Opinion
CIVIL ACTION NO. 99-30106-MAP
March 28, 2003
MEMORANDUM REGARDING DEFENDANTS'/THIRD-PARTY PLAINTIFFS' MOTION FOR DISMISSAL OF THIRD PARTY COUNTERCLAIMS (Docket No. 233)
I. INTRODUCTION
This controversy arises from a complaint filed by the City of Springfield under 42 U.S.C. § 9607, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), and Mass. Gen. Laws ch. 21E, the Massachusetts Oil and Hazardous Material Release Prevention Act. In response to Springfield's complaint, the defendants Rexnord Corporation and RHI Holdings, Inc. ("RHI") (collectively "Rexnord") filed a third-party action against a number of individuals and business entities for contribution. The third-party defendants filed subsequent counterclaims.
Following entry of a consent judgment between Springfield and Rexnord, both parties filed a joint motion to dismiss the third-party counterclaims for contribution. For the reasons set forth below, the motion (limited solely to counterclaims for contribution) will be ALLOWED.
II. FACTUAL BACKGROUND
On May 25, 1999, the City of Springfield ("City") brought a lawsuit against Rexnord, seeking recovery for costs incurred in assessing, removing, and remediating contamination on a site located at 369 Plainfield Street, Springfield, Massachusetts and adjacent property also owned at that time by the City (the "Site"). Rexnord, through a variety of corporate personae, had maintained a chain belt manufacturing facility within a complex of five industrial buildings on the Site from approximately 1929 until 1969. On or about January 10, 1969, Rexnord, then known as Rex Chain Belt, Inc., moved its manufacturing business and conveyed its property to the Springfield Redevelopment Authority ("SRA"). In June 1973, the SRA conveyed to the City, as one parcel, the Rexnord property and several other properties it had acquired to the north of the Rexnord property. During the mid-1970's, the City constructed the German Gerena School on a portion of the Site.
On or about June 8, 1981, Rexnord filed a "Notification of Hazardous Waste Site" with the United States Environmental Protection Agency, stating that it had occupied the Site from 1929 until 1970 and had disposed of both heavy metals and oils at the location. Rexnord undertook an environmental study at the direction of the Massachusetts Department of Environmental Quality Engineering ("DEQE"). Following the study, it was found that no remediation was necessary at that time.
In the early 1990's, the City decided to construct a new school on a portion of the Site. Springfield at that time acquired parcels to the south of the Site for additional parking and recreational/athletic activities. As part of the construction of the new school, now known as the Chestnut Accelerated Middle School, additional soil samples were taken for testing. Upon submission to the Department of Environmental Protection ("DEP"), formerly the DEQE, these samples showed significant contamination. As a result, the DEP issued a Notice of Responsibility ("NOR") to the City. The NOR required that a site assessment be conducted and substantial remediation be undertaken in accordance with the Massachusetts Contingency Plan ("MCP").
Following the completion of the site assessment, it was found that the site was contaminated by lead, PCBs, and petroleum products. Various contractors were hired to conduct the remediation, which included the excavation and removal of contaminated soil to qualified disposal facilities. The remediation and cleanup of the Site substantially increased the cost of the school's construction.
Following the construction of the new school, the City filed its complaint against Rexnord seeking recovery of costs. The action was brought under federal and state statutes for damages to real property caused by the release or threatened release of hazardous materials and oil. Rexnord raised certain affirmative defenses and filed a counterclaim for contribution, reimbursement, and equitable share against the City.
The City claimed in its original amended complaint that the Site had been owned solely by Rexnord. In actuality, the Site comprises property previously owned by Rexnord as well as several other properties owned by third parties, purchased and conveyed to the city by the SRA. Facing the City's lawsuit, Rexnord sought contribution from these parties. Rexnord filed a third-party complaint against George E. Roy, Jr.; Roy's Towing and Recycling Services, Inc.; Carol Slate, Trustee, New Plainfield Properties Realty Trust; Normand R. Lebeau; Associated Electro Mechanics, Inc.; Milton L. Kobrosky; Edwin L. Slowick; Boston Marine Corporation; General Electric Company; John Doe Corporation I through IV; and John Does I through IV.
Third-party defendants, with the exception of Milton Kobrosky, filed answers denying liability to third-party plaintiff Rexnord. Several also filed third-party counterclaims — some seeking costs and counsel fees, others seeking contribution, and one seeking contribution, cost recovery and damage to real property.
Third-party defendant Milton L. Kobrosky failed to answer Rexnord's complaint; notice of default judgment was entered by this court on August 20, 2001.
On July 12, 2001, the trial of the claims brought by the City against Rexnord was separated from the trial of the claims by Rexnord against the third-party defendants. Rexnord and third-party defendant General Electric settled their respective third-party claims on August 7, 2001.
