Black Horse Lane v. Dow Chem Corp , 228 F.3d 275 ( 2000 )

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
9-20-2000
Black Horse Lane v. Dow Chem Corp
Precedential or Non-Precedential:
Docket 0-5031
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Filed September 20, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-5031
BLACK HORSE LANE ASSOC., L.P., a New Jersey limited
partnership; UNITED STATES LAND RESOURCES, L.P., a
New Jersey limited partnership; UNITED STATES REALTY
RESOURCES, INC., a New Jersey Corporation; and
LAWRENCE S. BERGER
v.
DOW CHEMICAL CORPORATION; ESSEX CHEMICAL
CORPORATION, a wholly owned subsidiary of DOW
CHEMICAL CORPORATION, a Michigan Corporation
Black Horse Lane Associates, L.P., United States Land
Resources, L.P., United States Realty Resources, Inc. and
Lawrence S. Berger,
Appellants
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 97-1250)
District Judge: Honorable Nicholas H. Politan
Argued August 8, 2000
BEFORE: BARRY, WEIS and GREENBERG, Circuit Jud ges
(Filed: September 20, 2000)
Paul H. Schafhauser (argued)
Berger & Bornstein
237 South Street
P.O. Box 2049
Morristown, N.J. 07960-2049
Attorneys for Appellants
Kenneth H. Mack (argued)
Linda Mack
Fox, Rothschild, O'Brien & Frankel
997 Lenox Drive
Princeton Pike Corporate Center,
Building 3
Lawrenceville, N.J. 08648
Attorneys for Appellees
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
This matter comes before this court on an appeal by
plaintiffs United States Land Resources, L.P. ("USLR"),
United States Realty Resources, Inc. ("USRR"), Black Horse
Lane Associates, L.P. ("Black Horse"), and Lawrence S.
Berger ("Berger") (collectively "appellants") from two orders
entered by the district court in this matter: (1) the order
entered August 10, 1999, granting a motion by appellees
Dow Chemical Corporation ("Dow") and Essex Chemical
Corporation ("Essex") for summary judgment pursuant to
Fed. R. Civ. P. 56, and denying appellants' cross-motion for
summary judgment on appellees' counterclaim; and (2) the
"Final Order" entered December 16, 1999, affirming the
June 30, 1999 order of the magistrate judge imposing
sanctions against appellants, and dismissing appellees'
counterclaim without prejudice for lack of subject matter
jurisdiction. This litigation arises out of a sale of
environmentally distressed real property located at 120
Black Horse Lane, South Brunswick, New Jersey
(hereinafter "the Property"), by Essex to USLR.
2
For the reasons that follow, we will affirm the August 10,
1999 and December 16, 1999 orders of the district court in
all respects.
II. FACTS and PROCEEDINGS
A. Factual Background
The historical facts in this case are rather straightforward
and, insofar as material to this appeal, essentially are not
disputed. Appellants, USLR, USRR, Black Horse, and
Berger, are related entities: USLR is the general partner in
Black Horse, USRR is the general partner of USLR, and
Berger is the president of USRR.1 Appellees Essex and Dow
also are related entities as Essex is Dow's wholly-owned
subsidiary by virtue of its purchase of all of Essex's stock
in 1988.
During the 1980s, Essex owned and operated the
Property, where it engaged in the business of preparing
adhesive-backed paper products. On or about August 17,
1984, Essex discovered that chemicals it used in that
process had leaked into the ground of the Property. In
October 1984, Essex entered into environmental cleanup
and decommission negotiations with the New Jersey
Department of Environmental Protection ("DEP"). Essex
submitted a "Clean-Up Plan" to the DEP on December 19,
1985, which the DEP conditionally approved on December
20, 1985.
Prior to Essex's submission of the Clean-Up Plan to the
DEP, it entered into a sales agreement ("the Agreement") on
September 5, 1985, with USLR to sell the Property to USLR
for $3.6 million. The parties do not dispute that appellants
were aware of the Property's environmental problems at the
time that USLR and Essex entered into the Agreement. The
Agreement required Essex to obtain and implement an
approved Clean-Up Plan at its sole expense. Paragraph 16
of the Agreement set forth Essex's responsibilities with
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1. Also, Berger is a named partner in the lawfirm representing
appellants.
3
respect to the remediation and detoxification of the
Property:
The parties acknowledge that the Subject Premises to
be conveyed are subject to the provisions of the
Environmental Clean-Up Responsibility Act, N.J.S.A.
13:1K-6 et seq. (`ECRA') [now named the Industrial Site
Recovery Act (`ISRA')]. Seller agrees to obtain approval
of a Clean-Up Plan from the Department of
Environmental Protection (`DEP'), post the necessary
financial security for performance pursuant to ECRA,
will implement the approved Clean-Up Plan and
complete the detoxification of the Subject Premises in
accordance with and to the approval of the DEP.
Pending DEP approval of a Clean-Up Plan, Seller will
attempt to obtain the consent of the DEP to the
conveyance of the Subject Premises. `ECRA Approval'
will be deemed to have taken place upon the receipt by
Seller from the DEP of the approval of the
implementation of the Clean-Up Plan and satisfactory
detoxification of the Subject Premises or a consent
from the DEP to convey the Subject Premises to
Purchaser in the form of an Administrative Consent
Order and bond securing the detoxification of the
Subject Premises by Seller, all in a form and substance
satisfactory to Purchaser's mortgage lender. In no event
shall Purchaser be obligated under this Contract to
assume any ECRA Clean-Up responsibilities. If ECRA
Approval is not obtained prior to January 1, 1986,
Purchaser shall have the continuing right to terminate
this Contract by giving Seller notice at any time up to
January 20, 1986. If ECRA Approval is not obtained by
June 1, 1986, this Contract shall be automatically
terminated and after the refund of the Deposit to
Purchaser, neither party shall have any rights or
claims against the other arising out of this Contract.
App. at 93a-94a. Title to the Property closed on December
23, 1985, three days after the DEP conditionally approved
the Clean-Up Plan, and on that day USLR assigned its
rights in the Property to its present owner, appellant Black
Horse.
4
As previously mentioned, at some point in 1988, appellee
Dow purchased all of Essex's stock, and Essex became a
wholly-owned subsidiary of Dow. Since that time, Dow
employees have been involved in the remediation and
detoxification of the Property, but these Dow employees
have been acting as "consultants" to Essex in that
connection. SA at 546, 549.
Essex began its soil remediation efforts shortly after it
sold the Property in 1985. While we are not able to
ascertain the exact date of completion from the record,
appellants' counsel confirmed at oral argument that soil
remediation was finished within two years of the sale of the
Property. See generally app. at 235a; SA at 536; appellees'
br. at 17. Essex commenced groundwater remediation in
1988, app. at 236a, but, to date, it has not completed that
remediation. It is Essex's alleged failure to complete
remediation and detoxification of the Property within a
"reasonable time" that forms the crux of the parties' dispute
in this case.
One specific example that appellants cite as proof of
Essex's alleged failure to remediate the Property within a
reasonable time pertains to Essex's cleanup efforts with
respect to certain "chlorinated volatile organic compounds"
("CVOCs") found in the soil and groundwater in certain
areas of the Property.2 In 1991, the DEP ordered Essex to
perform a "temporary well point survey" to investigate the
presence and source of CVOCs found in the groundwater
and soil gas. See app. at 304a. After Essex conducted
extensive investigations into the source and levels of
CVOCs found in the soil gas and groundwater, Essex
proposed to remediate the areas of the Property
contaminated with CVOCs by means of soil vapor
_________________________________________________________________
2. "CVOCs" is a shorthand reference to those volatile organic compounds
that Essex used to clean the plant's adhesive-backed paper rolls.
The CVOCs found on the northeastern and eastern portions of
the Property include tetrachloroethylene, trichloroethylene, trans-1,2-
dichloroethylene, and vinyl chloride. App. at 237a. Essex discovered
trace amounts of CVOCs on the eastern and northeast corners of the
Property in 1985, but the concentrations were so low that at that time
DEP did not require Essex to address them. See appellees' br. at 19;
App. at 200a, 237a; SA at 553.
5
extraction ("SVE") technology, specifically, a "dual phase
extraction system." App. at 307a. In May 1992, DEP
approved this proposal. App. at 307a, 240a.
Notwithstanding DEP's approval of Essex's proposed
system, Essex did not begin to install and operate the
system immediately. Rather, from 1992 to 1997, Essex
continued to investigate the source of the various CVOCs
found on the Property, and conducted various tests at
DEP's request. See app. at 238a-40a. This additional
investigation required Essex to modify the SVE design,
which requirement might account for the delay in its
installation. App. at 240a. In any event, Essex completed
its installation of the dual-phase extraction system in
August 1997. We note, however, that Essex experienced
some "start up" difficulties at the outset of its operation of
the system. App. at 240a. Insofar as we can determine from
the record, Essex is continuing its remediation efforts in
connection with the CVOCs detected on the Property.
B. Procedural History
Appellants commenced this action in the district court in
1997, and filed an amended complaint shortly thereafter.
The amended complaint sets forth five causes of action
against appellees Essex and Dow:3 (1) a claim based on a
breach of Paragraph 16 of the sales contract as a result of
Essex's failure to complete its cleanup of the Property
within a "reasonable time", (count I);4 (2) a claim based on
a breach of the implied covenant of good faith and fair
dealing based on "defendants' " actions in connection with
their cleanup efforts, (count II); (3) a claim for damages
pursuant to section 107(a)(4)(B) of the Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. S 9607(a)(4)(B), based on appellants'
alleged expenditure of "necessary costs of response," and
_________________________________________________________________
3. Inasmuch as the amended complaint refers to Essex and Dow
collectively as "defendants" and asserts allfive claims against each
entity, we refer to the defendants together as "appellees" unless
otherwise noted.
4. The count does not use the term "reasonable time" but appellants
contend that a reasonable time provision is implicit in the Agreement.
6
for declaratory and injunctive relief, (count III); (4) a claim
for contribution for the costs of "clean-up and removal" and
for injunctive and declaratory relief pursuant to the New
Jersey Spill Compensation and Control Act, N.J. Stat. Ann.
S 58:10-23.11 et seq. ("the Spill Act"), (count IV); and (5) a
claim for "damages" based on appellees' breach of the
Agreement "as well as the contamination with respect to the
subject Property for which defendants are responsible,"
(count V). See app. at 67a. Appellees filed an answer to the
amended complaint and a counterclaim seeking declaratory
relief that remediation of the Property under Paragraph 16
of the Agreement included use of "engineering and
institutional controls" and an order requiring appellants to
consent to them. App. at 80a-81a.
The parties commenced discovery on November 7, 1997.
Appellants designated Berger as their Fed. R. Civ. P.
30(b)(6) witness to testify on behalf of USLR, USRR and
Black Horse. On October 2, 1998, appellees' counsel began
to depose Berger, but counsel was not able to obtain a date
to reconvene the deposition. As a result of counsels'
inability to agree on the date that Berger's deposition
should resume, appellees' counsel sought an order from the
magistrate judge overseeing discovery to set the date for the
resumption of the deposition. After a teleconference with
the parties on October 6, 1998, the magistrate judge signed
an order dated October, 9, 1998, which provided the
following:
IT IS on this 9th day of October, 1998, ORDERED, as
follows:
1. Lawrence S. Berger, as Plaintiffs' Fed. R. Civ. P.
30(b)(6) designated witness and fact witness, shall
appear for oral deposition commencing on Tuesday,
October 13, 1998, at 10:00 a.m. and continuing from
day to day thereafter until completed.
App. at 657a.
Notwithstanding the court's directive, when appellees'
counsel appeared at Berger's law office to continue his
deposition on October 13, 1998, Berger failed to appear and
his counsel, Paul Schafhauser, was "in trial" and not in the
7
office. SA at 60-61. At that point, appellees' counsel again
sought the court's intervention.
On October 15, 1998, the magistrate judge signed and
entered an order which directed that Berger's deposition
recommence on Monday, October 19, 1998, at 10:00 a.m.
App. at 660a. The order also provided that "[a]s a sanction
for failure by Lawrence Berger to appear for depositions on
Tuesday, October 13, Plaintiffs shall promptly pay the fees
and costs of counsel fees for defendants (a) for appearing at
Mr. Berger's non-deposition on October 13, and (b) for
bringing this application and appearance today." App. at
660a. While Berger appeared for his deposition at the
designated date and time, appellees claim that he provided
evasive and non-responsive answers to many of counsel's
questions relating to the negotiation and execution of the
Agreement, and appellants' damages allegations. See
generally app. at 540a-655a.
