State v. Employers Ins. of Wausau, C5-01-1904.

• Decision Date: 21 May 2002
• Docket Number: No. C5-01-1904.,C5-01-1904.
• Citation: 644 N.W.2d 820
• Parties: STATE of Minnesota, by its Attorney General, Mike HATCH, Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Respondent, Home Insurance Company, Respondent, Travelers Casualty and Surety Company, Respondent, The Travelers Indemnity Company et al., Respondents.
• Court: Minnesota Court of Appeals

644 N.W.2d 820

STATE of Minnesota, by its Attorney General, Mike HATCH, Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Respondent, Home Insurance Company, Respondent, Travelers Casualty and Surety Company, Respondent, The Travelers Indemnity Company et al., Respondents.

No. C5-01-1904.

Court of Appeals of Minnesota.

May 21, 2002.

Mike Hatch, Attorney General, Mark B. Levinger, Assistant Attorney General, St. Paul, MN; and William F. Greaney, admitted pro hac vice, Covington & Burling, Washington, DC, for appellant.

Scott Ryskoski, Charles A. Gross, Shawn Raiter, Darron Knutson, Larson King L.L.P., St. Paul, MN, for respondent Employers Insurance of Wausau, a Mutual Company.

Eric Magnuson, Robert B. Jaskowiak, Melissa Hortman, Rider Bennett Egan & Arundel, L.L.P., Minneapolis, MN, for respondent Home Insurance Company.

Andrew S. Amer, Mary Beth Forshaw, Michael S. Komar, Jerauld E. Brydges, Simpson Thatcher & Bartlett, New York, NY; and Charles E. Spevacek, Stacy A. Broman, Meagher & Geer P.L.L.P., Minneapolis, MN, for respondent Travelers Casualty & Surety Company and respondents Travelers Indemnity Company et al.

Laura A. Foggan, Karalee C. Morell, Wiley Rein & Fielding L.L.P., Washington, DC; and Dwight G. Rabuse, Nelson L. Peralta, Livgard & Rabuse, P.L.L.P., Minneapolis, MN, for amici curiae Insurance Environmental Litigation Association and The Insurance Federation of Minnesota.

Considered and decided by HANSON, Presiding Judge, SCHUMACHER, Judge, and PORITSKY, Judge.

OPINION

PORITSKY, Judge.¹

The state appeals from the district court's grant of respondents' motion for summary judgment. The district court ruled that the state's claims are time-barred by the statute of limitations provision of the Minnesota Environmental Response and Liability Act (MERLA). On appeal, respondents filed notices of review, asking this court to review a prior district court order denying their motions for summary judgment on numerous constitutional grounds. Additionally, respondent Home Insurance Co. (Home) challenges an order denying its motion for partial summary judgment concerning a settlement agreement it had previously negotiated with Ford Motor Company. We affirm in part, reverse in part, and remand.

FACTS

The state commenced this action pursuant to the Minnesota Landfill Cleanup Act (LCA) and the cost-recovery provisions of the Minnesota Environmental Response and Liability Act (MERLA). The LCA permits the state to bring a direct action against respondent insurers to recover response costs² incurred by the state for cleaning up two landfills located in Oak Grove and East Bethel, Minnesota. See Minn.Stat. §§ 115B.39-.445 (2000).

MERLA is Minnesota's legislative solution to problems arising from the release of hazardous substances into the environment. The primary purposes of MERLA are:

(1) to impose strict liability on those responsible for harm caused by release of hazardous substances; (2) to allow the state to clean up contamination and collect costs later; and (3) to fund state cleanup activity.

Musicland Group, Inc. v. Ceridian Corp., 508 N.W.2d 524, 529 (Minn.App.1993), review denied (Minn. Jan. 27, 1994). MERLA was modeled after the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). Westling v. County of Mille Lacs, 581 N.W.2d 815, 817 n. 1 (Minn. 1998).

The Minnesota Pollution Control Agency (MPCA) is the agency responsible for implementing MERLA. Minn.Stat. §§ 115B.02, subd. 3; 115B.17 (2000). MERLA requires the MPCA to identify contaminated sites in the state and the parties who are potentially responsible for the contamination (the "potentially responsible parties"—PRPs). Minn.Stat. §§ 115B.17, subds. 1, 3, 13; 115B.03, subd. 1 (2000). MERLA authorizes the MPCA to take remedial action if, after requesting the PRPs to take such action, the MPCA determines that the PRPs will not take the action in the manner or within the time requested. Minn.Stat. § 115B.17, subd. 1. When the MPCA spends public money to take a response action, MERLA authorizes the MPCA to recover its costs from the PRPs. Id., subd. 6.

