Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

UNITED STATES v. GEORGE A. WHITING PAPER CO. (May 4, 2011)

The Fox River flows through central and eastern Wisconsin. The river is heavily contaminated with PCBs. The most prevalent PCB is Aroclor 1242 but the river also contains Aroclor 1254 and 1260. The United States brought suit under CERCLA against 11 potentially responsible parties, including Appleton Papers Inc. and NCR, in 2009. Appleton and NCR are currently involved in a cleanup at the river and are seeking contribution from many other PRPs. The United States filed suit against several de minimis defendants and provided notice of proposed settlements. Appleton and NCR objected. After revising one settlement upward based on the objection, the United States moved for approval of the settlements. Appleton and NCR intervened. Judge Griesbach (E.D. Wis.) approved the settlements. Appleton and NCR appeal.

In their opinion, Circuit Judges Kanne and Tinder and District Judge Herndon affirmed. The Court first noted its "double dose" of deference. The district judge should approve the settlement if it is fair and reasonable and consistent with CERCLA. The Court, in turn, reviews that decision for an abuse of discretion only. The Court first concluded that there was a substantial amount of information in the record which provided a rational basis for the district court's conclusion. The Court then rejected, simply because it was false, appellants' contention that the government's comparative fault analysis did not include all PCB discharges. Finally, the Court concluded that Appleton and NCR failed to meet their "heavy burden" of showing that the government was wrong in its toxicity calculations. The district court did not abuse its discretion in finding those calculations reasonable.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

ARROW GEAR CO. v. DOWNERS GROVE SANITARY DISTRICT (December 10, 2010)

A number of residents of Downers Grove, Illinois brought a class action in 2004 against Arrow Gear Company and others for damages. The suit alleged that Arrow and the others contaminated the local groundwater with industrial solvents. The parties settled the suit in 2006 for approximately $16 million. The defendants allocated the settlement amount amongst themselves in a series of agreements. As part of the settlement, each defendant released every other defendant from a future claim for contribution. Although the release was broad, it provided that it did not release any claims other than those specified and did not release claims that "may arise in other litigation or in other contexts." The court then dismissed the case with prejudice. A few years later, Arrow brought CERCLA contribution suits for costs it had incurred against those same defendants. Judge Darrah (N.D. Ill.) dismissed the suit as barred by res judicata. Arrow appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Sykes reversed. The Court first addressed its appellate jurisdiction, since the district court did not dismiss the suit against all defendants. Arrow took a voluntary dismissal without prejudice with respect to two of the defendants. A decision is not final, and appellate jurisdiction does not exist, if the plaintiff has the opportunity to refile against some defendants. That was the case here. However, as the Court has done before on more than one occasion, it provided Arrow's lawyer an opportunity at oral argument to convert the without prejudice dismissal to a with prejudice dismissal. Arrow's lawyer accepted the invitation and satisfied the Court of its appellate jurisdiction. The Court also briefly addressed the district court's jurisdiction. This is a case that involves enforcement of a settlement agreement -- and the general rule is that a district court does not have jurisdiction of such a claim without an independent basis for its jurisdiction. But here, Arrow's claim does have such an independent basis. The claim is based on CERCLA. The fact that the defendants interposed a settlement agreement as the basis for its res judicata defense does not strip the court of its federal question jurisdiction. On the merits, the Court seemed to have little difficulty concluding that res judicata did not bar the suit. The agreements between the defendants in the earlier class action was limited to the allocation of the $16 million in damages paid to the private plaintiffs. The current suit seeks contribution for an additional $5 million that Arrow has incurred as a result of an EPA investigation. The settlements in the earlier suit did not release Arrow's claims in the current one.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

SYCAMORE INDUSTRIAL PARK ASSOC. v. ERICSSON  (October 20, 2008)

Ericsson used to manufacture wiring and cable at its 28-acre, nine-building facility in Sycamore, Illinois. The buildings were heated by two large steam boilers and a network of piping. Most of the system is insulated. In January of 1983, Ericsson ceased its operations and decided to sell the property. Michael Kreiger, Ericsson’s property manager at the site, decided to buy the property and operate it as an industrial park. Between December of 1984 and the spring of 1985, Ericsson installed natural gas heaters throughout the property and discontinued the use of the steam boiler system. Meanwhile, Kreiger agreed to buy the building and formed Sycamore Industrial Park Associates (“Sycamore”) to hold title to the property after the purchase. The sale closed in May of 1985 and the property was immediately assigned to Sycamore. Sycamore discovered asbestos in the insulation of the boilers and associated piping. Sycamore brought an action against Ericsson based on CERCLA and RCRA to compel it to remove the asbestos. The court granted summary judgment for Ericsson, holding that the abandonment of the insulation in place was neither a CERCLA “disposal” nor a RCRA “handling, storage, treatment, transportation, or disposal.” Sycamore appeals.

