Opinion
No. 98-2777 D, 98-2968 D, 00-2245 D, (Consolidated Cases)
October 9, 2002
FINDINGS OF FACT AND RECOMMENDATION ON HEARING ON DAMAGES REGARDING HAWKINS MACHINERY, INC. AND SOUTHERN TRUCKING CORP.
In this environmental case arising under the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601 et seq., ("CERCLA"), the plaintiffs seek to recover each defendant's allocable share of the recoverable response costs incurred by the plaintiffs in fulfillment of the plaintiffs' obligations under a judicially approved Consent Decree entered in the United States District Court for the Eastern District of Arkansas in the case of United States v. Aircraft Service International, Inc., Civil Action Nos. J-C-98-362 and 363 (E.D. Ark., Dec. 19, 2000) (the "Consent Decree") (Ex. 3) resolving the plaintiffs' liability to the United States and the State of Arkansas for contamination at the South Eighth Street Landfill Superfund Site in West Memphis, Arkansas, and at the Gurley Pit Superfund Site in Edmondson, Arkansas.
By order of United States District Judge Bernice B. Donald, entered March 29, 2002, ("Order of Reference"), the plaintiffs' Application for Default Judgments Against Defendants Hawkins Machinery, Inc. ("Hawkins") and Southern Trucking Corp., ("Southern") for, inter alia, failure to answer the complaint and failure to respond to discovery was granted. This matter was referred to the United States Magistrate Judge for a hearing on damages.
Pursuant to the reference, this court conducted a hearing on damages on September 12, 2002. Present at the hearing were David Wade, counsel for the plaintiffs, and Mike Rafferty, counsel for Southern. At the hearing, the plaintiffs proceeded on their claim for contribution and presented the testimony of Charmaine Claxton, a fact witness, with regard to the plaintiffs' recoverable CERCLA response costs, and the testimony of Raymond F. Dovell, C.P.A., C.F.E., an expert witness with experience in Superfund allocations, who testified with regard to the appropriate allocation of damages to Hawkins and Southern. During the damages hearing, the plaintiffs introduced fourteen exhibits, which were received into evidence either by stipulation of the parties or by ruling of the court.
Mr. Wade objected to Rafferty's participation at the hearing given Southern's default status. The court permitted Rafferty to cross-examine witnesses and make argument, but would not permit Rafferty to introduce into evidence any documents withheld during the discovery process.
The court finds the testimony of the two witnesses to be credible and probative. The court notes that due to the small size of the two claims and the potential impecuniosity of Hawkins and Southern, the plaintiffs chose not to pursue some of their damage claims and legal theories against Hawkins and Southern and chose to proceed in the damages hearing even though fact and expert discovery was not closed as to other parties. Defendant Southern, by and through its attorney, cross-examined the witnesses. Counsel for the plaintiffs and counsel for Southern presented argument on the issues presented to the court, which included the amount of recoverable costs incurred by the plaintiffs, the appropriate allocation of those costs between the South Eighth Street Site and the Gurley Pit Site, and Hawkins and Southern's allocable share of the costs incurred at the Gurley Pit Site.
Based on the foregoing, the court hereby issues the following proposed findings of fact and recommendation for the disposition of the damages issues as to Hawkins and Southern.
In so doing, the court recognizes that fact discovery was to be completed by September 15, 2002, but some discovery issues may remain unresolved beyond that date, and that expert discovery has not yet begun. ( See Case Management Order, January 12, 2001.)
PROPOSED FINDINGS OF FACT
A. Gurley Oil/Gurley Refining and Waste GeneratorsNumerous parties, including auto dealerships, trucking lines, railroads, industrial operations, and machine shops provided used or waste oil to Gurley Oil/Gurley Refining between 1960 and 1975. ( See Ex. 1.) The used or waste oil from trucks, automobiles, industrial operations and the like contained various CERCLA hazardous substances. Gurley Oil/Gurley Refining processed substantially all of this waste oil in a re-refining system that generated both acid sludge waste and filter clay waste containing hazardous substances. ( See Exs. 1, 5, and 6; Signature Combs, Inc. v. United States, No. 98-2968D (W.D. Tenn.), Third Amended Complaint ("Complaint") at ¶ 106.) The acid sludge waste and filter clay waste resulting from the processing of the used or waste oil were deposited at the South Eighth Street Site from approximately 1960 to 1970, and then at the Gurley Pit Site from approximately 1970 until the end of 1975. ( See Ex. 1.)
