65 F.3d 615 (7th Cir. 1995), 94-1956, GNB Battery Technologies, Inc. v. Gould, Inc.

Docket Nº:94-1956.
Citation:65 F.3d 615
Party Name:GNB BATTERY TECHNOLOGIES, INCORPORATED, formerly known as GNB, Incorporated and GNB Industrial Battery Company, Plaintiffs-Appellants, v. GOULD, INCORPORATED, Defendant-Appellee.
Case Date:September 06, 1995
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 615

65 F.3d 615 (7th Cir. 1995)


GNB, Incorporated and GNB Industrial Battery

Company, Plaintiffs-Appellants,


GOULD, INCORPORATED, Defendant-Appellee.

No. 94-1956.

United States Court of Appeals, Seventh Circuit

September 6, 1995

Argued Nov. 30, 1994.

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[Copyrighted Material Omitted]

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Donald B. Hilliker, Roseann Oliver (argued), Marie A. Halpin, Phelan, Cahill, Devine & Quinlan, Chicago, IL, for plaintiffs-appellants.

Irene Savanis, Paul W. Schroeder (argued), Carol A. Ahern, Jones, Day, Reavis & Pogue, Chicago, IL, for defendant-appellee.

Before FLAUM, RIPPLE and GARZA, [*] Circuit Judges.

RIPPLE, Circuit Judge.

GNB Battery Technologies, Inc. and GNB Industrial Battery Company (collectively "GNB") appeal the district court's determination that GNB assumed liability for toxic waste generated by Gould's battery business at sites other than those sold to GNB. For the following reasons, we affirm the decision of the district court.



  1. Facts

    Since the nineteenth century, Gould has been involved in the business of the manufacture, sale and reclamation of batteries. Facilities related to this business were located throughout the United States. Waste generated in Gould's battery business, some of which is now considered hazardous under federal environmental laws, was disposed of "on-site" at its plant locations across the country or "off-site" at various common disposal facilities.

    In the early 1980s, Gould, a publicly-held conglomerate, undertook a general corporate restructuring that involved selling off three primary divisions of its battery business. 1 In order to facilitate the sale of its battery business, Gould formed a wholly-owned subsidiary, GNB Batteries, Inc. ("GNB Batteries"), to which it then transferred the business and assets of its battery business. The transfer was accomplished through a Bill of Sale and Assignment, effective January 1, 1983.

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    Beginning in April 1983, Gould offered to sell all the stock of GNB Batteries to interested purchasers. Stanley Gaines, one of Gould's senior vice-presidents, subsequently became interested in buying GNB Batteries from Gould. Together with Frank Beaudette, the Controller of Gould's automotive battery division, and Daniel Heffernan, a partner in the New York investment banking firm of Allen & Company, Gaines formed GNB Acquisition Corp. for that purpose.

    Gould's Board of Directors appointed Gaines as President of GNB Batteries. Three months later, Gould accepted GNB Acquisition Corp.'s bid for the purchase of GNB Batteries. From May 1983 until April 1984, Gould negotiated with GNB Acquisition Corp. over the terms of the sale. In December 1983, Gould and GNB Acquisition Corp. executed a Restated Purchase Agreement that detailed the terms of the sale of GNB Batteries. Gould also executed a Restated Assumption Agreement with GNB Batteries in which GNB Batteries agreed to assume "any and all obligations and liabilities of any nature ... of Gould relating to the businesses and operations of the [Battery] Divisions incurred by Gould or the Divisions prior to [April 6, 1984], except as otherwise provided in Exhibit A hereto and for the following obligations or liabilities:...." Richard Williams, who served as Gould's Senior Vice President and General Counsel and as GNB Batteries' Vice President, executed the assumption agreement on behalf of both Gould and GNB Batteries.

    At the close of purchase, GNB Acquisition Corp. merged into GNB Batteries. GNB Batteries was later renamed GNB Incorporated and then GNB Battery Technologies, Inc. ("GNB"). GNB, one of the appellants, later incorporated Industrial Battery Co., the other appellant, as a wholly-owned subsidiary.

