Canadyne-Georgia Corp v. Nationsbank N.A., CANADYNE-GEORGIA

• Decision Date: 11 August 1999
• Docket Number: No. 97-9357,CANADYNE-GEORGIA,97-9357
• Citation: 183 F.3d 1269
• Parties: (11th Cir. 1999) CORPORATION, Plaintiff-Appellant, v. NATIONSBANK, N.A. (SOUTH), as successor by merger to Bank South, f.k.a. Bank South, N.A., etc., Individually and in its capacity and executor and trustee of the J.W. Woolfolk Trust; THE J. W. WOOLFOLK TRUST, et al., Defendants-Appellees
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1269

183 F.3d 1269 (11th Cir. 1999)

CANADYNE-GEORGIA CORPORATION, Plaintiff-Appellant, v. NATIONSBANK, N.A. (SOUTH), as successor by

merger to Bank South, f.k.a. Bank South, N.A., etc.,

Individually and in its capacity and executor and trustee

of the J.W. Woolfolk Trust; THE J. W. WOOLFOLK

TRUST, et al., Defendants-Appellees.

No. 97-9357

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

August 11, 1999

[Copyrighted Material Omitted] Appeal from the United States District Court for the Middle District of Georgia D. C. Docket No. 5:96-CV-114-1(DF)

Before EDMONDSON and BLACK, Circuit Judges, and RESTANI^*, Judge.

BLACK, Circuit Judge:

Appellant Canadyne-Georgia Corporation (Canadyne) appeals the district court's dismissal, pursuant to Fed. R. Civ. P. 12(b)(6), of Canadyne's complaint against NationsBank, N.A. (South) (the Bank). Canadyne's allegations, if proved, would support its claims against the Bank. Accordingly, we reverse the district court's dismissal of the complaint and remand for further proceedings.

I. BACKGROUND

Between 1990 and 1995, the Environmental Protection Agency (EPA) issued orders requiring, among other things, that Canadyne evaluate property in Fort Valley, Georgia (the Site), relocate residents living near the Site, remove contaminated soil from the Site, and purify the groundwater at the Site. Under the direction of the EPA and the Georgia Environmental Protection Division (GEPD), Canadyne has spent the last decade and many millions of dollars cleaning up the Site. On March 22, 1996, Canadyne sued the Bank, as well as the J. W. Woolfolk Trust (the Woolfolk Trust), the current trustees of the Woolfolk Trust, Woolfolk Chemical Works, Ltd. (WCW), and certain former partners in WCW, claiming they were liable under the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA), the Georgia Hazardous Site Response Act (HSRA), and Georgia common law for response costs Canadyne has incurred in cleaning up the Site.

The parties' connection to the Site goes back over 80 years. In 1921, Mr. John W. Woolfolk founded a company, which in 1941 became WCW. Mr. Woolfolk was a general partner in WCW, which manufactured pesticides at the Site from 1942 to 1972. Woolfolk's pesticide plant released the hazardous substances, including arsenic, that Canadyne has been required to clean up.

In 1942, Mr. Woolfolk established for the benefit of his daughters three inter vivos trusts, for which the Bank's predecessor, Fulton National Bank of Atlanta, served as co-trustee.¹ The trusts owned greater than 50% of the limited partnership interests in WCW. Mr. Woolfolk died in 1945. His will named the Bank as co-executor of his estate, which included his general partnership interest in WCW. Five years later, the Bank became a trustee of the Woolfolk Trust, the assets of which included Mr. Woolfolk's general partnership interest in WCW.

In 1972, WCW incorporated, and in 1977, it was purchased by a corporate affiliate of Canadyne. Canadyne sold the pesticide business and most of its assets in 1984. Subsequently, the Bank resigned as trustee of the Woolfolk Trust and the inter vivos trusts and delivered the trust assets to new trustees. As discussed above, it was not until the 1990s that the EPA required Canadyne to clean up the Site.

Canadyne sued, and the Bank moved to dismiss Canadyne's amended complaint under Rule 12(b)(6) for failure to state a claim upon which relief could be granted. The district court granted the Bank's motion, concluding the Bank was not a "covered person" within the meaning of 107(a)(1) of CERCLA.² Canadyne-Georgia Corp. v. NationsBank, 982 F. Supp. 886, 890 (M.D. Ga. 1997). As for Canadyne's state law claims, the district court held that, as Georgia's HSRA statute incorporates the same definitions and standards for owner and operator liability as CERCLA, dismissal of Canadyne's CERCLA claims mandated dismissal of its state law HSRA claim. Id. at 891. The district court further held that, since the Bank had no liability under either CERCLA or HSRA, Canadyne's other state law claims under Georgia common law for contribution, indemnity, and restitution also failed as a matter of law. Id. On appeal, Canadyne asserts the district court erred in concluding that the Bank was not a "covered person" under CERCLA.³

II. STANDARD OF REVIEW

"In reviewing de novo a dismissal pursuant to Rule 12(b)(6), we apply the same standard as did the district court." South Florida Water Management Dist. v. Montalvo, 84 F.3d 402, 406 (11th Cir. 1996) (citation omitted). "The motion must be denied unless it is clear the plaintiff can prove no set of facts in support of the claims in the complaint." Id. (citation omitted).

