Quaker State Minit-Lube, Inc. v. Fireman's Fund Ins. Co.

Decision Date21 March 1994
Docket NumberCiv. No. 91-C-461J.
Citation868 F. Supp. 1278
PartiesQUAKER STATE MINIT-LUBE, INC., Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, et al., Defendants.
CourtU.S. District Court — District of Utah

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Shane D. Smoot, Quaker State Minit-Lube, Salt Lake City, UT, Wiley E. Mayne, Holland & Hart, Denver, CO, Jeffrey M. Jones, Durham, Evans & Jones, Dwight Epperson, Salt Lake City, UT, for plaintiff.

Mark J. Williams, Hanson, Epperson & Smith, Salt Lake City, UT, Lawrence A. Levy, Rivkin, Radler, Bayh, Hart & Kermer, Uniondale, NY, for Fireman's Fund Ins. Co. and Nat. Sur. Corp.

Mark J. Williams, Hanson, Epperson & Smith, Salt Lake City, UT, Lawrence A. Levy, Alyse Walker, Ginamarie T. Alvino, Rivkin, Radler, Bayh, Hart & Kremer, Uniondale, NY, Gary D. Centola, Rivkin, Radler, Bayh, Hart & Kremer, New York City, for American Ins. Co.

Ford G. Scalley, John E. Hansen, Scalley & Reading, Salt Lake City, UT, for Liberty Mut. Ins. Co.

Joy L. Clegg, Snow, Christensen & Martineau, Salt Lake City, UT, for Continental Ins. Co.

Barbara K. Berrett, Richards, Brandt, Miller & Nelson, Salt Lake City, UT, for Unigard Ins. Co.

MEMORANDUM OPINION AND ORDER

JENKINS, District Judge.

This matter is now before this court on cross-motions for summary judgment filed by plaintiff Quaker State Minit-Lube, Inc. ("Quaker State"), and defendants Liberty Mutual Insurance Company ("Liberty Mutual"), Fireman's Fund Insurance Company, American Insurance Company, National Surety Corporation (collectively "Fireman's Fund") and Unigard Insurance Company ("Unigard"). The parties have submitted a series of lengthy memoranda, supported by voluminous appendices of exhibits, documents, excerpts of deposition testimony, and an array of unpublished court decisions, articles and texts. The motions were heard on March 29, 1993. Since the hearing, the parties' moving papers have been augmented by a series of supplemental citations and copies of cases forwarded by counsel. The Court has reviewed and considered the materials submitted and the arguments made by counsel, and now rules as follows:

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This action arises out of the efforts of business, firmly prodded by public mandate and administrative enforcement action, to attempt to clean up the mess left by an industrial enterprise, now defunct, which engaged in the discharge of contaminated oils and toxic chemicals upon land. It arises as well out of the efforts of insurance carriers, who profit by reason of their paid-for promises to assume the risks of others, to write those promises as narrowly as possible. It is a case about cost, about consequence, and about who will, as a matter of public policy, ultimately bear the economic burden of the wrongful conduct of others, now defunct.

This action concerns a 6.6-acre industrial oil refining facility located at 1628 North Chicago Street, Salt Lake City, Utah, which until its closure in 1988, was operated purportedly for the purposes of re-refining and recovery of used automobile and industrial oils. The facility was originally owned and operated as an oil refinery by O.C. Allen Oil Company from 1953 to 1968. In 1968, Flinco, Inc. purchased and began operating the facility. In 1978, it was purchased by Axel Johnson, Inc. and was operated by Ekotek, Inc., a Delaware corporate subsidiary of Axel Johnson, Inc. See EPA Administrative Order on Consent for Emergency Surface Removal, dated August 1, 1989 (Docket No. CERCLA VIII-89-25), at 4 (annexed as Exhibit 4 to the Memorandum of Defendants Fireman's Fund Insurance Company, American Insurance Company and National Surety Corporation in Support of Motion for Summary Judgment, dated January 15, 1993 (hereinafter "Fireman's Fund Mem.")).

Following the purchase of the property by Steven Self and Steven Miller in 1981, Ekotek, Inc., a Utah corporation ("Ekotek"), operated the facility until its bankruptcy in 1987. The facility was last operated by an entity known as Petrochem Recycling Corporation, which also purported to engage in the oil recovery/re-refining and recycling business, until February 1988, when all operations ceased. Id.

Quaker State owns and operates a series of "convenience automobile service centers," which provide simple vehicle maintenance services, including engine oil changes. Beginning in 1977 and continuing through April of 1985, Quaker State sold drain oil1 collected at its service centers to Ekotek. In the ordinary course of dealing between Quaker State and Ekotek, Ekotek trucks would collect drain oil from storage tanks located at the Quaker State service centers and transport it to the Ekotek re-refining facility where it would be transferred to large storage tanks for later processing. See "Statement of Facts," Plaintiffs Memorandum Brief in Support of Motion for Partial Summary Judgment, dated January 15, 1993 ("Quaker State Mem."), at ?? 5-6.

