The Second Chem-Dyne Settlement

David B. Graham

Editors' Summary: Of the major pathways now being followed in the implemetation of hazardous waste cleanups under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), several have been charted at one site, Chem-Dyne Corporation's Hamilton, Ohio facility. Chem-Dyne was the subject of the first multi-party CERCLA negotiation, in which state and federal agencies squared off against hundreds of companies whose wastes allegedly cluttered the site. It was the subject of the first court ruling on the lynchpin of the federal government's legal theory about liability under CERCLA — that waste generators are jointly and severally liable. In June 1985, Chem-Dyne became the subject of one of the first settlements governing soil removal and groundwater purification at a multi-generator site. Mr. Graham, who has been intimately involved in the Chem-Dyne proceedings from the first, describes the avenues by which the governments and generators reached the second settlement. He argues for a surface-cleanup-first approach to major CERCLA cases, and recommends that potentially responsible parties and government agencies take a more cooperative stance so as to avoid litigation, which costs millions and delays cleanup.

David B. Graham is a partner in the firm of Freedman, Levy, Kroll & Simonds in Washington, D.C. As Chairman of the Steering Committee of the settling companies in the first Chem-Dyne settlement, and as the attorney representing the company believed to have the largest volume of substances at the site, he has devoted a large share of his recent professional life to the negotiations discussed in this article.

[15 ELR 10208]

During the 1970's, hundreds of companies that generated industrial wastes dealt with the Chem-Dayne Corporation for the purpose of having their materials recycled, treated, or otherwise disposed of at various facilities. Chem-Dyne was one of a number of companies that had appeared in the 1970's to handle wastes that, under expanding state and federal pollution control laws, could not be disposed of down drains or up smokestacks. To the companies generating such wastes, Chem-Dyne seemed one of the more professional disposal companies available. The main Chem-Dyne office was located in Hamilton, Ohio, and the corporation used this facility as a recycling and transshipment center. Unfortunately, the owners allowed thousands of drums and tanks of hazardous substances to collect at the Hamilton facility, and it soon became a waste disposal site in need of cleanup.

Chem-Dyne, like many such sites, posed three types of cleanup problems: removal of the drums and tanks, many of which were leaking; removal of contaminated soil; and treatment of contaminated groundwater. The problems at this site led to federal and state cleanup actions against the owner-operators and generators under the 1980 Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund).¹ The case has produced two major private party settlements. First, in August of 1982, over 100 companies settled with the United States and the State of Ohio for the drum and tank removal phase. Because this was the first large multi-party settlement under the new Superfund law, it received widespread publicity.² Second, during June of 1985, over 160 parties agreed to a settlement for the remaining (and much more expensive) soil and groundwater phases of the site cleanup.

Cleanup of hazardous waste sites under CERCLA is a complex and expensive process. For large sites at which there are numerous potentially responsible parties, the transaction costs of determining the cleanup plan and allocating responsibility among the parties could — if not handled efficiently — be greater than the site cleanup cost. If the issues all must be litigated, not only is the process extremly costly, it is exceptionally slow. Since every day of delay can increase the potential damage at most sites, avoiding litigation should be a prioity at all waste sites.

Though desirable, CERCLA settlements are not easy to reach. As Chem-Dyne illustrates, consensus on cleanup and [15 ELR 10209] liability issues with significant economic and environmental implications must be reached among hundreds of independent parties whose individual interests differ. The second Chem-Dyne settlement illustates how concerted effors to organize the generators and, where possible, to work with the government, can overcome the obstacles and produce workable settlements. While no two Superfund cases ever will be identical and no single settlement can serve as the model for all others, the experiences documented below should be instructive to parties in the future as they search for ways to facilitate settlements.

First Settlement and Initial Lawsuit

In April 1982, prior to any litigation concerning site cleanup, the United States and the State of Ohio (the governments) invited 47 of approximately 300 potentially responsible parties (PRPs) to the first Chem-Dyne meeting. Invitations to the meeting were extended to companies that sent particular chemicals to Chem-Dyne for disposal (e.g., PCB's), companies with leaking drums on site, and the two dozen companies believed to be the largest customers of Chem-Dyne. It was a little bit like having your entire high school class summoned before the principal together to be remonstrated for a general disturbance in the lunchroom: some knew they had made a major contribution to the ruckus, others believed their own contributions were small, while still others were not sure they were even in the lunchroom that day. The prospects for amicable resolution seemed small because the governments' authority was illdefined and as yet untested, evidence of contributions by the PRPs to the site was fragmentary, and there were so many parties with different interests.

