889 F.2d 664 (5tht Cir. 1989), 88-2860, Amoco Oil Co. v. Borden, Inc.

Docket Nº:88-2860.
Citation:889 F.2d 664
Party Name:20 Envtl. AMOCO OIL COMPANY, Plaintiff-Appellant, v. BORDEN, INC., Defendant-Appellee.
Case Date:December 08, 1989
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 664

889 F.2d 664 (5tht Cir. 1989)

20 Envtl.

AMOCO OIL COMPANY, Plaintiff-Appellant,


BORDEN, INC., Defendant-Appellee.

No. 88-2860.

United States Court of Appeals, Fifth Circuit

December 8, 1989

Opinion on Denial of Rehearing Jan. 23, 1990.

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[Copyrighted Material Omitted]

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Edward W. Warren, David G. Norrell, Joseph S. Hoover, Jr., Washington, D.C., McLeod, Alexander, Powel & Apffel, Ervin A. Apfell, Jr., Otto D. Hewitt, III, Galveston, Tex., Jana Gill, Washington, D.C., for plaintiff-appellant.

Blake A. Watson, Appellate Section, Land & Natural Resources Div., Washington, D.C., amicus curiae for U.S.

Thomas W. Hill, Melvin D. Weinstein, Emens, Hurd, Kegler & Ritter, and Lawrence L. Dieker, Columbus, Ohio, for defendant-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before BROWN, REAVLEY and HIGGINBOTHAM, Circuit Judges.

REAVLEY, Circuit Judge:

In a private action brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C.A. Secs. 9601-9675 (1983 & Supp.1989), 1 Amoco Oil Co. ("Amoco") sought a declaratory judgment for liability and response cost damages from Borden, Inc. ("Borden"), from which Amoco had purchased contaminated industrial property. Finding that Amoco had failed to establish CERCLA liability, the district court entered judgment for Borden. Holding that Amoco has met the liability requirements, we reverse and remand for determination of damages.

  1. Background

    The property at issue is a 114-acre tract of land in Texas City, Texas. For many years, Borden operated a phosphate fertilizer plant on the site. As a by-product of the fertilizer manufacturing process, large quantities of phosphogypsum were produced. The site now contains a large inactive pile of phosphogypsum covering approximately 35 acres.

    Phosphogypsum alone contains low levels of radioactivity. More highly radioactive sludges and scales from processing equipment, however, were dumped into the phosphogypsum pile, creating "hot" areas within the pile. Additionally, during processing, radioactive materials became concentrated in manufacturing equipment, pipe, and filter cloths used in production. These materials constitute "off-pile" wastes and were left primarily near a junkyard on the property and near the abandoned manufacturing buildings. Some of the off-pile sites contain over 500 times the background level of radiation. 2

    In 1977, Amoco became interested in purchasing the property. The parties discussed two prices: $1.8 million for the site "as is," or $2.2 million if Borden would remove the phosphogypsum. Allegedly unaware of the site's radioactivity, Amoco accepted the "as is" option.

    Amoco claims it had no knowledge of the radioactive nature of phosphogypsum until it was so informed by the Texas Department of Water Resources in 1978. Amoco then hired several consultants to measure the radioactivity, to determine geology and hydrology, and to characterize the data. The consultant's reports revealed the various elevated radiation levels throughout the site. The site is currently unused and is secured with fences and guards to prevent access. Amoco claims that permanent remedial action will cost between $11 million and $17 million.

    In 1982, Amoco brought this action in diversity, alleging various state law claims, including fraud and breach of contract. It later added the CERCLA claim to recover response costs incurred as a result of the radioactive contamination. The state law claims were tried to a jury. The jury found that Borden did not fraudulently misrepresent the condition of the property, but did find that Borden did not deliver the building, equipment, and machinery in a "clean and healthful" condition, as it had expressly warranted. Yet, because the jury also

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    found that Amoco should have known about the radioactivity prior to April 16, 1978, that claim was barred by the statute of limitations.

    Amoco continued to pursue its CERCLA cost recovery claim, which the district court bifurcated into liability and remedial phases. Borden's primary defenses against liability were: (1) that it had sold the property on an "as is" basis, and that this fact and the doctrine of caveat emptor should preclude a finding of liability; and (2) that the levels of radiation emanating from the site are not high enough to be considered a release of a hazardous substance within the meaning of CERCLA.

