Commander Oil Corp. v. Advance Food Service Equipment

Citation991 F.2d 49
Decision Date13 April 1993
Docket NumberNo. 596,596
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Parties, 23 Envtl. L. Rep. 20,858 COMMANDER OIL CORPORATION, Plaintiff, v. ADVANCE FOOD SERVICE EQUIPMENT, Defendant. SLATER DEVELOPMENT CORPORATION formerly known as Slater Electric Inc., Defendant Third-Party Plaintiff-Appellant, v. PASS & SEYMOUR, INC. and LEGRAND S.A., Third-Party Defendants-Appellees. Docket 92-7827.

Joseph Zuckerman, New York City (Richard G. Leland, Rosenman & Colin, New York City, of counsel), for third-party plaintiff-appellant.

Thomas C. Buckel, Jr., Hancock & Estabrook, Syracuse, NY, for third-party defendants-appellees.

Before: OAKES, WINTER, and WALKER, Circuit Judges.

WALKER, Circuit Judge:

Third-party plaintiff Slater Development Corporation ("Slater") appeals from the July 2, 1992 Order of the United States District Court for the Eastern District of New York (Mishler, J.), that granted summary judgment to third-party defendants Pass & Seymour, Inc. and Legrand S.A. ("PSI") on the ground that, under the language of contracts whereby PSI purchased the business and leased certain properties from Slater, PSI is not obligated to indemnify Slater for environmental liability. We conclude that the language is ambiguous and thus a genuine issue of fact remains. Accordingly, we vacate the grant of summary judgment and remand for proceedings consistent with this opinion.

Background

Commander Oil Corporation ("Commander Oil"), the owner of a site in Garden City, New York, brought an action to recover environmental response costs for damage to that site against Slater and others pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq. ("CERCLA"). According to the complaint, Slater employed Pasley Solvents and Chemicals, Inc. ("Pasley") to remove industrial waste generated at Slater's Glen Cove, New York facility between 1972 and 1982. Pasley allegedly disposed of the waste illegally at the Garden City site that it had leased from Commander Oil.

The dispute in this case, however, is between defendant Slater and PSI, a third-party defendant that Slater brought into the suit in order to seek indemnification. On September 14, 1987, Slater contracted to sell its business of manufacturing electrical wiring devices to PSI. Under an Asset Purchase Agreement of that date, PSI acquired the business, excluding real estate and other specified assets, and leased Slater's offices and manufacturing facilities located in Glen Cove, New York and Elizabeth, New Jersey. At the January 22, 1988 closing, Slater and PSI signed a ten-year lease covering the Glen Cove and Elizabeth properties (the "Lease").

The Asset Purchase Agreement contains an indemnification clause in which PSI agreed to take over from Slater the defense of certain "litigations" and to indemnify Slater for any liabilities that resulted. PSI's obligation covered certain specified pending lawsuits, as well as "all other litigations occurring from and after the date of signing the Agreement relating to the business and assets being acquired hereunder." At the closing, PSI and Slater signed an Assumption Agreement which restated PSI's defense and indemnification obligations as set forth in the Asset Purchase Agreement.

The Lease also contains indemnification language. Article 23 allocates responsibility between Slater and PSI for environmental liabilities occurring on or about the Glen Cove and Elizabeth premises. PSI agrees to be responsible for contamination arising at the premises during the Lease term and to defend and indemnify Slater for any cleanup costs, losses and damages arising from an "Environmental Event," which the Lease defines as "any events or conditions involving the emission, spill, discharge or cleanup of any hazardous or toxic substance or waste on the premises or ... actual knowledge or notice of any other events or conditions on the premises which could give rise to any such emission, spill, discharge or cleanup...." However, under the Lease, PSI is not responsible for pre-transfer on-site contamination at the Glen Cove or Elizabeth premises.

In its third-party complaint against PSI, Slater seeks a declaratory judgment that PSI is required to assume the defense of the primary action by Commander Oil against Slater and indemnify Slater for costs incurred to date and any ultimate liability. Before any discovery, Slater moved and PSI cross-moved for summary judgment pursuant to Fed.R.Civ.P. 56(c). The district court granted summary judgment in favor of PSI and dismissed Slater's third-party complaint. This appeal followed.

