In Barclay Lofts LLC v. PPG Industries, Inc., Case No. 20-CV-1694, 2024 WL 4224731 (E.D. Wis. Sept. 18, 2024), a United States District Court in Wisconsin, after deciding several threshold issues under CERCLA, allocated liability for past and future response costs to clean up a contaminated site based upon a detailed analysis of the operational and material handling practices of the potentially responsible parties.  The decision offers insights about the facts that a court may find compelling and the factors that a court may apply to reach an equitable CERCLA allocation among responsible parties.

In 2017, a plaintiff developer bought two parcels of industrial property in Walker’s Point, Milwaukee for residential redevelopment (the “Properties”).  The purchase price for the Properties was $500,000, reduced from $2M due to the presence of contamination.    In 2018, the City of Milwaukee Department of Neighborhood Services issued “Raze or Repair” orders requiring the buildings on the Properties to be repaired or demolished.  As a result, Barclay Lofts LLC (“Barclay”) launched a lawsuit against former owners and operators of the Properties for contaminating and failing to clean up soil, groundwater, and soil vapor contamination, including hexavalent chromium, arsenic, mercury, lead, and trichloroethylene (“TCE”).  Barclay sought to recover pre-remediation response costs and a declaratory judgment for future response costs under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), §§107(a) and 113(g)(2), respectively, from PPG Industries Inc. (“PPG”), Wayne Chemical Corporation (“WCC”), Wayne Pigment Corporation (“WPC”) and its sole individual owner/officer, Hydrite Chemical Co. (“Hydrite”), and Lumimove Inc. (“Lumimove”).  PPG asserted a counterclaim against Barclay and the entity acting on its behalf, Sherman Associates, Inc. (“Sherman”), and a cross-claim against Hydrite and Lumimove for contribution under CERCLA, §113(f)(1).  Hydrite cross-claimed against PPG for CERCLA contribution.  Prior to trial, Barclay settled its claim against WPC, its individual owner, Lumimove, Hydrite, and WCC’s insurer.

In determining allocation, the Court cited the six “Gore Factors”: (i) ability to distinguish party contributions; (ii) amount of hazardous waste; (iii) toxicity of hazardous waste; (iv) degree of involvement; (v) degree of care taken with respect to the waste; and (vi) degree of cooperation with the government.  Beyond this non-exhaustive list, the Court stated that factors such as ability to pay, the extent of a party’s knowledge of the contamination, efforts made to prevent harm, and efforts made to settle the case should also be considered. 

Pre-Remediation Response Cost Recovery

Barclay claimed $1.43M in pre-remediation response costs for environmental consultant fees, legal fees, and security/monitoring costs.  Of the amount claimed, the Court held that $1.17M was incurred in necessary costs consistent with the National Contingency Plan.

The Court found that although Barclay and PPG were jointly and severally liable for pre-remediation response costs, 100% of Barclay’s past response costs were allocated to Barclay because of PPG’s counterclaim for contribution under CERCLA.  The Court held that Barclay had already been compensated for past response costs through the $1.5M purchase price reduction, which was directly related to the scope of contamination.  Accordingly, the Court found that allocating any of the $1.17M to a party other than Barclay would be inequitable.

Future Response Cost Recovery

The Court noted that the parties’ experts “wildly disagreed” on the potential costs of remediation – with PPG’s expert opining that past and future response costs would total over $6.7M and Barclay’s experts opining that the costs, including building demolition, would total over $28M.  While the Court declined to make a determination about the recoverability of future response costs and whether demolition costs would be considered necessary response costs, it allocated future liability as follows:

• 50% liability to PPG, given that it operated the Properties for industrial purposes from 1905 to 1975, at a time generally devoid of environmental regulation, to manufacture paints, coatings, varnishes, and resins. The Court questioned PPG’s unwillingness to settle with Barclay since it admitted to polluting the Properties and had earmarked funds to address remediation.
• 20% liability to Hydrite, given that it owned one of the parcels from 1976 to 1985, on which it stored TCE-containing waste.
• 20% liability to WPC, given that it owned and operated the Properties from 1985 to 2017 and used hazardous chemicals including hexavalent chromium. State regulator inspections and results pointed to improper storage habits and documented soil contamination.  Because of WPC’s corporate dissolution and Barclay’s previous settlement and release with WPC’s insurer, the Court found it equitable to assign WPC’s 20% “orphan share” to Barclay/Sherman.
• 10% liability to Barclay/Sherman, given that Barclay purchased the Properties with knowledge of the extent of environmental contamination and that it failed to take any steps to clean up the Properties since its purchase. The Court considered Barclay and Sherman together, finding that Sherman made decisions about Barclay’s environmental compliance.
• No liability to WCC, given the lack of evidence that it contributed to contamination during its brief ownership of one of the parcels and evidence that it improved property conditions to reduce the possibility of contamination.
• No liability to Lumimove, given that it leased and operated the Properties from 2012 to 2015, the lack of evidence that Lumimove contributed to contamination.

Finally, as part of Hydrite’s settlement with Barclay, Hydrite agreed to pay $550,000 for past costs and to fund an escrow account in the amount of $3M for future costs incurred to address chlorinated solvent contamination located at the parcel previously owned by Hydrite.  The Court approved the settlement as adequate and fair given the highest estimate for future response costs presented at trial and Hydrite’s allocation of 20% of future response costs.

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