Caldwell Trkng PRP v. Rexon Tech Corp

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
8-31-2005
Caldwell Trkng PRP v. Rexon Tech Corp
Precedential or Non-Precedential: Precedential
Docket No. 03-2346
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No: 03-2346
_______________
CALDWELL TRUCKING PRP, an organization of defendants
in Civil Action No. 94-1473 (WGB) (D.N.J.) for themselves and
on behalf of other settling defendants whose contribution
claims they may assert pursuant to an Assignment of Right
Appellants
vs.
REXON TECHNOLOGY CORP; PULLMAN
TRANSPORTATION COMPANY; S.B. THOMAS INC.; ADT
AUTOMOTIVE, INC., (PARENT TO SKYLINE
AUTOMOTIVE EXCHANGE); AERO METAL PRODUCTS
CORP., (SUBSIDIARY OF HILLSIDE SPINNING &
STAMPING CO.); AIRE-SCIENCES INC., (SUCCESSOR-IN-
INTEREST TO EDO-AIR DIVISION OF EDO
CORPORATION); ALFA MACHINE & TOOL CO., INC.;
ALLEN BRADLEY COMPANY, INC.,
(SUCCESSOR-IN-INTEREST TO THETA INSTRUMENTS
CORP.); AMERICAN TELEPHONE & TELEGRAPH CO.,
(SUCCESSOR-IN-INTEREST TO WESTERN ELECTRIC
CO.); ANDERSON & VREELAND, INC., (INDIVIDUALLY
AND AS SUCCESSOR-IN-INTEREST TO WILLIAMSON &
CO., INC.); ANJUL INC.; ARCS FABRICATORS INC.;
ASSOCIATED TESTING LABORATORIES; BAUREIS
REALTY CO., INC.; BAXTER RUBBER CO., INC.; BECTON
DICKINSON & COMPANY; BEE CHEMICAL CO., INC.,
(WHOLLY-OWNED SUDSIDIARY OF MORTON
INTERNATIONAL, INC.; BELL MOLDED PRODUCTS INC.;
BILTRITE TOOL & DIE; BLOOMFIELD
MANUFACTURING CO., INC.; BROWNING-FERRIS
INDUSTRIES OF PATERSON NEW JERSEY, INC.; CANTEL
INDUSTRIES, INC., (SUCCESSOR-IN-INTEREST TO
CHAROZ-CARSON CORP.); CARTRIDGE ACTUATED
DEVICES, INC.; CHEM SYSTEM, INC.; CHRONOS
RICHARDSON, INC., (SUCCESSOR-IN-INTEREST TO
HOWE-RICHARDSON COMPANY, INC.); COBEHN, INC;
COLTEC INDUSTRIES, INC., (FORMERLY KNOWN AS
COLT INDUSTRIES, INC., CRUCIBLE STEEL DIVISION,
SUCCESSOR-IN-INTEREST TO CRUCIBLE SPECIALTY
METALS CO.); CONOPCO, INC.,
(SUCCESSOR-IN-INTEREST TO GOOD HUMOR CORP.);
COOK & DUNN PAINT CORP.; CRANE CO., INC.; CWC,
INC., (SUCCESSOR-IN-INTEREST TO CULLIGAN WATER
CONDITIONING COMPANY OF NORTH JERSEY, INC.);
DELTA SALES CO., INC.; AIROYAL DIVISION,
(SUCCESSOR-IN- INTEREST TO AIRROYAL
MANUFACTURING CO., INC.); EASTERN CYCLONE
INDUSTRIES, INC.; FAIRFIELD FILTER CORP.;
FAIRFIELD TEXTILES CORP., (INDIVIDUALLY AND AS
SUCCESSOR-IN-INTEREST TO OTTEX, INC.); FLM
GRAPHICS CORPORATION; FOLANDER SHEET METAL
CO., INC.; FORD MOTOR COMPANY, INC.;
FROELICH/GREENE COLORPRESS, INC.,
(SUCCESSOR-IN-INTEREST TO COLORPRESS, INC.);
GARFIELD INDUSTRIES INC.; GEC MARCONI
ELECTRONIS SYSTEMS CORPORATION,
(SUCCESSOR-IN-INTEREST TO KEARFOTT DIVISION OF
THE SINGER COMPANY, INC.); GENERAL HOSE
PRODUCTS, INC.; GENERAL WAYNE GLASS, INC.;
HERCULES, INC., (SUCCESSOR-IN-INTEREST TO
ESGRAGH, INC.); HILLSIDE SPINNING AND STAMPING
CO., INC., (PARENT CORPORATION TO AERO METAL
PRODUCTS CORP.); HOFFMANN-LA ROCHE, INC.;
SOLBERN DIVISION, SUCCESSOR-IN-INTEREST TO
SOLBERN CORP.; HOWDEN GROUP AMERICA, INC.,
(PARENT TO HOWDEN FOOD EQUIPMENT, INC.,
SOLBERN DIVISION SUCCESSOR-IN-INTEREST TO
SOLBERN CORP.); HURCO MANUFACTURING CO.,
DIVISION OF HURCO COMPANIES, INC.
