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CONSOLIDATED EDISON CO. OF NEW YORK v. UGI UTILITIES

March 29, 2004.

CONSOLIDATED EDISON CO. OF NEW YORK, INC., Plaintiff, -against- UGI UTILITIES, INC., Defendant


The opinion of the court was delivered by: DENNY CHIN, District Judge

OPINION

In this case, brought pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601-9675, plaintiff Consolidated Edison Company of New York, Inc. ("Con Ed") seeks to hold defendant UGI Utilities, Inc. ("UGI") liable for environmental response costs Page 2 related to soil and groundwater contamination from manufactured gas plant ("MGP") activities undertaken from 1898 to 1904 at sites owned by a subsidiary and a predecessor of UGI. Defendant moves for summary judgment pursuant to Fed.R.Civ.P. 56. For the reasons set forth below, defendant's motion is granted.

  STATEMENT OF THE CASE

 I. The Facts

  For purposes of this motion, the facts are construed in the light most favorable to Con Ed as the party opposing summary judgment.

  A. The Origins of UGI, 1882-1887

  United Gas Improvement Company ("UGIC") was formed in June 1882 by a group of Philadelphia business men for the purpose of "manufacturing gas and gas-making machinery" based on the patent for a "water gas" process and apparatus, obtained in April 1882 from inventor Thaddeus S.C. Lowe. (Def. Exh. 2 at 32, 34-39; Gary Aff., Exh. 4 at UGI 1353; Gary Aff., Exh. 3 at UGI 5332). Lowe water gas was an improvement over coal gas because it produced more light at a lower cost. (Gary Aff., Exh. 4 at UGI 1353). UGIC sought ways to exploit and use this new technology, including by purchasing certain existing gas works, establishing or building new gas works that it would use itself or sell to others, and entering into agreements to operate certain gas plants in return for a share of the profits. (Def. Exh. 2 at 32-33; Def. Exh. 4 at 89; Gary Aff., Exh. 5 at 96). Page 3

  Under Pennsylvania law, UGIC could not hold stocks in another corporation. (Gary Aff., Exh. 5 at 96). Accordingly, in 1887, the owners of UGIC formed a new company called the Union Company and used it to acquire an old Pennsylvania corporate charter with broad powers that included the right to own other corporations. (Def. Exh. 4 at 89; Gary Aff., Exh. 5 at 96-97). The name of this new company was then changed to The United Improvement Company ("TUGIC"). (Id.).

  B. UGI Acquisitions in New York. 1888-1900

  TUGIC, which would later become UGI, purchased all of the assets of UGIC in 1888 and then used the charter to acquire gas and electric properties across the United States. (Id.; Def. Exh. 3 at 62-67).

  UGI*fn1 acquired ownership interests in the White Plains Lighting Company and Hudson River Gas & Electric Company of Tarrytown in 1898 and 1900, respectively. (Gary Aff., Exh. 29; Exh. 33 at ENV 93, 95; Def. Exh. 9 at 276).

  In a January 1900 Board Meeting, UGI President Thomas Dolan reported that UGI had acquired interests in, inter alia, New Rochelle Electric Company, Pelham Electric Light and Power Company, Port Chester Electric Light Company, and the White Plains Electric Company. (Def. Exh. 6 at 114). Dolan also reported that UGI had organized a company known as WestChester Page 4 Gas and Coke Company, which had gas franchises in Mount Vernon and New Rochelle. (Id.).

  In March 1900, UGI acquired the New York Suburban Gas Company ("New York Suburban") from the American Gas Company ("American Gas") (Def. Exh. 7), itself a consolidation of utility companies owned by American Gas — the Eastchester Gas Light Company, the Pelham Gas Light Company, the Larchmont Gas Company, the Westchester Gas and Electric Company, and the New Rochelle Gas and Fuel Company. (Def. Exh. 8). UGI thereby acquired interests in MGP sites in Mount Vernon, New Rochelle, Pelham, Port Chester, and Rye.

  Each company in which UGI invested had a superintendent who oversaw the day-to-day activities of the gas plant. (Macey Dep. at 292-94). UGI developed an audit system pertaining to its various subsidiaries' budgets, expenditures, and best practices. (Def. Exh. 4 at 98).

