Raytheon Constructors, Inc. v. Asarco Inc.

• Decision Date: 11 March 2003
• Docket Number: No. 00-1530.,No. 00-1500.,00-1500.,00-1530.
• Citation: 368 F.3d 1214
• Parties: RAYTHEON CONSTRUCTORS INC., a Delaware corporation, Plaintiff-Appellant/Cross-Appellee, v. ASARCO INCORPORATED, a New Jersey corporation, Defendant-Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

368 F.3d 1214

RAYTHEON CONSTRUCTORS INC., a Delaware corporation, Plaintiff-Appellant/Cross-Appellee, v. ASARCO INCORPORATED, a New Jersey corporation, Defendant-Appellee/Cross-Appellant.

No. 00-1500.

No. 00-1530.

United States Court of Appeals, Tenth Circuit.

March 11, 2003.

Robert B. McKinstry, Jr. (Marc Davies, of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, PA, and Roger P. Thomasch and Denise S. Maes, of Ballard Spahr Andrews & Ingersoll, LLP, Denver, CO, with him on the briefs), of Ballard Spahr Andrews & Ingersoll LLP, Philadelphia, PA, for Plaintiff-Appellant/Cross-Appellee.

Michael R. Thorp (Marcy G. Glenn and Tiffany W. Smink, of Holland & Hart, Denver, CO, and Peter J. Nickles and Gerald N. Magliocca, of Covington & Burling, Washington, D.C., with him on the briefs), of Heller, Ehrman, White & McAuliffe, Seattle, WA, for Defendant-Appellee/Cross-Appellant.

Before TACHA, Chief Judge, ALDISERT^*, and SEYMOUR, Circuit Judges.

SEYMOUR, Circuit Judge.

Raytheon Constructors, Inc. ("Raytheon") appeals the decision of the district court holding it liable to ASARCO Corporation ("ASARCO") as an "operator" and an "arranger" under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., in relation to the environmental cleanup at the Rawley Mine site in Saguache County, Colorado. ASARCO cross-appeals regarding damages. We reverse as to Raytheon's liability and therefore need not reach the cross-appeal regarding damages.

I.

The mine at issue in this case was owned by the Colorado Corporation when, in 1925, it encountered financial difficulties and defaulted on several debts, including those owed to Stearns-Roger (the predecessor in interest to Raytheon), ASARCO, and Metals Exploration Company. Those three entities together created Rawley Mine, Inc. ("RMI") as a part of a reorganization plan to recover the outstanding debts. They invested the necessary funds in RMI in different proportions (ASARCO at forty percent, Metals Exploration at forty percent, and Stearns-Roger at twenty percent), and each received stock corresponding to their liens against Colorado Corporation. At the initial meeting of the board of directors of RMI, Mr. Stearns, the president of Stearns-Roger, was elected chairman and president of RMI. In 1929, after RMI had repaid Stearns-Roger's loans, ASARCO purchased all of Stearns-Rogers' RMI stock and Mr. Stearns resigned as RMI's president and executive committee chairman. This ended Stearns-Roger's association with RMI. We note in reciting these facts that the role played by Stearns-Roger, which never owned more than twenty percent of RMI, is best characterized as that of minority shareholder rather than "parent" company.

In 1996, Raytheon sought a declaratory judgment that it was not liable to ASARCO under CERCLA for the costs ASARCO incurred through cleanup in connection with the Rawley Mine site. ASARCO counterclaimed, arguing Raytheon was liable under CERCLA and state common law as Stearns-Rogers' successor in interest. The parties filed cross-motions for partial summary judgment. The district court denied ASARCO's motion. The court granted Raytheon's motion on the issue of "owner" liability, but denied its motion on the issues of "operator" or "arranger" liability. The court then bifurcated the issues of liability and damages, and after a bench trial held Raytheon liable for CERCLA contribution as an operator and an arranger.

Prior to the damages portion of the trial, Raytheon moved for reconsideration of the liability decision based on a new Supreme Court opinion, United States v. Bestfoods, 524 U.S. 51, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998). The district court treated that motion as one pursuant to Fed.R.Civ.P. 60(b), even though it acknowledged that Raytheon was seeking reconsideration of an interlocutory order rather than a final judgment. After considering Bestfoods, the court denied Raytheon's motion in a second order. It subsequently held Raytheon responsible to ASARCO for a portion of ASARCO's "recoverable costs." See 42 U.S.C. § 9607(a); 40 C.F.R. § 300.700.

II.