(SUCCESSOR-IN-INTEREST TO ELTEE ENTERPRISES,
INC. AND ELTEE PULSITRON, INC.); INDUSTRIAL
BRUSH CO., INC; INGERSOLL-RAND COMPANY, INC.;
JAYSON OIL COMPANY, (SUCCESSOR-IN- INTEREST TO
HULTS SERVISOFT WATER SERVICE, INC.); JERSEY
SPECIALTY CO., INC.; K&N NAMEPLATE, INC.; KONNER
CHEVROLET, INC.; KREISLER INDUSTRIAL CORP; L.F.E.
& C., INC., (SUCCESSOR-IN- INTEREST TO WEST ESSEX
PLUMBING SERVICE); LAWSON PRODUCTS, ; LEWIS
STUDIOS, INC; LITTON INDUSTRIES, INC.; MELLONICS
SYSTEM DEVELOPMENT DIVISION,
(SUCCESSOR-IN-INTEREST TO INFORMATICS GENERAL
CORP.); MARVEL MANUFACTURING CO., INC.;
MERRIMAC INDUSTRIES, INC., also known as MERRIMAC
RESEARCH AND DEVELOPMENT, INC.; MONTE SANO &
COMPANY, INC.; MYLES F. KELLEY, INC.,
(SUCCESSOR-IN-INTEREST TO PINEBROOK LUMBER
CO.); NATIONAL PRECISION TOOL CO., INC.; NEW
JERSEY BELL TELEPHONE CO; PENTEL OF AMERICA,
LTD; PIO COSTA ENTRERPRISES; PPG INDUSTRIES,
INC.; PYMAH CORPORATION, (PARENT CORPORATION
TO INFO-CHEM, INC., A SUBSIDIARY); R&L SHEET
METAL CO., INC.; RADIATION SYSTEMS, INC.; ANGHEL
LABORATORIES DIVISION, (SUCCESSOR-IN-INTEREST
TO ANGHEL LABORATORIES, INC.); RAPP WELDING &
DIESEL SERVICES, INC.; RELIANCE ELECTRICAL,CO.,
INC.; REPUBLIC TOOL & MANUFACTURING CO., INC.;
RUDOLPH RESEARCH CORP.; SEARS ROEBUCK & CO.,
INC.; SMITHS INDUSTRIES AEROSPACE & DEFENSE
SYSTEMS, INC., (SUCCESSOR-IN-INTEREST TO CONRAC
CORP., SYSTEMS EAST DIVISION); SUMCO INC.;
SUMMIT SCIENTIFIC CORP.; THE EVANS PARTNERSHIP,
doing business as EVANS SHURE CONSTRUCTION; 350
PASSAIC ASSOCIATIONS, INC.,
(SUCCESSOR-IN-INTEREST TO ELECTRO-NUCLEONICS,
INC.); TILTON RACK & BASKET CORP.; TITANIUM
METALS CORPORATION; TRW, INC.; UNIMATIC
MANUFACTURING CORP.; VIBRA SCREW, INC.;
WAVELINE, INC.; WELSH FARMS, INC.; WOOLSULATE
CORPORATION; YELOF CORP, also known as D&J METAL
FINISHING COMPANY, SUCCESSOR-IN-INTEREST TO
FOLEY METAL FINISHING CO.; CALDWELL TOWNSHIP,
A MUNICIPAL CORPORATION OF THE STATE, OF NEW
JERSEY; CEDAR GROVE TOWNSHIP, A MUNICIPAL
CORPORATION OF THE STATE OF NEW JERSEY;
MONTVIHIP, (PINEBROOK), A MUNICIPAL
CORPORATION OF THE STATE OF NEW JERSEY;
PASSAIC CITY, A MUNICIPAL CORPORATION OF THE
STATE OF NEW JERSEY; TOTOWA BOROUGH, A
MUNICIPAL CORPORATION OF THE STATE OF NEW
JERSEY; WAYNE TOWNSHIP, A MUNICIPAL
CORPORATION OF THE STATE OF NEW JERSEY; JOHN
DOE DEFENDANTS, 1 through 50; JOHN DOE
DEFENDANTS, A through Z; JOHN ROE DEFENDANTS, 1
