13 ELR 20897 | Environmental Law Reporter | copyright © 1983 | All rights reserved

United States v. Reilly Tar & Chemical Corp.

No. 4-80-469 (D. Minn. June 23, 1983)

The court grants defendant's motion for a jury trial in a suit alleging violations of the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and state statutory and common law. Although the defendant's motion for a jury trial is untimely under FED. R. CIV. P. 38(b), the court grants the motion, relying on its discretion to do so under FED. R. CIV. P. 39(b) and its determination that the legal issues are not so complex that they preclude a jury trial. The court declines to find, however, that defendant has a right to a jury trial on all the claims against it. The court holds that the United States, in its claims under § 107(a) of CERCLA for recovery of the costs of testing and monitoring the waste site, seeks an equitable remedy in restitution. The United States' request for an order enjoining defendant from further disposal of waste and directing defendant to finance and monitoring and maintenance of the site is also equitable. The court rules that the claims against the defendant based on strict liability for abnormally dangerous activity and negligence are legal. To avoid the possibility that collateral estoppel could bar defendant from a jury trial on the legal claims if the court first renders an opinion on the equitable claims, the court will conduct a single proceeding of all claims, with the jury deciding the legal claims and the court deciding the equitable claims. Finally, the court grants defendant's motion to amend its answer to add a statute of limitations defense and to correct certain errors.

[A related decision is reported at 12 ELR 20954 — Ed.]

Counsel for Plaintiff
David Bruce Hird
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-5466

Robert Leininger
Office of the General Counsel
Environmental Protection Agency, Washington DC 20460
(202) 382-4134

Counsel for Plaintiffs-Intervenors
Stephen A. Shakman, Dennis Coyne, Special Ass't Attorneys General
102 State Capitol, St. Paul MN 55155
(612) 296-2591

Joseph C. Vesely
Vesely & Miller
203 NW Nat'l Bank Bldg., Hopkins MN 55343
(612) 938-7635

Wayne G. Popham
Popham, Haik, Schnobrich, Kaufman & Doty, Ltd.
4344 IDS Ctr., Minneapolis MN 55402
(612) 333-4800

Counsel for Defendant
Edward J. Schwartzbauer
Dorsey & Whitney
2200 First Bank Place E., Minneapolis MN 55402
(612) 340-2600

[13 ELR 20897]

Boline, Mag.:

Memorandum Opinion and Order

The above-entitled matter came on for hearing before this Court on May 4, 1983, on motions of Plaintiffs United States and the State of Minnesota to strike demand of Reilly Tar & Chemical Corporation (hereinafter Reilly) for a jury trial, on both substantive and procedural grounds, and on the motion of Reilly to amend its answer. During the hearing on the above motions, Reilly made an oral motion for a jury trial.

Appearing for the State of Minnesota were Dennis Coyne, Esq., and Stephen Shakman, Esq., Special Assistant Attorneys General; appearing for the United States were David Hird, Esq., Environmental Enforcement Section, Land and Natural [Resources] Division, Department of Justice, and Robert Leininger, Esq., Environmental Protection Agency; appearing for Reilly Tar & Chemical Corporation was Edward J. Schwartzbauer, Esq.; appearing for the City of Hopkins was Joseph C. Vesely, Esq.; appearing for the City of St. Louis Park was Wayne G. Popham, Esq.

The relevant procedural history of this case is as follows. Defendant Reilly operated a tar refinery and wood treating plant in St. Louis Park from 1917 until 1972. Plaintiffs in this action allege that, in the course of operating its business, Reilly discharged coal tar products and distillation wastes onto land which it owned, and, while doing so, failed to undertake reasonable and adequate safeguards to prevent the permeation of these wastes into the land and water table. Plaintiffs allege that Reilly's failure to take adequate precautions has resulted in the pollution of the drinking water of the City of St. Louis Park. Plaintiffs further allege that this pollution presents a public health threat which, because of its continuing nature, is likely to cause future damage to the environment and to city residents.