III. DISCUSSION

Canadyne brought its CERCLA contribution claim against the Bank under 107(a) and 113(f) of CERCLA, codified at 42 U.S.C. 9607(a), 9613(f). Section 113(f) provides "[a]ny person may seek contribution from any other person who is liable or potentially liable under section 9607(a) [ 107(a)] of this title." 42 U.S.C. 9613(f)(1).

Canadyne alleges the Bank is liable as an "owner" of the Site under 107(a)(2) of CERCLA, which imposes liability on "any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of."⁴ 42 U.S.C. 9607(a)(2) (emphasis added). In this regard, Canadyne emphasizes that during the time of contamination, the Bank served as a trustee for trusts, the assets of which included a general partnership interest and limited partnership interests in WCW, the company that allegedly contaminated the Site. In response, the Bank contends it cannot be deemed an "owner" under 107(a)(2) and, even if it can, it is exempt from liability under the Asset Conservation Act.⁵

CERCLA imposes two barriers Canadyne must overcome at the outset to avoid dismissal of its claims against the Bank. First, CERCLA subjects only "covered persons" to liability. There are only four classes of potentially responsible parties under 107(a). 42 U.S.C. 9607(a). As discussed above, Canadyne claims the Bank is potentially responsible, because it was an "owner" of the Site at the time of the disposal of hazardous substances. Second, even if deemed "owners" under CERCLA, fiduciaries like the Bank are protected from personal liability, with a few exceptions, by the Asset Conservation Act.⁶ Canadyne must overcome each barrier separately. Although we could address the issues in either order, for the sake of simplicity, we will address them in the same order as did the district court.

The question of whether a particular defendant can be deemed an "owner" under CERCLA turns on application of state law, and consequently, the answer may vary from state to state. See Redwing Carriers, Inc. v. Saraland Apartments Ltd., 94 F.3d 1489, 1498 (11th Cir. 1996). In this case, we look to Georgia law at the time of the release of hazardous substances at the Site to determine whether the Bank was an owner for purposes of CERCLA liability. Even though the Bank technically held its WCW general partnership interest in trust, under Georgia law, the Bank held legal title to and therefore owned the general partnership interest. See O.C.G.A. 53-12-2(11) (trustee "hold[s] legal title to the property in trust"). The Bank therefore owned whatever property the general partners of WCW owned.

Under current Georgia law, the partnership, not the individual partners, owns real property held in the name of the partnership. O.C.G.A. 14-8-8(f). At the time the Bank held a general partnership interest in WCW, however, the individual partners owned the real property of the partnership. See Bloodworth v. Bloodworth, 178 S.E.2d 198, 200 (Ga. 1970) ("Legal title to real property can never vest in a partnership as such; legal title is in the partners as tenants in common." (citations omitted)). Since the Bank owned a general partnership interest that owned the Site, the Bank owned the Site. Thus, under Georgia law and, ipso facto, for purposes of CERCLA, the Bank was an "owner."⁷ See Redwing Carriers, 94 F.3d at 1498 (equating the holding of title to being an owner under CERCLA). We now turn to the closer question of whether the Bank was entitled to dismissal of Canadyne's claims by virtue of the Asset Conservation Act.

In 1996, Congress enacted the Asset Conservation Act. The Act amended 107 of CERCLA to protect fiduciaries from personal liability for the costs of cleaning up environmental hazards:

Section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9607) is amended by adding at the end the following: '(n) Liability of fiduciaries.-

(1) In general.-

The liability of a fiduciary under any provision of this Act for the release or threatened release of a hazardous substance at, from, or in connection with a vessel or facility held in a fiduciary capacity shall not exceed the assets held in the fiduciary capacity.'

Asset Conservation Act, Pub. L. No. 104-208, Div. A., Title II, Subtitle E, 2502, 110 Stat. 3009, 3009-462 (1996). In general, the amendment limits the liability of fiduciaries to the assets held in a fiduciary capacity.⁸ That is, fiduciaries, even those who might otherwise be deemed "owners" under 107(a), generally cannot be held personally liable under CERCLA. There are, however, a few narrow exceptions to fiduciaries' exemption from CERCLA liability.

Canadyne argues for application of the exception found in 2502(n)(3) of the Asset Conservation Act.⁹ That subsection provides that the Act "do[es] not limit the liability pertaining to a release or threatened release of a hazardous substance if negligence of a fiduciary causes or contributes to the release or threatened release." 42 U.S.C. 9607(n)(3). Citing this negligence exception to the Act's limitation of fiduciary liability, Canadyne claims that the Bank's negligence caused or contributed...