Opinion
No. 97-CV-72874-DT
June 24, 2002
OPINION
This action is before this Court on a Complaint for Declaratory Judgment. Plaintiffs request that this Court declare that the Defendants are liable to the South Macomb Disposal Authority (SMDA) for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9613 (f), for costs associated with the remediation of two waste disposal sites in Macomb Township, Michigan. In addition to their CERCLA contribution claim, Plaintiffs originally asserted claims for indemnification under CERCLA, common law indemnification, common law contribution, and unjust enrichment. The Court subsequently dismissed all of Plaintiffs' claims except for the CERCLA contribution claim.
On August 10, 2001, the Court granted Plaintiffs partial summary judgment, holding Defendants liable under CERCLA. The bench trial on the allocation issue started on December 14, 2001, and continued through December 20, 2001. Prior to, during, and post trial, Plaintiffs and Defendants have filed various motions. Both Plaintiffs and Defendants filed proposed findings of fact and conclusions of law; and each has filed responses thereto. This Opinion addresses the various motions, as well as the bench trial on allocation under CERCLA.
BACKGROUND
During the early 1970's, SMDA owned and operated two landfills, sites 9 and 9A, located in Macomb Township. In 1983, a group of residents in Macomb Township filed suit against SMDA and various state and local governmental agencies for damages resulting from the contamination of the groundwater at sites 9 and 9A (the Bielat action). After the State of Michigan settled with the private plaintiffs in the Bielat action, it realigned as a plaintiff against SMDA.
In 1986, SMDA was ordered to remediate sites 9 and 9A. Since 1986, the State of Michigan and SMDA have been involved in drafting a settlement agreement regarding the remediation of these sites. As a result of its liability in the Bielat action, SMDA filed suit against various insurance companies with which it was insured, including Plaintiffs, seeking insurance coverage for the costs associated with the remediation of sites 9 and 9A (the Westchester action).
In 1997, facing the threat of potential liability to SMDA in the Westchester action, Plaintiffs filed the instant action "in the name of the [SMDA]" pursuant to the authority granted it under its insurance contracts. In this action, Plaintiffs assert SMDA's right to contribution under CERCLA against Defendants as arrangers, generators, and transporters of waste deposited in sites 9 and 9A. The court in the Westchester action issued an Opinion and Order on December 13, 2001, in favor of plaintiff (SMDA).
MOTIONS
The various motions filed are:
• Defendants' Brief Establishing that this Court Lacks Subject Matter Jurisdiction
• Plaintiffs' Motion to Reinstate Common Law Contribution Claim
• Defendants' Motion to Dismiss Based on Collateral Estoppel
• Plaintiffs' Cross-Motion re Judicial Estoppel and/or Collateral Estoppel
• Defendants' Motion to Dismiss Based on Statute of Limitations
• Plaintiffs' Motion to Exclude the Testimony of Defendants' Proposed Allocation Expert, John Barkett
• Plaintiffs' Request that the Court Take Judicial Notice of Post Trial Matters Pursuant to FRE 201(B)
• Defendants' Motion for Involuntary Dismissal Based on Failure to Prove an Essential Element of CERCLAI. Subject Matter Jurisdiction:
Although this is labeled a "brief," it will be discussed in this Opinion as a "motion."
This Motion is moot due to the Court's findings of fact and conclusions of law.
On October 25, 2001, Defendants filed their "Brief Establishing that this Court Lacks Subject Matter Jurisdiction." A hearing on this Motion was held on December 10, 2001. In this Brief, Defendants argue that Plaintiffs' claim for contribution under CERCLA § 113(f) is not properly before the Court because there has not been a prior Section 106 or Section 107(a) action against Plaintiffs. Defendants cite to the language of Section 113(f) and a recent decision from the Fifth Circuit Court of Appeals that held that pending or prior action under Section 106 or Section 107(a) is required for actions under Section 113(f). See Aviall Services, Inc., v. Cooper Industries, Inc., 263 F.3d 134, 137 (5th Cir. 2001), reh'g, en banc, granted by 278 F.3d 416 (5th Cir. 2001).
Plaintiffs have filed a motion seeking to strike Defendants' Supplemental Brief on subject matter jurisdiction and a motion seeking to file a supplemental brief. Because Defendants' Motion is being denied, these motions are moot.
Sections 106, 107(a), and 113 refer to 42 U.S.C. § 9606, 9607 (a), and 9613 respectively.
Section 113 of CERCLA provides:
Any person may seek contribution from any other person who is liable or potentially liable under section [107(a)], during or following any civil action under section [106] or under section [107 (a)]. Such claims shall be brought in accordance with this section and the Federal Rules of Civil Procedure, and shall be governed by Federal law. In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate. Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section [106] or section [107].42 U.S.C. § 9613 (f)(1). Defendants argue that the language "during or following any civil action under section 106 or under section 107(a)" in Section 113 requires that there be a prior or pending Section 106 or Section 107(a) action in order to bring a Section 113 contribution claim. Because this requirement has not been met in this case, Defendants argue this Court lacks subject matter jurisdiction over Plaintiffs' contribution claim under Section 113.
Plaintiffs contend that there have been prior "actions" against them under Section 107(a). However, because the Court disagrees with Defendants' reading of the statute, whether or not there has been any action against Plaintiffs under Section 106 or Section 107(a) is not relevant.
The Fifth Circuit, in a split decision, in Aviall held that the word "may" used in Section 113 ("may seek contribution") "establishes an exclusive cause of action and means `shall' or `must.'" Aviall, 263 F.3d at 138-39. Therefore, the court held that "a party can file a contribution claim only if it has been alleged or deemed liable under § 107(a) or if the federal government has ordered it to clean up contaminated sites under § 106." Id. at 139 (emphasis added). As for the savings clause of Section 113, the court held that it "was likely intended to preserve state law-based claims of contribution." Id. at 140. The Court disagrees with Defendants' and the Fifth Circuit's reading of Section 113.
The "savings clause" is the last sentence of Section 113(f)(1), which provides that "[n]othing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section [106] or section [107]." 42 U.S.C. § 9613 (f)(1).
As this Court held in its February 11, 2000 Order, CERCLA preempts state law contribution claims. ( See 2/11/00 Order). The Aviall decision is inconsistent with this prior holding because, as stated above, it interprets Section 113's savings clause as preserving state law contribution claims. In this Court's opinion, the savings clause does not preserve state law contribution claims, but rather, allows Section 113 contribution claims to be brought in the absence of prior or pending actions under Section 106 or Section 107(a). As the dissent in Aviall points out, the majority's holding elevates
the phrase "during or following" in § 113(f)(1) to the pedestal of exclusivity while . . . trivializing Congress's palpable (and presumably intentional) refusal to insert the word "only" to modify the phrase "during or following any civil action" in the first sentence of this section or to insert the word "state" to modify the phrase "action for contribution" in the final sentence (the "savings clause"). . . .Aviall, 263 F.3d at 146 (Wiener, J., dissenting). This Court agrees with Judge Weiner's statement in his dissenting opinion. Applying the majority's strict reading would modify rather than interpret the statutory language.
