United States v. Southeastern Pennsylvania Transportation Authority , 235 F.3d 817 ( 2000 )

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit
12-26-2000
United States v. Southeastern PA Transport. Auth.
Precedential or Non-Precedential:
Docket 99-1479
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Filed December 26, 2000
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-1479
UNITED STATES OF AMERICA;
COMMONWEALTH OF PENNSYLVANIA,
DEPARTMENT OF ENVIRONMENTAL RESOURCES
v.
SOUTHEASTERN PENNSYLVANIA TRANSPOR TATION
AUTHORITY ("SEPTA"), NATIONAL RAILROAD
PASSENGER CORPORATION ("AMTRAK"), and
CONSOLIDATED RAIL CORPORATION ("CONRAIL")
v.
CITY OF PHILADELPHIA;
PENN CENTRAL CORPORATION,
Third-Party Defendants
Penn Central Corporation, now known as
American Premier Underwriters, Inc.,
Appellant
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 86-cv-01094)
District Judge: Honorable Robert F. Kelly
Argued April 10, 2000
Before: NYGAARD, ALITO, and GIBSON,* Cir cuit Judges.
_________________________________________________________________
*The Honorable John R. Gibson, United States Court of Appeals for the
Eighth Circuit, sitting by designation.
(Filed December 26, 2000)
James J. Capra, Jr., Esq. (ARGUED)
Orrick, Herrington & Sutcliffe
666 Fifth Avenue
New York, New York 10103
Counsel for Appellant
Joel M. Gross, Esq. (ARGUED)
U. S. Department of Justice
P. O. Box 7611,
Ben Franklin Station
Washington, D.C. 20026
Paul M. Schmidt, Esq. (ARGUED)
Commonwealth of Pennsylvania
Department of Environmental
Protection
Suite 6015, Lee Park
555 North Lane
Conshohocken, PA 19428-2233
Bonnie A. Barnett, Esq. (ARGUED)
Drinker, Biddle & Reath
1100 PNB Building
Broad & Chestnut Streets
Philadelphia, PA 19107
Counsel for Appellees
OPINION OF THE COURT
JOHN R. GIBSON, Circuit Judge:
American Premier Underwriters, Inc.1 appeals the entry of
a consent decree that resolves the liability of Consolidated
Rail Corporation (Conrail), National Railroad Passenger
Corporation (Amtrak), and Southeastern Pennsylvania
_________________________________________________________________
1. American Premier Underwriters, Inc. was previously called The Penn
Central Corporation. The Penn Central Corporation ar ose out of the
reorganization of Penn Central Transportation Company. For
convenience, we will refer to all three entities as American Premier.
2
Transportation Authority (SEPTA) for environmental
contamination at the Paoli Rail Yard Site2 in Paoli,
Pennsylvania. American Premier, a non-settling defendant,
argues that the decree unfairly allocates responsibility for
cleanup at the Site and that the contribution pr otection it
provides to the settling parties is not per mitted under the
relevant statute. We affirm.
Operations that involved the service, repair , and storage
of rail cars were conducted at Paoli Rail Y ard from 1915
until the beginning of 1995. In the 1950s, electric rail cars
that used dielectric fluid to cool their transfor mers were
first stored and maintained at the yar d. Dielectric fluid
contains polychlorinated biphenyls (PCBs). PCBs, which
pose substantial risks to human health and the
environment, are released during the servicing of train
transformers and volatilize if overheated during train
operation. Operations at the yard allegedly caused PCB
contamination throughout the rail yard pr operty. The
contamination eventually spread to other nearby properties
through erosion.
From 1915 until 1976, American Premier and its
predecessors owned and operated the rail yar d. Pursuant to
the Regional Rail Reorganization Act of 1973, American
Premier conveyed the yard to Conrail on April 1, 1976. That
same day, Conrail conveyed the yard to Amtrak. Amtrak
still owns the property. Conrail operated the yard from April
1, 1976 until the end of 1982. SEPTA then took over the
yard's operation, using it to maintain commuter trains from
1983 until January 1995, when it moved its maintenance
operations to a different location. SEPT A gradually phased
out the use of dielectric fluid that contained PCBs, ending
its use in 1986.
In 1985, EPA representatives observed that access to the
rail yard was unrestricted and that people walked through
and children played in areas at and near the rail yard. They
also saw signs of erosion indicating water runoff from the
yard into nearby residential areas. Sampling revealed PCB
_________________________________________________________________
2. The Site includes the 28-acre rail yar d property and the surrounding
400-acre watershed.
