Kennedy Building Associates v. Viacom, Inc. , 375 F.3d 731 ( 2004 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 03-1520
___________
Kennedy Building Associates, *
*
Plaintiff - Appellee, *
*
v. * Appeal from the United States
* District Court for the
Viacom, Inc., as successor in interest * District of Minnesota.
to CBS Corporation, as successor in *
interest to Westinghouse Electric *
Corporation, *
*
Defendant - Appellant. *
___________
Submitted: December 15, 2003
Filed: July 15, 2004
___________
Before WOLLMAN, JOHN R. GIBSON, and RILEY, Circuit Judges.
___________
JOHN R. GIBSON, Circuit Judge.
Viacom, Inc., the corporate successor to Westinghouse Electric Corporation,
appeals the judgment entered against it for damages and injunctive relief and the
awards of attorneys' fees and prejudgment interest in this suit arising out of
Westinghouse's environmental contamination of a site it once owned in Minneapolis.
Kennedy Building Associates, the present owner of the contaminated property,
obtained a jury verdict awarding it $225,000 in compensatory damages and
$5,000,000 in punitive damages on its common law claim for strict liability. The
district court awarded Kennedy $106,393.23 in response costs Kennedy had already
incurred under the federal Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA) and the Minnesota Environmental Response and
Liability Act (MERLA), and declared Viacom liable for any response costs Kennedy
should incur in the future. The court also issued an injunction under the Minnesota
Environmental Rights Act (MERA), requiring Viacom to clean up the contamination
at the site. The court awarded Kennedy statutory attorneys' fees, witness fees, and
costs in the amount of $1,113,915, and prejudgment interest in the amount of
$41,677.89. Viacom appeals everything except the CERCLA and MERLA relief,
arguing that the strict liability award was not permissible under Minnesota common
law; that the strict liability claim cannot support an award of punitive damages; that
the MERA claim is moot because Viacom has entered an administrative consent order
concerning the contaminated property; that the attorneys' fee award was excessive;
and that the prejudgment interest was excessive because Viacom had offered to settle
the case. We reverse as to the common law strict liability claim and the punitive
damages award; reverse and remand the award of injunctive relief with instructions
to modify the injunction; remand for adjustment of the fees award; affirm the award
of prejudgment interest on the CERCLA and MERLA claims; and reverse the
prejudgment interest on the strict liability award.
Westinghouse owned the property at 2303 Kennedy Street in Minneapolis from
the 1920s until 1980. Westinghouse used the building there to house an electrical
transformer repair facility. A portion of Westinghouse's business there was the repair
of transformers that were insulated with Inerteen, a Westinghouse product that
contained polychlorinated biphenyls, known as PCBs. Chlorobenzenes were used as
a solvent to thin the PCBs down to a usable consistency.
By the late 1960s, it was recognized that PCBs were potential carcinogens and
that they were accumulating, rather than breaking down, in tissues and in the
environment. In 1976, Congress passed the Toxic Substances Control Act, which
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singled out PCBs as a hazardous substance, requiring the EPA to prescribe rules
restricting their manufacture, use and disposal. Pub. L. No. 94-469, Title I, § 6, 90
Stat. 2020 (1976) (codified at 15 U.S.C. § 2605). In 1979, EPA banned rebuilding
of transformers that contained PCB levels of more than 500 parts per million, stating
that these operations presented an unreasonable risk of release of PCBs.
Polychlorinated Biphenyls (PCBs), Manufacturing, Processing, Distribution in
Commerce, and Use Prohibitions, 44 Fed. Reg. 31514 (May 31, 1979) (codified at 40
C.F.R. pt. 671). PCBs and chlorobenzenes are classified as hazardous substances
under MERLA and CERCLA. Minn. Stat. § 115B.02, subd. 8(1) (cross referencing
33 U.S.C. § 1321(b)(2)(A)); 42 U.S.C. § 9601(14) (same); 40 C.F.R. § 116.4 (listing
hazardous substances). Sites contaminated with hazardous substances are subject to
remediation under federal and state law. See 42 U.S.C. § 9604 (CERCLA); Minn.
Stat. § 115B.04, subd. 1 (MERLA).
In 1971-73, Westinghouse undertook a study of the sites where it used PCBs.
The purpose of the study was to ascertain whether PCBs were leaking from those
sites and migrating off Westinghouse property, and if so, whether the PCBs were
likely to be detected by others and traced back to Westinghouse. The head of the
Westinghouse study, Dr. Thomas Munson, testified at trial that he examined four such
facilities (but not the Minneapolis facility). Munson said, "We found PCBs
everywhere we looked." Munson testified that Westinghouse stopped the study after
the initial sampling of four plants showed PCBs were leaving the sites and showing
up in wildlife (and fish markets) nearby. On cross examination, Viacom counsel
brought out that the four plants sampled were manufacturing, not repair facilities, but
Munson said that "it was a given" that repair sites were contaminated and that he told
Westinghouse management,
It simply wasn't possible to handle, ah, gallon quantities of PCBs,
pumping them into transformers, draining them out of transformers,
without having some spillage. And it was just a given at that time that
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every facility that had been doing that for any length of time would have
spilled considerable amounts of PCB.
(February 4, 2002, vol 4 p. 105-06.) The district court found,
Westinghouse knew during the time it owned the site at issue that there
were health risks associated with PCBs, and that PCB contamination
was virtually certain to be found at its long-term transformer-repair
facilities.
(Order of May 31, 2002, slip op. at 3.) Viacom does not argue that this finding was
clearly erroneous.
The district court found Westinghouse's operations contaminated the property
with PCBs and chlorobenzenes through spillage, overflow of an oil-storage tank, and
burning of PCB-contaminated oil in the building's furnace. Evidence at trial indicated
that the site's soil was contaminated by PCB concentrations as high as 9,100 mg/kg
(the allowable level is 1.2 mg/kg) and the groundwater contains concentrations as
high as 37,000 µg/liter (the allowable level is .04 µg/liter). Expert witness William
Welbes testified that the amount of PCB contamination now at the site indicates that
approximately 18,000 pounds of PCBs have been spilled there, resulting in
contamination of 25,000 tons of soil. Chlorobenzenes were also present in the
groundwater. Welbes testified that, because the site was also contaminated with
mineral oil, which is a solvent for the PCBs, the PCBs at the site are presently
migrating and contaminating surrounding soil and groundwater of neighboring
properties. The chlorobenzenes are very water soluble and they "show every
indication of having left the site and they're still migrating."
