JULY 2008

Dana fined $125 million

The United States has settled environmental claims of the Environmental Protection Agency (EPA), the Department of Commerce, and the Department of the Interior, brought against chapter 11 debtors Dana Corporation and 40 affiliated companies (Dana), under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), Michael J. Garcia, the U.S. Attorney for the Southern District of New York and Ronald J. Tenpas, the Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division announced.

The United States’ environmental claims will be allowed in the bankruptcy proceeding in the amount of $125,670,252. An allowed claim is an uncontested claim that Dana is required to pay under its court-approved plan of reorganization, the terms of which govern creditor recoveries. Dana had filed an objection to the United States’ environmental claims, which Dana will withdraw in connection with the settlement. The settlement resolves the government’s environmental cleanup claims with respect to six toxic waste sites, also known as Superfund sites, in five states. The settlement also resolves claims against Dana for related civil monetary penalties.

In May 2006, Dana, an auto parts manufacturer based in Toledo, Ohio, filed petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The government then filed claims against Dana in the Bankruptcy Court seeking to recover past and future environmental cleanup costs with respect to six Superfund sites formerly owned or operated by Dana, and/or where Dana had disposed of hazardous waste. The government also filed a claim against Dana for natural resource damages at one of these sites. The government’s claims also sought civil monetary penalties under CERCLA and the Clean Water Act for violations at two manufacturing facilities formerly owned by Dana. Because the case presented significant issues of federal environmental law, on November 20, 2007, U.S. District Judge Shira A. Scheindlin granted the government’s motion to withdraw the government’s claims from the Bankruptcy Court, and assumed jurisdiction over all proceedings relating to the government’s claims.

The largest of the government’s environmental claims relates to the Cornell Dubilier Electronics, Inc. (CDE) Superfund Site, located in South Plainfield, New Jersey (CDE Site). The CDE Site consists of a 26-acre industrial facility and the surrounding area that has been contaminated as a result of releases of hazardous substances from the facility. The government charged that Dana was liable at the CDE Site based on its prior ownership of the real property and buildings at the CDE Site from 1936 to 1956.

According to the government’s Proof of Claim, during that time, Dana leased the property and buildings to CDE, an electronics manufacturer whose operations polluted the property. Specifically, the government charged that, as a result of CDE’s burying of hazardous waste in large pits on the property, and pollution released from CDE’s manufacturing operations, the property and surrounding environment has been pervasively contaminated with polychlorinated biphenyls (PCBs) and other toxic substances. In addition, the government alleged that PCB contamination from CDE’s operations during Dana’s ownership caused injury to natural resources at the CDE Site. Dana has denied these allegations. For a number of years, EPA has been working to address the contamination at the CDE Site and the risk posed to the surrounding community.

Under the settlement for the CDE Site, the United States’ claim in the bankruptcy proceeding will be allowed in the amount of $100,710,000. Of that total, $97,590,000 will be allocated to EPA to cover past and future cleanup costs at the CDE Site. The remaining $3,120,000 will be allocated to the Departments of Commerce and Interior for natural resource restoration and assessment.

Dana also agreed that the United States would receive an allowed claim in the bankruptcy totaling $24,290,000 in settlement of EPA’s environmental claims relating to a Superfund site in Hastings, Nebraska (Hastings Site). Dana owned and operated an auto parts manufacturing facility at the Hastings Site from approximately 1978 to 2002. The government alleged that Dana used hazardous substances, such as tetrachloroethylene, in its manufacturing processes and that these hazardous substances were released into the environment during plant operations. Dana also denies these allegations.

In addition, Dana agreed that the United States would receive an allowed claim in the bankruptcy totaling approximately $500,000 for response costs relating to four other Superfund sites located in Southington Connecticut; Claypool and Elkhart, Indiana; and Tremont City, Ohio. Dana further agreed that the United States would receive an allowed claim in the amount of $169,000 to resolve violations of CERCLA and the Clean Water Act at two facilities formerly owned by Dana in Muskegon, Michigan, and Bellefontaine, Ohio.