United States v. Bell Petroleum Services, Inc.

No. MO-88-CA-05 (32 ERC 1296) (W.D. Tex. July 24, 1990)

The court approves a partial consent decree requiring two Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) defendants to pay $1 million in return for the government's covenant not to sue for current and future response costs incurred in connection with the Odessa Chromium I site in Texas. The decree also provides that the government will not seek to compel the settling defendants to perform future response actions at the site and provides them with contribution protection from claims by other potentially responsible parties (PRPs). Another defendant objected to the terms of the consent decree, claiming that the proposed settlement amount to be paid by defendant Bell is not commensurate with the harm it caused at the site. The court, noting that Bell is currently in bankruptcy and another named defendant is in very poor financial shape, finds that denial of the partial consent decree would cause protracted litigation with no increased likelihood that any money would be forthcoming from defendants. The court holds that CERCLA §122 places no limits on the government's inherent powers to settle CERCLA actions, and that § 113(f)(2) provides authority to settle cost recovery claims by unilaterally providing contribution protection to settlors. The court next holds that nothing in § 113(f)(1) limits a court to approving settlements on the basis of "fair share" of liability, and that the record shows that liability for contamination of the site is indivisible other than by equitable means. Thus, the court concludes that because the partial consent decree is fair, adequate, and reasonable in light of the record, approval outweighs forcing the defendants into bankruptcy with no cleanup costs recovered by the government.

[Prior decisions in this litigation are published at 20 ELR 20533 and 21117.]

Counsel for Plaintiff
Peter Mounsey, Harry Kelso
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Eugene Labay
Cox & Smith
2000 NBC Plaza, 1112 E. Pecan St., San Antonio TX 78205
(512) 554-5500

Bunton, J.:

Order

BEFORE THIS COURT came the parties for a hearing on the Government's Motion for Entry of Partial Consent Decree and hearing on Phase III¹ of above numbered action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §9605 et seq. Having reviewed the testimony at both hearings, the voluminous record in the cause and the relevant authorities, this Court now enters its findings on the matters.

The Partial Consent Decree calls for payment by Defendants Regal International, Inc. ("Regal") and Bell Petroleum Services, Inc. ("Bell") of $1,000,000.00 in return for an agreement by the Government not to sue Bell and Regal for all current and future response costs incurred in connection with the Odessa Chromium I Site and not to seek to compel them to perform future response actions at that Site. The Decree also provides Bell and Regal with contribution protection from claims by other potentially responsible parties ("PRPs") in connection with the Odessa Chromium I Site. A notice seeking comments on the Partial Consent Decree was published in the Federal Register on March 8, 1990. Fed. Reg. Vol. 55 #4, p.8611. None of the numerous Defendants hereto, save for Sequa Corporation and Chromalloy American Corporation (collectively referred to as "Sequa"), objected to the terms or conditions of the Partial Consent Decree. The arguments of Sequa go to the issue of fairness, i.e. whether the amount to be paid by Defendant Bell is commensurate with the harm caused by Bell. Sequa's main concern is that, with the settlement between Bell and the Government, Sequa shall be left to pay the remaining liability for damages caused by the chromium contamination of the Trinity Aquifer by chromate wastewater poured onto the ground by John Leigh, Bell Petroleum, Sequa and Chromalloy.

The proposed Partial Consent Decree was lodged with this Court on March 2, 1990, after which a 30-day period commenced wherein the United States Department of Justice received public comments on the proposed decree. In reviewing a consent decree in a CERCLA action, this Court must keep in mind the strong judicial policy favoring voluntary settlements between parties, without merely rubber stamping the decree. See, e.g.: Kelley v. Thomas Solvent Co., 717 F. Supp. 507 [20 ELR 20109] (W.D. Mich. 1989); Citizens for a Better Environment v. Gorsuch, 718 F.2d 1117, 1126 [13 ELR 20975] (D.C. Cir. 1983) cert. denied, 467 U.S. 1219, 104 S. Ct. 2668, 81 L. Ed. 2d 373 (1984); United States v. Hooker Chemicals & Plastics Corp., 540 F. Supp. 1067, 1080 [12 ELR 20701] (W.D.N.Y. 1982) aff'd, 776 F.2d 410 [16 ELR 20079] (2d Cir. 1985); United States v. Louisiana, 527 F. Supp. 509, 511 (E.D. La. 1981), aff'd, 669 F.2d 314 (5th Cir. 1982); United States v. Seymour Recycling Corp., 554 F. Supp. 1334, 1337-8 [13 ELR 20195] (S.D. Ind. 1982).

