Am International, Inc. v. Datacard Corporation, Dbs, Inc., Addressograph Farrington, Inc.

106 F.3d 1342, 27 Envtl. L. Rep. (Envtl. Law Inst.) 20503, 44 ERC (BNA) 1001, 1997 U.S. App. LEXIS 2284, 30 Bankr. Ct. Dec. (CRR) 434, 1997 WL 55366
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 11, 1997
Docket96-1621
StatusPublished
Cited by57 cases

This text of 106 F.3d 1342 (Am International, Inc. v. Datacard Corporation, Dbs, Inc., Addressograph Farrington, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Am International, Inc. v. Datacard Corporation, Dbs, Inc., Addressograph Farrington, Inc., 106 F.3d 1342, 27 Envtl. L. Rep. (Envtl. Law Inst.) 20503, 44 ERC (BNA) 1001, 1997 U.S. App. LEXIS 2284, 30 Bankr. Ct. Dec. (CRR) 434, 1997 WL 55366 (7th Cir. 1997).

Opinions

EVANS, Circuit Judge.

For nearly 25 years, AM International (AMI) spilled hazardous chemicals at an industrial site in Holmesville, Ohio. This case involves the claims of a subsequent purchaser of the site, Datacard Corporation, arising out of the site’s cleanup. Before the district court, AMI argued that its liability had been discharged in bankruptcy. The court disagreed and awarded Datacard response costs, an injunction requiring AMI to perform the cleanup, and attorney fees. As we’ll explain below, we affirm the award of response costs and the injunction, but reverse the award of attorney fees. First, the facts.

From 1959 to 1981 ÁMI housed two of its divisions, Multigraphics and Addressográph, at the Holmesville site. On part of the site Multigraphics operated a “tank farm.” The farm consisted of nine tanks ranging in capacity from 6,000 to 8,000 gallons. Multi-graphics used the tanks to mix tetrachloroe-thylene (TTE) with naphtha to produce “Blankrola,” a cleaning solvent. When mixing the chemicals, Multigraphics’ employees sometimes spilled a little. Sometimes they spilled a lot. In 1971, for example, an employee named Ron Proper didn’t exactly live up to his name. Instead, Mr. Proper failed to properly close a valve, a misstep that allowed thousands of gallons of Blankrola to pour onto the ground.

In November 1981 AMI sold the site and Addressográph to a company called DBS, Inc. In order to allow Multigraphics to continue producing Blankrola in Holmesville, however, AMI retained ownership of the tanks and leased the tank farm grounds back from DBS. When AMI sold Addressográph, [1346]*1346many of AMI’s employees, including Ron Proper, jumped ship and signed on with DBS. Five months later, in April 1982, AMI petitioned for reorganization under chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq., in the Northern District of Illinois. During and after the bankruptcy, which was confirmed in September 1984, AMI continued to mix—and spill—TTE, naphtha, and Blank-rola. In May 1985, AMI finally put the lid on its tank farm operations.

About a year later, Datacard entered the picture. Datacard planned to buy DBS and, as part of its due diligence, conducted an environmental audit of the Holmesville site. The audit turned up soil contamination and a layer of Blankrola at least 12 inches thick floating on the groundwater. Despite the find, Datacard went ahead with the purchase, figuring it had a good shot at recovering its cleanup costs from AMI and that the cleanup would only run about $350,000—small change in comparison to the $52 million it was shelling out to buy DBS.

After completing the purchase, Datacard syphoned the Blankrola off of the groundwater and gave AMI, the State of Ohio, and the EPA notice that it planned to sue for its response costs and an injunction ordering AMI to clean up its own mess. After receiving this notice, AMI raced back to the federal courthouse for the Northern District of Illinois and sought a judgment declaring that Datacard’s claims had been discharged in bankruptcy. In turn, Datacard filed counterclaims against AMI, requesting damages and injunctive relief under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. § 6901 et séq., and state common law. In 1992, the district court granted summary judgment for AMI on the state law claims but denied it on the CERCLA and RCRA claims. Among other things, the court found that a genuine issue of material fact existed as to whether DBS had sufficient information to give rise to a CERCLA claim before AMI’s bankruptcy was confirmed in 1984. AMI cried foul and moved to reopen discovery, arguing the “sufficient information” standard applied by the district court was a substantial departure from established precedent. Sensing AMI was merely trying to fine tune over 4 years of discovery, the court denied the request.

In 1993, with the Illinois case almost 6 years old and still pending, AMI found itself back in troubled financial waters and once again petitioned for reorganization in bankruptcy, this time in Delaware. In an effort to liquidate Datacard’s claims, the Delaware bankruptcy court lifted the automatic stay and gave the green light for the Illinois case to go to trial. After a 3-day bench trial AMI filed its post-trial brief, requesting that Data-card’s claims be disallowed under § 502(e)(1)(B) of the Bankruptcy Code. The district court struck that portion of the brief, finding that the Delaware court retained exclusive jurisdiction on the allowance of claims and that AMI waived the affirmative defense of disallowance by failing to raise it before— or even during—the trial.

In September 1994 the district court entered judgment for Datacard and, with a few minor changes, adopted Datacard’s proposed findings of fact and conclusions of law. Specifically, the court found: Datacard’s claims had not been discharged; Datacard was entitled to its response costs, attorney fees, and interest under CERCLA; Datacard was entitled to contribution from AMI for any future judgments entered against Datacard for response costs; and Datacard was entitled to both an injunction requiring AMI to perform any future cleanup and an award of attorney fees on its RCRA and CERCLA citizen suit claims.

We review the district court’s findings of fact for clear error and its legal conclusions de novo. Maher v. Harris Trust & Sav. Bank, 75 F.3d 1182 (7th Cir.1996). However, we will apply the clearly erroneous standard with a little more bite where a district court has adopted a party’s findings of fact verbatim. Andre v. Bendix Corp., 774 F.2d 786, 800 (7th Cir.1985).

AMI first argues that the district court erred in allowing Datacard to directly pursue response costs under CERCLA § 107(a)(4)(B), 42 U.S.C. § 9607(a)(4)(B). Only innocent parties, AMI says, can sue [1347]*1347under § 107(a)(4)(B). Datacard was limited, AMI asserts, to a claim for contribution under § 113(f). We disagree. In Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761 (7th Cir.1994), we held that cost recovery disputes between two potentially responsible parties should ordinarily be addressed as claims for contribution under § 113(f). However, we noted if a landowner faces liability solely because a third party spilled or allowed hazardous waste to migrate onto its property, the landowner may directly sue for its response costs. Id. at 764. In this case, Data-card presumably paid less for DBS because it knew it was buying into an expensive cleanup. While that may have rendered Datacard a little less “innocent” than the landowner described in Akzo, Datacard did not take part in the manufacture of Blahkrola. Instead, Datacard—like a party forced to clean up contamination on its property due to a third party’s spill—faces liability merely due to its status as landowner.

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Bluebook (online)
106 F.3d 1342, 27 Envtl. L. Rep. (Envtl. Law Inst.) 20503, 44 ERC (BNA) 1001, 1997 U.S. App. LEXIS 2284, 30 Bankr. Ct. Dec. (CRR) 434, 1997 WL 55366, Counsel Stack Legal Research, https://law.counselstack.com/opinion/am-international-inc-v-datacard-corporation-dbs-inc-addressograph-ca7-1997.