Petition for Writ of Certiorari — Key Tronic Corp. v. United States

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93-376 "| PIERD

In the

Supreme Court of the United States

October Term, 1993

KEY TRONIC CORPORATION,

Petitioner,

UNITED STATES ETAL.,

Respondents.

STANTON ROAD ASSOCIATES,

Petitioner,

LOHREY ENTERPRISES, INC., ELECTRONIC

VALET SYSTEMS, INC., DAVID LOHREY AND

NATHAN PANG,

Respondents.

JOINT PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

James R. Moore Steven L. Hock

(Counsel of Record) James C. Collins

Mark W. Schneider Bruce J. Berrol

Kathryn L. Tucker THELEN, MARRIN,

PERKINS COIE JOHNSON & BRIDGES

1201 Third Avenue Two Embarcadero Center

Seattle, WA 98101-3099 San Francisco, CA 94111

(206) 583-8888 (415)392-6320

Attorneys for Petitioners

QUESTIONS PRESENTED

Whether under the federal Superfund statute, a private party

may recover attorneys’ fees as response costs when fees are incurred

(a) to prepare and negotiate a reasonable scope of work and consent

decree related to cleanup of contaminated property; (b) to search for

and identify other parties responsible for the contamination; and

to compel their participation in the remediation.

l. The Sixth and Eighth Circuits

TABLE OF CONTENTS Have Held ThatCERCLA

Authorizes Recovery of

Page Attorneys’ Fees in Private Party

Response Cost Actions. The

QUES TOS PRE Ee 6 IED ccccccvecccccesscsssosscnssennsnanbbenensnnnentn i Tenth Circuit Permitted

Recovery of Certain Fees ..................

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2. The First and Ninth Circuits

OPINIONS BELOW OOOO EEE EEE HEHEHE EEE E EEE EEE HEHEHE HEHE EEEESESESESEEEEES 2 Have Held That CERCLA Does

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Attorneys’ Fees as Response

Costs in Private Party Response

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Cost Actions. The Tenth Circuit

STA TUNGIING Go acccsccicossccinesiinsciitienesiaediaaaeaeaaia 3 Held That CERCLA Does Not

Authorize Recovery of

A. KEY TRONIC CORPORATION’S Litigation-Related Attorneys’

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1. Dcchahamy ORIG ncccciccccnsiecsatnsisiatiaml 5 B. THE QUESTIONS PRESENTED ARE

OF NATIONAL IMPORTANCE. .................

B. STANTON ROAD ASSOCIATES’

STA TEDSENT OF FACT S..cccsocccscessscsssesseesss 7 l. Protection of Human Health and

the Environment Is at Stake...............

1, SCENT IORI vscesccescsssssouienianesinnas 8

2. Prompt High Court Resolution of

REASONS FOR GRANTING THE WRIT... 8 This Frequently Litigated Issue

of Statutory Construction Is

A. THEREIS AN INTER-CIRCUIT Essential to End Confusion

CONFLICT INVOLVING FIVE Among Lower Coutts ..........0.0000000000.

CIRCUITS WHICH HAVE RULED

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APPENDICES

Opinion of the United States Court of Appeals for the

Ninth Circuit in Key Tronic Corporation v. United

States

Opinion of the United States District Court for the

Eastern District of Washington in Key Tronic

Corporation v. United States

Opinion of the United States Court of Appeals for the

Ninth Circuit in Stanton Road Assocs. v. Lohrey

Enters.

Opinion of the United States District Court for the

Northern District of California in Stanton Road

Assoc. v. Lohrey

Order of the United States Court of Appeals for the

Ninth Circuit Denying Rehearing and Rehearing En

Banc in Key Tronic Corporation v. United States

Order of the United States Court of Appeals for the

Ninth Circuit Denying rehearing and rehearing en

banc in Stanton Road Assocs. v. Lohrey Enters.

TABLE OF AUTHORITIES

Cases

AT&T Technologies, Inc v. Heleva, 1990 WL

a I ice inricinrrtirnternmnnenannnienss

BCW Assocs. Lid. v. Occidental Chem. Corp. , 1988

WL 102641 (E.D. Pa. Sept. 29, 1988) 000. ceeceeeees

Bolin v. Cessna Aircraft Co., 759 F. Supp. 692 (D.

BTR Dunlop, Inc. v. Rockwell Int'l Corp. , 1993 U.S.

Dist. LEXIS 1720(N.D. Ill. Feb. 12, 1993) 000000.

Chesapeake & Potomac Tel. Co. v. Peck Iron &

Metal Co., 814 F.Supp. 1281 (E.D. Va. 1993)...............

Cook v. Rockwell Int'l Corp. , 755 F. Supp. 1468 (D.

EP eee ees ony eS ee ee ee

Donahey v. Bogle, 987 F.2d 1250 (6th Cir. 1993)..........

Fallowfield Dev. Corp. v. Strunk, 1990 WL 52745

Rr Ecce CEE cxrcevenmrrninnrisitininmncsreninantananeiien

FMC Corp. v. Aero Indus., Inc., 1993 U.S. App.

LEXIS 17,074 (10th Cir. July 9, 1993) 000.

General Electric Co. v. Litton Indus., Automation

Sys., Inc., 920 F.2d 1415 (8th Cir. 1990), cert.

Gg TEC

Gopher Oil Co. v. Union Oil Co. of California, 955

Hastings Bidg. Prods., Inc. v. National Aluminum

Corp., 815 F.Supp. 228(W.D. Mich. 1993) ...000000000.0....

Page

10, 16

9,16

11,14

9,10

HRW Sys., Inc. v. Washington Gas Light Co., 823

Fs ED, SPA EE WU ccrinensnsscnmansscnssnomanessnsnensersees

In re Hemingway Transp., Inc., 993 F.2d 915 (ist

Br crcrnenccennnenceretnnmaincenanictanneeniemnameeensenensemnes

Jersey Citv Redevelopment Authority v. PPG

Industries, Inc., 17 Chem. Waste Litig. Rptr. 626

Sey, SE ceunicnticnnsecnsinnsenenistaimeasintiiniininesineemssceen

Joy v. Louisiana Conference Ass'n of Seventh-Day

Adventists, 1992 WL 165670 (E.D. La. July 6,

Keystone Chem. Co. v. Maver Poliock Steel Corp.,

1993 U.S. Dist. LEXIS 3733 (E.D. Pa. March 10,

Lvkins v. Westinghouse Elec. Corp., 27 Env't Rep.

Cas. (BNA) 1590(E.D. Ky. 1988).....0.0....0.. eee eeeeeees

Mesiti v. Microdot Inc., 739 F. Supp. 57 (D.N.H.

Pease & Curren Ref., Inc. v. Spectrolab, Inc., 744

io SERA SEEDED: GUDTIED cnnictrnicuenccncsenscocssnmnesessnnes

Pennsylvania v. Union Gas Co., 491 U.S. 1 (1989)........

Regan v. Cherry Corp., 706 F. Supp. 145 (D.R.1.

aT cnasniarnstetaneniantniinseaaneniennnimamumenensimiunenieiieies

Shapiro v. Alexanderson, 741 F. Supp. 472

T&E Indus., inc. v. Safety Light Corp. , 680 F. Supp.

ay Wee iresncnsinieeneeritienssniiiiensiinsiisinnsetiitiimniaiiiinsienienens

vii

United States v. Hardage, 750 F. Supp. 1444 (W.D.

See rerticrnrnsvcnnnsensennmenstunnemsseemesnenssepmmmnestniageenes

United States v. Mexico Feed & Seed Co., 980 F.2d

EEE Ee OY a a a

Statutes

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ID cetscccscccssenrnenintmenrannicanseninnnines

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8 Ee

Other Authorities

Knopf, Breaking New Ground: Recovery of

Transaction Costs in Private CERCLA

Cost-Recovery Actions, 28 Willamette L. Rev. 495

SST hersceeinchsnccatineiaieresnastiaaeanintatnaalinieiincananaiiieiadiiashbentitiaing

Inthe

Supreme Court of the United States

October Term, 1993

KEY TRONIC CORPORATION,

Petitioner,

Vv.

UNITEDSTATESETAL.,

Respondents.

STANTON ROAD ASSOCIATES,

Petitioner,

LOHREY ENTERPRISES, INC., ELECTRONIC

VALET SYSTEMS, INC., DAVID LOHREY AND

NATHAN PANG,

Respondents.

JOINT PETITION FORA WRIT OF

CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH

CIRCUIT

Petitioners Key Tronic Corporation' and Stanton

Associates? respectfully jointly petition for a writ of certiorar, to

IKey Tronic Corporation has no parent company. All of its subsidiaries are

wholly owned. Sup. Ct.R. 29.1.

2Stanton Road Asociates has no parent company and no subsidiaries. Sup.

Ct.R. 29.1.

review the judgments of the United States Court of Appeals for the

Ninth Circuit in Key Tronic Corporation v. United States et al. and

in Stanton Road Associates v. Lohrey Enterprises et al.

OPINIONS BELOW

The opinion of the Ninth Circuit in Key Tronic Corporation v.

United States is reported at 984 F.2d 1025 and is reprinted in

Appendix A. The opinion of the district court is reported at 766

F. Supp. 865 and is reprinted in Appendix B.* The opinion of the

Ninth Circuit in Stanton Road Assocs. v. Lohrey Enters. is reported

at 984 F.2d 1015 and is reprinted in Appendix C. The opinion of the

district court is reported at 1991 U.S. Dist. LEXIS 5630 and is

reprinted in Appendix D.

JURISDICTION

The judgments of the Ninth Circuit in both cases were entered

on January 28, 1993. On June 7, 1993 the Court denied timely

petitions for rehearing (by 2-1 votes) and also denied suggestions for

rehearing en banc. Appendices E and F. This Court has jurisdiction

to review the decisions by the Court of Appeals by writ of certiorari

pursuant to 28 U.S.C. § 1254(1).

STATUTEINVOLVED

The Comprehensive Environmental Response, Compensation,

and Liability Act (“CERCLA”), 42 U.S.C. § 9601 ef seq., also

known as Superfund, provides that private and governmental

plaintiffs may recover “necessary costs of response” or “costs of

removal or remedial action.” 42 U.S.C. § 9607(a)(4)(A), (B).

3The Respondents are the United States of America, the United States Air

Force, and Donald B. Rice, the Secretary of the United States Air Force, in his

official capacity. Sup. Ct. R. 14.1(b).

4The district courts were vested with jurisdiction by 42 U.S.C. §§ 9607(a)

and 9613(b). Sup. Ct. R. 14. 1(i).

“Response” is defined in CERCLA §101 to mean “remove,

removal, remedy, and remedial action, all such terms (including the

terms ‘removal’ and ‘remedial action’) include enforcement

activities related thereto.” 42 U.S.C. § 9601(25).

STATEMENTS

A. KEY TRONIC CORPORATION’S STATEMENT OF

FACTS

This case involves the recovery of costs incurred by Petitioner

Key Tronic Corporation (“Key Tronic”). Key Tronic voluntarily

performed environmental cleanup measures in a timely manner to

protect public health and was then forced, by the recalcitrance of

others with similar legal responsibility for the environmental

contamination, to investigate and pursue legal remedies against those

recalcitrant parties.

Key Tronic acted on its own initiative to protect citizens from

exposure to contamination leaching from the Colbert Landfill in

Eastern Washington (“Colbert” or “Landfill”). When the contami-

nation was discovered, Key Tronic publicly disclosed its prior use of

Colbert and took immediate steps to correct the problem. In contrast,

Respondent United States Air Force (“Air Force”) had comparable

responsibility for the problem, but did not acknowledge its use of

Colbert or its contribution to contamination. The Air Force took no

action until pursued by Key Tronic. Eight years after Key Tronic

responded, the Air Force finally agreed to pay a portion of the costs

for the long-term cleanup, pursuant to a remediation plan that Key

Tronic previously designed and partially funded.‘

5The Air Force agreement with the United States Environmental Protection

Agency (“EPA”) was finalized more than one year after Key Tronic had settled

with EPA, and only after the Air Force was adjudged liable to Key Tronic for

costs associated with Colbert as a result of Key Tronic’s state law contribution

action. The Air Force was held liable to Key Tronic in the contribution case on

Key Tronic incurred costs to investigate well contamination and

to provide neighboring residents with alternative water supplies.®

Key Tronic incurred costs in searching for other responsible parties

to establish their contribution to the contamination problem. It

incurred costs in preparing the remediation plan and Consent

Decree, which established the cleanup action to be taken. Finally, it

incurred costs in litigating this cost recovery action to require the Air

Force and other PRPs to reimburse it for a portion of these costs.’

Spokane County (“County”) operated the Landfill in Eastern

Washington during the 1970s. Appendix B, at 2. During that decade,

liquid chemicals were disposed of at the Landfill by a number of

entities, including Key Tronic and the Air Force. Appendix A, at 2.

In the fall of 1980, the Washington Department of Ecology

(“WDOE”) tested drinking water wells in the area surrounding the

Landfill and determined that 1,1,1-trichloroethane (“TCA”) was

present in higher than acceptable quantities. Appendix A, at 2.

Appendix B, at 2. WDOE advised residents adjacent to the landfill

not to use their well water.

Key Tronic and the County responded promptly to the public

health threat posed to neighboring residents, jointly retaining con-

sultants to further evaluate conditions at the Landfill. Extensive well

water sampling and analyses were performed in 1982. Beginning in

1983, Key Tronic supplied bottled water to residents adjacent to the

landfill and funded installation of anew water system.

November 3, 1989. The Interagency Agreement was finalized on some

unspecified date after February 4, 1990.

5Those costs, totalling $696,268.06, were notat issue in the Ninth Circuit.

Key Tronic also agreed to pay $4.2 million to fund the long-term cleanup at

Colbert. Appendix A, at 2. It dropped its action to compel the Air Fe-:e to

reimburse it for those costs because the Air Force subsequently agreed to

contribute $1.45 million to that effort.

Key Tronic undertook the necessary investigation to identify

other potentially responsible parties (“PRPs”), one of which was

determined to be the Air Force, for the purpose of assuring that they

would participate in the ultimate long-term remedial effort and share

costs (the “PRP search”). Key Tronic’s efforts in identifying

responsible parties and establishing the Air Force’s disposal of

wastes at Colbert resulted in the EPA’s action against the Air Force.

Appendix B, at 14, n.4.

Key Tronic also retained counsel and a consultant to work with

EPA and WDOE to investigate the site, develop a remedy and draft

the scope of work and Consent Decree which established the

remediation to be performed at the Landfill. The technical and legal

work performed by Key Tronic resulted in agreement with EPA on

reasonable and appropriate remedial action.®

Key Tronic incurred costs responding to hazards at the Landfill

in two different ways. First, it incurred remediation costs on its own

initiative before entering the Consent Decree (“pre-Consent Decree

costs”) and, second, it agreed to pay money pursuant to the Consent

Decree (“Consent Decree costs”) for further response action. The

appeal below concerned only Key Tronic’s voluntarily incurred pre-

Consent Decree costs, and related enforcement costs. It did not

concern Consent Decree costs.

1. Decisions Below

Key Tronic filed the complaint in this cost-recovery action in

October 1989. The action named three defendants, including the Air

Force.’ The action asserted both a private cost recovery claim under

8in August 1983, Colbert was designated by EPA as a National Priorities

List site under CERCLA § 105. EPA issued its Record of Decision for the

Landfill in September 1987.

Key Tronic reached settlement with one of the defendants, Alumax, prior to

argument of Key Tronic’s motion for summary judgment. Appendix B, at 4. Key

Tronic’s claim against the other defendant, the Landfill operator, was dismissed

CERCLA § 107(a)(4\B), 42 U.S.C. § 9607(a)(4)(B), and a

contribution claim under CERCLA § 113(f), 42 U.S.C. § 9613(f).

The Air Force moved to dismiss both claims against it. The Air

Force argued, based on the fact that it had entered into an

Interagency Agreement with EPA and WDOE regarding cleanup of

Colbert, that it was entitled to contribution protection, under

CERCLA § 113(f)(2).

