BancorpSouth Bank v. Environmental Operations, Inc. et al

Filing 34

MEMORANDUM OPINION AND ORDER IT IS HEREBY ORDERED that Defendant The Clayton Engineering Co.'s Motion to Dismiss for Failure to State a Claim, or in the Alternative, Motion for More Definite Statement, [Doc. No. 20], is granted in part and denie d in part; IT IS FURTHER ORDERED that Defendant Geotechnology, Inc.'s Motion to Dismiss Counts III, IV and VI, [Doc. No. 24], is granted;IT IS FURTHER ORDERED that Defendant Environmental Operations, Inc.'s Motion to Dismiss Counts III, IV and VI, [Doc. No. 26], is granted. IT IS FURTHER ORDERED that Counts III, IV and VI are dismissed. 24 20 26 Signed by Honorable Henry E. Autrey on 10/11/11. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
BANCORPSOUTH BANK,
Plaintiff,
v.
ENVIRONMENTAL OPERATIONS,
INC., et al.,
Defendants,

)
)
)
)
)
)
)
)
)
)

Case No. 4:11CV9 HEA

OPINION, MEMORANDUM AND ORDER

This matter is before the Court on Defendant The Clayton Engineering Co.'s
Motion to Dismiss for Failure to State a Claim, or in the Alternative, Motion for
More Definite Statement, [Doc. No. 20]; Defendant Geotechnology, Inc.'s Motion
to Dismiss Counts III, IV and VI, [Doc. No. 24], and Defendant Environmental
Operations, Inc.'s Motion to Dismiss Counts III, IV and VI, [Doc. No. 26].
Plaintiff opposes all of these motions. For the reasons set forth below, the motions
are
Facts and Background
Plaintiff, a Mississippi state bank and successor by merger to The Signature
Bank, alleges that Environmental Operations Inc., (EOI), Geotechnology, Inc.,

