Lion Oil Co. v. Tosco Corporation ( 1996 )

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No. 95-3270
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Lion Oil Company, Inc., *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Western District of Arkansas.
Tosco Corporation, *
*
Appellee. *
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Submitted: May 13, 1996
Filed: July 19, 1996
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Before BOWMAN, Circuit Judge, HENLEY, Senior Circuit Judge, and
WOLLMAN, Circuit Judge.
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WOLLMAN, Circuit Judge.
Lion Oil Company (Lion Oil) appeals the district court's1 grant of
judgment on the pleadings to Tosco Corporation (Tosco) denying Lion Oil's
claim that Tosco indemnify it for costs associated with the cleanup of
property located on an oil refinery site pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601
et seq. (CERCLA). We affirm.
I.
Tosco operated an oil refinery located on approximately 385 acres
near El Dorado, Arkansas, from 1972 to 1985. To handle hazardous materials
generated during this period, Tosco constructed
1
The Honorable Harry F. Barnes, United States District Judge
for the Western District of Arkansas.
two hazardous waste management units (HWMUs) regulated pursuant to the
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901 et seq.,
and several solid waste management units (SWMUs). On March 22, 1985, Lion
2
Oil purchased the refinery from Tosco. Section 2.8(d) of the Asset
Purchase and Sale Agreement (the Agreement) entered into by the parties on
that same date specifically provided that:
Tosco hereby agrees to indemnify and hold harmless [Lion Oil]
. . . for any and all (1) civil, legal and administrative
costs; (2) fines and penalties; (3) response, remedial and
clean-up costs, and (4) other costs or liability arising from
any sudden or non-sudden harm to the environment or public
health resulting from actions of Tosco prior to the Closing
Date. . . . Costs which result from harm inflicted or
discovered after the Closing Date, but which are the
consequence of actions taken by Tosco prior to this date, shall
be indemnified by Tosco.
The clean-up costs which Tosco agrees to indemnify include, but
are not limited to, all studies, site assessments, and any and
all other efforts taken to determine the extent of harm to
public health or the environment and/or to identify possible
remedial alternatives that could ameliorate such harm. Clean-
up costs include costs incurred directly by [Lion Oil] or by
employees, agents, or contractors hired by [Lion Oil].
. . .
Under this clause, [Lion Oil] shall be indemnified for all
liability and costs incurred under common law (federal or
state) or existing local, state or federal statutes that
protect public health and/or the environment, including but not
limited to, the following federal statutes: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
42 U.S.C. Sec. 9601-9657[] . . . .
The liability of Tosco pursuant to this Section 2.8 (d) shall
expire at the end of four (4) years after Date of Closing and
shall not exceed a total of $1,000,000 in the aggregate. . . .
2
Lion Oil was known as XYZ Inc. at the time of the
transaction.
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In August 1986, the parties executed an Amendment and Release (the
Release). In exchange for Tosco's agreement to accept at a discount
prepayment by Lion Oil of Lion Oil's remaining note obligation for the
purchase price, the Release provided that:
Lion [Oil] hereby extinguishes, discharges, releases and
abandons any and all rights and claims against Tosco which it
has or may have pursuant to the provisions of subsection 2.8(d)
of the March 22 Agreement, or to the extent any such claims
would be covered by the provisions of said subsection 2.8(d)
even though also potentially covered within the general
indemnification provisions of subsection 2.8(a), . . . whether
now existing or arising in the future, at common law, or in
equity, or created by any rule of law, regulatory order,
statute or otherwise, and whether known or unknown.
In November 1988, Lion Oil decided to close the two HWMUs and filed
for a RCRA post closure permit. The permit, which was approved in
September 1990, required Lion Oil to conduct post-closure maintenance and
monitoring of the HWMUs. In addition, the permit required Lion Oil to
investigate and correct any potential leakage of hazardous materials from
the SWMUs, in violation of CERCLA. A preliminary investigation disclosed
potential releases of hazardous waste from approximately eighteen SWMUs,
some of which had been constructed by Tosco. Lion Oil estimates that it
may cost as much as $30,000,000 to bring the SWMUs into compliance with
CERCLA.
