Ford Motor Company et al v. Michigan Consolidated Gas Company

Filing 69

OPINION AND ORDER granting 58 Defendant's Motion for Reconsideration and for leave to file counterclaim; granting 61 Defendant's Motion for Leave to File Third Party Complaint and setting deadline to file pleadings. Signed by District Judge Robert H. Cleland. (LWag)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

FORD MOTOR COMPANY, et al.,
Plaintiffs,
v.

Case No. 08-CV-13503-DT

MICHIGAN CONSOLIDATED GAS COMPANY,
Defendant.
/
OPINION AND ORDER GRANTING DEFENDANT’S “MOTION FOR
RECONSIDERATION AND FOR LEAVE TO AMEND COUNTERCLAIM,” GRANTING
DEFENDANT’S “MOTION FOR LEAVE TO FILE THIRD-PARTY COMPLAINT,”
AND SETTING DEADLINE TO FILE PLEADINGS
Before the court is a “Motion for Reconsideration and for Leave to Amend
Counterclaim” filed by Defendant Michigan Consolidated Gas Company (“MichCon”).
MichCon has also filed a “Motion for Leave to File Third-Party Complaint.” The motions
are opposed by Plaintiffs Ford Motor Company (“Ford”) and Severstal North American,
Inc. (“Severstal”). No hearing is required on the motions. See E.D. Mich. LR 7.1(f)(1)
& (2). For the reasons stated below, the court will grant the motions.
I. BACKGROUND
Plaintiffs Ford and Severstal filed this action against MichCon on August 13,
2008, seeking recovery of costs that Plaintiffs have incurred and will continue to incur in
connection with environmental impacts allegedly caused by MichCon and its
predecessors at a manufactured gas plant (“MGP”) on the west side of the Rouge River
in the City of Dearborn, Michigan. The property at issue in this litigation is referred to by
the parties as the Schaefer Road Area Property (“SRA Property”).

The initial complaint against MichCon asserted seven counts, but Plaintiffs
subsequently filed an amended complaint asserting only five counts: Count I, entitled
“Cost Recovery Pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. § 9607” (“CERCLA”); Count II, entitled
“Contribution Pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. § 9613”; Count III, entitled “Cost Recovery Pursuant to the
Michigan Natural Resources and Environmental Protection Act” (“NREPA”); Count IV,
“Contribution under Michigan’s [NREPA];” and Count V, entitled “Common Law
Indemnification.” On MichCon’s motion, the court has dismissed Counts II and V.
On October 30, 2009, MichCon filed its counterclaim, asserting four counts
against Ford and Severstal: two counts for contribution under CERCLA (Count I) and
Michigan’s NREPA (Count III) and two counts for cost recovery under CERLCA (Count
II) and NREPA (Count IV). Plaintiffs filed a partial motion to dismiss on November 25,
2009, seeking dismissal of the cost recovery claims. Shortly after the motion to dismiss
was filed, the parties voluntarily agreed to stay the case in order to pursue settlement
negotiations. After negotiations concluded, unsuccessfully, the motion was fully briefed
and oral argument was held on August 26, 2010. The court granted the motion on
August 27, 2010, and dismissed MichCon’s Count II and Count IV.
MichCon timely filed a motion for reconsideration and for leave to amend the
counterclaim, in which MichCon seeks to file an amended counterclaim addressing the
deficiencies noted in the court’s previous order. MichCon has also moved for leave to
file a Third Party Complaint against the United States of America, asserting claims for
contribution and for cost recovery under CERCLA.