Because the Air Force had executed the Interagency Agreement,

Key Tronic acquiesced in the dismissal of its Section 113 contribu-

tion claim (i.e., claims for recovery of consent decree costs), and the

district court granted summary judgment to Key Tronic on its Sec-

tion 107 cost recovery claim (i.e., pre-consent decree costs and all

enforcementactivity costs, including attorneys’ fees). Appendix B.

The Air Force and Key Tronic subsequently negotiated the

amounts to be paid on all six categories of claimed response costs in

a two-step process. First, the parties executed a Consent Decree

providing for payment on two categories of costs (well

contamination investigation and provision of alternative water

supplies) and reserved the other four categories of costs (the

“excepted claims”) which the Air Force intended to appeal.'°

Second, the parties entered a stipulation regarding the amounts the

Air Force would pay on the excepted claims, so that a final judgment

could be entered. Appendix A, at 3.

On the Air Force’s appeal of the excepted claims, the Ninth

Circuit reversed and held that CERCLA does not authorize the

based on a covenant not to sue that Key Tronic had given the County in the

Consent Decree, which extended to county employees, including the Landfill

operator. Appendix B, at 3.

10The excepted claims included attorneys’ fees incurred in negotiating the

Consent Decree and scope of work, fees incurred in the PRP search, fees incurred

in bringing the cost recovery action, and prejudgment interest on excepted claims.

The Air Force did not pursue appeal of the interest claim.

recovery of attorneys fees. Thus the court held that the district court

had no authority to award fees in any of the three categories of fees

incurred by Key Tronic.

B. STANTON ROAD ASSOCIATES’ STATEMENT OF

FACTS

This case involves a completely innocent private landowner

enforcing the clean-up provisions of CERCLA against a recalcitrant

polluter. Petitioner Stanton Road Associates (“Stanton Road”)

owned a large commercial warehouse office building on property in

Burlingame, California. Appendix D, at 2. Respondents owned and

operated an industrial dry-cleaning plant on property contiguous to

Stanton Road. Appendix D, at 2-3.

For several years through 1988, respondents repeatedly

contaminated Stanton Road’s property by allowing the hazardous

chemical perchloroethene (“PCE”) to spill from the dry-cleaning

plant onto and beneath Stanton Road’s property. Appendix D, at 5-6.

Respondents also dumped sludge containing PCE from the

dry-cleaning operations onto property leading to Stanton Road’s

property. Appendix D, at6.

Upon learning of the contamination in 1988, Stanton Road

repeatedly asked respondents to investigate and clean up the

contamination. Respondents did not do so. Appendix D, at 6.

In this same time frame, government authorities issued to

respondents citations and demands for remediation of the PCE

pollution. Respondents did not do so. Appendix D, at 6-7.

For nearly three years respondents ignored every effort by

Stanton Road and the government to get them to clean up the

contamination they had created. Stanton Road was forced to hire an

environmental consultant to deal with the pollution problem, and to

pursue litigation as the only available means of forcing respondents

to comply with their obligations under state and federal law.

Consequently, Stanton Road incurred attorneys fees and costs in

responding to the contamination caused by respondents. Appendix

D,at9.

1. Decisions Below

On March 15, 1989 Stanton Road filed this action in the United

States District Court for the Northern District of California pursuant

to sections 107 and 113 of CERCLA and pursuant to various state

laws. The District Court ruled in favor of Stanton Road on every

contested issue. The Court found that respondents were completely

responsible for the contamination of Stanton Road’s property and

that they refused to clean up the property even after both Stanton

Road and government officials demanded cleanup. Appendix D, at

6-7.

The Court ordered, inter alia, pursuant to CERCLA that

respondents pay all response costs incurred up to that point by

Stanton Road, including attorneys’ fees (allocated so that only the

portion under CERCLA was awarded). The district court awarded

$126,197.78 in attorneys’ fees as one component of Stanton Road’s

reasonable “response costs” incurred in investigating and

successfully prosecuting its CERCLA claims against respondents.

Appendix D, at 10-11. The court also granted Stanton Road

declaratory relief for all future costs of response. Appendix D, at 11.

On appeal the Ninth Circuit reversed the award of attorneys’

fees, holding that any exception to the American Rule must be

explicitly authorized by statute and that CERCLA does not cortain

an explicit authorization.

REASONS FOR GRANTING THE WRIT

A. THEREISANINTER-CIRCUIT CONFLICT

INVOLVING FIVE CIRCUITS WHICH HAVE

RULED ON THE ISSUE

Five circuit courts have ruled on whether CERCLA authorizes

recovery of attorneys’ fees as response costs in private cost recovery

actions. Two circuits hold that it does, two circuits hold that it does

not, and one circuit holds that certain fees may be recoverable while

others are not.!!

1. The Sixth and Eighth Circuits Have Held

That CERCLA Authorizes Recovery of

Attorneys’ Fees in Private Party Response

Cost Actions. The Tenth Circuit Permitted

Recovery of Certain Fees

The Eighth Circuit in General Elec. Co. v. Litton Indus.

Automation Sys., Inc., 920 F.2d 1415 (8th Cir. 1990), cert. denied,

111 S. Ct. 1390 (1991), upheld an award of attorneys’ fees as

CERCLA response costs.'? In analyzing whether Congress provided

for recovery of attorneys’ fees by private cost-recovery litigants, the

Eighth Circuit construed §§ 107(a)(4)(B) and 101(25) of CERCLA.

Section 107(aX4\(B) provides that private parties may recover

“necessary costs of response.” Section 101(25) defines “response”

as “remove, removal, remedy, and remedial action .. . [including]

enforcement activities related thereto.” The Eighth Circuit construed

the inclusion of “enforcement activities” in the definition of

“response” as express provision for recovery of attorneys’ fees:

Hat present, petitioners are aware that district court decisions have recently

been entered in at least three circuits that have not yet resolved the question, the

Third, Fourth and Seventh Circuits. . systone Chem. Co. v. Mayer Pollock Steel

Corp., 1993 U.S. Dist. LEXIS 3733 (E.D. Pa, March 10, 1993) (fees not

recoverable), HRW Sys. inc. v. Washington Gas Light Co., 823 F. Supp. 318 (D.

Md. 1993) (fees recoverable); Chesapeake & Potomac Tel. Co. v. Peck Iron &

Metal Co., 814 F. Supp. 1281 (E.D. Va. 1993) (fees recoverable); BTR Dunlop,

Inc. v. Rockweil Int'l Corp., 1993 U.S. Dist. LEXIS 1720 (N.D. Ill. Feb. 12, 1993)

(magistrate's report and recommendation) (fees recoverable). These circuits will

likely soon have to address the issue presented by this petition.

\2The Third Circuit previously awarded attorneys’ fees in the prosecution of

a private CERCLA action, but that decision was not published in the federal

reporter. Jersey City Redevelopment Auth. v. PPG Indus.. Inc., 17 Chem. Waste

Litig. Rptr. 626, 636 (3d Cir. 1988).

Attorney fees and expenses necessarily are

incurred in this kind of enforcement activity

and it would strain the statutory language to

the breaking point to read them out of the

‘necessary costs’ that section 96 ‘a)(4)\(B)

allows private parties to recover. W: .nerefore

conclude that CERCLA authorizes, with a

sufficient degree of explicitness, the recovery

by private parties of attorney fees and

expenses.

920 F.2d at 1422.'3 This construction, Petitioners maintain, is the

proper one.

The Sixth Circuit recently followed the reasoning of General

Electric. Donahey v. Bogie, 987 F.2d 1250, 1256 (6th Cir. 1993),

reh'g, en banc, denied, (6th Cir. June 15, 1993). In Donahey, the

purchaser of a contaminated parcel sued the seller and a past lessee

of the property after it discovered the contamination, seeking

rescission of the sales contract and cost recovery under CERCLA for

reimbursement of costs incurred in investigating the contamination

and attempting to clean it up. The district court denied recovery of

all response costs, including attorneys’ fees. The Sixth Circuit

reversed the trial court’s denial of attorney's fees as response costs

under CERCLA. The Sixth Circuit stated:

[T]}his court prefers to follow the reasoning of

cases such as Bolin v. Cessna Aircraft Co.,

759 F. Supp. 692 (D. Kan. 1991), Shapiro v.

Alexanderson, 741 F. Supp. 472 (S.D.N.Y.

1990), and General Electric Co. v. Litton, 920

F.2d 1415 (8th Cir. 1990), cert. denied, 111 S.

\3two 1992 Eighth Circuit decisions have followed General Electric.

Gopher Oil Co. v. Union Oil Co. of California, 955 F.2d 519 (8th Cir. 1992);

United States v. Mexico Feed & Seed Co., 980 F.2d 478 (8th Cir. 1992).

Ct. 1390 (1991). The Bolin opinion made the

following persuasive statement:

By providing parties with a

federal cause of action for the

recovery of necessary expenses

in the cleanup of hazardous

wastes, Congress intended

§ 107 as a powerful incentive

for these parties to expend their

own funds initially without

waiting for the responsible

persons to take action.

[Citations omitted]. The court

can conceive of no surer

method to defeat this purpose

than to require private parties

to shoulder the financial burden

of the very litigation that is

necessary to recover these

costs. 759 F. Supp. at 710.

987 F.2dat 1256.

The Tenth Circuit recently followed the Eighth and Sixth

Circuits, in part, holding that nonlitigation-related attorneys’ are

recoverable response costs. FMC Corp. v. AERO Indus., Inc., 1993

U.S. App. LEXIS 17,074 (10th Cir. July 9, 1993). In FMC Corp., a

group of responsible parties that had cleaned up a contaminated site

pursuant to an EPA order sued another responsible party that had not

participated in the cleanup for a variety of response costs. These

costs included the costs of conducting the removal action,

nonlitigation removal-related attorneys’ fees and costs, and litigation

fees and costs in bringing the cost recovery action. The trial court

held the defendant liable for response costs under CERCLA and

allocated the defendant a 25% share of the total response costs, but

excluded attorneys’ fees.

On appeal, the Tenth Circuit affirmed the 25% allocation and

affirmed the district court’s denial, under the American Rule of

recovery of attorneys’ fees incurred in litigating the cost recovery

action. /d. at p. 6. This portion of the holding thus conflicts with the

Eighth and Sixth Circuits and, Petitioners maintain, is incorrect. The

Tenth Circuit reached a different conclusion, however, with respect

to nonlitigation attorneys’ fees, which it held do not fall under the

American Rule because they are not incurred in pursuing litigation.

The Tenth Circuit concluded that recovery of such fees is not barred

as a matter of law. “Rather, the issue is whether nonlitigation

attorneys’ fees are necessary response costs within the meaning of

Section 9607(aX4\(B).” Jd. The court concluded that attorneys’ fees

generated in designing and negotiating the removal action and in

preparing and carrying out the work plan approved by the EPA

would constitute recoverable response costs if determined to be

necessary. Jd. Accordingly, the court remanded for the district court

to determine whether these nonlitigation attorneys’ fees were

necessary and therefore recoverable response costs. '4

2. The First and Ninth Circuits Have Held That

CERCLA Does Not Authorize Recovery of

Attorneys’ Fees as Response Costs in Private

Party Response Cost Actions. The Tenth

Circuit Held That CERCLA Does Not

Authorize Recovery of Litigation-Related

Attorneys’ Fees

In Stanton Road, the Ninth Circuit held: “we are persuaded that

the words ‘enforcement activities’ as used in Section 101(25) do not

explicitly authorize the payment of attorneys’ fees.” 984 F.2d at

!4Under the holding of the Tenth Circuit, two of the three categories of

response costs sought by Key Tronic--the PRP search costs and the scope of work

and consent decree negotiation costs--would be recoverable if determined to be

necessary.

1019. The Ninth Circuit rejected the Eighth Circuit’s construction of

CERCLA §§ 107(a)(4)(B) and 101(25), stating:

Attorneys’ fees are incurred in every private

action to enforce rights embodied in a federal

Statute where the litigant is represented by

counsel. ... A holding that attorneys’ fees are

not explicitly authorized in a private response

action does not “read them out” of section

9607(a)(4)(B), as suggested by the Eighth

Circuit.

Stanton Road, 984 F.2d at 1020; Key Tronic Corp. v. United States,

984 F.2d at 1027. What the panel did not acknowledge is that

CERCLA, in contrast to most if not all other federal statutes

embodying a private right of action, specifically allows private

litigants to recover their costs in enforcing the statute, costs that

necessarily include attorneys’ fees. This was recognized by Judge

Canby in his cogent dissent in Stanton Road, 984 F.2d at 1023: “If

the language of Congress in sections 107(a)(4)(B) and 101(25) is to

be given meaning and effect, those fees must be recoverable.”

The First Circuit also specifically rejected the Eighth Circuit's

approach. /n re Hemingway Transport, Inc., 993 F.2d 915 (1st Cir.

1993) petition for cert. filed, 62 U.S.L.W. 3114 (U.S. Aug. 17,

1993) (No. 93-187). Hemingway involved a claim for CERCLA

response costs against parties who had filed in bankruptcy. The

bankruptcy court awarded the piaintiff $38,000 as response costs but

disallowed $54,000 in attorneys’ fees, holding that these were not

recoverable response costs. The district court affirmed. On appeal,

the First Circuit rejected the argument that the term “necessary costs

of response” should be construed to encompass attorneys’ fee

awards, stating: “Absent an explicit statutory authorization, a party

is not entitled to recover attorneys’ fees simply because it prevailed

in the litigation.” 993 F.2d at 934. Plaintiff disputed that all $54,000

was incurred in the cost recovery litigation itself, asserting that the

greater portion of fees was incurred to ensure that plaintiff's

response was in compliance with EPA’s order compelling cleanup.

The First Circuit held:

We conclude that the present claim was

waived. At trial, [plaintiffs] attorney fee

billings were admitted in evidence. [Plaintiff]

suggested no distinction between attorneys’

fees incurred for litigative and administrative

purposes. [Plaintiff's] failure to advance the

present contention below deprived the

bankruptcy court of an opportunity to consider

it, thereby waiving the claim.

Id. at 935. Hemingway might have presented a case similar to FMC

Corp., supra, and to Key Tronic, where a portion of claimed

attorneys’ fees did not relate to the cost recovery litigation itself, but

related to the implementation of the removal or remedial action.

However, the First Circuit did not reach the question of whether

nonlitigation-related fees should be treated differently than those

incurred in prosecuting a cost recovery action.

The Tenth Circuit, in FMC Corporation v. AERO Industries,

supra, held that litigation-related fees were not recoverable response

costs based on the American Rule. 1993 U.S. App. LEXIS 17074 at

p. 6.

B. THE QUESTIONS PRESENTED ARE OF NATIONAL

IMPORTANCE

1. Protection of Human Health and the

Environment Is at Stake

The questions presented in this case are of national importance.

In passing the Superfund statute, Congress recognized the need to

clean up the numerous heavily contaminated sites, created from

decades of waste disposal practices that are no longer tolerated by

modern environmental laws. The task of promoting cleanup of the

estimated 35,000 such sites!’ is beyond the resources of EPA, the

responsible enforcement agency. Pennsylvania v. Union Gas Co.,

491 U.S. 1, 21-22 (1989). The only possible means of promoting

cleanup of these tens of thousands of polluted sites is through

cleanup actions initiated by private parties. Jd. See also Knopf,

Breaking New Ground: Recovery of Transaction Costs in Private

CERCLA Cost-Recovery Actions, 28 Willamette L. Rev. 495, 511

(1992).

Congress provided the mechanism to facilitate private-party

cleanup in CERCLA § 107(a)(4)(B), 42 U.S.C. § 9607(aX4)\B), by

allowing private parties to undertake cleanup actions and then

recover costs from the parties responsible for contributing to the

contamination. The Ninth Circuit below construed “necessary costs

of response” to exclude attorneys’ fees despite the fact that such

costs are necessarily incurred in responding to Superfund cleanups.

