APL Co. v. Kemira Water Solutions, Inc.

999 F.Supp.2d 590

APL CO. PTE. LTD., The Britannia Steam Ship Insurance Association Limited, The West of England Ship Owners Mutual Insurance Association (Luxembourg), Plaintiffs

v.KEMIRA WATER SOLUTIONS, INC., (formerly known as “Kemiron Companies”), Fairyland Envitech Co. Ltd., Defendants.

No. 11 Civ. 1686.

United States District Court, S.D. New York.

Feb. 25, 2014.

Charles S. Donovan, Brenna E. Moorhead, Brian R. Blackman, Theodore Carl Lindquist, III, Sheppard Mullin Richter & Hampton LLP, San Francisco, CA, Lisa M. Lewis, Sarah Elizabeth Aberg, Sheppard, Mullin, Richter & Hampton, LLP, New York, NY, for Plaintiffs.

Matthew Todd Loesberg, McDermott & Radzik, LLP, Daniel Gerard McDermott, Marshall, Dennehey, Warner, Coleman & Goggin, New York, NY, Stanley Lee Gibson, Gibson Robb & Lindh LLP, Marisa Gale Huber, Gibson Robb Lindh, San Francisco, CA, for Defendants.

OPINION & ORDER

KATHERINE B. FORREST, District Judge.

This case arises from two shipments of ferrous chloride crystals sent from Taiwan to California that, simply put, did not go as planned. The bags in which the crystals were originally packaged leaked as a result of improper packaging at some point between their departure from Taiwan and their arrival in California. The result was contamination of the containers in which the bags were stored and of the ships that transported the containers, as well as at the ports where the containers were discharged. Cleanup and response efforts ultimately lasted more than seven months and were fraught with unexpected delays and setbacks along the way—both on-site at the ports and back at the corporate offices of the companies involved.

In the end, the bill for these efforts totaled more than five million dollars. Plaintiffs, APL Co. Pte. Ltd. (“APL”) and its insurers,¹ footed that bill—APL was the carrier of the ferrous chloride cargo. Though this case has been narrowed considerably since its inception,² the fundamental question now before the Court is whether defendant Kemira Water Solutions, Inc. (“Kemira”),³ the end purchaser and consignee of the ferrous chloride, must bear the brunt of the joint and several liability provisions of Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9601 et seq., for the cleanup and response costs incurred by APL. Kemira entered into an agreement with Fairyland Envitech Co. Ltd. (“Fairyland”), a Taiwanese company, to purchase the ferrous chloride crystal; in that agreement, Kemira specified the use of bulk bags to transport the material. The bags that were then chosen and ultimately used by Fairyland to transport the material leaked, and a parade of horribles ensured. Fairyland, for its part, was and is nowhere to be found.

This Court finds that Kemira is liable under CERCLA for cleanup costs.

Plaintiffs brought this admiralty and maritime action, pursuant to 28 U.S.C. § 1333, in the Northern District of California on August 27, 2009 against defendants Kemira and Fairyland for breach of contract, negligence, and recovery under CERCLA related to the cleanup and response costs they incurred as a result of the two shipments. This action was transferred to the Southern District of New York on March 11, 2011 and transferred to the undersigned on November 8, 2011.

After the parties cross-moved for summary judgment, on August 22, 2012, this Court granted Kemira summary judgment on APL's breach of contract and negligence claims. (SJ Decision at 16, 24–25, ECF No. 96.) The Court declined to grant summary judgment for Kemira on APL's CERCLA claim. (Id. at 22.) In doing so, the Court held that (1) the bags in which the ferrous chloride crystals were packaged and shipped are “facilities” under 42 U.S.C. § 9601(9)(B) ; and (2) Kemira is a “potentially responsible party” (or “PRP”) because it was an “operator,” under 42 U.S.C. § 9607(a)(2), and not the “shipper” under 42 U.S.C. § 9607(20)(B). (Id. at 17, 22.)⁴ Accordingly, at the June 3, 2013 final pretrial conference, the Court made clear that the limited issues for trial were the scope of damages and the potential divisibility of such damages under 42 U.S.C. § 9607(a). (See 6/3/13 Tr. at 31, ECF No. 122; 6/4/13 Order ¶ 2, ECF No. 121.)

On August 26–28, 2013, the Court held a bench trial in this matter.⁵ The following individuals⁶ testified on behalf of APL: Dale Strieter, Technical Service Manager for Patriot Environmental Services (“Patriot”), Walt Dorn, Director of Emergency Services for Patriot, Haldis Fearn, Director of Hazardous Materials for the Americas for APL, Curtis Shaw, Director of Safety for APL, Mark Peterson, Manager of Insurance and Claims for APL, and Michael Bohlman, APL's proposed expert witness concerning the custom and practice in the steamship industry as to ensuring proper cargo packaging and the opening of cargo containers prior to transport. The following individuals testified on behalf of Kemira: Jerome Fahey, Vice President of Procurement at Kemira, Jan Pavlicek, Technical Product and Applications Manager at Kemira, Robert J. Ten Eyck, Kemira's proposed expert as to the bulk bags containing the ferrous chloride crystals, and Dr. Jeffrey V. Dagdigian, Kemira's proposed expert as to the adequacy and reasonableness of the cleanup and response efforts for both shipments of ferrous chloride under CERCLA.

