U.S.A. v. Southeastern PA Transportation, 99-1479

• Decision Date: 26 December 2000
• Docket Number: No. 99-1479,99-1479
• Citation: 235 F.3d 817
• Parties: (3rd Cir. 2000) UNITED STATES OF AMERICA; COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF ENVIRONMENTAL RESOURCES v. SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY ("SEPTA"), NATIONAL RAILROAD PASSENGER CORPORATION ("AMTRAK"), and CONSOLIDATED RAIL CORPORATION ("CONRAIL") v. CITY OF PHILADELPHIA; PENN CENTRAL CORPORATION, Third-Party Defendants Penn Central Corporation, now known as American Premier Underwriters, Inc., Appellant
• Court: U.S. Court of Appeals — Third Circuit

Page 817

235 F.3d 817 (3rd Cir. 2000)

UNITED STATES OF AMERICA; COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF ENVIRONMENTAL RESOURCES v. SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY ("SEPTA"), NATIONAL RAILROAD PASSENGER CORPORATION ("AMTRAK"), and CONSOLIDATED RAIL CORPORATION ("CONRAIL") v. CITY OF PHILADELPHIA; PENN CENTRAL CORPORATION, Third-Party Defendants

Penn Central Corporation, now known as American Premier Underwriters, Inc., Appellant

No. 99-1479

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued April 10, 2000

Filed December 26, 2000

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 86-cv-01094) District Judge: Honorable Robert F. Kelly

[Copyrighted Material Omitted]

James J. Capra, Jr., Esq. (ARGUED) Orrick, Herrington & Sutcliffe 666 Fifth Avenue New York, New York 10103, Counsel for Appellant

Joel M. Gross, Esq. (ARGUED) U. S. Department of Justice P. O. Box 7611, Ben Franklin Station Washington, D.C. 20026; Paul M. Schmidt, Esq. (ARGUED) Commonwealth of Pennsylvania Department of Environmental Protection Suite 6015, Lee Park 555 North Lane Conshohocken, PA 19428-2233; Bonnie A. Barnett, Esq. (ARGUED) Drinker, Biddle & Reath 1100 PNB Building Broad & Chestnut Streets Philadelphia, PA 19107, Counsel for Appellees

Before: NYGAARD, ALITO, and GIBSON,^* Circuit Judges.

OPINION OF THE COURT

JOHN R. GIBSON, Circuit Judge:

American Premier Underwriters, Inc.¹ appeals the entry of a consent decree that resolves the liability of Consolidated Rail Corporation (Conrail), National Railroad Passenger Corporation (Amtrak), and Southeastern Pennsylvania Transportation Authority (SEPTA) for environmental contamination at the Paoli Rail Yard Site² in Paoli, Pennsylvania. American Premier, a non-settling defendant, argues that the decree unfairly allocates responsibility for cleanup at the Site and that the contribution protection it provides to the settling parties is not permitted under the relevant statute. We affirm.

Operations that involved the service, repair , and storage of rail cars were conducted at Paoli Rail Yard from 1915 until the beginning of 1995. In the 1950s, electric rail cars that used dielectric fluid to cool their transformers were first stored and maintained at the yard. Dielectric fluid contains polychlorinated biphenyls (PCBs). PCBs, which pose substantial risks to human health and the environment, are released during the servicing of train transformers and volatilize if overheated during train operation. Operations at the yard allegedly caused PCB contamination throughout the rail yard property. The contamination eventually spread to other nearby properties through erosion.

From 1915 until 1976, American Premier and its predecessors owned and operated the rail yard. Pursuant to the Regional Rail Reorganization Act of 1973, American Premier conveyed the yard to Conrail on April 1, 1976. That same day, Conrail conveyed the yard to Amtrak. Amtrak still owns the property. Conrail operated the yard from April 1, 1976 until the end of 1982. SEPTA then took over the yard's operation, using it to maintain commuter trains from 1983 until January 1995, when it moved its maintenance operations to a different location. SEPT A gradually phased out the use of dielectric fluid that contained PCBs, ending its use in 1986.

In 1985, EPA representatives observed that access to the rail yard was unrestricted and that people walked through and children played in areas at and near the rail yard. They also saw signs of erosion indicating water runoff from the yard into nearby residential areas. Sampling revealed PCB contamination in the rail yard and residential soils and in the fish in nearby creeks.

