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Gadsden Industrial Park, LLC v. United States Cmc, Inc.

United States District Court, N.D. Alabama, Middle Division

May 22, 2015

GADSDEN INDUSTRIAL PARK, LLC, Plaintiff,
v.
THE UNITED STATES OF AMERICA; CMC, INC., and HARSCO CORPORATION, Defendants.

MEMORANDUM OPINION

KARON OWEN BOWDRE, Chief District Judge.

This matter comes before the court on Defendants CMC, Inc and Harsco Corporation's "Joint Motion for Summary Judgment, " (Doc. 74), and CMC and Harsco's "Joint Motion to Exclude Testimony of DR Davies Contractor LLC, " (Doc. 76).

Plaintiff Gadsden Industrial Park, LLC sued CMC and Harsco for conversion and negligence stemming from CMC and Harsco's burial and sale of three railroad track spur lines - HN1, HS1, and HS2 - owned by GIP at the former Gulf States Steel facility. That facility is now a Superfund site under 42 U.S.C. ยง 9607, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. GIP purchased part of the GSS facility in 2001, but excluded the facility's eastern portion from the sale because GIP feared environmental contamination on that portion of the site. GIP subsequently bought the spur lines, which were located on the eastern excluded property. CMC and Harsco are EPA contractors who buried and sold the spur lines during the remediation of the eastern excluded property. GIP alleges that CMC and Harsco intentionally and/or negligently sold or buried the spur lines solely for their own profit.

CMC and Harsco moved for summary judgment, arguing they are government contractors entitled to immunity. Additionally, CMC and Harsco argue that GIP did not own the spur lines and, thus, cannot sue for conversion. Finally, CMC and Harsco argue that GIP has not produced any legitimate proof of damages. The court will deny CMC and Harsco's motion for summary judgment because, when the facts are taken in the light most favorable to GIP, CMC and Harsco are not entitled to immunity as government contractors and GIP has sufficiently shown its ownership of the tracks and the damages it suffered.

Before addressing CMC and Harsco's summary judgment motion, however, the court must rule on CMC and Harsco's Daubert motion to determine the record for summary judgment.

I. Daubert Motion

CMC and Harsco ask the court to exclude the testimony of Daniel R. Davies, GIP's expert on the spur lines' market value. Davies has over 20 years of experience in the Alabama railroad industry. GIP plans to offer Davies' testimony as to the spur lines' market value based on information he received from GIP regarding the spur lines, track market pricing information, his familiarity with the GSS facility including his work repairing track at the facility, and his familiarity with the market for track in Alabama. The court will grant in part and deny in part the motion.

Federal Rule of Evidence 702, as explained in Daubert v. Merrell Dow Pharmaceuticals, Inc., controls determinations regarding the admissibility of expert testimony. See 509 U.S. 579, 589 (1993). "[U]nder the Rules the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert, 509 U.S. at 589. The court may admit expert testimony when "(1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry mandated in Daubert; and (3) the testimony assists the trier of fact, through the application of scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in issue." City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 562 (11th Cir. 1998).

First, Davies is qualified. CMC and Harsco argue that Davies is not qualified to testify regarding the spur lines' market value because anyone could gather the same information Davies gathered. Davies did much more than merely gather prices, however. Davies applied his 20 years of experience and independent research to the information provided by GIP to determine what GIP could reasonably expect to receive for the spur lines if sold as salvage or retail rail, or what GIP would pay to replace the spur lines. Davies does not provide a lay opinion, as such information is not general knowledge, and is qualified to testify regarding the spur lines' market value based on his 20 years of experience in the industry.

Second, Davies's methodology is reliable. CMC and Harsco argue that Davies's methodology is not reliable because Davies did not actually inspect the spur lines, the eastern excluded property, the track conditions, the soil stability, or GIP's right to access the property. CMC and Harsco also argue that Davies's methodology is not reliable because Davies did not base his calculations on a true market survey.

