Foamseal, Inc. v. Dow Chemical Co.

No. 96-71129 (991 F. Supp. 883) (E.D. Mich. January 30, 1998)

The court holds that contribution bars in Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) settlements not involving the United States or a state government are valid. The court first approves a corporation's settlements with a group of settling parties. The agreements seem to roughly approximate the settlors' liability, taking into account the reduction in transaction costs that will be realized from approval of the voluntary settlements. The court then rejects the nonsettlors' argument that CERCLA § 113(f)(2) allows contribution bars only when the UnitedStates or a state government is involved. CERCLA is silent when settlements between private parties include contribution bars. Further, a growing number of federal courts have applied the Uniform Comparative Fault Act when dealing with settlements between private parties. Although the nonsettlors argue that the contribution will unjustly prevent them from seeking contribution from settlors in the cost recovery actions brought by the state and the United States, Congress intended the disparities that inevitably arise under such a legislative scheme to act as a catalyst for early and inexpensive settlements. Disproportionate liability will invariably result, but it is not the court's place to countermand clear legislative mandate. Last, the court holds that it will not conduct a full evidentiary hearing. This would discourage parties from settling, which is contrary to CERCLA policy.

[A decision related to this litigation is published at 28 ELR 21147].

Counsel for Plaintiffs
David G. Hetzel, Ronald W. Zdrojeski
LeBoeuf, Lamb, Greene & MacRae
Goodwin Sq.
225 Asylum St., 13th Fl., Hartford CT 06103
(860) 293-3500

Counsel for Defendants
Bernard P. Paige, Patrick J. Ennis
Colombo & Colombo
36800 Woodward Ave., Ste. 300, Bloomfield Hills MI 48303
(248) 645-9300

[28 ELR 21110]

Feikens, J.:

Opinion and Order

Plaintiffs bring this action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., to recover expenses plaintiffs assumed under consent decrees entered in two companion cases both entitled United States v. BASF Corp., et al. (Case Nos. 91-40320 and 96-75279). These consent decrees obligated plaintiffs to pay a total of approximately $ 45 million to remediate a landfill contaminated by hazardous waste. Plaintiffs now seek approval of settlements that will resolve their claims against a group of twenty-two defendants (hereafter "settlors"). A group of nonsettling defendants (hereafter "nonsettlors") has raised a number of objections to these settlements. These objections substantially mirror the ones I addressed in another companion case, Kelly v. Wagner, 930 F. Supp. 293 [26 ELR 21581] (E.D.Mich.1996), which declined to approve a settlement between the State of Michigan and General Electric ("GE") for costs expended by the State to clean up the landfill at the center of these disputes.

[28 ELR 21111]

My primary concern with the proposed consent decree in Kelly was that it obligated GE to pay only $ 35,000 in satisfaction of potential liability that was approximately $ 646,000. This disparity, while troubling, was made worse by the fact that the consent decree contained a broad contribution bar that would have made it impossible for other potentially responsible parties to seek contribution against GE for the remainder of its liability. I concluded that the contribution bar coupled with the inadequate sum paid made the consent decree "unfair":

As a matter of substantive fairness, a CERCLA settlement must be based upon and roughly correlated to an acceptable measure of comparative fault, apportioning liability among PRPs according to rational estimates of fault. United States v. Cannons, 899 F.2d 79, 87 [20 ELR 20845] (1st Cir. 1990). As noted by the State and GE, "the court's role is not to determine the best method for measuring fault and determining liability." Nucor, 825 F. Supp. at 1459. However, I should not uphold the Consent Decree if the basis for apportioning liability is "arbitrary, capricious, and devoid of a rational basis." I find that the definition of "matters addressed" [which effectively created the broad contribution bar] in the Consent Decree turns an otherwise apparently reasonable settlement into one that appears to assess GE's liability in a non-rational manner. The definition of matters addressed, if taken at face value, potentially gives GE complete finality with respect to all liability for cleanup of the Site. The total amount of liability is estimated to be about $ 95 million, and GE is estimated to be responsible for .68 percent of that figure (about $ 646,000). The figure suggested for settlement falls far short of that number. I do not judge whether this is the "best" settlement possible, but the State and GE have failed to explain how they rationally arrived at a figure that does not appear to be "in the ballpark" of the State's own estimate of GE's liability.