A group of these companies formed a PRP steering committee for purposes of negotiating with the governments. Negotiations continued throughout the spring and summer and the generator group grew in number as the steering committee contacted other PRPs and convinced them to participate in the effort to reach a settlement. On August 19, 1982, 112 of the PRPs entered into an agreement under which we consented to pay approximately $2.5 million in return for a release from liability for the cleanup of the surface of the site and the study of groundwater and soil contamination. Individual settling companies' contributions to the $2.5 million were based principally on whether they were one of the 47 PRPs singled out by the governments to be invited to the meeting (the group which became known as the first tier) or if they were not (the group which became known as the second tier). The participants in the settlement from the former agreed to pay $50,000 each, the latter $5,000 each. When it became clear that the total would not satisfy the government, many companies believed to have larger volume in th first tier scaled up their contributions in proportion to the volume figures then available while many companies in the second tier doubled their contributions. Under the terms of the agreement, the settling companies could participate in the groundwater and soil contamination study. Working with technical consultants engaged to oversee the study (later called the Remedial Investigation/Feasibility Study or RI/FS) took a significant amount of time during the next two years, but the value of participation in the RI/FS became apparent as the case unfolded.

Almost immediately after the first settlement, the governments sued 23 of the non-settling companies in the U.S. District Court for the Southern District of Ohio before Judge Carl B. Rubin.³ The plaintiffs sought to recover the costs they had incurred in the surface cleanup and the RI/FS that were not recovered under the terms of the settlement. The governments estimated that the first settlement accounted for about 75 percent of those costs.

Through the remainder of 1982 and all of 1983, the governments and the 23 defendants devoted much time and resources to traditional litigation practice. They filed answers, counterclaims, and numerous motions, along with interrogatories and document production requests. The governments deposed scores of corporate officials, and defendants deposed many government officials. The central legal issue in the litigation was whether CERCLA made responsible parties jointly and severally liable; that is, whether the governments could recover all their response costs from one or a subset of the potentially responsible parties instead of having to identify and join all whose wastes ended up at the site.⁴

After the first settlement, the settling companies decided that it would be prudent to continue group efforts through the steering committee to monitor the governments' work on the RI/FS. This effort was important because we knew the governments might claim that we were liable under CERCLA for some of the costs of the soil and groundwater cleanup remedy that would be selected through the RI/FS. Accordingly, the settling companies employed technical consultants to review the work of the governments' contractors conducting the RI/FS at the site. With our own consultants closely monitoring the governments' contractors, we believed that we could better ensure that the governments' RI/FS would be performed in a technically sound manner and a cost-effective remedial action plan would result.

New Suits and Claims

While the defendants engaged in an active pleading and discovery practice with the governments in 1982 and 1983, the settling companies did their best to stay on the sidelines. We expected the case to be limited to the governments' surface cleanup claims against the non-settling defendants and believed that the groundwater issues could best be dealt with outside the litigation and after the governments had completed their RI/FS. We hoped to negotiate a groundwater settlement once the RI/FS was finished and thus avoid litigation entirely.

Two rulings by Judge Rubin during 1983, however, changed the nature and course of the case and ended our hopes of avoiding litigation. By early 1984, we, and many others, had been brought into the litigation.

First, the governments filed a motion asking the judge to manage the case in two separate phases: surface cleanup issues and, after completion of the governments' RI/FS, groundwater cleanup issues. This was precisely the approach [15 ELR 10210] the settlors believed would be most efficient, so we filed an amicus brief in support of the governments' motion.

Judge Rubin rejected this approach, however. He decided instead to bifurcate the case, with all liability issues to be decided first (for both surface and groundwater cleanup) and with damages and/or extent of the remedy to be decided second.

Second, Judge Rubin decided that responsible parties under CERCLA could be held "jointly and severally" liable for cleanup costs,⁵ the first in what proved to be a series of district court decisions upholding the government on this point.⁶ He ruled that "harm" (liability for response costs) could be apportioned only where the defendants could establish a reasonable basis for allocating responsibility among their number.

These two rulings had a significant influence on the governments and the defendants, causing them to greatly expand the scope of the litigation and the number of parties involved. At the end of 1983, the governments added groundwater cleanup claims to the litigation and added four new defendants from the 1982 settling group.⁷ From January through March of 1984, the defendants filed third-party complaints against (a) almost all of the 1982 settlors and (b) over 60 additional parties listed by EPA as PRPs at the Chem-Dyne site, but who had neither participated in the 1982 settlement nor been sued by the governments in 1982.⁸ the original settling group faced the prospect of having to put aside their hydrogeology manuals and dust off their Manuals For Complex Litigation.

