Textileather Corp. v. Gencorp Inc.

• Decision Date: 11 September 2012
• Docket Number: No. 10–3634.,10–3634.
• Parties: TEXTILEATHER CORPORATION, Plaintiff–Appellant, v. GENCORP INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

697 F.3d 378

TEXTILEATHER CORPORATION, Plaintiff–Appellant,

v.GENCORP INC., Defendant–Appellee.

No. 10–3634.

United States Court of Appeals,Sixth Circuit.

Argued: March 2, 2012.

Decided and Filed: Sept. 11, 2012.

ARGUED:Louis E. Tosi, Shumaker, Loop & Kendrick, LLP, Toledo, Ohio, for Appellant. Robert S. Walker, Jones Day, Cleveland, Ohio, for Appellee. ON BRIEF:Louis E. Tosi, Joseph S. Simpson, Shumaker, Loop & Kendrick, LLP, Toledo, Ohio, Michael J. O'Callaghan, Shumaker, Loop & Kendrick, LLP, Columbus, Ohio, for Appellant. Robert S. Walker, Matthew P. Silversten, Jones Day, Cleveland, Ohio, for Appellee.

Before: SILER, ROGERS, and WHITE, Circuit Judges.

OPINION

SILER, Circuit Judge.

Textileather Corporation, which purchased a vinyl-manufacturing facility with hazardous waste management units (“RCRA units”) from GenCorp Inc., appeals from the district court's grant of summary judgment to GenCorp in this breach-of-contract and Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) action. We AFFIRM IN PART, REVERSE IN PART, and REMAND the case to the district court for further proceedings consistent with this opinion.

I.

GenCorp owned and operated a vinyl-manufacturing facility from the mid–1950s to 1990, including the operation of several RCRA units, which reclaimed solvent waste. Under the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq., GenCorp was obligated to obtain permits to operate these units.

In 1989, GenCorp entered into negotiations to sell the vinyl-manufacturing facility to Textileather. In order to address allocation of each side's liabilities, the parties jointly hired an environmental consulting firm. GenCorp applied for, but had not received, all of the required RCRA permits at the time of its agreement with Textileather.

The negotiations culminated in an Asset Purchase Agreement (“APA”), which specified, in relevant part, GenCorp's retained liabilities, and contained a provision requiring each party to indemnify and defend against their retained liabilities. Section 9.1.1 of the APA, titled “Retained Liabilities,” provides the following:

Seller will retain responsibility for:

(a) all liabilities, if any, to third persons in respect of the substances, conditions and other matters which are included on the Chemicals List in Section 9.1.6, ... whenever such liabilities may arise, and by whatever third persons may assert such liabilities, specifically including (A) fines, penalties, judgments, awards, settlements, losses, damages, costs, fees (including attorneys' and consultants' fees), expenses and disbursements, (B) defense and other responses to any administrative or judicial action (including claims, notice letters, complaints and other assertions of liability) instituted by any third person concerning any such liability, and (C) financial responsibility for (i) cleanup costs and injunctive relief, including any removal, remedial or other response actions, and natural resource damages, and (ii) any other compliance or remedial measures.... and

(b) all liabilities, if any, to third persons (including the types of liabilities identified in (a)(A)-(C) above) in respect of any substance, condition or other matter related to the off-site management (including handling, storage, treatment, recycling, transportation or disposal) of any material after June 14, 1954 and prior to the Closing at any off-site property.

Section 9.1.4, titled “Indemnification,” provides the following:

Seller will indemnify and defend Purchaser with respect to the liabilities retained by Seller as provided in Sections 9.1.1 and 9.1.2 above; provided that Purchaser promptly gives Seller notice of any claims or actions, transmits to Seller copies of all documents and papers received by or served on Purchaser in connection therewith, permits Seller to control the defense thereof, and (at its own expense) fully cooperates with Seller in the defense thereof. Purchaser will indemnify and defend Seller with respect to the liabilities assumed by Purchaser as provided in 9.1.3 above; provided that Seller promptly gives Purchaser notice of any claims or actions, transmits to Seller copies of all documents and papers received by or served on Seller in connection therewith, permits Purchaser to control the defense thereof, and (at its own expense) fully cooperates with Purchaser in the defense thereof.

The parties entered the APA on May 30, 1990, and Textileather became the owner of the vinyl-manufacturing facility on June 4, 1990.

