Westlake Vinyls, Inc. v. Goodrich Corp.

• Decision Date: 27 September 2007
• Docket Number: No. 5:03CV-240-R.,5:03CV-240-R.
• Citation: 518 F.Supp.2d 918
• Parties: WESTLAKE VINYLS, INC. Plaintiff v. GOODRICH CORPORATION Defendant; Third Party Plaintiff v. Polyone Corporation Third Party Defendant.
• Court: U.S. District Court — Western District of Kentucky

518 F.Supp.2d 918

WESTLAKE VINYLS, INC. Plaintiff v. GOODRICH CORPORATION Defendant; Third Party Plaintiff v. Polyone Corporation Third Party Defendant.

No. 5:03CV-240-R.

United States District Court, W.D. Kentucky, Paducah Division.

September 27, 2007.

Adam T. Goebel, Samuel D. Hinkle, IV, Stoll Keenon Ogden PLLC, Louisville, KY, Christopher J. Kayser, Larkins Vacura LLP, Portland, OR, David A. Super, E. Barrett Atwood, Nicholas A. Brady, R. Stan Mortenson, Samuel J. Waldon, Baker Botts LLP, Washington, DC, for Plaintiff.

Amanda M. Leffler, Paul A. Rose, Sallie C. Lux, Brouse McDowell, Akron, OH, E. Frederick Straub, Jr., J. Duncan Pitchford, Whitlow, Roberts, Houston & Straub, PLLC, Paducah, KY, Patrick J. Moran, Chadwick A. McTighe, Charles J. Cronan, IV, 0. Scott Barber, III, Thad M. Barnes, Margaret R. Grant, Phillip W. Collier, Stites & Harbison, PLLC, Louisville, KY, for Defendant; Third Party Plaintiff.

Clinton J. Elliott, Darryl Scott Lavery, David T. Klapheke, Matthew B. Gay, Raymond G. Smith, Richard W. Edwards, Edward H. Stopher, Boehl Stopher & Graves, LLP, Louisville, KY, Jeffrey M. Sanders, Sanders, Timso & Associates, PSC, Fort Thomas, KY, Jonathan A. Conte, Loveland, OH, Charles D. Walter, Boehl, Stopher & Graves, LLP, Paducah, KY, for Third Party Defendant.

MEMORANDUM OPINION

THOMAS B. RUSSELL, District Judge.

This matter is before the Court on Goodrich Corporation's Motion for Partial Summary Judgment on its Declaratory Claims (Counts I and II) against PolyOne Corporation (Docket # 456). PolyOne filed a response (Docket # 497) to which Goodrich has replied (Docket # 525). This matter is now ripe for adjudication. For the reasons that follow, Goodrich's Motion for Partial Summary Judgment on its Declaratory Claims is GRANTED.

BACKGROUND

During the 1950s, an industrial park was developed on the southern bank of the Tennessee River near Calvert City, Kentucky. Goodrich purchased approximately 150 acres of that park in 1951 for use as a manufacturing facility ("the Site"). Goodrich produced vinyl chloride monomer ("VCM") at the Site from 1953 to March 1, 1990. Goodrich began to use ethylene dichloride ("EDC"), a feedstock used to produce VCM, to make VCM in 1959 and in 1964 it added a new plant to convert EDC to VCM. The units that made EDC and the units that "cracked" EDC to form VCM were known collectively as the EDC/ VCM Plant. Goodrich also built and operated facilities at the Site that manufactured ethylene and chlorine, the feedstock for EDC, and a byproduct called caustic. This part of the Site was known as the Chlor-Alkali and Olefins Plant ("CA & 0 Plant").

Waste containing EDC was generated at the Site. Treatment included settlement ponds, landfills, and burn pits, Over a period of time, some of the EDC contained in this waste migrated through the soil to the groundwater underlying the Site.

In June of 1988, the Environmental Protection Agency ("EPA") issued a Record of Decision ("ROD") declaring a portion of the Site, specifically a landfill on the Site's eastern boundary, a "Superfund Site" subject to remediation requirements under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). Goodrich was required to secure approval of, implement, complete, and pay for remedial actions approved by the EPA and to provide reimbursement for future oversight costs.

The Kentucky Natural Resources and Environmental Protection Cabinet (the "Cabinet") issued a Hazardous Waste Management Permit to Goodrich effective October 29, 1989. The EPA issued a similar permit under the Hazardous Solid Waste Management Act Amendments ("HSWA") Post-Closure Permit, also effective October 29, 1989. Together the Kentucky and EPA permits form the Resource Conservation and Recovery Act ("RCRA") Part B Permit for the Site.¹

As the sole permittee, Goodrich must comply or ensure compliance with all terms and conditions of the Permit. These legal obligations include:

To install and maintain a groundwater monitoring system.

To treat all contaminated groundwater under the Site and to treat all contaminated groundwater migrating outside the Site's boundaries to underlying contiguous properties.