In so concluding, the Ninth, First and Tenth Circuits incorrectly

construe the statute’s language and frustrate Congressional intent.

The Court should resolve the clear inter-circuit conflict on this

important issue.

2. Prompt High Court Resolution of This

Frequently Litigated Issue of Statutory

Construction Is Essential to End Confusion

Among Lower Courts

The many courts nationwide faced with the question presented

in this case are divided in resolving the issue.'© This Court’s

ISAs of August 1991, the federal government’s database of contaminated

sites, the Comprehensive Environmental Response, Compensation and Liability

Information System (“CERCLIS”), listed 35,000 such sites. See 5 Superfund

No. 17(1991 Predicasts).

16Decisions from federal district courts in favor of allowing the recovery of

attorneys’ fees have come from district courts in Maryland, Michigan, Illinois,

guidance is needed to avoid the wasting of further judicial and

private resources as federal district courts follow conflicting circuit

court precedents. This confusion affects vast numbers of individuals

and businesses, a large number of Superfund sites, and millions of

dollars in remediation and related litigation costs. Moreover, with

the present conflict, cost recovery litigants have incentive to forum

shop for a forum that recognizes that fees are recoverable response

costs.'7

Virginia, Louisiana, Kansas, California, New York and Kentucky. HRW Sys.,

Inc. v. Washington Gas Light Co., 823 F. Supp. 318 (D. Md. 1993); Hastings

Bldg. Prods., Inc. v. National Aluminum Corp., 8\5 F.Supp. 228 (W.D. Mich.

1993); BTR Dunlop, Inc. v. Rockwell Int'l Corp., 1993 U.S. Dist. LEXIS 1720

(N_D. Ill. Feb. 12, 1993); Chesapeake & Potomac Tel. Co. v. Peck Iron & Metal

Co., 814 F. Supp. 1281 (E.D. Va. 1993); Joy v. Louisiana Conference Ass'n of

Seventh-Day Adventists, 1992 WL 165670 (E.D. La. July 6, 1992), Bolin v.

Cessna Aircraft Co., 759 F. Supp. 692 (D. Kan. 1991); Pease & Curren Ref, Inc.

v. Spectrolab Inc., 744 F. Supp. 945 (C.D. Cal. 1990); Shapiro v. Alexanderson,

741 F. Supp. 472 (S.D.N.Y. 1990); Lykins v. Westinghouse Elec. Corp., 27 Env’t

Rep. Cas. (BNA) 1590 (E.D. Ky. 1988). Federal district courts in Pennsylvania,

Colorado, Oklahoma, New Hampshire, Rhode Island, and New Jersey have denied

recovery of fees. Keystone Chem. Co. v. Mayer Pollock Steel Corp., 1993 U.S.

Dist. LEXIS 3733 (E.D. Pa. March 10, 1993); AT&T Technologies, Inc. v. Heleva,

1990 WL 76616 (E.D. Pa. June 6, 1990); Fallowfield Dev. Corp. v. Strunk, 1990

WL 52745 (E.D. Pa. Apr. 23, 1990); Cook v. Rockwell Int'l Corp., 755 F. Supp.

1468 (D. Colo. 1991); United States v. Hardage, 750 F. Supp. 1444 (W.D. Okla.

1990); Mesiti v. Microdot Inc., 739 F. Supp. 57 (D.N.H. 1990); Regan v. Cherry

Corp., 706 F. Supp. 145 (D.R.1. 1989); T&E Indus., Inc. v. Safety Light Corp. , 680

F. Supp. 696 (D.N.J. 1988), BCW Assocs. Lid. v. Occidental Chem. Corp., 1988

WL 102641 (E.D. Pa. Sept. 29, 1988).

!7CERCLA permits cost recovery actions in either the “district in which the

release or damages occurred, or in which the defendant resides, may be found, or

has his principal office.” 42 U.S.C. § 9613(b).

CONCLUSION

For the reasons stated, Petitioners respectfully request that the

Court grant the petition for a writ of certiorari to the United States

Court of Appeals for the Ninth Circuit.

RESPECTFULLY SUBMITTED this 3rd day of September

1993.

James R. Moore

(Counsel of Record)

Mark W. Schneider

Kathryn L. Tucker

PERKINS COIE

1201 Third Avenue

40th Floor

Seattle, WA 98101-3099

(206) 583-8888

Steven L. Hock

James C. Collins

Bruce J. Berrol

THELEN, MARRIN, JOHNSON

& BRIDGES

Two Embarcadero Center

San Francisco, CA 94111

(415) 392-6320

Attorneys for Petitioners

A-l

APPENDIX A

KEY TRONIC CORPORATION, a Washington Corporation,

Plaintiff-Appellee,

UNITED STATES of America, United States Department of the

Air Force; Donald B. Rice, Secretary of the United States Air

Force, in his official capacity, Defendants-Appellants.

No. 91-36021.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Nov. 2, 1992.

Decided Jan. 28, 1993.

Before: SNEED, ALARCON and CANBY, Circuit Judges.

ALARCON, Circuit Judge:

The United States Air Force (Air Force) appeals from the award

of $155,500 in attorneys’ fees to Key Tronic Corporation (Key

Tronic) in this private response cost recovery action. The district

court held that the Air Force was liable to pay to Key Tronic

attorneys’ fees as necessary response costs for prosecuting this

private response cost recovery action in the district court, for legal

expenses incurred searching for other potentially responsible parties

liable for the cleanup, as well as legal expenses incurred in the

preparation and negotiation of a consent decree between Key Tronic

and the United States Environmental Protection Agency (EPA). The

Air Force contends that the district court erred in concluding that

these legal expenses incurred by Key Tronic were necessary

response costs compensable under section 107(aX4\B) of

CERCLA. We agree and reverse the award of attorneys’ fees.

A-2

PERTINENT FACTS

The Air Force disposed of liquid chemicals at Colbert Disposal

Site (Colbert) from 1975 to 1980. Key Tronic also disposed

hazardous waste at Colbert. In 1980, the Washington Department of

Ecology (DOE) tested the drinking water wells around Colbert and

found that they were contaminated.

Key Tronic alleged that it incurred, at its own initiative,

expenses totaling $1,271,511.10 in cleanup costs. Key Tronic

subsequently entered into a consent decree with the EPA and DOE.

The decree required Key Tronic to pay the EPA $4.2 million in

response costs.

The Air Force also stipulated with the EPA and DOE to the

entry of a consent decree. The Air Force agreed to pay the EPA

$1.45 million for the clean up of Colbert. The EPA released the Air

Force from any further liability, and granted the Air Force the

“contribution protection” authorized by 42 U.S.C. § 9622(g)(5).’

Pursuant to this section, the Air Force was freed from liability for

contribution claims made by other parties regarding matters

addressed in the settlement between the Air Force and the EPA.

42 U.S.C. § 9622(g)(5).

Key Tronic filed the present private response cost recovery

action against the Air Force for 1) contribution for the $4.2 million it

was obligated to pay under its consent decree with the EPA, and

2) an award of $1.2 million for response costs it incurred prior to its

settlement with the EPA. Key Tronic contended that it incurred five

different types of response costs: 1) remediation costs at the site

prior to the EPA’s involvement; 2) attorneys’ fees expended trying

ISection 9622(g\5) provides, in pertinent part: “[a] party who has resolved

its liability to the United States under this subsection shall not be liable for claims

for contribution regarding matters addressed in the settlement.”

- de allie ha

A-3

to identify other potentially responsible parties (PRP’s) liable for the

clean up under CERCLA; 3) attorneys’ fees for negotiating the

scope of the remedial action with the EPA; 4) attorneys’ fees for the

present action; and 5) prejudgment interest.

The Air Force moved to dismiss the complaint. The district

court dismissed Key Tronic’s contribution claim against the Air

Force relating to Key Tronic’s $4.2 million liability for the consent

decree on the ground that it was barred by the Air Force’s consent

decree. The court denied the motion to dismiss Key Tronic’s claim

for the $1.2 million in response costs. The court ruled that because

Key Tronic’s $1.2 million claim was a direct action to recover its

own response costs as authorized by section 107(a)(4)(B), it was not

barred by the “contribution protection” the EPA granted the Air

Force.

After the entry of the order regarding the motion to dismiss, the

Air Force and Key Tronic negotiated a consent decree and resolved

all the issues of Key Tronic’s claims for response costs from the Air

Force except for the claim for attorneys’ fees and prejudgment

interest.

The district court determined that section 107(a)(4)(B) permits

private parties to recover attorneys’ fees as necessary response costs.

766 F. Supp. 865 (E.D. Wash. 1991). It also awarded prejudgment

interest. The Air Force did not appeal from the award of

prejudgment interest.

DISCUSSION

A. ATTORNEYS’ FEES ARE NOT AUTHORIZED BY

CERCLA

The Air Force argues that CERCLA does not authorize courts to

award attorneys’ fees to a private litigant for legal expenses incurred

in connection with cleanup activities or in prosecuting a response

A-4

cost recovery action. The Air Force also contends that Key Tronic is

not entitled to recover attorneys’ fees because it contributed to the

contamination of the site. In Stanton Rd. Assoc. v. Lohrey Enter.,

984 F.2d 1015 (9th Cir. 1993), we held that a litigant cannot recover

in a private response cost recovery action attorneys’ fees from a

party that was responsible for the pollution. /d. at 1020. Thus, the

district court lacked the authority to award attorneys’ fees in this

matter even if Key Tronic did not contribute to the contamination at

Colbert.

B. VALIDITY OF THE AWARD OF ATTORNEYS’

FEES FOR THE SEARCH FOR OTHER

RESPONSIBLE PARTIES

In addition to awarding attorneys’ fees for the litigation

expenses incurred by Key Tronic in employing outside counsel for

the prosecution of this private cost recovery action, the district court

also included in its lump sum award an amount for the legal

expenses incurred by Key Tronic in conducting an investigation to

search for other persons or entities responsible for the pollution. Key

Tronic asserts that “the same authority that allows for the recovery

of attorneys’ fees in the prosecution of a private enforcement action

applies to the recovery of costs for the search of other potentially

responsible parties.” As discussed above, CERCLA does not

authorize an award of attorneys’ fees in a private response cost

recovery action. /d. at 1020. Accordingly, the district court lacked

the authority to enter an award for the legal expenses incurred by

Key Tronic in searching for other potentially responsible parties,

whether performed by outside counsel or its general counsel.

C. VALIDITY OF AN AWARD FOR LEGAL EXPENSES

IN NEGOTIATING AND PREPARING THE

CONSENT DECREE

The district court included in its award of attorneys’ fees an

amount to cover legal expenses incurred in the employment of

outside counsel and the services performed by Key Tronic’s general

A-5

counsel in preparing and negotiating a consent decree. In support of

this award, Key Tronic relies on General Elec. Co. v. Litton Indus.

Automation Sys., Inc., 920 F.2d 1415, 1422 (8th Cir. 1990), cert.

denied, _US.__, 111 S. Ct. 1390, 113 L. Ed. 2d 446 (1991).

In that matter, the Eighth Circuit construed section 107(a)(4)(B) as

authorizing an award of attorneys’ fees in a private cost recovery

action. Jd. at 1422. In Stanton Rd., we declined to adopt the Eighth

Circuit’s interpretation of the words “necessary response cost” as

including an authorization for the award of attorneys’ fees. Stanton

Rd., 984 F.2d 1015, 1020. The district court erred in awarding

attorneys’ fees to Key Tronic for its legal expenses in preparing and

negotiating the consent decree.

CONCLUSION

Because Congress has not explicitly authorized private litigants

to recover their legal expenses incurred in a private cost recovery

action, that portion of the district court’s judgment awarding

attorneys’ fees is REVERSED.

CANBY, Circuit Judge, dissenting:

Section 107(aX4\B) of CERCLA, 42 U.S.C. § 9607(a)(4)(B),

authorizes certain persons who clean up hazardous waste sites to

recover “necessary costs of response.” In 1986, Congress amended

the definition of “response” in section 101(25) to include

“enforcement activities relating thereto.” 42 U.S.C. § 9601(25). For

reasons fully stated in my dissent in Stanton Road Associates v.

Lohrey Enterprises, Inc. , 984 F.2d 1015, 1020, 1028 (9th Cir. 1993),

I conclude that the 1986 amendment was intended to authorize the

recovery of attorneys’ fees along with cleanup costs.

Because the majority bases its decision on the proposition that

attorneys’ fees are not recoverable under sections 107(a)(4)(B) and

101(25), I dissent. Having registered my disagreement with the

foundation of the majority’s opinion, I find no need to address the

questions of the recoverability of fees for the search for other

responsible parties, or for negotiation or preparing the consent

APPENDIXB

KEY TRONIC CORPORATION, a Washington corporation,

Plaintiff,

UNITED STATES of America, United States Air Force;

Donald B. Rice, the Secretary of the United States Air Force, in

his official capacity; Alumax, Inc., a Delaware corporation,

Alumax Fabricated Products, Inc., a Delaware corporation, and

Alumax Mill Products, Inc., a Delaware corporation,

Defendants.

No. CS-89-694-JLQ.

United States District Court,

E.D. Washington.

March 19, 1991.

As Amended Aug. 12, 1991.

ORDER RE: PLAINTIFF’S MOTIONS

FOR SUMMARY JUDGMENT

QUACKENBUSH, Chief Judge.

Bi. ..£ THE COURT is defendant United States’ Motion for

Enlargement of Time (Ct.Rec. 107), the plaintiffs Motion For

Summary Judgment Re: Contribution Claim (Ct.Rec. 99), the

plaintiff's Motion For Summary Judgment that Alumax is a Covered

Person (Ct.Rec. 103), the plaintiff's Motion for Partial Summary

Judgment that Response Costs are Recoverable (Ct.Rec. 94), and

defendant United States’ Motion to Stay (Ct. Rec.113), hvard with

B-2

oral argument on March 11, 1991. Mark Schneider and Kathryn

Tucker represented the plaintiff. Leslie Nellermoe and William Maer

represented defendant Alumax. Eileen McDonough represented the

United States Air Force. Having reviewed the record, heard from

counsel, and fully considered these matters, the court enters this

order to memorialize its ora! rulings on these motions.

FACTUAL BACKGROUND

From 1968 to 1986 Spokane County maintained the Colbert

Disposal Site (“Colbert”) in Spokane County, Washington. From the

early 1970s through 1980, the County contracted to have defendant

William Schmidt do the work necessary to construct, improve and

complete the landfill. In that capacity, Schmidt accepted and

disposed of refuse at Colbert. Key Tronic alleges that between 1975

and 1980, Schmidt accepted liquid chemicals from the United States

Air Force (“USAF”), Alumax Fabricated Products, Inc. and Alumax

Mill Products, Inc. (hereafter collectively “Alumax”), and Key

Tronic Corporation, and, therefore, that Key Tronic is entitled to

contribution and cost recovery from the USAF and Alumax for

monies it paid and expended under the Comprehensive

Environmental Response, Compensation, and Liability Act

(“CERCLA”), 42 U.S.C. § 9601 et seq.

In 1980 drinking water wells around Colbert were found to be

contaminated by various chemicals including “TCA” and “TCE.” It

is not disputed that Key Tronic had deposited such materials at

Colbert. Key Tronic alleges that it incurred, at its own initiative,

expenses totaling $1,271,511.10 responding to that discovery. Key

Tronic subsequently entered into a Consent Decree and Scope of

Work statement with the Washington Department of Ecology

(“DOE”) and the United States Environmental Protection Agency

(“EPA”); as part of that decree, Key Tronic agreed to pay

$4.2 million in clean-up costs. The Air Force also entered into a

consent decree with DOE and EPA in which the Air Force agreed to

pay EPA $1.45 million to resolve its liabilities with the EPA for the

Colbert cleanup.

a ord

ee i re

B-3

On August 9, 1990, the court entered an order (Ct.Rec. 67)

relating to the parties’ motions for summary judgment. The court

dismissed Key Tronic’s contribution claims against the USAF

relating to Key Tronic’s $4.2 million in liability from the consent

decree; however, the court did not dismiss Key Tronic’s claim

against the USAF for contribution relating to the $1.2 million

incurred independently by Key Tronic. The court granted in part

Key Tronic’s motion for partial summary judgment against the

USAF, and held that Key Tronic had established CERCLA liability

against the Air Force. The court denied Key Tronic’s motion for

summary judgment against Alumax and held that Key Tronic had

not met its burden of proof in establishing that there was no triable

issue of fact as to Alumax’s liability under CERCLA. The court

dismissed the claims against defendant Schmidt.