Hawkins and Southern, having defaulted, cannot now deny the factual allegations of the Complaint establishing liability.
Both Hawkins and Southern provided used or waste oil to the Gurley operations between 1970 and 1975, the period of time when the waste containing hazardous substances was being deposited at the Gurley Pit Site. (Complaint at ¶ 106.) Therefore, the court finds that both Hawkins and Southern are persons who arranged for disposal or treatment of hazardous substances which came to be deposited at the Gurley Pit Superfund Site. See 42 U.S.C. § 9807(a)(3).
B. Plaintiffs' Recoverable CERCLA Response Costs
The work done at the South Eighth Street Site and the work done at the Gurley Pit Site involved the clean-up and remediation of materials containing hazardous substances. (Complaint at ¶ 106.) The clean-up and remediation at the South Eighth Street Site and the clean-up and remediation at Gurley Pit Site were consistent with the National Contingency Plan. The clean-up and remediation costs at the South Eighth Street Site and the clean-up and remediation costs at the Gurley Pit Site were incurred as necessary response costs to address the release or threatened release of materials containing hazardous substances. (Complaint at ¶ 106.)
The plaintiffs have incurred clean-up and remediation costs through both the payment of cash and the performance of remediation work. Pursuant to their obligations under the Consent Decree, the plaintiffs made payments in cash to the United States Environmental Protection Agency, the United States Department of Justice, and the Arkansas Department of Environmental Quality. Also, pursuant to their obligations under the Consent Decree, the plaintiffs made payments to Conestoga Rovers, Four Seasons, ERM, and Ferguson Harbour for remediation work. (Ex. 8.)
The plaintiffs have also incurred costs for the search for potentially responsible parties (PRPs) which would be recoverable pursuant to the holding in Key Tronic Corp. v. United States, 511 U.S. 809 (1994), but which the plaintiffs have not included in their damages claim as to Hawkins and Southern for purposes of this hearing only.
The court, therefore, finds that the plaintiffs have incurred contribution claim recoverable costs for remediation and settlement to the date of the hearing with respect to both the South Eighth Street Site and the Gurley Pit Site in the amount of $6,582,136.00, which does not include any of the plaintiffs' costs that would be recoverable under KeyTronic. (Ex. 8.)
C. The Appropriate Allocation of Plaintiffs' Response Costs
The plaintiffs provided witness testimony and documentation upon which the court can arrive at an appropriate allocation of the plaintiffs' response costs between the South Eighth Street and Gurley Pit sites. The entire cost for the Superfund clean-up for the two sites and the damages caused thereby was $24,491,319.00 ($12,593,848 for the South Eighth Street Site and $11,897,471 for the Gurley Pit Site). One-third of this cost, or $8,162,957.00 ($4,197,530 for the South Eighth Street Site and $3,965,427 for the Gurley Pit Site (Ex. 11), was allocated as the total generator share for both sites. ( See also Ex. 4, Transcript of Fairness Hearing before the Honorable Stephen M. Reasoner, United States v. Aircraft, Nos. J-C-362 and J-C-363 (E.D. Ark., Dec. 19, 2000) at 19 23.)
Exhibit 11 presented by the plaintiffs contained an addition error, which the court has corrected. The correct sum is $24,491,319.00, not $24,411.319.00 as shown on Exhibit 11.
The remediation at the South Eighth Street Site addressed an in-place volume of 19, 376 cubic yards of waste. (Ex. 10.) The remediation at the Gurley Pit Site addressed an in-place volume of 20,000 cubic yards of sludge waste. ( Id.)
Pursuant to the Consent Decree, (Ex. 3), and the Unilateral Administrative Order entered November 18, 1998, (Ex. 5), the plaintiffs and the other settling defendants are obligated to perform the remedial action at the South Eighth Street Site and to pay specific sums to the governmental plaintiffs. The plaintiffs have complied with their obligations under the Consent Decree and performed the remedial action at the South Eighth Street Site and made the required cash payments to the United States and the State of Arkansas in settlement of their liability at both the South Eighth Street Site and at the Gurley Pit Site. ( See Ex. 8.)
