IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
______________________
No. 99-20020
______________________
GERAGHTY AND MILLER, INC.,
Plaintiff - Counter Defendant - Appellee,
versus
CONOCO INC.; CONDEA VISTA CHEMICAL COMPANY,
Defendants - Counter Claimants - Appellants.
___________________________________________________________________
Appeal from the United States District Court for the
Southern District of Texas
___________________________________________________________________
December 14, 2000
Before POLITZ, GIBSON,* and HIGGINBOTHAM, Circuit Judges.
JOHN R. GIBSON, Circuit Judge.
Conoco Inc. and Condea Vista Chemical Company appeal the
district court's order granting summary judgment to Geraghty and
Miller, Inc. ("G&M") in this environmental clean-up action. This
case includes a claim under CERCLA, the Comprehensive Environmental
Response, Compensation and Liability Act, as well as state common
law claims. We affirm in part and, because a genuine issue exists
as to certain material facts, we reverse in part.
The parties do agree on a sufficient number of background
facts to set the stage. This dispute arises out of an
*
Circuit Judge of the Eighth Circuit, sitting by designation.
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environmental clean-up at the Lake Charles Chemical Complex in
Westlake, Louisiana. The Complex has been owned and operated by
Conoco or Vista since 1961, and in 1968 Conoco began managing
ethylene dichloride at the facility. Ethylene dichloride, a
feedstock in the production of vinyl chloride monomer, is a
"hazardous substance" as CERCLA defines that term. As a result of
historic releases and migration, ethylene dichloride contamination
occurred in soil from the surface to at least twenty-five feet down
and in shallow groundwater zones.
The Louisiana Department of Environmental Quality required
Conoco to investigate and address the ethylene dichloride
contamination under state groundwater protection laws and
regulations and federal and state solid waste laws and regulations.
It also required Conoco to put in place a groundwater monitoring
and assessment program pursuant to the Resource Conservation and
Recovery Act (RCRA), 42 U.S.C. §§ 6901-6992k (1994), and its
corresponding regulations and their Louisiana state counterparts.
As is often the case in such clean-ups, the process was set to take
place in stages. Conoco and G&M entered into a contract on March
12, 1985 under which G&M was to furnish all required services for
"Ground-Water Quality Assessment, Phase 2" at the Vinyl Chloride
Monomer Plant Area and Waste Water Treatment Area ("the Plant") of
the Complex. Vista was a third-party beneficiary under the
contract.
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Under the contract, G&M was to assess possible contamination
beneath several suspected source areas at the Complex. It was to
perform that assessment by 1) preparing design specifications for
the installation of groundwater monitor wells and piezometers used
to monitor possible groundwater contamination at the Complex; 2)
installing the monitor wells and piezometers; and 3) sampling the
monitor wells following installation. G&M completed the
installation of fifty monitor wells on July 23, 1985.
For approximately the following year, G&M sampled the monitor
wells and interpreted the monitoring data to determine the nature
and extent of contamination. G&M submitted quarterly reports to
Conoco/Vista to advise them of the results.
Sometime before May 1988, Conoco/Vista began to suspect
potentially serious technical and physical deficiencies in three of
the monitor wells G&M had installed. They were concerned that such
deficiencies were aggravating the contamination. Conoco/Vista
received approval from the Louisiana Department in May 1988 to plug
and abandon those wells. Conoco/Vista allege that they uncovered
physical evidence that the three wells were not installed according
to the contract specifications, and they sent a series of letters
to G&M concerning the deficiencies. In December 1989, Conoco/Vista
plugged and abandoned a fourth well, and they allege that this well
also was not installed according to specifications.
These experiences caused Conoco/Vista to question the
soundness of the remaining wells and other parts of the groundwater
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monitoring system. Conoco/Vista and G&M discussed who was
responsible for the costs associated with these allegedly defective
wells, but they were unable to resolve the issue. On August 27,
1990, the parties entered into the Groundwater Wells Interim
Agreement. The Interim Agreement called for the parties to agree
upon criteria for determining whether a given monitor well was
"suspect" or "not suspect" of being improperly installed, and to
agree upon criteria for determining whether a given well was
"properly" or "not properly" installed. Once the criteria were in
place, the parties would apply them to each of the wells to
determine which needed to be removed and who would bear the costs.
That never occurred, however, because the parties never agreed on
the criteria.
The parties entered into the Interim Agreement to allocate
responsibility between them for the costs of plugging and
abandoning additional wells that they were to agree upon as being
"suspect." G&M maintains that there was no other purpose for
entering into the deal, but Conoco/Vista insist that the Interim
Agreement gave the parties time to investigate the integrity of the
wells while not allowing the statute of limitations to run on any
defect claims that remained unresolved. Conoco/Vista assert that
G&M received, as consideration for the deal, a release from
approximately $250,000 in monitor well plugging and abandonment
costs.
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Conoco/Vista retained other environmental consulting firms to
continue the groundwater assessment program. Upon the
recommendation of one such consultant, Conoco/Vista plugged and
abandoned the remaining G&M-installed wells in 1993 and replaced
them.