In Centerior Serv. Co. v. Acme Scrap Iron Metal, 153 F.3d 344 (6th Cir. 1998), the court defined contribution under Section 113(f) by stating "[c]ontribution, then, under both the common law and § 113(f) applies in claims such as these where a potentially responsible party has been compelled to pay for response costs for which others are also liable, and who seeks reimbursement for such costs." Id. at 352. Although the plaintiffs in Centerior had paid response costs pursuant to a Section 106 order, which the court found satisfied the requirement of compulsion, the court did not limit the compulsion to compulsion under CERCLA. See id. As the quoted language above indicates, the key to a contribution claim is that a potentially responsible party is compelled to pay. This is consistent with this Court's reading of Section 113(f) not being limited to parties who are compelled to pay under Section 106 or Section 107(a).
The savings clause of Section 113(f), in this Court's opinion, allows contribution claims under Section 113(f) even in the absence of a prior or pending Section 106 or Section 107(a) action. Furthermore, the Fifth Circuit's decision in Aviall is inconsistent with this Court's prior Order holding that CERCLA preempts state-law contribution claims. In sum, Defendants have failed to persuade this Court that it lacks subject matter jurisdiction in this action because of a lack of a prior or pending Section 106 or Section 107(a) claim against Plaintiffs. Therefore, Defendants' Motion shall be denied. II. Collateral Estoppel/Judicial Estoppel:
In relation to Defendants' "Brief" on subject matter jurisdiction, Plaintiffs filed a Motion to Reinstate Common Law Contribution Claim. Plaintiffs' Motion, however, only seeks reinstatement if "the Court decides to dismiss Plaintiffs' CERCLA contribution claim for lack of jurisdiction . . ." (Pls.' Br. at 2). Defendants' motion to dismiss for lack of subject matter jurisdiction is being denied. Therefore, Plaintiffs' reinstatement motion is moot.
Defendants have filed a Motion to Dismiss Based on Collateral Estoppel; Plaintiffs have filed a Cross Motion re Judicial Estoppel and/or Collateral Estoppel.
A. Defendants' Motion:
Defendants argue the Macomb County Circuit Court's decision in South Macomb Disposal Authority v. Westchester Fire Insurance Company, et al., Case No. 1984-2686-CZ (2001) (the Westchester action), decided the allocation issue before this Court and therefore the doctrine of collateral estoppel precludes this Court from proceeding in this case.
Application "of collateral estoppel `precludes relitigation of issues of fact or law actually litigated and decided in a prior action between the same parties and necessary to the judgment, even if decided as a part of a different claim or cause of action.'" In re Markowitz, 190 F.3d 455, 461 (6th Cir. 1999) (citation omitted). Collateral estoppel applies "where (1) the law of collateral estoppel in the state in which the issue was litigated would preclude relitigation of such issue, and (2) the issue was fully and fairly litigated in state court." Id.(citing 28 U.S.C. § 1738) (other citations omitted).
In Michigan, "[c]ollateral estoppel precludes relitigation of an issue in a subsequent, different cause of action between the same parties where the prior proceeding culminated in a valid, final judgment and the issue was (1) actually litigated, and (2) necessarily determined." People v. Gates, 434 Mich. 146, 154 (1990) (citations omitted). In this case, the prior proceeding did culminate "in a valid, final judgment" on December 13, 2001, when the state court issued its Opinion and Order which, pursuant to Michigan Court Rules 2.602(A)(3), resolved the last claim and closed the case. ( See Defs.' Ex. A.)
When applying collateral estoppel, "one of the `critical factors' . . . is the determination of whether the respective litigants were parties or privy to a party to an action in which a valid judgment has been rendered." Id. at 155-56. In the Westchester action, the insurance companies involved in this case were defendants. Defendants here, the member Cities of SMDA, however, were not parties in the Westchester action. Defendants assert that they are in privity with SMDA, plaintiff in the Westchester action; therefore they are entitled to assert collateral estoppel.
Defendants rely on Gates, supra, to support their assertion that they are in privity with SMDA. In Gates, the Michigan Supreme Court held that the Department of Social Services and the Jackson County Prosecutor should be considered as the same party because they are both "creatures of the state." Gates, 434 Mich. at 156. Defendants state that "[t]he same result applies here." (Defs.' Br. at 8). The two departments involved in Gates were two parts of one entity, the state. In the Westchester action there was one entity, SMDA. In this action the Defendant Cities are the members of that entity. The court in Gates did not deal with the issue of an entity and its shareholders. The Court is not persuaded that the holding in Gates applies to the case at bar.
Defendants also cite to Chesapeake Indus., Inc. v. Wetzel, 265 F.2d 881 (6th Cir. 1959) and argue that shareholders "are sufficiently connected to their corporations to take advantage of favorable judgments to the corporation." (Defs.' Br. at 8). Wetzel, however, is not persuasive. In Wetzel, the plaintiff brought an action in New York against a corporation of which Wetzel was the sole shareholder, director and president, claiming that the corporation made false representations to plaintiff inducing it to purchase assets. See Wetzel, 265 F.2d at 882. Wetzel had negotiated the agreement of sale and controlled the litigation against the corporation which defended on the basis that there was no false representation. See id. The New York court ruled against plaintiff finding there was no false representation made to plaintiff and that plaintiff had suffered no damages. See id.
When plaintiff subsequently sued Wetzel individually in the U.S. District Court, Wetzel sought dismissal on the basis of collateral estoppel. The Sixth Circuit held that because Wetzel was the owner of all the stock of the corporation which was the defendant in the prior action, because he represented the corporation in negotiations with plaintiff out of which the present controversy arose, and because he controlled the prior litigation, he "was so far in control of the litigation in New York and identified in interest with the defendants therein as to be entitled to the estoppel in the present action. . . ." Id. at 883.
In this case, the prior state court litigation involved a claim by SMDA seeking the proceeds of an insurance policy that it had purchased from the insurers, Plaintiffs in this action. The Cities were not insureds under the policy of the insurance and could not have been parties to the action seeking insurance proceeds. The Cities' "involvement" in the prior litigation is substantially different than Mr. Wetzel's involvement in Wetzel. In Wetzel the court referred to Restatement of Judgments § 84. See id. at 883. Restatement of Judgments, § 84 is entitled "Persons Who Participate But Are Not Parties." RESTATEMENT OF JUDGMENTS § 84 (1942). While Mr. Wetzel's involvement in the prior litigation in Wetzel could be deemed "participation," such cannot be said for the Cities' involvement in Westchester.
In Genesis Dev. Corp., et al. v. Bielfield, 1996 Mich. App. LEXIS 1370, the Michigan Court of Appeals dealt with the issue of preclusion as it applies to privity between a closely held corporation and its shareholder. See id at *6-9. The court in Bielfield cited to Restatement (Second) of Judgments, § 59. Section 59 provides, in pertinent part:
Although the court in Bielfield dealt with the issue of privity in the context of res judicata, the definition of privity it quoted is the same as that used by Michigan courts for collateral estoppel. See n. 9, infra.
