Gencorp, Inc. v. Olin Corp.
| Decision Date | 22 November 2004 |
| Docket Number | No. 03-3019.,No. 03-3211.,03-3019.,03-3211. |
| Citation | 390 F.3d 433 |
| Parties | GENCORP, INC., Plaintiff-Appellant/Cross-Appellee, v. OLIN CORPORATION, Defendant-Appellee/Cross-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ARGUED: Robert J. Jonker, Warner, Norcross & Judd, Grand Rapids, Michigan, for Appellant. Peter Buscemi, Morgan, Lewis & Bockius, Washington, D.C., for Appellee. ON BRIEF: Robert J. Jonker, John V. Byl, Dean F. Pacific, Warner, Norcross & Judd, Grand Rapids, Michigan, Michael L. Hardy, Keely J. O'Bryan, Thompson Hine, Cleveland, Ohio, for Appellant. Peter Buscemi, Ralph N. Albright, Jr., Charles Swinburn, Thomas J. O'Brien, Morgan, Lewis & Bockius, Washington, D.C., for Appellee.
Before: MARTIN and SUTTON, Circuit Judges; WILLIAMS, District Judge.*
In the 1960s, GenCorp, Inc. and Olin Corporation began a business relationship that defies easy categorization. By agreement of the parties, Olin built a manufacturing plant with GenCorp's assistance that for more than a decade supplied GenCorp with a chemical used to produce urethane foam. The manufacturing plant also produced hazardous waste. Plant operators hauled the waste to an offsite landfill, which eventually landed on the EPA's National Priority List of hazardous waste facilities and which generated clean-up costs of more than $65 million.
Olin sued GenCorp under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq., to recover a percentage of the clean-up costs and to obtain a declaratory judgment that GenCorp bore responsibility for that same percentage of future costs. The district court granted the relief, concluding that GenCorp was a "[c]overed person[ ]" under § 9607(a) of the statute because it "arranged for disposal ... of hazardous substances" and concluding that it was responsible for 70% of the clean-up costs at the landfill. We agree with that conclusion and reject each of the parties' other challenges to the district court's decision except one: Olin's claim that a declaratory judgment should have been entered. Accordingly, we affirm the district court's judgment as to GenCorp's contribution liability and the apportionment of liability between the parties but remand the case to consider Olin's request for a declaratory judgment.
During the 1960s, GenCorp (once known as "General Tire and Rubber Company") manufactured urethane foam — a material used in carpets and mattresses, among other products — at a plant (the "PVC Plant") located in Ashtabula, Ohio. Among other ingredients, the production of the foam required toluene di-isocyanate ("TDI"), which is a "critical" chemical ingredient in the process. JA 1319. To minimize the financial risks of urethane production, GenCorp sought a reliable and cost-effective source of TDI.
Olin Corporation claimed to have a supply answer to this demand. Having developed a cost-effective process for producing TDI, which involved highly toxic chemicals, including phosgene or "mustard" gas, it began discussions with GenCorp about building and operating a plant for manufacturing the chemical (the "TDI Plant"). On June 21, 1962, after lengthy negotiations, the parties concluded a final agreement (the "1962 Agreement").
As the contractual cornerstone of the 1962 Agreement, Olin agreed to "erect or cause to be erected, at its sole cost and expense" the TDI Plant. JA 660. The parties agreed to locate the plant on land owned by GenCorp, which was adjacent to GenCorp's own PVC Plant (where the TDI from Olin's new plant would eventually be converted into urethane foam), and agreed that Olin would pay GenCorp $10 a year for the lease of the land. Olin also agreed to build a second plant at its own expense to produce toluene diamine or "TDA" — a chemical needed in the TDI manufacturing process — and to supply enough TDA to meet the TDI Plant's requirements.
In return, GenCorp agreed to purchase 50% of the TDI Plant's output at cost, which included variable costs, fixed costs for the TDI Plant and "related facilities," and a "charge-in" for the TDA supplied by Olin to the plant. JA 671. Both parties remained free to sell TDI to third parties without sharing any profits from these sales. GenCorp also agreed to purchase hydrochloric acid — an additional byproduct of the TDI manufacturing process — from Olin and to supply steam from its PVC Plant to meet the TDI Plant requirements.
