Opinion ID: 595491
Heading Depth: 2
Heading Rank: 2

Heading: CERCLA Jurisdiction

Text: 22 The district court did not need to rely solely on its supplemental jurisdiction to approve the settlement, because additional authority arises from CERCLA's jurisdictional grant vesting the power in all district courts to approve agreements compromising potential CERCLA claims asserted by the government. CERCLA's jurisdictional provision broadly states, the United States district courts shall have exclusive original jurisdiction over all controversies arising under [CERCLA]. 42 U.S.C. § 9613(b) (1988). This original grant remains in full force even when the government has already begun an action against other parties in a different district. 23 Exclusive jurisdiction like that established in § 9613 preempts all other types of courts from hearing certain matters but permits any court of the specified type to exercise jurisdiction. See 1A Moore's Federal Practice p 0.201 (2d ed. 1991). Contrary to Publicker's contentions, § 9613's grant of exclusive jurisdiction does not limit jurisdiction to a single district court. The exclusive jurisdictional grant to the district courts means only that no court other than a federal district court may hear and determine CERCLA controversies. The limitation is not to be read to require that once a CERCLA action has been commenced in one district court any subsequent matter relating to it must be resolved only in that same district court. Cf. In re Chateaugay Corp., 944 F.2d 997, 999 (2d Cir.1991) (environmental actions from all 50 states reviewed by single district court in bankruptcy action). 24 When Congress has sought to restrict not simply the kind of court in which an action may be brought but also the specific court that may hear such action, it has done so explicitly. See, e.g., 28 U.S.C. § 1334(d) (1988) (The district court in which a case under title 11 is commenced or is pending shall have exclusive jurisdiction of all of the property, wherever located....); 26 U.S.C. § 7428 (1988) (declaratory judgment action in certain tax cases must be brought in United States Tax Court, United States Claims Court, or United States District Court for the District of Columbia); 28 U.S.C. § 1365 (1988) (Senate actions must be brought in United States District Court for the District of Columbia). 25 Absent an express restriction set forth in CERCLA or a clearly stated legislative purpose limiting the statute's plain meaning, a judicial limitation on § 9613's jurisdictional grant would be an unwarranted judicial intrusion into a matter confided to Congress. Cf. Union Bank v. Wolas, --- U.S. ----, ----, 112 S.Ct. 527, 531, 116 L.Ed.2d 514 (1991). The legislative history cited by Publicker is inapposite. It simply supports the proposition that judicial review of settlements under CERCLA is desirable to ensure good faith negotiations and fairness to other defendants and the public; it does not purport to restrict the district courts' jurisdiction. See H.R.Rep. No. 253, 99th Cong., 2d Sess., pt. 1, at 59 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 2841 (importance of court review of consent decrees to protect public interest); H.R.Rep. No. 253, 99th Cong., 2d Sess., pt. 3, at 19 (1985), reprinted in 1986 U.S.C.C.A.N. 3038, 3042 (judicial approval required to prevent improper settlements). 26 Publicker unsuccessfully seeks comfort from 42 U.S.C. § 9622(d)(1)(A) (1988), regarding consent decrees for remedial cleanup actions, and 28 C.F.R. § 50.7 (1991), concerning Justice Department policy on consent judgments in actions to enjoin pollutant discharge. Section 9622(d)(1)(A) provides merely that remedial action consent decrees shall be entered in the appropriate United States district court, while § 50.7(b) declares the Justice Department's policy that pollution abatement agreements will be entered with the court. Those legislative and regulatory provisions provide little aid to Publicker's position. Further, they speak to inapposite situations. Pollution abatement and cleanup activities require ongoing court supervision. The present action deals only with the cost of a recovery and how it is to be shared, which does not implicate continuing judicial involvement. 27 As a consequence, jurisdiction to approve the settlement agreement was appropriately exercised by the district court based on CERCLA's general grant of jurisdiction to the district courts and on the court's jurisdiction over title 11 proceedings and related matters. II Transfer 28 Publicker next insists that even were the district court to have had jurisdiction to approve the settlement agreement, it should have transferred the matter--or at least the CERCLA portion--to the Eastern District of Pennsylvania, and that its failure to do so constituted reversible error under 28 U.S.C. § 1404 (1988). Section 1404(a) provides, in relevant part, For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. 