In April 1993, Conoco/Vista filed suit against G&M in Texas
state court, alleging state common law causes of action. During
the course of that litigation, the Texas Court of Appeals held that
the language in the Interim Agreement concerning a possible tolling
and extension of the statute of limitations was ambiguous as a
matter of law.
In April 1997, with the state court lawsuit still pending, G&M
filed the instant CERCLA action, seeking reimbursement from
Conoco/Vista for G&M's past and future response costs.
Conoco/Vista filed a counterclaim two months later, also seeking
relief under sections 107 and 113 of CERCLA. Meanwhile, the state
court case was trifurcated for trial, with the first phase focused
on whether the Interim Agreement tolled the statutes of
limitations. Trial began in phase one in November 1997 and, while
the jury was deliberating, Conoco/Vista took a voluntary non-suit
and the state court judge dismissed the lawsuit.
After the district court granted partial summary judgment to
G&M, Conoco/Vista amended their counterclaim to omit their section
107 CERCLA claim and to add the state common law claims.
Ultimately, G&M voluntarily dismissed its complaint, leaving only
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Conoco/Vista's CERCLA section 113 and state common law
counterclaims at issue.
Less than a month before this case was to begin trial, G&M
unsuccessfully sought leave to file a partial summary judgment
motion on the basis that Conoco/Vista's CERCLA counterclaim was
time-barred. When the parties appeared for trial on the scheduled
date, the district court discussed the case with counsel and
suspended the start of the trial. Less than a week later, the
district court granted summary judgment to G&M on several grounds
including that the CERCLA claim was time-barred.
The district court held that Conoco/Vista's state common law
claims were barred by Texas statutes of limitations; that G&M was
not liable for contribution because it was not a "covered person"
under CERCLA as an operator, arranger, or transporter of hazardous
materials; and that the six-year limitation period of 42 U.S.C. §
9613(g)(2) (1994) barred Conoco/Vista's CERCLA claim. We address
each of these issues, along with Conoco/Vista's complaint that the
district court entered summary judgment without giving them notice
and an opportunity to respond.
I.
The district court entered summary judgment for G&M without
providing the notice required by Rule 56(c) of the Federal Rules of
Civil Procedure. Conoco/Vista argue that they were unfairly
prejudiced because they did not have notice that the district court
was contemplating entering a dispositive order, nor did they have
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an opportunity to respond or to present evidence. We review under
the harmless error standard. See Nowlin v. Resolution Trust Corp.,
33 F.3d 498, 504 (5th Cir. 1994).
By the time this case reached its trial date, G&M had filed
three motions for partial summary judgment and had attempted to
file a fourth. The district court had granted G&M's motion that
Conoco/Vista be declared "covered persons" under CERCLA, had denied
G&M's motion that it be declared not to be a "covered person", and
had yet to rule on G&M's motion seeking summary judgment on
Conoco/Vista's state common law claims. Conoco/Vista had filed
briefs and affidavits in opposition to those three motions. G&M
had sought leave to file a motion that the remaining CERCLA claim
be declared barred by the statute of limitations, but the district
court denied leave because the motion was untimely. Thus, all of
the issues except the CERCLA statute of limitations had been fully
briefed by the time the case was ready for trial.
When the district court entered its order granting complete
summary judgment to G&M, the parties expected to be in the midst of
a non-jury trial. When they arrived for trial on the appointed
day, the district court announced the view that it would be
beneficial to take some time to narrow the issues so that the
evidence could be streamlined. The court indicated that it would
review the file and directed the parties to return the following
day to begin trial. After its review, the district court concluded
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that all of the claims were amenable to judgment as a matter of
law.
While the district court erred by not observing the notice
requirements of Rule 56(c), this procedural error was later cured.
After the district court entered its summary judgment order,
Conoco/Vista filed a motion for rehearing/new trial along with a
brief on the CERCLA statute of limitations issue. In their motion,
Conoco/Vista pointed out what they believed to be disputed material
facts and offered citations to the record for those facts. They
did not, however, submit any additional affidavits or documentary
evidence.
Conoco/Vista pointed out that they had not received notice and
an opportunity to respond to the CERCLA statute of limitations
issue, as the court had denied G&M leave to file its partial
summary judgment motion on that issue. To support their argument,
Conoco/Vista attached an affidavit and an exhibit to their separate
brief on the CERCLA statute of limitations issue.
The district court considered both the motion and the brief
and determined that summary judgment was still appropriate. The
district court thus revisited all of the issues in the summary
judgment order. Conoco/Vista ultimately had an opportunity to be
heard on all of the issues,1 and the district court's post-summary
judgment consideration and ruling cured any procedural defect. See
1
Conoco/Vista admit in their brief on appeal that they had
such an opportunity: "[T]he evidence Conoco and Vista would have
presented to the court in response to the summary judgment motion
was filed in connection with their motion for rehearing."
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Barney v. IRS, 618 F.2d 1268, 1271 n.8 (8th Cir. 1980); United
States v. Shelly's Riverside Heights Lot X, 859 F. Supp. 150, 151
(M.D. Pa. 1994).
District courts are empowered to enter summary judgment sua
sponte. See Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986).
Although we disagree with some of the district court's legal
conclusions, its consideration of summary judgment in the first
instance without notice and hearing was harmless error.
II.
