United States v. ISP Envtl. Servs.

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UNITED STATES OF AMERICA, Plaintiff, v. ISP ENVIRONMENTAL SERVICES INC. and G-I HOLDINGS INC., Defendants.

Civil Action No. 22-4344 (JXN) (JBC)

United States District Court, D. New Jersey

May 7, 2024

OPINION

JULIEN XAVIER NEALS United States District Judge.

This matter comes before the Court on Defendant ISP Environmental Services Inc.'s (“IES”) motion to dismiss the United States of America's (“Plaintiff”) complaint (ECF No. 1) (the “Complaint”) pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 5). Plaintiff opposed (ECF No. 16), and IES replied. (ECF No 21). Jurisdiction is proper pursuant to 28 U.S.C §§ 1331, 1345 and 1355, and 42 U.S.C. §§ 9613(b). Venue is proper pursuant to 28 U.S.C. § 1391(b) and 42 U.S.C. § 9613(b). The Court has carefully considered the parties' submissions and heard oral argument on April 22, 2024. (ECF No. 51). For the reasons set forth below, IES's motion to dismiss (ECF No. 5) is DENIED.

I. BACKGROUND AND PROCEDURAL HISTORY

This is an environmental matter under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), 42 U.S.C. §§ 9606(b)(1), 9607(a), (c)(3), and 9613(g)(2). On June 30, 2022, Plaintiff filed the three-count Complaint against IES and Defendant G-I Holdings Inc. (“G-I”) alleging in pertinent part that IES and GI (together, the “Defendants”) are liable for the “release[]” of “hazardous substances” “from the LCP Chemicals, Inc., Superfund Site in Linden, Union County, New Jersey” (the “Linden Site”), “including mercury” into the “South Branch Creek and the Northern Off-Site Ditch.” (Compl. ¶¶ 1, 14, 56, 65-66).^[1]

Count One is alleged against Defendants for the “recovery of unreimbursed response costs incurred, and to be incurred, in response to” the release of hazardous substances from the Linden Site. Counts Two and Three are alleged against IES only for “civil penalties and punitive damages” related to IES's “failure without cause to comply with” the U.S. Environmental Protection Agency's (“EPA”) “May 20, 2015” Order “directing IES to complete the remedial design of the remedy selected for the” Linden Site. (Id. ¶ 1). The relevant facts follow.

From “1972 until the mid-1980s[,]” the Linden Site “was owned and operated by GAF Corporation” (“Old GAF”)[.]” (Id. ¶ 15). In 1987, G-I, a “holding subsidiary for five additional subsidiaries[,]” including “Dorset Inc. [(“Dorset”)], Edgecliff Inc. [(“Edgecliff”)], Clover Inc., Perth Inc. and Merick Inc.[,]” was incorporated “as a direct, wholly-owned subsidiary of” Newco Holdings, Inc. (“Newco Holdings”), which had a subsidiary named Newco Acquisition Corp. (“Newco Acquisition”). (Id. ¶ 32). In 1988, Newco Holdings and Newco Acquisition entered an “Agreement and Plan of Merger” with Old GAF, “agreeing to merge [Newco] Acquisition with and into” Old GAF, with Old GAF “as the surviving company.” (Id. ¶ 35). Old GAF “became an indirect subsidiary of [Newco] Holdings and a direct subsidiary of the five subsidiaries of” G-I and “expressly retained its liabilities under CERCLA.” (Id. ¶¶ 30, 36).

In 1989, Old GAF entered a “Plan of Complete Liquidation” that “transferred most of its assets and related liabilities to its five direct parent companies.” (Id. ¶ 37). Dorset “acquired” Old GAF's “assets and assumed its liabilities” related to its “Chemicals Businesses” and “acquired nearly 88% of the fair market value of” Old GAF's assets, which “include the assets and liabilities” of the Linden Site. (Id. ¶¶ 38-39). Edgecliff acquired Old GAF's “assets and assumed its liabilities relating” to its other businesses and “acquired nearly 10.85% of its fair market value of” Old GAF's assets. (Id. ¶ 40). Alleged in the alternative, “the assets and liabilities” assumed by Edgecliff “include the assets and liabilities of the Linden Site.” (Id. ¶ 41). In 1989, Old GAF was dissolved and Newco Holdings “changed its name to GAF Corporation” (“New GAF”). (Id. ¶ 43). “That same day, GAF Chemicals Corporation was merged into Dorset[], which was then renamed GAF Chemicals Corporation” (“GAF Chemicals”). (Id. ¶ 43).

In 1991, GAF Chemicals “entered into a reorganization agreement that created” International Specialty Products Inc., and its subsidiary” IES. (Id. ¶ 47). That year, IES entered “an ‘Assumption of Liabilities and Continuing Obligations' agreement ‘in favor of' GAF chemicals and New GAF.” (Id. ¶ 48). “Under this agreement, IES assumed from GAF Chemicals ‘[a]ll liabilities and obligations relating to the manufacture and sale of specialty chemicals at” the Linden Site. (Id. ¶ 49). In 2000, New GAF “merged into” G-I. (Id. ¶ 51).

