Mardan Corp. v. CGC Music, Ltd.

• Decision Date: 06 December 1984
• Docket Number: No. Civ 83-707 TUC-WDB.,Civ 83-707 TUC-WDB.
• Citation: 600 F. Supp. 1049
• Parties: MARDAN CORPORATION, Plaintiff, v. C.G.C. MUSIC, LTD. and MacMillan, Inc., Defendant.
• Court: U.S. District Court — District of Arizona

600 F. Supp. 1049

MARDAN CORPORATION, Plaintiff, v. C.G.C. MUSIC, LTD. and MacMillan, Inc., Defendant.

No. Civ 83-707 TUC-WDB.

United States District Court, D. Arizona.

December 6, 1984.

COPYRIGHT MATERIAL OMITTED

John Lindberg, Tucson, Ariz., Renee R. Mawhinney, Indianapolis, Ind., for plaintiff.

Leo N. Smith, Tucson, Ariz., Warren Radler, Chicago, Ill., for defendant.

ORDER

BROWNING, District Judge.

This case presents complex and novel issues regarding environmental law, statutory construction, contract law, and remedies. The principal statutory authorities involved in this case are the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq., and the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. § 6901 et seq. The entire text of each of the Acts is attached to this Order as Exhibit "A."

CERCLA represents a relatively new body of law. It was enacted hastily in the wake of publicity surrounding the Love Canal controversy. See United States v. A & F Materials Co., Inc., 578 F.Supp. 1249, 1253, 20 E.R.C. 1353, 1357 (S.D.Ill.1984). Accordingly, the legislative history with respect to some of CERCLA's provisions is sketchy. With respect to still others, a clear expression of legislative intent is nonexistent. For the foregoing reasons, many of the issues raised by the parties' cross motions for summary judgment have yet to be squarely addressed by the courts. Because of the unsettled nature of the law in this area, the Court has decided to publish its Order in this matter.

Background

This lawsuit stems from the operation of a musical instrument manufacturing business in Nogales, Arizona. The business is currently owned by the plaintiff in this action, Mardan Corporation. Mardan's president, Daniel J. Henkin, purchased the Nogales facility from C.G.C. Conn, Ltd., a subsidiary of Macmillan, Inc. Following the sale, Macmillan, Inc. changed the name of its subsidiary from C.G.C. Conn, Ltd. to C.G.C. Music Ltd. and subsequently dissolved C.G.C. Music Ltd. on October 31, 1980.¹

Prior to its sale on September 5, 1980, the Nogales facility was used by C.G.C. Conn, Ltd. to manufacture musical instruments. Electroplating processes utilized in the manufacturing process resulted in the generation of waste streams consisting of heavy metals, solvents, and cyanide. These wastes were deposited by C.G.C. into a settling pond or lagoon located on the facility property. Following the sale, Mardan continued to manufacture musical instruments at the Nogales facility, generating many of the same waste by-products as those previously generated by C.G.C.² Mardan also continued to use the settling pond for waste storage purposes.

Following the sale of the Nogales facility, Mardan applied for a federal hazardous waste disposal permit pursuant to RCRA § 3005 and the regulations promulgated thereunder. See 42 U.S.C. § 6925; 40 C.F.R. part 265 et seq.³ The State of Arizona also granted Mardan temporary approval to operate the facility pursuant to Arizona Code of Rules and Regulations R9-8-1820.H.1. The state's temporary approval was conditioned upon Mardan's compliance with EPA interim status standards then in effect. Mardan did not, however, comply with those standards. On two different occasions, the EPA notified Mardan that it was in violation of federal and state requirements. The EPA also proposed that civil penalties in the amount of $36,000 be assessed against Mardan.

Mardan determined that the cost of bringing the waste disposal operation at the Nogales facility up to EPA standards was too high to justify continued use of the lagoon for waste storage purposes. Therefore, Mardan decided instead to "close" the settling pond.⁴ On September 30, 1983, Mardan entered into a Consent Agreement and Final Order with the EPA in which Mardan agreed, inter alia, to close the settling pond in lieu of operating it under an EPA permit.

Law and Discussion

Mardan's lawsuit is based primarily upon Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA").⁵ § 107(a) provides, in pertinent part:

Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section

* * * * * *

(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,

* * * * * *

shall be liable for —

(A) all costs of removal or remedial action incurred by the United States Government or a State not inconsistent with the national contingency plan;

(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan; and

(C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release.

