In re Combustion, Inc.

• Decision Date: 15 January 1997
• Docket Number: No. 94 MDL 4000.,94 MDL 4000.
• Parties: In re COMBUSTION, INC.
• Court: U.S. District Court — Western District of Louisiana

Page 1056

960 F.Supp. 1056

In re COMBUSTION, INC.

No. 94 MDL 4000.

United States District Court, W.D. Louisiana. Lafayette-Opelousas Division.

January 15, 1997.

MEMORANDUM AND ORDER

HAIK, District Judge.

Pending before the Court is Certain Insurers' Motion for Summary Judgment on the issue of what law or laws govern Phases II and IV of this litigation, the resolution of dispositive motions based on questions of law and the resolution of issues of contract coverage, respectively. Attachment A is a list of the insurers who joined this motion. Also before the Court are additional motions filed by most of these insurers adopting the Brief of Certain Insurers and setting out the particular facts of each insurer's contract. Attachment B is a chart of each insurer, its corresponding insured, the action raised in these motions and the law urged by that insurer.

At stake for these parties, ultimately, is insurance coverage for contracts spanning just over 30 years for tort and CERCLA damages associated with a Superfund site in Livingston Parish. Insurers urge no less than eight states' laws in their motion.

The majority of these insurers are responding to claims filed by the Plaintiffs' Class pursuant to the Louisiana Direct Action Statute, La. R.S. 22:655. Four insurers urge their motions solely with respect to contract disputes with each of their insureds. Attachment C. All of the insurers of Avondale Industries, and most of the insurers of Port Allen Marine Services, Inc. and Younger Brothers, Inc. face claims by the Plaintiffs and by their insured's on the same contract. Attachment D.

The Plaintiffs have filed an omnibus Motion urging the Court to find that Louisiana law governs all of these contract disputes.

At oral argument on October 18, 1996, this Court ruled from the bench that the circumstances of this case and the public policy of this state overwhelmingly supported the conclusion that Louisiana law applies to all actions brought pursuant the Direct Action Statute. This finding is supported by reasons below.

In addition, because Louisiana is the contaminated and contaminating state, the residence of the persons injured, the location where the injuries occurred and of the damaged property, the domicile or habitual residence of the injuring parties — the named insureds — this Court now finds that the State of Louisiana is the only state having a genuine interest in these contract disputes, a fortiori, Louisiana is the state whose policies would be most severely impaired if its laws were not used to interpret the contracts at issue. Relevant to this determination with respect to the contracts being sued on by both the Plaintiffs and the insureds is this Court's reluctance to interpret a single contract under two states' laws, particularly when the outcome would yield conflicting results.

Thus, this Court finds that Louisiana law governs the direct action and contract disputes in this litigation, and hereby GRANTS the Motion by the Plaintiffs and DENIES the Motions of the Insurers who urged the laws of other states.

This Court will first address the choice of law for actions brought by the Plaintiffs solely under the Louisiana Direct Action Statute. Then the Court will discuss the contract disputes between the insurers and their insureds.

I.

In the early 1960's, Earl Dubose began the operation of what he termed an oil recycling and fuel oil resale business on property he owned in Livingston Parish, Louisiana. Residential properties surrounded the waste site. Dubose collected waste oil from his customers and processed the oil in pits he dug that were lined naturally with clay but no additional synthetic material. Early processing consisted of allowing the waste oil to separate on its own from other waste materials much like oil and vinegar salad dressing left standing on a shelf. Later Dubose found that heating the waste oil accelerated the separation process, and that the desired characteristic for fuel oil of flammability increased by adding chemicals to the waste oil such a toluene. Dubose stored the final product for resale as recycled fuel oil, an enterprising business particularly in light of the Arab oil embargo in the early 1970s. However, during the Dubose years, fires erupted at the facility, severe rains caused extensive flooding of the ponds into bordering canals, and several large oil spills occurred.

In 1977, Dubose sold the business to H. Arthur Gammons. Mr. Gammons incorporated the business under the name "Combustion Inc." and continued a similar but slightly more sophisticated operation until 1982 when he closed Combustion. Inc. because of financial and regulatory problems.