The district court found that despite Westinghouse's knowledge that PCB
contamination was "virtually certain" to exist on the property, Westinghouse sold the
site to Hillcrest Development Company in 1980 without conducting any investigation
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or decontamination at the site and without disclosing the nature of its work at the site.
(Order of May 31, 2003, slip op. at 3.) Gerald Trooien, a partner in Kennedy
Building Associates, bought the property from Hillcrest in 1982 and transferred it to
Kennedy. The district court found that at the time Trooien bought the property, he
did not know and had no reason to know that Westinghouse had disposed of
hazardous substances at the site. (Id. at 4.)
In 1997 Kennedy entered negotiations to sell the property back to Hillcrest.
In preparation for the purchase, Hillcrest hired an environmental consultant, who
discovered the PCB contamination. Hillcrest withdrew its offer to purchase the site.
Kennedy reported the contamination to the Minnesota Pollution Control Agency and
entered the Agency's voluntary clean-up and investigation program, which required
Kennedy to undertake field investigations of the contamination of the soil and
groundwater in order to avoid being referred to the federal Superfund program. The
Kennedy Building site was listed on the Minnesota Pollution Control Agency's
permanent list of priorities on September 27, 2000.
In 1999 Kennedy filed this suit in state court seeking relief under MERLA and
MERA, as well as under the common law of nuisance, negligence and strict liability.
Viacom removed the case to federal court on grounds of diversity of citizenship, and
Kennedy amended its complaint to add claims for CERCLA relief and punitive
damages. Viacom filed a counterclaim asserting Kennedy was liable under CERCLA
and MERLA, and seeking injunctive relief against Kennedy under MERA.
At the time of trial, Kennedy had incurred costs of $106,393.23 in investigating
the contamination. The Minnesota Pollution Control Agency had required it to file
a deed restriction showing the property was contaminated, which meant that Kennedy
could not do anything that would disturb the soil on the property without obtaining
Agency approval. The Agency issued Kennedy an assurance letter stating that
Kennedy did not contaminate the site. Viacom and the Agency entered an
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administrative consent order on the eve of trial, January 22, 2002, in which Viacom
agreed to conduct a remedial investigation, submit a feasibility study, develop a
response action plan, and implement such a plan.
The common law and punitive damages claims were submitted to a jury, which
found in favor of Viacom on the negligence and nuisance claims, but which awarded
$225,000 in actual damages and $5,000,000 in punitive damages on the strict liability
claim. Because the CERCLA, MERLA, and MERA claims invoked the court's
equitable jurisdiction, the district court decided those claims. The court found that
Kennedy proved its CERCLA and MERLA claims against Viacom and that Viacom
did not prove its CERCLA and MERLA claims against Kennedy. The court awarded
Kennedy response costs of $106,393.23 for costs already incurred and declared
Viacom liable for future response costs. The court held that Kennedy proved its
MERA claim and accordingly the court enjoined Viacom "to remediate the site's soil,
groundwater, and building interior so that the previously-placed deed restriction may
be removed, pursuant to Minn. Stat. § 116B.07."
Kennedy filed post-trial motions seeking prejudgment interest and an award of
attorneys' fees, expert witness's fees and costs. The motion was referred to a
magistrate judge, who recommended the award of $41,677.89 in prejudgment interest
on the CERCLA response costs and the actual damages award, and an award of
$1,113,915 for attorneys' fees, expert witness's fees, and costs. The district court
adopted the magistrate judge's recommendation and entered judgment accordingly.
I.
Viacom argues that the district court erred in interpreting Minnesota common
law to hold a land-owner strictly liable to its successor in interest for contamination
of land. The district court interpreted the common law tort derived from the English
case of Rylands v. Fletcher, LR 3 H.L. 330 (1868), to provide a cause of action to
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Kennedy against Viacom for the escape of PCBs and chlorobenzenes onto the soil
and groundwater of the property. Viacom argues that the Rylands rule only creates
a cause of action for land-owners against neighbors who cause harm by their use of
nearby property. Viacom contends that Minnesota has not and would not extend the
Rylands rule to create a cause of action in favor of a land-owner against its
predecessor in title for harm done to the land when the predecessor owned it.
This Court reviews the district court’s determinations of state law de novo.
Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991). Our task is to ascertain
how the Minnesota Supreme Court would answer the question before us; if no
decision of that court directly addresses the question, we look at “related state court
precedents, analogous decisions, considered dicta, and other reliable sources in an
effort to determine what the Minnesota Supreme Court’s decision would be.” Union
Pac. R.R. v. Reilly Indus., Inc., 215 F.3d 830, 840 (8th Cir. 2000).
In Rylands, the owners of a mill, Rylands and Horrocks, built a reservoir on
land north of their mill, to supply their mill with water. The plaintiff, Fletcher, leased
coal mines on a neighboring close of land between the reservoir and the mill. The
water from the reservoir burst into old, disused shafts that communicated with
Fletcher’s mine and flooded the mine. Fletcher sued and prevailed in the Court of
Exchequer Chamber, but Rylands and Horrocks appealed, arguing that because they
did not know the shafts communicated with the mine, they were not negligent, and
therefore they could not be liable. The House of Lords held that Fletcher did not have
to prove negligence, since “the person who, for his own purposes, brings on his land
and collects and keeps there anything likely to do mischief if it escapes, must keep
it in at his peril.” Id. at 339. Lord Cairns’s opinion recited the lower court’s
statement of the ratio decedendi of the case expressly depending on the relationship
of neighbor to neighbor:
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[I]t seems but reasonable and just that the neighbour who has brought
something on his own property (which was not naturally there),
harmless to others so long as it is confined to his own property, but
which he knows will be mischievous if it gets on his neighbour’s, should
be obliged to make good the damage which ensues if he does not
succeed in confining it to his own property.
Id. at 340.