(Geotech) and The Clayton Engineering Company, Inc., (Clayton) prepared and
implemented an environmental remediation plan affecting property known as the
Hazelwood Logistics Center, in which, Plaintiff holds an interest. Plaintiff claims
that Defendants failed to completely remediate the site for the purpose of assisting
the developer and lender with future redevelopment. Count I is a claim brought
against all defendants for cost recovery and declaratory relief, alleging a violation
of the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (CERCLA); Count II alleges breach of Contract against EOI; Count III
alleges negligent misrepresentation brought against EOI and Geotech; Count IV
alleges strict products liability for construction of an engineered cell and is
brought against all defendants; Count V alleges negligence as to all defendants;
and Count VI alleges strict products liability for placement of screened fines
against EOI and Geotech.
Plaintiff alleges that it is the successor in interest to a bank that lent money
to Hazelwood Logistics Center, LLC. It further alleges that Defendants were the
remediation designers and contractors for the site. According to Plaintiff,
Defendants failed to properly design and carry out construction of an engineered
cell on the site, which was a layer of clay dirt put in place to contain old landfill
materials, and to adequately screen materials or "fines" from the dirt on the site
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prior to that dirt being spread around the site as fill.
Discussion
Standard of Review
When ruling on a motion to dismiss for failure to state a claim, the Court
must take as true the alleged facts and determine whether they are sufficient to
raise more than a speculative right to relief. Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555-56 (2007). The Court does not, however, accept as true any allegation
that is a legal conclusion. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009). The
complaint must have “‘a short and plain statement of the claim showing that the
[plaintiff] is entitled to relief,’ in order to ‘give the defendant fair notice of what
the . . . claim is and the grounds upon which it rests.’” Twombly, 550 U.S. at 555
(quoting Fed.R.Civ.P. 8(a)(2)) and then Conley v. Gibson, 355 U.S. 41, 47 (1957),
abrogated by Twombly, supra); see also Gregory v. Dillard’s Inc., 565 F.3d 464,
473 (8th Cir.) (en banc), cert. denied, 130 S.Ct. 628 (2009). While detailed factual
allegations are not necessary, a complaint that contains “labels and conclusions,”
and “a formulaic recitation of the elements of a cause of action” is not sufficient.
Twombly, 550 U.S. at 555; accord Iqbal, 129 S.Ct. at 1949. The complaint must
set forth “enough facts to state a claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 570; accord Iqbal, 129 S.Ct. at 1949; C.N. v. Willmar Pub.
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Sch., Indep. Sch. Dist. No. 347, 591 F.3d 624, 629-30 (8th Cir.2010); Zutz v.
Nelson, 601 F.3d 842, 848 (8th Cir. 2010); Braden v. Wal-Mart Stores, Inc., 588
F.3d 585, 594 (8th Cir. 2009). “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. If
the claims are only conceivable, not plausible, the complaint must be dismissed.
Twombly, 550 U.S. at 570; accord Iqbal, 129 S.Ct. at 1950. In considering a
motion to dismiss under Fed. R. Civ. P. 12(b)(6), “the complaint should be read as
a whole, not parsed piece by piece to determine whether each allegation, in
isolation, is plausible.” Braden, 588 F.3d at 594. The issue in considering such a
motion is not whether the plaintiff will ultimately prevail, but whether the plaintiff
is entitled to present evidence in support of the claim. See Neitzke v. Williams, 490
U.S. 319, 327 (1989).
Count I-CERCLA
Defendant Clayton moves to dismiss Count I for failure to comply with
Rules 8 and 12(b)(6) of the Federal Rules of Civil Procedure. Count I is brought
under the provisions of 42 U.S.C. §§ 9601-9675, the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA).
In 1980, Congress enacted [CERCLA] in response to the serious
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environmental and health risks posed by industrial pollution. See
United States v. Bestfoods, 524 U.S. 51, 55, 118 S.Ct. 1876, 141
L.Ed.2d 43 (1998). The Act was designed to promote the "'timely
cleanup of hazardous waste sites'" and to ensure that the costs of such
cleanup efforts were borne by those responsible for the
contamination. Consolidated Edison Co. of N.Y. v. UGI Util., Inc.,
423 F.3d 90, 94 (C.A.2 2005); see also Meghrig v. KFC Western,
Inc., 516 U.S. 479, 483, 116 S.Ct. 1251, 134 L.Ed.2d 121 (1996);
Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074,
1081 (C.A.1 1986). These cases raise the questions whether and to
what extent a party associated with a contaminated site may be held
responsible for the full costs of remediation.
Burlington Northern and Santa Fe Ry. Co. v. U.S., ___ U.S. ___, 129 S.Ct. 1870,
1874 (2009).
Clayton argues that the Complaint fails to sufficiently set forth that it is an
"operator" of a facility or a "generator/arranger" of hazardous wastes. Section
9607(a) sets out the classes of persons potentially responsible under CERCLA:
(1) the owner and operator of a vessel or a facility,
(2) any person1 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, or arranged with a transporter for transport for

1

For purposes of the statute, a “person” is defined as “an individual, firm,
corporation, association, partnership, consortium, joint venture, commercial entity,
United States Government, State, municipality, commission, political subdivision
of a State, or any interstate body.” 42 U.S.C. § 9601(21).
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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 such 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 incurrence of response costs, of a
hazardous substance ....”
42 U.S.C. § 9607(a).
Clayton argues that the Complaint fails to allege facts sufficient to establish
liability. While recognizing that CERCLA requires Plaintiff to establish that
Clayton was an "operator" or "generator/arranger" of hazardous waste, Clayton
claims that it had neither actual control nor the authority to control any of the
environmental operations of the subject property.
Contrary to its argument, however, the Complaint alleges that all
Defendants knew, since at least 2001, that there were disposed hazardous
materials on the property. Plaintiff further alleges that Defendants engaged in
deliberate disturbance, unearthing, spilling, moving and re-releasing all of the
enumerated hazardous materials and compounds into the property. Although the
Complaint does not specifically list each Defendant by name in its CERCLA
Count, it alleges that all defendants engaged in the activities such that Defendant

