United States v. USX Corp. ( 1995 )

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
10-23-1995
United States v USX Corp.
Precedential or Non-Precedential:
Docket 94-5681
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
Recommended Citation
"United States v USX Corp." (1995). 1995 Decisions. Paper 278.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/278
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_───────────_
No. 94-5681
_───────────_
UNITED STATES OF AMERICA,
v.
HUGHES, HUBBARD & REED,
Intervenor-Plaintiff
v.
USX CORPORATION; ATLANTIC DISPOSAL SERVICE,
INC.; EASTERN SOLID WASTE EQUIPMENT COMPANY,
INC.; A.C. REALTY; CHURCHDALE LEASING INC.;
PAUL C. MURPHY, INC.; ATTWOODS, INC.; ALVIN
WHITE; AVE MARIA CARITE, AS EXECUTOR OF THE
ESTATE OF CHARLES CARITE; STEPHEN MINER, AS
EXECUTOR OF THE ESTATE OF CHARLES CARITE,
Defendants
and
ALVIN WHITE; A.C. REALTY; ANTHONY CARITE,
JR., AVE MARIA CARITE, AS EXECUTOR OF THE
ESTATE OF CHARLES CARITE; STEPHEN MINER, AS
EXECUTOR OF THE ESTATE OF CHARLES CARITE;
ATLANTIC DISPOSAL SERVICE, INC.; USX
CORPORATION; THE HARLEYSVILLE MUTUAL
INSURANCE COMPANY,
Third-party Plaintiffs
v.
CHUBB GROUP OF INSURANCE COMPANIES; FIRST
STATE INSURANCE COMPANY; THE HARLEYSVILLE
MUTUAL INSURANCE COMPANY; INTERSTATE FIRE AND
CASUALTY COMPANY; PENNSYLVANIA MANUFACTURERS
INSURANCE COMPANY; SAFETY MUTUAL CASUALTY
CORPORATION; WYLE LABORATORIES, INC.; EASTERN
1
SOLID WASTE EQUIPMENT COMPANY, INC.;
CHURCHDALE LEASING INC.; A.C. REALTY;
ATTWOODS, INC.; PAUL C. MURPHY, INC.; ALVIN
H. WHITE; AVE MARIA CARITE, AS EXECUTOR OF
THE ESTATE OF CHARLES CARITE; STEPHEN MINER,
AS EXECUTOR OF THE ESTATE OF CHARLES CARITE;
ANTHONY CARITE, JR.; UTICA MUTUAL INSURANCE
COMPANY,
Third-party Defendants
ATLANTIC DISPOSAL SERVICE, INC., ALVIN WHITE,
A.C. REALTY, AVE MARIE CARITE, AS EXECUTOR OF
THE ESTATE OF CHARLES CARITE, AND STEPHEN
MINER, AS EXECUTOR OF THE ESTATE OF CHARLES
CARITE,
Appellants
_───────────_
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 90-3068)
Argued July 26, 1995
Before: BECKER and ALITO, Circuit Judges,
VANASKIE, District Judge*
(Filed October 23, 1995)
*The Honorable Thomas I. Vanaskie, United States District Judge
for the Middle District
of Pennsylvania, sitting by designation
2
Sanford F. Schmidt (Argued)
Gerston, Cohen & Grayson
20 Kings Highway West
Haddonfield, NJ 08033
Attorney for Appellants
Atlantic Disposal
Service, Inc.,
Alvin White and A.C. Realty
Joseph H. Kenney (Argued)
Kenney & Kearney
220 Lake Dyrive East
P.O. Box 5034
Cherry Hill, NJ 08034
Attorney for Appellants
Ave Maria Carite and Stephen
Miner,
as Executors of the Estate of
Charles
Carite
Albert M. Ferlo, Jr. (Argued)
United States Dept. of Justice
Environment & Natural
Resources
Division
P.O. Box 23795
Washington, DC 20026
Attorney for Appellee
_───────────_
OPINION OF THE COURT
_───────────_
VANASKIE, District Judge
This is an appeal from a declaratory judgment in favor
of the United States and against defendants/appellants Atlantic
Disposal Service, Inc. ("ADS"), the principal shareholders of
3
ADS, Alvin White ("White") and Charles Carite ("Carite"), and
A.C. Realty, decreeing that each is jointly and severally liable
under §107 of the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A. §§9601-75
(1995), for any future response costs incurred by the United
States at a hazardous waste site located in Tabernacle, New
Jersey (the "Tabernacle Site"). The district court held, on
summary judgment motions, that each appellant was liable under
CERCLA as a "person who . . . accepted . . . hazardous substances
for transport to disposal or treatment facilities . . . or sites
selected by such person." 42 U.S.C.A. §9607(a)(4)(1995). ADS
was held liable based upon evidence that its employees had
transported approximately 200 drums of hazardous waste to the
Tabernacle Site pursuant to an arrangement negotiated by a
representative of ADS with the lessees of the Tabernacle Site.
