In re Tutu Wells Contamination Litig.

• Decision Date: 18 February 1998
• Docket Number: Civil Docket No.1996–54(B).,Master Docket No. 1989–107–1227.
• Citation: 38 V.I. 275
• Parties: In re TUTU WELLS CONTAMINATION LITIGATION.
• Court: U.S. District Court — Virgin Islands

38 V.I. 275

In re TUTU WELLS CONTAMINATION LITIGATION.

Master Docket No. 1989–107–1227.

Civil Docket No.1996–54(B).

District Court of the Virgin Islands, Division of St. Croix.

Feb. 18, 1998.

Owners and lessees of contaminated water wells brought suit under the Comprehensive Environment Response, Compensation, and Liability Act (CERCLA) and under state law, and various third-party complaints and counterclaims were asserted. On motions by third-party defendants to dismiss third-party claims or for summary judgment, the District Court, Brotman, J., sitting by designation, held that: (1) third-party defendants were not entitled to award of costs and fees as condition to voluntary dismissal of third-party claims; (2) third-party plaintiffs, who were defendants in CERCLA litigation, were not entitled to bring third-party claims under citizen suit provision of Resource Conservation and Recovery Act (RCRA), regardless of whether they were subjects of administrative order issued by Environmental Protection Agency (EPA); (3) third-party plaintiffs were “innocent” parties who could pursue both cost-recovery action and contribution claim against third-party defendants; (4) personal liability of individual third-party defendants, who were formerly officers and directors of dissolved corporation that owned and operated facility, was not precluded by prior dismissal of CERCLA claims against them in their former capacities; and (5) passive migration of hazardous waste, during isolated period of time in which individual third-party defendants actually were owners of record of facility, was not “disposal,” as required for “owner” liability under CERCLA.

Motions granted in part and denied in part. McCarter & English, Newark, NJ by Gita F. Rothschild, for First Manhattan Co., Firmanco Associates, and Daniel Rosenbloom.

McCarter & English, Wilmington, DE by Robert B. Anderson, Paul A. Bradley, for First Manhattan Co., Firmanco Associates, and Daniel Rosenbloom.

James M. Derr, St. Thomas, U.S.V.I. by James M. Derr, Daniel Rosenbloom, for First Manhattan Co., Firmanco Associates, Daniel Rosenbloom.

Stroock & Stroock & Lavan, L.L.P., New York City by Brian M. Cogan, Kevin J. Curnin, for Goldman, Sachs & Co.

Gerald T. Groner, Christiansted, St. Croix, U.S.V.I. by Gerald T. Groner, for Goldman, Sachs & Co.

Archer & Greiner, Haddonfield, NJ by Robert T. Lehman, Christopher R. Gibson, for Esso Virgin Islands, Inc. and Esso Standard Oil (Puerto Rico).

Douglas L. Capdeville, Christiansted, St. Croix, U.S.V.I. by Douglas L. Capdeville, for Esso Virgin Islands, Inc. and Esso Standard Oil (Puerto Rico).

Tofel Berelson Saxl & Partners, P.C., New York City by Robert L. Tofel, Mark A. Lopeman, Jamie D. Batterman, for Andreas Gal, Paul Lazare, Panex Co., and the Panex Industries, Inc. Liquidating Trust.

Kevin A. Rames, P.C., Christiansted, St. Croix, U.S.V.I. by Kevin A. Rames, for Andreas Gal, Paul Lazare, Panex Co., and Panex Industries, Inc. Liquidating Trust.

Nancy D'Anna, St. John, U.S.V.I. by Nancy D'Anna, for L'Henri.

O'Connor & Meyers, Coral Gables, FL by Addison J. Meyers, for Texaco, Inc. and Texaco Caribbean, Inc.

Hymes, Zebedee & Smock, Charlotte Amalie, St. Thomas, U.S.V.I. by John Zebedee, for Vernon Morgan.

Government of the Virgin Islands Department of Justice, Charlotte Amalie, St. Thomas, U.S.V.I. by Gary M. Alizzeo, Assistant Attorney General for Government of the Virgin Islands Department of Education.

United States Attorney, St. Thomas, U.S.V.I., by Susan Akers, Asst. U.S. Atty.

Wright, Coon & Cunningham, P.A., Portland, ME by

John R. Coon, for Western Auto Supply Co.

BROTMAN, District Judge, Sitting by Designation.

I. Background

A. Introduction

This case has its inception as far back as July 8, 1987, when Eric Tillet detected odors of gasoline emanating from a well located on No. 186 Estate Anna's Retreat in the Tutu region on the island of St. Thomas, U.S. Virgin islands. Tillet contacted the Department of Planning and Natural Resources of the Territory of the Virgin Islands (“DPNR”), which contacted and conferred with the United States Environmental Protection Agency (“EPA”).

On or about August 7, 1987, the DPNR ordered the closure of the wells of the Four Winds Plaza Partnership located at No. 392 Estate Anna's Retreat, of the wells of PID, Inc., and of wells on property owned by the Harthman family. See EPA Administrative Order of Consent, Index No. 11–RCRA–Proceeding 7003 & 9003–02–0401, dated Feb. 19, 1992 ¶ 6; see also PID Compl. ¶¶ 15–16, and Four Winds Compl. ¶¶ 13–14. As a result of DPNR orders, eighteen wells were closed between July 31 and September 2, 1987.

