The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
American Premier
Underwriters, Inc.,
Plaintiff,
Case No. 1:05-cv-437
Vv.
Judge Michael H. Watson
General Electric
Company,
Defendant.
OPINION AND ORDER
This cause comes before the Court on Plaintiff American Premier
Underwriters, Inc.’s (“APU”) Trial Brief, ECF No. 178, Defendant Genera! Electric
Company’s (“GE”) Trial Brief, ECF No. 180, and APU’s Reply, ECF No. 181. For
the following reasons, the Court finds that GE is not liable as a former operator of
the Silverliner IV and Jersey Arrow II railcars or the Paoli, Sunnyside, and
Wilmington rail yards.
I. INTRODUCTION
APU is the successor to the Penn Central Transportation Company (“Penn
Central”).' Compl. 23, ECF No. 1. This action arises from contamination at
three rail yards operated by Penn Central prior to April 1, 1976: (1) the Paoli Yard
in Paoli, Pennsylvania; (2) the Sunnyside Yard in Long Island, New York; and (3)
' The Court refers to Pennsylvania Railroad and Penn Central Transportation Company
collectively as “Penn Central.” The former was renamed to the latter after a 1968 merger.
the Wilmington Yard and its related facilities in Wilmington, Delaware. /d. at J 24.
When Penn Central operated these three rail yards (collectively the “Yards’), it
owned and used passenger railcars with transformers designed and
manufactured by GE. /d. at { 25. APU claims these GE railcar transformers
contributed to contaminating the Yards by leaking polychlorinated biphenyls
(“PCBs”). /d. at | 2. APU now seeks to hold GE responsible for portions of the
clean-up and response costs asscciated with those leaks based on its theory that
GE is a “former operator’ of the Yards and related railcars, as that term is defined
by the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (“CERCLA”), 42 U.S.C. § 9601, et seq. /d. □□ 911. To understand
this litigation, a brief summary of its previous proceedings is necessary.
In 1992, the United States filed a CERCLA action against Penn Central to
recover response costs related to the contamination at the Paoli Yard. /d. at
{| 63. That case proceeded alongside other CERCLA claims against Penn
Central filed by the Southeastern Pennsylvania Transportation Authority
(“SEPTA”), National Railroad Passenger Corporation (“Amtrak”), and
Consolidated Rail Corporation (“Conrail”) to recover environmental costs incurred
at the Sunnyside and Wilmington Yards. On September 20, 1999, SEPTA,
Amtrak, and Conrail entered into a settlement agreement with the United States
relating to the Paoli Yard; the settling defendants were obligated to pay $500,000
to the United States and $100,000 to Pennsylvania for response costs, and
$850,000 to the United States and Pennsylvania for natural resource damages
Case No. 1:05-cv—437 Page 2 of 26
arising from the contamination at the Paoli Yard. APU SOF No. 22-23, ECF No.
96-2. About five years later, on November 8, 2004, APU, SEPTA, Amtrak, and
Conrail entered into a settlement agreement relating to the contamination of the
Paoli Yard, under which APU paid $23,000,000 to SEPTA and $15,000,000 to
Amtrak.” /d. No. 27, ECF No. 96-3. Ten months after that, in September 2005,
APU and the United States entered a settlement agreement under which APU
paid another $6.4 million for response costs and natural resource damages
related to the Paoli Yard. /d. No. 31-32. APU has also incurred costs related to
CERCLA claims for the Sunnyside and Wilmington Yards. /d. Nos. 51, 56-58.
In June 2005, APU filed this action against GE asserting twenty-three
causes of action under federal! law and the laws of four states seeking to recover
costs expended to remove the PCB contamination at the Yards. After GE moved
to dismiss certain causes of action, the Court dismissed twelve of APU’s claims.
See Opinion & Order, ECF No. 60. Then, in May 2011, after discovery had
closed, APU and GE each moved for summary judgment on various remaining
claims. The case was then reassigned to Judge Barrett, who ruled on those
motions. ECF Nos. 151, 153-55. Judge Barrett subsequently permitted the
parties to move for reconsideration. See ECF No. 157. He later denied APU’s
Motion for Reconsideration. ECF No. 170. This case was then reassigned to the
2 The United States had initially demanded $58,600,000. /d. No. 29.
Case No. 1:05—cv-437 Page 3 of 26
Undersigned, who granted in part and denied in part GE’s Motion for
Reconsideration. ECF No. 175.
As a result of this extensive litigation history, only two claims remain for
trial: (1) APU’s recovery claim for removal costs at the Sunnyside and Wilmington
Yards (Count I), and (2) APU’s contribution claim for settlement payment to the
United States in connection with the Paoli Yard (Count Ill). Although CERCLA’s
removal and contribution claims are separate, United States v. Atl. Research
Corp., 551 U.S. 128, 131 (2007), the parties agree that the threshold issue for
both these remaining claims is whether GE qualifies as a former “operator” of the
relevant facilities. See Joint Mot. to Approve Case Mgmt. Order at 1~2, ECF No.
