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noting that, with respect to apportionment, "[d]ifficulty or imprecision in determining measurements of relative fault will not preclude the trial court from entering a consent decree."
Summary of this case from Garrison Southfield Park LLC v. Closed Loop Ref. & Recovery, Inc.Opinion
Case No. 1:89-cv-503, Case No. 1:89-cv-961
August 24, 2000
J. Michael Smith/David J. Gass, Miller, Johnson, Snell Cummiskey, Grand Rapids, MI, for BESTFOODS f/k/a CPC International.
John D. Tully/Robert J. Jonker/John V. Byle, Warner, Norcross Judd Grand Rapids, MI, for AEROJET-GENERAL CORPORATION.
John D. Tully, etc (same as above), for CORDOVA CHEMICAL COMPANY.
John D. Tully, etc (Same as above), for CORDOVA CHEMICAL COMPANY OF MICHIGAN.
Kathleen L. Cavanaugh, Assistant Attorney General, Natural Resources Division, Lansing, MI, for MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY f/k/a Michigan Department of Natural Resources.
Michael L. Shiparski, Assistant U.S. Attorney, Western District of Michigan, MI, for UNITED STATES OF AMERICA.
Michael J. McNulty, U.S. Department of Justice, Washington, DC, for Environment and Natural Resources Division.
Larry L. Johnson, Chicago, IL, for U.S. Environmental Protection Agency.
OPINION GRANTING MOTION TO ENTER CONSENT DECREE
This matter is before the court on the motion of the United States to enter a consent decree resolving the liability of defendants Aerojet-General Corporation, the Cordova Chemical Company of California, and Cordova Chemical Company of Michigan (collectively, the "Aerojet defendants") related to environmental contamination at a Dalton Township, Michigan site. The proposed consent decree was lodged with this court on July 20, 1999. Notice of the proposed consent decree was published on August 5, 1999, advising the public of the lodging of the consent decree with this court. 64 Fed. Reg. 42715 (Aug. 5, 1999). The United States received four comments on the proposed consent decree. Three comments expressed support of the proposed decree. The remaining adverse comment was filed by Bestfoods, Inc., f/k/a/ CPC Int'l, Inc., who is itself a defendant in this action.
On February 25, 2000, following the public comment period, the United States moved for entry of the consent decree on the grounds that it is fair, reasonable and consistent with the goals of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601, et seq. Bestfoods filed an extensive opposition, reiterating the comments it filed in response to the publication of the proposed decree. The remaining parties to this dispute all favor entry of the consent decree.
The court heard oral argument on May 8, 2000, and received supplemental briefing following argument. The matter presently is before the court on the motion to enter consent decree.
On August 18, 2000, the moving parties submitted a stipulation to the court which clarifies that the reference to Appendix E, at pages 23 and 24, or anywhere else, in the Consent Decree, is inadvertent error. The parties advise that there is no Appendix E and that the correct list of Appendices is at page 60 of the Consent Decree.
I.
The underlying facts of this case are set forth at some length in this court's earlier decision following the liability phase of this trial. See CPC Int'l, Inc. v. Aerojet-General Corp., 777 F. Supp. 549 (W.D.Mich. 1991). In brief, this is a consolidated action for claims regarding responsibility for past and future costs associated with the environmental cleanup of the soil, surface water, and groundwater surrounding a dormant chemical manufacturing plant in Dalton Township, Muskegon County, Michigan. The 197-acre site was under the ownership of a series of companies in the following manner: (1) from 1957-1972, by the Ott Chemical Co. (Ott I) (now defunct); (2) from 1965-72, by the Ott Chemical Co. (Ott II) (a subsidiary of CPC International, Inc., now Bestfoods, Inc.); (3) from 1972-1977, by the Story Chemical Co. (which filed for bankruptcy in 1976); (4) from 1977-1978, by Cordova Chemical Co. of California (a subsidiary of Aerojet-General Corp.); and (5) from 1978 to present, by the Cordova Chemical Co. of Michigan (a subsidiary of Cordova Chemical of California).On August 27, 1991, following a 15-day trial on liability, this court issued a decision containing findings of fact about the history of chemical contamination of the site. In that decision, the court concluded that prior to 1957, the quality of the groundwater at the site was excellent. By 1959, as a result of chemical waste disposal, the water pumped for use at the site had become contaminated. By 1964, the groundwater under the site was contaminated.
