F I L E D
United States Court of Appeals
Tenth Circuit
MAR 11 2003
PUBLISH
PATRICK FISHER
Clerk
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
RAYTHEON CONSTRUCTORS INC.,
a Delaware corporation,
Plaintiff-Appellant/
Cross-Appellee,
v. Nos. 00-1500 & 00-1530
ASARCO INCORPORATED, a New
Jersey corporation,
Defendant-Appellee/
Cross-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 96-N-2072)
Robert B. McKinstry, Jr. (Marc Davies, of Ballard Spahr Andrews & Ingersoll,
LLP, Philadelphia, Pennsylvania, and Roger P. Thomasch and Denise S. Maes, of
Ballard Spahr Andrews & Ingersoll, LLP, Denver, Colorado, with him on the
briefs), of Ballard Spahr Andrews & Ingersoll LLP, Philadelphia, Pennsylvania,
for Plaintiff-Appellant/Cross-Appellee.
Michael R. Thorp (Marcy G. Glenn and Tiffany W. Smink, of Holland & Hart,
Denver, Colorado, and Peter J. Nickles and Gerald N. Magliocca, of Covington &
Burling, Washington, D.C., with him on the briefs), of Heller, Ehrman, White &
McAuliffe, Seattle, Washington, for Defendant-Appellee/Cross-Appellant.
Before TACHA, Chief Judge, ALDISERT *, and SEYMOUR, Circuit Judges.
SEYMOUR, Circuit Judge.
Raytheon Constructors, Inc. (“Raytheon”) appeals the decision of the
district court holding it liable to ASARCO Corporation (“ASARCO”) as an
“operator” and an “arranger” under the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601 et seq., in
relation to the environmental cleanup at the Rawley Mine site in Saguache
County, Colorado. ASARCO cross-appeals regarding damages. We reverse as to
Raytheon’s liability and therefore need not reach the cross-appeal regarding
damages.
I.
The mine at issue in this case was owned by the Colorado Corporation
when, in 1925, it encountered financial difficulties and defaulted on several debts,
including those owed to Stearns-Roger (the predecessor in interest to Raytheon),
ASARCO, and Metals Exploration Company. Those three entities together
created Rawley Mine, Inc. (“RMI”) as a part of a reorganization plan to recover
*
Honorable Ruggero J. Aldisert, Senior United States Circuit Judge for the
Third Circuit, sitting by designation.
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the outstanding debts. They invested the necessary funds in RMI in different
proportions (ASARCO at forty percent, Metals Exploration at forty percent, and
Stearns-Roger at twenty percent), and each received stock corresponding to their
liens against Colorado Corporation. At the initial meeting of the board of
directors of RMI, Mr. Stearns, the president of Stearns-Roger, was elected
chairman and president of RMI. In 1929, after RMI had repaid Stearns-Roger’s
loans, ASARCO purchased all of Stearns-Rogers’ RMI stock and Mr. Stearns
resigned as RMI’s president and executive committee chairman. This ended
Stearns-Roger’s association with RMI. We note in reciting these facts that the
role played by Stearns-Roger, which never owned more than twenty percent of
RMI, is best characterized as that of minority shareholder rather than “parent”
company.
In 1996, Raytheon sought a declaratory judgment that it was not liable to
ASARCO under CERCLA for the costs ASARCO incurred through cleanup in
connection with the Rawley Mine site. ASARCO counterclaimed, arguing
Raytheon was liable under CERCLA and state common law as Stearns-Rogers’
successor in interest. The parties filed cross-motions for partial summary
judgment. The district court denied ASARCO’s motion. The court granted
Raytheon’s motion on the issue of “owner” liability, but denied its motion on the
issues of “operator” or “arranger” liability. The court then bifurcated the issues
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of liability and damages, and after a bench trial held Raytheon liable for CERCLA
contribution as an operator and an arranger.
