Indy environmental cleanup case partially remanded on liability questions

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The 7th Circuit Court of Appeals has vacated an Indiana Southern District Court ruling in an environmental cleanup dispute in Indianapolis, finding its determinations on apportionment and allocation of liability required remand.

For 50 years, industrial facility owners and operators on the northeast side of Indianapolis dumped toxic chemicals used in manufacturing processes, including chlorinated solvents PCE and TCE, into the surrounding area. Over time, the solvents seeped into the soil and groundwater, eventually commingling into a groundwater plume.

The hazardous materials flowed from northeast to southwest, covering approximately three-quarters of a mile. Also, vapor emissions from the plume migrated up from the groundwater and through the soil, resulting in vapor intrusion into 40 homes and an indoor facility at a public park in the area.

Von Duprin LLC, whose predecessor owned one of the properties at issue, spent $3.2 million in cleanup efforts and then sought to recover some of those costs from the other former and current property owners: Moran Electric Service, Zimmer Paper Products and Major Holdings LLC and Major Tool & Machine. Von Duprin pursued recovery under § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act.

The Indiana Southern District Court granted in part Moran and Major’s motions for summary judgment, determining CERCLA liability was divisible and should be apportioned among and between the potentially responsible parties. It also found Major was a “bona fide prospective purchaser” and thus could not be held liable for response costs that Von Duprin sought to recover relating to the Moran property and Zimmer packaging facility.

But in affirming in part and remanding in part on appeal, 7th Circuit found fault with the district court’s liability determinations, pointing at two specific errors.

“First, the district court applied incorrect substantive and procedural standards in concluding at summary judgment that the environmental harm and attendant CERCLA liability could be apportioned,” Judge Michael Scudder wrote in a Friday opinion. “Second, after the bench trial, the district court conflated the concepts of apportionment and allocation and left unexplained the factors guiding its ultimate assignments of liability. These two errors interrelate in ways that leave us no choice but to vacate the district court’s judgment and to remand for further proceedings.

“… The errors were the product of the district court approaching the divisibility question at too high a level of generality, taking too literally the use of the word ‘theoretically’ in our decision in (United States v. NCR Corp., 688 F.3d 833 (7th Cir. 2012)),” Scudder wrote. “…(O)ur review of the summary judgment record leaves us of the view that the district court stopped short of grappling with the complexity inherent in a CERCLA cost-recovery case as wide-ranging as this one.”

The appellate panel noted the “critical takeaway” at hand was to recognize that the substantive law governing the parties’ claims and the procedural rule controlling whether summary judgment is appropriate work in tandem.

“The district court charted a different course, one that did not account at summary judgment for the substantive burden Major and Moran would face at trial on the apportionment question. The district court even seemed to require Von Duprin to affirmatively disprove that the harm was capable of apportionment. That was error, especially at the summary judgment stage,” it wrote.

Finding the error was one it could not correct on appeal, the 7th Circuit bounced the case back to the district court on remand “given how fact and context-specific the apportionment inquiry is.”

“In approaching this question anew, the district court should analyze the facts and record evidence at a higher level of particularity under the standards articulated in the Restatement (Second) of Torts and the pertinent case law,” Scudder wrote.

Finding itself “stuck,” the appellate court further noted its confusion about how the district court arrived at its determinations of liability, and about how much to award each party and on what basis.

“We see no path forward other than to vacate the judgment and allow the district court to revisit the entirety of its liability analysis. On remand and with the legal framework now clarified, the district court must first revisit the apportionment question it previously resolved at summary judgment on Von Duprin’s § 107(a) cost-recovery claim,” it wrote.

The 7th Circuit panel affirmed the remaining challenges to the district court’s ruling, including Major’s bona fide prospective purchaser defense, Von Duprin’s compliance with the National Contingency Plan and the district court’s admission of Dr. Adam Love’s expert testimony.

The case is Von Duprin LLC v. Major Holdings, LLC and Major Tool and Machine, Inc., and Moran Electric Service, Inc., 20-1711 and 20-1793.

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