MERLA was amended in 1998 to establish the accrual period for actions seeking recovery of response costs. 1998 Minn. Laws ch 341, § 2. Such actions must be brought within six years after commencement of physical on-site construction of a response action. Minn.Stat. § 115B.11, subd. 2(a) (2000).

The LCA was enacted in 1994 to create a more effective and less costly way for the state to cleanup landfills by authorizing the state to assume direct responsibility for remediating certain closed landfills. Minn.Stat. § 115B.40, subd. 7(b)(1). Because the state assumes the responsibility for the cleanup on behalf of a PRP, the state is permitted to recover costs, in part, through any existing insurance coverage a PRP may have acquired. Minn.Stat. §§ 115B.40-.41, 115B.441. To ensure the state's right to recover response costs, the LCA included a provision suspending the statute of limitations for such cost-recovery actions until 2004. Minn.Stat. § 115B.40, subd. 8. The LCA was amended in 1996 to permit the state to file a direct action against the responsible party's insurer. 1996 Minn. Laws ch. 370, §§ 1-5 (codified at Minn.Stat. §§ 115B.441-.445).

In the present case, following extensive discovery, respondents moved for summary judgment challenging the constitutionality of the LCA. On June 13, 2001, the district court denied respondents' motions. Respondents, via notice of review, ask this court to review the denial of their motions.

On June 18, 2001, respondents filed a second summary judgment motion, arguing that the state's claims were barred by the statute of limitations. The district court granted respondents' motion, finding that the MERLA statute of limitations as originally enacted in 1983 barred the state's cost-recovery claims. The court applied the discovery-accrual rule, under which a cause of action accrues when a party discovers facts giving rise to the cause of action. Because the state had knowledge of the pollutants in East Bethel in 1982 and in Oak Grove in 1984, the court found that the state's claims, brought in February of 2000, were time barred in 1988 and 1990 (prior to the passage of the LCA and its provision temporarily suspending the statute of limitations). The state appeals.

Respondent Home Insurance Company challenges the district court's denial of its separate summary judgment motion concerning a settlement agreement signed by Ford Motor Company (Ford). The agreement resolved Ford's claims for coverage under policies issued by Home for Ford's liability at several hazardous-waste sites around the country. The district court denied Home's motion because Ford failed to procure the state's approval prior to entering the settlement agreement as required by Minn.Stat. § 115B.444, subd. 2.

ISSUES

1. Does the statute of limitations provision in MERLA as enacted in 1983 bar the state from recovering response costs for cleaning up contaminated landfills?

2. Do the amendments to the Minnesota Landfill Cleanup Act constitute an impairment of contracts in violation of the Minnesota and U.S. Constitutions?

3. Does the federal CERCLA preempt the Minnesota Landfill Cleanup Act?

4. Do the amendments to the Minnesota Landfill Cleanup Act violate the Commerce Clause of the Minnesota and U.S. Constitutions?

5. Does the settlement, release, and policy buy-back agreement between Home Ins. Co. and Ford preclude the state's recovery against Home Ins. Co. under the Minnesota Landfill Cleanup Act?

ANALYSIS

"On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990)

(citation omitted). No genuine issue of material fact exists "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn.1997) (alteration in original) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)). "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."

Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993) (citation omitted). The state has made a showing, in the affidavit of Thomas C. Newman, that the MPCA first incurred environmental-response costs related to the construction of remedial action at the East Bethel Landfill on October 31, 1995, and at the Oak Grove Landfill on April 17, 1996. Although these facts are not beyond dispute,³ viewing the evidence in the light most favorable to the state for the purposes of this appeal, we accept the state's facts as true.

I.

The state argues that the district court's application of the discovery-accrual rule is erroneous. First, the state argues that its claims are timely under the amended MERLA statute of limitations provision that existed when the state brought this action. Second, the state argues that even under the statute prior to its amendment, the state's claims are timely. Respondents argue: (1) the amendments to MERLA do not act to revive the state's claims, and (2) under the original provisions of MERLA, the district court was correct in applying the discovery-accrual rule and barring the state's claims. We agree with the state's second argument and conclude that, under MERLA as originally enacted, that is, prior to its amendment, the state's claims are timely.

The construction and applicability of a statute of limitation is a question of law, reviewed de novo. Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn. 1998). Here, the controlling statutory authority is the statute of limitations provision in the 1983 originally-enacted language of the MERLA, and as the statute was...