CPC Intern., Inc. v. Aerojet-General Corp.

• Decision Date: 27 August 1991
• Docket Number: No. G89-10503 CA,G89-961 CA.,G89-10503 CA
• Citation: 777 F. Supp. 549
• Parties: CPC INTERNATIONAL, INC., Plaintiff, v. AEROJET-GENERAL CORPORATION, Cordova Chemical Company, Cordova Chemical Company of Michigan, and Michigan Department of Natural Resources, Defendants. UNITED STATES of America, Plaintiff, v. CORDOVA CHEMICAL COMPANY OF MICHIGAN, Cordova Chemical Company of California, Aerojet-General Corporation, CPC International, Inc., and Dr. Arnold C. Ott, Defendants. CPC INTERNATIONAL, INC., Third-party Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANY, et al., Third-party Defendants.
• Court: U.S. District Court — Western District of Michigan

777 F. Supp. 549

CPC INTERNATIONAL, INC., Plaintiff, v. AEROJET-GENERAL CORPORATION, Cordova Chemical Company, Cordova Chemical Company of Michigan, and Michigan Department of Natural Resources, Defendants.

UNITED STATES of America, Plaintiff, v. CORDOVA CHEMICAL COMPANY OF MICHIGAN, Cordova Chemical Company of California, Aerojet-General Corporation, CPC International, Inc., and Dr. Arnold C. Ott, Defendants.

CPC INTERNATIONAL, INC., Third-party Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANY, et al., Third-party Defendants.

Nos. G89-10503 CA, G89-961 CA.

United States District Court, W.D. Michigan, S.D.

August 27, 1991.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Patrick J. Conlon, Roseland, N.J., J. Michael Smith, Gordon J. Quist, Miller, Johnson, Snell & Cummiskey, Grand Rapids, Mich., Randy M. Mott, Raissa Kirk, Robert T. Lee, Stephen E. Williams, Mott, Williams & Lee, PC, Washington, D.C., William S. Wells, CPC Intern., Inc., Englewood Cliffs, N.J., for CPC Intern. Inc.

John D. Tully, Warner, Norcross & Judd, Grand Rapids, Mich., for Aerojet-General Corp., Cordova Chemical Co. and Cordova Chemical Co. of Mich Thomas J. Gezon, Michael L. Shiparski, Asst. U.S. Attys., Grand Rapids, Mich., Michael J. McNulty, Gregory L. Sukys, and Thomas Carroll, U.S. Dept. of Justice, Environmental Enforcement Section, Environment and Natural Resources Div., Washington, D.C., Nicholas Bollo, and Larry L. Johnson, Associate Regional Counsel, U.S. EPA, Region V, Chicago, Ill., for U.S.

Stewart H. Freeman, Kathleen L. Cavanaugh and Eric J. Eggan, Asst. Attys. Gen., Frank J. Kelley, Atty. Gen., Environmental Protection Div., Lansing, Mich., for Michigan Dept. of Natural Resources.

HILLMAN, Senior District Judge.

                                               TABLE OF CONTENTS
                  I. INTRODUCTION ............................................................ 554
                 II. FINDINGS OF FACT ........................................................ 555
                     A. Background ........................................................... 555
                        1. Ownership ......................................................... 555
                        2. Contamination ..................................................... 555
                        3. EPA's response .................................................... 556
                        4. Stipulations ...................................................... 556
                     B. Ownership by Ott I: 1957 to 1965 ..................................... 557
                     C. Ownership by Ott II: 1965 to 1972 .................................... 557
                        1. Acquisition of Ott I .............................................. 557
                        2. Board of directors ................................................ 558
                        3. Management ........................................................ 559
                        4. CPC's development company ......................................... 560
                        5. Environmental matters ............................................. 561
                        6. Financial matters ................................................. 562
                        7. Labor matters ..................................................... 562
                        8. Other business matters ............................................ 562
                        9. Sale of Ott II to Story ........................................... 562
                     D. Ownership by Story: 1972 to 1977 ..................................... 562
                     E. Agreement between MDNR and Cordova/California: 1977 .................. 562
                        1. MDNR's environmental emergency .................................... 562
                        2. Negotiations between MDNR and Aerojet's Cordova Chemical Co.        563
                        3. The stipulation and consent order ................................. 564
                     F. Ownership by Cordova/California and Cordova/Michigan: Since 1977 ..... 567
                        1. Acquisition of the site ........................................... 567
                        2. Incorporation of Cordova/California, Cordova/Michigan ............. 568
                        3. Aerojet's direct involvement with the site ........................ 568
                        4. Integration of business ........................................... 568
                        5. Board of directors ................................................ 569
                        6. Management ........................................................ 569
                        7. Financial matters ................................................. 570
                III. CONCLUSIONS OF LAW ...................................................... 570
                     A. CERCLA overview ...................................................... 570
                     B. Conclusions of law regarding CPC liability ........................... 571
                        1. Claims against CPC ................................................ 571
                        2. Section 107(a)(2) "operator" liability ............................ 571
                           a. Parent corporation liability under section 107(a)(2) ........... 571
                           b. Liability of CPC under section 107(a)(2) ....................... 574
                     C. Conclusions of law regarding MDNR liability .......................... 576
                        1. Claims against MDNR ............................................... 576
                        2. Section 107(a)(3) "arranger" liability ............................ 576
                        3. Section 107(a)(2) "operator" liability ............................ 577
                     D. Conclusions of law regarding liability of Aerojet, Cordova/California, 578
                        Cordova/Michigan
                        1. Claims against Aerojet and its subsidiaries ....................... 578
                