The parties also submitted deposition designations for eight witnesses in lieu of live testimony⁷ : Melvin Blaine, Operations Manager at Kemira's facility in Fontana, California, William F. Sheridan, Director of Network Operations in the Western Region for APL, Shannon Mizell, Dangerous Goods Specialist at APL, Diane Terrien, Senior Manager of Documentation at APL, Robert Wetzel, General Manager at Transloading Environmental Corporation (“TEC”), Eri Soto, a TEC foreman, Robert Wolters, Operations Superintendant at California United Terminals (“CUT”), and John Chiu, Owner of FTS International Express.

This Opinion constitutes this Court's findings of fact and conclusions of law in this matter. As set forth below, this Court finds that plaintiffs are entitled to judgment on their CERCLA claim under 42 U.S.C. § 9607(a). The Court finds that the expenses incurred by APL were both necessary and incurred for cleanup and response efforts that were substantially consistent with the National Contingency Plan (“NCP”). The Court also finds that Kemira has failed to meet its burden of showing that any portion of the costs for which it is solely responsible are divisible.

FINDINGS OF FACT

A. The Parties

1. APL is a global transportation and logistics company providing, among other services, container transportation services. APL was the carrier of the two ferrous chloride crystal shipments aboard the M/V HYUNDAI INDEPENDENCE (“Hyundai Independence”) and the M/V APL SINGAPORE (“APL Singapore”) in the fall of 2006 that are at issue in this litigation. (See SF ¶¶ 2, 15.)

2. Kemira is a company that sells water treatment chemicals. Kemira was the consignee and importer of the ferrous chloride into the United States and arranged for its clearance through U.S. Customs. (See SJ Decision at 1; SF ¶ 4; Chiu Dep. at 11–12, 20–21, 26–28; JX19.)

3. At the time of the events alleged in the complaint, Fairyland was a Taiwanese chemical supplier. Fairyland was the supplier of the two shipments of ferrous chloride at issue. Fairyland has ceased all business and operations, and cannot be located. As a result, according to the docket, Fairyland does not appear to have been served with the complaint. (See SF ¶ 3; SJ Decision at 1, 2 n. 1.)

B. Background on Ferrous Chloride Crystal

4. Ferrous chloride crystal (also referred to as “FeCl2 crystal”) is a salt that is highly hygroscopic, which means that it attracts liquid and is prone to liquefaction when exposed to moisture. When ferrous chloride crystal liquefies, it is aggressively corrosive to most metals. (See Strieter Decl. ¶ 19; Trial Tr. at 76–78 (Strieter); JX12 at 1.)

5. Ferrous chloride crystal is a hazardous chemical classified as “Class 8: Corrosive” under the International Maritime Dangerous Goods (“IMDG”) Code promulgated by the International Maritime Organization of the United Nations. (See SF ¶ 14.)

6. In this case, Kemira purchased the ferrous chloride crystals from Fairyland to be sold to municipal and industrial entities for use as a water treatment product. These entities use ferrous chloride to remediate sewer odor (by neutralizing hydrogen sulfide) and to remove phosphorous at their wastewater plants. (See SF ¶ 9; Trial Tr. at 326 (Fahey), 363 (Pavlicek).)

C. The Fairyland–Kemira Purchase Agreement

7. On August 3, 2006, Kemira and Fairyland entered into a purchase agreement pursuant to which Kemira agreed to purchase ferrous chloride crystal from Fairyland, and Fairyland agreed to ship the chemical from Taiwan to California (the “Purchase Agreement”). The Purchase Agreement confirmed the product and price provisions for the sale of the ferrous chloride crystal. (See SJ Decision at 2; SF ¶ 12; JX6 at 1–2.)

8. The Purchase Agreement set forth the terms of sale as “DDP” or “delivery duty paid” by Fairyland to Kemira's plant in Fontana, California. (See SF ¶ 12.)

9. Schedule A of the Purchase Agreement set forth the “General Requirements” for packaging the ferrous chloride. In it, Kemira directs Fairyland that the ferrous chloride crystal shall:

1. Be shipped in bottom unloading 1 metric ton net weight bulk bags with four loops capable of suspending the entire bag.

2. The bulk bags will be shipped in such a manner to assure that all material arrives at destination with sacks intact and without material leakage.

3. The bulk bags shall be impermeable to water.

4. The bulk bags shall be loaded into the container such that they will be able to be unloaded via forklift trucks or via pallet jacks of U.S. specifications.

5. Material quality will be consistent throughout the shipment and within the bulk bags with respect to stated specifications.

6. Quantities of

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