United States v. WallaceUnited States v. Wallace
MEMORANDUM OPINION AND ORDER
Now before the Court are:
1. Unitеd States’ Motion for Entry of Consent Decree and brief in support thereof, filed November 30, 1994;
2. State of Texas’ (TNRCC) Motion for Entry of Consent Decree and brief in support thereof, filed December 16, 1994;
3. Response and Joinder of Settling Defendants to United States’ Motion for Entry of Consent Decree, filed December 13, 1994;
4. Opposition of Defendants United Technologies Corporation and CTU of Delaware, Inc. to United States’ Motion for Entry of Consent Decree, filed December 19, 1994;
5. Response in Opposition to Defendants United Technologies Corporation and CTU
6. Opposition of Defendants United Technologies Corporation and CTU of Delaware, Inc. to State of Texas’ Motion for Entry of Consent Decree, filed January 6, 1995;
7. United States’ Reply to Opposition of Defendants United Technologies Corporation and CTU of Delaware, Inc. tо Motion for Entry of Consent Decree, filed January 12, 1995; and
8. Settling Defendants’ Reply to Response in Opposition to Defendants United Technologies Corporation and CTU of Delaware, Inc. to Response and Joinder of Settling Defendants to United States’ Motion for Entry of Consent Decree, filed January 20, 1995.
Upon review of the motions, the supporting and opposing memoranda, and the applicable law, the Court finds the motions for entry of the consent decree should be GRANTED.
BACKGROUND
Bio-Ecology Systems, Inc. operated a waste treatment and disposal facility at the Bio-Ecology Systems Superfund Site (“Site”) in Grand Prairie, Texas, from 1972 to 1978. By agreement between the Environmental Protection Agency (“EPA”) and the State of Texas (“State”), a Remedial Investigation and a Feasibility Study was performed during 1982, 1983, and 1984, documenting the presence of numerous hazardous waste substances at the Site. The release or threatened release of the hazardous substances from the Site posed a substantial hazard to the public health, welfare and the environment, warranting remedial action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act,
The United States of America (“United States”) filed this case, pursuant to CERCLA,
The United States initiated settlement negotiations with the defendants, including the federal and state agencies, each represented by independent counsel. After months of arms-length, good faith settlement negotiations, seventy three (73) of the defendants (“Settling Defendants”), the federal agencies (“Settling Federal Agencies”), аnd the state agencies (“Settling State Agencies”) lodged a proposed consent decree (“Consent Decree”) with the Court and published a notice of lodging in the Federal Register on August 12, 1994, for the thirty (30) day public comment period pursuant to CERCLA,
APPLICABLE LAW
The Supreme Court has long endorsed the propriety of the use and entry of consent
CERCLA specifically provides for the use of consent decrees to encouragе potentially responsible persons (“PRPs”) “to contribute to cleanup costs and/or to undertake response activities themselves.”
United States v. Cannons Engg. Carp.,
The district court reviewing a proposed consent decree formulated pursuant to CERCLA should ensure that the settlement protects public health and the environment to the greatest extent possible under currently existing technology.
United States v. Hooker Chems. & Plastics Corp.,
Approval by state and federal agencies which are charged with the implementation and review of the various environmental protection statutes carries with it a strong presumption of the validity of the proposed consent decree.
United States v. Hooker Chems. & Plastics Corp.,
The presumption in favor of settlement is particularly strong where a consent decree has been negotiated by the Department of Justice on behalf of a federal administrative agency ‘specially equipped, trained or oriented in the field____’ United States v. National Broadcasting Co.,449 F.Supp. 1127 , 1144 (C.D.Cal.1978). EPA is such an agency.
United States v. Cannons Engg. Corp., 720
F.Supp. 1027, 1035 (D.Mass.1989). The district court “is not to substitute its judgment for that of the parties to the decree.”
United States v. Hooker Chems. & Plastics Corp.,
DISCUSSION
I. Fairness
The Court’s analysis of the Consent Decree for fairness includes both procedural and substantive aspects. Fairness is surveyed from the standpoint of both settling and non-settling defendants alike, however, the effect on non-settlers is not determinative in the Court’s evaluation.
United States v. Cannons Engg. Corp.,
A. Procedural Fairness
The Court considers the negotiation process in its examination of procedural fairness, weighing factors of candor, openness, and bargaining balance.
United States v. Cannons Engg. Corp.,
The record shows all defendants were afforded ample opportunity to participate in the negotiations which produced the Consent Decree. Coupled with the arms length settlement negotiations conducted in good faith by experienced legal counsel representing each defendant, the Court’s finding of procedural fairness is clearly supported.