Prior to the damages portion of the trial, Raytheon moved for
reconsideration of the liability decision based on a new Supreme Court opinion,
United States v. Bestfoods, 524 U.S. 51 (1998). The district court treated that
motion as one pursuant to F ED .R.C IV .P. 60(b), even though it acknowledged that
Raytheon was seeking reconsideration of an interlocutory order rather than a final
judgment. After considering Bestfoods, the court denied Raytheon’s motion in a
second order. It subsequently held Raytheon responsible to ASARCO for a
portion of ASARCO’s “recoverable costs.” See 42 U.S.C. § 9607(a); 40 C.F.R. §
300.700.
II.
On appeal, Raytheon argues the district court misapplied Bestfoods in
making its “operator” liability determination. Raytheon contends the underlying
reasons for reversal of “operator” liability also support reversal of the “arranger”
liability determination. In analyzing the district court’s opinion, we must first
determine our standard of review.
The district court was incorrect to treat Raytheon’s motion for
reconsideration under Rule 60(b), which only applies to final orders or judgments.
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Instead, “any order . . . however designated, which adjudicates fewer than all the
claims or the rights and liabilities of fewer than all the parties . . . is subject to
revision at any time before the entry of judgment adjudicating all the claims and
the rights and liabilities of all the parties.” F ED .R.C IV .P. 54(b). Thus we will not
review the district court’s order for abuse of discretion, as we would a ruling on a
Rule 60(b) motion. Rather, we review de novo the district court’s conclusions of
law in its reconsideration of its order on liability. See, e.g., Elder v. Holloway,
510 U.S. 510, 516 (1994).
The central issue in this appeal is whether Raytheon may be held liable for
the actions of RMI under section 107(a) of CERCLA, 42 U.S.C. § 9607(a).
Section 107(a) lists four classes of liable parties: (1) owners and operators of
hazardous substance sites; (2) persons who owned or operated such sites at the
time of disposal; (3) persons who have arranged for the disposal of hazardous
substances; and (4) persons who have transported hazardous substances for
disposal. See Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313,
1317 (11th Cir. 1990). RMI itself is liable as an owner, an operator, and an
arranger. Raytheon, as successor in interest to Stearns-Roger, may only be held
liable if it can be determined that the operation and arrangement functions of RMI
may be attributed directly to Stearns-Roger as a stockholder.
In Bestfoods, the Supreme Court clarified the standard to be used in making
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this determination. First, it “sharpen[ed] the definition [of “operator”] for
purposes of CERCLA’s concern with environmental contamination.” Bestfoods,
524 U.S. at 66. The Court stated “an operator must manage, direct, or conduct
operations specifically related to pollution, that is, operations having to do with
the leakage or disposal of hazardous waste, or decisions about compliance with
environmental regulations.” Id. at 66-67. Furthermore, the Court emphasized the
necessary connection between the potential “operator” and the facility itself,
rather than with the subsidiary per se: “The question is not whether the parent
operates the subsidiary, but rather whether it operates the facility, and that
operation is evidenced by participation in the activities of the facility, not the
subsidiary.” Id. at 68 (quotation omitted). Because the Court in Bestfoods was
addressing a situation involving a parent and subsidiary, we must accordingly
modify our inquiry as appropriate to suit the situation of a minority shareholder
such as Stearns-Roger. The focus on the facility remains the crucial
consideration.
The Court acknowledged the possibility that directors and officers might
hold positions with both a parent and a subsidiary, and recited the corporate law
principle that it is entirely appropriate for them to do so. Id. at 69. Such dual
officers can and do “change hats” to represent the two corporations separately.
Id. (quotation omitted). Again citing basic principles of corporate law, the Court
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noted the presumption that directors wear their “subsidiary hats” rather than their
“parent hats” when they act for the subsidiary, and concluded that
it cannot be enough to establish liability here that dual officers and
directors made policy decisions and supervised activities at the
facility. The Government would have to show that, despite the
general presumption to the contrary, the officers and directors were
acting in their capacities as [parent] officers and directors, and not as
[subsidiary] officers and directors when they committed those acts.
