Opinion ID: 1036612
Heading Depth: 2
Heading Rank: 3

Heading: Allocation of Costs

Text: The Litgo Appellants and Sanzari Appellees argue that the District Court’s allocation of costs under CERCLA was an abuse of discretion.10 In our view, the District Court 10 The Litgo Appellants also contend that the District Court abused its discretion when it declined to hold a separate hearing on how costs should be allocated among the PRPs, and instead allocated costs after the seventeen-day bench trial on the merits. Courts may hold a separate hearing to allocate 30 carefully and judiciously compared the parties’ relative fault both in its initial opinion on the merits and upon reconsideration. First, the parties challenge multiple findings of fact upon which the District Court relied in allocating costs, including: (1) that the Sanzari Appellees’ environmental consultant installed a faulty seal on one of the monitoring wells; (2) that the Sanzari Appellees failed to deliver a full set of preliminary groundwater test results and failed to disclose information about TCE contamination on a nearby property; (3) that the Litgo Appellants deliberately slowed the remediation process; (4) that the Litgo Appellants, unlike the other PRPs, stood to benefit from the remediation; and (5) that the United States Appellees exercised reasonable care in hiring a reputable contractor to transport the waste. They also claim that the District Court should have found that the United States Appellees did not cooperate with NJDEP’s cleanup of the JANR warehouse. costs, and sometimes choose to do so. See, e.g., United States v. Davis, 261 F.3d 1, 16 (1st Cir. 2001) (describing three phases of a trial on a § 107(a) claim involving over 100 defendants). But CERCLA does not require courts to conduct a separate allocation hearing. See Acushnet Co. v. Mohasco Corp., 191 F.3d 69, 82 (1st Cir. 1999) (“CERCLA does not demand a bifurcated trial on this score, nor have we insisted that the many knotty issues that arise in the typical CERCLA action be resolved in any particular chronological order.”). Here, the Litgo Appellants did not even request a bifurcated trial—the United States Appellees did—and the District Court reasonably determined that separate proceedings were unnecessary in this case. 31 After carefully reviewing the record, we cannot conclude that any of these findings of fact was clearly erroneous. With respect to the faulty monitoring well, the United States Appellees’ expert testified that the cement seal that was supposed to be around the monitoring well “was missing, had degraded or crumbled, or maybe was never installed properly in the first place.” See App. 3663. From this testimony, the District Court could reasonably infer that some mistake had occurred during the installation process— either the seal was never secured properly, or it became loose over time because of the manner in which it was installed. There is also sufficient evidence to support the District Court’s finding that the Litgo Appellants did not receive a full set of preliminary test results and that the Sanzari Appellees did not disclose information about contamination at a nearby property. At trial, the Litgo Appellants introduced an April 1989 letter from Sanzari’s attorney to Goldstein’s attorney. The letter included information about some of the contaminants on the Property but omitted information about VOCs, including TCE. See App. 6192. Although the Sanzari Appellees argue that the relevant information may have been provided shortly thereafter, at a time when Goldstein still had the opportunity to back out of the transaction, the District Court was not required to so find. The Litgo Appellants also presented evidence at trial showing that there was contamination at a well close to the Property that the Sanzari Appellees were aware of, but did not disclose. See App. 5346 (letter to Sanzari from Ken Hortsman stating that he had instructed the environmental consultant not to include information about the alleged existence of groundwater contamination in Bridgewater, New Jersey in his report to NJDEP); App. 4142–46 (testimony regarding the 32 contamination of the nearby property and the Hortsman letter). Again, while the Sanzari Appellees dispute the inferences that may be drawn from these communications and testimony, it was not clear error for the District Court to rely on them. The record also supports the District Court’s finding that the Litgo Appellants deliberately slowed the remediation process. For example, Goldstein’s deposition testimony, used at trial for impeachment purposes, suggests that he instructed the consultants to slow down the groundwater investigation: [Q:] You’re saying that [the consultant] recommended to you that you should stall the DEP? [A:] No. No professional would ever recommend to stall. He felt that we should do what the DEP is saying we should do, but not— not as fast as they’re looking for, but don’t stall. I mean, you know, I don’t think any professional would ever stall the DEP. ... [Q:] Well, wasn’t he actually recommending to you that you offer as a more aggressive approach to delineate the groundwater in the southeast and propose a mediation technique for— ... [A:] I told him that I was not interested at this point in doing and learning how bad this thing 33 is going to be because he was talking astronomical numbers and we should just not get boxed in to where it may cost me five or six million dollars. See App. 1416; see also App. 1418 (Goldstein wanted to “go very slowly” because the contamination “could be a monstrous thing”). The District Court reasonably found that “groundwater contamination continues to migrate downstream,” and so the Litgo Appellants’ “lack of action over the past twenty years may well have increased the threat to the environment and public health.” App. 126; see also App. 2175–76 (plumes are continuing to migrate). Nor was the District Court’s determination that the Litgo Appellants were the only parties