Travelers Indem. Co. v. Dingwell

• Decision Date: 08 February 1989
• Docket Number: Nos. 88-1953,s. 88-1953
• Parties: , 15 Fed.R.Serv.3d 27 The TRAVELERS INDEMNITY COMPANY, et al., Plaintiffs, Appellees, v. Richard A. DINGWELL, d/b/a McKin Company, et al., Defendants, Appellees (Two Cases). Appeal of CHICAGO INSURANCE COMPANY, Defendant. The TRAVELERS INDEMNITY COMPANY, et al., Plaintiffs, Appellants, v. Richard A. DINGWELL, d/b/a McKin Company, et al., Defendants, Appellees. Appeal of AMERICAN POLICYHOLDERS INSURANCE COMPANY, Defendant. AMOCO OIL COMPANY, et al., Plaintiffs, Appellees, v. Richard A. DINGWELL, d/b/a McKin Company, Defendant, Appellee (Three Cases). Appeal of CHICAGO INSURANCE COMPANY, Intervenor. Appeal of The TRAVELERS INDEMNITY COMPANY, et al., Intervenors. Appeal of AMERICAN POLICYHOLDERS INSURANCE COMPANY, Intervenor. to 88-1958. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 629

884 F.2d 629

30 ERC 1409, 15 Fed.R.Serv.3d 27

The TRAVELERS INDEMNITY COMPANY, et al., Plaintiffs, Appellees, v. Richard A. DINGWELL, d/b/a McKin Company, et al.,

Defendants, Appellees (Two Cases).

Appeal of CHICAGO INSURANCE COMPANY, Defendant.

The TRAVELERS INDEMNITY COMPANY, et al., Plaintiffs, Appellants, v. Richard A. DINGWELL, d/b/a McKin Company, et al.,

Defendants, Appellees.

Appeal of AMERICAN POLICYHOLDERS INSURANCE COMPANY, Defendant.

AMOCO OIL COMPANY, et al., Plaintiffs, Appellees, v. Richard A. DINGWELL, d/b/a McKin Company, Defendant,

Appellee (Three Cases).

Appeal of CHICAGO INSURANCE COMPANY, Intervenor.

Appeal of The TRAVELERS INDEMNITY COMPANY, et al., Intervenors.

Appeal of AMERICAN POLICYHOLDERS INSURANCE COMPANY, Intervenor.

Nos. 88-1953 to 88-1958.

United States Court of Appeals,

First Circuit.

Heard Feb. 8, 1989.

Decided Sept. 7, 1989.

Conrad K. Harper with whom Marc A. Chatman, Geraldine Mack, Simpson Thacher & Bartlett, New York City, John J. O'Leary, Jr., Catherine R. Connors, Benjamin W. Lund and Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, Me., were on brief, for The Travelers Indem. Co., et al.

Rosanna Sattler with whom Richard M. Rosenthal, Posternak, Blankstein & Lund, Boston, Mass., Peter S. Plumb and Murray, Plumb & Murray, Portland, Me., were on brief, for appellant Chicago Ins. Co.

James D. Poliquin, Portland, Me., Louis G. Adolfsen, Darrel M. Seife, Ann Marie Forte, Siff, Rosen & Parker, P.C., New York City, and Norman, Hanson & DeTroy, Portland, Me., on brief, for appellant American Policyholders Ins. Co.

William P. Skinner with whom William F. Greaney and Covington & Burling, Washington, D.C., were on brief, for appellees Amoco Oil Co., et al.

Before BOWNES, Circuit Judge, COFFIN, Senior Circuit Judge, and TORRUELLA, Circuit Judge.

TORRUELLA, Circuit Judge.

This is a consolidated appeal from two separate decisions by the district court. The underlying dispute involves four groups of litigants. From 1963 to 1977, Richard Dingwell, doing business as The McKin Company ("Dingwell"), operated a plant to clean petroleum and chemical storage tanks in the town of Gray, Maine. He took out general liability insurance policies with primary insurers and excess insurers. His primary insurers were Travelers Indemnity Company and Charter Oak Fire Insurance Company (the "primary insurers"). His excess insurers were American Policyholders Insurance Company, Chicago Insurance Company, and National Fire Insurance Company of Pittsburgh, Pennsylvania (the "excess insurers"). ¹ The fourth set of litigants consists of fifteen companies that either generated waste or transported it for processing to Dingwell's plant (the "Generator Group" or the "Group").

The factual background of this dispute is relatively straightforward. In 1977, the town of Gray ordered Dingwell's business shut down when it became apparent that hazardous wastes were being dumped at the site. The Environmental Protection Agency ("EPA") and the Maine Department of Environmental Protection ("MDEP") notified Dingwell, as owner and operator of the site, and the generators and transporters of the hazardous waste (including the Generator Group) that they were Potentially Responsible Parties ("PRPs") for the contamination under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sec. 9601, et seq., and its Maine counterpart, the Uncontrolled Hazardous Substance Sites Law, Me.Rev.Stat.Ann. tit. 38, Sec. 1365. Under these statutes, the PRPs were strictly, jointly and severally liable for all costs incurred in site investigation and cleanup. The insurers agreed to pay Dingwell's legal expenses in connection with these administrative proceedings, but expressly reserved their right to deny indemnification for any and all damages for which Dingwell might be held liable.

