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PRUDENTIAL INS. CO. OF AMERICA v. UNITED STATES GY

March 28, 1989

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA; PIC REALTY CORPORATION; 745 PROPERTY INVESTMENTS, Plaintiffs,
v.
UNITED STATES GYPSUM; W. R. GRACE & COMPANY; THE CELOTEX CORPORATION; UNITED STATES MINERAL PRODUCTS; KEENE CORPORATION; PFIZER, INC.; ASBESTOSPRAY CORPORATION; and "JOHN DOE COMPANIES," fictitious names for presently unidentified entities, Defendants. THE PRUDENTIAL INSURANCE COMPANY, Plaintiff, v. NATIONAL GYPSUM COMPANY, Defendant



The opinion of the court was delivered by: ACKERMAN

 This is an action for compensatory and punitive damages as well as declaratory relief against numerous corporate entities who have allegedly designed, manufactured or supplied asbestos-containing materials that had been used in the construction and maintenance of various buildings. This matter is presently before the court on various motions of defendants to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b) (1), 12(b) (6) and 12(c), plaintiffs' cross motion to strike certain affirmative defenses and for declaratory judgment as well as plaintiffs' motions to amend the complaint, consolidate this action with a substantially similar matter and dismiss one of the defendants without prejudice.

 II. PROCEDURAL HISTORY

 The procedural history with respect to the substantive issues before me, as opposed to matters related to the legal representation of the litigants relate to two separately filed complaints. I shall review that history below.

 A. Prudential Insurance Company of America, et al. v. United States Gypsum Co., et al.

 On October 20, 1987, plaintiffs, Prudential Insurance Company of America ("Prudential"), a New Jersey corporation, PIC Realty Corporation ("PIC"), a Delaware corporation, and 745 Property Investments ("745 Property"), a voluntary trust association organized under the laws of Massachusetts, filed a ten count complaint for damages and declaratory relief from defendants, United States Gypsum Company, a Delaware corporation, W. R. Grace & Company, a Connecticut corporation, Celotex Corporation, a Delaware corporation, United States Mineral Products Co., a New Jersey corporation, Keene Corporation, a New York corporation, Pfizer Incorporated, a Delaware corporation, Asbestospray Corporation, a New York corporation, and John Doe Companies. The caption of that case is Prudential Insurance Co., et al. v. U.S. Gypsum, et al., No. 87-4227 (D.N.J. filed Oct. 20, 1988). As complete diversity between all of the plaintiffs and all of the defendants is lacking, this court presently has federal question jurisdiction over the complaint pursuant to 28 U.S.C. § 1331 as plaintiffs seek recovery pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, ("CERCLA") 42 U.S.C. § 9601, et seq. In addition, plaintiffs request that I exercise pendent jurisdiction over state law claims of strict liability, negligence, breach of expressed and implied warranties, fraud and misrepresentation, unfair and deceptive trade practices, civil conspiracy and restitution as well as the issuance of a declaratory judgment pursuant to 28 U.S.C. § 2201-02. Defendants Pfizer, Asbestospray, Celeotex, Keene and United States Mineral each have filed answers to the complaint.

 On December 10, 1987, defendants U.S. Gypsum and W. R. Grace moved to dismiss the complaint pursuant to Fed.R.Civ. P. 12(b)(1) and 12(b)(6). On December 14, 1987, defendant Keene similarly moved to dismiss the complaint on the grounds set forth by U.S. Gypsum and W. R. Grace. On December 15, 1987, defendant Celotex moved to dismiss counts 1 and 10 for failure to state a claim and the state law claims for lack of subject matter jurisdiction. On December 18, 1987, defendant Asbestospray filed a motion for judgment on the pleadings pursuant to Rule 12(c) and to dismiss the state claims pursuant to Rule 12(b) (1) for the reasons set forth in the brief of U.S. Gypsum and W. R. Grace. On January 8 and 25, 1988, respectively, defendants Pfizer and U.S. Minerals also filed motions to dismiss on the grounds set forth by their co-defendants.

