Appendix — Beazer East, Inc. v. Mead Corp.

10a

through December 31, 1999, were recoverable CERCLA

response costs. In August 2002 the District Court issued a

thorough opinion largely rejecting Mead’s challenges to

Beazer’s costs. The court determined that Beazer had incurred

recoverable response costs of $4,805,137.60 through the end

of 1999 and entered judgment against Mead for 67.5% of this

amoumt, or $ 3,243,467.80. Pursuant to the parties’

stipulation, in September 2002, the Court further ordered

Mead to pay pre-judgment interest in the amount of

$1 ,538,164.03. Finally, in October 2002, the District Court

entered a declaratory judgment requiring Mead to pay 67.5%

of Beazer’s ongoing response costs associated with

implementing the AOC. The order also provided a framework

for resolution of disputes over the necessity and NCP-

consistency of such costs.

Mead timely appealed these orders. In December 2002,

we assigned the case for mediation pursuant to the Third

Circuit's Appellate Mediation Program, L.A.R. 33. The

parties strenuously dispute what transpired at the February

26, 2003, mediation session. Beazer claims that the parties

reached an oral agreement while Mead claims that the

tentative agreement reached at mediation was conditioned on

further management approval which was ultimately denied. In

May 2003, Beazer moved this Court to enforce the alleged

oral settlement and dismiss Mead’s appeal with prejudice. The

motion was referred to this panel and we decide it here along

with Mead’s appeals.

III .Jurisdiction

The District Court had jurisdiction over this case under 42

U.S.C. § 9613(b), which vests exclusive jurisdiction of

CERCLA claims in the federal courts, as well as under 28

U.S.C. §§ 1331 and 1332. Horsehead Industries, Inc. v.

lla

Paramount Communications, Inc., 258 F.3d 132, 140 (3d

Cir. 2001); Beazer 1, 34 F.3d at 210. We have appellate

jurisdiction over the appeal from the District Court's final

orders described above pursuant to 28 U.S.C. § 1291.

Horsehead Industries, 258 F.3d at 140. Finally, we have

original jurisdiction over Beazer’s motion to enforce the

alleged settlement agreement. See Fed. R. App. Pro. 33

(“The court may, as a result of the [mediation], enter an order

controlling the course of the proceedings or implementing any

settlement agreement.”). See aiso Herrnreiter v. Chi. Hous.

Auth. , 281 F.3d 634, 637 (7th Cir. 2002).

V. Discussion

A. Enforcement of the alleged oral settlement.

Beazer’s motion to specifically enforce the alleged oral

settlement reached at the appellate mediation and to dismiss

this appeal with prejudice must be rejected. Both Local

Appellate Rule (LAR) 33.5 and sound judicial policy compel

the conclusion that parties to an appellate mediation session

are not bound by anything short of a written settlement. Any

otlier rule would seriously undermine the efficacy of the

Appellate Mediation Program by compromising the

confidentiality of settlement negotiations.‘

* Federal Rule of Appellate Procedure 33 gives appellate courts the

power to order settlement conferences and to “implement{]} any

s>ttlement agreement” reached as a result of such conferences. Fed.

R. App. P. 33. The Third Circuit has established an Appellate

Mediation Program to implement this general directive. Local

Appellate Rule 33.0. The program is subject to the rules and

procedures provided in the Local Appellate Rules. /d.

12a

Beazer requests enforcement of the alleged oral settlement

but admits that there are genuine factual disputes regarding

whether the parties actually reached an agreement.’ Mead

correctly argues that we cannot resolve these disputes without

violating the confidentiality rule, LAR 33.S(c). With

exceptions not relevant here, Rule 33.5(<) provides that no

one at the mediation session - neither mediator, counsel, nor

party - may disclose “statements made or information

developed during the mediation process.” The provision

further provides that “the parties are prohibited from using

any information obtained as a result of the mediation process

as a basis for any motion or argument to any court.” LAR

33.5(c) (emphases added). Beazer cannot prove the existence

or terms of the disputed oral settlement without violating this

provision’s broadly stated prohibitions.°

* Beazer asserts that the parties reached an oral agreement at the

mediation conference but that Mead’s management ultimately

reneged on the agreement while it was being reduced to writing

over the course of the following weeks. Mead contends that the

parties only reached “a tentative resolution of some of the financial

terms.” According to Mead, this resolution was non-binding

because it exceeded Mead’s representatives’ settlement authority.

According to Beazer, Mead’s representatives never indicated that

the agreement reached at the mediation session was conditioned on

subsequent approval by Mead’s management.

® It is true that the rule also provides that “notwithstanding the

foregoing, the bare fact that a settlement has been reached as a

result of mediation shall not be considered confidential.” LAR

33.5(c). However, this exception is unavailing. Beazer may assert

the “bare fact” that a settlement was reached but may not offer any

evidence supporting this assertion. Since Mead asserts that no

settlement was reached, there is no way for us to resolve the

dispute.

13a

Beazer argues that the rule is not so sweeping. Beazer

concedes that it may not use information obtained at the

conference in any argument going to the merits of the appeal,

but contends that it must be able to use that information for

the limited purposes of proving the existence and terms of a

settlement. This argument is unpersuasive. First, the rule is

stated in the broadest possible language and docs not

contemplate any such exception. Second, Beazer’s proposed

exception would effectively undermine the rule and would

compromise the effectiveness of the Appellate Mediation

Program. A confidentiality provision “permits and encourages

counsel to discuss matters in an uninhibited fashion often

leading to settlement.” Lake Utopia Paper Lid. v. Connelly

Containers, Inc., 608 F.2d 928, 929 (2d Cir. 1979). If

counsel know beforehand that the proceedings may be laid

bare on the claim that an oral settlement occurred at the

conference, they will “of necessity . . . feel constrained to

conduct themselves in a cautious, tight-lipped, non-committal

manner more suitable to poker players in a high-stakes game

than to adversaries attempting to arrive at a just resolution of

a civil dispute.” /d.; see also Herrnreiter, 281 F.3d at 637

(“A motion to implement a conference settlement easily could

be a strategy to pierce the confidentiality of the negotiations

and inform the judges of the parties’ position, rather than to

carry Out an agreement actually reached.”). Third, Beazer’s

proposed exception would require appellate courts to receive

evidence and resolve factual disputes, tasks more properly

suited to the district courts. See Herrnreiter, 281 F.3d at 637.

We must also consider LAR 33.5(d), which provides that

“no party shall be bound by statements or actions at a

mediation session unless a settlement is reached.” The rule

further provides that “if a settlement is reached, the

agreement shall be reduced to writing and shall be binding

upon all parties to the agreement.” Mead argues that the most

l4a

“straightforward” reading of this rule is that no agreement is

binding until it is written. Mead’s reading is serial: 1) if the

parties reach an agreement, 2) then that agreement shall be

written down, and 3) then, and only then, the agreement shall

be binding. However, the grammatical structure of the rule is

consistent with a parallel construction: 1) if the parties reach

an agreement, 2)a) then it shall be reduced to writing, and,

2)b) then it shall be binding. Under this reading, the

agreement is binding because it has been reached, not because

it has been written down.

The “parallel” construction of Rule 33.5(d) -- which

would make oral settlement agreements binding on the parties

-- is irreconcilable with Rule 33.5(c), because, as described

above, there is no way to prove the existence or terms of a

disputed oral settlement without violating the confidentiality

provision. Therefore, we adopt Mead's “serial” reading of

Rule 33.5(d), according to which an agreement is not binding

unless it is reduced to writing. We note that the Ninth Circuit

adopted a serial interpretation of similar language in Barnett

v. Sea Land Serv., Inc., 875 F.2d 741, 743-44 (9th Cir.

1989).’

” As in this case, the parties in Barnett entered into mediation, but

one of the parties refused to sign a settlement agreement prepared

by another p#rty after the mediation took place and argued that no

settlement fad been reached. Jd. Relying on Local Rule 39.1, a

confidentiality provision governing mediation proceedings in the

Western District of Washington, the District Court prohibited the

party seeking to enforce the alleged agreement from eliciting

testimony from the mediator about whether a settlement had been

reached. /d. Local Rule 39.1 is very similar to the Third Circuit's

LAR 33.5(c) & (d). After providing that mediation proceedings and

statements are privileged, the rule states that “no party shall be

bound by anything done or said at the conference unless a

1Sa

Further, Judge Easterbrook’s opinion in Herrnreiter

provides persuasive policy justifications (or requiring written

settlements.* In Herrnreiter the parties admitted that they had

reached an oral settlement at a voluntary appellate mediation

session but they did not agree on the terms. /d. at 636. The

court denied the defendant’s motion to implement the oral

settlement. /d. at 637. The court noted that there is no

transcript of appellate mediation sessions and that settlement

conference attorneys presiding over such sessions promise

both sides that nothing that transpires at the conference will

be revealed to the judges; the court finally observed that

appellate courts are not well-positioned to conduct factfinding

missions. /d. Accordingly, the court concluded that nothing

short of a mutually satisfactory written settlement agreement

could terminate an appeal. /d. “Any other approach would

compromise the confidentiality of the negotiations, require the

settlement attorneys to become witnesses in appellate

factfinding proceedings, and substantially complicate the

disposition of litigation.” /d. All of these concerns are equally

present in this case. In fact, the argument for preserving

confidentiality of proceedings is even stronger in this case,

where participation in the appellate mediation program is

settlement is reached, in which event the agreement upon a

settlement shall be reduced to writing and shall be binding upon all

the parties to that agreement.” /d. The Ninth Circuit interpreted this

language to mean that “until a settlement is reduced to writing, it

is not binding upon the parties.” /d. at 744.

* If there are analogous local rules governing the Seventh Circuit's

appellate mediation program the Court in Herrnreitter did not

address them. Rather, it interpreted the text of Fed. R. App. Pro.

33, which does not contain a confidentiality provision, and the

practice of the Seventh Circuit’s Settlement Conference Office. 281

F.3d at 637-38.

l6a

mandatory and the mediation is directed by a court-employed

mediator of a judicial officer. See In re Anonymous, 283 F.3d

627, 636-37 (4th Cir. 2002) (citation omitted).

Beazer complains that if Mead’s interpretation of Rules

33.5(c) and (d) is accepted then parties will be able to enter

into oral agreements at settlement conferences and simply

back out on a whim, significantly deterring the federal policy

of encouraging settlements. See D.R. v. East Brunswick Bd.

of Educ., 109 F.3d 896, 901 (3d Cir. 1997). Beazer also

relies on our oft-repeated position that a written agreement is

not necessary to render a settlement enforceable. See, e.z.,

Green v. John H. Lewis & Co., 436 F.2d 389, 390 (3d Cir.

1970) (citations omitted). Mead’s first argument is simply

incorrect: if parties know beforehand that only a written

settlement agreement is binding, they will be sure to

memorialize their agreement in writing at the end of the

mediation session. Its second argument is based on basic

common law contract principles, see Main Line Theatres, Inc.

v. Paramount Film Distributing Corp. , 298 F.2d 801, 803 (3d

Cir. 1962), and has no application where specific court rules

provide otherwise.

For all these reasons, Beazer’s motion to enforce the

alleged oral settlement agreement and dismiss the appeal is

denied.

B. The District Court’s Referral to the Magistrate Judge.

Mead argues that the Magistrates Act, 28 U.S.C. § 636,

does not authorize the District Court’s referral to the

Magistrate Judge, over Mead’s objection, of the equitable

allocation issue. Mead contends that, for that reason, the

Magistrate Judge lacked jurisdiction to conduct a hearing or

issue a Report and Recommendation. Mead further asserts

17a

District Court's putative de novo review did not rectify the

improper referral. We agree with Mead on both points.”

The jurisdiction of magistrate judges is limited by statute

and may not be augmented by the federal courts. See Thomas

v. Whitworth, 136 F.3d 756, 758 (1ith Cir. 1998) (citing

NLRB v. A-Plus Roofing, Inc., 39 F.34-1410, 1415 (9th Cir.

1994)). The District Court did not rely on any specific

provision of the Magistrates Act in its order of referral or its

order rejecting Mead's objections to the referral, but it is

clear from the context that the court considered the equitable

allocation issue a “pretrial matter” under § 636(b)(1)."

Beazer argues in the alternative that the referral could be re-

characterized as a designation of the Magistrate Judge to serve

as a special master under § 636(b)(2) and Federal Rule of

Civil Procedure 53(b). Beazer also argues that the referral

was permissible under § 636(b)(3), which authorizes

magistrate judges to undertake “such additional duties as are

not inconsistent with the Constitution and laws of the United

States.” We conclude that the referral was not proper under

any provision of the Magistrates Act."

* The scope of a magistrate judge's authority is a question of law

over which this Court exercises plenary review. Bowers v. NCAA,

346 F.3d 402, 410 (3d Cir. 2003).

We agree with the Fifth Circuit that “good practice would

indicate that court orders of designation or reference state plainly

under what statutory provision the court is proceeding.” Archie v.

Christian, 808 F.2d 1132, 1137 (Sth Cir. 1987) (en banc); see also

Silberstein v. Silberstein, 859 F.2d 40, 42 (7th Cir. 1988).

"' The District Court also held that Mead’s objections to the referral

were untimely because Mead did not immediately object but waited

until the Magistrate Judge had issued a scheduling order

18a

1. Equitable allocation is not a “pretrial matter.”

We first consider whether the equitable allocation

proceeding referred to the Magistrate Judge is correctly

characterized as a “pretrial matter.” The Magistrates Act

withorizes district courts to appoint magistrate judges to

consider pretrial matters without regard to the parties’

contemplating implementation of the referral. Mead correctly

argues that objections to a magistrate judge’s authority are

jurisdictional and may be raised at any time. Government of Virgin

Islands v. Williams, 892 F.2d 305, 309 (3d Cir. 1989). Further, for

reasons provided in the next section of this opinion we conclude

that the Magistrate Judge essentially held a trial on the equitable

allocation issue, and trials may not be conducted by a magistrate

judge without the parties’ consent. 28 U.S.C. § 636(c)\(1). Even if

this consent requirement could be waived, a question we need not

District Court's order of referral cannot be construed as a waiver.

Mead objected to the Magistrate Judge's authority to consider the

equitable allocation issue just after the Magistrate Judge entered its

scheduling order and long before the Magistrate Judge had begun

to consider the merits of this issue, much less receive the parties’

submissions or hold a hearing.

We note that Beazer has failed on appeal to respond to any of

Mead's arguments on this point. Of course, an appelice does not

concede that a judgmezi sisould be reversed by failing to respond to

an appellant's argument in favor of reversal. See Singletary v.

Continental lilinois Nat'l Bank, 9 F.3d 1236, 1240 (7th Cir. 1993).

However, the appellee “waives, as a practical matter anyway, any

objections not obvious to the court to specific points urged by the

{appeliant].” Hardy v. City Optical Inc. , 39 F.3d 765, 771 (7th Cir.

1994) (citations omitted).

19a

consent. 28 U.S.C. § 636(b)(1)."2 The District Court

considered the equitable allocation proceeding a pretrial

matter because it constituted a “significant step” in resolving

the case:

First, the identification of the equitable factors that

will be relevant in an ultimate disposition of this case

essentially is a pretrial matter and constitutes a

significant step in resolving the parties’ current

dispute. In addition, submitting briefs in support of an

aliocation of Beazer’s clean-up costs among the parties

likewise is a pretrial undertaking which is necessary to

narrow the issues for trial.

The District Court's reasoning is misleading and without

supporting authority. First, the District Court significantly

understates the significance and scope of the referral. The

parties did not simply “submit briefs” in support of the

equitable allocation issue -- they presented extensive

testimonial and documentary evidence over the course of a

12-day hearing. At the conclusion of this hearing the

Magistrate Judge not only identified equitable factors but also

applied those factors to make a recommendation as to the

allocation of liability among the parties. Second, by the

District Court’s reasoning, any issue in the case could be

could be considered by a magistrate judge in a “pretrial”

proceeding so long as the Court later conducted a “trial” on

at least one issue. Whether a given issue is a “pretrial

'? The magistrate judge may hear and decide nondispositive pretrial

matters but may only issue a report and recommendation on

dispositive pre-trial matters. Compare 28 U.S.C. § 636(b)(1)(A)

with id. at § 636(b)(1)(B); see also Fed. R. Civ. P. 72; United

States v. Polishan, 336 F.3d 234, 239 (3d Cir, 2003); NLRB v.

Frazier, 966 F.2d 812, 816 (3d Cir. 1992).

20a

matter,” however, turns on the nature of the issue itself, not

on the position in which it falls in the sequence of decision.

A CERCLA contribution action consists of determining

which parties are liable under CERCLA and apportioning the

liable parties’ shares in an equitable manner. See 42 U.S.C.

§§ 9607(a) & 9613(f)(1); New Jersey Turnpike Authority v.

PPG Industries, Inc. , 197 F.3d 96, 104 & n.7 (3d Cir. 1999);

Kalamazoo River Study Group v. Menasha Corp., 228 F.3d

648, 656-57 (6th Cir. 2000). Here, the first phase was

uncontested: Mead, Beazer, and KII are each liable as current

or former owners and operators of the Woodward Coke Plant.