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II. STANDARD
To prevail on a motion for reconsideration, Plaintiff “must not only demonstrate a
palpable defect by which the court and the parties . . . have been misled but also show
that correcting the defect will result in a different disposition of the case.” E.D. Mich. LR
7.1(h)(3).
The decision whether to grant leave to amend the pleadings is governed by
Federal Rule of Civil Procedure 15. Rule 15 provides that, after a responsive pleading
has been filed, “a party may amend its pleading only with the opposing party’s written
consent or the court’s leave. The court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2). “In the decision whether to permit an amendment,
some of the factors which may be considered by the trial court are ‘undue delay in filing,
lack of notice to the opposing party, bad faith by the moving party, repeated failure to
cure deficiencies by previous amendments, undue prejudice to the opposing party, and
futility of amendment.’” General Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1130 (6th
Cir. 1990) (citing Hageman v. Signal L.P. Gas, Inc., 486 F.2d 479, 484 (6th Cir. 1973)).
Plaintiffs assert that the court should deny MichCon’s motion to amend because
the proposed claims are futile. The court may indeed deny a motion to amend
pleadings if the proposed claims would be futile. Blakely v. United States, 276 F.3d
853, 874 (6th Cir. 2002). Claims are futile if they could not survive a motion to dismiss
under Rule 12(b)(6) of the Federal Rules of Civil Procedure. When ruling on a motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must construe
the complaint in a light most favorable to the plaintiff and accept all the factual
allegations as true. Evans-Marshall v. Bd. of Educ., 428 F.3d 223, 228 (6th Cir. 2005);

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Rossborough Mfg. Co. v. Trimble, 301 F.3d 482, 489 (6th Cir. 2002). In doing so, Athe
court must draw all reasonable inferences in favor of the plaintiff.@ Directv, Inc. v.
Treesh, 487 F.3d 471, 476 (6th Cir. 2007). Although a heightened fact pleading of
specifics is not required, “[t]o survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on
its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
Though decidedly generous, this standard of review does require more than the
bare assertion of legal conclusions.
[A] plaintiff’s obligation to provide the “grounds” of his “entitle[ment] to
relief” requires more than labels and conclusions, and a formulaic
recitation of a cause of action’s elements will not do. Factual allegations
must be enough to raise a right to relief above the speculative level on the
assumption that all the complaint’s allegations are true.
Twombly, 550 U.S. at 555 (citing Fed. R. Civ. P. 8(a)). Further, the complaint must
“give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which
it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957) abrogated on other grounds by
Twombly, 550 U.S. 544. In application, a “complaint must contain either direct or
inferential allegations respecting all material elements to sustain a recovery under some
viable legal theory.” Eidson v. State of Tenn. Dep’t of Children’s Servs., 510 F.3d 631,
634 (6th Cir. 2007) (citation omitted). Therefore, “to survive a motion to dismiss, the
plaintiff must allege facts that, if accepted as true, are sufficient to raise a right to relief
above the speculative level and to state a claim to relief that is plausible on its face.”
Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (citations and internal
quotation omitted). Despite these requirements, a court cannot grant a motion to

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dismiss under Rule 12(b)(6) based upon its disbelief of a complaint’s well-pled factual
allegations. Twombly, 550 U.S. at 556.
III. DISCUSSION
A. Reconsideration
In the August 27, 2010, order, the court dismissed MichCon’s Count II and Count
IV, but did not specifically state whether the dismissal was “with prejudice.” MichCon
now asks for reconsideration of that dismissal, but only insofar as the order dismissed
the counts “with prejudice.” The court now clarifies that the dismissal of both counts,
based on the failure to plead the counts with requisite specificity, was without prejudice.
The Sixth Circuit has stated that “where a more carefully drafted complaint might state a
claim, a plaintiff must be given at least one chance to amend the complaint before the
district court dismisses the action with prejudice.” E.E.O.C. v. Ohio Edison Co., 7 F.3d
541, 546 (6th Cir. 1993) (quoting Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir. 1991));
see also U.S. ex rel. Bledsoe v. Community Health Systems, Inc., 342 F.3d 634, 644
(6th Cir. 2003). As will be discussed below, a more carefully pleaded counterclaim
could cure the defects addressed in the court’s August 26, 2010 order. Accordingly, to
the extent that the court’s previous order can be read as prohibiting the amendment of
the counterclaim, MichCon’s motion for reconsideration will be granted, and the court
now specifically states that the August 26, 2010, dismissal was without prejudice.
B. Amendment
In the court’s August 26, 2010, order, it found that MichCon’s cost recovery claim
under CERCLA § 107, 42 U.S.C. § 9607 (Count II) and the corresponding Michigan
claim under NREPA Part 201 (Count IV) were not adequately alleged pursuant to