The court found that the principal source of contamination at the site was the use of engineered, unlined lagoons for chemical waste disposal, which were in use from 1959 though at least 1968, during the Ott I and Ott II periods of ownership. The court also found that substantial contamination occurred through large numbers of chemical spills during the Ott I and Ott II periods, and through burial of chemical wastes during that period. Approximately 8,700 fifty-five gallon drums of solid and liquid chemicals were buried or abandoned on the site. The court found that no disposal into the lagoons occurred during the Story and Cordova periods. The court also found that the Cordova defendants neither buried waste nor dumped it on the ground. The court found, however, that some spills occurred in the Story and Cordova periods.
Beginning in 1965 and continuing during the Ott II period, certain purge wells were used intermittently in an attempt to treat groundwater contamination and slow its spread away from the site. The purge wells were not operated for any significant period during the Story and Cordova periods, allowing unchecked spread of contamination away from the site. Cordova, however, at no time buried waste or dumped it into the lagoons.
In its decision of August 27, 1991, this court concluded that the Aerojet defendants and CPC International (Bestfoods) were jointly and severally liable to the United States and the State of Michigan for the costs incurred in connection with the site. Defendants appealed, contending (1) CPC and Aerojet, as parent corporations, were not liable under Michigan corporate veil-piercing standards because the government had failed to prove fraud; (2) there was no disposal of hazardous substances at the time of ownership or operation by Cordova/California or Cordova/Michigan; and (3) the Aerojet defendants were entitled to the third- party defense under section 107(b)(3) of CERCLA.
The Sixth Circuit reversed this court, holding that a parent corporation could be liable under CERCLA only if the state standards for corporate veil-piercing were met and further holding that the Michigan veil-piercing standard required proof of fraud or injustice, proof it concluded had not been shown in the instant case. The Sixth Circuit remanded for consideration of whether the Aerojet defendants were entitled to the third-party defense and whether the Aerojet defendants disposed of hazardous waste during the time of ownership by Cordova/California or Cordova/Michigan. See United States v. Cordova Chem. Co., 59 F.3d 584 (6th Cir. 1995). The United States and the State petitioned for rehearing en banc. The en banc court again held that parental liability could only be imposed if the conduct of the corporation met the standard for piercing the corporate veil under Michigan law. See United States v. Cordova Chem. Co., 113 F.3d 572 (6th Cir. 1997). The court also held that this court erred in its application of Aerojet's asserted innocent owner defense on at least one prong of the test. The court ruled that a subsequent owner who enters into a deed relationship with a polluter was not barred from the defense unless the release of the hazardous substance resulted from the act of a third party "in connection with" the contractual relationship with the defendant. Id. The court therefore remanded for consideration of the innocent owner defense.
The United States and the State of Michigan appealed to the Supreme Court for review only on the issue of whether a parent corporation may be held liable as an operator of a facility by virtue of its direct involvement in the management and operation of the facility. The Supreme Court determined that under some circumstances a parent corporation could be directly liable under CERCLA for operating the subsidiary's facility without reference to derivative liability imposed under veil-piercing principles. The Court remanded for further proceedings consistent with the opinion. See United States v. Bestfoods, 524 U.S. 51 (1998).
During the course of liability proceedings in this court, the Michigan state courts separately considered a collateral action filed by the Aerojet defendants against the State of Michigan over the terms of an agreement between the State and Aerojet which was signed at the time of the purchase of the facility by the Aerojet defendants from the Story bankruptcy trustee. The state courts held that pursuant to the agreement, the State of Michigan must indemnify Aerojet for any environmental liabilities at the site. See Cordova Chem. Co. v. Dep't of Natural Resources, 212 Mich. App. 144, 536 N.W.2d 860 (1995), leave to app. denied, 453 Mich. 901, 554 N.W.2d 319 (1996).
Throughout the course of litigation and following the remand of the decision from the Supreme Court, the United States engaged in extensive settlement discussions with the Aerojet defendants and the State of Michigan. The parties advised the court of these settlement discussions at the time of a status conference held following the Supreme Court decision, in August 1998. The instant proposed consent decree results from those discussions.
Under the proposed consent decree between the United States, the State of Michigan and the Aerojet defendants, the Aerojet defendants are credited with $2.6 million in past response costs associated with the soil remedies at two operable units ("OU-1" and "OU-2"). They also are obligated for approximately $5.5 million in costs associated with implementation of a third operable unit ("OU-3"), which is to be put into place under the agreement. In reality, the Aerojet defendants are unlikely to pay any of the $5.5 million because, pursuant to the terms of the agreement under which Cordova Chemical bought the site, the State of Michigan promised to indemnify the Aerojet defendants for the costs of cleanup. The Michigan courts have interpreted the requirement strictly. The consent decree requires, however, that the Aerojet defendants will pay if for some reason the State does not. The total of $8 million, according to the United States, amounts to about 8% of the total estimated cleanup costs at the site, $100 million. The Aerojet defendants say that, taking the settlement amount at today's dollars, the amount represents about 11% of the total cleanup costs.
