United States v. Hardage

No. CIV-86-1401-W (W.D. Okla. February 25, 1987)

The court appoints a special master in a suit brought by the United States under § 106 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) against parties potentially responsible for conditions at an Oklahoma hazardous waste site. The court first holds that exceptional conditions exist within the meaning of Federal Rule of Civil Procedure 53(b), which allows for the appointment of a special master in a jury case where required by exceptional conditions. There is the potential for an imminent and substantial endangerment to public health as a result of conditions at the site. Moreover, the liability and apportionment issues in the case are complex. There are claims by the government against 33 defendants, crossclaims among defendants for apportionment of any court-ordered cleanup, and the possibility of impleaders of additional defendants; there are also requests for division of the litigation into liability and damage phases and disagreements as to which should be resolved first. The number of parties and the commingling of waste at the site further complicate resolution of the issues. Finally, the amount of discovery that will be required will require extensive supervision.

The court holds that the scope of the special master's authority includes the submission of technical advice to the court. Despite the federal government's argument that this conflicts with its policy regarding the use of masters, masters have been used in similarly complex remedial actions involving equitable decrees. The court also holds that a special master may be appointed to supervise discovery. The court allows the master to rule on the admissibility of evidence, to supervise and issue recommendations on pretrial matters, and to hold hearings on the injunctive relief and apportionment claims. The court establishes a fund for the master's compensation, to be paid for by the parties, noting that it may assess a losing party for the full share of the master's fee, and approves an hourly rate of $100.

[Previous decisions from this litigation are published at 17 ELR 20242, 20738, and 20741.]

Counsel are listed at 17 ELR 20242.

[17 ELR 21082]

West, J.:

Order of Reference to Special Master

Pursuant to Federal Rule of Civil Procedure 53, the Court hereby appoints Alexander H. Danzberger as a Special Master in the above-captioned environmental case. This case warrants the assistance of a Master due to the need for prompt resolution of the instant claims which allege an imminent and substantial endangerment to the public health. The numerous and complicated factual issues the Court must determine also prompt the need for a Special Master. Finally, the assistance of a Master is necessitatedby the procedural posture of the case at bar which currently involves thirty-six parties. The Court concludes the following, in support of this Order of Reference.

I. Standards for Appointment of Master

Federal Rule of Civil Procedure 53(b) provides in relevant part:

A reference to a master shall be the exception and not the rule. In actions to be tried by a jury, a reference shall be made only when the issues are complicated; in actions to be tried without a jury, save in matters of account and of difficult computation of damages, a reference shall be made only upon a showing that some exceptional condition requires it.

The purpose of the Special Master is to assist the Court in its determination of "the facts and arrive at a correct result in a complicated piece of litigation before the Court." Webster Eisemlohr v. Kalodner, 145 F.2d 316, 319 (3d Cir. 1944). Exceptional circumstances exist within the meaning of Rule 53(b) when a court is faced with a multi-faceted "problem that cannot easily be resolved through a traditional courtroom-bound adjudicative process." Hart v. Community School Board, 383 F. Supp. 699, 766 (E.D.N.Y. 1974). The function of the Master is to help the Court in a case where assistance is necessary. Webster Eisemlohr, supra. 145 F.2d at 316.

Reference to a master is within the discretion of the district court. Southern Agency Co. v. LaSalle Casualty Co., 393 F.2d 907, 914 (8th Cir. 1968). The use of masters is not to displace the function of the court, and congestion of the court's docket in itself is not such an exceptional circumstance as to justify a reference to a master. LaBuy v. Howes Leather Co., 77 S. Ct. 309, 315 (1957). Similarly, mere complexity of issues of fact and law, without more, will not warrant the appointment of a master. Id.

