City of New York v. Exxon Corp., 85 Civ. 1939 (KC).
| Decision Date | 29 September 1988 |
| Docket Number | No. 85 Civ. 1939 (KC).,85 Civ. 1939 (KC). |
| Citation | 697 F. Supp. 677 |
| Parties | The CITY OF NEW YORK, Plaintiff, v. EXXON CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Peter Lehner, New York City Law Dept., New York City, for plaintiff.
Michael M. Gordon, Cadwalader, Wichersham & Taft, New York City, for Exxon Corp. and Exxon Research & Eng. Co.
Marvin Katz, New York City, for Chrysler Corp.
Thomas P. McCaffey, New York City, for United Tech. & Carrier Corp.
Arthur Schmauder, Shanley & Fisher, P.C., New York City, for BASF Wyandotte Corp.
K. Dennis Sisk, Hunton & Williams, New York City, for Dana Corp., Public Service Elec. & Gas Co., Borg-Warner Corp.
Dennis M. Reznick, McElroy, Deutsch & Mulvaney, New York City, for Ingersoll-Rand Corp.
Eric M. Wagner, Cole & Deitz, New York City, for Refinement Intern.
Alan H. McLean, Hughes, Hubbard & Reed, New York City, for Nat. Can Corp.
Jeffrey G. Miller, Verner, Liipfert, Bernhard, McPherson and Hand, Washington, D.C., for Koppers Co., Inc.
Sidley and Austin, New York City, for Alcan Aluminum.
Breed, Abbott and Morgan, New York City, for Ford Motor Co.
The City of New York ("the City") commenced this action in March of 1985 under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq.1, together with various state law claims. According to the complaint, the fifteen corporate defendants named therein generated hazardous industrial and chemical wastes that were ultimately disposed of at five City landfills. The wastes were transported to the landfills by certain waste-hauling companies owned or operated by Russell Mahler. Mahler gained access to the City landfills for the purpose of dumping the defendants' wastes by bribing an employee of the City's Department of Sanitation.2
The City now seeks (i) recovery of the costs incurred to date for evaluating the nature and extent of chemical contamination at the five sites and for emergency measures undertaken to control off-site migration of hazardous substances; (ii) a declaratory judgment that defendants are liable for the future costs of investigations and remedial actions at the sites; and (iii) damages for injury to natural resources caused by defendants' wastes.
In August of 1986, the original defendants filed their answers, which included counterclaims against the City under CERCLA and common law, and also filed three separate third-party complaints against more than 300 additional parties. On January 23, 1987, the Court severed and stayed the third-party actions pending the outcome of the main action. On September 29, 1987, the Court, at the request of thirteen of the fifteen original defendants, further streamlined the case by dividing it into three phases. In the first phase, issues of liability would be determined. If necessary, the Court would then consider remedies and damages following the completion of the City's plans for closure of the five landfills.3 In the last phase, the Court would allocate liability and damages. The late honorable Edward Weinfeld severed and stayed the third-party actions because, among other reasons, he anticipated that a settlement between some or all of the original parties might lead to the amicable disposition of the entire case.
A proposed settlement is now before the Court. On May 25, the City and defendants American National Can Corporation, BASF Corporation, Borg-Warner Corporation, Dana Corporation, Ford Motor Company, Koppers Company, Inc., and Public Service Electric and Gas Company ("the settling companies" or "the settling defendants") moved for the entry of Judgment on Consent ("the Judgment"). The Judgment provides that, within ten days of its entry, the settling companies will deliver to the City a Landfills Remedial Fund Agreement ("the Agreement") executed by and binding upon CNA Insurance Company ("CNA"). Pursuant to the Agreement, CNA will pay to the City the sum of twelve million five hundred fifty-five thousand dollars in five installments over a period of six years. All monies paid to the City pursuant to the Agreement are to be used by the City for removal, remedial, and response costs incurred in connection with the landfills. In addition to the monies paid directly to the City, the settling companies will pay $1,243,492.00 into a Natural Resource Trust Fund ("NRT Fund") to be established and administered by NYSDEC. Monies paid into the NRT Fund are to be used for assessing any remedying damage to natural resources resulting from the release of hazardous substances from the landfills.
