Canadyne-Georgia v. Nationsbank ( 1999 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 97-9357
FILED
U.S. COURT OF APPEALS
________________________
ELEVENTH CIRCUIT
D. C. Docket No. 5:96-CV-114-1(DF) 08/11/99
THOMAS K. KAHN
CANADYNE-GEORGIA CORPORATION, CLERK
Plaintiff-Appellant,
versus
NATIONSBANK, N.A. (SOUTH), as successor by
merger to Bank South, f.k.a. Bank South, N.A., etc.,
Individually and in its capacity and executor and trustee
of the J.W. Woolfolk Trust; THE J. W. WOOLFOLK
TRUST, et al.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Georgia
_________________________
(August 11, 1999)
Before EDMONDSON and BLACK, Circuit Judges, and RESTANI*, Judge.
BLACK, Circuit Judge:
*
Honorable Jane A. Restani, Judge, U. S. Court of International Trade, sitting by
designation.
Appellant Canadyne-Georgia Corporation (Canadyne) appeals the district court’s
dismissal, pursuant to Fed. R. Civ. P. 12(b)(6), of Canadyne’s complaint against NationsBank,
N.A. (South) (the Bank). Canadyne’s allegations, if proved, would support its claims against the
Bank. Accordingly, we reverse the district court’s dismissal of the complaint and remand for
further proceedings.
I. BACKGROUND
Between 1990 and 1995, the Environmental Protection Agency (EPA) issued orders
requiring, among other things, that Canadyne evaluate property in Fort Valley, Georgia (the
Site), relocate residents living near the Site, remove contaminated soil from the Site, and purify
the groundwater at the Site. Under the direction of the EPA and the Georgia Environmental
Protection Division (GEPD), Canadyne has spent the last decade and many millions of dollars
cleaning up the Site. On March 22, 1996, Canadyne sued the Bank, as well as the J. W.
Woolfolk Trust (the Woolfolk Trust), the current trustees of the Woolfolk Trust, Woolfolk
Chemical Works, Ltd. (WCW), and certain former partners in WCW, claiming they were liable
under the Comprehensive Environmental Response Compensation and Liability Act of 1980
(CERCLA), the Georgia Hazardous Site Response Act (HSRA), and Georgia common law for
response costs Canadyne has incurred in cleaning up the Site.
The parties’ connection to the Site goes back over 80 years. In 1921, Mr. John W.
Woolfolk founded a company, which in 1941 became WCW. Mr. Woolfolk was a general
partner in WCW, which manufactured pesticides at the Site from 1942 to 1972. Woolfolk’s
pesticide plant released the hazardous substances, including arsenic, that Canadyne has been
required to clean up.
2
In 1942, Mr. Woolfolk established for the benefit of his daughters three inter vivos trusts,
for which the Bank’s predecessor, Fulton National Bank of Atlanta, served as co-trustee.2 The
trusts owned greater than 50% of the limited partnership interests in WCW. Mr. Woolfolk died
in 1945. His will named the Bank as co-executor of his estate, which included his general
partnership interest in WCW. Five years later, the Bank became a trustee of the Woolfolk Trust,
the assets of which included Mr. Woolfolk’s general partnership interest in WCW.
In 1972, WCW incorporated, and in 1977, it was purchased by a corporate affiliate of
Canadyne. Canadyne sold the pesticide business and most of its assets in 1984. Subsequently,
the Bank resigned as trustee of the Woolfolk Trust and the inter vivos trusts and delivered the
trust assets to new trustees. As discussed above, it was not until the 1990s that the EPA required
Canadyne to clean up the Site.
Canadyne sued, and the Bank moved to dismiss Canadyne’s amended complaint under
Rule 12(b)(6) for failure to state a claim upon which relief could be granted. The district court
granted the Bank’s motion, concluding the Bank was not a “covered person” within the meaning
of § 107(a)(1) of CERCLA.3 Canadyne-Georgia Corp. v. NationsBank, 982 F. Supp. 886, 890
(M.D. Ga. 1997). As for Canadyne’s state law claims, the district court held that, as Georgia’s
HSRA statute incorporates the same definitions and standards for owner and operator liability as
2
Fulton National Bank of Atlanta changed its name to Bank of the South, N.A., then to
Bank South, N.A., and then to Bank South. In 1996, Bank South merged with and into Appellee
NationsBank, N.A. (South). Thus, for purposes of this opinion, we will refer to each bank (be it
the Appellee or one of its predecessors) as “the Bank.”
3
The district court did not address the Bank’s alternative argument that it was protected
from liability by the Asset Conservation, Lender Liability, and Deposit Insurance Protection Act
of 1996 (the Asset Conservation Act or the Act), 42 U.S.C. § 9607(n).
