In re Kaiser Gypsum Co.
| Decision Date | 13 November 2020 |
| Docket Number | Case No. 16-31602 (JCW) |
| Court | U.S. Bankruptcy Court — Western District of North Carolina |
| Parties | In re: KAISER GYPSUM COMPANY, INC., et al., Debtors. |
(Jointly Administered)
This matter arises from the Fifth Omnibus Objection to Lower Duwamish Waterway Claims, an objection filed by debtors Hanson Permanente Cement, Inc. and Kaiser Gypsum Company, Inc. to the claims numbered 30, 32, 48, and 56 filed by Glacier Northwest, Inc., two against each Debtor. Glacier subsequently withdrew its claims against Kaiser (Claim Nos. 30 and 48) and withdrew from its claims against Hanson (Claim Nos. 32 and 56) recovery of costs incurred in response to contamination in the Lower Duwamish Waterway and recovery of future costs to be incurred in response to contamination in the LDW or at properties currently or formerly owned by Glacier [Docket No. 2126].
Glacier has maintained its claim against Hanson seeking recovery of past response costs incurred in the upland portion of an approximately 18-acre property owned by Glacier, located at 5900 and 5096 West Marginal Way in Seattle, Washington (the "Property"). Glacier asserts a right to contribution pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., and the Washington Model Toxics Control Act ("MTCA"), Ch. 70.105D RCW. In addition to seeking contribution for costs that it has incurred, Glacier also seeks contribution for response costs incurred by Reichhold Chemicals, Inc. ("Reichhold"), which assigned its rights to Glacier as part of a settlement reached between Glacier and Reichhold in Reichhold's bankruptcy. Glacier alleges that these combined past costs total approximately $8.6 million and seeks contribution from Hanson for thirty-seven and one-half percent (37.5%) of these past costs, or $3,230,597. Hanson has objected to Glacier's claim arguing that it is not a liable party or, alternatively, if liable, it should be allocated only a de minimis share of the costs incurred.
This claim objection was heard by the Court on June 24, 25, and 30 and July 1, 2020. Hanson and Kaiser Gypsum Company, Inc. (collectively, "Debtors") were represented by C. Marie Eckert of Miller Nash Graham & Dunn, LLP, Gregory M. Gordon and Paul Green of Jones Day, and Jack Miller of Rayburn Cooper & Durham, P.A. Glacier was represented by Amit D. Ranade of Hillis Clark Martin & Peterson P.S. Due to CV-19 and the ensuing "stay at home' orders" issued by various Governors, and with the consent of the parties, this hearing was conducted by videoconferencing technology. Extensive evidence, including testimony and documents, was presented at the hearing, and each party presented a closing argument. At the conclusion of the hearing, the Court requested that each party submit proposed findings of fact and conclusions of law. The Court has carefully considered the parties' pre-hearing briefs, thetestimony presented at the hearing, the exhibits admitted into evidence, oral arguments of counsel, and proposed findings of fact and conclusions of law. The Court, being fully advised, now makes the following Findings of Fact and Conclusions of Law.
1. Since 1991, Glacier has owned the Property, which is comprised of an upland portion of about 13.8 acres and an aquatic portion of about 4.2 acres [Amended Joint Statement of Stipulated Facts [Docket No. 2295] ("JSF") ¶ 3]. The aquatic portion is within an embayment in the Lower Duwamish Waterway ("LDW"), commonly known as Glacier Bay [Id.].
2. The Property is in a historically industrial part of Seattle, where the Duwamish River has been dredged into a deeper water channel known as the Lower Duwamish Waterway ("LDW"). Sediments in the LDW are heavily polluted with hazardous substances. The LDW is a federal Superfund site and is on the Hazardous Sites List maintained by the Washington Department of Ecology ("Ecology"). The U.S. Environmental Protection Agency ("EPA") and Ecology have parceled oversight responsibilities between them. EPA is the lead agency overseeing the investigation and cleanup of LDW sediments, while Ecology is the lead agency overseeing the investigation and cleanup of properties that are potential sources of contamination to the LDW. With respect to the Property, the allocation of responsibility means EPA is leading investigation and cleanup of the sediments in the aquatic portion of the Property while Ecology is leading investigation and cleanup of the upland portion of the Property.
3. In the 1920s, the Duwamish River was dredged and straightened into a deeper water channel to accommodate marine transportation and the growth of industrial activities along the river. Dredged material was deposited on the Property and other riverfront properties. Industrialization in the area was in its nascent stages at the time.