We turn now to the district court's rulings on the substantive
legal issues. We review the grant of summary judgment de novo.
See Uniroyal Chemical Co. v. Deltech Corp., 160 F.3d 238, 241 (5th
Cir. 1998). G&M bears the burden of showing the absence of
evidence to support Conoco/Vista's case, and Conoco/Vista must set
forth specific facts demonstrating a genuine issue for trial. We
view the facts in the light most favorable to Conoco/Vista and draw
all reasonable inferences in their favor. If Conoco/Vista set
forth specific facts essential to their claims, a genuine issue of
material fact will preclude summary judgment. See Coleman v.
Houston Indep. School Dist., 113 F.3d 528, 533 (5th Cir. 1997).
A.
CERCLA contains different statutes of limitations for section
107(a) cost-recovery actions and for section 113 contribution
actions. See 42 U.S.C. § 9613(g)(2)(B) (1994) (six-year statute
for initial action for recovery of remedial costs under section
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107(a), triggered by beginning of physical on-site construction);
42 U.S.C. § 9613(g)(3) (three-year period for contribution action
under section 113, with three alternative triggering events: a
prior judgment, an administrative order, or a judicially approved
settlement). Whether a party is seeking recovery under section
107(a) or contribution under section 113 does not always determine
the applicable statute of limitations. In cases such as this one
where a party seeks contribution but none of the triggering events
has occurred, Congress did not designate the statute of
limitations.
The district court determined that Conoco/Vista's CERCLA claim
is governed and barred by the six-year statute of limitations. The
court characterized this as an initial action for the recovery of
remediation costs and found that Conoco/Vista initiated remedial
on-site construction in 1987. According to the district court's
application, the statute of limitations expired in 1993. Because
Conoco/Vista did not file their CERCLA counterclaim until 1997, the
district court found it time-barred.
Conoco/Vista argue that their CERCLA contribution claim is
governed by the three-year limitations period, as 42 U.S.C. §
9613(g)(3) is the only section that on its face applies to
contribution actions. Conoco/Vista insist that their counterclaim
was timely because it was filed before any of the triggering events
contained in section 113(g)(3) occurred. Under their theory, it is
indeterminate when the limitations period would ever expire.
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In the alternative, Conoco/Vista assert that, even if section
113(g)(2) applies, the statute of limitations has not run or
material facts are in dispute as to whether it has run. They
further assert that G&M waived the affirmative defense of section
113(g)(2) by not properly or timely pleading it.
B.
The circuits are split on the appropriate statute of
limitations to apply in a case that is neither a recovery claim
under section 107 nor derivative of or responsive to any other
formalized dispute. There are three basic approaches to the issue,
see City of Merced v. R.A. Fields, 997 F. Supp. 1326, 1334 (E.D.
Cal. 1998) (collecting cases), but our court has not yet adopted
any of the three. Under the first approach, we would find that the
plain language of section 113(g)(3) establishes no statute of
limitations for this case. Under the second, we would use the six-
year statute of limitations in section 113(g)(2), for reasons
explained below. Under the third, we would use the three-year
statute of limitations in section 113(g)(3) and import another
triggering event from federal common law. See id.
We conclude that the Tenth Circuit's reasoning in favor of the
second approach in Sun Co. v. Browning-Ferris, Inc., 124 F.3d 1187
(10th Cir. 1997), is the most persuasive. In Sun Co., the Tenth
Circuit analyzes the statutory framework and applies it in a
practical way. Its rationale begins with the explanation that
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while section 113(f)2 is the vehicle for bringing a contribution
action, it does not create a new cause of action or create any new
liabilities. Rather, it is a mechanism for apportioning costs that
are recoverable under section 107. See id. at 1191 (citing cases).
In other words, a section 113 contribution action is a claim for
collection of the costs referred to in section 107. By definition,
the Tenth Circuit reasons, a contribution action is merely one type
of cost-recovery action. See id. at 1192. If there has been no
prior section 107 cost-recovery action, a contribution action
becomes an "initial action for recovery of the costs referred to in
section 9607 of this title," and must be brought "within 6 years
after initiation of physical on-site construction of the remedial
action." Id. (quoting 42 U.S.C. § 9613(g)(2)(B)).
We hold that the statute of limitations found in CERCLA
section 113(g)(2) applies to initial contribution actions such as
this. If we were to accept Conoco/Vista's argument and apply
section 113(g)(3), the statute of limitations would be indefinite
2
Section 113(f) of CERCLA provides:
Any person may seek contribution from any other person
who is liable or potentially liable under section 9607(a)
of this title, during or following any civil action under
section 9606 of this title or under section 9607(a) of
this title. . . . In resolving contribution claims, the
court may allocate response costs among liable parties
using such equitable factors as the court determines are
appropriate. Nothing in this subsection shall diminish
the right of any person to bring an action for
contribution in the absence of a civil action under
section 9606 of this title or section 9607 of this title.
42 U.S.C. § 9613(f)(1) (1994).
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because a triggering event might never occur. This result would
undermine the certainty that statutes of limitations are designed
to further.
