MRP Properties Company, LLC v. United States ( 2023 )

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 23a0132p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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MRP PROPERTIES COMPANY, LLC; VALERO REFINING
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COMPANY–OKLAHOMA; PREMCOR REFINING GROUP
│
INC.; ULTRAMAR, INC.; VALERO REFINING COMPANY–
│
TENNESSEE LLC; VALERO REFINING–TEXAS, L.P., > No. 22-1789
Plaintiffs-Appellees, │
│
│
v. │
│
UNITED STATES OF AMERICA, │
Defendant-Appellant. │
┘
Appeal from the United States District Court for the Eastern District of Michigan at Bay City.
No. 1:17-cv-11174—Thomas L. Ludington, District Judge.
Argued: June 15, 2023
Decided and Filed: June 23, 2023
Before: SUTTON, Chief Judge; BATCHELDER and STRANCH, Circuit Judges.
_________________
COUNSEL
ARGUED: Michelle Melton, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
DC, for Appellant. Jennifer C. Barks, KELLEY DRYE & WARREN LLP, Houston, Texas, for
Appellees. ON BRIEF: Michelle Melton, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, DC, for Appellant. Jennifer C. Barks, KELLEY DRYE & WARREN LLP,
Houston, Texas, Jill M. Wheaton, DYKEMA GOSSETT PLLC, Ann Arbor, Michigan, for
Appellees.
No. 22-1789 MRP Properties Co., LLC v. United States Page 2
_________________
OPINION
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SUTTON, Chief Judge. During World War II, the federal government played a
significant role in American oil and gasoline production, often telling refineries what to produce
and when to produce it. It also rationed crude oil and refining equipment, prioritized certain
types of production, and regulated industry wages and prices. All of this affected the operations
of American oil companies at the time. But did it make the United States a refinery “operator”
under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42
U.S.C. §§ 9601–75? We hold that it did not and reverse the district court’s contrary
determination.
I.
The Allies fought the Axis largely with American supplies. American steel built their
tanks, ships, and aircraft. American factories assembled them. And American petroleum
products, including oil and gasoline, fueled them for war.
Wartime demand led to shortages. Congress responded. It authorized the President to
ration essential materials, to set wages and prices, to prioritize production of critical war
products, to inspect defense contractors’ facilities, and to requisition property for military use.
O’Neal v. United States, 140 F.2d 908, 910–11 (6th Cir. 1944); 50a U.S.C. §§ 633, 643 (1946)
(expired); An Act to Authorize the President of the United States to Requisition Property
Required for the Defense of the United States, Pub. L. No. 99-274, 55 Stat. 742 (1941).
The President applied these powers with care, at least to America’s oilmen. He did not
nationalize their industry or confiscate their equipment. But he did impose wage and price
controls and inspect refinery facilities, including for “[c]ontrol of dust, fumes [and] vapors.”
R.77-47 at 8. And he did regulate the quantities and grades of crude oil each refinery could
process, ration capital goods such as steel piping, and seize five refineries temporarily after labor
disputes threatened production. Perhaps most importantly, he told refiners what to make and for
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whom to make it, demanding tractor fuel for farmers one week and aviation gasoline for the Air
Force the next.
Refining oil creates sludge, slop, and other waste products. Wartime refineries burned
this waste, buried it, impounded it in landfills, or kept it in vats. Leaks and spills, often managed
by the refineries “by visual inspection,” also released waste into the environment. R.74-32 at 56.
These practices preceded the war, and the war did not end them. But to produce what the
government requested using the crude oil it allotted, refineries sometimes changed their
manufacturing techniques. These changes led to more waste production and corroded refinery
equipment, increasing leakage and spillage. Compounding this last problem, government
rationing of steel and other construction materials delayed repairs meant to address corrosion and
prevent “unintended leaks, spills, and breaks.” Id. at 50.
This case involves twelve refinery sites, all owned today by the Valero Energy
Corporation or its affiliates. Each refinery operated during the war, faced wartime regulations,
and managed wartime waste. After the war, inspections revealed environmental contamination
at each site.
Valero started cleaning up the sites. It then sought contribution from the United States,
arguing that the government “operated” each site during World War II. It did not contend that
government personnel regularly disposed of waste at any of the sites or handled specific
equipment there. Nor did it allege that the United States designed any of the refineries or made
engineering decisions on their behalf. Valero instead claimed that the government’s production
directives, rationing schemes, and wartime inspections made the United States an operator of
each facility.
After discovery, the district court granted partial summary judgment to Valero. It held
that any reasonable juror would find that the United States operated each site during the war,
emphasizing that it controlled what and how much the refineries would produce during wartime.