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Clayton is put on notice that Plaintiff seeks recovery from Clayton for its
involvement in the disturbance, etc. of hazardous materials on the property.
Liability for the release of hazardous substances may be imposed on ""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.'" Gurley, 43 F.3d at 1192 (quoting 42 U.S.C. §
9607(a)(2)). When considering an individual's liability as an
operator, "'[i]t is the authority to control the handling and disposal of
hazardous substances that is critical under the statutory scheme.'" Id.
(quoting United States v. Ne. Pharm. & Chem. Co., 810 F.2d 726, 743
(8th Cir.1986)).
K.C.1986 Ltd. Partnership v. Reade Mfg., 472 F.3d 1009, 1020 (8th Cir. 2007).
While discovery may reveal that Clayton had no authority to control the
handling of the hazardous material on the property, the issue before the Court at
this stage is whether the Complaint sufficiently alleges control.2 Under the
standards articulated herein, the Court concludes that the Complaint meets the
Twombly and Iqbal standards of alleging facts sufficient to place Clayton on
notice of the CERCLA claim against it.
Count III-Negligent Misrepresentation against EOI and Geotech
Plaintiff has styled Count III as a negligent misrepresentation claim against
EOI and Geotech. Defendants argue that it is, in reality, a claim for negligent

2

Clayton's reliance on The City of North Miami, Florida v. Morris Berger, 828 F.Supp.
401 (E.D. Va 1993) is, at best, premature. The matter was before the Virginia District Court on
summary judgment.
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omission.
The elements of negligent misrepresentation are: (1) the speaker supplied
information in the course of his business; (2) because of the speaker's
failure to exercise reasonable care, the information was false; (3) the
information was intentionally provided by the speaker for the
guidance of limited persons in a particular business transaction; (4)
the hearer justifiably relied on the information; and (5) due to the
hearer's reliance on the information, the hearer suffered a pecuniary
loss.
Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 134
(Mo.2010)(citing Dancin Development, L.L.C. v. NRT Missouri, Inc., 291 S.W.3d
739, 744 (Mo.Ct.App.2009)). “A party must prove every element of a claim for
negligent misrepresentation for the claim to succeed.” Id.
As the basis for its negligent misrepresentation claim, Plaintiff alleges that
Defendants EOI and Geotech issued studies that omitted the identification of
landfill areas later discovered, did not report various methane-related items, failed
to apprise recipients about various methane-related items, and made no provision
of the accumulation of methane gas.
Defendants argue that Plaintiff fails to state a claim because Plaintiff has
failed to allege any misrepresentations, rather, Defendants argue that Plaintiff has
restated its breach of contract and negligence claims, focusing on actions and
failures, i.e., failure to evaluate the potential impact of biodegration of former

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landfill materials, failure to list methane gas as a contaminant of concern, failure
to obtain a "Letter of Completion." In the instant matter, the Court finds that the
Complaint fails to sufficiently set forth any facts to support any representations
allegedly made by Defendants EOI and Geotech to Plaintiff that were false.
Plaintiff merely recites the elements of a claim for negligent misrepresentation and
concludes that "due to Defendants' failure to exercise reasonable care, the
information provided in the Information and Reports were false and incomplete.
Such allegations, under Twombly and Iqbal, are insufficient to state a claim.
Count IV and VI-Strict Products Liability
Plaintiff alleges that each Defendant sold products, to wit, an engineered
containment cell, to hold contaminated and hazardous materials and remediated
screened fines derived from contaminated material removed from the property, in
the ordinary and normal course of business. Based on these allegations, Plaintiff
seeks to hold Defendants strictly liable for the alleged leaking and spreading of
contaminated material.
In 1969, the Missouri Supreme Court adopted the rule of strict liability in
tort, as stated in Restatement (Second) of Torts § 402A:
(1) One who sells any product in a defective condition unreasonably
dangerous to the user or consumer or to his property is subject to
liability for physical harm thereby caused to the ultimate user or
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consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without
substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and
sale of his product, and
(b) the user or consumer has not bought the product from or entered
into any contractual relation with the seller.