After the completion of discovery, the parties filed several
motions germane to this appeal. First, appelleesfiled a
motion for summary judgment pursuant to Fed. R. Civ. P.
56, seeking dismissal of the amended complaint in its
entirety. Appellants opposed the motion, and filed a cross-
motion for summary judgment on appellees' counterclaim
for declaratory relief. In addition, appellees filed a motion
before the magistrate judge for discovery sanctions
pursuant to Fed. R. Civ. P. 37(b), (d), seeking to preclude
appellants "from asserting, at trial, a position which differs
from the testimony of their Rule 30(b)(6) witness." App. at
20a. Appellees also sought reimbursement of the attorney's
fees and costs associated with Berger's deposition and their
filing of the second sanctions motion.
The magistrate judge granted appellees' request for
sanctions pursuant to Rule 37 by letter opinion and order
entered June 30, 1999. Relying on Rule 37(b) and (d), he
agreed that Berger's conduct warranted the sanction
appellees requested, namely that appellants would be
precluded from asserting a position and introducing
evidence contrary to the positions Berger asserted during
his deposition. The court also concluded that Berger's lack
of preparedness at his deposition warranted the imposition
of monetary sanctions pursuant to Rule 37(d) in the form of
8
costs and attorney's fees associated with taking the
deposition and bringing the sanctions motion before the
court. App. at 22a. Appellants filed an appeal from the
magistrate judge's order to the district court.
In the meantime, after hearing oral argument on the
cross-motions for summary judgment on June 28, 1999,
see app. at 806a-831a, the district court granted appellees'
motion on the amended complaint and denied appellants'
cross-motion on the counterclaim by letter opinion and
order entered August 10, 1999. Addressing appellees'
motion first, the district court determined that dismissal of
the amended complaint in its entirety was appropriate for
several reasons, each of which we will discuss in greater
detail in the discussion that follows.5
With respect to the breach of contract claim (count I), the
court held that Paragraph 16 of the Agreement did not
contain a provision requiring Essex to remediate the
Property in a "reasonable time," and, given the commercial
context in which the parties negotiated and executed the
Agreement and appellants' subsequent conduct, the court
should not imply that the contract had a reasonable time
provision. See app. at 10a. Alternatively, it stated that even
if it were to assume that there is an implicit "reasonable
time" provision in Paragraph 16 of the Agreement,
_________________________________________________________________
5. Before engaging in a substantive analysis of appellants' claims
against
Essex, the district court dismissed with prejudice all claims appellants
asserted against Dow, reasoning that
(1) plaintiffs' causes of action arise solely out of plaintiffs'
contractual relationship with defendant Essex; (2) Dow and Essex
are not related except to the extent that Dow acquired Essex's
stock;
(3) Essex is a responsible party and not insolvent; and (4) there
is
not even a scintilla of evidence that would justify piercing
Essex's
corporate veil.
App. at 7a n.1. Appellants assert that the district court erred in
dismissing outright the claims against Dow, claiming that there are
factual issues concerning whether it is a proper party in this suit. We
will affirm the court's dismissal of Dow without further discussion as
appellants' argument clearly is without merit. In any event, our
affirmance of the summary judgment for Essex means that Dow cannot
be liable to appellants.
9
appellants failed to adduce any evidence from which a
reasonable jury could conclude that 14 years, i.e., from
1985 to the date of the district court's decision, was an
unreasonably long time period to complete the type of
detoxification and remediation called for in the Clean-Up
Plan. App. at 11a. Turning next to appellants' claim based
on the alleged breach of the implied covenant of good faith
and fair dealing (count II), the court found that appellants
failed to produce sufficient evidence that Essex acted in bad
faith or engaged in misconduct that caused the delay in
completing the cleanup of the Property. App. at 13a.
Third, the court dismissed the CERCLA and Spill Act
claims for damages on the ground that appellants could not
demonstrate that they incurred any compensable costs
under either statute. The court pointed out that the only
costs that appellants allegedly incurred were the fees they
paid to their consultant, Enviro-Sciences, Inc. ("ESI"), but
that such fees were not compensable under either the
CERCLA or the Spill Act. App. at 15a. The court also denied
appellants' request for injunctive and declaratory relief
under CERCLA and the Spill Act, reasoning that
declaratory relief was inappropriate because "plaintiffs have
utterly failed to make any showing that they are likely to
incur any future costs that will be recoverable" under either
statute. It further found that injunctive relief was not
warranted in view of the circumstance that Essex"is
contractually and statutorily bound to detoxify the
Property," and there was no evidence that Essex had
breached the contract or violated CERCLA or the Spill Act.
App. at 15a-16a. Next, the court dismissed count V, stating
that "because plaintiffs have failed to adduce sufficient
evidence in support of their breach of contract claims, they
cannot recover the damages outlined in Count Five of the
Complaint." App. at 16a.
Finally, the district court addressed and denied
appellants' cross-motion for summary judgment on the
counterclaim, noting that appellants "cite no authority in
support of their motion," but "merely allege that `Plaintiffs
do not and need not consent to any [engineering and
institutional controls] with respect to the Property.' "
Ultimately the court found that "[o]n the present record,
10
this Court is unable to say that the plaintiffs are entitled,
as a matter of law, to a judgment dismissing defendants'
counterclaims."6 App. at 17a. The court's order stated that
appellants' amended complaint was dismissed with
prejudice.
After the district court ruled on the parties' dispositive
motions, on or about August 13, 1999, the district court
ordered the parties to file cross-motions with respect to
Essex's counterclaim. App. at 775a. On December 13,
1999, the district court heard oral argument on the cross-
motions, and also considered appellants' outstanding
appeal from the magistrate judge's sanctions order. Ruling
on the outstanding motions the district court (1) affirmed
the magistrate judge's sanctions order, and (2) dismissed
Essex's counterclaim against appellants without prejudice
for lack of subject matter jurisdiction because the
controversy set forth in the counterclaim was not ripe. See
app. at 832a-49a. The district court then memorialized its
record rulings in its "Final Order" entered December 16,
1999. App. at 23a. The monetary sanctions have been
quantified and we understand that appellants have paid
them.
Appellants filed a timely notice of appeal to this court
from the district court's orders of August 10, 1999, and
December 16, 1999. App. at 34a. The appellees do not
cross-appeal from the dismissal of their counterclaim. We
have jurisdiction pursuant to 28 U.S.C. S 1291.7 Of course,
the fact that the dismissal of the counterclaim was without
_________________________________________________________________
6. The court also addressed and denied appellees' motion for sanctions
pursuant to Fed. R. Civ. P. 11. That aspect of the court's ruling is not
in issue in this appeal, and we need not address it any further.
7. The district court exercised subject matter jurisdiction pursuant to
28
U.S.C. S 1331 inasmuch as count III of the amended complaint asserted
a claim pursuant to CERCLA. The district court exercised supplemental
jurisdiction over the remaining state law claims pursuant to 28 U.S.C.
S 1367. We exercise plenary review over the district court's dismissal
of
appellants' amended complaint and the counterclaim, see Nelson v.
Upsala College, 51 F.3d 383, 385 (3d Cir. 1995), and review the court's
disposition of the sanctions issue pursuant to Rule 37 for an abuse of
discretion. See General Ins. Co. of Am. v. Eastern Consol. Utils. Inc.,
126
F.3d 215, 219 (3d Cir. 1997).
11
prejudice does not in the circumstances here deprive us of
jurisdiction. See Presbytery of N.J. v. Florio , 40 F.3d 1454,
1461 (3d Cir. 1994); see also Erie County Retirees Ass'n v.
County of Erie, 220 F.3d 193, 202 (3d Cir. 2000).
III. DISCUSSION
As is evident from our recitation of the procedural history
leading to this appeal, appellants challenge several of the
district court's rulings made during the proceedings in this
matter. First, we will address the court's August 10, 1999
order dismissing the amended complaint. Then, we will
review the district court's December 16, 1999 order
dismissing appellees' counterclaim without prejudice, and
affirming the magistrate judge's sanctions order.
A. District Court's Dismissal of
the Amended Complaint
1. Breach of Contract Claim (Count I)
Appellants focus most of their attention on the district
court's dismissal of their breach of contract claim pleaded
in count I of the amended complaint. While recognizing that
under New Jersey law, courts generally find that there is a
"reasonable time" term implicit in contracts that do not set
forth any time limitation for performance, the district court
nevertheless held that "[i]n this case, the Court finds no
justification for implying a `reasonable time' for
performance because such a term is not `necessary to give
business efficacy to the contract as written.' " App. at 8a.
The court explained that "[a] main purpose of the
Agreement, and the only purpose of Paragraph 16, was to
require Essex to remediate the Property to the full
satisfaction of the DEP and thereby make the land freely
marketable." App. at 8a. The court found that"a
`reasonable time' limitation is not necessary because
Essex's performance under the contract--obtainingfinal
DEP approval--must be evaluated solely by reference to the
DEP." App. at 9a. Accordingly, the court stated that "such
a contract simply does not lend itself to a reasonable time
limitation." Id.
12
It also dismissed the breach of contract claim on the
alternative ground that appellants presented insufficient
evidence from which a reasonable jury could conclude that
Essex breached its obligation to perform remediation and
obtain DEP approval pursuant to the Clean-Up Plan within
a "reasonable time." On this point, the district court held as
follows:
Plaintiffs allege that Essex has breached its contractual
obligation to complete the detoxification and obtain
final DEP approval `within a reasonable time.'
Therefore, to prevail, plaintiffs must show that a
`reasonable time' has already expired. The Agreement
was executed in 1985. This Court cannot say that
fourteen years is unreasonable as a matter of law. In
the context of an ISRA clean-up, which plaintiff Berger
understood to be a `cumbersome' and `long' process,
plaintiffs must adduce evidence that a `reasonable time'
for completion of the clean-up is less then fourteen
years. . . .
Such evidence might be in the form of reprimands or
other statements from regulatory agencies like the
DEP. Plaintiffs might also carry their evidentiary
burden with expert testimony that, under the
circumstances of this site and comparing it to other
sites, fourteen years is an unreasonable length of time.
In this case, however, plaintiffs have simply failed to
adduce any evidence that fourteen years is
unreasonable. The only evidence that even remotely
addresses this issue is contained in plaintiffs' expert
report. . . .
Giving plaintiffs the best of Mr. Cohen's report, `the
environmental program undertaken on this site has
been slow and ineffective in treating the contaminants
that were release by Essex Chemical.' But evidence of
a slow and ineffective clean-up process, without more,
cannot reasonably support an inference that fourteen
years is unreasonable.
App. at 11a-12a.
Appellants contend that the court erred in dismissing
their breach of contract claim because, notwithstanding the
13
absence in Paragraph 16 of the Agreement of an explicit
date by which Essex was to complete its cleanup of the
Property and obtain DEP approval, by implication the
Agreement requires Essex to fulfill its contractual
obligations within a reasonable time. Appellants rely on the
well-established principle of New Jersey law, which is
applicable here on the contractual issues, that" `[w]here no
time is fixed for the performance of a contract, by
implication a reasonable time was intended.' " Br. at 41
(quoting, inter alia, Becker v. Sunrise at Elkridge, 543 A.2d
977, 983 (N.J. Super. Ct. App. Div. 1988)). They claim that
the district court erred in concluding that the nature of this
particular contract, and Essex's obligation with respect to
the remediation of the Property, rendered a "reasonable
time" limitation unreasonable in the circumstances.
Alternatively, they assert that at a minimum, there was a
genuine issue of material fact as to whether the parties
intended that Essex complete its remediation obligations
within a reasonable time, thus precluding summary
judgment in appellees' favor. Second, appellants contend
that contrary to the district court's finding, they presented
sufficient evidence from which a reasonable jury could
conclude that Essex failed to remediate the Property within
a "reasonable time."
Appellees respond that the district court correctly
dismissed the breach of contract claim because appellants
base their argument on the incorrect premise that
Paragraph 16 omits a contractual provision which in turn
requires the court to supply a "reasonable time" limitation.
Br. at 36. They claim that contrary to appellants'
construction of the contract, Paragraph 16 does contain a
definite term for completion of the Property's remediation
and therefore does not omit a contractual provision. In
appellees' view the contract unambiguously provides the
only term for completion that is reasonable in the
circumstances--namely, that Essex's obligation is satisfied
if the detoxification is undertaken "in accordance with and
to the approval of DEP." Br. at 35-36. They claim that the
district court correctly determined that it would be
unreasonable to find that the Agreement included an
implied reasonable time limitation, given the commercial
context of the sale and purchase.
