RSR Corporation v. Avanti Development Inc, (S.D.Ind. 2000)

Full title: RSR CORPORATION and QUEMETCO INC, Plaintiffs, v. AVANTI DEVELOPMENT INC…

Court: United States District Court, S.D. Indiana, Indianapolis Division

Date published: Mar 31, 2000

Cause No. IP95-1359-C-M/S (S.D. Ind. Mar. 31, 2000)

Opinion

Cause No. IP95-1359-C-M/S

March 31, 2000.

ORDER ON VORNADO'S MOTION FOR PARTIAL SUMMARY JUDGMENT

LARRY J. McKINNEY, Judge

This matter comes before the Court on a motion for partial summary judgment filed by defendant Vornado Realty Trust ("Vornado") on January 11, 1999. Vornado's motion raises only the issue of whether the plaintiffs, RSR Corporation and Quemetco, Inc. (collectively "RSR/Quemetco"), may properly assert a claim for cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601-9675 (1995), when they are potentially responsible parties ("PRPs") under the act. According to Vornado, a PRP is limited to an action under § 113 for contribution, which provides for equitable allocation of cleanup costs among all responsible parties. See 42 U.S.C. § 9613(f)(1). The plaintiffs disagree, and argue it would be premature for the Court to declare them a responsible party and therefore ineligible to pursue a § 107 cost recovery action. See 42 U.S.C. § 9607(a).

Having reviewed the parties' arguments and evidence, the Court finds that it is not premature to decide if RSR/Quemetco should be precluded from a § 107 action merely because of their potential responsibility for contamination at the site. For the reasons further explained below, the Court finds that plaintiff Quemetco, Inc., an admitted former smelter operator on and owner of the site, is precluded from bringing a claim under § 107. Plaintiff RSR Corporation, however, has not admitted to any conduct that might impose direct liability on it under § 107, and has only been shown to be connected to the site through its relationship with its subsidiary, Quemetco. RSR is therefore not precluded from bringing a § 107 claim.¹ Vornado's motion for partial summary judgment is GRANTED, in part, as to Quemetco, and DENIED, in part, as it relates to RSR Corporation.

1 On July 6, 1999, Vornado joined in a motion filed June 2, 1999, by defendant AlliedSignal, Inc., in which the subject of RSR's actual liability is examined. The evidence offered and issues raised in that motion were not considered by the Court when determining Vornado's motion for partial summary judgment. The only evidence submitted for consideration with Vornado's motion was copies of the Third Amended Complaint, plaintiffs' brief in response to Fluor Corporation's motion for summary judgment, the warranty deed for the purchase of the Avanti property by Quemetco, and two EPA cleanup orders. Plaintiffs submitted no additional evidence, merely citing what was included with Vornado's motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

RSR/Quemetco brought this CERCLA action to obtain a determination of liability among numerous defendants for the cleanup costs of a contaminated site, named after its current owner, the "Avanti" Site. For purposes of the various summary judgment rulings in this action, the Court has found that plaintiff Quemetco, Inc. ("Quemetco"), owned or leased property at the Site from approximately 1972 to 1974. RSR Corp. v. Avanti, IP 95-1359, Order Dated June 25, 1999, at 2 ("Ace Order"). Quemetco used the Avanti Site to operate a secondary lead smelting facility from at least 1970 to 1972. Df.'s Ex. B, Plfs.' Resp. to Df. Fluor Corp.'s Mot. for Sum. J. at 5; Pls.' Resp. to Statement of Material Facts, Fact 2 (undisputed). A secondary smelter collects scrap materials containing lead and processes them to produce new usable forms of lead. Ace Order at 2. Quemetco was acquired by plaintiff, RSR Corporation ("RSR Corp."), from defendant St. Joe Minerals Corporation on or about October 25, 1972. Third Am. Compl. ¶ 74. It retained its corporate identity and RSR Corp. became Quemetco's parent corporation. Id. ¶¶ 74-75. Prior to this acquisition, Quemetco had stopped operating the smelter on the Avanti site. Df.'s Ex. B at 5. A little less than two months later, on December 21, 1972, Quemetco purchased a portion of the Avanti Site from Romos Industries, Inc. Df.'s Ex. C, Corporate Warranty Deed dated Dec. 21, 1972. It sold the property in 1974. Third Am. Compl. ¶ 76.

Approximately twenty years later, the United States Environmental Protection Agency ("EPA") determined that the Avanti Site and surrounding residential properties were contaminated, and ordered RSR Corp., Quemetco, and others, to clean it up. Df.'s Ex. E, Mar. 29, 1994, EPA Admin. Order ("`94 Order"). Specifically, the EPA found that the industrial property at 502-566 South Harris Street, Indianapolis, Indiana, and the surrounding residential properties, were polluted with lead. Id. The agency referred to both the industrial property and the residential areas as the site.² RSR Corp., Quemetco, Oxide Services Corp. d/b/a/ O C Corp., Indiana Oxide Corp. and Avanti Development, Inc., were ordered "to conduct removal activities described herein to abate an imminent and substantial endangerment to the public health, welfare or the environment that may be presented by the actual or threatened release of hazardous substances at or from the site." Id.

2 The Court will refer to the actual property at 502-566 Harris Street as the Site or Avanti Site, and will remain consistent with the EPA's order by referring generally to the combination of the Avanti Site and the surrounding residential areas as the "site" or "contaminated site."

According to the EPA, the Indiana Department of Environmental Management ("IDEM") took soil samples from the Site in April of 1993, and found them to contain concentrations as high as 180,000 parts per million ("ppm") total lead. Id., Findings of Fact ¶ 3. A month later, the Marion County Health Department conducted blood tests on area homeowners and their children, as well as employees of businesses on the Site. Id. ¶ 4. Their preliminary tests indicated that "39% of the children ages 8 years and younger and 24% of the population aged 9 years and older had elevated blood-lead levels of concern." Id. Soil samples taken from the actual industrial areas on the property resulted in readings as high as 230,000 ppm total lead, or 23% of the composition of the sample. Id. ¶¶ 5, 7.

From these and other facts the EPA concluded that the Avanti Site was a "facility," as defined by CERCLA. Id., Conclusions of Law and Determinations ¶¶ 1-3. Noting that lead constituted a "hazardous substance," the EPA found that each named respondent was a "person" as defined by CERCLA. Id. It also determined that "RSR-Quemetco, Inc." (Quemetco), a subsidiary of RSR Corp., was an owner of part of the industrial property at the time of disposal of hazardous substances. Id. ¶ 7. As a successor of Quemetco, Inc. ("Old Quemetco"), Quemetco was also considered an owner/operator of a lead smelter on the industrial property at the time of disposal of hazardous substances. Id. The EPA further found that RSR Corp., as a 100% shareholder of, and the provider of legal services for, Quemetco, is "liable as an owner and/or operator" under § 107 of CERCLA. Id. ¶ 8. Because the conditions on the Site constituted a threat to public health, welfare, or the environment, the EPA ordered the respondents, including RSR Corp. and Quemetco, to:

1. notify the EPA within three business days of their irrevocable intent to comply with the order;

2. perform the removal actions themselves or retain a contractor to implement the removal action;

3. perform twelve enumerated minimum response activities, such as preparing a work plan, securing the Site twenty-four hours a day, and excavating and stabilizing all lead contaminated soil.

Id., Order, ¶¶ 1-3.

If either RSR Corp. or Quemetco failed to comply with the EPA's administrative order, the company risked being fined $25,000.00 per violation, per day. Id., Penalties For Noncompliance. CERCLA allows for the imposition of this fine on a PRP who, "without sufficient cause, willfully violates, or fails or refuses to comply with, any order" of the EPA. 42 U.S.C. § 9606 (b)(1). Not willing to chance being in non-compliance, both RSR Corp. and Quemetco have incurred response costs and entered agreements to pay for the remediation of the Avanti Site. Compl. ¶¶ 77, 80; Vornado's Statement of Material Facts (undisputed), Nos. 4, 5. Those costs have mounted to more than four million dollars, and are expected to increase with future remediation. Pls.' Mem. in Oppos. to Vornado Realty's Mot. for Partial Sum. J. at 3.

RSR/Quemetco filed their three-count complaint on October 11, 1995, and amended it on July 24 and October 20, 1997, and April 27, 1998. Count one seeks a declaratory judgment in favor of the plaintiffs under § 107 of CERCLA, essentially declaring that the named defendants are jointly and severally liable for the contamination at the Site. 42 U.S.C. § 9607(a). In count two, RSR/Quemetco seek a monetary judgment representing the total amount of their costs of remediating the Site in response to the EPA order. If, however, the plaintiffs are determined to be entitled to less than a full recovery under § 107, count three seeks contribution from the defendants under § 113 of CERCLA, which allows for equitable allocation of response costs. Id. § 9613(f). Vornado's motion for partial summary judgment is directed at whether the plaintiffs are entitled to bring the claims contained in counts one and two, and does not address the actual extent of liability of RSR Corp. or Quemetco under either § 107 or § 113.

II. DISCUSSION

The most common cost-recovery actions under § 107 are by state or federal government agencies, but courts have held that a private landowner whose property is contaminated and who did not contribute to that contamination, may also sue under this section. See Rumpke v. Cummins Eng. Co., Inc., 107 F.3d 1235, 1241 (7th Cir. 1997) (concluding that "landowners who allege that they did not pollute the site in any way may sue for their direct response costs under § 107(a)."); Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761, 764 (7th Cir. 1994) (noting that § 107(a) relief was not available to landowner that admitted it had sent hazardous substances to the site); New Castle Cty. v. Halliburton Nus Corp., 111 F.3d 1116, 1123 (3d Cir. 1997) (noting that § 107 "historically has been used by governments to recover costs incurred in the clean-up of hazardous sites"). The general rule is that "when two parties who both injured the property have a dispute about who pays how much . . . the statute directs them to § 113(f) and only to § 113(f)." Rumpke, 107 F.3d at 1240. An exception to that rule occurs when a party's "status as a PRP for CERCLA purposes is based solely on its ownership" of the contaminated property, and the landowner contributed nothing to the hazardous conditions at the site. Id. This has been called the "innocent landowner" exception. PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610, 617 (7th Cir. 1998), cert. denied 119 S.Ct. 871 (1999). It derives from the courts' construction of one of the statutory defenses to § 107 liability, and the meaning of the term "contractual relationship" under the act. Id.

Liability under § 107 is established by showing that 1) the site in question is a facility³; 2) the defendant is a responsible person⁴; 3) a release or a threatened release of a hazardous substance occurred; and 4) the release or threatened release has caused the plaintiff to incur response costs. Town of Munster v. Sherwin-Williams Co., Inc., 27 F.3d 1268, 1273 (7th Cir. 1994). These same elements form the basis for a claim under § 113. Environmental Transp. Sys., Inc. v. ENSCO, Inc., 969 F.2d 503, 506 (7th Cir. 1992); see Sun Co., Inc. (R M) v. Browning-Ferris, Inc., 124 F.3d 1187, 1191 (10th Cir. 1997), cert. denied 522 U.S. 1112 (1998) (section 113 did not create a new cause of action or any new liabilities; "it is no more than a mechanism for apportioning CERCLA-defined costs"); New Castle Cty., 111 F.3d at 1122. Thus, § 107 provides the substantive law for determining who is a responsible party under CERCLA, and § 113 allows those § 107-determined responsible parties to seek contribution from each other. See Town of Munster, 27 F.3d at 1270.

3 CERCLA defines a facility as "(A) any building, structure, installation, equipment, pipe or pipeline, . . . well, pit, pond, lagoon, impoundment, ditch, landfill, storage container, motor vehicle, rolling stock, or aircraft, or (B) any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located; but does not include any consumer product in consumer use or any vessel." 42 U.S.C. § 9601(9)

4 The four categories of responsible persons subject to clean-up costs are:
(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,

(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing hazardous substances, and

(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the occurrence of response costs, of a hazardous substance. . . .

