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The State of New York v. Solvent Chemical Company

May 16, 2012

THE STATE OF NEW YORK, PLAINTIFF,
v.
SOLVENT CHEMICAL COMPANY, INC., AND
INDUSTRIES, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
OLIN CORPORATION AND E.I. DU PONT DE NEMOURS & COMPANY, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: John T. Curtin United States District Judge

On January 26, 2010, following years of protracted litigation and a lengthy non-jury trial, this court issued a Memorandum of Decision incorporating its findings of fact and conclusions of law on the issues pertaining to liability and equitable allocation of responsibility for response costs incurred in remediating environmental contamination at adjoining industrial sites located in Niagara Falls, New York, pursuant to the Comprehensive Environmental Response and Compensation Act ("CERCLA"), 42 U.S.C. §§ 9601--9675. New York v. Solvent Chemical Co., Inc., 685 F. Supp. 2d 357 (W.D.N.Y. 2010). The court awarded third-party plaintiff Solvent Chemical Company, Inc. ("Solvent") contribution from third-party defendant E.I. du Pont de Nemours & Company ("DuPont") in the amount of $2,050,371, and from third-party defendant Olin Corporation ("Olin") in the amount of $462,288, for past costs associated with the remediation of contaminated soil and groundwater at Solvent's facility located at 3163 Buffalo Avenue (the "Solvent Site"), and groundwater contamination at a portion of Olin's neighboring property known as the "Olin Hot Spot." The court denied Solvent's request for declaratory judgment as to liability for future cleanup costs, determining upon consideration of the equitable factors "that final judgment regarding the allocation of future costs to any party other than Solvent would be premature." Id. at 455-56. Judgment was entered on May 14, 2010 (Item 1547), and all parties appealed.

On December 19, 2011, the Second Circuit Court of Appeals entered separately (1) an Opinion and (2) a Summary Order constituting its ruling on the parties' appeals. New York v. Solvent Chemical Co., Inc., 664 F.3d 22 (2d Cir. 2011) ("Opinion"); New York v. Solvent Chemical Co., Inc., 453 F.App'x 42 (2d Cir. 2011) ("Summary Order"). The ruling vacated this court's allocation of response costs as between Solvent, DuPont, and Olin with respect to the Olin Hot Spot, and reversed the judgment insofar as this court declined to issue a declaratory judgment in favor of Solvent against DuPont and Olin as to liability for recovery of future response costs. The ruling affirmed this court's findings of fact and conclusions of law in all other respects, and remanded only for reallocation of response costs for the Olin Hot Spot and entry of declaratory judgment in favor of Solvent on liability for future response costs.

In the wake of this ruling, a status conference was held with counsel on February 15, 2012 to discuss the parties' respective positions regarding an appropriate way to address the matters necessary for compliance with the Second Circuit's directives on remand. Failing to reach a consensus, the parties were ordered to submit written proposals, which the court has now had the opportunity to consider.

Upon full consideration of the Second Circuit's Opinion and Summary Order, and for the reasons discussed below, the court finds that those portions of its January 26, 2010 findings of fact and conclusions of law that were either expressly affirmed or undisturbed on appeal remain binding on the parties, and provide a solid basis for both reallocation of responsibility at the Olin Hot Spot and entry of declaratory judgment in favor of Solvent regarding equitable allocation of ongoing remediation costs. This can be done without resort to additional discovery, presentation of evidence, briefing, argument, or other wasteful re-visitation of issues that have been exhaustively litigated during years of pretrial proceedings, lengthy trial on the merits, and on appeal. Accordingly, in the interests of economy of public and private resources, judicial efficiency, and finality, the court turns to the record as it stands for compliance with the directives on remand.

