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United Alloys, Inc v. Harold A. Baker

July 14, 2011

UNITED ALLOYS, INC., PLAINTIFF,
v.
HAROLD A. BAKER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Consuelo B. Marshall United States District Judge

SECOND AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW

The matter before the Court, the Honorable Consuelo B. Marshall, United States District Judge presiding, is the bench trial held on Plaintiff and Counter-defendant United Alloys, Inc.'s ("United Alloys") claims for cost recovery and declaratory relief against Defendant and Counter-claimant Flask Chemical Corporation ("Flask"), and Flask's counterclaims for contribution against United Alloys, due to the contamination at United Alloys' property located at 900 East Slauson Avenue in Los Angeles, California. Upon consideration of the testimony and evidence received, and the Court's evaluation of the demeanor and credibility of the witnesses, the Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).*fn1

JURISDICTION

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367, and 42U.S.C. §§ 9607 and 9613(b).

FINDINGS OF FACT

A. PROCEDURAL POSTURE OF THIS ACTION

1. On August 6, 1993, United Alloys filed the Complaint in this action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., and various state laws. (Final Pretrial Conference Order at ¶40.)

2. On October 20, 1993, Flask answered the Complaint and filed counterclaims for contribution and declaratory relief pursuant to 42 U.S.C. § 9613, equitable indemnity, and negligence against United Alloys. (Id.at ¶41.)

3. In 1994, Flask filed bankruptcy. (Id.at ¶ 43.) In 1995, in order to lift the mandatory litigation stay imposed by Flask's bankruptcy, United Alloys and the bankruptcy trustee stipulated that United Alloys would release Flask from liability if United Alloys stipulated that it would limit any recovery to what might be obtained from claims against Flask's insurance carriers, Fireman's Fund Insurance Company ("Fireman's Fund") and Chubb Insurance Company ("Chubb"). (Id.at ¶ 44.)

4. On January 13, 1997, the Court approved the settlements of Siskin Investment Company ("Siskin"), Harold A. Baker ("Baker"), and Harold A. Baker Metal Supply Company, Inc. (Id.at ¶ 46.) These settlements totaled $290,000. (Flask Chemical Corp.'s Post-Trial Findings of Fact and Conclusions of Law at 50 [Doc. No. 301].) As part of the Order Confirming Good Faith Settlement, United Alloys was ordered to place all settlement proceeds in a separate, segregated account for the purpose of funding environmental remediation at the Property. (Final Pretrial Conference Order at ¶ 47.)

5. United Alloys filed a Second Amended Complaint on June 2, 1998, in which it named Southern Pacific Transportation Company ("SPTC") as a defendant in the action. [Doc. No. 105.]

6. On April 11, 2001, United Alloys filed its Third Amended Complaint, in which it named BNSF Railway Company ("BNSF") as a defendant. [Doc. No. 125.] The Third Amended Complaint also named Union Pacific Railroad Company ("Union Pacific") as a defendant, and alleged that Union Pacific is the successor-in-interest to SPTC. [Doc. No. 125.]

7. On March 26, 2010, the Court dismissed United Alloys' claim for relief under the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., for lack of subject matter jurisdiction. [Doc. No. 255.]

8. The parties stipulated that United Alloys entered a settlement with BNSF and Union Pacific (collectively, "the Railroads") in the amount of $50,000 and a settlement with Chubb in the amount of $300,000. (4/21/102 Trial Tr. at 35.)

9. United Alloys thereafter voluntarily dismissed its state law causes of action, with the exception of its Carpenter-Presley-Tanner Hazardous Substance Account Act claim. [Doc. No. 262.] Flask also voluntarily dismissed its claims for equitable indemnity and negligence. [Doc. No. 261.]

10. At trial, the parties sought a judicial determination as to the extent and scope of the parties' liability for and contribution to contamination at United Alloys' property located at 900 East Slauson Avenue, Los Angeles, California. Thus, the Court must determine the liability of each party with respect to the contamination, the appropriate allocation of past costs incurred by United Alloys for site investigation and characterization, and whether declaratory relief is appropriate.