176. Thus, that is the sole question before the Court, which the parties agreed to
submit to the Court by trial briefs. See ECF Nos. 176-77. Based on those briefs
and the evidence presented in them, the Court makes the following findings of
fact and conclusions of law.
Il. | FINDINGS OF FACT
For most of the twentieth century, Penn Central provided passenger and
freight rail services throughout the United States. Compl. 16, ECF No. 1.
Beginning in 1915, Penn Centra! operated self-propelled multi-unit (“MU”)
passenger railcars powered by electricity at the Paoli Yard in Paoli,
Pennsylvania. APU Brief, Ex. 2 at 2, ECF No. 99-1. in 1928, Penn Central
began commuter services from Philadelphia to the Wilmington Yard in
Case No. 1:05—cv-437 Page 4 of 26
Wilmington, Delaware. /d. at 3. Then, in 1933, Penn Central first operated
electric railcars at the Sunnyside Yard in Queens, New York. /d. at 4.
At those operations, Penn Central provided commuter services via MU
railcars. Evans Dep. 13-15, ECF No. 180-1. The commuter cars were self-
propelled using electricity provided by catenary lines strung above the railroads.
fd. at 14-16. The railcars drew high-voltage alternating currents from the
overhead lines, reduced the current to a lower voltage with an onboard electrical
transformer, and converted the alternating current to a direct current with other
electrical devices. /d. at 16-18. Each transformer was essentially a tank with
various attachments coming out of it. Evans Dep. 31, ECF No. 180-1. To
insulate the substantial heat within the tanks, the transformers were filled with a
fluid called askarel, which contained PCBs. /d. at 26, 33. GE eventually
trademarked its version of askarel as “Pyranol.” /d. at 27.
Depending on the model of the railcar and its transformer, the volume of
Pyranol in a transformer’s sealed tank ranged from 80 to 140 gallons. /d. at 31—
32. The transformers could not function with an insufficient amount of Pyranol
since the internal components would then overheat, which would cause the tank
to explode. /d. at 31, 33-34. Thus, when GE delivered the railcars to Penn
Central, GE had already filled the transformer tanks with Pyranol. GE Ex. 5
(“MacMonagle Dep. II”) at 203, Doc. 180-5. GE mounted the transformers under
the railcars’ cabins, about eight inches to two feet above the railroad (depending
Case No. 1:05—cv—437 Page 5 of 26
on the railcar model). Ex. 101, ECF No. 102-2: Evans Dep. at 20-21, ECF No.
180-1.
As the internal components in a transformer became hot during operation,
the Pyranol expanded, thereby increasing the tank’s internal pressure. Evans
Dep. at 34-35, ECF No. 180-1. GE designed the tank to accommodate
increased pressure, and avoid a potential explosion, by including a pressure
relief valve on the transformers. /d. at 35-37. These devices prevented tank
ruptures by releasing vapor—and sometimes Pyranol—until the tank’s internal
pressure feil to a level that could not potentially rupture the tank. Evans Dep. at
65-74, ECF No. 180-1.
Beginning on July 1, 1965, and continuing until April 1, 1976, Penn Central
and the New Jersey Department of Transportation (‘NJDOT’) entered
agreements, which obligated Penn Central to run and maintain various railcars in
New Jersey, including Jersey Arrow II railcars. APU SOF No. 6, ECF No. 95-2.
On October 11, 1971, SEPTA leased Penn Central 130 Silverliner IV railcars for
use in four Pennsylvania counties and in the City of Philadelphia. /d. Nos. 1, 4,
ECF No. 95-1. On October 14, 1971, GE and NJDOT entered a sales contract
under which GE agreed to “design, construct, test, deliver, and guarantee” 70
Jersey Arrow Il railcars. fd. No. 7, ECF No. 95-2. A few days later, on October
18, 1971, SEPTA and GE executed a contract under which GE agreed to
“design, construct, test, deliver, and guarantee” 144 Silverliner IV railcars for
SEPTA. fd. No. 5, ECF No. 95-1. GE manufactured the Silverliner IV and
Case No. 1:05-cv—437 Page 6 of 26
Jersey Arrow Ii railcars at its plant in Erie, Pennsylvania. MacMonagle Dep. tI at
178, ECF No. 180-5. And GE manufactured those Railcars’ transformers at a
GE plant in Pittsfield, Massachusetts. /d. at 165. In addition to the Railcars’
purchase agreements, GE executed warranty agreements with NJDOT and
SEPTA.
In the warranty agreements, GE guaranteed that each Silverliner IV and
Jersey Arrow II railcar and its components would contain no “defects in design,
materials, and workmanship[.]” GE Ex. 14 at 12, ECF No. 180-14; GE Ex. 15 at
13, ECF No. 180-15. If 25% of the railcars experienced a particular component
failure, GE was required to recall and repair that component in ail the railcars.
