Louisiana-Pacific Corp. v. Beazer Materials & Services

• Decision Date: 27 January 1993
• Docket Number: No. CIV. S-89-871 LKK.,CIV. S-89-871 LKK.
• Citation: 811 F. Supp. 1421
• Court: U.S. District Court — Eastern District of California
• Parties: LOUISIANA-PACIFIC CORPORATION, a Delaware corporation, Plaintiff, v. BEAZER MATERIALS & SERVICES, INC., a Delaware corporation, as Successor in Interest to Koppers Company, Inc., a Delaware corporation, et al., Defendants.

811 F. Supp. 1421

LOUISIANA-PACIFIC CORPORATION, a Delaware corporation, Plaintiff, v. BEAZER MATERIALS & SERVICES, INC., a Delaware corporation, as Successor in Interest to Koppers Company, Inc., a Delaware corporation, et al., Defendants.

No. CIV. S-89-871 LKK.

United States District Court, E.D. California.

January 27, 1993.

James C. Collins, Greg M. Block, Thelen, Marrin, Johnson & Bridges, San Francisco, CA, for plaintiff.

Gregory P. Stone, Patrick J. Cafferty, Munger, Tolles & Olson, San Francisco, CA, for defendants.

AMENDED ORDER

KARLTON, Chief Judge Emeritus.

This matter is before the court on defendant Beazer East Inc.'s ("Beazer") motion for summary judgment. Following oral argument the parties were directed to file supplemental briefs.¹ Thereafter, the matter was resubmitted and is disposed of herein.

For the reasons herein stated, Beazer's motion is granted in part and denied in part.

I THE FACTS AND THE COMPLAINT

A. The Undisputed Facts

Plaintiff Louisiana-Pacific owns and operates a sawmill site and landfill in Oroville, California. Each of these non-adjacent sites are on the Superfund National Priorities List ("NPL"). Beazer operates a log processing plant, "the Koppers Site," adjacent to Louisiana-Pacific's sawmill site. This site is also on the Superfund NPL. It is undisputed that Beazer dumped large amounts of pentachlorophenol into the water flowing between the properties. This water ultimately collected in a log deck pond located on Louisiana-Pacific's sawmill site, where the plaintiff used it for various purposes related to its operation of the mill.

After the sawmill and landfill were placed on the NPL, the Environmental Protection Agency ("EPA") and Louisiana-Pacific entered into negotiations for a consent order providing for the investigation and cleanup of the sites. These negotiations broke down after Louisiana-Pacific refused to agree to a provision that would have imposed stipulated penalties without the availability of judicial review for whatever future work EPA might require beyond that delineated in the original work plan.

Upon failure to reach an agreement, EPA conducted an investigation of the Louisiana-Pacific sites. In a separate suit, it is now seeking reimbursement of over $3.6 million for the costs of that investigation. See United States v. Louisiana-Pacific, CIV-S-92-2023 LKK/PAN (E.D.Cal. filed December 4, 1992). Louisiana-Pacific also conducted an investigation of the sites.

B. The Complaint

In this suit, Louisiana-Pacific seeks, inter alia, recovery from Beazer of its costs of investigation and a declaratory judgment concerning future liability under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601-75, including the cost of the EPA investigation.

Louisiana-Pacific alleges five causes of action:

(1) Recovery of presently incurred costs of response pursuant to 42 U.S.C. § 9607(a)(1) or (a)(2);

(2) A judgment declaring that Beazer is liable for future costs of response pursuant to 42 U.S.C. § 9613(g)(2) and 28 U.S.C. § 2201(a);

(3) Declaratory relief for indemnity or contribution;

(4) Damages under a state cause of action in trespass; and

(5) Damages under a state cause of action in nuisance.

Beazer now moves for summary judgment on the various grounds discussed below.

The standards for summary judgment are well-known and need not be rearticulated here. See, e.g., Clark v. Kizer, 758 F.Supp. 572, 574-75 (E.D.Cal.1990).

II DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

In its first cause of action, Louisiana-Pacific seeks recovery under CERCLA for the costs it has incurred in association with the investigation it conducted.

A. Necessary and Consistent with the NCP

Under the statute, private parties may only recover response costs which are "necessary" and "consistent with the national contingency plan ("NCP"), see 42 U.S.C. § 9607(a)(4)(B).² Beazer maintains that as a matter of law the costs associated with Louisiana-Pacific's site investigation cannot be considered "necessary" and "consistent with the national contingency plan" because it was duplicative of the EPA's investigation.³ It argues that the purpose of Louisiana-Pacific's investigation was to demonstrate that Beazer was the source of contamination and thus the cost of investigation should be characterized as "litigation expenses" not recoverable under CERCLA.⁴ Louisiana-Pacific argues that its investigation, nearly completed prior to the EPA undertaking its investigation, was not designed solely to develop evidence against Beazer, but was designed to determine the extent and source of contamination on its sites and is thus a recoverable response cost.