42 U.S.C. § 9607(a).

The parties do not dispute whether the first, third, and fourth elements are met. The Avanti Site is a facility, there was a release or threatened release of a hazardous substance, and the plaintiffs have both incurred response costs. The issue is whether plaintiffs RSR/Quemetco meet the criteria for responsible persons under the second element for imposing CERCLA liability, thus barring them from bringing a § 107 action. The Court is being asked to determine that issue as a matter of law on the basis of the plaintiffs' status as potentially responsible persons, rather than on the basis of any actual finding of responsibility.⁵

5 In contrast, AlliedSignal, Inc. filed a motion for partial summary judgment in which it asks the Court to determine the actual extent of responsibility each plaintiff should bear. Vornado joined in AlliedSignal's motion, but the evidence and facts disputed therein are not implicated in this motion. Instead, Vornado's motion is directed at RSR/Quemetco's entitlement to bring a § 107 claim, while AlliedSignal's motion challenges their ability to sustain such a claim on summary judgment.

A party is not a responsible person under § 107 if one of the enumerated statutory defenses is met. Those defenses provide that no liability shall be imposed on:

a person otherwise liable who can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by —

(1) an act of God;

(2) an act of war;

(3) an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship . . . with the defendant . . . if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance concerned . . . and (b) he took precautions against foreseeable acts or omissions of any such third party . . .; or

(4) any combination of the foregoing paragraphs.

42 U.S.C. § 9607(b) (emphasis added). For purposes of this section, a contractual relationship includes:

land contracts, deeds, or other instruments transferring title or possession, unless the real property on which the facility concerned is located was acquired by the defendant after the disposal or placement of hazardous substance on, in, or at the facility, and . . .

(i) At the time the defendant acquired the facility the defendant did not know and had no reason to know that any hazardous substance . . . was disposed of on, in, or at the facility.

* * *

In addition to establishing the foregoing, the defendant must establish that he has satisfied the requirements of section 9607(b)(3)(a) and (b) of this title.

42 U.S.C. § 9601(35). By construing these provisions together, courts have allowed a § 107 action by a landowner who has no connection to the contamination other than ownership of the contaminated property, which was acquired after the contamination occurred and without the defendant's knowledge of any contamination despite its exercise of reasonable precautions. See Rumpke, 107 F.3d at 1241 (Rumpke's status as a PRP was based solely on its ownership of the site in question). The question here is whether this "innocent landowner" defense extends to the parent corporation of an owner and operator of a contaminated site.

The significance of this question is that a plaintiff who can assert a § 107 claim may recover all of its response costs from a single responsible defendant. The key difference for defendants sued under § 107 is the imposition of strict liability, automatically holding them jointly liable, and the unavailability of any equitable defenses. See Browning-Ferris Indus. of Ill. v. Ter Maat, 195 F.3d 953, 956 (7th Cir. 1999) (noting that § 107 imposes automatic joint liability on defendants while § 113 "does not include that automatic feature"); Town of Munster, 27 F.3d at 1270-71. In contrast, under § 113 "equitable factors may be considered in the allocation of contribution shares" among liable parties, including the plaintiff. Town of Munster, 27 F.3d at 1270. A contribution action under § 113 represents a claim by and between jointly or severally liable parties for an "appropriate division" of the payment one of them had to make. New Castle Cty., 111 F.3d at 1121. A successful § 107 claim, on the other hand, entitles the plaintiff to shift all of its response costs to the defendant against whom it succeeds, leaving that defendant the task of collecting equitable shares from any other responsible parties.

Defendant Vornado argues that RSR/Quemetco are not entitled to such a recovery for several reasons. First, it is undisputed that Quemetco operated a lead smelter on the Site from December of 1970 to October of 1972, and it purchased the Site in December of 1972. As a result, Vornado asserts, Quemetco meets the definition of a responsible person under CERCLA and is limited to bringing its claim under § 113. See Akzo Coatings, 30 F.3d at 764 (finding Akzo a party liable in some measure for the contamination and its claim therefore governed by § 113(f)). Second, both Quemetco and RSR Corp. are subject to a cleanup order from the EPA, meaning the EPA considers them to be responsible persons and could eventually sue them under CERCLA § 106. This status provides another reason, Vornado argues, that RSR Corp. and Quemetco are not entitled to sue under § 107(a). See Rumpke, 107 F.3d at 1239 (noting the absence of this circumstance when determining whether the Akzo exception would apply to Rumpke).

Finally, Vornado contends that because RSR Corp. and Quemetco entered agreements and incurred response costs for cleaning up the Site, they can only bring an action for contribution under § 113. Presumably, this argument is grounded on the premise that by their actions the plaintiffs have conceded liability of some sort. Noting disagreement among some courts about whether a party must be adjudicated as responsible, or just identified as potentially responsible, before being precluded from suing under § 107, the defendant argues that the Seventh Circuit has applied the "innocent landowner" exception narrowly and would not extend it to the parties in this case. See PMC, Inc., 151 F.3d at 617 (noting, without deciding, that because the plaintiff spilled some toxic waste on the property it may not be entitled to any relief under § 107).

According to Vornado, the First, Third, Fifth, Seventh, Ninth, Tenth and Eleventh Circuits, have held that parties who are even partially liable for response costs under CERCLA may not maintain an action under § 107. See Akzo Coatings, 30 F.3d at 764; see also Sun Company, 124 F.3d at 1190; Pinal Creek Grp. v. Numont Mining Corp., 118 F.3d 1298, 1301 (9th Cir. 1997), cert. denied 118 S.Ct. 2340 (1998); New Castle, 111 F.3d at 1124 (PRP who resolved its liability to the United States is required to use § 113); Redwing Carriers, Inc. v. Saraland Apts., 94 F.3d 1489, 1496 (11th Cir. 1996) (PRP that disavowed its liability in its consent order is still restricted to § 113); United Tech. Corp. v. Browning-Ferris Indus., Inc., 33 F.3d 96, 101 (1st Cir. 1994), cert. denied, 513 U.S. 1183 (1995); Amoco Oil, Inc. v. Borden, Inc., 889 F.2d 664, 672 (5th Cir. 1989). Vornado is suggesting that incurring response costs in compliance with an EPA order makes RSR/Quemetco partially liable. The plaintiffs respond that they must comply with an EPA order, citing 42 U.S.C. § 9606(b), and that they may not seek judicial review of the EPA's action till the work is completed. See Employers Ins. of Wausau v. Browner, 52 F.3d 656, 661 (7th Cir. 1995), cert. denied 516 U.S. 1042 (1996) (person served with EPA cleanup order must either comply, or disobey and "run the risk of being found to have violated a valid order" and of incurring "heavy sanctions").

Before addressing these arguments, the Court notes that the parties have treated RSR Corp. and Quemetco as if they were a single entity, or at least as related entities that cannot be treated separately under CERCLA. Yet, no factual or legal basis for such treatment has been identified in connection with this motion. It is undisputed that Quemetco is a wholly-owned subsidiary of RSR Corp., is separately incorporated, and presumably acts independently of RSR Corp. Unless there is evidence to show that the corporate veil between the two should be pierced, Quemetco's conduct should be analyzed separately from RSR's for purposes of determining whether either can maintain a § 107 action. See United States v. Best Foods, 118 S.Ct. 1876, 1884 (1998). In Best Foods, the Supreme Court noted the "general principle of corporate law . . . that a parent corporation (so-called because of control through ownership of another corporation's stock) is not liable for the acts of its subsidiaries." Id. CERCLA has not rejected "this bedrock principle, and against this venerable common-law backdrop, the congressional silence is audible." Id. at 1885. Nor does CERCLA change the "well-settled rule" that "the corporate veil may be pierced and the shareholder held liable for the corporation's conduct when, inter alia, the corporate form would otherwise be misused . . . on the shareholder's behalf." Id. Given these twin principles, the Court held that "when (but only when) the corporate veil may be pierced, may a parent corporation be charged with derivative CERCLA liability for its subsidiary's actions." Id. at 1885-86 (footnotes omitted).

Under this guidance, the Court will analyze separately the § 107 status of Quemetco and RSR Corp. With respect to Quemetco, its status as a PRP is based on both owner and operator potential liability. For a period of two years before it was acquired by RSR Corp., Quemetco operated a secondary lead smelter on the Avanti Site. The Site is contaminated with lead, and the plaintiffs have sued many former smelter operators for recovery of the costs of cleanup. These facts place Quemetco squarely within the category of a PRP who admits to activities that may have contributed to the contamination of the site. The general rule is that "when two parties who both injured the property have a dispute about who pays how much . . . the statute directs them to § 113(f) and only to § 113(f)." Rumpke, 107 F.3d at 1240. The Akzo/Rumpke exception to this general rule does not apply because Quemetco's PRP status is not based solely on its ownership of the contaminated Site, and Quemetco may not sue under § 107. Vornado's motion for partial summary judgment on the issue of standing to sue under § 107 is GRANTED, in part, with respect to plaintiff Quemetco.

RSR Corp.'s status as a PRP, on the other hand, is based only on its role as Quemetco's parent corporation.⁶ The EPA identified RSR Corp. as "a parent corporation of RSR-Quemetco, Inc.," noting its ownership of all of Quemetco's stock and that it provides legal representation to Quemetco. Def.'s Ex. E, Admin. Order at 5. The exercise of the type of control that "stock ownership gives to the stockholders . . . will not create liability beyond the assets of the subsidiary." Best Foods, 118 S.Ct. at 1884. In other words, a stockholder will not be held liable for the acts of the corporation whose stock it holds unless the stockholder's control over the corporation's conduct exceeds the norm of protecting the stockholder's investment. See id. at 1885. No evidence has been presented with this motion that would indicate RSR Corp. exercised such excessive control. Nor did RSR Corp. ever own any property on the Site. Instead, RSR Corp. owned the owner of the property, and Vornado has given this Court no reason to pierce the corporate veil between the two and impose derivative liability.

6 The Court finds unpersuasive Vornado's assertion that RSR Corp. is precluded from a § 107 claim merely because it received an EPA cleanup order, or because it has incurred cleanup costs. If this argument were to prevail, the policy behind CERCLA of encouraging prompt cleanup of contaminated sites would be subverted because allegedly innocent parties would hesitate to undertake any cleanup activities for fear it would be deemed a concession of responsibility. Moreover, such a holding would be inconsistent with the Seventh Circuit's identification of an exception for innocent landowners, which would have to be modified to include only those innocent landowners who comply under some type of formal protest to the EPA orders.

Another source of liability for a parent corporation would be if the parent could be found directly liable for wrongdoing at a facility its subsidiary owns. "CERCLA liability may turn on operation as well as ownership, and nothing in the statute's terms bars a parent corporation from direct liability for its own actions in operating a facility owned by its subsidiary." Id. at 1886. A parent corporation may always be held directly liable for its own actions. Id.; see Ter Maat, 195 F.3d at 955. CERCLA's operator category of liability "is concerned primarily with direct liability for one's own actions." Best Foods, 118 S.Ct. at 1886. In Best Foods, however, the Supreme Court found the meaning of and actions constituting "operation" of a facility to be unclear. Id. at 1887. After considering the possible meanings that could be used, the Court decided that, "under CERCLA, an operator is simply someone who directs the workings of, manages, or conducts the affairs of a facility." Id. Further, such management and direction must be specifically related to the alleged pollution or decisions about compliance with environmental laws. Id. In essence, the Court distinguished between derivative and direct liability, by stating that "operation is evidenced by participation in the activities of the facility, not the subsidiary. Control of the subsidiary . . . gives rise to indirect liability under piercing doctrine, not direct liability under the statutory language." Id.

