2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 2-10-2009 

# P h arm a c i a C orp v

. M ot or C arrie r S e rv P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 07-3204

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2009 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion
" P h arm a c i a C orp v

. M ot or C arr ie r S e r v " (2009). 2009 D e cisio n s . P ape r 1891. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/1891NO T PRECEDEN TI AL

U N IT E D S T A T E S C O U R T O F A P P E A L S F O R T H E T H IR D C IR C U IT N o. 07- 3204

_______ P HAR M AC I A C OR P OR AT I ON f / k / a M ONS ANT O C OM P ANY v. M O T O R C A R R IE R S E R V IC E S C O R P .; C S X IN T E R M O D A L , IN C .; CSX CO RPO RA TI O N ; G . O . D . , I N C. ; RI LEY LEA SI N G CO RP. M o to r C a rr ie r S e rv ic e s C o rp .; C S X In te rm o d a l, I n c .;

C SX C orpor at i on, A p p e llan ts

_________ N o. 08- 2553

_________ P H A R M A C IA C O R P O R A T IO N , f /k /a M o n s a n to C o m p a n y ,

v. M O T O R C A R R IE R S E R V IC E S C O R P .; C S X IN T E R M O D A L , IN C .; C S X C O R P O R A T IO N ; G .O .D ., IN C .; R IL E Y L E A S IN G C O R P ., M ot orC arr i erSer vi ces C orp. ; C SX I nt erm odal , I nc. ; C SX C orpor at i on,

A p p e llan ts O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

f o rt h e D i s t r i c to f

N e w J e r s e y ( D . C . N o. 04- cv- 03724 ) D is tr ic t J u d g e : H o n o ra b le G a rr e tt E . B ro w n , J r.H on. L oui s H . Pol l ak, Seni or J udge, U ni t ed St at es D i s t r i ct * C our tfort he East ern D i s t r i ctof Penns y lva ni a, s i t t i ng by des i gnat i on. 2

A r gued J anuary12, 2009 B efor e: SL O V I T E R and B A R R Y , C i r cui tJ udges , and

PO L L A K , D i s t r i ctJ udge

* ( Fi l ed: February10, 2009)

____ R oyT . E ngl er t , J r . ( A r gued) R obbi ns , R us s el l , E ngl er t , O r s eck & U nt er ei ner W as hi ngt on, D . C . 20006 A tto rn e yf

o r A p p e llan ts J ohn M cG ahr en ( A r gued) Pat t on B oggs N ew ark, N . J . 07102 A t t or neyforA ppel l ee

____ OP I NI ON SL O V I T E R , C i r cui tJ udge. I. Phar m aci a C orp. ( form er l yknow n as the M ons ant o C om pany ) m anufa ctur ed chemi cal s ata fa ci l i t yon 28 acr es of pr oper t yabut t i ng the Pas s ai c R i veri n K earny , N ew Je rse y(th e “ K e a rn yS ite” ), f ro m 1 9 5 6 to 1 9 9 1 . In D e c e m b e r 1 9 9 4 , itso ld th e K e a rn yS ite3

t o M ot orC arr i erSer vi ces C orp. , w hi ch ow ned a s i x- acr e pr oper t yl ocat ed ac r os s the s tr e e t, f o r a p p ro x im a te ly $ 5 .5 m illio n . T h e p u rc h a se a n d sa le a g re e m e n t (th e “ A g re e m e n t”) b e tw e e n th e p a rties e x p re ss ly addr es s ed the di vi s i on of r es pons i bi l i t ybetw een Pharm aci a and M ot orC arr i err egar di ng e n v iro n m e n tal c lea n u p a c tiv iti e s a t th e K e a rn yS ite. P h a rm a c ia w a s o b lig a ted to c o m p lete ( as i tdi d) cert ai n r emedi al act i ons r equi r ed bythe N ew J er s eyD epart m entof E n v ir o n m en tal P rotec ti o n (“N JD E P ”) u n d er a 1 9 8 9 sett lem en t as w ell as c ertain f u ture ac ti v it ies related th ere to. U n d er § 2 . 3 o f th e A g ree m en t, M o tor C arrier i s resp o n sible fo r ( i ) anyand al l cos t s and expe ns es ( i ncl udi ng at t orney ’ s fee s ) of C l ean- up [r equi r ed underfede r al ors t at e l aw ] . . . ( i i ) and anyvol unt ar i l yi ncurr ed cos t s and expe ns es ( i ncl udi ng at t or ney ’ s fee s ) t o i nves t i gat e, r emedi at e, r emove, tr eat , cl ean up or p re v e n t th e e sc a p e , in e a c h c a se o f a n yS u b sta n c e s p re se n t at o r w h ich m ig ra te fr om t he K earnySi t e, t he Pl antorthe Pr oper t yatanyt i m e af t erthe Effec t i ve T im e . A p p . a t 2 4 2 6 . T he A gr eemental s o pr ovi des thatthe part yr ece i vi ng not i ce orobt ai ni ng i nform at i on t hata pr ocee di ng r egar di ng an envi r onm ent al cl eanup maybe comm ence d agai ns torbyone of the part i es “s hal l pr om pt l ypr ovi de w r i t t en not i ce ther eof t o t he other p a rt y .” A p p . a t 2 4 5 1 . I n J anuary1998, C SX I nt erm odal , I nc. ( “I nt erm odal ”) acqui r ed al l the s har es of M o tor C arrier fo r ap p rox im ately$ 1 4 . 5 m il li o n . Interm o d al i s a w h o ll y -ow n ed su b sidiary of C SX C orp. ( “C SX ”) . Pr i ort o cl os i ng, Phar m aci a r eques t ed as s ur ance thatM ot or C arr i er ’ s netw or t h w as atl eas t$5 m i l l i on. I nt erm odal r es ponded byi nform i ng4

