ELR Citation: ELR 21534
No(s). s. 92-7605, -7671 (3d Cir. Sep 17, 1993)

The court affirms a district court's decision that the sister and parent corporations of the former corporate owner of a lead smelting site are not liable under §107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for a local water authority's costs of securing an alternative water supply and/or treating the water for its existing supply wells, which are located near the site. The court first holds that the district court's factual findings were not deficient although they were made orally only a few hours after a long and complex trial and were drawn heavily from a defendant's proposed findings. The lower court's findings offered the distinct advantage of fresh recollection and prompt justice. Accordingly, the court holds that the lower court did not violate Federal Rules of Civil Procedure 52(a) and application of the "clearly erroneous" standard in reviewing the lower court's factual findings is appropriate. The court next holds that the lower court's findings that the contaminated site and the authority's wells are hydrogeologically isolated, and that the site contamination thus did not pose a threat to the authority's water supply, were not clearly erroneous. The lower court was faced with a "battle of the experts," and it found the corporations' expert more credible. The court upholds the lower court's finding because the corporations' expert provided a reasonable explanation of the scientific data.

The court holds that the district court's finding that a release and threatened release caused the authority to incur monitoring and response costs was not clearly erroneous. The U.S. Environmental Protection Agency conducted removal actions under CERCLA at the site due to a release of hazardous substances and is conducting a remedial investigation there under CERCLA. In addition, there was testimony at trial that the authority was concerned about the threat of future releases because the site owner had applied for a permit to dispose of hazardous wastes at its facility. The court holds that with respect to the issue of operator liability, the lower court properly applied the "actual control" test. However, the court vacates the district court's decision that the sister corporation is not liable as an operator for the authority's monitoring and evaluation costs and remands for more detailed factual findings on whether the corporation was an "operator." The district court's findings failed to address a number of key factual issues concerning the role of several officers of the sister corporation in the management of the site owner. The court upholds the district court's decision that the sister corporation was not an "owner" under CERCLA, because during the period the site was operational, the sister corporation was no longer the site owner's parent. Also, the circumstances do not warrant piercing the corporate veil, because the corporations adhered to the corporate formalities, the two corporations entered transactions on an arm's-length basis, and the site owner was not undercapitalized.

The court holds that although the parent corporation never appeared in the case, the rule prohibiting inconsistent judgments requires the court to find in its favor concerning the cost of alternative supplies or water treatment. The court, however, vacates the district court's decision in favor of the parent on monitoring and evaluation costs, because the lower court provided no explanation for its decision, and the court remands for the district court to articulate the basis for its judgment.

Counsel for Plaintiff
John M. Hyson, Prof.
Villanova Law School
Garey Hall, Spring Mill Rd., Villanova PA 19085
(215) 519-7000
Anthony J. Mazullo Jr.
Stengel Law Firm
350 S. Main St., P.O. Box 1007, Doylestown PA 18901
(215) 348-8484

Counsel for Defendants
Bernard A. Labuskes Jr.
McNees, Wallace & Nurick
100 Pine St., P.O. Box 1166, Harrisburg PA 17108
(717) 232-8000

Before Alito and Roth, JJ.