                                                                                                                           Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-23-1995

United States v USX Corp.
Precedential or Non-Precedential:

Docket 94-5681




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Recommended Citation
"United States v USX Corp." (1995). 1995 Decisions. Paper 278.
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    IN THE UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT

               _───────────_
                No. 94-5681
               _───────────_

         UNITED STATES OF AMERICA,

                     v.

          HUGHES, HUBBARD & REED,

                           Intervenor-Plaintiff

                     v.

USX CORPORATION; ATLANTIC DISPOSAL SERVICE,
INC.; EASTERN SOLID WASTE EQUIPMENT COMPANY,
INC.; A.C. REALTY; CHURCHDALE LEASING INC.;
PAUL C. MURPHY, INC.; ATTWOODS, INC.; ALVIN
WHITE; AVE MARIA CARITE, AS EXECUTOR OF THE
ESTATE OF CHARLES CARITE; STEPHEN MINER, AS
EXECUTOR OF THE ESTATE OF CHARLES CARITE,

                          Defendants

                    and

ALVIN WHITE; A.C. REALTY; ANTHONY CARITE,
JR., AVE MARIA CARITE, AS EXECUTOR OF THE
ESTATE OF CHARLES CARITE; STEPHEN MINER, AS
EXECUTOR OF THE ESTATE OF CHARLES CARITE;
ATLANTIC DISPOSAL SERVICE, INC.; USX
CORPORATION; THE HARLEYSVILLE MUTUAL
INSURANCE COMPANY,

                          Third-party Plaintiffs

                     v.

CHUBB GROUP OF INSURANCE COMPANIES; FIRST
STATE INSURANCE COMPANY; THE HARLEYSVILLE
MUTUAL INSURANCE COMPANY; INTERSTATE FIRE AND
CASUALTY COMPANY; PENNSYLVANIA MANUFACTURERS
INSURANCE COMPANY; SAFETY MUTUAL CASUALTY
CORPORATION; WYLE LABORATORIES, INC.; EASTERN


                      1
         SOLID WASTE EQUIPMENT COMPANY, INC.;
         CHURCHDALE LEASING INC.; A.C. REALTY;
         ATTWOODS, INC.; PAUL C. MURPHY, INC.; ALVIN
         H. WHITE; AVE MARIA CARITE, AS EXECUTOR OF
         THE ESTATE OF CHARLES CARITE; STEPHEN MINER,
         AS EXECUTOR OF THE ESTATE OF CHARLES CARITE;
         ANTHONY CARITE, JR.; UTICA MUTUAL INSURANCE
         COMPANY,

                                     Third-party Defendants

         ATLANTIC DISPOSAL SERVICE, INC., ALVIN WHITE,
         A.C. REALTY, AVE MARIE CARITE, AS EXECUTOR OF
         THE ESTATE OF CHARLES CARITE, AND STEPHEN
         MINER, AS EXECUTOR OF THE ESTATE OF CHARLES
         CARITE,

                                     Appellants

                           _───────────_

         On Appeal from the United States District Court
                 for the District of New Jersey
                     (D.C. Civil No. 90-3068)

                       Argued July 26, 1995

           Before:    BECKER and ALITO, Circuit Judges,
                     VANASKIE, District Judge*

                     (Filed October 23, 1995)



*The Honorable Thomas I. Vanaskie, United States District Judge
for the Middle District
 of Pennsylvania, sitting by designation




                                 2
                                      Sanford F. Schmidt (Argued)
                                      Gerston, Cohen & Grayson
                                      20 Kings Highway West
                                      Haddonfield, NJ 08033

                                      Attorney for Appellants
                                                   Atlantic Disposal
Service, Inc.,
                                      Alvin White and A.C. Realty

                                      Joseph H. Kenney (Argued)
                                      Kenney & Kearney
                                      220 Lake Dyrive East
                                      P.O. Box 5034
                                      Cherry Hill, NJ 08034