With the permission of the district court and our permission, the United States took an
interlocutory appeal. See 28 U.S.C. § 1292(b).
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II.
As its name conveys, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, CERCLA for short, creates a national program for remediating pollution
and sharing the clean-up costs among responsible parties. 42 U.S.C. §§ 9601–75. One of its key
provisions makes “operator[s]” of a “facility” liable for cleaning up hazardous waste found on
facility premises, sometimes long after the discharges and other pollution occurred. Id.§ 9607(a)(1)–(2). A facility’s current operators may seek contribution to pay for the remediation
of the property from their predecessors. Id. § 9613(f)(1).
The two key terms are facility and operator. Facility includes “any building, structure,
installation, equipment, pipe[,] or pipeline,” along with “any site or area where a hazardous
substance has . . . come to be located.” Id. § 9601(9).
Operator means a “person . . . operating . . . [a] facility.” Id. § 9601(20)(A)(ii). More
helpfully, “an operator . . . directs the workings of, manages, or conducts” a facility’s “affairs.”
United States v. Bestfoods, 524 U.S. 51, 66 (1998) (citing dictionaries). Honing the definition
further, “an operator must manage, direct, or conduct operations specifically related to pollution,
that is, operations having to do with the leakage or disposal of hazardous waste, or decisions
about compliance with environmental regulations.” Id. at 66–67.
Who or what counts as “conduct[ing]” or “manag[ing]” “operations . . . specifically
related to pollution” and concerning the leakage or disposal of hazardous waste? One category
that suffices covers those who perform day-to-day work with hazardous waste. Id. at 66 & n.12.
Another category covers those who make strategic decisions about waste management, say by
choosing to store waste onsite rather than offsite or by adopting processes that lead to leakage or
spillage. See GenCorp, Inc. v. Olin Corp., 390 F.3d 433, 449 (6th Cir. 2004); Am. Premier
Underwriters, Inc. v. Gen. Elec. Co., 14 F.4th 560, 580–81 (6th Cir. 2021) (citing cases); see
also 42 U.S.C. §§ 9601(29), 6903(3) (“disposal” includes “leaking” and “spilling” along with
intentional removal or storage). By contrast, run-of-the-mill regulators, lenders, and suppliers do
not amount to “operators.” United States v. Township of Brighton, 153 F.3d 307, 315 (6th Cir.
1998) (opinion of Boggs, J.) (regulators); id. at 324–25 (Moore, J., concurring in the judgment)
No. 22-1789 MRP Properties Co., LLC v. United States Page 5
(agreeing); see 42 U.S.C. § 9601(20)(F) (lenders); Am. Premier Underwriters, 14 F.4th at 580
(suppliers). All in all, “a person . . . ‘manages’ activities ‘specifically related to pollution,’” and
thus qualifies as an operator, where she “exercises control over the waste disposal process.”
GenCorp, 390 F.3d at 449.
Some cases illustrate the two sides of the operator line. On the one side, consider
GenCorp. GenCorp, Inc. and the Olin Corporation built a manufacturing plant together.
GenCorp helped pay for construction, its employees worked side-by-side with Olin’s, and its
senior management decided how the plant would dispose of toxic waste. Id. at 438–40. We
described GenCorp as an “operator” of the plant, emphasizing “GenCorp’s control over the
hazardous waste” and its disposal. Id. at 449. Or consider Nu-West Mining Inc. v. United States.
768 F. Supp. 2d 1082, 1091 (D. Idaho 2011); see Am. Premier Underwriters, 14 F.4th at 576
(relying on Nu-West). The Forest Service told a mine how to design its waste dumps and where
to put them. 768 F. Supp. 2d at 1089–90. That meant the United States “operated” the dumps,
for it “actively manag[ed] the disposal of hazardous waste” there. Id. at 1091; accord Am.
Premier Underwriters, 14 F.4th at 576.
On the other side of the line, consider American Premier Underwriters. General Electric
designed railroad equipment to vent toxic chemicals when hot, then sold the equipment to a
railroad. 14 F.4th at 565–66. That made General Electric a “service provider” but not an
operator, as General Electric did not “t[ell]” the railroad “what to do” about the venting or “play
[a] substantial role[] in the day-to-day operation of” the equipment. Id. at 580–81. Or consider
United States v. Vertac Chemical Corp., a case whose facts rhyme with today’s. 46 F.3d 803(8th Cir. 1995). A factory manufactured Agent Orange pursuant to official government
directives and in accordance with government specifications; that said, the government did not
design the factory, supply it with equipment, or “address the manner in which [it] was to handle
waste[].” Id. at 807. The Eighth Circuit held that the United States had not “operated” the
factory. Id. at 809.