3
contamination in the rail yard and residential soils and in
the fish in nearby creeks.
The following year, the United States br ought this action
against SEPTA, Conrail, and Amtrak (collectively, the rail
companies) pursuant to, inter alia, sections 104, 106(a),
and 107 of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), 42 U.S.C.
SS 9604, 9606(a), and 9607. The gover nment sought
injunctive relief and reimbursement of r esponse costs in
connection with the release of PCBs at the Site. The
Commonwealth of Pennsylvania intervened as a plaintiff
later that year.3
In June 1986, the United States, Conrail, and SEPT A
petitioned the district court that had overseen American
Premier's bankruptcy reorganization to establish their right
to proceed against American Premier . See In re Penn Cent.
Transp. Co., 944 F.2d 164, 166 (3d Cir. 1991). American
Premier's argument that the earlier r eorganization
discharged the CERCLA claims was ultimately
unsuccessful. See id. at 168. In 1992, the United States
filed a separate action against American Pr emier, and the
rail companies brought American Premier into this action
as a third-party defendant. American Pr emier then sought
a declaratory judgment that the government's claims were
barred by a 1980 settlement agreement that resolved claims
between American Premier and the United States arising
from the valuation of American Premier's rail assets
conveyed pursuant to the Regional Rail Reorganization Act.
See Penn Cent. Corp. v. United States, 862 F . Supp. 437,
448-58 (Regional Rail Reorg. Ct. 1994). The court granted
summary judgment to the government on this issue. See id.
at 458.
_________________________________________________________________
3. In 1979, Pennsylvania's Department of Envir onmental Resources
determined that portions of the Site wer e contaminated. The
Commonwealth issued an administrative order to the rail companies,
requiring them to implement immediate stop-gap measures, assess the
contamination, and begin cleanup. The rail companies appealed this
order to the Pennsylvania Environmental Hearing Board. The appeal was
stayed and eventually transferred to the district court (via a 1990
stipulation) as part of this litigation.
4
Since the government initiated this action, it has entered
into five partial preliminary consent decr ees with the rail
companies under which they agreed to per form a variety of
remedies at the Site. In 1986, SEPTA agr eed to construct a
combination fence that restricted access to the rail yard
and limited further PCB migration into the ar ea
surrounding the yard. Later that year , all three rail
companies agreed to conduct an engineering study
addressing erosion and PCB migration fr om the rail yard
and identifying possible remedies to limit the spread of
PCBs. A dispute arose between the United States and the
rail companies over the work necessary to implement the
study, and EPA ended up constructing sedimentation
basins and erosion control systems and r emoving and
disposing of contaminated soil from several r esidential
properties. Under the third partial pr eliminary consent
decree, the rail companies conducted a r emedial
investigation to determine the extent of PCB contamination
at the Site and a feasibility study of various r emedial
alternatives. As part of this decree, SEPTA entered into a
stipulation that addressed worker protection at the rail
yard and decontamination of the car shop, a building in
which rail cars had been repaired since 1915. Under the
fourth partial preliminary consent decr ee, the rail
companies agreed to conduct a soil sampling pr ogram to
determine the extent of PCB contamination in the
residential areas and the surface water channels north of
the rail yard. Finally, under the last partial decree, the rail
companies excavated approximately 3500 cubic yards of
contaminated soils from the residential ar ea north of the
yard. All told, the rail companies spent appr oximately $12
million on remedial action related to the Site before
entering into the consent decree that is the subject of this
appeal.
EPA placed the Paoli Rail Yard Site on the National
Priorities List in 1990. In July 1992, EPA issued a Record
of Decision that reviewed remedial alter natives and their
projected costs and selected remedies for the Site. As
modified, the Record of Decision requir es: (1) excavation
and on-site treatment of contaminated rail yar d soils
(estimated cost: $19,507,375), (2) groundwater treatment
and fuel oil recovery (estimated cost: $1,131,120), (3)
5
decontamination and demolition of rail yard buildings and
structures (estimated cost: $1,471,905), (4) excavation of
contaminated residential soils (estimated cost: $1,196,000),
and (5) excavation of contaminated stream sediments
(estimated cost: $5,701,720).
In 1995, EPA proposed a consent decr ee that would
require all four defendants to clean up the rail yard by
carrying out the first three remedies fr om the Record of
Decision, while leaving American Premier r esponsible for
cleaning up the watershed by carrying out the last two
remedies.