To recap, in its decision after trial, this court found DuPont and Olin liable for contribution under CERCLA § 113(f) for an equitable share of response costs incurred by Solvent to remediate contamination at both the Solvent Site and the Olin Hot Spot by virtue of the migration of hazardous substances to both areas from the DuPont and Olin facilities. Solvent Chemical, 685 F. Supp. 2d at 430-38. The court then adopted, with certain modifications, the volumetric allocation methodology proposed by Solvent's allocation expert, James Kohanek, and allocated responsibility among the three parties for costs incurred through the agreed upon date of June 30, 2007 for each of the four separate components of the remediation--the contaminated soils at the Solvent Site; the shallow overburden (or "A--Zone") groundwater contamination at the Solvent Site; the bedrock (or "B--Zone") groundwater contamination at the Solvent Site; and the groundwater contamination at the Hot Spot.*fn1 The court dismissed Solvent's claim for a declaratory judgment against both DuPont and Olin with respect to remediation costs incurred after June 30, 2007, finding upon consideration of "key equitable factors" that "final judgment regarding the allocation of future costs to any party other than Solvent would be premature." Id. at 455--56.

The parties each appealed different aspects of this court's findings of fact and conclusions of law. For its part, Solvent appealed the denial of the request for a declaratory judgment and the allocation of costs incurred at the Olin Hot Spot. DuPont appealed the court's ruling on certain discrete issues regarding threshold contribution liability under CERCLA, and the court's failure to consider toxicity as a factor in determining the groundwater allocation. Olin challenged certain issues related to the court's allocation of responsibility for costs incurred in connection with the cleanup of Gill Creek. Significantly, neither DuPont nor Olin appealed this court's adoption of Mr. Kohanek's volumetric-based allocation methodology, or for that matter, any of the court's factual findings or evidentiary rulings with respect to hydrogeology and groundwater migration pathways between the various facilities. See Item 1566, pp. 2-4.

In its December 19, 2011 Opinion and Summary Order, the Second Circuit sustained both of Solvent's arguments on appeal, while rejecting all of the arguments raised by DuPont and Olin. With respect to the claim for declaratory judgment, the circuit court found that while the equitable factors considered by this court in declining to issue a final judgment might justify a refusal to allocate future cleanup responsibility, they did not support the refusal to grant declaratory judgment as to liability itself. The Second Circuit stated:

The district court has already decided that Olin and DuPont were liable for contribution as to historical losses. Save for the possibility that the DEC might in the future impose different remedies to clean up the chlorinated aliphatics, none of the factors identified by the court distinguishes between past and future cleanup. That is to say, the factors do not explain why DuPont and Olin should pay for cleanup costs through June 30, 2007, but not for those incurred on July 1, 2007 and thereafter. And should the DEC take action in the future regarding chlorinated aliphatics, the district court can consider that fact in allocating costs down the road. Even concern over the future role of chlorinated aliphatics in the ongoing cleanup would not affect Olin's responsibility to contribute to cleanup costs based on its discharge of chlorinated benzenes.

Opinion, 664 F.3d at 26. Upon considering the factors for determining whether to issue a judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a), the circuit court found that declaratory judgment was necessary in this case for statute of limitations purposes "to ensure an equitable apportionment of cleanup costs that (as is common) are incurred over many years .," id. at 26-27, and because the " 'costs and time involved in relitigating issues as complex as these where new costs are incurred would be massive and wasteful.' " Id. at 26-27 (quoting Boeing Co. v. Cascade Corp., 207 F.3d 1177, 1191 (9th Cir. 2000)).

