Petition for Writ of Certiorari — Commander Oil Corp. v. Barlo Equipment Corp.

Supreme Court brief2000

Ask Donna

What actually matters in this document.

Text

Supreme Court, VU.8.

\\/ PILED

00-373 SEP 8 2000

No. 00- QERICE Q6 ENE CLERK

IN THE

Supreme Court of the United States

COMMANDER OIL CORP.,

Petitioner,

BARLO EQUIPMENT CORP.,

Respondent.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

ANDREW J. SIMONS

Counsel of Record

COLLEEN MCMAHON

FARRELL Fritz, P.C.

Attorneys for Petitioner

EAB Plaza - West Tower, 14" Floor

Uniondale, New York 11556

(516) 227-0684

162032 @ Counsel Press LLC

(800) 274-3321 + (800) 359-6859

ACL, aA Ee TT A ONE ONNNE ww preOy eS EPO

QUESTION PRESENTED FOR REVIEW

1. Whether a tenant/sublandlord who rents a portion

of its premises to the polluter and fails to exercise its

authority and control over the site to prevent the

contamination is a “covered person” within the meaning of

42 U.S.C. § 9607(a)(1) and thus a party liable in contribution

within the meaning of 42 U.S.C. § 9613(f)(1).

PARTIES TO THE PROCEEDING

Petitioner Commander Oil Corporation (““Commander’’)

states that the parties to the proceeding are Petitioner,

Commander, and Respondent Barlo Equipment Corporation

(“Barlo”). All of the other original parties to this action in

the District Court have either settled out, defaulted or had

the claims against them dismissed. Only Commander and

Barlo are present before the Supreme Court.

STATEMENT PURSUANT TO RULE 29.6

Commander has no corporate parent and no publicly held

company owns 10% or more of its stock.

TABLE OF CONTENTS

Question Presented for Review ............-++-

Parties to the Proceeding ..........-.--+++ee005

Statement Pursuant to Rule 29.6 ...............

REESE RATS TT Te Tee EEE

pe ae eee ee

Table of Appendices ...............e eee eeeees

I Se eS Oe hs yk -6 aes wae 80 bbe

Opinions Below ...........-.e eee eee eee ees

Statement of Jurisdiction ..........cceeeveeees

Statutory Provisions Involved .............+++:

es tees enka tenn sees

Reasons for Granting the Writ ...............-.

As This Court Did In Bestfoods On The Issue

Of “Operator” Liability Under Cercla, In This

Case The Court Should Address The Issue

Of “Owner” Liability Under CERCLA:

A. In order to remedy the tautology

created by the definition of “owner”

in CERCLA;

Page

Contents

B. In order to resolve the conflict

among the federal courts regarding

the imposition of “owner” liability

upon a tenant/sublandlord; and

C. Inorder to achieve consistency with

BestFoods on the issues of “owner”

and “operator” liability under

CU Sv aaucwebnceces eee ws

The Court should assist the bench, the

bar and the environmental community in

fleshing out the tautological definition

of “owner” in CERCLA. ... icssei cies

This case presents the Court with the

opportunity to resolve a conflict among

the various federal courts regarding the

imposition of owner liability upon a

Pg Pre Se

Harmony with the BestFoods analysis,

not found in the decision of the Second

Circuit, can and should be achieved in

OE. 5 i tse eds ae eee vs

II. Relieving Lessees Of Liability In

Contribution Under CERCLA Undermines

CERCLA’s Policy Of Equitable Allocation

OE CO CUO soci wid Nb ss ve eK

Conclusion

Fee e eee eee eS ee eee er ee ee ee ee hy

Page

TABLE OF CITED AUTHORITIES

Cases:

Artesian Water Co. v. New Castle County, 851 F.2d

643 (3d Cir. 1988) .......... eee eee eee eee

Boeing Co. v. Cascade Corp., 920 F. Supp. 1121

(D. Or. 1996) 0... ccccccccccccccccsccccnes

Burlington Northern v. Woods Indus., 815 F. Supp.

1384 (E.D.Wash. 1993) .......----e eee eeeee

Burnette v. Carothers, 192 F.3d 52 (2d Cir. 1999) ..

Catellus Develop. Corp. v. L.D. McFarland Co., 910

F. Supp. 1509 (D. Or. 1995) ....------ eee eee

Delaney v. Town of Carmel, 55 F. Supp.2d 237

(S.D.N.Y. 1999) 20... 2c cece cece cece eceeeee

Farmland Indus., Inc. v. Colorado & Eastern R. Co.,

944 F. Supp. 1492 (D. Colo. 1996) ........---

Louisiana v. Braselman Corp., 78 F. Supp.2d 543

(E.D.La 1999) .......ccccecccceccceeecenes

Meghrig v. KFC Western, Inc. 516 U.S. 479

‘f,' Sn ee Armee eS a kee. Daya oy ee

Nurad v. William E. Hooper & Sons, Co., 966 F.2d

837 (4% Cir. 1992) ...... cece ee eeeeecccees

Page

Cited Authorities

Page

Servco Pacific, Inc. v. Dods, No. 98-00272, 2000

WL 1048586 (D. Hawaii, July 12, 2000) ...... 15, 18

State of New York v. Shore Realty Corp., 759 F.2d

og pt ae) | renee rr pee orien ire 12

Stilloe v. Almy Bros., Inc., 759 F. Supp. 95 (N.D.N.Y.

SPOR) bac diakincenaesese eee ee 12

United States. v. A & N Cleaners and Launderers,

Inc., 788 F. Supp. 1317 (S.D.N.Y. 1992) ...12, 15, 18

United States v. BestFoods, 524 U.S. 51 (1998) ... passim

United States v. South Carolina Recycling and

Disposal, Inc., 653 F. Supp. 984 (D.S.C. 1985),

aff'd sub nom. in part, vacated in part, United

States v. Monsanto, 858 F.2d 160 (4" Cir.

ere TT Pees rer Pre Ty se 12, 15

Statutes:

a0 UBS... GARD 66 ace eae 2 -

Be Wan, © SNe 6k 60054 0s eae vues 7

S3:UBA. S BOGE ONG Bio in ctve vie ei eee 2

43 UB... § PERIOD sc kina Wound es 3,43

vii

Cited Authorities

Page

42 U.S.C. § 9605(a) .. 16. cece ee eee eee nees 6

42 U.S.C. § 9607 20... ccc cece errr cece eee eeee 10

42 U.S.C. § 9607(a) . 0.6 e eee eee reece reese 3,4, 11

42 U.S.C. § 9607(a)(1) .... eee eee eee eee eens i

42 U.S.C. § 9613(f) .....- cece eee cece rere eee a

42 U.S.C. § 9613(f)(1) ... eee eee eee eee i, $, 7, 19

Other Authorities:

Andrew’s Hazardous Waste Litigation Reporter of

July 10, 2000 ...... cere reece rere eee eeees 21

H.R. Rep. No. 99-253(I) (1985), reprinted in 1986

te Far oP OS | Breer er rere ete See 20

Oswald, Bifurcation of the Owner and Operator

Analysis under CERCLA, 72 WASH. U.L.Q. 223

4 PPT e Tee Cavkeee 17

S. Rep. No. 96-848 (1980) ...----- essere eeeeee 8, 19

vill

TABLE OF APPENDICES

Appendix A — Opinion Of The United States Court

Of Appeals For The Second Circuit Dated And

Decsded Jame 12, 2000 2... cccsscccecczcess

Appendix B —- Memorandum Of Decision And

Order Of The United States District Court For The

Eastern District Of New York Dated July 6,

| EPCS rT ee ee erry rns eee) eee

Appendix C — Memorandum Of Decision And

Order And Judgment Of The United States District

Court For The Eastern District Of New York

DUE SN By BOO 6 ok ive aici MiahiAdionk

Appendix D — Memorandum Of Decision And

Order Of The United States District Court For The

Eastern District Of New York Dated June 10,

Te decease bei be eeure POUR creas

SE ee eT ee eee ee

INTRODUCTION

Petitioner, Commander Oil Corporation (“Commander”),

respectfully requests that a Writ of Certiorari be issued to review

the Decision and Judgment of the United States Court of Appeals

for the Second Circuit rendered in this case on June 12, 2000.

OPINIONS BELOW

The Decision and Judgment of the United States Court

of Appeals for the Second Circuit, sought to be reviewed

herein, is reported at 215 F.3d 321 (2d Cir. 2000), and appears

at page la in the Appendix to this Petition. (“Pet. App.”).

In rendering its decision, the United States Court of

Appeals for the Second Circuit reversed several companion

decisions of the United States District Court for the Eastern

District of New York (Honorable Jacob Mishler), to wit:

1. Judge Mishler’s Memorandum of Decision and Order,

dated June 10, 1997, which granted, inter alia, partial

summary judgment to Commander on the issue of liability

against its tenant, Barlo Equipment Corp. (“Barlo”), the

Respondent herein, which Decision is reproduced at

Pet. App., page 40a;

2. Judge Mishler’s Memorandum of Decision and Order,

dated May 20, 1998, in which, following a bench trial, the

Court granted judgment to Commander as against Barlo in

the amount of $802,915, which Decision is reproduced at

Pet. App., page 28a; and

3. Judge Mishler’s Memorandum of Decision and Order

of July 6, 1998, which denied Barlo’s motion for reargument

based on this Court’s then recent decision in United States

v. BestFoods, 524 U.S. 51 (1998). This decision of

Judge Mishler denying reargument is reproduced at

Pet. App., page 24a.

STATEMENT OF JURISDICTION

The decision and judgmeni of the United States Court

of Appeals for the Second Circuit was entered on June 12,

2000. There have been no subsequent orders concerning

rehearing or extensions of time within which a petition to

this Court may be filed. The time within which to file this

petition extends to September 11, 2000.

The jurisdiction of this Court is invoked pursuant to

28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

The Comprehensive Environmental Response,

Compensation, and Liability Act (“CERCLA”) is codified

at 42 U.S.C. § 9601 et seg. CERCLA’s relevant definitions

include the following:

The term “owner or operator” means (i) in the

case of a vessel, any person owning, operating,

or chartering by demise, such vessel, (ii) in the

case of an onshore facility or an offshore facility,

any person Owning or operating such facility, and

(iii) in the case of any facility, title or control of

which was conveyed due to bankruptcy,

foreclosure, tax delinquency, abandonment, or

similar means to a unit of State or local

government, any person who owned, operated, or

otherwise controlled activities at such facility

immediately beforehand. Such term does not include

a person, who, without participating in the

management of a vessel or facility holds indicia of

ownership primarily to protect his security interest

in the vessel or facility.

42 U.S.C. § 9601(20)(A) (Supp. 2000).

Section 9607(a) identifies those parties who may be held

liable for recoverable costs and damages for remediation of

environmentally contaminated sites. In relevant part, the statute

_ provides that liability is imposed on the following “covered

persons”:

Notwithstanding any other provision or rule of law,

and subject only to the defenses set forth in

subsection (b) of this section —

(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any

hazardous substance owned or operated any

facility at which such hazardous substances were

disposed of,

(3) any person who by contract, agreement,

or otherwise arranged for disposal or treatment,

or arranged with a transporter for disposal or

treatment, of hazardous substances owned or

possessed by such person, by any other party or

entity, at any facility or incineration vessel

owned or operated by another party or entity and

containing such hazardous substances, and

(4) any person who accepts or accepted any

hazardous substances for transport to disposal

or treatment facilities, incineration vessels or

sites selected by such person, from which

there is a release, or a threatened release which

causes the incurrence of response costs, of a

hazardous substance, shall be liable for —

(A) all costs of removal or remedial action

incurred by the United States

Government or a State or an Indian tribe

not inconsistent with the national

contingency plan;

(B) any other necessary costs of response

incurtred by any other person consistent

with the national contingency plan;

loss of natural resources, including the

reasonable costs of assessing such injury,

destruction, or loss resulting from such a

release; and

(D) the costs of any health assessment or

health effects study carried out under

section 9604(i) of this title.

eo .@

42 U.S.C. § 9607(a).

tou Pere a ee

Finally, section 9613(f) allows parties held liable for

CERCLA response costs to bring a civil proceeding to

recover in contribution from other responsible parties.

(1) Contribution ~

Any person may seek contribution from any other

person who is liable or potentially liable under

section 9607(a) of this title, during or following

any civil action under section 9606 of this title or

under section 9607(a) of this title. Such claims

shall be brought in accordance with this section

and the Federal Rules of Civil Procedure, and

shall be governed by Federal law. In resolving

contribution claims, the court may allocate

response costs among liable parties using such

equitable factors as the court determines are

appropriate. Nothing in this subsection shall

diminish the right of any person to bring an action

for contribution in the absence of a civil action

under 9606 of this title or section 9607 of

this title.

42 U.S.C. § 9613(f)(1).

STATEMENT OF THE CASE

The fundamental issue presented to the Court for

determination in this case is whether and under what

circumstances a tenant, who sublets a portion of the leased

premises to a subtenant who then contaminates the property,

should be answerable in damages for a portion of the cleanup

costs under the “owner” liability provisions of CERCLA.

The District Court imposed such liability herein and the

Second Circuit overturned that judgment.

The property in question is a 75-foot by 275-foot

parcel which has been owned by Commander since 1963.

From 1972 through 1989 Commander leased the facility,

which later came to be known as the Pasley Chemicals &

Solvents Superfund Site, to its tenant, Barlo. Over the course

of its seventeen years as lessee of the site, Barlo enjoyed the

rights and bore the obligations of ownership and exercised

control over and responsibility for the use of the site

(A. 642).

By leases executed in 1972 and 1977, Commander

granted Barlo the right to sublet its interest in the site,

(A. 643), and on February 1, 1973, Barlo subleased the site

to Pasley Chemicals & Solvents Corp. (“Pasley”) (A. 643).

It subsequently came to light that during the term of

Pasley’s lease, its storage, transfer and disposal operations

resulted in the release of various hazardous wastes at the

site (A. 646). Although Pasley’s operations at the site violated

both State and County laws relating to the storage of

hazardous wastes, and these violations occurred only a few

feet from the office of Pasley’s landlord — Barlo, Barlo did

nothing to stop Pasley from continuing with its unlawful

activities (A. 699).

In fact, Pasley’s contaminating activities were not

terminated until June 1982, after Pasley appeared in the

Nassau County District Court and was directed to drain all

storage tanks, to remove all product therefrom and to vacate

the premises. As a result of the soil and groundwater

contamination caused by Pasley’s unlawful operations at the

site, Commander’s property was listed by the EPA as

Site No. 380 on the National Priorities List established

pursuant to Section 105(a) of CERCLA, 42 U.S.C. § 9605(a).

On April 11, 1990, Commander commenced this action

seeking, inter alia, recovery of, and contribution for, past and

future response costs and other relief from various defendants

pursuant to CERCLA, the Resource Compensation and

Recovery Act (“RCRA”), the New York Environmental

Compensation Law (“ECL”), and various common-law theories

of public and private nuisance, abnormally dangerous activities,

trespass, negligence, and indemnification (A. 52, 240 at { 15).

The District Court had federal question subject matter

jurisdiction under 28 U.S.C. § 1331. Subsequently, Commander

entered into settlement negotiations with sixteen of the

Potentially Responsible Parties (“PRPs”), which culminated in

a Consent Decree entered into with the United States on January

26, 1996 (A. 110). Under the terms of the Consent Decree, which

Barlo refused to join, Commander agreed to establish a

Remedial Trust Fund to implement cleanup of the site and to

reimburse the United States for its past and future response costs

(A. 206). In settlement of claims against them, sixteen settling

defendants paid $1,849,127.91 in contribution (A. 207). As a

result of Barlo’s refusal to join in the settlement, the underlying

action continued.

After eight years of litigation, including a four-day bench

trial to ascertain the extent and apportionment of damages in

light of the relevant equitable factors and pursuant to section

9613(f)(1) of CERCLA, Judge Mishler determined that

Commander’s total net recoverable response costs in this action

were $3,211,662, of which Barlo was allocated a 25% share, or

$802,915 (A. 704).

By decision entered June 12, 2000, the Second Circuit

reversed that part of Judge Mishler’s decision which held Barlo

liable as a CERCLA “owner” and affirmed that part of the

decision which dismissed Commander’s claims for

indemnification and certain state-law causes of action

(Pet. App. 1a).

REASONS FOR GRANTING THE WRIT

The Comprehensive Environmental Response,

Compensation, and Liability Act (““CERCLA” or

“Superfund”) is one of the most significant congressional

enactments of the 20" Century, addressing an issue described

as “the most serious health and environmental challenge of

the decade.” S. Rep. No. 96-848, at 2 (1980). Regrettably, it

has also been described as a statute which seeks to impose

strict liability upon the owner of a facility but gives no helpful

guidance for interpreting the breadth of “owner” liability:

“It has been criticized frequently for inartful drafting and

numerous ambiguities attributable to its passage” (Artesian

Water Co. v. New Castle County, 851 F.2d 643, 648 (3d Cir.

1988)), and requires the courts “to give content to a statutory

tautology, a position to which we have become increasingly

accustomed in the environmental context” (Second Circuit

Opinion herein, Pet. App., page 9a).

This CERCLA tautology was recognized by this Court

on the issue of “operator” liability in United States v.

BestFoods, et al., 524 U.S. 51, 56 (1998): This case presents

the same tautology, but in the context of “owner” liability.

This Court stated in BestFoods that CERCLA’s tautological

anomaly in the definition of “operator” was one of the reasons

certiorari had been granted therein: “‘it is this bit of circularity

that prompts our review.” /d. That same reasoning should

prompt the Court in this case to review the decision of the

Second Circuit below and to address the congressional intent

in its imposition of strict liability upon the “owner”

of a facility. %

Moreover, as the Second Circuit expressly

acknowledged, its decision refusing to impose owner liability

upon a tenant/sublandlord is at odds with most other federal

court decisions which have considered the same

issue. (Second Circuit Opinion, Pet. App., page 12a).

This acknowledged confusion throughout the federal system

warrants the intervention of this Court.

