Appendix — Gurley v. United States

No.

IN THE

Supreme Court of the United States

October Term, 1994

WILLIAM M. GURLEY,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

APPENDIX

*JamMeS W. GENTRY, JR.

SPEARS, MOORE, REBMAN

& WILLIAMS

8th Floor, Blue Cross Building

Chatta a, TN 37402

(615) 756-

ELTON A. Rieves IV

RIEVES & MAYTON

304 East Broadwa

West Memphis, AR 72303

(501) 735-3420

Counsel for Petitioner

*Counsel of Record William M. Gurley

ie

TREVATHAN PRESS « LITTLE ROCK

TABLE OF CONTENTS

USA v. Gurley, No. 93-2702, 8th Circuit Court of

Appeals (December 28, 1994). Reported

BE ES Fie FAO cies Ath Raven ciasiniacigeoesioransins A-1

USA v. Gurley, No. J-C-291 (E.D. Ark.) June 14,

1990 (Memorandum Opinion and Order

granting pretrial partial summary judg-

RTI I acta hts scrcincscivcncisnintnsdsescnincenecces A-30

USA v. Gurley, No. J-C-87-291 (E.D. Ark.)

March 27, 1992. Reported at 788 F.Supp.

1473, aff'd in part, reversed in part at 43

BE Be NG ile Fe rcrcire eres tncensasessononseses A-52

Amended Judgment (USA v. Gurley, No. J-C-87-

291 (E.D. Ark.) April 29, 1993 .........ssssssseeseees A-82

Order denying Petition for Rehearing and Sug-

gestion for Rehearing En Banc (USA v.

Gurley, No. 93-2702EAJ (8th Cir.) March

DFE is blibsestcmneeilacembtiaedciasesblanlebiipcclegersenes A-83

Complaint (USA v. Gurley, No. J-C-87-291)

(E.D. Ark.) November 18, 1987 ........sccsesseeees A-84

Second Amended and Supplemented Answer

(USA v. Gurley, No. J-C-87-291 (E.D.

Ark.) October 17, 1989), Reprints of

peace 8-4, P20, TS 14, 1G, BD iii ccssescessssnccscees A-94

USA’s First Set of Requests for Admissions to

William M. Gurley (USA v. Gurley, No. J-

C-87-291 (E.D. Ark.) January 30, 1990).

Reprints of pages 1, 4-7, 9-11, 15 ......cceseseseees A-105

USA’s Motion for Partial Summary Judgment

(USA v. Gurley, No. J-C-87-291 (E.D.

PTR) Fe Za EFF) csesievsciscsssctvinsdsons dichaipsbdiaiion A-114

United States Court of Appeals

for the Eighth Circuit

No. 93-2699

United States of America, Plaintiff/Appellee,

v.

Larry Gurley, Defendant/Appellant,

Betty Gurley; R. A. Caldwell;

Gurley Refining Company; Gurley

Refining Company, Inc.; William

Martin. Gurley, Defendants.

No. 93-2702

United States of America, Plaintiff/Appellee,

v.

Gurley Refining Company, Inc.;

William Martin Gurley, Defendants/Appellants

Larry Gurley; Betty Gurley;

R. A. Caldwell; Gurley Refining

Company, Defendants.

Appeals from the United States

District Court for the

Eastern District of Arkansas

Submitted: January 12, 1994

Filed: December 28, 1994

Before Hansen, Circuit Judge, FLoyp R. Gisson, Senior

Circuit Judge, and Kopr, District Judge.

Hansen, Circuit Judge.

The Environmental Protection Agency (EPA), on

behalf of the United States, brought this action to recover

the costs of cleaning up a hazardous waste site near

Edmonson, Arkansas. The district court entered judg-

ment for the EPA, imposing liability for past costs

($1,786,502.92) and future costs (estimated at $6,000,000)

on defendants Gurley Refining Company, Inc.; its princi-

pal shareholder and president, William Gurley; and an

employee, Larry Gurley. These defendants appeal, raising

several issues, the most significant of which are the argu-

ment that the present action is precluded by a prior action

brought against the Gurley Refining Company, Inc., in

1983 and the argument that Larry Gurley’s role in the

company’s disposal of hazardous waste was too tenuous

to make him liable as an “operator” of a hazardous waste

facility. We affirm in part and reverse in part.

Z

The facts of this case are well stated in the district

court’s memorandum order, see United States v. Gurley

“The HONORABLE RICHARD G. KoprF, United States District Judge

for the District of Nebraska, sitting by designation.

A-2

Refining Co., 788 F.Supp. 1473, 1476-78 (E.D. Ark. 1992),

and we will merely summarize them here. From 1970 to

1975, the Gurley Refining Company (GRC) rerefined

used motor oil. GRC treated the used motor oil with sul-

furic acid, mixed it with clay to absorb impurities, filtered

out the clay, and sold the resulting rerefined oil. GRC

then disposed of an acidic sludge and the spent clay in a

borrow pit! it had leased from R. A. Caldwell pursuant to

a permit issued for that purpose by the Arkansas De-

partment of Pollution Control and Ecology (ADPCE). /d.

The wastes of the rerefining process contained hazardous

materials such as barium, lead, zinc, PCBs, and sulfuric

acid. (Appellee’s Br. at 4.)

In October 1975, GRC discontinued its rerefining

processes and stopped disposing of wastes at the pit. In

1978, the United States Fish and Wildlife Service discov-

ered that contaminated water from the pit had spilled

over and damaged nearby fish and waterfowl habitats.

The Service reported this to the EPA, which performed

some work on the pit to prevent future spillovers.

But in the spring of 1979, after heavy rains, the pit

overflowed again, releasing about a half million gallons of

oily water into the surrounding area. The EPA could not

persuade Caldwell! or GRC to clean up the pit, so later

that year it again performed work on the site to contain

LA “borrow pit” is “an excavated area where material (as earth) has

been borrowed to be used as fill at another location. ” Webster’s Third

New Int'l Dictionary 257 (1986).

A-3

and treat wastes. In 1983, the EPA brought an action

against Caldwell and GRC under the Federal Water Pol-

lution Control Act, also known as the Clean Water Act

(CWA), 33 U.S.C. §§1251-1376, to recover the costs it

had incurred in 1979. In 1985, the district court entered

judgment in favor of the EPA and against Caldwell and

GRC in the amount of $76,758.60. See United States v.

Caldwell, J-C-83-399, slip op. at 9 (E.D. Ark. Oct. 30,

1985), reprinted in Appellant GRC’s & William Gurley’s

Br. at A34-A45. GRC did not appeal.

Meanwhile, in 1983, the pit was listed on the

EPA’s National Priorities List. In 1985, an investigation

conducted on behalf of the EPA revealed that the site

was still contaminated. In 1986, a feasibility study pro-

posed four alternative courses of remedial action. The

EPA chose the third alternative, which called for stabili-

zation of the soil and contaminates, disposal of the soil

and contaminates in an on-site landfill, backfilling of the

excavated area, construction of flood protection, on-site

treatment of contaminated water, and annual ground-

water monitoring. Gurley Refining Co., 788 F.Supp. at

1477.

Then in 1987, the EPA brought this action to re-

cover the costs, both past and future, of the remedial ac-

tion it had adopted after the 1986 study. Before trial, de-

fendant Betty Gurley was dismissed from the case, and

defendant R. A. Caldwell settled with the EPA. /d. at

1476 n.2. The matter was tried to the court for eight days

in June and September of 1990. The district court entered

A-4

judgment for the EPA on March 27, 1992, concluding that

GRC, William Gurley, and Larry Gurley should be jointly

and severally liable for cleanup costs, with prejudgment

interest from September 10, 1990. The district court also

entered a declaratory judgment that those three defend-

ants shall be liable for the costs of all remedial action

taken by the EPA in the future. The three defendants

appeal.

Il.

In 1980, Congress passed the Comprehensive En-

vironmental Response, Compensation, and Liability Act

(CERCLA), 42 U.S.C. §§9601-9675. Under the Act, per-

sons who are responsible for the release of hazardous

substances may be liable for the costs of removing or

remedying the contamination, the costs associated with

damage to natural resources, and the costs to human

health. See id. §9607(a); see also Dravo Corp. v. Zuber, 13

F.3d 1222, 1225 (8th Cir. 1994). The EPA may initiate a

civil action to recover these costs. See 42 U.S.C.

§§9607(a), 9613(h).

A.

Larry Gurley argues that he should not be held

liable because, in short he was merely an employee of

GRC. He argues in the alternative that imposing liability

on him for conduct that preceded CERCLA’s enactment

would violate the Due Process Clause.

A-5

Liability for the release of hazardous substances

may be imposed on “any person who at the time of dis-

posal of any hazardous substance owned or operated any

facility at which such hazardous substances were disposed

of.” 42 U.S.C. §9604(a)(2) (emphasis added). The EPA

does not contend that Larry Gurley had an ownership

interest in either GRC or the site of the facility. Thus, he

can be held liable only if he is an “operator.” Larry Gur-

ley argues specifically that the term “operator” should be

limited to those individuals who had the “authority, re-

sponsibility, and capacity to control the corporate conduct

in question.” (Appellant Larry Gurley’s Br. at 11.) He

contends that he did not have the authority to determine

whether or how to dispose of hazardous wastes because

he was not an Officer, director, or shareho}der in GRC

and because his father, William Gurley, possessed nearly

exclusive authority over GRC’s operations.

CERCLA defines “owner or operator” simply as

“in the case of an onshore facility or an offshore facility,

any person owning or operating such facility.”’ /d.

§9601(20)(A)(ii). It is clear that the term “person” may

include individuals, see id. §9601(21), but it is not clear

when an individual should be deemed to have “operated”

a hazardous waste disposal facility. In United States v.

Northeastern Pharm. & Chem. Co., 810 F.2d 726 (8th Cir.

1986) (NEPACCO), cert. denied, 484 U.S. 848 (1987), we

held that an individual could be held liable for the release

of hazardous substances under a different subsection,

A-6

which imposes liability on a person who “arranged for

disposal or treatment . . . of hazardous substances owned

or possessed by such person,” see 42 U.S.C. §9607(a)(3).

We found that the individual defendant “possessed” the

hazardous substances because he “had actual ‘control’

over the NEPACCO plant’s hazardous substances.”

NEPACCO, 810 F.2d at 743. We also stated, “It is the

authority to control the handling and disposal of hazard-

ous substances that is critical under the statutory

scheme.” /d. Thus, we affirmed a finding that the individ-

ual had “possessed” hazardous substances on two closely

related but distinct grounds: that the individual had “ac-

tual control” of the hazardous substances and that he had

“authority to control” their disposal.

Federal courts have struggled with these two con-

cepts when addressing the question of whether an indi-

vidual may be found liable as an “operator” under

§9607(a)(2). In some circuits, a plaintiff must prove that

an individual defendant had actual responsibility for, in-

volvement in, or control over the disposal of hazardous

waste at a facility. See Sidney S. Arst Co. v. Pipefitters Wel-

fare Educ. Fund, 25 F.3d 417, 421 (7th Cir. 1994) (holding

that plaintiff must allege that individual defendant “di-

rectly and personally engaged in conduct that led to the

specific environmentai damage at issue”); Riverside Mar-

ket Devel. Corp. v. International Bldg. Prods., Inc., 931 F.2d

327, 330 (Sth Cir.) (holding that proper focus is “the ex-

tent of [individual] defendant’s personal participation in

the alleged wrongful conduct”), cert. denied, 112 S.Ct. 636

(1991); New York v. Shore Realty Corp., 759 F.2d, 1032,

A-7

1052 (1st Cir. 1985) (holding that individual defendant

was “operator” because he was “in charge of the opera-

tion of the facility”); see also Levin Metals Corp. v. Parr-

Richmond Terminal Co., 781 F.Supp. 1454, 1457 (N.D.

Cal. 1991) (“‘an individual cannot be liable as an ‘opera-

tor’ under CERCLA Section 107(a)(2) [42 U.S.C.

§9607(a)(2)] unless the individual actually participates in

the operation of the facility at which hazardous sub-

stances are disposed of, exercised control over the com-

pany immediately responsible for the operation of that

facility, or is otherwise intimately involved in that compa-

ny’s operations”).

On the other hand, in one circuit, a plaintiff can

succeed by proving less than that; an individual defendant

“ ‘need not have exercised actual control in order to qual-

ify as [an] operator[s] under §9607(a)(2), so long as the

authority to control the facility was present.’ ’’ United

States v. Carolina Transformer Co., 978 F.2d 832, 836-37

(4th Cir. 1992) (emphasis added) (quoting Nurad, Inc. v.

Hooper & Sons Co., 966 F.2d 837, 842 (4th Cir.), cert. de-

nied, 113 S.Ct. 377 (1992)); see also Northwestern Mut. Life

Ins. Co. v. Atlantic Research Corp., 847 F.Supp. 389, 397

(E.D. Va. 1994) (holding that individual defendant may

be liable if he has “the ‘authority to control’ activities on

the facility”); Robertshaw Controls Co. v. Watts Regulator

Co., 807 F.Supp. 144, 152-153 (D. Me. 1992) (holding that

liability is proper if individual defendant had authority

such that he “could have prevented the hazardous waste

discharge”); cf. Kelley v. Thomas Solvent Co., 727 F.Supp.

1532, 1543-44 (W.D. Mich. 1989) (stating that court

A-8

should “weigh the factors of the corporate individual’s

degree of authority” but also should consider “evidence

of responsibility undertaken and neglected”).

An individual defendant who has actual control

over the operation of a facility presumably also has au-

thority to control the operation of the facility, with the

possible exception of an individual acting ultra vires, a sit-

uation not present in this case or in the cases cited above.

Thus, in reality, the two approaches differ in that one

requires a plaintiff to prove that the defendant both had

the authority to control the operation of the facility and

actually exercised that authority, while the other requires

a plaintiff to prove only that a defendant had the authori-

ty to control the operation of the facility.

We believe that the latter approach is inconsistent

with the term “opezator,’’ whose common meaning is

“one that produces a physical effect or engages himself in

the mechanical aspect of any process or activity.” Web-

ster’s Third New Int'l Dictionary 1581 (1986). Likewise, the

verb “to operate” means “to perform a work or labor,” to

“exert power or influence,” to “produce an effect,” “to

cause to occur,” or to “bring about by or as if by the exer-

tion of positive effort or influence.” Jd. at 1580-81. These

definitions connote some type of action or affirmative

conduct, an element not required by those courts that ask

only whether a defendant had the authority to control the

operation of the facility. We prefer not to interpret the

statute in a manner that would produce the anomalous

result of imposing CERCLA liability on an “operator”

A-9

who in fact never “operated” a facility. Thus, we hold that

an individual may not be held liable as an “operator”

under §9607(a)(2) unless he or she (1) had authority to

determine whether hazardous wastes should be disposed

of and to determine the method of disposal and (2) actu-

ally exercised that authority, either by personally perform-

ing the tasks necessary to dispose of the hazardous wastes

or by directing others to perform those tasks. We believe

that this rule is the wiser of the two choices reflected in

the existing case law and is faithful to our closely analo-

gous decision in NEPACCO.

The district court made oral findings that Larry

Gurley “personally participated in the disposal of the

hazardous substances in question in the pit that is in-

volved in this litigation” and that he “had extensive au-

thority in an effort to implement the policies and prac-

tices of the corporate entity, which included the disposal

of these hazardous substances.” (Trial Tr. at 210-11.) In

fact, the district court found those facts to be “‘crystal

clear.’ Jd. These findings address both prongs of the

standard we have set out above. We review the district

court’s findings for clear error. See Fed. R. Civ. P. 52(a).

The record reveals that GRC had approximately

six employees from 1970 to 1975 and that William Gurley,

who was the principal shareholder, had ultimate respon-

sibility for the business and took an active role in its man-

agement. In particular, William Gurley negotiated the

lease with R. A. Caldwell for the property that later con-

tained the pit, oversaw construction of the disposal facili-

A-10

ty, and directed employees to dispose of rerefining wastes

there. The record also reveals that Larry Gurley began

working in the rerefining plant in 1969 after his gradua-

tion from college. In that role, he helped load the trucks

that hauled hazardous wastes to the pit. In 1972, he

moved into the administrative offices, where he served as

GRC’s purchasing agent.

But several parts of the record also reveal that

Larry Gurley’s duties were broader than just purchasing.

First, Larry Gurley testified in 1983 in Caldwell v. Gurley

Refining Co., No. J-C-79-101 (E.D. Ark.), aff'd, 755 F.2d

645 (8th Cir. 1985), that he eventually became “director

of operations,” a job which “basically put me in control of

the day to day operations of the plant and anything that

pertains to that.” (Appellee’s App. at 41.) He testified

that his father tended to other businesses while he took

care of GRC (/d.) Second, when the ADPCE contacted

GRC in 1973 to express its concern about the pit, Larry

Gurley personally responded in a letter that said, “I re-

ceived your letter concerning the pit where we dump our

waste material. I made a visual inspection of the pit area

today.” (/d. at 1.) Third, Larry Gurley testified in 1983

that he “would have to take responsibility for” installing a

pump and hose in the pit in 1974 that caused ADPCE to

complain. (/d. at 45-56). Fourth, in 1974, Larry Gurley

personally responded to a letter from the West Memphis,

Arkansas, City Attorney concerning the discharge of oil

from the pit into the surrounding area. (/d. at 2-3.) Fifth

and finally, Larry Gurley’s responsibility for waste dispos-

al is evidenced by the role he played in closing down the

A-11

pit and filing reports with the ADPCE. He personally sent

at least one letter to the ADPCE, (id. at 9), and he wrote

and signed a report concerning the closure of the pit. He

testified that the report reflected an engineer’s recom-

mendations and GRC’s agreement with the ADPCE,

which he apparently had negotiated. (/d. at 49-50).

