AL Tech Specialty Steel Corp. v. Allegheny International Credit Corp.

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
1-17-1997
Al Tech Spec Steel v. Algheny Intl Credit
Precedential or Non-Precedential:
Docket 95-3415
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 95-3415
____________
AL TECH SPECIALTY STEEL CORPORATION,
Appellant
v.
ALLEGHENY INTERNATIONAL CREDIT CORPORATION;
SUNBEAM CORPORATION; SUNBEAM HOLDINGS, INC.,
ALMET/LAWNLITE, INC; CHEMETRON CORPORATION;
INTERGRATED SPECIALTIES, INC.;
ALLEGHENY INTERNATIONAL (USA), INC.;
AL INDUSTRIAL PRODUCTS, INC.;
ALLEGHENY INTERNATIONAL EXERCISE, CO.;
WOODSHAFT, INC.; CHEMETRON INVESTMENTS, INC.,
INFOWSITCH, INC.; ELISKIM, INC.
____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 93-01445)
____________________
Argued: May 6, 1996
Before: GREENBERG, ALITO, and MCKEE, Circuit Judges:
(Opinion Filed: January 17, 1997 )
____________________
David P. Flynn, Esq.
Kevin M. Hogan, Esq. (Argued)
Phillips, Lytle, Hitchcock,
Blaine & Huber
3400 Marine Midland Center
Buffalo, New York 14203
Attorneys for Appellant
William L. Gardner, Esq.
Anthony C. Roth, Esq. (Argued)
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
Attorneys for Appellee
1
____________________
OPINION OF THE COURT
____________________
ALITO, Circuit Judge:
This is an appeal from a district court order affirming
the bankruptcy court's disallowance of AL Tech Specialty Steel
Corporation's ("AL Tech") claim against Allegheny International,
Inc. ("Allegheny International") in Allegheny International's
Chapter 11 proceeding. AL Tech's claim was based on certain
environmental liabilities, under the federal Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA") and the New York Oil Spill Act, at two steel plants
that it purchased from Allegheny International's corporate
predecessor in 1976. The bankruptcy court held that AL Tech's
claim was not barred by either § 502(c) or § 502(e)(1)(B) of the
Bankruptcy Code, 11 U.S.C. §§ 502(c),(e)(1)(B), and it estimated
the total remediation cost at the two plants for which Allegheny
International might share responsibility at $12,792,000. The
bankruptcy court also ruled that Allegheny International's
equitable share of AL Tech's federal liabilities was zero,
primarily because of a dollar-for-dollar discount taken off the
purchase price by the current owner of AL Tech's stock in 1989.
It further held that the New York statute created a private right
of action but that any action that AL Tech could bring against
Allegheny International under the New York statute was time-
2
barred. The district court affirmed the bankruptcy court's order
in all respects.
We conclude that there was insufficient evidence before
the bankruptcy court to support the finding of a dollar-for-
dollar discount in the 1989 purchase of AL Tech by its current
corporate parent and that any discount that may have been given
accrued to the benefit of AL Tech's parent and not to AL Tech.
We therefore reverse the order of the district court as it
relates to Allegheny International's equitable share of AL Tech's
federal environmental liabilities. We also conclude that the
bankruptcy court applied the wrong limitations period in
assessing the portion of AL Tech's claim that relied on the New
York statute. However, in light of a 1995 decision by the New
York Court of Appeals on the availability of a private right of
action under the New York statute, we remand that issue for
application of the holding of that decision to the present case.
We affirm the order of the district court as it relates to §§
502(c) and 502(e)(1)(B) and the bankruptcy court's estimation of
remediation costs to be allocated between AL Tech and Allegheny
International.
I.
The factual and procedural history of this case may be
summarized as follows. AL Tech bought two steel plants in
Dunkirk and Watervliet, New York, from Allegheny International's
predecessor, Allegheny Ludlum Industries ("Allegheny Ludlum"), in
1976. (Allegheny Ludlum had owned and operated the plants since
1937.) Since then, AL Tech's stock has been sold three times: in
3
1981, to GATX Corporation; in 1986, to Rio Algom, Inc. and Rio
Algom Limited (collectively "Rio Algom"); and most recently (in
1989) to Sammi Steel Company, Limited ("Sammi"). Environmental
assessments of the two plants performed in the mid- and late
1980s revealed numerous areas of contamination with oil,
polychlorinated biphenyls ("PCBs"), and other hazardous
substances that would require costly remediation in order to come
into compliance with applicable environmental statutes and
regulations.