The consent decree provides a complete release to the Aerojet defendants and protects them from contribution claims of other possible defendants. The decree, however, preserves any claims the Aerojet defendants may have against other possible defendants.
II.
CERCLA encourages settlements between the United States and parties deemed responsible for environmental contamination under the statute. See 42 U.S.C. § 9622(a) ("Whenever practicable and in the public interest, as determined by the President, the President shall act to facilitate agreements under this section that are in the public interest and consistent with the National Contingency Plan in order to expedite effective remedial actions and minimize litigation. . . ."). The statute also encourages settlements by providing protection from contribution claims for matters addressed in a settlement to parties who settle with the United States. 42 U.S.C. § 9613(f)(2).
The approval of a consent decree is committed to the sound discretion of the district court. Kelley v. Thomas Solvent Co., 717 F. Supp. 507, 516 (W.D.Mich. 1989). The scope of review, however, is deferential. United States v. Akzo Coatings of America, Inc., 949 F.2d 1409, 1424 (6th Cir. 1991). The court may not determine whether the agreement is ideal, but only whether the agreement is fair, reasonable, and consistent with the purposes of the statute. See id. at 1424, 1426; United States v. Jones Laughlin Steel Corp., 804 F.2d 348, 351 (6th Cir. 1986) (stating the same rule for consent decrees generally). Judicial deference is particularly appropriate where that settlement "has been negotiated by the Department of Justice on behalf of a federal administrative agency like EPA which enjoys substantial expertise in the environmental field." Akzo Coatings, 949 F.2d at 1436. A presumption of validity exists where such agency has negotiated an agreement. United States v. Hooker Chem. Plastics Corp., 776 F.2d 410, 411 (2d Cir. 1985).
A. Fairness
The United States, joined by the State of Michigan and the Aerojet defendants, contends that the settlement is fair because the settlement terms are based upon and roughly correlated with an acceptable measure of comparative fault. See United States v. Cannons Engineering Corp., 899 F.2d 79, 87 (1st Cir. 1990).
In determining whether apportionment is fair, a "court is not required to determine the best method for measuring fault and apportioning liability; it must approve of the method proposed by the government unless it is `arbitrary, capricious, and devoid of a rational basis.'" Id. Difficulty or imprecision in determining measurements of relative fault will not preclude the trial court from entering a consent decree. Id.; United States v. Charles George Trucking, Inc., 34 F.3d 1081, 1089 (1st Cir. 1994).
In evaluating whether a settlement amount is fair and adequate, the court must compare the proportion of projected costs to be paid by the settling defendants with the proportion of responsibility attributed to them. Charles George, 34 F.3d at 1086. The court also must attribute reasonable discounts to reflect litigations risks and savings obtained by settlement. Id. Where the settlement falls within the broad range of approximations of proportional liability, the court should not disturb the parties' agreement. Cannons, 899 F.2d at 88; United States v. Bliss, 133 F.R.D. 559, 569 (E.D.Mo. 1991); Charles George, 34 F.3d at 1089 (fairness requires "approximation only roughly correlated with some acceptable measure of comparative fault").
The United States asserts that its best estimate for total cleanup costs is $100 million, anticipating that remediation measures will continue over the next 25 years. Bestfoods objects to this estimate of the total, saying that at one point in a report filed by the Michigan Department of Environmental Quality ("MDEQ") with the Michigan legislature in 1998, the MDEQ estimated that while the treatment plant is designed for 30 years of operation, modeling suggests that groundwater treatment will take 80 years. As a consequence, Bestfoods estimates that the total costs will be close to $200 million. Bestfoods therefore asserts that the total remediation costs are insufficiently supported by the United States and the agreement must be rejected.
In support of its contention, Bestfoods cites United States v. Montrose Chem. Corp., 50 F.3d 741 (9th Cir. 1995), in which the Ninth Circuit rejected a settlement because no evidence existed regarding the total government estimate of remediation costs. In the instant case, however, unlike in Montrose, the United States is not operating in the complete absence of information regarding the cost of remediation. First, in contrast to Montrose, the court has been provided with an estimate of total remediation costs. As the United States observes, Montrose permits the United States to rely on its own estimates, as long as those estimates are rationally supported. See id., 50 F.3d at 747. The Montrose decision holds only that a district court fails in its independent review of fairness where it has no knowledge of the government's estimate of total costs yet nevertheless approves a settlement sum as a fair proportion of that total. Id.