A claim of inconsistency with the NCP is not a defense to liability under CERCLA, but goes only to the issue of damages. Mid Valley Bank v. North Valley Bank, 764 F.Supp. 1377, 1389 (E.D.Cal. 1991) (citing Cadillac Fairview/Cal., Inc. v. Dow Chemical Co., 840 F.2d 691, 695 (9th Cir.1988)). Nonetheless, even viewed as a matter of damages, if Louisiana-Pacific simply may not recover any part of the costs incurred for its investigation as a matter of law, Beazer is entitled to a pretrial limitation of the scope of damages available to Louisiana-Pacific in this suit.⁵ Before turning to the substantive issue, the court must address a preliminary matter.

1. EPA's Conduct

It appears that the EPA conditioned Louisiana-Pacific's opportunity to conduct its own, potentially lower cost investigation, on the company's waiver of a right to judicial review of costs unrelated to the investigation which EPA might charge against it. In the order directing further briefing, I noted that neither party had addressed the question of whether EPA may properly condition a consent agreement on a waiver of a right to judicial review. In the absence of authority to compel such a waiver, it might be argued that the EPA's conduct in denying Louisiana-Pacific the opportunity to conduct the investigation was arbitrary and capricious, and thus EPA's investigation, rather than Louisiana-Pacific's, should be considered duplicative.

Upon further consideration, I have concluded that the instant suit, in which the EPA is not a party, is an inappropriate vehicle to determine whether the agency could require a waiver of judicial review as a condition of settlement. The court concludes that the issue of the propriety of EPA's conduct is properly reviewable in the suit where it seeks recovery of costs for its investigation from Louisiana-Pacific. Accordingly, I turn to the issue of necessity and consistency without regard to the propriety of the EPA's conduct.⁶

2. Louisiana-Pacific's Conduct

Plaintiff, as the party seeking cost recovery, bears the burden of proving necessity and consistency with the NCP. United States v. Hardage, 982 F.2d 1436, 1442 (10th Cir.1992), (citing United States v. Northeastern Pharmaceutical, 810 F.2d 726, 747 (8th Cir.1986)); County Line Inv. Co. v. Tinney, 933 F.2d 1508, 1512 (10th Cir.1991); Cadillac Fairview, 840 F.2d at 695; Pinole Point Properties, Inc. v. Bethlehem Steel Corp., 596 F.Supp. 283, 290 (N.D.Cal.1984). As a general matter, investigative costs incurred by a private party after the EPA has initiated a remedial investigation, unless authorized by the EPA, are "duplicative" and therefore not recoverable. U.S. v. Hardage, 750 F.Supp. 1460, 1511-17 (W.D.Okla.1990), aff'd, 982 F.2d 1436, 1447-48 (10th Cir.1992). As the district court in Hardage persuasively demonstrated, the measure of necessity is confined to the costs of removal or remedial actions, Hardage, 750 F.Supp. at 1509-11. See also Daigle v. Shell Oil Co., 972 F.2d 1527, 1535-37 (10th Cir.1992) (necessary costs are only those incurred in the containment and cleanup of hazardous releases). Accordingly, where costs have been incurred solely to defend against the government's action, they are not "necessary" within the meaning of CERCLA § 107(a)(4)(B). Hardage, 750 F.Supp. at 1511, aff'd, 982 F.2d at 1448. See also Fallowfield Dev. Corp. v. Strunk, 1991 WL 17793 at 19 (E.D.Pa.1991) (investigation that is duplicative and undertaken in anticipation of litigation is not a "necessary cost of response").

It is not disputed that after settlement negotiations broke down, the EPA explicitly informed Louisiana-Pacific of its intent to conduct an investigation; nor is it disputed that thereafter, but prior to the commencement of EPA's investigation, Louisiana-Pacific proceeded with its own unauthorized investigation. It is also not disputed that the EPA and Louisiana-Pacific investigations were essentially the same. Louisiana-Pacific asserts, however, that it undertook its investigation in good faith, assuming that the EPA would come around to its position and cancel its planned investigation. Given the conclusion reached above, that the propriety of the EPA's conduct is not relevant to this suit, that assertion appears irrelevant.

Clearly Louisiana-Pacific could not have prevented EPA's actions at the time. See 42 U.S.C. § 9613(h); Fairchild Semiconductor Corp. v. EPA, 984 F.2d 283 (9th Cir.1993). Moreover, it may well be that as a matter of sound business and litigation judgment Louisiana-Pacific had to conduct its own investigation to make certain that the EPA conclusions were justified.⁷ The issue is not Louisiana-Pacific's good faith or the reasonableness of the conduct. The issue is who should pay for its exercise of business and litigation judgment, even assuming good faith.

The effect of allowing Louisiana-Pacific to recover its investigation costs is to give it discretion, not merely to double the response costs, but potentially to pass those increased costs on to third parties without notice or consent. Nothing in the statute suggests such a result, and arguably, such a result violates the statutory requirement that remedial actions be cost-effective. See 42 U.S.C. § 9605(a)(7); County Line Inv. Co., 933 F.2d at 1514...