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United States v. D.S.C. of Newark Enterprises, Inc.

United States District Court, Third Circuit

June 12, 2013

UNITED STATES OF AMERICA, Plaintiff,
v.
D.S.C. OF NEWARK ENTERPRISES, INC., AND FRICTION DIVISION PRODUCTS, INC., Defendants. D.S.C. OF NEWARK ENTERPRISES, INC., Third-Party Plaintiff,
v.
CHAMPION INTERNATIONAL CORPORATION (SUCCESSOR TO ST. REGIS PAPER COMPANY), MORTON INTERNATIONAL, INC. (SUCCESSOR TO THIOKOL CHEMICAL COMPANY), DOW CHEMICAL COMPANY, DYNAMIC AUTOMOTIVE DISTRIBUTORS, INC., MONTROSE MANUFACTURING COMPANY, AND WILLIAM CARNEY, Third-Party Defendants.

MEMORANDUM OPINION

MARY L. COOPER, District Judge.

Plaintiff, United States of America ("Government"), brought this action against defendants, D.S.C. of Newark Enterprises, Inc. ("D.S.C.") and Friction Division Products, Inc. ("Friction"), alleging violations of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). (See dkt. entry no. 1, Compl.)[1] D.S.C. filed a third-party complaint against third-party defendants, seeking contribution and cost recovery under CERCLA and contribution and indemnification under New Jersey state law. (See dkt. entry no. 4, Answer & Third Party Compl. at 20, 27.)[2]

The Government moved for summary judgment in its favor on all claims against D.S.C. (See dkt. entry no. 39, Mot. for Summ. J.) The motion was denied without prejudice. (See dkt. entry no. 46, 10-13-11 Order.) The Government moved for reconsideration of the motion for summary judgment. (See dkt. entry no. 52, Mot. for Reconsideration.) The Third Party Defendants also moved for summary judgment in their favor on all claims. (See dkt. entry no. 50, Mot. for Summ. J.) The Court heard oral argument on both the motion for reconsideration and the motion for summary judgment by Third Party Defendants on September 19, 2012. (See dkt. entry no. 66, Minute Entry for 9-19-12 Hearing.) The Court ordered the Government and D.S.C. to submit supplemental briefing. (See id.) D.S.C. stipulated to dismissal of International Paper without prejudice. (See dkt. entry no. 68, 10-2-12 Order.) On April 16, 2013, the Government filed a notice of settlement with D.S.C., requesting no action from the Court during the time for public comment on the proposed consent decree. (See dkt. entry no. 78, Notice of Lodging of Consent Decree at 1.) Accordingly, the Court will now only resolve the motion for summary judgment as it relates to Morton.

The Court, having heard oral argument on this matter and reviewed the papers submitted by the parties, will grant summary judgment in favor of Morton on all claims.

STANDARD OF REVIEW

The standard for a motion for summary judgment is well-settled and will be briefly summarized here. Federal Rule of Civil Procedure ("Rule") 56(a) provides that summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). In making this determination, the Court must "view[] the record in the light most favorable to the nonmoving party and draw[] all inferences in that party's favor." United States ex rel. Josenske v. Carlisle HMA, Inc. , 554 F.3d 88, 94 (3d Cir. 2009); see Montville Twp. v. Woodmont Builders LLC, 436 Fed.Appx. 87, 89-90 (3d Cir. 2011).

BACKGROUND[3]

This case concerns response costs incurred by the United

States Environmental Protection Agency ("EPA") during the cleanup of a three-acre industrial site (the "Site"), located at 40 Enterprise Avenue in Trenton, New Jersey. (See Morton Statement at ¶ 1.)

I. Use of the Site Prior to Abandonment

The property was owned by St. Regis from 1938 through the end of 1961. (See id. at ¶ 41.) St. Regis maintained its Panelyte Division at the Site; this operation "manufactured industrial laminates in sheet, tub and rod form for the electrical, appliance, machinery and other industries." (Id.) This manufacturing process employed base materials including "special grades of paper, cotton, linen or nylon fabric, glass fiber, and asbestos fabric"; the majority of hazardous substances used by St. Regis in connection with this operation were stored in tanks on the Site. (Id. at ¶ 42.) St. Regis did not build or use any baghouses on the Site. (See id. at ¶ 45.)[4]

