The opinion of the court was delivered by: GERRY
Before us today is a motion for entry of a partial consent decree, which embodies a so-called " de minimis " settlement negotiated pursuant to § 122(g) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). 42 U.S.C. § 9622(g).
The settlement resolves the United States and the State of New Jersey's claims against certain parties in this action pursuant to § 107(a) of CERCLA, 42 U.S.C. § 9607(a), to recover costs incurred for enforcement, investigation and clean-up activities at the Lipari Landfill in the Township of Mantua, Gloucester County, New Jersey.
The motion is opposed by certain defendants to this action. Rohm & Haas, which is alleged to have contributed 46,507 55-gallon drums out of the estimated 54,361 drums of the hazardous waste dumped at Lipari, opposes entry of the decree on the grounds that the settling parties' payment does not adequately reflect their proportionate share of the waste at Lipari. Rohm & Haas asserts that the plaintiffs are allowing the settlors to cash out so cheaply because they can recover any shortfall, which could run into the millions of dollars, from the remaining defendants. The non-settlors will bear this risk, because the settlement extinguishes their contribution rights vis-a-vis the settlors and leaves the defendants with only a credit in the amount of the settlement. Another defendant, Manor Health Care ("Manor Health"), the successor company to a waste haulage firm, objects to and seeks to enjoin the proposed consent decree because it has not been permitted to participate as a de minimis party, while its predecessor's customers have. These objections will be dealt with during our evaluation of whether to enter the proposed consent decree.
On August 9, 1989, this court held a lengthy hearing on the proposed consent decree, in which it entertained argument from the United States on behalf of itself and the State of New Jersey; by the objecting defendants, Rohm & Haas and Manor Health Care; and by several of the de minimis settlors. The presentations made at that oral argument, voluminous briefs and the record evidence compiled by all parties, forms the analysis that follows.
The landfill site, as we have indicated in a previous opinion, see 669 F. Supp. 672 (D. N.J. 1987), occupies approximately six acres in Mantua Township, New Jersey. It is bordered by two streams.
Beginning in 1958, the Landfill's owner, Nicholas Lipari, accepted chemical and industrial wastes for deposit at the site. Overall, the United States now estimates that 55,782 55-gallon drums, or approximately 3,068,010 gallons, of liquid wastes were deposited at Lipari before it was closed by the State of New Jersey in 1971. A variety of hazardous substances, including benzene, chromium, lead, zinc and arsenic, have been detected at the site and on areas adjacent to and down gradient from the Landfill.
The Lipari Landfill has the dubious honor of being the number one site on the National Priorities List, a ranking of hazardous waste sites based on potential threat to human health and the environment. 42 U.S.C. § 9605(c); 40 C.F.R. Part 300, Appendix B; U.S. Ex. 2 at 1.
The United States has responded to the situation at Lipari by undertaking or preparing to undertake three phases of remedial action. During Phase I, the EPA installed a slurry wall encircling 16 acres of contaminated soil and groundwater, topped by an impermeable cap. See Record of Decision ("ROD") for Phase I, U.S. Ex. 9. Costs incurred through June 1, 1988 for Phase I, and for Phases II and III, are approximately $ 10,500,000. U.S. Ex. 7, Attachment 1. Phase II, selected by EPA on September 30, 1985, consists of a flushing system, and its estimated price tag is $ 33,800,000. ROD for Phase II, U.S. Ex. 10, 10A; U.S. Ex. 7, Attachment 1. On July 11, 1988, EPA selected the Phase III remedy which will address off-site contamination. See ROD for Phase III; U.S. Ex. 11. Its cost is projected at $ 20,970,000. U.S. Ex. 7, Attachment 1. Thus, total costs for remedial action are currently estimated at $ 65,270,000.
On September 10, 1985, the United States filed a complaint under § 107 of CERCLA against Rohm & Haas Company, Inc., Owens-Illinois, Inc., CBS Records, Inc., Almo, Inc., Cenco, Inc., Manor Health Care Corporation and Marvin Jonas, Inc.