And finally, as recognized by the Second Circuit,

because CERCLA is a remedial statute it must be liberally

construed to effectuate the congressional intent to efficiently

and expeditiously clean up contaminated properties and to

impose liability, without fault, on those persons who are

potentially responsible for the contamination, i.e., the owners

and operators of the facilities. The question raised here is

whether the tenant/sublandlord of a contaminated facility —

who was in possession of the adjoining property and had the

legal obligation to supervise and control the acts of its

subtenant — should be relieved of any liability for the

contamination when the contaminating subtenant is defunct

and the owner who was not in possession or control of the

site has borne the full cost of cleanup. Judge Mishler

after trial assigned a 25% contribution to such a

tenant/sublandlord, standing in the shoes of an owner, and it

is that judgment which should be reviewed and reinstated

by this Court. si

For all of these reasons, and particularly because the

federal courts need guidance on the application of CERCLA

“owner” liability in the landlord/tenant context, it is

respectfully submitted that this Petition for a Writ of

Certiorari should be granted.

AS THIS COURT DID IN BESTFOODS ON THE ISSUE

OF “OPERATOR” LIABILITY UNDER CERCLA, IN

THIS CASE THE COURT SHOULD ADDRESS THE

ISSUE OF “OWNER” LIABILITY UNDER CERCLA:

A. In order to remedy the tautology created by the

definition of “owner” in CERCLA;

B. In order to resolve the conflict among the federal

courts regarding the imposition of “owner”

liability upon a tenant/sublandlord; and

C. In order to achieve consistency with BestFoods

on the issues of “owner” and “operator” liability

under CERCLA.

A. The Court should assist the bench, the bar and the

environmental community in fleshing out the

tautological definition of “owner” in CERCLA.

As this Court indicated in BestFoods, CERCLA was

enacted in 1980 in response to the serious environmental:

and health risks posed by industrial pollution. The statutory

scheme anticipates liability without fault being imposed upon

various categories of “potentially responsible parties”

in order to accomplish expeditious remediation of

contaminated facilities. The categories of potentially

responsible parties are defined in § 9607 of CERCLA as

follows:

(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any

hazardous substance owned or operated any facility

at which such hazardous substances were

disposed of,

(3) any person who by contract, agreement, or

otherwise arranged for disposal or treatment, or

arranged with a transporter for disposal or

treatment, of hazardous substances owned or

possessed by such person, by any other party or

entity, at any facility or incineration vessel owned

or operated by another party or entity and containing

such hazardous substances, and

(4) any person who accepts or accepted any hazardous

substances for transport to disposal or treatment

facilities, incineration vessels or sites selected by

such person, from which there is a release, or a

threatened release which causes the incurrence of

response costs...

42 U.S.C. § 9607(a). And § 9601(20)(A) unhelpfully defines

the term “owner or operator” as the person who “owns” or

“operates” the contaminated facility.

In this case, petitioner Commander is the owner of

property which it leased to respondent Barlo, who in turn

subleased a portion of the premises to Pasley, the actual

contaminator of the property. As a result of the

contamination, Commander has spent in excess of $7 million

cleaning up the property, $5 million of which was found by

Judge Mishler to be recoverable response costs under

CERCLA. After certain settlement amounts were deducted

from the recoverable total, Judge Mishler entered judgment

for Commander against Pasley in the amount of $3,211,662,

and assessed Barlo’s liability at 25% of the total, or $802,915.

The legal issue confronted by the District Court was whether

a tenant/sublandlord, a category of party not identified in

CERCLA, could be held liable as if it were the “owner” of

property which it had sublet to the contaminator. In other

words, the question was whether, and under what

circumstances, a tenant/sublandlord could be liable under

CERCLA as a potentially responsible party, i.e., “owner.”

Consistent with many decisions throughout the country,

the District Court answered the question in the affirmative,

and imposed “owner” liability upon Barlo. Judge Mishler

noted that the statute has consistently been given a liberal

reading in this regard in order to serve CERCLA’s broad

~ remedial purpose. Pet. App., page 54a (citing Stilloe v. Almy

Bros., Inc., 759 F. Supp. 95 (N.D.N.Y. 1991); State of New

York v. Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir.

1985)). Judge Mishler further noted that “rather than limiting

liability to record owners of the property in question, courts

have inquired as to a defendant’s degree of authority and

control over the facility” and have concluded that lessees

with control and responsibility over the property were

responsible under CERCLA. Pet. App., page 55a (citing

United States. v. A & N Cleaners and Launderers, Inc., 788

F. Supp. 1317, 1332-33 (S.D.N.Y. 1992); Nurad v. William

E. Hooper & Sons, Co., 966 F.2d 837 (4" Cir. 1992); United

States v. South Carolina Recycling and Disposal, Inc., 653

F. Supp. 984, 1003 (D.S.C. 1985), aff'd sub nom. in part,

vacated in part, United States v. Monsanto, 858 F.2d 160

(4" Cir. 1988)).

The United States Court of Appeals for the Second

Circuit, after acknowledging the many decisions of the

federal courts which had reached conclusions similar to that

of Judge Mishler on similar facts, nevertheless departed from

those decisions and reached the opposite conclusion.

Rejecting the theory that the term “owner” in CERCLA

should extend beyond the fee or record owner to a party

possessing the requisite degree of control over the facility,

the Court confused the concepts of “owner” and “operator”

liability, concluding that the imposition of “owner” liability

instead of “operator” liability “threatens to conflate two

statutorily distinct categories of potentially responsible

parties.” (Second Circuit Opinion, Pet. App., page 13a.)

After quoting this Court in BestFoods as indicating that

“an operator must manage, direct, or conduct operations

specifically related to pollution,” the Court then erroneously

concluded that “if control over a facility could establish

ownership then operator liability in these circumstances

would be just a subset of owner liability.” According to the

Court: “Imposing owner liability on the basis of site control

threatens to make owners of all operators and surplusage of

most of operator liability.” (Second Circuit Opinion,

Pet. App., page 13a.)

Nothing could be more unfounded or less accurate.

In point of fact, while “operator” liability may well, and

should, depend upon the operations performed at the site,

owner liability is otherwise. In a very real sense “owner”

liability is based upon status, upon the concept of the right

to control the activities on the property, whether that

power is exercised or not. In fact in this case, Judge Mishler

concluded that Barlo (a) had the right and the duty to

control any contaminating activities of its subtenant Pasley,

and (b) neglected that duty and allowed the contamination

to take place under its very nose without the kind of

intervention that the law expects from the owner of property.

As this Court stated in BestFoods, CERCLA

unfortunately is not a model of legislative draftsmanship and

the circularity of its defining the phrase “owner or operator”

as “any person owning or operating a facility” prompted the

Court in that case to review the determination of the United

States Court of Appeals for the Sixth Circuit. It is respectfully

submitted that that same circularity regarding in this instance

not the definition of “operator” but rather the definition of

“owner” should prompt a similar review by this Court.

B. This case presents the Court with the opportunity to

resolve a conflict among the various federal courts

regarding the imposition of owner liability upon a

tenant/sublandlord.

A conflict in the application of a significant federal

statute among the federal courts throughout this land is a

significant reason for this Court to grant certiorari and to

resolve the conflict. Such a conflict prompted the Court to

grant certiorari in BestFoods. Such a conflict exists here,

and warrants the intervention of this Court.

Commander’s suit against Barlo seeks contribution

and/or indemnity for the costs it has and will continue to

incur under the Consent Decree it entered into with the United

States. Judge Mishler granted partial summary judgment to

Commander for contribution on the theory that Barlo, as a

tenant/sublandlord, stood in the shoes of an “owner” of the

site and was therefore strictly liable for a portion of the

cleanup costs under CERCLA. And the Second Circuit Court

of Appeals acknowledged that “[o]ther courts to have

considered whether lessees/sublessors are owners for

purposes of CERCLA’s strict owner liability provisions have

reached the same conclusion on similar facts.” Second Circuit

Opinion herein, Pet. App., page 8a (citing Delaney v. Town of

Carmel, 55 F. Supp.2d 237, 258-59 (S.D.N.Y. 1999); United

States v. A & N Cleaners & Launderers, Inc., 788 F. Supp.

1317, 1332-34 (S.D.N.Y. 1992); United States v. South Carolina

Recycling & Disposal, Inc., 653 F. Supp. 984, 1002-03 (D.S.C.

1984), aff'd in part, vacated in part sub nom. United States v.

Monsanto Co., 858 F.2d 160 (4" Cir. 1988)). Moreover, a similar

result was reached in July of this year by the District Court for

the District of Hawaii, where the Court concluded that the tenant

had maintained sufficient control and possessory interests in

the site in order to be considered an “owner” (as well as an

“operator”) under CERCLA (referring to but not following the

Second Circuit’s decision in this case). See Servco Pacific, Inc.

v. Dods, No. 98-00272, 2000 WL 1048586 (D. Hawaii, July

12, 2000).

Despite this apparent unanimity among the District Courts

and at least one other Circuit Court of Appeals, the Second

Circuit has charted a different path. Despite acknowledging that

CERCLA should be broadly construed so as to address the

environmental problems which Congress sought to remediate,

the Court contrariwise indicated that the strict liability concept

of CERCLA should be a “narrowly tailored tool capturing a

specific kind of responsibility” which it did not find in this

case. Regrettably, the Second Circuit went astray in relying

upon such ephemeral (and unsubstantiated) concepts as the

“sophisticated lessee/sublessor who exploits unanticipated risks

on the property of an unsophisticated owner,” concluding that

such a situation did not exist in this case. (We do not know

whether such situation existed or not, since there was no

evidence in the record before Judge Mishler on that issue.)

Moreover, the Court ventured into uncharted waters when it

opined that a buyer, rather than a lessee, will evaluate the

environmental condition of a facility before determining to go

forward with the transaction. While there was nothing in the

record to substantiate this analysis, nor was there any judicial

authority referenced by the court, it is common knowledge

among those who practice environmental law that a lessee

may well be just as concerned about contamination of the

property it is leasing as is a prospective buyer seeking to

purchase the same ‘site. Neither wants to be saddled with

someone else’s earlier contamination of the property.

According to the Second Circuit, while Barlo possessed some

attributes of ownership with respect to the site (the duty to

secure insurance, liability for assessments and increases in

taxes, responsibility for all nonstructural repairs, including

cesspool maintenance, driveway parking area and pavement

repairs, etc.), “Barlo lacked most of the bundle of rights that

comes with ownership of property,” and “we are reluctant

to surprise Barlo with new and unexpected liability, and to

undermine the security of lessees/sublessors throughout the

circuit who have entered into subleases before this decision.”

It is respectfully submitted that this faulty analysis, at

odds with almost all of the other federal decisions on the

same issue, warrants this Court’s review of the decision of

the Second Circuit herein.

C. Harmony with the BestFoods analysis, not found in

the decision of the Second Circuit, can and should be

achieved in this case.

The Second Circuit’s decision herein is inconsistent with

this Court’s analysis in BestFoods and should be reviewed

so that such consistency can be achieved (or, alternatively,

be deemed unnecessary despite the importance of CERCLA

and the consistent application of the Superfund law).

In United States v. BestFoods, 524 U.S. 51 (1998), this

Court considered the “actual control test” under CERCLA

in the context of determining whether a parent corporation

could be held liable as an “operator.” The Court expressly

rejected an analysis which focused on parental control over

its subsidiary and determined that the correct focus must be

on the parent corporation’s activities which demonstrated

control over the facility itself. See id. at 67. “The question is

not whether the parent operates the subsidiary, but rather

whether it operates the facility, and that operation is

evidenced by participation in the activities of the facility,

not the subsidiary.” Jd. at 67-68 (quoting Oswald, Bifurcation

of the Owner and Operator Analysis under CERCLA,

72 Wasn. U.L.Q. 223, 269 (1994)) (emphasis added)).

Significantly, in BestFoods the District Court was found to

have “mistaken[ly] ... rest[ed] its analysis” on the

relationship between the parent and the subsidiary when, in

order to determine if the parent was liable, it “should have

instead have rested on the relationship” between the parent

and the facility. Jd. at 68.

In Commander v. Barlo, the Second Circuit was similarly

mistaken in resting its analysis of “owner” liability on the

relationship between Commander and Barlo, both PRPs

within the meaning of CERCLA, rather than on the extent

of each party’s control over or opportunity and obligation to

control the contaminating facility.

It is respectfully submitted that the appropriate test to

determine whether a lessee/sublessor should be liable in

contribution as “owner” is the degree of control and

responsibility it has over the contaminated property. In fact,

this has been the test applied by numerous courts which have

held lessees/sublessors liable as owners under CERCLA.

See, e.g., United States v. A & N Cleaners and Launderers,

Inc., 788 F. Supp. 1317 (S.D.N.Y. 1992); see also, Second

Circuit Opinion herein, Pet. App., page 8a. On July 12, 2000,

the United States District Court in Hawaii held that both the

fee owner of the contaminated site and the current lessee

were liable as CERCLA owners, finding “‘as a matter of law

that [the lessee] maintains sufficient control

and possessory interests in the Property to be an “owner”

(and “operator”) as those terms are defined and interpreted

in CERCLA.” Servco Pacific, Inc. v. Dods, No. 98-00272,

2000 WL 1048586, at *10 (D. Hawaii, July 12, 2000);

see also Louisiana v. Braselman Corp., 78 F. Supp.2d 543,

551 (E.D. La 1999) (“Even though NONER did not have

title to the property, NONER was a lessee who asserted

control over the property and, as such, was an ‘owner’ for

purposes of § 9607(a)(1)”); Burlington Northern v. Woods

Indus., 815 F. Supp. 1384, 1391 (E.D.Wash. 1993) (“Since

Hansen asserted control over the use of the property, Hansen

is considered the ‘owner’ for purposes of § 9607(a)(1) even

though it is only a lessee”). These decisions are consistent

with this court’s analysis in BestFoods, and are inconsistent

with the Second Circuit’s rationale herein.

For this reason it is appropriate for this Court to grant

this Writ so that the corollary to BestFoods can be handed

down in the next Term of this Court.

Il.

RELIEVING LESSEES OF LIABILITY IN

CONTRIBUTION UNDER CERCLA UNDERMINES

CERCLA’S POLICY OF EQUITABLE ALLOCATION

OF CLEANUP COSTS

In enacting CERCLA’s scheme of Strict, joint and several

liability, Congress sought to assure that those who caused

or contributed to environmental contamination, as well as

benefitted from associated commercial activity, would be

held accountable. See S. Rep. 96-848, at 12 ( 1980). Issues

of fairness and equity were chief among the reasons for

imposing strict, joint and several liability. Jd. at 33.

In furtherance of these equitable principles, Congress

amended CERCLA in 1986 to include a provision

which expressly created a cause of action for contribution.

See 42 U.S.C. § 9613(f). It thus gave the congressional stamp

of approval to several decisions which had allowed parties

which were strictly liable under CERCLA and which had

borne alone the financial burden of remediation to obtain

contribution from other responsible parties.

This Court has noted that CERCLA’s contribution

provision, 42 U.S.C. § 9613(f)(1), serves CERCLA’s two

main purposes: the “ ‘prompt cleanup of hazardous waste

sites and imposition of all cleanup costs on the responsible

party.’ Meghrig v. KFC Western, Inc. 516 U.S. 479,

483-85 (1996). As articulated by Congress in enacting the

contribution provision, Section 113 serves to “clarify and

confirm the right of a person held jointly and severally liable

under CERCLA to seek contribution from other potentially

liable parties, when the person believes that it has assumed

a share of the cleanup or costs that may be greater than its

equitable share under the circumstances.” H.R. Rep. No.

- 99-253(1), at 79 (1985), reprinted in 1986 U.S.C.C.A.N.

2835, 2861; see also Burnette v. Carothers, 192 F.3d 52,

58 (2d Cir. 1999). In allocating such equitable shares, the

district courts consider such factors as the financial status

of the parties, the degree of involvement of the parties in

contributing to the discharge or release of hazardous

substances, knowledge of contaminating activities and

financial benefits received as a result, and the degree of

cooperation by the parties with State and Federal officials.

See Boeing Co. v. Cascade Corp., 920 F. Supp.

1121 (D. Or. 1996); Farmland Indus., Inc. v. Colorado &

Eastern R. Co., 944 F. Supp. 1492 (D. Colo. 1996); Catellus

Develop. Corp. v. L.D. McFarland Co., 910 F. Supp. 1509

(D. Or. 1995).

It is thus respectfully submitted that judicial

interpretation of CERCLA which completely absolves from

liability a tenant/sublandlord who holds a possessory interest

in property which is contaminated during the leasehold

severely undermines CERCLA’s remedial goals. Under the

Second Circuit’s reading of CERCLA, an on-site lessee

which subleases a portion of its leasehold to a judgment-

proof polluter may insulate itself “by virtue of its passivity.” —

Nurad Inc. v. Hooper & Sons Co., 966 F.2d 837, 845

(4" Cir. 1992). This holding clearly frustrates CERCLA’s

remedial purpose and ignores the equitable factors applied

by the courts to apportion liability. Cf id. at 845-46 (rejecting

the argument that actual proof of disposal by former owners

was required as it would create a “regime which [would]

reward indifference to environmental hazards and discourage

voluntary efforts at waste cleanup”). Moreover, the Second

Circuit’s decision sends a dangerous message to lessees who

simply choose to ignore hazardous waste practices by

sublessees. Notably, just two days after the Second Circuit

rendered its decision in Commander, an article summarizing

the decision appeared on the front page of the New York

Law Journal under the headline, “Lessee Avoids CERCLA

Liability.” And the Andrew’s Hazardous Waste Litigation

Reporter of July 10, 2000, in its front page highlights,

described the Second Circuit’s decision as ruling that a

tenant/sublandlord cannot be held liable under CERCLA

“unless it is the lawful owner.”

The Second Circuit’s holding in Commander obfuscates

the remedial purpose sought by CERCLA by establishing

an ambiguous and unworkable test which will enable

on-site lessees to completely avoid CERCLA liability.

Furthermore, a legal rule which so insulates lessees

effectively forecloses record owners who have acted

responsibly in remediating environmentally contaminated

sites from the opportunity to recover any portion of their

response costs from the one who had the best chance to

prevent or halt the contamination — the onsite tenant/

sublandlord. This rule undermines CERCLA’s policy of

equitable allocation of costs, rewards indifference and may

well have a chilling effect on the future of voluntary

environmental remediation.

