## F I L E D United States Court of Appeals Tenth Circuit 

### MAR 11 2003 

### PATRICK FISHER Clerk 

### PUBLISH UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

RAYTHEON CONSTRUCTORS INC., a Delaware corporation, Plaintiff-Appellant/ Cross-Appellee,

v. ASARCO INCORPORATED, a New Jersey corporation, Defendant-Appellee/ Cross-Appellant. Nos. 00-1500 & 00-1530

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

(D.C. No. 96-N-2072)
Robert B. McKinstry, Jr. (Marc Davies, of Ballard S pahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, and Roger P. Thoma sch and Denise S. Maes, of Ballard Spahr Andrews & Ingersoll, LLP, Denver, Col orado, with him on the briefs), of Ballard Spahr Andrews & Ingersoll LLP, Philadelphia, Pennsylvania, for Plaintiff-Appellant/Cross-Appellee. Michael R. Thorp (Marcy G. Glenn and Tiffany W. Smi nk, of Holland & Hart, Denver, Colorado, and Peter J. Nickles and Gerald N . Magliocca, of Covington & Burling, Washington, D.C., with him on the briefs), of Heller, Ehrman, White & McAuliffe, Seattle, Washington, for Defendant-Appel lee/Cross-Appellant.* Honorable Ruggero J. Aldisert, Senior United Stat es Circuit Judge for the

Third Circuit, sitting by designation. -2- Before TACHA , Chief Judge, ALDISERT * , and SEYMOUR , Circuit Judges.

SEYMOUR , Circuit Judge.

Raytheon Constructors, Inc. (“Raytheon”) appeals th e decision of the district court holding it liable to ASARCO Corporat ion (“ASARCO”) as an “operator” and an “arranger” under the Comprehensiv e Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S. C. §§ 9601 et seq. , in relation to the environmental cleanup at the Rawley Mine site in Saguache County, Colorado. ASARCO cross-appeals regarding d amages. We reverse as to Raytheon’s liability and therefore need not reach t he cross-appeal regarding damages.

I. The mine at issue in this case was owned by the Col orado Corporation when, in 1925, it encountered financial difficultie s and defaulted on several debts, including those owed to Stearns-Roger (the predeces sor in interest to Raytheon), ASARCO, and Metals Exploration Company. Those thre e entities together created Rawley Mine, Inc. (“RMI”) as a part of a re organization plan to recover-3-

the outstanding debts. They invested the necessaryfunds in RMI in different proportions (ASARCO at forty percent, Metals Explor ation at forty percent, and Stearns-Roger at twenty percent), and each receivedstock corresponding to their liens against Colorado Corporation. At the initial meeting of the board of directors of RMI, Mr. Stearns, the president of Ste arns-Roger, was elected chairman and president of RMI. In 1929, after RMI had repaid Stearns-Roger’s loans, ASARCO purchased all of Stearns-Rogers’ RMI stock and Mr. Stearns resigned as RMI’s president and executive committee chairman. This ended Stearns-Roger’s association with RMI. We note in r eciting these facts that the role played by Stearns-Roger, which never owned mor e than twenty percent of RMI, is best characterized as that of minority shar eholder rather than “parent”
company. In 1996, Raytheon sought a declaratory judgment that it was not liable to ASARCO under CERCLA for the costs ASARCO incurred through cleanup in connection with the Rawley Mine site. ASARCO count erclaimed, arguing Raytheon was liable under CERCLA and state common l aw as Stearns-Rogers’ successor in interest. The parties filed cross-mot ions for partial summary judgment. The district court denied ASARCO’s motio n. The court granted Raytheon’s motion on the issue of “owner” liability , but denied its motion on the issues of “operator” or “arranger” liability. The court then bifurcated the issues-4-

of liability and damages, and after a bench trial h eld Raytheon liable for CERCLA contribution as an operator and an arranger. Prior to the damages portion of the trial, Raytheon moved for reconsideration of the liability decision based on a new Supreme Court opinion, United States v. Bestfoods , 524 U.S. 51 (1998). The district court treated t hat motion as one pursuant to F ED .R.C IV .P. 60(b), even though it acknowledged that Raytheon was seeking reconsideration of an interloc utory order rather than a final judgment. After considering Bestfoods , the court denied Raytheon’s motion in a second order. It subsequently held Raytheon respon sible to ASARCO for a portion of ASARCO’s “recoverable costs.” See 42 U.S.C. § 9607(a); 40 C.F.R. §
300.700.