The complaint seeks to recover costs already incurred in responding to the problem at Lipari, as well as a declaratory judgment on liability for future costs. The complaint alleges that Rohm & Haas, CBS Records and Owens-Illinois were parties that arranged with a transporter for disposal or treatment of hazardous substances they generated, and that Almo and Marvin Jonas transported these hazardous substances to the Lipari Landfill. See 42 U.S.C. 9607(a)(3), (4) ("generators" and "transporters," respectively). Cenco and Manor Health were named as successor corporations to Almo.
In January 1986, the State of New Jersey intervened pursuant to § 104(c) of CERCLA, 42 U.S.C. § 9604(c), to recover its 10 percent share of the response costs incurred. On July 28, 1988, the United States filed an amended complaint and named Triangle Publications, Inc., The Glidden Company, E.I. DuPont deNemours & Co., Allied Paper, Inc., Owens-Corning Fiberglass Corp., SPS Technologies, Inc., The Gilbert Spruance Company, Betz Laboratories, Inc., and Hercules, Inc. as additional defendants. These nine defendants are parties to the proposed consent decree which was filed with the court on the same day.
The decree embraces 12 parties: the two plaintiffs, the United States and the State of New Jersey; one original defendant, CBS Records, and the nine defendants added by the amended complaint. It requires the settlors to pay a total of $ 3,034,807. Proposed Consent Decree, § III, U.S. Ex. 1. Approximately $ 2,586,000 is slated to partially reimburse the United States for its response costs, and $ 287,000 will be paid to New Jersey toward its claim for response costs. New Jersey will receive an additional $ 161,220 as payment for potential damages to natural resources within its jurisdiction.
In return for these payments the settlors receive a release from liability for all claims related to Lipari. The United States and the State of New Jersey covenant not to sue for future civil claims under §§ 106 and 107 of CERCLA, 42 U.S.C. §§ 9606 and 9607, and § 7003 of the Resource Conservation and Recovery Act, 42 U.S.C. § 6973. U.S. Ex. 1, § V. New Jersey has provided the settlors with releases from liability under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.1 et seq., the Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq., and any other state statutory and common law. In addition, the United States Department of Interior and the State of New Jersey have provided releases for damages to any natural resources within their respective jurisdictions. Id. Finally, the decree grants the settlors contribution protection from the remaining defendants, i.e., the non-settling defendants, in accordance with §§ 113(f)(2) and 122 (g)(5) of CERCLA, 42 U.S.C. §§ 9613(f)(2) and 9622(g)(5), which we will discuss shortly. Id., § VII. It is this feature, or more properly this effect, of the settlement which has impelled the objections of Rohm & Haas and Manor Health.
The decree contains two "reopener" provisions. The first allows the plaintiffs, and non-settling defendants, to seek relief from the settlors if information not currently known shows that a settling party is no longer eligible for de minimis status, defined in the agreement as a volumetric contribution to the Landfill of 1 percent or less. In negotiating the settlement, the United States used as a rule of thumb the notion that a de minimis party was one which had contributed 1 percent or less of the waste at Lipari. Indeed, each settling party was required to and has certified that it contributed less than 1 percent of the hazardous waste at Lipari.
The second reopener allows the plaintiffs and any other parties to seek relief from any of the settling parties if total response costs exceed $ 94 million. Id., § VI. According to the United States, this figure was selected because:
. . . during negotiations an off-site remedy had not been selected, but the United States desired to establish a settlement figure which accounted for unknown future costs while still providing for a premium payment and ensuring that the United States at least received an amount that represented the de minimis settlor's volumetric share of the costs. Since the settlors cumulatively were considered responsible for approximately 3.0% of the waste at the site during the negotiations, the selection of the $ 94 million reopener along with the settlement amount of $ 2.87 million ensured that all of these goals were accomplished.
United States Brief at 11.
Even though the United States now views the best estimate of the settlors' volumetric contribution to be 4.23 percent, it still believes the $ 94 million reopener is adequate, since the settlors are still bearing approximately their proportionate share and might be contributing a premium, since they could have contributed even less than the 3.0 percent used to select the $ 94 million reopener.
