U.S. v. Colorado & Eastern R. Co.

• Decision Date: 17 March 1995
• Docket Number: Nos. 94-1041,93-1422,s. 94-1041
• Citation: 50 F.3d 1530
• Parties: UNITED STATES of America, Plaintiff, v. COLORADO & EASTERN RAILROAD COMPANY, Defendant-Appellant. FARMLAND INDUSTRIES, INC., Defendant-Appellee, and Maytag Corporation, McKesson Corporation, Defendants, v. Gary W. FLANDERS; Great Northern Transportation Company, Third-Party Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1530

50 F.3d 1530

40 ERC 2109

UNITED STATES of America, Plaintiff, v. COLORADO & EASTERN RAILROAD COMPANY, Defendant-Appellant.

FARMLAND INDUSTRIES, INC., Defendant-Appellee, and Maytag Corporation, McKesson Corporation, Defendants, v. Gary W. FLANDERS; Great Northern Transportation Company,

Third-Party Defendants-Appellants.

Nos. 94-1041, 93-1422.

United States Court of Appeals Tenth Circuit.

March 17, 1995.

Wayne B. Schroeder (Ronald L. Fano with him on the brief) of Grimshaw & Harring, P.C., Denver, CO, for appellee.

Katherine L. Letson (Timothy R. Gablehouse, Joshua B. Epel and Karina M. Thomas with her on the brief) of Gablehouse, Epel & Letson, Denver, CO, for appellants.

Before ANDERSON, FAIRCHILD ^*, and BARRETT, Circuit Judges.

OPINION ON REHEARING

BARRETT, Senior Circuit Judge.

Appellee's petition for rehearing is granted in part. This court's prior opinion, filed November 17, 1994, is withdrawn.

Colorado & Eastern Railroad Company (CERC), Great Northern Transportation Company (CERC's holding company) and Gary W. Flanders (CERC's former president and sole shareholder), collectively referred to as "the CERC parties," appeal from the district court's judgment entered June 10, 1993, following trial to the court. In this action filed pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. Secs. 9601, et seq. (1987), the court awarded Farmland Industries (Farmland) $734,058.30 plus interest and costs (Appellants' Appendix, Tab 17, p. 272), as amended on November 5, 1993, awarding Farmland prejudgment interest.

From the late 1950's to 1971, Woodbury Chemical Company (Woodbury) operated a pesticide formulation facility at 5400 Monroe Street in Commerce City, Colorado on what is now referred to as the "Woodbury Chemical Superfund Site" (site). In May, 1965, the main Woodbury building was destroyed by fire. Shortly thereafter, Woodbury constructed a new building at the original location. During this time, contaminated debris and rubble from the fire was distributed to various locations at the site, including a 2.2 acre vacant lot directly east of the Woodbury building. In 1968, Farmland purchased a controlling interest in Woodbury. Three years later, in 1971, Farmland sold its interest to McKesson Corporation (McKesson).

On September 8, 1983, the site was added to the National Priorities List of hazardous waste sites. In September, 1985, the Environmental Protection Agency (EPA) completed its remedial investigation and feasibility study (RI/FS) for the First Study Area (Unit I), which consisted of the 2.2 acre vacant lot, and found substantial levels of pesticides and metals. The EPA issued a Record of Decision (ROD) on July 19, 1985, specifying remediation measures for cleaning up the site. During pre-design studies, the EPA discovered significant additional contamination west of the 2.2 acre lot. The area of additional contamination (Unit II) included the original Woodbury property and vacant property located west and north of the Woodbury facility which had been purchased by CERC from McKesson in 1984. An amended ROD was issued on September 22, 1986, expanding the site to include all of the CERC property, Unit II. The RI/FS for Unit II was completed and the final ROD was issued in September, 1989.

District Court Proceedings

In October, 1989, the EPA filed suit in the United States District Court for the District of Colorado under CERCLA, 42 U.S.C. Sec. 9607 (Sec. 107), against all known potentially liable parties (PRPs), Farmland, McKesson, CERC, and Maytag Corporation. The United States sought judgment against the defendants, jointly and severally, for all response costs incurred in connection with response actions relating to the site, together with prejudgment interest and costs and for a declaratory judgment jointly and severally against each defendant pursuant to 42 U.S.C. Sec. 9611(g) as to its liability for response costs that will be binding in any subsequent action or actions to recover further response costs at the site.

As a result of EPA's suit, Farmland and McKesson entered into a Partial Consent Decree with EPA on September 4, 1990, under which Farmland and McKesson agreed to finance and perform all remediation of the site and to pay $700,000 to EPA for its past response costs. McKesson and Farmland completed all remediation of the site at a cost in excess of $15 million in June, 1992. Included in that figure was $1,439,330 expended for remediation work allegedly caused by the CERC parties' actions at the site. ¹

In April, 1992, two months before all remediation of the site was completed, the CERC parties entered into a Consent Decree with the EPA, whereby the CERC parties agreed to pay $100,000 in past EPA response costs.

