United States v. Shell Oil Co.

No. CV 91-0589-RJK (Jan. 16, 1992) (C.D. Cal. January 16, 1992)

The court grants in part, and denies in part, the United States' and California's motions to strike the affirmative defenses pled by several defendant oil companies and other defendants in a Comprehensive Environmental Response, Compensation, and Liability Act nCERCLA) cost recovery action, and holds that the defendants' CERCLA § 107(b) "act of war" defense presents a mixed question of fact and law and is inappropriate for dismissal. Defendants contend that the alleged CERCLA violations resulted from their manufacture of high octane aviation fuel pursuant to contracts with the federal government during World War II. Defendants further argue that the federal government exercised extensive control over the operations and production of the fuel during the war, and issued a permit for the disposal of the acid waste associated with the manufacture of the fuel. In total, the oil company defendants raised 31 defenses, and the other defendants have raised 14 defenses. Also before the court are plaintiffs' motion to trifurcate the litigation into a liability phase, a cost-determination phase, and a resolution of counterclaims and cross-claims phase.

The court first notes that for purposes of CERCLA § 107(a), only the enumerated defenses of an act of God, an act of war, and a third-party act or omission will be recognized. The court grants the governments' motion to strike the defendants' defense asserting that the governments' complaint fails to state a claim on which relief can be granted. The governments' complaint alleges all the requisite elements of liability under § 107 and depicts the circumstances at issue. The court next holds that because defendants' "act of war" defense includes questions of law and fact, and falls within one of the enumerated defenses of CERCLA, it is inappropriate to dismiss under Federal Rule of Civil Procedure 12(f). The court also denies the plaintiffs' motion to strike defendants' defense that the release of wastes, if any, was caused solely by the acts or omissions of third parties. Defendants have properly pled the defense, since they have alleged that they did not have a relationship with the third party who "solely" caused the release.

The court strikes defense motions alleging no imminent and substantial endangerment, the governments' failure to mitigate and be cost-effective, causal responsibility, laches, estoppel, waiver, unclean hands, state licensure, contributory negligence, comparative fault, and government contractor protection. First, imminent and substantial endangerment is a prerequisite only for injunctive actions filed under CERCLA § 106(a), making that defense illogical and improper to a § 107 claim. As to the defendants' defense that the governments failed to mitigate, § 107 does not require a plaintiff to mitigate damages, and except with reference to the national contingency plan (NCP), § 107 does not require cost effectiveness by a plaintiff. As to defendants' causation defenses, CERCLA imposes strict liability without regard to causation. As to defendants' equitable defenses, the court notes that it cannot envision clearer language than CERCLA's for eliminating the possibility of any defenses other than those enumerated, which necessarily restricts the court's equitable jurisdiction. The remaining asserted defenses are likewise not accepted defenses, or do not fit within interpretations of the accepted defenses.

Turning to the remaining affirmative defense motions, the court refuses to strike those motions alleging the governments' failure to comply with the NCP, a bar to recovering pre-1980 costs, due process violations, an impermissible taking, no right to costs not yet incurred, releases were federally permitted, joint and several liability, impairment of contract rights, entitlement to setoff and recoupment, and a state law bar to recovery. Since defendants' allegation that the costs incurred by plaintiffs have not been approved under and are inconsistent with the NCP, the defense attacks a necessary element of a § 107 claim, making it inappropriate to strike that defense. Next, although case law exists holding that retroactive application of CERCLA does not violate due process because imposing liability is a legitimate legislative purpose, since the defense attacks the constitutionality of CERCLA and the 9th Circuit has not decided the issue, dismissal of the defense is inappropriate. Similarly, the taking defense attacks CERCLA's constitutionality and must survive. As to the defense that future response costs are not permitted, the court notes that § 113(g)(2) allows entry of declaratory judgment of § 107(a) liability. As to the federal permit defense, the court declines to strike the defense, but requests that the defendants allege with greater specificity what portion of the damages are covered by the federal permit. Because imposition of joint and several liability under § 107 involves a question of law, striking the defense is premature. Although defendants' contract impairment defense as to the federal government is stricken because the Contract Clause of the U.S. Constitution does not apply to federal law, the uncertain applicability to certain state laws requires the defense as to the state government to continue. While issues of setoffs and recoupment are perhaps inappropriate as affirmative defenses, dismissal is inappropriate because the issues will be addressed after liability has been determined. Finally, the court refuses to strike the state bar to recovery defense, since it is unclear whether California is circumventing the state law restrictions by proceeding in this case pursuant to CERCLA only.

Finally, the court denies plaintiffs' motion to divide the trial into three phases because the common issue to all parties involved is the defendants' liability under § 107, and any recoupment, setoff, or contribution thereafter.

