Petition for Writ of Certiorari — Beazer East, Inc. v. Mead Corp.

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A Constitutional Analysis of Magistrate Judge Authority,

Magistrate Judges Division of the Administrative

Office of the United States Courts,

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H.R. Rep. No. 94-1609 (1976), reprinted in

1976 U.S.C.C.A.N. 6162 .........54.. 14-15, 17

H.R. Rep. No. 90-1629 (1968), reprinted in

1968 U.S.C.C.A.N. 4252 2... cece eee eee ee 14

Judicial Conference of the United States, Long Range Plan

for the Federal Courts (Dec. 1995) ...... 2.6.6.4. 14

L. Ralph Mecham, /987 Annual Report of the Director

of the Administrative Office of the United States Courts

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Report of the Federal Courts Study

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Report to the Subcommittee on the Structure of the

Federal Courts of the Federal Courts Study Committee

(May |, 1989) in J] Federal Courts Study Committee,

Working Papers and Subcommittee Reports

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Kent Sinclair, Practice Before Federal Magistrates

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PETITION FOR A WRIT OF CERTIORARI

Petitioner Beazer East, Inc. (“Beazer”) respectfully

petitions for writ of certiorari to review the judgment and

opinion of the United States Court of Appeals for the Third

Circuit entered on June 23, 2005.

Pi BEL

The opinion of the Court of Appeals for the Third Circuit

(“Third Circuit”) is reported at 412 F.3d 429 (3d Cir. 2005).

App. 5a-42a. Beazer’s Petition for Rehearing En Banc was

denied without opinion, in an unpublished order issued on

July 21, 2005. App. la-2a. The various decisions of the

United States District Court for the Western District of

Pennsylvania that are included in the appendix were not

reported. App. 43a-247a. An earlier decision of the Court

of Appeals for the Third Circuit regarding this case is

reported at 34 F.3d 206 (3d Cir. 1994), cert. denied, 514

U.S. 1065 (1995).

JURISDICTION

The Third Circuit issued its order denying Beazer’s

Petition for Rehearing En Banc on July 21, 2005 (App.

la-2a), and this Petition for a Writ of Certiorari is being

timely filed within 90 days of that date. The jurisdiction of

this Court is invoked under 28 U.S.C. § 1254(1).

ST. RY PROV I LVE

Section 636(b)(3) of the Federal Magistrates Act

(“Magistrates Act”) provides: “A magistrate judge may be

assigned such additional duties as are not inconsistent with the

Constitution and laws of the United States.” 28 U.S.C.

§ 636(b)(3) (2005). Section 636 of the Magistrates Act, is

reproduced in the appendix to this petition. App. 248a-257a.

2

Section 113 of the Comprehensive Environmental

Response, Compensation and Liability Act (“CERCLA”), 42

U.S.C. § 9613, is reproduced in the appendix. App.

258a-269a.

STATEMENT OF THE CASE

This petition seeks review of a decision of the Third

Circuit overturning and remanding a judgment of the United

States District Court for the Western District of Pennsylvania

(the “District Court”). The central issue in this petition

involves the District Court’s referral of certain “additional

duties” to a magistrate judge pursuant to § 636(b)(3) of the

Magistrates Act for a report and recommendation on

appropriate equitable allocation factors in a CERCLA cost-

recovery case. Beazer requests that this Court ultimately hold

that there is no constitutional provision or federal law

prohibiting a magistrate judge from conducting a civil nonjury

hearing, even if a party objects, provided that the district

court makes a de novo determination of the magistrate’s

proposed findings.

The District Court had federal question jurisdiction over

this case under 42 U.S.C. § 9613(b), which vests exclusive

original jurisdiction over all controversies arising under

CERCLA with the United States District Courts. The Court

of Appeals had jurisdiction over the appeal from the District

Court’s final orders pursuant to 28 U.S.C. § 1291.

The underlying case involves responsibility for cleaning

up a coke plant that was operated by each of the parties in

Woodward, Alabama (the “Coke Plant”). The Mead

Corporation (“Mead”) was responsible for the operation of

the Coke Plant from 1910 until 1974, during which period the

District Court found that ninety percent of the wastes at issue

had been disposed of on the Coke Plant. App. 55a. In 1974,

3

Beazer acquired the Coke Plant from Mead pursuant to an

Asset Purchase Agreement and continued operations there

until December 29, 1988. Thereafter, Koppers Industries,

Inc. (“KII”) acquired the operations portion of the facility

from Beazer, and operated the Coke Plant until it was

deactivated in 1998 and ultimately demolished in 1999.

Since 1981 and without any contribution from Mead,

Beazer has incurred substantial environmental investigation

and remediation costs, now totaling more than $10 million, to

address the release and/or threat of release of hazardous

substances at the Coke Plant. Beazer filed this case with the

District Court in 1991, alleging causes of action under

CERCLA, the 1974 Asset Purchase Agreement and several

common law theories seeking contribution from Mead for its

fair share of the costs to investigate and remediate the

environmental conditions at the Coke Plant. The procedural

history of this case between the filing of the complaint and the

first time this case was addressed by the Third Circuit is set

forth at Beazer East, Inc. v. Mead, 34 F.3d at 209-10.

On July 8, 1996, after remand from the Third Circuit,

District Court Judge Gustave Diamond, in an effort to

preserve judicial economy, referred the matter to Magistrate

Judge Kenneth Benson (the “ Magistrate”) for: “(1) proposing

the equitable factors to be considered under § 9613(f) [of

CERCLA], (2) submitting briefs in support of an allocation of

Beazer’s clean-up costs among the parties and, after a hearing

if necessary, (3) a submission of report [to the District Court]

addressing the same.” App. 246a. Following a scheduling

conference, the Magistrate directed the parties to file briefs

and proposed findings of fact and conclusions of law on

allocation issues, at which time, if necessary, he would hold

a hearing on the matter. App. 240a-243a. Shortly after the

issuance of the Magistrate’s Order, Mead filed objections,

4

asserting that the Magistrate was without authority to either

conduct a hearing or issue a report and recommendation on

the subject of allocation factors. On April 30, 1997, the

District Court denied Mead’s Objections. App. 233a-239a.

Thereafter, the Magistrate undertook several tasks

designed to simplify the issues that would need to be

addressed by the District Court in this complex case, which

has generated over 360 separate District Court docket entries

in its fourteen-year history. Many of these entries highlight

the considerable effort spent by the Magistrate in narrowing

the issues that would be presented to the District Court. For

example, the Magistrate ruled on five separate motions in

limine (see Docket Nos. 269, 271) as well as thousands of

objections to both deposition designations (see Docket No.

302) and various exhibits (see Docket No. 302). After

conducting a hearing consistent with the District Court’s

reference, the Magistrate issued a report recommending

proposed findings of fact and conclusions of law.

Specifically, the Magistrate identified and proposed various

equitable allocation factors, and based on those factors

recommended the following allocation of liability: KII 2.5%;

Mead 73.75%; and Beazer the remaining 23.75%. App.

23la. Mead filed extensive objections to the report and

recommendation, which were considered by the District

Court. On March 7, 2000, the District Court issued an

opinion and order wherein he made a de novo determination

of the Magistrate’s findings by reviewing all of the evidence

presented before the Magistrate. he District Court revised

the Magistrate’s Proposed Findings of Fact and Conclusions

of Law by ruling that Mead’s fair share of response costs was

67.5%, with the remaining 32.5% being allocated to the post-

1974 Owners of the Coke Plant, Beazer and KII. App. 122a,

128a. In so doing, the District Court increased Beazer’s

7

share and gave greater weight to certain equitable allocation

factors proposed by the Magistrate.