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Twombly and Iqbal. Specifically, the court found that MichCon’s counterclaim did not
sufficiently allege that the response costs sought to be recovered were “necessary,” as
is required under both CERCLA and NREPA. MichCon now seeks leave to amend its
counterclaim in order to assert additional allegations of necessity. Plaintiffs contend
that MichCon, in its proposed amended counterclaim, has again failed to alleged
sufficient facts to withstand a motion to dismiss. The court disagrees.
As stated in the court’s previous order, to assert a prima facie case for CERCLA
recovery under § 107(a), MichCon must allege (1) the property at issue is a “facility”; (2)
there has been a “release” or “threatened release” of a hazardous substance; (3) the
release has caused MichCon to incur “necessary costs of response” that are
“consistent” with the National Contingency Plan (the “NCP”); and (4) Ford and Severstal
are in one of four categories of potentially responsible parties. Reg’l Airport Auth. of
Louisville v. LFG, LLC, 460 F.3d 697, 703 (6th Cir. 2006) (citing Franklin County
Convention Facilities Auth. v. Am. Premier Underwriters, Inc., 240 F.3d 534, 541 (6th
Cir. 2001)).1
The court has already set forth the relevant standards for “necessary costs of
response,” and includes only a general overview here. Pursuant to the relevant
statutory definitions, in order to sustain a claim for cost recovery under CERCLA,
MichCon must have incurred “necessary costs of response,” including costs of removal
or remedial action. Removal costs and remedial action may include “such actions as
may be necessary to monitor, assess, and evaluate the release or threat of release of

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The court rejects MichCon’s assertion that “necessity” is not part of a CERCLA
prima facie case. (Def.’s Mot. Br. at 4, n.5.) MichCon’s citation to a district court case
does not overcome Sixth Circuit case law to the contrary.
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hazardous substances.” 42 U.S.C. § 9601(23). “Monitoring and evaluation costs may
be recovered as ‘removal’ costs under CERCLA if they were reasonable, and the
activities were not scientifically deficient or unduly costly.” Village of Milford v. K-H
Holding Corp., 390 F.3d 926, 933 (6th Cir. 2004) (citing Johnson v. James Langley
Operating Co., 226 F.3d 957, 963-64 (8th Cir. 2000) and Lansford-Coaldale Joint Water
Auth. v. Tonolli Corp., 4 F.3d 1209, 1219 (3d Cir. 1993)). Thus, investigative costs may,
under certain circumstances, be recovered as “necessary costs of response.” Id. at
935. “Generally speaking, legal fees and litigation-related costs ‘are not recoverable’;
only ‘work that is closely tied to the actual cleanup . . . may constitute a necessary cost
of response.’” Ellis v. Gallatin Steel Co., 390 F.3d 461, 482 (6th Cir. 2004) (quoting
Franklin Cnty. Convention Facilities Auth., 240 F.3d at 549).
The Sixth Circuit has also held that “[c]osts are ‘necessary’ if incurred in
response to a threat to human health or the environment.” Regional Airport Authority of
Louisville, 460 F.3d at 703 (citations omitted). “Conversely, costs incurred at a time
when the plaintiff was unaware of any threat to human health or the environment are not
‘necessary.’” Id. For a response cost to be necessary, there must be some link or
nexus between the response cost and some effort to respond to a risk of or an actual
contamination. Id. at 705-06 (quoting G.J. Leasing Co. v. Union Elec. Co. (“G.J.
Leasing I”) 854 F.Supp. 539, 562 (S.D. Ill. 1994)) (“CERCLA liability attaches only
where a release or threatened release of a hazardous substance ‘causes the incurrence
of response costs.’”); Johnson v. James Langley Operating Co., Inc., 226 F.3d 957, 964
(8th Cir. 2000) (“Testing and sampling expenses are necessary only if the party seeking
to recover costs has an objectively reasonable belief that the defendant’s release or