Phar m aci a thati thad pur chas ed M ot orC arr i erand r ecogni zed thati tw as an “A ffi l i at e” undert he A gr eement . A s a r es ul tof the s t ock pur chas e tr ans act i on, M ot orC arr i er b e c a m e a w h o lly-o w n e d s u b s id ia ry o f In te rm o d a l. I n J anuary1995 ( s hor t l yaft erPhar m aci a’ s s al e of the K earnySi t e t o M ot or C arr i er ) , t he U ni t ed St at es E nvi r onm ent al Pr ot ect i on A gency( “EP A ”) i nform ed Phar m aci a thati tw as i nves t i gat i ng envi r onm ent al cont ami nat i on i n a s i x- m i l e s t r et ch of t he Pas s ai c R i vernearN ew ark, N ew J er s ey . B yl ett erdat ed A pr i l 1996, E PA not i fi ed Phar m aci a of i t s pot ent i al l i abi l i t yunderthe C om pr ehens i ve Envi r onm ent al R es pons e, Com pe ns a t i on , a nd Li a bi l i t yA c t( “ CE RC LA ” ) . Pha r mac i a r e s po nd e d b yi nf ormi ng EPA t hati tw oul d notpar t i ci pat e i n t he r emedi at i on of the Pas s ai c R i ver“[b] eca us e ther e w as in a d e q u a te e v id e n c e tyin g th e [ K e a rn y ] s ite to is s u e s in th e ri v e r.” A p p . a t 5 3 4 . In S e p tem b e r 2 0 0 3 , E P A a g a in c o n tac ted P h a rm a c ia b ylette r re g a rd in g its p o t e n t i a l l i a b i l i t yu n d e rCERCLA f o rth e Kea r n ySi t e . La t e ri n Se p t e mbe r2 0 0 3 , NJ DEP i s s ued an a dm i ni s t r at i ve di r ect i ve thati nform ed Pharm aci a and M ot orC arr i erthatthey w er e pot ent i al l yl i abl e unders t at e l aw forcont ami nat i on of the Pas s ai c R i verfr om the K e a rn yS ite. In M a rc h 2 0 0 4 , E P A iss u e d a f in a l d ra f t A d m in istra tiv e O rd e r o n C o n se n t, underw hi ch the s et t l i ng par t i es –w hi ch di d noti ncl ude Pharm aci a unt i l J une 2005–agr eed t o r ei m bur s e EP A forcert ai n cos t s as s oci at ed w i t h E PA ’ s R emedi al I nves t i gat i on and F e a sib ili tyS tu d y(“ R I/F S ” ) o f th e lo w e r P a ss a ic R iv e r. A ll th e se ttl in g p a rties a g re e d to j oi nt l yfund $10 m i l l i on of EP A ’ s cos t s forthe l ow erPas s ai c R i verR I / FS. I n M ar ch 2004, Phar m aci a’ s couns el t hen pr ovi ded M ot orC arr i erw i t h not i ce of an envi r onm ent al5