Counsel for Plaintiffs
Timothy R. Patterson
Attorney General's Office
110 W. 8th St., Ste. 700, P.O. Box 85266, San Diego CA 92186 (619) 237-7788

Counsel for Defendants
Peter R. Taft
Munger, Tolles & Olson
355 S. Grand St., 34th Fl., Los Angeles CA 90071
(213) 683-9100

[22 ELR 20792]

Kelleher, J.:

Memorandum of Decision and Order

The United States and California state governments brought this suit against defendant oil companies, Shell Oil, Union Oil, Arco, and Texaco, ("oil companies") and McAuley LCX Corporation ("McAuley") pursuant to § 107 (a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") for the recovery of response costs incurred by the plaintiffs in preventing the release and threatened release of hazardous substances from the McColl Superfund Site, a facility located in the northwest section of the City of Fullerton, California. The United States is seeking $15 million and the state $4 million in costs.

In the present action, the plaintiffs are moving to strike the majority of the defendants' affirmative defenses and to trifurcate the litigation, including discovery, into three phases: (1) issues of liability, (2) determination of costs, and (3) resolution of counterclaims and cross-claims.

Discussion

I. Striking Affirmative Defenses Under Rule 12(f)

Plaintiffs ask this court to strike most of the affirmative defenses pled by the oil company defendants and the McAuley defendant pursuant to Federal Rule of Civil Procedure 12 (f) ("F.R.Civ.P."). Rule 12 (f) provides that a court may strike from a pleading any insufficient defense or any redundant, immaterial, impertinent or scandalous matter. Because striking a portion of a pleading is a drastic remedy, motions under Rule 12 (f) are generally viewed with disfavor. A Rule 12 (f) motion will not be granted if an unresolved, substantial question of fact or law remains. This is true even if the issue could be determined by drawing inferences from undisputed acts and statements.

When a defense is legally insufficient, however, the motion should be granted in order to save the parties unnecessary expenditure of time and money in preparing for trial. 2A Moore's Federal Practice, § 12.21 (1991); Anchor Hocking Corp. v. Jacksonville Elec. Auth., 419 F. Supp. 992, 1000 (M.D. Fla. 1976) (insufficient defenses should be stricken in order to avoid unnecessary time and money in litigating invalid, spurious issues). What constitutes an insufficient defense depends, of course, upon the nature of the claim for relief and the defense in question. 1 Wright & Miller, Federal Practice and Procedure, § 1381 (1991). In a recent CERCLA § 107(a) case, one court observed that a motion to strike under Rule 12(f) is the "primary procedure" for objecting to an insufficient affirmative defense. U.S. v. Marisol, Inc., 725 F. Supp. 833, 836 (M.D. Pa. 1989).

II. § 107 of CERCLA

Before addressing each defense, § 107 (a) of CERCLA must be examined. In general, CERCLA imposes "strict liability on owners and operators of facilities at which hazardous substances were disposed." 3550 Stevens Creek Assoc. v. Barclays Bank of Calf., 915 F.2d 1355, 1357 [21 ELR 20011] (9th Cir. 1990), citing 42 U.S.C. § 9607(a). § 107 (a) imposes liability on certain classes of people for the response costs of the United States, subject to three statutorily permitted defenses enumerated in § 107 (b).¹ 42 U.S.C. § 9607 (a) (1991). These defenses are: (1) the release of waste was caused by an act of God, (2) an act of war, (3) an act or omission of an unrelated third party, or (4) any combination thereof. The McAuley defendant has raised, however, fourteen defenses, and the oil company defendants have raised thirty-one defenses.

The majority of courts have concluded that the three defenses enumerated within § 107 (a) of CERCLA are exclusive. In Levin Metals Corp. v. Parr-Richmond Terminal Co., 799 F.2d 1312 [16 ELR 20954] (9th Cir. 1986), the Ninth Circuit recognized that Congress had imposed strict but not absolute liability under CERCLA leaving an explicit provision for three defenses. The court found that "in order to state a claim for a declaration of nonliability, the declaratory judgment plaintiff must base its claim of nonliability on one or more of the statutory affirmative defenses." Id. at 1316-17. In light of this language, this Court must conclude that for purposes of § 107 (a) of CERCLA, only the enumerated defenses will be recognized.

III. First Affirmative Defense: Failure to State a Claim

Both the oil company and McAuley defendants assert that the complaint fails to state a claim upon which relief can be granted. Under F.R.Civ.P. 8 (a), a claim for relief is sufficient if it gives the defendant fair notice of the plaintiff's claim and the grounds upon which it rests.

