U.S. v. Kayser-Roth Corp., Inc.
| Decision Date | 22 June 2000 |
| Docket Number | C.A. No. 88-325B.,C.A. No. 98-160T. |
| Citation | 103 F.Supp.2d 74 |
| Parties | UNITED STATES v. KAYSER-ROTH CORP., INC. |
| Court | U.S. District Court — District of Rhode Island |
Terrence P. Donnelly, U.S. Attorney's Office, Providence, RI, Donald G. Frankel, U.S. Dept. of Justice, Environmental Enforcement Section, Newton Corner, MA, for Plaintiff.
William S. Eggeling, Ropes & Gray, Providence, RI, J. Daniel Berry, Ropes & Gray, Washington, DC, for Defendant.
Background.........................................................77
The 1988 Case .................................................77
The Appeal ....................................................78
The 1998 Case and Bestfoods ...................................78
The Rule 60(b) Standard ...........................................78
Discussion ........................................................79
I. Prospective Application ..................................79
II. Inequity .................................................80
III. Futility .................................................81
A. Operator Liability ....................................81
B. Owner Liability .......................................82
1. Law of the Case ....................................82
2. Bestfoods ..........................................84
Conclusion ........................................................85
Kayser-Roth Corp., Inc. ("Kayser-Roth" or "KR") has moved, pursuant to Fed.R.Civ.P. 60(b)(5), for relief from that portion of a 1990 judgment (the "declaratory judgment") entered by Judge Boyle1 in C.A. No. 88-325-B (the "1988 case") declaring KR liable for the future cost of remediating a hazardous waste site in Forestdale R.I. (the "Site"). That motion was prompted by the commencement of another action (C.A. 98-160T or the "1998 case") in which the United States seeks to recover some of those costs.
The issues presented are whether the declaratory judgment has "prospective application" within the meaning of Rule 60(b)(5); and, if so, whether Kayser-Roth is entitled to relief from that judgment on the ground that the Supreme Court's intervening decision in United States v. Bestfoods, 524 U.S. 51, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) represents a material change in the law governing a parent corporation's liability under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 ("CERCLA") as the "operator" or "owner" of a hazardous waste facility.
I find that although, in this case, the United States seeks to apply the declaratory judgment prospectively, relief may not be obtained under Rule 60(b)(5) because Bestfoods does not render continued application of that judgment inequitable. Accordingly, Kayser-Roth's motion for relief from judgment is denied.
In 1990, Judge Boyle entered judgment against Kayser-Roth in C.A. No. 88-325-B requiring Kayser-Roth to pay some of the costs previously incurred by the United States Environmental Protection Agency ("EPA") in remediating the Site. The judgment also declared Kayser-Roth liable under CERCLA for any future remediation costs incurred by EPA. See United States v. Kayser-Roth Corp., 724 F.Supp. 15, 16-19 (D.R.I.1989). The facts underlying the declaratory judgment are recited in Judge Boyle's written opinion, see generally id., and may be summarized briefly as follows.
From 1952 to 1975, Stamina Mills Inc., a wholly-owned subsidiary of Kayser-Roth, operated a textile mill in Forestdale. In 1969, Stamina Mills installed a system that used trichloroethylene ("TCE") to clean its equipment. A few months later, a tanker truck that was delivering TCE accidentally spilled an indeterminate quantity of the chemical at the site. Apparently, additional quantities of TCE also leached into the soil from empty TCE containers that were discarded in a landfill on Stamina Mills's property.
Several years later, studies by EPA and the Rhode Island Department of Health determined that TCE from the site had contaminated nearby wells. Consequently, the site was added to the Superfund list, and cleanup efforts began. Stamina Mills then ceased doing business, and EPA brought a CERCLA action against Kayser-Roth seeking reimbursement for the costs it had incurred and for a declaration that Kayser-Roth would be liable for any additional costs incurred in the future.
Although EPA presented six theories on which it claimed that Kayser-Roth was liable, Judge Boyle found it necessary to address only two of them. He determined that Kayser-Roth was an "operator" of the site within the meaning of 42 U.S.C. § 9601(20) because it exercised "pervasive control over Stamina Mills," including control "with regard to environmental matters." Kayser-Roth, 724 F.Supp. at 22. More specifically, Judge Boyle found that:
Kayser-Roth had the power to control the release or threat of TCE, had the power to direct the mechanisms causing the release, and had the ultimate ability to prevent and abate damage. Kayser-Roth knew that Stamina Mills employed a scouring system that used TCE; indeed, Kayser-Roth approved the installation of that system after mandating that a cost-benefit study be made by Stamina Mills.
