Free Motion for Leave - District Court of Colorado - Colorado

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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. ______________________________________________________________________________ MOTION FOR LEAVE TO ASSERT COUNTERCLAIM FOR CERCLA 42 U.S.C. § 9613 CONTRIBUTION AGAINST PLAINTIFFS ______________________________________________________________________________ COMES NOW C.V.Y. Corporation, d/b/a Your Valet Cleaners, and Johnny on the Spot, Inc. ("Defendants"), by and through their counsel, Montgomery, Kolodny, Amatuzio & Dusbabek, L.L.P, and submit their Motion for Leave to Assert Counterclaim, and aver as follows: 1. Certification pursuant to D.C.COLO.LCivR 7.1(A): Counsel for Defendants

certify that they have consulted with Plaintiffs' counsel and they object to the requested relief. Cross-Plaintiffs, Boulder Cleaners, Inc.'s and John's Cleaner's, Inc.'s, claims have been severed

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from this action and their claims will be tried separately at the conclusion of this matter. As such, counsel for Cross-Plaintiffs has not been consulted regarding this relief. 2. At the June 30, 2006 hearing, Plaintiffs' counsel indicated they intended to

withdraw Plaintiffs' CERCLA § 113 contribution claim, 42 U.S.C. § 9613. Although no motion to dismiss pursuant to F.R.C.P. Rule 42 has been filed and no order on the requested withdrawal of the claim has issued, Defendants, anticipating dismissal of Plaintiffs' CERCLA § 113 claim, request leave to assert a counterclaim for CERCLA 42 U.S.C. § 9613 contribution against Plaintiffs. 3. To date, this case has proceeded on the premise, and the Court has entered

numerous orders stating, that Defendants can only be held liable for their proportionate share of clean up costs. 1 Plaintiffs have now called this into question, citing the recent decision by the Supreme Court in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157, 125 S.Ct. 577 (2004) and its progeny, which Plaintiffs now say precludes their contribution action and which Plaintiffs will undoubtedly argue precludes equitable apportionment under 42 U.S.C. § 9607. Permitting Defendants to assert a counterclaim against Plaintiffs for CERCLA § 113 contribution will, in effect, maintain the case in the same posture as contemplated by the Court and the parties prior to the issuance by the Supreme Court of its opinion in Aviall. 4. As this Honorable Court is aware, this matter arises out of alleged contamination

allegedly caused by dry cleaning operations on Plaintiffs' property. The initial Complaint in this matter was filed on September 14, 2001. Plaintiffs filed their Second Amended Complaint on May 31, 2002. In their Second Amended Complaint, Plaintiffs asserted the following claims:
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See #196, #236, #260, #351, #381, and #418.

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(1) RCRA citizen suit pursuant to 42 U.S.C. § 6901; (2) CERCLA cost recovery action pursuant to 42 U.S.C. § 9607; CERCLA contribution claim pursuant to 42 U.S.C. § 9613; (3) Breach of Contract; (4) Trespass; and (5) Negligence. 5. Plaintiffs filed suit against Defendants and Cross-Plaintiffs, Boulder Cleaners,

Inc. and John's Cleaner's, Inc., asserting that all four were responsible for the alleged contamination at the property. Cross-Plaintiffs settled with Plaintiffs and the settlement was judicially approved on October 30, 2002. (See Order Approving Settlement, #196.) As this

Honorable Court is aware, Cross-Plaintiffs claims against Defendants were severed from the instant litigation on April 14, 2005. (See Courtroom Minutes, #418.) Cross-Plaintiffs' claims will be determined in a later trial to be set after the conclusion of the trial in the instant dispute between Plaintiffs and Defendants. 6. Defendants initially asserted counterclaims for indemnification and for cost

recovery pursuant to 42 U.S.C. § 9607; however, those claims were dismissed at the Court's urging and instruction and based, in part, on holdings by the Court that each defendant would only be responsible for their equitable share of cleanup costs. Since Defendants could not be held liable for more than their alleged proportionate share of the contamination, the Court reasoned, there was no need for Defendants to assert a counterclaim against Plaintiffs for any indemnification. Plaintiffs filed a Motion for Summary Judgment related to Defendants'

remaining counterclaims and this Court granted Plaintiffs' motion on March 31, 2004. (See Order Granting the Plaintiffs' Motion for Summary Judgment on Counterclaims asserted by Defendants CVY Corporation, #381.) Therein, the Court emphasized that, "pursuant to several Orders of this Court, the Plaintiffs can only recover damages from CVY to the extent that

