16

‐ 1260

‐ cv

Next Millenium Realty, LLC v. Adchem Corp., et al.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT

. C ITATION TO A

SUMMARY ORDER FILED ON OR AFTER J ANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY

F EDERAL R ULE OF A PPELLATE P ROCEDURE 32.1 AND THIS COURT ʹ S L OCAL R ULE 32.1.1.

W HEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT

, A PARTY MUST

CITE EITHER THE F EDERAL A PPENDIX OR AN ELECTRONIC DATABASE ( WITH THE NOTATION

ʺ SUMMARY ORDER ʺ ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON

ANY PARTY NOT REPRESENTED BY COUNSEL

.

At a stated term of the United States Court of Appeals for the Second

Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in

the City of New York, on the 11 th day of May, two thousand seventeen.

PRESENT: DENNY CHIN,

RAYMOND J. LOHIER, JR.,

Circuit Judges

, COLLEEN McMAHON,

Chief District Judge. *

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ x

NEXT MILLENIUM REALTY, LLC,

Plainti ff‐ Counter

‐ Defendant

‐ Cross

‐ Defendant

‐ Appellant,

101 FROST STREET ASSOCIATES,

Plainti ff‐ Counter

‐ Defendant

‐ Third

‐ Party

‐

Plainti ff‐ Cross

‐ Claimant

‐ Cross

‐ Defendant

‐

Consolidated

‐ Defendant

‐ Appellant,

STATE OF NEW YORK,

Consolidated

‐ Plainti ff‐ Counter

‐ Defendant

‐

Cross

‐ Defendant,

* Chief Judge Colleen McMahon, of the United States District Court for the

Southern District of New York, sitting by designation.‐ 2

‐ DENISE M. SHEEHAN,

Consolidated

‐ Plainti ff‐ Cross

‐ Defendant,

v. 16

‐ 1260

‐ cv

ADCHEM CORP., LINCOLN PROCESSING CORP.,

NORTHERN STATE REALTY CORP., NORTHERN

STATE REALTY COMPANY, PUFAHL REALTY

CORPORATION,

Defendants

‐ Third

‐ Party Defendants

‐ Cross

‐ Defendants

‐ Counter

‐ Claimants

‐ Cross

‐

Claimaints

‐ Third

‐ Party

‐ Plainti ff

s

‐ Appellees. *

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ x

FOR APPELLANTS: KEVIN MALDONADO, Kevin Maldonado &

Partners LLC, Windham, New York.

FOR APPELLEES: DANIEL RIESEL (Dan Chorost, Edward K.

Roggenklamp, IV, on the brief ), Sive, Paget &

Riesel, P.C., New York, New York.

Appeal from the United States District Court for the Eastern District of

New York (Lindsay, M.J., and Brown, M.J. ).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED

.

Plaintiffs

‐ appellants Next Millenium Realty, LLC ( ʺ Next Millenium ʺ ) and

101 Frost Street Associates ( ʺ 101 Frost Street, ʺ and, together with Next Millenium,

ʺ plaintiffs ʺ ) appeal from a judgment of the district court entered March 29, 2016,

* The Clerk of the Court is directed to amend the official caption in accordance with the

above.‐ 3

‐ dismissing their claims against defendants

‐ appellees Pufahl Realty Corp. ( ʺ Pufahl ʺ ),

Northern State Realty Corp. ( ʺ NSR Corp. ʺ ), Northern State Realty Co. ( ʺ NSR Co. ʺ ),

Lincoln Processing Corp. ( ʺ Lincoln ʺ ), and Adchem Corp. ( ʺ Adchem ʺ ) (collectively,

ʺ defendants ʺ ). Plaintiffs challenge three of the district court ʹ s rulings: (1) the October 22,

2014 Memorandum and Order granting defendants ʹ motion for partial summary

judgment; (2) the March 31, 2015 Memorandum and Order granting in part and

denying in part defendants ʹ motion for partial summary judgment; and (3) the March

23, 2016 Memorandum and Order granting defendant Lincoln ʹ s motion for summary

judgment. We assume the parties ʹ familiarity with the underlying facts, the procedural

history of the case, and the issues on appeal.

