In Re: Tutu Wells ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
4-9-2003
In Re: Tutu Wells
Precedential or Non-Precedential: Precedential
Docket 01-4176
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PRECEDENTIAL
Filed April 8, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 01-4176 & 01-4204
IN RE: TUTU WATER WELLS CERCLA LITIGATION
COMMISSIONER OF THE DEPT. OF PLANNING &
NATURAL RESOURCES, DEAN C. PLASKETT, in his
capacity as Trustee for Natural Resources of the Territory
of the United States Virgin Islands
v.
ESSO STANDARD OIL S.A., LTD.; ESSO VIRGIN
ISLANDS, INC.; ESSO STANDARD OIL COMPANY
(PUERTO RICO); TEXACO CARIBBEAN, INC.; TEXACO
PUERTO RICO; THE SUCCESSOR PANEX INDUSTRIES
STOCKHOLDERS’ LIQUIDATING TRUST; MICHAEL D.
DeBAECKE, ESQ., IN HIS CAPACITY AS TRUSTEE OF
THE SUCCESSOR PANEX INDUSTRIES, INC.
STOCKHOLDERS LIQUIDATING TRUST; PANEX CO.;
THE ESTATE OF PAUL LAZARE
BY ITS EXECUTORS, NORMAN HALPER and
OLIVER LAZARE; ANDREAS GAL; L’HENRI, INC.
D/B/A O’HENRY CLEANERS
Andreas Gal; The Estate of Paul Lazare
by its Executors, Norman Halper and
Oliver Lazare; Panex Co.,
Appellants at No. 01-4176
The Successor Panex Industries, Inc.
Stockholders’ Liquidating Trust and
Michael D. DeBaecke, Esq.,
Successor Trustee,
Appellants at No. 01-4204
2
On Appeal from the District Court of the Virgin Islands
Division of St. Croix
D.C. Civil Action Nos. 98-cv-00206 & 96-cv-00054
(Honorable Raymond L. Finch)
Argued: September 20, 2002
Before: SCIRICA, ALITO and McKEE, Circuit Judges
(Filed April 8, 2003)
ROBERT L. TOFEL, ESQUIRE
(ARGUED)
MARK A. LOPEMAN, ESQUIRE
Tofel, Karan & Partners
780 Third Avenue
New York, New York 10017
Attorneys for Appellants,
Andreas Gal; The Estate of Paul
Lazare by its Executors, Norman
Halper and Oliver Lazare;
Panex Co.
ROBERT K. HILL, ESQUIRE
(ARGUED)
Seitz, Van Ogtrop & Green
222 Delaware Avenue, Suite 1500
P.O. Box 68
Wilmington, Delaware 19899
Attorney for Appellants,
The Successor Panex Industries,
Inc. Stockholders’ Liquidating
Trust and Michael D. DeBaecke,
Esq., Successor Trustee
3
MICHAEL B. LAW, ESQUIRE
Office of the Attorney General
of the Virgin Islands
Department of Justice
48B-50C Kronprindsens Gade
GERS Building, 2nd Floor
Charlotte Amalie, St. Thomas
U.S. Virgin Islands 00802
Attorney for Appellees,
Dean C. Plaskett, in his capacity
as Trustee for Natural Resources
of the Territory of the United
States Virgin Islands; Virgin
Islands Department of Education
JOHN K. DEMA, ESQUIRE
(ARGUED)
Law Offices of John K. Dema
1236 Strand Street, Suite 103
Christiansted, St. Croix
U.S. Virgin Islands 00820-5008
Attorney for Appellee,
Dean C. Plaskett, in his capacity
as Trustee for Natural Resources
of the Territory of the United
States Virgin Islands
H. MARC TEPPER, ESQUIRE
Buchanan Ingersoll
11 Penn Center, 14th Floor
1835 Market Street
Philadelphia, Pennsylvania 19103
Attorney for Appellee,
Virgin Islands Department of
Education
4
DAVID A. BORNN, ESQUIRE
The Bornn Firm
8 Norre Gade, 2nd Floor
Charlotte Amalie, St. Thomas
U.S. Virgin Islands 00802
Attorney for Appellee,
Virgin Islands Housing Authority
GLEN R. STUART, ESQUIRE
(ARGUED)
KELL M. DAMSGAARD, ESQUIRE
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, Pennsylvania 19103
Attorneys for Appellees,
Esso Standard Oil S.A., Ltd., Esso
Virgin Islands, Inc., and Esso
Standard Oil Co. (Puerto Rico)
DONALD W. STEVER, ESQUIRE
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attorney for Appellees,
Texaco Caribbean, Inc., Texaco
Puerto Rico, Inc. and Texaco, Inc.