GE Ex. 16 at 1-2, ECF No. 180-16. But GE was not required to perform any
repairs. GE Ex. 14 at 13-14, ECF No. 180-14; GE Ex. 15 at 13-14, ECF No,
180-15. Rather, GE had to pay for them. GE Ex. 14 at 13-14, ECF No. 180-14;
GE Ex. 15 at 13-14, ECF No. 180-15. This reimbursement warranty policy
included any costs Penn Central incurred for labor, fringe benefits, and overhead.
GE Ex. 16 at 1, ECF No. 180-16.
Around June 1974, GE began delivering the Silverliner IV and Jersey
Arrow II railcars to Penn Central on a rolling basis. GE Brief Ex. 2 (“Kennedy
Dep.”) at 97, ECF No. 180-2. Almost immediately, some railcar transformers
suffered serious internal failures, GE Brief Ex. 17, ECF No. 180-17, that were
sometimes accompanied by the release of Pyranol. GE Brief 26, ECF No. 180.
GE investigated the issue and ultimately concluded that the failures were caused
Case No. 1:05—cv—437 Page 7 of 26
by “a randomly occurring core blocking workmanship problem.”? GE Brief Ex. 17
at 1, ECF No. 180-17. GE also concluded that the overall failure rate on the
Railcars with the original design was between 10-20%. GE Brief Ex. 18, ECF
No. 180-18. To remedy the issue, GE designed a modified coil blocking
component that stabilized the tanks’ coils and prevented short-circuiting.
MacMonagle Dep. II at 197, ECF No. 180-5. This tweak solved the issue. Evans
Dep. at 117-18, ECF No. 180-1. But GE only added that component to Railcars’
transformers after they had already malfunctioned. GE Brief Ex. 17, ECF No.
180-17.
After GE delivered the Silverliner IV railcars to Penn Central, GE
established a trailer at the Paoli Yard to house four GE employees that
performed warranty administration and field service support to the Penn Central
employees at the shop. Keefe Dep. at 29-31, ECF No. 180-3. To that end,
when a railcar arrived at the Paoli Yard with a “warranty problem,” a Penn
Central shop foreman would enter the GE trailer and ask one of the four GE
technicians for assistance. Evans Dep. at 163, ECF No. 180-1. Only the Penn
Central shop foreman could request assistance from GE technicians. /d. Upon
doing so, GE technicians assisted Penn Central employees with troubleshooting
the railcars problems, but those technicians were not allowed to give orders to
3 GE, perhaps to put this in terms the Court better understands, describes the problem
as “affectfing] the stability of the components within the transformer tank.” GE Brief 24,
ECF No. 180.
Case No. 1:05—-cv-437 Page 8 of 26
the railroad employees since the GE technicians could only offer technical
support. /d. So, according to the “ground rules,” the Penn Central shop foreman
was in charge, and only he could give commands regarding the maintenance and
repair of the Railcars and their components. /d. For that reason, the GE
technicians never tried to give orders to Penn Central employees but rather just
offered them advice. /d. This hierarchy is consistent with Penn Central's labor
organization at the Paoli Yard, which prohibited any non-Penn Central personnel
from performing mechanical labor on the Railcars. Evans Dep. at 165~167, ECF
No. 180-1. Thus, GE technicians were barred from performing any work on the
Railcars, such as disconnecting wires, removing covers, or “that type of thing.”
ld. For that reason, the four GE technicians at the Paoli Yard never serviced or
repaired any transformers there. Evans Dep. at 229-33, ECF No. 180-1.
The Railcars’ transformers, which were filled with liquid, required repairs
every now and then; but their tanks contained up to 140 gallons of Pyranol, so
they were extremely heavy. APU SOF Ex. 98, ECF No. 102-2; MacMonagle
Dep. 1 147, ECF No. 180-4. To remove and then repair or replace the
transformers, Penn Central employees sometimes drained the transformer tanks
of Pyranol directly onto the railbeds or on other parts of the Yards. Keefe Dep. at
163-65, ECF No. 180-3; D’Antonio Dep. at 31-41, ECF No. 180-11.
in sum, APU asserts that Pyranol leaks occurred when: “(1) the Railcars’
transformers overheated; (2) rocks or debris damaged the transformers while the
Railcars were in service on the main line; (3) fluid volatilized; and (4) the Railcar’s
Case No. 1:05-cv-437 Page 9 of 26
transformers were serviced.” APU’s SOF No. 12, ECF No. 95-3. And the record
indicates that some leaks occurred at the Paoli and Wilmington Yards from the
deliberate wholesale dumping or spraying of fluids drained from the rail car
transformers and from unintended spillage and leakage of fluids from
transformers. /d.
lll. LAW AND ANALYSIS
The threshold issue here is whether GE is a former operator of the Yards
or Railcars. CERCLA defines a former “operator” as anyone “who at the time of
disposal of any hazardous substance . . . operated any facility at which such
hazardous substances were disposed off.]” 42 U.S.C. § 9607(a)(2). APU and
GE agree that some of those elements are supported by the evidence here.