After Allegheny International filed a bankruptcy
petition in 1988, AL Tech filed a timely proof of claim, alleging
that Allegheny International was liable for a share of the
incurred, contingent, and unliquidated response costs required to
remediate the contamination at the two plants. The bankruptcy
court initially denied the claim, but its decision was reversed
by the district court, In re Allegheny Int'l, Inc., 126 B.R. 919
(W.D. Pa. 1991), and a panel of this court affirmed by judgment
order, Allegheny Int'l, Inc. v. AL Tech Specialty Steel Corp.,
950 F.2d 721 (3d Cir. 1991) (table). The case was remanded to
the bankruptcy court for a trial to allow for estimation and
allocation of AL Tech's claim.
On the basis of evidence presented at that 1992 trial,
the bankruptcy court (1) estimated the allowable liabilities at
$12,792,000, (2) found that Sammi had received a $22 million
discount (3) held, primarily for that reason, that Allegheny
International's equitable share of the cleanup costs was zero,
and (4) held that AL Tech's Oil Spill Act claim was time-barred
4
by the applicable limitations period. In re Allegheny Int'l,
Inc., 158 B.R. 361 (Bankr. W.D. Pa. 1993). The district court
affirmed the bankruptcy court's order in its entirety. AL Tech
Specialty Steel Corp. v. Allegheny Int'l, Inc., No. 93-1445 (W.D.
Pa. June 27, 1995). This appeal followed.
On appeal, AL Tech argues that there was no discount;
that if there was one, it was received by Sammi, not AL Tech;
that the bankruptcy court abused its discretion in focusing on
only one equitable factor when it concluded that Allegheny
International's equitable share was zero; that the bankruptcy
court erred in finding that AL Tech failed to prove that
Allegheny International was responsible for any of the PCB
contamination at one of the contaminated sites, Willowbrook Pond;
that the bankruptcy court underestimated response costs at
Willowbrook Pond (at $1.3 million, versus AL Tech's estimate of
approximately $14 million); and that the bankruptcy court applied
the wrong limitations period and used the wrong triggering event
in holding AL Tech's Oil Spill Act claim to be time-barred.
Allegheny International disagrees on every point and
raises two independent grounds for affirming the district court:
first, that AL Tech's claim is barred by Bankruptcy Code §
502(e)(1)(B) because it is a contingent co-liability to the
government, rather than a direct claim against Allegheny
International; and second, that it should be disallowed pursuant
to Bankruptcy Code § 502(c) because AL Tech has not taken
sufficient steps to remove the contingencies (i.e., has not done
enough to assess and clean up the contamination since 1976). We
5
address Allegheny International's arguments first and then turn
to AL Tech's arguments.
II.
Section 502(e)(1)(B) of the Bankruptcy Code provides:
(e)(1) . . . [T]he court shall disallow any claim for
reimbursement or contribution of an entity
that is liable with the debtor on or has
secured, the claim of a creditor, to the
extent that --
. . .
(B) such claim for reimbursement or contribution is
contingent as of the time of allowance or
disallowance of such claim for reimbursement
or contribution.
11 U.S.C. §§ 502(e)(1), (e)(1)(B).
Allegheny International argues that § 502(e)(1)(B) bars
AL Tech's claim. The bankruptcy court originally agreed with
Allegheny International, but in its 1991 decision, the district
court held that this section barred only contingent claims on
which the claimant and the debtor are co-liable to a third party
and that to the extent that AL Tech's claim against Allegheny
International was based on CERCLA, 42 U.S.C. §§ 9601 et seq.,1 it
was not excluded because it was a direct claim against Allegheny
International. 126 B.R. at 923-24. This court affirmed the
district court's order by judgment order. 950 F.2d 721 (3d Cir.
1991)(table). On remand, the bankruptcy court considered itself
bound by the district court's 1991 decision under the "law of the
1. The parties did not brief the applicability of § 502(e)(1)(B)
to AL Tech's Oil Spill Act claim in the earlier appeal to the
district court. In the present appeal, Allegheny International
has again focused its arguments on the applicability of §
502(e)(1)(B) to CERCLA claims, leaving the Oil Spill Act claim
virtually unaddressed. We thus read Allegheny International's
argument as limited to AL Tech's CERCLA claim.
