U.S. v. Lightman

• Decision Date: 12 December 1997
• Docket Number: No. CIV. 92-4710(JBS).,CIV. 92-4710(JBS).
• Citation: 988 F.Supp. 448
• Parties: UNITED STATES of America, Plaintiff, v. Jerome LIGHTMAN, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

988 F.Supp. 448

UNITED STATES of America, Plaintiff, v. Jerome LIGHTMAN, et al., Defendants.

No. CIV. 92-4710(JBS).

United States District Court, D. New Jersey.

December 12, 1997.

COPYRIGHT MATERIAL OMITTED

Mark A. Gallagher, Trial Attorney, Environmental Enforcement Section, Environment and Natural Resources Division, U.S. Department of Justice, Washington DC, Faith Hochberg, United States Attorney, Louis J. Bizzarri, Asst. U.S. Atty., United States Attorney's Office, Camden, NJ, for Plaintiff.

John M. Seagnelli, Eric S. Aronson, Whitman Breed Abbot & Morgan, Newark, NJ, for Defendant Stepan Company.

Robert A. Gladstone, Nan Bernardo, Shanley & Fisher, P.C., Morristown, NJ, for Joint Defense Group.

OPINION

SIMANDLE, District Judge.

In this Superfund case, a group of defendants (The "Joint Defense Group" or "JDG") has moved to enforce an agreement between the JDG and defendant Stepan Company to fund the joint settlement of all defendants with the United States. The plaintiff, the United States, has joined this motion. In response to the motion, Magistrate Judge Rosen held an evidentiary hearing, and prepared comprehensive findings in a Report and Recommendation granting the JDG's motion to enforce the settlement with Stepan.

Defendant Stepan Company has objected to the Report's findings that there was an enforceable agreement between the JDG and Stepan Company and that Stepan is equitably estopped from denying the enforceability of the agreement. The JDG, while concurring with the Report's finding of an enforceable agreement, objects to the recommendation of denial of their request for attorney's fees and costs.

The issue in this motion essentially is whether a binding agreement-in-principle can be implied from the parties' course of conduct, namely Stepan's offer and the JDG's acceptance, despite provisions in an unexecuted memorialization of the agreement that specifically make the effectiveness of that document contingent upon written execution by all the parties. Because the resolution of this question requires a fact-intensive analysis, the court will set forth the factual background of the matter in some detail.

I. BACKGROUND

This Superfund case has been pending before this court since November 1902, The United States, pursuant to Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act ["CERCLA"], 42 U.S.C. § 9607(a), has alleged that the defendants in this action are strictly liable, jointly and severally, for the costs incurred by the United States in responding to the release and/or threatened release of hazardous substances deposited at the D'Imperio Property Superfund Site, Hamilton Township, New Jersey. Various defendants have also brought cross-claims against each other arising out of the D'Imperio Site and the Ewan Superfund Site located in Burlington County, New Jersey, asserting claims for contribution under section 113(f) of CERCLA, 42 U.S.C. § 9613(f).

A. Settlement Negotiations

At various stages in the litigation, aggressive settlement initiatives were undertaken by the parties, under the supervision of Magistrate Judge Rosen. In May of 1993, the court stayed the litigation so the defendants could engage in mediation in order to resolve a dispute between the defendants regarding the proper allocation of response costs amongst them. As a result of that first mediation effort, all alleged defendant and third-party defendant generators of waste, with the exception of Stepan Company, agreed to an allocation of responsibility for the cleanup costs of the two Superfund sites, and agreed to coordinate their defense jointly by forming a Joint Defense Group ("JDG").¹ Stepan Company, however, disputed the mediator's recommended allocation of costs, and chose not to join the JDG. As a result of this dispute, the litigation has proceeded with the JDG and Stepan each being represented by separate counsel.

Further settlement discussions then continued after the litigation resumed in October 1995. Pursuant to Magistrate Judge Rosen's supervision, the defendants all entered into negotiations with the United States in an effort to settle the United States' claims for past costs. (See Case Management Order No. 7, ¶ 3, Ex. A to Certification of Sean Monaghan (hereinafter "Monaghan Certif.").) On December 1, 1995, the United States proposed a settlement of the United States' claims for past costs whereby the government would agree to reduce its past costs claim from $8.7 million to $7.1 million. (See Ex. C to Monaghan Certif.) The government's proposal was contingent, inter alia, on the immediate payment of the $7.1 million, and the government therefore suggested that "the JDG and Stepan may, if they choose, agree amongst themselves to a temporary funding mechanism to make this payment, with a proviso that they readjust their contributions to the total at the conclusion of the contribution action." (See id.) Stepan and the JDG took steps to obtain a stay of the litigation so that the parties could negotiate and respond to the government's substantial reduction of its demand in order to achieve the benefits of an early settlement, according to the testimony of Mr. Matthews, who was Stepan's counsel at that time. (Matthews Dep. Tr. at 46:17 to 47:22.)

