Purolator Products Corp. v. Allied-Signal, Inc., Civ. No. 90-1060L.

• Decision Date: 16 August 1991
• Docket Number: Civ. No. 90-1060L.
• Citation: 772 F. Supp. 124
• Parties: PUROLATOR PRODUCTS CORP., Plaintiff, v. ALLIED-SIGNAL, INC., Defendant.
• Court: U.S. District Court — Western District of New York

772 F. Supp. 124

PUROLATOR PRODUCTS CORP., Plaintiff, v. ALLIED-SIGNAL, INC., Defendant.

Civ. No. 90-1060L.

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

August 16, 1991.

COPYRIGHT MATERIAL OMITTED

Theodore L. Garrett, Covington & Burline, Washington, D.C., and Michael R. Wolford, Nixon, Hargrave, Devans & Doyle, Rochester, N.Y., for plaintiff.

Philip H. Gitlen, Whiteman, Osterman & Hanna, Albany, N.Y., for defendant.

DECISION AND ORDER

LARIMER, District Judge.

PROCEDURAL BACKGROUND

This action involves a dispute between two companies as to their respective liability for clean-up costs for hazardous substances that were deposited at a manufacturing facility in Elmira, New York. Both companies, or their predecessors, had some connection with the premises. There were two agreements, however, with indemnification provisions, that must be interpreted to determine whether and under what circumstances liability may be shifted from one party to another.

Plaintiff, Purolator Products Corp. ("Purolator"), brought this action under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., to recover "response" costs incurred in connection with a federally-mandated investigation and cleanup of chemical wastes generated by the corporate predecessor of defendant, Allied-Signal, Inc. ("Allied"), and a declaratory judgment that Allied is liable for such costs.

Allied has moved for summary judgment dismissing the complaint. Also pending before the court is Purolator's cross-motion for partial summary judgment on liability only.

FACTS

Purolator was known prior to 1989 as Facet Enterprises, Inc. Facet was a wholly-owned subsidiary of Bendix Corporation from 1975 to April 1, 1976, when Bendix divested Facet. Allied was known as Allied Corporation until 1987. Allied acquired Bendix in 1983.

As part of its Motor Components Division, Bendix ran an automotive parts factory in Elmira, New York from 1929 to 1975. Bendix allegedly disposed of hazardous substances there.

Bendix created Facet in 1975 in response to a Federal Trade Commission antitrust order. In 1976, Bendix transferred the Elmira plant to Facet, which continued to run the plant.

After the Environmental Protection Agency listed the plant on its National Priorities List in 1982, Facet and Allied entered into an administrative consent order with the EPA in May 1986. Pursuant to that order, Facet undertook its own investigation of the site, and concluded that Bendix had disposed of hazardous substances there. Purolator alleges that the EPA is expected to choose a remedy for cleaning up the site and to direct Purolator and Allied to effect the remedy. Purolator claims that it has been complying with the EPA's order, but that Allied has refused to take any action or to pay for any of the studies or other costs involved. Purolator has allegedly spent over $600,000 so far in connection with the study.

PLEADINGS

Count I of the complaint is based on § 113(f) of CERCLA, 42 U.S.C. § 9613(f), which provides for "contribution from any other person who is liable or potentially liable" under § 9607(a). Section 9607(a) states that the owner or operator of a facility at which substances were disposed of is liable for "necessary costs of response incurred by any other person" as a result of the disposal. Purolator seeks a judgment on Count I declaring Allied liable for, and directing it to pay, Purolator's response costs relating to the Elmira investigation and cleanup. At this point, Purolator seeks judgment on liability only, with damages to be determined at a later date.

Count II states that, relying on the 1975 purchase agreement between Bendix and Facet and a 1979 agreement between Bendix and Facet relating primarily to a settlement of certain pension liabilities, Allied has demanded indemnification from Purolator for environmental liability costs at sites other than Elmira. These costs apparently relate to chemicals generated at Elmira and disposed of elsewhere prior to Facet's creation in 1975. On this count, Purolator seeks a judgment declaring that it is not liable to indemnify Allied under the Bendix-Facet agreements or for any other reason.

In its answer, Allied contends that CERCLA liability was included in the indemnification provision in the 1975 and 1979 agreements. Allied claims that although the agreements did not expressly refer to environmental liability, the indemnity provisions are broad enough to require indemnification for all expenses incurred by Allied in connection with the clean-up.