The parties share some initial common ground in applying these principles and
definitions. They agree that Valero’s refinery sites count as “facilities” and that they contain
hazardous waste. And they agree that a high-volume purchaser is not for that reason alone an
No. 22-1789 MRP Properties Co., LLC v. United States Page 6
operator. They part ways over whether the United States, a high-volume purchaser and
regulator, “operated” these facilities during World War II. It did not, for several reasons.
During the war, the refineries, not the government, made the key management decisions
related to waste and implemented those decisions. Individual refineries, not the government,
worked “day-to-day” with petroleum’s hazardous byproducts. Am. Premier Underwriters,
14 F.4th at 581. Employees of the refinery, not the government, burned and buried toxic waste.
Employees of the refinery, not the government, manned refinery control rooms. And employees
of the refinery, not the government, maintained the refineries and monitored them for leaks or
spills. Far from “exercis[ing] control” over routine “waste disposal process[es],” government
officials had little to do with them. GenCorp, 390 F.3d at 449.
So too, individual refineries, not the government, made broader, strategic decisions about
waste disposal. The government did not design Valero’s refineries or tell them how to process
petroleum. Cf. Am. Premier Underwriters, 14 F.4th at 575–81 (citing cases). It did not tell them
how to handle their waste, say by treating rather than burning it, or tell them how to supervise
maintenance or refining activities. See id. And it did not instruct them about where they should
locate waste disposal sites. Id. at 576. Rather, as Valero’s expert admits, “[w]aste disposal was
an afterthought in [the United States’] wartime control of the petroleum industry.” R.74-32 at
53. To be sure, the government influenced refineries’ business decisions during the war. But
that influence did not extend to refinery facilities’ waste-related features—to how refinery
“building[s], structure[s], installation[s], [and] equipment” handled or mishandled waste.
42 U.S.C. § 9601(9) (defining “facility”); see id. § 9601(20)(A)(ii).
Decisions from other circuits confirm this conclusion. Case after case holds that the
government’s World War II demands did not give it control over waste disposal and did not
make it an “operator” of American mining or manufacturing facilities. See, e.g., PPG Indus. Inc.
v. United States, 957 F.3d 395, 403 (3d Cir. 2020) (chromite ore processing); United States v.
Sterling Centrecorp Inc., 977 F.3d 750, 758–59 (9th Cir. 2020) (gold mining); Exxon Mobil
Corp. v. United States, 108 F. Supp. 3d 486, 521 (S.D. Tex. 2015) (oil refining). One of these
cases, like today’s, considered “the government’s pervasive wartime regulation of the petroleum
industry.” Exxon, 108 F. Supp. 3d at 521. The court’s bottom line in that case mirrors ours.
No. 22-1789 MRP Properties Co., LLC v. United States Page 7
“Although the government had regulatory authority over the [petroleum] industry,” it did not
thereby “‘manage, direct, or conduct . . . operations having to do with the leakage or disposal of
hazardous waste, or decisions about compliance with environmental regulations.’” Id. (quoting
Bestfoods, 524 U.S. at 61).
A dose of common sense runs in the same direction. Emergency rationing is a
paradigmatic regulatory tool. See, e.g., 15 U.S.C. § 753(a) (1976) (expired) (petroleum rationing
during 1973 oil shock). So are orders directing manufacturers to prioritize production of key
products. 50 U.S.C. § 4511. So are mandatory inspection regimes. Donovan v. Dewey, 452
U.S. 594, 600–02 (1981); Colonnade Catering Corp. v. United States, 397 U.S. 72, 73–76 (1970)
(listing examples). By wielding these powers, regulators do not “operate” the industries they
regulate any more than “‘extensive regulation’ of a private company” makes the regulated party
a state actor. Ciraci v. J.M. Smucker Co., 62 F.4th 278, 284 (6th Cir. 2023) (quoting Manhattan
Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1928, 1932 (2019)).
All told, the government did not “operate” Valero’s refineries during the war.
Valero attacks this conclusion along several fronts. It says that the government told
refineries what to produce and that, to produce those items, refineries altered their operations in
ways that increased waste production. But manufacturers often reorganize production in order to
meet their end-users’ needs. That reality does not turn end-users into “operators.” PPG, 957
F.3d at 405 (holding that “a [g]overment directive to increase output during a time of war” did
not make the government an operator, even when manufacturer responded by altering production
processes).