In February 1996, American Premier offer ed to pay 20%
of past and future remediation costs at the Site as part of
a global settlement. American Premier told the rail
companies not to view the proposal as a typical"opening
bid," thus intimating that it would not be willing to increase
its settlement offer. The rail companies responded that they
were disappointed with the offer and that they believed that
American Premier had "sorely misjudged" the probable
outcome if the parties were to litigate. The United States
was similarly unsatisfied with the offer .
On September 30, 1996, EPA issued a unilateral
administrative order requiring American Pr emier to
implement the remedies from the Recor d of Decision related
to the watershed portion of the Site. Under this or der,
American Premier is responsible for the excavation of
residential soils and stream sediments. T ogether, these
remedies are estimated to cost $6,897,720.
On July 28, 1997, the United States filed a Praecipe to
Lodge Consent Decree, with the proposed decree resolving
the rail companies' liability to the United States and the
Commonwealth for contamination at the Site. The consent
decree contends "that the degree of involvement by
American Premier . . . in the disposal of hazar dous
substances and the operation at the Site is at least equal to
or maybe greater than the degree of involvement by all the
Settling parties combined." It requir es the rail companies to
excavate and contain the rail yard soils, per form the
groundwater treatment and fuel oil r ecovery, and
decontaminate and demolish rail yard buildings and
6
structures. Together, these r emedies are estimated to cost
$22,110,400. The decree also requir es several payments by
the rail companies: $500,000 to the EPA Hazar dous
Substance Superfund to reimburse past r esponse costs,
$100,000 to the Commonwealth to reimburse past response
costs, and $850,000 for natural resource damages.
The decree gives contribution protection to the rail
companies for the past, interim, and future r esponse costs
of the United States and the Commonwealth and for
natural resource damages. It also gives them protection for
all remedial actions they have perfor med or will perform at
the Site, as well as for the work that American Pr emier is
to perform under the administrative or der.
American Premier objected to the proposed settlement by
submitting comments both to EPA and to the
Commonwealth. On July 30, 1998, the United States
moved for entry of the consent decree. American Premier
opposed the motion. The district court granted the motion
after finding the consent decree procedurally and
substantively fair, reasonable, and consistent with
CERCLA's goals. This appeal followed.
American Premier challenges the entry of the consent
decree on two related grounds. First, it argues that
CERCLA does not authorize the contribution pr otection
provided to the rail companies by the decr ee. Second, it
argues that the district court erred by approving the
consent decree because the decree is substantively unfair.
I.
We review a district court's decision to grant a motion for
entry of a consent decree for abuse of discr etion. See, e.g.,
United States v. Cannons Eng'g Corp., 899 F .2d 79, 84 (1st
Cir. 1990); United States v. Montr ose Chem. Corp., 50 F.3d
741, 746 (9th Cir. 1995). "We appr oach 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." Cannons, 899 F.2d at 84. The first layer is the
deference the district court owes to EP A'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.
7
See id. Thus, American Premier is faced with a "heavy
burden" in its attempt to persuade us that the district court
abused its discretion by approving the consent decree. See
id.
American Premier's argument that CERCLA does not
authorize the type of contribution protection granted by the
consent decree raises an issue of law, and we exercise
plenary review of the district court's decision on this issue.
See New Castle County v. Halliburton NUS Corp. , 111 F.3d
1116, 1120 (3d Cir. 1997).
II.
The district court held that the contribution pr otection
provided by the consent decree is per missible under
CERCLA. Under 42 U.S.C. S 9613(f)(2), "[a] person who has
resolved its liability to the United States or a State in an
administrative or judicially approved settlement shall not be
liable for claims for contribution regar ding matters
addressed in the settlement."
Here, the consent decree defines "matters addressed" as
all claims asserted by the United States and the
Commonwealth in their respective complaints and all
claims of the United States and the Commonwealth
against the Settling Defendants for recovery of"Past
Response Costs", "Interim Response Costs","Future
Response Costs," and "Natural Resource Damages" as
those terms are defined in this Consent Decree, and all
claims of the United States and the Commonwealth for
all the costs of all past response actions per formed by
the Settling Defendants, the costs of, or per formance
of, the "Work" as that term is defined in this Consent
Decree, and the cost or performance of all Work to
implement that portion of the ROD [Record of Decision]
which Settling Defendants are not being r equired to
implement under this Consent Decree excluding those
items covered under the reservation of rights and
reopener provisions of Section XXII.
American Premier claims that CERCLA does not authorize
the contribution protection provided by the decree. The
8
problem, according to American Premier, is that the decree
gives the rail companies contribution protection for the
remedies that they will perform under the decree (which are
matters addressed in the settlement) and for the remedies
that American Premier will perfor m under the
administrative order (which are not matters addressed in
the settlement). In its view, this is a partial settlement, and
the rail companies are only entitled to contribution
protection for the remedies they ar e undertaking under the
consent decree.