Prior to the commencement of remedial action by the United States Environmental Protection Agency ("EPA") at the 1628 North Chicago Street site (hereinafter referred to as the "Ekotek Site"), it was observed that an estimated 500,000 gallons of liquid "containing varying concentrations of hazardous substances" was held in approximately 60 above-ground storage tanks ranging in size from 2,900 to 87,000 gallons, including twelve 20,000-gallon tanks located on the site, along with another 475 drums and approximately 1,500 smaller containers found in five warehouse buildings. See EPA Administrative Order on Consent for Emergency Surface Removal (Exhibit 4 to the Fireman's Fund Mem.), at 6. "Approximately 200,000 gallons of flammable liquids ... were contained in 32 tanks and 69 drums." Id. at 9. Also found on the Ekotek Site were three surface impoundment areas, "numerous piles and pits of waste material," underground tanks and an underground drain field. "EPA Findings of Fact" at ? 11, EPA Administrative Order on Consent for Remedial Investigation/Feasibility Study, dated July 10, 1992, (Docket No. CERCLA (106) VIII-92-21) (annexed as Exhibit 5 to the Fireman's Fund Mem.), at 4.

Contaminants associated with these on-site sources include a wide range of organic substances such as chlorinated solvents and other volatile organic compounds (acetone, vinyl chloride, 1, 1-dichloroethane, 1, 1, 1-trichloroethane), polynuclear aromatic hydrocarbons (2-methylnapthalene), phthalates, pesticides (chlordane, endrin, 4, 4-DDE, 4, 4-DDT) PCBs (Aroclor 1260), dioxin (2, 3, 7, 8-TCDD) and furans. Arsenic, chromium, lead, and mercury are also present in on-site primary and secondary sources.

Id.

Quaker State's initial summary judgment memorandum details a number of incidents in which oil or toxic materials (such as acid sludge produced in the re-refining process) were discharged or released upon the land or into the water at the Ekotek Site. See Quaker State Mem. at 3-9, ?? 7-22.

On two separate occasions, accidents in connection with loading and unloading of Union Pacific Rail Road cars with used oil led to 12,000 gallons of oil being spilled on the property.... The great majority of this oil went underground in a deep trench designed to collect rainwater runoff from the rail siding at the property; the amount recovered is unknown.
Refinery accidents over the course of the years contributed very large volumes to the spillage total.... Volumes lost as the result of tank overflows from operator error and spills from trucks resulting from driver error were substantial....
Prior to 1967, acid sludge produced in the rerefining process was discharged into a pit on the property. The pit was covered over in 1967, but no effort was made at the time to remove sludge residue remaining in the pit....
The rerefining process used clay as a filtration substance to remove impurities from the oil. Oil and clay were mixed together, and the oil was then squeezed out of the clay in a rotary vacuum filter. The spent clay was accumulated on the ground in the refinery area and periodically carted to landfills. Witnesses differed on the amount of oil remaining in the spent clay and whether oil leaked out of the pile....

Id. at 10-11, 13, 15 (citations omitted). Deposition testimony of former refinery employees related numerous incidents of the discharge of oil and other materials onto the Ekotek Site property:

James Blaser recalls that in early 1985 there was a large spill when a manhole was left off a tank and product flowed from the tank all the way to the west end of the site. He also recalls two or three incidents when tank 52 accidently overflowed approximately 500 gallons caused by water in the hot oil resulting in the oil foaming out the top of the tank.... Jim Blaser also states that he does not believe that there was any year when there wasn't an accidental spill/mishap at the site....
Scott Adair recalls that in 1980 or 1981 there were times when there were runovers in the processing area large enough that they went across the street.... He also recalls that there were occurrences between 1978 and 1983, happening once or twice a year, of overflows during the loading of acid sludge onto trucks. These spills, on occasions, were large enough that they flowed down the road and would have involved 500 to 2,000 gallons of oil and acid mixture....
Alex Bloomfield recalls that there were significant tank spills in each and every year he was at Ekotek, 1978 through 1985....

Id. at ?? 19-21 (citations omitted); cf. Quaker State Minit-Lube's Response in Opposition to Defendants' Motions for Summary Judgment, dated February 26, 1993 ("Quaker State Opp.Mem.") at 342; Quaker State Minit-Lube's Reply Memorandum in Further Support of Motion for Partial Summary Judgment, dated March 10, 1993 ("Quaker State Reply Mem.") at 3-11, ?? 2-16. The defendants' summary judgment memoranda set forth additional facts detailing similar events:

Scott Adair who started work in 1978
...

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