§ 59 Corporation and Its Officers, Directors, Stockholders, and Members
(3) If the corporation is closely held, in that one or a few persons hold substantially the entire ownership in it, the judgment in an action by or against the corporation or the holder of ownership in it is conclusive upon the other of them as to issues determined therein as follows:
(a) The judgment in an action by or against the corporation is conclusive upon the holder of its ownership if he actively participated in the action on behalf of the corporation, unless his interests and those of the corporation are so different that he should have opportunity to relitigate the issue; and
RESTATEMENT (SECOND) OF JUDGMENTS § 59 (1982) (emphasis added).
Although Defendants do control SMDA through their board membership, there is no indication here that the Defendant Cities "actively participated" in the Westchester action on behalf' of SMDA. Therefore, the Court is not persuaded that as shareholders of SMDA they are in privity with SMDA for collateral estoppel purposes.
Defendants further argue that this Court, in its September 30, 1999 Opinion, "explicitly recognized that the interests of SMDA and the Cities were closely aligned when it denied SMDA's motion to intervene as a defendant." (Defs.' Br. at 9 (citing 9/30/99 Opinion at 16)). The Court did not make any such statement in its prior Opinion. The Court held that SMDA had failed to demonstrate why the Cities' representation would not adequately represent SMDA. (9/30/99 Opinion at 16). This is not the same as stating the two parties are closely aligned. Defendants have failed to persuade this Court that they are in collateral estoppel privity with SMDA, the party in the state action.
Michigan courts have defined privy in the collateral estoppel sense as "one who, after rendition of the judgment, has acquired an interest in the subject matter affected by the judgment through or under one of the parties, as by inheritance, succession, or purchase." Duncan v. Highway Comm., 147 Mich. App. 267, 271 (1985) (quoting Howell v. Vito's Trucking Excavating Co., 386 Mich. 37, 42 (1971).
Even assuming that Defendants had met the privity requirement, Defendants' arguments fail to meet the actually litigated prong of collateral estoppel.
In analyzing whether an issue was "actually litigated" in the prior proceeding, the Court must look at more than what has been pled and argued. We must also consider whether the party against whom collateral estoppel is asserted has had a full and fair opportunity to litigate the issue.Gates, 434 Mich. at 156 (citations omitted). The issue before this Court is the allocation of response costs between SMDA and the member Cities. In the Westchester action, the state court "evaluate[d] defendants' claims in American Special Risks in order to determine whether any action taken by SMDA in an effort to `interfere' with such claims would breach any of the EIL [insurance] policies." (Defs.' Ex. A at 79).
In doing this "evaluation," the court accepted the testimony of plaintiffs expert witness who testified that the allocation should be 100% to SMDA and 0% to the Cities. ( See Id.). The court concluded that "the claims that defendants are seeking to pursue in the American Special Risks action appear worthless to this court. . . ." (Defs.' Ex. A. at 82 (emphasis added)). While the plaintiff (SMDA) in the Westchester action may have litigated a response to defendant insurers' breach claim by asserting that the action before this Court is without merit, there is no indication that defendants, or plaintiff, actually litigated the allocation issue that is before this Court.
Defendants fail to persuade this Court that they are in privity with the plaintiff in the Westchester action. Furthermore, in this Court's opinion, the allocation issue before this Court was not actually litigated in the Westchester action. Therefore, Defendants' Motion shall be denied.
B. Plaintiffs' Motion:
In their Cross-Motion, Plaintiffs argue that "Defendant Cities, which claim that they are one and the same as SMDA, and are represented by the very same attorneys that represented SMDA in the state court, should be judicially estopped from taking positions in this case contrary to those that SMDA took in the state court action." (Pls.' Br. at 9). Plaintiffs quote Edwards v. Aetna Life Insurance Company, 690 F.2d 595 (6th Cir. 1982), which stated "judicial estoppel may be applied even if detrimental reliance or privity does not exist." Id. at 598. Apparently relying on this language, Plaintiffs assert that "it does not matter that the positions taken in state court were taken by SMDA, not the Defendant Cities." (Pls.' Br. at 10).
According to Plaintiffs, SMDA argued in the state case that it "had properly constructed, operated, closed, and maintained Sites 9 and 9A" and that the Cities had provided funds to SMDA "in their capacity as `shareholders' of SMDA." (Pls.' Br. at 10-11). Plaintiffs contend these statements/positions are contrary to the Defendant Cities' statements/positions in this case that "the pollution problems at Sites 9 and 9A were due to the fault of SMDA" and "that they provided the funds to SMDA in their capacity as generators/transporters." ( Id. at 11).
Plaintiffs have misconstrued the doctrine of "judicial estoppel." Judicial estoppel applies, for example, where a party asserts a position in one tribunal against a party which is accepted by that tribunal and subsequently asserts a contrary position in another tribunal against a different party. The court's statement in Edwards that judicial estoppel may apply even if "privity does not exist," Edwards, 690 F.2d at 598, refers to the fact that there need not be privity between the parties against whom the inconsistent positions were taken. However, the party taking the inconsistent positions must be the same in each case. "Judicial estoppel addresses the incongruity of allowing a party to assert a position in one tribunal and the opposite in another tribunal." Id. at 599 (emphasis added); See also Konstantinidis v. Chen, 626 F.2d 933, 936 n. 6. (D.C. 1980) ("Judicial estoppel requires . . . a prior judicial acceptance of the factual assertion made by the party who now advances an inconsistent contention." (emphasis added)); McMeans v. Brigano, 228 F.3d 674, 686 (6th Cir. 2000) ("The doctrine of judicial estoppel forbids a party from taking a position inconsistent with the one successfully and unequivocally asserted by that same party in an earlier proceeding."(emphasis added)).
The doctrine requires that the two statements be made by the same party. Clearly, SMDA and Defendants are not the same party. Therefore, Plaintiffs' Motion relying on the doctrine of judicial estoppel shall be denied. III. Statute of Limitations:
Plaintiffs also assert certain collateral estoppel claims "if the Court finds that [Defendants] are in privity with SMDA. . . ." (Pls.' Br. at 11). Plaintiffs first argue that there is no privity between SMDA and Defendants. As stated above, Defendants failed to persuade this Court that they are in privity with SMDA; therefore this part of Plaintiffs' Motion is moot.
On December 28, 2001, Defendants filed a Motion to Dismiss Based on the Statute of Limitations. In response, Plaintiffs move to strike Defendants' Motion pursuant to Federal Rule of Civil Procedure 16(e) and Local Rule 16.2, because this defense was not included in the Final Pretrial Statement filed December 13, 2001. For the reasons stated below, the Court shall strike Defendants' Motion.
Federal Rule of Procedure 16(e) provides:
After any conference held pursuant to this rule, an order shall be entered reciting the action taken. This order shall control the subsequent course of the action unless modified by a subsequent order. The order following a final pretrial conference shall be modified only to prevent manifest injustice.
Fed.R.Civ.P. 16(e). Defendants have not included the statute of limitations defense in the Joint Final Pretrial Statement (JFPTS) filed with this Court. The Court has signed the Statement, and the Statement is an Order of this Court pursuant to Local Rule 16.2. See E.D. Mich. L.R. 16.2. Pursuant to Fed.R.Civ.P. 16(e) and Local Rule 16.2, the Order controls the subsequent course of the action and supersedes the pleadings. Not having raised the issue in the JFPTS, Defendants cannot raise it after trial by motion.