    Five or six years after the closing of the Gould-GNB transaction, serious environmental problems relating to the battery business began to surface. The liability for such environmental damage is significant. Under the Resource Conservation and Recovery Act ("RCRA") and the Comprehensive Environmental Liability Act ("CERCLA"), the Environmental Protection Agency ("EPA") may hold a responsible person strictly liable for cleanup costs. Under CERCLA, however, a responsible party may be indemnified for its liability. The present conflict involves the extent to which GNB is responsible for environmental damage created by Gould during its 70+ years of battery business operation. GNB has agreed that it will indemnify Gould for any environmental liability deriving out of toxic waste stored at any facility sold to GNB. However, GNB asserts that it is not responsible for environmental liabilities that have arisen at Gould plants or common dump sites closed prior to the 1984 sale. In Gould's view, GNB assumed all the environmental liabilities of Gould's Battery Divisions, including (1) liabilities connected with facilities sold by Gould prior to 1983, when it transferred its battery business into GNB Batteries, and (2) liabilities connected with Gould's disposal of wastes at common facilities before 1983.

  2. District Court Proceedings

    In April 1990, GNB filed a two-count declaratory judgment action against Gould. In the first count of its complaint, labeled "Declaratory Judgment Under CERCLA," GNB requested a declaration that "GNB is not a potentially responsible party under Section 107(a) of CERCLA, 42 U.S.C. Sec. 9607, for the hazardous waste disposed of by Gould at its battery manufacturing facilities not acquired by GNB or by Gould at common facilities." R.1 at 12. In the second count, termed "Declaratory Judgment Under Contract," GNB requested a declaration that, "[u]nder the Restated Assumption Agreement, GNB did not undertake responsibility for Gould's liability for environmental cleanups or damages for any Gould properties or manufacturing facilities ... [or] ... for common facilities." R.1 at 15. Gould filed a two-count counterclaim with its answer to GNB's complaint. Gould's counterclaim duplicated, in many respects, GNB's complaint. In Count One, it sought a declaration that GNB was liable to it under CERCLA, and in Count Two, it sought a declaration that GNB was responsible under the Restated Assumption Agreement for Gould's environmental liabilities

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    complaint. Gould also raised a breach of warranty claim in which it alleged that GNB had breached its contractual obligation by its refusal to indemnify Gould.

    In November 1990, the district court granted summary judgment against GNB on the breach of warranty claim but otherwise dismissed the counterclaim. In April 1992, both parties filed additional motions for summary judgment on the remaining claims, and in September, the district court denied the motions in part, concluding that a genuine issue of material fact existed as to whether the Restated Assumption Agreement transferred environmental liabilities for prior Gould operations to GNB.

    At trial, the district court concluded that the Restated Assumption Agreement unambiguously transferred the disputed environmental liabilities to GNB. The court stated that, even assuming that the Restated Assumption Agreement was ambiguous, "the parol evidence presented at trial strongly supports our finding that Gould intended to convey, and GNB Acquisition understood that it was assuming, all of Gould's liability arising out of its earlier dumping and storage of toxic waste." Mem.Op. at 13.



    Before turning to the merits of the dispute which the parties bring to us, we turn first to a matter of jurisdiction. "That the parties have not contested, nor the district court considered jurisdiction does not impede our inquiry. We are required to satisfy ourselves not only of our own jurisdiction, but also the jurisdiction of the district court." Commercial Nat'l Bank v. Demos, 18 F.3d 485, 487 (7th Cir.1994) (citations and quotations omitted).

  3. Subject Matter Jurisdiction

    The Declaratory Judgment Act, 28 U.S.C. Sec. 2201(a), provides:

    In a case of actual controversy within its jurisdiction, ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

    However, because the Declaratory Judgment Act is not an independent source of federal subject matter jurisdiction, see Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 70 S.Ct. 876, 878-79, 94 L.Ed. 1194 (1950), the district court must possess an independent basis for jurisdiction. In this case, GNB premises jurisdiction over Count One on "federal question" jurisdiction. See 28 U.S.C. Sec. 1331. The "presence or absence of federal-question jurisdiction is governed by the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Burda v. M. Ecker Co., 954 F.2d 434, 438 (7th Cir.1992).

    Under the "well-pleaded complaint" rule, "federal law must create the cause of action, or some substantial, disputed question of federal law must be an element in the plaintiff's claim." Commercial Nat'l Bank v. Demos, 18 F.3d 485, 488 (7th Cir.1994); see generally Ceres Terminals, Inc. v. Industrial Comm'n, 53 F.3d 183 (7th Cir.1995). In declaratory judgment cases, the well-pleaded complaint rule dictates that jurisdiction is determined by whether federal question jurisdiction would exist over the presumed suit by the declaratory judgment defendant. Nuclear Eng'g Co. v. Scott, 660 F.2d 241, 253 (7th Cir.1981), cert. denied, 455 U.S. 993, 102 S.Ct. 1622, 71 L.Ed.2d 855 (1982). In this case, Count One of GNB's complaint presumes the possibility of an action by Gould under Secs. 107(a)...

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