Garrett Day LLC et al v. International Paper Company et al

Filing 189

REPORT AND RECOMMENDATIONS - IT IS THEREFORE RECOMMENDED THAT: The HPP Defendants Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(2) and 12(c) be DENIED. Objections to R&R due by 11/29/2017. Signed by Magistrate Judge Sharon L. Ovington on 11/15/2017. (srb)(This document has been sent by regular mail to the party(ies) listed in the NEF that did not receive electronic notification.)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
GARRET DAY LLC, et al.,
Plaintiffs,
vs.
INTERNATIONAL PAPER
COMPANY, et al.,
Defendants.

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Case No. 3:15-cv-00036
District Judge Walter H. Rice
Magistrate Judge Sharon L. Ovington

REPORT AND RECOMMENDATIONS1
I.

Introduction
The present CERCLA2 case explores which former owners and operators are

responsible for the costs of cleanup efforts undertaken by Plaintiffs Garrett Day LLC and
the Ohio Developmental Services Agency at the site of a century-old paper mill in
Dayton, Ohio (the Site).3 Plaintiffs have allegedly spent in the neighborhood of $1.7
million cleaning hazardous substances—trichloroethylene, asbestos, bleaching agents,
PCBs (polychlorinated biphenyls), etc.—from the Site. They bring this case against the

1

Attached is a NOTICE to the parties regarding objections to this Report and Recommendations.

2

CERCLA refers, of course, to the Comprehensive Environmental Response, Compensation and Liability
Act.
3

A list of hazardous substances allegedly found at the Site includes, for example, trichloroethylene,
asbestos, bleaching agents, Chromium, and Polycyclic Aromatic Hydrocarbons. (Doc. #144, PageID #s
1237-40).

Site’s former owners and operators asserting claims under (1) Section 107 of CERCLA,
42 U.S.C. §§ 9607(a); (2) Ohio’s Voluntary Action Program, Ohio Revised Code §
3746.23(A); and (3) common law nuisance.
Among the many Defendants are Harrison Holdings, L.P.; HPM Investors, Inc.;
and HHP, Inc. (the HPP Defendants). They presently seek dismissal of Plaintiffs’ First
Amended Complaint under Fed. Civ. P. 12(b)(2) for lack of personal jurisdiction. They
also seek judgment on the pleadings in their favor under Fed. R. Civ. P. 12(c). The HPP
Defendants contend, in the main, that dismissal of Plaintiffs’ claims is warranted because
the HPP Defendants no longer exist and are, in fact (albeit metaphorically), “dead and
buried.” This means to the HPP Defendants that they lack the capacity to sue or be sued
and are not “persons” within the meaning of CERCLA.
Plaintiffs oppose dismissal for reasons to be explored. But first, more needs to be
said about the HPP Defendants.
II.

Factual Background
Accepting Plaintiffs’ allegations as true, see E.E.O.C. v. J.H. Routh Packing Co.,

246 F.3d 850, 851 (6th Cir. 2001), reveals the following.
Defendant HPM Investors
In 1972, St. Regis Paper Company sold the Site and related assets to Howard
Paper Mills, Inc. II.4 This entity—Howard Paper Mills, Inc. II—is also known as
Defendant HPM Investors. (Doc. #144, PageID #1232).

4

Howard Paper Mills, Inc. I was bought in 1960 by St. Regis. (Doc. #144, PageID #1232).

2

Defendant HPP, Inc.
In 1989, Howard Paper Group acquired Howard Paper Mills II. Plaintiffs
understand, upon information and belief, that Defendant HPP was one of the general
partners of Howard Paper Group. Id. at 1233.
Defendant Harrison Holdings, L.P.
Defendant Harrison Holdings is formerly known as Howard Paper Group.
Howard Paper Group
Plaintiffs allege that in June 1991, the Howard Paper Group sold its business
(including its right to its trade name) to several Fox River Paper entities (Fox River
Paper) through a purported asset purchase agreement. Id. Plaintiffs assert, “While the
Fox River Paper purchase agreement was labeled an asset purchase agreement, Fox River
Paper took over Howard Paper Mills, Inc.’s entire business. Put another way, the
transaction represented a complete acquisition of Howard Paper Group’s operations and
business by Fox River Paper.” Id.
“Following the transaction, Howard Paper Group no longer operated in any
capacity….” (with 2 minor exceptions). Id. According to Plaintiffs, “Howard Paper
Group signed a noncompetition agreement, effectively preventing Howard Paper from
continuing its business.” Id.
Plaintiffs maintain, upon information and belief, “the most material aspect of the
Howard Paper Group that was purportedly not transferred to Fox River Paper was
Howard Paper Group’s environmental liabilities (which were almost certainly known to

