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UNITED STATES v. NICOLET

May 10, 1989

UNITED STATES OF AMERICA
v.
NICOLET, INC., et al.



The opinion of the court was delivered by: BRODERICK

 RAYMOND J. BRODERICK, UNITED STATES DISTRICT JUDGE.

 Plaintiff United States, at the request of the Administrator of the United States Environmental Protection Agency ("EPA"), on May 30, 1985, filed suit against defendant Nicolet, Inc. ("Nicolet"). In its original Complaint, the United States alleged that Nicolet was liable, pursuant to § 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9607 (a), for costs incurred by EPA in responding to a release or threatened release of a hazardous substance at a waste disposal site in Ambler, Pennsylvania ("Ambler Site"). The United States sought the following relief: a judgment that Nicolet was liable for costs already incurred by EPA; a declaratory judgment that Nicolet is liable for all future costs (not inconsistent with the National Contingency Plan) to be incurred by EPA in connection with the Ambler site; interest; and litigation costs.

 On March 13, 1986, Nicolet filed a third-party Complaint against T & N plc ("T & N") (formerly known as Turner & Newall PLC), alleging that T & N was liable for the response costs and/or was liable for contribution or indemnity to Nicolet for such costs as a consequence of T & N's relationship to the previous owner of the Ambler site. The United States, on February 4, 1987, moved to amend its Complaint to add T & N as a defendant. The motion to amend was granted on May 28, 1987, and the United States filed and served its First Amended Complaint on June 5, 1987.

 On July 17, 1987, Nicolet filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 1101 et seq., in the Bankruptcy Court for the Eastern District of Pennsylvania. Accordingly, pursuant to Section 362(a) of the Bankruptcy Code, this Court, on September 1, 1987, issued an Order placing the action in the Civil Suspense File. On January 12, 1988, this Court granted the United States' Motion for Declaration of Inapplicability of Automatic Stay, removed the case from civil suspense, and established a briefing and discovery schedule. United States v. Nicolet, Inc., 81 Bankr. 310 (E.D.Pa. 1988), affirmed, 857 F.2d 202 (3d Cir. 1988). Defendant Nicolet and the United States have executed a settlement of all claims. The United States has submitted the settlement to the Department of Justice for review and public notice and comment. Upon completion of the review process, it is anticipated that the settlement will be submitted to this Court for final approval.

 I. Factual Background

 From approximately 1873 to September 1962, Keasbey & Mattison Company ("Keasbey"), a Pennsylvania company founded in 1873, incorporated in 1892, and dissolved in 1967, owned and operated a manufacturing facility and two adjoining waste disposal sites in Ambler, Montgomery County, Pennsylvania. In 1934, T & N, a company organized in 1920 and operated under the laws of England, purchased a majority interest (60%) of stock in Keasbey. Four years later later, in 1938, T & N purchased the remaining shares of Keasbey and maintained 100% ownership of the company until its dissolution in 1967. From November 8, 1951 through 1967, the record owner of Keasbey's stock was Turner & Newall (Overseas), Ltd. ("T & N(O)"). In 1962, Nicolet purchased the manufacturing facility and adjoining waste disposal piles and has owned the site from that date to the present.

 As a result of sampling programs conducted pursuant to § 9604 of CERCLA in 1983, EPA determined that there was a release or threatened release of asbestos, a dangerous substance, at the Ambler site. On March 14, 1984, Nicolet was informed by EPA that its contractors would perform the allegedly necessary abatement. Following a protracted legal battle, EPA was granted entry to the Ambler site and performed the allegedly necessary abatement. See Nicolet, Inc. v. Eichler, Civ. Action No. 84-0271 (E.D.Pa. March 26, 1984). The United States, among other measures, covered over and hydroseeded a 16 acre "mountain" of asbestos containing material. Subsequently, the United States, pursuant to Section 116(d) of CERCLA, 42 U.S.C. § 9616(d), conducted a remedial investigation/feasibility study for the site, and published a Record of Decision for the site on September 30, 1988. The United States alleges that it has incurred, through its actions, at least $ 2,500,000 in "response costs" as defined at 42 U.S.C. § 9601(25), which figure includes the costs of "removal" as defined at 42 U.S.C. § 9601(23), and enforcement costs.

 II. United States' Theories of Liability As to Defendant T & N

 In the First Amended Complaint, the United States advances the following four theories in support of its allegation that defendant T & N is liable for the costs incurred at the Ambler site to abate the release of threatened release of asbestos:

 
1. Defendant T & N is liable, under a federal rule of decision for CERCLA cases, as the alter ego of Keasbey in that T & N had both a substantial ownership interest and exercised substantial involvement in Keasbey, a corporation potentially liable under CERCLA. First Amended Complaint, paras. 10, 19, 20.
 
2. Defendant T & N is liable, under Pennsylvania law, as the alter ego of Keasbey in that Keasbey's policies, business practices, and finances were dominated by T & N and the corporate entity of Keasbey was used to defeat public convenience, protect fraud or defend crime. First Amended Complaint, paras. 23, 24, 25, 25.
 
3. Defendant T & N is directly liable under Section 107(a)(2) of CERCLA, as a former owner and operator of the Ambler site, because T & N was the sole stockholder of Keasbey and actively participated in its management while asbestos was being disposed of at the Ambler site. First Amended Complaint, paras. 19, 20, 27.
 
