CPC Intern., Inc. v. Northbrook Excess & Surplus Ins. Co.

• Decision Date: 03 October 1994
• Docket Number: No. 94-1276,94-1276
• Citation: 46 F.3d 1211
• Court: U.S. Court of Appeals — First Circuit
• Parties: CPC INTERNATIONAL, INC., Plaintiff-Appellant, v. NORTHBROOK EXCESS & SURPLUS INSURANCE COMPANY, Defendant-Appellee. . Heard

Page 1211

46 F.3d 1211

CPC INTERNATIONAL, INC., Plaintiff-Appellant, v. NORTHBROOK EXCESS & SURPLUS INSURANCE COMPANY, Defendant-Appellee.

No. 94-1276.

United States Court of Appeals First Circuit.

Heard Oct. 3, 1994.

Decided Jan. 25, 1995.

Jerome P. Facher, with whom Michelle D. Miller, Nicholas Carter, Hale and Dorr, Boston, MA, David L. Harris, Geoffrey A. Price and Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, were on brief, for appellant.

Philip J. McGuire, with whom Douglas G. Shreffler, Gleason, McGuire & Shreffler, Chicago, IL, Kenneth P. Borden, Higgins, Cavanaugh & Cooney, Providence, RI, Stephen W. Miller, James B. Burns and Clark, Ladner, Fortenbaugh & Young, Philadelphia, PA, were on brief, for appellee.

Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and CYR, Circuit Judge.

TORRUELLA, Chief Judge.

Plaintiff-appellant, CPC International, Inc. ("CPC"), filed this action seeking a declaration that defendant-appellee, Northbrook Excess & Surplus Insurance Company ("Northbrook"), is obligated to indemnify it for environmental cleanup costs related to land and water contamination allegedly caused by Peterson/Puritan, Inc. ("Peterson/Puritan"), a former subsidiary of CPC. At the close of CPC's evidence in the jury trial of the case, the district court granted Northbrook's motion, pursuant to Fed.R.Civ.P. 50(a), for judgment as a matter of law. CPC appeals 1) the district court's pretrial choice-of-law decision predicting that a New Jersey court would apply the substantive law of Rhode Island and 2) the district court's grant of judgment as a matter of law. For the reasons stated herein, we affirm the district court's choice-of-law decision and certify a question to the Rhode Island Supreme Court.

I. BACKGROUND

A. Factual Background

The ultimate issue in this case is whether Northbrook is obligated to indemnify CPC for environmental cleanup costs related to land and water contamination caused by Peterson/Puritan, an aerosol packaging plant formerly owned by CPC. CPC is a multinational packaging and manufacturing corporation headquartered in New Jersey. From July 1, 1979 to July 1, 1980, Northbrook served as CPC's first layer excess insurance carrier, with a $25 million umbrella liability policy.

In 1968, CPC acquired the Puritan Aerosol Company and renamed it Peterson/Puritan. Peterson/Puritan manufactures, among other things, flea spray, hair spray, spot remover and oven cleaner. Its manufacturing facility is located in the town of Cumberland, Rhode Island, on a seventeen-acre site ("the Peterson-Puritan site") fronted on its western side by the Blackstone River. In 1979, both Cumberland and the neighboring town of Lincoln discovered chemical contamination in their municipal water supplies, the Quinnville Wellfields. The wells were closed later that year.

In 1980, the United States Environmental Protection Agency ("EPA") hired the environmental engineering firm Goldberg-Zoino and Associates to conduct a hydrogeological study of the aquifer underlying the Blackstone River (the "GZA Report"). In 1982, based on the results of the GZA Report, the Town of Lincoln sued Peterson/Puritan for contamination of the Quinnville Wells. That suit was settled in 1984 for $780,000. The settlement was paid by Northwestern National Insurance Company ("Northwestern National"), CPC's primary insurance carrier In 1983, EPA placed an area including the Peterson/Puritan site and the aquifer east of the Blackstone River (designated by the EPA as "OU-1") on its National Priorities List. In 1987, following several years of negotiations, EPA issued an Administrative Order by Consent, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Sec. 9601 et seq., which identified Peterson/Puritan as the party responsible for numerous hazardous chemicals migrating into the groundwater, and ordered Peterson/Puritan to investigate additional responsible parties and further analyze site conditions. Later that year, Northwestern National informed CPC and Northbrook that the primary insurance policy was exhausted, thus bringing Northbrook into the fold. ¹

under a policy with a coverage limit of $1 million.

In July of 1987, CPC filed suit against Northbrook in New Jersey state court seeking a declaration that Northbrook is obligated to indemnify it for environmental cleanup costs and damages arising from the Town of Lincoln settlement and the EPA-ordered cleanup. On the basis of diversity jurisdiction, Northbrook removed the case to the United States District Court for the District of New Jersey. In 1989, the New Jersey district court granted Northbrook's motion to transfer venue to the United States District Court for the District of Rhode Island.

