author: LUONGO, Chief Judge.

text:
    Eugene LOWE and Margaret Lowe, h/w v. JOHNS-MANVILLE CORPORATION, Johns-Manville Sales Corporation, Raybestos Manhattan, Owens-Illinois, Celotex, Eagle-Picher, Keene Corporation, Nicolet Industries, Inc., Amatex, Pittsburgh-Corning, Unarco, Armstrong World, GAF Corporation, Fibreboard Corporation, Pacor, Inc., Porter Hayden, Forty Eight Insulations, Inc., Dar Industrial Products, Owens-Corning Fiberglas, Southern Textile Company, H.K. Porter Co.
    Civ. A. No. 82-2131.
    United States District Court, E.D. Pennsylvania.
    March 20, 1985.
    Lawrence D. Levin, Wyncote, Pa., Martin Greitzer, Philadelphia, Pa., for plaintiffs.
    Robert St. Leger Goggin, Philadelphia, Pa., for Johns-Manville Corp.' and JohnsManville Sales Corp.
    Arthur Makadon, Philadelphia, Pa., for Raybestos Manhattan.
    Nathan A. Schachtman, Peter J. Lynch, Cherry Hill, N.J., for Owens-Illinois.

      Thomas O. Malcolm, Edmund K. John, Andrew J. Trevelise, West Chester, Pa., for Celotex.
    Victor L. Drexel, Norristown, Pa., Francis E. Shields, Philadelphia, Pa., for Amatex.
    Edward J. David, Philadelphia, Pa., for Pittsburgh-Corning.
    Dudley Hughes, Philadelphia, Pa., for Unarco.
    Joseph M. O’Neill, Philadelphia, Pa., for Armstrong World.
    Charles J. Kalinoski, Edward Greer, Philadelphia, Pa., for Gaf Corp.
    Barbara Pennell, Joseph R. Thompson, Philadelphia, Pa., for Eagle-Picher.
    John Ledwith, Leslie A. Miller, Francis G. Wenzel, Jr., Philadelphia, Pa., for Keene Corp.
    Mark O. Denehy, Philadelphia, Pa., for Nicolet Industries, Inc.
    Peter P. Liebert, III, Philadelphia, Pa., for Fibreboard Corp.
    G. Daniel Bruch, Jr., Philadelphia, Pa., for Pacor, Inc.
    John Patrick Kelley, Philadelphia, Pa., for Owens-Corning Fiberglas.
    Joseph H. Foster, Philadelphia, Pa., for Southern Textile Co. and H.K. Porter Co.
   OPINION

LUONGO, Chief Judge.

In this lawsuit, plaintiffs Joseph Eugene Lowe and James Albert Lowe (“plaintiffs”) seek recovery as personal representatives of Eugene Lowe (Lowe) for injuries sustained by Lowe as a result of his occupational exposure to asbestos. The defendants have moved for summary judgment on the ground that plaintiffs’ claims are barred by the statute of limitations. Because I conclude that a genuine issue of material fact exists as to when Lowe discovered that he suffered from an asbestos-related disease, I will deny the motions.

I.

This case was originally filed as a personal injury action by Eugene Lowe and his wife Margaret Lowe on May 14, 1982. Mr. Lowe died testate on September 13, 1982, and the named plaintiffs were later appointed as co-administrators of his estate. A motion for substitution of parties was filed and Lowe’s death was suggested upon the record on February 20, .1985. I will grant the motion for substitution.

II.

The question presented by defendants’ motions is whether it can be said, as a matter of law, that Lowe had “discovered” or ought to have “discovered” that he had an asbestos-related disease in excess of two years before the filing of this action. The parties agree that if Lowe could not be charged with such knowledge, application of the “discovery rule” exception to the statute of limitations would preserve plaintiffs’ claim. The parties dispute the impact that a ruling in defendants’ favor would have: Plaintiffs argue that, under Pennsylvania’s choice of law principles, New Jersey law defines plaintiffs’ substantive claims, and that under New Jersey law, Lowe’s discovery of some asbestos-related maladies would not preclude recovery for subsequently developed, far more serious disorders. Defendants assert that Pennsylvania law governs accrual of actions in cases brought in Pennsylvania, and that Pennsylvania precedent mandates dismissal of all asbestos-related claims if claims with respect to Lowe’s initial asbestos-related injury are time-barred.

III.

In support of their motions for summary judgment, defendants have presented evidence that Mr. Lowe knew or should have known in December, 1979, both that he had pleural thickening, and that his illness was related to asbestos exposure. To establish the latter proposition, defendants point out that in July, 1978 Lowe completed a “Dust Exposure Record” on which he acknowledged that he had been exposed to asbestos. With respect to Lowe’s knowledge of his injury, defendants contend that in December, 1979 Lowe was informed by his employer’s physician that he suffered from pleural thickening. Because I find the issue of Mr. Lowe’s knowledge of his illness dispositive of the present motions, I must examine with great care the evidence upon which defendants predicate Lowe’s discovery of his disease.

Eugene Lowe was employed at Mobil Oil Corporation’s refinery in Paulsboro, New Jersey at various times from 1942 until this suit was filed. Lowe’s employment caused him to come in contact with asbestos products as well as the dust and fibers that accompany the use of such products. Because of his exposure to asbestos, Lowe participated in Mobil’s Asbestos Surveillance Program, a medical examination program designed to monitor the effects of asbestos exposure among Mobil’s employees.

Pursuant to Mobil’s Asbestos Surveillance Program, participating employees were invited to group discussions of the effects of asbestos exposure. On those occasions, employees were provided a description of asbestos-related diseases, the risks of such diseases and related complications, and they were informed of the effect of smoking on persons exposed to asbestos. In addition to group discussions, the Asbestos Surveillance Program included personal interviews between individual employees and Mobil’s staff physicians for the purpose of discussing the results of the employees’ physical examinations and x-rays.

To establish that Lowe learned of his finding of pleural thickening in a group discussion and personal interview, defendants rely upon Mobil’s medical records concerning Lowe’s treatment as well as the deposition testimony of Dr. John P. McNally, a Mobil physician. Lowe’s medical records contain two notations of particular relevance. The first is a notation dated 12/18/79, signed by Dr. McNally, which states findings for Lowe of “moderate R plaque” and “questionable fibrosis,” and that Lowe was to be called in for a “group chest consult.” The second, dated 12/20/79 and also signed by Dr. McNally, states that Lowe was a “participant in [a] group discussion of asbestos related disease” and that he was “informed of his own finding of pleural thickening.”

Dr. McNally’s deposition testimony described both the group discussions and personal interviews. The group sessions were utilized, according to McNally, to describe the effects of asbestos exposure in layman’s terms with the assistance of visual aids such as anatomic sketches. The personal interviews, which Dr. McNally termed “confessionals,” were used to explain each employee’s individual findings so that the individual “not only knew what the basic disease was but that he knew what his position in it was.”

When asked specifically about his contacts with Lowe, McNally stated that he remembered Lowe, that having refreshed his recollection with Lowe’s medical records he recalled Lowe participating in a group discussion, that after review of his notes he found no reason to believe he conducted the group discussion in a manner different from his ordinary practice, and that there would be no reason for his notation of having informed Lowe of his finding of pleural thickening if he had not conducted a personal interview with Lowe on December 20, 1979.