LaBuy does not prohibit a court from appointing a master to achieve the resolution of a complicated case where promptness is required. See, Johnson Fare Box Co. v. National Rejectors, Inc., 269 F.2d 348, 351 (8th Cir. 1959). Nor does LaBuy bar the use of a master where constant supervision is necessary to regulate discovery in complicated litigation. First Iowa Hydro Electric Cooperative v. Iowa-Illinois Gas & Electric Co., 245 F.2d 613, 627 (8th Cir. 1957). A trial court may appoint a master to make extensive calculations regarding damages in a jury case where proof involves voluminous evidence of quantity, percentages, market values and ownership of property arising frm numerous transactions. See, United States v. Wilson, 21 F.R.D. 173 (N.D. Tex. 1957). The Court may refer all issues to a master for a hearing and report where potentially substantial economic concerns are involved and where an expeditious resolution of difficult issues is required. Helene Curtis v. Sales Affiliates, 199 F.2d 732, 733 (2d Cir. 1952). A master may be appointed to conduct a comprehensive analysis of highly technical data. Costello v. Wainwright, 387 F. Supp. 324 (M.D. Fla. 1973).

A master has been appointed pursuant to Rule 53 to determine the damages of over 700 plaintiffs in an environmental nuisance case. Biechele v. Norfolk & Western Railway Co., 309 F. Supp. 354, 358-59 (N.D.Ohio 1969). A Special Master may be appointed to oversee the implementation of an injunctive order. Gary W. v. Louisiana, 601 F.2d 240, 244-45 (5th Cir. 1979). Moreover, the Supreme Court appointed a Special Master to assist the resolution of a tax dispute regarding the estate of billionaire Howard Hughes. See, California v. Texas, 103 S. Ct. 288 (1983).

Finally, a trial court may issue an order of reference to a Special Master sua sponte. In Re Josyln's Estate, 171 F.2d 159, 164 (7th Cir. 1948). The Court is not required to conduct an evidentiary hearing to determine whether a master should be appointed. Gary W. v. Louisiana, 801 F.2d 240, 244 (5th Cir. 1979).

Pursuant to the above-stated standards and cited authorities, the Court concludes that the appointment of a Special Master in the instant litigation is required due to the existence of complicated issues and exceptional conditions within the meaning of Rule 53.

The primary factor which justifies the use of a Special Master in the case at bar is the urgency of prompt disposition, to protect the public health and safety. The main request of the government in this action appears to be a request for a court-ordered clean up pursuant to 42 U.S.C. § 9606(a). This statute authorizes injunctive relief when there is "an imminent and substantial endangerment to the public health or welfare or the environment because of an actual or threatened release of a hazardous substance. . . ." The government also requests this Court to order defendants to refrain from all activities relating to the handling, treatment, storage or disposal of hazardous and solid wastes and hazardous substances at the site, except where specifically directed otherwise. The government alleges the disposal site has a surface area of approximately seventy-five acres and is located near Criner, McClain County, [17 ELR 21083] Oklahoma. More than 18,000,000 gallons of hazardous substances, solid wastes, and/or hazardous wastes have been deposited at this site. The disposal area encompasses approximately seven acres of the entire seventy-five acre tract. Surface and subsurface soils and water outside this seven acre section are contaminated by solid or hazardous wastes or hazardous substances.

The site is located on a ridge and lies in a north-south direction, and slopes to the east on one side and to the south and west on the other. Portions of the site have been leased for use as pasture land for cattle. The primary areas which contain solid and hazardous wastes and hazardous substances have been surrounded by a fence. However, the cattle graze on areas which may be contaminated by these wastes or substances.

The Hardage site is situated in the drainage basin of North Criner Creek, a tributary of Criner Creek, which is itself a tributary of the Washita River. Drainage from the Hardage facility primarily flows to the south and southwest.

Public roads border the site on the west and the south, and a dairy is located to the southwest, across the road. Pasture land surrounds the east and north sides of the site, and cattle have grazed near the site and occasionally on the site itself. Residential drinking water wells are located nearby to the south and southwest.

The subsurface is composed of interbedded layers of sandstone, shale, and siltstone. These layers are fractured vertically and horizontally, and thereby allow migration of the hazardous wastes and substances.