                                      Attorney for Appellants
                                      Ave Maria Carite and Stephen
Miner,
                                       as Executors of the Estate of
Charles
                                       Carite

                                      Albert M. Ferlo, Jr. (Argued)
                                      United States Dept. of Justice
                                      Environment & Natural
Resources
                                       Division
                                      P.O. Box 23795
                                      Washington, DC   20026

                                      Attorney for Appellee



                            _───────────_
                         OPINION OF THE COURT
                            _───────────_


VANASKIE, District Judge

            This is an appeal from a declaratory judgment in favor

of the United States and against defendants/appellants Atlantic

Disposal Service, Inc.    ("ADS"), the principal shareholders of


                                  3
ADS, Alvin White ("White") and Charles Carite ("Carite"), and

A.C. Realty, decreeing that each is jointly and severally liable

under §107 of the Comprehensive Environmental Response,

Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A. §§9601-75

(1995), for any future response costs incurred by the United

States at a hazardous waste site located in Tabernacle, New

Jersey (the "Tabernacle Site").                     The district court held, on

summary judgment motions, that each appellant was liable under

CERCLA as a "person who . . . accepted . . . hazardous substances

for transport to disposal or treatment facilities . . . or sites

selected by such person."               42 U.S.C.A. §9607(a)(4)(1995).                   ADS

was held liable based upon evidence that its employees had

transported approximately 200 drums of hazardous waste to the

Tabernacle Site pursuant to an arrangement negotiated by a

representative of ADS with the lessees of the Tabernacle Site.

White and Carite were held liable based upon the district court's

finding that they exercised control over the activities of ADS in

1976 and 1977, when the drums were deposited at the Tabernacle

Site.0     A.C. Realty, a partnership formed by Carite and White

which owned the land and buildings occupied by ADS, was held

liable on the ground that it was a joint venturer of ADS at the

time of the disposal activities at issue here.

               Although we agree that the record before the district

court established, as a matter of law, the liability of ADS as a


0
 Charles Carite was killed in an airplane accident in 1991, and the executors of his estate have
been substituted as defendants. During the relevant time frame, Carite and White were the sole
shareholders, directors and officers of ADS.

                                                4
"transporter" under §107(a)(4) of CERCLA, 42 U.S.C.A.

§9607(a)(4), we find that there are genuine issues of material

fact pertaining to the potential liability of White, Carite and

A.C. Realty.   Specifically, as to White and Carite, the district

court erred in assessing liability on the basis of day-to-day

control of the affairs of ADS, as opposed to whether White and/or

Carite actually participated in the decision to dump drums of

hazardous waste at the Tabernacle Site.    Because there are

genuine disputes pertaining to the knowledge and participation of

White and Carite in the Tabernacle Site dumping, summary judgment

on their liability is inappropriate.    As to A.C. Realty, we find

that there are genuine issues concerning the intent of the

parties to establish a joint venture relationship, thereby

precluding summary judgment on this issue as well.    Accordingly,

we will affirm the declaratory judgment against ADS, but will

vacate the declaratory judgment against White, Carite and A.C.

Realty and remand to the district court for further proceedings.
I.   FACTS AND PROCEDURAL HISTORY
     A.   The Statutory Liability Scheme

          "Congress enacted CERCLA to facilitate the cleanup of

potentially dangerous hazardous waste sites, with a view to the

preservation of the environment and human health." Tippins, Inc.

v. USX Corp., 37 F.3d 87, 92 (3rd Cir. 1994).    One of the

principal purposes of CERCLA is "to force polluters to pay for

costs associated with remedying their pollution." United States
v. Alcan Aluminum Corp., 964 F.2d 252, 259-60 (3rd Cir. 1992).




