Union Oil Co. of California v. Terrible Herbst

• Decision Date: 09 June 2003
• Docket Number: No. 01-17176.,No. 01-16683.,01-16683.,01-17176.
• Citation: 331 F.3d 735
• Parties: UNION OIL COMPANY OF CALIFORNIA, Plaintiff-Appellant, v. TERRIBLE HERBST, INC., Defendant-Appellee. Union Oil Company of California, dba/Unocal, a California Corporation, Plaintiff-Appellant, v. Terrible Herbst, Inc., a Nevada Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

331 F.3d 735

UNION OIL COMPANY OF CALIFORNIA, Plaintiff-Appellant, v. TERRIBLE HERBST, INC., Defendant-Appellee.

Union Oil Company of California, dba/Unocal, a California Corporation, Plaintiff-Appellant, v. Terrible Herbst, Inc., a Nevada Corporation, Defendant-Appellee.

No. 01-16683.

No. 01-17176.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 7, 2002.

Filed June 9, 2003.

COPYRIGHT MATERIAL OMITTED

Alice A. Seebach, Seebach & Seebach, Los Angeles, California; Rodney M. Jean, Lionel Sawyer & Collins, Las Vegas, NV, for the plaintiff-appellant.

J. Terry Schwartz and Craig A. Parton, Price, Postel & Parma LLP, Santa Barbara, California; Sean T. Higgins, Las Vegas, NV, for the defendant-appellee.

Appeal from the United States District Court for the District of Nevada; Roger L. Hunt, District Judge, Presiding. D.C. No. CV-98-01579-RLH.

Before B. FLETCHER, RICHARD S. ARNOLD,^* and RAWLINSON, Circuit Judges.

Opinion by Judge RICHARD S. ARNOLD; dissent by Judge RAWLINSON.

OPINION

RICHARD S. ARNOLD, Circuit Judge:

This appeal involves a contract dispute over who is responsible for cleaning up pollution beneath a gas station. Union Oil Company of California (Unocal) bought the service station from Terrible Herbst, Inc., in 1986 on the condition that Herbst would clean up the site. In 1990, the Nevada Department of Environmental Protection (NDEP) relieved Herbst of the duty to monitor the site but did not relieve it of liability for any damage it had already done there. The site remained polluted, but it was not clear whether Unocal or Herbst was at fault. Seven years later, as a precursor to settlement talks over who was responsible for cleaning up the land, Unocal and Herbst signed a series of agreements in which Herbst agreed that the statute of limitations would not run and that it would waive its statute-of-limitations defense as to any claims that Unocal "may assert" against Herbst. A year later, Unocal brought this breach-of-contract suit against Herbst and received a jury verdict of approximately a million dollars. The District Court, however, entered judgment as a matter of law for Herbst on the grounds that the waiver agreement was invalid under Nevada law for lack of consideration, and that the statute of limitations had run on all of Unocal's claims. Additionally, the District Court took the view that the contract applied only to claims that Unocal "may assert," and that the parties intended that phrase to mean claims which were valid, i.e., not time barred. In the alternative, the District Court conditionally granted Herbst's motion for a new trial, an action that is also being appealed.

We respectfully disagree with the District Court's interpretation of Nevada law. If a party withholds the assertion of a nonfrivolous claim in reliance on an agreement, that forbearance is sufficient consideration to support a contract. We also think the District Court ascribed a meaning to the waiver agreement that was not supported by the language of the agreement. The District Court also disagreed with some of the factual conclusions of the jury and granted Herbst's request for a new trial. We think that the jury's verdict was not against the clear weight of the evidence. Therefore, we reverse the judgment of the District Court, both on the statute-of-limitations question and on the order for a new trial, and order that the jury verdict be reinstated.

I.

Terrible Herbst, Inc., the defendant, purchased land in Las Vegas, Nevada, in 1981 and built a service station on it. In 1986, while negotiating the sale of the station to Unocal, the parties began to have concerns that pollutants might have escaped into the soil from the gas station. To ensure that the sale would go through, Herbst signed a letter agreement with Unocal promising to monitor and remediate any contamination at the site until the NDEP certified that the contamination problem had been solved. Unocal bought the gas station and assumed operations there.

Herbst continued to clean and monitor the site for the next three years. In February of 1989, the amount of fuel contamination at the site suddenly increased. The NDEP ordered Unocal to start monitoring the site as well, because the contaminant was found to contain some of Unocal's proprietary fuel additives. However, Unocal's investigators claimed that they could find no leaks in their storage tanks or records indicating that their own fuel was unaccounted for. In May of 1990, the NDEP said that Herbst need no longer monitor the site, but reserved the right to hold Herbst liable for any pollution Herbst had caused. The NDEP did not request that Herbst do anything regarding the site during the next twelve years. Herbst understood NDEP's action to mean that its obligations under the letter agreement with Unocal had been fulfilled. Meanwhile, Unocal continued to incur costs monitoring and cleaning the site.

