USA v. Sterling Centrecorp Inc. et al

Filing 153

MEMORANDUM and ORDER signed by Judge Morrison C. England, Jr., on 12/8/11: ORDERING that plaintiffs' 114 Motion for Partial Summary Judgment as to the CERCLA liability of defendant Stephen P. Elder is GRANTED. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,
and CALIFORNIA DEPARTMENT
OF TOXIC SUBSTANCES CONTROL,

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No. 2:08-cv–02556-MCE-JFM

Plaintiffs,
v.

MEMORANDUM AND ORDER

STERLING CENTRECORP INC.,
STEPHEN P. ELDER and ELDER
DEVELOPMENT, INC.,
Defendants.

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Both the United States and the California Department of

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Toxic Substances (hereinafter collectively referred to as

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“Plaintiffs” or “government” unless otherwise specified) have

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designated the former Lava Cap Mine, located in Nevada County,

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California, as a Superfund site polluted by elevated levels of

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arsenic that were disseminated through tailings and waste

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materials generated by mine operations.

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undertaken cleanup efforts designed to remediate that arsenic

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contamination.
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Plaintiffs have

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The present action seeks contribution for the costs of those

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activities both from former owners of the site and operators

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responsible for its mining.

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Plaintiffs’ Motion for partial summary judgment as to the CERCLA

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liability of Defendant Stephen P. Elder.

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the prerequisites for the recovery of response costs under CERCLA

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as against Defendant Elder, and in particular Elder’s status as a

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“covered person” under the terms of the statute, have been

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established as a matter of law.

Presently before the Court is

Plaintiffs argue that

Plaintiffs further seek a

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determination rejecting any affirmative defenses asserted on

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Elder’s behalf, as well as a declaratory judgment from the Court

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with respect to Elder’s liability for future cleanup costs.

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set forth below, that motion will be granted.1

As

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BACKGROUND

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Mining operations at the Lava Cap Mine commenced in 1861.

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Between 1934 and 1943, mining was conducted at the site by the

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Lava Cap Gold Mining Corporation (“LCGMC”).

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period, the Lava Cap Mine was one of the leading gold and silver

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producers in California, and among the top twenty-five gold

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producers in the nation.

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Fact (“SUF”) No. 4.

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During that time

Plaintiffs’ Statement of Undisputed

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Because oral argument was not of material assistance, the
Court ordered this matter submitted on the briefs. E.D. Cal.
Local Rule 230(h).
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In 1938, LCGMC built a tailings dam on Greenhorn Creek (now known

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as Lost Lake Dam) to stop mine tailings from polluting the waters

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of the Bear River.

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within the mine-generated tailings contained elevated

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concentrations of naturally occurring arsenic, a hazardous

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substance pursuant to the Comprehensive Environmental Response,

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Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq.

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(“CERCLA”).

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SUF Nos. 9, 10.

Waste products included

SUF No. 80-81.

No active mining occurred at Lava Cap after 1943, when its

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operations were shut down by the United States government during

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the Second World War.

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sell, lease, or exchange all the property and assets of the

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company.

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transaction between LCGMC and New Goldvue, Mines, Ltd, a Canadian

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company developing a gold mine in Quebec and looking to upgrade

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its equipment.

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executed between the two companies.

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New Goldvue, having “been advised as to the . . . assets and

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liabilities of [LCGMC], agreed to purchase “all the assets of

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[LCGMC], subject to the liabilities of [LCGMC], which liabilities

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[New Goldvue] agreed to assume and cause to be paid promptly.”

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SUF No. 19.

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assets would be transferred to Keystone Copper Corporation

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(“Keystone”), a wholly-owned subsidiary of LCGMC, before Keystone

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was itself conveyed to New Goldvue.

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SUF No. 12.

In 1950, LCGMC decided to

In 1952, LCGMC’s directors recommended a sales

A purchase and sale agreement was subsequently
Pursuant to that agreement,

The sales agreement further specified that LCGMC’s

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Keystone, which had previously operated a copper mine while a

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LCGMC subsidiary, thus became a wholly-owned subsidiary of New

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Goldvue.2

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See SUF No. 33.

The sales transaction between New Goldvue and LCGMC was

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financed by a transfer of New Goldvue stock.

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the LCGMC purchase was consummated, New Goldvue expanded its

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board from five to seven and appointed two individuals previously

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associated with LCGMC to the New Goldvue Board of Directors.

