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United States v. Ward

ELR Citation: 16 ELR 20127
Nos. No. 83-63-CIV-5, 618 F. Supp. 884/23 ERC 1391/(E.D.N.C., 09/09/1985) Response cost liability

In a suit brought by the United States and North Carolina under §107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to recover funds spent cleaning areas along the North Carolina roadsides where a transporter hired by defendants had sprayed polychlorinated biphenyls (PCBs) from moving trucks, the court holds, among other things, that defendants are liable for response costs, plaintiffs may recover preenactment response costs, and defendants may challenge the cleanup method selected by the Environmental Protection Agency (EPA). The court first holds that defendants, a corporation dealing in electrical equipment and its president, are liable for response costs as persons who arranged for disposal of hazardous substances under CERCLA §107(a)(3). Defendants are persons under CERCLA and were owners and possessors of the PCB oil, a hazardous substance under the statute. Defendants also arranged for disposal of the PCB oil by contract with a transporter. The corporate president, who acted on behalf of the corporation and who was personally involved in the selection of the transporter is individually liable for cleanup costs. Defendants cannot avoid liability by attempting to characterize their transaction with the transporter as a sale of the oil rather than a contract arranging for disposal. Neither can defendants escape liability on the grounds that they were not aware of the exact sites at which the oil was to be disposed. In addition, the definition of facility in CERCLA §101(9) is broad enough to include the North Carolina roadsides where the oil was sprayed. Finally, the spraying constitutes a release of a hazardous substance, and both the United States and North Carolina incurred response costs in removing the contaminated soil and transporting it to a landfill.

The court rules that defendants are not liable under CERCLA §107(a)(2) as operators of the roadside spill sites. The court concludes that plaintiffs "inventive" legal theory would require the application of collateral estoppel from defendant's criminal trial on the issue of defendants' willful participation in a conspiracy with the transporter and would not apply to all the dumpings whereas defendants are liable as a matter of law under §107(a)(3) for all the dumpings. The court then rules that defendants can not successfully assert a defense under CERCLA §107(b)(3) because the alleged act or omission of a third party occurred in connection with the contractual relationship between defendants and the transporter.

The court next rules that plaintiffs may recover expenditures made prior to CERCLA's enactment. CERCLA's retroactive nature, the imposition of costs on responsible parties, and the specific time limits for recovery for preenactment natural resources damages indicate congressional intend to hold responsible parties liable for preenactment response costs. The burden of proving that response costs are inconsistent with the National Contingency Plan falls on defendants. Defendants may, however, challenge the EPA's cleanup method in addition to the costs in implementing the remedial plan. The court observes, however, that EPA's remedial decisions are entitled to great deference and will be reviewed under the arbitrary and capricious standard.

Addressing statute of limitations defenses raised by defendants to bar certain counterclaims brought by third-party defendants, the court holds that defendants have waived this defense for those counterclaims against which it was not asserted in defendants' responsive pleadings, as required by Federal Rule of Civil Procedure 8(c). The court holds that counterclaims for which defendants did plead the statute of limitations defense, alleging fraud arising out of kickback schemes in the disposal contract and various unauthorized sales of electrical equipment owned by third-party defendants, are barred unless brought within three years after the alleged fraud was or should have been discovered. The court holds that various unfair trade practice allegations are also barred unless commenced within four years from the date of the alleged violation.

The court next addresses defendants' challenges to the merits of certain third-party counterclaims. The court holds that a third-party counterclaim alleging that defendants intended to harass and injure a competitor's business with their claims for contribution does not state a cause of action for unfair trade practices. The third-party defendant failed to allege that the claim was filed solely to interfere with its business without any intent to influence the outcome of the case. Another counterclaim alleging that defendants abused the civil process by forcing the same third-party defendant to pay for defendants' criminal conduct must be dismissed because no allegations were made that defendants intended to use this suit for anything but to recover damages or that they had any ulterior motive.

The court next holds that the corporate president is collaterally estopped from denying his willful participation in the PCB oil dumpings with respect to those sites covered in his criminal conviction, and therefore he has no right of contribution from the third-party defendants for cleanup costs at these sites. To the extent that the president is barred from seeking contribution, the corporate defendant, a close corporation in privity with its president, is also barred. Finally, the court upholds a magistrate's order denying defendants' request to obtain information from the United States about response measures at other spill sites and holds that a jury trial is not available for CERCLA claims.

Counsel for Plaintiff
James S. Perry, Ass't U.S. Attorney
P.O. Box 26897, Raleigh NC 27611
(919) 755-4530

Jeremy Ray Akers
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-4624

Counsel for Defendants
Walter E. Brock Jr., Jerry S. Alvis
Young, Moore, Henderson & Alvis
2700 Wycliff Rd., P.O. Box 31627, Raleigh NC 27622
(919) 782-6860

Counsel for Plaintiff-Intervenor
Thomas F. Moffitt, Deputy Attorney General
Department of Justice, Justice Bldg., Box 629, Raleigh NC 27602
(919) 733-3377