorro, New Mexico. U.S. Bank appealed to the district court, which affirmed the finding.

U.S. Bank appealed to the Sixth Circuit, arguing: (i) EP Tech is not liable under CERCLA for hazardous waste releases that occurred before EP Tech acquired an interest in the Socorro plant in 1998; (ii) even if EP Tech is liable for the clean-up costs at the plant, genuine issues of material fact precluded the bankruptcy court from concluding that EP Tech was responsible for contamination detected at a well located a mile and a half south of the plant; and (iii) the bankruptcy court improperly excluded evidence at the hearing on estimating the future cost of cleaning up the hazardous substances.

The Appeals Court said in affirming the finding, "the bankruptcy court’s decision was legally correct, and it did not abuse its discretion by excluding evidence of future costs."

Further explaining its decision the Appeals Court said, "Our review of the hearing transcript indicates, contrary to U.S. Bank’s characterization, that the bankruptcy court was well-aware that, notwithstanding the finality of the divisibility issue, U.S. Bank was allowed to challenge the estimate derived from EPA’s proposed clean-up strategy. And the transcript shows that the court gave both parties wide latitude. The court appreciated the overlap between the divisibility issue and the estimation of future costs. . . It did not categorically bar questions about the scope of the contamination, and instead probed each of the experts on how their proposed clean-up plans fit with the available data. . ."

Access the complete opinion (click here).

Sycamore Industrial Park v. Ericsson, Inc.

Oct 20: In the U.S. Court of Appeals, Seventh Circuit, Case No. 08-1118. The Appeals Court explains that in 1985, plaintiff Sycamore Industrial Park Associates bought an industrial property with fixtures, including a boiler-based steam heating system, from defendant Ericsson, Inc. Before it sold the property, Ericsson installed a new natural gas heating system, but it left the old heating system in place. Several years after purchasing the property, Sycamore discovered that the boilers, pipes, and various pipe joints that make up the old system were insulated with asbestos-containing material.

Sycamore sued to force Ericsson to remove and dispose of the abandoned asbestos insulation and reimburse Sycamore for alleged "response costs it has incurred or will incur in removing the asbestos insulation." The suit was brought under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA). The district court granted Ericsson’s motion for summary judgment, and Sycamore appealed. The Appeals Court affirmed the district court’s grant of summary judgment.

In its ruling, the district court found that the defendant abandoned the asbestos insulation in place at the property prior to sale. Yet it held as a matter of law that the abandonment did not constitute “disposal” of a solid or hazardous waste into or on any land or water so that such solid waste or hazardous waste might enter the environment, as CERCLA requires. In addition, the district court held as a matter of law that the abandonment of the boiler-based heating system and the subsequent sale of the Sycamore property was not “handling, storage, treatment, transportation or disposal of any solid or hazardous waste,” as required by RCRA.

In its review the appeals Court notes that the Ninth Circuit reached the same conclusion in Stevens Creek, 915 F.2d 1355. The Seventh Circuit said, "Our sister Circuit determined there was no private cause of action under CERCLA for the sale of a building containing materials with asbestos because the defendant never 'disposed' of a hazardous substance." The Seventh Circuit ruled further, "Here, there is no evidence that Ericsson transferred the Sycamore property with the intent to dispose of a hazardous substance. It incidentally left the old heating equipment in place when it sold otherwise useful realty. It simply does not make sense to hold that Ericsson is a responsible party just because Sycamore decided to remove asbestos in place decades after it purchased valuable real estate in a legitimate transaction."

On the RCRA claim, the Appeals Court said, ". . .as a matter of law, by leaving equipment that is insulated by asbestos in place and then selling the Sycamore property, Ericsson did not handle, store, treat, transport, or dispose of the asbestos as required for RCRA liability.

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USA v. Capital Tax Corp

Sep 19: In the U.S. Court of Appeals, Seventh Circuit, Case No. 07-3744. Capital Tax Corporation (Capital Tax) is an Illinois company that purchases distressed real estate properties and resells them for profit. At a Cook County scavenger sale in October 2001, Capital Tax successfully bid on tax certificates to a derelict paint factory on the south side of Chicago. Capital Tax claims that it then entered into an agreement to sell the property to a man named Mervyn Dukatt. Pursuant to this alleged contract, Capital Tax exercised its option on the tax deed and delivered possession of the property to Dukatt. Capital Tax retained legal title to the property, however, as security for the remainder of the purchase price. Dukatt never made another payment, leaving Capital Tax with title to an unwanted property.

Both the Chicago Department of the Environment (CDOE) and U.S. EPA were called to the old paint factory after receiving complaints that toxic paint products were leaking out of the factory into nearby streets and sewers. The inspections revealed thousands of rusty and leaking barrels containing hazardous waste. The EPA ordered Capital Tax to dispose of the waste but Capital Tax refused; the EPA cleaned up the site itself.

The Government then initiated the legal action under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for the response costs it incurred. The district court granted summary judgment in favor of the Government on both liability and damages. Capital Tax appealed the decision, raising two basic arguments. (1) it claims that it is not liable under CERCLA because it is not the “owner” of the facility; and (2) even if it is liable, Capital Tax claims that it is only responsible for the cleanup of the parcels it owned.

On the ownership and liability issue the Appeals Court said, "From this record, it is difficult for us to determine whether Capital Tax had a valid and enforceable contract for the sale of land under Illinois law. If there is no valid contract, then Capital Tax is the 'owner' under § 107(a)(1) and is liable under CERCLA. If there is a valid contract and if equitable conversion applies, Capital Tax is not the 'owner' under § 107(a)(1) and is not liable under CERCLA. The case will likely turn on whether the facts show that Dukatt was, in fact, a bona fide buyer."

