Farmland Industries, Inc. v. Morrison-Quirk Grain Corp.

• Decision Date: 11 May 1993
• Docket Number: Nos. 92-1322,MORRISON-QUIRK,92-1390,s. 92-1322
• Citation: 987 F.2d 1335
• Parties: 23 Envtl. L. Rep. 20,869 FARMLAND INDUSTRIES, INC., Appellee/Cross-Appellant, v.GRAIN CORPORATION, a dissolved Nebraska corporation; Morrison Enterprises, a Nebraska partnership, Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1335

987 F.2d 1335

23 Envtl. L. Rep. 20,869

FARMLAND INDUSTRIES, INC., Appellee/Cross-Appellant, v. MORRISON-QUIRK GRAIN CORPORATION, a dissolved Nebraska corporation; Morrison Enterprises, a Nebraska partnership, Appellants/Cross-Appellees.

Nos. 92-1322, 92-1390.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 10, 1992.

Decided March 8, 1993.

Rehearing Denied May 11, 1993.

William T. Session, Kansas City, MO, argued (Richard H. Ralston and Miriam Glueck, Kansas City, MO, and Scott Davis, Lincoln, NE, on brief), for appellants.

Alvin D. Shapiro, Kansas City, MO, argued (Terry R. Wittler, Lincoln, NE and Edmund S. Gross, Kansas City, MO, on brief), for appellee.

Before FAGG, BEAM, and HANSEN, Circuit Judges.

BEAM, Circuit Judge.

Morrison Enterprises and Farmland Industries ¹ appeal from jury verdicts denying them indemnity for response costs incurred under the Comprehensive Environmental Response Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (CERCLA). The facts of this case were hotly contested, both at trial and on appeal. Some facts, however, are uncontroverted, and these facts form the basis for our decision. We therefore reverse and remand for a new trial without reaching the issues of credibility raised by the parties.

I. BACKGROUND

The Environmental Protection Agency added the FAR-MAR-CO subsite ("subsite"), near Hastings, Nebraska, to the National Priorities List in 1986. Because of soil and groundwater contamination found at and near the subsite, it was designated a "Superfund" site. In 1988 the United States brought a CERCLA action against Morrison Enterprises ("Morrison") for past and future response costs incurred by the government at the subsite.

On May 4, 1990, the district court entered partial summary judgment in favor of the United States in its suit against Morrison. United States v. Morrison-Quirk Grain Corp., No. 88-L-720 Memorandum Opinion and Order, 1990 WL 482139 (D.Neb. May 4, 1990) ("previous case"). In this previous case, the district court determined that Morrison owned the subsite during the time that a hazardous release occurred, and that Morrison was a responsible person under 42 U.S.C. § 9607(a)(2). ² The court expressly stated in the previous case, however, that its holding was not based on a determination that Morrison had caused the contamination at the subsite.

Shortly after the government filed suit against Morrison in 1988, Farmland Industries ("Farmland") filed this declaratory judgment action against Morrison. Farmland sought a ruling that Morrison would be liable for any response costs incurred by Farmland in connection with the investigation and clean-up of the subsite. Morrison filed a counterclaim against Farmland seeking contribution and indemnity for costs already incurred and for any future costs incurred in connection with the clean-up of the subsite. ³

Morrison owned the subsite from 1954 until 1975, when Farmland purchased the site. The subsite consists of approximately 100 acres, and includes a number of grain elevators. Morrison operated a grain storage and handling business at the subsite during the years that it owned the property. In connection with its business activities, Morrison stored liquid grain fumigants, including Max-Kill 10, in a 3000- to 4000-gallon tank on top of Grain Elevator No. 2. Max-Kill 10 is a liquid grain fumigant that contains carbon tetrachloride and ethylene dibromide. Both carbon tetrachloride and ethylene dibromide are hazardous substances as defined in 42 U.S.C. § 9601(14).

In 1959, a grain dust explosion occurred at the grain elevator facility at the subsite. The explosion dislodged the large Max-Kill 10 storage tank from its position on top of Grain Elevator No. 2. According to insurance claims filed at the time, 940 gallons of Max-Kill 10 were lost as a result of this explosion.

When Farmland acquired the subsite from Morrison in 1975, it also purchased the storage tank. At the time of Farmland's purchase, the storage tank contained approximately 2500 gallons of Max-Kill 10. Farmland used both liquid and solid grain fumigants at the subsite. Sometime between 1982 and 1983, Farmland discovered that the Max-Kill 10 storage tank was empty.

The jury heard all of the evidence and returned a verdict for Morrison on Farmland's claim, and a verdict for Farmland on Morrison's counterclaim. Both parties filed post-trial motions seeking judgment notwithstanding the verdict, or in the alternative, seeking a new trial. The district court denied these motions, and the parties appealed.

