Gould Electronics Inc. v. U.S., 99-1893

• Decision Date: 19 June 2000
• Docket Number: No. 99-1893,99-1893
• Parties: (3rd Cir. 2000) GOULD ELECTRONICS INC., F/K/A GOULD INC.; AMERICAN PREMIER UNDERWRITERS, INC., V. UNITED STATES OF AMERICA GOULD ELECTRONICS INC. AMERICAN PREMIER UNDERWRITERS, INC. APPELLANTS Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 169

220 F.3d 169 (3rd Cir. 2000)

GOULD ELECTRONICS INC., F/K/A GOULD INC.; AMERICAN PREMIER UNDERWRITERS, INC.,

V.

UNITED STATES OF AMERICA GOULD ELECTRONICS INC. AMERICAN PREMIER UNDERWRITERS, INC. APPELLANTS

No. 99-1893

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: June 19, 2000

Filed July 31, 2000

Appeal from the United States District Court For the Eastern District of Pennsylvania (D.C. Civil No. 99-cv-01130) District Judge: Honorable Thomas N. O'Neill, Jr. [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Joel D. Gusky (Argued) Harvey, Pennington, Cabot, Griffith & Renneisen, Ltd. 11 Penn Center, 29th Floor 1835 Market Street Philadelphia, PA 19106 Attorney for Appellant Gould Electronics Inc.

Richard L. Kremnick (Argued) Blank Rome Comisky & McCauley Llp One Logan Square Philadelphia, PA 19103 Attorney for Appellant American Premier Underwriters, Inc.

Steven M. Talson (Argued) Senior Trial Counsel Torts Branch, Civil Division United States Department of Justice P.O. Box 340, Ben Franklin Station Washington, DC 20044 Attorney for Appellee

Before: Greenberg and Weis, Circuit Judges, and Schwartz, District Judge^*

OPINION FOR THE COURT

Schwartz, Senior District Judge

I. INTRODUCTION

Plaintiffs/appellants Gould Electronics, Inc. ("Gould") and American Premier Underwriters, Inc. ("APU") were co-defendants in a toxic tort case captioned Cheryl Allen, et al. v. Marathon Battery Co., et al., No. 1074/90 (N.Y. Sup. Ct.) (the "Allen case"). The Allen case arose out of personal injuries and property damage allegedly caused by air and water pollution from a battery manufacturing plant in Cold Spring, New York. The plant was designed, constructed, owned, and operated by the United States Army, via its office in Philadelphia, Pennsylvania, and owned and operated by Gould and APU, and their predecessors, at various times. The Army was not a party to the Allen litigation. Gould and APU settled the Allen case for $4.5 million.

Gould and APU filed a Complaint against defendant/appellee United States of America ("United States"), in the Eastern District of Pennsylvania, seeking contribution and indemnity because of their entry into the Allen case settlement, pursuant to the Federal Tort Claims Act ("FTCA"), 28 U.S.C. SS 1346(b), 2671 et seq. The District Court granted the United States' Motion to Dismiss for lack of subject matter jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(1) ("Rule 12(b)(1)"), holding: (1) under Pennsylvania choice of law rules, New York contribution and indemnity law governs the FTCA jurisdictional inquiry; (2) the court lacks jurisdiction over the contribution claim because the United States would not be liable for contribution under N.Y. Gen. Oblig. Law S 15-108(c), which bars settling parties from bringing contribution claims against non-settling parties (hereinafter "S 15-108(c)"); and (3) the court lacks jurisdiction over the indemnification claim because the United States would not be liable for indemnification under New York law, which bars indemnification when the plaintiff is at least partially at fault.

Gould and APU contend the District Court erred by: (1) misapplying the standards governing a motion to dismiss under Rule 12(b)(1); (2) holding New York, rather than Pennsylvania, contribution and indemnity law governs the jurisdictional inquiry, under Pennsylvania choice of law rules; (3) holding the United States would not be liable for contribution under S 15-108(c) because the United States waived the protection of S 15-108(c); and (4) holding the United States would not be liable for indemnity under New York law.

We find the District Court properly applied the standards used for analyzing a Rule 12(b)(1) motion to dismiss, but erred in determining New York contribution and indemnity law controls the outcome. Rather we hold that Ohio law governs the jurisdictional inquiry and, under Ohio law, the United States would be liable for contribution, but not indemnity.¹ As such, the District Court has subject matter jurisdiction over Gould/APU's FTCA claim for contribution, but not for indemnity. The District Court's ruling is AFFIRMED IN PART and REVERSED IN PART and the case is REMANDED for proceedings consistent with this opinion.²

II. FACTS

The plaintiffs/appellants are Gould, an Ohio corporation with its principal place of business in Ohio, and APU, a Pennsylvania corporation with its principal place of business in Ohio (hereinafter "Gould/APU"). Defendant/appellee is the United States.

