Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

UNITED STATES v. LIGHTMAN

December 12, 1997

UNITED STATES OF AMERICA, Plaintiff,
v.
JEROME LIGHTMAN, et al., Defendants.



The opinion of the court was delivered by: SIMANDLE

 SIMANDLE, District Judge:

 In this Superfund case, a group of defendants (The "Joint Defense Group" or "JDG") has moved to enforce an agreement between the JDG and defendant Stepan Company to fund the joint settlement of all defendants with the United States. The plaintiff, the United States, has joined this motion. In response to the motion, Magistrate Judge Rosen held an evidentiary hearing, and prepared comprehensive findings in a Report and Recommendation granting the JDG's motion to enforce the settlement with Stepan.

 Defendant Stepan Company has objected to the Report's findings that there was an enforceable agreement between the JDG and Stepan Company and that Stepan is equitably estopped from denying the enforceability of the agreement. The JDG, while concurring with the Report's finding of an enforceable agreement, objects to the recommendation of denial of their request for attorney's fees and costs.

 The issue in this motion essentially is whether a binding agreement-in-principle can be implied from the parties' course of conduct, namely Stepan's offer and the JDG's acceptance, despite provisions in an unexecuted memorialization of the agreement that specifically make the effectiveness of that document contingent upon written execution by all the parties. Because the resolution of this question requires a fact-intensive analysis, the court will set forth the factual background of the matter in some detail.

 I. BACKGROUND

 This Superfund case has been pending before this court since November 1992. The United States, pursuant to Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act ["CERCLA"], 42 U.S.C. § 9607(a), has alleged that the defendants in this action are strictly liable, jointly and severally, for the costs incurred by the United States in responding to the release and/or threatened release of hazardous substances deposited at the D'Imperio Property Superfund Site, Hamilton Township, New Jersey. Various defendants have also brought cross-claims against each other arising out of the D'Imperio Site and the Ewan Superfund Site located in Burlington County, New Jersey, asserting claims for contribution under section 113(f) of CERCLA, 42 U.S.C. § 9613(f).

 A. Settlement Negotiations

 At various stages in the litigation, aggressive settlement initiatives were undertaken by the parties, under the supervision of Magistrate Judge Rosen. In May of 1993, the court stayed the litigation so the defendants could engage in mediation in order to resolve a dispute between the defendants regarding the proper allocation of response costs amongst them. As a result of that first mediation effort, all alleged defendant and third-party defendant generators of waste, with the exception of Stepan Company, agreed to an allocation of responsibility for the cleanup costs of the two Superfund sites, and agreed to coordinate their defense jointly by forming a Joint Defense Group ("JDG"). *fn1" Stepan Company, however, disputed the mediator's recommended allocation of costs, and chose not to join the JDG. As a result of this dispute, the litigation has proceeded with the JDG and Stepan each being represented by separate counsel.

 Further settlement discussions then continued after the litigation resumed in October 1995. Pursuant to Magistrate Judge Rosen's supervision, the defendants all entered into negotiations with the United States in an effort to settle the United States' claims for past costs. (See Case Management Order No. 7, P3, Ex. A to Certification of Sean Monaghan (hereinafter "Monaghan Certif").) On December 1, 1995, the United States proposed a settlement of the United States' claims for past costs whereby the government would agree to reduce its past costs claim from $ 8.7 million to $ 7.1 million. (See Ex. C to Monaghan Certif..) The government's proposal was contingent, inter alia, on the immediate payment of the $ 7.1 million, and the government therefore suggested that "the JDG and Stepan may, if they choose, agree amongst themselves to a temporary funding mechanism to make this payment, with a proviso that they readjust their contributions to the total at the conclusion of the contribution action." (See id.) Stepan and the JDG took steps to obtain a stay of the litigation so that the parties could negotiate and respond to the government's substantial reduction of its demand in order to achieve the benefits of an early settlement, according to the testimony of Mr. Matthews, who was Stepan's counsel at that time. (Matthews Dep. Tr. at 46:17 to 47:22.)