c laim b a se d o n E P A ’s a c tio n . M o to r C a rrie r re f u se d P h a rm a c ia’ s re q u e st th a t it i ndemni fyi tfort he cos t s of the EP A orN J D E P act i ons . Phar m aci a fi l ed thi s act i on i n A ugus t2004. II. P h a rm a c ia s o u g h t su m m a ryju d g m e n t to p ier c e M o to r C a rrie r’s c o rp o ra te v e il, w h ich th e D istric t C o u rt g ra n ted in D e c e m b e r 2 0 0 6 . A s a re su lt, it h e ld In ter m o d a l li a b le forM ot orC arr i er ’ s l i abi l i t yundert he A gr eement . Fol l ow i ng a benc h t r i al , the D i s t r i ct C our tent er ed an or deron J une 22, 2007, hol di ng thatM ot orC arr i er , I nt erm odal , and C S X w e re re q u ire d to in d e m n if yP h a rm a c ia u n d e r th e A g re e m e n t “f o r a n ya n d a ll co sts forw hi ch Pharm aci a i s orbecomes l i abl e t o N J D E P and U SE PA . . . oranyfutur e ac t i on byN J D E P, U SE PA oranyot herr egul at oryagenc yr el at ed t o t he r emedi at i on of the L ow erPas s ai c R i ver , and forfutur e cl eanup of the K earnySi t e. ” A pp. at103. T he D i s t r i c tCour ta l s o r e

j e c t e d M ot orCarr i e r ’ s l a t e no t i c e de fe ns e a s t o the c os t s of the EPA in v e s tig a tio n . I n A ugus t2007, t he N at i onal O cea ni c and A t m os pher i c A dm i ni s t r at i on ( “N O A A ”) , act i ng as t he l ead f eder al natur al r es our ces trus t ee unde rC E R C L A , i nform ed P h a rm a c ia th a t itw a s p o ten tiallyliab le f o r n a tu ra l re so u rc e d a m a g e s to th e lo w e r P a ss a ic R i verbas ed on i t s form erK earnySi t e oper at i ons . Phar m aci a not i fi ed M ot orC arr i erof t he N O A A cl ai m and s oughti ndemni fi cat i on underthe A gr eementand the D i s t r i ct C our t ’ s J une 22 or der , butM ot orC arr i err efus ed. O n S e p tem b e r 1 7 , 2 0 0 7 , the D istric t C o u rt o rd e re d M o to r C a rrie r to p a yP h a rm a c iaT h e D istric t C o u rt h a d ju risd ictio n o v e r P h a rm a c ia’ s s tate 1 l aw contr actcl ai m s under28 U . S. C . § 1332. M ot o r C arrier fi l ed t w o appea l s i n t hi s cas e, w hi ch w e have cons ol i dat ed. O n J ul y20, 20 0 7 , M o t o rCa r r i e rf

i l e d a n o t i c e o f

a p p e a l a s t o t h e Di s t r i ct C our t ’ s J une 22, 2007 or derr es ol vi ng l i abi l i t yi s s ues ( N o. 07- 3204) , and thatappea l s ubs equent l yr i pened w h en t he D i s t r i ct C our tful l yr es ol ved the part i es ’ c l ai m s on the mer i t s . See C ape M ayG ree n e, Inc . v . W arren , 6 9 8 F . 2 d 1 7 9 , 1 8 4 -85 (3d C ir . 1 9 8 3 ). W e h a v e ju ri s d ic tio n o v e r N o . 0 7 -3 2 0 4 p u rs u a n t to 2 8 U .S .C . § 1 2 9 1 . Phar m aci a ar gues the s econd not i ce of appeal (N o . 08- 2553) , w hi ch s t at ed i tappea l ed the M ay19, 2008 j udgm ent , w as unt i m el y . I tcont ends t hatt he D i s t r i ctC our t ’ s J anuary9, 2008 or derw as t he r el evantfi nal j udgm ent . T he D i s t r i ct C our t ’ s or der ent er ed on M ay19, 2008 w as ent i t l ed “Fi nal J udgm ent , ” A pp. at 27A , an d w e s ee no r eas on nott o t ake thatdes i gnat i on atfac e val ue. W e conc l ude thatM ot orC arr i er ’ s not i ce of ap peal i n N o. 08- 2553 w as t i m el y fi l ed and that w e t her efor e al so h ave ju ri s d ic tio n o v e r t h a t a p p e a l p u rs u a n t to 2 8 U .S .C . § 1 2 9 1 . 6 appr oxi m at el y$448, 430 i n cl eanup c os t s i ncurr ed up t o t hatdat e. O n J anuary9, 2008, t he D i s t r i ctC our tor der ed M ot orC arr i ert o payappr oxi m at el y$469, 360 i n att orney s ’ fee s t o Phar m aci a, w hi ch r epr es ent ed the cos tof Pharm aci a’ s l egal r epr es ent at i on i n t he under l y i ng governm enti nves t i gat i ons . T he D i s t r i ctC our tent er ed fi nal j udgm enton M ay 19, 2008. 1 III . T h is is e ss e n tiallya c o n tra c t d isp u te. B e c a u se w e c o n c lu d e th a t th e A g re e m e n t is notambi guous , w e r evi ew t he D i s t r i ctC our t ’ s i nt erpr et at i on de novo. M ot orC arr i er ar gues t hati ti s r es pons i bl e fort he cos t s of cl eanup a ct i vi t i es onl yi f the pol l ut ant s ati s s ueM o t o rC a r r i e ra l s o c o n t e n d s th a tth e D i s t r i c tC o u r t 's 2 i n t e rp re ta tio n re n d e rs th e p h ra s e “ in e a c h c a s e ” in § 2 .3 m eani ngl es s . W e di s agr ee. T he phra s e “i n eac h cas e” r efe r s t o t he typ e s o f v o lu n tar yc lea n u p a c tiv iti e s th a t im m e d iate ly p re c e d e it i n § 2. 3( i i ) and does not r efe r back t o governm ent - m andat ed “Cl eanu p ” c o v ere d b y§ 2 . 3 (i ). 7 m ig ra ted f