Id. at 69-70. 1
Raytheon does not contend the factual findings of the district court are
clearly erroneous; indeed, the findings of fact were stipulated by the parties.
Based on those facts, we are persuaded the district court erred in its application of
Bestfoods. The district court correctly cited the relevant points we have listed
from Bestfoods, but then reasoned as follows:
Although my Findings and Conclusions rest, in part, on evidence that
Stearns-Roger . . had a significant stake in [RMI] in terms of stock,
1
To the extent that the district court considered the actions of Mr. Gordon,
who wore only a Stearns-Roger hat, we point out that the Supreme Court in
Bestfoods also addressed the separate possibility that an agent of the parent with
no subsidiary hat to wear might manage or direct activities at the facility. On this
point, the Court stated that activities that “involve the facility but which are
consistent with the parent’s investor status . . . should not give rise to direct
liability.” Id. at 72. Thus, the Court directed lower courts considering these
issues to determine “whether . . . actions directed to the facility by an agent of the
parent alone are eccentric under accepted norms of parental oversight of a
subsidiary’s facility.” Id. On the record here, the actions of Mr. Gordon are
wholly consistent with investor status, particularly given Stearns-Rogers’ position
as a minority shareholder.
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capital, and voting power, such evidence is not necessary to a finding
that Stearns-Roger (and, therefore, Raytheon) was directly liable for
the operations of RMI’s facility, the Rawley Mine. Moreover,
contrary to Raytheon’s assertions, it is clear that Mr. Thomas
Stearns, president of Stearns-Roger and president and chairman of
RMI, acted on behalf of Stearns-Roger, not simply as an RMI board
member. As I stated in my Findings and Conclusions, Stearns
himself, as sole stockholder and president of Stearns-Roger, served
in a representative capacity as the primary liaison between the two
entities.
Aplt. Appx. at 100 (quotation and citation omitted). We note, however, that
serving as the primary liaison between two corporations does not rebut the
presumption of wearing separate hats in separate corporate roles. Mr. Stearns’
role as president of Stearns-Roger does not lead to the conclusion reached by the
district court – i.e., that he acted on behalf of Stearns-Roger rather than RMI.
Indeed, none of these facts rebut the Bestfoods presumption.
The district court continued:
Of course, Mr. Stearns’s personal involvement in the purchase
of land to collect Rawley Mine tailings most pointedly illustrates
Stearns-Roger’s direction of environmental decision-making at RMI.
While this evidence serves as the basis of Raytheon’s liability as both
an arranger and an operator, it is not the only reason for finding
Raytheon liable as an operator of RMI. As I held earlier, Mr. Stearns
was far more than a figurehead, and Stearns-Roger, along with
ASARCO and Metals Exploration, ran RMI.
Id. (quotation and citation omitted). Again, the district court misinterpreted
Bestfoods. There is no evidence to rebut the presumption that Mr. Stearns’
involvement in the purchase of land for RMI was undertaken in any capacity other
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than as president of RMI and a member of its board. As such, his involvement in
the purchase cannot serve as the basis for operator or arranger liability of Stearns-
Rogers.
Other evidence listed by the district court in support of its legal conclusion
included the fact that Mr. Stearns wrote a letter to RMI stockholders regarding
financial and operating conditions of the company, that he negotiated for RMI an
ore smelting contract with ASARCO, that he submitted board licenses and
agreements with a mineral separation company and had unanimous approval to
sign those documents, that he submitted to the board a contract for electrical
power supply to the mines and had approval to sign that contract, that he signed
an installation order and a chattel mortgage for new transformers, that he had
board approval to execute demand notes for cash advances, and that as a member
of the board, he helped supervise and replace the on-site manager. Id. at 100-01.
The critical point, however, is that nothing indicates Mr. Stearns undertook any of
these actions while wearing any hat other than his RMI president hat. The crucial
consideration here is not what Mr. Stearns did, but what Stearns-Roger did. As
long as Mr. Stearns acted as an executive and board member of RMI, Bestfoods
tell us that his actions cannot be attributed to Stearns-Roger. While the district
court believed that Mr. Stearns himself was an operator of RMI’s facilities, id. at
101, that does not suffice to make Stearns-Roger, as a minority shareholder, an
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operator. The suit here is against the company, not Mr. Stearns personally. We
hold that as a matter of law, this evidence is insufficient to support the district
court’s conclusions.