Allied's answer asserts three counterclaims, the first two of which are based on Allied's allegation that the 1975 and 1979 agreements require Facet to indemnify Bendix for any expenses resulting from claims against Bendix connected with the assets that were transferred to Facet. Allied maintains that environmental liabilities were implicitly included in these provisions.

Allied's first counterclaim seeks a declaratory judgment that Allied is entitled to complete indemnification from Purolator for all environmental liabilities related to the assets transferred from Bendix to Facet in 1975. In the second counterclaim, Allied requests damages for Purolator's alleged breach of the indemnity agreements.

The third counterclaim alleges that Allied has incurred response costs in connection with the EPA order regarding the Elmira plant. Allied seeks indemnity for these costs from Purolator under 42 U.S.C. § 9613(f).

SUMMARY JUDGMENT MOTIONS

In its motion for summary judgment, Allied relies upon the 1975 and 1979 agreements. The 1975 agreement stated that pursuant to the FTC order requiring Bendix to transfer certain of its assets to a new company, Bendix transferred

all of Bendix' right, title and interest in and to the Assets, including, without limitation, the following:

* * * * * *

(a) Bendix' Motor Components Division, the principal plant and offices of which are located at 18th Street at Oakwood, Elmira, New York, exclusive of the portion thereof directly involved in or related to the manufacture or sale of bicycle brakes, certain assets of which excluded portion are listed in Exhibit C attached hereto ...¹

The agreement also stated that "Facet hereby assumes and agrees to satisfy all liabilities and obligations of Bendix, secured or unsecured (whether accrued, absolute, contingent or otherwise) relating to or arising out of the Assets (which are transferred hereby subject to such liabilities and obligations)."

The 1979 agreement arose out of certain legal disputes between Facet and Bendix. Purolator claims that the 1979 agreement only concerned a dispute over pension plans, but Allied contends that the agreement was intended to be a "global settlement" between the parties, and that Facet assumed liability for anything not specifically excluded which related to the transferred assets.

It is clear that a dispute over pension contributions was a concern of the parties when they entered into the 1979 agreement. The 58-page agreement lists a number of specific disagreements, lawsuits, and areas of potential liability — many of which concerned pensions — which it was intended to resolve. However, it also contains more general language, stating, for instance, that the "parties have concluded that it would be in their respective best interests to settle all the disputes between them ..."

The agreement further states in § 5.01 that Facet agreed that the 1975 agreement

includes, but without limiting the generality thereof, an assumption by Facet of, and an indemnity to Bendix and Fram² against, any and all liabilities arising out of or connected with the assets and businesses of Bendix or Fram divisions or subsidiaries or portions thereof transferred to Facet pursuant to the FTC Order ...

Several additional paragraphs expand upon Facet's assumption of liability, but in general they all use the "any and all" language quoted above. It is undisputed that environmental liability was not expressly mentioned anywhere in the agreement.

Section 5.02 of the agreement also contains the following statement: "Bendix warrants and represents that it has caused to be conducted a survey of the lawyers in the Bendix Office of the General Counsel, and that it has been advised that, based on such survey, none of such lawyers is aware of any pending or currently threatened litigation or claim against Facet or against Bendix or any of its subsidiaries or portions thereof Bendix or Fram transferred to Facet," except for certain specified claims, none of which included the environmental claims underlying the instant case.

Allied contends that under the 1979 agreement, Facet assumed liability for all liabilities, past, present and future, related to the transferred assets. Allied says that the agreement was intended to be a "global settlement" ending all disputes over the those assets once and for all. Therefore, Allied argues, Facet assumed liability for any other matter not specifically addressed in the agreement, known or unknown, relating to the assets.

Allied also alleges that Facet was aware of potential environmental liability in connection with the Elmira site in 1979, because in 1978, county and state officials visited the site and expressed concern over the storage and disposal of hazardous substances. Allied states that the officials had several contacts with Facet that year on the subject, and that the DEC also began investigating the site before the 1979 agreement was signed.

Purolator's position is essentially two-fold: first, Purolator contends that as a matter of federal law, the indemnity agreements are not enforceable as to liability for hazardous waste clean-up costs. Purolator maintains that CERCLA bars such indemnity agreements.

Second, Purolator argues that even if indemnity agreements are allowed under CERCLA, the agreements must explicitly refer to environmental liability to be effective. Purolator states...