See 42 U.S.C. § 9607(a)i). The equitable apportionment

phase was divided into two proceedings: a proceeding

(conducted by the Magistrate Judge) to determine the parties’

equitable shares of response costs on a percentage basis, see

42 U.S.C. § 9613(f)(1), and a separate proceeding (conducted

by the District Court) to determine which of Beazer's actual

costs qualify as recoverable response costs, see 42 U.S.C.

§ 9607(a)(4)(B). Contrary to the District Court's assertions,

then, the issue referred to the Magistrate Judge was not a

precursor to resolution of the ultimate issue -- it was one of

the ultimate issues to be tried. In fact, it was the only issue in

the case unique to contribution claims. Whether a party is

liable and which costs are recoverable are questions governed

by CERCLA's liability provision, 42 U.S.C. § 9607. The

contribution provision, section 9613(f)(1), provides that “in

resolving contribution claims, the court may allocaie response

costs among liable parties using such equitable factors as the

court determines are appropriate.” This was the very task

referred to the Magistrate Judge.

Further, this task required the Magistrate Judge to resolve

factual disputes going to the merits of the case. In Banks v.

United States, 614 F.2d 95 (6th Cir. 1980), the court

2la

reasoned that section 636(b)(1) was carefully drafted to avoid

granting magistrate judges the authority to perform fact-

finding on the merits of case because that function is the

essence of a trial, and magistrate judges cannot conduct trials

without the parties’ consent:

The statute clearly contemplates that a magistrate be

allowed to help a district judge with a variety of pre-

cannot conduct a trial itself. Under our system of law,

when there are factual controversies, there must be a

trial. Only when a party is entitled to judgment as a

matter of law may a trial be aborted. See e.g. Fed R.

Civ. P. 12, 56. Congress was careful to recognize this

distinction when it amended the Federal Magistrate's

Act. The Act permits a magistrate to prepare proposed

findings on a variety of “case dispositive” motions

such as summary judgment. Except for prisoner's

cases, the act does not permit the magistrate to

perform fact-finding on the merits of a case. That is

the exclusive function of a district judge. Indeed, the

magistrate judge's role is to free the judge from pre-

trial wrangling so that he can try cases.

22a

Id. at 97." In this case the Magistrate Judge did not facilitate

the District Court's ultimate adjudicatory function - he

assumed that function. In the course of making his Report and

Recommendation, the Magistrate Judge resolved two critical

factual disputes. First, the he determined that Mead was

responsible for approximately 90% of the waste at the

Woodward Coke Plant. Second, he found that the parties to

the 1974 purchase agreement intended that Mead would not

be responsible for any environmental liabilities at the Piant.

By making these findings, he tried part of the case and

usurped the role of the District Judge. Accordingly, the

equitable allocation proceeding conducted by the Magistrate

Judge is not a “pretrial matter” under 28 U.S.C. § 636(b)(1).

One further argument warrants mention. Beazer and che

District Court imply that the equitable allocation proceeding

conducted by the Magistrate Judge was a “pretrial matter”

simply because it preceded the recoverable costs proceeding

conducted by the District Court. This is mere happenstance.

The proceedings could have been held in the reverse order or

held together. As discussed above, the important issue is not

the order of decision but the nature of decision - both the

equitable allocation proceeding and the recoverable costs

'’ This interpretation is supported by the legislative history of the

Magistrate's Act and its amendments. See, ¢e.g., H.R. Rep. No. 94-

1609, at 7 (1976) (explaining that the magistrate judge is to “assist

the district judge in a variety of pretrial and preliminary matters

thereby facilitating the ultimate and final exercise of the

adjudicatory function at the trial of the case.”); see also Gomez v.

United States, 490 U.S. 858, 872, 104 L. Ed. 2d 923, 109 S. Ct.

2237 & n.23, 490 U.S. 858, 104 L. Ed. 2d 923, 109 S. Ct. 2237

(1989) (collecting legislative history for the proposition that

“magistrates should handle subsidiary matters to enable district

judges to concentrate on trying cases”).

23a

proceeding required the decisionmaker to resolve factual

disputes going to the ultimate issues in the case.

2. Equitable allocation cannot be referred to a special

master without the parties’ consent.

Beazer argues that, even if the referral is not authorized

by § 6306(b)(1), we should recharacterize the referral as a

designation of the Magistrate Judge to serve as a special

master under § 636(b)(2). We need not reach the issue of

whether an appellate court can save a flawed referral in this

manner because we hold that the designation of a Magistrate

Judge to conduct an equitable allocation without the parties’

consent would constitute an abuse of discretion.'* See Sierra

Club v. Browner, 257 F.3d 444, 446 (9th Cir. 2001)

(designation of special master is reviewed for abuse of

discretion); American Cyanamid Co. v. Ellis-Foster Co. , 298

F.2d 244, 247 (3d Cir. 1962) (same).

‘* At least one circuit court has suggested in dictum that an

improper referral under § 636(b)(1) could be re-characterized as a

designation of a magistrate judge to serve as a special master per §

636(b)(2) and Rule 53(b). In Callier v. Gray, 167 F.3d 977, 983

(6th Cir. 1999), the court upheld an ambiguous referral to a

magistrate judge of a damages issue under the “additional duties”

provision, § 636(b)(3). The court noted that Rule 53(b) might have

served as an “additional basis for jurisdiction of the magistrate

judge on the damages dispute,” but concluded that it did not need

to reach the issue. /d. at 983 n.10. The court entertained this idea

even though the referral in that case was made specifically under

§ 636(b)(1)(B), not § 636(b)(2). We take no position on this issue.

24a

Sect.on 636(b)\(2) provides in pertinent part that a judge

“may designate a magistrate judge to serve as a special miaster

pursuant to the applicable provisions of this title and the

Federal Rules of Civil Procedure” without the parties’

consent. The applicable Federal Rule is Rule 53(b), which

provides for references to special masters:

A reference to a master shall de the exception and not

the rule. In actions to be tried by a jury, a reference

shali be made only when the issues are complicated;

in actions to be tried without a jury, save in matters of

account and of difficult computation of damages, a

reference shall be made only upon a showing that

some exceptional condition requires it.'°

The non-jury standard of review applies here. Thus, unless

the proceeding referred to the Magistrate Judge in this case is

characterized as part of a “difficult computation of damages,”

the reference can only be justified upon a showing that some

“exceptional condition” required it.

Beazer makes no argument that any “exceptional

condition” exists in this case, nor does Beazer argue that the

Magistrate Judge performed any difficult computations.

Rather, Beazer contends that the referral was proper because

the equitable allocation proceeding conducted by the

Magistrate Judge was a “predicate” to a “difficult

computation of damages” performed by the District Court.

Beazer’s expansive reading of Rule 53(b) is at odds with the

Supreme Court's restrictive interpretation.

'® Both § 636(b)(2) and Rule 53(b) provide that a magistrate judge

may be designated as a special master without regard to Rule

5Xb)’s limitations upon consent of the parties. Because Mead did

not consent, this exception is inapplicable.

25a

In La Buy v. Howes Leather Co. , 352 U.S. 249, 256, 259,

1 L. Ed. 2d 290, 77 S. Ct. 309 (1957), the Court affirmed the

appellate court’s issuance of a writ of mandamus compelling

the District Court io vacate its order referring essentially the

entirety of two complex antitrust cases to a special master.

The Court noted that while masters could “aid judges” in the

performance of specific duties, they could not be permitted to

“displace the court.” /d. at 256; see also Prudential Ins. Co.

v. United States Gypsum Co. , 991 F.2d 1080, 1086 (3d Cir.

1993) (“A district court has no discretion to delegate its

adjudicatory responsibility in favor of a decision maker who

has not been appointed by the President and confirmed by the

Senate.”) (citing La Buy); In re Bituminous Coal Operators’

Ass'n. 292 U.S. App. D.C. 309, 949 F.2d 1165, 1168 (D.C.

Cir. 1991) (“Rule 53 . . . authorizes the appointment of

special masters to assist, not to replace, the adjudicator,

whether judge or jury, constitutionally indicated for federal

court litigation”). The Court found that the references at issue

“amounted to little less than an abdication of the judicial

function depriving the parties of a trial before the court on the

basic issues involved in the litigation.” La Buy, 352 U.S. at

256." The Court acknowledged, however, that difficult

'® The Court also rejected the judge’s claim that docket congestion,

complexity, and length of time necessary for trial constituted

“exceptional circumstances” justifying the reference. Jd. at 258-59;

see also Charles Alan Wright & Arthur R. Miller, 9A Federal

Practice and Procedure § 2605, at 662 (2d ed. 1994) (noting that

the Court rejected “the three most obvious matters” that might be

thought to constitute “exceptional conditions”); Jn re Armco, Inc.,

770 F.2d 103, 105 (8th Cir. 1985) (“Beyond matters of account,

difficult computation of damages, and unusual discovery, it is

difficult to conceive of a reference of a nonjury case that will meet

the rigid standards of the La Buy decision.”) (internal quotations

omitted).

26a

damages computations could sometimes be referred to a

master without the parties’ consent. “The detailed accounting

required to determine the damages suffered by each plaintiff

might be referred to a master after the court has determined

the over-all liability of defendants, provided the circumstances

indicate that the use of the court's time is not warranted in

receiving the proof and making the tabulation.” /d. at 259.

Accountings and other damages computations may be

referred without the parties’ consent because they generally

do not call for any peculiar judicial talent or insight. See 9A

Charles Alan Wright & Arthur R. Miller, Federal Practice

and Procedure § 2605 at 655-66 (2d ed. 1994). Equitable

apportionment, on the other hand, is a quintessentially judicial

endeavor. CERCLA’s contribution provision authorizes the

court to “allocate response costs among liable parties using

such equitable factors as the court determines are

appropriate.” 42 U.S.C. § 9613(f)(1). In a given case, “a

court may consider several factors or a few, depending on the

totality of the circumstances and equitable considerations.”

New Jersey Turnpike Authority v. PPG Industries, Inc., 197

F.3d 96, 104 (3d Cir. 1999) (citation omitted). This flexible

inquiry involves discretion, judgment, and legal reasoning

that simply is not connoted by the phrase “difficult

computation of damages.” This case provides a good

illustration of this point.

The Magistrate Judge's proposed allocation turned chiefly

on three factors: 1) volume of waste should be the pre-

eminent equitable factor given CERCLA’s over-arching

“polluter-pays” principle; 2) Mead was responsible for

approximately 90% of the waste; and 3) Mead was

nonetheless entitled to a reduction in its share based on the

parties’ intent that Mead would not be responsible for future

environmental liabilities. In weighing these factors, only the

27a

second is reasonably related to a “computation of damages.”

The other two turn on questions of law, policy, equity, and

contractual intent. Further, even with respect to weighing the

second factor, the computations performed by the Magistrate

Judge were not “difficult” - they entailed elementary

subtraction and addition of percentages. The Magistrate Judge

did not crunch any numbers to determine that Mead was

responsible for 90% of the waste on the site; rather, he

decided which expert's percentage estimates were more

convincing. In fact, even this decision largely turned on a

legal question: should Beazer be able to recover all of its

response costs based on an AOC ordered under the Resource

Conservation and Recovery Act that required investigation

and monitoring of the entire industrial site, or should it be

limited, as Mead’s chief expert contended, to costs that would

have been assessed under a more modest hypothetical AOC

issued pursuant to CERCLA? Thus, the issues referred to the

Magistrate Judge here were not akin to a complicated

accounting or difficult damages calculation. Rather, they were

foremost among the “basic issues” to be tried, and the District

Court's referral of those issues without the parties’ consent

was “an abdication of the judicial function.” La Buy, 352

U.S. at 256.

Beazer also argues that our opinion in Beazer / ended the

“liability phase” of this case, that everything that occurred on

remand constituted the “damages phase,” and therefore

everything on remand could have been properly referred to a

master. This formalistic argument is inconsistent with La

Buy's reasoning. In United States v. Microsoft Corp., 331

U.S. App. D.C. 121, 147 F.3d 935, 954-55 (D.C. Cir.

1998), the D.C. Circuit Court of Appeals vacated a reference

to a special master to determine the parties’ rights under a

complex consent decree. Seeking to uphold the reference, the

Department of Justice invoked the “well-established tradition”

28a

allowing special masters to oversee compliance during the

remedial phase of litigation, arguing that the reference to

oversee implementation of the consent decree fell squarely

within that tradition. /d. at 954. (citations omitted). The court

rejected this position, holding that “the matters referred to the

master are no more “remedial” than would be those of any

total referral of a contract case. The concern about

nonconsensual references turns on the determination of rights,

not on a formalistic division of the juridical universe into pre-

trial, trial and post-trial. It is for this reason that special

masters may not decide dispositive pretrial motions.” /d.

(citation omitted). Similarly, the reference here involved a

complex and delicate determination of equities.

We note, however, that there is some support for Beazer’s

position. In United States v. Conservation Chemical Co. , 106

F.R.D. 210, 216 (W.D. Mo. 1985), the District Court

referred all pretrial and discovery matters as well as the trial

on the merits to a special master without the parties’ consent.

The reference included “the authority to hold hearings and

issue recommendations on the claims for . . . apportionment

of costs.” /d. Predictably, the Eighth Circuit Court of Appeals

held that no “exceptional condition” justified the District

Court's sweeping reference. In re Armco, 770 F.2d 103, 105

(8th Cir. 1985). But then, without explaining its reasoning,

the court affirmed ail aspects of the reference except for the

trial on the liability issues. Thus, the court affirmed reference

of all post-liability damages proceedings. /d. Although not

explicitly stated, this reference necessarily covered any

equitable allocation proceedings that might be necessary to

resolve contribution claims brought by any of the liable

patties.

The Armco Court’s unexplained decision to uphold the

reference of dispositive matters without any showing of

29a

exceptional conditions has been met with perplexity by two

other circuit courts. Stauble v. Warrob, Inc., 977 F.2d 690,

696 (1st Cir. 1992) (noting that the court was “baffled” by the

Armco Court's decision to authorize reference of dispositive

pre-trial motions); /n re United States, 816 F.2d 1083, 1091

(6th Cir. 1987) (noting the court’s inability “to follow the

[Armco] Court’s reasoning” on this issue). We also do not

consider Armco to be persuasive authority. It is possible that

the Armco Court was overly solicitous towards the District

Court’s Rule 53(b) reference because it perceived that the

District Court required an extraordinary degree of flexibility

to handle an enormous CERCLA case involving more than

250 parties. See 9A Wright & Miller, Federal Practice and

Procedure § 2605, at 666 (“Despite the restrictive standard

set out in the La Buy case, the actual utilization of masters

under Rule 53(b) in the past two decades has been quite

lively[,] undoubtedly [in response to} the rapid growth of

complex litigation in the federal courts, particularly in cases

requiring significant scientific and technical knov"'«dge, [and]

management skills”). In contrast, this case does not present

similar administrative challenges -- there are only three

parties, and one, KII, has played only a minor role in the

proceedings.

Accordingly, we reject Beazer’s contention that the

District Court could have designated the Magistrate Judge to

hear the equitable allocation issue as a special master without

Mead’s consent.

3. Equitable allocation cannot be referred under the

“additional duties” clause.

Finally , we reject Beazer’s suggestion that the referral was

proper under the “additional duties” clause. 28 U.S.C.

§ 636(b)(3). This clause covers only subsidiary matters in the

30a

absence of the parties’ consent, and equitable allocation is

central, rather than subsidiary, to a CERCLA contribution

action.

The parties’ consent or lack thereof is a key factor in

deciding whether a referral is authorized under the “additional

duties” clause. In Gomez v. United States, 490 U.S. 858,

876, 104 L. Ed. 2d 923, 109 S. Ct. 2237 (1989), the Court

held that this clause did not authorize magistrate judges to

supervise voir dire proceedings in a criminal case over a

defendant’s objection. However, in Peretz v. United States,

501 U.S. 923, 932-36, 115 L. Ed. 2d 808, 111 S. Ct. 2661

(1991), the Court held that the “additional duties” clause did

authorize the reference of voir dire in a criminal case where

the defendant consented to the reference. The Court reasoned

that the scope of the clause varied significantly according to

whether the parties’ consented to the reference. See Peretz,

501 U.S. at 931-33; Gomez, 490 U.S. at 870-71. As the

Court explained in Gomez and reiterated in Peretz, the scope

of § 636(b)(3)’s residuary clause had to be interpreted in light

of the duties specifically authorized in the other sections of

the Act. Peretz, 501 U.S. at 930-31 (citing Gomez, 490 U.S.

at 864). The Court explained that “the duties that a magistrate

judge may perform over the parties’ objections are generally

subsidiary matters not comparable to supervision of jury

selection. However, with the parties’ consent, a district judge

may delegate to a magistrate judge supervision of entire civil

and misdemeanor trials. These duties are comparable in

responsibility and importance to presiding over voir dire ata

felony trial.” Peretz, 501 U.S. at 932.