In addition, several potential drinking water aquifers in the area, including the alluvium of Criner Creek and North Criner Creek, and some portions of the Hennessey formation lie directly beneath the site. These alluvial systems have been used as drinking water sources. Thus, circumstances present the possibility of extensive contamination.

The government contends that the following chemicals, all toxic or hazardous substances, have been found in the groundwater, wastes, soil, water and sediments, pursuant to investigations of the site by the Environmental Protection Agency: 1, 1, 2-trichloroethane, 2, 4, 6-trichlorophenol, 1, 2, 4-trichlorobenzene, flouranthene, napthalene, 1, 2-diphenylhydrazine, benezene, 1, 2-dichloroethene, 1, 1-dichloroethene, styrene, PCB-1254, PCB-1260, tetrachloroethene, toluene, trichloroethene, o-xylene, 1, 2-dichlorobenzene, chlorobenzene, ethylbenzene, toxaphene, arsenic, cyanide and heavy metals such as chromium, lead, nickel, zinc, copper and cadmium. In addition, the government claims that the following hazardous substances have migrated from the site: 1, 1-dichloroethane, 1, 1, 2-trichloroethane, tetrachloroethene and trichloroethene.

The government argues the migration of these chemicals has contaminated, or threatens to contaminate North Criner Creek, the North Criner Creek alluvium, wells which utilize it for drinking water purposes, and other aquifers, as well as other downstream drainage.

This case is not a typical Superfund case in which the government seeks reimbursement after having corrected the hazardous situation. Rather, it is an unusual action, as the government is attempting to remedy the situation through mandatory injunctive relief. Therefore, it is apparent exceptional circumstances exist which require the prompt and immediate attention of a master who can devote extraordinary amounts of time and skill to supervise discovery and to make factual determinations.

The issues in the case at bar are complex. Procedurally, this case involves claims by the government for injunctive relief against the site owner and operator, thirty-three generator defendants and three transporter defendants. In addition to cross-claims among the defendants for monetary apportionment of the ultimate cost of any court-ordered clean-up, the generator defendants have impleaded or have expressed their intention to implead as many as thirty third-party defendant generators. The generator defendants seek inclusion of the third-party defendants in any injunctive order and request an apportionment of the cost of the remedy among themselves and the third-party defendants. Both plaintiff and defendants have submitted proposed case management orders to the Court, which differ particularly in the order in which each party wishes to try the issues. Both parties propose that the Court bifurcate the litigation into a liability phase and a damage phase, but plaintiff wants to try the liability phase first, whereas defendants want to try the damages phase first. Other issues upon which the parties differ include the role of liaison counsel and the amount of time which should be allowed for filing third party claims for contribution and indemnity and cross-claims.

Substantively, the case is complicated by the nature of the facts the Court must determine. The Court first must decide whether an imminent and substantial danger exists at the site within the meaning of 42 U.S.C. § 9606. In addition, the Court mustdetermine whether each generator and each transporter caused or contributed to the endangerment. These determinations will require meticulous investigation as the chemical site covers seventy-five acres and contains more than 18,000,000 gallons of hazardous substances and waste. These chemical impoundments, bound in a large unlined, unsealed pit ("main pit"), a series of small temporary pits, two large mounds ("barrel" and "sludge" mounds) and a sludge drying building allegedly have produced chemical spillage, leakage and overflow.

If the Court determines that injunctive relief is appropriate, the Court then must apportion the relative cost of clean-up among the generators. The determination of apportionment, similar to an accounting, will require an analysis of the exact amount of waste deposited by each generator as well as the degrees of toxicity. The district court has broad discretion to appoint a master where difficult accounting problems are involved. Southern Agency Co., supra, 393 F.2d at 914. Ultimately, the Court will be required to determine the percentage of the cost of the remedy caused by each generator.

Therefore, appointment of a Special Master is warranted by several factors. First, the case requires an urgent resolution due to a threat to the public welfare. Second, an analysis of technical and scientific data is required to determine complex issues of liability and apportionment. Third, the issues are further complicated by the number of parties and the commingling of waste. Finally, the vast amount of evidence necessary to litigate this case will result in extensive discovery which will require almost constant supervision. Accordingly, a Master will be appointed to assist this Court.