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SUF No. 20.

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LCGMC was subsequently dissolved.

SUF No. 19. After

See

SUF No. 35.

New Goldvue, which was originally incorporated in Ontario,

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Canada as Goldvue Mines Ltd in 1944, changed its name several

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times over the years before becoming Sterling in 2001.3

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1985, the company now known as Sterling was primarily a natural

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resources company with investments in mining and oil and gas

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production.

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Lava Cap Mine for some 37 years (aside from a brief, ultimately

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unsuccessful attempt to transfer ownership to another company).

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No mining occurred during that period.

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Until

Sterling, through its subsidiary Keystone, owned the

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Keystone was a California corporation and remained a
Sterling subsidiary until it became inactive after selling the
Lava Cap Mine in 1989 (Keystone was ultimately suspended by the
California Secretary of State in 1991).
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New Goldvue changed its names several times over the years
before becoming Sterling Centrecorp Inc. in 2001. New Goldvue
and the subsequent names by which the corporation was known will
be simply referred to as “Sterling” throughout the remainder of
this Memorandum and Order unless otherwise noted.
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In 1979, a partial log dam collapse led to a release of mine

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tailings which, in turn, caused downstream neighbors to complain

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about pollution from the resulting silt.

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complaints, the California Regional Water Quality Control Board

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issued a Cleanup and Abatement Order to Keystone on October 25,

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1979.

In response to those

See SUF No. 82.

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Following an ultimately unsuccessful attempt to sell the

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Lava Cap Mine to another company, Keystone sold, in 1989, the

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property to Banner Mountain Properties, Ltd., an entity

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controlled by Defendant Stephen Elder, who currently owns four of

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the seven parcels comprising the former mine site.

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120-23.

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business interest, Defendant Elder Development, Inc.

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an engineering firm prepare a Preacquisition Site Assessment

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before his purchase of the mine site that revealed hazardous

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substance contamination, primarily arsenic.

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SUF Nos. 77,

The remaining three parcels are owned by another Elder
Elder had

SUF No. 127.

The United States Environmental Protection Agency (“EPA”)

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completed a Preliminary Assessment on the mine site in April of

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1993, after Banner Mountain’s purchase of the mine site.

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86.

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of both arsenic and lead.

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See SUF

Sediment and soil samples revealed elevated concentrations

Heavy rainstorms in 1993 washed mine wastes downstream into

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Little Clipper Creek and a former mine tailings pond now known as

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Lost Lake.

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1997 and the site was officially designed a Superfund site in

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January of 1999.

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removal and relocation of tailings, reinforcement of the log dam,

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and diversion of Little Clipper Creek around the tailings pile.

SUF No. 88.

The EPA began cleanup operations in late

SUF Nos. 89-90.

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Those operations included the

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Id.

Future remedial work contemplated by the EPA for the site

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will include actions to address the polluted groundwater.

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EPA estimates that it spent at least $20 million in response

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costs at the site as of April 30, 2008.

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of California Department of Toxic Substances alleges that its own

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response costs as of December 2010 are another $1,000,000.

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is no dispute that the release of hazardous substances at the

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mine site is responsible for the response costs that have been

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incurred by Plaintiffs.

SUF No. 100.

The

The State

There

See SUF No. 102.

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As indicated above, Plaintiffs now seek partial summary

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judgment with respect to Defendant Stephen P. Elder’s liability.4

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Aside from responding to the Statement of Undisputed Facts filed

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by Plaintiffs with respect to all four of their concurrently

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filed summary judgment requests, Defendant Elder has otherwise

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filed no opposition to the instant motion.

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STANDARD

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The Federal Rules of Civil Procedure provide for summary

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judgment when “the pleadings, depositions, answers to

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interrogatories, and admissions on file, together with

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affidavits, if any, show that there is no genuine issue as to any

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material fact and that the moving party is entitled to a judgment

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as a matter of law.”

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Catrett, 477 U.S. 317, 322 (1986).

Fed. R. Civ. P. 56(c); Celotex Corp. v.

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A default judgment against Defendant Elder’s company,
Defendant Elder Development, Inc., has already been granted by
Order filed September 20, 2011 (ECF No. 149).
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One of the principal purposes of Rule 56 is to dispose of

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factually unsupported claims or defenses.

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Catrett, 477 U.S. at 325.

