Scott Galvanizing, Inc. v. Northwest EnviroServices, Inc.

• Decision Date: 28 January 1993
• Docket Number: No. 58961-5,58961-5
• Citation: 844 P.2d 428,120 Wn.2d 573
• Parties: , 36 ERC 1210 SCOTT GALVANIZING, INC., a Washington corporation, Respondent, v. NORTHWEST ENVIROSERVICES, INC., a Washington corporation, formerly known as Northwest Tank Service, Petitioner.
• Court: Washington Supreme Court

Page 573

120 Wn.2d 573

844 P.2d 428, 36 ERC 1210

SCOTT GALVANIZING, INC., a Washington corporation, Respondent, v. NORTHWEST ENVIROSERVICES, INC., a Washington corporation formerly known as Northwest Tank Service, Petitioner.

No. 58961-5.

Supreme Court of Washington En Banc.

Jan. 28, 1993.

LeSourd & Patten, P.S., David S. Grossman, Lawrence E. Hard, Seattle, for petitioner.

Hackett, Beecher & Hart, Theodore H. Millan, James M. Beecher, Seattle, for respondent.

UTTER, Justice.

Northwest EnviroServices, Inc. ("Northwest") challenges a grant of summary judgment in favor of Scott Galvanizing, Inc. ("Scott") for indemnity against liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq. Northwest failed to move for summary judgment. The Superior Court for King County held, as a matter of law, the terms of a hazardous waste transportation agreement between the parties required Northwest to indemnify Scott for its CERCLA liability. After a bench trial to determine the amount of the indemnity, the trial court held Northwest liable for 39.6 percent of Scott's CERCLA costs and attorney's fees. The Court of Appeals affirmed. Scott Galvanizing, Inc. v. Northwest EnviroServices, Inc., 63 Wash.App. 802, 822 P.2d 345 (1992). We hold the trial court and the Court of Appeals erred in granting summary judgment for Scott inasmuch as questions of fact remain to be resolved.

I

Scott is a metal galvanizing operation that coats steel with zinc employing what is known as a "hot dip" process. One byproduct of this process is a liquid chemical waste known as "spent pickle liquor", consisting of sulfuric acid, zinc, and other chemicals. Prior to 1979, Scott disposed of its spent pickle liquor through the Metro sewer system. In that year, Scott contracted with Liquid Waste Disposal Company, LIDCO, to haul the spent pickle liquor to the Western Processing, Inc. (Western Processing) hazardous waste disposal facility in Kent, Washington. Between 1979 and 1982, LIDCO transported at least 78,900 gallons of Scott's industrial waste to Western Processing.

Northwest is a Washington corporation that provides waste management consulting, waste disposal and storage, and waste transportation services. In 1982, Scott contacted Northwest about the possibility of employing Northwest to replace LIDCO. Negotiations between the two firms were handled by Lee Russell of Scott and Larry Petersen, the environmental manager at Northwest. In discussing the terms under which Northwest would transport Scott's chemical waste, Russell informed Petersen that Scott wished to continue disposing of its chemical waste at the Western Processing facility. Scott preferred the Western Processing facility because its operators charged the lowest prices. Also, Petersen apparently informed Russell that once the waste was loaded onto Northwest's trucks and the relevant paperwork completed, then the waste would become Northwest's "responsibility".

Prior to the execution of a written agreement, Northwest transported approximately 6,500 gallons of Scott's liquid waste to the Western Processing facility. See Exhibits A-C to Affidavit of Victoria J. Bjorkman, Clerk's Papers, at 131-41.

On May 4, 1982, Scott and Northwest executed a written contract entitled "Hazardous Waste Agreement", which was prepared by Northwest. The contract indicated the agreement became effective three days earlier, on May 1, 1982. Clerk's Papers, at 96. Of the various services generally offered by Northwest, only "[t]ransportation to a disposal site" and "[d]isposal at [an] approved chemical processor" were selected by Scott. Clerk's Papers, at 93. The hazardous waste agreement contained the following indemnity provision:

f. [Northwest] agrees to indemnify and hold Customer harmless from any and all liability, damages, costs, claims, demands and expenses (including reasonable attorney fees), including but not limited to pollution or other damages, as and to the extent that such liability, damages, costs, claims, demands and expenses are caused by, arise out of or in any manner result from the performance by [Northwest] of its services under this agreement or arise out of the negligence of [Northwest] provided, however, that the loss or claim does not result from the misidentification or failure to properly identify the materials by the Customer or the negligence of the Customer.

Clerk's Papers, at 94-95. The agreement also provided title to Scott's waste materials would pass to Northwest once the waste had been loaded onto Northwest's transportation vehicles and the appropriate paperwork had been completed.