Although Larry Gurley argues that he acted as a

mere “wordsmith” for his father, (Appellant Larry Gur-

ley’s Reply Br. at 9), we are not convinced. The letters

were sent under Larry Gurley’s name. In fact, William

Gurley testified in 1983 that Larry Gurley bore responsi-

bility for the report filed with the ADPCE because “[h]e

was operational manager; he had the latitude to make

decisions of this kind.” (/d. at 39). Although Larry Gurley

testified at the trial of this case that he is simply following

William Gurley’s directions on these matters, it is appar-

ent that he had substantial responsibilities of his own

between 1972 and 1975. The district court, which read the

transcripts of the 1983 trial and heard the. testimony of

Larry Gurley and William Gurley at the trial of this ac-

tion, reasonably concluded that Larry Gurley “personally

participated in the disposal of the hazardous substances”

and “had extensive authority” over GRC’s disposal of

hazardous wastes.

We think Larry Gurley’s argument places too

much emphasis on his status within GRC and not enough

emphasis on his actual activities. Although he was not an

officer, director, or shareholder, he nonetheless had sub-

stantial responsibilities for GRC’s waste disposal. Perhaps

A-12

persons who are officers, directors, or shareholders are

more likely to cause a company to dispose of hazardous

wastes, but we decline to confer immunity on all persons

who do not hold such positions. An individual defendant’s

responsibility for the disposal of hazardous waste should

be judged on a case-by-case basis. In this case, the evi-

dence clearly and strongly supports the district court’s

findings that Larry Gurley had authority to determine

GRC’s hazardous waste disposal activities and that he

actually exercised that authority.

For these reasons, the district court did not err

when it found that Larry Gurley was liable as an “opera-

tor.” See 42 U.S.C. §9607(a)(2).

he

Larry Gurley’s second argument, that the imposi-

tion of liability for conduct that preceded CERCLA’s ef-

fective date violates due process, is squarely foreclosed by

NEPACCO, where we held that CERCLA was intended

to apply retroactively and that such retroactive applica-

tion does not violate the Due Process Clause. 810 F.2d at

732-34. For due process purposes, Larry Gurley’s circum-

stances are no different from the circumstances of the

defendants in NEPACCO.

B.

GRC and William Gurley argue that the district

court’s judgment should be reversed because (1) under

A-13

the res judicata doctrine, the EPA’s present action is pre-

cluded by the CWA action it brought in 1983; (2) under

the collateral estoppel doctrine, the EPA is precluded by

positions it took in the prior action from proving the ap-

pellants’ liability in this action; (3) the waste deposited at

the pit falls within CERCLA’s petroleum exclusion;

(4) the district court erred by granting partial summary

judgment; (5) the disrict court erred when it admitted cer-

tain exhibits into evidence; (6) the district court erred

when it included attorney fees in the award of damages;

(7) and the EPA acted arbitrarily and capriciously when it

sought to recover its cleanup costs from the appellants.

Larry Gurley joins in these arguments, incorporating

them by reference. (See Appellant Larry Gurley’s Br. at

Vii n.1.)

The appellants first argue that this action is barred

because the EPA earlier pursued a CWA action against

GRC. Under the res judicata doctrine, which also is

known as claim preclusion, “a final judgment on the mer-

its bars further claims by parties or their privies based on

the same cause of action.” Montana v. United States, 440

USS. 147, 153 (1979). A prior judgment is binding “ ‘ “not

only as to every matter which was offered and received to

sustain or defeat the claim or demand, but as to any other

admissible matter which might have been offered for that

purpose. ”’ ” Sea-Land Servs., Inc. v. Gaudet, 414 U.S.

573, 579 (1974) (quoting Commissioner v. Sunnen, 333

U.S. 591, 597 (1948) (quoting Cromwell v. County of Sac,

94 U.S. 351, 352 (1876))); see also Lane v. Peterson, 899

F.2d. 737, 741 (8th Cir.) (“res judicata precludes the relit-

A-14

igation of a claim on grounds that were raised or could

have been raised in the prior action”), cert. denied, 498

U.S. 823 (1990). Here, the parties essentially agree that

the prior case went to “final judgment” and that GRC

was a party to it. Thus, whether res judicata bars the

present action depends on whether the present action

presents the “same cause of action” as the EPA presented

in its 1983 action and on whether these appellants may

assert the defense.

a.

Whether the present action is the “same cause of

action” as the prior action depends on whether it “arises

out of the same nucleus of operative facts as the prior

claim.” Lane, 899 F.2d at 742; see also Reyher v. Champi-

on Int'l Corp., 975 F.2d 483, 487 (8th Cir. 1992). The legal

theories of the two claims are relatively insignificant be-

cause “‘a litigant cannot attempt to relitigate the same

claim under a different legal theory of recovery.” Poe v.

John Deere Co., 695 F.2d 1103, 1105 (8th Cir. 1982); Ruple

v. City of Vermillion, 714 F.2d 860, 861 (8th Cir. 1983); see

also Restatement (Second) of Judgments §24 cmt. c (1982),

quoted in Poe, 695 F.2d at 1106 n.5. To determine wheth-

er the present claim and the prior claim constitute the

same claim, we consider “ ‘whether the facts are related

in time, space, origin, or motivation, whether they form a

convenient trial unit, and whether their treatment as a

unit conforms to the parties’ expectations. .. .”” Lane, 899

F.2d at 742 (quoting Restatement (Second) of Judgments

§24(2) (1980)).

A-15

Here, the present action and the prior action fo-

cussed on the same underlying facts. Each action con-

cerned the appellants’ disposal of hazardous waste in the

borrow pit on the Caldwell property in the 1970s and the

later release of those wastes. Thus, they are closely “re-

lated in time, space, [and] origin.” /d. Furthermore, they

“form a convenient trial unit” because each action de-

pends on the same evidence of appellants’ actions. In fact,

in the present action, the EPA introduced into evidence

transcripts of testimony from the prior CWA action. (See

Appellee’s App. at 71-87.)

The district court reasoned that res judicata does

not apply because the prior action concerned the EPA’s

cleanup activities in the 1970s while the present action

concerned the EPA’s cleanup activities in the 1980s. See

788 F.Supp. at 1479. We believe that the district court

improperly focussed on the plaintiff's conduct when it

identified the underlying facts. “ ‘In the final analysis the

test would seem to be whether the wrong for which re-

dress is sought is the same in both actions.’ ” Roach v.

Teamsters Local Union No. 688, 595 F.2d 446, 449 (8th

Cir. 1979) (emphasis added) (quoting Woodbury v. Porter,

158 F.2d 194, 195 (8th Cir. 1946)). A “claim” should be

determined not by the actions of a plaintiff vindicating its

rights but by the conduct or alleged conduct of a defend-

ant breaching those rights. See Supporters to Oppose Pollu-

tion, Inc. v. Heritage Group, 973 F.2d 1320, 1326 (7th Cir.

1992) (holding that RCRA action is barred by prior

RCRA action because, in part, “new evidence of injury

differs from a new wrong”).

A-16

The district court also reasoned that res judicata

does not apply because

CERCLA itself contemplates that the two

actions can be brought, and that [the] first

will not bar the second. Pursuant to Section

113(g)(2), the United States may bring suc-

cessive actions to recover further response

costs or damages. 42 U.S.C. §9613(g)(2).

Thus, according the language of the statute,

the United States did not have to bring its

section 107 action at the time it brought its

action under the Clean Water Act.

788 F.Supp. at 1479. We believe the district court’s con-

clusion—that the EPA may pursue both a CWA action

and a CERCLA action to right the same wrong—is not

supported by the statute, which permits only successive

CERCLA actions, i.e., one CERCLA action after another

CERCLA action. The EPA essentially concedes that

§9613(g)(2) is limited in this way, but it urges us to give

the statute a “generous interpretation” on the ground

that “there is no reason to think that Congress would

have intended a different result where the initial judg-

ment awarded the costs of a CWA removal action rather

than a CERCLA removal action.” (Appellee’s Br. at 14.)

We decline to extend §9613(g)(2) beyond its self-defined

scope and instead choose to apply the res judicata doc-

trine in a straightforward manner. “There is simply ‘no

principle of law or equity which sanctions the rejection by

a federal court of the salutary principle of res judicata.’ ”

Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 401

(1981) (quoting Heiser v. Woodruff, 327 U.S. 726, 733

A-17

(1946)); see also id. (““The Court of Appeals’ reliance on

‘public policy’ is similarly misplaced.”)

We understand that cleaning up hazardous wastes

can be time-consuming and that in this case the scope of

the cleanup was not known until April 1986 when the

choice was made by EPA among the four alternative

courses of action outlined by the feasibility study, and we

also understand that the EPA’s CWA claim was subject to

a Statute of limitations. But these facts do not relieve the

EPA of its obligation to abide by the requirements of the

res judicata doctrine. The EPA could have asserted a

CERCLA claim when it filed the CWA action in Decem-

ber 1983 or while that case was pending, see Fed. R. Civ.

P. 15. In fact, the EPA asserts that “[c]ommunications

with the defendants, aimed at persuading them to assume

responsibility for the response, continued throughout this

period.” (Appellee’s Br. at 16.) The appellants’ release of

hazardous waste in the late 1970s, combined with the pas-

sage of CERCLA in 1980, made the present action possi-

ble in 1983. Cf. United States v. Fisher, 864 F.2d 434, 439

(7th Cir. 1988) (holding that CERCLA action was not

barred by res judicata because defendant allegedly re-

leased additional hazardous substances after prior action

was completed and because statutory amendments creat-

ed rights that could not have been asserted at time of

prior action). The EPA chose to purse a CWA action in

1983, and that choice precluded it from pursuing a subse-

quent CERCLA action for the same wrong in 1987.

A-18

Our conclusion that the EPA asserts the same

claim in this action that it asserted in the prior action is

consistent with analogous cases from this circuit and oth-

er circuits. See Johnson v. SCA Disposal Servs., Inc., 931

F.2d 970, 974-77 (1st Cir. 1991) (holding that negligent

misrepresentation action filed before plaintiff incurred

cleanup expenses precluded later CERCLA reimburse-

ment action); United States Envtl. Protection Agency v. City

of Green Forest, 921 F.2d 1394, 1403-05 (8th Cir. 1990)

(holding that intervening citizens’ CWA action was pre-

cluded. by consent decree entered into by EPA and de-

fendant), cert. denied, 112 S.Ct. 414 (1991); Aliff v. Joy

Mfg. Co., 914 F.2d 39, 42-44 (4th Cir. 1990) (holding that

false representation suit precluded later CERCLA reim-

bursement action). Our conclusion also is consistent with

the purpose of the res judicata doctrine: to protect de-

fendants “from the expense and vexation attending multi-

pie lawsuits,” to “conserve[ | judicial resources,” and to

“foster[ ] reliance on judicial action by minimizing the

possibility of inconsistent decisions.” Montana, 440 U.S.

at 153-54; see also Nevada v. United States, 463 U.S. 110,

129 n.10 (1983) (“The policies advanced by the doctrine

of res judicata perhaps are at their zenith in cases con-

cerning real property, land and water.”).

b.

GRC may assert the defense of res judicata be-

cause it was a party to the prior action. Neither William

Gurley nor Larry Gurley, however, were parties to the

prior action. Thus, each of them may assert the defense

A-19

only if he is a “privy” to GRC. See Montana, 440 U.S. at

153. A person is in privity with another person if he has a

“ ‘close relationship, bordering on near identity.’ ” Head-

ley v. Bacon, 828 F.2d 1272, 1276-79 (8th Cir. 1987).

As a general rule, “[c]orporations are treated as

entities separate from their officers, directors, and share-

holders for purposes of preclusion just as for other pur-

poses. Without more, judgments entered in actions

against any one of them are not binding on any other.”

Charles Alan Wright et al., Federal Practice and Procedure

§4460, at 533 (1981). As an exception to this general rule,

directors, officers, and sharcholders may be in privity with

a corporation and thereby assert a res judicata defense if

“they are named as defendants solely in their capacity as

directors,” officers, and shareholders. See Oglala Sioux

Tribe v. Homestake Mining Co., 722 F.2d 1407, 1410 n.3

(8th Cir. 1983); cf Headley, 828 F.2d at 1276-79 (holding

that prior action against city did not bar subsequent ac-

tion against police chief in his personal capacity); Micklus

v. Greer, 705 F.2d 314, 316-17 (8th Cir. 1983) (holding

that prior actions against government officials barred -sub-

sequent action against another government official in her

official capacity). Here, William Gurley is the principal

shareholder, the president and one of two directors of

GRC. The only other director and the only other share-

holder is his wife, Betty Gurley. It is undisputed that the

district court imposed liability on him not in his capacity

as principal shareholder, president, and director, but as

an individual who meets §9607(a)(2)’s definition of “op-

erator.” Thus, William Gurley is not in privity with GRC

A-20

and may not assert the defense of res judicata. See Oglala

Sioux Tribe, 722 F.2d at 1410 n.3.

As a general rule, “litigation by an employer is not

binding on employees.” Wright et al., supra, §4460, at 531;

see also Headley, 828 F.2d at 1276. Larry Gurley had and

has no ownership interest in GRC. As an employee, he is

even more removed from GRC’s interests than is William

Gurley. Thus, he is not in privity with GRC and may not

assert the defense of res judicata.

In sum, the EPA was precluded from bringing this

action against GRC. The EPA was not precluded from

bringing this action against William Gurley and Larry

Gurley.

The appellants next argue that the EPA is pre-

cluded from proving liability in this action by certain posi-

tions it took in the CWA action. The appellants specifi-

cally contend (1) that the EPA should be precluded from

proving that CERCLA’s petroleum exclusion does not

apply because the EPA proved in the prior action that

GRC had disposed of oil and (2) that the EPA should be

precluded from proving that William Gurley and Larry

Gurley were “operators” under §9607(a)(2) because the

EPA had proved in the prior action that GRC was an

“operator.”

A-21

Under the doctrine of collateral estoppel, which

also is known as issue preclusion, “once an issue is actual-

ly and necessarily determined by a court of competent ju-

risdiction, that determination is conclusive in subsequent

suits based on a different cause of action involving a party

to the prior litigation.”” Montana, 440 U.S. at 153. The

appellants were entitled to rely on collateral estoppel in

this case if

“(1) the issue was identical to one in a prior

adjudication; (2) there was a final judgment

on the merits; (3) the estopped party was a

party or in privity with a party to the prior

adjudication; and (4) the estopped party

was given a full and fair opportunity to be

heard on the adjudicated issue.”

Arkla Exploration Co. v. Texas Oil & Gas Corp., 734 F.2d

347, 356 (8th Cir. 1984) (quoting Oldham v. Pritchett, 599

F.2d 274, 279 (8th Cir. 1979)), cert. denied, 469 U.S. 1158

(1985).?

2-Although mutuality generally is not required for collateral estoppel,

the EPA argues, in part, that William Gurley and Larry Gurley

should not be permitted to assert collateral estoppel because they

were not pasties to the prior action. This argument rests on an unset-

tled issue of law. Compare United States v. Mendoza, 464 U.S. 154, 162

(1984) (holding that nonmutual offensive collateral estoppel may not

be asserted against the government). with United States v. Stauffer

Chem. Co., 464 U.S. 165, 174 (1984) (holding that mutual defensive

collateral estoppel may be asserted against the government). None-

theless, we need not reach the issue because we can resolve this part

of the appeal on other grounds.

A-22

The appellants’ first contention stumbles on the

requirement that the issue in the present case be identical

to the issue in the prior case. See Aetna Cas. & Surety Co.

v. General Dynamics Corp., 968 F.2d 707, 711 (8th Cir.

1992). In the prior action, the EPA sought to prove, and

did prove, that GRC had disposed of cither “hazardous

substances” or “oil.” See 33 U.S.C. §1321(b)(1). Under

the CWA, “oil” is defined as “oil of any kind or in any

form, including, but not limited to, petroleum, fuel oil,

sludge, oil refuse, and oil mixed with wastes other than

dredged spoil.” Jd. §1321(a)(1). In this action, GRC

sought to prove that it had disposed of “petroleum, in-

cluding crude oil or any fraction thereof which is not oth-

erwise specifically listed or designated as a hazardous

substance under subparagraphs (A) through (F).”’ 42

U.S.C. §9601(14). Although these two definitions may

overlap to some degree, a substance that is included in

CWA’s definition of “oil” is not necessarily exempted

from CERCLA’s definition of “petroleum.” See infra part

II.B.3. Thus, the issue in the prior case and the issue in

the present case are not identical, and the appellants may

not assert collateral estoppel on this issue.

The appellants’ second contention also fails.

Whether GRC was an “opevator” under CWA in the

prior action is distinct from the question of whether Wil-

liam Gurley and Larry Gurley were “operators” under

CERCLA. Thus, the issuz in the prior case and the issue

in the present case are riot identical, and the appellants

may not assert collateral estoppel on this issue.

A-23

In sum, the EPA was not precluded from proving

the necessary elements of GRC’s, William Gurley’s, and

Larry Gurley’s liability.

The appellants next argue that the wastes they

deposited at the pit fall within CERCLA’s petroleum ex-

clusion, which states, in part: “The term [‘hazardous sub-

stances’] does not include petroleum, including ceude oil

or any fraction thereof which is not otherwise specifically

listed or designated as a hazardous substance under sub-

paragraphs (A) through (F)....” 42 U.S.C. §9601(14).

A petroleum product may be exempted from

CERCLA “ ‘even though certain of its indigenous com-

ponents and certain additives [added] during the refining

process have themselves been designated as hazardous

substances within the meaning of CERCLA.’ ” Cose v.

Getty Oil Co., 4 F.3d 700, 704 (9th Cir. 1993) (emphasis

omitted) (quoting Wilshire Westwood Assocs. v. Atlantic

Richfield Corp., 881 F.2d. 801, 810 (9th Cir. 1989)). How-

ever, “ ‘hazardous substances which are added to petrole-

um or which increase in conjunction solely as a result of

contamination of the petroleum during use are not part

of the “petroleum” and thus are not excluded from

CERCLA.’ ” Southern Pacific Transp. Co. v. California,

790 F.Supp. 983, 986 (C.D. Cal. 1991) (quoting EPA

General Counsel, Scope of the CERCLA Petroleum Exclu-

sion Under Sections 101(14) and 104(a)(2) 5 (July 31,

1987)); see also Cose, 4 F.3d at 704 (citing 50 Fed. Reg.

