Regents of the Univ. of Minn. v. United States

• Decision Date: 14 October 2020
• Docket Number: CIVIL NO. 17-3690(DSD/ECW)
• Citation: 494 F.Supp.3d 580
• Parties: REGENTS OF the UNIVERSITY OF MINNESOTA, Plaintiff, v. UNITED STATES of America; and E.I. du Pont De Nemours and Company, Defendants.
• Court: U.S. District Court — District of Minnesota

494 F.Supp.3d 580

REGENTS OF the UNIVERSITY OF MINNESOTA, Plaintiff,

v.UNITED STATES of America; and E.I. du Pont De Nemours and Company, Defendants.

CIVIL NO. 17-3690(DSD/ECW)

United States District Court, D. Minnesota.

Signed October 14, 2020

Rick E. Kubler, Esq., Richard C. Landon, Esq. and Lathrop GPM LLP, 80 South 8^th Street, Suite 500, IDS Center, Minneapolis, MN 55402 and Brian J. Slovut, Esq., University of Minnesota, Office of the General Counsel, 200 Oak Street SE, Suite 360, Minneapolis, MN 55455 counsel for plaintiff.

Friedrich A.P. Siekert, United States Attorney's Office, 300 South 4^th Street, Suite 600, Minneapolis, MN 55415; Phillip R. Dupre and Lauren Denise Grady, DOJ-ENRD P.O. Box 7611, Washington, DC 20044, counsel for defendant United States of America.

John McGahren, Esq. and Morgan Lewis & Bockius LLP, 502 Carnegie Center, Princeton, NJ 08540 counsel for defendant E.I. du Pont De Nemours and Company.

ORDER

David S. Doty, Judge

This matter is before the court upon the cross motions for partial summary judgment by defendant United States of America (Government) and plaintiff Regents of the University of Minnesota (University). Based on a review of the file, record, and proceedings herein, and for the following reasons, the court denies the Government's motion and grants the University's motion.

BACKGROUND

I. The GOW

This environmental dispute arises out of a contract between the University and the Government. During World War II, the Government operated the Gopher Ordinance Works (GOW), a facility "designed to produce smokeless cannon and rifle powder, oleum and other materials used in the manufacture of smokeless powder." Compl. ¶¶ 3, 21. The GOW was located on 13,600 acres of land in Rosemount, Minnesota (Site). Id. ¶¶ 2, 29. The GOW was designed, constructed, and operated by defendant E.I. du Pont de Nemours and Company (DuPont). Id. ¶¶ 4, 30-31. Between November 1944 and August 1945, the GOW produced "an estimated 29 million pounds of smokeless powder, 80 million pounds of oleum and 51 million pounds of nitric acid." Id. ¶ 33.

II. The Parties’ Agreement

After the war, the Government determined that it no longer needed the GOW and transferred the Site to the University through two quitclaim deeds and corresponding contracts for sale. Id. ¶¶ 6, 38. The first deed, executed in 1947, conveyed a 4,687-acre parcel consisting largely of open space (1947 Parcel). Id. ¶ 43; Countercl. ¶ 28. The second deed, executed in 1948, conveyed a 3,320-acre parcel that "contained most of the buildings, infrastructure, and equipment transferred to the University" (1948 Parcel). Compl. ¶ 43; Countercl. ¶ 28. The instant motions only involve the 1948 Parcel. The deed conveying the 1948 Parcel (1948 Deed) contains the following indemnification provision:

[T]he [University] herein covenants and agrees for itself and its successors and assigns to assume all risk for all personal injuries and property damages arising out of ownership, maintenance, use and occupation of the foregoing property, and further covenants and agrees to indemnify and save harmless the ... United States of America ... against any and all liability claims, causes of action or suits due to, arising out of, or resulting from, immediately or remotely, the possible contaminated condition, ownership, use, occupation or presence of the [University], or any other person upon the property lawfully or otherwise.

Answer and Countercl. Ex. 2, at 5.

The corresponding contract for sale (1948 Contract) includes the following provision:

The [University] acknowledges that the above-described property may be contaminated and it assumes all liability and responsibility which may arise out of the said contaminated condition, decontamination and use and occupancy of the said property. The [University] further agrees that it will perform at its sole expense any and all decontamination work or functions found necessary in order to render the above-described property free of any and all dangers of explosives and suitable for general usage.

Id. Ex. 5, at 4.

