DMJ Associates, L.L. v. Capasso, et al
ORDER ADOPTING REPORT AND RECOMMENDATIONS -- For the reasons set forth in the ATTACHED WRITTEN MEMORANDUM AND ORDER, the Report and Recommendation issued by the Hon. Robert M. Levy, U.S.M.J., on July 6, 2015 is adopted in its entirety upon due consid eration of objections made thereto. Accordingly, the Third Party Defendants' motions for partial summary judgment as to Count 1 of the Third Amended Third Party Complaint is denied in its entirety. SO ORDERED by Judge Dora Lizette Irizarry on 3/31/2016. (Irizarry, Dora)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
DMJ ASSOCIATES, L.L.C.,
CARL A. CAPASSO, et al,
EXXON MOBIL CORPORATION and
QUANTA RESOURCES CORPORATION,
ACE WASTE OIL, INC., et al,
DORA L. IRIZARRY, U.S. District Judge:
MEMORANDUM AND ORDER
ADOPTING REPORT &
In the underlying first-party action, plaintiff DMJ Associates, L.L.C. (“DMJ”) brought an
environmental cleanup cost recovery claim against various defendants, including Exxon Mobil
Corporation (“Exxon Mobil”) and Quanta Resources Corporation (“Quanta”), under Section 107
of the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), 42 U.S.C. § 9607, inter alia. In 2002, during the pendency of that action,
defendants and third-party plaintiffs Exxon Mobil and Quanta (collectively, the “TPPs”), and
nineteen other named respondents, entered into an Administrative Order on Consent (“AOC”)
with the New York State Department of Environmental Conservation (“DEC”). The AOC
required the TPPs to clean up the sites at issue in the DMJ action, including the site of Quanta’s
Long Island City refining facility (the “Quanta Site”). The AOC would further absolve the TPPs
of their liability to DEC for purposes of contribution protection provided by CERCLA §
113(f)(2) if the remediation of the properties at issue was completed in a manner deemed
satisfactory by DEC.
In June 2005, DMJ entered into a settlement agreement with the TPPs in which the TPPs
agreed to pay certain monies to DMJ for its response costs and to remediate contamination at
DMJ’s property to the satisfaction of the DEC. A provision of the settlement agreement required
DMJ to apply to place the sites at issue into New York’s Brownfield Cleanup Program (“BCP”). 1
The AOC was terminated once DMJ’s BCP application was approved in September
2005. Therefore, the TPPs contend that the AOC’s termination suggests that no resolution of
CERCLA liability has occurred or will occur because the TPPs and New York State are no
longer bound by the provisions of the AOC.
In their Third Amended Third-Party (“TAPT”) Complaint, the TPPs assert claims under
CERCLA § 107(a), 42 U.S.C. § 9607(a), for recovery of their response costs; and CERCLA §
113(f)(1), 42 U.S.C. §9613(f), for contribution and indemnification for “common liability.” (See
TATP Compl., Dkt. Entry No. 1149.)
The Private third-party defendants (“Private TPDs”) and the Federal third-party
defendants (“Federal TPDs”) (collectively, the “TPDs”) moved for partial summary judgment on
Count 1 of the TATP Complaint, which asserts a claim for cost recovery under CERCLA §
107(a). The TPDs argue that, because the TPPs were sued by DMJ for CERCLA liability under
A brownfield site is “any real property, the redevelopment or reuse of which may not be complicated by the
presence of a contaminant.” Lighthouse Pointe Property Associates LLC v. New York State Department of
Environmental Conservation, 14 N.Y.3d 161, 165 (2010) (internal quotation marks and citations omitted) [emphases
included]. The goal of the BCP is to encourage private sector remediation of brownfields and to promote their
redevelopment as a means to revitalize economically blighted communities. East River Realty Co., LLC v. New
York State Department of Environmental Conservation, 68 A.D.3d 564 (1st Dep’t 2009).
§ 107(a) and settled with a government agency, the TPPs are precluded from seeking response
cost recovery under § 107(a).
The TPPs counter that they may seek reimbursement of response costs under both §§
107(a) and 113(f) because their liabilities with New York State remain unresolved and the plain
language of CERCLA and the case law interpreting it permit § 107(a) and § 113(f) claims to be
asserted concurrently by parties in the TPPs’ procedural position. The TPPs further contend that,
because they voluntarily incurred response costs to clean up the Quanta Site that went beyond
the scope of the underlying DMJ action, they are entitled to pursue claims against the TPDs
under § 107(a). The TPDs refute the TPPs’ measurement of the scope of the DMJ litigation by
arguing that remediation of the Quanta Site was not voluntary, but rather compelled by the
lawsuit because DMJ had alleged that contamination was migrating from the Quanta Site to the
Capasso Properties. (Private TPDs’ Objection (“Pvt. TPDs’ Obj.”) at 1, Dkt. Entry No. 1567.)
