E. Concrete Materials, Inc. v. Ace Am. Ins. Co.

• Citation: 948 F.3d 289
• Decision Date: 17 January 2020
• Docket Number: No. 18-11043,18-11043
• Parties: EASTERN CONCRETE MATERIALS, INC., Plaintiff-Counter Claimant – Appellant v. ACE AMERICAN INSURANCE COMPANY, Defendant v. Great American Insurance Company, Counter Defendant – Appellee
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

948 F.3d 289

EASTERN CONCRETE MATERIALS, INC., Plaintiff-Counter Claimant – Appellant

v.ACE AMERICAN INSURANCE COMPANY, Defendant

v.Great American Insurance Company, Counter Defendant – Appellee

No. 18-11043

United States Court of Appeals, Fifth Circuit.

FILED January 17, 2020

Nina Cortell, Christopher Knight, Dallas, TX, Leslie Conant Thorne, Attorney, Austin, TX, Mark R. Trachtenberg, Houston, TX, Haynes & Boone, L.L.P., John Russell Hardin, Esq., Perkins Coie, L.L.P., Dallas, TX, for Plaintiff-Counter Claimant-Appellant.

James Pio Ruggeri, Myles D. Morrison, Edward Parks, II, Shipman & Goodwin, L.L.P., Washington, DC, Robert G. Dees, Esq., Levon G. Hovnatanian, Martin, Disiere, Jefferson & Wisdom, L.L.P., Houston, TX, for Counter Defendant-Appellee Great American Insurance Company.

Before OWEN, Chief Judge, and JONES and STEWART, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The issue raised here is whether an unplanned discharge of "rock fines," pellets produced during the course of quarry operations, is covered by a company’s umbrella insurance policy or excluded by a pollution exclusion. Great American Insurance Company ("GAIC") sought a declaratory judgment that it is not required to defend or indemnify Eastern Concrete Materials, Inc. ("Eastern Concrete") because of a pollution exclusion in its insurance policy. The federal district court denied Eastern Concrete’s motion to dismiss for lack of personal jurisdiction and granted GAIC’s motion for summary judgment. Eastern Concrete timely appealed. After careful review, we AFFIRM that federal jurisdiction exists and AFFIRM the district court’s grant of summary judgment.

BACKGROUND

Eastern Concrete is a New Jersey corporation that operates rock quarries in New Jersey. It is a wholly-owned subsidiary of U.S. Concrete, a Delaware corporation with its principal place of business in Euless, Texas. Given the overlapping leadership between Eastern Concrete and U.S. Concrete, at least two of Eastern Concrete’s officers—its president and secretary—live in Texas, where they also serve as officers for U.S. Concrete.

U.S. Concrete purchased a commercial umbrella insurance policy ("GAIC Policy") for itself and more than sixty subsidiaries, including Eastern Concrete, from GAIC, an Ohio Corporation. The GAIC Policy, which provides nationwide coverage to the named insureds, was negotiated, brokered, and issued in Texas. U.S. Concrete does not typically maintain insurance to cover environmental liabilities. True to form, the GAIC Policy includes an "absolute pollution exclusion:"

This insurance does not apply to:

...

Any liability, including, but not limited to settlements, judgments, costs, charges, expenses, costs of investigations, or the fees of attorneys, experts, or consultants arising out of or in any way related to:

1. The actual, alleged or threatened presence, discharge, dispersal, seepage, migration, release or escape of "pollutants," however caused.

2. Any request, demand, or order that any "Insured" or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to or assess the effects of "pollutants." ...

...

This exclusion will apply to any liability, costs, charges or expenses, or any judgments or settlements, arising directly or indirectly out of pollution ....

As used in this exclusion "pollutants" means any solid , liquid, gaseous or thermal irritant or contaminant , including , but not limited to, smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste material . Waste material includes materials which are intended to be or have been recycled, reconditioned or reclaimed . (Emphasis added).

The parties dispute whether this pollution exclusion applies to the following facts.

At its rock quarry in Glen Gardner, New Jersey, Eastern Concrete "drills and blasts large pieces of stone off of the face of [a] rock formation." The stones are crushed and screened "to produce different sizes or gradations of stone." The smallest particles are called "rock fines." Rock fines are often collected by being washed off larger stones and gathered into settling ponds, after which they are removed, dried, and stockpiled on site to be used at the quarry or sold.

In July 2017, Eastern Concrete, anticipating substantial rain, began to lower the water levels in its settling ponds by pumping water, pursuant to a valid permit, into the nearby Spruce Run Creek. Unfortunately, the quarry manager "accidentally failed to shut off the pumping before the stone fines from the bottom of the settlement ponds began to be pumped into Spruce Run." As a result, "substantial amounts of rock fines" (up to two feet in some places) were released into Spruce Run Creek, causing "physical damage to the stream and stream bed by changing the flow and contours of the stream." Upon discovering the damage, the New Jersey Department of Environmental Protection ("Department") issued "Notices of Violation" to Eastern Concrete, requiring it to remove the rock fines and take preventive measures to stem their migration downstream. The Department also found Eastern Concrete liable for violating various state statutes, including the New Jersey Water Pollution Control Act.

