US v. Nicolet, Inc.

• Decision Date: 10 May 1989
• Docket Number: Civ. A. No. 85-3060.
• Parties: UNITED STATES of America v. NICOLET, INC., et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

712 F. Supp. 1193

UNITED STATES of America v. NICOLET, INC., et al.

Civ. A. No. 85-3060.

United States District Court, E.D. Pennsylvania.

May 10, 1989.

COPYRIGHT MATERIAL OMITTED

David Street, Trial Atty., Dept. of Justice, Washington, D.C., Susan Dein Bricklin, Asst. U.S. Atty., Dept. of Justice, Philadelphia, Pa., for plaintiff.

Jon S. Brooks, New York City, for T & N.

Joel Schneider, Philadelphia, Pa., for Nicolet, Inc.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

Plaintiff United States, at the request of the Administrator of the United States Environmental Protection Agency ("EPA"), on May 30, 1985, filed suit against defendant Nicolet, Inc. ("Nicolet"). In its original Complaint, the United States alleged that Nicolet was liable, pursuant to § 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9607(a), for costs incurred by EPA in responding to a release or threatened release of a hazardous substance at a waste disposal site in Ambler, Pennsylvania ("Ambler Site"). The United States sought the following relief: a judgment that Nicolet was liable for costs already incurred by EPA; a declaratory judgment that Nicolet is liable for all future costs (not inconsistent with the National Contingency Plan) to be incurred by EPA in connection with the Ambler site; interest; and litigation costs.

On March 13, 1986, Nicolet filed a third-party Complaint against T & N plc ("T & N") (formerly known as Turner & Newall PLC), alleging that T & N was liable for the response costs and/or was liable for contribution or indemnity to Nicolet for such costs as a consequence of T & N's relationship to the previous owner of the Ambler site. The United States, on February 4, 1987, moved to amend its Complaint to add T & N as a defendant. The motion to amend was granted on May 28, 1987, and the United States filed and served its First Amended Complaint on June 5, 1987.

On July 17, 1987, Nicolet filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 1101 et seq., in the Bankruptcy Court for the Eastern District of Pennsylvania. Accordingly, pursuant to Section 362(a) of the Bankruptcy Code, this Court, on September 1, 1987, issued an Order placing the action in the Civil Suspense File. On January 12, 1988, this Court granted the United States' Motion for Declaration of Inapplicability of Automatic Stay, removed the case from civil suspense, and established a briefing and discovery schedule. United States v. Nicolet, Inc., 81 B.R. 310 (E.D.Pa.1988), affirmed, 857 F.2d 202 (3d Cir.1988). Defendant Nicolet and the United States have executed a settlement of all claims. The United States has submitted the settlement to the Department of Justice for review and public notice and comment. Upon completion of the review process, it is anticipated that the settlement will be submitted to this Court for final approval.

On February 22, 1988, T & N moved to dismiss the United States' First Amended Complaint. The United States filed Plaintiff's Response to Defendant T & N's Motion to Dismiss on March 9, 1988, and a Supplemental Memorandum in Opposition to the Motion to Dismiss on April 28, 1988. Defendant T & N filed Reply Memoranda on April 6, 1988, June 23, 1988, and April 18, 1989. In addition, on November 23, 1988, the United States filed its Second Motion for Leave to Amend the Complaint, which motion T & N opposed on December 15, 1988. Based upon a request by the parties, this Court deferred ruling on both the Motion to Dismiss and the Second Motion to Amend pending disposition of the ongoing settlement negotiations between the United States and T & N. However, because the parties have recently informed the Court that they have been unable to reach a settlement, the Court will proceed to determine both motions.

I. Factual Background

From approximately 1873 to September 1962, Keasbey & Mattison Company ("Keasbey"), a Pennsylvania company founded in 1873, incorporated in 1892, and dissolved in 1967, owned and operated a manufacturing facility and two adjoining waste disposal sites in Ambler, Montgomery County, Pennsylvania. In 1934, T & N, a company organized in 1920 and operated under the laws of England, purchased a majority interest (60%) of stock in Keasbey. Four years later later, in 1938, T & N purchased the remaining shares of Keasbey and maintained 100% ownership of the company until its dissolution in 1967. From November 8, 1951 through 1967, the record owner of Keasbey's stock was Turner & Newall (Overseas), Ltd. ("T & N(O)"). In 1962, Nicolet purchased the manufacturing facility and adjoining waste disposal piles and has owned the site from that date to the present.

