4 F.3d 1209 (3rd Cir. 1993), 92-7605, Lansford-Coaldale Joint Water Authority v. Tonolli Corp.

Docket Nº:92-7605
Citation:4 F.3d 1209
Case Date:September 17, 1993
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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4 F.3d 1209 (3rd Cir. 1993)

23 Envtl.


No. 92-7605



International B.V., Appellants in No. 92-7671.

Nos. 92-7605, 92-7671.

United States Court of Appeals, Third Circuit

September 17, 1993

Argued June 24, 1993.

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[Copyrighted Material Omitted]

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John M. Hyson (argued), Villanova, PA, Anthony J. Mazullo, Jr., Doylestown, PA, for appellant in No. 92-7605.

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Bernard A. Labuskes, Jr. (argued), Terry R. Bossert, Scott A. Gould, McNees, Wallace & Nurick, Harrisburg, PA, for appellants in No. 92-7671.

Before: BECKER, ALITO and ROTH, Circuit Judges.


BECKER, Circuit Judge.

The plaintiff, the Lansford-Coaldale Joint Water Authority ("Authority"), provides public water in Carbon County, Pennsylvania. The Authority's groundwater production and supply wells are adjacent to a site formerly used for lead smelting that is owned by Tonolli Pennsylvania ("Tonolli PA"). After learning that there had been releases of hazardous substances on the Tonolli site and that Tonolli PA had applied for a hazardous waste disposal permit, the Authority commissioned a study to determine whether there was or would be any contamination of its wells. Based on this study, the Authority brought suit against Tonolli PA, its sister corporation, Tonolli Canada, and its parent corporation, IFIM, alleging that they were owners or operators of the Tonolli PA facility and that hazardous discharges from their property posed a threat of future contamination to the Authority's water supply. Because Tonolli PA had become bankrupt, the Authority subsequently dropped its claims against it, and the trial proceeded against only Tonolli Canada and IFIM. The Authority's suit sought to recover response costs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. Sec. 9607(a). More specifically, the Authority sought to obtain both the costs it would incur due to the threat of future contamination, e.g., the costs of obtaining an alternative water supply, and the costs it would incur in monitoring and evaluation. At the conclusion of the trial, the district court made oral findings of fact and conclusions of law denying the Authority recovery on all claims. This appeal followed.

At the heart of the Authority's appeal is an attack on the district court's fact findings. First, the Authority asserts that the findings are tainted because they were made orally only a few hours after a long and complex trial and were principally drawn verbatim from Tonolli Canada's proposed findings. Second, the Authority contends that the district court's finding that the hazardous waste releases at the Tonolli site posed no threat to the Authority's water supply, which was based upon a finding of hydrogeologic separation of the Tonolli site from the Authority site, was clearly erroneous. Third, the Authority contends that, even if that finding is upheld, we should reverse the district court's failure to authorize recovery of monitoring and evaluation costs against Tonolli Canada because it was the owner or operator of the Tonolli PA facility.

We acknowledge that the district court might have made more precise findings had it taken the time to await the trial transcript and to draft a written opinion. Moreover, the findings might have been better had they not drawn so heavily on Tonolli Canada's proposed findings. But the court's oral findings offered the distinct advantage of fresh recollection and prompt justice. We therefore reject the Authority's suggestion that the court's findings are deficient because of the nature of their construction and delivery and hold that they did not violate the requirements of Fed.R.Civ.P. 52(a). Pursuant to that rule, we review them only for clear error.

On the most important issue to the parties, the threat posed to the Authority's water supply, the district court was faced with a "battle of the experts." It found Tonolli Canada's expert more credible than the Authority's expert and we are satisfied that the court's findings on this claim are not clearly erroneous.

However, we will vacate the district court's judgment on the monitoring and evaluation costs claim against Tonolli Canada. In reaching its conclusion that Tonolli Canada should not be deemed an operator, the district court applied the correct inquiry for determining whether Tonolli Canada was a CERCLA operator, i.e., whether it actively participated in the management of the affiliated corporation during a period of hazardous waste disposal. The federal courts are divided over this issue, but we hold that this

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represents the correct standard. Nevertheless, due to the district court's failure to address several critical factual issues, we will vacate the judgment on this count and remand for more detailed fact findings.

