Morrison Enterprises v. McShares, Inc.

• Decision Date: 01 August 2002
• Docket Number: No. 98-3219.,No. 98-3229.,98-3219.,98-3229.
• Citation: 302 F.3d 1127
• Parties: MORRISON ENTERPRISES, a Kansas general partnership, Plaintiff-Appellant/Cross-Appellee, v. McSHARES, INC., a Kansas corporation, Defendant-Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

302 F.3d 1127

MORRISON ENTERPRISES, a Kansas general partnership, Plaintiff-Appellant/Cross-Appellee, v. McSHARES, INC., a Kansas corporation, Defendant-Appellee/Cross-Appellant.

No. 98-3219.

No. 98-3229.

United States Court of Appeals, Tenth Circuit.

August 1, 2002.

Submitted on the briefs:^*

Donald W. Bostwick, Clifford L. Malone, Patrick B. Hughes of Adams, Jones, Robinson and Malone, Chartered, Wichita, KS, for the Plaintiff-Appellant/Cross-Appellee.

Thomas D. Kitch, Scott D. Jensen, Lyndon W. Vix of Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, KS, for the Defendant-Appellee/Cross-Appellant.

Before HENRY, HOLLOWAY, and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

After a bench trial, the district court granted defendant judgment in plaintiff's suit under the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. §§ 9601-9675. We conclude that the district court failed to grant plaintiff a presumption to which he was entitled under CERCLA. Exercising our jurisdiction pursuant to 28 U.S.C. § 1291, we reverse the judgment of the district court and remand for further proceedings.

I

Plaintiff, Morrison Enterprises ("Morrison"), is a general partnership that owns land in Salina, Kansas, including grain elevators and related buildings. Morrison operated those facilities until 1980, when it began leasing the site to another corporation.

Defendant, McShares, Inc. ("McShares"), is the successor in interest to Research Products Company, which supplied grain fumigants to Morrison for use at the grain elevator facility from the 1950s until approximately 1985. Throughout that period, McShares sold Morrison liquid grain fumigants containing carbon tetrachloride to be applied to the grain within the elevators and other buildings on the property. In November 1963 there was a spill of liquid grain fumigants on the Morrison property when a McShares employee was preparing to unload fumigant for delivery to Morrison.

In 1988 the Kansas Department of Health and Environment ("KDHE") tested residential water wells on property adjacent to Morrison's land and determined that the water in those wells was contaminated by carbon tetrachloride. After this discovery, Morrison provided alternative water supplies to area residents. The KDHE then issued an administrative order requiring Morrison to investigate the carbon tetrachloride contamination on its property. Morrison hired Kejr Science Group, Inc. ("Kejr"), an environmental consulting firm, to investigate the source and extent of the contamination. Kejr was, until at least the time of the district court's final decision in this case, in charge of conducting tests on the property to study the contamination.

Morrison entered into a consent order with the KDHE in late 1992 in which Morrison agreed to investigate the contamination on the site and to take corrective action to address that contamination. Under the order, Morrison was to develop a workplan describing its future activities on the site, a comprehensive investigation report describing the results of its investigation of the contamination on the site, and a corrective action study proposing activities to address the contamination. The KDHE reserved the right to approve or disapprove any actions to be taken by Morrison. Kejr was hired by Morrison to prepare the work plan, the comprehensive investigation report, and the corrective action study. Kejr subsequently completed all three documents, which were approved by the KDHE in May 1993, October 1994, and August 1997, respectively. Morrison paid Kejr for all of these activities, and as of June 30, 1997, the total expenditures by Morrison were over $430,000. The district court found that Morrison "has performed all activities required of it under the Consent Order with the KDHE." (1 Appellant's App. at 291.)

At approximately the same time that Morrison was addressing the contamination on its property, the KDHE and the United States Environmental Protection Agency ("EPA") developed a "state deferral pilot program" in which the EPA allowed the state to lead the way in addressing contamination at a number of sites throughout Kansas. (1 id. at 291-92.) Initially approved by the EPA in October 1994 and approved in a revised form in July 1995, the program provided that the KDHE's program for cleaning up sites where hazardous wastes had been released was in compliance with various requirements of federal law. The EPA retained oversight authority for the program, required the KDHE to submit regular reports, and reserved the right to require that any particular site in the program be removed from the state deferral program and directly handled by the federal government. The Morrison property was accepted into this program in 1995.