In its original Findings of Fact and Conclusions of Law, although the
district court recognized that the need to resolve the “arranger” issue was
obviated by the determination that Stearns-Roger was an “operator,” the court
nevertheless addressed the issue as an alternative basis for liability. In so doing,
the court concluded that Raytheon was liable as an arranger because Stearns-
Roger “actually arranged for the disposal of RMI mine tailings at the lower
tailings area.” Id. at 89. Here the court relied upon evidence that “in his capacity
as an RMI board member, [Stearns] directed the purchase of property with the
knowledge and intent that it serve as a disposal site for the mine tailings.” Id.
To be held liable under CERCLA as an arranger, a party must satisfy three
requirements. First, the party must be a “person” as defined in CERCLA.
Second, the party must “own” or “possess” the hazardous substance at issue.
Third, the party must, by contract, agreement or otherwise, arrange for the
transport or disposal of such hazardous substances. See 42 U.S.C. § 9607(a)(3).
As to the questions of ownership or possession, the district court found that
Stearns-Roger’s twenty percent stockholder ownership interest along with its
“now-established operator status” created a “nexus” between Stearns-Roger and
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the disposal of the hazardous substance. Aplt. Appx. at 88 (citing Transportation
Leasing Co. v. State of Cal. (CalTrans), 861 F. Supp. 931, 941 (C.D. Cal. 1993),
and Gen. Elec. Co. v. AAMCO Transmissions, Inc., 962 F.2d 281, 286 (2d Cir.
1992)). The court further noted that under Transportation Leasing, constructive
ownership or possession may be demonstrated by a party’s selection of a site for
disposal. Because Mr. Stearns was involved in this type of decision-making for
RMI, the district court found he satisfied the requirement.
Once again, the district court made the mistake of automatically attributing
Mr. Stearns’ action to his role with Stearns-Roger and not to his role with RMI.
The Bestfoods holding regarding operator liability also logically applies to cases
involving arranger liability. See Carter-Jones Lumber Co. v. Dixie Distrib. Co.,
166 F.3d 840, 846 (6th Cir. 1999). Because the district court relied on its
erroneous conclusion regarding operator liability, it also erred in reaching its
conclusion on arranger liability.
Finally, in its second order, citing Bestfoods, the district court stated:
Thus, for example, in arranging for the supply of electrical power to
RMI’s Bonanza mines or negotiating a detailed contract for the
smelting of raw materials from all of RMI’s mines, Mr. Stearns --
and, by extension, Stearns-Roger -- helped the mines to function.
Inasmuch as the functioning of these facilities produced hazardous
waste which leaked or was improperly disposed of, Stearns-Roger
“manag[ed], direct[ed], or conduct[ed] operations specifically related
to pollution.”
Aplt. Appx. at 101 (citation omitted). This reasoning is fatally flawed by the
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district court’s unsupported assumption that Mr. Stearns’ actions may be
considered, by extension, to be those of Stearns-Roger. To the contrary, we are
required by Bestfoods to presume that Mr. Stearns’ actions in “helping the mines
to function” were taken in the ordinary course of his role as RMI president. The
facts do not support a rebuttal of that presumption. This error goes to the analysis
of both operator and arranger liability. As the Court stated in Bestfoods, “it
cannot be enough to establish liability here that dual officers and directors made
policy decisions and supervised activities at the facility.” Bestfoods, 524 U.S. at
69-70.
In sum, the correct analysis results in a conclusion that Raytheon, as
successor in interest to Stearns-Roger, may not be held liable either as an operator
or as an arranger in connection with the environmental cleanup at issue in this
case. This determination renders moot the cross-appeal on the issue of damages.
Accordingly, we REVERSE the decision of the district court.
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