 On November 21, 1988, plaintiffs filed a motion to strike defendants' affirmative defense regarding the applicability of CERCLA to this action and request that I issue an order declaring that section 9607 of CERCLA authorizes private parties to recover costs incurred in responding to the alleged hazard posed by asbestos in buildings.

 Thereafter, on December 16, 1988, plaintiffs filed a motion for an order (1) consolidating this lawsuit with a separate suit pending before me (2) permitting plaintiffs to amend their complaint and (3) permitting plaintiffs to dismiss defendant Pfizer, Inc. without prejudice.

 I note here that by order filed October 6, 1988, United States Magistrate Stanley R. Chesler consolidated this action with an action entitled Prudential Insurance Co. v. National Gypsum Co., No. 87-4238 (D.N.J. filed Oct. 21, 1988). In addition, by consent order filed January 24, 1989, plaintiffs agreed to voluntarily dismiss all claims against defendant Pfizer, without prejudice.

 B. Prudential Insurance Co. v. National Gypsum Co.

 On October 21, 1987, plaintiffs, Prudential Insurance Company and PIC Realty Corp. filed a similar ten count complaint against National Gypsum Co., a Delaware corporation. The complaint predicates jurisdiction on the existence of a federal question involving recovery under CERCLA. Plaintiffs also seek relief under theories of strict liability, negligence, breach of express and implied warranties, fraud and misrepresentation, unfair and deceptive trade practices, civil conspiracy, restitution and for declaratory judgment. This action, captioned Prudential Insurance Co., et al. v. National Gypsum Co., No. 87-4238 (D.N.J. filed Oct. 21, 1987), was originally assigned to Judge Barry but has since been reassigned to me and consolidated with Civil Action No. 87-4227.

 Prior to reassignment and consolidation, on December 10, 1987, National Gypsum filed a motion to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b) (1) and 12(b) (6).

 On March 30, 1988, plaintiff Prudential filed its first amended complaint in the National Gypsum action in which it deleted the claims of PIC Realty. According to the amended complaint, plaintiff seeks relief under § 113 of the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9613, and a declaratory judgment under the Declaratory Judgment Act, 28 U.S.C. § 2201-02, as well as relief under the common law theories of strict liability, negligence, breach of express and implied warranties, fraud and misrepresentation, unfair and deceptive trade practices, civil conspiracy and restitution.

 On May 5, 1988, defendant National Gypsum filed its answer to the amended complaint. In its answer, defendant denies the presence of federal jurisdiction and specifically denies that CERCLA is applicable to any actions National Gypsum may have taken in the manufacture and distribution of asbestos-containing substances and that the sale of same does not constitute disposal under CERCLA. Defendant also asserts the affirmative defense that the complaint fails to state a claim upon which relief can be granted. These are the basis upon which defendant sought to dismiss the original complaint, and apparently the amended complaint as well.

 III. STANDARD OF REVIEW/FACTUAL CONTEXT

 Since all of the parties seek dismissal of the federal claims either pursuant to Fed. R. Civ. P. 12(b) (1), 12(b) (6), or 12(c), I must, in considering these motions to dismiss, accept as true the factual allegations of the complaint and construe them liberally, in a light most favorable to the plaintiffs. Gomez v. Toledo, 446 U.S. 635, 636 n. 3, 64 L. Ed. 2d 572, 100 S. Ct. 1920 (1980); Angelastro v. Prudential-Bache Securities Inc., 764 F.2d 939, 944 (3d Cir. 1985); cert. denied, 474 U.S. 935, 88 L. Ed. 2d 274, 106 S. Ct. 267 (1985); Jennings v. Shuman, 567 F.2d 1213, 1216 (3d Cir. 1977); Mortensen v. First Federal Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). I may dismiss the claims which are the subject of the motions if it "appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claims which would entitle [them] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Cruz v. Beto, 405 U.S. 319, 31 L. Ed. 2d 263, 92 S. Ct. 1079 (1972).