3
CERCLA, dismissal of Canadyne’s CERCLA claims mandated dismissal of its state law HSRA
claim. Id. at 891. The district court further held that, since the Bank had no liability under either
CERCLA or HSRA, Canadyne’s other state law claims under Georgia common law for
contribution, indemnity, and restitution also failed as a matter of law. Id. On appeal, Canadyne
asserts the district court erred in concluding that the Bank was not a “covered person” under
CERCLA.4
II. STANDARD OF REVIEW
“In reviewing de novo a dismissal pursuant to Rule 12(b)(6), we apply the same standard
as did the district court.” South Florida Water Management Dist. v. Montalvo, 84 F.3d 402, 406
(11th Cir. 1996) (citation omitted). “The motion must be denied unless it is clear the plaintiff
can prove no set of facts in support of the claims in the complaint.” Id. (citation omitted).
III. DISCUSSION
Canadyne brought its CERCLA contribution claim against the Bank under §§ 107(a) and
113(f) of CERCLA, codified at 42 U.S.C. §§ 9607(a), 9613(f). Section 113(f) provides “[a]ny
person may seek contribution from any other person who is liable or potentially liable under
4
Canadyne also appeals the district court’s dismissal of its claims under HSRA and
Georgia common law. The district court correctly determined that because HSRA incorporates
the same definitions and standards for owner liability as CERCLA, a proper dismissal of the
CERCLA claims would mandate dismissal of the HSRA claim. Likewise, however, reversal of
an improper dismissal of the CERCLA claims would mandate reversal of the dismissal of the
HSRA claim. Since we reverse the dismissal of the CERCLA claims, we also reverse the district
court’s dismissal of the state law claims. Although we reverse the dismissal of the HSRA claim,
we do emphasize that the Georgia statute expressly exempts from liability anyone “who acts in
good faith solely in a fiduciary capacity and who did not actively participate in the management,
disposal, or release of hazardous wastes, hazardous constituents, or hazardous substances from
the facility.” O.C.G.A. § 12-8-92(7)(C). Canadyne has, of course, alleged in its complaint that
the Bank did not act solely in a fiduciary capacity.
4
section 9607(a) [§ 107(a)] of this title.” 42 U.S.C. § 9613(f)(1).
Canadyne alleges the Bank is liable as an “owner” of the Site under § 107(a)(2) of
CERCLA, which imposes liability 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.”5
42 U.S.C. § 9607(a)(2) (emphasis added). In this regard, Canadyne emphasizes that during the
time of contamination, the Bank served as a trustee for trusts, the assets of which included a
general partnership interest and limited partnership interests in WCW, the company that
allegedly contaminated the Site. In response, the Bank contends it cannot be deemed an “owner”
under § 107(a)(2) and, even if it can, it is exempt from liability under the Asset Conservation
Act.6
CERCLA imposes two barriers Canadyne must overcome at the outset to avoid dismissal
5
Before the district court, Canadyne also asserted the Bank should be liable under
§ 107(a)(2) as an “operator” of the Site. On appeal, however, Canadyne has withdrawn its
arguments for “operator” liability, in light of the United States Supreme Court’s recent decision
in United States v. Bestfoods, 524 U.S. 51, 118 S. Ct. 1876 (1998).
6
Canadyne makes much of what it considers the district court's finding that the Bank was
an owner and the Bank's admission that it was an owner. Indeed, Canadyne contends that
whether the Bank is an "owner" under CERCLA is not even at issue on appeal. Upon reading
the district court's opinion and the record on appeal, we disagree. Although the district court
found and the Bank conceded it was an owner in its fiduciary capacity (as a trustee for a trust
holding a general partnership interest in a limited partnership owning the Site), personal liability
under CERCLA attaches only to those that are deemed owners under CERCLA. The district
court in fact based its entire decision on its conclusion that the Bank should not be deemed a
CERCLA owner. See Canadyne-Georgia, 982 F. Supp. at 890 (“This restriction prevents the
Court from finding that Fulton National could be considered ‘owners’ under CERCLA under the
analysis mandated by Redwing Carriers. . . . Here, the fact that Fulton National was directed as
trustee to continue the operations of Woolfolk Chemical Works, Ltd., precludes a finding under
CERCLA, that Fulton National is a prior ‘owner’ as defined by the law of Georgia.”).
Furthermore, we could find no place in the record where the Bank admitted it was an owner for
purposes of CERCLA.
5
of its claims against the Bank. First, CERCLA subjects only “covered persons” to liability.