First, there is no dispute that the Railcars and Yards qualify as separate
“facilities” under CERCLA. And both parties agree that Pyranol, which contains
PCBs and is a “hazardous substance” under CERCLA, was released at the
Yards and from the transformers of some Railcars. The only disagreement
between APU and GE, then, is whether GE operated the Yards or Railcars when
the Pyranol leaks occurred.
The temporal requirement is a straightforward question of fact. The
conduct requirement, on the other hand, is a complicated question of law and
fact.
To begin, in United States v. Bestfoods, the Supreme Court explained that,
to “operate” in the context of CERCLA, one “must manage, direct, or conduct
Case No. 1:05—cv—437 Page 10 of 26
operations specifically related to pollution, that is, operations having to do with
the leakage or disposal of hazardous waste[.]” 524 U.S. 51, 66-67 (1998). In
other words, the Court clarified, “to operate’. . . obviously mean[s] something
more than mechanical activation of pumps and valves, and must be read to
contemplate ‘operation’ as including the exercise of direction over the facility's
activities.” /d. at 71. Two months after Bestfoods, the Sixth Circuit provided the
test to apply when determining whether one qualifies as a CERCLA operator.
United States v. Twp. of Brighton, 153 F.3d 307 (6th Cir. 1998). There, the Sixth
Circuit held that the “actual control” test applies, meaning that “[bJefore one can
be considered an ‘operator’ for CERCLA purposes, one must perform affirmative
acts.” /d. at 314. Thus, the Sixth Circuit found, “[t]he failure to act, even when
coupled with the ability or authority to do so, cannot make an entity into an
operator.” /d.
Under that general framework, APU argues that GE qualifies as an
operator of the Railcars and Yards for three reasons. First, APU contends that
GE operated the Railcars by designing and manufacturing them and, in
particular, their transformers. Second, APU argues that, by administering the
Railcars' warranties at the Yards, GE controlled the Railcars enough to
effectively direct the activities of the Railcars and the Yards. Third, APU asserts
GE controlled the Railcars by implementing its “fail and fix” warranty policy, under
which GE chose to repair rather than replace potentially faulty transformers. For
Case No. 1:05-cv—437 Page 11 of 26
the following reasons, APU’s first and third theories fail as matters of law, and its
second theory fails on the record here.
A. Designing and Manufacturing the Railcars Does Not Make GE an
Operator.
There is no dispute that GE was the general contractor for the building of
the Silverliner IV and Jersey Arrow II railcars, as well as the manufacturer of the
transformers and propulsion system. GE Brief 6, ECF No. 180. APU contends
that this conduct establishes that GE is an operator of the Railcars.* For two
primary reasons, however, APU’s claim fails as a matter of law. First, GE’s
design and manufacture activities are not the types of work that support a finding
that it was an operator under CERCLA. Second, even if those actions could
move the “operator” needle, GE’s design and manufacturing work cannot serve
as the basis for operating the Railcars because APU does not allege that any
leaks occurred at the time GE performed that work. Thus, GE cannot be held
liable as an operator for designing and manufacturing the Railcars.
Again, CERCLA defines former operators as “any person who at the time
of disposal of any hazardous substance . . . operated any facility at which such
hazardous substances were disposed off.]” 42 U.S.C. § 9607(a)(2). APU
contends that GE’s design and manufacture of the Railcars demonstrates its
operator status as those acts related to pollution to the extent that, by including
4 APU also briefly suggests that GE is liable because it invented and patented PCB-
containing Pyranol. APU Brief 18, ECF No. 178. Without further developing that
argument, however, the Court need not analyze it.
Case No. 1:05-cv—437 Page 12 of 26
Pyranol and valve releases as components of the transformers, GE planned for
Pyranol discharges to occur in certain future circumstances. Even if true,
however, CERCLA does not extend liability so broadly as to attach to GE for its
actions that occurred before the release of PCB-containing materials.
Acknowledging this defect, APU points to the multi-factor test of operator
liability proposed in the Brighton concurrence, which weighed, among other
things, an alleged operator's role in designing a facility and its expertise and
knowledge of the dangers of a facility. APU Reply at 4, 7 (citing Brighton, 153
F.3d at 327 (Moore, J., concurring)). While the Court previously found these
factors to be “instructive,” Op. & Order 12 n.5, ECF No. 154, they are of course
not binding.* See Maryland v. Wilson, 519 U.S. 408, 412-13 (1997). Meanwhile,
the majority opinion in Brighton—which is binding—requires that an operator
“actually control” the relevant facility. Brighton, 153 F.3d at 314. That is,
“[b]efore one can be considered an ‘operator’ for CERCLA purposes, one must
perform affirmative acts” to control the facility, id., “at the time of disposal of any
hazardous substances[.]” 42 U.S.C. § 9607(a)(2). As a matter of law, then, the
fact that GE designed and manufactured facilities that later released hazardous
substances cannot create operator status.