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Celotex Corp. v.

Rule 56 also allows a court to grant summary adjudication on

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part of a claim or defense.

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may move for summary judgment, identifying . . . the part of each

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claim or defense . . . on which summary judgment is sought.”);

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see, also, Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 378-79

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(C.D. Cal. 1995); France Stone Co., Inc. v. Charter Twp. of

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See Fed. R. Civ. P. 56(a) (“A party

Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).

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The standard that applies to a motion for summary

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adjudication is the same as that which applies to a motion for

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summary judgment.

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ChemTronics, 16 F. Supp. 2d. 1192, 1200 (S.D. Cal. 1998).

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See Fed. R. Civ. P. 56(a), 56(c); Mora v.

Under summary judgment practice, the moving party
always bears the initial responsibility of informing
the district court of the basis for its motion, and
identifying those portions of ‘the pleadings,
depositions, answers to interrogatories, and admissions
on file together with the affidavits, if any,’ which it
believes demonstrate the absence of a genuine issue of
material fact.

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Celotex Corp., 477 U.S. at 323 (quoting Fed. R. Civ. P. 56(c)).

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If the moving party meets its initial responsibility, the

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burden then shifts to the opposing party to establish that a

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genuine issue as to any material fact actually does exist.

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

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585-87 (1986); First Nat’l Bank v. Cities Serv. Co., 391 U.S.

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253, 288-89 (1968).

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In attempting to establish the existence of this factual

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dispute, the opposing party must tender evidence of specific

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facts in the form of affidavits, and/or admissible discovery

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material, in support of its contention that the dispute exists.

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Fed. R. Civ. P. 56(e).

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the fact in contention is material, i.e., a fact that might

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affect the outcome of the suit under the governing law, and that

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the dispute is genuine, i.e., the evidence is such that a

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reasonable jury could return a verdict for the nonmoving party.

The opposing party must demonstrate that

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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52

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(1986); Owens v. Local No. 169, Assoc. of W. Pulp and Paper

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Workers, 971 F.2d 347, 355 (9th Cir. 1987).

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“before the evidence is left to the jury, there is a preliminary

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question for the judge, not whether there is literally no

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evidence, but whether there is any upon which a jury could

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properly proceed to find a verdict for the party producing it,

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upon whom the onus of proof is imposed.”

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251 (quoting Improvement Co. v. Munson, 81 U.S. 442, 448 (1871)).

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As the Supreme Court explained, “[w]hen the moving party has

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carried its burden under Rule 56(c), its opponent must do more

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than simply show that there is some metaphysical doubt as to the

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material facts . . . . Where the record taken as a whole could

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not lead a rational trier of fact to find for the nonmoving

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party, there is no ‘genuine issue for trial.’”

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475 U.S. at 586-87.

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Stated another way,

Anderson, 477 U.S. at

Matsushita,

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In resolving a summary judgment motion, the evidence of the

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opposing party is to be believed, and all reasonable inferences

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that may be drawn from the facts placed before the court must be

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drawn in favor of the opposing party.

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Nevertheless, inferences are not drawn out of the air, and it is

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the opposing party’s obligation to produce a factual predicate

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from which the inference may be drawn.

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Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),

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aff’d, 810 F.2d 898 (9th Cir. 1987).

Anderson, 477 U.S. at 255.

Richards v. Nielsen

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ANALYSIS

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In order to establish Defendants’ liability for response

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costs under Section 107(a) of CERCLA, 42 U.S.C. § 9607(a),

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Plaintiffs must make a four-part showing.

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prove that the Lava Cap Mine Superfund Site is a “facility” as

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defined by CERCLA.

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“threatened release” of a hazardous substance from the facility

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has occurred.

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the release or threatened release caused Plaintiffs to incur

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response costs.

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Defendants must fall within one of the four classes of covered

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persons described in Section 9607(a).

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700, 703-04 (9th Cir. 1993); 3550 Stevens Creek Assocs. v.

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Barclays Bank of California, 915 F.2d 1355, 1358 (9th Cir. 1990).

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First, Plaintiffs must

Second, they must show that a “release” or

Third, Plaintiffs are required to establish that

Fourth and finally, in order to incur liability

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Cose v. Getty Oil, 4 F.3d

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If Plaintiffs are successful in establishing these four elements

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of liability, they are entitled to summary judgment unless

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Defendants are able to invoke one of the limited statutorily-

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permitted defenses to CERCLA liability.