Unocal wanted to be indemnified for its clean-up costs and contacted Herbst about the site in September of 1997. Herbst's Nevada counsel signed a written waiver of Herbst's statute-of-limitations defense to forestall Unocal from immediately filing suit. The waiver agreement read:

Union Oil Company of California ("Union Oil") and Terrible Herbst, Inc. ("Herbst") are attempting to resolve Union Oil's claims relating to Herbst's liability for environmental contamination at and around 101 N. Decatur Boulevard, Las Vegas, Nevada. In furtherance of that effort, Herbst hereby agrees to toll and extend until March 12, 1998, the limitations period on any cause of action that Union Oil may assert against Herbst arising from or relating to the contamination. Herbst hereby waives any defense based on any statute of limitations to any such cause of action in accordance with this agreement. This agreement shall bind Herbst's heirs, executors, agents, principals, assigns, and successors.

This agreement was extended five times as the negotiations continued. Unocal filed its complaint in mid-November of 1998, and the case went to trial in June of 2001. Both parties agreed to try the limitations issue before the District Court and submit all other issues to the jury.

The District Court held that the agreement did not toll or waive the statute of limitations. It concluded that Unocal's claims were already time-barred when the agreement was signed, and that Nevada law would not allow the forbearing to bring a time-barred claim to serve as consideration for a contract. Alternately, the District Court ruled that the contract was meant to encompass only claims that were viable at the time of contracting and thus was not meant to apply to expired claims. The Court announced that it intended to grant judgment as a matter of law for Herbst and dismiss all of Unocal's claims, including its continuing-trespass and nuisance claims.

The District Court (prudently) deferred handing down this ruling, and submitted the contract issue to the jury so that a jury verdict would be on the record. The jury deliberated for three days, determined that Herbst had violated its contract with Unocal, and returned a verdict in favor of Unocal in the amount of $1,086,000 for past and future costs, which was 58 per cent. of the damages sought by Unocal. The District Court then vacated the jury's verdict and granted judgment for Herbst as a matter of law for the reasons stated above. The District Court also determined that the jury's verdict was contrary to the weight of the evidence and conditionally granted Herbst's motion for a new trial. Unocal promptly filed an appeal with this Court.

II.

The most important question on this appeal, and the one we address first, is whether Nevada law allows the forbearing to bring a stale claim to serve as consideration for an agreement waiving a statute-of-limitations defense. The Nevada Supreme Court has not decided this question, so we must apply the law as we believe the Supreme Court of Nevada would. Santana v. Zilog, Inc., 95 F.3d 780, 783 (9th Cir.1996). This Court reviews the District Court's interpretation of Nevada's law de novo. Wetzel v. Lou Ehlers Cadillac, 222 F.3d 643, 646 (9th Cir. 2000) (en banc).

The District Court decided as a matter of law that Unocal's forbearance from filing suit could not be consideration. Because of the lack of direct authority in Nevada addressing this question, the District Court sought guidance from the Nevada Supreme Court's interpretation of a statute-of-limitations rule that involves the revival of expired claims: the latter half of Nevada Revised Statutes 11.200.¹

The Nevada Supreme Court interpreted that statute to mean that a debt must be currently enforceable in order for a payment on that debt to extend the time in which suit can be brought on a contract. Havas v. Long, 85 Nev. 260, 262, 454 P.2d 30, 31 (1969), citing Riff v. Kowal, 76 Nev. 271, 352 P.2d 819 (1960). The District Court determined that the requirement that a debt be currently enforceable is an inherent requirement that applies to all statute-of-limitations provisions, including both the first half of N.R.S. 11.200 and

N.R.S. 11.390.²

We respectfully disagree with this conclusion and believe there are several reasons to think that the Nevada Supreme Court never intended for the currently-enforceable requirement to be applied so broadly. Our reasoning is guided by the over arching principle that we should not make unwarranted assumptions in favor of the statute-of-limitations defense. See Howard v. Waale-Camplan & Tiberti, 67 Nev. 304, 312, 217 P.2d 872, 876 (1950) ("While the plea of the statute of limitations is not an unconscionable defense, it is not such a meritorious defense that either the law or the facts should be strained in aid of it, nor should this court indulge in any presumption in its favor.")³

With this approach in mind, we conclude that the Nevada Supreme Court intended the holding of Havas to be a narrow one. In Havas, the Nevada...