Vornado presented no evidence that RSR Corp. or any of its agents or employees managed, directed, or otherwise controlled the activities of the lead smelter or the Avanti Site at the time hazardous substances were deposited there. Examples of that type of activity include the day-to-day supervision of the operation of the smelter, or of the Site, negotiating waste-dumping contracts, directing where the wastes were to be dumped, or designing or directing measures for preventing the leeching of toxic substances. See Ter Maat, 195 F.3d at 956. If it had engaged in any such activities, RSR Corp. would be exposed to direct liability, could not assert one of the statutory defenses, and would be unable to sue another responsible party under § 107. Similarly, if RSR Corp. had arranged for the disposal of any hazardous wastes on the Avanti Site, it would be subject to direct liability and could not use § 107 against other responsible parties. In the absence of such evidence, RSR Corp.'s status as a PRP does not bar it from lodging a § 107 claim.

The cases cited by Vornado in support of its contention that RSR may not bring a § 107 action all have one thing in common. In each case, the person attempting to use § 107 for a direct cost-recovery action had a direct connection to the contaminated site. Most were acknowledged to be liable in part for the contamination of the site. See Akzo Coatings, 30 F.3d at 764 ("Akzo itself is a party liable in some measure for the contamination"); Sun Co., 124 F.3d at 1189 (EPA identified Sun Company as a PRP that had contributed to the waste at the site); Pinal Creek Grp., 118 F.3d at 1300 (plaintiffs admitted they were partly responsible for a portion of the cleanup costs); New Castle Cty., 111 F.3d at 1124 (at oral argument New Castle conceded it was a PRP); Redwing Carriers, Inc., 94 F.3d at 1494 (Redwing Carriers owned land on which it operated trucking terminal from which waste water containing hazardous substances was dumped); United Technologies, 33 F.3d at 97 (plaintiff's predecessor had owned and operated the site for twenty-five years); Amoco Oil Co., 889 F.2d at 672 (holding that Amoco shares joint and several liability because it is the owner of a facility that continues to release a hazardous substance).

Thus, in each of these cases, the court precluded the plaintiff from asserting a § 107 claim because the plaintiff had no colorable claim to one of the enumerated defenses in that section. See New Castle Cty., 111 F.3d at 1124 (holding that "a potentially responsible person under section 107(a), who is not entitled to any of the defenses enumerated under section 107(b), may not bring a section 107 action against another potentially responsible person."). Each plaintiff had admitted to or been found to have engaged in activity that may have contributed to the pollution on the site. In contrast, RSR Corp. has not admitted to any such conduct nor has the Court been presented with evidence sufficient to find that RSR engaged in activities that might lead to direct liability.⁷ Instead, RSR Corp. has a colorable claim to one of the defenses under § 107(b) — the defense that the release of a hazardous substance was caused solely by:

7 Moreover, the EPA only identified RSR as a PRP because it was the parent corporation of Quemetco, which it found to be a PRP.

(3) an act or omission of a third party other than an employee or agent of the defendant, . . . if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance concerned . . . and (b) he took precautions against foreseeable acts or omissions of any such third party.

42 U.S.C. § 107(b).

In light of this relationship between RSR Corp. and the site, the Court finds that RSR Corp. is entitled to bring a § 107 action against the defendants. If the evidence subsequently reveals that the corporate veil between Quemetco and RSR Corp. should be pierced, then RSR Corp. would lose its § 107 claim. It would similarly lose if the defendants offer evidence that RSR Corp. itself engaged in conduct that renders it directly liable for the contamination on the Site. Barring these two circumstances, the Court finds that RSR Corp. would be entitled to recover the costs it has incurred for cleanup of the Avanti Site. For purposes of further pursuit of its § 107 claim, however, RSR Corp. must separate the costs it has incurred from those incurred by its subsidiary, Quemetco. Similarly, RSR Corp. may not recover any costs from the remaining defendants that were incurred by it on behalf of its subsidiary. Under these conditions, the Court finds that Vornado's motion for partial summary judgment on the issue of RSR Corp.'s standing to sue under § 107 is DENIED, in part.

III. CONCLUSION

The Court has found that plaintiff Quemetco has admitted activity that would preclude it from asserting a § 107 cost-recovery action against the defendants in this action. As a result, Vornado's motion for partial summary judgment against Quemetco is GRANTED. Quemetco may no longer seek recovery in this matter under counts one or two. With respect to plaintiff RSR Corp., however, the Court has found that no evidence has been produced that would allow a finding that RSR Corp. is a responsible person under CERCLA, nor has RSR admitted to any conduct that might impose direct CERCLA liability on it. Thus, Vornado's motion for partial summary judgment against RSR Corp. is DENIED. In sum, the pending motion for partial summary judgment filed by Vornado is DENIED, in part, and GRANTED, in part.

ORDER ON ALLIEDSIGNAL INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT

This matter comes before the Court on a motion filed on June 2, 1999, by defendant AlliedSignal, Inc. ("Allied"), seeking partial summary judgment against plaintiff RSR Corporation ("RSR"), on the issue of RSR's liability under § 107 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). See 42 U.S.C. § 9607. Defendant Vornado Realty Trust ("Vornado") joined Allied's motion on July 6, 1999, although Vornado had its own motion for partial summary judgment pending on the issue of whether RSR had standing to sue under § 107. The Court has resolved Vornado's motion on the standing issue in favor of RSR, finding that insufficient evidence was presented at that time to determine that RSR had no colorable claim to a statutory defense to potential liability under § 107. The order resolving that issue has been released as a companion order to this one.

In its motion, Allied argues that RSR should be held liable for the acts of its subsidiary, Quemetco, Inc. ("Quemetco"), because the two were actually a single business enterprise. In addition, Allied argues that RSR was directly involved in activities at the site that caused its further contamination, and that RSR was a generator of lead scrap that was transported to the site for disposal. According to RSR, it cannot be held derivatively liable because Quemetco engaged in no activity on the site after it became a subsidiary of RSR's that would have added to or created any contamination. RSR also disputes the allegations that it disposed of lead battery scrap at the site and notes that even if it did, the Court has already found that such activity would not incur arranger liability.

Having reviewed the parties' evidence and arguments and considered the relevant law, the Court finds there are genuine issues of material fact that prevent a decision about piercing the corporate veil on summary judgment. Nevertheless, sufficient evidence has been presented to assure the Court that RSR is no longer entitled to pursue a claim under § 107 of CERCLA because it is not an innocent party. The extent of and source for RSR's responsibility for the contamination cannot be determined at this time because of genuine factual issues that are material to that determination. For the reasons further explained below, defendant Allied's motion for partial summary judgment is GRANTED in part, to the extent that it seeks a determination that RSR is liable as a potentially responsible party, and DENIED in part, to the extent it seeks a determination that RSR is derivatively responsible for all of Quemetco's CERCLA liability.

As a consequence of the Court's resolution of this summary judgment motion, neither Quemetco nor RSR may continue to pursue the relief sought from Count Two of the Complaint, which is a claim for cost recovery under § 107 of CERCLA. 42 U.S.C. § 9607 (a). Thus, summary judgment on count two is GRANTED in favor of all of the defendants in this action and against the plaintiffs.

I. FACTUAL BACKGROUND

RSR and Quemetco brought this CERCLA action to obtain a determination of liability among numerous defendants for the cleanup costs of a contaminated site, named after its current owner, the "Avanti" Site. For purposes of the various summary judgment rulings already entered in this action, the Court has found that plaintiff Quemetco owned or leased property at the Site from approximately 1970 to 1974. RSR Corp. v. Avanti, IP 95-1359, Order Dated June 25, 1999, at 2 ("Ace Order"). Quemetco used the Avanti Site to operate a secondary lead smelting facility from at least 1970 to 1972. Pls.' Resp. to Df. Fluor Corp.'s Mot. for Sum. J. at 5. A secondary smelter collects scrap materials containing lead and processes it to produce new usable forms of lead. Ace Order at 2. RSR acquired Quemetco from defendant St. Joe Minerals Corporation ("St. Joe") on or about October 25, 1972. Third Am. Compl. ¶ 74. Quemetco retained its corporate identity and RSR became its parent corporation. Id. ¶¶ 74-75.

Prior to this acquisition, Quemetco had allegedly stopped operating the smelter and was in the process of moving its smelting operations. Def.'s Ex. 10(a), Howard M. Meyers 1976 Dep. at 375. According to RSR president, Howard M. Meyers ("Meyers"), Quemetco had also exercised an option to buy a portion of the Avanti Site. Id. That purchase, from Romos Industries, Inc., was accomplished approximately two months later, on December 21, 1972. Df.'s Ex. C, Corporate Warranty Deed, dated Dec. 21, 1972. RSR was not interested in keeping the newly purchased property. Def.'s Ex. 10(a), Meyers 1976 Dep. at 375-76.

At the time Quemetco was acquired by RSR, it was in the process of building a new plant in Indianapolis, but it had not yet moved from the Avanti Site. Def.'s Ex. 6, Quenell Dep. at 507; Df.'s Ex. 19, Robert Beil Dep. at 9-10. The new plant was on Morris Street, and it was to be managed by Robert Beil ("Beil") for Quemetco. Id. at 10. After the smelting operations were moved to the new location and Quemetco had purchased part of the Avanti Site, RSR decided to sell the Avanti property. Def.'s Ex. 10, Meyers 1974 Dep. at 956-57; Def.'s Ex. 10(a), Meyers' 1976 Dep. at 147, 375. Before it could be sold, however, the property needed to be cleaned up to make it more marketable. Def.'s Ex. 10(a), Meyers's Dep. at 147; Pls.' Ex. 1, Howard B. Myer's 1998 Dep. at 111-12. Quemetco allegedly contracted with RSR to mine the site for lead, remove the remaining equipment, make necessary repairs to the building, and bulldoze and re-contour the land at the Site. Def.'s Ex. 10(a), Meyer's Dep. at 376-77; Def.'s Ex. 19, Beil Dep. at 20-22. In the process, RSR recovered approximately 30,000 pounds of lead from the Site and shipped it to a smelter of one of its subsidiaries' in Texas. Beil, Quemetco's general manager of Indiana operations at the time, witnessed RSR removing dry lead-coated battery tops from the site, which caused powdered lead to scatter across the property and into the air. Def.'s Ex. 19, Beil Dep. at 20-24; Ex. 19(a), Beil Dep. at 25. Once the cleanup was completed, Quemetco and RSR sold the Site in 1974. Third Am. Compl. ¶ 76.

Approximately twenty years later, the United States Environmental Protection Agency ("EPA") determined that the Avanti Site and surrounding residential properties were contaminated, and ordered RSR, Quemetco, and others, to clean it up. Df.'s Ex. E, Mar. 29, 1994, EPA Admin. Order ("`94 Order"). Specifically, the EPA found that the industrial property at 502-566 South Harris Street, Indianapolis, Indiana, and the surrounding residential properties, were polluted with lead. Id. The agency referred to both the industrial property and the residential areas as the site.¹ RSR Corp., Quemetco, Oxide Services Corp. d/b/a/ O C Corp., Indiana Oxide Corp. and Avanti Development, Inc., were ordered "to conduct removal activities described herein to abate an imminent and substantial endangerment to the public health, welfare or the environment that may be presented by the actual or threatened release of hazardous substances at or from the site." Id. According to RSR's general counsel, Howard B. Myers ("Myers"), RSR and Quemetco have incurred nearly five million dollars in response costs thus far, with RSR paying 95-97% of those costs. Def.'s Ex. 5, Myers Dep. at 136.

1 The Court will refer to the actual property at 502-566 Harris Street as the Site or Avanti Site, and will remain consistent with the EPA's order by referring generally to the combination of the Avanti Site and the surrounding residential areas as the "site" or "contaminated site."