This Court reviews a grant of summary judgment de novo

, construing all

evidence and drawing all reasonable inferences in favor of the non

‐ moving party. See

New York v. Nat’l Serv. Indus., Inc

., 460 F.3d 201, 206 (2d Cir. 2006).

A. Factual Background

This case arises from the cleanup of perchloroethylene ( ʺ PCE ʺ ) spilled at

89 Frost Street, in Westbury, New York (the ʺ Site ʺ ). In 1988, the New York State

Department of Environmental Conservation ( ʺ NYSDEC ʺ ) listed the Site as a Class 2

Inactive Hazardous Waste Site. See State of New York v. Next Millenium Realty

, LLC, 732

F.3d 117, 121

‐ 22 (2d Cir. 2013). The primary cause of the PCE spill, which contaminated

the groundwater, was a fire set by an employee of the sublessee of the Site. Although‐ 4

‐ Next Millenium and 101 Frost Street did not cause the spill, they were required to pay

for the cleanup as owners. They commenced this action below under sections 107 and

113(f)(3)(B) and (g)(2) of the Comprehensive Environmental Remediation,

Compensation, and Liability Act of 1980 ( ʺ CERCLA ʺ ), 42 U.S.C. §§ 9607 and

9613(f)(3)(B) and (g)(2), seeking payment for past and future response costs. They also

asserted a state law nuisance claim. Third

‐ Am. Compl. ¶ 1. Plaintiffs allege that

defendants are private potentially responsible parties ( ʺ PRPs ʺ ) liable for the costs of the

cleanup because they were either prior owners or operators of the Site.

On April 1, 1966, the owner of the Site, Jerry Spiegel, leased the Site to

Pufahl (the ʺ Lease ʺ ). From 1966 to 1976, Joseph, Herman, and Charles Pufahl (the

ʺ Pufahl Brothers ʺ ) owned and managed, as officers, the following companies: (1)

Pufahl; (2) NSR Corp.; (3) NSR Co.; (4) Lincoln; and (5) Adchem.

From August 1966 to 1973, Pufahl subleased the Site to Lincoln, a textile

producer. On May 21, 1973, Pufahl, which had changed its name to NSR Corp.

,

assigned the Lease to NSR Co. 1 In May 1973

, NSR Co. entered into a sublease with 89

Frost Leasing Corp., an affiliate of Marvex Processing and Finishing Corp. ( ʺ Marvex ʺ ).

Between 1973 and 1976, Marvex occupied the building and operated

textile manufacturing activities at the Site pursuant to the sublease. Marvex installed a

commercial dry cleaner, which used large quantities of PCE and may have caused PCE

1 NSR Corp. then dissolved.‐ 5

‐ contamination during daily operations. In May 1976, an employee of Marvex

committed arson and burned the Site to the ground, causing PCE contamination. As a

result, on June 24, 1976, Spiegel terminated the Lease and asked Marvex to vacate the

premises. Speigel chose not to rebuild the Site at that time.

In July 1976, NSR Co. sued Spiegel and Allendale Mutual Insurance

( ʺ Allendale ʺ ), the fire insurance provider for the Site, seeking (1) a declaration that the

purchase option had not been terminated or (2) an order requiring Allendale to pay

insurance proceeds either to NSR Co. or Spiegel, with the stipulation that Spiegel

rebuild the Site. In May 1977, the parties settled. Under the settlement agreement,

Allendale agreed to issue the fire insurance proceeds to Spiegel, and Spiegel and his

successors agreed to release Pufahl, the Pufahl Brothers, NSR Co., NSR Corp., Lincoln,

and Adchem from liability from all claims ʺ arising out of [the Lease]. ʺ App. 486. In

1978, using the insurance proceeds, Spiegel rebuilt the Site, and re

‐ let the property.