By Order dated November 15, 2013, this Court referred the motions to Hon. Robert M. Levy,
U.S.M.J., for a report and recommendation (“R & R”).
On July 6, 2015, the magistrate judge issued the R & R, which recommended that this
Court deny the TPDs’ motions for partial summary judgment. (R & R at 2, Dkt. Entry No.
1564.) The Private TPDs and the Federal TPDs filed objections to the R & R. (See generally
Pvt. TPDs’ Obj.; Federal TPDs’ Objection (“Fed. TPDs’ Obj.”), Dkt. Entry No. 1568.) For the
reasons set forth below, upon due consideration of the R & R and the objections to it, the R & R
is adopted in its entirety and the TPDs’ motions for partial summary judgment on Count 1 of the
TATP Complaint are denied.
Standard of Review
Where a party objects to an R & R, a district judge must make a de novo determination
with respect to those portions of the R & R to which the party objects. See Fed. R. Civ. P. 72(b);
United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997). Portions of the R & R to which
the parties have not objected are reviewed for clear error. See Orellana v. World Courier, Inc.,
2010 WL 3861013, at *2 (E.D.N.Y. Sept. 28, 2010). The district court may then “accept, reject,
or modify the recommended disposition; receive further evidence; or return the matter to the
magistrate judge with instructions.” Fed. R. Civ. P. 72(b); see also 28 U.S.C. § 636(b)(1).
The TPDs object to the magistrate judge’s denial of their motions for partial summary
judgment, contending that the magistrate judge erred in holding that the TPPs were permitted to
pursue a cost recovery action under CERCLA § 107(a) because the underlying DMJ action
against the TPPs precluded the pursuit of such an action. (Pvt. TPDs’ Obj. at 2, n. 2.) The
interplay between the cost recovery provision of CERCLA § 107(a) and the contribution remedy
afforded under CERCLA § 113(f) forms the crux of the issue before the Court. Therefore, an
overview of the statutory framework will provide necessary context for the Court’s decision.
CERCLA is a remedial statute designed to encourage prompt and effective cleanup of
hazardous waste sites. Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112,
120 (2d Cir. 2010) (“NiMo”). The statute “empowers the federal government and the states to
initiate comprehensive cleanups and to seek recovery of expenses associated with those
cleanups.” Id. CERCLA also affords property owners a recourse to seek reimbursement of their
remediation costs from others “in the chain of title or from certain polluters—the so-called
potentially responsible parties (“PRPs”). Id. This recourse is available to parties through three
separate CERCLA provisions, §§ 107, 113(f)(1), and 113(f)(3)(B). Id.
A. Section 107(a)
Section 107(a) authorizes parties to recover money spent on cleanup and prevention
costs. Consolidated Edison Co. of New York, Inc. v. UGI Utilities, Inc., 423 F.3d 90, 94 (2d Cir.
2005). “Section 107(a) states that various persons, including the owner or operator of a facility,
may be held liable for, among other things, ‘all costs of removal or remedial action incurred by
the United States Government or a State … not inconsistent with the national contingency
plan.’” Id. (quoting 42 U.S.C. § 9607(a)(4)(A)). 2
This provision permits private parties to pursue cost recovery actions against other PRPs
who may have contributed to the environmental contamination of a particular property. Id. at
94-95. Section 107(a) identifies four classes of PRPs covered under the section: (1) the present
owner and operator of a facility; (2) any person who owned or operated the facility at the time of
the disposal of hazardous substance at the facility; (3) any person who arranges for the disposal
of a hazardous substance at the facility of another; and (4) any person who transports a hazardous
substance to a disposal facility. Schaefer v. Town of Victor, 457 F.3d 188, 195 (2d Cir. 2006).
In United States v. Atlantic Research, the Supreme Court held that § 107(a) allows for the
recovery of remediation costs “without any establishment of liability to a third party” where the
party seeking recovery has incurred the costs directly. 551 U.S. 128, 139 (2007). Furthermore,
Atlantic Research held that “[a PRP’s] costs incurred voluntarily are recoverable only by way of
§ 107(a)(4)(B).” Id. at 139 n. 6. As is clearly set forth in the magistrate judge’s exhaustive case
The national contingency plan “‘provide[s] the organizational structure and procedures for preparing for and
responding to discharges of oil and releases of hazardous substances, pollutants, and contaminants,” and is
promulgated by the Environmental Protection Agency.’” Price Trucking Corp. v. Norampac Industries, Inc., 748
F.3d 75, 80 n. 3 (2d Cir. 2014) (quoting 40 C.F.R. §§ 300.1-2).
law and statutory analysis in the R & R, the Supreme Court has not decided definitively whether
a party may proceed under § 107(a) or § 113(f) if it has voluntarily and directly incurred costs.
