IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION ) CIVIL ACTION NO UWC

Transcription

1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. CHATHAM STEEL, INC., et al., Defendants. CHATHAM STEEL, INC., Third-Party Plaintiff, v. ANGLERS ROOST TRADING COMPANY, ELGIN SCRAP BATTERY, INC., JOWERS BATTERIES, INC. a/k/a GJ BATTERIES, MADEWELL & MADEWELL, INC., MORRIS SCRAP, INC., Third-Party Defendants. CIVIL ACTION NO UWC THIRD-PARTY DEFENDANTS MOTION FOR PARTIAL SUMMARY JUDGMENT ON LIABILITY Pursuant to Fed. R. Civ. P. 56(b, Third-Party Defendants Anglers Roost Trading Company ( Anglers Roost, Elgin Scrap Battery, Inc. ( Elgin Scrap, Jowers Batteries, Inc. ( Jowers, Madewell & Madewell, Inc. ( Madewell, and Morris Scrap, Inc. ( Morris Scrap respectfully

2 move this Court for partial summary judgment on all claims stated in Plaintiff s Complaint. Defendants respectfully request oral argument on this motion. As demonstrated in the accompanying Memorandum in Support of Defendants Motion for Summary Judgment on Liability, Defendants are entitled to summary judgment because there are no genuine issues of material fact, and because, as a matter of law, Defendants are not subject to personal jurisdiction by this Court and Defendants are not liable under the Comprehensive Environmental Response, Compensation, and Liability Act ( CERCLA, 42 U.S.C Defendants respectfully request that this Court grant them summary judgment on all claims stated in Plaintiff s Complaint. Respectfully submitted, Dated: April 11, 2001 Michael G. Shaw Bar No Attorney for Third-Party Defendants 4801 Massachusetts Ave, N.W. Washington, D.C Tel. No

3 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. CHATHAM STEEL, INC., ET AL., Defendants. CHATHAM STEEL, INC., Third-Party Plaintiff, v. ANGLERS ROOST TRADING COMPANY, ELGIN SCRAP BATTERY, INC., JOWERS BATTERIES, INC. a/k/a GJ BATTERIES, MADEWELL & MADEWELL, INC., MORRIS SCRAP, INC., Third-Party Defendants. CIVIL ACTION NO UWC

4 MEMORANDUM IN SUPPORT OF THIRD-PARTY DEFENDANTS MOTION FOR PARTIAL SUMMARY JUDGMENT ON LIABILITY TABLE OF CONTENTS SUMMARY... 1 STATEMENT OF MATERIAL FACTS... 2 STANDARD OF REVIEW... 4 ARGUMENT... 5 I. CLAIMS AGAINST ALL DEFENDANTS SHOULD BE DISMISSED BECAUSE THE COURT HAS NO PERSONAL JURISDICTION OVER THEM... 5 A. The Alabama long-arm statute does not warrant the exercise of personal jurisdiction... 5 B. Defendants did not have minimum contacts with Alabama and could not have reasonably anticipated being haled into Alabama courts Defendants Anglers Roost and Elgin Scrap conducted all business with non-alabama brokers Defendants Jowers, Morris Scrap, and Madewell did not have minimum contacts in Alabama II. DEFENDANT MADEWELL IS ENTITLED TO SUMMARY JUDGMENT BECAUSE, AS A MATTER OF LAW, IT DID NOT ARRANGE FOR THE TREATMENT OR DISPOSAL OF A HAZARDOUS SUBSTANCE A. An arranger must arrange for either treatment or disposal of hazardous material B. Plates and groups are not processed to change them from a hazardous substance to a non-hazardous substance and thus Defendant Madewell did not arrange for their treatment under section 107(a(3 of CERCLA.1 2 C. Plates and groups are useful products and thus Defendant Madewell did not arrange for their disposal under section 107(a(3 of CERCLA III. DEFENDANTS ANGLERS ROOST, ELGIN SCRAP, JOWERS, AND MORRIS SCRAP ARE ENTITLED TO SUMMARY JUDGMENT BECAUSE, AS A MATTER OF LAW, THEY ARE EXEMPTED FROM LIABILITY UNDER SECTION 127 OF CERCLA A. Congress enacted Section 127 of CERCLA to protect companies like these Defendants B. Section 127 establishes that recyclers of recyclable materials are not liable under CERCLA C. Defendants Anglers Roost and Elgin Scrap are exempted from liability under Section 127 of CERCLA because they conducted all business through brokers and never dealt with ILCO D. Defendants Anglers Roost, Elgin Scrap, Jowers, and Morris Scrap are exempted from liability under i

5 Section 127 of CERCLA because they did not have an objectively reasonable basis to believe that ILCO was not in compliance CONCLUSION ii

