Dana Cos. v. Rentals

• Decision Date: 19 December 2013
• Docket Number: No. 92A03–1208–CC–358.,92A03–1208–CC–358.
• Citation: 1 N.E.3d 738
• Parties: DANA COMPANIES, LLC, Appellant–Respondent, v. CHAFFEE RENTALS, a/k/a, Chaffee Rentals and Storage, BRC Rubber Group, Inc., Charles V. Chaffee, Karen J. Chaffee and Clifford Chaffee, Appellee–Petitioner.
• Court: Indiana Appellate Court

1 N.E.3d 738

DANA COMPANIES, LLC, Appellant–Respondent,

v.CHAFFEE RENTALS, a/k/a, Chaffee Rentals and Storage, BRC Rubber Group, Inc., Charles V. Chaffee, Karen J. Chaffee and Clifford Chaffee, Appellee–Petitioner.

No. 92A03–1208–CC–358.

Court of Appeals of Indiana.

Dec. 19, 2013.

George M. Plews, Todd G. Relue, Plews Shadley Racher & Braun, Indianapolis, IN, Attorneys for Appellant.

N. Reed Silliman, Karen T. Moses, Faegre Baker Daniels LLP, Fort Wayne, IN, Attorneys for Appellee.

MEMORANDUM DECISION

PYLE, Judge.

STATEMENT OF THE CASE

Dana Companies, LLC, (“Dana”) appeals their damages awarded in their lawsuit against Chaffee Rentals, Charles V. Chaffee, Karen J. Chaffee, Clifford Chaffee, and BRC Rubber Group, Inc., (collectively, “BRC”). On cross-appeal, BRC claims that the trial court's findings do not support its judgment and that Dana should not recover any damages.

We affirm in part, reverse in part, and remand.

ISSUES

1. Whether the trial court properly determined that the fortuity principle did not apply to Dana's claim.

2. Whether Dana is entitled to recover any damages from BRC in light of their negotiated settlement agreement.

3. Whether Dana is entitled to prejudgment interest.

FACTS

Dana is in the business of manufacturing and engineering parts for the automotive industry. From 1963 through 1983, Dana occupied a plant (“the Plant”) located in Churubusco, Indiana. As a part of their manufacturing process and general plant operations, Dana generated hazardous waste. Thus, Dana was subject to regulations issued by the Environmental Protection Agency (“EPA”) under the Hazardous Waste and Consolidated Permit Regulations of the Resource Conservation and Recovery Act (“RCRA”).¹ In November 1980, Dana submitted an application to the EPA for a Part A permit that would allow them to treat and store hazardous waste at the Plant. Dana did not complete subsequent application requirements in a timely manner. As a result, the EPA brought an action against Dana. The EPA and Dana entered into a consent agreement that allowed Dana to operate as if it had acquired interim status. ² The EPA further required Dana to comply with all permitted and interim status regulations under RCRA. As Dana became more familiar with the requirements of compliance with RCRA, the company believed that RCRA did not apply to its activities at the Plant. In January of 1984, Dana notified the State of Indiana that it had ceased operations at the Plant. In April of 1985, the State of Indiana notified Dana that it had to submit a closure plan for the Plant. Instead, Dana sold the Plant to Chaffee Rentals in May of 1985, who in turn, rented the property to BRC. At the time of the sale, Dana did not tell BRC that the property was under EPA supervision.

BRC manufactures rubber seals and other rubber parts for automobiles. Shortly after BRC began operations at the facility, the local water treatment company discovered elevated levels of polychlorinated biphenyls (“PCBs”) that was traced back to BRC's facility.³ None of the manufacturing processes used by BRC included or produced PCBs. The Indiana Department of Environmental Management (“IDEM”) conducted an investigation. IDEM collected sediment, soil, and water samples to identify the source of the PCBs. The results of IDEM's testing showed elevated PCB levels at the Plant.

Dana was notified of the findings, and its investigation confirmed the findings of IDEM. Dana also determined that the cause of the contamination was a heat transfer fluid used between 1964 and 1972 to heat rubber injection presses. Thereafter, with IDEM's knowledge, Dana conducted extensive remediation activities at the Plant and other affected areas from July 1986 to March of 1988. Having been responsible for the PCB contamination, Dana paid all of the costs of remediation. After Dana completed its work, IDEM prepared an agreement that would serve as a settlement of the PCB contamination. However, the agreement was never executed by Dana or IDEM.