;

CONCLUSION

This case presents a question of significant national

importance — whether tenants/sublandlords of

environmentally contaminated properties may be held liable

as “owners” within the meaning of the Comprehensive

Environmental Response, Compensation, and Liability Act.

Although federal courts in imposing such liability have

consistently and rationally considered actual control of, as

well as authority to control, the possession and use of the

contaminated property, the Court of Appeals for the Second

Circuit has rejected this approach, instead preferring a strict,

narrow reading of the statute. In spite of CERCLA’s broad

remedial purpose of encouraging prompt, voluntary cleanup

of hazardous waste sites, and the liberal reading it has been

given by most courts including the Supreme Court, the

Second Circuit has significantly narrowed the scope of

CERCLA by abandoning the control analysis utilized by this

Court in BestFoods and employing an amorphous test which

has already created confusion among the federal courts, the

bar, and the regulated community. Guidance from this Court

is needed, and is sought herein.

For the foregoing reasons, it is respectfully requested

that this Petition for Writ of Certiorari should be granted.

Respectfully submitted,

ANDREW J. SIMONS

Counsel of Record

COLLEEN MCMAHON

FARRELL FRITz, P.C.

Attorneys for Petitioner

EAB Plaza - West Tower, 14" Floor

Uniondale, New York 11556

(516) 227-0684

APPENDIX

APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

DATED AND DECIDED JUNE 12, 2000

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 1999

(Argued October 19, 1999 Decided June 12, 2000)

Docket Nos. 98-7975(L), 98-9075(xap)

COMMANDER Oli Corp.,

Plaintiff-Counter-Defendant-

Appellee-Cross-Appellant,

ae ak

BARLO EQUIPMENT CorpP.,

Defendant-Appellant-Cross-Appellee,

ADVANCE Foop SERVICE EQUIPMENT ET AL.,

Defendants-Counter-Claimants,

JACKSON STEEL Propucts, INc.

and SLATER ELECTRIC, INC.,

Defendants-Counter-Claimants-

Third-Party Plaintiffs,

Appendix A

Die Matic Propucts, INc.,

Defendant-Cross-Claimant,

M.V. BARMED, INC. and JACKSON ACQUISITION CorpP.,

Third-Party Plaintiffs,

JOHN J. BERNANSKY ET AL.,

Third-Party Defendants,

AMPEREX ELECTRONIC CoO. ET AL.,

Defendants,

ROBERT PASLEY and PASLEY SOLVENTS

& CHEMICALS, INC.,

Defendants-Cross-Defendan ts.

Before:

WALKER, CABRANES, and KATZMANN,

Circuit Judges.

Appendix A

JOHN M. WALKER, Jr., Circuit Judge:

This dispute requires us to decide whether the lessee of

a 75' X 250' parcel of land in Uniondale, New York, may be

held liable as an “owner” for purposes of allocating the costs

of remediation imposed by the Environmental Protection

Agency (“EPA”) under the Comprehensive Environmental

Response, Compensation, and Liability Act, 42 U.S.C.

§§ 9601-9675 (“CERCLA”).

Defendant Barlo Equipment Corp. (“Barlo”) appeals

from a judgment of the United States District Court for the

Eastern District of New York (Jacob Mishler, Judge), finding

it liable under CERCLA to plaintiff Commander Oil Corp.

(“Commander Oil”) as an “owner” of the parcel by virtue of

its status as the parcel’s lessee/sublessor. Although we

conclude that a lessee may, under some circumstances, be

held liable under CERCLA as an “owner,” we conclude that,

under the circumstances of this case, Barlo was not an

“owner” within the meaning of CERCLA. Accordingly, we

reverse the judgment of the district court in substantial part.'

BACKGROUND

In 1963, Commander Oil became the owner of two lots

in Nassau County, lots 7A and 7B, after Commander Oil

merged with Lawrence J. Bennett, Inc., the lots’ record

1. Commander Oil cross-appeals from the judgment of the

district court to the extent that it dismissed its claims for

indemnification and certain state-law causes of action. In these

respects, we affirm the judgment of the district court, as we discuss

below.

Appendix A

owner. Lot 7A contained office and warehouse space; 7B, |

the parcel at issue in this case, housed twelve above-ground

petroleum storage tanks and was used by Commander Oil as

a fuel depot and “throughput” facility at least until 1967. In

1964, Commander Oil leased the office and warehouse space

on lot 7A to Barlo, which was in the business of buying,

manufacturing, and distributing petroleum-handling

equipment. In 1969, Commander Oil leased lot 7B to Pasley

Solvents & Chemicals, Inc. (“Pasley”), which used the site

to repackage solvents purchased in bulk and to reclaim and

revitalize used solvents. Under Pasley’s lease, Commander

Oil retained the use of three oil storage tanks on lot 7B.

The arrangement at the heart of the present dispute arose

in 1972 when Commander Oil consolidated its leases. Under

a single new lease, Commander Oil rented both lots 7A and

7B to Barlo, which in turn subleased 7B to Pasley. This

arrangement simplified Commander Oil’s bookkeeping and

also delegated responsibility to Barlo for basic maintenance

and payment of taxes on both lots. The nature of the sublease

from Barlo to Pasley is fiercely contested. Barlo characterizes

itself simply as a rent conduit and the lease and sublease of

7B as a bookkeeping measure implemented entirely at

Commander Oil’s behest. Barlo claims that the new

arrangement did not change the actual relationship between

the three parties and that Pasley continued to treat

Commander Oil as its lessor. Commander Oil paints a

substantially different picture, referring to instances of

Barlo’s alleged involvement with Pasley’s activities on 7B,

and to the fact that Barlo derived a profit, albeit a small one,

from the sublease arrangement. We need not resolve this

dispute, however, because it does not affect the legal result.

- Appendix A

In 1981, an investigation by the Nassau County

Department of Health (“DOH”) led to the discovery of

contamination on lot 7B. The DOH referred the matter to

the New York State Department of Environmental

Conservation, which charged Pasley in Nassau County

District Court with violating the Nassau County Fire

Prevention Ordinances. Pasley agreed to drain its tanks,

remove solvents it had stored on the lot, and vacate the

premises.

Six years later, the EPA ordered Commander Oil to

conduct an investigation and a feasibility study to determine

the extent of the contamination and to propose a plan for its

remediation. In 1988, the EPA sought reimbursement from

Commander Oil and other defendants for response costs

incurred by the federal government in remediating the site.

On January 26, 1996, Commander Oil and other defendants

entered into a consent decree in which “Commander agreed

to design and implement response actions at the site and to

reimburse the United States for past and future response costs

incurred in connection with the Site.” (Consent Decree { 20).

In turn, Commander Oil received contribution for these costs

from certain defendants, who ultimately settled for

$1,849,127.91.

In 1990, Commander Oil filed this action, demanding

contribution or indemnification for additional costs from

Barlo and Pasley. Commander Oil’s complaint seeks, inter

alia, indemnification or contribution under CERCLA,

contractual indemnification, and damages for various state-

law claims -including trespass, negligence, nuisance, and

waste.

Appendix A

On June 12, 1997, the district court granted partial

summary judgment to both Commander Oil and Barlo. For —

purposes of establishing CERCLA liability, the only

contested issue was whether Barlo was an “owner” within

the meaning of 42 U.S.C. § 9607(a)(1). The district court

held that Barlo was an owner within the meaning of

§ 9607(a)(1) by virtue of its “authority and control” over lot

7B. In so holding, the district court implicitly rejected Barlo’s

argument that “owner” in § 9607(a)(1) means “record owner”

and instead ruled that “a lessee who has contro] over and

responsibility for the use of the property is the owner of the

property” for CERCLA purposes. The district court also

denied Commander Oii’s claims for contractual

indemnification, permitted Barlo to amend its answer in order

to plead a statute of limitations defense to Commander Oil’s

various state-law claims, and, in the same order, dismissed

the claims as time barred.

- The district court subsequently held a bench trial to

apportion liability as between Barlo, Commander Oil, and

Pasley. Following trial, the district court ruled that although

Pasley was responsible for all response costs, the costs had

to be allocated between Commander Oil and Barlo because

Pasley was “financially irresponsible.” The district court

rejected Commander Oil’s request for full indemnification

from Barlo under CERCLA on the ground that Commander

Oil was not an “innocent landowner” within the meaning of

42 U.S.C. § 9607(b)(3). Nevertheless, the district court ruled

that Commander Oil could recover 25% of its costs from

Barlo under 42 U.S.C. § 9613(f)(1). Accordingly, the district

court entered judgment against Barlo in the amount of

$802,915 plus 25% of “any future restoration costs.”

“i : | mee

Appendix A

Barlo appeals from that judgment, arguing that its status

as a lessee/sublessor did not make it an “owner” within

the meaning of CERCLA and that the district court’s

apportionment of liability was clearly erroneous.Commander

Oil cross-appeals claiming that the district court erred in

dismissing its claims for contractual indemnification and in

permitting Barlo to amend its pleadings to assert a statute of

limitations defense to Commander Oil’s state-law Causes of

action.

DISCUSSION

We are called upon in this case to resolve yet another

ambiguity within CERCLA’s miasmatic provisions.

CERCLA creates a regime of broad-ranging liability,

permitting the government to recover its remediation

expenses directly from parties responsible for pollution, see

42 U.S.C. § 9607(a)(4)(A), and authorizing private parties

to pursue contribution or indemnification from potentially

responsible parties for expenses incurred responding to

environmental threats, see 42 U.S.C. § 9607(a)(4)(B).

CERCLA creates various categories of potentially

responsible parties, one of which is pertinent to this case:

Owners and operators of facilities. See 42 U.S.C.

§ 9607(a)(1); B.F. Goodrich Co. v. Murtha, 958 F.2d 1192,

1198 (2d Cir. 1992) (delineating potentially responsible

parties as: “past and present owners or operators of facilities,

transporters of hazardous substances, and those ... who

generate or arrange for the disposal or treatment of hazardous

substances”). Absent a Showing that one of CERCLA’s

affirmative defenses applies, liability for owners and

operators is strict. See B.F. Goodrich, 958 F.2d at 1198.

A AE CE Le BENET Ab

Appendix A

Commander Oil’s suit against Barlo seeks either

contribution or indemnification for the costs it has and will —

continue to incur under its consent decree with the EPA.

The district court granted partial summary judgment to

Commander Oil for contribution on the theory that Barlo, as

a lessee/sublessor, was an “owner” of lot 7B and was

therefore strictly liable.? Other courts to have considered

whether lessees/sublessors are owners for purposes of

CERCLA’s strict owner liability provisions have reached

the same conclusion on similar facts. See, e.g., Delaney v.

Town of Carmel, 55 F. Supp. 2d 237, 258-59 (S.D.N.Y. 1999)

(“[T]he owner of a leasehold of a CERCLA facility may be

liable as an owner of that facility.”); United States v. A & N

Cleaners & Launderers, Inc., 788 F. Supp. 1317, 1332-34

(S.D.N.Y. 1992); United States v. South Carolina Recycling

& Disposal, Inc., 653 F. Supp. 984, 1002-03 (D.S.C. 1984),

aff'd in part, vacated in part sub nom. United States v.

Monsanto Co., 858 F.2d 160 (4th Cir. 1988). Essentially,

these courts have interpreted the term “owner” to extend

beyond the fee or record owner to anyone possessing the

requisite degree of control over the property. Whether, and

under what circumstances, a lessee/sublessor may be held

liable as an owner for CERCLA purposes is a question of

first impression in this circuit and we review the district

2. As before the district court, the sole contested issue with

respect to Barlo’s liability under CERCLA is whether Barlo was an

owner within the meaning of § 9607(a)(1). There is no dispute that

Commander Oil has otherwise satisfied the requirements for

establishing a claim under CERCLA. See Freeman v. Glaxo

Wellcome, Inc., 189 F.3d 160, 163 (2d Cir. 1999) (enumerating the

elements of a prima facie CERCLA claim).

Appendix A

court’s legal conclusions de novo. See Maguire v. Citicorp

Retail Servs., Inc., 147 F.3d 232, 235 (2d Cir. 1998).

CERCLA’s text offers no helpful guidance for

interpreting the extent of owner liability. According to the

statute: “The term ‘owner or operator’ means. . . any person

owning or operating [a] facility.” 42 U.S.C. § 9601(20)(A).

We are thus required to give content to a statutory tautology,

a position to which we have become increasingly accustomed

in the environmental context. Nor are we the first court to

have recognized that CERCLA is hardly a model of

legislative clarity. See, e.g., Exxon Corp. v. Hunt, 475 U.S.

355, 363 (1986); Artesian Water Co. v. Government of New

Castle County, 851 F.2d 643, 648 (3d Cir. 1988) (“CERCLA

is not a paradigm of clarity or precision. It has been criticized

frequently for inartful drafting and numerous ambiguities

attributable to its precipitous passage.”).

Our statutory interpretation is guided by CERCLA’s few

well-established principles. “Because it is a remedial statute,

CERCLA must be construed liberally to effectuate its two

primary goals: (1) enabling the EPA to respond efficiently

and expeditiously to toxic spills, and (2) holding those parties

[potentially] responsible for the releases liable for the costs

of the cleanup.” B.F. Goodrich, 958 F.2d at 1198. The

scheme envisioned by Congress protects taxpayers generally

from bearing the costs of nationwide cleanup. See id. Instead,

potentially responsible parties must shoulder the frequently

10a

Appendix A

heavy burden of environmental liability. Potentially ©

responsible parties are not limited to parties who were the

cause in fact of the contamination, see New York v. Shore

Realty Corp., 759 F.2d 1032, 1044 (2d Cir. 1985) (“[S]ection

9607(a)(1) unequivocally imposes strict liability on the

current owner of a facility from which there is a release or

threat of release, without regard to causation.”), but neither

does CERCLA automatically assign liability to every party

with any connection to a contaminated facility. A recent

Supreme Court decision demonstrates the difficulty of

determining the limits of CERCLA’s strict liability

provisions.

In United States v. Bestfoods, 524 U.S. 51 (1998), the

Court was called on to construe operator liability and decide

“whether a parent corporation that actively participated in,

and exercised control over, the operations of a subsidiary

may, without more, be held liable as an operator of a polluting

facility owned or operated by the subsidiary.” Jd. at 55. The

contested issues in Bestfoods concerning corporate law and

operator liability do not control the instant dispute. However,

the Court faced a similar interpretive task and we find its

approach useful here.

We therefore begin our analysis of the term “owner” in

§ 9607(a) by doing “the best we can to give the term its

ordinary or natural meaning.” Bestfoods, 524 U.S. at 66

(internal quotation marks omitted). But unlike “operator,”

the term “owner” has no natural meaning that can resolve

the present dispute. Barlo urges that CERCLA’s owner

liability is restricted to record owners. Commander Oil argues

for a more expansive definition that relies primarily on the

lla

Appendix A

right to control property, whether the right is pOssessory or

is a recorded property interest. Neither position is obviously

implausible. According to Webster’s dictionary, an owner

is “[O]ne that has the legal or rightful title whether the

possessor or not.” Webster’s Third New International

Dictionary of the English Language Unabridged 1612

(1981). Black’s Law Dictionary, however, equivocates

between titular and Possessory owner, defining an owner

variously as “[o]ne who has the right to possess, use, and

convey something,” and as “[o]ne who has the primary or

residuary title to property.” Black’s Law Dictionary 1130

(7th ed. 1999). This definition’s ambiguity comes as no

surprise. Long-standing scholarship has informed us that

ownership — and its attendant concept “property” — has

limited inherent content. See, e.g., Wesley Newcomb

Hohfeld, Some Fundamental Legal Conceptions as Applied

in Judicial Reasoning and Other Legal Essays 96 (Walter

Wheeler Cook ed., 1923) (stating that property “consists of

a complex aggregate of rights (or claims), privileges, powers,

and immunities”). - ae

Courts and commentators have supplied no consistent

guidance as to which rights in the proverbial property bundle

define ownership. Compare, e.g., Hodel v. Irving, 481 U.S.

704, 716 (1987) (stating that “the right to Pass on property

— to one’s family in particular” constitutes a protected

property right under the Fifth Amendment), with Andrus vy.

Allard, 444 U.S. 51, 65-66 (1979) (holding that abrogating

the right to sell endangered eagles’ feathers did not implicate

the Fifth Amendment); see also William A. Fischel,

Introduction: Utilitarian Balancing and Formalism in

Takings, 88 Colum. L. Rev. 158] » 1590-94 (1988) (reviewing

12a

Appendix A

various commentators’ disagreements over the content of

protectable property interests). Our task today is less

theoretical yet is still grounded in the same basic controversy

over defining ownership. Its manifestation in this case is

whether, and under what circumstances, the rights possessed

by a lessee are sufficient to rise to the level of “ownership”

for CERCLA purposes.

Most of the district courts that have considered this

question have held that site control is a sufficient indicator

of ownership to impose liability on lessees or sublessors.

See, e.g., Castlerock Estates, Inc. v. Estate of Markham, 871

F. Supp. 360, 367 (N.D. Cal. 1994); Burlington N. R.R. Co.

v. Woods Indus., Inc., 815 F. Supp. 1384, 1391-92 (E.D.

Wash. 1993); Pape v. Great Lakes Chem. Co., No. 93 C 1585,

1993 WL 424249, at *3 (N.D. Ill. Oct. 19, 1993); see also,

e.g., Delaney, 55 F. Supp. 2d at 258-59 (“[T]he owner of a

leasehold interest in a CERCLA facility may be liable as an

owner of that facility, as long as the lessee exercised

sufficient site control to place it in the shoes of owners.”’)

(internal quotation marks omitted); A & N Cleaners &

Launderers, Inc., 788 F. Supp. at 1333 (“The undisputed

facts establish that the sublessor] exercised a degree of site

control over the Property, that . . . confers ownership status

upon it for purposes of CERCLA ....”); South Carolina

Recycling & Disposal, Inc., 653 F. Supp. at 1003 (“[The

lessee] maintained control over and responsibility for the

use of the property and, essentially, stood in the shoes of the

property owners.”). The reasoning of these district courts is

not without its appeal; if the lessee is the active user and

polluter of the property, imposition of CERCLA liability

seems particularly appropriate. But, while the imposition of

13a

Appendix A

liability in such a situation is surely correct, imposing owner

liability instead of operator liability threatens to conflate

two statutorily distinct categories of potentially responsible

parties.