29 As an initial matter, non-parties usually lack standing to challenge venue dispositions. See Trans World Airlines, Inc. v. Civil Aeronautics Bd., 339 F.2d 56, 63-64 (2d Cir.1964), cert. denied, 382 U.S. 842, 86 S.Ct. 40, 15 L.Ed.2d 82 (1965); 3B Moore's Federal Practice p 24.19 (1992). Even assuming Publicker had standing to dispute the government's choice of venue, it still failed to demonstrate an abuse of the trial court's discretion in refusing to make the requested transfer to the Eastern District of Pennsylvania. The reason is plain. The policy of conserving scarce judicial resources militates in favor of a versatile solution to this sort of legal problem, leaving latitude to the district courts for the exercise of their informed discretion. See Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183-84, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952) (emphasizing court's discretion in such matters); Calavo Growers of Cal. v. Belgium, 632 F.2d 963, 966 (2d Cir.1980) (noting district court's wide discretion), cert. denied, 451 U.S. 934, 101 S.Ct. 2012, 68 L.Ed.2d 321 (1981). 30 Publicker mounts its attack first by pointing out that the instant refusal ignored the policy favoring consolidation of related litigation. This challenge overlooks the fact that bankruptcy and environmental claims--which in this case were related--remained before the district court in New York. Thus, keeping the entire action in New York was consonant with the policy of consolidation. Appellant's second challenge focuses on the general rule that two competing but related disputes brought in different fora should be consolidated in the court in which the first action was brought. See, e.g., Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 790 (2d Cir.1986); William Gluckin & Co. v. International Playtex Corp., 407 F.2d 177, 178 (2d Cir.1969). This rule usually applies when identical or substantially similar parties and claims are present in both courts. See Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir.1978), cert. denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979). Its governance is more problematic here where there are separate and distinct parties and claims embraced in the Southern District of New York settlement from those present in the Eastern District of Pennsylvania. Further, it remains unclear whether the CERCLA cost recovery action was actually brought prior to the time when the settlement agreement compromised the CERCLA claim against Freedom Savings. Although the government's motion seeking approval of the compromise post-dated the filing of the cost recovery action against Publicker in Pennsylvania, the settlement agreement, its predecessor and the bankruptcy petition were all filed with the New York bankruptcy court several years before the Pennsylvania action commenced. 31 Publicker's challenge ultimately fails because the policy favoring consolidating related disputes is subject to the discretion of the trial court. See Kerotest, 342 U.S. at 183-84, 72 S.Ct. at 221; William Gluckin, 407 F.2d at 179. The rule that grants priority to the suit first filed is subject in this Circuit to an exception that looks to other special circumstances that would make granting priority to the suit filed second more appropriate. See Factors Etc., Inc., 579 F.2d at 218. Further, motions for transfer lie within the broad discretion of the district court and are determined upon notions of convenience and fairness on a case-by-case basis. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 2243, 101 L.Ed.2d 22 (1988). 32 Appellant suggests no inconvenience to the parties, nor any interests of justice that would impel the district court to take the extraordinary measures of severing the CERCLA claim from the bankruptcy claim and sending the cleanup cost recovery portion of the settlement to the Eastern District of Pennsylvania for approval. While the familiarity and expertise of the Pennsylvania court arguably might be indispensable were this case to concern remedial measures to take place at the site, the same cannot be said for a compromise as to the amount of money recovered for cleanup purposes, especially one, as here, against a non-party. Moreover, the strong bankruptcy code policy that favors centralized and efficient administration of all claims in the bankruptcy court, see In re Ionosphere Clubs, Inc., 922 F.2d 984, 989 (2d Cir.1990), cert. denied, --- U.S. ----, 112 S.Ct. 50, 116 L.Ed.2d 28 (1991); In re Manville Forest Prods. Corp., 896 F.2d 1384, 1391 (2d Cir.1990), outweighs any similar policy expression found under CERCLA. 