Schiavone v. Pearce
| Decision Date | 14 March 1996 |
| Docket Number | KERR-M,D,No. 944,944 |
| Citation | 79 F.3d 248 |
| Parties | , 64 USLW 2603, 26 Envtl. L. Rep. 20,824 Michael SCHIAVONE, Plaintiff, v. Herbert H. PEARCE; Donald B. Lippincott; Kerr McGee Corporation; Penn Central Corporation, Defendants.cGEE CHEMICAL CORPORATION, Defendant-Third-Party Plaintiff-Appellant, v. UNION CAMP CORPORATION, Third-Party Defendant-Appellee. ocket 95-7627. |
| Court | U.S. Court of Appeals — Second Circuit |
Gregory A. Sharp, Hartford, Connecticut (Michael J. Donnelly, Murtha, Cullina, Richter and Pinney, Hartford, Connecticut, of counsel), for Defendant-Third-Party Plaintiff-Appellant.
Elizabeth C. Barton, Hartford, Connecticut (Harold M. Blinderman, Jennifer A. Osowiecki, Updike, Kelly & Spellacy, P.C., Hartford, Connecticut, of counsel), for Third-Party Defendant-Appellee.
Before: NEWMAN, Chief Judge, MAHONEY, Circuit Judge, and SAND, District Judge. *
Defendant-third-party plaintiff-appellant Kerr-McGee Chemical Corporation ("Kerr- McGee") 1 appeals from an order entered June 1, 1995, pursuant to an opinion dated August 25, 1994, in the United States District Court for the District of Connecticut, Peter C. Dorsey, Chief Judge, granting third-party-defendant-appellee Union Camp Corporation's ("Union Camp") 2 motion for summary judgment. We conclude that the indemnification agreement relied on by Union Camp does not transfer the direct liabilities of Union Camp to Kerr-McGee. Thus, Kerr-McGee may be entitled to contribution from Union Camp under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), as amended, 42 U.S.C. § 9601 et seq., and under Conn.Gen.Stat. § 22a-452. We vacate and remand for findings as to Union Camp's CERCLA and state statutory liability.
Union Bag & Paper, the predecessor of Union Camp, formed American Creosoting Corporation ("AmCre Corp.") in 1956 to facilitate Union Camp's acquisition of certain assets from American Creosoting Company. With funds supplied by Union Camp, AmCre Corp., a wholly owned subsidiary of Union Camp, purchased these assets, which included a business on certain leased real property in North Haven, Connecticut. American Creosoting Company had operated a creosoting facility on this property since 1922. On July 24, 1964, Union Camp entered into a stock purchase agreement with Kerr-McGee Oil, the predecessor of Kerr-McGee Corporation, whereby Kerr-McGee acquired AmCre Corp. In Section 4 of this stock purchase agreement ("the indemnification agreement"), which the parties accepted in New York and contemplated closing in New York, Union Camp agreed to indemnify and hold harmless AmCre Corp. and Kerr-McGee for legal claims and suits filed against them prior to August 1, 1965. The indemnification agreement reads, in pertinent part:
Union [Camp] hereby indemnifies and agrees to hold [AmCre Corp.] harmless from and against any and all of the following: ...
(iii) Any obligation or liability of [AmCre Corp.] under or pursuant to any legal action or other proceeding, now or hereafter instituted, based on a cause of action arising out of or attributable to the operations or activities of [AmCre Corp.] prior to the time of Closing hereunder; and Union does further indemnify and agree to hold Kerr-McGee harmless from any and all loss or expense, of whatsoever nature, which Kerr-McGee may sustain or incur by reason of any such liability or obligation....
J.A. at 86. Subsequent to its purchase of AmCre Corp., Kerr-McGee changed the name of AmCre Corp. to Moss American, Inc. ("Moss American"). In 1974 Kerr-McGee Chemical Corporation, a subsidiary of Kerr-McGee Corporation, merged with Moss American, assuming all Moss American's liabilities.
A contract between AmCre Corp. and the New York, New Haven and Hartford Railroad Company ("the Railroad"), concerning the operations of the creosoting plant in North Haven, Connecticut ("the plant"), forms the basis of the underlying action. From approximately 1921 through 1966, the Railroad owned the property on which the plant is located and leased it to American Creosoting Company. The property, which changed ownership several times over subsequent years, suffered creosote contamination as a result of the plant's storage, handling, and disposal activities. Prior to September 25, 1984, at the behest of the Connecticut Department of Environmental Protection, the then-owners of the property, defendants Herbert H. Pearce ("Pearce") and Donald B. Lippincott ("Lippincott"), implemented a remedial program to cleanse the land. Their curative efforts, however, were not without critics.