 As the court has declined to consider additional assertions of fact beyond those alleged in the complaint, I am bound by the prospective for reviewing Rule 12 motions and therefore, accepting all facts plead in the complaints as true, the factual scenario of which these cases arise is as follows: Prudential, PIC and 745 Realty have an ownership interest in a number of commercial office buildings, hotels and residential rental properties located in Arkansas, Arizona, California, Colorado, Florida, Georgia, Illinois, Louisiana, Maryland, Missouri, Minnesota, Nebraska, New Jersey, New York, Oklahoma, Pennsylvania, Tennessee and Texas, which have been constructed and/or maintained with asbestos-containing products that defendants had allegedly manufactured, processed, marketed, distributed, supplied and/or sold.

 Asbestos is a fiberous material that was commonly used through the 1970s as a component of a variety of building materials such as fireproofing and insulation. Plaintiffs assert that some asbestos-containing materials had been sprayed onto steel beams, girders, floors, ceilings, walls and in the ventilation systems of their buildings.

 Plaintiffs assert that in the 1970's it was determined that the disturbance, damage or deterioration of asbestos-containing materials causes the release of asbestos fibers that building occupants may inhale. The fibers are "a known human carcinogen" and thus exposure to asbestos dust can cause various diseases about which the defendants knew or should have known prior to the sale of the materials. See para. 11 of the First Amended Complaint filed in Prudential v. National Gypsum, No. 87-4238 and para. 18 of the Complaint filed in Prudential et al. v. United States Gypsum, et al., No. 87-4227. Specifically, plaintiff contends that defendants knew or should have known of the contamination hazards posed by the presence of asbestos-containing materials in light of the medical and scientific reports published from the early 1930's through the early 1960's. Plaintiffs assert that despite this knowledge, however, defendant fraudulently concealed the dangers, and failed to warn foreseeable users of the hazards and risks associated with asbestos materials, failed to represent the risks accurately and failed to test those materials and/or develop asbestos-free substitutes.

 Because of the purported health dangers, plaintiffs assert that they have instituted an inspection, monitoring, maintenance and abatement program with respect to the buildings at issue so as to determine the extent to which asbestos-containing materials are present, the extent of contamination and to accordingly institute the necessary remedial measures to remove, enclose or otherwise repair such materials. Through these civil actions, plaintiffs seek reimbursement for the costs of these programs and for damage that has or will occur from the presence of the asbestos-containing products in their buildings.

 Of particular relevance here is plaintiffs claim for relief pursuant to CERCLA.

 In Count One of the First Amended Complaint filed in Prudential v. National Gypsum plaintiff alleges:

 
24. Within the meaning of the comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601, et seq., defendant is a person who has arranged for the disposal of a hazardous waste substance in the facilities identified . . . in . . . this First Amended Complaint, from which the substance has been and will continue to be released into the environment.
 
25. Costly abatement actions by plaintiff have been and will be necessary response actions consistent with the federal National Contingency Plan.
 
26. The actions and failures to act by defendant have directly, foreseeably and proximately caused damage and injury to plaintiff, including but not limited to physical harm to and contamination of plaintiff's buildings, and the expense of testing, monitoring, and abating the asbestos-containing product hazards in those buildings, for which recover is allowed under CERCLA.

 Similarly, in Count I of the complaint filed in Prudential et al. v. U.S. Gypsum et al. plaintiffs allege:

 
40. By virtue of the design, manufacture, sale and distribution by defendants of asbestos-containing materials to be incorporated in the buildings identified in the Appendix to this complaint, and within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. (hereinafter "CERCLA"), defendants are persons (42 U.S.C. § 9601(21)) who have arranged and are responsible for the disposal (42 U.S.C. §§ 9607(a) (3) and 9601(29)) of asbestos, a hazardous substance (42 U.S.C. § 9601(14) (D) and (E)), in facilities (42 U.S.C. § 9601(9)) from which the hazardous substance has been and will continue to be released into the environment (42 U.S.C. § 9601(22)).
 