In United States v. 0.161 Acres of Land, an economist testified regarding property values. See 837 F.2d 1036, 1039 (11th Cir. 1988). The economist "spent over 200 hours researching 145 land sales during the years 1976-84 in the downtown Birmingham area and reviewing economic data on the downtown area... but he did not have personal familiarity with specific parcels." Id. at 1039. The Eleventh Circuit found that the economist's "failure to acquaint himself with the substance of each of the 145 transactions in his study conceivably lessens the probative value of his testimony;" nevertheless, because the economist's "testimony has a rational foundation as to market value, " the Eleventh Circuit concluded that his testimony should be permitted. Id. at 1039-41.

Davies did not personally inspect the spur lines (because CMC and Harsco sold HS1 and HS2 and allegedly buried HN1) and only relied on two comparable transactions for market research. However, Davies did review information about the spur lines and is familiar with the GSS facility's tracks. Like in 0.161 Acres of Land, while his opinion might be more reliable had he inspected the spur lines and reviewed more transactions, it is admissible. The weight to assign his testimony is for the jury to decide.

Third, Davies's opinions are helpful to the jury. CMC and Harsco argue that Davies's opinions are not helpful because Davies merely provides a generic description of how track is sold and because Davies fails to show his calculations or ultimate conclusion. Again, CMC and Harsco are free to cross examine Davies about his market valuation methodology, but his opinions will assist the jury in determining the spur lines' market value.

Finally, CMC and Harsco object to Davies's opinion regarding the value of GIP's rail car storage business. Davies admits he is not an expert on this subject:

Q. All right. Do you consider yourself an expert in the field of valuing railroad car storage?
A. No, ma'am.

(Doc. 76-3, 27). Thus, he is not qualified to testify as a rail car storage expert.

Therefore, the court will not allow Davies's opinions regarding the value of GIP's rail car storage business and will allow the remainder of Davies's opinions.

II. Summary Judgment

A. Facts

The facts below, for purposes of summary judgment, are taken in the light most favorable to Gadsden Industrial Park. These facts may not be the true facts proved at trial.

1. The Gulf States Steel Facility

Gulf States Steel owned a 761 acre steel producing facility in Gadsden, Alabama until it declared bankruptcy around 2001. The GSS facility contained 25 miles of railroad tracks, including multiple spur lines and a main line. Three of the GSS facility's spur lines were named HN1, HS1, and HS2. HN1 is 1000 feet long. HS1 and HS2, now scrapped, were 800 and 600 feet long, respectively. At some point in 2001, EPA designated the GSS facility as a Superfund site on the national priority list and began site remediation.

In May 2001, the Williams Family Limited Partnership purchased "over (25) miles of in-ground railroad track" at GSS's bankruptcy foreclosure auction. (Doc. 82-12, 3, 18). WFLP "had a permissive use license through the bankruptcy trustee to use the Track until such time as the real estate was sold. WFLP did not have a lease, license, or legal right to access or conduct business on Track on property that it did not own or otherwise have a contractual right to use." (Doc. 74-12, 3). WFLP used the tracks to operate a rail car storage business from 2001 to 2002 and used the spur lines to store rail cars until 2002.

In December 2002, GIP purchased a 400 acre portion of the GSS facility. GIP knew that EPA had designated the GSS facility as a Superfund site when it purchased the real property, and GIP excluded the facility's eastern 200 acres from the sale because it feared environmental contamination on that portion of the facility.

The eastern excluded property contained the spur lines at issue. The eastern excluded property also contained two large "slag piles" of non-hazardous scrap metal totaling approximately three million cubic yards. One slag pile was located north of several lagoons on the eastern excluded property near HN1. The other slag pile was located south of the lagoons near HS1 and HS2.