II. On appeal, Raytheon argues the district court misap plied Bestfoods in making its “operator” liability determination. Ray theon contends the underlying reasons for reversal of “operator” liability also s upport reversal of the “arranger” liability determination. In analyzing the districtcourt’s opinion, we must first determine our standard of review. The district court was incorrect to treat Raytheon’ s motion for reconsideration under Rule 60(b), which only applie s to final orders or judgments.-5-

Instead, “any order . . . however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties . . . is subject to revision at any time before the entry of judgment a djudicating all the claims and the rights and liabilities of all the parties.” F ED .R.C IV .P. 54(b). Thus we will not review the district court’s order for abuse of disc retion, as we would a ruling on a Rule 60(b) motion. Rather, we review de novo the d istrict court’s conclusions of law in its reconsideration of its order on liability. See, e.g. , Elder v. Holloway , 510 U.S. 510, 516 (1994). The central issue in this appeal is whether Raytheo n may be held liable for the actions of RMI under section 107(a) of CERCLA, 42 U.S.C. § 9607(a). Section 107(a) lists four classes of liable parties : (1) owners and operators of hazardous substance sites; (2) persons who owned oroperated such sites at the time of disposal; (3) persons who have arranged forthe disposal of hazardous substances; and (4) persons who have transported ha zardous substances for disposal. See Florida Power & Light Co. v. Allis Chalmers Cor p. , 893 F.2d 1313, 1317 (11th Cir. 1990). RMI itself is liable as an owner, an operator, and an arranger. Raytheon, as successor in interest to St earns-Roger, may only be held liable if it can be determined that the operation a nd arrangement functions of RMI may be attributed directly to Stearns-Roger as a st ockholder.
In Bestfoods , the Supreme Court clarified the standard to be us ed in making-6-

this determination. First, it “sharpen[ed] the def inition [of “operator”] for purposes of CERCLA’s concern with environmental contamination.” Bestfoods , 524 U.S. at 66. The Court stated “an operator mustmanage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or deci sions about compliance with environmental regulations.” Id. at 66-67. Furthermore, the Court emphasized the necessary connection between the potential “operato r” and the facility itself, rather than with the subsidiary per se: “The quest ion is not whether the parent operates the subsidiary, but rather whether it oper ates the facility, and that operation is evidenced by participation in the acti vities of the facility, not the subsidiary.” Id. at 68 (quotation omitted). Because the Court in Bestfoods was addressing a situation involving a parent and subsi diary, we must accordingly modify our inquiry as appropriate to suit the situation of a minority shareholder such as Stearns-Roger. The focus on the facility r emains the crucial consideration. The Court acknowledged the possibility that directo rs and officers might hold positions with both a parent and a subsidiary, and recited the corporate law principle that it is entirely appropriate for them to do so. Id. at 69. Such dual officers can and do “change hats” to represent the two corporations separately. Id. (quotation omitted). Again citing basic principle s of corporate law, the Court1 To the extent that the district court considered t he actions of Mr. Gordon,

who wore only a Stearns-Roger hat, we point out that the Supreme Court in Bestfoods also addressed the separate possibility that an ag ent of the parent with no subsidiary hat to wear might manage or direct ac tivities at the facility. On this point, the Court stated that activities that “invol ve the facility but which are consistent with the parent’s investor status . . . should not give rise to direct liability.” Id. at 72. Thus, the Court directed lower courts cons idering these issues to determine “whether . . . actions directed to the facility by an agent of the parent alone are eccentric under accepted norms of parental oversight of a subsidiary’s facility.” Id. On the record here, the actions of Mr. Gordon are wholly consistent with investor status, particularl y given Stearns-Rogers’ position as a minority shareholder.

