Opinion ID: 770612
Heading Depth: 3
Heading Rank: 3

Heading: Appellants' CERCLA Claim (Count III) and Spill Act Claim (Count IV)

Text: 68 Count III of the amended complaint asserts a claim for damages and injunctive and declaratory relief pursuant to CERCLA, and count IV seeks the same relief pursuant to the Spill Act. As previously mentioned, the district court dismissed the CERCLA claim, reasoning that appellants had not incurred any compensable necessary costs of response pursuant to section 107(a)(4)(B) of CERCLA. See 42 U.S.C. S 9607(a)(4)(B). In particular, the court explained that the only costs that appellants claimed to have incurred were the fees they paid to their environmental consultant, ESI. The district court found that those fees were not recoverable under CERCLA because they had nothing to do with any effort by plaintiffs to detoxify the Property or to prevent or minimize the release of hazardous substances. App. at 14a (emphasis added). The district court explained that the fees were not recoverable because ESI merely reviewed the quarterly reports that Essex submitted to appellants and the DEP; ESI never visited the Property, monitored the contamination or the cleanup of the Property, or gathered data related to the investigation or remediation of the Property. The district court stated that ESI's fees are those of an ordinary expert witness: the fees represent litigation costs, not environmental monitoring costs. App. at 15a. Similarly, the court dismissed appellants' Spill Act claim seeking to recover ESI's fees because the fees are unrelated to any prevention, mitigation, or remediation of contamination on the Property. App. at 14a. 69 The district court also denied appellants' request for a declaration that Essex is liable to appellants for any future costs pursuant to CERCLA or the Spill Act. The court stated that [p]laintiffs have utterly failed to make any showing that they are likely to incur any future costs that will be recoverable under CERCLA or the Spill Act. Indeed, it is undisputed that Essex is contractually obligated to remediate the Property at its own expense. App. at 15a. Inasmuch as there was no evidence--or even an allegation -- that the plaintiffs intend to participate in future clean-up activities or incur any costs that might be recoverable under CERCLA, the court concluded that granting declaratory relief would be inappropriate. 70 Finally, the court denied appellants' request for an injunction compelling Essex to commence and complete the cleanup on the basis that there was no present case or controversy. The court reasoned that [t]here is no dispute that Essex is under both a contractual and statutory duty to detoxify the Property; nor is there any dispute that Essex has worked continuously to remediate the Property. The court further explained that [i]n the absence of evidence that Essex has breached the Agreement or violated CERCLA or IRSA, there is no basis for the injunction that plaintiffs seek. App. at 16a. 71 On appeal from the CERCLA and Spill Act dispositions, appellants primarily claim that the district court erred in dismissing their CERCLA claim for monetary relief. 11 While appellants have not set forth their CERCLA argument in any detail, we understand they predicate it on a belief that they are entitled to recover the amounts paid to appellants' environmental consultant, ESI, as necessary costs of response pursuant to section 107(a) of CERCLA, because those oversight costs fall within the scope of either removal or remedial action as defined by section 101 of CERCLA, 42 U.S.C. S 9601(23), (24). See generally br. at 53 (citing United States v. Lowe, 118 F.3d 399, 401-02 (5th Cir. 1997), which held, contrary to our decision in United States v. Rohm and Haas Co., 2 F.3d 1265 (3d Cir. 1993), that EPA's costs incurred in oversight of the private party cleanup of site were compensable response costs pursuant to section 107(a) of CERCLA). Appellants state that the court erred in finding that ESI's fees were those of an ordinary expert witness, inasmuch asan `expert witness' is clearly required only in the context of litigation while, by contrast, Plaintiffs have been forced to retain and utilize the expertise of ESI, an environmental consultant, for the past fifteen years due to the lack of progress made by Essex with respect to the Property's `detoxification.'  Br. at 53. 72 Appellants' argument thus raises the issue of whether ESI's fees are necessary costs of response for which appellants, as private parties, may recover in a suit pursuant to section 107(a)(4)(B) against Essex, the party indisputably responsible for the cleanup of the Property pursuant to the Clean-Up Plan approved by the DEP. To answer that question, we must ascertain the character of the costs in question, and determine whether they fall within the types of costs recoverable by an innocent party pursuant to section 107(a)(4)(B) of CERCLA. 