United States v. Ward

No. 83-63-CIV-5 (E.D.N.C. May 14, 1984)

The court holds, in an action under §§ 104 and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to recover state and federal response costs incurred in cleaning up polychlorinated biphenyls (PCBs) sprayed along North Carolina roadsides, that a third party action for contribution by the primary defendant is not precluded by collateral estoppel, or by CERCLA. The court first notes that one who intentionally or criminally causes an injury has no right to contribution or indemnity in an action resulting from that injury. Ward was convicted of the roadside PCB disposal, and the third party defendants may properly benefit from the doctrine of collateral estoppel with regard to those convictions despite not being parties to the criminal action. Therefore, the court holds the doctrine of collateral estoppel acts as a bar to any right Ward might have had against the third-party defendants as to all disposal sites covered by the criminal action. But since Ward was convicted of contaminating only some of the roadsides involved in this action, the court denies the third-party defendants' dismissal motion. The court goes on to hold that contribution and indemnity are available under § 107 of CERCLA. Congress did not intend to preclude actions under CERCLA for contribution and indemnity, but intended that the scope of liability be determined by federal common law.

[Related decisions are published at 12 ELR 20285, 12 ELR 20336, and 12 ELR 20402.]

Counsel for Plaintiff
James S. Terry, 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) 633-5271

Douglas Greenhouse
Office of the General Counsel
Environmental Protection Agency, Washington DC 20460
(202) 475-8040

Counsel for Plaintiff-Intervenor
Andrew A. Vanore Jr., Sr. Deputy Attorney General; Thomas E. Moffitt
Department of Justice, Corner of Wilmington & Morgan, Raleigh NC 27601
(919) 733-3377

Counsel for Defendants
Ralph McDonald
Bailey, Dixon, Wooten, McDonald & Fountain
P.O. Box 2246, Raleigh NC 27602
(919) 828-0731

Robert W. Spearman
Sanford, Adams, McCullough & Beard
P.O. Box 389, Raleigh NC 27602
(919) 828-0564

[14 ELR 20804]

Britt, J.:

Order

During the summer of 1978, officials in the State of North Carolina discovered that the shoulders of many miles of rural roadside had been sprayed with an oily substance laced with polychlorinated biphenyls (PCBs), a toxic substance. Investigation revealed that the PCBs had been deliberately sprayed along the roadside from a truck equipped for that purpose by Robert Burns and his two sons. The source of the chemical proved to be Ward Transformer Company (WTC), a Raleigh, North Caorlina enterprise engaged in the business of buying, rebuilding and reselling used voltage transformers. This process resulted in waste PCBs, a liquid used extensively in transformers because of its high ignition temperature or "flash point."

Robert Earl Ward, Jr. (Ward), Chairman of the Board of WTC, was indicted by state officals for malicious damage to real property as a result of some of the spills and was later acquitted. He was subsequently indicted by federal authorities for unlawful disposal of toxic substances under the Toxic Substance Control Act, 15 U.S.C. §§ 2601-2629. His conviction on the eight-count indictment was affirmed by the United States Court of Appeals for the Fourth Circuit. United States v. Ward, 676 F.2d 94 [12 ELR 20285] (1982). After much debate, public and private, and after at least three lawsuits instituted for the purpose of preventing its accomplishment, the contaminated soil was removed from the roadside by state officials and buried in a landfill in Warren County. See NAACP v. Gorsuch, No. 82-768-CIV-5 (E.D.N.C. Aug. 10, 1982); Twitty v. State of North Carolina, 527 F. Supp. 778 [12 ELR 20336] (E.D.N.C. 1981), aff'd 696 F.2d 992 [13 ELR 20788] (4th Cir. 1982); Warren County v. State of North Carolina, 528 F. Supp. 276 [12 ELR 20402] (E.D.N.C. 1981). At least a part of the funding for this removal was provided to the State by the federal government under the Superfund legislation. Comprehensive Environmental Response Compensation Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601-9657.

I. Procedural Background

The federal government instituted this action on 26 January 1983 against Ward and WTC seeking to recover funds expended under CERCLA for the PCB cleanup. Express authority for such an action is granted under sections 104 and 107 of CERCLA. Id. §§ 9604 & 9607. Upon motion, the State was permitted to intervene, seeking to recover its cleanup costs which were not reimbursed by the federal government.

On 19 September 1983, upon leave of Court, Ward and WTC filed a third-party complaint against Norry Electric Corporation (Norry) and Liberty Motor and Machinery Company (Liberty), alleged joint-venturers, seeking indemnity or contribution for any amounts they may be found to owe plaintiffs as defendants under section 107(a)(3) of CERCLA. 42 U.S.C. § 9607(a)(3). Norry and Liberty have filed motions to dismiss for failure to state a claim on which relief can be granted. Fed. R. Civ. P. 12(b)(6). The motions have been thoroughly briefed by the parties, oral arguments have been held, and the matter is now ripe for ruling.