With respect to the allocation itself, the Second Circuit found that this court did not abuse its discretion when it calculated equitable shares of responsibility for the B-Zone groundwater contamination based on the allocation framework proposed by Mr. Kohanek. The circuit court noted that, in constructing his proposal, Mr. Kohanek relied on the findings of other experts as to migration pathways and use of a "tracer" compound associated with DuPont's plant to conclude that 68.39% of the B-Zone groundwater being remediated at the Solvent Site contained chlorinated aliphatics, and 31.61% contained chlorinated benzenes. He attributed 98% of the chlorinated aliphatic share to DuPont, and 2% to Solvent, and he attributed 98% of the chlorinated benzene share to Solvent and 2% to Olin. This court found that equitable considerations required modification of Mr. Kohanek's proposed share percentages in order to adequately account for the principal negative environmental impact of the contaminants driving the groundwater remedy--i.e., chlorinated benzenes and chlorinated benzene DNAPL. The court determined that this could be accomplished by splitting the difference between the risk analysis rates as calculated by Solvent (on the basis of pumping well data) and DuPont (on the basis of monitoring well data), to arrive at adjusted relative contribution rates of 62.05% for chlorinated benzenes and 37.95% for chlorinated aliphatics. DuPont's share of the chlorinated aliphatic contamination was then discounted by 10% to further account for "the overwhelming evidence of the extensive chlorinated benzene contamination as the primary negative environmental impact driving the overall remedy at issue in this litigation," Solvent Chemical, 685 F. Supp. 2d at 451, resulting in the allocation of the costs associated with the B-Zone groundwater remedy at the Solvent Site at 65.98% to Solvent, 33.39% to DuPont, and 0.63% to Olin. The Second Circuit expressly rejected DuPont's challenge to this allocation on the ground that the court's adoption of Mr. Kohanek's methodology overlooked the relative toxicities of the contaminants, finding "no abuse of discretion." Summary Order, 453 F.App'x at 48.

This court again relied on Mr. Kohanek's framework to allocate the costs associated with the groundwater remedy at the Olin Hot Spot. Based primarily on the volumetric analysis of the pumping well data, Mr. Kohanek determined that chlorinated aliphatics (for which DuPont was 100% responsible) constituted 93.52% of the contamination in the Hot Spot groundwater, and chlorinated benzenes (for which Olin was 98% responsible) constituted 6.48% of the Hot Spot groundwater contamination. He therefore proposed that DuPont bear 93.52%, Olin 6.35%, and Solvent 0.13% of the costs associated with the Hot Spot groundwater remedy. This court once again reasoned that the "overwhelming evidence of the extensive chlorinated benzene and DNAPL contamination" required modification of these percentages to reflect the same equitable considerations made with respect to the allocation of the responsibility for the costs associated with the B--Zone remedy at the Solvent Site, resulting in a "discounted relative share of 33.39%" for DuPont. Solvent Chemical, 685 F. Supp. 2d at 452-53. The court adopted Mr. Kohanek's proposed assessment of Olin's allocable share at 6.35%, leaving Solvent to bear 60.26% of the responsibility of the responsibility for the costs associated with the Hot Spot remedy.

The Second Circuit found inadequate support for these calculations. According to the circuit court:

Solvent's proposal that Olin bear 6.35% of the cleanup costs for the Olin Hot Spot was premised on the view that 93.52% of the costs resulted from contamination by chlorinated aliphatics, of which DuPont was the sole producer. The district court's rejection of this view in favor of a finding that the remedy was driven primarily by contamination from chlorinated benzenes-which both Olin and Solvent produced-therefore removes the foundation for the 6.35% figure. Moreover, the district court should not, without further explanation, have borrowed for its Hot Spot findings the same percentage of responsibility it had allocated to DuPont for B--Zone contamination at the Solvent Site. There was substantial dispute about the nature and extent of contamination at the Hot Spot, as well as about the similarity (or lack thereof) between the contamination at the Hot Spot and at the Solvent Site. Absent resolution of at least some of these issues, the district court's use of its allocation at the Solvent Site in allocating costs for the Hot Spot is not supported. Although the district court was disserved by the "parties' inability to reach any workable consensus as to the reasonable scientific conclusions" to be drawn from the evidence, the finding made nevertheless lacks support.

Summary Order, 453 F.App'x at 49 (quoting Solvent, 685 F. Supp. 2d at 452). The circuit court therefore vacated this court's allocation of response costs for the Olin Hot Spot, and remanded "to reallocate response for the Olin Hot Spot and to enter a declaratory ...


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