 Accordingly, the defendants embarked on internal negotiations between the JDG and Stepan Company, pursuant to an Order of the court filed December 26, 1995, in the hopes of reaching an agreement on a way for the defendants to preserve their rights against each other while funding a settlement with the United States for its past costs claim. (See Case Management Order No. 9, P 3, Ex. B. to Monaghan Certif..) *fn2" Negotiations progressed quickly, and on January 17, 1996, a letter was sent to JDG counsel Robert Gladstone, Esquire, by Stepan's former counsel Robert Matthews, Esquire, of the firm of McKenna & Cuneo, setting forth Stepan's proposal for a set of principles for an agreement to fund the joint settlement of the United States' claims for past costs, under which each defendant's respective burden would be subject to future reallocation by trial, if necessary. *fn3" (See Ex. D to Monaghan Certif..) Stepan's General Counsel, Jeffrey W. Bartlett, had discussed the contents of Matthews' January 17, 1996 letter and approved it. (Matthews Dep. Tr. 24:12 to 26:19, at Ex. G to Stepan Company's Objections.) Throughout the subsequent negotiations, these fundamental terms never changed, and no attempt was made to change them. (See Monaghan Certif. P5.)

 On January 22, 1996, during a telephone status conference with Magistrate Judge Rosen, the parties represented to the court that Stepan and the JDG were close to achieving settlement with the United States. (See Certification of Nan Bernardo, P 3 (hereafter "Bernardo Certif."); see also letter of January 26, 1996 to Judge Rosen from Nan Bernardo, counsel to the JDG, Ex. A to Bernardo Certif..) Based on these assertions, Judge Rosen understood that the United States' claims for past costs were being resolved through the joint funding agreement, and that the litigation would go forward without the United States so that the liability of defendants and third-party defendants upon the claims and cross-claims for contribution among themselves could be prepared for trial. Accordingly, he issued a Case Management Order in which it was contemplated that the United States would not participate in future depositions. (See Case Management Order No. 10, filed January 29, 1996, Ex. B. to Bernardo Certif. (providing that "should the defense group and Stepan fail to consummate settlement with the United States of America, it is understood that the United States will have an opportunity to re-depose any individual produced for deposition pursuant to paragraph 3.").)

 On February 15, 1996, Stepan's counsel, Robert Matthews, again sent a letter to JDG Counsel Robert Gladstone, transmitting a draft of a proposed funding agreement. *fn4" (See Ex. E to Monaghan Certif.) This proposal set forth in further detail a method for the parties to achieve the goals set forth in Mr. Matthews' previous letter, and specified an amount that Stepan would be willing to contribute toward the initial settlement payment to the government. *fn5" (See Monaghan Certif. at P 6.) *fn6" In his letter, Mr. Matthews at first did not hold the attached proposal out as a firm offer, explaining that he had not had an opportunity to review the draft with his client because his client contact was out of the country; he therefore reserved the right to make changes to the draft "based on such discussion". (See Ex. E to Monaghan Certif. P 3.) Because Mr. Matthews did not subsequently make any changes to the essential terms of the draft, either upon his client's return or at any time thereafter, (see Monaghan Certif. P 7), the Matthews letter of February 15, 1996, including the attached draft funding agreement, constituted a firm offer from Stepan for a funding agreement. Mr. Matthews indeed has testified that Mr. Bartlett (Stepan's General Counsel) reviewed the February 15, 1996 offer letter upon Bartlett's return, and that when Matthews discussed the settlement offer with Bartlett, Bartlett indicated no disagreement with "the direction in which we were heading on negotiating this settlement". (Matthews Dep. Tr., supra, at 43:14 to 44:19.)