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CVY is at fault. CVY cannot be liable for damages caused by former Defendants Boulder Cleaners, Inc. or John's Cleaner's, Inc." (See #381, p. 3, ¶ 3.) Based on these prior Orders, this Honorable Court concluded that "therefore, there is no potential liability for which CVY can seek indemnification from the Plaintiffs." (See #381, p. 6.) 7. Despite over four years of litigation, at the June 30, 2006 hearing, Plaintiffs

advised the Court that they wished to withdraw their CERCLA § 113 claim based on the United States Supreme Court's opinion in Aviall. In that opinion, the Supreme Court held that a party who has not been sued under CERCLA §§ 106 or 107(a) or who has not entered into an administrative or judicially approved settlement pursuant to CERCLA § 113(f)(3)(B), cannot maintain a CERCLA § 113 contribution claim. Aviall, 543 U.S. at 158, 125 S.Ct. at 578. Plaintiffs claim that they fall within this definition. 8. Prior to Aviall, Courts linked and read CERCLA § 107 and § 113 claims together

or found that federal common law principles of contribution applied to a § 107 claim. Consolidated Edison Co. of New York, Inc. v. UGI Utilities, Inc., 423 F.3d. 90, 99 (2nd Cir. 2005). In the Court's Order on Pending Motions of March 26, 2003, in footnote 5, this Court adopted such reasoning. "Whether Plaintiffs recover cleanup costs from CVY directly under § 9607, or in the nature of contribution under § 9613 seems to be a difference largely of semantics. In short, regardless of the statutory section invoked, there is little chance that CVY will ultimately pay more or less than the portion of cleanup costs that it is directly responsible for." (See #260.) Given this approach, taken by this and other courts, parties in Defendants' position did not need to assert counterclaims pursuant to CERCLA § 113, as each party's liability was

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apportioned using equitable principles, and defendants such as CVY were not customarily held liable for damages caused by other parties. 9. CERCLA § 113 enables courts to "allocate response costs among liable parties

using equitable factors as the court determines are appropriate." (See 42 U.S.C. § 9613.) Following Aviall, it is an open question whether CERCLA § 107 provides for an implied right of contribution. Plaintiffs will undoubtedly argue that, post Aviall, no such implied right should be held to exist, even though the Supreme Court in Aviall, "decline[d] to decide whether Aviall has an implied right to contribution under § 107." Aviall, 543 U.S. at 159, 125 S.Ct. at 580. However, at least one court, the District Court of Kansas, recently held that a "PRP who is barred from seeking recovery under section 113(f) maintains an implied right of contribution under section 107(a)." Raytheon Aircraft Co. v. United States of America, 2006 WL 1517762 at *11 (D. Kans. 2006) However, the Second Circuit Court of Appeals has indicated that the proper procedural mechanism and remedy is for a plaintiff to assert a CERCLA § 107 claim and for a defendant to bring a counterclaim under CERCLA § 113(f)(1) to offset contribution against Plaintiffs. Consolidated Edison Co., 423 F.3d at 100, fn. 9. Which, if either, of these lower court procedural mechanisms the Supreme Court will adopt to avoid unjust enrichment of an at fault PRP who files a cost recovery action under CERCLA § 107 has yet to be decided. 10. Pursuant to F.R.C.P. Rule 13(e), a counterclaim which either matures or is

acquired after service of a pleading may, with the permission of the court, be presented as a counterclaim by supplemental pleading. Aviall was decided by the Supreme Court two and one half (2 ½) years after Plaintiffs' Second Amended Complaint was filed. Plaintiffs sought to withdraw their CERCLA § 113 claim on June 30, 2006. Based on the above and the Second