11. In the Final Pretrial Conference Order, the parties stipulated to sixty-three (63) facts, all of which are incorporated into the Court's Second Amended Findings of Fact and Conclusions of Law. [Doc. No. 291.]

12. The Court heard live testimony from three (3) lay witnesses and three(3) expert witnesses. Mr. Timothy Wood ("Wood"), who testified as an expert witness on behalf of United Alloys, rendered opinions regarding the source and nature of the contamination at the Property, the impact of the contamination on soil and groundwater beneath the Property, the need for remediation, and the proper apportionment of liability. Mr. Ulf Lindmark ("Lindmark"), an expert witness on behalf of Flask, testified as to the source and extent of subsurface contamination of volatile organic compounds ("VOCs"). Mr. James T. Wells ("Wells"), who also testified as an expert witness on behalf of Flask, served as a rebuttal expert witness to Wood. The Court also received into evidence the deposition testimony of three (3) lay witnesses and hundreds of exhibits.

B. BACKGROUND OF THE OWNERSHIP OF THE PROPERTY

13. The dispute concerns real property located at 900 East Slauson Avenue, Los Angeles, California ("the Property"). (Final Pretrial Conference Order at ¶ 1.*fn2 The Property is three hundred sixty-seven (367)feet long and two hundred (200) feet wide. (Id. at ¶ 2.) A building ("the Main Building") occupies approximately half of the Property, which is located in a heavy industrial and commercial manufacturing area. (Exs. 205, 406*fn3 .)

14. The Property was owned by Goodyear Tire and Rubber from 1920 to 1928. (Final Pretrial Conference Order at ¶ 1.)

15. In 1924, the Atchison Topeka and Santa Fe Railway Company and the Pacific Electric Railway Company entered into a contract for industry track enabling them to operate in what became the railroad right-of-way on the southern border of the Property. (Id. at ¶ 3.) The railroad right-of-way was a forty-six (46) foot wide easement, half of which occupied the southernmost twenty-three (23) feet of the Property. (Id. at ¶ 4.)

16. The Property was owned by several different investment companies, including Siskin, from 1929 to 1970. (Id. at ¶ 5.)

17. Reese Chemical Company ("Reese") began leasing and operating a chemical distribution facility at the Property in 1969. (Id. at ¶ 6.)

18. Baker purchased the Property from Siskin in 1970. (Id. at ¶ 7.)

19. In November 1972, Flask assumed Reese's lease and operated a chemical distribution facility at the Property until January 1979. (Id. at ¶ 8; Ex. 418.) By January 1979, Flask had ceased operations at the Property. (Final Pretrial Conference Order at ¶ 21.)

20. On January 3, 1979, Baker sold the Property to United Alloys. (Id. at

¶ 20; 4/20/10 Trial Tr. (Donn, R.) at 38; Ex. 420.)

21. In 1995, the Railroads and/or their corporate successors-in-interest filed a Certificate of Abandonment for the tracks in the railroad right-ofway. (Final Pretrial Conference Order at ¶ 45.) Since that time, United Alloys has maintained an exclusive possessory right in the former railroad right-of-way. (Id.)

22. In 2002, United Alloys was purchased by Cronimet Corporation ("Cronimet") along with all of the equipment on the Property owned by United Alloys. (Id. at ¶ 50.) United Alloys continues to own the Property but leases it to Cronimet. (Id. at ¶¶ 51, 62; 4/20/10 Trial Tr. (Donn, R.) at 35, 38.) The business has remained essentially the same, but the name was changed to United Alloys and Metals, Inc. (Final Pretrial Conference Order at ¶ 52.) United Alloys and Metals, Inc. continues to operate at the Property. (Id. at ¶ 61.)