II. DISCUSSION

The parties raise numerous issues on appeal. Farmland contends that the district court erred when it failed to accord collateral estoppel effect to the previous case brought against Morrison by the government. Morrison contends that the district court erroneously instructed the jury, thereby preventing the jury from properly considering Morrison's indemnity claim. Both parties also allege numerous other errors.

A. Collateral Estoppel

Farmland contends that the district court should have accorded collateral estoppel effect to the previous case. In that decision, the district court found Morrison to be a responsible person under 42 U.S.C. § 9607. As a responsible person under the statute, Morrison is liable to the government for any response costs it incurred at the subsite. According to Farmland, principles of collateral estoppel mandate a finding that Morrison caused the contamination at the subsite. We do not agree. Farmland's argument is based on a misunderstanding of the holding in the previous case.

Under 42 U.S.C. § 9607, liability to the United States for CERCLA response costs is a matter of strict liability. See United States v. Monsanto Co., 858 F.2d 160, 168 (4th Cir.1988), cert. denied, 490 U.S. 1106, 109 S.Ct. 3156, 104 L.Ed.2d 1019 (1989); New York v. Shore Realty Corp., 759 F.2d 1032, 1042 (2d Cir.1985). Liability, therefore, is not dependent on any showing of causation or fault. New York v. Shore Realty, 759 F.2d at 1044-45 ("Congress specifically rejected including a causation requirement in section 9607(a).... We will not interpret section 9607(a) in any way that apparently frustrates the statute's goals...."); United States v. Bliss, 667 F.Supp. 1298, 1304 (E.D.Mo.1987) ( [l]iability under CERCLA is strict, without regard to the liable party's fault or state of mind). In the previous case, the district court correctly concluded that causation was not at issue in a section 9607 recovery action. United States v. Morrison-Quirk Grain Corp., No. 88-L-720 Memorandum and Order at 2-3 (D.Neb. June 20, 1990). Therefore, the previous case determined only that Morrison was a responsible party under section 9607. Farmland Indus., Inc. v. Morrison-Quirk Grain Corp., No. 88-L-718 Memorandum and Order at 1 (D.Neb. Dec. 31, 1991), Appellant's Addendum at 2. Causation was simply not at issue.

Before collateral estoppel will bar relitigation of a factual issue in a subsequent proceeding, the prior determination must satisfy a four-part test:

(1) the issue sought to be precluded must be the same as that involved in the prior action;

(2) the issue must have been litigated in the prior action;

(3) the issue must have been determined by a valid and final judgment; and

(4) the determination must have been essential to the prior judgment.

In re Miera, 926 F.2d 741, 743 (8th Cir.1991). The party asserting collateral estoppel bears the burden of proving that a prior decision satisfies all four elements of the test. Id.; Spilman v. Harley, 656 F.2d 224, 229 (6th Cir.1981). If the party against whom the earlier decision is being asserted did not have a full and fair opportunity to litigate the issue in question collateral estoppel does not apply. In re Miera, 926 F.2d at 743; Lovell v. Mixon, 719 F.2d 1373, 1376 (8th Cir.1983). Farmland cannot satisfy any part of this test. Therefore, the district court did not err when it refused to give collateral estoppel effect to the previous case.

The issue of whether Morrison should be liable to Farmland for any expenses incurred as a result of contamination at the subsite is inextricably linked to causation. ⁴ General Electric Co. v. Litton Indus. Automation Sys., Inc., 920 F.2d 1415, 1417 (8th Cir.1990) (a private party seeking to recover response costs from a section 9607 responsible party must prove that the release of hazardous substances caused the response costs at issue), cert. denied, --- U.S. ----, 111 S.Ct. 1390, 113 L.Ed.2d 446 (1991). The district court, however, specifically refused to consider issues of causation in the previous case. The district court ruled that Morrison was a responsible person under section 9607 because [a]dequate evidence has been presented to indicate that no question remains as to whether some type of release into the environment occurred at the Far-Mar-Co site, either as a result of the explosion, spilling and leaking, or pouring the fumigant in rat holes.

I do not decide at this time whether Morrison-Quirk is solely responsible for the response costs....

United States v. Morrison-Quirk Grain Corp., No. 88-L-720, Memorandum and Order at 8, 1990 WL 482139 (D.Neb. May 4, 1990), Appellee's Addendum at 8. The district court only determined that: (1) the subsite was a facility; (2) a threatened release or a release from the subsite had occurred; (3) the release or threatened release caused the United States to incur response costs; and (4) the defendant is a responsible party. Id. at 3 (citing United States v. Aceto Agric. Chems. Corp., 872 F.2d 1373, 1378-79 (8th Cir.1989)).

Farmland relies on the third element, that "the release or threatened release caused the United States to incur response costs," as support for its collateral estoppel argument. However, the record belies this interpretation of the previous case. In its discussion of the third element, response costs, the district court stated:

[t]he requirement...