For the reasons set out below, the motions will be denied.

II. Contentions

A. Third-Party Plaintiffs. Ward and WTC seek, by their complaint against Norry and Liberty,

to recover over from [each of them] an amount which represents that proportion of the judgment or recovery which the amount of PCB fluid from [each third-party defendant's] transformers dumped . . . bears to the total PCB fluid removed from WTC which was dumped. In the alternative, Ward and WTC are entitled to pro rata contribution [from each third-party defendant] toward any recovery against them.

Ward and WTC contend that Norry and Liberty had agreements with WTC for the storage, reconditioning and reuse or resale of transformers owned by each of them respectively and that waste PCBs from those transformers constituted a part of that dispersed on North Carolina Roadsides. Alleging that Norry and Liberty were joint-venturers with WTC, third-party plaintiffs contend that by virtue of strict liability under CERCLA and general principles of the law of torts they are entitled to indemnity or contribution.

[14 ELR 20805]

B. Third-Party Defendants. Norry and Liberty contend that there is neither a common law nor a statutory right of contribution. In addition, they contend that Ward and WTC are collaterally estopped from pursuing such remedies because of Ward's federal criminal convictions.

III. Analysis

A. If the collateral estoppel argument is correct then the Court will have no occasion to address the question of whether there is a right of contribution or indemnity. Thus, it will be addressed first.

Whether predicated under common law or North Carolina statute, there is no right of contribution or indemnity by one who intentionally or criminally causes the injury giving rise to the action. N.C. Gen. Stat. § 1B-1(c); 46 Am. Jur. 2d, Joint Ventures § 47 (1969); W. Prosser, Law of Torts § 50 (4th ed. 1971); Restatement (Second) to Torts, § 886A(3).

The question then becomes whether Ward's conviction of the federal criminal charges prevents Ward and WTC from pursuing desired remedies against Norry and Liberty under the doctrine of collateral estoppel. A part of the broader doctrine of res judicata, collateral estoppel is also known as "issue preclusion." Kaspar Wire Works, Inc. v. Leco Engineersing & Machine, Inc., 575 F.2d 530 (5th Cir. 1978); C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4402 (1981). The rule is stated in section 2 of the Restatement (Second) of Judgments, as follows

When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on a same or a different claim.

The "issue of fact or law" with which we are here concerned is the alleged deliberate and criminal act of Ward in disposing of the PCBs.

The first court in the indictment in the case of United States of America v. Robert Earl Ward, Jr., No. 79-401-CR-5, charged that defendant ". . . knowingly and willfully caused . . . PCB's to be disposed of . . . in Johnston and Harnett Counties, North Carolina . . . ." The remaining seven counts contained identical allegations with reference to Franklin, Warren and Halifax Counties (second count); Granville County (third count); Harnett County (fourth count); Wake, Nash and Franklin Counties (fifth count); Nash County (sixth count); Halifax County (seventh count); and Wilson and Edgecombe Counties (eighth count). The separate counts refer to separate spill sites, some of which extended in continuous fashion into more than one county. Evidence at the trial, over which the undersigned presided, disclosed that the disposal was accomplished by driving a tanker truck equipped with a side-mounted spraying device along the road spraying the liquid in a band along the shoulders thereof. Many miles of roadside shoulders were contaminated in this fashion. Under the instructions given the jury, in order to convict Ward, had to find that he "willfully and knowingly" caused the PCBs to be disposed of unlawfully. Those two words were defined as follows:

. . . [K]nowingly . . . means that the act wad done voluntarily and intentionally and not because of mistake or accident.

. . . [W]illfully . . . means that the act was committed voluntarily and purposely, with the specific intent to do something the law forbids; that is to say, with bad purpose either to disobey or disregard the law.

It is clear that the issue of fact or law involved in the criminal case is the same as that involved here with regard to the actual roadsides covered by the criminal indictment. It is equally clear that the issue was "actually litigated and determined" and that the determination was "essential to the judgment."

Ward contends, however, that the spill sites set forth in this civil action are not necessarily the same as those covered by the eight counts of the indictment. Paragraph 19 of the complaint sets forth in fifteen subparagraphs the sites of disposal at issue in this action. Subparagraphs a through d relate to sections of roadways lying wholly or in part in counties not within the Eastern District and not listed in the indictment (Chatham, Alamance, Lee and Person). Quite obviously then, the issue of Ward's deliberate act of disposal of PCBs on those roadsides was not decided in the criminal action.

