Durham Mfg. Co. v. Merriam Mfg. Co.

• Decision Date: 17 December 2003
• Docket Number: No. 3:99CV2583 (GLG).,3:99CV2583 (GLG).
• Citation: 294 F.Supp.2d 251
• Parties: THE DURHAM MANUFACTURING COMPANY, Plaintiff, v. MERRIAM MANUFACTURING COMPANY, Allan E. Adams, and Aztec Industries, L.L.C., d/b/a American Metal Crafters, Defendants.
• Court: U.S. District Court — District of Connecticut

294 F.Supp.2d 251

THE DURHAM MANUFACTURING COMPANY, Plaintiff, v. MERRIAM MANUFACTURING COMPANY, Allan E. Adams, and Aztec Industries, L.L.C., d/b/a American Metal Crafters, Defendants.

No. 3:99CV2583 (GLG).

United States District Court, D. Connecticut.

December 17, 2003.

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Eric Lukingbeal, James P. Ray, Richard Michael Fil, Robinson & Cole, Hartford, CT, for Plaintiff.

Amy E. Souchuns, Gian-Matthew Ranelli, Joseph P. Williams, Shipman & Goodwin, James C. Graham, Pepe & Hazard, Hartford, CT, for Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

GOETTEL, District Judge.

Plaintiff, The Durham Manufacturing Company ("Durham"), has brought this environmental suit pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601, et seq. ("CERCLA"), against Defendants, Merriam Manufacturing Company ("Merriam"), Allan E. Adams, and Aztec Industries, L.L.C. ("Aztec"), d/b/a American Metal Crafters, seeking to recover costs incurred in responding to soil and ground-water contamination allegedly caused by the release of hazardous substances by Defendants. Plaintiff has also invoked this Court's supplemental jurisdiction over its state-law environmental claims, in which it has sought indemnification, declaratory and equitable relief, costs, and attorneys' fees against Defendants. Following a six-day bench trial, the Court renders the following findings of fact and conclusions of law.

FINDINGS OF FACT

I. The Parties

1. Plaintiff, The Durham Manufacturing Company, is a corporation organized under the laws of the State of Connecticut with its principal place of business in Durham, Connecticut.

2. Durham has operated a metal box fabrication business on a certain parcel of land known as 201 Main Street (formerly 84 Main Street), Durham, Connecticut (the "Durham Premises") since 1922. Its products include, inter alia, metal first aid kits, metal tool boxes, metal lock boxes, and metal cabinets, bins, drawers, packaging, and shelving.

3. Defendant, Merriam Manufacturing Company, was incorporated in Connecticut in 1851, and now has its principal place of business in Middletown, Connecticut.

4. From 1851 until March 1998, when a fire destroyed a portion of Merriam's plant and part of its manufacturing equipment, Merriam operated a metal box fabrication business in Durham, Connecticut, at 275-281 Main Street (the "Merriam Premises"). In the earlier years, Merriam primarily manufactured kitchenware and metal toys. Over the years, however, Merriam evolved into a manufacturer of metal containers, boxes, cases, and other metal parts. In fact, Durham and Merriam are competitors, and customers have periodically left one company to purchase products from the other.

5. As a result of the fire, by year-end 1998, Merriam had discontinued all operations at the Merriam Premises.

6. Although located on the same street in Durham, the Merriam Premises and the Durham Premises are located on separate, non-contiguous parcels of land, with the Merriam Premises to the north of the Durham Premises.

7. During the period when both companies were conducting manufacturing operations in Durham, Connecticut, Durham was a much larger company than Merriam with sales as much as ten times greater than those of Merriam. Durham also employed significantly more employees than Merriam. In the late 1990's, Merriam had approximately 50 employees, compared to Durham's approximately 240 employees.

8. Defendant Allan E. Adams became part owner of Merriam in 1960 and, since 1964, has been the owner of 100 percent of the outstanding shares of Merriam's stock. He also serves as its President. At all times relevant hereto, the officers of Merriam were Allan E. Adams, President, and Donna Noonan, Corporate Secretary.

9. Since 1974, Adams has been the sole owner of a fee simple interest in the Merriam Premises, which Merriam leased from Adams. Adams still owns the Merriam Premises, which he now leases to another tenant.

10. Defendant, Aztec Industries, L.L.C., was incorporated in Connecticut on April 20, 1998, by Carolyn Adams, the wife of Allan Adams, and Donna Noonan, Ken Pearson, and Daniel Pearson, who are the step-children of Allan Adams. On January 1, 1999, Aztec began manufacturing operations at 695 High Street in Middletown, Connecticut (the "High Street Premises").