We reject American Premier's view. While legislative
history indicates that "Congress contemplated that there
would be partial settlements which would leave settling
parties liable for matters not addressed in the agreement,"
United States v. Charter Int'l Oil Co., 83 F .3d 510, 515 (1st
Cir. 1996), this is not a partial settlement. The Paoli Site
does contain two distinct areas: the rail yar d and the
watershed. Under the settlement, the rail companies are
responsible for cleaning up the rail yar d. CERCLA does not
require, however, that the matters addressed in the decree
be limited to the rail yard.
The decree states that the United States and the rail
companies "wish to finally conclude . . . all claims and
causes of action set forth" in this litigation. This litigation
relates to contamination of the entire Paoli Site. The rail
companies agreed to take on the remedies necessary to
clean up the rail yard in order to r esolve their liability for
contamination throughout the Site. Reading this settlement
as a whole, it would be reasonable to conclude that the
matters it addresses are matters r elated to the entire Site,
even without an explicit definition of matters addressed.
See John M. Hyson, CERCLA Settlements, Contribution
Protection and Fairness to Non-Settling Responsible Parties,
10 Vill. Envtl. L.J. 277, 320 (1999) ("[I]n light of Congress's
intent to induce settlements, all settlement[s] should be
presumed to afford to the settlors protection against claims
for contribution regarding an entir e site, unless there is an
explicit provision to the contrary."); see also Akzo Coatings,
Inc. v. Aigner Corp., 30 F.3d 761, 771-74 (7th Cir. 1994)
(Easterbrook, J., dissenting).
9
Furthermore, including a definition of matters addressed
in the decree will foreclose futur e arguments over the scope
of the contribution protection.4 See Charter Int'l, 83 F.3d at
517 n.9; Akzo Coatings, 30 F.3d at 768 & n.14. The
definition of matters addressed in this decr ee clarifies the
extent of the contribution protection that the rail
companies are receiving in exchange for their agreement to
clean up the rail yard property, r eimburse the United
States and the Commonwealth for part of their r esponse
costs, and pay for a portion of natural resour ce damages.
The district court did not err by holding the contribution
protection provided by the decree per missible under
CERCLA.
III.
American Premier's second argument is that the district
court should not have granted the motion to enter the
consent decree because the decree is substantively unfair.
A court should approve a proposed consent decree if it is
fair, reasonable, and consistent with CERCLA's goals. See
United States v. Cannons Eng'g Corp., 899 F .2d 79, 85 (1st
Cir. 1990). The terms of a decr ee are substantively fair if
they are based on comparative fault and if liability is
apportioned according to rational estimates of the harm
each party has caused. See id. at 87.
According to American Premier, the court erred in three
different ways: (1) by adopting a method of allocating
responsibility based on years of ownership and operation,
(2) by approving a decree that sets a minimum amount of
liability for American Premier while setting a maximum
amount of liability for the rail companies, prior to an
allocation proceeding, and (3) by approving a decree that
immunizes the rail companies from sharing liability for
uncertain future costs.
_________________________________________________________________
4. While it is possible that the breadth of a matters addressed provision
could render a consent decree unfair , that is not this case. See infra,
Section III.
10
A.
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. Cannons, 899 F.2d at 87. According to the
decree, American Premier's responsibility for contamination
at the Site is at least equal to and possibly gr eater than the
responsibility of the rail companies combined. The district
court accepted as fair the decree's apportionment of liability
based on years of ownership of the Paoli Rail Y ard and the
likelihood of contamination during those years.
PCBs were used at the rail yard for at least twenty-five
years while American Premier owned and operated the
yard. Amtrak owned the yard for ten years while PCBs were
used. During that ten-year period, first Conrail and then
SEPTA operated the yard. Therefor e, American Premier
owned and operated the rail yard more than 70% of the
time while PCBs were used.
American Premier argues that the district court "wholly
disregarded" its settlement proposal, which was based on
factors other than years of ownership, to assume 20% of
the past and future costs of remediation at the Site. But the
district court was not required to accept American
Premier's methodology for apportioning liability. Once it
found that the decree was based on a rational
determination of comparative fault, its task was complete,
whether or not it would have employed the same method of
apportionment. See id. at 88. The district court did not
abuse its discretion by accepting years of ownership and
operation as a plausible method on which to judge the
fairness of the consent decree.
B.