A-24

13,460 (Apr. 4, 1985)); United States v. Alcan Aluminum

Corp., 964 F.2d 252, 266 (3d Cir. 1992); United States v.

Amtreco, Inc., 846 F.Supp. 1578, 1584-85 (M.D. Ga.

1994).

Here, the appellants disposed of rerefining wastes

that consisted of oil, clay, barium, lead, zinc, PCBs, and

sulfuric acid. The EPA asserts that PCBs and sulfuric acid

do not naturally occur in crude oil. The EPA also points

out that William Gurley testified that he used sulfuric

acid in the rerefining process. (Appellec’s Br. at 22 n.22.)

The appellants have not rebutted these statements in

their reply brief but rather have chosen to argue for an

interpretation of the statute that is at odds with the case

law we have cited above. Thus, we conclude that the

waste deposited at the pit does not fit within CERCLA’s

petroleum exclusion.

4.

The appellants next argue that the district court

erred when it included attorney fees (in the form of pay-

roll expenses for employees of the EPA and the Depart-

ment of Justice) in its award of damages. See 788 F.Supp.

at 1483. The appellants objected to these amounts on the

ground that they were attributable in part to the EPA’s

actions against R. A. Caldwell and Betty Gurley, both of

which were dismissed, and because the EPA did not idcn-

tify the portions that were attributable to the appellants.

The district court overruled the objection. /d. at 1484.

The appellants renew their argument here, contending

A-25

that the district court erred by including “expenses of

$75,925.80 shown on Plaintiff’s Exhibit 87 and the

$13,497.33 of expenses shown on Plaintiff’s Exhibit 89.”

(Appellants GRC & William Gurley’s Br. at 46.)

A party responsible for the release of hazardous

substances may be held 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)(4)(B). “The terms ‘respond’ or ‘response’ mean

remove, removal, remedy, and remedial action,” and

these terms include “enforcement activities related there-

to.” Id. §9601(25). The Supreme Court recently held that

a private party may recover attorney fees associated with

identifying other potentially responsible parties. Key Tron-

ic Corp. v. United States, 114 S.Ct. 1960, 1967 (1994). The

Court reasoned, “Tracking down other responsible sol-

vent polluters increases the probability that a cleanup will

be effective and get paid for. Key Tronic is therefore

quite right to claim that such efforts significantly benefit-

ed the entire cleanup effort and served a statutory pur-

pose apart from the reallocation of costs.” /d.

In this case, the objected-to attorney fees were

associated with identifying R. A. Caldwell and Betty Gur-

ley as potentially responsible parties. As such, they were a

necessary part of the EPA’s legitimate enforcement activ-

ities. They are not related to the EPA’s status as a prevail-

ing party in this action. The EPA’s attorney fees in this

case “significantly benefited the entire cleanup effort and

served a statutory purpose apart from the reallocation of

A-26

costs.” /d. In fact, because the EPA is the primary enforc-

er of CERCLA, the fees in this case arguably served a

statutory purpose more so than did the fees in Key Tronic,

where a private party sought to recover its attorncy fees.

See id. at 1965 (noting that CERCLA did not expressly

authorize private actions until 1986 amendments). Thus,

the district court did not err by including the objected-to

amounts in its award of damages.

We have fully considered the remaining issucs

jointly raised by the appellants, and we conclude that they

are without merit.

IIf.

In conclusion, the district court erred when it im-

posed liability on the Gurley Refining Company because

the EPA’s action was precluded by an carlier action that

was based on the same underlying facts. The district court

did not err when it imposed liability on William Gurley

and on Larry Gurley. The district court’s judgment is af-

firmed in part, reversed in part, and remanded for further

proceedings consistent with this opinion.°

3On January 31, 1994, counsel for the EPA filed a letter calling our

attention to additional authorities, pursuant to Fed. R. App. P. 28()).

On February 4, 1994, counsel for GRC and William Gurley filed a

two-page response challenging the relevance and strength of the

EPA’s additional authorities. Because the responsive letter does not

A-27

FLoyp R. Gisson, Senior Circuit Judge, concurring in part

and dissenting in part.

I agree that the district court did not err in finding

that Larry Gurley had acted as more than a merc em-

ployee of GRC. The record demonstrates that Larry Gur-

ley had extensive authority over the company’s daily op-

erations and that he personally participated in and moni-

tored the waste disposal process. | therefore concur in the

majority’s conclusion that the district court did not err in

imposing liability on Larry Gurley.

However, | do not belicve that the CWA action

brought by the EPA in 1983 prevented it from pursuing

this CERCLA action against GRC. As the majority notes,

the doctrine of res judicata precludes the relitigation of a

claim on grounds that were raised or could have been

raised in the prior action. Ante at 12. Because I do not

believe that the CERCLA action could have been proper-

ly raised in the prior litigation, | respectfully dissent from

this portion of the majority’s opinion.

The majority acknowledges that the EPA faced a

statute of limitations problem in recouping expenditures

from the 1978 and 1979 removal efforts at the pit, ante at

14-15, but concludes that the EPA could have asserted a

CERCLA claim when it filed the CWA action in Decem-

comply with Rule 28(j)'s “without argument” requirement, we strike

it from the record.

A-28

ber 1983 or while that case was pending. However, the

results of the EPA’s feasibility study were not released

until April 1986, three years after the CWA action was

filed and six months after the entry of the district court’s

first judgment against GRC. In fact, the majority admits

that “the scope of the cleanup was not known until April

1986.” Ante at 14.

I agree with the EPA’s argument that a CERCLA

remedial action filed in conjunction with the CWA litiga-

tion would have been premature. Thus, | would conclude

the EPA was not precluded from bringing this action

against GRC and that the district court did not err in

imposing liability. In all other respects, I concur in the

majority’s opinion.

A true copy.

Attest:

Cuierk, U.S. Court oF ApreaALs, EIGHTH Circuit.

A-29

In the United States District Court

Eastern District of Arkansas

Jonesboro Division

Civil No. J-C-87-291

United States of America Plaintiff

v.

Gurley Refining Co., Inc. et al. Defendants

Memorandum Opinion and Order

The United States brings this action pursuant to

§107(a) of the Comprehensive Environmental Response,

Compensation and Liability Act of 1980 (“CERCLA”),

42 U.S.C. §9607(a) (as amended). The United States

seeks to recover the costs it has incurred to date in con-

nection with the response activities at the Gurley Oil Pit

Site (“Gurley Pit” or “Pit”) in Edmondson, Arkansas.

The United States also seeks a declaratory judgment of

defendants’ liability for all future costs to be incurred by

the United States in response to future releases or threats

of release at the Pits. A brief review of the undisputed

facts of this case is necessary before addressing the pend-

ing motions.

In July of 1970, Gurley Refining Co., Inc. (“GRC,

Inc.”) leased for a ten-year period a tract of property lo-

cated one mile north of Edmondson, Arkansas, from

R. A. Caldwell. The purpose of the lease was to provide a

disposal site for secondary oil refining wastes generated

by GRC, Inc.’s used oil refinery located in West Mem-

phis. William Gurley is the president and majority stock-

A-30

holder of GRC, Inc., which operated from 1960 through

1975.

The leased tract of land had previously been site

of a clay mining plant consisting of one large pit about 1/8

mile from Fifteen Mile Bayou, a tributary of St. Francis

River which flows into the Mississippi River.

GRC, Inc. utilized the property from 1970 to 1975

posal pits for waste oil. In 1975, GRC, Inc., changed

ic production of fuel oil from used oil, eliminating the

need ior the disposal pit. GRC, Inc. abandoned the pit in

1975.

In January, 1978, the Arkansas Department of Pol-

lution Control & Ecology (““ADPCE”) found waste oil

being discharged from the pit. The Environmental Protec-

tion Agency (““EPA’’) investigated the problem and in

July of 1978 sent an expert in oil spill cleanup to author-

ize expenditures from the EPA’s Revolving Fund.

Cleanup of the pit was done in December 1978. A

severe flood inundated the pits in April of 1979, causing

oil to be discharged over a wide area south of the pits.

EPA instituted a major containment, cleanup and dispos-

al operation with regard to this oil discharge in April and

May of 1979.

The United States brought an action in 1983

against R. A. Caldwell and GRC, Inc., in the United

States District Court, J-C-83-299, pursuant to the Clean

A-31

Water Act, 33 U.S.C. §1321 et seg. for the costs incurred

in removing the oil which had been discharged from the

pits. The case was tried before the Honorable William

Overton, who found defendants Caldwell and GRC, Inc.

jointly and severally liable for violations of the Clean

Water Act.

EPA evaluated the Gurley site for listing on the

National Priorities List (“NPL’’) in 1980-1981. The site

was listed on the NPL in 1982 making it eligible to re-

ceive money from the Superfund, 40 C.F.R. §300.68. The

United States contends that since that date EPA has ex-

pended more than $1.8 million in investigation, remedial

design and enforcement of this matter.

Congress enacted CERCLA in 1980 in response to

the severe environmental and public health problems

posed by the disposal of hazardous substances. CERCLA

gives EPA broad authority to respond to the release or

threatened release of hazardous substances into the envi-

ronment. See S.Rep. No. 848, 96th Cong. 2d Sess. 56.

Under CERCLA, EPA has several options avail-

able to determine the most appropriate response to the

problems associated with the release or threatened re-

lease of hazardous substances. Under section 106(a), 42

U.S.C §9606(a), EPA may either seek equitable relief in

court or issue an administrative order requiring responsi-

ble parties to abate the releases or take other actions.

The Act also created a “Superfund” to finance clean-up

activities. Pursuant to section 104(a), 42 U.S.C. §9604(a),

A-32

EPA is authorized to undertake response action to abate

any actual or threatened release of any hazardous sub-

stance. The United States can then recover response costs

from “responsible parties” pursuant to section 107(a), 42

U.S.C. §9607(a). See generally Developments in the Law—

Toxic Waste Litigation, 99 Harv.L.Rev. 1459, 1486 (1986).

1, The United States Motions for Partial Summary

Judgment Against GRC, Inc. and William Gurley and to

Strike Affirmative Defenses.

The United States has filed a motion for partial

summary judgment against William Gurley and GRC, Inc.

asserting that they are liable under CERCLA. In its mo-

tion for summary judgment, the United States also con-

tends that it is entitled to summary judgment on a number

of affirmative defenses defendants have raised.!

To establish liability under Section 107, the United

States must prove that there has been a release or threat-

ened release of a hazardous substance from a facility, that

1-The United States has also filed a motion to strike the affirmative

defenses pursuant to Rule 12(f), in which the United States raises a

number of the same arguments it raised in its motion for summary

judgment.

Rule 12(f) provides that the Court may strike from any pleading “any

insufficient defense.” Thus, by either motion to strike the defenses or

by motion for summary judgment, the United States has challenged

the sufficiency of certain defenses as a matter of law. The Court,

therefore, will treat the motions as one when addressing the argu-

ments that are raised in both motions.

A-33

the release or threatened release has caused the United

States to incur response costs; and that defendants fall

within one of the classes of persons liable under section

107(a)(1)-(4). United States v. Bliss, 667 F.Supp. 1298,

1304 (E.D. Mo. 1987).

a. Res Judicata and Collateral Estoppel

Defendants argue that the United States is pre-

cluded from establishing their liability because of res judi-

cata and collateral estoppel. Thus, before the Court ad-

dresses the elements of CERCLA liability, it will review

the previous litigation to determine whether these de-

fenses are applicable.

In 1983, the United States brought an action under

the Clean Water Act, 33 U.S.C. §1321 et seq., against

R. A. Caldwell and GRC, Inc., to recover the costs of

removing oil improperly discharged into navigable waters

and adjoining shorelines. The case, docketed as J-C-83-

399, was tried before the Honorable William Overton. By

order filed October 30, 198[5], Judge Overton found

Caldwell and GRC, Inc. jointly and severally liable for the

discharge of oil in violation of the Clean Water Act and

awarded the United States $76,758.60 for the costs it ex-

pended in removal of the oil.

Defendants argue that by virtue of the decision in

United States v. Caldwell, the United States is precluded

from arguing that anyone other than GRC, Inc. was the

owner and operator of the Pit, and that any substance

—

A-34

other than oil and oil waste was discharged. The previous

action concerned the clean up of oil that had spilled from

the Pits in 1978 and 1979 into the Fifteen Mile Bayou.

Judge Overton found that GRC, Inc. had leased

Caldwell’s property for a ten year period and had utilized

the property as a disposal pit for waste oil. Judge Overton

further found that GRC rerefined used oil for sale as

motor oil and dumped the waste material from its proc-

esses into the disposal pit. In 1975, GRC, Inc. switched

operations and determined it no longer needed the dis-

posal pit.

Before being granted permission to abandon the

pits, ADPCE advised GRC, Inc. to install gravity drains

for the discharge of the water. Judge Overton found that

the pipes were not adequate to handle the discharge from

the disposal pit. Thus, Judge Overton found that the pits

had not been properly abandoned and GRC, Inc. re-

mained liable for the consequences of the subsequent oil

spill.

As a result of problems with the drainage system,

waste oil was carried into a drainage ditch which emptied

into the Fifteen Mile Bayou. Because of heavy rains in

the area, the pit overflowed causing a severe emergency

Situation. EPA notified Caldwell and GRC, Inc. to take

prompt and immediate action. EPA formulated a plan for

handling the oil spill, including the containment of oil,

appropriate treatment of the water, and clean up and dis-

posal of oil and debris outside the confines of the Pit.

A-35

When GRC, Inc., indicated that it would not perform the

work outlined in the plan, the EPA in July of 1978, hired

a private contractor to perform the work under the su-

pervision of EPA.

In April of 1979, flood waters inundated the dis-

posal pit causing oil to be discharged. A major contain-

ment, clean up, and disposal operation was again institui-

ed and lasted until May of 1979. The charges for the en-

tire operation in 1978 and 1979 amounted to $76,758.60.

Judge Overton found those charges to be reasonable. He

found that the defendants were responsible for the dis-

charge of oil in violation of the Clean Water Act; that

defendants did not properly conduct removal and clean

up operations of the discharged oil, and that the United

States was authorized to remove or arrange for the re-

moval of the oil.

Based on the decision in United States v. Caldwell,

defendants argue that the United States is precluded from

asserting anything other than GRC, Inc. was the operator

of the facility and that oil and oil waste was disposed of

by GRC, Inc.

Use of collateral estoppel is appropriate when

(1) the issue is identical to one in a prior adjudication;

(2) there was a final judgment on the merits; (3) the

estopped party was a party or in privity with a party to the

prior adjudication; and (4) the estopped party was given

and [sic ] full and fair opportunity to be heard on the ad-

judicated issue. Arkla Exploration Co. v. Texas Oil & Gas

\

A-36

Corp., 734 F.2d 347 (8th Cir. 1984), cert. denied, 105 S.Ct.

905 (1985).

The Court finds that defendants’ argument of col-

lateral estoppel is not available in the case at bar. Here

the issues of the liability of persons other than GRC, Inc.

and Caldwell were never litigated. The issue of whether a

hazardous substance had been released was also not liti-

gated. See United States v. Young, 804 F.2d 116 (8th Cir.

1986), cert. denied, 107 S.Ct. 3184 (1987). Thus, the Court

finds that plaintiff is not collaterally estopped from assert-

ing that defendants are liable under CERCLA and that

hazardous substances were released or are threatened to

be released.

Defendants also assert that plaintiff's claim under

CERCLA is barred by res judicata. Defendants argue that

as CERCLA had been enacted in 1980, plaintiff could

have and should have included its CERCLA claim in the

Clean Water Act action. Defendants further argue that

plaintiff was already incurring section 107 costs in 1983

when the first action was instituted and continued to incur

those costs up until the case was tried in 1985.

Res judicata bars a subsequent suit based on the

same cause of action where there has been a final judg-

ment on the merits in a prior suit involving the same par-

ties or their privies. Kapp v. Natujrelle, Inc., 611 F.2d 703,

707 (8th Cir. 1979). The United States vigorously argues

that res judicata is inapplicable here.

A-37

The previous action involved the clean up of oil

that had spilled from the Pit in 1978 and 1979 and was

brought pursuant to 33 U.S.C. §1321. Here, the United

States attempts to recover the costs it incurred in the

remediation of the Pit since 1983. The causes of action

are therefore different.

Furthermore, CERCLA itself contemplates that

the two actions can be brought, and the first will not bar

the second. Pursuant to Section 113(g)(2), the United

States may bring successive actions to recover further

response costs or damages. 42 U.S.C. §9613(g)(2). Thus,

according to the language of the statute, the United

States did not have to bring its section 107 action at the

time it brought its action under the Clean Water Act. The

Court finds that this action is not barred by res judicata

b. Liability of William Gurley and GRC, Inc. Un-

der CERCLA

Having determined that a determination of the

issues in this matter are [sic] not precluded by res judicata

or collateral estoppel, the Court must determine whether

genuine issues of material fact exist as to the liability of

William Gurley and GRC, Inc. under CERCLA.

Defendants do not appear to dispute that the Gur-

ley Pit is a “facility” as defined in section 101(9). They

contend however that the material placed in the facility

was a petroleum product or fraction thereof as set forth

in 42 U.S.C. §9601(14). Defendants further contend that

A-38

neither William Gurley nor GRC, Inc. was owner or op-

erator of the Pit at the time the materials were placed in

the Pit.

