Cooper Dev. Co. v. First Nat. Bank of Boston

• Citation: 762 F. Supp. 1145
• Decision Date: 25 April 1991
• Docket Number: Civ. A. No. 90-2678.
• Parties: COOPER DEVELOPMENT COMPANY, INC., Plaintiff, v. FIRST NATIONAL BANK OF BOSTON, as Trustee of the Cooper Laboratories, Inc., Stockholders Liquidating Trust, Defendant.
• Court: U.S. District Court — District of New Jersey

762 F. Supp. 1145

COOPER DEVELOPMENT COMPANY, INC., Plaintiff, v. FIRST NATIONAL BANK OF BOSTON, as Trustee of the Cooper Laboratories, Inc., Stockholders Liquidating Trust, Defendant.

Civ. A. No. 90-2678.

United States District Court, D. New Jersey.

April 25, 1991.

John Agnello, Carella, Byrne, Bain, Gilfillan, Cecchi & Stewart, Roseland, N.J., and Richard E. Wallace, John G. Bickerman, Kaye, Scholer, Fierman, Hays & Handler, Washington, D.C., for plaintiff.

Michael L. Rodburg, Stephen H. Skoller, David A. Thomas, Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, N.J., for defendant.

OPINION

WOLIN, District Judge.

In this case, the Court must decide the scope of application of the New Jersey Environmental Cleanup and Responsibility Act ("ECRA") to a corporate transaction involving a parent corporation and its subsidiary. Before the Court are defendant's motion to dismiss this suit pursuant to Federal Rule 12(b)(6) and plaintiff's cross-motion for partial summary judgment pursuant to Federal Rule 56. For the reasons expressed below, the Court will deny defendant's motion to dismiss. Because the Court finds that defendant is liable for a share of plaintiff's cleanup costs, it will grant, in part, plaintiff's motion for partial summary judgment.

I. BACKGROUND

In September 1982, Cooper Laboratories ("Laboratories"), for which the defendant First National Bank of Boston ("First National") is acting as trustee, incorporated Cooper Development ("Cooper") as its wholly-owned subsidiary.¹ On November 1, 1983, Laboratories acquired the Freehold Facility,² a manufacturing facility which produces biomedical products, and transferred it to Cooper on the same day. Laboratories provided administrative and managerial services to Cooper, including tax, treasury, legal, risk management, investor relations, corporate development, financial reporting and data processing. Cooper began publicly trading its stock in 1983, although Laboratories remained an 85 percent shareholder.

On June 17, 1985, in accordance with a liquidation plan, Laboratories transferred its controlling interest in Cooper, about 85 percent of the shares of Cooper, to Laboratories shareholders. Laboratories simultaneously filed a Certificate of Dissolution with the state of Delaware. Pursuant to its Plan of Liquidation, Laboratories entered into the Cooper Laboratories, Inc. Stockholders' Liquidating Trust Agreement dated June 21, 1985 with defendant First National. In the Trust Agreement, Laboratories transferred to First National, as trustee, all of its liabilities and obligations, as well as certain assets³ which had not been distributed to its stockholders or disbursed to creditors. Neither Laboratories nor Cooper complied with ECRA's notice and reporting requirements in executing this transaction.

In 1986, Cooper sought to sell the Freehold Facility. As required by ECRA, Cooper filed a notice with the New Jersey Department of Environmental Protection (NJDEP) in connection with the proposed transfer of the facility. NJDEP required that Cooper investigate the contamination at the Freehold Facility, propose a cleanup plan that was subject to state approval and undertake cleanup in accordance with the approved plan. In its investigation, Cooper found that production processes had caused groundwater and other contamination at the Freehold Facility. The costs of the cleanup have already exceeded one million dollars and Cooper estimates that on-going cleanup activities will cost several million dollars.

On July 5, 1990, NJDEP sent Laboratories a letter informing the company that its dissolution in 1985 was conducted in violation of ECRA and requesting that the company submit portions of ECRA Initial Notice forms. Barbara Murray, Chief of NJDEP's Bureau of ECRA Applicability and Compliance, confirmed in an affidavit that the July 5 letter accurately reflects NJDEP's position. Counsel for First National, as Laboratories' trustee, responded to NJDEP's letter in December 1990 and claimed that Cooper was solely responsible for the non-compliance. To date, NJDEP has taken no further action on this matter.