White and Carite were held liable based upon the district court's
finding that they exercised control over the activities of ADS in
1976 and 1977, when the drums were deposited at the Tabernacle
Site.0 A.C. Realty, a partnership formed by Carite and White
which owned the land and buildings occupied by ADS, was held
liable on the ground that it was a joint venturer of ADS at the
time of the disposal activities at issue here.
Although we agree that the record before the district
court established, as a matter of law, the liability of ADS as a
0
Charles Carite was killed in an airplane accident in 1991, and the executors of his estate have
been substituted as defendants. During the relevant time frame, Carite and White were the sole
shareholders, directors and officers of ADS.
4
"transporter" under §107(a)(4) of CERCLA, 42 U.S.C.A.
§9607(a)(4), we find that there are genuine issues of material
fact pertaining to the potential liability of White, Carite and
A.C. Realty. Specifically, as to White and Carite, the district
court erred in assessing liability on the basis of day-to-day
control of the affairs of ADS, as opposed to whether White and/or
Carite actually participated in the decision to dump drums of
hazardous waste at the Tabernacle Site. Because there are
genuine disputes pertaining to the knowledge and participation of
White and Carite in the Tabernacle Site dumping, summary judgment
on their liability is inappropriate. As to A.C. Realty, we find
that there are genuine issues concerning the intent of the
parties to establish a joint venture relationship, thereby
precluding summary judgment on this issue as well. Accordingly,
we will affirm the declaratory judgment against ADS, but will
vacate the declaratory judgment against White, Carite and A.C.
Realty and remand to the district court for further proceedings.
I. FACTS AND PROCEDURAL HISTORY
A. The Statutory Liability Scheme
"Congress enacted CERCLA to facilitate the cleanup of
potentially dangerous hazardous waste sites, with a view to the
preservation of the environment and human health." Tippins, Inc.
v. USX Corp., 37 F.3d 87, 92 (3rd Cir. 1994). One of the
principal purposes of CERCLA is "to force polluters to pay for
costs associated with remedying their pollution." United States
v. Alcan Aluminum Corp., 964 F.2d 252, 259-60 (3rd Cir. 1992).
5
CERCLA imposes liability for the costs of cleaning up a
polluted site on four separate categories of parties:
(1) The owner and operator of a
facility from which there has been a release
or threatened release of hazardous substances
necessitating responsive action, §107(a)(1);
(2) A person who owned or operated such
a facility at the time hazardous substances
were deposited there, §107(a)(2);
(3) A person who arranged for the
transportation, disposal or treatment of
hazardous substances at such a facility,
§107(a)(3); and
(4) A person who had accepted hazardous
substances for transportation to a facility
selected by that person, §107(a)(4).0
Section 107(a)of CERCLA, in pertinent part, states:
0
Notwithstanding any other provision or rule of law, and subject only to the
defenses set forth in subsection (b) of this section --
(1) the owner and operator of a vessel or a facility,
(2) any person who at the time of the disposal of any
hazardous substance owned or operated any facility at which such
hazardous substances were disposed of,
(3) any person who by contract, agreement, or otherwise
arranged for disposal or treatment, or arranged with a transporter
for transport for disposal or treatment of hazardous substances
owned or possessed by such person, by any other party or entity, at
any facility or incineration vessel owned or operated by another
party or entity and containing such hazardous substances, and
(4) any person who accepts or accepted any hazardous
substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by such person, from which
there is a release, or a threatened release which causes the
incurrence of response costs, of a hazardous substance, shall be
liable for--
6
Potentially responsible parties described by
subsections (1) and (2) are generally known as "owners" and
"operators"; those who fall under subsection (3) are generally
known as "generators" and sometimes referred to as "arrangers";
and those who fall under subsection (4) are commonly known as
"transporters."0 See Atlantic Richfield Co. v. Blosenski, 847
F. Supp. 1261, 1271 (E.D. Pa. 1994). Liability of responsible
parties is strict, i.e., not dependent on a finding of fault.
