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MRP Properties Co. LLC v. United States

United States District Court, E.D. Michigan, Northern Division

November 28, 2017

MRP PROPERTIES, LLC, et al., Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant.

          ORDER DENYING MOTION TO DISMISS AND MOTION TO TRANSFER AND SETTING DEADLINE TO RESPOND TO PLAINTIFFS' COMPLAINT

          THOMAS L. LUDINGTON, UNITED STATES DISTRICT JUDGE.

         Plaintiffs MRP Properties, et al., filed its complaint against Defendant United States of America in this Court on April 13, 2017, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). Plaintiffs seek payment of response costs arising from investigation and cleanup of contamination at Plaintiffs' refineries, contending that the United States exercised control over the refineries before and during World War II. Compl., ECF No. 1. Plaintiffs did not initially serve the Complaint on Defendant, but filed an Amended Complaint on July 5, 2017, which was served on Defendant. Am. Compl, ECF No. 4.

         Defendant filed the instant motion to dismiss all Plaintiffs other than MRP Properties as improperly joined under Rule 20 or, in the alternative, to sever and transfer those Plaintiffs to a proper venue. Mot. Dismiss, ECF No. 13; Fed.R.Civ.P. 20. On August 25, 2017, Defendant filed a motion to stay their answer deadline until thirty days after the Court rules on the pending motion to dismiss. ECF No. 14. The parties stipulated to extend the answer deadline from September 5 to October 10, 2017. ECF No. 16. On October 6, 2017, the Court entered an order staying Defendant's answer deadline until seven days after the Court's decision on the instant motion to dismiss.

         I.

         Plaintiffs are six wholly owned subsidiaries or affiliates of the Valero Energy Corporation. See Discl. Corp. Aff., ECF No. 5. Plaintiffs collectively own twelve refinery sites (the Sites) located in Michigan, Oklahoma, Kansas, Tennessee, Illinois, Texas, and California. With one exception, Plaintiffs did not own the refineries during WWII, but acquired the refineries afterward. Id. Plaintiffs allege that before and during WWII, the Government controlled the operations of the refining industry. Id. at 5. Pursuant to Executive Order 9276, President Roosevelt established the Petroleum Administration for War (PAW), and vested PAW with broad discretionary authority to carry out the national plans, policies, and objectives for the petroleum industry. Id. at 7. The PAW divided the nation into districts, and implemented the national policy at a regional and refinery level by orders and directives controlling operations and refinery yields. Id. at 8. The executive order provides, in part:

“[t]here is established a Petroleum Administration for War, at the head of which shall be a Petroleum Administrator who shall be directly responsible to the President . . . The Administrator shall: a. Subject to the provisions of this order, establish basic policies and formulate plans and programs to assure for the prosecution of the war the conservation and most effective development and utilization of petroleum in the United States and its territories and possessions, issue necessary policy and operating directives to parties engaged in the petroleum industry . . . c. (1) Obtain from the Departments of War and the Navy, the Office of Lend-Lease Administration, the Department of State and the Board of Economic Warfare, the several divisions and branches of the War Production Board, and such other Federal departments and agencies as may be appropriate, estimates of the amounts of petroleum which will be required from the United States, its territories and possessions, to meet direct and indirect military, and essential industrial and civilian, requirements; and compile and analyze such estimates and submit them to the War Production Board with recommendations for the allocation of petroleum to meet such requirements. (2) Prepare and recommend to the War Production Board estimates of the quantities and kinds of material needed by the petroleum industry to produce, refine, store, distribute (excluding transportation), or otherwise make available the amount of petroleum recommended by the Administrator for allocation by the War Production Board.

Exec. Order No. 9276, 7 FR 100912 (1942).

         Plaintiffs allege that PAW proceeded to operate the nation's refineries by directing and controlling, at the refinery level: “(i) the allocation-by time and amount-of crude oil and other feed stocks . . .; (ii) the procurement priorities to obtain services, equipment and parts . . .; (iii) the types and specifications of war-related products to be manufactured; (iv) the levels of production for each of those products; (v) the price of the products and profits made; and (vi) to whom the products would be sold within the Government-controlled supply chain.” Id. at 9. Plaintiffs allege that by serving as the “de facto operator” of the refineries, and controlling the inputs and outputs, the Government's control “necessarily extended to the generation of waste and its release into the environment.” Id. at 11.

         Plaintiffs' amended complaint further alleges that the Government's control of all inputs and outputs necessarily impacted the hazardous waste profile of their refineries. Plaintiffs also contend that the Government specifically exercised control over the hazardous waste management process itself by controlling approval of war-time construction projects, denying approval for some projects “relating to pollution control that were deemed non-essential to the war effort” while approving other projects. Id. at 10. The Government also “oversaw the amount and type of wastes (i.e. ‘losses') generated (and ultimately released)” and tracked production statistics including production yields and losses. Id. at 15.

         In sum, the Government did everything other than “manually turn the levers and valves.” Id. at 9. Thus, Plaintiffs contend that the level of control exercised by PAW was “well beyond the Government's regulatory role, ” and that the Government is appropriately responsible as an operator under CERCLA. Id. at 10. As such, Plaintiffs contend the Government must pay its share of response costs that Plaintiffs have incurred and continue to incur to dispose of hazardous waste arising from the Government's operation of their refineries during the wartime period. Id. at 15.

