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Cyprus Mines Corporation v. M & R Industries, Inc., (NLH) (KMW)

United States District Court, D. New Jersey

March 30, 2015

CYPRUS MINES CORPORATION, Plaintiff,
v.
M & R INDUSTRIES, INC., f/k/a M & R REFRACTORY Metals, INC. f/k/a METEC, INC., Defendant.

KEITH E. LYNOTT MCCARTER & ENGLISH, LLP NEWARK, NJ, On behalf of Plaintiff.

OPINION

NOEL L. HILLMAN, District Judge.

Presently before the Court is the motion of Plaintiff, Cyprus Mines Corporation (Cyprus Mines), for default judgment against Defendant, M & R Industries, Inc. (M & R). Cyprus Mines contends that, as a result of the discharge of hazardous substances by M & R at a site located in Winslow Township, New Jersey (the Metec Site), and failure of M & R to remediate the Metec Site in the manner required, it has incurred damages and costs under 42 U.S.C. ยงยง 9607 and 9613 (Comprehensive Environmental Response, Compensation and Liability Act, ("CERCLA")) and the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to 23.-24 (the "Spill Act"). Cyprus Mines also alleges a breach of contract claim and breach of indemnification agreement in light of M & R's failure to perform obligations assigned to it under the parties' Purchase Agreement. Cyprus Mines seeks damages, contribution, and a declaratory judgment. For the reasons expressed below, Cyprus Mines' motion for default judgment will be granted.

Background

Cyprus Mines is a Delaware Corporation with its principal place of business in Phoenix, Arizona. It is the successor to Cyprus Metec Corporation, a Delaware corporation and former owner/operator of the Metec Site. Cyprus Metec Corporation merged into Cyprus Mines in July, 1995.

M & R is a Delaware corporation with its principal place of business in Greenwich, Connecticut. It is registered as a foreign corporation authorized to do business in New Jersey, with a principal place of business in Winslow, New Jersey. M & R is the successor entity to Metec Inc., the former owner/operator of the Metec Site that sold the area and operation to Cyprus Mines.

Beginning in 1967, M & R owned and operated the Metec Site, manufacturing metal products. In 1987, Cyprus Mines acquired the site and operation from M & R. Before the purchase, Cyprus Mines performed due diligence and learned that M & R had installed two unlined ponds on the Metec Site ("Lagoons") to receive process waste from its hearth roaster operation. Throughout M & R's operation of the Metec Site, it discharged ammonium sulfate solutions containing hazardous substances into these Lagoons. According to the N.J. Department of Environmental Protection ("NJDEP") Directive and Notice to Insurers ("Directive"), the substances discharged by M & R are considered "hazardous" under the Spill Act, N.J.S.A. 58:10-23.11b. Because M & R failed to install an impervious layer at the bottom of the Lagoons, hazardous substances seeped into local groundwater and were released into the environment.

As part of Cyprus Mines' acquisition of the Metec Site, M & R agreed to discontinue its discharge into the Lagoons, be solely responsible for complying with the requirements of the New Jersey Environmental Cleanup Responsibility Act (ECRA) N.J.S.A. 13:1K-6 (now, the Industrial Site Recovery Act ("ISRA")), and to defend, indemnify, and hold harmless Cyprus Mines against all associated liabilities. Cyprus Mines and M & R executed the Purchase Agreement on October 31, 1986, in which the Metec Site and operation thereon would be transferred to Cyprus Mines.[1]

On January 9, 1987, M & R entered into an Administrative Consent Order (ACO) with the NJDEP in which it agreed to investigate the Metec Site and implement a NJDEP approved cleanup plan.

The initial Purchase Agreement (dated October 31, 1986), the Amendment (dated January 14, 1987), and the Indemnification Agreement (dated January 14, 1987), together, comprise the "Purchase Agreement" in which M & R agreed to indemnify Cyprus Mines for all costs, losses and expenses relating to the Site. Section 10(b) of the Purchase Agreement provides that M & R shall be liable and solely responsible for the obligations and liabilities associated with its ownership of the Metec site arising out of events that occurred prior to closing, including those claims related to environmental health and safety matters. Section 10(c) further provides that M & R shall retain present, and assume future, obligations to comply with ECRA, DEP and NJPDES obligations as they relate to its discharges into the Lagoons. This obligation consists of performing physical work and making any necessary filings.