    On February 2, 1987, the district court issued a Memorandum and Order denying Amoco's motion for entry of judgment on the CERCLA claim. In that order, the court rejected Borden's caveat emptor argument, holding that common-law defenses do not apply to CERCLA claims and that there can be no implied transfer of CERCLA liability. The court further held, however, that Amoco must prove that some threshold level of radioactivity exists at the site in order to establish CERCLA liability and selected the standards for remedial actions at inactive uranium processing sites, see 40 C.F.R. Part 192 (1988) ("Inactive Tailings Standards"), promulgated by the Environmental Protection Agency ("EPA") under the Uranium Mill Tailings Radiation Control Act, 42 U.S.C.A. Secs. 7901-7942 (1983 & Supp.1989), to determine hazardous radionuclide levels.

    After hearing evidence at a later trial, the court used data that averaged radiation levels throughout the phosphogypsum pile and concluded that the property's radiation levels did not exceed the Inactive Tailings Standards. It then entered judgment for Borden. Amoco appeals the court's holding that a threshold level of radionuclides must be shown to exist at the site to establish CERCLA liability, the appropriateness of the Inactive Tailings Standards for defining that threshold, and the court's application of that standard.

  2. Discussion


    Congress enacted CERCLA in response to well-publicized toxic waste problems. H.R.Rep. No. 1016, 96th Cong., 2d Sess., pt. I, at 17-18 (1980), reprinted in 1980 U.S.Code Cong. & Admin.News 6119, 6120 [hereinafter House Report]; Developments in the Law--Toxic Waste Litigation, 99 Harv.L.Rev. 1458, 1466 (1986) [hereinafter Developments ]. Yet, because the final version was enacted as a "last-minute compromise" between three competing bills, it has "acquired a well-deserved notoriety for vaguely-drafted provisions and an indefinite, if not contradictory, legislative history." United States v. Mottolo, 605 F.Supp. 898, 902, 905 (D.N.H.1985).

    CERCLA substantially changed the legal machinery used to enforce environmental cleanup efforts and was enacted to fill gaps left in an earlier statute, the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.A. Secs. 6901-6987 (1983 & Supp.1989), as amended by Solid Waste Disposal Act Amendments of 1980, Pub.L. No. 96-482, 94 Stat. 2334. House Report, at 22, reprinted in 1980 U.S.Code Cong. & Admin.News at 6125; Developments, 99 Harv.L.Rev. at 1470-71. The RCRA left inactive sites largely unmonitored by the EPA unless they posed an imminent hazard. House Report, at 21-22, reprinted in 1980 U.S.Code Cong. & Admin.News at 6124-25. CERCLA addressed this problem "by establishing a means of controlling and financing both governmental and private responses to hazardous releases at abandoned and inactive waste disposal sites." Bulk Distribution Centers, Inc. v. Monsanto Co., 589 F.Supp. 1437, 1441 (S.D.Fla.1984); see New York v. Shore Realty Corp., 759 F.2d 1032, 1041-42 (2d Cir.1985). Section 9607(a), one of CERCLA's key provisions for furthering this objective, permits both government and private plaintiffs to recover from responsible parties the costs incurred in cleaning up and responding to hazardous substances at those sites.

    Because of the complexity of CERCLA cases, which often involve multiple defendants and difficult remedial questions, courts have bifurcated the liability and remedial, or damages, phases of CERCLA litigation. See United States v. Wade, 653 F.Supp. 11, 14-15 (E.D.Pa.1984); cf. United States v. Mottolo, 695 F.Supp. 615, 620-21 (D.N.H.1988) (resolving liability by summary judgment); United States v. Bliss, 667 F.Supp. 1298, 1308-09 (E.D.Mo.1987) (same). In doing so, disputed factual and legal issues pertaining only to liability are resolved before deciding the more complicated and technical questions of appropriate cleanup measures and the proportionate fault of liable parties. Bifurcation and

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    the use of summary judgment provide efficient approaches to these cases by narrowing the issues at each phase, by avoiding remedial questions if no liability attaches, and by potentially hastening remedial action or settlement discussions once liability is determined. See Mottolo, 695 F.Supp. at 620-21; Bliss, 667 F.Supp. at 1308-09; Wade, 653 F.Supp. at 14-15.

    B. Liability

    To establish a prima facie case of liability in a CERCLA cost recovery action, a plaintiff must prove: (1) that the site in question is a "facility" as defined in Sec. 9601(9); (2) that the defendant is a responsible person under Sec. 9607(a); (3) that a release or a threatened release of a hazardous substance has occurred; and (4) that the release or threatened release has caused the plaintiff to incur response costs. See, e.g., Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1152-53 (9th Cir.1989); Southland Corp. v...

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