Berendo Property v. Closed Loop Refining and Recovery Incorporated

1 WO — 2 — — 3 — — 4 — — 5 — 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA — 8 — 9 Berendo Property, et al., No. CV-22-01721-PHX-SMM 10 Plaintiffs, ORDER 11 v. 12 Closed Loop Refining and Recovery Incorporated, et al., — 13 — Defendants. — 14 — 15 Pending before the Court is Plaintiffs and Defendant IMS Electronics Recycling, 16 Inc.’s Joint Motion for Approval of Settlement Agreement. (Doc. 40). 17 I. BACKGROUND 18 Plaintiffs are four companies who, between them, own two warehouses in Phoenix, 19 Arizona. (Doc. 1 at 3). Between 2010 and 2016, Plaintiffs leased these warehouses to 20 Defendant Closed Loop Refining and Recovery, Inc. (Id. at 4). Closed Loop used these 21 warehouses to operate recycling centers that recycled—or claimed to recycle—CRT waste. 22 (Id. at 11-12). CRT (cathode ray tubes) are used in older television, computer, and other 23 electronic displays and contain lead, which is listed as a hazardous substance under the 24 Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”). 25 (Id. at 2-3). 26 Plaintiffs allege that Closed Loop operated a sham recycling scheme, in which it 27 charged companies for accepting their CRT waste and—rather than recycling it in 28 accordance with CERCLA—stockpiled and ultimately abandoned it. (Id. at 12). Plaintiffs 1 allege that Closed Loop accepted approximately 195 million pounds of CRT waste, of 2 which 106 million was abandoned at the warehouses. (Id.) They allege that the cost of 3 removing the waste and cleaning up the warehouse sites may exceed $15 million. (Id. at 4 20). 5 On October 7, 2022, Plaintiffs filed suit against 51 defendants, seeking cost 6 recovery, declaratory relief, and common law damages. (Doc. 1). Defendants include 7 Closed Loop and 50 Arranger/Transporter Defendants, among them IMS Electonics 8 Recycling, Inc. (“IMS”). (Id. at 8). According to Closed Loop’s records, IMS arranged for 9 the transport of 71.5 million pounds of waste to the warehouses. (Id. at 8; Doc. 40 at 3). 10 The Court has previously approved a consent decree between Plaintiffs and 11 Defendant UNICOR (Doc. 24) and a settlement agreement between Plaintiffs and 12 Defendant California Electronic Asset Recovery. (Doc. 26). 13 On January 31, 2023, Plaintiffs and IMS filed a Joint Motion for Approval of 14 Settlement Agreement. (Doc. 40). Under the settlement agreement, IMS has agreed to pay 15 Plaintiffs $5,000,000.00. (Doc. at 40 at 20). This money will go towards response costs. 16 (Id.) The Arizona Department of Environmental Quality has not objected to the settlement. 17 (Doc. 40 at 50-51). 18 II. DISCUSSION 19 A. Legal Standard 20 In determining whether to approve a settlement in the CERCLA context, a court 21 need not determine whether the settlement is the best possible settlement available. City of 22 Colton v. Am. Promotional Events, Inc., 281 F. Supp. 3d 1009 , 1012 (C.D. Cal. 2017). 23 Rather, courts must determine whether the proposed settlement is procedurally fair, 24 substantively fair, reasonable, and consistent with the policies of CERCLA. State of 25 Arizona v. Nucor Corp., 825 F. Supp. 1452 (D. Ariz. 1992), aff'd on other grounds, 66 F.3d 26 213 (9th Cir. 1995), United States v. Montrose Chemical Corp. of Calif., 50 F.3d 741 (9th 27 Cir. 1995). 28 /// 1 B. Procedural Fairness 2 To determine procedural fairness, courts “must look to the negotiation process and 3 ‘attempt to gauge its candor, openness, and bargaining balance.’” Nucor, 825 F. Supp. at 4 1456 (quoting U.S. v. Cannons Eng’g Corp., 899 F.2d 79 , 86 (1st Cir. 1990)). Toward this 5 end, the parties state that negotiations were executed in good faith and at arm’s length. 6 (Doc. 40 at 7). 7 The Court finds the settlement agreement was the result of procedural fairness. Both 8 parties were represented in settlement negotiations by experienced attorneys. (Id. at 7, 24, 9 36, 47). The parties also considered all relevant factors when conducting negotiations. (Id. 10 at 7). 11 C. Substantive Fairness and Reasonableness 12 Substantive fairness “concerns the issues of corrective justice and accountability.” 13 Nucor, 825 F. Supp. at 1458 . “A party should bear the costs of the harm for which it is 14 legally responsible.” Cannon, 899 F.2d at 87. In determining the reasonableness of 15 CERCLA a settlement, courts will consider the “efficacy of the settlement in compensating 16 the public for actual and anticipated remedial and response costs and the relative strength 17 of the parties’ litigating.” Nucor, 825 F. Supp. at 1464 . As part of this analysis, courts 18 examine whether the settlement amount is proportional to the settling defendant’s share of 19 responsibility for the environmental damage. Montrose, 50 F.3d at 747 ; Cannons, 899 F.2d 20 at 87 . 