Rohm & Haas, as we shall see, believes these reopeners are inadequate. It contends that the evidence currently in the record demonstrates that the settling parties are responsible for over 10 percent of the hazardous waste at Lipari and therefore should be paying almost $ 4 million more.
The United States and Rohm & Haas agree that it was, rather ironically, Rohm & Haas which initiated and drove the process that led to the proposed decree. They part company with respect to what affect this had on the settlement ultimately agreed upon by the Government and the settlors.
Rohm & Haas avers that after settlement negotiations between the original defendants and the United States failed it approached the United States about the possibility of identifying other parties potentially responsible for the clean-up of Lipari Landfill ("potentially responsible parties" or "PRPs"). The United States evinced very little interest in this proposal, being quite content to recover its response costs from the then named defendants. Therefore, it was Rohm & Haas which undertook primary responsibility for identifying other PRPs. The purpose of this process, according to Rohm & Haas,
was to develop a "cash-out" agreement whereby these generators would settle all claims relating to Lipari Landfill by paying a lump-sum amount in return for a covenant not to sue pursuant to CERCLA, Section 122(g), 42 U.S.C. 9622(g). The Government expressed little interest in conducting the discovery necessary to allocate the share of total costs to companies other than defendants Rohm and Haas, Owens-Illinois and Manor Health Care. Therefore, the burden fell on Rohm and Haas and the other defendants to investigate the extent of liability of the so-called " de minimis " parties.
Rohm & Haas Brief at 4-5.
To facilitate this process, United States Magistrate Jerome B. Simandle established a discovery period to identify other PRPs. Discovery was stayed, except insofar as it was directed at identifying such PRPs. Numerous depositions were taken, most important of which was that of Marvin Jonas, whose company had transported large amounts of Rohm & Haas waste to Lipari. During his deposition, Jonas said that he had transported to Lipari the waste of several generators that were not originally named as defendants in the original complaint. Jonas Deposition of April 17, 1986; U.S. Ex. 12. By way of this deposition, and from the records of those companies mentioned by Jonas, and from further discovery taken from Nick Lipari, other PRPs were identified.
Through this discovery, Rohm & Haas was able to persuade the United States that these parties were responsible for the Lipari response costs.
On October 10, 1986, counsel for Rohm & Haas drafted and transmitted a proposed settlement agreement and release. Whitman Certification, Rohm & Haas Ex. 1. Under this proposal seven companies identified during this discovery process (seven of the ten who are parties to the proposed consent decree) would have paid $ 2.6 million in return for a release of liability for all claims relating to Lipari. U.S. Ex. 4, Attachment 1A. This figure, Rohm & Haas says, was premised on its belief that the total response costs at Lipari would be $ 20 million, and EPA's belief that $ 26 million, given the potential for cost overruns, was a "liberal" estimate of the potential response costs. Whitman Cert., Rohm & Haas Ex. 1; U.S. Ex. 7, Attachment 1.
At a meeting on October 14, 1986, Rohm & Haas presented its settlement to the parties and explained that the $ 2.6 million figure was premised on estimated clean-up costs of $ 20 million. Id. Rohm & Haas viewed the settlement as representing a 10 percent share of the waste at Lipari, plus a $ 600,000 "premium" for an early "cash-out," whereby the settling parties pay additional funds above their volumetric share of the waste in exchange for avoiding the possible joint and several liability and substantial litigation costs which accompany being a CERCLA defendant.
On November 13, 1986, the United States "preliminarily endorsed" the $ 2.6 million figure. U.S. Ex. 33. This approval, says Rohm & Haas, was at that time based on EPA's view that the settlement constituted a payment for the seven settlors' estimated 5 percent share of the waste, plus a 5 percent premium for an early cash-out. Rohm & Haas Brief at 7-8; U.S. Ex. 7, Attachment 1.
Under either of these scenarios, Rohm & Haas was prepared to support the settlement. However, in 1988, Rohm & Haas learned that EPA's estimate of the response costs had soared from $ 26 million to $ 65 million after completion of the Remedial Investigation and Feasibility Study ("RI/FS") pursuant to § 104(b) of CERCLA, 42 U.S.C. § 9604(b).