The legislative history behind the 1986 amendments to CERCLA establish that a court's role in reviewing a Superfund settlement is to "satisfy itself that the settlement is reasonable, fair, and consistent with the purposes that CERCLA is intended to serve." Kelley, at 516 [citing: H.R. Rep. No. 253, Part 3, 99th Cong., 1st Sess. 19 (1985)]. Factors considered by other courts charged with reviewing a proposed consent decree include: the strength of the Government's case, the good faith efforts of the negotiators, the opinions of counsel, the possible risks involved in the litigation if the settlement is not approved, the ability of the settlors to withstand a greater judgment, the adequacy of the remedy called for in the consent decree in solving the hazards of contamination at the site, and the effect of the settlement on the public interest as expressed in CERCLA. United States v. Hooker Chemical & Plastics Corp., supra; City of New York v. Exxon, 697 F. Supp. 677 [19 ELR 20332] (S.D.N.Y. 1988); United States v. Conservation Chemical Co., 628 F. Supp. 391 [17 ELR 20158] (W.D. Mo. 1985); U.S. v. Acton Corp., 733 F. Supp. 869, 872 [20 ELR 21191] (D.N.J. 1990).

This Court notes Bell is currently in bankruptcy and Regal is in very poor financial shape. Settlement talks have been numerous and heated, culminating in a pretrial conference among all of the parties before this Court wherein this Court was informed the parties would not agree to any type of settlement. The funding of the consent decree is by agreement among various insurance companies, none of whom admit to liability, but all of whom apparently desire the litigation and liability costs in this matter to finally come to an end. Should this Court deny approval of the Partial Consent Decree, litigation shall undoubtedly be protracted and it is highly unlikely any money will be forthcoming from either Regal or Bell.

Sequa does not attack the diligence of the parties in attempting to reach a settlement, but rather the fairness of the settlement in light of the entire liability and the responsibility of each party for such liability. Sequa's complaints regarding the consent decree are divided thusly: (1) The Government is not authorized under CERCLA to settle its cost recovery claims in the manner set forth in the Consent Decree; (2) any inherent authority of the Government to settle cost recovery claims does not include the ability to unilaterally provide contribution protection to settlors; (3) the Government is without authority to grant a complete release as contemplated by the Consent Decree; (4) a Consent Decree must be fair and the consideration must equal a party's proportionate liability under §113(f)(1); (5) the consideration paid by Bell and Regal under the Consent Decree is disproportionate to their liability under §113(f)(1) of CERCLA; and (6) rather than disproving the Consent Decree, this Court should flexibly interpret the concept of joint and several liability to prevent the inequitable transfer of liability. Each point shall be discussed seriatim.

1. The Government's Authority for Settling its Cost Recovery Claims in the Manner Set Forth in the Submitted Consent Decree Must Be Inherent because Such Action is Not Authorized by CERCLA. Sequa's first argument focuses upon the authority of the Government to settle its claims with Bell and Regal. According to Sequa, the Government may only settle with regard to (a) performance of response actions; (b) de minimis potentially responsible parties ("PRPs"); or (c) cost recovery claims under §107 prior to the time that claim is referred to the Department of Justice (the "DOJ"). Sequa does not contest the Government's inherent powers to settle a CERCLA action and this Court is of the opinion such inherent authority indeed exists and is not limited by Section 9622 of CERCLA. See, e.g.: Swift & Co. v. United States, 276 U.S. 311, 331, 48 S. Ct. 311, 72 L. Ed. 2d 587 (1927).

2. Any Inherent Authority of the Government to Settle Cost Recovery Claims Does Not Include the Ability to Unilaterally Provide Contribution Protection to Settlors. Sequa's next argument is premised upon that portion of the Partial Consent Decree which insulates Bell and Regal from any liability for contribution to the remaining PRPs. This Court is of the opinion CERCLA directly addressed this point in Section 9613(f)(2) which states:

A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.

42 U.S.C. §9613(f)(2) (Supp. 1990). As this Court is of the opinion the Consent Decree should be approved, the Court's approval thereof brings the Consent Decree within the terms of §9613(f)(2) and the settlors' liability for contribution shall disappear by statute.

3. The Government is without authority to Grant Bell and Regal a Complete Release as Contemplated by the Submitted Consent Decree. Sequa next argues the Consent Decree does not comport with the requirements of Section 9622 of CERCLA. As the Government points out, however, the Consent Decree was not entered pursuant to Section 9622, but instead by the inherent powers of the Government to enter into settlement agreements. Therefore, this Court finds Sequa's arguments under Section 9622 irrelevant.

4. Before the Settlement of a Governmental Cost Recovery Action can be Judicially Approved, There Must Be a Finding that the Settlement is Fair in that it Requires the Payment of Consideration Equal to a Party's "Fair Share" of liability under §113(f)(1). Section 113(f)(1) of CERCLA states:

Any person may seek contribution from any other person who is liable or potentially liable under section 9607(a) of this title, during or following any civil action under section 9606 of this title or under section 9607(a) of this title. Such claims shall be brought in accordance with this section and the Federal Rules of Civil Procedure, and shall be governed by Federal Law. In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court deems are appropriate.