Finally, the Authority contends that the district court improperly granted judgment in favor of the parent corporation, IFIM, which never filed an answer or otherwise appeared in this case. We will affirm the judgment in favor of IFIM on the Authority's claim for the costs of obtaining a new water supply and/or treating its current supply because such a result is dictated by the rule prohibiting inconsistent judgments. However, with respect to the judgment in favor of IFIM on the monitoring and evaluation costs claim, because the district court provided no explanation for its decision and we can discern no basis for it, we will vacate this portion of the judgment and remand to the district court for further consideration.


Tonolli Canada is a Canadian Corporation engaged in the business of lead smelting and metal reclamation. In the early 1970's, Tonolli Canada decided to open a smelting facility in the northeastern United States to reduce transportation costs and improve customer service. It chose a site near Nesquehoning, Carbon County, Pennsylvania. Tonolli PA was incorporated to construct and operate the facility, and Tonolli Canada was its sole shareholder from its incorporation in 1972 until 1976. In 1976, IFIM, a Dutch corporation, purchased all of the Tonolli PA stock and also became the parent corporation of Tonolli Canada. The Nesquehoning plant commenced operations in 1975. The plant site is located approximately 3,100 feet from the Authority's production wells.

In the early 1980's, the Authority learned through a public announcement that Tonolli PA had applied for a permit to dispose of hazardous waste at the Nesquehoning site. The parties have also conceded that Tonolli PA was responsible for the release of hazardous substances there, although it is unclear from the record as to when these releases occurred and when the Authority became aware of them. In any event, sometime after learning about the releases as well as Tonolli PA's permit application, the Authority commissioned a study to determine whether there was or would be any contamination in its wells from the Tonolli site. That study, conducted in July, 1987 and known as the AGES study, 1 forms the Authority's proof regarding a threat of contamination from the Tonolli site.

Although the Authority's wells are concededly upgradient from the Tonolli site, the Authority claims the study shows that continuous pumping of groundwater for a 72-hour period resulted in a reversal in the direction of the groundwater which, if true, means that lead contaminants from the Tonolli site could infiltrate the Authority's water supply. Tonolli Canada denies that such conclusions can be drawn from the AGES study, and has offered its own expert testimony that the Tonolli discharge did not and cannot affect the Authority's wells.

The Authority brought suit against Tonolli PA, Tonolli Canada, and IFIM, originally alleging only common law claims, but then adding a claim for private cost recovery under CERCLA. The Authority subsequently dropped its claim against Tonolli PA, which had become bankrupt, so that the trial proceeded against only Tonolli Canada and IFIM. IFIM, however, has never answered or otherwise appeared in the case, although no motion for a default judgment has been made by the Authority. Without explanation, the district court entered judgment in IFIM's behalf at the close of the trial. The Tonolli Canada submissions advance a procedural argument on behalf of IFIM, but the Tonolli Canada lawyers do not represent IFIM.

The liability phase of the trial took nine days, spread out over December, 1991 and January and February, 1992. Within hours of the conclusion of the trial, the court delivered 150 oral findings, most of which it took verbatim from Tonolli Canada's proposed findings given to the court at the beginning of the trial.

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With respect to the Authority's more substantial monetary claim--its allegation that releases at the Tonolli site have created a threat of contamination that will cause the Authority either continuously to treat its water supply or to secure a new one--the court found squarely for the defendants. Most importantly, the district court found that the Authority had not proved that there is any threat of future contamination to the Authority's water supply. However, with respect to the Authority's claim for monitoring and evaluation costs, the court found that a release at the Tonolli site had induced the Authority to incur monitoring and evaluation expenses (i.e., the costs of the AGES study). The court nonetheless denied recovery for these costs because it concluded that the Authority had not established the other necessary elements of their claim under CERCLA, specifically, Tonolli Canada's status as an owner or...

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