United States v. Multi-Chem, Inc.

No. 84-0159-BG(CS) (W.D. Ky. August 1, 1989)

The court holds that a chemical distributing company and its managing shareholder are liable under § 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for the goverrnment's cleanup costs at a hazardous waste site in Kentucky. An investigation of a pond near the chemical company's facility revealed that contaminants in the pond coincided with chemicals used at the company's facility. The court, in granting summary judgment for the government, found that6 the chemical company and its managing shareholder were aware that the government's CERCLA, the chemical company's plant constituted a "facility." Moreover, there had been a "release" or "threatened release" of a hazardous substance. The court holds that the managing shareholder, who admitted that he inspected the company's warehouse and drums daily, personally supervised employees on chemical handling and transferring, and retained the discretion to fire employees for failure to comply with his instructions, fits CERCLA's definition of an "owner or operator" and is liable for cleanup costs. The evidence that the managing shareholder presented in opposition to the government creates no material issue of fact that would rebut the government's scientific evidence and preclude granting summary judgment.

Counsel for Plaintiff
Anna C. Thode
Land and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 622-1197

Counsel Pro Se
Wendell Capps
1503 Officer's Row, Vancouver WA 98661

Simpson, J.:

Memorandum Opinion

This matter is before the Court on motion of the plaintiff, United States of America ("U.S."), for partial summary judgment.

The action was brought under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., to recover the costs incurred by the U.S. in connection with the removal of hazardous substances from the Keith Farm Pond. The U.S. claims that testing established that the contamination originated on the property of Multi-Chem, Inc., a chemical distributing company which performed blending, mixing and repackaging of chemicals at its facility near Bowling Green, Kentucky.

The Multi-Chem facility was located, at the time, approximately one-quarter to one-half mile from the Keith Farm Pond, a spring-fed pond used for watering cattle and as a reservoir for a public drinking water source. In March of 1983, an investigation was conducted regarding contamination of the pond with hazardous substances, and, on March 31, 1983, Fred Stroud, EPA On-Scene Coordinator for Region IV, commenced an immediate removal action at the pond, pursuant to 42 U.S.C. § 9604. During the period March 31 through June 6, 1983, pond water was treated and discharged, contaminated soil was collected and removed and testing was performed in order to locate the source of the contamination. None of the foregoing acts has been contested by the defendants.

A party moving for summary judgment has the burden of showing that there are no genuine issues of fact and that the movant is entitled to summary judgment as a matter of law. Adickes v. S. H. Kress & Co., 398 U.S. 144, 151-60, 90 S. Ct. 1598, 16 L. Ed. 2d 142 (1970); Felix v. Young, 536 F.2d 1126, 1134 (6th Cir. 1976). Not every factual dispute between the parties will prevent summary judgment. The disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510 (1986). The dispute must also be genuine. The facts must be such that if they were proven at trial, a reasonable jury could return a verdict for the nonmoving party. Id. at 2510. The disputed issue does not have to be resolved conclusively in favor of the nonmoving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 388-89 (1968). The evidence must be construed in a light most favorable to the party opposing the motion. Bohn Aluminum & Brass Corp. v. Storm King Corp., 303 F.2d 425 (6th Cir. 1962).

In order to prove entitlement to reimbursement from Multi-Chem, the U.S. must show that Multi-Chem is a "covered person" under the Act (42 U.S.C. § 9607(a)), and that there was a release or threatened release of hazardous substances from the Multi-Chem property (42 U.S.C. § 9607(a)(4)), that the release or threatened release caused the U.S. to incur costs (42 U.S.C. § 9607(a)(4)), and that the costs sought to be reimbursed are not inconsistent with the national contingency plan. See Artesian Water Co. v. Government of New Castle County, 659 F. Supp. 1269 [18 ELR 20785] (D. Del. 1987), aff'd, 851 F.2d 643 [18 ELR 21012].