Between 2002 and 2005, WFLP, GIP, and a third party operated a rail car storage business using WFLP's tracks. The tracks were in good repair and not buried in 2005. In December 2005, GIP bought out its partners, purchasing all 25 miles of track from WFLP for $270, 000.00. Although GIP never verified the track length, GIP purchased all the track WFLP originally purchased at the GSS bankruptcy foreclosure auction.

In 2006, GIP purchased locomotives for its rail car storage business. "Towards the end of 2006 or early 2007, GIP was ready to start going into the railroad car storage business" alone. (Doc. 82-9, 8-9). GIP has an oral license from the GSS bankruptcy trustee to store rail cars on the eastern excluded property. GIP's representative testified:

First of all, go back to when we bought the Gulf States Steel assets from the bankruptcy. Jim Henderson was the trustee, or the lawyer for the trustee. I think he was the trustee and Harry Long was the lawyer for the trustee. But I had a conversation with Jim Henderson and he said - and we were talking about the eastern property, and he said you can basically do whatever you want there because Gulf States Steel is defunct. And we were talking about how long we have to take out kish slag we owned there. We felt that we had the right to just use that property because no one cared, there wasn't anybody to object, and that we - when we bought it from Williams in 2005, the partnership had been using it for years. So we were just going to continue to use it.

(Doc. 82-9, 18).

As of 2009, the Gulf States Steel Acquisition Corporation held "fee title" to the eastern excluded property. (Doc. 74-23, 3). However, the eastern excluded property was placed up for sale in 2009 for ad valorem taxes and no entity purchased the property. Therefore, "tax title" to the eastern excluded property is now held by the State of Alabama.

Currently GIP operates a rail car storage business using the tracks on GIP's property, but not the track on the eastern excluded property. GIP charges customers between $2 and $2.50 per day to store rail cars. GIP could store 39-41 cars per day on the spur lines on the eastern excluded property. GIP never had any contracts with any customer to store rail cars on the spur lines. Instead, GIP planned to use the spur lines to store long term, "slow mover" rail cars. (Doc. 82-9, 20). GIP has "been at capacity where we turn cars away." (Doc. 82-9, 20).

2. EPA Remediation

EPA began remediation of the eastern excluded property by 2007. EPA did not allow GIP on the eastern excluded property after 2007 and posted keep out signs.

EPA hired CMC "to find a way to address the hazardous substances, leachate, and volume of the waste piles." (Doc. 74-1, 3). CMC first helped EPA remediate leaking tanks, the coke plant ovens, the power house, and an oil lagoon on the eastern excluded property. EPA then asked CMC to address the two slag piles. According to EPA, water flow over the metallic content in the slag piles caused the pH levels in surrounding bodies of water to become harmful to human life. CMC suggested remediation of the slag piles by mining and recycling the metallic content in the slag piles. CMC asked multiple companies about mining the slag piles, and Harsco expressed interest.

In 2009, Harsco studied the feasibility of mining and recycling the metallic content in the slag piles. The feasibility study showed Harsco that mining the slag piles would be profitable. The feasibility study showed EPA that removal of the metallic content from the slag piles would cost effectively reduce the slag piles' environmental impact. EPA viewed its actions as addressing "the source of the release of hazardous substances from the Site, which acts as an ongoing threat to human health and the environment." (Doc. 74-33, 17).

After the successful feasibility study, Harsco signed a slag processing agreement with CMC. Harsco agreed to mine the slag piles and provide CMC a royalty on the revenue generated by the sale of the recycled metal. CMC credited its royalty to the amounts billed to EPA for all of CMC's work at the GSS facility.

Harsco mined metallic content from the slag piles to generate profit, and Harsco had no knowledge of the alleged environmental benefits of reducing the volume of the slag piles. Harsco chose where to mine the slag piles to find the most profitable materials, whether to remove the materials, and the best price and buyer for the materials.

In 2009, Harsco buried HN1 while processing slag mined from the slag piles because HN1 impeded Harsco's path to rich deposits of recyclable materials. HN1 remains in place today and could be unburied by ...


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