                                    5
              CERCLA imposes liability for the costs of cleaning up a

polluted site on four separate categories of parties:
               (1) The owner and operator of a
          facility from which there has been a release
          or threatened release of hazardous substances
          necessitating responsive action, §107(a)(1);

                   (2) A person who owned or operated such
              a facility at the time hazardous substances
              were deposited there, §107(a)(2);

                   (3) A person who arranged for the
              transportation, disposal or treatment of
              hazardous substances at such a facility,
              §107(a)(3); and

                   (4) A person who had accepted hazardous
              substances for transportation to a facility
              selected by that person, §107(a)(4).0


Section 107(a)of CERCLA, in pertinent part, states:
0




             Notwithstanding any other provision or rule of law, and subject only to the
      defenses set forth in subsection (b) of this section --

                     (1) the owner and operator of a vessel or a facility,

                     (2) any person who at the time of the disposal of any
              hazardous substance owned or operated any facility at which such
              hazardous substances were disposed of,

                      (3) any person who by contract, agreement, or otherwise
              arranged for disposal or treatment, or arranged with a transporter
              for transport for disposal or treatment of hazardous substances
              owned or possessed by such person, by any other party or entity, at
              any facility or incineration vessel owned or operated by another
              party or entity and containing such hazardous substances, and

                      (4) any person who accepts or accepted any hazardous
              substances for transport to disposal or treatment facilities,
              incineration vessels or sites selected by such person, from which
              there is a release, or a threatened release which causes the
              incurrence of response costs, of a hazardous substance, shall be
              liable for--



                                               6
                Potentially responsible parties described by

subsections (1) and (2) are generally known as "owners" and

"operators"; those who fall under subsection (3) are generally

known as "generators" and sometimes referred to as "arrangers";

and those who fall under subsection (4) are commonly known as

"transporters."0            See Atlantic Richfield Co. v. Blosenski, 847
F.Supp. 1261, 1271 (E.D. Pa. 1994).                        Liability of responsible

parties is strict, i.e., not dependent on a finding of fault.

See Tippins, 37 F.3d at 92.0                   This appeal involves the question



                                        (A) all costs of removal or remedial
                        action incurred by the United States Government or
                        a State or an Indian tribe not inconsistent with the
                        national contingency plan;

                                       (B) any other necessary costs of
                        response incurred by an other person consistent with
                        the national contingency plan;

                                        (C) damages for injury to,
                        destruction of, or loss of natural resources,
                        including the reasonable costs of assessing such
                        injury, destruction, or loss resulting from such a
                        release; and

                                       (D) the costs of any health
                        assessment or health effects study carried out under
                        section 9604(i) of this title. 42 U.S.C.A.
                        9607(a)(1995).

The term "person" as used in §107(a) is defined to include "an individual, firm, corporation,
association, partnership, consortium, joint venture, commercial entity, United States
Government, State, municipality, commission, political subdivision of a State or any interstate
body." 42 U.S.C.A. §9601(21).
0
 CERCLA defines the terms "transport" and "transportation" as "the movement of a hazardous
substance by any mode." 42 U.S.C.A. §9601(26).
0
 Strict liability is described as "liability that is imposed on an actor apart from either (1) an intent
to interfere with a legally protected interest without a legal justification for doing so, or (2) a

                                                   7
of whether the record before the district court established that

ADS, White, Carite and/or A.C. Realty should be held liable as

"transporters" of hazardous substances to the Tabernacle Site.0
       B.    The Potentially Responsible "Transporter" Parties

               White and Carite formed ADS in 1963.                       ADS was engaged

in the business of hauling waste from commercial and industrial

establishments.           At the time of incorporation, Carite owned 50

percent of ADS' stock, White owned 49 percent of the stock, and

the remaining one percent was owned by White's spouse.0                                From its

incorporation until 1991, when its assets were sold, White and

Carite were the sole officers and directors of ADS.                              White was

the President of ADS; Carite was its Secretary/Treasurer.