"Minnesota was one of the first American jurisdictions to adopt the strict
liability rule of [Rylands]," Minnesota Mining & Mfg. Co. v. Travelers Indem. Co.,
457 N.W.2d 175, 183 (Minn. 1990), and was a leader in the development of the tort
in this country, Jed Handelsman Shugerman, The Floodgates of Strict Liability:
Bursting Reservoirs and the Adoption of Fletcher v. Rylands in the Gilded Age, 110
Yale L. J. 333, 348 (2000). Beginning with a case involving a tunnel collapse that
flooded neighboring property in Cahill v. Eastman, 18 Minn. 324, 1872 WL 3309
(1872), Minnesota applied the theory in a wide variety of fact situations. See, e.g.,
Sachs v. Chiat, 162 N.W.2d 243, 246 (Minn. 1968) (pile driving damaged neighbor’s
house); Bridgeman-Russell Co. v. City of Duluth, 197 N.W. 971 (Minn. 1924) (water
reservoir flooded neighbor’s property); Wiltse v. City of Red Wing, 109 N.W. 114,
115 (Minn. 1906) (water reservoir flooded neighbor’s house); Hannem v. Pence, 41
N.W. 657, 658 (Minn. 1889) (ice fell on plaintiff from defendant's unsafely designed
building). In particular, Minnesota applied the theory to pollution and ground water
contamination. Minnesota Mining & Mfg. Co., 457 N.W.2d at 183; Berger v.
Minneapolis Gaslight Co., 62 N.W. 336 (Minn. 1895) (petroleum contaminated
neighbors’ property). The Minnesota Supreme Court summarized the rule as follows:
[A] party who, for his own profit, keeps on his premises anything not
naturally belonging there, the natural tendency of which is to become a
nuisance, and to do mischief if it escapes, is liable if it escapes, without
proof of negligence, for all damages directly resulting therefrom.
Wiltse, 109 N.W. at 115 (emphasis in original).
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The Minnesota Supreme Court has never entertained the question of whether
the Rylands rule applies to the case of a land-owner suing its predecessor in title for
damage to the land antedating the plaintiff's ownership of the land.
Kennedy does not claim that Minnesota has yet made the leap from liability to
neighbors to liability to successors in title, but instead argues that Minnesota courts
would do so, relying on T&E Indus. v. Safety Light Corp., 587 A.2d 1249, 1255-59
(N.J. 1991), in which the New Jersey Supreme Court extended Rylands liability to the
claim of a land-owner against its predecessor in title for contaminating the land.
Accord Hanlin Group, Inc. v. Int’l Minerals & Chem. Corp., 759 F. Supp. 925, 934
(D. Me. 1990); see also Interstate Power Co. v. Kansas City Power & Light Co., 909
F. Supp. 1224, 1240 (N. D. Iowa 1991) (denying summary judgment on strict liability
claim brought by land-owner against predecessor in title for polluting land, but
without discussing issue of whether strict liability should be extended to successors
in title). The majority of courts that have considered this question have agreed that
strict liability should not be extended to cover claims by a subsequent owner of the
land against an earlier owner. Rosenblatt v. Exxon Co., 642 A.2d 180, 185-88 (Md.
1994); Hicks v. Humble Oil & Refining Co., 970 S.W.2d 90, 97 (Tex. Civ. App.
1998); Hydro-Mfg., Inc. v. Kayser-Roth Corp., 640 A.2d 950, 958 (R.I. 1994); Futura
Realty v. Lone Star Bldg. Ctrs., 578 So. 2d 363, 365 (Fla. Dist. Ct. App. 1991);
Andritz Sprout Bauer, Inc. v. Beazer East Inc., 174 F.R.D. 609, 623-26 (M.D. Pa.
1997); Cross Oil Co. v. Phillips Petroleum Co., 944 F. Supp. 787, 789-90 (E.D. Mo.
1996); 325-343 E. 56th St. Corp. v. Mobil Oil Corp., 906 F. Supp. 669, 677-78
(D.D.C. 1995); Dartron Corp. v. Uniroyal Chem. Co., 893 F. Supp. 730, 740 (N.D.
Ohio. 1995); 55 Motor Ave. Co v. Liberty Indus. Finishing Corp., 885 F. Supp. 410,
423 (E.D.N.Y. 1994); Wellesley Hills Realty Trust v. Mobil Oil Corp., 747 F. Supp.
93, 101-02 (D. Mass. 1990) (buyer knew of contamination at time of land sale); see
also City of Minneapolis v. Arkla, Inc., No. 4-91-CV-44, 1993 WL 61827, at * 2 (D.
Minn. 1993) (unpublished) (Under Minnesota law, claim for strict liability for
ultrahazardous activities is “available only to adjoining or neighboring landowners.”).
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We must determine what the principle would be for limiting or extending
Rylands liability and ascertain whether the Minnesota Supreme Court would accept
or reject such a principle.
Viacom contends that the strict liability rule was "developed to protect the
owner of property adjacent to a site from which a harmful release occurs." Minnesota
has not limited the Rylands cause of action to cases in which the plaintiff and
defendant were neighboring land-owners. The Minnesota Supreme Court once
applied the doctrine in favor of a plaintiff who was not a land-owner, but was merely
walking by the defendant's unsafely designed building when ice fell from the building
onto the public sidewalk. Hannem v. Pence, 41 N.W. 657 (Minn. 1889).
Furthermore, in Cahill the Minnesota Supreme Court applied the rule to a defendant
that did not own the land on which it created a hazard. 1872 WL 3309, at *5 ("That
the defendants did not own the soil could not of course lessen the liability, if any,
which they might, because of their operations therein, incur with respect to plaintiffs.
If the owner could not have made the excavation with impunity, certainly one who
was not the owner could not."). Moreover, it made no difference that the defendant
was no longer in possession or control of the instrumentality that caused the hazard.
Id. "If [the defendants] were responsible for the consequences of the excavation, they
could not evade them by giving up such possession and control to others." But cf.
Mahowald v. Minnesota Gas Co., 344 N.W.2d 856, 860 (Minn. 1984) ("close
examination" of Minnesota strict liability cases, including Cahill, shows that in each
the instrumentality that caused damage was in "exclusive control" of the person
sought to be charged.).