The elements of 42 U.S.C. § 9607 (a) are: (1) the site is a "facility," (2) the release or threatened release of hazardous substances has occurred, (3) the release or threatened release caused the U.S. to incur response costs that are "consistent with the national contingency plan," and (4) the defendants fall within at least one of the four classes of responsible persons described in the statute. Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1153 (9th Cir. 1989). Because the complaint alleges all the requisite elements of liability for § 107 (a) of CERCLA and depicts the circumstances at issue, the Court concludes that the complaint gives the defendants sufficient notice and states a claim upon which relief can be granted.² Accordingly, the Court grants the government's motion to strike the defendants' first affirmative defense.

IV. Third Affirmative Defense: Act of War³

CERCLA § 107 (b) provides that a party will not be liable for response costs if he or she establishes by a preponderance of the evidence that the release or threat of release was caused "solely" by an act of war. 42 U.S.C. § 9607 (b).

Defendants contend that the alleged violation of CERCLA resulted from an "act of war" as they manufactured high octane aviation fuel pursuant to contracts with the U.S. during World War II. Defendants argue that during the war, the U.S. government exercised extensive control over the operations and production of the fuel and gave the owner of the site in question, Eli McColl, a permit to dispose the acid waste associated with the manufacture of the fuel. The defendants then contracted with Mr. McColl to dispose of their waste. The defendants allege that because of the war effort, the U.S. government did not afford them the resources to build reclamation plants to dispose the waste properly. They thus imply that the government is at fault for their improper waste disposal.

The statute is clear that an act of war must be the solecause of the release or threat of release of hazardous substances. An "act of war" generally implies an act of a combative nature. Seizures of enemy [22 ELR 20793] vessels and enemy-owned patents are examples of "acts of war" in other contexts. See J. Ribas y Hijo v. United States, 194 U.S. 315 (1904); Farbwerke Vormals Meister Lucius & Bruninq v. Chemical Foundation, Inc., 283 U.S. 152 (1931).⁴

The defendants would have the Court define something which occurred over a forty-year period as an "act of war." This appears to contradict the plain meaning and purpose of the statute. Since this defense includes, however, a mixed question of law and fact and falls within one of the enumerated defenses of the statute, the Court finds it inappropriate at this juncture to dismiss the defense under Rule 12 (f).

V. Fourth Affirmative Defense: Acts or Omissions of Third Parties⁵

Defendants contend that the release of wastes, if any, were caused solely by the acts or omissions of third parties. § 107 (b) (3) of CERCLA allows for such a defense if the defendant affirmatively establishes that the release or threat of release of a hazardous substance was caused "solely by an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant." 42 U.S.C. § 9607 (b).

This defense is limited and based upon a complete absence of causation. United States v. Monsanto Co., 858 F.2d 160, 168 [19 ELR 20085] (4th Cir. 1988), cert. denied, 490 U.S. 1106 (1989). As with any affirmative defense, the courts interpreting this section have uniformly held that the defendant bears the burden of pleading and proving each element of any defense. United States v. Bliss, 667 F. Supp. 1298, 1304-5 [18 ELR 20055] (E.D.Mo. 1987).

One court dismissed a CERCLA § 107 (b) (3) third-party defense which did not conform to the statute, requiring the defendant to allege facts in specific conformity with the statute's provisions. Marisol, 725 F. Supp. at 838-39. The Marisol court found that the defendants had not alleged that the third party was the sole cause of the release or that the third party was someone totally unrelated to the defendant.

The Court finds that the defendants have properly pled this defense in accordance with the statute as the defendants have alleged that they did not have a relationship with the third party who "solely" caused the release. As such, the Court denies the government's motion as to this defense.

VI. Fifth Affirmative Defense: No Imminent and Substantial Endangerment

The oil company defendants claim that there is no imminent and substantial endangerment to the public health, welfare or environment from the release or threatened release of a hazardous substance within the meaning of § 106 of CERCLA.

Imminent and substantial endangerment is a prerequisite only for injunctive actions filed under § 106 (a) not § 107. U.S. v. Fairchild Industries, Inc., 766 F. Supp. 405, 409 (D. Md. 1991); accord U.S. v. Kramer, 757 F. Supp. 397, 418 [21 ELR 20879] (D.N.J. 1991). The complaint is clear that this is a § 107 cost recovery case. The defendants' § 106 defense is thus illogical and improper and shall be stricken under Rule 12 (f).

VII. Sixth Affirmative Defense: Failure to Comply with the National Contingency Plan⁶

The oil company defendants contend that the costs incurred by the plaintiffs in cleaning up the waste site have not been approved under and are inconsistent with the National Contingency Plan.

§ 9607 (a)(4)(A) of CERCLA provides that any defendant which causes the incurring of response costs of a hazardous substance shall be liable for "all cost of removal or remedial action incurred by the U.S. Government or a State not inconsistent with the national contingency plan."

The Court finds this defense attacks a necessary element of a § 107 claim. Since the defense involves an obvious factual determination, the Court will not dismiss it.

