Elf Atochem North America v. US

• Court: U.S. District Court — Eastern District of Pennsylvania
• Writing for the Court: JOYNER
• Citation: Elf Atochem North America v. US, 914 F. Supp. 1166 (E.D. Pa. 1996)
• Decision Date: 12 February 1996
• Docket Number: 94-0662.,Civ. A. No. 92-7458
• Parties: ELF ATOCHEM NORTH AMERICA v. UNITED STATES of America and Witco Corporation. UNITED STATES of America v. WITCO CORPORATION v. ELF ATOCHEM NORTH AMERICA.

914 F. Supp. 1166

ELF ATOCHEM NORTH AMERICA v. UNITED STATES of America and Witco Corporation.

UNITED STATES of America v. WITCO CORPORATION v. ELF ATOCHEM NORTH AMERICA.

Civ. A. Nos. 92-7458, 94-0662.

United States District Court, E.D. Pennsylvania.

February 12, 1996.

William J. Kennedy, Frederick G. Herold, Eli R. Brill, Dechert, Price & Rhoads, Philadelphia, PA, for Elf Atochem North America, Inc.

Brud Rossmann, U.S. Department of Justice, Environmental and Natural Resources Division, Jonathan A. Marks, U.S. Department of Justice, Environmental Enforcement Section, Washington, DC, for United States.

Michael R. Lazerwitz, Charles F. Lettow, Christopher G. Smith, Cleary, Gottlieb, Steen

& Hamilton, Washington, DC, for Witco Corporation.

MEMORANDUM

JOYNER, District Judge.

Today we resolve cross-motions for summary judgment asking whether the United States is liable as an Owner, Operator and/or Arranger under section 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601-75 (1995) (CERCLA).

The claims against the United States are based on manufacturing activities that took place during World War Two at a location now known as the Myers Property. In 1941, Elko Chemical Works, Inc. obtained a one-year government contract to manufacture arsenic trichloride for the government. Arsenic trichloride is a component of the poison gas Lewisite, which was in high demand at the time. That demand was quickly satisfied, however, and the United States terminated Elko's arsenic contract in 1942. In 1944, Elko obtained a contract to manufacture DDT for the United States and soon after, sold its facilities at the Myers Property to PennSalt Manufacturing Company, which assumed the DDT contract and continued to produce DDT at the Myers Property. PennSalt is the predecessor in interest to Elf Atochem North America, a Plaintiff and Third-Party Defendant in these consolidated actions.

Today, the land and ground water on and around the Myers Property are contaminated with many hazardous substances, including arsenic as well as chlorobenzene and benzene, which are used in the manufacture of DDT. In 1983, the Environmental Protection Agency placed the Myers Property on CERCLA's National Priorities List. In 1992, Elf and the EPA entered into a consent decree that requires Elf to remediate the Myers Property, but allows it to seek contribution from other sources. Elf seeks contribution from Witco Corporation, a subsequent owner of the Myers Property, and from the United States for its actions during World War Two. These consolidated actions have resulted. The particular facts relevant to these motions will be discussed as needed in the body of the analysis.

SUMMARY JUDGMENT STANDARD

In considering a motion for summary judgment, a court must consider whether the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show there is no genuine issue of material fact, and whether the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must determine whether the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

All of the facts must be viewed in the light most favorable to the non-moving party and all reasonable inferences must be drawn in favor of the non-moving party. Id. at 256, 106 S.Ct. at 2514. Once the moving party has met the initial burden of demonstrating the absence of a genuine issue of material fact, the non-moving party must establish the existence of each element of its case. J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir.1990), cert. denied, 499 U.S. 921, 111 S.Ct. 1313, 113 L.Ed.2d 246 (1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986)).

I. DISCUSSION

Witco moves for a summary judgment that the United States is liable as an Owner and Arranger under § 107(a). The United States cross-moves for a summary judgment that it is not liable as either an Owner, Arranger or Operator. Elf maintains that this Court need not decide either motion because the United States has already been found liable as an Owner of DDT facilities. Under CERCLA, once a party is liable in any respect, joint and several liability attaches. Despite this, we will consider the United States's potential additional liability and thereby clarify this complicated action's issues for trial.

The tests for Owner, Arranger and Operator liability are each different, but certain critical elements are common to all three. These are (1) whether one owns facilities and (2) whether one manages or controls the operations. We will look at these two common issues first and then apply them to each liability category in turn.