It is settled in this circuit that owner and operator liability

should be treated separately. See, e.g., Schiavone v. Pearce,

79 F.3d 248, 254 (2d Cir. 1996) (“Observing that ‘owner’

liability and ‘operator’ liability denote two separate concepts,

courts stress the disjunctive character of CERCLA liability.”

(internal quotation marks omitted)); cf. Bestfoods, 524 U.S.

at 64 (“If the act rested liability entirely on ownership of a

polluting facility, this opinion might end here; but CERCLA

liability may turn on operation as well as ownership . . . .”).

Even a cursory examination of the basis for operator liability

reveals that it would be almost entirely subsumed by owner

liability that relied on site control analysis. As the Supreme

Court recently explained, “an operator must manage, direct,

or conduct operations specifically related to pollution, that

is, operations having to do with the leakage or disposal of

hazardous waste, or decisions about compliance with

environmental regulations.” Bestfoods, 524 U.S. at 66-67.

If control over a facility could establish ownership then

operator liability in these circumstances would be just a

subset of owner liability. Imposing owner liability on the

basis of site control threatens to make owners of all operators

and surplusage of most of operator liability. See Castlerock,

871 F. Supp. at 367 (“The test for ‘ownership’ liability under

CERCLA ... has become similar to |the] test for ‘operator’

liability under CERCLA.”). Because we strive to avoid

redundancy in our interpretation of statutes, see, e.g., Exxon

Corp., 475 U.S. at 369-70, we believe that site control alone

l4a

Appendix A

is an improper basis for the imposition of owner liability. .

Lessees may frequently be liable as operators but most

lessees are not owners within the meaning of § 9607(a).

While the typical lessee should not be held liable as an

owner, there may be circumstances when owner liability for

a lessee would be appropriate. Some district courts, for

example, have treated lessees as owners for CERCLA

purposes when they sublet the premises to other entities. See,

e.g., South Carolina Recycling & Disposal, Inc., 653 F. Supp.

at 1003 (“The fact that during part of its leasehold [the lessee]

sublet a portion of the site does not diminish its

responsibility. If anything, it strengthens the case [against

the lessee].”). These courts have reasoned that a sublessor,

by virtue of its relationship to the sublessee, will often be in

the best position — or at least in a better position than the

record owner — to prevent pollution at a facility. However,

this reasoning improperly emphasizes the relationship

between the lessee/sublessor and the sublessee, instead of

the relationship between the owner and the lessee/sublessor.

Ownership has consistently defied easy definition across

a variety of legal contexts, but we know at least that it is

relational. See Restatement (First) of Property ch. 1 intro.

note (1936) (“[Property comprises] legal relations between

persons with respect to a thing.”). Ownership exists vis-a-vis

someone else; it represents a priority of rights and claims

and not a concrete status. Lessees/sublessors necessarily have

relationships with both the original lessor — often the record

owner — and the sublessee. A lessee/sublessor has many of

15a

Appendix A

the rights and obligations of ownership in relation to the

sublessee; he usually retains, inter alia, the power to lease,

to exclude, and to govern the terms of property’s use. But

lessees/sublessors are simply lessees iti relation to the

original owner/lessor, incapable of granting to a sublessee

more than they originally acquired from their lessor. Since a

typical lessee is not liable as an owner, then logically a

sublessor should not be liable either, unless its status with

regard to the sublessee operates somehow to confer owner

liability. However, we find no basis in CERCLA for

supposing that the relationship between the sublessor and

sublessee is the critical relationship for identifying owner

liability and therefore no principled basis for assuming that

a lessee/sublessor’s relationship with a sublessee

automatically transforms the lessee/sublessor into an owner

under § 9607(a). In fact, there are good reasons why this

relationship cannot be dispositive for purposes of

establishing strict owner liability.

Strict liability is a narrowly tailored tool, capturing a

specific kind of responsibility. CERCLA’s admittedly

disjointed legislative history offers some useful insights into

the congressional purposes motivating strict owner liability.

Cf. Shore Realty Corp., 759 F.2d at 1039 (stating that

“CERCLA’s history reveals as much about the nature of the

legislative process as about the nature of the legislation,”

but nevertheless finding important guidance from the Act’s

history). The report of the Senate Committee on Environment

and Public Works justified CERCLA’s imposition of strict

liability in part by referring to the English case of Rylands

v. Fletcher, L.R. 3 H.L. 330 (1868). See, e.g., S. Rep. No.

96-848, at 33 (1980), reprinted in 1 Legislative History of

16a

Appendix A

the Comprehensive Response, Compensation, and Liability —

Act of 1980 (Superfund), Public Law 96-510, at 305, 340

(1983) [hereinafter “CERCLA Legislative History”]. The

reference is instructive. The principle enunciated in Rylands

v. Fletcher has been succinctly stated by this court in United

States v. FMC Corp., 572 F.2d 902, 907 (2d Cir. 1978):

“When one enters into a business or activity for his own

benefit, and that benefit results in harm to others, the party

should bear the responsibility for that harm.” Central to the

Rylands v. Fletcher theory of strict liability is the underlying

fairness of imposing on the beneficiaries of an ultra-

hazardous activity the ultimate costs of that activity. The

Senate Committee wrote: “To establish provisions of liability

any less than-strict, joint, and several liability would be to

condone a system in which innocent victims bear the actual

burden of releases, while those who conduct commerce in

hazardous substances which cause such damage benefit with

relative impunity.” 1 CERCLA Legislative History, supra at

320. CERCLA’s strict owner liability, therefore, can be

justified in part on the grounds that owners — even as lessors

— derive benefit from the activities conducted on their

property.

The same justification for strict liability does not

necessarily or automatically apply to lessees/sublessors, as

the facts of the present case make clear. The arrangement

that led to Pasley’s contamination of the site was between

Commander Oil and Pasley, not between Pasley and Barlo.

The terms of the original lease between Pasley and

Commander Oil were set before Barlo was interposed as a

sublessor. Commander was a sophisticated lessor and fully

capable of including in the price of the lease the risk of Pasley

17a

Appendix A

contaminating the site. As we explain in part II of this

opinion, infra, owner liability might attach to a scphisticated

lessee/sublessor who exploits unanticipated risks on the

property of an unsophisticated owner. But here, and in the

normal course of events, such liability will not attach to

lessees/sublessors.

There is an additional policy reason supporting our

conclusion that owner liability should not automatically

apply to lessees/sublessors. When buyers are considering

purchasing property they will usually conduct an

environmental assessment prior to closing. CERCLA has

raised the costs of owning polluted land, and owners and

potential owners are on notice of their liability and are wise

to ensure that a potential acquisition is not encumbered by

massive environmental liability. So far as we are able to

discern, the same is not true of lessees/sublessors. A lessee/

sublessor’s concern about environmental hazards on a site

will usually be limited to ensuring “that the property is

adequate for the tenant’s purposes and that there are no

on-site environmental conditions or features which would

impair the tenant’s ability to operate.” Richard D. Jones &

Ivan S. DeVoren, Managing Environmental Risks in

Commercial Real Estate Leases, SA81 ALI-ABA 121, 126

(1996). We are reluctant to surprise Barlo with new and

unexpected liability, and to undermine the security of lessees/

sublessors throughout the circuit who have entered into

subleases before this decision.

—— ee

18a

Appendix A

Il.

We do not foreclose the possibility that in some

circumstances lessees/sublessors may be liable as owners

under CERCLA. Certain lessees may have the requisite

indicia of ownership vis-a-vis the record owner to be de facto

owners and therefore strictly liable. Such would probably

be true of a lessee with the proverbial 99-year lease. While

we need not define with specificity those factors that might

transform a lessee into an owner, we note several that we

think could be important, specifically: (1) whether the lease

is for an extensive term and admits of no rights in the owner/

lessor to determine how the property is used; (2) whether

the lease cannot be terminated by the owner before it expires

by its terms; (3) whether the lessee has the right to sublet all

or some of the property without notifying the owner;

(4) whether the lessee is responsible for payment of all taxes,

assessments, insurance, and operation and maintenance costs;

and (5) whether the lessee is responsible for making all

structural and other repairs. This non- clusive list is meant

to reinforce the point that the critical question is whether

the lessee’s status is that of a de facto owner and not whether

it exercises control over the facility. Cf Bedford Affiliates

v. Sills, 156 F.3d 416, 425 (2d Cir. 1998) (noting that the

innocent owner exception to liability is premised on an

entity’s status and not on its participation in activities relating

to contamination). Moreover, the critical relationship is that

between the lessee/sublessor and the owner/lessor, not that

between the lessee/sublessor and the sublessee.

For example, sale-leaseback arrangements may not serve

to insulate the former-owner/lessee from owner liability if

19a

Appendix A

the lessee actually retains most rights of ownership with

respect to the new record owner. See 2 Powell on Real

Property § 17A, at 3 (1997) (“[T]he tenant’s position as to

use and occupancy and responsibility for operating expenses

does not differ, from a practical standpoint, from the position

that the tenant occupied as owner prior to sale.”). Likewise,

extremely long-term leases may create owner liability in the

lessee if, according to the terms of the lease, the lessee retains

so many of the indicia of ownership that he is the de facto

owner. And owner liability might also lie where a lessee/

sublessor has impermissibly exploited — by use himself or

through a sublease — more rights than he originally leased,

effectively expropriating from the owner the right to benefit

from activity on the property.

Applying these principles to the case at hand, we

conclude that the district court erred in holding Barlo strictly

liable as an owner pursuant to 42 U.S.C. § 9607(a)(1).

Whether or not Barlo was simply a rent conduit between

Commander Oil and Pasley — as Barlo claims — it did not

possess sufficient attributes of ownership over lot 7B. By

the terms of the lease between Barlo and Commander Oil,

Barlo was, inter alia, (1) limited to using lot 7A, and only

“for that business presently conducted by tenant on a portion

of the same premises leased hereunder”; (2) required to obtain

written consent from Commander Oil before making “any

additions, alterations or improvements” on the land, which

alterations would become Commander Oil’s property in any

event; (3) required to obtain written approval from

Commander Oil to sublet the property, and prohibited from

subletting to any entity that had “any connection with the

fuel, fuel oil or oil business”; (4) required to obtain written

20a

Appendix A

permission from Commander Oil to display any “sign,

advertisement, notice or other lettering” on the building;

(5) required to keep the property “clean and in order to the

satisfaction of’ Commander Oil, and responsible for any

damage Barlo itself caused to the premises or to the “systems

or equipment or any installation therein”; and (6) prohibited

from doing anything that would “in any way increase the

rate of fire insurance” on the property, and from bringing or

keeping upon the premises “any inflammable, combustible

or explosive fluid, chemical or substance.” In addition, the

lease was limited to a five-year term with one option for

renewal.

Moreover, Commander Oil retained many of the rights

and obligations of ownership. Among other things, the fuel

company: (1) reserved a right to enter onto the lot for various

purposes; (2) reserved for its own use three oil storage tanks

on lot 7B; (3) reserved an “option” to use, on written notice

to Barlo, “certain office space” within lot 7A; (4) reserved

the right to maintain “its aerial or a comparable aerial” on

the roof of the building; and (6) assumed responsibility to

make structural repairs.

To be sure, Barlo possessed some attributes of ownership

with respect to lot 7B. For instance, Barlo was obligated to

secure insurance for the property, was liable to Commander

Oil for all assessments on the property and any increases

(but only increases) in taxes, and assumed responsibility for

all nonstructural repairs, including “all repairs to heating,

plumbing and lighting fixtures and equipment; cesspool

maintenance, repair and replacement; snow removal;

driveway, parking area and pavement repairs, etc.”

2la

Appendix A

Notwithstanding these attributes, however, Barlo lacked most

of the bundle of rights that comes with ownership of property.

Accordingly, it may not be held liable under CERCLA as an

owner, and the judgment of the district court is reversed to

the extent that it imposed liability against Barlo for the

contamination on lot 7B.3

Il.

Commander Oil has cross-appealed on two grounds: that

the district court erred by refusing to grant Commander Oil

indemnification as opposed to contribution; and by

permitting Barlo to amend its answer to plead a statute of

limitations defense to Commander Oil’s state-law claims.

We disagree.

Commander Oil argues first that it should be entitled to

indemnification pursuant to 42 U.S.C. § 9607(a)(4)(B).

However, we have previously held that potentially

3. Commander Oil urges us, if we disapprove of the district

court’s judgment, to remand the case for further proceedings to

determine whether Barlo might be liable as an operator. We decline

to do so. Although there are some unresolved factual issues that

would bear on whether Barlo was an operator within the meaning

of 42 U.S.C. § 9607(a)(1), under no version of those facts could

Barlo be said to have “manage[d], direct[ed], or conduct[ed]

operations specifically related to pollution, that is, operations having

to do with the leakage or disposal of hazardous waste, or decisions

about compliance with environmental regulations.” Bestfoods, 524

U.S. at 66-67. Moreover, in light of our conclusion that Barlo is not

liable as an owner under CERCLA, we need not — and do not —

reach its arguments on appeal concerning the district court’s

apportionment of liability.

22a

Appendix A

responsible parties may pursue only contribution claims.

against other potentially responsible parties and may not seek

indemnification. See Bedford Affiliates, 156 F.3d at 423-24.

In an effort to circumvent the rule of Bedford Affiliates,

Commander Oil argues, contrary to the district court, that it

was entitled to an “innocent owner” defense and thus was

not a potentially responsible party. We express no view as

to whether a successful innocent owner defense negates

potentially responsible party status because it was not clearly

erroneous for the district court to determine that Commander

Oil was not innocent within the meaning of the statute.

Certain semi-volatile organic compounds consistent with

pollution from petroleum were found at the site under the

tenks retained by Commander Oil and at least some testimony

was presented at trial describing an oil spill from one of

Commander Oil’s trucks. Commander Oil is therefore a

potentially responsible party and thus not entitled to pursue

an indemnification claim.

Alternatively, Commander Oil argues that it is entitled

to contractual indemnification from Barlo by virtue of their

lease agreement. Commander Oil relies on those portions of

the standard contract that require Barlo to prevent and abate

nuisances connected with the property, and to repair the

property. However, Commander Oil failed to raise the issue

below in a timely manner and it is therefore waived for

purposes of this appeal. In any event, indemnification

provisions in contracts are to be strictly construed, see, e.g.,

Commander Oil Corp. v. Advance Food Serv. Equip., 991

F.2d 49, 51 (2d Cir. 1993) (citing New York law), and we

doubt whether Commander Oil and Barlo’s generic lease

agreement could have shifted to Barlo the kind of massive

CERCLA liability at stake in this case.

er rn eer anne Emer meen

23a

Appendix A

Finally, so long as leave was properly given to Barlo to

amend its answer, Commander Oil’s remaining claims for

negligence, nuisance, trespass, and waste were properly

dismissed as time barred. Leave to amend shall be freely

given, and this court reviews the district court’s actions for

abuse of discretion. See Block v. First Blood Assoc., 988

F.2d 344, 350 (2d Cir. 1993). Parties are generally allowed

to amend their pleadings absent bad faith or prejudice. See

State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843,

856 (2d Cir. 1981). Moreover, “it is rare for an appellate

court to disturb a district court’s discretionary decision to

allow amendment.” Rachman Bag Co. v. Liberty Mut. Ins.

Co., 46 F.3d 230, 235 (2d Cir. 1995). Commander Oil’s

claimed prejudice derives from the expenses incurred

preparing to litigate its state-law claims.-However, we see

no reason to believe — and Commander Oil has not

demonstrated — that these costs were in any way additional

to the costs it necessarily incurred preparing its CERCLA

claims. Even in the face of Barlo’s seven-year delay to add

its statute of limitations defense, we will not upset the district

~court’s decision to permit Barlo to amend its answer

accordingly, absent any showing of prejudice to Commander

Oil or bad faith on the part of Barlo.

CONCLUSION

For the reasons stated above, the judgment of the district

court is REVERSED to the extent that it imposes CERCLA

liability against Barlo. The judgment of the district court is

AFFIRMED to the extent that it dismisses Commander Oil’s

indemnification and state-law claims.

24a

APPENDIX B— MEMORANDUM OF DECISION AND

ORDER OF THE UNITED STATES DISTRICT COURT.

FOR THE EASTERN DISTRICT OF NEW YORK

DATED JULY 6, 1998

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

90-CV-1243

COMMANDER OIL CORPORATION, -

Plaintiff,

— against — .

BARLO EQUIPMENT CORP., et al.

Defendants.

Memorandum of Decision and Order

July 6, 1998

*« * *

MISHLER, D.J.,

Through an Order to Show Cause filed on June 5, 1998,

Barlo Equipment Corp. (the “Defendant”) has moved this

court pursuant to Fed.R.Civ.P. 59(e), 60(b), 52(a), 52(b) and

59(a), respectively, to alter and amend the court’s Judgment,

dated May 20, 1998 (entered on May 26, 1998 and amended

on June 1, 1998), to grant relief from the court’s findings, to

OR eRe en ame OM CN CEN

25a

Appendix B

have the court amend its findings, to have the court make

new findings or to have the court order a new trial. The court

denies Defendant’s requests for the reason stated below.

The Federal Rules of Civil Procedure at issue state the

following. Rule 59(e) simply sets a time limit of 10 days

within which to move to alter or amend judgment and does

not provide for relief. Secondly, Rule 60(b) states, in

pertinent part:

On motion and upon such terms that are just,

the court may relieve a party or a party’s legal

representative from a final judgment, order or

proceeding for the following reasons: (1) mistake,

inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence which by due

diligence could not have been discovered in time

to move for a new trial under Rule 59(b); (3) fraud

(whether heretofore denominated intrinsic or

extrinsic), misrepresentation or other misconduct

of an adverse party; (4) the judgment is void;

(5) the judgment has been satisfied, released, or

discharged, or a prior judgment upon which it is

based has been reversed or otherwise vacated, or

it is no longer equitable that the judgment should

have prospective application; or (6) any other reason

justifying relief from the operation of the judgment.