Contrary to Conoco/Vista's argument, G&M did assert this
affirmative defense in a sufficiently timely manner. G&M included
the statute of limitations as an affirmative defense in its first
responsive pleading, thereby putting Conoco/Vista on notice of the
issue. Even though G&M initially relied on the limitations period
of section 113(g)(3), a mere assertion of the defense satisfies the
pleading requirements of Rule 8 of the Federal Rules of Civil
Procedure. See Daingerfield Island Protective Soc'y v. Babbitt, 40
F.3d 442, 444-45 (D.C. Cir. 1994). Moreover, the pretrial order
recited G&M's assertion that the CERCLA claim was barred by the
statute of limitations, with a precise citation to the statute.
Conoco/Vista were not surprised or prejudiced by the district
court's consideration of the issue. See Allied Chem. Corp. v.
Mackay, 695 F.2d 854, 855-56 (5th Cir. 1983); Hargett v. Valley
Fed. Sav. Bank, 60 F.3d 754, 763 (11th Cir. 1995).
C.
Our review of the CERCLA statute of limitations issue does not
end with our determination that section 113(g)(2) applies. We must
next decide whether Conoco/Vista's response actions at the Complex
are properly categorized as "remedial" or "removal" to determine
whether the counterclaim is timely. See 42 U.S.C. § 9613(g)(2)
(under subsection (A), an action for recovery of costs of a
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"removal action" must be filed "within 3 years after completion of
the removal action"; under subsection (B), an action to recover
costs of a "remedial action" must be filed "within 6 years after
initiation of physical on-site construction of the remedial
action").
The district court determined that Conoco/Vista were engaged
in ongoing remediation at the Complex and that physical on-site
construction began in 1987. It also determined that Conoco/Vista
were currently involved in removal and remediation activities.
Conoco/Vista argue that their counterclaim seeks recovery of costs
for what can only be characterized as removal of the contamination.
Not surprisingly, G&M agrees with the district court's
determinations that remediation activities were in place and that
they began in 1987.
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Congress provided definitions for "removal"3 and "remedial
action,"4 and the classification of the activity is determined as
3
CERCLA defines "remove" or "removal" as:
the cleanup or removal of released hazardous substances
from the environment, such actions as may be necessary
taken in the event of the threat of release of hazardous
substances into the environment, such actions as may be
necessary to monitor, assess, and evaluate the release or
threat of release of hazardous substances, the disposal
of removed material, or the taking of such other actions
as may be necessary to prevent, minimize, or mitigate
damage to the public health or welfare or to the
environment, which may otherwise result from a release or
threat of release. The term includes, in addition,
without being limited to, security fencing or other
measures to limit access, provision of alternative water
supplies, temporary evacuation and housing of threatened
individuals not otherwise provided for, action taken
under section 9604(b) of this title, and any emergency
assistance which may be provided under the Disaster
Relief and Emergency Assistance Act.
42 U.S.C. § 9601(23).
4
CERCLA defines "remedy" or "remedial action" as:
those actions consistent with permanent remedy taken
instead of or in addition to removal actions in the event
of a release or threatened release of a hazardous
substance into the environment, to prevent or minimize
the release of hazardous substances so that they do not
migrate to cause substantial danger to present or future
public health or welfare or the environment. The term
includes, but is not limited to, such actions at the
location of the release as storage, confinement,
perimeter protection using dikes, trenches, or ditches,
clay cover, neutralization, cleanup of released hazardous
substances and associated contaminated materials,
recycling or reuse, diversion, destruction, segregation
of reactive wastes, dredging or excavations, repair or
replacement of leaking containers, collection of leachate
and runoff, onsite treatment or incineration, provision
of alternative water supplies, and any monitoring
reasonably required to assure that such actions protect
the public health and welfare and the environment. The
term includes the costs of permanent relocation of
residents and businesses and community facilities where
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a matter of law. See Advanced Micro Devices, Inc. v. National
Semiconductor Corp., 38 F. Supp. 2d 802, 809 (N.D. Cal. 1999);
United States v. Vertac Chem. Corp., 33 F. Supp. 2d 769, 782 (E.D.
Ark. 1998). In reviewing the undisputed facts and the parties'
arguments concerning how we should apply the relevant law to those
facts, it strikes us that confusion often results because the
industry use of "remediation" is not synonymous with CERCLA's
definition of "remedial." Moreover, the CERCLA definitions are
expansive enough that certain activities may well be covered by
both. This is a question of law with some complexity. "Elements
of either response action may overlap and semantics often obscure
the actual nature of the cleanup performed." Public Serv. Co. v.
Gates Rubber Co., 175 F.3d 1177, 1182 (10th Cir. 1999).
Although the cases on this issue tend to be highly fact-
specific, certain principles emerge. We have often noted that
removal actions generally are immediate or interim responses, and
remedial actions generally are permanent responses. See, e.g., OHM
Remediation Servs. v. Evans Cooperage Co., 116 F.3d 1574, 1578 (5th
Cir. 1997). In addition, "Congress intended that the term 'removal
the President determines that, alone or in combination
with other measures, such relocation is more cost-
effective than and environmentally preferable to the
transportation, storage, treatment, destruction, or
secure disposition offsite of hazardous substances, or
may otherwise be necessary to protect the public health
or welfare; the term includes offsite transport and
offsite storage, treatment, destruction, or secure
disposition of hazardous substances and associated
contaminated materials.