Over the next year, Northwest transported some 45,200 gallons of liquid waste to the Western Processing facility. Northwest thus shipped a total of 51,700 gallons of spent pickle liquor. This figure was 39.6 percent of the total liquid waste delivered to the Western Processing facility on behalf of Scott. The remaining 60.4 percent was shipped by LIDCO between 1979 and 1982.

Shortly thereafter, Northwest learned that government agencies had begun questioning the adequacy of Western Processing's disposal methods. Larry Petersen contacted Lee Russell and suggested Northwest be allowed to dispose of Scott's waste at a different disposal site. Russell refused and insisted Northwest continue to transport the waste to the Western Processing facility because it was the cheapest disposal site available and was legal to use.

In April 1983, the United States Environmental Protection Agency (EPA) designated the Western Processing facility a "Superfund" clean-up site pursuant to CERCLA and ordered it to cease operations. The clean-up of the Western Processing site was divided into three phases: (1) surface clean-up [Phase I], (2) subsurface clean-up [Phase II], and (3) groundwater clean-up [Phase III]. ¹ Western Processing and over 300 other entities, including both Scott and Northwest, were designated potentially responsible parties (PRPs). Under CERCLA, PRPs may be held liable for costs expended by the federal and state governments in responding to the release and threatened release of hazardous materials. In 1984, certain PRPs that had settled with the government regarding the Phase I cleanup brought a third party contribution action against Scott. The company settled this action for $50,000. A contribution action for the Phase II cleanup is presently pending in federal court. In addition, Standard Equipment, Inc., whose property adjoined the Western Processing site, brought suit against Scott and other hazardous waste generators. This suit was also settled by Scott for $50,000.

Scott then brought this state court action to recover its costs from Northwest under the indemnity clause. On August 15, 1990, Scott moved for summary judgment, claiming its CERCLA liability had triggered Northwest's duty to indemnify. Northwest responded it had no contractual duty to indemnify Scott because Northwest committed no overt act or omission in the performance of the transportation contract which caused or contributed to the CERCLA liability imposed on Scott.

The trial court awarded summary judgment to Scott. It held the agreement obligated Northwest to indemnify Scott for a 39.6 percent share of its existing and future liability, equal to the proportion of the waste shipped to the Western Processing facility by Northwest. Clerk's Papers, at 170. After a trial to determine reasonable attorney fees, the court awarded Scott 39.6 percent of: (1) the $50,000 incurred in settling the contribution action for the phase I clean-up; (2) the $50,000 incurred in settling the Standard Equipment action; (3) $110,928.13 in attorney fees; and (4) $29,919.58 in costs. Scott Galvanizing, Inc. v. Northwest EnviroServices, Inc., 63 Wash.App. 802, 807, 822 P.2d 345 (1992).

Northwest appealed and sought reversal of summary judgment and dismissal of the action or, in the alternative, a remand for further proceedings. Northwest claimed the Superior Court erred in interpreting and construing the indemnity clause. Under Northwest's interpretation of the clause, the parties intended indemnity to apply only to liabilities and costs caused by or contributed to by Northwest's performance of its contractual services. The Court of Appeals rejected Northwest's interpretation. It agreed with the trial court that, as a matter of law, the parties intended Northwest to assume responsibility for waste disposal risks not resulting either from Scott's negligence or its improper identification of waste materials. Scott Galvanizing, Inc. v. Northwest EnviroServices, Inc., 63 Wash.App. 802, 810-12, 822 P.2d 345 (1992).

We granted Northwest's petition for review.

II

CERCLA does not allow private parties to absolve themselves of liability for response costs through contractual arrangements. 42 U.S.C. § 9607(e)(1). It does, however, allow the execution and enforcement of agreements allocating the financial consequences of CERCLA liability among jointly and severally liable parties. See Mardan Corp. v. C.G.C. Music, Ltd., 804 F.2d 1454, 1459 (9th Cir.1986) ("Such agreements cannot alter or excuse the underlying liability, but can only change who ultimately pays that liability."). These agreements are interpreted and then construed according to the law of the state in which they were made. See Lyncott Corp. v. Chemical Waste Management, Inc., 690 F.Supp. 1409, 1417 (E.D.Pa.1988); Mardan Corp. v. C.G.C. Music, Ltd., 600 F.Supp. 1049, 1052-53 (D.Ariz.1984), affirmed 804 F.2d 1454, 1458-59 (9th Cir.1986). The interpretation of the indemnity agreement in this case is therefore determined by the application of Washington law.

III

A party is entitled to summary judgment only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). In...