Eastern Concrete undertook the prescribed remediation. It then notified GAIC of the incident through its Texas insurance broker and demanded reimbursement for the costs of removing the rock fines and of defending the claim.¹ In response, GAIC filed a declaratory judgment action in the Northern District of Texas seeking a declaration that the incident fell within the GAIC Policy’s pollution exclusion, and thus it had no duty to defend or indemnify Eastern Concrete. One month later, Eastern Concrete filed a competing lawsuit in New Jersey Superior Court. The New Jersey court stayed its case pending resolution of the federal suit. The federal district court rejected Eastern Concrete’s subsequent motion to dismiss for lack of personal jurisdiction and, after GAIC moved for summary judgment, confirmed that the absolute pollution exclusion applied. Eastern Concrete timely appealed these adverse judgments.

STANDARDS OF REVIEW

"[W]hether personal jurisdiction can be exercised over a defendant is a question of law and subject to de novo review." In re Chinese Manufactured Drywall Prods. Liab. Litig. , 742 F.3d 576, 584 (5th Cir. 2014). "The plaintiff has the burden to make a prima facie showing that personal jurisdiction is proper." Monkton Ins. Servs., Ltd. v. Ritter , 768 F.3d 429, 431 (5th Cir. 2014) (emphasis added). "We must accept the plaintiff’s uncontroverted allegations, and resolve in [its] favor all conflicts between the facts contained in the parties’ affidavits and other documentation." Id. (quoting Revell v. Lidov , 317 F.3d 467, 469 (5th Cir. 2002) ).

This court "review[s] a district court’s grant of summary judgment de novo , ... view[ing] all facts in the light most favorable to the nonmoving party, and affirm[ing] only if the evidence shows that ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ " Estate of Bradley ex rel. Sample v. Royal Surplus Lines Ins. Co. , 647 F.3d 524, 528 (5th Cir. 2011) (quoting FED. R. CIV. P. 56(a) ). Where relevant, this court reviews a district court’s choice-of-law determinations de novo , applying "the choice of law rules of the forum state, in this case Texas." R.R. Mgmt. Co. v. CFS La. Midstream Co. , 428 F.3d 214, 221–22 (5th Cir. 2005).

DISCUSSION

I. Personal Jurisdiction.

A federal court "may exercise personal jurisdiction over a nonresident defendant if (1) the forum state’s long-arm statute confers personal jurisdiction over that defendant; and (2) the exercise of personal jurisdiction comports with the Due Process Clause of the Fourteenth Amendment." Freudensprung v. Offshore Tech. Servs., Inc. , 379 F.3d 327, 343 (5th Cir. 2004). "In this case, these two inquiries merge into one because the Texas long-arm statute permits the exercise of jurisdiction over a nonresident defendant to the fullest extent allowed by the United States Constitution." Id . Federal court jurisdiction satisfies Due Process if two conditions are met: "(1) the nonresident must have minimum contacts with the forum state, and (2) subjecting the nonresident to jurisdiction must be consistent with ‘traditional notions of fair play and substantial justice.’ " Id . (quoting Asarco, Inc. v. Glenara, Ltd. , 912 F.2d 784, 786 (5th Cir. 1990) ). A defendant’s "minimum contacts" may give rise to general or specific jurisdiction. See Luv N’ care, Ltd. v. Insta-Mix, Inc. , 438 F.3d 465, 469 (5th Cir. 2006). Because we agree with the district court that specific jurisdiction exists, we need not address the parties’ arguments about general jurisdiction.

Specific jurisdiction arises when a defendant’s minimum contacts with a forum state are related to the pending lawsuit. Id. at 469.

This circuit applies a three-step analysis for the specific jurisdiction inquiry: (1) whether the defendant has minimum contacts with the forum state, i.e., whether it purposely directed its activities toward the forum state or purposefully availed itself of the privileges of conducting activities there; (2) whether the plaintiff’s cause of action arises out of or results from the defendant’s forum-related contacts; and (3) whether the exercise of personal jurisdiction is fair and reasonable.

Monkton Ins. Servs. , 768 F.3d at 433 (quoting Seiferth v. Helicopteros Atuneros, Inc. , 472 F.3d 266, 271 (5th Cir. 2006) ). If a plaintiff establishes the first two prongs, the burden shifts to the defendant to show that the exercise of personal jurisdiction would be unfair or unreasonable. Id .

Applying these principles, the district court concluded that it had specific jurisdiction over Eastern Concrete. It began by noting Eastern Concrete’s contacts with Texas. First, GAIC "plausibly posit[ed] that the [GAIC Policy] was procured on behalf of Eastern Concrete by or through...