Plaintiff Michael Schiavone, who purchased the property from Pearce and Lippincott by warranty deed on or about October 23, 1984, commenced the underlying lawsuit, alleging that Pearce and Lippincott had inadequately remediated the creosote contamination, causing plaintiff to incur substantial clean-up costs. Plaintiff named Kerr-McGee as a defendant. 3 Kerr-McGee impleaded Union Camp, seeking contribution based on Union Camp's management of the plant, through the activities of Union Camp's wholly-owned subsidiary and the title owner of the plant, AmCre Corp., from 1956 through 1964.
During that period, Union Camp and AmCre Corp. shared the same board of directors, and several of AmCre Corp.'s high-ranking officers, specifically its president, general counsel, assistant comptroller, and assistant treasurer, were also employed by Union Camp. During the years in question, Union Camp's legal department rendered services to AmCre Corp., including the review and approval of the 1958 renewal of the contract concerning the operations of the plant. Kerr-McGee states that several Union Camp employees participated, as officers and directors of AmCre Corp., in the negotiations surrounding the 1958 contract renewal. Kerr-McGee also maintains that during this period, the interlocking Union Camp-AmCre Corp. board of directors examined and approved capital expenditures, including pollution-control equipment, for AmCre Corp.'s creosoting plants. 4 It is Kerr-McGee's contention that Union Camp's sustained involvement in the plant's operations reflects an exercise of control by Union Camp sufficient to render Union Camp directly liable for the environmental harm caused.
Union Camp moved for summary judgment on both the CERCLA and state statutory claims. On August 25, 1994, the district court granted the motion, finding that the indemnification agreement shifted all Union Camp's liabilities, including environmental liabilities, to Kerr-McGee. The district court did not address the factual question of the extent of Union Camp's direct liability, if any, as it deemed Kerr-McGee's CERCLA and state statutory claims to be barred, based on the indemnification agreement. On September 14, 1994, Kerr-McGee moved for reconsideration, arguing that the district court had incorrectly interpreted the indemnification agreement and had improperly declined to address the issue of Union Camp's direct CERCLA and state statutory liability. In an April 18, 1995, ruling, the district court denied Kerr-McGee's motion, and on June 1, 1995, final judgment was entered in favor of Union Camp.
This appeal followed.
We review a grant of summary judgment de novo. Mellon Bank, N.A. v. United Bank Corp., 31 F.3d 113, 115 (2d Cir.1994). The question answered by the district court, and thus before this court on appeal, involves the interpretation of contractual language. The precise issue is whether the indemnification agreement transfers Union Camp's direct liabilities to Kerr-McGee.
Kerr-McGee's theory of liability is that, given the degree to which Union Camp controlled the management of the plant, Union Camp has incurred direct and independent liability as an operator under CERCLA, 42 U.S.C. §§ 9607(a)(2). Kerr-McGee's contribution claim is based also on Conn.Gen.Stat. § 22a-452, which provides a private right of action for reimbursement of environmental clean-up costs. In essence, Kerr-McGee asserts that Union Camp's own actions in advising and overseeing the plant's operations subject it directly, not derivatively through AmCre Corp., to CERCLA and state statutory liability.
This appeal, although involving an indemnification agreement, does not turn on contractual indemnification claims. Kerr-McGee's third-party action against Union Camp does not derive from the indemnification language, but rather from Union Camp's alleged CERCLA and state statutory liability, separate and distinct from the indemnification agreement. The agreement has relevance only for Union Camp's defense: Union Camp contends that under the indemnification agreement, all Union Camp's liabilities relating to the plant were transferred to Kerr-McGee after the August 1, 1965, cut-off date.
Summary judgment is appropriate only when the language of a contract is "wholly unambiguous." Mellon, 31 F.3d at 115; Sayers v. Rochester Telephone Corp., 7 F.3d 1091, 1094 (2nd Cir. 1993). The question of whether contract language is plain or ambiguous is to be determined by the court as a matter of law. Sayers, 7 F.3d at 1094. The trial court found the language of the indemnification agreement unambiguously to shift Union Camp's liabilities to Kerr-McGee and thus awarded summary judgment to appellee. Although we also find the language in question to be unambiguous, we disagree with the lower court's interpretation of that language. We read the indemnification agreement as embracing the liabilities only of AmCre Corp., not of Union Camp.
A purchase agreement entered into in New York, with closing contemplated in New York, is to be interpreted under New York law. See Tehran-Berkeley Civil and Envtl. Eng'rs v. Tippetts-Abbett-McCarthy-Stratton, 888 F.2d 239, 242 (2d Cir.1989); Risser v. Hirshhorn, 199 F.2d 917, 919 (2d Cir.1952); Resnick v. Sikorsky Aircraft, 660 F.Supp. 415, 417...
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