Viacom contends that the rationale for the Rylands rule is that a land-owner
cannot protect itself from the activities of neighboring land-owners, and that such a
rule should not apply to a successor land-owner because it could have avoided the
harm by inspecting the property before it bought it. This reasoning finds support in
case law from other jurisdictions, but is questionable in Minnesota. One of the
leading cases on this issue concluded that a key ingredient of Rylands was the
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neighboring land-owner’s inability to protect himself from his neighbor’s dangerous
activities; accordingly, the court held that a land-owner who purchased the property
after the harm was done could have avoided encountering the harm and therefore
could not recover under Rylands.
Subsequent users . . . are able to avoid the harm completely by
inspecting the property prior to purchasing or leasing it. Thus, it is not
unreasonable to expect subsequent users to bear the risk of such harm.
We think, however, that it would be unreasonable to hold the prior user
liable to remote purchasers or lessees of commercial property who fail
to inspect adequately before taking possession of the property.
Rosenblatt v. Exxon Co., 642 A.2d 180, 188 (Md. 1994).1 Accord 325-43 E. 56th St.,
906 F. Supp. at 677-78. However, this rationale would also defeat a Rylands cause
of action by plaintiffs who bought a property after neighbors had created a hazard, at
least where the hazard was obvious. See Rosenblatt, 642 A.2d at 186 (strict liability
limited to claims by occupier of land harmed by actions abnormally dangerous in
relation to area, when carried on by "contemporaneous occupier" of neighboring
land). Kennedy contends that this reasoning is inconsistent with the Minnesota
Supreme Court's decision in Cahill. There, the Minnesota Supreme Court adopted the
Rylands rule in a case in which defendants' tortious act was complete before the
plaintiffs obtained an interest in the land. The defendants, Eastman et al., constructed
a tunnel on the land of the St. Anthony Falls Water Power Co., the "assignee" of
plaintiff's landlord, Steele. 1872 WL 3309, at *4. The tunnel was built before
October 4, 1869, and the plaintiffs leased the mill on adjoining property shortly
afterwards, in December 1869 and January 1870, respectively. Id. at *4-5. River
1
We cite Rosenblatt with caution because it is clear that Maryland law is more
restrictive of the strict liability tort than Minnesota law. Maryland has declined to
extend strict liability to a case in which the defendant was a contractor that did not
own the land on which it created a hazard. Rosenblatt, 642 A.2d at 187. Minnesota
applied the Rylands doctrine to a contractor, rather than land-owner, in the first case
in which it adopted the doctrine. Cahill, 1872 WL 3309, at *5.
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water burst into the tunnel, causing erosion the length of the tunnel on October 4,
1869, before the plaintiffs became lessees. After the plaintiffs leased the mill, the
tunnel flooded again in April 1870, this time eroding the land on which the mill
stood. Id. at *5. Since the Cahill plaintiffs entered the leasehold after the tunnel had
been built and one flood had happened, Kennedy contends that it was not fatal to the
plaintiff's case that they acquired the property after the defendant created the
hazardous condition or even after the hazard had manifested itself. The Minnesota
Supreme Court did not inquire into whether the plaintiffs could have discovered the
hazard by inspecting the property before entering into it. Minnesota law would thus
not appear to restrict the Rylands cause of action to plaintiffs in possession of
property at the time the defendant created the hazard, and it is questionable whether
a neighbor's claim would be defeated by a showing that he could have learned of the
hazard before acquiring the property. (However, the Cahill plaintiffs were in
possession of the land at the time of the flood that eroded their mill; thus, they were
not merely purchasers of land that had already suffered the damage for which they
sued.)
Furthermore, a rule restricting Rylands liability on the ground that subsequent
purchasers can inform themselves of the condition of the property would not fit a case
such as this one, where the district court found that a visual inspection of the property
did not reveal the contamination and that Kennedy "did not know, and had no reason
to know, when [it] purchased the site, that Westinghouse had disposed of hazardous
substances at the site."
We do, however, conclude that there is a principle that precludes a Rylands
cause of action by a subsequent owner of the affected land. Minnesota's version of
the Rylands rule has required that there be an "escape" of the instrumentality causing
the harm. In Berger, the Minnesota Supreme Court summed up the rule:
The essential condition of liability, without proof of negligence on the
part of the owner, for injury to others by the escape of things kept by
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him on his own premises, is that the natural tendency of the things kept
is to become a nuisance or to do mischief, if they escape. The authority
of Cahill v. Eastman is not to be extended beyond the class of cases
possessing all of the elements upon which the judgment of the court was
based.
62 N.W. at 338 (emphasis added). With this admonition in mind, we may not extend
the Rylands rule to a case in which the harm was not caused by an escape. Kennedy
argues that the release of the PCBs and chlorobenzenes was an escape, and that it is
not necessary for the escape to cross a property line. However, in Hannem v. Pence,
the case in which the ice fell from the defendant's building onto the plaintiff, who was
walking on the public sidewalk, the Minnesota Supreme Court characterized the tort
as one in which the defendant in effect spreads his dominion past his own property:
His [the defendant's] act was an attempt to extend his right as proprietor
beyond the limits of his own property, at the expense of the safety of the
traveling public. He was bound at his peril to keep the ice and snow that
collects on his own roof within his own limits, and if the shape of his
roof is such as necessarily or naturally to throw it upon the street, he is
responsible for all damages, precisely as if he had under the same
circumstances thrown it upon the premises of an adjacent owner.
41 N.W. at 659. This reasoning simply does not apply to a suit based on harm done
to the defendant's own property. Kennedy rightly points out that not all courts limit
strict liability to cases involving an escape. See Wellesley Hills, 747 F. Supp. at 102
("Of course, as the rule developed, courts applied it to situations which did not
involve an 'escape' from the land."). This view is reflected in Restatement (Second)
§ 519. However, the Minnesota Supreme Court has emphatically not adopted
Restatement (Second) § 519, see Mahowald, 344 N.W.2d at 860-61, but has adhered
to its own interpretation of the Rylands rule. Kennedy further argues that there was
evidence that the PCBs did migrate across the property line. Be this as it may,
Kennedy's suit was to recover for the damage to the 2303 Kennedy Street property,
not for damage caused by the escape of the pollutants onto other people's property.