Plaintiffs argue that whether McNally informed Lowe of his pleural thickening remains a genuine issue of material fact for four reasons: First, plaintiffs argue that a jury should evaluate Dr. McNally’s rather equivocal answers with respect to his specific conversations with Mr. Lowe. Critical to plaintiffs’ argument in this regard was McNally’s admission in his deposition that he did not specifically remember his personal interview with Mr. Lowe. Second, plaintiffs dispute that the information conveyed by Dr. McNally sufficiently apprised Lowe that he was suffering from an asbestos-related disease. Plaintiffs argue that McNally so minimized Lowe’s findings that it would be unreasonable to charge Lowe with discovery of his illness. Third, plaintiffs point out that subsequent entries in Lowe’s medical records indicate that Lowe was to be informed of similar findings in September, 1980. This, plaintiffs argue, would be superfluous if Lowe had actually been so informed in December, 1979. Finally, as evidence of Lowe’s state of mind prior to 1982, plaintiffs have proffered affidavits from Margaret Lowe, and James Lowe (Eugene Lowe’s son) and Dr. Rudolph T. DePersia (Eugene Lowe's personal physician). Mrs. Lowe’s affidavit states that she and her husband discussed his physical examinations including the December, 1979 examination, that Mr. Lowe told her the results of such examinations were good, and that Mr. Lowe did not mention having an asbestos-related disease prior to his hospitalization in March, 1982. James Lowe’s affidavit states that, when Mr. Lowe became ill in March, 1982, he went to Mobil’s benefits department to secure payment for his father’s medical bills, that he was sent to see Dr. McNally, and that Dr. McNally told him that Eugene Lowe did not have asbestosis. Dr. DePersia’s affidavit states that he did not diagnose Mr. Lowe as suffering from any asbestos-related disease before 1982, and that he does not recall any discussions of asbestos-related disease with Mr. Lowe before 1982.

IV.

Federal Rule of Civil Procedure 56(c) permits entry of summary judgment on defendants’ motion if defendants have shown that there is “no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” The purpose of rule 56 is “to eliminate a trial in cases where it is unnecessary and would only cause delay and expense.” Goodman v. Mead Johnson & Company, 534 F.2d 566, 573 (3d Cir.1976) (footnote omitted), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). In evaluating the evidence presented in support of a motion for summary judgment, the non-moving party is entitled to have resolved in its favor all conflicts in evidence, and all disputed inferences from those facts. Credibility, of course, may not be resolved at the summary judgment stage unless the nonmovant’s position is plainly unreasonable. Losch v. Borough of Parkesburg, Pennsylvania, 736 F.2d 903, 909 (3d Cir.1984).

Applying these standards to the facts in this record, I am compelled to deny defendants’ motion for summary judgment. Although defendants have produced rather persuasive evidence that Mr. Lowe was informed of his finding of pleural thickening, they have not established that a reasonable jury could not reject Dr. McNally’s explanation of his notations in Lowe’s medical records. Dr. McNally could not himself state that he recalled informing Lowe of his findings; McNally’s testimony is an interpretation of his handwritten notations in light of his regular medical practice. It will be necessary for a jury to evaluate the validity of the inferences drawn by Dr. McNally from those handwritten notes.

This conclusion is perhaps best confirmed by a review of several of the asbestos cases in which the Pennsylvania Superi- or Court has articulated and applied Pennsylvania’s “discovery rule” exception to the statute of limitations. In Price v. Johns-Manville Corporation, — Pa.Super. —, 485 A.2d 466 (1984), the court affirmed a summary judgment granted against the plaintiff where the injured person had sought and received worker’s compensation on the basis of asbestos-related impairments some fifteen years before suit was filed. In that case, conclusive evidence of the plaintiff’s knowledge of his disease was established through the plaintiff’s own statements. Likewise, in Cianfrani v. Johns-Manville Corporation, — Pa.Super. —, 482 A.2d 1049 (1984), the court affirmed a summary judgment where, inter alia, the plaintiff admitted that he was advised of his asbestosis and filed a “Federal Employees Notice of Injury and Occupational Disease” four years before bringing suit. To similar effect is Berardi v. Johns-Manville Corporation, — Pa.Super. —, 482 A.2d 1067 (1984), a case in which summary judgment was upheld where the decedent, seeking worker’s compensation, admitted that he had asbestos-related lung disease four years before suit was brought, and wrote a letter to the Department of Labor explaining the connection between asbestos exposure and his illness more than two years before filing of the complaint.

In the leading case Cathcart v. Keene Industrial Insulation, 324 Pa.Super. 123, 471 A.2d 493 (1984), the court affirmed summary judgment where the plaintiff’s deposition established that, also in connection with a disability determination, he knew of his “asbestosis lung” and its cause more than two years before suit was filed. In Volpe v. Johns-Manville Corporation, 323 Pa.Super. 130, 470 A.2d 164 (1983), the court sustained an order granting summary judgment where the plaintiff testified that, more than three years before filing suit, he was informed that he had asbestosis and read articles describing the dangers of exposure to asbestos. Finally, in Staiano v. Johns-Manville Corp., 304 Pa.Super. 280, 450 A.2d 681 (1982), the court affirmed the grant of summary judgment where the plaintiff filed a “Federal Employees’ Notice of Injury or Occupational Disease” form on which he claimed injury from occupational exposure to asbestos in 1972, approximately five years before suit was filed.

It is apparent from this review of the Superior Court’s cases, that the “discovery rule” has not been construed as an authorization for judicial fact-finding of the underlying events upon which defendants seek to charge an injured party with discovery of his injury and its cause. The Superior Court, in accord with federal practice, has permitted summary judgment only where the factual record left no genuine dispute as to when the critical information was imparted to the plaintiff.

In the case at bar, I cannot determine as a matter of law that Mr. Lowe had the requisite notice of his injury in December, 1979. That determination can only be made after an assessment of the accuracy of Dr. McNally’s conclusion that in Lowe’s case he followed his usual practice of informing the employee of his findings, describing their complications, and making appropriate inscriptions in the employee’s medical record. Making such an assessment is a function for a jury.

Defendants properly assert that the test for applicability of the discovery rule includes a heavy burden of inquiry upon the party seeking to invoke it. See Pocono International Raceway, Inc. v. Pocono Produce, Inc., 503 Pa. 80, 468 A.2d 468 (1983); Cathcart v. Keene Industrial Insulation, 471 A.2d at 500; Ciccarelli v. Carey Canadian Mines, Ltd., 757 F.2d 548 at 553 (3d Cir.1985); O'Brien v. Eli Lilly & Company, 668 F.2d 704 (3d Cir.1982); Cowgill v. Raymark Industries, Inc., C.A. 83-4196 1:(E.D.Pa. Feb. 1, 1985) (Huyett, J.). As the Pennsylvania Supreme Court has stated, “The ‘discovery rule’ is ... an exception, and arises from the inability of the injured, despite the exercise of due diligence, to know of the injury or its cause.” Pocono International Raceway, 468 A.2d at 471 (emphasis in original). In the context of this case, however, defendants’ reference to Lowe’s duty to inquire puts the cart before the horse: Lowe was obligated to discover the fact of his injury only if he had been apprised of facts sufficient to put him on notice that he suffered from a disease. The current record does not establish such notice. Lowe’s knowledge of his exposure to asbestos is insufficient in the absence of proof beyond genuine dispute that he also knew he had been injured. For the reasons discussed above, I conclude that it remains a genuine issue of fact whether Dr. McNally informed Lowe of his asbestos-related illness. Moreover, defendants have not established that information from alternative sources should have put Lowe on notice of his injury. Certainly Lowe could not have been expected on his own to diagnose his pleural thickening — a latent disease apparently in its initial stages. Nor have defendants argued that Lowe’s case of pleural thickening curtailed his life activities such that he should have been put on guard of a respiratory ailment.

In short, a physician’s guidance was necessary to inform Lowe that the effects of his exposure to asbestos had become manifest in a disease. Because that underlying fact has not been established, I cannot say as a matter of law that Lowe should have investigated and discovered the fact of his injury more than two years before suit was filed.

V.

Because I will deny defendants’ motions, I need not presently resolve the effect on plaintiffs’ mesothelioma claim of a ruling that plaintiffs’ pleural thickening claim is time-barred. That question, which has become debated under the term “second disease rule,” would be squarely presented by a jury verdict in favor of defendants with respect to Mr. Lowe’s discovery of his pleural thickening. In view of the need for a jury trial at least for the issues discussed in this opinion, and the possibility that our Court of Appeals will decide that issue in Ross v. Johns-Manville Corp., appeal docketed, No. 84-1528 (3d Cir.), I conclude that reserving judgment on that issue would be appropriate. Nevertheless, in the interest of judicial economy, it will be necessary at trial to require the jury to specify at least: (1) whether Lowe discovered his injury and its cause more than two years before suit was brought, (2) the amount of damages for plaintiffs’ mesothelioma claim, and (3) the total amount of damages. In that fashion, the verdict can be adjusted according to any intervening decisions of the Court of Appeals or the trial judge’s rulings on post-trial motions.

