Olin Corp. v. Consolidated Aluminum Corp.

• Decision Date: 15 September 1993
• Docket Number: No. 1431,D,1431
• Citation: 5 F.3d 10
• Parties: , 24 Envtl. L. Rep. 20,021 OLIN CORPORATION, Plaintiff-Counter-Claim-Defendant-Appellee, v. CONSOLIDATED ALUMINUM CORPORATION, Defendant-Counter-Claimant-Appellant, Swiss Aluminum, Ltd., Defendant. ocket 93-7021.
• Court: U.S. Court of Appeals — Second Circuit

Page 10

5 F.3d 10

62 USLW 2209, 24 Envtl. L. Rep. 20,021

OLIN CORPORATION, Plaintiff-Counter-Claim-Defendant-Appellee, v. CONSOLIDATED ALUMINUM CORPORATION Defendant-Counter-Claimant-Appellant Swiss Aluminum, Ltd., Defendant.

No. 1431, Docket 93-7021.

United States Court of Appeals Second Circuit.

Argued May 5, 1993.

Decided Sept. 15, 1993.

John M. Hessel, St. Louis, MO (Joseph E. Martineau, Neal F. Perryman, Lewis, Rice & Fingersh, of counsel), for appellant.

James J. Harrington, New York City (Barry T. Bassis, Michael L. Gioia, Newman & Harrington, New York City, E. McIntosh Cover, Olin Corp., Stamford, CT, of counsel), for appellee.

Before: MESKILL, PIERCE and WALKER, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal from an amended judgment entered on December 17, 1992 in the United States District Court for the Southern District of New York, Edelstein, J. The district court granted Olin Corp.'s (Olin) motion for partial summary judgment, denied Consolidated Aluminum Corp.'s (Conalco) motion for partial summary judgment and dismissed with prejudice Conalco's first claim for relief in its counterclaim which was based on the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sec. 9601 et seq. (CERCLA). ¹ The decision is reported at 807 F.Supp. 1133 (S.D.N.Y.1992). We affirm in part, vacate in part and remand for further proceedings.

At issue in this appeal is the proper interpretation of indemnity and release provisions contained in certain agreements entered into by Conalco and Olin. Conalco contends that these contractual provisions, which predated the enactment of CERCLA, are insufficient to relieve Olin of its liability under CERCLA for its pre-CERCLA activities at certain sites because the provisions contain no clear, unequivocal and express transfer of CERCLA liability. We hold that as to the site in Hannibal, Ohio these provisions are broad enough to require Conalco to indemnify Olin for CERCLA liability. However, as to environmental claims that might arise against Olin in the future based on its activities at sites owned by third parties (third-party sites), the district court was not presented with a case or controversy. Therefore, we remand this matter to the district court to amend the amended judgment to indicate that the claims in Conalco's CERCLA counterclaim as they pertain to third-party sites are dismissed without prejudice. On remand, the district court also should make findings and rule on Conalco's CERCLA counterclaim as to the Pennsylvania site.

BACKGROUND

The facts are fully set forth in Judge Edelstein's opinion and order dated December 1, 1992. Olin Corp. v. Consolidated Aluminum Corp., 807 F.Supp. 1133, 1135-36 (S.D.N.Y.1992). We summarize only those facts necessary for an understanding of our disposition of the issues in this appeal.

Olin operated an aluminum plant in Ohio (the Hannibal site) from 1955 until December 1973. As part of its aluminum operations, Olin maintained processing equipment utilizing hydraulic fluid (Pydraul) manufactured by Monsanto Industrial Chemicals Company (Monsanto). The Pydraul contained polychlorinated biphenyls (PCBs) which CERCLA defines as a hazardous substance. See 42 U.S.C. Sec. 9601(14)(A); 33 U.S.C. Sec. 1321(b)(2)(A); 40 C.F.R. Sec. 116.4 (1992).

The district court found that until 1972 Olin was unaware that Pydraul contained PCBs and was toxic. Olin disposed of the Pydraul and many of its industrial byproducts by depositing them in an impoundment pool on the Hannibal site. Olin periodically set the contents of the pool afire and then drained what remained into a swale.

In 1972, Monsanto sent Olin a letter advising that PCBs were present in Pydraul and that certain prophylactic measures, such as high-heat incineration, were necessary to assure safe disposal. Olin responded by discontinuing use of the impoundment pool; it constructed a liquid waste incinerator to dispose properly of its Pydraul and other hazardous liquids. The district court found, however, that Olin took no action to eliminate contaminants from the impoundment pool or to clean up the surrounding soil.

