MEMORANDUM OPINION and ORDER
The dispute in this case over reimbursement of response costs incurred in the environmental cleanup of the Bio-Ecology Site is
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 were performed during 1982, 1988, 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, 42 U.S.C. § 9601, et al. (“CERCLA”).
The United States of America (“United States”) filed this case, pursuant to CERC-LA, 42 U.S.C. § 9607, to recover costs incurred in responding to the releases or threatened releases of hazardous substances from the Site. The State alsо filed suit, pursuant to CERCLA, 42 U.S.C. §§ 9604 and 9607, for the recovery of costs incurred for the remedial action at the Site, which case was previously consolidated herewith. The United States and the State seek recovery from United Technologies Corporation (“UTC”) and CTU of Delaware (“CTU”, collectively “Defendants”) as parties jointly and severally liable for contributing the hazardous substances to the Site. Some defendants filed cross-claims and counterclaims against the United States, pursuant to CERCLA, 42 U.S.C. § 9607, alleging the U.S. Air Force (“USAF”), the Drug Enforcement Agency (“DEA”), and the Small Business Administration (“SBA”) were jointly and severally liable for response costs at the Site. Further, some defendants filed a third party complaint against the State, alleging the Texas Deрartment of Agriculture (“TDA”) and the University of Texas at Dallas (“UTD”) were jointly and severally liable for response costs and seeking contribution under CERC-LA, 42 U.S.C. § 9613(f).
UNDISPUTED FACTS
1. The Bio-Ecology Systems, Inc. (“Bio-Ecology”) operated a waste treatment and disposal facility at the eleven-acre Site, which contained an incinerator, waste lagoons, tanks containing solvents, and landfill areas containing metal and organic compounds which are hazardous under CERCLA.
2. On March 27, 1969, Mostek was incorporated under Delaware law.
3. Mostek manufactured arsenic-doped silicon semiconductor wafers at its Carrollton, Texas plant.
4. Between 1969 and 1979, Mostek became a leading United States manufacturer of semiconductors, with its principal place of business in Carrollton, Texas. During this ten-year period, Mostek operated as an independent company. As of 1979, Mostek had 1,539 common stockholders in the United States and abroad, a total of 5,962,850 shares, sales of more than $154 million, and earnings of more than $12 million.
5. Mostek Corporation (“Mostek”) by contract, agreement or otherwise arranged for the treatment or disposal, or arranged with a transporter for transport for disposal or treatment of hazardous substances at the Site from at least June 1976 through September 1977. Most of the waste was dilute hydrofluoric acid that Mostek shipped to the Site via tank trucks from Bio-Ecology. During this same period Mostek shipped 32,605 gallons of spent solvents to the Site in 55-gallon drums.
6. The Remedial Investigation documented the presence of numerous hazardous substances in waste samples at the Site including, but not limited to, heavy metals (such as
7. In September 1984, EPA and the State of Texas entered into a cooperative agreement for the performance of the Remedial Design. The Remedial Design was approved in May 1986. Construction on the Remedial Action commenced on, or shortly after, May 1,1987. The final inspection of the Remedial Action construction was conducted on August 31,1988.
8. On July 21, 1934, United Technologies Corporation (“UTC”) was incorporated under Delaware law.
9. On January 26, 1978, Speco Corporation was incorporated under Delaware law as a subsidiary of UTC. Speco changed its name on November 16, 1978, to CTU of Delaware, Inc. (“CTU”).
10. UTC has been the sole shareholder of CTU from November 1978 through the present.
11. CTU of Delaware, Inc. conducted no business prior to September 1979, and was an inactive corporation prior to the acquisition of Mostek in March 1980.
12. On September 26,1979, UTC, CTU and Mostek entered into an Agreement for Acquisition of Mostek Corporation.
13. On January 8,1980, CTU-Sub, Inc. was incorporated under Delaware law as a wholly owned subsidiary of CTU.
14. On January 11, 1980, CTU-Sub, Inc. was merged into Mostek, the surviving corporation.
15. On or about March 28, 1980, Mostek was merged into CTU, the surviving corporation. According to the Certificate of Ownership and Merger merging Mostek into CTU, “all debts, liabilities, and obligations of Mos-tek [became] the debts, liabilities and obligations of CTU”. CTU simultaneously changed its name to Mostek Corporation.