The Court notes that Defendants have included other defenses in the JFPTS.
In response, Defendants state that once a defendant includes an affirmative defense in its answer and puts plaintiff on notice, "the issue will be tried unless the plaintiff moves to include the issue ofwhether or not the theory can be argued at trial in the JFPTS." (Def's Rep. at 1) (emphasis in original) (citing Craft v. United States, 233. F.3d 358, 372 (6th Cir. 2000), reversed on different grounds by United States v. Craft, 122 S.Ct. 1414 (2002)). Craft is clearly distinguishable. In Craft, the defendant contended that the court improperly considered the government's theory of "fraudulent enhancement" because "the IRS had not raised the theory until immediately prior to trial. . . ." Craft, 233 F.3d at 370. In rejecting this argument, the district court found that defendant "had impliedly consented to trial of the fraudulent enhancement theory . . . [because she consented] to the Joint Final Pretrial Order, which indicated that the enhancement claim was a controverted issue for trial; and by failing to object at trial to the government's evidence" relating to this issue. Id. at 371. The Court of Appeals affirmed stating that defendant "knew of the government's theory prior to trial because the government had argued it in its pre-trial briefs" Id. at 372, and "the issue was tried by her implied consent." Id.
There is no evidence in this case that the statute of limitations defense was identified in the pretrial order as a "controverted issue," or that the issue was tried by implied consent. Craft did not involve Fed.R.Civ.P. 16(e) or Local Rule 16.2. In this case, Defendants did not seek to amend the pretrial order. Defendants cannot raise this issue after trial by motion.
Defendants having failed to include the statute of limitations issue in the JFPTS are now precluded from asserting the defense pursuant to Federal Rule of Civil Procedure 16(e) and Local Rule 16.2. Therefore, Plaintiffs' Motion to strike Defendants' Motion shall be granted, in part. IV. Motion to Exclude Expert Witness:
Plaintiffs also request that this Court assess sanctions on Defendants for this "frivolous" motion. Although Defendants' Motion will be stricken pursuant to Plaintiffs' response, the Court does not find that the Motion was frivolous. Furthermore, Plaintiffs have failed to provide the authority under which this Court may assess sanctions in this situation. Therefore, Plaintiffs' request for sanctions shall be denied.
On December 19, 2001, Plaintiffs filed their Motion to Exclude the Testimony of Defendants' Proposed Allocation Expert John Barkett (Barkett). Plaintiffs also moved to exclude Barkett's testimony during the trial. The Court permitted Barkett to testify, but reserved its decision on Plaintiffs' Motion. For the reasons set forth below, the Court shall grant Plaintiffs' Motion.
Plaintiffs move to exclude Barkett's testimony arguing the testimony does not assist the Court with factual issues, but rather it tells the Court how it "should do its job." (Pls.' Br. at 3). Plaintiffs argue the testimony amounts to legal conclusions, and is therefore impermissible under the Federal Rules of Evidence.
Plaintiffs do not challenge Barkett's qualifications.
Under the Federal Rules of Evidence, "testimony offering nothing more than a legal conclusion — i.e., testimony that does little more than tell the jury what result to reach — is properly excludable. . . ." Woods v. Lecureux, 110 F.3d 1215, 1220 (6th Cir. 1997). If Barkett's testimony offers the trier of fact "nothing more than a legal conclusion," the Court may exclude the testimony. Barkett's testimony at trial is summarized below.
Barkett is an attorney experienced in performing CERCLA allocation work. (12/20/01 Tr. at 4). In his work as a "neutral" and an arbitrator, Barkett renders allocations under CERCLA using the factors used by district courts in allocation cases. ( Id. at 6-8). During voir dire by Plaintiffs' counsel, the following exchange occurred with Plaintiffs' counsel inquiring as to what Barkett's testimony would be:
Q. You're going to try to apply principles of fairness and equity as you see it?
A. I'm going to do
Q. Fair enough?
A. I've done an allocation factors analysis using allocation methodology that I've done over and over again in numbers of cases around the country.
Q. Okay. And this is going to be your opinion on what you think the allocation should be?
A. It is.
Q. Okay. And you're going to tell the Court what your opinion is?
A. I will.
Q. You understand, of course, that it's the Court's job ultimately to decide what is fair and equitable, not yours?
A. Absolutely. And I've written that in my opinion.
Q. But you're planning to do that job, too, and tell the Court how you would come down if you were the judge?
A. I'm prepared to offer my expert opinion as an allocator, who's done a lot of this.
( Id. at 25-26). After voir dire, defense counsel asked Barkett's opinion in the following colloquy:
Q. Mr. Barkette, [ sic] what is your expert opinion as to the proper allocation in this case?
* * * *
A. That the — as the case is structured, that the member cities should be allocated nothing.
( Id. at 35). After testimony regarding which allocation factors Barkett used to reach his conclusion, Barkett testified as follows:
Q. So based on this analysis that you've done, is it your opinion that the allocation in this case should be one hundred percent SMDA and zero percent to the cities?
A. Yes, be consistent with the way that they've operated, I would honor and respect the 50 years of operations. They are, in effect, one single unit, but only because CERCLA allows you to put different hats on these folks to get to a liability question doesn't mean that you ignore their relationship when you get to allocation.
( Id. at 47). During cross examination, in response to a question from Plaintiffs' counsel regarding the parties' concerns about payment, Barkett stated "I was asked to render an allocation looking at the facts of this case and the unique posture of the case and I've done that." ( Id. at 76). During re-cross examination, Barkett, in response to a hypothetical question regarding unrelated parties, stated "I'm not an expert on a lot of the facts in this case, but I know enough to know that it would certainly be a very large share." ( Id. at 87).
The summary of Barkett's testimony shows that Barkett's purpose was to render an allocation, then, through "expert testimony," tell the Court how it should render the allocation in this case. Barkett's testimony and the basis for it is identical to this Court's duty in this bench trial for CERCLA allocation. Therefore, Barkett's testimony does not "aid" the Court in understanding the facts; rather Barkett's testimony attempts to persuade the Court, as it is the attorneys' jobs to do, how it should allocate costs in this case. Barkett's testimony does nothing more than tell the Court what to do. Therefore, Barkett's testimony shall be excluded.
V. Judicial Notice:
On April 12, 2002, Plaintiffs filed their "Request that the Court Take Judicial Notice of Post Trial Matters Pursuant to FRE 201(B) [ sic]." In this "Request," Plaintiffs ask the Court to take judicial notice of filings in the Bielat action that Plaintiffs assert are contrary to Defendants' assertions before this Court. These filings (all of which took place after the completion of this trial) are: 1) Joint Memorandum by the State and SMDA and it [ sic] Member Cities Regarding Consent Decree Process; 2) Order Vacating March 12, 2002 Order Setting Forth Procedure for Finalization of Consent Decree Among the State, SMDA and its Five Member Cities; 3) First Amended Complaint (in the Bielat action).
In support for their request, Plaintiffs cite to Federal Rule of Evidence 201(b) in the heading of their request. Federal Rule of Evidence 201(b) provides:
Kinds of facts. A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.
