High Voltage Engineering Corp. v. Federal Ins. Co., 92-1588
| Decision Date | 07 October 1992 |
| Docket Number | No. 92-1588,92-1588 |
| Citation | 981 F.2d 596 |
| Parties | HIGH VOLTAGE ENGINEERING CORPORATION, Plaintiff, Appellant, v. FEDERAL INSURANCE COMPANY, Defendant, Appellee. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
William G. Southard, with whom Sarah B. Porter and Bingham, Dana & Gould, Boston, MA, were on brief, for plaintiff, appellant.
Peter G. Hermes, with whom Mark E. Young and Peabody & Arnold, Boston, MA, were on brief for defendant, appellee.
Before CYR, Circuit Judge, BOWNES, Senior Circuit Judge, and FUSTE, * District Judge.
Appellant High Voltage Engineering Corporation ("High Voltage") instituted this diversity action in the United States District Court for the District of Massachusetts against Federal Insurance Company ("Federal") demanding reimbursement of costs incurred in defending and indemnifying certain of its officers and directors in an underlying state court action. The district court granted summary judgment for Federal, on the ground that insurance coverage was excluded under the pollution exclusion clause. We affirm.
On September 14, 1983, American Landmark Development, Inc. ("Landmark") agreed to buy thirty-four acres of commercial real estate in Burlington, Massachusetts ("Burlington site") from High Voltage. Landmark assigned its purchase rights to Oskar Brecher and Bruce Silverman, d/b/a American Landmark Partners and American Landmark Partners II ("ALP"). On March 27, 1984, ALP purchased the Burlington site from High Voltage and leased back the portion on which High Voltage was to continue its manufacturing operation.
At the time of the sale, the Chief Executive Officer of High Voltage assured ALP that the Burlington site had not been contaminated by hazardous waste during the preceding fifteen years. Three years later, in March 1987, hazardous materials were discovered in the soil, groundwater, and bedrock at the Burlington site. The contaminants were most conspicuous near a degreaser unit operated by High Voltage. The cleaning solvents utilized in the High Voltage degreaser unit were identical to the contaminants found in the surrounding area. ALP notified High Voltage and attempted to arrive at a settlement on the cleanup costs.
In December 1987, High Voltage became the target of a hostile tender offer by Natalie Acquisition Corporation ("Natalie"), a subsidiary of Hyde Park Partners, a limited partnership controlled by Clifford Meantime, ALP met with little success in persuading High Voltage to clean up the hazardous wastes at the Burlington site. In February 1988, ALP again demanded that High Voltage accept responsibility for the cleanup. In March 1988, ALP threatened legal action unless High Voltage cleaned up the contamination and compensated ALP in damages. Ultimately, in September 1988, ALP brought an action in Massachusetts Superior Court demanding declaratory, injunctive, and monetary relief from High Voltage, Press, and Levy, among others.
Press and Laurence Levy. Natalie borrowed $51 million from Marine Midland National Bank ("Marine Midland") to finance Natalie's acquisition of High Voltage's stock. By March 1988, Natalie had acquired 94% of High Voltage's stock, and Press and Levy became officers and directors of High Voltage. In August 1988, Press and Levy merged Natalie into High Voltage, and High Voltage assumed liability for the Marine Midland loans with which the High Voltage takeover had been financed
In October 1987, prior to Natalie's takeover of High Voltage but after the discovery of the contaminants at the Burlington site, Federal issued an executive liability and indemnity policy to High Voltage, insuring High Voltage's officers and directors against loss occasioned by third party claims for wrongful acts committed during the policy period. High Voltage itself was insured under the policy for defending or indemnifying its officers and directors against third party claims. The coverage exclusions in the Federal policy included the pollution exclusion clause at issue in the present dispute and a property damage exclusion clause.
In April 1988, High Voltage notified Federal of ALP's threats to initiate legal action, and in October 1988 provided Federal with a copy of the ALP complaint. Federal declined coverage, citing the pollution and property damage exclusions.
