U.S. v. Cordova Chemical Co. of Michigan
| Decision Date | 13 May 1997 |
| Docket Number | Nos. 92-2288,92-2326,s. 92-2288 |
| Citation | 113 F.3d 572 |
| Parties | , 65 USLW 2734, 27 Envtl. L. Rep. 20,949 UNITED STATES of America, Plaintiff-Appellee, v. CORDOVA CHEMICAL COMPANY OF MICHIGAN; Cordova Chemical Company; Aerojet-General Corporation (92-2288), Defendants-Appellants, CPC International Inc. (92-2326), Defendant-Appellant, Michigan Department of Natural Resources, Defendant-Appellee. . Re |
| Court | U.S. Court of Appeals — Sixth Circuit |
Richard B. Stewart, U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Anne L. Alonzo, U.S. Environmental Protection Agency, Office of Regional Counsel, Region V, Chicago, IL, John Fogarty, Environmental Protection Agency, Enforcement & Compliance Division, J. Carol Williams, U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Michael L. Shiparski, Asst. U.S. Attorney, Thomas J. Gezon, Asst. U.S. Attorney for the Western District of Michigan, Grand Rapids, MI, Michael J. McNulty, U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Katherine W. Hazard (argued and briefed), U.S. Department of Justice, Environment & Natural Resources, Washington, DC, Bradley M. Campbell, U.S. Department of Justice, Washington, DC, Patricia L. Sims, Environmental Protection Agency, Washington, DC, for U.S. in No. 92-2288.
John V. Byl, Robert J. Jonker (briefed), John D. Tully (argued and briefed), Warner Norcross & Judd, Grand Rapids, MI, for Cordova Chemical Company of Michigan, Cordova Chem. Co., Aerojet-General Corporation in Nos. 92-2288 and 92-2326.
J. Michael Smith (argued and briefed), Miller, Johnson, Snell & Cumminskey, Grand Rapids, MI, for CPC International Inc. in No. 92-2288.
Robert P. Reichel, Asst. Attorney Gen. (argued and briefed), Office of the Attorney General, Environmental Protection Division, Lansing, MI, Eric J. Eggan, Office of the Attorney General, Transportation Division, Lansing, MI, Kathleen L. Cavanaugh, Office of the Attorney General, State Affairs Division, Lansing, MI, for Michigan Department Kenneth S. Geller, Donald M. Falk, Mayer, Brown & Platt, Washington, DC, for amicus curiae Business Roundtable in No. 92-2288.
of Natural Resources in Nos. 92-2288 and 92-2326.
Paul D. Kamenar (briefed), Washington Legal Foundation, Washington, DC, for amicus Curiae Washington Legal Foundation in No. 92-2288.
Richard B. Stewart, U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Anne L. Alonzo, U.S. Environmental Protection Agency, Office of Regional Counsel, Region V, Chicago, IL, J. Carol Williams, U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Michael L. Shiparski, Asst. U.S. Attorney, Thomas J. Gezon, Asst. U.S. Attorney for the Western District of Michigan, Grand Rapids, MI, Michael J. McNulty, U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Nicholas Bollo, Wilmette, IL, Katherine W. Hazard (argued and briefed), U.S. Department of Justice, Environment & Natural Resources, Washington, DC, Bradley M. Campbell, U.S. Department of Justice, Washington, DC, Patricia L. Sims, Environmental Protection Agency, Washington, DC, for U.S. in No. 92-2326.
J. Michael Smith (argued), David M. Buday, Miller, Johnson, Snell & Cumminskey, Grand Rapids, MI, for CPC International Inc. in No. 92-2326.
Before: MARTIN, Chief Judge; MERRITT, KENNEDY, MILBURN, NELSON, RYAN, BOGGS, NORRIS, SILER, BATCHELDER, DAUGHTREY, and MOORE, Circuit Judges.
MERRITT, J. (pp. 583-86), delivered a separate opinion concurring in part and dissenting in part. RYAN, J. (pp. 586-95), delivered a separate dissenting opinion in which MARTIN, C.J., DAUGHTREY, and MOORE, JJ., joined and in which MERRITT, J., joined as to Part I.
OPINION
This appeal highlights the difficulty that often attends the apportionment of liability for the clean-up costs of sites that have been subjected to long-term environmental degradation. In the present case, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601-9675 (1988 & Supp. V 1993), the environmental damage occurred over a period of decades and during the watch of several owners.