6 SUMMARY The Environmental Protection Agency ( EPA brought suit under the Comprehensive Environmental Response, Compensation, and Liability Act ( CERCLA against Third-Party Plaintiff Chatham Steel ( Plaintiff and nine other parties, seeking to recover its site remediation costs related to the Interstate Lead Company ( ILCO Superfund site. The other nine parties then assigned to Plaintiff their claims for contribution from other potentially responsible parties ( PRPs. Plaintiff brought this action seeking contribution from the Third-Party Defendants ( Defendants. The Defendants now move for partial summary judgment on liability. This Court has no personal jurisdiction over the Defendants because the Defendants are nonresidents of Alabama, the Alabama long-arm statute does not reach the Defendants, and even if it did apply, the Defendants did not meet the minimum contact requirement and could not have reasonably anticipated being haled into Alabama courts. Additionally, Defendants Anglers Roost and Elgin Scrap conducted all business with non-alabama brokers. Defendant Madewell cannot be held liable under CERCLA because the materials it sold do not meet the requirements of CERCLA. The other Defendants cannot be held liable under CERCLA because they are exempt according to the 1999 Superfund Recycling Equity Act ( SREA, which was enacted to protect companies like the Defendants. Congress specifically stated that companies like the Defendants who deal exclusively with brokers shall not be held liable under CERCLA and therefore Defendants Anglers Roost and Elgin Scrap cannot be held liable. Additionally, Defendants Anglers Roost, Elgin Scrap, Jowers, and Morris Scrap cannot be held liable because they had no reasonably objective basis to believe that the ILCO Superfund site was not in compliance with environmental laws. 1

7 For the reasons stated above, and because there are no genuine issues of material fact, none of the Defendants can be held liable, as a matter of law, and summary judgment is appropriate. STATEMENT OF MATERIAL FACTS Plaintiff Chatham Steel has one hundred employees and $100,000,000 in gross annual sales. Class Answer to Interrogatories. Defendant Anglers Roost is a West Virginia resident. It has two employees and annual gross sales of approximately $500,000. It conducted all of its transactions with ILCO through a broker. All of its transactions with the broker were for spent lead-acid batteries. List of Possible Third-Party Defendants provided by Brian Friel ( Friel List. Defendant Elgin Scrap is an Illinois resident. It has twenty employees and annual gross sales of approximately $2,000,000. It conducted all of its transactions with ILCO through a broker. All of its transactions with the broker were for spent lead-acid batteries. Friel List. Defendant Jowers is a Florida resident. It has one employee and annual gross sales of approximately $10,000,000. All of its transactions with ILCO were for spent lead-acid batteries. Friel List. Defendant Morris Scrap is a Mississippi resident. It has fifty employees and annual gross sales of approximately $15,000,000. It conducted all of its transactions with ILCO during the period through a broker. During other periods it dealt directly with ILCO. All of its transactions with the broker and ILCO were for spent lead-acid batteries. Friel List. Defendant Madewell is an Oklahoma resident. It has more than two hundred employees and annual gross sales of approximately $50,000,000. All of its transactions with ILCO were for plates 2

8 and groups. Friel List. Defendant Madewell processed the plates and groups at its own site. Statement in class on Mar. 28, All direct contacts between Defendants and ILCO were by telephone. Id. All brokers who conducted transactions with Defendants were residents of states other than Alabama. Dep. of Brian Friel. When dealing with brokers, ILCO dealt solely with the brokers, and never dealt with the brokers customers other than to go to the location of the brokers customers to pick up the materials. Environmental Litigation Hypothetical Case Study ( Case Study at p. 3. Defendants never delivered materials to ILCO. ILCO always used ILCO trucks to pick up the materials at the ILCO customer sites or brokers customer sites. Case Study at p. 3. EPA identified numerous PRPs who allegedly sent hazardous substances to the ILCO Site. The United States, seeking to recover its site remediation costs, filed a cost recovery action against Chatham Steel and nine other parties, under section 107(a of CERCLA, 42 U.S.C. 9607(a. See United States v. Chatham Steel Corporation, et al., Civil Action No UWC (N.D. Alabama The Defendants in the instant case were also designated as PRPs but were not included in the United States cost recovery action. See id.; Compl. at 21. The other nine defendants in the cost recovery action assigned their claims under the CERCLA contribution provisions to Chatham Steel. Chatham Steel, as a Third-Party Plaintiff, brought claims against the Third-Party Defendants in the instant case, seeking contribution under section 113(f(1 of CERCLA, 42 U.S.C. 9613(f(1, and a declaration under section 113(g(2 of CERCLA, 42 U.S.C. 9613(g(2, that each Third-Party Defendant is liable to Chatham Steel for costs incurred and to be incurred by Chatham Steel at the Site, and to a declaration specifying the rights and other legal relations of Chatham Steel. Compl. at 36. 3

9 The Third-Party Defendants now move for partial summary judgment on liability. STANDARD OF REVIEW A motion for summary judgment should be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law. Fed. R. Civ. P. 56(c; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986; Everett v. Napper, 833 F.2d 1507, 1510 (11th Cir. 1987; Pritchard v. Southern Co. Services, 92 F.3d 1130, 1132 (11th Cir An issue of fact is genuine if the record as a whole could lead a rational trier of fact to find for the nonmoving party. Chatham Steel Corp. v. Brown, 858 F. Supp. 1130, 1136 (N.D. Fla. 1994, citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986. The evidence must be viewed in the light most favorable to the nonmoving party. See Pritchard, 92 F.3d at 1132, citing Augusta Iron and Steel Works, Inc. v. Employers Insurance of Wausau, 835 F.2d 855, 856 (11th Cir Any factual questions must be resolved with all reasonable inferences being drawn in favor of the nonmovant. See Fed. R. Civ. P. 56(c; Hillburn v. Murata Elecs. N. America, Inc., 181 F.3d 1220, 1225 (11th Cir. 1999, citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962; Pritchard, 92 F.3d at However, the nonmoving party may not rest on the mere denials or allegations in the pleadings, but must set forth specific facts sufficient to raise a genuine issue for trial. See Fed. R. Civ. P. 56(e; Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575, 1579 (11th Cir If the plaintiff cannot support each essential element of his claim, summary judgment must be granted because a complete failure of proof regarding an essential element necessarily renders other facts immaterial. See Celotex, 477 U.S. at

