Jones-Hamilton Co. v. Beazer Materials & Services, Inc.

• Decision Date: 24 August 1992
• Docket Number: JONES-HAMILTON,No. 91-15054,91-15054
• Parties: CO., a California Corporation, Plaintiff-Appellant, v. BEAZER MATERIALS & SERVICES, INC.; Kop-Coat, Inc., a Pennsylvania Corporation; Koppers Company, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 688

973 F.2d 688

61 USLW 2159

JONES-HAMILTON CO., a California Corporation, Plaintiff-Appellant, v. BEAZER MATERIALS & SERVICES, INC.; Kop-Coat, Inc., a

Pennsylvania Corporation; Koppers Company, Inc.,

Defendants-Appellees.

No. 91-15054.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 16, 1992.

Decided March 12, 1992.

As Amended on Denial of Rehearing

and Rehearing En Banc

Aug. 24, 1992.

John L. Boos, Pettit & Martin, San Francisco, Cal., for plaintiff-appellant.

James L. Meeder, Beveridge & Diamond, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN, FLETCHER, and BRUNETTI, Circuit Judges.

ORDER

The opinion filed on March 12, 1992, is amended as follows:

Slip opinion at 2528: In Part II.A., at the end of the first full paragraph, add the following footnote:

Beazer objects that Abend is at odds with prior decisions in this circuit regarding the appealability of summary judgment denials. We discern no intracircuit conflict.

In exercising jurisdiction over the partial denial of plaintiff's and defendants' summary judgment motions in Abend, we held that we may review a denial of summary judgment where it is accompanied by a final order disposing of all issues before the district court and where the record has been sufficiently developed to support meaningful review of the denied motion. See Abend v. MCA, Inc., 863 F.2d 1465, 1468-72, 1482 n. 20 (9th Cir.1988).

This holding does not conflict with our prior statements of the general rule that, ordinarily, a denial of summary judgment is interlocutory and hence not appealable. See, e.g., Datagate, Inc. v. Hewlett-Packard Co., 941 F.2d 864, 868 n. 1 (9th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1667, 118 L.Ed.2d 388 (1992); White v. Pierce County, 797 F.2d 812, 814 (9th Cir.1986). Abend merely applied a longstanding exception to the general rule, based on the familiar principle that interlocutory orders merge into final judgments. See High Tech Gays v. Defense Indus. Sec. Clearance Office, 895 F.2d 563, 574 n. 11 (9th Cir.1990) ("[B]ecause we have jurisdiction to decide [defendant's] appeal from the granting of plaintiffs' motion for summary judgment, we exercise our discretion to decide their claim of error in the denial of their summary judgment motion as well."); Moran v. Aetna Life Ins. Co., 872 F.2d 296, 301 (9th Cir.1989) ("The denial of a summary judgment order is appealable after the entry of a final judgment."); see also Peyton v. Reynolds Assocs., 955 F.2d 247, 253 (4th Cir.1992); American Motorists Ins. Co. v. United Furnace Co., 876 F.2d 293, 302 (2d Cir.1989); Barhold v. Rodriguez, 863 F.2d 233, 237 (2d Cir.1988); Placid Oil Co. v. Ashland Oil, Inc., 792 F.2d 1127, 1133-34 (Temp.Emer.Ct.App.1986); Morgan Guaranty Trust Co. v. Martin, 466 F.2d 593, 599-600 & n. 9 (7th Cir.1972) (per curiam). See generally 15B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3914.28, at 213 (2d ed. 1991) ("The better cases recognize that on appeal from a final judgment an earlier denial of summary judgment can be reviewed if it becomes relevant upon disposition of other issues and if the record is sufficiently developed to support intelligent review.").

The court is, of course, under no obligation to exercise its discretion in every instance, and we have declined to review summary judgment denials where, for example, the final order in the case was a dismissal for lack of subject matter jurisdiction. See Burke v. Ernest W. Hahn, Inc., 592 F.2d 542, 546 (9th Cir.1979); Simons v. United States, 497 F.2d 1046, 1048-50 (9th Cir.1974); cf. Bealmer v. Texaco, Inc., 427 F.2d 885, 887 (9th Cir.) (per curiam) (refusing to exercise jurisdiction over plaintiff's appeal of summary judgment denial after holding that district court lacked jurisdiction to consider issues that led it to grant defendant's summary judgment motion), cert. denied, 400 U.S. 926, 91 S.Ct. 187, 27 L.Ed.2d 185 (1970).

With the above amendment, the panel has voted to deny the petition for rehearing and to reject the suggestion for rehearing en banc.