By late July 1987, the EPA had begun its investigation of the suspected pollution of the Tutu Water Wells under the provisions of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9615 (West 1995) (hereinafter “CERCLA”) and the Resource Conservation and Recovery Act, 42 U.S.C. § 6991 et seq. (West 1995) (“RCRA”). On August 10 and 11, 1987, the EPA collected water samples from twenty-four wells located in the Tutu section of Anna's Retreat within what is known as the Turpentine Run Aquifer. An analysis of the recovered samples revealed the presence of 1,2–Trans–Dichloroethylene (“DCE”), Trichloroethylene (“TCE”), Tetrachloroethylene (“PCE”), Toluene (“TOL”), benzene, and Terbutylmethylether (“TBME”). In October of 1987, the EPA collected additional samples from twenty-four wells. The analysis of these samples revealed that DCE, TCE, PCE, and TBME are the major contaminants of the water. See Consent Order at ¶ 11. In January 1988, after taking additional samples from 123 cisterns serviced by area water haulers, the EPA initiated a limited CERCLA Removal Action, which included the cleaning of some cisterns, the providing of a temporary alternative water supply, and monitoring of the well water. See id. at ¶¶ 8–12. A photovac sampling in 1989 showed high levels of benzene, TCE, and PCE. See id. at ¶ 13. Benzene, DCE, PCE, TCE, TOL, and TBME are gasoline additives, petroleum derivatives, or components of cleaning solvents used by service stations. PCE is also a common component of dry cleaning fluids.

In 1987 and 1988, the EPA issued a series of unilateral orders to Esso Standard Oil, S.A. (hereinafter “Esso”); Daniel Bayard; Texaco, Inc., Texaco Caribbean, Inc., and Vernon Morgan (collectively referred to herein as “Texaco”); and L'Henri Dry Cleaners (“L'Henri”) (sometimes referred to herein as “O'Henry”), requiring them to supply information about the underground storage tanks in which they kept their gasoline and about their use or handling of PCE. The orders also required them to conduct soil vapor surveys. See id. at ¶¶ 14–33. The surveys confirmed the presence of TCE, PCE, DCE, and benzene at the Esso facility and at the Four Winds Parking Lot. See id. at 20–22. Texaco also submitted information confirming that gasoline had leaked from its underground storage tanks. See id. at ¶¶ 25–26. Soil samples at the L'Henri facility contained PCE in concentrations of 440 parts per million. See id. at ¶ 33.

In March 1989, the EPA completed preliminary assessments of potentially responsible parties (hereinafter “PRPs”) in the area. These parties included Ramsay Motors, Inc; the old Laga clothing manufacturing facility, which is now owned by the Virgin islands Department of Education (hereinafter VIDEO and others). Pursuant to the provisions of CERCLA and RCRA, the EPA on March 22, 1990 issued a Unilateral Consent Order against Esso, Texaco, and L'Henri, requiring them to take over a well-monitoring program. See id. at ¶ 4; EPA Administrative Order, Index No. 11–CERCLA–00401, RCRA–90–UST–9003–0401, dated Mar. 22, 1990, § VII, at 11–13 (“Unilateral Order”).

B. The History of “Laga”

The EPA's search for those responsible for the contamination of the Tutu aquifer resulted in the naming of another PRP. Laga Industries, Ltd. (“Laga”), organized under Virgin Islands law, operated a textile manufacturing plant, also in Estate Anna's Retreat. The primary chemical discovered on Laga's property was PCE, which had been allegedly discharged via underground pipes into the ground as a result of Laga's on-site dry cleaning operations—a final step in the manufacturing process of Laga's textile products.

It is worth noting portions of Laga's history in the Virgin islands. In 1970, Laga's initial shareholders and officers, Paul Lazare and Andreas Gal (hereinafter “Lazare” and “Gal”), sold Laga to The Duplan Corporation (“Duplan”), a Delaware corporation. Gal and Lazare stayed on as directors and majority shareholders of Duplan. As a result of the sale, Duplan owned one hundred percent (100%) of Laga's shares. See Oct. 4, 1994 Lazare Dep. Laga was administratively dissolved in 1981 for failure to pay corporate franchise taxes.

On August 31, 1976, Duplan filed for Chapter XI reorganization. By court order dated October 5, 1976, Duplan's bankruptcy proceeding was converted into a chapter X proceeding. In 1979, Duplan received authorization from the bankruptcy court to sell the Laga facility to Panex Co., a partnership composed of Gal and Lazare. This sale was formally consummated on December 12, 1979. Panex Co. later sold the property to the Government of the Virgin Islands, specifically to VIDE.

Duplan's Plan of Reorganization, and the bankruptcy court's order of June 4, 1981, directed, among other matters, that Laga be dissolved.¹ The Plan further provided that holders of subordinated notes and debentures in Duplan were to receive new common stock in the successor corporation.² On July 11, 1981, Duplan was renamed Panex Industries, Inc. (hereinafter “Panex”). ³ Article VIII of the Restated Certificate provides that, to the extent authorized under Delaware law, certain directors, officers and other identified persons could be indemnified by Panex.⁴

On September 18, 1981, the Board of Directors of Panex met and decided the following: that...