that stood to benefit from the remediation clearly erroneous. Because of the contamination, the Litgo Property is currently unusable and cannot be developed. If the land could be developed after remediation, it would increase its value, and the Litgo Appellants are the only parties that stand to benefit from such an increase. See Alcan-Toyo Am., Inc., 881 F. Supp. at 347 (finding that the current owner was the only party that would “reap the benefits of the environmental cleanup of its property,” and so it should bear a portion of the costs). The District Court’s findings with respect to the United States Appellees were also supported by the record. The Litgo Appellants and Sanzari Appellees claim there was insufficient evidence to show that the United States Appellees exercised reasonable care in disposing of waste. They argue that the only evidence supporting the Court’s finding was testimony from an NJDEP witness, who stated that NJDEP believed at the time that RTS, the contractor the United States 34 Appellees used, was reputable. This testimony suffices. NJDEP’s testimony as to its own views about the contractor could support an inference that the contractor had a good reputation at that time. Finally, the record does not mandate a finding that the United States Appellees failed to cooperate with NJDEP in cleaning up the JANR warehouse. As the District Court explained, NJDEP contacted the United States Appellees in an attempt to identify the source of the contaminants in the warehouse, but there was no testimony suggesting that NJDEP ever asked or expected the United States Appellees to help remove the hazardous substances at that time. Thus, the District Court reasonably concluded that the United States Appellees did not “fail to cooperate” with NJDEP. The Litgo Appellants and the Sanzari Appellees assert further challenges both to the particular factors considered by the District Court and the weight given to each. CERCLA does not specify which factors courts must consider in allocating costs among responsible parties; instead, it provides that, “[i]n resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate.” 42 U.S.C. § 9613(f) (emphasis added). This provision affords district courts tremendous discretion. As we have previously explained, “[c]ourts examining this language and its history have concluded that Congress intended to grant the district courts significant flexibility in determining equitable allocations of response costs, without requiring the courts to prioritize, much less consider, any specific factor.” Beazer E., 412 F.3d at 446. Some of the factors frequently considered by courts, taken from an unsuccessful amendment to CERCLA, are 35 known as the “Gore factors.” See Matter of Bell Petroleum Servs., Inc., 3 F.3d 889, 899 (5th Cir. 1993). They include: (i) the ability of the parties to demonstrate that their contribution to a discharge, release or disposal of a hazardous waste can be distinguished; (ii) the amount of the hazardous waste involved; (iii) the degree of toxicity of the hazardous waste involved; (iv) the degree of involvement by the parties in the generation, transportation, treatment, storage, or disposal of the hazardous waste; (v) the degree of care exercised by the parties with respect to the hazardous waste concerned, taking into account the characteristics of such hazardous waste; and (vi) the degree of cooperation by the parties with the Federal, State or local officials to prevent any harm to the public health or the environment. Id. at 899–900 (internal alteration omitted); United States v. Kramer, 644 F. Supp. 2d 479, 493 n.13 (D.N.J. 2008). Courts are not, however, bound to consider each of the Gore factors, nor are they limited to considering only the 36 Gore factors. Beazer E., 412 F.3d at 446; Envtl. Transp. Sys., Inc. v. ENSCO, Inc., 969 F.2d 503, 507 (7th Cir. 1992) (§ 9613(f) “does not limit courts to any particular list of factors, nor does the section direct the courts to employ any particular test”). Nevertheless, both the Litgo Appellants and the Sanzari Appellees argue that the District Court should have given more weight to the fact that the United States Appellees were the only identified generators of waste, and the fact that the Litgo Appellants and the Sanzari Appellees did not contribute anything to the contamination. They also claim that the District Court erred in failing to take into consideration the United States Appellees’ business relationship with Columbia Aircraft. The Court thoroughly compared the role the United States Appellees played in the contamination with that of the Litgo Appellants and the Sanzari Appellees—parties whose active concealment or resistance to remediation may have worsened the conditions at the Litgo Property. The United States Appellees arranged for hazardous waste to be disposed of by what was then considered to be a reputable contractor, and the waste reached the JANR warehouse only because of third-party actors. Nor did the Court abuse its discretion in declining to consider the United States Appellees’ relationship with Columbia Aircraft in the 1940s. The District Court found that it would be “inappropriate” to assign the United States Appellees additional costs based on conduct that would not subject them to CERCLA liability. The Litgo Appellants and Sanzari Appellees argue that courts have broad discretion in considering equitable factors when allocating responsibility, and these factors could include both the fact that the United States Appellees leased Columbia Aircraft equipment and the 37 fact that Columbia Aircraft was assisting with the war effort. See, e.g., United States v. Shell Oil Co., 294 F.3d 1045, 1060 (9th Cir. 2002). Although the United States Appellees’ relationship with Columbia Aircraft may be a factor that the Court could have considered in allocating costs, the decision not to take that factor into account was well within the Court’s discretion, and is not reversible error. The Litgo Appellants