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UNITED STATES v. PETERSEN SAND & GRAVEL

October 7, 1992

UNITED STATES OF AMERICA, Plaintiff,
v.
PETERSEN SAND AND GRAVEL, INC., Defendant. PETERSEN SAND AND GRAVEL, INC., Defendant/Third Party Plaintiff, v. LAKE COUNTY FOREST PRESERVE DISTRICT; COMMONWEALTH EDISON COMPANY; THE TEWES COMPANY OF LIBERTYVILLE, INC.; SKOKIE VALLEY ASPHALT CO., INC.; NORTHERN TRUST BANK/LAKE FOREST N.A.; AMERICAN FLY ASH COMPANY; and LAKE COUNTY GRADING CO. OF LIBERTYVILLE, INC., Third Party Defendants.


Conlon


The opinion of the court was delivered by: SUZANNE B. CONLON

AMENDED MEMORANDUM OPINION AND ORDER

 BACKGROUND

 In this CERCLA action, the United States seeks to recover funds it spent on the remedial investigation of a contaminated site from Petersen, Inc. as the operator of the site. Petersen, Inc. is an Illinois corporation formed in 1970 by Raymond A. Petersen. The United States alleges that beginning in about 1955, Raymond A. Petersen used an area of land ("the site") in Lake County, Illinois to mine sand and gravel. Raymond A. Petersen allegedly began allowing parts of the site to be used for disposing hazardous waste in the 1960's. Petersen, Inc. allegedly continued the practice after its formation in 1970.

 In 1982, the Lake County Forest Preserve District ("the Forest Preserve") condemned the site for use as a recreational lake. While working on the site, a Forest Preserve bulldozer struck a buried barrel. The Forest Preserve contacted the United States Environmental Protection Agency ("EPA"); the EPA informed the Forest Preserve that it would be liable for cleanup under CERCLA. The Forest Preserve began cleanup of the site through a private contractor in 1983. The Forest Preserve's contractor completed its site cleanup in December 1983.

 The EPA performed a hazardous ranking score evaluation on the site in June 1984. As a result of the evaluation, the site was placed on the National Priorities List, a list of priority releases for long-term remedial evaluation and response. Then the EPA, in conjunction with an Illinois agency, performed the remedial investigation that is the subject of this lawsuit. The remedial investigation revealed that the site contained hazardous substances above levels that occur naturally, but that the site is now basically safe. The United States brought this action in September 1991 to recover the more than $ 800,000 cost of the remedial investigation.

 Petersen, Inc. filed a third-party complaint for contribution from seven third-party defendants under CERCLA, 42 U.S.C. § 9613(f)(1). Apparently, *fn1" most of the third-party defendants are allegedly liable for the disposal of fly ash -- a hazardous byproduct of coal combustion -- on the site. Apparently, Petersen, Inc. contends that Commonwealth Edison Company produced the fly ash and that American Fly Ash Company disposed of the fly ash by having it trucked via The Tewes Company of Libertyville, Inc. to Skokie Valley Asphalt Co. Skokie Valley Asphalt Co., which made road base on the Petersen, Inc. site, apparently is alleged to have stockpiled the fly ash in a way that was a disposal under CERCLA. Northern Trust Bank/Lake Forest N.A.'s alleged liability as an owner is apparently based on the bank's acting as trustee of an Illinois land trust that owned the site from 1959 to 1982. Lake County Forest Preserve District's alleged liability as an owner is apparently based on the district's filing a condemnation petition for land on which the site was located in 1974 and receiving title to the land by a final judgment in 1982.

 DISCUSSION

 A movant is entitled to summary judgment under Rule 56 when the moving papers and affidavits show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Where the non-movant fails to make a sufficient showing on an essential element of his case, on which he would bear the burden of proof at trial, summary judgment is proper. Id. at 322-23. Once a moving party has met its burden, the nonmoving party must go beyond the pleadings and set forth specific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Becker v. Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir. 1990). Any material fact set forth by the moving papers and not controverted by the opposing papers is deemed admitted. Local Rule 12(n).

 A. The United States' Motion

 The United States seeks summary judgment on its claim for the cost of the remedial investigation against Petersen, Inc. as operator of the site. In order to recover from Petersen, Inc., CERCLA requires the United States to show that (1) there was a "release" or "threatened release" of a "hazardous substance" from the site; (2) the site is a "facility"; (3) the release caused the United States to incur response costs; and (4) Petersen, Inc. is a responsible party under 42 U.S.C. § 9607(a). Because the United States' failure to show the fourth element -- that Petersen, Inc. is a responsible party under Section 9607(a) -- obviates any need to explore the other three elements of recovery, the discussion begins there.

 To establish that Petersen, Inc. is a responsible party, the United States elects to show that Petersen, Inc. is an "owner or operator" under Section 9607(a)(2). Section 9607(a)(2) confers liability for CERCLA response costs on "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." 42 U.S.C. § 9607(a)(2). The United States maintains that Petersen, Inc. is responsible under Section 9607(a)(2) on three different theories: that barrels of hazardous waste were put into the ground at the site after Petersen, Inc.'s incorporation in 1970; that Petersen, Inc. is liable as a successor in interest to the operator Raymond A. Petersen; and that "disposal" under Section 9607(a)(2) includes passive leaching or leaking that occurred after 1970. The United States has not met its summary judgment burden on any of these theories.