A central concern on appeal is the criteria required under CERCLA before a parent corporation can be held financially liable for pollution that occurred on a site owned by a subsidiary. Because we adopt a stricter standard than did the district court for imposition of such liability, we reverse certain of its determinations and remand for further proceedings.
In May and June 1991, the district court conducted a fifteen-day bench trial to determine which parties were responsible for clean-up costs related to pollution of a site located in Dalton Township, Michigan. In addition to the live testimony of twenty-nine witnesses, the court received more than 2,300 exhibits and reviewed dozens of deposition transcripts. Given the complexity of the proceedings below, the factual findings contained in the district court's published opinion are extensive. CPC Int'l, Inc. v. Aerojet-General Corp., 777 F.Supp. 549, 555-70 (W.D.Mich.1991). We summarize them here by way of background.
Beginning in 1957, a series of owners used the Dalton Township site to manufacture chemicals. The initial owner, the Ott Chemical Company ("Ott I"), controlled the site from 1957 until 1965. During this time, the groundwater flowing underneath the site became contaminated, a development confirmed by tests conducted in 1964.
Pollution of soil, surface water, and groundwater continued after the Ott Chemical Company ("Ott II"), a wholly owned subsidiary of CPC International, Inc. ("CPC"), took over ownership of the site in 1965. The use of unlined lagoons as a means of chemical waste disposal was the principal cause of the contamination. According to the district court, this practice spanned the period from 1959 until at least 1968.
Seepage from these lagoons did not, however, constitute the sole source of pollution that occurred during the ownership of Ott I and Ott II. Further contamination emanated from chemical spills from train cars, from chemical drums, from overflows of chemicals contained in a cement-lined equalization basin, and from other sources. Groundwater pollution did not go completely untreated during this time; from 1965 until 1974, purge wells were operated intermittently in an attempt to alleviate the problem.
In 1972, the Story Chemical Company ("Story") acquired the site from Ott II and continued to operate it until 1977, when bankruptcy ended operations. At that point, the trustee in bankruptcy assumed title to the site and attempted to find a buyer.
Active governmental response to the pollution problems at the site began in 1977, after Story's bankruptcy, when the Michigan Department of Natural Resources ("MDNR") visited the site to assess the situation. In view of the severity of the environmental problems and the lack of resources to pay for a cleanup, the MDNR became active in an effort to attract a purchaser who would participate financially in clean-up efforts. This search led to the signing of a document on October 13, 1977, by the Cordova Chemical Company ("Cordova/California"), a wholly owned subsidiary of Aerojet-General Corporation ("Aerojet"), and the MDNR. The district court described the agreement and its aftermath:
It addressed the problem of environmental contamination at the property and set forth obligations with respect to cleanup activities....
....
... MDNR agreed to remedy the waste container and sludge problems, and Cordova/California agreed to eliminate the phosgene gas and give MDNR $600,000 to defray the costs of the agency's cleanup of the waste containers, sludge and residential wells.
....
With respect to Cordova/California's $600,000 payment and the company's responsibility or liability for the contamination at the site it was acquiring, the [agreement] stated:
....
Cordova Chemical Company shall not have any responsibility or liability in connection with any other corrective actions which the Department of Natural Resources or any other governmental agency may hereafter deem necessary....
....
However, the agreement did not provide for a total cleanup of the site's severe environmental problems....
In particular, MDNR and Cordova/California did not reach an agreement regarding a remedy for the groundwater contamination problem. Instead, the fate of the groundwater problems was not resolved, with MDNR left to tackle the problem as part of its overall regulatory responsibility for the site.
....
... Cordova/California and MDNR fulfilled their cleanup obligations under the [agreement].
CPC Int'l v. Aerojet-General, 777 F.Supp. at 564-67.
Having executed this document, Cordova/California purchased the site the following day from the Story bankruptcy trustee. Cordova Chemical Company of Michigan ("Cordova/Michigan"), a wholly owned subsidiary of Cordova/California, acquired ownership of the site in 1978. Cordova/Michigan retains ownership, although manufacturing operations at the site ceased in 1986.
The district court made the following observations regarding conditions at the site during the ownership of the Cordova companies:
During their period of operations, [the companies] neither buried waste nor dumped it onto the ground. No chemical waste was disposed into the unlined lagoons that had been used during the Ott I and Ott II eras. Before beginning chemical manufacturing, Cordova/Michigan repaired the equalization basin and chemical sewer system. When operating, Cordova/Michigan discharged chemical waste through off-site disposal or to a sewer that...
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