Thus, in the absence of Mead’s consent, the referral

would only be authorized under § 636(b)(3) if we

characterized the equitable allocation proceeding as a

“subsidiary matter.” See Charles Alan Wright et al, 12

3la

Federal Practice & Procedure § 3068.1 at 329 (2d ed. 1997).

As explained in the previous two sections, equitable allocation

is central to Beazer’s CERCLA action, not subsidiary thereto.

Accordingly, the referral could not be authorized under the

“additional duties” clause over Mead's objection.

This conclusion is consistent with Congressional intent. As

the Court in Peretz explained, “the Act is designed to relieve

the district courts of certain subordinate duties that often

distract the courts from more important matters.” 501 U.S. at

934. In support of this assessment, the Court cited several

statements from the legislative history of the Act and its

various amendments. See, e.g., H.R. Rep. no. 94-1609, p. 7

(1976) (stating that a magistrate judge is to “assist the district

judge in a variety of pretrial and preliminary matters thereby

facilitating the ultimate and final exercise of the adjudicatory

function at the trial of the case”). Equitable allocation is at the

very core of a CERCLA contribution action and is not a

preliminary or subordinate matter.

4. Remand is required notwithstanding the District

Court’s purported de novo review.

Beazer contends, and the District Court reasoned, that any

flaw in the referral is corrected by the District Court’s

purported de novo review of the Magistrate Judge’s proposed

equitable allocation. This argument is unavailing.

First, as noted above, a magistrate judge’s authority is

jurisdictional. Without the parties’ consent, a magistrate judge

cannot conduct a trial or any part thereof, see 28 U.S.C.

§ 636(c)(1) (“upon the consent of the parties, a. . .

magistrate judge . . . may conduct any or all proceedings in

a jury or nonjery civil matter”), and “the mere existence of

a recommendation [and accompanying de novo review] will

32a

not change a full trial [or any part thereof] into a pre-trial

motion.” Jeffrey S. v. State Bd. of Educ. , 896 F.2d 507, 512

n.17 (11th Cir. 1990) (citing Hall v. Sharpe, 812 F.2d 644,

647 (11th Cir. 1987)). Second, § 636(b)(1)(B) provides that

certain dispositive pre-trial motions may be referred to a

magistrate judge, but the magistrate judge's proposal must be

reviewed de novo by the court. Mead correctly argues that

this provision would be meaningless if no specific statutory

delegation were necessary se long as the District Court

conducted a de novo review. Third, the District Court’s error

cannot be considered harmless no matter how admirable the

Magistrate Judge’s efforts may have been. See United States

v. Ruiz-Rodriguez, 277 F.3d 1281, 1293 n.17 (11th Cir.

2002) (“Harmless error analysis does not apply when a

magistrate judge lacks the power to act.”). Since the

Magistrate Judge lacked the power to conduct the equitable

allocation proceeding in this case, there was nothing for the

District Court to review."”

Although the issue of appropriate remedy is less settled

where the flawed referral is to a special master (or a

magistrate judge acting as a special master) rather than to a

magistrate judge qua magistrate judge, remand for a new trial

is the proper remedy even if the District Court’s referral

could be re-characterized as a designation of the Magistrate

Judge to serve as a special master. First, while at least two

courts of appeals have suggested that a remand for a new trial

may not be required where the district court reviews the

master’s report de novo, Sierra Club v. Browner, 257 F.3d

444, 447 (9th Cir. 2001) (vacating reference but declining to

'’ Because we conclude that the District Court could not save the

flawed referral no matter what level of review it conducted, we

need not consider whether it actually performed a de novo review

of the Magistrate Judge’s report and recommendation.

33a

decide whether de novo review by the district judge could

save a flawed reference), Stauble, 977 F.2d at 698 n.12

(same), we rejected a similar argument in Prudential. The

C strict Court in Prudential had stated that the reference was

limited to pre-trial motions, and that it would review every

conclusion of law proposed by the special master de novo.

991 F.2d at 1086 n.11. We reasoned, however, that de novo

review of legal matters could not save an improper referral

because such review was always available regardless of

whether the referral violated Rule 53(b). /d. That is, if de

novo review of legal issues cured referrals made in violation

of Rule 53(b), that provision would be meaningless.

Furthermore, the referral in this case encompassed

questions of fact as well as questions of law, and Rule

53(e)(2) provides that in non-jury trials the district court

“shall accept the master’s findings of fact unless clearly

erroneous.” Fed. R. Civ. Pro. 53(e)(2) (emphasis added);

Apex Fountain Sales, Inc. v. Kleinfeld, 818 F.2d 1089, 1097

(3d Cir. 1987) (noting that review of master’s legal

conclusions is plenary, but that district court must accept

master’s factual findings unless clearly erroneous). Relying on

this provision, the court in Microsoft rejected the argument

that de novo review can save an improper referral because the

master’s factual conclusions cannot be reviewed de novo

under Rule 53(e)(2). 147 F.3d at 955; see also Sierra Club,

257 F.3d at 448 (suggesting but not reaching same

conclusion). In this case the District Court claims that it

reviewed both the Magistrate Judge’s factual findings and its

legal conclusions de novo. This is inconsistent with Rule

53(e)(2), and a district court cannot cure one violation of Rule

53 by committing another. Finally, it would be inappropriate

to re-characterize the referral as a flawed designation of a

special master solely to avoid the remand required by case

law construing other provisions of the Magistrates Act.

34a

Accordingly, this case must be remanded for a new

equitable allocation proceeding before the District Court. We

note that Beazer’s contribution action is now in its fourteenth

year and will likely enjoy several more birthdays, partly

because our reversal today will require the parties to retread

well-worn ground. In an attempt to avoid further duplicative

litigation and speed this case towards its conclusion, we take

this opportunity to resolve two other issues raised by the

parties on appeal.

C. The District Court’s Equitable Allocation Was

Erroneous.

First, we agree with Mead that the District Court

committed legal error, and therefore abused its discretion, in

prioritizing the parties’ respective contributions of waste at

the Woodward Coke Plant in determining the appropriate

allocation of Beazer’s response costs."* The District Court

found that the parties to the 1974 sale intended that Mead

would not bear any environmental liability following the 1974

sale, but reduced Mead’s equitable share by only 20% in

recognition of this and related findings that we refer to here

'’ A district court's allocation of CERCLA response costs in a

contribution action is reviewed for abuse of discretion. See, e.g.,

Kalamazoo River Study Group v. Rockwell Intern. Corp., 274 F.3d

1043, 1047 (6th Cir. 2001). An abuse of discretion occurs when

“the district court's decision rests upon a clearly erroneous finding

of fact, an errant conclusion of law or an improper application of

law to fact.” International Union v. Mack Trucks, Inc., 820 F.2d

91, 95 (3d Cir. 1987).

35a

as the “purchase agreement factors,” all of which favor

Mead.”

The District Court's decision to prioritize the volume of

waste over the purchase agreement factors appears to follow

two related rationales explicitly developed in the Magistrate

Judge’s Report and Recommendation. The Magisirate Judge

concluded that “CERCLA is premised upon the policy that the

‘polluter pays.’” Thus, the Magistrate Judge began from the

premise that cach party's equitable share should be driven by

its respective contribution of waste. The Magistrate Judge

deviated only slightly from this premise to account for the

equitable factors surrounding the 1974 sale. The Magistrate

Judge also concluded that it would be inconsistent with our

decision in Beazer / to allocate “all or even most” of the

response costs to Mead. The District Court somewhat

ambiguously adopted each rationale. However, neither Beazer

I, nor CERCLA itself, requires that the parties’ intent to shift

environmental risk be subordinated to the “polluter pays”

principle - as long as someone pays. Therefore, the District

Court's allocation, which was based in part on its agreement

'* The District Court found that the parties to the 1974 agreement

“intended that Mead be able to ‘walk away’ from the site, i.e., that

Mead would not indemnify [KCI, Beazer’s predecessor] for any

future costs at the site for any reason, including environmental

response costs.” The District Court also found that KCI purchased

the property pursuant to the doctrine of caveat emptor, that the

purchase agreement contained an “as is” clause, that KCI was “well

aware of the environmental condition of the site” after performing

a full inspection prior to purchase, and that “reasonable parties

negotiating the sale of an industrial site in Alabama in 1974 would

expect that the seller would not be held liable for any future

environmental costs.”

36a

with the Magistrate Judge's flawed reasoning, was an abuse

of discretion.

First, the Magistrate Judge’s and District Court's

prioritization of the “polluter pays” principle in equitable

allocation proceedings is inconsistent with CERCLA’s

courts to “allocate response costs among liable parties using

such equitable factors as the court determines are

appropriate.” 42 U.S.C. § 9613(f)(1). Courts examining this

language and its history have concluded that Congress

intended to grant the district courts significant flexibility in

determining equitable allocations of response costs, without

requiring the courts to prioritize, much less consider, any

specific factor. In a leading case, the Seventh Circuit Court of

Appeals explained that “the language of section 9613(f)

clearly indicates Congress’s intent to allow courts to

determine what factors should be considered in their own

discretion without requiring a court to consider any particular

list of factors.” Environmental Transportation Systems, Inc.

v. ENSCO, 969 F.2d 503, 508 (7th Cir. 1992); see also

United States v. R.W. Meyer, Inc., 932 F.2d 568, 576-77 (6th

Cir. 1991) (reasoning that section 9613(f)(1)’s language

“confirms the legislative intent to grant courts flexibility in

exercising their discretion”) (citations to legislative history

omitted). As we have held, “a court may consider several

factors or a few, depending on the totality of the

circumstances.” New Jersey Turnpike Authority v. PPG

Industries, Inc., 197 F.3d 96, 104 (3d Cir. 1999) (citation

omitted).

Accordingly, the “polluter pays” principle has no

canonical or transcendent importance under § 9613(f)(1); it is

certainly not the “primary policy” of contribution claims, as

implied by the District Court. It is simply one of many factors

37a

that may or may not bear on a given equitable allocation

determination. See Kerr-McGee, 14 F.3d at 326 (listing

possible factors). Specifically, there is no basis in CERCLA’s

text or history for prioritizing a priori the parties’ relative

contributions of waste over their contractual intent to allocate

environmental liability among themselves. To the contrary,

CERCLA expressly authorizes private indemnity agreements,

see 42 U.S.C. § 9607(e)(1); Fisher Development Co. v. Boise

Cascade Corp. , 37 F.3d 104, 110 (3d Cir. 1994) (finding in

§ 107(e)(1) “a policy favoring private ordering of ultimate

risk distribution”), and the District Court’s insistence on

elevating relative waste contribution is fundamentally

inconsistent with CERCLA’s policy of favoring private

indemnity agreements.

Second, Beazer | dealt with the legal interpretation of

Paragraph 4(c). As a matter of equity, however, the intent of

the parties, which is manifested by their actions and in the

written agreement, can be taken into account - no matter what

our legal conclusion was in Beazer I. Beazer I does not tip the

equitable scales one way or another. In Beazer I, we

determined that the 1974 agreement was governed by

Alabama law, 34 F.3d at 211-15, and that indemnification

agreements are enforceable under Alabama law only if they

contain “a plain and unambiguous expression of intent to

cover the cost of the liability in question.” /d. at 216.

Applying this standard, we concluded that “nothing in this

agreement demonstrates a clear and unambiguous intent to

transfer all CERCLA liability to [KCI].” /d. at 219. The

Magistrate !..‘%e correctly reasoned that Beazer ] reached no

conclusior re»,arding the parties’ actual intent; only that, as a

matter of .labama law, the contract did not contain a

sufficiently clear expression that KCI would indemnify Mead

against all environmental liability associated with the site. See

id. Thus, the Magistrate Judge concluded that “there is no

38a

inherent inconsistency in the ruling made on appeal and a

decision by this court that, as a matter of equity, the parties’

intentions concerning indemnity, to the extent they can be

divined from both the document and any other evidence

offered by the parties, should be considered in equitable

allocation.””

However, the Magistrate Judge further reasoned that

shifting all or most of the response costs to Beazer based on

the purchase agreement factors “would give the agreement,

found legally insufficient under Alabama law, the force of

* The Magistrate Judge properly cited Kerr-McGee Chemical Corp.

v. Lefton lron & Metal Co., 14 F.3d 321 (7th Cir. 1994) in support

of this distinction between legal and equitable rulings. In that case,

the District Court concluded that the relevant indemnification

provision was insufficiently clear as a matter of Illinois law, id. at

327, and consequently “ignored the [provision] when allocating

responsibility for cleanup costs.” /d. at 326. In dictum, the Seventh

Circuit concluded that this was error, reasoning that “although

contractual arrangements between parties are mot necessarily

determinative of statutory liability, Lefton’s intent to indemnify

Kerr-McGee- should be considered in the allocation of cleanup

costs.” /d. The court further explained that the fact that “Lefton --

with knowledge of the creosote on the site -- agreed that it took the

property “as is” and would assume future liabilities resulting from

that pollution is certainly a significant circumstance.” /d. The court

noted that “the fact that Kerr-McGee’s predecessor Moss-American

was the source of most of the pollution at the site may also weigh

in the “ourt’s analysis; this however is not reason to ignore other

relevant considerations.” /d. The issue of the appropriate weight to

be accorded to each factor was not before the court, and the court

had no occasion to suggest an answer to this question since it

ultimately concluded that the indemnification provision did cover

CERCLA liability, so no equitable allocation proceeding was

required. /d. at 327-28.

39a

law, and would place [the District] Court’s decision at odds

with the ruling made by the Court of Appeals.” This

conclusion does not follow from Beazer /.

The District Court, however, rejected Mead’s contention

that the Magistrate Judge had misinterpreted Beazer /. The

court quoted from its penultimate paragraph, seemingly for

the proposition that Mead’s “fair share” of Beazer’s response

costs should be greatly influenced, if not largely determined,

by Mead’s relative contributions of hazardous waste to the

site. The penultimate paragraph provides:

Our refusal to construe Paragraph 4(c) as a clear

promise by Beazer to indemnify Mead against

CERCLA response costs leaves both Beazer and Mead

responsible for their fair share of the cleanup costs

associated with the Coke Plant. That result reinforces

CERCLA policy. “Congress enacted CERCLA, a

complex piece of legislation ... to force polluters to

pay for costs associated with remedying their

pollution.” United States v. Alcan Aluminum Corp.

964 F.2d 252, 258 (3d Cir.1992).

34 F.3d at 219. Apparentiy, the District Court considered this

quotation from Alcan Aluminum to support (or perhaps

require) elevating the “polluter pays” principle above al! other

equitable factors.

The quoted paragraph does not warrant such significance.

The first two sentences uncontroversially state that holding

Mead and Beazer responsible for their fair share of cleanup

costs reinforces CERCLA policy. /d. at 219. The next

sentence, the quotation from Alcan Aluminum, is to the effect

that Congress intended that polluters pay for the costs of

remedying their pollution. /d. (quoting Alcan, 964 F.2d at

40a

258).”" The District Court apparently inferred from the

juxtaposition of these statements that each party’s “fair share”

must be more or less rigidly tied to its share of pollution at

the site. Such an interpretation is, however, fundamentally at

odds vith CERCLA’s contribution provision as well as with

CERCLA’s policy of favoring private indemnity agreements.

We note, moreover, that in the footnote at the end of the -

penultimate paragraph, the Beazer ] Court quoted the

“equitable factors” language of section 9607(a) and went on

to note that on remand, “the trial court will have to revisit the

parties’ contribution claims and correspondingly apportion

liability for attendant CERCLA response costs.” This

direction is significantly broader than a direction that liability

should be apportioned to reflect each party’s share of

pollution at the site - which the Beazer | Court could easily

have stated if that were its intent.

It is clear, then, that the District Court erred in

eliminating significant consideration of the parties’ intent in

its equitable allocation. See Kerr-McGee, 14 F.3d 321, 326

(“Although contractual arrangements between parties are not

necessarily determinative of statutory liability, Lefton’s intent

to indemnif’ Kerr-McGee should be considered in the

allocation of cleanup costs.”). Moreover, to the extent that the

court felt itself bound by the “polluter pays” principle or by

our oblique reference to that principle in Beazer I, that

conclusion was unwarranted. Because we conclude that the

District Court’s ultimate allocation of Beazer’s costs was

?! Alcan Aluminum had nothing to do with contribution actions

under § 113(f); the issues considered in Alcan Aluminum bore on

Alcan’s initial liability under CERCLA and to what degree it was

required to reimburse the government for clean-up costs. See 964

F.2d at 259, 267-71.

4la

predicated in large part on this error, that conclusion was an

abuse of discretion.

Mead would have us go further and prescribe that the

purchase agreement factors must be prioritized on remand,

but we think this is inappropriate. CERCLA places both the

selection and weighing of equitable factors in the sound

discretion of the district court, not the appellate court.

Accordingly, we leave these matters for the District Court to

decide on its own on remand, unfettered by the legal errors

discussed above.

D. Any Declaratory Judgment Should Contain a

Contingency Provision.