      . Plaintiffs’ motion for substitution cites the New Jersey Survival Act as authority for the proposition that Mr. Lowe’s death did not extinguish his claim. No party has suggested that Pennsylvania law is to the contrary, so I do not decide any choice of law questions on this issue.

      . Kelly v. Johns-Manville Corp., 590 F.Supp. 1089 (E.D.Pa.1984).

      . Goodman v. Mead Johnson & Co., 534 F.2d 566 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977).

      . Cowgill v. Raymark Industries, Inc., C.A. 83-4196 slip. op. at 7, n. 2 (E.D.Pa. Feb. 1, 1985) (Huyett, J.).

      . Cathcart v. Keene Industrial Insulation, 324 Pa.Super. 123, 471 A.2d 493 (1984).

      . Cf. Ayers v. Morgan, 397 Pa. 282, 154 A.2d 788 (1959).

      . This is a very close case, and it is out of an abundance of caution that I conclude that a jury must determine whether Dr. McNally informed Lowe of his pleural thickening. I acknowledge that my esteemed colleague Judge Huyett recently granted a motion for summary judgment on similar facts despite deposition testimony from the decedent that he had not been informed that he had an asbestos-related injury. Cowgill v. Raymark Industries, Inc., supra. It is my view of the facts before me, however, that McNally’s equivocal responses fail to negate the existence of a genuine issue as to when Lowe was notified of his illness, and that Lowe’s duty to inquire became relevant only when he was apprised of the fact of his injury.

      . In reaching this conclusion, I have given little weight to the alleged ambiguities in Dr. McNally's notations after December, 1979 and to the "state of mind” affidavits submitted by plaintiffs. I note also that, in view of the foregoing analysis, I have no occasion to consider whether a reasonable jury could conclude that Dr. McNally’s explanation of asbestos-related disease failed to put Lowe on notice of his injury.


source: Caselaw Access Project

author: ROY, District Judge.

license: Public Domain

text:
    Michael SWOFFORD, Plaintiff, v. SHEARSON LEHMAN/AMERICAN EXPRESS, INC., Defendant.
    No. LR-C-85-182.
    United States District Court, E.D. Arkansas, W.D.
    March 20, 1985.

      Timothy O. Dudley, and Gary D. Corum, Little Rock, Ark., for plaintiff.
    Sam Hilburn, North Little Rock, Ark., for defendant.
   ORDER

ROY, District Judge.

Pending before the Court is the Plaintiffs Motion For Preliminary Injunction asking this Court to stay proceedings in the Pulaski County Chancery Court. In the state court action, Shearson alleges that Swofford is indebted to it because of his misappropriation of funds. That action is to be tried before the Honorable Lee Mun-son on April 3, 1985. Swofford would have this Court stay the state court trial until this Court could rule on his Petition to Compel Arbitration of their dispute. As the Plaintiff points out in his brief accompanying motion the Arbitration Act, 9 U.S.C. § 2 applies to state as well as federal courts. The state court has the power to stay its action pending arbitration and has apparently refused to do so. This Court will not interfere with that decision and interrupt the normal flow of judicial business in chancery court.

Federal courts are prohibited by statute from granting injunctions to stay state court proceedings. 28 U.S.C. § 2283. The Court does not believe that any of the exceptions to the Act are applicable here. It is within this Court’s discretion whether to stay the state court action or not. Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263 (7th Cir.1976).

The Court does not believe this is a proper case for preliminary injunction. Plaintiff has the opportunity for a trial on the merits of the action against him in the state court. There is no reason to believe that justice will not be served thereby. If the Plaintiff is correct in his assertions made here, then he has recourse in the appellate courts of Arkansas if he loses in state court and chooses to file an appeal.

As the Supreme Court has said: “Since the beginning of this country’s history Congress has, subject to few exceptions, manifested a desire to permit state courts to try state cases free from interference by federal courts____” Younger v. Harris, 401 U.S. 37, 43, 91 S.Ct. 746, 750, 27 L.Ed.2d 669 (1971). That desire will be followed in this Court.

IT IS ORDERED:

That the Plaintiff’s Motion for Preliminary Injunction is denied.


author: EDWARD C. REED, Jr., District Judge.

text:
    Martin HORWITZ, Plaintiff, v. SOUTHWEST FOREST INDUSTRIES, INC., and William A. Franke, Defendants.
    No. CV-R-84-467-ECR.
    United States District Court, D. Nevada.
    March 20, 1985.

      John Frankovich, Reno, Nev., and Allan R. Tessler, Sheldon D. Camhy, Kurt Hunciker and John G. Nicolich, New York City, for plaintiff.
    Albert F. Pagni, Reno, Nev., and Charles F. Richards, Jr., Donald A. Bussard, Jesse A. Finkelstein, Gregory P. Williams, Gregory V. Vallallo, C. Stephen Bigler, Allen M. Terrell, Jr., Wilington, Del., for Southwest Forest Industries, Inc.

      Peter D. Laxalt and Richard L. Davenport, Reno, Nev., for Franke.
   MEMORANDUM DECISION AND ORDER

EDWARD C. REED, Jr., District Judge.

The plaintiff has moved for a preliminary injunction enjoining the defendants from taking any action in furtherance of certain stock purchase rights declared by the defendants, as a dividend to the common stockholders of Southwest Forest Industries (SFI or the Company), on October 22, 1984. SFI has opposed the motion. (Defendant Franke, who has pending a motion to dismiss or transfer for lack of personal jurisdiction, has not responded). Memoranda of points and authorities, affidavits and exhibits have been filed by both the plaintiff and SFI.

The gist of the plaintiffs contentions is as follows: About a year ago, SFI’s Board of Directors approved an agreement in principle whereunder an insider group headed by the Company’s president, defendant Franke, would take SFI private by buying all of its outstanding stock from the stockholders for $24 per share. The plan failed for lack of capital. However, an outside group then indicated willingness to buy all the stock at the same price. After some brief negotiations, the Board terminated consideration of the matter. It then announced the issuance of “poison pill” warrants. The effect of special features of the warrants is to make a tender offer for the Company’s stock virtually impossible. This procedure was adopted for the purpose of thwarting any competitive offers by outsiders to obtain control of SFI. The stockholders have been told that the warrants were designed to enable present Management to pre-screen and veto tender offers that it deems unfair or inadequate. However, deciding whether to accept a tender offer or to vote in favor of a proposed merger are rights of stockholders that are usurped by the warrant provisions. The dominant motives of Management are self-perpetuation in office and the continued enjoyment of Management perquisites. The warrants also authorize Management to veto the acquisition by any person of a 20% interest in SFI’s stock. This, in effect, will preclude mergers that are authorized by statutes of Nevada, the state of SFI’s incorporation. Since a 20% interest may not be acquired by anyone without Management’s acquiescence, any meaningful challenge to the Company’s present control group is prevented. The result is impairment of the rights of stockholders to buy as much of the Company’s stock as they wish and to sell their shares to anyone at the highest price in a free market. The plaintiff is an SFI stockholder. The Hearst Corporation is the owner of the largest bloc of Company stock, namely 17.5% of the stock outstanding. It has three representatives on SFI’s Board of Directors. Certain officers and directors, including defendant Franke, own in the aggregate another 3.1% of the stock. The Board of Directors has authorized the Company to enter into “golden parachute” agreements with certain of its officers, thus providing them with windfall benefits if a change in control of the Company should result in a termination of their employment. The poison pill warrants are tied to the outstanding shares of Company stock, one warrant for each share. The warrants, when exercisable, entitle their holders to purchase the Company’s common stock at a $50 per share price. At the time the Company announced its dividend of warrants, SFI’s stock was trading at approximately $17 per share. The warrant rights are not exercisable until after public announcement that a person or group owns 20% of the Company’s stock or the commencement of a tender offer for 30% or more of the stock. Until such time, the Company may recall or redeem the warrants for the nominal price of 25c each. In the case of a merger, each warrant entitles its holder to receive stock of the surviving company having a market value of $100 in return for the payment of $50. Alternatively, the acquiring company is permitted to buy the warrants at an exorbitant cash premium. In either event, the cost would be so high as to make any merger unfeasible. An injunction is needed because acquisition of a 20% interest by one person or group or the making4 of a tender offer for 30% or more of the Company’s stock would set off a “spring-gun,” making the warrants effective. The result would be the stifling of tender offers, the depression in value of the stock, and impairment of the stockholders’ rights to buy stock, to sell stock and to seek a controlling voice in SFI.