See Tippins, 37 F.3d at 92.0 This appeal involves the question
(A) 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;
(B) any other necessary costs of
response incurred by an other person consistent with
the national contingency plan;
(C) damages for injury to,
destruction of, or loss of natural resources,
including the reasonable costs of assessing such
injury, destruction, or loss resulting from such a
release; and
(D) the costs of any health
assessment or health effects study carried out under
section 9604(i) of this title. 42 U.S.C.A.
9607(a)(1995).
The term "person" as used in §107(a) is defined to include "an individual, firm, corporation,
association, partnership, consortium, joint venture, commercial entity, United States
Government, State, municipality, commission, political subdivision of a State or any interstate
body." 42 U.S.C.A. §9601(21).
0
CERCLA defines the terms "transport" and "transportation" as "the movement of a hazardous
substance by any mode." 42 U.S.C.A. §9601(26).
0
Strict liability is described as "liability that is imposed on an actor apart from either (1) an intent
to interfere with a legally protected interest without a legal justification for doing so, or (2) a
7
of whether the record before the district court established that
ADS, White, Carite and/or A.C. Realty should be held liable as
"transporters" of hazardous substances to the Tabernacle Site.0
B. The Potentially Responsible "Transporter" Parties
White and Carite formed ADS in 1963. ADS was engaged
in the business of hauling waste from commercial and industrial
establishments. At the time of incorporation, Carite owned 50
percent of ADS' stock, White owned 49 percent of the stock, and
the remaining one percent was owned by White's spouse.0 From its
incorporation until 1991, when its assets were sold, White and
Carite were the sole officers and directors of ADS. White was
the President of ADS; Carite was its Secretary/Treasurer.
As business expanded, White and Carite formed other
corporations and partnerships. In 1971, they incorporated
Eastern Solid Waste Equipment Company, Inc. ("ESWECO"). Although
initially intended to operate as a distributor of refuse
collection equipment, ESWECO essentially served as a maintenance
company for the equipment used and buildings occupied by ADS.
ESWECO was owned by relatives of White and Carite, but White and
Carite served as the sole officers of that corporation.
Carite and White were also the sole partners in A.C.
Realty, which was the owner of approximately 8.5 acres of land
breach of a duty to exercise reasonable care, i.e., actionable negligence." W. Page Keaton, et al.,
Prosser & Keaton on the Law of Torts §75 at 534 (5th ed. 1984).
0
There is no dispute that the Tabernacle Site is a "facility" under CERCLA. Nor is there any
challenge to the fact that there has been a release of hazardous substances from this facility.
0
By 1977, White and Carite each owned 50 percent of the ADS stock.
8
located in Mt. Laurel, New Jersey. Facilities constructed on a
three-acre section of this parcel were leased to ADS. In the
late 1970's, A.C. Realty leased another acre of land to Atlantic
Recovery and Transfer Systems, Inc. ("ARTS"), which operated a
waste transfer station adjacent to ADS.0
Also in the late 1970's, White and Carite established
A.C. Enterprises, a partnership that leased containers and trucks
to ADS. In 1982, A.C. Enterprises sold its assets to Churchdale
Leasing, Inc., a Subchapter S corporation owned by White and
Carite, who were its sole officers and directors. Churchdale
Leasing continued to lease rolling stock and containers to ADS.
ESWECO, A.C. Realty, and A.C. Enterprises dealt solely
with ADS and other companies established by White and Carite.
Neither A.C. Realty nor A.C. Enterprises had any employees; ADS
employees performed the work of these partnerships.0
C. The Tabernacle Site
One of the ADS industrial accounts during the 1970's
was a plant operated by USX Corporation in Camden, New Jersey.
ADS hauled 55-gallon drums of liquid waste from the USX facility
to a landfill in Gloucester County. When the Gloucester County
landfill refused to accept the USX drums, arrangements were made
to dispose of the drums on a 1-acre wooded parcel in Tabernacle,
New Jersey, leased by Robert Ware, an ADS mechanic. Ware's
Carite and White were each 50 percent shareholders in ARTS as well.
0
After the business operations of A.C. Enterprises were turned over to Churchdale Leasing, ADS
0
continued to provide the employees to conduct the leasing business. ESWECO, A.C. Realty and
A.C. Enterprises conducted their business at the Mt. Laurel facility leased to ADS.