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the parties at the time). Put simply, Fox River Paper and Howard Paper Group amounted
to a de facto merger or consolidation.” Id. at 1234.
A tiny table attached the HPP Defendants’ pending Motion summarizes their
description of themselves as “dead and buried”:
Orig. Name
Howard Paper
Partners, Inc.
Howard Paper
Mills, Inc.
Harrison
Holdings
Limited
Partnership

Name Chg.
HPP, Inc.

State
OH

Entity
Corporation

Formed
4/30/1991

Dissolved
6/29/1992

HPM
Investors Inc.
NA

DE

Corporation

11/16/1971

6/29/1992

DE

Limited
Partnership

9/8/1989

6/29/1992

(Doc. #177, PageID #1611).
III.

Rules 12(b)(2) and 12(c)
The HPP Defendants’ reliance on Rule 12(b)(2) to assert that it is dead and buried

seems procedurally odd. Rule 12(b)(2) is, of course, the correct procedural tool to use
when seeking dismissal for lack of personal jurisdiction. But, such dismissals typically
arise from a defendant’s lack of minimum contacts with the forum state, not because of a
business entity’s lack of existential status. This is no less so in CERCLA cases. Cf. City
of Bangor v. Citizens Communications Co., No. 02-183-B-S, 2003 WL 22183205, at *2
(D.Me. 2003) (“Congress has not provided for nationwide service of process in CERCLA
actions except when they are commenced by the United States, 42 U.S.C. § 9613(e).”).
Still, the HPP Defendants take a lesson from AT&T Global Info. Solutions Co. v.
Union Tank Car Co., No. 2:94cv876, 1998 U.S. Dist. LEXIS 19410, *4 (S.D. Ohio, July
6, 1998), where a CERCLA defendant’s motion to dismiss for lack of personal
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jurisdiction was granted because it was a dead-and-buried company. Id. This seems an
odd use of Rule 12(b)(2) for it mixed personal jurisdiction into a situation where a claim
failed because an essential element was missing—i.e., the dead-and-buried defendant was
not a CERCLA “person.” And, it is an odd use of Rule 12(b)(2) in the present situation
because it frames as a personal-jurisdiction question the HPP Defendants’ challenge to
Plaintiffs’ ability to establish that the HPP Defendants are persons under CERCLA. It is,
nonetheless, helpful to recognize that the HPP Defendants argue in favor of evidencebased findings concerning its dissolution. Hence their desire to proceed under Rule
12(b)(2) where the court may consider the pleadings and affidavits to determine whether
a personal jurisdiction is established. See AlixPartners, LLP v. Brewington, 836 F.3d
543, 548-49 (6th Cir. 2016).
Regardless of whether the HPP Defendants’ present personal-jurisdiction
challenge is procedurally correct, two axioms exist: The Court must have personal
jurisdiction over the HPP Defendants, and Plaintiffs bear the burden of establishing the
Court has personal jurisdiction over the HPP Defendants. See id. at 548-49. This burden
“is relatively slight” if the Court “relies on written submissions and affidavits…, rather
than resolving the motion after either an evidentiary hearing or limited discovery….” Air
Products and Controls, Inc. v. Safetech Intern., Inc., 503 F.3d 544, 549 (6th Cir. 2007).
The HPP Defendants also seek dismissal under Rule 12(c), arguing that they are
entitled to judgment in their favor on the pleadings. A motion for judgment on the
pleadings is reviewed under the same standards as a Rule 12(b)(6) motion to dismiss for
failure to state a claim upon which relief can be granted. J.H. Routh Packing Co., 246
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F.3d at 851. A complaint survives a motion for judgment on the pleadings when it
contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Engler v. Arnold, 862 F.3d 571, 575 (6th Cir. 2017) (quoting, in
part, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (other citation omitted)). “Mere labels
and conclusions are not enough; the allegations must contain ‘factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.’” Id. (quoting, in part, Iqbal, 556 U.S. at 678).
IV.

Discussion

A.