After PCE contamination was discovered on the Site in 1988, the NYSDEC

listed the Site as a Class 2 Inactive Hazardous Waste Site. Next Millenium and 101 Frost

purchased the property in 1997 or 1998. On January 2003, the plaintiffs voluntarily

entered into Consent Decrees with NYSDEC to remediate the Frost Street Properties.

Plaintiffs have spent more than $10 million pursuant to the Consent Decree on the

cleanup.‐ 6

‐ B. Proceedings Below

Plaintiffs filed suit on November 24, 2003 in the United States District

Court for the Eastern District of New York, alleging that defendants are liable under

CERCLA as ʺ owners ʺ and ʺ operators. ʺ Third Am. Compl. ¶ 7. On October 22, 2014, the

district court (Lindsay, M.J. ) denied plaintiffs ʹ motion for partial summary judgment

and granted defendants ʹ cross

‐ motion for partial summary judgment, holding that

Lincoln and Adchem were not ʺ owners ʺ of the Site. 2 On March 31, 2015, the district

court granted in part and denied in part defendants ʹ motion for summary judgment,

holding that Lincoln and Adchem were not liable based on a single enterprise theory.

The court also rejected the common law nuisance claim and granted the motion to strike

the jury demand. On March 23, 2016, the district court (Brown, M.J. ) granted Lincoln ʹ s

ʺ motion in limine to dismiss, ʺ dismissing all claims again Lincoln as ʺ operators. ʺ 3 App.

83, 88. On March 29, 2016, a final judgment was entered in favor of all defendants

dismissing all pending causes of action, and denying plaintiffs ʹ motion for partial

summary judgment. This appeal followed.

2 The parties consented to jurisdiction before the magistrate judge pursuant to 28 U.S.C.

§ 636.

3 On May 4, 2015, the case was transferred from Magistrate Judge Lindsay to Magistrate

Judge Gary Brown.‐ 7

‐ C. Discussion

1. CERCLA

Congress created CERCLA to address the cleanup of hazardous waste

spills by imposing strict liability on ʺ any person who at the time of disposal of any

hazardous substance owned or operated any facility at which such hazardous substances

were disposed of. ʺ 42 U.S.C. § 9607(a)(1)

‐ (2) (emphasis added). Owners and operators

are subject to strict liability unless they can prove an affirmative defense. See B.F.

Goodrich Co. v. Murtha

, 958 F.2d 1192, 1198 (2d Cir. 1992). Liability extends to current

owners even though they did not cause the pollution. See New York v. Shore Realty Corp.

,

759 F.2d 1032, 1044 (2d Cir. 1985) ( ʺ [S]ection 9607(a)(1) unequivocally imposes strict

liability on the current owner of a facility from which there is a release or threat of

release, without regard to causation. ʺ ).

CERCLA is a remedial statute that ʺ must be construed liberally to

effectuate its two primary goals: (1) enabling the EPA to respond efficiently and

expeditiously to toxic spills, and (2) holding those parties responsible for the releases

liable for the costs of the cleanup. ʺ B.F. Goodrich Co.

, 958 F.2d at 1198; see also Prisco v.

A&D Carting Corp.

, 168 F.3d 593, 602 (2d Cir. 1999) (citing Schiavone v. Pearce

, 70 F.3d

248, 253 (2d Cir. 1996) ( ʺ As a remedial statute, CERCLA should be construed liberally to

give effect to its purposes. ʺ )).‐ 8

‐ Plaintiffs allege claims under section 107(a) and section 113(f) of

CERCLA. 4 They contend that: (1) Pufahl, NSR Co., NSR Corp. and Adchem are liable

as ʺ owners ʺ based on the sublease with their sublessees Lincoln and Marvex because

they are de facto owners or under a site control theory of ownership; (2) Pufahl, NSR Co.,

NSR Corp. and Adchem are liable as ʺ owners ʺ based on a ʺ single enterprise ʺ theory

because the defendants acted as a ʺ single enterprise ʺ with the sublessees; and (3)

Lincoln is liable as an ʺ operator ʺ because its operations purportedly caused the PCE

contamination.

