Hatco Corp. v. WR Grace & Co.-Conn.

• Decision Date: 27 July 1992
• Docket Number: Civ. A. No. 89-1031.
• Citation: 801 F. Supp. 1309
• Parties: HATCO CORPORATION, Plaintiff, v. W.R. GRACE & CO. — CONN., Defendant and Third Party Plaintiff, v. ALLSTATE INSURANCE COMPANY (as Successor to Northbrook Excess and Surplus Insurance Company), et al., Third-Party Defendants.
• Court: U.S. District Court — District of New Jersey

801 F. Supp. 1309

HATCO CORPORATION, Plaintiff, v. W.R. GRACE & CO. — CONN., Defendant and Third Party Plaintiff, v. ALLSTATE INSURANCE COMPANY (as Successor to Northbrook Excess and Surplus Insurance Company), et al., Third-Party Defendants.

Civ. A. No. 89-1031.

United States District Court, D. New Jersey.

July 27, 1992.

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Aubrey M. Daniel, III, Paul Mogin, Evan J. Roth, Dane H. Butswinkas, Williams & Connolly, Washington, D.C., Robert M. Goodman, Carpenter, Bennett & Morrissey, Newark, N.J., for plaintiff.

Randy Paar, Elizabeth A. Sherwin, Frank S. Occhipinti, Anderson Kill Olick & Oshinsky, New York City, Anthony Marchetta, Hannoch Weisman, Roseland, N.J., for defendant.

OPINION

WOLIN, District Judge.

Our society's destruction of its own living environment is a problem that we increasingly must confront. For centuries humankind has polluted the Earth's land, air and waterways with impunity, under the assumptions, now known to be false, that the Earth's resources are inexhaustible, and that advances in technology would in any event solve our environmental problems faster than we could create them.

To some extent we are all responsible for the past lax practices of industry and government.¹ That we, through our representatives in government, tolerated standards and practices that allowed wholesale dumping of untreated chemicals and other forms of hazardous waste onto our land, and into our water and air, bespeaks of our lack of forethought as a society. To the extent these cheaper, though harmful waste disposal practices lowered the prices we paid for consumers products or government services, or created wealth for great numbers of shareholders of publicly traded companies, the inescapable fact remains that we all benefitted directly from this conduct.

At long last we have recognized the frailty created by our shortsightedness and have begun to take steps to reduce the rate of the Earth's destruction, and to remediate our past transgressions against the planet. For its part, through the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. § 9601 et seq., Congress has fashioned a statutory framework intended to motivate individuals to cleanup their own land by providing the incentive that they may recover all costs from other parties to whom the environmental damage is attributable. Conceived in haste and born out of compromise, that statute has produced significant litigation over the meaning of even its most basic terms,² and has not, after a decade, produced a fraction of the results envisioned by Congress. As this case well demonstrates, the legal, economic and political difficulties involved in fairly and accurately allocating financial responsibility for the cleanup of past environmental abuses present problems perhaps more daunting than the scientific and engineering problems faced in the actual remediation of the polluted sites.

This is a case brought pursuant to CERCLA and state common law. The current owner of an industrial site located in Fords, New Jersey — Hatco Corporation ("Hatco") — who has conducted chemical manufacturing operations on the site for thirteen years, has sued its predecessor-in-title — W.R. Grace & Co. — Conn. ("Grace") — who conducted chemical manufacturing operations on the site for close to twenty years. A cast of numerous third-fourth- and fifth-party insurance company defendants have been impleaded into the action. All are battling to avoid responsibility for costs to monitor, evaluate and remediate the Fords tract.

For more than three decades, that site has been polluted by a wide variety of toxic chemical compounds (including known carcinogens) that have been defined by the Environmental Protection Agency as "hazardous substances." Voluminous evidence presented to the Court demonstrates the extent to which this land has been polluted. Through the practice of pumping millions of pounds of effluent yearly from its chemical manufacturing operations into lagoons and holding ponds on the site, the owners and operators of the site have thoroughly saturated the ground with toxic wastes. Much of it continues to migrate under the earth, spreading the poisons over a wider area and contaminating the groundwater. Illustrative of conditions at the site is the existence of a marsh filled with black sludge that exudes a strong mothball odor. Estimates of potential cleanup costs have been suggested by the parties in the range from "tens of millions" of dollars upward to $100 million.

