Buffalo Avenue (the "Buffalo Avenue site" or the "site") in
Niagara Falls, New York. Item 1056, ¶ 4. Solvent's "principal
products of manufacture were various technical and refined grades of
chlorinated benzenes and zinc chloride solution." Id., ¶ 12.
In 1983, the State of New York (the "State") brought an action
against, inter alia, Solvent pursuant to section 107(a) of CERCLA,
42 U.S.C. § 9607(a), "seeking recovery of costs incurred and to be
incurred, and other relief, in responding to the release or threatened
release of hazardous substances at or in connection with the property
located at and near 3163 Buffalo Avenue, Niagara Falls, New York . . . ."
Item 1056, Ex. 3, p. 2. In December 1996, the State issued a Record of
Decision ("ROD") identifying a number of hazardous substances in the soil
and groundwater at the Buffalo Avenue site and calling for specific
remedial activities to be undertaken there. Item 1056, Ex. 1. Zinc was
among the contaminants identified in the ROD. Id., pp. 10-11. Zinc is
listed as a hazardous substance pursuant to section 101(14) of CERCLA,
42 U.S.C. § 9601(14). Item 1056, Ex. 2.
In April 1997, Solvent and the State entered into a Consent Decree, in
which Solvent agreed to implement the remedy set forth in the ROD. Item
1056, Ex. 3. The Consent Decree was approved by this court on October 8,
1997. Item 655. It reserved Solvent's right to seek contribution against
other non-settling parties. Item 1056, Ex. 3, ¶ 47. It also provided
that the remedial actions to be undertaken to clean up the site should be
conducted in compliance with applicable provisions of CERCLA and the
National Contingency Plan, 40 C.F.R. Part 300. Id., ¶ 6. Solvent then
proceeded to file third-party actions seeking, inter alia, statutory
contribution under CERCLA against other alleged owners, operators,
transporters, and those who arranged for disposal at the site. Solvent
asserts that it has incurred over $4.4 million in response costs at the
site, and anticipates that it will incur over $20 million in total
response costs. Item 1056, ¶¶ 6, 7.
On April 3, 1998, in its fifth-amended third-party complaint, Solvent
impleaded Bay State and Benjamin Sack*fn1 as third-party defendants,
seeking contribution from each of them under CERCLA for a share of the
response costs Solvent has and will incur at the site. Item 1056, Ex. 4.
The complaint charged Bay State and Sack, and a number of other parties
collectively referred to as the "Zinc Waste Generators," id., ¶ 85,
with selling zinc wastes to Solvent between approximately 1973 and 1978.
Id., ¶ 141. The complaint asserted that when the Zinc Waste
Generators provided zinc wastes to Solvent, "they arranged for the
disposal of and/or treatment of the Zinc Wastes . . . and any hazardous
substances contained therein." Id., ¶ 143. The complaint further
alleged that the Zinc Waste Generators were unable to use the Zinc Wastes
which they sold to Solvent unless they were further processed. Id.,
¶ 144. In addition, Solvent claimed that if the Zinc Waste Generators
had not provided these wastes to Solvent, "they would have had to
otherwise treat or dispose of them." Id., ¶ 145. The Zinc Waste
Generators, asserted Solvent, were able to arrange for the disposal of
and/or treatment of the zinc wastes and alleged hazardous substances
contained therein by selling them to Solvent for a nominal price or
giving them to Solvent at no cost. Id., ¶ 146.
In their answer, Bay State and Sack raised thirty-four affirmative
defenses. Item 1056, Ex. 5. They did not raise the
defense,*fn2 although the thirty-first defense incorporated by reference
all applicable defenses set forth in the answers of other third-party
defendants. Id., p. 11. Other defendants have included the "useful
product" defense in their answers. See Item 1000, Ex. 5, p. 19.
The cross-motions for summary judgment primarily concern whether the
sales of zinc oxide and zinc skimmings by Bay State to Solvent
constituted arrangements for treatment or disposal under CERCLA —
which would be an element of CERCLA liability — or sales of a
useful product — which would obviate CERCLA liability.
Most of the facts in this case are undisputed; the parties contest the
legal significance of those facts.
On December 29, 1967, Sack Smelting Co., Inc., was incorporated by
Benjamin Sack and two other incorporators in the State of Massachusetts.
Item 1035, Ex. A. On March 26, 1968, Sack Smelting Co., Inc., was granted
the right to operate under the name Bay State Smelting Co., Inc. ("Bay
State"), while at the same time, under the same Article of Amendment, the
"original" Bay State Smelting Co. changed its name to Benjamin Smelting
Co., Inc. Item 1033, p. 2, n. 1; Item 1035, Ex. B. Bay State operated
from 15A Bleachery Court in Somerville, Massachusetts, from 1968 until
its voluntary dissolution in 1996. Item 1035, Ex. C.
Bay State was in the business of smelting non-ferrous metals and
trading scrap metals. Item 1056, Ex. 6, pp. 9-10. It "recycled previously
manufactured non-ferrous metal products," Item 1032, Sack Aff., ¶
11. Bay State produced brass and bronze ingots by melting scrap metal in
its furnaces, and sold the ingots to various foundries which made brass
and bronze metal goods. Id. Brass contains zinc; and when brass is
melted, a portion of the zinc boils off. Item 1054, ¶ 12. During the
smelting process, "[t]he zinc in the flue dust oxidize[s] . . . to form
zinc oxide." Item 1032, Sack Aff., ¶ 12.