At this point the Chem-Dyne stage was crowded with three groups of companies:

(1) 23 companies that the governments originally sued on surface cleanup claims in August 1982 and against which they added groundwater claims in late 1983 (the Original Defendants);

(2) 93 of the 112 companies that participated in the 1982 settlement and against which, in early 1984, 19 of the 23 Original Defendants filed third-party complaints (or cross claims in the case of the four settlors sued by the governments in December 1983) (the Settling Defendants),⁹ and

(3) over 60 companies that were neither among the original group of 1982 settlors nor the group of 23 Original Defendants, against which the Original Defendants filed third-party complaints in early 1984 (the Non-Settling Third-Party Defendants or the "Unwashed," as they came to be known, because they had not participated in the 1982 surface settlement nor had they been sued until the third-party complaints were filed).

The Impact of Combining Surface and Groundwater Issues

The consolidation of surface and groundwater cleanup issues into a single litigation had some advantages in the Chem-Dyne case. It might be useful, however, to examine briefly the question of whether the plaintiffs and defendants benefited in the long run from all parties being brought before the court at one time or whether the parties would have been better off if the case had been bifurcated into surface cleanup issues and groundwater and soil cleanup issues as the 1982 settlors and governments had argued. On the benefit side, it is certainly true that consolidation placed real pressure on the parties to resolve all the issues when the third-party complaints brought all the parties to the table in 1984. Also judicial economy resulted when the second trial proved unnecessary. I believe, however, that bifurcation into surface cleanup issues first and groundwater and soil cleanup issues second ultimately would have been more cost effective and would have had the effect of promoting faster cleanup of waste sites by encouraging surface settlements. At most waste sites, until a long-term RI/FS is completed (often two years), insufficient information is available on whether a groundwater problem exists and, if it does, the means and costs to clean it up. Consequently, if company-defendants wish to settle these cases, they must write "blank checks" until the remedial action plan is selected and the cost of implementing it is determined. One effect of bifurcating a CERCLA trial into a liability phase and a damages phase is that settlement is more difficult to achieve because damages often remain an unknown until the RI/FS is complete. Another effect of such a bifurcation is that defendants are more inclined to litigate liability issues for an indefinite period if it is not clear whether they might ultimately be found liable for a $20 million remedy or a $5 million remedy.

Continued Negotiations Under Threat of Trial

Despite the fact that we and many others had become embroiled in potentially massive and complex litigation, the Settling Defendants still hoped to avoid the high costs and uncertainties of full-blown trials on liability and remedial issues. We worked, initially to be severed from the litigation, then in search of settlement. During 1984 and the first half of 1985, the parties worked within their groups and sometimes among their groups in attempts to resolve the many issues raised by the litigation. Judge Rubin expedited these efforts by setting tentative trial dates. The result of all these efforts is an agreement reached in June 1985, which the parties lodged with the court on June 13.¹⁰ Judge Rubin is expected to sign the decree during the first week of August.

Organization

At the beginning of 1984, the Settling Defendants hoped to be severed from the main proceedings, but nonetheless [15 ELR 10211] developed a limited joint defense agreement with the Original Defendants. We felt that even if we escaped the litigation, we still would benefit from a coordinated approach to technical work and to pleading and discovery practice. The Original Defendants and Settling Defendants agreed to procedures (1) to commission and pay for technical work in response to the governments' own RI/FS; (2) to share documents with each other; and (3) to simplify discovery among the agreeing parties.

In March of 1984, since Judge Rubin had not ruled on any motions to sever or motions for summary judgment and had scheduled a trial for October or November, the Settling and Original Defendants decided to beef up our cooperative efforts, utilizing a complex but effective system of committees and liaison counsel.

The Settling Defendants established four subcommittees to work under our steering committee on litigation, cost allocation, settlement, and technical issues. To ensure that attorneys fees would be borne more fairly among all the members of the group, we hired two "liaison counsel" from private law firms: Theodore Garrett of Washington, D.C. and Charles Tisdale of Atlanta, Georgia. They would serve as attorneys for the entire group on common litigation issues and as lead negotiators with the governments on group issues, under the direction of a trial management committee.