42 U.S.C. § 9601(24).
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action' be given a broad interpretation." See, e.g., Kelley v.
E.I. DuPont de Nemours and Co., 17 F.3d 836, 843 (6th Cir. 1994).
With these principles in mind, we conclude that the response
action in this case is properly classified as removal. The
groundwater quality assessment program that Conoco/Vista instituted
by order of the Louisiana Department was conducted in three phases.
The first phase was one of assessment only, to confirm the presence
of contaminants and understand the groundwater flow and other
underground conditions. The second phase--and the only one that
G&M participated in--was a more detailed assessment to determine
the extent of contaminants in the first fifty feet of soil and to
investigate water quality below that level. The third phase
included establishing a groundwater monitoring and remediation
program and conducting a feasibility study of remedial
alternatives. In the specifications and contract documents, G&M
described the third phase as "a comprehensive rate-and-extent
assessment of migrating ground-water contaminants, and if
necessary, a determination of the appropriate remedial actions
necessary to abate contaminant movement."
The operative facts are that G&M installed monitor wells and
piezometers at the Complex. In describing the scope of the work it
was to perform under the contract, G&M stated that it had designed
the monitor wells and piezometers to collect data but also "so that
they can be converted to recovery wells if needed." At the time,
G&M apparently did not consider its work to include any remediation
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efforts, and only considered it a possibility that its work would
be part of a recovery effort.
Although Conoco/Vista eventually removed and replaced these
wells, they were part of a pilot corrective action program that
Conoco/Vista instituted in response to the Louisiana Department
order. Their ultimate use is irrelevant, however, because the
crucial response activity is that which occurred during G&M's
involvement. Thus, even if the wells had remained in place and
their use converted to an unquestionably remedial purpose, that
would not change the classification for statute of limitations
purposes. See Louisiana v. Braselman Corp., 78 F. Supp. 2d 543,
549 (E.D. La. 1999) (monitoring wells were used during
investigation and design phases of project; their continued use
during remedial action phase did not convert the pilot study to
remedial action); Advanced Micro Devices, 38 F. Supp. 2d at 813
("The fact that the extraction activities ultimately did not turn
out to be short-term, because they were implemented in the final
remedy four years later, cannot now be considered in hindsight.").
The undisputed facts show that no permanent remedy was in
place for the Complex when G&M constructed and installed the wells.
Even if the wells performed some function that falls within the
definition of remedial activity, that does not automatically
exclude them from classification as removal activities. There can
be some overlap between the two. See General Elec. Co. v. Litton
Indus. Automation Sys., Inc., 920 F.2d 1415, 1419 (8th Cir. 1990)
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(although CERCLA lists excavation as an example of remedial
activity, excavation can be and under facts of case is a removal
activity).
Although G&M suggests that a clean-up program of this
magnitude and duration must be categorized as remedial, we are not
persuaded. The record shows that the Louisiana Department had yet
to issue its final decision, and only that decision will define the
ultimate remedial strategy for the Complex. Even if the
replacements for these wells are integral to the long-term
remediation of the site, that does not mean that their initial
placement cannot be categorized as removal. See General Elec. Co.,
920 F.2d at 1419 n.4; Advanced Micro Devices, 38 F. Supp. 2d at
813; EPA v. TMG Enters., Inc., 979 F. Supp. 1110, 1130 (W.D. Ky.
1997).
We hold that the activities at issue are properly categorized
as removal activities, and the statute of limitations does not bar
Conoco/Vista's counterclaim for CERCLA contribution.
III.
Having determined that Conoco/Vista's CERCLA counterclaim was
timely, we must next decide whether G&M is a "covered person" under
CERCLA and therefore amenable to a contribution claim. See CERCLA
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§ 107(a), 42 U.S.C. § 9607(a) (1994).5 The statute defines a
"covered person" as:
(1) the owner and operator of a vessel or a
facility,
(2) any person who at the time of disposal of any
hazardous substance owned or operated any facility at
which such hazardous substances were disposed of,
(3) any person who by contract, agreement, or
otherwise arranged for disposal or treatment, or arranged
with a transporter for transport for disposal or
treatment, of hazardous substances owned or possessed by
such person, by any other party or entity, at any
facility or incineration vessel owned or operated by
another party or entity and containing such hazardous
substances, and
(4) any person who accepts or accepted any hazardous
substances for transport to disposal or treatment
facilities, incineration vessels or sites selected by
such person, from which there is a release, or a
threatened release which causes the incurrence of
response costs, of a hazardous substance. . . .
The district court held that G&M is not an operator, arranger,
or transporter of hazardous substances.6 The court described G&M
as "merely an environmental contractor employed to investigate and
assist in constructing a facility for remedying contamination
already in the soils."
5
To prevail in a contribution action, Conoco/Vista must show
1) G&M is a "covered person" under CERCLA section 107(a); 2) the
Complex is a "facility" under CERCLA; 3) a "release" or "threatened
release" of a "hazardous substance" occurred at the facility; and
4) the release or threatened release caused Conoco/Vista to incur
response costs. See 3550 Stevens Creek Assocs. v. Barclays Bank,
915 F.2d 1355, 1358 (9th Cir. 1990). The last three elements are
not at issue in this appeal.