930 F. Supp. at 298-299. (Footnote omitted.) That problem has been remedied and I have approved a new arrangement between GE and the State of Michigan that, combined with the settlement sub judice, obligates GE to pay considerably more than the $ 35,000 figure I originally rejected. This figure, in my view, adequately approximates GE's "fair share."

The same can be said for the other settlements I now approve. As part of my review of these settlements, I requested that the settling parties produce the agreements for my in camera inspection. After such review, I am not concerned that the agreements are "outside of the ballpark." To the contrary, the agreements seem to roughly approximate the settlors' liability, taking into account the reduction in transaction costs that will be realized from approval of the voluntary settlements.

This conclusion does not end the inquiry. The nonsettlors point out that § 113(f)(2)¹ of CERCLA allows contribution bars, but only where a settlement involves the United States or a state government. The provision 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." Id. CERCLA is silent, however, where, as here, settlements not involving a state or the United States include broad contribution bars of the sort presently before me.

A similar situation occurred in Comerica Bank-Detroit v. Allen Industries, Inc., 769 F. Supp. 1408 (E.D.Mich.1991), where Comerica Bank and General Motors entered a comprehensive settlement that included a broad contribution bar prohibiting nonsettling parties from suing General Motors for contribution in a CERCLA cost recovery action. Comerica joined the "growing chorus" of federal courts² that have applied the Uniform Comparative Fault Act ("UCFA") when dealing with settlements between private parties. 769 F. Supp. at 1414. Section 6 of UCFA provides:

A release, covenant not to sue, or similar agreement entered into between a claimant and a person liable discharges that person from all liability for contribution, but it does not discharge any other person liable upon the same claim unless it so provides. However, the claim of the releasing person against other persons is reduced by the amount of the released person's equitable share of the obligation. . . .

The clear import of this provision is, as Judge Newblatt held in Comerica, that "the claimant bears the risk that the ultimate liability of the settling defendant may exceed the settlement amount." 769 F. Supp. at 1414. See also United States v. SCA Services of Indiana, Inc., 827 F. Supp. 526 [24 ELR 20086] (N.D.Ind.1993).

This is undoubtedly of little solace to the nonsettlors who argue that the contribution bar will unjustly prevent them from seeking contribution from settlors in the cost recovery actions brought by the State of Michigan and United States. However, as Comerica points out, Congress intended the disparities that inevitably arise under such a legislative scheme to act as a catalyst for early and inexpensive settlements. Disproportionate liability will invariably result, but it is not my place to countermand this clear legislative mandate.

In the same manner, I decline nonsettlors' invitation to review these settlements in microscopic detail. The review that nonsettlors request would require exhaustive evidentiary hearings that would, in many respects, mirror a trial on the merits. As Judge Newblatt observed in Comerica:

The preparation for such "mini-trials," and the uncertainty of the out-comes, would discourage parties from settling, and this would be contrary to CERCLA's policy of encouraging early settlement.

769 F. Supp. at 1411. While I have conducted a thorough review of settlements to determine if they are fair and reasonable, I agree with Judge Newblatt that "a full blown evidentiary hearing [. . .] is not necessary or appropriate here." 769 F. Supp. at 1411. Accordingly, the motion to approve the settlements and contribution bars is GRANTED.

IT IS SO ORDERED.

1. 42 U.S.C. § 9313(f)(2).

2. See, United States v. Conservation Chemical Co., 628 F. Supp. 391, 402 [17 ELR 20158] (W.D.Mo.1985), Lyncott Corp. v. Chemical Waste Management, Inc., 690 F. Supp. 1409 (E.D.Pa.1988), Edward Hines Lumber Company v. Vulcan Materials Company, 1987 WL 27368 (N.D.Ill.1987), United States v. Western Processing Co., 756 F. Supp. 1424, 1430 [21 ELR 20858] (W.D.Wash.1990), American Cyanamid Co. v. King Industries, Inc., 814 F. Supp. 215 [23 ELR 20919] (D.R.I.1993).