A few months later, before trial commenced, a settlement agreement was also reached on the primary action, between the City and Rexnord. Based on this settlement, the court entered a Consent Judgment on February 7, 2002 which resolved both the City's claims against Rexnord and Rexnord's counterclaims against the City.
Fairchild Environmental Liability Management, Inc., a corporation affiliated with RHI that previously agreed to assume RHI's environmental liability for the Site, participated on RHI's behalf in the Consent Judgment.
As part of the settlement, a "Covenant Not to Sue" ("Covenant") was executed under CERCLA and Mass. Gen. Laws ch. 21E with respect to any present or future liability. As consideration for the Covenant, Rexnord agreed to make a payment of $2.5 million to the City. In addition, Rexnord was assigned "the City's rights against any other person under CERCLA, Chapter 21E or any other provision of law with regard to the Site for claims existing as of the date of the assignment" while "expressly reserv[ing its] rights to prosecute such claims against any and all third parties, subject to the Assignment." (Consent Judgment, at 5). As the quoted language indicates, the consent judgment did not settle the third-party claims brought by Rexnord against third-party defendants or the counterclaims by these parties against Rexnord.
The City and Rexnord have jointly filed this motion to dismiss the third-party counterclaims for contribution, claiming that such suits are barred because of the consent agreement and CERCLA. It is important to emphasize that the motion does not seek dismissal of any portion of the counterclaims based on any theory other than contribution.
On February 3, 2003, the court allowed a joint motion for voluntary dismissal and entry of final judgment, filed by Rexnord and the third-party defendants Associated Electro Mechanics, Normand R. Lebeau, and the Boston and Maine Corporation. As a result, the only third parties remaining in this case are George H. Roy, Jr.; Roy's Towing and Recycling Service; Carol Slate, as Trustee of New Plainfield Properties; and Edwin L. Slowick.
III. DISCUSSION
The counterclaims of the four remaining third-party defendants may be broken down into three categories: claims for attorney's fees and costs, claims for direct cost recovery, and claims for contribution. It is understood that any claims for fees or cost recovery will await further proceedings.
The City and Rexnord contend that, under 42 U.S.C. § 9613(f)(2) and Mass. Gen. Laws ch. 21E § 3A(j)(2), third-party defendants are barred from pursuing existing claims or instituting new claims for contribution damages, because all claims have been settled with the City. 42 U.S.C. § 9613(f)(2) provides:
A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.Id. Similarly, Mass. Gen. Laws ch. 21E, § 3A(j)(2) states:
A person who has resolved its liability to the commonwealth in an administrative or judicially approved settlement shall not be liable for claims for contribution, cost recovery, or equitable share regarding matters addressed in the settlement. . . . Such settlement does not discharge any other person unless its terms so provide, but shall reduce the potential liability of all other liable persons by the amount of the settlement.Id.
Since the settlement in this case involved neither the United States nor the Commonwealth of Massachusetts, the first issue presented by the motion to dismiss is whether the statutory protection from contribution claims, as described in the quoted language, covers settlements involving municipalities or private parties. Although the issue is not crystal clear, the better view of the law is that the statutory protection does extend to parties such as Rexnord and the City of Springfield. This conclusion is strongly supported by the intent of the law itself. As one district court stated, "the intent of Congress and the purposes of CERCLA are inextricably intertwined: To achieve the prompt clean-up of hazardous waste sites, and fairly allocate the costs of the clean-up to those responsible for the contamination." Hillsborough County v. A E Rd. Oiling Serv., Inc., 853 F. Supp. 1402, 1411 (M.D.Fla. 1994) (citation omitted).
Courts and commentators have repeatedly recognized that CERCLA's goals of promptness and equity in remediating hazardous sites are most efficiently served by encouraging settlements and minimizing costs associated with protracted litigation. Because of the years needed to complete them, "complex multi-staged, multi-party CERCLA actions lead to astronomical transactional/ litigation costs which drain public and private sector resources." United States v. SCA Servs. of Ind., Inc., 827 F. Supp. 526, 531 (N.D.Ind. 1993) (citation omitted). Realizing this, "[c]ourts have long recognized a strong federal interest in promoting settlement. . . . This is especially true in complex CERCLA litigation which would place an enormous strain on the judicial caseload if settlements were not encouraged." Id.; see also United States v. Cannons Eng'g Corp., 899 F.2d 79, 84 (1st. Cir. 1990).
As a means to encourage such settlements, in CERCLA litigation,
Congress specifically provided that contribution actions could not be maintained against settlors. This provision was designed to encourage settlements and provide [potentially responsible parties] a measure of finality in return for their willingness to settle. Congress plainly intended non-settlors to have no contribution rights against settlors.