6
Conoco/Vista did not allege that G&M is the owner of the
Complex.
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We agree with the district court concerning G&M's status as a
transporter, but we conclude that the disputed material facts
preclude the entry of summary judgment declaring that G&M is not an
operator or an arranger.
A.
Although the first category of "covered persons" refers to
"the owner and operator" of a facility, those words are not
redundant. In some circumstances the operator may not be the
owner. In addition, a facility may have more than one operator.
While we normally begin our analysis with the statutory
language, we do not obtain much assistance from the CERCLA
definition of a facility's "operator" as "any person . . .
operating" the facility. 42 U.S.C. § 9601(20)(A)(ii) (1994). We
look then to see how case law has supplied a definition.
[U]nder CERCLA, an operator is simply someone who directs
the workings of, manages, or conducts the affairs of a
facility. . . . [A]n 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.
United States v. Bestfoods, 524 U.S. 51, 66-67 (1998). For one to
be considered an operator, then, there must be some nexus between
that person's or entity's control and the hazardous waste contained
in the facility. This nexus has been described as a "well-settled
rule" that "'operator' liability. . . only attaches if the
defendant had authority to control the cause of the contamination
at the time the hazardous substances were released into the
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environment." Kaiser Aluminum & Chem. Corp. v. Catellus Dev.
Corp., 976 F.2d 1338, 1341 (9th Cir. 1992); see also CPC Int'l,
Inc. v. Aerojet-General Corp., 731 F. Supp. 783, 788 (W.D. Mich.
1989) ("The most commonly adopted yardstick for determining whether
a party is an owner-operator under CERCLA is the degree of control
that party is able to exert over the activity causing the
pollution.").
A court must decide whether a contractor is an operator after
considering the totality of the circumstances concerning its
involvement at the site. See K.C. 1986 Ltd. Partnership v. Reade
Mfg., 33 F. Supp. 2d 820, 834 (W.D. Mo. 1998). While Conoco/Vista
point out that G&M had a great deal of control over the placement,
design and installation of the wells, including the selection and
supervision of the subcontractor who performed the actual
installation, G&M portrays its role as one of lending advice and
expertise to the project that was ultimately controlled by
Conoco/Vista. However, it is more than the portrayal of the roles
that is in dispute. The parties also disagree on material facts
concerning Conoco/Vista's technical expertise, their supervision of
the work, and the parties' relative authority at the work-site.
Because the facts concerning the degree of G&M's control over the
monitor wells are in dispute, summary judgment declaring that G&M
was not an operator was premature.
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B.
Arranger liability attaches under CERCLA when one has
"arranged for disposal" of hazardous substances. See 42 U.S.C. §
9607(a)(3). Because CERCLA does not define "arranged for," courts
sometimes look to the definition and interpretation of "disposal"
for assistance in deciding if one is an arranger. While we have
not provided a bright-line test for determining when one is an
"arranger," we have looked at "disposal" in the context of the
entire phrase. In Tanglewood East Homeowners v. Charles-Thomas,
Inc., 849 F.2d 1568, 1573 (5th Cir. 1988), we rejected a narrow
interpretation of "disposal," thereby leaving open the possibility
that one who moves hazardous waste intra-site can be held liable as
an arranger.7
The parties dispute if and how the hazardous waste was moved
by G&M at the Complex, including whether installation of the wells
by G&M's subcontractor caused migration of the ethylene dichloride.
Thus, the district court should not have entered summary judgment
on this issue. See Burlington N. R.R. Co. v. Woods Indus., Inc.,
815 F. Supp. 1384, 1392 (E.D. Wash. 1993) (even though lessee
didn't bring hazardous waste to the site, if facts revealed that
7
Tanglewood also declined to answer another argument G&M
raises, namely that arranger liability under CERCLA may not reach
beyond waste generators that enlist third parties as agents. When
asked to decide which specific businesses and activities are
covered by CERCLA, we declined to do so in the context of a Rule
12(b)(6) motion. 849 F.2d at 1573-74. We have not been asked to
articulate a list in this case.
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its instructions to a third party caused waste to be dispersed
across the site it would be subject to arranger liability).
"Arranger" is another CERCLA term that is to be given a
liberal interpretation. See, e.g., United States v. Aceto Agric.
Chems. Corp., 872 F.2d 1373, 1380 (8th Cir. 1989). Our approach in
Tanglewood is consistent with that interpretation. We are mindful,
however, that just as a nexus must exist for operator liability to
attach, there must also be a nexus that allows one to be labeled an
arranger. One court has described that nexus as "the obligation to
exercise control over hazardous waste disposal, and not the mere
ability or opportunity to control the disposal." General Elec. Co.
v. Aamco Transmissions, Inc., 962 F.2d 281, 286 (2d Cir. 1992)
(emphasis in original). On remand, therefore, the totality of the
circumstances must take into consideration each of these factors.
C.