6
case" doctrine, and it thus declined Allegheny International's
invitation to revisit the issue in light of two 1992 bankruptcy
court decisions, In re Cottonwood Canyon Land Co., 146 B.R. 992
(Bankr. D. Colo. 1992), and In re Eagle-Picher Indus., Inc., 144
B.R. 765 (Bankr. S.D. Ohio 1992), aff'd, 164 B.R. 265 (S.D. Ohio
1994). 158 B.R. at 367.
In this appeal, Allegheny International urges us to
reexamine the question whether AL Tech's claim is barred by §
502(e)(1)(B), but under the law of the case doctrine, we believe
that it would be inappropriate for us to do so. Under the law of
the case doctrine, an appellate court should generally decline to
reconsider a question that was decided in a prior appeal. See 18
Charles A. Wright, et al., Federal Practice and Procedure § 4478,
at 788 (1981 & 1996 Supp.). "The doctrine is not a
jurisdictional limitation; rather, it `merely expresses the
practice of courts generally to refuse to reopen what has been
decided.'" Alliance for Cannabis Therapeutics v. DEA, 15 F.3d
1131, 1134 (D.C. Cir. 1994) (quoting Messenger v. Anderson, 225
U.S. 436, 444 (1912)). Accordingly, it is appropriate for an
appellate court to reconsider a decision made in an earlier
appeal in exceptional circumstances, such as where there has been
an intervening change in the law, where new evidence has become
available, or where reconsideration is necessary to prevent clear
error or a manifest injustice. 18 Charles A. Wright, et al.,
supra, § 4478, at 790.
In this case, the panel that heard the prior appeal
necessarily decided that AL Tech's claim was not barred by §
7
502(e)(1)(B). The law of the case doctrine applies to this
decision even though it was rendered by judgment order because
that doctrine "applies both to issues expressly decided by a
court in prior rulings and to issues decided by necessary
implication." Bolden v. SEPTA, 21 F.3d 29, 31 (3d Cir. 1994);
see also United States v. Local 560 (I.B.T.), 974 F.2d 315, 329-
30 (3d Cir. 1992) (applying doctrine to judgment order).
Moreover, we do not believe that there are exceptional
circumstances here that make it appropriate to reconsider the
prior panel's decision. While Allegheny International points to
two intervening bankruptcy court decisions that disagree with the
district court's decision in this case, those decisions do not
represent the type of authority necessary to invoke the exception
that applies when there has been an intervening change in the
law. Nor do those decisions convince us that a refusal to
reconsider the issue would amount to clear error or a manifest
injustice.
We likewise reject Allegheny International's argument
that this court's opinion in In re Penn Cent. Transp. Co., 944
F.2d 164 (3d Cir. 1991), cert. denied, 503 U.S. 906 (1992),
represents an intervening change in the law sufficient to relax
the usual strictures of the law of the case doctrine. There are
two problems with Allegheny International's argument. First,
while the decision in Penn Central came after the district
court's 1991 decision, it was handed down more than two months
before the filing of judgment order by which this court affirmed
the district court's order. Second, the Penn Central decision
8
did not directly address the issue at hand but rather concerned
the government's ability to assert CERCLA claims against a
reorganized debtor where the consummation order, which protected
the reorganized debtor against lawsuits based on the debtor's
activities, predated the enactment of CERCLA. Accordingly, we
believe that it is inappropriate in this case to reconsider the
merits of Allegheny International's § 502(e)(1)(B) argument.
Allegheny International also argues that § 502(c) of
the Bankruptcy Code precludes estimation of AL Tech's claim
because AL Tech has not taken sufficient steps to remove the
contingencies in its claim, i.e., has not done enough to assess
and remediate the various contamination problems at its plants.
We agree with the district court that this argument must fail.
The cases that Allegheny International cites do not support its
position. All three cases, Kessler v. Jefferson Storage Corp.,
125 F.2d 108 (6th Cir. 1941), In re Hot Springs Broadcasting,
Inc., 210 F. Supp. 533 (W.D. Ark. 1962), and In re KDI Corp., 119
B.R. 594 (Bankr. S.D. Ohio 1990), concern § 57(d) of the
Bankruptcy Act of 1898, which provided that unliquidated claims
were not to be allowed where liquidation would unduly delay the
administration of the estate. Thus, a claimant had the burden of
liquidating its claim as a condition precedent to its allowance.
By contrast, § 502(c) of the Bankruptcy Code specifically
provides for estimation, for purposes of allowance, of such
unliquidated claims. The three cases are also factually
distinguishable from the present case; for instance, the claimant
in KDI Corp. was denied permission to amend a claim filed 12
9
years earlier, after it had waited eight years before even
seeking permission to amend. As the bankruptcy court noted, the
law does not require that all contingencies be removed, and AL
Tech has taken some steps to remove the contingencies in its
claim.