RSR and Quemetco filed their three-count complaint on October 11, 1995, and amended it on July 24, October 20, 1997, and April 27, 1998. Count one seeks a declaratory judgment in favor of the plaintiffs under § 107 of CERCLA, essentially declaring that the named defendants are jointly and severally liable for the contamination at the Site. 42 U.S.C. § 9607(a). In count two, the plaintiffs seek a monetary judgment representing the total amount of their costs of remediating the Site in response to the EPA order. In the event that the plaintiffs are determined to be entitled to less than a full recovery under § 107, count three seeks contribution from the defendants under § 113 of CERCLA, which allows for equitable allocation of response costs. Id. § 9613(f). Allied's motion for partial summary judgment is directed at whether RSR may prove its entitlement to the cost recovery claim contained in count two, and does not address the actual liability of RSR, if any, that should be allocated under § 113.

II. DISCUSSION A. Summary of Arguments and Framework

There are two ways a private party can recover some or all of its cleanup costs under CERCLA: a cost recovery action under § 107 and a contribution action under § 113. 42 U.S.C. § 9607(a), 9613(f)(1); Bedford Affil. v. Sills, 156 F.3d 416, 423 (2nd Cir. 1998). RSR and Quemetco sued Allied under both theories. Congress established CERCLA as a comprehensive method of providing an "efficacious response to environmental hazards and to assign the cost of that response to the parties who created or maintained the hazards." North Shore Gas. Co. v. Salomon, Inc., 152 F.3d 642 (7th Cir. 1998) (noting that successor liability comports with CERCLA's remedial purpose); see also Public Serv. Co. of Col. v. Gates Rubber Co., 175 F.3d 1177, 1181 (10th Cir. 1999). "CERCLA is a remedial measure which is aimed only at correcting environmentally dangerous conditions." Id. In other words, CERCLA has a "broad remedial purpose" that induces courts to interpret its provisions liberally to effect that purpose. See Uniroyal Chem. Co., Inc. v. Deltech Corp., 160 F.3d 238, 242 (5th Cir. 1999) (courts must construe CERCLA provisions liberally to avoid frustrating Congress' intent); OHM Remediation Servs. v. Evans Cooperage Co., Inc., 116 F.3d 1574 (5th Cir. 1997) (same); Schiavone v. Pearce, 79 F.3d 248, 253 (2d Cir. 1996) (same); see also United States v. Occidental Chem. Corp., 200 F.3d 143, 147 (3d Cir. 1999) (noting CERCLA's "broad remedial purpose"); United States v. Vertac Chem. Corp., 46 F.3d 803, 810 (8th Cir. 1995); FMC Corp. v. United States Dept. of Comm., 29 F.3d 833, 840 (3d Cir. 1994).

Allied's motion for partial summary judgment seeks a determination from the Court of three dispositive issues. First, it asks for a decision on the issue of whether the corporate veil between RSR and Quemetco should be pierced, imposing all of Quemetco's CERCLA liability on RSR. As a corollary to this issue, Allied asks for a finding that Quemetco is liable for all of the activities of its predecessor corporation, called for purposes of this order "Old Quemetco." Second, Allied contends that RSR should be held liable for any contamination that occurred as a result of the bulldozing, mining and leveling activities it conducted at the Site prior to its sale. The imposition of such direct liability is particularly appropriate, Allied argues, because RSR, not Quemetco received the proceeds from the sale. Finally, Allied claims that RSR should be held directly liable as a generator of hazardous waste that was transported to and disposed of at the Site when it was operated by Old Quemetco.

In response, RSR and Quemetco deny there are any grounds to pierce the corporate veil. Even if there were, they assert that RSR cannot be held derivatively liable for any operator liability of Quemetco's because by the time RSR bought it, Quemetco was no longer operating a smelter on the site. With respect to derivative ownership liability, RSR contends that during the time Quemetco owned the Site, "the only act of Quemetco's . . . was to sell the Site, which was an act that did not create or add to any potential CERCLA liability." Pls.' Mem. of Law in Oppos. to Df. AlliedSignal's Mot. for P. Sum. J. at 4. The plaintiffs also argue that the facts material to determining whether to pierce the corporate veil are in dispute, making summary judgment on that issue inappropriate. Second, the plaintiffs contend RSR's cleanup of the Site in preparation for its sale was as a contractor of Quemetco's, and that status does not subject it to operator or arranger liability under CERCLA. Finally, RSR claims it did not supply battery scrap to the Site, and even if it did, it should benefit from the Court's prior ruling that the supply of battery scrap by a battery-breaking operation does not give rise to CERCLA liability.

The Court has reviewed the evidence supplied by the parties on this latter issue and finds it insufficient to allow a fact-finder to conclude that RSR supplied battery scrap to the Avanti Site. The testimony of former Quemetco employee, Robert L. Puckett ("Puckett"), to which Allied points for support that RSR supplied lead scrap to the Site, includes further testimony in which Puckett expresses doubt in his recollection. Pls.' Ex. 9, Puckett Dep. at 81-86. After stating he saw RSR trucks at the Avanti Site, Puckett "clarified" his testimony by explaining that an employee of RSR's operated a battery-breaker that "may have been independent of RSR, but he was breaking battery scrap that was associated with RSR at the time." Id. at 82-83. The Puckett testimony is too equivocal to support a finding that RSR actually supplied its own battery scrap to the Avanti Site. Even if RSR's scrap were supplied, however, the recent amendment to CERCLA, titled the Superfund Recycling Equities Act of 1999 ("SREA"), provides support for the Court's prior ruling that battery-breakers supplying lead recovered from spent batteries to a smelter for recycling are not arrangers for purposes of CERCLA liability.² In light of the equivocal nature of the evidence that RSR shipped battery scrap to the Avanti Site, and the fact that Allied did not dispute that such conduct would put RSR in the same posture as those defendants the Court has found not liable, summary judgment for RSR on this issue is appropriate. Thus, the Court will address only the parties' arguments concerning derivative liability through veil piercing, and direct liability through RSR's actions at the Site.

2 Section 127(a) provides that "a person who arranged for recycling of recyclable material shall not be liable under sections 107(a)(3) and 107(a)(4) with respect to such material." For purposes of the amendment, recyclable material includes "spent lead-acid, spent nickel-cadmium, and other spent batteries." § 127(b).

The real issue lurking behind Allied's motion is whether sufficient evidence has been presented to preclude RSR from bringing a § 107 action against any of the defendants. The significance of this issue lies in the fact that without a cost recovery action, RSR would be limited to a contribution action under § 113. Rumpke of Ind., Inc. v. Cummins Eng. Co., Inc., 107 F.3d 1235, 1240 (7th Cir. 1997). This means RSR may be assessed some of the costs of cleanup. The jury would be asked to determine RSR's relative share of liability along with all other responsible parties, and the Court would then equitably allocate the response costs among those parties. On the other hand, if the evidence creates a genuine issue of material fact about whether RSR is at least partly responsible for the contamination of the Site, then the § 107 claim would remain in the case set for trial by jury on September 18, 2000. Id. At trial, a jury might decide that RSR is not a responsible party, in which case RSR would be able to recover all of its response costs from any one defendant that it proves is a responsible party.

In the following discussion, the Court will consider and resolve the issues surrounding RSR's alleged direct liability, which is the more straightforward issue. Next, it will assess the evidence presented on the derivative liability claim. Finally, the Court will summarize the types of evidence that should be presented at trial to enable it to render a decision on the equitable issues, such as whether it should pierce the corporate veil, as well as the scope and source of RSR's share of liability.

B. RSR's Direct Liability

Section 107 is a strict liability statute, and those parties who fall within one of the specified categories of responsibility³ will be strictly liable for cleanup costs unless they can prove one of the statute's limited defenses. See Axel Johnson, Inc. v. Carroll Carolina Oil Co., Inc., 191 F.3d 409, 413 (4th Cir. 1999). Liability under § 107 is established by showing that 1) the site in question is a facility;⁴ 2) the defendant is a responsible person ( i.e. falls in one of the four categories); 3) a release or a threatened release of a hazardous substance occurred; and 4) the release or threatened release has caused the plaintiff to incur response costs. Town of Munster v. Sherwin-Williams Co., Inc., 27 F.3d 1268, 1273 (7th Cir. 1994). Because a party who is a responsible person cannot bring a § 107 action, when the party's status as an "innocent party" has been challenged, the Court must determine whether the plaintiff is in fact innocent.

3 Those four categories are:
(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,

(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing hazardous substances, and

(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the occurrence of response costs, of a hazardous substance. . . .

42 U.S.C. § 9607(a).

4 CERCLA defines a facility as "(A) any building, structure, installation, equipment, pipe or pipeline, . . . well, pit, pond, lagoon, impoundment, ditch, landfill, storage container, motor vehicle, rolling stock, or aircraft, or (B) any site or area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located; but does not include any consumer product in consumer use or any vessel." 42 U.S.C. § 9601(9)

Allied points to the fact that RSR has been named as a potentially responsible party ("PRP") by the EPA, has undertaken cleanup activity, and has a connection to the Site through Quemetco and its own activity, as support that RSR is not an innocent party. Although the moving party has the initial burden of showing the absence of genuine issues of material fact, see Schroeder v. Barth, 969 F.2d 421, 423 (7th Cir. 1992), once it does, the party opposing summary judgment bears an affirmative burden of presenting evidence that a disputed issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Scherer v. Rockwell Int'l Corp., 975 F.2d 356, 360 (7th Cir. 1992). There is no dispute that RSR was named as a PRP by the EPA, or that it has undertaken cleanup activities and incurred costs. Thus, if Allied can meet its initial burden of showing RSR's connection to the Site, then RSR will have the burden of pointing to sufficient evidence to prove it is an innocent party. Barring such a showing by RSR, its § 107 claim will drop out of this action. See New Castle Cty. v. Halliburton Nus Corp., 111 F.3d 1116, 1124 (3d Cir. 1997) (holding that a PRP under § 107(a), who is not entitled to any of the statutory defenses, may not bring a § 107 action against another PRP).

A party is not a responsible person under § 107 if one of the statutory defenses is met. Those defenses provide that no liability shall be imposed on:

a person otherwise liable who can establish by a preponderance of the evidence that the release or threat of release of a hazardous substance and the damages resulting therefrom were caused solely by —

(1) an act of God;

(2) an act of war;

(3) an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant . . . if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance . . . and (b) he took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions; or

(4) any combination of the foregoing paragraphs.

42 U.S.C. § 9607(b). These defenses allow current owners to escape liability if they can show that their "status as a PRP for CERCLA purposes is based solely on [their] ownership" of the contaminated property, and they contributed nothing to the hazardous conditions at the site. Rumpke, 107 F.3d at 1239. This has been called the "innocent landowner" exception. PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610, 617 (7th Cir. 1998), cert. denied 119 S.Ct. 871 (1999).

RSR claims entitlement to a version of this exception, as an "innocent" party. Although the Seventh Circuit has only specifically recognized an "innocent landowner" exception to CERCLA liability, other courts have referred to the exception as an "innocent party" defense. See PMC, Inc., 151 F.3d at 617 (noting Seventh Circuit's decisions have held that innocent landowner can sue under § 107, citing Rumpke, 107 F.3d at 1240-41; AM Int'l, Inc. v. Datacard Corp., 106 F.3d 1342, 1347 (7th Cir. 1997)); see also Axel Johnson, Inc. v. Carroll Carolina Oil Co., 191 F.3d 409 (4th Cir. 1999) (noting that an "innocent party" would be one who is entitled to one of the statutory defenses). Given that RSR's claimed innocence cannot be based on it being an owner of the Site, it must derive from some other aspect of the statutory defenses. The most likely one would be that the contamination was caused solely by the acts of third persons, none of whom were RSR's agents, employees, or otherwise connected to RSR in a way that could lead to liability, such as by contract.⁵ See GNB Battery Tech., Inc. v. Gould, Inc., 65 F.3d 615, (7th Cir. 1995); Harley-Davidson, Inc. v. Minstar, Inc., 41 F.3d 341 (7th Cir. 1994); Kerr-McGee Chem. Corp. v. Lefton Iron Metal Co., 14 F.3d 321, (7th Cir. 1994); Axel Johnson, Inc., 191 F.3d at 1347.