Thereafter, the District Court held a trial on the damages

phase of this litigation in February 2002, at which time the

District Court determined which of Beazer’s claimed response

costs were necessary and consistent with the National

Contingency Plan, 40 C.F.R. § 300 (1990), and, therefore,

recoverable from Mead (less Beazer’s allocated share). In its

August 29, 2002 Order, the District Court entered judgment

in Beazer’s favor and against Mead in the amount of

$3,243,467.80. App. 50a-Sla. In addition, on September

17, 2002, the District Court entered an order awarding Beazer

$1,538,164.03 in prejudgment interest. App. 48a-49a.

Finally, on October 8, 2002, the District Court issued a

declaratory judgment that Mead is liable for 67.5% of 2 |

future response costs incurred by Beazer regarding the Coke

Plant. App. 43a-45a.

On September 27, 2002, Mead appealed to the Third

Circuit many of the rulings described above, but principally

challenged the District Court’s July 8, 1996 referral to the

Magistrate for a report and recommendation on the allocation

factors to be considered. After briefing, oral argument was

held before the Third Circuit on December 16, 2004. The

Third Circuit issued its Opinion on June 23, 2005 (App.

5a-42a) and denied Beazer’s Petition for Rehearing En Banc

on July 21; 2005. App. la-2a. As will be discussed below,

the Third Circuit’s Opinion represents a radically-restrictive,

fringe view of subsection (b)(3) of the Magistrates Act. In its

opinion, the Third Circuit: failed to identify any constitutional

or statutory prohibition against the District Court’s referral to

the Magistrate; incorrectly ruled that the Magistrate “resolved

factual issues going to one of the ultimate issues in the case”;

completely ignored the District Court’s de novo determination

6

of the Magistrate’s findings; and misapplied this Court’s

holdings in Peretz v. United States, 501 U.S. 923 (1991) and

Gomez v. United States, 490 U.S. 858 (1989), criminal cases

with constitutional implications not present in this case. App.

16a-34a.

For the reasons set forth more fully below, the reasoning,

analysis and ruling of the Third Circuit with respect to the

“additional duties” clause of the Magistrates Act is flawed

and adds to the widespread conflict and uncertainty between

the Circuit Courts of Appeal regarding the use of magistrates

in civil cases.

REASONS FOR GRANTING THE PETITION

Summary of Argument

In 28 U.S.C. § 636(b)(3), Congress authorized district

courts to utilize magistrates to the full extent “not inconsistent

with the Constitution or laws of the United States.” In this

case, the Third Circuit has taken an extremely restrictive view

of this language that would dramatically limit district courts’

use of magistrates in civil cases. This Court should grant

certiorari to review this decision for three reasons. First, this

decision is in direct conflict with a case decided by the Tenth

Circuit, and also conflicts with the ratienale articulated by

several other circuits. Second, the scope of the magistrate’s

authority pursuant to subsection (b)(3) in civil cases represents

an important question of federal law that has not been, but

shouid be, settled by this Court. Third, the Third Circuit’s

decision conflicts with the reasoning articulated by this Court

in its one decision addressing the scope of the “additional

duties” clause in the civil context, Mathews v. Weber, 423

U.S. 261 (1976), and with the decisions of this Court that

have discussed the scope of subsection (b)(3) in the criminal

7

context, particularly Peretz and Raddatz v. United States, 447

U.S. 667 (1980).

-t.— The Decision of the Third Circuit Directly Conflicts

with the Tenth Circuit and Generally Conflicts with

Decisions of Other Circuits.

Pursuant to Supreme Court Rule 10(a), there is a

compeiling reason for this Court to grant this Petition for

Certiorari. As will be discussed below, the Third Circuit's

decision in this case is in direct conflict with a case from the

Tenth Circuit, and generally conflicts with the reasoning and

rationale articulated by several courts of appeals that have

interpreted the scope of a magistrate’s authority when given

an assignment pursuant to § 636(b)(3) of the Magistrates Act.

A. The Third and Tenth Circuits are in Direct

Conflict.

In Clark v. Poulton, 963 F.2d 1361 (10th Cir.), cert.

denied, 506 U.S. 1014 (1992), the Tenth Circuit upheld the

nonconsensual referral to a magistrate for the complete

hearing of an entire civil case, followed by a report and

recommendation. The district court then made a de novo

determination of the magistrate’s proposed findings. The

Clark Court reasoned that the 42 U.S.C. .983 claim at issue

in that case was comparable in importance to a nonconsensual

referral of a prisoner’s challenge to the conditions of his

confinement, which this Court upheld in McCarthy v.

Bronson, 500 U.S. 136 (1991). The Tenth Circuit

emphasized the practical need for district courts to have

maximum flexibility in referring matters to magistrates.

Significantly, the Tenth Circuit was clear that its decision in

Clark was based entirely on subsection (b)(3), and not on

subsection (b)(1)(B), upon which the Clark Court specifically

declined to rely.

8

According to Judge Seymour’s Dissent in Clark, the

majority’s interpretation of subsection (b)(3) “would permit

a district court to refer to a magistrate the entire civil trial of

any plaintiff, without consent, so long as the district court

retained de novo review.” Id. at 1369 (Seymour, J.,

dissenting,. Based largely on the rationale contained in Judge

Seymour’s Dissent, Clark petitioned this Court for certiorari,

raising the question: “Does section 636(b)(3) authorize a

district court to refer a civil rights action to a Federal

Magistrate for trial without the plaintiff's consent?” No. 92-

557, 1992 WL 12073986, at i (1992). While this Court

declined to answer this question in Ci#rk, there is now a clear

split between the Tenth and Third Circuits. In Clark, the

Tenth Circuit answered this question in the affirmative and

authorized the expanded use of magistrates in civil cases so

long as the district court makes a de novo determination of the

magistrate’s findings. In contrast, the Third Circuit would

answer this question in the negative since it has now taken an

extremely narrow view of a magistrate’s authority to conduct

«videntiary hearings in civil cases, regardless of whether the

district court makes a de novo determination of the

magistrate’s findings.' Given the widespread use of

magistrates throughout the country (discussed in greater detail

below), this important conflict between the Third and Tenth

Circuits demands this Court’s attention.

' The reference at issue here was for the Magistrate to issue a report and

recommendation on CERCLA allocation factors. In Jn re Armco, 770

F.2d 103 (8th Cir. 1985), the Eighth Circuit approved use of a magistrate

to handle all aspects of a CERCLA case except liability. While other

circuits have criticized this approach, see Stauble v. Warrob, Inc., 977

F.2d 690, 696 (ist Cir. 1992) and Jn re United States, 816 F.2d 1083,

1091 (6th Cir. 1987), the circuit split on this narrow CERCLA referral

issue is indicative of broader uncertainty about magistrates’ civil authority.

9

B. The Third Civcuit’s Opinion Generally Conflicts

with the Manner in Which Other Circuits Have

Analyzed the Magistrates Act.

The Seventh and Second Circuit courts have agreed with

the Tenth Circuit's approach and applied the plain language

of § 636(b)(3) to approve an expansive view of district courts’

use of magistrates. See Jn Matter of Establishment Inspection

of Gilbert & Bennett Mfg., 589 F.2d 1335, 1340-41 (7th Cir.

1979) (involving an OSHA search warrant and holding that

magistrates could perform any duties that were not explicitly

excluded); Loral Corp. v. McDonnell Douglas Corp., 558

F.2d 1130, 1133 (2d Cir. 1977) (upholding nonconsensual

referral for an entire bench trial with only “clearly erroneous”

review due to length, complexity and classified information

involved).

