State of N.Y. v. AMRO Realty Corp.

• Decision Date: 25 June 1991
• Docket Number: D,No. 1058,1058
• Citation: 936 F.2d 1420
• Parties: , 20 Fed.R.Serv.3d 136, 21 Envtl. L. Rep. 21,253 STATE OF NEW YORK, Plaintiff, v. AMRO REALTY CORPORATION; Harry Moskowitz and David Moskowitz, Defendants-Third-Party Plaintiffs-Appellants, v. ZURICH INSURANCE COMPANY; Graphic Arts Mutual Insurance Company; Federal Insurance Company and Home Insurance Company, Third-Party Defendants, Atlantic Mutual Insurance Company; Unigard Security Insurance Company; Lumbermens Mutual Casualty Company and First State Insurance Company, Third-Party Defendants-Appellees. ocket 90-7940.
• Court: U.S. Court of Appeals — Second Circuit

Page 1420

936 F.2d 1420

33 ERC 1573, 20 Fed.R.Serv.3d 136, 21

Envtl. L. Rep. 21,253

STATE OF NEW YORK, Plaintiff, v. AMRO REALTY CORPORATION; Harry Moskowitz and David

Moskowitz, Defendants-Third-Party Plaintiffs-Appellants, v. ZURICH INSURANCE COMPANY; Graphic Arts Mutual Insurance

Company; Federal Insurance Company and Home

Insurance Company, Third-Party Defendants,

Atlantic Mutual Insurance Company; Unigard Security

Insurance Company; Lumbermens Mutual Casualty

Company and First State Insurance

Company, Third-Party

Defendants-Appellees.

No. 1058, Docket 90-7940.

United States Court of Appeals, Second Circuit.

Argued Feb. 4, 1991.

Decided June 25, 1991.

Hiram D. Gordon, Janvey, Berglas & Gordon, New York City, for defendants-third-party plaintiffs-appellants.

James M. Sweet, Paul McDonald, Paul St. Antoine, Drinker Biddle & Reath, Philadelphia Andrew Feldman, Barbara L. Schifeling, Damon & Morey, Buffalo, N.Y., for third-party defendant-appellee, Unigard Sec. Ins. Co.

Pa., for third-party defendant-appellee, Lumbermens Mut. Cas. Co.

Lewis G. Adolfsen, Steven G. Adams, Amy Gallent, Siff, Rosen & Parker, P.C., New York City, for third-party defendant-appellee, First State Ins. Co.

Michael F. Close, Barry, McTiernan & Moore, New York City, for third-party defendant-appellee, Atlantic Mut. Ins. Co.

Thomas W. Brunner, Laura A. Foggan, Francis M. Gaffney, Wiley, Rein & Fielding, Washington, D.C., for amicus curiae, Insurance Environmental Litigation Ass'n.

Before NEWMAN and ALTIMARI, Circuit Judges, and CONBOY, District Judge. ^*

CONBOY, District Judge:

This appeal concerns an insurance coverage dispute. The insured parties are the defendants/third-party plaintiffs, AMRO Realty Corp. ("AMRO") and David and Harry Moskowitz (collectively, "the insureds"). They have been sued by The State of New York for violations of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Sec. 9601 et seq., and for creating and maintaining a public nuisance, in connection with the discharge of hazardous waste from a site owned by AMRO and leased to a manufacturer, American Thermostat ("AT"). David and Harry Moskowitz were officers, directors, and part-owners of AT. Harry Moskowitz was an officer, director, and shareholder of AMRO. The insureds sought coverage from several of their carriers, and were denied coverage. The insureds now appeal from two orders of the United States District Court for the Northern District of New York (Neal P. McCurn, Chief Judge ), which granted summary judgment to three of the insurance companies that were impleaded by the insureds in the action below, and partial summary judgment to a fourth.

The district court first held that Lumbermens Mutual Casualty Co. ("Lumbermens") and Unigard Security Insurance Co. ("Unigard") were not timely notified by the insureds of the occurrence of the pollution, that Lumbermens did not waive its right to invoke the "untimely notice" defense to coverage, and that the "pollution exclusion" clause (a part of all the insurance policies except the one issued by Lumbermens) excused Unigard from any coverage obligations. New York v. Amro Realty Corp., 697 F.Supp. 99 (N.D.N.Y.1988) ("Amro I "). In a subsequent order, Judge McCurn reaffirmed his previous order with respect to Lumbermens and Unigard, and granted the summary judgment motions of Atlantic Mutual Insurance Co. ("Atlantic") ¹ and First State Insurance Co. ("First State") on the basis of the "pollution exclusion" clause. New York v. Amro Realty Corp., 745 F.Supp. 832 (N.D.N.Y.1990) ("Amro II "). In the second order, Judge McCurn also certified as final under Fed.R.Civ.P. 54(b) the judgments in favor of the four insurers.