Nearly all of the 93 Settling Defendants paid into a fund to cover the liaison counsel's fees. The other groups of defendants also hired liaison counsel, though with some variation as to funding. The four Settling Defendants sued by the governments on groundwater claims selected a separate liaison counsel, Joseph Lonardo of Columbus, Ohio, to protect their interests. The Non-Settling Third-Party Defendants also selected and jointly funded two liaison counsel, James Kelly and Roger Fry of Cincinnati, Ohio. The Original Defendants designated two liaison counsel, Thomas Terp and James Adams of Cincinnati, Ohio, but they did not fund these counsel's fees as a group. Rather, the group tried to divide the various tasks among the counsel representing individual Original Defendants so that the economic burden would be allocated on an equitable basis. Two firms took the lead on discovery, another on expert witnesses, and a fourth on establishing a document depository. The division of responsibilities by task, however, may have resulted in certain of the Original Defendants bearing a greater share of the litigation costs than others, because the time and resources required for the assigned tasks varied considerably and were hard to predict.

Allocation — I

During the spring and summer of 1984, while the groups of PRPs were sorting themselves into committees and selecting liaison counsel, the Settling Defendants and the Original Defendants also formed a joint allocation committee. The allocation group began a difficult search for a workable apportionment formula acceptable to all parties. In August, the Non-Settling Third-Party Defendants decided to join in funding the additional technical work at the site and began participating on the allocation committee.

Initially the apportionment committee had little information relevant to its task. In 1982, the governments had provided us with rough estimates of the waste volumes of the two dozen companies then thought to be the largest customers of Chem-Dyne, but not furnish a "wastein" list identifying the volume or type of substances allegedly sent to the site by each of the 300 PRPs. The available federal and state documents indicating volumes of wastes attributable to generators proved to be deficient on six counts. They did not (1) include all companies using the site, (2) cover the entire period of site use, (3) specify volumes of materials with sufficient particularity, (4) take into account all available documents regarding movement of materials to and from the site, (5) delete all brokered materials (materials that were rerouted elsewhere before even crossing the property line of the Chem-Dyne site) and transshipped materials (materials that went to the site, but were removed before they caused any environmental problem), or (6) consistently account for duplicate invoices.

The allocation committee tried to remedy the data short-age. It developed a simplified form for each defendant to complete that would make possible compilation of a definitive waste-in list. The committee decided that such factors as relative toxicity, mobility, persistence, and the cost of removing, disposing, or treating specific wastes would not be taken into account in the allocation process, unless the governments' remedial action plan dictated extraordinary costs for removal, disposal, or treatment of specific materials. It decided that embellishing volumetric data with toxicity or other information would be wasteful because many wastes were too poorly described to evaluate toxicity, toxicity was not necessarily related to the cost of ultimate disposal or treatment of a material, and most committee members believed that attempting to consider such factors would be too difficult.

The second stage of the process designed by the committee was to be that when (and if) a definitive waste-in list became available, the court would be requested to appoint an independent decisionmaker (a senior or inactive judge) to receive written submissions from each company wishing to reduce its listed waste volume. The judge would allow companies to present evidence demonstrating that their listed waste volumes should be reduced for materials that never reached the site or for materials that were transshipped or removed voluntarily by the company. Some truckloads of wastes stopped at the Hamilton, Ohio facility only overnight for a change of drivers, others remained much longer. Some companies, upon learning that there were problems at the facility, took the materials elsewhere. With respect to transshipped materials and materials removed voluntarily, a variable volume credit would be given depending upon the time the materials were on-site since, the committee concluded, the longer the materials were on-site, the greater the chances that they would have been spilled as drums deteriorated or materials were moved from one place to another. Also, the judge was to grant credits against volume for "products" sold to Chem-Dyne.

Shortly after the allocation committee made its recommendations to all the parties, however, the committee reconsidered the proposal and decided for a variety of reasons to abandon this elaborate allocation approach. The various parties (primarily from the Original Defendants and the Non-Settling Third-Party Defendants) argued that [15 ELR 10212] the approach was too complex, time-consuming, and expensive. After evaluating the criticisms, the committee concluded that allocation would have to be based on the crude existing data on waste volume. It then offered an alternative method of allocation that would refine that data. First, the committee prepared a waste-in list by averaging the volumes shown on the Department of Justice and Ohio Environmental Protection Agency lists, as supplemented by information gathered in discovery on individual defendants. Second, defendants with similar waste volumes were grouped into twelve tiers with everyone in the same tier assigned the same dollar amount except for the twelfth and smallest-volume tier. Defendants in that tier would be asked to pay decreasing amounts as their volumes dropped.