21 The parties’ settlement agreement is substantively fair and reasonable. Plaintiffs 22 allege—based on Closed Loop’s records—that IMS was responsible for 71.5 million out 23 of the 195 million tons of CRT waste that reached the warehouse. This amounts to a little 24 under 36.7% of the total CRT waste. The estimated cleanup cost is over $15 million. The 25 $5,000,000.00 that IMS is agreeing to contribute to cleanup costs therefore represents a 26 little over 33.3% of the total cleanup costs. Because the settlement amount is proportional 27 to IMS’ alleged share of responsibility and the funds will be put toward cleanup efforts, 28 the settlement agreement is substantively fair and reasonable. 1 E. Consistency with CERCLA 2 One of CERCLA’s primary goals is to encourage early settlements. See Montrose 3 at 745-56. This helps further the goal of ensuring prompt site cleanups. Nucor, 825 F. Supp. 4 at 1464. An additional goal of CERCLA is to ensure accountability from those responsible 5 for any abandoned waste. Id. 6 Parties’ settlement agreement is firmly in line with these goals. This settlement is 7 relatively prompt: filed less than three months after Plaintiffs filed their initial complaint. 8 It will streamline any future litigation by removing a defendant from the case and will 9 quickly transfer money into the cleanup fund. Further, it holds IMS accountable for their 10 contribution to the abandoned CRT waste at the warehouses. 11 F. Pro Tanto v. Pro Rata Crediting 12 Under CERCLA, district courts have discretion in allocating response costs among 13 liable parties. Am. Cyanamid Co. v. Capuano, 381 F.3d 6 , 21 (1st Cir. 2004). In 14 determining how one defendant’s settlement affects the liability of other defendants, courts 15 may employ either a pro tanto or pro rata crediting approach. Ameripride Servs. Inc. v. 16 Texas E. Overseas Inc., 782 F.3d 474, 483-4 (9th Cir. 2015). Under a pro rata approach, a 17 court must determine the liability of all settling and non-settling defendants and then reduce 18 the shares of non-settling defendants by the percentage of the settlor’s fault. Akzo Nobel 19 Coatings, Inc. v. Aigner Corp., 197 F.3d 302, 308 (7th Cir. 1999). Under the pro tanto 20 approach, non-settling defendants’ liability is simply reduced by the dollar amount of the 21 settlements. Ameripride, 782 F.3d at 484 . 22 In the CERCLA context, pro tanto crediting encourages defendants to settle and 23 plaintiffs to promptly and voluntarily clean up hazardous substances. Ameripride, 782 F.3d 24 at 487 . It is also easier to apply here than the pro rata approach, which would necessitate 25 that the Court determine the liability of 50 other Defendants before it can approve the 26 settlement agreement. 27 The Court uses its discretion to hold that IMS’ settlement payment will be credited 28 pro tanto in determining other Defendants’ equitable shares of remediation costs. I. CONCLUSION 2 Because the settlement agreement is substantively and procedurally fair, reasonable, || and consistent with CERCLA, the Court will grant the Joint Motion for Approval of Settlement Agreement (Doc. 40) and approve the settlement. 5 Accordingly, 6 IT IS HEREBY ORDERED granting the Joint Motion for Approval of Settlement 7\| Agreement. (Doc. 40). The Court approves the Settlement Agreement. (Doc. 40 at 16-34). 8 IT IS FURTHER ORDERED dismissing Defendant IMS Electronics Recycling, 9|| Inc. from the case and directing the Clerk of the Court to dismiss Defendant IMS || Electronics Recycling, Inc. 11 IT IS FURTHER ORDERED dismissing and barring, except for the exceptions || stated in the Settlement Agreement and except for claims asserted by the US. 13 || Environmental Protection Agency (“EPA”) and the State of Arizona (acting on Arizona 14|| Department of Environmental Quality’s behalf), all past, present, and future claims, 15 || counterclaims, and crossclaims against Defendant IMS Electronics Recycling, Inc. related 16]| to Plaintiffs’ two warehouse sites. 17 IT IS FURTHER ORDERED that Defendant IMS Electronics Recycling, Inc.’s 18 |} settlement payment will be credited pro tanto in determining other Defendants’ equitable shares of remediation costs. The liability of the remaining parties shall accordingly be 20 || reduced by the dollar amount of IMS Electronics Recycling, Inc.’s settlement payments. 21 IT IS FURTHER ORDERED that this Court retains jurisdiction and shall retain jurisdiction after entry of judgment in this case to enforce the terms and conditions of the 23 || Settlement Agreement. 24 Dated this 31st day of January, 2023. — 25 — 26 — Lil nora ah Beene Hdhorable Stephen M. McNamee 27 Senior United States District Judge — 28 — _5-