To avoid protracted litigation, in 1987 the Generator Group and some 300 other PRPs signed a proposed consent decree with the EPA and MDEP, pursuant to which they were obligated to spend roughly $12.5 million to remedy the effects of the dumping. The Generator Group also sought to negotiate a settlement of their claims for contribution and indemnity against Dingwell. The Group initially sought to negotiate a settlement with Dingwell's insurers, but received no response from them. In May 1987, Dingwell's personal counsel invited the Group to enter into direct negotiations with Dingwell. The Group stated that it would do so only if Dingwell's insurers denied coverage or reserved the right to deny coverage for the Group's claims. When the insurers reiterated the reservation of their right to deny coverage, the Group entered into direct negotiations with Dingwell. The insurers were invited to participate in these settlement discussions, but refused to do so. Ultimately, the two sides reached the following agreement in September 1988: Dingwell would assume 65% of the cleanup costs, join the Consent Decree, and assign to the Group his indemnification rights against his insurers, in return for which the Group agreed to waive its claims against Dingwell personally and seek satisfaction of Dingwell's obligations solely from assets that might be available under his insurance policies.

The agreement was to take effect on September 30, 1987. The primary insurers, who opposed the settlement, filed a declaratory judgment action in the district court on September 28, 1987 against Dingwell and the excess insurers, seeking a declaration that they were not liable to indemnify Dingwell for the cleanup costs (the "declaratory judgment action"). The complaint contained twenty-two causes of action under state law, and one cause of action under federal law. Dingwell sought to dismiss the complaint because it failed to join indispensable parties--the members of the Generator Group.

On November 2, 1987, members of the Group filed suit in the district court against Dingwell, seeking statutory contribution, common law indemnification, and contractual damages relating to cleanup of the plant site (the "indemnification action"). Pursuant to the settlement agreement between the parties, and with Dingwell's assent, the plaintiffs filed a motion for entry of a consent judgment. The primary and excess insurers moved to intervene to oppose entry of a consent judgment and seek a stay of the proceedings until the previously filed declaratory judgment action was resolved.

On July 27, 1988, the district court granted Dingwell's motion to dismiss the declaratory judgment action for failure to join indispensable parties. See Travelers Indemnity Company v. Dingwell, 691 F.Supp. 503 (D.Me.1988). The court first decided that the insurers' one federal claim was moot, and therefore that the only remaining source of federal court jurisdiction was diversity of citizenship. Joining all members of the Group would eliminate that source of jurisdiction because one of the Group members--Champion International Corporation ("Champion")--had the same jurisdiction as one of the insurers. Because the insurers had conceded that all members of the Group qualified as necessary parties under Fed.R.Civ.P. 19(a)(2), ² but see infra n. 7, the only issue before the court was whether the lawsuit should be dismissed because the Group members were indispensable for purposes of Rule 19(b). After considering the four factors stated in Rule 19(b), the court concluded that the Group members were indispensable and that the action had to be dismissed.

In a separate order issued the same day, the district court denied the insurers' motions to intervene in the indemnification action and granted the Group's motion for entry of a consent judgment. See Amoco Oil Company v. Dingwell, 690 F.Supp. 78 (D.Me.1988). The court first held that the insurers were not entitled to intervene as of right under Fed.R.Civ.P. 24(a) or permissively under Rule 24(b). ³ It held that the insurers were not entitled to intervene as of right for two reasons. First, they did not have a significantly protectable interest in the subject matter of the suit. By reserving the right to deny coverage, the insurers relinquished their right to manage Dingwell's defense. The insurers' focus--whether their policies covered Dingwell's obligations--was not directly implicated in an action to determine the extent of Dingwell's obligations. Second, the insurers' interests would not be impaired by the entry of a consent judgment in their absence. The insurers could raise coverage defenses in any action brought by the Group to enforce the settlement agreement. But even if resolving the case in the absence of the insurers would impair their interests, the court noted that they would not be entitled to intervene because they did not have a direct interest in the main action.

The district court then held that the insurers were not entitled to permissive intervention under Rule 24(b)(1) for the same reasons that they were not entitled to intervene as of right. The court also held that the insurers were not entitled to permissive intervention under Rule 24(b)(2) because there were no independent jurisdictional grounds for their claims and counterclaims.

As regards the motion for entry of a consent judgment, the court scrutinized the agreement closely because of the possibility of collusion between the Group and Dingwell against the insurers. Although it approached the settlement agreement with skepticism, the district court concluded that the liability apportionment was fair because Dingwell was relatively more negligent and less cooperative than the members of the Group.

The primary and excess insurers appeal both rulings by the district court. ⁴ We affirm, relying to a large extent on the lucid opinions of the district court.

The Declaratory Judgment Action

The insurers' core contention is that the settlement agreement between Dingwell and the Group only became effective after they had filed...