Free Supplement/Amendment - District Court of Colorado - Colorado

Case 1:01-cv-01807-MSK-MJW

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Filed 11/05/2007

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No.: 01-cv-01807-MSK-MJW BANK ONE, COLORADO, N.A. and, BANK ONE TRUST COMPANY, N.A., As Trustee of the Frank G. Jamison Marital Trust and the Frank G. Jamison Family Trust, Plaintiffs, v. C.V.Y. CORPORATION, d/b/a Your Valet Cleaners; and, JOHNNY ON THE SPOT, INC. Defendants.

BOULDER CLEANERS, INC. and, JOHN'S CLEANER'S, INC., Cross-Plaintiffs, v. C.V.Y. CORPORATION, d/b/a Your Valet Cleaners, Cross-Defendant. ______________________________________________________________________________ SUPPLEMENTAL REPLY OF C.V.Y. CORPORATION AND JOHNNY ON THE SPOT, INC. IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH CONTRIBUTION PROTECTION ______________________________________________________________________________ COME NOW, Defendant and Cross-Defendant C.V.Y. Corporation ("CVY"), and Defendant Johnny On The Spot, Inc. ("JOS"), and for their Supplemental Reply in Support of Joint Motion for Approval of Settlement Agreement with Contribution Protection ("Contribution Motion"), state as follows: Plaintiffs Bank One, N.A. and Bank One Trust Company, N.A. (the "Bank"), and Defendants CVY and JOS have entered into a Settlement Agreement to settle the claims among them and the

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Settlement Agreement has now been made public. The Settlement Agreement completely resolves all claims and defenses between and among these parties, and also resolves any liability relating to CVY, JOS or their officers, directors, shareholders, successors, affiliates, owners, employees, agents, heirs, and assigns (the "Settling Defendants"). Pursuant to and as a result of the settlement, the parties to the settlement have jointly requested that the Court enter an Order approving the Settlement Agreement and granting contribution protection pursuant to both 42 U.S.C. § 9613(f)(2) and the Uniform Comparative Fault Act ("UCFA"). The requested relief and proposed Order is substantially the same as that requested by Boulder Cleaners, Inc. and John's Cleaners, Inc. ("BCI/JCI"), in connection with their previous settlement with the Bank. The Order which BCI/JCI submitted at the time of their settlement with the Bank asked, inter alia, for the Court to find: (1) The Settlement Agreement was reached in good faith following armslength negotiations among the signatories; (2) The Settlement Agreement meets the standards of fairness, reasonableness, and faithfulness to the statutory objectives of CERCLA that is required of CERCLA settlements; * * *

(4) All contribution claims relating to any matter addressed in the Settlement Agreement, whether asserted or not asserted by any non-settling Defendants or any other potential Defendant against the Settling Defendants or against The Dugout, Inc., whether arising under CERCLA or state law, are hereby barred. See Joint Motion for Approval of Settlement Agreement and Dismissal of Claims with Prejudice and with Contribution Protection, Exhibit 2 (Doc.#173).

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The proposed Order submitted by CVY, JOS and the Bank in connection with the instant settlement requests that the Court find: (1) The Settlement Agreement was reached in good faith following arm'slength negotiations among the signatories; (2) The Settlement Agreement meets the standards of fairness, reasonableness, and faithfulness to the statutory objectives of CERCLA that is required of CERCLA settlements; and (3) All contribution claims against the Settling Defendants relating to any matter addressed in the Settlement Agreement, whether asserted or not asserted by any third-parties whether arising under CERCLA or state law, are hereby barred. See Joint Motion for Approval of Settlement Agreement with Contribution Protection, Attachment #1 (Doc. #492). In objecting to the instant Contribution Motion, BCI/JCI do not take issue with the amount paid, the contents of the Settlement Agreement or whether the Settling Defendants are entitled to contribution protection. Indeed they cannot, as the protection sought is substantially similar to the protection which they themselves sought in connection with their settlement with the Bank. Rather, BCI/JCI wish to inject into the proceedings extraneous and premature issues as to what, if any, effect the requested contribution bar will have on BCI/JCI's cross-claims against CVY in this Court and BCI/JCI's claims against, inter alia, various stockholders, officers and/or directors of CVY and/or JOS in a state court case pending in the Denver District Court. 1 Setting aside for the moment

1 The state court case alleges not only breach of contract, but also breach of fiduciary duties, civil conspiracy, fraud, negligent misrepresentation and constructive trust.

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jurisdictional issues concerning the propriety of this Court issuing orders concerning what effect the instant settlement will or will not have upon proceedings in a state court, it simply is premature to address the issues raised by BCI/JCI even with respect to the cross-claims pending in this Court. The issue before this Court at the present time is simply whether the Settlement Agreement is "reasonable, fair and consistent with the purposes CERCLA is intended to serve." See, United States v. Cannons Engineering Corp., 899 F.2d 79, 85 (1st Cir. 1990) (quoting H.R.Rep. No. 253, Pt. 3, 99 Cong., 1st Sess. 19 (1985) (Legislative history of Superfund Amendment and Reauthorization Act of 1986). If it is, the Settling Defendants are entitled to contribution protection. In considering whether a settlement is reasonable, fair and consistent with the purposes of CERCLA, courts examine whether the settlement was the result of good faith arms-length bargaining, whether it adequately compensates the Plaintiffs, whether it promotes clean-up of the site, and whether it is consistent with the purposes CERCLA is intended to serve. Cannons, 899 F.2d at 85-93. BCI/JCI do not suggest that the instant settlement is deficient in any of these respects. Accordingly, this Honorable Court should approve the Settlement Agreement with contribution protection pursuant to CERCLA §113(f) and the UCFA. BCI/JCI have not challenged that the Settling Defendants are entitled to the same contribution protections in respect to their private settlement with the Bank as they would be entitled to under §113(f)(2) in connection with a settlement with a governmental entity. This is in accord with the holdings of numerous courts, including the Eastern District of Missouri in the recent case of