III.
AL Tech's principal arguments on appeal concern the
bankruptcy court's determination of Allegheny International's
equitable share of AL Tech's allowable CERCLA liabilities. After
estimating AL Tech's response costs to total $12,792,000, the
bankruptcy court proceeded to determine Allegheny International's
equitable share of those costs pursuant to § 113(f) of CERCLA,
which authorizes a court to allocate response costs among
responsible parties "using such equitable factors as [it]
determines are appropriate." 42 U.S.C. § 9613(f). The court
considered a number of factors, but its ultimate conclusion --
that Allegheny International's equitable share was zero -- was
based on its findings that Sammi was fully aware of AL Tech's
future environmental liabilities and that, as a result, Sammi
"discounted the purchase price dollar for dollar until the total
purchase price was $1.00" and thus "held no real expectation that
[Allegheny International] would pay for any portion of the
remediation costs." 158 B.R. at 383. AL Tech argues that there
is no record evidence, let alone sufficient evidence, to support
such findings and that, even if there were such a discount, the
beneficiary of that discount was not AL Tech, the claimant in
this case, but Sammi.
10
With respect to this issue, the following facts are
undisputed or at least beyond dispute under a clearly erroneous
standard. Sammi was aware of $22 million in environmental
liabilities on the part of AL Tech when it purchased AL Tech's
stock in 1989. An agreement among Rio Algom, Sammi, and AL Tech
provided for an adjustment to the purchase price in the event of
changes in AL Tech's net worth. At the time of the sale, AL Tech
and Sammi "accrued" $22 million in expenses to cover future
environmental liabilities; these were charged against sales
during the first seven months of 1989. This substantially
reduced the net worth of AL Tech,2 and after litigation and
arbitration over the propriety of this accounting procedure, Rio
Algom was required to pay Sammi in excess of $5 million to assume
ownership of AL Tech.3 Of this amount, $2.4 million was awarded
to Sammi to account for the increased environmental liabilities.
AL Tech argues that there was insufficient evidence to
show that Sammi reduced the sale price dollar for dollar to
account for the $22 million in liabilities of which it was aware
at the time of the transaction. Allegheny International relies
on the testimony of two officers of AL Tech: Ronald Hansen, the
chief financial officer, and James Mintun, the chief executive
officer. Both Hansen and Mintun testified that the environmental
2. AL Tech points out that the net worth of its stock on the
date of purchase was approximately negative $16 million. A.
1515. Thus, it argues, even considering the subsequent
adjustment in the purchase price, Sammi overpaid for AL Tech's
stock by some $11 million.
3. The parties cite a figure of $5.3 million, while the
bankruptcy court quoted the figure of $6.5 million.
11
liabilities reduced AL Tech's value and reduced the purchase
price, A. 301, 303, 325-27, and Hansen testified that these
liabilities brought the purchase price down "[a]pproximately
dollar for dollar." A. 327. However, Hansen also testified that
he had "absolutely no idea whatsoever how [the purchase price]
was arrived at," A. 335, and had not come to know the reason for
the one dollar purchase price, A. 322, and Mintun likewise
testified that he had no knowledge of how the price was arrived
at. A. 398. Mintun also testified that neither he nor Hansen
participated in any of the discussions concerning the price to be
paid for AL Tech, A. 398-99, and Hansen testified that he had no
involvement in determining what the purchase price would be. A.
323; see also A. 335 (Hansen testifying that he "[did] not know
specifically what Sammi paid in fact for AL Tech or what was
going through their mind and how they arrived at that").
Also of some relevance is the fact that the agreement
for the sale of AL Tech to Sammi makes reference to the proof of
claim that AL tech had filed against Allegheny International. A.
1415.4 Allegheny International points out that this claim was
4. In a reference to possible recoupment from GATX, the notes
accompanying AL Tech's financial statements also refer to its
management's belief that:
part of [the $22 million] environmental liability may
be recovered through negotiations or
litigation with certain of the Company's
previous owners. Because of the uncertainty,
no recognition has been given to a recovery
of these liabilities in the accompanying
financial statements.
A. 1582.
12
not identified as an asset on AL Tech's balance sheets. In
addition, the schedule of the sale agreement in which it appears
seems designed to disclose pending or threatened litigation that
might result in judgments against AL Tech. See A. 1331. Still,
on the basis of the sale agreement, it is clear that Sammi was
aware of the existence of AL Tech's claim against Allegheny
International.