F.R.E. 201(b). This Court may take judicial notice of pleadings filed in other courts of record. See Lyons v. Stovall, 188 F.3d 327, 332 at n. 3 (6th Cir. 1999) (stating "it is well settled that [f]ederal courts may take judicial notice of proceedings in other courts of record. . . .").
Defendants oppose Plaintiffs' request on the basis that trial in this case "is over and the presentation of evidence, including presentation of evidence by seeking to have this Court take judicial notice, is closed[,]" and that Plaintiffs have not cited any basis for this Court to reopen proofs. (Defs.' Br. in Resp. at 1).
While the Court can, of course, take judicial notice of certain "facts" if offered during the course of the trial, this Court does not believe that it is appropriate to consider "facts" presented for the first time three months after the completion of the trial and weeks after both parties filed their proposed findings of fact and responses thereto. Therefore, the Court shall deny Plaintiffs' request to take judicial notice.
Plaintiffs also request that the Court strike Defendants' proposed findings of fact, but have not provided any basis for this request. Therefore, this request also shall be denied.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiffs are seeking contribution pursuant to § 113(f) of CERCLA. Section 113(f) provides:(f) Contribution
(1) Contribution
Any person may seek contribution from any other person who is liable or potentially liable under section [107(a)] of this title, during or following any civil action under section [106] of this title or under section [107(a)] of this title. Such claims shall be brought in accordance with this section and the Federal Rules of Civil Procedure, and shall be governed by Federal law. In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate. Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section [106] of this title or section [107] of this title.42 U.S.C. § 9613 (f)(1).
Plaintiffs "seeking contribution under § 113(f) must look to § 107 to establish the basis and elements of the liability of defendants, as well as any defenses to that liability." Centerior, 153 F.3d at 350. Private parties, such as Plaintiffs, "have an implied private right of action for response costs through § 107(a)(4)(B)." Id. at 347. Section 107(a)(4)(B) provides for recovery of "any other necessary costs of response incurred by any other person consistent with the national contingency plan [(NCP)] [.]" 42 U.S.C. § 9607 (a)(4)(B). To establish their case, Plaintiffs must prove "the release caused the plaintiff[s] to incur necessary costs of response consistent with the NCP. . . ." Franklin Cty. Conv. Facilities v. American Premier, 240 F.3d 534, 541 (6th Cir. 2001). "CERCLA authorizes a private plaintiff to recover from liable parties only `necessary' response costs that are consistent' with the NCP." Id. at 543 (emphasis added). Therefore, in this allocation trial, the Court may allocate between the parties costs that have been necessarily incurred and are consistent with the NCP. I. Failure to Prove Consistency With the National Contingency Plan:
Defendants have stipulated that the costs incurred or that will be incurred are necessary. ( See JFPTS at 16, ¶ 9). They have not, however, stipulated that the costs incurred are consistent with the NCP.
Plaintiffs make certain assertions regarding the NCP in their Proposed Findings of Fact and Conclusions of Law. Under their Conclusions of Law section, Plaintiffs assert that the Court "has already ruled on liability . . . finding the Defendant Cities are liable under § 9607(a)," (Pls.' Proposed Findings of Fact and Conclusions of Law at 24), and that Defendants did not preserve this issue in the Final Pretrial Order contrary to Local Rule 16.2. Plaintiffs also contend that Defendants have stated in the Final Pretrial Order that the only issue for trial was allocation, and because "[n]o issue was raised concerning any alleged lack of consistency with the NCP," the Court should hold that all elements of their claim have been met. (Pls.' Proposed Findings of Fact and Conclusions of Law at 25). Plaintiffs also cite to four trial exhibits and state that these exhibits show consistency with the NCP. Each of these assertions is discussed below.
Defendants have filed a post-trial motion to dismiss based on Plaintiffs' failure to prove consistency with the NCP. Plaintiffs have filed a response to this Motion. The Motion, however, is moot due to the Court's decision regarding the NCP.
A. Liability Opinion:
Plaintiffs assert, under the heading "National Contingency Plan (NCP)" that this Court has already found Defendants liable. Although it is true that this Court has already granted Plaintiffs partial summary judgment on the issue of liability, neither the Court's August 10, 2001 Opinion (Liability Opinion), nor the parties' briefs submitted therefor, addressed the issue of consistency with the NCP. In fact, the issue of consistency with the NCP is separate from the issue of liability. See Amoco Oil Co. v. Borden, Inc., 889 F.2d 664, 668 (5th Cir. 1989).
In the Liability Opinion, this Court, citing Kalamazoo River Study Group v. Menasha Corp., 228 F.3d 648 (6th Cir. 2000), discussed and decided liability on the following three elements:
(1) that the defendant deposited hazardous substances at the site, (2) that there was a release at the site, and (3) that the release caused the incurrence of response costs.
(8/10/2001 Opinion at 7). The Court then stated "Defendants admit . . . the release caused the incurrence of response costs. . . ." ( Id. at 8). It is clear from this language that consistency with the NCP was not decided, or admitted to by Defendants, in the Liability Opinion.
The issue of consistency with the NCP is separate from liability. For liability elements, this Court cited to Kalamazoo, which cited the Centerior Court. Neither of these cases dealt with the NCP issue. The Centerior Court cited the Fifth Circuit's decision in Amoco Oil, supra, for the liability elements. In Amoco Oil, the court stated:
To establish a prima facie case of liability in a CERCLA cost recovery action, a plaintiff must prove . . . (4) that the release or threatened release has caused the plaintiff to incur response costs. If the plaintiff establishes each of these elements and the defendant is unable to establish the applicability of one of the defenses listed in § 9607(b), the plaintiff is entitled to summary judgment on the liability issue. This is true even when "there is a genuine issue as to appropriate damages."
A plaintiff may recover those response costs that are necessary and consistent with the National Contingency Plan. . . . Thus, once liability is established, the court must determine the appropriate remedy and which costs are recoverable. The court then must ascertain, under CERCLA's contribution provision, each responsible party's equitable share of the cleanup costs.Amoco Oil, 889 F.2d at 668 (citations and footnotes omitted) (emphasis added). Thus, consistency with the NCP is not a part of the liability issue; rather, consistency with the NCP deals with which costs incurred are recoverable, i.e., appropriate damages. Consistency with the NCP was irrelevant to the Liability Opinion, and Plaintiffs' reliance on the Liability Opinion is unavailing.
As the court in Containerport Group v. American Financial Group, 128 F. Supp.2d 470 (S.D.Ohio 2001), stated:
"[a] defense that the [plaintiffs] response costs are incurred pursuant to response actions that are inconsistent with the NCP is a defense to the recoverability of particular response costs, not a defense to liability for those costs."
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When, through partial summary judgment, a plaintiff seeks a declaration of the defendant's liability, the plaintiff is not required to prove that the response costs are necessary and consistent with the national contingency plan; issues of proof related to the necessity and consistency of response costs are properly addressed in the contribution or damages phase of trial.Id. at 481 (quoting United States v. Hardage, 982 F.2d 1436, 1445 (10th Cir. 1992) and ATT Global Information Solutions Co. v. Union Tank Car Co., 29 F. Supp.2d 857, 862 (S.D.Ohio 1998)) (citations omitted) (emphasis added)).
