US v. Vertac Chemical Corp., Civ. No. LR-C-80-109

• Citation: 756 F. Supp. 1215
• Decision Date: 04 February 1991
• Docket Number: Civ. No. LR-C-80-109,LR-C-80-110 and LR-C-87-833.
• Parties: UNITED STATES of America, Plaintiff, v. VERTAC CHEMICAL CORP., et al., Defendants. ARKANSAS DEPARTMENT OF POLLUTION CONTROL AND ECOLOGY, Plaintiff, v. VERTAC CHEMICAL CORP., et al., Defendants. UNITED STATES of America, Plaintiff, v. PHOENIX CAPITAL ENTERPRISES, et al., Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

756 F. Supp. 1215

UNITED STATES of America, Plaintiff, v. VERTAC CHEMICAL CORP., et al., Defendants.

ARKANSAS DEPARTMENT OF POLLUTION CONTROL AND ECOLOGY, Plaintiff, v. VERTAC CHEMICAL CORP., et al., Defendants.

UNITED STATES of America, Plaintiff, v. PHOENIX CAPITAL ENTERPRISES, et al., Defendants.

Civ. Nos. LR-C-80-109, LR-C-80-110 and LR-C-87-833.

United States District Court, E.D. Arkansas, W.D.

February 4, 1991.

Charles Banks, U.S. Atty. by A. Douglas Chavis, III, Asst. U.S. Atty., Little Rock, Ark., Gary S. Guzy, Roger Marzulla, U.S. Dept. of Justice, Land and Natural Resources Div., Washington, D.C., Mel McFarland, Carla S. Nelson, E.P.A., Region VI, Dallas, Tex., Craig D. Galli, U.S. Dept. of Justice, Land and Natural Resources Div., Environmental Defense Section, Washington, D.C., for U.S.

Robert R. Ross, Arnold, Grobmyer & Haley, Timothy O. Dudley and Stephen C. Engstrom, Wilson, Engstrom, Corum & Dudley, D. Allan Gates, Mitchell, Williams, Selig & Tucker, Little Rock, Ark., Scott Slaughter, Newman & Holtzinger, Washington, D.C., for Vertac Chemical Corp.

Charles R. Nestrud, Chisenhall, Nestrud & Julian, Little Rock, Ark., for Inter-Ag Corp. and C.P. Borman, Jr.

Steve A. Weaver, Dept. of Pollution Control & Ecology, Little Rock, Ark., for Arkansas Dept. of Pollution Control and Ecology.

N.M. Norton, Jr. and Charles L. Schlumberger, Wright, Lindsey & Jennings, Little Rock, Ark., Allen Malone, Apperson, Crump, Duzane & Maxwell, Memphis, Tenn., Roxanne Jayne, Law Dept., Hercules, Inc., Wilmington, Del., and V. Robert Denham, Jr., Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for Hercules, Inc.

Charles R. Nestrud, Chrisenhall, Nestrud & Julian, Little Rock, Ark., James A. Rogers, Skaden, Arps, Slate, Meaghen & Flom, Washington, D.C., for Phoenix Capital Enterprises, Inc.

J. Randal Tomblin, Germantown, Tenn., pro se.

Carol S. Arnold, Rose Law Firm, Little Rock, Ark., for Dow Chemical Co.

MEMORANDUM OPINION AND ORDER

GEORGE HOWARD, Jr., District Judge.

Pending before the Court is the motion of the United States for entry of a consent decree.¹ The proposed Consent Decree arises out of a consolidated action against Phoenix Capital Enterprises, Inc., Inter-Ag Corporation, InterCapital Industries, Inc., Pat Bomar, and J. Randal Tomblin (referred to collectively as the "Phoenix parties") under section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607(a), section 7003 of the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6973, and the Federal Priority Statute, 31 U.S.C. § 3713. The proposed Consent Decree resolves the Phoenix parties' liability under these and other applicable state and federal environmental statutes identified in the Consent Decree at paragraph 12, "Covered Matters," in exchange for the Phoenix parties' agreement to reimburse the United States for a portion of cleanup costs necessary to complete the response actions at the Vertac site. Pursuant to 28 C.F.R. § 50.7 and section 122(d)(2)(B) of CERCLA, 42 U.S.C. § 9622(d)(2)(B), the United States published a Notice of Lodging of the proposed Consent Decree in the Federal Register on November 22, 1989, 54 Fed.Reg. 48331-32 (1989). The Notice of Lodging described the proposed Consent Decree and invited the public to comment on the proposed decree for 30 days.

The United States received two comments, letters from Hercules Incorporated ("Hercules"), and Dow Chemical Company ("Dow"), both defendants at the time in this action.² After reviewing both the public comments, the United States on April 30, 1990, filed a motion for entry of the consent decree. Hercules opposed the motion on several grounds to be discussed below.³

HISTORY OF LITIGATION

The instant action was commenced in 1980 when the United States and the Arkansas Department of Pollution Control and Ecology ("ADPC & E") filed suit against Vertac and Hercules pursuant to the RCRA, the Clean Water Act, the Refuse Act, and Arkansas law, and seeking injunctive relief against these parties for the contaminated conditions at the Vertac Chemical Corporation Superfund Site.⁴

The Court issued a preliminary injunction against Vertac in May, 1980, requiring it to conduct remedial action to construct and repair clay cover areas over waste burial areas. On January 18, 1982, the Court entered a Consent Decree, under which Vertac agreed to take certain action in regard to the clean-up on-site.