In 1951, the Signal Corps of the United States Army ("Army"), through its office in Philadelphia, Pennsylvania, entered into a Letter Contract and Facilities Contract with Sonotone Corp. ("Sonotone"), a predecessor corporation to Gould. Pursuant to these contracts, the United States agreed to design and construct a battery manufacturing plant to be located on government property in Cold Spring, New York. Sonotone was to assist in the design of the plant and then operate the plant on a contract basis to produce batteries for the government. However, the United States retained ultimate supervision and control over the day-to-day operations of the plant.

Between 1951 and 1952, the Army designed the plant, including its industrial waste water disposal and air emissions systems. For waste water disposal, Sonotone recommended a closed system to allow removal of hazardous material before releasing waste water from the plant. The Army rejected the closed design, opting for an open system which did not remove hazardous material from the waste water. By January, 1953, the Army had caused the construction of the plant, including the waste water and air emission systems.

From 1953 to 1962, Sonotone acted as contractor-operator of the plant, which produced nickel-cadmium batteries. During this time period, according to the Complaint, the Army owned and retained ultimate supervision and control over the plant, including:

(a) Title to all real and personal property remained with the government;

(b) All equipment was to be installed by the government;

(c) Title to all materials, supplies, work-in-process and other property vested with the government;

(d) The Plant was to be used solely to fulfill government contracts for an initial five year period;

(e) The government was to reimburse Sonotone for all repairs, replacements and restorations "in excess of normal requirements for maintenance and in excess of fair wear and tear." Such reimbursed expenditures were required to be pre-approved by the government;

(f) The government was provided with access to the Plant at all times;

(g) The Plant and facilities were to be erected, made available, delivered and installed by the government;

(h) The government reserved to itself the right to dismantle, remove and ship the Plant and facilities when deemed in the best interest of the government to do so; and

(i) The government reserved to itself the right to terminate use of the facility when the government determined it was in its best interests to do so.

Complaint P 19. During this time, the plant discharged industrial waste water into Foundry Cove and the Hudson River and discharged contaminated dust and vapors into the air surrounding the plant.

In 1962, the Army sold the plant to Sonotone. From 1962 to 1969, Sonotone continued to operate the plant as a battery manufacturing plant and continued to discharge industrial waste water into Foundry Cove.³ In 1969, Sonotone sold the plant to Business Funds, Inc., which through a series of corporate mergers over the next several years, became Marathon Battery Co. and then plaintiff APU. From 1969 to 1979, APU owned and operated the plant, continued to produce batteries, and continued to discharge industrial waste water into Foundry Cove. ⁴ In 1979, APU sold the plant to Merchandise Dynamics, Inc., which ceased manufacturing batteries at the plant.

In 1990, residents of Cold Spring, New York filed the Allen lawsuit against, inter alia, Gould/APU in the Supreme Court of New York. The Allen plaintiffs alleged negligence and strict liability claims arising out of injuries caused by air and water pollution released from the plant. The United States was not named as a defendant and could not be joined as a co-defendant because of its sovereign immunity in state court. Gould/APU attempted to remove the case to the United States District Court for the Southern District of New York in order to join the United States as a defendant, but the request was denied.

In 1991, the United States Environmental Protection Agency ("EPA") listed the plant and surrounding area (the "Site") on the National Priorities List for the Federal Superfund Program under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. S 9601 et seq . In 1991, the EPA entered into a first consent decree ("First CERCLA Consent Decree") with Gould/APU and the Army providing for clean up of the Site. The First CERCLA Consent Decree contained a provision providing:

N. All Parties reserve all rights and legal obligations with respect to any toxic tort claims including, but not limited to, all claims asserted in Cheryl Allen, et al. v. Marathon Battery Co., et al., Index No., 1074/90 (N.Y. Sup. Ct.).

Joint Appendix ("App.") 648a.

In 1993, the EPA entered into a second consent decree ("Second CERCLA Consent Decree") with Gould/APU and the Army covering the Site. The Second CERCLA Consent Decree contained, inter alia, two provisions providing:

5. Settling Parties specifically reserve and do not hereby waive any defenses which they may have with respect to any asserted liability related to the Site. Settling Parties reserve all rights, defenses, and legal contentions with respect to any third party claims, including, but not limited to, all claims asserted in Cheryl Allen et al. v. Marathon Battery Co., et al

. . . . .

108. Settling Parties reserve,...