The defendants in the EPA action filed cross-claims against each other, all of which were settled or dismissed before trial except for Farmland's claim against the CERC parties ² for $734,058.30 pled as (1) cost recovery under CERCLA Sec. 107(a), 42 U.S.C. Sec. 9607(a), or, in the alternative, (2) contribution under CERCLA Sec. 113(f), 42 U.S.C. Sec. 9613(f). ³

Thereafter, the district court granted Farmland's motion for partial summary judgment on the issue of the amount and reasonableness of the "additional" cleanup costs of $734,058.30 Farmland had incurred based upon the alleged CERC "excavation and soil removal activities, refusal to allow access and other actions." United States v. Colorado & Eastern Railroad, 832 F.Supp. 304, 306 (D.Colo.1993). The CERC parties also moved for summary judgment based upon the contention that Farmland's claims were barred by the contribution protection provided by 42 U.S.C. Sec. 9613(f)(2). The district court denied that motion on two bases: (1) that because CERC had not yet paid the $100,000 required by the consent decree entered into with EPA, CERC may not claim protection arising from the decree, and, alternatively, (2) even if CERC were not in default, "... it cannot be said that there is no genuine issue of material fact as to the scope of the contribution protection afforded by CERC's consent decree." Id. at 307.

Thereafter, following a two-day trial to the court, the district court entered its "Findings of Fact, Conclusions of Law and Order for Judgment" on June 9, 1993. (Appellants' Appendix, Vol. I, Tab 16, pp. 265-71). The district court made no findings relative to the issue of the CERC parties' contention that Farmland's claims were barred by the contribution protection provided under Sec. 9613(f)(2). The district court concluded, as a matter of law, that Farmland was entitled to recover its response costs of $734,058.30 against the CERC parties, jointly and severally under Sec. 107(a), and that (1) Farmland need not prove causation in order to recover its response costs under Sec. 107(a), (2) the response costs of $734,058.30 were consistent with the National Contingency Plan, (3) liability may be apportioned through Sec. 113(f) contribution actions, but the CERC parties did not counterclaim for contribution, and (4) because the court had held that Farmland was entitled to recover against the CERC parties under Sec. 107(a), it was not necessary to reach Farmland's alternative claim for contribution under Sec. 113(f). Id.

On June 10, 1993, the district court entered judgment for Farmland and against the CERC parties in amount of $734,058.30 (Farmland's 51% share of the total "additional" cleanup costs of $1,439,330; McKesson Corporation paid the balance) with interest at the rate of 3.54% per annum. (Appellants' Appendix, Tab 17, p. 272). Finally, on November 5, 1993, upon motion, the court amended the judgment to award Farmland pre-judgment interest in amount of $27,060.00. (Appellants' Appendix, Tab 20, pp. 304-05).

Issues

On appeal, the CERC parties contend that the district court: (1) erred in awarding Farmland cost recovery under a theory of strict liability pursuant to Sec. 107 rather than requiring Farmland to prove causation under Sec. 113(f)(1) and erred in denying them contribution protection under Sec. 113(f)(2); (2) erred in finding that the response costs sought by Farmland were "necessary and consistent" with the National Contingency Plan; and (3) erred in failing to rule on the CERC parties Act-of-God and Act-of-Third-Party defenses.

I.

The CERC parties contend that the district court erred in (1) awarding Farmland cost recovery under a theory of strict liability pursuant to Sec. 107 rather than requiring Farmland to prove causation under Sec. 113(f)(1), and (2) denying them contribution protection under Sec. 113(f)(2). "Causation" in the context of this case means whether CERC caused the increase in the expense of remediation. If it did, that would be an equitable factor for the court to consider under Sec. 113(f)(1). All concerned acknowledge that liability under Sec. 9607 is strict and causation would be irrelevant in that context.

Questions of law are considered by this court de novo. Estate of Holl v. Commissioner, 967 F.2d 1437, 1438 (10th Cir.1992). Because this issue on appeal turns on the correct interpretation of the relevant statutory provisions, we are not constrained by the district court's conclusions. FDIC v. Bank of Boulder, 911 F.2d 1466, 1469 (10th Cir.1990), cert. denied, 499 U.S. 904, 111 S.Ct. 1103, 113 L.Ed.2d 213 (1991). Thus, the standard of review is the same as that which would be applied by the district court in making its initial ruling. Lilly v. Fieldstone, 876 F.2d 857, 858 (10th Cir.1989).

A.

In its cross-claim, Farmland sought to recover from the CERC parties a part of the cost of remediation of Unit II of the site that was allegedly caused by the CERC parties. Farmland argues that its claim is one to recover costs incurred in the removal of hazardous waste and the remediation of the site under CERCLA Sec. 107; therefore, CERC is strictly liable.

The CERC parties contend that the district court...