The Third Circuit's discomfort with a magistrate making

a report and recommendation on “factual disputes going to

one of the ultimate issues in the case” (App. 6a) is also out of

step with the approach taken by the Fifth Circuit. See Feist

v. Jefferson County Comm'rs Court, 778 F.2d 250, 251 (Sth

Cir. 1985) (even if it would be improper to refer for a “jury

trial” without consent, referral was proper for an “evidentiary

hearing” to “dig beneath conciusional allegations” (quoting

Spears v. McCotter, 766 F.2d 179, 180 (Sth Cir. 1985)).’

2 The Fifth Circuit's approach has been endorsed by respected legal

commentators. For example, in Kent Sinclair, Practice Before Federal

Magistrates § 18.01(a) (2004), the author explains that the exceedingly

broad range of issues that may be referred for a report and

recommendation include “all aspects of a proceeding, entire phases of a

case (liability, damages), or more specific issues on which evidence is

required (amount of damages).” Professor Sinclair also wrote that there

is authority to refer “virtually any form of evidentiary hearing that would

be of assistance in an action pending in federal court.” /d.

10

The Third Circuit also f-damentally disagrees with the

Sixth and Fifth Circuits concerning the significance of the

district court’s de novo review. See Ford v. Estelle, 740 F.2d

374, 380 (Sth Cir. 1984) (the safeguarding role of the district

court remains in place even when an evidentiary hearing

expands into a full jury trial covering all issues presented);

Hill v. Duriron Co., 656 F.2d 1208, 1214 (6th Cir. 1981)

(referral of employment discrimination case for hearing and

recommended disposition would be proper if district court

conducted de novo review); see also Practice Before Federal

Magistrates § 18.01a, 18-3 (“So long as the result of the

evidentiary hearing before the magistrate will be treated as

proposed findings and a recommended disposition, all subject

to review by a district judge, the referral will be considered

proper.”).

The Third Circuit’s conclusion that the Magistrate

“resolved” critical factual disputes (App. 6a, 20a-22a) also

creates a circuit split because several other circuits have ruled

that an assignment under subsection (b)(3) does not “resolve”

anything provided that the magistrate’s proposed findings are

subject to de novo determination by the district court. See

Rajaratnam v. Moyer, 47 F.3d 922, 924-25 (7th Cir. 1995);

Massey v. City of Ferndale, 7 F.3d 506, 509 (6th Cir. 1993)

(matters assigned to a magistrate under § 636(b)(3) are not

subject to final determination by the magistrate); Estate of

Conners v. O'Connor, 6 F.3d 656, 659n.2 (9th Cir. 1993)

(magistrate did not have authority to enter final order under

§ 636(b)); McLeod, Alexander, Powel & Apffel, P.C. v.

Quarles, 925 F.2d 853, 856 n.5 (Sth Cir. 1991) (when a case

is referred to the magistrate under § 636(b)(3), “the

magistrate is not authorized to enter judgment for the court;

she makes only proposed findings of fact and recommends a

ruling on the motion”); Colo. Bldg. & Constr. Trades Council

v. B.B. Andersen Constr. Co., 879 F.2d 809, 811 (10th Cir.

11

1989) (stating that a magistrate assigned additional duties

under § 636(b)(3) “remains constantly subject to the inherent

supervisory power of the district judge”) (quoting Harding v.

Kurco, Inc., 603 F.2d 813, 814 (10th Cir. 1979) (quoting

Mathews v. Weber, 423 U.S. at 270)).

In summary, the above cases represent a variety of

approaches to the interpretation of subsection (b)(3) taken in

the courts of appeals. The approach taken by the Third

Circuit, however, represents an extreme departure that should

be overturned by this Court.

Il. This Court Has Not Ruled on the Application of

§ 636(b)(3) in Civil Cases, but This Is an Important

Question of Federal Law That Should Be Settled by

This Court.

Pursuant to Supreme Court Rule 10(c), one of the

compelling reasons for this Court to grant a Writ of Certiorari

is that the opinion being appealed from decides “an important

question of federal law that has not been, but should be,

settled by this Court.” The following section of this Petition

will address two points: (1) the application of § 636(b)(3) of

the Magistrates Act in civil cases has not yet been resolved by

this Court; and (2) this is an important question of federal law

that should be settled by this Court.

A. This Court Has Not Ruled on the Scope of the

Authority Created by Congress in § 636(b)(3) for

District Courts to Refer Non-Jury Civil Matters to

Magistrates Without the Consent of the Parties.

This case is a perfect opportunity for this Court to rule on

the constitutional and statutory limits of nonconsensual

referrals to magistrates in civil cases under § 636(b)(3).

While this Court’s decision in Mathews v. Weber, 423 U.S.

at 270 (permitting the use of magistrates to handle all aspects

12

of Social Security cases), provides guidance on this issue, this

Court has not ruled since the 1976 amendments to the

Magistrates Act upon the scope of district courts’ authority to

assign magistrates significant portions of civil cases over the

objections of a party where the district court retains the ability

to make a de novo determination of the magistrate’s proposed

findings. See A Constitutional Analysis of Magistrate Judge

Authority, Magistrate Judges Division of the Administrative

Office of the United States Courts, 150 F.R.D. 247, 251

(June 1993).

As discussed in greater detail below, while this Court’s

opinions regarding the Magistrates Act suggest that the

referral in this case was proper, this Court has only addressed

the scope of subsection (b)(3) in referrals to magistrates in

criminal cases, where fundamental constitutional concerns are

prevalent. See Peretz, 501 U.S. at 932-33 (magistrates may

conduct jury selection in a felony case only upon the parties’

consent); Gomez, 490 U.S. at 868-69 & n.15; and Raddaiz,

447 U.S. at 673 (district court could refer suppression hearing

to magistrate without parties’ consent).

B. This Is an Important Issue That Should Be Settled

by This Court.

There are three distinct reasons why the application of

§ 636(b)(3) of the Magistrates Act is an important issue that

should be settled by this Court: (1) providing guidance on

this issue is essential to judicial economy; (2) if this case is

not heard, the Third Circuit’s decision will have a significant

chilling effect on the Congressional intent to permit district

courts to experiment with the use of magistrates, an intent that

has been recognized and endorsed by this Court; and (3) the

express language of the statute requires that this Court

articulate any constitutional limitations regarding the

additional duties of magistrates.

13

1. Providing Guidance on the Scope of

“Additional Duties” That Can Be Assigned to

Magistrates Pursuant to § 636(b)(3) Is Essential

to Judicial Economy.

Resolution of this issue will have wide-ranging benefits.

Magistrates perform a “staggering volume of judicial work.”

Peretz, 501 U.S. at 928 n.5 (citing supporting statistics).

This Court has recognized that Congress intended magistrates

to play an “integral and important role in the federal judicial

system.” Gomez, 490 U.S. at 869 (quoting H.R. Rep. No.

96-287, at 5 (1979)); McCarthy, 500 U.S. at 142; Peretz, 501

U.S. at 928 (magistrate’s role is “nothing less than

indispensable”) (quoting Government of Virgin Islands

Williams , 892 F.2d 305, 308 (3d Cir. 1989)).

In the fourteen years since Peretz, the use of magistrates

has dramatically increased. Some illustrative statistics

demonstrate the vital role magistrates continue to play in the

federal court system. When Peretz was decided, magistrates

performed 162,512 civil case duties. L. Ralph Mecham,

1987 Annual Report of the Director of the Administrative

Office of the United States Courts 129 (Table S-28) (1987).

During the fiscal year ending September 20, 2004,

magistrates performed 303,895 civil case duties, an 87%

increase. See L. Ralph Mecham, 2004 Judicial Business of

the United States Courts 24-25, 61 (Table S-17) (2005).

Magistrates submitted significantly more reports and

recommendations in prisoner petitions and other civil matters

in 2004 than in 1987. /d. at 366 (Table M-4B); 1987 Annual

Report at 409 (Table M4-A). District court case loads

continue to increase. 2004 Judicial Business at 16 (Table 3),

20 (Table 5). Thus, the need to fully utilize magistrates

continues to become even more pressing than when Peretz

was decided.