VIII. Seventh Affirmative Defense: Duty to Mitigate and Cost-Effectiveness

McAuley asserts that the U.S. has failed to mitigate costs or damages and has not been "cost-effective." The oil company defendants also assert that the U.S. has not been cost-effective pursuant to § 104 of CERCLA and the national contingency plan.

§ 107 does not require a plaintiff to mitigate his or her damages. One court has stated that "[i]n keeping with the broad and independent liability scheme inherent in § 107 . . ., the Court concludes that because § 107 imposes no duty upon the United States to mitigate costs, this defense is insufficient as a matter of law and will be stricken." Kelley v. Thomas Solvent Co., 714 F. Supp. 1439, 1451 (W.D. Mich. 1989).

Except with reference to the national contingency plan, § 107 does not require "cost-effectiveness." In Kramer, 757 F. Supp. at 436, the court held that "terms used by defendants such as proper, or improper, remote, speculative and contingent, and unreasonable, duplicative, and not cost-effective, do not state an appropriate challenge to the propriety of the government's costs, and will be stricken." Id. (emphasis added). This Court agrees with the rationale of these cases as § 107 is nearly a strict liability statute. These defenses are inappropriate except to the reference to the national contingency plan. As this is covered by the sixth affirmative defense, the seventh affirmative defense is stricken.

IX. 8th, 23rd, 24th, and 25th Affirmative Defenses: Due Care Causation and Proximate Cause⁷

Defendants assert that they are not causally responsible for costs incurred and that they exercised due care and complied with all statutory and regulatory requirements. In addition, they argue that CERCLA does not impose liability for the non-negligent acts of a generator who disposed of its waste at a "licensed" site owned and operated by third parties over whom the generator had no control.

The Second Circuit has held that 42 U.S.C. § 9607 (a) (1) unequivocally imposes strict liability without regard to causation and to interpret "§ 9607 (a) (1) as including a causation requirement makes superfluous the affirmative defenses provided in § 9607 (b), each of which carves out from liability an exception based on causation." N.Y. v. Shore Realty Corp., 759 F.2d 1032, 1044 [15 ELR 20358] (2d. Cir. 1985). The Fourth Circuit has also found that the legislature had eliminated the element of causation from the plaintiff's liability case. Monsanto, 858 F.2d at 167. As such, "[t]hese defenses are also irrelevant in determining the scope of liability, whether joint and several or apportioned." Fairchild Industries, 766 F. Supp. at 410.

A district court in the Ninth Circuit has also held that § 107 (a) does not contain a causation requirement and that plaintiffs do not have to prove traditional causation. U.S. v. Stringfellow, 661 F. Supp. 1053, 1060-1 [17 ELR 21134] (C.D. Cal. 1987). The Ninth Circuit has held that in order for a plaintiff to claim declaratory judgment in a § 107 case, he or she must base the claim of nonliability on one or more of the statutory defenses. Levin Metals Corp. v. Parr-Richmond Terminal Co., 799 F.2d 1312, 1317 [16 ELR 20954] (9th Cir. 1986).

This Court thus finds that causation and similar defenses have no part in a § 107 claim and are stricken.

X. 9th, 15th and 16th Affirmative Defenses: Pre-1980 Costs, Retroactve Application, and Due Process

In their ninth defense, the oil company defendants contend that the plaintiffs are barred from recovering any response cost or damage incurred prior to the enactment of CERCLA on December 11, 1980. The Eighth Circuit, Court Circuit and district courts of the First, Third and Tenth Circuits have allowed recovery of pre-1980 response costs. U.S. v. Northeastern Pharmaceutical & Chemical Co., 810 F.2d 726, 734 [17 ELR 20603] (8th Cir. 1986); Monsanto, 858 F.2d at 174; U.S. v. Shell Oil Co., 605 F. Supp. 1064, 1075 [15 ELR 20337] (D. Colo. 1985); Philadelphia v. Stepan Chemical Co., 748 F. Supp. 283, 289 [21 ELR 20760] (E.D. Pa. 1990); In re Acushnet River & New Bedford Harbor Proceedings, etc., 716 F. Supp. 676, 688 [19 ELR 21471] (D. Mass. 1989). Because other provisions of CERCLA contained express [22 ELR 20794] time limitations and § 107 did not, those courts found § 107 could apply to pre-1980 costs.

In their fifteenth defense, the oil company defendants contend that retroactive application violates due process and constitutes double jeopardy. The U.S. Supreme Court has held that the retroactive aspects of any legislation must meet the test of due process. This burden is met by showing that the retroactive application of the legislation is justified by a rational legislative purpose. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 730, 104 S. Ct. 2709 (1984). It is well established that economic legislation is presumed to be constitutional and that the burden is on the complainant to establish that the legislature has acted in an arbitrary and irrational way. "This is true even though the effect of the legislation is to impose a new duty or liability based on past acts." Usry v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 96 S. Ct. 2882 (1976).