Section 2 of the Amendment provides that M & R assumes all rights, obligations and liabilities under the Purchase Agreement, specifically those under the ECRA and DEP. Section 1(c) of the Indemnification Agreement, provides that M & R shall retain and assume all present and future obligations to comply with ECRA, NJDEP, and NJPDES requirements with respect to its ownership and operation of the Metec Site and discharge of substances to the Lagoons.

The Purchase Agreement, Amendment, and Indemnification Agreement also contained indemnification clauses. Section 11(a) of the Purchase Agreement provided that Seller shall forever indemnify, defend and hold harmless Buyer from liabilities and responsibilities arising out of the liabilities and obligations retained and assumed by Seller. Section 2 of the Amendment provided that M & R would assume all rights, obligations, and liabilities of Seller under the Purchase Agreement, including obligations under the ECRA, DEP, and ACO. Section 2(a) of the Indemnification Agreement provided that M & R would indemnify, defend and hold harmless Cyprus Mines for responsibility and liability arising out of obligations retained by M & R. These representations form the basis of Cyprus Mines' claims.

Cyprus Mines owned the Metec Site until October 21, 1994; it then sold the Site to H.W.R. Corporation, a third party. On December 9, 1994, M & R reported that it was performing its obligations under the ACO. In March 2009, Cyprus Mines received a Directive issued by NJDEP (addressed to M & R, Cyprus Mines, and H.W.R.) indicating that M & R had failed to satisfy its obligations under the ACO. The Directive stated that the groundwater beneath the Metec Site was contaminated by ammonia, nitrate, molybdenum, selenium, and sulfate, and the contaminated groundwater had migrated into a residential area. The Directive stated that, although M & R had been working on remedial cleanup of the site for the past twenty years (following the sale of the site to Cyprus Mines), it never completed its remedial investigation. The Directive requested that M & R, Cyprus Mines, and H.W.R. conduct a remedial investigation and implement an approved Remedial Action plan at the contaminated site.

On August 6, 2009, Cyprus Mines sent a written Claim for Indemnification Pursuant to the Purchase Agreement to M & R, stating that the Directive sent by NJDEP on March 16, 2009 constituted an indemnified claim under the Purchase Agreement. Cyprus Mines demanded that Metec Inc. and its parent/successor M & R fully defend, indemnify, and hold harmless Cyprus Mines against all damages, liabilities, obligations, claims, costs and expenses associated with the NJDEP Directive. Cyprus Mines did not receive a response from M & R.

Again, on April 9, 2014, Cyprus Mines sent M & R a letter reiterating its claims as set out in the March 16, 2009 Claim Letter, notifying M & R that it intended to pursue treble damages under N.J.S.A. 58:10-23.11f(a)(3) of the Spill Act. Cyprus Mines did not receive a response from M & R.

Finally, on July 21, 2014, Cyprus Mines filed this complaint against M & R as a means to coerce M & R to honor its commitments under the Purchase Agreement and reimburse Cyprus Mines for damages incurred. Cyprus Mines also seeks a declaratory judgment outlining M & R's responsibilities. Cyprus Mines contends that, as a result of M & R's failure to fulfill its obligations under the Purchase Agreement and ECRA, Cyprus Mines has incurred substantial cost and expense in complying with the Directive. It has conducted an investigation and outlined a remediation plan for the site, incurring costs for preparing and submitting required forms, investigating and evaluating the environmental conditions of the site, and identifying other potentially responsible parties. Cyprus Mines' investigation has revealed ammonia contamination of groundwater and molybdenum contamination of soil near the Lagoons.

The affidavit of Ronald J. Buchanan, Manager, Remediation Projects, for Freeport-McMoRan, Inc., produced by Cyprus Mines, outlines the costs that Cyprus Mines has incurred to date. These costs amount to over two million dollars and include legal and consulting fees, travel and administrative costs, and a $135, 000 submission that NJDEP required Cyprus Mines to place in a Remediation Funding Source trust account. Cyprus Mines contends that it will continue to incur costs associated with its response, investigation, and remediation of the Site because of M & R's breach of the Purchase Agreement.

Discussion

A. ...


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