ro m th e K e a rn yS ite a f

ter th e A g re e m e n t b e c a m e e f f e c tiv e (a c o n d iti o n it c laim s is n o t sa tisf

ied ). It co n ten d s th a t § 2 .3 (q u o ted e a rlier ) m a k e s it re sp o n sib le o n ly forgovernm ent - or der ed cl eanup unde r§ 2. 3( i ) and vol unt aryact i vi t i es under§ 2. 3( i i ) , but “i n eac h cas e” onl yfor“Subs t ance s . . . w hi ch mi gr at e fr om the K earnySi t e . . . atany t i m e af t ert he Effec t i ve Ti m e. ” A pp. at2426. W e r ej ectthatcont ent i on and i ns t ead a gr ee w ith th e D is tr ic t C o u rt th a t u n d e r § 2 .3 (i ) M o to r C a rr ie r m u s t p a yth e c o s t o f “ C le a n -u p ,” w h ich is d ef

ined in the A g ree m en t t o m ea n “inv esti g atory , rem ed ial an d m o n it o ri n g w o rk m andat ed byt he R equi r ement s of Law ora G overnm ent al A gencyt o i nves t i gat e, r emedi at e, r emove, t r eat , cl ean- up, cont ai n orpr eventthe es cape of Subst ance s on, w i t hi n, gener at ed byoremi t t ed fr om [the K earnySi t e] . ” A pp. at2420. N othi ng i n t hat d e f in iti o n su g g e sts a tem p o ra l li m itatio n o n M o to r C a rrie r’s liab ili tyf o r g o v e rn m e n tm a n d a te d c le a n u p . T h u s , it f o llo w s th a t th e “ a f

te r t h e E f

f e c tiv e T im e ” la n g u a g e in § 2 .3 r el i ed upon byM ot orC arr i erm odi fi es onl y§ 2. 3( i i ) –w hi ch, agai n, does notus e the d ef ined term “C lean -up ”– an d n o t § 2 . 3 (i ). 2 In terp re tin g § 2 .3 to im p o se re sp o n sib ili tyo n M o to r C a rrie r f o r g o v e rn m e n tm a n d a te d c le a n u p a c tiv itie s is c o n s is te n t w ith th e re m a in in g p ro v is io n s in th e A g re e m e n t.8

S e c t i o n 2 . 5 g o v e r n s M o t o rCa r r i e r ’ s i n d e mn i f i c a t i o n o b l i g a t i o n f

o rc l e a n u p a c t i v i t i e s . As r el evanther e, § 2. 5( a) r equi r es M ot orC arr i ert o i ndemni fyPhar m aci a for“anyFi ne a ss e ss e d f