After deciding to divest itself of all assets and liabilities of its aluminum business, Olin, in 1973, engaged in successful negotiations with Conalco for the sale of Olin's aluminum operations, including the Hannibal site. The parties signed several agreements to effectuate the sale, each of which contained very broad language which required Conalco to indemnify Olin for all post-divestment liabilities associated with Olin's ownership of the Hannibal site and the aluminum operations. However, none of these agreements specifically addressed allocation of environmental liabilities between the parties.

The Purchase Agreement, dated September 21, 1973, provides in pertinent 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 related to the Aluminum Assets or the Aluminum Affiliates or the Aluminum Subsidiaries as they exist on the Closing Date or arise thereafter with respect to actions or failures to act occurring prior to the Closing Date.

At the closing on January 1, 1974, the parties executed the Assignment and Assumption Agreement (Assumption Agreement) which provides in pertinent part:

Conalco hereby assumes and agrees to be responsible for and to pay, perform, discharge and indemnify Olin against, all liabilities (absolute or contingent), obligations On May 10, 1974, the parties entered into an agreement (Release) which provides in pertinent part:

and indebtedness of Olin related to the Aluminum Assets or the Aluminum Affiliates or the Aluminum Subsidiaries as they exist on the Effective Time or arise thereafter with respect to actions or failures to act occurring prior to the Effective Time.

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. ²

We will refer to the Purchase Agreement, the Assumption Agreement and the Release collectively as the "Agreements."

Conalco has owned and operated the aluminum facility located at the Hannibal site since January 1, 1974. In 1986, the Ohio Environmental Protection Agency (Ohio EPA) concluded that the pool, as well as the soil adjacent and subjacent to the pool, was contaminated with PCBs and ordered remediation of this hazard. Conalco complied with this remediation order, incurring substantial cleanup costs. Conalco believed that Olin's disposal practices created the PCB contamination and sought voluntary contribution from Olin. Olin refused to contribute to the cleanup costs and filed this declaratory judgment action seeking, inter alia, a determination that defendants Conalco and Swiss Aluminum, Ltd. (Alusuisse) ³ are "liable to Olin for the costs of defending against, and for all losses in connection with, all claims against, and liabilities of, Olin arising out of its former aluminum business."

Conalco filed a counterclaim. Its first claim for relief was pursuant to CERCLA and sought (1) reimbursement for the $991,359.91 it allegedly spent cleaning up the Hannibal site, and (2) a declaratory judgment "declaring Olin liable for claims related in any way to the ... disposal of PCBs or any other hazardous substances or chemicals, including but not limited to the present and future clean-up costs at the Hannibal, Ohio plant property and the site of Eastern Diversified Metals in Hometown, Pennsylvania."

At the close of discovery, the parties filed cross-motions for partial summary judgment. Olin sought a partial summary judgment declaring Conalco contractually obligated to indemnify Olin for the alleged Hannibal site environmental liability and sought dismissal of Conalco's counterclaim. Conalco sought partial summary judgment that (1) Olin was liable to it for initial investigatory and monitoring costs of the environmental cleanup at the Hannibal site, (2) Olin was a "responsible party" under CERCLA and the Superfund Amendments and Reauthorization Act of 1986, Pub.L. No. 99-499, 100 Stat. 1613 et seq. (1986) (SARA), and thus was liable to it for contribution for any and all costs incurred as a result of Olin's disposal of hazardous wastes and contaminants on properties later sold to Conalco, (3) Olin was not relieved of its CERCLA and SARA liabilities as a result of the Agreements, and (4) Conalco was not liable to Olin under the Agreements for the costs of the cleanup of hazardous waste deposited by Olin.

Judge Edelstein first determined that CERCLA permits private parties to contract with respect to indemnification and contribution for environmental liability although each party remains fully liable to the government. 807 F.Supp. at 1137-39. He then discussed the proper interpretation of the Agreements at issue in this case. Id. at 1139-41. The judge decided that it was unnecessary to draft a uniform federal standard because state law should serve as the federal rule of This appeal followed.

                decision when interpreting a contractual provision that purports to allocate CERCLA liability.  Judge Edelstein concluded that, under New York law, the indemnification agreements entered into by Olin and Conalco were valid and enforceable.  He reasoned that these Agreements were clear on their face and that their provisions shielded Olin from liability to Conalco.  Because the judge determined that no ambiguity existed as to the proper interpretation of the indemnity clauses contained in the Agreements he denied Conalco's motion for partial summary judgment and granted Olin partial summary judgment,

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