Second, Bestfoods does not dispute the basis for the government's estimate if the remediation takes only 25 years. Instead, Bestfoods contends only that some evidence exists that the process will take longer and hence, the cost will be proportionately more. Where, as here, Bestfoods does not dispute the method of computation, only the term, this court is not free to find such estimate unsupported.
Third, unlike the Montrose case, this case involves litigation at a very late stage in the cleanup process. At the time of the liability phase of trial, this court heard and received substantial evidence concerning cleanup and proportional fault. Moreover, many costs associated with cleanup already have been incurred and/or the amount of continuing expenditures is substantially established on a per annum basis. This case represents a far cry from cases in which the court is operating with no evidence or estimate of the fairness of the proposed settlement.
Bestfoods also disputes the degree of relative fault attributed to the Aerojet defendants. In making its argument, Bestfoods repeats two observations. First, it asserts that CERCLA makes each responsible party jointly and severally liable, arguing that if Aerojet is liable at all, it is liable for the total amount. Second, it notes that the agreement settles the case with three of the four potentially responsible parties, suggesting that the attribution of 8% fault is disproportionate because three-quarters of the defendants will be relieved of further liability.
In this court's findings regarding liability, while the court made no final determinations of comparative fault, the court nevertheless received all of the parties' evidence regarding allocation and made findings that the Aerojet defendants had substantially more limited responsibility for contamination at the site. In fact, the court concluded that during the ownership by Cordova Chemical, no active dumping or intentional contamination occurred. CPC Int'l, 777 F. Supp. at 556. The settling defendants purchased the site after the major contamination by Ott and more limited contamination by Story, and the court found that during its period of ownership, Cordova did not bury any waste, dump it on the ground or dispose of it into unlined lagoons. Id. The court concluded, however, that two chemicals used by Cordova in small amounts were present in the soil and groundwater. The court also found that the purge wells created during the Ott I period to treat groundwater contamination were not operated during the period in which Cordova owned the site. Id.
Because this court previously found no active dumping by Cordova, the liability of the Aerojet defendants principally turns on the companies' failures to prevent spread after acquiring the property. Since this court's prior decision, the Sixth Circuit has held that a current owner of a site may not be said to have engaged in a "disposal" of hazardous substances within the meaning of 42 U.S.C. § 9607(2) solely on the basis of having failed to prevent the spread of contamination. See United States v. 150 Acres of Land, 204 F.3d 698, 704-05 (6th Cir. 2000). In addition, in State of New York v. Lashins Arcade Co., 91 F.3d 353, 360 (2d Cir. 1996), the Second Circuit made it easier for a purchaser of a contaminated site to retain its third party defense by limiting the kind of contractual relationship between the third-party and purchaser which would foreclose the defense. See also Cordova Chemical, 113 F.3d at 583. Taken together, the decisions provide some new authority for Aerojet's contention that it is entitled to an innocent owner defense under CERCLA. See 42 U.S.C. § 9607 (b)(3). Although the United States continues to oppose the defense, it acknowledges that the new cases improve Aerojet's chances of proving the defense.
Bestfoods urges that this court's prior findings make it highly unlikely that the Aerojet defendants could prevail on their innocent owner defense and therefore the litigation risk should be given no weight. The defense, however, has been remanded to this court by the Sixth Circuit for reconsideration, despite the fact that the court expressly found error with only one prong of this court's analysis. Arguably, the remand represents an implicit demand that this court reconsider its findings on all prongs.
At this juncture, however, the court may not affirmatively decide the availability of the defense and the continuing viability of past findings. See Citizens for a Better Environment v. Gorsuch, 718 F.2d 1117, 1126 (D.C. Cir. 1983) (because a consent judgment represents parties' determination to resolve a dispute without litigating the merits, the court's role is not to resolve the underlying legal claims, but only to determine whether the settlement negotiated by the parties is in fact a fair, reasonable and adequate resolution of the disputed claims) (citing Swift Co. v. United States, 276 U.S. 311, 327 (1928)). The court acknowledges that the defense still prevents a significant hurdle to the Aerojet defendants. Nevertheless, the court agrees that intervening legal changes somewhat increase the likelihood that the Aerojet defendants could prevail on their defense, a litigation risk appropriate for the government to weigh in its settlement calculations.