B. Substantive Fairness
Substantive fairness encompasses the concepts of corrective justice and accountability; “a party should bear the cost of the harm for which it is legally responsible.”
United States v. ASARCO, Inc.,
Defendants urge the Cоurt to deny the motion for entry of the Consent Decree based on a lack of substantive fairness. Defendants argue (1) the terms of the Consent Decree are not based upon a rational measure of apportioning liability and determining comparative fault; (2) the United States and the State of Texas are attempting to provide themselves with an unfairly favorable settlement; and (3) the outstanding issues of divisibility of harm make it uncertain that the remedial action will be fully funded by those allegedly responsible, thus making the United States’ and the State of Texas’ limit of their own liability inappropriate. Opposition of UTC and CTU to Motion for Entry of Consent Decree, at 1.
1. Rational Apportionment of Liability
Defendants rely most heavily on
United States v. Pesses, et al.,
In
Pesses,
the United States (“plaintiff’) sought to recover “costs it incurred in response to an alleged rеlease or threatened release of hazardous substances at the Metcoa Radiation site located in Pulaski, Pennsylvania.”
Id.
at * 1. The court in
Pesses
Defendants urge the Court to require the United States to include in its determination of a reasonable basis for apportionment the same factors, not volume alone. The Court declines Defendants’ invitation to look to the factors listed in Pesses for guidance in its decision on substantive fairness of the Consent Decree.
“The argument that the EPA should have used relative toxicity as a determinant of proportionate liability for response costs, instead of a strictly volumetric ranking, is a stalking horse.”
United States v. Cannons Engg. Corp.,
The volumetric method utilized the Waste-In List prepared by the EPA for the Site to apportion the liability of each potentially responsible party. See Plaintiff’s Exhibit 7. The Waste-In List is a result of the compilation of data gathered by the EPA which includes responses to information requests from potentially responsible parties, Bio-Ecology business records, and Industrial Waste Manifests required by the State of Texas. See Plaintiff’s Exhibit 6 (Declaration of Diana W. Hinds). The United States then applied the chosen volumetric formula consistently to all defendants. To arrive at a PRP’s volumetric share, the EPA used the estimates from the Waste-In List to derive a ratio of the volume of wastes sent to the Site over the total amount of wastes sent there. The fact that seventy-three (73) defendants accepted the allocation of contribution based on a volumetric formula suggests the chosen method is fair.
Comparative fault is a factual determination, the best measure of which should be chosen by the EPA based upon their expertise.
Cannons,
The Court finds the United States reasonably relied on the volumetric formula for apportioning liability among the defendants.
2. The SBA
Defendants object to the United State’s determination that SBA is not an owner or operatоr of the Site but that SBA acted primarily to protect its security interest in the facility. The definition section of CERCLA states the term “[owner or operator] does not include a person, who, without participating in the management of a vessel or facility, holds indicia of ownership primarily to protect his security interest in the vessel or facility.”
It is not disputed that SBA held an indicia of ownership to protect its security interest in the Site. The dispute presented to the Court is over the interpretation of the phrase “participating in the management.” Relying on
United States v. Fleet Factors Corp.,
Defendants argue SBA should be held liable as an owner or operator because it participated in the financial management of the Site to a degree suggesting that it had actual or potential ability to influence or control hazardous waste disposal decisions.
Upon review of current case law and in the absence of specific legislative guidance, the Court determines that “participating in management” should be interpreted as participation in the day-to-day or operational management of the hazardous waste treatment and disposal systems.
Fleet Factors,
Defendants argue that SBA’s hiring of financial and technical consultants is evidence of SBA’s participation in management. See Deposition of John T. Lurcott, at 104; Deposition of Marshall Davidson, at 65-77. Davidson acknowledged that SBA providеd consultants, however, he specifically stated “[i]t was left up to the management of the— of the business to either initiate the suggestions or — or leave them____” Deposition of Marshall Davidson, at 65-78. Defendants argue further that SBA’s authority to (1) limit capital expenditures on new waste treatment equipment, (2) limit certain employee raises and bonuses, (3) approve dividends to shareholders, and (4) control voting shares of stock evidences activities of participation in the management of the Site.
The Court disagrees. The reservation of certain rights to protect its investment, the monitoring of any aspect of a debtor’s business, and involvement in occasional and discrete financial decisions relating to the protection of its security interest does not equate with participation in the management.