FACTUAL BACKGROUND

In 1981, New York State environmental officials discovered pollution at a site owned by AMRO and leased to AT, in South Cairo, New York ("the site"). That same year, the State brought suit against AT and AMRO in state court, alleging that AMRO and AT had engaged in pollution from the 1950's through 1981, by improperly disposing solvents including tetrachloroethylene and trichloroethylene into a drainage ditch, into groundwater via a septic system, and by dumping the solvents directly onto the ground. The complaint alleged causes of action under common law On March 19, 1986, after the break in compliance, the New York State Attorney General's Office sent letters to AMRO and Harry and David Moskowitz notifying them that the State "intends to commence legal action against you" under CERCLA and common law in connection with the pollution from the site, and informing the Moskowitzes that they might be personally liable under CERCLA and state common law. On December 2, 1986, the State filed its complaint in this action. The complaint is brought against AMRO, Harry Moskowitz, and David Moskowitz, and includes causes of action under CERCLA and common law nuisance.

and state environmental statutes. Several residential neighbors of the site also filed suits in state court against AMRO and AT at that time. In 1983, the State entered into an interim consent order with AMRO and AT which obligated them to undertake remedial measures and supply local residents with bottled water. In November 1985, AT was forced into Chapter 7 bankruptcy, and ceased compliance with the consent order.

At the time of the 1981 suit, AMRO and AT notified their then liability insurer, Atlantic, of the claim. (The Atlantic policies covered the period from January 1, 1974 to January 1, 1983.) They did not, however, until much later notify any of the carriers who had written earlier policies for AT and AMRO.

Lumbermens was first notified of the pollution problem at the site by letter dated August 14, 1985. That letter attached copies of the complaints in the 1981 State and private lawsuits, informed Lumbermens that the State lawsuit was the subject of an interim consent order but that the private actions were still pending, and requested coverage on behalf of AT and AMRO. ² In a November 11, 1985 letter, Lumbermens disclaimed coverage on the 1981 State claim, citing six reasons and stating, "[w]e reserve our rights to rely on additional reasons for disclaimer should they become apparent in the future." In a letter dated November 14, 1985, Lumbermens declined coverage for one of the 1981 private suits, stating two reasons, with the same reservation. Lumbermens did not include, in either letter, as a ground for disclaimer that the insureds had not promptly notified Lumbermens of the occurrence giving rise to the claim. On April 10, 1986, after receiving the State's intent-to-sue letters, the insureds' attorney sent another letter to Lumbermens, informing it of the intent-to-sue letters, enclosing copies of them, and requesting coverage for AMRO and David and Harry Moskowitz for defense and reimbursement of "these actions". By letter of May 5, 1986, Lumbermens again declined coverage, referring back to the November 11 letter, and stating "[t]here has bee [sic] no additional information to change our position since then." It was not until January 23, 1987, six weeks after Lumbermens had received a copy of the December 1986 CERCLA complaint, and three weeks after Lumbermens had attended a meeting of the various insurers, that Lumbermens first invoked the "untimely notice of occurrence" defense.

DISCUSSION

I. Certification Pursuant to Fed.R.Civ.P. 54(b).

As a threshold matter, Atlantic moves to dismiss this appeal, contending that the district court "improvidently certified" its judgment pursuant to Fed.R.Civ.P. 54(b). ³

Rule 54(b) provides in relevant part:

When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.

"[A]n appellate court deciding whether to entertain an appeal certified under the Rule must determine first whether the judgment is eligible for Rule 54(b) certification and then whether the District Court acted within its discretion in directing entry of judgment." Steve's Homemade Ice Cream, Inc. v. Stewart, 907 F.2d 364, 365 (2d Cir.1990) (citing Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 436-37, 76 S.Ct. 895, 900-901, 100 L.Ed. 1297 (1956), and Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 7-8, 100 S.Ct. 1460, 1464-1465, 64 L.Ed.2d 1 (1980)).

In deciding whether the district court correctly determined that more than one claim exists for purposes of Rule 54(b), our scope of review is broad. See Curtiss-Wright [ ], 446 U.S. [at] 10 ...; Avondale Indus., Inc. v. The Travelers Indemnity Co., 887 F.2d 1200 (2d Cir.1989) [, cert. denied, --- U.S. ----, 110 S.Ct. 2588, 110 L.Ed.2d 269 (1990) ]; 10 Wright, Miller & Kane, Federal Practice and Procedure, Civil 2d Sec. 2655, at 42-43 (1983). The wide deference accorded a trial court under Rule 54(b) is usually reserved for its determination that no just cause for delay exists. See Curtiss-Wright, 446 U.S. at 10 . Therefore, we must examine de novo the relationship between plaintiffs' claims to determine whether they are sufficiently separate and distinct as to lend themselves to review as single units, or whether they are so interrelated and dependent upon each other as to be one indivisible whole.

Hudson River Sloop Clearwater v. Dept. of Navy, 891 F.2d 414, 417-18 (2d Cir.1989).

Here, it is clear that the order set out in Amro II was eligible for Rule 54(b) certification. The judgment completely and finally disposed of the third-party claims brought against Atlantic, Unigard, Lumbermens, and First State. Because a judgment is eligible for rule 54(b) certification where the claims for or against "one or more but fewer than all ... parties"...