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United States v. NCR Corp.

United States District Court, E.D. Wisconsin

August 22, 2017

NCR CORPORATION, et al., Defendants.



         The United States and State of Wisconsin lodged a proposed consent decree they negotiated with NCR Corporation and Appvion, Inc., with the Court and then published notice of the proposed settlement in the Federal Register. 82 Fed. Reg. 7862 (Jan. 23, 2017). In the governments' view, the proposed consent decree, as recently revised, will settle the overwhelming majority of outstanding issues relating to the cleanup of the Lower Fox River. Following a public comment period, the plaintiff governments, joined by NCR and Appvion, have now moved for court approval of the settlement. Only one of the remaining defendants, P.H. Glatfelter Company, opposes approval of the revised consent decree. For the reasons given below, the motion will be granted.

         I. BACKGROUND

         This case is one of two cases before the Court involving the effort to remediate the pollution of the Lower Fox River caused by the discharge of polychlorinated biphenyls (PCBs), a highly toxic organic compound which was used from 1954 to 1971 in the production of carbonless copy paper (CCP), a product developed and sold exclusively by NCR Corporation. The cleanup, which is ongoing, was anticipated to be the largest environmental dredging project ever undertaken. The first case, the Whiting case or contribution action (Case No. 08-C-016), was commenced by NCR and Appleton Papers, Inc., (now Appvion, Inc.) in 2008 in an effort to force other entities the EPA had identified as potentially responsible parties (PRPs) to contribute to the cost of the clean-up. This second action, the enforcement action, was commenced by the United States and the State of Wisconsin against NPR, Appleton Papers and other PRPs to enforce the EPA's Administrative Order for Remedial Action after work on the clean-up had slowed in response to certain decisions the Court had rendered in the contribution action. The following facts, taken largely from the Court's December 16, 2009 decision in the contribution action dismissing on summary judgment the plaintiffs' contribution claims, Whiting, Dkt. 795 at 1-7; 2009 WL 5064049, at *1-11, provide the context in which the current dispute between the parties arises.

         In 1954 the National Cash Register Corporation introduced “No Carbon Required” copy paper, the name being a play on NCR's corporate name. A key component of NCR paper, also known as carbonless copy paper (CCP), was an emulsion (a mixture of liquids that do not mix) containing Aroclor 1242, a solvent manufactured by the Monsanto Corporation. Aroclor 1242 is a type of polychlorinated biphenyl (PCB), a stable compound that does not easily degrade. PCBs have been linked to illness and death in fish, birds and other wildlife, and studies suggest that their persistence in the environment has caused numerous health problems, including cancer, in humans who have consumed fish or had other contact with PCBs.

         Although NCR developed and sold its carbonless paper product and created the PCB-containing emulsion, the paper was actually manufactured by the Appleton Coated Paper Company, which coated sheets of paper with NCR's emulsion. This manufacturing process resulted in significant discharges of PCBs into the Fox River. But PCBs also escaped into the river in other ways. The Lower Fox River area boasts the largest concentration of paper mills in the world, and prior to 1972 many of these mills recycled NCR-brand carbonless copy paper. Some purchased the waste paper and trimmings called “broke” that inevitably resulted from the CCP manufacturing process from NCR/Appleton Coated Paper and used it to manufacture their own paper products. As CCP became commonly used throughout the business world, and the paper recycling industry grew, CCP also became a significant part of the recycled paper that the paper mills purchased on the after-use market. The recycling and de-inking processes several of the mills developed to prepare the broke and recycled paper for use in their own manufacturing process likewise led to the release of PCBs into the river. As a result, the EPA named NCR and Appleton Papers, both successors to Appleton Coated Papers; the paper mills; and various other entities, such as cities, utilities and sewerage districts that treated and/or released wastewater containing PCBs from NCR's CCP and/or broke into the river as PRPs for the clean-up. Finally, even after NCR stopped using PCBs in its emulsion in 1971, stocks of pre-1971 paper still remained in offices for years. As this paper was used up, it was sent for recycling along with other paper, and the recycling process led to smaller quantities of PCBs releasing into the river throughout the 1970s and possibly later.