Ward contends also that his acquittal of criminal charges brought by the State of North Carolina and relating to the Halifax County dumpings make the application of collateral estoppel here inappropriate as the same factual situation has produced inconsistent verdicts. The Court, however, is not persuaded by this argument. The state charges, alleging malicious damage to real property, were quite different from the federal.

Even though they were not parties to the criminal action, Norry and Liberty may properly benefit from the doctrine of collateral estoppel. Blonder Tongue v. The University Foundation, 402 U.S. 313 (1971); Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979).

The court holds that the doctrine of collateral estoppel or issue preclusion acts as a bar to any right Ward may have against Norry and Liberty as to all disposal sites covered by the criminal action. However, since it appears from the pleadings that there are disposal sites which were not included in the criminal indictment and since it does not clearly appear from the pleadings which disposal sites were in fact covered by the criminal indictment, the motion to dismiss under Rule 12(b)(6) of the Federal Rules of Criminal Procedure based thereon will be denied. The matter may be more appropriately addressed, and disposed of, by motion for summary judgment. Likewise, the applicability of the doctrine to WTC can best be determined on motion for summary judgment when Ward's relationship with WTC can be more clearly defined.

B. The second issue concerns a determination of whether there is a statutory or common law right to contribution or indemnity under section 107 of CERCLA, 42 U.S.C. § 9607. Although one district has decided the issue to the contrary, United States v. Westinghouse Electric Corp., No. IP 83-9-C [14 ELR 20483] (S.D. Ind. June 29, 1983), this Court is in agreement with the legislative analysis contained in United States v. Chem-Dyne Corp., No. C-1-82-840 [13 ELR 20986] (S.D. Ohio Oct. 11, 1983). See also, United States v. South Carolina Department of Health and Environmental Control, No. 80-1274-6 (D.S.C. Feb. 23, 1984); United States v. Conservation Chemical Co., 14 ELR 20207 (W.D. Mo. Feb. 3, 1984); United States v. Northeastern Pharmaceutical and Chemical Co., 14 ELR 20212 (W.D. Mo. Jan. 31, 1984); United States v. A & F Materials Co., 14 ELR 20105 (S.D. Ill. Jan. 20, 1984); United States v. Wade, 14 ELR 20096 (E.D. Pa. Dec. 20, 1983).

Although it did not address the extant issue, the Chem-Dyne court reviewed the legislative history of CERCLA in context and considered the question of whether CERCLA permits the imposition of joint and several liability. The court concluded that Congress had not intended to reject joint and several liability by deleting an earlier proposal contained in the House version, but had instead sought to avoid the judicial application of an inflexible legislative standard. Chem-Dyne Corp., slip op. at 9. Furthermore, the application of joint and several liability under CERCLA would be determined from "traditional and evolving principles of common law," id. at 10, and more specifically, would be interpreted according to uniform federal law, id. at 14.

In approving the use of joint and several liability in actions brought under CERCLA, Chem-Dyne recognized the general law concerning joint torts and the problems of apportionment and contribution. Id. at 8 n.3 & 14-16. See also, South Carolina Department of Health and Environmental Control, slip op. at 16 § 16-17 n.8 ("Such arbitrary or theoretical means of costs apportionment do not diminish the indivisibility of the underlying harm, and are matters more appropriately considered in an action for contribution between responsible parties after plaintiff has been made whole."); Northeastern Pharmaceutical and Chemical Co., 14 E.L.R. at 20221 n.26 (concluding that joint tort-feasors are not indispensable parties under federal law and should be made parties to the suit by defendants); A & F Materials Co., 14 E.L.R. at 20110 (generator-defendant should protect itself from multiple liability through the impleader provision of Rule 14).

In addition, contribution among tort-feasors is now permitted in eighty percent of the states, Restatement (Second) of Torts § 886A reporter's note (app. 1982), and the action for indemnity has always been recognized, id. § 886B comment a (1979). For instance, the Uniform Contribution Among Tortfeasors Act provides [14 ELR 20806] that "where two or more persons become jointly or severally liable in tort for the same injury to person or property . . ., there is a right of contribution among them even though judgment has not been recovered against all or any of them," N.C. Gen. Stat. § 1B-1(a). This statute also preserves the action for indemnity, id. § 1B-1(f). See also, Prosser, Law of Torts, §§ 50-51 (4th ed. 1971). 1971).

Accordingly, the Court concludes that Congress did not intend to preclude actions under CERCLA for contribution and indemnity, but rather intended that the scope of liability under section 107, 42 U.S.C. § 9607, be determined by federal common law.

IV. Conclusion

The motions of Norry and Liberty to dismiss are denied.