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General v. Lewis Bros.

August 31, 2012

GENERAL MOTORS LLC PLAINTIFF,
v.
LEWIS BROS., L.L.C., SAMUEL LEWIS,
AND TIMOTHY LEWIS, DEFENDANTS.



The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court

DECISION AND ORDER

I. INTRODUCTION

Plaintiff General Motors LLC ("GM") commenced this action on September 2, 2010, asserting twelve claims for relief. On March 14, 2011, GM moved for a preliminary injunction and appointment of a receiver. It seeks an order requiring Lewis Bros. to comply with various agreements, and enjoining it from releasing PCB contaminated oil onto GM's Tonawanda Engine Plant property. Through the appointment of a receiver, GM seeks to prevent Lewis Bros. from diverting assets and depleting resources that should be used to prevent PCB contamination.

Oral argument was held on May 9, 2011, after which this matter was referred to Magistrate Judge Foschio for an expedited discovery schedule relative to GM's motion. When discovery was largely complete,*fn1 this Court held a series of conferences-during which Defendants retained new counsel-and set a schedule for post-discovery submissions. This matter is now fully briefed. For the reasons stated below, GM's motion is denied without prejudice.

II. BACKGROUND

A. Factual Background

1. The Properties

The two properties at issue here, located in Tonawanda, New York, were at one time owned and operated as a single property by General Motors Corporation ("GMC"). (Docket No. 18, ¶ 1, Ex. 1.) GMC operated both an Engine Plant and a Forge Facility there. In 1994, GMC sold the Forge Facility, to American Axle and Manufacturing, Inc. ("AAM"). (Id. ¶¶ 2-5, Exs. 2-3.)

Prior to the sale, the Engine Plant and Forge Facility shared utilities, including a system that draws "mill water" from the Niagara River to cool machinery and for fire protection. (Docket No. 17 ¶¶ 6,9.) The used mill water, along with storm water and wastewater from both operations, was collected in a shared storm sewer, sent to a corrugated plate interceptor ("CPI"), and returned to the Niagara River as allowed under a New York State Pollutant Discharge Elimination ("SPDES") permit. (Id. ¶¶ 5,7,13.) The CPI is designed to slow the flow of storm water to allow oily residues to float to the top and sediments to collect at the bottom, so they can be collected and disposed of, rather than discharged. (Id. ¶ 10.) The electric power needed to run both facilities was managed by a primary electric substation. Both the CPI and substation are located on what is now the Engine Plant site. (Id. ¶ 9.)

GMC and AAM agreed that, following the sale, GMC would continue to provide utilities to AAM via the existing shared systems. The entities entered into a Tonawanda Services Agreement (the "Services Agreement"), a Tonawanda Wastewaters and Stormwater Services Agreement (the "Wastewaters Agreement"), an Asset Purchase Agreement ("APA"), and a deed transferring title. (Id. ¶ 9; Docket No. 18 ¶ 7, Exs. 2-5.)

2. The Subsequent Property Transfer from AAM to Lewis Bros.

In 2008, AAM entered into a contract to sell the Forge Facility property to Defendant Lewis Bros., and title was transferred on December 3, 2008. (Docket No. 18 ¶¶ 8-9.) At that same time, AAM sold to FormTech the Forge Facilities' operating assets. (Id. ¶ 11.) Lewis Bros. then leased a portion of its newly-purchased property to FormTech.*fn2 (Id. ¶ 13.) As part of the AAM to Lewis Bros. property transaction, AAM, Lewis Bros., and GMC executed an Assignment Agreement, assigning the Wastewaters Agreement and Services Agreement, as amended and modified, from AAM to Lewis Bros. (Id. ¶ 14, Ex. 10.)