The United States and Key Tronic subsequently negotiated a

consent decree which was signed by this court on January 14, 1991.

See Ct.Rec. 92. The consent decree resolved all but the following

issues of response cost liability between the United States and Key

Tronic:

A. Costs and fees incurred by attorneys and investigators

for Key Tronic in the amount of $365 649 during Key

Tronic’s search for additional potentially responsible

parties and costs and fees incurred by attorneys

related to the negotiation of the Consent Decree

between Key Tronic, the United States, and the State

of Washington in The State of Washington v. County

of Spokane, CS-89-033-RJM;

B. The salary of David Powers, Key Tronic’s General

Counsel and Secretary, in the amount of $70,000 for

time spent supervising the search for additional

potentially responsible parties and negotiating the

Consent Decree identified in A;

C. Attorneys’ fees and costs incurred by Key Tronic in

the prosecution of this action; and

B-4

D. Prejudgment interest on excepted claims.

Ct.Rec. 92, pp. 2-3.

Key Tronic now brings the following motions for summary

judgment. First, Key Tronic moves for summary judgment that its

$4.2 million in liability from the consent decree constitutes

“recoverable” monies under CERCLA Section 113, 42 U.S.C.

§ 9613, for purposes of its contribution claim against Alumax.

Second, Key Tronic moves for summary judgment that Alumax

disposed of hazardous wastes at the Colbert landfill. Third, Key

Tronic moves for summary judgment that its independent response

costs of $1.2 million are recoverable under CERCLA.

At oral argument, the plaintiff and defendant Alumax informed

the court that all claims against defendant Alumax had been settled,

and, therefore, that oral argument on the motions as they related to

Alumax was unnecessary. The plaintiff and defendant United States

informed the court that, should the court rule against the United

States, they had stipulated to the quantum of liability and that they

would subsequently submit that stipulation to the court.

DISCUSSION

I. MOTIONS DIRECTED SOLELY AGAINST

DEFENDANT ALUMAX

Because of the settlement between Key Tronic and Alumax, two

of Key Tronic’s motions have been mooted. Therefore, Key Tronic’s

motion that the $4.2 million consent decree is recoverable under

CERCLA for contribution purposes, and Key Tronic’s motion that

Alumax is a covered person under CERCLA ARE HEREBY

DENIED AS MOOT.

Il. RECOVERABILITY OF “RESPONSE COSTS"

Key Tronic moves this court to hold that monies it spent

independently of the Consent Decree are recoverable under

B-5

CERCLA as “response costs.” By the January 1991 consent decree

between Key Tronic and the Air Force, Key Tronic has waived all

claims against the United States except for the four items contested.

Because Key Tronic has settled its claims with Alumax, these

excepted items are the sole remaining claims at issue.

Key Tronic contends the following claims are recoverable from

the Air Force under CERCLA as “response costs": (1) prejudgment

interest for any liability assessed against the USAF from these

motions; (2) attorneys’ fees for prosecuting this action;

(3) attorneys’ and investigators’ fees, and opportunity costs of Key

Tronic’s executive resulting from the search for other potentially

responsible parties; and (4) attorneys’ fees and opportunity costs of

Key Tronic’s executive related to the negotiation of the consent

decree.

A. Prejudgment Interest Against the USAF

CERCLA waives sovereign immunity with the following

statutory provision:

Application of Act to Federal Government.

(1) In general. Each department, agency, and

instrumentality of the United States (including

the executive, legislative, and judicial

branches of government) shall be subject to,

and comply with, this Act in the same manner

and to the same extent, both procedurally and

substantively, as any nongovernmental entity,

including liability under section 107 of this

Act.

42 U.S.C. § 9620(a)(1). CERCLA also provides that prejudgment

interest in cost recovery actions is available:

I Because the parties have stipulated to the quantum of liability for these

items, the court will address solely the legal issue of recoverability of these items.

B-6

The amounts recoverable in an action under

this section shall include interest on the

amounts recoverable under [the preceding

paragraphs).

42 U.S.C. § 9607.

Based on the foregoing provisions, Key Tronic contends that

prejudgment interest may be awarded against the United States

Government.

[1] The Government asserts that prejudgment interest may

not be awarded against it for sovereign immunity reasons. Absent

express congressional consent to the award of interest in addition to

a general waiver of immunity to suit, the United States is immune

from an interest award. Library of Congress v. Shaw, 478 U.S. 310,

106 S. Ct. 2957, 92 L. Ed. 2d 250 (1986). The Government contends

that CERCLA does not contain an express waiver of immunity from

prejudgment interest as required by Shaw, and the general waiver of

liability, despite its reference to Section 107 of CERCLA, is legally

inadequate to award prejudgment interest.

[2] The court finds the Government's argument to be

unpersuasive. Shaw involved a statute which provided that the

United States shall be liable for costs as a private individual; the

statute in Shaw did not make any reference to prejudgment interest.

The face of 42 U.S.C. § 9620 makes quite clear that Congress

waived its sovereign immunity and intended for the Government to

be treated as any other private defendant. CERCLA clearly states

that in cost recovery actions under § 107 the plaintiff may recover

prejudgment interest. Thus, this court holds that CERCLA allows

prejudgment interest as an element of damages against the United

States.

B. Attorneys’ Fees for Prosecuting this Action

[3] Attorneys’ fees may not be recovered without a specific

statutory provision allowing such a recovery. Alyeska Pipeline Co. v.

B-7

Wilderness Society, 421 U.S. 240, 262, 95 S. Ct. 1612, 1624, 44 L.

Ed. 2d 141 (1975). CERCLA does not have a provision which

specifically states that enabling plaintiff is entitled to recover

“attorney's fees.” Liability of responsible parties under § 107

includes the necessary costs of response resulting from a hazardous

waste release or threatened release. 42 U.S.C. § 9607. In the

definitions section, “respond or response means remove, removal,

remedy, and remedia! action, all such terms (including the terms

remand and remedial action) include enforcement activities related

thereto.” (emphasis supplied) 42 U.S.C. § 9601(25). CERCLA does

not define “enforcement” or “enforcement activity."

CERCLA permits citizens who sue under the citizens’ suit

provision, 42 U.S.C. § 9659, to obtain relief from a district court.

The court may not award money damages but may grant such relief

in order to correct the violations and may impose civil penalties. The

court may award to the prevailing party the costs of litigation,

including attorneys’ fees. 42 U.S.C. § 9659(f).

CERCLA provides special recovery measures for the United

States Government. Section 107 permits the United States to recover

all removal or remedial costs incurred which are not inconsistent

with the national contingency plan. “Removal” costs are defined as

including any actions taken under Section 104(b) of the Act. 42

U.S.C. § 9601(23). Section 104(b) permits the Government to incur

legal costs and to recover those costs. 42 U.S.C. § 9604(b)(1). Case

law establishes that the United States may recover its litigation costs

under CERCLA. United States v. Northeastern Pharmaceutical &

Chemical Co., 579 F. Supp. 823, 851 (W.D. Mo. 1984), aff'd in part

and rev'd in part, 810 F.2d 726 (8th Cir. 1986), cert. denied, 484

U.S. 848, 108 S. Ct. 146, 98 L. Ed. 2d 102 (1987); United States v.

South Carolina Recycling & Disposal, Inc., 653 F. Supp. 984, 1009

(D.S.C. 1986), aff'd in part and vacated in part, 858 F.2d 160 (4th

Cir. 1988), cert. denied, 490 U.S. 1106, 109 S. Ct. 3156, 104 L. Ed.

2d 1019(1989).

Key Tronic asserts that it is entitled to its legal fees because the

attorneys’ fees required to bring this § 107 cost recovery action are

B-8

“enforcement costs” recoverable as a necessary response cost. Key

Tronic first cites two cases in which the Ninth Circuit characterized

a Section 107 cost recovery claim by a private party as a “private

enforcement action.” Cadillac Fairview, Inc. v. Dow Chemical Co..,

840 F.2d 691, 694 (9th Cir. 1988); Wickland Oil Terminals vy.

Asarco, Inc., 792 F.2d 887, 892 (9th Cir. 1986). From these cases

Key Tronic contends that the recovery of attorneys’ fees through the

enforcement cost language has already been resolved. However, the

Ninth Circuit’s characterization of the cost recovery action appears

to be dicta as the holdings of those cases did not turn upon the

enforcement action language.

Some courts addressing this issue have held that attorneys’ fees

are recoverable. For example, in General Electric Co. v. Litton

Industrial Automation Systems, Inc., 920 F.2d 1415 (8th Cir. 1990),

the Eighth Circuit held that a private party bringing a cost recovery

action under § 107 could recover attorneys’ fees for bringing the

action. In that case, General Electric purchased a piece of land on

which Litton had previously dumped toxic wastes. GE entered into a

settlement agreement with the state authorities, agreed to clean up

the waste site, and subsequently sued Litton for its response costs

pursuant to Section 107 of CERCLA. In holding that attorneys’ fees

were recoverable, the court gave the following rationale:

[CERCLA] defines “response” as “remove,

removal, remedy, and remedial action; all

such terms (including the terms removal’ and

‘remedial ction’) include enforcement

activities related thereto.” A private party

cost-recovery action such as this one is an

enforcement activity within the meaning of

the statute. Attorney fees and expenses

necessarily are incurred in this kind of

enforcement activity and it would strain the

statutory language to the breaking point to

read them out of the “necessary costs” that

section 9607(a)(4)(B) allows private parties to

recover. We therefore conclude that CERCLA

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authorizes, with a _ sufficient degree of

explicitness, the recovery by private parties of

attorney fees and expenses. This conclusion

based on the statutory language is consistent

with two of the main purposes of

CERCLA--prompt cleanup of hazardous

waste sites and imposition of all cleanup costs

on the responsible party. These purposes

would be undermined if a non-polluter (such

as GE) were forced to absorb the litigation

costs of recovering its response costs from the

polluter. The litigation costs could easily

approach or even exceed the response costs,

thereby serving as a disincentive to clean the

site. (citations omitted)

’ 920 F.2d at 1422. Two district courts have reached the same result

with similar reasoning. Pease & Curren Refining, Inc. v. Spectrolab,

Inc., 744 F. Supp. 945 (C.D. Cal. 1990); Shapiro v. Alexanderson,

741 F. Supp. 472, 480(S.D.N.Y. 1990).

Other district courts have held that attorneys’ fees are not

recoverable under CERCLA. United States v. Hardage, 750 F. Supp.

1460, 1511 (W.D. Okla. 1990); Fallowfield Development Corp. v.

Strunk, 1990 WESTLAW 52745, *5-6* (E.D. Pa. 1990); Mesiti v.

Microdot, Inc., 739 F. Supp. 57, 62-63 (D.N.H. 1990); Regan v.

Cherry Corp., 706 F. Supp. 145, 149 (D.R.I. 1989); T & E Indus.,

Inc. v. Safety Light Corp., 680 F. Supp. 696, 708 (D.N.J. 1988);

BCW Associates v. Occidental Chemical Corp., 1988 WESTLAW

102641, *23 (E.D. Pa. 1988); Hemingway Transportation, Inc. v.

Khan, 108 B.R. 378, 383 (Bkrtcy. D. Mass. 1989). One of the

leading cases for this position is T & E Indus., Inc. v. Safety Light

Corp., supra. Like the facts in Litton, T & E unknowingly purchased

property with a hazardous waste site. T & E sued Safety Light, a

successor to the original polluter, for both its cleanup costs and

attorneys’ fees as response costs. The court held that CERCLA

generally intended to distinguish between costs recoverable to the

government and those recoverable by private entities. Jd. at 707-8.

B-10

The court found that while the government could obtain attorneys’

fees pursuant to § 104(b), private parties had no comparable

entitlement. /d. Without further explanation, the court rejected the

plaintiff's argument that attorneys’ fees for bringing the action were

recoverable as enforcement activities related to response

expenditures on the basis that private parties cannot incur

enforcement costs. /d. at 708, n. 13.

Another court rejecting attorneys’ fees in cost-recovery actions

emphasized the legislative history related to the amendment to the

Act which added the “enforcement activities thereto” language.

Fallowfield Development Corp. v. Strunk, 1990 WESTLAW 52745

(E.D. Pa. 1990). The Committee on Energy and Commerce had

made the following comments on § 101:

The section also modifies the definition of

“response action” to include related

enforcement activities. The change will

confirm the EPA’s authority to recover costs

for enforcement actions taken against

responsible parties.

H.R. Rep. No. 253, 99th Cong., Ist sess., pt. 1, at 66-67 (1985),

reprinted in 1986 U.S. Code Cong. & Admin. News, 2835, 1848-49.

From that language the court concluded that when Congress

expanded the definition of response costs to include enforcement

costs, Congress did not intend for private parties to obtain attorneys’

fees as part of a cost recovery action. Fallowfield, 1990 WESTLAW

52745, at *6.

In this case, the Government contends that CERCLA’s statutory

scheme, taken as a whole, evidences a Congressional intent to

provide attorneys’ fees for the Governinent but not for private

parties. First, the Government points out that CERCLA does not

explicitly authorize attorneys’ fees as part of a § 107 cost-recovery

claim. In contrast, Congress explicitly provided for attorneys’ fees

for citizen’s suits, 42 U.S.C. § 9659, and for response actions by the

United States, 42 U.S.C. § 9604. The Government argues, therefore,

B-11

that when Congress wanted to provide for attorneys’ fees, it did so

explicitly, and the failure to make such a provision in § 107

demonstrates the Congressional intent to deny attorneys’ fees under

Section 107.

The Government further asserts that the statute, taken as a

whole, shows that only the Government may bring an “enforcement

action.” The Government asserts that an enforcement action is an

action to compel compliance with CERCLA. The United States may

bring such an action under § 104 or § 106 (and private citizens under

§ 310), but private parties may only bring contribution actions under

§ 113 or cost recovery claims under § 107. The Government also

relies upon the two sentences of the legislative history cited by the

Fallowfield court. Thus the Government contends that even if the

court rejects the Government’s argument that attorneys’ fees are

unavailable because of a lack of explicit statutory authority under

§ 107, attorneys’ fees are nevertheless unrecoverable because a

private party cannot incur costs of enforcement activities.

[4,5] The court rejects both of the Government’s contentions.

As an initial matter, “CERCLA is essentially a remedial statute

environment, courts are obligated to construe its provisions liberally

to avoid frustration of the beneficial legislative purposes in the

absence of a specific congressional intent otherwise.” Wilshire

Westwood Assoc. v. Atlantic Richfield, 881 F.2d 801, 804 (9th Cir.

1989) (quoting Dedham Water Co. v. Cumberland Farms Dairy,

Inc., 805 F.2d 1074, 1081 (ist Cir. 1986)). “Congress intended that

those responsible for problems caused by the disposal of chemical

poisons bear the cost and responsibility for remedying the harmful

conditions they created.” Pinole Point Properties v. Bethlehem Steel

Corp., 596 F. Supp. 283, 287 (N.D. Cal. 1984) (quoting United

States v. Reilly Tar & Chemical Corp. , 546 F. Supp. 1100 (D. Minn.

1982). Thus, absent specific Congressional intent to the contrary,

CERCLA should be interpreted liberally to permit recovery

associated with identifying of potentially responsible parties and

forcing those responsible parties to share their fair portion of the

cleanup ofa hazardous waste site.