73 We begin with the relevant statutory language. Section 107 of CERCLA, 42 U.S.C. S 9607(a)(4), provides that certain enumerated parties shall be liable for .. . all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; [and] . . . any other necessary costs of response incurred by any other person consistent with the national contingency plan. . . . The statute defines response as remove, removal, remedy, and remedial action, and states that these terms include enforcement activities related thereto. See CERCLA section 101(25), 42 U.S.C. S 9601(25). It then defines remove or removal and remedy or remedial action as follows: 74 (23) The terms `remove' or `removal' means [sic] the cleanup or removal of released hazardous substances from the environment, such actions as may be necessary taken in the event of the threat of release of hazardous substances into the environment, such actions as may be necessary to monitor, assess, and evaluate the release or threat of release of hazardous substances, the disposal of removed material, or the taking of such other actions as may be necessary to prevent, minimize, or mitigate damage to the public health or welfare or to the environment, which may otherwise result from a release or threat of release. The term includes, in addition, without being limited to, security fencing or other measures to limit access, provision of alternative water supplies, temporary evacuation and housing of threatened individuals not otherwise provided for, action taken under section 9604(b) of this title, and any emergency assistance which may be provided under the Disaster Relief and Emergency Assistance Act. . . . 75 (24) The terms `remedy' or `remedial action' means [sic] those actions consistent with permanent remedy taken instead of or in addition to removal actions in the event of a release or threatened release of a hazardous substance into the environment, to prevent or minimize the release of hazardous substances so that they do not migrate to cause substantial danger to present or future public health or welfare or the environment. The term includes, but is not limited to, such actions at the location of the release as storage, confinement, perimeter protection using dikes, trenches, or ditches, clay cover, neutralization, cleanup of released hazardous substances and associated contaminated materials, recycling or reuse, diversion, destruction, segregation of reactive wastes, dredging or excavations, repair or replacement of leaking containers, collection of leachate and runoff, onsite treatment or incineration, provision of alternative water supplies, and any monitoring reasonably required to assure that such actions protect the public health and welfare and the environment. The term includes the costs of permanent relocation of residents and businesses and community facilities where the President determines that, alone or in combination with other measures, such relocation is more cost-effective than and environmentally preferable to the transportation, storage, treatment, destruction, or secure disposition offsite of hazardous substances, or may otherwise be necessary to protect the public health or welfare; the term includes offsite transport and offsite storage, treatment, destruction, or secure disposition of hazardous substances and associated contaminated materials. 76 Section 101(23)(24), 42 U.S.C. S 9601(23), (24) (footnotes omitted). 77 As we explained in United States v. Rohm and Haas Co., [i]n general, removal actions are short term responses to a release or threat of release while remedial actions involve long term remedies. 2 F.3d at 1271. Here, while appellants fail to recognize explicitly the distinction between removal and remedial actions and do not attempt to place ESI's consultant fees in either category, given the character of the costs at issue we believe that if the activities involved here are included within the definition of response costs, it is because they are removal rather than remedial actions. Cf. id. (noting that the parties agreed that if the government's oversight activities were deemed necessary costs of response, it would be because they were removal actions rather than remedial actions). 78 Although the district court believed that ESI's consulting fees are best characterized as those of an ordinary expert witness, appellants contest that statement by indicating rather cryptically in their brief that ESI has been appellants' environmental consultant for fifteen years with respect to the Property's `detoxification,'  and therefore contend that we cannot consider ESI to be an expert witness retained only for litigation purposes. While appellants fail to cite an applicable portion of the record in support of that statement, our review of the parties' submissions confirms that Cohen testified at his deposition that appellants had retained ESI as a consultant as early as 1987 or 1988. See SA at 527. 79 Nevertheless, based on our study of the record, exercising plenary review we conclude that the district court did not err in concluding that ESI's consulting fees for which appellants seek reimbursement were litigation-related expenses. Inasmuch as private parties may not recoup litigation-related expenses in an action to recover response costs pursuant to section 107(a)(4)(B) of CERCLA, see Key Tronic Corp. v. United States, 511 U.S. 809, 819-20, 114 S.Ct. 1960, 1967 (1994); Redland Soccer Club, Inc. v. Department of the Army, 55 F.3d 827, 850 (3d Cir. 1995), and appellants do not claim to have incurred any other costs which fall within the definition of necessary costs of response, we agree with the district court's disposition of the CERCLA claim. 80 In Redland Soccer Club, we determined that the Redland plaintiffs' litigation costs, which included attorney's fees, health risk assessments and expert witness fees, were not response costs under any of the statutory definitions found in section 9601 of CERCLA. 