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summary judgment as to CERCLA liability provided the requisite

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showing has been made.

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Co., 841 F. Supp. 962, 968 (C.D. Cal. 1993).

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Courts readily grant

See, e.g., United States v. Shell Oil

In granting Plaintiffs’ concurrently filed Motion for
Partial Summary Judgment as to the first three of the above-

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enumerated four requirements for imposition of CERCLA liability,

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this Court has already found that Plaintiffs have established

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that a “release” or “threatened release” of a “hazardous

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substance” occurred from a “facility” as that term is defined

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under CERCLA, and that Plaintiffs incurred response costs as a

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result thereof.

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Plaintiffs now seek to establish by way of this motion that

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Defendant Elder qualifies as a “covered person” as that term is

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defined in the statute.

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that none of the statutorily-prescribed defenses to CERCLA

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liability are available to Defendant Elder, and that he is

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consequently liable for both present and future response costs.

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Plaintiffs also ask this Court to find

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It is undisputed that Elder is a current owner of four of

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the seven parcels that incorporate the former Lava Cap mine site.

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As such a current owner, Elder qualifies as a “covered person”

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for purposes of CERCLA liability under Section 107(a), 42 U.S.C.

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§ 9607(a)(1) (“covered person” includes the owner and operator of

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a “facility”); see also California Dept. Of Toxic Substances

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Control v. Hearthside Residential Corp., 613 F.3d 910, 912-13

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(9th Cir. 2010) (“covered person” refers “to ‘current’ owners or

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operators”).

Consequently, because Plaintiffs have established

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that all four prerequisites of CERCLA liability apply to

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Defendant Elder, he is liable for all costs of removal or

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remediation incurred by the Plaintiffs.

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613 F.3d at 912-916.

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Hearthside Residential,

Importantly, recoverable expenses include both existing

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costs and costs to be borne in the future.

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section 107 of CERCLA, in addition to entering judgment on

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liability for costs already incurred, “the court shall enter a

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declaratory judgment on liability for response costs or damages

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that will be binding on any subsequent action or actions to

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recover further response costs or damages.

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§ 9613(g)(2).

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In any action under

42 U.S.C.

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Consequently, Plaintiffs have not only established all four

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prerequisites for Elder’s liability under CERCLA, but further

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have shown their entitlement to declaratory judgment for

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liability purposes with respect to both present and prospective

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cleanup costs.5

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Given Plaintiffs’ showing, Defendant Elder can avoid

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liability only if he can establish that one or more of the four

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affirmative defenses to liability recognized under CERCLA

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Section 107(g) existed.

Those defenses include 1) an act of God;

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2) an act of war; 3) acts or omissions of certain third parties

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not in privity with the defendant; or 4) any combination of the

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above three defenses.

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only cognizable defenses to liability under Section 107(g).

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California ex rel. Calif. Dept. Of Toxic Substances Control v.

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Neville Chem. Co., 358 F.3d 661, 672 (9th Cir. 2004).

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even these four available defenses should be narrowly construed

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since CERCLA must be read “consistent with [its] broad remedial

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purpose.

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792 F.2d 887, 892 (9th Cir. 1986).

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42 U.S.C. § 9607(b)(1)-(4).

These are the
See

Moreover,

See, e.g., Wickland Oil Terminals v. ASARCO, Inc.,

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That showing is for liability purposes only. Having
established liability, Plaintiffs must show their entitlement to
actual damages in the second stage of these proceedings, as set
forth in the Court’s Bifurcation Order of March 25, 2009. (ECF
No. 26).
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Examination of Elder’s Answer (ECF No. 38) indicates that

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Elder pled four affirmative defenses.

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defenses asserted, which allege issues of estoppel and offset,

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respectively, are not included within the available list of

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CERCLA defenses outlined above, they need not be considered in

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assessing Elder’s liability.

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however, Elder does allege that “the harm alleged was caused by

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an act of God.”

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Because the first two

As a Third Affirmative Defense,

Def. Elder’s Answer, ECF No. 38, 9:1-2.

CERCLA defines an act of God to mean “an unanticipated grave

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natural disaster or other natural phenomena of an exceptional,

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inevitable, and irresistible character, the effects of which

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could not have been prevented or avoided by the exercise of due

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care or foresight.”

