Opinion ID: 779912
Heading Depth: 2
Heading Rank: 1

Heading: The District Court's Allocation

Text: 44 CERCLA § 113(f) provides: Any person may seek contribution from any other person who is liable or potentially liable under § 9607(a).... In 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)(1). Thus, the statute envisions a two-part inquiry: First, the court must determine whether the defendant is liable under CERCLA § 107(a); Second, the court must allocate response costs among liable parties in an equitable manner. See Kalamazoo River Study Group v. Menasha Corp., 228 F.3d 648, 656-57 (6th Cir.2000). The party seeking contribution bears the burden of proof at both prongs of the court's inquiry. See, e.g., Minyard Enters., Inc. v. Southeastern Chem. & Solvent Co., 184 F.3d 373, 385 (4th Cir.1999); H.R.Rep. No. 99-253(III), at 19 (1985) (Of course, the burden of proof is on the ... party seeking apportionment to establish that it should be granted.). 45 As we explained in Betkoski, (the last time these parties were before us), a finding of liability under § 107(a) requires proof that: 46 (1) the defendant is within one of the four categories of responsible parties enumerated in § 9607(a); (2) the landfill site is a facility as defined in § 9601(9); (3) there is a release or threatened release of hazardous substances at the facility; (4) the plaintiff incurred costs responding to the release or threatened release; and (5) the costs and response actions conform to the national contingency plan. 47 99 F.3d at 514. The district court held that the Municipal Defendants are liable under this test, and they do not appear to contest that finding on appeal. In any case, the district court was clearly correct. 48 With regard to the first element of this test, those who arrange for disposal of hazardous substances are among the responsible parties covered under § 9607(a). And, as we first explained in Murtha, [w]hen a mixture or waste solution contains hazardous substances that mixture is itself hazardous for purposes of determining CERCLA liability. Murtha, 958 F.2d at 1201. The Municipal Defendants acknowledge that their MSW contained hazardous substances, conceding that [f]rom the testimony of Dr. Ham ... this fact or conclusion was inescapable. The Municipal Defendants also concede the remaining elements of the liability test, i.e., that hazardous substances were released from the landfills, and that the Coalitions incurred response costs and undertook response actions that conform to the NCP. 15 Accordingly, we turn to the Municipal Defendants' objections to the district court's allocation.
49 We begin with our analysis by settling upon the standard of review, an issue that is hotly debated by the parties-and well it should because we find it determinative. As we have stated before, because [Section 113(f)'s] expansive language ... affords a district court broad discretion to balance the equities in the interests of justice.... We will not overturn the district court's [allocation of response costs] absent an abuse of that discretion. Bedford Affiliates v. Sills, 156 F.3d 416, 429 (2d Cir.1998) (emphasis added) (citations omitted). 50 A district court `abuses' or `exceeds' the discretion accorded to it when (1) its decision rests on an error of law (such as application of the wrong legal principle) or a clearly erroneous factual finding, or (2) its decision — though not necessarily the product of a legal error or a clearly erroneous factual finding — cannot be located within the range of permissible decisions. Zervos v. Verizon New York, Inc., 252 F.3d 163, 169 (2d Cir.2001). The Municipal Defendants raise several arguments seeking to avoid this deferential standard of review. We address each argument in turn. 51 The Municipal Defendants' first argument rests on a clause in the Order of Reference stating the standard the district court would apply when it reviewed the Master's Report: 52 Any factual objection will be decided on whether the finding or recommendation is clearly erroneous based on the record before the Special Master. 