9
understanding was that ADS would pay him a fixed amount for each
drum dumped at the Tabernacle Site.
In 1976, Edith Ruhl, who was then Ware's wife, saw
three trucks arrive at the Tabernacle Site and unload 55-gallon
drums and other containers. Painted on the doors of the trucks
were the words "Atlantic Disposal Services." An ADS dispatcher,
William Milsop, acknowledged sending trucks containing drums of
liquid waste to the Tabernacle Site.
In 1982, investigators of the Burlington County, New
Jersey Health Department discovered 193 barrels and containers at
the Tabernacle Site. Attached to at least one of the drums found
at the Tabernacle Site were USX shipping documents.
Pursuant to a "Unilateral Administrative Order" issued
by the United States Environmental Protection Agency ("EPA") in
February of 1984 pursuant to §106(a) of CERCLA, 42 U.S.C.A.
§9606(a) (1995),0 ADS removed all drums and related waste from
the Tabernacle Site. Analyses of the contents of the drums
revealed a number of hazardous substances. Soil sampling
disclosed a release of the hazardous substances to the
environment. Sampling from monitoring wells confirmed the
existence of groundwater contamination.
A Remedial Investigation and Feasibility Study
("RI/FS") was undertaken by EPA in 1985. As a result of the
RI/FS, "special notice letters" were issued in July of 1988 to
Section 106(a) authorizes EPA to issue "such orders as may be necessary to protect the public
0
health and welfare and the environment" from an imminent and substantial danger resulting from
an actual or threatened release of hazardous substances.
10
ADS and USX, affording them the opportunity to negotiate an
agreement to perform the Remedial Design and Remedial Action
("RD/RA") proposed by EPA for the Tabernacle Site.0 The ensuing
negotiations resulted in an agreement by USX to perform the
RD/RA. ADS, however, refused to participate in the environmental
remediation work.
D. Procedural History
In August, 1990, the United States commenced this cost
recovery action pursuant to Section 107 of CERCLA, 42 U.S.C.A.
§9607 (1995), naming as defendants only USX and ADS. Liability
was sought to be imposed on USX as a "generator," and ADS was
alleged to be liable as a "transporter."
In July of 1992, the United States amended its
complaint, adding as defendants White and Carite. The United
States claimed that White and Carite were personally liable for
the transportation of USX waste to the Tabernacle Site based upon
their alleged pervasive control of ADS. The United States also
added as defendants Churchdale Leasing, ESWECO, and A.C. Realty,
alleging that these entities were "joint venturers" of ADS in
connection with the transportation of wastes containing hazardous
substances to the Tabernacle Site. USX filed cross-claims
against each of these parties.0
0
The "special notice letters" were issued pursuant to §122(e) of CERCLA, 42 U.S.C.A.
§9622(e)(1995), which establishes the mechanism for negotiating an agreement with potentially
responsible parties to undertake environmental remediation work.
0
In addition, USX named Anthony Carite, Jr., Charles Carite's brother and the operations
manager of ADS, as a third-party defendant. Pursuant to a stipulation of dismissal, the USX
claims against Anthony Carite, Jr. were later dismissed.
11
In an opinion dated December 6, 1993, the district
court ruled that ADS, A.C. Realty, Churchdale Leasing, and ESWECO
had been engaged in a joint venture that encompassed the
transportation of waste containing hazardous substances to the
Tabernacle Site.0 In separate Memoranda and Orders filed on
January 12, 1994, the district court ruled that ADS, White and
Carite were liable as "transporters" under §107(a)(4) of CERCLA,
and USX was liable as a generator under §107(a)(3) of CERCLA.
The district court, however, declined to grant summary judgment
in favor of the United States on its damage claim of
$1,778,518.89, finding that there were genuine issues of material
fact "regarding the reasonableness of the RI/FS and whether the
United States' response costs were incurred due to a `needless
and expensive monitoring study.'" (A. 127a.)
By letter dated March 11, 1994, the United States
informed the district court that it had reached a settlement with
USX and Attwoods, Inc.0 Under the terms of the settlement, USX
agreed to pay the United States $1.71 million of the $1.78
0
The December 6, 1993 Memorandum and Order addressed cross-motions for summary judgment
filed by USX, as third-party plaintiff, and by ESWECO and Churchdale Leasing, two of the
third-party defendants. The United States had separately moved for summary judgment on the
joint venture issue. While the district court did not address the motion of the United States on
this point, the parties have acknowledged that the ruling on USX's motion applies with equal
force to the claims of the United States against A.C. Realty as an alleged joint venturer.