NANCY D’ANNA, ESQUIRE
18-38 Estate Enighed
P.O. Box 8330
St. John
U.S. Virgin Islands 00831
Attorney for Appellee,
L’Henri, Inc. d/b/a O’Henry
Cleaners
5
JOHN A. ZEBEDEE, ESQUIRE
Hymes & Zebedee
10 Norre Gade, 3rd Floor
P.O. Box 990
Charlotte Amalie, St. Thomas
U.S. Virgin Islands 00804
Attorney for Appellee,
Vernon Morgan
OPINION OF THE COURT
SCIRICA, Circuit Judge:
This is an appeal of the approval of a consent decree
under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C.
§§ 9601 et seq., substantially resolving more than a decade
of litigation involving contamination of the Tutu Water
Wells aquifer in the United States Virgin Islands. Three
non-settling parties1 appeal the District Court’s approval of
the consent decree, contending that the consent decree is
arbitrary and unreasonable in its damage assessments and
that the District Court erred in not conducting a full
evidentiary hearing prior to its decision.
I.
This matter has been in litigation for several years. We
have reviewed different aspects of this case on three
separate occasions. In 1995, we dismissed claims against
since-dissolved corporations. In re Tutu Wells Contamination
Litig., 74 F.3d 1228 (3d Cir. 1995) (table). In 1997, we
reversed sanctions imposed upon defendant Esso by the
District Court. In re Tutu Wells Contamination Litig., 120
1. The non-settling parties are Andreas Gal, the Estate of Paul Lazare,
and the Successor Panex Industries, Inc. Stockholders’ Liquidating
Trust. We will refer to these parties as the “Laga Parties,” which is what
the entities called themselves, taking the first two letters of their last
names.
6
F.3d 368 (3d Cir. 1997). Finally, in 2000, we denied
without discussion a petition for a writ of mandamus.
Before us now is the District Court’s approval of a
consent decree resolving the underlying litigation. The
consent decree resolves two lawsuits arising out of the Tutu
site contamination.2 The first suit was filed by the
Commissioner of the Department of Planning and Natural
Resources, Dean C. Plaskett, in his capacity as Trustee for
the Natural Resources of the Territory of the United States
Virgin Islands, against Esso, Texaco, Gal, Lazare, and
certain other parties under the Comprehensive
Environmental Response, Compensation and Liability Act,
as amended, 42 U.S.C. §§ 9601 et seq., and territorial
statutory and common law. In the second lawsuit, Esso and
Texaco sought to recover contribution under CERCLA for
remediation costs incurred under prior Environmental
Protection Agency administrative orders.
In support of their joint motion to the District Court, the
Settling Parties filed a two-volume appendix, including the
consent decree and various EPA and other expert reports.
The Trustee retained Industrial Economics to conduct a
damage assessment, one of two nationally known firms that
performs these assessments. Comm’r of the DPNR v. Esso
Standard Oil, Civ. No. 1998-206, at 20 (D.V.I. filed Oct. 15,
2001). The assessment here examined two types of losses:
“use related loss” represented the cost to rehabilitate the
contaminated portions of the Tutu aquifer; and “non-use
related loss” assessed the lost value to the public from non-
use of the aquifer. Industrial Economics calculated the use
related loss at $16.9 million and estimated the non-use
related loss at approximately $19 million. Its work was
peer-reviewed by Dr. Raymond J. Kopp, a senior fellow at
Resources for the Future, and Dr. Kevin J. Boyle, a
professor of environmental economics at the University of
Maine.
In March 1999, all parties convened a settlement
conference where the Trustee disseminated the Industrial
2. For a more detailed description of the contamination at the Tutu Wells
site, see In re Tutu Wells, 120 F.3d at 373-78 (discussing factual and
procedural history).
7
Economics assessment to all defendants, including the
Laga Parties. In conjunction with the EPA and the United
States Department of Justice, the Trustee also prepared a
spreadsheet to allocate fault percentages to the various
parties. Based on relevant factors, including the volume
and toxicity of the parties’ contamination, their financial
resources, and their degree of cooperation, the Trustee
allocated a 38.89% share to Esso, a 26.98% share to
Texaco, and a 19.84% share to the Laga Parties.3
The Laga Parties elected not to participate in settlement
discussions beyond the initial March 1999 meeting. In
contrast, Esso and Texaco participated in settlement
negotiations with the Trustee between March and
September 1999. These negotiations were conducted at
arm’s length and in good faith. They resulted in the parties
agreeing in principle to a consent decree, with Esso
agreeing to pay $6.1 million and Texaco $3.195 million to
settle the Trustee’s claims.