Finally, we are sympathetic with Mead’s contention that

the District Cowrt’s declaratory judgment fixing the parties’

equitable shares of future response costs should contain a

provision authorizing the parties to re-litigate the District

Court’s equitable allocation if new facts or future events

render the current division inequitable. For example, Mead

argues that once the investigatory phase of the case concludes

and the remedial phase ensues, the District Court's equitable

allocation would no longer be fair if any required remediation

is “primarily or exclusively directed to those areas of the Site

where Beazer is responsible for the majority of the

contamination.”

Because the equitable allocation proceeding in this case

must be conducted again on remand by the District Court, the

declaratory judgment already entered in this case is null and

void. If and when the District Court enters a new declaratory

judgment covering future costs, however, we agree with

Mead that the judgment should contain some kind of provision

authorizing the parties to re-litigate the allocation of those

42a

costs for good cause shown in response to new events or new

evidence that would reasonably bear upon the equity of the

allocation. Such contingency provisions are generally favored

in CERCLA contribution actions, see United States v. Davis,

261 F.3d 1, 45 (1st Cir. 2001) (quoting contingency provision

imposed by district court); Acushnet Co. v. Coaters, Inc. , 972

F. Supp. 41, 69 (D. Mass. 1997); Boeing Co. v. Cascade

Corp., 920 F. Supp. 1121, 1142 (D. Or. 1996), and we agree

with the wisdom of those cases. We leave the specific design

of the provision to the discretion of the District Court, with

the help of the parties. We recognize Beazer’s concern that

Mead might use such a provision to re-litigate issues that will

have already been decided in the equitable allocation

proceeding to be conducted on remand, but we think this

concern can be adequately addressed by application of the

‘law of the case’ doctrine.”

VI.Conclusion

For the reasons stated above, we will reverse the

judgments of the District Court and remand this action for

further proceedings consistent with this opinion.

2 Finally, contrary to Beazer’s suggestion, Federal Rule of Civil

Procedure 60(b) is insufficient to protect Mead’s rights if new

events render the initial allocation inequitable because motions

based on new evidence brought under that rule must be made “not

more than one year” after the judgment was entered.

43a

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF

PENNSYLVANIA

[Filed October 8, 2002]

Civil Action No. 91-408

BEAZER EAST, INC.,

Plaintiff,

Counterdefendant,

v.

THE MEAD CORPORATION,

Defendant,

Counterclaimant,

Third-Party Plaintiff,

Third-Party Counterdefendant,

v.

KOPPERS INDUSTRIES, INC.,

Third-Party Defendant,

Third-Party Counterdefendant.

ee ee ee ee ee

44a

ORDER OF COURT

AND NOW, to-wit, this 8" day of October, 2002, IT IS

ORDERED that a declaratory judgment be, and the same

hereby is, issued in this civil action incorporating by

reference the Opinion and Order of this court entered on

August 29, 2002 (Document 345), and all other substantive

rulings of this court in this civil action including, but not

limited to, specifically its rulings and orders declaring

defendant, The Mead Corporation, (“Mead”) liable to

plaintiff, Beazer East, Inc., (“Beazer”) for 67.5% of all of

Beazer’s necessary response costs incurred consistent with the

National Contingency Plan (“NCP”) at the Woodward Coke

Plant, located in Dolomite, Alabama.

IT FURTHER IS ORDERED that Beazer timely shall

submit invoices for such costs to Mead for review and

payment; and, in the event that Mead has objections to the

costs submitted by Beazer, based on challenges to the

necessity and/or NCP-consistency of those costs, those

objections shall be filed by Mead with the court for

resolution. Mead shall have forty-five (45) days from the

receipt of Beazer’s Submission to Mead of the costs which

Beazer deems to be recoverable response costs within which

to file with the court Mead’s objections to the recoverability

of such costs along with a brief in support thereof; Beazer

shall have thirty (30) days after receipt of Mead’s objections

to file with the court Beazer’s response thereto and brief in

support thereof.

/s/

Gustave Diamond

United States District Judge

45a

Mark D. Shepard, Esq.

D. Matthew Jameson Ill, Esq.

Melissa L. Evans, Esq.

Babst Calland Clements & Zomnir, P.C.

Two Gateway Center, Eighth Floor

Pittsburgh, PA 15222

Jill M. Blundon, Esq.

Beazer East, Inc.

One Oxford Centre, Suite 3000

Pittsburgh, PA 15219

Van Carson, Esq.

Squire, Sanders & Dempsey L.L.P.

4900 Key Tower

127 Public Square

Cleveland, OH 44114, 1304

Charles R. McElwee, Ii, Esq.

Squire, Sanders & Dempsey L..L.P.

One Maritime Plaza, Suite 300

San Francisco, CA 94111

David E. White, Esq.

Thorp, Reed & Armstrong

One Riverfront Center

Pittsburgh, PA 15222

46a

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF

PENNSYLVANIA

Civil Action No. 91-408

[Dated September 19, 2002]

BEAZER EAST, INC., )

Plaintiff, )

)

v. )

)

MEAD CORPORATION, )

Defendant. )

)

ORDER OF COURT

AND NOW, to-wit, this 19" day of September, 2002, IT

IS ORDERED that on or before September 26, 2002, counsel

for the plaintiff will provide the court and counsel for the

defendant with a proposed declaratory judgment to be entered

in this case along with a brief memorandum in support

thereof; and,

IT FURTHER IS ORDERED that on or before October

3, 2002, counsel for the defendant will provide the court and

counsel for the plaintiff with defendant’s response to

plaintiffs submission and, if appropriate, defendant’s

proposed declaratory judgment along with a brief

memorandum in support of its position.

/s/

Gustave Diamond

47a

United States District Judge

48a

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF

PENNSYLVANIA

[Filed September 17, 2002]

Civil Action No. 91-408

BEAZER EAST, INC.,

Plaintiff,

V.

THE MEAD CORPORATION,

Defendant.

ed

ORDER OF COURT

AND NOW, this 17th day of September, 2002, in

accordance with the stipulation of plaintiff, Beazer East, Inc.

and defendant, The Mead Corporation (Document No. 348)

approved by the court on September 16, 2002, IT IS

ORDERED that prejudgment interest in the amount of

$1,538,164.03 be, and the same hereby is, added to the

judgment in favor of Beazer East, Inc. and against The Mead

Corporation entered by the court on the 29th day of August,

2002.

/s/

Gustave Diamond

United States District Judge

49a

CC: Mark D. Shepard, Esq.

D. Matthew Jamison III, Esq.

Melissa L. Evans, Esq.

Babst, Calland, Clements & Zomnir

Two Gateway Center, Eighth Floor

Pittsburgh, PA 15222

George P. Faines, Esq.

John H. Bingler, Jr., Esq.

Thorp, Reed & Armstrong-

One Oxford Centre, 14" Floor

Pittsburgh, PA 15219-2402

Alan M. Wiseman, Esq.

Thomas A. Isaacson, Esq.

Howrey & Simon

299 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2402

Van Carson, Esq.

Charles R. McElwee, II, Esq.

Squire, Sanders & Dempsey

127 Public Square

4900 Key Tower

Cleveland, OH 44114-1304

John E. Frey, Esq.

Wildman, Harrold, Allen & Dixon

225 West Wacker Drive

30" Floor

Chicago, IL 60606-1225

50a

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT

OF PENNSYLVANIA

{Filed August 29, 2002]

Civil Action No. 91-408

BEAZER EAST, INC., )

)

Plaintiff, )

)

v. )

)

THE MEAD CORPORATION, )

)

Defendant. )

)

ORDER OF COURT

AND NOW, this 29" day of August, 2002, in accordance

with the opinion filed this day, IT IS ORDERED that

judgment be, and the same hereby is, entered in favor of

Beazer East, Inc., and against The Mead Corporation in the

amount of $3,243,467.80. This award is subject to the

addition of prejudgment interest as calculated in accordance

with the court’s rulings;

IT FURTHER IS ORDERED that counsel for the parties

shall apply the-eourt’s rulings on prejudgment interest to the

response costs awarded by the court and stipulate to the

applicable amount of prejudgment interest on or before

September 11, 2002; and,

5la

IT FURTHER IS ORDERED that on or before September

11, 2002, each party shall show cause why a declaration of

liability, in accordance with the findings and rulings of the

court to date will not provide the parties with adequate relief

for the response costs incurred and to be incurred in

implementing the administrative order of consent.

/s/

Gustave Diamond

United States District Judge

52a

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT

OF PENNSYLVANIA

Civil Action No. 91-408

[Filed August 29, 2002]

BEAZER EAST, INC.,

Plaintiff,

v.

THE MEAD CORPORATION,

Defendant.

ed

OPINION

DIAMOND, DJ.

Beazer East, Inc. (“Beazer”) commenced this action in

March of 1991 under the Comprehensive Environmental

Response, Compensation and Liability Act (“CERCLA”)

seeking contribution for expenses that have been and will in

the future be incurred in cleaning up the Woodward Coke

Plant, an industrial site near Dolomite, Alabama. The site

consists of approximately 170 acres. Coke used in the

steelmaking industry was produced at an 83-acre plant on the

site from 1911 unti! 1998 when the plant was deactivated. The

plant was demolished in 1999. Beazer seeks recovery against

the Mead Corporation (“Mead”) as a prior owner and

53a

operator of the site from 1911 to 1974. Mead asserted a

counterclaim against Beazer as prior owner and operator of

the site (1974 to 1988) and joined the current owner of a

portion of the site and operator of the plant from 1988 to

1998, Koppers Industries, Inc. (“KII”). Mead’s third-party

claim against KII effectively was resolved in a prior phase of

the litigation that determined each party’s proportional

responsibility for Beazer’s recoverable response costs. In the

current phase of the litigation Beazer and Mead dispute which

of Beazer’s specifically claimed environmental costs incurred

through December 31, 1999, properly are recoverable in a

contribution, action under 42 U.S.C. §9613(f). Presently

before the court are Beazer and Mead’s revised proposed

findings of fact and conclusions of law submitted after a

three-day non-jury trial commencing on February 4, 2002.

For the reasons set forth below, the court will enter judgment

in Beazer’s favor in accordance with the rulings rendered

herein and direct the parties to stipulate to the applicable

amount of prejudgment interest under the court’s rulings.

The procedural history of this eleven year old complex

CERCLA action is protracted and will only be briefly

summarized here in light of the limited issues remaining for

resolution. The first phase of the litigation concerned the

parties’ respective rights and obiigations under the 1974 asset

purchase agreement through which Beazer acquired the site

from Mead; The parties filed cross-motions for summary

judgment based on the indemnity provisions of that agreement

and this court granted summary judgment in Mead’s favor.

Beazer appealed. The United States Court of Appeals for the

Third Circuit reversed and remanded for further proceedings,

explaining that the failure of the asset purchase agreement to

require either party to indemnify the other left “both Beazer

and Mead responsible for their fair share of the clean-up costs

associated with the Coke Plant.” Beazer East, Inc. v. Mead

54a

Corp., 34 F.3d 206, 219 (3d Cir. 1994). The court further

explained:

On remand, the trial court will have to revisit the

parties’ contribution claims and correspondingly

apportion liability for the attendant CERCLA response

costs.

Id. at 219 n.10. During this phase of the litigation Mead was

found to be a “responsible party” within the meaning of 42

U.S.C. §9607(a) and thus “for the purposes of CERCLA

liability.” Id. at 218, 219 n.10.

Following the return of the action to this court it was

remanded to Magistrate Judge Benson for further pretrial

proceedings. After considering a report and recommendation

and objections thereto, this court entered a memorandum

order on July 8, 1996, granting in part and denying part

Mead’s motion for partial summary judgment and referring

the matter back to the magistrate judge for a report (I)

identifying the equitable factors to be considered in the

parties’ cross claims for contribution under 42 U.S.C.

§9613(f) and (2) recommending a comprehensive allocation

of Beazer’s clean-up costs among the parties. See

Memorandum Order of July 8, 1996 (Document 193). After

lengthy proceedings that included a twelve-day hearing and

the submission of over 47 ring binders containing

approximately 1300 exhibits, the magistrate judge considered

the equitable allocation factors advocated by the parties and

issued a report on November 24, 1999, recommending

proposed findings of fact and conclusions of law. (Document

303). As part of this process the magistrate judge

recommended final allocation percentages reflecting cach

party’s equitable share of the CERCLA response costs

ultimately found to be recoverable.

$Sa

Each party filed objections to the magistrate judge’s

report. On March 7, 2000, this court issued a memorandum

and order granting in part Mead’s objections and adopting the

report as this court’s findings of fact and conclusions of law.

The court determined that “Mead is, in fact, responsible for

placing most of the contamination at the Woodward Coke

Plant” and under the most precise calculations available

“Mead placed approximately 90% of the waste on site.”

Findings of Fact and Conclusions of Law (Document 303) at

pp. 96-97. After considering a number of other factors which

were found to be relevant in apportioning the parties’

responsibilities for recoverable response costs, the court's

order provided:

The final, costs found recoverable in this action shall

be allocated as follows: The Mead Corporation -

67.5%; and Beazer East, Inc. - 32.5%.

Memorandum Order of March 7, 2000 (Document 308).

During this “allocation phase” of the case the parties agreed

that determinations regarding the recoverability of specific

costs would be left to a later phase in the litigation. See

Proposed Findings of Fact and Conclusions of Law of

November 24, 1999 (Document 303) at p. 17 n.6); Joint

Pretrial Stipulation (Document 320) at p. 3, 44.

After the parties appeared before the court for a

conference on March 21, 2000, an order was entered on April

5, 2000, setting forth the procedures and compliance dates

for the completion of the current phase of the litigation. The

purpose of this phase is to determine which of the specific

costs incurred by Beazer prior to December 31, 1999, are

CERCLA response costs for which Beazer is entitled to

contribution from Mead. See Joint Pretrial Stipulation at 45.

56a

At the commencement of this phase of the litigation

Beazer presented Mead with invoices totaling $5,008 ,709.00.

The parties agree that at least a portion of these invoices

reflect response costs at the site and that with minor

exceptions these cost documents are genuine business records

of Beazer and represent costs actually incurred by Beazer on

or before December 31, 1999. Id. at 44 24 & 28. They

further agree that at least $1,960,811.00 to $2,706,273.00

represent recoverable response costs incurred by Beazer and

that Mead bears a 67.5% responsibility for such costs. Id. at

44 29-30. Beazer’s cost documents reflecting its claimed

response costs through December 31, 1999, were admitted

into evidence at the trial. See Clerk’s Memorandum

(Document 336) at p. 4.

After reviewing Beazer’s proffered cost documents Mead

asserted that certain portions of them were not necessary

response costs under CERCLA and/or were not costs incurred

consistent with the National Contingency Plan (“NCP”).

Mead segmented its challenges into four categories: (1) post

risk assessment costs, (2) unnecessary sampling costs, (3)

programmatic activity and (4) inadequate documentation. See

Mead’s Pretrial Brief in Support of Judgment (Document

324) at p. 25. After reviewing Mead’s challenges, Beazer

reduced its claimed Costs to $4,993,488 .00 to account for any

possible duplication or inadequate documentation identified by

Mead. Trial Transcript (“TT”) of February 4, 2002 (Muck)

at 116-121; Plaintiff's Demonstrative Exhibits D-43 & D-45.

Beazer contended that many of Mead’s remaining objections

to the specific invoices previously had been litigated and

highlighted in its pretrial brief several of the court’s prior

findings and rulings, arguing that they essentially resolved

most of Mead’s challenges to the cost documents.

57a

In the pretrial stipulation the parties raised the issue of the

preclusive effect of the court’s prior rulings on the issues

raised in this phase of the litigation. On January 22, 2002,

the court issued a memorandum advising the parties that it

would not “revisit factual or legal issues that have been

considered and resolved in the process of arriving at the

percentages assigned to the respective parties for equitable

allocation and accordingly the [instant] phase of this litigation

[would] be limited to the consideration of matters beyond

those previously addressed and resolved by the court.”

Memorandum and order of January22, 2002 (Document No.

330) at p. 2. The order accompanying the memorandum

specifically provided:

The evidence presented at the [instant] phase of this

litigation shall be limited to whether the specific

invoices Beazer produced to Mead for activities at the

site through December 31, 1999, reflect recoverable

response costs, within the meaning of 42 U.S.C.

§9613(f). The court will give preclusive effect to its

prior findings of fact and conclusions of law and the

litigation will be limited to the remaining matters

raised in the parties’ submissions filed pursuant to the

court’s pretrial order of April 5, 2000. The parties

shall prepare for trial accordingly[.]

Id. at p. 8. At trial Mead insisted that the prior proceedings

did not resolve its “necessary” and “consistency” defenses as

they relate to Beazer’s specific cost documents. The Court

permitted the introduction of evidence and argument

concerning Mead’s objections to the extent it did not clearly

seek to revisit, circumvent or avoid the court’s previous

findings and rulings with the expressed understanding that the

previous findings and rulings would be given full force and

58a

effect. See TT of February 4, 2002 (Document 337) at pp.

21-26. Those findings and rulings are incorporated herein.