The committee coupled the "tiering" concept with the use of the waste-in list because the individual waste volume figures for many of the moderate to larger volume defendants were often only rough approximations. For example, the volumes often included large quantities of waste that never crossed the property lines at the Hamilton, Ohio site, because wastes frequently were transported by Chem-Dyne from a company's plant directly to a waste disposal facility. Thus, the tiering approach helped to deemphasize the illusory specificity of waste-in list numbers. Ultimately, representatives of the three groups of defendants reached agreement on this allocation approach.

Preparations For Trial

Shortly after the joint allocation committee began its efforts, the Settling Defendants and the Original Defendants formed a joint trial committee. At an early stage, Judge Rubin indicated that he would allow the governments and the defendants to name only four expert witnesses for each side. One of the trial committee's first priorities was to interview prospective witnesses to find four who could best meet our needs at trial. We selected expert witnesses in hydrogeology, toxicology, fate and transport of chemicals, and soils and site closure; the governments selected four in similar disciplines. The two sides exchanged summaries of the expected testimony of each expert, and various defense counsel agreed to take primary responsibility for preparing and deposing the governments' experts. At the same time, the trial committee began developing a strategy to be pursued should the case fail to settle by the fourth quarter of 1984, the time when, Judge Rubin had informed us, the trial date would be set.

Settlement Track

As a part of the 1982 Settlement Agreement, the settling companies obtained the right to participate in a limited fashion in the governments' groundwater and soil study (RI/FS) at the Chem-Dyne site. The participation afforded by that agreement, however, proved to be insufficient for the type of meaningful dialogue we expected to result. In essence, we could make comments and suggestions on the RI/FS, but the governments were under no obligation to act on them. Undoubtedly, competing interests with respect to litigation strategy and concern about providing free discovery affected the atmosphere at the infrequent technical meetings that occurred between the parties. A continuation of this type of working relationship on the RI/FS would probably have increased the chances of the extent of the remedial action being litigated rather than promoting the possibility of the parties settling the case by reaching agreement on the remedy.

At a status conference in early 1984, shortly after the Settling Defendants had been brought into the case, we requested that the court provide an opportunity for more meaningful participation in the RI/FS. The court liked the idea and the federal government's counsel did not object. In fact, he agreed that a process involving more than the sharing of information and data by the parties would be a good idea likely to promote good faith efforts to settle the case. Shortly after the status conference, we began to meet on a regular basis. These meetings provided an opportunity for the technical experts from both sides to express their opinions and challenge opinions with which they did not agree in a face-to-face setting. The change in the process contributed greatly to the eventual resolution of differences on the most appropriate remedy for the site.

At a subsequent status conference, in an effort to promote settlement, Judge Rubin directed the governments to inform the defendants by October 1, 1984 of the remedial action plan that the governments believed the site required or the governments' projections of the total cost to settle the case. Without this information, the court realized the defendants would never be in a position to make a settlement offer because they would not have a total cleanup cost figure to apportion among themselves. In large part as a result of the expanded interaction among the parties' technical negotiators, at the end of September the governments and the defendants concluded that they were making sufficient progress toward a mutually acceptable remedial action plan, which the defendants would implement, and that agreement would probably be reached in the near future. We agreed to notify the court that there was no need for the information that Judge Rubin had directed the governments to provide to us on October 1. This agreement marked the beginning of the end of active litigation and placed the case on a "settlement track."

On October 9, the defendants provided the governments with a proposed remedial action plan for the site and, within a week, the governments reacted. In November, we essentially reached agreement on a remedial action plan, the cost of which appeared to be approximately $12 million. We also began to close in on dollar amounts to reimburse the governments for administrative and removal costs and another amount for the state's natural resource damages claim.

Allocation — II

Just as we were approaching an agreement with the governments, however, the defendants were forced to address a divisive issue that had remained dormant for some time. While the allocation committee had been developing a tiering approach, the different defendant groups had avoided discussing how to allocate the governments' administrative and removal costs associated with the surface cleanup. The Settling Defendants' position was that such costs were largely "covered costs" under the 1982 agreement for which we, as settling parties, had received a release. Consequently, the Settling Defendants refused to use the tiering approach developed by the joint allocation [15 ELR 10213] committee for dividing up the $4 million agreed to as a settlement amount for the federal government's response costs (removal costs and administrative costs incurred in connection with the surface cleanup and the RI/FS). Finally, the Original Defendants and the Non-Settling Third-Party Defendants agreed to pay approximately $3 million and the Settling Defendants agreed to pay approximately $1 million. Although a number of parties were not pleased with the outcome of the negotiations on this issue, the resolution of this dispute among the defendants allowed the negotiation team to concentrate on the consent decree and the remaining technical differences on the remedial action plan. In agreeing to pay the $1 million, the representatives of the Settling Defendants utilized the principle that none of the companies that participated in the 1982 settlement would pay more than 90 percent of the amount a nonsettling company in the same tier on the allocation chart would pay. In this manner, the representatives of the Settling Defendants believed they had ensured that each company that settled in 1982 received a tangible benefit over those companies that chose not to voluntarily shoulder responsibility for surface cleanup costs.

