Superfund Court Modifies Allocation of Cleanup Costs Based on Buyer's Intent to Assume Liability

Kim Lesniak

A magistrate judge improperly under-evaluated the amount for which the purchaser of a contaminated property should be held liable in a Superfund contribution action, given the buyer’s knowledge of and intent to take full responsibility for contamination at the site, a federal district court ruled March 7 (Beazer East Inc. v. Mead Corp., W.D. Pa., No. 91-408, 3/7/00).

Although the parties’ intent to transfer all cleanup liability to the buyer was not dispositive, the magistrate judge should have weighed it more heavily in the liability allocation, according to the U.S. District Court for the Western District of Pennsylvania.

At issue is liability for cleanup of the Woodward Coke Plant site near Dolomite, Ala., which is contaminated with a number of hazardous wastes deposited in on-site landfills during a century of metal processing. The Mead Corp. owned the facility from 1968 until 1974, when it sold the parcel in an asset purchase agreement to Beazer East Inc. In 1988, Beazer sold the operational portion of the plant to Koppers Industries Inc. (KII).

In 1991, Beazer entered into an administrative order on consent with the U.S. Environmental Protection Agency, requiring Beazer to investigate the site.

Contribution Action
Beazer’s investigation caused it to file a contribution action against Mead for past and future response costs. Mead counter-claimed against Beazer and joined the current owner operator of the site, KII. In November 1999, the Magistrate Judge allocated cleanup responsibility to Mead at 73.75 percent, to Beazer at 23.75 percent, and to KII at 2.5 percent.

Mead objected to the magistrate judge’s report, seeking an increase in Beazer’s contribution share "based upon Beazer’s pre-sale connection to and knowledge of the site and its willingness to bear the risks of various environmental costs in the future."

The U.S. District Court agreed with Mead, citing the language of the asset purchase agreement and "the attendant circumstances surrounding" the plant’s sale as equitable considerations that called for an increase in Beazer’s share. It increased Beazer's liability to 32.5 percent, and decreased Mead’s obligation to 67.5 percent. The Court explained that at the time of the sale, Beazer was aware the property was contaminated and agreed that Beazer would accept liability for any environmental contamination.

"The parties in fact intended that Mead be able to ‘walk away’ from the site, i.e., that Mead would not indemnify Beazer for any future costs at the site for any reason, including environmental response costs," the court said, citing the findings of the Magistrate Judge.

The court denied KII’s argument that it should be excluded from the equitable allocation because the action was brought by Beazer against Mead. Since KII is a potentially responsible party as the current owner, joinder of KII to Mead’s counterclaim was appropriate, the court said.