This civil action was brought by the United States on behalf of the Administrator of the Environmental Protection Agency to repair the harm which has allegedly been caused by Reilly's failure to act prudently. Plaintiff United States claims that the disposal of hazardous wastes by Reilly Tar is presenting an imminent and substantial endangerment to public health and to the environment, within the meaning of Section 7003 of the Resource Conservation and Recovery Act, 42 U.S.C. § 6973. Plaintiff United States has requested injunctive relief to enjoin defendant Reilly from further pollution of the environment, and also requests that Reilly be ordered to finance the restoration of closed drinking water wells in the City of St. Louis Park which have been contaminated with hazardous wastes. Plaintiff United States further requests that Reilly be ordered to pay for the United States' costs incurred in taking samples, installing monitoring devices, and identifying, quantifying and locating hazardous wastes on the Reilly site, and on the property adjacent to the Reilly site.

Plaintiff-Intervenor City of St. Louis Park has alleged that Reilly's disposal presents an imminent and substantial endangerment to the health and environment under the Resource Conservation and Recovery Act, 42 U.S.C. § 6973. It requests injunctive relife against Reilly to prevent further pollution and requests a judgment against Reilly to compensate for expenses incurred, and to be incurred by the City as a result of the alleged underground contamination. Additional relief requested by the City of St. Louis Park arises out of a condition of a purchase agreement between the City and Defendant Reilly. The City of St. Louis Park claims tht, following Reilly's announced termination of its operations in tht city, Reilly indicated its intent to offer its property for sale. The City became interested in purchasing the property as part of its urban renewal plan. On April 14, 1972, the City signed a purchase agreement, a condition of which was the dismissal with prejudice by the Pollution Control Agency and the City of the surface water and air pollution claims of their original complaint, which had been filed against Reilly on October 2, 1970, in District Court. Plaintiff-Intervenor City of St. Louis Park now argues that neither it, nor the Minnesota Department of Health, nor the Pollution Control Agency had been aware of an existing threat to the source of drinking water or ground water at the time the purchase agreement was signed. The City states that, had it been aware of those facts, it would not have purchased the property from Defendant Reilly, nor would it have consented to the "hold harmless" agreement. The City claims that it gave the hold harmless agreement based upon statements of the PCA that there were no significant clean-up problems on the site. The City of St. Louis Park, based on the above allegations, asks that the language of the "hold harmless" agreement in the contract which it signed on April 14, 1972, be construed by the Court and declared void because it was executed under mutual mistake as to material facts. The City has also incorporated into its complaint a claim that the coal tar distillation activities of Reilly prior to its shutdown in 1972 constituted an abnormally dangerous activity because of the [13 ELR 20898] presence of carcinogenic substances used as part of the distillation process. Due to this allegation, Plaintiff-Intervenor City of St. Louis Park argues that Reilly is strictly liable for any harm which resulted from the abnormally dangerous activity in which it was knowingly engaged.

Plaintiff-Intervenor the State of Minnesota alleges in its complaint that it has undertaken, at considerable expense, the investigation of the extent of the contamination due to the inaction by Reilly regarding its chemical wastes. The State of Minnesota further alleges that those actions by Reilly have created a common law public nuisance, the severity of which is not yet ascertainable. The relief requested by the State is injunctive in part; it has requested that Reilly be ordered to prevent the further spread of hazardous wastes into the ground water by accomplishing certain preventative measures after consultation with the Environmental Protection Agency and the State of Minnesota. The State claims that Reilly is strictly liable for the damages resulting from its abnormally dangerous activities, in which it voluntarily engaged for pecuniary gain. The State finally requests that it be compensated for all amounts which it has expended and will expend as a result of its response to Reilly's aleged chemical contamination. The State claims that Reilly violated state law which requires that the PCA be notified immediately of discharges of coal tar, creosote, and other coal tar derivatives, and also requires that immediate action be taken to recover discharged pollutants and to minimize or abate the pollution of state waters. MINN. STAT. § 115.061 (1978).

Plaintiff-Intervenor City of Hopkins, in its complaint against Defendant Reilly, claims that, due to its geographic proximity to the City of St. Louis Park, it has been affected by the discharge by Reilly of coal tar products and distillation wastes onto its land, in the same manner as the City of St. Louis Park. The City of Hopkins claims that the discharge of coal tar products and distillation wastes by Reilly onto Reilly's land in St. Louis Park was the result of an abnormally dangerous activity and that Reilly is therefore strictly liable for all resultant harm. The relief requested by the City of Hopkins is first injunctive, to impose conditions on Reilly such as may be necessary to protect against further pollution of the ground waters, and to abate the continuing harm. Secondly, Hopkins requests judgment in an amount found to compensate it for the expenses incurred and to be incurred as a result of the alleged underground contamination.