               As business expanded, White and Carite formed other

corporations and partnerships.                   In 1971, they incorporated

Eastern Solid Waste Equipment Company, Inc. ("ESWECO").                                 Although

initially intended to operate as a distributor of refuse

collection equipment, ESWECO essentially served as a maintenance

company for the equipment used and buildings occupied by ADS.

ESWECO was owned by relatives of White and Carite, but White and

Carite served as the sole officers of that corporation.

               Carite and White were also the sole partners in A.C.

Realty, which was the owner of approximately 8.5 acres of land



breach of a duty to exercise reasonable care, i.e., actionable negligence." W. Page Keaton, et al.,
Prosser & Keaton on the Law of Torts §75 at 534 (5th ed. 1984).
0
 There is no dispute that the Tabernacle Site is a "facility" under CERCLA. Nor is there any
challenge to the fact that there has been a release of hazardous substances from this facility.
0
 By 1977, White and Carite each owned 50 percent of the ADS stock.


                                                 8
located in Mt. Laurel, New Jersey.                  Facilities constructed on a

three-acre section of this parcel were leased to ADS.                          In the

late 1970's, A.C. Realty leased another acre of land to Atlantic

Recovery and Transfer Systems, Inc. ("ARTS"),                      which operated a

waste transfer station adjacent to ADS.0

              Also in the late 1970's, White and Carite established

A.C. Enterprises, a partnership that leased containers and trucks

to ADS.      In 1982, A.C. Enterprises sold its assets to Churchdale

Leasing, Inc., a Subchapter S corporation owned by White and

Carite, who were its sole officers and directors.                        Churchdale

Leasing continued to lease rolling stock and containers to ADS.

              ESWECO, A.C. Realty, and A.C. Enterprises dealt solely

with ADS and other companies established by White and Carite.

Neither A.C. Realty nor A.C. Enterprises had any employees; ADS

employees performed the work of these partnerships.0
       C.    The Tabernacle Site

              One of the ADS industrial accounts during the 1970's

was a plant operated by USX Corporation in Camden, New Jersey.
ADS hauled 55-gallon drums of liquid waste from the USX facility

to a landfill in Gloucester County.                  When the Gloucester County

landfill refused to accept the USX drums, arrangements were made

to dispose of the drums on a 1-acre wooded parcel in Tabernacle,

New Jersey, leased by Robert Ware, an ADS mechanic.                         Ware's



Carite and White were each 50 percent shareholders in ARTS as well.
0


After the business operations of A.C. Enterprises were turned over to Churchdale Leasing, ADS
0


continued to provide the employees to conduct the leasing business. ESWECO, A.C. Realty and
A.C. Enterprises conducted their business at the Mt. Laurel facility leased to ADS.


                                              9
understanding was that ADS would pay him a fixed amount for each

drum dumped at the Tabernacle Site.

              In 1976, Edith Ruhl, who was then Ware's wife, saw

three trucks arrive at the Tabernacle Site and unload 55-gallon

drums and other containers.               Painted on the doors of the trucks

were the words "Atlantic Disposal Services."                      An ADS dispatcher,

William Milsop, acknowledged sending trucks containing drums of

liquid waste to the Tabernacle Site.

              In 1982, investigators of the Burlington County, New

Jersey Health Department discovered 193 barrels and containers at

the Tabernacle Site.           Attached to at least one of the drums found

at the Tabernacle Site were USX shipping documents.

              Pursuant to a "Unilateral Administrative Order" issued

by the United States Environmental Protection Agency ("EPA") in

February of 1984 pursuant to §106(a) of CERCLA, 42 U.S.C.A.

§9606(a) (1995),0 ADS removed all drums and related waste from

the Tabernacle Site.           Analyses of the contents of the drums

revealed a number of hazardous substances.                     Soil sampling

disclosed a release of the hazardous substances to the

environment. Sampling from monitoring wells confirmed the

existence of groundwater contamination.