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For instance, Kennedy's complaint alleged: "Defendant is strictly liable for the
damages resulting as a natural consequence from the release of PCBs and related
hazardous substances on the Property. . . ." (emphasis added). We conclude that this
case does not fit the pattern of Rylands liability under Minnesota law.
Therefore, we must reverse the district court’s entry of judgment for Kennedy
on the jury’s verdict of strict liability and accompanying punitive damages.
II.
Viacom next contends that the injunction entered under MERA, Minn. Stat. §
116B.03, is moot because Viacom has entered a consent order with the Minnesota
Pollution Control Agency, in which Viacom agreed to conduct a remedial
investigation, submit a feasibility study, develop a response action plan, and
implement such a plan.
The administrative consent order does not state substantive standards for the
remediation of the site. Instead, it requires Viacom to design and implement a
remedial plan whose terms are yet unknown. The operative language of the consent
order requires Viacom to
Perform the following response actions in accordance with the terms and
conditions of this Order:
1. Prepare a Remedial Investigation Work Plan (RI Work
Plan);
2. Conduct the Remedial Investigation (RI) in accordance
therewith;
3. Submit a Remedial Investigation Report (RI Report);
4. Conduct a Feasibility Study (FS);
5. Submit a Feasibility Study Report (FS Report);
6. Develop a Response Action Plan (RAP); and
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7. Implement the Response Action Plan, including any
operation and maintenance of remedial action systems,
monitoring, and institutional controls. . . .
The substance of the clean-up will eventually be determined by negotiation between
Viacom and the Agency, with remedies in case negotiations break down. Viacom is
to submit to the Agency the various studies and plans called for in the order. The
Agency is to approve the documents or propose revisions, to which Viacom then must
respond. If the parties do not come to agreement, the Agency can do the work itself
and sue Viacom. In the resulting lawsuit, the issues would be limited to the question
of whether the Agency's clean-up was "reasonable and necessary to protect the public
health and welfare and the environment."
The district court found that Viacom had not yet fulfilled the obligations
imposed on it in the consent order. The court found that because "the site's soil and
groundwater PCB concentrations exceeded the [Agency's] acceptable limits,
[Kennedy] was required to place a deed restriction on the property. The restriction
notifies potential purchasers of the contamination and restricts the owner's use and
development options while the contamination remains." The court granted "judgment
in favor of [Kennedy] and against Viacom, and affirmatively enjoins Viacom to
remediate the site's soil, groundwater, and building interior so that the previously-
placed deed restriction may be removed, pursuant to Minn. Stat. § 116B.07."
Viacom argues that the administrative consent order is entitled to some sort of
preemptive effect because the Agency is a party to it. We must consult MERA itself
to determine whether it gives the consent order a preemptive effect. MERA allows
the state attorney general to intervene in MERA litigation pursued by others, Minn.
Stat. Ann. § 116B.03, subd. 3, but it does not appear from the statute that the attorney
general replaces the existing plaintiff or alters the plaintiff's standing to pursue
declaratory or equitable relief in the name of the state. The Attorney General has not
chosen to intervene in this case. This is a critical difference between the procedures
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provided by MERA and those provided by the Clean Water Act, upon which Viacom
relies in citing Comfort Lake Ass'n, Inc. v. Dresel Contracting, Inc., 138 F.3d 351
(8th Cir. 1998). Under the federal Clean Water Act, various statutory provisions
provide that citizen suits are barred or preempted by agency action; in Comfort Lake
these statutory provisions led us to conclude that a citizen suit had no substantive
claim for civil penalties once such penalties had been recovered by the state in
administrative proceedings. Comfort Lake, 138 F.3d at 356-57. Viacom points to no
such provisions in MERA.
Viacom contends that, in light of the administrative consent agreement, MERA
relief is precluded by Minn. Stat. § 116B.03 subd. 1, which states, "[N]o action shall
be allowable under this section for conduct taken by a person pursuant to any
environmental quality standard, limitation, rule, order, license, stipulation agreement
or permit issued by the pollution control agency, department of natural resources,
department of health or department of agriculture." Kennedy obviously did not sue
for any action taken pursuant to the consent agreement since the consent agreement
was not signed until the eve of trial and, even then, contained no substantive terms
other than agreements to study and arrive at actual clean-up measures in the future.
The preemptive scope of section 116B.03, subd. 1, appears to depend on
whether the injunction directly contradicts the Agency stipulation or can co-exist with
the stipulation. In Williams Pipeline Co. v. Soo Line R.R., 597 N.W.2d 340 (Minn.
Ct. App. 1999), the Minnesota Court of Appeals rejected a similar argument that an
Agency consent order preempted a MERA claim. Williams owned a pipeline
transporting petroleum products through a Superfund site. It entered a consent order
with the Minnesota Pollution Control Agency and EPA to remove the pipeline from
the site, but the consent order did not specify where the replacement pipeline should
be placed, although Williams could only reroute within the site if EPA and the
Minnesota Pollution Control Agency approved. Id. at 342-43. Williams proposed
to reroute its pipeline under a railroad yard owned by MT Properties and sought an
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easement by condemnation. Id. at 343. MP brought a MERA claim to enjoin the
rerouting. The trial court found that rerouting the pipeline in the railroad yard would
lead to shifting, mixing, spreading and dispersion of the existing contamination, id.
at 345, but concluded that the MERA claim was barred by Minn. Stat. § 116B.03,
subd. 1 because the claim challenged an action taken pursuant to the Minnesota
Pollution Control Agency and EPA consent order. Id. at 343.2 The Court of Appeals
reversed, holding:
Because the consent order allows Williams to choose among several
alternatives, its decision to seek this particular easement and rerouting
does not constitute an action taken "pursuant to" an order or stipulation
of the [Minnesota Pollution Control Agency], and section 116B.03 is
inapplicable.
