United States v. Ivey (1996), 30 O.R. (3d) 370 (C.A.)

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  • Date: 2018

United States of America v. Ivey et al. *

[Indexed as: United States of America v. Ivey]

30 O.R. (3d) 370

[1996] O.J. No. 3360

Court File No. C23578

Court of Appeal for Ontario,

Houlden and Osborne JJ.A. and Campbell J. (ad hoc)

September 26, 1996

 

 

* Application for leave to appeal to the Supreme Court of Canada dismissed with costs May 29, 1997 (Lamer C.J. and Cory and McLachlin JJ.).

Conflict of laws — Foreign judgments — Enforcement — United States judgment ordering defendants to pay cost of cleaning up Michigan waste disposal site pursuant to their liability under U.S. environmental law enforceable in Ontario — Public law exception to enforceability of foreign judgments (assuming that such exception exists) not applying — Cost recovery action so close to common law claim for nuisance that it has commercial or private law character.

The defendants appealed a decision enforcing in Ontario United States judgments ordering the defendants to pay the cost of cleaning up a Michigan waste disposal site pursuant to their liability under U.S. environmental law.

 

Held, the appeal should be dismissed.

 

Assuming that notification before clean-up was essential to the American judgment or its Canadian enforcement (which was far from clear), the defendants received such notice.

A finding that the defendants caused the harm was not essential for American liability or Canadian enforcement, because liability under the relevant U.S. environmental legislation depends on ownership or operation at the time of disposal, not causation of harm. In any event, there was ample evidence of causation.

The U.S. environmental legislation, Comprehensive Environmental Response, Compensation and Liability Act, 1980, 42 U.S.C. (“C.E.R.C.L.A.”), is not a penal or revenue statute. The public law exception to the enforceability of foreign judgments rests on a shaky doctrinal foundation. It is not necessary to close the door on the possible existence of such an exception, as the doctrine would have to be extended beyond its present scope in order to apply to this case. The United States did not attempt to enforce any laws against extraterritorial conduct. It is no extension of U.S. sovereign jurisdiction to enforce its domestic judgments against those legally accountable for any environmental mess in the United States by reason of their ownership or operation of American waste disposal sites. The cost recovery action, although asserted by a public authority, was so close to a common law claim for nuisance that it was, in substance, of a commercial or private law character.

 

The defendants’ counsel conceded the applicability of the “real and substantial connection” test.

 

Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, 76 D.L.R. (4th) 256, 52 B.C.L.R. (2d) 160, 122 N.R. 81, [1991] 2 W.W.R. 217, 46 C.P.C. (2d) 1, 15 R.P.R. (2d) 1, consd

 

APPEAL from a judgment of Sharpe J. (1995), 26 O.R. (3d) 533, 130 D.L.R. (4th) 674 (Gen. Div.), enforcing a United States judgment.

 

John S. McKeown and Catherine C. Grant, for appellants. Stephen T. Goudge, Q.C., and Malcolm N. Ruby, for respondent.

BY THE COURT: —

 

The Appeal

 

The defendants appeal the decision of Sharpe J. (1995), 26 O.R. (3d) 533, 130 D.L.R. (4th) 674 (Gen. Div.), enforcing in Ontario the judgments of the United States District Court for the Eastern District of Michigan ordering the defendants to pay the cost of cleaning up a Michigan waste disposal site pursuant to their liability under U.S. environmental law.

 

The Facts

 

The facts are set out in the judgment of Sharpe J. The appellants challenge four of the findings of fact made by the learned judge.

 

The Issues on Appeal

 

The appellants submit that the motions judge erred in his appreciation of the evidence and made findings of fact that were not supported by the evidence:

1.  that the defendants engaged in the waste disposal business in Michigan;

2.  that the EPA notified Ivey and the LDI’s trustee in bankruptcy before undertaking each removal action, and thus gave them an opportunity to respond;

3.  that the defendants caused the harm that created the cleanup cost;

4.  that the defendants had the opportunity in the U.S. action to raise the issue of their alleged inability to take any remedial action as a result of the temporary restraining order.

 

The appellants also submit that the motions judge erred in law in the following respects:

1.  in his interpretation and application, to the U.S. environmental legislation, of the “penal, revenue or other public law” test;

2.  in his interpretation and application of the Morguard test of real and substantial connection between the defendants and the subject-matter or the place of the U.S. action;

3.  in his conclusion that the American proceedings satisfied the requirements of natural justice.