14
Appellees further assert that, in any event, even if we
agreed with appellants that the district court should have
implied a "reasonable time" limitation on Essex's
remediation obligations pursuant to Paragraph 16,
summary judgment was appropriate because there is no
evidence that Essex breached its contractual obligations in
that connection. They claim that the district court correctly
determined that appellants failed to meet their burden of
producing evidence demonstrating that as of the date that
appellants filed their complaint in the district court, Essex
had failed to remediate and detoxify the Property in
accordance with the Clean-Up Plan, and obtain DEP
approval of its efforts, within a reasonable time.
Appellees' protestations notwithstanding, we reject the
district court's conclusion that a reasonable time provision
was not implicit in Paragraph 16 of the Agreement. After
all, New Jersey courts uniformly have applied the principle
that "where no time is fixed for the performance of a
contract, by implication a reasonable time was intended."
See Becker, 543 A.2d at 983 (contract for sale of real
property); see also, e.g., River Dev. Corp. v. Liberty Corp.,
148 A.2d 721, 722 (N.J. 1959) (license to reclaim land must
be exercised within a reasonable time); Ridge Chevrolet-
Oldsmobile, Inc. v. Scarano, 569 A.2d 296, 300 (N.J. Super.
Ct. App. Div. 1990) (performance under real estate
contract); Mazzeo v. Kartman, 560 A.2d 733, 737 (N.J.
Super. Ct. App. Div. 1989) ("If the trial judge cannot
determine the parties' actual intent [concerning the
temporal limits of a right of first refusal], he should
determine a `reasonable time' for the expiration of the
right."); Ocean Cape Hotel Corp. v. Masefield Corp., 164
A.2d 607, 614 (N.J. Super. Ct. App. Div. 1960) (where
plaintiff claimed that defendant was obligated to make
certain repairs to property, if plaintiff 's claim had been
based on breach of contract, the court would have implied
a term that required completion of performance within a
reasonable time and would not have permitted parol
evidence that defendant promised repairs as of a certain
fixed date); McGraw v. Johnson, 126 A.2d 203, 206 (N.J.
Super. Ct. App. Div. 1956) (noting that performance under
contract must be completed within reasonable time where
claim was based on contractor's alleged failure to complete
15
building of home within a reasonable time); Curtis Elevator
Co. v. Hampshire House, Inc., 362 A.2d 73, 76 (N.J. Super.
Ct. Law Div. 1976) (performance under contract to install
elevators; where no specific date for completion was
provided in contract, court implied term requiring
completion within a reasonable time).
The district court predicated its analysis on statements in
New Jersey cases to the effect that terms are implied to
"give business efficacy to the contract as written." See app.
at 8a (citing McGarry v. Saint Anthony of Padua Roman
Catholic Church, 704 A.2d 1353, 1357 (N.J. Super. Ct. App.
Div. 1998)). But appellants argue persuasively that it would
be commercially unreasonable to construe the terms of
Paragraph 16 so as to permit Essex to begin its cleanup at
its leisure, and to continue its efforts in perpetuity without
the threat or even the slightest possibility of adverse legal
consequences flowing from inordinate delay. We also doubt
that the parties could have intended such a bizarre result.
See Onderdonk v. The Presbyterian Homes of N.J., 425 A.2d
1057, 1063 (N.J. 1981) ("Central to this inquiry of
ascertaining what, if any, terms are implied is the intent of
the parties. Intent may be determined by examination of
the contract and in particular the setting in which it was
executed.").
Nevertheless, notwithstanding our holding that a
"reasonable time" term is implicit is Paragraph 16 of the
Agreement, we agree with the district court's alternative
basis for dismissing appellants' breach of contract claim,
i.e., that a reasonable time period has not expired.8 We are
mindful that "[w]hat constitutes a reasonable time under
New Jersey law `is usually an implication of fact, and not of
law, derivable from the language used by the parties
considered in the context of the subject matter and the
_________________________________________________________________
8. In view of our result appellees should understand that they do not
have forever to complete the remediation and detoxification. To the
contrary, they must diligently pursue their efforts to obtain the DEP
approval within a reasonable time. Of course, it is not our intention by
making this point to invite further litigation. We believe that if
appellees
are diligent in these efforts and keep appellants advised of the steps
they
are taking that the parties should be able to avoid additional judicial
proceedings.
16
attendant circumstances, in aid of the apparent intention.' "
Mazzeo, 560 A.2d at 737 (quoting Borough of West Caldwell
v. Borough of Caldwell, 138 A.2d 402, 412 (N.J. 1958)).
Nevertheless, appellants would bear the burden of proof on
this issue at trial, to show that a reasonable time has
expired, and to survive summary judgment, they must
adduce evidence from which a reasonable jury could
conclude that Essex breached its contractual obligation to
complete its remediation and detoxification efforts within a
reasonable time. Here, even viewing the facts in the light
most favorable to appellants, we agree with the district
court's assessment of the weakness of appellants' evidence
as well as the court's conclusion that appellants failed to
demonstrate that there was a genuine issue of material fact
on the issue of whether Essex had breached its obligation
to remediate the Property and obtain DEP approval within
a reasonable time. Simply put, the record does not support
the conclusion that appellants posit, i.e., that Essex
breached its contractual duties to complete the remediation
and detoxification efforts within a reasonable time.
For example, appellants first point to an Essex"Expense
Appropriation Request" which indicated that the
"completion date" of the entire project would be "1987."9
App. at 777a. But we do not share appellants' view that
this evidence can support a conclusion that Essex breached
Paragraph 16 of the Agreement. Obviously, the fact that
Essex estimated its completion date incorrectly does not
support the conclusion that it has failed to cleanup the
Property within a reasonable time. While a party's advance
estimate of the time to complete a project might be
persuasive evidence of the reasonable time for that
undertaking, it is not in the circumstances here in which
the scope of the project was so uncertain.
_________________________________________________________________
9. According to the deposition testimony of Irwin Zonis, Essex's Chief
Environmental Officer who was involved in the remediation and
detoxification of the Property, the purpose of the Expense Appropriation
Request was to notify Essex's financial department of the amount of
funds deemed necessary for the completion of the project. He further
explained that the document "told the financial department that the
$320,000 would be expended by the end of 1987." App. at 189a.
17
Appellants also rely on the fact that in March 1986,
shortly after the DEP approved Essex's Clean-Up Plan, Dr.
Calvin J. Benning ("Benning"), Director of Environmental
Affairs for Essex, wrote to the DEP questioning whether
certain of the standards set forth in the Clean-Up Plan with
respect to the contemplated soil remediation and whether
the Clean-Up Plan's requirements were reasonable in the
circumstances. App. at 225a-26a. For convenience, we will
refer to this correspondence as Essex's "March 1986 letter."
Appellants claim that the March 1986 letter was Essex's
"attempt[ ] to circumvent the parameters and conditions" of
its Clean-Up Plan, and that it demonstrates that Essex
failed to proceed "reasonably and diligently" with the
Property's detoxification. Br. at 46.
We cannot agree. The March 1986 letter questions the
cleanup levels relating to the soil remediation which Essex
completed within two years of the sale of the Property. See
generally app. at 235a; appellees' br. at 17. Certainly if
Essex also had completed the groundwater remediation
within that period appellants would not have instituted
litigation alleging a breach of Paragraph 16. Thus,
inasmuch as appellants' breach of contract claim
essentially is predicated on Essex's failure to complete
groundwater remediation, we fail to see how this letter
supports appellants' argument.
Similarly, appellants cite the fact that Essex did not
begin groundwater remediation efforts until 1988 or
remediation of the CVOCs until 1997. See br. at 47-48.
However, appellants do not present evidence indicating that
the delays were avoidable, and in any event, were
unreasonable. Also they rely on the circumstance that
groundwater pumping "was frequently interrupted
throughout the years," br. at 47, and that the DEP gave
Essex a rating of "unacceptable due to `failure to operate the
groundwater remediation system in the capacity it was
designed.' " App. at 298a (emphasis added). But a review of
the evidence in the record confirms that the interruptions
Essex experienced are not a basis for holding that it
unreasonably delayed its performance under Paragraph 16.
To the contrary, intermittent delays are to be expected on
a remediation project which cannot be compared to an
18
ordinary construction project built in accordance with fixed
plans which is thus far less likely to encounter problems
than a remediation undertaking. Moreover, as appellees
correctly point out, the DEP's "unacceptable" rating did not
relate to the length of time that Essex had expended on the
remediation and detoxification of the Property. Rather, the
DEP comments related to the need for Essex to implement
a sufficient maintenance program so that it could manage
the problems it had been experiencing with the wells more
efficiently in the future. See app. at 298a. Thus, we cannot
view the DEP's comments as tantamount to a statement
that Essex was taking too long to finish the Property
cleanup.
As the district court correctly observed, app. at 11a-12a,
appellants' strongest evidence on this score is a statement
by their environmental consultant, Irving Cohen of ESI.
Cohen issued a report in which he opined that "the
environmental program undertaken on this site has been
slow and ineffective in treating the contaminants that were
released by Essex Chemical." App. at 418a. In our view,
however, this statement does not create a factual issue for
the jury on the issue of unreasonable delay. Importantly,
Cohen stops short of stating definitively that, given the
circumstances, Essex had taken too long to complete its
remediation and detoxification efforts. Moreover, even if he
had stated such a conclusion it would not have an
adequate foundation as he does not analyze specifically the
types of contaminants involved in this project and the
circumstances surrounding the remediation of this site. Nor
does he compare Essex's efforts to other sites plagued with
similar environmental contaminants. Given the vague
nature of Cohen's conclusion, we agree with the district
court's observation that "evidence of a slow and ineffective
cleanup process, without more, cannot reasonably support
an inference that fourteen years is unreasonable." App. at
12a.
When boiled down to its essence, appellants' argument is
that because the cleanup of the Property has taken longer
to finish than the parties originally anticipated, Essex has
breached Paragraph 16 of the Agreement as it has not
completed the cleanup within a "reasonable time." While it
19
may be unfortunate that it has taken Essex an extended
period of time to complete the cleanup of this Property, the
delay does not support a conclusion that the amount of
time it already has spent is unreasonable given the nature
of Essex's contractual obligation. By appellants' own
admission, the remediation and detoxification of the
Property is a large effort which, by its very nature, is a
lengthy and time-consuming process. Given the realities of
the situation, appellants simply have failed to point to any
evidence in this record demonstrating that the length of
time that Essex has taken to detoxify the Property and
obtain DEP approval is unreasonable in the circumstances.
Accordingly, we will affirm the district court's dismissal the
breach of contract claim.
2. Breach of the Implied Duty of Good Faith
and Fair Dealing (Count II)
The district court also dismissed appellants' claim based
on Essex's alleged breach of the implied duty of good faith
and fair dealing, reasoning:
In this case, plaintiffs allege only that Essex has failed
to complete the clean-up process and obtain final DEP
approval within a reasonable time. They point to no
acts or omissions done in bad faith. There is no
allegation, and certainly no evidence, that Essex has
committed any misconduct. Summary judgment is
therefore appropriate.
App. at 13a. Appellants claim that the district court erred
in granting summary judgment on this claim because it
ignored evidence from which a reasonable jury could
conclude that Essex breached the implied duty of good faith
and fair dealing during the course of its cleanup of the
Property. Appellants point to the following evidence in
support of their claim: (1) documents confirming that
appellees "attempted to renege upon the standards set forth
in the Clean-Up Plan"; (2) evidence showing that appellees
"inexplicably failed to even begin remediation for many
years after delineating contamination on the Property"; and
(3) DEP documents reprimanding Essex for " `violations' and
`unacceptable' progress." Br. at 49.
20
To be sure, "every contract in New Jersey contains an
implied covenant of good faith and fair dealing." Sons of
Thunder, Inc. v. Borden, Inc., 690 A.2d 575, 587 (N.J.
1997); see also Restatement (Second) of Contracts S 205
(1981) ("Every contract imposes upon each party a duty of
good faith and fair dealing in its performance and its
enforcement."). "The implied covenant is an independent
duty and may be breached even where there is no breach
of the contract's express terms." Emerson Radio Corp. v.
Orion Sales, Inc., 80 F. Supp. 2d 307, 311 (D.N.J. 2000)
(citing, inter alia, Sons of Thunder, Inc., 690 A.2d at 575);
see also Bak-a-Lum Corp. v. Alcoa Bldg. Prods., Inc. , 351
A.2d 349, 352 (N.J. 1976).