Id. at 346. Thus, a consent order that specifies general but not particular actions a
defendant must take to clean up a site does not preempt a MERA claim based on
aspects of the defendant's actions that were not required by the consent order. On the
other hand, MERA does not authorize an injunction that imposes standards
conflicting with substantive standards affirmatively imposed by the Minnesota
Pollution Control Agency or one of the other agencies named in section 116B.03,
subd. 1. Cf. Holte v. State, 467 N.W.2d 346, 349 (Minn. Ct. App. 1991) (affirmative
2
The trial court in Williams also concluded that jurisdiction was barred by a
provision of CERCLA that precludes jurisdiction over challenges to administrative
clean-up orders, 42 U.S. C. § 9613(h). 597 N.W.2d at 343; see also Werlein v. United
States, 746 F. Supp. 887, 894, 897 (D. Minn. 1990) (no jurisdiction over MERA
claims regarding site subject to ongoing administrative clean-up), vacated in part on
other grounds, 793 F. Supp. 898 (D. Minn. 1992). The Minnesota Court of Appeals
concluded that § 9613(h) did not bar jurisdiction over state court proceedings based
on state law. Williams, 597 N.W.2d at 344. The court's conclusion was bolstered by
the fact that § 9613(h) specifically excludes from its jurisdictional bar federal suits
alleging state claims in which jurisdiction is predicated on diversity of citizenship.
Id. Viacom removed this case to federal court on the ground of diversity of
citizenship.
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order of Department of Agriculture pursuant to Grasshopper Control Act was not
amenable to MERA challenge). Requiring a direct conflict with agency action to find
preemption takes cognizance of both the language in section 116B.03, subd. 1,
protecting administrative action from MERA challenge, and the language of Minn.
Stat. § 116B.12, which provides that the "rights and remedies provided [in MERA]
shall be in addition to any administrative, regulatory, statutory or common law rights
and remedies now or hereafter available." See State by Fort Snelling State Park Ass'n
v. Minneapolis Park & Rec. Bd., 673 N.W.2d 169, 177 (Minn. Ct. App. 2003) (citing
§ 116B.12 in declining to find that MERA claim was preempted by administrative
proceedings).
Because Viacom and the Minnesota Pollution Control Agency have, as yet, not
agreed upon substantive terms of remediation, there is as yet no conflict between any
order of the Minnesota Pollution Control Agency and the district court's order.
Whether any conflict would ever arise is completely speculative, and we cannot find
preemption based on hypothetical facts.
Viacom contends that the administrative stipulation rendered moot the MERA
claim. We must consider whether a defendant's entry into an agreement with a third
party to negotiate a resolution to the violation on which injunctive relief is based
moots a claim for injunctive relief. "Simply stated, a case is moot when the issues
presented are no longer 'live' or the parties lack a legally cognizable interest in the
outcome." County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979) (quoting
Powell v. McCormack, 395 U.S. 486, 496 (1969)). The "heavy" burden of proving
mootness falls on the party asserting the case has become moot. Id. A case becomes
moot if it can be said with assurance that there is no reasonable expectation that the
violation will recur or if interim relief or events have completely and irrevocably
eradicated the effects of the alleged violation. Id.
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Viacom contends that by entering the administrative consent order, it
responded to the continuing contamination of the soil and groundwater at the site.
But, as the district court found, Viacom did not abate the contamination. Whether
abatement ever occurs depends on future events entirely outside Kennedy's control.
As the Supreme Court pointed out in Friends of the Earth, Inc. v. Laidlaw Envt'l
Servs., Inc., 528 U.S. 167, 191-92 (2000), the question of mootness, unlike that of
standing, is likely to be raised after years of litigation when the case is far advanced.
Because of that societal investment in the case, "to abandon the case at an advanced
stage may prove more wasteful than frugal." Id. at 192. If the suit were to be
dismissed upon an agreement between third parties to perform at some time in the
future, if "some impediment arises or some prolonged delay ensues" in the planned
performance, the plaintiff would be "at square one." Kostok v. Thomas, 105 F.3d 65,
66 (2d Cir. 1997). In this case, Kennedy is not a party to the unperformed
administrative consent agreement. If the Agency fails to devote the resources to see
that Viacom eventually performs, Viacom does not suggest that Kennedy can enforce
the agreement.
Viacom cites Comfort Lake Ass'n, Inc. v. Dresel Contracting, Inc., 138 F.3d
351 (8th Cir. 1998), in which an action to enjoin a contractor from violating a
pollution discharge permit was dismissed as moot after the construction project which
was causing the violations was completed and the permit had terminated. It also cites
Grandson v. Univ. of Minnesota, 272 F.3d 568, 574 (8th Cir. 2001), cert. denied, 535
U.S. 1054 (2002), in which a claim seeking an injunction requiring the University to
establish a women's hockey team was deemed moot because the University had
already established such a team at the behest of the United States Department of
Education. Additionally, Viacom cites Mississippi River Revival, Inc. v. City of
Minneapolis, 319 F.3d 1013, 1015 (8th Cir. 2003), in which another Clean Water suit
seeking to force defendants to obtain discharge permits was moot once the permits
were obtained. Id. at 1016. Civil penalties under the Clean Water Act were not
available for "wholly past violations" and the defendants were able to prove that it
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was "absolutely clear that the allegedly wrongful behavior could not reasonably be
expected to recur." Id. (quoting Laidlaw, 528 U.S. at 189). The claim for civil
penalties was therefore moot as well as the claim for injunctive and declaratory relief.
In each case Viacom cites, the condition on which the suit was based had been
remedied. Here, it has not.
Even assuming for the sake of argument that entering an administrative
agreement to do something in the future is the same thing as having already done the
thing for purposes of mootness analysis, in this particular case, the consent order does
not contain substantive standards for remediation of the contamination. Relief
granted in another tribunal can moot a claim, but only where the relief granted is
complete. See Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 35 n.5 (1980); 13A
Charles Alan Wright et al., Federal Practice and Procedure § 3533.2 & n.31 (1984 &
2003 Supp.) ("Partial relief in another action, on the other hand, does not moot an
action seeking additional relief.").
The district court ordered Viacom to "remediate the site's soil, groundwater,
and building interior so that the previously-placed deed restriction may be removed."