2. Application

a. Owner Liability

As an initial matter, plaintiffs ask that we overrule Commander Oil Corp. v.

Barlo Equip. Corp.

, 215 F.3d 321, 329 (2d Cir. 2000), in which we laid out the

circumstances under which a lessee is deemed an owner under CERCLA. The request

is denied. This panel does not have authority to overrule the prior panel decision in

Commander Oil

. See United States v. Wilkerson

, 361 F.3d 717, 732 (2d Cir. 2004) ( ʺ [Second

4 Section 107(a) permits a property owner or operator who has spent money on cleaning

up hazardous waste to seek reimbursement for cleanup costs from other PRPs. See 42

U.S.C. § 9607(a)(4)(B). Section 113(f) permits anyone to ʺ seek contribution from any

other person who is liable or potentially liable under [section 107(a)]. ʺ 42 U.S.C.

§ 9613(f). Under Section 113(f), a party who has been sued to contribute to cleanup

costs can seek contribution from other PRPs for cleanup costs, including from the initial

plaintiff who sued for reimbursement under section 107(a).‐ 9

‐ Circuit panels] are bound by the decisions of prior panels until

. . . they are overruled

either by an en banc panel of our Court or by the Supreme Court. ʺ ).

Commander Oil remains the law of this Circuit. Under Commander Oil

, as

the district court noted, the lease here was ʺ a typical commercial lease reflecting the

usual relationship between a landlord and a single industrial tenant. ʺ Hence, on this

record, defendants were not liable as de facto owners under CERCLA.

Plaintiffs argue that if defendants are not liable as de facto owners under

Commander Oil

, we should adopt a site control test to determine liability. In Commander

Oil, however, we expressly declined to adopt a site control standard for ownership. We

held that ʺ site control alone is an improper basis for the imposition of owner liability. ʺ

215 F.2d at 329. We reasoned that ʺ while the imposition of liability [where the lessee is

the active user and polluter] is surely correct, imposing owner liability instead of operator

liability threatens to conflate two statutorily distinct categories of potentially

responsible parties. ʺ Id. Again, Commander Oil controls in this respect as well, and

hence this argument fails.

b. Operator Liability Based on a ʺ Single Enterprise ʺ Theory

Plaintiffs also argue that defendants are liable for Lincoln ʹ s manufacturing

operations on the Site between 1966 and 1973 on the theory defendants operated as ʺ a

single enterprise ʺ under the domination and control of the Pufahl Brothers, who owned

and controlled Lincoln. Under the ʺ single enterprise theory, ʺ a corporation can be held‐ 10

‐ liable for the actions of another corporation if they are part of a single enterprise. See

N.L.R.B. v. Deena Artware, Inc., 361 U.S. 398, 403 (1960)

.

Under New York law, liability will be imposed upon a parent corporation

through veil piercing where a plaintiff shows: (1) the parent corporation dominates the

subsidiary in such a way as to make it a ʺ mere instrumentality ʺ of the parent; (2) the

parent company exploits its control to commit a fraud or other wrong, and (3) the

plaintiff suffers an unjust loss or injury as a result of the fraud or wrong. Wm.

Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 138 (2d Cir. 1991). In

CERCLA cases, plaintiffs must also show that domination caused the contamination at

the site. See New York State Elec. & Gas Corp. v. FirstEnergy Corp., 766 F.3d 212, 228 (2d

Cir. 2014) ( ʺ The use of control to commit a wrong is a key component to veil piercing. ʺ );

Bedford Affiliates v. Sills

, 156 F.3d 416, 431

‐ 32 (2d Cir. 1988). Domination and control

alone are not enough to support veil

‐ piercing. New York State Elec. and Gas

, 766 F.3d at

228 (citing Bedford Affiliates

, 156 F.3d at 431).