SFI’s papers filed in opposition to the plaintiff’s motion for a preliminary injunction present its side of the story as follows: The purpose of the issuance of the warrants is to protect the Company’s shareholders from unfair two-tier tender offers. Under such an offer, the acquiror makes a cash offer for a controlling position. After gaining control, the acquiror then offers a lesser consideration (often including securities rather than all cash) for the remaining stock. Alternatively, the remaining stockholders may be ignored by the acquiror, who already possesses a controlling interest. A front-end loaded, two-tier tender offer thus is coercive and unfair to the shareholders. Even if the initial cash offer is inadequate, a shareholder is under pressure to tender his stock because of the realization that he figures to receive even less in the second tier of the transaction. As to the agreement in principle for acquisition of SFI by a group of investors which included members of the Company’s Management, the deal fell apart when certain banks that had agreed to finance the transaction withdrew from participation because of rising interest rates and other factors. The outside group, which in May 1984 indicated it was interested in acquiring control at the same per share price offered by the Management group, failed to make a formal offer and would not or could not demonstrate the availability of adequate financing. Therefore, in July 1984 the Company’s Board of Directors directed Management to terminate negotiations. Following these two unsuccessful acquisition episodes, the Board instructed Management to concentrate on business operations. Effort then was devoted to an already-commenced five-year plan to develop and expand the Company. The plan was submitted for review to The First Boston Corporation, an investment banking firm that had been serving for several years as a financial adviser to SFI. In connection with the Company’s expressed concern over its vulnerability to any coercive takeover attempt, First Boston worked with outside legal counsel and Management in developing the rights or warrant plan with which the plaintiff' takes umbrage. A three-hour discussion of said plan took place at a Board meeting on October 22, 1984. First Boston, outside counsel and the Company’s Nevada counsel explained the plan and its pros and cons. Its utility in protecting SFI and its stockholders from unfair or coercive takeovers while the five-year plan was being implemented was an important factor. If expectations are met, the Company stock will have a market value of $50 per share by the end of the five years; hence, the use of that price in the warrants. The warrant plan serves to encourage a potential acquiror to negotiate with the Board, in light of the Board’s right to redeem the warrants for a mere 25$ each. The Board thus would serve as the bargaining agent for all the shareholders, who individually have little negotiating leverage. The Board’s negotiations would be exercised in the light of its fiduciary duties. The fact that other major corporations had adopted similar plans was made known to the Board. The Company’s Nevada attorneys advised the Board that research indicated that the warrant plan appeared legal under Nevada law. The plan was adopted unanimously by the directors in the exercise of their business judgment. Eleven of the twelve directors are non-Management. The rights were issued November 1, 1984.

The Complaint was filed herein on November 8, 1984.

Discussion

An injunction may issue only after the plaintiff has established that the conduct sought to be enjoined is illegal and the defendants, if not enjoined, will engage in such conduct. United Transportation Union v. State Bar of Michigan, 401 U.S. 576, 584, 91 S.Ct. 1076, 1081, 28 L.Ed.2d 339 (1971); Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 8, 98 S.Ct. 1554, 1559, 56 L.Ed.2d 30 (1978). Therefore the conduct of SFI’s Board of Directors must be the focus of attention here.

The powers of corporate directors is determined by state law. Burks v. Lasker, 441 U.S. 471, 478, 99 S.Ct. 1831, 1837, 60 L.Ed.2d 404 (1979). It is the law of the state of incorporation that is controlling. Lewis v. Anderson, 615 F.2d 778, 781 (9th Cir.1979). SFI is incorporated in Nevada. To the extent that any issues raised have not yet been confronted by the Nevada Supreme Court, this federal court must predict how the State Supreme Court would decide them. Amfac Mortgage Corp. v. Arizona Mall of Tempe, Inc., 583 F.2d 426, 434-5 (9th Cir.1978). Guidance may be sought from other jurisdictions that have considered those issues. Matter of Charles D. Stapp of Nevada, Inc., 641 F.2d 737, 738 (9th Cir.1981).

A director is a fiduciary. Foster v. Arata, 74 Nev. 143, 325 P.2d 759, 765 (1958). Since the value of and rights incident to outstanding shares of stock are affected by the conduct of directors, a fiduciary relationship exists in favor of the shareholders as to their shares of stock. Smith v. Gray, 50 Nev. 56, 250 P. 369, 373 (1926); cf. Treadway Companies, Inc. v. Care Corp., 638 F.2d 357, 375 (2nd Cir.1980). The director's obligation consists of the duty of care and the duty of loyalty. Norline Corp. v. Rooney, Pace Inc., 744 F.2d 255, 264 (2nd Cir.1984). The duty of care requires the director to exercise the care that a reasonably prudent person in a similar position would use under similar circumstances. Id. The duty of loyalty requires the director to act in good faith and, where he is shown to have a self-interest in a transaction, the burden shifts to him to demonstrate that the transaction is fair and serves the best interests of the corporation and its shareholders. Id.

Nevada statute, NRS 78.120(1) provides that, with certain limitations not pertinent here, the board of directors shall have full control over the affairs of the corporation. Traditionally, the board’s managerial function includes making the decision whether to welcome or oppose a proposed merger or takeover. Jewel Companies v. Pay Less Drug Stores Northwest, 741 F.2d 1555, 1560 (9th Cir.1984); Panter v. Marshall Field & Co., 646 F.2d 271, 288 (7th Cir.1981). Further, the board possesses discretion to negotiate the terms of a proposed merger agreement, although the ultimate decision whether to accept or reject it rests with the stockholders. Jewel Companies at 1562; Conoco Inc. v. Seagram Co., Ltd., 517 F.Supp. 1299, 1303 (S.D.N.Y.1981), aff'd w/o op. 661 F.2d 907 (2nd Cir.1981). Even after a proposed agreement has been negotiated by the board, its fiduciary obligation to its shareholders requires the providing to them of information regarding competing offers. Jewel Companies at 1564.

Where a director is charged with breach of his fiduciary obligation, the “business judgment” rule is utilized. That rule bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in lawful furtherance of corporate purposes. Norlin Corp. v. Rooney, Pace Inc., 744 F.2d at 264. It serves as a defense for the board members where: (1) they acted in a good faith belief that their conduct was in the corporation’s best interests; (2) they exercised due care in ascertaining the relevant facts and law before acting; and (3) they didn’t act in self-interest. Whittaker Corp. v. Edgar, 535 F.Supp. 933, 950 (N.D.Ill.1982). The affidavits and exhibits submitted by the Company in opposition to the instant motion for a preliminary injunction reflect the expenditure of considerable effort to obtain full knowledge of the facts and law. The rights plan was formulated in the light of the five-year plan for development and expansion of the Company. Advice was obtained both from investment bankers and law firms. Directors have a right to rely on such advice, even if it turns out to be erroneous. Id. at 951; Panter v. Marshall Field & Co., 646 F.2d at 297. A desire to maintain control of the corporation does not indicate that the directors acted in self-interest, unless that motive is the sole or predominant reason for their conduct. Id. at 294; Whittaker Corp. at 950.

There is a presumption that the acts of corporation directors are honest and in the best interests of the company. Foster v. Arata, 74 Nev. 143, 325 P.2d 759, 764 (1958). The business judgment rule postulates that if directors’ actions can arguably be taken to have been done for the benefit of the corporation, then the directors are presumed to have been exercising their sound business judgment rather than to have been responding to self-interest motivation. Panter at 294; Whittaker Corp. at 950. The burden of showing bad faith or abuse of discretion rests upon the plaintiff. Id.; Treadway Companies, Inc. v. Care Corp., 638 F.2d 357, 381 (2nd Cir.1980).