Mardan characterizes its cost of complying with RCRA as CERCLA "response costs."⁶ It seeks to recover those costs from defendants pursuant to Section 107(a)(4)(B). As a first line of defense, C.G.C. and Macmillan argue that costs of complying with RCRA requirements cannot be considered "response costs" under CERCLA. Therefore, the first question which must be addressed is whether the monies expended by Mardan in order to fulfill its obligations under the 1983 Consent Agreement and Final Order with the EPA constitute "response costs" under CERCLA.

Defendants argue that the provisions of CERCLA were not intended to apply to an ongoing and useful disposal site such as the Nogales facility operated by Mardan. It is defendants' position that CERCLA was enacted to "address the complex problems posed by abandoned and inactive hazardous waste disposal sites." See Memorandum in Support of Defendants' Motion for Summary Judgment (hereinafter "Defendants Memorandum") at 25-26. Accordingly, defendants contend that CERCLA has no application to the Nogales facility. Instead, defendants claim that the provisions of RCRA should govern the operation of such an active site. Implicit in defendants' argument is the notion that RCRA and CERCLA are mutually exclusive. But such a conclusion is supported by neither the language nor the legislative history of CERCLA.

That CERCLA was intended to operate independently of and in addition to RCRA is indicated by the first clause of Section 107 of CERCLA which provides: "Notwithstanding any other provision or rule of law ... liability may be established." Similarly, the fact that RCRA facilities were specifically exempted from the notice requirements of Section 103(c), but not the liability provisions of Section 107(a) suggest that RCRA and CERCLA were intended to be cumulative. See also Jones v. Inmont Corp., supra note 6, 584 F.Supp. at 1430-35 (holding that RCRA applies to both active and inactive hazardous waste disposal sites). Finally, the exemption from CERCLA's notice requirements applies only to facilities which have been issued "a legally enforceable final permit issued pursuant to RCRA." The committee report accompanying the Senate version of CERCLA contained the following statement regarding the "federally permitted release" exemption:

The reported bill tightly limits the types of disposal site releases that would be covered by this federally permitted release definition. First, only final RCRA permits are included. Sites or facilities which have interim status under RCRA do not adequately utilize acceptable levels of technology, and do not qualify for this exclusion.

S.Rep. No. 848, 96 Cong. 2nd Sess. 48 (1980) (emphasis added).

Hence, it appears that the Nogales facility was not even exempted from the notice requirements of CERCLA let alone the Act's liability provisions. From the foregoing it is evident that CERCLA applies both to active and inactive waste disposal sites and that Mardan's RCRA compliance costs may also be considered "response costs" under CERCLA.

But CERCLA requires not only that funds expended by the plaintiff be characterizable as "costs of response," but also that they be "incurred ... consistent with the national contingency plan ...." See Section 107(a)(4)(B). Defendant contends that in order to meet this requirement, it is necessary for the plaintiff to show that its clean-up effort was government approved and that it followed some enforcement activity initiated by the federal government. In defendants' words,

many of the decisions addressing the question have limited private cost recovery actions under CERCLA because of concerns over opening the door to a proliferation of such actions absent some standards or guidelines set by the government. Despite CERCLA's policy for swift and voluntary clean-up activities, these decisions emphasize the need for governmental activity and supervision under CERCLA. See, e.g., Bulk Distribution Centers, Inc. v. Monsanto Co., No. 83-6805 589 F.Supp. 1437 (S.D. Fla. June 19, 1984); Wickland Oil Terminals v. ASARCO, Inc., 590 F.Supp. 72 (N.D.Cal.1984); Cadillac Fairview/California, Inc. v. Dow Chemical Co., Cv. Nos. 83-7996 and 83-8034 (C.D.Cal. March 5, 1984).

See Defendants' Reply Memorandum at 13.

While it is true that virtually every reported decision or order addressing the issue has found some degree of governmental involvement or supervision to be a prerequisite to a private cause of action under Section 107(a) of CERCLA, those courts have done so on the ground that to hold otherwise could lead to haphazard and ineffectual clean-up efforts by private parties.⁷ In the present case, Mardan's activities in closing the settling pond are under the supervision of the EPA and pursuant to a Consent Agreement and Final Order with EPA. Therefore, the danger that Mardan's efforts will be "haphazard and ineffectual" does not exist.

Having determined that Mardan's claim against C.G.C. and Macmillan is authorized by Section 107(a) of CERCLA, it becomes...