The implied covenant of good faith and fair dealing
requires that "neither party shall do anything which will
have the effect of destroying or injuring the right of the
other party to receive the fruits of the contract." Sons of
Thunder, Inc., 690 A.2d at 587 (internal quotation marks
omitted); Palisades Properties, Inc. v. Brunetti , 207 A.2d
522, 531 (N.J. 1965). A party to a contract breaches the
covenant if it acts in bad faith or engages in some other
form of inequitable conduct in the performance of a
contractual obligation. See, e.g., Sons of Thunder, Inc., 690
A.2d at 589 (distinguishing prior decision in Karl's Sales &
Service, Inc. v Gimbel Bros. Inc., 592 A.2d 647 (N.J. Super.
Ct. App. Div. 1991), in which "there were no allegations of
bad faith or dishonesty on the part of the terminating
party" to the contract); Association Group Life, Inc. v.
Catholic War Veterans, 293 A.2d 382, 384 (N.J. 1972)
(stating that a contracting party breaches duty of good faith
and fair dealing by engaging in behavior that was"not
contemplated by the spirit of the contract and fell short of
fair dealing"); Emerson Radio Corp., 80 F. Supp. 2d at 311
("The Restatement and the [New Jersey] cases note a state
of mind or malice-like element to breach of good faith and
fair dealing, holding that the duty excludes activity that is
unfair, not decent or reasonable, nor dishonest."); Kapossy
v. McGraw-Hill, Inc., 921 F. Supp. 234, 248 (D.N.J. 1996)
(noting that courts "imply a covenant of good faith and fair
dealing in order to protect one party to a contract from the
other party's bad faith misconduct or collusion with third
parties where there is no breach of the express terms of the
21
contract"); see also Restatement (Second) of Contracts S 205
cmt. a (noting that "[t]he phrase `good faith' is used in a
variety of contexts, and its meaning varies somewhat with
the context" and explaining that "[g]ood faith performance
or enforcement of a contract emphasizes faithfulness to an
agreed common purpose and consistency with the justified
expectations of the other party; it excludes a variety of
types of conduct characterized as involving `bad faith'
because they violate community standards of decency,
fairness or reasonableness.").10
Section 205 of the Restatement (Second) of Contracts
provides examples of the types of behavior that can give
rise to a claim for breach of the implied duty of good faith
and fair dealing in the context of one's performance under
a contract:
Subterfuges and evasions violate the obligation of good
faith in performance even though the actor believes his
conduct to be justified. But the obligation goes further:
bad faith may be overt or may consist of inaction, and
fair dealing may require more than honesty. A complete
catalogue of types of bad faith is impossible, but the
following types are among those which have been
recognized in judicial decisions: evasion of the spirit of
the bargain, lack of diligence and slacking off , willful
rendering of imperfect performance, abuse of power to
specify terms, and interference with or failure to
cooperate in the other party's performance.
Id. S 205 cmt. d (emphasis added).
Appellants' basic contention is that the circumstances of
this case demonstrate that there is a genuine issue of
material fact concerning Essex's lack of good faith in its
_________________________________________________________________
10. Quite coincidentally this very panel on the same day that it heard
argument in this case also heard argument in a case under Pennsylvania
law involving the implied duty of good faith and fair dealing. See
Northview Motors, Inc. v. Chrysler Motors Corp., No. 99-3873, 2000 WL
1273953, ___ F.3d. ___ (3d Cir. Sept. 8, 2000). Plainly, New Jersey law
imposes a broader obligation on a party to a contract than Pennsylvania
law to act in good faith in its performance. The parties, however, do
not
dispute that New Jersey law applies in this case, and we will decide the
case on that basis.
22
performance of its obligation to remediate the Property and
obtain DEP in accordance with Paragraph 16 of the
Agreement. They claim that since the DEP approved the
Clean-Up Plan in 1985, Essex has not performed its
cleanup in a diligent manner, and in fact, has engaged in
bad faith conduct purposely to protract the process.
According to appellants, Essex's conduct has precluded
them from obtaining the fruits of their contract, i.e., a
property that is not environmentally distressed.
We cannot agree that the evidence in this case supports
the existence of a genuine issue of material fact on the
issue of Essex's good faith in its performance of its
obligation to remediate and detoxify the Property. In reality,
appellants' argument rests exclusively on their subjective
interpretation of the March 1986 letter in which Benning
set forth the following reservations as to whether certain
aspects of the Clean-Up Plan were reasonable in the
circumstances:
The clean-up plan calls for the excavation and disposal
of the contaminated soil to a level of 1 ppm, . . . based
on the requirements of the case manager at BISE. I
believe these levels are extremely low and not
warranted. . . . We fully intend to remove the
contaminated dirt from the former tank farm area. . . .
However to satisfy BISE we are required to perform 15
separate sample analyses in the laboratory instead of
using a portable field analyzer to determine the extent
of pollution and excavation, and to excavate to 1 ppm
residual total VOC in the soil. I believe these
requirements are both unreasonable and unwarranted.
The clean up plan had to be approved by the end of
1985 and time was not available to question the
requirement or to rationally discuss these points.
However, the IAG discussion [which Benning attended
on March 18, 1986] indicate [sic] that the[DEP] has
also been rethinking some of their procedures and
actions. I believe hexane and heptane are classified as
hydrocarbon and I believe that a higher level than 1
ppm is perfectly justified.
App. at 225a-26a. Appellants claim that this letter exhibits
Essex's lack of good faith and confirms that Essex
23
attempted to "renege upon the standards set forth in the
Cleanup Plan." Br. at 49; reply br. at 22-23.
While the letter questions whether the cleanup level of 1
ppm is warranted and whether lab analysis of soil samples
is necessary as opposed to Essex merely conductingfield
measurements of the soil, the letter does not demonstrate
a lack of good faith on Essex's part in performing its
obligations pursuant to Paragraph 16 of the Agreement.
First, as we previously mentioned, the letter discusses
Essex's obligations under the Clean-Up Plan relating to soil
remediation, but appellants do not dispute that Essex has
completed its soil remediation and detoxification efforts. In
fact, appellants confirmed that Essex began its cleanup of
the soil shortly after the sale, and that it completed soil
remediation sometime within two years. Thus, we fail to see
how this letter can demonstrate Essex's lack of diligence in
that regard, or how Essex's conduct in questioning certain
aspects of the Clean-Up Plan compromised appellants' right
"to receive the fruits of the contract." See Sons of Thunder,
Inc., 690 A.2d at 587 (internal quotation marks omitted).
Moreover, and perhaps more importantly, Benning wrote
the March 1986 letter after he met with DEP officials and
discussed the topic of appropriate cleanup levels in soil.
The letter specifically states that the "IAG discussion on
March 18 indicate [sic] that the department has also been
rethinking some of their procedures and actions." App. at
225a. Thus, while the letter questioned the reasonableness
of certain aspects of the Clean-Up Plan, Benning's
comments indicate that he did so because of his previous
discussions with DEP officials which apparently led him to
believe that the DEP might no longer view some of its
requirements as necessary or appropriate. Thus, when
viewed in context, the letter does not indicate that Essex
intended to renege on its obligation to cleanup the Property,
and it does not indicate that Essex performed its
contractual obligations with a lack of good faith.
In any event, Benning's concern over certain aspects of
the Clean-Up Plan is of no consequence when we consider
that less than two months later, he wrote a memorandum
to Essex officials in which he recognized and re-emphasized
24
Essex's obligation to adhere to the requirements set forth in
Clean-Up Plan. The memorandum states:
Lately we have received letters from NJDEP and have
discussed our program and permit applications with
both state and local officials. These discussions have
led to some very specific program requirements and
items we must `keep in mind.'
For example:
1. The NJDEP's ECRA office and the department of
solid waste management have made it very clear
that we must adhere to the Clean Up Plan .
App. at 227a.
Simply put, the fact that Benning questioned certain
aspects of the Clean-Up Plan is not evidence that Essex
acted in bad faith, as the DEP obviously responded to
Benning's concerns by indicating that Essex was obligated
to remediate the Property in accordance with the Clean-Up
Plan, and Benning expressly reaffirmed Essex's intent to
comply with its contractual and statutory obligations in
that regard. Moreover, appellants do not demonstrate that
Essex ever failed to implement a substantive remediation
measure that the DEP required in connection with Essex's
cleanup of the Property, and do not dispute that Essex
completed soil remediation on the Property within two years
of the sale. In our view, Benning's May 1986 memorandum
reaffirming Essex's commitment to remediate the Property
in accordance with the Clean-Up Plan belies appellants'
assertion that the March 1986 letter evidences Essex's
intent from the outset to conduct its remediation and
detoxification efforts in "bad faith." Reply br. at 23. In the
circumstances, we will affirm the district court's dismissal
of appellants' claim that Essex breached the duty of good
faith and fair dealing.
3. Appellants' CERCLA Claim (Count III)
and Spill Act Claim (Count IV)
Count III of the amended complaint asserts a claim for
damages and injunctive and declaratory relief pursuant to
CERCLA, and count IV seeks the same relief pursuant to
25
the Spill Act. As previously mentioned, the district court
dismissed the CERCLA claim, reasoning that appellants
had not incurred any compensable "necessary costs of
response" pursuant to section 107(a)(4)(B) of CERCLA. See
42 U.S.C. S 9607(a)(4)(B). In particular, the court explained
that the only costs that appellants claimed to have incurred
were the fees they paid to their environmental consultant,
ESI. The district court found that those fees were not
recoverable under CERCLA "because they had nothing to
do with any effort by plaintiffs to detoxify the Property or to
prevent or minimize the release of hazardous substances."
App. at 14a (emphasis added). The district court explained
that the fees were not recoverable because ESI merely
reviewed the quarterly reports that Essex submitted to
appellants and the DEP; ESI never visited the Property,
monitored the contamination or the cleanup of the
Property, or gathered data related to the investigation or
remediation of the Property. The district court stated that
"ESI's fees are those of an ordinary expert witness: the fees
represent litigation costs, not environmental monitoring
costs." App. at 15a. Similarly, the court dismissed
appellants' Spill Act claim seeking to recover ESI's fees
because the fees "are unrelated to any prevention,
mitigation, or remediation of contamination on the
Property." App. at 14a.
The district court also denied appellants' request for a
declaration that Essex is liable to appellants for any future
costs pursuant to CERCLA or the Spill Act. The court
stated that "[p]laintiffs have utterly failed to make any
showing that they are likely to incur any future costs that
will be recoverable under CERCLA or the Spill Act. Indeed,
it is undisputed that Essex is contractually obligated to
remediate the Property at its own expense." App. at 15a.
Inasmuch as there was "no evidence--or even an allegation
--that the plaintiffs intend to participate in future clean-up
activities or incur any costs that might be recoverable
under CERCLA," the court concluded that granting
declaratory relief would be inappropriate.
Finally, the court denied appellants' request for an
injunction compelling Essex to commence and complete the
cleanup on the basis that there was no present case or
26
controversy. The court reasoned that "[t]here is no dispute
that Essex is under both a contractual and statutory duty
to detoxify the Property; nor is there any dispute that Essex
has worked continuously to remediate the Property." The
court further explained that "[i]n the absence of evidence
that Essex has breached the Agreement or violated CERCLA
or IRSA, there is no basis for the injunction that plaintiffs
seek." App. at 16a.
On appeal from the CERCLA and Spill Act dispositions,
appellants primarily claim that the district court erred in
dismissing their CERCLA claim for monetary relief. 11 While
_________________________________________________________________
11. We will address only briefly the several other issues appellants
raise
in connection with their CERCLA and Spill Act claims pleaded in counts
III and IV of the amended complaint. Specifically, appellants maintain
that the district court erred in rejecting their request for injunctive
and
declaratory relief pursuant to CERCLA, and in dismissing count IV of the
amended complaint, their Spill Act claim. First, appellants contend that
they are entitled to declaratory relief under CERCLA even if they have
not incurred any compensable response costs as of yet, "[p]articularly
[because] in light of the inexplicable lack of progress by Defendants in
detoxifying the Property to date, Plaintiffs may well be forced to incur
future response costs to complete [the] detoxification. . . ." Br. at 52
(citing Bowen Eng'g v. Estate of Reeve, 799 F. Supp. 467, 476 (D.N.J.
1992), aff 'd, 19 F.3d 642 (3d Cir. 1994) (table)). They also state
generally that injunctive relief pursuant to CERCLA is appropriate in
the
circumstances, but fail to explain the reason for their position on that
point. See id.