-7- noted the presumption that directors wear their “su bsidiary hats” rather than their “parent hats” when they act for the subsidiary, and concluded that it cannot be enough to establish liability here that dual officers and directors made policy decisions and supervised acti vities at the facility. The Government would have to show that, despite the general presumption to the contrary, the officers a nd directors were acting in their capacities as [parent] officers and directors, and not as [subsidiary] officers and directors when they commi tted those acts. Id. at 69-70. 1 Raytheon does not contend the factual findings of t he district court are clearly erroneous; indeed, the findings of fact wer e stipulated by the parties. Based on those facts, we are persuaded the districtcourt erred in its application of Bestfoods . The district court correctly cited the relevant points we have listed from Bestfoods , but then reasoned as follows: Although my Findings and Conclusions rest, in part, on evidence that Stearns-Roger . . had a significant stake in [RMI] in terms of stock,-8-

capital, and voting power, such evidence is not nec essary to a finding that Stearns-Roger (and, therefore, Raytheon) was d irectly liable for the operations of RMI’s facility, the Rawley Mine. Moreover, contrary to Raytheon’s assertions, it is clear thatMr. Thomas Stearns, president of Stearns-Roger and president and chairman of RMI, acted on behalf of Stearns-Roger, not simply a s an RMI board member. As I stated in my Findings and Conclusions , Stearns himself, as sole stockholder and president of Stearns-Roger, served in a representative capacity as the primary liaison between the two entities. Aplt. Appx. at 100 (quotation and citation omitted) . We note, however, that serving as the primary liaison between two corporat ions does not rebut the presumption of wearing separate hats in separate co rporate roles. Mr. Stearns’ role as president of Stearns-Roger does not lead to the conclusion reached by the district court – i.e., that he acted on behalf of S tearns-Roger rather than RMI. Indeed, none of these facts rebut the Bestfoods presumption. The district court continued: Of course, Mr. Stearns’s personal involvement in th e purchase of land to collect Rawley Mine tailings most pointe dly illustrates Stearns-Roger’s direction of environmental decision -making at RMI. While this evidence serves as the basis of Raytheon ’s liability as both an arranger and an operator, it is not the only rea son for finding Raytheon liable as an operator of RMI. As I held e arlier, Mr. Stearns was far more than a figurehead, and Stearns-Roger, along with ASARCO and Metals Exploration, ran RMI. Id. (quotation and citation omitted). Again, the dist rict court misinterpreted Bestfoods . There is no evidence to rebut the presumption th at Mr. Stearns’ involvement in the purchase of land for RMI was und ertaken in any capacity other-9-

than as president of RMI and a member of its board. As such, his involvement in the purchase cannot serve as the basis for operatoror arranger liability of StearnsRogers. Other evidence listed by the district court in supp ort of its legal conclusion included the fact that Mr. Stearns wrote a letter t o RMI stockholders regarding financial and operating conditions of the company, that he negotiated for RMI an ore smelting contract with ASARCO, that he submitte d board licenses and agreements with a mineral separation company and ha d unanimous approval to sign those documents, that he submitted to the boar d a contract for electrical power supply to the mines and had approval to sign that contract, that he signed an installation order and a chattel mortgage for ne w transformers, that he had board approval to execute demand notes for cash adv ances, and that as a member of the board, he helped supervise and replace the o n-site manager. Id. at 100-01. The critical point, however, is that nothing indicates Mr. Stearns undertook any of these actions while wearing any hat other than his RMI president hat. The crucial consideration here is not what Mr. Stearns did, butwhat Stearns-Roger did. As long as Mr. Stearns acted as an executive and boardmember of RMI, Bestfoods tell us that his actions cannot be attributed to St earns-Roger. While the district court believed that Mr. Stearns himself was an oper ator of RMI’s facilities, id . at 101, that does not suffice to make Stearns-Roger, a s a minority shareholder, an-10-