16. The Mostek subsidiary operated from 1980 to 1985. Mostek incurred substantial losses between 1980 and 1985.
17. On October 29,1985, Thomson Semiconductors, Inc. (“Thomson”) was incorporated under Delaware law as a subsidiary of Thomson-CSF.
18. On October 30, 1985, Thomson entered into a memorandum of understanding to acquire most of the assets of Mostek, including the name Mostek. Mostek’s operations in Ireland and land and buildings in Colorado Springs, Colorado were excluded.
19. On November 13, 1985, Thomson entered into an Asset Purchase Agreement with Mostek. Pursuant to section 1.03(b) of the Agreement, CTU retained certain liabilities of Mostek, including environmental liabilities.
20. Following the sale of most of Mostek’s assets to Thomson, on December 23, 1985, Mostek changed its name back to CTU of Delaware, Inc.
21. From November 1985 to October 1989, CTU’s only operation was the liquidation of assets. Since approximately June 1987, CTU has not conducted any significant business operations, and since 1989, CTU has not conducted any business operations.
SUMMARY JUDGMENT
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c);
Celotex Corp. v. Catrett,
The party moving for summary judgment must identify the evidence on file in the case which establishes the absence of any genuine issuе of material fact.
Celotex Corp.,
The party opposing a motion for summary judgment cannot defeat the motion unless he provides specific facts that show the case presents a genuine issue of material fact, such that a jury may rеturn a verdict in his favor.
Anderson v. Liberty Lobby, Inc.,
DISCUSSION
Plaintiffs claim Defendants UTC and CTU are jointly and severally liable for response costs incurred in the cleanup of the Site. Plaintiffs bear the burden establishing that:
(1) defendant is one of the four categories of covered persons listed under § 9607(a) as liable for the costs of remedial action, (2) the site of the cleanup is a facility under § 9601(9), (3) there is a release or threatened release of hazardous substances at the facility, (4) as a result of which plaintiff has incurred response costs, and (5) the costs incurred conform to the national contingency plan under § 9607(a)(4)(A) as administered by the EPA.
United States v. Alcan Aluminum Corp.,
1. LIABILITY OF CTU of Delaware
It is undisputed that Mostek falls within the third category of covered persons listed in section 9607(a), any person 1 who arranged for 2 disposal or treatment of hazardous substances at a facility at which such substances were disposed of. 42 U.S.C. § 9607(a). It is further undisputed that CTU assumed all debts, liabilities and obligations of Mostek upon merger. However, CTU presents three arguments as to why they should not be held jointly and severally liable.
A PLAINTIFFS’ ACTION SHOULD BE BARRED
First, CTU argues Plaintiffs are barred from imposing joint and several liabil
None of the cases cited by Defendants support the proposition that the sovereign-ties may not seek to impose joint and several liability on responsible persons, as specifically provided by CERCLA, when agencies of the governments are also responsible persons liable for response costs. The Court declines Defendants’ invitation to extend the holdings of their cited authority to the facts of the instant case. Plaintiffs’ potential liability for contribution does not affect the governments’ right to full recovery of its response costs.
See United States v. Kramer,
B. MATERIAL QUESTIONS OF FACT
Although CERCLA imposes strict liability on persons as listed in § 9607(a), a defendant may escape
joint and several
liability for response costs if it shows (1) that its waste, when mixed with other hazardous wastes, did not contribute to the release and cleanup costs incurred, or (2) that, at most, it contributed to only a divisible portion of the harm.
Alcan,
1. Contribution
a. 32,605 Gallons of Spent Solvents
CTU does not dispute Plaintiffs’ statement that the 32,605 gallons of spent solvents shipped by Mostek to the Site contained trichloroethylene, phenol, diethylbenzene, trichlorobenzene, alpha-phellandrene, napthene, trichloromethane, trimethylsilanol, syn-dimethylurea, hexamethyldisilazane, ex-thylcellosolve acetate, xylenol, cyclotrisilox-ane, butyl acetate, siloxane, and diehloroben-zene; hazardous substances under CERCLA. The Court finds the undisputed evidence clearly establishes these hazardous substances contained in the spent solvents shipped by Mostek to the Site were released or threatened released at the facility, resulting in the incurrence of response costs.