Under 42 U.S.C. §9601(14), a hazardous substance

includes:

(A) any substance designated pursuant to

section 1321(b)(2)(A) of Title 33, (B) any

element, compound, mixture, solution, or

substance designated pursuant to section

9602 of this title, (C) any hazardous waste

having the characteristics identified under

or listed pursuant to section 3001 of the

Solid Waste Disposal Act... , (D) any toxic

pollutant listed under section 112 of the

Clean Air Act ..., and (F) any imminently

hazardous chemical substance or mixture

with respect to which the Administrator has

taken action pursuant to section 2606 of

Title 15. The term does not include petro-

leum, including crude oil or any fraction

thereof which is not otherwise specifically

listed or designated as a hazardous sub-

stance under subparagraphs (1) through (F)

of this paragraph, and the term does not

include natural gas, natural gas liquids, liq-

uefied natural gas, or synthetic gas usable

for fuel... .

~

The United States has submitted the affidavit of

Timothy K. Underwood, Environmental Engineer with

EPA, who stated that the attached documents revealed

the presence of heavy metals including zinc, copper and

lead in samples taken by ADPCE in 1974 and 1975. Anal-

A-39

yses of samples taken from the Pit in 1978 showed the

presence [of] zinc and heavy metals. Samples taken from

the Pit in 1979 revealed the presence of polychiorinated

biphenyl compounds (“PCBs”).

The United States also submitted the affidavit of

Dr. Norman J. Weinstein, who specializes in the technical

and economic aspects of petroleum and hydrocarbon

products and refining. He reviewed the records in this

case and concluded that hazardous substances present

came from the Gurley re-refining process. Discharges

from the Pit in 1974, 1975 and 1978 showed elevated lead,

zinc, dissolved organics, oil and grease.

Thus, chemicals listed at 40 C.F.R. §302.4 (1986)

as hazardous substances have been found in the soil adja-

cent to the Pit. These substances included PCBs, lead,

zinc, and barium.

Defendants assert that because the United States

proved that the discharges were of oil and oil waste in

United States v. Caldwell, it cannot now claim that haz-

ardous substances were rcleased. As stated above, the

presence of hazardous substances was not raised or liti-

gated in the previous suit. Furthermore, if the waste ma-

terial contains hazardous substances, then the waste ma-

terial itself is a hazardous substance under CERCLA.

United States v. Carolawn Co., 21 ERC 2124, 2126 (D. S.C.

1984).

Defendants also rely on the petroleum exclusion

found in §9601(14). They cite Wilshire Westwood Associ-

ates v. Atlantic Richfield, 881 F.2d 801 (9th Cir. 1989). In

Wilshire, the court held that the petroleum exclusion ap-

plies to unrefined and refined gasoline, even though cer-

tain indigenous components and additives have been des-

ignated as hazardous substances under CERCLA. In par-

ticular, the court took judicial notice that benzene, tol-

uene, xylene, ethylbenzene and lead, are hazardous sub-

stances but are all indigenous components of crude oil.

Here, defendants have not established that a genu-

ine issue of material fact exists as to the presence of haz-

ardous substances. In particular, defendants have not

demonstrated that the substances found in the Pit and

discharged (other than lead) are indigenous to oil. Fur-

thermore, defendants have not refuted plaintiff's proof

that the substances found on the site were hazardous

under CERCLA.

Thus, the Court finds that the United States has

established that there has been a release or threatened

release of a “hazardous substance.” See United States v.

Bliss, 667 F.Supp. 1298, 1305 (E.D. Mo. 1987).

The main dispute concerns whether any of the

defendants are liable under section 107(a) which provides

the categories of parties who are liable. The United

States contends that GRC, Inc. and William Gurley are

liable as owners and operators under Sections 107(a)(1)

and (a)(2).

A-41

Section 107(a)(2) makes liable “any person who at

the time of disposal of any hazardous substance owned or

operated any facility at which such hazardous substances

were disposed of.” GRC, Inc. has admitted that it gener-

ated the wastes disposed of at the Pit. The waste products

from GRC, Inc.’s refinery operations were transported or

“disposed” at the Pit by GRC, Inc. employees. The Court

has found that the wastes contained hazardous sub-

stances.

GRC, Inc., does not appear to seriously dispute

that it was an operator or owner of the pit. It only asserts

that hazardous substances were not disposed of at the

time it operated the pit. This issue has been resolved

against GRC, Inc., and the Court finds that it is a liable

person pursuant to §9607(a)(2).

The United States contends that William Gurley is

also liable under section 107(a)(2). It asserts that corpo-

rate officials who participate in the daily activities of haz-

ardous waste disposal are personally liable. United States

v. Northeastern Pharmaceutical & Chemical Co.

(“NEAPACCO”’), [sic] 810 F.2d 726, 744 (8th Cir. 1986),

cert. denied, 108 S.Ct. 146 (1987) (two corporate officers

who arranged for the disposal of a corporation’s hazard-

ous waste found personally liable under CERCLA). See

also State of New York v. Shore Realty, 759 F.2d 1032, 1052

(2d Cir. 1985); United States v. Bliss, 667 F.Supp. at 1306;

United States v. Conservation Chemical Co., 619.F.Supp.

162, 190 (W.D. Mo. 1985) (corporate officials who active-

A-42

ly participate in the management of a disposal facility

can be held personally liable under section 107(a)).

In support of its motion for partial summary

judgment, the United States has included portions of Wil-

liam Gurley’s deposition. According to the deposition tes-

timony, Gurley stated that he was responsible for the

management of the Pit—he selected the Pit as the dispos-

al site, he negotiated the terms of the lease with Caldwell,

he supervised the design of the Pit to accommodate the

wastes from the refinery, he directed the dumping of

waste in the Pit.

Gurley does not dispute the assertions of the

United States or offer any evidence to the contrary to

demonstrate that he was not, as a corporate official, per-

sonally responsible for the daily operations of the Pit.

Gurley contends, however, that he is exempt from liability

as a “service station dealer, etc.” 42 U.S.C. §9614(c). A

“service station dealer” is defined under §9601(37)(A) as

any person

(i) who owns or operates a motor vehicle

service station, filling station, garage, or

similar retail establishment engaged in the

business of selling, repairing, or servicing

motor vehicles, where a significant percent-

age of the gross revenue of the establish-

ment is derived from the fueling, repairing,

or servicing of motor vehicles, and

(ii) who accepts for collection, accumula-

tion, and delivery to an oil recycling facility,

A-43

recycled oil that (1) has been removed from

the engine of a light duty motor vehicle or

household appliances, and (II) is presented,

by such owner, to such person for collec-

tion, accumulation, and delivery to an oil

recycling facility.

Nowhere does William Gurley establish that he

owned or operated a retail csiablishment which sold,

serviced or repaired motor vehicles. He states that he was

owner of a Sub-chapter S corporation which collected,

accumulated, and delivered recycled oil to GRC, Inc.

That alone, however, does not qualify for the exception of

§9601(37)(A)(i).

Gurley cannot just rest on his allegations. He must

demonstrate that genuine issues of material fact exist as

to his liability as an owner or Operator under Section

107(a). Here, he merely asserts that he is a service station

dealer. Even his assertions do not fully meet the defini-

tion set forth in the statute. The Court cannot, without

more, find that Gurley is entitled to exemption from li-

ability as a service station dealer. Thus, the Court finds

that Gurley is personally liable because as a corporate

official and major stockholder he was responsible for the

daily management of the Pit and disposal of hazardous

wastes in the Pit.

c. Affirmative Defenses

The United States argues in both its motion for

partial summary judgment and its motion to strike de-

A-44

fenses that the only defenses available to defendants are

those set forth in section 107(b), i.e., that the release or

threatened release was caused solely by: (1) an act of

God; (2) an act of war; or (3) an act or omission of an

unrelated third party; or any combination thereof.

The courts appear to be divided on the availability

of other defenses to defendants. See e.g. United States v.

Stringfellow, 661:F.Supp. 1053, 1062 (C.D. Cal. 1987)

(defendants cannot raise any affirmative defenses other

than those listed in section 107(b)). But see United States

v. Conservation Chemical Co., 619 F.Supp. 162, 205 (W.D.

Mo. 1985) (equitable defenses available under Section

107).

A number of courts, however, have refused to read

the statutory language of Section 107 as narrowly as the

United States would have this Court read it. Thus, courts

have read Section 107(b) as limiting the defenses to liabil-

ity under the statute, but have considered constitutional

challenges to CERCLA.®? See e.g. United States v.

Monsa[n]to, Co., 858 F.2d 160, 173 (4th Cir. 1988), cert.

denied, 109 S.Ct. 3156 (1989).

2-Even the court in Stringfellow noted that a number of defenses

pertaining to comparative fault, negligence, failure to comply with

claims procedures and the national contingency plan were not de-

fenses to liability but rather relevant factors to consider with respect

to damages. 661 F.Supp. at 1062.

A-45

In addressing the issue of availability of defenses,

one commentator has stated:

Courts appear to be mistaken in reading

the “subject only” clause literally. As one

court has noted, the section 107(b) defenses

cannot be exhaustive, because defenses

such as res judicata, payment, accord and

Satisfaction, statute of limitations, waiver,

and laches must be available. Indeed,

CERCLA itself recognizes bars to liability

beyond those mentioned in section 107(b).

For example, section 107(j) bars govern-

ment recovery for response costs resulting

from a federally permitted rclease, and sec-

tion 112(d) imposes a three-year statute of

limitations on certain claims. To read sec-

on 107(a) as precluding all defenses other

than those listed in section 107(b) would

directly contradict the plain language of

these provisions. Rather, the legislative his-

tory of CERCLA suggests that the “subject

only” clause was primarily intended to ex-

clude defenses based on the absence of neg-

ligence.

Developments in the Law—Toxic Waste Litigation, 99

Harv.L.Rev. 1458, 1550 (1986).

The Court does not agree with the United States

that all defenses other than those in section 107(b) are per

se unavailable and must be stricken. The Court, however,

need not determine the scope of affirmative defenses

under CERCLA. Suffice it [to] say, even considering the

appropriateness of certain defenses, those defenses dis-

A-46

cussed below arc, with few exceptions, insufficient as a

matter of law.

Defendants raise a number of arguments chalicng-

ing the constitutionality of the statute. Defendants claim

that CERCLA violates the Contracts Clause, that it vio-

lates the Due Process Clause and the Takings Clause of

the Fifth Amendment of the United States Constitution,

that it violates the Ex Post Facto Doctrine of the United

States Constitution, and CERCLA is an unconstitutional

tax. ,

The constitutional challenges have been consid-

ered by other courts and summarily rejected. E.G., United

States v. Monsa[n]to, 858 F.2d at 173-175 (CERCLA does

not violate due process and is not an ex post facto law);

NEAPPCO, {sic} 810 F.2d at 734 (retroactive application

of CERCLA does not violate Due Process clause and

does not constitute unconstitutional taking); United States

v. Conservation Chemical Co., 619 F.Supp. at 213

(CERCLA does not violate Contracts Clause, is not ex

post facto law, does not violate the Takings Clause, and

the imposition of joint and several liability does not vio-

late the Equal Protection Clause). Furthermore, this

Court finds that the CERCLA liability provisions do not

constitute a tax. The purpose of CERCLA is not to raise

revenues, but to regulate the disposal and cleanup of haz-

ardous waste sites.

In sum, the Court finds that the constitutional

challenges asserted by defendants should be stricken as

they are without merit and insufficient as a matter of law.

Defendants also contend that the action is found-

ed in tort and therefore barred by the three year statute

of limitations or alternative[ly] is founded in contract and

barred by the six year statute of limitations. In addition,

defendants argue that the action is not governed by the

Statute of limitations found in CERCLA, 42 U.S.C.

§9612(d), as this action was barred prior to October 17,

1986, the date of the enactment of section 9612(d).

A number of courts have addressed the argument

raised by defendants as to the applicable statute of limita-

tions. The Court adopts the reasoning [of] Kelley v.

Thomas Solvent Co., 714 F.Supp. 1439, 1449-50 (W.D.

Mich. 1989); United States v. Dickerson, 640 F.Supp. 448,

450-51 (D. Md. 1986); and United States v. Mottolo, 605

F.Supp. 898, 908-09 (D. N.H. 1985). That is, at the rele-

vant time the statute of limitations of three years on cost

recovery actions and six years for remediation actions was

not in effect. The courts reasoned that response costs are

equitable —not legal—in nature, so that a legal limitations

period was not applicable and that the doctrine of laches

was the only appropriate limitation on CERCLA re-

sponse cost lawsuits.

However, even assuming the cost recovery action

is characterized as legal as opposed to purely equitable,

the case would not be barred by the six year statute of

A-48

limitations found at 28 U.S.C. §2415(a). This action was

filed within about four years of the time the United States

first began incurring costs for which it secks recovery in

this action. See United States v. Mottolo, 605 F.Supp. at

909.

Thus, the Court finds that this action is not barred

by any statute of limitations and defendants’ assertion of

that defense is stricken.

Defendants[’ arguments] that the Court does not

have personal jurisdiction over them, that the complaint

fails to state a cause of action, that the EPA is required to

give notice under Section 112(a) and that individual li-

ability cannot be imposed under CERCLA are all without

merit and have been addressed by other courts. The

Court will not further dwell on these issues, but finds that

they are insufficient as a matter of law and will be strick-

en. Furthermore, as discussed above, the defenses of col-

lateral estoppel and res judicata as well as the defense of

“service station dealer” are not applicable here and they

are therefore stricken.

The Court is of the opinion, however, that defend-

ants’ assertions as to the validity of the remedial plan and

whether it was consistent with the National Contingency

Plan (“NCP”) should not be stricken. Such “defenses” are

available to defendants. That is, they have the burden of

proving that the response costs are inconsistent with the

NCP and that EPA’s choice of a response action was arbi-

trary and capricious.

A-49

2. Motions for Summary Judgment with regard to

Larry Gurley

Larry Gurley has moved for summary judgment

contending that he was only an employce at the time and

cannot be found liable under CERCLA, that is he docs

not come within any of the four liable parties set forth in

Section 107(a). The United States has filed a Motion for

Partial Summary Judgment against Larry Gurley contend-

ing that Larry Gurley personally oversaw and directed

the operation of the refinery and pit and is therefore li-

able as an operator under Section 107(a)(2).

Both parties have submitted documentation in

support of their positions. The Court finds, based on the

record, that genuine issues of matcrial fact exist as to Lar-

ry Gurley’s involvement in the opcration and manage-

ment of the Pit and therefore Larry Gurley’s liability, if

any.

Thus, the Court denics the motions for summary

judgment.

Conclusion

In sum, the Court grants the United States’ motion

for partial summary judgment to the extent set forth

above. That is, the Court finds that the United States has

established a prima facie case of liability with respect to

GRC, Inc. and William Gurley. The Court further grants

in part and denics in part the motions to strike the af-

A-50

firmative defenses as set forth above. Finally, the Court

denies Larry Gurley’s motion for summary judgment and

the United States’ motion for partial summary judgment.

It Is So OrvereED this 13 day of June, 1990.

GEORGE Howarp, Jr.

United States District Judge

A-51

In the United States District Court

Eastern District of Arkansas

Jonesboro Division

aaa : Civil No. J-C-87-291

United States of America Plaintiff

v.

Gurley Refining Co., Inc. et al. Defendants

Memorandum Opinion and Order

The United States of America, on behalf of the

United States Environmental Protection Agency (EPA),

brings this action pursuant to the Comprehensive Envi-

ronmental Response, Compensation, and Liability Act of

1980 (CERCLA), 42 U.S.C. §9601 ef seg. to recover the

costs it has incurred in connection with the response ac-

tivities related to the Gurley Oil Pit Site in Edmondson,

Arkansas. The United States also secks a declaratory

judgment of defendants’ liability for all future costs it will

incur in response to future releases or threats of release

posed by the Site.

Statutory Background

CERCLA was enacted in December 1980 “to ini-

tiate and establish a comprehensive response and financ-

ing mechanism to abate and control the vast problems

associated with abandoned and inactive hazardous waste

disposal sites.” H.R. Rep. No. 1016(1), 96th Cong. 2d

Sess. 22, reprinted in 1980 U.S. Code Cong. and Admin{.]

News 6119, 6125. CERCLA was reauthorized and

A-52

amended by the Superfund Amendments and Reauthori-

zation Act of 1986 (SARA), which established the Haz-

ardous Substance Superfund (Superfund), a fund used to

finance the government’s response to actual or threat-

ened releases of hazardous materials.

CERCLA authorizes the Administrator of the

EPA to respond with “remedial” or other “removal” ac-

tion against any threatened or actual release of any haz-

ardous substance that may pose an imminent and substan-

tial public health threat. 42 U.S.C. §9604(a)!

Under the statutory scheme, EPA has various op-

tions available to determine the most appropriate re-

sponse to an actual or threatened release of hazardous

substances into the environment. See U.S. v. Ottati &

Goss, Inc., 900 F.2d 429, 433 (1st Cir. 1990) (discussion of

four separate statutory paths that EPA might follow to

clean up hazardous waste sites). For example, under

§106(a) of CERCLA, 42 U.S.C. §9606(a), EPA may ei-

ther seek equitable relief from a court or issue an admin-

istrative order requiring responsible parties to abate ac-

tual or threatened release of hazardous substances or to

take other appropriate actions. Under Section 104, 42

U.S.C. §9604, EPA is authorized to undertake “response”

'-The statute authorizes the President of the United States to take

certain actions. The President, however, has delegated most of his

authority to the Administrator of the EPA. See Executive Order No.

12,580, 52 Fed. Reg. 2923 (Jan. 23, 1987), reprinied-in 42 US.C. §9615

App. at 223-227 (West Supp. 1991).

A-53

activities to address the release or threatened release of a

hazardous substance into the environment. Response ac-

tivities include ‘“‘removal”’ and “remedial” actions. 42

U.S.C. §9601(25).

Removal actions are short-term actions taken to

halt any immediate risks posed by hazardous wastes, and

include such actions as “‘may be necessary to monitor,

assess, and evaluate the release or threat of release of

hazardous substances, the disposal of removed material,

or the taking of such other actions as may be necessary to

prevent, minimize, or mitigate damage to the public

health or welfare or to the cnvironment....” 42 U.S.C.

