Olin Corp. v. Consolidated Aluminum Corp.

• Citation: 807 F. Supp. 1133
• Decision Date: 01 December 1992
• Docket Number: No. 87 Civ. 7377 (DNE).,87 Civ. 7377 (DNE).
• Parties: OLIN CORPORATION, Plaintiff, v. CONSOLIDATED ALUMINUM CORPORATION and Swiss Aluminum, Ltd., Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

807 F. Supp. 1133

OLIN CORPORATION, Plaintiff, v. CONSOLIDATED ALUMINUM CORPORATION and Swiss Aluminum, Ltd., Defendants.

No. 87 Civ. 7377 (DNE).

United States District Court, S.D. New York.

December 1, 1992.

COPYRIGHT MATERIAL OMITTED

James J. Harrington and Associates, New York City (James J. Harrington, Stephen A. Dvorkin, of counsel), for plaintiff.

Lewis, Rice & Fingersh, St. Louis, MO (John M. Hessel, Joseph E. Martineau, John D. Husmann, of counsel), for defendants.

OPINION & ORDER

EDELSTEIN, District Judge:

On October 15, 1987, plaintiff Olin Corporation ("Olin") filed this declaratory judgment action. This action is currently before the Court on cross motions for partial summary judgment. Olin seeks partial summary judgment that defendants, Consolidated Aluminum Corporation and its corporate parent, Swiss Aluminum, Limited (collectively "Conalco"), have breached their contractual obligation to indemnify Olin for environmental liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. §§ 9601 et seq. (1989) (as amended). Conalco moves for partial summary judgment that Olin is liable to Conalco for initial investigatory and monitoring costs of an environmental cleanup, pursuant to Section 107(a) of CERCLA, 42 U.S.C. § 9607(a).

BACKGROUND

From 1955 until December 1973, Olin operated an aluminum fabrication and rolling facility located in Hannibal, Ohio (the "Hannibal Site"). During this period, Olin maintained processing equipment that utilized hydraulic fluid ("Pydraul") manufactured by Monsanto Industrial Chemicals Company ("Monsanto"). This hydraulic fluid contained polychlorinated biphenyls ("PCBs"). PCBs are a hazardous substance as defined by CERCLA. See 42 U.S.C. § 9601(14); 33 U.S.C. § 1321(b)(2)(A); 40 C.F.R. § 116.4.

Until 1972, Olin disposed of Pydraul and certain other industrial by-products by depositing them in an impoundment pool located on the Hannibal Site. As the impoundment pool filled, its contents were set afire. That which remained after burning was drained into a swale. During the period in which wastes were disposed of in this manner, Olin was unaware that Pydraul contained PCBs and Olin had no knowledge of the toxicity of PCBs.

Shortly before it discontinued this practice in 1972, Olin received a letter from Monsanto advising it, inter alia, that PCBs were present in Pydraul and that prophylactic measures, in the form of high-heat incineration, were necessary to safely dispose of Pydraul. In response, Olin constructed a liquid waste incinerator to dispose of Pydraul and other hazardous liquids. Olin, however, took no action to eliminate contaminants from the pool or from adjacent or subjacent soil.

Late in 1972, Olin decided to divest all assets and liabilities related to the aluminum business. To this end, during 1973 Olin began negotiations with Conalco for the sale of Olin's aluminum operations, including the Hannibal Site. As a result of these negotiations, Olin and Conalco signed a purchase agreement, dated September 21, 1973 (the "Purchase Agreement").

Each of the several agreements executed to effectuate the transaction between Olin and Conalco contains broad language that purports to indemnify Olin for all post-divestment liabilities associated with Olin's ownership of the Hannibal Site and the aluminum operations. None of these agreements, however, specifically addresses allocation of environmental liabilities between Olin and Conalco. Section 4.01(c)(iv) of the Purchase Agreement provides in relevant part:

Conalco will ... deliver to Olin an instrument or instruments ... whereby Conalco shall assume and agree to be responsible for and to pay, perform, discharge and indemnify Olin against, all liabilities, obligations and indebtedness of Olin ... as they exist on the Closing Date or arise thereafter with respect to actions or failures to act occurring prior to the Closing Date.

When the transaction contemplated in the Purchase Agreement closed on January 1, 1974, Olin and Conalco executed an "Assignment and Assumption Agreement" (the "Assumption Agreement"). The Assumption Agreement provides in relevant part:

Conalco hereby assumes and agrees to be responsible for and to pay, perform, discharge and indemnify Olin against all liabilities (absolute or contingent) related to, inter alia, the Hannibal Site ... as they exist on the effective date or arise thereafter....