On February 14, 2001, the District Court heard the
Settling Parties’ joint motion to enforce the consent decree
and permitted all parties to submit evidence and make
arguments. Both the Settling Parties and the Laga Parties
presented the court with proposed findings of fact and
conclusions of law. On October 15, 2001, the District Court
approved the consent decree and the Laga Parties now
appeal.
II.
This appeal presents two questions. First, was the
District Court’s approval of the consent decree fair,
reasonable, and in the public interest? Second, did the
District Court err by approving the consent decree without
holding a full evidentiary hearing?
A.
In enacting CERCLA, Congress crafted a complex
statutory scheme designed to ensure the cleanup of the
3. The remaining share of 14.29% was attributed to lesser contributors.
8
nation’s hazardous waste sites. In FMC Corp. v. Department
of Commerce, 29 F.3d 833, 843 (3d Cir. 1994), we noted
“CERCLA’s broad remedial purposes” and cited as “most
important[ ]” CERCLA’s “essential purpose of making those
responsible for problems caused by the disposal of chemical
poisons bear the costs and responsibility for remedying the
harmful conditions they created.”
To this end, CERCLA provides the EPA with “a variety of
tools for achieving the efficient and cost-effective cleanup of
the nation’s hazardous waste sites.” United States v.
Occidental Chem. Corp., 200 F.3d 143, 147 (3d Cir. 1999).
Notable for our purposes here is that the Act expressly
provides that “[w]henever practicable and in the public
interest . . . [the government] shall act to facilitate
agreements . . . in order to expedite effective remedial
actions and minimize litigation.” 42 U.S.C. § 9622(a). Under
CERCLA, the EPA and other environmental agencies like
the DPNR are authorized to agree to settlements that “shall
be entered in the appropriate district court as a consent
decree.” 42 U.S.C. § 9622(d)(1)(A).
We recently had occasion to consider judicial approvals of
consent decrees in CERCLA actions. United States v.
SEPTA, 235 F.3d 817, 822 (3d Cir. 2000). In SEPTA, the
United States brought a CERCLA action against SEPTA,
Conrail, and Amtrak, all prior owners of a contaminated
rail yard. The parties resolved the dispute and sought entry
of a consent decree. But another prior owner of the rail
yard, American Premier, objected to the proposed
settlement. The district court approved the consent decree
and American Premier appealed.
On appeal, we considered the proper standard of review.
As we stated:
We approach our task mindful that, on appeal, a
district court’s approval of a consent decree in CERCLA
litigation is encased in a double layer of swaddling. The
first layer is the deference the district court owes to
[the] EPA’s expertise and to the law’s policy of
encouraging settlement; the second layer is the
deference we owe to the district court’s discretion.
Thus, [a litigant] is faced with a heavy burden in its
9
attempt to persuade us that the district court abused
its discretion by approving the consent decree.
Id. (quoting, in part, United States v. Cannons Eng’g Corp.,
899 F.2d 79, 84 (1st Cir. 1990)).
Appellate review, therefore, is “encased in a double layer
of swaddling.” Id. First, there is deference to the
administrative agencies’ input during consent decree
negotiations and the law’s policy of encouraging settlement.
Where the appropriate agency has reviewed the record and
has made a reasonable determination of fault and damages,
that determination is owed some deference. See Cannons,
899 F.2d at 90 (“If the figures relied upon derive in a
sensible way from a plausible interpretation of the record,
the court should normally defer to the agency’s expertise.”).
Second, there is deference accorded the District Court
under an abuse of discretion standard.
A court should approve a consent decree if it is fair,
reasonable, and consistent with CERCLA’s goals. SEPTA,
235 F.3d at 823. In evaluating the fairness of a consent
decree, a court should assess both procedural and
substantive considerations. Procedural fairness requires
that settlement negotiations take place at arm’s length. A
court should “look to the negotiation process and attempt
to gauge its candor, openness and bargaining balance.”
Cannons, 899 F.2d at 86. Substantive fairness requires
that the terms of the consent decree are based on
“comparative fault” and apportion liability “according to
rational estimates of the harm each party has caused.”