§9601(23). Removal actions may precede remedial action

which includes relatively long-term or permanent abate-

ment activities. 42 U.S.C. §9601(24).

In determining the appropriate response action,

the Administrator “may undertake such investigations,

monitoring, surveys, testing, and other information gath-

ering” necessary to identify the existence and extent of

the release or threat of release, the source and nature of

the hazardous substances involved, and the extent of dan-

ger to the public health or welfare or to the ¢nvironment.

In addition, the Administrator may undertake a wide va-

riety of studies or investigations necessary or appropriate

to plan and direct the response actions. The Administra-

tor may then bring an action to recover the costs incurred

from those parties found to be responsible for the haz-

ardous waste discharge. See 42 U.S.C. §§9604(b) and

9607(a).

A-54

Response actions must be consistent with the Na-

tional Contingency Plan (NCP), which consists of EPA

regulations establishing the methods and criteria for de-

termining appropriate response to the release of hazard-

ous substances. See 40 C.F.R. §300.1 et seq. “Before any

remedial action is undertaken, the site is studied, alterna-

tives are examined, and a preferred cleanup remedy is

selected in accordance with the administrative procedures

set forth in the NCP. This process results in a site-specific

study called a Remedial Investigation/Feasibility Study

(RI/FS). See 40 C.F.R. §300.430(d)-(f).” Cooper Industries,

Inc. v. U.S. E.P.A., 775 F.Supp. 1027, 1031 (W.D. Mich.

1991).

After providing an opportunity for public com-

ment concerning the proposed plan, the EPA selects the

remedy that it pians to implement at the site and issues a

“Record of Decision” (ROD) setting forth the final

remedial plan. 40 C.F.R. §300.435.

The EPA may respond to the problem by either

implementing the remedial action itself, or it may seck to

compel a third party to undertake the response action. If

the EPA responds directly undertaking the removal or

remedial action, it may then seck to recover its costs from

the responsible parties. 42 U.S.C. §9607(a).

Factual Background

The Gurley Oil Pit Site is located in Crittenden

County, about 1 mile north of Edmondson, Arkansas. The

A-55

site lies entirely within the watershed of the Fifteen Mile

Bayou which is a tributary of the St. Francis River, which

is a tributary to the Mississippi River. The site is located

within the 100 year floodplain of Fifteen Mile Bayou.

The pit was excavated some time prior to 1970

when the Arkalite Company removed soils for use in ag-

gregate production. In July, 1970, Gurley Refining Com-

pany, Inc. (hereinafter “Gurley Refining”) leased the pit

area for a period of ten years from the landowner, R. A.

Caldwell, for use as a disposal site for secondary oil refin-

ing wastes. The pit was divided into three smaller waste

disposal cells when Gurley Refining installed two cross-

levees in the fall of 1970.

In September of 1970, Guricy Refining obtained a

waste disposal permit from the Arkansas Department of

Pollution Control and Ecology (ADPC&E). From then

until late 1975, Gurley Refining used the pit to dispose of

sludge and filter material from the rerefining of used

motor oil.

In May, 1975, an inspection by ADPC&E revealed

that Gurley Refining was discharging contaminated

2-The EPA originally sued Gurley Refining Company, Inc.; Gurley

Refining Company (a partnership); William Martin Gurley, Betty

Gurley; Larry Gurley, and R. A. Caldwell. The partnership and Betty

Gurley were dismissed pursuant to order dated June 15, 1990. The

government subsequently settled with Caldwell. The consent decree

was filed on September 25, 1991.

A-56

a en eat: Se

stormwater from the pit into Fifteen Mile Bayou without

treatment. Gurley Refining was convicted on charges of

permit violation and was given one year to implement site

cleanup and remedial measures. In October, 1975, Gurlcy

Refining closed part of its refining operation which gen-

erated wastes disposed at the site.

In December 1975, Gurley Refining returned its

permit to ADPC&E stating that the waste disposal had

ceased and that the site was secure. During 1978, person-

nel from the U.S. Fish and Wildlife Service reported to

EPA and ADPC&E that overflows from the pit had dam-

aged fish and waterfowl in the bayou. EPA directed work

to treat and discharge the pit waters. By July of 1978, the

spill was cleaned up and water levels in the pit lowered

sufficiently to provide adequate capacity for further rain-

fall.

During April 1979, after heavy rains, the pit over-

flowed, releasing approximatcly 450,000 to 500,000 gal-

lons of oil and oily wastes to surrounding farmlands,

roads, and Fifteen Mile Bayou. EPA attempted to induce

both Caldwell and Gurley Refining to conduct a cleanup

operation. When they would not do so, EPA cleaned up

the site under Section 311 of the Clean Water Act.

Periodic rains continued to fill the pit and pump-

ing was required throughout the summer and fall of 1979.

An inspection by ADPC&E in August, 1981, indicated

that conditions at the site were essentially unchanged,

A-57

although the trench installed by EPA in 1979 had caved

in.

In August, 1983, the site was listed on the National

Priorities List (NPL). In December, 1983, EPA author-

ized a remedial investigation (RI) to determine the na-

ture, magnitude, and extent of contamination at the site.

The RI work was conducted from February 1984 until

May 1985. Analyses of the results of the RI indicated the

presence of a complex mixture of oil and oil waste. Nu-

merous volatile organic and inorganic substances were

found in the sludge, however, no significant level of con-

taminants were present in the subsurface soil samples.

Organic and inorganic contaminates were present at low

concentrations in the ground water. The possibility of lab

contamination existed.

The Feasibility Study (FS) rcleased April 18, 1986,

contained four alternatives for the source control

remedy.°

EPA selected the third alternative, a remedy which

includes stabilization of the sludge, contaminated soil and

sediment, and disposal of them in an on-site constructed

3-Following the source control R1I/FS, EPA initiated a groundwater

operable unit RI to identify background water quality. The final re-

port of the RI/FS was issued August 1, 1988. The RI found that pit

wastes have not leaked through the clay surrounding the pit. The

ROD which was issued concerning the groundwater operable unit

concluded that no action was necessary.

A-58

:

;

f

f

RCRA landfill. EPA estimated the cost of the remedial

action to be about $6 million, which includes costs for

construction of the RCRA landfill cell, stabilization of

the waste, backfilling of the excavated area and construc-

tion of flood protection, and onsite treatment of contam-

inated water. The estimated costs also includes annual

groundwater monitoring, maintenance of the monitoring

walls, cell cap and flood protection.

The EPA in its Enforcement Decision Document

dated October 6, 1986, found that the alternative is “‘a

cost effective remedy that provides adequate protection

of public health, welfare, and the environment.” (AR 100,

pg. 002327).

The United States then brought this action to re-

cover response costs associated with the 1986 administra-

tive decision. William Gurley, Larry Gurley and Gurley

Refining (“the Gurley defendants”) object to the United

States’ action. By order filed June 14, 1990, the Court

found that the United States had established a prima facie

case of liability with respect to Gurley Refining and Wil-

liam Gurley.‘ A trial was held concerning defendants’

responsibility for the costs incurred by the United States.

“To establish a prima facie case ot liability under CERCLA, the

United States must establish that (i) there was a release or a threat of

a release of a hazardous substance at the facility; (ii) as a result of the

release or threatened release, the United States incurred response

costs; and (iii) the defendant falls within one of the categories of re-

sponsible parties set forth in Section 107(a)(1)-(4). U.S. v. Aceto Agri-

cultural Chemicals Corp., 872 F.2d 1373. 1379 (8th Cir. 1989).

A-59

At trial, the Court found Larry Gurley to be a responsible

party. All evidence is in, the parties have submitted post-

trial briefs, and the matter is ready for decision.

The Gurley defendants raisc a number of objec-

tions to the United States’ cost recovery action: (1) this

action is barred by res judicata and collateral estoppel;

(2) certain evidence pertaining to costs and expenditure

of attorney’s fees should be stricken; (3) EPA’s actions

are arbitrary and capricious and the costs claimed are

inconsistent with the National Contingency Plan (NCP).

The Court will address cach of these contentions.

Discussion

Res Judicata and Collateral Estoppel

The Gurley defendants contend that the instant

action is based upon the same injuries that were litigated

in an earlier proceeding. In addition, the Gurley defend-

ants contend that based on findings in previous actions,

the United States is estopped from relitigating certain

issues.

The parties were involved in two lawsuits prior to

the instant one. In 1979, Caldwell brought a citizen’s suit

pursuant to 33 U.S.C. §1365 against Gurley Refining

Company, William M. Gurley, Larry M. Gurley, EPA and

its Administrator, and the Secretary of the U.S. Depart-

ment of Transportation. Caldwell v. Gurley Refining Co.,

J-C-79-101. The action concerned the various problems

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concerning the pits that occurred in the 1970s. Caldwell

sought an injunction ordering Gurley to comply with the

Federal Water Pollution Control Act (“FWPCA”) and an

injunction ordering the EPA to enforce the FWPCA and

a declaratory judgment as to his liability for the clean-up

undertaken by the EPA. Caldwell further sought against

defendant Gurley specified performance of the Icase

agreement and damages.

The Honorable Henry Woods, U.S. District Judge

for the Eastern District of Arkansas, found that the court

did not have jurisdiction over a plaintiff's suit against the

EPA brought pursuant to 33 U.S.C. §1365(a)(2). Thus,

the court dismissed the EPA. Caldwell v. Gurley Refining

Co., 533 F.Supp. 252 (E.D. Ark. 1982).

Caldwell’s claims for declaratory relief against

Larry and William Gurley and the corporation proceeded

to trial on October 3, 1983. The Court directed a verdict

as to the individual claims against William Gurley and

Larry Gurley. Based on the jury’s responses to interroga-

tories, the court entered declaratory judgment in favor of

Caldwell that the July 1979 lease remained in effect for its

full term of ten years and that the Gurley Refining Com-

pany is responsible during that period of time for all pol-

lution o--wrring to the navigable waterways of the United

States and the State of Arkansas and their tributaries

from operations of Gurley Refining Company at the Icase

site. (Defendants’ Ex. 13).

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The Gurley defendants contend that the court’s

directed verdict in favor of Larry Gurley and William

Gurley as to their obligation to close the pits is res judica-

ta as to all parties in this action.

The argument is without merit. The Court notes

that the judgment does not contain the basis for the di-

rected verdict. At the most it only concerns Larry Gur-

ley’s and William Gurley’s obligations under the FWPCA

and their obligations to perform under the lease. These

are not issues in this lawsuit and there is nothing in the

previous action to preclude EPA’s present action under

CERCLA to recover response costs.

In 1983, the United States brought an action

against Caldwell and Gurley Refining Company pursuant

to the Clean Water Act, 33 U.S.C. §1321 et seg. for the

costs the EPA incurred in removing the oil that had

spilled from the Pits in 1978 and 1979. U.S. v. Caldwell, J-

C-83-399. The case was tried before the Honorable Wil-

liam Overton, U.S. District Judge for the Eastern District

of Arkansas. By order docketed October 30, 1985, Judge

Overton found Caldwell and Guricy Refining jointly and

severally liable for the discharge of oil in violation of the

Clean Water Act and awarded the United States

$76,758.60 for the costs it expended in the removal of the

oil.

The Gurley defendants assert that Judge Overton’s

finding that the releases were that of oii, sludge, and/or

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waste oil, precludes a finding from this Court that the re-

leases were of a hazardous substance.

The Court addressed this argument in the Court’s

order of June 14, 1990. The Court found that res judicata

and collateral estoppel are not applicable in this instance.

As the Court noted previously, the issucs of whether a

hazardous substance had been released was not litigated.

The Court further stated:

The previous action involved the clean up

of oil that had spilled from the Pit in 1978

and 1979 and was brought pursuant to 33

U.S.C. §1321. Here, the United States at-

tempts to recover the costs it incurred in

the remediation of the pit since 1983. The

causes of action are therefore different.

Furthermore, CERCLA itself contemplates

that the two actions can be brought, and

that first will not bar the second. Pursuant

to Section 113(g)(2), the United States may

bring successive actions to recover further

response costs or damages. 42 U.S.C.

§9613(g)(2). Thus, according to the lan-

guage of the statute, the United States did

not have to bring its scction 107 action at

the time it brought its action under the

Clean Water Act.

(June 14, 1990 Order at pp. 8-9)

Defendants rely on two cases decided subsequent

to the June 14th Order to support their assertion that the

Court should reconsider its ruling. The Court has re-

viewed the cases, Johnson v. SCA Disposal Services, Inc.,

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931 F.2d °79 (1st Cir. 1991) and Aliff v. Joy Manufacturing

Co., 914 F.2d 39 (4th Cir. 1990), and finds that their hold-

ings are not helpful to defendants’ argument. They both

involve private plaintiffs, where the first lawsuit con-

cerned common law tort claims.

The Court is not persuaded that its original order

of June 14th is incorrect, and finds that neither res judica-

ta nor collateral estoppel bar this action. See U.S. v. Fish-

er, 864 F.2d 434 (7th Cir. 1988) (carlicr consent decree

under the Resource Conservation and Recovery Act did

not bar later CERCLA action)/.]

Connected with these arguments is defendants’

position that EPA has failed to demonstrate a release or

threat of release other than the release in 1978 and 1979

which had already been litigated in the 1983 suit. The

Gurley defendants point to the groundwater RI of 1988 in

support of their position. That RI found that there had

been no leaching of any matcrials contained in the oil

sludge into the groundwater underneath the pits. The

Gurley defendants further point out that in the Spring of

1989, the EPA issued an Emergency Order concerning

the condition of the pit. Gurley Refining under the super-

vision of both the ADPC&E and EPA “dewatered” the

pit, thereby alleviating the threat of any rainwater dis-

charge from the pit.

CERCLA imposes liability on the owner and op-

erator of a facility from which there is a release or a

threatened release of a hazardous substance. 42 U.S.C.

A-64

§9607(a). A release is defined as “any spilling, leaking,

pumping, pouring, cmitting, emptying, discharging, inject-

ing, escaping, leaching, dumping, or disposing into the

environment” of a hazardous substance. 42 U.S.C.

§9601(22). In the June 14th Order the Court found that

EPA had established that there was a release or threat-

ened release of a hazardous substance at the site.

The record is replete with references to hazardous

substances already present at the site (sec c.g., AR Doc.

92, Endangerment Assessment). That contaminants have

not been found in the groundwater does not climinate the

possibility of the threat of release. The Court finds, there-

fore, that EPA has established that there was a release of

hazardous substances as well as a threat of release suffi-

cient to impose liability under CERCLA. See Dedham

Water Co. v. Cumberland Farms Dairy, Inc., 889 F.2d 1146,

1154 (1st Cir. 1989) (“To our knowledge, every court...

has held that it is not necessary to prove actual contami-

nation of plaintiff's property by dcefendant’s waste in or-

der to establish liability under CERCLA.”)

Evidentiary Issues

Both the United States and the Gurley defendants

raise a number of evidentiary issucs. The Gurley defend-

ants move to strike certain of the United States’ exhibits

which are cost summarics.

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Defendants move to strike Plaintiff's Exhibits 87,

88, and 89, 109, 110 and 111.° They contend that (1) Ex-

hibits 87, 88, 89[,] 109, 110 and 11{1] should be stricken

because of the United States’ failure to make the underly-

ing exhibits available to defendants in a timely fashion;

(2) Exhibits 109, 110, and 111 are irrelevant; (3) Exhibits

87, 88, 89, 109, 110 and 111 should Se stricken becausc no

foundation for the underlying documents was ever laid.

The Gurley defendants also contend that Exhibit 89 was

never admitted into evidence.

With respect to the last assertion, that is, the status

of plaintiff's exhibit 89, the Court finds that the exhibit

was admitted into evidence. At the trial, the Court pro-

vided the United States an opportunity to lay a founda-

tion for the admission of Exhibits 87, 88, and 89 (Tr. 512).

After the direct testimony of William Kime, the account-

ant for the Department of Justice, the Court admitted the

exhibits, subject to a possible motion to strike by defend-

ants should they succeed in discrediting the exhibits (Tr.

564).

>-Plaintiff’s Exhibit 87 is a cost summary of Region VI EPA expendi-

tures, Exhibit 88 is a cost summary of EPA’s headquarter costs, and

Exhibit 89 is a revised summary of the Environment and Natural

Resource Division’s costs relating to the case.

Plaintiff's Exhibits 109, 110 and 111 are the Department of Justice’s

expenditure and allotment reports for the fiscal years 1988, 1987, and

1989 respectively.

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With respect to defendants’ assertion that they did

not have sufficient time to review the documents, the

Court notes that the underlying documentation of the

cost summaries is extensive. However, the Court is per-

suaded that defendants had ample opportunity to review

the underlying documentation. Defendants could have

engaged in more extensive discovery prior to trial. When

defendants raised the timeliness issue prior to trial, the

Court afforded defendants additional time to review the

cost documentation and to interview witnesses prior to

the commencement of the trial. Furthermore, defendants

had ample opportunity to review the documentation dur-

ing the 21/2 month recess of the trial.

Defendants’ argument concerning the relevancy of

Exhibits 109, 110, and 111 is without merit. These reports

were used by William Kime to calculate the indirect costs,

contained in Exhibit 89. As Exhibit 89 is in evidence, the

documents used by Kime as a basis for his calculations,

i.e., Exhibits 109, 110, and 111, are relevant. Furthermore,

Phillip B. Stiness, testified as to the accuracy and reliabili-

ty of Exhibits 109-111.

Defendants’ primary argument is that the exhibits

should be stricken as the United States failed to lay the

proper foundation for admissibility of these cost sum-

maries. That is, defendants argue, the summaries are

based on inadmissible hearsay. See Ford Motor Co. v. Auto

Supply Co., 661 F.2d 1171, 1175 (8th Cir. 1981) (“A sum-

mary, if drawn from data that is inadmissible, likewise

must be excluded.”’)

