Peoples Gas Light & Coke Co. v. Beazer E., Inc.

• Decision Date: 21 September 2015
• Docket Number: No. 14–3634.,14–3634.
• Citation: 802 F.3d 876
• Parties: The PEOPLES GAS LIGHT AND COKE COMPANY, Plaintiff–Appellant, v. BEAZER EAST, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

802 F.3d 876

The PEOPLES GAS LIGHT AND COKE COMPANY, Plaintiff–Appellant

v.BEAZER EAST, INC., Defendant–Appellee.

No. 14–3634.

United States Court of Appeals, Seventh Circuit.

Argued May 26, 2015.

Decided Sept. 21, 2015.

Craig C. Martin, Attorney, Jenner & Block LLP, Chicago, IL, Plaintiff–Appellant.

Kevin King Douglass, Attorney, Alana Elizabeth Fortna, Attorney, Babst, Calland, Clements & Zomnir, Pittsburgh, PA, Anthony Hopp, Attorney, Jeremy S. Goldkind, Attorney, Steptoe & Johnson LLP, Chicago, IL, for Defendant–Appellee.

Before BAUER, KANNE, and WILLIAMS, Circuit Judges.

Opinion

BAUER, Circuit Judge.

The Peoples Gas Light and Coke Company(“Peoples”), brought suit against defendant-appellee, Beazer East, Inc.(“Beazer”), to recover costs incurred by Peoples in conducting environmental investigation and removal activities at a property, partially owned by Peoples, known as the Crawford Station site.

I.BACKGROUND

This case requires the interpretation of a contract entered into in 1920 between Peoples and Beazer's predecessor, Koppers.Under the terms of the contract, Koppers agreed to “organize ... a corporation empowered by its charter to build and to operate a by-product coke plant and a plant for the manufacture of carbureted water gas.”The corporation was to be called Chicago By–Product Coke Company(“Chicago Coke” or “Coke”).Coke then was to enter into a contract with Koppers, under the terms of which Koppers would agree to build and operate for a period of years a coke plant located at Crawford Station in Chicago, Illinois (the “coke plant”), “for and in behalf of and in the name of ‘Coke,’ ” using Koppers' patented coke-oven technology.To pay for construction, Coke issued $13,000,000 of first mortgage bonds to Koppers and $600,000 of second mortgage bonds.Peoples agreed to purchase all of the gas and coke manufactured at the plant for distribution to consumers.

Operations at the coke plant began in October 1921.Seven years later, Peoples acquired the assets of Coke.Koppers continued to operate the coke plant until 1938, when Peoples purchased the stock of Coke and took over operations until 1956.Today, some of the land is still owned by Peoples.

In recent years, Peoples began working with the United States Environmental Protection Agency(“EPA”) and the Illinois Environmental Protection Agency to investigate environmental contamination at the Crawford Station site.Peoples eventually entered into three agreements with the EPA, beginning in 2007 when they entered an “Administrative Settlement Agreement and Order on Consent”(“2007 AOC”).This agreement required Peoples “to conduct an Engineering Evaluation and Cost Analysis ... of alternative response actions ... to address the environmental concerns in connection with ... Crawford Station.”In 2008, Peoples and the EPA entered a second “Administrative Settlement Agreement and Order on Consent”(“2008 AOC”), which concerned “the preparation and performance of a remedial investigation and feasibility study” at the Crawford Station site.Then, in 2011, Peoples and the EPA entered a third “Administrative Settlement Agreement and Order on Consent”(“2011 AOC”), which provided “for the performance of a removal action by [Peoples] and the reimbursement of certain response costs by the United States” in connection with the Crawford Station site.As a result of the investigation and removal activities at the Crawford Station site, Peoples has incurred over $70,000,000 in costs.

On April 4, 2014, Peoples filed suit against Beazer to recover costs incurred in connection to the aforementioned environmental investigation and removal activities.Count I of the two-count complaint was for cost recovery pursuant to CERCLA § 107(a),42 U.S.C. § 9607(a); Count II was for contribution pursuant to CERCLA § 113(f)(3)(B),42 U.S.C. § 9613(f)(3)(B).Beazer moved to dismiss the complaint on three grounds: (1) Peoples had contractually released Koppers of all liability of any character for its operation of the coke plant; (2) Peoples was limited to a contribution claim; and (3) Peoples' contribution claim was time-barred with respect to costs incurred under the 2007 and 2008 AOCs.