The Eighth Circuit has held that CERCLA applies retroactively. Northeastern Pharmaceutical, 810 F.2d at 734. In particular, the Northeastern Pharmaceutical court noted that the language of § 107 referred to actions and conditions in the past tense. Id. at 733. The court also found that retroactive application of CERCLA did not violate due process as imposing liability for the cost of cleaning up hazardous sites was a legitimate legislative purpose. Id. at 734. The majority of other courts have agreed. See United States v. Shell Oil Co., 605 F. Supp. 1064, 1075-76 [15 ELR 20337] (D. Colo. 1985). The Court notes that the defendants have failed to allege that Congress acted in an arbitrary and irrational manner.

The Ninth Circuit has not addressed these issues, however. See Levin Metals, 817 F.2d at 1451. Since the defenses attack the constitutionality of the statute and the Ninth Circuit has not decided the issue, the Court will not dismiss these defenses at this time.

XI. Tenth Affirmative Defense: Recovery of Future Response Costs Not Permitted

The oil company defendants claim that the United States cannot recover costs not yet incurred. § 113 (g)(2) of CERCLA allows a court, however, to enter a declaratory judgment for § 107 (a) liability that shall be binding on any subsequent action or actions to recover further response costs or damages. 42 U.S.C. § 9613 (g)(2).

The Court notes that if a declaration were made under § 113 (g)(2), it would refer only to liability and would not prevent the defendants from challenging the actual costs incurred. While the defense thus appears inappropriate at this time, the Court will refrain from striking this defense as the issues may reappear if the defendants are deemed liable.

XII. Eleventh Affirmative Defense: Waste Was Federally Permitted

The oil company defendants also contend that if there were any releases of hazardous substances from the McColl Site, the releases were federally permitted under § 107 (j) of CERCLA, 42 U.S.C. § 9607 (j).

§ 107 (j) of CERCLA provides in relevant part that "recovery by any person for response costs resulting from a federally permitted release shall be pursuant to existing law in lieu of this section." 42 U.S.C. § 9607 (j). Plaintiffs contend that only releases governed by other federal statutes fall within this exception and that no statute existed when the release or threat of release at the McColl site first occurred.

A defendant who claims exemption for the release of hazardous substances bears the burden of proving which releases are federally permitted and what portion of the damages are allocable to the federally permitted releases. In re Acushnet River and New Bedford Harbor, 722 F. Supp. 893 [20 ELR 20204] (D. Mass. 1989). The term "federally permitted release" is narrowly defined in § 101 (10) of CERCLA, 42 U.S.C. § 9601 (10).

The defendants fail to refer to any federally approved permit and do not allege what portion of the damages are covered by such a permit. The Court will not strike this defense but requests the defendants to allege this defense with greater specificity.

XIII. Twelfth Affirmative Defense: Joint and Several Liability

The oil company defendants assert that CERCLA does not authorize the imposition of joint and several liability. They contend, however, that if it does, then joint and several liability is not applicable here because the defendants' liability is de minimis.

Whether § 107 allows the imposition of joint and several liability obviously involves a question of law. Some courts have found that CERCLA provides for joint and several liability as CERCLA's scope of liability is to be determined from traditional and evolving principles of common law. U.S. v. Chem-Dyne Corp., 572 F. Supp. 802 [13 ELR 20986] (S.D. Ohio 1983). Under this principle, where two or more persons cause a single and indivisible harm, each is subject to liability for the entire harm.

In determining whether joint and several liability or apportionment is appropriate, courts examine whether the harm is clearly divisible among the defendants. In United States v. Western Processing Company, 734 F. Supp. 930, 942 [20 ELR 20990] (W.D. Wash. 1990), for example, the court found that the harm was not divisible as the defendant could not demonstrate that its chemical had caused a specific, separate harm. The plaintiffs contend that the same problem exists here as the chemical wastes at the McColl site are so intermingled that it is impossible to ascertain what damage is attributed to which chemical.

The defendants also argue that de minimis generators cannot be liable. In United States v. Conservation Chemical Co., 619 F. Supp. 162, 215 [16 ELR 20193] (W.D. Mo. 1985), the court recognized that de minimis generator could indeed be liable under CERCLA. The court placed the burden of proof as to apportionment of harm upon each defendant.

The foregoing indicates that legal and factual questions remain regarding this defense. As such, the Court finds it premature to strike it at this time.