 

1.  The Factual Issues

Did the Defendants Engage in the Waste Disposal Business? In Ivey’s day-to-day control of the operations of LDI, in

Maziv’s share interest and mortgage and banking and other financial arrangements with LDI, in Ineco’s assumption of Maziv’s liabilities, and in the findings of fact by Judge Zatcoff, there is ample support for the conclusion of Sharpe J. that the defendants engaged in the waste disposal business in Michigan so as to give them a real and substantial connection with the subject matter of the action.

 

Notification Before Cleanup?

Sharpe J. found that the E.P.A. notified Ivey and LDI’s trustee in bankruptcy before each of the removal actions, and gave them an opportunity to respond to the environmental problems identified by E.P.A. Because Ivey did not receive personal notice of the first two removals, it is more technically precise to say that the trustee received actual notice, and that Ivey received constructive notice of the second two removals.

Because Ivey was working so closely with the trustee, notice to the trustee was constructive notice to Ivey. In any case, it is far from clear that notification before cleanup was essential to the American judgment or its Canadian enforcement.

To the extent, however, that pre-cleanup notice is relevant,

Ivey received constructive notice. Did the Defendants Cause the Harm?

Sharpe J. noted that the American judgments went no further than to hold the defendants to account for the cost of remedying the environmental harm that their waste disposal activities caused.

This finding is not essential for American liability or Canadian enforcement, because liability under the relevant U.S. environmental legislation depends on ownership or operation at the time of disposal, and it is not necessary to prove that the defendants caused the harm.

Even though the finding of causation is not essential, there is ample evidence of causation in the evidence admitted by Judge Zatcoff of the pre-accident environmental violations by LDI, and in the failure of the defendants to abate the environmental problems by shipping the liquid contaminants to other available disposal sites when on-site incineration was no longer available.

Opportunity to Argue Lack of Control?

The defendants argued that the U.S. legislation, Comprehensive Environmental Response, Compensation and Liability Act, 1980, 42 U.S.C. (“C.E.R.C.L.A.”), was unfairly applied because they lacked control as a result of Judge Daner’s temporary restraining order. Sharpe J. said the defendants had an opportunity to argue the point before Judge Zatcoff but they chose not to do so.

The defendants’ argument appears to be unsupported by the evidence. Although the defendants preferred to incinerate the material on site, the temporary restraining order did not prevent them from shipping it to another disposal site.

A further answer to the appellant’s argument, that the statute gave them no opportunity to raise that issue before Judge Zatcoff, is that they never defended the case, they never tried to raise that issue, and we will therefore never know whether or not the argument would have been received, or how it would have been received. To say they could not have made an argument they did not try to make is to speculate.

In any event, as Sharpe J. pointed out, even if Judge Zatcoff erred in holding the defendants liable, that is no ground for refusing enforcement.

 

2.  The Legal Issues

 

Penal, Revenue, or Other Public Law?

For the reasons given by Sharpe J., we conclude that the U.S. environmental legislation (C.E.R.C.L.A.) is not a penal or revenue statute.

The public law exception to the enforceability of foreign judgments rests, as Sharpe J. pointed out in rejecting it, on a shaky doctrinal foundation.

It is not, however, necessary to close the door on the possible existence of such an exception. As Sharpe J. pointed out, the doctrine would have to be extended beyond its present scope in order to apply to this case.

We adopt the reasoning of Sharpe J. in this regard and simply note the following. The United States did not seek to enforce any laws against extraterritorial conduct. It simply sought financial compensation for actual costs incurred in the United States in remedying environmental damage inflicted in the United States on property in the United States. It is no extension of U.S. sovereign jurisdiction to enforce its domestic judgments against those legally accountable for an environmental mess in the United States by reason of their ownership or operation of American waste disposal sites.

In this case the cost recovery action is unlike the laws typically associated with the other “public law” public law exception, such as import and export regulations, trading with the enemy legislation, price control and anti-trust legislation.

The cost recovery action, although asserted by a public authority, is so close to a common law claim for nuisance that it is, in substance, of a commercial or private law character.

The cost recovery action under this statutory regime is not the unique right of government; it may be asserted against government and it may be asserted by between private parties.

Many jurisdictions including Ontario have adopted similar statutes which strengthen common law compensation remedies. International comity supports the mutual enforcement of such similar statutory regimes.

Real and Substantial Connection to the Action?

Appellants’ counsel, by saying he “does not advance the argument that Morguard should not be followed” concedes the applicability of the “real and substantial connection” test.

For the reasons given by Sharpe J., we conclude that he correctly applied and interpreted the Morguard test [Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, 76 D.L.R. (4th) 256].

Was Natural Justice Satisfied?

For the reasons given by Sharpe J., we conclude that the American proceedings satisfied the requirements of natural justice.

 

Conclusion

 

For these reasons, the appeal is dismissed with costs.

 

Appeal dismissed.