On the apportionment issue, the appeals Court indicates that, "As the district court noted, Capital Tax’s mistake is in attempting to apportion liability based on where the hazardous materials were located on the day they were removed. Those hazardous materials could easily have originated in another part of the plant. As in the game of 'musical chairs,' the fact that the chemicals came to rest in any particular place when production ended was largely happenstance. . . Because we have commingling, cross-contamination and migration occurring on a site that formerly operated as a single, unitary operation, there is no basis for apportionment. [citing: See Burlington Northern, 520 F.3d at 956-58].

The Appeals Court also ruled, "A 'sufficient cause' for failing to comply is a reasonable belief that one is not liable under CERCLA. See United States v. Barkman . . .Because we are remanding this case to district court on the issue of liability, we find it appropriate to vacate the award of damages. The district court may reassess the issue of penalties, if it deems that action necessary, after resolving the liability issue."

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Cannon v. Gates (Defense Department)

Aug 26: In the U.S. Court of Appeals, Tenth Circuit, Case No. 07-4107. Plaintiffs-Appellants F. Douglas Cannon, et al (the Cannons) brought suit against the Defendants-Appellees claiming two violations of the Solid Waste Disposal Act and one violation of the Administrative Procedures Act. The district court dismissed the case for lack of subject matter jurisdiction pursuant to the jurisdiction-stripping provision at 42 U.S.C. § 9613(h). The Appeals Court concluded that the district court properly applied § 9613(h) because the Cannons’ suit constitutes a challenge to the Government’s selected removal action, and therefore affirmed the dismissal.

Cannon owned over 1,416 acres of land in Tooele County, Utah and in 1945 entered into a six-month lease with the U.S. War Department, in return for one dollar, which permitted the Government to enter his land to conduct Project Sphinx, which was designed to test means of battling Japanese forces entrenched in caves in the Pacific Islands. The Government agreed that, at the expiration of the lease, it would “leave the property of the owner in as good condition as it is on the date of the government’s entry.”

As part of that testing, the Government used incendiary weapons, including aviation fuel, butane, gasoline, napalm, PT jell, and napalm-gas mixtures. The Government also used chemical weapons, such as phosgene, hydrogen cyanide, mustard gas, and defoliants. Finally, the Government dropped conventional bombs on Cannon’s property. In the 1970s, the Government initiated efforts to study the contamination at the adjacent Dugway Proving Grounds, and included the Cannon property in some of these efforts. The Government, however, did not clean up the Cannon property at that time, and has yet to do so.

Frustrated by the slow progress in the Government’s clean up efforts, two of Cannon’s children, sued the U.S. in 1998 under the Federal Tort Claims Act (FTCA). Following a bench trial, the district court found that the Government had diminished the value of the Cannons’ land from $176.26 to $25 an acre, and awarded them $160,937 in damages. The Tenth Circuit, however, reversed that judgment and held that the statute of limitations barred the Cannons’ FTCA claims.

In November 2005, the Cannons tried a different approach and initiated legal action alleging two claims under the Solid Waste Disposal Act (SWDA). The Cannons alleged under two sections of SWDA that the United States was in violation of federal and Utah regulations applicable to generators of hazardous waste; and that the U.S. has contributed to conditions on their property that endanger the Cannons, other individuals mining on the property, and members of the general public who come onto the Cannons’ property. The Cannons also made a claim under the Administrative Procedures Act (APA), to “compel agency action unlawfully withheld or unreasonably delayed.”

The district court said SWDA § 9613(h) deprives federal courts of jurisdiction to consider “any challenges to removal or remedial action selected.” The Cannons' appealed and the Appeals Court determined that the "Government has already undertaken several
steps toward determining how it will address the contamination present on the Cannons’ property"; and thus, "the Government’s removal actions are therefore sufficient to trigger § 9613(h)." The Appeals Court said, "We are sympathetic to the Cannons’ frustration with the long delays; however, their suit falls within the broad ambit of § 9613(h)."

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James River Insurance v. Ground Down Engineering

Aug 20: In the U.S. Court of Appeals, Eleventh Circuit, Case No. 07-13207. James River Insurance Company appealed the district court’s dismissal of its claim seeking a declaratory judgment that it is not obligated to provide a legal defense to Ground Down Engineering under the insurance policy Ground Down purchased from James River. James River also appealed the denial of its summary judgment motion. James River argues that the “pollution exclusion” in the policy excuses it from the obligation to defend Ground Down and Ground Down’s engineer, Laurel Hall, in a suit filed by Priority Development for "negligently failing to discover construction debris and fuel tanks during an environmental site
assessment."

In its decision, the Appeals Court concluded that the district court erred in holding that the pollution exclusion does not apply. and vacated the district court’s dismissal and remanded the case with instructions for the district court to enter an order granting summary judgment to James River.

In its decision, the Appeals Court said, "Appellees argument fails for two reasons. First, Priority’s complaint states that the damages associated with the construction debris come from the elevated levels of methane gas caused by the debris and lists the debris under the heading 'environmental contamination.' Second, the pollution exclusion is not actually limited to irritants or contaminants. The definition for pollutants states that 'irritants or contaminants' covers 'waste' which includes 'all . . . materials to be disposed of, recycled, stored, reconditioned, or reclaimed.' Only a strained reading of this language would exclude construction debris causing elevated levels of methane gas from this definition. Finally, the first sentence of the exclusion states that 'Pollution / environmental impairment / contamination is not covered under this policy.' The construction debris described in Priority’s complaint, even without the methane gas, would be considered an environmental impairment."

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