XIV. 13th Affirmative Defense: Taking of Property

The oil company defendants assert that CERCLA works a taking of private property without just compensation. In general, the takings clause applies only to interference with specific property rights not contractual rights or monetary liability for harm created. Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1274-76 (7th Cir. 1983), cert. denied, 467 U.S. 1259 (1984). The Court is uncertain as to the scope of defendants' taking defense. If the defendants are contending that the government's cleanup interfered with the defendants' interests in the McColl site, then the plaintiffs may have possibly eliminated a public nuisance. See Northeastern Pharmaceutical, 810F.2d at 734. If the imposed costs are the alleged taking, then "[t]here is considerable doubt that money, standing alone, constitutes property that can be subject to the 'taking" clause." Conservation Chemical, 619 F. Supp. at 216.

While the Court suspects that CERCLA does not work a taking, rendering the necessary legal analysis is inappropriate at this juncture. Since the defense attacks the constitutionality of the statute itself, it will not be stricken.

XV. Fourteenth Affirmative Defense: Impairment of Contracts

The oil company defendants also contend that CERCLA unconstitutionally impairs their contract rights. The contract clause, however, only applies to state legislation, not federal legislation. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 732 n. 9, 104 S. Ct. 2709 (1984). Since CERCLA is federal legislation, any defense based on the contract clause is inapplicable. Chemical Waste Management, Inc. v. Armstrong World Industries, Inc., 669 F. Supp. 1285, 1293 [18 ELR 20191] (E.D. Pa. 1987).

In U.S. v. Conservation Chemical Co., 619 F. Supp. 162, 214 (W.D. Mo. 1985), the court also held that CERCLA does not violate the Contracts Clause as that clause only applies to state legislation. "Moreover, even if the Contract Clause were construed to apply to CERCLA, the Act does not operate substantially to impair the defendants' waste disposal contracts with [defendant], but, rather, establishes liability." Id. at 214.

Because the Contract Clause does not apply to federal law, the affirmative defense as to the federal government is stricken. As to the state government, there is a question regarding the applicability of certain state laws. While the state contends that it is only acting under the umbrella of CERCLA's provisions, the defendants counter this. Such a legal resolution is inappropriate for a Rule 12 (f) motion, and as such, the defense as to the state government is not dismissed.

[22 ELR 20795]

XVI. 17th, 18th & 19th Affirmative Defenses: Equitable Defenses (Laches, Estoppel, Waiver, Unclean Hands)

Defendants assert the defenses of estoppel, waiver, laches and unclean hands, contending they had an implied agreement with the U.S. government that it would deal fairly with defendants and take no action to enrich itself unjustly.

As stated earlier, the Ninth Circuit has held that nonliability must be based on one of the statutory affirmative defenses. Levin Metals, 799 F.2d at 1317. Other courts have also found that equitable defenses cannot be used to preclude liability under CERCLA § 107 (a). Stringfellow, 661 F. Supp. at 1062.

Defendants cite Weinberger v. Romero-Barcelo, 456 U.S. 305, 102 S. Ct. 1798 [12 ELR 20538] (1982), in which the Supreme Court construing the Clean Water Act stated that "[u]nless a statute in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied." Id. at 313.

In the first line of § 107(a), the statute specifically states "[n]otwithstanding any other provision or rule of law, and subject to the defenses set forth in subsection (b)." 42 U.S.C. § 9607 (emphasis added). The Court cannot envision clearer language eliminating the possibility of any other defenses than those enumerated. This Court agrees with the Stringfellow court's reasoning that § 107's language mandates the necessary restriction on the court's equitable jurisdiction. Stringfellow, 661 F. Supp. at 1062.

The Court thus finds that the language of § 107 of CERCLA imposes strict liability with the exception of its three enumerated defenses. As such, the statute "by a necessary and inescapable inference" restricts this Court's jurisdiction in equity and prohibits these defenses asserted by the defendants. As such, they are stricken.

XVII. Twentieth Affirmative Defense: License

The oil company defendants claim that they are not liable because the McColl site was licensed by the City of Iullerton for disposal. This defense, however, is subsumed under § 107 (b)'s third-party defense and § 107 (j)'s federal permit exception. As such, it is stricken.

XVIII. 21st and 22nd Affirmative Defense: Contributory Negligence and Comparative Fault

The oil company defendants have raised affirmative defenses based on contributory negligence and comparative fault. The McAuley defendant has raised assumption of risk as its tenth defenses.

Again the Court refers to the language of § 107 which narrowly tailors the available defenses. Other courts have found that comparative fault and contributory negligence are not defenses to CERCLA liability. Stringfellow, 661 F. Supp. at 1062; U.S. v. Fairchild Industries, 766 F. Supp. 405 (D.Md. 1991). Courts have also found that assumption of risk is an inappropriate defense. Marisol, 725 F. Supp. at 833. As such, these defenses are legally insufficient and are stricken.

XIX. 26th Affirmative Defense: Acts at Direction or Sufferance of Plaintiff

The oil company defendants also claim that they are not liable for any acts undertaken at the direction or by the sufferance of governmental authority. Plaintiffs contend that this defense is subsumed under the third-party defense of § 107 (b).