APU disagrees and argues that, as a matter of law, GE’s design and
manufacture of the transformers is sufficient to establish operator liability
5 APU does not suggest otherwise.
Case No. 1:05-cv—437 Page 13 of 26
because the relevant product contained hazardous substances. APU offers two
cases for support.
Relying on Nu-West Mining Inc. v. United States, 768 F. Supp. 2d 1082 (D.
Idaho 2011), APU argues that operator liability can attach to the designer-
manufacturer of a CERCLA facility. For several reasons, though, that case is
inapposite. For one, the Nu-West Mining court applied a standard for operator
liability that differs from the one that applies here. /d. at 1089. There, the court
relied on the Ninth Circuit's “authority to control” standard. /d. (quoting Kaiser
Alum. & Chem. Corp. v. Catellus Dev. Corp., 976 F.2d 1338, 1341-42 (9th Cir.
1992)). Whatever the rule may be in the Ninth Circuit, the Sixth Circuit requires a
CERCLA operator to exercise “actual control” over the facility that released the
contamination.
Moreover, in Nu-West Mining, the defendant was the federal government,
which had substantial control over the facilities—four hazardous waste dumps—
by exerting its regulatory authority and contractual final-approval authority over
the plaintiff to relocate, redesign, and (after the dumps were built) modify the four
hazardous waste dumps. /d. at 1090-91. The government also continued to
inspect the facilities “to ensure compliance with the mining plans and waste
disposal guidelines.” /d. at 1090. After those inspections, the government
ordered the plaintiff to modify the facilities’ structures and to stop dumping
hazardous waste in certain areas, “among other decisions affecting the waste
dump.” /d. In this way, the government controlled how much, where, and the
Case No. 1:05—cv—437 Page 14 of 26
methods by which waste could be handled by the plaintiff. fo. When the
government later argued that it was not an operator under CERCLA but instead a
typical “regulator,” the court rejected that argument because, ultimately, the
government “was a very active participant in designing and locating the waste
dumps, in inspecting mining operations, and in ensuring compliance with all rules
and plans.” /d. at 1090-91.
Finally, in Nu-West Mining, the CERCLA facility the government designed,
built, and monitored was a hazardous waste dump, and so, that facility was
intentionally designed for the purpose of polluting. In contrast, GE designed,
manufactured, and tested the Railcars—i.e., transportation vehicles, not waste
dumps—and then delivered those Railcars to Penn Central for its commuter
operations. After delivery, GE did not maintain rights to inspect the Railcars, did
not have any control over how or where Penn Ceniral operated the Railcars, and
did not order Penn Central to operate the Railcars in compliance with any
environmental regulations (more on all that later). Accordingly, unlike the
defendant in Nu-West, GE’s design and manufacture of the Railcars were not
“specifically related to” activities involving the disposal of hazardous waste, and
so GE did not participate in designing and manufacturing a facility designed
specifically for the purpose of dumping hazardous materials.
Next, APU relies on GenCorp, Inc. v. Olin Corp., 390 F.3d 433 (6th Cir.
2004), arguing that, there, the Sixth Circuit found the defendant was an arranger
and operator under CERCLA for participating in a joint committee that approved
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the design plans for the facility, as well as other projects. /d. at 449. True
enough, the GenCorp court rejected the defendant's argument that arranger and
operator liability did not attach because it had not directly engaged in disposal
activities. Still, GenCorp does not help APU much as the Sixth Circuit in that
case did not focus on the fact that the defendant had participated in the design
and construction of the facility to find that those activities established the
defendant was an operator. /d. at 449. Rather, the Sixth Circuit pointed out that,
based on the defendant’s “active interest in the facility-—as evidenced by its
option to buy the plant and its contribution of one haif of the facility’s construction
costs—and “equal representation” on the committee that oversaw the
construction, operation, and management of the facility, the defendant had
substantially controlled the facility as to justify operator/arranger liability. /d. at
449 (emphasis in original). Put differently, the defendant’s role on the committee
(which included overseeing the facility’s design and construction, among other
things), demonstrated the substantial degree of control that the defendant
exerted over the entire facility.
Thus, GenCorp does not support APU’s argument that, inter alia, operator
liability attaches to one who designs and manufactures a vehicle that later emits
a hazardous substance. Rather, GenCorp focuses on whether a party actually
controlled the operations specifically related to the disposal of hazardous
substances at the time of those disposals. /d. at 447-49.