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Circuit's footnote in Consolidated Edison Co., and, in order that this case can be decided on the same basis as contemplated originally by the Court and the parties, Defendants should be granted permission to assert a Counterclaim pursuant to CERCLA § 113 against Plaintiffs. This

procedural alignment accomplishes the same result as before in regards to each party's liability and will not add to the complexity of this action. In essence, the filing of the CERCLA § 113 counterclaim maintains the procedural status quo. Further, because Plaintiffs' alleged fault is already at issue in that it inter alia has been pled as an affirmative defense in respect to Plaintiff's state law negligence claim, the addition of the CERCLA § 113 claim will not result in the need for additional discovery or for the presentation of evidence not otherwise already contemplated. 11. Pursuant to CERCLA § 113(f)(1), a party "may seek contribution from any other

person who is liable or potentially liable under section 9607(a) of this title, during or following any civil action under § 9606 of this title or under § 9607(a) of this title." Since Defendants are currently parties to a § 9607(a) action, it is permissible for them to assert a CERCLA § 113(f)(1) action against Plaintiffs. 12. Pursuant to CERCLA § 9607(a), the following entities can be potentially liable:

i.) "the owner or operator of a vessel or a facility;" or ii.) "any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of." Plaintiff Bank One Trust Company, N.A. "is a trustee holding legal title to commercial property located at 2520-2524 Broadway, Boulder, Colorado (the "Property") in trust for the Dora Lucille Jamison Trust and the Jamison Family Trust (the "Trusts")." (See Second Amended Complaint, #136, p. 2, ¶ 2.) On January 9, 1978, Bank One Trust "became

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trustee of the Trusts, and took legal title to the Property." (See #136, p. 5, ¶ 19.) Plaintiff Bank One, Colorado, N.A., "a national banking association with its main office in Denver, Colorado, through its predecessor-in-interest leased part of the Property to various commercial dry cleaning tenants." (See #136, p. 2, ¶ 3.) On March 13, 1979, "Bank One Trust's predecessor, acting as trustee and landlord, executed a Master Lease Agreement ("MLA") concerning the Property with Bank One's predecessor, First National Bank in Boulder, N.A. ("First National"), acting as lessee and sublessor." (See #136, p. 5, ¶ 20.) Both Plaintiffs have allegedly incurred costs of response, including, but not limited to, costs of "removal" and "remedial actions" as those terms are defined in 42 U.S.C. § 9601(23) and (24), and both Plaintiffs seek to recover their costs from Defendants. (See #136, p. 9, ¶¶ 44 and 45.) Based on the allegations in the Second Amended Complaint and the discovery conducted to date, there is sufficient information to support the filing of CERCLA § 113 contribution claim against both Plaintiffs. 13. Without question, Plaintiff Bank One Trust is the owner of the property and/or

was an owner at the time of alleged disposal, as required by CERCLA § 9607(a). Based on information and belief, Plaintiff Bank One was a de facto owner or operator at the time of the alleged disposal, as required by CERCLA § 9607(a). In U.S. v. Friedland, 152 F.Supp.2d 1234, 1244 (D. Colo. 2001) the court discussed the Barlo factors for determining "whether a lessee/sublessor might be held liable as an `owner' under CERCLA for contamination that a sublessee causes." These factors include: (1) the term of the lease and rights of owner/lessor to determine how the property is used; (2) termination clauses; (3) the right to sublet without notifying the owner; (4) responsibility for payment of taxes, assessments, insurance and operation and maintenance costs; (5) responsibility for repairs. Id. In the above context, courts

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examine the extent of control that the lessee/sublessor exercises over the premises. Id. Based on the MLA and other facts revealed through discovery, Defendants have a basis to assert that Plaintiff Bank One was given a sufficient amount of control to constitute it being a de facto owner or operator, and thus a PRP for purposes of CERCLA § 113 contribution. 14. The MLA was in existence for twenty (20) years. (See Second Amended