The historical basis for Beazer’s contribution claim arose

as a result of its compliance with (1) initial requests by and

(2) subsequent administrative orders entered into with the

United States Environmental Protection Agency (“EPA”) and

the Alabama Department of Environmental Management

(“ADEM”). The site became the target of investigations by

the EPA and ADEM in the early 1980's after the Resource

Conservation and Recovery Act (“RCRA”) became effective.

Initial soil, surface water and sediment testing was conducted

in 1985 and groundwater monitoring programs were initiated

in 1986. These activities were performed by Beazer, the EPA

and ADEM and the collected data was used by the EPA as

part of its initial investigation and characterization of the site.

The EPA advised Beazer that historical treatment and disposal

of hazardous wastes at the site were a concern under RCRA.

Beazer notified Mead on September 18, 1986, that historical

waste disposal practices at the site might become the subject

of a RCRA §3008(h) corrective action order and invited Mead

to join Beazer in negotiating with the EPA regarding any

required corrective action pursuant to a mutually agreed upon

method of sharing Costs. Mead denied any responsibility for

the historical waste disposal practices at the site on the ground

that the asset purchase agreement made Beazer solely

responsible for all such practices.

On March 22, 1988, Beazer notified Mead that an EPA

contractor was about to conduct a facility assessment at the

site “to investigate prior disposal activities at the plant” and

invited Mead to be present and observe the process. Mead

declined. On November 28, 1990, Beazer notified Mead of

its receipt of a proposed administrative order of consent

59a

(“AOC”) prepared by the EPA and again invited Mead to

participate in the negotiation of a final order. Mead declined.

On July 8, 1991, Beazer and the EPA became partics to

an AOC entered under §3008(h) of RCRA. The order made

a finding that “the hazardous waste and/or hazardous

constituents identified [during prior sampling at the site] pose

a threat to human health or the environment” and that there

had “been a release of hazardous waste and/or hazardous

constituents into the environment from the facility.” AOC

(Plaintiff's Trial Exhibit 443) at 4, 7. The AOC directed

Beazer to develop a work plan “designed to define the

presence, magnitude, extent, direction and rate of movement

of any hazardous wastes and/or hazardous constituents, within

and beyond the Facility boundary,” and

to conduct those investigations necessary to: (1)

characterize the potential pathways of contaminant

migration; (2) characterize the source(s) of

contamination; (3) define the degree and extent of

contamination; (4) identify actual or potential

receptors; and (5) support the development of

alternatives from which a corrective measure will be

selected by EPA.

Id. at 8. The EPA concluded that the actions required by the

AOC “are necessary to protect human health or the

environment” and it further reserved the right to “determine

that certain tasks, including investigatory work or engineering

evaluations, are necessary to protect human health or the

environment in addition to the tasks and deliverables included

in the work plans [to be developed and performed by Beazer]

when new information indicates that such additional work is

necessary.” Id. at 7, 10.

60a

A RCRA facility investigation (“RFI”) was initiated to

satisfy the obligations set forth in the AOC. Its overall

objectives were to:

@ Characterize the nature and extent of constituents of

interest(“COI”) within and beyond the facility

boundary;

@ Determine and characterize the sources of COI:

@ Define and characterize the potential pathways of

constituent migration;

@ Identify and characterize actual and potential human and

environmental receptors and assess the potential risks

posed to such receptors; and

@ Gather the data necessary to support the development,

evaluation and selection of corrective measures or

alternatives, as necessary.

RFI (Plaintiff's Trial Exhibit 443) at pp. 1, 2; AOC at p. 8.

Beazer’s contractor submitted an RFI work p. «. in September

of 1991, which was approved by the EPA. The RFI obligated

Beazer to characterize the hydrogeologic conditions, soil and

rock units, surface water and sediment, and topographical and

climatic conditions at the site. RFI at pp. 12-16. The RFI was

designed to investigate the entire site as a hole due to its size,

the close proximity of the various hazardous substances and

areas of concern, the similarity of COI among the potential

source areas, the technical difficulty of segmenting potential

releases from any particular area and the need to focus on the

common potential migration pathways at the site. Findings of

Fact and Conclusions of Law (Document No. 303) at pp. 20-

21.

61a

RFI Phase I activities began on February 3, 1992. Major

Phase I activities included soil borings, test pits, soil

sampling, monitoring well installation and groundwater

sampling, aquifer characterization, surface water and

sediment investigation, preliminary ecological investigation

and additional groundwater sampling. Joint Pretrial

Stipuiation at 415. RFI Phase II activities began on

September 11, 1995, and concluded on September 24, 1996.

Major activities during this phase included preliminary

planning, site reconnaissance, dye tracer study, naturai

potential survey and magnetometer surv*\ , surface water and

sediment sampling, ecological and wetlands reconnaissance

survey, soil boring and sampling, coke and coke fill sampling,

monitoring well installation and groundwater sampling,

downhole geophysical surveys, aquifer pump test, and

pipeline testing. Id. at 416.

Beazer submitted a draft Phase I and II RFI and

groundwater quality assessment report to the EPA and ADEM

on March 7, 1997. The report included a risk assessment

prepared by Beazer’s contractor, Ogden Environmental, and

a response to ADEM’s requirement that Beazer complete a

groundwater quality assessment. The risk assessment

advanced and sought to support the proposition that estimated

non-cancer and excess lifetime cancer risks posed by the site

are within acceptable target ranges. Beazer is still waiting for

the environmental agencies’ formal substantive response to its

report and risk assessment.

In March of 1999, Beazer submitted a Site Conceptual

Model for groundwater flow and in April of 2000, ADEM

required Beazer to submit a draft Phase II] RFI work plan

outlining the means by which additional groundwater

sampling would be conducted. The Phase III investigation is

designed to identify the potential migration of hazardous

62a

substances into the groundwater beyond the boundaries of the

site. Its primary focus is on the flow patterns of deeper and

off-site ground water.

Beazer employed a multi-tiered process to identify, verify,

monitor and segregate the environmental costs initiated at the

site pursuant to the AOC. A project/environmental manager

was assigned to the site. TT of February 4, 2002,

(Brourman) at 31, 54. This individual assisted in the selection

of environmental consultants that performed environmental

work at the site and oversaw the work they performed. Id. at

54-55. Compliance with NCP requirements was always a

goal and numerous steps were taken to achieve that goal,

including quality control of the data collected, use of

accredited laboratories, developing a community relations

plan and so forth. Id. at 56.

When an invoice from an environmental consultant or

outside contractor reflecting work undertaken to comply with

the AOC was reviewed by Beazer, it was subjected to a multi-

level review process. Id. at 57. The invoice was reviewed by

the accounting department and a tracking label providing key

information needed in the verification process to follow was

attached to it. Id. at 58. The accounting department reviewed

any numbers or mathematica! computations appearing on the

invoice, cross referenced it to the specific location and the

applicable work order, and performed any other pertinent

administrative verification. Id. The invoice would then be

forwarded to Beazer’s project/environmental manager for

technical review. This included verifying that the work was

in compliance with the purchase order and any applicable

change orders, and was otherwise consistent with the

objectives and actual work being performed at the site. Id. at

59-60. All invoices were coded to a specific site and at

Woodward Coke the invoices also were correlated to the

63a

specific tasks outlined in the AOC. Id. at 62. The

project/environmental manager would then perform a

breakdown of any specific charges for individual tasks to

verify their accuracy and compliance with the governing,

purchase order. Id. Additional data or explanatory material

was requested from the consultant whenever necessary. Id. at

64. After completion of the technical review the invoices

were returned to the accounting department for payment. Id.

at 58. Payments for larger amounts required explicit approval

from Beazer’s chief financial officer. Id.

A multi-level review process also was undertaken to

segregate the cost documents Beazer tendered to Mead.

Initially the accounting department was given a beginning and

ending date for the retrieval of invoices. TT of February 4,

2002 (Muck) at 116. All invoices within that time frame that

were coded to Woodward Coke were pulled from Beazer’s

environmental, cost ledgers. Id. Then each invoice was

reviewed to verify that it was a true cost attributable to

complying with the AOC. Id. at 127. During this process

various expenses that were not true environmental costs

attributable to the implementation of the AOC were deducted.

Id. at 118, 126. This review was undertaken by Beazer’s

chief financial officer, Karen Mance, with assistance from the

technical staff, including the project/environmental manager.

Id.; Deposition of Karen Mance (Document 333) at il. She

reviewed the invoices and eliminated costs such as property

management costs, plant operation costs, outside counsel fees,

and travel costs of internal personnel connected to the instant

litigation or not specifically related to the implementation of

the AOC. Id. at 11-16. Other amounts such as costs

estimated to be attributable to groundwater monitoring and

quality assessment for a RCRA regulated unit not associated

with Mead’s operation of the plant were then computed and

deducted. TT of February 4, 2000 (Muck) at 118; Mance

64a

Denrosition at 12. These calculations were made with the

assistance of technical personnel and in-house counsel and

were based upon the hypothetical costs of installing four

groundwater wells and the estimated costs of monitoring

them. Mance Deposition at 12-13.

As previously noted, Beazer has produced to Mead and

submitted into the record approximately 3,600 pages of

invoices to support the costs it contends ‘are recoverable

response costs. Beazer has categorized these costs into the

following categories: groundwater quality assessment, outfall

area study, remed_al field investigation, risk assessment,

waste disposal, RFI work plan, monitoring outfall (plant

lake), Part B post-closure permit application, travel - legal

and technical, community relations, and conceptual design -

lagoon remediation. Beazer’s cost documents are

professionally organized and easy to reference.

Beazer does not dispute its obligation to prove its invoices

reflect recoverable response costs incurred at the site on or

before December 31, 1999. It asserts it has presumptively

and factually done so. In other words, Beazer argues that the

circumstances leading to and surrounding the implementation

of the AOC coupled with a review of its technical

requirements establish that the generated invoices were

necessary costs of response incurred consistent with the NCP.

It further argues that the AOC is the functional equivalent of

a CERCLA §106 or §122 order and the cost documents as a

whole (1) identify the source of the release and the response

actions taken, (2) accurately account for the costs incurred,

and (3) identify the risks to public health and the

environment; all of which demonstrate compliance with the

applicable regulations and provisions of the NCP and indicate

Beazer’s claimed costs were incurred as part of an

undertaking designed to produce a CERCLA quality clean-up.

65a

Mead contends in general that Beazer has applied an

inappropriate standard for determining whether its

investigative costs are recoverable response costs. It argues

that the work performed pursuant to the AOC should not be

presumed to meet the necessary and consistency requirements

of CERCLA. And, even if such a presumption is appropriate,

a specific review of Beazer’s cost documents assertediy

demonstrates a significant amount of the costs were not

incurred pursuant to the AOC and/or were not “necessary

costs of response” or “incurred consistent with the NCP.”

From Mead’s perspective the cost documents continue to

reflect non-recoverable expenditures in the form of (1) double

billing/inadequate documentation, (2) programmatic costs

incurred in complying with independent environmental

regulatory programs, (3) unrecoverable post risk assessment

costs and (4) unnecessary sampling costs.

Beazer sufficiently has demonstrated the costs it incurred

in complying with the AOC were generated in a setting that

presumptively satisfies CERCLA’s necessary and consistency

requirements. The record also demonstrates that as a whole

Beazer’s cost documents do reflect necessary costs of

response incurred consistent with the NCP that were

generated as part of an environmental remediation effort

designed to produce a CERCLA quality clean-up.

Accordingly, Beazer’s claimed response costs are

presumptively recoverable and Beazer is entitled to recover its

claimed costs unless Mead’s specific challenges have led the

court to conclude otherwise.

“Congress enacted CERCLA, a complex piece of

legislation ... to force polluters to pay for costs associated

with remedying their pollution.” Beazer East, 34 F.3d at 219

(quoting United States v. Alcan Aluminum Corp., 964 F.2d

252, 258 (3d Cir.1992)). CERCLA is a remedial statute

66a

which is to be construed liberally to effectuate its goals and

one of its principal concerns is assuring that those who are

responsible for environmental conditions bear the costs of

remedying those conditions. [d. (citing, inter alia, B.F.

Goodrich vy, Murtha, 958 F.2d 1192, 1197 (2d Cir. 1992)).

Generally, CERCLA initially imposes strict liability on

potentially responsible parties. With limited exception, a

potentially responsible party who has incurred costs associated

with hazardous substance clean-up and site remediation may

recoup that poriion of its expenditures which exceed its fair

share of the overall liability through the contribution and

equitable apportionment mechanism engrafted into CERCLA

by the Superfund Amendments and Re-Authorization Act, 42

U.S.C. §9613(f). See New Castle County v. Halliburton

NVS Corp., 111 F.3d 1116, 1122 (3d Cir. 1997).

A private party may recover contribution under CERCLA

for any “necessary cests of response incurred ... consistent

with the national contingency plan.” 42 U.S.C. §9607(a)(4)

(B); see also 40 C.F.R. §330.700(c)(2). The party seeking

contribution has the burden of demonstrating that its identified

costs satisfy both the necessary and consistency requirements

of the statute. Foster vy. United States, 926 F.Supp. 199, 203

(D.D.C. 1996). Also, as a general matter response costs

must have been incurred in a reasonable manner. Langford-

Coaldale Water Authority v. Tonolli Corp., 4 F.3d 1209,

1219 (3d Cir. 1993); Northwestern Mutual Ins. Co. v.

Aulantic Research, 847 F.Supp. 389, 401 (E.D.Va. 1994). In

other words, costs incurred for needless measures that do not

come within the ambit of CERCLA’s necessity and

consistency requirements are not recoverable. Id.

Beazer is entitled to seek contribution for ali necessary

“response costs associated with a release or threatened release

of hazardous materials.” 42 U.S.C. §9607(a)(4)(B).

67a

“*Response’ [under CERCLA] means remove, removal,

remedy, and remedial action.” 42 U.S.C. §9601(25).

“Removal” includes “such actions as may be necessary to

monitor, assess, and evaluate the release or threat of release

of hazardous substances ....” 42 U.S.C. §9601(23). Thus,

CERCLA contemplates that investigative costs incurred to

assess, characterize and evaluate the threat of a release are

response costs. See, e.g, Bowen Engineering v. State of

Reeve, 799 F.Supp. 467, 476 (D.N.J. 1992) (citing Jones v.

Inmont Corp., 584 F.Supp. 1425, 1429 (S.D.Oh. 1984)).

In order to prove its identified costs satisfy the necessity

requirement, Beazer must prove “(1) that the costs were

incurred in response to a threat to human health or the

environment and (2) that the costs were necessary to address

that threat.” Foster, 926 F.Supp. at 203 (quoting G.J. Leasing

Co. vy. Union Elec. Co., 854 F.Supp. 539, 561 (S.D.IIl.

1994) (emphasis in original)). In the area of investigatory

costs this requirement generally is understood to mean that “a

claimant’s investigatory costs must be precipitated by a release

of a hazardous substance and necessary to the remediation

thereof.” Id. (citing Gache v. Town of Harrison, 813 F.Supp.

1037, 1046 (S.D.N.Y. 1993) & Artesian Water Co. v.

Government of New Castle County, 659 F.Supp. 1269; 1278

(D.Del. 1987)). The threat to public health or the environment

must be actual and real. J.G. Leasing Co., 854 F.Supp. at

562 (citing Matter of Bell Petroleum Services, Inc., 3 F.3d

889, 904-906 (Sth Cir. 1993)). A hypothetical threat is

insufficient. Id. In addition, the release or threatened release

must have caused the claimant to have incurred the response

costs. Id. (citing 42 U.S.C. §9607(a)(4); Dedham Water Co.

v. Cumberland Farms Dairy, Inc., 872 F.2d 453, 459 (ist

Cir. 1992)).

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The EPA has determined that all actions undertaken to

comply with the AOC are a necessary response to a release

and ongoing threat of release of hazardous substances into the

environment and are actions needed to protect human health

or the environment. In the AOC the EPA made a finding that

“{t}here has been a release of hazardous waste and/or

hazardous constituents into the environment.” AOC

(Plaintiff's Trial Exhibit 443) at §V(4). It further determined

that all actions required under the AOC are “necessary to

protect human health or the environment.” Id. at §V(5).

These determinations were based upon the initial and

subsequent investigations and sampling at the site which

confirmed that there had been a release of hazardous

substances within the meaning of CERCLA. The EPA also

determined that the ongoing investigation and characterization

activities under the AOC are necessary and appropriate steps

toward assessing potential measures designed to select feasible

and reasonable measures to clean-up the site and eliminate the

threat of a future release. The EPA’s determinations were

made within its area of technical expertise and are entitled

to deference. See Commonwealth of Pa., Dept. of

Environmental Resources v. U.S.E.P.A., 932 F.2d 269, 272

(3d Cir. 1991). It follows that Beazer’s activities undertaken

to comply with the AOC are costs incurred in response to a

threat to human health or the environment and are necessary

to address that threat.