         In November 2007, the EPA issued a unilateral administrative order pursuant to 42 U.S.C. § 9606(a) requiring that NCR, Appleton Papers, and six other respondents conduct certain remedial actions in the downriver part of the Lower Fox River. The EPA's order followed years of activity by various PRPs to address the Lower Fox River contamination. Some of the activity was pursuant to Consent Decrees the EPA and the Wisconsin Department of Natural Resources (WDNR) reached with various PRPs and much of it was the result of voluntary cooperation among and between the parties. With the bulk of the cleanup work yet to be done and the parties unable to reach agreement on how the costs of the remediation were to be allocated, NCR and Appleton Paper commenced the contribution action “to put in place a procedure for determining each unsettled PRP's allocable share of the cleanup costs and natural resource damages.” Whiting, Dkt. 9 at 2. Though initially naming only George Whiting Company as a defendant because of its refusal to execute a tolling and standstill agreement, the case expanded through a series of amended complaints. The plaintiffs eventually brought more than twenty additional parties into the suit, including the various paper companies along the 39-mile stretch of the River who had allegedly discharged PCBs in the course of their recycling processes, various municipalities and/or their sewage treatment plants that had discharged PCBs in treated waste water from the paper mills into the River and perhaps other sources, and the City of Green Bay and the Army Corps of Engineers whose involvement consisted of dredging the bottom of the portion of the River within the City limits to allow large ships access to the industrial plants and warehouses along the River and in the process moving PCBs from one area of the River to another.

         Early motion practice in the case resulted in the dismissal of the plaintiffs' cost recovery claim, leaving only a contribution action for past and future cleanup costs and allocation for natural resource damages. The parties then met in an effort to reach agreement on a case management plan for what all believed would be a massive undertaking. This was especially true if the key focus became the amount and location of PCBs each of the parties had discharged into the Lower Fox River from 1954, when NCR first introduced its CCP, through 1971, when it ceased using PCBs in the manufacturing process, and beyond as the then existing stock cycled through the economy. As the Court noted in a case management order entered at that time, “[a]ll parties agree that full preparation of the case for trial would require extensive document discovery, deposition of several hundred witnesses, and retention of experts at substantial expense to each party. Trial of all issues at once could take months.” Whiting, Dkt. 252 at 1.

         A number of the parties the plaintiffs brought into the case had not been named as respondents in the EPA's November 2007 Unilateral Administrative Order (“UAO”) for Remedial Action (the non-UAO parties) and, viewing their own PCB contributions as minimal to nonexistent, argued they did not belong in the lawsuit. They requested and were granted a 4-month stay during which they would attempt to work out settlements with the EPA that would bar the plaintiffs' contribution claims and thereby allow them to avoid the massive litigation costs required for a defense. The remaining defendants-primarily the paper companies-did not deny that they belonged in the lawsuit but argued that discovery should focus first on two issues: (1) when each party knew, or should have known, that recycling NCR-brand carbonless paper would result in the discharge of PCBs to a waterway, thereby risking environmental damages; and (2) what, if any, action each party took upon acquiring such knowledge to avoid the risk of further PCB contamination. Id. at 2-3. These defendants argued that resolution of these issues first would materially improve the likelihood that the parties would be able to settle most if not all of the case without the protracted discovery and trial that would otherwise be required.

         NCR and Appleton Paper strongly opposed the defendants' suggestion, noting that knowledge and action or inaction by a party are only two of the multiple factors a court should consider in apportioning liability under CERCLA. The plaintiffs argued that the case would more likely settle with a firm trial date and discovery proceeding on all issues at once. The plaintiffs also argued that staying discovery as to certain issues would be unfair and prejudicial because it would risk the further loss of evidence, as key witnesses to events that transpired over three decades ago pass away, and unduly emphasize only two of the myriad of factors the Court must ultimately consider.