 On February 20, 1996, Mark Gallagher of the United States Department of Justice sent to counsel for Stepan and the JDG a proposed Partial Consent Decree for settlement of the United States' claims for past costs. (See Ex. F to Monaghan Certif..) This Partial Consent Decree incorporates the principles described in Mr. Matthews' letters. *fn7"

 On February 29, 1996, members of the JDG met by telephone conference, in which a voting majority of the JDG indicated their approval of the terms of Stepan's funding proposal and the partial consent decree, but suggested some modifications to the language of both documents. (See Monaghan Certif. at P 10.) Counsel for the JDG then forwarded a revised draft of the Funding Agreement to Mr. Matthews on March 9, 1996. This revised draft incorporated the suggested modifications to the language of Stepan's proposal without making any changes to the fundamental terms of the agreement. (See id. at P 11.) Counsel for the JDG and Stepan then conferred repeatedly by telephone between March 18 and April 17, and negotiated further refinements to the language of the funding agreement; no changes to the fundamental principles of the settlement were made. (See id. at P 13-18.) These discussions between Stepan (represented by Mr. Matthews and Joyce Lim, Esquire, also of the firm of McKenna & Cuneo) and the JDG (represented by Mr. Gladstone and Mr. Monaghan of Shanley & Fisher) amounted to fine tuning of language, not renegotiation of substantive terms of payment, timing or the like; indeed, these negotiated revisions were described by Ms. Lim as merely "conforming changes." (Facsimile of Mar. 19, 1996 by Joyce Lim to Sean Monaghan, Ex. I to Monaghan Cert..)

 On April 9, 1996, at a case management conference before Judge Rosen, it was again represented to the court that the parties were finalizing their settlement. (See Bernardo Certif. P 5.) Accordingly, the subsequent revised Case Management Order filed by the court on April 26, 1996, CMO No. 11, again contemplated that discovery would proceed without the participation of the United States. (See Ex. C to Bernardo Certif.)

 Discussions regarding the language of the Funding Agreement concluded in a meeting on May 6, 1996, in which counsel for Stepan and the JDG conferred by telephone and either reached or came close to reaching final agreement regarding the details of the language for the funding agreement. *fn8" It was understood by all parties involved that the Stepan Settlement Agreement would be executed immediately after the execution of the Partial Consent Decree with the United States. (See Monaghan Certif. at P 23.) The signature pages for the Stepan Settlement Agreement were not circulated among the parties, however, pending receipt of the United States' signature pages for the Partial Consent Decree. (See id. at P 22.)

 Over the next month, discussions continued among all parties regarding the Partial Consent Decree with the United States. (See id. P at 24.) An essentially final version of the Partial Consent Decree was produced by Counsel for the United States on May 20, 1996. *fn9" At no time during the discussions leading up to this point did counsel for Stepan indicate in any way that Stepan did not consider itself bound by its agreement with the JDG to finance the settlement with the United States for past costs. (See id.) On June 24, 1996, the Partial Consent Decree was circulated among the parties, along with a request that the parties sign the signature page and return it to Sean Monaghan, counsel for the JDG. (See id. at P 26,29.) Throughout the following months, while members of the JDG were submitting executed signature pages to the Partial Consent Decree to Mr. Monaghan, Stepan gave no indication of an intent to withdraw from either the Funding Agreement or the Partial Consent Decree.

 A new issue, having no direct bearing on the Stepan-JDG funding agreement, was introduced into the negotiation of the Partial Consent Decree when the United States District Court for the Southern District of Alabama held the retroactive application of CERCLA § 107(a) and 106(a) to be unconstitutional. (See id. at 26. (discussing United States v. Olin, 927 F. Supp. 1502 (S.D. Ala. 1996).) Both the JDG and Stepan became interested in having an opportunity to test the legality of the Olin decision before this court. (See id.) Members of the JDG and Stepan therefore discussed several options, including abandoning negotiations of the Partial Consent Decree in order to immediately move to dismiss the complaint. (See Ex H P 1 to Stepan's Objections to Magistrate Joel Rosen's January 27, 1997 Report and Recommendation (hereinafter "Stepan Objections").) On June 7, 1996, the JDG and Stepan approached the United States and proposed either that the lodging of the Partial Consent Decree be delayed or that the Decree include a provision regarding the effect of any future development in Superfund law that might arise from the Olin decision. (See id. at P 3.) Counsel for the United States Mark Gallagher rejected this proposal, explaining that the Justice Department and the EPA considered the Olin decision to be an aberration, and warning that any action taken in reliance upon the Olin decision would jeopardize the settlement negotiations with the United States. (See id.) Mr. Gallagher also warned defendants of his prediction that any attempt to litigate the retroactivity issue would likely be met with hostility by this court. (See id.) Mr. Gallagher nonetheless agreed to a two week delay in finalizing the Consent Decree, in order to permit the defendants to decide whether to take any action based upon the Olin decision. (See id. at P 4.)