11. Because of the fire in 1998, Merriam was required to use outside contractors for many of the manufacturing operations it had previously performed. This outsourcing of manufacturing operations by Merriam dramatically increased its cost of goods sold. In 1999, Aztec, doing business under the name "American Metal Crafters," began providing all of the manufacturing operations required by Merriam to fill its orders.

12. Aztec employs approximately twenty (20) former Merriam employees, as well as several supervisory employees from Merriam. Daniel Pearson was formerly in charge of purchasing and production for Merriam. He still performs those responsibilities for Aztec, as well as additional duties. Ken Pearson was formerly Sales Manager — Sales & Production for Merriam. He is currently employed by Merriam as its Sales Manager and is a member of Aztec. Donna Noonan was the controller and corporate secretary for Merriam. She continues to serve as Merriam's corporate secretary. She is also employed by Aztec and is a member of Aztec. Other employees of Aztec, including certain supervisory staff members, were also formerly employed by Merriam.

13. The High Street Premises were purchased in November 1998 by CAF Associates, L.L.C. ("CAF"), a Connecticut limited liability company of which Carolyn Adams is the sole member. The High Street Premises consist of approximately 157,000 square feet, of which 70,000 square feet were under lease to existing tenants at the time CAF acquired the property. CAF leases 85,069 square feet of the High Street Premises to Aztec pursuant to a written lease agreement for a term of five years, commencing on January 1, 1999. CAF leases another 1,000 square feet of the High Street Premises to Merriam pursuant to a written lease agreement, also for a five-year term, commencing January 1, 1999.

14. Merriam takes orders from its customers for the metal boxes that it sells, which Aztec manufactures to fill the orders in exchange for a subcontracting fee of approximately 90% of the price Merriam charges its customers. The boxes are sold under the "Merriam" label. Although Merriam is Aztec's primary customer, Aztec does perform manufacturing operations for a small number of customers other than Merriam.

15. Since January 1, 1999, Merriam's operations have been limited to sales, although on its web site www.merriammfg.com Merriam holds itself out as in the manufacturing business and as occupying an 80,000-square-foot facility in Middletown.

16. Some of the manufacturing equipment used by Aztec was salvaged from the fire at the Merriam Premises, which Aztec purchased from Merriam. Additionally, Aztec was required to lease a significant amount of equipment.

17. Aztec never undertook any manufacturing operations at the Merriam Premises in Durham, and Merriam has never undertaken any manufacturing operations at the High Street Premises in Middletown.

18. Prior to the creation of Aztec, the members of Aztec were aware of the environmental conditions and potential liabilities of Merriam and Adams with respect to the Merriam Premises.

19. Aztec maintains separate books, records, and bank accounts from Merriam. It files separate tax returns and maintains a separate payroll. It never agreed to assume the debts or liabilities of Merriam. Merriam and Aztec, however, do share a common mailing address.

II. The Manufacturing Processes and Use of Cleaning Solvents

20. Durham and Merriam used similar manufacturing processes for the fabrication of metal boxes, which, in general terms, involved the cutting, bending, cleaning, and painting of steel.

21. While there have been changes in the cleaning and painting processes over time, the basic metal box fabrication process at Merriam remained essentially unchanged for the better part of the twentieth century. Merriam purchased flat or cold-rolled steel, stamped and formed it into boxes, cleaned and painted them, and shipped them to customers.

22. Likewise, since 1922, Durham has used a similar manufacturing process.

23. In the manufacturing operations at both Durham and Merriam, the metal boxes had to be cleaned or degreased before being painted. At various times over the years, both companies used chlorinated solvents, such as trichloroethylene ("TCE") and methylene chloride, as cleaning agents. Other non-chlorinated solvents have also been used at various times as paint thinners.

24. Durham has used chlorinated solvents for cleaning and degreasing from approximately 1947 to the present. It began with TCE, then switched to 1,1,1-trichloroethane ("TCA") in 1967, which it continued to use until 1980. Durham also used methylene chloride from 1976 until 1997.

25. As part of its manufacturing operations, Merriam used TCE as its primary parts cleaner from 1940 until 1953. From 1953 to 1978, Merriam cleaned parts using "Oakite," a water-based cleaner that did not contain chlorinated compounds. Merriam began using TCE in a small parts washer from 1974 to 1986 and methylene chloride in its larger degreaser from 1978 to 1986. Both washers were converted to TCA in 1986. Merriam used TCA from 1986 to 1993.

26. By the late 1980's, Merriam, like many industrial companies, had identified alternatives to chlorinated solvents. In 1990, it eliminated its small parts washer. In 1993, Merriam replaced its large parts cleaner with a water-based system, thus permanently eliminating the use of chlorinated solvents. Merriam's decision to eliminate the use of chlorinated solvents in its operations eliminated all risk of release of...