Finally, on May 10, 1974, Olin and Conalco entered into an agreement (the "Release") pursuant to which Conalco released and settled claims against Olin in return for $3,700,000. The Release provides in relevant part:

In consideration of the payment on this date by Olin to Conalco of $3,700,000 ... Conalco hereby releases and settles all claims of any nature which Conalco now has or hereafter could have against Olin ... whether or not previously asserted, under or arising out of the Purchase Agreement ... or the transactions contemplated thereby.

From January 1, 1974 through the present, Conalco has owned and operated the aluminum facility located at the Hannibal Site. In 1986, after inspecting the Hannibal Site, the Ohio Environmental Protection Agency ("Ohio EPA") determined that the pool, as well as the soil adjacent and subjacent to the pool, was contaminated with PCBs. The Ohio EPA ordered remediation of this hazard. Conalco complied with the Ohio EPA order and incurred substantial clean-up costs.¹ Because Conalco believes that Olin's disposal practices created the PCB contamination, Conalco sought voluntary contribution from Olin to cover remediation costs. Olin refused to contribute to the clean-up and filed the instant declaratory judgment action seeking this Court's determination that it is immune from liability under the express terms of the Purchase Agreement, the Assumption Agreement, and the Release (collectively the "Hannibal Sale Documents").

DISCUSSION

On December 11, 1980, Congress enacted CERCLA to establish and fund enforcement mechanisms for the clean-up of property contaminated by environmentally hazardous chemicals and industrial waste.² CERCLA is a broad remedial measure that seeks to protect the public health by requiring prompt remediation of improperly managed hazardous waste sites and by encouraging voluntary remediation of such sites. Essentially a strict liability statute, CERCLA casts a broad liability net. A person³ may be held fully liable for clean-up costs under Section 107 of CERCLA even if that person neither caused nor contributed to the release of hazardous waste at the site. Section 107 of CERCLA imposes strict liability for the clean-up of hazardous waste on four categories of potentially responsible parties ("PRPs"): The current owner or operator of a hazardous waste site; the owner or operator at the time the waste was deposited at the site; generators of waste sent to the site; and persons that transported waste to the site.

The instant litigation focuses on Section 107(e)(1) of CERCLA, which specifically deals with contractual allocation of CERCLA liability. The House Report analyzing CERCLA explains that the purpose of Section 107 of the Act is "to provide a mechanism for prompt recovery of monies expended for the costs of remedial actions ... from persons responsible therefore and to induce such potentially liable persons to pursue appropriate environmental response actions voluntarily." H.R.Rep. No. 1016, 96th Cong., 2d Sess., pt. 1, at 33 (1980), reprinted in 1980 U.S.C.C.A.N. 6119, 6136. Section 107(e)(1) provides:

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).

Emphasizing the first sentence of Section 107(e)(1), Conalco contends that CERCLA prohibits PRPs from contractually relieving themselves of liability. See Memorandum of Consolidated Aluminum Corporation In Support of Its Motion For Partial Summary Judgment, ("Conalco's Memorandum In Support") at 15. Conalco recognizes, however, that a majority of courts have interpreted this Section as allowing private parties who are themselves PRPs to contractually transfer CERCLA liability. See id. Conalco thus argues in the alternative that, while parties may contractually allocate CERCLA liability, to be effective, such agreements must include a clear, express and unequivocal waiver of CERCLA rights. See id. at 16. Conalco contends that the indemnification agreements to which it is a party do not meet this threshold requirement.

Olin, on the other hand, contends that Conalco may not seek contribution for response costs related to any wastes on the Hannibal Site because Conalco agreed to indemnify Olin for environmental liability. Memorandum In Support of Olin Corporation's Motion For Partial Summary Judgment, and In Opposition to Consolidated Aluminum Corporation's Motion For Partial Summary Judgment, ("Memorandum In Support of Olin's Motion") at 23. Citing Purolator Products Corp. v. Allied-Signal, Inc., 772 F.Supp. 124, 130 (W.D.N.Y.1991), Olin argues that a majority of courts interpret Section 107 to allow private parties to enter into valid and enforceable agreements to allocate CERCLA liability. Olin urges this Court to adopt the Purolator court's reasoning that

CERCLA does not prohibit private parties from entering into indemnity agreements. Such agreements do not absolve the parties of liability to the Government. They may, however, form the basis of an action to obtain indemnification, and they may also be asserted as a defense in an action between the parties to the agreement. ... Thus, if a

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