See Kemp Industries, Inc. v. Safety Light Corp.,
3. “Sweetheart Deals”
Defendants also argue a more exacting scrutiny of the consent decree as outlined in
United States v. Moore,
4. Divisibility of Harm
Defendants repeat their arguments that toxicity and divisibility of harm remain to be considered, thus, the Court should deny the United States motion. The non-settling defendants receive substantively fair treatment under the Consent Decree where their liability would be reduced from the allegеd 23% to an alleged 14% of responsibility for response
The Court is not swayed by Defendants arguments that they are not liable and should, therefore, not be required to pay even 14% of the response costs. Clearly, the issues of liability and toxicity are to be addressed in later proceedings before this Court; objections to the Consent Decree is not the appropriate avenue for argument on these concerns.
5. Contribution Protection
Defendants express additional concern that the settling federal and state agencies receive contribution protection under the Consent Decree. In its memorandum in support of this motion, the United States argues contribution protection appropriately includes the settling state and federal agencies because they are “persons” within the meaning of
CERCLA specifically provides contribution protection for persons resolving their liability to the United States in a cost recovery action to encourage settlement by providing “an increased measure of finality to settlements.”
See
1986 U.S. Code Cong.
&
Admin. News 2835, 2862. “Person” is defined by
The Consent Decree is fair, both procedurally and substantively.
II. Reasonableness
In determining whether or not a consent decree satisfies the reasonableness requirement, the Court reviews the Consent Decree in light of the following factors:
1. the nature and extent of the hazards at the site;
2. the degree to which the remedy provided for in the consent decree will adequately address the hazards present at the site;
3. the possible alternative approaches for remedying the hazards at the site;
4. the relative strength of the parties’ litigating positions, taking into account foreseeable risks of loss; and
5. whether the settlement satisfactorily compensates the public for the actual and anticipated costs of remedial and response measures.
See United States v. Cannons Engg. Corp.,
The first three factors are properly not contested as the evidence presented to the Court shows the remedy has been completely and fiilly implemented. No party objects to and the Court does not doubt each party’s bаrgaining position. Each party engaged legal counsel to fully represent its interests in the settlement negotiation process. It is the fifth factor of reasonableness, as listed above, upon which Defendants base their objection to the reasonableness of the Consent Decree. Defendants again argue that the remaining issues of divisibility bar the entry of this decree because a finding that Defendants are not liable would result in the United States not collecting the 14% of response costs sought from Defendants. Thus, Defendants urge the Court to find the Consent Decree is not reasonable because it does not ensure
Unequivocally, the goals of CERCLA which encourage early settlement to avoid costly litigation refute Defendants’ arguments. The potential risk of the United States, ergo the public, that it would incur exorbitant legal costs in litigating the issues resolved by the Consent Decree against the 73 settling Defendants and the risk of loss of the contributions by each of the Settling Defendants greatly outweighs the risk of a 14% loss in the event Defendants prevail at trial on the liability and divisibility issues. Thus, the Court finds the Consent Decree is reasonable.
III. Consistency with Goals of CERCLA
The two primary, underlying policy concerns of CERCLA are (1) Congress’ desire to equip the federal government with tools necessary for prompt and effective responses to hazardous waste disposal problems of national magnitude and (2) Congress’ desire that those responsible for causing the problems thus identified bear the costs and responsibility for remedying the harmful conditions they created.
United States v. Cannons Engg. Corp.,
As the court stated in
Cannons,
a consent decree is consistent with the goals of CERCLA where the government has properly identified the potentially responsible persons and apportioned liability using a method reasonably related to assuring accountability and “the technical efficacy of the selected remedial measures is not in issue.”
United States v. Cannons Engg. Corp.,
Defendants do not specifically address the goals as outlined but merely refer to previous arguments relating to fairness and reasonableness as their arguments that the Consent Decree fails the consistency prong of the Court’s analysis. No one contests the effectiveness of the remedial measure utilized and devised for continuing maintenance of the Site. The Court’s findings against Defendants’ arguments on the issues of fairness and reasonableness implicitly negate Defеndants’ arguments of inconsistency with the goals of CERCLA. The Consent Decree is patently consistent with the goals of CERCLA.
CONCLUSION
The evidence presented to the Court amply supports the determination that the proposed Consent Decree is fair, reasonable, and consistent with the goals of CERCLA. Accordingly, the Court finds the United States’, the State of Texas’, and the Settling Defendants’ motions for entry of the Consent Decree should be granted.
IT IS THEREFORE ORDERED that the Consent Decree shall be filed as of the date of this Order.
SO ORDERED.