55 F.3d at 849-50 & n.12 (citing, inter alia, Key Tronic Corp., 511 U.S. at 819, 114 S.Ct. at 1967, which held that litigation-related attorney's fees were not recoverable in a private response cost recovery action). In reaching our result, we first observed that under section [107], plaintiffs may only recover response costs which are necessary and consistent with the [National Contingency Plan]. Id. at 850. Second, we found that [t]he heart of these definitions of removal and remedy are `directed at containing and cleaning up hazardous releases.' . . . [T]herefore[,] . . . `necessary costs of response' must be necessary to the containment and cleanup of hazardous releases. Id. (quoting United States v. Hardage, 982 F.2d 1436, 1448 (10th Cir. 1992) (alteration in original) (internal quotation marks omitted)). Given that the costs incurred were all litigation-related expenses unrelated to any remedial or response action at the property itself, we stated that we do not believe the district court erred in determining that plaintiffs' costs are not response costs because they are not `monies . . . expended to clean up sites or to prevent further releases of hazardous chemicals.'  Id. (quoting Redland Soccer Club, Inc. v. Department of Army, 801 F. Supp. 1432, 1435 (M.D. Pa. 1992), aff'd in relevant part, 55 F.3d 827 (3d Cir. 1995)). 81 Here, as in Redland, the record required the district court to reach its conclusion that the costs for which the parties involved were seeking reimbursement were litigation-related expenses, and thus do not fall within the definition of necessary costs of response. We first point out that, notwithstanding appellants' use of ESI's services prior to the commencement of this litigation, the billing statements that appellants submitted as proof of the amounts expended for ESI's service were for consulting fees. Importantly, the billing statements cover services that ESI rendered in connection with the Property intermittently from November 1996 to May 1998. See SA at 1-17. Obviously, inasmuch as appellants filed their complaint in the district court in March 1997, appellants are seeking reimbursement for consulting services rendered just prior to the time that they commenced this litigation, as well as reimbursement for services during the duration of the proceedings in the district court. The timing of the transactions demonstrates that the district court correctly concluded that ESI performed consulting services in anticipation of appellants instituting this litigation, and also performed consulting work during the pendency of this litigation. 82 In this connection, we find it significant that Cohen prepared an expert report for purposes of this litigation on behalf of ESI for appellants dated April 28, 1998, see app. at 412a, and that ESI correspondingly recorded a significant charge on its billing statement to USLR for that billing period. See SA at 13. The only reasonable inference we can draw from these circumstances is that the consulting fee that appellants paid to ESI for that time period represented, at least in significant part, ESI's payment for its preparation of the expert report. 83 Second, we note that the record reflects, and it is not disputed, that as appellants' environmental consultant, ESI's responsibilities were limited to reviewing Essex's quarterly reports it submitted to the DEP, and to providing appellants with a summary or analysis of Essex's progress in completing its remediation and detoxification efforts in accordance with the approved Clean-Up Plan. See app. at 466a; see also SA at 527. Indeed, ESI was not involved in Essex's cleanup effort; it neither performed an investigation of the Property nor gathered data for that purpose. In our view, the nature of Essex's responsibilities toward its clients as described in the record thus confirms that it was retained to assess, for litigation purposes, whether Essex was complying with its contractual responsibility to cleanup the Property pursuant to the requirements set out in the Clean-Up Plan. 84 Moreover, it is relevant to our analysis that Berger's deposition testimony, as appellants' designated Rule 30(b)(6) witness, is far from illuminating on the necessary costs of response issue. Contrary to the spirit of Rule 30(b)(6), Berger's evasive answers provide us with little assistance in determining the exact purpose for which appellants retained ESI, the nature of ESI's services that are referenced cryptically in the billing invoices in the record, and whether the costs incurred in relation thereto were the result of litigation-related consultation or were incurred in connection with work performed for some other purpose. Berger's responses clearly do not suggest that ESI's consulting fees were anything other than expenses incurred in connection with the lawsuit that appellants eventually might file if they were not satisfied with Essex's progress (and ultimately did file) against appellees. We only need cite the following colloquy between Essex's counsel and Berger, which occurred at his deposition, to illustrate our point: 85 Q: [Referring to the invoices for ESI] Mr. Berger, have you ever seen those bills before? 86 A. I have no idea. 87 Q. Well, then look through them. 88 A. I could look through them for the next five hours and I would have no idea. We've 90 properties. I get bills from people. There are bills going into 1997 and before. I have no idea whether I have ever seen these bills or any other bills you might put in front of me today. 