Rest.2d Torts § 402A; see Keener v. Dayton Elec. Mfg. Co., 445 S.W.2d 362, 364
(Mo.1969) (adopting Restatement). In adopting the rule of strict liability for tort,
the Missouri Supreme Court pointed out that such a rule would help insure the
costs of injuries arising from defective products will be borne by the
manufacturers and sellers that put the products into the marketplace, rather than by
the injured persons. Keener, 445 S.W.2d at 364. Under § 402A, strict liability
rule “applies to any person engaged in the business of selling products for use or
consumption.” Rest.2d Torts § 402A, cmt. f; see also Keener, 445 S.W.2d at 365
(quoting from Rest.2d Torts § 402A, cmt. f.). For example, the rule “applies to
any manufacturer of [a product described in § 402A], to any wholesale retail

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dealer or distributor, and to the operator of a restaurant.” Rest.2d Torts § 402A,
cmt. f. “The basis for the rule is the ancient one of the special responsibility for
the safety of the public undertaken by one who enters into the business of
supplying human beings with products which may endanger the safety of their
persons and property, and the forced reliance upon that undertaking on the part of
those who purchase such goods.” Id.
The issue before the Court is whether Defendants may be held liable as
“sellers of a product” within the meaning of § 402A.3 Defendants point to the
Missouri case of Chubb Group of Ins. Co. v. C.F. Murphy & Assoc., Inc., 656
S.W.2d 766 (Mo.Ct.App.1983), in which a Missouri appellate court addressed
claims related to the collapse of the roof of the Kemper Arena in Kansas City,
Missouri. In that case certain plaintiffs alleged that the defendants designed or
manufactured the Arena, that it was in a defective condition unreasonably
dangerous for any reasonably anticipated use, and that they had been damaged as a
result of the defect. Chubb, 656 S.W.2d at 778. In recognizing that real property
3