As indicated above, three motions were heard by this Court on May 4, 1983. Plaintiffs United States and the State of Minnesota moved to strike the demand of Reilly Tar for a jury trial first on the ground that such motion was not timely under FED. R. CIV. P. 38(b). Plaintiffs provided the Court with a detailed chart, which set forth in chronological order the dates when the various pleadings had been filed, to further illustrate the extent of Reilly's untimeliness.

FED. R. CIV. P. 38(b) does set forth a clear deadline before which a demand for a trial by jury is to be made. That deadline is not later than ten days after the service of the last pleading directed to any issue triable of right by a jury. As emphasized by the Plaintiffs, where a party fails to follow the prescribed procedures, under Rule 38(d) he is deemed to have waived whatever right he may have had to demand a jury trial. The parties hereto have argued at great length about which pleading was the last pleading directed to issues for which Reilly has demanded a jury trial. The Court, however, need not discuss the merits of the parties' respective arguments on this issue, because of the discretion provided it under FED. R. CIV. P. 39(b). That rule provides that the Court may, in its discretion, and upon motion, order a trial by jury on any or all issues. This discretion is accorded the Court because the right to a jury trial is regarded as being of such great importance. See Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962); Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959); Klein v. Shell Oil Company, 386 F.2d 659 (8th Cir. 1967); Curry v. Pyramid Life Insurance Co., 271 F.2d 1 (8th Cir. 1959). Where an action is one which is highly complex, as where complicated considerations of federal and state law are involved, the Court would be inclined to exercise its discretion in favor of a court trial. That is essentially what the Court in United States v. Pilot Freight Carriers, Inc., 54 F.R.D. 519 (1972) decided to do, based on the great complexity of the applicable law, and on the fact that both legal and equitable relief was being sought.

In the present case, the Court does not find the law to rise to the level of complexity which, as in the above case, would militate against granting a jury trial on the legal issues. Therefore, after a careful review of all the facts herein, the Court has decided that it will exercise its discretion under Rule 39(b) and deny Plaintiff's motion which urges the rejection of Reilly's jury trial request on the ground that it was untimely.

Plaintiff United States has moved the Court to strike Reilly's demand for a jury trial on substantive grounds. Reilly argues that the United States' claim for restitution is, in part, legal in nature, and therefore entitles Reilly to a jury trial on all its claims. Reilly also argues that the presentation of legal claims by Plaintiff-Intervenors militates even more strongly in favor of its right to a jury trial on all its claims, because the prior adjudication by the Court of equitable claims may collaterally estop Reilly on a subsequent determination of legal issues. Thus, Reilly would effectively be deprived of its right to a jury trial on some of the legal claims which have been brought against it.

The Court does not agree with Reilly's characterization of the United States' suit against it as being legal rather than equitable. The United States has brought this action to recover monies expended to respond to a potential public health threat stemming from the alleged contamination of the water table by Reilly. Additional relief requested by the United States is injunctive, in that it seeks an order enjoining Reilly from further disposal of waste, and directing Reilly to finance the monitoring and maintenance necessary to verify containment and clean-up of the affected site. Defendant Reilly states that the government's characterization of its claim under CERCLA § 107(a)(1)(A) & (2)(A) as a claim for restitution rather than money damages is largely a matter of semantics. Reilly has relied heavily on United States v. Consolidated Edison Co. of New York, 580 F.2d 1122 (2d Cir. 1978) to support this contention. In Consolidated Edison, which involved a claim by the government (Atomic Energy Commission) to recover for electric power which it made available to the New York utility during a serious power shortage, the Court held that the United States was properly permitted to recover the costs it incurred in assisting Con Edison, under the emergency assistance doctrine.1 Defendant Reilly argues that the use by the Court of the term "damages" to characterize the relief which it granted Plaintiff in Consolidated Edison indicates that Plaintiff's action was legal as opposed to equitable. This Court sees the above distinction, to quote Defendant's own language, as largely a matter of semantics. The Court must look beyond the label attached to any request for relief, and decide what the real nature of the request is, to determine what the real nature of the action is. See Klein v. Shell Oil Co., 386 F.2d 659 (8th Cir. 1967). Here, Plaintiff United States is asking for the return of monies it expended on Reilly's behalf, to safeguard the public health. As the Supreme Court stated in Porter v Warner Co., 328 U.S. 395 (1945), restoring the status quo and ordering the return of what rightfully belongs to a party, is within the recognized power and within the highest tradition of a court of equity. 328 U.S. at 402. In Porter, which involved an enforcement proceeding under 205(a) of the Emergency Price Control Act of 1942, the Supreme Court held that the Federal District Court could order restitution as an equitable adjunct to an injunction decree. 328 U.S. at 399-400. Here, the monetary relief requested by the government is only that amount necessary to compensate it for amounts expended in taking samples, installing monitoring wells, and otherwise identifying, quantifying and locating hazardous wastes on and migrating from the Reilly site, or, in other words, the amount necessary to return the United States to status quo ante. Such a return is precisely what the equitable [13 ELR 20899] remedy of restitution has as its goal. See, e.g., Graves v. Romney, 502 F.2d 1062 (8th Cir. 1974), cert. denied, 420 U.S. 963 (1975). This Court cannot, therefore, agree with Reilly's contention that the action by the United States is, in part, legal.