A-67

The United States argues that the underlying doc-

uments are admissible under the public records exception

to the hearsay rule. Federal Rule of Evidence 803(8) pro-

vides that “[rJecords, reports ... or data compilations in

any form, of public offices or agencies setting forth

(A) the activities of the office or agency or (B) matters

observed pursuant to duty imposed by law as to which

matters there was a duty to report...” are not excluded

by the hearsay rule.

The Court finds that the United States has met its

burden to establish that the underlying documents are

public records by demonstrating that the reports are from

a public agency reflecting its work and there was a duty to

report or prepare the documents. In particular, the NCP

mandates that the EPA complete and maintain docu-

ments to support its action and to form the basis for cost

recovery. According (0\40 C.F.R. §300.160 (1991):

“(Djocumentaticn shall be sufficient to provide the

source and circumstances of the release, the identity of

responsible parties, the response action taken, accurate

accounting of federal, state, or private party costs in-

curred for response actions. ...”

The Court finds that the cost summaries are ad-

missible, and that the United States has provided adc-

quate documentation to support its claim for costs. See

U.S. v. Bell Petroleum Services, Inc., 734 F.Supp. 771, 781

(W.D. Tex. 1990).

A-68

Defendants arguc in the alternative that if Exhibit

87 is not stricken, then attorneys’ fees incurred by the

United States in prosecuting this action should not be in-

cluded as part of the costs. In particular, the Gurley de-

fendants point to the order dismissing Betty Gurley and

Gurley Refining Company, a partnership, Stating that “the

parties shall bear their own costs and attorney’s fees in

this matter.” Defendants assert that because the United

States can not determine what portion of its costs are di-

rectly attributable to preparing its case against the dis-

missed defendants, the Court should strike the United

States’ claim for all attorney’s fees. The Court will ad-

dress this argument later when discussing costs.°

Recovery of Costs

Pursuant to Section 107(a)(4)(A) of CERCLA,

defendants are liabic for “all costs of removal or remedial

action incurred by the United States Government .. . not

inconsistent with the national contingency plan.”’ 42

U.S.C. §9607(a)(4)(A).

Defendants have the burden of showing the Unit-

ed States’ response costs are inconsistent with the NCP.

Those response costs not inconsistent with the NCP are

©The Court reserved a number of rulings pertaining to evidentiary

issues. In its post-trial brief, EPA renews its objections to some por-

tions of Michael Bates’ testimony, and to testimony outside the ad-

ministrative record. To the extent a discussion of these evidentiary

issues is necessary, the Court will address them below.

A-69

conclusively presumed to be reasonable and therefore

recoverable. U.S. v. Northeastern Pharmaceutical & Chem-

ical Co., 810 F.2d 726, 747 (8th Cir. 1986), cert. denied,

484 U.S. 848 (1987) (“NEPACCO”).

Furthermore, in order to avoid liability for re-

sponse costs, defendants must demonstrate that the

EPA’s choice of response action was arbitrary and capri-

cious Or Otherwise not in accordance with law based on

the administrative record. 42 U.S.C. §9613(j)(2). See

NEPACCO, 810 F.2d at 748 (“Because determining the

appropriate remedial and removal action involves special-

ized knowledge and expertise, the choice of a particular

cleanup method is a matter within the discretion of the

EPA. The applicable standard of review is whether agen-

cy’s choice is arbitrary and capricious.”)

In reviewing the administrative record, the Court

should not attempt to substitute its judgment for the ex-

pertise of EPA officials. The Court’s role, ‘‘as the

CERCLA statute makes clear, is one of review on the

administrative record, searching for errors of procedure

and for glaring omissions or mistakes which indicate that

EPA has acted arbitrarily and capriciously.” U.S. v. Akzo

Coatings of America, Inc., 949 F.2d 1409, 1424-25 (oth Cir.

1991).

The Gurley defendants assert that the proposed

remedial action is arbitrary and capricious. In support of

their position, they point to the fact that the ADPC&E

did not agree to the proposed remedial action, and con-

A-70

Sidered it not cost-effective and too extensive.’ The state

did not formally object in 1986 to the proposed remedy;

instead it conveyed its concerns orally.®

ADPC&E began to object more vigorously to the

proposed remedial action in 1988 after the RI/FS of the

ground water operable unit and release of the design

analysis by the U.S. Army Corps of Engineers. ADPCKXE

continued to contend that the proposed remedy was not

cost-effective and further maintained that the proposed

remedial action was not protective of the health and envi-

ronment because of the possibility [of] ground water con-

tamination and the likelihood of hazardous air emissions

(See, e.g., Plaintiff's Exhibits 21, 30, 31, 32, Tr. 989, 1114-

1115). Instead of a RCRA vault, ADPCKE proposed that

the pit water be treated, the remaining waste solidificd,

’-Defendants also assert that EPA used flawed information in

evaluating the Gurley site for listing on the NPL. According to de-

fendants, EPA ignored advice by ADPC&E concerning the ranking

of the site, and that its refusal to use correct data is arbitrary and ca-

pricious.

The designation of the site on the NPL cannot be challenged by de-

fendants at this late date. 42 U.S.C. §9613(a), and the manner in

which the site was evaluated and ranked cannot be used as an exam-

ple of arbitrary and capricious action justifying the denial of costs

under §9613(g)(2).

Sat trial, Michael Bates, Chief of the hazardous waste division of

ADPC&E, testified that the State did not submit written comments

because based on past dealings, the State believed that EPA would

ignore the State’s concerns. The record reflects. however, that EPA

was aware of the State’s specific concerns. (AR Doc. 100, pg. 002327).

A-71

and capped in place with native clays (Plaintiff's Exhibit

30).

The Court is of the opinion that the dispute be-

tween ADPC&E and EPA is basically one of difference

of opinion concerning the appropriate removal and

remedial action. The Court is not persuaded that the

EPA’s choice is arbitrary and capricious. Defendants as

well as the ADPC&E had ample opportunity to voice

their opinions. The Court will not second guess the tech-

nical expertise of EPA. The record supports its decision.”

In furtherance of their position, defendants also

point to the fact that the State had consistently refused to

enter into a contract or cooperative agreement with EPA

*-In rebuttal, the United States called a chemist, Dr. Soundararajan,

to testify concerning the remedy proposed by ADPC&E, that is, the

use of Class C fly ash to solidify the waste (Tr. 1283-1275) [sic]: De-

fendants then attempted to rebut the testimony of Dr. Soundararajan

with their own scientists (Surrebuttal testimony of Dr. John Smith,

Dr. William Zuber, John Michael Hinds, November 13, 1990 and Dr.

Daniel R. Marks, November 14, 1990). This testimony is, of course,

outside the administrative record, and beyond the scope of review.

However, the opinions of these ‘“‘experts” merely demonstrate that

courts should refrain from delving into highly technical areas; the de-

cisions concerning appropriate actions are best left to those having

the technical expertise and knowledge in the field.

A-72

as required by 42 U.S.C. §9604.!°

Section 104(c)(3) bars expenditures from the Su-

perfund for remedial actions unless the state enters into a

cooperative agreement with the federal government.

However, a number of courts have held that liability un-

der Section 107(a) is independent of the authorized uses

of the Fund and separate from the cooperative agreement

required in Section 104(c)(3). That is, a cooperative

agreement with the state is not a prerequisite for a cost

recovery action brought pursuant to Section 107(a). See

U.S. v. Kramer, 757 F.Supp. 397, 421 (D. N.J. 1991); Unit-

ed States v. Conservation Chemical Co., 619 F.Supp. 162,

208 (W.D. Mo.. 1985); United States v. Wade, 577 F.Supp.

1326, 1335-36 (E.D. Pa. 1983).

Thus, the failure of the State to enter into a coop-

erative agreement with EPA does not bar recovery of

costs by EPA. It is not an indication that the response ac-

tions are arbitrary and capricious. At the most, the lack of

a cooperative agreement supports the Court’s conclusion

that the dispute between ADPC&E and EPA was a tech-

nical one concerning the appropriate remedy.

10.By letter dated September 7, 1990, the ADPC&E and EPA

reached agreement on the remedy to be implemented at the Gurley

Oil Pit Site. ADPC&E now agrees to a RCRA vault, however, the

design of the vault will be modified to address the State’s concerns.

(Plaintiff's Exhibit 117).

Furthermore, that the United States continued to

incur costs despite the opposition of the state does not

establish that the United States should not recover its

costs. Certainly, CERCLA does not contemplate that

EPA remain idie in the face of serious threats to health

and the environment. As mandated by the statute, EPA

moved forward to develop a plan to deal with the prob-

lems at the Gurley site. That it did so in the face of oppo-

sition by the state does not warrant a finding that the

EPA’s actions are arbitrary and capricious.'! Further-

more, that the remedy proposed is more expensive than

one proposed by the state, or more expensive than de-

fendants desired, docs not warrant to a finding that the

action is not cost-cffective or the costs incurred are in-

consistent with the NCP.

Finding that the costs are consistent with the NCP

and that the action is neither arbitrary nor capricious, the

Court must determine what costs the United States can

recover. The statute provides that the United States is

entitled to all costs not inconsistent with the NCP. 42

U.S.C. §9607(a). Thus, the United States is entitled to all

costs of administrative, investigative, construction, and

enforcement activities incurred in connection with the

11-Steve Gilrein, an EPA employee who has been responsible for the

Gurley Pit site since 1987, testified that the EPA had a number of

meetings with state personnel to discuss the design. EPA was aware

of the state concerns, but believed that the EPA had a verbal com-

mitment from the ADPC&E to provide the state ten percent match

prior to contracting with the Corps of Engineers to do the design.

(Tr. 356-360).

A-74

Site. 42 U.S.C. §9604(b). See e.g., U.S. v. Bell Petroleum

Services, Inc., 734 F.Supp. 771 (W.D. Tex. 1990) (United

States entitled to indirect costs, litigation expenses, cntire

amount of feasibility study costs, prejudgment interest as

of the date the cost accrued); U.S. v. Hardage, 733 F.Supp.

1424, 1432 (W.D. Okla. 1989) (United States could re-

cover investigative costs, litigation costs, but question of

fact as to whether United States entitled to indirect

costs); NEPACCO, 579 F.Supp. 823 (W.D. Mo. 1984),

aff'd in part and rev'd in part on other grounds, 810 F.2d

726 (8th Cir. 1986), cert. denied, 484 U.S. 848 (1987) (gov-

ernment’s response costs include investigations, monitor-

ing and testing; planning and implementation of response

action, and costs, including salarics and expenses, in-

curred associated with these activitics){.]

The United States presented evidence of the costs

it has incurred in connection with its response activities as

of February, 1990. The following is a summary of the

costs incurred:

a. Payroll expenses of EPA headquarters

employees in the amount of $1[,]317.09;

b. Payroll expenses of Region VI employ-

ees of $75,649.33;

c. Travel expenses of Region VI employees

of $10,050.80;

d. Payments to CH2MHill pursuant to con-

tract work in the amount of $363,255.14

pursuant to Contract No. 68-01-6692, Work

A-75

Assignment No. 98-6139.0, and $305,270.00 in

payments to CH2MHill for response activi-

ties conducted pursuant to EPA Contract

No. 68-01-7251, Work Assignment No. 134-

6139;

e. Payments to TechLaw pursuant to con-

tract work in the amount of $47,926.25;

f. Payments to Jacobs Engineering Group,

Inc. in the amount of $28,855.79 for con-

tract work;

g. Payments to Viar and contract laborato-

ries participating [in] the EPA’s Contract

Laboratory program in the amount of

$99,353.27;

h. Payments to Peer Consultants in the

amount of $3,157.90 for contract work;

i. Payments to the State of Arkansas pursu-

ant to Cooperative Agreement No. 646201

in the amount of $28,258.24;

j. Payments to the Department of Interior

pursuant to an interagency agreement in

the amount of $2,613.00;

k. Payments to the Army Corps of Engi-

neers pursuant to an interagency agreement

in the amount of $570,076.32;

1. Payments to the National Enforcement

and Investigation Center (NEIC) in the

amount of $6,878.87;

A-76

m. Payroll Expenses for responses activities

conducted at the site by Department of Jus-

tice (DOJ) personnel in the amount of

$13,472.80;

n. Costs of at least $2,440.85 in other direct

costs for response activities conducted at

the site by DOJ personnel;

O. Indirect costs in the amount of

$28[,]404.89 for activities performed by

DOJ personnel;

p. Indirect costs in the amount of

$201,839.50.

In total, the United States secks response costs in

the amount of $1,786,502.92 for costs incurred as of Feb-

ruary 28, 1990. The Court notes that while defendants

argue in general that EPA’s choicc of response action is

arbitrary and capricious, and that the costs are inconsist-

ent with the NCP they do not point to any particular cost

as not a proper response cost.

As noted above, the Gurley defendants assert that

the United States is not entitled to attorney’s fees based

on the language of the order dismissing Betty Gurley and

the partnership. That order provided that “the partics

shall bear their own costs and attorncy’s fees in this mat-

ter.” Defendants assert that because the United States

could not establish the exact amount of costs attributable

to the prosecution of the case against the dismissed de-

fendants, all attorney’s fees should be excluded.

ii

The majority of courts have imposed joint and

several liability in cases under $107 unless the defendants

are able to establish that a reasonable basis exists for

apportioning the harm among them. United States v.

Wade, 577 F.Supp. 1326, 1338 (E.D. Pa. 1983). See also

United States v. R. W. Meyer, Inc., 889 F.2d 1497, 1507 (6th

Cir. 1989), cert. denied, 494 U.S. 1057 (1990) (While

CERCLA does not mandate the imposition of joint and

several liability; it permits it in cases of indivisible harm);

United States v. Monsanto, 859 F.2d 160, 171-72 (4th Cir.

1988), cert. denied, 490 U.S. 1106 (1989) (CERCLA has

been interpreted to impose joint and several liability);

Kelly v. Thomas Solvent Co., 714 F.Supp. 1439, 1448

(W.D. Mich. 1989) (where two or more defendants are

responsible for an indivisible harm, cach is subject to li-

ability for the whole harm).

In this instance the harm is indivisible. That the

United States agreed to waive its claim for attorney’s fees

with respect to the dismissed defendants does not excuse

the remaining defendants from their responsibility for

attorney’s fees. The Court finds that the remaining Gurley

defendants are jointly and severally liable for all costs,

including attorney’s fecs.

A review of the costs incurred may lead one to

surmise that they are excessive. Indeed, much moncy has

been spent determining the remedy; the remedy, howev-

er, has yet to be implemented. Despite the seeming

enormity of the costs incurred, the Court must conclude

that the United States is entitled to recover them. As onc

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district court perhaps a little forcefully stated:

Taking a broader look at the purposes be-

hind CERCLA, the Court does not find

therein Congress’ desire to allow a respon-

sible party to sit back and watch the Gov-

ernment sift through the rubble of a pollut-

ed site, formulate a remedial solution and

take action and then attack every cost asso-

ciated therewith. This Court is of the opin-

ion gross misconduct on the part of the

Government should bar recovery. Yet the

‘Court keeps in mind the fact the wrongdo-

ers herein had the option of taking respon-

sibility for their own actions at the outset,

which, had they done so, would unques-

tionably have limited certain costs. Our

Government, God bless her, is a bureau-

cratic monster which, by definition, runs

inefficiently. ... Many, many costs would

have been unnecessary had the Defendants

shouldered the burden and sought to quick-

ly and efficiently clean up the mess they

made. Instead, their frec ride has increased

costs exponentially, including all the bu-

reaucratic expenses typical of a large Gov-

ernment, costs of discovery and trial, Court

costs ... the list is unending.

U.S. v. Bell Petroleum, 734 F.Supp. at 780-81.

In sum, the Court finds that the United States is

entitled to recover costs as set forth above in the amount

of $1,786,502.92 for costs incurred to February 28, 1990.

CERCLA also authorizes recovery of prejudgment

interest. 42 U.S.C. §9607(a) (“The amounts recoverable

A-79

in an action under this section shall include interest on

the amounts recoverable. Such intcrest shall accrue from

the later of (i) the date payment of a specified amount is

demanded in writing, or (ii) the date of the expenditure

concerned.”) Here, there is no indication when any spe-

cific amount was demanded. Indeed, the total amount

claimed was not made known to defendants until the con-

clusion of the United States’ case in chief. Thus, the

Court will award prejudgment intcrest from September

10, 1990, or the date the United States rested with respect

to its cost recovery action.

The United States also secks a declaratory judg-

ment of the liability of the Gurley defendants for future

response costs associated with the Gurley site. 42 U.S.C.

§9613(g)(2) (in an action for recovery of costs, “the court

shall enter a declaratory judgment on liability for re-

sponse costs or damages that will be binding on any sub-

sequent action or action to recover further response costs

or damages.”’) See U.S. v. Alcan Aluminum Corp., 755

F.Supp. 531, 543 (N.D. N.Y. 1991) (court enters declara-

tory judgment in plaintiffs’ favor that defendant liable to

plaintiffs for future response cost associated with the

site); U.S. v. Hardage, 733 F.Supp. 1424, 1439 (W.D. Okla.

1989) (while the Court cannot award costs until they are

incurred, the Court can determine liability for future re-

sponse costs). Thus, the Court grants the United States’

request for declaratory judgment in its favor and against

defendants with respect to liability for future response

costs.

Conclusion

In sum, the Court finds that the Gurley defendants

are jointly and severally liable to the United States for

$1,786,502.95 for costs incurred in connection with re-

sponse activities at the Gurley Pit Site as of February,

1990; prejudgment interest at the statutory rate from Sep-

tember 10, 1990. Declaratory judgment is also entered in

favor of the United States and against defendants for fu-

ture response costs to be incurred at the Gurley Pit Site.

Judgment will be entered accordingly.

It Is So Orverepd this 26 day of March, 1992.

GeorGE Howaro, Jr.

United States District Judge

In the United States District Court

Eastern District of Arkansas

Jonesboro Division

Civil No. J-C-87-291

United States of America Plaintiff

v.