III. Environmental Cleanup of the Site

Since the mid-1980s, the Site has been subject to numerous environmental studies and investigations, which have revealed the release or threatened release of hazardous materials at the Site. See Compl. ¶¶ 52-81; Countercl. ¶¶ 73-74. The Minnesota Pollution Control Agency has identified the University, the United States Army Corps of Engineers, and DuPont as "responsible persons" under the Minnesota Environmental Response and Liability Act (MERLA). Compl. ¶¶ 75-76. According to the University, it has incurred more than $3 million in "environmental investigation and other necessary response costs in connection with the release or threatened release of hazardous substances at the Site" and expects that amount to increase. Id. ¶ 82. The University has unsuccessfully demanded reimbursement from the Government. Id. ¶ 83.

The University has received, however, $732,695.84 from its lessee Dakota Aggregates, LLC to cover "certain environmental, development, engineering and legal expenses," including the environmental cleanup at issue. Dostal Decl. ¶ 3; id. Ex. 1 § 3.4. The University maintains that the sums received from Dakota Aggregates were advances that it has largely repaid, rather than reimbursement for expended cleanup costs. See id. ¶ 4; id. Ex. 2. The lease between the University and Dakota Aggregates refers to the payments as "Expense Reimbursement" and notes that the payments are "non-refundable" and that they may be made "directly to the governmental bodies for costs and expenses ... payable to such bodies." Id. Ex. 1 § 3.4.

IV. This Action

On August 11, 2017, the University commenced this suit seeking damages and declaratory relief from the Government and DuPont under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and from DuPont under MERLA. On November 17, 2017, the Government answered the complaint and filed counterclaims alleging that (1) the University breached the 1948 Deed and 1948 Contract by seeking reimbursement for environmental response costs and failing to indemnify the Government against all lawsuits and claims relating to the 1948 Parcel; (2) the University should be apportioned at least some of any response costs found to be due under CERCLA; and (3) the University should be held liable for all response costs incurred or that may be incurred in connection with the Site. Answer and Countercl. ¶¶ 106-22. DuPont answered the complaint, but did not file counterclaims or cross-claims.¹

The Government moved for partial judgment on the pleadings as to its defense to the University's CERCLA claim relating to the 1948 Parcel and its breach-of-contract counterclaim. The Government specifically requested that the court hold that the University is not entitled to recover its response costs relating to the 1948 Parcel and that the University is obligated to indemnify and hold harmless the Government for all past, current, and future response costs relating to the 1948 Parcel. The court denied the motion, concluding that the parties’ agreement is ambiguous insofar as the indemnification provision is concerned:

The court finds that the contracts, read as a whole, support both parties’ interpretations and therefore are ambiguous. Neither contract clearly states that the University assumed liability relating to environmental contamination. However, it is also not clear that environmental liability is not encompassed within the provisions at issue. Indeed, the provisions are broadly written to suggest the intent to include liability beyond the risks presented by residual explosives.

Order, ECF No. 57, at 7 (citations omitted). The court noted that it would be better positioned to assess the scope of the indemnification provision when presented with relevant extrinsic evidence. See id. (concluding that "whether environmental liability is included cannot be determined on the present record absent additional factual development"). After engaging in discovery, the parties filed the instant cross motions for partial summary judgment relating to the Government's counterclaim for breach of contract based on the indemnification provision and its corresponding affirmative defense. The Government also seeks a determination that the University is precluded from recovering environmental response costs for which is has already been reimbursed.

V. Extrinsic Evidence

Among the evidence submitted includes documents showing that harmful effects from smokeless powder plants was generally known at the time the parties entered into the relevant agreements. See, e.g., Gov't Ex. 1,² ECF No. 94-1, at 4-5, 15 (noting that the production of explosives and ammunition during World War I led to the poisoning of 17,000 people, 475 of whom died, and that the War Department instituted an "extensive industrial health and hygiene program" to avoid the same outcome in World War II); Gov't Ex. 2, ECF No. 94-2, at 5 (commenting that DNT's "toxicity [to people] is similar to that of TNT"). Other contemporaneous studies showed the harmful effect of lead and mercury on people. See Gov't Mem., ECF No. 93, at 4-5.

Other documents show that the Government was aware that the GOW was contaminated with toxic substances beyond explosive materials. Specifically, the Army acknowledged in December 1945, that ordinance plants such as the GOW included "toxic hazards" that were a danger to "life or health." Gov't Ex. 3, ECF No. 94-3, at 2. Further, documents detailing the War Department's decontamination of the GOW to "stand-by condition" in the summer of 1946, made clear that the GOW was not necessarily free of all hazards or safe for use other than for its constructed purpose. Gov't Ex. 4, ECF No. 94-4, at 2. Indeed, that decontamination process included ridding, to the extent possible, the Site of hazardous non-explosive materials such as sulfuric acid, nitric acid, ammonia, and DNT.³ See Gov't Ex. 5,...