10 ARGUMENT I. CLAIMS AGAINST ALL DEFENDANTS SHOULD BE DISMISSED BECAUSE THE COURT HAS NO PERSONAL JURISDICTION OVER THEM Determining whether this Court may exercise personal jurisdiction over the Defendants requires a two-step analysis. First, this Court must ascertain whether Alabama s long-arm statute authorizes the Court to exercise jurisdiction. See Cable/Home Communication v. Network Productions, Inc., 902 F.2d 829, 855 (11th Cir Next, this Court must determine whether or not sufficient minimum contacts exist to satisfy the Due Process clause of the Fourteenth Amendment. See id. Only if both steps of the analysis are satisfied may this Court exercise jurisdiction over the Defendants. See Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir None of the Defendants are residents of Alabama. The Alabama long-arm statute does not confer personal jurisdiction over any of the Defendants because there is no evidence that the Defendants engage in any regular or persistent business in Alabama, or derive substantial revenue from business in Alabama. But even if the long-arm statute did confer personal jurisdiction, Plaintiff has not presented any evidence to prove that the consequences of Defendant s transactions were foreseeable. Hence, the requirement for minimum contacts with Alabama was not met. A. The Alabama long-arm statute does not warrant the exercise of personal jurisdiction The Alabama long-arm statute, Ala. R. Civ. P. 4.2, provides personal jurisdiction over nonresident defendants. The statute requires that the defendant has sufficient contacts with the state and lists examples including: (A transacting any business in [Alabama]; (B contracting to supply services or goods in [Alabama];... [and] (D causing tortious injury or damage in [Alabama] by an act or omission outside [of Alabama] if the person regularly does or solicits business, or engages in any other persistent course of conduct or derives substantial revenue from goods used or consumed... in [Alabama]. 5

11 Id. at (a(2(a, (B, (D. The statute also requires that it be fair and reasonable to require the person to come to the state to defend an action. Id. at (a(2(i. A similar case from Florida involving battery recycling is distinguishable because the Florida long-arm statute is different than Alabama s. The issue of personal jurisdiction for a non-resident seller of spent batteries was addressed in the Florida case of Chatham Steel v. Brown, 858 F. Supp 1130 (N.D. Fla Defendant Charles Cleveland a South Carolina resident moved for dismissal based on lack of personal jurisdiction. Cleveland sold spent batteries to the smelter Sapp Battery a Florida resident on at least five occasions. The standard procedure was for Sapp to contact Cleveland to see if Cleveland had batteries to sell. If so, then Sapp would send its trucks to pick up the batteries. Sapp paid for the batteries by check. Cleveland claimed that it did not know where Sapp took the batteries or what it did with them. Cleveland had no other contacts with the state. The court stated that the plaintiffs must establish a prima-facie case of personal jurisdiction by presenting enough evidence to withstand a motion for directed verdict. See Chatham Steel, 858 F. Supp. at The court in Chatham Steel first looked at the Florida long-arm statute. Fla. Stat. ch (1993. It rejected plaintiffs first argument that Cleveland fell under the statute because he caused injury within Florida by an act outside of Florida. The reason for the rejection was that the statute also requires that [p]roducts, materials, or things processed, serviced, or manufactured by the defendant anywhere were used or consumed within this state in [Florida] in the ordinary course of commerce, trade, or use. Fla. Stat. ch (1(f(2; Chatham Steel, 858 F. Supp at The court could find no evidence that Cleveland processed, serviced, or manufactured the batteries, holding instead that Cleveland merely collected spent batteries and broker[ed] them to recyclers 6

12 like Sapp. See id. at The court in Chatham Steel did, however, find that Cleveland had committed a tortious act under the long-arm statute, even though it had not uncovered any Eleventh Circuit or Florida case defining a CERCLA violation as a tortious act. Id. at The Alabama long-arm statute is different than the Florida long-arm statute used by the court in Chatham Steel. Alabama has no explicit provision for committing a tortious act in the state as does Florida. The closest provision in Alabama is that a person has sufficient contacts when the person caus[es] tortious injury or damage in [Alabama] by an act or omission outside [of Alabama] if the person regularly does or solicits business, or engages in any other persistent course of conduct or derives substantial revenue from goods used or consumed... in [Alabama]. Ala. R. Civ. P. 4.2(a(2(D. In the instant case, Plaintiff has presented no evidence that the Defendants engage in any regular or persistent business in Alabama, or derive substantial revenue from business in Alabama. Additionally, as the court in Chatham Steel stated, there is no Eleventh Circuit precedent that a violation of CERCLA is even a tort; the court merely cited federal cases from Missouri and Delaware. See Chatham Steel, 858 F. Supp. at Subsequent Eleventh Circuit cases that have discussed Chatham Steel have not stated that the Chatham Steel Court s determination that a CERCLA violation is a tort was correct. See, e.g., Associated Transport Line, Inc. v. Productos Fitosanitarios Proficol El Carmen, S.A., 197 F.3d 1070 (11th Cir There is no evidence in the instant case that the Defendants fall under the Alabama long-arm statute. This Court cannot exercise personal jurisdiction over them. B. Defendants did not have minimum contacts with Alabama and could not have reasonably anticipated being haled into Alabama courts But even if the long-arm statute applied to the Defendants, Plaintiff would still have to show that the Defendants had minimum contacts with Alabama and that the exercise of personal 7