 First, the United States cannot prevail on its active disposal theory -- that is, the theory that some barrels were delivered and put into the ground while Petersen, Inc. was an operator -- because the summary judgment affidavits and depositions only establish that there were barrels on the site after 1970. In support of this theory, the United States relies on two sections of deposition testimony and a declaration. United States 12(m) P 11. But none of these supporting documents establishes that any hazardous waste was either delivered or buried after the incorporation of Petersen, Inc. Rather, the documents only show that there were barrels visible on the site after 1970. See Jacobsen Decl. P 3 (In 1971, "I saw 50 or more steel drums in the northwest portion of the pit. Some of the drums were on the side of the pit, and others were half buried in the gravel."); Peters Dep. at 9 ("Q. Did you ever see any barrels being put into the ground out there in Disposal Area No. 2? A. I never did, no."); Graham Dep. at 20 ("Q. So you didn't see the drums actually being dumped at the site? A. No, no. Q. Or being disposed of at the site? A. They were there."). While a jury would be permitted to infer that these barrels were buried after 1970, on a motion for summary judgment a court may not make that inference in favor of a movant. Moreover, Petersen, Inc.'s opposing papers present directly contradictory evidence. See Dennis Petersen Dep. at 51 ("Q. When was the last time that you remember seeing barrels delivered to the site? A. I believe it was in '69."). Thus the United States fails to show that there is no genuine issue of material fact as to whether there was active disposal of hazardous waste while Petersen, Inc. operated the site.

 The United States' first theory founders on the facts; the successor theory founders on the law. As Petersen, Inc. points out, the United States' legal authority for liability on this theory is an amalgam of two common law corporate doctrines: piercing the corporate veil and successor liability. To be sure, there are legal situations where the corporate form is disregarded, see United States v. Mottolo, 695 F. Supp. 615, 624 (D.N.H. 1988), and there are situations where a corporate successor to the assets of a corporate predecessor also succeeds to the predecessor's liabilities. See Upholsterer's Int'l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1325-27 (7th Cir. 1990). However, Petersen, Inc. is in neither of those situations. The United States is not seeking to pierce the corporate veil: it does not seek to hold any principal or shareholder of Petersen, Inc. personally liable. Without going into details (because they are not argued by the United States), Petersen, Inc. is likewise not liable as a successor to any statutory liabilities of the individual, Raymond A. Petersen: Petersen, Inc. did not assume any of those liabilities, and there is no contention that Raymond A. Petersen had a fraudulent purpose for incorporating. See id. at 1327.

 The United States' third theory is that Petersen, Inc. is liable because it was an operator of the site while passive disposal -- i.e., leaking and leaching of hazardous substances -- occurred. The parties agree that some of the hazardous substances in some of the barrels had seeped into the ground. Petersen, Inc. 12(n) to United States PP 20-24. The United States argues that the leaking and leaching of barrels is a "disposal" under CERCLA -- a "passive" disposal -- which may form the basis of operator liability under Section 9607(a)(2). No court in the Seventh Circuit has yet addressed whether passive disposal may form the basis of liability under Section 9607(a)(2). Those courts that have decided the issue are about evenly split. Compare, e.g., Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 844-46 (4th Cir. 1992) ("Passive" is enough for Section 9607(a)); United States v. Waste Industries, Inc., 734 F.2d 159, 164 (4th Cir. 1984) (disposal includes "passive" disposal under RCRA); Stanley Works v. Snydergeneral Corp., 781 F. Supp. 659 (E.D. Cal. 1990) ("passive" is enough for Section 9607(a)) with Ecodyne Corp. v. Shah, 718 F. Supp. 1454, 1455-57 (N.D. Cal. 1989) (rejecting "passive" disposal as enough on grammatical construction); In re Diamond Reo Trucks, Inc., 115 Bankr. 559, 565-66 (Bankr. W.D. Mich 1990) (adopting Ecodyne position).

 Although the Seventh Circuit has not addressed this precise issue, it has had occasion to interpret Section 9607(a)(2). In Edward Hines Lumber Co. v. Vulcan Materials Co., 861 F.2d 155 (7th Cir. 1988), the Seventh Circuit determined that a defendant who designed and built a chemical treatment plant owned and operated by the plaintiff was not an "operator" under Section 9607(a)(2). After reciting the language of the statute, the court of appeals explained the function of the courts when interpreting CERCLA:

 We are enforcing a statute rather than modifying rules of common law. . . . To the point that courts could achieve "more" of the legislative objectives by adding to the lists of those responsible, it is enough to respond that statutes have not only ends but also limits. Born of compromise, laws such as CERCLA and SARA do not pursue their ends to their logical limits. A court's job is to find and enforce stopping points no less than to implement other legislative choices.

 Id. at 157 (citations omitted). Using the Seventh Circuit's approach to interpreting CERCLA provisions, this court concludes that "passive" disposal does not trigger Section 9607(a)(2) liability.

 CERCLA defines "disposal" by reference, incorporating the definition provided by the Resource Conservation and Recovery Act ("RCRA"). See 42 U.S.C. § 9601(29). The RCRA in turn defines disposal in the following way:

 The term "disposal" means the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water so that such solid waste or hazardous waste or any constituent thereof may enter the environment or be emitted ...


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