The Court's holding in the Liability Opinion established the basis upon which Plaintiffs could then prove their recoverable or allocatable damages. To do this, however, Plaintiffs needed to establish that the costs incurred were consistent with the NCP.
B. Local Rule 16.2:
Plaintiffs also assert that "the Defendant Cities failed to raise such issue at any time before or after the August 10, 2001 opinion [ sic], and further the Defendant Cities did not preserve the issue in the Final Pretrial Order, contrary to L[ocal] R[ule] 16.2." (Pls.' Proposed Findings of Fact and Conclusions of Law at 24). Local Rule 16.2 provides, in pertinent part:
The Court presumes that "the issue" Plaintiffs refer to is Plaintiffs' failure to address consistency with the NCP, which is raised by Defendants' Motion to Dismiss.
(2) Plaintiffs' Claims. The statement of the claim or claims of plaintiffs shall include legal theories.
(3) Defendants' Claims. The statement of the defenses or claims of defendants, or third parties, shall include legal theories.
E.D. Mich. L.R. 16.2. Plaintiffs' assertion fails because consistency with the NCP is not part of Defendants' claims; rather it is a part of Plaintiffs' prima facie case. See American Premier, supra, 240 F.3d at 541.
C. Final Pretrial Order:
Plaintiffs contend that Defendants asserted in the Final Pretrial Order that the only issue for trial was allocation. The Court fails to see how this assertion helps Plaintiffs establish consistency with the NCP. As discussed above, consistency with the NCP is part of the allocation issue. The bench trial in this case was on the issue of allocation. Plaintiffs should have established consistency with the NCP during the allocation phase of this trial. See Containerport, supra, 128 F. Supp.2d at 481.
D. No Issue Raised:
Plaintiffs also assert that the Court should find they have met all of the elements of their contribution claim, including consistency with the NCP, because "[n]o issue was raised concerning any alleged lack of consistency with the NCP." (Pls.' Proposed Findings of Fact and Conclusions of Law at 25). Plaintiffs' assertion is without merit. In a recovery action such as this, "it is the plaintiffs burden to establish that its costs were consistent with the NCP." City of Detroit v. A.W. Miller, Inc., 842 F. Supp. 957, 962 (E.D.Mich. 1994). Therefore, Plaintiffs had the burden of raising the issue and proving consistency with the NCP. Plaintiffs have not directed this Court's attention to any case where a plaintiff has failed to raise or prove the issue of consistency with the NCP and still prevailed because a lack of consistency was not raised.
In this Court's opinion, Plaintiffs have failed to meet their burden with regard to the NCP, presumably because Plaintiffs believed that the Liability Opinion decided the issue, which it did not. E. Trial Exhibits:
Plaintiffs' failure to address this issue can best be summed up by their assertions in their Response to Defendants' Motion regarding this issue:
In their motion, Defendants do address the fact that the Court has already ruled on liability. However, they brush this fact aside, arguing that, since the magic words consistent with the National Contingency Plan do not occur in the Court's August 10, 2001 Opinion, the Opinion cannot be read to resolve this issue.
(Pls.' Resp. to Defs.' Mot. at 4) (emphasis added). It seems from this language that Plaintiffs' view of this essential element of their claim is that it was nothing more than "magic words." Unfortunately, for Plaintiffs, these "magic words" constitute an essential element of their CERCLA claim.
Plaintiffs assert "that remediation at the site while under [the United States Environmental Protection Agency (EPA)] lead was pursuant to the NCP (Plaintiffs' Exhibits 4-6), and upon transferring the lead to the State of Michigan, EPA retained oversight control (Plaintiffs' Trial Exhibit 303), and thus all NCP requirements have been met, in view of stipulations between the parties that SMDA has incurred and will continue to incur `necessary costs of response.'" (Pls.' Proposed Findings of Fact and Conclusions of Law at 25 (citing Kalamazoo River Study Group, supra, 228 F.3d 648, 653; (JFPTS Stipulated Facts at ¶ 9))).
Plaintiffs' citation to Kalamazoo River Study Group is unavailing. The court in Kalamazoo River Study Group dealt with the issue of liability under CERCLA, not allocation. As stated above, consistency with the NCP is part of allocation, not liability. Therefore, Kalamazoo River Study Group does not support Plaintiffs' assertions.
The Exhibits Plaintiffs cite to are: 1) EPA Superfund Record of Decision, dated 8/13/91 (Pls.' Trial Ex. 4); 2) Administrative Consent Order Cost Recovery, dated 8/9/93 (Pls.' Trial Ex. 5); 3) Administrative Consent Order Cost Recovery, dated 9/14/93 (Pls.' Trial Ex. 6); Michigan Department of natural Resources Interoffice Communication, dated 2/2/93 (Pls.' Trial Ex. 303). Each of these Exhibits is discussed separately below.
i. Exhibit 4:
Plaintiffs' Trial Exhibit 4 is EPA's Record of Decision (ROD). The purpose of this ROD was to present:
the selected remedial action for the South Macomb Disposal Authority, Landfills 9 and 9a, (SMDA) Site, in Macomb County, Michigan, which was chosen in accordance with the requirements of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA) and, to the extent practicable, the National Oil and Hazardous Substances Pollution Contingency Plan (NCP). This decision is based on the administrative record for this site.
(Pls.' Trial Ex. 4). Other than this mention of the NCP, there is no other indication that this Exhibit proves that the costs incurred were consistent with the NCP.
Furthermore, the Administrative Consent Order of 8/9/93 by the EPA states that "[n]o PRP entered into an agreement with the U.S. EPA to conduct the proposed remedial action for the groundwater operable unit. Negotiations were terminated." (Pls.'s Trial Ex. 5 at ¶ 6). The proposed remedial action referred to is the "remedy contained in the ROD." ( Id. at ¶ 5). Therefore, all the ROD could possibly establish is that the proposed remedial action may have been consistent with the NCP. However, Plaintiffs have not provided any evidence that this proposed remedy was conducted, and in light of the statement in the Administrative Order that none of the potentially responsible parties agreed to conduct the proposed remedial action, this Court finds that Plaintiffs' Trial Exhibit 4 fails to establish consistency with the NCP. ii. Exhibits 5 and 6:
The Court notes that establishing consistency with the NCP is a fact intensive issue and, in this Court's opinion, cannot be established by reference to any one exhibit.
Plaintiffs' Exhibit 5 is a document entitled Administrative Consent Order Cost Recovery, dated 8/9/93 (Consent Order I). Exhibit 6 is entitled Administrative Consent Order Cost Recovery, dated 9/14/93 (Consent Order II). Neither of these exhibits establish consistency with the NCP in favor of Plaintiffs' claims.
Plaintiffs are not the respondents in either Consent Order I or Consent Order II. Therefore, any costs referred to in these orders are not costs that Plaintiffs have paid, and are not costs that Plaintiffs may recover.
These consent orders are also irrelevant because both of them contain identical clauses that provide:
With regard to claims for contribution against Respondents for matters addressed in this Consent Order, the Parties agree that each Respondent, upon U.S. EPA receipt of all payments due from said Respondent under Section VII, Paragraph 1.a. or 1.b., is entitled to such protection from contribution actions or claims as is provided in CERCLA Section 113(f)(2) and 122(h)(4), 42 U.S.C. § 9613 (f)(2) and 9622(h)(4).