In 1986, Vertac wanted to spin-off several of its assets, including other plant sites. The United States, ADPC & E, and Vertac entered into a stipulation under which the United States and ADPC & E agreed not to challenge Vertac's spin-off after Vertac agreed to provide financial assurances that it would meet its environmental clean up responsibilities under the Consent Decree. In particular Vertac agreed to put up a $6.7 million trust fund, a $4 million letter of credit for environmental cleanup of the Vertac site, and a $3.15 million disbursement from the shareholders. The money in the letter of credit was later placed in the trust fund. After the spin-off, Vertac owned only the Jacksonville plant site and a pesticide marketing operation run from its Memphis, Tennessee headquarters. The Jacksonville plant site had ceased operations; there were, however, 28,000 drums and 194 bulk storage tanks of waste left aboveground. Additionally, the soils and buildings in the manufacturing area were contaminated.

By late 1986, Vertac was a wholly-owned subsidiary of Phoenix Capital Enterprises, Inc. ("Phoenix"). C.P. Bomar, Jr., was the sole shareholder of Phoenix as well as its president and sole director. Bomar was also chairman of the board of Vertac. J. Randal Tomblin was president and a director of Vertac. Bomar incorporated InterCapital Industries, Inc. ("InterCapital") as a subsidiary of Phoenix, and Inter-Ag Corporation ("Inter-Ag") as a subsidiary of InterCapital. Bomar was president and sole director of both InterCapital and Inter-Ag; Tomblin was executive vice-president of Inter-Ag.

In February, 1987, Vertac sold the pesticide marketing operation to Inter-Ag for $1.675 million. Inter-Ag occupied the same offices, hired the same employees, and sold the same products to the same customers as Vertac had. Dow transferred the supply contract it had with Vertac to Inter-Ag.

Upon learning of the transfer of Vertac's assets, the United States and ADPC & E filed a motion seeking the appointment of a receiver for Vertac and to have Inter-Ag be declared a successor to Vertac. After a hearing, the Honorable Judge Henry Woods held that Inter-Ag was a successor to Vertac, and appointed a receiver for Vertac and Inter-Ag. United States v. Vertac Chemical Corporation, 671 F.Supp. 595 (E.D.Ark.1987). The Eighth Circuit Court of Appeals subsequently vacated the order as to Inter-Ag because only Vertac had been served with process. United States v. Vertac Chemical Corp., 855 F.2d 856 (8th Cir.1988).

The United States subsequently added Inter-Ag as a party to the original 1980 action and filed a separate suit against Phoenix, Bomar, and Tomblin, alleging they were liable under section 107(a) of CERCLA, 42 U.S.C. § 9607(a), section 7003 of RCRA, 42 U.S.C. § 6973, and the Federal Priority Statute, 31 U.S.C. § 3713. A trial was scheduled, but prior to its commencement, the United States and the Phoenix parties began negotiations which resulted in the proposed Consent Decree.

DISCUSSION

The proposed Consent Decree resolves the liability of the Phoenix parties under CERCLA, RCRA, the Federal Priority Statute, and other federal and state environmental laws in return for their payment of $1.84 million for cleanup costs, $126,000 for natural resource damages caused by the contamination, and 33 percent of all future pre-tax profits earned over the next twelve years, or forty percent of the liquidation value, in the event Phoenix is liquidated before the termination date.

The Court has carefully reviewed the proposed Consent Decree and the lengthy objection filed by Hercules. In reviewing the proposal, the Court is guided by several basic principles. The law favors settlements. The policy encouraging settlements "has particular force where, as here, a government actor committed to the protection of the public interest has pulled the laboring oar in constructing the proposed settlement." United States v. Cannons Engineering Corp., 899 F.2d 79, 84 (1st Cir.1990). Furthermore, the public policy favoring settlement is reflected in the governing statute, CERCLA. See United States v. Acton Corp., 733 F.Supp. 869, 872 (D.N.J.1990).

Before approving a CERCLA settlement, the Court must be convinced that it is fair, reasonable, and consistent with the objectives of CERCLA. Cannons Engineering, 899 F.2d at 84. See also City of New York v. Exxon Corp., 697 F.Supp. 677, 692 (S.D.N.Y.1988); United States v. Conservation Chemical Co, 681 F.Supp. 1394, 1415 (W.D.Mo.1988).

Hercules raises a number of objections. It contends that the settlement is contrary to the express provisions of the CERCLA provisions governing settlements. 42 U.S.C. § 9622. In particular, Hercules argues that the statute prohibits a "cash out" settlement with a non de minimis party where no remedy has been selected or completed; that the covenant not to sue is permitted only when remedial action has been completed; and that the settlement does not contain a reopener provision as required by section 122(f)(6)(A).

The Court is not persuaded that the statutory language of section 122 is to be construed so narrowly. CERCLA is a remedial statute, and the EPA must be granted some discretion in fashioning settlements which are fair and reasonable under the circumstances, while furthering the objectives of CERCLA. In passing the Superfund legislation, Congress directed the President to "expedite effective remedial actions and minimize litigation." City of New York, 697 F.Supp. at 693.

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