89 Q. Mr. Berger, other than the charges represented in those bills, are there any other costs that have been expended by any plaintiff for any environmental consulting or removal or remediation with respect to the Black Horse Lane property? 90 A. I have no idea. 91 Q. Do you know a man named Mr. Irving Cohen? 92 A. Yes. 93 Q. How long have you known him? 94 A. I would say about ten years. 95 Q. And in what capacity do you know him? A. Mr. Cohen was the president of Enviro-Sciences. It's an environmental consulting firm. 96 Q. Has that firm ever been used by [appellant] Black Horse Lane Associates? 97 A. I have no idea. 98 Q. Looking through the exhibits, if you could, could you tell me whether those bills appear to indicate that such was the case? 99 A. These bills are--at least the ones that I can see here --are from Enviro-Sciences, Inc. They reference Essex Chem, and I will tell you that every one references Essex Chem, except for those that reference Black Horse Lane, which is the subject property of this lawsuit. Other than that, I can't tell you anything about these bills. All I'm doing is reading from the bills for you. 100 Q. Turn to the bills that talk about Black Horse Lane, Phase One, I believe. 101 A. There's a bill dated 10-16-97 that says `Phase One, Black Horse Lane.' 102 Q. All right. To what does that bill refer? 103 A. I don't understand the question. 104 Q. What does Phase One, Black Horse Lane refer to? 105 A. I have no idea. 106 Q. Did you ever order a Phase One on Black Horse Lane? 107 A. I have no idea. 108 Q. Do you have an understanding what the phrase `Phase One' means? 109 A. Yes, I do. 110 Q. What is that? 111 A. It's a preliminary environmental report which basically points out areas of potential environmental concern. 112 Q. Does it include any invasive testing, as far as you know? 113 A. Typically, no. 114 Q. Do you have any idea why Black Horse Lane would have ordered a Phase One at or about the time period for which the bill is indicated? 115 A. Sitting here today, I have no idea why we did or didn't. I suspect if we did, in fact, order one a year ago, at that point I had a reason for it, but I don't know what that reason would be sitting here today. If, in fact, we did order a Phase One. I don't recall that either. 116 App. at 544a. Our review of the remainder of Berger's deposition testimony regarding the nature of ESI's consulting work for appellants confirms that he failed to offer any useful information concerning the factual basis for appellants' CERCLA response cost claim relating to the fees paid for ESI's services. See generally app. at 544a-49a. 117 Given the totality of the information in the record, we agree with the district court's assessment of the nature of ESI's consulting responsibilities to its client during the time period for which appellants seek reimbursement. We believe that the record requires the conclusion that ESI's work was designed to assess, for potential or actual litigation purposes, the extent of Essex's remediation efforts and its progress in that regard. Accordingly, ESI's consulting fees charged in connection with its services are not response costs that are recoverable in a private cost recovery suit pursuant to section 107(a)(4)(B) of CERCLA. 12 118 In any event, assuming arguendo that we were to accept appellants' position that ESI's consulting fees were not for strictly litigation costs in the sense that appellants retained ESI's services during the relevant time period solely to assist them in preparing to litigate this matter, we nevertheless would reach the result we do, primarily for two reasons. First, appellants cannot reasonably deny that the record demonstrates that ESI's role was limited to evaluating Essex's progress on the cleanup effort and to reporting its progress (or lack thereof) to appellants. Indeed, it is significant that neither appellants nor ESI have played any role in the containment and cleanup of the Property. At best, it appears that ESI served as appellants' environmental advisor in relation to the Property, and that appellants simply monitored, for their own benefit, Essex's progress in its cleanup efforts. Given that neither ESI nor appellants were involved in any capacity in the actual environmental cleanup of the Property, it is clear that the fees appellants paid in connection with ESI's consulting work did not relate to any remedial or response action at the Property. As in Redland, the funds for which appellants seek reimbursement were not necessary to the containment and clean up of hazardous releases, see Redland, 55 F.3d at 850 (emphasis added), inasmuch as appellants simply had no involvement in any remedial or removal actions on the Property. Cf. Key Tronic Corp., 511 U.S. at 820, 114 S.Ct. at 1967 (stating that some lawyers' work that is closely tied to the actual cleanup may constitute a necessary cost of response in and of itself under the terms of S 104(a)(4)(B), and finding that the component of claim that covers attorneys' work in identifying other potentially responsible parties fell within that category). 