(Pls.'s Trial Ex. 5 at 15, ¶ 5; Trial Ex. 6 at 15, ¶ 5) (emphasis added). Section 113(f)(2) provides:
(2) Settlement. A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.42 U.S.C. § 9613 (f)(2) (emphasis added). Section 122(h)(4) provides:
(4) Claims for contribution. A person who has resolved its liability to the United States under this subsection shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement shall not discharge any of the other potentially liable unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.42 U.S.C. § 9622 (h)(4) (emphasis added). The "respondents" in these Administrative Consent Orders are the Defendants in this case. Therefore, any matters addressed in these Orders cannot be the basis for Plaintiffs' claim for contribution against Defendants in the case at bar. Accordingly, this Court finds that Plaintiffs' Exhibits 5 and 6 fail to establish consistency with the NCP.
Defendants City of Eastpointe and City of Roseville are respondents to Consent Order I, and Defendants City of Warren, City of St. Clair Shores, and City of Centerline are respondents to Consent Order II.
iii. Exhibit 303:
Plaintiffs' Exhibit 303 is entitled Michigan Department of Natural Resources Interoffice Communication, dated 2/2/93. This document's subject is "[u]pdates on SMDA landfill sites 9 9A." (Pls.' Trial Ex. 303). This document discusses what had been happening in relation to sites 9 and 9A at that time, and mentions work plans for clean-up of the sites. This document indicates that there may be, at that time, more than one possible plan for cleanup of the sites. There is no indication, however, in this document that a cleanup plan was used on these sites and that such a cleanup plan caused Plaintiffs to incur costs consistent with the NCP. As discussed below, the NCP requirements are very detailed. The Court finds that this document does nothing to establish consistency with the NCP.
Determination of consistency with the NCP is a fact intensive issue, which cannot be determined in this case due to Plaintiffs' failure to address the legal or factual issues related to this issue prior to or during the trial.
The Sixth Circuit in Franklin, supra, described the NCP requirement as follows:
For the purpose of cost recovery under CERCLA § 107(a)(4)(B), a cleanup will be consistent with the . . . NCP if, taken as a whole, it is in "substantial compliance" with 40 C.F.R. § 300.700 (c)(5)-(6), and results in a "CERCLA-quality cleanup." 40 C.F.R. § 300.700 (c)(3)(i).
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A "CERCLA-quality cleanup" is a response action that (1) protects human health and the environment, (2) utilizes permanent solutions and alternative treatment technologies or resource recovery technologies to the maximum extent practicable, (3) is cost-effective, (4) satisfies Applicable and Relevant or Appropriate Requirements ("ARARS") for the site, and (5) provides opportunity for meaningful public participation.Franklin, 240 F.3d at 543.
There is an extensive list of potentially applicable provisions listed in the Code of Federal Regulations for private party response actions. See 40 C.F.R. § 300.700 (c)(5)-(6). Plaintiffs' only attempt to prove consistency with this extensive list of potentially applicable provisions under the NCP are their assertions discussed above. Plaintiffs have failed to establish this element, and thus have failed to establish that there are any costs incurred that may be allocated by this Court in this action.
II. Allocation; Assuming NCP Requirements Met:
As stated above, Plaintiffs' case at trial only addressed the equitable allocation portion of their § 113 claim. Even though, in this Court's opinion, Plaintiffs' have failed to establish consistency with the NCP and are therefore not entitled to CERCLA contribution, the Court will address equitable allocation in this case assuming the NCP requirements had been met.
Section 113(f)(1) provides that "the court may allocate response costs among the liable parties using such equitable factors as the court determines are appropriate." 42 U.S.C. § 9613 (f)(1) (emphasis added). The Sixth Circuit has explained the breadth of a district court's discretion pursuant to § 113(f)(1) as follows:
by using the term "equitable factors" Congress intended to invoke the tradition of equity under which the court must construct a flexible decree balancing all the equities in the light of the totality of the circumstances.
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"The hallmark of a court of equity is its ability to frame its decree to effect a balancing of all the equities and to protect the interest of all affected by it, including the public." Congress reemphasized that the trial court should invoke its moral as well as its legal sense by providing that the court use not just "equitable factors," which phrase already implies a large degree of discretion, but "such equitable factors as the court determines are appropriate." This language broadens the trial court's scope of discretion even further.
Thus, under § 9613(f)(1) the court may consider any factor it deems in the interest of justice in allocating contribution recovery. . . . No exhaustive list of criteria need or should be formulated. However, in addition to the criteria listed above, the court may consider the state of mind of the parties, their economic status, any contracts between them bearing on the subject, any traditional equitable defenses as mitigating factors and any other factors deemed appropriate to balance the equities in the totality of the circumstances.United States of America v. R.W. Meyer, Inc., 932 F.2d 568, 572 (6th Cir. 1991) (emphasis added) (footnotes omitted).
Plaintiffs have focused on two equitable factors: economic benefit and ability to pay. These factors are discussed below, along with the Court's findings of fact on each.
Plaintiffs assert that the "Gore factors" are neutral in this case. Therefore, their application need not be discussed in this Opinion.
A. Economic Benefit:
Plaintiffs' economic benefit argument is that Defendants "benefitted economically by the arrangement [with SMDA]. They were able to . . . generate, transport and dispose of their waste at a much lower cost and thus it was beneficial to them to do so. . . . Everyone who benefitted from the operation should pay their fair share." (12/14/01 Tr. at 15). This "approach dictates that a potentially responsible party's responsibility should be related to the economic benefits it received from the site." Gould, Inc. v. A M Battery Tire Service, 987 F. Supp. 353, 364 (M.D.Pa. 1997).
At the trial, Plaintiffs called Ted Wahby, the chairman of SMDA. (12/14/01 Tr. at 107). Wahby testified that SMDA's revenue came from "tipping fees" charged to the cities using its services. ( Id. at 111). The tipping fees paid for hauling of waste from the transfer station to the landfill, the staff, operation of the offices, overhead, and "all things that were pertinent to that." ( Id. at 114).
A "tipping fee is a per ton charge" for the waste brought to SMDA's transfer station. (12/14/01 Tr. at 111).
In addition to the tipping fees, a surcharge was paid "for any expenses." ( Id. at 115). If the funds set aside for these expenses were inadequate, any financial shortfalls or need for funds would be "billed back to the cities and the cities paid it." ( Id.). The Cities were billed according to the percentage of volume of waste each city disposed through SMDA. ( Id. at 113). The only cities invoiced for "shortfalls" in this manner were Defendants. ( Id.) Wahby also testified that SMDA never refrained from taking any action because Defendants did not want to pay for it. ( Id. at 186).