Further, three other companies, Gilbert Spruance, Allied Paper and Betz Laboratories, joined the original settlors. Despite this, the United States entered into a settlement with these ten parties for only $ 360,000 -- $ 200,000 for response costs, and $ 160,000 for natural resource damages -- more than the $ 2.6 million figure originally proposed by Rohm & Haas.
Rohm & Haas urged the United States to demand a markedly higher dollar figure from these PRPs in light of the new circumstances. The United States' refusal to do so demonstrates, according to Rohm & Haas, the non-adversarial nature of this settlement. The United States did not pursue these settlors with the vigor one usually associates with plaintiffs. Rather, it went along with the de minimis process so long as it was convenient for it to do so; i.e., while Rohm & Haas was doing all the work, but was never committed to striking a fair bargain which would exact an adequate sum from the de minimis PRPs. After all, notes Rohm & Haas, these PRPs were not targets chosen by the United States, and the Government never wished to devote much time to pursuing them since it already had strong cases against Rohm & Haas and Owens-Illinois. Moreover, the United States believed that the non-settlors, as opposed to itself, would bear the brunt of a bad settlement. As such, it had little incentive to engage in a hard-fought bargaining process.
During the negotiating process, the United States insists that it engaged the settlors in lengthy and hard-fought bargaining. The settlors demanded a complete release from liability for claims related to Lipari. The United States refused this demand and insisted upon the inclusion of the two reopeners described earlier.
Moreover, many of the settlors originally offered to pay significantly lower dollar contributions than what were eventually agreed upon. The United States held out for and eventually accepted a dollar settlement which constituted 90 percent of its original demand.
At oral argument, counsel for the United States and for some of the de minimis settlors represented to the court that the settlement was a good-faith compromise of this litigation. Counsel for the de minimis settlors assured the court that the United States was a tough and largely unyielding adversary. Counsel for the United States accorded equal respect to counsel for the settlors, who, it says, consistently made suggestions for inclusions or deletions from the United States settlement proposal and never hesitated to point out the weakness of the case against their clients.
Rohm & Haas does not contest these assertions of good-faith. It does not deny that there were proposals and counter-proposals, drafts and counter-drafts. Rather, Rohm & Haas believes that the settlement was not the product of truly spirited negotiating because the United States felt it had nothing at risk, and thus lacked the underlying incentive to hold out for a fair deal. The United States would not, Rohm & Haas asserts, have entered into this settlement, negotiated based on a response costs estimate of $ 26 million, if it bore the risk that this was a bad settlement. It was only because the Government believed that Rohm & Haas and the other non-settling defendants would be responsible for making up any underpayment by the settlors that it allowed the ten settlors, among whom are corporate titans like DuPont and CBS Records, to cash out so cheaply.
To fully understand this argument, one must recognize the effect a CERCLA de minimis settlement has on the contribution rights of a non-settling PRP, such as Rohm & Haas. It is to that subject that we now direct our attention.
IV. THE CONSENT DECREE AND NON-SETTLORS' CONTRIBUTION RIGHTS
CERCLA ordinarily accords any potentially responsible party, such as Rohm & Haas, the right to seek contribution from other PRPs during or following any action under §§ 106 or 107(a). § 113(f)(1) of CERCLA; 42 U.S.C. § 9613(f)(1). In resolving such claims, "the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." Id.
However, the contribution rights of PRPs vis-a-vis defendants who settle a CERCLA action with the United States or a state are extinguished by such a settlement. Under the proposed consent decree's provisions, the non-settling defendants, and any unidentified PRPs, would be barred from seeking contribution from any of the settling defendants. In lieu of such rights, any potential liability of the non-settlors would be reduced by the amount of the settlement. U.S. Ex. 1, § VII. Therefore, if the United States obtains a judgment of X dollars against all the PRPs and Rohm & Haas satisfies that entire judgment, it will only receive a credit in the amount of the settlement even if the amount of the settlement is only 4.4 percent of X and Rohm & Haas can show that the settlors' equitable share is 10 percent of X -- a scenario which under comparative fault principles would ordinarily give rise to a contribution right in Rohm & Haas since it had satisfied more than its equitable share of a joint liability. This result, the United States argues and Rohm & Haas fears, is dictated by two specific CERCLA provisions added by the SARA amendments which address the effect CERCLA settlements have on non-settling parties.