  According to an April 9, 1894 account in the Daily Philadelphia Stockholder describing UGI, each UGI subsidiary

  "should have a separate and independent organization, reporting, however, to the head office in [Philadelphia]. . . . The local superintendents are thus kept in close touch with the home office, and they take no important step which is not specifically authorized. While their instructions are to purchase in the city where each plant is located all needful supplies obtainable there, and thus give to each city the benefit of outlays in part incidental with the carrying on of the business, supplies, such as coal, oil, cast iron pipe, etc., are purchased through the home office, in order that here in the East the company may secure the benefit of minimum prices. Attached to Page 5 the company is a corps of traveling auditors, one of whom visits each local company every three months and makes an examination of its operations and reports thereon to the home office. . . . Not a dollar is outlayed for its account at any point or for any purpose which is not first approved at the home office, and there is the closest scrutiny into each item of expense. . . . Annually there is a convention of superintendents of the local companies, presided over by the general superintendent, at which, besides reports of each as to the operations of the plant or plants under his control, papers are read on practical subjects relating to the objects of the company, etc.

 (Gary Aff., Exh. 6 at 2).

  C. Formation and Operation of WLC

  1. Formation

  In November 1900, UGI organized a new subsidiary to be called the Westchester Lighting Company ("WLC"). (Def. Exh. 10 at CE/UGI 6375). WLC was incorporated for the purpose of "manufacturing and supplying gas for lighting the streets and public and private buildings or cities, villages and towns in the State of New York, and for manufacturing and using electricity for producing light, heat and power. . . ." (Def. Exh. 10 at 281). UGI owned more than 80% of WLC's total shares. (Def. Exh. 11 at 535).

  At their first board meeting on November 9, 1900, WLC's nine directors appointed a special committee to "investigate and make inquiry" into the desirability of acquiring the various Westchester gas and electric entities owned by UGI. (Def. Exh. 11 at 295, 297). The committee, with the help of a gas and Page 6 electric light business expert, approved the proposed acquisition and merger. (Id.).

  On November 30, 1900, the WLC board acquired and then merged the companies in which it had obtained interests: the Pelham Electric Light and Power Company, Port Chester Electric Lighting Company, Larchmont Electric Light Company, Eastchester Electric Company, and the Westchester Gas and Coke Company. (Def. Exh. 11 at 307-13). Accordingly, WLC became the owner of MGP sites in Rye, Mount Vernon, Pelham, Port Chester, and New Rochelle.

  In February 1901, WLC purchased the Hudson River Gas and Electric Company and the White Plains Lighting Company. (Id. at 459-61). In November 1902, WLC merged the companies into WLC. (Id.). WLC thus became the owner of MGP sites in Tarrytown and White Plains.

  2. Operations

  a. Board of Directors

  Upon WLC's creation in 1900, none of the first nine men listed in the WLC Certificate of Incorporation and selected to serve on WLC's board were dual office-holders. (Def. Exh. 11 at 289; Def Exh. 12 at 724). At no time during 1900 to 1904 did UGI directors, officers, or employees constitute a majority of the directors or officers of WLC. (Def. Exh. 12 at 724-25).

  During the first months of the WLC board's existence, the directors appointed an executive committee to help manage the company, elected its president who would serve for the next four Page 7 years, and reviewed the strength of each constituency company before effecting the large-scale merger. (Def. Exh. 11 at 296-301, 446).

  In 1901, three of the nine WLC directors held UGI senior executive positions. (Def. Exh. 12 at 724). Two of the other board members — A.M. Young and R.A.C. Smith — had worked "in conjunction" with UGI to acquire possession of the New Rochelle Electric Company, Pelham Electric Light and Power Company, Port Chester Electric Light Company, Larchmont Electric Light Company, Eastchester Electric Company, and White Plains Electric Company. (Def. Exh. 6 at 114; Exh. 11 at 446-47).

  In 1902 and 1903, four of the eleven WLC directors held UGI senior executive positions. (Id.). In 1904, four, then five, of eleven directors held UGI senior executive positions. (Id.).

  From 1900 to 1904, UGI senior executives never held the positions of WLC president, vice president, or secretary. (Id.). UGI executives did hold positions as WLC treasurer, assistant secretary, and managing director. (Id.). Specifically, UGI's treasurer Lewis Lillie was elected to assistant secretary and treasurer of WLC. (Def. Exh. 11 at CE/UGI 12469, 19079). UGI's general superintendent Walton Clark was named WLC managing director. (Id. at CE/UGI 19078).

  The managing director "shall have the general management of the business and properties of the company, and shall perform such other duties as may be imposed upon him by the Page 8 board of directors." (Def. Exh. 11 at CE/UGI 12387). According to the WLC bylaws, the duties of WLC's president included "presid[ing] at all meetings of the board of directors," "act [ing] as temporary chairman at and call [ing] to order all meetings of the stockholders," "countersign[ing] all checks, and . . . sign[ing] drafts, notes, certificates of stock, and all contracts and other instruments, unless otherwise ordered by the board." (Def. Exh. 11 at CE/UGI 12385). ...


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