Testimony at trial indicated that a deed restriction is required when the level of PCBs
on the property exceeds the Minnesota Pollution Control Agency's reference value,
which is 1.2 milligrams per kilogram. The site had PCB concentrations as high as
9,100 milligrams per kilogram. The consent order neither orders Viacom to abate the
level of PCBs to any particular level or to make it possible to clear the title restriction.
Therefore, the relief granted by the consent order is not the same as that granted by
the MERA injunction. Viacom has not proven that the MERA injunction is moot.
However, the injunction is subject to another serious objection. We conclude
that MERA does not support the injunction as drawn, even without regard to the
effect of the administrative consent order. Viacom contends that the private attorney
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general-type suit available under MERA is preventative in nature and does not
authorize the court to order clean-up of an existing toxic waste site.
MERA provides that any partnership, corporation, association, organization or
other entity with members residing in Minnesota may bring a civil action for
declaratory or equitable relief in the name of the state of Minnesota "for the
protection of the air, water, land, or other natural resources located within the state
. . . from pollution, impairment, or destruction." Minn. Stat. § 116B.03, subd. 1.
"Pollution, impairment or destruction," is defined as "any conduct by any person"
which violates, or is likely to violate a state standard, permit, etc. or which "materially
adversely affects or is likely to materially adversely affect the environment." Minn.
Stat. § 116B.02, subd. 5. Viacom cites Werlein v. United States, 746 F. Supp. 887,
898 (D. Minn. 1990), vacated in part on other grounds, 793 F. Supp. 898 (D. Minn.
1992), in which the court observed: "Generally, MERA does not seem to contemplate
affirmative injunctive relief that essentially amounts to an order to clean up past
pollution. . . . In fact, If MERA were so construed, courts could use MERA to order
clean-up of all pollution anywhere within the state. Under plaintiffs' definition,
whoever is responsible for that pollution is engaging in conduct by not cleaning it
up."
The language Viacom quotes from Werlein was followed by a caveat that
Viacom omits, interpreting MERA to authorize injunctive relief to clean up hazardous
substances when such substances create ongoing pollution of underground water and
lakes, which constitute "separate natural resources." 746 F. Supp. at 898.
Even under the view that MERA only protects the land, air and water
from current or prospective harm, the statute applies, because both are
present here. While MERA may not authorize the Court to order a total
cleanup at the Trio Solvents site, the Court believes that MERA
empowers it to order defendants to abate any continuing contamination
of underground or surface waters.
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Id.; accord Soo Line R.R. v. B.J. Carney & Co., 797 F. Supp. 1472, 1486-87 (D.
Minn. 1992) ("[T]he failure to remedy a toxic waste site is considered ongoing
actionable conduct under MERA. . . . Because the complaint alleges that the
defendants' activities have caused hazardous substances to be released that will
continue to contaminate the soil and groundwater at the site, the Court finds that Soo
Line has properly pleaded a claim under MERA." (citation omitted)). These cases
from the District of Minnesota appear to us to have arrived at the correct
interpretation of MERA, which is that the statute can require remediation of past
pollution to the extent past deposits pose a threat of continuing contamination of
natural resources, including soil and water.
Viacom stipulated in the administrative consent order that "there . . . continue
to be releases or threatened releases, within the meaning of Minn. Stat. § 115B.02,
subd. 15, of these hazardous substances from the Kennedy Building Site. . . ." At
trial, Kennedy's expert William Welbes testified that the PCBs on the Kennedy site
continued to migrate because they were accompanying non-PCB transformer oil,
which would migrate with the groundwater. Welbes also testified that the
chlorobenzenes on the site would also migrate. The district court found: "The PCBs
continue to migrate in the soil and groundwater today due to the presence of
transformer mineral oil constituents."
The district court's Conclusions of Law pertaining to Kennedy's MERA claim
state in their entirety:
[Kennedy] claims that Viacom is liable pursuant to the Minnesota
Environmental Rights Act, Minn. Stat. §§ 116B.01 et seq. The Court
concludes that [Kennedy] has proven its MERA claim by the
preponderance of the evidence.
Accordingly, the Court grants judgment in favor of [Kennedy] and
against Viacom, and affirmatively enjoins Viacom to remediate the site's
soil, groundwater, and building interior so that the previously-placed
deed restriction may be removed, pursuant to Minn. Stat. § 116B.07.
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The order in this case exceeds the relief authorized by MERA. The district
court's injunction is not aimed at prevention of new pollution of separate natural
resources, but orders complete clean-up of the Kennedy site, sufficient to clear the
deed restriction, without any reference to what would be necessary to prevent future
pollution. Testimony at trial indicated that a deed restriction is required when the
level of PCBs on the property exceeds the Minnesota Pollution Control Agency
reference value, which is 1.2 milligrams per kilogram. A PCB level of more than 1.2
milligrams per kilogram does not necessarily mean that the contamination threatens
neighboring land or water. Kennedy's expert Welbes testified at trial, "Cleanup is not
necessarily required [when the PCB levels exceed 1.2] as long as it can be proven that
it does not pose an immediate health risk and that the plume is stable." Jan. 30, 2002,
vol. 2, p. 166. Although there is evidence of continuing migration of the
contaminants, the injunction is not tailored to address only that problem. Therefore,
the injunction cannot be upheld as drawn. The injunction must be redrawn to order
only the relief authorized by MERA, that is, the prevention of ongoing releases of
PCBs and chlorobenzenes into soil and groundwater.
We must remand the injunction for more precise definition of the specific acts
required of Viacom. See United States v. Articles of Drug, 825 F.2d 1238, 1247 (8th
Cir. 1987).
III.
The district court awarded attorneys' fees, expert witness fees and costs
authorized under MERLA, Minn. Stat. § 115B.14, in the amount of $1,113,915.
Viacom contends that the fees and costs award included expenses incurred in
litigating claims other than the MERLA and CERCLA claims, and that there is no
statutory authorization for award of fees on those claims.
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The district court's decision to award fees under MERLA to the prevailing
party and the amount of such an award will not be disturbed absent a clear abuse of
discretion. Control Data Corp. v. S.C.S.C. Corp., 53 F.3d 930, 939 (8th Cir. 1995);
Musicland Group, Inc. v. Ceridian Corp., 508 N.W.2d 524, 535 (Minn. Ct. App.