Upon fulfillment by the settling companies of their obligations described above, the Judgment provides that the City's claims against the settling companies are dismissed with prejudice and the City releases the settling companies, and certain additional companies, from liability for all claims relating to the landfills. In turn, the settling companies' counterclaims against the City, as well their claims against any of the remaining parties, including third-party actions, are dismissed. Thus, the Judgment will completely resolve and terminate this litigation as to the settling companies.
Although not a party to this action, New York State, through NYSDEC, participated in the negotiations that led to the proposed settlement, and the obligations assumed by the settling defendants' under the Judgment will discharge their liability to both the City and the State. Nonetheless, NYSDEC and the settling companies have executed a separate Order on Consent (or "Consent Order") to formalize their agreement.4 The effectiveness of the Order on Consent is conditioned on the Court's approval of the Judgment and is incorporated therein by reference.
Two of the eight remaining original defendants and twelve of the approximately 350 third-party defendants have opposed the proposed Judgment. The substance of their opposition is set forth in the memoranda of law of original defendants Exxon Corporation and Exxon Research and Engineering Company, Inc. ("Exxon") and third-party defendant Clairol, Incorporated ("Clairol"). Exxon takes exception to Section 3, Paragraph 4 of the Judgment which provides that the Judgment "shall constitute the resolution of liability to a State ... within the meaning of Section 113(f)(2) of CERCLA." Settlement pursuant to Section 113(f)(2), 42 U.S.C. § 9613(f)(2), which on its face governs only settlements by "the United States or a State," may subject non-settling CERCLA defendants to a disproportionate share of liability from which they would otherwise be protected, and may also subject them to contribution actions by settling defendants which might otherwise be barred.5 Consequently, Exxon contends that the issue of whether the City is a "State" within the meaning of section 113 should be resolved before the Court approves the Judgment.
As Exxon points out, a nearly identical issue is raised in its pending motion for summary judgment. The complaint asserts claims, in the alternative, under CERCLA sections 107(a)(4)(A) and 107(a)(4)(B), which impose liability on certain statutorily defined responsible persons for, respectively:
(emphasis added). In its pending motion, Exxon argues, inter alia, that the City lacks the capacity to proceed as a "State" under § 107(a)(4)(A). Exxon suggests that the Court reserve decision on the proposed Judgment until the Court determines the City's right to assume the role of the State in the context of the pending summary judgment motion. Without citing any specific deficiency, Exxon also contends that the settling parties have not presented a factual record sufficient to justify approval of the settlement.
Clairol is equally concerned with the settlement's impact on contribution rights and apportionment of liability, but Clairol's interpretation of the Judgment differs from Exxon's. Specifically, Clairol does not object to the Judgment in so far as it resolves the City's claims against the settling companies. Apparently ignoring Section 3, Paragraph 4 of the Judgment, Clairol states that the resolution of the City's claims against the settling companies "does not adversely affect the right of Clairol or any other person and, therefore, no one but the City and the Settling Defendants has any interest in it." Memorandum in Opposition to Motion for Entry of Judgment on Consent at 2. Clairol's demurrer is limited to that portion of the Judgment which incorporates the Consent Order between the State and the settling companies. According to Clairol, "the purpose and effect of the proposed consent judgment which incorporates the agreement between the Settling Defendants and the State is to provide the Settling Defendants with the benefits of section 113(f)(2) of" CERCLA. Id.6 Because, Clairol asserts, it would be improper to afford judicial approval to claims that have never been asserted before the Court, Clairol insists that the portion of the Judgment which incorporates the Consent Order should be severed, or, in the alternative, that the State be required to file a motion, on notice, for leave to intervene in this action. If granted, Clairol further argues that the Consent Order must be reviewed in the context of a full hearing, on notice, to determine if it is fair and reasonable. Last, Clairol contends that all interested parties should be afforded an opportunity to conduct discovery in preparation for that hearing.
In response to Clairol's and Exxon's objections, several of the settling parties have argued that a ruling on the applicability of section 113(f)(2) to the settlement would be...
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