Document of Understanding

As the end of November approached and a final pretrial conference scheduled for December 7 drew near, the governments began pressing for development of a "document of understanding" regarding the remedial action plan and the performance standards that would be met. Without such a document, the governments were unwilling to approach Judge Rubin and indicate that they believed the case would settle. The document was critical because it was the first to attempt to put into specific language the elements of the complex remedial plan that had long been under discussion.

The defendants' technical negotiators — a surface water consultant, a soil and site closure expert, a groundwater hydrogeologist, several in-house company environmental specialists and lawyers, liaison counsel for the Settling Defendants, and the author — had been working together for nearly two years to oversee the government contractor's work on the RI/FS. We believed from the discussions at the regular meetings with the governments' technical negotiation team that we essentially agreed on the elements of the remedial action plan. Fortunately that belief proved correct and the two negotiation teams reached agreement on a document of understanding after a period of intense negotiations shortly before the scheduled December 7 pretrial conference. The negotiations were intense because we were negotiating the essence of the remedial action plan, including such matters as performance criteria for the groundwater cleanup and soil removal criteria, and if we failed to reach an agreement prior to the pretrial conference, the chance of avoiding trial would probably be lost. The negotiations proved successful in large part due to the mutual understanding and respect that had developed among the negotiators over the months. The document of understanding eventually served as the foundation for paragraph V of the consent decree (described infra), which contains the details of the remedial action plan for the site.

As a result of the parties' representations that the case would settle, on December 12 Judge Rubin conditionally dismissed the case for 90 days to give the parties time to resolve the remaining issues. We had taken major strides toward settlement, but we had some distance to go. The year ended with both a consent decree and the details of the remedial action plan remaining to be negotiated.

Marathon Consent Decree and Remedial Action Plan Negotiations

The parties paused as if to catch their breath before entering what all hoped was the home stretch of this protracted race. Negotiations started off slowly in early January, but began to quicken as the month wore on. Through February and March negotiations continued at a wearying pace. While the parties' lawyers traded drafts of proposed consent decrees in one series of meetings, the technical representatives and a few lawyers for each of the two sides continued to negotiate on the contents and performance aspects of the site remedy in another series of meetings. Eventually we eliminated the separate meetings as a result of the governments insisting that the specific outline of the remedy to be performed be folded into the consent decree.

Two major obstacles threatened to block the path to settlement at this late stage. The client companies of some members of the negotiation team believed that two issues were so fundamentally important that they should be brought to the attention of the EPA Administrator. Those two issues were how to pay for "shortfalls" in the $19 million estimated to be needed to settle the case that would result if not enough defendants chose to participate in the settlement, and how to avoid or narrow the scope of the "reopener" language that the governments insisted should be in the draft consent decree.

With respect to the shortfall question, the defendants' position was that if the entire $19 million was not raised, a "trustee" representing the defendants that did settle and the governments would jointly pursue non-settlors in litigation. If shortfalls had to be made up immediately, Superfund dollars would be used and the uit against non-settlors could be converted into a cost recovery action. The governments' position, on the other hand, was that all shortfalls would be made up by the defendants that settled. We believed the governments' position was unfair and would create an incentive not to settle for many defendants.

We also opposed the governments' release language. They insisted on a "reopener" for conditions that "may present" an imminent and substantial endangerment to the public health, welfare or the environment. We believed that this language, which the governments argued simply "tracked the statute," was too broad and would be a disincentive to settlement. The governments countered that if the reopener conditions occurred, the governments could compel defendants to abate the hazard under CERCLA § 106¹¹ in any event.

The Administrator declined to meet to discuss these issues. Although there was nothing the negotiation team could do to alleviate our concern about the scope of the "reopener" language, we did develop a means of avoiding an immediate shortfall. A separate letter agreement with the governments provided that the consent decree would [15 ELR 10214] only become effective if $17 million was committed by defendants willing to sign. Fortunately, with $18 million committed by the defendants by June, the shortfall problem did not materialize.