In their opinion, Judges Flaum, Williams, and Sykes affirmed. The Court first addressed the CERCLA claim. To prevail, Sycamore had to show that Ericsson owned the facility at the time it “discharged, deposited, injected, dumped, spilled, or leaked” a solid or hazardous waste. The Court referred to its prior decision in G.J. Leasing for the proposition that asbestos abandoned in place in a structure does not create CERCLA liability, even when the structure is sold. CERCLA “disposal” requires a threat that the asbestos will be emitted or discharged into air or water. Here, all of the asbestos is enclosed and not a threat to enter the environment. The Court found no CERCLA liability and proceeded to address the RCRA count. To prevail on its RCRA count, the Court stated that Sycamore had to show that Ericsson “handled, stored, treated, transported, or disposed of” solid or hazardous waste. Because RCRA and CERCLA use the same definition of disposal, the Court adopted its analysis of the CERCLA claim to conclude that there was no RCRA disposal either. The district court properly entered judgment for Ericsson on the both counts. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 UNITED STATES V. CAPITAL TAX CORP. (September 19, 2008)

National Lacquer operated a paint and coatings business on Chicago’s south side for years. Hazardous materials were used, stored, and spilled at the site. When National Lacquer fell on hard times and lagged on its property taxes, the county made five of the seven separate parcels comprising the site available at a tax scavenger sale. Capital Tax Corporation (“Capital”), which buys and sells distressed properties, acquired tax certificates to the five parcels. The certificates did not pass title but gave Capital the option, if the parcels were not redeemed by the owner, to petition for a tax deed. Capital then (it is alleged) entered into an oral agreement for the sale of the parcels to Dukatt. Capital obtained the tax deeds only after receiving a payment from Dukatt, ostensibly a partial payment for the property. Beginning in 2002, the local and federal environmental authorities became interested and inspected the property. The EPA ordered Capital to clean up the property. After Capital refused, the EPA conducted its own cleanup. It sued Capital (and the owners of the other two parcels) to recover the costs of cleanup, civil penalties, and punitive damages. The district court granted summary judgment to the government on liability and damages. It found Capital jointly and severally liable for response costs in excess of $2.6 million and assessed civil penalties of $230,250. Capital appeals.

In their opinion, Judges Cudahy, Posner, and Rovner vacated the decision of the district court and remanded. After a brief statement regarding the government’s authority to conduct the cleanup and impose strict joint and several liability in defined circumstances, the court moved directly to the government’s basis for holding Capital liable. The government argued that Capital was liable as an “owner” because it held legal title to several of the parcels. Capital, on the other hand, argued that it held title only as security for the balance of the agreed sales price. It therefore fit into an exception whereby a person who “holds indicia of ownership primarily to protect his security interest” in land is not an “owner.” The district court had rejected Capital’s argument because it did not hold title as a traditional security interest.

The Court decided that the parties' reliance on the "security interest" exemption to the definition of owner was the wrong way to analyze the issue. In fact, the Court declined to decide that issue, although it found Capital's argument "colorable." Instead, it defined the issue as whether Capital was even an "owner" under section 107(a)(1) of CERCLA. The Court recognized the long-held principle that the equitable interest in the five parcels passed from Capital to Dukatt at the time of the contract for sale. The more difficult questions it faced were whether that doctrine, equitable conversion, was recognized by CERCLA and, if so, whether the court should develop a federal common law or rely on state law. On the first question, the Court noted that CERCLA did rely on common law analogies. The court cited favorably to two federal appellate cases and a number of district court cases that had held that a holder of legal title in a non-traditional arrangement was not an owner under CERCLA. Relying on these cases as well as general principles of common sense and common law analogies, the court found a sufficient basis to proceed in its analysis. On the second question, it saw no need for a federal common law. It held that state property law should apply in determining property ownership under CERCLA. Because neither the equitable conversion nor the Illinois property law issues were fully developed in the court below, the Court remanded for a full consideration by the district court of whether there was an enforceable land sales contract under Illinois law and whether the doctrine of equitable conversion applies in the case.

Capital also argued that it should have been liable for only a portion of the costs of cleanup. The Court recognized the CERCLA principle that a party can avoid joint and several liability if it can carry the burden of establishing divisibility of harm. Capital relied on an EPA document that tracked the parcels from which each of thousands of containers was removed. But the fact that the document did not include many other costs of cleanup, as well as the facts that a) many of the containers had been moved, b) the facility was historically operated as a single enterprise, and c) spills and leaks caused the product to cross parcel lines led the court to reject Capital’s divisibility argument.

Finally, the Court did not rule on Capital’s objection to the imposition of costs and penalties related to the two parcels it did not own. Given that it was remanding on liability, it vacated the district court’s award of damages for reassessment, if necessary, after the determination of liability. 
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link