Norfolk Southern Corp. v. Chevron, U.S.A., Inc.

• Citation: 371 F.3d 1285
• Decision Date: 03 June 2004
• Docket Number: No. 03-14473.,03-14473.
• Parties: NORFOLK SOUTHERN CORPORATION, Georgia Southern and Florida Railway Company, Plaintiffs-Appellants, v. CHEVRON, U.S.A., INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

371 F.3d 1285

NORFOLK SOUTHERN CORPORATION, Georgia Southern and Florida Railway Company, Plaintiffs-Appellants, v. CHEVRON, U.S.A., INC., Defendant-Appellee.

No. 03-14473.

United States Court of Appeals, Eleventh Circuit.

June 3, 2004.

COPYRIGHT MATERIAL OMITTED

Brett Alexander Spain, Gary Alvin Bryant, Norfolk, VA, James C. Rinaman, Jr., Marks, Gray, P.A., Jacksonville, FL, for Plaintiffs-Appellants.

John F. MacLennan, Smith, Hulsey & Busey, Tim E. Sleeth, Jacksonville, FL, Stephen Jerome Darmody, Shook, Hardy & Bacon, John M. Barkett, Nadine Vail Gardner, Coll, Davidson, Smith, Salter & Barkett, P.A., Miami, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT and HILL, Circuit Judges, and MILLS^*, District Judge.

TJOFLAT, Circuit Judge:

The St. Johns River Terminal Company leased a tract of land (the "Leased Site") in Jacksonville, Florida, to the Gulf Oil Corporation from 1906 to 1961. Gulf constructed above-ground tanks on the land to store oil and fuel. In 1977, the United States Coast Guard informed St. Johns that oil was leaking from the Leased Site onto the surface of the nearby Long Branch Creek and required St. Johns to remediate the leakage at its own expense. St. Johns sued Gulf for reimbursement for the cost of the cleanup.

Prior to trial, the parties settled. Gulf agreed to pay St. Johns $163,000 to help cover the cost of the containment efforts, and St. Johns executed a release, stating:

St. Johns River Termianl [sic] Company does hereby release and forever discharge said Gulf Oil Company, its successors and assigns, from any and all actions, causes of action, claims and demands for, upon or by reason of any damage, loss or injury, which heretofore has been or which hereafter may be sustained by St. Johns River Terminal Company arising out of any contamination by oil of the Talleyrand Terminal property in Jacksonville, Florida, which is alleged to have occurred during Gulf Oil Corporation's use and occupancy of said property and all those matters alleged in [St. Johns's 1977 lawsuit].

This release extends and applies to, and also covers and includes, all unknown, unforeseen, unanticipated and unsuspected injuries, damages, loss and liability, and the consequences thereof, arising out of said alleged oil contamination, as well as those now disclosed and known to exist.

We shall refer to this as the "Settlement Agreement." Once the parties entered into this Agreement, the district court entered a judgment of dismissal with prejudice (the "1977 Dismissal") based upon the parties' joint stipulation, stating, "It is hereby agreed by and between all parties that the above entitled cause has been compromised and settled and that this cause is dismissed with prejudice under Rule 41 of the Federal Rules of Civil Procedure...."

The plaintiffs, Norfolk Southern Corporation and Georgia Southern and Florida Railway Company (collectively, "Norfolk"), are the successors-in-interest to St. Johns. The defendant, Chevron, is the successor-in-interest to Gulf. In 1999, Norfolk discovered that contamination from oil storage tanks on the Leased Site had leaked onto an adjacent salt marsh ("the Marsh"). The contaminants are known as "tank bottoms" because they formed from the sludge that accumulated at the bottom of the storage tanks.

Norfolk sued Chevron under both the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675, and Florida common law, seeking reimbursement of expenses that it has incurred and will incur in cleaning up the leakage. The district court granted Chevron summary judgment, concluding that Norfolk's claims were barred by the res judicata effect of the 1977 Dismissal. It held that a dismissal entered pursuant to a settlement agreement is presumed to have the same res judicata effect as any other judgment, although the scope of this preclusive effect may be limited by the agreement into which the parties entered.