5 The Court notes that, in response to the amended answers and counterclaims of defendants Brodey Brodey, Inc. and Indiana Battery, Inc., RSR has raised an affirmative defense that "the release or threat of release of a hazardous substance and any resulting damages were caused solely by the act or omission of a third party other than an employee or agent of . . . or one in a direct or indirect contractual relationship with" RSR. Pls.' Reply To Brodey Brodey, Inc.'s Am. Ans. to Pls.' Third Am. Comp., Additional Defenses, Counterclaims, Cross-claims and Third Party Claims at 3.

The other side of that inquiry is whether RSR should be held directly liable for its activities on the Site. Having reviewed the evidence presented, the Court finds that RSR's activities at the Site would fit within category two of § 107, which covers "any person who at the time of disposal of any hazardous substance . . . operated any facility at which such hazardous substances were disposed of."⁶ 42 U.S.C. § 9607(a). Such liability was recognized in a case recently, in which two contractors that were hired to clean up contamination at a facility actually exacerbated the problem by contaminating previously uncontaminated areas. See Ganton Tech., Inc. v. Quadion Corp., 834 F. Supp. 1018, 1021 (N.D.Ill. 1993). In Ganton, the court held that disposal did not mean only the initial disposal of a hazardous waste, and the term operator should include the circumstance in which a person controls the activity by which additional contamination takes place. Id. at 1022 (citing Kaiser Alum. v. Catellus Dev., 976 F.2d 1338, 1342 (9th Cir. 1992)). Rather than limit disposal to the initial introduction of contaminants into a site, the court found that the term "can depend on the context of the entire situation." Id. (citing Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746, 751 (7th Cir. 1993)). In another case, the Seventh Circuit has noted that the meaning of disposal depends on the context of the situation. Amcast, 2 F.3d at 751. For example, for an operator of a hazardous-waste dump, "disposal" includes accidental spills; whereas in the context of a shipper of a product, "disposal" might exclude accidental spillage. Id.

6 It is arguable that RSR's activities in connection with the site would place it in category three, which is "any person who by contract, agreement, or otherwise arranged for disposal . . . of hazardous substances . . . possessed by such person, by any other party or entity, at any facility . . . owned or operated by another party or entity and containing hazardous substances." 42 U.S.C. § 9607(a)(3).

Here, RSR is accused of having spilled lead, in powder and solid form, on the ground between a stockpile of spent lead batteries and a waiting railroad boxcar while cleaning up the Site to make it more marketable. As noted before, this activity occurred after RSR acquired Quemetco, and during the time Quemetco owned the Site. The Court finds the evidence supporting this connection to the Avanti Site sufficient to cast the burden onto RSR to show its innocence.

In support of its contention that RSR further contaminated the site by its cleanup operation in 1973 and 1974, Allied points to the deposition testimony of RSR's president at the time, Howard M. Meyers, who confirmed that RSR conducted cleanup operations at the Avanti site beginning shortly after the site was acquired, and concluding before its sale in 1974. Def.'s Ex. 10(a), Meyers 1976 Dep. at 147, 376-78, 396. He reported that "the property was stripped of debris, bulldozed level, the roofs were cleaned of debris, the general building was cleaned of debris and holes in the floor filled in; generally spruced up to obtain even the low value that we did obtain for it." Id. at 147. In addition, RSR mined approximately 30,000 pounds of lead from the property. Id. at 377. When asked what it did with the lead, Meyers stated, "it went to our smelter and went into our system. . . ." Id. Quemetco's general manager of Indiana operations at the time, Robert Beil, confirmed that RSR assumed control over all operations at the Site, including the salvage and cleanup operations. Def.'s Ex. 19, Beil Dep. at 15, 20.

According to Beil, a huge pile of battery tops waiting to be processed constituted the only scrap at the Site to be removed. Id. at 20. The tops contained granule lead or lead oxide in powdery form, because they "had been sitting out there for quite a while, and . . . were all dried out." Id. at 22. If someone tried to move the batteries, the powdery lead "would fall off and go into the ground." Id. Shortly after RSR "took over they came in with railroad cars and loaded the tops out and shipped them to Dallas." Id. at 23-24. Beil actually witnessed RSR's loading activity and saw that "every time they would pick [the tops] up the bucket would be full, and as it moved across a certain amount of it would fall out and go on the ground." Id. at 24-25. Not only did the powdery lead fall out, but Beil saw some of the tops and the solid lead fall out as well. Id. at 25.

Arguing that its cleanup activities should not result in CERCLA liability, RSR asserts that it did not "dispose" of any hazardous waste during its operations on the Site, arguing that under CERCLA "disposal" encompasses "placing of any hazardous waste . . . onto any land." Id. at 12 (citing Kaiser, 976 F.2d at 1342-43). It further notes that "cleanup or like activities in an area previously contaminated do not constitute disposal, unless the defendant causes the hazardous material to sift or spread, or exacerbates the problem. . . ." Id. RSR also claims it only removed equipment and debris from the site in an effort to help Quemetco obtain the best price for the property, and it did so pursuant to a "management agreement with Quemetco." Pls.' Mem. of Law in Opp. to Def. AlliedSignal, Inc.'s Mot. for Partial Sum. J. at 11 and n. 43. The Court will address each argument in turn.

Although it has the burden of proof, RSR has offered no evidence to contradict Beil's statements about the company's cleanup activities at the Site in 1972 to 1974, choosing instead to dispute whether those activities constitute disposal when the smelter was no longer in operation. RSR agrees, however, that if cleanup activities sift, spread, or otherwise exacerbate the pollution, they can be considered disposal under CERCLA. See Pls.' Mem. of Law at 12; Ganton Tech., 834 F. Supp. at 1021-22. The undisputed evidence shows that RSR's cleanup activities caused dry, powdery, or solid lead to fall on the ground between the pile of battery tops and the railroad cars. In the absence of any evidence to show that this spillage did not spread or otherwise exacerbate the pollution, the Court finds sufficient evidence that it does. A reasonable inference to draw from this evidence is that the powdery lead became airborne and contaminated areas that had not been previously contaminated. Moreover, the EPA found lead in surrounding residential areas, which suggests the airborne lead had settled on the adjacent properties, another reasonable inference to draw from Beil's testimony. For these reasons, the Court finds that the activities engaged in by RSR, its employees or agents at the site added to the contamination of the overall site, and constituted a disposal.⁷

7 A recent Seventh Circuit decision lends further support to a finding that Quemetco's shareholder parent corporation, RSR, could be found liable under an operator theory for its activities at the Site. See Browning-Ferris Indus. of Ill., Inc. v. Ter Maat, 195 F.3d 953, 955-56 (7th Cir. 1999). When read in the light of the expansive interpretation of "operator" in the Supreme Court's Best Foods decision, and the meaning of "facility" under CERCLA, the Ter Maat case demonstrates the logic of holding RSR liable for its cleanup activities at the Site.

With respect to RSR's argument that without the smelter in operation no operator liability could attach, the Court notes that the meaning of operation is much broader than just the operation of a smelter or manufacturing plant. As the Supreme Court noted in Best Foods, the term operation is not well-defined in CERCLA. United States v. Best Foods, 524 U.S. 51, 66 (1998). The Court interpreted it as "simply someone who directs the workings of, manages, or conducts the affairs of a facility." Id. The relevant activities, however, are those that relate to pollution, such as "operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." Id. Just as did the plaintiff in Axel Johnson, RSR mistakenly narrows the meaning of "facility" when arguing that it was not an operator. CERCLA defines "facility" to include "any site or area where a hazardous substance has been deposited." 42 U.S.C. § 9601(9).

Plugging that definition into § 107(a), CERCLA provides in effect that any person who owned or operated a "site or area where a hazardous substance has been deposited" at a time when "any hazardous substances . . . were disposed of" at that "site or area" is liable for response costs incurred due to the release or threatened release of "a hazardous substance' from the "site or area."

Axel Johnson, 191 F.3d at 415. These more liberal interpretations of "operate" and "facility" lead the Court to find that, because RSR directed the workings of, or managed, the cleanup activities at a "site or area where a hazardous substance [had] been deposited," at a time when the hazardous substance was disposed of, it can be held liable for a portion of the cleanup costs.

RSR also argues that it cannot be held liable for the cleanup operations because it was performing pursuant to a "management agreement" with Quemetco.⁸ Exactly how this contract immunizes RSR from CERCLA liability is not clear, and RSR cites no authority in support of such a rule. Aside from the fact that RSR did not produce the agreement in response to Allied's motion, there is no dispute that the activity at the Site was actually conducted by RSR. At most, the contract would merely provide the reason for RSR's presence at the Site, and place it in the same category as the cleanup contractors in Ganton, who were held liable under CERCLA because they had exacerbated the contamination at a site. 834 F. Supp. at 1022. The Ganton court found that holding cleanup contractors liable under CERCLA was consistent with CERCLA's policies of taxing "those who profit or benefit from their disposal." Id.

8 In support of this contention, RSR cites the testimony of its general counsel, Howard B. Myers. Pls.' Ex. 1, Myers Dep. at 161. Upon review of this portion of the deposition, the Court finds that Myers is only discussing the accounting and purchasing services provided by RSR to Quemetco by a service agreement. Id.

The two cases cited by RSR in support of its contention that it should not be held liable under CERCLA unless it played "some role in the day to day management of what causes the contamination," are distinguishable. Pls.' Mem. in Oppos. to Allied's Mot. for P. Sum. J. at 14. In the Wisconsin case, the court considered the potential liability of a paving contractor that had a long-term oral contract with a landfill owner that allowed it to dump solid waste at the landfill. Acme Printing Ink Co. v. Menard, Inc., 870 F. Supp. 1465 (E.D.Wis. 1994), recons'd. in part 891 F. Supp. 1289 (E.D.Wis. 1995). Their agreement was that the paving contractor "was obligated to level, grade, and backfill the materials it dumped" at the landfill, and the plaintiff argued that this created operator liability. Id. at 1484. The court had already ruled that there was insufficient proof that any materials dumped by the paving contractor were hazardous. Id. at 1483. Thus, the paving contractor's activities on the site could not incur operator liability from having added to an existing contamination problem. As a result, the court looked at whether the contractor had exercised any kind of "day-to-day control over operations on the site," and found that it had not. Id. at 1484. RSR uses this ruling to support its contention that it could not be held liable as an operator unless it had exercised day-to-day control over the smelter, which it did not. The difference, however, is that RSR had day-to-day control over the cleanup activities on the site, which activities caused the lead contamination to spread.

The other case cited by RSR in support of this notion is one in which an excavating firm, McKiness Excavating, was hired by a power company, a city and the state department of natural resources to excavate and clean up an area owned by the power company, and to build a sanitary sewer through it. Interstate Power Co. v. Kansas City Power Light Co., 909 F. Supp. 1284, 1285 (N.D.Iowa 1994). The court found that McKiness had furthered the contamination in the area and in a nearby creek, but that all of its activities were under the direct supervision and control of the power company and the state department of natural resources. In fact, the state department of natural resources directed the activities and provided the legal authority for the work that was performed. Id. For purposes of determining whether McKiness should be held liable under an owner/operator theory of CERCLA liability, the court found this lack of control or authority to control the activities that led to contamination to be dispositive. Id. at 1288. In contrast, RSR cannot point to any state agency directing its cleanup activities in the 1970s.