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Indeed, it is well established that simply designing and building a facility
that subsequently leaks hazardous substances into the environment does not
establish or otherwise support a finding of operator liability under CERCLA,
Judge Easterbrook’s opinion in Edward Hines Lumber Co. v. Vulcan Materials
Co., 861 F.2d 155 (7th Cir. 1988), best illustrates this point. There, the Seventh
Circuit explained that, because operator liability attaches only to those who
control the relevant facilities at the time of the disposals, CERCLA “does not fix
liability on slipshod architects, clumsy engineers, poor construction contractors,
or negligent suppliers of on-the-job training—and the fact that [the defendant}
might [be] all four rolled into one does not change matters.” Edward Hines, 861
F.2d 155, 157 (7th Cir. 1988). This is true, the Edward Hines court found, even
when-—after the initial transaction—the designer-manufacturer-seller trains the
operator-buyer to use the machinery, reserves the right to inspect ongoing
operations, and furnishes the toxic materials. /d. at 156-57. And so, assuming
as true APU’s claims that GE negligently designed and manufactured poorly
constructed railcars and transformers, CERCLA does not impose operator
liability on such actors. Accordingly, APU cannot hold GE liable as an operator
for designing and manufacturing the Silverliner IV and Jersey Arrow II railcars.
B. Administering the Railcars’ Warranties at the Yards Does Not Make GE
an Operator.
Next, APU contends that GE is a CERCLA operator of the Railcars and
Yards for leading the Railcars’ maintenance and repair processes and ultimately
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“bec[oming] ingrained in the day-to-day operations at the [Yards].” APU Brief 7,
ECF No. 178. GE disagrees with that characterization of its post-sale activities,
arguing that there is no evidence regarding whether GE personnel engaged in
any on-site activities at the Sunnyside and Wilmington Yards, and that, to the
extent GE had personnel stationed at the Paoli Yard, those technicians merely
administered the Railcars’ warranties, which does not involve the type of
“direction” or “control” necessary to establish that GE is an operator under
CERCLA. The question, then, is whether GE’s post-sale activities at the Yards
involved managing, directing, or conducting the Railcars and Yards.
As an initial matter, though, GE correctly points out that the record is
mostly absent of evidence that GE engaged in any activities at the Sunnyside
and Wilmington Yards.
Regarding the Sunnyside Yard, Evans, a former Penn Central employee,
testified that he had no knowledge about whether GE had a trailer there. Evans
Dep. at 161, ECF No. 130. A former GE engineer, MacMonagle, testified that he
was not certain whether GE had a trailer at the Sunnyside Yard, but he believed
it did. MacMonagle Dep. at 55, ECF No. 137. And Keefe, a GE field engineer,
testified that GE had an office building or a part of an office building at the
Sunnyside Yard from 1970 to around 1975, but he did not elaborate beyond that.
Keefe Dep. at 40, ECF No. 132. Under the “actual control” standard required by
Brighton, GE’s presence at a facility undoubtedly does not establish that it
operated that facility. Simply put, “existence” does not amount to “actual control.”
Case No. 1:05-cv—437 Page 18 of 26
Thus, APU has not established that GE operated the Sunnyside Yard.
By the same token, there is sparse evidence to illustrate what, if any,
activities GE performed at the Wilmington Yard. Keefe testified that GE had a
“commissioning site” there in the early 1970s. Keefe Dep. at 13-22, ECF No.
132. He explained that GE handled warranty support for another set of railcars
(not the Silverliner IV or Jersey Arrow II Railcars) at its Wilmington Yard site,
primarily “diagnosing whether the thing was functioning or defective.” /d. at 22.
Further, to the extent Evans testified that GE had a presence at the Wilmington
Yard in the mid-1970s, he explained that it was because GE delivered the
Silverliner IV cars to SEPTA there. Evans Dep. at 160-61, ECF No. 130.
Neither Evans nor Keefe explained in any detail, however, the work that GE
performed at the Wilmington Yard. Again, without evidence establishing that GE
maintained control over the Wilmington Yard’s operations, APU has not shown
that operator liability should attach to GE for simply diagnosing and delivering
railcars there.
That leaves the Paoli Yard. The parties do not dispute that, there, GE had
a shop—better described as “a small work trailer’—from 1974 to 1978, and that
four GE technicians administered the Silverliner IV railcars’ warranties and taught
the Penn Central employees about how to troubleshoot and repair those railcars.
id. at 155-58. But GE and APU disagree about whether those activities establish
that GE operated the Railcars and the Paoli Yard. Two witnesses, one testifying
on behalf of each party, explained the breakdown of duties at the Paoli Yard.
Case No. 1:05-cv-437 Page 19 of 26
Evans was a Penn Central shop foreman there in the 1970s. Keefe was a GE
technician at the Paoli Yard’s shop around the same time. Their testimony is
consistent.