A reduction in the purchase price of a facility is
certainly a valid factor to be considered in allocating CERCLA
response costs among responsible parties, see, e.g., Smith Land &
Improvement Corp. v. Celotex Corp., 851 F.2d 86, 90 (3d Cir.
1988), cert. denied, 488 U.S. 1029 (1989), and the amount of the
discount is, of course, important, id. On the record before the
bankruptcy court, however, we do not think that there was
sufficient evidence to support a finding that the discount
received by Sammi equalled $22 million. The testimony of Hansen
and Mintun reflects, at best, informed speculation as to the
existence and magnitude of any discount in the price paid by
Sammi for AL Tech's stock.
An even more fundamental issue raised by AL Tech is
whether any discount received by Sammi in its purchase of AL Tech
from Rio Algom should be reflected in a dispute that involves
neither Sammi nor Rio Algom, but rather AL Tech and Allegheny
International. AL Tech point out that Smith Land and all of the
other cases cited by Allegheny International and the bankruptcy
court -- Amoco Oil Co. v. Borden, Inc., 889 F.2d 664 (5th Cir.
1989); BTR Dunlop, Inc. v. Rockwell Int'l Corp., 1992 WL 159203
13
(N.D. Ill. June 29, 1992); South Fla. Water Management Dist. v.
Montalvo, 1989 WL 260215 (S.D. Fla. Feb. 15, 1989); and Southland
Corp. v. Ashland Oil, Inc., 696 F. Supp. 994 (D.N.J.), modified
on reconsideration, 1988 WL 125855 (D.N.J. Nov. 23, 1988) --
involved allocation between the seller and the purchaser of the
subject property (or their successors, see Smith Land, 851 F.2d
at 88). Here, the seller (Rio Algom) is not in the picture;
Allegheny International's predecessor received full value for the
plants when it sold them to AL Tech in 1976 for $23.5 million in
cash and stock. A. 647-702 (purchase agreement). In addition,
AL Tech, not Sammi, is the claimant here, and under traditional
corporate law principles the two companies are considered
separate entities. Thus, even if it is assumed that there was a
discount in the 1986 sale, this discount would work against Sammi
and in favor of Rio Algom, but it does not necessarily work
against AL Tech and in favor of Allegheny International.
Allegheny International's counterargument is that the
bankruptcy court properly disregarded corporate forms in light of
AL Tech's status as a wholly-owned subsidiary of Sammi.
Allegheny International cites several cases describing bankruptcy
courts as courts of equity that will disregard legal fictions
when justice requires. The problem here is that the bankruptcy
court did not find that justice required that it regard Sammi and
AL Tech as a single entity. In the absence of such a finding, it
was error to assume, as the bankruptcy court appears to have
done, that any windfall reaped by Sammi should be imputed to AL
Tech.
14
Nor do we believe, on the record before us, that such a
finding would be warranted. Allegheny International has pointed
to no facts that would allow the piercing of the corporate veil.
Without sufficient facts of record to warrant veil-piercing,
i.e., facts of sufficient dominance of the affairs of the
subsidiary by the parent corporation, AL Tech and Sammi must be
considered separate entities. See In re Cohn, 54 F.3d 1108,
1116-17 (3d Cir. 1995); see also Mellon Bank, N.A. v. Metro
Communications, Inc., 945 F.2d 635, 643 (3d Cir. 1991) ("[T]here
is a presumption that a corporation, even when it is a wholly
owned subsidiary of another, is a separate entity."), cert.
denied, 503 U.S. 937 (1992).
AL Tech also argues that the bankruptcy court abused
its discretion in relying exclusively on a single equitable
factor -- the discount received by Sammi -- in deciding that
Allegheny International's equitable share of the cleanup cost was
zero. It is within the court's discretion to rely on a single
factor, see Environmental Transp. Sys., Inc. v. ENSCO, Inc., 969
F.2d 503, 509 (7th Cir. 1992), but here the court also considered
several other factors, e.g., actual years of ownership and
operation of the two plants, 158 B.R. at 383, Allegheny Ludlum's
compliance with federal environmental laws that were in effect
before it sold the plants to AL Tech, id. at 384, and AL Tech's
less-than-enthusiastic cleanup efforts since the sale, id.