Several legal claims have been raised against Reilly by plaintiff-intervenors in this action. Those claims, as mentioned earlier, include strict liability for abnormally dangerous activities, and negligence. As further support for its request for a jury trial on all its claims, Reilly argues that a decision by the Court on the United States, equitable claims may have a collateral estoppel effect on those legal claims raised by intervenors in this action, before a jury trial can be completed. Reilly concludes that the application of collateral estoppel under the circumstances here would violate its rights under the Seventh Amendment.2 Reilly cites two recent Supreme Court cases for this proposition. In the first case, Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959), the Supreme Court held that even assuming pleadings could be construed to support a request for an injunction, which would have justified equity in taking jurisdiction, the right to a jury trial is so important a right that it should not be impaired by any blending with a claim for equitable relief.See also Scott v. Neely, 140 U.S. 106, 109-110 (1891).The Court in Beacon repeatedly emphasized the essential and important nature of the right to a jury trial, stating that any curtailment of that right is to be scrutinized with the utmost of care. See also Dimick v. Schiedt, 293 U.S. 474, 486 (1935).

The second case which Reilly discusses for the proposition that it is entitled to a jury trial is Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979). That case involved an action by the Securities and Exchange Commission (SEC) against Parklane Hosiery for violations of the Securities Act of 1934. Parklane lost in an equitable action for an injunction brought by the SEC. They were then sued for damages by private plaintiffs, who argued that defendants were precluded from relitigating the same issues in an action at law, under the doctrine of collateral estoppel. Defendants argued that to permit collateral estoppel to apply in these circumstances would effectively deny them of their rights under the Seventh Amendment in their legal action. The Supreme Court agreed that such a result was indeed possible but that it would not be violative of the Seventh Amendment. The Court stated, in Parklane, that, "if, as we have held, the law of collateral estoppel forecloses the petitioners from relitigating the factual issues determined against them in the SEC action, nothing in the Seventh Amendment dictates a different result . . . ." 439 U.S. at 337. The Court also clarified that, in Beacon Theatres, it simply enunciated the general prudential rule that, when legal and equitable claims are joined in the same action, the trial judge has only limited discretion in determining the sequence of the trial and must exercise that discretion wherever possible to reserve the right to a jury trial. 439 U.S. at 334. Thus, according to the Supreme Court's explanation, there is nothing in its Parklane holding which proves inconsistent with its holding in Beacon Theatres. Parklane only specifies an exception to the rigid protections generally accorded the jury trial right.

The Supreme Court, in Beacon Theatres, set forth a relatively uncomplicated method for dealing with cases involving an intermingling of both legal and equitable claims. It stated

If there should be cases where the availability of declaratory judgment or joinder in one suit of legal and equitable causes would not in all respects protect the plaintiff seeking equitable relief from irreparable harm while affording a jury trial in the legal cause, the trial court will necessarily have to use its discretion in deciding whether the legal or equitable cause should be tried first.