Based on the evidence that has been presented, the Court finds that RSR assumed complete control over the Avanti Site during its cleanup operations in 1972 to 1974, and it took possession of the lead that was mined from the property. Further corroborating this view of the evidence is the testimony of RSR's president, Howard M. Meyers, who said in a 1976 deposition that RSR had decided to clean up the property at the Avanti Site and sell it. Def.'s Ex. 10(a), Meyers Dep. at 375-76. RSR was not pleased that Quemetco had exercised its option to buy the property just before RSR bought Quemetco from St. Joe. Id. Nevertheless, RSR understood that the property contained some "hidden inventory" that would make it economical to clean it up. Id. at 376. When RSR learned differently, it sued St. Joe for alleged misrepresentations in connection with its purchase of Quemetco.

Meyers recalled that RSR had mined enough lead from the property to cover some of its expenses from the cleanup. Id. at 377. No records could be produced, however, to show the amount of lead that was mined or how much it yielded to RSR. Id. at 377-78. In addition, RSR removed some equipment from the building at the Site, but Meyers could not recall whether it was sold or used. Id. at 390. Meyers testified that "RSR tried to get as much as it could for the property. . . ." Id. at 396. He also said that if they could have gotten more for the property than they had paid for it, they would have made money on its sale. Id. The 1976 deposition of Meyers was taken in connection with a suit filed by RSR against St. Joe for alleged breach of warranty and misrepresentations in connection with RSR's purchase of Quemetco's stock. All of these facts further support the Court's finding that RSR performed the cleanup operations at the Avanti Site under its own initiative and for purposes of enhancing the value that could be received for the property and that would inure to RSR's benefit upon its sale.

In response to Allied's claim that RSR should be held liable as an operator based on its cleanup activities, RSR has offered no evidence that would demonstrate it was under the direct control and supervision of a third party while performing any of those activities. Even if it had produced such evidence, it may not have sufficed to overcome the strong showing that RSR took over the site after it acquired ownership of Quemetco's stock. Given the fact that CERCLA's policy is to tax all those who benefit from disposal of hazardous waste, RSR's retention of the proceeds from the sale of the lead and the sale of the property would place it within the category of those CERCLA seeks to hold responsible for cleanup costs.⁹

9 The Court notes that RSR made no attempt to produce any evidence that would establish "by a preponderance of the evidence that (a) [RSR] exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance . . . and (b) [RSR] took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions." 42 U.S.C. § 9607(b)(3).

Thus, RSR's cleanup activities at the Harris Street site, which caused the further disbursement of powdered and solid lead, constituted operation of a facility at a time when disposal of a hazardous substance occurred. For that reason, RSR cannot claim to be an innocent party with respect to the Avanti Site, and consequently may not maintain its § 107 cost-recovery claims against the defendants. Allied's motion for partial summary judgment on Count 2 is GRANTED.

C. RSR's Derivative Liability

The Court has determined that RSR may only bring a contribution claim against the remaining defendants in this action because it is not an innocent party. A consequence of that finding is that the Court must also determine the extent of liability to allocate to RSR under a § 113 analysis. As the Court found in the Vornado Order, the general rule is that "when two parties who both injured the property have a dispute about who pays how much . . . the statute directs them to § 113(f) and only to § 113(f)." Rumpke, 107 F.3d at 1240. That section of CERCLA provides that "[a]ny person may seek contribution from any other person who is liable or potentially liable under section 9607(a). . . .[and] [i]n resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate." 42 U.S.C. § 9613 (f). Allied's argument about piercing the veil between RSR and Quemetco relates directly to the extent of RSR's liability under CERCLA. It is one of the equitable factors the Court will consider when determining the proper allocation of response costs under § 113. It also bears on a determination of how much of those costs to allocate to Quemetco, in the sense that if the corporate veil should be pierced for purposes of CERCLA liability, Quemetco's share could be payable by RSR.

Unlike the analysis of whether RSR could claim innocent party status, a determination of whether RSR is derivatively liable for Quemetco's CERCLA liability places the burden of proof on Allied. This is because the principle of limited liability for corporations leads to the corollary that "disregard of entity [piercing the veil] should be approached reluctantly or cautiously" and should only be undertaken "in exceptional cases." P. Blumberg, Law of Corporate Groups — Substantive Law, ch. 6, p. 106 (hereafter "Blumberg"). As the Supreme Court has observed, "[i]t is a general principle of corporate law deeply ingrained in our economic and legal systems that a parent corporation (so-called because of control through ownership of another corporation's stock) is not liable for the acts of its subsidiaries." Best Foods, 524 U.S. 61 (quotations omitted). Thus, the party seeking to overcome this corporate norm bears the burden of proof. See Fletcher Cyc. Corp., § 41.28, p. 610-11 (Perm. Ed. 1999) (citing Chicago Florsheim Shoe Store Co. v. Cluett Peabody Co., Inc., 826 F.2d 725 (7th Cir. 1987)).

Equally embedded in corporate law is the principle that "the corporate veil may be pierced and the shareholder held liable for the corporation's conduct when, inter alia, the corporate form would otherwise be misused to accomplish certain wrongful purposes . . . on the shareholder's behalf." Best Foods, 524 U.S. at 62. Nothing in CERCLA prompts courts to disregard these well-settled rules. Id. Thus, the corporate veil may be pierced when a parent exercises a degree of control over its subsidiary that is not consistent with the normal control given by stock ownership to a stockholder. Best Foods, 524 U.S. at 61. Yet, even before a corporate veil analysis can be undertaken, it must be clear that the corporation has incurred some liability that can be imputed to the shareholder with the veil-piercing. Fletcher Cyc. Corp., § 41.28, p. 608. Piercing a corporate veil is not a separate cause of action, but a means of imputing a corporation's liability to its shareholders. Id. For purposes of this summary judgment motion, the Court will assume that Quemetco has incurred some corporate liability under CERCLA and proceed with an analysis of whether its parent should share in that liability.

1. Piercing the Corporate Veil

The doctrine of "piercing the corporate veil," or "disregard of entity," is equitable in nature. Fletcher Cyc. Corp., § 41.25, pp. 603-04 (Perm. Ed. 1999) (citing cases). Because of this, a party seeking to pierce the corporate veil must show that fraud, or at least "an inequitable result, involving fundamental unfairness, will result from a failure to disregard the corporate form." Id. at 605; see Hystro Prods., Inc. v. MNP Corp., 18 F.3d 1384, 1390 (7th Cir. 1994) (piercing corporate veil requires showing of "some element of unfairness, something akin to fraud or deception, or the existence of a compelling public interest"). In most jurisdictions, besides showing neglect of corporate formalities, a party seeking to have a court disregard the corporate fiction must also "show that the managers or investors used the corporate form to perpetrate an injustice." Mark I, Inc. v. Gruber, 38 F.3d 369, 371 (7th Cir. 1994). Under Delaware law, the showing of "injustice" must be more than breach of contract, or inability to collect a debt. Outokumpu Eng. Ent., Inc. v. Kvaerner Enviropower, Inc., 685 A.2d 724, 729 (Del.Super. 1996); see also Hystro Prods., 18 F.3d at 1390 (injustice requires more than the mere showing of an unsatisfied judgment, but less than a showing of fraud).

Although courts disagree about whether state law or federal common law should apply to a veil-piercing analysis, Best Foods, 524 U.S. at 63-64, n. 9, the parties here do not dispute the application of Delaware law to their relationship.¹⁰ Under that law, a corporate veil will be pierced when the degree of control exercised by a parent over its subsidiary amounts to "exclusive domination and control . . . to the point that [the subsidiary] no longer has legal or independent significance of its own." Outokumpu Eng., 685 A.2d at 729 n. 2. As the Supreme Court has noted, however, the type of "control" leading to derivative liability does not include "the election of directors, the making of by-laws . . . and the doing of all other acts incident to the legal status of stockholders." Best Foods, 524 U.S. at 62. Nor will the "duplication of some or all of the directors or executive officers" be fatal to the parent company's corporate immunity. Id.

10 Allied relies on Seventh Circuit, Indiana, and Pennsylvania case law in its arguments, but does not dispute RSR's contention that the law of the state of Delaware should apply. Both RSR and Quemetco were incorporated in Delaware. Allied's Am. Statement of Mat. Undisputed Facts, Nos. 1, 2 (undisputed). The Court notes the Seventh Circuit rule that efforts to pierce the corporate veil are presumptively governed by the law of the state of incorporation. See Stromberg Metal Works, Inc. v. Press Mech., Inc., 77 F.3d 928, 933 (7th Cir. 1996).

Allied has identified several factors for the Court to consider when determining whether to pierce the corporate veil between RSR and Quemetco, including that RSR owns all of Quemetco's capital stock and that Quemetco's officers and directors are also officers and directors of RSR. These facts alone do not lead to the imposition of derivative liability. See Best Foods, 524 U.S. at 62. Yet, there is more. According to Allied, the capitalization of Quemetco is inadequate, as evidenced by the fact that RSR borrowed $15 million to buy Quemetco and used Quemetco's guarantee to secure the loan.¹¹ Allied's Am. Statement of Mat. Facts, No. 19 (undisputed); Def.'s Ex. 4, Min. of the Spec. Mtg. of the Quemetco Bd. of Dirs., Oct. 25, 1972. Further, RSR allegedly "took over" the operation of a Quemetco smelter in New York and then transferred it to another RSR subsidiary. Allied's Am. Statement of Mat. Facts, Nos. 23, 24 (undisputed that smelter was transferred). There is no paperwork to document RSR's transfer of the New York smelter to another of its subsidiaries, and no evidence that any revenue flowed to Quemetco from the transaction. Def.'s Ex. 5, Myers Dep. at 272-75; Pls.' Ex. 1, Myers Dep. at 165, 273-75. Allied also points out that in the early 1970s, RSR's annual reports listed Quemetco as an "operating unit" of RSR's, and that Quemetco's listing in the Indianapolis 1975 and 1976 telephone books was as "RSR-Quemetco, Inc." See Def.'s Exs. 11, 13, 14, 15. RSR's 1972 Annual Report stated that the acquisition of Quemetco was a "key to RSR's growth," and that RSR immediately set out to "recast it into the RSR mold." Def.s' Ex. 11, at 6.

11 The total amount of money borrowed from Chemical Bank on Quemetco's guarantee was $17,500,000.00. Pls.' Ex. 11, Min of the Spec. Mtg. of Quemetco's Bd. of Dirs., Oct. 25, 1972. The Court notes that RSR subsequently obtained two lines of credit — one for $3,000,000.00 and one for $4,000,000.00 — using additional guarantees from Quemetco. Pls.' Exs. 12, 13, Min. of Spec. Mtg. of Quemetco's Bd. of Dirs., Nov. 17, 1972 (Ex. 12), May 7, 1973 (Ex. 13). Consequently, in just over six months of ownership of Quemetco, RSR added more than $24,000,000.00 in debt to its subsidiary's financial statements.