B-12

The court must reject the Government’s “express statutory

authorization” argument. Alyeska, supra, stood for the proposition

that the federal courts may not award attorneys’ fees in the complete

absence of any statutory authority. 421 U.S. at 269, 95 S. Ct. at

1627. In that case the Court of Appeals had found that the case did

not fit into any of the recognized exceptions to the “American rule”

but nevertheless awarded attorneys’ fees because the litigation had

been beneficial to the public and had ensured that the governmental

system functioned properly. /d. at 245, 95 S. Ct. at 1615-16. The

Supreme Court held that a judicially created rule awarding

attorneys’ fees was improper and therefore reversed the decision by

the Court of Appeals. /d. at 269-70, 95S. Ct. at 1627-28.

Unlike Alyeska, the plaintiff in this case points to a statutory

provision which entitles the recovery of all necessary response costs.

The statute defines response costs as including “enforcement

activities.” 42 U.S.C. § 9601(25). Thus, the issue for the court is

only whether a private party can incur enforcement costs.

The court finds that a private party may incur enforcement

costs, and, therefore, may recover attorneys’ fees for bringing a cost

recovery action under § 107. Congress drafted Section 101(25) to

establish the scope of response costs recoverable throughout

CERCLA; thus, the definition of response, on its face, applies to

both the Government and private parties. Congress failed to restrict

“enforcement activities” in that definition to governmental actions.

Although the court acknowledges the force of the Government’s

position that the statutory scheme implies that enforcement activities

are those actions taken by the EPA to require compliance with

CERCLA, the court must construe the provisions of § 107 and

§ 101(25) liberally to achieve the overall objectives of the statute.’

2The court notes that the two sentences of legislative history cited by the

Government fail to make any reference to private parties. The court cannot

conclude from these statements that Congress intended to deny recovery to private

parties for enforcement activities.

B-13

The court further finds that the cases cited, infra p. 869-870, are

more persuasive. Read as a whole, the statute clearly meant for those

responsible for dumping chemical wastes to pay for the cleanup of

those wastes. If the court narrowly read the statute as the

Government suggests, then even innocent purchasers of property

who clean up hazardous wastes and subsequently seek recovery

from the responsible parties would be unable to recover the entirety

of the expenses incurred in holding the responsible parties

accountable for their pollution.» Accordingly, the court concludes

that enforcement costs must be read broadly, and thus includes

therein attorneys’ fees for making responsible parties share

necessary response costs.

C. PRP Search Costs

Key Tronic also seeks to recover the costs of its executive,

outside investigators’ fees, and attorneys’ fees relating to the search

for potentially responsible parties. The Government acknowledges

that PRP search costs are recoverable when sought by the EPA when

enforcing CERCLA. Both parties acknowledge that the case law

does not specifically discuss a private party’s PRP search costs.

[6] The court finds its holding on enforcement activities and

expenses recoverable thereunder to be applicable. Having held that

the enforcement cost language of CERCLA must be read broadly,

this court concludes that the search for responsible parties is an

3The court is not persuaded that Litton should be read as a clean-hands case.

If enforcement costs were read to cover only the Government's expenses in

compelling compliance with the statute, then persons with clean hands who bring

cost recovery actions would also be denied a statutory mechanism to recover their

attorneys’ fees. The court cannot find a statutory basis to justify an analytical

distinction between those who have clean hands and bring a cost recovery action

and those who do not.

B-14

enforcement activity within the meaning of CERCLA.‘ For the

reasons articulated by the court in permitting the recovery of the

attorneys’ fees in bringing this legal action, the court must find the

PRP search costs to be recoverable.

D. Costs Incurred by Key Tronic’s Attorneys and

Executive in Negotiation of the Consent

Decree

Courts have held that consultant and legal fees incurred in the

investigation of a hazardous waste site are recoverable as necessary

response costs. /nternational Clinical Laboratories, Inc. v. Stevens,

1990 WESTLAW 43971, 1990 U.S. Dist. LEXIS 3685 (E.D.N.Y.

1990); BCW Associates v. Occidental Chem. Corp., 1988

WESTLAW 102641, 1988 U.S. Dist. LEXIS 11275.

[7] The court finds that the attorneys’ fees and executive’s

opportunity costs in negotiating Key Tronic’s consent decree are

necessary response costs in cleaning up the Colbert landfill. The

court cannot accept the Government’s argument that such costs are

not recoverable solely because attorneys (as opposed to engineers)

carried out work necessary to solving the problems at Colbert.’ The

court further notes that the Government does not contend that these

fees are recoverable only as “enforcement activities.” Because these

expenses were necessary response costs, the court finds that these

costs are recoverable under CERCLA.

4indeed, Key Tronic asserts, and the Government does not refute, that Key

Tronic’s efforts in identifying responsible parties and establishing the Air Force's

disposal of wastes at Colbert resulted in the EPA's action against the Air Force.

5The Government did not raise the issue of whether Key Tronic might have

been foreclosed from recovering attorneys’ fees related to obtaining a consent

decree for the same reasons that Key Tronic may not seek contribution for the

$4.2 million liability of the consent decree. The Government instead has defended

solely on the basis that Key Tronic's attorneys’ fees are not response costs.

B-15

MOTION TOSTAY

The United States moves the court stay its decision on the

quantum of damages. The parties having represented that they will

submit a stipulation as to the amount of damages, the defendant’s

motion IS HEREBY DENIED AS MOOT. The parties shall submit

their stipulation to the court within 30 days of the entry of this order.

IT IS HEREBY ORDERED:

1. Defendant United States’ Motion for Enlargement of Time

(Ct.Rec. 107) ISHEREBY GRANTED.

2. The plaintiffs Motion (F)or Summary Judgment Re:

Contribution Claim (Ct.Rec.99) against defendant Alumax IS

HEREBY DENIED AS MOOT.

3. The plaintiffs Motion For Summary Judgment that

Alumax is a Covered Person (Ct.Rec. 103) IS HEREBY DENIED

AS MOOT.

4. The plaintiff's Motion for Partial Summary Judgment that

Response Costs are Recoverable (Ct.Rec.94) IS HEREBY

GRANTED as herein stated. Within 30 days of the entry of this

order, the plaintiff and defendant United States shall submit their

stipulation as to the quantum of liability.

5. Defendant United States’ Motion to Stay (Ct.Rec. 113) IS

HEREBY DENIED AS MOOT.

ITIS SOORDERED.

C-]

APPENDIX C

STANTON ROAD ASSOCIATES,

Plaintiff-Appellee,

LOHREY ENTERPRISES, Electronic Valet Systems, Inc.,

David Lohrey, Nathan Pang, Defendants-Appellants.

No. 91-15729.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Nov. 2, 1992.

Decided Jan. 28, 1993.

Before: SNEED, ALARCON and CANBY, Circuit Jiidges.

ALARCON, Circuit Judge:

Appellants Lohrey Enterprises, Inc., Electronic Valet Systems,

Inc., David Lohrey, and Nathan Pang (collectively, “Lohrey”) appeal

from the award of attorneys’ fees to Stanton Road under

section 107(aX4)(B) of the Comprehensive Environmertal

Response, Compensation, and Liability Act of 1980, as 2 r<..ded

(“CERCLA”), 42 U.S.C. § 9607(a)(4)(B). Lohrey also secks reversal

of the order requiring it to pay $1,100,000 in monetary damages to

Stanton Road Associates (“Stanton Road”) for deposit in an escrow

account to fund the clean-up of Stanton Road’s property.

[1,2] This case presents us with two novel issues. First, we

must decide whether Congress has explicitly authorized attorneys’

fees to private litigants as part of the response costs incurred in

C-2

cleaning up property contaminated by a hazardous substance. We are

also confronted with the question regarding whether a district court

may order a party found liable for contamination to pay monetary

damages for deposit in an escrow account to fund the future clean-up

of the contamination.

We conclude that Congress has not expressly provided for an

award of attorneys’ fees to private parties seeking to recoup response

costs under CERCLA. We further hold that the order that Lohrey

pay $1,100,000 in monetary damages to Stanton Road constitutes an

award of future response costs in violation of CERCLA. We reverse

the award of attorneys’ fees and vacate the order requiring Lohrey to

pay $1,100,000 to Stanton Road as monetary damages to fund a

future response action.

Lohrey owned and operated a dry cleaning plant on property

contiguous to Stanton Road’s property. While the dry cleaning plant

was in operation, the hazardous chemical perchlorethelene was

allowed to spill onto the adjoining alley. The chemical contaminated

Stanton Road’s property. Stanton Road brought this action seeking

declaratory relief and response costs under CERCLA, and damages

under pendent state law claims alleging trespass, negligence, and

nuisance.

At trial, Stanton Road introduced expert testimony that the

clean-up of Stanton Road’s property would cost between $775,000

and $1,100,000. Stanton Road also introduced evidence that the

minimum amount of funding necessary for an environmental firm to

undertake the clean-up would be $1,100,000. Lohrey did not offer

any evidence at trial to contradict Stanton Road’s testimony

regarding the estimated cost of the proposed remediation.

The district court found Lohrey liable for the contamination.

The court awarded Stanton Road $77,374 in response costs,

$389,925 in damages under the state law claims, and $126,198 in

attorneys’ fees under CERCLA. Lohrey was also ordered to pay

C-3

Stanton Road $1,100,000 to fund the clean-up of Stanton Road’s

property. That portion of the order provides as follows:

Defendants, joi’: and severally, are ordered

to pay to Stanton the additional sum of one

million one hundred thousand dollars

($1,100,000). Stanton shall deposit said sum

in an interest bearing escrow trust account

(“Cleanup Escrow”) established to implement

the remediation of 860 Stanton Road as

expeditiously as possible by _ the

environmental consulting firm PES

Environmental, Inc. (“PES”). Defendants shall

have no control over the Cleanup Escrow

fund, other than to monitor the expenditures

therefrom. Payments from the Cleanup

Escrow fund for cleanup services rendered

shall be paid out as invoices are received and

word is reviewed and approved by PES

principals. Copies of said invoices shall be

provided to a party to be designated jointly by

all defendants.

The Cleanup Escrow will terminate upon

written certification from PES that the 860

Stanton Road property has been remediated in

accordance with all relevant regulatory

cleanup levels and requirements.

If unused funds remain in the Cleanup Escrow

at the time of termination, such funds will be

distributed as follows:

First, all unused funds shall be paid out to

Stanton in order to satisfy any money

damages awarded to Stanton in this judgment

that remain unpaid as of the date of the

termination of the escrow. ... /n the event all

C-4

monetary damages awarded Stanton have

been satisfied in full upon termination of the

Cleanup Escrow, all remaining sums shall be

paid out to defendants on a pro rata basis

according to the percentage that each

defendant paid funds into the original Cleanup

Escrow.

(emphasis added).

The judgment was entered on April 15, 1991. Lohrey filed a

timely notice of appeal. It did not seek a stay of the judgment until

May 29, 1992. The district court denied the motion.

The district court did not indicate in its judgment whether the

monetary damages were awarded pursuant to CERCLA or under the

pendent state law claims. In an attempt to clarify the basis for the

award of monetary damages, we issued an order requesting the

district court to enter an order indicating whether its award was

based on state law or CERCLA. In response, the district court

informed us that it awarded Stanton Road $1,100,000 under both

CERCLA and state law.

Il.

Attorneys’ Fees

[3] Lohrey contends that the district court erred in awarding

attorneys’ fees to Stanton Road. They argue that CERCLA does not

authorize attorneys’ fees in private response cost actions. We review

the district court’s interpretation of CERCLA de novo. /daho v.

Howmet Turbine Component Co., 814 F.2d 1376, 1378 (9th Cir.

1987).

Stanton Road contends that a private litigant may recover

attorneys’ fees under CERCLA as “necessary costs of response”

pursuant to 42 U.S.C. § 9607(a\4\B). Section 9607(a) provides in

pertinent part:

C-5

[A]ny person who at the time of disposal of

any hazardous substance owned or operated

any facility at which such hazardous

substances were disposed of . . . shall be liable

for ...any other necessary costs of response

incurred by any other person consistent with

the national contingency plan.

42 U.S.C. §9607(a). Section 101(25) defines “response” as

“remove, removal, remedy, and remedial action, . . . includ[ing]

enforcement activities related thereto” 42U.S.C. § 9601(25)

(emphasis added). Stanton Road maintains that an action by a private

litigant to recover response costs is an “enforcement activity” within

the meaning of the statute.

The question whether CERCLA authorizes private parties to

recover attorneys’ fees as enforcement costs is a matter of first

impression in this circuit. The Eighth Circuit has concluded that

CERCLA authorizes private parties to recover attorneys’ fees as

“necessary costs of response.” General Elec. Co. v. Litton Indus.

Automation Sys., Inc., 920 F.2d 1415, 1421-22 (8th Cir. 1990), cert.

denied, U.S. , 111 S. Ct. 1390, 113 L. Ed. 2d 446

(1991). The Eighth Circuit reasoned that a “private party

cost-recovery action...[under section 107(aX4)(B)] is an

enforcement activity within the meaning of the statute.” /d.

While we characterized an action to recover costs under

section 107(aX4)(B) in Cadillac Fairview/California, Inc. v. Dow

Chem. Co., 840 F.2d 691, 694 (9th Cir. 1988) as a private response

action, we were not required to consider in that matter whether

CERCLA authorizes a private party to recover its attorneys’ fees. In

Cadillac Fairview, we held that a private litigant may initiate an

action pursuant to section 107(a) to recover the costs of testing for

contamination and employing a guard service in responding to the

hazardous substances, without waiting for governmental action

concerning the contaminated site. /d. at 694-95.

C-6

The district courts in this circuit disagree on the question

whether response costs include attorneys’ fees incurred by private

litigants. Compare Pease & Curren Refining, Inc. v. Spectrolab,

Inc., 744 F. Supp. 945, 952 (C.D. Cal. 1990) (private parties may

recover attorneys’ fees as costs of response under

section 107(aX4)(B) with Santa Fe Pac. Realty Corp. v. United

States, 780 F. Supp. 687, 695 (E.D. Cal. 1991) (attorneys’ fees are

not recoverable as response costs under section 107(a)(4)(B).

Under the American Rule, a prevailing party may not recover

attorneys’ fees. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421

U.S. 240, 247, 95 S. Ct. 1612, 1616, 44 L. Ed. 2d 141 (1975). In

Alveska, the plaintiffs temporarily halted construction of an oil

pipeline in Alaska. Jd. at 242, 95 S. Ct. at 1614. The Court of

Appeals for the District of Columbia awarded attorneys’ fees to the

plaintiffs. Jd. at 245, 95 S. Ct. at 1615. The court reasoned that the

plaintiffs had vindicated “important statutory rights of all citizens”

and had insured that the governmental process had functioned

properly. /d. Thus, they were entitled to attorneys’ fees to encourage

private parties to undertake litigation that benefits the public. /d. at

245-46, 95S.Ct. at 1616.

The Supreme Court reversed. The Court instructed that under

the American Rule, a prevailing party cannot recover attorneys’ fees

in the absence of congressional authority. /d. at 269, 95 S. Ct. at

1627. The Court stated that it was up to Congress to “carve out

specific exceptions” to the general rule against providing attorneys’

fees to the prevailing litigant. Jd. The Court reasoned that a court is

not

free to fashion drastic new rules with respect

to the allowance of attorneys’ fees to the

prevailing party in federal litigation or to pick

and choose among plaintiffs and the statutes

under which they sue and to award fees in

some cases but not in others, depending upon

the courts’ assessment of the importance of

us —

C-7

the public policies involved in particular

cases.

Id.

In Runyon v. McCrary, 427 U.S. 160, 96 S. Ct. 2586, 49 L. Ed.

2d 415 (1976), the Court explained that “the law of the United

States... has always been that absent explicit congressional

authorization, attorneys’ fees are not a recoverable cost of

litigation.” Jd. at 185, 96 S. Ct. at 2602 (emphasis added). The

Court stated that attorneys’ fees cannot be awarded unless “Congress

intended to set aside [a] long-standing American rule of law.” /d. at

185-86, 96S. Ct. at 2602.