The following year, the United States brought this action against SEPTA, Conrail, and Amtrak (collectively, the rail companies) pursuant to, inter alia, sections 104, 106(a), and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. SS 9604, 9606(a), and 9607. The government sought injunctive relief and reimbursement of response costs in connection with the release of PCBs at the Site. The Commonwealth of Pennsylvania intervened as a plaintiff later that year.³

In June 1986, the United States, Conrail, and SEPT A petitioned the district court that had overseen American Premier's bankruptcy reorganization to establish their right to proceed against American Premier . See In re Penn Cent. Transp. Co., 944 F.2d 164, 166 (3d Cir. 1991). American Premier's argument that the earlier reorganization discharged the CERCLA claims was ultimately unsuccessful. See id. at 168. In 1992, the United States filed a separate action against American Premier, and the rail companies brought American Premier into this action as a third-party defendant. American Premier then sought a declaratory judgment that the government's claims were barred by a 1980 settlement agreement that resolved claims between American Premier and the United States arising from the valuation of American Premier's rail assets conveyed pursuant to the Regional Rail Reorganization Act. See Penn Cent. Corp. v. United States, 862 F . Supp. 437, 448-58 (Regional Rail Reorg. Ct. 1994). The court granted summary judgment to the government on this issue. See id. at 458.

Since the government initiated this action, it has entered into five partial preliminary consent decrees with the rail companies under which they agreed to per form a variety of remedies at the Site. In 1986, SEPTA agreed to construct a combination fence that restricted access to the rail yard and limited further PCB migration into the area surrounding the yard. Later that year, all three rail companies agreed to conduct an engineering study addressing erosion and PCB migration from the rail yard and identifying possible remedies to limit the spread of PCBs. A dispute arose between the United States and the rail companies over the work necessary to implement the study, and EPA ended up constructing sedimentation basins and erosion control systems and removing and disposing of contaminated soil from several residential properties. Under the third partial preliminary consent decree, the rail companies conducted a remedial investigation to determine the extent of PCB contamination at the Site and a feasibility study of various remedial alternatives. As part of this decree, SEPTA entered into a stipulation that addressed worker protection at the rail yard and decontamination of the car shop, a building in which rail cars had been repaired since 1915. Under the fourth partial preliminary consent decree, the rail companies agreed to conduct a soil sampling program to determine the extent of PCB contamination in the residential areas and the surface water channels north of the rail yard. Finally, under the last partial decree, the rail companies excavated approximately 3500 cubic yards of contaminated soils from the residential area north of the yard. All told, the rail companies spent approximately $12 million on remedial action related to the Site before entering into the consent decree that is the subject of this appeal.

EPA placed the Paoli Rail Yard Site on the National Priorities List in 1990. In July 1992, EPA issued a Record of Decision that reviewed remedial alternatives and their projected costs and selected remedies for the Site. As modified, the Record of Decision requires: (1) excavation and on-site treatment of contaminated rail yard soils (estimated cost: $19,507,375), (2) groundwater treatment and fuel oil recovery (estimated cost: $1,131,120), (3) decontamination and demolition of rail yard buildings and structures (estimated cost: $1,471,905), (4) excavation of contaminated residential soils (estimated cost: $1,196,000), and (5) excavation of contaminated stream sediments (estimated cost: $5,701,720).

In 1995, EPA proposed a consent decree that would require all four defendants to clean up the rail yard by carrying out the first three remedies from the Record of Decision, while leaving American Premier responsible for cleaning up the watershed by carrying out the last two remedies.

In February 1996, American Premier offered to pay 20% of past and future remediation costs at the Site as part of a global settlement. American Premier told the rail companies not to view the proposal as a typical "opening bid," thus intimating that it would not be willing to increase its settlement offer. The rail companies responded that they were disappointed with the offer and that they believed that American Premier had "sorely misjudged" the probable outcome if the parties were to litigate. The United States was similarly unsatisfied with the offer.

On September 30, 1996, EPA issued a unilateral administrative order requiring American Premier to implement the remedies from the Record of Decision related to the watershed portion of the Site. Under this order, American Premier is responsible for the excavation of residential soils and stream sediments. Together, these remedies are estimated to cost $6,897,720.

On July 28, 1997, the United States filed a Praecipe to Lodge Consent Decree, with the proposed decree resolving the rail companies' liability to the United States and the Commonwealth for contamination at the Site. The consent decree contends "that the degree of involvement by American Premier . . . in the disposal of hazardous substances and the operation at the Site is at least equal to or maybe greater than the degree of involvement by all the Settling parties combined." It requires the rail companies to excavate and contain the rail yard soils, per form the groundwater treatment and fuel oil recovery, and decontaminate and demolish rail yard buildings and structures. Together, these remedies are estimated to cost $22,110,400. The decree also requires several payments by the rail companies: $500,000 to the EPA Hazardous Substance Superfund to reimburse past...