Olin Corp. v. Riverwood Int'l Corp.

• Decision Date: 01 August 1999
• Docket Number: D,No. 682,No. 99-5047,682,99-5047
• Citation: 209 F.3d 125
• Parties: (2nd Cir. 2000) In Re: MANVILLE FOREST PRODUCTS CORPORATION, Debtor. OLIN CORPORATION, Appellant, v. RIVERWOOD INTERNATIONAL CORPORATION, formerly known as Manville Forest Products Corporation, Appellee. ocket
• Court: U.S. Court of Appeals — Second Circuit

Page 125

209 F.3d 125 (2nd Cir. 2000)

In Re: MANVILLE FOREST PRODUCTS CORPORATION, Debtor.

OLIN CORPORATION, Appellant, v. RIVERWOOD INTERNATIONAL CORPORATION, formerly known as Manville Forest Products Corporation, Appellee.

No. 682, Docket No. 99-5047

August Term, 1999

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: November 5, 1999

Decided: April 07, 2000

Appeal from a judgment of the United States District Court for the Southern District of New York (Stein, J.) affirming an order of the United States Bankruptcy Court for the Southern District of New York (Lifland, B.J.), granting plaintiff-appellee's motion for partial summary judgment and denying defendant-appellant's motion for summary judgment.

Affirmed.

MICHAEL H. WETMORE, Husch & Eppenberger, LLC, St. Louis, MO (Philip Bentley Kramer, Levin, Naftalis & Frankel, LLP, New York, NY, on the brief), for Defendant-Appellant.

KAREN E. WAGNER, Davis Polk & Wardwell, New York, NY (Lowell Gordon Harriss, Rebecca Winters, on the brief), for Plaintiff-Appellee.

Before: JACOBS, STRAUB, Circuit Judges, and PAULEY, District Judge.^*

PAULEY, District Judge:

Olin Corporation ("Olin") appeals an order and judgment of the United States District Court for the Southern District of New York (Stein, J.), affirming the order and judgment of the United States Bankruptcy Court for the Southern District of New York (Lifland, B.J.), 225 B.R. 862 (Bankr. S.D.N.Y. 1998). The bankruptcy court granted summary judgment in favor of Riverwood International Corporation ("Riverwood") on Olin's claim for indemnification, holding that the indemnification claim was discharged and barred by a prior bankruptcy confirmation order. The bankruptcy court denied Olin's motion for summary judgment on the same grounds. For the reasons set forth below, we affirm.

BACKGROUND

In January 1967, Olin transferred its forest products division to Olinkraft, Inc. ("Olinkraft"), a wholly-owned subsidiary of Olin. Olin transferred to Olinkraft a piece of real property in Louisiana on which Plant 94, a plant operated by Olin's forest products division, was located. At the time of the transfer, Olinkraft executed and delivered to Olin an indemnification agreement, which stated in relevant part:

Olinkraft hereby assumes and agrees to pay, perform and discharge, and to save Olin harmless with respect to, and at Olinkraft's expense to defend any actions brought in connection with, all debts, obligations, contracts and liabilities of Olin with respect to such Division of every kind, character or description, whether accrued, absolute, contingent or otherwise (and whether or not reflected or reserved against on Olin's balance sheets, books of account and records or arising after the date hereof) including, without limiting the foregoing general language, all of the covenants and undertakings of Olin contained in or pursuant to commitments, sales orders, purchase orders, notes, agreements, promises and undertakings of every kind, written or oral, with respect to such Division.

In May 1974, Olinkraft became an independent public company. At that time, Olinkraft reaffirmed the undertakings contained in the 1967 indemnification agreement and executed a second indemnification agreement, where Olinkraft agreed:

to indemnify and save Olin, its successors and assigns, harmless with respect to, and at Olinkraft's expense to defend any action brought against Olin, its successors and assigns, in connection with . . . all claims, obligations and liabilities of any kind, including matters now or hereafter in litigation, which may be asserted against or imposed on Olin in respect of Olinkraft, or any of its Subsidiaries, its or their active or former employees, business, operations or assets, whether accrued, absolute, contingent, or otherwise.

On January 19, 1979 Olinkraft merged into JM Capital, a wholly-owned subsidiary of Johns-Manville Corporation. Thereafter, Olinkraft changed its name to Manville Forest Products Corporation ("Manville").

In 1982, Manville filed for relief under Chapter 11 of the Bankruptcy Code in United States Bankruptcy Court for the Southern District of New York. The bankruptcy court set a deadline of December 29, 1983 for Manville's debtors to file proofs of pre-petition claims. On December 28, 1983, Olin filed a claim for certain taxes owed to it by Manville. Olin did not file proofs for any claims under the indemnification agreements.

