ELR Citation: ELR 21331
No(s). 94-C-277K (D. Utah Mar 24, 1995)

The court denies motions to dismiss and for summary judgment on the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) liability of several companies that sent used oil containing hazardous substances to a used motor-oil refinery in Salt Lake City, Utah. The court first holds that the plaintiff group of potentially responsible parties (PRPs) are restricted to a contribution action under CERCLA §113, and may not sue the companies under CERCLA §107. The Tenth Circuit held in United States v. Colorado & Eastern Railroad Co., 25 ELR 20309, that PRPs may not bring an action under §107(a) against other PRPs. The court holds that the opinion's broad language prevents the PRP group from distinguishing this case from Colorado on the grounds that the PRP group "voluntarily" incurred response costs by assisting in the cleanup and that the defendant companies have not already settled their liability with the U.S. Environmental Protection Agency (EPA). That it is the plaintiff's status as a PRP which is controlling, and not the voluntariness with which it initiated cleanup or the settling status of other PRPs, may be seen in the Tenth Circuit's straightforward and simple approach to the issue and its conclusion that claims between PRPs to apportion costs between themselves are contribution claims pursuant to §113 regardless of how they are pled.

The court next holds that the three-year limitations period in §113(g)(3), not the six-year limitations period in §113(g)(2), applies to this action. Section 113(g)(3), which explicitly deals with claims for contribution, is more relevant. The court next holds that the conditions for the statute of limitations to begin to run have not been met. Section 113(g)(3) provides that no action for contribution may be commenced more than three years after the date of a judgment, the date of an administrative order under CERCLA §122(g) or (h), or the date of entry of a judicially approved settlement. There has not been any judgment or judicially approved settlement, and the 1989 consent order between the companies and EPA may be reasonably seen only as a CERCLA §106 order. The order does not absolve the companies from liability for future costs expended at the site, but reserves EPA's right to proceed against them for future costs or to the extent that the order's requirements are not fulfilled. The order states that it is made under the authority of §106 and consistently avoids any statement that it is premised, even in part, on authority granted under §122. Further, the order appears to be a settlement reached under §§106 and 122(a), as opposed to §122(h), in that its main purpose was to compel the companies to assist in cleaning up the site. Such compulsion is not the focus of §122(h), which is designed to allow the United States to recoup its expenses. Moreover, the order lacks a characteristic feature of a §122(h) order; it does not appear to have been published in the Federal Register.

The court next holds that the burden of proof is on the companies to establish the applicability of CERCLA §101(14)'s exclusion of petroleum from the definition of hazardous substances. The court notes that cases that have addressed the problem of used oil have concluded that the substance does not fall within the scope of the petroleum exclusion where the use of the oil results in the presence of elevated levels of hazardous substances. The court holds that this interpretation is consistent with both the legislative history and the administrative interpretations of the exclusion. The record indicates that used motor oil contains hazardous substances not contained in, or at levels in excess of that found in, unused oil. The court thus holds that summary judgment in favor of the companies based on the petroleum exclusion is inappropriate. The court next rejects the companies' useful-product defense that their shipment of used oil to the site does not fall within CERCLA's scope because the oil was sent for recycling, and thus did not constitute waste. Neither the original refiners of the oil, nor the automobile owners and other persons who then converted the oil to its used status, did so with the purpose of creating a product that could ultimately be sold for some negligible amount to an oil recycling facility. The used oil had fulfilled, and was then no longer fit for, its original purpose. And as long as the companies are shown to have arranged for the disposal of waste, their characterization of the transfer as a "sale" will not protect them from liability under CERCLA. The court also holds that given the extensive chemical reworking of the used oil at the site, it is impossible to say that these processes did not constitute treatment of hazardous waste within CERCLA's meaning. The court next holds that the companies are not entitled to CERCLA §114(c)'s exemption from liability arising from the release of recycled oil for service station dealers that manage the oil in compliance with certain EPA regulations. The EPA regulations did not become effective until after the site had closed and was no longer receiving shipments of used oil from the companies. Although EPA promulgated the regulations late, this delay is not a basis for applying the exemption retroactively. The exemption expressly provides that its effective date shall be the effective date of the regulations relating to the recycling of used oil. The clear use of the future tense reflects an expression of congressional intent barring retroactive application of the service station dealer exemption.

The court next holds that it has personal jurisdiction over two out-of-state companies. It is apparent that although the companies were not physically present in Utah, they nonetheless transacted business, supplied goods, and caused injury by supplying used oil to the facility in Utah, thereby rendering themselves subject to liability under the Utah long-arm statute. The action against them arises out of, and is predicated on, these very actions, and imposing jurisdiction based on these actions is both fair and reasonable. The court finds that the first company had sufficient knowledge that its used oil was to be recycled in Utah, and that the exercise of personal jurisdiction is consistent with constitutional due process. And while the second company and its manager deny any absolute knowledge that their used oil was destined for Utah, the evidence remains clear that they periodically sold a toxic substance to a company that they knew to be a Utah company in the business of treating such substances in Utah. The court finds that it would seriously undermine CERCLA's remedial purpose if defendants who disposed of toxic substances by selling them to persons they know to be operating in interstate commerce were allowed to defeat personal jurisdiction by turning a blind eye to the actual place of disposal. Turning finally to three companies' assertion that having dissolved and distributed their assets, they are "dead and buried corporations" not subject to CERCLA liability, the court next holds that a dissolved corporation holding no valuable assets is not a person within CERCLA's meaning and therefore cannot be held liable. The court holds, however, that summary judgment should not be granted at this time because further discovery should be permitted as to the status of each company.

Counsel for Plaintiff
Lawrence J. Jensen
Holland & Hart
111 E. Broadway, Ste. 880, Salt Lake City UT 84111
(801) 578-6000

Counsel for Defendants
Allan D. Brock
Carter, Brock & Hinman
First Interstate Ctr.
877 W. Main St., Ste. 707, Boise ID 83702
(208) 336-1776