 On June 10, 1996, Stepan Company replaced Mr. Matthews of McKenna & Cuneo with John M. Scagnelli, Esquire, and Eric S. Aronson Esquire, of Whitman, Breed, Abbott & Morgan. The next day, Robert Matthews and the firm of McKenna & Cuneo filed a notice of withdrawal of its representation of Stepan and indicated that Stepan would now be represented by Whitman, Breed, Abbott & Morgan. Around July 23, 1996, Eric Aronson, new counsel for Stepan, orally advised a member of the JDG that Stepan was considering backing out of the settlement with the United States. (See JDG's Reply to Stepan's Objections at 5.) On September 12, 1996, new counsel for Stepan Company abruptly advised the United States, the JDG and the court that Stepan would no longer participate in the settlement by consent decree with the United States. (See id. at P 30.)

 By letter dated September 13, 1996, the United States withdrew, as to Stepan only, the offer upon which the proposed settlement was based. (See Certification of Eric Aronson P 3 (hereafter "Aronson Certif.").) The United States subsequently reconsidered its position, however, and reiterated its willingness to settle with Stepan and the JDG under the settlement terms already agreed upon, subject to approval of the Assistant Attorney General and the Court. (See United States' Response to JDG's Motion to Enforce Settlement, at 5.)

 B. JDG's Motion to Enforce the Stepan Agreement

 The JDG then brought a motion in November 1996 to enforce what it alleges was a binding agreement between Stepan and the JDG to jointly negotiate and fund the Partial Consent Decree, and the United States joined this motion. The JDG argued that an enforceable agreement was reached when Mr. Matthews, in a letter dated January 17, 1996, set forth the fundamental terms of the proposed funding agreement between Stepan and the JDG. Specifically, the JDG suggested that an agreement was reached concerning what portions of the Government's past costs demand should be paid initially by both Stepan and the JDG, and how the short-fall was to be funded. The JDG pointed to the fact that throughout the subsequent negotiations between the parties, the principal terms of the agreement never changed. Further, the JDG pointed to the fact that the provisions were formalized in an agreement between Stepan and the JDG, which was to be signed after execution of the Partial Consent Decree, as evidence that there was a meeting of the minds between the JDG and Stepan, as well as between the government and Stepan. The JDG also sought costs for the filing of this motion. Additionally, the JDG urged that, even assuming arguendo that there is no enforceable settlement agreement, Stepan should be required to pay fees and costs that will be incurred by the JDG as a result of the government's re-entry into the litigation and the possibility that the government may have to redepose and otherwise seek discovery.

 In response to the motion, Stepan argued that regardless of whether the major components of a settlement had been agreed to, there is not and never has been an enforceable agreement between Stepan and the JDG to jointly negotiate and fund a settlement with the United States. Stepan argued that throughout the negotiation process it was understood by all defendants that the proposed funding agreement would not be binding and enforceable unless all parties individually signed it. In support of this argument, Stepan pointed to specific language in the draft funding agreement, which specifically requires the signature of all parties in order for the document to take effect. *fn10" Stepan also pointed to language in the proposed agreement which provides that the agreement between the defendants would not take effect until the consent decree with the United States is entered and lodged. *fn11" Stepan further argued that former counsel for Stepan, Robert Matthews, Esquire, never had authority to finalize the agreement. Finally, Stepan argued that Mr. Matthews, by his own testimony, had indicated that there were still issues outstanding with regard to the funding agreement between the parties, such that no party to the negotiations could have believed that the proposed agreement had been adopted and become binding.

 This motion to enforce the settlement was referred to Magistrate Judge Rosen on a report and recommendation basis. Judge Rosen supervised discovery related to this motion, and depositions of Mr. Gladstone and Mr. Matthews were convened on December 4, 1996, which transcripts have been reviewed. *fn12" Judge Rosen conducted a hearing on December 6, 1996, hearing arguments on ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.