Evans averred that at the Paoli, Wilmington, and Sunnyside Yards, Penn
Central’s Transportation Department managed the train schedules, staffing,
equipment, and railcar inventory. /d. at 43, 241-44. And a Penn Central
engineer “drove” the Railcars. /d. at 241. Meanwhile, Penn Central's Mechanical
Department (of which he was a part), performed any maintenance and repairs on
the Railcars. /d. at 241-45. Both Evans and Keefe also explained that the GE
technicians at the Paoli Yard merely trained and assisted the Penn Central
employees, who then maintained and repaired the Railcars. /d. at 152-53; Keefe
Dep. 31-32, ECF No. 132. Keefe described the duties of the GE technicians
working at the Paoli Yard as follows:
In broad terms we were warranty administrators, but under the
heading of warranty administrators you trained, you assisted with
troubleshooting, administrative functions of doing failure analysis,
determining whether it was legitimate equipment failure, whether the
equipment was abused. It was a multifunctional job because there
were times where | even dispatched people to go out and ride the
equipment to find out what the railroad was complaining about. That
was essentially it.
Keefe Dep. 31-32, ECF No. 132.
Evans’ testimony substantiates Keefe’s and further explains that the GE
technicians could only offer advice to Penn Central employees about identifying a
Railcar’s issues. In other words, the GE technicians were only allowed to
Case No. 1:05-cv—437 Page 20 of 26
recommend methods to repair a Railcar’s problems, given that Penn Central's
shop foreman had exc/usive authority over the railroad employees’ actions as
they performed maintenance and repairs on the Railcars. Evans Dep. 162-63,
ECF No. 130. Here is how Evans explained the division of authority for the Paoli
Yard’s maintenance operations:
Q: Now, was there a particular protocol that needed to be followed
when Paoli employees of Penn Central communicated with the
guys in the GE trailer? | mean, did they have to go through a
particular supervisor, or could kind of anyone walk in and talk
to the guys?
A: | The shop manager handled that, the manager of the shop.
Q: So that would have been the position you had?
A: My position, or somebody under me in a management position,
would say, | need some assistance on such-and-such a project,
or tell them that a car’s coming in, it’s got a warranty problem.
Q: So essentially it had to be authorized by the shop foreman?
A: Yes.
Q: Were the GE employees who staffed the trailer allowed to give
orders to the railroad employees?
A: No.
Q: What would have happened if they had tried to give orders to
the railroad employees?
A: They did — they didn’t try to give orders to the railroad
employees because they knew the ground rules when they
came there. They were the technicians, and... . if any orders
were to be given out, it would be given out by the [the railroad’s]
foreman.
Case No. 1:05-cv-437 Page 21 of 26
id. Not only this, but Penn Central’s union labor rules required that Penn Central
employees actually repair and perform maintenance on the Railcars. /d. at 167—
68.
And the purchase agreemenis under which GE sold the Railcars clearly
state that GE was a contractor. Unlike the defendant in GenCorp, GE had no
interest in the facility (i.e., had no right to share in the profits and was not
required to contribute to the operational losses, or any other operational
expense, beyond those called for in the warranty agreement). Notably, APU has
not presented any cases in which a court has held a party liable for administering
its warranty obligations. And APU has not explained how administering the
Railcars’ warranties amounts to operating the railcars. To the contrary, replacing
parts of the Railcars in accordance with the warranty agreement at an off-site
location suggests that the Railcars were not operating during those activities.
Plus, according to Evans, in any instance where a transformer was leaking, GE
employees were not around to provide advice about fixing the unit. /d. at 236.
Consistent with the Warranty Agreements, GE presents a document that
lists the activities that the GE warranty administrators performed:
a.) On-the-job training of the railroad personnel
b.) Technical assistance to railroad personnel
c.) Assistance with troubleshooting the Railcars when:
i. a Railcar’s problems were complex or beyond the capability
of the Penn Central personnel to diagnose and correct
Case No. 1:05—cv—437 Page 22 of 26
li. GE personnel had not yet taught Penn Central personnel the
necessary troubleshooting methods in formal or on-the-job
training
ii. a Railcar had a repeated issue and Penn Ceniral personnel
were unable to diagnose and correct the problem
d.) Administering the warranty
GE Brief, Ex. 22 at 2, ECF No. 180-22. That document also states that “GE can
not perform routine troubleshooting of [RailJcars or try to run the [Penn Central]
maintenance facilities.” /d.
Based on this procedure, then, GE did not know about any problems with a
Railcar’s transformer until after Penn Central had tried and failed to fix the
transformer or Penn Central had otherwise sought a GE employee's technical
guidance.