As explained earlier, the third-party defense must be alleged in specific conformity with the statute's provisions. Marisol, 725 F. Supp. at 838-9. It is unclear whether the defendants intended this defense to fall within the affirmative defense provided for in the statute. The Court will allow the defendants to resubmit this defense in conformity with that provided by the statute. The Court reiterates its opinion, however, that § 107 imposes strict liability with the exception of the three affirmative defenses and finds no other basis for this defense except that it refers to the statute's own third party defense.

XX. 27th and 28th Affirmative Defenses: Setoff and Recoupment of Plaintiff's Claims

The oil company defendants contend that they are entitled to a setoff and recoupment if the plaintiffs recover costs or damages.

The issues of setoff and recoupment are generally the subject of a future proceeding. U.S. v. Western Proceeding Co., 734 F. Supp. 930, 939-940 (W.D. Wash. 1990). "The government's potential liability for contribution does not affect this § 107 (a) response cost recovery action. The government's potential liability alters neither the type of affirmative defenses permissible under § 107 (a), nor the government's right to full recovery of its response costs." Kramer, 757 F. Supp. at 414. "[T]he government recovers first, then contribution claims are resolved — even when all are comprised within one action." Id.

While the issues of setoffs and recoupment are perhaps inappropriate as affirmative defenses, the Court will not dismiss these defenses as the issues will be addressed after liability has been established.

XXI. Twenty-Ninth Affirmative Defense: Counterclaim

The oil company defendants incorporate by reference their counterclaims asserted against the United States which seek setoff and recoupment.

Federal Rule of Civil Procedure 8 (e) requires that affirmative defenses be set forth in the answer. The defendants' counterclaim was not set forth in their answer and is thus more appropriately labelled as a counterclaim only. In addition, issues of setoff and recoupment are addressed in the twenty-seventh and twenty-eighth affirmative defenses. As such, this defense is stricken.

XXII. 30th Affirmative Defense: Government Contractor Defense

The oil company defendants also contend that plaintiffs are not entitled to recover because defendants' actions were undertaken pursuant to contracts between them and the United States. The defendants acknowledge that this defense is novel in a CERCLA case and urge the Court to adopt the three-prong test enumerated in Boyle v. United Technologies Corp., 487 U.S. 500, 108 S. Ct. 2510 (1988), to determine government contractor liability.

42 U.S.C. § 9620 addresses the issues of government contractor liability in the CERCLA context. It provides that nothing in this section shall be construed to affect the liability of any person or entity under sections 9606 and 9607 (the section at issue in this case). 42 U.S.C. § 9620 (a)(1). In light of § 9620 and the strict liability language of § 107, this affirmative defense is inappropriate and inconsistent with the third-party defense provided within § 107. As such, it is dismissed.

XXIII. 31st Affirmative Defense: Statutory Bar to Recovery

The oil company defendants claim that the funds the state of California used to clean up the waste was expended in accord with the California Hazardous Substance Account Act. See Calf. Health & Safety Code § 25366. Defendants contend that the Act provides a cause of action for recovery of said funds from responsible parties only if their conduct was unlawful at the time of disposal of the alleged hazardous waste. The defendants argue that since their alleged acts were legal and permitted at the time they were committed, the state is barred from recovery of its response costs.

At this time, it is not clear whether the state is circumventing the state law restrictions by proceeding pursuant to CERCLA only. Because of the need for further argument and briefing on this issue, the Court will not strike this defense.

XXIV. Plaintiffs' Motion to Trifurcate

Pursuant to Federal Rule of Civil Procedure 42 (b) and Local Rule 9.5.3, the U.S. and the state of California move the court to trifurcate the litigation, including discovery, into three phases:

1. The determination of all issues of liability with respect to plaintiffs' claims against the defendants,

2. The determination of costs to be paid to the plaintiffs by defendants, and

3. The resolution, through equitable apportionment or otherwise, of all remaining issues relating to contribution, set-off, recoupment, indemnification, and damages claim, as set forth in the counterclaims and cross-claims, to commence following completion of phases one and two.

The plaintiffs contend that trifurcation provides the most sensible and economical means of resolving this litigation as a finding of nonliability would render all other issues moot. The plaintiffs also argue that the numerous parties, claims, cross-claims and counter-claims warrant case management.

[22 ELR 20796]

A. F.R.Civ.P. 42 (b) and CERCLA cases.

F.R.Civ.P. 42 (b) allows the court for purposes of convenience, avoiding prejudice, expedition or judicial economy to order a separate trial of any claim including counterclaims, cross-claims or any other issue. Only one of Rule 42 (b)'s conditions has to be met for the court to order a separate trial. In re Paris Air Crash of March 3, 1974, 69 F.R.D. 310 (C.D. Cal. 1975). The principle goal of Rule 42 (b) is to promote efficient judicial administration. Stoddard v. Ling-Temco-Vought, Inc., 513 F. Supp. 314 (C.D. Cal. 1980).

