ELR Citation: ELR 20690
No(s). S88-620(RLM) (N.D. Ind. Nov 18, 1991)

The court holds that a supplier of trichloroethylene (TCE), which is a hazardous substance under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), is liable as a transporter for spilling TCE during delivery to a manufacturing plant and allegedly contaminating the plant's soil and groundwater. The alleged spills involved an overfill spill, an open-valve spill, and numerous delivery spills. An overfill spill occurs when a delivery vehicle over fills a receiving tank. An open-valve spill occurs when a shut-off valve in the delivery equipment or receiving tank equipment either malfunctions or is inadvertently turned on. Delivery spills occur after delivery vehicles finish filling receiving tanks and discharge when pulling away. Plaintiffs alleged that they expended over $1 million to monitor the release of TCE into the environment and design and install a permanent remedy, and now seek to recover response costs against the supplier. On motions for summary judgment, plaintiffs allege that the supplier delivered approximately 34 orders of TCE and was the plant's sole source of TCE. However, 15 of the 34 deliveries were made using the services of an independent common carrier. Each count of plaintiffs' response cost action is based on the proposition that the supplier caused TCE to be spilled. However, in support of their motions for summary judgment, plaintiffs introduced only testimonial evidence of the alleged spills.

The court first rules on defendants' motions to strike the testimony of plaintiffs' hearsay witnesses to the spills. The plant engineer testified that he was notified of each spill by two other persons, one who witnessed the spill, and another who heard about the spill from someone else. The court holds that this testimony is not inadmissible hearsay if limited to showing that the plaintiffs engaged in an investigation of the spills, but is not admissible under the residual exception established by Federal Rule of Evidence 803(24) to establish that spills occurred. Case law establishes that the declarants' identities and the basis of the declarants' knowledge must be known in order to successfully invoke the residual exception to the general hearsay rule. Although the plant engineer provided six names of persons he spoke with, he was unable to recall what he was told by each of them. The court also denies defendant's motion to strike the testimony of a person who testified to having seen TCE end up on the ground when trucks filled the plant's tanks on 10 to 15 occasions. The record indicates that the defendant was the plant's sole TCE supplier during the period the witness testified about, and the testimony is not unduly prejudicial because the supplier may be liable under CERCLA for arranging transportation for the disposal of a hazardous substance.

The court next grants in part, and denies in part, defendant's motions to strike the hearsay testimony of another declarant that testified to having heard of an overfill spill at the plant and to having seen delivery spills. The court holds that although the declarant could not specify the time period in which he observed the delivery spills, his testimony as to the delivery spills has substantial probative value that outweighs any risk of unfair prejudice to defendant. The declarant recollected that the timing of the delivery spills predated construction of the plant's second TCE tank, which the evidence shows occurred after defendant became the sole supplier of TCE to the plant. However, the court holds that the declarant's testimony as to the overfill spill is inadmissible hearsay, because the record provides no basis for the truthfulness, knowledge, or consistency of the source of his information, even though the declarant named the source.

The court grants defendant's motions to strike the testimony of other declarants as hearsay. The court holds that although a declarant wrote a contemporaneous memo, now lost, about the alleged overfill spill, which was based on information from other employees, his recollection of what others told him is still inadmissible hearsay. No case law supports admitting a verbal recollection of a lost business record prepared 11 years earlier. The court holds that another declarant's testimony is inadmissible because although plaintiffs assert it was offered to show that plaintiffs had notified the supplier of the spills, which would have made the testimony admissible, the declarant denied any recollection of notifying defendant or any other supplier. The court further holds that other non-eyewitness testimony by declarants is inadmissible because cumulative and repetitive accounts of the alleged spills do not render hearsay admissible. Thus, the court grants defendant summary judgment as to the alleged overfill spill, because plaintiffs failed to establish a genuine issue of fact for trial. However, the court concludes that because there is evidence supporting the delivery spills and the open-valve spill, plaintiffs' claims based on those allegations survive.

The court next holds that defendant's motion to strike a document plaintiffs submitted is moot because it neither strengthens the plaintiffs' case with respect to the overfill spill nor weakens the case with respect to the delivery spills and the open-valve spill. The court also holds that testimony of an expert, who prepared a report reviewing the investigations of soil and groundwater contamination and remediation efforts at the plant site and concluded that the efforts complied with the national contingency plan (NCP) under CERCLA, is admissible. The NCP presents technical issues, for which the opinion of a properly qualified expert is admissible to determine whether a given course of conduct complied with the law.

Turning to the parties motions on the CERCLA claims, the court holds that defendant is not a responsible party under CERCLA §107(a)(1) with respect to shipments of TCE delivered by defendant's contractor common carrier. Defendant did not own or operate the common carrier's trucks. However, as indicated before, CERCLA §107(a)(3) makes no reference to "owner and operator" with respect to arranger liability. Because defendant's liability arises from its contract or arrangement with the plaintiffs to transport the TCE, it is immaterial whether the common carrier or defendant, or both, were "owners and operators" with respect to the TCE transported in the common carrier's trucks.

