Honeywell Intern., Inc. v. Phillips Petroleum Co.

• Decision Date: 30 June 2005
• Docket Number: No. 04-20589.,04-20589.
• Citation: 415 F.3d 429
• Parties: HONEYWELL INTERNATIONAL, INC., formerly known as Allied Signal Inc., Plaintiff-Appellant, v. PHILLIPS PETROLEUM CO.; et al., Defendants, Conoco Phillips Co., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

415 F.3d 429

HONEYWELL INTERNATIONAL, INC., formerly known as Allied Signal Inc., Plaintiff-Appellant, v. PHILLIPS PETROLEUM CO.; et al., Defendants Conoco Phillips Co., Defendant-Appellee.

No. 04-20589.

United States Court of Appeals, Fifth Circuit.

June 30, 2005.

Jeffrey Scott Bromme, Arnold & Porter, Washington, DC, for Plaintiff-Appellant.

Michael Vance Powell, Thomas F. Loose, Locke, Liddell & Sapp, Dallas, TX, Mark R. Zehler, Conoco Phillips, Houston, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before REAVLEY, JONES and GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Honeywell International, Inc. ("Honeywell") appeals the district court's order granting summary judgment in its suit against Phillips Petroleum Company ("Phillips"). The issue on appeal is whether the court erred in holding that Phillips had no contractual duty to indemnify Honeywell for costs and attorney's fees Honeywell incurred defending a suit by Lone Star Industries ("Lone Star").

I

In 1968, The Signal Companies, Inc. ("Signal") sold a former oil refinery site along the Houston ship channel to Lone Star (the "Lone Star Site"). Approximately a year later, Signal reformed itself as a holding company and began running its three operations — real estate development, chemicals, and natural resources — through subsidiaries. Signal transferred its natural resources business to Signal Oil & Gas ("Signal Oil"), a previously inactive subsidiary. The transfer agreement (the "Master Agreement") contained a provision requiring Signal Oil to assume certain liabilities, the scope of which is the basis for this action.

In 1992, Lone Star sued Signal, now named Honeywell,¹ under the Comprehensive Environmental Response Compensation Act ("CERCLA") and the Resource Recovery and Conservation Act ("RCRA") for pollution damages on the Lone Star Site. 42 U.S.C. §§ 9613(b), 6972(a)(1)(B). In 1993, Honeywell filed a third-party complaint against Signal Oil, now Phillips, for indemnity. Honeywell successfully defended against Lone Star's claims, with the district court entering judgment in favor of Honeywell in 1998. The judgment against Lone Star did not address Honeywell's claims against Phillips, which had yet to be adjudicated. On Honeywell's motion, the court entered an order pursuant to Fed. R. Civ. P. 21 severing Honeywell's third-party action against Phillips. The court entered an amended final judgment in the original action reflecting the severance.

Honeywell's 1993 complaint against Phillips, filed before Honeywell's legal liability to Lone Star had been adjudicated, asked the court to hold Phillips liable both for any amount it might be adjudged liable to Lone Star and for costs and attorney's fees associated with the Lone Star suit. Honeywell's indemnity claims against Phillips remained in the complaint against Phillips after that action was severed from the Lone Star action in 1998. But, in light of the court's judgment against Lone Star and Lone Star's failure to appeal, the parties focused exclusively on Honeywell's request for attorney's fees and costs in their 2003 and 2004 cross-motions for summary judgment. Phillips' motion argued that it was obligated to indemnify Honeywell only for liabilities related to the assets that Signal transferred to Signal Oil. Because Signal sold the Lone Star Site two years before transferring its natural resource operation to Signal Oil, Phillips argued, Signal Oil did not inherit liability associated with the site.

The district court agreed. It held that neither the Master Agreement nor a supplement executed in 1974 as part of Signal's sale of Signal Oil (the "Supplemental Agreement") required Phillips to indemnify Honeywell for liability relating to a property Signal sold in 1968. Honeywell appeals, arguing not only that the district court erred in granting summary judgment but also that the court lacked subject matter jurisdiction over Honeywell's severed claim.

II

Before reaching the merits of the district court's decision, we address Honeywell's contention, raised for the first time on appeal, that the district court did not have subject matter jurisdiction over its severed action against Phillips. See Arizonans for Official English v. Arizona, 520 U.S. 43, 73, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997) (stating that every appellate court has an obligation to satisfy itself of its own jurisdiction and that of the district court); Giles v. NYLCare Health Plans, Inc., 172 F.3d 332, 336 (5th Cir.1999) ("A lack of subject matter jurisdiction may be raised at any time, which means we can examine the district court's jurisdiction for the first time on appeal.") (internal citation omitted).