13 jurisdiction does not offend traditional notions of fair play and substantial justice. See Chatham Steel, 858 F. Supp. at , citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945; Dillon Equities v. Palmer & Cay, Inc., 501 So.2d 459, 461 (Ala Minimum contacts requires that the contacts be related to the cause of action, that the defendant purposely availed itself of the privilege of conducting activities with the forum and thus invoked the benefits and protections of the laws of the forum, and that the defendant could have reasonably anticipated being haled into court in the forum. See Chatham Steel, 858 F. Supp. at 1147, citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985, Hanson v. Denckla, 357 U.S. 235, 253 (1958, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980. It is crucial that the consequences of the defendant s actions be foreseeable and that there be a firm nexus between the acts and the consequences. See Steel Processors, Inc. v. Sue s Pumps, Inc Rentals, 622 So.2d 910, (Ala. 1993, citing Duke v. Young, 496 So.2d 37, 39 (Ala In determining foreseeability, [t]he fundamental question is, did the defendant act in such a manner that he reasonably ought to anticipate the direct consequences of his actions to be felt by another person residing in another state? Steel Processors, 622 So.2d at There is a two-part analysis: 1 whether it is foreseeable to the nonresident defendant that it will be sued in Alabama, and 2 whether the degree of contact that the nonresident defendant has with Alabama is sufficient. Keelean v. Central Bank of the South, 544 So.2d 153, (Ala Other than Plaintiff s allegations concerning contacts with ILCO, there is no evidence that the Defendants had any contacts in Alabama at all. Plaintiff asserts that Defendants either transacted business in Alabama, contracted to supply services or goods in Alabama, or placed materials containing hazardous materials into the stream of commerce. Compl. at 3. Transacting business in Alabama and contracting to supply services or goods in Alabama are explicitly addressed in the 8

14 Alabama long-arm statute. Placing hazardous materials into the stream of commerce is not explicitly addressed and therefore would be addressed under general minimum contacts analysis. 1. Defendants Anglers Roost and Elgin Scrap conducted all business with non-alabama brokers Defendants Anglers Roost and Elgin Scrap 1 dealt exclusively with brokers, which were nonresidents of Alabama. There has been no evidence to show that, when dealing with the brokers, these Defendants either knew whom the broker dealt with or exercised any control over the location and method of recycling. The only contact at all with ILCO was when ILCO trucks came to these Defendants locations to pick up the materials. There has been no evidence that these Defendants transacted any business within Alabama or contracted to supply services within Alabama. Because there has been no evidence that these Defendants even knew they were conducting business with an Alabaman entity, they could not be said to have purposely availed themselves of the privilege of conducting activities in Alabama. And there was no reason for them to anticipate that they would be haled into a court in Alabama. It was not foreseeable that dealing with a non-alabama broker would result in any consequence in Alabama. The court in Chatham Steel discussed whether liability under Section 107(a(3 attaches to a defendant that dealt only with brokers; the same reasoning should apply to whether a court has personal jurisdiction over a defendant who deals only with brokers. The court held that defendants who sold batteries to the smelter through a battery broker couldn t avoid CERCLA liability merely because the broker decided who would be the ultimate recipient of the batteries; the determining factor would be whether the defendant knew the ultimate destination of a hazardous substance at the time of the transfer. The court stated that since the record indicated the smelter s trucks went to the defendant s site, there was a genuine issue as to whether the defendant knew the ultimate destination 1 Defendant Morris Scrap dealt exclusively with brokers during the period During other periods, Morris 9

15 and hence summary judgment could not be given to the defendant. See Chatham Steel, 858 F. Supp. at However, in the instant case, Plaintiff is unable to prove that Defendants went to the ILCO Site, or whether they had actual or constructive knowledge of the ultimate destination. Plaintiff has failed to show that Defendants purposely availed themselves of the privilege of conducting business with an Alabama entity, and has failed to show that Defendants should have anticipated being haled into a court in Alabama. 2. Defendants Jowers, Morris Scrap, and Madewell did not have minimum contacts in Alabama Defendants Jowers, Morris Scrap, 2 and Madewell dealt directly with ILCO but did it soley through telephone conversations with ILCO. By telephone, they entered into agreements that ILCO would purchase and pick up materials from them at the Defendants locations outside of Alabama. ILCO came to the Defendants locations outside of Alabama; the Defendants did not send their own trucks to Alabama. These Defendants believed that they were making a simple agreement to sell materials for recycling. There was no reason for them to anticipate that they would be haled into a court in Alabama. Plaintiff has not presented evidence to prove that the requirement of minimum contacts was met. This Court cannot exercise personal jurisdiction over the Defendants. II. DEFENDANT MADEWELL IS ENTITLED TO SUMMARY JUDGMENT BECAUSE, AS A MATTER OF LAW, IT DID NOT ARRANGE FOR THE TREATMENT OR DISPOSAL OF A HAZARDOUS SUBSTANCE Scrap dealt directly with ILCO. 2 Defendant Morris Scrap dealt exclusively with brokers during the period During other periods, Morris Scrap dealt directly with ILCO. 10