After the transfer, CPC filed a motion for a declaration that the substantive law of New Jersey governs this litigation. In an Opinion dated June 21, 1990, the Rhode Island district court concluded, first, that in ruling upon the choice-of-law issue it must apply the law of the state which would have been applied had the change of venue not occurred and, second, that a New Jersey court would apply New Jersey law to this case because, as the home base of the insured, CPC, it has the most significant interest in the outcome of the case. CPC Int'l, Inc. v. Northbrook Excess & Surplus Ins. Co., 739 F.Supp. 710, 713-15 (D.R.I.1990).

The parties filed cross-motions for summary judgment and, on March 15, 1991, the district court denied CPC's motion for summary judgment and allowed Northbrook's cross-motion on the ground that the pollution exclusion clause in Northbrook's policy precluded coverage for gradual pollution. The district court concluded that CPC failed to sustain its burden of establishing a genuine issue of fact with respect to whether the contamination of the aquifer was "sudden and accidental," within the meaning of New Jersey law, and therefore held that the pollution exclusion applied. CPC Int'l, Inc. v. Northbrook Excess & Surplus Ins. Co., 759 F.Supp. 966, 976 (D.R.I.1991).

CPC appealed and, on March 24, 1992, we reversed the district court's grant of summary judgment for Northbrook and remanded the case to the district court. We concluded that, in predicting how the New Jersey Supreme Court would interpret the "sudden and accidental" provision, the district court gave insufficient weight to decisions of the New Jersey Superior Court's Appellate Division (New Jersey's intermediate appellate court), which had concluded that the "sudden and accidental" provision is ambiguous and had interpreted it favorably to insureds as providing coverage for gradual pollution. See CPC Int'l, Inc. v. Northbrook Excess and Surplus Ins. Co., 962 F.2d 77, 97-98, reh'g denied, 962 F.2d 98 (1st Cir.1992). ²

After the case was remanded, Northbrook moved for reconsideration of the district court's 1990 choice-of-law decision. In a The case went to trial on January 28, 1994. Over eleven days, CPC offered testimony from several witnesses, including three experts, and employees of the former Peterson/Puritan facility. At the close of CPC's evidence, Northbrook moved for judgment as a matter of law under Fed.R.Civ.P. 50(a). On February 16, 1994, the district court delivered a detailed oral opinion concluding that CPC had failed to present evidence from which a reasonable jury could conclude that there was an "occurrence"--an event resulting in property damage--during the policy period. The district court therefore granted Northbrook's motion for judgment as a matter of law. This appeal followed.

Memorandum and Order dated December 16, 1993, 839 F.Supp. 124 (the "Second Choice-of-Law Decision"), the district court granted Northbrook's motion, holding that the substantive law of Rhode Island would henceforth govern the case. We denied CPC's petition for mandamus.

II. STANDARD OF REVIEW

We review the district court's choice-of-law decision de novo. See Crellin Technologies, Inc. v. Equipmentlease Corp., 18 F.3d 1, 4 (1st Cir.1994). With respect to the district court's grant of judgment as a matter of law, we note, at the outset, that judgment as a matter of law is proper at the close of the plaintiffs' case only when, after scrutinizing plaintiffs' evidence and the inferences reasonably to be drawn therefrom in the light most favorable to the plaintiffs, the trial court concludes that no reasonable jury could find in plaintiffs' favor on any permissible claim or theory. Rolon-Alvarado v. Municipality of San Juan, 1 F.3d 74, 76 (1st Cir.1993). Judgment as a matter of law may be entered only if the evidence, viewed from this perspective, is such that reasonable minds could not differ as to the outcome. Id.

We review the Rule 50(a) motion decision de novo, see Salve Regina Coll. v. Russell, 499 U.S. 225, 231-32, 111 S.Ct. 1217, 1220-22, 113 L.Ed.2d 190 (1991); Jordan-Milton Mach., Inc. v. F/V Teresa Marie, II, 978 F.2d 32, 34 (1st Cir.1992), under the same standards governing the district court, Rolon-Alvarado, 1 F.3d at 76, with a view to the legal sufficiency of the evidence presented by the plaintiffs.

III. DISCUSSION

CPC contends that the district court erred, first, in determining that Rhode Island law would govern the case, after previously determining that New Jersey law would govern, and, second, in concluding that CPC had failed to present evidence from which a reasonable jury could find in its favor. ³

A. Choice of Law

CPC asserts that the district court erred in changing its original choice-of-law determination. CPC makes two related arguments in support of this assertion. First, CPC contends that the district court violated the "law of the case" doctrine in changing its original choice-of-law ruling. Second, CPC maintains that the district court's second choice-of-law ruling was erroneous--i.e., that a New Jersey court would not apply the substantive law of Rhode Island to this case.

In its original...