On September 12, 1988, IDEM sent a violation letter to BRC directing it to submit a revised part A application or to comply with interim status requirements. BRC responded that the violation was improperly directed at them, as Dana was the original applicant on the Part A application. In March of 1990, the EPA issued a complaint and a compliance order to BRC directing them to cease all hazardous waste operations, comply with all permit application procedures, or submit an appropriate closure plan for those areas of the plant treating hazardous waste. In turn, BRC filed a lawsuit against Dana in October of 1991, seeking indemnity from the EPA action and possible sanctions. As a part of the EPA investigation, a visual site inspection (“VSI”) began on May 6, 1992. Before the inspection was completed, Dana and BRC entered into a settlement agreement resolving BRC's lawsuit and the EPA administrative actions. The agreement, in relevant part, provided:

AGREEMENT

In exchange for good and valuable consideration recited herein, the receipt of which is acknowledged, it is hereby agreed:

1. Dana indemnifies BRC Parties from all liability, incurred after the date of this agreement, that they may suffer as a result of judgments or settlements against them in the administrative or civil actions identified above and in any subsequent administrative, civil or criminal action brought against BRC Parties arising out of or relating solely to Dana's alleged treatment, storage or disposal of hazardous waste or hazardous substances at the Plant. Such indemnity shall include, without limitation, indemnity from penalties, closure, corrective action, disposal and cleanup activities, and shall continue in full force and effect until June 1, 2007.

2. BRC Parties agree to notify Dana in writing, by certified mail, return receipt requested, at its address as stated in this Agreement, within 20 days of receipt of an action specified in paragraph 1 giving rise to an indemnity claim. BRC Parties agree to allow Dana full control over the defense, including without limitation the compromise or settlement of any matter in which BRC Parties may claim as covered by this Agreement. Dana agrees to keep BRC Parties fully informed about the defense, including but not limited to compromise and settlement.

3. Dana agrees to assume BRC Parties' defense in the pending EPA administrative proceeding, In the Matters of Dana Corporation–Victor Products and BRC Rubber Group, Docket Nos. V–W–90–R–14 and V–W–90–R–15 on the date of execution of this Agreement. For this pending claim and for any subsequent claim on which BRC Parties seeks indemnification, Dana shall have the right to defend BRC and to select counsel of its choice. Except for the pending EPA administrative proceeding specified above, Dana shall not have the obligation to defend BRC Parties on any claims in which the scope of indemnification is in dispute. BRC Parties agree to waive any conflict of interest which such counsel may have in accepting such representation, or to which such counsel may later become subject to by said representation.

4. BRC Parties shall hold Dana harmless for, and the extent of Dana's indemnification under this Agreement shall not extend to, any claims for violations, fines, pollution, remediation work, contaminations, natural resource damage, personal injury or property damage arising out of acts, conduct or omissions at the Plant since May 21, 1985, unless such claims arise out of Dana's alleged treatment, storage, or disposal of hazardous waste or hazardous substances activities at the Plant.

* * * * * *

8. Dana and BRC Parties and their attorneys shall keep strictly confidential the existence and terms of this Agreement and shall not disclose the existence or terms of this Agreement, unless expressly required by law or required to fully enforce this Agreement. In addition, BRC parties may disclose the existence and terms of this Agreement to prospective purchasers of the Plant upon 48 hours advance notice to Dana and after execution by the prospective purchaser of a confidentiality agreement prohibiting the disclosure of the existence or terms of this Agreement.

(Ex. Index, Vol. III, Ex. 5). Dana and BRC executed the settlement agreement in early August 1992. The EPA concluded its VSI and issued its report in October of 1992. The report identified twenty-nine (29) solid waste management units (“SWMU”) and six areas of concern (“AOC”) which the EPA recommended for further investigation and possible remediation.

On June 22, 1994, the administrative law judge (“ALJ”) in the original action brought by the EPA against Dana and BRC issued a ruling on Dana's and BRC's motions for summary judgment and the EPA's motion for an accelerated decision against Dana and BRC. As to BRC, the ALJ found that BRC had no knowledge of the Plant's interim status at the time it acquired the Plant and that “BRC has not conducted any operations at the facility in violation of RCRA.” (Ex. Index, Vol. III, Ex. 7). As to Dana, the ALJ found Dana liable for violation of the applicable statutes and regulations. However, the civil penalty that Dana was required to pay was disputed and was not resolved under the accelerated decision.

In August of 1996, BRC contacted Dana and requested that Dana investigate the areas that the EPA recommended for further action in the VSI. Dana replied that while it intended to “abide by the terms of the Settlement Agreement ...,” Dana had no obligation to indemnify BRC unless an administrative action was brought against it. (Ex. Index, Vol. III, Ex. 13). As a result, BRC decided to apply to IDEM's voluntary remediation program (“VRP”).⁴ BRC invited Dana to participate as well; Dana refused, stating it did not believe participation in the program would reduce the possibility of subsequent action by IDEM. IDEM accepted BRC into the remediation program. During the preliminary stages of the VRP, IDEM project manager Andrea...