KELLEY EX REL. MICH. NAT. RES. COM'N v. Tiscornia, 5:90-CV-62.

• Decision Date: 12 January 1993
• Docket Number: No. 5:90-CV-62.,5:90-CV-62.
• Citation: 810 F. Supp. 901
• Parties: Frank J. KELLEY, Attorney General of the State of Michigan, ex rel., MICHIGAN NATURAL RESOURCES COMMISSION, Michigan Water Resources Commission, and David F. Hales, Director of the Michigan Department of Natural Resources, Plaintiffs, v. Lester TISCORNIA, James W. Tiscornia, Edward C. Tiscornia, Loren Gerber, Defendants, and MANUFACTURES NATIONAL BANK OF DETROIT, Defendant and Third-Party Plaintiff, v. UNITED STATES of America, Third-Party Defendant.
• Court: U.S. District Court — Western District of Michigan

810 F. Supp. 901

Frank J. KELLEY, Attorney General of the State of Michigan, ex rel., MICHIGAN NATURAL RESOURCES COMMISSION, Michigan Water Resources Commission, and David F. Hales, Director of the Michigan Department of Natural Resources, Plaintiffs, v. Lester TISCORNIA, James W. Tiscornia, Edward C. Tiscornia, Loren Gerber, Defendants, and MANUFACTURES NATIONAL BANK OF DETROIT, Defendant and Third-Party Plaintiff, v. UNITED STATES of America, Third-Party Defendant.

No. 5:90-CV-62.

United States District Court, W.D. Michigan, S.D.

January 12, 1993.

Paul F. Novak, Frank J. Kelley, Atty. Gen., Environmental Protection Div., Lansing, MI, for plaintiff.

Jon R. Muth, Miller, Johnson, Snell & Cummiskey, Grand Rapids, MI, for defendants Tiscornias.

Robert P. Hurlbert, Dickinson, Wright, Moon, Van Dusen & Freeman, Bloomfield Hills, MI, Frederick J. Dindoffer, Bodman, Longley & Dahling, Detroit, MI, Kenneth T. Brooks, Dickinson, Wright, Moon, Van Dusen & Freeman, Lansing, MI, for Manufacturers Nat. Bank of Detroit.

Thomas H. Pacheco, U.S. Dept. of Justice, Environmental Defense Section, Land & Natural Resources Div., Washington, DC, Michael L. Shiparski, John A. Smietanka, U.S. Atty., Grand Rapids, MI, Leland S. Van Koten, U.S. Dept. of Justice, Torts Branch, Civ. Div., Washington, DC, for U.S.

MEMORANDUM OPINION AND ORDER

McKEAGUE, District Judge.

This action is brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq, and the Michigan Environmental Response Act ("MERA"), M.C.L.A. 299.601 et seq. The State is seeking compensation for expenses it incurred cleaning up two sites: the Auto Specialties Manufacturing Company ("AUSCO") facility located in St. Joseph, Michigan (the "St. Joseph Facility") and the facility located in Benton Harbor, Michigan (the "Riverside Facility)." Counts I and II of the complaint seek relief under CERCLA and allege that Manufacturers National Bank of Detroit ("MNB" or the "Bank") operated the sites during times when hazardous substances were released. Counts III and IV of the complaint seek relief under MERA and allege that the Bank owned or operated the sites at the time of disposal of a hazardous substance.

This matter is before the Court on cross-motions for summary judgment. Plaintiffs move for partial summary judgment as to the liability of defendant MNB.¹ MNB also moves for summary judgment. The Court has reviewed the pleadings and exhibits, heard oral argument on October 26, 1992, and now finds the matter ready for disposition.

FACTS

The commercial relationship between the Bank and AUSCO began in 1964. MNB president, Roland Mewhort, was a member of AUSCO's board from 1964 through 1978. Lester Tiscornia placed him on the board after he seized control of AUSCO, a feat Tiscornia accomplished with the financial assistance MNB provided during a family fight for control of the company. After Mewhort died, Jim Bunker, Senior Vice President at Manufacturers National Corporation, took a seat and served on the board until 1986.² The Board of Directors met once or twice a year and dealt primarily with pension and capital spending issues. The executive committee, which was comprised of inside directors and the plant operating staff, met more frequently and decided daily operational matters.

During this time, the Bank assigned two account officers, J.F. VanProoyer and Hugh Porter, to AUSCO. They kept the Bank's loan committee apprised of AUSCO's status. The communication from AUSCO to the Bank is reflected in various memoranda which have been provided to the Court. The Bank memoranda for AUSCO in the 1979-1985 era describe the operations of the St. Joseph foundry operations (Exhibit 379), criticize AUSCO's other lender, the Harris Bank, and discuss strategies to force Harris to share the risk or bow out (Exhibit S-2),³ show the Bank knew of labor disputes and the terms under review in the labor negotiation process (Exhibits 382-384), and discuss AUSCO's default on its loan covenants (Exhibit 385).