The district court correctly decided that G&M is not subject
to liability as a "transporter" of hazardous waste. CERCLA defines
"transportation" as "the movement of a hazardous substance by any
mode. . . ." 42 U.S.C. § 9601(26) (1994). Under CERCLA section
107(a)(4), however, liability is imposed on a person who transports
hazardous substances to a disposal or treatment facility or to
"sites selected by such person." Even if G&M's conduct resulted in
the unintended migration of ethylene dichloride, there is no
evidence that G&M moved the ethylene dichloride to another facility
or site. We affirm the entry of summary judgment on this issue.
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IV.
We turn now to Conoco's state common law counterclaims of
breach of contract, fraud, breach of warranty, and negligence. The
district court entered summary judgment on all, finding them barred
by the applicable statutes of limitations. Conoco/Vista correctly
point out that G&M bears the burden of proof on such an affirmative
defense. See Bell v. Showa Denko K.K., 899 S.W.2d 749, 753 (Tex.
App. 1995, writ denied). They assert that their claims were timely
by virtue of the relation back doctrine and the Texas discovery
rule and that the parties agreed to toll the statutes as part of
the Interim Agreement.
A.
The Interim Agreement, signed by the parties in 1990, is not
a model of clarity. It recites that its purpose is to achieve
accord and satisfaction of past disputes and to suspend potential
future disputes about paying expenses associated with the
groundwater assessment program. The Agreement called for the
parties to reach further accord within 90 days on the criteria for
determining whether a well had been properly or improperly
installed. The parties agreed to pay all of their own expenses to
date, with Conoco/Vista agreeing to waive reimbursement of what it
now says was $250,000 in expenses. The final relevant portion of
the Agreement is in paragraph H, which adopted the ten-year
"statute of limitations" contained in Tex. Civ. Prac. & Rem. Code
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Ann. §§ 16.008 (West Supp. 2000) and 16.009 (West 1986)8 and
applied it to any unresolved claim for damages.
The parties make much of their disagreement as to the purpose
of the Interim Agreement. Conoco/Vista insist that paragraph H
reflects the parties' agreement to toll and extend the statute of
limitations, that its inclusion was an integral part of the deal,
and that G&M in effect received $250,000 as consideration for the
extension.9 G&M denies that such a purpose existed. This
disagreement is irrelevant to the basis for the summary judgment
order, however, because the district court found the document
unenforceable as an "agreement to enter into an agreement."
Under Texas law, parties may agree on certain contractual
terms, understanding them to be an agreement, while leaving other
terms open for future negotiation. See Scott v. Ingle Bros. Pac.,
Inc., 489 S.W.2d 554, 555 (Tex. 1972).10 Whether we agree with the
8
The statutes are in fact statutes of repose rather than
statutes of limitations. They permit a person to bring suit for
damages against architects, engineers and others who design and
construct improvements to real property or equipment attached to
real property no later than ten years after the improvements are
completed.
9
Elsewhere in their brief, Conoco/Vista argue that the
statutes of repose cited in paragraph H do not apply because G&M is
not an engineering or construction firm. Conoco/Vista cannot have
it both ways, and we disregard that argument.
10
We recognize that this is an incomplete statement of Texas
law. There are two essential elements that must be satisfied for
this kind of contract to be enforceable. First, the contract must
be sufficiently definite in its terms so that a court can
understand the promises made. Second, all material terms of the
contract must be agreed upon. See T.O. Stanley Boot Co. v. Bank of
El Paso, 847 S.W.2d 218, 221 (Tex. 1992).
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district court that the Interim Agreement is an "agreement to
agree" ultimately makes no difference. In the state court lawsuit
--involving the same parties and exactly the same state common law
claims--the trial court entered summary judgment in favor of G&M on
the sole ground that the claims were barred by the applicable
statutes of limitations. Conoco/Vista appealed, arguing that a
question of fact existed as to whether paragraph H of the Interim
Agreement tolled and extended the statutes of limitations. The
Texas Court of Appeals reversed the summary judgment order, holding
that paragraph H is ambiguous as a matter of law and that its
interpretation is a fact issue.
This is a matter of state substantive law where we will defer
to the Texas Court of Appeals' decision. See United States v.
Johnson, 160 F.3d 1061, 1063 (5th Cir. 1998). We are required to
apply the doctrine of stare decisis to the Texas appellate court
decision on this issue, particularly because it was issued in a
case involving the same parties and the same issues. See Peregoy
v. Amoco Prod. Co., 742 F. Supp. 372, 374 (E.D. Tex. 1990), aff'd,
929 F.2d 196 (5th Cir. 1991).
Accepting the decision that the Interim Agreement dated August
27, 1990 is ambiguous, it is uncertain whether it tolls the statute
of limitations. We must reverse the summary judgment order on this
issue, then, unless we can determine as a matter of law that the
limitations period expired before that date.11
11
The district court made no finding as to when the Interim
Agreement was terminated. Under paragraph H, termination triggers
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B.
We return, then, to the fundamental question of when the
statute of limitations expired for each of the state law claims.
Conoco/Vista never answer that question directly. Rather, they
assert various reasons why their amended counterclaim was filed
within the requisite time without saying when that time expired.
Texas law provides the answer: the statute of limitations for
breach of contract, breach of warranty, and fraud is four years,12
and for negligence it is two years.13
Conoco/Vista argue that the discovery rule applies to each of
these actions, so that the limitations period began running when
they learned of the injury rather than when the injury occurred.