                        2. Section 107(a)(1) "present owner" liability ...................... 578
                        3. Section 107(a)(2) "operator" liability ........................... 579
                        4. Section 107(a)(3) "arranger" liability ........................... 580
                        5. Section 107(b)(3) innocent landowner defense ..................... 580
                 IV. CONCLUSION ............................................................. 581
                

I. INTRODUCTION

This consolidated action involves a series of claims brought under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ? 9601 et seq. (1988). The parties are litigating who must pay past and future costs incurred in the environmental cleanup of the soil, surface water and groundwater surrounding a dormant chemical manufacturing plant that has become one of the nation's most severely contaminated areas.

Following denial of summary judgment on liability issues,¹ the CERCLA liability phase of this case was tried before the court over 15 days in May and June 1991. This opinion sets forth the court's findings of fact and conclusions of law regarding CERCLA liability.

The parties participating in the liability phase were the United States; CPC International, Inc. ("CPC"); the Michigan Department of Natural Resources ("MDNR"); and Aerojet-General Corporation ("Aerojet"), along with its two wholly owned subsidiaries, Cordova Chemical Company and Cordova Chemical Company of Michigan (collectively, "the Cordova defendants").²

CPC, MDNR and the Cordova defendants each defended theories of liability advanced by the United States or other defendants under CERCLA's liability provisions in section 107(a) of the statute.³ 42 U.S.C. ? 9607(a). The court heard live testimony from 29 witnesses, received all or part of dozens of depositions, and admitted more than 2,300 trial exhibits. Following the trial, each party submitted proposed findings of fact and conclusions of law. On June 28, 1991, the parties delivered closing arguments.

After careful consideration of all the evidence and arguments set forth, the court makes the following findings of fact and conclusions of law on the issues of CERCLA liability, in accordance with Fed. R.Civ.P. 52(a).⁴

II. FINDINGS OF FACT

A. Background

1. Ownership

The site of contamination that is the subject of this litigation is located at 500 Agard Road in Dalton Township, Michigan, ("the site"), near Muskegon in a primarily rural area in the western part of the state. Groundwater underneath the site flows through an aquifer in a southeasterly direction toward two waterways, Little Bear Creek and the Unnamed Tributary.

From approximately 1959 to 1986, the site was used by a series of owners as a chemical manufacturing facility for the production of a variety of synthetic organic intermediate chemicals used for pharmaceutical, veterinary and agricultural purposes.

From 1957 to 1965, the site was owned and operated by the Ott Chemical Company, a Michigan corporation ("Ott I").

From 1965 to 1972, the site was owned and operated by a wholly owned subsidiary of CPC International, Inc. ("CPC")⁵, known as Ott Chemical Company ("Ott II").

In 1972, Ott II sold the site to Story Chemical Company ("Story"), a Georgia corporation. Story owned and operated the site until it was adjudicated bankrupt in 1977.

In 1977, the Michigan Department of Natural Resources ("MDNR") initiated a regulatory investigation at the site aimed at determining the extent of environmental problems and possible remedies. As part of its efforts, MDNR tried to attract a new purchaser for the site who would participate in a cleanup of the site. As a result of these efforts MDNR entered into negotiations with Aerojet-General Corporation and its subsidiary, Cordova Chemical Company. These negotiations were fruitful and on October 13, 1977, Cordova Chemical Company ("Cordova/California") signed a "stipulation and consent order" with MDNR that set forth obligations with respect to efforts to remedy environmental contamination problems at the site. One day later, Cordova/California, a wholly owned subsidiary of Aerojet-General Corporation ("Aerojet"), purchased the site from the Story bankruptcy trustee.

In 1978, Cordova Chemical Co. of Michigan ("Cordova/Michigan"), a wholly owned subsidiary of Cordova/California, became the owner of the site. Cordova/Michigan continues to own the site, but the facility has not been in operation since 1986.

2. Contamination

Prior to the commencement of...