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United States v. Chromatex

July 6, 2010

UNITED STATES OF AMERICA, PLAINTIFF,
v.
CHROMATEX, INC., THE VALMONT GROUP, ALAN CHERENSON, STANLEY SIEGEL, ALAN SHULMAN, JAMES COCHRAN AND JOSEPH BYRNES, DEFENDANTS.



The opinion of the court was delivered by: (Judge McClure)

MEMORANDUM

I. INTRODUCTION

Before the court are two motions for protective orders (Rec. Doc. Nos. 102 and 104), both of which were filed on May 11, 2010 by the United States of America, the plaintiff, on behalf of the United States Environmental Protection Agency ("EPA"). The United States has filed these motions so that it might produce to the defendants allegedly confidential information that relates to cost documentation supporting its future response cost bills incurred in connection with the Valmont Industrial Park, Hazle Township, Pennsylvania ("The Site"). The two instant motions arise out of an action begun in 1991 against defendants Alan Cherenson, Stanley Siegel, and Alan Shulman ("The Valmont Partners").*fn1 This action resulted in declaratory relief awarded to the United States in two orders issued on October 27, 1993 and February 9, 1994 (the "1993 Order" and "1994 Order," respectively). For the following reasons, we will grant the United States' motion for a protective order regarding confidential business information. In addition, we will order the government to provide to the court, in camera, the document at issue in its motion for a protective order pursuant to the Privacy Act of 1974, 5 U.S.C. § 552a. (Rec. Doc. Nos. 104 and 105).*fn2

II. BACKGROUND

On October 30, 1991, the United States commenced this action by filing a complaint under § 107 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9607. The complaint sought recovery of the costs incurred by the EPA responding to a release and threatened release of hazardous substances from a manufacturing facility located at the Site. The complaint also sought a declaratory judgment on the defendants' liability for future response costs pursuant to § 113(g)(2) of CERCLA, 42 U.S.C. § 9613(g)(2), and pursuant to 28 U.S.C. § 2201.

On October 27, 1993, this court issued an order granting the United States, inter alia, declaratory relief providing that the defendants would be liable for future response costs or damages incurred at the Site. (Rec. Doc. No. 43). On February 9, 1994, we issued a final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, finding all defendants liable for $682,002.16. (Rec. Doc. No. 50). In addition, we established a procedure for the payment of the future response costs referred to in the 1993 Order. This procedure set forth the following method for handling payment disputes:

Defendants may dispute payment of Additional Costs and Future Response Costs if defendants determine that the United States has made an accounting error or if they allege that a cost item that is included represents costs that are inconsistent with the National Contingency Plan (NCP), 40 C.F.R. Part 300. Any such dispute shall specifically identify the contested costs and the basis for defendants' objection to the costs and shall be sent to plaintiff at the addresses specified above. The parties shall negotiate in good faith to resolve disputed claims. If the parties fail to resolve a dispute within thirty (30) days of defendants' written notification to plaintiff of the dispute, plaintiff may request by motion and supporting documentation that this Court order defendants to pay the disputed costs.

Id. (emphasis added). On September 29, 1994, the United States Court of Appeals for the Third Circuit affirmed our decision.

Beginning in 2005, the United States sent bills to the Valmont Partners requesting payment for future response costs incurred at the Site. On May 3, 2006, the former Valmont Partners filed a motion for further relief pursuant to 28 U.S.C. § 2202. (Rec. Doc. No. 65). Despite the explicit procedure already set out in the 1994 Order, the Valmont Partners moved this court to establish "a procedure by which their liability and that of other potentially liable parties for new and additional response costs . . . may be determined." (Rec. Doc. No. 66 at 1-2). Specifically, the Valmont Partners requested that the court: (a) order the EPA to file with the court its administrative record for its new and additional response actions taken by the EPA after November 15, 1988; (b) issue a case management order setting a schedule for discovery, pleadings, and dispositive motions; (c) grant leave to the Valmont Partners to file a cross-claim for contribution and indemnification against defendant Chromatex, Inc.; and (d) grant leave to the former Valmont Partners to file a third-party claim for contribution and indemnification against Rossville Industries, Inc., Culp, Inc., Chromatex Properties, Inc., and any other successor of Chromatex, Inc. or subsequent owner of the Site. Id. at 14-15. On June 22, 2006, plaintiff United States filed a brief in opposition and defendants, the former Valmont Partners, filed a reply brief on July 7, 2006.

This court, by a Memorandum and Order dated October 17, 2006, denied the Valmont Partners' motion. First, we found that the Valmont Partners did not have statutory authority to move for further relief pursuant to 28 U.S.C. § 2202, as the Valmont Partners were the unsuccessful party in the declaratory action. Therefore, the Valmont Patners could not move for "further relief." Second, even if the Valmont Partners did in fact have such authority, we concluded that we had the discretion, under § 2202, to decide the motion for further relief. Exercising such discretion, we concluded that the relief requested by the Valmont Partners was unnecessary in light of the 1994 Order, which provided an adequate procedure for the handling of payment disputes concerning future response costs. Finally, we found that that procedure, which provides the United States with the discretion to pursue such costs by motion, had the effect of making the Valmont Partners' challenge to costs not yet pursued by the United States premature, as well as inconsistent with the procedure provided for in the 1994 Order.