Under Texas law, the discovery rule (an exception to the general
rule)applies to breach of contract14 and fraud,15 but it does not
the running of the statute of limitations.
12
See Tex. Civ. Prac. & Rem. Code Ann. § 16.004 (West Supp.
2000)(fraud); Enterprise-Laredo Assocs. v. Hachar's, Inc., 839
S.W.2d 822, 837 (Tex. App. 1992, writ denied) (breach of contract);
S-C Indus. v. American Hydroponics Sys., Inc., 468 F.2d 852, 855-56
(5th Cir. 1972) (non-UCC breach of warranty subject to four-year
limitations in Tex. Rev. Civ. Stat. Ann. art. 5527, repealed and
now contained in § 16.004).
13
See Tex. Civ. Prac. & Rem. Code Ann. § 16.003 (West Supp.
2000).
14
See Enterprise-Laredo Assocs, 839 S.W.2d at 837.
15
See Quinn v. Press, 140 S.W.2d 438, 440 (Tex. 1940).
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apply to breach of warranty16 or negligent design and construction17
causes of action.
We can apply the four- and two-year statutes of limitations to
the breach of warranty and negligence claims, as it is undisputed
that G&M completed its work in 1985. The statutes expired in 1989
and 1987, respectively, and none of Conoco/Vista's arguments serve
to change that conclusion.18
With respect to the breach of contract and fraud claims, G&M
bears the burden of proof as to the discovery rule. In order for
G&M to prevail on its affirmative defenses to the breach of
contract and fraud claims in a summary judgment motion, it must
16
See Martinez v. Humble Sand & Gravel, Inc., 940 S.W.2d 139,
147 (Tex. App. 1996), aff'd sub nom. Childs v. Haussecker, 974
S.W.2d 31 (Tex. 1998) (discovery rule does not apply to breach of
warranty claims under Tex. Bus. & Comm. Code Ann. § 2.725 relating
to sale of goods). Conoco/Vista allege that G&M breached an
express warranty, but they cite only cases regarding breach of an
implied warranty in support of their argument that the discovery
rule applies. Even if those cases were relevant, they are no
longer good law. See Clark v. DeLaval Separator Corp., 639 F.2d
1320, 1325 n.2 (5th Cir. 1981).
17
See Olson v. Passero, 402 S.W.2d 953, 954 (Tex. App. 1966,
writ ref'd n.r.e.).
18
We find no merit to Conoco/Vista's argument that the Texas
relation back doctrine provides relief. Conoco/Vista amended their
counterclaim in December 1997. That amendment could not relate
back to anything earlier than G&M's April 1997 complaint. The
pendency of the state court lawsuit before April 1997 did not toll
the statute of limitations for the federal court action. See
Cunningham v. Fox, 879 S.W.2d 210, 212 (Tex. App. 1994, writ
denied) ("A dismissal is the equivalent of a suit never having been
filed. . . . Therefore, if a suit is dismissed, the statute of
limitations is not tolled for any new pleading filed."); Armstrong
v. Ablon, 686 S.W.2d 194, 196 (Tex. App. 1984, no writ) ("Where a
plaintiff voluntarily abandons his suit, the statute of limitations
is not interrupted during the period when the suit was pending.").
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prove when the claims accrued and must negate the discovery rule by
proving as a matter of law that there is no genuine issue of fact
about when Conoco/Vista discovered or should have discovered the
nature of the injury. See Burns v. Thomas, 786 S.W.2d 266, 267
(Tex. 1990). We conclude that G&M has not met this burden, as the
facts are disputed concerning the date on which Conoco/Vista did or
should have discovered their injury.
Certainly Conoco/Vista cannot argue for a discovery date of
later than April 1993, because that is when they filed their state
court lawsuit. In their motion to reconsider the district court's
order, Conoco/Vista asserted that the window for them to have
discovered their injury is from May 1988 to sometime in 1992, when
they initiated the plugging and abandonment of the remaining wells.
G&M argues that Conoco/Vista discovered the injury in a series of
alternative ways from 1988 through 1993.
If we were reviewing this without the possible influence of
the Interim Agreement on the tolling issue, we would accept
Conoco/Vista's admission that they discovered their injury no later
than 1992. We would then apply the four-year statute of
limitations for breach of contract and fraud and conclude that
their 1997 counterclaim was not timely. However, as we noted
earlier, we must reverse the summary judgment order unless we can
conclude as a matter of law that the statute of limitations expired
before the Interim Agreement was signed on August 27, 1990.
Because we may not resolve the disputed facts concerning when the
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injury was or should have been discovered, we leave this
determination for the district court.
V.
We reverse the district court's judgment and order with
respect to its conclusions that Conoco/Vista's CERCLA counterclaim
is barred by the statute of limitations, that G&M cannot be found
liable in a CERCLA contribution claim as an operator or an
arranger, and that Conoco/Vista's state law claims for breach of
contract and fraud are time-barred. We affirm the district court's
judgment and order insofar as it dismisses the CERCLA claim seeking
to hold G&M liable as a transporter and Conoco/Vista's counterclaim
for breach of warranty and negligence. We remand for further
proceedings consistent with this opinion.
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