16 Legislative history and case law indicate that sending material for recycling is different than the CERCLA liability requirements of arranging for disposal or treatment. The plates and groups that ILCO picked-up from Madewell were useful products and were not disposed of. The plates and groups never met the CERCLA requirements and therefore Madewell cannot be liable under CERCLA. A. An arranger must arrange for either treatment or disposal of hazardous material Section 113(f(1 of CERCLA, 42 U.S.C. 9613(f(1, provides that any person may seek contribution from any other person who is liable or potentially liable under section [107(a of CERCLA], during or following any civil action under... section [107(a]. To establish a claim under Section 107(a of CERCLA, 42 U.S.C. 9607(a, requires four elements. Here, the only dispute is whether Defendants are responsible parties. 3 See 42 U.S.C. 9607(a(3. There are four classes of persons subject to liability. Here, the only dispute is whether the Defendants are generators or arrangers of hazardous substances to the Site. 4 An arranger is 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 of 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 U.S.C. 9607(a(3 3 The other three elements are whether the site is a facility, whether a release or threatened release of a hazardous substance has occurred, and whether the release or threatened release caused the plaintiff to incur response. See 42 U.S.C. 9607(a; Chatham Steel, 858 F. Supp at The other three classes of persons are current owners or operators of the site, past owners or operators of the site at the time hazardous substances were disposed of, and transporters of hazardous substances to the site. See 42 U.S.C. 9607(a(1, (a(2, (a(4. 11

17 Here, Plaintiff claims that Defendant Madewell is an arranger. Compl. at 7. To determine if Madewell is an arranger requires an analysis of whether Madewell arranged for disposal or treatment. In his remarks to Congress upon enactment of the SREA, see discussion supra III.A, Senator Lott specifically stated that sending material for recycling is not the same as arranging for disposal or treatment, and recyclable materials are not a waste. 145 Cong. Rec. S , S15048 (Nov. 19, 1999 [hereinafter Lott] (statement of Sen. Lott. In an earlier statement, Senator Lott said: Recycling is not disposal and shipping for recycling is not arranging for disposal Cong. Rec. S , S13086 (Oct. 25, 1999 [hereinafter Lott October] (statement of Sen. Lott. The legislative history establishes that Defendant Madewell is not an arranger, as required by CERCLA. The following discussion shows that case law establishes the same conclusion. B. Plates and groups are not processed to change them from a hazardous substance to a non-hazardous substance and thus Defendant Madewell did not arrange for their treatment under section 107(a(3 of CERCLA Treatment is defined essentially to mean the process of neutralizing a hazardous substance. Douglas County v. Gould, Inc., 871 F.Supp 1242, 1244 (D. Neb. 1994, citing 42 U.S.C. 6903(34. 5 Here, there is no evidence that Defendant Madewell shipped the plates and groups to have them neutralized, and therefore Madewell did not arrange for the treatment of the plates and groups. C. Plates and groups are useful products and thus Defendant Madewell did not arrange for their disposal under section 107(a(3 of CERCLA Because Defendant Madewell did not arrange for treatment of the plates and groups, the only other question is whether Madewell arranged for their disposal. Merely selling a hazardous 5 Treatment means: [A]ny method, technique, or process, including neutralization, designed to change the physical, chemical, or biological character or composition of any hazardous waste so as to neutralize such waste or so as to render such waste nonhazardous. 42 U.S.C. 6903(34. 12

18 substance is not sufficient to prove arranging for disposal; there would have to be some additional agreement for disposal. See Douglas County, 871 F. Supp. at 1245, citing Florida Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313, 1317 (11th Cir The sale of a useful, although hazardous substance, to serve a particular purpose, is not an arrangement for disposal and will not impose CERCLA liability, id., citing AM Int l, Inc. v. International Forging Equip. Corp., 982 F.2d 989, 999, and [s]elling hazardous substances as part of a complete, useful product does not generally make a party a [PRP]. Douglas County, 871 F. Supp. at 1245, citing United States v. Petersen Sand & Gravel, Inc., 806 F. Supp. 1346, 1354 (N.D. Ill The court explained that any court examining the issue must decide whether the transaction was a prohibited arrangement for the disposal of the material or was a permissible sale of a useful product. See Douglas County, 871 F. Supp. at It also stated that disposal necessarily includes the concept of waste, see Douglas County, 871 F. Supp. at 1245, and therefore the defendant must have dumped the waste on the site rather than conveying a useful substance for a useful purpose. See id. The court in Douglas County held that the shipment of plates and groups did not cause the defendant to be an arranger. However, it addressed the factually similar case of United States v. ILCO, 996 F.2d 1126 (11th Cir. 1993, which reached the opposite conclusion. The District Court in ILCO had held that the plates from spent batteries were raw materials, but the Eleventh Circuit reversed by holding that the plates were hazardous waste. See ILCO, 996 F.2d at The Court in Douglas County distinguished both the facts and the legal basis in Douglas County from those in ILCO. In ILCO, the contaminated site was owned by the defendant, which processed spent batteries and also operated a secondary smelter. However, in Douglas County the defendant did not own the site and only processed spent batteries; thereby performing only one of the functions that the defendant in ILCO performed. See Douglas County, 871 F. Supp. at Defendant Madewell 13