The court next holds that plaintiffs complied with the NCP sufficiently to recover the costs of response to the release of a hazardous substance. The court first holds that plaintiffs' actions complied with both the 1985 and 1990 NCPs with respect to providing the public with review and comment of the remedy selection process. The evidence shows that although the 1985 NCP contemplates that a public meeting should be held in most circumstances, the plaintiffs' failure to hold a formal meeting was not fatal because the public had an opportunity to review for 30 days the plaintiffs' application for a national pollutant discharge elimination system (NPDES) permit to allow the plaintiffs to discharge water that was extracted from the groundwater and treated to remove most of the TCE. Moreover, the court holds that the comment period on plaintiffs' NPDES permit complied with the 1990 NCP requirement that the public be given an opportunity to comment on the selection of the response action, even though plaintiffs did not submit a proposed plan that supplements the remedial investigation/feasibility study (RI/FS). Further, because the expert witness' report on plaintiffs' compliance with the NCP is not legally insufficient, it stands as undisputed evidence that the plaintiffs complied with the RI/FS requirements of the NCP.

The court next holds that plaintiffs' possible contribution to groundwater contamination at the plant does not bar their CERCLA cost recovery action. Applying the unclean hands doctrine against a CERCLA plaintiff who may have caused the release of hazardous substances would defeat CERCLA's purpose. The court also holds that because the TCE was not useful after it was spilled on the ground and thereafter was not used as intended, defendant is liable for disposal of the TCE. Although courts have held that liability did not attach to an innocent supplier of a hazardous substance who made no decision to dispose of the hazardous substance, defendant selected the method of delivery and the safeguards that would surround the deliveries. Plaintiffs had no say in whether the defendant's driver would close the valve on the day of the open-valve spill.

Turning to the parties state law claims, the court holds that under Indiana law, the defendant is entitled to summary judgment on plaintiffs' claim that defendant breached an implied contractual term to deliver the TCE without spillage and without causing environmental damage. Plaintiffs may not rely on the existence of notice to defendant in 1980 of the alleged overfill spill, where the summary judgment record does not establish the overfill spill's occurrence. Notice of an alleged event on which suit cannot be based cannot satisfy the timely notice requirement under Indiana law with respect to other, actionable breaches. Because plaintiffs knew of the spills when they occurred, but did not notify defendant until years later, defendant is entitled to summary judgment. The court next rejects plaintiffs' trespass claim, holding that defendant's drivers had permission to enter plaintiffs' plant site, and whether defendant's drivers negligently and recklessly spilled TCE while at the site does not make defendant a trespasser.

The court next holds that expert testimony on the reasonableness standard of care is not a necessary element in plaintiffs' prima facie claim of negligence by the delivery drivers. However, as to plaintiffs' claim that defendant's failure to report and clean up its TCE spills constitutes negligence per se, the court holds that evidence of plaintiffs' violation of an administrative regulation is only evidence of negligence under Indiana law. However, the court declines to grant summary judgment in defendant's favor on this claim. The court also holds that plaintiffs may not prevail on their state claim that defendant negligently hired and trained its delivery drivers. The evidence reveals that the drivers received literature informing them of the nature of TCE and they were instructed on how to handle it. The court further holds that res ipsa loquitur does not apply to create an inference of negligence from defendant's control of the instrumentality causing the damage and the lack of such damage in the ordinary course of things. The evidence did not establish that defendant had exclusive control over the common carrier. The court also rejects plaintiffs' abnormally dangerous activity claim, which would impose strict liability on defendant for damages because of its delivery of TCE. Although the handling of TCE involves a high degree of risk to persons and land, and it is likely that the harm that results from the release of TCE would be great, it appears that the exercise of reasonable care can eliminate the risk of TCE releases and pumping TCE from one tank to another is not unusual. Moreover, plaintiff found TCE very useful and used it for many years.

Finally, the court denies summary judgment on plaintiffs' motion for punitive damages against the defendant. Although plaintiffs have presented evidence of numerous spills of TCE during delivery during the time that defendant was the plant's sole TCE supplier, this is not evidence sufficient to convince the court that reasonable jurors could find, by a clear and convincing standard, that punitive damages should be awarded.

Counsel for Plaintiffs
D. Jeffrey Ireland, Armistead W. Gilliam Jr., Ann Wightman
Faruki Gilliam & Ireland
600 Courthouse Plaza SW, 10 N. Ludlow St., Dayton OH 45402
(513) 227-3700

Counsel for Defendants
Arthur G. Surguine Jr., James J. Shea
Hunt, Suedhoff, Borror & Eilbacher
803 S. Calhoun St., 900 Paine Webber Bldg., Fort Wayne IN 46802
(219) 423-1311