Thirdly, Rule 52(a) grants authority to the court both to find -

facts and state conclusions of law, and Rule 52(b) allows a

party to move for an amendment of those findings. F inally,

Rule 59(a) provides that:

26a

Appendix B

A new trial may be granted to all or any of

the parties and on all or part of the issues ...

(2) in an action tried without a jury, for any of

the reasons for which rehearings have heretofore

been granted in suits in equity in the courts of the

United States. On a motion for a new trial in an

action tried without a jury, the court may open —

the judgment if one has been entered, take

additional testimony, a:nend findings of fact and

conclusions of law or make new findings and

conclusions, and direct the entry of a new

judgment.

Defendant’s claims fail to satisfy the requirements of

any of these rules. Defendant’s brief contends that the court

erred in several ways: by finding the Defendant liable for

25% of response costs; by apportioning a share of Pasley’s

100% liability to the Defendant; by concluding that

Commander Oil Corporation (the “Plaintiff’) had met its

burden of proof with regard to Pasley’s share of liability as

an “orphan share”; and by holding that the Defendant was

liable in the absence of a showing that the Defendant knew

or should have known that Pasley was polluting the property.

The court has considered carefully each of these issues,

along with others, prior to, at and after the December 1997

bench trial and has given the parties a full and fair opportunity

at various points throughout the matter to argue and/or brief

these issues in accordance with a time schedule set by the

parties. Thus, there is no basis for Defendant to request

reconsideration in the form of a motion for a new trial or a

motion for altering or amending current findings or making

27a

Appendix B

new findings under the above federal rules. Moreover, the e

Defendant’s reference to U.S. v. Bestfoods as a means for

introducing new grounds is misplaced: that case concerned

the question of liability in the parent-subsidiary context

whereas the instant case concerns the question of liability in

the landlord-tenant and owner-operator context.

ORDER

The Defendant’s motion is denied, and execution is

stayed for ten (10) days from date.

s/ Jacob Mishler

JACOB MISHLER, U.S.D.]J.

—

28a

APPENDIX C — MEMORANDUM OF DECISION AND

ORDER AND JUDGMENT OF THE UNITED STATES

DISTRICT COURT FOR THE EASTERN DISTRICT

OF NEW YORK DATED MAY 20, 1998

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

CV 90-1243

COMMANDER OIL CORP.,

Plaintiff,

— against —

BARLO EQUIPMENT CORP., ROBERT PASLEY,

PASLEY SOLVENTS & CHEMICALS, INC.,

CONSOLIDATED LITHO COMPANY, F&R DISPLAY

FIXTURES, JACKSON STEEL PRODUCTS, INC.,

TRANS WORLD OPTICS, INC., and ULTRA SPRAY,

Defendants.

Memorandum of Decision and Order

May 20, 1998

& *

MISHLER, District Judge

The court conducted a trial on the following issues which

were identified in the court’s memorandum of decision dated

ee nme

29a

Appendix C

June 10, 1997, as relevant to the claim of Commander Oil

Corporation (“Commander”) against Barlo Equipment Corp.

(“Barlo”):

Whether Commander is an “innocent owner” and

entitled to recover response costs against Barlo

pursuant to § 107 of CERCLA, 42 U.S.C. § 9607,

for joint and several liability.

Apportioning Liability — the degree to which

Commander’s response costs should be imposed on

Barlo.

. The nature and extent of Commander’s response

costs and damages including the percentage of salary

of Commander’s employee charged as a response

cost.

The deposit of $1.6 million representing the proceeds

of Commander’s insurance policy into the Remedial

Trust Fund, claimed by Barlo as reducing its

damages.

Innocent Landowner Exception

Commander claims its right to total response costs

against Barlo pursuant to § 9607(a) as an innocent landowner,

citing Rumphe of Indiana, Inc. v. Cummins Engine Co., Inc.,

107 F.3d 1235 (7 Cir. 1997). Rumphe is discussed at length

in the court’s memorandum of decision (pp. 46-50) dated

June 10, 1997 (hereinafter “MOD”). The fact findings in the

MOD deny Commander the status of “innocent landowner.”

30a

Appendix C

~ Pasley was a tenant of Commander from 1969 to February

1, 1973. Barlo leased the office and warehouse space adjacent

to the Site to engage in the business of buying, selling and

manufacturing petroleum-handling equipment. In 1972

Commander entered into a lease with Barlo which provided

for the continued occupancy and use by Pasley on part of

the Site. Pasley used its portion of the premises as a chemical

distribution center. Chemicals reclaimed from Pasley

customers were stored at the Site in 55 gallon drums. While

stored at the portion of the Site used by Pasley, hazardous

substances were released in the soil and polluted the ground

water at the Site.

Commander was aware of Pasley’s use of the Site and

Pasley’s release of hazardous substances into the soil.

Commander continued to receive rent for Pasley’s use after

1972, until June 1982, through Barlo. Commander was aware

of Pasley’s use of the Site during Pasley’s occupancy.

Under § 9607(b) the burden of proof is on Commander

to “establish by a preponderance of the evidence that the

release or threat-of release of a hazardous substance and the

damages resulting therefrom were caused solely by —

* * *

(3) an act or omission of a third party ... and

(b) he took precautions against foreseeable

acts or omissions of any such third party and

the consequences that could foreseeably

result from such acts or omissions .. .

3la

Appendix C

The MOD (pp. 4-5 & 6) describes Commander’s use of

the Site from about 1961 to 1967 as a fuel oil depot. Under

the Barlo lease, Commander retained control of three (3) oil

storage tanks and the pump house and loading platform. The

Site in the area of the oil storage tanks and pump house were

polluted by hydrocarbons present in fuel oil known as

semi-volatile organic compounds (“SVOCs”). The presence

of SVOCs at the area of the Site used by Commander is

attributable to Commander. Commander’s pollution of the

soil was minimal compared to Pasley’s.

Commander failed to sustain its burden of proving that

it was an innocent landowner.

Apportioning Response Costs

Section 9613(f)(1) states in pertinent part:

[I]n resolving contribution claims, the court may

allocate response costs among liable parties using

such equitable facts as the court determines are

appropriate.

The court in United States v. Colorado & Eastern R.

Co., 50 F.3d 1530, 1536 (including f.n.5) (10" Cir. 1995)

discusses § 9613(f) as follows:

To resolve contribution claims, § 113(f)(1)

continues, “the court may allocate response costs

among liable parties using such equitable factors

as the court determines are appropriate.” 42

U.S.C. § 9613(f)(1). In any given case, “a court

32a

Appendix C

may consider several factors, a few factors, or

only one determining factor, . . . depending on the

totality of the circumstances presented to the

court.” Environmental Transp. Sys., Inc. v.

ENSCO, Inc., 969 F.2d 503, 509 (7" Cir. 1992).°

Of course, the burden of proof is on the . . . party

seeking apportionment to establish that it should

be granted.” H.R.Rep. No. 99-253 (III). 99" Cong.

1* Sess. 19 (1986), reprinted in 1986 U.S.C.C.A.N.

2835, 3038, 3042; see United States v. R.W.

Meyer, Inc., 889 F.2d 1497, 1507-08 (6" Cir.

1999) (a party is entitled to relief against the other

defendant to the extent that it can “demonstrate

the divisibility of the harm and that it paid more

than its fair share”), cert. denied, 494 U.S. 1057,

110 S. Ct. 1527, 109 L.Ed.2d 767 (1990).

5. In addition, many courts look to the “Gore Factors”,

proposed in a moderate approach to joint and several

liability by Senator Albert Gore, to apportion

contribution claims under § 113(f)(1). We emphasize

that the Gore Factors are neither an exhaustive nor

exclusive list. The six factors are: (i) the ability of the

parties to demonstrate that their contribution to a

discharge, release or disposal of a hazardous waste can

be distinguished; (ii) the amount of the hazardous

waste involved; (iii) the degree of toxicity of the

hazardous waste involved; (iv) the degree of

involvement by the parties in the generation,

transportation, treatment, storage, or disposal of the

hazardous waste; (v) the degree of care exercised by

the parties with respect to the hazardous waste

33a

Appendix C

concerned, taking into account the characteristics or

such hazardous waste; and (vi) the degree of

cooperation by the parties with the Federal, State or

local officials to prevent any harm to the public health

or the environment. Environmental Transp. Sys., Inc.

v. ENSCO, Inc., 969 F.2d 503, 508-09 (7* Cir. 1992).

Pasley is responsible for all the response costs. We are

advised that Pasley is financially irresponsible.

Barlo was aware of Pasley’s use of the premises. It had

the authority under the sublease with Pasley to halt the

spillage of hazardous substances into the soil. Pasley was

obliged under CERCLA to exercise its authority.

In considering all the circumstances upon which

apportionment is based, the most significant are:

(1) Commander will benefit in remedying the condition of

the Site, and (2) Commander polluted the soil as described

above. :

We find that the sum now due to the Remedial Trust

Fund as here‘nafter computed should be apportioned between

the parties as follows:

Commander Oil Corp. — 75%

Barlo Equipment Corp. — 25%

34a

Appendix C

The Nature and Extent of Response Cost

Section 9607(a)(4)(B) provides for the recovery of “any

. .. necessary costs of response incurred .. .” The court in

In re Dant & Russell, Inc., 951 F.2d 246, 249 (9" Cir. 1991),

discussing costs incurred and response costs expended in

the future holds: |

Under CERCLA’s scheme for private action,

response costs may not be recovered when there

has been no commitment of resources for meeting

these costs. Section 9607(a)(4)(B) permits an

action for response costs “incurred — not “to be

incurred.” Moreover, CERCLA expressly

provides for declaratory actions for determining

liability as to future response costs. Section

9613(g)(2) provides that in actions under § 9607,

“the court shall enter a declaratory judgment on

liability for response costs . . . that will be binding

on any subsequent action or actions to recover

further response costs. . . .”

Commander claims response costs totaling

$6,222,168.37 consisting of:

(1) $3,500,000.00 — Remedial Trust Fund set up

by Commander to guaranty

performance of the remedy.

(2) $1,802,231.37 — Uncontested past response costs.

(3) $ 361,762.00 — Contested past response costs.

35a

Appendix C

(4) $ 350,000.00 — Future EPA oversight costs.

(S) $ 163,175.00 — Indirect response costs (personnel

and overhead expenditures).

(6) $ 45,000.00 — Interest on future payment of

EPA’s past response costs.

Barlo challenges Commander’s right to assess response

costs for the following items (referring to the above

numbering):

(2) Uncontested past response costs. Barlo does not

claim that the costs were not response costs. Barlo

claims it does not become an assessable response

cost until it is paid. We hold that Commander’s

obligation to pay for services rendered in the clean-up

are response costs and assessable against Barlo.

(3) Contested past response costs. Barlo challenges the

services of Edgar Barnett, an employee of

Commander, as a restoration cost in the amount of

$163,175.00. The record supports the charge.

Services were rendered toward the clean-up. Had

Commander used the services of a non-employee it

would be chargeable. The services rendered by

Barnett in aiding the remedial process is a restoration

cost.

Barlo also challenges the sum of $80,000.00 paid to

Levine & Robinson, as attorneys for Camin Cargo on the

ground that “there is insufficient evidence to establish that

36a

Appendix C

these items are recoverable response costs.” (Barlo’s memo,

pp. 54-55). The objection is overruled. (Tr. pp. 310-313 —

Barnett’s testimony).

Barlo challenges the payment of $23,700.00 to Metcalf

& Eddy for “Additional work in connection with the

feasibility study and remedial investigation.” Metcalf & Eddy

were retained for work on the remedial investigation and

feasibility study of the Site. The court found, based on the

testimony of Keith Tyan, that Metcalf & Eddy services were

rendered in 1992 (Tr. p. 320), Ryan testimony (pp. 174-175,

202, 206-207. See Barnett’s testimony p. 319: “It (Ex. 140)

shows that $23,700.00 was paid to Metcalf & Eddy on April

30, 1992, and it would have been only in conjunction with

the Pasley Site.”

Barlo objects to the charge of $3,000.00 paid to Marcum

& Kleigman based on Barnett’s testimony “that the amount

only related to the preparation of a letter for Commander

regarding the trust fund.” (Barlo memo, pp. 55-56). Barnett

testified that the services rendered by Marcum & Kleigman,

E.P.A., were much more and related to the plan to remedy

the Site. (Tr. pp. 320-321).

Commander seeks recovery of the full amount of the

Remedial Trust Fund in the amount of $3.5 million, required

under the Consent Decree. Commander is obligated to pay

Trea-Tek to conduct remediation of the Site the sum of

$2,338,622.00. To the extent that Commander seeks a sum

in excess to which it is obligated, the court finds that the

sum of $2,338,622.00 paid or payable to Trea-Tek is

recoverable. We deny the excess sum of $1,161,378.00 as a

37a

Appendix C

cost of restoration. We find restoration costs to be

$5,060,790.37 (reducing the sum claimed by $1,161,378.00).

Crediting the sum due with payments made by the settling

defendants in the amount of $1,849,127.71, the fund is now

owed the sum of $3,211,662.66.

Barlo seeks credit for the proceeds of an insurance policy

issued to Commander in the amount of $1.6 million. We are

guided by the collateral service rule denying the benefit

received by Commander based on its payment of insurance

premiums, to inure to Barlo. i:

Judgment is awarded Commander Oil Corp. against the

Defendant Barlo Equipment Corp. in the sum of $802,915.00.

The court grants declaratory judgment providing for the

payment of any future restoration costs which have not been

considered in this memorandum of decision. Barlo is liable

for 25% of such costs.

SO ORDERED.

A judgment is issued simultaneously herewith.

s/ Jacob Mishler

JACOB MISHLER,

U.S. District Judge

38a

Appendix C

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

CV 90-1243

COMMANDER OIL CORP.,

Plaintiff,

— against —

BARLO EQUIPMENT CORP., ROBERT PASLEY,

PASLEY SOLVENTS & CHEMICALS, INC.,

CONSOLIDATED LITHO COMPANY, F&R DISPLAY

FIXTURES, JACKSON STEEL PRODUCTS, INC.,

TRANS WORLD OPTICS, INC., and ULTRA SPRAY,

Defendants.

JUDGMENT

The action having come on for trial before Honorable

Jacob Mishler, District Judge presiding, and the issue of

liability having been tried and a decision rendered on June

10, 1997, and the issue of damages against defendants Barlo

Equipment Corp., Robert Pasley and Pasley Solvents &

Chemicals, Inc. having subsequently been tried and a

decision rendered,

It is ORDERED and ADJUDGED

that plaintiff Commander Oil Corp. recover of

defendants Robert Pasley and Pasley Solvents and

39a

Appendix C

Chemicals, Inc. (“Pasley”) the sum of $3,21 1,662.00, and it

is further

ORDERED and ADJUDGED

that plaintiff Commander Oil Corp. recover of defendant

Barlo Equipment Corp. the sum of $802,915.00, and that

Barlo Equipment Corp. have a right of indemnity against

Pasley for any sums paid pursuant to this judgment, and it is

further

ORDERED and ADJUDGED

that defendants shall pay any restoration costs, not

considered by the court in its memorandum of decision.

Pasley shall pay the full amount of such costs. Barlo

Equipment Corp. shall pay 25% of such costs.

The claims against Consolidated Litho Company, F&R

Display Fixtures, Jackson Steel Products, Inc., Trans World

Optics, Inc. and Ultra Spray are dismissed.

Commander Oil Corp. shall recover costs of the action.

Dated: Uniondale, NY

May 20, 1998 s/ Jacob Mishler

JACOB MISHLER,

U.S. District Judge

40a

APPENDIX D — MEMORANDUM OF DECISION AND

ORDER OF THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NEW YORK

DATED JUNE 10, 1997

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

CV 90-1243

COMMANDER OIL CORP.,

Plaintiff,

— against —

BARLO EQUIPMENT CORP., ROBERT PASLEY,

PASLEY SOLVENTS & CHEMICALS, INC.,

CONSOLIDATED LITHO COMPANY, F&R DISPLAY

FIXTURES, JACKSON STEEL PRODUCTS, INC.,

TRANS WORLD OPTICS, INC., and ULTRA SPRAY,

: Defendants.

Memorandum of Decision and Order

June 10, 1997

* * *

MISHLER; District Judge:

Pursuant to the Comprehensive Environmental

Response, Compensation and Liability Act of 1980

4la

Appendix D

(“CERCLA”), 42 U.S.C. § 9601 et. seq., the Resource

Conservation and Recovery Act (“RCRA”), 42 U.S.C.

§ 6901, et. seg., the Real Property Actions and Proceeding

Law of the State of New York (“RPAPL”), the Environmental

Conservation Law of the State of New York (“ECL”), and

New York State’s common law of nuisance, negligence,

trespass and abnormally dangerous activity, Plaintiff

Commander Oil Corporation (“Commander”) seeks recovery

of and contribution for its past and future costs resulting from

the release of hazardous wastes on a parcel of real property

owned by Commander and identified on the Nassau County

Land and Tax map as Lot 7B in Block D of Section 44, at

Commercial Avenue in Uniondale, Nassau County (the

“Site”) from defendants Barlo Equipment Corp. (“Barlo”),

Consolidated Litho Company (“Consolidated”), F&R

Display Fixtures (“F&R”), Jackson Steel Products, Inc.

(“Jackson Steel”), Pasely Solvents & Chemicals Inc.

(“Pasely”), Robert Pasely, the President of Pasely, Trans

World Optics (“Trans World”), and Ultra Spray (collectively

referred to as the “Defendants”).

I. The Motions

Presently before the Court is Commander’s motion for

partial summary judgment pursuant to Fed. R. Civ. P. 56, in

which it seeks an order from the Court:

a. imposing liability upon Barlo as an “owner

Or operator” pursuant to 42 U.S.C.

§9607(a)(2);

b. imposing liability upon both Pasely and

Robert Pasely, as “operators,” and

42a

Appendix D

“transporters” of hazardous materials pursuant

to 42 U.S.C. §§ 9607(a)(2) and 9607(a)(4),

respectively;

. imposing liability upon Consolidated, F&R,

Trans World, and Ultra Spray as “arrangers”

for the transport of hazardous substances,

pursuant to 42 U.S.C. § 9607(a)(3);

. holding each of the Defendants jointly and

severally liable for recovery of past and future

response costs and other damages incurred by

Commander in connection with the cleanup,

pursuant to 42 U.S.C. § 9607(a);

. holding each of the Defendants liable to

Commander for contribution for its past and

future response costs and other damages

incurred by Commander in connection with

the cleanup, and allocating said costs among

each Defendant pursuant to 42 U.S.C.