CTU presents no argument as to why it should not be held liable for costs related to the cleanup of these hazardous substances. Accordingly, the Court finds CTU, having assumed all of the debts, liabilities and obligations of Mostek, is liable for the response costs thus incurred. However, if liability wеre based on only this small amount of contribution to the hazardous substances which were released or which threatened release at the Site, the Court would allow CTU to present further evidence on the issue of divisibility prior to holding CTU jointly and severally liable for the response costs attributed to the cleanup of the 32,605 gallons of spent solvents.
b. Hydrofluoric Acid Waste
(1) Treated
It is undisputed that Mostek sent approximately one million gallons of hydrofluoric acid (“HF”) to the Site for treatment and disposal, however, Defendants argue that the HF wastes were treated so that they were harmless and, thus, did not contribute to the release or threatened release at the Site. In support of their argument, Defendants offer the testimony of Dr. William Brown that all of Mostek’s HF was chemically converted to non-hazardous constituents. Defendants’ Exhibit 2, Brown Deposition, at 35-36. Brown further stated that the dilution of the treated HF could be tested by titrating the treated HF waste with a dilute solution of reagent made calcium hydroxide and determining an input. In other words, if the treated HF waste was titrated slowly enough to show the change in pH, an end point could be derived for determining the effectiveness of the treatment. Id., at 95.
(2) Evidence of HF or Arsenic at the Site
Defendants also argue that the absence of any data in Plaintiffs’ report on the assessment of contamination at the Site which would indicate the presence of HF in any samples of soil or groundwater further supports their position. Plaintiffs admit that the investigation conducted on the samples of environmental media collected at the Site were not tested for the presence of HF or fluorides, thus, there is no direct evidence that HF or calcium fluoride which would result from the treatment of HF was released at the Site. Plaintiffs’ Exhibit 6, Declaration of Dr. Eugene Meyer. However, Plaintiffs seek to hold Defendants hable for the release or threatened release of HF contaminated with arsеnic. Plaintiffs evidence clearly supports a finding that arsenic was released or threatened release at the Site. See Plaintiffs’ Exhibit 6, Declaration of Dr. Eugene Meyer; Plaintiffs’ Exhibit 2, Site Investigation Report.
In response, Defendants urge the Court to find Plaintiffs’ evidence of expert testimony proffered to establish that Mostek’s wastes included arsenic is unreliable and insufficient to show Mostek’s wastes contributed to the release or threatened release of arsenic. The Court finds Plaintiffs’ evidence establishes that Mostek’s wastes were contaminated with arsenic.
Plaintiffs’ evidence of Dr. Eugene Meyer’s expert opinion discusses Mostek’s wastes sent to the Site. 3 Dr. Meyer based his opinions on a review of the Site Investigation, Biо-Ecology Site, Grand Prairie, Texas; a review of other documents describing the history and the operations that formerly occurred at the Site; the deposition testimony of Harold Rickie Meyer, and a discussion with Robert Scace. Plaintiffs’ Exhibit 6, Declaration of Dr Eugene Meyer. According to Dr. Meyer, Mostek manufactured arsenic-doped silicon wafers utilizing processes which generated chemical wastes of hydrofluoric acid containing arsenic in the form of either arsenic pentoxide or arsenic acid. Id. From Rickie Meyer’s testimony that Mostek’s process of manufacturing silicon wafers included a step of implanting arsenic on the wafer, Dr. Meyer concluded that the subsequent wash with hydrofluoric aсid necessarily contained remnants of arsenic which was used in the manufacturing process. Id. Plaintiffs’ evidence further shows that arsine gas was used by Mostek from 1973 through 1979. Plaintiffs’ Exhibit 2, Declaration of Durwood Bolding.