A district court has the inherit power to control the disposition of a case "with economy of time and effort for itself, for counsel and for litigants." Landis v. North American Co., 299 U.S. 248, 254 (1936). In a CERCLA action, each court must make its own case-by-case determination as to whether a severance of issues is appropriate. U.S. v. Kramer, 770 F. Supp. 954 (D.N.J. 1991).

B. Merits of the Motion.

The oil company defendants' opposition is based on four contentions: (1) the "act of war" defense overlaps with their counterclaims against the U.S., (2) trifurcation would effect a stay on discovery and postpone litigation, (3) trifurcation is prejudicial because of the advanced age of the witnesses, and (4) granting the motion would reduce the chance of settlement as major players are removed from the litigation.

The oil company defendants' counterclaim asserts twelve claims including contribution, set-off, breach of contract and joint and several liability, each of which would require discovery from numerous federal agencies and oil companies. The McAuley defendant has a counterclaim asserting seven claims which primarily seek damages for reimbursement, nuisance, trespass and indemnification. In addition, the oil company defendants and McAuley have cross-claimed against each other, essentially for reimbursement of response costs, contribution and breach of contract.

After examining the pleadings, it appears at this stage of the litigation that many of the claims asserted in the defendants' counter-claims and cross-claims relate to the third-party defense enumerated in § 107 (b). In addition, discovery that is pertinent to the "act of war" affirmative defense may also be relevant to the counterclaims. The Court is thus hesitant to effectuate duplication of and possible stays of discovery at this juncture.

Every court has an interest in promoting settlement. After rendering this decision, the Court believes that the issues are more definitive and each party will be better able to assess their strengths and weaknesses. At this stage, the Court is fearful that trifurcation may result in one party's adoption of the "wait and see" attitude noted in United State v. New Castle County, 116 F.R.D. 19, 28 [18 ELR 20188] (D. Del. 1987) (finding bifurcation in a CERCLA case may impede settlement negotiations).

Both parties cite U.S. v. Kramer, 770 F. Supp. 954 (D.N.J. 1991), in which the court addressed the issue of the third-party defendants' motion to sever and stay their claims of contribution until after the adjudication or settlement of the primary CERCLA claim. The Kramer court's objective was to ensure that the trial of the primary claim would not become unmanageable since the third-party claims involved a significant multiplication of the numbers of parties and issues. Indeed, the Kramer case involved fifty primary defendants and 300 third-party defendants. In addition, the court found that the central § 107 claim did not include equitable defenses while the third-parties' contribution claims did. The court thus determined that different legal issues would be addressed in the separate trials.

In the instant case, there are approximately seven defendants, nine counterdefendants and two cross-claimants. All the counterdefendants are U.S. governmental agencies and officials. As such, the primary counterdefendant is the U.S. government. The papers indicate that the oil company defendants are acting as one group. Therefore, the Court predicts the presence of only four major players: the U.S. and state governments, the oil company defendants, and the McAuley defendant. Thus far, the U.S. and state governments have consolidated their respective arguments, and the arguments of the two groups of defendants often overlap. The common issue to all is twofold: (a) the defendants' liability under § 107 and (b) any recoupment, setoff or contribution thereof. At this stage, the Court will not trifurcate or bifurcate the litigation. If, however, the presence of the counter- and crossclaims proves to thwart the expeditious adjudication of the plaintiffs' § 107 claim, the Court will not hesitate to bifurcate the issues.

Conclusion

Due to the strict liability scheme imposed by § 107 of CERCLA, the Court strikes the aforementioned affirmative defenses. At this stage of the litigation, the Court does not find trifurcation necessary and denies the plaintiffs' motion to trifurcate.

IT IS HEREBY ORDERED. The Clerk of the Court shall mail a copy of this Memorandum of Decision and Order to the respective parties.

1. The statute itself provides that "[n]otwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section." 42 U.S.C.§ 9607 (a) (emphasis added).

2. The elements of § 107 (a) are outlined in paragraphs 13 through 23 of the plaintiffs' complaint.

3. This is McAuley defendant's eleventh affirmative defense.

4. The defendants cite Skeels v. United States, 72 F. Supp. 372 (W.D. La. 1947), in support of their argument. Not only does the Skeels case interpret the term "combatant activities" rather than "act of war," the Skeels court found that the term denoted actual conflict "such as where planes and other instrumentalities were being used." Id. at 374. This case only further supports the plaintiffs' position.

5. This is McAuley's 12th defense.

6. This is McAuley's fourteenth defense.

7. This is McAuley's eighth defense.