On December 31, 1961, St. Regis sold the Site and its Trenton, New Jersey Panelyte Division to Thiokol. (See id. at ¶ 46.) St. Regis included in this transaction some business assets, including: "all inventories of raw materials, work-in-process, and finished goods; supplies; and equipment relating to the Panelyte Division's [at the Site]. St. Regis's inventories were useful products and valued as part of the sales transaction with Thiokol." (Id. at ¶ 47.) The agreement transferring the Site explicitly mentioned that "[t]he inventory of the [Site], of raw materials, supplies, work in process and finished goods, is and at the time of the Closing will continue to be, in good condition and usable and/or saleable in connection with the business carried on by the Trenton Plant". (See id. at ¶ 48.) St. Regis's physical inventory was valued at $1, 554, 787 at the time of the sale to Thiokol. (See id. at ¶ 49.) The parties intended Thiokol to use St. Regis's product inventory as part of the newly acquired Panelyte business, maintaining the current business and operations of St. Regis's Panelyte plant. (See id. at ¶ 50.) After the sale to Thiokol, St. Regis ceased any operations on the Site. (See id. at ¶ 52.)

Thiokol operated its Panelyte Division on the Site from January 1962 until 1974. (See id. at ¶ 53.) Building 8, located on the Site, was constructed at some time between 1966 and 1969, at least four years after St. Regis sold the Site to Thiokol. (See id. at ¶ 43.) Building 8 was constructed on part of the Site that was previously used as a parking lot. (See id. at ¶ 44.) Thiokol's Panelyte Division engaged in a similar process to that of St. Regis's Panelyte production, "combining asbestos, glass, cotton, paper or nylon with a synthetic thermosetting resin, and then curing the mixture under high temperature and pressure to create a solid homogenous mass." (Id.) These operations ended in 1969, when Thiokol stopped manufacturing Panelyte and instead began manufacturing asbestos brake linings, shoes and pads on the Site as part of its Friction Division. (See id. at ¶ 54.) These products "were composed of a mixture of asbestos, phenolic resins, and friction modifying ingredients that were cured under high pressure and temperature, post-baked, and then machined to dimensional tolerances." (Id.) Between 1970 and 1982, Thiokol purchased and employed "approximately seven Kleissler bag house-type dust separators for use in its operations" on the Site, as well as a "DCE Vokes Unimaster bag house-type dust separator in approximately 1978 for use in the production of drum brake lining". (Id. at ¶ 55.)[5]

Thiokol sold the Site to "KAD Realty (n/k/a DSC, who remains the current owner)" in 1974; from 1974 to 1983, D.S.C. leased the Site back to Thiokol, which continued its Friction Division on the Site. (Id. at ¶ 56.) On July 29, 1983, Thiokol sold its Friction Division to Friction as an independent ongoing business. (See id. at ¶ 57.) The sale included Friction Division's manufacturing equipment, baghouses, works-in-process, raw material inventories, and supplies. (See id. at ¶ 58.) The parties to the sale characterized Thiokol's inventories as useful products and valued the products as part of the business assets that were sold as a going concern to Friction for over $2 million. (See id.) "[T]he building was in good physical condition during Thiokol's tenancy." (Id. at ¶ 59.)

Friction began its brake manufacturing operations on the Site, including use of the baghouses and other equipment purchased. (See id.) Friction leased the Site from D.S.C. and manufactured brake shoes and pads on the Site from 1983 until approximately 2002. (See id. at ¶ 16.)[6] Friction used, inter alia, "asbestos, motor oil, methy ethyl ketone, iron powders, adhesives, anti-freeze, ethylene glycol and manganous oxide... [as well as storing] paint[, ] paint stripping agents, [and] waste oil" on the Site during the same period. (Id. at ¶ 17.) Friction's operational processes created asbestos dust, which was collected and stored in the baghouses located on the Site; Friction contained other wastes and hazardous substances in barrels, containers, and other types of closed receptacles as well. (See id. at ¶ 18.) In 2002, Friction "ceased operations at the [Site], abandoning barrels and other containers of hazardous substances and waste materials in the form of both production materials and production waste." (Id. at ¶ 19.) The Site was in "disarray" at the time Friction abandoned it; "[w]alls and utility lines were left damaged, the electrical system was dismantled, drums of unknown materials were strewn about, and piles of unknown debris, chemicals and unknown materials were abandoned throughout the leasehold." (Id. at ¶ 20.)

