U.S. v. Mexico Feed and Seed Co., Inc.

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: Before JOHN R. GIBSON, Circuit Judge, HEANEY, Senior Circuit Judge, and BEAM; BEAM
• Citation: U.S. v. Mexico Feed and Seed Co., Inc., 980 F.2d 478 (8th Cir. 1992)
• Decision Date: 16 November 1992
• Docket Number: Nos. 91-3085,91-3090,s. 91-3085
• Parties: , 24 Fed.R.Serv.3d 1032, 23 Envtl. L. Rep. 20,461 UNITED STATES of America, Appellee, v. MEXICO FEED AND SEED COMPANY, INC.; James F. Covington, Individually; Mary J. Covington; James F. Covington, doing business as Mexico Feed and Seed Company, Appellees, Jack Pierce, Individually and as a Director of Pierce Waste Oil Service; Pierce Waste Oil Service, Inc.; Martin J. Pierce, a Director of Pierce Waste Oil Service, Inc., Moreco Energy, Inc., Appellant. UNITED STATES of America, Appellee, v. MEXICO FEED AND SEED COMPANY, INC.; James F. Covington, Individually; Mary J. Covington; James F. Covington, doing business as Mexico Feed and Seed Company, Appellees, Jack Pierce, Individually and as a Director of Pierce Waste Oil Service; Pierce Waste Oil Service, Inc., Appellants, Martin J. Pierce, a Director of Pierce Waste Oil Service, Inc.,

Page 478

980 F.2d 478

35 ERC 1761, 24 Fed.R.Serv.3d 1032,

23 Envtl. L. Rep. 20,461

UNITED STATES of America, Appellee, v. MEXICO FEED AND SEED COMPANY, INC.; James F. Covington,

Individually; Mary J. Covington; James F.

Covington, doing business as Mexico Feed

and Seed Company, Appellees,

Jack Pierce, Individually and as a Director of Pierce Waste

Oil Service; Pierce Waste Oil Service, Inc.;

Martin J. Pierce, a Director of Pierce

Waste Oil Service, Inc.,

Moreco Energy, Inc., Appellant.

UNITED STATES of America, Appellee, v. MEXICO FEED AND SEED COMPANY, INC.; James F. Covington,

Individually; Mary J. Covington; James F.

Covington, doing business as Mexico Feed

and Seed Company, Appellees,

Jack Pierce, Individually and as a Director of Pierce Waste

Oil Service; Pierce Waste Oil Service, Inc., Appellants,

Martin J. Pierce, a Director of Pierce Waste Oil Service, Inc.,

Nos. 91-3085, 91-3090.

United States Court of Appeals Eighth Circuit.

Submitted June 8, 1992.

Decided Nov. 16, 1992.

Thomas J. Immel, Springfield, Ill., argued for Moreco Energy, Inc.

Bradford A. Brett, Mexico, Mo., argued for appellant Pierce Waste.

Kevin T. McClain, Springfield, Ill., on the brief, for appellant.

Jamie K. Lansford, Kansas City, Mo., argued for Covington, et al.

Katherine L. Adams, Washington, D.C., argued, for U.S.

Gerhardt Braeckel, Barry M. Hartman and John A. Bryson, Washington, D.C., on the briefs, for appellee.

Before JOHN R. GIBSON, Circuit Judge, HEANEY, Senior Circuit Judge, and BEAM, Circuit Judge.

BEAM, Circuit Judge.

This is an appeal from a district court judgment finding Moreco Energy, Inc. (Moreco), Pierce Waste Oil Service, Inc. (PWOS), and Jack Pierce (Pierce) jointly and severally liable under 42 U.S.C. § 9607 ¹ for clean-up costs of $1,024,321.79 plus prejudgment interest. 764 F.Supp. 565. Moreco, PWOS, and Pierce also appeal the court's judgment for James Covington and Mexico Feed and Seed Company (Mexico) on their 42 U.S.C. § 9613(f) cross-claim for a contribution of $36,500 to their response costs.

We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. We affirm in part and reverse in part.

I. BACKGROUND

James Covington owned a 53-acre tract in Audrain County, Missouri. He used three acres of the tract as the business offices of Mexico, of which he is president. During the mid-1960s, Jack Pierce, the president and owner of PWOS, a waste oil hauling company, approached Covington about putting some tanks on Mexico's premises. PWOS intended to store waste oil in these tanks, until enough was collected to haul to its Springfield, Illinois, processing plant. Pierce and Covington entered into an oral lease, allowing PWOS to place four tanks on a 40' by 40' parcel for $150 a year. That parcel is the focus of this litigation.

PWOS actively used the tanks until 1976. After that time PWOS stopped using them and allowed them to fall into disrepair. Rent was paid only through May, 1975. At least once after 1976, PWOS pumped one of the tanks out after Covington complained it was leaking. Neither Mexico nor Covington ever used the tanks for their own purposes nor did they accept ownership of the tanks in lieu of rent. No third party ever used the tanks, although once several people were arrested for trying to remove oil from the tanks.

During the time PWOS used the tanks, it hauled oil to the tanks from numerous clients who were later found to have PCBs ² at their sites. PWOS never tested the oil for PCBs. ³ Oil was spilled around the tanks while PWOS trucks loaded and unloaded material. After PWOS stopped using the tanks, they developed holes which allowed rain and snow to accumulate in the tanks and oil residue to ooze out. PWOS never cleaned the sludge out of the tanks.