14

The judiciary itself has recognized the importance of

clearly defining the scope of a magistrate’s authority. The

Report of the Federal Courts Study Committee 80 (1990)

stated: “Some district courts have been reluctant to expand

the role of magistrates because of confusion over magistrates’

constitutional and statutory authority.” See also Report to the

Subcommittee on the Structure of the Federal Courts of the

Federal Courts Study Committee (May 1, 1989) in IT Federal

Courts Study Committee, Working Papers and Subcommittee

Reports 79-156 (June |, 1990) (“The challenge is to persuade

judges to use magistrates fully.”). The Federal Courts Study

Committee recommended that district court judges be

provided with a specific list of tasks that fall within the

“additional duties” authorized in § 636(b)(3). Report of the

Federal Courts Study Committee 80 (1990). The Judicial

Conference has also called for a “national approach,” Judicial

Conference of the United States, Long Range Plan for the

Federal Courts 102 (Dec. 1995), which obviously must come

from this Court. Thus, Congress, the judiciary, and

commentators have all recognized the benefits to judicial

economy that will result from this Court defining the scope of

“additional duties” available to be delegated in civil cases

pursuant to subsection (b)(3).

2. The Third Circuit’s Decision Will Have a

Significant Chilling Effect on the Congressional

Intent to Permit District Courts to Experiment

with the Use of Magistrates.

The Magistrates Act was first enacted in 1968, to address

deficiencies in the former U.S. Commissioner system. H.R.

Rep. No. 90-1629 (1968), reprinted in 1968 U.S.C.C.A.N.

4252, 4255-57. Congress intended, from the beginning, for

district courts to use magistrates extensively. H.R. Rep. No.

94-1609 at 6 (1976), reprinted in 1976 U.S.C.C.A.N. 6162,

15

6166. The language giving magistrates authority to act in atiy

way “not inconsistent with the constitution and laws of the

United States” has been present since the initial act.

Originally, however, the “additional duties” clause was

simply included in the middle of § 636(b). 28 U.S.C.

§ 636(b) (1968).

Congress has amended the Magistrates Act on several

occasions, each time to expand magistrates’ duties and

authority. For example, in 1976, in response to this Court’s

narrow interpretation in Wingo v. Wedding, 418 U.S. 461

(1974), Congress amended the statute to indicate that

magistrates could hold evidentiary hearings in habeas corpus

cases. In these amendments, Congress also moved the

“additional duties” clause to a new, stand-alone subsection in

order to encourage experimentation with other uses of

magistrates and to emphasize that subsection (b)(3) was not

limited by other sections of the Act. H.R. Rep. No. 94-1609

at 12, reprinted in 1976 U.S.C.C.A.N. at 6172. District

courts, however, have still not been as innovative as Congress

had hoped and have continued to be “reluctant to expand the

role of magistrates because of confusion over magistrates’

constitutional and statutory authority.” Report of the Federal

Courts Study Committee 80 (1990).

This Court has recognized Congress’ intent several times.

In McCarthy, this Court, in interpreting § 636(b)(1)(B), took

guidance from the policy behind the Magistrates Act, the goal

of which the Court observed was to “authorize greater use of

magistrates to assist in handling an ever-increasing caseload.”

500 U.S. at 142-43 (quoting S. Rep. No. 94-625, at 2 (1976))

(holding that its permissive interpretation of the proscribed

duties of the magistrate is “consistent with this purpose

because it will allow referral of a broader category of

16

cases”).? In Raddatz, this Court noted legislative history

showing Congress’ belief that constitutional concerns were

satisfied so long as the ultimate determination was made by

the district court. 447 U.S. at 681 n.8 (“Congress reasoned

that permitting the exercise of an adjudicatory function by a

magistrate, subject to ultimate review by the district court,

would also pass constitutional muster.”). In Raddatz, this

Court recognized that suppression hearings often determine

the outcome of a case, but concluded that a de novo review

was sufficient to protect the constitutional interests involved.

Id. In a unanimous decision, this Court recently observed

that “Congress intended to authorize the nonconsensual

reference of ail prisoner petitions to a magistrate,” including

suits alleging isolated episodes of unconstitutional conduct.

Porter v. Nussle, 534 U.S. 516, 526-27 (2002) (emphasis in

original) (quoting McCarthy, 500 U.S. at 140).

In Peretz, this Court concluded that Congress intended “to

give federal judges significant leeway to experiment” with

other uses of magistrates. 501 U.S. at 932. This Court

encouraged district judges to explore possible ways to

3 Interestingly, in McCarthy, this Court expressed concern with generating

additional work for district courts resulting from potential disputes

regarding whether the case at issue was challenging ongoing conditions of

confinement or whether the case was challenging specific acts of alleged

misconduct. 500 U.S. at 143. In other words, this Court was concerned

with getting districts courts bogged down in aisputes over how to label a

particular case. Similarly, the Third Circuit's ruling in this case will lead

to ongoing disputes in district courts over whether the matters assigned to

a magistrate are “subsidiary” or “central” to the issue in the case.

Clearly, the authority of a magistrate to hear a particular phase of the case

should not hinge on the label applied to that phase. So long as the district

court retains the ability to make a de novo determination of the

magistrate’s proposed findings, the label of “subsidiary” or “central” is

irrelevant.

17

improve the efficiency of the judiciary “that had not already

been tried or even foreseen.” Jd. Congress has also clearly

invited creative use of magistrates. See, e.g., H.R. Rep. No.

94-1609, at 12, reprinted in 1976 U.S.C.C.A.N. at 6172

(under subsection (b)(3) “district courts would remain free to

experiment in the assignment of other duties to magistrates

which may not necessarily be included in the broad category

of ‘pretrial matters’”).

The District Court accepted the invitation to experiment

in a complex CERCLA case. The referral was limited to the

submission of a report and recommendation regarding the

equitable factors to be considered in resolving the allocation

inquiry. This innovative assignment to the Magistrate was

carefully controlled by the District Court, which retained full

authority to make a de novo determination regarding the

report and to make the final decision. The Magistrate

conducted a hearing that is analogous to lengthy, multiple-

expert Daubert hearing.* In addition to being innovative way

to exercise the equitable allocation discretion afforded the

District Court and reduce its workload in this complicated

CERCLA case, as discussed in greater detail below, the

referral at issue falls well within the boundaries established by

the statutory language and the opinions of this Court.

Nevertheless, the Third Circuit was scathing in its criticism,

both as to the scope of the referral and as to the veracity of

the District Court’s de novo review. App. 16a-34a. If

allowed to stand, the Third Circuit’s decision will result in the

District Court now having to re-hear the equitable allocation

phase of this case, which is now in its fourteenth year, despite

the fact that it has already considered this evidence. Is this

* For example, in Barnes v. Kerr Corp. , 418 F.3d 583 (6th Cir. 2005), the

Sixth Circuit acknowledged, and took no issue with the magistrate’s

conducting of a Daubert hearing.

18

the “reward” district courts should expect for accepting this

Court’s invitation to experiment?

The unique equitable powers vested in district courts

pursuant to § 113(f) of CERCLA present the exact type of

case that this Court has indicated would be appropriate to use

a magistrate. In light of the Congressional mandate to permit

district courts to experiment with the use of magistrates, the

Third Circuit’s view of § 636(b)(3) is overly narrow and

operates to prevent district courts from promoting judicial

economy, especially in CERCLA cases, which are notoriously

complex and prone to taxing the judicial system.’ At an

absolute minimum, the unique intersection of a district court’s

expansive discretion to (1) innovatively utilize magistrates,

and (2) determine the appropriate equitable factors for

allocation proceedings under § 113(f) of CERCLA, justified

the District Court’s referral in the instant case.