III. PROCEDURAL HISTORY

A. The Instant Motion for Protective Order Regarding Confidential Business Information

On May 11, 2010, the United States filed a motion for a protective order concerning confidential business information ("CBI"), as well as a brief in support. (Rec. Doc. Nos. 104 and 105). The proposed protective order is sought "to protect the confidentiality of information, which may be entitled to treatment as 'Confidential Business Information' under 40 C.F.R. Part 2, that the [EPA] seeks to produce to Defendants in accordance with [the 1994 Order]." (Rec. Doc. No. 104 at 1-2). According to the government, at issue is information provided by EPA contractors which, the government argues, "can be of potential value to other businesses competing for contracts with EPA, other agencies, or the private sector." (Rec. Doc. No. 105 at 8). The government contends that the EPA typically has afforded confidential treatment to information relating to costs like profit rates, labor, and overhead, as release of this type of information "is likely to cause substantial competitive harm." Id. at 8-9 (citing Environmental Protection Agency, 58 Fed. Reg. 458, 459 (1993)). The government posits that the "EPA routinely enters into a confidentiality agreement or seeks the entry of a stipulation and protective order before releasing CBI." Id. at 9 (citing 58 Fed. Reg. 458, 460 ("This regulation amends 40 CFR 2.310 to provide for limited release of CBI to responsible parties . . . under a stipulation and protective order during litigation."); 40 C.F.R. § 2.310). EPA regulations, the government notes, provide that disclosure of "any information to which this section applies that may be entitled to confidential treatment . . . must be made pursuant to a stipulation and protective order . . . ." 40 C.F.R. § 2.310(g)(6).*fn3 Therefore, so the government argues, it is not seeking to add any conditions to its obligations under this court's 1994 Order. The government contends that good cause exists for the issuance of a protective order protecting the CBI at issue.*fn4

Defendants filed a brief in opposition on May 25, 2010. (Rec. Doc. No. 107). First, defendants contend that the government, by attempting to seek a protective order concerning CBI, is seeking to impose conditions upon this court's 1994 Order. (Rec. Doc. No. 107 at 5-6). Defendants also contend that Fed. R. Civ. P. 26(c)(1)(G) cannot properly form the basis for any protective order issued by this court, as this rule pertains to pre-trial discovery. Second, the Valmont Partners claim that the United States must initiate an action to obtain the relief sought, namely a CBI protective order relating to costs incurred at the Site. Id. at 6-8. Third, the defendants argue that the United States has failed to establish "good cause" for the issuance of a protective order, as the government has failed to "specifically demonstrate" that disclosure of the relevant documents pursuant to the 1994 Order will cause a "clearly defined and serious injury." Id. at 8-10. Even if the United States did demonstrate such injury, defendants contend that a protective order is still inappropriate based on the factor-balancing test, established by the Court of Appeals for the Third Circuit, which is to be applied by a court in considering whether to issue a protective order. Id. at 11-12.

In its reply brief (Rec. Doc. No. 109), the government again notes that the defendants neither dispute the facts in support of its CBI protective order motion nor allege that prejudice would be incurred as a result of having received the information at issue. The government also rebuts each of the three arguments presented by the defendants in their brief in opposition. First, the United States contends that the court has the clear authority to enter such a protective order, whether pursuant to Fed. R. Civ. P. 26(c)(1)(G) or based upon its inherent equitable powers. Id. at 109. The government also argues that, rather than seeking to impose additional conditions on this court's 1994 Order, the government is instead seeking to both comply with the 1994 Order and abide by its own regulations. Second, the government reiterates its contention that this court "retains jurisdiction over the procedures regarding billing and the provision of related cost documentation, payment of bills, and disputes arising from the response costs incurred by the United States at the Site[.]" Id. at 6. Third, the government contends that issuance of a protective order by this court is appropriate, as good cause for such issuance exists based upon a balancing of the relevant factors. See id. at 6-9.

B. The Instant Motion for Privacy Act Protective Order

Also on May 11, 2010, the United States filed a motion for a Privacy Act protective order pursuant to 5 U.S.C. § 552a(b)(11), as well as a brief in support. (Rec. Doc. No. 102 and 103). The proposed protective order concerns information allegedly protected from disclosure by the Privacy Act of 1974, 5 U.S.C. § 552a.

The United States claims the information that is the subject of the proposed protective order "may impact the Defendants' total Future Response Cost liability for the Site." (Rec. Doc. No. 103 at 4).

The Valmont Partners filed a brief in opposition on May 25, 2010, arguing that the motion for protective order should be denied. (Rec. Doc. No. 106). First, the Valmont Partners argue that the United States has failed to identify those documents that are the subject of the proposed protective order and similarly has failed to establish that the Privacy Act is applicable to any such documents. Id. at 4-6. Second, the Valmont Partners contend that the United States has failed to provide the defendants, pursuant to the 1994 Order, with cost documentation concerning costs incurred at the Site. In addition, the Valmont Partners claim that the United States, with its motion for a protective order, is seeking to impose additional conditions on the language of the 1994 Order relating to its compliance. Id. at 6-7. Third, the Valmont Parnters argue that the United States must begin a new action seeking the recovery of future costs incurred for the United States to impose such conditions on the 1994 ...


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