C. FLASK'S OPERATIONS AT THE PROPERTY: 1972 TO 1979

23. During its operations from 1972 to 1979, Flask conducted chemical storage, processing, sales, and distribution at the Property. (Id. at ¶¶ 8, 9.) Beginning in 1972, Robert Heisler ("Heisler") served as Flask's operations manager. (Id. at ¶ 15.)

24. The Main Building, which was used as a warehouse and operations building, was situated on the eastern half of the Property during Flask's tenancy. (Exs. 310, 445.)

25. In the northwestern area of the Property, Flask used a ten-thousand (10,000) gallon gasoline tank. (Ex. 310.)

26. In the southwestern area of the Property, Flask used four (4) aboveground storage tanks ("AST(s)") to store chlorinated solvents, including perchlorethylene ("PCE") and trichloroethene ("TCE"). (Final Pretrial Conference Order at ¶ 10; Exs. 310, 445.) Three (3) of these ASTs held twenty thousand (20,000) gallons and one (1) AST held ten thousand (10,000) gallons. (Final Pretrial Conference Order at ¶ 10; Ex. 310.)

27. The ASTs were situated on concrete pads, and surrounded by gravel and a retaining wall. (4/23/10 Trial Tr. (Wood, T.) at 160.) The concretepad served as a support structure for the ASTs, the gravel allowed for infiltration of spills, and the retaining wall enabled spills to be restricted to a predetermined area. (Id. at 160-61.)

28. To the north of the AST area, Flask used eighteen (18), five thousand (5,000) gallon underground storage tanks ("UST(s)") to store flammable material including alcohol, acetone, naptha, and methyl ethyl ketone. (Final Pretrial Conference Order at ¶ 11; Deposition of Robert Heisler ("Heisler Dep.") at 23; Ex. 310.) The UST area of the Property was approximately two thousand four hundred seventy-five (2,475) square feet. (Final Pretrial Conference Order at ¶ 12.)

29. The ASTs and the USTs were separated by a concrete apron, approximately thirty-five (35) feet long. (Id. at ¶ 13.) The concrete apron contained a two thousand (2,000) gallon blending tank, a filling machine for small containers, pumps, a scale, and a conveyor. (Id. at ¶ 14; 4/23/10 Trial Tr. (Wells, J.) at 25; Ex. 310.)

30. There was also a clarifier located in the area between the ASTs and the USTs. (Final Pretrial Conference Order at ¶ 22; 4/22/10 Trial Tr. (Lindmark, U.) at 113.) The clarifier is a multi-compartment concrete structure designed to separate oil from water. (4/22/10 Trial Tr. (Lindmark,U.) at 22-23.) It served as a treatment method for wastewater. (Id. at 23.) Flask used the clarifier for a neutralization system for acids that were discharged into the sewer, not for chlorinated solvents. (4/23/10 Trial Tr. (Lindmark, U.) at 84.)

31. Flask mixed, blended, and containerized chlorinated solvents in the areas between the ASTs and USTs and north of the USTs. (4/22/10 Trial Tr. (Lindmark, U.) at 113; 4/23/10 Trial Tr. (Wells, J.) at 14-15, 23-24; Ex. 310.) At this location, it also used pumps to fill the tanks or tanker trucks that arrived with deliveries. (4/22/10 Trial Tr. (Lindmark, U.) at 113;4/23/10 Trial Tr. (Wells, J.) at 14-15, 23-24; Ex. 310.)

32. On the southern border of the Property, Flask received chemical and solvent shipments from railcars via the railroad spur. (Final Pretrial Conference Order at ¶ 16; Exs. 310, 445.) Railcars delivered chlorinated solvents, such as PCE, TCE, and methylene chloride. (Heisler Dep. at 25, 60, 65-66, 71-74.) The metal rails were situated on railroad ties. (Id. at 54-55.) Dirt covered the area under and around the metal rails. (Id. at 55.)

33. Flask's employees were responsible for offloading chemicals from the railcars on the railroad spur and transporting the chemicals onto the Property.(Final Pretrial Conference Order at ¶ 18;Heisler Dep. at 22.) Neither Heisler nor other Flask employees had specific instructions, knowledge, or training as to how to unload the chemicals from these railcars. (Heisler Dep. at 104-05.)