Shortly after RSR acquired Quemetco, Allied contends, its president Meyers fired Quemetco's comptroller. Def.'s Ex. 3, 6, List of Officers and Directors of RSR and Quemetco (Ex. 3), Quenell FTC Hrg. Trans. at 512-13 (Ex. 6); Pls.' Resp. to Allied's Am. Statement of Mat. Undisputed Facts, Fact 28 (disputed). At the time, Quenell was listed as the president and chief executive officer ("CEO") of Quemetco, but the firing was accomplished without his knowledge or consent. Def.'s Ex. 6, Quenell FTC Hrg. Trans. at 512; Def.'s Ex. 3 (showing Quenell as Director, President and Treasurer from Dec. 29, 1970 to Dec. 31, 1973). RSR does not deny that Meyers fired Quemetco's comptroller or that it was done without Quenell's involvement. Instead, RSR contends that Meyers discharged the comptroller in his capacity as "president of Quemetco." Pls.' Resp. to Allied's Am. Statement of Mat. Undisputed Facts, Fact 28. However, the evidence raises a genuine issue of material fact about who was the president and CEO of Quemetco at the time of the firing.¹²

12 Although not noted by Allied, the Court observes that further confusion about Meyers' role at Quemetco during those first six months is created by the fact that in one set of Special Meeting Minutes, Meyers is referred to as the "President of the Corporation," with the "corporation" defined as Quemetco, Inc., a Delaware corporation. Pls.' Ex. 11, Min. Oct. 25, 1972. In another set, the Minutes of the Special Meeting on November 17, 1972, Quenell is specifically referred to as the "President of Quemetco" in a resolution empowering him to endorse, for RSR's benefit, certain promissory notes related to the line of credit being acquired by RSR. Pls.' Ex. 12, Min. Nov. 17, 1972.

Another incident in which Meyers' role with Quemetco was unclear, is when RSR sent representatives to the Quemetco offices in Indianapolis and Wallkill, New York, and those representatives "removed all records and files, breaking into desks, taking out personal records, as well as company records, and hauling them off to Dallas. . . ." Def.'s Ex. 6, Quenell FTC Hrg. Trans. at 513; Def.'s Ex. 10, Meyers Dep. at 388-89, 394 (admitting to breaking open Quenell's desk in California office). Quenell, who was in Mexico at the time, reacted to these break-ins by sending his attorney to his office in California with instructions to remove all of his records from his desk, including personal and Quemetco records, as well as some St. Joe records. Def.'s Ex. 6, Quenell FTC Hrg. Trans. at 513. RSR does not deny the incident. It merely contends that it sent people to obtain important Quemetco corporate records, and to protect them from being destroyed or removed from Quemetco property without authorization. Pls.' Ex. 1, Myers Dep. at 150. Again, the issue of Meyers' authority to act when ordering the records retrieved is material and in dispute.

According to Allied, these factors show that RSR exercised such control over Quemetco that the two operated as a single enterprise. However, this argument does not take into account the alleged management services agreement between RSR and its subsidiary Quemetco, the existence of which Allied has not addressed. RSR contends that all of Meyers' actions after October 25, 1972, were taken as the president of Quemetco, and that any "management" of Quemetco's operations occurred as a result of the management services agreements between RSR and Quemetco. Instead of producing a copy of the actual agreement between Quemetco and RSR covering the period from October of 1972 to December of 1974, RSR merely offers the conclusory testimony of its general counsel that one existed.

As an example of the agreement it had with Quemetco, RSR produced a copy of a service agreement between itself and one of its other subsidiaries, Murph Metals. Def.'s Ex. 12. Upon review of that agreement, the Court notes three troubling facts that need further clarification. First, the agreement between Murph Metals and RSR states that

In consideration of the management and supervisory services and technical and other assistance to be furnished by RSR to [Murph] under [this agreement] . . . [Murph] shall pay RSR an amount equal to the portions of the salaries and wages paid by RSR to its personnel properly chargeable as direct costs of such services and assistance, plus out-of-pocket disbursements and expenses. . . .

RSR shall render to [Murph] monthly, or at such other regular intervals as may be mutually agreed upon, itemized statements of the amounts payable by [Murph] under [this agreement]. . . .

Def.'s Ex. 12, Management Agreement of Oct. 27, 1971. The troubling aspect is that no evidence has been produced that would document any of the payments from Quemetco to RSR for these management services, or would show the regular submission of billing statements to Quemetco.

Second, the agreement is signed by Howard M. Meyers for RSR, and by Howard M. Meyers for Murph Metals. Id. This fact casts doubt on RSR's contention that these management agreements were undertaken as a result of an "arms length transaction." See Pls.' Ex. 1, Myers Dep. at 161-62. If RSR had provided the Court with copies of any Quemetco board meetings at which a resolution was taken to enter these agreements to be managed by RSR, that doubt could be reduced. Myers specifically testified that the written management services agreements between Quemetco and RSR were still in existence, yet no such agreement has been produced. Id. at 162. Subsequent agreements between Quemetco and RSR have been included with Allied's exhibits. One, dated June 22, 1982, is signed by Howard M. Meyers for RSR and by Howard M. Meyers for Quemetco; and the other, dated June 1, 1988, is signed by Albert P. Lospinoso for RSR, and by Albert P. Lospinoso for Quemetco and six other subsidiaries. Def.'s Ex. 12.

Finally, the management agreements all provide that RSR will "have supervisory authority over, and be responsible for the efficient operation and management of [the subsidiary's] business, including . . . management and supervision of" the operation of the plants, of the personnel and industrial relations department "including . . . liaison with governmental environmental protection agencies." Def.'s Ex. 12, Murph Metals Agreement. RSR was also responsible for management of its subsidiary's sales, procurement of raw materials, operation of its distribution department, accounting procedures, and engineering and quality control. Id. In the 1982 management agreement, RSR is responsible for most of the same functions, but adds managing the "technical services department, including environmental and health and safety testing and compliance procedures." Id. 1982 Management Agreement; see also Pls.' Ex. 1, Myers Dep. at 179 (stating RSR's people had "a little bit of an oversight role" with respect to emissions and discharges). The extent of RSR's authority over the subsidiaries' operations authorized by these agreements seems to be of the type that might incur either direct or indirect CERCLA liability for RSR. At the very least, further testimony is required for the Court to be determine whether this conduct gives rise to the "critical question" of whether, "in degree and detail, actions directed to the facility by an agent of the parent alone are eccentric under accepted norms of parental oversight of a subsidiary's facility." Best Foods, 524 U.S. at 72.

Allied has pointed to enough evidence of a disregard of corporate formalities, extensive and pervasive control of the subsidiary by the parent, intermingling of assets, siphoning off of the subsidiary's assets, and the non-function of corporate officers and directors at Quemetco, to require RSR to "go beyond the pleadings" and set forth specific facts to show that a genuine issue exists. See Hong v. Children's Mem. Hosp., 993 F.2d 1257, 1261 (7th Cir. 1993), cert. denied, 511 U.S. 1005 (1994). This burden cannot be met with conclusory statements or speculation, see Weihaupt v. American Med. Ass'n, 874 F.2d 419, 428 (7th Cir. 1989), but only with appropriate citations to relevant admissible evidence. See Local Rule 56.1; Brasic v. Heinemann's Inc., Bakeries, 121 F.3d 281, 286 (7th Cir. 1997). Against Allied's evidence and argument, RSR has stacked up several pieces of evidence that create genuine issues of material fact about the relationship between the two corporations.

First, it is undisputed that RSR owns all of the capital stock of Quemetco and that Quemetco shares officers and directors with RSR. Citing Best Foods, RSR argues that these two factors do not create derivative liability as a matter of law, and that is correct. Second, RSR contends there are sharp disputes of the factual issues relating to the other listed factors. For instance, Allied alleges that RSR and Quemetco failed to observe corporate formalities, yet RSR's general counsel, Myers, testified that Quemetco and the other RSR subsidiaries had "a separate corporate existence, and they were separate corporations." Pls.' Ex. 1, Myers Dep. at 165-66. He emphasized that there was "a distinct effort . . . to make them separate companies." Id. at 166. With respect to RSR's role in relation to its subsidiaries, Myers acknowledged that RSR did not make any products, that it sold the products made by its subsidiaries, and that it sometimes got the income from the sales directly, rather than through its subsidiary. Id. at 183. RSR and its subsidiaries have had consolidated financial statements since 1972. Id. Despite the consolidated financials, Myers indicated that Quemetco had a separate bank account, to which RSR made regular advances. Id. at 183-84. Quemetco also handled its own payroll, according to Myers and managed its own labor relations. Id. at 184-85.

Myers also testified that the plant managers at RSR's subsidiaries were autonomous and responsible for operations at their plant. Id. at 187. Even though they reported to an RSR vice president, that RSR person was also a board member and executive vice president of Quemetco's. Id. at 187; Def.'s Ex. 3. In response to a question about whether the subsidiaries had any "power to override the Dallas office," Myers stated, "[t]hey did. They acted on their own on a number of occasions." Pls.' Ex. 1, Myers Dep. at 179. Finally, Myers emphasized that RSR and Quemetco kept separate board minutes. Pls.' Ex. 1, Myers Dep. at 98. Finally, Myers stated directly that the assets of the sale of the Avanti property went to Quemetco and that Quemetco was the owner of that property. Id. at 187. To some extent, Myers' testimony is vague, subject to generalizations, and somewhat ambiguous. It suggests a factual issue, however, and the source of evidence to prove the facts alleged, which suffices for summary judgment purposes.

RSR emphatically disputes Allied's allegations that RSR intermingled Quemetco's assets with its own and that it dominated Quemetco. According to RSR, Allied is putting a "spin" on the facts when it states that all of the record-keeping functions were transferred to RSR's headquarters in Dallas, and Dallas was responsible for determining major expenses of Quemetco and for all sales and purchasing functions. Those facts merely reflect the effect of the management services agreement, RSR argues, and that Meyers served as president of both Quemetco and RSR. Pls' Exs. 11, Minutes, Spec. Mtg. of Quemetco, Inc. Board of Directors, Oct. 25, 1972; 12, Minutes, Spec. Mtg. of Quemetco, Inc. Board of Directors, Nov. 17, 1972; 13, Minutes, Spec. Mtg. of Quemetco, Inc. Board of Directors, May 7, 1973. For the management services agreements, and Meyers' role at Quemetco, to diffuse the inference of excessive control that arises from the evidence of RSR's management of Quemetco's operations, however, RSR would need to show that such agreements are consistent with the normal control given by stock ownership to a stockholder. Best Foods, 524 U.S. at 62. The same type of proof is needed to dispel the inferences raised by the fact that RSR and Quemetco have had consolidated financial statements since 1972, and that Quemetco's bank account primarily received deposits in the form of "advances" from its parent company. See Def.'s Ex. 5(a), Myers Dep. at 183.

To further counter Allied's assault on its corporate immunity, RSR points to testimony by its general counsel that Quemetco had the power to override decisions from Dallas and that it did so "on a number of occasions." Pls.' Ex. 1, Myers Dep. at 179. To win this point, however, RSR must provide specific factual examples of independent decision-making by Quemetco, in opposition to its parent corporations' counsel or wishes. Myers also explained that the transfer of some management functions to RSR headquarters in Dallas was to "centralize accounting and keep expenses down." Pls.' Ex. 8, Myers 1999 Aff. ¶ 5. Proof of the effect of these transfers would be of assistance.

Finally, RSR argues that Allied "blatantly mischaracterizes" the evidence relating to the alleged raid of Quemetco offices and desks to obtain Quemetco records. See Pls.' Ex. 1, Myers Dep. at 150; Def.'s Ex. 10, Meyers Dep. at 394. With respect to this final point, RSR's president admitted that Quenell's desk was broken into, but RSR claims this was done after Quenell had his attorney start removing files from his office in California. Def.'s ex. 10, Meyers Dep. at 394. Quenell states it happened before his attorney became involved. This factual issue needs to be resolved by a jury. Another issue bearing on the significance of this incident is whether Quenell was still the president of Quemetco at the time, and in what capacity Meyers acted when ordering the alleged raid. The evidence of record could support finding either that Quenell was the president and was ignored by RSR when it took Quemetco's property, or that Meyers was the president and was authorized to take all of these actions.