We are persuaded that the words “enforcement activities” as

used in section 101(25) do not explicitly authorize the payment of

attorneys’ fees. Congress has repeatedly demonstrated that it knows

how to express its intention to create an exception to the American

Rule.

For example, in section310(f) of CERCLA, congress

authorized courts to “award costs of litigation (including reasonable

attorney and expert witness fees) to the prevailing party or the

substantially prevailing party whenever the court determines such an

award is appropriate” in citizen suit actions. 42 U.S.C. § 9659(f).

Similarly, section 104(b) of CERCLA provides that the

“President...may undertake such planning, /ega/, fiscal, [or]

economic, ...to plan and direct response actions [and] to recover

the costs thereof.” 42 U.S.C. § 9604(b) (emphasis added). When

compared to the express provisions for attorneys’ fees in these

sections of CERCLA, the term “enforcement activities” would

appear to be “outside even the most exhaustive lexicon of customary

fee shifting language.” Santa Fe Pac. Realty, 780 F. Supp. at 695.

Moreover, the fact that those district courts that have confronted this

issue disagree on the question whether attorneys’ fees are allowable

under section 101(25) and 107(aX4\B) demonstrates that the words

“enforcement activities” do not explicitly signal, with any persuasive

degree of clarify, that Congress intended to provide for an award of

C-8

attorneys’ fees to private litigants. See Litton, 920 F.2d at 1422 n. 10

(noting that district courts have split on whether attorneys’ fees are

recoverable by private parties as a necessary cost of response).

[4,5] Ordinarily, where there is a dispute regarding whether a

statute applies to the facts before the court, we first look to the plain

meaning of the language used by Congress. Wilshire Westwood

Assoc. v. Atlantic Richfield, 881 F.2d 801, 803 (9th Cir. 1989). If the

words used in the statute are ambiguous, however, we must consult

the legislative history to determine the intent of Congress. Blum v.

Stenson, 465 U.S. 886, 896, 104 S. Ct. 1541, 1548, 79 L. Ed. 2d 891

(1984). The rule set forth in Alyeska and Runyon, however,

precludes us from implying from ambiguous language an intent that

atiorneys’ fees can be awarded in a private response action. Under

Alyeska and Runyon, the American Rule must be applied unless

Congress explicitly authorizes the courts to award attorneys’ fees.

Alyeska, 421 U.S. at 269, 95 S. Ct. at 1627; Runyon, 427 U.S. at

185, 96 S. Ct. at 2601. The words “necessary costs of response” do

not expressly authorize an award of attorneys’ fees for legal

expenses incurred in remediating the contamination of property.

Stanton Road argues that we should adopt the Eighth Circuit’s

interpretation of the words “necessary costs of response.” We

decline to do so because we are unpersuaded by the Eighth Circuit's

analysis of the issue.

The Eighth Circuit’s explanation of its holding is contained in

the following paragraph:

As noted earlier, 42 U.S.C. § 9607(a)(4)\(B),

allows private parties to recover “necessary

costs of response...consistent with the

national contingency plan.” 42 U.S.C.

§ 9601(25) defines “response” as “remove,

removal, remedy, and remedial action; all

such terms (including the terms removal’ and

‘remedial action’) including enforcement

activities related thereto.” (Emphasis added).

C-9

A private party cost-recovery action such as

this one is an enforcement activity within the

meaning of the statute. See Cadillac

Fairview/California, Inc. v. Dow Chem. Co.,

840 F.2d 691, 694 (9th Cir. 1988); Wickland

Oil Terminals v. Asarco, Inc., 792 F.2d 887,

892 (9th Cir. 1986). Attorney fees and

expenses necessarily are incurred in this kind

of enforcement activity and it would strain the

statutory language fo the breaking point to

read them out of the “necessary costs” that

section 9607(a\4)B) allows private parties to

recover. We therefore conclude that CERCLA

authorizes, with a sufficient degree of

explicitness, the recovery by private parties of

attorney fees and expenses. This conclusion

based on the statutory language is consistent

with two of the main purposes of

CERCLA--prompt cleanup of hazardous

waste sites and imposition of all cleanup costs

on the responsible party. These purposes

would be undermined if a non-polluter (such

as GE) were forced to absorb the litigation

costs of recovering its response costs from the

polluter. The litigation costs could easily

approach or even exceed the response costs,

thereby serving as a disincentive to clean the

site.

Litton, 920 F.2d at 1421-22 (emphasis in the original).

We agree with the Eighth Circuit that attorneys’ fees are

ordinarily expended in a private response action. This truth does not,

however, permit a federal court to read into the phrase, “necessary

costs of response,” explicit congressional authority to award

attorneys’ fees. Attorneys’ fees are incurred in every private action

to enforce rights embodied in a federal statute where the litigant is

represented by counsel. The cost of representation cannot be shifted

C-10

by implication under the American Rule. Runyon, 427 U.S. at 185,

96 S. Ct. at 2601. A holding that attorneys’ fees are not explicitly

authorized in a private response action does not “read them out” of

section 9607(a4)(B), as suggested by the Eighth Circuit. To the

contrary, to uphold the district court’s award of attorneys’ fees in a

private response action, we would have to read into the statute words

not explicitly inserted by Congress. The Supreme Court instructed us

in Alyeska and Runyon that we lack such power.

The Eighth Circuit’s reliance on the policy underlying CERCLA

to support its conclusion that Congress must have intended that

litigants may recover attorneys’ fees in a private response action is

also misplaced. We cannot imply authority to award attorneys’ fees

because we determine that such a rule would enhance public policy.

The Supreme Court rejected this notion in Alyeska:

It is true that under some, if not most, of the

statutes providing for the allowance of

reasonable fees, Congress has opted to rely

-heavily on private enforcement to implement

public policy and to allow counsel fees so as

to encourage private litigation.... But

congressional utilization of the private-

attorney-general concept can in no sense be

construed as a grant of authority to the

Judiciary to jettison the traditional rule against

nonstatutory allowances to the prevailing

party and to award attorneys’ fees whenever

the courts deem the public policy furthered by

a particular statute important enough to

warrant the award.

Alyeska, 421 U.S. at 263,95 S. Ct. at 1624.

If Congress determines that an exception to the American Rule

is appropriate in private response actions, it will do so in explicit

terms as it has previously done in other parts of CERCLA. See 42

U.S.C. §§ 9604(b), 9659(f). Because Congress has not explicitly

C-11

authorized an award of legal expenses as necessary response costs,

the district court had no authority to award attorneys’ fees to Stanton

Road. Runyon, 427 U.S. at 185, 96S. Ct. at 2601.

Validity of the Award of Monetary Damages

for Future Response Acts

1. Mootness

[6] Stanton Road asserts that the validity of the order

requiring Lohrey to pay monetary damages in the sum of $1,100,000

is moot because most of the funds placed in the escrow account have

been expended to pay for remediation costs. We disagree. Lohrey

appeals from the judgment ordering it to pay monetary damages to

Stanton. The fact that payments have been made in satisfaction of a

money judgment does not foreclose an appeal. United States ex rel.

Morgan & Son Earth Moving, Inc. v. Timberland Paving & Constr.

Co., 745 F.2d 595, 598 (9th Cir. 1984).

2. Waiver

[7] The parties disagree regarding whether Lohrey objected

before the trial court to the validity of the order requiring it to pay

$1,100,000 in monetary damages to Stanton Road for deposit in an

escrow account. We need not decide whether the issue was raised in

the district court because the question whether CERCLA permits the

recovery of future response costs is a matter of law, and the

challenged order is part of the record. See White v. McGinnis, 903

F.2d 699, 700 n.4 (9th Cir.) (en banc) (appellate courts may consider

issues raised for first time on appeal if the “issue is purely one of law

and the pertinent record has been fully developed”) cert. denied, 498

U.S. 903, 111 S. Ct. 266, 112 L. Ed.2d 223 (1990) (quoting United

States v. Gabriel, 625 F.2d 830, 832 (9th Cir. 1980)).

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3. Validity of The Award of Future Response Costs Under

CERCLA

[8] Lohrey contends that the district court erred in ordering

Lohrey to pay Stanton Road $1,100,000 to fund the clean-up of its

property, because CERCLA prohibits awards of future response

costs. We agree.

In ordering Lohrey to pay future response cost damages, the

court believed that it could avoid holding further proceedings at

which Stanton Road would be required to show that the costs it

incurred were necessary to clean up the contamination and were

consistent with the national contingency plan. The district court

explained its motivation as follows:

I am just going to give you a judgment and

give you an amount of money of what it

would take [to clean up the property]. In these

cases the court would have 50,000 cases on

their docket waiting some sort of a resolution.

I don’t know if declaratory relief is really a

basis of sense in this case.

Section 107(a)(4)(B) permits a private party to recover costs

incurred in responding to the contamination. 42 U.S.C.

§ 9607(a\4B). CERCLA further provides for a declaratory

judgment action to establish liability for future response costs. 42

U.S.C. § 9613(g\2). Section 9607(aX4)(B) limits damages in

private response actions to expenses that were “necessary” and

“consistent with the national contingency plan.” 42 U.S.C.

§ 9607(aX4\(B). We held in Dant & Russell v. Burlington N. R.R.

Co. that CERCLA requires plaintiffs “to actually incur response

costs before they can recover them.” 951 F.2d 246, 250 (9th Cir.

1991). Thus, the district court erred in ordering Lohrey to pay

monetary damages of $1,100,000 for clean-up costs that Stanton

Road had not incurred. Furthermore, because Stanton Road had not

cleaned up its property at the time the district court entered its

judgment, it failed to meet its burden of proving in an adversary

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proceeding that its expenses were necessary and incurred in a

manner consistent with the national contingency plan. See Cadillac

Fairview, 840 F.2d at 695 (“To recover costs under section 107(a)

the party undertaking the response action must prove that the costs it

incurred were ‘necessary’ and that it incurred those costs in a

manner ‘consistent with the national contingency plan.’”).

The award of monetary damages to Stanton Road to fund a

future clean-up of Stanton Road’s property violated CERCLA.

Therefore, that portion of the award of monetary damages that was

based on CERCLA cannot stand.

4. Validity of the Award of Monetary Damages Under

State Law

[9] The district court has informed this court that the

$1,100,000 monetary damage award was ordered pursuant to both

CERCLA and state law. Lohrey contends that an award of monetary

damages under state law is invalid because it would permit the

plaintiff to circumvent the requirement under CERCLA that

response costs be necessary and consistent with the national

contingency plan. This argument is meritless.

CERCLA provides that “[njothing in this chapter shall affect or

modify in any way the obligations or liabilities of any person under

other Federal or State law, including common law, with respect to

releases of hazardous substances or other pollutants or

contaminants.” 42 U.S.C. § 9652(d). CERCLA further precludes a

plaintiff from recovering cost of repair damages under both

CERCLA and state law. 42 U.S.C. § 9614(b). Thus, the express

language of the statute defeats Lohrey’s contention that CERCLA

preempts a state law recovery. See Manor Care, Inc. v. Yaskin, 950

F.2d 122, 127 (3d Cir. 1991) (the prohibition in 42 U.S.C.

section 9614(b) against double recovery for removal costs “would be

unnecessary and inexplicable if ... costs that may be recovered

under CERCLA may not be recovered under state law”).

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Lohrey further contends that the district court awarded Stanton

Road damages for the diminution in market value of its property

under state law. Lohrey argues that the award of monetary damages

in the sum of $1,100,000 will result in a double recovery under state

law. See Armitage v. Decker, 218 Cal. App. 3d 887, 905, 267 Cal.

Rptr. 399 (1990) (“[T}he cost of repair ... and the difference in

market value before and after injury are alternate means of achieving

[the same] ... compensation [for tortious injury to property.]”’)

(emphasis added).

Contrary to Lohrey’s contention, the district court did not award

Stanton Road damages for diminution of the market value of the

property due to the contamination. Rather, the district court found

that Stanton Road contracted to sell the property for $1,420,000 on

September |, 1988, and that the buyer refused to go through with the

sale upon learning of the contamination. On January 31, 1990,

Stanton Road entered into a contract with another buyer to sell the

property, with the sale being contingent on Stanton Road's

remediation of the property. The district court awarded Stanton Road

$199,159, representing the loss of use of $1,420,000 from

September 1, 1988 to January 31, 1990 at 9.25% interest. The

district court also awarded damages to Stanton Road for expenses

incurred in maintaining the property from September 1, 1988 to

January 31, 1990. The award of damages was not intended to

compensate Stanton Road for the lost market value of the property.

IV.

CONCLUSION

The award of monetary damages for future response costs

violated CERCLA and must be vacated. The district court failed to

indicate what portion of the monetary damages awarded to Stanton

Road was compensation for the costs of repair based on a finding of

liability under the state law claims.

Accordingly, we vacate the award of monetary damages. Upon

remand, the district court is directed to conduct further proceedings.

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Before awarding any response costs under CERCLA, the district

court must require Stanton Road to meet its burden of proof under

section 9607(a)(4)(B) that any clean up expenses it incurred were

necessary and consistent with the national contingency plan. If the

court determines that damages should be awarded under state law, it

is requested to prepare express findings and conclusions of law that

specify the cost and the nature of the repairs attributable to a

violation of state law.

VACATED and REMANDED with directions.

CANBY, Circuit Judge, dissenting:

With all respect, | cannot agree with two major conclusions

reached by the majority. In my view, plaintiff's attorneys’ fees are

properly recoverable under section 107(a)(4)(B) and the amended

version of section 101(25) of the Comprehensive Environmental

Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C.

§§ 9607(aX 4B) and 9601(25). In addition, | would not reserve the

district court’s establishment of an escrow fund, nor would I reach

the question of that court’s power to create such a fund, because |

believe that this issue was never properly raised by the defendants in

the district court.’

Attorneys’ Fees

The plaintiff, Stanton Road, owns land that the defendants

contaminated by repeated discharges of perchlorethelene over a

period of years. Accordingly, Stanton Road is entitled under

section 107(a)(4)(B) of CERCLA to recover from the defendants its

“necessary costs of response.” When CERCLA was first enacted,

“response” was defined in section 101(25), 42 U.S.C. § 9601(25), as

follows: “’respond’ or ’response’ means remove, removal, remedy,

and remedial action.” Had this case arisen between 1980 and 1986,

I agree with the majority's conclusion that the case is not moot, and with its

treatment of the validity of the damages award under state law.

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then, Stanton Road would have been entitled to recover its “costs of

remedial action.” Those recoverable costs might reasonably have

been interpreted to be only those incurred in the physical cleanup of

the site.

In 1986, however, Congress enacted the Superfund Amendment

and Reauthorization Act, which amended section 101(25) of

CERCLA to provide: “The terms ‘respond’ or ‘response’ means

remove, removal, remedy, and remedial action, all such terms

(including the terms ‘removal’ and ‘remedial action’) include

enforcement activities related thereto.” (Emphasis added). In the

scheme of CERCLA, this language must mean that private plaintiffs

can recover the attorneys’ fees expended in enforcing the liabilities

that CERCLA imposes on polluters.

CERCLA is to a large degree a machine driven by private

litigation or the threat of it. As the plurality opinion of the Supreme

Court in Pennsylvania v. Union Gas Co., 491 US. 1, 109 S. Ct.

2273, 105 L. Ed.2d 1 (1989), observed:

Congress did not think it enough . . . to permit

only the Federal Government to recoup the

costs of its own cleanups of hazardous-waste

sites; the Government’s resources being finite,

it could neither pay up front for all necessary

cleanups nor undertake many different

projects at the same time. Some help was

needed, and Congress sought to encourage

that help by allowing private parties who

voluntarily cleaned up hazardous-waste sites

to recover a proportionate amount of the costs

of cleanup from the other potentially

responsible parties.

Id. at 21-22, 109 S. Ct. at 2285. Thus our court has not hesitated to

characterize private actions under section 107 of CERCLA as

“private enforcement actions.” Wickland Oil Terminals v. ASARCO,

Inc., 792 F.2d 887, 892 (9th Cir. 1986); Cadillac

C-17

Fairview/California, Inc. v. Dow Chemical Co., 840 F.2d 691, 694

(9th Cir. 1988).