Gurley Refining Co., et al. Defendants *

Amended Judgment

Pursuant to the Memorandum Opinion and Order

entered March 27, 1992, judgment is entered in favor of

plaintiff and against defendants in the amount of

$1,786,502.95 for costs incurred in connection with the

response activities at the Gurley Pit Site as of February

28, 1990; plaintiff is entitled to prejudgment interest at

the statutory rate from September 10, 1990. Declaratory

judgment is also entered in favor of plaintiff and against

defendants with respect to liability for future response

costs to be incurred at the Gurley Pit site. The cross-claim

of R. A. Caldwell is dismissed in its entirety.

ENTERED this 28th day of April, 1993.

GEORGE Howarb, JR.

United States District Judge

A-82

United States Court of Appeals

for the Eighth Circuit

No. 93-2702EAJ

United States of America, Appellee,

V.

Larry Gurley et al, Defendants,.

Gurley Refining Company, etc., et al., Appellants

Order Denying Petition for Rehearing

_ and Suggestion for Rehearing En Banc

The suggestion for rehcaring en banc is denied.

The petition for rehearing by the panel is also denied.

March 9, 1995

Order Entered at the Direction of the Court:

MICHAEL E. Gans

Clerk, U. S. Court of Appeals, Eighth Circuit

A-83

In the United States District Court

Eastern District of Arkansas

Jonesboro Division

Civil Action No. J-C-87-291

United States of America,

Plaintiff,

v.

Gurley Refining Company, Gurley

Refining Co., Inc., R. A. Caldwell,

William Martin Gurley, Betty

Gurley and Larry Gurlcy

Defendants.

Complaint

Plaintiff, United States of America, at the request

of the Administrator of the United States Environmental

Protection Agency (hereafter “EPA”) alleges:

Preliminary Statement

1. This is a civil action brought pursuant to Section

107(a) of the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980 (hereafter

“CERCLA”), 42 U.S.C. §9607(a) (as amended), for the

reimbursement of response costs incurred by the United

States in response to the release or threat of release of

hazardous substances from waste oil disposal pits in

Edmonston, Arkansas (hercinafter “Gurley site’).

A-84

Jurisdiction and Venue

2. This court has jurisdiction pursuant to 28 U.S.C.

$1345 and 42 U.S.C. §§9607 and 9613(b).

3. Venue is properly in this Court pursuant to 28

U.S.C. $1391(b) and 42 U.S.C. §9613(b).

Defendants

4. Mr. R. A. Caldwell is the owner of the property

on which the Gurley site is located.

5. Gurley Refining Company is a partnership doing

business in Arkansas. During the period 1970 through

1980, Gurley Refining Company Icased the land from

R. A. Caldwell and disposed of the waste oils at the Gur-

ley site.

6. Gurley Refining Co., Inc., is a corporation in-

corporated under the laws of the State of Arkansas that

does business in West Memphis, Arkansas. On informa-

tion and belief, Gurley Refining Company, Inc. gencrated

wastes that were disposed of at the Gurley site and cither

transported or arranged for transportation of wastes to

the site and the ultimate disposal of the wastes at the

Gurley site.

7. On information and belief, William Martin Gur-

ley, is President of and principal shareholder in Gurley

Refining Co., Inc. a, and partner in Gurlcy Refining

A-85

Company. William Gurlcy, at all times relevant herein,

was responsible for the conduct and management of the

Gurley site. William Gurley controlled the affairs and ac-

tivities of Gurley Refining Company, Inc., and Gurley

Refining Company.

8. On information and belict, Betty Gurley, is Vice

President and Secretary of and principal shareholder in

Gurley Refining Co., Inc., and partner in Gurley Refining

Company. Betty Gurley assisted in the operation of the

used oil refining process at the Gurley site.

9. Larry Gurley, is partner in Guriey Refining

Company and assisted in the opcration of the used oil

disposal process at the Gurley site.

General Allegations

10. The Gurley site consists of 3.25 acres, located

approximately 1.2 miles north of Edmonston, Arkansas,

Prior to 1970, the site consisted of one large pit, approxi-

mately 750 feet by 250 fect and between 9-15 feet in

depth. South and downgradient of the site by approxi-

mately one-eighth of a mile is the Fifteen Mile Bayou, a

tributary to the St. Francis which flows into the Mississip-

pi River.

11. In 1970, Gurley Refining Company and Gurley

Refining Co., Inc., obtained a permit from the Arkansas

Department of Pollution Control and Ecology

(ADPC&E) to usc the pit for waste disposal. Subsequent-

A-86

ly the defendants divided the pit into three cells, running

north to south.

12. During the period October 1970 through late

1975, the defendants filled the pits with waste material,

consisting of oil sludge and filter material from the used

oil refinery processes operated by the Gurley Refining

Co., Inc.

13. The waste material in the pits contains, inter

alia, polychlorinated biphenyls (PCBs) and heavy metals

including lead, barium, zinc and nickel. The pits also con-

tain water that is contaminated with the waste matcrial.

14. PCBs and heavy metals are hazardous sub-

stances as defined in Section 101(14) of CERCLA, 42

U.S.C. §9601(14).

15. During the period 1976 through 1980, in-

creased amounts of storm water caused the waste materi-

al in the pits to overflow the sides and enter Fifteen Mile

Bayou.

16. In 1980, the Gurley site was evaluated for list-

ing on the National Priorities list.

17. In December 1982, the Gurlcy site was added

to the National Priorities List. As a result of the listing,

EPA was authorized to spend monies from the fund es-

tablished pursuant to CERCLA, at the site for remedial

or removal actions.

A-87

18. In February 1983, the EPA contacted R. A.

i Caldwell and Larry Gurley of Gurley Refining Company

to inquire if either would be interested in performing a

Remedial Investigation and Feasibility Study (RI/FS) at

the Gurley site to determine the extent of contamination

of the site and propose a method of cleanup. Negotia-

tions continued until September 1983 without final

agreement between the parties. Thereafter, the EPA

undertook the task of preparing the RI/FS.

19. To date the United States has incurred in ex-

cess of $405,946.17 for remedial actions taken at the Site.

20. The United States is continuing to incur, and

will continue to incur further response costs, including

those under 42 U.S.C. §9607(a)(4)(b) at the Gurley site.

Claim for Relief

21. Section 107(a) of CERCLA, 42 U.S.C.

§9607(a) provides in pertinent part:

107(a) — Notwithstanding any other provision or

rule of law, and subject only to the defenses sect

forth in subsection (b) of this section—

(1) the owner or operator of a... . facility,

(2) any person who at the time of disposal of

any hazardous substance owned or operat-

ed any facility at which such hazardous sub-

stances were disposed of,

A-88

(3) any person who by contract, agreement, or

otherwise arranged for disposal or treat-

ment, Or arrangement for transport for dis-

posal or treatment, of hazardous substances

owned or possessed by such person, by any

other party or entity, at any facility ov.ned

or operated by another party or entity and

containing such hazardous substances, and

(4) any person who accepts or accepted any

hazardous substances for transport to dis-

posal or treatment facilities or sites elected

by such person, from which there is a re-

lease, or a threatened release which causes

the incurrence of response costs, of a haz-

ardous substance, shall be liable for—

. (A) all costs of removal or remedial action

incurred by the United States Government . . .

not inconsistent with the national contingency

plan; ..

22. The term “facility” is defined in Section 101(9)

of CERCLA, 42 U.S.C. §9601(9) as

(A) any building, structure, installation equip-

ment, pipe or pipeline (including any Pipe into

a sewer or publicly owned treatment works),

well, pit, pond, lagoon, impoundment, ditch,

landfill, storage container, motor vehicle, roll-

ing stock, or aircraft, or (B) any site or area

where a hazardous substance has been deposit-

ed, stored, disposed of, or placed, or otherwise

come to be located; but docs not include any

A-89

consumer product in consumer use or any ves-

sel;

23. The Gurley site is a facility within the meaning

of Section 101(°) of CERCLA, 42 U.S.C. §9601(9).

24. “Hazardous substance” is defined by Section

101(14) of CERCLA, 42 U.S.C. §9601(14), to include

(A) any substance designated pursuant to sec-

tion 311(b)(2)(A) of the Federal Water Pollu-

tion Control Act, (B) any clement, compound,

mixture, solution, or substance designated pur-

suant to Section 102 of the Act, (C) any haz-

ardous waste having the characteristics identi-

fied under or listed pursuant to Section 3001 of

the Solid Waste Disposal Act (but not includ-

ing any waste the regulation of which under the

Solid Waste Disposal Act has been suspended

by Act of Congress), (D) any toxic pollutant

listed under Section 307(a) of the Federal

Water Pollution Control Act, (E) any hazard-

ous air pollutant listed under Section 112 of

the Clean Air Act, and (F) any imminently

hazardous chemical substance or mixture with

respect to which the administrator has taken

action pursuant to Section 7 of the Toxic Sub-

stances Control Act.

25. ‘‘Release”’ is defined in Section 101(22) of

CERCLA, 42 U.S.C. §9601(22), as

any spilling, leaking, pumping, pouring, emitting,

emptying, discharging, injecting, escaping, lcach-

A-90)

ee

ing, dumping, or disposing into the environ-

ment, ...

26. At relevant times, a rclease or substantial

threat of a release of hazardous substances occurred at

the Gurley site.

27. The materials in the pits at the Gurley site are

“hazardous substances” within the meaning of Section

101(14), 42 U.S.C. §9601(14).

28. The United States has incurred costs for ac-

tions taken in response to the release or threat of release

of hazardous substances from the Gurley site.

29The Unifed States’ actions concerning the Gur-

ley site constitute “remedial” actions as defined by Sec-

tion 101(24) of CERCLA, 42 U.S.C. §9601(24).

30. The United States’ remedial actions concern-

ing the Gurley site were not inconsistent with the Nation-

al Contingency Plan.

31. Defendants R. A. Caldwell, Gurley Refining

Company, Gurley Refining Co., Inc., William Martin Gur-

ley, Betty Gurley, and Larry Gurley were, at the time of

disposal of the hazardous wastes, the operators of the

Gurley site at which hazardous wastes were disposed or

the generators of the hazardous waste or both.

A-91

32. Defendant R. A. Caldwell is liable under Sec-

tion 107(a)(1), 42 U.S.C. §9601(a)(1), to the United

States for the cost of the remedial actions that the United

States has taken at the Site.

33. Gurley Refining Company and Gurley Refining

Company, Inc., William Martin Gurley, Betty Gurley, and

Larry Gurley are liable under Section 107(a)(2)(3) of

CERCLA, 42 U.S.C. §9607(a)(2)(3), to the United States

for the cost of the remedial actions it has taken at the

site.

34. The defendants are also liable under Section

107(a) of CERCLA, 42 U.S.C. §9607(a), for the costs the

United States will incur pursuant to Section 104(b) of

CERCLA, 42 U.S.C. §9604(b), to recover the costs of the

remedial action it has taken concerning the site.

Prayer for Relief

WHEREFORE, the United States prays that this

Court:

1. Enter judgment against the defendants, jointly

and severally, in favor of the United States for all costs

incurred and to be incurred by the United States in re-

sponse to the release or threat of release of hazardous

substance at the Gurlcy site, plus interest, which costs are

currently in excess of $405,946.17;

A-92

2. Grant such other relief as this Court deems just

and proper.

Respecttully submitted,

RoGer J. MARZULLA

Acting Assistant Attorney General

Land and Natural Resources Division

Craic E. JOHNSON

Attorney

Environmental Enforcement Section

United States Department of Justice

CHARLES A. BANKS

United States Attorney

Eastern District of Arkansas

By: A. Douc Cuavis

Assistant United States Attorney

Eastern District of Arkansas

A-93

ij

In the United States District Court

Eastern District of Arkansas

Jonesboro Division

Civil No. J-C-87-291

United States of America Plaintiff

v.

Gurley Refining Company, Gurley

Refining Co.., Inc., William Martin

Gurley, Betty Gurley and

Larry Gurley Defendants

Second Amended and Supplemented Answer

of Gurley Refining Company, Gurley

Refining Co., Inc., William Martin

Gurley, and Betty Gurley

Comes now Gurley Refining Company, Gurley

Refining Co., Inc., William Martin Gurley, and Betty Gur-

ley, by and through their attorneys for their second

amended and suppicmented answer to the complaint filed

herein, and do state as follows:

1. While denying that costs have been incurred in

response to the release or threat of release of hazardous

substances, admit that this is a civil action brought pursu-

ant to §107(a) of the Comprehensive Environmental

Response, Compensation, and Liability Act of 1980

(hereinafter “CERCLA”), 42 U.S.C. §9607(a) (as amend-

ed), for the reimbursement of response costs allegedly

incurred by the United States in response to the alleged

A-94

release or threat of release of alleged hazardous sub-

stances from waste oil disposal pits in Edmondson, Ar-

kansas (hereinafter “Gurley Site”).

2. Admit that this court has subject matter jurisdic-

tion pursuant to 28 U.S.C. §1345 and 42 U.S.C. §§9607

and 9613(b).

3. Admit that venue is proper in this court pursu-

ant to 28 U.S.C. §1391(b) and 42 U.S.C. §9613(b).

4. Admit that R. A. Caldwell is the owner of the

property on which the Gurley Site is located.

5. Admit that Gurley Refining Company is a part-

nership doing business in Arkansas. Deny that during the

period 1970 through 1980 Gurley Refining Company

leased the land from R. A. Caldwell or disposed of the

waste oils at the Gurley Site.

6. Admit that Gurley Refining Co., Inc. is a corpo-

ration incorporated under the laws of the State of Arkan-

sas. Deny that Gurlcy Refining Co., Inc. presently docs

business in West Memphis, Arkansas or elsewhere. Admit

that Gurley Refining Co., Inc. generated wastes that were

disposed of at the Gurley Site and transported or ar-

ranged for the transportation of waste to the site and the

ultimate disposal of waste at the Gurley Site. (The word

“waste” is used in this paragraph in its broad sense and

not as defined by CERCLA.)

A-95

7. Admit that William Martin Gurley is president

of and principal shareholder in Gurley Refining Co., Inc.

and is a partner in Gurley Refining Company, a partner-

ship. Deny that William Martin Gurley, in his individual

capacity, was at any time responsible for the conduct and

management of the Gurlcy Site. Deny that William Mar-

tin Gurley, in his individual capacity, at any time con-

trolled the affairs or activitics of Gurley Refining Co.,

Inc. Admit that William Martin Guricy, as a partner in

Gurley Refining Company, controlled in part the affairs

and activities of Gurley Refining Company, a partnership.

8. Admit that Betty Gurley is vice-president and

secretary of Gurley Refining Co., Inc. Admit that Betty

Gurley is a sharcholder in Guricy Refining Co., Inc.,

though she owns less than a controlling interest. Admit

that Betty Gurley is a partner in Gurley Refining Compa-

ny. Deny that Betty Gurley, in her individual capacity, as-

sisted in the operation of the used oil refining (actually

re-refining) process at the Gurlcy Site.

9. Admit that Larry Gurlcy is a partner in Gurley

Refining Company. Deny that Larry Gurley, in his indi-

vidual capacity, assisted in the operation of the used oil

disposal process at the Gurley Site.

10. Admit that the Gurley Site consists of 3.25

acres, more or less, located approximately 1.2 miles north

of Edmondson, Arkansas. Admit that prior to 1970 the

site consisted of one large pit approximately 750 feet by

250 feet and between ninc to fiftecn feet in depth. Admit

A-96

that south and downgradient of the site by approximately

1/8 of a mile is the Fifteen Mile Bayou, a tributary to the

St. Francis River which flows into the Mississippi River.

11. Admit that Gurley Refining Co., Inc. obtained

a permit from the Arkansas Department of Pollution

Control and Ecology to use the pit for waste disposal,

though the exact year in which such permit was obtained

is not known at present. Admit that Gurley Refining Co.,

Inc. subsequent to 1970 divided the pit into three cells

running north to south. Deny that Gurley Refining Com-

pany, William Martin Gurley, Betty Gurley, or Larry Gur-

ley divided the pit into three cells running north to south

subsequent to 1970. Deny that in 1970 Gurley Refining

Company obtained a permit from the Arkansas Depart-

ment of Pollution Control and Ecology to use the pit for

waste disposal.

12. Admit that during the period beginning Octo-

ber 1970 and ending in 1975, Gurley Refining Co., Inc.

placed into the pits material from its oil refining (actually

re-refining) proccss operated by Gurley Refining Co., Inc.

Deny that such material constituted waste material, oil

sludge or filter material as defined by CERCLA. Deny

that Gurley Refining Company, William Martin Gurley,

Betty Gurley, and/or Larry Gurley placed any materials in

the pits at any time.

13. For lack of information upon which to base a

reasonable belief at this time, deny that the waste materi-

al in the pit contains, inter alia, polychlorinated biphenyls

A-97

(PCBs) and heavy metals including lead, barium, zinc and

nickel and further deny that the pit also contains water

that is contaminated with the waste material.

therein, can therefore not be in any way liable to the

United States of America in this cause.

37. Gurley Refining Co., Inc. by way of further af-

firmative defense states that in cause No. J-C-83-399 for-

merly pending in the United States District Court for the

Eastern District of Arkansas, Jonesboro Division, the

United States of America brought suit pursuant to the

Clean Waters Act as set forth in 33 U.S.C. §1321 et seq. to

recover from Gurley Refining Co., Inc. removal costs of

discharges from the Gurley Site; that a judgment was en-

tered in said cause; that the issues and claims in the

present cause are ones which were litigated or which

could have been litigated in the former cause; and that

the United States of Amcrica is estopped under the prin-

ciple of res judicata from pursuing the instant cause as

against Gurley Refining Co., Inc.