         Plaintiffs' first claim for relief seeks response cost recovery under CERCLA section 107(a), codified at 42 U.S.C. 9607(a). Plaintiffs assert a second claim for relief arising under CERCLA section 113(g)(2), codified at 42 U.S.C. 9613(g)(2), and the declaratory judgment act, 28 U.S.C. 2201(a), seeking a declaratory determination binding the Defendant in subsequent actions to pay response costs or damages.

         II.

         Defendant moves to dismiss all Plaintiffs other than MRP properties (MRP) as improperly joined, and to dismiss the claims asserted by MRP that concern refineries outside of Michigan. Mot. at 1, ECF No. 13. If Defendant's requested relief is granted, the only claims remaining would be MRP's claims concerning the Leonard Alma, Mid-West Alma, and Roosevelt Mount Pleasant refineries, all of which are located in the Eastern District of Michigan. In the alternative, Defendant moves to sever all other parties and claims and transfer them to the districts where the refineries are located. Id.

         A.

         Defendant argues that Plaintiffs are improperly joined under Rule 20(a)(1). Fed.R.Civ.P. 20(a)(1)(A). Defendant asserts that Plaintiffs' claims do not arise out of the same transaction, occurrence, or series of transactions or occurrences, nor do they present “predominantly the same question of law or fact.” Def. Br. at 13. Defendant notes that no refinery is owned by a common subsidiary or affiliate, and that there is a “different factual bases underlying each claim” that will require “substantial site-specific discovery relating to each refinery.” Id. at 2. Defendant contends that

the allegations of the Amended Complaint described refineries that produced a different mix of products, received different production orders from the relevant government agencies . . . were in operation for different lengths of time, were owned or operated by a different combination of entities both during and after World War II, and may have experienced differing levels of hazardous substance releases both during and after World War II.

Id. at 10. Defendant underscores a number of other variations between refineries. Each refinery may have had other previous owners or operators who contributed to hazardous waste generation and disposal and could be liable as third party defendants for contribution under section 113(f) of CERCLA, 42 U.S.C. 9613(f)(1). Defendant also highlights a number of site specific details necessary to sustain each Plaintiff's burden of proof under CERCLA to establish recoverable response costs. These include the care exercised in the operation of the refinery, activities undertaken by Plaintiffs to address waste, the necessity of the cleanup costs incurred, their compliance with the National Contingency Plan, and the adequacy of documentation surrounding these costs. Id. at 12 (citing United States v. R.W. Meyer, Inc., 932 F.2d 568, 571 (6th Cir. 1991)).

         Defendant argues that, even if joinder is proper under Rule 20, fairness and practicality strongly favor a transfer of venue to the districts in which each refinery is located. Defendant believes the balance of factors outlined in Overland favor a transfer of venue. Id. at 18 (citing Overland, Inc. v. Taylor, 79 F.Supp.2d 809, 811 (E.D. Mich. 2000)).

         B.

         Plaintiffs respond that they are properly joined under Rule 20, as their claims present common issues of fact or law and arise from the same series of transactions and occurrences. Pl. Br., ECF no. 20. “Each site presents common issues of fact relating to Government control and involvement at the refineries and common issues of law relating to the proper standard for the Government's liability as an operator of the refineries.” Id. at 2.

         Plaintiffs contend their claims arise from the same series of transactions or occurrences, because they arise from the same “highly coordinated national policy of control over the entire refinery industry” that was carried out “in a common, core manner, by controlling and directing, among other things, what was produced, how much was produced, to whom products were sold and at what price.” Id. at 3, 6, 9. Plaintiffs acknowledge the need for site-specific discovery in this case, including specific cleanup costs. Id. at 3. Nevertheless, Plaintiffs assert this does not render joinder improper, and intends to address refinery specific factual issues with common company representatives and experts. Id. at 3-4.

         Plaintiffs also oppose severance and transfer under 28 U.S.C. § 1404(a), and contend that fairness and practicality counsel in favor of permitting their claims to proceed in their chosen forum. Id. at 13. They argue that Defendant cannot meet its “heavy burden” as the moving party to “show that the balance of factors weighs strongly in favor of transfer.” Id. (citing Sullivan v. Tribley, 602 F.Supp.2d 795, 799 (E.D. Mich. 2009); Steelcase, Inc. v. Smart Technologies, Inc., 336 F.Supp.2d 714, 719 (W.D. Mich. 2004)).

         III.

         A.

         Federal Rule of Civil Procedure 20 provides that persons “may be joined in one action as plaintiffs if: (A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all plaintiffs will arise in the action.” Fed.R.Civ.P. 20(a)(1). Thus, to join plaintiffs in a single action the two independent requirements of Rule 20 must be met: (1) their claims must be asserted “with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences, ” and (2) there must be a “question of law or fact common to all plaintiffs.” Fed.R.Civ.P. 20(a)(1).

         The “transaction-or-occurrence” test of Rule 20(a) “is similar to the transaction-or-occurrence test of Rule 13(a) for compulsory counterclaims, which has been construed as requiring a ‘logical relationship' between the claims.” In re EMC Corp., 677 F.3d at 1357-58 (quoting Moore v. N.Y. Cotton Exch., 270 U.S. 593, 610 (1926)). The “logical relationship” test, in turn, “is satisfied if there is substantial evidentiary overlap in the facts giving rise to the cause of action . . .” Id. Courts have applied the “logical relationship” test when interpreting the “same transaction or occurrence” standard not only under Rule 20(a)(2) for joinder of defendants and Rule 13(a) for compulsory counter claims, but also to joinder of plaintiffs under Rule ...


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