The defendants go to great lengths in their response to explain that Multi-Chem conducted its business with care so as to avoid leakage or spills. These assertions do not operate to preclude summary judgment in favor of the U.S. in this case. The liability provisions of CERCLA impose strict liability upon the owner and operator of a facility from which there was release or threatened release of a hazardous substance where the U.S. has incurred costs of clean-up. See United States v. Monsanto Co., 858 F.2d 160 [19 ELR 20085] (4th Cir. 1988). There are only four exceptions which may be asserted as defenses to the strict liability imposed by 42 U.S.C. § 9607(a):

(b) Defenses . . .

(1) An at of God;

(2) An act of war;

(3) An act or omission of a third party other than an employee or agent of the defendant . . .

(4) Any combination of the foregoing paragraphs.

Contrary to the defendants' assertion, the existence of care in the ordinary course of conducting one's business does not, without more, imply that the hazardous condition resulted from an act of God, 42 U.S.C. § 9607(b)(1). There is evidence in the record which rebuts the defendants' assertion that the hazardous condition was caused by an act or omission of a third party under 42 U.S.C. § 9607(b)(3), such as another neighboring property owner.

The defendants state that they did not retain counsel until the time the United States moved for summary judgment. They claim to have been told some time earlier that "the matter had been dropped." Affidavit of Wendell Capps ("Capps Aff.") para. 3. The defendants further claim that they were not notified of the results of the hydrological tests conducted on behalf of the U.S. and thus had no opportunity to obtain their own tests.¹ The U.S. has responded to these allegations with affidavits of Fred B. Stroud III, EPA On-Scene Coordinator (second affidavit), Paul J. Schaeffer, an attorney with the United States Department of Justice, and Richard A. Dennis, Assistant United States Attorney.

Stroud stated that at the time the clean-up was commenced and the investigation into the source of the contamination was being performed, Capps was kept apprised of the findings. On April 12, 1983, a meeting was held between the EPA personnel and Capps, Frank Fly, Capps' lawyer, and Steve Anderson, an environmental consultant hired by Capps. At the meeting, the EPA informed them of the test results, obtained consent to take additional soil samples at Multi-Chem, and stated that on April 13 they could be present and could split the EPA soil samples. On April 13 Capps declined to take the samples, and signed a form to that effect. (Stroud Aff., paras. 20, 22, 24, 26).

Schaeffer was involved with the preparation of this case at its inception. Dennis stated that in 1984 when this lawsuit was commenced Multi-Chem and Capps retained attorney Frank M. Fly to negotiate a settlement of the matter. No agreement was reached. From February through October of 1985, Capps maintained contact with the U.S. regarding the case and complied with discovery requests. In July of 1986, Capps' deposition was taken in Phoenix, Arizona, where he then resided. (Dennis Aff., pp. 1-3 and copies of correspondence). Schaeffer stated that in September of 1984 John C. Craig, Ph.D., President of Craig-Lynes Chemical Management, Inc., requested on behalf of Capps, and was provided, copies of analytical data from the U.S. relating to the contamination of Keith Pond. (Dennis Aff., Schaeffer Aff. and copies of correspondence).

[20 ELR 20554]

In light of the documented correspondence, the taking of Capps' deposition and Capps' enlistment of the assistance of a chemist, it seems unlikely that Multi-Chem and Capps were unaware that the action was still ongoing. Regardless, the motion for partial summary judgment was made in June of 1987. It appears that the defendants have done nothing further in this matter since filing their response on July 10, 1987. These issues are more than ripe for decision.

The property on which Multi-Chem, Inc. operated constituted a "facility" under the CERCLA definitions. "The term 'facility' means . . . (B) any site or area where a hazardous substance has been deposited, stored, disposed of or placed, or otherwise come to be located . . ." 42 U.S.C. § 9601(9). Capps' deposition and invoices which he provided during discovery establish that Multi-Chem handled numerous substances which are listed and regulated as "hazardous substances" under 42 U.S.C. § 9601(14), and 40 C.F.R., Part 261 and appendices. Multi-Chem mixed, repackaged and distributed various solutions including what may be generically termed lacquer and paint thinners. The hazardous chemicals admittedly handled at the Multi -Chem site included xylene, methylene chloride, trichloroethylene, toluene, acetone, ethyl acetate, perchloroethane, to name a few. (See Capps depo., pp. 58-70; Multi-Chem invoices, appearing as Ex. B to Aff. of Dennis Revell (attachment 2 to U.S. motion for summary judgment)). These hazardous substances were "deposited," "stored," "placed," or "otherwise came to be located" at the Multi-Chem site, within the meaning of 42 U.S.C. § 9601(9); therefore, it is a "facility." See U.S. v. Mottolo, 695 F. Supp. 615 [19 ELR 20442] (D.N.H. 1988).