Instead of allowing the Court to determine any of these facts on summary judgment, the evidence produced has revealed genuine issues of material fact that preclude a decision about piercing the corporate veil. If a finder of fact believes Allied's evidence, it would be reasonable to find that RSR exceeded the corporate norms for control and oversight of a subsidiary by its parent corporation. In that case, the Court would need to determine if that excessive control was exercised to accomplish a wrongful purpose. Allied suggests that RSR wants to maintain the corporate fiction only to preserve assets it has wrongfully drained from Quemetco, and that Quemetco will be unable to pay its share of response costs because RSR has "siphoned off the requisite assets" to do so. Mem. in Supp. of Allied's Mot. for P. Sum. J. at 27. This would constitute a wrongful purpose, because any party who benefits from the management of a contaminated site in a way that added to its contamination, should bear a portion of the cleanup costs. See Ganton Tech., 834 F. Supp. at 1022.

Moreover, Allied argues that "RSR is taking unconscionable advantage of the corporate form when it denies that it has succeeded to all of Quemetco's CERCLA liability . . . so that it may recover under CERCLA's joint and several liability cost recovery section 107." Id. at 28. In essence, Allied claims that RSR is trying to shield itself from CERCLA liability by misusing the corporate form. Finally, if RSR is allowed to so use the corporate form, it may result in the inequitable result that defendants who are found to be PRPs may have no opportunity to reduce their equitable share of response costs by seeking contribution from RSR for it and its subsidiary's shares. At trial, Allied must produce evidence more carefully focused on these points to demonstrate the need for piercing the corporate veil. Given that genuine issues of material fact prevent the Court from finding the facts as Allied has presented them, and for the reasons provided herein, the Court DENIES Allied's motion for summary judgment with respect to the issue of piercing the corporate veil between RSR and Quemetco.

2. Quemetco's Successor Liability

Should the evidence at trial prove the necessity of piercing the corporate veil, a further dispute exists as to the extent of liability that should be allocated to Quemetco and through it to RSR. Robert Quenell ("Quenell") founded Quemetco's predecessor, Western Lead Products Co. ("Western Lead"), in 1946 with money from a "GI loan," and began to manufacture powdered lead. Def.'s Ex. 6, Quenell FTC Hrg. Trans. at 496. The company slowly expanded into the lead oxide, zinc alloy, and secondary lead product markets, and by 1959 it built a new plant in the City of Industry, California. Id. at 497. In the next five years Western Lead established plants in Monterey (Mexico), Dallas, and Indianapolis, the latter involving a joint venture, between Western Lead and Globe Union, to establish a secondary lead smelter. Id.; Def.'s Am. Statement of Material Undisp. Facts Nos. 4, 5 (undisputed). The secondary smelter was operated as "Indiana Smelting," and by 1969, Western Lead had bought out its joint venture partner and was looking for opportunities to attract more capital to further expand its operations. Def.'s Ex. 6, Quenell FTC Hrg. Trans. at 497-99.

Its efforts were unsuccessful, and in 1970 Quenell sold the company to St. Joe. Id. at 499. By that time, Western Lead had changed its name to Quemetco, Inc., a California corporation ("Old Quemetco"). Def.'s Am. Statement of Material Undisp. Facts Nos. 8 (undisputed). St. Joe kept the name Quemetco and operated the company as a subsidiary until it was sold to RSR in 1972. Id. at 499, 503. According to Allied, the purchase agreement by which St. Joe acquired Old Quemetco, expressly stated that the acquisition company, Q Acquisition, a Delaware corporation, would assume the assets and liabilities of Old Quemetco, a California corporation. Def.'s Ex. 1, Agreement for Purchase and Sale By and Among Quemetco, Inc., St. Joe Minerals Corp. and Q Acquisition, dated Dec. 29, 1970, §§ 1.03, 7.03B. At the close of this transaction, "new" Quemetco, a Delaware corporation, was formed. Id. Art. I. Among the liabilities that the new Quemetco assumed from Old Quemetco, were any losses, costs, claims or demands "of any kind or character" arising out of the debts, obligations, agreements and liabilities of Old Quemetco, except any real properties not listed in Schedule 1. Id. § 7.03B. Schedule 1 of the purchase agreement specifically listed the property at 502 South Harris Street in Indianapolis (the Avanti Site). Id. Sched. 1, Pt. IV. This means that any liability related to that property was not excluded from new Quemetco's assumption of liabilities of Old Quemetco.

According to Allied, this purchase agreement demonstrates that all of the liabilities incurred by Old Quemetco in connection with the Avanti property passed on to New Quemetco in 1970, and subsequently to Quemetco, the subsidiary of RSR acquired in 1972. Because RSR purchased only the outstanding shares of Quemetco's capital stock from St. Joe, it did not expressly assume any liabilities of the company. Those liabilities would remain with Quemetco, as RSR's subsidiary. Thus, the only way that RSR could be responsible for any CERCLA liability incurred by Old Quemetco and passed on to new Quemetco, is if the Court finds it necessary to pierce the corporate veil for purposes of CERCLA. See Blumberg, ch. 6, p. 132 ("piercing the veil" is a legal conclusion stating the result "for the purpose at hand," and does not mean the same result would follow "in other areas of law involving different policies and objectives").

The crux of the dispute between the parties about whether Quemetco succeeded to any CERCLA liability based on Old Quemetco's operations at the Avanti Site between 1964 and 1970, is whether the mechanism used by St. Joe to acquire Old Quemetco shielded the new company from successor liability. In its brief in response to Allied's motion, RSR did not discuss the successor liability issue, except to call it irrelevant. Pls.'s Mem. of Law in Opp. to Def.'s Mot. for P. Sum. J. at 2, n. 3. Specifically, RSR asserts that Allied's exposition on successor liability "is entirely irrelevant to the issue upon which Allied moved — whether RSR is a PRP and whether such a determination would defeat RSR's § 107 claim against Allied." Id. RSR then states that Allied is incorrect when it claims Old Quemetco's liability passed on to new Quemetco, and refers the Court to the pertinent portions of its response to St. Joe's motion for summary judgment. See Pls.' Mem. in Opp. to St. Joe's Mot. for Sum. J., filed Dec. 16, 1998. RSR explains that in its memorandum, it tried to "parse the extraneous matters Allied raises." Id.

Upon reviewing RSR's response to the St. Joe motion for summary judgment, the Court notes that RSR does not argue that no successor liability passed from Old Quemetco to new Quemetco. Instead, its argument is that such liability should be imposed on St. Joe because it exercised excessive control and domination of its "paper subsidiary," and the corporate veil between the two should be pierced. For example, RSR contends that the 1970 purchase agreement shows that "Q Acquisition was a sham corporation and, thus, that St. Joe, in effect and intent, acquired Old Quemetco's assets, liabilities, and sales, and then spun them off as a wholly-owned subsidiary, New Quemetco." Pls.' Mem. in Opp. to St. Joe's Mot. for Sum. J., at 6.

For purposes of Allied's motion for summary judgment, RSR's response to the St. Joe motion does not address the issue raised. Rather than analyze whether successor liability followed the transaction, RSR focuses on who should bear that liability. It would be inconsistent for RSR to argue that new Quemetco succeeded to Old Quemetco's liability for purposes of imposing it on St. Joe, and denying the existence of such liability for purposes of Allied's motion. The Court will assume RSR did not intend such inconsistency, but expects that at trial RSR will take a position and defend it with respect to the issue. For purposes of Allied's pending motion, however, the Court agrees that whether Quemetco has succeeded to CERCLA liability from Old Quemetco is not relevant. This motion is not asking the Court to determine the extent of liability that should be imposed on either Quemetco or RSR. If the evidence at trial supports piercing the veil between RSR and Quemetco, the issue of successor liability will become relevant to RSR's liability in the damages phase. Otherwise, it is only relevant to a determination of Quemetco's equitable share of response costs. Thus, to the extent that Allied's motion for partial summary judgment is directed at the issue of Quemetco's successor liability, it is premature and is DENIED.

D. Relevant Evidence Needed at Trial

In order to assist the parties with preparing for the liability phase of the trial of this matter in September, the Court will briefly summarize the type of evidence that must be presented, in addition to evidence relating to any factual disputes already identified. RSR must produce evidence to defeat Beil's testimony about witnessing RSR employees cleaning up the Avanti site in the early 1970s, other than its own conclusory allegation that it was operating under a management contract with Quemetco. It must also show why, under CERCLA, such a contract should shield it from CERCLA liability for its own actions at the Site. To fully succeed in proving the statutory defense that unrelated third parties were solely responsible for the contamination, RSR must "establish by a preponderance of the evidence that (a) [it] exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance . . . and (b) [it] took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts. . . ." 42 U.S.C. § 9607(b). For example, if RSR hired an independent contractor to clean up the Avanti site, and provided that contractor with no instructions about the nature of the substances being moved, it would not be able to use this defense.

RSR has provided almost no evidence of a contract or agreement between itself and Quemetco for the provision of management services, much less for the clean up of the site in the 1970s. Some documentation of that agreement, or specific testimony about that agreement should be presented. Also, there is no evidence that it was an "arms length transaction." There is only the legal conclusion of RSR's general counsel that it was. It would be useful to have testimony about how those agreements were negotiated, how they were entered, and how, when and what amount of payments were made under the contracts. Proof of those payments would be helpful to establishing that the contracts existed and that the parties properly observed corporate formalities.

Additionally, RSR needs to supply evidence to show that the separate corporate identities of RSR and Quemetco were respected at all times, rather than merely offering its general counsel's allegation that they were. Allied has raised serious questions about the management of Quemetco's operations by RSR, including how much did RSR control Quemetco's environmental compliance, its labor relations, its accounting functions, and its sales. It has identified statements in RSR's annual reports that suggest it treated Quemetco as a division rather than as a subsidiary, and it has cast doubt on how Quemetco was capitalized. RSR must produce some evidence to show that its conduct was consistent with the accepted norms for the relationship between a parent and its subsidiary. Finally, RSR must present evidence that would document the treatment of Quemetco's assets as those of a separate corporation, and show that corporate formalities were observed at all times in handling those assets. The absence of any documentation of these transactions strongly suggests that RSR disregarded the corporate form in its dealings with Quemetco.

A few specific facts must be established to assist the finder of fact in determining the extent of CERCLA liability to impose on someone for Quemetco's and RSR's activities at the Site between 1972 and 1974. Specifically, it is not clear when the smelter on the Site was actually shut down, or when deliveries of lead scrap to the Site ended. Also absent is any definitive time frame for RSR's cleanup operations prior to the sale of the Avanti property. Although there is evidence that powdered lead fell to the ground during those cleanup operations, there is no evidence about the effects of the disbursement of powdered lead. Nor is there any evidence about the standards of the day for cleaning up a toxic substance that is more volatile when dry. Allied should provide evidence that RSR's activities on the site caused measurable further contamination.

III. CONCLUSION

The Court has considered Allied's motion for partial summary judgment and has found that it should be GRANTED in part with respect to whether RSR may continue to maintain a § 107 cost recovery action under CERCLA. It may not, and count 2 of the complaint is DISMISSED, with prejudice, as it relates to all defendants in this action. This decision rests on the Court's finding that RSR is not an innocent party for purposes of CERCLA liability, and it is therefore not entitled to recover all of its response costs.

Allied's motion also sought the Court's decision about whether to pierce the corporate veil between RSR and its wholly-owned subsidiary, Quemetco, for purposes of CERCLA liability. The Court has identified several genuine issues of material fact pertinent to that decision, and has DENIED, in part, Allied's motion for partial summary judgment on this issue. As a corollary to its claim that the corporate veil should be pierced, Allied also argued that Quemetco should be subject to successor liability for the acts of its predecessor, Old Quemetco, particularly the operation of a secondary lead smelter from 1964 to 1970. The Court found that this issue was irrelevant to the primary thrust of Allied's motion, and that it was premature, and has declined to decide it at this point in the litigation.