Further, the United States continues to face a risk that Aerojet itself will not be held responsible under the Supreme Court's standard for liability of a parent corporation in a CERCLA case. See United States v. Bestfoods, 524 U.S. 51 (1998). As a result, both the litigation risks and the actual conduct in this case warrant imposing a relatively small portion of liability on the Aerojet defendants.
Bestfoods responds that Aerojet is not entitled to the defense based on contrary record evidence from trial and on the position taken by the United States in its earlier briefs. However, litigation positions cannot reasonably serve as a bar to settlement for a lesser amount. And the fact that evidence can be read in other ways does not make arbitrary and capricious the determination of the United States regarding relative liability. I am satisfied that the government's assessment of proportional responsibility and amount of damages is rational. See Cannons 899 F.2d at 87; Charles George Trucking, 34 F.3d at 1084-86.
Bestfoods next argues that the agreement is unfair because under the agreement the settling parties are relieved from the risks of contribution actions by other potentially responsible parties, such as Bestfoods. The agreement, however, permits Aerojet to retain its rights to contribution from non-settling defendants (Bestfoods).
The unfairness of which Bestfoods complains results from the judgment of Congress. In 1986, Congress amended CERCLA by enacting the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), Pub.L. No. 99-499, 100 Stat. 1613 (1986). Those amendments provided for a right of contribution for private parties to recoup costs associated with cleanup of a hazardous waste site. Centerior Serv. Co. v. Acme Scrap Iron Metal Corp., 153 F.3d 344, 348 (6th Cir. 1998). The SARA amendments provide that in the case of a settlement under CERCLA, a settling party is "not liable for claims of contribution regarding matters addressed in the settlement." 42 U.S.C. § 9613(f)(2). Congress simultaneously provided, however, that a party who has settled continues to be permitted to seek contribution from other responsible parties. See § 9613(f)(3)(B). By these provisions, Congress expressed its clear intent to permit the so-called unfairness expressed in this consent decree. Bestfoods' argument, therefore, is with Congress, not with the United States and the settling defendants. See United States v. Alcan Aluminum, Inc., 25 F.3d 1174, 1184- 85 (3d Cir. 1994) (recognizing Congressionally created advantage for early settlers); Cannons, 899 F.2d at 92 (by enacting SARA amendments, "Congress purposed that all who choose not to settle confront the same sticky wicket of which appellants complain.").
Moreover, at oral argument, the State of Michigan presented a stipulation, representing that it would not attempt to recover from Bestfoods the costs paid on behalf of Aerojet. The stipulation undisputedly gives Bestfoods more than that to which it was entitled under the consent decree. Bestfoods dismisses the State's stipulation, however, saying that the State may not amend the proposed consent decree by its own interpretation.
In United States v. Armour Co., 402 U.S. 673, 682 (1971), the Supreme Court held that a consent decree must be interpreted upon its own terms, and that a party could not attempt to prove an intended meaning at odds with or supplemental to the plain language of the document. Bestfoods contends that Armour therefore bars this court from considering the stipulation of the State as evidence of the fairness of the consent decree.
In Armour, however, the United States sought to have the stockholders and successors of defendant Armour barred from any involvement in the grocery business, an interpretation of the consent decree that placed greater restrictions on those stockholders and successors than were created by the language of the agreement. The Supreme Court held that it must enforce the terms of the agreement itself, not the government's more restrictive intent. Here, in contrast to Armour, the State does not attempt to place additional obligations upon other parties; it attempts to waive its own rights. The present stipulation therefore is an auxiliary promise by the State — outside the consent decree — which purports to bind its own conduct, not the conduct of other parties.
Moreover, even if Armour prevents the stipulation from being read as part of the agreement, the stipulation nevertheless may operate to bind the future conduct of the State of Michigan. The doctrine of judicial estoppel forbids a party "from taking a position inconsistent with one successfully and unequivocally asserted by the same party in a prior proceeding." Reynolds v. Commissioner, 861 F.2d 469, 472-73 (6th Cir. 1988) (citations omitted). Judicial estoppel is an equitable doctrine that preserves the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship, achieving success on one position, then arguing the opposite to suit an exigency of the moment. See Warda v. Commissioner, 15 F.3d 533, 538 (6th Cir. 1994); Scarano v. Central R. Co., 203 F.2d 510, 513 (3d Cir. 1953) (judicial estoppel precludes a party from "playing fast and loose with the courts"). In order to invoke judicial estoppel, a party must show that the opponent took a contrary position under oath in a prior proceeding and that the prior position was accepted by the court. Warda, 15 F.3d at 538; Reynolds, 861 F.2d at 472-73. The ordinary settlement of a case does not constitute judicial acceptance of the terms of that settlement. See Warda, 15 F.3d at 539 (citations omitted). However, where the court has approved a settlement based on a determination that the settlement is fair and equitable, as when approving a consent decree, such approval amounts to judicial acceptance triggering judicial estoppel. See Warda, 15 F.3d at 539 (holding that bankruptcy settlement requiring court approval of payment from the estate constitutes judicial acceptance). As a result, the stipulation of the State, if relied upon by the court in finding the decree is fair and reasonable, will be binding on the State by virtue of judicial estoppel.