         In a decision that was intended to further the goal of arriving at a “just, speedy, and inexpensive determination of [the] action, ” Fed.R.Civ.P. 1, but that in hindsight is difficult not to question, the Court adopted the defendants' recommendation, explaining:

Having considered the arguments of counsel, I now conclude that the defendants' proposal, as modified, is the more efficient and just way to proceed with this action. I am satisfied, without prejudging the issue, that knowledge and fault could constitute the principal bases on which contribution may be allocated. See Environmental Transp. Systems, Inc. v. ENSCO, Inc., 969 F.2d 503, 509 (7th Cir. 1992). The cases make clear that there are no hard and fast rules for an equitable claim based on contribution, but certainly fairness would seem to dictate that those who were in the best position to know about possible contamination (or those who did know) should bear more responsibility than parties further down the stream (so to speak). Indeed, under some circumstances, joint tortfeasors having substantially greater culpability can be denied contribution altogether. See Restatement (Second) of Torts § 886B (1979). If a ruling can be reached on this issue in advance of proceeding with the rest of the case, it could obviate the need for numerous parties to engage in extensive discovery, the cost of which could exceed several parties' actual liability. Accordingly, defendants' proposal, as modified to include consideration of the knowledge and actions of the defendants, and to allow sufficient time for the court to decide potential motions for summary judgment on the issues raised, will be adopted herein.

Id. at 4.

         The parties undertook discovery in accordance with this plan and then filed motions for summary judgment. In a decision dated December 16, 2009, the Court concluded from the undisputed evidence before it that while none of the defendants knew they were discharging PCBs into the Fox River during the 1960s, “by the late 1960s, NCR had access to the vanguard of data suggesting an appreciable risk of serious and long-lasting environmental damage resulting from the production and recycling of NCR paper.” Whiting, Dkt. 795 at 26, 2009 WL 50640949, at *14. This fact, combined with the fact that NCR actually increased production in the final years as the risk should have been more apparent, while the defendants neither knew of the presence of PCBs nor were in a position to know of their presence and the environmental risk posed by PCBs, led the Court to conclude that the plaintiffs' contribution claims against the other defendants were barred. Whiting, Dkt. 795 at 27-46; 2009 WL 5064049, at *14-25.

         It would be an understatement to say that this decision did not induce the parties to settle the case. NCR and Appleton Papers, the latter of which was later determined to have no direct liability due to the terms of the asset purchase agreement by which it acquired the coating plant from NCR, were convinced that the Court had erred in its equitable apportionment, and slowed and eventually ceased what had been their voluntary clean-up measures. The remaining defendants, armed with what they may have viewed as a shield to further liability and a vehicle for recovering some or all of what they had already spent on the clean-up, were even less receptive to NCR's insistence that they contribute.

         While the dispute continued between the PRPs, the EPA and the WDNR commenced this action to enforce the EPA's UAO against twelve parties it had identified as PRPs to insure that the clean-up continued. Although the plaintiffs' complaint asserted six separate claims, including claims for recovery of past and future response costs of the federal and state governments, and for natural resources damages (NRD), the governments sought immediate relief on only their fifth claim for relief which sought enforcement of the November 2007 UAO. On April 27, 2012, the Court entered an order granting the EPA's motion for a preliminary injunction requiring NCR to continue the clean-up work called for by the remedial action plan. Dkt. 370, 2012 WL 1490200. That order was later affirmed on appeal. United States v. NCR Corporation, 688 F.3d 833 (7th Cir. 2012).

         In the meantime, discovery and further motion practice in the contribution action continued, revolving around such issues as the defendants' contribution counterclaims, insurance set-offs, and NCR's potential liability for upstream discharges as an arranger under 42 U.S.C. § 9607, the last of which issues resulted in a seven-day court trial. Whiting, Dkt. 1405, 2012 WL 2704920. The cases continued to proceed parallel to each other with the principal focus in the enforcement action on (1) the propriety of the remedy called for in the EPA's 2007 amendment of the record of decision (ROD) and (2) whether the harm to the River was divisible and capable of apportionment.

         Following years of investigation, field studies and analysis, the EPA, in partnership with the WDNR, had selected dredging and removal of PCBs from the riverbed as the default remedial method, but allowing for capping and sand covering where certain design criteria were met. The ROD set a remedial action level (RAL) of one part per million (1 ppm), meaning that remediation was required in all areas of the River where the concentration of PCBs exceeded 1 ppm. The Court ultimately concluded on summary judgment that the EPA's decision selecting a combination of dredging and capping was not arbitrary and capricious, a decision that the Seventh Circuit affirmed on appeal. United States v. NCR Corp., 911 F.Supp.2d 767 (E.D. Wis. 2012), aff'd., 768 F.3d 662, (7th Cir. 2014). The question of whether the harm was divisible and thus capable of apportionment, however, became the primary defense to the government's enforcement action of NCR and, later, P.H. Glatfelter Company, the furthest upstream of the paper companies. It was also the central issue of an eleven-day bench trial.

