PCS Nitrogen, Inc. v. Ross Dev. Corp.

• Citation: 127 F.Supp.3d 568
• Decision Date: 21 August 2015
• Docket Number: Case No. 2:09–cv–03171–MBS.
• Parties: PCS NITROGEN, INC., Plaintiff, v. ROSS DEVELOPMENT CORPORATION; T. Heyward Carter, Jr.; Grayson G. Hanahan; William O. Hanahan, III; Katharyne H. Rike; Estate of G.L. Buist Rivers, Jr.; Mikell R. Scarborough ; C. Cotesworth Pinckney and T. Heyward Carter, as Co–Trustees of the Trust of William O. Hanahan, Jr.; Ann Hanahan Blessing; Donald Buhrmaster, III; Eleanor W. Carter; Margaret H. Carter; Elizabeth H. Clark; Maria Grayson–Metaxas; Buist L. Hanahan; Elizabeth A. Hanahan; Frances G. Hanahan; Mary Ross Hanahan; Muriel R. Hanahan; Roger Parke Hanahan, Jr.; Grayson C. Jackson; Oriana H. Kirby; and Jeanne Deforest Smith Hanahan, Defendants.
• Court: U.S. District Court — District of South Carolina

127 F.Supp.3d 568

PCS NITROGEN, INC., Plaintiff,

v.ROSS DEVELOPMENT CORPORATION; T. Heyward Carter, Jr.; Grayson G. Hanahan; William O. Hanahan, III; Katharyne H. Rike; Estate of G.L. Buist Rivers, Jr.; Mikell R. Scarborough ; C. Cotesworth Pinckney and T. Heyward Carter, as Co–Trustees of the Trust of William O. Hanahan, Jr.; Ann Hanahan Blessing; Donald Buhrmaster, III; Eleanor W. Carter; Margaret H. Carter; Elizabeth H. Clark; Maria Grayson–Metaxas; Buist L. Hanahan; Elizabeth A. Hanahan; Frances G. Hanahan; Mary Ross Hanahan; Muriel R. Hanahan; Roger Parke Hanahan, Jr.; Grayson C. Jackson; Oriana H. Kirby; and Jeanne Deforest Smith Hanahan, Defendants.

Case No. 2:09–cv–03171–MBS.

United States District Court, D. South Carolina, Charleston Division.

Signed Aug. 21, 2015.

As Amended Sept. 23, 2015.

Kirby D. Shealy, III, Adams and Reese, Columbia, SC, John Buchanan Williams, Williams Lopatto, Washington, DC, Sandra Kaczmarczyk, Alton Associates, Washington, DC, for Plaintiff.

Daniel S. McQueeney, Jr., George Trenholm Walker, Kathleen Fowler Monoc, John Phillips Linton, Jr., Pratt–Thomas Walker, Charleston, SC, for Defendants.

AMENDEDFINDINGS OF FACT AND CONCLUSIONS OF LAW

MARGARET B. SEYMOUR, Senior District Judge.

This matter is before the court after trial for final disposition of Plaintiff PCS Nitrogen, Inc.'s ("PCS") cause of action for fraudulent conveyance. The claims in this case arise out of litigation that resolved liability under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") for the remediation of the Columbia Nitrogen Superfund Site ("Site") in Charleston, South Carolina. Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., Case No. 2:05–cv–02782–MBS (D.S.C.) (hereinafter Ashley II ). Both PCS and Defendant Ross Development Corporation ("Ross") are former owners and operators of the Site that were parties to the Ashley II action and were found liable for response costs at the Site. PCS brought this action on December 8, 2009, to recover funds from Ross, T. Heyward Carter, Jr. ("Carter"); Grayson G. Hanahan; William O. Hanahan, III ("Hanahan"); Katharyne H. Rike ("Rike"); Mikell R. Scarborough ("Scarborough"); and the Estate of G.L. Buist Rivers (collectively the "Ross Directors"); as well as C. Cotesworth Pinckney and T. Heyward Carter as co-trustees of the Trust of William O. Hanahan, Jr.; Anne Hanahan Blessing; Donald Buhrmaster, III; Eleanor W. Carter; Margaret H. Carter; Elizabeth H. Clark; Maria Grayson–Metaxas; Buist L. Hanahan; Elizabeth A. Hanahan; Mary Ross Hanahan; Muriel R. Hanahan; Roger Parke Hanahan, Jr.; Grayson C. Jackson; Orianna H. Kirby; and Jeanne Deforest Smith Hanahan (collectively the "Ross Shareholders").¹ ECF No. 1. PCS dismissed its claim against the Estate of G.L. Buist Rivers on June 10, 2011 (ECF No. 91) and against Maria Grayson–Metaxas on July 17, 2014 (ECF No. 294).