American Premier contends that the decr ee is unfair
because it sets a minimum level of responsibility for
American Premier by foreclosing it fr om receiving
contribution from the rail companies for its costs, while
setting a maximum level of responsibility for the rail
companies by leaving them free to bring a contribution
action against American Premier. This disparity does not
11
establish that the decree is substantively unfair or that the
district court abused its discretion by entering it.
Taking into account American Premier's share of Site
remediation and assuming that it will have to r eimburse
the United States and the Commonwealth for the r emainder
of their past response costs and pay natural r esource
damages, American Premier will be responsible for costs
that exceed $17 million. Eventually, the total amount
expended on Site remediation and damages, including the
$12 million already spent by the rail companies, will likely
exceed $53 million. Because of the contribution pr otection
provided to the rail companies, American Pr emier's
minimum share of these costs is 33%. Its shar e may
increase if the rail companies bring a successful
contribution action against it.
American Premier's offer to assume r esponsibility for 20%
of the costs was unacceptable to EPA and the rail
companies, so they chose to settle without American
Premier. The settlement reduces the rail companies'
maximum share of liability from 100% to 67% in exchange
for their agreement to clean up the rail yar d and pay part
of past response costs and natural resour ce damages:
In most instances, settlement requires compromise.
Thus, it makes sense for the government, when
negotiating, to give a PRP [potentially r esponsible 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 . . . .
United States v. DiBiase, 45 F.3d 541, 546 (1st Cir. 1995).
The rail companies' share of liability may decr ease if they
bring a successful contribution action against American
Premier.
We recently pointed out that the "intended effect" of
protecting settling parties from contribution claims "is that
``non-settling defendants may bear disproportionate liability
for their acts.' " United States v. Occidental Chem. Corp.,
200 F.3d 143, 150 n.8 (3d Cir. 1999) (quoting B. F. Goodrich
v. Betkoski, 99 F.3d 505, 527 (2d Cir . 1996)). In Occidental
Chemical, EPA had already settled with one potentially
12
responsible party when it issued an administrative order to
Occidental, requiring it to participate in the cleanup. See id.
at 145. Occidental pointed out that, because the other
party obtained contribution protection for matters
addressed in the settlement, Occidental could end up
paying more than its fair share. See id. at 150 n.8. We
responded, "While this is true, it is the r esult of a deliberate
policy choice made by Congress in order to encourage
settlements." Id.
It is highly unlikely that this consent decr ee will result in
a final allocation of responsibility for contamination at the
Paoli Site. The rail companies will be able to bring a
contribution action against American Premier and will be
able to offer more specific evidence r egarding the relative
fault of the parties. The district court will then be able to
determine whether American Premier is liable for a portion
of the rail companies' costs. If the court chooses to do so,
it will be able to take into account the costs incurred by
American Premier which are not recoverable through
contribution. See 42 U.S.C. S 9613(f)(1) (in a contribution
action, "the court may allocate response costs among liable
parties using such equitable factors as the court
determines are appropriate").
This consent decree does set a floor for American
Premier's liability while setting a ceiling for the rail
companies' liability. That is part of the scheme enacted by
Congress, and the district court did not abuse its discretion
by rejecting the argument that this r esult made the decree
unfair.
C.
Finally, American Premier argues that the consent decree
is unfair because it alone will be responsible for "highly
speculative" future costs: those related to its share of Site
remediation, natural resource damages, and future
response costs of the United States and the
Commonwealth. This, too, is an argument based on the
contribution protection provided to the rail companies.
In every case where remedial measur es have yet to be
performed, the future costs ar e uncertain. But that
13
uncertainty should not be used to hinder settlement. EPA
used standard methodologies to estimate the costs of
cleaning up the Site, and neither we nor the district court
are in a position to second-guess these estimates. See
Cannons, 899 F.2d at 90 ("If the figures relied upon derive
in a sensible way from a plausible interpr etation of the
record, the court should normally defer to the agency's
expertise."). The natural resource damages estimate was
based on detailed assessments, and if these damages turn
out to be "significantly greater" than the $5.3 million
estimate, the consent decree does not pr event EPA from
pursuing the rail companies for the excess. Finally, we
doubt that the United States and the Commonwealth will
incur much in the way of future response costs since the
consent decree, along with the administrative order, will
result in a complete remedy at the Paoli Rail Yard Site.
Whenever a non-settling party is barred fr om bringing a
contribution action and work remains to be done, its future
liability may exceed present estimates. The district court
determined that this possibility did not r ender the consent
decree unfair, and we see no abuse of discretion in that
determination.
* * *
We affirm the entry of the consent decree.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
14