In assessing whether the district court had subject matter jurisdiction, we generally look to the time at which the action commenced. See Carney v. Resolution Trust Corp., 19 F.3d 950, 954 (5th Cir.1994) ("Subject matter jurisdiction is determined at the time the complaint is filed."). However, a severed action must have an independent jurisdictional basis. See United States v. O'Neil, 709 F.2d 361, 375 (5th Cir.1983) (holding that severed counterclaims "became independent actions requiring an independent jurisdictional basis."); see also 28 U.S.C. § 1367 (providing that "the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy ....") (emphasis added). Accordingly, we look to the point at which that action was severed from Lone Star's action against Honeywell to determine whether the district court had subject matter jurisdiction over Honeywell's claims against Phillips.

Phillips argues that Honeywell's third-party complaint contained both federal and state law causes of action. Honeywell's 1993 complaint against Phillips alleged, in relevant part:

CAUSE OF ACTION INVOLVING LONE STAR

23. If [Honeywell] is liable to Lone Star ... then Phillips is liable to [Honeywell] by way of assumption, indemnity and/or contribution.

....

PRAYER FOR RELIEF

28. Defendant and third-party plaintiff [Honeywell] respectfully prays that the Court enter judgment against Phillips and:

(a) hold Phillips liable for any amounts which [Honeywell] may be judged liable to Lone Star, including award of contribution from Phillips pursuant to 42 U.S.C. § 9613(f) if [Honeywell] is found liable to Lone Star for response costs;

....

(d) enter a declaratory judgment pursuant to 28 U.S.C. § 2201 that Phillips is liable to [Honeywell] for all current and future liabilities ... including all current and future response costs pursuant to 42 U.S.C. § 9613(f) if [Honeywell] is found liable to Lone Star for future response costs.

Phillips contends that paragraphs 23, 28(a), and 28(d) assert federal causes of action, namely claims for indemnification pursuant to 42 U.S.C. § 9613(f). Thus, Phillips argues, the district court had subject matter jurisdiction pursuant to 28 U.S.C. § 1331.

Honeywell responds that, notwithstanding its references to 42 U.S.C. § 9613(f), the complaint does not establish subject matter jurisdiction because it either did not state a viable federal question at the time it was filed or no longer stated a viable federal claim after the Lone Star judgment became final. See Raymon v. Alvord Ind. Sch. Dist., 639 F.2d 257 (5th Cir.1981) ("A complaint that alleges the existence of a frivolous or insubstantial federal question is not sufficient to establish jurisdiction in federal court."); Murphy v. Inexco Oil Co., 611 F.2d 570, 573 (5th Cir.1980) ("the assertion that the claim involves such a question must be more than incantation. While jurisdiction does not depend on the contention having ultimate merit, its mere recital cannot confer jurisdiction if the contention is frivolous or patently without merit.").

Honeywell's request that the district court "hold Phillips liable for any amounts which [Honeywell] may be judged liable to Lone Star, including award of contribution from Phillips pursuant to 42 U.S.C. § 9613(f) if [Honeywell] is found liable to Lone Star for response costs" states a federal cause of action sufficient to invoke federal jurisdiction. While the sufficiency of Honeywell's complaint to support this cause of action, and whether Phillips could be subjected to liability under § 9613(f)(1), are certainly open to question,² "legal insufficiency of a federal claim generally does not eliminate the subject matter jurisdiction of a federal court. . . ." Growth Horizons, Inc. v. Del. County, Pa., 983 F.2d 1277, 1280 (3d Cir.1993). Having reviewed Honeywell's complaint, we find that its CERCLA contribution claim against Phillips, when filed, was not so insubstantial, meritless or so foreclosed by precedent as to render it insubstantial for purposes of subject matter jurisdiction.

Honeywell next argues that even if its complaint against Phillips stated a federal cause of action when filed, it no longer stated a viable federal claim after Honeywell was adjudged not liable to Lone Star. Honeywell notes that its complaint asked for "contribution from Phillips pursuant to 42 U.S.C. § 9613(f) if [Honeywell] is found liable to Lone Star for response costs...." (emphasis added). Honeywell claims that at the time its action against Phillips was severed, Lone Star's time to appeal the district court's judgment against it had already passed and there was, therefore, a final, unappealable judgment. Thus, Honeywell reasons, the CERCLA contribution claim dissolved by its own terms when Honeywell prevailed in the Lone Star action.

We reject this argument. Even assuming that a final, unappealable judgment in favor of Honeywell against Lone Star would have defeated subject matter jurisdiction, such a judgment did not exist at the time the district court severed Honeywell's action against Phillips. Honeywell's...