         Divisibility had taken on fresh significance as a defense following the Supreme Court's 2009 decision in Burlington Northern & Santa Fe Railroad Company v. United States, 556 U.S. 599 (2009). Section 107(a) of CERCLA imposes strict liability for contamination on the owner of any facility that discharges hazardous substances into the environment, and where owners of two or more facilities discharge hazardous substances into a body of water such as a river, they are jointly and severally liable for the entire harm unless they can show that a reasonable basis for apportionment of the harm exists. Where a reasonable basis for apportionment can be shown, however, each party is only liable for that portion of the harm that is attributable to that party and the equitable factors governing contribution claims play no role. This rule is consistent with the Restatement of the Law of Torts: “Where the tortious conduct of two or more actors has combined to bring about harm to the plaintiff, and one or more of the actors seeks to limit his liability on the ground that the harm is capable of apportionment among them, the burden of proof as to the apportionment is upon each such actor.” Restatement (Second) of Torts, § 433B(2). The reason for the rule placing the burden of proof as to apportionment on the defendants is to avoid the injustice of allowing multiple defendants who have combined to cause the plaintiff harm to further burden the plaintiff by requiring that he or she present such evidence or, even worse, allow the defendants to escape liability where the nature of the harm makes apportionment difficult or impossible. “As between the proved tortfeasor who has clearly caused some harm, and the entirely innocent plaintiff, any hardship due to lack of evidence as to the extent of the harm caused should fall upon the former.” Id., cmt. d; United States v. NCR Corp., 960 F.Supp.2d 793, 796-97 (E.D. Wis. 2013).

         Prior to Burlington Northern, exceptions to joint and several CERCLA liability were considered rare and the EPA could usually recover its costs in full from any responsible party, regardless of that party's relative fault. Metro. Water Reclamation Dist. of Greater Chicago v. N. Am. Galvanizing & Coatings, Inc., 473 F.3d 824, 827 n.3 (7th Cir. 2007) (“The only exception to joint liability is when the harm is divisible, but this is a rare scenario.”). Thus, in cases where there were multiple PRPs, they were left to resolve their differences over how much each should pay in contribution actions if they could not otherwise reach agreement either with the government or among themselves. That was what NCR was attempting to accomplish here in filing its contribution action. But in Burlington Northern, decided the year after NCR commenced its contribution action, the Court upheld a district court finding that the chemical contamination of soil and ground water on land where a defunct agricultural chemical distribution business had operated was divisible. The district court in that case had apportioned the liability of the two solvent PRPs: Burlington Northern Railroad, which had leased a portion of land where spills had occurred to the defunct distributor, and Shell Oil Company, which had sold one of the chemicals that over time had been spilled onto the ground. The district court calculated the railroad's liability at 9% and Shell's at 6%, thereby leaving the remaining 85% of the government's response costs unrecoverable. 556 U.S. at 602-07. On appeal, the Supreme Court absolved Shell of any liability and upheld the district court's finding that the railroad's liability was limited to 9% of the total clean-up costs, based on the length of time the railroad had leased its property to the distributor, its estimate of the percentage of spills that occurred on its property, and a calculation error of up to 50%. Id. at 616-17.

         Given the Supreme Court's decision upholding the district court's finding that the contaminated soil and ground water in Burlington constituted divisible harm, NCR focused its efforts in the enforcement action on establishing just such a defense here in an effort to substantially limit its ultimate liability. To do so, NCR undertook the very type of detailed and costly discovery and expert analysis the Court's initial case management plan was intended to avoid, and the other parties responded in kind. Experts, along with technicians working under their supervision, were retained to carefully map the part of the River designated Operating Unit (OU) 4, from the De Pere dam to its termination into the lake waters of Green Bay and analyze sediment samples collected and analyzed, along with historical documents relating to recycling and production of CCP and other paper products during the fifteen-year production period that had ended some thirty-five years earlier. After one expert arrived at an estimate of the percentage of the total PCBs each PRP discharged into the River over the past fifty-five years, another expert input that data into a fate-and-transport computer model designed to simulate the movements of sediment and PCB ...

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