Morrison first filed suit against McShares in December 1992, seeking monetary damages under CERCLA based on the 1963 spill. Morrison failed to comply with a deadline for disclosure of expert witnesses, and as a result, the district court entered an order precluding Morrison from calling expert witnesses in that case. Upon a motion by Morrison, the district court subsequently dismissed the lawsuit without prejudice.

Morrison refiled its complaint on June 8, 1994, seeking monetary damages to cover Morrison's expenses for investigating and cleaning up the site, and a declaratory judgment that McShares would be liable for the future costs of cleaning up the site. Once again, Morrison's counsel failed to comply with disclosure deadlines, and the district court entered an order precluding Morrison from using expert testimony at trial. As the case proceeded to trial, Morrison made a number of motions to reconsider or narrow the scope of the court's preclusion order. All motions were denied by the district court.

A three-day bench trial was held in August 1997. During the trial, the court excluded evidence proffered by Morrison on the grounds that the evidence was covered by the preclusion order.

After the trial, the district court found that Morrison had met its burden of proving all of the prima facie elements of liability under CERCLA except two-compliance with the National Contingency Plan ("NCP") and the reasonableness and necessity of Morrison's costs¹ — and that Morrison's inability to call expert witnesses was fatal to its capacity to meet its burden on those points. The district court accordingly entered judgment on the monetary claims in favor of McShares, but it also entered declaratory judgment in Morrison's favor on the points of prima facie liability that Morrison had succeeded in establishing at trial. The district court specifically held that Morrison would not be precluded from establishing consistency with the NCP with respect to future costs it might incur in cleaning up the site.

Morrison timely appealed, challenging the district court's dismissal of one of its CERCLA claims, the district court's failure to grant it a presumption of compliance with the NCP, and the propriety of the district court's preclusion order and the order's application throughout the case. Morrison also argues that the district court should have issued a declaratory judgment establishing the extent of McShares's liability for cleanup costs. McShares cross-appealed, arguing that the district court erred in granting Morrison any favorable partial declaratory judgment.

II

CERCLA was enacted by Congress in 1980 as a response to the Love Canal hazardous waste disaster. Its purpose is to establish "a comprehensive response and financing mechanism to abate and control the vast problems associated with abandoned and inactive hazardous waste disposal sites." Pub. Serv. Co. of Colo. v. Gates Rubber Co., 175 F.3d 1177, 1181 (10th Cir.1999) (quotation omitted). CERCLA was amended in 1986 by the Superfund Amendments and Reauthorization Act, Pub.L. No. 99 499, § 101 et seq., 100 Stat. 1613, in order "to facilitate the prompt cleanup of hazardous waste sites and to shift the cost of environmental response from the taxpayers to the parties who benefitted from the wastes that caused the harm." Id. (quotation omitted).

CERCLA requires that releases of hazardous materials be reported to the appropriate federal authorities, 42 U.S.C. § 9603, and authorizes the President to respond to such releases, including both emergency responses and long-term remediation actions, id. § 9604. It also requires that the President develop the NCP, which is to be used to guide federal, state, and private actions that respond to releases of hazardous wastes. Id. § 9605. The NCP must establish criteria for the development of a National Priorities List, which is a list of sites where releases have occurred that have the highest national priority for remediation efforts. § 9605(a)(8). CERCLA also prescribes specific statutory requirements for the response process and cleanup standards. Id. §§ 9604, 9616, 9617, 9621. A national "Hazardous Substance Superfund" may be used by the federal government to provide immediate funds to respond to releases. Id. § 9611. Parties that have expended funds to respond to hazardous waste releases, whether they are federal, state, or private, may in turn recoup their costs from parties that might be liable under the statute, commonly known as "potentially responsible parties" or "PRPs." Id. § 9607(a).

Liability under § 9607 (sometimes known as § 107 of CERCLA) attaches to four categories of individuals: current owners and operators of the facility where the release occurred, § 9607(a)(1); any party that owned or operated the facility where the release occurred at the time that hazardous substances were being disposed at that facility, § 9607(a)(2); any party that arranged for disposal or treatment of hazardous substances at that facility, or who arranged for transport for disposal or treatment, § 9607(a)(3); and any party that accepted hazardous waste for transport to that facility if the party selected the...