There are only four classes of potentially responsible parties under § 107(a). 42 U.S.C.
§ 9607(a). As discussed above, Canadyne claims the Bank is potentially responsible, because it
was an “owner” of the Site at the time of the disposal of hazardous substances. Second, even if
deemed “owners” under CERCLA, fiduciaries like the Bank are protected from personal
liability, with a few exceptions, by the Asset Conservation Act.7 Canadyne must overcome each
barrier separately. Although we could address the issues in either order, for the sake of
simplicity, we will address them in the same order as did the district court.
The question of whether a particular defendant can be deemed an “owner” under
CERCLA turns on application of state law, and consequently, the answer may vary from state to
state. See Redwing Carriers, Inc. v. Saraland Apartments Ltd., 94 F.3d 1489, 1498 (11th Cir.
1996). In this case, we look to Georgia law at the time of the release of hazardous substances at
the Site to determine whether the Bank was an owner for purposes of CERCLA liability. Even
though the Bank technically held its WCW general partnership interest in trust, under Georgia
law, the Bank held legal title to and therefore owned the general partnership interest. See
O.C.G.A. § 53-12-2(11) (trustee “hold[s] legal title to the property in trust”). The Bank therefore
owned whatever property the general partners of WCW owned.
Under current Georgia law, the partnership, not the individual partners, owns real
property held in the name of the partnership. O.C.G.A. § 14-8-8(f). At the time the Bank held a
7
Congress made clear the Act does not create liability. See 42 U.S.C. § 9607(n)(6)(B)
(“Nothing in [the Act] creates any liability for a person or a private right of action against a
fiduciary or any other person.”). Rather, the Act merely limits liability that might otherwise be
present. The Act can only help the Bank.
6
general partnership interest in WCW, however, the individual partners owned the real property
of the partnership. See Bloodworth v. Bloodworth, 178 S.E.2d 198, 200 (Ga. 1970) (“Legal title
to real property can never vest in a partnership as such; legal title is in the partners as tenants in
common.” (citations omitted)). Since the Bank owned a general partnership interest that owned
the Site, the Bank owned the Site. Thus, under Georgia law and, ipso facto, for purposes of
CERCLA, the Bank was an “owner.”8 See Redwing Carriers, 94 F.3d at 1498 (equating the
holding of title to being an owner under CERCLA). We now turn to the closer question of
whether the Bank was entitled to dismissal of Canadyne’s claims by virtue of the Asset
Conservation Act.
In 1996, Congress enacted the Asset Conservation Act. The Act amended § 107 of
CERCLA to protect fiduciaries from personal liability for the costs of cleaning up environmental
hazards:
8
We do not mean to suggest that anyone who holds a general partnership interest in trust
is an owner for purposes of CERCLA. In fact, the result in this case is somewhat anachronistic.
Under the Uniform Partnership Act, which Georgia adopted in 1984, the partnership, not the
individual partners, owns real property titled to the partnership. See, e.g., O.C.G.A. § 14-8-8(f).
So, if there were a release of hazardous substances at partnership property today, the general
partners would not own the property and therefore would not be directly liable under CERCLA.
The general partners might nonetheless be held indirectly, or vicariously, liable—might be
deemed “owners”—under CERCLA because of their relationship to the partnership. See
Redwing Carriers, 94 F.3d at 1499 (“That the Hutton partners are not owners of the Site under
CERCLA does not end our analysis. This only means the limited partners are not directly liable
under the Act for cleaning up the Site. The question remains whether the Hutton partners, by
virtue of their being limited partners in the Partnership, are accountable indirectly for the
Partnership’s CERCLA liability under applicable partnership law.”). A trustee holding a general
partnership interest in trust, however, might escape this indirect liability by virtue of state trust
law. See Restatement (Second) of Trusts § 265 (“Where a liability to third persons is imposed
upon a person, not as a result of a contract made by him or a tort committed by him but because
he is the holder of the title to property, a trustee as holder of the title to the trust property is
subject to personal liability, but only to the extent to which the trust estate is sufficient to
indemnify him. (emphasis added)).
7
Section 107 of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. § 9607) is amended by adding at the end the
following: ‘(n) Liability of fiduciaries.—
(1) In general.—
The liability of a fiduciary under any provision of this Act for the release or
threatened release of a hazardous substance at, from, or in connection with a
vessel or facility held in a fiduciary capacity shall not exceed the assets held in
the fiduciary capacity.’
Asset Conservation Act, Pub. L. No. 104-208, Div. A., Title II, Subtitle E, § 2502, 110 Stat.