In the Consent Decree, (Ex. 3 at ¶ 90.a), the plaintiffs waived all claims or causes of action that they have for costs incurred under the terms of the Consent Decree relating to the South Eighth Street Site. Accordingly, Hawkins and Southern are only liable for their share of the costs allocable to the settlement of the plaintiffs' liability at the Gurley Pit Site. The government has expressly stated and this court finds that it is not appropriate to attribute all the costs associated with the plaintiffs' work performed at the South Eighth Street Site to the settlement of the Government's South Eighth Street Site claims, nor is it appropriate to attribute all the cash payments by the plaintiffs to the settlement of the Government's Gurley Pit Site claims. (Ex. 2.) Further, the generator share at both sites was one-third (1/3) of the remedial costs of each site. (Ex. 11.)
The court finds, therefore, that given the approximately equal total remedial costs at the two sites and the approximately equal volumes of waste that had to be addressed by the remedial action at the two sites, the appropriate allocation of the plaintiffs' recoverable settlement/response costs for the two sites is 50% to the South Eighth Street Site and 50% to the Gurley Pit Site. (Ex. 12.)
D. Plaintiffs' Recoverable Costs Relating to the Gurley Pit Site
As previously stated, the plaintiffs' recoverable response costs are $6,582,136.00. (Ex. 8.) This amount should be reduced, as Mr. Dovell testified, based on the following factors:
(1) Settlement funds received by the plaintiffs prior to entry of the Consent Decree were placed into the same account holding the assessments paid by the 45 plaintiffs. The plaintiffs contributed 79% of the total funds in the account. Therefore, as reasonably estimated by Mr. Dovell, the plaintiffs are entitled to recover 79% of the funds expended from that account in fulfilling their obligations under the Consent Decree settlement. (79% x $6,582,136.00 = $5,199,877.00). ( See Ex. 14.)
(2) Since the entry of the Consent Decree, the plaintiffs have entered into additional settlements and have received settlement funds totaling $389,023.63. As set forth in the damages calculations presented by the plaintiffs' expert, Mr. Dovell, for purposes of this damage hearing such amount is deducted, as the plaintiffs propose, against the plaintiffs' recoverable costs. ( See Ex. 14.)
(3) The plaintiffs cannot recover the 50% of the otherwise recoverable amount relating to the South Eighth Street Site.
The court finds, therefore, that the plaintiffs are entitled to recover 79% of their recoverable costs, reduced by the sums received from other settling parties and by the costs allocated to the South Eighth Street Site, for a net proportionate share of the total recoverable costs allocated to the Gurley Pit Site of $2,210,914.87, after the aforesaid deductions. ( See Ex. 14.)
E. The Volumetric/Monetary Calculations of Each Defendant's Liability
Although there is no documentation from which a precise refinery throughput can be calculated, the plaintiffs provided the court with a reasonable basis, for purposes of this hearing, from which reasonable estimates of throughput can be calculated.
The total throughput at the Gurley re-refinery during the South Eighth Street Site period of operation, as reasonably estimated by Mr. Dovell, was 12,089,427 gallons of material. (Ex. 13.) The total throughput at the Gurley re-refinery during the Gurley Pit Site period of operation, as reasonably estimated by Mr. Dovell based upon the in-place waste at the Gurley Pit Site, was 12,478,764 gallons of material. (Ex. 13.) The total throughput in gallons of the plaintiffs and other identified PRPs, including Southern and Hawkins, as reasonably estimated by Mr. Dovell, based upon the discovery considered by him at the time of the hearing, was 8,349,385 gallons. (Ex. 13.) The total throughput attributable to all known parties of 8,349,385 gallons, as reasonably estimated by Mr. Dovell, is substantially less than the total re-refinery throughput of 24,568,192 gallons estimated by Mr. Dovell to be necessary to generate the volume of waste found at the two sites. (Ex. 13.)
Southern's percentage share of the volume of throughput attributable to all known parties is 7,200 gallons out of 8,349,385 gallons, or 0.08623%. (Ex. 14.) Southern's percent of the volume attributable to known parties, or 0.08623%, applied against $2,210,914.87, the recoverable costs allocated to the Gurley Pit Site, makes Southern's share of recoverable costs payable to the plaintiffs equal $1,905.47. (Ex. 14.)