53 (emphasis added). The Municipal Defendants assert that this clause extended to non-factual members and, accordingly, bound the district court to the Master's recommended equitable factors and allocation of response costs among the parties unless there was clear error. This loose reading of the Order's standard of review is inconsistent with the Order's terms and even with the Master's understanding of his role in the case. 54 A separate section of the Order of Reference discussing the mediation stage of the litigation states: The success of mediation depends on the acknowledgment by each party that the decision after a hearing cannot be predicted. That uncertainty arises from the `equitable factors' to be applied by the Court as `appropriate' in accordance with CERCLA § 113[f]. (emphasis added). Thus, in referring the case to the Master, the district court clearly reserved to itself the power to allocate response costs among the parties according to the equitable factors it, not the Master, found appropriate to the case. 55 The Master himself acknowledged this on several occasions. For example, he advised the parties that the ultimate question to be decided in this case, under § 113[f], is almost unpredictable, except to the extent that you can judge what Judge Dorsey believes to be a reasonable set of equitable factors.... (R. 1/29/1998 at 198:19-24.) Likewise, the Master stated I don't decide what equitable factors are equitable factors.... [T]he statute places the broadest discretion in the hands of Judge Dorsey and not me. And the statute specifically says equitable factors that he deems to be appropriate, not that I deem to be appropriate. (R. 4/1/1998 at 204:11-16.) Thus, the Master clearly understood what the Order of Reference made apparent: that the district court reserved the right to determine the appropriate equitable factors to apply, and the appropriate allocation of response costs among the parties, unbridled by the clear error standard of review. 56 Next, the Municipal Defendants claim that, because allocation of liability under CERCLA is a question of fact, we must review the Master's recommended allocation directly, for clear error. This is a none too subtle begging of the question. It is true that we review a master's factual findings for clear error, whether or not the district court accepts them. Morris Plan Indus. Bank v. Henderson, 131 F.2d 975, 976-77 (2d Cir.1942); see also Fed. R.Civ.P. 53(e)(2). However, we are not persuaded that the allocation of response costs under § 113(f) is a question of fact. Rather, it is an equitable determination based on the district court's discretionary selection of the appropriate equitable factors in a given case. See Bedford Affiliates, 156 F.3d at 429. 16 57 The Municipal Defendants also maintain that we are required to ignore the district court's allocation of response costs and instead review directly the Master's recommended allocation for abuse of discretion, citing Van Gemert v. Boeing Co., 739 F.2d 730 (2d Cir.1984). In Van Gemert, we reviewed the district court's equitable distribution of the unclaimed balance of a judgment entered against the defendant. In determining whether the district court abused its discretion in returning the unclaimed funds to the defendant, we looked to the special master's report and recommendation, which the district court had adopted in full. Id. at 733, 736-38. Thus, Van Gemert stands for the unremarkable proposition that where a district court charged with making an equitable determination adopts a master's recommendation on that issue, we review the master's report and recommendation to determine whether the district court abused its discretion. Id. at 738. Of course, that is not the case here — the district court rejected the master's recommended allocation and allocated response costs according to the equitable factors it determined were appropriate under the circumstances of the case. Accordingly, Van Gemert is inapposite. 58 Finally, the Municipal Defendants claim that the district court was required to accept the Master's recommended allocation absent the Master's abuse of discretion, citing Gottlieb v. Barry, 43 F.3d 474 (10th Cir.1994). In Gottlieb, the court considered whether the district court abused its discretion in choosing the appropriate method for determining attorneys' fees in a securities class action where the district court rejected the master's recommendation on that issue. The court noted that because the way to calculate fees depended on the particular circumstances of the case, the district court should have given some deference to the master's recommendation, which resulted from his special knowledge of the case. Gottlieb, 43 F.3d at 487. Finding that the district court had simply rejected the master's recommendation for reasons largely unrelated to the particular circumstances of [the] case, the court reversed the district court's decision and found that attorneys' fees should be calculated as the master recommended. Id. 59 Consistent with Gottlieb, we hold that a district court must give some deference to a master's recommendation where the master has direct and extensive knowledge about the particular circumstances of a given case. Id. at 487 & n. 10; see also Cook v. Niedert, 142 F.3d 1004, 1010 (7th Cir.1998). A district court that extends some deference to the master will consider his recommendation and the factors influencing it, but will not regard the recommendation as the alpha and omega of the ... analysis. Id.