Neither Plaintiff nor Defendants cite to any Missouri case directly on
point, and this Court has found none. Thus, in the absence of controlling
authority, this Court undertakes to predict how the Missouri Supreme Court would
rule if faced with the issue of whether Defendants are sellers within the meaning
of § 402A. See Pace Const. Co. v. Fidelity and Guar. Ins. Co., 934 F.2d 177, 179
(8th Cir.1991) (in absence of controlling authority, district court should predict
how Missouri Supreme Court would rule).
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was subject to special treatment under other sections of the Restatement, the court
stated that “the applicability of strict liability depends not on an arbitrary line of
division between chattel and real property, but on a consideration of whether the
policy behind such liability is applicable to the facts.” Chubb, 656 S.W.2d at 779.
The court determined that “[t]he underlying consumer protection principles
of strict liability simply do not appear to be applicable to the constructors of a
large commercial building built for a particular client presumably under contract
with that client.” Chubb, 656 S.W.2d at 780. The court found that plaintiffs had
no cause of action for products liability against the architect and construction
supervisor, the general contractor, or the consulting structural engineers. Chubb,
656 S.W.2d at 781. In contrast, the court did determine that a cause of action
could lie against the provider of the steel bolts used to secure the roof's supports
and the provider of the steel beams, which, if defective, may have been “products”
within the meaning of § 402A. Chubb, 656 S.W.2d at 781. The court emphasized
that these two entities could be held to the standards of strict liability “as suppliers
of products incorporated into the structure.” Volume Services, Inc. v. C.F. Murphy
& Assoc., Inc., 656 S.W.2d 785, 793 (Mo.Ct.App.1983).
None of the Defendants were sellers of a product within the meaning of §
402A. Defendants may have provided the engineered cell and screened fines,
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however, these specifically designed items were incident to the services provided
by defendants in order to complete their obligations to Plaintiff to prepare and
implement an environmental remediation plan. See Hinojasa v. Automatic
Elevator Co., 92 Ill.App.3d 351, 48 Ill.Dec. 150, 416 N.E.2d 45, 48
(Ill.App.Ct.1980) (policy reasons justifying strict liability are not applicable to
product installers; one who simply installs a product “is not involved in the sale of
the product and therefore receives no profit from placing the defective product in
the stream of commerce” and “fact that an installer lacks the purchasing power of
a retailer or a distributor makes it less able to exert pressure upon manufacturers to
enhance product safety”).
The Court concludes that, under Missouri law, Defendants cannot be held
strictly liable for the damage caused by the "defective" engineered cell and or
screened fines put in place on the property. None of the Defendants were acting as
a seller, manufacturer, wholesaler, or distributor of a product. Here, it appears
clear that the Missouri Supreme Court would refuse to impose liability. In fact,
imposing strict liability on Defendants would not effectuate the Missouri Supreme
Court's policy that strict liability should be used to insure that the costs of injuries
arising from defective products will be borne by manufacturers and sellers of those
products. The underlying consumer protection principles of strict liability do not
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appear to apply to a general contractor whose subcontractor installed a defective
product. See Chubb, 656 S.W.2d at 780 (consumer protection principles do not
apply to constructors of commercial building built for particular client). Plaintiff
cites no case in which a court has extended the principles of strict liability to facts
such as those presented here, and the Court concludes that the Missouri Supreme
Court would decline to so extend the cause of action. See Hunt v. Guar. Elec. Co.
of St. Louis, 667 S.W.2d 9, 12 (Mo.Ct.App.1984) (where evidence showed only
that defendant installed an automatic timer pursuant to its contract to provide the
services of electricians, policy reasons justifying imposition of strict tort liability
not present because defendant merely rendering professional services); Hinojasa,
48 Ill.Dec. 150, 416 N.E.2d at 48 (declining to extend doctrine to situation where
defendant merely installed a product supplied by another). Thus, because
Defendants cannot be held strictly liable for the damage caused by the engineered
cell and or the screened fines, the claim made against them necessarily fails.
Therefore, Defendants' Motions to Dismiss Count IV are granted.
Count V-Negligence
Defendant Clayton seeks to dismiss Count V for failure to state a claim for
negligence against it.
“A negligence claim requires proof of a duty, the breach thereof, and
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proximately caused damages.” Sandage v. Bankhead Enters., Inc., 177 F.3d 670,
675 (8th Cir.1999) (citation omitted). Plaintiff alleges that all defendants had a
duty to adhere to a standard of reasonable care during the environmental
remediation of the property. Plaintiff further alleges that Defendants were
negligent in preparing the Remedial Action Plan, executing it, in the design and
construction of an engineered cell performing the remediation activities as they
relate to the cleanup of the Landfill Site and Property. Further, Plaintiff alleges, in
its general allegations, and in the exhibits attached to the Complaint that Clayton
participated in the preparation of the remedial action plan. The Court finds that
these facts satisfy the standard set forth in Twombly and Iqbal in that they raise a
reasonable expectation that discovery will reveal evidence of Plaintiff's negligence
claim. Twombly, 550 U.S. at 556. The Court will therefore deny Defendant
Clayton's Motion to Dismiss the negligence claim.
Conclusion
Plaintiff's Complaint sufficiently alleges a CERCLA claim and negligence
claim against Defendant Clayton. The motion to dismiss these claims will be
denied. As to the strict liability claims and the negligent misrepresentation claims,
the motions to dismiss are well taken and will be granted.
Accordingly,
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IT IS HEREBY ORDERED that Defendant The Clayton Engineering Co.'s
Motion to Dismiss for Failure to State a Claim, or in the Alternative, Motion for
More Definite Statement, [Doc. No. 20], is granted in part and denied in part;
IT IS FURTHER ORDERED that Defendant Geotechnology, Inc.'s
Motion to Dismiss Counts III, IV and VI, [Doc. No. 24], is granted;
IT IS FURTHER ORDERED that Defendant Environmental Operations,
Inc.'s Motion to Dismiss Counts III, IV and VI, [Doc. No. 26], is granted.
IT IS FURTHER ORDERED that Counts III, IV and VI are dismissed.
Dated this 30th day of September, 2011.

______________________________
HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE

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