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threatened release of hazardous substances would contaminate his or her property.”);
Lansford-Coaldale Joint Water Auth. v. Tonolli Corp., 4 F.3d 1209, 1219 (3d Cir. 1993)
(stating that in order to recover monitoring and evaluation expenses there must have
been “a reasonable risk (although one that may not materialize) that the defendant’s
release or threatened release of hazardous substances would contaminate the plaintiff’s
property”); Young v. United States, 394 F.3d 858, 863 (10th Cir. 2005) (citing United
States v. Hardage, 982 F.2d 1436, 1447 (10th Cir. 1992)).
MichCon’s previous counterclaim failed to sufficiently allege facts which linked its
costs to any effort by MichCon to respond to the contamination at the relevant property.
Specifically, despite detailed allegations relating to the history of the relevant property,
its operations, its transfer of ownership, its contamination, and efforts taken, or not
taken, by Plaintiffs to clean up the property, the counterclaim was practically devoid of
any allegations relating to MichCon’s removal costs. While MichCon alleged, generally,
that it incurred “costs of response,” nowhere did MichCon specifically allege that the
response costs were “necessary,” which is required to sustain a CERCLA claim for cost
recovery. See Regional Airport Authority of Louisville, 460 F.3d at 703. MichCon’s
conclusory allegations, without further supporting averments, were too general to state
a claim under applicable pleading standards. “The pleading standard Rule 8 announces
does not require ‘detailed factual allegations,’ but it demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation.” Iqbal, 129 S.Ct. at 1949 (quoting
Twombly, 550 U.S. at 570). The court stated “[i[t is simply not enough to allege that
MichCon incurred costs of response, without detailing any factual allegations in support
of the statement; without alleging that the costs were necessary and explaining–even

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briefly–why they were necessary; or without otherwise enhancing the bare recitation of
the element of a cost recovery claim.” (8/27/10 Order at 11-12 (citing Iqbal, 129 S.Ct. at
1949).) The court also dismissed MichCon’s NREPA claim for the same defects 2
because, “[a]s with the CERCLA count, MichCon includes only one, bare-bones factual
allegation relating to the necessity of response costs under NREPA.” (Id. at 14.)
Having reviewed MichCon’s proposed First Amended Complaint, the court is
satisfied that MichCon has corrected its previous deficiencies. Plaintiffs argue that
MichCon’s proposed amendments still do not allege that MichCon incurred “costs in its
effort to respond to contamination, that these costs were necessary to contain and
cleanup hazardous substances, or that these costs were undertaken in cooperation with
or under direction of state or federal agencies.” (Pl.’s Resp. at 2.) Plaintiffs assert that
MichCon has not alleged the basis for its belief that contamination could migrate to
MichCon’s property and has not alleged the types of costs it occurred. (Id. at 11.)
Fundamentally, Plaintiffs contend that MichCon’s costs were incurred, not as necessary
costs of response, but as “a preemptive effort to advance MichCon’s own, singular
agenda–diminishing its potential exposure in the event it later was called upon to
reimburse Plaintiffs or remediate portions of the SRA Property.” (Id. at 11.)
Contrary to Plaintiffs arguments, the court finds that MichCon’s allegations are
sufficient to withstand a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), and the amended counterclaim is therefore not futile. See Blakely, 276 F.3d at

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In Pitsch v. ESE Michigan, Inc., 593 N.W.2d 565 (Mich. Ct. App. 1999), the
Michigan Court of Appeals noted that that Michigan courts deviate from federal
decisions interpreting the CERCLA when “the clear language of the [the predecessor of
NREPA] compels a different result.” 593 N.W.2d at 574.
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874. MichCon has responded to the court’s concerns and has included additional
allegations in its pleadings addressing all of the deficiencies noted by the court.
Specifically, MichCon has alleged that it has incurred necessary response costs “of the
nature defined in CERCLA,” including removal costs, “to monitor, assess, and evaluate
the release or threat of release of hazardous substances at the SRA Property.” (Am.
Countercl. ¶ 92.)