Six months after the purchase, Textileather decided to discontinue use of the RCRA units. Textileather began the closure process required by Ohio Administrative Code § 3745–66. However, during Textileather's efforts to close the RCRA units, the Ohio Environmental Protection Agency (“OEPA”) issued several Notices of Deficiency. These notices led to an extended period of negotiations between OEPA and Textileather. The Notices of Deficiency required Textileather to complete a detailed soil-sampling analysis, as well as follow OEPA-developed, site-specific clean-up standards and implement a ground-water-monitoring program. For a more detailed account of the interactions between Textileather and OEPA, see Textileather v. Korleski, Nos. 06AP955, 06AP–956, 2007 WL 2306968 (Ohio Ct.App. Aug. 14, 2007).

In 2001, OEPA approved a closure plan submitted by Textileather. In its letter regarding the approved closure plan, OEPA noted that compliance with this approved plan was expected and would be monitored. Textileather appealed portions of the approved plan. The Ohio Tenth District Court of Appeals affirmed the plan in part and reversed in part with instructions to OEPA to approve a plan consistent with its holding. OEPA has not yet issued a new plan. Throughout the course of the RCRA closure proceedings, including the negotiation of various plans and appeal of the approved plan, Textileather notified GenCorp that it believed, pursuant to the APA, GenCorp was obligated to indemnify and defend Textileather in these proceedings.

Textileather brought this action to recover the costs it incurred in the RCRA closure proceedings. Textileather and GenCorp filed cross-motions for summary judgment, and the district court granted GenCorp's motion and denied Textileather's motion. In particular, the district court held the APA to be unambiguous and determined that, under the terms of the APA, OEPA did not constitute a “third party” and Textileather's RCRA closure proceedings with OEPA did not constitute a “claim or action.”

II.

We review a grant of summary judgment de novo, construing the evidence and drawing all reasonable inferences in favor of the nonmoving party. Hirsch v. CSX Transp., Inc., 656 F.3d 359, 362 (6th Cir.2011).

A. Breach of Contract Claim

Textileather argues that the district court erred in its interpretation of the APA because that agreement requires GenCorp to defend and indemnify Textileather for the RCRA closure proceedings. We agree that, under the APA, GenCorp bears responsibility.

Per the terms of the APA, Ohio law governs the dispute. Under this law, contract interpretation is a question of law for determination by the court. Savedoff v. Access Grp., Inc., 524 F.3d 754, 763 (6th Cir.2008); Saunders v. Mortensen, 101 Ohio St.3d 86, 801 N.E.2d 452, 454 (2004). Ohio courts examine contracts in order to determine the intent of the parties, which is presumed to reside in the language of the agreement. Savedoff, 524 F.3d at 763. We must apply the plain language of the contract unless that language is ambiguous. Id. “[C]ommon words appearing in a written instrument will be given their ordinary meaning unless manifest absurdity results[ ] or unless some other meaning is clearly evidenced from the face or overall contents of the instrument.” Foster Wheeler Enviresponse, Inc. v. Franklin Cnty. Convention Facilities Auth., 78 Ohio St.3d 353, 678 N.E.2d 519, 526 (1997) (quoting Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146, 150 (1978), superseded by statute on other grounds ). “[A] writing, or writings executed as part of the same transaction, will be read as a whole, and the intent of each part will be gathered from a consideration of the whole.” Id.

1. Third Person

We begin by addressing whether OEPA is a “third person.” Section 9.1.1 of the APA defines GenCorp's retained liabilities as limited to those owed to “third persons.” The district court reasoned that “the parties cannot provide, nor has the Court found, any case holding that a regulatory obligation incurred by a party's own business decision is the same as a third-party claim or action.” In considering this issue, the district court explained that OEPA could act as a third party if “OEPA demands Textileather clean-up, but Textileather refuses, and ... OEPA then hires a contractor to come in and do the clean-up. In this situation, ... OEPA would be a ‘third person’ contemplated by the APA who may attempt to sue Textileather to recover its costs.” Because Textileather complied with OEPA's orders instead of disregarding them, the district court found only first-party regulatory obligations in this case, which it did not view as covered by the APA.

We interpret the phrase “third person” differently. To ascertain the common meanings of terms or phrases not defined in the language of contracts, Ohio courts routinely turn to dictionaries. See, e.g., United Ohio Ins. Co. v. Brooks, No. 12–11–04, 2012 WL 1099821, at *4 (Ohio Ct.App. Apr. 2, 2012) (slip copy) (citing Merriam Webster's Collegiate Dictionary and Black's Law Dictionary); Ohio Valley Associated Builders & Contractors v. Rapier Elec., Inc., 192 Ohio App.3d 29, 947 N.E.2d 1261, 1265 (2011). The APA does not define the phrase “third person,” but it is commonly understood to refer to a person or entity who is not a party to an interaction or agreement. See, e.g., Oxford English Dictionary (2002) (“[a]dditional to...