Stearns & Foster Bedding v. Franklin Holding Corp.

• Decision Date: 03 December 1996
• Docket Number: Civil Action No. 94-0967.
• Citation: 947 F.Supp. 790
• Court: U.S. District Court — District of New Jersey
• Parties: STEARNS & FOSTER BEDDING COMPANY, Plaintiff, v. FRANKLIN HOLDING CORPORATION, a New York Corporation, The Franklin Corporation — SBIC, a New York Corporation, M & T Capital Corporation, a New York Corporation, Nycon Capital Corporation, a New York Corporation, Rand Capital Corporation, a New York Corporation, R.C. Memhard & Co., a Connecticut Corporation, Stop-Fire Inc., a Delaware Corporation, Stop-Fire Inc., a New Jersey Corporation, I.M.P. Co., a New Jersey Partnership, Joseph J. McGuire, Richard C. Memhard, Vincent Protano, Martin S. Orland, Estate of Macy Nurkiewicz, Estate of Ignatius Nurkiewicz, Defendants.

947 F.Supp. 790

STEARNS & FOSTER BEDDING COMPANY, Plaintiff, v. FRANKLIN HOLDING CORPORATION, a New York Corporation, The Franklin Corporation — SBIC, a New York Corporation, M & T Capital Corporation, a New York Corporation, Nycon Capital Corporation, a New York Corporation, Rand Capital Corporation, a New York Corporation, R.C. Memhard & Co., a Connecticut Corporation, Stop-Fire Inc., a Delaware Corporation, Stop-Fire Inc., a New Jersey Corporation, I.M.P. Co., a New Jersey Partnership, Joseph J. McGuire, Richard C. Memhard, Vincent Protano, Martin S. Orland, Estate of Macy Nurkiewicz, Estate of Ignatius Nurkiewicz, Defendants.

Civil Action No. 94-0967.

United States District Court, D. New Jersey.

December 3, 1996.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kevin J. Bruno, Ritaelena Casavechia, Hannoch Weisman, P.C., Roseland, NJ, for Plaintiff.

Steven Gray, Waters, McPherson, McNeill, Secaucus, NJ, for Franklin Holding Corp. and The Franklin Corporation — SBIC.

Daniel M. Darragh, Buchanan Ingersoll, A Professional Corporation, Pittsburgh, PA, and David S. Garber, Princeton, NJ, for M & T Capital Corp.

Alfred C. Constants, III, Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, Roseland, NJ, for NYCON Capital Corp.

Alice J. Kryzan, Kryzan & Kolaga, L.L.P., Buffalo, NY, and Thomas E. Hastings, Smith, Stratton & Brennan, Princeton, NJ, for Rand Capital Corporation.

James E. Berube, Jr., Little Silver, NJ, for Stop-Fire Inc. and Joseph J. McGuire.

Richard C. Memhard, R.C. Memhard & Co., Riverside, CT, pro se.

Jeffrey Gerber, Bressler, Amery & Ross, P.C., Florham Park, NJ, for Estate of Macy Nurkiewicz, Estate of Ignatius Nurkiewicz, I.M.P. Co.

Lawrence S. Lawrence, Lawrence & Walsh, Hempstead, NY, and Russell M. Woods, Woods and Trembulak, Cranford, NJ, for Martin S. Orland.

                                          Table of Contents
                  I. FACTS AND PROCEDURAL HISTORY                                     795
                 II. STANDARD FOR SUMMARY JUDGMENT                                    796
                III. DISCUSSION                                                       797
                     A) Private Party Actions Under CERCLA Section 107(a)             797
                     B) Operator Liability Under CERCLA                               801
                        (1) Introduction                                              801
                        (2) The Actual Control Standard                               802
                        (3) Franklin's Operator Liability                             803
                        (4) M & T's Operator Liability                                807
                        (5) Rand's Operator Liability                                 808
                        (6) Agency Liability of M & T and Rand                        809
                     C) The Continuity of Enterprise Theory                           809
                     D) The New Jersey Spill Act                                      810
                     E) Martin S. Orland's Motion for Summary Judgment                811
                     F) NYCON's Motion for Summary Judgment                           812
                     G) The Nurkiewicz Defendants' Motion to Approve Settlement       813
                     H) The Motions to Strike                                         814
                 IV. CONCLUSION                                                       815
                

OPINION

ORLOFSKY, District Judge:

This action has been brought by Stearns & Foster Bedding Corp. ("Stearns & Foster"), a manufacturer of mattresses and box springs, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601-9675, and the statutory and common law of New Jersey. In Count One of its Third Amended Complaint, plaintiff seeks to recover response costs under CERCLA Section 107(a), 42 U.S.C. § 9607(a), in relation to pollution remediation activities undertaken at a facility currently owned by Stearns & Foster. In Count Two, plaintiff seeks contribution under CERCLA Section 113(f)(1), 42 U.S.C. § 9613(f)(1). Stearns & Foster also seeks contribution pursuant to the New Jersey Spill Compensation and Control Act ("Spill Act"), N.J.Stat.Ann. § 58:10-23.11f(a)(2), as well as damages and equitable relief under the common law of New Jersey. Several defendants have filed counterclaims against Stearns & Foster and cross-claims seeking indemnity and/or contribution. Jurisdiction is conferred upon this court by 28 U.S.C. §§ 1331 and 1367(a).