Part of the settlement between the State of Michigan and SMDA concerning remediation of sites 9 and 9A included Defendants passing resolutions "guaranteeing and demonstrating financial ability to pay" and the bonds used to pay for the remediation were guaranteed by Defendants "on behalf of SMDA[.]" (12/14/01 Tr. at 174). SMDA has paid the company with whom it has contracted to remediate sites 9 and 9A pursuant to SMDA's agreement with the state through a bond issue. ( Id. at 188). Each of the Defendant Cities has entered into an agreement to pay its share of this bond issue. ( Id. at 189). Everything that SMDA has paid for at sites 9 and 9A has been paid for by Defendants, through assessments or levies. (12/17/01 Tr. at 85-86).
Plaintiffs' economic benefit argument is problematic for two reasons. First, Plaintiffs argument is that SMDA was run at cost, rather than at a profit. As explained above by Wahby's testimony, the Court believes this is true. However, even accepting that SMDA was operated in this manner, it is SMDA and its directors who made the decision to operate SMDA in this manner. The Cities, as generators of waste, did not make this decision.
Any role the Cities may have played in the decision to operate SMDA at "cost" was in their capacity as directors. The Court has already ruled that the Cities cannot be sued by Plaintiffs in their capacity as directors because, as directors of SMDA, they are "insureds" under the insurance policy. ( See 9/30/99 Opinion at 11).
In this case, the Cities were found liable as generators, not as shareholders or directors of SMDA. Because the Cities as generators were not involved in the decision to operate SMDA at "cost," this would, in this Court's opinion, tip the equitable scale towards more allocation for SMDA. It is Plaintiffs' argument that SMDA's failure to charge its customers enough prevented SMDA from having the necessary funds to remedy any environmental problems. In fact, Plaintiffs' expert witness, John Tatum, testified that in 1991 and 1995 SMDA realized "it had charged too much, and rather than setting aside money to pay for clean-up, it rebated . . . those monies . . . to the member cities." (12/17/01 Tr. at 114). Considering this evidence, it seems that even if SMDA had operated at a profit, that profit would have likely been rebated to the member Cities, thereby putting SMDA in the same financial situation it was in under its costs only operational method.
The second problem with Plaintiffs' argument is that there was no significant economic benefit for Defendants in this situation. Although, they were charged only enough to run SMDA rather than charged enough for SMDA to make a profit, Defendants were billed for any expenses for which the tipping fees were insufficient. (12/14/01 Tr. at 115). Therefore, Defendants did not reap any significant economic benefits from having paid lower tipping fees because any costs for which the tipping fees were insufficient would be billed to Defendants, thereby reducing any benefits Defendants may have enjoyed through the lower disposal fees.
In this Court's opinion, the facts show that there was no significant economic benefit to Defendants that should subject them to a higher allocation of response costs. Furthermore, any possible economic benefit was due to SMDA's manner of operations, which is ultimately SMDA's doing. Therefore, the Court is not persuaded that the facts and circumstances of this case lead to any significant economic benefit to Defendants, or that any economic benefit under the circumstances of this case would call for allocation of response costs to Defendants.
B. Ability to Pay:
Plaintiffs' ability to pay argument is summed-up in their Proposed Findings of Fact and Conclusions of Law as:
Since the Defendant Cities will pay 100% and continue to pay 100% of whatever SMDA's obligations are (TT of Barkett 12/20/01, p. 74), and since they have the ability to pay and SMDA does not, it is not inequitable that the Defendant Cities should be allocated 100% of the liability (TT of Tatum 12/17/01, p. 123).
(Pls.' Proposed Findings of Fact and Conclusions of Law at 14).
At trial, Plaintiffs' expert witness, John Tatum, testified that he relied upon the EPA's analysis of financial information for his ability to pay analysis. (12/17/01 Tr. at 121). The EPA's analysis was introduced as Plaintiffs' Exhibit 272 at trial. ( See Pls.' Trial Ex. 272). This Exhibit includes a letter from the Superfund Division Director, William E. Muno, which states that "our financial analysis determined that SMDA could afford to fund the entire cost of the cleanup. . . ." (Pls.' Trial Ex. 272) (emphasis added). Tatum, at trial, answered "yes" to Defendants' counsel asking "[s]o in the view of the EPA ability to pay is a wash, right?" (12/17/01 Tr. at 154).
Therefore, the EPA analysis' conclusion, upon which Tatum relied for his ability to pay analysis, was that both SMDA and the Defendant Cities had the ability to pay. This coupled with Wahby's testimony that SMDA would bill the Cities for any expenses it could not fund leads to this factor being a "wash" and not a basis for allocating the response costs to Defendant Cities.
Furthermore, the fact that the Cities have paid and are obligated to pay 100% of whatever SMDA pays requires no allocation to the Cities.
This is an action for contribution. In this Court's opinion, it is not equitable to require Defendants to contribute "their share" when they have already done so. The following colloquies between defense counsel and Plaintiffs' expert witness best illustrate Plaintiffs' contribution argument and the problem with this argument in this case:
Q. So you're saying that someone could actually come into this Court and bring a contribution action against, let's say a liable party under CERCLA 107, that party, who's the defendant, has paid all the response costs at the site and the law would permit that party to continue that lawsuit, to bring that lawsuit, that there's a right and a basis and a [ sic] equitable reason for contribution there.
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A. I don't see where in the hypothetical that you've given me that we would have a right to maintain a contribution lawsuit. That's not the case here.
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Q. But you've already agreed with me, sir, that the cities have paid the vast majority of the costs that SMDA has paid at the site, right, you've already agreed with that?
A. I've agreed that whatever's been paid SMDA has paid. And the cities have paid SMDA to fulfill whatever responsibilities it has as owner/operator. That's not the same as the cities' responsibilities as generator, nor for their allocated share as generators.
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Q. It doesn't — I'm just asking you any role. In any role if all of the money at issue here came from the member cities, how can there be a right to ask this judge to equitably then make them pay again what they have already paid 100 percent of?
A. Because it's critical what pocket it comes out of. . . .
(12/17/01 Tr. at 138) (emphasis added). Plaintiffs have not presented any facts, nor directed this Court's attention to any law, to persuade this Court that it should order Defendants to contribute, under CERCLA, to costs they have already paid so that they may pay them from a different "pocket." This "pocket" analysis aside, even Tatum agreed with defense counsel that "if a party has paid their fair share or its fair share of that total nut of response costs, then there is no right of contribution against that party. . . ." (12/17/01 Tr. at 144).
Bruce Berend, a Certified Public Accountant that has audited SMDA for over 20 years, testified that the money SMDA has paid "was either paid by the cities or will be paid by the cities as they provide the funds to SMDA." (12/18/01 Tr. at 11). In fact, there is no dispute that any money that SMDA has paid or will in the future pay, will come from the Cities.
Based upon the facts presented to this Court and the totality of the circumstances in the case at bar, principles of equity do not call for this Court to step in and impose upon Defendants duties which they have already fulfilled, or obligated themselves to fulfil in the future. Therefore, had Plaintiffs met the NCP requirements, this Court, using the equitable factors discussed above, would not allocate any response costs to Defendants.
CONCLUSION
For the reasons set forth above, the Court finds that Plaintiffs have failed to prove by a preponderance of the evidence that they are entitled to contribution pursuant to CERCLA § 113. Therefore, Plaintiffs' Complaint for Declaratory Judgment will be dismissed.
A Judgment consistent with this Opinion shall issue forthwith.