II. Scope of the Master's Authority

Pursuant to Rule 53, Fed. R. Civ. P., the district court may authorize the Special Master to serve as fact finder, monitor, and hearing officer. Gary W. v. Louisiana, supra, 601 F.2d at 245. The district court should, however, clearly set forth the Master's duties in the Order of Reference. Id. Even the appointment of broad authority to a Master does not constitute an abuse of discretion where, as in the instant case, the Order provides that the parties have the right to object to the Master's recommendations and to participate in hearings on objections, complete with the right to present evidence of a documentary and testimonial nature and to cross-examine adverse witnesses. Id. The court retains judicial authority by reserving the right to reject or to modify any recommendation by the Master regardless of whether any party has filed an objection. Id.

The United States Department of Justice recently adopted a policy regarding the use of Special Masters. Essentially, said policy provides that the United States may agree to the appointment of a Special Master only in limited situations and under tightly controlled circumstances.

This Court believes its retained judicial authority in this case, by reservation of the right to reject or modify any recommendation by the Master, regardless of whether any party has filed an objection, does not disturb the conviction of the United States Department of Justice that "judicial power vested by the Constitution in the courts must be exercised by judges and their legislatively created subordinates, such as United States Magistrates." (Memorandum of United StatesRegarding the Use of a Special Master and Submission of List of Candidates, p. 4.)

The Government suggests in its Memorandum that there are two areas, at a minimum, in which a Master could be used which would be consistent with its policy: discovery and privilege matters and the settlement process. The United States argues the use of a Special Master to provide technical advice to the Court would be inconsistent with its policy and therefore would be vigorously resisted.

Nevertheless, the Court would have the government note that Masters have been used in a wide variety of remedial contexts, and are particularly appropriate in the implementation of complex equitable decrees which require ongoing judicial supervision. Halderman v. Pennhurst State School and Hospital, 611 F.2d 84, 11-12 (3d Cir. 1979), rev'd on other grounds and remanded, 101 S. Ct. 1531 [17 ELR 21084] (1981). The instant case involves such complex equitable decrees which require ongoing judicial supervision. Similarly, a Special Master may be appointed to supervise discovery when impartial supervision is needed. Fisher v. Harris, Upham & Co., 61 F.R.D. 447, 449-50 (S.D.N.Y. 1973). In this context, the Master may issue recommended rulings on discovery disputes. Waldo Theatres Corp. v. Dondis, 1 F.R.D. 592, 593-94 (D. Me. 1941). A reference of discovery disputes for recommendation does not constitute an abdication of judicial function where the district court retains ultimate responsibility for the discovery proceedings. American Honda Motor Co. v. Vickers Motors, Inc., 64 F.R.D. 118, 120 (W.D. Tenn. 1974). This type of function is consistent with the policy of the Department of Justice. Fed. R. Civ. P. 53 requires the district court to review and consider questions of law arising from the Special Master's report. Polin v. Dunn & Bradstreet, Inc., 634 F.2d 1318, 1321 (10th Cir. 1980). With respect to the Master's findings of fact in a non-jury case, the court is required to hold a hearing to allow parties to raise objections to the report. In re Kosmadakes, 444 F.2d 999, 1003 (D.C. Cir. 1970). Hence, the function of the Master involves more than mere fact finding. Haldermen v. Pennhurst State School & Hospital, supra.

In view of the above-articulated standards, the Court defines and limits the Master's authority in the instant case to the following particulars:

1. The Master possesses power to order and to preside over hearings. The Master may conduct such hearings on the record.

2. The Master may require production of evidence on all matters relevant to the reference of the case to him, including production of all books, papers, vouchers, documents and writings.

3. The Master is authorized to subpoena witnesses and to call the parties to the action. The Master has the authority to put witnesses and parties under oath and may himself examine them.