In September of 1985, the issue of new financing arose. AUSCO presented a consolidation plan to the Bank during discussions of financing. The Bank opted to continue financing AUSCO and executed two loan agreements on September 15, 1985. A revolving line of credit and a liquidation facilities note were executed. The Bank included various provisions to enable it to monitor the finances of AUSCO. The agreement required daily reporting, prohibited outside financing, banned dividends and created a blanket lien on all machinery and equipment. The daily reporting mechanism, used in asset-based lending, authorized the Bank to monitor the cash proceeds from receivables against the outstanding loan on a daily basis.

In early 1986, Bank officers met with AUSCO officers on a more frequent basis to monitor AUSCO's adherence to the consolidation plan that came into existence during loan negotiations. David Day, a MNB employee, participated in monthly meetings with AUSCO. He expressed concerns as to the ability of the management at AUSCO to make the manpower reductions laid out in the consolidation plan. He also expressed concern because AUSCO failed to meet anticipated reductions in utility costs, maintenance costs, overhead costs, inventory, and shipping and freight costs, all of which were monitored by the Bank. On August 6, 1986, David Day and Hugh Porter met with James Tiscornia, head of operations at AUSCO, to discuss these concerns. The Bank's position at the meeting was that if it were to remain involved in financing, certain changes had to be made. First, Lester Tiscornia⁴ should be dropped from the payroll. Second, a turnaround specialist was needed to replace James Tiscornia. The Bank recommended Benjamin Sachs,⁵ as well as another candidate, and indicated to James Tiscornia that Loren Gerber, Chief Financial Officer at AUSCO, was not acceptable to the Bank for this position.

AUSCO hired Sachs in September of 1986. Edward and Lester Tiscornia contacted the Bank during their negotiation with Sachs to question the Bank about whether they had to accept Sachs' terms.⁶ Embree, a Bank representative, informed the Tiscornias that if outside management were not retained by AUSCO, the Bank would not continue to lend money to the company. The Tiscornias then requested that a $500,000 bonus provision for Sachs be financed by the Bank. Embree rejected the request. The parties eventually agreed to an incentification bonus, structured to provide compensation to Sachs based on his ability to reduce the debt owed to the Bank. The Bank financed this arrangement. Further, the Bank set the same date for termination on advances to AUSCO under the revolving line of credit as the expiration date of Sachs' contract.

As President and Chief Executive Officer of AUSCO, Sachs had responsibility for the day-to-day operations at AUSCO. In the winter of 1986-87, Sachs experienced management problems and he complained to the Bank. Loren Gerber and James Tiscornia testified in deposition that the Bank threatened to make management changes if they did not cooperate with Sachs. Sachs met with Bank representatives frequently during his tenure; over 100 conferences occurred from August of 1986 through June of 1988. There is no dispute that Sachs provided information to the Bank on a regular basis until he was fired by Lester Tiscornia on June 30, 1988.

STANDARD OF REVIEW

Summary judgment is appropriate where no genuine issue of material fact exists so that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court determines whether "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Of course, "inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 993, 8 L.Ed.2d 176 (1962)). The movant meets its initial burden "by showing — that is, pointing out to the district court — that there is an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). At that point, the nonmovant "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(c).

ANALYSIS

CERCLA liability attaches if each of the following elements is established:

(1) There is a release or threatened release of a hazardous substance;

(2) at a facility

(3) causing the plaintiff to incur response costs; and

(4) the defendant is a responsible party as defined in § 107(a).

42 U.S.C. § 9607(a); United States v. Aceto Agricultural Chemicals Corp., 872 F.2d 1373 (8th Cir.1989).

Liability is strict, fault or state of mind is irrelevant. United States v. Monsanto Co., 858 F.2d 160 (4th Cir.1988). Because the goals of CERCLA are remedial, the court is obligated to construe the statute's liability provision broadly to avoid frustrating its legislative purpose. Anspec Co., Inc. v. Johnson Controls, 922 F.2d 1240, 1247 (6th Cir.1991).⁷

At issue in this motion is the fourth element, whether the Bank is a responsible party.⁸ Under 42 U.S.C. § 9607(a)(2), a responsible party is defined as:

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of, ...

Further, under the Act, an owner or operator is defined as "any person" and any person is defined as "an individual, firm, corporation, association, partnership, consortium, joint venture, commercial entity, United States government, state,...