As a result of sampling programs conducted pursuant to § 9604 of CERCLA in 1983, EPA determined that there was a release or threatened release of asbestos, a dangerous substance, at the Ambler site. On March 14, 1984, Nicolet was informed by EPA that its contractors would perform the allegedly necessary abatement. Following a protracted legal battle, EPA was granted entry to the Ambler site and performed the allegedly necessary abatement. See Nicolet, Inc. v. Eichler, Civ. Action No. 84-0271 (E.D.Pa. March 26, 1984). The United States, among other measures, covered over and hydroseeded a 16 acre "mountain" of asbestos containing material. Subsequently, the United States, pursuant to Section 116(d) of CERCLA, 42 U.S.C. § 9616(d), conducted a remedial investigation/feasibility study for the site, and published a Record of Decision for the site on September 30, 1988. The United States alleges that it has incurred, through its actions, at least $2,500,000 in "response costs" as defined at 42 U.S.C. § 9601(25), which figure includes the costs of "removal" as defined at 42 U.S.C. § 9601(23), and enforcement costs.

II. United States' Theories of Liability As to Defendant T & N

In the First Amended Complaint, the United States advances the following four theories in support of its allegation that defendant T & N is liable for the costs incurred at the Ambler site to abate the release of threatened release of asbestos:

1. Defendant T & N is liable, under a federal rule of decision for CERCLA cases, as the alter ego of Keasbey in that T & N had both a substantial ownership interest and exercised substantial involvement in Keasbey, a corporation potentially liable under CERCLA. First Amended Complaint, ¶¶ 10, 19, 20.

2. Defendant T & N is liable, under Pennsylvania law, as the alter ego of Keasbey in that Keasbey's policies, business practices, and finances were dominated by T & N and the corporate entity of Keasbey was used to defeat public convenience, protect fraud or defend crime. First Amended Complaint, ¶¶ 23, 24, 25, 25.

3. Defendant T & N is directly liable under Section 107(a)(2) of CERCLA, as a former owner and operator of the Ambler site, because T & N was the sole stockholder of Keasbey and actively participated in its management while asbestos was being disposed of at the Ambler site. First Amended Complaint, ¶¶ 19, 20, 27.

4. Defendant T & N is directly liable under Section 107(a)(2) of CERCLA, as a former owner and operator of the Ambler site, because T & N, as the parent corporation of its subsidiary, Keasbey, was familiar with Keasbey's waste disposal practices and had the capacity to abate environmental harm resulting from such activities. First Amended Complaint, ¶¶ 19, 21, 22, 27.

In addition, the United States, in its proposed Second Amended Complaint, advances a fifth theory of liability:

5. Defendant T & N is directly liable under Section 107(a)(2) of CERCLA, as a former owner and operator of the Ambler site, in that T & N both held a mortgage (an indicia of ownership under Pennsylvania law) on the Ambler site which it assigned to T & N(O), the alter ego or instrumentality of T & N, and actively participated in the management of the Ambler facility. Second Amended Complaint, ¶¶ 30, 31, 32, 33, 34, and 42.

In addition, the United States seeks, in the Second Amended Complaint, to: plead an expanded time frame for T & N's alleged liability (based upon facts revealed during discovery); correct certain inaccuracies in the First Amended Complaint; describe more clearly the theories of liability set forth in the First Amended Complaint; and to update the history, status, and cost of the EPA environmental response with respect to the Ambler site. Paragraphs 41-47 of the proposed Second Amended Complaint set out the theories of liability against T & N alleged by the United States. With the exception of paragraph 42 (indicia of ownership), each of the paragraphs are refinements or modifications of the theories of liability initially set forth in the First Amended Complaint.

Defendant T & N opposes this Court granting the United States leave to file a Second Amended Complaint, alleging both undue delay and bad faith on the part of the United States in seeking to amend and prejudice to T & N if such amendment was allowed. In addition, T & N has moved to dismiss the First Amended Complaint on the ground that the United States has failed to allege facts in the First Amended Complaint sufficient to make T & N liable under any of the first four theories of liability. Finally, defendant T & N argues that the United States has failed to allege facts in the Second Amended Complaint sufficient to make T & N liable under the fifth theory of liability.

III. United States' Motion for Leave to File Second Amended Complaint

It is well established that while the granting of a motion to amend a complaint is within the sound discretion of the district court, Lewis v. Curtis, 671 F.2d 779, 783 (3d Cir.), cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 144 (1982), the general rule is that leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Howze v. Jones & Laughlin Steel Corp., 750 F.2d 1208, 1212...