In 1985, the Louisiana Department of Environmental Quality (DEQ) became involved in this matter, as did the United States Environmental Protection Agency (EPA). The Combustion, Inc. site was listed on the National Priorities List as a Superfund site. The DEQ issued letters to "potentially responsible parties" (PRPs) it determined had disposed of used oil or chemicals at the site. In response to action by the DEQ, a group of approximately 23 PRPs formed a committee to clean up the site. To date remediation expenses exceed $17 million and could escalate tremendously if current testing reveals ground water contamination.

Over 10,000 individuals have completed Proof of Claim forms asserting both personal injury and property damage as a result of the operation of the waste site. Plaintiffs allege participation by 600 — 800 "generator" and "transporter" defendants, who caused or contributed to or delivered waste oil or toxic chemicals to the site. The allegations of harm resulting from exposure to toxic chemicals during the recycling process and as a result of the fires, floods and spills vary from fear, fright and anxiety regarding the possibility of future disease to wrongful death from disease caused by the exposure. Property damage claims run the gambit from contamination to diminution in value because of proximity to the site.

II

This matter was initiated in 1986 with seventeen suits being filed in the Twenty-first Judicial District Court in Livingston Parish, Louisiana. Each of those state court suits sought to recover for alleged personal injury and property damage resulting from the contamination at the Dubose-Combustion site. One of these suits was filed on behalf of a class of persons who had claims related to the site. Defendants removed the suits twice to federal court, but remand was ordered in both instances.

Pursuant to an order of the Louisiana court, plaintiffs in all seventeen suits combined their allegations into one Master Amending and Supplemental Petition asserting claims on behalf of individuals as well as a class action on behalf of all persons in Livingston Parish allegedly injured from various types of exposure to toxic chemicals at the site. The class was certified by the state court and affirmed on appeal with the exception of the class definition, which was approved on the second appeal as follows:

All persons or entities who or which own real or personal property and/or live and/or operate places of business and/or work and/or attend school in Livingston Parish, Louisiana, and/or who have been so situated during the time since the early 1960's, and who or which claim to have sustained damages as a result of the discharge, release or leakage of toxic substances from the premises now or formerly known as Combustion, Inc., and/or Earl G. Dubose, located at Dubois Lane and Milton Road and Burgess Road in Livingston Parish, Louisiana.

Thereafter, defendant McDermott, Inc. filed a Third Party Demand against American Cyanamid in each of the seventeen pending suits for contribution or indemnification for any amount which McDermott might be held liable to plaintiffs and for cost recovery action under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601, et seq. The matter was then removed by American Cyanamid to the United States District Court for the Middle District Court of Louisiana pursuant to 28 U.S.C. § 1441(c) on the basis of the Court's exclusive jurisdiction over all claims brought under CERCLA.

Simultaneously, McDermott filed third party claims against approximately two hundred potential "generators" and "transporters" and brought claims against the United States Government. In addition, McDermott filed suits in United States District Courts in Alabama, Florida and Mississippi under CERCLA with supplemental tort claims. McDermott then invoked a petition for Multi-district certification permitting all suits to be consolidated for purposes of pre-trial proceedings.

In July of 1994, and by agreement of all parties, Combustion was transferred to the Western District of Louisiana. Shortly thereafter remand was denied, and in July of 1995, this Court adopted the previous class certification.

In 1995 and 1996, the Court allowed Plaintiffs' class to assert a direct action pursuant to La. R.S. 22:655 et seq. against all insurers of the main and third party defendants. In addition, the Court allowed all defendants and third party defendants to file cross-claims against their insurers. According to the Court's Case Management and Scheduling Orders, Phase I of Combustion was the CERCLA trial, scheduled to September 3, 1996. Phase II consists of dispositive motions primarily on insurance contract defenses argued throughout the fall of 1996 and 1997. Phase III is the tort trial and Phase IV will wrap up outstanding insurance contract disputes based on the factual determination made in Phase III.

These choice of law motions were argued as part of Phase II of this litigation.

III

This Court has exclusive jurisdiction over all claims brought under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq., and discretionary power pursuant to 28 U.S.C. § 1367(a) to exercise jurisdiction over...