We reject appellants' arguments in their entirety. First, appellants have
not presented any evidence with respect to their request for a
declaratory
judgment as to future response costs under CERCLA demonstrating that
such relief is appropriate. Given our discussion in the text that
follows,
it is clear that appellants have not incurred any response costs to
date,
and it is undisputed that Essex, rather than appellants, is bound
contractually to complete the cleanup of the Property and obtain final
DEP approval. Thus, there is nothing in the record suggesting that
appellants ever will incur response costs, and there is no potential for
injury that is "sufficiently immediate and real" so as to warrant
declaratory relief pursuant to section 113(g)(2) of CERCLA, 42 U.S.C.
S 9613(g)(2). See Kelley v. E.I. DuPont de Nemours & Co., 17 F.3d 836,
845 (6th Cir. 1994) (internal quotation marks omitted); see also United
States v. USX Corp., 68 F.3d 811, 819 (3d Cir. 1995) (quoting statement
in Kelly, 17 F.3d at 844, that " `[i]n providing for the recovery of
response
27
appellants have not set forth their CERCLA argument in
any detail, we understand they predicate it on a belief that
they are entitled to recover the amounts paid to appellants'
environmental consultant, ESI, as "necessary costs of
response" pursuant to section 107(a) of CERCLA, because
those "oversight costs" fall within the scope of either
_________________________________________________________________
costs, Congress included language [in section 113(g)(2)] to insure that a
responsible party's liability [for response costs], once established,
would
not have to be relitigated. . . .' ") (emphasis added)); The Southland
Corp.
v. Ashland Oil, Inc., 696 F. Supp. 994, 999 (D.N.J. 1988) ("To be
granted
a declaratory judgment on the issue of liability, . . . plaintiff[ ]
must
establish four factors to satisfy the requirements of section 107(a),"
including "that, as a result [of defendants' conduct], [plaintiff] has
incurred response costs."); compare Bowen Eng'g, 799 F. Supp. at 476
(stating that "[O]nce some expenditure [for response costs] has been
made, the controversy is sufficiently real to permit the court to issue
a
declaratory judgment on defendant's liability.") (internal quotation
marks
omitted). Second, appellants' vague assertion that injunctive relief is
appropriate in this case, without any further elaboration on that point,
is unconvincing.
Finally, we agree with the district court's disposition of the Spill Act
claim seeking both monetary and equitable relief. While we have
considered appellants' argument on this score, which essentially
consists
only of a citation to T&E Industries, Inc. v. Safety Light Corp., 587
A.2d
1249 (N.J. 1991), we fail to see how the case is germane here because
it did not present claims under the Spill Act. In any event, after
reviewing the applicable statutory provisions and case law on point, we
are convinced that the district court did not err in dismissing count
IV.
Accordingly, we will affirm the court's dismissal of the Spill Act claim
without further discussion. See N.J. Stat. Ann. S 58:10-23.11b.d.
(providing definition of "cleanup and removal costs" for purposes of
Spill
Act); id. S 58:10-23.11g.c.(1) (stating that responsible persons are
"strictly liable, jointly and severally, without regard to fault, for
all
cleanup and removal costs no matter by whom incurred") (emphasis
added); compare Analytical Measurements, Inc. v. The Keuffel & Esser
Co., 843 F. Supp. 920, 929-30 (D.N.J. 1993) (stating that costs of the
initial soil and groundwater investigation, analysis of problems and
alternatives, excavation of soil, removal of thefirst 600 tons of soil
to
Ohio, and design of a groundwater investigation plan were "clearly
recoverable under the Spill Act since they are associated with the
cleanup and removal of discharged hazardous substances"; court also
noted that declaratory relief was appropriate because it would "resolve
any uncertainties over who is responsible for future cleanups").
28
"removal" or "remedial" action as defined by section 101 of
CERCLA, 42 U.S.C. S 9601(23), (24). See generally br. at 53
(citing United States v. Lowe, 118 F.3d 399, 401-02 (5th
Cir. 1997), which held, contrary to our decision in United
States v. Rohm and Haas Co., 2 F.3d 1265 (3d Cir. 1993),
that EPA's costs incurred in oversight of the private party
cleanup of site were compensable "response costs"
pursuant to section 107(a) of CERCLA). Appellants state
that the court erred in finding that ESI's fees were those of
"an ordinary expert witness," inasmuch as"an `expert
witness' is clearly required only in the context of litigation
while, by contrast, Plaintiffs have been forced to retain and
utilize the expertise of ESI, an environmental consultant,
for the past fifteen years due to the lack of progress made
by Essex with respect to the Property's `detoxification.' " Br.
at 53.
Appellants' argument thus raises the issue of whether
ESI's fees are "necessary costs of response" for which
appellants, as private parties, may recover in a suit
pursuant to section 107(a)(4)(B) against Essex, the party
indisputably responsible for the cleanup of the Property
pursuant to the Clean-Up Plan approved by the DEP. To
answer that question, we must ascertain the character of
the costs in question, and determine whether they fall
within the types of costs recoverable by an innocent party
pursuant to section 107(a)(4)(B) of CERCLA.
We begin with the relevant statutory language. Section
107 of CERCLA, 42 U.S.C. S 9607(a)(4), provides that
certain enumerated parties "shall be liable for .. . all costs
of removal or remedial action incurred by the United States
Government or a State or an Indian tribe not inconsistent
with the national contingency plan; [and] . . . any other
necessary costs of response incurred by any other person
consistent with the national contingency plan. . . ." The
statute defines "response" as "remove, removal, remedy,
and remedial action," and states that these terms include
"enforcement activities related thereto." See CERCLA
section 101(25), 42 U.S.C. S 9601(25). It then defines
"remove or removal" and "remedy or remedial action" as
follows:
29
(23) The terms `remove' or `removal' means[sic] the
cleanup or removal of released hazardous substances
from the environment, such actions as may be
necessary taken in the event of the threat of release of
hazardous substances into the environment, such
actions as may be necessary to monitor, assess, and
evaluate the release or threat of release of hazardous
substances, the disposal of removed material, or the
taking of such other actions as may be necessary to
prevent, minimize, or mitigate damage to the public
health or welfare or to the environment, which may
otherwise result from a release or threat of release. The
term includes, in addition, without being limited to,
security fencing or other measures to limit access,
provision of alternative water supplies, temporary
evacuation and housing of threatened individuals not
otherwise provided for, action taken under section
9604(b) of this title, and any emergency assistance
which may be provided under the Disaster Relief and
Emergency Assistance Act. . . .
(24) The terms `remedy' or `remedial action' means [sic]
those actions consistent with permanent remedy taken
instead of or in addition to removal actions in the event
of a release or threatened release of a hazardous
substance into the environment, to prevent or minimize
the release of hazardous substances so that they do
not migrate to cause substantial danger to present or
future public health or welfare or the environment. The
term includes, but is not limited to, such actions at the
location of the release as storage, confinement,
perimeter protection using dikes, trenches, or ditches,
clay cover, neutralization, cleanup of released
hazardous substances and associated contaminated
materials, recycling or reuse, diversion, destruction,
segregation of reactive wastes, dredging or excavations,
repair or replacement of leaking containers, collection
of leachate and runoff, onsite treatment or
incineration, provision of alternative water supplies,
and any monitoring reasonably required to assure that
such actions protect the public health and welfare and
the environment. The term includes the costs of
permanent relocation of residents and businesses and
30
community facilities where the President determines
that, alone or in combination with other measures,
such relocation is more cost-effective than and
environmentally preferable to the transportation,
storage, treatment, destruction, or secure disposition
offsite of hazardous substances, or may otherwise be
necessary to protect the public health or welfare; the
term includes offsite transport and offsite storage,
treatment, destruction, or secure disposition of
hazardous substances and associated contaminated
materials.
Section 101(23)(24), 42 U.S.C. S 9601(23), (24) (footnotes
omitted).
As we explained in United States v. Rohm and Haas Co.,
"[i]n general, removal actions are short term responses to a
release or threat of release while remedial actions involve
long term remedies." 2 F.3d at 1271. Here, while appellants
fail to recognize explicitly the distinction between"removal"
and "remedial" actions and do not attempt to place ESI's
consultant fees in either category, given the character of the
costs at issue we believe that if the activities involved here
are included within the definition of "response costs," it is
because they are "removal" rather than "remedial" actions.
Cf. id. (noting that the parties agreed that if the
government's oversight activities were deemed "necessary
costs of response," it would be because they were removal
actions rather than remedial actions).
Although the district court believed that ESI's consulting
fees are best characterized as those of an "ordinary expert
witness," appellants contest that statement by indicating
rather cryptically in their brief that ESI has been
appellants' environmental consultant for "fifteen years with
respect to the Property's `detoxification,' " and therefore
contend that we cannot consider ESI to be an "expert
witness" retained only for litigation purposes. While
appellants fail to cite an applicable portion of the record in
support of that statement, our review of the parties'
submissions confirms that Cohen testified at his deposition
that appellants had retained ESI as a consultant as early
as 1987 or 1988. See SA at 527.
31
Nevertheless, based on our study of the record, exercising
plenary review we conclude that the district court did not
err in concluding that ESI's consulting fees for which
appellants seek reimbursement were litigation-related
expenses. Inasmuch as private parties may not recoup
litigation-related expenses in an action to recover response
costs pursuant to section 107(a)(4)(B) of CERCLA, see Key
Tronic Corp. v. United States, 511 U.S. 809, 819-20, 114
S. Ct. 1960, 1967 (1994); Redland Soccer Club, Inc. v.
Department of the Army, 55 F.3d 827, 850 (3d Cir. 1995),
and appellants do not claim to have incurred any other
costs which fall within the definition of "necessary costs of
response," we agree with the district court's disposition of
the CERCLA claim.
In Redland Soccer Club, we determined that the Redland
plaintiffs' litigation costs, which included attorney's fees,
health risk assessments and expert witness fees, were not
"response costs" under any of the statutory definitions
found in section 9601 of CERCLA. 55 F.3d at 849-50 &
n.12 (citing, inter alia, Key Tronic Corp., 511 U.S. at 819,
114 S.Ct. at 1967, which held that litigation-related
attorney's fees were not recoverable in a private response
cost recovery action). In reaching our result, wefirst
observed that "under section [107], plaintiffs may only
recover response costs which are necessary and consistent
with the [National Contingency Plan]." Id. at 850. Second,
we found that "[t]he heart of these definitions of removal
and remedy are `directed at containing and cleaning up
hazardous releases.' . . . [T]herefore[,] . . . `necessary costs
of response' must be necessary to the containment and
cleanup of hazardous releases." Id. (quoting United States v.
Hardage, 982 F.2d 1436, 1448 (10th Cir. 1992) (alteration
in original) (internal quotation marks omitted)). Given that
the costs incurred were all litigation-related expenses
unrelated to any remedial or response action at the
property itself, we stated that "we do not believe the district
court erred in determining that plaintiffs' costs are not
response costs because they are not `monies . . . expended
to clean up sites or to prevent further releases of hazardous
chemicals.' " Id. (quoting Redland Soccer Club, Inc. v.
Department of Army, 801 F. Supp. 1432, 1435 (M.D. Pa.
1992), aff 'd in relevant part, 55 F.3d 827 (3d Cir. 1995)).
32
Here, as in Redland, the record required the district court
to reach its conclusion that the costs for which the parties
involved were seeking reimbursement were litigation-related
expenses, and thus do not fall within the definition of
"necessary costs of response." We first point out that,
notwithstanding appellants' use of ESI's services prior to
the commencement of this litigation, the billing statements
that appellants submitted as proof of the amounts
expended for ESI's service were for "consulting fees."
Importantly, the billing statements cover services that ESI
rendered in connection with the Property intermittently
from November 1996 to May 1998. See SA at 1-17.
Obviously, inasmuch as appellants filed their complaint in
the district court in March 1997, appellants are seeking
reimbursement for consulting services rendered just prior
to the time that they commenced this litigation, as well as
reimbursement for services during the duration of the
proceedings in the district court. The timing of the
transactions demonstrates that the district court correctly
concluded that ESI performed consulting services in
anticipation of appellants instituting this litigation, and also
performed consulting work during the pendency of this
litigation.
In this connection, we find it significant that Cohen
prepared an expert report for purposes of this litigation on
behalf of ESI for appellants dated April 28, 1998, see app.
at 412a, and that ESI correspondingly recorded a
significant charge on its billing statement to USLR for that
billing period. See SA at 13. The only reasonable inference
we can draw from these circumstances is that the
"consulting fee" that appellants paid to ESI for that time
period represented, at least in significant part, ESI's
payment for its preparation of the expert report.