Complaint, #136, ¶¶ 20 and 32.) Pursuant to the MLA, Plaintiff Bank One was responsible for all taxes and assessments and had the right to contest the validity or amounts of any taxes or assessments. (See MLA, attached as Exhibit "A," p. 3 and 4.) Bank One also had the "right to construct improvements thereon at its sole cost and expense, and the right to make such changes, alterations and/or additions thereto as [Bank One] may desire, at its sole cost and expense and will. . . ." (See Exhibit "B," p. 5.) Moreover, Bank One "may demolish and/or remove any and all buildings and improvements now or thereafter erected on the premises." (See Exhibit "B," p. 5.) As part the MLA, Bank One Trust delivered full possession of the demised premises free and clear of all liens, encumbrances and leases, with the exception of the June 1, 1975 lease with CVY. (See Exhibit "B," p. 5.) Regardless of the one alleged exception, Bank One Trust "assign[ed] to [Bank One] all of [Bank One Trust's] rights as Lessor under the terms of said existing lease and [Bank One] assumes all of [Bank One Trust's] obligations under said lease." (See Exhibit "B," p. 5 and 6.) The MLA also provided that Bank One could "mortgage this Lease and the options to renew, assign this lease and the options to renew, and to sublet the premises hereby leased or any part or parts thereof, without the consent of [Bank One Trust] . . . ." (See Exhibit "B," p. 6.) All repairs and maintenance were the responsibility of Bank One. In no event, was Bank One Trust to be "required to make any alterations, rebuildings, replacements,

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changes, additions, improvements or repairs, nor shall [Bank One Trust] be required to furnish to [Bank One] any facilities or services of any kind. . . ." (See Exhibit "B," p. 7.) Additionally, Bank One was required to maintain both liability and property insurance for the property. As part of its insurance obligations, Bank One was required to "negotiate and settle with the insurance company issuing such policy," and Bank One Trust appointed Bank One as its "attorney-in-fact, irrevocably to make and prosecute in the name of [Bank One Trust]," any action or legal proceeding necessary to collect any insurance proceeds payable at [Bank One's] sole expense. (See Exhibit "B," p. 8.) Bank One Trust further "irrevocabl[y] assign[ed] to [Bank One] the [Bank One Trust's] entire interest, if any, in and to each such insurance policy and to any insurance proceeds payable thereunder, if, as and when collected." (See Exhibit "B," p. 8 and 9.) The above MLA provisions fall squarely within the Barlo factors discussed in Friedland, and there is sufficient information to support a contribution counterclaim pursuant to CERCLA § 113 against Plaintiff Bank One as an owner or operator. 15. The grant or denial of a motion to allow the filing of a supplemental counterclaim

is within the trial court's discretion. Ins. Concepts, Inc. v. Western Life Ins. Co., 639 F.2d 1108, 1114 (5th Cir. 1981) "The policies underlying Rule 13(e) are the avoidance of a multiplicity of litigation and the injustice of barring a late-maturing claim arising out of the same transaction or occurrence." Spencer v. Newton, 79 F.R.D. 367, 374 (D. Mas. 1978) "The purpose of Rule 13(e) is to provide a means for complete litigation in one action of all claims that parties may have with respect to each other and thus avoid multiplicity of actions." Cold Metal Products Co. v. Crucible Steel Co. of America, 126 F.Supp. 546, 551 (D. N.J. 1954) The policies and purpose behind F.R.C.P. Rule 13(e) support granting Defendants leave to file their counterclaim.

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16.

For the above reasons, Defendants respectfully request leave to assert the attached

Counterclaim so that this matter can proceed on the same premise that has guided this Honorable Court's many orders and the parties' expectations. A copy of the proposed Counterclaim is attached. WHEREFORE, Defendants CVY, Inc. and Johnny on the Spot, Inc. respectfully request that the Court issue an order granting leave to assert the attached Counterclaim. Respectfully submitted this 7th day of July, 2006. MONTGOMERY, KOLODNY, AMATUZIO & DUSBABEK, L.L.P.

By: s/ Max K. Jones Jr. C. Michael Montgomery Max K. Jones, Jr. 475 Seventeenth Street, 16th Floor Denver, Colorado 80202 Telephone: (303) 592-6600 Fax: (303) 592-6666 [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 certified that on July 7, 2006, I electronically filed MOTION FOR LEAVE TO ASSERT COUNTERCLAIM FOR CERCLA 42 U.S.C. § 9613 CONTRIBUTION AGAINST PLAINTIFFS with the Clerk of the Court using the CM/ECF system which will send notification of such filing 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. Davis Graham & Stubbs LLP 1550 Seventeenth Street, Suite 500 Denver, Colorado 80202 [email protected]

s/ Karen Wood Karen Wood Montgomery, Kolodny, Amatuzio & 475 Seventeenth Street, 16th Floor Denver, Colorado 80202 Telephone: (303) 592-6600 Fax: (303) 592-6666 [email protected]

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