Reply Brief — Fleet Factors Corp. v. United States, 111 S. Ct. 752 (1991) (No. 90-504)

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No. 90-504 /

” | loserit F. SPANIOL, JR.

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

FLEET FACTORS CORP.,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

REPLY BRIEF OF

PETITIONER FLEET FACTORS CORP.

DouGLas J. Goop GRIFFIN B. BELL

LAURICE FIRENZE (Counsel of Record)

RUSKIN, SCHLISSEL, MOSCOU, PATRICIA BARMEYER

EVANS & FALTISCHEK, P.C. KING & SPALDING

170 Old County Road 1730 Pennsylvania Ave., N.W.

Mineola, New York 11502 Washington, D.C. 20006

(516) 248-9500 (202) 737-0500

RICHARD E. MILEY

NIXON, YOW, WALLER & CAPERS

1500 First Union Bank Building

Augusta, Georgia 30910

(404) 722-7541

Attorneys for Petitioner,

Fleet Factors Corp.

(AEE EE LOE OIE: ET TE S| TE LO Seal

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

TABLE OF CONTENTS

TABLE OF AUTHORITIES

STATUTE INVOLVED

ARGUMENT

I. THE GOVERNMENT DOES NOT DENY

THAT THIS CASE PRESENTS A QUESTION

OF NATIONAL IMPORTANCE .....WW00000w.......

Il. SIGNIFICANT TENSION EXISTS BETWEEN

THE ELEVENTH CIRCUIT’S DECISION IN

FLEET FACTORS AND THE NINTH CIR-

CUIT’S DECISION IN BERGSOE METAL

US ceccaneaccucegtciseacin. seskakesanbhcibdbablanncgcapdecmiccindcttnnaensiienice

Ill. THE QUESTION PRESENTED IS RIPE FOR

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SRI, isiciasbnccitcsininchnceneinicbshioreeninianciageaiinoaniatio jabaiinsiene

ii

TABLE OF AUTHORITIES

Cases Page

Arizona v. Maricopa County Medical Soc’y, 457

SE. Se CD ocictecsieeeie eee, 6

Black v. Cutter Laboratories, 351 U.S. 292 (1956)... 6

Brotherhood of Locomotive Firemen and Engine-

men v. Bangor & A. R.R., 389 U.S. 327 (1967)... 6

Chan v. Korean Air Lines, Ltd., 109 S. Ct. 1676

TROD xvcnisssisu. suncncuccdestanuiemasbiumenddabasmed ian ie 6

City of New Orleans v. Dukes, 427 U.S. 297

CI sxsnsascsiceica us cessciansecensekesubisueenetacaansiacinetrala tae ne a a 6

Dawson Chem. Co. v. Rohm and Haas Co., 448 U.S.

176, reh’g denied, 448 U.S. 917 (1980) —............ 4

Goodman v. Lukens Steel Co., 482 U.S. 656 (1987)... 6

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240

16 Se | | eens Aen ne stone 6

In re Bergsoe Metal Corp., 910 F.2d 668 (9th Cir.

DI sicdiesiicsaisccintitouasioniimndas comonieaaaaae Lia 3, 4,5

United States v. Fleet Factors Corp., 901 F.2d

BORO CEE Ge. BOON ccc passim

Statutes

28 U.S.C.A. § 1254(1) (West Supp. 1990) ................ 5

42 U.S.C.A. § 9601(20) (A) (West Supp. 1990) ...... passim

42 U.S.C.A. § 9607(a) (West Supp. 1990) 0.0000... _..passim

Court Rules

Bs Ss Ti DG. sa secinccccisniksneccsncectgvntieaiishateaalamnacenamiiannanens 5

EU. Rs Ts BE COD seesecasisneiiccctdecsenicclapneacceueaeeeias 3

Other Authorities

Testimony of Steven A. Seelig, Director of the Di-

vision of Liquidation at the FDIC, Before the

Subcommittee on Transportation and Hazardous

Materials of the Committee on Energy and Com-

merce, U.S. House of Representatives (Aug. 2,

NMG nM ee RN AE Rl EE 2

Testimony of David C. Cooke, Executive Director

of the Resolution Trust Corporation, Before the

Subcommittee on Transportation and Hazardous

Materials of the Committee on Energy and Com-

merce, U.S. House of Representatives (Aug. 2,

| SE OMS ee IFFY et Sh waka ae: 2

IN THE

Suprenw Court of the United States

OCTOBER TERM, 1990

No. 90-504

FLEET FACTORS CoRrP.,

Petitioner,

V.

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

REPLY BRIEF OF

PETITIONER FLEET FACTORS CORP.

Fleet Factors Corp. (“Petitioner”)

the Eleventh Circuit.

STATUTE INVOLVED

' The matter before the Court involves several sections

of the federal Comprehensive Environmental Response,

Compensation and Liability Act (“CERCLA”):

(20) (A), 107(a) of CERCLA, 42 U.S.C.A. $§ 9601(20) (A),

respectfully sub-

mits this Reply Brief in support of its Petition for Writ

of Certiorari to the United States Court of Appeals for

$$ 101

2

9607(a) (West Supp. 1990). These are set forth ver-

batim in the Petition for Writ of Certiorari. Petition

at 2. In essence, this matter involves the proper inter-

pretation of the CERCLA statute’s “secured creditor

exemption,” an issue of significant national importance.