0
Attwoods had purchased the assets of ADS and the stock of Churchdale Leasing and ESWECO
in March of 1991. Ownership of these companies was transferred to an Attwoods subsidiary
known as Paul C. Murphy, Inc. The United States sued Attwoods and Paul C. Murphy, Inc. as
purported corporate successors of ADS. USX filed cross-claims against these parties. In a
Memorandum and Order dated January 11, 1994, the district court denied cross-motions for
summary judgment on the issue of successor liability. (A. 100a-22a.)
12
million claimed as recoverable response costs. The March 11,
1994 letter explained:
The settlement reached by the settling
parties will encompass the following claims
set forth in the pleadings in this action:
(1) All the United States' claims in
its amended complaint except for a request
for declaratory judgment for future response
costs against the non-settling defendants;
and (2) All claims by and between USX and
defendants Attwoods, Churchdale Leasing,
[ESWECO and Paul C. Murphy, Inc.]. Thus, the
settlement will resolve all triable issues
related to the United States' claims and the
United States has no need at this time to
participate in the pretrial conference
scheduled for March 16, 1994. [A. 180-81a,
emphasis added.]
In a footnote in this letter, the United States also stated:
The Court has already ruled that the
non-settling defendants are liable to the
United States under Section 107(a) of CERCLA.
Since the settlement will resolve the United
States' claim for past costs, the only relief
that the United States may ask this court for
is a declaratory judgment of liability for
future costs against the non-settling
defendants. [A. 180a.]0
The United States did not participate in the final
pretrial conference, which was conducted on March 16, 1994. A
jury trial commenced in June of 1994. In light of the settlement
with the United States, the trial was limited to cross-claims
between USX and Attwoods, on the one hand, and the ADS Defendants
on the other.0 After several days of trial, USX, Attwoods, and
0
The non-settling parties were ADS, White, Carite and A.C. Realty, who will be referred to
collectively as the "ADS Defendants."
0
USX sought recovery of $1.71 million paid to settle the United States' claims; $3.59 million
incurred in conducting the RD/RA at the Tabernacle Site, and a declaration that ADS, White,
13
the ADS Defendants announced that they had reached a settlement.
The basic terms of the settlement were that the ADS Defendants
would pay $2 million to USX, and in exchange would receive a
general release from USX as well as an agreement by USX to
indemnify them for any future response cost incurred by the
United States at the Tabernacle Site. They also would obtain from
Attwoods a general release with respect to the Tabernacle Site.
(A. 59a.-65a.)
At the time that counsel for the ADS Defendants placed
on the record the settlement of the cross-claims, he requested
"that this case . . . be dismissed with prejudice. . . ."
(A. 61a.) Counsel for the United States objected to the
dismissal with prejudice, observing:
This Court already ruled each one of
those defendants is a liable party here. A
settlement with the USX and Attwoods
defendants deals with our present and past
costs, but it does not deal with potential
future costs at the site.
I just want to let the Court know that
if they were to move to dismiss with
prejudice, the Government might oppose that
motion at that time. [A. 66a-67a.]
On August 15, 1994, the United States filed a motion
for a declaratory judgment against the ADS Defendants for future
costs that may be incurred at the Tabernacle Sites. The ADS
Defendants responded to the request for declaratory relief by
moving for dismissal for failure to prosecute arising out of the
Carite and A.C. Realty were liable for all future costs incurred in connection with the RD/RA at
the Tabernacle Site. Attwoods sought recovery of $2.71 million purportedly spent in connection
with the cleanup of the Tabernacle Site. (A. 147a.-48a.)
14
fact that the United States had not participated in the
preparation of the final pretrial order and had not attended the
trial. In an Opinion dated September 20, 1994, the district
court granted the United States' motion and denied the ADS
Defendants' motion.
The ADS Defendants filed a timely notice of appeal,
reasserting that the United States had effectively abandoned its
request for declaratory relief. They also argue that the
district court's summary judgment rulings on liability are
erroneous.
The district court had jurisdiction pursuant to 28
U.S.C. §1331 as the United States' claims arose under federal
law. We have appellate jurisdiction under__
15