4. Defendant T & N is directly liable under Section 107(a)(2) of CERCLA, as a former owner and operator of the Ambler site, because T & N, as the parent corporation of its subsidiary, Keasbey, was familiar with Keasbey's waste disposal practices and had the capacity to abate environmental harm resulting from such activities. First Amended Complaint, paras. 19, 21, 22, 27.

 In addition, the United States, in its proposed Second Amended Complaint, advances a fifth theory of liability:

 
5. Defendant T & N is directly liable under Section 107(a)(2) of CERCLA, as a former owner and operator of the Ambler site, in that T & N both held a mortgage (an indicia of ownership under Pennsylvania law) on the Ambler site which it assigned to T & N(O), the alter ego or instrumentality of T & N, and actively participated in the management of the Ambler facility. Second Amended Complaint, paras. 30, 31, 32, 33, 34, and 42.

 In addition, the United States seeks, in the Second Amended Complaint, to: plead an expanded time frame for T & N's alleged liability (based upon facts revealed during discovery); correct certain inaccuracies in the First Amended Complaint; describe more clearly the theories of liability set forth in the First Amended Complaint; and to update the history, status, and cost of the EPA environmental response with respect to the Ambler site. Paragraphs 41-47 of the proposed Second Amended Complaint set out the theories of liability against T & N alleged by the United States. With the exception of paragraph 42 (indicia of ownership), each of the paragraphs are refinements or modifications of the theories of liability initially set forth in the First Amended Complaint.

 Defendant T & N opposes this Court granting the United States leave to file a Second Amended Complaint, alleging both undue delay and bad faith on the part of the United States in seeking to amend and prejudice to T & N if such amendment was allowed. In addition, T & N has moved to dismiss the First Amended Complaint on the ground that the United States has failed to allege facts in the First Amended Complaint sufficient to make T & N liable under any of the first four theories of liability. Finally, defendant T & N argues that the United States has failed to allege facts in the Second Amended Complaint sufficient to make T & N liable under the fifth theory of liability.

 III. United States' Motion for Leave to File Second Amended Complaint

 It is well established that while the granting of a motion to amend a complaint is within the sound discretion of the district court, Lewis v. Curtis, 671 F.2d 779, 783 (3d Cir.), cert. denied, 459 U.S. 880, 74 L. Ed. 2d 144, 103 S. Ct. 176 (1982), the general rule is that leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Howze v. Jones & Laughlin Steel Corp., 750 F.2d 1208, 1212 (3d Cir. 1984). Indeed, the Supreme Court has directed that leave to amend should be freely given:

 
in the absence of any apparent or declared reason -- such as undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment. . . .

 Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962); see also Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S. Ct. 795, 28 L. Ed. 2d 77 (1971).

 As the Third Circuit has held, "delay alone, however, is an insufficient ground to deny an amendment, unless the delay unduly prejudices the non-moving party." Cornell & Co., Inc. v. Occupational Safety and Health Review Commission, 573 F.2d 820, 823 (3d Cir. 1978). Rather, "the touchstone is whether the non-moving party will be prejudiced if the amendment is allowed." Howze v. Jones & Laughlin Steel Corp., 750 F.2d at 1212. Thus, the Third Circuit, in Adams v. Gould, Inc., has provided the framework within which a district court addresses a motion for leave to amend a Complaint:

 
The passage of time, without more, does not require that a motion to amend a complaint be denied; however, at some point, the delay will become 'undue,' placing an unwarranted burden on the court, or will become 'prejudicial,' placing an unfair burden on the opposing party. The question of undue delay, as well as the question of bad faith, requires that we focus on the plaintiffs' motives for not amending their complaint to assert this claim earlier; the issue of prejudice requires that we focus on the effect on the defendants.

 739 F.2d 858, 868 (3d Cir. 1984), cert. denied, 469 U.S. 1122, 105 S. Ct. 806, 83 L. Ed. 2d 799 (1985); see also J.E. Mamiye & Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 613-14 (3d Cir. 1987).

 While we have, in the past, expressed our concern that the parties have failed to litigate this matter in an expeditious and efficient manner, a concern we today reiterate, we conclude that there was neither undue delay, bad faith, or dilatory motive in the United States seeking leave to file a second amended complaint. We note that in the approximately one year since T & N was named, in the First Amended Complaint, as a defendant, the parties have engaged in extensive, protracted, and often contentious discovery on both sides of the Atlantic Ocean. Accordingly, the United States' present motion which is the first proposed amendment adding to or modifying its theories of liability against defendant T & N, is both reasonable and far superior to piecemeal amendments to its pleadings. Moreover, the proposed Second Amended Complaint is based exclusively upon either alleged facts discovered during the formal discovery period or subsequent significant events affecting the litigation (such as the United States' preparation of the remedial investigation/feasibility study).

 More importantly, we conclude that defendant T & N will not be prejudiced by the proposed Second Amended Complaint. We note not only that many of the allegations advanced by the United States in its proposed amended pleading, were derived from documents within T & N's possession but also that most of the allegations and alleged facts in support thereof have been previously identified in the United States' Second Supplemental Response to Defendant Turner & Newall's First Set of Interrogatories and Accompanying Requests for Production. Accordingly, we reject as disingenuous, T & N's characterization of the proposed Second Amended Complaint as an "attempt . . . to change the rules long after the game has started." Indeed, T ...


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