41. Because of the release and threatened release of this hazardous substance into the environment, costly inspection, monitoring, maintenance and abatement measures by plaintiffs have been and will be necessary response actions (42 U.S.C. § 9601(23) and (24)) consistent with the National Contingency Plan (40 C.F.R. Part 300) for responding to releases of hazardous substances.
 
42. The actions and failures to act by defendants have directly, foreseeably and proximately caused damage and injury to plaintiffs, which includes but is not limited to physical harm to and contamination of the buildings, and the expense of testing, monitoring and abatement response actions to remedy and eliminate the asbestos-containing product hazards in those facilities, for which recovery is allowable under CERCLA. 42 U.S.C. § 9607(a) (3) (B).

 Defendants have moved to dismiss plaintiffs claim under CERCLA on the ground that the statute applies to the cleanup of abandoned and inactive hazardous disposal sites, and not to the regulation of substances that are components of commercial products used to construct buildings. Specifically, defendants contend that the 1986 amendments to the act specifically limit its applicability, excluding from its coverage products which are part of the structure of a building. In addition, defendants argue that the essential elements of a viable CERCLA claim are absent in this case. Since plaintiffs' have not alleged that defendants have "disposed" of a hazardous substance at a "facility", as those terms are defined in the statute. Defendants assert that since one may dispose only of a waste, and since the asbestos at issue is not a discarded material, the manufacture and sale of asbestos for commercial use does not constitute disposal of a waste and hence its cleanup cannot be a basis for CERCLA liability. Further, even assuming defendants did dispose of a waste, they argue that the disposal did not occur at a "facility" since the substance was placed in a consumer product which the statute explicitly excludes from the definition of a facility. Finally, defendant Celeotex argues that the release of asbestos fibers is not a release as defined under CERCLA since it does not involve the emitting of a substance into the air, but rather involves the emission of dust in an enclosed building. Finally, defendants assert that as plaintiffs fail to state a claim under CERCLA, the basis for federal jurisdiction is removed, and therefore the court should decline to exercise pendent jurisdiction and the complaint should be dismissed. *fn1"

 In support of their cross motion to strike defendants' affirmative defenses that CERCLA does not apply to this case and for a declaratory judgment that CERCLA allows private parties to recover the costs of responding to the alleged hazard created by asbestos in buildings, and in opposition to defendants' motion to dismiss, plaintiffs argue that the language and spirit of CERCLA demonstrate that the Act allows for private cost recovery for the abatement of asbestos in buildings in a case in which defendants have arranged for the disposal of a hazardous substance that is being released or is threatening to be released from Prudential's buildings, which are facilities.

 Plaintiffs argue that CERCLA was enacted to respond to the problem of hazardous substance release, not just the cleanup of abandoned waste dumps, through a bifurcated structure that allows for both private enforcement actions and superfund financed cleanups.

 Plaintiffs assert that their complaint alleges facts that satisfy each of the elements for CERCLA liability. First, plaintiffs assert that defendants have not disputed that they are persons who can be liable under § 9607(a). Second, plaintiffs allege that through the transport and distribution of asbestos-containing materials, defendants arranged for the treatment and transport of a hazardous substance. Third, plaintiffs argue that defendants do not dispute that asbestos is a hazardous substance within the meaning of CERCLA. Fourth, plaintiffs assert as the complaint alleges that the buildings are a place at which hazardous substances are found, they are facilities. Relatedly, plaintiffs argue that to say that the facility is a consumer product is irrelevant here since the consumer product exception applies only to products in consumer use and the asbestos here was not in "consumer use." Fifth, plaintiffs contend that the escape of asbestos fibers into the environment is a release within the broad meaning of CERCLA. Sixth, plaintiffs assert that they will expend money to remove, monitor and evaluate the release or threat of release of hazardous substances

 Plaintiffs also argue that the literal meaning of the 1986 amendments to the statute reflect only that they were intended to limit the response action which the federal government could take and did not similarily limit actions by private parties and thus, while the federal government may not use Superfund monies to provide for the removal of substances from products which are part of the structure of a building, private parties are still authorized to recover costs incurred in dealing with such releases.