In the summer of 1983 Pierce sold the assets of PWOS to Moreco, a pre-existing corporation in the re-refining business with operations in several states, including one at McCook, Illinois. Moreco had sales volumes approximately five times those of PWOS. Moreco purchased PWOS's assets to strengthen its ability to collect waste oil for processing at its McCook facility. It was primarily interested in the trucks, routes, drivers, and collecting expertise PWOS had accumulated. There is no allegation that the sale was not an arm's length transaction, that the terms of the sale were unfair, or that the sale price was in any way less than the fair value of the PWOS assets Moreco received. Pierce has not yet received the full purchase price. At the time of the sale, Jack Pierce owned 90 percent of PWOS's stock. He retired from the presidency of PWOS a few months before the sale and never worked for Moreco. In February of 1984, Pierce dissolved PWOS and distributed the proceeds.

Moreco had Pierce list PWOS's assets in order to avoid acquiring hidden liabilities. PWOS's assets included oil hauling trucks and hundreds of storage tanks. The four offending tanks were not included in either the list of hard assets purchased or that of hard assets not purchased. In an inartful attempt to make sure PWOS's customer base, customer list, and goodwill were not interpreted to be excluded from the sale by the list, the list of hard assets purchased ended with a statement that the list was not exclusive. Moreco never used the tanks at issue in this case, or even knew of their existence until the EPA brought it to their attention.

Moreco ran PWOS's collection network in essentially the same manner as PWOS had run it, with many of the same employees, collection routes and trucks except it redirected the end point of the network to its McCook facility. The PWOS name was not immediately removed from the collection trucks, and it remained on receipts, insurance policies, and in state regulatory agency paperwork for a few years. Martin Pierce, Jack's son, was hired by Moreco to run the daily operations of a portion of the PWOS network. He was supervised through weekly meetings with Moreco's president. Martin Pierce was elected to Moreco's board of directors several years after the sale. There was no continuity of shareholders or directors between PWOS and Moreco at the time of the purchase.

In 1984 the EPA inspected the tanks and discovered that they contained high concentrations of PCBs. The contamination radiated out about 100 feet into the soil around the tanks, due to a process of "weathering." That degree of "weathering" indicated the initial contamination had occurred as much as 20 years earlier.

The EPA cleaned up the site, incurring response costs. The government brought suit under 42 U.S.C. § 9607 to recover its costs. It sued the Covingtons and Mexico, as owners of the site (the land); Pierce and PWOS, as owners and operators of the site (the tanks); and finally Moreco, as the corporate successor to PWOS.

The Covingtons and Mexico settled with the government during the pendency of this litigation and filed a cross-claim against Pierce, PWOS, and Moreco for the amount they personally paid the government ($20,000) and for the legal fees they had incurred due to the placement of PCBs on their property.

II. DISCUSSION

The parties raise diverse issues on appeal. Pierce and PWOS argue that the district court erred in finding that they placed the PCBs in the tanks. Moreco argues that due to the government's unexcusable mistake of fact, it was improperly substituted as a party defendant to this litigation; that 42 U.S.C. § 9607 does not apply to corporate successors; and, that even if it does, Moreco cannot properly be found to be PWOS's successor. Moreco also argues that it did not receive a fair trial. Pierce, PWOS, and Moreco all argue that Covington and Mexico could not be awarded any legal costs on their cross-claim under 42 U.S.C. § 9613(f).

A. Pierce and PWOS

Pierce and PWOS argue that the district court's finding of fact that they owned and operated the tanks at the time of the contamination was clearly erroneous, and thus they cannot be responsible parties under 42 U.S.C. § 9607. ⁴ After reviewing the record, we find this argument untenable. The evidence is overwhelming that PWOS hauled oil from many clients who were generating PCB contaminated oil, that PWOS stored oil in the tanks in question, that no one else used the tanks in question, and that the tanks and surrounding soil were highly contaminated with PCBs.

Pierce, as the president, and active manager of PWOS, does not and could not dispute that he is a responsible party for CERCLA purposes. United States v. Northeastern Pharmaceutical & Chemical Co., 810 F.2d 726, 743-44 (8th Cir.1986), cert. denied, 484 U.S. 848, 108 S.Ct. 146, 98 L.Ed.2d 102 (1987).

Both Pierce and PWOS argue that they were ignorant of any PCB contamination of the oil they hauled. That very well may be true, but is irrelevant as far as CERCLA is concerned. CERCLA is a remedial strict liability statute. As such, its focus is on responsibility, not culpability. Once a person is determined to be a covered person under section 9607(a), the only relevant defenses are those listed in 42 U.S.C. § 9607(b). Ignorance or the lawfulness of the acts of persons causing the contamination are simply not available defenses according to the plain language of this statute. ⁵

B. Moreco

1. Procedural Questions

First, Moreco complains that, at the last minute, it was improperly substituted as a party defendant. The EPA initially brought this CERCLA suit against Motor Oils Refining Technology Corporation (MORTC), a shell through which the PWOS assets passed to Moreco. The EPA had in its possession at that time the asset purchase agreement between PWOS, Pierce, and Moreco. The asset purchase agreement was the basis of Moreco's dismissal from a July 1984 Toxic Substances Control Act proceeding the EPA had initiated involving this same site. ⁶ The asset purchase agreement clearly notes that the assets are to pass directly through MORTC to Moreco. Further, two depositions the EPA took in 1989 plainly state that the assets...