Continental Cas. v. Diversified Industries

• Decision Date: 27 March 1995
• Docket Number: No. 91-7261.,91-7261.
• Citation: 884 F. Supp. 937
• Parties: CONTINENTAL CASUALTY CO., and Transportation Insurance Co. v. DIVERSIFIED INDUSTRIES, INC., Theodore Sall, Inc., and AT & T Nassau Metals Corporation v. CONTINENTAL CASUALTY CO., Transportation Insurance Co., Transcontinental Insurance Co., Continental National Association, a/k/a CNA Insurance Companies, and CNA Financial Corporation.
• Court: U.S. District Court — Eastern District of Pennsylvania

884 F. Supp. 937

CONTINENTAL CASUALTY CO., and Transportation Insurance Co. v. DIVERSIFIED INDUSTRIES, INC., Theodore Sall, Inc., and AT & T Nassau Metals Corporation v. CONTINENTAL CASUALTY CO., Transportation Insurance Co., Transcontinental Insurance Co., Continental National Association, a/k/a CNA Insurance Companies, and CNA Financial Corporation.

No. 91-7261.

United States District Court, E.D. Pennsylvania.

March 27, 1995.

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John P. O'Dea, Stradley, Ronon, Stevens & Young, Philadelphia, PA, Stephen C. Baker, Stradley, Ronon, Stevens & Young, Wayne, PA, Eileen King Bower, Marsha K. Ross, Haskell & Perrin, Chicago, IL, Michael J. Miller, Stradley, Ronon, Stevens & Young, Malvern, PA, J. Andrew Douglas, Martin T. Lee, Karen L. Bizzini, Christine D. Ryan, Long and Levit, Los Angeles, CA, for plaintiffs Continental Cas. Co. et al.

Neal A. Jacobs, Matthew J. Siembieda, Carl D. Buchholz, III, Blank, Rome, Comisky & McCauley, Philadelphia, PA, Louis F. Bonacorsi, Couburn and Croft, St. Louis, MO, Terry L. Trantina, Arthur H. Saiewitz, AT & T, Basking Ridge, NJ, John H. Gross, Robert M. Horkovich, Steven R. Dolmanisth, Anderson, Killholick, O'Shinsky, New York City, for defendants Diversified Industries, Inc., et al.

Neal A. Jacobs, Matthew J. Siembieda, Blank, Rome, Comisky & McCauley, Philadelphia, PA, Louis F. Bonacorsi, Bruce D. Ryder, Ellen E. Bonacorsi, Joseph G. Nassif, Larry A. Reed, Couburn and Croft, St. Louis, MO, Terry L. Trantina, Arthur H. Saiewitz, AT & T, Basking Ridge, NJ, John H. Gross, Robert M. Horkovich, Steven R. Dolmanisth, Anderson, Killholick, O'Shinsky, New York City, for defendants AT & T Nassau Metals Corp. et al.

J. Andrew Douglas, Martin T. Lee, Karen L. Bizzini, Christine D. Ryan, Long and Levit, Los Angeles, CA, for Transcontinental Ins. Co.

Kean K. McDonald, LaBrum and Doak, Philadelphia, PA, for Continental National Ass'n.

David J. Parsells, Kean K. McDonald, Pamela Tobin, LaBrum & Doak, Philadelphia, PA, Stephen C. Baker, Stradley, Ronon, Stevens & Young, Malvern, PA, for CNA Financial Corp.

OPINION

CAHN, Chief Judge.

This litigation was commenced by an insurance company seeking a declaratory judgment that it is not obligated to provide insurance coverage for the remediation of environmental damage which was caused, in part, by its insureds. The insureds have responded with several counterclaims. Numerous motions are currently before the court. Jurisdiction is proper pursuant to 28 U.S.C. § 1332.

I. Background

Continental Casualty Company ("Continental") and Transportation Insurance Company ("Transportation") (collectively, the "plaintiffs") are Illinois corporations having their principal places of business in Chicago, Illinois. Diversified Industries, Inc. ("Diversified"), is a Delaware corporation having its principal place of business in St. Louis, Missouri. Diversified and its subsidiaries held a "Comprehensive General Liability" insurance policy ("CGL policy") with plaintiffs from 1968 until October 31, 1991.

During the period of coverage, Eastern Diversified Metals Corporation ("EDM"), one of Diversified's subsidiaries, operated a metal reclamation facility in Schuylkill County, Pennsylvania (the "Site"). At the Site, EDM reclaimed copper and aluminum from telecommunication cables and wires. The reclamation process involved mechanically stripping and separating the plastic insulation surrounding the wire. EDM stored the excess insulation material, known as "plastic fluff," on an adjacent piece of land. It was later discovered that this excess material contained contaminants.

In 1977, EDM sold the Site to Theodore Sall, Inc. ("Sall"), another subsidiary of Diversified. In March of 1987, the Environmental Protection Agency ("EPA") notified Sall and over 170 other businesses that they were Potentially Responsible Parties ("PRP's") under Section 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et. seq. As such, they would be responsible for the clean-up costs associated with the hazardous material collected at the Site between approximately 1968 and 1977. Diversified informed plaintiffs of the EPA's claim and demanded that plaintiffs both defend against the EPA's claim and reimburse Diversified for any expenditures associated with cleaning up the Site.