A. Ownership of the Arsenic Chlorinators

Witco asserts that the United States owned certain chlorinators used to manufacture arsenic trichloride. This ownership is based on the United States's alleged financing of Elko's acquisition of the chlorinators, probably through a system of advance payments. Lee Kolker 1993 Dep. at pp. 44-45; Witco Mot.Ex. 7. Under the law and regulations of the time, title to things financed by the United States immediately vested in the United States upon its making of advance payments.¹ 10 C.F.R. § 81.10(f)(2)(ii) (1938 & Supp.1940).

The United States agrees that the evidence suggests that it financed some of Elko's equipment, but maintains that no evidence directly ties it to the chlorinators. In fact, it proffers evidence that when Elko bid on the arsenic trichloride contract, it already owned the chlorinators, and therefor, their purchase could not have been financed by the United States. See U.S. Response at Ex. C.

Witco has not met its burden of showing no genuine issue of fact as to United States ownership of the arsenic trichloride chlorinators. For this reason, and as discussed more fully below, any aspect of these motions that depends on a finding of ownership of this equipment must be denied.

B. Control of the Chemical Production

The second major issue is the level of management and/or control the United States had at the Myers Property. Witco contends that the United States was intimately involved with its operations, in part through the United States's unprecedented control over the American economy and private businesses during World War Two. With respect to the Myers Property, Witco and Elf point to evidence they assert shows extensive involvement, ranging from inspection powers to housing an Army Second Lieutenant at the Myers Property for security purposes. The United States also made recommendations for draft deferments for Elko employees, established strict guidelines for the exact product it required and gave Elko advice on safety in handling the finished products. An allegedly telling example of control was when the Army officer discovered that an Elko employee was of German descent and was sending money to Germany. After this discovery, the Government allegedly ordered Elko to fire this employee.

In response, the United States maintains that much of the above evidence does not show control so much as simple regulation. In FMC Corp. v. United States, 29 F.3d 833 (3d Cir.1994), the Third Circuit held that regulatory powers did not constitute actual control. In addition, in United States v. Vertac Chem. Corp., 46 F.3d 803, 811 (8th Cir.1995), cert. denied, ___ U.S. ___, 115 S.Ct. 2609, 132 L.Ed.2d 853 (1995), the Court ruled that allocation of raw materials did not constitute possession or ownership. Further, that any Government control over price, quality and quantity of production was simply a requirement of the contracts between it, Elko and PennSalt. The Government asserts its right to enter into contracts with specifications, delivery dates and the like, without being converted into a controller of the manufacture of the product.

Courts that find management or control have done so in situations where there is day to day management of the facility or actual control. FMC, 29 F.3d at 843; United States v. Fleet Factors Corp., 901 F.2d 1550, 1558 (11th Cir.1990), cert. denied, 498 U.S. 1046, 111 S.Ct. 752, 112 L.Ed.2d 772 (1991). In contrast, when there is only financial advice or actions that are common in a traditional lender-borrower relation, sufficient management is not found. United States v. McLamb, 5 F.3d 69, 72 (4th Cir.1993); Waterville Indus. v. Finance Auth., 984 F.2d 549 (1st Cir.1993); In re Bergsoe Metal Corp., 910 F.2d 668, 672 (9th Cir.1990); Maxus Energy Corp. v. United States, 898 F.Supp. 399 (N.D.Tex.1995); Rospatch Jessco Corp. v. Chrysler Corp. No. 93-47 (W.D.Mich. Aug. 9, 1995); Z & Z Leasing, Inc. v. Graying Reel, Inc., 873 F.Supp. 51, 55 (W.D.Mich.1995); Guidice v. BFG Electroplating & Mfg. Co., 732 F.Supp. 556, 562 (W.D.Pa.1989).

We find that there is a genuine issue of fact whether the United States managed or controlled the Myers Property operations. The test for control uses a totality of the circumstances standard, which is unusual to resolve on summary judgment. This is especially so here, where several of the factors such as the number and nature of on-site inspections and visits are disputed. Accordingly, we will deny summary judgment on any issue for which control or management is an element.

II. OWNER LIABILITY

As resolved above, there is a material issue of fact as to whether the United States owned the arsenic chlorinators, which precludes summary judgment on liability due to ownership of that equipment. It also precludes the secured creditor exemption the United States proffers as an affirmative defense because this exemption looks to both ownership and management issues in its analysis. 42 U.S.C. § 9601(20)(A); United States v. Fleet Factors Corp., 901 F.2d 1550, 1555-56 (11th Cir.1990), cert. denied,...