Second, we note that the record reflects, and it is not
disputed, that as appellants' environmental consultant,
ESI's responsibilities were limited to reviewing Essex's
quarterly reports it submitted to the DEP, and to providing
appellants with a summary or analysis of Essex's progress
in completing its remediation and detoxification efforts in
accordance with the approved Clean-Up Plan. See app. at
466a; see also SA at 527. Indeed, ESI was not involved in
33
Essex's cleanup effort; it neither performed an investigation
of the Property nor gathered data for that purpose. In our
view, the nature of Essex's responsibilities toward its
clients as described in the record thus confirms that it was
retained to assess, for litigation purposes, whether Essex
was complying with its contractual responsibility to cleanup
the Property pursuant to the requirements set out in the
Clean-Up Plan.
Moreover, it is relevant to our analysis that Berger's
deposition testimony, as appellants' designated Rule
30(b)(6) witness, is far from illuminating on the necessary
costs of response issue. Contrary to the spirit of Rule
30(b)(6), Berger's evasive answers provide us with little
assistance in determining the exact purpose for which
appellants retained ESI, the nature of ESI's services that
are referenced cryptically in the billing invoices in the
record, and whether the costs incurred in relation thereto
were the result of litigation-related consultation or were
incurred in connection with work performed for some other
purpose. Berger's responses clearly do not suggest that
ESI's consulting fees were anything other than expenses
incurred in connection with the lawsuit that appellants
eventually might file if they were not satisfied with Essex's
progress (and ultimately did file) against appellees. We only
need cite the following colloquy between Essex's counsel
and Berger, which occurred at his deposition, to illustrate
our point:
Q: [Referring to the invoices for ESI] Mr. Berger, have
you ever seen those bills before?
A. I have no idea.
Q. Well, then look through them.
A. I could look through them for the next five hours
and I would have no idea. We've 90 properties. I get
bills from people. There are bills going into 1997 and
before. I have no idea whether I have ever seen these
bills or any other bills you might put in front of me
today.
Q. Mr. Berger, other than the charges represented in
those bills, are there any other costs that have been
34
expended by any plaintiff for any environmental
consulting or removal or remediation with respect to
the Black Horse Lane property?
A. I have no idea.
Q. Do you know a man named Mr. Irving Cohen?
A. Yes.
Q. How long have you known him?
A. I would say about ten years.
Q. And in what capacity do you know him?
A. Mr. Cohen was the president of Enviro-Sciences. It's
an environmental consulting firm.
Q. Has that firm ever been used by [appellant] Black
Horse Lane Associates?
A. I have no idea.
Q. Looking through the exhibits, if you could, could
you tell me whether those bills appear to indicate that
such was the case?
A. These bills are--at least the ones that I can see here
--are from Enviro-Sciences, Inc. They reference Essex
Chem, and I will tell you that every one references
Essex Chem, except for those that reference Black
Horse Lane, which is the subject property of this
lawsuit. Other than that, I can't tell you anything
about these bills. All I'm doing is reading from the bills
for you.
Q. Turn to the bills that talk about Black Horse Lane,
Phase One, I believe.
A. There's a bill dated 10-16-97 that says `Phase One,
Black Horse Lane.'
Q. All right. To what does that bill refer?
A. I don't understand the question.
Q. What does Phase One, Black Horse Lane refer to?
A. I have no idea.
35
Q. Did you ever order a Phase One on Black Horse
Lane?
A. I have no idea.
Q. Do you have an understanding what the phrase
`Phase One' means?
A. Yes, I do.
Q. What is that?
A. It's a preliminary environmental report which
basically points out areas of potential environmental
concern.
Q. Does it include any invasive testing, as far as you
know?
A. Typically, no.
Q. Do you have any idea why Black Horse Lane would
have ordered a Phase One at or about the time period
for which the bill is indicated?
A. Sitting here today, I have no idea why we did or
didn't. I suspect if we did, in fact, order one a year ago,
at that point I had a reason for it, but I don't know
what that reason would be sitting here today. If, in
fact, we did order a Phase One. I don't recall that
either.
App. at 544a. Our review of the remainder of Berger's
deposition testimony regarding the nature of ESI's
consulting work for appellants confirms that he failed to
offer any useful information concerning the factual basis for
appellants' CERCLA response cost claim relating to the fees
paid for ESI's services. See generally app. at 544a-49a.
Given the totality of the information in the record, we
agree with the district court's assessment of the nature of
ESI's consulting responsibilities to its client during the time
period for which appellants seek reimbursement. We believe
that the record requires the conclusion that ESI's work was
designed to assess, for potential or actual litigation
purposes, the extent of Essex's remediation efforts and its
progress in that regard. Accordingly, ESI's consulting fees
charged in connection with its services are not"response
36
costs" that are recoverable in a private cost recovery suit
pursuant to section 107(a)(4)(B) of CERCLA.12
In any event, assuming arguendo that we were to accept
appellants' position that ESI's consulting fees were not for
strictly "litigation costs" in the sense that appellants
retained ESI's services during the relevant time period
solely to assist them in preparing to litigate this matter, we
nevertheless would reach the result we do, primarily for two
reasons. First, appellants cannot reasonably deny that the
record demonstrates that ESI's role was limited to
evaluating Essex's progress on the cleanup effort and to
reporting its progress (or lack thereof) to appellants. Indeed,
it is significant that neither appellants nor ESI have played
any role in the containment and cleanup of the Property. At
best, it appears that ESI served as appellants'
environmental advisor in relation to the Property, and that
appellants simply monitored, for their own benefit, Essex's
progress in its cleanup efforts. Given that neither ESI nor
appellants were involved in any capacity in the actual
environmental cleanup of the Property, it is clear that the
fees appellants paid in connection with ESI's consulting
work did not relate to any remedial or response action at
the Property. As in Redland, the funds for which appellants
seek reimbursement were not "necessary to the
containment and clean up of hazardous releases," see
Redland, 55 F.3d at 850 (emphasis added), inasmuch as
appellants simply had no involvement in any remedial or
removal actions on the Property. Cf. Key Tronic Corp., 511
U.S. at 820, 114 S.Ct. at 1967 (stating that "some lawyers'
_________________________________________________________________
12. Again, we have not overlooked the circumstance that there are
references in the record to the fact that Cohen performed some
undefined environmental work for appellants prior to the dates found on
the billing invoices in the record. See, e.g. , app. at 546a (Berger
testifying
that he had a "general recollection" that Cohen of ESI performed
"environmental work" for Black Horse Lane Associates prior to February
14, 1997). Nevertheless, as we previously stated, the invoices submitted
indicate that the environmental consulting for which appellants seek
reimbursement in this cost recovery claim began in November 1996 and
continued intermittently through May 1998. Thus, while it appears that
ESI performed work for appellants prior to its work for which they seek
reimbursement, that fact is irrelevant inasmuch as appellants only seek
reimbursement for those amounts listed on the billing invoices.
37
work that is closely tied to the actual cleanup may
constitute a necessary cost of response in and of itself
under the terms of S 104(a)(4)(B)," andfinding that the
component of claim that covers attorneys' work in
identifying other potentially responsible parties fell within
that category).
Second, inasmuch as ESI's role was limited to reviewing
the manner in which Essex was performing its legal
obligation to remediate the Property and reporting Essex's
progress to appellants, we think it fair to characterize ESI
as an "overseer" of Essex's progress on behalf of appellants.
But our decision in Rohm & Haas precludes appellants
from recovering such "oversight" costs as"response costs"
pursuant to section 107(a)(4)(B) of CERCLA. In Rohm &
Haas, we held that the EPA could not recover from the
statutory responsible party the cost of its "oversight" of the
remedial actions performed and paid for by the private
party. See 2 F.3d at 1278. The oversight costs the EPA
incurred there included "direct costs (i.e. , hiring contractors
to provide sampling support and field investigation) and
indirect costs (i.e., travel costs, payroll, hiring contractors to
review [defendants'] work"). Id. at 1269 n.4 (emphasis
added). We stated that the "key issue" was whether
CERCLA's definition of "removal" should be read "to
encompass the government's activity in overseeing a
removal or remedial action paid for and conducted by
private parties." Id. at 1275.
In reaching our conclusion, we looked to the definition of
"removal" found in section 101(23) of CERCLA, and noted
that "[n]owhere in the definition of removal is there an
explicit reference to oversight of activities conducted and
paid for by a private party." Id. at 1275. Moreover, we
reviewed the five categories in the definition of removal,
with particular focus on the third of the five, i.e., "such
actions as may be necessary to monitor, assess, and
evaluate the release or threat of release of hazardous
substances," as the EPA argued that it was that aspect of
the definition that applied to permit recovery of the
oversight costs it sought. In analyzing this language, we
rejected the EPA's argument that it supported the relief
requested, explaining our holding as follows:
38
Examined in a vacuum, this language could be
understood to encompass at least some oversight of the
activities of a private party, particularly private
activities focusing on assessment of the risk. On the
other hand, it is at least as plausible to read this
language as referring only to actual monitoring of a
release or threat of release rather than oversight of the
monitoring and assessment activities of others. This
latter reading would be consistent with an
understanding of the definition that distinguishes at all
stages--assessment, response formulation, and
execution--between actions taken to define the scope
of the risk created by a release or threatened release
and actions taken to evaluate the performance of
others to determine whether they are meeting their
legal obligations. We believe a reading of the statutory
definition that embraces this distinction is
linguistically the more plausible one.
Id. at 1275-76. We further concluded that"[a]ll things
considered, we cannot say that clause [3] of the removal
definition is sufficient to constitute the clear statement of
intent required by [National Cable Television Ass'n, Inc. v.
United States, 415 U.S. 336, 342, 94 S. Ct. 1146, 1149-50
(1974) ("NCTA")]."13 Id. at 1276.
_________________________________________________________________
13. Obviously, we premised our result in Rohm & Haas on our
application of the NCTA doctrine, which we believed required the EPA to
demonstrate "a clear statement of congressional intent" for it to
recover
the oversight costs as response costs. See 2 F.3d at 1273, 1276. But our
application of the NCTA doctrine does not undermine our reliance on our
statutory interpretation analysis in Rohm & Haas as germane here.
Plainly put, we reach our result because the language of the relevant
statutory provisions requires that we do so. Indeed, the only plausible
basis for finding that appellants' oversight actions through ESI are
"removal" activities is if they fall within the third category of
"removal"
actions, i.e., actions "necessary to monitor, assess, and evaluate the
release or threat of release of hazardous substances." But as we
explained in Rohm & Haas, this language plainly refers to actual
monitoring, assessment or evaluation "of a release or a threat of
release."
Id. at 1275 (emphasis added). Here, ESI's oversight activities, to the
extent that we are willing for the sake of argument to deem them
monitoring, assessment or evaluation activities, were not related to the
release or threat of release of hazardous substances. Rather, the object
of ESI's reports, insofar as we can tell from the record, was to analyze
Essex's removal activities, including its cleanup, disposal, monitoring
and assessment actions, as described in its quarterly reports to the
DEP.
39
Our interpretation of the removal definition as excluding
the sort of "oversight" costs that the EPA sought in Rohm &
Haas compels the conclusion that appellants cannot
recover the funds paid to ESI for its consultant work, even
though appellants are private entities rather than a
governmental agency. As in Rohm & Haas, appellants seek
reimbursement from Essex, the responsible party, for costs
appellants incurred in monitoring the responsible party's
compliance with its legal obligations. See Rohm & Haas, 2
F.3d at 1279 n.23 ("The oversight costs here held to be
non-recoverable are incurred at a different level of
supervision. They are the costs of overseeing the
performance of the entity that has assumed responsibility
for the cleanup."). Indeed, there is no dispute in this case
that Essex is bound contractually to complete remediation
and detoxification of the Property, and that appellants have
not assisted Essex in meeting its statutory and contractual
obligations. In this sense, then, the district court was
correct in its observation that the costs for which
appellants seek reimbursement were not incurred as a
result of appellants' actions in cleaning up the Property.
Obviously then, inasmuch as our holding in Rohm &
Haas precludes the EPA from seeking reimbursement for
"oversight" costs incurred in overseeing the performance of
a private entity where a private party has assumed
responsibility for the cleanup, an analysis of the scope of
the "removal" definition necessarily requires us to reach the
same result in a situation where a private party seeks
reimbursement for overseeing another private party's legal
obligation to cleanup a property. In short, we are satisfied
that Congress did not intend section 107(a)(4)(B) to provide
a private party with a cause of action against a responsible
party for reimbursement of the party's expenses in
retaining an environmental consultant for oversight
purposes without direct involvement in the responsible
party's remediation and detoxification efforts.