The full court has been advised of the suggestion for en banc rehearing, and no judge of the court has requested a vote on the suggestion for rehearing en banc.

The petition for rehearing is DENIED and the suggestion for rehearing en banc is REJECTED.

FLETCHER, Circuit Judge:

Jones-Hamilton Co. ("J-H") appeals the district court's grant of summary judgment in favor of Beazer Materials & Services, Inc. ("Beazer") and denial of J-H's own motion for partial summary judgment. The district court found that J-H was obligated to indemnify Beazer for any liability Beazer incurred from environmental cleanup orders issued to J-H, and that this obligation barred J-H's action against Beazer for contribution under CERCLA.

We affirm in part and reverse in part.

BACKGROUND

In 1970, J-H, a contract chemical formulator, entered into a formulation agreement (the "Agreement") with Wood Treating Chemicals Co. ("WTCC"). The Agreement was to continue in force until terminated by written notice; it was ultimately terminated in 1984. In 1971, WTCC was sold to Koppers Company; Beazer has assumed the duties and liabilities of Koppers under the Agreement and has been assigned all rights thereunder. Throughout this opinion, WTCC or its successors will be referred to as "Beazer." ¹

Under the Agreement, J-H would formulate raw materials provided by Beazer into wood preservation compounds. Beazer retained ownership of the materials it provided. The Agreement contained two clauses specifically relevant to this appeal. First, with regard to chemicals used in formulation, it provided: "A tolerance of up to two percent by volume shall be allowed for spillage or shrinkage in any calendar month...." With regard to indemnification, it provided: "J-H agrees to comply with all applicable Federal, State and Local laws, ordinances, codes, rules and regulations and to indemnify WTCC against all losses, damages and costs resulting from any failure of J-H or any of its employees, agents or contractors to do so."

J-H carried out formulation activities under the Agreement at its facility in Newark, California. Dr. Stutz, a consultant employed by Beazer, was on site at the facility and was present during the formulation process, although his role in the process is a matter of dispute.

Among the raw materials Beazer provided to J-H were pentachlorophenol and tetrachlorophenol, substances classified as "hazardous substances" under CERCLA. In 1970, J-H had received a waste discharge permit from the California Regional Water Quality Control Board ("RWQCB"); the permit prohibited J-H from discharging chemicals other than certain listed substances into its waste water containment ponds. However, prohibited substances, apparently including pentachlorophenol, were nonetheless discharged into the ponds.

In 1985, after contamination had been discovered at the Newark site, the RWQCB issued cleanup and abatement orders to J-H. J-H has spent over $2,000,000 to comply with the orders.

J-H filed suit against Beazer under CERCLA seeking contribution from Beazer for cleanup costs. See 42 U.S.C. § 9613(f). J-H also sought a declaratory judgment as to Beazer's potential liability under CERCLA. Beazer counterclaimed, seeking indemnity under the Agreement. Both parties filed motions for summary judgment. The district court granted summary judgment in favor of Beazer as to J-H's duty to indemnify Beazer, and held that the indemnification clause barred J-H's claim for contribution. It also denied J-H's motion for partial summary judgment on the issue of whether Beazer had "arranged for the disposal" of toxic substances. In addition, the district court awarded attorneys' fees to Beazer.

JURISDICTION; STANDARD OF REVIEW

The district court had jurisdiction under 42 U.S.C. § 9613(b) and 28 U.S.C. § 1331; this court has jurisdiction under 28 U.S.C. § 1291.

A grant of summary judgment is reviewed de novo. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 629 (9th Cir.1987). "A grant of summary judgment is reviewed de novo to determine whether, viewing the evidence in a light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court applied the relevant substantive law." Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

A federal court applies state law as it believes the highest court of the state would apply it. Insurance Co. of N. Amer. v. Howard, 679 F.2d 147, 149 (9th Cir.1982).

DISCUSSION

I. Did the District Court Err in Granting Summary Judgment in Favor of Beazer?

A. Was the Indemnity Clause against Public Policy under CERCLA?

CERCLA's provision regarding indemnity clauses is truly murky:

No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section.

42 U.S.C. § 9607(e)(1). As the district court noted in its opinion, courts around the country have reached different interpretations of this language. This court has held that enforcement of indemnification clauses does not frustrate public policy as expressed in CERCLA. Mardan Corp. v. C.G.C. Music, Ltd., 804 F.2d 1454, 1459 (9th Cir.1986). In Mardan, we reasoned that CERCLA policy would not be frustrated because all responsible parties would remain fully liable to the government, although they would be free to enter into private contractual arrangements "essentially tangential to the enforcement of...