If allowed to stand, the Third Circuit’s Opinion will serve

as a stark warning to other courts inclined to experiment with

the use of magistrates. This Court and Congress have both

encouraged district courts to experiment with novel and

innovative uses of magistrates. The inflexible, formalistic

approach taken below will prevent precisely those uses of

magistrates aimed at improving judicial efficiency and will

bring the desired experimentation to a screeching halt.

> As noted earlier, contrary to the Third Circuit's assertion that this case

does not present any “administrative challenges,” this case involved a plant

that operated for nearly 100 years, and the record that was reviewed de

novo by the District Court included nearly 1,200 exhibits and volumes of

deposition designations.

19

3. The Express Language of the Statute Requires

That This Court Articulate Any Constitutional

Limitations Regarding the Additional Duties of

Magistrates.

The text of subsection (b)(3) cries out for a constitutional

interpretation by permitting the assignment of any “additional

duty” that is “not inconsistent with the Constitution and laws

of the United States.” Because there is no federal law that

limits a district court’s ability to refer a civil nonjury hearing

to a magistrate judge, any such limitation must emanate from

the Constitution. Accordingly, it is incumbent upon this

Court to articulate those limits. See, e.g., Williams v. Taylor,

529 U.S. 362, 378-79 (2000); Marbury v. Madison, 5 U.S.

(1 Cranch) 137, 177 (1803).

The structure of § 636 of the Magistrates Act places

decision-making authority with this Court. Subsection

(b)(1)(A) gives authority to refer “any” pretrial matters, with

certain enumerated exceptions, and requires only “clearly

erroneous” review by the district court. Subsection (b)(1)(B)

gives magistrates express authority to conduct “hearings,

including evidentiary hearings” and to submit proposed

findings and recommendations on the matters excepted in

subsection (b)(1)(A) and other matters, subject to a de novo

determination by the district court. Subsection (b)(2) covers

magistrates’ role as special masters. Subsection (c) provides

that, upon consent of the parties, magistrates may preside

over entire jury or non-jury civil trials and enter judgment,

with no review by the dis**ict court. In referrals under

§ 636(c), the Article III judge’s involvement effectively ends.

See Roell v. Withrow, 538 U.S. 580, 585 (2003) (“Unlike

nonconsensual referrals of pretrial but case-dispositive matters

under section 636(b)(1), which leave the district court free to

do as it sees fit with the magistrate judge’s recommendations,

20

a section 636(c)(1) referral gives the magistrate judge full

authority over dispositive motions.”); accord Ford, 740 F.2d

at 379 (subsection (b) nonconsensual referrals are

constitutional based on the district court’s control over the

ultimate disposition while subsection (c) referrals are

premised on the “entirely different notion” of the parties’

consent). Congress intended subsection (b)(3) to fill the gaps

left in these provisions. See Peretz, 501 U.S. at 932

(recognizing Congress’ intent for full use of magistrates to the

limits established by the Constitution or other law by

including a “broad residuary clause”).

In Peretz, this Court relied upon the fact that the

defendant consented to the assignment of jury selection to the

magistrate, of a duty that is not readily susceptible to de novo

review. /d. The text of subsection (b)(3), however, in no

way conditions a magistrate’s authority upon a party’s

consent. Moreover, Peretz itself acknowledges, “If Congress

had intended to strictly limit these additional duties to

functions considered in the committee hearings or debates,

presumably it would have included in the same statute a bill

of particulars rather than a broad residuary clause.” /d. at

932-33. Further, because subsection (c) explicitly deals with

situations in which a party has consented, the lack of a

consent requirement in subsection (b)(3) must be regarded as

intentional. This is the logical reading of § 636—subsection

(b) deals with nonconsensual designations, and subsection (c)

deals with consensual designations.

The natural question then becomes, why did Congress

provide for consensual designations of nonjury civil matters

in § 636(c) if such matters can be designated without consent

pursuant to § 636 (b)(3)? The answer to this question lies in

the review of the magistrate’s findings, which is

fundamentally different—under subsection (b)(3) such a

21

decision is subject to the district court’s de novo

determination, while under subsection (c)(1) such a decision

is not reviewed at all by the district court. This distinction is

extremely important. However, because the lower courts are

clearly in conflict on this issue, this Court should clarify this

issue by holding ‘as suggested by this Court in Peretz) that

subsection (b)(3) delegations are subject to a de novo

determination by the district court.

111.The Third Circuit’s Decision Conflicts with Relevant

Decisions of This Court.

This Court should grant this Writ of Certiorari because the

opinion being appealed from “has decided an important

federal question in a way that conflicts with relevant decisions

of this Court.” Supreme Court R. 10(c). Although this Court

has not directly addressed the application of § 636(b)(3) to

nonconsensual referrals to magistrates in civil cases, this

Court has established certain underlying principles that apply

to this case, and the Third Circuit’s opinion violates two such

fundamental principles. First, this Court has clearly indicated

that for a referral to be invalidated there must be a

Constitutional limitation under Article III or the Due Process

clause. The Third Circuit did not articulate either such

limitation. Second, this Court has found referrals to

magistrates to be improper only as to actions for which a de

novo determination is virtually impossible. Contrary to the

Third Circuit’s opinion, a de novo determination in this case

was not only possible, but, in fact, actually occurred. In sum,

this Court’s precedent, which will be discussed below,

strongly suggests that a magistrate can conduct a hearing and

submit proposed findings in a nonjury civil case, subject to a

de novo determination by the district court.

22

A. The Third Circuit’s Opinion Conflicts with

Rationale Underlying This Court’s Application of

§ 636(b)(3) to Criminal Cases.

By requiring the District Court to establish a specific

source of authority for the referral under the Magistrates Act,

the Third Circuit misplaced the burden. Congress mandated

through the enactment of subsection (b)(3) that the party

objecting to the referral demonstrate a specific constitutional

or statutory prohibition. There is no Article III or due

process violation based on the referral in this case.

1. There Is No Article III Violation.

The fundamental interest in Article III is to preserve the

balance of powers constitutionally granted to the judicial

branch from congressional encroachment. Northern Pipeline

Constr. Co v. Marathon Pipeline Co., 458 U.S. 50, 57

(1982). In Raddatz, this Court concluded that the

nonconsensual referral of a suppression hearing for fact-

finding and preliminary conclusions of law by a magistrate

did not violate the constitution so long as an Article III judge

made the final decision. 447 U.S. at 682-83 (citing Crowell

v. Benson, 285 U.S. 22 (1932) and St. Joseph Stock Yards ~

Co. v. United States, 298 U.S. 38 (1936)). The dissent in

Raddatz, authored by Justice Marshall, emphasized the unique

and important liberty interests at stake in criminal felony

trials. Jd. at 712.

In Peretz, 501 U.S. at 932-33, and Gomez, 490 U.S. at

872, this Court held that magistrates could not perform jury

selection in a felony criminal trial without consent of the

parties. The Third Circuit was apparently blinded by these

holdings and failed to give adequate consideration to the

Article Ill analysis in Peretz, where this Court stated that no

Article Ill concerns are raised by referrals under the

23

Magistrates Act because the “ultimate decisions” to appoint

and remove magistrates, to refer matters to the magistrate,

and to make final rulings, remain with the district court.

Because the entire process is under the district court’s total

control and jurisdiction, there is “no danger” of Congress

emasculating the Article Ill courts. Peretz, 501 U.S. at 937.

This Court further explained that the district court’s de novo

review, in addition to satisfying due process, also cures any

potential Article III concerns. /d. at 937-38 (citing Justice

Blackmun’s concurrence in Raddatz, 447 U.S. at 685-86).