On appeal, Raytheon argues the district court misapplied Bestfoods in making its "operator" liability determination. Raytheon contends the underlying reasons for reversal of "operator" liability also support reversal of the "arranger" liability determination. In analyzing the district court's opinion, we must first determine our standard of review.

The district court was incorrect to treat Raytheon's motion for reconsideration under Rule 60(b), which only applies to final orders or judgments. Instead, "any order ... however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties ... is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." Fed.R.Civ.P. 54(b). Thus we will not review the district court's order for abuse of discretion, as we would a ruling on a Rule 60(b) motion. Rather, we review de novo the district court's conclusions of law in its reconsideration of its order on liability. See, e.g., Elder v. Holloway, 510 U.S. 510, 516, 114 S.Ct. 1019, 127 L.Ed.2d 344 (1994).

The central issue in this appeal is whether Raytheon may be held liable for the actions of RMI under section 107(a) of CERCLA, 42 U.S.C. § 9607(a). Section 107(a) lists four classes of liable parties: (1) owners and operators of hazardous substance sites; (2) persons who owned or operated such sites at the time of disposal; (3) persons who have arranged for the disposal of hazardous substances; and (4) persons who have transported hazardous substances for disposal. See Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313, 1317 (11th Cir.1990). RMI itself is liable as an owner, an operator, and an arranger. Raytheon, as successor in interest to Stearns-Roger, may only be held liable if it can be determined that the operation and arrangement functions of RMI may be attributed directly to Stearns-Roger as a stockholder.

In Bestfoods, the Supreme Court clarified the standard to be used in making this determination. First, it "sharpen[ed] the definition [of `operator'] for purposes of CERCLA's concern with environmental contamination." Bestfoods, 524 U.S. at 66, 118 S.Ct. 1876. The Court stated "an operator must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." Id. at 66-67, 118 S.Ct. 1876. Furthermore, the Court emphasized the necessary connection between the potential "operator" and the facility itself, rather than with the subsidiary per se: "The question is not whether the parent operates the subsidiary, but rather whether it operates the facility, and that operation is evidenced by participation in the activities of the facility, not the subsidiary." Id. at 68, 118 S.Ct. 1876 (quotation omitted). Because the Court in Bestfoods was addressing a situation involving a parent and subsidiary, we must accordingly modify our inquiry as appropriate to suit the situation of a minority shareholder such as Stearns-Roger. The focus on the facility remains the crucial consideration.

The Court acknowledged the possibility that directors and officers might hold positions with both a parent and a subsidiary, and recited the corporate law principle that it is entirely appropriate for them to do so. Id. at 69, 118 S.Ct. 1876. Such dual officers can and do "change hats" to represent the two corporations separately. Id. (quotation omitted). Again citing basic principles of corporate law, the Court noted the presumption that directors wear their "subsidiary hats" rather than their "parent hats" when they act for the subsidiary, and concluded that

it cannot be enough to establish liability here that dual officers and directors made policy decisions and supervised activities at the facility. The Government would have to show that, despite the general presumption to the contrary, the officers and directors were acting in their capacities as [parent] officers and directors, and not as [subsidiary] officers and directors when they committed those acts.

Id. at 69-70, 118 S.Ct. 1876.¹

Raytheon does not contend the factual findings of the district court are clearly erroneous; indeed, the findings of fact were stipulated by the parties. Based on those facts, we are persuaded the district court erred in its application of Bestfoods. The district court correctly cited the relevant points we have listed from Bestfoods, but then reasoned as follows:

Although my Findings and Conclusions rest, in part, on evidence that Stearns-Roger .. had a significant stake in [RMI] in terms of stock, capital, and voting power, such evidence is not necessary to a finding that Stearns-Roger (and, therefore, Raytheon) was directly liable for the operations of RMI's facility, the Rawley Mine. Moreover, contrary to Raytheon's assertions, it is clear that Mr. Thomas Stearns, president of Stearns-Roger and president and chairman of RMI, acted on behalf of Stearns-Roger, not simply as an RMI board member. As I stated in my Findings and Conclusions, Stearns himself, as sole stockholder and president of Stearns-Roger, served in a representative capacity as the primary liaison between the two entities.

Aplt. Appx. at 100 (quotation and citation omitted). We note, however, that serving as the primary liaison between two corporations does not rebut the presumption of wearing separate hats in separate corporate roles. Mr. Stearns' role as president of Stearns-Roger does not lead to the conclusion reached by the district court — i.e., that he acted on behalf of Stearns-Roger rather than RMI. Indeed, none of these facts rebut the Bestfoods presumption.

The district court continued:

Of course, Mr....