High Voltage initiated the present diversity action, seeking a judicial declaration that Federal was liable under the policy for losses incurred by High Voltage and its officers and directors in connection with the ALP action, damages for breach of contract, and damages for unfair and deceptive business practices under Mass.Gen.L. ch. 93A. Subsequently, High Voltage dropped all demands for relief, except its claim for damages incurred in behalf of Press and Levy in connection with count XIV of the ALP complaint alleging unfair and deceptive trade practices under Mass.Gen.L. ch. 93A. Federal moved for summary judgment under the pollution and property damage exclusion clauses. High Voltage countered with a motion for partial summary judgment relating to the same issues. Finding "no relevant ambiguity in the [p]olicy, or uncertainty in the facts, which would justify denying effect to the [p]olicy's pollution exclusion," the district court concluded that the High Voltage claims "clearly lie outside the [p]olicy's coverage under the circumstances in this case." On appeal, High Voltage challenges the grant of summary judgment.
"We review de novo to ensure that no genuine issue of material fact ... has been overlooked and that ... [the moving party was] entitled to summary judgment as a matter of law." Jimenez v. Peninsular & Oriental Steam Navigation Co., 974 F.2d 221, 222 (1st Cir.1992) (citing Milton v. Van Dorn Co., 961 F.2d 965, 969 (1st Cir.1992)). The proper interpretation of an insurance policy presents a question of law. Nieves v. Intercontinental Life Ins. Co. of Puerto Rico, 964 F.2d 60, 63 (1st Cir.1992); see also Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131, 134 (1st Cir.1984). As the findings of fact material to the present appeal are undisputed, we need only determine whether Federal is entitled to judgment as a matter of law.
The ALP complaint in the underlying state court action comprises seventeen counts against numerous defendants and alleges violations of the Massachusetts Oil and Hazardous Material Release Prevention Act, breach of warranty, breach of lease, deceit, trespass, and negligence. The relief ALP sought included: an injunction directing defendants to assess, contain, and remove hazardous waste contamination at the Burlington site and to cease and desist from further releases of contaminants; damages caused by the contamination; damages resulting from High Voltage's unfair and deceptive practices, including its alleged misrepresentation and concealment and its failure to clean up the contamination; damages for breach of its warranty relating to the absence of site contamination; the annulment, as a fraudulent conveyance, of High Voltage's agreement to satisfy Marine Midland's loans to Natalie, the proceeds from which were used to buy High Voltage stock; annulment of the High Voltage security agreement with Marine Midland, granting security interests and mortgages in all High Voltage assets, which allegedly rendered High Voltage insolvent and placed its assets beyond ALP's reach; and an injunction against the liquidation of High Voltage's assets and the conveyance of any additional assets to Marine Midland.
The controversy on appeal focuses on count XIV of ALP's complaint in the underlying state court action. Count XIV names Press, Levy, and Hyde Park Partners as defendants and charges unfair and deceptive trade practices in violation of Mass.Gen.L. ch. 93A. The relevant substantive allegations in count XIV are as follows:
161. On information and belief, Press and Levy, on behalf of Hyde Park Partners, control the affairs of High Voltage and have for their own personal benefit intentionally stalled the Plaintiffs in order to consummate the merger, document High Voltage's obligation and collateral to Marine Midland, and liquidate assets of High Voltage without making them available to the Plaintiffs.
162. On information and belief, Press, Levy and Hyde Park Partners have exerted their control over High Voltage to cause High Voltage to take minimal action in regards to the contamination problem; have delayed the progress by firing engineers previously retained by them and by limiting the efforts of the engineers currently retained by High Voltage; and have knowingly injured the Plaintiffs, for the personal gain of Press, Levy and Hyde Park Partners.
....
166. Press, Levy and Hyde Park Partners, in their conduct towards the Plaintiffs, have employed unfair and deceptive acts and practices against the Plaintiffs, primarily and substantially in the Commonwealth of Massachusetts in the conduct of a trade or commerce, each and every one of which is a separate and distinct cause of action, including, but not necessarily limited to the following:
a. By using their control over the affairs of High Voltage to attempt to sabotage the Plaintiffs' development of the [Burlington site].
b. By deceiving and stalling the Plaintiffs for their own personal gain.
c. By attempting to use economic duress against the Plaintiffs to force them to abandon their claim against High Voltage, and to enable High Voltage to attempt to liquidate the Plaintiffs' promissory note to High Voltage.
d. By using their control over High Voltage to cause High Voltage to continue to fail to remove said contamination from [the Burlington site].
e. By using their control over High Voltage to cause High Voltage to fraudulently convey its assets to Marine Midland.
f. By using their control over High Voltage to interfere with the contractual relations...
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