The business judgment rule affords directors wide latitude in devising strategies to resist unfriendly advances. Norlin Corp. at 744 F.2d 264. Defensive tactics themselves are illegitimate only if their primary purpose is the entrenchment of present management. Warner Communications, Inc. v. Murdoch, 581 F.Supp. 1482, 1491 (D.Del.1984). The decision to build the value of a company from within, rather than through merger or takeover may be a rational exercise of business judgment. Panter at 296. Therefore, directors’ actions in averting takeovers will be upheld if reasonable and taken in good faith. Jewel Companies v. Pay Less Drug Stores Northwest, 741 F.2d 1555, 1560-1 (9th Cir.1984). It is not the consensus of the courts and commentators that the promotion of active competition among would-be acquirors of a corporation is the sole aim of corporate law. Id. at 1568-9.

The plaintiff contends that the defendants have made misstatements in connection with the adoption of the Company’s rights plan and the issuance of the poison pill warrants. However, it does appear that any injuries to him have resulted from the acts of misconduct, rather than the misstatements. If the evidence eventually should show this to be the case, relief would not lie under federal securities laws. Warner Communications at 1495; Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 479, 97 S.Ct. 1292, 1304, 51 L.Ed.2d 480 (1977).

The function of a preliminary injunction is to preserve the status quo ante litem. Regents of University of California v. ABC, Inc., 747 F.2d 511, 514 (9th Cir.1984). The status quo is the last uncontroverted status that preceded the pending controversy. Id.; Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 804, 809 (9th Cir.1963). In the instant case, the status quo would be the situation before the adoption of the rights plan and the issuance of the warrants.

The Ninth Circuit has formulated several descriptions of the correct standard for determining whether a preliminary injunction should issue. Regents of University of California at 515. Nevertheless, they all fit within a single continuum. Id. The essential task in each case is to balance the equities, that is, to determine the relative hardship to the parties. Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir.1984). If denial of an injunction will be decidedly hard on the plaintiff, he need not show as robust a likelihood of success on the merits. Id.

SFI’s rights have been accepted for trading on the New York Stock Exchange, and their existence has been noted on recently issued stock certificates of the Company. A return to the status quo would entail the undoing of these acts, with resulting confusion to the investing public. Against this must be weighed the plaintiff’s allegations that even an inadvertent act could “spring-gun” the warrants into effect, thereby stifling tender offers, depressing the value of the stock, and impairing shareholders’ rights to buy and sell their stock and to seek control of the Company.

Public interest is a factor to be considered in balancing the hardships. Students of California School for the Blind v. Honig, 736 F.2d 538, 542 (9th Cir.1984), app. pdg.; Lopez v. Heckler, 725 F.2d 1489, 1498 (9th Cir.1984), app. pdg. The issuance of a preliminary injunction here necessarily would result in serious confusion among Company’s Management, the investing public and financial institutions. On the other hand, the hardship that refusal of injunctive relief would impose on the plaintiff is somewhat speculative. If SFI’s Board of Directors carries out its fiduciary obligations, as it is presumed it will, the leverage it has to represent all the stockholders in negotiating a merger or takeover agreement could well redound to the plaintiff’s benefit. The Ninth Circuit has noted, in the context of a case involving the maintenance of a derivative action:

“To allow one shareholder to incapacitate an entire board of directors merely by leveling charges against them gives too much leverage to dissident shareholders. There is no reason to believe that a minority shareholder is more likely to act in the best interest of the corporation than are directors who are elected by a majority of the stockholders.”

Lewis v. Anderson, 615 F.2d 778, 783 (9th Cir.1979).

The only test that the plaintiff herein might satisfy for determining whether injunctive relief would be appropriate, is to show probable success on the merits since he has established only a possibility of irreparable injury. From the record it can be seen that while it is possible that the plaintiff could be successful on the merits, it is not probable. Perhaps further discovery and investigation will enable him to prove bad faith, self-dealing or an abuse of discretion on the part of the defendants. However, as the movant, he has the burden of establishing that he is clearly entitled to the preliminary injunction he seeks. Mayview Corp. v. Rodstein, 480 F.2d 714, 719 (9th Cir.1973); Dymo Industries, Inc. v. Tapeprinter, Inc., 326 F.2d 141, 143 (9th Cir.1964); Sierra Club v. Hickel, 433 F.2d 24, 33 (9th Cir.1970). Although no Nevada case has been found on point, the trend of decisions in other jurisdictions suggests that the conduct of the defendants was probably legal in the absence of improper motive or intent. See, e.g., Moran v. Household International, Inc., Del.Chancery Ct. No. 7730 (1/29/85). It cannot be said at this juncture that the plaintiff has demonstrated probable success on the merits.

IT IS, THEREFORE, HEREBY ORDERED that plaintiff’s motion for a preliminary injunction be DENIED.


author: SHAPIRO, District Judge.

text:
    INDUSTRIAL PARK DEVELOPMENT COMPANY v. The ENVIRONMENTAL PROTECTION AGENCY, an agency of the United States of America; and Lee M. Thomas, in his capacity as the Administrator of the Environmental Protection Agency; and Stanley L. Laskowski, in his capacity as the Acting Regional Administrator for the Environmental Protection Agency Region III.
    Civ. A. No. 85-0875.
    United States District Court, E.D. Pennsylvania.
    March 21, 1985.

      Denis V. Brenan, Frank M. Thomas, Jr., William F. Mongan, Philadelphia, Pa., for plaintiff.
    Michael L. Martinez, Asst. U.S. Atty., Philadelphia, Pa., for defendants.
   MEMORANDUM AND ORDER

SHAPIRO, District Judge.

Plaintiff Industrial Park Development Company (“IPDC”) sought injunctive relief to prevent Environmental Protection Agency (“EPA”) access to IPDC’s property to remove hazardous waste materials under the presumed authority of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq.

Following a hearing on February 21 and 22, 1985, for reasons stated from the bench, the court denied plaintiff preliminary injunctive relief (because there was no showing of irreparable harm) but retained jurisdiction to consider the merits of this litigation on an expedited basis. This Memorandum is an elaboration of the court’s bench opinion.

IPDC, a limited partnership, owns a 5.5-acre tract of undeveloped land in Eddy-stone, Pennsylvania (the “site”). During the 1970’s the site leased to ABM Trucking Company, Inc. (“ABM”). Some time after ABM’s lease terminated, EPA discovered on the site drums (55-gallon capacity) and cans (lk pint to 5-gallon capacity) containing waste materials as well as a tank truck containing approximately 1,000 gallons of sludge. Since termination of ABM’s lease, IPDC has not leased this property and has no present plans either to lease or develop the vacant site.

In August, 1983, EPA inspected the site and took samples of the contents of some drums and surrounding soil. In October, 1984, results of the chemical analyses of these samples revealed the presence of substances termed hazardous under CERCLA, § 101(14), 42 U.S.C. § 9601(14). EPA then conducted site inspections and determined that these substances posed a significant and imminent environmental threat. At that time, EPA estimated the area of concern for container removal and soil decontamination as 1.1 acres.

On December 12, 1984, Thomas P. Eichler, the former EPA Regional Administrator for Region III, issued an order pursuant to CERCLA § 106, 42 U.S.C. § 9606 (“Section 106 Order”), directing IPDC to submit and implement a plan for IPDC action to clean up the site. Section 106 provides that where the President determines that there may be “imminent and substantial” danger to the public health or welfare or the environment because of an actual or threatened release of a hazardous substance, he may require the Attorney General to secure equitable relief in federal court to abate such danger or threat. The President may also, after notifying the affected state, issue orders requiring action by private responsible parties to protect public health and welfare and the environment. Removal actions involve the cleanup and disposal of released hazardous substances from the environment. Remedial actions involve preventing or minimizing the threatened release of hazardous substances into the environment. In this instance, the Attorney General did not seek a court injunction but the EPA issued the Section 106 Order.