The district court explained that a claim that would typically be barred under res judicata may be preserved only if a party makes a "clear expression" of a "reservation of right" to bring suit on the basis of that claim in the future. Because the Settlement Agreement did not expressly allow St. Johns (Norfolk's predecessor-in-interest) to bring any future claims regarding contamination of the Leased Site, the court held that the Agreement did not curtail the scope of traditional res judicata principles. Applying those principles, the court held that Norfolk's current claim was precluded and dismissed the case. Norfolk appeals, arguing that it should be entitled to proceed with its lawsuit.

Because res judicata determinations are pure questions of law, we review them de novo. Israel Discount Bank Ltd. v. Entin, 951 F.2d 311, 314 (11th Cir.1992). We disagree with the district court's analysis because, although the 1977 dismissal has a res judicata effect, that effect is controlled by the Settlement Agreement into which the parties entered. In the absence of a settlement agreement, of course, a judgment of dismissal pursuant to Rule 41 should be given the same res judicata effect as any other judgment. See Astron Indus. Assoc., Inc. v. Chrysler Motors Corp., 405 F.2d 958, 960 (5th Cir.1968) ("[A] stipulation of dismissal with prejudice ... normally constitutes a final judgment on the merits which bars a later suit on the same cause of action.").¹ Where the parties consent to such a dismissal based on a settlement agreement, however, the principles of res judicata apply (in a somewhat modified form) to the matters specified in the settlement agreement, rather than the original complaint.

A judgment dismissing an action with prejudice based upon the parties' stipulation, unlike a judgment imposed at the end of an adversarial proceeding, receives its legitimating force from the fact that the parties consented to it. In the closely related context of consent decrees, we have recognized the importance of confining their scope to matters upon which the parties have consented. United States v. Miami, 664 F.2d 435, 440 (5th Cir.1981) (en banc) (Rubin, J., concurring) ("Even in a two-party litigation the parties may agree on as much as they can, ask the court to incorporate that agreement into a consent decree, and call upon the court to decide the issues they cannot resolve."). The expressed intent of the parties is also the determining factor in whether a consent-based judgment is given collateral estoppel effect. See Balbirer v. Austin, 790 F.2d 1524, 1528 (11th Cir.1986) ("[A] consent judgment cannot constitute collateral estoppel unless the party pleading collateral estoppel proves from the record of the prior case or through extrinsic evidence that the parties intended the consent judgment to operate as a final adjudication of a particular issue.").

In determining the res judicata effect of an order of dismissal based upon a settlement agreement, we should also attempt to effectuate the parties' intent. The best evidence of that intent is, of course, the settlement agreement itself. Consequently, the scope of the preclusive effect of the 1977 Dismissal should not be determined by the claims specified in the original complaint, but instead by the terms of the Settlement Agreement, as interpreted according to traditional principles of contract law. See W.J. Perryman & Co. v. Penn. Mut. Fire Ins. Co., 324 F.2d 791, 793 (5th Cir.1963) ("The compromise, settlement and release are as conclusive as a judgment would have been if the claim had been litigated rather than compromised and settled. The dismissal with prejudice adds res judicata to the release as barring recovery by the appellant." (citation omitted; emphasis added)); see also Barber v. Int'l Brotherhood of Boilermakers, 778 F.2d 750, 758 (11th Cir.1985) ("[W]e respect the parties' clear contractual intent ... to give the release preclusive effect....").

It might be argued that this way of applying res judicata to dismissals predicated upon settlement agreements does not adequately respect the fact that such a dismissal is an actual judgment. We believe it does, however, for two reasons. First, res judicata is an affirmative defense which must be pled, and may be waived, by the defendant. Louisville & N.R. Co. v. M/V Bayou Lacombe, 597 F.2d 469, 471 n. 1 (5th Cir.1979) ("Res judicata is an affirmative defense. That defense was waived when the defendant failed to raise it below."). When a defendant signs a settlement agreement stating that only some claims will be precluded in the future, it is as if the defendant is preemptively waiving any potential res judicata defense he would have had as a result of the dismissal to which the parties consent under the agreement. Thus, we...