When Congress amended CERCLA to permit such private

litigants, among others, to recover the “costs” of “enforcement

activities,” it is difficult to imagine what it might have had in mind

other than the recovery of attorneys’ fees. The “enforcement” of

CERCLA by a private party consists in suing to hold the polluter

liable. The lion’s share of the enforcement cost, as opposed to

cleanup cost, will lie in attorneys’ fees. Congress cannot have been

ignorant of that fact. A private party simply cannot recover its cost

of enforcement if it cannot recover its attorneys’ fees. If the

language of Congress in sections 107(aX4)(B) and 101(25) is to be

given meaning and effect, those fees must be recoverable.

This is the conclusion reached by the only other circuit to have

addressed the question.? In General Electric Co. v. Litton Industrial

Automation Systems, Inc., 920 F.2d 1415 (8th Cir. 1990), the Eight

Circuit ruled:

Attorney fees and expenses are necessarily

incurred in this kind of enforcement activity

and it would strain the statutory language to

the breaking point to read them out of the

“necessary costs” that section 9607(a)(4)(B)

allows private parties to recover. We therefore

conclude that CERCLA authorizes, with a

sufficient degree of explicitness, the recovery

by private parties of attorney fees and

expenses. This conclusion based on the

2The question whether private parties could recover litigation costs under

section 107(aX4)(B) was recently presented to the Tenth Circuit, but that court

declined to address that broad question. See United States v. Hardage, 982 F.2d

1436, 1447 (10th Cir. 1992). It affirmed a denial of the fees on the narrower

ground that the district court had not erred in its factual determination that the

litigation costs had not been necessary. Id, at 1447-48.

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Statutory language is consistent with two of

the main purposes of CERCLA--prompt

cleanup of hazardous waste sites and

imposition of all cleanup costs on the

responsible party. These purposes would be

undermined if a non-polluter ... were forced

to absorb the litigation costs of recovering its

response costs from the polluter. The litigation

co its could easily approach or even exceed the

response costs, thereby serving as a

disincentive to clean the site.

Id. at 1422.

The majority here resists reading “costs” of “e 1forcement

activities” to include attorneys’ fees because Congress elsewhere has

used the phrase “attorneys’ fees” or, less explicitly, “legal costs.” Of

course it would have made our task easier if Congress had used the

term “attorneys’ fees” in its amendment to section 101(25). But

Congress is not confined to a particular linguistic formula; it need

only manifest its clear intention to permit the litigant to recover fees.

As the Eighth Circuit convincingly demonstrated, Congress has done

so inthe 1986 amendments to CERCLA.

The majority invokes the “American rule” upheld in Alyeska

Pipeline Serv. Co. v. Wilderness Soc 'y, 421 U.S. 240, 247, 95 S. Ct.

1612, 1616, 44 L. Ed. 2d 141 (1975), and Runyon v. McCrary, 427

U.S. 160, 182-86, 96 S. Ct. 2586, 2600-02, 49 L. Ed. 2d 415 (1976),

but that is a rule requiring each party to bear its own attorneys’ fees

when Congress has not otherwise declared its intent. In Alveska, the

Statute in issue said nothing remotely touching upon fees; the Court

rejected the proposition that fee awards should follow from the fact

that Congress had authorized private lawsuits. Alyeska, 421 U.S. at

263, 95 S. Ct. at 1624. In Runyon, the governing statute merely

authorized the federal courts to apply the common law when federal

law failed “to furnish suitable remedies.” Runyon, 427 U.S. at 184,

96 S. Ct. at 2601. Alyeska and Runyon provide the rule when

Congress has not indicated an intent; those two cases should not be

C-19

construed to create a presumption against the award of fees that

Congress can only overcome by the use of particular language.

[ would give the natural contextual meaning to “costs” of

“enforcement activities” and hold that those terms authorize the

recovery of Stanton Road’s attorneys’ fees. In so doing, I would

avoid the frustration of Congress’s purpose of stimulating private

cleanup efforts, and would also avoid an unnecessary conflict

between circuits.

Escrow Fund

I find in the record no hint that the defendants objected to the

creation of an escrow fund from which disbursements would be

made as future cleanup costs were incurred. Indeed, the statements

of both sides in district court indicated that they contemplated the

establishment of some such fund. I would not now entertain an

objection raised by defendants that was not presented to the district

court.

It is true, as the majority opinion states, that we may consider

issues raised for the first time on appeal “if the issue is one of law

and the pertinent record has been fully developed.” United States v.

Gabriel, 625 F.2d 830, 832 (9th Cir. 1980) (emphasis added). In my

view, the record in this case is anything but fully developed on the

question of the propriety of an escrow fund to cover future cleanup

costs. Because the parties did not dispute the issue, there is no

evidence regarding alternatives to such a fund, or the necessity for it

in this case, or the alternative methods of ensuring that

disbursements will be for necessary expenses only and will be

“consistent with the national contingency plan” as required by

section 107(a)(4)(B).

The majority has ruled that the district court erred in setting up

the escrow fund because that required the defendants to pay damages

for cleanup costs that Stanton Road had not yet incurred. But the

disbursements were not to be made from the escrow fund until after

the costs had been incurred. The majority apparently concludes

C-20

nonetheless that such an arrangement runs afoul of our holding in

Dant & Russell v. Burlington N. R.R. Co., 951 F.2d 246 (9th Cir.

1991), that plaintiffs must “actually incur response costs before they

can recover them.” /d. at 250. But Dant & Russell involved a flat

award for future response costs. In holding that costs could not be

recovered before they were incurred, we said:

This case provides no occasion for defining

what “incurred” means--only what it does not

mean. Here, we are presented with nothing but

bare assertions by BN that BN will perform

future cleanup. These assertions do not

amount to response costs “incurred” under

§ 9607(a)(4)(B).

Id. Here the escrow arrangement was based on far more than mere

assertions of intended cleanup. The arrangement may be sufficiently

concrete to satisfy the definition of costs “incurred.” If it is not, the

fault is with the defendants. Had they raised an objection to the

escrow arrangement in district court, the escrow conditions could

have been modified to require the kind of commitment to cleanup

that might well be deemed to render the costs “incurred.”

CERCLA is relatively new legislation, and our experience with

it is still unfolding. Escrow arrangements to cover cleanup costs may

prove to be a useful device in effectuating Congress’s purposes,

particularly when there is a question concerning the continued

solvency of the liable polluter. I would not hastily rule out the use of

such a tool unless I were convinced that the statute forbade it. I can

reach no such conclusion on this scanty record. The issue, | submit,

should have been left for a later day, when the parties have properly

framed it. Here it has been waived; I would affirm the district court.

D-1

APPENDIX D

STANTON ROAD ASSOCIATES, a California partnership,

Plaintiff,

LOHREY ENTERPRISES, INC., ELECTRONIC VALET

SYSTEMS, INC., DAVID LOHREY and NATHAN PANG,

Defendants.

No. C 89 0947 SC

United States District Court for the Northern District

of California.

1991 U.S. Dist. LEXIS 5630

April 15, 1991, Decided.

April 15, 1991, Filed.

On Appeal to Ninth Circuit.

Before: SAMUEL CONTI, United States District Judge.

This case came on for hearing without a jury April 2, 3, 4, and

8, 1991 before the Honorable Samuel Conti. Steven Hock and Greg

Block appeared for plaintiff Stanton Road Associates; Susan Watson

and Richard Nosky Jr. appeared for defendants Lohrey Enterprises,

Inc., Electronic Valet Systems, Inc., David Lohrey and Nathan Pang.

The suit involves a private action under state and federal law for

damages, cleanup and other relief by an owner of commercial

property who contends that dry cleaning operations on adjoining

property resulted in illegal contamination of its property with

hazardous wastes. The court having considered all the evidence

before it at trial and the briefs and argument of counsel, makes the

following findings of fact and conclusions of law.

D-2

FINDINGS OF FACT

1. Plaintiff in this action, Stanton Road Associates

(“Stanton”), is a California limited partnership formed in 1987.

George Sheldon (“Sheldon”), an individual, has been the general

partner of Stanton since its formation, and Sheldon’s two children

have been the limited partners. Prior to 1987, Sheldon was employed

by the Curley Bates Company (“Curley Bates”), a sporting goods

firm of which he became president and sole shareholder in 1976. At

all relevant times, Stanton was the owner of property located at 860

Stanton Road, Burlingame, California (“Stanton Road Property”).

2. Defendants in this action are Lohrey Enterprises, Inc.

(“Lohrey Enterprises”), a California corporation; Electronic Valet

Systems, Inc. (“Electronic Valet”), a California corporation; David

Lohrey (“Lohrey”), an individual; and Nathan Pang (“Pang”), an

individual.

3. Prior to June 9, 1987, Electronic Valet’s corporate name

was West Coast Valet Services, Inc. (“West Coast Valet”). At all

relevant times, Electronic Valet, formerly West Coast Valet,

occupied property at 855 and 857 Malcolm Road, Burlingame,

California (“Malcolm Road Property”).

4. Lohrey Enterprises was formed as a partnership in 197]

and was incorporated in 1975. As of 1982, Lohrey and his brother,

Arthur Lohrey, were the shareholders of Lohrey Enterprises. In

1986, Lohrey acquired Arthur Lohrey’s shares of Lohrey Enterprises

and became the chairman, president, and sole shareholder of Lohrey

Enterprises.

5. The two contiguous parcels of real property involved in

this action, the Malcolm Road Property and the Stanton Road

Property, are separated by approximately twenty feet of earth (“the

Alley”) which is unimproved except for certain utility lines and

boxes. The property line between the properties runs down the

D-3

middle of the Alley. At all relevant times, the rear door of the

building on the Malcolm Road Property opened out on the Alley.

6. Curley Bates owned the Stanton Road Property from 1962

to 1987, when Stanton acquired it. On January 31, 1990, Stanton

sold the property to Alberto Manuel and Marta Rodriguez and

Stephen J. Russell and Stephanie J. Morgan-Russell, who have

owned the property since.

7. As of June 1, 1982, the Bank of California owned the

Malcolm Road Property as the trustee/lessor. In December 1986,

Lohrey and his wife, Elizabeth Danel, became the owners of the

Malcolm Road property, and have owned it since.

8. The building on the 855 portion of the Malcolm Road

Property has been used for a commercial dry cleaning operation

from 1982 to present, first by West Coast/Electronic Valet until

1988, and then by a third party from 1988 to present.

9. Lohrey, Lohrey Enterprises and Pang actively participated

in establishing the West Coast Valet commercial dry cleaning

business: Lohrey, acting as an individual and on behalf of Lohrey

Enterprises, prepared business plans and financial projections and

procured a line of credit; Lohrey Enterprises leased the Malcolm

Road Property for West Coast Valet’s business and guaranteed a line

of credit for West Coast Valet; and Pang prepared its business and

financial plans, researched the market, solicited business, located a

site, and hired employees.

10. Lohrey, Lohrey’s brother Arthur Lohrey, and Pang initially

owned West Coast Valet in the following capacities, respectively:

37.5%, 37.5%, and 25%. The three had an understanding that over

time, they would each own 33.3%. In 1986, Lohrey acquired Arthur

Lohrey’s ownership interest.

11. From June 9, 1986 through June 8, 1987, Pang and Lohrey

considered Pang to be “vice president” of West Coast Valet. Lohrey

and his brother interchangeably considered themselves “president”

of West Coast Valet.

D-4

12. From June 9, 1982 through June 9, 1987, Lohrey and Pang

were actively involved, through regular meetings, in managing the

business affairs of West Coast Valet.

13. A July 1987 private placement memorandum distributed to

potential investors in Electronic Valet stated “in 1982 Lohrey

Enterprises, Inc. founded West Coast Valet Services, Inc. ... “

West Coast Valet was also identified and held out as a “subsidiary”

of Lohrey Enterprises, and as a“Lohrey Enterprises” Company.

14. Lohrey was the sole incorporator of West Coast Valet in

June of 1982. From June 1982 through June 8, 1987, West Coast

Valet had no board of directors, no minutes of board meetings, no

bylaws, no issued stock, and no elected or appointed officers.

Neither Lohrey nor Pang paid any capital into or invested any

money in the business of West Coast Valet in exchange for their

ownership interests. Neither of the two, nor any other purported

owner of West Coast Valet, paid capital into, invested in, or risked

their own money or assets in connection with West Coast Valet

during the period from 1982 to 1987.

15. The funds necessary to begin operating the West Coast

Valet commercial dry cleaning business were provided by a line of

credit from Bank of the West, procured by Lohrey and guaranteed

by Lohrey Enterprises. In consideration for the line of credit the

Bank of the West received, among other things, a security interest in

any unencumbered assets of the West Coast Valet commercial dry

cleaning operations.

16. West Coast Valet opened for business in 1982 and operated

at a loss for several months. Thereafter it began to profit, and

continued to do so until it was sold in 1988. At least half of such

profits were regularly distributed to Lohrey and Pang as owners of

West Coast Valet as “dividends” and converted to their personal use,

even though no stock had been issued.

17. On June 30, 1987, West Coast Valet changed its name to

Electronic Valet. Its board of directors (Lohrey, Lohrey’s wife, and

Pang) adopted by-laws and elected officers. Lohrey was elected

;

D-5

chairman of the board, president and chief executive officer; Pang

was elected vice president.

18. Soon thereafter Lohrey combined (in his words, “merged”)

the business of Electronic Valet with the business of West Coast

Laundry Machinery, Inc. Lohrey planned to offer preferred stock in

Electronic Valet to investors to market certain automated valet

service units. However, the offering ultimately failed to attract

investors on terms suitable to Lohrey and Pang, and the marketing

plan was wound down.

19. In August 1987, Electronic Valet issued to Lohrey and his

wife 3,750,000 shares of common stock, for total consideration of

one dollar.

20. As of June 30, 1986, West Coast Valet had retained

earnings of $146,128 and net income from the past year of $21,952.

As of June 30, 1987, Electronic Valet was projected to have an

accumulated deficit of $72,996, capital from the sale of common

stock of $1.00 and a net loss for the past year of $219,124.

Electronic Valet was projected to have loans of $441,674,

obligations under capital leases of $503,849 and payables of

$226,354.

21. On July 14, 1988, Electronic Valet’s commercial dry

cleaning operation was sold to a third party for cash, and the

proceeds were distributed to creditors, to Lohrey Enterprises for

purported “debts,” and to Lohrey and his wife individually.

22. From 1982 through 1988, perchlorethelene (“perc”), a toxic

chemical and “hazardous substance” under CERCLA, was used

continuously in the dry cleaning operation on the Malcolm Road

Property.

23. In 1982, both Lohrey and Pang knew that perc was a

volatile and flammable liquid, and that it had a unique, strong odor.

Pang also knew that perc was delivered in a vehicle similar to a

gasoline truck, and he observed that perc was destroying plastic

piping in the dry cleaning equipment.

D-6

24. During the period from 1982 to 1985, a reasonable person

having knowledge of the facts described in the preceding paragraph

should and w “ld have known that perc was toxic and dangerous if

released into the environment.

25. On three occasions beginning in 1982, Pang observed perc

spilling from the drycleaning systems and flowing out the door into

the Alley due to the slant of the floor. The perc was left in the Alley

to dry.

26. In 1983 Pang was informed of at least three more such

incidents by West Coast Valet Manager Robert Curtis. Mr. Pang

recalls that the spills continued through 1985. Additional disposal of

perc to the Alley occurred when sludge was dumped out the back

door from the “cooker.”

27. Perc has been listed as a hazardous waste since 1979 by the

State, and since 1980 by the EPA.

28. In 1985 the City of Burlingame notified West Coast Valet

to stop dumping sludge into the Alley, and cited it for disposing of

perc in the public sewer system.

29. In 1985 Pang received materials informing him that perc is

a hazardous substance. On August 3, 1988 Pang received a Cease

and Desist Order from attorneys for Stanton. After receiving this

order, Electronic Valet notified the Regional Water Quality Contro!