Judge Boyle also determined that Kayser-Roth was an "owner" of the site within the meaning of § 9601(20) because, in effect, Stamina Mills was merely Kayser-Roth's alter ego. More specifically, Judge Boyle found that Stamina Mills's corporate veil should be pierced "not only because public convenience, fairness, and equity dictate such a result, but also due to the all encompassing control which Kayser-Roth had over Stamina Mills as, in fact and deed, an owner." Id. at 24.
Accordingly, judgment was entered against Kayser-Roth for $846,492.33 in response costs previously incurred by EPA, plus interest of $111,928. In addition, a declaratory judgment was entered stating that "defendant Kayser-Roth Corporation is liable to the United States, pursuant to 42 U.S.C. § 9607(a)(2), for all further response costs incurred by the United States related to the Stamina Mills Site."
Kayser-Roth appealed from the 1990 judgment, but the appeal was unsuccessful. See United States v. Kayser-Roth Corp., 910 F.2d 24 (1st Cir.1990). In affirming the District Court's judgment, the First Circuit stated:
Without deciding the exact standard necessary for a parent to be an operator, we note that it is obviously not the usual case that the parent of a wholly owned subsidiary is an operator of the subsidiary. To be an operator requires more than merely complete ownership and the concomitant general authority or ability to control that comes with ownership. At a minimum it requires active involvement in the activities of the subsidiary.
The Court went on to find that the degree of control described in the "district court's excellent opinion," id., was "more than sufficient" to impose "operator" liability on Kayser-Roth. Id. at 28. Since the imposition of operator liability was dispositive, the Court of Appeals did not reach the "veil-piercing" issue.
In March of 1998, EPA commenced C.A. 98-160T to recover additional response costs of $4.1 million incurred after the period covered by the 1990 judgment, plus $2.3 million in interest.
Three months later, the Supreme Court issued its decision in United States v. Bestfoods, 524 U.S. 51, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) in which it held, inter alia, that the test for determining whether a parent corporation may be held directly liable as the operator of a hazardous waste facility run by its subsidiary "is not whether the parent operates the subsidiary, but rather whether it operates the facility." 524 U.S. at 67, 118 S.Ct. 1876. That decision prompted Kayser-Roth to file its Rule 60(b)(5) motion for relief from the 1990 judgment. Kayser-Roth argues that imposing "operator" liability on it is inconsistent with Bestfoods because both Judge Boyle and the First Circuit focused on whether Kayser-Roth controlled Stamina Mills rather than on whether Kayser-Roth controlled operations at the site. Kayser-Roth also argues that Bestfoods rejected the standard utilized by Judge Boyle in piercing Stamina Mills's corporate veil and holding Kayser-Roth derivatively liable as an "owner" of the facility.
Rule 60(b) represents an effort to strike a balance between two competing and equally important objectives of our legal system. It seeks to reconcile the strong public policy interest in recognizing the finality of judgments with the equally strong policy interest in attempting to ensure that disputes are decided on their merits and that justice is done. See Cotto v. United States, 993 F.2d 274, 276 (1st Cir.1993); Teamsters, Chauffeurs, Warehousemen & Helpers' Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 19 (1st Cir.1992). In attempting to strike that balance, courts, generally, are "disinclined to disturb judgments under the aegis of Rule 60(b)" unless the party seeking relief can demonstrate: (1) that its motion was timely filed; (2) the existence of exceptional circumstances justifying extraordinary relief; (3) the absence of unfair prejudice to the opposing party; and (4) that there is reason to believe that vacating the judgment will not be an empty exercise. See Teamsters, Chauffeurs, Warehousemen & Helpers Union, 953 F.2d at 19.
In this case, Kayser-Roth relies on that portion of Rule 60(b) that provides for relief from a final judgment when "it is no longer equitable that the judgment should have prospective application." Fed. R.Civ.P. 60(b)(5). More specifically, Kayser-Roth argues that it would be inequitable to continue to apply what it describes as the "discredited" declaratory judgment.2
EPA argues that:
(1) the 1990 judgment does...
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