42 U.S.C. §9613(f)(1) (Supp. 1990). Nothing in the above-quoted language limits a court to approving settlements on the basis of "fair share" of liability. See, e.g.: In re Acushnet River & New Bedford Harbor, 712 F. Supp. 1019, 1029 [19 ELR 21210] (D. Mass. 1989); U.S. v. Acton Corp., 733 F. Supp. 869, 872 [20 ELR 21191] (D.N.J. 1990).

Even if the statute required liability apportionment on the basis of fault, where measurable, this Court is of the opinion the chromium contamination found in the ground waters below the Odessa I Site is not divisible. The evidence at both the Phase I and Phase III hearings clearly demonstrated there is no method of dividing the liability among the Defendants which would rise to any level of fairness above mere speculation. Different methods suggested by the parties for apportioning liability included the amount of chrome flake purchased by each of the Defendants, the amount of electricity used (subtracting out any electrical usage not devoted to electroplating), chrome reduction in the aquifer, and periods of occupation of the Chromium I Site. Having heard the evidence adduced at trial of Phase III, this Court is of the opinion none of the above offer viable methods for dividing liability among John Leigh, Bell or Sequa. Each involves a significant assumption factor as records have been lost, and theories differ significantly. Therefore, this Court is of the opinion the liability of the parties for contamination of the Chromium I Site is indivisible other than by equitable means.

Thus, this Court is of the opinion that although reasonableness is in fact a significant factor in this Court's decision regarding approval of the proposed consent decree, the proportionate liability of the parties is neither a requirement of the reasonableness inquiry, nor relevant to the particular facts before the Court. Therefore, Sequa's fourth point is without merit.

5. The Consideration Being Paid by Bell and Regal to Settle Claims Against Them is Disproportionate to Their Liability Under §113(f)(1) of CERCLA. As discussed hereinabove, the Court is of the opinion proportionate liability is not relevant to the Court's decision herein. The Court is not inclined to agree the pollution at issue is capable of logical or factual divisibility. Therefore, the Court is of the opinion Sequa's Fifth point should likewise be overruled.

It is this Court's opinion that the proposed Partial Consent Decree is the result of great effort on the part of insurance carriers for Bell and Regal to compromise their differences and offer a significant amount of money to settle this matter to avoid protracted litigation and defray expenses thereof. This Court previously determined Bell was liable to the Government for Response Costs. As earlier stated, it is unlikely the Government would receive any amount of money from Bell or Regal in the end. In terms of the public interest and the congressional intent behind CERCLA, the approval of the Partial Consent Decree far outweighs forcing Bell and Regal into bankruptcy with no clean up costs recovered by the Government. Thus, it is the finding of this Court the proposed Partial Consent Decree is fair, adequate and reasonable in light of the record.

In the alternative, this Court is of the opinion the responsibility for costs should be divided roughly equally among the parties with Bell and Sequa shouldering 35% of the burden each and John Leigh shouldering 30%. The reasons for such division are purely equitable, as Bell occupied the Site for the longest period of time and Sequa gained access to the Site with knowledge that chromium contamination was a problem and measures to correct the contamination were necessary. John Leigh accrued the least financial gain from his chrome-plating venture and has cooperated at every juncture with the Government in the Government's efforts to discover the sources behind the chrome contamination. This finding by no means dilutes the Court's approval of or confidence in the Partial Consent Decree as this Court need not consider the fairness of the decree to non-settling parties. U.S. v. Acton Corp., at 872.

This Court's approval of the Partial Consent Decree moots several issues currently pending between the parties. These issues include: (1) the United States' Motion for Summary Judgment as to Successor Liability against Defendants Bell and Sequa; and (2) Third Party Defendant Small Business Association's ("S.B.A.") Motion for Summary Judgment as to Bell's Cross-Claim against the S.B.A. This Court shall dismiss those Motions as moot per adoption of the Partial Consent Decree.

Accordingly, and in light of the foregoing,

IT IS ORDERED the Government's Motion for Entry of Partial Consent Decree is hereby GRANTED. The Partial Consent Decree filed in this case on March 2, 1990 is hereby APPROVED AND ENTERED.

IT IS FURTHER ORDERED Sequa's Motion for Reconsideration of Decision on Joint and Several Liability is hereby DENIED.

IT IS FURTHER ORDERED the Government's Motion for Summary Judgment as to Successor Liability against Defendants Bell and Chromalloy is hereby DISMISSED AS MOOT.

IT IS FURTHER ORDERED Third Party Defendant S.B.A.'s Motion for Summary Judgment is hereby DISMISSED AS MOOT.

1. Phase III of the cause consisted of proof by the parties of the divisibility of the harm caused by the chromium each Defendant placed on the ground which leaked down to and polluted the Trinity Aquifer.