SEPTA, 235 F.3d at 823. “As long as the measure of
comparative fault on which the settlement terms are based
is not arbitrary, capricious, and devoid of a rational basis,
the district court should uphold it.” Id. at 824 (quotations
omitted). A consent decree only need be “based on a
rational determination of comparative fault, . . . whether or
not [a district court] would have employed the same method
of apportionment.” Id.Once a district court determines procedural and
substantive fairness and approves the consent decree, we
review its judgment for abuse of discretion. Occidental
Chem., 200 F.3d at 150 n.8. Parties challenging a district
10
court’s discretion bear a “heavy burden.” We will not upset
the court’s judgment unless those parties demonstrate the
court committed a material error of law or a “meaningful
error in judgment.” Cannons, 899 F.2d at 84; see also
United States v. BP Amoco Oil PLC, 277 F.3d 1012, 1019
(8th Cir. 2002).
B.
Here, the Laga Parties offered no factual or documentary
support for their arguments before the District Court. They
elected not to offer any expert witnesses and submitted no
expert reports to challenge those submitted by the Settling
Parties. While they provide express references to deposition
testimony to this court on appeal, they failed to do so
before the District Court.
Instead of offering direct evidence to the District Court,
the Laga Parties attempted to undercut the evidence
submitted by the Settling Parties. They argued the record
did not contain enough information for the District Court to
determine whether the settlement’s value was a rational
determination of comparative fault. Specifically, they
questioned the accuracy of the Industrial Economics
damage assessment, arguing the estimation of non-use
damages was inconclusive. They also contended the process
did not provide them with sufficient opportunity to contest
the assessment.4
The Laga Parties have not met their “heavy burden” to
demonstrate a “meaningful error in judgment” by the
District Court. The record includes evidence that Industrial
Economics is one of only two companies in the United
States that conduct these types of assessments. Its report
was peer-reviewed and approved by two independent
experts. The Settling Parties, negotiating at arm’s length,
4. The Laga Parties also contend the District Court should have
disapproved the settlement because of a pending motion, offered by some
of the Settling Parties and joined by the Laga Parties, alleging a conflict
of interest by the trustee’s counsel, John K. Dema. But the District
Court’s decision not to disapprove the settlement on these grounds was
sound. The Settling Parties all consented to Dema’s participation in the
negotiations and the settlement was independently reviewed.
11
accepted the report’s findings. The Laga Parties received the
Industrial Economics assessment at the same time as the
Settling Parties and had ample opportunity to contest the
fault share attributed to them. Instead, they elected to forgo
the settlement process following the March 1999 meeting.
The Laga Parties were not obligated to participate in the
settlement negotiations. But as we held in Occidental
Chemical, and reaffirmed in SEPTA, “non-settling
defendants may bear disproportionate liability for their
acts.” Occidental Chem., 200 F.3d at 150 n.8; see SEPTA,
235 F.3d at 825. “In most instances, settlement requires
compromise. Thus, it makes sense for the government,
when negotiating, to give a [potentially responsible party] a
discount on its maximum potential liability as an incentive
to settle. Indeed, the statutory scheme contemplates that
those who are slow to settle ought to bear the risk of paying
more . . . .” SEPTA, 235 F.3d at 824-25 (quoting United
States v. DiBiase, 45 F.3d 541, 546 (1st Cir. 1995)).
Esso, Texaco, and the other Settling Parties
acknowledged to the District Court that they were prepared
for trial but settled to avoid the risk of an adverse jury
verdict. This type of compromise is contemplated by
CERCLA. Thus, even if the Laga Parties’ liability is
increased as a result of this consent decree, it does not
render the consent decree unfair.
As the Court of Appeals for the First Circuit has
observed:
Respect for the agency’s role is heightened in a
situation where the cards have been dealt face up and
a crew of sophisticated players, with sharply conflicting
interests, sit at the table. That so many affected
parties, themselves knowledgeable and represented by
experienced lawyers, have hammered out an agreement
at arm’s length and advocate its embodiment in a
judicial decree, itself deserves weight in the ensuing
balance. The relevant standard, after all, is not whether
the settlement is one which the court itself might have
fashioned, or considers as ideal, but whether the
proposed decree is fair, reasonable, and faithful to the
objectives of the governing statute.
12
Cannons, 899 F.2d at 84 (citations omitted).
Here, the District Court found the parties negotiated the
settlement at arm’s length. Comm’r of the DPNR, Civ. No.