ro m a n d a f

ter th e E f

f e c tiv e T im e ,” w h e re a s § 2 .5 (b ) re q u ire s M o to r C a rrie r to i ndemni fyPhar m aci a for“anycos t s of C l ean- up of Subst ance s ” r equi r ed underfede r al or s t at e l aw “w hetherornots uch C l ean- up ar i s es fr om ori n connec t i on w i t h Subst ance s d u m p e d , b u rie d , inje c ted , d e p o site d o r d isp o se d o f b y[ P h a rm a c ia] .” A p p . at 2 4 2 9 . T h is br oad l anguage of § 2. 5( b) cl ear l yr equi r es M ot orC arr i ert o i ndemni fyPhar m aci a for governm ent - m andat ed cl eanup c os t s that“ar i s e fr om ” envi r onm ent al harm s caus ed by Phar m aci a’ s form eroper at i ons and i ncl udes no l i m i t at i on bas ed on w hen the pol l ut ant s at issue m igrated fro m the K ea rnyS it e. S im il arly , § § 2 . 2 an d 2 . 4 , w h ich g o v ern P h a rm a c ia’ s o b lig a tio n s f o r c lea n u p , cle a rlylim it P h a rm a c ia’ s c lea n u p o b lig a tio n s to c e rt a in a c tiv itie s p re v io u s ly m a n d a te d b yN J D E P . M o to r C a rrie r n e x t co n ten d s th a t ev e n if it m u st in d e m n if

yP h a rm a c ia f

o r c o sts a ss o c iate d w ith th e E P A a n d N JD E P in v e stig a tio n s, th e D istric t C o u rt e rre d in h o ld in g it resp o n sible fo r th e c o sts of the N O A A inv esti g ati o n b ec au se N O A A see k s “c o m p en sato ry damages fornatur al r es our ce i nj ur y ” as w el l as “cos t s of as s es s i ng i nj uryt o natur al re s o u rc e s ,” n e ith e r o f

w h ic h is c o v e re d b yth e te rm “ C le a n -u p ” u n d e r t h e A g re e m e n t. A p p e llan t’s S u p p . B r. at 1 3 (e m p h a sis o m itt e d ). H o w e v e r, th e N O A A a c tio n f a lls s q u a r e l ywi t h i n t h e b r o a d d e f i n i t i o n o f “ Cl e a n - u p . ” T h e “ p r i ma r yp u rp o s e ” o f E P Am andat ed cl eanups underC E R C L A “i s t o pr ot ecthum an hea l t h. ” See N atur al R es our ce9

D amage A s s es s m ent s , 51 Fed. R eg. 27, 674, 27, 681 ( A ug. 1, 1986) . I n contr as t , natur al r es our ce da m age a s s es s m ent s i nvol ve, i nt eral i a, r emedi al eff or t s , “s uch as habi t at m anage m entoracqui s i t i on of an e qui val entr es our ce, [that ] w i l l be bey ond t he s cope of t he [EPA ] r es pons e ac t i on. ” I d. ; s ee a l s o 43 C . F. R . § 11. 93( a) ( r equi r i ng compl et i on of “R es t or at i on Pl an” that“s hal l des cr i be how the moni es [obt ai ned bynatur al r es our ces t rus t ees ] w i l l be us ed t o addr es s natur al r es our ces , s peci fi cal l yw hatr es t or at i on, reh ab il it ati o n , rep lace m en t, o r ac q u isi ti o n o f th e e q u ivalen t r eso u rce s w il l occ u r. ”). I n s um , t he N O A A act i on fal l s s quar el yw i t hi n t he def i ni t i on of “Cl ean- up” under t he A gr eement . T he “a s s es s m ent ” forw hi ch N O A A s oughtfundi ng i n A ugus t2007 i s an “i nves t i gat i on” of the ext entof natur al r es our ce da m age c aus ed byPhar m aci a and the o th e r p o ten tiallyliab le p a rties to th e P a ss a ic R iv e r. M o re o v e r, an yd a m a g e s re q u ire d to be pai d fol l ow i ng t he as s es s m entw i l l be us ed for“r emedi al ” ac t i vi t i es , s uch as “re storati o n ” o r “reh ab il it ati o n ” o f th e P assa ic R iver. I V. M ot orC arr i ernextchal l enges the D i s t r i ctC our t ’ s fi ndi ng thatPhar m aci a pr ovi ded t he not i ce r equi r ed byt he A gr eementof the EP A i nves t i gat i on and thati n anycas e M ot or C arr i erpr oved no pr ej udi ce, as r equi r ed byPfi zer , I nc. v. E m pl oy er s I ns . of W aus au, 712 A . 2d 634, 644 ( N . J . 1998) , and C ooperv. G ov’ tE m pl oy ees I ns . C o. , 237 A . 2d 870, 873-T he N ew Jer seydecis i on on w hich M otorC arr i er r el i es, 3 Sneed v. C oncor d I ns . C o. , 237 A . 2d 289 ( N . J . Super . C t . A pp. D i v. 1967) , di d not cr eat e an exce pt i on t o t he gene r al rul e thatan i ns ur erm us ts how pr ej udi ce t o s ucce ed on a l at e not i ce de fens e, butr atherdeal t w i t h t he di s t i ncti s s ue of e s t oppel w her e an i ns ur er s eeks t o deny cover age aft er contr ol l i ng t he defe ns e o f the u n d e r l y i n g c l a i m f