Are the HPP Defendants’ Potentially Liable Under CERCLA?
The HPP Defendants, as seen above, argue that they are dead and buried and

therefore not subject to CERCLA liability. Plaintiffs contend that the dead-and-buried
rule is inconsistent with CERCLA and does not apply in the present case (for various
reasons). Plaintiffs further contend that they are entitled to discovery on the issue of
whether the HPP Defendants are dead and buried.
CERCLA is 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.” Burlington Northern and Santa Fe Ry. Co. v. United States, 556 U.S.
599, 602 (2009) (internal punctuation omitted). “Appreciating the risk that never-ending
litigation might impede a ‘swift and effective response to hazardous waste
sites,’ Congress authorized … potentially responsible parties to launch clean-up efforts
first, then recover the costs from other responsible parties later—through settlements,
consent decrees and, if need be, judgments.” RSR Corp. v. Commercial Metals Co., 496
6

F.3d 552, 555 (6th Cir. 2007) (quoting, in part, Anspec Co., Inc. v. Johnson Controls,
Inc., 922 F.2d 1240, 1247 (6th Cir. 1991) (other internal citations omitted).
Plaintiffs seek to hold the HPP Defendants liable for their costs under CERCLA
provisions that provide, “‘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,’ shall be liable for ‘other necessary costs of response incurred by any
other person consistent with the national contingency plan.’” Garrett Day LLC v.
International Paper Co., No. 3:15cv36, 2017 WL 633467, at *2 (S.D. Ohio, 2017) (Rice,
D.J.) (emphasis added; quoting, in part, 42 U.S.C. § 9607(a)(2) and (a)(4)(B)); see Doc.
#161, PageID at 1473. CERCLA broadly defines the term “person” to include “an
individual, firm, corporation, association, partnership, consortium, joint venture,
commercial entity…,” 42 U.S.C. § 9601(21); see United States v. Atlas Lederer Co., 494
F.Supp.2d 649, 656 (S.D. Ohio 2007) (Rice, D.J.).
Recalling the HPP Defendants’ contention that they are “dead and buried” and,
therefore not persons under CERCLA—what is dead and what is buried? A “dead”
business entity is dissolved but has assets that a CERCLA plaintiff might reach. A “dead
and buried” entity is dissolved with no remaining assets. See AT&T Global, 1998 U.S.
Dist. LEXIS 19410, *6. In other words, the operations of a dead business entity have
perished and its remaining assets are moribund. A dead and buried business entity is
pushing up the daises.
The parties’ dead-and-buried contentions present two main issues. The first is an
issue of law: whether a dead-and-buried business entity is not a “person” under
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CERCLA. The second is factual: whether the HPP Defendants are dead and buried.
The U.S. Court of Appeals for the Sixth Circuit has neither addressed nor held that
a dead-and-buried business entity is not a person under CERCLA. At least two U.S.
District Judges in Ohio have accepted that a corporation cannot be sued under CERLCA
once it is dead and buried. Stychno v. Ohio Edison Co., 806 F.Supp. 663 (N.D. Ohio
1992) (Bell, D.J.) held, “where ‘the funeral is still going on’ and ‘corporate assets that
might be used to pay cleanup costs have not yet been distributed to shareholders’ there is
no good reason not to hold that corporation liable under CERCLA.” Id. at 670 (quoting,
in part, United States v. Sharon Steel Corp., 681 F.Supp. 1492, 1498 (D. Utah 1987)).
Relying in part on Stychno, the District Court in AT&T Global, 1998 U.S. Dist. LEXIS
19410 (Holschuh, D. J.) recognized, “[f]or purposes of CERCLA liability, the weight of
authority holds that a corporation cannot be sued once it is both ‘dead’ and ‘buried.’”
1998 U.S. Dist. LEXIS 19410, *5 (citations omitted); but see Town of Oyster Bay v.
Occidental Chemical Corp., 987 F.Supp. 182, 200 (E.D.N.Y. 1997) (“One line of cases
holds that a corporation’s dead and buried status is irrelevant to a determination as to
whether it can be subject to suit under CERCLA.”). Advancing the dead-and-buried rule
as an established principle of CERCLA law does not presently assist the HPP Defendants
because it remains to be seen whether, as a factual matter, it is dead and buried.
The HPP Defendants argue, “There can be no doubt whatsoever that they are dead
and buried as contemplated by AT&T Global. Each of them … has been dead for a very
long time (since 1992). The entities’ former shareholders do not live in Ohio and never
lived in Ohio. Each entit[y]’s legal status is a matter of public record….” (Doc. #177,
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PageID #1614). The HPP Defendants further assert that none of them holds any assets,
and none of them has any operations, directors, officers, or employees.
The HPP Defendants, however, overlook the crucial role that discovery plays in
determining whether a CERCLA defendant is dead and buried. For example, in AT&T
Global, the district found the defendant to be dead and buried after ordering the parties to
conduct discovery on the issue. The plaintiff, moreover, conceded that discovery had
unearthed evidence showing the defendant was dead and buried as of a certain date. 1998
U.S. Dist. LEXIS 19410 ,*5-*6. Permitting discovery was similarly crucial in Stychno
where the party seeking to impose CERCLA liability was “entitled to determine whether
the defendant corporation is both dead and buried.” 806 F.Supp. at 670. Similar cases
within the Sixth Circuit yield similar results. For example, in Traverse Bay Area Interm.
School Dist. v. Hitco, Inc., 762 F.Supp. 1298 (W.D. Mich. 1991) (Gibson, D.J.),
discovery was needed as to defendant Parsons’ remaining assets. The district court
explained:
[T]he question whether Parsons still holds assets and whether it is
a “person” under CERCLA are intertwined. Although an existing
corporation is clearly a “person” under CERCLA, a non-existent
corporation cannot be included within that definition. In such a case
there is no entity to sue or to defend against a lawsuit, and any
judgment entered by the court would be unenforceable, much less
uncollectible. To use the Gilman court's analogy, although [defendant]
Hitco may have shown that Parson’s is “dead,” in order to fulfill
CERCLA’s remedial goals, plaintiff is entitled to determine whether
the corporation has been “buried.” If it is established through
discovery that Parsons holds no assets whatsoever, then it no longer
exists. In that situation it is not a “person” under CERCLA and no
lawsuit can be maintained against it.