and the Sanzari Appellees also challenge the significant size of their own shares of responsibility, given that they were deemed PRPs as owners and operators, rather than as parties directly involved in the disposal of waste. As the Litgo Appellants point out, it may be unusual for an owner or operator who played no role in the discharge to be allocated such a large percentage of the costs. See, e.g., Am. Color & Chem. Corp., 918 F. Supp. at 959–60 (0% to current owner); Bedford Affiliates, 156 F.3d at 430 (5% to current owner); Alcan-Toyo Am., Inc., 881 F. Supp. at 346–47 (10% to current owner). In most of the cases they cite, however, the current owners did not take steps to delay the remediation process, or to conceal the contamination problem. Compare Am. Color & Chem. Corp., 918 F. Supp. at 959–60 (owner did not contribute to release and fully cooperated with state and local officials), with Bedford Affiliates, 156 F.3d at 430 (fact that owner delayed cleanup served as an “independent basis for imposing some liability”). And perhaps more importantly, in each of these cases, one of the PRPs was directly responsible for the release or discharge of waste, so it was reasonable to allocate a substantial portion of the costs to that party. See Am. Color & Chem. Corp., 918 F. Supp. at 948, 959–60 (party whose activities resulted in the discharge of waste held fully responsible); Bedford Affiliates, 156 F.3d at 422, 430 (party at fault assigned 95% of the 38 responsibility); Alcan-Toyo Am., Inc., 881 F. Supp. at 345, 347 (companies that deposited coal tar at site held responsible for 90% of future costs). Here, the most responsible parties— Columbia Aircraft, Signo, JANR, and NJDEP—either were not joined as parties in the suit, or could not be sued under CERCLA. 11 Thus, the unavailability of the most responsible parties accounts for the relatively high allocations assigned to the Litgo Appellants and the Sanzari Appellees. The Sanzari Appellees raise several additional equitable claims, which require only brief discussion. First, they claim that the Court should have taken into account the settlement agreements that Goldstein reached with two other parties—Dande Plastics and Wausau Insurance—during the 1996 proceedings. See K.C.1986 Ltd. P’ship v. Reade Mfg., 472 F.3d 1009, 1017–18 (8th Cir. 2007) (stating that courts should generally take settlements into account to avoid duplicate recovery). Although the Court did not rely on the settlement agreement in determining the Litgo Appellants’ allocation of responsibility, it did deduct the amount that the Litgo Appellants had received in these settlements from the total remediation costs, which avoided the problem of duplicate recovery. Second, the Sanzari Appellees claim that the District Court should have considered prior litigation positions taken by Goldstein in its suit against EWMA. The Sanzari Appellees contend that Goldstein’s allegations of negligence 11 The NJDEP Commissioner was immune from suit under the Eleventh Amendment, Columbia Aircraft was defunct long before the suit began, and the parties do not explain why Signo and JANR were not joined. 39 and substandard services were essentially admissions that the Litgo Appellants paid too much for the remedial services that they received, and the District Court should have taken those admissions into account. The Sanzari Appellees point to no case law suggesting that courts are required to take prior inconsistent positions into account in allocating remediation costs. See Alcan-Toyo Am., Inc., 881 F. Supp. at 346–47 (explaining that “estoppel . . . may be considered in the allocation of contribution shares” (emphasis added)). In any event, the Sanzari Appellees ignore that the District Court did take into account the Litgo Appellants’ prior allegations against its own consultant in its damages determination. Third, the Sanzari Appellees claim that the District Court failed to fully account for the nature of the Sales Agreement between Sanzari and Goldstein. Pursuant to the Sales Agreement, Goldstein agreed to assume Sanzari’s environmental obligations, and he was assigned the right to pursue claims against Sanzari’s former tenants and others. He used the assignment to pursue Sanzari’s insurer, Sanzari’s environmental consultants, and Dande Plastics in the 1996 litigation. A review of the record shows, however, that the District Court did give weight to Goldstein’s assumption of risk when it assigned the Litgo Appellants 70% of the remediation costs. It also took into account Sanzari’s failure to disclose relevant information to Goldstein before he chose to assume that risk. The District Court’s balancing of these two factors was not an abuse of discretion.12 12 We further note that, contrary to the Litgo Appellants’ and Sanzari Appellees’ contentions, there is nothing inconsistent about the District Court’s finding that, although Sanzari failed to disclose all relevant information 40 Finally, the Sanzari Appellees contend that the District Court erred in holding them responsible for the costs of soil remediation, in addition to the costs of groundwater remediation. The Sanzari Appellees argue that they were candid with the Litgo Appellants about the possibility of soil contamination. They also claim that, even if they were responsible for the installation of a faulty well, that defect would have only increased groundwater—not soil— contamination. The District Court addressed these arguments in its opinion on the motions for reconsideration. It explained that it “had taken this argument into consideration as one of the factors in its decision to reduce the Sanzari Appellees’ final allocation to 27%,” but that it did not believe that it was necessary to separate the costs. Sanzari’s failure to disclose had consequences that extended beyond responsibility for the groundwater contamination alone, and the Court did not clearly err in holding the Sanzari Appellees responsible for part of the costs of soil remediation.