However, it is clear to us that the bankruptcy court's ultimate
conclusion can be justified only on the basis of the discount, as
the bankruptcy court itself seemed to recognize. See id. at 383
15
("[T]his court considers the discounted purchase price for the AL
Tech steel plants to be the most compelling and dispositive
allocation factor in this case."). Other factors may weigh in
Allegheny International's favor, but they are insufficient to
drive Allegheny International's equitable share down to zero. In
other words, it was inconsistent with the sound exercise of its
discretion for the bankruptcy court to rely, not simply on a
single factor, but on a single factor where the factual finding
underlying the factor was clearly erroneous.
AL Tech raises two arguments with respect to
Willowbrook Pond, a cooling pond at the Dunkirk plant that is
contaminated with PCBs.5 First, AL Tech argues that the
bankruptcy court erred in concluding that it failed to prove, by
a preponderance of the evidence, that Allegheny International (as
successor to Allegheny Ludlum) is responsible for any of the PCB
contamination. Second, AL Tech argues that the bankruptcy court
committed reversible error in choosing Allegheny International's
estimate of the response costs at Willowbrook Pond ($1.3 million)
instead of AL Tech's estimate (approximately $14 million).
We find no fault in the bankruptcy court's
determination on the liability question here. AL Tech presented
no reports, analyses, or other documentation of the use of PCB-
containing materials at the plants during the period when the
plants were owned by Allegheny Ludlum. AL Tech's evidence
5. The sediments in the pond also contain high levels of nickel,
but the dispute here concerns responsibility for, and remediation
of, the PCB problem.
16
consisted of the testimony of Edwin Diehl and Morton Parker,
neither of whom could establish that the materials used by
Allegheny International before the purchase of the plants by AL
Tech contained PCBs. Mr. Diehl, AL Tech's Director of
Engineering (and previously its Director of Environmental
Affairs), pointed to a hydraulic fluid, first used in new rolling
mill machinery in 1970, as the source of the PCBs in Willowbrook
Pond. A. 437-40, 454, 457. He had no personal knowledge,
however, as to whether the fluid contained PCBs.
Mr. Parker visited the Dunkirk plant in the mid-1970s
to determine whether oils and greases that Allegheny Ludlum had
collected from Willowbrook Pond were suitable for reclamation by
his employer, Wallover Oil Company. A. 465-69. He testified
that Allegheny Ludlum had recently switched to a new hydraulic
fluid that did not contain PCBs, that the fluid previously used
sank because it was heavier than water, and that fluids that
contained PCBs also were heavier than water and sank. A. 467-69.
Mr. Parker also testified that his company rejected Allegheny
Ludlum's oils and greases for reclamation and that, while PCB
contamination was the reason for most such rejections, he did not
recall the reason for rejecting Allegheny Ludlum's materials. A.
470-72. Mr. Parker also could not recall the results of any
chemical analyses done on the materials from Willowbrook Pond.
A. 470. Nor could he recall the year in which he visited the
plant or the name of anyone whom he met there. A. 466. Like Mr.
Diehl, then, Mr. Parker could provide no specific information as
17
to whether any materials used by Allegheny Ludlum before the 1976
sale of the plants to AL Tech contained PCBs.
It may well be that Allegheny Ludlum used PCB-
containing materials during the relevant period, and it may be
that the only reasonable explanation for the presence of PCBs in
the pond sediments, based on the evidence adduced, is that
Allegheny Ludlum dumped them there. But that is different from
proving, by a preponderance of the evidence, that Allegheny
International is responsible for at least some of the
contamination. This AL Tech failed to do. In light of this
conclusion, it is not necessary to reach AL Tech's second
argument regarding Willowbrook Pond.
IV.
We deal last with two related questions concerning AL
Tech's claim under the New York Oil Spill Act, N.Y. Nav. Law §§
171-197 (McKinney 1989 & Supp. 1996). First, may AL Tech bring
an action against Allegheny International under the Oil Spill
Act? Second, is any such action time-barred? Because our
decision concerning these questions of New York law is unlikely
to have much precedential significance, we will deal with them in
an abbreviated fashion.
A. Under White v. Long, 650 N.E.2d 836 (N.Y. 1995), a
case not considered by either the bankruptcy court or the
district court, it is clear that a property owner may under
certain conditions sue a prior owner to recover cleanup costs.
The claim in White was asserted under § 181(5), which provides as
follows:
18
Any claim by any injured person for the costs
of cleanup and removal and direct and
indirect damages based on the strict
liability imposed by this section may be
brought directly against the person who has
discharged the petroleum, provided, however,
that damages recoverable by any injured
person in such a direct claim based on the
strict liability imposed by this section
shall be limited to the damages authorized by
this section.