Here, plaintiffs failed to present evidence from which a reasonable

factfinder could conclude that defendants ʹ alleged domination or control of Lincoln

caused the contamination at the Site. Any contamination caused by Lincoln would

have arisen from its daily operations at the Site. There is nothing in the record to

suggest that defendants directed or controlled Lincoln ʹ s daily operations in such a way

as to cause contamination.‐ 11

‐ As for Marvex, the wrongdoing that allegedly caused the pollution

involved an act of arson by an employee of Marvex. There is nothing in the record to

support the proposition that defendants ʹ alleged domination of Lincoln caused the

Marvex spill. Thus, plaintiffs ʹ single enterprise claims fail.

c. Lincoln

Plaintiffs argue that Lincoln is liable as an ʺ operator ʺ based on its

operations at the Site between 1966 and 1973. Lincoln, however, had ceased operations

by 1972 or 1973, several years before the fire in 1976, and it was dissolved well before

the claims accrued in 1997 or 1998, when Next Millenium purchased the Site.

Whether a corporation has the capacity to be sued is a question of state

law. See Marsh v. Rosenbloom

, 499 F.3d 165, 179 (2d Cir. 2007) ( ʺ CERCLA does not

preempt state statutes that limit a party ʹ s capacity to be sued. ʺ ). In New York, this

question is governed by New York Business Corporation Law ( ʺ BCL ʺ ) §§ 1005 and

1006. Section 1005(a)(1) provides that a dissolved corporation ʺ shall carry on no

business except for the purpose of winding up its affairs. ʺ BCL § 1005(a)(1). Section

1006(a) provides that a dissolved corporation ʺ may continue to function for the purpose

of winding up the affairs of the corporation in the same manner as if the dissolution had

not taken place. ʺ BCL § 1006(a). An aggrieved party, however, may seek ʺ any remedy

available to or against such [dissolved] corporation, its directors, officers or

shareholders for any right or claim existing or any liability incurred before such‐ 12

‐ dissolution. ʺ Id. § 1006(b). Thus, the dissolved corporation exists for ʺ the purpose of

and for as long as is necessary to satisfy and provide for its debts and obligations and it

may sue or be sued on these obligations until its affairs are fully adjusted. ʺ Rodgers v.

Logan

, 503 N.Y.S.2d 36, 39 (App. Div., 1st Dep ʹ t 1986).

Plaintiffs argue that defendant ʹ s affairs were not ʺ fully adjusted ʺ at the

time they filed suit in 2003 because Section 1006 provides no time limit on winding up a

corporation ʹ s affairs. This is not correct. While Section 1006 is silent on time limits,

New York courts have held that where there is no stated time limit, the wind up period

is limited to a ʺ reasonable period of time. ʺ See Lance Int ʹ l, Inc. v. First Nat ʹ l City Bank

, 927

N.Y.S.2d 56, 58 (App. Div. 1st Dep ʹ t 2011). The winding up ʺ cannot continue

indefinitely. ʺ Id.

Here, Lincoln ceased operations in 1972 or 1973, and dissolved in

approximately 1977. There is nothing in the record to show that Lincoln

‐‐ which has not conducted business since 1977

‐‐ had not fully adjusted its affairs by

1997, when plaintiffs purchased the property, or by 2003, when this suit was filed. The

district court reasonably concluded that Lincoln ʹ s operations were ʺ wound up ʺ and its

affairs fully

‐ adjusted long before plaintiffs commenced this action.

* * *‐ 13

‐ We have reviewed the plainti ff s ʹ remaining arguments on appeal and

conclude they are without merit. Accordingly, we AFFIRM the judgment of the district

court.

FOR THE COURT:

Catherine O ʹ Hagan Wolfe, Clerk