B. Section 113(f)(1)
“Section 113(f)(1) expressly creates a contribution right for parties liable or potentially
liable under CERCLA.” Consolidated Edison, 423 F.3d at 95. The statute holds that “[a]ny
person may seek contribution from any other person who is liable or potentially liable under [§
107(a)], during or following any civil action under [§ 106] or under [§ 107].” 42 U.S.C. §
9613(f)(1). The magistrate judge correctly notes that Cooper Industries, Inc. v. Aviall Services¸
Inc., 543 U.S. 157 (2004), and Atlantic Research altered the landscape of CERCLA litigation by
broadening the availability of § 107 claims to private claimants, while limiting the availability of
§ 113(f) claims. (R & R at 18.) In Cooper Industries, the Supreme Court concluded that a party
may pursue a contribution claim under § 113(f)(1) only if that party has been subject to a civil
action as specified in that section. Cooper Industries, 543 U.S. at 165.
C. Section 113(f)(3)(B)
“Under § 113(f)(3)(B), a ‘person who has resolved its liability to the United States or a
state for some or all of a response action or for some or all of the costs of such action in an
administrative or judicially approved settlement may seek contribution from any person who is
not party to a settlement.’”
NiMo, 596 F.3d at 124 (quoting 42 U.S.C. § 9613(f)(3)(B)).
Consolidated Edison made clear that “only when liability for CERCLA claims, rather than some
broader category of legal claims, is resolved” does § 113(f)(3)(B) create a right to contribution.
Consolidated Edison, 423 F.3d at 95 (internal quotation marks and citations omitted); see also
W.R. Grace & Co.-Conn. v. Zotos International, Inc., 559 F.3d 85, 90 (2d Cir. 2009). Therefore,
according to the Second Circuit in W.R. Grace, “‘the operative question in deciding whether [the
TPPs] claims arise under section 113(f)(3)(B) ... is whether [the TPPs] resolved [their] CERCLA
liability before bringing suit.’” W.R. Grace, 559 F.3d at 90-91 (quoting Consolidated Edison,
423 F.3d at 96). As explained in greater detail below, the magistrate judge correctly found that,
due to the termination of the AOC, the TPPs had not resolved their CERCLA liability prior to
bringing the § 107(a) action against the TPDs. (R & R at 33.)
Interplay Between CERCLA §§ 107(a) and 113(f)
The TPDs argue that the TPPs are precluded from pursuing a cost recovery action under
§ 107(a) because the DMJ action against them triggered a contribution claim under §
113(f)(3)(B) to the exclusion of any § 107(a) cause of action. (Pvt. TPDs’ Obj. at 2, n. 2.) TPDs
further contend that the fact that the TPPs were sued under § 107(a) is dispositive and, thus,
renders irrelevant the nature of the costs the TPPs incurred when deciding what remedies are
available to them. (Id. at 2.) Therefore, the TPDs define the issue before this Court as whether a
party that has been sued under § 107(a) can seek to recover the same response costs under that
section. (Id. at 6.) According to the TPDs, the plain language of CERCLA and the case law
interpreting the statute precludes recovery under § 107(a), and a recovery recourse exists only
pursuant to a § 113(f) contribution action. (Id.)
The TPDs also argue that the determinative factor governing the availability of § 107(a)
or § 113(f) relief is the procedural circumstances of the party seeking cost recovery. (Id. at 9.)
The relevant procedural circumstance is whether or not a PRP has been subject to an
enforcement action, such as a § 107(a) suit. Appleton Papers Inc. v. George A. Whiting Paper
Co., 572 F. Supp. 2d 1034, 1042 (E.D. Wis. 2008), aff’d sub nom. NCR Corp. v. George A.
Whiting Paper Co., 768 F.3d 682 (7th Cir. 2014). The TPDs contend that the voluntary or
compelled nature of the response costs is an irrelevant consideration in determining whether
those costs are recoverable under § 107(a) or § 113(f).
The TPDs rely on cases such as Whittaker Corp. v. United States from the Central
District of California to support the proposition that the statutory language of § 113(f)(1) does
not limit recovery to the scope of the eventual settlement between the parties. 2014 WL 631113,
at *6 (C.D. Cal. Feb. 10, 2014), appeal pending, Docket No. 14-55385 (9th Cir. 2014) (court
rejected plaintiff’s argument that many of its remediation costs were voluntary and predated
entry into a settlement agreement, thus entitling it to recovery costs under § 107(a) and held that,
because plaintiff’s procedural posture was as a § 107(a) defendant, all of the costs fell within the
ambit of § 113(f)(1)).
The TPDs further contend that DMJ’s § 107(a) action against the TPPs implicated the
entire cleanup of the Quanta site; therefore, the TPPs are precluded from dividing their response
costs between those eligible for § 107(a) relief and those eligible for § 113(f)(1) relief. (Pvt.