Overview of Consent Decree

Despite the unpalatability of several provisions in the consent decree, the Chem-Dyne case settled primarily because the defendants believed they would save substantial sums of money both in the cost of the remedy and in litigation costs. In the cost of the remedy alone, our consultants estimated we would save several million dollars as a result of us, not the government, implementing the remedial plan. No estimate of the transaction costs of resuming trial preparations was ever developed but they would have been substantial if other recent cases are any guide.¹² Many companies apparently also elected to settle because they believed they would be sued by both the governments and the settlors' trustees if they did not.

The Chem-Dyne consent decree is a long and complete document. Much of it is description of site-specific remedial measures. The core of the agreement can be distilled out in eight basic points.

1. Payment to United States — $4 Million

To reimburse the United States for response costs incurred at the site, the settlors agreed to pay $4 million.

2. Payment to Ohio — $3.43 Million

To settle the natural resource damages claims and to reimburse the State of Ohio for response costs incurred, the settlors agreed to pay $3.43 million in three installments over a two-year period through December 31, 1987.

3. Allocation Formula

The governments and the settlors agreed that the individual settlors' payments represent "a fair, reasonable and equitable apportionment of the total settlement costs." The decree calls for the use of the same formula in apportioning additional amounts among the settlors in the event cost-overruns or other shortfall situations create the need for future assessments by the trustees.

4. Implementation of Remedy by Settlors

The settlors agreed to finance and perform the remedial action for the site as described in paragraph V of the decree and in the remedial action plan. Stripped to the bare essentials, the remedial action consists of removal of approximately 1000 cubic yards of contaminated soil (completed in May), construction of a clay cap with a synthetic liner, demolition of on-site structures, installation of a groundwater pumping, treating, and reinjection system, monitoring of groundwater, and maintenance and monitoring of the cap.

Operation of the treatment system may be terminated after 10 years if two performance goals are met: (1) a concentration of not more than 100 parts per billion (ppb) of total volatile organic compounds (VOCs) is achieved inside each well within the boundary of the plume of groundwater contamination, and (2) the concentration of VOCs has become effectively constant in each well. If after 10 years the concentration of VOCs has become effectively constant but the performance goal of 100 ppb has not been achieved, operation of the system may be terminated if substantial compliance with the 100 ppb level has been achieved and the periodic reevaluations of the system demonstrate that no reasonable system modification or adjustment will produce significant improvement within an additional 10 years. If both performance goals are not met by the 20th year, the parties shall determine whether further operation and modification of the system would be cost-effective. If the parties disagree, disputes will be resolved by the court.

5. Additional Litigation

The governments agreed that it is their present intention, subject to prosecutorial discretion, to assert claims against non-settling defendants to collect all response costs and damages unreimbursed by the terms of the consent decree. For all amounts which the settlors may be obligated to pay in excess of their apportioned shares, the settlors intend to instruct the trustees to assert claims against non-settling defendants. To facilitate later claims for contribution against non-settlors, the consent decree states that all payments and costs in connection with the settlement are consistent with the National Contingency Plan.¹³

6. Limited Release Subject To "Reopener" Contingencies

The decree releases each settling defendant from all liability for all common law state and federal civil claims and causes of action under provisions of environmental statutes and regulations and claims for natural resource damages which have been or could have been asserted.

The release provided to each settlor is limited in three respects. First, the settlors have a continuing responsibility to perform the remedial action plan, which can involve financial commitments over and above the cost estimates currently available to implement the plan. Second, the release does not cover and liability arising from the offsite disposal of the contaminated soils. Third, the "reopener" language could be triggered if conditions arise that "may present an imminent and substantial endangerment" as a result of:

(1) Either (a) previously unknown or undetected conditions at or from the Chem-Dyne site or (b) other previously unknown facts arise or are discovered after execution by the parties of this Consent Decree; or

(2) The conditions are caused by the implementation of the Remedial Action Plan or this Consent Decree.¹⁴

7. "Buy-Out" for Small Generators

For generators responsible for 200 drums or less, the consent decree provides an opportunity to obtain a complete release from both the governments and the settlors in exchange for payment of an amount equal to 2.5 times the generator's allocated share. Such parties will also be free of any obligations the settlors will retain as holders of the water pollution control permit and any other permits that must be obtained.¹⁵ In return, the settlors assume all liability for compliance with the decree.