On September 8, 2014, the district court partially granted Beazer's motion to dismiss.The court dismissed with prejudice Count I of the complaint, finding that Peoples had resolved its liability to the United States via administrative settlement and, therefore, only had a claim for contribution under CERCLA § 113(f)(3)(B).As to Count II, the district court dismissed with prejudice Peoples' claims for contribution for costs arising out of the 2007 and 2008 AOCs.The court held that each AOC was subject to the three-year statute of limitations set forth in 42 U.S.C. § 9613(g)(3)(B), thus Peoples' claims were time-barred.The court held Peoples' contribution claim stemming from the 2011 AOC was not time-barred, but dismissed with prejudice Peoples' contribution claim based on Koppers' operator liability.The court denied Beazer's motion as to Peoples' claim based on ownership liability.On November 3, 2014, the district court conducted a Status Hearing where Peoples moved to voluntarily dismiss the remaining contribution claim in Count II.The district court granted this oral motion and entered judgment in favor of Beazer.

On appeal, Peoples contests the district court's dismissal of Count II of its complaint.¹

Peoples presents two issues on appeal: (1) that the district court erred in holding that the 1920 agreement bars Peoples' contribution claims under CERCLA § 113(f)(3)(B) based on Koppers' status as an operator; and (2) that the district court erred in holding that Peoples' contribution claims arising out of the 2007 and 2008 AOCs are time-barred.

II.ANALYSIS

CERCLA was passed in 1980“to promote the ‘timely cleanup of hazardous waste sites' and to ensure that the costs of such cleanup efforts were borne by those responsible for the contamination.”Burlington Northern & Santa Fe Ry. Co. v. United States,556 U.S. 599, 602, 129 S.Ct. 1870, 173 L.Ed.2d 812(2009)(internal citations omitted).There are four classes of potentially responsible parties upon whom CERCLA imposes liability: (1) present owners and operators of facilities; (2) past owners or operators of the facility at the time of the disposal of a hazardous substance; (3) arrangers of the disposal of hazardous substances at the facility; and (4) certain transporters of hazardous substances.42 U.S.C. § 9607(a).The parties do not dispute Koppers' role as an operator during the relevant period.

Section 107(e)(1) of CERCLA provides:

No indemnification, hold harmless, or similar agreements or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section.Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section.

42 U.S.C. § 9607(e)(1).

At first blush, this section appears internally inconsistent.However, we have joined other federal courts of appeals in reconciling these two sentences by construing them to mean that responsible parties may not transfer their CERCLA liability, but may obtain indemnification for that liability.SeePMC, Inc. v. Sherwin–Williams Co.,151 F.3d 610, 613(7th Cir.1998)(“Parties are free ... to allocate [CERCLA] expenses between themselves by contract.”);Kerr–McGee Chem. Corp. v. Lefton Iron & Metal Co.,14 F.3d 321(7th Cir.1994);Harley–Davidson, Inc. v. Minstar, Inc.,41 F.3d 341, 342–43(7th Cir.1994)(holding that § 107(e)(1)“does not outlaw indemnification agreements, but merely precludes efforts to divest a responsible party of his liability”);see alsoSmithKline Beecham Corp. v. Rohm & Haas Co.,89 F.3d 154, 158(3rd Cir.1996)(“[R]esponsible parties can lawfully allocate CERCLA response costs among themselves while remaining jointly and severally liable to the government for the entire clean-up.”);Beazer East, Inc. v. Mead Corp.,34 F.3d 206, 211(3rd Cir.1994).

Peoples does not question this court's interpretation of § 107(e)(1).However, it argues that the 1920 agreement, which was signed well-before CERCLA was passed, does not relieve Beazer (as Koppers' successor) of its liability for contribution under CERCLA.It is well-established that “[a]party may indemnify another party for liability arising out of a law not in existence at the time of contracting.”Kerr–McGee,14 F.3d at 327.However, where such a contractual assignment of liability pre-dates CERCLA, courts will look to see “whether an indemnification provision is either specific enough to include CERCLA liability or general enough to include any and all environmental liability which would, naturally, include subsequent CERCLA claims.”Beazer East,34 F.3d at 211.Peoples argues that the 1920 agreement between Beazer's predecessor Koppers and Peoples contains neither an unqualified, broad release of environmental liability nor a specific release of environmental liability sufficient to absolve Beazer of its CERCLA liability.

We apply state law to determine whether a particular indemnification provision encompasses contribution costs under CERCLA.SeeLaSalle Nat'l Trust, N.A. v. ECM Motor Co.,76 F.3d 140(7th Cir.1996).Here, we apply Illinois law to construe the terms of the 1920 agreement.Under Illinois law, the court's “primary objective in construing a contract is to give effect to the intent of the parties.”Gallagher v. Lenart,226 Ill.2d 208, 232, 314 Ill.Dec. 133, 874 N.E.2d 43(Ill.2007).The court must first “look to the language of [the] contract alone, as the language, given its plain and ordinary meaning, is the best indication of the parties' intent,” and construe the contract “as a whole, viewing each part in light of the others.”Id. at 233, 314...