Beazer has demonstrated sufficiently that in general its

costs in complying with the AOC should enjoy a presumption

of necessity and consistency under CERCLA. Mead’s

contention that such a presumption is inappropriate because

the AOC was entered under §3008(h) of the RCRA is

unpersuasive. While Mead correctly notes that the preamble

to the 1990 NCP indicates a RCRA corrective action is not

entitled to a presumption of necessity and consistency under

69a

CERCLA merely because it requires a private party to

conduct clean-up activities, see Mead’s Brief in Support of

Judgment (Document 341) at p. 7, it equally is clear that

response actions undertaken pursuant to RCRA can justify

presumptive cost recovery under CERCLA where the

activities are from a technical perspective analogous to those

that would have been required under an order issued by the

EPA pursuant to §106 or §122 of CERCLA and the costs

incurred are substantially similar to those that would have

been incurred under CERCLA. Those circumstances are

present here.

The AOC is the functional equivalent of and mandates a

substantially similar process to what would be required under

a §122 administrative order on consent under CERCLA. As

a general matter the investigatory and characterization

components of a response action under CERCLA begin with

a remedial preliminary assessment (“PA”) and a remedial

sight inspection (“SI”). See 40 C.F.R. §300.420. “A

remedial PA shall consist of a review of existing information

about a release such as information on the pathway of

exposure, exposure targets, and source and nature of release.”

40 C.F.R. §300.420(a)(2). A PA report must include a

description of the release, a description of the probable nature

of the release, a recommendation on further action and a

recommendation on whether a SI or removal action or both

should be undertaken. 40 C.F.R. §300.420(4). If a SI is

chosen, it must build upon the information gathered from the

PA, involve both on and off site field investigation efforts and

sampling, and utilize a process for obtaining data of sufficient

quality and quantity to “achieve adequate data for use in site

evaluation and hazard ranking system activities.” 42 C.F.R.

§300.425. If a remedial SI is performed, the lead agency

performing the investigation must prepare a report containing:

70a

(I) A description/history/nature of waste handling;

(ii) A description of known contaminants;

(iii) A description of pathways of migration of

contaminants;

(iv) An identification and description of human and

environmental targets; and

(v) A recommendation on whether further action is

warranted.

Id. The entire process is designed to provide the data and

information necessary to perform a _ remedial

investigation/feasibility study and permit the EPA to select

appropriate remedial actions. See 42 C.F.R. §300.430.

As noted above, the AOC obligates Beazer to engage in a

substantially similar process. The AOC specifically required

Beazer to complete a RCRA Facility Investigation Work Plan

for the entire site which was “designed to define the presence,

magnitude, extent, direction and rate of movement of any

hazardous waste and/or, hazardous constituents, within and

beyond the facility boundary.” Id. at §VI(A)(1) & (2). As

part of this process Beazer had to conduct the “investigations

necessary to: (1) characterize the potential pathways of

contaminant migration; (2) characterize the source(s) of

contamination; (3) define the degree and extent of

contamination; (4) identify actual or potential receptors; and

(5) support the development of alternatives from which a

corrective measure will be selected by the EPA.” Id. at

§VI(A)(2). Beazer also was required to submit both

preliminary and final RFI reports to the EPA and develop a

data collection quality assurance plan, a data management

plan, a _ health and safety plan and a_ public

involvement/community relations plan. Id. at §vi(A)(3). In

fulfilling these obligations Beazer is required to provide

monthly progress reports to the EPA and ADEM and the EPA

Tila

has expressly reserved the right to modify and/or make

changes to all of Beazer’s required submissions and

deliverables. Upon completion of the RFI, the AOC obligates

Beazer to submit a corrective measures study to inform the

EPA’s selection of a corrective measure or measures for the

site. Id. at §V1(B)(4) & (5). Finally, the EPA may require

Beazer to perform additional tasks, including investigatory

work or engineering evaluations, if in its judgment such

actions are necessary to protect human health or the

environment due to the receipt of new information indicating

“that such additional work is necessary.” Id. at §VI(C)(11).

A comparison of the manner in which the release of

hazardous substances at the site has been investigated reveals

its substantial similarity with the general process to be

employed under CERCLA and the NCP. The RFI work plan

initiated a series of investigative measures designed to assess

and characterize the nature of the release, the potential

pathways of migration, the human and environmental

receptors placed at risk by the migration and to provide the

information necessary to make informed decisions about

future action. The work was performed in incremental steps

in order to permit the EPA or ADEM to expand or modify its

scope based upon gained information. Internal and external

data validation controls were maintained. Both on and off site

sampling has been utilized and the entire process is designed

to generate the information needed to evaluate remedial

alternatives and select an appropriate remedial measure.

Moreover, each parties’ expert witness offered an opinion

on when investigation and characterization activities

performed under an independent statute or regulation should

be deemed presumptively consistent with costs that would be

incurred under CERCLA. Both acknowledged that where

investigative and pre-remedial activities have been undertaken

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pursuant to an independent environmental statute or

regulation, the resulting costs are recoverable under CERCLA

if from a technical perspective the governing order is similar

to a consent decree that would be entered under §122 of

CERCLA. In fact, Mead’s expert, Dr. Ball, acknowledged

that when an independent consent order is similar to and

structurally consistent with a model §122 CERCLA consent

order from a technical perspective, then any costs incurred in

implementing that order presumptively comply with

CERCLA’s necessity and consistency requirements. See TT

of February 5, 2002 (Document 338) (Dr. Ball), at p. 137.

The AOC is conceptually similar to and from a technical

perspective contains the functionally equivalent sections of the

EPA’s model administrative order on consent, for a remedial

investigation/feasibility study under CERCLA. Compare

Plaintiff's Exhibit 569 with Plaintiff's Exhibit 443; see also

Testimony of Dr. Ball on Cross-Examination, TT of February

5, 2002, at pp. 132-38. And Beazer’s expert, Jay Vandeven,

directly and convincingly opined that (1) necessary costs of

response under CERCLA include “costs and activities that are

necessary to characterize the nature and extent of

contamination at the site, develop data for risk assessment,

and develop data for developing, analyzing and selecting a

remedial alternative at a site” and (2) from a technical

perspective the investigation at the Woodward Coke Facility

would have progressed in essentially the same manner if it had

been undertaken pursuant to CERCLA as opposed to RCRA.

See Testimony of Jay Vandeven, February 5, 2002, Trial

Transcript at pp. 48-49 and February 6, 2002, Trial

Transcript at pp. 4-7.

Beazer’s undertakings to comply with the AOC also are

presumptively consistent with the NCP. The NCP is “a series

of regulations promulgated by the EPA to establish

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procedures, criteria and responsibilities for response actions

conducted both by the government and private parties.” The

Reading Co v. City of Philadelphia, 823 F.Supp. 1218, 1239

(E.D.Pa. 1993) (quoting Ambrogi_v. Gould, Inc., 750

F.Supp. 1233, 1238 (M.D.Pa. 1990)). To be consistent with

the NCP from a substantive perspective, a private party’s

response actions must be aimed at bringing conditions at a

toxic waste site into compliance with applicable environmental

and public health requirements. Artesian Water Co., 659

F.Supp at 1296. Under the provisions of the 1990 NCP “a

private party response action will be considered consistent

with the NCP if the action, when evaluated as a whole, is in

substantial compliance with the applicable requirements ...

and results ina CERCLA-quality clean-up.”'

' The parties each used the 1990 version of the NCP in conducting

their review of Beazer’s Cost documents. Since the passage of

CERCLA in 1980, there have been three versions of the NCP in

effect: 1982, 1985 and 1990. While it is understood that response

costs are to be evaluated in conjunction with the NCP in force at the

time the costs are incurred, the courts have generally agreed that

the 1990 version merely clarified the standard of compliance set

forth in the 1985 version and as a result most courts have applied

the “substantial compliance” standard as clarified to costs incurred

both before and after 1990. See Reading Co., 823 F.Supp. at 1239-

1240; Nashua Corp. v. Norton Co., 116 F.Supp.2d 330, 353

(N.D.N.Y. 2000); Sherman-Williams Co. v. ARTRA Group, Inc.,

125 F.Supp.2d 739, 753 (D.Md. 2000). The EPA chose the

“substantial compliance” standard in order to ensure that cost

recovery actions for meritorious clean-up activities were not

defeated by a talismanic application of the NCP” s detailed

requirements. 55 Fed.Reg. 8666, 8993 (1990). This court will

employ the substantiai compliance standard as well.

7y4a

Consistency with the NCP also requires a private party to

generate and maintain documentation to support all response

and remedial actions taken at a site. “In general, [the}

documentation 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 incurred for response

actions, and impacts and potential impacts to the public health

and welfare and the environment.” 40 C.F.R. §300.700°)

(5)(ii). Beyond these general requirements “the NCP simply

does not contain any specific standards concerning the

documentation of costs.” United States v. Findett Corp., 75

F.Supp.2d 982, 991 (E.D.Mo. 1999); United States v.

Chrysler Corp., 168 F.Supp.2d 754, 759 (N.D.Ohio 2001).

Nor do the regulations elaborate on what is meant by

“accurate accounting” or “sufficient” documentation. Id.

Consequently, compliance with the documentation and

accounting requirements of the NCP can factually be satisfied

through the submission of documentation and cost summaries

that as a whole (1) identify the general nature of the action

taken, (2) identify the cost incurred and (3) establish a nexus

between the claimed cost and the response or remedial action

taken or to be taken at the site. Id.

The practical inability of applying the detailed procedures,

criteria and goal-oriented requirements of the NCP to pre-

remedial activities undertaken to investigate, characterize and

monitor a release or threatened release of hazardous

substances when no remedial measures have been selected at

a site has been recognized by essentially every court that has

squarely considered the issue. See Donahey v. Bogle, 987

F.2d 1250, 1255-56 (6th Cir. 1993) (“Although consistency

with the NCP is a necessary element for recovery of remedial

costs, it does not necessarily follow that consistency with the

NCP is required for recovery of monitoring or investigative

75a

costs”) following Carlyle Piermont Corp. v. Federal Paper

Board Co., 742 F.2d 814 (S.D.N.Y. 1990), vacated on other

grounds 512 U.S. 1201 (1994)); Artesian Water Co., 659

F.Supp. at 1294 (“the detailed NCP provisions governing

other response actions cannot reasonably be applied to

preliminary monitoring and evaluation of a release of

hazardous substances”), affirm’d, 851 F.2d 643, 647 (3d Cir.

1988) (the plaintiff's failure to demonstrate consistency with

the NCP led the district court “to deny recovery for all claims

except for costs of monitoring, an instance where the

procedural requirements were not pertinent”); Foster, 926

F.Supp. at 203 (“because the detailed NCP provisions

governing other response action cannot reasonably be applied

to preliminary monitoring and evaluation of a release of

hazardous substances, ... investigatory costs are generally

recoverable irrespective of their consistency with the NCP”)

(citing numerous additional cases in support) (citations

omitted); Marriott Corp. v. Simkins Indus., Inc., 825

F.Supp. 1575, 1583 (S.D.Fla., 1993) (“courts that have

considered the issue of investigatory costs’ consistency with

the NCP are in agreement that these costs are recoverable

irrespective of their consistency with the NCP”) (collecting

cases); City of New York v. Chemical Waste Disposal Corp.,

836 F.Supp. 968, 980 (E.D.N.Y. 1993) (“the costs of initial

investigation and monitoring of a release are recoverable,

however, without [showing they are consistent with the

NCP]”).

In light of the conceptual difficulties of applying the

detailed remedial provisions of the NCP to initial investigation

and monitoring costs, a number of courts have deemed

CERCLA’s consistency requirement to be satisfied where a

private party’s pre-remedial costs were undertaken in a

manner designed to further the fundamental purposes of

CERCLA: prompt detection of a release or threatened release

T6a

of hazardous substances and the removal or remediation of

any such substance. See, e.g., HRW _ Systems, Inc. vy.

Washington Gas Light Co., 823 F.Supp. 318 344 (D.Md.

1993) (consistency with the NCP investigatory and will be

deemed present where monitoring activities are designed to

characterize the release, describe its probable nature and lead

to recommendations regarding future actions); Northwestern

Mutual Life Ins. Co. v. Atlantic Research Corp., 847 F.Supp.

389, 400-01 (E.D.Va. 1994) (investigatory activities

undertaken to assess the nature of a release of hazardous

substances at a facility and to identify feasible remedial

alternatives are consistent with the NCP); Nashua Corp. vy.

Norton Co., 116 F.Supp.2d 330, 352-53 (N.D.N.Y. 2000)

(costs incurred “at the preliminary remedial evaluation phase”

in order to identify potential remedial measures and assess

their feasibility sufficiently comply with the NCP).

A similar standard is appropriate in this case. The AOC

obligates Beazer to conduct an in depth RFI investigation

designed to generate sufficient data from which to characterize

the nature and extent of the contamination at and beyond the

site, identify and understand the sources of that

contamination, identify and understand the pathways of the

contamination and characterize the actual and potential ways

in which the contamination poses risks to human health and

the environment. Beazer’s investigation and monitoring

activities under the AOC are designed to characterize a known

release of hazardous substances, describe the probable nature

of that release and lead to recommendations regarding future

action as to that release. The procedures being employed are

designed to produce reliable data regarding all environmental

mediums that potentially could be affected by the

contamination. These activities have been and are being

undertaken in accordance with direct oversight by the EPA

and ADEM. It follows that the investigation and monitoring

T7a

activities undertaken at the site have been designed to

characterize the release, described its probable nature,

generate adequate data from which alternative remedial,

measures can be identified, and lead to recommendations

regarding future actions.

The AOC also is designed to lead to a CERCLA-quality

clean-up. It obligates Beazer to perform a corrective

measures study after completing a final RCRA facility

investigation report. The stages of the RFI are designed to

assure adequate data from which to analyze the risks

presented. The object of the CMS is to identify and

development alternative corrective measures, compare the

effectiveness and efficiency of those alternatives and permit

the EPA to select the most effective measures to remediate the

site. See Exhibit B to the AOC, Plaintiff's Exhibit 443 at p.

5,172. Beazer’s activities undertaken to comply with the

AOC are thus designed to lead to an effective clean-up of the

hazardous wastes present at the site and satisfy the general

requirements needed to establish presumptive consistency with

the NCP.

Finally, Beazer’s cost documents sufficiently comply with

the applicable requirements in 40 C.F.R. §300.700(c)(5) &

(6). As a whole Beazer’s cost documents sufficiently identify

the source and circumstances of the release, the nature of the

action taken to assess, characterize and monitor the nature of

that release, the costs incurred as a result of the actions taken

and the aspects of the AOC the activity was designed to

achieve.

The AOC is substantially similar to a §122 administrative

order on consent for a remedial investigation/feasability study

under CERCLA. Beazer’s investigative activities pursuant to

the AOC are from a technical perspective the functional

78a

equivalent of what would have been required under a

CERCLA-based investigation. Beazer’s investigative

activities were as a general matter undertaken as a necessary

response to a release and threatened release of hazardous

substances that pose an imminent danger to human health and

the environment. Beazer’s investigation and monitoring

activities have been performed in order to (1) characterize the

release, (2) describe its probable nature, (3) generate adequate

data from which alternative remedial measures can be

identified and (4) provide the information necessary to make

informed decisions about future remedial action. Beazer’s

activities performed to implement the AOC are designed to

lead to a CERCLA-quality clean-up. Beazer has employed

adequate and reliable methods to (1) identify the cost of its

investigative and monitoring activities and (2) the purpose

those activities served toward accomplishing the various

components of the AOC. It follows that Beazer’s cost

documents presumptively meet the requirements governing a

private party contribution action under CERCLA.

Mead contends four categories of Beazer’s cost documents

are non-recoverable because they either reflect activities that

were not undertaken to comply with the AOC or are otherwise

beyond the scope of CERCLA’s recoverable response costs.

These include: (1) instances of double billing or insufficient

documentation, (2) programmatic costs incurred in order to

comply with operational requirements under RCRA or the

Clean Water Act (“CWA”), (3) post risk assessment costs and

(4) the excessive and unneeded gathering of data at the site.

Each of these categories is addressed below.

In its pretrial brief Mead identified a number of invoices

allegedly reflecting instances of double billing. It also

highlighted invoices that assertedly did not provide sufficient

information to determine whether the claimed costs qualified

79a

as a necessary cost of response. Prior to trial Beazer

eliminated a number of its invoices in order to make

adjustments for instances of alleged double billing.

Notwithstanding these adjustments, Mead continues to contend

that Beazer’s cost documents reflect instances of double

billing and similar nonrecoverable expenses.

Mead specifically challenges an invoice by Dow

Environmental for “resampling” services in the amount of

$55,984.76. See Plaintiff's Exhibit 565 at Bates No. 3249.

Beazer’s environmental manager at Woodward Coke, Mr.