There are no fewer than nine motions and cross-motions presently before the court. Defendants, Franklin Holding Corp. and the Franklin Corp. — SBIC (collectively "Franklin"), have filed a motion for summary judgment. Defendant, M & T Capital Corp. ("M & T"), has filed a motion for summary judgment. Defendant, Rand Capital Corp. ("Rand") has filed a motion for summary judgment. Defendant, Martin S. Orland ("Orland"), seeks summary judgment dismissing Counts One through Eight of the Third Amended Complaint as against him. Defendant, NYCON Capital Corp. ("NYCON"), has filed a motion for summary judgment. In addition, plaintiff, Stearns & Foster, has moved for partial summary judgment on the issue of CERCLA liability against defendants, Franklin Holding Corp., M & T Capital Corp. and Rand Capital Corp.

On separate issues, defendants, I.M.P. Co., the Estate of Ignatius Nurkiewicz and the Estate of Macy Nurkiewicz (the "Nurkiewicz defendants"), have filed a motion to approve a settlement with Stearns & Foster and to dismiss with prejudice the cross-claims of the other defendants. Two of the defendants, M & T and Rand, have filed motions seeking to strike the certifications of Jose Morera, Carmelo Figueroa, and Oscar Franz and the affidavits of George Gilkie, Peter Edmonds, and Steven Morabito, all of which have been presented in support of Stearns & Foster's motion for partial summary judgment.

These motions require this court to decide: (1) whether a plaintiff, who is also a potentially responsible party under CERCLA, may sue for response costs under Section 107; (2) whether the summary judgment record supports the imposition of CERCLA liability upon any, or all, of the companies which provided capital to Stop Fire-DE and Stop Fire-NJ, because these companies actually controlled the day-to-day operations of Stop Fire-DE and Stop Fire-NJ at a time when hazardous waste disposal took place; (3) whether Stop Fire-NJ is responsible for any CERCLA liability which attaches to its predecessor companies, Stop Fire-NY and Stop Fire-DE; (4) whether Franklin's Executive Vice President, Martin S. Orland, may be held personally liable for contamination at the Site; and (5) whether affidavits and certifications filed after the close of discovery may be considered in the summary judgment record in this case.

I. Facts and Procedural History

As is typical in CERCLA actions, the facts are largely undisputed, although the legal conclusions to be drawn from those facts are vigorously contested. This case concerns responsibility for environmental pollution at a twenty-one acre site in South Brunswick, New Jersey, now owned by Stearns & Foster (the "Site"). Until November, 1979, the Site was used primarily for the manufacture of fire extinguishers under the brand name "Stop-Fire." From 1979 until 1991, the Site was used by Stearns & Foster for its bedding manufacturing operations.

The Site, then a farm, was purchased in 1953 by the Ashwill Corporation, a New York holding company owned by Ignatius, Macy and Paul Nurkiewicz. Ashwill Corporation was dissolved on August 24, 1970, and ownership of the Site was transferred to I.M.P. Company, a New Jersey Partnership formed by Ignatius, Macy and Paul Nurkiewicz. While the Site was owned by the Nurkiewiczes, the fire extinguisher manufacturing operations were conducted by a series of companies using the "Stop-Fire" brand name, beginning with Union Parts Manufacturing Company ("Union") and Stop Fire, Inc., a New York Corporation ("Stop Fire-NY").

Union and Stop Fire-NY were purchased in September, 1973, by a newly-formed Delaware corporation, Stop Fire, Inc. ("Stop Fire-DE"). Financing for the purchase was provided to Stop Fire-DE by Franklin and M & T. Additional financing was provided to Stop Fire-DE in 1975, by Franklin, M & T and Rand (the "Investor Group").

Pursuant to Bankruptcy Rules then in effect, Stop Fire-DE was adjudicated a bankrupt by a consent order entered in this court on April 23, 1976. On May 19, 1976, Stop Fire, Inc., was newly incorporated as a New Jersey corporation ("Stop Fire-NJ"). On June 3, 1976, Franklin, acting for itself and on behalf of M & T, purchased the physical assets of Stop Fire-DE from the bankruptcy trustee. On the following day, June 4, 1976, Franklin and M & T transferred these physical assets to Stop Fire-NJ.

On June 7, 1989, pursuant to provisions of New Jersey's Environmental Cleanup Responsibility Act ("ECRA"),¹ Stearns & Foster entered into an Administrative Consent Order ("ACO") with the New Jersey Department of Environmental Protection ("NJDEP") which required Stearns & Foster to determine the nature and extent of soil and groundwater contamination at the site and to implement remedial measures. As a result of its investigations, Stearns & Foster discovered, among other problems, some soil and extensive groundwater pollution from chlorinated solvents.²

Stearns & Foster contends that it never used chlorinated solvents in its manufacturing process. On the other hand, it is undisputed that, as part of the fire extinguisher manufacturing process, the various Stop Fire entities utilized chemical degreasers containing chlorinated solvents in order to prepare canisters and other metal parts for painting. There is undisputed testimony that, on at least one occasion, employees of Stop Fire emptied drums onto the ground at the Site. It is assumed, for purposes of these motions, that those drums contained solvents from the parts cleaning process. It is contended by Stearns & Foster, and supported by affidavit testimony, that such disposal of solvents continued throughout the tenure of the various Stop...