 IV. DISCUSSION

 In 1980, Congress passed CERCLA to provide the nation with a comprehensive mechanism for the cleanup of inactive hazardous waste sites, hazardous spills and the release of hazardous substances into the environment. United Technologies Corp. v. United States Environmental Protection Agency, 261 U.S. App. D.C. 226, 821 F.2d 714, 717 (D.C.Cir. 1987); Dedham Water Co. v. Cumberland Farms, Inc., 805 F.2d 1074, 1080 (1st Cir. 1986); Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 890 (9th Cir. 1986); New York v. Shore Realty Corp., 759 F.2d 1032, 1037, 1041 (2d Cir. 1985); United States v. Northernaire Plating Co., 670 F. Supp. 742, 745 (W.D.Mich. 1987); Allied Towing v. Great Eastern Petroleum Corp., 642 F. Supp. 1339, 1348 (E.D.Va. 1986); New York v. General Electric Co., 592 F. Supp. 291, 296 (N.D.N.Y. 1984); United States v. Northeastern Pharm. & Chem. Co., 579 F. Supp. 823, 838 (W.D.Mo. 1984), aff'd in part, reversed in part on other grounds, 810 F.2d 726 (8th Cir. 1986), cert. denied, 484 U.S. 848, 98 L. Ed. 2d 102, 108 S. Ct. 146 (1987), citing, United States v. Price, 523 F. Supp. 1055, 1109 (D.N.J. 1981), aff'd, 688 F.2d 204 (3d Cir. 1982); H. R.Rep. No. 1016 at 22, reprinted in 1980 U.S. Code Cong. & Ad. News at 6125; City of Philadelphia v. Stepan Chemical Co., 544 F. Supp. 1135, 1142 (E.D.Pa. 1982).

 The statute embodies a bifurcated scheme to promote the cleanup of hazardous sites, spills and releases. First, through the creation of Superfund, the federal government is provided with the tools to respond to the growing problems resulting from hazardous waste disposal. 42 U.S.C. §§ 9604-05, 9611-12. Second, the statute also authorizes private parties to institute civil actions to recover the costs involved in the cleanup of hazardous wastes from those responsible for their creation and to thereby insure, so far as possible, that those responsible for the creation of the problem are liable for the response costs in cleaning them up. 42 U.S.C. § 9607(a) (1-4); Walls v. Waste Resource Corp., 823 F.2d 977, 980-81 (6th Cir. 1987); Dedham, supra at 1081; Wickland, supra at 892; Violet v. Picillo, 648 F. Supp. 1283, 1288 (D.R.I. 1986); Idaho v. Bunker Hill Co., 635 F. Supp. 665, 672 (D.Idaho 1986); Northeastern Pharm & Chemical, supra at 848; General Electric, supra at 302; United States v. Reilly Tar & Chemical Corp., 546 F. Supp. 1100, 1112 (D. Minn. 1982).

 To present a prima facie case for the recovery of the response costs of clean-up of such waste, a private plaintiff must prove the following:

 
(1) that the defendant is within one of four statutory categories of "covered persons" liable for such costs;
 
(2) that there has been a release or there is a threat of release of a hazardous substance from a facility;
 
(3) which has caused plaintiff to incur clean-up and response costs;
 
(4) that the costs expended were necessary;
 
and
 
(5) that the responsive actions taken and the costs incurred were consistent with the National Contingency Plan.

 Artesian Water Co. v. Government of New Castle County, 659 F. Supp. 1269, 1278 (D. Del. 1987), aff'd, 851 F.2d 643 (3d Cir. 1988). At issue today is whether the defendants are "covered persons" who can be held liable for the costs of response. Plaintiffs contend that the defendants are covered persons ...


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