Finally, the court notes that Bestfoods' objections to the fairness of the amount of the settlement and to the availability of contribution actions against Bestfoods are mutually inconsistent. First, Bestfoods argues that the amount of cleanup costs attributed to the Aerojet defendants by the consent decree represents an amount less than Aerojet's fair proportion of the responsibility for cleanup. Second, Bestfoods simultaneously contends that it is at unfair risk of a contribution action by the Aerojet defendants and the State as indemnitor. Bestfoods makes much of this alleged two-pronged unfairness. However, recovery of contribution by Aerojet and/or the State could only occur if the sum attributed to the Aerojet defendants is greater than their proportional share. As a result, the fact that a contribution action against Bestfoods survives under the agreement presents a risk to Bestfoods only if the amount paid by the Aerojet defendants under the agreement exceeds their share of responsibility, a circumstance Bestfoods vigorously disputes. Where the state has separately promised that it will not seek to recover any such sum, Bestfoods can assert no risk at all.
As a result, the concern of this court is reduced to determining whether the amount apportioned to the Aerojet defendants represents a rational apportionment of Aerojet's share of the estimated total amount of cleanup costs. For the reasons I have stated, I conclude that the proposed consent decree is substantively fair.
Bestfoods next argues that, in addition to being substantively unfair the settlement is procedurally unfair because Bestfoods was not included in the settlement discussions. A settlement voluntarily negotiated at arms-length by sophisticated counsel is presumed to be fair and reasonable. See Cannons, 899 F.2d at 84. Where the government has conducted negotiations in good faith, the agreement is procedurally fair. Id.
I am not persuaded by Bestfoods' assertions of procedural unfairness. As long as it operates in good faith, the United States is under no obligation to negotiate with and settle with every party simultaneously. Cannons, 899 F.2d at 93. Moreover, as a matter of fact, Bestfoods has presented no evidence that it was kept in the dark about settlement discussions. In fact, Bestfoods unquestionably knew about serious settlement discussions at least as early as 1998, when the parties advised the court of those discussions. Further, Bestfoods does not allege that the United States refused to negotiate with it. Cf. United States v. Anderson, Greenwood Co., Civ. A. No. H-91-3529, 1996 WL 363439 (S.D. Tex April 10, 1996) (refusing to enter consent decree because of failure of United States to treat one defendant on evenhanded basis in negotiating settlement) (cited by Bestfoods), vacated on other grounds, 1997 WL 1037852 (1997). I find no unfairness in the decision of the United States to negotiate the instant consent decree with the Aerojet defendants. See Cannons, 899 F.2d at 93 ("So long as it operates in good faith, the EPA is at liberty to negotiate and settle with whomever it chooses.").
Bestfoods also asserts that the proposed decree is procedurally unfair because the settlement was reached solely in order to protect the State of Michigan from further liability. Bestfoods contends that because the State must indemnify the Aerojet defendants pursuant to its separate contractual arrangement, the settlement was negotiated at a particularly low number by the United States in order to protect the State from significant further costs expended on Aerojet's behalf.
Bestfoods, however, has pointed to no evidence of collusion. The settlement agreement was negotiated over a lengthy period of time, with extensive negotiations by all settlers. The court already has concluded that the proportions reflected in the settlement are rationally related to the relative fault of the parties and are a fair reflection of that fault. As a consequence, the amount of the settlement itself does not suggest that the United States is conferring an advantage on the State. Moreover, the United States has conflicting interests with Aerojet and its indemnitor, the State of Michigan. Because the United States previously was responsible to pay 90% of the OU-3, the United States had significant incentive to see that as much of those costs as possible were incurred by another party. The fact that the other party in the end is the State of Michigan is no more relevant than if that party were an insurance carrier. Nothing about the circumstances of the negotiation suggests that the United States would subserve its own interests to benefit the State.