o ra s u b s t a n t i a l p e r i o d a f t e rth e i n s u r e rb e c a me aw ar e of t he bas i s for deny i ng cover age. See al s o V ornado, I nc. v. L i ber t yM ut . I ns . C o. , 254 A . 2d 325 ( N . J . Super . C t . C h. D i v. 1969) ( not i ng di s t i nct i on betw een e s t oppel cas es an d l at e not i ce defe nse, and ho l ding t hat i nsurerassert i ng l at e no t i ce def ense m ust p ro v e p re

ju d ic e ). 10 7 4 (N .J. 1 9 6 8 ). W e n e e d n o t d e c id e w h e th e r P h a rm a c ia p ro v id e d M o to r C a rrie r w ith 3
s uffi ci entnot i ce of

E PA ’ s A pr i l 1996 l ett eri nform i ng Phar m aci a of i t s pot ent i al C E R C L A liab ili tyf

o r th e K e a rn yS ite, b e c a u se w e c o n c lu d e th a t th e D istric t C o u rt d id n o t c le a rl ye rr in f

in d in g th a t M o to r C a rr ie r w a s n o t p re ju d ic e d b ya n ys u c h la te n o tic e . T h e D istric t C o u rt f

o u n d th a t M o to r C a rrie r f a iled to o f

f e r e v id e n c e th a t P h a rm a c ia m ade a nydeci s i ons i n defe ns e of the EP A i nves t i gat i on thatw er e detr i m ent al t o M ot or C arr i er . M ot orC arr i ercount er s t hati f Pharm aci a had pr oper l ypr ovi ded not i ce of the A pr i l 1996 l et t er , i tcoul d have e xer ci s ed i t s r i ghtunder§ 9. 9 of the A gr eementt o t ake o v e r th e d e f

e n se o f th e E P A a c tio n . It also a rg u e s th a t P h a rm a c ia f a iled to p re se n t a rep o rtb yit s en v ir o n m en tal co n su lt an t ( R o u x A sso ciates) that su g g ested that P h arm ac ia’s o p era ti o n s at th e K ea rnyS it e c o u ld n o t hav e c o n tam inated the P assa ic R iver. H o w ev er, as Phar m aci a not es , i thad pr ovi ded EP A w i t h a s i m i l arr epor tfr om R oux A s s oci at es even befor e EP A ’ s A pr i l 1996 l et t er . M or e i m por t ant l y , ther e i s no i ndi cat i on thatM ot or11

C arr i er“i r r etr i evabl yl os t ” anyr i ght s orcoul d have be en more s ucce s s ful i n defe ndi ng E PA ’ s i nves t i gat i on. E PA t ook no act i on agai ns tPhar m aci a unt i l Sept ember2003, w hen it se n t P h a rm a c ia a n o th e r le tter r e g a rd in g its p o ten tial C E R C L A liab ili ty . P h a rm a c ia form al l ynot i fi ed M ot orC arr i erof EP A ’ s i s s uance of a dr aftadmi ni s t r at i ve or der r egar di ng t he l ow erPas s ai c R i veri n M ar ch 2004. Phar m aci a di d notent eri nt o a s et t l ementw i t h E PA unt i l J une 2005. T hus , M ot orC arr i ercoul d have e xer ci s ed i t s r i ght to tak e o v e r th e d e f

e n se o f th e E P A in v e stig a tio n m o re th a n a y e a r b e f o re a n yliab ili ty w as i m pos ed on Pharm aci a. B eca us e w e ca nnotconcl ude thatthe D i s t r i ctC our t ’ s fi ndi ng of no pr ej udi ce w as cl ear l yerr oneous , M ot orC arr i erw as notent i t l ed t o a l at e not i ce d e f e n s e . V. W e tur n t o M ot orC arr i er ’ s cont ent i on thatthe D i s t r i ctC our terr ed i n gr ant i ng s um m aryj udgm entt o pi er ce i t s corpor at e vei l , ther ebyhol di ng I nt erm odal l i abl e for M ot orC arr i er ’ s i ndemni fi cat i on obl i gat i ons . W e r evi ew the gr antof s um m aryj udgm ent de novo. U nderN ew J er s eyl aw , t he corpor at e vei l of a s ubs i di arycorpor at i on m aybe p ier c e d o n lyw h e re (1 ) “ th e p a re n t so d o m in a ted th e su b sid iar yth a t ith a d n o se p a ra te exi s t ence butw as m er el ya condui tforthe par ent ” and ( 2) “the par enthas abus ed the pr i vi l ege of