3009, 3009-462 (1996). In general, the amendment limits the liability of fiduciaries to the assets
held in a fiduciary capacity.9 That is, fiduciaries, even those who might otherwise be deemed
“owners” under § 107(a), generally cannot be held personally liable under CERCLA. There are,
however, a few narrow exceptions to fiduciaries’ exemption from CERCLA liability.
Canadyne argues for application of the exception found in § 2502(n)(3) of the Asset
Conservation Act.10 That subsection provides that the Act “do[es] not limit the liability
9
That fiduciaries may nonetheless be liable in their fiduciary capacity to the extent of the
assets held in trust would not help Canadyne here. The Bank's liability in its fiduciary capacity
is not at issue.
10
Canadyne also argues for application of an exception found in section 2502(n)(7) of the
Asset Conservation Act. That subsection provides that the Act does not limit fiduciary liability
where the fiduciary “acts in a capacity other than that of a fiduciary [and] in that capacity,
directly or indirectly benefits from a trust or fiduciary relationship.” 42 U.S.C.
§ 9607(n)(7)(A)(i), (ii). Although Canadyne alleges in its complaint that the Bank’s dual role as
fiduciary and as the primary lender to Mr. Woolfolk and WCW, by itself, brings the Bank under
this exception, we are confident Congress did not intend for the mere existence of a lending
relationship to be enough to bring a fiduciary under this exception. Canadyne’s expansive
interpretation of the exception would render the protections of the Asset Conservation Act
virtually meaningless for banks, the very group Congress intended to protect. Although the
amendments to CERCLA found in the Asset Conservation Act were buried within a defense
appropriations bill, what little legislative history exists makes clear the Act was passed in
response to lobbying efforts by banks to protect them from liability under CERCLA. See, e.g.,
141 Cong. Rec. S2528, S2528 (daily ed. Feb. 10, 1995) (statement of Sen. D’Amato, the Act’s
sponsor) (“This bill addresses an urgent issue facing America’s banks and lenders today—the
8
pertaining to a release or threatened release of a hazardous substance if negligence of a fiduciary
causes or contributes to the release or threatened release.” 42 U.S.C. § 9607(n)(3). Citing this
negligence exception to the Act’s limitation of fiduciary liability, Canadyne claims that the
Bank’s negligence caused or contributed to the release of hazardous substances at the Site.11
To gain the benefit of the negligence exception, Canadyne must present evidence that the
Bank took particular negligent actions that caused or contributed to the release of hazardous
substances. Here, the negligence exception requires some action because the Bank had no duty
to prevent someone else from releasing hazardous substances. Canadyne has mentioned only
one possible source of the Bank’s duty to prevent others from releasing hazardous substances:
CERCLA. However, CERCLA had not been enacted at the time the hazardous substances were
released at the Site.
Even assuming arguendo that CERCLA were in effect at the time the Bank allegedly
failed to prevent the pollution at the Site, CERCLA imposes no duty to act. CERCLA does not
allocate liability based on fault or negligence; it is a strict liability statute. CERCLA imposes
imposition of massive liability for the cleanup of property . . . . But lenders should not be held
liable merely because of their deep pockets.”).
11
In addition to contending that the Bank negligently caused or contributed to the
releases at the Site, Canadyne argues that the alleged negligence or negligence per se of the
WCW employees who actually caused the releases should be imputed to the Bank based upon its
status as a former general partner in WCW. This argument lacks merit. To begin with, the Bank
was not a general partner, but a co-trustee for a trust, the assets of which included a general
partnership interest. Yet, even assuming arguendo that the Bank was a general partner,
Canadyne must show the Bank itself negligently caused or contributed to the pollution. Just
because under state partnership law a partnership and its partners may be vicariously liable for
the negligence of any one partner or employee of the partnership does not mean every partner
herself negligently caused the accident. Vicarious liability, or “imputed negligence,” is not the
same as saying “negligence of a fiduciary cause[d] or contribute[d] to the release,” as required
under the Asset Conservation Act. See 42 U.S.C. § 9607(n)(3).
9
liability on individuals not based on their causing the release of hazardous substances, but based
solely on their prior or current relationship to the polluted property. For instance, the owner of
land is directly liable under CERCLA, regardless of whether he or she caused or contributed to
the release of hazardous substances there. In addition to those who face direct liability, certain
individuals may be indirectly, or vicariously, liable as “owners” under CERCLA, not because
they owned the land or contributed to the release of hazardous substances there, but because of
their relationship to the owners of the land. See Redwing Carriers, 94 F.3d at 1499. As an
example, if a partnership were directly liable as an owner of land, then the general partners in
that partnership might be indirectly liable. Id. But CERCLA imposes no duty to act, and thus
the Bank could not have been negligent in failing to prevent others from polluting.