TPD’s Obj. at 13.)
However, as the magistrate judge correctly notes, the TPDs’ arguments ignore the plain
language of the statutes at issue. (R & R at 34.) The availability of contribution costs under §
113(f)(3)(B) requires a party’s resolution of liability to the United States or a State pursuant to an
administrative or judicially approved settlement. See 42 U.S.C. § 9613(f)(3)(B). The TPDs fail
to demonstrate that the TPPs resolved their liability to New York State under the conditions of
Indeed, the Seventh Circuit’s decision in Bernstein v. Bankert, upon which the TPPs
heavily rely, stands for the proposition that “[w]hether, and when, a given settlement resolves a
party’s liability to the EPA [or a state] within the meaning of [§ 113(f)(3)(B)] is ultimately a
case-specific question dependant [sic] on the terms of the settlement before the court.” 733 F.3d
190, 196 (7th Cir. 2013) (internal quotation marks omitted).
Similar to the settlement in
Bernstein, the settlement between the TPPs, DMJ, DEC, and other the parties did not provide for
resolution of CERCLA liability upon entering into the settlement agreement. Id. Here, the
settling parties entered into the AOC in 2002, after DMJ’s Brownfield Cleanup Program
application was approved. In 2005, the AOC was terminated; however, this termination occurred
before the parties could fulfill all of their obligations set forth in the AOC and before the
issuance of a final report showing that no further remedial action was necessary. Indeed, the
AOC stated that the DEC would issue a release from liability and a covenant not to sue “[u]pon
the [DEC]’s approval” of a final report “evidencing that no further remedial action” was
required. (Certification of Camille V. Otero, Esq. 3 (“Otero Cert.”) at Exhibit A, ¶ G, Dkt. Entry
No. 1474-6.) Since no final report was issued due to the AOC’s termination prior to the
completion of all remedial action, the TPPs had not been released from liability. Accordingly,
the TPPs cannot assert a contribution claim under § 113(f)(3)(B), but may pursue a cost recovery
action under § 107(a).
The Court concurs with the magistrate judge that resolution of the instant motion is a
matter of statutory construction. The plain language of § 107(a)(4)(B) provides that certain
parties “shall be liable for . . . any other necessary costs of response incurred by any other person
consistent with the national contingency plan.” This provision does not preclude the pursuit of a
cost recovery action under § 107(a) simply because a party has already been sued pursuant to
that provision. Nor does § 113(f) become the only remedy available to a party who has been
sued under § 107(a) and seeks to recover costs incurred. Atlantic Research, 551 U.S. at 138.
Camille V. Otero, Esq. is a director at Gibbons P.C. and counsel for third-party defendant Rexam Beverage Can
Company. (Otero Cert. at ¶ 1, Dkt. Entry No. 1474-5.)
The magistrate judge also correctly found that the TPPs could not proceed on all of their
claims under both §§ 107 and 113, simultaneously. (R & R at 34.) The TPPs seek to recover
four different categories of costs: (1) directly incurred response costs; (2) funds they paid to
reimburse third parties pursuant to a settlement agreement; (3) some costs they incurred as a
result of having been sued by DMJ; and (4) some costs they incurred having entered into the
later-terminated AOC, but without resolving their liability. (Id. at 36.) Atlantic Research
distinguished the rights afforded under §§ 107(a) and 113(f):
Section 113(f) authorizes a contribution action to PRPs with common liability
stemming from an action instituted under § 106 or § 107(a). And § 107(a)
permits cost recovery (as distinct from contribution) by a private party that has
itself incurred cleanup costs. Hence, a PRP that pays money to satisfy an
agreement or a court judgment may pursue § 113(f) contribution. But by
reimbursing response costs paid by other parties, the PRP has not incurred its own
costs of response and therefore cannot recover under § 107(a). As a result, though
eligible to seek contribution under § 113(f)(1), the PRP cannot simultaneously
seek to recover the same expenses under § 107(a).
551 U.S. at 139.
Accordingly, some of the TPPs’ costs are recoverable only under § 107, while some are
separately recoverable only under § 113. Consistent with the Supreme Court’s holding in
Atlantic Research, none of the listed costs are recoverable under both sections simultaneously.
The magistrate judge correctly concluded that the TPPs should be permitted to maintain both §
107 and § 113 causes of action as the evidence supported the applicability of both statutes to
their cost outlays.
After de novo review of the portion of the R & R to which the TPDs object, the R & R is
adopted in its entirety. Accordingly, the TPDs motion for partial summary judgment with
respect to Count 1 of the TATP Complaint is denied.
Dated: Brooklyn, New York
March 31, 2016
DORA L. IRIZARRY
United States District Judge
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