II. EPA's Investigation and Surface Cleanup of the Site

The Bureau of Emergency Response, Region II (the "Bureau") was notified of an abandoned facility (the Site) on December 8, 2005. (See id. at ¶ 21.) The abandoned facility was known as "Friction Division Products, Inc., and consisted of two buildings (Buildings 7 & 8) and nine free standing bag houses". (Id.) The Bureau inspected the Site on December 14, 2005, finding leaking drums of hazardous materials and broken bags of hazardous powders. (See id. at ¶ 22.) The Bureau discovered "five-gallon pails of unknown materials and drums of motor oils, methyl ethyl ketones, iron powders, antifreeze, and brake bonding adhesives" abandoned in Building 7. (Id.) Some of the drums containing adhesives had leaked and left solidified material on the floor. (See id.) The Bureau found open bags of sulfur compounds and fiber drums of sodium hydroxide with crystallization on the outside. (See id.) Building 7 had no electrical power and its roof was leaking; the Bureau found over 100 abandoned drums in Building 7. (See id.)

Building 8 had two rooms; the first room held "highly incompatible chemicals including containers of aluminum powders in an epoxy phenol base, phenolic resins in fiber drums, drums and containers of bis butyl peroxy di-isopropyl benzene, containers of iron powders in sulfuric acid, [and] containers of hexamethylene tetra amine", as well as unlabeled chemicals in drums. (Id. at ¶ 23.) The second room had rows of "stacked 55 gallon drums, many of which showed signs of leakage.... In sum, Friction left hundreds of drums of liquid chemicals and tons of solid chemicals in the buildings." (Id.)

The Bureau issued D.S.C. a "Field Directive/Notice to Insurer(s) finding that there is an illegal storage of hazardous waste drums and containers. Numerous drums have evidence of leakage. The property where the drums are stored is classified as abandoned.'" (Id. at ¶ 24.) The EPA and New Jersey Department of Environmental Protection conducted joint investigations and inspections of the Site between December 2005 and May 2006, observing numerous releases on the Site. (See id. at ¶ 25.) The releases were caused by chemicals leaking, spilling, or escaping from the abandoned containers as the containers deteriorated; other releases resulted from chemicals being displaced by rainwater, which entered the containers from the leaking roof, causing the chemicals to overflow the containers. (See id. at ¶ 26.)

The EPA originally agreed that Friction and D.S.C. would work to clean the Site, but subsequent EPA reports show that Friction only removed a few drums from the buildings, instead shipping useable material (i.e., brake shoes) to its facility in Virginia. (See id. at ¶ 27.) The initial agreement resulted in "only a small amount of the drums and pallets of bagged chemicals [being] actually removed, with the remainder simply being restaged to different locations within the [Site]." (Id.) "On June, 15, 2006, additional releases were observed when Friction spilled chemicals on the floor of one of the storage buildings while attempting to remove chemicals it had previously abandoned at the [Site]." (Id. at ¶ 28.)

The EPA undertook a removal action under § 104 of CERCLA in January 2007, after D.S.C. and Friction failed to take any corrective action. (See id. at ¶ 29.) The EPA sought to remove "[t]he hazardous substances found... at the [Site, including] asbestos, ethylene glycol, manganese oxide, Resource Conservation Recovery Act ("RCRA") ignitable wastes, and RCRA corrosives, all qualifying as CERCLA hazardous substances." (Id.) The EPA engaged in removal activities including: "decontaminating work areas; locating and restaging drums and containers;" disconnecting and cleaning asbestos-filled baghouses; bulking abandoned brake pads; transporting the baghouses to an existing, enclosed building on the Site; removing asbestos waste under negative pressure; containerizing the asbestos waste material; and shipping asbestos waste for disposal in a RCRA-permitted landfill. (Id. at ¶ 30.) The EPA conducted testing on 455 samples taken from almost every container at the Site, which were then used to consolidate waste streams for off-site disposal. (See id.) "In total, EPA removed approximately 70 tons of asbestos waste from the nine bag houses and removed more than 700 containers of waste chemicals for proper off-site disposal." (Id. at ¶ 31.) The "EPA incurred response costs of at least $1, 255, 125.75 as a result of this Surface Cleanup." (Id. at ¶ 37.)

The EPA completed the surface cleanup on September 21, 2007, and subsequently began efforts to recover costs from D.S.C. and Friction. (See id. at ¶¶ 32-34.)

ANALYSIS

The Court will first address the claims under CERCLA, and then those claims arising under New Jersey state law for contribution and indemnification.

I. CERCLA Claims for Contribution and Cost Recovery

D.S.C. brings claims against the Third Party Defendants seeking cost recovery under § 107(a) and contribution under § 113(f)(1). (See Answer & Third Party Compl. at 20-25.) Morton argues it is not liable under either section because: (1) the sections require potentially responsible parties to seek contribution or recovered costs only from liable parties, which Third Party Defendants claim they are not; (2) D.S.C. did not pay more than its fair share of cleanup costs incurred by the EPA, precluding it from seeking contribution under § 113(f)(1); and (3) D.S.C. did not incur any cleanup ...


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