1998-206, at 39. The talks included Commissioner Plaskett
of the DPNR and the Territorial Attorney General. The
District Court found “the settlement comports with the
public interest favoring settlement because it provides
prompt resolution of the environmental claims and
accountability.” Id. at 44.
We see no abuse of discretion.
III.
A.
The District Court made 170 findings of fact and 91
conclusions of law. Citing United States v. Microsoft Corp.,
253 F.3d 34, 101 (D.C. Cir. 2001) (“It is a cardinal principle
of our system of justice that factual disputes must be heard
in open court and resolved through trial-like evidentiary
proceedings.”), the Laga Parties challenge the District
Court’s failure to hold a full evidentiary hearing prior to
adopting the findings and conclusions, asserting they
suffered “deprivations of the rights to due process to which
[they] are entitled under the U.S. Constitution.”
CERCLA favors fair and efficient settlements through
consent decrees. 42 U.S.C. § 9622(d)(1)(A). The District
Court here provided the Laga Parties an opportunity to
submit evidence and present arguments to challenge the
proposed CERCLA consent decree. The Constitution does
not require the court to conduct a full and formal
evidentiary hearing to satisfy due process concerns. See BP
Amoco Oil, 277 F.3d at 1017-18 (“It is within the sound
discretion of the trial court to decide whether an evidentiary
hearing is necessary before ruling on a proposed consent
decree. . . . Due process does not always require an
evidentiary hearing, even where a significant interest is at
stake.”).
The decision whether to hold a full-blown evidentiary
hearing is committed to the sound discretion of the District
13
Court. Here, the settlement negotiations took place at arm’s
length, and produced a reasonable and fair result. The
Settling Parties produced an extensive documentary record
to support their joint motion. The record included exhibits,
expert reports, and deposition testimony detailing the fruits
of more than a decade of environmental investigation at the
Tutu site. In contrast, the Laga Parties presented no
competing documents, testimony, or analysis. They merely
contested the Settling Parties’ evidence as insufficient and
replete with errors. We see no violation of the Laga Parties’
due process rights.
B.
Citing Hartford-Empire Co. v. Shawkee Manufacturing Co.,
147 F.2d 532 (3d Cir. 1944), and Sims v. Greene, 161 F.3d
87, 89 (3d Cir. 1947), the Laga Parties contend the District
Court erred by adopting nearly verbatim all of the factual
findings and conclusions of law submitted by the Settling
Parties during the February 14, 2001 hearing.5
Here, the Laga Parties failed to submit deposition
testimony, expert reports, or analysis to support their
criticism of the Settling Parties’ evidence, and were afforded
ample opportunity to be heard prior to and on February 14,
2001.6 That the District Court adopted nearly verbatim the
proffered findings and conclusions is irrelevant as long as
those findings and conclusions were fair, reasonable, and
consistent with the public interest. We have “squarely held
that a district court’s findings, when adopted verbatim from
5. The Laga Parties contend the District Court did not properly take into
account the effect of the consent decree on other pending claims in the
CERCLA and territorial law actions. But the District Court’s obligation
under CERCLA was to ensure the consent decree is fair, reasonable, and
consistent with the statute’s goals. Whether the court’s findings have a
preclusive effect against the Laga Parties only becomes ripe for
determination if and when the Settling Parties use the findings and
conclusions in other contexts.
6. The District Court’s letter to counsel, dated February 1, 2001,
indicated the February 14 proceeding was intended for the court to
“entertain argument on the motion for summary judgment and the
Consent Decree.”
14
a party’s proposed findings, do not demand more stringent
scrutiny on appeal.” Lansford-Coaldale Water Auth. v.
Tonolli Corp., 4 F.3d 1209, 1215 (3d Cir. 1993); see also
Durham Life Ins. Co. v. Evans, 166 F.3d 139, 148 (3d Cir.
1999).
The responsibility of district courts is clear — “[a] court
should approve a proposed consent decree if it is fair,
reasonable, and consistent with CERCLA’s goals.” SEPTA,
235 F.3d at 823. The District Court here approved a fair,
reasonable, and consistent consent decree. We find no
abuse of discretion.7
IV.
For the foregoing reasons, we will affirm the judgment of
the District Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
7. The Laga Parties also attack specifically a number of findings of fact
as being unsupported or contradicted by record evidence, and a number
of conclusions of law as being erroneous. The basis for many of these
arguments is the District Court’s decision not to hold a full evidentiary
hearing, which we have addressed above. We find these attacks baseless,
especially given the Laga Parties’ failure to offer their own independent
evidence to contradict the volumes of evidence submitted by the Settling
Parties.