4. For nearly thirty years prior to the time that Hanson began leasing the Property in 1965, there were extensive industrial operations that both parties agree led to contamination of soil and groundwater at the Property [See JSF ¶¶ 4-16]. The prior contaminating operators and the periods of their respective operations include, among others, Mineralized Cell Wood Preserving Company (1936-1939), the United States by and through Carlisle Lumber Company (1940-43) and Crown Zellerbach Corporation (1943-44), and Reichhold Chemicals, Inc. (1946-1961) [Id.].
5. Between 1936 and 1939, Mineralized Cell Wood Preserving Company ("Mineralized Cell") used portions of the Property to treat and preserve timber [JSF ¶ 5]. This process involved applying a solution containing arsenic, copper, and zinc to the ends of freshly cut logs, with excess solution dripping to the ground [Id.]. Mineralized Cell is now defunct. Mineralized Cell's operations are a source of arsenic, copper, and zinc at the Property [Id.]. During the period of Mineralized Cell's operations, the Property was owned by King County, Washington ("King County") [JSF, App. 1].
6. Between 1940 and 1944, the United States Army and entities it contracted with used portions of the Property to manufacture activated charcoal and whetlerite for use in gas masks [JSF ¶ 6]. Between 1940 and 1942, under contract with the United States, Carlisle Lumber Company ("Carlisle") constructed a manufacturing plant for this purpose on the northern end of the Property [Id.]. Carlisle operated this plant until February 1943, at which point the United States awarded a contract to Crown Zellerbach Corporation ("Crown"). Crown upgraded the Army plant and operated it until November 1944 [Id.].
7. The Army plant consisted of structures made of wood and corrugated metal with steel frames. Some structures had wooden floors; others stood on concrete slabs no thicker thanfour inches. Given the types of foundation, flooring, and materials used for these structures, the construction during this period required relatively minimal soil excavation [Ex. 33].
8. The operations of the United States, Carlisle, and Crown are a source of arsenic, carcinogenic polycyclic aromatic hydrocarbons ("cPAHs"), copper, dioxins and furans, polychlorinated biphenyls ("PCBs"), total petroleum hydrocarbons, and zinc at the Property [JSF ¶ 6]. During the period when the United States, Carlisle, and Crown operated the Property, the Property was owned by the following entities: King County (1940-April 1943), Carlisle-related entities (April 1943-July 1943), and the United States (July 1943-November 1944) [JSF, App. 1].
9. A 1945 report by the Washington Pollution Control Commission noted that Crown's activities included dumping discarded charcoal and sawdust on the ground [JSF ¶ 7]. The report also observed that Crown was discharging copper ammoniate, a byproduct of the manufacturing process, that drained into the LDW and recommended that Crown instead dump the byproduct on land upland from the LDW [Id.]. The report noted that this part of the Property was already being used as a "dumping ground" by Crown for discarded charcoal and sawdust [Ex. 9 at 11-12].
10. From 1946 to 1961, the United States continued to own the Property and leased the Property to Reichhold to operate a chemical manufacturing plant [JSF ¶ 9 & App. 1]. The lease required Reichhold to maintain the charcoal/whetlerite structures, machinery, and equipment in case the United States needed to resume production [JSF ¶ 9]. Reichhold used the Property to produce resins, glues, formaldehyde, pentachlorophenol ("PCP"), and sodium pentachlorophenate [JSF ¶ 10]. To do so, Reichhold retrofitted some existing structures and constructed new improvements, including an aboveground tank farm to store chemicals, a boiler house, a railroad spur, a cooling tower, a plant office, and experimental laboratory, pilotproduction plants (on the north-central portion of the Property) for PCP and sodium pentachlorophenate, and other improvements. Reichhold's new buildings were made of wood and corrugated metal with steel frames. They stood on the same types of foundations as the Army structures [Id.].
11. Between 1946 and 1956, Reichhold constructed unlined drainage ditches to convey chemical wastes from its manufacturing process [JSF ¶ 11]. In 1955, Reichhold constructed a washwater impoundment in the central portion of the Property to collect waste and washwater for infiltration into the soil [Id.]. Reichhold's operations are a source of carcinogenic polycyclic aromatic hydrocarbons ("cPAHs"), dioxins and furans, polychlorinated bi-phenols ("PCBs"), PCP, total petroleum hydrocarbons, and other phenols at the Property [JSF ¶ 15]. Reichhold ceased production in 1958 and used the Property as administrative offices and laboratory space until 1961 [JSF ¶ 13]. Upon termination of its lease, Reichhold abandoned the chemical plant, leaving some equipment in place.
12. The structures constructed by...
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