§ 9613(f);

holding each of the Defendants responsible for

all future response actions necessary to carry

out the remedies elected in the Record of

Decision and Amended Record of Decision

pursuant to RCRA, 42 U.S.C. § 6973(a); and

. imposing liability upon each of the Defendants

for violations of New York’s ECL §§ 27-0911

and 27-0913 and New York’s common laws

43a

Appendix D

of public nuisance, trespass, negligence, waste

and strict liability for conducting abnormally

dangerous activity.

Defendant Barlo cross-moves for an order granting

summary judgment, dismissing the claims against it, and

moves to amend its answer to assert the affirmative defense

of statute of limitations. Defendant Consolidated opposes

Commander’s motion for partial summary judgment, based

upon a lack of competent evidence. On May 29, 1997, the

Court heard oral argument on the various motions.

Il. Background

In 1963, Commander became the owner of the Site

through a merger with the owner of record at that time,

Lawrence J. Bennet, Inc. (“Bennet”), formerly known as

L.E.K. Valentine, Inc. Bennet and Commander were both in

the business of dealing in fuels and fuel products, including

oil and gasoline, and each conducted retail and wholesale

business operations from the Site. From about 1961 to at

least 1967, Commander operated the Site as a fuel oil depot.'

The Site is described as a 75 by 250 foot parcel which,

prior to dismantling in 1988, contained 12 above-ground

storage tanks; three 75,000 gallon vertical tanks, six 10,000

gallon horizontal tanks, two 15,000 gallon tanks and one

1. Title to the Site (and Lot 7A) was conveyed to L.E.K.

Valentine, Inc. on December 3, 1963. In 1970, L.E.K. Valentine,

Inc. changed its corporate name to Lawrence J. Bennet, Inc.

Commander merged with Lawrence J. Bennet, Inc. on January 3,

1979.

44a

Appendix D

5,000 gallon horizontal tank. (Compl. 4 25.) Commander is

also the owner of the adjacent property on Commercial

Avenue, Lot 7A, which contains office and warehouse space.

A. Barlo’s Interest in the Site

The following facts are not in dispute:

Barlo began leasing Lot 7A, the office and warehouse

space adjacent to the Site, on April 1, 1964 (the “Barlo

Lease”) from Bennet. The premises were to be used and

occupied by Barlo for the purpose of buying, selling,

manufacturing, jobbing and distributing petroleum-handling

equipment. Barlo continued to lease the office space from

Commander after Commander’s merger with Bennet, and in

1972 Commander and Barlo extended the Barlo Lease for

an additional five (5) years upon the same terms and

conditions. However, the 1972 Barlo Lease placed Barlo in

possession of both the office space and the Site, and provided

that Barlo would sublet the Site to Pasley, a chemical

distribution company, and previously Commander’s tenant

at the Site. (Tr. at 36.)? The Barlo Lease was maintained

until 1989.

Under the terms of the Barlo Lease, Barlo enjoyed the

rights and bore obligations of ownership over the entire Site,

other than “that portion of the subject premises which

contains three (3) oil storage tanks located at the southerly

portion of the property, and the pump house and loading

2. References to “Tr.” are to the transcript of oral argument

held on May 29, 1997. j

45a

Appendix D

platform adjacent thereto,” over which Commander retained

control. (Barlo Lease at 2.) The Barlo Lease obligated Barlo

to (1) pay charges for all utilities and services (Barlo Lease

{ 30); (2) maintain public liability insurance over the

premises (Barlo Lease { 31); (3) pay “any increases in real

estate taxes over and above the amounts paid by the landlord

during the calendar year 1972,” (Barlo Lease { 28), and (4)

make all repairs to the premises except structural repairs,

i.e., “all repairs to heating, plumbing and lighting fixtures

and equipment; cesspool maintenance repair and

replacement; snow removal; driveway; parking area and

pavement repairs, etc.” (Barlo Lease ¥ 3.)

With respect to Pasely, the Barlo Lease provided:

25th. Tenant is presently in possession of a

portion of the premises and as of the date of the

commencement of this lease, certifies that he has

possession of the entire premises. The landlord

and tenant acknowledges that at the present time -

there is another tenant occupying a portion of said

premises, to wit, PASLEY SOLVENTS &

CHEMICAL, INC., a Corporation occupying a

portion of said premises without an existing lease.

_ The tenant occupies the premises subject to the

tenancy mentioned herein, and the landlord grants

to the tenant the right to negotiate a sub-lease with

the aforementioned sub-tenant, or any other

sub-tenant to the sub-leasing provisions of this

instrument.

46a

Appendix D

B. Pasley’s Use of the Site

As indicated above, Pasely had been in possession of

the Site, as a tenant of Commander, beginning in 1969. (Tr.

at 36.) On February 1, 1973, Pasely became the sub-tenant

of Barlo, enabling Commander to receive one rent check from

Barlo for the entire lot, rather one from Barlo for the office

space and another from Pasely for the Site. (Tr. at 36-38.)

Barlo and Pasley executed a sublease of the tank farm at the

Site (the “Pasely Sublease”) “for the unexpired term of five

(5) years to commence the Ist day of February 1973 and to

end on the 30th day of September 1977.” The Pasley Sublease

authorized the use of the premises for “that business presently

conducted by the tenant on a portion of the same premises

leased hereunder.” ey

The Pasley Sublease incorporated provisions of the Barlo

Lease relating to the right of Pasley to assign or sublet the

premises, other than the portion of the premises used by

Commander which contained “three (3) oil storage tanks.”

It also provided that Pasley pay “that percentage of the tax

increase over the year 1972, that the square footage occupied

by him bears to the total square footage of the landlord’s

premises.” (Pasely Sublease at J 34.) The Pasely Sublease

created a landlord-tenant relationship between Barlo and

Pasely. Indeed, at his deposition, Robert Pasely indicated

that after he signed the Pasely Sublease, he looked to Barlo

as his landlord. (Robert Pasely Dep. at 69.) As landlord, Barlo

was obliged “to commence alterations necessary to provide

3. We note that Barlo claims that prior to the execution of the

Pasely Sublease, Pasley was using the Site “as a chemical

distribution facility.” (Barlo’s Mem. Opp. at 3-5.)

47a

Appendix D

the tenant with exclusive use and occupancy of the yard... .”

(Pasely Sublease 4 38.) Pasely, as a tenant, maintained “the

right to terminate the sub-lease if. . . the use of the demised

premises be deemed illegal by any act, regulation or law of

any governmental body. . . .” (Pasely Sublease { 40.)

From at least F ebruary 1, 1973, the date of execution of

the Pasley Sublease, to June 1982, Pasely used the Site as a

chemical distribution center. Pasely would purchase bulk

virgin solvents from major corporations such as Exxon and

Shell, and would transfer them into its bulk tanks located at

the Site, then repackage the solvents into 55-gallon drums

for shipment to its customers in New York and New Jersey.

The Site was also used to Store, transfer and dispose of

that portion of Pasely’s customer’s solvents which were

economically feasible to reclaim. The customer would place

the reclaimable solvents back in the 55-gallon drums, and

then call Pasely to pick “up the drums for transport to the

Site. The drums were stored at the Site in a berm concrete

storage area until shipment to a reclaimer for revitalization

and potential resale. The berm concrete Storage area was built

by Pasely with the permission of Barlo. The drums generally

remained on the Site for three to four weeks. (See Robert

Pasely’s Dep. at 72.) While stored at the Site, either for

reclamation or final disposal, hazardous substances were

released in the soil and ground water at the Site.

C. Notice of Contamination at the Site

On June 8, 1981, an investigation by the Nassau County

Department of Health (“NCDOH”) revealed that the soils at

48a

Appendix D

the Site were contaminated with hazardous materials (See

Administrative Order, dated April 18, 1988, 4 16, annexed

at Ex. 6 to Commander’s Rule 3(g) Stmt., the “Administrative

Order.”’) By letter dated June 29, 1981, the NCDOH advised

Pasley that the Site was inspected on June 8, 1981, and that

soil samples from the areas beneath the storage tanks

contained high levels of halogenated and non-halogenated

solvents, making it appear “that the soil has been

contaminated with chemicals your facility processes.” Pasley

was ordered to commence a cleanup action at the Site

(Administrative Order J 17.) Pasley discontinued its chemical

distribution operation from the Site in May 1982.

(Administrative Order 4 20.)

NCDOH referred the matter to New York State

Department of Environmental Conservation (“DEC”). Pasley

was charged with violations of the Nassau County Fire

Prevention Ordinances in the Nassau County District Court.

On April 14, 1982, Pasley agreed to drain all tanks, remove

all product storage from the premises and vacate the

premises. Pasley vacated the premises in June 1982.

On August 19, 1988, an Administrative Order relating

to the Site was issued by the United States Environmental

Protection Agency (the “EPA”) on consent of Commander,

pursuant to CERCLA § 104(a) and (b) and § 122(d)(3). It

referred to the Site as the “Pasely Solvent and Chemicals

Site.” As “owner and/or operator” of the Site at the time of

the Administrative Order “and/or at the time of the disposal

of the hazardous substances,” Commander was ordered to

undertake a Remedial Investigation and Feasibility Study

with respect to the Site.” (Administrative Order { 33.)

49a

Appendix D

On November 2, 1995, the United States, on behalf of

the Administrator of the EPA, filed a complaint against

Commander and certain other defendants pursuant to

CERCLA §§ 106(a) and 107(a), seeking reimbursement for

costs incurred by the EPA and Department of Justice for

response actions at the Site and seeking to compel

performance of studies and future response actions by

Commander at the Site. On January 26, 1996, a consent

decree (the “Consent Decree”) was entered into among

Commander and certain settling defendants, pursuant to

which “Commander agreed to design and implement

response actions at the site and to reimburse the United States

for past and future response costs incurred in connection with

the Site.” (Consent Decree { 20.) Commander received

contributions from the settling defendants in the amount of

$1,849,127.91 as part of the cost of the remedial work

undertaken by Commander in accordance with the Consent

Decree. It presently seeks contribution from the non-settling

defendants named as Defendants herein.

III]. Commander's CERCLA Claims

Commander moves for partial summary judgment on the

issue of the Defendants’ CERCLA liability. Fed. R. Civ. P.

56(c) provides in pertinent part:

The judgment sought shall be rendered forthwith

if the pleadings, depositions, answers to

interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the

moving party is entitled to judgment as a matter

50a

Appendix D

of law. A summary judgment, interlocutory in

character, may be rendered on the issue of liability

alone although there is a genuine issue as to the

amount of damages.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106

S. Ct. 2505, 2510 (1986). See Hayes v. New York City Dep't

of Corrections, 84 F.3d 614, 619 (2d Cir. 1996).

The moving party has the “burden of showing the

absence of a genuine issue as to any material fact, and for

these purposes the material it lodged must be viewed in the

| light most favorable to the opposing party.” Adickes v. S.H.

| Kress & Co., 398 U.S. 144, 157, 90S. Ct. 1598, 1608 (1970).

| See Matsushita Electric Industrial Corp. v. Zenith Radio

Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986). Once

the moving party satisfies “the initial burden of

demonstrating that no genuine issue of facts exists .. . the

non-moving party must set forth specific facts demonstrating

that there is a genuine issue for trial.” B.F. Goodrich Co. v.

Murtha, 754 F. Supp. 960, 962 (D. Conn. 1991) (citing

Anderson v. Liberty Lobby, Inc., 477 U.S. at 250, 106 S. Ct.

at 2511), aff'd, 958 F.2d 1192 (2d Cir. 1992). In meeting its

burden, the non-moving party may not rest upon speculation,

| conjecture or conclusory allegations. See Goenaga v. March

of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1996).

- If, after considering the record, a:jury could draw a reasonable

inference in favor of the non-moving party on a material

fact, summary judgment must be denied. Brady v. Town of

Colchester, 863 F.2d 205, 211 (2d Cir. 1988).

Commander’s first set of claims for remedial costs and

other damages are based on CERCLA, 42 U.S.C. § 9607, -

Sla

Appendix D

In order to make out a prima facie cause of action under

CERCLA, Commander must establish the following:*

4. Section 9607(a) states in pertinent part:

(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any

Ous substance owned or operated any facility at

which such hazardous substances were disposed of,

of hazardous substances owned or possessed by such

person, by any other Party or entity, at any facility or

incineration vessel owned or Operated by another party

or entity and containing such hazardous substances, and

(4) any person who accepts or accepted any hazardous

substances for transport to disposal or treatment

facilities, incineration vessels or Sites selected by such

person, from which there is a release, or a threatened

release which causes the incurrence of nse costs,

of a hazardous substance, shall be liable for —

(Cont'd)

52a

Appendix D

(1) defendant fits one of the four classes of

responsible parties outlined in § 9607(a); (2) the

site is a facility;> (3) there is a release or threatened

release of hazardous substances at the facility;

(4) the plaintiff has incurred costs responding to

the release or threatened release; and (5) the costs

and response actions conform to the National

Contingency Plan set up under the Act and

administered by the EPA....

(Cont'd)

(A) all costs of removal or remedial action

incurred by the United States Government

or a State or an Indian tribe not inconsistent

with the national contingency plan;

(B) any other necessary costs of response

incurred by any other person consistent with

the national contingency plan;

loss of natural resources, including the

reasonable costs of assessing such injury,

destruction, or loss resulting from such a

release; and

(D) the costs of any health assessment or

health effects study carried out ufider section

104(i) [42 USCS § 9604(i)]}.

5. The term “facility” is defined as “any site or area where a

hazardous substance has been deposited, stored, disposed of, or

placed, or otherwise come to be located....” 42 U.S.C.

§ 9601(9)(B).

53a

Appendix D

Prisco v. State of New York, 902 F.Supp. 374, 381-82

(S.D.N.Y. 1995) (citing B.F. Goodrich v. Murtha, 958 F.2d

1192, 1198 (2d Cir. 1992)). Absent a showing by a

preponderance of the evidence that one of the affirmative

defenses contained in CERCLA’s § 9607(b) has been

Satisfied, defendant’s liability for response costs is strict.

See U.S. v. A & N Cleaners and Launderers, 854 F.Supp.

229, 237 (S.D.N.Y. 1994); Prisco, 902 F.Supp. at 382.

Alternatively, if defendants are able to establish that they

are not responsible parties as defined by § 9607(a), then they

are entitled to summary judgment on the liability issue.

Prisco, 902 F.Supp. at 382.

The undisputed facts in the record establish the last four

elements of Commander’s prima facie case. The decisive

issue before the Court is whether Commander has established

that the respective Defendants fall within any of CERCLA’s

four categories of responsible parties.

A. Liability of Barlo as an “Owner or Operator”

Commander seeks to establish Barlo’s liability as an

Owner or operator of the Site pursuant to 42 U.S.C.

§ 9607(a)(2). Barlo argues that Commander does not make

out a prima facie case since Barlo did not own the property,

or exercise the requisite degree of control over the operations

of the Site. The threshold question is therefore whether Barlo

was an Owner or cperator of the Site by virtue of its role as a

lessee and sublessor.

54a

Appendix D

Section 9601(20) provides that an “owner or operator”

is “any person owning or operating such facility.”° The

redundant nature of this definition strongly implies “that the

statutory terms have their ordinary meanings, rather than their

technical meanings.” Edward Hines Lumber Co. v. Vulcan

Materials Co., 861 F.2d 155, 156 (7th Cir. 1988). Courts

grappling with the precise boundaries of this definition have

favored a liberal reading, in part to effectuate the broad

remedial purpose of the statute. See Stilloe v. Almy Bros.,

Inc., 759 F.Supp. 95 (N.D.N.Y. 1991). See e.g., State of New

York v. Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir.

1985) (stockholder who manages corporation personally

liable as operator).

Indeed, rather than limiting liability to record owners of

the property in question, courts have inquired as to a

defendant’s degree of authority and control over the facility.

Generally, courts have been willing to impose CERCLA

liability upon a non-owner where the defendant either

(a) had the “authority to control the cause of the

contamination a the time the hazardous substances were

released into the environment,” even if the control was never

exercised, Kaiser Aluminum v. Catellus Dev., 976 F.2d 1338

(9th Cir. 1992) (internal citations omitted), or (b) actually

exercised substantial control over the corporation responsible

for the contamination. See City of New York v. Exxon, 112

B.R. 540, 552-53 (S.D.N.Y. 1990) aff'd in part, 932 F.2d

1020 (2d Cir. 1991).

6. We note the comment of the Ninth Circuit Court of Appeals

in Kaiser Aluminum v. Catellus Dev., 976 F.2d 1338 (9th Cir. 1992),

“The circularity of this definition renders it useless.”

55a

Appendix D

While the Second Circuit has not yet ruled on whether

to adopt the “authority to control” or the “actual control”

test, courts in this circuit and others specifically addressing

the landlord-tenant issue have held that a lessee who has

“control over and responsibility for the use of the property”’

is the owner of the property and thus a responsible party for

purposes of CERCLA. U.S. v. A. & N. Cleaners and

Launderers, Inc., 788 F. Supp. 1317, 1332-33 (S.D.N.Y.

1992) (internal citations omitted). See Nurad v. William E.

Hooper & Sons, Co., 966 F.2d 837 (4th Cir. 1992) (tenants

who have authority to control the facility are “operators”);

_United States v. South Caroling Recycling and Disposal, Inc.,

653 F. Supp. 984, 1003 (D.S.C. 1985)), aff'd sub nom, United

States v. Monsanto, 858 F.2d 160 (4th Cir. 1988) (finding

that a sublessor of a facility may be liable as its owner/

operator).