operator. The suit here is against the company, no t Mr. Stearns personally. We hold that as a matter of law, this evidence is insu fficient to support the district court’s conclusions. In its original Findings of Fact and Conclusions of Law, although the district court recognized that the need to resolve the “arranger” issue was obviated by the determination that Stearns-Roger wa s an “operator,” the court nevertheless addressed the issue as an alternative basis for liability. In so doing, the court concluded that Raytheon was liable as an arranger because StearnsRoger “actually arranged for the disposal of RMI mi ne tailings at the lower tailings area.” Id. at 89. Here the court relied upon evidence that “i n his capacity as an RMI board member, [Stearns] directed the purc hase of property with the knowledge and intent that it serve as a disposal si te for the mine tailings.” Id. To be held liable under CERCLA as an arranger, a pa rty must satisfy three requirements. First, the party must be a “person” as defined in CERCLA. Second, the party must “own” or “possess” the hazar dous substance at issue. Third, the party must, by contract, agreement or ot herwise, arrange for the transport or disposal of such hazardous substances. See 42 U.S.C. § 9607(a)(3). As to the questions of ownership or possession, the district court found that Stearns-Roger’s twenty percent stockholder ownershi p interest along with its “now-established operator status” created a “nexus” between Stearns-Roger and-11-

the disposal of the hazardous substance. Aplt. App x. at 88 (citing Transportation Leasing Co. v. State of Cal. (CalTrans) , 861 F. Supp. 931, 941 (C.D. Cal. 1993), and Gen. Elec. Co. v. AAMCO Transmissions, Inc. , 962 F.2d 281, 286 (2d Cir. 1992)). The court further noted that under Transportation Leasing , constructive ownership or possession may be demonstrated by a party’s selection of a site for disposal. Because Mr. Stearns was involved in this type of decision-making for RMI, the district court found he satisfied the requ irement. Once again, the district court made the mistake of automatically attributing Mr. Stearns’ action to his role with Stearns-Roger and not to his role with RMI. The Bestfoods holding regarding operator liability also logicall y applies to cases involving arranger liability. See Carter-Jones Lumber Co. v. Dixie Distrib. Co. , 166 F.3d 840, 846 (6th Cir. 1999). Because the dis trict court relied on its erroneous conclusion regarding operator liability, it also erred in reaching its conclusion on arranger liability. Finally, in its second order, citing Bestfoods , the district court stated: Thus, for example, in arranging for the supply of e lectrical power to RMI’s Bonanza mines or negotiating a detailed contr act for the smelting of raw materials from all of RMI’s mines, Mr. Stearns -- and, by extension, Stearns-Roger -- helped the mine s to function. Inasmuch as the functioning of these facilities pro duced hazardous waste which leaked or was improperly disposed of, S tearns-Roger “manag[ed], direct[ed], or conduct[ed] operations s pecifically related to pollution.” Aplt. Appx. at 101 (citation omitted). This reason ing is fatally flawed by the-12-

district court’s unsupported assumption that Mr. St earns’ actions may be considered, by extension, to be those of Stearns-Ro ger. To the contrary, we are required by Bestfoods to presume that Mr. Stearns’ actions in “helping the mines to function” were taken in the ordinary course of h is role as RMI president. The facts do not support a rebuttal of that presumption . This error goes to the analysis of both operator and arranger liability. As the Co urt stated in Bestfoods , “it cannot be enough to establish liability here that d ual officers and directors made policy decisions and supervised activities at the f acility.” Bestfoods , 524 U.S. at
69-70. In sum, the correct analysis results in a conclusio n that Raytheon, as successor in interest to Stearns-Roger, may not be held liable either as an operator or as an arranger in connection with the environmental cleanup at issue in this case. This determination renders moot the cross-ap peal on the issue of damages. Accordingly, we REVERSE the decision of the district court.