Canadyne has made no allegation of any particular action by the Bank that caused or
contributed to the release of hazardous substances. Rather, Canadyne baldly asserts in its
complaint that the Bank “negligently released or allowed the release of hazardous substances.”
Of course, to survive summary judgment, much less to prevail, Canadyne must do more than just
utter the word “negligence.” But here we are reviewing the dismissal of Canadyne’s complaint.
Although Canadyne may struggle to present evidence to support its allegations of negligence and
causation, this case comes to us in a Rule 12(b)(6) posture. As such, we must take the
allegations of the complaint as true.
The sufficiency of a complaint is measured by Fed. R. Civ. P. 8(a), which requires only
“a short and plain statement of the claim showing that the pleader is entitled to relief.” The
Supreme Court has emphasized that the Federal Rules “do not require a claimant to set out in
detail the facts upon which he bases his claim.” Leatherman v. Tarrant County Narcotics
10
Intelligence & Coordination Unit, 507 U.S. 163, 168, 113 S. Ct. 1160, 1163 (1993) (quotations
and citations omitted). Our Circuit, interpreting the Federal Rules, has repeatedly stated that “a
motion to dismiss for failure to state a claim should not be granted unless it appears to a certainty
that the plaintiff would be entitled to no relief under any state of facts which could be proved in
support of his claim.” Banco Continental v. Curtiss Nat’l Bank of Miami Springs, 406 F.2d 510,
514 (5th Cir. 1969) (quotations, citations, and footnote omitted);12 see also Quality Foods de
Centro America, S.A. v. Latin American Agribusiness Dev. Corp., S.A., 711 F.2d 989, 998 (11th
Cir. 1983) (collecting cases). In fact, “[t]his mandate is particularly true where, as here, issues of
negligence are involved.” Banco, 406 F.2d at 514. We are compelled by precedent to hold that
“[i]t is sufficient against a motion to dismiss to allege that defendant acted negligently [thereby
causing injury]. The complaint, in substantial compliance with [Rule 8(a)] was good against the
motion to dismiss.” Augusta Broadcasting Co. v. United States, 170 F.2d 199, 200 (5th Cir.
1948) (footnote omitted).
In concluding that the complaint should not have been dismissed, however, we do not
mean to intimate that the Bank is liable under CERCLA; we merely state that the complaint
satisfies the very low threshold of sufficiency prescribed by the Federal Rules of Civil
Procedure, as interpreted by the Supreme Court and this Court. The Bank will have an
opportunity to move for summary judgment at the appropriate time.
In addition, simply because its complaint can survive a motion to dismiss does not
authorize Canadyne to engage in wholesale discovery. This Circuit has been critical of notice
12
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior
to close of business on September 30, 1981.
11
pleading.13 Yet, we are bound by precedent not to require more. That is why “it is particularly
important for district courts to undertake the difficult, but essential, task of attempting to narrow
and define the issues from the earliest stages of the litigation.” Ebrahimi, 114 F.3d at 165; see
also Johnson Enter. of Jacksonville, Inc., 162 F.3d at 1333 (“As we have previously stated, and
state once again, district courts have the power and the duty to define the issues at the earliest
stages of litigation.” (citations omitted)). Here, for example, the district court may limit
discovery to determining whether the Bank, through its negligent action, caused or contributed to
the release of hazardous substances at the Site. See 42 U.S.C. § 9607(n)(3).
IV. CONCLUSION
After reviewing the allegations in Canadyne’s complaint, we conclude the district court
erred in determining that the complaint failed to state a claim upon which relief could be granted.
REVERSED AND REMANDED.
13
See, e.g., Johnson Enters. of Jacksonville, Inc. v. FPL Group, Inc., 162 F.3d 1290,
1332-33 (11th Cir. 1998); Morro v. City of Birmingham, 117 F.3d 508, 515 (11th Cir. 1997),
cert. denied, 118 S. Ct. 1299 (1998); Ebrahimi v. City of Huntsville Bd. of Educ., 114 F.3d 162,
165 (11th Cir. 1997); Anderson v. District Bd. of Trustees of Cent. Fla. Community College, 77
F.3d 364, 366-67 (11th Cir. 1996). Cf. South Fla. Water Management Dist. v. Montalvo, 84 F.3d
402, 408 n.10 (11th Cir. 1996) (“As a general rule, conclusory allegations and unwarranted
deductions of fact are not admitted as true in a motion to dismiss.”) (citing Associated Builders,
Inc. v. Alabama Power Co., 505 F.2d 97, 100 (5th Cir. 1974)).
12