i ncorpor at i on byus i ng t he s ubs i di aryt o perpetr at e a f r aud ori nj us t i ce, or ot herw i s e t o ci r cumventt he l aw . ” N ew J er s eyD ep’ tof Envt l . Pr ot . v. V entr on C orp. , 468 A .2 d 1 5 0 , 1 6 4 (N .J . 1 9 8 3 ).12

T he D i stri ctC ou rtsum m ari zed the rel evan tfact s as t o the fi rs tprong as fol l ow s: “Si nce the cl os i ng, i n J anuary1998, nei t herthe s har ehol der s , offi cer s nordi r ect or s of M o tor C arrier ha v e h eld a m ee ti n g as se t fo rth in the co m p an y ’s by -l aw s. M o reo v er, M o to r C a rrie r h a s n o t . . . m a in tain e d a b a lan c e sh e e t, no r iss u e d a f in a n c ial re p o rt to Int erm od al . ” A pp . at69 . M otorC arr i er al so “has n o em ploy ees, and exis t s sol el yas a h o ld in g c o m p a n yf

o r th e K e a rn y[ S ite],” A p p . at 6 0 , an d In ter m o d a l u se s th a t p ro p e rty w i t houta l eas e orpaym ent . T he t ot al i t yof thes e ci r cumst ance s s ugges t s thatthe D i s tr i ct C o u rt c o rr e c tly c o n c lu d e d th a t I n te rm o d a l d o m in a te d M o to r C a rr ie r. M ot orC arr i erar gues t hatt he D i s t r i ctC our ti m pr oper l yconcl uded thati tw as under capi t al i zed. H ow ever , under capi t al i zat i on i s m er el yone fa ct ort o be cons i der ed, a n d is n o t a r e q u ire m e n t f o r p ier c in g th e c o rp o ra te v e il. A lth o u g h M o to r C a rrie r c o rre c tly n o tes th a t co u rts u su a llya n a ly z e c a p italiz a tio n a t th e in c e p tio n o f a c o rp o ra tio n , tha t ru le d o e s n o t ap p lyw h e n “ th e c o rp o ra tio n d istin c tlyc h a n g e s th e n a tu re o r m a g n itu d e o f its bu si ness. ” 1 W i l l i am M eade F l et cher, F l et cher C y cl op edia of t he L aw of C orporat i on s § 4 1 .3 3 (2 0 0 8 ). H e re , the n a tu re o f M o to r C a rrie r’s b u sin e ss c h a n g e d sig n if ica n tlyw h e n it w as pur chas ed byI nt erm odal . Pr i ort o t hatt i m e, M ot orC arr i err ece i ved r evenue of over $ 1 m i l l i on fr om l eas i ng t he K earnySi t e t o t hi r d par t i es , w her eas ther eaf t er , M ot or C arr i erhad no r evenue atal l . M or eover , gi ven i t s l ack of r evenue and ac know l edged r es pons i bi l i t yundert he A gr eementfor( atl eas ts om e) envi r onm ent al cont ami nat i on att he K e a rn yS ite, it i s d if

f icu lt t o c o n c lu d e th a t M o to r C a rrie r’s re so u rc e s w e re re a so n a b le “ in13

r el at i on t o t he natur e of the bus i nes s of the corpor at i on and the r i s ks at t endantt o s uch b u s in e s s e s .” Id . A s to the sec o n d v eil -piercin g p ron g , w e n o te a N ew Jerse yap p ell ate c o u rt d ec isi o n that ex p lai n ed that, “the h all m ark s o f . . . ab u se [ o f th e c o rpo rate fo rm ] are t ypi cal l yt he enga gementof the s ubs i di aryi n no i ndepende ntbus i nes s of i t s ow n but excl us i vel yt he per form ance of a s ervi ce f orthe par entand, even mor e i m por t ant l y , the u n d e r c a p i t a l i z a t i o n o f

t h e s u b s i d i a r yr e n d e r i n g i tj u d g me n t - p r o o f. ” OTR As s o c s . v . I BC S e rv s., In c ., 8 0 1 A .2 d 4 0 7 , 4 0 9 -1 0 (N .J. S u p e r. C t. A p p . D iv . 2 0 0 2 ). A s P h a rm a c ia stre ss e s, b o th o f