              A Remedial Investigation and Feasibility Study

("RI/FS") was undertaken by EPA in 1985.                     As a result of the

RI/FS, "special notice letters" were issued in July of 1988 to


Section 106(a) authorizes EPA to issue "such orders as may be necessary to protect the public
0


health and welfare and the environment" from an imminent and substantial danger resulting from
an actual or threatened release of hazardous substances.

                                              10
ADS and USX, affording them the opportunity to negotiate an

agreement to perform the Remedial Design and Remedial Action

("RD/RA") proposed by EPA for the Tabernacle Site.0                         The ensuing

negotiations resulted in an agreement by USX to perform the

RD/RA.      ADS, however, refused to participate in the environmental

remediation work.
       D.    Procedural History

              In August, 1990, the United States commenced this cost

recovery action pursuant to Section 107 of CERCLA, 42 U.S.C.A.

§9607 (1995), naming as defendants only USX and ADS.                          Liability

was sought to be imposed on USX as a "generator," and ADS was

alleged to be liable as a "transporter."

              In July of 1992, the United States amended its

complaint, adding as defendants White and Carite.                          The United

States claimed that White and Carite were personally liable for

the transportation of USX waste to the Tabernacle Site based upon

their alleged pervasive control of ADS.                    The United States also

added as defendants Churchdale Leasing, ESWECO, and A.C. Realty,

alleging that these entities were "joint venturers" of ADS in

connection with the transportation of wastes containing hazardous

substances to the Tabernacle Site.                  USX filed cross-claims

against each of these parties.0


0
 The "special notice letters" were issued pursuant to §122(e) of CERCLA, 42 U.S.C.A.
§9622(e)(1995), which establishes the mechanism for negotiating an agreement with potentially
responsible parties to undertake environmental remediation work.
0
 In addition, USX named Anthony Carite, Jr., Charles Carite's brother and the operations
manager of ADS, as a third-party defendant. Pursuant to a stipulation of dismissal, the USX
claims against Anthony Carite, Jr. were later dismissed.

                                              11
              In an opinion dated December 6, 1993, the district

court ruled that ADS, A.C. Realty, Churchdale Leasing, and ESWECO

had been engaged in a joint venture that encompassed the

transportation of waste containing hazardous substances to the

Tabernacle Site.0          In separate Memoranda and Orders filed on

January 12, 1994, the district court ruled that ADS, White and

Carite were liable as "transporters" under §107(a)(4) of CERCLA,

and USX was liable as a generator under §107(a)(3) of CERCLA.

The district court, however, declined to grant summary judgment

in favor of the United States on its damage claim of

$1,778,518.89, finding that there were genuine issues of material

fact "regarding the reasonableness of the RI/FS and whether the

United States' response costs were incurred due to a `needless

and expensive monitoring study.'"                  (A. 127a.)

              By letter dated March 11, 1994, the United States

informed the district court that it had reached a settlement with

USX and Attwoods, Inc.0             Under the terms of the settlement, USX

agreed to pay the United States $1.71 million of the $1.78



0
 The December 6, 1993 Memorandum and Order addressed cross-motions for summary judgment
filed by USX, as third-party plaintiff, and by ESWECO and Churchdale Leasing, two of the
third-party defendants. The United States had separately moved for summary judgment on the
joint venture issue. While the district court did not address the motion of the United States on
this point, the parties have acknowledged that the ruling on USX's motion applies with equal
force to the claims of the United States against A.C. Realty as an alleged joint venturer.
0
 Attwoods had purchased the assets of ADS and the stock of Churchdale Leasing and ESWECO
in March of 1991. Ownership of these companies was transferred to an Attwoods subsidiary
known as Paul C. Murphy, Inc. The United States sued Attwoods and Paul C. Murphy, Inc. as
purported corporate successors of ADS. USX filed cross-claims against these parties. In a
Memorandum and Order dated January 11, 1994, the district court denied cross-motions for
summary judgment on the issue of successor liability. (A. 100a-22a.)