In April 1994, Lion Oil brought suit against Tosco, seeking
contribution under CERCLA for the clean-up costs of the property. In May
1995, Tosco filed a motion for judgment on the pleadings, which the
district court granted.
II.
Lion Oil contends that the district court erred in concluding that
the Agreement and the Release combined to constitute a general
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release of Tosco's CERCLA liability. Lion Oil alleges that the district
court should have allowed the admission of extrinsic evidence to
demonstrate the parties' actual intent in drafting the documents.
We review de novo the district court's grant of a motion for judgment
on the pleadings. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.
1990). Judgment on the pleadings is appropriate if the moving party
clearly establishes that there are no material issues of fact and that he
is entitled to judgment as a matter of law. National Car Rental v.
Computer Associates, 991 F.2d 426, 428 (8th Cir.), cert. denied, 114 S. Ct.
176 (1993). Under this strict standard, we accept as true all facts pled
by the non-moving party and draw all reasonable inferences from the
pleadings in his favor. Id.
CERCLA provides that a former owner or operator of a facility is
jointly and severally liable for cleanup associated with hazardous waste
sites. 42 U.S.C. § 9607(a). CERCLA does, however, permit one party to
insure, hold harmless, or indemnify another party for liability under the
statute. § 9607(e); see also Fisher Dev. Co. v. Boise Cascade Corp., 37
F.3d 104, 107 (3d Cir. 1994) (parties may allocate among themselves
financial burden for cleaning up hazardous waste site under CERCLA).
Courts will enforce a contract allocating CERCLA liability when "the
provisions [of the contract] evince a clear and unmistakable intent of the
parties to do so." Keywell Corp. v. Weinstein, 33 F.3d 159, 165 (2d Cir.
1994).
Lion Oil contends that the contracts are ambiguous and that extrinsic
evidence should therefore have been admitted to show the true intention of
the parties. Specifically, Lion Oil seeks to offer evidence to show that
Section 2.8(d) was meant to cover only the two HWMUs and was not a general
limitation on potential CERCLA liability for the SWMUs.
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Under Arkansas law, which the parties agree governs the contracts,
the language contained in the contract is the best evidence of the parties'
intentions. First Nat'l Bank v. Griffin, 832 S.W.2d 816, 818-19 (Ark.
1992), cert. denied, 113 S. Ct. 1280 (1993). Thus, we first look to the
contract itself to determine if it is ambiguous -- not to extrinsic
evidence offered to contradict the plain meaning of the contract. Id.
The district court found that "[t]he Purchase Agreement and the
Release are clear, unequivocal and unambiguous in their allocation of
Tosco's liability and its release therefrom." We agree that the plain
language contained in the contracts compels such a result. The Agreement
contained a broad indemnity provision that encompassed environmental harm
caused by Tosco. Indeed, Section 2.8(d) specifically referred to CERCLA.
The Release absolves Tosco from all obligations under Section 2.8(d). In
these circumstances, the Agreement and Release unequivocally combine to
allocate to Lion Oil any potential liability arising under CERCLA. The
parol evidence rule prohibits the admission of extrinsic evidence to alter
these otherwise unambiguous contracts. Griffin, 832 S.W.2d at 818-20; see
also Rainey v. Travis, 850 S.W.2d 839, 840 (Ark. 1993) (extrinsic evidence
not admissible when agreement is unambiguous on its face).
We note that this is not a case in which an unsophisticated party
hastily entered into a contract. It is clear that Lion Oil was aware that
the purchase of an oil refinery involved a risk of significant potential
environmental liability, as exhibited in the detailed provisions of the
Agreement. As the district court recognized, "The fact that hindsight may
have proven the Agreement to be a bad business decision for Lion Oil does
not negate its validity."
The judgment is affirmed.
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A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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