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762 F.Supp. at 1301-02 (emphasis added). Following Hitco, the plaintiffs in BASF Corp.
v. Central Transport, Inc., 830 F.Supp. 1011 (E.D. Mich. 1993) (Gadola, D.J.), “must
have the opportunity to conduct discovery in order to determine whether Hughes
Chemical still possesses or controls assets that subject it to CERCLA liability.” 830
F.Supp. at 1013.
The same reasoning and result adhere in the present case. The discovery phase
does not close until March 15, 2018. Meanwhile, the parties should engage in discovery
to determine whether or not the HPP Defendants are in fact dead and buried. Discovery
on this question is needed especially when the HPP Defendants rely on evidence outside
the First Amended Complaint, including the sworn Declaration of Frederick W. Harrison,
who states, “The HPP Defendants have been dissolved, paid their debts, distributed their
assets, completely wound up their affairs, and have been inactive for a period of time.”
(Doc. #177, PageID #1620). Harrison provides additional details. The problem this
evidence creates requires little reflection. By wandering astray of the pleadings,
Defendants have expanded the scope of their Rule 12(c) motion beyond its borders, i.e.,
the four corners of the pleadings. Two procedural options exist: ignore Harrison’s
Declaration or convert Defendants’ Rule 12(c) motion into a motion for summary
judgment. Luis v. Zang, 833 F.3d 619, 632 (6th Cir. 2016) (quoting, parenthetically,
Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389, 392 (6th Cir. 1975) (“It
seems clear then, that if affidavits are filed with the district court, the court must proceed
under Rule 56 unless the court decides to exclude the affidavits.”)). It is premature to
consider the HPP Defendants’ status in the summary-judgment context when months
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remain in discovery. Harrison’s Declaration, moreover, although it is on the right factual
track, might or might not be all it seems. He acknowledges, “I believe that Defendant
Harrison Holdings Limited Partnership’s assets were distributed within the 1992 calendar
year, it owned no property after December 31, 1992 and ceased operations.” (Doc. #172
PageID #1622). He expresses the same belief as to Defendant HMP Investors. Id. at
1621. While his beliefs on these factual matters might prove accurate, only additional
discovery will tell the tale. Consequently, judgment on the pleadings is not warranted
and conversion to summary judgment would be premature.5 Luis, 833 F.3d at 632.
Accordingly, the HPP Defendants are not entitled to judgment on the pleadings in
their favor on Plaintiffs’ CERCLA claims.6
B.