8. Dispute Resolution and Force Majeure Clauses

In the event a dispute cannot be resolved within thirty days, the dispute resolution procedure is triggered by either plaintiff, any settlor, or the trustee or its designee filing a petition with the court setting forth the matters in dispute and the relief requested. If an event arises which delays or prevents the performance of any obligation under the decree and the plaintiffs disagree with the settlors that the [15 ELR 10215] event arose from causes beyond their control, the dispute resolution provisions shall apply. In such situations, the burden of proof is not weighted in favor of either party by the decree. The consent decree also does not contain a stipulated penalty clause, contrary to other decrees.

Chem-Dyne Site Trust Fund

To effectuate the various provisions of the consent decree, the settlors are establishing a Chem-Dyne site trust fund by separate agreement. The responsibilities relating to performance and overview of the remedial action and management of the funds are the most important duties to be carried out by the trustees. Five of the defendants with large volumes of the waste-in list have agreed to undertake trustee responsibilities on behalf of all the settlors.

The draft trust agreement provides that all of the settlors will indemnify the trustees from any legal liabilities they incur and allows the trustees to require the settlors other than the small volume settling defendants who exercised their buy-out option to make additional payments to the fund when necessary to ensure that the remedial, work described in the decree is performed. The trustees are empowered to hire engineering/management firms to implement the remedial plan and attorneys to file claims against non-settling companies.

Conclusion

There is one paramount lesson to be learned from this and other multi-party CERCLA cases. As a general rule, from the moment PRPs first receive their notice letters from EPA, they must make a concerted effort to organize themselves so that they may negotiate to develop the work plan for the RI/FS, perform the RI/FS, and implement the remedial action plan without litigation. EPA can assist — and needs to assist — PRPs in this effort by working with the cooperating parties to bring pressure to bear on those PRPs that refuse to acknowledge their responsibility at the site. As this cooperative norm is heeded at more and more sites, cleanups will be completed at a much faster place and the vast amounts of money being consumed by what frequently is unproductive litigation will be saved.

1. 42 U.S.C. §§ 9601-9657, ELR STAT. 41941.

2. See, e.g., N.Y. Times, Aug, 27, 1982; Washington Post, Aug. 27, 1982; Wall St. J., Aug. 27, 1982; and CHEMICAL WEEK, Nov. 3, 1982. For an in-depth discussion of the first settlement, see ENVTL. FORUM, Dec. 1982, at 7.

3. United States v. Chem-Dyne Corp., No C-1-82-840, ELR PEND. LIT. 65763 (S.D. Ohio complaint filed Aug. 26, 1982).

4. See e.g., Defendants' Joint Memorandum in Support of Motion for Early Determination of the Issue of Joint and Several Liability, United States v. Chem-Dyne Corp., ELR PEND. LIT. 65787 (S.D. Ohio filed Mar. 1, 1983).

5. United States v. Chem-Dyne Corp., 572 F. Supp. 802, 13 ELR 20986 (S.D. Ohio 1983).

6. See generally Comment, CERCLA Litigation Update: The Emerging Law of Generator Liability, 14 ELR 10224 (1984).

7. The federal government did not reveal how it decided which of the settling companies to sue, but presumably it believed that it could show that chemicals associated with these four companies could be found in the soil or groundwater.

8. See, e.g., ELR PEND. LIT. 65825 (abstracting a half dozen memoranda and motions relating to the third-party claims).

9. The Original Defendants did not file third-party claims against all 112 companies that participated in the 1982 settlement, because the requirements of FED. R. CIV. P. 11 for bringing suit against some of the companies could not be satisfied; for example, there was insufficient factual information demonstrating that some companies' wastes crossed the property lines of the Chem-Dyne site for the plaintiffs to file a third-party complaint in accordance with the standards of conduct expected of attorneys who sign pleadings.

10. 50 Fed. Reg. 25797 (June 21, 1985).

11. 42 U.S.C. § 9606, ELR STAT. 41947.

12. See testimony of John C. Butler III, Costs of Superfund Litigation, before the Senate Committee on Environment and Public Works, Apr. 3, 1985 (copy available from author).

13. CERCLA § 107(a)(4)(B), 42 U.S.C. § 107(a)(4)(B), ELR STAT. 41947, provides that nongovernmental parties who have incurred response costs consistent with the national contingency plan, 40 C.F.R. Part 300, ELR REG. 47401, shall have a cause of action against other responsible parties.

14. Paragraph XIII. C.6. of Consent Decree.

15. The trustees for the settling defendants have already been issued necessary water pollution, underground injection, and air pollution permits. The state agreed to issue all necessary permits upon filing of the applications, paragraph IV.C. of the decree.