For the reasons stated, I am satisfied that the proposed consent decree is both substantively and procedurally fair and adequate.
B. Reasonableness
In determining whether a settlement is reasonable, courts have looked at the following factors: (1) whether the settlement satisfactorily compensates the public for the actual and anticipated costs of remedial and response measures, (2) the relative strength of the parties' litigating positions, and (3) whether the decree is effective as a vehicle for promoting prompt remedial action at the site. See Cannons, 899 F.2d at 89-90. The United States asserts that the amount received by the settlement represents a reasonable one, in light of the risks and costs of further litigation with the Aerojet defendants.
Bestfoods contends that the proposed consent decree fails to meet any of the three considerations. First, Bestfoods asserts that the settlement agreement fails to compensate the public for any actual or anticipated costs of remedial and response measures at the site. Because of the pre-purchase agreement entered into by the State and the Aerojet defendants, together with the holdings of the Michigan courts, the State must indemnify the Aerojet defendants for all monies expended in remediation of the site. Bestfoods argues that the settlement agreement therefore is not reasonable.
I disagree. This case is highly unusual in that the State of Michigan elected to enter into an independent agreement with the Aerojet defendants under which it would be bound to pay for all of the cleanup costs attributed to those defendants at the end of the site cleanup. As a consequence, regardless of the amount attributed to the Aerojet defendants by the consent decree, Michigan taxpayers will not be compensated for that amount. In that sense, any consent decree, however unfavorable to Aerojet, may be argued not to serve the Michigan public in monetary terms. However, the State's obligation neither arises from the resolution of the CERCLA claims nor from the Aerojet defendant's obligations under federal and state environmental laws. Instead, it arises from a separate indemnification agreement that is not appropriately considered in this court's analysis of the reasonableness of the settlement.
Moreover, with respect to the first consideration, the public does gain a benefit and some degree of compensation from the agreement. The decree relieves national taxpayers of a portion of responsibility for cleanup and compensates the national public for some portion of the expense. Since it is the national public seeking compensation for costs under CERCLA, it is the national public whose interests must be weighed in this consideration. In addition, the consent decree fixes the cost imposed upon the State by its obligation to the Aerojet defendants under its ill-considered indemnity agreement. The State may now plan for that liability with certainty.
Further, the consent decree terminates the ever-increasing litigation costs incurred by the United States, the State, and the Aerojet defendants (for which the State is liable) in litigating this dispute. The public, therefore, receives a net benefit in the elimination of future litigation expenses. Bestfoods argues that further litigation costs are of little consequence, inasmuch as this action already has proceeded for ten years. However, because the action is now back in the district court for decision, the action is subject again to the full range of appeals. Future litigation costs related to Aerojet's liability therefore may meet or exceed those already expended. Such litigation costs are far from inconsequential.
With respect to the second consideration, Bestfoods argues that the consent decree does not reasonably reflect litigation risks. I previously have discussed some of the litigation risks appropriate for consideration in the fairness of the settlement. The remaining question is the degree of litigation risk associated with the claims against the Aerojet defendants vis-a-vis the litigation risk associated with Bestfoods. As previously noted, the question of the liability of a parent corporation as an operator under CERCLA is one remaining for both Bestfoods and Aerojet. In reviewing the decision of the Supreme Court in this case, I am persuaded that substantially greater likelihood exists that Bestfoods will be found to be liable as an operator under the Supreme Court standard than that Aerojet will be held to be liable. This relative litigation risk is significant in evaluating the reasonableness of the settlement.
Finally, addressing the third consideration, despite Bestfoods' arguments to the contrary, the consent decree will promote the efficient cleanup of the site. While the MDEQ already has begun the soil remedy with OU-3, the consent decree both establishes who will be required to pay the costs and holds Aerojet responsible to complete the cleanup if the MDEQ should fail in its responsibility. Further, the agreement establishes precise penalties for failure to meet obligations under the agreement and provides for dispute resolution. Site cleanup, therefore, is promoted by the decree. Moreover, payment for site cleanup is transferred from the United States to the wrongdoers and their indemnitor, the State of Michigan.
Taken together, I am persuaded that the consent decree is reasonable.
C. Consistent with Purposes of CERCLA
As noted by the United States Court of Appeals for the Sixth Circuit in Akzo Coatings, the legislative intent behind CERCLA is "to ensure prompt and efficient cleanup of hazardous waste sites and to place the costs of those cleanups on PRPs." 949 F.2d at 1416-1417. In addition, CERCLA purposes to encourage settlement between the United States and parties responsible for contamination. See 42 U.S.C. § 9622(a).