19 in the instant case is similar to the defendant in Douglas County, not ILCO, because Madewell processed batteries at its own site, not at the ILCO site. The distinguishing legal basis in the two cases was that ILCO only had the narrow legal issue of whether lead plates are exempt from regulation. The court in Douglas County agreed that the lead plates in ILCO were discarded but believed that the issue in Douglas County was whether a company whose business is to reclaim lead plates has the additional function of arrangement for disposal. The distinction was that of a seller of whole spent batteries and a seller of reclaimed lead from such batteries. Douglas County, 871 F. Supp. at Defendant Madewell in the instant case is similar to the defendant in Douglas County, not ILCO, because Madewell was a seller of reclaimed lead from the batteries. Madewell is a seller of reclaimed lead that happens to have come from spent batteries; it is not a seller of whole spent batteries and it is not a smelter of whole spent batteries. The analysis of Douglas County, not ILCO, is appropriate to the instant case. Additionally, Senator Lott s remarks establish that a recycler arranger is not an arranger under Section 107(a(3 of CERCLA. Defendant Madewell is not liable under Section 107(a(3 of CERCLA. III. DEFENDANTS ANGLERS ROOST, ELGIN SCRAP, JOWERS, AND MORRIS SCRAP ARE ENTITLED TO SUMMARY JUDGMENT BECAUSE, AS A MATTER OF LAW, THEY ARE EXEMPTED FROM LIABILITY UNDER SECTION 127 OF CERCLA Congress passed the SREA in 1999 for the purpose of exempting recyclers like the Defendants from unintended CERCLA liability. One of the Defendants, Morris Scrap, was specifically cited in Congress as the type of business the Act was enacted to protect. See Lott, supra, at S Businesses that recycle by dealing through brokers were clearly exempted from 14

20 CERCLA. Businesses that deal directly with a noncompliant facility like ILCO could still be liable if the plaintiff could prove that they knew or should have known that the facility was noncompliant. Defendants Anglers Roost and Elgin Scrap dealt exclusively with brokers and are not liable under CERCLA. Defendants Anglers Roost, Elgin Scrap, Jowers, and Morris Scrap are not liable under CERCLA because no evidence has been shown to prove that they did or should have known of ILCO s noncompliance. A. Congress enacted Section 127 of CERCLA to protect companies like these Defendants Congress, with strong bipartisan support, 6 passed the SREA in 1999, Pub.L. No , 113 Stat (November 29, 1999, and codified it in Section 127 of CERCLA, 42 U.S.C It shields certain persons who arrange for recycling of recyclable material from contribution liability under CERCLA. Congress believed that unintended liability was being imposed on legitimate recyclers, Morton Int l, Inc. v. A.E. Staley Manufacturing Comp., 106 F. Supp.2d 737, 753 (D.N.J. 2000, and intended the act to clarify that liability under CERCLA. See Gould v. A&M Battery & Tire Service, 232 F.3d 162, 168 (3rd Cir In Congress, Senator Lott stated the main purpose of the SREA was to remove the liability facing recyclers: We had one and only one purpose in introducing the Superfund Recycling Equity Act to remove from the liability loop those who collect and ship recyclables to a third party site. Lott October, supra, at S Two other purposes were to promote the reuse and recycling of scrap material in furtherance of the goals of waste minimization... [and] to remove the disincentives and impediments to recycling created as an unintended consequence of the 1980 Superfund liability provisions. S (a, 113 Stat. 1536, 1537; see Gould, 232 F.3d at , citing Lott October, supra, at S10431; Morton, 106 F. 6 The SREA had sixty-eight cosponsors in the Senate. See 145 Cong. Rec. S , S15051 (Nov. 19, 1999 (statement of Sen. Lott. 15

21 Supp.2d at 747. In other words, Congress intended the Act to overrule court decisions holding bona fide sellers of recyclable materials liable under CERCLA. Gould, 232 F.3d at 171. In a statement before Congress, Senator Lott even went as far as singling out Defendant Morris Scrap as an example of the type of company the SREA was intended to exempt from liability. [T]his is a great day for my good friend and fellow Mississippian, Phillip Morris [, the owner of Morris Scrap]. It is also a great day for the thousands of mom-and-pop recycling firms across America, like the one owned by Phillip Morris.... This ends the long Superfund nightmare that our nation s recyclers have suffered. Each time they sold their recyclable products they were, unintentionally, exposing themselves to costly Superfund liability. Lott, supra, at S The other Defendants in the instant case, as discussed below, have characteristics similar to Morris Scrap. They sent materials to ILCO to be recycled and participated in the type of recycling program that the SREA was enacted to promote. They have fewer employees than Morris Scrap and they have lower gross annual revenue than Morris Scrap. These Defendants were clearly intended by Congress to be exempt from CERCLA liability. B. Section 127 establishes that recyclers of recyclable materials are not liable under CERCLA Section 127 of CERCLA, 42 U.S.C. 9627, states that persons who arrange for recycling of recyclable material shall not be liable under Section 107(a, 42 U.S.C. 9607(a. It specifically identifies transactions involving spent lead-acid batteries as arranging for recycling, provided the arranger meets certain criteria. See 42 U.S.C. 9607(b, (e. To be considered an arranger for recycling of spent lead-acid batteries, a party need merely demonstrate that the materials met the criteria for recyclable and that the party was in compliance with applicable environmental regulations. See 42 U.S.C. 9627(e. 16