This Section 106 Order also provided that if the EPA On-Site Coordinator (“OSC”) determined that IPDC was in non-compliance with the Order, EPA could have access to the site “at all reasonable times, to undertake such measures in lieu of the Respondent [IPDC], and to take any other measures which the OSC determines may be necessary to protect public health, welfare, or the environment.” December 12, 1984 Section 106 Order, ¶ 25. Authority for this power to enter private property was presumed by EPA to be found in CERCLA § 104, 42 U.S.C. § 9604(a)(1), which provides, “the President is authorized to act [to remove hazardous substances] unless the President determines that such removal and remedial action will be done properly by the owner or operator of the vessel or facility from which the release or threat of release emanates, or by any other responsible party.” Any response action pursuant to CERCLA must be carried out in accordance with that portion of the National Contingency Plan, 42 U.S.C. § 9605, approved through agency rule-making procedures and found at 42 CFR 300.1 et seq., providing for the identifying, removing or remedying releases of hazardous substances. Such response actions are financed by the Hazardous Substance Response Fund (“Superfund”), 42 U.S.C. § 9631.

CERCLA does not provide for a court or administrative hearing prior to the issuance of a Section 106 Order nor did 1125 of the Order provide for a hearing to permit EPA access to the site for any purpose. The costs of an EPA clean-up, as well as punitive fines, may be recovered from a responsible party by federal court action. 42 U.S.C. § 9607. According to the defendant, this extraordinary power was legitimately delegated to the EPA Administrator, then the Regional Administrators, and finally to any EPA OSC.

IPDC did not agree to be bound by the terms and conditions of this Order. But IPDC nonetheless engaged an independent consultant, Resource Technology Services, Inc. (“RTS”), to prepare a work plan and carry out activities under that plan for the removal of wastes from the site. On December 18, 1984, IPDC submitted the RTS plan to the EPA OSC. This plan divided the waste removal action into Phase I activities (site stabilization, container sampling, and preliminary sample analysis) and Phase II activities (waste removal and disposal, and any necessary soil sampling, analysis and disposal). The RTS plan included a list of approved disposal facilities regularly utilized by RTS. The OSC orally approved this plan on December 18, 1984 and confirmed this approval in writing on January 3, 1984. The OSC was also on the site to observe and monitor Phase I compliance. RTS completed Phase I on January 2, 1985 at a cost to IPDC of $133,000.

IPDC submitted RTS’s Phase II plan to EPA on January 24, 1985. The OSC requested a meeting to review several aspects of the plan unsatisfactory to him. In particular, the OSC objected to the proposed timetable and to scheduling a Phase III (instead of completing the removal response by Phase II). At this February 6, 1985 meeting, the OSC demanded that IPDC revise the plan by the next day. IPDC complied with this demand and submitted a revised plan on February 7, 1985. The OSC objected to the February 7 plan on essentially the same grounds as the prior plan (OSC Affidavit, II15). At that time, the OSC advised IPDC that EPA would undertake its own clean-up response on February 11, 1985, if IPDC did not submit an acceptable- plan promptly. He secured the services of O.H. Materials, under government contract for this purpose.

IPDC was permitted several brief extensions (until February 9, 1985, then February 11, 1985, then February 12, 1985) to submit a revised plan. On February 9, 1985 the OSC advised IPDC that the revised plan would have to, inter alia, conclude the clean up by March 2, 1985 and effectuate additional sampling and analysis. (OSC Affidavit, ¶ 18). At some time (the exact date is unclear), the OSC had also unilaterally “modified” the December 12, 1984 Section 106 Order to cover cleanup of 2 acres rather than 1.1 acres at the site. IPDC’s plans did cover this larger area.

The OSC received the revised plan on February 12, 1985 but that same day deemed it inadequate for the following reasons:

Specifically, they [RTS and IPDC] failed to move up all activities by four days; they extended an agreed on two day tanker cleaning activity to three days; they extended the schedule by four days concluding'on March 4th; they did not include the agreed to additional PCB testing; and, they deleted the bulk solids testing from the analysis schedule.

OSC Affidavit, ¶ 20. Because of this alleged non-compliance with his requirements for the clean-up plan, the OSC notified IPDC that pursuant to EPA’s removal authority under CERCLA Section 104 and ¶ 25 of EPA’s Section 106 Order, EPA’s contractor, O.H. Materials, would undertake the clean-up as of February 13, 1985.

Over IPDC’s objections, the OSC has conducted the EPA clean-up response at the site since February 13, 1985, and RTS has been prevented from concluding the clean-up for IPDC. This EPA clean-up had no self-imposed termination point; the OSC considered himself able to monitor the site and modify his plan at will. For instance, he reported that on February 14, 1985, his response team discovered a previously unreported waste disposal area at the site that might warrant EPA attention. The OSC had also expressed “uncertainty” regarding the amount of time that would elapse between packaging of the waste materials and their removal to an available disposal site.

IPDC filed a complaint seeking injunctive relief on February 19, 1985 to allow it to continue its private clean-up efforts and to prohibit deprivation of its property without due process. The complaint contained two additional counts: a request for judicial review of the constitutionality of the Section 106 Order and a declaratory judgment that IPDC would not be liable for fines for alleged noncompliance with the Section 106 Order or costs of the EPA clean-up.

The initial question in this case is whether the court has jurisdiction to consider plaintiff’s request for relief on the merits. Of course, there is no question that a federal district court has original jurisdiction under 28 U.S.C. § 1331 to consider the important questions arising under the Constitution and statutes of the United States presented by IPDC’s claim for relief. The court has jurisdiction to determine if it has jurisdiction so long as the issues raised are not frivolous. United States v. United Mine Workers of America, 330 U.S. 258, 67 S.Ct. 677, 91 L.Ed. 884 (1947). The constitutional question appears to be one of first impression at least in this Circuit and counsel for the Government concedes that the issues of statutory interpretation, while considered to some degree by other district courts, have not been resolved by the Court of Appeals for the Third Circuit or any other. The issues the court has jurisdiction to determine are whether there may or must be judicial authorization or review by a district court of an EPA Section 106 Order, and if so the appropriate standard for such authorization or review.

Congress enacted CERCLA in 1980 in response to growing concern over the threat to human and environmental health and welfare posed by sites on which hazardous wastes or other hazardous substances were stored or abandoned. Because of the extreme danger of hazardous waste, CERCLA appears to authorize Presidential (or EPA) response without prior administrative notice and hearing for the parties ultimately liable (owner of the site or producer of the hazardous waste), without prior judicial authorization, and without explicit provision for prompt administrative or judicial review after EPA action.

Some courts have found that the statutory scheme demonstrates that Congress did not intend to allow any judicial review of EPA orders until the Government commences either an enforcement action under 42 U.S.C. § 9606 or a recovery action under 42 U.S.C. § 9607(c)(3). See Lone Pine Steering Committee v. EPA, 600 F.Supp. 1487 (D.N.J.1985) (no pre-recovery action judicial review only if plaintiff specifically alleges that “EPA had absolutely no rational basis for undertaking a response action and that no preliminary assessment had been made”) (emphasis added).

This court has grave doubts about the constitutionality of delegating to a variety of administrative officials statutory authorization for deprivation of property without prior notice and hearing or prompt subsequent administrative or judicial review. But for purposes of this preliminary injunction hearing, this court need not determine the general availability of judicial review under CERCLA, as the Government conceded that this court has jurisdiction to determine whether EPA’s Section 106 Order and subsequent decision to enter the site complied with CERCLA’s statutory scheme.

It is well established that the party moving for a preliminary injunction has the burden of showing: (1) a reasonable probability of eventual success on the merits, and (2) that irreparable injury pendente lite will occur if relief is not granted. The court should also weigh, wherever relevant,-(3) the possibility of harm to other interested persons from the grant or denial of injunctive relief, and (4) the public interest. In re Arthur Treacher’s Franchisee Litigation, 689 F.2d 1137 (3d Cir.1982); Constructors Association of Western Pennsylvania v. Kreps, 573 F.2d 811 (3d Cir.1978). In balancing these competing concerns, the court must consider the extraordinary nature of injunctive relief:

[a]n injunction should issue only where the intervention of a court of equity ‘is essential in order effectually to protect property rights against injuries otherwise irremediable.’ ... the basis for injunctive relief in the federal courts has always been irreparable injury and the inadequacy of legal remedies.

Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, 102 S.Ct. 1798, 1803, 72 L.Ed.2d 91 (1982) (citations omitted).

We find that IPDC has a substantial probability of prevailing on the merits. First, the Regional EPA Administrator may have lacked the authority to enter the December 12,1984 Section 106 Order. Second, CERCLA’s failure to provide either a pre-deprivation or prompt post-deprivation hearing may represent an unconstitutional deprivation of IDPC’s due process rights. Third, EPA may have acted arbitrarily and capriciously in instituting the EPA removal action and effectively ousting IPDC’s contractor RTS from the site.

CERCLA § 106(a) provides that, “[t]he President may ... take other action under this section including, but not limited to, issuing such orders as may be necessary to protect public health and welfare and the environment.” Executive Order No. 12316 delegated this authority to the EPA Administrator. Section 8(f) of Executive Order No. 12316 also provided that several functions originally delegated to the heads of various agencies may be redelegated “to the head of any agency with his consent.” (Emphasis added) According to the December 12,1984 Section 106 Order, authority under CERCLA was redelegated to the Regional Administrator, but this court has reservations about the legitimacy of this further delegation.

More troubling is the Order’s provision that the EPA OSC could (as this OSC did) unilaterally, even after he approved the removal plan, determine that the private removal action was not being “properly” effectuated, 42 U.S.C. § 9604(a)(1), and decide that EPA would enter the site and clean up in lieu of the responsible party already obligated by contract to do so. (December 12, 1984, Section 106 Order, ¶ 25). We know of no authority permitting such summary administrative action by a relatively low-level official without a court order, hearing, or any record.

The cases cited by the Government as justification for the EPA’s authority repeatedly emphasize that summary administrative deprivation of property interest violates the Constitution’s due process guarantees except in very narrowly circumscribed emergency situations. For example, in Hodel v. Virginia Surface Mining and Reclamation Assn., 452 U.S. 264, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981), a pre-enforcement challenge, the Supreme Court upheld the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. 1201 et seq, permitting the Secretary of the Interi- or “to order total or partial cessation of a surface mining operation whenever he determines ... that the operation ‘creates an immediate danger ... ’ ” 452 U.S. at 298 (citations omitted). But the Secretary’s authority was not redelegated. Furthermore, a prompt post-deprivation hearing was an integral part of the emergency power. A mine operator aggrieved by a cessation order could request temporary relief immediately and the Secretary had to respond to such a request within five (5) days of its receipt. In justifying the absence of the pre-deprivation hearing normally required, see Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976); Eash & Eash v. Riggins Trucking, Inc., 757 F.2d 557, (3d Cir.1985) (en banc); Friendly, Some Kind of Hearing, 123 U.Pa.L.Rev. 1287, (1975), the Supreme Court emphasized not only the emergency nature of mining disasters but the “prompt and adequate post-deprivation administrative hearings and an opportunity for judicial review,” 452 U.S. at 303,101 S.Ct. at 2374.

Similarly, Ewing v. Mytinger & Casselberry, Inc., 339 U.S. 594, 599, 70 S.Ct. 870, 872, 94 L.Ed. 1088 (1950), upheld a provision of the Federal Food, Drug, and Cosmetic Act permitting seizure of misbranded articles because the statute provided for a prompt post-deprivation judicial hearing. See also Bethelehem Steel Corp. v. EPA, 669 F.2d 903 (3d Cir.1982) (upholding the requirement that parties challenging a notice of noncompliance under the Clean Air Act must exhaust administrative remedies (a hearing on the record with a decision in ninety (90) days) before obtaining judicial review).

In contrast, EPA has interpreted CERCLA to permit delegation of extraordinary powers without any prior judicial authorization or subsequent judicial review. At least one district court has found that due process requires limited judicial review of an EPA clean-up order (under the arbitrary and capricious standard) so that the responsible party is not coerced by the threat of severe sanctions otherwise posed by noncompliance. See Aminoil, Inc. v. EPA, 599 F.Supp. 69, 74-76 (C.D.Cal.1984) (not considering the situation where EPA instituted its own clean-up response).

The Government did not concede the availability of judicial review under CERCLA, but there is no dispute that, if judicial review is available, the scope of review is the arbitrary and capricious standard provided by the Administrative Procedure Act, 5 U.S.C. § 706. The testimony at the hearing together with the OSC’s Affidavit suggest a strong likelihood that EPA has compounded the constitutional defects seemingly inherent in CERCLA §§ 104 and 106 by acting not only beyond the scope of its statutory authority under the Section 106 Order but in an arbitrary and capricious manner.

The Section 106 Order provided for EPA access to perform a removal action only if IPDC “fails or refuses to comply with the requirements ... above____” (Section 106 Order ¶ 25). But EPA never provided a written explanation or notice that IPDC was not complying with the Order. Instead the OCS insisted on such modifications as he wished from time to time as the clean-up progressed (or failed to progress in his opinion), even if contrary to the original Order. For example, as previously noted, the Section 106 Order covered an area of 1.1 acres which the OCS subsequently, without authorization, changed to 2 acres. The Order also did not contain a definite termination date, although the OCS justified ousting RTS because its predicted completion date was not sufficiently timely.

Additionally, it appears to the court that many of the OSC’s decisions regarding IPDC’s “non-compliance” may have been arbitrary and capricious. This is particularly true of the OSC’s preoccupation that IPDC’s plan did not proceed with adequate speed. Certainly, it is in the public interest to remove hazardous waste materials to a proper disposal site as promptly as possible. But a full sixteen months elapsed between the EPA’s initial inspection of the site and issuance of the Section 106 Order, while IPDC’s delays are alleged to be no more than several weeks. And, of course, the delays were at least partially explained by EPA’s increasing the size of the cleanup site substantially and making RTS revise its plan continually. Furthermore, the Phase I activities performed for IPDC by RTS stabilized the site and abated any formerly-existing emergency conditions, so delay did not pose a clear and present danger to the environment thereafter. Moreover, the OSC terminated RTS’s clean-up for IPDC although RTS had disposal sites available to store the removed waste materials, and neither O.H. Materials nor EPA had available storage sites or knowledge of when such sites would be available. The court found it extraordinary that the OSC testified that IPDC’s delays warranted EPA intervention but EPA did not know how long it would take for it to remove the packaged and secured waste from the site to a disposal area, so obviously EPA’s actions might take longer than RTS’s for IPDC.

The OSC also testified that he had several conversations with O.H. Materials concerning that contractor’s clean-up of the site between December 11,1984 and February 12, 1985. But at least until some time in January, 1984 (if ever at all), there was no reason for the OSC to believe that IPDC would not accomplish the removal action promptly. These early contacts with O.H. Materials appear unwarranted and contrary to Congressional intent that EPA “may not act where the party responsible for the release or threatened release ... will take proper action.” H.R.Rep. No. 1016, Part I, 96th Cong., 2d Sess., reprinted in 1980 U.S.Code Cong. & Ad.News 6119, 6131 (emphasis added), cited in Lone Pine Steering Committee, at 1490. We would also expect that concerns over Superfund expenditures as well as this administration’s policy of reducing Governmental intervention would cause an EPA clean-up to be an instrument of last rather than early resort.

Of course, since only the plaintiff presented evidence in support of its case for preliminary relief, we have not heard much of the evidence favoring the Government’s action. The OSC was called by the plaintiff for cross-examination but the Government did not have the opportunity to present evidence on the nature of the hazard and the need for EPA action. Further development of the Government’s case may explain the action of the EPA, but on the present record, it suggests an arrogance of power that is bureaucracy at its worst; the Government’s assertion that its conduct is completely insulated from court review initiated by those harmed thereby compounds the problem.