To develop and implement a corrective action program to clean up the groundwater to a concentration standard established by law and regulation. The program is known as the Plant-wide Corrective Action Program ("PCAP"). Goodrich's C-Stripper and extraction well system was approved by the regulators as the mandated corrective measure under the PCAP.

To ensure the PCAP complies with the groundwater protection standard.

To both operate and adequately fund the PCAP, specifically including the C-Stripper.

To clean up the groundwater until a demonstration is made that concentrations of targeted contaminants fall below the groundwater protection standard.

Non-compliance with any Permit condition would subject Goodrich to an enforcement action.

On March 1, 1990, pursuant to the Amended and Restated Master Conveyance Agreement ("1990 Agreement"), Goodrich sold the EDC/VCM Plant to Westlake Vinyls, Inc. In Section 8.3 of the 1990 Agreement, Westlake agreed to "indemnify and save Goodrich harmless from and against any Liability which results from, arises out of or occurs in connection with," among others, "remediation of any soil, surface water and/or groundwater resulting from or attributable to events occurring from and after the Closing Date and arising from or in any way incident to the ownership, use and/or operation of the VCM Plant after the Closing Date." Goodrich provided a reciprocal indemnity to Westlake with respect to contamination released before the closing date in Section 8.2.

As part of the 1990 Agreement to sell the EDC/VCM Plant, Westlake and Goodrich met with state and federal environmental regulators before the closing to discuss the status of the Permit. Goodrich advocated to the regulators that Westlake not be added to the Permit. Ultimately, the state did not require Westlake to become liable under the Part B Permit; provisions allowing Goodrich access to Westlake's property to conduct its remediation obligations under the Permit were deemed satisfactory.

On February 11, 1993, Goodrich began to divest itself of its PVC business, incorporating a new, wholly-owned subsidiary, Geon. Effective March 1, 1993, Goodrich transferred substantially all of the liabilities and assets of its PVC business that had been operated by the Geon Vinyls Division to newly-formed Geon. Goodrich sold all of its shares in a two-stage public offering that took place in May and November of 1993.

Goodrich originally intended to transfer all of its PVC-related assets at Calvert City to Geon in the divestiture, including the CA & 0 Plant and utilities. However, Westlake filed legal proceedings against Goodrich, claiming that the transfer of assets and impending IPO triggered the right of first refusal to purchase the CA & 0 Plant and utilities from Goodrich under the 1990 Agreement. As a result of Westlake's actions, the utilities and CA & 0 Plant were pulled back from the transaction at the last moment. Hence, Goodrich did not transfer ownership of the CA & 0 Plant assets and certain utilities at the Site in connection with the 1993 Bill of Sale and 1993 Separation Agreement, but did transfer all of its liabilities associated with the Calvert City Site, including all environmental liabilities and all existing and future obligations under the Permit and PCAP.

Geon's agreement to assume Goodrich's Calvert City obligations and to indemnify Goodrich for such obligations is set out in the 1993 Amended and Restated Assumption of Liabilities and Indemnification Agreement ("1993 ALIA"). The 1993 ALIA along with the 1993 Separation Agreement and 1993 Bill of Sale are referred to collectively as the "1993 Agreements." Generally, Geon assumed all of Goodrich's obligations and liabilities relating to the Goodrich PVC Business, which was defined to include all of Goodrich's Calvert City environmental liabilities and obligations associated with the EDC/VCM Plant, the CA & 0 Plant, the RCRA Permit and other permits, the PCAP, and the Calvert City Environmental Sites, and all of Goodrich's liabilities to Westlake arising out of the operation of the assets transferred to Westlake under the 1990 Agreement. The 1993 Separation Agreement states:

It is the intent of the parties that any and all liabilities of the Goodrich PVC Business, disclosed or undisclosed, heretofore or hereafter arising, of every nature whatsoever be transferred to and assumed by Geon and that Geon indemnify and hold Goodrich harmless with respect thereto.

This direct assumption of liabilities was accompanied by a series of parallel indemnity obligations on Geon's part.

The 1993 ALIA provided PolyOne, as Geon's successor, with the right to prosecute in Goodrich's name, any claims Goodrich may have against third parties for contractual indemnity:

PROVIDED FURTHER THAT Goodrich shall make available to [PolyOne] to the extent it can (but without the obligation for Goodrich to incur any costs or assume any liabilities) the benefit of any assumption of liability or indemnification provision in any agreement with third parties with respect to liabilities assumed by [PolyOne] hereby.

As part of the 1993 Agreements that separated the companies, PolyOne agreed to become the permittee under the Permit and accept ownership of certain real property located at the chemical facilities owned and operated by Goodrich's former Geon Vinyls Division in Calvert City.² PolyOne also agreed to become the owner of three tracts of real property known as the "Environmental Sites;" the former settlement ponds 1A and 2 and the RCRA Closure Cell, the Superfund Site, and the property on which C-Stripper is sited. PolyOne also agreed to take control of remediation activities at the Site in the 1993 ESA.

The 1993 Separation Agreement provided that transfers of...