Further, Defendants argue Dr. Meyer’s opinion is insufficient for the Court to find Mostek’s wastes included arsenic because, in part, Dr. Meyer’s opinion is based on Rickie Meyer’s testimony about Mostek’s activities for a period after 1980. Defendants have not provided evidence to support this assertion. Although the Court was directed to page seven of Rickie Meyer’s deposition, page seven does not appear in Defendants’ Exhibit 3. Even if Rickie Meyer’s discussion based on his personal knowledge does not specifically detail Mostek’s manufacturing processes pri- or to 1980, Defendants have not presented any evidence to show that Mostek’s processing changed from the processing implemented during 1976-1977. Bolding’s declaration that, from 1973 through 1979, Mostek received deliveries of cylinders of arsine gas for use in its semiconductor manufacturing process, coupled with Rickie Meyer’s testimony that Mostek’s processes continued to use arsenic in its manufacturing, satisfies the Court that Mostek’s HF wastes were contaminated with arsenic. Defendants’ argumentative attack on Plaintiffs’ evidence of Mostek’s wastes containing arsenic is unsupported by any evidence to controvert or even raise a question of material facts so as to preclude thе grant of Plaintiffs’ motion for summary judgment as to liability. Further, the Court finds Defendants’ evidence fails to show that Mostek’s arsenic contaminated HF wastes were treated so that they did not contribute to the release or threatened release of hazardous substances.
2. Divisibility
Defendants further urge the Court to deny summary judgment because material questions of fact on the issue of divisibility remain. In seeking to avoid the imposition of joint and several liability, the defendant bears the burden of establishing a reasonable basis for apportioning liability (a question of law), as well as showing the amount of harm it caused (a question of fact).
Bell,
“Whether there is a reasonable basis for apportionment depends on whether there is sufficient evidence from which the court can determine the amount of harm caused by each defendant.”
Bell,
Defendants’ four page legal argument, urging the Court to deny summary judgment because of factual issuеs of divisibility, fails to direct the Court’s attention to evidence establishing a reasonable basis for apportioning liability. Defendants’ failure to satisfy their burden of presenting evidence from which the Court could determine the amount of harm caused by each defendant mandates the Court’s ruling in favor of Plaintiffs.
4
The Court concludes that CTU, having assumed all of the debts, liabilities and obligations of Mostek, is jointly and severally
II. LIABILITY OF UTC
Plaintiffs seek summary judgment that UTC is jointly and severally liable as the successor in interest to and as the alter ego of CTU. Plaintiffs assert the corporate veil between UTC and CTU should be pierced in order to hold UTC responsible for response costs on a theory of derivative liability. Additionally, Plaintiffs argue UTC should be held hable as the sole shareholder of CTU which is dissolved de facto.
UTC moves for summary judgment on the grounds that as a matter of law there is no basis for piercing CTU’s corporate veil and holding its parent UTC hable for Mostek’s waste disposal activities that occurred before CTU merged with Mostek. UTC further argues that CTU is not dissolved de facto, thus, holding UTC hable as the sole shareholder would be unwarranted.
A PIERCING THE CORPPORATE VEIL
1. Nexus between UTC and Mostek
UTC asserts Plaintiffs have not established a sufficient nexus between UTC and the arrangement for disposal of hazardous wastes by Mostek. Plaintiffs counter that there is no nexus requirement in eases seeking the imposition of derivative liability. The Court does not agree with UTC’s case interpretations, but agrees with Plaintiffs that no showing of a nexus is required under a theory of derivative liability.
Liability for CERCLA violations may be sought under a theory of (1) direct liability or (2) derivative liability. Direct liability wih extend to a party only where there is a nexus to the decision on the disposition of the hazardous substance.
See Riverside Market Dev. v. Intern. Bldg. Products,
2. Alter Ego
The parties agree that federal common law of corporate veil piercing should be applied in CERCLA actions. Generally, “ ‘a corporate entity may be disregarded in the interest of public convenience, fairness and equity.’ ”
In re Acushnet River,
For liаbility to attach under the alter ego doctrine, the control required “amounts to total domination of the subservient corporation, to the extent that the subservient corporation manifests no separate corporate interests of its own and functions solely to achieve the purposes of the dominant corporation” with no separate mind, will or existence of its own.