Furthermore, the Third Circuit also failed to recognize

that the referral at issue in this case is fundamentally different

from those at issue in Peretz and Gomez for four primary

reasons. First, this is a civil, rather than criminal, case.

Thus, the numerous constitutional protections afforded to

criminal defendants by the Constitution are simply not

applicable.° See Wharton-Thomas v. United States, 721 F.2d

922 (3d Cir. 1983) (referral of civil case poses less

constitutional problems than the nonconsensual referral of a

suppression hearing upheld in Raddatz).

Second, the underlying cause of action in this case is a

statutory creation of Congress. In its Article III cases, this

Court has recognized that Congress may constitutionally

provide non-Article III dispute resolution procedures to

resolve statutorily-created rights. See Northern Pipeline, 458

® Certainly, the constitutional rights implicated by the criminal cases

discussed below are more substantial than those of the parties to this case.

This is one of the resulting ironies of the Third Circuit's decision—despite

greater constitutional implications in criminal cases, the Third Circuit

would give a large corporation like Mead a greater standard of entitlement

to an Article III judge in a civil case than an individual defendant would

have in a criminal case.

24

U.S. at 67-70 (discussing the “public rights” doctrine).

Then-Justice Rehnquist’s concurrence in Northern Pipeline

concludes that only state common law actions must be heard

by an Article Ill judge. /d. at 89-91, accord Thomas v.

Union Carbide Agric. Products Co., 473 U.S. 568, 584

(1985). A CERCLA cause of action—the only remaining

count involved in this case—is obviously a statutory cause of

action, not a common law action.

Third, because the parties in this case were not entitled to

a jury trial, the Seventh Amendment is not implicated. The

underlying CERCLA cause of action does not provide for a

jury trial. Hatco Corp. v. W.R. Grace & Co. Conn. , 59 F.3d

400, 412-14 (3d Cir. 1995). Thus, the entire discussion of

jury selection in Peretz and Gomez is irrelevant.

Fourth, unlike jury selection, the identification of

equitable allocation methodologies is easily susceptible to de

novo review. In this regard, the resolution of each side’s

proposed equitable allocation factors, culminating in a report

and recommendation, certainly bears far greater similarity to

specifically enumerated duties in the Magistrates Act (e.g.,

motions for injunctive relief, Daubert hearings, suppression

hearings) than felony voir dire (which Gomez acknowledged

was not readily susceptible to de novo review). In sum, there

is simply no Article III violation when a civil nonjury hearing

is conducted by a magistrate if the district court makes a de

novo determination of the magistrate’s proposed findings.

2. There Is No Due Process Violation.

In Mathews v. Eldridge, 424 U.S. 319, 335 (1976), this

Court articulated a three-part test for evaluating procedural

due process claims. The Court must consider: (1) the private

interest that would be affected; (2) the risk of erroneous

deprivation and the probable value of additional safeguards;

25

and (3) the government interest, including fiscal and

administrative burdens.’ In Mathews v. Weber, 423 U.S. at

270-72, this Court held that under the 1968 version of

§ 636(b), a magistrate could manage an entire Social Security

matter under de novo review of the district court without

consent of the parties.

In Raddatz, this Court held that it was not a due process

violation for a magistrate to preside over a suppression

hearing because the district court alone acted as the ultimate

decision maker. 447 U.S. at 680-81. The majority rejected

the argument that “the one who decides must hear,” id. at

677, reasoning that the interests in a suppression hearing are

of lesser magnitude than those in a felony jury trial. /d. at

679. The district court’s ability to perform a de novo review,

including the ability to reject or modify the magistrate’s

proposed findings and to re-hear witnesses, fully satisfied due

process. Justice Blackmun’s concurrence in Raddatz focused

on the “practical concern for accurate results.” He reasoned

that the Magistrates Act was constitutional because the

referral process, followed by objections and de novo review

by the district court, actually enhances the accuracy of the

results. Id. at 684-86.

In Mathews v. Weber, this Court discussed the numerous

due process benefits of referral to a magistrate: (1) it helps

focus the court’s attention on relevant parts of a voluminous

record; (2) it directs the court to legal arguments that are

supported by the record; and (3) it gives a “preliminary

evaluation of the cumulative effect of the evidence in the

record, to which the parties may address argument, and in

” In Medina y. California, 505 U.S. 437, 443-45 (1992) this Court held

that the Mathews v. Eldridge test applied to civil, but not criminal,

procedures.

26

this way narrows the dispute.” 423 U.S. at 554-55. All of

these factors were directly implicated by the referral at issue

here. CERCLA cases are often complex. The Magistrate

reviewed and ruled on the admissibility of voluminous

exhibits (1,193 in this case), resolved thousands of objections

to deposition designations and counter-designations, enabled

the parties to fully present their conflicting allocation

methodologies, explored difficult technical and scientific

issues that required numerous conflicting experts (thirteen in

this case), analyzed the experts’ methodologies,* and gave his

evaluation of the cumulative effect of the record. Certainly,

many of the tasks performed by the Magistrate narrowed and

crystallized the issues in dispute and enabled the District

Court to better exercise the discretion given under CERCLA

to equitably allocate response costs. The parties were given

a full opportunity to make objections to each of the

Magistrate’s proposed findings. Indeed, the parties received

far greater process than if the District Court had simply

conducted a hearing itself.

B. The Third Circuit Improperly Limited the

Magistrate’s Authority Even Though a De Novo

Determination of the Magistrate’s Proposed

Findings Was Made by the District Court.

The District Court’s referral to the Magistrate was not as

broad as the Third Circuit’s Opinion implies. In its July 8,

® As noted earlier, in many ways, the proceeding conducted by the

Magistrate in this case was analogous to a lengthy Daubert hearing, which

is well within a magistrate’s authority. Because virtually all of the

witnesses who testified before the Magistrate were expert witnesses, the

Magistrate, similar to what would occur in a Daubert hearing, offered to

the District Court a synopsis of each expert’s qualifications, along with a

summary of the analysis performed by each expert.

27

1996 Order, the District Court directed the Magistrate to

perform the following functions: “(1) proposing the equitable

factors to be considered under § 9613(f) [of CERCLA], (2)

submitting briefs in support of an allocation of Beazer's clean-

up costs among the parties and, after a hearing if necessary,

(3) a submission of report [to the District Court] addressing

the same.” App. 246a. In making such a limited referral, the

District Court sought only to narrow the issues before it to

those equitable factors applicable to the instant case, the goal

of judicial economy being acknowledged as within the

purview of the Magistrates Act. See, e.g., Mathews v.

Weber, 422 U.S. at 274 (“[R]eference promotes more

focused, and so more careful, decision-making by the district

judge.”). The Third Circuit, however, undermined this goal

by recharacterizing the activities of the Magistrate to those of

core trial matters, even though these activities were actually

subsidiary to the District Court’s de novo determinations

based on its independent review of the record.

The Third Circuit's Opinion also ignores that, as part of

its referral to the Magistrate, the District Court reserved the

right to rehear “portions of the evidence and/or hold

additional hearings on the same subject matter” as needed.

App. 2374. The District Court ultimately determined that this

was not necessary because during the proceeding before the

Magistrate virtually all of the live testimony presented was

that of expert witnesses. Fact testimony from former plant

personnel was submitted almost entirely in the form of

deposition designations. Moreover, with respect to the expert

testimony, the Magistrate's report and recommendation

“assign[ed] relative weight on such factors as the

methodology employed, the thoroughness of the expert's

analysis, the number of potential relevant factors considered,

the internal consistency of the testimony and assessments

made.... It [did] not discredit any testimony on the basis of

28

the demeanor or character of the witness.” App. 124a n.5.

Because Mead filed extensive objections to the report and

recommendation of the Magistrate, ail of Mead’s arguments

were fully presented to and decided by the District Court.’