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even arguably may fall within this definition is the partial

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collapse of the original log dam at the site in January of 1997,

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during a winter storm.

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10,000 cubic yards of tailings into Little Clipper Creek.

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Elder does not dispute this characterization of what happened,

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but indicates only in his response to Plaintiffs’ Statement of

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Undisputed Facts that the storm was a severe one, and one of the

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worst to affect the region in recent times.

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Response to Pls.’ SUF No. 87.

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42 U.S.C. § 9601(1).

SUF No. 87.

The only event that

That collapse released over
Id.

Def. Elder’s

That distinction has already been rejected.

In United

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States v. Stringfellow, 661 F. Supp. 1053, 1059 (C.D. Cal. 1987),

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the Defendants in a CERCLA suit involving toxic waste raised a

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similar act of God defense based on heavy rainfall.

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Id. at 1061.

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The Central District repudiated that defense, stating that “rains

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were not the kind of ‘exceptional natural phenomena’ to which the

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narrow act of God defense of section 107(b)(1) applies.”

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the court explained, “rains were foreseeable based on normal

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climatic conditions and any harm caused by the rain could have

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been prevented through design of proper drainage channels.”

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Even excessive rainfall has been deemed insufficient to establish

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the “exceptional, inevitable, and irresistible” nature of a

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viable act of God defense.

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Id.

As

Id.

United States v. Atlantic Richfield,

Co., 1996 U.S. Dist. LEXIS 22885 at *15 (D. Mont. 1986).

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Moreover, even Elder concedes in the counterclaim appended

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to his answer that the “log dam . . . was in a precarious

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condition and likely to fail.”

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11:7-8.

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collapse was so utterly unforeseeable to qualify for treatment as

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an act of God.

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law to Elder under the circumstances of this case.

Elder’s Answer, ECF No. 38,

Elder is therefore hard pressed to argue that the

That CERCLA defense is unavailable as a matter of

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Elder’s fourth and final affirmative defense alleges the

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statutorily-available CERCLA defense absolving a defendant of

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liability if the release in question was caused by “an act or

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omission of a third party” not in privity with the defendant.

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42 U.S.C. § 9607(b)(3).

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however, Elder must demonstrate that a “totally unrelated third

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party is the sole cause of the release.

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661 F. Supp. at 1061.

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care with respect to the hazardous substance, and that he took

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precautions against foreseeable acts or omissions of the third

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party.

To prevail in asserting this defense,

Stringfellow,

He must also show that he exercised due

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The third party defense is unavailable because, as set forth

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above, Elder had a Preacquisition Site Assessment prepared before

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his purchase of the mine site that revealed hazardous substance

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contamination, primarily arsenic.

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actual knowledge of contamination at the time of purchase, like

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Elder, cannot assert the defense.

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Int’l, Inc., 542 F. Supp. 2d 1188, 1201 (E.D. Cal. 2008).

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further undisputed that releases continued after Elder assumed

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ownership of the Lava Cap site, including the aforementioned

SUF No. 127.

A landowner with

United States v. Honeywell
It is

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partial dam collapse in 1997.

Under those circumstances Elder

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simply cannot allege that a third party was the sole cause of

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arsenic releases at the site, which he must do in order to avail

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himself of the third party affirmative defense.

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CONCLUSION

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Plaintiffs’ Motion for Partial Summary Judgment as to the

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CERCLA liability of Defendant Stephen P. Elder (ECF No. 114) is

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GRANTED.

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summary adjudication as to all four components of CERCLA

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liability, including the particular focus of this summary

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adjudication request –– Elder’s status as a “covered person”

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under the statute.

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Plaintiffs have demonstrated their entitlement to

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Because Plaintiffs have also established that no statutorily

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authorized affirmative defenses to CERCLA liability are available

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under the circumstances of this case, Plaintiffs are entitled to

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a declaratory judgment holding Defendant Elder liable under

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Section 107(a) for all costs of removal or remediation incurred

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by Plaintiffs, including all appropriate further response costs

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under Section 113(g)(2) of CERCLA, 42 U.S.C. § 9613(g)(2).

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amount to be recovered will be determined in the damages phase of

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this litigation now that Defendant Elder’s liability for cleanup

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costs has been established.

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IT IS SO ORDERED.

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Dated: December 8, 2011

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_____________________________
MORRISON C. ENGLAND, JR.
UNITED STATES DISTRICT JUDGE

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The