In the present case, the undisputed facts establish that

Barlo held itself out to be the landlord of the Site, had control

over the use of the land made subject of the lease, and enjoyed

the benefits of ownership and control of the Site for the full

term of Pasley’s subtenancy. Pasely looked to Barlo as its

landlord,’ at one point requesting permission from Barlo to

build the berm concrete storage area. Aside from two

restrictions contained in the Barlo Lease, one in which Barlo

agreed not to rent any portion of the premises to anyone

having “any connection with the fuel, fuel oil or oil business,”

and a second which preserved Commander’s right to a certain

portion of the Site containing three oil storage tanks, Barlo’s

7. See Robert Pasley Dep. at 69, “Q: did you look to Barlo as

your landlord? A: Yes.” ‘

56a

Appendix D

control over the Site was complete. Neither of these

restrictions mitigated Barlo’s authority and control over the

Site as a lessee/sublessor. Commander has therefore made

out a prima facie case of CERCLA liability, and Barlo is

liable for costs incurred as a result of the contamination of

the Site.

B. Liability of Pasley as Operator and Transporter*

Commander also claims that Pasely is liable as both an

operator and a transporter’ of hazardous substances pursuant

to 42 U.S.C. § 9607(a)(2) and § 9607(a)(4), respectively. As

previously stated, CERCLA imposes operator liability on

those individuals who participate in the operation of the

facility, exercise control over, or are immediately responsible

for the operation of a facility. See Kaiser, 976 F.2d at 1341.

The Court finds that Pasely operated and exercised control

cver the Site from 1973 until 1982, and that its actions

rendered it an operator as provided by CERCLA.

The Court finds that Pasely is also liable to Commander

@ a transporter of hazardous waste. The Second Circuit

recently discussed CERCLA transporter liability and adopted

én “active participation standard” of liability. Under this

Standard, a transporter must either help the generator choose

——_

8. The Court notes that neither Pasely nor Robert Pasely has

Submitted papers in opposition to Commander’s Motion for

Summary Judgment.

9. The terms “transport” or “transportation” are defined by

CERCLA § 9601(26) as “the movement of a hazardous substance

ty any mode... .”

57a

Appendix D

a disposal facility by recommendation, or play an active role

in choosing the disposal facility, in order for CERCLA

liability to attach. B.F. Goodrich v. Betkoski, 99 F.3d 505,

521 (2d Cir. 1996).

It is undisputed that Pasely used the Site as the disposal

facility chosen for the hazardous waste. Pasely used its own

trucks to pick up the waste from its customers and stored the

waste at the Site prior to transfer to a reclamation or final

disposal facility. Pasely was therefore more than an “active

participant” in the site selection process, it actually made

the cl.oice to transport the waste to the Site for storage. Pasely

is therefore also liable to Commander as a transporter of

hazardous waste.

C. Liability of Robert Pasley as Operator and Ti ransporter

Commander asserts that Robert Pasely, the President and

holder of 85% of the stock of Pasley,' is personally liable

as an operator and transporter under CERCLA. Commander

predicates Robert Pasely’s personal liability upon his

extensive involvement in Pasely’s daily operations, including

his immediate supervision over the manner in which

hazardous waste was collected and stored at the Site for

reclamation or disposal.

While CERCLA does not explicitly provide for personal

liability of stockholders and corporate officers, courts have

interpreted the statute as providing for such liability,

10. The other 15% is held by Margaret Pasley, Robert Pasley’s

wife. Margaret Pasley is deceased.

58a

Appendix D

concluding that “in certain circumstances an officer or

shareholder of the corporate owner of a facility can be liable

as an ‘operator’ under CERCLA even if the traditional

requirements for piercing the corporate veil are not met.”

Idylwoods Associates v. Mader Capital, 915 F.Supp. 1290

(W.D.N.Y. 1996), reconsideration in part, 956 F.Supp. 410

(1996) (citations omitted).

The Second Circuit has squarely held that an “owning

stockholder who manages the corporation . . . is liable under

CERCLA as an owner or operator.” State of New York v.

Shore Realty Corp., 759 F.2d at 1052 (imposing liability on

sole shareholder and officer of corporation who was “in

charge” of its management). See City of New York v. Exxon,

112 B.R. 540 (S.D.N.Y. 1991), modified, 935 F.2d 1020 (2d

Cir. 1991) (parent corporation held liable as generator or

transporter of hazardous waste based upon the activities of

it’s wholly-owned subsidiary); Donahey v. Bogle, 987 F.2d

1250, 1254 (6th Cir. 1992) (imposing CERCLA liability on

sole shareholder of corporation because he had “authority to

prevent the contamination of the property by his

corporation”); U.S. v. Kayser-Roth Corp., 910 F.2d 24, 27

(1st Cir. 1990) (parent corporation held liable for acts of

subsidiary where it exercised “practical total influence” over

its operations).

Robert Pasely was a majority stockholder, and the sole

officer of Pasely. The Court finds that he was responsible

for and exercised significant control over the daily operation

and management of Pasely. (See Robert Pasley Dep. at 11.)

The record also indicates that Pasely’s thirteen employees

were under his supervision and control. By virtue of his

59a

Appendix D

control over the daily operations of Pasely, Robert Pasely is

liable as an operator and transporter under CERCLA.

D. Arranger Liability of the Remaining Defendants"

Commander maintains that Pasely’s customers,

Consolidated, F&R, Jackson Steel, Trans World and Ultra

Spray (the “Customer defendants”), are liable as generators

of hazardous waste who arranged for its disposal, pursuant

to 42 U.S.C. § 9607(a)(3). In its Complaint, Commander

alleges that the Customer defendants “contracted and agreed

or otherwise arranged with a transporter for transport,

disposal or treatment of hazardous substances owned or

possessed by that defendant to a facility which contained

such hazardous substances.” (Compl. 4 57.) Commander

alleges that more than 10,000 gallons of waste was

transported to the Site by the Customer defendants.

(Commander’s Mem. Supp. at 13-14; see Exs. 19-23,

annexed to Commander’s Rule 3(g) Stmt.)

Consolidated argues that Commander has failed to meet

its burden of production on summary judgment by failing to

submit competent evidence based upon personal knowledge

to establish Consolidated activities in connection with the

Site. It also disputes the factual accuracy of the information

contained in paragraphs 63 to 67 of Commander’s Rule 3(g)

Statement, relating to the degree of Consolidated’s

involvement in the transportation of hazardous waste.

11. Only Consolidated has opposed Commander’s Motion for

Summary Judgment; F&R, Ultra Spray, Jackson Steel and Trans

World have not opposed Commander’s Motion for Summary Judgment.

60a

Appendix D

While CERCLA imposes liability on muse persons “who

arrange for” the disposal or treatment of hazardous

substances, it does not define this term. See 42 U.S.C.

§ 9607(a)(3). In attempting to ascertain the limits of arranger

liability, courts have observed that CERCLA was designed

to cast a wide, but not aimless net, and have therefore

required intentional action on the part of the defendant in

order to impose arranger liability. Town of Windsor v. Tesa

Tuck, Inc., 935 F.Supp. 305, 308 (S.D.N.Y. 1996) (internal

citations omitted). See United States v. Cetlo-Foil Products,

Inc., 848 F. Supp. 1352, 1356 (W.D. Mich. 1994) (not all

transactions which involve hazardous substances are

arrangements for disposal).

The Second Circuit has refused to impose arranger

liability on “any entity that merely had the opportunity or

ability to control a third party’s waste disposal practices. . . .”

AAMCO, 962 F.2d at 285-86. The court reasoned that

there must be some nexus between the potentially

responsible party and the disposal of the hazardous

substance. . . . In other words, Congress employed

traditional notions of duty and obligation in

deciding which entities would be liable under

CERCLA as arrangers for thé disposal of

hazardous substances. Accordingly, this court

concludes that it is the obligation to exercise

control over hazardous waste disposal and not the

mere ability or opportunity to control the disposal

of hazardous substances that makes an entity an

arranger under CERCLA’s liability provision.

AAMCO, 962 F.2d at 285.

6la

Appendix D

In reaching this conclusion, the Second Circuit observed

that “[a]lmost all of the courts that have held defendants

liable as arrangers have found that the defendant had some

actual involvement in the decision to dispose of waste.”

AAMCO, 962 F.2d at 285. See e.g., U.S. v. Iron Mountain

Mines, Inc., 881 F.Supp. 1432, 1451 (E.D.Cal. 1995)

(arranger liability will not be imposed “on a party who never

owned or possessed and never had any authority to control

or duty to dispose of the hazardous substance at issue”). In

short then, “liability for releases under § 9607(a)(3) . . . ends

with that party who both owned the waste and made the

crucial decision how it would be disposed of or treated, and

by whom.” United States v. A&F Materials Co., Inc., 582

F. Supp. 842, 845 (S.D. Ill. 1984).

The undisputed facts before the Court do not give rise

to arranger liability as a matter of law with respect to the

Customer defendants. The procedure for picking up the tanks

lends no support to the conclusion that the Customer

defendants had “actual involvement” in the waste disposal

decision. The waste transport procedure is described in the

Complaint as follows:

Pasley picked up hazardous substances from its

customers, transplanted them to the site, stored

them on the site and eventually delivered or

caused them to be delivered to a final solid waste

management facility.

(Compl. § 37.)

Pasley’s application for approval to operate a solid waste

management facility, dated September 24, 1980, recites:

62a

Appendix D

We deliver in our own trucks. We sell to about .

300 customers in the New York Metropolitan

area.

Waste drums are trucked in from customers and

stored in the waste storage area.

A district court addressing similar facts also determined

that arranger liability was inappropriate. In Cello-Foil

Products, 848 F. Supp. at 1358, defendants, customers of

plaintiffs, returned drums containing hazardous waste to the

supplier for the purpose of reclaiming their deposits. The

court granted summary judgment for the customer

defendants, holding that “defendants are not liable under

section 107(a)(3) absent a showing that they intended to

dispose of the residual amounts of the hazardous substances

remaining in their returned drums.” Cello-Foil Products, 848

F.Supp at 1358.

_ Similarly, the record before the Court is barren of any

showing that the Customer defendants took affirmative action

in disposing of hazardous waste, or that the Customer

defendants were under an “obligation to exercise control over

hazardous waste disposal,” as required to impose liability

under the statute. Commander’s motion for summary

judgment against the Customer defendants is denied, and its

claims against the Customer defendants are dismissed.

The Court is cognizant that the Customer defendants

have not opposed Commander’s Motion for Summary

Judgment, due to their apparent financial insolvency.

However, it is well within the Court’s powers to grant

—_

63a

Appendix D

summary judgment in favor of a nonmoving party, in the

absence of a cross-motion, where the undisputed facts show

that such party is entitled to judgment as a matter of law, the

facts before the court are fully developed, and the moving

party suffers no procedural prejudice. See Coach y.

Leatherware Co. v. Ann Taylor, Inc., 933 F.2d 162, 167 (2d

Cir. 1991); Lowenschuss y. Kane, 520 F.2d 255 (2d Cir.

1975); D'Agostino v. New York State Liquor Authority, 913

F.Supp. 757, 769 (W.D.N.Y. 1996): Montgomery v. Scott,

802 F.Supp. 930, 935 (W.D.N.Y. 1992).

IV. Commander's RCRA Claims:

Commander also seeks monetary, injunctive and

declaratory relief pursuant to RCRA’s citizens suit provision,

42 U.S.C. § 6972(a)(1)(B), for all future response actions

necessary to carry out the Record of Decision and Amended

Record of Decision relating to the Site.

Barlo argues that Commander’s RCRA claim must be

dismissed because RCRA forbids a private plaintiff from

seeking monetary damages, and that in any Case, it is not

liable as a responsible party under RCRA because it is not

an “owner or operator” of the Site. It also argues that

Commander’s RCRA citizen Suit is barred as a matter of

law because of the Consent Decree it entered into pursuant

to CERCLA §§ 106 and 107.

A. The Prima Facie Case

RCRA’s citizen suit provision, 42 U.S.C. § 6972(a)(1)(B),

provides that a plaintiff may bring a civil action

64a

Appendix D

against any person . . . and including any past or

present generator, past or present transporter, past

or present owner or operator of a treatment,

storage or disposal facility, who has contributed

to the past or present handling, storage, treatment,

transportation, or disposal of any solid or

hazardous waste which may present an imminent

and substantial endangerment to health or the

environment.

Under this section, private plaintiffs must demonstrate

(1) that the conditions at the site may present an

imminent and substantial endangerment to health

or the environment, (2) that the endangerment

stems from the past or present handling, treatment

or disposal of solid or hazardous waste, and

(3) that the defendant contributed to such

handling, treatment or disposal of the solid or

hazardous waste.

Acme Printing Ink Co. v. Menard, Inc., 870 F.Supp. 1465,

1478 (E.D. Wis. 1994) (citations omitted).

Like CERCLA, RCRA sets a strict liability standard;

once a prima facie case is established, liability will be

imposed “without fault or negligence.” U.S. v. Northeastern

Pharmaceutical & Chem. Co., 810 F.2d 726, 740 (8th Cir.

1986). As recently described by the Supreme Court,

RCRA is a comprehensive environmental statute

that governs the treatment, storage and disposal

rere

65a

Appendix D

of hazardous waste. See Chicago vy.

Environmental Defense Fund, 511 U.S.

114 S. Ct. 1588, 1590-91 (1994). Unlike

[CERCLA], RCRA is not principally designed to

effectuate the cleanup of toxic waste sites or to

compensate those who have attended to the

remediation of environmental hazards. Ce.

General Electric Co. v. Litton Industrial

Automation Systems, Inc., 920 F.2d 1415, 1422

(8th Cir. 1990).... RCRA’s primary purpose,

rather, is to reduce the generation of hazardous

waste and to ensure the proper treatment, storage

and disposal of that waste which is nonetheless

generated, “so as to minimize the present and

future threat to human health and the

environment.” 42 U.S.C. § 6902(b).

Meghrig v. KFC Western, Inc., i a 3 ASE CD

1251, 1253 (1996).

RCRA’s citizen suit remedies are circumscribed; a

district court is authorized only to “restrain any person who

has contributed to or who is contributing to the past or present

handling, storage, treatment, transportation, or disposal of

any solid or hazardous waste . . . , [or] to order such person

to take such other action as may be necessary, or both.”

42 U.S.C. § 6972(a).

The Supreme Court has held that the plain language of

this provision limits citizen suits to prospective relief, in the

form of either a mandatory injunction, or a prohibitory

injunction, reasoning that “RCRA’s citizen suit provision

66a

Appendix D

was not intended to provide a remedy for past cleanup costs.”

Meghrig, _U.S. at __, 116 S. Ct. at 1255. This conclusion

is consistent with RCRA’s goal of preventing the creation

of hazardous waste in the first place rather than promoting

the cleanup of existing sites, and with the legislative history

of RCRA which “indicates an intent to strike a balance

between encouraging citizen enforcement of environmental

regulations and avoiding burdening the federal courts with

excessive numbers of citizen suits.” Furrer v. Brown, 62 F.3d

1092, 1098 (8th Cir. 1995) (citations omitted).

Commander’s RCRA Complaint seeks both monetary

and equitable relief with respect to past and future clean-up

based upon Defendants’ contribution “to the past handling,

storage, treatment, transportation and disposal of hazardous

wastes which may have presented and may still present an

imminent and substantial endangerment to health or the

environment.” (Compl. 4 65.) Only Commander’s claims for

injunctive or declaratory relief resting upon “allegation(s]

that the contaminated site presently poses an ‘imminent and

substantial endangerment to health or the environment,’ ”

may go forward. Commander’s RCRA claims predicated

upon recovery of past response costs, regardless of whether

such costs are denominated “damages” or “equitable

restitution,” must be dismissed. See Meghrig, _U.S.at_,

116 S. Ct. at 1256.

B. RCRA’s Prohibition Provisions

The Court need not address whether Commander has

made out its prima facie case for equitable relief from future

harm under RCRA, because, as pointed out by Barlo,

67a

Appendix D

Commander is barred from bringing a private citizen action

as a matter of law. (Barlo Mem. Opp. at 42.)

RCRA’s section 9672(b)(2)(B) provides that

No action may be commenced under subsection

(a)(1)(B) of this section if the Administrator, in

order to restrain or abate acts or conditions which

may have contributed to the activities which may

present the alleged endangerment,

(iv) has obtained a court order

(including a consent decree) or issued

an administration order under section

106 of [CERCLA] or section 6973 of

this title pursuant to which a responsible

party is diligently conducting a removal

action, Remedial Investigation and

Feasibility Study or proceeding with a

remedial action. :

In the case of an administrative order referred to

in clause (iv), actions under (a)(1)(B) are

prohibited for the duration of the administrative

order referred to in clause (iv).

See generally, U.S. v. State of Colo., 990 F.2d 1565 (10th

Cir. 1993); O'Leary v. Moyer’s Landfill, Inc., 677 F Supp.

807 (E.D.Pa. 1988); McGreagor vy. Industrial Excess

Landfill, Inc., 709 F Supp. 1401 (N.D. Ohio 1987).

68a

Appendix D

In short, RCRA’s restriction on citizen suits applies

where “the EPA Administrator has (1) obtained a court order

(including a consent decree) or (2) issues an administrative

order under CERCLA § 106 or RCRA § 7003.” Acme

Printing, 870 F.Supp at 1507. :

The Administrative Order dated August 18, 1988

between the EPA and Commander was executed under the

authority of CERCLA §§ 104(a) and (b) and 122(d)(3); it is

therefore not properly the subject of §6972(b)(2)(B)(iv)’s

prohibition. See Acme Printing, 870 F.Supp. at 1507.

However, on January 26, 1996, pursuant to CERCLA’s

§§ 106 and 107, Commander and the certain settling

defendants entered into a Consent Decree, whereby the

parties agreed to design and implement response actions at

the Site and to reimburse the United States for past and future

response costs incurred in connection with the Site. (See

Consent Decree, annexed at Ex. 13 to Commander’s Rule

3(g) Stmt.)

The Consent Decree is plainly the subject of RCRA’s

prohibition against citizen suits. At oral argument, counsel

for Commander indicated that the remedy set forth in the

Record of Decision relating to the Consent Decree was in

the design stage, and that it would progress to the

construction stage next year. (Tr. at 25.) Commander’s

RCRA action is therefore barred at present and for the

duration of the remedy provided for in the Consent Decree

and Record of Decision.

eereereeemneneeeenrnietaeeemeriieiianiiainiiiieiniilid

69a

Appendix D

V. Commander's New York ECL Claims

Commander asserts that the Defendants are liable for

violations of Article 27, Title 9 of New York’s ECL,

§§ 27-0911 and 27-0913, New York’s federally authorized

program under RCRA to regulate the treatment, storage and

disposal of solid and hazardous waste. Barlo claims that

Commander’s ECL claims must be dismissed because the

ECL does not provide for citizen suits related to violations

of Article 27. (Barlo’s Mem. Opp. at 43.) Commander

acknowledges that the ECL only authorizes the Attorney

General and Department of Environmental Conservation to

enforce violations of Article 27, but urges the Court to imply

a private right of action based upon legislative intent.