ARGUMENT

I. THE GOVERNMENT DOES NOT DENY THAT

THIS CASE PRESENTS A QUESTION OF NA-

TIONAL IMPORTANCE

The Eleventh Circuit has rendered an incorrect decision

on a vitally important question of federal law: whether

CERCLA’s “secured creditor exemption” protects a se-

cured lender from liability for environmental cleanup

costs where the lender neither took title to any of the

borrower’s property, nor participated in the day-to-day

management of the facility in question. The government’s

brief in opposition does not deny the importance of this

issue,

Indeed, severai of the government’s own agencies have

acknowledged the significant and negative impact of the

Eleventh Circuit’s decision on the nation’s financial insti-

tutions. For example, an official of the Federal Deposit

Insurance Corporation recently stated: “The FDIC is

very concerned about nonculpable lenders’ potential lia-

bility under [CERCLA]. ... The Fleet Factors decision

may have an enormous impact on lenders.” Testimony of

Steven A. Seelig, Director of the Division of Liquidation

at the FDIC, Before the Subcommittee on Transportation

and Hazardous Materials of the Committee on Energy

and Commerce, U.S. House of Representatives 1, 12

(Aug. 2, 1990). See also Testimony of David C. Cooke,

Executive Director of the Resolution Trust Corporation,

Before the Subcommittee on Transportation and Hazard-

ous Materials of the Committee on Energy and Com-

merce, U.S. House of Representatives 4 (Aug. 2, 1990)

(“The impact of [CERCLA] is highlighted and, to a

3

great extent, exacerbated by a recent case, United States

v. Fleet Factors’).

Moreover, the government’s brief acknowledges that

the concern of the lending community resulting from the

decision has attracted the attention of Congress and the

U.S. Environmental Protection Agency (“EPA”). See

Brief in Opposition at 18. The government concludes that

the Court “might find it advisable to await the outcome

of the|se] legislative and administrative proceedings.”

Id, at 13. However, the prospect that these activities will

correct the erroneous decision of the Eleventh Circuit is

speculative at best.

CERCLA was reauthorized for a period of three years

at existing levels at the conclusion of the 101st Congress.

Congress is therefore unlikely to visit CERCLA issues in

the near future because it has several other major en-

vironmental statutes to reauthorize in the meantime (i.e.,

the Clean Water Act and the Resource Conservation and

Recovery Act). Any rulemaking by EPA construing

CERCLA in a manner different from the Eleventh Cir-

cuit’s decision will not have the effect of reversing or

overruling the Court of Appeals. In addition, an EPA

rule different from Fleet Factors presumably would not

control a private cost recovery action under CERCLA.

Il. SIGNIFICANT TENSION EXISTS BETWEEN THE

ELEVENTH CIRCUITS DECISION IN FLEET

FACTORS AND THE NINTH CIRCUIT'S DECISION

IN BERGSOE METAL CORP.

Significant tension exists between the Eleventh Circuit’s

decision in the Fleet Factors case and the Ninth Circuit’s

decision in the Bergsoe Metal Corp. case. See In re Berg-

soe Metal Corp., 910 F.2d 668 (9th Cir. 1990); United

States v. Fleet Factors Corp., 901 F.2d 1550 (1ith Cir.

1990). Therefore, review by the Court at this time is

warranted. Sup. Ct. R. 10.1(a).

4

An absolute or definitive conflict among the circuits is

not necessarily required for the Court to grant review.

For example, in Dawson Chem. Co. v. Rohm and Haas

Co., 448 U.S. 176, reh’g denied, 448 U.S. 917 (1980), the

Court “granted certiorari . . . to forestall a possible con-

flict in the lower courts and to resolve an issue of prime

importance in the administration of the patent law.” /d.

at 185. The Court explained that “|(tjhere |was] no di-

rect conflict [in that case], but a number of decisions

exhibited] some tension” on the patent issues involved.

Id, at 185 n.4,

The government has concluded erroneously that “the

reasoning of the Ninth Circuit [regarding the “secured

creditor exemption”] is entirely consistent with that of

the Eleventh Circuit.” Brief in Opposition at 11. The

inconsistency of the two circuits’ construction of the stat-

ute is evident from the plain language of their decisions.

The Eleventh Circuit expressly held the following:

[A] secured creditor will be liable if its involvement

with the management of the facility is sufficiently

broad to support the inference that it could affect

hazardous waste disposal decisions if it so chose.

901 F.2d at 1558 (emphasis added). The Ninth Circuit,

on the other hand, reached a clearly different and more

reasonable approach to CERCLA’s “secured creditor

exemption.” Although the Ninth Circuit indicated that it

would “leave for another day the establishment of a

Ninth Circuit rule,” it went on to hold:

What is critical [in deciding whether to impose

lender liability] is not what rights the Port had, but

what it did. The CERCLA security interest excep-

tion uses the active “participating in management.”