22 However, Section 127(f of CERCLA, 42 U.S.C. 9627(f, states that the exemption from liability does not apply if the PRP had an objectively reasonable basis to believe at the time of the recycling transaction that the recyclable material would not be recycled or that consuming facility was not in compliance with a substantive provision of any Federal, State, or local environmental law or regulation. 7 See 42 U.S.C. 9627(f(1(A. [A]n objectively reasonable basis for belief shall be determined using criteria that include (but are not limited to the size of the person s business, customary industry practices..., the price paid in the recycling transaction, and the ability of the person to detect the nature of the consuming facility s operations concerning its handling, processing, reclamation, or other management activities associated with the recyclable material. 42 U.S.C. 9627(f(2. Section 127 does not apply to any concluded judicial or administrative action or any pending judicial action initiated by the United States prior to its enactment. 42 U.S.C. 9627(i. However, the implication of that language is that Section 127 does apply retroactively to all other types of actions, including judicial and administrative actions that were initiated prior to November 29, 1999 by a party other than the United States and are still pending. See Gould, 232 F.3d at 169. Thus, Section 127 of CERCLA applies to the instant case even though United States v. Chatham Steel was filed in September 1999 prior to enactment of the SREA. See United States v. Chatham Steel, et al., Civil Action No UWC (N.D. Alabama The SREA is new and there is a lack of jurisprudence concerning most of its provisions. It is therefore appropriate to look at the legislative history in the Senate. Senator Lott inserted a legislative history into the record, which described the Congressional purpose for each section of the SREA. 7 A third alternate element is that the recyclable material would be burned as fuel, or for energy recovery or incineration. 42 U.S.C. 9627(f(1(A(ii. 17

23 The SREA clarifies liability for recyclers. It was the intent of Congress that a person who generates, transports, and/or collects a spent battery, but does not themselves break or smelt such battery, is not liable... provided all other requirements... are met. Lott, supra, at S The SREA does not relieve recyclers of liability where they contaminated their own facilities. Id. at S Senator Lott specifically stated that sending material for recycling is not the same as arranging for disposal or treatment, and recyclable materials are not a waste. Id. at S In an earlier statement, Senator Lott said: Recycling is not disposal and shipping for recycling is not arranging for disposal... Lott October, supra, at S However, a person who arranged for recycling and would thus not be liable under Section 127 may still be liable if the party bringing the action can prove one of a number of criteria specified in Section 127(f. The burden of proving the criteria in Section 107(f is on the party bringing the action. Id. at S C. Defendants Anglers Roost and Elgin Scrap are exempted from liability under Section 127 of CERCLA because they conducted all business through brokers and never dealt with ILCO Senator Lott specifically mentioned brokers. For transactions between brokers and the arranger for recycling, it is the responsibility of the broker, not the original person who entered into the transaction with the broker, to take reasonable care to determine the compliance status of the consuming facility. Id. at S Defendants Anglers Roost and Elgin Scrap 8 were recycling arrangers and dealt exclusively with brokers that were non-residents of Alabama. There has been no evidence to show that, when dealing with the brokers, these Defendants either knew whom the broker dealt with or exercised any 8 Defendant Morris Scrap dealt exclusively with brokers during the period During other periods, Morris Scrap dealt directly with ILCO. 18

24 control over the location and method of recycling. The only contact at all with ILCO was when ILCO trucks came to these Defendants locations to pick up the materials. There is no evidence that these Defendants knew that the material they sold would eventually end-up at the ILCO site. Because of Senator Lott s statement that it is the responsibility of the broker and not the original person who entered into the transaction with the broker to determine the compliance status of the consuming facility, Defendants Anglers Roost and Elgin Scrap do not meet the criteria of Section 127(f and thus are exempted from liability under Section 127 of CERCLA. D. Defendants Anglers Roost, Elgin Scrap, Jowers, and Morris Scrap are exempted from liability under Section 127 of CERCLA because they did not have an objectively reasonable basis to believe that ILCO was not in compliance Section 127(f states that the exemption from liability that the SREA gave recyclers does not apply if certain criteria are met. Senator Lott clarified Section 127(f. The main criteria would be that the recycling arranger did not have an objectively reasonable basis for belief that the recyclable material would never be recycled or that the consuming facility was not in compliance with a substantive provision of an environmental law. See 42 U.S.C. 9627(f; Lott, supra, at S The standard of the objectively reasonable basis for belief in Section 127(f(1(A is not equivalent to the reasonable care standard that is used elsewhere in the SREA. The objectively reasonable basis for belief standard is meant to be a more rigorous standard than the reasonable care standard. Lott, supra, at S Senator Lott s statement would seem to indicate that Congress, by specifying this more rigorous standard, wants to limit the situations when a party bringing an action could actually prove its burden and does not want the recycling arrangers to be liable under CERCLA. 19