Jon-T,
768 F.2d at
The factual posture of this case is similar to that of Kilka, though one step removed. As noted above, Mostek shipped hazardous waste to the Site from June 1976 through September 1977. During this time period, not only did UTC have no connection with the activities of Mostek, UTC had no connection with CTU which was, at that point in time, nonexistent.
CTU was originally incorporated under the name Speco Corporation on January 26, 1978. UTC has been the sole shareholder of CTU since November 1978. On September 26,1979, UTC, through CTU, entered into an agreement to acquire Mostek Corporation. CTU acquired Mostek in March 1980, simultaneously changing its name to Mostek Corporation. The Mostek subsidiary operated from 1980 to 1985. Based on these facts, the Court finds the relevant point in time for the analysis of UTC’s control over its subsidiary CTU/Mostеk begins in 1979 and 1980, during the time UTC negotiated the agreement to acquire and CTU did acquire liability for the alleged wrongful conduct of Mostek.
The evidence provided by Plaintiffs primarily addresses activities and operations from the early 1980’s to the present while the evidence of Defendants focuses on activities and operations of UTC and CTU during the mid to late 1970’s. In the absence of evidence establishing material facts regarding the activities of UTC and CTU beginning in 1979 and later, the Court is unable to determine whether CTU operated as the alter ego of UTC so as to justify piercing the corporate veil. Accordingly, the motions for summary judgment on this basis must be denied.
C. SHAREHOLDER DERIVATIVE LIABILITY
Plaintiffs argue UTC, as the sole shareholder of CTU, should be held liable to the extеnt that UTC received proceeds from or related to the sale of most of the assets of Mostek to Thomson Semiconductors, under the doctrine of de facto dissolution. UTC argues Plaintiffs failed to make any showing that CTU should be considered a de facto dissolved corporation under controlling precedent. Further, UTC argues Plaintiffs failed to show that UTC received any assets in the form of Mostek sale proceeds from CTU.
1. De Facto Dissolution
De facto dissolution may be shown with evidence that the corporation has no property; no meetings are held, no officers are elected, and no business or corporate functions conducted.
United States v. Playa De Flor Land & Improvement Co.,
2. Trace of Assets
The Trust Fund doctrine, relied upon by Plaintiffs, permits “creditors of a dissolved corporation to pursue assets distributed to shareholders ‘so long as the assets [are] traceable and [have] not been acquired by a bona fide purchaser.’”
North American Sav. v. Metroplex Dev. Partnership,
Plaintiffs’ sparse, indirect evidence clearly does not establish that UTC received CTU’s assets in the form of proceeds from the sale of Mostek’s assets to Thomson Semiconductors. However, the Court finds the evidence is sufficient to raise a material question of fact based on the inference naturally dеrived from an otherwise unexplained reduction occurring during the time when Mostek’s assets were sold.
Plaintiffs offer evidence of a reduction in the intercompany payable between CTU and UTC from $310,293,566 to $222,850,510. Plaintiffs argue that this reflects a credit from UTC to CTU related to the proceeds that UTC received from the sale of the Mos-tek assets to Thomson. The deposition testimony of Perschbacher shows that such a reduction does reflect a credit from UTC to CTU. Plaintiffs’ Exhibit 37. Further, Perschbacher agreed that proceeds from any transaction of CTU with a third party distributed to UTC would be reflected as a reduction in the intercompany payable. Id. Although the evidence does not conclusively establish Plaintiffs’ assertion that the credit resulted from a transfer of Mostek asset-sale proceeds to UTC, the evidence supports such an inference. There is no evidence supporting an inference of any other accounting for the change in the balance; no evidence of other transactions to explain the reduction from $310,293,566 to $222,850,510. Accordingly, the Court declines to grant either parties’ motions for summary judgment as to the liability of UTC as the sole shareholder of CTU.
D. SUBSTANTIAL CONTINUITY
In Plaintiffs’ Repl//Sur-reply, for the first time, Plaintiffs argue the substantial continuity rule should be applied to the facts of this case in order to hold UTC liable as the mere continuation of CTU. The Court notes that Defendants were not given an opportunity to respond to this newly asserted basis for imposing liability on UTC. However, the Court is not swayed by Plaintiffs argument and addresses the issue merely to explain the inapplicability of the substantial continuity test.