Approximately six months after Lewis Bros. assumed ownership of the Forge Facility site, on June 1, 2009, GMC filed for Chapter 11 bankruptcy protection. (Id. ¶ 15.) Among other things, GMC and certain of its affiliates sought bankruptcy court approval of an "Amended and Restated Master Sale and Purchase Agreement," by which GMC would sell the bulk of its assets to NGMCO, Inc.,*fn3 which the bankruptcy court refers to as the "New GM." In re GMC, 407 B.R. 463, 473, n.2 (S.D.N.Y. 2009); (Docket No. 31, Ex. 3). Under this transaction, NGMCO, Inc. would acquire the assets covered by the agreement-including the Tonawanda Engine Plant-and create a "new GM" named General Motors Company. In re GMC, 407 B.R. at 480. General Motors Company was incorporated on May 29, 2009. (Docket No. 31, Ex. 1.) On October 16, 2009, it converted from a corporation to a limited liability company under the name General Motors LLC, the named Plaintiff here. (Id.)

Soon after GMC's bankruptcy filing, on or about August 26, 2009, FormTech filed for bankruptcy and ceased operations at the Forge Facility. (Docket No. 18 ¶ 17; Complaint ¶ 32.)

3. Subsequent Activities at the Forge Site

Once FormTech shut down operations, Lewis Bros. solicited bids for the sale of scrap and equipment from the Forge Facility. (Complaint ¶ 33.) Demolition and salvage operations commenced in the summer of 2009, and GM attributes a number incidents to that activity. (See Docket No. 17 ¶¶ 14-15.)

For example, a petroleum discharge occurred on the Forge Facility site on or about August 1, 2009, to which the DEC assigned Spill No. 0911809. (Docket No. 30 ¶ 2, Ex. 3.)

On August 24, 2009, GM performed a weekly test of storm water in manhole 54A ("MH54A"), located near the Engine Plant's border with the Forge Facility, and detected PCBs at a concentration of 1.94 parts per billion (ppb). (Docket No. 17 ¶¶ 12, 18.) GM's SPDES permit limit for PCBs is 0.3 ppb. (Id. ¶ 14.) A concentration of 1.31 ppb was detected at MH54A the following week, on August 31, 2009. (Id. ¶ 19.)

GM's environmental supervisor inspected the surrounding area on September 2, 2009. He noticed that a pump at the Forge Facility associated with a bermed containment area had been turned off, allowing water and oily residue to spill over in a heavy rain onto Engine Plant property. The flooding covered approximately one-half acre of the Engine Plant site. (Id. ¶ 20.) Testing of the oily residue showed a PCB concentration of 2800 ppb, while the water in the area tested at 0.2 ppb. (Id. ¶ 22.) GM concluded the flooding event likely had not caused the high concentrations of PCBs it had detected in August at MH54A and the CPI. (Id. ¶ 27.) In other words, this surface flooding appears to have occurred after August 31.

The Forge Facility's pump was reenergized on September 4, 2009, and GM hired an outside contractor to clean up the oil spill. (Id. ¶ 24, Ex. 9.) Following the flood and clean up, on November 23, 2009, GM terminated the Wastewaters Agreement. (Docket No. 16, ¶ 5, Ex. 2.)

The next incident occurred on January 3, 2010, when fire protection pipes at the Forge Facility froze and ruptured, creating flooding that carried oily waters to the Engine Plant's storm sewer and CPI. (Docket No. 17 ¶¶ 28-31.) Testing at the CPI on and after this date did not show elevated levels of PCBs. (Docket No. 30, Ex. 5.)

On February 11, 2010, the New York State Department of Environmental Conservation ("DEC") directed Lewis Bros. to initiate containment and removal of Petroleum Spill Number 0911809, which had occurred at the Forge Facility property on or about August 1, 2009.*fn4 (Docket No. 18 ¶ 30, Ex. 23.) Samuel Lewis signed a Stipulation on September 24, 2010 in which he agreed that Lewis Bros. would remediate the spill. (Docket No. 83, ¶ 21, Ex. 17.) As discussed below, Lewis Bros. failed to do so in a timely manner.

On June 3, 2010, a breaker for an electric feeder to the Forge Facility located in GM's primary substation tripped, interrupting power to the pump house associated with the same containment area that overflowed in September 2009. (Docket No. 17 ¶¶ 33-34.) A few days later, on June 7, 2010, oily water was discovered emanating from the Forge Facility to Engine Plant property. Sampling showed a PCB concentration of 9,800 ppb. (Id. ¶¶ 35-36.) As a result, GM notified Lewis Bros., on June 17, 2010, that it considered Lewis ...


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