Brourman, explained that the invoice reflected the costs of

validation for the resampling of data collected by another

vendor. TT of February 4, 2002 (Document 337) at 71. The

initial data could not be validated due to mistakes of the

contractor gathering the samples, ES&E. Because ES&E was

responsible for the mistakes leading to the need to resample,

“ES&E voluntarily re-did the sampling and analysis at their

costs, that include[d] both the field work and the laboratory

portion.” Id. at 71-72. However, Dow Industrial was paid

for its quality assurance/quality control work for both the

initial sampling and the resampling because it was not

responsible for ES&E’s mistakes and Beazer did not request

ES&E to pay the Dow invoice on Beazer’s behalf. It was

Beazer’s practice to avoid having one vendor collect directly

from another; instead, Beazer would have paid one vendor

and then demanded an off-setting credit from the other. TT

of February 4, 2002 (Brourman) at 104. Beazer was unable

to locate in its invoices any specific credit provided by ES&E

to account for the portion of the Dow Environmental invoice

of July 29, 1996, reflecting resampling charges. Under such

circumstances Dow Environmental’s resampling invoice of

July 29, 1996, for $55,984.76 is not a recoverable response

cost.

80a

Mead attacks a series of invoices from a vendor known as

“Dames & Moore.” These invoices were submitted for

community relations work. The invoices indicate the work

was performed at Beazer’s “wood treatment plant” in

Dolomite, Alabama. See Plaintiff's Exhibit 561 at Bates Nos.

1850-60. Brourman explained that Beazer did not own a

wood treatment plant in Dolomite and therefore the work had

to have been done in conjunction with Woodward Coke. See

TT of February 4, 2002 at 76. Mead notes that Brourman

admitted on cross-cxamination that it was just as likely a

scenario that the address of Woodward Coke in Dolomite,

Alabama, hed been entered in error as opposed to the

designation of a “wood treatment plant.” Id. at 83. Mead

thus argues that the record demonstrates equally plausible

scenarios and therefore Beazer has not met its burden.

The record contains sufficient evidence to support

Beazer’s treatment of the Dames & Moore invoices as

attributable to Woodward Coke. First, Brourman noted in his

direct testimony that the tracking sticker attached to the

invoices by Beazer at the time the invoices were processed

designated the activity to “582”, the control number for the

Woodward Coke plant. This designation was made on each

Dames & Moore invoice included in Beazer’s cost documents.

Second, the invoices reflect a period of service commencing

on July 27, 1991, which immediately followed Beazer’s entry

into the AOC. The AOC required Beazer to establish a

community relations program. The invoices reflect the types

of activities one would expert to be performed in developing

and initiating a community reiations program at a large RCRA

site. Finally, the invoices reflect activity through November

1, 1991, which correlates to the time when complying with

the community relations component of the AOC would have

been appropriate and necessary. Under these circumstances

8la

the record supports Beazer’s inclusion of the Dames & Moore

invoices in its cost documents.

Mead contends several of Beazer’s invoices should be

excluded because a reasonable person cannot utilize the

supporting documentation to determine the nature of the

actions taken and their relationship to Beazer’s obligations

under the AOC. It also challenges three invoices from ES&E

_ that were designated as “non-billable charges” without further

explanation. Mead identified these invoices in categories “D-

1” and “D-2,” in its trial exhibit “M-11.”

In response Brourman indicated that when the invoices in

these categories were received and processed by Beazer they

were treated as environmental costs for activities at

Woodward Coke and on that basis they were included in

Beazer’s recoverable response costs. Brourman was not able

to provide any further information on the invoices in category

“D-1.” ES&L’s project manager also was unable to provide

further explanation regarding either category of invoices.

Under these circumstances the invoices in the amount of

$35,041.09 in category “D-1,” were insufficiently

documented and are not properly included in Beazer’s

recoverable response costs.

Beazer adequately met its burden of proof on the costs

reflected in category “D-2.” Brourman explained that the

costs in “D-2" reflected work that was beyond the scope of

ES&E’s initial contract at the site but nevertheless was work

that was essential to performing the contract. As part of

ES&E’s work in analyzing the field samples taken from the

site, ES&E was asked to develop an electronic database from

which the sample results could be examined and manipulated

in different ways. ES&E agreed that a certain amount of its

employees’ time would be consume learning curve needed to

82a

“get up to speed in figuring that exercise out” and as a result

ES&E had agreed to charge Beazer only for what was

“reasonable to expect of an experienced contractor.” TT of

February 4, 2002 at 73. A “non-billable charges” designation

was used as an accounting mechanism to track separately the

hours devoted to developing the electronic database. Beazer’s

employees reviewed the actual work performed to develop the

database and Brourman approved the amounts billed to Beazer

as reasonable for the services provided. Id. Beazer paid the

approved invoices. Id. Analyzing the data generated from

the field sampling was an essential part of formulating the risk

assessment. Under these circumstances ES&E’s “non-billable-

invoices” were sufficiently connected to Beazer’s obligations

under the AOC and accordingly these charges are recoverable

response costs.

Mead contends two types of costs should be eliminated

because they represent programmatic operating costs incurred

solely to comply with independent requirements under RCRA

or the Clean Water Act (“CWA”): (1) national pollution

discharge elimination system (“NPDES”) costs (categorized

by Beazer as outfall area study and monitoring: outfall plant

lake costs); and (2) other RCRA costs (categorized by Beazer

as groundwater quality assessment and part B post-closure

application costs). Mead argues that Beazer incurred and

would have incurred these environmental costs solely as a

function of independent environmental regulations applicable

to its ongoing operations of the plant and therefore they are

independent of the historical disposal practices addressed

through the AOC. Specifically, Mead identifies $37,079.72

in costs which it claims are nonrecoverable NPDES costs tied

solely to Beazer’s compliance with the CWA during the

83a

ongoing operation of the plant.? The record does not support

Mead’s contention that these costs did not serve any purpose

in Beazer’s compliance with the AOC and were incurred

solely as a result Df independent environmental regulations.

In the prior phase of this litigation Mead argued that its

liability to Beazer should not include programmatic costs that

Beazer would have incurred separately from its costs of

complying with the AOC. Arguments concerning this issue

were raised by both parties’ experts and after considering

Mead’s objections to the magistrate judge’s proposed findings

of fact and conclusions of law, this court concluded that “even

assuming that some undertakings may coincidentally serve a

dual purpose for Beazer, this factor in itself does not make

such undertakings unnecessary for proper monitoring and

remediation of the site.” Memorandum and Order of Court

of March 7, 2000 (Document 308) at 17. Mead has advanced

no authority to undermine the court's determination.

Moreover, contrary to Mead’s assertions in its post-trial

brief in support of judgment, the record adequately

demonstrates that the various costs Mead has placed into its

“programmatic costs” category were incurred as part of

Beazer’s compliance with the AOC and thus represent

necessary costs of response incurred consistent with the NCP.

Mead essentially concedes that if the activities within this

category were necessary to comply with any aspect of the

AOC, then they properly are included in Beazer’s recoverable

* Separate and apart from the obligations set forth in the AOC,

ADEM’s regulations requirea Beazer to perform a groundwater

quality assessment at the site. Beazer obtained permission from

ADEM to combine its groundwater quality assessment obligations

with its groundwater monitoring activities required under the RFI.

84a

response costs. See Mead’s Post-Trial Brief in Support of

Judgment (Document 341) at 18 (“To the extent that costs

were incurred in the RCRA closure activities that could

conceivably also [have] been of use in the §3008(h) corrective

action efforts, they have not been deducted [by Mead].”). It

argues, however, that these costs were incurred solely for

independent regulatory compliance purposes.

The record does not support Mead’s assertion that the

costs in question served only an independent regulatory

purpose. Jay Vandeven provided the following assessment of

these costs in his rebuttal expert report:

This issue was raised in previous expert reports by

myself and Dr. Ball, and addressed by the court. The

costs questioned by Dr. Ball relate to the monitoring

of water quality in wells installed to comply with

Woodward Coke plant RCRA permit and NPDES-

permitted outfalls.

That these activities are associated, in part, with

RCRA and NPDES compliance is not disputed;

indeed, the amount of money Beazer is seeking to

recover from Mead includes a discount for the costs

associated with programmatic requirements.

However, the remaining costs after the discount are

indeed recoverable and have been incurred in a

manner consistent with the NCP. The data generated

by the monitoring of RCRA compliance groundwater

monitoring wells and NPDES outfalls have been and

will continue to be used in the RFI. For example,

the RFI contains a number of potentiometric surface

maps, which are used to understand groundwater flow

patterns. Each of these maps were developed using

85a

groundwater elevation data from the RCRA

compliance wells.

The NPDES outfall in question monitors discharges

from the South Pond, which is a regulated Solid Waste

Management Unit (SWMU). As a SWMU, the South

Ponds are a potential source for releases of chemicals

to the environment. Monitoring of potential releases

from this SWMU is an integral component of the RFI.

Therefore, it is clear from my review of the site

documents that no costs are “due solely to the

operation of the Woodward Coke plant.” Rather, a

portion of the costs were associated with activities that

had multiple purposes. In addition, the activities in

question continue to be required by ADEM even

though the plant has ceased operation and has been

demolished. Consequently, the costs associated with

these activities cannot be due solely to the operations

of the Woodward Coke pliant.

Rebuttal Expert Report of Jay Vandeven (Document 319) at

pp. 18-19. Mr. Vandeven’s trial testimony further explained

the manner and means by which the data and resulting

knowledge gained from the activities underlying these costs

were used as part of Beazer’s response actions. For example,

in conducting the groundwater quality assessment for the RFI,

data taken from any particular location or well could not be

separated from the data gathered from other monitoring

locations. He explained:

From a technical perspective, you really can’t

separate, the data that you gather from [wells put in

around one particular RCRA regulated unit} from the

data that you gathered during the rest of the RFI.

86a

For instance, a big part of the RFI at the site is

characterizing the nature of the groundwater flow. To

do that, you take water level measurements in the

wells and develop a map of how groundwater flows.

Well, the water levels from those RCRA wells were

used in developing the RFI groundwater maps. They

are used for, at least, dual purposes.

TT of February 4, 2002 (Vandeven) at 162-63. Thus, Mead’s

general arguments concerning Beazer’s NPDES and RCRA

groundwater sampling are unavailing. Similarly, the data

gathered for the “outfall area study” was used to identify the

migration of Contaminants that originated in the South Pond,

a RCRA management unit. The sampling attempted to

identify and characterize contaminants generated from the

historical waste disposal at the site that resulted from various

tars and coking bi-products being released into the South Pond

during the years it was used as part of the industrial process.

Id. This activity was part of the AOC. Id. at 163. A similar

investigation was undertaken in conjunction with the plant

lake. Id. at 167. It too sought to monitor and characterize

groundwater that was leaving the site and flowing into

Opossum Creek, which is one of the primary receptors and

points of concern identified by the EPA and ADEM. Both

outfall area studies monitored the movement of constituents

through the groundwater from onsite locations to remote and

offsite locations. Id. at 167. Both sought to characterize

releases from RCRA units on site, including historical

disposal sites and solid waste management units. Id. at 168.

And, all monitoring and characterization of groundwater and

its flow through the karst terrain contributed to the

formulation of the site conceptual model for groundwater

flow. It follows that these costs are recoverable costs of

response incurred consistent with the NCP.

87a

Mead’s contends that the monitoring and sampling

activities associated with the actual closure of three RCRA

regulated units reflect nonrecoverable response costs because

the activity was not aimed at producing data useful to the

formulation of the risk assessment. Although | the

investigation, characterization and monitoring activities

associated with closing these units did not lead to data used in

the risk assessment, these costs are nevertheless recoverable

response costs.

First, two of the three RCRA regulated units that are now

controlled by a part B RCRA permit were produced by onsite

historical waste disposal practices that resulted in hazardous

wastes being present on the site for a number of decades. TT

of February 6, 2002 (Document 339) (Vandeven) at 47. The

costs associated with the closure, remediation and post-closure

monitoring of these units relate to onsite historical waste

disposal practices, and two of the units were operated prior to

Beazer purchasing the site from Mead. Id. at 53. The

activities undertaken in conjunction with these units is thus

directed at monitoring, controlling and remediating the release

of hazardous substances generated by historical waste disposal

practices.

Second, this court previously considered and rejected

Mead’s contention that the site should be segregated into

distinct operable units, with responsibility being allocated

based upon the parties’ respective use or association with

those units. Instead, the court held that consistent with

traditional field and agency practice, the investigation,

characterization and assessment of the site must be examined

and analyzed as a whole. See Findings of Fact and

Conclusions of Law of November 24, 1999 (Document 303),

at 70-78, 95 (“Any allocation in this case must encompass the

entire site, and must include investigation expenses that have

88a

resulted in certain areas of the site being found not to need

remediation. ”).

Third, the basic aims of an RFI under RCRA (and a

remedial investigation under CERCLA as well) are to

determine the nature and extent of contamination at the site,

use all of the data available to conduct a risk assessment and

examine and evaluate feasible remedial alternatives. Id. at 29.

The various activities that Mead contends are “nonrecoverable

RCRA regulated unit closure costs” segregated by Dr. Ball

into the “C-1” category have contributed and will continue to

contribute to the site-wide characterization of the

contamination and its potential to migrate. Understanding the

entire picture is essential to identifying and evaluating,

feasible remedial alternatives. TT of February 6, 2002

(Document 339) (Vandeven) at 29, 33, 52 (“All sampling

analysis at the site provides for characterization of the nature

and extent of contamination as required by the AOC.”) & 53.

In addition, the closure, remediation and monitoring of the

historical Waste disposal units already are part of the goal to

be obtained by implementing the AOC, the actual remediation

of the site. Accordingly, these costs- properly are included as

recoverable response costs.’

> The court agrees with Mead as to two particular costs placed in

this category by Dr; Ball. It is well settled that RCRA does not in

itself provide for the recovery of past costs incurred in the

treatment, storage and disposal of hazardous wastes. See Meghrig

vy. KFC Western, Inc., 516 U.S. 479, 484 (1996). Consequently,

recovery is appropriate under a RCRA-based program only where

recovery of the claimed costs is warranted under CERCLA. Id. at

487-88. The $6,000.00 post-closure application fee paid to ADEM

reflects a purely administrative RCRA cost and the cost itself lacks

any potential to contribute to the characterization of the site or the

evaluation of potential remedial measures. Thus, it will be

89a

Mead’s contention that its CERCLA liability was

extinguished by Beazer’s submission of a risk assessment to

the environmental agencies on March 3, 1997, also is

Unavailing. At the completion of Phase I and II of the RFI

Beazer submitted a risk assessment to ADEM as an appendix

to its report on those phases. The risk assessment was

excluded.

In addition, Beazer agreed that a deduction is appropriate for

the costs of installing and monitoring the wells for one of the post-

closure units because one unit was created exclusively by Beazer’s

operations at the site. Beazer deducted $365,299.00 from its

Claimed costs as reflective of installing and monitoring four RCRA

ground wells at a hypothetical RCRA regulated unit. This

calculation was made based on the estimated costs which would

have been required by the K060 regulated unit at the site.

Testimony from Beazer’s environmental project manager indicated

that the unit had five wells associated with it, not four. Based On

Beazer’s average cost for each of the four wells, an additional

deduction of $91,324.75 is appropriate.

The remaining costs placed in the “C-1” category by Dr. Ball

are recoverable. Dr. Ball reviewed Beazer’s invoices to determine

whether on their face the invoices reflected activities that “were

referenced in the risk assessment or were reasonably necessary to

produce the risk assessment.” TT of February 5, 2002 (Ball) at 94;

see also id. at 95. If the invoice did not demonstrate its purpose in

this process, Dr. Ball placed it in “C-1.” Id. at 95. This approach

is contrary to the substantial compliance standard mandated by the

1990 NCP. Furthermore, the court has reviewed the remaining

invoices in this category and is satisfied that they reflect monitoring

and data-gathering activities that are essential to characterizing and

understanding the site as a whole in conjunction with assessing the

nature of the release, understanding its potential risks and

evaluating feasible remedial measures.

90a

prepared by Beazer’s contractor, Ogden, and provided in

pertinent part:

Estimated non-cancer risks resulting from potential

exposures to site related constituents are all below the

U.S. EPA’s target Hazard Index of 1.0, for all

receptors in all media at all exposure areas. Similarly

all estimated excess lifetime cancer risks are within the

U.S. EPA’s target risk range of 1 x 10° (1 in

1,000,000) and 1 x 10° (1 in 10,000).

Defendant’s Exhibit M-14 at p. ES-2. Mead notes that “the

entire Ogden risk assessment is extremely conservative” and

expressly indicates that conservative assumptions have been

employed in developing it. Mead’s Post-Trial Brief in Support

Of Judgment (Document 341) at 21 (citing Defendant's

Exhibit M-14 at p. 7-1). Mead further contends that the risk

assessment has been accepted by ADEM because it has

approved Beazer’s report on the Phase I & II RFI activities

and has not indicated any disagreement with the risk

assessment.‘

Based on the above, Mead argues that “the primary focus

of CERCLA and the NCP is the elimination of unacceptable

risk to human health and the environment” and because a

determination of no unace “table risk has been made through

Beazer’s risk assessment, no further action would be required

under CERCLA. From Mead’s perspective all activities at

the site subsequent to the submission of the risk assessment

* Mead bolsters this argument by asserting that “from the CERCLA

perspective, Beazer is the ‘lead agency’” and as a result a

determination has been made that no further remedial action within

the meaning of CERCLA will be necessary at the site.