                                              12
million claimed as recoverable response costs.                         The March 11,

1994 letter explained:
               The settlement reached by the settling
          parties will encompass the following claims
          set forth in the pleadings in this action:

                   (1) All the United States' claims in
              its amended complaint except for a request
              for declaratory judgment for future response
              costs against the non-settling defendants;
              and (2) All claims by and between USX and
              defendants Attwoods, Churchdale Leasing,
              [ESWECO and Paul C. Murphy, Inc.]. Thus, the
              settlement will resolve all triable issues
              related to the United States' claims and the
              United States has no need at this time to
              participate in the pretrial conference
              scheduled for March 16, 1994. [A. 180-81a,
              emphasis added.]


In a footnote in this letter, the United States also stated:
               The Court has already ruled that the
          non-settling defendants are liable to the
          United States under Section 107(a) of CERCLA.
          Since the settlement will resolve the United
          States' claim for past costs, the only relief
          that the United States may ask this court for
          is a declaratory judgment of liability for
          future costs against the non-settling
          defendants. [A. 180a.]0


              The United States did not participate in the final

pretrial conference, which was conducted on March 16, 1994.                                A

jury trial commenced in June of 1994.                     In light of the settlement

with the United States, the trial was limited to cross-claims

between USX and Attwoods, on the one hand, and the ADS Defendants

on the other.0         After several days of trial, USX, Attwoods, and
0
 The non-settling parties were ADS, White, Carite and A.C. Realty, who will be referred to
collectively as the "ADS Defendants."
0
 USX sought recovery of $1.71 million paid to settle the United States' claims; $3.59 million
incurred in conducting the RD/RA at the Tabernacle Site, and a declaration that ADS, White,


                                               13
the ADS Defendants announced that they had reached a settlement.

The basic terms of the settlement were that the ADS Defendants

would pay $2 million to USX, and in exchange would receive a

general release from USX as well as an agreement by USX to

indemnify them for any future response cost incurred by the

United States at the Tabernacle Site. They also would obtain from

Attwoods a general release with respect to the Tabernacle Site.

(A. 59a.-65a.)

              At the time that counsel for the ADS Defendants placed

on the record the settlement of the cross-claims, he requested

"that this case . . . be dismissed with                             prejudice. . . ."

(A. 61a.)       Counsel for the United States objected to the

dismissal with prejudice, observing:
               This Court already ruled each one of
          those defendants is a liable party here. A
          settlement with the USX and Attwoods
          defendants deals with our present and past
          costs, but it does not deal with potential
          future costs at the site.

                   I just want to let the Court know that
              if they were to move to dismiss with
              prejudice, the Government might oppose that
              motion at that time. [A. 66a-67a.]


              On August 15, 1994, the United States filed a motion

for a declaratory judgment against the ADS Defendants for future

costs that may be incurred at the Tabernacle Sites.                            The ADS

Defendants responded to the request for declaratory relief by

moving for dismissal for failure to prosecute arising out of the

Carite and A.C. Realty were liable for all future costs incurred in connection with the RD/RA at
the Tabernacle Site. Attwoods sought recovery of $2.71 million purportedly spent in connection
with the cleanup of the Tabernacle Site. (A. 147a.-48a.)

                                               14
fact that the United States had not participated in the

preparation of the final pretrial order and had not attended the

trial.   In an Opinion dated September 20, 1994, the district

court granted the United States' motion and denied the ADS

Defendants' motion.

           The ADS Defendants filed a timely notice of appeal,

reasserting that the United States had effectively abandoned its

request for declaratory relief.    They also argue that the

district court's summary judgment rulings on liability are

erroneous.

           The district court had jurisdiction pursuant to 28

U.S.C. §1331 as the United States' claims arose under federal

law.   We have appellate jurisdiction under__




                                  15