Valero adds that the government managed facility inputs as well as outputs, restricting
“the supply of crude oil . . . to” each refinery. R.74-18 at 48. That does not improve things
either; controlling a facility’s supply of inputs does not make the supplier an “operator.” See,
e.g., PPG, 957 F.3d at 403 (controlling supply of chromite ore to processing plant did not make
government an “operator”); cf. Am. Premier Underwriters, 14 F.4th at 581 (supplier of railcar
components that emitted toxic substances did not “operate” railcars or components); Edward
Hines Lumber Co. v. Vulcan Materials Co., 861 F.2d 155, 157–58 (7th Cir. 1988) (entity
No. 22-1789 MRP Properties Co., LLC v. United States Page 8
supplying toxic substance to factory, which it had also designed, did not “operate” factory when
toxic substance leaked into groundwater). CERCLA regulates “the waste disposal process,” not
the supply of products leading to the production and disposal of waste. GenCorp, 390 F.3d at
449 (emphasis added).
In a similar vein, Valero observes that the wartime government rationed steel and other
necessary capital goods, leading to deferred maintenance and increases in leakage. Still, again,
controlling the supply of goods or services available for market does not make the controller an
“operator.” The government limits the domestic supply of raisins, Horne v. Dep’t of Agric.,
576 U.S. 350, 355 (2015), but that does not make the United States an “operator” of raisin
distributors or of the grocery store’s raisin aisle. Many wartime industries relied on steel and
thus were affected by such rationing. Were Valero correct, that would make the government,
implausibly, an operator of each of those facilities. See also Exxon Mobil, 108 F. Supp. 3d at526–28.
Trying to show that this was not an ordinary supplier-customer relationship, Valero
emphasizes the nature of the government’s wartime regulations, which left refineries with little
choice about usage and production decisions. But many regulatory regimes create such pressures
without making regulators “operators.” Utility regulators, for instance, tell electrical utilities
whom they must serve (typically everyone within their service area), what they must provide
(electricity of a certain voltage, frequency, and degree of reliability) and often how they must
provide it (by purchasing power from certain generators or kinds of generators). See generally
Jackson v. Metro. Edison Co., 419 U.S. 345 (1974); FERC v. Elec. Power Supply Ass’n, 577
U.S. 260 (2016); Regulatory Assistance Project, Electricity Regulation in the US: A Guide
(2011). These mandates do not transform utility regulators into “operators” of the facilities they
regulate. Cf. Jackson, 419 U.S. at 351.
Switching gears, Valero says that the government “required . . . [r]efineries to convert
their operations” to make the government’s new products. Appellees’ Br. 9. But the government
did not second-guess refineries’ engineering decisions about how to rejigger their plants. It told
the refineries to produce new products, then allowed them to create or modify the necessary
production facilities. Having left the production decisions to the refineries, the government did
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not become their “operator.” See PPG, 957 F.3d at 405 (finding that government did not operate
chromium manufacturing facility when it directed increased output but did not choose production
methods).
FMC Corp. v. U.S. Department of Commerce does not help Valero either. 29 F.3d 833(3d Cir. 1994) (en banc). A synthetic rubber plant leased government-owned machinery, which
a third party installed at the government’s behest. Id. at 837. “[W]astes were generated and
disposed of by the government-owned equipment,” and a government representative monitored
the facility employees who handled waste disposal. Id. at 837–39. The Third Circuit found that
the United States operated the facility. But here, unlike in FMC, the government did not own the
waste-producing equipment or supervise the waste-disposing employees.
FMC, it is true, describes control over “what product [a] facility would produce, the level
of production, the price of the product, and to whom the product would be sold” as “leading
indicia” of operator status, a framing that favors Valero. Id. at 843. But the Third Circuit
decided FMC before the Supreme Court decided Bestfoods, and Bestfoods clarified that
CERCLA requires control over activities “specifically related to pollution” rather than control
over general pricing and product-related decisions. 524 U.S. at 66–67; see also PPG, 957 F.3d
at 405–06 (retreating, in a subsequent Third Circuit decision, from FMC’s “leading indicia”
language in a similar way).
Valero’s remaining arguments meet a similar end. It says that the government seized a
plant not at issue in this appeal. But it never spells out how such a seizure makes the United
States an operator of facilities it did not seize. It likewise observes that the United States capped
some refinery employees’ wages, but it never explains why those controls amounted to operation
rather than regulation. And it emphasizes that government employees inspected refineries for
leaks and spills, but it does not show that those inspections made the government an operator of
Valero’s refineries—perhaps unsurprising because the United States sometimes faced
“considerable difficulty convincing . . . management” to carry out its post-inspection
recommendations. R.94-20 at 2.
We reverse.