25 No one factor is determinant and the reasonableness is measured at the time of the agreement. See id. at S The factors explicitly mentioned in Section 107(f(2 to help determine whether the person had an objectively reasonable basis to believe... that the consuming facility was not in compliance are the size of the person s business, customary industry practices, the price paid, and the ability of the person to detect the nature of the consuming facility s activities. See 42 U.S.C. 9627(f(2. Regarding the size of the person s business, Congress recognizes that small businesses often have less resources available to them than large businesses.... [and thus Section 127(c(6(B] acknowledges the fact that a small company may be able to determine less information about the consuming facility s operations than a large company. Lott, supra, at S Senator Lott explicitly stated that Morris Scrap was the type of company the SREA was intended to exempt from CERCLA liability. See id. at S Morris Scrap has more employees (fifty and more annual gross sales ($15,000,000 than Anglers Roost, Elgin Scrap, and Jowers. Therefore, we can deduce that Defendants Anglers Roost, Elgin Scrap, and Jowers are also small businesses and thus may be less able to determine ILCO s noncompliance. Plaintiff Chatham Steel has one hundred employees and $100,000,000 in gross annual sales more than any of the Defendants and yet there is no evidence that Chatham Steel knew of the noncompliance. The price paid for the materials needs to be reasonable. In addition to the price compared to other transactions for similar materials at the time of the transaction, factors such as the length of the deal and market conditions should be considered. See Lott, supra, at S Here, there is no evidence to indicate that the prices of the transactions were anything other than reasonable While Senator Lott did not explicitly state how a determination of the consuming facility s compliance could be determined, he stated that Section 127(f(1(A(3 is the corollary to Section 20

26 127(c(5. Id. at S The requirement would seem to be, therefore, that a recycling arranger only [needs to] make reasonable inquiries; inquiries need not be made before every transaction. Inquiries need only be made to those agencies having primary responsibilities over environmental matters related to the handling, processing, etc. of the secondary materials involved in the recycling transaction. Id. There is no evidence to show that Defendants had the ability to determine whether ILCO was in compliance. Plaintiff cites newspaper articles, a trade journal, a television report, a court case, and Federal Register entries in an attempt to show that Defendants should have known that ILCO was in noncompliance. See Chatham Steel Answer to Interrogatory No. 4. Some of those sources appeared after some of the Defendants had already ceased transactions pertaining to ILCO; the latest was a USA Today article in The earliest source was in 1985 but some of the Defendants had transactions pertaining to ILCO almost a decade prior to that. None of the newspapers cited by Plaintiff were local to any of the Defendants. 9 There is no evidence that the Defendants read, saw, had access to, or should have had access to any of those sources. There is no evidence that it was customary in the industry to read the cited trade magazine American Metal Market. Additionally, the SREA does not mention those types of sources. The SREA only mentions a need to make reasonable inquiries of the agencies having that type of information. See Lott, supra, at S The question is whether it should have been reasonable to expect the Defendants to make inquiries of EPA. Congress believed that companies the size of the Defendants might not have the resources to make those types of inquiries. Here, there is no evidence to prove otherwise. Given the Congressional intent towards these types of Defendants, and given that there is no evidence to indicate that the Defendants had an objectively reasonable basis to believe that ILCO 9 Plaintiffs cited newspapers USA Today, The Atlanta Journal-Constitution, The Washington Post, and The Wall Street Journal. See Chatham Interrog. 4 at 1, 5. 21

27 was not in compliance, Plaintiff has failed to meet its burden. Defendants Anglers Roost, Elgin Scrap, Jowers, and Morris Scrap are not liable under CERCLA. CONCLUSION The court has no personal jurisdiction over the Defendants because the Defendants are nonresidents of Alabama, the Alabama long-arm statute does not reach the Defendants, and even if it did apply, the Defendants did not meet the minimum contact requirement and could not have reasonably anticipated being haled into Alabama courts. Additionally, two of the Defendants conducted all business with non-alabama brokers. CERCLA requires that a defendant be an arranger for the treatment or disposal of a hazardous substance. Plaintiff has failed to meet its burden of proving that Defendant Madewell s transactions with plates and groups met the CERCLA requirement. Until 1999, CERCLA had the unintended detriment of harming the United States recycling effort and harming companies that legitimately try to participate in the effort and improve the environment of the United States. The SREA was enacted to rectify the situation by exempting recyclers like the Defendants from CERCLA liability. Plaintiff has failed to meet its burden of proving the elements required by CERCLA, and has failed to prove that the Defendants should not be given the SREA exemption from CERCLA liability created for defendants like these. For the reasons stated above, and because there are no genuine issues of material fact, none of the Defendants can be held liable, as a matter of law, and summary judgment is appropriate. Respectfully submitted, 22 Michael G. Shaw Bar No Attorney for Third-Party Defendants 4801 Massachusetts Ave, N.W.

28 Dated: April 11, 2001 Washington, D.C Tel. No

29 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. CHATHAM STEEL, INC., ET AL., Defendants. CHATHAM STEEL, INC., Third-Party Plaintiff, v. ANGLERS ROOST TRADING COMPANY, ELGIN SCRAP BATTERY, INC., JOWERS BATTERIES, INC. a/k/a GJ BATTERIES, MADEWELL & MADEWELL, INC., MORRIS SCRAP, INC., Third-Party Defendants. CIVIL ACTION NO UWC [PROPOSED] ORDER GRANTING THIRD-PARTY DEFENDANTS MOTION FOR PARTIAL SUMMARY JUDGMENT ON LIABILITY Third-Party Defendants Anglers Roost Trading Company, Elgin Scrap Battery, Inc., Jowers Batteries, Inc., Madewell & Madewell, Inc., and Morris Scrap, Inc. have moved pursuant to Fed. R. Civ. P. 56(b for partial summary judgment on all claims set forth in Plaintiff s Complaint. The

30 Court finds that good cause exists to grant said motion. Therefore, IT IS HEREBY ORDERED that the motion for partial summary judgment is GRANTED. DATED this day of, The Honorable U.W. Cunningham United States District Judge Presented By: Michael G. Shaw Attorney for Third-Party Defendants 2