Opinion ID: 779912
Heading Depth: 3
Heading Rank: 2

Heading: Naugatuck Treatment Company's Settlement with the BHC

Text: 81 Naugatuck Treatment Company (NTC) — a wholly-owned subsidiary of BHC member Uniroyal — is one of the many third-party defendants who settled with the BHC prior to trial. NTC — in exchange for a complete release from any further liability — paid the BHC $325,000.00 in 1993. 82 Five years later, during the proceedings before the Master, the Borough of Naugatuck produced evidence showing that the $325,000.00 NTC gave to the BHC for the release was taken from a reserve fund held by NTC in escrow for the benefit of the Borough. The Borough's witness explained that the reserve fund was earmarked for major capital improvements at the Borough's treatment facility, not for paying down NTC's CERCLA liability. 83 After the hearings before the Master concluded, the Municipal Defendants argued in their papers that any contribution share attributable to the Borough for the BHC's response costs should be reduced by the NTC settlement. The Municipal Defendants claimed that NTC used the Borough's funds without any approval from the Borough's governing body, its Mayor and Borough Burgesses.... Because the Master did not allocate any contribution share to the Borough, he saw no need to render any findings on the circumstances of NTC's settlement. 84 In its First Ruling, the district court rejected the Master's recommendation as to the Borough's liability for contribution. Instead, the court allocated the Borough a 1.1% share of responsibility for BHC's response costs, resulting in liability amounting to $361,862.92 minus $325,000 that involved [NTC], a net of $46,465.05. 19 The district court offered no explanation for the offset. 85 Undeterred, the BHC asked the court to reconsider its ruling, contending that certain Borough officials knew, prior to NTC's settlement with BHC, that the reserve fund would be tapped to pay the settlement. Yet they did nothing to stop the payment. The district court upheld the offset, explaining [w]hether payment was made with knowledge of [Borough] officials does not resolve BHC's argument. The question is not the propriety of the payment ... but rather whose money was used. As BHC has not shown to the contrary, [Borough] funds are found to have been used. Thus the credit is proper. 86 BHC now appeals the court's decision, urging us to hold as a matter of law that § 113(f)'s equitable factors are limited to those factors directly related to the harm to the environment, the parties' causal relationship to that harm, and the parties' ability to contribute to ... remediation.... As we held in Bedford Affiliates, however, Section 113(f) does not limit courts to any particular list of factors. 156 F.3d at 429. Instead, [t]he statute's expansive language ... affords a district court broad discretion to balance the equities in the interests of justice. Id.; see also Envtl. Transp. Sys., Inc. v. ENSCO, Inc., 969 F.2d 503, 509 (7th Cir.1992) (declining to limit equitable factors); United States v. R.W. Meyer, Inc., 932 F.2d 568, 572 (6th Cir.1991) ([T]he court may consider the state of mind of the parties, their economic status, any contracts between them bearing on the subject, any traditional equitable defenses as mitigating factors and any other factors deemed appropriate to balance the equities in the totality of the circumstances. ) (footnote omitted) (emphasis added). Accordingly, we reject the BHC's invitation to curb the district court's discretion to consider any equitable factors it deems appropriate. 87 The BHC also contends that the district court abused its discretion because the equities favor the BHC, not the Borough. As already noted, the BHC claims that certain Borough officials in charge of overseeing the Borough's operating agreement with NTC knew about NTC's planned use of the reserve fund but did nothing to stop it. It follows, BHC argues, that the Borough should not be rewarded for sitting on its rights. 88 Admittedly, the evidence before the Master suggests that members of the Naugatuck Water Pollution Control Board (the WPCB) — i.e., the board that oversaw the operating agreement — did indeed know of NTC's planned use of the reserve fund before the settlement. However, the evidence also showed that the WPCB was controlled at the time by Uniroyal employees. Thus, it is hardly shocking that the WPCB did nothing to stop the transaction, which enriched Uniroyal at the Borough's taxpayers' expense and permitted Uniroyal's wholly-owned subsidiary to escape liability for any cleanup costs. 89 In short, we believe the district court acted within its discretion by applying the credit, notwithstanding the WPCB's knowledge of NTC's planned use of the fund. Accordingly, we affirm the district court's decision to offset NTC's settlement amount against the Borough's allocated share of the BHC's response costs. 90