II. DISCUSSION

This case presents issues of first impression. Few courts have interpreted ECRA and it has meager legislative history.⁴ The primary issues implicated in these motions are: (1) ECRA's application to Laboratories' dissolution and stock distribution in 1985, (2) Laboratories' or Cooper's responsibility for complying with ECRA, and (3) Cooper's ability to recover damages from Laboratories in a private cause of action under ECRA.

A. Procedural Standards

(1) Motion to Dismiss

In determining whether a complaint should be dismissed for failure to state a claim pursuant to 12(b)(6), the Court must limit its consideration to the facts alleged in the complaint. Biesenbach v. Guenther, 588 F.2d 400, 402 (3d Cir.1978). Moreover, in its examination of the complaint, the Court is required to accept all of the allegations contained therein and all inferences arising therefrom as true. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). Unless plaintiff can prove no set of facts in support of its claim that would entitle it to relief, its complaint should not be dismissed. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); D.P. Enterprises v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir.1984).

(2) Standard for Summary Judgment

Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The party moving for summary judgment has the burden of showing that there is no genuine issue of material fact, and once the moving party has sustained this burden, the opposing party must introduce specific evidence showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Williams v. Borough of West Chester, 891 F.2d 458, 464 (3d Cir.1989).

A genuine issue is not established unless the evidence, viewed in a light most favorable to the nonmoving party, would allow a reasonable jury to return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986); Radich v. Goode, 886 F.2d 1391, 1395 (3d Cir.1989). If the evidence is merely colorable or is not significantly probative, summary judgment may be granted. Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2510-11; Radich, 886 F.2d at 1395. Whether a fact is material is determined by substantive law. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; United States v. 225 Cartons, 871 F.2d 409, 419 (3d Cir.1989).

B. Description of ECRA

Enacted in 1983,⁵ ECRA represented the New Jersey Legislature's response to the problem of abandoned hazardous waste sites. New Jersey Department of Environmental Protection v. Ventron, 94 N.J. 473, 468 A.2d 150 (1983), a suit brought by NJDEP against the current owners of a decaying chemical plant and their predecessors in interest, illustrated the difficulties that governmental agencies experienced in cleaning up abandoned facilities. NJDEP was compelled to engage in expensive and time-consuming litigation to remedy the environmental damage at the plant. In similar situations, state and federal agencies were forced to initiate comprehensive cleanup efforts and legal actions against previous owners. ECRA's sponsor, State Senator Raymond Lesniak, explained that contaminated property "leaves a blight on our State and health hazards and economic burdens to our residents." See Lesniak, ECRA is Coming, 104 N.J.Law. 41 (1983). ECRA was passed in response to Ventron-type problems at hazardous industrial facilities.

ECRA's primary purpose is to impose liability for cleanup costs on property owners without protracted litigation. As courts have recognized, "the essential goal of ECRA is to secure the cleanup of contaminated industrial sites at the earliest possible date." Dixon Venture v. J. Dixon Crucible, 235 N.J.Super. 105, 111, 561 A.2d 663 (App.Div.1989), aff'd as modified, 122 N.J. 228, 584 A.2d 797 (1991). This motive is expressed in the legislature's finding that

the generation, handling, storage and disposal of hazardous substances and wastes pose an inherent danger of exposing citizens, property and natural resources of this State to substantial risk of harm or degradation; that the closing of operations and the transfer of real property utilized for the ... hazardous substances and wastes should be conducted in a rational and orderly way, so as to minimize potential risks; and that it is necessary to impose a precondition on any closure or transfer of these operations by requiring the adequate preparation and implementation of acceptable cleanup procedures....

N.J.Stat.Ann. § 13:1K-7. As the court observed in Superior Air Products v. NL Indus., 216 N.J.Super. 46, 522 A.2d 1025 (App.Div.1987), ECRA imposes "a self-executing duty to remediate without the necessity and delay" of a determination of liability through litigation. Id. at 63, 522 A.2d 1025.

ECRA requires all "industrial establishments"⁶ to obtain prior NJDEP approval of either a negative declaration that the site is free from possible contamination or a cleanup plan as a precondition to the sale, closure or transfer of business operations. N.J.Stat.Ann. § 13:1K-9. Any "owner or operator" of an industrial establishment planning to sell or close operations must notify NJDEP within five days after public release of its decision to close or within five days of the execution of any agreement of sale or option to buy, as applicable. N.J. Stat.Ann. § 13:1K-9. The NJDEP regulations describe the type of information to be submitted, including inventories of hazardous substances, description of current operations, copies of all soil, groundwater and surface water sampling results and details of the impending transaction....