In November 1991, plaintiffs filed this declaratory judgment action against Diversified. Plaintiffs sought a determination of whether they were obligated to indemnify Diversified for costs incurred in cleaning-up the Site. The court has been notified that the cost of the clean-up could exceed $300 million.¹

This litigation has proceeded slowly, and has required the court to rule on various pretrial motions. For instance, this court has denied Diversified's motion to dismiss based upon the doctrine of forum non conveniens. See Order (April 13, 1992). The court has also held that Pennsylvania law controls the plaintiffs' declaratory judgment action. See Order (February 22, 1993). In addition, the litigation was delayed when, in March 1993, Diversified declared bankruptcy and this case was automatically stayed. See 11 U.S.C. § 362. The bankruptcy court lifted the stay on May 25, 1993.

After the stay was lifted, the plaintiffs moved to amend their complaint to include Sall and AT & T Nassau Metal Corporation ("AT & T") as parties to the action. Plaintiffs sought to add Sall because, like Diversified, Sall was a named insured under the CGL policies. Therefore, plaintiffs asserted that the issues raised by their denial of liability with respect to Diversified were the same as for Sall. Plaintiffs sought to add AT & T because AT & T was a major supplier to the Site during the relevant times, and had been notified by the EPA that it was a PRP. After incurring costs in responding to the EPA's action, AT & T sued Sall for, inter alia, contribution. See AT & T Nassau Metal Corp. v. Fixman & Sall, Civil Action No. 93-001601 (E.D.Mo.1993) (the "Missouri Case"). Therefore, plaintiffs argued that, depending upon the outcome of this litigation, they could be required to defend and indemnify Sall against AT & T's claims. The court granted plaintiffs leave to amend their complaint. On March 23, 1994, plaintiffs filed their Amended Complaint against Diversified, Sall, and AT & T.

Diversified and its subsidiaries then entered into a settlement with AT & T which contained both an assignment (the "Assignment") and an agreement (the "Agreement"). The Assignment provided, in part, that AT & T would be assigned Diversified's potential right of recovery against the plaintiffs and would be given the power to prosecute this litigation. The Agreement stated that the parties would enter a Consent Decree to settle the Missouri Case. The Consent Decree provided that Diversified, Sall, EDM (now known as "Scullin"), and United Refining and Smelting Company ("United"), another Diversified subsidiary, were liable for "damages, expenses, and remediation and removal costs" arising from their status as PRP's for the EDM Site. In addition, the Consent Decree stated that:

(i) as between Sall, Diversified, and Scullin and AT & T ..., that Sall, Diversified, and Scullin are jointly and severally liable for 90% of the above-described liability at the EDM Site; and (ii) as between United and AT & T ..., United is liable for a de minimis portion of the above-described liability at the EDM Site.

Although the plaintiffs objected to the Agreement, the Bankruptcy Court overseeing Diversified's Chapter 11 proceeding approved it.

On October 10, 1994, Diversified, Sall, and AT & T (the "defendants" or "counterclaim plaintiffs") answered the plaintiffs' amended complaint, asserting various affirmative defenses. In addition, the defendants alleged various counterclaims against the plaintiffs and other entities related to the plaintiffs. Specifically, defendants counterclaimed against Continental, Transportation, Transcontinental Insurance Company ("Transcontinental"), Continental National Association a/k/a CNA Insurance Companies ("CNA Insurance"), and CNA Financial Corporation ("CNA Financial") (collectively "counterclaim defendants" or the "CNA Companies"). The defendants' counterclaims sound in breach of contract, misrepresentation under the Illinois Consumer Fraud and Deceptive Business Practices Act, violation of the Illinois Consumer Fraud and Deceptive Practices Act, negligent provision of loss control services, conspiracy to misrepresent or conceal facts, and bad faith.

Several motions are currently before the court. First, the defendants have moved this court to reconsider its ruling that the plaintiffs have not failed to join indispensable parties. Second, the counterclaim defendants have moved to dismiss or strike the defendants' counterclaims on various grounds. Third, Diversified and Sall have moved for default judgment against Continental, Transportation, and Transcontinental based upon the failure of those parties to answer Diversified and Sall's counterclaims. Finally, CNA Financial has moved this court to dismiss all causes of action filed against it on the grounds that the court lacks jurisdiction to adjudicate such claims.

II. Defendants' Motion to Reconsider

On August 19, 1994, this court denied defendants' motion to dismiss this case based upon the plaintiffs' alleged failure to join indispensable parties to this litigation. Defendants have moved this court to reconsider its ruling. The purpose of a motion for reconsideration is to "correct manifest errors of law or fact or to present newly-discovered evidence." Harsco Corporation v. Zlotnicki, 779 F.2d 906, 909 (3d Cir.1985). Because federal courts have a strong interest in the finality of judgments, motions for reconsideration should be granted sparingly. Rottmund v. Continental Assurance Company, 813 F.Supp. 1104, 1107 (E.D.Pa.1992).

Defendants contend that there...