Finally, even if this Court agrees with the Third Circuit's

determination that the Magistrate went too far in making

certain factual determinations as to relative fault, or in

entertaining live testimony, this Court should still hear this

case in order to clarify the application of the harmless error

doctrine to Magistrates Act referrals." In determining

whether an error is harmless, one “must be well-satisfied that

the error did not prejudice a party, but [one] need not

disprove every reasonable possibility of prejudice.” Gen.

Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296,

329 (3d Cir. 2001). As stated above, because the District

* Throughout its Opinion, the Third Circuit implied, without any record

support, that te District Court did not conduct the in-depth de novo

review that the District Court stated it conducted. See, e.g., App. 32a

n.17 (“Because we conclude that the District Court could not save the

flawed referral ... we need not consider whether it actually performed a

de novo review of the Magistrate Judge's report and recommendation. ”)

(emphasis added); App. 33a (“In this case the District Court claims that

it reviewed both the Magistrate Judge's factual findings and its legal

conclusions de novo.”) (emphasis added)

'© At least three circuits have relied upon the harmless error doctrine to

rehabilitate arguably unauthorized assignments by magistrates by

recharacterizing the nature of the referral. Members v. Paige, 140 F.3d

699, 701 (7th Cir. 1998) (referral for bench trial in prisoner case treated

as evidentiary hearing instead of irial); United States v. Mueller, 930 F.2d

10, 12 (8th Cir. 1991) (magistrate’s order purporting to enforce IRS

summons properly treated as a proposed order), United States v. First

Nat'l Bank of Atlanta, 628 F.2d 871, 873 (Sth Cir. 1980) (construing

magistrate’s order as a proposed disposition and the district court's order

as an adoption of the magistrate’s proposal).

29

Court reviewed the entire record before making its own ruling

on the allocation matter (departing from the proposed findings

and conclusions recommended by the Magistrate), the referral

did not affect the substance of Mead’s rights. See, e.g., Fed.

R. Civ. P. 61. Because the final determination of equitable

allocation was made by the District Court on the basis of

those factors it deemed appropriate, after an exhaustive

review of the record, it is “highly probable” that the outcome

would have been the same had the Magistrate not been

involved at all. See, e.g., Mathews v. Weber, 423 U.S. at

274 (“We categorically reject the suggestion that judges will

accept, uncritically, recommendations of magistrates.”).

The Third Circuit's Opinion also runs counter to strong

policies behind the harmless error doctrine aimed at

preserving judicial resources and public respect for

proceedings. See, e.g., Calderon v. Coleman, 525 U.S. 141,

146 (1998) (noting that the harmless error test “furthers the

‘strong policy against retrials years after the first trial where

the claimed error amounts to no more than speculation’”)

(quoting Boyde v. California, 494 U.S. 370, 380 (1990));

Arizona v. Fulminante, 499 U.S. 279, 308 (1991) (“[T]he

harmless-error doctrine ... promotes public respect for the ...

process by focusing on the underlying fairness of the trial

rather than on the virtually inevitable presence of immaterial

error.”). The Third Circuit's almost flippant observation that

“Beazer’s contribution action is now in its fourteenth year and

will likely enjoy several more birthdays” (App. 34a),

emphasizes the Third Circuit’s failure to consider the sound

policies behind the harmless error doctrine.

30

CONCLUSION

For the foregoing reasons, this Petition for Writ of

Certiorari should be granted.

Respectfully submitted,

D. Matthew Jameson Ill

(Counsel of Record)

Mark D. Shepard

K. Mark Hall

Melissa L. Evans

Of the firm:

Babst, Calland, Clements and Zomnir, P.C.

Two Gateway Center, Eighth Floor

Pittsburgh, PA 15222

(412) 394-5400

Counsel for Petitioner Beazer East, Inc.

Dated: October 19, 2005

(\) Supreme Court, U.S.

FILED

05-5240cT 192005

No. __ orc:

In the

Supreme Court of the United States

BeEAZER East, INC.,

Petitioner,

Vv.

THe MEAD CORPORATION,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Third Circuit

APPENDIX TO PETITION

FOR A WRIT OF CERTIORARI

D. MATTHEW JAMESON III

(Counsel of Record)

Mark D. SHEPARD

K. Mark HAL

Meuissa L. Evans

Of the firm:

Basst, CALLAND, CLEMENTS

AND ZOMNIR, P.C.

Two Gateway CENTER, 8TH FLOOR

PrrrspurGH, PA 15222

(412) 394-5400

Octoser 19, 2005

Counsel for Petitioner Beazer East, Inc.

Becker Gallagher Legal Publishing, Inc. 800.890.5001

i

TABLE OF CONTENTS OF APPENDIX

Third Circuit Order Denying Rehearing En Banc

aa a oe ae te le eee ae ie la

Third Circuit Judgment

SE re ee ee a> 3a

Third Circuit Opinion Reversing and Remanding

to District Court

id ie een yay cee tek eh awoks Sa

District Court Order Entering Declaratory

Judgment for Future Response Costs

ED 6 a oa! 4.u-e w.¢.0.n'6 6.000 00066 088% 43a

District Court Order Requesting Proposed

Declaratory Judgment Orders

As +046 6 <.08'ee oa 00 kd ena eens 46a

District Court Order Awarding Prejudgment Interest

EE so 6.46 00 0.066 0840s h0es wee en 48a

District Court Order Entering $3,243,467.80

Judgment in Favor of Beazer

Pe. serve ee vndaee s 6ee bee aeee 50a

District Court Opinion Regarding Seazer's

Recoverable Response Costs

EE <b wh a-o's «9:06 wstb.vel ea eeeeun SZa

District Court Memorandum and Order Regarding

Magistrate’s 11/24/99 Proposed Findings

Dt sé os G.l we bed 4.4 ek 6.66 eR lila

Magistrate’s Proposed Findings of Fact and

Conclusions of Law Regarding Allocation Factors

DOE PEO 6 osc cdwekeveseentéaiosne 13la

District Court Memorandum and Order Denying

Mead’s Objections to Magistrate Referral

TONES 060 eh eheeerinndheetierbns 233a

Magistrate Order Scheduling Briefing and Hearing

on Allocation Factors

EE « Weeks eee ewan eedd tt kenes 240a

District Court Memorandum Order Referring

Allocation Issues to Magistrate

STG 66 v0 eenns 044s de Kee ee 244a

Federal Magistrates Act, 28 U.S.C. § 636 (2005)... 248a

Comprehensive Environmental Response,

Compensation and Liability Act, 42 U.S.C. § 9613 . 258a

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos: 02-3727/02-4185

[Filed July 21, 2005]

BEAZER EAST, INC

v.

THE MEAD CORPORATION

v.

KOPPERS INDUSTRIES, INC.,

The Mead Corporation,

Appellant-Case No. 02-3727.

BEAZER EAST, INC.

v.

THE MEAD CORPORATION

v.

KOPPERS INDUSTRIES, INC.,

The Mead Corporation,

Appellant-Case No. 02-4185.

ee ee ee ee ee ee ee ee ee ee ee ee ee ee

The petition for rehearing en banc filed by the Appellant

in the above-entitled case having been submitted to the judges

2a

who participated in the decision of this Court and to all the

other available circuit judges of the circuit in regular active

service, and no judge who concurred in the decision having

asked for rehearing, and a majority of the circuit judges of the

circuit in regular active service not having voted for rehearing

by the court en banc, the petition for rehearing is denied.

By the Court,

/s/ Jane R. Roth

Circuit Judge

3a

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos: 02-3727/02-4185

[Filed June 23, 2005]

BEAZER EAST, INC

v.

THE MEAD CORPORATION

v.

KOPPERS INDUSTRIES, INC.,

The Mead Corporation,

Appellant-Case No. 02-3727.