1994). "A request for attorney's fees should not result in a second major litigation."
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).
The starting point for determining the fee award is the number of hours
reasonably expended on the case multiplied by a reasonable hourly rate. Musicland
Group, 508 N.W.2d at 535. The magistrate judge to whom the district court referred
the fees litigation conducted this analysis, and Viacom does not demonstrate an abuse
of discretion with regard to this analysis.
Where a plaintiff succeeds on some claims in litigation and fails on others, the
court must decide first, whether the claims involve a common core of facts and were
based on related legal theories; and second, whether the plaintiff's level of success
justifies basing the fee award on the hours reasonably expended. Id. (citing Hensley,
461 U.S. at 430). No fee can be awarded on unsuccessful claims that were not related
to the successful claim. Hensley, 461 U.S. at 434-35. Where successful and
unsuccessful claims involve a common core of facts and related theories, it will
generally be impracticable to separate the hours spent on the claims, and rather than
trying to do so, the court should focus on the overall relief the plaintiff obtained in
relation to the time reasonably spent on the litigation. Id. at 435. In assessing
whether claims are so related that the fees cannot practicably be severed, one
consideration is whether the "types of relief requested" under the various claims are
similar or have differing purposes. Musicland, 508 N.W.2d at 535. Apportionment
of fees between successful and unsuccessful claims is entrusted to the district court's
discretion. Gopher Oil Co. v. Union Oil Co., 955 F.2d 519, 527 (8th Cir. 1992).
Where the MERLA claim is accompanied by other claims for which no statutory fees
are available, as in this case, the relationship between eligible and non-eligible claims
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is subject to the same analysis as the relationship between successful and non-
successful claims. See id. (successful common law fraud claim had different purpose
than CERCLA and MERLA claims and therefore fees were not compensable);
Musicland, 508 N.W.2d at 535 (successful common law claims all intertwined with
MERLA and therefore fees compensable).
The magistrate judge considered the intertwinement question and concluded
that "all claims litigated shared a common core of facts with the MERLA claim rather
than an claim. 955 F.2d at 527. We held that the purpose of the fraud
claim was to protect the plaintiff from contribution claims resulting from its
ownership of the contaminated facility, and this "overriding" purpose mandated
separation of the fees notwithstanding intertwinement of the claims. Id. Under the
reasoning of Gopher Oil, the distinction in the aims and purposes of the MERLA
claim and the MERA claim is sufficient to require the district court to separate out the
fees incurred in furtherance of the MERA claim, to the extent practicable.
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Viacom makes the same argument with regard to Kennedy's claim for punitive
damages, but Kennedy's fee petition stated that it excluded from its fee request the
hours spent solely in furtherance of its punitive damages claim, and Viacom does not
attempt to demonstrate that this is incorrect.
Viacom also contends that it should not be liable for fees incurred after its
settlement proposal of June 18, 2001. We reject the contention that the June 18
proposal can be given such an effect, for reasons discussed in section IV, below.
We must remand for the district court to reduce the fee award by the amount
of fees attributable to the MERA claim.
IV.
On June 18, 2001, Viacom sent Kennedy an offer of settlement consisting of
an eight-page proposed agreement under which Viacom would undertake clean-up
operations "to the extent, and only to the extent, required by any governmental
regulatory agency having the requisite authority and jurisdiction" and would also pay
$400,000 to Kennedy. Under the proposal, if Viacom damaged the building during
remediation, "Viacom shall . . . if appropriate in the sole discretion of Viacom . .
restore any impaired premises to substantially the same condition as existed
immediately prior to the implementation of the investigation and remediation."
(emphasis added). The agreement did not specify any substantive standards for
remediation of the contamination and in fact contained the following prohibition:
Prohibition. [Kennedy] shall not, directly, indirectly, or in any manner,
seek to influence the actions or decisions of any governmental
regulatory agency concerning the soil on the Property or groundwater
beneath or adjacent to the Property, or the extent of Viacom's
obligations with respect thereto. To the extent that [Kennedy] violates
this prohibition, [Kennedy] shall be and become solely responsible for
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the investigation and remediation of the soil on the Property and the
groundwater beneath and adjacent to the Property.
This settlement proposal was made approximately six months before the Minnesota
Pollution Control Agency consent order was executed. Thus, the purport of the
proposal was for Viacom to do whatever unspecified action a government agency
might later decide on, if any, with Kennedy barred from any input into the appropriate
measures to be taken with regard to abatement of hazardous waste on its own
property.
Viacom argues that this proposal stopped the accrual of prejudgment interest
under Minn. Stat. § 549.09, subd. 1(b). The magistrate judge concluded that
Viacom's offer to settle was "not sufficiently precise" to afford it the benefit of the
offer-counter offer mechanism in the Minnesota statute. This apparently referred to
the lack of substantive standards for the clean-up and indeed the contingency of the
clean-up offer on Viacom being ordered to do anything at all by some government
agency at some unspecified time. Additionally, the offer added a condition that
Kennedy would not exercise its rights to petition the government agency in any way
concerning government action affecting its own property. Viacom demanded that
Kennedy agree to a condition that certainly has not been granted by the judgment in
this case, nor could such a condition have been included as relief for any cause of
action litigated herein. Viacom's proposal did not function as an offer of settlement
within the meaning of Minn. Stat. Ann. § 549.09 stopping the accrual of interest. Cf.
Hodder v. Goodyear Tire & Rubber Co., 426 N.W.2d 826, 841 (Minn. 1988) (offer
that did not encompass all claims in suit did not stop interest).
Obviously, the award of interest on the strict liability award must be vacated,
but the interest on the CERCLA and MERLA award should be affirmed.
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V.
We reverse the judgment in favor of Kennedy for strict liability and punitive
damages, reverse and remand the award of injunctive relief with instructions to
modify the injunction in accordance with this opinion, remand the award of attorneys'
fees for segregation and disallowance of those hours expended in furtherance of the
MERA claim, affirm so much of the interest award as pertains to the CERCLA and
MERLA claims, and reverse that part of the interest award that pertains to the strict
liability damages. We remand for further proceedings consistent with this opinion.
_______________
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