34. Flask's employees were also responsible for unloading chemical and solvent shipments delivered to the Property by tanker trucks. (Final Pretrial Conference Order at ¶ 16; Heisler Dep. at 22-23.) Occasionally, chemicals were put into drums directly from the trucks because Flask did not have sufficient storage to accommodate the deliveries. (Heisler Dep. at 23; Ex. 445.) The drums were stored along the western side of the Main Building. (Ex. 445.)

35. During Flask's operations on the Property, there were accidental spills. (Final Pretrial Conference Order at ¶ 17.)

36. Specifically, there were four accidental spills of chemicals delivered to the Property by railcars. (Id. at ¶ 19; Heisler Dep. at 60, 65-66, 71-74.)In the first incident, approximately two (2) to five (5) gallons of PCE spilled when Flask's employees tried to open the railcar to transfer the PCE onto the Property. (Heisler Dep. at 60.) In two (2) other incidents, Flask's employees caused approximately five (5) to ten (10) gallons of PCE to be spilled during the disconnection of a hose attached between a pump and the railcar. (Id. at 65-66, 73-74.) In the final incident, Flask employees caused approximately five (5) to ten (10) gallons of methylene chloride to be spilled while disconnecting the hose attached between a pump and the railcar. (Id. at 71-73.) During these incidents, the chemicals spilled onto unpaved ground and Flask made no effort to clean up the spills. (Id. at 63, 66-67, 72.) These incidents were also not reported to any agency or entity. (Id. at 63, 67,73-74.)

37. There were also chlorinated solvent spills during the period in which Flask employees were learning how to transfer chemicals from the tanker trucks to Flask's chemical containers. (Id. at 59-60.)

38. On other occasions, forklifts punctured drums of chemicals causing spills of approximately twenty (20) gallons of chemicals on each occasion inside of the facility. (Id. at 56-57.)

39. Finally, on another occasion, a vandal opened the valves on an AST containing PCE that resulted in a spill of five hundred (500) gallons. (Id. at 79-80.)

40. By January 1979, Flask had ceased operations at the Property. (Final Pretrial Conference Order at ¶ 21.) In or around January 1979, it removed the ASTs from the Property and took them to its next place of business. (Id. at ¶ 25.)

D. UNITED ALLOYS OPERATIONS AT THE PROPERTY: 1979 TO PRESENT

41. On January 3, 1979, Baker sold the Property to United Alloys. (Id. at¶ 20; 4/20/10 Trial Tr. (Donn, R.) at 38; Ex. 420.) In 1980, United Alloys was owned by Mr. Ron Donn ("Donn"), Mr. Allan Sacks, and Mr. Arthur Sacks. (Final Pretrial Conference Order at ¶ 27; 4/20/10 Trial Tr. (Donn,R.) at 55.)

42. United Alloys used the Property for a scrap metal recycling and refurbishing business. (Final Pretrial Conference Order at ¶ 26.) Site activities included receiving, sorting, stripping, crushing, processing, and re-selling high-grade alloy metals, such as zirconium, nickel, titanium, cobalt, and copper. (Exs. 207*fn4 , 671*fn5 .)

43. At the time of the sale of the Property from Baker to United Alloys, the Property consisted of the Main Building and a work yard ("the Yard") occupying the western half of the Property. (Final Pretrial Conference Order at ¶ 24.)