N.Y. Nav. Law § 181(5) (McKinney Supp. 1996).
Another provision of the Act defines a "claim" as "any
claim by an injured person, who is not responsible for the
discharge." N.Y. Nav. Law § 172(3) (McKinney Supp. 1996)
(emphasis added). Noting this definition, the New York Court of
Appeals wrote in White:
Although even faultless owners of
contaminated lands have been deemed
"dischargers" for purposes of their own
section 181(1) liability,[6] where they have
not caused or contributed to (and thus are
not "responsible for") the discharge, they
should not be precluded from suing those who
have actually caused or contributed to such
damage. To preclude reimbursement in that
situation would significantly diminish the
reach of section 181(5).
650 N.E.2d at 838 (footnote added).
Since neither the bankruptcy court nor the district
court has applied White to the facts of this case, we remand AL
Tech's Oil Spill Act claim so that this can be done.7
6. This provision states in pertinent part that "[a]ny person
who has discharged petroleum shall be strictly liable, without
regard to fault, for all cleanup and removal costs and all direct
and indirect damages, no matter by whom sustained, as defined in
this section." N.Y. Nav. Law § 181(1)(McKinney Supp. 1996).
7. AL Tech originally argued that its claim arose under N.Y.
Nav. Law § 176(8), which provides:
19
B. On the issue of the statute of limitations, under
the New York Court of Appeals' decision in State v. Stewart's Ice
Cream, Inc., 473 N.E.2d 1184 (N.Y. 1984), it appears that AL
Tech's claim is governed by the six-year limitations period for
actions on express or implied contracts, N.Y. Civ. Prac. L. & R.
§ 213(2) (McKinney 1990). In Stewart's Ice Cream, the state paid
for the cleanup and removal of discharged petroleum and then
sought to recover its expenses from the party that caused the
discharge. The New York Court of Appeals concluded that the
state's claim was one for indemnity and that liability on an
indemnity claim "theoretically springs from an implied contract."
Id. at 1186. The court further held that the state's claim was
not covered by the three-year limitations period for actions to
recover on a liability created or imposed by a statute, N.Y. Civ.
Prac. L. & R. § 214(2) (McKinney 1990), because that provision
(..continued)
Notwithstanding any other provision to the contrary . .
. every person providing cleanup, removal of
discharge of petroleum or relocation of
persons pursuant to this section shall be
entitled to contribution from any other
responsible party.
AL Tech now argues that its claim arises "under both
Section 176(8) and Section 181(5)," see Appellant's Br. at 46
n.22, and that White v. Long, supra, which was based on § 181(5),
"settled definitively" its right to bring a private action.
Appellant's Br. at 44 n.20. AL Tech does not argue that there is
any difference between the right of action created by § 181(5)
and the right of action that it has asserted under § 176(8). We
therefore do not decide whether there is an independent private
right of action under § 176(8) or whether any such action differs
in scope from the right of action under § 181(5). On remand, the
bankruptcy and district courts need only apply White to the facts
of this case.
20
applies only to liability not recognized in the common or
decisional law and because it could not be said that the state's
claim "would not exist but for the statute." Stewart's Ice
Cream, 473 N.E.2d at 1187.
In this case, AL Tech's claim appears to be in the
nature of a claim for indemnity. Stewart's Ice Cream is arguably
distinguishable on the ground that there the court held that the
Oil Spill Act did not "expressly provide for an indemnity action
such as [the one brought by the state]," 473 N.E.2d 1186, whereas
here § 181(5) does expressly provide for AL Tech's claim.
However, Stewart's Ice Cream made this point to refute the
argument that N.Y. Civ. Prac. L. & R. § 214(2) furnished the
applicable statute of limitations. Since Allegheny International
does not contend this provision applies here, this arguable
distinction need not concern us.8 Thus, we hold that Stewart's
Ice Cream governs here. See 145 Kisco Ave. Corp. v. Dufner
Enters., Inc., 604 N.Y.S.2d 963 (App. Div. 1993).
8. Moreover, while § 181(5) expressly authorizes Al Tech's
claim, the right of indemnity also has roots in common law,
although it is also sometimes imposed by statute. See 23 N.Y.
Jur. 2d Contribution, Indemnity, and Subrogation § 2 (1982).
The conclusions reached above also follow if AL Tech's claim
is characterized as one for contribution rather than indemnity.