As a result of these mergers, G-I “became the corporate successor to New GAF and, in turn, corporate successor to Old GAF.” (Id. ¶ 52). Thus, G-I “is the successor-in-interest to Old GAF's liability under CERCLA notwithstanding any assumption of liabilities under the Plan of Complete Liquidation and/or IES's assumption of liabilities under the ‘Assumption of Liabilities and Continuing Obligations' agreement.” (Id. ¶ 53). Additionally, IES “expressly assumed the liabilities of Old GAF.” (Id. ¶¶ 49, 54). “Alternatively, as the successor to” formerly Edgecliff, “G-I expressly assumed the liabilities of Old GAF.” (Id. ¶ 55).

In 1998, IES “indicated that it was a successor to Old GAF with respect to the” Linden Site. (Id. ¶ 57). In response to an EPA letter “sent to several potentially responsible parties” or (“PRP”), IES made “a good faith offer to perform” the “remedial investigation and feasibility study” (“RI/FS”) to help “finance and/or perform the RI/FS” at the Linden Site. (Id. ¶¶ 60-61). In 1999, IES and the EPA “entered into an Administrative Order on Consent” (“AOC”) “requiring IES to perform RI/FS work at” the Linden Site. (Id. ¶ 62). In 2013, IES “completed” RI and FS Reports regarding the RI/FS work at the Linden site. (Id. ¶¶ 63-64).

On July 8, 2022, IES filed the instant motion to dismiss.^[2]On August 1, 2022, Plaintiff opposed. On August 8, 2022, IES replied. This matter is ripe for consideration.

II. LEGAL STANDARD

Rule 8 requires that a pleading include “a short and plain statement of the claim showing that the pleader is entitled to relief” and provide the defendant with “fair notice of what the claim is and the grounds upon which it rests[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation and internal quotations and ellipses omitted). On a Rule 12(b)(6) motion, the “facts alleged must be taken as true” and dismissal is not appropriate where “it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits.” Phillips v. Cnty. Of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (citation omitted). A complaint will survive a motion to dismiss if it provides a sufficient factual basis to state a facially plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

To determine whether a complaint is sufficient, the Third Circuit requires a three-part inquiry: (1) the court must first recite the elements that must be pled in order to state a claim; (2) the court must then determine which allegations in the complaint are merely conclusory and therefore need not be given an assumption of truth; and (3) the court must “assume the[] veracity” of well-pleaded factual allegations and ascertain whether they plausibly “give rise to an entitlement for relief.” Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (citations omitted).

III. DISCUSSION^[3]

A. Count One Pleads a Plausible Section 107(a) Claim against IES

The thrust of IES's contention is that CERCLA prohibits the transfer of liability as a matter of law under 42 U.S.C. § 9607(e)(1). (ECF No. 5-1 at 16-23).^[4] Plaintiff counters that IES conflates “divesting” liability, which § 9607(e)(1) prevents, with successor liability, which CERCLA allows. (ECF No. 16 at 14-25). The Court agrees.

1. The Complaint Sufficiently Alleges Successor Liability

Under CERCLA, a “person” means “an individual, firm, corporation, association, partnership ....” 42 U.S.C. § 9601(21). A “facility” means “any site or area where a hazardous substance has been deposited, stored, disposed of, or placed ....” § 9601(9). A “release” means “any spilling, leaking, pumping, pouring, emitting, emptying, discharging, . . . into the environment ....” § 9601(21). A “hazardous substance” means “any element, compound, mixture, solution or substance” that “when released into the environment may present substantial danger to the public health or the environment ” §§ 9601(14), 9602(a). “Response” means “remove, removal, remedy, and remedial action ” § 9601(25).

Here, Plaintiff alleges that the Linden Site is a “facility” under CERCLA. (Compl. ¶ 88). Old GAF “was an ‘owner' and/or ‘operator'” of the Linden Site “at the time of ‘disposal' of a hazardous substance” at the Linden Site. (Id. ¶ 70). There “have been ‘releases' under CERCLA, and “threatened releases, of ‘hazardous substances,'” within the meaning of the same statute. (Id. ¶ 73). Specifically, “mercury, arsenic, lead, polychlorinated biphenyls, VOCs, and semi-VOCs.” (Ibid.). And the “EPA has incurred and will continue to incur response costs ....” (Id. ¶ 74). To trigger IES's liability, Plaintiff must allege that IES is a PRP to stand in Old GAF's place.

“PRPs are: (1) current owners and operators of the ‘facility' at which the contamination occurred; (2) persons who were owners or operators of the facility ‘at the time of disposal of any hazardous substance'; (3) persons who arranged for the disposal or treatment of the hazardous substance; and (4) persons who transported the hazardous substance.” Litgo N.J Inc. v. Comm'r N.J. Dep't of Envtl. Prot., 725 F.3d 369, 379 (...