33 Thus, we see no reason to disturb the exercise of the district court's discretion in refusing to transfer that portion of the settlement agreement compromising the CERCLA claim to the Eastern District of Pennsylvania. III Agreement 34 Publicker's remaining argument questions the approval of the settlement agreement on several substantive grounds. First, appellant asserts that the covenant not to sue is contrary to 42 U.S.C. § 9622(f) (1988), and that the provision releasing the bank and its receiver, the Resolution Trust Corporation, from natural resource damage liability violates § 9622(j). Second, Publicker contends the settlement is not fair, reasonable, or consistent with the goals of CERCLA since Freedom Savings and Resolution Trust should be jointly and severally liable for the site remediation costs. 35 With respect to the grounds first raised, Publicker has waived its opportunity to object. Both in its submission to the district court opposing the approval motion and in its reply papers, other than challenging the fairness and reasonableness of the settlement, appellant failed to raise any substantive objection to it. Although Publicker may have raised some of these arguments before the bankruptcy court, it joined in requesting that the approval motion be withdrawn from the bankruptcy court, and readily concedes the bankruptcy court's limited approval concerned only bankruptcy issues. Given the limited nature of the bankruptcy court's review and the full opportunity Publicker had to bring these objections to the district court's attention, we do not think it an injustice to refuse to review these issues on appeal. See Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 (1976); In re Grand Jury Proceedings (Kluger), 827 F.2d 868, 874 n. 4 (2d Cir.1987). 36 Turning to appellant's second contention, that the district court erred in finding the settlement fair, reasonable, and consistent with CERCLA's goals, we find the district court acted within its discretion. A district court reviewing CERCLA is required to rule on the fairness of any proposed settlement. See United States v. Cannons Eng'g, 899 F.2d 79, 84 (1st Cir.1990). Publicker insists that Freedom Bank should be held liable as an owner and/or operator of the site from February 13, 1987 until February 23, 1988, when it relinquished control of the property, and that the Resolution Trust Corporation should also be liable as the bank's successor. Essentially it declares the settlement is unfair and unreasonable because if it is found jointly and severally liable under CERCLA, Publicker will not be able to bring a contribution action under § 9613 against the bank or its receiver-successor. Cf. O'Neil v. Picillo, 883 F.2d 176, 178-79 (1st Cir.1989) (stressing that courts frequently hold responsible parties jointly and severally liable with little likelihood of contribution), cert. denied, 493 U.S. 1071, 110 S.Ct. 1115, 107 L.Ed.2d 1022 (1990). 37 We owe a twofold deference to the approved settlement. Appellate courts ordinarily defer to the agency's expertise and the voluntary agreement of the parties in proposing the settlement. See Chevron, U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-44, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984); Cannons, 899 F.2d at 84. Further deference is accorded by the reviewing court to the informed discretion of the trial court in approving the settlement. See United States v. Hooker Chems. & Plastics Corp., 776 F.2d 410, 411 (2d Cir.1985); United States v. AKZO Coatings of Am., Inc., 949 F.2d 1409, 1424 (6th Cir.1991). The usual deference given the EPA coupled with the abuse of discretion standard for reviewing the district court's action in approving a settlement precludes upsetting the appealed-from order unless Publicker is able to point to an error of judgment or law. Cf. AKZO, 949 F.2d at 1425-26 (applying arbitrary and capricious standard of review). Appellant has not made such a showing. 38 Considerable doubt is cast on Publicker's contention that Freedom Bank would be found liable as an owner or operator during its period of access to and control of the site in 1987 for several reasons. As an initial matter, the settlement's reopener provision minimizes any potential prejudice the settlement might have on Publicker. The agreement releases Freedom Bank from liability and provides for contribution protection based solely on the representations of fact made by the bank regarding its limited activity at the site. If the government discovers the bank's factual representations are false the covenant not to sue and the agreement's contribution protection provisions have no effect. 39 Moreover, and perhaps more significant in casting doubt, Freedom Savings may be exempt from CERCLA liability. While § 9607(a) imposes liability on certain owners and operators of facilities releasing hazardous substances, the Act exempts from the definition of owner or operator any person, who, without participating in the management of a vessel or facility, holds indicia of ownership primarily to protect his security interest in the vessel or facility. 