9la

were undertaken to comply with the regulatory requirements

of RCRA and any costs Beazer incurred after that date “were

‘on its own nickel’ because the costs would no longer be

necessary costs of response pursuant to CERCLA, since they

no longer were incurred in response to a threat to human

health or the environment.” Id. at 21. Because the risk

assessment purportedly established that no further action was

required under CERCLA, Mead contends that all costs

incurred after May 3, 1997, are not recoverable response

costs.

Mead’s contention that the risk assessment extinguished its

liability under CCRCLA is specious. First, while Beazer is

“the lead agency” under various provisions of the NCP, the

determination of whether further corrective measures and/or

additional activities leading to remediation of the site will be

required under the AOC is a determination that remains with

the environmental agencies. No provision of the AOC

explicitly or implicitly grants Beazer the authority to decide

that its obligations to perform a corrective measure study and

implement any remedies selected by the agencies have been

extinguished by its assessment of the risk posed by the site.

Second, ADEM’s letter of August 24, 2000 - indicating

the draft Phase I & II RFI and groundwater assessment reports

prepared by Beazer’s contractor have been “approved” -

cannot be read to support Mead’s contention that the

conclusions advanced in the risk assessment have been

accepted by ADEM and therefore no further response actions

or remedial measures under CERCLA will be necessary. See

Defendant's Exhibit M-15. The letter merely indicates that

the reports have been approved, which can only be understood

to mean that Beazer has fulfilled the requirements of the work

plan governing Phase I & Il investigation activities and

developed a risk assessment. See TT of February 6, 2002

92a

(Vandeven) at 56. In other words, the letter simply means

that Beazer met the requirements of Phase I and Phase II of

the RIF work plan and has developed the risk assessment as

required by the terms of the AOC-id- And ADEM’s intent

to further investigate and characterize the potential migration

of hazardous substances before substantively approving the

risk assessment and moving to the corrective measures

component of the AOC is evident by the reference in the letter

to the “Phase III RFI work plan” under negotiation between

ADEM and Beazer. It also is evident that the need for the

Phase III work arose as a result of areas of concern generated

from the submitted reports. Defendant's Exhibit M-15; TT of

February 6, 2002 (Vandeven) at 55-56; TT of February 5,

2002 (Vandeven) at 7, 29-30.

Third, it is a well-accepted premise that the risk

assessment is only one step in the CERCLA decision-making

process. See Rebuttal Expert Report of October 2000 at pp.

13-14; TT of February 6, 2002 at 28-31. It is merely one

piece of information that will be used by the environmental

agencies along with all other available information in making

their own assessment of the acceptable and unacceptable risks

that remain at the site. Id.

The author of the Ogden risk assessment, Dr. Magee, also

expressed the same view. In conjunction with questioning

regarding Ogden’s decisions to include or exclude particular

chemicals in a risk assessment presented to an environmental

agency, Dr. Magee provided the following insight as to how

a risk assessment is prepared and presented:

As is typical in the work that I do for clients, I view

my job to put a realistic defensible risk assessment on

the table first time through that’s consistent with the

law and the regulations and the guidance but that

93a

wears the client’s hat rather than the agency’s hat

because I’m working for the client.

We know full well that the agency may often, and

usually does, disagree with many of the assumptions

and approaches that we take. So that the numbers of

this report, which is the favorable report to start the

negotiation with the agency, concludes simply that

nothing has to be done anywhere.

But I don’t believe for a minute that nothing will

have to be done anywhere. Because I believe that

they’re going to say, up in the ponds, you have shown

that if a trespasser gets in there and touches some of

the sediment, it won’t hurt them. But you didn’t say a

darn thing about the ecology, the ecological receptors.

Or you assume that if trespassers get on the site

and contact the average of all the soil across one or

two areas, that there won’t be a problem. But you

didn’t consider that they might go preferentially to this

very small, what we would call, hot spot; what would

be the answer if they went just there?

On groundwater, you assume no use of the

groundwater directly beneath the site. While we

might, all agree that it’s unlikely that someone would

drop a well there and make that their drinking water,

they could use the water for industrial process water.

Again, not atypical of any site, the negotiation that

goes on between the PRP and the agency is just that,

and we haven't seen how they responded to this yet.

So from my general experience on sites that have

these kinds of chemicals in them at these levels, I am

94a

sure that some remediation will be required. And it

will be my job then, if I’m asked to continue working

on it, to focus it in and make it be reasonable and cost

effective, selective removal in just this area, capping

and so forth.

Deposition testimony of Dr. Magee at pp. 48-50. In other

words, the initial risk assessment submitted by Beazer is

anticipated to be a mere first step in the bargaining process

between the EPA/ADEM and Beazer with regard to what

additional response/remediation activities will be required at

the site. Absent written notice from the EPA/ADEM

indicating Beazer has complied with all of its obligations

under the AOC, there is no factual or legal basis for this court

to conclude that subsequent response and remediation

activities at the site will fall outside the “necessary” and

“consistency” requirements of CERCLA.

Furthermore, to extrapolate the proposition that no

unacceptable risk remains at the site and therefore no further

remedial measures will be required from the siatements made

in the risk assessment fails to acknowledge the role of the

EPA in evaluating the information generated from agency-

directed investigations. Ogden’s risk assessment did not

purport to render a conclusion on whether the site continues

to present an acceptable or unacceptable risk. The assessment

merely advances an objective proposition regarding general,

site-wide estimated non-cancer and excess lifetime cancer

risks. The assessment is based upon numerous assumptions

about the hazardous substances present, the likely pathways of

exposure, the likely receptors and future expected land and

water use. It docs not purport to address the need or lack

thereof for future remedial action.

95a

Guidance documents from the EPA indicate clearly that

mere objective findings reflecting the presence of hazardous

wastes within an acceptable target range does not mean that a

CERCLA-quality remedial measure will not subsequently be

required by the EPA at the site. In a memorandum providing

guidance on the use of a risk assessment in the CERCLA

decision-making process, the EPA has emphasized that a

finding within the agency’s acceptable target range will not

eliminate the agency’s discretion to require further remedial

action based on other pertinent factors. EPA’s Office of Solid

Waste and Emergency Response advises that “the EPA uses

the general 10(-4) to 10(-6) risk range as a ‘target range’

within which the Agency strives to manage risks as part of a

Superfund clean-up,” but further emphasizes:

(a) A risk manager may also decide that a baseline risk

level less than 10“ is unacceptable due to-site specific-

reasons and that remedial action is warranted [and

similarly} EPA may determine that risks less than | x

10% are not sufficiently protective and warrant

remedial action.

(b) Other chemical-specific ARARS [applicable

regulations and applicable requirements] may also be

used to determine whether a site warrants remediation.

(c) The upper boundary of the risk range is not a

discreet line at 1 x 10*....

Role of the Baseline Risk Assessment in the Superfund

Remedy Selection Decisions, EPA Office of Selid Waste and

Emergency Response (OSWER), 1991, Base 9355.3-30; see

also Rebuttal Expert Report by Jay Vandeven at pp. 12-13;

TT of February 6, 2002 (Vandeven) at 30-31.

96a

The AOC incorporates the EPA’s authority to evaluate as

a whole all risks presented by the site. All of Beazer’s work

under the AOC is submitted for agency review. The EPA and

ADEM retain the express right to require additional

investigation, characterization; monitoring or remedial action

whenever in the agencies’ judgment the data submitted by

Beazer requires such measures and the EPA reserves the right

to select and require the implementation of corrective

measures. See, e.g., AOC at pp. 7-8. The EPA and ADEM

have not substantively approved the Ogden risk assessment or

released Beazer from any further obligations under the AOC;

to the contrary, they have required additional RFI work

pertaining to deep and off-site groundwater flow. Under these

circumstances Mead’s contention that the Ogden risk

assessment eliminated any further basis for cost recovery

under CERCLA lacks sufficient evidentiary support and

Beazer’s post March 7, 1997, response costs are recoverable

to the extent they are not otherwise precluded by the court’s

-—_——Tulings.

Mead’s assertion that Beazer engaged in inefficient and

excessive sampling at the site, thereby rendering a substantial

portion of the data collected “unnecessary” for the purposes

of assessing risk and selecting a remedial action, also is

without merit. Mead argues that in accordance with the NCP,

“(t]he purpose of the remedial investigation (“RI”) is to

collect data necessary to characterize adequately the site for

the purpose of developing and evaluating effective remedial

alternatives.” 42 C.F.R. §300.430(d). It then notes that a

number of the samples collected during Phases I & II of the

RFI were not used by Ogden in formulating the risk

assessment. It reasons “that the risk assessment is the

essential document for identifying and evaluating effective

remedial alternatives and therefore “only those data necessary

to support a risk assessment for the Woodward Coke Site are

97a

recoverable under the NCP.” Mead’s Post-Trial Brief in

Support of Judgment at p. 23.

Mead reduces its “unnecessary” sampling arguments to a

set of mathematical formulas. The total number of samples

made available to Ogden for formulating the risk assessment

was 662. Ogden used a maximum number of 368

investigative samples in evaluating the mediums of concern

(soil, groundwater, sediment and surface water) and thus from

Mead’s perspective a total of 294 samples were not used in

calculating the risk. Mead’s expert then tabulated the

estimated cost of gathering the 662 samples and subtracted

44% from this total (i.e., 294/662 equals .44).

As a further refinement of this requested reduction Mead

notes that while 368 samples represent the maximum number

used by Ogden for an individual contaminant of concern, in

certain of the medium of concern Ogden used far fewer

samples to calculate the risk. For example, to calculate the

risk for some contaminants of concern in the soil, Ogden

needed only 34 samples and for others Ogden used the

maximum number of samples available, 93. From these

premises Mead reasons:

Thus, although Ogden used the additional data, they

were clearly not necessary to complete the risk

assessment, as the minimum number was used for

many of the [contaminants of concern]. In aggregate,

the minimum number of samples used by Ogden is

166, as opposed to the maximum aggregate of 368.

Therefore, as further refinement of the percentage

listed above, the investigation and laboratory costs that

are not recoverable under CERCLA and the NCP

98a

equal approximately 74% - (662 minus 167)/662 - of

the total sampling related costs claimed by Beazer.

The deduction from Beazer’s costs that should be

made if one looks solely at the data used in the risk

assessment is $1 ,154,018.67 (44% of $2,622,769.71 -

the “total E/F costs” ...; if the deduction is based

upon the efficient data needs (that is the number of

samples-which would have satisfied the risk

assessment needs) the deduction is $1 ,964,976.07 ....

Mead is willing to “split the difference” with Beazer

between the deduction based upon the “inefficient”

risk assessment number and the deduction based upon

the efficient risk assessment number; thus, the

deduction Mead proposes for this item is

$1,559,497.37 ($1,964,978 + $1,154,018 =

$3,118,994 +2).

Id. at 25-26. In other words, Mead advocates that only the

minimum amount of data samples needed to formulate the risk

assessment, as calculated after the fact, can be found to be

necessary costs of response incurred consistent with the NCP.

Mead’s mathematical efficiency arguments are flawed on

many levels. First, the court already has considered and

rejected Mead’s contention that Beazer engaged in inefficient

and/or ineffective methods of gathering and processing the

information used in characterizing the site. In the previous

phase of the litigation Mead argued that there was evidence of

“over testing” by Beazer in that it did more testing under

RCRA than would have been “necessary” under CERCLA,

pointing to purported over sampling during Phase II of the

RFI work plan as an example. See Findings of Fact and

Conclusions of Law of November 24, 1999 at p. 52. Mead

also challenged Beazer’s methods of sampling as inefficient

99a

and lacking quality control. Id. After considering these

matters, the court rejected Mead’s challenges on the grounds

that there was nothing “suspect” in the manner in which

Beazer proceeded with its sampling programs under Phase I

& Il of the RFI and Dr. Ball’s criticisms merely reflected “the

type of difference in professional opinion referred to by the

USEPA in guidance documents, and which is to be expected

from site to site.” Id. at 53.

The court explained that identifying the most efficient

approach to investigating a site under CERCLA was not

grounds for excluding additional costs as unnecessary because

such a rigid approach “leaves no room for the accepted notion

that professional judgment might vary from site to site.” Id.

at 54, 74. It then made the following finding:

54. Dr. Ball’s criticisms of the manner in which the

site was addressed under RCRA do not suffice to

establish that any of the actions taken are inconsistent

with the national contingency plan. The manner in

which a site is addressed under RCRA or CERCLA

differs from site to site, and a certain amount of

professional style (for lack of a better word) or

judgment is inherent in the system. Dr. Ball has

established only that he would have conducted the site

inspection and remediation differently: he has not

established that anything actually done at the site was

inconsistent with the NCP.

Id. at p. 78, 454. Indeed, the court rejected the proposition

that efficiency arguments based upon hindsight are a proper

means of identifying necessary costs of response incurred

consistent with the NCP. The court opined:

100a

15. Recovery of costs pursuant to CERCLA requires

that actions taken be “consistent with” the NCP. There

is no requirement that the actions be no more than are

necessary. There is no authority for viewing the

consistency of actions taken in hindsight, i.e., by

arguing that certain actions may not have been

necessary. In short, there is no requirement that a

remedial investigation [be] “perfect” before costs

expended will be found to be consistent with the

“NCP” and, therefore, recoverable in a CERCLA

action.

16. Mead, through the testimony of Dr. Ball, seems to

assert that any action which would not be forced upon

a PRP under CERCLA would not be “consistent” with

the NCP. The court disagrees. Again, the NCP vests

discretion in individual professionals involved in the

investigation and remediation of a particular site to

select from a range of options. There is no support in

the law for Dr. Ball’s hypothesis, and the expert

testimony offered by Beazer concerning the practices

in the field is entirely to the contrary.

Id. at p. 98, 44 15, 16. Thus, the court already has ruled that

the necessity and consistency requirements under CERCLA

are not limited to the minimal means of investigating and

characterizing the risk posed by a site as measured with

hindsight.

Second, Mead’s attempt to reduce the necessity and

consistency requirements of CERCLA to encompass only

those tasks undertaken to gather data directly used in

formulating a risk assessment reflects a_ significant

misapprehension of the CERCLA decision-making process

and the information needed to perform that process efficiently

10la

and effectively. The applicabie regulation does indicate that

“the purpose of the remedial investigation is to collect data

necessary to adequately characterize the site for the purpose

of developing and evaluating effective remedial alternatives.”

42 C.F.R. §300.430(d). But, it does not follow from that

proposition that only the gathering of the data actually used to

support a risk assessment constitutes recoverable costs under

the NCP.

The AOC obligated Beazer to collect data to characterize

the site, delineate the nature and extent of the contamination

present, and perform a baseline risk assessment. Beazer has

gathered the data to characterize the site and published a draft

Phase I & II RFI report. All of the data collected was used in

formulating the RFI report, and the risk assessment was but

one component part of that report. Rebuttal Expert Report of

Jay Vandeven at p. 23. ADEM reviewed the report and

mandated additional investigation above and beyond the data

collected during the first two phases of the RFI investigation

prior to requiring Beazer to undertake the process of

completing a corrective measures study. Thus, the steps

Beazer has been required to take in implementing the AOC

demonstrate clearly that collecting the data necessary to

evaluate remedial alternatives effectively encompasses far

more than a “private party’s formulation of a risk

assessment.”

> A review of the persuasive expert testimony of record more than

adequately supports this proposition. As Jay Vandeven highlighted

in his rebuttal expert report:

Data collected during the course of an investigation have

many purposes and uses. These data are used to develop

conceptual models of the site, to delineate the nature and

extent of contamination, to evaluate groundwater flow and

102a

Third Beazer’s obligation to perform the RFI Phase III

contaminant transport, to document site conditions for

evaluation of remedial alternatives, and to assess risk. The

risk assessment, which is only one component of the RFI,

does use all. the data available in a qualitative manner and

a subset of the data in a quantitative manner to evaluate

exposure pathways and calculate an excess lifetime cancer

risk and hazard index. All of the information from the

various phases of the RFI, including the risk assessment,

when complete, will be considered by ADEM when they

ultimately select a remedy at the site.

Rebuttal Expert Report of Jay Vandeven at p. 22. At trial he

reiterated the multifaceted use of data in conducting an initial

CERCLA or RCRA investigation, emphasizing that the basic

objectives under both RCRA and CERCLA are to characterize the

nature and extent of the contamination at the site and then to

develop remedies to address the risk posed to human health and the

environment. TT of February 6, 2002 (Vandeven) at 8.

Dr. Magee, the vice president and principal toxicologist of

Ogden Environmental and chief architect of the risk assessment,

similarly emphasized the multi-purposes for collecting data during

the course of a CERCLA site investigation. He repeatedly

emphasized that the entire data selection and evaluation process

leading to the formulation of a risk assessment has a bearing on and

informs the decision-making process concerning the assumptions

underlying the risk assessment and the selection of the data used to

formulate the assessment. Deposition Testimony of Dr. Magee

(Document 331) at pp. 25-30. For example, all of the groundwater

samples were en

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