Title 42, United States Code, Section 9607(a)(1) provides for recovery of costs from "the owner and operator of . . . a facility" where there has been a "release" or "threatened release" of a hazardous substance. It is undisputed that Multi-Chem was engaged in the chemical distributing business at the time of the investigation and clean-up in mid-1983. The terms "owner or operator" are defined at 42 U.S.C. § 9601(20)(A) as "any person owning or operating" an onshore facility. The term "person is defined at 42 U.S.C. § 9601(21) as "an individual" or a "corporation." Under CERCLA, an owning stockholder who manages the corporation may be held liable as an "owner or operator." State of New York v. Shore Realty Corp., 759 F.2d 1032 [15 ELR 20358] (2d Cir. 1985). Capps' deposition testimony established that he and Jim Milan formed the Multi-Chem Corporation in December, 1974 with the purpose of engaging in the chemical distribution business. (Capps depo., pp. 7-9). Capps and Milan were the sole shareholders, each being issued 500 shares of stock in 1975. (Capps depo., pp. 11-12). In January, 1980, Milan transferred 167 shares to Capps and 333 shares back to Multi-Chem. (Capps depo., pp. 12-15). As of 1980, Milan was planning to move to Florida and Capps was obtaining ownership and control of Multi-Chem. Milan was paid $ 22,250.00 for 333 shares sold to the corporation and was kept on a salary of $ 800.00 per month as a salesman and consultant for Multi-Chem from January 1, 1980 through December 31, 1982. Capps stated that although Milan was a part owner, he never really worked for Multi-Chem. Capps stated that he ran Multi-Chem from the time it started until the time it ended. (Capps depo., pp. 18-21). The affidavit of Capps filed in support of his response to the US' summary judgment motion is not inconsistent with Capps' own assertion in his deposition that he was the managing shareholder of Multi-Chem during the time it was in operation. Capps' affidavit states that he did not personally supervise the activities which went on at the facility. (Capps Aff., para. 8). He does state, however, that he personally inspected the warehouse and drums every day (Capps depo., paras. 14, 15), he instructed the employees personally concerning the procedures for handling chemicals and transferring chemicals from drum to drum (Capps Aff., para. 10, 12, 16-18), and retained the discretion to fire employees for failure to comply with his instructions (Capps Aff., para. 17). Clearly, Capps was the managing shareholder and owner of Multi-Chem, Inc., thus he may be held liable as "owner and operator," with the corporate entity, for the costs incurred in cleanup by the U.S.

The U.S. must establish that a "release" or "threatened release" of a hazardous substance from the Multi-Chem facility occurred. CERCLA defines "release" as "any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment" of a hazardous substance. 42 U.S.C. § 9601(22). "Environment" is defined as "surface water, ground water, drinking water supply, land surface or subsurface strata, or ambient air." 42 U.S.C. § 9601(8). The defendants do not dispute the allegation that the Keith Farm Pond was polluted with hazardous substances, but have argued against the assertion that the contamination originated at Multi-Chem.

The U.S. has provided the following evidence in support of its position that the hazardous substances were introduced into the ground water system which feeds the Keith Farm Pond:

1. On April 4 and 5, 1983, the EPA dug holes next to several of Multi-Chem's underground storage tanks. In a number of those holes wet soil and small pools of liquid were observed. Information concerning the construction of the tanks was sought from Capps. His drawings did not show the piping leading to and away from the tanks. Liquid was observed in pools around an underground pipe used for "sticking the tank" (method of measuring the amount of fluid contained in the tank). In his experience, Stroud has found that leaks from underground tanks are prevalent in the piping as well as in the tanks. Organic Vapor Analyzer readings taken in the holes were high for volatile organic substances. (Stroud Second Aff., para. 14).