Olin initially retained title to the TDI Plant under the 1962 Agreement and "owned and operated" the plant. JA 660, 663. The parties agreed that at some later date Olin would "sell, convey and transfer" title to the TDI Plant to GenCorp at Olin's then-current book value for the plant. JA 678-79. GenCorp agreed to advance Olin up to one half of its total capital costs for the plant as "earnest money [ ] towards its obligation to purchase and acquire the TDI Plant." JA 680. That amount, it was agreed, would be "credited by Olin against the ultimate sale and purchase price" due at the future sale. Id. The parties affirmed in a separate agreement that GenCorp had a "definite obligation to take title" to the TDI Plant and had committed itself to this purchase through a "substantial deposit against the ultimate purchase price." JA 699. In accordance with these future plans for ownership of the plant, the engineering specifications for the plant were "subject to the approval" of both GenCorp and Olin, JA 662, and Olin agreed not to make any capital expenditures without GenCorp's approval after the plant's start-up. Olin also agreed to insure the TDI Plant for "all risk of loss, liability and damage to property and facilities." JA 679.
To the ends of "oversee[ing] the construction, operation and management of the TDI plant," the contract created a four-member committee (the "TDI Committee") composed of two representatives of GenCorp and two representatives of Olin. In consultation with the committee, Olin agreed to select a Plant Manager and other staff "to supervise the day-to-day operation of the plant." JA 663. Olin also agreed to appoint a Committee Manager, who was the sole party authorized to instruct the Plant Manager on behalf of the Committee. The 1962 Agreement contained no guidelines for committee governance — i.e., specifying whether decisionmaking would occur by consensus or by majority vote, or how a deadlock would be resolved — but rather allowed the Committee to devise its own management rules (which apparently were never created).
Although not detailed in the agreement, GenCorp supplied all of the TDI Plant's hourly workers, keeping them on its own payroll and negotiating a collective bargaining agreement for them. Olin, on the other hand, supplied and paid many of the plant's salaried, supervisory employees, including the Plant Manager and other departmental heads, although GenCorp filled some management positions with its own employees. All employees ultimately reported to the Olin-appointed Plant Manager.
The 1962 Agreement did not address hazardous waste disposal. The TDI manufacturing process generated at least two byproducts that amount to "hazardous waste" for CERCLA purposes: a tar-like residue waste and spent vacuum-pump oils, both of which contain the toxic chemicals TDI, TDA and chlorobenzene. Early plant designs contemplated generation and disposal of the TDI residue. The TDI Plant engineer told Phillip Sayre, a GenCorp employee who reviewed the design specifications, that the TDI chemical residue would be "drum[med][ ] off and bur[ied]." JA 1323. Despite Sayre's concerns about the dangers of this plan, which he conveyed to his supervisors at GenCorp, GenCorp approved the plant designs and capital appropriation requests by Olin. Id.
After approving the plant designs, the TDI Committee discussed TDI residue disposal and the GenCorp committee members researched and recommended offsite locations for disposal sites in view of their greater familiarity with the Ashtabula area. D. Ct. Op. of July 14, 1999, at 40 [hereinafter D. Ct. Op.]. TDI employees disposed of some waste at the plant site itself, which the parties agree caused a "release" into the waterway known as "Fields Brook" that ran between the TDI and PVC Plants on GenCorp's land (a site that is the subject of this litigation but not this appeal). Id. Benjamin Brenkus, a hauler apparently hired by the Olin Plant Manager, carried other waste offsite. From the beginning of plant operations in 1964 through February 1976, Brenkus hauled waste to the Big D site, all of which the TDI Plant hourly employees had placed in metal drums and loaded onto Brenkus' truck for disposal. D. Ct. Op. at 41. Payment for Brenkus' hauling efforts required completion of a service requisition form, which on occasion GenCorp employees in intermediate management positions signed. Id.
Over the years of the TDI Plant's operation, the Committee addressed the issue of waste disposal in a variety of ways. TDI residue disposal (i.e., the hauling costs) appeared as a line item on Olin's budget for the TDI Plant, which the Committee approved, and which GenCorp paid for as part of the variable costs incorporated into the TDI price. The Committee approved (apparently without dissension) capital expenditures aimed at reducing the volume of waste generated by the plant. D. Ct. Op. at 41. GenCorp Committee member Robert Laundrie visited the Big D site more than once, and he issued his criticisms of disposal methods to Olin's Plant Manager, id. at 40-41 (). And GenCorp and Olin jointly funded "Golden TDI" research, a program aimed (fruitlessly, it turns out) at finding commercial uses for the TDI residue in order to reduce the amount of waste shipped offsite. Id. at 41.
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