4. The Master may rule on the admissibility of evidence. When a party so requests, the Master shall make a record of the evidence offered and excluded in a manner and subject to limitations consistent with the Federal Rules of Evidence for a court sitting without a jury.

5. The Master may supervise and issue recommendations regarding pretrial matters. The Master's recommendations must be filed with the Clerk of the Court. Unless otherwise provided, the parties will have ten days from the date of the Master's recommendation to object, to respond, or to comment on the recommendation. The parties may file replies to these objections, responses and comments within five days thereafter, unless otherwise provided. The Court reserves the right to independently review the Master's recommendations and to adopt, to modify, to reject or to recommit any of such recommendations with instructions.

6. The Master will hold hearings on the claims for inclusion in any injunctive relief order and apportionment of costs. With respect to the claims for injunctive relief, the Master will prepare a report upon matters submitted to him and will submit recommended findings of fact and conclusions of law to the Court. The Master will file his report with the Clerk of the Court, and will file with it a transcript of the proceedings, the evidence and the original exhibits. A similar report will be prepared with respect to the claims for apportionment of costs. If the Court determines the apportionment claims require a jury trial, the use of the Master's findings will be governed by Federal Rule of Civil Procedure 53(e)(3), and relevant case law.

7. Any party may file objections, responses or comments with regard to the Master's recommended findings of fact and conclusions of law, within ten days of the date of filing of the recommendation. These time limits may be modified by the Master or the Court. The Court will independently review the Master's proposed findings of fact and conclusions of law, and after a hearing the Court may adopt the report, may modify it, may reject it in whole or in part, may receive further evidence, or may recommit the report with instructions.

8. Prior to filing his report, the Master may submit a draft thereof to counsel for all parties, and counsel may make suggestions to the Master regarding the report.

9. The Master shall exercise the power to regulate all proceedings in every hearing before him and may do all acts and take all measures necessary or proper for the efficient performance of his duties under this Order.

10. Due to the large number of parties involved, if a party fails to appear at a previously scheduled conference or hearing, the Master may proceed ex parte or, in his discretion, adjourn and continue the proceeding.

11. The Master is directed to make periodic reports to the Court concerning the progress of this litigation.

12. The Master has the authority to recommend to the Court the appointment of an expert, to conduct investigations relevant to the instant litigation. The Master may direct such expert to prepare studies and reports of the expert's investigations.

13. Any questions or disputes concerning the scope of the Master's authority must be resolved by motion to the Court.

III. Selection of the Master and Compensation

A Special Master appointed under Rule 53 should be well versed in the law and capable to perform the duties incumbent on one who sits in place of the Court. Cruz v. Hauck, 515 F.2d 322, 327 (5th Cir. 1975). In the instant case, the Master appointed by the Court has extensive experience in hazardous waste management, including Environmental Protection Agency Guidance, Resource Conservation and Recovery Act and Comprehensive Environmental Response, Compensation and Liability Act of 1980, Environmental Protection Agency sampling and analysis protocols, fate and effect of pollutants, relevant earth sciences and cost engineering. Moreover, the Master is a recognized expert in the fields of chemical and environmental engineering, hazardous materials processing, water treatment, wastewater engineering and chemicals safety. The Master has a Bachelor of Science from the Massachusetts Institute of Technology and has done additional course work in finance, law and mathematics. He is listed in Who's Who in Engineering, Who's Who in the East and Who's Who in the West. Following its review of the background of Alexander H. Danzberger, the Court concludes Alexander H. Danzberger is well qualified to assume the responsibility of Special Master in the instant litigation.

Fed. R. Civ. P. 53 provides the "compensation to be allowed a Master shall be fixed by the Court, and shall be charged on such of the parties or paid out of any fund or subject matter of the action, which is in the custody and control of the court as the court may direct . . . ." This Court has broad discretion to fix the amount of the Master's compensation and to determine which parties to charge. Morgan v. Kerrigan, 530 F.2d 401, 427 (1st Cir. 1976). The Court's judgment regarding the amount to be paid the Master "will not be disturbed unless a clear abuse" of discretion is established. Stonesifer v. Swanson, 146 F.2d 671, 673 (7th Cir. 1945).