Board that it had not discharged hazardous waste at any time.

30. West Coast Valet’s disposal of perc into unlined soils in the

Alley violates federal and state statutes. Its failure to notify

regulatory authorities of the perc spills violates federal law.

31. On December 4, 1989, Dirk Jensen of the San Mateo

County Health Department notified Lohrey that he was in violation

of California Health and Safety Code Sections 25254 and 25189.5.

On March 13, 1990, he notified Lohrey a second time of the

violations and directed that Lohrey submit a corrective action plan to

the county within ten days.

;

“a

;

‘

D-7

32. To date, the county has not received a corrective action

plan or any other reports from any of the named defendants. None of

the defendants has taken any action to clean up the Stanton Road

Property.

33. According to expert opinion, it is estimated that it would

take about three years and would cost approximately $775,000 to

clean up the Stanton Road Property to conform to government

regulations regarding levels of perc. The $775,000 figure includes a

contingency factor of plus or minus 40%. That is, the cleanup could

cost as little as 40% less than $775,000, or as much as 40% more

than $775,000.

34. The minimum amonnt of funding available that would be

necessary for an environmental firm to be willing to undertake the

cleanup of the Stanton Road Property would be $1,100,000. There

was no evidence presented as to any lesser amount acceptable to an

environmental firm to do the cleanup.

35. From 1963 to 1986, Curley Bates occupied the Stanton

Road Property. In 1986 Easton Development Corporation (“Easton”)

began occupying the premises pursuant to a lease agreement with

Curley Bates dated December 2, 1985, under which Easton would

lease the premises through September 1, 1988. Under the lease

agreement, Curley Bates could exercise a “put” right (require Easton

to purchase the property) by giving Easton notice of exercise of the

right on September | , 1988.

36. Pursuant to the lease agreement, on August |, 1988 Easton

provided Stanton with an appraisal of the fair market value of the

Stanton Road Property at $1,340,000. Attached to the appraisal was

the August 1987 report of Blymer & Sons Engineering Company

concerning the presence of hazardous chemicals on the property.

This was Sheldon’s first notice of contamination of the Stanton Road

Property.

37. Upon learning of the contamination, Stanton retained the

environmental consulting firm of Harding Lawson Associates

(“HLA”) to investigate. HLA reported that the Stanton Road

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property was contaminated with perc from the West Coast Valet

drycleaning operation.

38. In August 1988 Sheldon and Easton agreed to have the

Stanton Road Property appraised a third time, and to have the

appraisal made under the assumption that the property was not

contaminated. They agreed to extend the purchase date under the

agreement from September 1, 1988 to October 1, 1988 in order to

get the third appraisal and investigate the contamination. Easton

communicated that it would not proceed with the purchase of a

contaminated property.

39. On September 9, 1988, the third appraisal valued the

property at $1,420,000 in an uncontaminated state. Stanton was

prepared to proceed with the sale at this price. However, Easton

confirmed in a May, 1989 letter that it would not proceed with the

purchase due to the contamination.

40. But for the contamination, Stanton would have made a cash

sale to Easton for $1,420,000.

41. Thereafter Stanton made all reasonable efforts to mitigate

its damages from the lost sale, incurring various expenses in those

efforts. In 1989, Stanton rented a portion of the property for a total

of $3,000. On January 31, 1990, Stanton sold the Stanton Road

Property to Alberto Manuel and Marta Rodriguez, and Stephen J.

Russell and Stephanie J. Morgan-Russell (collectively, “Alrod”) for

a purchase price of $1 425,000.

42. The terms of the sale to Alrod included: Stanton’s

agreement to clean up the property to comply with government

standards within three years of January 31, 1990; seller financing by

Stanton by taking back a note from the buyers for a face amount of

$1,111,500, secured by a first deed of trust on the Stanton Road

Property; and Stanton’s indemnity of the buyers for expenditures

and liability they might incur because of the contamination.

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43. Asa direct and proximate result of defendants’ conduct and

the contamination of the Stanton Road Property, Stanton has

suffered the damages listed below:

a. Stanton lost the use of the $1,420,000 cash it would

have gotten from the sale to Easton for the period from September | ,

1988 through January 31, 1990. Deposited, this amount would have

earned interest at 9.25% compounded daily, for a total return to

Stanton of $199,159.

b. Also between September 1, 1988 and January 31, 1990:

Stanton paid real property taxes on the Stanton Road Property of

$23,665; it paid $7,069 for insurance and maintenance costs on the

property; it paid $1,000 in real estate commission on the 1989 rental

described above; it paid $2,500 to repair the roof of the building on

the property; and it paid a real estate brokerage commission of

$85,500 in connection with the sale to Alrod.

c. To date, Stanton has paid HLA $77,374 for its

environmental consulting work on the property.

d. Stanton, through its general partner Sheldon, has

suffered annoyance and inconvenience. $75,000 is reasonably

necessary to compensate for this damage. This amount includes any

difference in the sale price of the Stanton Road Property due to

appreciation in the real estate market.

e. In responding to the contamination, Stanton has

incurred attorney fees and costs.

Il.

CONCLUSIONS OF LAW

1. This court has jurisdiction over the subject matter of this

action pursuant to § 113(b) of CERCLA (42 U.S.C. § 9613(a)), 28

U.S.C. § 1331, and jurisdiction pendent thereto.

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2. Since the release and wrongful acts took place in San

Mateo County, venue lies in this court pursuant to 28 U.S.C.

§ 1391(b) and 42 U.S.C. § 9613(b).

3. Defendants are liable for the recovery of response costs

pursuant to 42 U.S.C. § 9607(a); Stanton is entitled to a declaration

that defendants are liable for all future response costs and for costs

incurred for cleanup, as required by Stanton’s contract with the

present owners of the Stanton Road Property; defendants trespassed

onto Stanton’s property; defendants were negligent in causing the

contamination; defendants created a nuisance; and defendants are

liable for indemnification and contribution.

4. Perc is a “hazardous substance” under 42 U.S.C.

§ 9601(14), 40C.F.R. § 302.4 and 40 C.F.R. § 261.31.

5. The defendants released contaminants into the Alley and

surrounding area within the meaning of “release” in 42 U.S.C.

§ 9601(22).

6. An award of attorney fees as part of “enforcement

activities” related to response in a private action under CERCLA is

justified by the language of the statute and is consistent with

CERCLA’s legislative intent. CERCLA § 101(25), 42 U.S.C.

§ 9601(25); see General Electric Co. v. Litton Industrial Automation

Systems, Inc., 920 F.2d 1415, 1422; Pease & Curren Refining, Inc.

v. Spectrolab, Inc., 744 F. Supp. 945 (C.D. Cal. 1990).

7. Stanton’s expenditures in investigating, monitoring, and

assessing the soils, waters and contiguous environment at the Alley,

and attorneys’ fees incurred for necessary response costs consistent

with the national recovery plan, are recoverable as costs of response

pursuant to the relevant definition sections of CERCLA, 42 U.S.C.

§ 9601(23), (24), and (25).

8. The court has reviewed Stanton’s request for attorneys’

fees together with its documentation and the defendants’ response

thereto. The court concludes that attorney fees are proper only with

reference to costs of “response” under CERCLA, and that 46% of

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the attorneys’ fees requested are attributable to response costs.

Therefore, the court finds that attorney fees in the amount of

$126,197.78 are reasonable “response costs” payable to Stanton.

9. Defendant Lohrey is a liable party pursuant to § 107(a) of

CERCLA as a current owner of contaminated property, and as

owner at the time of contamination. New York v. Shore Realty Corp.,

759 F.2d 1032 (2d Cir. 1985).

10. Defendants Lohrey, Lohrey Enterprises, Electronic Valet

and Pang are strictly liable under § 107(a) as owners and/or

operators of the facility during all relevant times.

11. Pursuant to CERCLA all defendants are liable parties.

Their acts regarding hazardous substances have already occurred.

The future costs of response are necessary and are not unlikely,

remote, or speculative. Accordingly, declaratory relief is appropriate

at this time in order that Stanton may ascertain its rights against

defendants. 42 U.S.C. § 9613(g)(2); 28 U.S.C. § 2201 (a).

12. Therefore, plaintiff Stanton is entitled to a declaration that

all defendants are jointly and severally liable under CERCLA for all

future response costs necessary to address the release and threatened

release of hazardous substances from or occasioned by perc and

other contaminants generated by defendants at the Stanton and

Malcolm Road Properties.

13. In order to ensure payment by defendants of al! future

response costs necessary to address the contamination of the Stanton

Road Property, defendants, jointly and severally, shall pay to

Stanton the sum of one million one hundred thousand dollars

($1,100,000). Stanton shall deposit said sum in an interest bearing

escrow trust account (“Cleanup Escrow”) established to implement

the remediation of 860 Stanton Road as expeditiously as possible by

the environmental consulting firm PES Environmental, Inc. (“PES”).

Defendants shall have no control over the Cleanup Escrow fund,

other than to monitor the expenditures therefrom. Payments from the

Cleanup Escrow fund for cleanup services rendered shall be paid out

as invoices are received and work in reviewed and approved by PES

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principals. Copies of the said invoices shall be provided to a party to

be designated jointly by all defendants.

14. The Cleanup Escrow will terminate upon written

certification from PES that the 860 Stanton Road Property has been

remediated in accordance with all relevant regulatory cleanup levels

and requirements.

15. If unused funds remain in the Cleanup Escrow at the time

of termination, such funds will be distributed as follows:

a. First all unused funds shall be paid out to Stanton in

order to satisfy any money damages awarded to Stanton in this

judgment that remain unpaid as of the date of termination of the

escrow. In the event excess Cleanup Escrow funds remain

subsequent to satisfying any unpaid judgment, such funds shall be

paid out to defendants on a pro rata basis according to the percentage

that each defendant paid funds into the original Cleanup Escrow;

b. In the event all monetary damages awarded Stanton

have been satisfied in full upon termination of the Cieanup Escrow,

all remaining sums shall be paid out to defendants on a pro rata basis

according to the percentage that each defendant paid funds into the

original Cleanup Escrow.

!6. Trespass occurs when a party unlawfully interferes with

another’s possession or enjoyment of property. Staples v. Hoefke,

189 Cal. App. 3d 1397 (1990). By spilling perc on Stanton’s

property, and by causing the migration of perc from defendant's

property to Stanton’s property without Stanton’s consent, defendants

unlawfully interfered with Stanton’s property and thereby committed

trespass.

17. For the trespass, defendants are liable for the consequential

damages and for the annoyance and inconvenience caused by the

trespass. Kornoff v. Kingsburg Cotton Oil Co., 45 C.2d 265, 272

(1955).

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18. Three elements are necessary to establish negligence:

|) defendants’ legal duty to use due care; 2) defendants’ breach of

that duty; 3) proximate causation of plaintiff's damages. Nally v.

Grace Community Church, 47 C.3d278 (1988).

19. Defendants had a duty to use due care when dealing with

contaminants to avoid causing injury to Stanton, and to remedy any

injury they caused by contamination. ae

20. Defendants failed to use ordinary care in the disposal of

perc in light of their possession of information that would put a

reasonable person on notice that it should not be discharged into the

environment. They are also charged as a matter of law with an

awareness of laws and regulations dealing with hazardous waste and

chemicals. Liguid Chemical Corp. v. Department of Health Services,

227 Cal. App. 3d 384, 403 (1991).

21. Defendants breached their duty by using and disposing of

perc in the Alley during the course of their operations as an

industrial scale dry cleaning operation. Defendants further breached

their duty of due care by failing to remedy the injury to plaintiff

caused by the release of contaminants in the Alley.

22. As a direct and proximate result of defendants’ negligence,

Stanton has incurred damages for which defendants are liable.

23. Nuisance requires proof that the defendants caused an

obstruction to the free use of property, so as to interfere with the

comfortable enjoyment of property. Cal. Civ. Code § 3479; Pinole

Point Properties, Inc. v. Bethlehem Steel Corp., 596 F. Supp. 283

(N.D. Cal. 1984); Wolford v. Thomas, 190 Cal. App. 3d 347 (1987).

24. Defendants’ acts and omissions regarding release of the

contaminants into the soil and groundwater in the Alley interfered

with Stanton’s free use and comfortable enjoyment of the Stanton

Road property. As a direct and proximate result of defendants’ acts

and omissions, Stanton has incurred damages for which defendants

are liable under the law of nuisance.

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25. Notwithstanding compliance with statutory requirements

for the creation and operation of a corporation, the corporate entity

may be disregarded to assure a just and equitable result. See

Ballantine, California Corporations Laws, § 295 et seq. at pp. 14-32

(4th Ed. 1990). For the corporate entity to be disregarded, the

circumstances of the particular case must be such that 1) there is

such a unity of interest and ownership that the separate personalities

of the corporation and the individual no longer exist, and 2) if the

acts are treated as those of the corporation alone, an inequitable

result will follow. Automotriz del Golfo de California v. Resnick, 47

Cal. 3d 792 (1957). Two principal areas of inquiry are the extent to

which a corporation is adequately capitalized throughout its

operations to meet liabilities and the degree to which corporate

formalities are followed. /d.

26. Defendants’ failure to: adequately capitalize West Coast

Valev/Electronic Valet; issue stock; maintain minutes and adequate

records; hold board meetings; and observe corporate formalities

constitutes such a unity of interest of the corporation and the

individuals that the separate personalities of the corporation and

individuals no longer exist.

27. Unless the corporate entity is disregarded and the

individual defendants are held liable, injustice will result in that an

innocent neighbor will have to bear the cost of cleanup and other

damages.

28. Based on the evidence in this case, defendants, each and

every one of them, are jointly and severally liable to Stanton for all

damages incurred by Stanton in connection with the contamination

of Stanton’s property, despite their acting through a corporation.

29. The measure of damages for tortious injury to property is

the amount which will compensate for all the detriment proximately

caused by the tortious act, whether it could have been anticipated or

not. Cal. Civ. Code § 3333; Armitage v. Decker, 218 Cal. App. 3d

887(1990).

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30. Based on the foregoing facts, Stanton has incurred damages

as follows:

a. Loss of use of $1 420,000 from September 1,

1988 (lost Easton sale) to January 31, 1990

(Alrod sale) (518 days at 9.25%)

Out-of-pocket expenses for carrying of

property from September | , 1988 to

January 31, 1990

Real property taxes of $23 ,665 less rent

received on short-term lease of $3 ,000

Insurance and maintenance

Roof repair

Real estate commission on January 31, 1990

Alrod sale which would not have been

incurred for lost Easton sale

Annoyance and inconvenience (trespass)

Environmental response costs

Liquidated damages

Additional amount testified to at trial

Attorney fees

Cleanup costs to be placed in escrow

Costs of suit

ITISSOORDERED.

$199,159

$20,665

$7,101

$2,500

$85,500

$75,000

$70,174

$7,200

$126,198

$1,100,000

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APPENDIXE

UNITED STATES COURT OF APPEALS

FOR THE NINTHCIRCUIT

KEY TRONIC CORPORATION,

a Washington Corporation, NO. 91-36021

Plaintiff-Appellee,

D.C. No. CV-89-694-JLQ

Vv.

UNITED STATES OF ORDER

AMERICA; UNITEDSTATES

DEPARTMENT OF THEAIR

FORCE; DONALDB. RICE,

Secretary of the United States Air

Force, in his official capacity,

Defendants-Appellants.

Before: SNEED, ALARCON, and CANBY, Circuit Judges.

Judge Sneed and Judge Alarcon vote to deny the petition for a

rehearing and recommend rejection of the suggestion for rehearing

en banc. Judge Canby would grant the petition for rehearing and

grant the suggestion for rehearing en banc.

The full court was advised of the suggestion for rehearing en

banc. An active judge requested a vote on whether to rehear the

matter en banc. The matter failed to receive a majority of the votes

of the nonrecused active judges in favor of en banc consideration.

Fed. R. App. P. 35.

The petition for rehearing is denied and the suggestion for

rehearing en banc is rejected.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.