Gerald Sack, son of Benjamin Sack, worked at Bay State from 1964 to
1994 in a number of capacities. Item 1032, ¶ 4. At his deposition, he
described Bay State's operations. He explained that the zinc oxide flue
dust "was collected in the bag houses [filters] and put into fiber
drums. And we had a closed trailer at the doorway of the furnace. And
every night they would take the full barrels of the zinc oxide and double
stack them into a trailer until the trailer was full." Item 1056, Ex. 6,
p. 14. Bay State would then "put a tractor under the trailer and drive it
to wherever we sold the bi-product." Id., p. 15. Gerald Sack knew of two
customers that bought Bay State's zinc oxide flue dust: Solvent and
Madison Industries. Id. He also testified that Bay State's
Superintendent, Irving Bond, was the person who handled the disposition
of the flue dust and the environmental permits. Id., pp. 12, 14.
In his affidavit, Gerald Sack stated that the "zinc oxide material was
not melted prior to sale or otherwise processed," and that "Bay State's
operations did not produce zinc chloride wastes." Item 1032, Sack Aff.,
¶¶ 14, 15. He also stated:
To my knowledge, Solvent and other zinc oxide
customers consistently paid for the zinc oxide, which
Bay State collected and sold as a raw material. The
sale of zinc oxide from the non-ferrous scrap smelting
operations was one of several sources of revenue
generated from that business.
At the time of the zinc oxide sales to Solvent, Bay
State would have assumed that the material was being
used as a raw material by Solvent.
Id., ¶¶ 16, 19.
Bay State sold zinc oxide flue dust to Solvent from 1974 to 1978. Item
1035, Ex. E. In May 1978, Solvent also purchased materials called "zinc
skimmings" or "sal skimmings" from Bay State. Id., pp. 40065, 40067,
Solvent's weekly production reports detail the ingredients used and
costs involved in manufacturing zinc chloride. Item 1035, Ex. E. The
production reports consistently list flue dust from Bay State (and other
suppliers) as a raw material. Id. Often the production reports contain a
raw material inventory, and Bay State's (and other suppliers') flue dust
is listed. Id., p. 7323. The cost of purchasing zinc oxide was included
in Solvent's zinc chloride production cost calculations. Id. at p. 4955.
Solvent's production reports also reveal that Solvent paid between
$0.03 and $0.08 per pound for Bay State's flue dust. Item 1035, Ex. E.
Solvent paid $0.03 per pound for the sal skimmings. Id.
In a note on the July 8-July 21, 1974 production report, Kabir Khalid,
a Solvent employee, wrote, "Please observe that the unit cost of
production is lower than those of previous weeks due to reduced manpower
usage. It has been possible to maintain the level of production with
reduced manpower because of the excellent quality of flue dust (Bay
State) which has made charging of digesters less manhours consuming."
Item 1035, Ex. E, p. 7237. There are references in other production
reports indicating the good quality of flue dust that Solvent received
from Bay State. In the May 25, 1975 raw material inventory, Ranjit Roy
wrote that, "[o]f this inventory [a total of 124,900 pounds] only 36,000
lbs of Bay State is good, usable flue dust." Item 1035, Ex. E, p. 5016.
On the other hand, Solvent experienced quality problems with the flue
dust it received from other suppliers. A number of production reports
indicated that the flue dust shipped from sources other than Bay State
was unusable, often because it was wet. Item 1035, Ex. E, pp. 5016,
5030. In another case, the July 6, 1975 raw material inventory had a star
next to Purity Zinc's 15,000 pounds of flue dust. The star indicated:
"This flue dust is unusable since it contains sulfur compounds which
generate H2S on reaction with acid. H2S is a toxic gas and inhalation in
large amounts can be fatal" Id., p. 5024.
Solvent did complain, however, about the cleanliness of the material
supplied by Bay State and other flue dust providers. Ranjit Roy authored
an internal memorandum dated February 11, 1975, entitled, "Flue Dust From
Sources Such As Bay State Smelting, New England Smelting, etc." He stated
that while the flue dusts are "very good in quality" and had "very few
other impurities," the dusts from their suppliers were "full of `junk'
— plastic sheets, beer cans, steel plates and other garbage, and
this is a major drawback in terms of equipment failure and downtime."
Item 1054, Ex. D. Apparently referring to this memorandum, Sanford
Schwartzman wrote a memorandum to Solvent President Bertram White, dated
February 28, 1975. The memorandum read in part:
In a recent memo Roy requested that we clean up the
high quality flue dust received from Bay State. It
seems that although the quality of the dust is very
good, the cleanliness of the material is awful, and it
is contaminated with all sorts of foreign matter that
gets caught in our digestor blades and act as knives,
rotating on the blades, to destroy our tanks. One
possible solution might be to get Bay State to clean
up their operation, even if it costs something to
accomplish this. The alternatives to this
would be to
screen the Bay State flue dust once it arrives. This
is a dusty, messy, expensive and toxic problem, but
must be done if there are no other alternatives.
Item 1054, Ex. E, p. 5