On March 26, 1984, the bankruptcy court entered an order confirming Manville's reorganization plan. The order provided that Manville was discharged from any and all unsecured debts that arose prior to the confirmation of the plan, whether or not proof of the claim was filed. Subsequent to the bankruptcy proceedings, Manville changed its name to Riverwood International Corporation ("Riverwood").

On July 13, 1984, the state of Louisiana enacted the Louisiana Environmental Quality Act ("LEQA"), La. Rev. Stat. Ann. 30: 2271, et seq. (West 1984). LEQA is a comprehensive environmental remediation plan and provides for liability for environmental clean-up costs by current and former owners of polluted property. On May 20, 1996, the Louisiana Department of Environmental Quality, relying upon LEQA, sent demand letters to Olin and Riverwood for remediation of the Plant 94 site. On June 28, 1996, Olin sent a letter to Riverwood requesting indemnification for any losses or liabilities arising out of the Plant 94 site remediation.

Riverwood filed this action on April 15, 1998 in the bankruptcy court. Riverwood moved for partial summary judgment seeking an order determining that any claims arising under the indemnification agreements were discharged by the confirmation order. Riverwood contended that Olin's indemnification rights arose upon the execution of the indemnification agreements and were pre-petition claims discharged by the bankruptcy confirmation.

Olin also filed a motion for summary judgment seeking a determination that its indemnification rights were not barred by the confirmation order. Olin claimed that because LEQA was not enacted until after the confirmation proceeding was complete, the demand for indemnification did not constitute a "claim" under the Bankruptcy Code prior to the statute's enactment, and therefore, was not discharged by the earlier confirmation proceeding. Olin argued that the bankruptcy court should rely upon cases where the claim arose directly under a statute and not from a pre-petition contract.

The bankruptcy court determined that the central issue in the case was whether Olin's indemnification rights under the agreements constituted pre-petition claims. The bankruptcy court granted Riverwood's motion for summary judgment and denied Olin's motion for summary judgment, holding that any indemnification rights owed to Olin under the 1967 and 1974 agreements were contingent claims discharged by the confirmation order. The bankruptcy court rejected Olin's argument that its indemnification claims should be treated as arising directly under LEQA and decided instead that the claims arose under contract. In determining that Olin's indemnification claims had arisen pre-petition, the bankruptcy court noted that the legal relationship between Olin and Riverwood was created when the indemnification agreements were executed, and those agreements contained all of the necessary elements to give rise to a right of payment at that time. The court also observed that a contingent claim arises upon the execution of a contract when the occurrence of the contingent event triggering indemnification was contemplated by the parties at or before execution. The bankruptcy court determined that the broad language of the indemnification agreements indicated that future environmental cleanup liability was contemplated by the parties.

Olin appealed the bankruptcy court's decision. In an order dated April 23, 1999, the district court affirmed the opinion of the bankruptcy court, adopting the rationale of the bankruptcy court. On May 20, 1999, Olin filed a timely appeal of the district court's decision.

DISCUSSION

Our review of the district court's decision is plenary. See United States Lines (S.A.), Inc. v. United States (In re McLean Indus. Inc.), 30 F.3d 385, 387 (2d Cir. 1994). We must "independently examine the bankruptcy court's decision, applying the clearly erroneous standard to findings of fact and de novo review to conclusions of law." Id., 30 F.3d at 387 (quoting Klein v. Civale & Trocato, Inc. (In re The Lionel Corp.), 29 F.3d 88, 89 (2d Cir. 1994)) (internal quotation marks omitted). Because the facts of the case are not in dispute, we review the decision de novo.

The Bankruptcy Code provides that confirmation of a reorganization plan discharges the debtor from any debt that arose before the date of the confirmation, regardless of whether proof of the debt is filed, the claim is disallowed, or the plan is accepted by the holder of the claim. See 11 U.S.C. 1141(d)(1) (1993). A valid pre-petition claim requires two elements. See LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478, 497 (2d Cir. 1995). First, the claimant must possess a right to payment. Second, that right must have arisen prior to the filing of the bankruptcy petition.¹ Whether a claim exists is determined by bankruptcy law, while the time a claim arises is determined under relevant non-bankruptcy law. See id. Thus, if Olin's indemnification rights were "claims" against Riverwood that existed prior to the filing of Riverwood's bankruptcy petition, then those claims were discharged and are now barred. Conversely, if Olin's indemnification rights were not pre-petition claims, then those claims were not discharged and now may be considered.

In order for Olin's indemnification rights to have been discharged by the bankruptcy confirmation, they must constitute claims under the Bankruptcy Code. When Riverwood filed for bankruptcy, a "claim" was defined,...