359 U.S. 500 at 510.

The Court also stated

Under the Federal Rules that same court may try both legal and equitable causes in the same action. FED. RULES CIV. PROC., 1, 2, 18. Thus any defenses, equitable or legal, Fox may have to charges of antitrust violations can be raised either in its suit for declaratory relief or in answer to Beacon's counterclaim . . . . Whatever permanent injunctive relief Fox might be entitled to on the basis of the decision in this case could, of course, be given by the court after the jury renders its verdict. In this way the issues between these parties could be settled in one suit giving Beacon a full jury trial of every antitrust issue.

359 U.S. 500 at 508.

This same method could be easily employed to resolve the potential estoppel problems in this case and to accomplish that goal with the maximum efficiency permitted by conducting a single proceeding, as opposed to a bifurcated proceeding. This solution was, in fact, intimated by Plaintiff United States in its reply brief as providing one practical solution for averting the risk of collateral estoppel.

The Court will apply the above solution to this case. Both legal and equitable claims which are raised herein can be heard in a single proceeding. The Court will render judgment on all equitable claims and the jury will render a verdict on all legal claims. Because both will be completed in the same action, there will be no threat of collateral estoppel, and the entire matter will be resolved in an efficient manner.

The final motion before this Court is that of Defendant Reilly, requesting leave to amend its Answers under FED. R. CIV. P. 15(a). Reilly seeks to amend its Answers to the Amended Complaints of all parties to this action. If its request to amend is granted, Reilly would raise as an affirmative defense applicable statutes of limitation, and would correct certain errors to conform the affirmative defense based on the Due Process of the Fifth Amendment.

The parties to this action agree that the time has passed for Defendant Reilly to amend its Answer as of right. Therefore, such amendment can be made only if the Court chooses to permit it under the discretionary language of FED. R. CIV. P. 15(a). Reilly urges that the Court exercise its discretion in this regard because no prejudice will result to the parties if an amendment is allowed at this time, and because the State and the City of St. Louis Park have long been apprised of Reilly's assertion of the defenses which Reilly now seeks to incorporate into its Answers.

The express language of Rule 15(a) states that "leave shall be given freely when justice so requires." (emphasis supplied.) A liberal application of this Rule, then, is obviously encouraged, and has been further recommended by the Eighth Circuit. In Chesnut v. St. Louis County, Mo., 656 F.2d 343 (8th Cir. 1981), for example, the Court stated that even a long delay was not sufficient reason to deny a motion to amend. Rather, it stated that prejudice to the parties was still the controlling factor. See also Buder v. Merrill Lynch, Pierce, Fenner & Smith, 644 F.2d 690 (8th Cir. 1981).

At this point, the parties opposing Defendant Reilly's motion to amend have not shown the Court that there is any risk of prejudice if such motion is granted. The most significant argument which the parties have raised in their opposition to Reilly's motion, rather, is that Reilly has demonstrated an indifference to the deadlines under the Rules and that such indifference cannot be regarded as excusable, inasmuch as such leniency would undermine the authority of the Rules and of the Court. While this Court agrees that laxity with reference to the deadlines and other mandates of the Rules cannot be condoned, it cannot ignore both the express language of the Rules and controlling precedent interpreting those Rules. Therefore, the Court will grant Reilly's motion to amend its Answers.


(1) That both legal and equitable claims raised in this case will be heard in a single proceeding, with the Court deciding all equitable claims and the jury rendering a verdict on all legal claims.

(2) That motions by Plaintiffs to deny Defendant Reilly's demand for a jury trial, on eithersubstantive or procedural grounds, are denied.

(3) That Defendant Reilly's motion to amend its Answers is granted.

1. This doctrine is explained by the Court in Consolidated Edison as being a form of quasi-contractual relief, which is embodied in § 115 of the RESTATEMENT OF RESTITUTION (1937). Section 115 states

A person who has performed the duty of another by supplying things or services, although acting without the other's knowledge or consent, is entitled to restitution from the other if

(a) he acted unofficiously and with intent to charge therefor, and

(b) the things or services supplied were immediately necessary to satisfy the requirements of public decency, health, or safety.

2. U.S. CONST. amend. VII.

13 ELR 20897 | Environmental Law Reporter | copyright © 1983 | All rights reserved