In sum, we are convinced that the district court correctly
determined that appellants could not recover, pursuant to
section 107(a)(4)(B) of CERCLA, the monies they expended
in consulting fees in connection with ESI's services during
the relevant time period. We will affirm the district court's
40
dismissal of appellants' private cost recovery action pleaded
in count III of the amended complaint.14
B. District Court's Final Order of
December 16, 1999
Appellants next contend that the district court erred in
affirming the magistrate judge's letter opinion and order
entered June 30, 1999, which granted appellees' motion for
discovery sanctions against appellants pursuant to Rule
37(b) and (d).15 As we previously mentioned, the magistrate
_________________________________________________________________
14. We also will dismiss appellants' Spill Act claim under Count IV. See
n.11, supra. Moreover, as we previously mentioned, count V of the
complaint pleaded a claim for "damages" stemming from appellees'
alleged "acts, omissions and breaches." App. at 66a. The district court
dismissed this count, stating that "[b]ecause plaintiffs have failed to
adduce sufficient evidence in support of their breach of contract
claims,
they cannot recover the damages outlined in Count Five of the
Complaint." Id. at 16a. Inasmuch as we agree with the district court's
dismissal of counts I through IV of the complaint, we will affirm the
district court's dismissal of count V, as there is no independent
substantive basis for appellants' claim for relief.
15. Appellants also maintain that the district court erred in dismissing
appellees' counterclaim without prejudice. The counterclaim sought a
declaratory judgment that remediation of the Property under the
Agreement included use of "engineering and institutional controls," and
an order requiring appellants to consent to them. App. at 80a-81a.
Appellees explain that their counterclaim actually sought an order
compelling appellants to consent to their use of a Classification
Exception Area ("CEA"), which is "a remediation by passive rather than
active means." App. at 845a.
As we previously mentioned, appellants initially sought partial
summary judgment to dismiss the counterclaim with prejudice, but the
district court denied their motion in its order of August 10, 1999,
reasoning that appellants failed to demonstrate that they were entitled
to
judgment as a matter of law. The court observed that appellants failed
to cite any authority in support of the motion, and"merely allege[d]
that
`Plaintiffs do not and need not consent' to the engineering and
institutional controls." App. at 16. After the court dismissed the
amended complaint in its entirety, appellees moved for summary
judgment on the counterclaim. After oral argument on appellees' motion,
the court entered an order dismissing the counterclaim without
41
judge agreed with appellees' argument that Berger's
conduct warranted a sanction in the form of precluding
appellants from asserting a position and introducing
evidence contrary to the position Berger asserted during his
deposition. In addition, the magistrate judge concluded that
Berger's lack of preparedness at his deposition justified the
imposition of monetary sanctions pursuant to Rule 37(d) in
the form of costs and attorney's fees associated with taking
the deposition and bringing the sanctions motion before the
court. App. at 22a. The magistrate judge clearly set forth
the factual and legal basis for his ruling, relying primarily
on the Court of Appeals for the Fifth Circuit's decision in
Resolution Trust Corp. v. Southern Union Co., 985 F.2d 196
(5th Cir. 1993) ("Southern Union"):
Here, Berger was not completely prepared on any
occasion for which he sat for a deposition. Further, his
_________________________________________________________________
prejudice, because, in its view, there was no current case or controversy
with respect to the subject matter of the counterclaim.
We have reviewed the entire record, and we agree with the district
court's disposition of the counterclaim. It appears that the appellees
instituted the counterclaim in response to certain statements by
appellants to the effect that they would not consent to the use of a CEA
to remediate the Property, and would oppose any application that Essex
made to the DEP for that purpose. Appellees' br. at 14. Nevertheless,
the
court's dismissal of the counterclaim was appropriate because appellees
do not dispute that Essex has not applied for a CEA, and presently
cannot do so. Accordingly, appellants' threats to the effect that they
would not consent to the use of a CEA do not present a controversy ripe
for resolution, and the court did not err in dismissing the counterclaim
without prejudice for lack of subject matter jurisdiction. See, e.g.,
Philadelphia Fed'n of Teachers v. Ridge, 150 F.3d 319, 323 (3d Cir.
1998) (discussing and applying ripeness doctrine in context of claims
seeking declaratory relief, and noting that "[t]he function of the
ripeness
doctrine is to prevent federal courts, `through avoidance of premature
adjudication, from entangling themselves in abstract disagreements.' ")
(quoting Abbot Labs v. Gardner, 387 U.S. 136, 148, 87 S. Ct. 1507
(1967), overruled on other grounds, Califano v. Sanders, 430 U.S. 99,
105, 97 S. Ct. 980 (1977)); The Presbytery of N.J. v. Florio, 40 F.3d at
1462 (addressing ripeness issue in context of suit seeking declaratory
relief and stating that "[i]t is the plaintiff 's responsibility to
allege
facts
that invoke the court's jurisdiction").
42
lack of preparation cannot be a mere oversight but is,
instead, a clear demonstration of bad faith. This is
obvious from Berger's repeated denial of any knowledge
of his status as a 30(b)(6) witness despite being present
at the deposition and being asked each and every time
he appeared if he had knowledge of his status. Further,
Berger, as did the plaintiffs' witness in Resolution Trust
Corp., even denied knowledge of documents which he
himself had signed, claiming that he had no
recollection of such documents despite acknowledging
that he normally did not sign anything that he did not
read first. These infractions would not be so
detrimental if Berger were no so consistent with his
apparent incompetence and lack of cooperation. Had
he taken the time to prepare in the slightest as Rule
30(b)(6) requires, he might have been fully prepared for
at least one deposition. Additionally, Berger's actions
are magnified by his status as a member of the Bar.
App. at 21a.
In affirming the magistrate judge's order, the district
court provided its reasons on the record:
I read the record. It is appalling. It is appalling.
[Berger] did nothing except show his face only under
the threat of court orders. When he showed up, he
knew he was a 30(b)(6) witness and, notwithstanding
the fact that he knew he was a 30(b)(6) witness, he
refused to answer questions in an intelligent way. He
refused to prepare, as you are required to prepare
under 30(b)(6), to intelligently answer questions and
just literally thumbed his nose at the defendants and,
frankly, at the Court.
. . . .
I'm satisfied, based upon my review of the record--and
I defy anyone to look at the record here which was
created by Mr. Berger--that the actions taken by[the
magistrate judge] were well within his discretion and
do not constitute either an abuse of discretion or are
they contrary to law or shocking to the conscience of
the Court.
43
One, in order to come to that conclusion, one must
live in the shoes of [the magistrate judge] in trying to
conduct orderly discovery in this matter.
One must review meticulously the record of
noncompliance by Mr. Berger in this matter.
[The magistrate judge] did not issue this opinion
lightly. [The magistrate judge] was fully cognizant of
the totality of the facts surrounding this matter, which
border upon almost conscious disregard of the Court
and the court rules. . . .
Affirmed.
App. at 836a, 843a-44a.
Appellants make two arguments in support of their
request to vacate the monetary sanctions order. 16 They first
claim that the district court abused its discretion in
affirming the magistrate judge's monetary sanctions
because the court misunderstood the requirements for
imposing sanctions pursuant to Rule 37(d). They assert
that Rule 37 required as a prerequisite to imposing a
monetary sanction that the court first issue an order
compelling appellants to supply the requested discovery
responses, and then find that they failed to do so. See
Reply Br. at 29. They further claim that pursuant to Rule
37(d), "a party making a motion based upon an alleged
violation of Rule 37(d) must certify that the movant has in
good faith conferred or attempted to confer with the party
failing to answer or respond in an effort to obtain such
answer or response without court action," but that there
was no such "good faith" effort by appellees to resolve the
_________________________________________________________________
16. Appellants also claim that the court abused its discretion in
granting
appellees' motion pursuant to Rule 37(b) to the extent that it precluded
appellants from asserting at trial a position which differs from
Berger's
testimony. Given that we are affirming the summary judgment
dismissing the amended complaint in its entirety, we need not address
this argument. Also, appellants apparently contend that the court erred
in awarding a monetary sanction pursuant to Rule 37(b)(2). This
argument is without merit, as it is clear to us that the court awarded
attorney's fees and costs pursuant to subdivision (d) of Rule 37 rather
than subdivision (b). See App. at 22a (citing Rule 37(d)).
44
dispute without court action. Reply Br. at 30 (internal
quotation marks omitted).
Finally, they rely on the fact that Rule 37(d) states that
sanctions may be imposed when a party, inter alia, "fails
. . . to appear before the officer who is to take the
deposition, after being served with a proper notice." Here,
they argue that we should apply the "fails to appear"
language literally, and that sanctions were inappropriate in
this case because Berger appeared for his deposition after
the magistrate judge's October 15, 1998 order and"testified
under oath for more than seventeen hours." Br. at 59-60. In
support of their literal reading of Rule 37(d), they rely
primarily on the Court of Appeals for the First Circuit's
opinion in R.W. International Corp. v. Welsh Foods, Inc., 937
F.2d 11 (1st Cir. 1991), which stated that "Rule 37(d)
sanctions apply only when a deponent `literally fails to
show up for a deposition session.' " Id. at 15 n.2 (quoting
Salahuddin v. Harris, 782 F.2d 1127, 1131 (2d Cir. 1986)).
Their second argument is based on their interpretation of
Berger's behavior during his deposition. They claim that
even if we agree with the magistrate judge's finding that
Rule 37(d) could support the imposition of sanctions when
a Rule 30(b)(6) witness provides inadequate and evasive
answers, the record demonstrates that Berger's deposition
did not present a situation warranting sanctions. They
claim that "[a] fair examination of the transcript of Mr.
Berger's 570-page deposition confirms that Mr. Berger
testified fully and in good faith in response to Defendants'
questioning." In any event, they maintain that"any
`violation' of Rule 30(b)(6) which might be said to have
existed was minimal, and indeed, paled in comparison with
the extraordinarily broad discovery obtained by Defendants
in this matter." Br. at 63.
We are not persuaded by either contention. Beginning
with appellants' interpretation of the language of Rule 37(d),17
_________________________________________________________________
17. Rule 37(d) provides:
(d) Failure of Party to Attend at Own Deposition or Serve Answers
to
Interrogatories or Respond to Request for Inspection. If a party
or
an
officer, director, or managing agent of a party or a person
designated
45
they simply are incorrect that the magistrate judge
committed an error of law in awarding a monetary sanction
to appellees. Initially, we point out that unlike subdivision
(b) of Rule 37, on its face subdivision (d) does not require
the court, prior to imposing sanctions, to have issued an
order compelling discovery. See Al Barnett & Son, Inc. v.
Outboard Marine Corp., 611 F.2d 32, 35 (3d Cir. 1979) ("[A]
direct order by the Court, as Rule 37(a) and (b) requires, is
not a necessary predicate to imposing penalties under Rule
37(d)."), repudiated on other grounds, Alexander v. Gino's
Inc., 621 F.2d 71 (3d Cir. 1980); compare Fed. R. Civ. P.
37(b)(2) ("If a party . . . or a person designated under Rule
30(b)(6) . . . fails to obey an order to provide or permit
discovery, including an order made under subdivision (a) of
this rule . . . .") with Fed. R. Civ. P. 37(d) (stating that if the
party fails, inter alia, to appear for a deposition, "the court
. . . may make such orders in regard to the failure as are
just"). Moreover, while appellants claim that subdivision (d)
_________________________________________________________________
under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails
(
1) to
appear before the officer who is to take the deposition, after
being
served with a proper notice, or (2) to serve answers or
objections
to
interrogatories submitted under Rule 33, after proper service of
the
interrogatories, or (3) to serve a written response to a request
for
inspection submitted under Rule 34, after proper service of the
request, the court in which the action is pending on motion may
make such orders in regard to the failure as are just, and among
others it may take any action authorized under subparagraphs (A),
(B), and (C) of subdivision (b)(2) of this rule. Any motion
specifying
a failure under clause (2) or (3) of this subdivision shall
include
a
certification that the movant has in good faith conferred or
attempted to confer with the party failing to answer or respond
in
an
effort to obtain such answer or response without court action. In
lieu of any order or in addition thereto, the court shall require
the
party failing to act or the attorney advising that party or both
to
pay
the reasonable expenses, including attorney's fees, caused by the
failure unless the court finds that the failure was substantially
justified or that other circumstances make an award of expenses
unjust.