60 Turning to the merits of the Municipal Defendants' claims, we believe the district court gave appropriate deference to the Master's recommendation and did not abuse its discretion in allocating contribution shares among the Municipal Defendants. The court undertook a painstaking analysis of the Master's Report, accepted most of the equitable factors suggested therein, and incorporated them into its allocation model. Moreover, to the extent the court supplemented the factors suggested by the Master or, conversely, did not apply factors recommended by the Master, we find that it acted within its discretion. We address the district court's allocation and the Municipal Defendants' objections thereto below. 61 The district court cited the volume of waste disposed of by the parties as an equitable factor and used his findings on the parties' respective waste volumes as the starting point of his allocation formula. The Municipal Defendants do not deny that the volume of waste each party disposed of is a legitimate equitable factor. Indeed, their own allocation expert opined that it is a logical starting point in cases of this type. 62 Nevertheless, the Municipal Defendants claim the district court erred in supplementing the Master's findings on the volume of MSW they disposed of. First, they argue that the district court is powerless to make supplemental findings of fact, even where the Master failed to make any findings on an issue. We reject this contention as contrary to the Federal Rules of Civil Procedure, which expressly permit a district court to modify a special master's report. Fed.R.Civ.P. 53(e)(2); cf. United States v. Tampa Bay Garden Apartments, Inc., 294 F.2d 598, 603 (5th Cir.1961) (We do not think the power to modify [under Rule 53(e)(2)] is to be narrowly construed or applied. The power to modify is a power to alter or change, and to enlarge and add to as well as to limit, restrict or reduce.). 63 Next, we reject their claim that the Master's failure to render any findings on the volume of waste they dumped is tantamount to a factual determination that the Coalitions did not carry their burden of proof on this issue. We find nothing in the Master's Report to support this suggestion. Moreover, the Municipal Defendants' argument is specious, when it is recalled that they expressly admitted in their proposed findings of fact that they each dumped a significant volume of MSW at one or, in some cases, both of the landfills. 64 The Municipal Defendants also claim that the district court clearly erred by preferring the Coalitions' estimates of the volume of waste each Municipal Defendant dumped over the municipalities' own estimates. In this regard, the Municipal Defendants do not contend that the district court relied on inadmissible evidence; rather, they simply assert that the court should have accepted their own estimated waste volumes. However, [t]he mere fact that there was evidence to support an inference contrary to that drawn by the trier of fact does not mean that the findings were clearly erroneous. Cifra v. G.E. Co., 252 F.3d 205, 213 (2d Cir.2001); see also Anderson v. Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.). Accordingly, we reject the Municipal Defendants' contention that the district court's volume findings resulted from clear error. 65 Next, the Municipal Defendants argue that the district court improperly ignored the Master's finding that MSW will not necessarily comport with a national profile in terms of the hazardous waste contained therein. Yet their own expert witness, Dr. Ham, testified: 66 My point is that municipal solid waste is also very varied in composition. Yet as you look at the way we live, the way we all have a certain number of grocery stores per capita throughout the country and the grocery stores generally produce the same kinds of wastes and so forth, when you look at general MSW, it's amazing how similar it is from one part of the country to the other, with the only real difference being the amount of yard waste and when that yard waste occurs. So even though municipal solid waste is heterogeneous, it is, in fact quite uniform in character and predictable. 67 (R. 1/23/1998 at 24:1-11.) (emphasis added). 68 The Municipal Defendants also argue that the district court failed to account for sorting and separation policies adopted by the Municipalities that supposedly reduced the amount of hazardous substances in their MSW. Although the Master chastised Dr. Brown for failing to take this factor into account, he did not render any specific findings regarding the Municipal Defendants' implementation of such policies. And while the district court cited sorting and separation policies as an equitable factor to be considered, it found that the Municipal Defendants policies were neither uniform nor all-encompassing over the period of waste disposal in question.... The record confirms this finding. 69 The Municipal Defendants also claim the district court did not give appropriate deference to the Master's findings regarding the relative mobility and releaseability 17 of the parties' waste and abused its discretion by allocating response costs based on volume and toxicity alone. We reject this contention. Our review of the district court's decision reveals that the court carefully considered the relevance of these factors in determining how to allocate costs among the parties. While the court's ultimate methodology may have been imprecise, we cannot say it amounted to an abuse of discretion. Cf. Control Data Corp. v. S.C.S.C. Corp., 53 F.3d 930, 937 (8th Cir.1995) (CERCLA, in the allocation stage, places the costs of response on those responsible for creating the hazardous condition. Allocating responsibility based partially on toxicity does just that because those who release substances that are more toxic are more responsible for the hazardous condition.); see also Bancamerica Comm. Corp. v. Mosher Steel, 100 F.3d 792, 802-03 (10th Cir.1996) (affirming allocation based on volume and relative toxicity). 70 Finally, the Municipal Defendants argue that the district court ignored the Master's concerns over the lack of direct proof that releases of hazardous substances from their MSW added to the costs incurred by the Coalitions. In the district court's view, the Coalitions were entitled to some benefit of the doubt given their cooperation with the government. We are untroubled by this view. By entering into consent decrees with the government, the Coalitions ensured that the landfills would be remediated in an expeditious manner and relieved the government of future litigation costs. See Betkoski, 99 F.3d at 526 (CERCLA § 9622(a) urges the government to enter into settlements in order to expedite effective remedial actions and minimize litigation.). The district court did not abuse its discretion in taking this factor into account. Cf. United States v. R.W. Meyer, Inc., 932 F.2d 568, 573 (6th Cir.1991) (I do not believe Congress intended to require meticulous findings of the precise causative contribution each of several hundred parties made to a hazardous site. In many cases, this would be literally impossible. Rather ... Congress intended the court to deal with these situations by creative means, considering all the equities and balancing them in the interests of justice.). 71 In sum, we believe the court gave appropriate deference to the Master's recommendation and did not abuse its discretion in allocating contribution shares to the Municipal Defendants.