th e se h a llm a rk s a re p re se n t h e re . In ter m o d a l u se d M o to r C a rrie r so lely t o hol d t he K earnySi t e fori t s bus i nes s ( w i t houtpaym ent ) , ther ebys hi el di ng I nt erm odal fro m an yp o tential li ab il ityarisi n g o u t th e e n v ir o n m en tal h arm s ca u sed b yP h arm ac ia’s form eroper at i ons . M or eover , M ot orC arr i erhas poi nt ed t o no evi dence thati thas the re s o u rc e s n e c e s s a ry to m e e t th o s e lia b iliti e s . In su m , the D istric t C o u rt p ro p e rlyc o n c lu d e d th a t M o to r C a rrie r’s c o rp o ra te v e il sh o u ld b e p ierced as a m att er o f law . T h ere fo re, I n term o d al i s li ab le fo r M o tor C arrier’s o b lig a tio n s u n d e r th e A g re e m e n t. A l t hough couns el forM ot orC arr i eras s ur ed thi s cour tatthe or al ar gum entthat I nt erm odal has t he r es our ces t o m eetthe i ndemni t yobl i gat i on, w e nonethel es s exami ne t he D i s t r i ctC our t ’ s hol di ng t hatC SX beca m e an “ A s s ur ance A ffi l i at e” upon c om pl et i on o f In term o d al’s st o ck p u rch ase o f M o tor C arrier i n Jan u ary1 9 9 8 b ec au se M o tor C arrier’s14

audi t orval ued M ot orC arr i eratonl yabout$340, 000 i n O ct ober1997. Sect i on 13. 19 of the A gr eementpr ovi des that , i f atthe end of anyquar t erthe net w or t h of M ot orC arr i erfal l s bel ow $5 m i l l i on, then M ot orC arr i erm us tpr om pt l ynot i fy Phar m aci a and w i t hi n fi ft een da y s “ca us e A ffi l i at es t o become A s s ur ance A ffi l i at es by c a u sin g th e m (in a f

o rm sa tisf

a c to ryto [ P h a rm a c ia] ) to b e c o m e p a rties to th is A g re e m e n t, to g u a ra n ty an d /o r t o o th e rw is e b e c o m e lia b le f o r t h e o b lig a tio n s u n d e r t h e A g re e m e n t . . . t o t he s ame ext entas [M ot orC arr i er ] , i n eac h cas e as [Pharm aci a] m ayel ect . ” A pp. at 2 4 5 9 -6 0 . E ven i f I nt erm odal s om ehow beca m e an A s s ur ance A ffi l i at e, nothi ng i n § 13. 19 pr ovi des t hatI nt erm odal ’ s corpor at e par ent , C SX , w oul d aut om at i cal l ybecome an A ss u ra n c e A f

f ili a te a s w e ll. S e c tio n 1 3 .1 9 p ro v id e s th a t o n c e a n A ss u ra n c e A f f ili a te is added, i t s netw or t h i s cons i der ed partof M ot orC arr i er ’ s netw or t h “forpurpos es of det erm i ni ng a nee d t her eaf t ert o add addi t i onal A s s ur ance A ffi l i at es . ” A pp. at2460. T he D i s t r i ctC our tm ade no f i ndi ng ( and Pharm aci a off er s no evi dence ) thatthe combi ned net w or t h of I nt erm odal and M ot orC arr i erfai l s t o exce ed $5 mi l l i on. T her efor e, ther e i s no bas i s upon w hi ch t o concl ude thatC SX w oul d be obl i gat ed t o become an A s s ur ance A f f ilia te . I n s um , t he D i s t r i ctC our terr ed i n concl udi ng thatC SX beca m e an A s s ur ance A ffi l i at e of M ot orC arr i erundert he A gr eement . T hus , C SX i s notdi r ect l yl i abl e for M otorC arr i er’ s i nd em nifi cat i on ob l i gati on s.15 V I. Fort he above - s t at ed r eas ons , w e w i l l aff i r m the D i s t r i ctC our t ’ s j udgm entthat M o to r C a rrie r a n d In ter m o d a l ar e re q u ire d to in d e m n if yP h a rm a c ia f

o r c o sts in c u rre d in r es pons e t o t he EP A , N J D E P, and N O A A i nves t i gat i ons . W e w i l l r ever s e the D i s t r i ct C ou rt ’s j ud gm ent that C S X w as r espon si ble for tho se cost s.