42 U.S.C. § 9601(20)(A) (1988). Although this safe harbor provision provides some protection to secured creditors, no judicial consensus clearly defining its scope has evolved. See In re Bergsoe Metal Corp., 910 F.2d 668, 672 (9th Cir.1990) (noting that at minimum some actual management of facility by creditor must take place before provision becomes inapplicable); United States v. Fleet Factors Corp., 901 F.2d 1550, 1557-58 (11th Cir.1990) (noting that a secured creditor may be liable under § 9607(a) if its involvement with the management of the facility is sufficiently broad to support the inference that it could affect hazardous waste disposal decisions if it so chose), cert. denied, --- U.S. ----, 111 S.Ct. 752, 112 L.Ed.2d 772 (1991); United States v. Mirabile, [1985] 15 Envtl.L.Rep. (Envtl.L.Inst.) 20,994, 20,996 (E.D.Pa. Sept. 4, 1985) (attaching no liability when secured lender foreclosed on its collateral and merely took prudent measures to secure property against further depreciation). The EPA has suggested that permissible activities within § 9601(20)(A) include efforts by secured creditors to foreclose on the security, wind-up operations, liquidate or sell off assets, and otherwise act to recover the value of the security interest in a manner consistent with good commercial practice. 56 Fed.Reg. 28,798, 28,800 (June 24, 1991). 40 Based on the bank's actions--as it represented them in the settlement--we think the probability that Freedom Savings or the Resolution Trust could be held liable under CERCLA remains sufficiently remote to inhibit us from holding the district court abused its discretion in approving the settlement. Freedom Savings assumed control of the dormant facility pursuant to court order and contracted for the salvage and sale of certain materials and equipment only after obtaining court approval and direction. At least under the EPA's suggested interpretation of the secured lender exemption, the bank's actions would not constitute management participation thereby triggering § 9607(a) liability. 41 Without expressly deciding whether such activities constitute management participation under § 9601(20)(A), we believe it unlikely enough as to demonstrate the reasonableness of the government's compromise of its claim. Given the risk of recovery, the settlement not only protects the public interest but is fair towards other potentially responsible parties like Publicker. In the event Publicker is found jointly and severally liable, it will be relieved of liability to the extent of the government's recovery under the settlement. 42 It also remains unlikely that both the government and Publicker would be able to recover from Freedom Savings due to that institution's limited assets following insolvency and receivership on October 13, 1989. Because liability has not yet been fixed in the EPA's cost recovery action filed in December, 1990 against Publicker in the Eastern District of Pennsylvania, the EPA and Publicker are not in a position to assert any accrued and unconditionally fixed claim against the bank or the Resolution Trust Corporation. Without an accrued and unconditionally fixed claim against the bank existing on or before its date of default, see 12 C.F.R. § 360.2(a)(7) (1992), and filed within 90 days with the Resolution Trust, see 12 U.S.C.A. § 1821(d)(5)(B) (1988), the government and Publicker may only recover if Freedom Savings' assets exceed all claims that were timely filed and fixed. 43 Despite Publicker's objections, the district court properly relied on the affidavit submitted by Resolution Trust stating that Freedom Savings will have insufficient funds to meet its obligations for accrued and unconditionally fixed claims, thus leaving contingent claims like those that the EPA and Publicker might make in the future totally unsatisfied. The possibility of the bank's insolvency before satisfying its fixed claims further indicates the fairness and reasonableness of the settlement. 44 Finally, the settlement fully comports with the two main objectives underlying CERCLA. Congress sought through CERCLA to encourage prompt and effective responses to hazardous waste releases and to impose liability on responsible parties, see Voluntary Purchasing Groups, Inc. v. Reilly, 889 F.2d 1380, 1386 (5th Cir.1989); Lone Pine Steering Comm. v. EPA, 777 F.2d 882, 886 (3d Cir.1985), cert. denied, 476 U.S. 1115, 106 S.Ct. 1970, 90 L.Ed.2d 654 (1986), and also aimed to encourage settlements that would reduce the inefficient expenditure of public funds on lengthy litigation. See 42 U.S.C. § 9622(a) (Supp.1992); City of New York v. Exxon Corp., 697 F.Supp. 677, 693 (S.D.N.Y.1988). Inasmuch as the settlement agreement reduces the litigation surrounding the Publicker site cleanup and releases from liability those parties unlikely to bear responsibility for it, it furthered CERCLA's goals. The district court therefore acted within its discretion in approving the settlement agreement as fair, reasonable and consistent with CERCLA's objectives.