BEAZER EAST, INC.

v.

THE MEAD CORPORATION

v.

KOPPERS INDUSTRIES, INC.,

The Mead Corporation,

Appellant-Case No. 02-4185.

me ee eee eae ee ee ee ee eee ee ee ee ee”

4a

JUDGMENT

This case came on to be heard on the record before the

United States District Court for the Western District of

Pennsylvania and was argued on December 16, 2003.

On consideration whereof,

IT IS ORDERED AND ADJUDGED by this Court

that the judgment of the District Court dated March 6, 199i,

we will reverse the judgments of the District Court and

remand this action for further proceedings consistent with this

opinion. Costs taxed against appellees.

All of the above in accordance with the opinion of this

Court.

ATTEST:

/s/

Marcia M. Waldron

Dated: June 23, 2005

5a

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos: 02-3727/02-4185

[Filed June 23, 2005}

BEAZER FAST, INC

v.

THE MEAD CORPORATION

v.

KOPPERS INDUSTRIES, INC.,

The Mead Corporation,

Appellant-Case No. 02-3727.

BEAZER EAST, INC.

v.

THE MEAD CORPORATION

Vv.

KOPPERS INDUSTRIES, INC.,

The Mead Corporation,

Appellant-Case No. 02-4185.

ee ed

OPINION

ROTH, Circuit Judge

The Mead Corporation appeals several orders of the

United States District Court for the Western District of

Pennsylvania in a CERCLA’ contribution action brought by

Beazer East, Inc. The main issue presented in these appeals

is whether the District Court, over Mead's objection, properly

referred part of Beazer’s action - the equitable allocation

proceeding - to the Magistrate Judge. In conducting this

proceeding, the Magistrate Judge resolved factual disputes

going to one of the ultimate issues in the case - what share of

Beazer’s response costs should be borne by each of the

responsible parties - and, in doing so, essentially tried part of

the case. Magistrate judges may not, however, try cases

without the parties’ consent. Because we conclude that the

District Court's referral was an improper delegation of its

traditional adjudicatory function, this case must be remanded

for a new equitable allocation proceeding before the District

Judge.

Il.Factual Background and Procedural History

This is the second time this CERCLA contribution action

has been before us. See Beazer East, Inc. v. The Mead Corp.,

34 F.3d 206 (3d Cir. 1994) (“Beazer J”). In 1991, Beazer

East, Inc., signed an Administrative Order on Consent (AOC)

developed by the United States Environmental Protection

Agency. The AOC required Beazer to investigate and cleanup

the Woodward Facility Coke Plant, an industrial site in

' Comprehensive Environmental Response Compensation and

Liability Act (CERCLA), 42 U.S.C.A. §§ 9601-9675.

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Alabama formerly owned and operated by Beazer. Beazer’s

predecessor, Koppers Company, Inc (KCI), bought the site

from The Mead Corporation in 1974. Beazer sought

contribution for its investigation and cleanup costs from Mead

under CERCLA, 42 U.S.C. §§ 9607(a) & 9613(f). Mead filed

a counterclaim for indemnity based on certain provisions of

the 1974 purchase agreement. The District Court granted

summary judgment to Mead on this basis, but we reversed in

Beazer I. We held that the key environmental indemnification

provision failed the basic rule of Alabama contract law that

promises to indemnify must be plain and unambiguous.

Beazer ! at 216-19. Accordingly, we remanded the case to the

District Court for further proceedings on Beazer’s

contribution claim. /d. at 219 & n.10.

The chief tasks on remand were to determine which of

Beazer’s response costs were necessary and consistent with

the National Contingency Plan (NCP), 42 U.S.C.

9607(a)(4)(B), and what percentage of those costs should be

born by each of the responsible parties: Beazer, Mead, and

Koppers Industries, Inc. (KII).? 42 U.S.C. § 9613(f)(1) (“In

? On remand Mead filed a third-party complaint against KII, the

current owner of much of the site. KI] was formed in a 1988

leveraged buy-out led by former KCI managers following Beazer’s

acquisition of KCI. Beazer sold the operational portion of the site

to KII in 1988, agreeing to indemnify KII for environmental

liabilities arising from pre-1988 activities. KI] continued to operate

the site until 1998 and demolished all site structures in 1999.

There is no dispute that Beazer, Mead, and KII are each

responsible parties as defined by CERCLA, 42 U.S.C. §

9607(a). Each entity has owned and operated the Woodward

Facility, and hazardous substances were disposed of at the

facility during each ownership period. See id. at § 9607(a)(2).

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resolving contribution claims, the court may allocate response

costs among liable parties using such equitable factors as the

court determines are appropriate”). In July 1996, the District

Court referred this second question to the Magistrate Judge,

ordering the Magistrate Judge to issue a report, “after a

hearing if necessary,” identifying the appropriate equitable

factors and setting forth an allocation of Beazer’s clean-up

costs among the parties.

Mead objected, arguing that the Magistrate Judge did not

have authority under the Magistrates Act to decide the

equitable allocation issue in the first instance without the

parties’ consent. The District Court rejected this argument,

reasoning that equitable allocation was “essentially . . . a

pretrial matter” which can be referred to a magistrate judge

without the parties’ consent per 28 U.S.C. § 636(b)(1), and

that any concerns over the Magistrate Judge’s authority were

allayed by the District Court’s retention of de novo review

over the Magistrate Judge’s Report and Recommendation.

The Magistrate Judge conducted a lengthy hearing on the

equitable allocation issue in May 1997 and ultimately issued

a Report and Recommendation in November 1999. Starting

from the premise that responsible parties should pay

according to their relative fault, the Magistrate Judge found

that Mead was responsible for disposing of approximately

90% of the waste on the site, while Beazer and KII together

were responsible for disposing of approximately 10% of the

waste. However, the Magistrate Judge adjusted this initial

allocation to account for his proposed finding that the parties

to the 1974 purchase agreement “intended that Mead be able

to ‘walk away’ from the site, i.e., that Mead would not

indemnify [KCI] for any future costs at the site for any

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reason, including environmental response costs.”* The

Magistrate Judge proposed that Mead’s share of Beazer’s

response costs be reduced and Beazer’s share increased by

15% of the total costs. The Magistrate Judge also found that

KII should bear a minor share of the response costs because,

as the current owner, it would benefit from the environmental

remediation of the site. The Magistrate Judge proposed that

KII’s share of Beazer’s response costs should be 2.5%, that

Mead’s share should be 73.75% (90% of the waste minus

15% shifted to Beazer minus 1.25%, half of KII’s share), and

that Beazer’s share should be 23.75% (10% of the waste plus

15% shifted from Mead minus 1.25%).

Following Mead’s objections, in March 2000, the District

Court adopted the Magistrate Judge’s report with the

following minor modifications: 1) 20% of the total costs --

rather than 15% -- would be shifted to Beazer based on the

text, parole evidence, and legal context of the 1974 purchase

agreement; and 2) KII’s share would be subtracted entirely

from Mead’s share and added to Beazer’s share because

Beazer did not bring a contribution claim against KII.

Accordingly, Mead’s share was reduced to 67.5% (90%

minus 20% minus 2.5%), and Beazer’s increased to 32.5%

(10% plus 20% plus 2.5%).

In February 2002, the District Court conducted a three-

day trial to determine which of Beazer’s actual costs incurred

’ This finding was based on the Magistrate Judge’s interpretation of

the indemnification clanse in the 1974 purchase agreement

discussed in Beazer I, the “as is, where is” clause in the same

agreement, and the law of caveat emptor in Alabama at the time of

the agreement. The Magistrate Judge further found that KCI

performed a full inspection of the site prior to purchase, and was

“well aware of the environmental condition of the site.”