PCS proceeded to trial on three of the causes of action in its Amended Complaint: (1) an action under the Statute of Elizabeth (S.C.Code Ann. § 27–3–10(A) ) to set aside alleged fraudulent conveyances brought against Ross, the Ross Directors, and the Ross Shareholders; (2) an action for an alleged civil conspiracy brought against the Ross Directors; and (3) a direct claim for alleged breach of fiduciary duty brought against the Ross Directors. ECF No. 34. The parties tried the equitable claim for fraudulent conveyance to the court at the same time as they tried the two legal claims to the jury. At the conclusion of the trial on July 31, 2014, the jury returned a verdict for the Ross Directors on the civil conspiracy claim and a verdict for PCS in the amount of $5,555,158.00 against the Ross Directors on the breach of fiduciary duty claim. ECF No. 319. According to the joint stipulations submitted to the jury, $5,555,158.00 is the exact amount of all distributions to all the shareholders of Ross from 1999 to 2006, when Ross dissolved. ECF No. 312. The jury declined to award PCS punitive damages. ECF No. 319.

At an August 19, 2014 hearing, Defendants moved for judgment as a matter of law on the fraudulent conveyance claim. ECF No. 325. The court ordered the parties to prepare briefs addressing whether the jury's verdict provided PCS with an adequate remedy at law that precluded its recovery of equitable relief. Id. Those briefs were submitted to the court by September 12, 2014. ECF Nos. 326, 327, 328, and 329. On October 29, 2014, this court determined that the jury's verdict does not preclude the court from awarding PCS relief under its fraudulent conveyance claim. ECF No. 344. The court did, however, dismiss PCS's claim without prejudice to the extent that it was also brought against the Ross Directors—Carter, Grayson Hanahan, Hanahan, Rike, and Scarborough—because the breach of fiduciary duty claim tried to the jury provided an adequate remedy at law precluding equitable relief as to those Defendants. Id. at 8. The court permitted PCS's claim to proceed against the Ross Shareholders. Id. In the order on the post-trial motions accompanying this Amended Findings of Fact and Conclusions of Law, the court vacated in part its order of October 29, 2014, to the extent that order dismissed without prejudice PCS's fraudulent conveyance claim against the Ross Directors. ECF No. 344. The Ross Directors thus remain defendants to PCS's fraudulent conveyance claim.

PCS's fraudulent conveyance claim alleges that the Ross Directors knew of contamination at the Site and that Ross could be liable for such contamination when they approved all the distributions to themselves and to the Ross Shareholders from 1992 through 2006. ECF No. 34. PCS's amended complaint asserts that from 1992 to 2006, "with knowledge of a future tort claim and with actual intent to evade liability for the Site and defraud Ross creditors, both existing and subsequent, including PCS," the Ross Directors voluntarily distributed all of Ross's assets to all the shareholders of Ross; and that such "distributions made Ross insolvent and unable to pay its creditors, including PCS." ECF No. 34, ¶¶ 69–71. In its fraudulent conveyance claim, PCS challenges only the distributions from 1998 to 2006. Summ. J. Hr'g Tr. 22:23–23:6 (ECF No. 343).