Cannons Eng'g Corp., 899 F.2d at 92. While "CERCLA expressly provides that parties who settle with the United States and any States are free from claims for contribution," SCA Servs., 827 F. Supp. at 530, courts have repeatedly interpreted this language to include private parties as well.
As the First Circuit has noted, "CERCLA is essentially a remedial statute designed by Congress to protect and preserve public health and the environment. [Courts] are therefore obligated to construe its provisions liberally to avoid frustration of the beneficial legislative purposes." Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074, 1081 (1st. Cir. 1986). In this regard, "allowing [a party other than the United States or an individual state] to proceed to settle private claims under section 42 U.S.C. § 9613(f)(2), and barring claims for contribution in private settlements 'would certainly advance the Act's remedial purpose by encouraging early and complete settlements.'" United States v. SCA Servs., 827 F. Supp. 526, 532 (N.D.Ind. 1993) (quoting City of New York v. Exxon Corp., 697 F. Supp. 677, 685 (S.D.N.Y. 1988); see also City and County of Denver v. Adolph Coors Co., 829 F. Supp. 340, 344 (D.Colo. 1993) ("Congress did not intend for its listing of 'United States or a State' in CERCLA § 9613(f)(2) to be exclusive of cities.").
As these authorities indicate, the settlement agreement between the City and Rexnord provides those parties the same protection from suits for contribution that the United States or a State would enjoy.
Third-party defendants George H. Roy, Jr. and Roy's Towing Service, Inc. (collectively "Roy") argue that the above authorities are distinguishable because they all arise from environmental litigation far more complex than this lawsuit. This argument is unpersuasive for two reasons.
First, there is no "complexity" threshold, set forth in any statute or decision, that defines when a settling party will be entitled to protection from claims for contribution. Second, the litigation here was, in fact, rather complex. As noted, the settlement provided for a payment of $2.5 million to the City; pretrial discovery involved the production of over 40,000 documents and dozens of depositions. The lawsuit focused on numerous parties sharing ownership in a twenty-plus acre parcel of land with relevant uses dating back to the 1800's. It may not have been the largest CERCLA case on the books, but it was certainly not simple. Under these circumstances, this case offers a perfect example of the sort of case that CERCLA was crafted to steer towards settlement.
A portion of Roy's counterclaim seeks damages under a theory of "cost recovery" for monies actually spent to clean up a portion of its former property when it was conveyed to the City. As noted repeatedly, the "cost recovery" portion of the third-party counterclaim is not a target of the current motion to dismiss. The distinction between "cost recovery" and "contribution" is addressed helpfully in United Techs. v. Browning-Ferris Indus., 33 F.3d 96 (1st Cir. 1994), but this will be an issue, perhaps, for another day.
Roy also argues that, even if a private party like Rexnord, or a municipality like Springfield can claim protection from contribution claims, Rexnord and Springfield failed to give proper notice as required by 42 U.S.C. § 9622(i)(1) and Mass. Gen. Laws ch. 21E, § 3A(j)(2). Again, this argument is not persuasive for two reasons.
First, the third parties were given actual notice of the proposed settlement. Although the notice did not comply with the technical requirements of the federal and state statutes, this actual notice undercuts any claim of prejudice by the third parties. Second, and more importantly, the statutory notice requirement does not apply to private settling parties, that is, parties who are neither the United States or a state. See, e.g., Hillsborough County v. A E Rd. Oiling Serv., Inc., 853 F. Supp. 1402, 1410 (M.D.Fla. 1994); SCA Servs., 827 F. Supp. at 526.
Lastly, Roy contends that settlement agreements, such as the Consent Judgment, do not create contribution protection from a non-settling party that "voluntarily" pays for cleanup costs. This argument has little merit. Simply put, there is little support in the case law for the notion that there exists a special class of "volunteer" liable parties whose contribution rights survive the execution of a release by the plaintiff. Indeed, a significant number of courts have found that non-settling parties are barred from seeking contribution claims against settling parties. See, e.g., Mavigliano v. McDowell, NO. 93 C 7216, 1995 WL 704391, at *2 (N.D.Ill. Nov. 28, 1995); Hillsborough County v. A E Rd. Oiling Serv., Inc., 853 F. Supp. 1402, 1408 (M.D.Fla. 1994); United States v. SCA Servs. of Ind., Inc., 827 F. Supp. 526, 532 (N.D.Ind. 1993). To the extent that dicta in United States v. SCA Services of Indiana, Inc., 849 F. Supp. 1264, 1277 (N.D.Ind. 1994), holds otherwise, this court does not find that authority persuasive.
IV. CONCLUSION
For the reasons stated above, the Motion to Dismiss of Springfield and Rexnord is hereby ALLOWED. The ruling does not affect third-party defendants' affirmative defenses to the claims set forth in Rexnord's third-party complaint, or counterclaims other than those for contribution.
A separate order will issue.