City Of St. Louis v. Velsicol Chem. Corp., Case No. 07-13683-BC.

• Court: United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
• Writing for the Court: THOMAS L. LUDINGTON
• Citation: 708 F.Supp.2d 632
• Decision Date: 25 March 2010
• Docket Number: Case No. 07-13683-BC.
• Parties: CITY OF ST. LOUIS, Plaintiff,v.VELSICOL CHEMICAL CORP., NWI-1, Inc., formerly known as Fruit of the Loom; Lepetomane II, Inc., as Trustee of the Fruit of the Loom Successor Liquidation Trust; Lepetomane III, Inc., as Trustee of the Fruit of the Loom Custodial Trust; Edgewood Farms, Inc.; John Does 1-300; Defendants.United States of America, Intervenor.

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CITY OF ST. LOUIS, Plaintiff,
v.
VELSICOL CHEMICAL CORP., NWI-1, Inc., formerly known as Fruit of the Loom; Lepetomane II, Inc., as Trustee of the Fruit of the Loom Successor Liquidation Trust; Lepetomane III, Inc., as Trustee of the Fruit of the Loom Custodial Trust; Edgewood Farms, Inc.; John Does 1-300; Defendants.
United States of America, Intervenor.

Case No. 07-13683-BC.

United States District Court,
E.D. Michigan,
Northern Division.

March 25, 2010.

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David K. Otis, Plunkett & Cooney, East Lansing, MI, Nicholas G. Campins, Sara D. Van Loh, Victor M. Sher, Sher Leff LLP, San Francisco, CA, for Plaintiff.

Ann Marie Uetz, Foley & Lardner LLP, Detroit, MI, Eric P. Gotting, Winston & Strawn, Washington, DC, J. Michael Smith, James S. Brady, Miller, Johnson, Grand Rapids, MI, for Defendants. ORDER DENYING PLAINTIFF'S MOTION TO REMAND, GRANTING THE UNITED STATES' MOTION TO INTERVENE, AND DENYING PLAINTIFFS' MOTIONS TO STRIKETHOMAS L. LUDINGTON, District Judge.

On July 9, 2007, Plaintiff City of St. Louis filed a complaint in Gratiot County Circuit Court arising out of the contamination and threatened contamination of its drinking water system against Velsicol Chemical Corporation; NWI-1, Inc.; Lepetomane II, Inc., as Trustee of the Fruit of the Loom Successor Liquidation Trust; Lepetomane III, Inc., as Trustee of the Fruit of the Loom Custodial Trust; Edgewood Farms, Inc., and John Does 1-300. On August 31, 2007, Lepetomane II and III and NWI-1 removed the case to this Court. Velsicol consented to the removal. Edgewood Farms has not yet appeared or answered the complaint.

The notice of removal asserts that federal subject matter jurisdiction is premised on bankruptcy removal jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 1452(a), federal officer removal jurisdiction pursuant to 28 U.S.C. § 1442(a), and diversity jurisdiction pursuant to 28 U.S.C. § 1332. Now before the Court are Plaintiff's motion to remand [Dkt. # 16] filed on October

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8, 2007; and the United States' motion to intervene [Dkt. # 30] filed on December 14, 2007. The Court held a hearing on the motions on January 23, 2008. Shortly thereafter, pursuant to the parties' requests, the Court stayed the proceedings to allow the parties to devote full efforts to investigating settlement alternatives.

Subsequently, on January 15, 2010, the Court lifted the stay, noting the extended period of time that the case had been stayed without coming to a negotiated resolution. The Court provided the parties with an opportunity to supplement the prior briefing, and held a second hearing on February 24, 2010. As further explained below, Plaintiff's motion to remand will be denied because the Court has bankruptcy removal jurisdiction pursuant to §§ 1334(b) and 1452(a) and federal officer removal jurisdiction pursuant to § 1442(a). In addition, the United States' motion to intervene will be granted to allow the United States to protect its interests.

I

Plaintiff City of St. Louis is organized as a municipal corporation and owns and operates a public drinking water system that provides drinking water to residents and businesses in and around St. Louis, Michigan. Compl. ¶¶ 1, 6 (Notice of Removal Ex. A). The water system includes production wells that draw drinking water from groundwater aquifers, and pumping, storage, and distribution facilities and equipment. Id. ¶ 6. Plaintiff alleges that it has “a significant property interest in the waters it appropriates and uses from its wells.” Id. ¶ 6.

Plaintiff alleges that from 1965 to 1978, Velsicol owned and operated a fifty-two acre DDT (dichlorodiphenyltrichlorethane) manufacturing site (“plant site”) on the Pine River in St. Louis, Michigan, where it manufactured, stored, and handled DDT and various DDT related by-products and wastes, including p-CBSA (para-Chlorobenzene Sulfonic Acid). Id. ¶¶ 7, 26. DDT was used as a pesticide in agriculture, until it was prohibited by the federal government in 1972 due to the substantial risks it posed to human health and the environment. Id. ¶¶ 2, 18. Likewise, the byproduct p-CBSA negatively impacts human health and the environment. Id. ¶ 20.