Before the Court are a number of motions by and between Hatco and Grace. First are cross-motions for summary judgment on the issue whether Grace's liabilities under CERCLA were assumed by Hatco under the 1978 Sale Agreement in which Hatco purchased the Fords, New Jersey facility that is the subject of this action. Grace asserts that it is entitled to a judgment, as a matter of law, that under the Sale Agreement, Hatco assumed responsibility and agreed to indemnify Grace for all costs to remediate and remove hazardous substances that may have been disposed of on the Fords site when it was owned by Grace, with the exception of those liabilities for which Grace is effectively insured. Hatco, conversely, asserts that it is entitled to a judgment as a matter of law that it did not under the Agreement assume any such responsibilities. For the reasons that follow, the Court will deny Grace's motion and grant Hatco's motion.

Second is the motion of Grace for summary judgment in its favor on Hatco's claim under state common law for damage to property based on a theory of strict liability. Grace bases its motion on the grounds that: (1) Hatco assumed the risk of the abnormally dangerous conditions at the site; and (2) Hatco's claims are time-barred by the statute of limitations. For the reasons that follow, Grace's motion will be granted on the statute of limitations ground.

Third is a motion by Hatco to strike a number of defenses from Grace's Answer to the Second Amended Complaint. For the reasons stated below, that motion will be granted in substantial part.

Fourth is a motion by Hatco for partial summary judgment against Grace on the issue of Grace's liability for all response costs under CERCLA. Grace has cross-moved, contingent on the Court granting Hatco's motion, for a declaration that Hatco is liable in contribution for its equitable share of response costs. Hatco's motion will be denied, and Grace's motion will therefore not be reached.

Fifth are cross-motions for summary judgment on the issue whether response costs already incurred by Hatco to clean up one area of the site were incurred in compliance with the national contingency plan. Both motions will be denied.

Last, the parties have cross-moved for summary judgment on the issue whether attorneys' fees are recoverable by a private party in a response cost action under CERCLA. Because the Court adheres to its view, expressed in a previous case, that such fees are not recoverable, Hatco's motion will be denied, and Grace's will be granted.

BACKGROUND

From 1959 until 1978, Grace owned and operated a chemical manufacturing business located on an approximately 80-acre tract of land in Fords, New Jersey, that used and produced a number of different chemical products, consisting primarily of plasticisers and synthetic lubricants. The business was run by a division of Grace known as Hatco Chemical Division. On August 21, 1978, Grace simultaneously sold "the Chemical Assets other than the Chemical Realty" of the Hatco Chemical Division to the Farben Corporation ("Farben"), and the "Chemical Realty" to the Fuss Corporation ("Fuss"). Fuss and Farben were owned by Alex Kaufman, who had worked at the Fords Hatco site for over twenty years, both for Grace and its predecessor. On September 1, 1978, Farben changed its name to the Hatco Chemical Corporation. On September 30, 1978, Fuss merged into the Hatco Chemical Corporation. On October 28, 1986, the Hatco Chemical Corporation was renamed the Hatco Corporation.

In the Sale Agreement, "Assumed Liabilities and Obligations" is defined as:

(a) liabilities of Chemical³ reflected in, reserved against or noted on the Closing Net Statement, other than Excluded Liabilities;

and

(b) the following obligations and liabilities existing on the date of the Closing, or in the case of those described in clause (iv), arising thereafter, whether or not they are reflected in, reserved against or noted on the Closing Net Statement:

(i) obligations with respect to sales orders accepted by the Chemical Business⁴ other than Excluded Liabilities;

(ii) obligations for goods and services ordered by the Chemical Business, other than Excluded Liabilities;

(iii) liabilities and obligations with respect to capital expenditures described in any Request for Capital Appropriation approved in accordance with Seller's customary procedures by the management of the Chemical Business, or any management group of Seller senior thereto;

(iv) other obligations and liabilities arising in the ordinary course of the Chemical Business, whether prior to or after the date of Closing, other than Excluded Liabilities;

(v) other liabilities and obligations of which Alex Kaufman or David G. Seabrook has actual present personal knowledge and awareness at the date of this agreement, other than Excluded Liabilities; and

(vi) other liabilities and obligations which do not exceed $5,000 per item and $50,000 in the aggregate, other than Excluded Liabilities.

Sale Agreement § 1.11 (JA 187).⁵

The Sale Agreement defines "Excluded Liabilities" to include, among other items, "liabilities against which Seller is effectively insured, without regard to any applicable deductible amounts", and "the liabilities specifically described in the schedule to this Section." Sale Agreement § 1.10(c), (h).⁶ Included in the schedule...