119 Second, inasmuch as ESI's role was limited to reviewing the manner in which Essex was performing its legal obligation to remediate the Property and reporting Essex's progress to appellants, we think it fair to characterize ESI as an overseer of Essex's progress on behalf of appellants. But our decision in Rohm & Haas precludes appellants from recovering such oversight costs asresponse costs pursuant to section 107(a)(4)(B) of CERCLA. In Rohm & Haas, we held that the EPA could not recover from the statutory responsible party the cost of its oversight of the remedial actions performed and paid for by the private party. See 2 F.3d at 1278. The oversight costs the EPA incurred there included direct costs (i.e. , hiring contractors to provide sampling support and field investigation) and indirect costs (i.e., travel costs, payroll, hiring contractors to review [defendants'] work). Id. at 1269 n.4 (emphasis added). We stated that the key issue was whether CERCLA's definition of removal should be read to encompass the government's activity in overseeing a removal or remedial action paid for and conducted by private parties. Id. at 1275. 120 In reaching our conclusion, we looked to the definition of removal found in section 101(23) of CERCLA, and noted that [n]owhere in the definition of removal is there an explicit reference to oversight of activities conducted and paid for by a private party. Id. at 1275. Moreover, we reviewed the five categories in the definition of removal, with particular focus on the third of the five, i.e., such actions as may be necessary to monitor, assess, and evaluate the release or threat of release of hazardous substances, as the EPA argued that it was that aspect of the definition that applied to permit recovery of the oversight costs it sought. In analyzing this language, we rejected the EPA's argument that it supported the relief requested, explaining our holding as follows: 121 Examined in a vacuum, this language could be understood to encompass at least some oversight of the activities of a private party, particularly private activities focusing on assessment of the risk. On the other hand, it is at least as plausible to read this language as referring only to actual monitoring of a release or threat of release rather than oversight of the monitoring and assessment activities of others. This latter reading would be consistent with an understanding of the definition that distinguishes at all stages--assessment, response formulation, and execution--between actions taken to define the scope of the risk created by a release or threatened release and actions taken to evaluate the performance of others to determine whether they are meeting their legal obligations. We believe a reading of the statutory definition that embraces this distinction is linguistically the more plausible one. 122 Id. at 1275-76. We further concluded that[a]ll things considered, we cannot say that clause [3] of the removal definition is sufficient to constitute the clear statement of intent required by [National Cable Television Ass'n, Inc. v. United States, 415 U.S. 336, 342, 94 S.Ct. 1146, 1149-50 (1974) (NCTA)]. 13 Id. at 1276. 123 Our interpretation of the removal definition as excluding the sort of oversight costs that the EPA sought in Rohm & Haas compels the conclusion that appellants cannot recover the funds paid to ESI for its consultant work, even though appellants are private entities rather than a governmental agency. As in Rohm & Haas, appellants seek reimbursement from Essex, the responsible party, for costs appellants incurred in monitoring the responsible party's compliance with its legal obligations. See Rohm & Haas, 2 F.3d at 1279 n.23 (The oversight costs here held to be non-recoverable are incurred at a different level of supervision. They are the costs of overseeing the performance of the entity that has assumed responsibility for the cleanup.). Indeed, there is no dispute in this case that Essex is bound contractually to complete remediation and detoxification of the Property, and that appellants have not assisted Essex in meeting its statutory and contractual obligations. In this sense, then, the district court was correct in its observation that the costs for which appellants seek reimbursement were not incurred as a result of appellants' actions in cleaning up the Property. 124 Obviously then, inasmuch as our holding in Rohm & Haas precludes the EPA from seeking reimbursement for oversight costs incurred in overseeing the performance of a private entity where a private party has assumed responsibility for the cleanup, an analysis of the scope of the removal definition necessarily requires us to reach the same result in a situation where a private party seeks reimbursement for overseeing another private party's legal obligation to cleanup a property. In short, we are satisfied that Congress did not intend section 107(a)(4)(B) to provide a private party with a cause of action against a responsible party for reimbursement of the party's expenses in retaining an environmental consultant for oversight purposes without direct involvement in the responsible party's remediation and detoxification efforts. 125 In sum, we are convinced that the district court correctly determined that appellants could not recover, pursuant to section 107(a)(4)(B) of CERCLA, the monies they expended in consulting fees in connection with ESI's services during the relevant time period. We will affirm the district court's dismissal of appellants' private cost recovery action pleaded in count III of the amended complaint. 14 126