Discussion

We review the district court's grant of summary judgment to determine whether a genuine issue of material fact exists and whether the law was applied correctly below. National Union Fire Ins. Co. v. Turtur, 892 F.2d 199 (2d Cir.1989). It is well settled that a court should grant a motion for summary judgment only when the evidence, viewed in the light most favorable to the non-moving party, presents no genuine issue of material fact. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 993, 8 L.Ed.2d 176 (1962); Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir.1990). There is no material fact issue only when reasonable minds cannot differ as to the import of the evidence before the court. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

Under CERCLA § 107(e)(1), the right of private parties to enter into indemnification agreements is preserved. 42 U.S.C. § 107(e)(1). The district court acknowledged that this was so but then held that the agreements before it did not obligate PSI to defend and indemnify Slater for Commander Oil's CERCLA claim. The district court, holding that the Asset Purchase Agreement and the Lease must be read together, relied upon the absence of specific language referencing environmental liability in the Asset Purchase Agreement's indemnification clause and reasoned that to hold that indemnification for this kind of liability is covered by the Asset Purchase Agreement would render meaningless the "painstaking[ ]" discussion of environmental liability in the Lease. The question raised by this appeal is whether the district court correctly interpreted the indemnification language in the two agreements.

Under New York law, which governs in this case, it is our function to "discern the intent of the parties to the extent their intent is evidenced by their written agreement." International Klafter Co. v. Continental Casualty Co., 869 F.2d 96, 99 (2d Cir.1989), citing Slatt v. Slatt, 64 N.Y.2d 966, 967, 488 N.Y.S.2d 645, 646, 477 N.E.2d 1099, 1100, (1985). But in New York indemnification agreements are strictly construed; a court cannot find a duty to indemnify absent manifestation of a "clear and unmistakable intent" to indemnify. Heimbach v. Metropolitan Transport. Authority, 75 N.Y.2d 387, 553 N.Y.S.2d 653, 657, 553 N.E.2d 242, 246 (1990). If the parties' intent is unclear from the writing, however, the court is required to consider extrinsic evidence of intent. Slatt, 64 N.Y.2d at 967, 488 N.Y.S.2d 645, 477 N.E.2d 1099. We have described such an ambiguity as the absence of "a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion." Hunt, Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989) (quoting Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280, 1282 (1978)). The district court, upon reading the Asset Purchase Agreement and the Lease together, found no such absence and, hence, no ambiguity. The court held that the parties never intended that PSI indemnify Slater for environmental liability at the Garden City site.

We turn to the relevant language in the two instruments. The Asset Purchase Agreement provides:

"(b) Liabilities. At the Closing, Seller shall assign and transfer to Buyer and Buyer shall assume and agree to pay, perform and discharge and indemnify Seller against (A) all of the liabilities of Seller in the categories set forth on Exhibit 2-B and the contingent liabilities set forth on Exhibit 2-B.1; (B) liabilities and obligations pursuant to the Contracts assigned to Buyer pursuant to this Agreement; ... and (D) all other liabilities specifically assumed by Buyer pursuant to this Agreement.... It is expressly agreed and understood that, except as set forth in this Agreement, Buyer shall not be liable for any obligations, liabilities, claims or causes or actions of Seller of any kind or nature."

Exhibit 2-B.1
CONTINGENT LIABILITIES ASSUMED

1) All product liability matters, to the full extent not covered by Slater's insurance.

2) Coverage of all Slater product warranties and guarantees given in the ordinary course of business.

3) All litigations disclosed on Exhibit 5-N and all other litigations occurring from and after the date of signing the Agreement relating to the business and assets being acquired hereunder.

4) All labor matters disclosed on Exhibit 5-0 and all other labor matters occurring from and after the date of signing the agreement.

* * * * * *

The pending litigations listed within Exhibit 5-N were grouped within the following categories: product liability, general liability, patent, and anti-trust.

The Lease covering the Glen Cove and Elizabeth premises, with Slater as Landlord and PSI as Tenant, provides in relevant part:

23. Representations, Warranties and Covenants.

23.01 Tenant acknowledges that it is responsible for compliance during the Term with all federal, state and local laws, rules and regulations relating to emission into the air, discharge onto lands and waters, storage and disposal of hazardous or toxic wastes or substances and all other federal,...

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