It appears well settled under New York law that contribution,
like indemnity, is based on an implied contract. Hard v. Mingle,
99 N.E. 542, 544 (N.Y. 1912); Blum v. Good Humor Corp., 394
N.Y.S.2d 894, 896 (App. Div. 1977). Furthermore, contribution
existed at common law. Mingle, 99 N.E. 542. Consequently, the
six-year limitations period for actions on contracts would apply.
Blum, 394 N.Y.S.2d at 896; Liberty Mut. Ins. Co. v. Société
Coiffure, Inc., 50 N.Y.S.2d 40, 41 (Sup. Ct. N.Y. Cty. 1944).
21
We reject Allegheny International's argument that AL
Tech's claim is subject to the three-year statute of limitations
for actions to recover for damages or injuries to property. See
N.Y. Civ. Prac. L. & R. § 214(4) (McKinney 1990). The cases upon
which Allegheny International principally relies9 -- State v.
King Serv., Inc., 563 N.Y.S.2d 331 (App. Div. 1990), and Town of
Guilderland v. Texaco Ref. & Mktg., Inc., 552 N.Y.S.2d 704 (App.
Div. 1990) -- involved claims that differ from those asserted by
AL Tech. The claim in Town of Guilderland was explicitly for
property damage, viz., damage to the town's sewer system that
resulted from an explosion of fumes from gasoline that had leaked
into the sewers, rather than one for reimbursement of cleanup
costs. The claim at issue in King Service was also one for
direct damages under § 190 of the Act, which covers actions
against insurers. See N.Y. Nav. Law § 190 (McKinney 1989). On
balance, we believe that Stewart's Ice Cream is a closer fit in
this case than the decisions on which Allegheny International
relies. We thus hold that the statute of limitation for AL
Tech's Oil Spill Act claim is six years.
9. Allegheny also cites two additional cases that are of limited
relevance to the present appeal: Victorson v. Bock Laundry Mach.
Co., 335 N.E.2d 275 (N.Y. 1975), which applied the three-year
limitations periods for actions for property damage and personal
injury to cases based on strict product liability; and P.B.N.
Assocs. v. Xerox Corp., 529 N.Y.S.2d 877 (App. Div. 1988), order
modified on reargument, 575 N.Y.S.2d 451 (App. Div. 1991), which
applied the three-year limitations period for actions for
property damage to an action for waste stemming from an oil
spill. Neither case involved the Oil Spill Act or an action for
indemnity or contribution.
22
Furthermore, it is settled law in New York that an
action for indemnity or contribution does not generally accrue
until the payment is made by the party seeking recovery. Bay
Ridge Air Rights, Inc. v. State, 375 N.E.2d 29 (N.Y. 1978). AL
Tech may thus seek to recover cleanup costs under the Oil Spill
Act that it incurred within six years prior to its filing of its
proof of claim against Allegheny International. To the extent
that AL Tech is seeking to recover for future remediation
costs,10 the limitations period has not yet begun.11
V.
For the reasons stated above, we reverse the order of
the district court as it relates to the bankruptcy court's
finding of a discount in the price paid by Sammi in 1989 and as
it relates to the bankruptcy court's determination of Allegheny
International's equitable share of AL Tech's allowable response
costs, and we remand for reconsideration of equitable allocation
without the discount. We reverse the order of the district court
as it relates to the limitations period applicable to AL Tech's
10. The bankruptcy court appears to have allowed only those
costs related to future remediation efforts.
11. The bankruptcy court disallowed as time-barred only AL
Tech's claim related to the Oil Contamination Area. 158 B.R. at
377-78. However, AL Tech's claims related to three other areas -
- the Pump House and Aboveground Fuel Tank, the Underground Fuel
Tanks, and the Kromma Kill -- are also based on petroleum
contamination. 158 B.R. at 368. Given CERCLA's petroleum
exclusion, see 42 U.S.C. § 9601(14), the Oil Spill Act may be the
only basis for liability at those locations. We thus point out
that our conclusion concerning the applicable limitations period
applies to any of AL Tech's claims involving petroleum
contamination.
23
claim under the New York Oil Spill Act, and we remand for
application of the standard set out in the New York Court of
Appeals' decision in White v. Long to the facts of this case. We
affirm the order of the district court as it relates to the
bankruptcy court's determination that Bankruptcy Code §§ 502(c)
and 502(e)(1)(B) do not bar AL Tech's claim and as it relates to
the bankruptcy court's determination that AL Tech failed to prove
that Allegheny International was responsible for any of the
cleanup costs at Willowbrook Pond.
24
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