In order to insure the reference's smooth function, the Court will arrange availability of compensation funds for immediate distribution. If the Master in a potentially lengthy case, such as the case at bar, were forced to forego payment until his services were complete, it would be difficult to find a qualified person willing to serve. Gary W. v. Louisiana, supra, 601 F.2d at 245-46. The monies paid for a Master are included in the recoverable costs under Fed. R. Civ. P. 54(d) and the Court may tax the losing party with a full share of the Master's fee. Id. at 246.

The following factors are relevant to the Court's consideration of the Master's hourly fee: the ability, experience and reputation of the Master; the effort the Master is expected to expend; the number and complexity of the claims before the Master; and the difficulty of the decisions the Master is anticipated to make. See, Chesa International, Ltd. v. Fashion Associates, Inc., 573 F.2d 1288 (2d Cir. 1977) (Master's hourly fee of $100.00 approved). The Court has considered the factors previously stated and concludes the reputation and skill of the Master, Alexander H. Danzberger, combined with the number and complexity of the claims involved in this case, justify an hourly fee of $100.00 in this litigation. Accordingly, the Court will provide for the Master's compensation under the following terms and conditions:

1. An account entitled "Master's Reimbursement Fund" shall be established with the Clerk of this Court to meet the expenses of interviewing the candidates for Master and the expenses of retaining the Master. The Fund also shall meet all expenses the Master incurs during his term of service to this Court.

2. The plaintiff shall contribute $35,000.00 to this Fund. The defendants and third-party defendants shall contribute a total of $35,000.00 to the Fund, to be allocated equally between the defendants. Each defendant and third-party defendant subsequently named in this suit will be required to make an identical contribution. Each party must certify to this Court within fifteen days of [17 ELR 21085] this Order that the party has contributed the required amount. The Court will consider the imposition of appropriate sanctions for any party who fails to comply with this provision.

3. The Master is to file with the Court monthly statements which itemize his hours worked and his expenses incurred in connection with this litigation. Upon receipt thereof, the Court will review the Master's statement and will authorize payment of the appropriate amount from the Reimbursement Fund. Expenses subject to reimbursement include, but are not limited to, the following: costs of research assistants, experts, investigations; storage and filing of documents; stenographers and others and others who may be retained by the Master.

4. The Master's Reimbursement Fund may be replenished by further Order of this Court.

5. Liaison counsel law firm McKinney, Stringer & Webster is directed of file with the Court a statement which lists those parties who have not contributed to the Fund as directed by this Order. Said statement must be filed within thirty days of the instant Order.

6. Any party who subsequently is dismissed from this suit or who subsequently is adjudged not liable in this action will be entitled to recover all contributions made by said party to the Reimbursement Fund. Such recovery of costs will not occur until the litigation is concluded. The ultimate costs of the Fund will be assessed against those parties adjudged liable for any claim. If no party is found liable, plaintiff will bear the entire cost of the Reimbursement Fund.

Accordingly, it is HEREBY ORDERED Alexander H. Danzberger is appointed to serve as Special Master pursuant to the powers and limitations set forth in this Order.

It is FURTHER ORDERED the Clerk of this Court shall deliver to the Master a complete copy of the file of this case.

It is FURTHER ORDERED the Clerk of this Court shall forward copies of all documents subsequently filed in this case to:

Alexander H. Danzberger, Danzberger and Associates, 13245 Willow Lane, Golden, Co. 80401 (Tax ID 84-0971927)

It is FURTHER ORDERED the Master's Reimbursement Fund is HEREBY CREATED AND ADMINISTERED in accordance with the provisions herein.

It is FURTHER ORDERED a hearing before the Special Master is set for March 4, 1987, at 9:00 o'clock a.m., in Courtroom No. 3, United States Courthouse, Western District of Oklahoma, Oklahoma City, Oklahoma, for the purpose of discussing an appropriate Court Management Order. Counsel for each party IS HEREBY DIRECTED to be present.