In spite of IPDC’s strong demonstration of its likelihood of success on the merits, we must nevertheless deny plaintiff’s motion because there was no showing that irreparable injury would occur in the absence of injunctive relief. Plaintiff’s burden of demonstrating harm is exacting:

The key word in this consideration is irreparable. Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough.

Oburn v. Shapp, 521 F.2d 142, 151 (3d Cir.1975) (emphasis original).

IPDC’s site is currently vacant and there are no pending plans for its lease or development. While EPA is effectively denying IPDC temporary use and control of its property, any unwarranted or unconstitutional trespass can be adequately compensated by a monetary award in the circumstances of this case. Moreover, as IPDC concedes, some contractor must be on the site to perform the removal action. IPDC would prefer the services of RTS, its own contractor, but O.H. Materials’ performance of this function does not constitute irreparable harm. Relations between the OSC and RTS employees may also have deteriorated to the point where it is advantageous for a contractor other than RTS to complete the clean-up.

The possibility that EPA will seek costs and penalties from IPDC in a future recovery action also does not pose a threat of irreparable harm. Currently, EPA not IDPC is completing the clean-up, so the threat of sanctions is not coercing IPDC to comply with a Section 106 Order it believes to be unconstitutional. See Aminoil Inc. v. EPA, 599 F.Supp. 69, 76 (C.D.Cal.1984) (finding irreparable harm because the threat of severe sanctions would coerce plaintiffs into complying with a Section 106 Order requiring a private party clean-up). EPA will not be permitted to impose sanctions or impose costs on IPDC later found unjustified.

This court will not allow the EPA to store the containerized waste materials indefinitely at the site nor to extend its cleanup beyond the two-acre tract covered by its original order. EPA must make prompt arrangements for disposal of the waste, for it would be unconscionable for EPA to take substantially (and indefinitely) more time to clean up the waste than IPDC would have taken. The Section 106 Order specified only 1.1 acres as the area of concern, though the court will permit a 2-acre cleanup because IPDC and RTS were also prepared to accomplish waste removal from that size area. But EPA has no unilateral authority to extend its clean-up to the remainder of the 5.5-acre site. As agreed to by counsel for the parties, EPA will analyze samples from the remainder of the site promptly and EPA and IPDC will then try to arrange a mutually agreeable procedure with the assistance of the court if further clean-up is required.

Whether the clean-up is completed by EPA instead of IPDC presents little possibility of harm to interested parties not involved in this litigation. The known hazardous substances have already been containerized, the rest of the site is being analyzed, and since the site is vacant, there is no threat of future accumulation of hazardous substances on IPDC’s property.

There is a strong public interest in protecting public health and our environment. CERCLA serves these important objectives by providing a mechanism by which EPA identifies the existence of hazardous substances and effects prompt removal or remedial action. But there is also a substantial public interest in having such clean-ups accomplished in the most cost-effective manner. Spending precious Superfund dollars on a site when there is a responsible party ready and willing to spend private dollars to accomplish the same result is hardly an efficient use of Government resources.

Moreover, there is a compelling public interest in oversight of governmental actions which deprive individuals of generally protected liberty or property interests. If the legislature does not provide for firm constraints on official action, then the courts must do so. The public interest would be best served if EPA, rather than IPDC, had sought judicial relief. As provided in CERCLA § 106, 42 U.S.C. § 9606(a), when the President (or his legitimate delegate) determines that hazardous substances pose a threat, “he may require the Attorney General of the United States to secure such relief as may be necessary ... [and the federal courts] shall have jurisdiction to grant such relief as the public interest and the equities of the case may require.” EPA could have come to court for an injunction ordering private clean-up of the site rather than choosing the alternative of issuing a Section 106 Order. In addition to providing due process, a court order decreases the likelihood of non-compliance by the responsible party because non-compliance would be a contempt of court. There has been no evidence that a Section 106 Order requiring a responsible party to prepare a proposed plan of action for a non-abandoned site accomplishes abatement of danger from hazardous waste more expeditiously than a court order.

If EPA, having issued its own Section 106 Order, determined that the responsible party was not complying, the public interest would again have been served if EPA sought a court order granting it access to the site instead of relying on the broad, ill-defined authority of CERCLA § 104, 42 U.S.C. § 9604, and an alleged unreviewable determination of necessity, to enter the site, remove a private contractor and substitute a contractor preferred by the Government. Unilateral administrative action under Section 104 should be saved for cases of extreme emergency particularly where the site has been abandoned; when there is a known responsible party, that affected party should be able to obtain a prompt hearing.

Because plaintiff made no showing of irreparable injury, the motion for a preliminary injunction is denied but the case will be expedited on the merits. It will be so ordered.

ORDER

AND NOW, this 21st day of March, 1985, upon consideration of plaintiffs motion for a preliminary injunction, for the reasons stated in the court’s bench opinion of February 22, 1985, as elaborated by the foregoing Memorandum, it is ORDERED that:

1. Plaintiff’s motion is DENIED.

2. Plaintiff may renew its application for injunctive relief if the EPA clean-up of the two-acre tract is not completed on or before March 22, 1985.

3. Any necessary discovery shall be completed on or before May 1, 1985.

4. A proposed joint final pretrial order, in accordance with Local Rule 21(d), shall be submitted on or before May 15, 1985.

5. A final pretrial conference will be held on May 30, 1985 at 4:30 p.m.

6. EPA and IPDC shall continue their efforts to arrange a mutually agreeable plan of action concerning the remainder of the site without waiver of the legal position of either party.

      . Because the Government did not present its case, it offered no proof that the substances found on the site (including Trichloroethylene, lead, mercury, arsenic, chromium, carbon tetrachloride, chlorinated hydrocarbons, benzene derivatives, isophorene; N-nitrosodiphenylamine, bis (2-ethylhdyl phthalate) are on the list of hazardous substances as defined by 42 U.S.C. § 9601(14). But IPDC did not contest the description of these substances as hazardous and argued only that they did not pose an imminent threat.

      . Because CERCLA has been interpreted to impose strict liability on any party legally responsible for a site, see City of Philadelphia v. Stepan Chemical Company, 544 F.Supp. 1135, 1140 (E.D.Pa.1982), IPDC was held responsible although IPDC has never been accused of creating or contributing to the hazardous waste found there. But ABM (the lessee) has been often accused ■ of responsibility for the presence of hazardous waste materials. See United States v. Wade, 546 F.Supp. 785 (E.D.Pa.1982) (ABM storing hazardous chemical waste products on Wade site); City of Philadelphia v. Stepan Chemical Co., 544 F.Supp. 1135 (E.D.Pa.1982) (finding ABM was illegally dumping hazardous waste and noting that the President of ABM was a fugitive from justice).

      . Section 106 grants this authority to the President. It is undisputed that these Presidential powers were delegated to the EPA Administrator and that he redelegated this authority to Regional Administrators, see Executive Order No. 12316, March 14, 1981, 40 CFR 300.21, but the legitimacy of this delegation is at issue.

      . Under CERCLA, a responsible party ordered under Section 106 to clean up a hazardous waste site may be fined up to $5,000 per day for failure to comply. 42 U.S.C. § 9606(b). 'Jf EPA acts under Section 104 to undertake its own clean-up, the responsible party may be liable for costs of the clean-up and punitive damages up to three times the amount of the clean-up cost incurred by EPA. 42 U.S.C. § 9607(c)(3).

      . According to the OSC’s Affidavit and testimony (he was called as a hostile witness by IPDC), he found several aspects of Phase I not completed: proper development of drum staging area, repackaging of drums, and containerization of visually contaminated soil. IPDC challenges this assessment.

      . 40 CFR 300.6 (1984) defines OSC as an official designated to coordinate and direct federal responses under the National Contingency Plan but states nothing about the authority of an OSC.

      . This would comport with Hodel, 452 U.S. 264, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1982). The Supreme Court there noted that the Secretary of the Interior’s power to issue immediate cessation orders under the Surface Mining Control and Reclamation Act of 1977 was primarily intended to avert the possible occurrence of sudden disasters. Id. at 300 n. 44, 101 S.Ct. at 2372 n. 44.