On November 4, 2014, the parties submitted proposed findings of fact and conclusions of law to the court pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. Rule 52(a) directs that "[i]n an action tried on the facts without a jury or with an advisory jury, the court must find the facts specially and state its conclusions of law separately." Fed.R.Civ.P. 52(a).

Having carefully considered the testimony, exhibits, deposition excerpts, trial briefs, and proposed findings of fact and conclusions of law, the court makes the following findings.

I. FINDINGS OF FACT

A. Background: The Ashley II Litigation

1. Ross is a dissolved South Carolina corporation that was formed more than 100 years ago as Planters Fertilizer and Phosphate Company ("Planters"). From 1906 to 1966, Planters operated a fertilizer plant at the Site. Trial Tr. 69:5–14.

2. Planters sold the Site and its fertilizer plant operations to PCS's predecessor, Columbia Nitrogen Corporation ("CNC"), in 1966. Trial Tr. 69:21–23.

3. The sale of the Site was governed by a letter of agreement containing an indemnification clause in which Planters agreed to indemnify CNC "in respect to any acts, suits, demands, assessments, proceedings and costs and expenses resulting from any acts of [Planter's] occurring prior to the closing date...." Pl.'s Ex. 3; Trial Tr. 124:2–17.

4. After the sale, Planters changed its name first to Ross Industrial Products and subsequently to Ross Development Corporation. Trial Tr. 65:22–66:2.

5. The property that Planters and CNC owned and operated is contaminated with lead and arsenic and must be remediated. Trial Tr. 69:15–20. Ross contributed lead and arsenic to the Site in significant quantities.Id.

6. In 2005, the EPA estimated that the total remedy costs would be roughly $7.882 million. Trial Tr. 304:10–16; Pl.'s Ex. 76.

7. Ashley II of Charleston, LLC ("Ashley"), bought the Site in 2003. Initially, Ashley planned to remediate the Site. In 2005, Ashley sued PCS under CERCLA to recover its remediation costs. See Ashley II. PCS brought counterclaims against Ashley and claims against other former and current owners of the Site, who likewise filed their own cross-claims. Ashley II, ECF No. 627 at 1. These third-party defendants included Ross; James H. Holcombe, J. Holcombe Enterprises, L.P., J. Henry Fair, Jr. (Collectively "Holcombe and Fair"); Allwaste Tank Cleaning, Inc. ("Allwaste"); Robin Hood Container Express ("RHCE"); and the City of Charleston.

8. After Ross was added as a third party defendant in the CERCLA case, and following a bench trial, the court determined, among other things, that PCS was jointly and severally liable to Ashley II for the response costs it had incurred. PCS Nitrogen Inc. v. Ashley II of Charleston LLC, 714 F.3d 161, 167 (4th Cir.), cert. denied, ––– U.S. ––––, 134 S.Ct. 514, 187 L.Ed.2d 366 (2013). As to the counterclaim and third-party claims, the court equitably allocated liability for the past and future response costs as follows: forty-five percent to Ross; thirty percent to PCS; sixteen percent to Holcombe and Fair; five percent to Ashley; three percent to Allwaste; one percent to RHCE; and zero percent to the City of Charleston. Id. at 185 ; Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 746 F.Supp.2d 692, 754 (D.S.C.2010) ; Trial Tr. 131:10–132:2.

9. The court entered judgment for Ashley II against PCS for $147,617.02 plus interest and judgment for PCS against Ross for $87,404.82 plus interest. Ashley II, ECF No. 628. The court also held that "PCS cannot collect upon its judgments against contributing tortfeasors until it has paid more than its share of judgment entered in favor of Ashley in this case." Ashley II, ECF No. 660 at 4. The Fourth Circuit affirmed these rulings. PCS

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