The United States contends that the settlement is more than consistent with the purposes of CERCLA. Settlement with the Aerojet defendants permits the OU-3 remedy to begin, with assured funding from a source other than the United States. Remediation therefore will begin or be facilitated, with no further litigation costs. In addition, the agreement serves the strong public policy favoring voluntary settlements, particularly in CERCLA actions.
Bestfoods argues, however, that the settlement obtains nothing from the Aerojet defendants, who are indemnified by the State, and that the remediation already is occurring without the settlement. It therefore asserts that the United States gains nothing by the settlement and that the settlement is an attempt to assign a low level of liability to Cordova, thereby reducing the amount of exposure of the State as a result of its agreement to indemnify. Bestfoods also argues that since the United States and the State will in any event be required to pay for cleanup, cleanup is not encouraged by the settlement because it will occur notwithstanding the entry of a consent decree.
I disagree. The fact that the two governments already have undertaken the responsibility to clean up the site supports a conclusion that the settlement is consistent with CERCLA. Accepting Bestfoods' argument that settlement would not encourage cleanup because the site already is being cleaned up would encourage all potentially responsible parties to delay settlement until governments had begun to cleanup so that they could argue that payment by them would not serve CERCLA because the government is already cleaning up.
As I previously have concluded, the instant settlement does foster the cleanup by fixing the responsibility for the OU-3 cleanup and by affirmatively imposing an obligation on the Aerojet defendants to complete the work if the State should fail to do so. Further, the settlement fosters the cleanup by eliminating further litigation costs associated with establishing the liability of the Aerojet defendants. Finally, the United States gains 100% funding of the OU-3; without the settlement the United States would pay 90% and the State 10%.
Bestfoods also objects that the $2.6 million already paid by the Aerojet defendants is not proved and that further, a side agreement between those defendants and the State requires the State to reimburse Aerojet $1.5 million. The State strenuously asserts that the $1.5 million being paid to Aerojet is for attorney fees and results from its separate indemnification agreement. It does not constitute reimbursement of the $2.6 million expended by Aerojet. As Aerojet notes, the $2.6 million is supported by representations made by Aerojet both in its prior correspondence with Bestfoods and in its answers to interrogatories. Bestfoods argues simply that Aerojet has an interest in inflating the amount and therefore should not be believed.
I conclude that, giving proper deference to the EPA, the agreement serves the strong policy of the statute to settle these cases. Although Bestfoods objects to the fact that Aerojet will pay little or nothing on its own, that fact results from the existence of an agreement under which the State must indemnify the Aerojet defendants.
It unquestionably is true that to the extent this agreement limits the allocation of responsibility to Aerojet, Bestfoods, if it ultimately is held liable, will be obligated for a larger proportion. The more responsibility assigned to the Aerojet defendants (regardless who pays), the less remains assignable to Bestfoods. This result, however, was contemplated by Congress in approving the SARA amendments to CERCLA.
The assignment of a greater sum to Aerojet would, of course, create a greater possibility of a right of contribution on behalf of Aerojet and its indemnitor.
I am satisfied that the United States and the Aerojet defendants have made a strong case for the reasonableness of the settlement and the relative apportionment of liability. Even if the facts could be interpreted differently to support a larger assignment to Aerojet, such a conclusion is insufficient to invalidate the proposed decree under the deferential standard of review accorded consent decrees. If the apportionment determined by the United States is reasonably supported by a sufficient factual base, this court must accept that apportionment.
III.
Taken together, I find that the consent decree proposed by the United States is fair and reasonable and furthers the objectives of CERCLA. I therefore conclude that the consent decree should be entered.
ORDER GRANTING MOTION TO ENTER CONSENT DECREE
In accordance with the opinion filed this date, notice is hereby given to the parties that the Consent Decree, as modified by stipulation of the parties dated August 18, 2000, has been signed by this court and shall be entered this date as final judgment in this matter as to defendants Aerojet-General Corporation, the Cordova Chemical Company of California, and the Cordova Chemical Company of Michigan. The United States' Motion to Enter Consent Decree (docket #764) is GRANTED as set forth in the opinion filed this date.
The Clerk of the Court shall provide the United States with a copy of the first page of the Consent Decree reflecting the file stamp, as well as a copy of the signature page. The United States shall provide copies of the signed Consent Decree to all interested parties.