MichCon alleges its response costs were incurred to analyze and

investigate the nature, source, and extent of the contamination, and that they were
closely tied to actual cleanup of the SRA Property. (Id. ¶¶ 93-94.) MichCon asserts,
among other things, that the response costs enabled it to comment on Plaintiffs’
proposed remedy and to propose alternative remedial measures that more effectively
address the releases and migration of the releases. (Id. ¶ 94.) MichCon alleges that it
“faced and continues to face an actual risk that the contamination, if not properly
abated, could migrate to its property.” (Id. ¶ 95.) MichCon further specifically alleges
that the response costs were not incurred for purposes of litigation. (Id. ¶ 96.) MichCon
makes similar assertions in its proposed Count IV for cost recovery under NREPA. (Id.
¶¶ 113-117.)
The court finds these allegations sufficient to meet the pleading standards
imposed by Federal Rule of Civil Procedure 8, as articulated under Supreme Court
precedent. Plaintiffs’ arguments go more to the veracity of MichCon’s allegations,
rather than their sufficiency. “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on
its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Accepting MichCon’s allegations as true, its

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counterclaims for cost recovery are plausible on the face of the pleadings. MichCon’s
more detailed allegations in its amended counterclaim provides more than “labels and
conclusions;” instead, the factual allegations are “enough to raise a right to relief above
the speculative level on the assumption that all the complaint’s allegations are true.”
Twombly, 550 U.S. at 555. The problem with MichCon’s previous counterclaim was that
it contained no factual matter whatsoever to support a claim for “necessary” costs of
response. MichCon has corrected this defect and the amended counterclaim is not
futile. As Plaintiffs present no other argument against the motion to amend, the court
will grant the motion and allow the amended counterclaim to proceed.
C. Third Party Complaint
Federal Rule of Civil Procedure 14 allows a defending party, through leave of
court, to institute a third-party action against a nonparty “who is or may be liable to it for
all or part of the claim against it.” Fed. R. Civ. P. 14(a). Pursuant to the court’s August
6, 2010, “Scheduling Order,” amendments to the pleadings were due by October 1,
2010, which is the date on which MichCon filed its motion to file a Third Party
Complaint. Plaintiff opposes the motion for the same reasons set forth in its response
to MichCon’s motion to amend the counterclaim. As the court has rejected those
arguments, the court will allow the Third Party Complaint.
IV. CONCLUSION
IT IS ORDERED that MichCon’s “Motion for Reconsideration and for Leave to
Amend Counterclaim” [Dkt. # 58] is GRANTED.
IT IS FURTHER ORDERED MichCon’s “Motion for Leave to File Third-Party
Complaint” [Dkt. # 61] is GRANTED.

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MichCon is DIRECTED to file its First Amended Counterclaim and Third-Party
Complaint within seven days of this order and to serve the United States of America
within fourteen days thereafter. The court will schedule a status conference
immediately after the United States of America files an answer. In the meantime, the
parties are instructed to continue their diligent discovery efforts, and to be prepared to
share, if they have not already done so, their previously-conducted discovery with the
United States in such a way as to maximize efficiency.

S/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: May 5, 2011
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, May 5, 2011, by electronic and/or ordinary mail.
S/Lisa Wagner
Case Manager and Deputy Clerk
[phone]
S:\Cleland\JUDGE'S DESK\C3 ORDERS\08-13503.FORD.MICHCON.Reconsideration.2.wpd

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