In
United States v. Mexico Feed and Seed Co., Inc.,
the Eighth Circuit discussed the purpose of and set forth the substantial continuity test.
United States v. Mexico Feed and Seed Co., Inc.,
Defendants filed a cross-motion for summary judgment as to the liability of the United States and the State of Texas, asking the Court to find the United States Air Force, the State of Texas’ Department of Agriculture, and the University of Texas at Dallas (collectivеly, “the Agencies”) liable for response costs at the Site. On July 17, 1995, this Court entered its Memorandum Opinion and Order granting the motions for entry of the Consent Decree representing a settlement between the United States and the majority of the defendants. The Consent Decree resolves the liability of the Agencies with respect to response costs incurred by the EPA and the State at the Site by providing for partial reimbursement of those response costs. The Consent Decree expressly provides protection to the settling defendants from actions for contribution regarding matters addressed in the settlement, as sought by Defendants. 42 U.S.C. § 9613(f)(2).
Defendants argue the Agencies are not entitled to contribution protection and further assert the United States’ liability precludes the imposition of joint and several liability on Defendants. Based on the applicable law and the Court’s findings as discussed in the Court’s July 17, 1995, order and as discussed herein, and for the same reasons pertinent hereto, the Court finds Defendants’ cross-motion for summary judgment should be and is hereby denied.
IV. Motion for Leave To Supplement the Record
Also before the Court is United States Motion for Leave to Supplement the Record, filed August 9, 1995. The response and reply were timely filed. Plaintiff requested leave to file additional evidence relating to the issue of piercing the corporate veil. The Court did not consider the evidence submitted by the parties on this issue but determined material fact issues precluded the grant of summary judgment on the issue оf piercing the corporate veil. Accordingly, the Court finds this motion should be denied as moot.
CONCLUSION
IT IS THEREFORE ORDERED that Plaintiffs’ motion for summary judgment as to the joint and several liability of CTU is hereby GRANTED.
IT IS FURTHER ORDERED that Defendant UTC’s motion for summary judgment is hereby DENIED.
IT IS FURTHER ORDERED that Plaintiffs’ cross motion for summary judgment as to the joint and several liability of UTC is hereby DENIED.
IT IS FURTHER ORDERED that UTC’s and CTU’s cross motion for summary judgment as to the liability of the United States and the State of Texas is hereby DENIED.
IT IS FURTHER ORDERED that the United States’ motion for leave to supplement the record is hereby DENIED as moot.
Notes
. "The term 'person' means an individual, firm, corporation, association, ... United States Government, municipality, commission, political subdivision of a State, or any interstate body.” 42 U.S.C. § 9601(21).
. Persons falling within this category are frequently referred to by courts as "arrаngers” or "generators”, thus the terms "arranger liability” or “generator liability”. Plaintiffs seek to hold UTC and CTU liable as arrangers/generators.
. Defendants object to Dr. Meyer's declaration, arguing the evidence cannot support Plaintiffs’ motion for summary judgment because Dr. Meyer's statements are not based on personal knowledge as required by Fed.R.Civ.P. 56(e). The requirement of personal knowledge is fundamental in the rules of evidence, however, the use of expert testimony is a well established exception. In order to safeguard against abuses of this exception, the Federal Rules of Evidence, Rules 702-706, set forth specific requirements for foundation, qualification, and use of the expert's opinion as evidence.
Fоr purposes of addressing the issues in the instant motions, the Court is satisfied that Dr. Meyer is qualified to deliver the opinions set forth in his declaration. The Court is further satisfied that the proper foundation for Dr. Meyer's opinions and conclusions is established in his declaration. Defendants' objection is overruled.
. The Court's determination of CTU’s liability is subject to resolution of Plaintiffs’ Motion for Summary Judgment as to Affirmative Defenses of CTU of Delaware and United Technologies, and/or subject to determination at trial.
. Although Plaintiffs discuss direct liability in their response to UTC's motion, Plaintiffs' Sur-reply to UTC's motion for summary judgment indicates liability is sought under the theory of derivative liability, not direct liability.
.
See also First Nat’l City Bank v. Banco Para El Com.,