44. There was also one clarifier, which was located in the southern portion of the Property between the AST area and UST area. (Id. at ¶ 22; Ex. 312.) The southern clarifier is connected to the sewer main running under the former railroad right-of-way. (Final Pretrial Conference Order at¶ 23.) 45. Following United Alloys' purchase of the Property, United Alloys made numerous changes to the Property, including the removal, in 1980, of the eighteen (18) USTs used by Flask during its tenancy. (Id. at ¶ 28; 6/2/10 Trial Tr. (Wood, T.) at 6; Ex. 410.) During the excavation of the USTs, there were no indications of soil saturation or vapors emanating from the soil. (Deposition of Darron H. Evans ("Evans Dep.") at 27-28, 30, 46.) However, the native soil was not tested for the presence or absence of contaminants. (Id. at 42; 4/22/10 Trial Tr. (Lindmark, U.) at 142; 6/2/10 Trial Tr. (Lindmark, U.) at 171.) Likewise, the import fill did not emit any strange odors but no samples were taken of the import soil used in connection with the soil excavation. (Evans Dep. at 36-37; 4/23/10 Trial Tr. (Wells, J.) at 38; 6/2/10 Trial Tr. (Lindmark, U.) at 171-72.)

46. In 1980, a degreasing system was installed inside of the Main Building. (Final Pretrial Conference Order at ¶ 29; Ex. 312.) A one thousand (1,000) gallon PCE storage tank was connected to the degreasing system. (Final Pretrial Conference Order at ¶ 30; Ex. 312.) From 1980 to 1997, PCE was used to clean certain metals and strip off any impurities that had formed on the metal. (Final Pretrial Conference Order at ¶ 31; Exs. 439, 671.) There was a spill in the degreasing room. (4/21/10 2 Trial Tr. (Lindmark, U.) at 48; 4/22/10 Trial Tr. (Lindmark, U.) at 114-15, 118.)

47. The purchasing records from 1982 through 1984 demonstrate that United Alloys purchased between two thousand seven hundred (2,700) gallons and approximately seven thousand seven hundred (7,700) gallons of PCE. (6/2/10 Trial Tr. (Wood, T.) at 32; Ex. 438.) United Alloys' permit with the South Coast Air Quality Management District limited emissions of PCE to eight thousand (8,000) gallons of use per year. (6/2/10 Trial Tr. (Wood, T.) at 32-33.)

48. On April 13, 1984, there was a spill at the Property when a third party attempted to deliver TCE to United Alloys. (4/21/10 2 Trial Tr. (Lindmark,U.) at 54; Ex. 250.) A 55-gallon drum of TCE spilled into the storm drain catch basin on Slauson Avenue. (4/23/10 Trial Tr. (Wood, T.) at 163-65; Ex. 250.) The catch basin, which was clogged, prevented any waste from reaching the flood control channel. (4/23/10 Trial Tr. (Wood, T.) at 165; Ex. 250.)

49. Until 1990, United Alloys used a ten thousand (10,000) gallon underground tank to store gasoline for its trucks. (Final Pretrial Conference Order at ¶ 32.) The gasoline tank was located in the northern area of the Property, roughly thirty-five (35) feet from the northern property line. (Id. at ¶ 33.) United Alloys removed this gasoline tank in 1990. (Id. at ¶ 34; Ex. 409.) There was no evidence of leakage or spillage during the removal.(Ex. 409.)

50. In 1990, United Alloys installed a clarifier in the northern portion of the Property as part of a storm water system. (Final Pretrial Conference Order at ¶ 35; Ex. 312.) It is located approximately twenty (20) feet from the northern border of the Property. (Final Pretrial Conference Order at ¶ 35.) 51. United Alloys' operations caused sludge waste to collect in the clarifiers and the degreaser. (Deposition of Arthur Castellanos ("Castellanos Dep.") at 18-19; 4/23/10 Trial Tr. (Wells, J.) at 68; 6/2/10 Trial Tr. (Wood, T.) at 16.) Sludge is the viscous mixture of grease and PCE, and perhaps even metal filings, left behind due to the cleaning of metal parts, which are often oily or greasy. (4/23/10 Trial Tr. (Wells, J.) at 69; 6/2/10 Trial Tr. (Wood, T.) at 35.)