Do State Statutes of Repose Bar Plaintiffs’ Ohio Statutory Claim?
Plaintiffs claim that Defendants are liable for the costs they (Plaintiffs)

volunteered to incur in their investigations and cleanup of the Site under Ohio’s
Voluntary Action Program (VAP), Ohio Rev. Code § 3746.
The HPP Defendants contend that Plaintiffs’ VAP claims are barred against each
of them under Ohio’s and Delaware’s statutes of repose. They maintain that Ohio Rev.
Code § 1701.88(B) precludes Plaintiffs’ claims, no matter when they accrued, because
Plaintiffs did not bring them against the HPP Defendants within five years of the

5

Although the HPP Defendants rely on some arguably public records, those records to do not trigger an
exception to the four-corner rule because those document do not conclusively speak to all the dead-andburied circumstances at issue, particularly the factual accuracy (or not) of many of Harrison’s assertions.
6

This conclusion obviates the need to address Plaintiffs’ waiver argument and the HPP Defendants’
contention that they lack the capacity to sue or be sued.

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corporation’s dissolution. The HPP Defendants also assert that a similar three-year
statute of repose bars Plaintiffs’ claims under Del. Code Ann. Title 8, § 278 and Title 6, §
17-803. The statutes of repose, according to the HPP Defendants, are not preempted by
CERCLA and are enforceable.
Plaintiffs contend the Ohio statute upon which the HPP Defendants rely, Ohio
Rev. Code 1701.88(B)(2), did not go into effect until May 4, 2012 and specifically
instructed that it did not apply to claims arising before that date. The HPP Defendants
counter that even if Plaintiffs are correct, the previously applicable statute, Ohio Rev.
Code § 1701.89, provided Ohio common pleas courts with the discretion to stay the
prosecution of any action against a dissolved corporation concerning its property.
Plaintiffs correctly find that Ohio Rev. Code § 1701.88(B), by its own terms, is not
applicable to the dissolution of the HPP Defendants before May 4, 2012. Consequently,
§ 1701.88(B) does not bar Plaintiffs VAP claims against the HPP Defendants. More
significantly—and a point the parties miss—is that the Ohio legislature has chosen to
allow more recent VAP claims than a statute of repose would permit:
The person conducting the voluntary action may commence the
civil action at any time after the person has commenced the conduct
of the voluntary action. Notwithstanding section 2305.09 of the
Revised Code, a civil action shall be commenced under this section
within three years after the applicable no further action letter was
submitted to the director of environmental protection under section
3746.11 of the Revised Code in connection with the voluntary action.
Ohio Rev. Code § 3746.23(C). This three-year limitation period is consistent with Ohio’s
doubtless desire to promote the cleanup of hazardous substances from its land and to
protect its citizens from the perilous health hazards such hazardous substances create.
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Plaintiffs allege in their First Amended Complaint, “A No Further Action letter
was issued on February 13, 2012….” (Doc. #144, PageID #1243). Plaintiffs filed the
present case on January 30, 2015, within three years of the date the No Further Action
letter issued. Consequently, their present VAP claims against the HPP Defendants are
not time barred.
Lastly, because Plaintiffs are entitled to conduct discovery about the particular
circumstances of the HPP Defendants’ death and burial, it is premature to apply any
statute of repose to bar Plaintiffs’ VAP claims.
Accordingly, the HPP Defendants’ are not entitled to judgment in their favor on
Plaintiffs’ VAP claim.
IT IS THEREFORE RECOMMENDED THAT:
The HPP Defendants’ Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(2) and
12(c) be DENIED.

November 15, 2017

s/Sharon L. Ovington
Sharon L. Ovington
United States Magistrate Judge

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NOTICE REGARDING OBJECTIONS
Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written
objections to the proposed findings and recommendations within FOURTEEN days after
being served with this Report and Recommendation. Such objections shall specify the
portions of the Report objected to and shall be accompanied by a memorandum of law in
support of the objections. If the Report and Recommendation is based in whole or in part
upon matters occurring of record at an oral hearing, the objecting party shall promptly
arrange for the transcription of the record, or such portions of it as all parties may agree
upon or the Magistrate Judge deems sufficient, unless the assigned District Judge
otherwise directs. A party may respond to another party=s objections within FOURTEEN
days after being served with a copy thereof.

Failure to make objections in accordance with this procedure may forfeit rights on
appeal. See Thomas v. Arn, 474 U.S. 140 (1985); United States v. Walters, 638 F.2d 947,
949-50 (6th Cir. 1981).

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