Plaintiff alleges that Velsicol utilized poor waste management practices at the plant site and various locations in and around St. Louis, where it “injected, buried, discharged, disposed of, failed to contain and/or otherwise released into the environment p-CBSA and other harmful chemicals.” Id. ¶¶ 7, 29. Plaintiff refers to these locations as “Contaminated Sites.” Id. ¶ 3. In particular, Plaintiff alleges that from the 1930s to the 1970s, Velsicol and its predecessor in interest stored and disposed of p-CBSA and other hazardous wastes at a Contaminated Site known as the “burn pit” or “golf course site,” located across the Pine River from the main Velsicol site. Id. ¶ 28. Plaintiff also alleges that Velsicol discharged contaminants directly into the Pine River, making it unadvisable to eat fish from the Pine River to this day. Id. ¶ 27.

Additionally, Plaintiff alleges that each Defendant to this action is a current or former operator or owner of the Contaminated Sites. Id. ¶ 4. Plaintiff alleges that Edgewood Farms, and possibly others, acquired the golf course site at some unidentified point in time. Id. ¶ 28. Plaintiff alleges that Northwest Industries (“NWI”) purchased Velsicol in 1965 and that NWI became the successor owner of the plant site in 1986. Id. ¶ 8. Plaintiff alleges that at some point NWI became a subsidiary of Fruit of the Loom, Inc. (“FTL”). Id. ¶ 8. Through a bankruptcy proceeding that began in December 1999, FTL and NWI

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were reorganized into NWI-1, Inc Id. ¶ 8. Lepetomane III is the Trustee of the Custodial Trust, which was created through the bankruptcy proceeding to manage and address the environmental liabilities related to seven properties of which it became the owner, at least one of which is a Contaminated Site. Id. ¶ 9. Lepetomane II is the Trustee of the Successor Trust, which was created through the bankruptcy proceeding to hold financial assets on behalf of the Custodial Trust to be used for remediation of the seven properties owned by the Custodial Trust. Id. ¶ 10.

Plaintiff alleges that p-CBSA and other harmful chemicals from the Contaminated Sites have migrated and continue to migrate in the earth's subsurface, contaminating and imminently threatening to contaminate Plaintiff's wells and water supply. Id. ¶¶ 3, 7, 21, 25, 29. Plaintiff alleges that p-CBSA has been detected at varying times and in varying amounts in water extracted from Plaintiff's wells, and further alleges that because p-CBSA is highly soluble in water and moves freely at approximately the rate of the groundwater's flow, its presence is known to be a precursor to detection of other harmful chemicals from the same source. Id. ¶ 2, 20, 24, 33.

Plaintiff alleges that in 1982, as part of a clean-up effort, Velsicol removed contamination at the golf course site and other Contaminated Sites, deposited those contaminated soils at the plant site, and attempted to contain the contamination there. Id. ¶ 30. Despite the effort, the containment system continues to leak various harmful chemicals into the Pine River and the drinking water aquifer, “all to Plaintiff's detriment and injury.” Id. ¶ 30. Plaintiff alleges that its injuries constitute an “unreasonable interference with, and damage to, the limited subterranean supplies of fresh drinking water on which Plaintiff's wells depend and in which Plaintiff has a significant property interest.” Id. ¶ 34. Plaintiff alleges that its “interest in protecting the quality of its limited drinking water supplies constitutes a reason personal for seeking damages sufficient to restore and/or replace such drinking water supplies to their pre-contamination condition.” Id. ¶ 34.

Plaintiff seeks an award of exemplary damages against Velsicol, in an amount that is “sufficient to compensate Plaintiff for the humiliation, outrage, and indignity it has suffered by Velsicol's wanton acts.” Id. ¶ 32, 57, 66, 74. Plaintiff alleges that Velsicol knew or should have known of the “grave harm and threat to public health” that its poor waste management practices caused and knew or should have known that its actions were threatening widespread pollution of groundwater, contamination of public and private drinking water supplies, and increased costs to public water suppliers and their customers. Id. ¶ 2, 31. Plaintiff alleges that Velsicol “knew that it was substantially certain” that its acts and omissions would cause injury and damage, including contamination of water supplies by p-CBSA and other harmful chemicals. Id. ¶ 32.

Count one of the complaint alleges violations of the Michigan Natural Resources Environmental Protection Act (“NREPA”), Mich. Comp. Laws § 324.20126a(7), against each Defendant, except Edgewood Farms. Id. ¶¶ 36-46. Plaintiff alleges that Velsicol and NWI-1 are jointly and severally liable for Plaintiff's necessary response costs because each owned and operated one of more of the Contaminated Sites at the time of the disposal of the hazardous wastes, and was responsible for causing the release and threat of release of the hazardous substances. Id. ¶ 42. Similarly, Plaintiff alleges that the Custodial and Successor Trusts are also jointly and severally liable because the Custodial

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Trust owns and operates one of the Contaminated Sites and the Successor Trust “is the trust of the Custodial Trust.” Id. ¶¶ 44-45. Plaintiff alleges that necessary response costs include monitoring and investigation costs, studies, treatment and replacement of wells, and other remedial actions to remove p-CBSA from its drinking water supplies. Id. ¶ 46.

Count two of the complaint alleges nuisance against all Defendants. Id. ¶¶ 47-57. Plaintiff states...