2. Liquid was seen leaking from an above-ground tank and from a damaged tanker truck on April 4 and 5, 1983. (Stroud Second Aff., paras. 14, 17).

3. On April 4, and 5, 1983, the EPA took soil samples from the holes dug on the Multi-Chem property, from the Keith Farm Pond and surrounding area for testing. (Stroud Second Aff., paras. 14, 15).

4. On April 6, 1983, the EPA dug holes in the area known as the "transfer point" where Multi-Chem's tanker trucks hooked up to hoses leading to the pumphouse and the underground tanks. An Organic Vapor Analyzer showed very high readings for volatile organic substances at the transfer point and stained soil was observed. In the hole dug near Multi-Chem's methylene chloride tank wet soil was found. (Stroud Second Aff., para. 19).

5. Dennis Revell, EPA chemist, conducted a comparative analysis of chemicals found in the water and sediment samples taken from the Keith Farm Pond, soil samples taken from the Multi-Chem facility and water samples of process water from the property of FMC, Inc.² The analysis showed that the Multi-Chem soil was contaminated with ten of the twenty-one compounds found in the pond. Twelve of the twenty-one compounds were bought, sold, blended and/or repackaged by Multi-Chem at its facility, as evidenced by its invoices and purchase orders. Four of eight compounds found in the FMC water samples were detected in the pond. These same four compounds — acetone, toluene, m-xylene and O & pxylene — were also found in the Multi-Chem soil and were shown to have been handled by Multi-Chem. (Revell Aff., paras. 3, 4, 7).

6. Nicholas C. Crawford, Ph.D., expert in Karst geomorphology and hydrology, performed five dye trace studies in an effort to identify the subsurface flow routes of toxic chemicals polluting the Keith Farm Pond and the Lost River. These dye trace tests involved the injection of fluorescent dyes into suspected ground water reentry points, then receptors were placed so as to track the course taken by the dye. The traces established the following:

No. 1: The water which overflows from the Keith Farm Pond into the small sinkhole on the northeast side flows toward the northeast, away from the pond and in the opposite direction from the Multi-Chem facility.

No. 2: Dye that was injected into the ground beside the underground tanks at Multi-Chem and flushed through the gravel and soil into the limestone below began flowing from the spring which feeds the pond forty-seven hours and fifteen minutes after injection.

No. 3: Dye was injected into a small stream of storm water runoff flowing off of FMC's building into a sinkhole. The samples collected at Keith Farm Pond were negative for dye. The receptors indicated that the water [20 ELR 20555] from the FMC facility flows directly from the sinkhole to State Trooper Cave, then on to the Lost River Blue Hole and through the Lost River Cave system. The trace occurred while the Lost River was high, a heavy rain having fallen shortly after the dye was injected. The fact that there was no dye found in Keith Farm Pond during a period of high discharge made even more certain the conclusion that FMC's runoff water does not flow to the pond.

No. 4: FMC's 18,000 gallon paint recovery system in the paint building was checked for leaks with the injection of eight pounds of dye. Shortly after injection there was a very slight increase in fluorescein concentration detected in the pond. A slight increase could be attributable to turbidity or natural fluorescence, but could also indicate a small leak in the tank. In order to determine whether a leak did exist trace No. 5 was performed.

No. 5: Fifty pounds of dye were injected into the system and samplings were done for one week. The samples were all negative for fluorescein. Follow-up was done for the next two months, all tests yielding a negative result.

(Crawford Aff.)

Crawford concluded that "subsurface water from the area where the underground tanks are located in the Multi-Chem site flows to the spring which feeds the Keith's pond. If chemicals from the tanks leak or chemicals are spilled on the ground they will flow with the ground water to the Keith pond," and "the groundwater flow investigation indicates that contamination in the Keith's pond was not caused by leaking or spilling of hazardous substances at the FMC Corporation facility." (Crawford Aff., conclusions, paras. 2, 5). Revell concluded, " Based on the results of ESD's sampling and analysis, Dr. Crawford's dye-tracing study and my comparative analysis, it is my opinion that the chemicals detected in the ponds more than likely migrated to the ponds from the Multi-Chem facility but not from FMC." (Revell Aff., para. 8).