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United States v. Mallinckrodt, 2006 WL 3331220 (E.D. Mo. Nov. 13, 2006). 2 There the Court observed: The Court believes that it would be contrary to CERCLA's objective of encouraging settlement not to grant private parties the same protection from suits for contribution that the United States or a State enjoys. As stated by the district court in Allied Corp, `[it] is hard to imagine that any defendant in a CERCLA action would be willing to settle if, after the settlement, it would remain open to contribution claims from other defendants.' 771 F.Supp. at 223. Nor have BCI/JCI challenged that the Settling Defendants are also entitled to the contribution protections afforded by the UCFA which this Court previously held applicable to the earlier settlement between BCI/JCI and the Bank. See Doc. #196. Despite this, BCI/JCI have asked this Court, as part of its deliberative process concerning the grant or denial of contribution protection, to, in effect, convert the matter into a summary judgment proceeding related not only to the crossclaims against CVY pending in this Court but also numerous and varied state law claims pending in the Denver District Court. This would be premature and improper. The proper and orderly way to address BCI/JCI's concerns regarding the effect of the contribution bar is by motion after a contribution order has been entered. In fact, BCI/JCI have already taken the first step toward the orderly resolution of such issues by filing an unopposed motion giving all parties thirty (30) days from the entry of this Court's Order on the Contribution Motion within which to file dispositive motions. CVY and JOS suggest that such an orderly way of proceeding is proper and that both sides

2 See also Allied Corporation v. Acme Solvent Reclaiming, Inc., 771 F.Supp. 219 (N.D. Ill. 1990); United States v. SCA Services of Indiana, 827 F.Supp. 526 (N.D. Ind. 1993); Colorado School of Mines v. AK Steel Corp., 2001 WL34041780 (D. Colo. 2001).

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will thereby have an adequate opportunity to address what effect, if any, the contribution protection afforded to the Settling Defendants under CERCLA and the UCFA have on the remaining crossclaims of BCI/JCI in this Court. What effect such protection will have on the state court proceeding will be for the state court to decide. With that said, CVY and JOS would be remiss if they did not address in at least cursory fashion some of the points raised by BCI/JCI in their supplemental response to the Contribution Motion. BCI/JCI suggest, for example, that they believe the settlement should have no effect on their cross-claims because the Settlement Agreement does not directly address the cross-claims. CVY will most certainly assert that pursuant to cases such as U.S. and Commonwealth of Pennsylvania, Department of Environmental Resources v. National Railroad Passenger Corp., 2004 W.L. 35780 (E.D. Pa. Jan. 8, 2004) and U.S. v. Southeastern Penn. Transportation Authority, 235 F.3d 817 (3rd Cir. 2000), BCI/JCI's argument in this respect should be rejected. BCI/JCI also suggest that the contribution bar should not affect their cross-claims because their cross-claims are pleaded as breach of contract. CVY will suggest that substantively this makes no difference, for it is the damages sought that the Court should focus upon and not the theories of liability. BCI/JCI themselves note that this Court, in its earlier dismissal of CVY's contractually based cross-claims against BCI/JCI, "acknowledged that the cross-claims asserted by CVY/JOS were indemnification claims distinct from contribution claims but were moot because CVY could only seek indemnification to the extent it was held liable for damages caused by BCI/JCI and the Court's earlier proportionate fault ruling insulated CVY from liability." BCI/JCI's Supplemental 6

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Reply (Doc. #508 , p.5 citing Doc. ## 236, 351 and 458). CVY will suggest that this same logic should now bar the alleged contractual cross-claims of BCI/JCI. These and other issues may be raised on motion by BCI/JCI and/or CVY and JOS after an Order has been entered on the Contribution Motion, but none of them have anything to do with whether the Order granting contribution protection should be entered in the first instance. The Settlement Agreement is "fair, reasonable and faithful to CERCLA's objectives." The Settling Defendants are therefore entitled to entry of the Order submitted with the Contribution Motion. The effect of the Order can thereafter be thrashed out through motions which give all parties and the Court a full opportunity to review thoroughly the complicated procedural history of this case and determine whether or to what extent the cross-claims of BCI/JCI remain viable. DATED: November 5, 2007. Respectfully submitted, MONTGOMERY, KOLODNY, AMATUZIO & DUSBABEK, L.L.P.

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s/ C. Michael Montgomery C. Michael Montgomery Max K. Jones, Jr. Ryan C. Gill 1775 Sherman St., 21st Floor Denver, Colorado 80203 Phone: 303-592-6600 [email protected] [email protected] [email protected] ATTORNEYS FOR THE DEFENDANTS C.V.Y. CORPORATION, d/b/a YOUR VALET CLEANERS, and JOHNNY ON THE SPOT, INC.

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CERTIFICATE OF MAILING I hereby certify that on November 5, 2007 a true and correct copy of the SUPPLEMENTAL REPLY OF C.V.Y. CORPORATION AND JOHNNY ON THE SPOT, INC. IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH CONTRIBUTION PROTECTION was filed with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Scott Jurdem, Esq. Buchanan Jurdem & Cederburg, P.C. 1621 18th Street, Suite 260 Denver, Colorado 80202 [email protected] Laura J. Riese, Esq. Jonathan W. Rauchway, Esq. Davis Graham & Stubbs LLP 1550 Seventeenth Street, Suite 500 Denver, CO 80202 [email protected] [email protected]

s/ Faithe Charnow [email protected]

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