The failure to act described in this subdivision may not be
excused on the ground that the discovery sought is objectionable
unless the party failing to act has a pending motion for a
protective
order as provided by Rule 26(c).
46
requires the party seeking sanctions to certify in their
motion papers that they conferred or attempted to confer in
good faith with the party failing to answer or respond in an
effort to avoid court intervention, subdivision (d) explicitly
only requires such a certification where the motion specifies
a failure "under clause (2) or (3) of this subdivision." Fed.
R. Civ. P. 37(d). Here, appellees made the motion for
sanctions based on clause (1) of subdivision (d), which
deals with a party's failure "(1) to appear before the officer
who is to take the deposition." Id.
In addition, while we recognize that the court's statement
in Welsh Foods supports appellants' interpretation of the
language of Rule 37(d)--namely that it requires an actual
"no show" to satisfy the "fails to appear" requirement in
subdivision (1)--they apparently have overlooked the
circumstance that the magistrate judge's decision relied on
Southern Union, 985 F.2d 196. Importantly, in Southern
Union the Court of Appeals for the Fifth Circuit rejected a
literal interpretation of Rule 37(d) in situations where
the uncooperative deponent is a party's Rule 30(b)(6)
designated witness.
In Southern Union the defendant Southern Union Co.
("Southern Union") served notice on the RTC that it
intended to depose it pursuant to Rule 30(b)(6), and set
forth with specificity ten discrete topics with which the
deponent was to be familiar. After the RTC designated two
individuals as Rule 30(b)(6) deponents, Southern Union's
representatives traveled from Washington, D.C. to Dallas,
Texas, to conduct the depositions. Neither representative,
however, possessed any knowledge relevant to the matters
designated in the Rule 30(b)(6) notice. Consequently,
Southern Union moved for sanctions, and the district court
granted the motion, awarding costs and fees incurred in
deposing the RTC's two witnesses and in identifying
ultimately the proper deponent with knowledge of the
relevant facts. See id. at 196-97.
Relying upon the Court of Appeals for the Second
Circuit's opinion in Salahuddin, a case cited subsequently
in Welsh Foods, the RTC contended that sanctions
pursuant to Rule 37(d) were not appropriate because both
witnesses literally appeared for their depositions, albeit that
47
neither was helpful or forthcoming with pertinent
information. The Court of Appeals for the Fifth Circuit
rejected that argument, reasoning:
Were we here faced with a case involving the deposition
of a natural person we might be inclined to agree with
the reading of Rule 37(d) by our Second Circuit
colleagues [in Salahuddin]. The deposition of a
corporation, however, poses a different problem, as
reflected by Rule 30(b)(6). Rule 30(b)(6) streamlines the
discovery process. It places the burden of identifying
responsive witnesses for a corporation on the
corporation. Obviously, this presents a potential for
abuse which is not extant where the party noticing the
deposition specifies the deponent. When a corporation
or association designates a person to testify on its
behalf, the corporation appears vicariously through
that agent. If that agent is not knowledgeable about
relevant facts, and the principal has failed to designate
an available, knowledgeable, and readily identifiable
witness, then the appearance is, for all practical
purposes, no appearance at all.
In the instant case, RTC possessed documents that
clearly identified [the eventual deponent] as having
personal knowledge of the subject of the deposition.
RTC did not furnish those documents or designate
[that deponent] until after it had designated Perry and
Wieting, obliged Southern Union's counsel to travel
from Washington, D.C. to Dallas for a useless
deposition, and been served with Southern Union's
motion for sanctions. The finding that RTC did not
make a meaningful effort to acquit its duty to designate
an appropriate witness is manifest. The district court
did not abuse its discretion in awarding fees and costs
under Rule 37(d).
Id. at 197-98.
Following the reasoning in Southern Union, several courts
similarly have read the phrase "fails . . . to appear" in Rule
37(d) pragmatically in light of the purposes of Rule 30(b)(6)
and the parties' obligations thereunder. See, e.g., Starlight
Int'l Inc. v. Herlihy, 186 F.R.D. 626, 639 (D. Kan. 1999)
48
("Corporations, partnerships, and joint ventures have a
duty to make a conscientious, good-faith effort to designate
knowledgeable persons for Rule 30(b)(6) depositions and to
prepare them to fully and unevasively answer questions
about the designated subject matter."); The Bank of New
York v. Meridien Biao Bank Tanzania Ltd., 171 F.R.D. 135,
151 (S.D.N.Y. 1997) (" `Producing an unprepared witness is
tantamount to a failure to appear.' ") (quoting United States
v. Taylor, 166 F.R.D. 356, 363 (M.D.N.C. 1996)); Taylor,
166 F.R.D. at 363 ("[I]nadequate preparation of a Rule
30(b)(6) designee can be sanctioned based on the lack of
good faith, prejudice to the opposing side, and disruption of
the proceedings."); Zappia Middle East Constr. Co. v. The
Emirate of Abu Dhabi, No. 94-1942, 1995 WL 686715, at *8
(S.D.N.Y. Nov. 17, 1995) (agreeing with rule announced in
Southern Union that providing a wholly inadequate witness
may amount to non-appearance under Rule 30(b)(6), but
finding that sanctions were not warranted in the
circumstances of that case); Municipal Subdistrict, Northern
Colo. Water Conservancy District v. OXY USA, Inc. , 990 P.2d
701, 710 (Colo. 1999) (en banc) (following Southern Union,
985 F.2d at 197, and holding that trial court may issue
sanctions for failure to appear under Col. R. Civ. P. 37(d)--
the state's analogue to Fed. R. Civ. P. 37(d)--when a
corporation designates a deponent who appears but is
unable to answer all the questions specified in the Col. R.
Civ. P. 30(b)(6) notice); see also, e.g., Turner v. Hudson
Transit Lines, Inc., 142 F.R.D. 68, 78-79 (S.D.N.Y. 1991)
("[A] party that fails to provide witnesses knowledgeable in
the areas requested in a Rule 30(b)(6) notice is likewise
subject to sanctions."); Thomas v. Hoffman-LaRoche, Inc.,
126 F.R.D. 522, 525 (N.D. Miss. 1989) ("Sanctions are
appropriate when a party fails to comply with a request
under Rule 30(b)(6) to provide a knowledgeable deponent to
testify on behalf of the organization."); see generally Boland
Marine & Mfg. Co. v. M/V Bright Field, No. 97-3097, 1999
WL 280451, at *3 (E.D. La. May 3, 1999) (acknowledging
the rule announced in Southern Union butfinding that
deponent was prepared adequately and that sanctions were
not warranted).
We agree with the distinction the Court of Appeals drew
49
in Southern Union, and find its analysis persuasive.18 In
reality if a Rule 30(b)(6) witness is unable to give useful
information he is no more present for the deposition than
would be a deponent who physically appears for the
deposition but sleeps through it. Indeed, we believe that the
purpose behind Rule 30(b)(6) undoubtedly is frustrated in
the situation in which a corporate party produces a witness
who is unable and/or unwilling to provide the necessary
factual information on the entity's behalf. See generally
Fed. R. Civ. P. 30 advisory committee's notes (stating that
the procedure outlined in subdivision (b)(6) should be
viewed as "an added facility for discovery" and would "curb
the `bandying' by which officers or managing agents of a
corporation are deposed in turn but each disclaims
knowledge" of relevant facts). "For courts to permit litigants
to disregard the responsibilities that attend the conduct of
litigation would be tantamount to `encouraging dilatory
tactics.' " Al Barnett & Son, Inc., 611 F.2d at 35 (quoting
Cine Forty-Second Street Theatre v. Allied Artists Pictures
Corp., 602 F.2d 1062, 1068 (2d Cir. 1979)). Thus, we hold
that when a witness is designated by a corporate party to
speak on its behalf pursuant to Rule 30(b)(6), "[p]roducing
an unprepared witness is tantamount to a failure to
appear" that is sanctionable under Rule 37(d). See Taylor,
166 F.R.D. at 363. Accordingly, we conclude that the
district court did not commit an error of law in affirming
the magistrate judge's sanctions order entered pursuant to
Rule 37(d), as the magistrate correctly applied the Court of
Appeals for the Fifth Circuit's construction, which we
_________________________________________________________________
18. We point out that the cases appellants cite in addition to Welsh
Foods in further support of their argument are equally unhelpful, as
none of them involved a situation in which the uncooperative and/or
unknowledgeable witness was a corporate entity's Rule 30(b)(6) designee.
See, e.g., Estrada v. Rowland, 69 F.3d 405, 405-06 (9th Cir. 1995)
(deponent was plaintiff pursuing action pursuant to 42 U.S.C. S 1983
against prison officials); Aziz v. Wright, 34 F.3d 587, 588-89 (8th Cir.
1994) (same); Salahuddin, 782 F.2d at 1131 (same); Stevens v.
Greyhound Lines, Inc., 710 F.2d 1224, 1228 (7th Cir. 1983) (deponent
was plaintiff in employment discrimination suit); SEC v. Research
Automation Corp., 521 F.2d 585, 587 (2d Cir. 1975) (deponent was
individual defendant and president of corporate defendant).
50
approve, of the phrase "fails . . . to appear" in Southern
Union.
We reject appellants' final contention that Berger's
responses during his deposition did not support the district
court's finding that he failed to cooperate with appellees'
attorneys, and that his conduct was tantamount to a
failure to appear that warranted sanctions under Rule
37(d). To the contrary, our review of Berger's deposition
testimony in its entirety confirms the observations of both
the magistrate judge and the district court on this point.
Indeed, throughout his lengthy deposition, Berger failed to
offer meaningful testimony about most, if not all, of the
items specified in the notice of deposition. While we need
not recite every instance in which Berger's testimony was
incomplete and unhelpful on the specified topics, we believe
that two examples of his uncooperative attitude and his
flagrant disregard for his obligation as a Rule 30(b)(6)
witness amply illustrate our point.
First, when Berger was asked about the Agreement he
signed between USLR and Essex, he stated that he had no
recollection of (1) seeing or signing the Agreement, (2)
negotiating the Agreement (or who participated in its
negotiation), (3) drafting the various provisions in the
Agreement (or who participated in its drafting), or (4) the
circumstances surrounding the purchase of the Property,
i.e., if he attended the closing and where it occurred, even
though he admitted that he was personally involved in the
purchase of the Property and "probably negotiated the
contract." See app. at 525a. Second, when asked about any
and all cleanup costs appellants' incurred as a result of the
contamination on the Property, Berger testified that he did
not know: (1) whether appellants spent any money to
cleanup hazardous waste; (2) whether appellants performed
any environmental evaluation or investigation on the
Property, whether they incurred costs in doing so, and
whether there are any records that such tests were
performed; (3) whether appellants hired ESI to perform
consulting services for the Property, and if so, the dates
and purposes for which appellants retained ESI; (4)
whether ESI's billing statements in the record reflected
work performed on the Property or other unrelated services;
51
and (5) whether appellants performed any removal or
remedial actions on the Property. App. at 521a, 523-25a,
544a-49a.
Obviously, as appellants' Rule 30(b)(6) witness, Berger
should have been prepared to discuss these and other
topics designated in the notice of deposition. Instead, he
divulged as little information as possible in every area that
appellees identified. Moreover, Berger's uncooperative
attitude is demonstrated further by statements in which he
claimed that he was unaware that he was appellants'
designated Rule 30(b)(6) representative, did not know what
the phrase "Rule 30(b)(6) representative" meant, and was
not familiar with Rule 30(b)(6) or what it required him to
do. App. at 513a-14a, 527a, 544a. He also admitted at one
point that he did not recall whether he reviewed the notice
of deposition prior to the date of the deposition, app. at
527a, and later stated clearly that he had not bothered to
read it at all. App. at 610. Simply put, we find his professed
ignorance on these points particularly unconvincing given
that he obtained undergraduate and law degrees from
prestigious universities and has been licensed to practice
law since "either [19]65 or [19]66." App. at 508a.
In any event, we believe that the magistrate judge's
finding that Berger engaged in discovery abuses plainly is
justified on this record. The magistrate judge had ample
evidence of Berger's failure to cooperate, which in turn
rendered his deposition a virtual non-event. Accordingly, we
will affirm the monetary sanctions ordered pursuant to
Rule 37(d).
IV. CONCLUSION
For the foregoing reasons, the district court's orders of
August 10, 1999, and December 16, 1999, will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
52