The first of these provisions, § 113(f)(2), applies generally to CERCLA settlements involving governmental plaintiffs and provides:
A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.
42 U.S.C. § 9613(f)(2). The second provision, § 122(g)(5), directly addresses the effect of a de minimis settlement upon non-settlors' contribution rights:
A party who has resolved its liability to the United States under this subsection [§ 122(g)] shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially responsible parties unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.
42 U.S.C. § 122(g)(5). (Emphasis added.)
While non-settlors lose their contribution rights, defendants who are parties to a CERCLA settlement retain the right to seek contribution from the non-settling PRPs. 42 U.S.C. § 913(f)(3)(B). And, of course, the Government retains the right to bring or maintain an action and seek relief from non-settling PRPs if the settlement provides it with less than complete relief. 42 U.S.C. § 9613(f)(3).
Prior to the 1986 SARA amendments, CERCLA had been silent as to whether defendants were jointly and severally liable for response costs, whether a right of contribution existed among PRPs, and therefore, of course, what effect settlements would have on non-settling PRPs' contribution rights. Courts, both pre- and post-SARA, have consistently held that defendants under CERCLA are jointly and severally liable where the harm at a particular waste-site is indivisible. United States v. Monsanto Company, 858 F.2d 160, 171 (4th Cir. 1988), cert. denied, Monsanto Company v. United States, 490 U.S. 1106, 109 S. Ct. 3156, 104 L. Ed. 2d 1019 47 U.S.L.W. 3812 (1989); United States v. Northeastern Pharmaceutical and Chemical Company (NEPACCO), 579 F. Supp. 823, 844-845 (W.D. Mo. 1984), aff'd in relevant part and reversed in part, 810 F.2d 726 (8th Cir. 1986), cert. denied, sub nom., Armco Inc. v. Maryland Casualty Co., 484 U.S. 1008, 108 S. Ct. 703, 98 L. Ed. 2d 654 (1988), cert. denied, 484 U.S. 848, 98 L. Ed. 2d 102, 108 S. Ct. 146 (1987); United States v. Wade, 577 F. Supp. 1326, 1337-39 (E.D. Pa. 1983); United States v. Chem-Dyne Corp., 572 F. Supp. 802, 805-810 (S.D. Ohio 1983).
There was, pre-SARA, more dispute about how settlements would affect contribution rights, which were generally assumed to exist under CERCLA. See State of Colorado v. ASARCO, Inc., 608 F. Supp. 1484, 1492 (D. Colo. 1985) (citing cases). EPA tried to encourage settlements by agreeing to indemnify any party with whom it settled to the extent necessary to extinguish any contribution claims against that party. However, EPA did have a preference for resolving the effect of a settlement on non-settlors in accord with section four of the Uniform Contribution Among Tortfeasors Act ("UCTA"), 12 Uniform Laws Annotated 63 (1975), which states:
When a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death:
(a) It does not discharge any of the other tortfeasors for liability for the injury or wrongful death unless its terms so provide; but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is the greater ; and
(b) It discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor.
Id. at 98; Interim Settlement Policy, 50 Fed. Reg. 5034, 5043 (Feb. 8, 1985) (emphasis added). At least one court, however, held that the rule articulated in the Uniform Comparative Fault Act, U.L.A. pocket part 40 (1989), was preferable to the UCTA for use under CERCLA. United States v. Conservation Chemical Co., 628 F. Supp. 391 (W.D. Mo. 1985).
Section 6 of the UCFA provides:
A release, covenant not to sue, or similar agreement entered into by a claimant and a person liable discharges that person from all liability for contribution, but it does not discharge any other persons liable upon the same claim unless it so provides. However, the claim of the releasing person against other persons is reduced by the amount of the released person's ...