52. Sludge from the clarifiers and the degreaser was packed into 55-gallon drums and stored on the Property outside of the Main Building, and south of the degreasing room. (Castellanos Dep. at 50-51, Ex. 9.) The sludge was removed, tested, and manifested for offsite disposal every ninety (90) days as required by law. (4/23/10 Trial Tr. (Simpson, T.) at 113-14; 6/2/10 Trial Tr. (Wood, T.) at 16-17.) Laboratory reports from 1991 to 1992 indicated that PCE was found in the clarifiers and the degreaser. (Castellanos Dep. at 12, 16-19, 28, 34, 51-54, 56-57; 4/22/10 Trial Tr. (Lindmark, U.) at 9-18; Exs. 242-47.)

53. United Alloys emitted approximately one hundred eight thousand five hundred twelve (108,512) pounds per year of PCE into the atmosphere through the degreaser. (4/23/10 Trial Tr. (Wells, J.) at 67-68; Ex. 301*fn6 .) Another four thousand two hundred (4,200) pounds per year of PCE were lost to adsorption onto the metal shavings cleaned through the degreasing process. (4/23/10 Trial Tr. (Wells, J.) at 68-69; Ex. 301.)

54. United Alloys used no more than eight thousand (8,000) gallons of PCE per year until 1997. (Final Pretrial Conference Order at ¶ 31; 4/22/10 Trial Tr. (Wells, J.) at 172-73.)

55. Vapor emissions of PCE from the storage tank, degreaser, and adsorber were approved by the South Coast Air Quality Management District. (4/23/10 Trial Tr. (Wells, J.) at 14; Ex. 439.)

E. ENVIRONMENTAL SITE INVESTIGATION AND REGULATORY OVERSIGHT AT THE PROPERTY

56. In 1992, Donn, the then-owner of United Alloys, came to suspect that the Property may be contaminated after attending institute meetings concerning the possible contamination of sites operated by chemical companies. (4/20/10 Trial Tr. (Donn, R.) at 35, 38.)

57. That same year, Green Environmental, Inc. ("Green Environmental") performed a Phase I site assessment of the Property. (Id. at 40; Final Pretrial Conference Order at ¶ 36; Ex. 406.) Green Environmental's investigation found PCE and TCE contamination in the soil at multiple locations throughout the Property. (Final Pretrial Conference Order at ¶ 37; Ex. 406.) Green Environmental identified the onsite handling of metals, the previous onsite storage and control of hydrocarbons, and hazardous material problems in the immediate vicinity as causes for concern. (Ex. 406.) Green Environmental recommended that an additional investigation be conducted at the Property. (Final Pretrial Conference Order at ¶ 38.)

58. The following year, in 1993, Western Environmental Engineering Company ("WEECO") performed a Phase II investigation at the Property, taking numerous soil samples under the Main Building and in the Yard. (Id.at ¶ 39; 4/20/10 Trial Tr. (Donn, R.) at 41-42; Ex. 407*fn7 .) WEECO drilled twenty-two (22) exploratory borings to depths between ten (10) and twenty-two (22) feet below ground surface. (Ex. 407.) WEECO concluded that the contamination of PCE and TCE was from a common source. (Id.) WEECO further concluded that there appeared to have been a release of solvents in the southwestern corner of the Property, which served as the AST area and UST area during Flask's tenancy. (Id.; see Findings of Fact Nos. 26, 28) WEECO recommended that further exploration be performed at the Property through the installation, sampling, and analysis of additional borings. (Ex. 407)

59. Shortly after the WEECO report was published, the fire department was notified of the contamination at the Property. (4/23/10 Trial Tr. (Simpson, T.) at 108, 119.)

60. In 1994, AMEC Geomatrix, Inc. ("Geomatrix") was hired to investigate the vertical and lateral extent of contamination at the Property and whether groundwater had been impacted. (Final Pretrial Conference Order at ΒΆ 42; 4/20/10 Trial Tr. (Donn, R.) at 43; 4/20/10 Trial Tr. (Simpson, T.) at 155; 4/23/10 Trial Tr. (Simpson, T.) at 107.) Mr. Timothy Simpson ("Simpson") has been the ...


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