Accordingly, the defendants embarked on internal negotiations between the JDG and Stepan Company, pursuant to an Order of the court filed December 26, 1995, in the hopes of reaching an agreement on a way for the defendants to preserve their rights against each other while funding a settlement with the United States for its past costs claim. (See Case Management Order No. 9, ¶ 3, Ex. B. to Monaghan Certif.)² Negotiations progressed quickly, and on January 17, 1996, a letter was sent to JDG counsel Robert Gladstone, Esquire, by Stepan's former counsel Robert Matthews, Esquire, of the firm of McKenna & Cuneo, setting forth Stepan's proposal for a set of principles for an agreement to fund the joint settlement of the United States' claims for past costs, under which each defendant's respective burden would be subject to future reallocation by trial, if necessary.³ (See Ex. D to Monaghan Certif.) Stepan's General Counsel, Jeffrey W. Bartlett, had discussed the contents of Matthews' January 17, 1996 letter and approved it. (Matthews Dep. Tr. 24:12 to 26:19, at Ex. G to Stepan Company's Objections.) Throughout the subsequent negotiations, these fundamental terms never changed, and no attempt was made to change them. (See Monaghan Certif. ¶ 5.)

On January 22, 1996, during a telephone status conference with Magistrate Judge Rosen, the parties represented to the court that Stepan and the JDG were close to achieving settlement with the United States. (See Certification of Nan Bernardo, ¶ 3 (hereafter "Bernardo Certif."); see also letter of January 26, 1996 to Judge Rosen from Nan Bernardo, counsel to the JDG, Ex. A to Bernardo Certif.) Based on these assertions, Judge Rosen understood that the United States' claims for past costs were being resolved through the joint funding agreement, and that the litigation would go forward without the United States so that the liability of defendants and third-party defendants upon the claims and cross-claims for contribution among themselves could be prepared for trial. Accordingly, he issued a Case Management Order in which it was contemplated that the United States would not participate in future depositions. (See Case Management Order No. 10, filed January 29, 1996, Ex. B. to Bernardo Certif. (providing that "[s]hould the defense group and Stepan fail to consummate settlement with the United States of America, it is understood that the United States will have an opportunity to redepose any individual produced for deposition pursuant to paragraph 3.").)

On February 15, 1996, Stepan's counsel, Robert Matthews, again sent a letter to JDG Counsel Robert Gladstone, transmitting a draft of a proposed funding agreement.⁴ (See Ex. E to Monaghan Certif.) This proposal set forth in further detail a method for the parties to achieve the goals set forth in Mr. Matthews' previous letter, and specified an amount that Stepan would be willing to contribute toward the initial settlement payment to the government.⁵ (See Monaghan Certif. at ¶ 6.)⁶ In his letter, Mr. Matthews at first did not hold the attached proposal out as a firm offer, explaining that he had not had an opportunity to review the draft with his client because his client contact was out of the country; he therefore reserved the right to make changes to the draft "based on such discussion". (See Ex. E to Monaghan Certif. ¶ 3.) Because Mr. Matthews did not subsequently make any changes to the essential terms of the draft, either upon his client's return or at any time thereafter, (see Monaghan Certif. ¶ 7), the Matthews letter of February 15, 1996, including the attached draft funding agreement, constituted a firm offer from Stepan for a funding agreement. Mr. Matthews indeed has testified that Mr. Bartlett (Stepan's General Counsel) reviewed the February 15, 1996 offer letter upon Bartlett's return, and that when Matthews discussed the settlement offer with Bartlett, Bartlett indicated no disagreement with "the direction in which we were heading on negotiating this settlement". (Matthews Dep. Tr., supra, at 43:14 to 44:19.)

On February 20, 1996, Mark Gallagher of the United States Department of Justice sent to counsel for Stepan and the JDG a proposed Partial Consent Decree for settlement of the United States' claims for past costs. (See Ex. F to Monaghan Certif.) This Partial Consent Decree incorporates the principles described in Mr. Matthews' letters.⁷

On February 29, 1996, members of the JDG met by telephone conference, in which a voting majority of the JDG indicated their approval of the terms of Stepan's funding proposal and the partial consent decree, but suggested some modifications to the language of both documents. (Se...