In addition to the evidence extrapolated from investigation and testing, the U.S. has provided an affidavit of Danny L. Anderson, an employee of Multi-Chem from 1975 through 1985. He was hired primarily as a driver of chemical tank trucks used by Multi-Chem to haul chemicals, chemical products, and waste solvents to and from the facility. In addition to driving the trucks,he states that he was involved with loading and unloading trucks, transferring chemicals from the trucks to 55 gallon drums, pumping chemicals from ten trucks into above and below-ground tanks, blending chemicals in mixing tanks, and repackaging chemicals into 5 gallon cans and 55 gallon drums. He has stated that he observed routine practices and procedures by employees which caused spillage and leakage of chemical and waste solvents onto the ground. He has cited five such practices in his affidavit. He has also stated that he was directed by Capps to excavate the underground tanks when the Bowling Green facility was closed and moved to Hendersonville, Tennessee. When the tanks were excavated, he saw 1/4" rust holes in several of the tanks. (Anderson Aff., paras. 2, 4, 5).

In opposition to the evidence presented by the US, Capps' affidavit makes the following assertions:

1. Danny Anderson doesn't remember signing the affidavit but remembers being threatened by the EPA to sign it or risk being "dragged into the lawsuit at great expense."

2. When the tanks were removed from the site, they were visually inspected and pressure tested and no leakage or rust holes were found.

3. There was rarely spillage when the trucks were loaded or unloaded since suction from the truck pumps would clear the liquid before it would run out of the hose.

4. Buckets were used over which hoses were hooked and unhooked to catch any spillage.

5. Trucks were immediately emptied as soon as they were brought to the facility.

6. Multi-Chem trucks, hoses and gaskets were inspected frequently for leakage; a leak in a Union Carbide truck found on the one occasion was immediately repaired.

7. During daily inspections, Capps does not recall ever finding a loose bung on a storage drum.

8. The concrete floor in the storage building was cracked in one corner. Empty 1 gallon cans were stored there. Caps never saw any chemical running on the floor or smelled any chemical in the air.

9. Multi-Chem employees were instructed not to bring back any drums which contained residue.

10. No drums with any contents were thrown on the ground; Capps personally instructed employees not to do it.

11. When chemicals were transferred from drum to drum, no spills occurred because the transfers were made with suction and nozzle.

12. During the time the dye test was performed it was raining hard at the Multi-Chem facility which would have caused runoff from other places including Agrico and FMC to go into the ground.

13. The place where dye was injected was approximately 100 feet from the unloading dock.

14. Multi-Chem and Capps were not given an opportunity to clean up any hazardous materials, and if they had been given such an opportunity, they would have performed the clean-up procedure.

(Capps Aff.)

None of the foregoing fourteen assertions creates a material issue of fact such as will preclude summary judgment in this case. The statements made in Capps' affidavit must be construed in a light most favorable to him. Even if all of the affirmative statements made by Capps are taken as true, there remains unrefuted evidence offered by the U.S. which entitles it to judgment in its favor.

Capps stated that Anderson was pressured into signing the affidavit by the EPA. Capps does not go so far as to state that the statements made by Anderson are untrue, only that Anderson was pressured into signing the document. Clearly, he implies that Anderson's statements are untrue, however. The U.S. has replied to this allegation of coercion with affidavits of its agents concerning the interview of Anderson and the making of Anderson's affidavit. (Dennis Aff.; Caplan Aff.). We will assume, for the sake of argument, that Capps was correct that the affidavit was fabricated. Completely disregarding Anderson's testimony, we still find that there exists evidence in the record concerning spills or leakage during the transfer, mixing, or packaging of chemicals. Stroud and the rest of the investigation team observed stained soil in the loading area, saw leakage from an above-ground tank and from a damaged truck. Capps' statements that no spills occurred during the operations because of the procedures utilized by Multi-Chem employees loses much of its credibility in light of his statement at paragraph 8 that he "did not personally supervise the activities which went on there." His statements concerning the procedures which he promulgated for his employees will be presumed to be accurate. Were those procedures in fact followed, there might not have been spills or leakage. Capps stated that he did not supervise the employees, thus he could not state and does not state that the Multi-Chem employees followed those procedures. Peculiarly absent from Capps' evidence is any testimony from Don Plunkett who Capps states was the on-site general manager. (Capps Aff., para. 7). Though Capps stated in his deposition that he did not have an employee specifically in charge of supervision, and that Plunkett was a salesman (Capps depo., pp. 60-61), he now asserts that Plunkett oversaw the day-to-day operation of the facility.