In the event one of the Railcars had a problem, Penn Central had the
ability to initiate a claim. GE Brief Ex. 16 at9, ECF No. 180-16. If Penn Central
initiated a claim, it could elect one of three options: (1) exchange the failed unit
for a new one, (2) have GE rebuild the failed unit, or (3) pursue a “limited repair
and return” option. /d. at 10-11. If Penn Central chose either the second or third
option, a GE technician would decide to either pay Penn Central to perform the
work or elect for GE to perform the work itself ata GE shop elsewhere. /d. The
on-site GE employees never actually physically repaired or serviced the
equipment. Evans Dep. at 232, ECF No. 180-1. And if a Penn Central employee
Case No. 1:05—cv—437 Page 23 of 26
or supervisor disagreed with a GE employee’s advice, the Penn Central
employees were free to disregard it. fd. 235.
APU points to Exxon Mobil Corp. v. United States, 108 F. Supp. 3d 486
(S.D. Texas 2015) for the proposition that an entity can be held liable as a former
CERCLA operator if that entity approved designs for a facility, permanently
stationed personnel there, and played a substantial role in day-to-day operations
of the facility. In Exxon, the plaintiff moved for summary judgment to determine
the government's culpability under CERCLA for its involvement at two different
types of facilities: refineries and plants. As to the plants, the court concluded that
the government, which had already admitted CERCLA liability as an owner of
those facilities, was also an operator under CERCLA because the government
had a substantial presence at the facility and final approval for, among other
things, expenditures exceeding $1,000; the disposal of waste; additions and
alterations to the plant; and increasing Exxon employees’ salaries and benefits.
fd. at 531. GE had no such control at the Paoli Yard. Plus, the extent of GE’s
presence at the Paoli Yard—a four-employee work trailer—pales in comparison
to the government's operations at the plants in Exxon. There, at just one of the
plants, the government “featured military barracks, a mess hall, air raid shelters,
high-security perimeter fencing, and four guard watchtowers.” Exxon, 108 F.
Supp. 3d at 532. The Exxon court thus concluded that the plant “resembled a
United States Army base more than a chemical plant.” /d, And so, Exxon does
not alter the Court's analysis of GE’s work trailer here.
Case No. 1:05—cv—437 Page 24 of 26
The Exxon court’s analysis of the refineries in that case provide even more
support that GE was not an operator in this case. That court concluded that the
government was not a former operator because—although the government
Stationed at least one employee at one of the refineries to ensure product quality
and coordinate shipping—there was no evidence that the government was
involved in the refineries’ daily management or waste disposal practices. /d. at
526. Notably, the Exxon court emphasized, the government was not authorized
to hire, fire, or in any way manage Exxon’s refinery employees. fd. Without such
control, and even though the government understood the potential for harmful
pollution at the facilities, the government did not operate those facilities. /d. at
529.
Similarly here, GE had no control over Penn Central’s employees and
certainly not over the entire Paoli Yard. Rather, as explained above, the GE
technicians could only recommend troubleshooting and repair advice. in
contrast, Penn Central's Transportation Department determined the staffing
decisions, equipment to be used, services to be offered, commuter schedules,
and railcar inventory. Evans Dep. 240-42, ECF No. 180-1. And Penn Central's
Mechanical Department performed all hands-on maintenance and repairs. /d. at
232. Meanwhile, GE technicians proposed maintenance schedules for the
Railcars, which Penn Central generally accepted and followed. /d. at 244.
Similarly, GE technicians could recommend—but not order—that Penn Central
remove a malfunctioning Railcar. /d. at 245,
Case No. 1:05-cv-437 Page 25 of 26
GE’s advisory role in the Railcars’ operation, as opposed to a management
or control position, leads to the conclusion that GE did not operate the Paoli Yard
or the Railcars.
C. The “Fail And Fix” Policy Does Not Render GE a CERCLA Operator.
Finally, APU contends that GE operated the Railcars by implementing a
“fail and fix” policy, which refers to GE’s decision not to proactively recall and
replace transformers under warranty that had not failed but also could not be
definitely declared defect-free. But even under APU's characterization, as GE
points cut, that policy would amount to a failure to exercise control over the
Railcars, which cannot be the basis for operator liability. See Brighton, 153 F.3d
at 314 (“Before one can be considered an ‘operator’ for CERCLA purposes, one
must perform affirmative acts. The failure to act, even when coupled with the
ability or authority to do so, cannot make an entity into an operator.”). Thus,
APU’s argument relating to GE's “fail and fix” policy fails as a matter of law.
IV. CONCLUSION
For these reasons, the Court finds that the record evidence establishes
that GE is not a CERCLA operator of the Paoli, Sunnyside, or Wilmington Yards,
or the Silverliner IV or Jersey Arrow II railcars. Therefore, the Court DIRECTS
the Clerk to enter judgment in favor of GE and TERMINATE this case.
IT IS SO ORDERED. : □ if / bon
ICHAEL H. WATSON, JUDGE é
UNITED STATES DISTRICT COURT
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