38. By way of further affirmative defense, William

Martin Gurley, Betty Gurley, and Larry Gurley, defend-

ants, state that the afore-referenced judgment entered in

cause No. J-C-83-399 formerly pending in the United

States District Court for the Eastern District of Arkansas,

Jonesboro Division, estops the United States of America

under the principles of res judicata from litigating the in-

A-98

stant cause of action against these defendants, or any of

them, since such issues are ones which were raised or

which could have been raised in the afore-referenced

former cause and since William Martin Gurley, Betty

Gurley and Larry Gurley are and were in privity with Gur-

ley Refining Co., Inc. in the following respects:

(a) William Martin Gurley, Betty Gurley and Larry

Gurley were officers or agents of Gurley Refining Co.,

Inc.;

(b) William Martin Gurley and Larry Gurley man-

aged, conducted, and participated in the afore-referenced

former litigation; and

(c) William Martin Gurley and Betty Gurley are,

and at all times relevant hereto have been, the sole stock-

holders in Gurley Refining Co., Inc., a closely held corpo-

ration.

39. By way of further affirmative defense, these

defendants state that:

(a) This cause of action is one founded upon a

contract implied in law or fact and is barred by the six

year limitation of action set forth at 28 U.S.C. §2415(a);

or

(b) Alternatively and only in the event that it

should be found that this cause of action is not one

founded upon a contract implied in law or fact, then the

A-99

cause of action is one founded upon a tort and is barred

by the three year limitation sect forth in 28 U.S.C.

§2415(b); and

(c) In either event, the limitation set forth in 42

U.S.C. §9612(d) as amended on October 17, 1986 is not

applicable to this cause of action because the cause of ac-

tion was barred prior to October 17, 1986 by the applica-

ble statute of limitation set

44. The pits upon the Guricy Site contain rain

water which, due to storm water accumulations, caused a

discharge (not of waste matcrial but of storm water) from

these pits into Fifteen Mile Bayou between the years 1976

and 1980. The plaintiff sued Gurley Refining Co., Inc. as

an “Operator” under the Clean Water Act (33 U.S.C.

§1321, et seg.) for said discharges and obtained a judg-

ment against the defendant. The plaintiff was recently

advised by representatives of Gurley Refining Co., Inc.

(through the State of Arkansas) that there was a probabil-

ity of a “Release” from the Gurley Site as defined in 42

U.S.C. §9601(22) because of the breached integrity of the

south berm of the pits. Whereupon, plaintiff directed the

State of Arkansas to assume the role of “lead agency” so

as to alleviate the threat of a substantial endangerment to

the environment by way of such a release. The State of

Arkansas, in conjunction with the defendant, Gurley Re-

fining Co., Inc., moved onto the Gurlicy Site; and Gurley

Refining Co., Inc. is presently treating and decanting the

A-100

"

rain water so as to relieve the danger of a release, all of

which is being done pursuant to and consistent with the

National Contingency Plan but not pursuant to the flawed

RI/FS referred to in paragraph 43 hereof since that RI/FS

called for a decantation of the storm water in a manner

“inconsistent” with the NCP.

45. The plaintiff, on behalf of “the President,” has

provided for a “flawed” remedial action pursuant to 42

U.S.C. §9604(c)(3), despite the fact that the State of Ar-

Kansas (in recognition of the fact that the RI/FS prepared

by or at the direction of the EPA was inconsistent with

the NCP) has consistently refused to assure the plaintiff

of a “10 per centum of costs of remedial action... ”, per

42 U.S.C. §9604(c)(3). Thus, the claim on behalf of the

plaintiff as to the already expended monies for an RI/FS

and for future costs to be expended inconsistent with the

NCP and pursuant to a flawed RI/FS is in violation of 42

U.S.C. §9604(c)(3) and therefore constitutes actions arbi-

trary and capricious and not in accordance with the law.

46. The administrative record (which has just been

certified to this Court by the plaintiff apparently in viola-

tion of 42 U.S.C. §9604(c)(3)) fails to recognize that the

proposed decantation of the storm water in the pits

(which has almost been completed by defendant, Gurley

Refining Co., Inc., in a manner consistent with the NCP)

and the subsequent proposed remcdial action on waste in

the pit will in fact, because of the basic inconsistency with

the NCP, expose the environment and members of neigh-

boring households to the threat of release of noxious

A-101

odors and the probable evacuation of their homes for a

substantial period of time. Neither of these possibilities

Fi are expressed in the “flawed” RI/FS nor have those pos-

sibilities been subject of a public hearing attended by

he those persons who may be exposed to odors or evacuated.

| The foregoing failure is arbitrary and

ck ook

the response action, as evidenced by the “flawed” RI/FS,

is arbitrary and capricious and that the damages claimed

to date by the plaintiff should not be awarded in light of

the admonitions of 42 U.S.C. §9613(j)(3).

48. Defendants, William M. Guricy and Betty Gur-

ley, allege that the plaintiff hcrein in the case of United

States of America v. R. A. Caldwell and Gurley Refining

Company, being No. J-C-83-399 in the United States Dis-

trict Court for the Eastern District of Arkansas, Jones-

boro Division, has previously sued the defendant Gurlicy

Refining Company [sic] Gurlcy Refining Co., Inc., and

established by a judicial order that Gurley Refining Co.,

Inc., disposed of waste oil, from the rerefining process of

used motor oil, in the so-called Gurley pits and as such

became an “‘Operator”’ for the purpose of 42 U.S.C.

§9607(a)(1) and (a)(2). In that litigation the plaintitf

herein also established that the defendant, Gurley Refin-

ing Co., Inc., was the entity which disposed of the oil from

its recycling plant in the so-called Gurley pits. Therefore,

the plaintiff herein is judicially estopped from insisting in

this litigation that any entity other than Guricy Refining

A-102

Co., Inc., was the “Operator” of the disposal area and/or

was responsible for the disposal of the waste oil in that

disposal area.

49. Additionally, the defendants, William M. Gur-

ley and Betty Gurley, state that from the late 1940s Gur-

ley Oil Co. (which was originally a sole proprictorship

owned by William M. Gurley but later became an Arkan-

Sas Corporation operated in the manner of a partnership

by William M. Gurley and Betty Gurlcy)

By: Genrry & BoeHM

Attorneys at Law

600 Dome Building

Chattanooga, TN 37402

(615) 756-5020

and

By: Rieves & Mayron

Attorneys at Law

P.O. Box 1359

West Memphis, AR 72302

(501) 735-3420

By: Ev-ron A. Rieves 1V

A-103

CERTIFICATE OF SERVICE

I, one of the attorncys for the defendants, state

that I have served a copy of the foregoing pleading on the

attorneys of record by depositing a copy thereof, postage

prepaid, in the United States Mail, addressed as follows:

A. Doug Chavis

Assistant U.S. Attorney

P. ©. Box 1229

Little Rock, AR 72203

Mr. Craig Johnson

U.S. Department of Justice

P. O. Box 7611

Ben Franklin Station

Washington, DC 20044

Mr. Bob Lawson

Lincoln & Lawson

Centre Place, Suite 200

212 Center Street

Little Rock, AR 72201

Ms. Debra K. Brown

Mitchell, Williams, Selig & Tucker

1000 Savers Federal Building

Capitol Avenue at Spring Street

Little Rock, AR 72201

A-104

es

This 17 day of October, 1989.

Evton A. Rieves ]TV

In the United States District Court

Eastern District of Arkansas

Civil No. J-C-87-291

United States of America, Plaintiff,

v.

Gurley Refining Company,

Gurley Refining Co., Inc.

R. A. Caldwell

William Martin Gurley

Betty Gurley

Larry Gurley Defendants.

United States’ First Set of Requests

for Admissions to Defendant

William M. Gurley

Pursuant to Rules 26, 36 and 37(c) of the Federal

Rules of Civil Procedure, the United States requests De-

fendant William M. Guricy to admit or deny, in writing

and under oath, the following requests for admissions and

serve such answers on the United States within 30 days.

A-105

Definitions and Instructions

to each request for admission.

A. If any objection to any of this discovery is made,

please state the rcasons therefor.

> 66

“facility,

tional

| N. A request that may present for admission a

matter that is an ultimate or genuine issue for trial shall

not, on that ground alone, be objectionable. F.R.C.P.

36(a).

O. If you fail to admit the truth of any statement

contained herein, and the United States thercafter proves

the truth of the matter, the United States may apply to

the court for an order requiring you to pay the United

States’ reasonable expenses incurred in making the proof.

F.R.C.P. Rule 37(c).

P. In each of the Requests for Admission, the

waste products referred to are the waste products pro-

duced by the oil re-refinery operated by Gurley Refining

Co., Inc., and located at 800 South Main Street, West

Memphis, Arkansas.

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Each definition and instruction herein applies fully

B. For the purposes of these admissions the terms

hazardous substances” “release,” “disposal,”

“person,” “remove” or “removal,” “response” and “‘na-

Q. All references to the masculine gender include

the feminine gender.

R. The term “PCB” refers generically to polychlor-

inated biphenyls.

S. The term “threatened release” has that meaning

given in CERCLA.

Requests for Admission

1. Mr. William Gurley was president of Gurley

Refining Co., Inc., during the period of time that Gurley

Refining Co., Inc., deposited waste matcrial from its re-

refining operation located at 800 South Main Street, West

Memphis, Arkansas, at the Gurley Pit.

2. In his capacity as president of Gurley Refining

Co., Inc., Mr. William M. Gurley personally sought a site

to dispose of the waste substances produced as a result of

the re-refining operations of Gurley Refining Co., Inc.

3. Mr. William M. Gurley personally sought a site

to dispose of the waste substances produced as a result of

the re-refining operations of Gurley Refining Co., Inc.

4. Mr. William M. Gurley personally negotiated

the lease of the Gurley Pit Site for Gurley Refining Co.,

Inc., with R. A. Caldwell.

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5. Mr. William M. Gurley negotiated the lease of

the Gurley Pit Site with R. A. Caldwell.

6. Gurley Refining Co., Inc., and Gurley Refining

Company, the corporation, as designated on the lease for

the Gurley Pit Site, arc one and the same corporations.

7. In his capacity as president of Guricy Refining

Co., Inc., Mr. William M. Gurley leased the Gurley Pit

Site from R. A. Caldwell.

8. In his capacity as president of Guricy Refining

Co., Inc., Mr. William M. Gurlcy was the “operator,” as

that term is defined at 42 U.S.C. §9601(20)(A), of the

Gurley Pit Site from approximately 1970 through 1975.

9. Mr. William M. Gurley was the “operator,” as

that term is defined at 42 U.S.C. §9601(20)(A) of the

Gurley Pit Site from approximately 1970 through 1975.

10. “Disposal,” as that term is defined at 42 U.S.C.

§9601(29), of the waste substances which resulted from

the re-refining operations of Gurley Refining Co., Inc.,

occurred at the Gurley Pit Site while Mr. William M. Gur-

ley was operator of the Site.

11. In his capacity as president of Gurley Refining

Co., Inc., Mr. William M. Gurley accompanicd the driver

that dumped the first truck load of waste substances from

Gurley Refining Co., Inc., at the Gurlcy Pit Site.

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12. Mr. William Gurlcy directed employees of

Gurley Refining Co., Inc., to place wastes produced by

that corporation in the Gurlcy Pit.

13. Mr. William M. Gurley accompanied the driver

that dumped the first truck load of waste substances

which resulted from the re-rcfining operations of Gurley

Refining Co., Inc., at the Guricy Pit Site.

14. Mr. William Gurley, in his capacity as presi-

dent of Gurley Refining Co., Inc., directed cmployccs of

Gurley Refining Co., Inc., to place wastes produced by

that corporation in the Gurlcy Pit.

15. The waste substances which resulted from the

re-refining operations of Gurley Refining Co., Inc., were

deposited, stored, disposed of, or placed, or otherwise

came to be located in the Gurley Pit Site while Mr. Wil-

liam M. Gurley was operator of the Site.

16. The waste substances produced as a result of

the re-refining operations of Gurlcy Refining Co., Inc.,

located at 800 S. Main Strect, West Memphis, Arkansas,

contain P.C.B.’s.

17. The waste substances produced as a result of

the re-refining operations at Gurley Refining Co., Inc.,

located at 800 S. Main Street, West Memphis, Arkansas,

contained heavy metals, lead, barium, and zinc.

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Ce es ES eRe a eh Opies ek lie et

18. The waste substances produced as a result of

the re-refining operations of Gurley Refining Co., Inc.,

located at 800 S. Main Strect, West Memphis, Arkansas,

contained heavy metals.

26. Barium is a “hazardous substance” as that term

[hazardous substancc] is defined in 42 U.S.C. §9601(14).

27. Zinc is a “hazardous substance” as that term

{hazardous substance] is defined in 42 U.S.C. §9601(14).

28. “Disposal,” as that term is defined at 42 U.S.C.

§9601(29), of the hazardous substances occurred at the

Gurley Pit Site during the period of time 1970 through

1975 while Mr. William M. Guricy was operator of the

Site.

29. Hazardous substances were deposited, stored,

disposed of, or placed, or otherwise came to be located in

the Gurley Pit Site while Mr. William Gurley was opera-

tor of the Site.

30. “Disposal,” as that term is defined at 42 U.S.C.

§9601(29), of the hazardous substances occurred at the

Gurley Pit Site during the period of time 1970 through

1975.

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31. Mr. William M. Gurley was responsible for the

day to day management of the Gurley Pit Site from 1970

through 1975.

32. Mr. William M. Gurley was responsible for the

day to day management of the Gurley Refining Co., Inc.,

from 1970 through 1975.

33. In his capacity as president of Gurley Refining

Co., Inc., Mr. William M. Gurlcy personally selected the

Gurley.Pit Site as the disposal site for waste substances

which resulted from the refining operations of Gurley

Refining Co., Inc.

34. Mr. William M. Gurley personally selected the

Gurley Pit Site as the disposal site for waste substances

which resulted from the re-refining operations of Gurley

Refining Co., Inc.

35. The Gurley Pit Site is a “facility” as that term

is defined at 42 U.S.C. §9601(9).

36. A “release” as that term is defined at 42 U.S.C.

§9601(22), or threat of release, of the waste substances

which resulted from the re-refining operations of Gurley

Refining Co., Inc., has occurred.

37. A “release” as that term is defined at 42 U.S.C.

§9601(22), of the waste substances which resulted from

the re-refining operations of Gurley Refining Co., Inc.,

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occurred while Mr. William M. Gurlcy was operator of

the Gurley Pit Site.

38. A “release” as that term is defined at 42 U.S.C.

§9601(22), of hazardous substances occurred while Mr.

William M. Gurley was operator of the Guricy Pit Site.

39. In his capacity as president of Gurley Refining

Co., Inc., Mr. William M. Gurlcy personally directed that

the waste substances produccd as a result of the re-

refining operations of Gurley Refining Co., Inc. be depos-

ited, stored, disposed of, placed, or otherwise came to be

located at the Guricy Pit Site.

40). Mr. William M. Gurley personally directed that

the waste substances produced as a result of the re-

refining operations of Gurley Refining Co., Inc. be depos-

ited, stored, disposed of, placed, or otherwise came to be

located at the Guricy Pit Site.

41. Mr. William M. Guricy was personally respon-

sible for the day to day operations of the Gurley Refining

Co., Inc., plant located at 800 South Main Street, West

Memphis, Arkansas.

42. Mr. William M. Gurley was personally respon-

sible for the day to day operations of the Gurley Pit Site.

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43. As a result of the release of hazardous sub-

stances at the Gurley Pit Site, the United States has in-

curred “response” costs, as that term [response] is de-

fined at 42 U.S.C. §9601(25).

ste fs sks

56. In the case United States v. R. A. Caldwell and

Gurley Refining Company, Civil Action No. JC-83-399, the

United States District Court for the Eastern District of

Arkansas made no determination of the liability of Mr.

William M. Gurley under 42 U.S.C. §$9607(a).

Respectfully submitted,

RIcHARD B. Stewart

Assistant Attorney General

Land and Natural Resources Division

By: Craic E. Jonson

Senior Attorney

United States Department of Justice

Environmental Enforcement Section

CHARLES A. Banks

United States Attorney

Eastern District of Arkansas

SAT Br? ENR: Neste anger

By:

Assistant United States Attorney

Eastern District of Arkansas

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none aha oe steers tin re ene esesntrem enero ney

In the United States District Court

Eastern District of Arkansas

Civil No. J-C-87-291

United States of Amcrica, Plaintiff,

v.

Gurley Refining Company,

Gurley Refining Co., Inc.

R. A. Caldwell

William Martin Guricy

Betty Gurlicy

Larry Gurley Defendants.

Motion of Plaintiff United States of America

for Partial Summary Judgment under CERCLA $107

The United States of America, plaintiff in this ac-

tion, hereby moves pursuant to Rule 56 of the Federal

Rules of Civil Procedure for partial summary judgment |

on the issue of liability under Section 107(a)(1) and (2) of |

the Comprehensive Environmental Response, Compensa-

tion, and Liability Act (CERCLA), 42 U.S.C. §9607(a)(1)

and (2), as amended by the Superfund Amendments and

Reauthorization Act (SARA), Pub. L. No. 99-499, 100

Stat. 1613 (1986), for costs and damages arising from a

hazardous waste site operated by the defendants Gurlcy

Refining Company, Inc., and William M. Gurley. The

plaintiff respectfully requests that this court find the de-

fendants Gurley Refining Co., Inc. and William M. Gur-

ley liable for the response costs incurred by the United

States under Section 107(a)(2)(3) of CERCLA, 42 U.S.C.

§9607(a)(2)(3) and center a declaratory judgment that

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Gurley Refining Co., Inc., and William Gurley shall be

liable for any response costs incurred by the United States

in the future with respect to the Gurley Pit Site. In sup-

port of this Motion, the United States submits the at-

tached memorandum in support of its Motion.

Respectfully submitted,

Donatp A. Carr

Acting Assistant Attorney General

Land and Natural Resources Division

By: Craic E. JouNnson

Senior Attorney

United States Department of Justice

Environmental Enforcement Section

CHARLES A. BANKS

United States Attorney

Eastern District of Arkansas

By:

Assistant United States Attorney

Eastern District of Arkansas

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