(Commander’s Reply Mem. Opp. at 16.)

The Court finds no support for an implied right of action

in the legislative history or elsewhere. Indeed, the limited

amount of authority on the issue of an implied private right

of action under ECL’s Article 27 supports Barlo’s position

that such a right was not intended by the legislature. The

Appellate Division, Fourth Department has held that because

the ECL “specifically authorizes the Attorney General to

enforce ‘any rule or regulation promulgated pursuant’ to ECL

article 27, (ECL 71-2727(2)) . . . the statute does not confer

a private cause of action.” Town of Wilson v. Town of

Newfane, 581 N.Y.S.2d 962, 963, 181 A.D.2d 1045, 1046

(4th Dep’t 1992).

Commander’s ECL claims are therefore dismissed.

70a

Appendix D

VI. Commander’s Common Law Environmental Claims

Commander asserts several tort-based common law

claims against the Defendants, including negligence,

trespass, waste, maintenance of a private and public nuisance

under common law and RPAPL § 841, and strict liability

for conducting abnormally dangerous activity. Barlo urges

the Court to decline to exercise pendent jurisdiction over

Commander’s state claims. In the alternative, Barlo requests

leave from the Court to amend its answer to assert the

affirmative defense of statute of limitations, so that it may

argue that these claims are time barred.

A. Pendent Jurisdiction

The doctrine of pendent jurisdiction permits a federal

district court to retain jurisdiction over state law claims

whenever the state and federal claims “clearly derive from a

common nucleus of operative fact” and ... [the plaintiff]

would ordinarily be expected to try them in one judicial

proceeding.” Shore Realty, 759 F.2d at 1050 (2d Cir. 1985)

(citations omitted). The question of whether to exercise

pendent jurisdiction is within the discretion of the district

court and should be guided by considerations of “judicial

economy, convenience, fairness and comity.” Buti v.

Impressa Perosa, 935 F.Supp. 458, 474-75 (S.D.N.Y. 1996)

(citations omitted). Accord, Block v. First Blood Associates,

988 F.2d 344, 351 (2d Cir. 1993).

An examination of these factors supports the Court’s

exercise of pendent jurisdiction in the present case. Interests

of convenience and judicial economy clearly weigh in favor

Tla

Appendix D

of trying the state claims together with Commander’s federal

claims; separate trials would require virtual duplication of

documentary evidence and witness testimony. Moreover, the

state law claims do not dominate Commander’s suit, nor

would a joint trial result in confusion. The Court will

therefore exercise pendent jurisdiction to decide whether

Commander’s state common law claims may go forward. !?

B. Leave to Amend and Statute of Limitations

Pursuant to Federal Rule of Civil Procedure 15(a), Barlo

moves to amend its pleadings to assert the affirmative defense

of statute of limitations. Rule 8(c) of the Federal Rules of

Civil Procedure provides, in pertinent part, that “[i]n pleading

to a preceding pleading, a rarty shall set forth affirmatively

- - . Statute of limitations . . . and any other matter constituting

an avoidance or affirmative defense.” Fed.R.Civ.Pro. 8(c).

See Winmar Co. v. Teachers Ins. & Annuity Ass ‘n, 870

F.Supp. 524, 533 (S.D.N.Y. 1994). The failure to raise a

Statute of limitations defense in an answer operates as a

waiver of the defense, unless the party is able to take

advantage of the exception provided by Federal Rule of Civil

Procedure 15(a) which “freely” permits amendment “when

justice so requires.” Fed.R.Civ.Pro 15(a). See Winmar, 870

F.Supp. at 533.

The rule in this and other circuits is that mere delay,

absent bad faith or undue prejudice, will not provide a basis

12. The Court’s exercise of pendent jurisdiction is essentially

for purposes of addressing Barlo’s statute of limitations defense.

As discussed infra, Commander’s common law claims are barred

as untimely.

ii Mediates

72a

Appendix D

for denial of leave to amend. See Block, 988 F.2d at 350;

Pisello v. Town of Brookhaven, 933 F.Supp. 202, 219

(E.D.N.Y. 1996). At the same time, the Court is cognizant

that “the longer the period of unexplained delay, the less

will be required of the non-moving party in terms of a

showing of prejudice.” Town of New Windsor v. Tesa Truck,

Inc., 919 F.Supp. 662, 675 (S.D.N.Y. 1996).

In determining whether a party has suffered prejudice,

the main factors to be considered are “whether the assertion

of the new claim would (i) require the opponent to expend

significant additional resources to conduct discovery and

prepare for trial; (ii) significantly delay the resolution of the

dispute; or (iii) prevent the plaintiff from bringing a timely

action in another jurisdiction.” Block, 988 F.2d at 350.

In the present case, Barlo’s answer was filed on August

14, 1990. Barlo’s previous attorney failed to assert the statute

of limitations defense. Barlo’s present counsel was retained

on March 13, 1993, and failed to assert the limitations bar

for almost four years. While this time period is significant,

Barlo correctly points out that the matter has been prosecuted

and defended all along as an environmental cleanup cost and

recovery action, with discovery directed toward CERCLA

issues. At oral argument, Commander was not able to

establish prejudice of any kind; nor did counsel for

Commander allege any bad faith on the part of Barlo. (Tr. at

52-54; 62-63.) Barlo’s motion to amend its answer to assert

the defense of statute of limitations is therefore granted and

its pleading is deemed amended.

73a

Appendix D

C. The Statute of Limitations Defense

Barlo argues that Commander’s common law claims for

negligence, trespass, nuisance, waste, and strict liability are

governed by New York’s CPLR § 214-c(2). This section

provides a three year limitations period for actions for

property damage caused through contamination by toxic

substances. As set forth by the New York Court of Appeals

in Jensen v. General Electric Co., 82 N.Y.2d 77, 623 N.E.2d

547, 603 N.Y.S.2d 420 (1993), the limitations period begins

to accrue from the date of discovery of the toxic harm.

Barlo contends that under Jensen, Commander’s claims

for both monetary and equitable relief are time barred. This

reading of Jensen is far too expansive. Commander correctly

points out that Jensen’s date of discovery rule applies only

to actions to recover damages and not “to the availability of

such tort theories to a party seeking injunctive or equitable

relief” based upon continuing trespass and nuisance.

(Commander’s Mem. Opp. at 25.) Commander therefore

argues that its equitable claims are timely under Jensen.

In Jensen, the Court of Appeals wrote that the Legislature

“intended no continuing wrong exception to its new

comprehensive across the board rules.” It continued that

“[s]ince by its terms the discovery rule of CPLR § 214-c(2)

applies only to actions for damages and not to injunctive

relief, the common-law accrual method is applicable.

Therefore, equitable injunctive relief may be available and

should be scrutinized under the usual array of considerations

for such matters.” 82 N.Y.2d at 90-91, 623 N.E.2d at 553,

603 N.Y.S.2d at 426.

74a

Appendix D

Under the Jensen date of discovery rule, Commander’s

claims for compensatory damages are dismissed as time

barred. The record establishes that Commander was on notice

of the contamination at the Site at least as early as July 1973,

when Commander received notice from the Nassau County

Fire Marshall alleging that there had been chemical spills at

the Site, and at the latest as of \iarch 10, 1983, when the

DEC filed an administrative complaint against Commander

relating to the Site. Thus, the limitations period expired, at

the latest date, on March 10, 1986. Commander did not file

the summons and complaint until 1990. Commander’s claims

for damages based upon New York common law are therefore

dismissed as time barred.

While Commander’s equitable claims might be timely

under the doctrine of continuing trespass, the Court cannot

discern, what, if any equitable relief Commander seeks. At

oral argument, Commander was unable to articulate the

equitable relief to which it was entitled. (Tr. at 63-64.)

_Coufisel for Commander suggested that the Court “grant

Commander a judgment saying it has the right to compel

Barlo to perform the remedy .. . to abate the nuisance that

they allowed to be created on our property....” (Tr. at

63-64.) Commander’s request is not a form of relief available

from this Court. Thus; Commander’s state-based tort claims

are dismissed in their entirety...

VII. Joint & Several Liability

Having decided that Barlo, Pasely and Robert Pasely

are liable to Commander under CERCLA for damages

relating to the contamination of the Site, the Court now comes

75a

Appendix D

to Commander’s request for relief, holding the Defendants

jointly and severally liable for its past and future response

costs under CERCLA § 9607(a)(4), and for contribution

under CERCLA § 9613(f).

Barlo’s position is that Commander, a potentially

responsible party (a “PRP”), may not pursue a claim for joint

and several liability under §9607(a)(4)(A), while seeking

contribution under § 9613(f). Moreover, Barlo contends that

in a private claim for contribution under § 9613(f), liability

is not joint and several. (Barlo’s Mem. Supp. at 49.)

Barlo urges the Court to adopt the line of cases which

limit responsible parties and PRPs to contribution claims

and preclude the use of § 107(a). See U.S. v. Colorado &

Eastern Railroad Co., 50 F.3d 1530 (10th Cir. 1995); United

Technologies v. Browning-Ferris, 33 F.3d 96 (Ist Cir. 1994),

cert. denied, __ U.S. <ane tho OB. CY 29% (1995); Akzo

Coatings Inc. v. Aigner Corp., 30 F.3d 761 (7th Cir. 1994);

Town of Windsor v. Tesa Tuck, Inc., 919 F.Supp. 662

(S.D.NLY. 1996); Folino vy. Hampden Color and Chemical

Co., 832 F.Supp. 757, 763 (D.Vt. 1993).

Commander urges the Court to adopt the view of a

competing line of cases which permit PRPs to pursue claims

for joint and several liability. See Idylwoods Associates y.

Mader Capital, 915 F ‘Supp. 1290, 1313 (W.D.N.Y. 1996),

reconsideration in part, 956 F Supp. 410 (1996); Town of

Wallkill v. Tesa Tape Inc., 891 F.Supp. 955 (S.D.N.Y. 1995)

(PRP entitled to maintain a claim for both joint & several

liability and for contribution against other PRPs); Barmer

Aluminum Corp. v. Doug Brantley & Sons, Inc.,914F Supp.

76a

Appendix D_

159, 164 (W.D. Ky. 1995) (holding that liable or potentially

liable parties are not limited to § 113 relief, but may also

pursue claims under § 107 for joint and several liability);

Companies for Fair Allocation v. Axil Corp., 853 F.Supp.

575 (D.Conn. 1994) (Congress intended § 107 liability to

sweep broadly).

In the alternate, Commander contends that the Court

should at least adopt the “innocent owner” exception, which

permits a non-responsible party to pursue a claim for joint

and several liability concurrently with a claim for

contribution. See e.g., Akzo Coatings Inc. v. Aigner Corp.,

30 F.3d 761 (7th Cir. 1994); Rumpke of Indiana, Inc. v.

Cummins Engine Co., Inc., 107 F.3d 1235 (7th Cir. 1997);

AM Intern., Inc. v. Datacard Corp., 106 F.3d 1342 (7th Cir.

1997). Commander contends that because it did not

contribute in any way to the hazardous condition of the Site,

has not admitted responsibility for the hazardous waste at

the Site, but faces CERCLA liability solely as a result of its

status as a landowner, it is an “innocent owner” capable of

bringing a cost recovery action under both CERCLA § 107(a)

and § 113. (Commander’s Mem. Opp. at 30.)

A brief history of CERCLA’s provisions for contribution

and joint and several liability is helpful before tackling the

questions presented. CERCLA did not originally provide for

contribution actions. Instead, only actions for recovery

pursuant to § 107 were available to parties involved in site

cleanup." Prior to 1986, courts used common law principles

13. Section 107 of CERCLA, 42 U.S.C. § 9607(a) provides that

certain enumerated parties — “potentially responsible persons” —

(Cont’d)

77a

Appendix D

to imply rights of action for contribution and indemnity

among PRPs, where necessary to alleviate the burden of joint

and several liability under § 107. See Pinal Creek Group v.

Newmont Min. Corp., 926 F.Supp. 1400, 1404 (D. Ariz.

1996).

In 1986, Congress passed the Superfund Amendments

and Reauthorization Act (“SARA”), adding an express cause

of action for contribution to the CERCLA Statutory

framework.'* The principle goal of this provision was to

clarify and confirm “the right of a person held jointly and

(Cont'd)

shall be liable for . . . all costs of removal or remedial

action incurred by the United States Government .. . :

[and] any other necessary costs of response incurred by

any other person consistent with the national

contingency plan.

14. Section 113(f) Provides a three year statute of limitations

and reads, in pertinent part:

(1) Contribution

Any person may seek contribution from any other person

under section 9607(a) of this title during or following

any civil action under section 9606 of this title or section

9607(a) of this title. . . . In resolving contribution claims,

the court may allocate response costs among liable

Parties using such equitable Principles as the court

determines are appropriate. Nothing in this section shall

diminish the right of any person to bring an action in

contribution in the absence of civil action under section

9606 of this title or section 9607 of this title.

78a

Appendix D

severally liable under CERCLA to seek contribution from

other potentially liable parties, when the person believes that

it has assumed a share of the cleanup costs that may be greater

than its equitable share under the circumstances.” Browning-

Ferris, 33 F.3d at 100 (quoting, S.Rep. No. 11, 99th Cong.

Sess. 44 (1985), reprinted in 2 Legislative History of the

Superfund Amendments and Reauthorization Act of 1986,

636, Sp. Print 101-120 (101st Cong., 2d Sess.) (1990)).

There is a sharp divide among courts with respect to the

issue of whether a PRP may pursue a CERCLA § 107 claim

concurrently with a claim for contribution. A relative

minority of courts permit PRPs to freely pursue cost recovery

actions pursuant to § 107. See Idylwoods Associates v. Mader

Capital, 915 F.Supp 1290, 1313 (W.D.N.Y. 1996),

reconsideration in part, 956 F.Supp. 410 (1996); Town of

Walkill v. Tesa Tape Inc., 891 F.Supp. 955 (S.D.N.Y. 1995)

(PRP entitled to maintain a claim for both joint and several

liability and for contribution against other PRPs); Barmet

Aluminum Corp. v. Doug Brantley & Sons, Inc.,914 F.Supp.

159, 164 (W.D. Ky. 1995) (holding that liable or potentially

liable parties are not limited to § 113 relief, both may also

pursue claims under § 107 for joint and several liability).

These courts have reasoned that “[w]hether a PRP seeks

relief against another PRP under § 107 or § 113 is of little

consequence .. . as it is a question of ligation tactics of the

parties. If, when Congress recognized contribution as an

available remedy in CERCLA actions, it wished to require a

PRP to utilize only § 113 in seeking reimbursement of

response costs, it could have said so.” Jdylwoods Associates,

915 F.Supp. at 1313.

siaoniiiia ail

79a

Appendix D

The Court finds this rationale unpersuasive, and instead

endorses the view of the majority of courts addressing this

issue, which refuse to recognize the ability of PRPs to pursue

claims for joint and several liability, but acknowledge the

potential for an innocent owner to bring such a claim. See

New Castle County v. Halliburton Nus Corp., 111 F.3d 1116

(3d Cir. 1997), No. 96-7443, 1997 WL 217627 at *3 (3d

Cir. May 2, 1997); Akzo Coatings, Inc. y. Aigner Corp.,

30 F.3d 761 (7th Cir. 1994); Rumpke of Indiana, Inc. v.

Cummins Engine Co., Inc., 107 F.3d 1235 (7th Cir. 1997);

Town of Windsor v. Tesa T, uck, Inc., 919 F Supp. 662

(S.D.N.Y. 1996) (parties who are not themselves liable or

potentially liable for response costs can bring a direct cost

recovery action under § 107(a) against PRPs).

The prohibition against § 107 suits by PRPs finds support

on many levels. First, drawing from basic tort principles,

courts have reasoned that a plaintiff who itself is a “party

liable in some measure for the contamination. ... [has] a

quintessential claim for contribution [under § 113(f)].”

Rumpke, 107 F.3d at 1240 (quoting Akzo, 30 F.3d ait 764).

See Redwing Carriers Inc. y. Saraland Apts., 94 F.3d 1489,

1513 (11th Cir. 1996) (parties who are not themselves liable

or potentially liable may bring a cost recovery action directly

under § 107 against PRPs, although the typical § 107 action

is brought by a governmental plaintiff).

This view is also Supported by Congressional action in

passing SARA. As recently expressed by the District Court

for the Southern District of New York in Town of Windsor,

“Congress would not have taken the time to codify the right

of contribution in § 1 13(f) ifa responsible party or potentially

80a

Appendix D

responsible party all along had the right to seek to impose

joint and several liability under § 107.” Town of Windsor,

919 F.Supp. at 681. This limitation also finds support on a

purely practical level: “if a responsible party or potentially

responsible partly were permitted to bring a claim for joint

and several liability under § 107(a), which has a six year

statute of limitations, the three year statute of limitations on

§ 113(f) would be eviscerated because a party with a claim

barred under § 113(f) could proceed under § 107(a).” Town

of Windsor, 919 F.Supp. at 681. Finally, limiting responsible

parties to contribution claims makes sense as a matter of

policy,” since “it will halt the ancillary litigation and third-,

fourth- and fifth- party practice that typically bogs down

CERCLA litigation.” Town of Windsor, 919 F.Supp. at 681.

The Third Circuit in New Castle shared the view that “a

section 107 action brought for recovery of costs may be

brought only by innocent parties that have undertaken

cleanups. An action brought by a potentially responsible

party is by necessity an action for contribution.” New Castle,

111 F.3d at __, No. 96-7443, 1997 WL 217627 at * 3

(citations omitted). The Third Circuit rejected New Castle’s

argument that section 107 joint and several liability should

be available to PRPs and should not be limited to innocent

parties. The cou

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.