Hawkins' percentage share of the volume of throughput attributable to all known parties is 14,940 gallons out of 8,349,385 gallons, or 0.17894%. (Ex. 14.) Hawkins' percent of the volume attributable to known parties, or 0.17894%, applied against $2,210,914.87, the recoverable costs allocated to the Gurley Pit Site, makes Hawkins' share of recoverable costs payable to the plaintiffs equal $3,956.21. (Ex. 14.)
F. Equitable Allocation Adjustments and Premiums
The settling parties to the Consent Decree, including the plaintiffs, which performed the remedial action at the South Eighth Street Site and paid cash to both the United States and the State of Arkansas, paid the full generator share of approximately $8,000,000 to remediate the South Eighth Street and Gurley Pit Sites. (Ex. 2, Ex. 11, and Fairness Hearing Transcript, Ex. 14.)
CERCLA's express policy is to encourage parties to settle cases quickly and inexpensively by cooperating with the government and removing risks to human health and the environment promptly and cost-effectively. Parties that do not step forward to cooperate with the government or with other PRPs performing clean-up and remediation activities unfairly increase the burden on those PRPs working cooperatively with EPA or state environmental agencies. Federal courts have broad discretion under both Rule 16 and existing CERCLA caselaw to develop equitable apportionment factors applicable to the case before the court. See generally the "Gore Factors" cited in 126 CONG. REC. 26, 779, 26, 781 (1980). As stated in United States v. Consolidation Coal Co., 184 F. Supp.2d 723 (S.D. Ohio 2002): "More than any other factor, cooperation touches directly upon CERCLA's objective of prompt clean-up at the expense of the responsible parties. With cooperation the goal is realized; without cooperation the goal is thwarted." Id. at 751.
In this case, litigation involving the South Eighth Street Site and the Gurley Pit Site has been ongoing for many years. The plaintiffs and many others have resolved their liability to the United States and the State of Arkansas and have shared the costs of the remediation efforts at both sites. Southern and Hawkins failed to cooperate in the remediation effort. They did not join the PRP Group funding the South Eighth Street remedy. They did not sign on to the Consent Decree. They did not resolve their liability during informal PRP allocation processes, nor did they resolve their liability during the Court-ordered Special Master process. They have been defaulted in this case because they failed to answer the complaint against them and failed to provide any discovery responses. Accordingly, it is appropriate to assess a premium against them as uncooperative parties.
The plaintiffs seek to apply a 2.0 multiplier with regard to these two defaulting defendants, as a premium for their default.
As set forth in the plaintiffs' bench brief, case law supports a percentage adjustment of the orphan's share to late settlers in determining the allocable share of recalcitrant or non-cooperative PRPs that force the government or other cooperating PRPs to pursue them through costly and time consuming litigation, see, e.g., Centerior Service Co. v. Acme Scrap Iron Metal Corp., 153 F.3d 344 (6th Cir. 1998) (plaintiffs must demonstrate defendant's equitable share); Ekotek Site PRP Comm. v. Self, 1 F. Supp.2d 1828 (D. Utah 1998) (assessing a 4 times multiplier, because of recalcitrance); United States v. Consolidation Coal Co., 184 F. Supp.2d 723 (S.D. Ohio 2002) (doubling defendant's percentage share due to recalcitrance). See also Raytheon Constructors Inc. v. Asarco Inc., No. Civ. A. 96 N 2072, 1998 WL 1742603 (D. Colo., April 17, 1998) (allocating 50% of orphan share for non-cooperation and recalcitrance); United States v. Kramer, 953 F. Supp. 592 (D.N.J. 1997) (allocating some or "all" of orphan to recalcitrant non-settlers). The plaintiffs in the present case chose, however, to seek a recalcitrant multiplier but not to seek an orphan's share adjustment as to Hawkins and Southern. They reserve their right to seek such adjustments against other defendants.
The court finds that in light of the facts developed during the hearing, a modest premium or multiplier of 2.0, as set forth in the EPA guidance and the case law, is a reasonable and appropriate adjustment or premium in determining Hawkins and Southern's allocable share. Accordingly, the court finds Southern's total allocable share to be $3,812.94 and Hawkins's total aoolcalbe share to be $7,912.42, calculated as follows: x2 x2
Actual damages attributable to Southern $1,906.47 X Premium of 2.0 Southern's Total Allocable Share $3,812.94 Actual damages attributable to Hawkins $3,956.21 x Premium of 2.0 Hawkins's Total Allocable Share $7,912.42