Regardless of what rights the Port may have had, it

cannot have participated in management if it never

exercised them.

910 F.2d at 672-73 (emphasis added).

5

Therefore, the Eleventh and Ninth Circuit’s views of

when a secured lender falls outside the protection of the

“secured creditor exemption” are patently at odds with

each other. The measure of liability under the Eleventh

Cireuit’s rule is the type of activity which the lender

could have engaged in or affected. The measure of lia-

bility according to the Ninth Circuit, however, is limited

to the activity actually engaged in by the lender. If the

two circuits’ approaches were consistent with each other,

as the government contends, then the Ninth Circuit would

have found the lender in the Bergsove case liable because

the loan documents provided the lender with authority to

affect the decision of the borrower. See 910 F.2d at

672-73.

The question presented to the Court by Petitioner is,

as noted above, of prime importance. Tension does exist

between the federal circuits’ interpretations of CERCLA’s

“secured creditor exemption.” Thus, this case is appro-

priate for review by this Court.

Ill, THE QUESTION PRESENTED IS RIPE FOR RE-

VIEW AT THIS TIME

In its opposition, the government focuses on the inter-

locutory posture of this case, but fails to recognize that

the broad rule announced by the court below is not fact-

bound. See Brief in Opposition at 7-10. This is not an

interlocutory case resting on disputed facts or conflicting

affidavits; rather, this case presents a broad legal ruling

that casts uncertainty over the settled commercial expec-

tations of secured lenders. Thus, the interlocutory pos-

ture of this case does not justify a denial of certiorari.

An interlocutory ruling by a United States circuit

court, including a denial of summary judgment, is ripe

for review by the Court; and the decision to grant or

deny a petition for certiorari is firmly grounded in the

Court’s discretion. 28 U.S.C.A. § 1254(1) (West Supp.

1990) ; Sup. Ct. R. 10.1,

6

The government incorrectly intimates that a hard and

fast litmus test exists for when a writ of certiorari will

be granted or denied. Brief in Opposition at 8. The Court

frequently grants review of interlocutory rulings regard-

ing summary judgment motions. See Chan v. Korean Air

Lines, Ltd., 109 S. Ct. 1676, 1678-79 (1989) (review of a

denial of summary judgment on a damages limitation

issue in a wrongful death action); Arizona v. Maricopa

County Medical Soc’y, 457 U.S. 332, 336-37 (1982) (re-

view of a denial of summary judgment on the issue of

liability in an antitrust action). The cases cited by the

government are inapposite, as none of them involved a

summary judgment ruling. See Goodman v. Lukens Steel

Co., 482 U.S. 656, 658-60 (1987); Brotherhood of Loco-

motive Firemen and Enginemen v. Bangor & A. R.R.,

389 U.S. 327, 327-28 (1967); Black v. Cutter Labora-

tories, 351 U.S. 292, 295-96 (1956); Hami/ton-Brown

Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251, 253-54

(1916).

The question presented to the Court by Petitioner is in

fact particularly ripe for review at this time. The

Eleventh Circuit has issued a final ruling which estab-

lishes a far-reaching, new legal standard for CERCLA’s

“secured creditor exemption.” See City of New Orleans

v. Dukes, 427 U.S. 297, 301-03 (1976) ‘(under the anal-

ogous but recently repealed § 1254(2), final ruling ripe

for review although related issues still to be resolved on

remand). Unless this legal standard is reviewed by the

Court, the district court must apply this new but erro-

neous rule on remand. Contrary to the government's

contention, the application of this rule will require the

district court to reverse its earlier grant of partial sum-

mary judgment for Petitioner on the issue of liability

for the time from February 1981 to June 1982. See

Petition at 4, 19a-20a; Brief in Opposition at 9.

The dispute in this case then is not over factual find-

ings as the government intimates. Brief in Opposition

ut 2-10. Rather, it is over the Eleventh Circuit’s final

7

and improper interpretation of the “secured creditor

exemption” under CERCLA. Therefore, the Court should

grant review to correct this substantial legal error before

it is perpetuated.

CONCLUSION

For the substantial reasons stated in this Reply Brief

and in Petitioner's Petition for a Writ of Certiorari,

Petitioner, Fleet Factors Corp., requests the Court to

grant the writ of certiorari to review the judgment of

the Eleventh Circuit.

Respectfully submitted,

Dove as J. Goop GRIFFIN B. BELL

LAURICE FIRENZE (Counsel of Record)

RUSKIN, SCHLISSEL, Moscov, PATRICIA BARMEYER

EvANs & FALTISCHEK, P.C. KING & SPALDING

170 Old County Road 1730 Pennsvivania Ave., N.W.

Mineola, New York 11502 Washington, D.C. 20006

(516) 248-9500 (202) 737-0500

RIcHARD FE. MILEY

Nixon, Yow, WALLER & CAPERS

1500 First Union Bank Building

\urusta, Georgia 30910

(404) 722-7541

Attornens for Petitioner,

Fleet Factors Corp.

December 28, 1990