Capps has further asserted that he inspected the above-ground tanks and drums regularly and did not find leakage from the stored drums. He has stated that the underground tanks were found not to leak and did not have rust spots on them when they were inspected upon removal. Capps' assertion does not refute the evidence concerning the pooling of liquid around pipes running to and from the underground tanks, nor does it refute the observations of stained soil indicating spills or leaks in the loading area.

The defendants have failed to rebut the scientific evidence concerning the composition of the contaminants and the tracing of those chemicals to the Multi-Chem facility. Capps has asserted that the dye test may be unreliable because of heavy rain causing runoff to go into the ground at other facilities including Agrico and FMC. It was shown, however, that Agrico did not utilize the contaminants in its operations and that FMC is not hydrologically connected to [20 ELR 20556] the spring which feeds the Keith Farm Pond. It was established in the Crawford's report that in fact the test results were more reliable because of the rain.

Capps has stated that Multi-Chem and Capps were not given an opportunity to conduct the clean-up independently. In fact, the Act does not require that the defendants be given such an opportunity. CERCLA was designed to allow the U.S. EPA to take immediate action to remedy hazardous conditions utilizing Superfund monies and to then recoup the costs from the responsible parties. The EPA found such an emergency situation to exist at the Keith Farm Pond. (Stroud Second Aff., paras. 8, 9).

Contrary to the defendants' assertion, § 9612(a) notice is not required for recovery under § 9607. United States v. Carolina Transformer Co., Inc., 650 F. Supp. 157, 158-9 (D.C.N.C. 1987). The U.S. has established that no material issue of fact exists regarding its allegations that a release occurred which originated at the Multi-Chem facility and that an emergency situation existed requiring that actions be taken to clean up the contamination.

The U.S. implemented a treatment procedure in which it hired O.H. Materials to construct and operate a water treatment system in the pond. The system consisted of pumping water out of the pond, placing it in above-ground swimming pools, treating it by several methods (carbon air stripping, flocculation) and releasing the treated water into the spring flowing away from the pond. In addition, costs of investigating the source of the pollution were incurred. (Stroud Second Aff., paras. 8, 9). "Response actions taken by the United States or a state government are presumed to be 'not inconsistent with the national contingency plan' under section 107(a)(4)(A); the defendant has the burden of proving otherwise." Artesian Water Co., 659 F. Supp. at 1277 n. 8, citing U.S. v. Ward 618 F. Supp. 884 [16 ELR 20127] (E.D.N.C. 1985).

For the reasons set forth above, the Court finds that summary judgment in favor of the United States is proper. A separate order will be entered herein this date in accordance with this opinion.

Order

This matter having come on before the Court on motion of the United States for summary judgment on the question of liability, and for the reasons set forth in the Memorandum Opinion entered this date, and the Court being otherwise sufficiently advised,

IT IS HEREBY ORDERED AND ADJUDGED that the motion of the United States for summary judgment is GRANTED, and Multi-Chem, Inc. and Wendell Capps are JOINTLY AND SEVERALLY LIABLE for the costs incurred by the United States in remedying the hazardous condition found to exist in the Keith Farm Pond near Bowling Green Kentucky, in March and June, 1983.

1. This point is argued in defendants' brief but is not supported with citation to sworn testimony.

2. FMC was the only other neighboring property owner to use some of the chemical solvents found in the Keith Farm Pond in the course of its business. Agrico Chemical Company was in the business of mixing and selling fertilizers but did not utilize any of the chemicals found in the pond. Additionally, testing showed Agrico to be down gradient of the pond. (Stroud Second Aff., paras. 6, 7).