through 10; AMERICAN SOUND & VIDEO CORPORATION,
(SUCCESSOR-IN- INTEREST TO RKO TAPE CORP.);
ASSOCIATED TESTING LABORATORIES, INC.; HAROLD
BERNSTEIN, Indemintor of ADT Automotive, Inc.; BOR
CORP, Formerly Dothan Auto Exchange, Inc.- Indemnitor of
ADT Automotive Inc., Formerly Hatfield Auto Auction, Inc.,
Formerly Skyline Auto Exchange, Inc., Formerly Keystone
Recon Center, Inc.; ESTATE OF FRANCIS L. CARTER,
Indemnitor of ADT Automotive, Inc., CONRAC
CORPORATION; EDO CORPORATION, Parent of Edo-Air
Division; ENVIROSOURCE INC., Successor to Solbern
Corporation; HENRY FULOP, Indemnitor of ADT Automotive,
Inc., JOSEPH A. KEATING, Indemnitor of ADT Automotive,
Inc.; R&F ALLOY WIRES, CO; HARRY MONTVILLE;
MUNICIPAL UTILITIES AUTHORITY, A municipal
corporation of the State of New Jersey; WAYNE TOWNSHIP
BOARD OF EDUCATION, A municipal corporation of the
State of New Jersey; PINE BROOK BUILDING SUPPLY, CO.,
AMERADA HESS CORP; BREED CORP; C.M.W.
CORPORATION; C.M.W.L. ASSOCIATES, L.P.; CHARLES
MICHAEL REALTY COMPANY; DUTCH LANE
DEVELOPMENT COMPANY; EVANS SHURE
CONSTRUCTION; GUSMER & MARTIN, INC.; HARRIS &
SANITATION; HEISLER MACINE & TOOL, INC.; MORRIS
SEPTIC TANK, Morris Septic Tank Company, Inc.; NORTH
AMERICA PHILLIPS CORPORATION; ROXBURY
TOWNSHIP; CHARLES EVANS DEVELOPMENT
COMPANY; WITCO CORPORATION ADT AUTOMOTIVE,
INC., (PARENT TO SKYLINE AUTOMOTIVE EXCHANGE);
THE EVANS PARTNERSHIPS d/b/a EVANS SHURE
CONSTRUCTION COMPANY; LITTON INDUSTRIES, INC.;
PENTEL OF AMERICA, LTD.; SMITHS INDUSTRIES
AEROSPACE & DEFENSE SYSTEMS, INC.; MYLES F.
KELLY, INC.; MONTE SANO AND COMPANY, INC.;
BILTRITE TOOL & DIE, CO.; PIO COSTA ENTERPRISES;
GUSMER & MARTIN, INC.; AERO METAL PRODUCTS
CORP.; BREED CORPORATION; FAIRFIELD FILTER
CORP.; WITCO CORPORATION; JERSEY SPECIALTY CO.,
INC.; TOTOWA BOROUGH; ASSOCIATED TESTING
LABORATORIES, INC.; THE PULLMAN
TRANSPORTATION COMPANY,
Defendants/Third-Party Plaintiffs
vs.
STORA KOPPARBERG; TELEMAX; T.J. LIPTON; TRW,
INC.; UCKO; UNIVERSAL STORAGE WAREHOUSE;
WOMETCO, INC.; YALE SECURITY, INC.; INTERSTATE
ELECTRONICS CORPORATION; CONRAC TECHNOLOGY
CORPORATION; CONRAC ELECTRON, INC.; BELGARVE
INDUSTRIES; CONRAC DISPLAY PRODUCTS, INC.;
MARK IV HOLDINGS, INC.; HOWDEN FLUID SYSTEM,
INC.; BOR CORP, formerly Skyline Auto Exchange, Inc.; BOR
CORP., formerly Hatfield Auto Auction, Inc.; BOR CORP,
formerly Keystone Recon Center, Inc.; SKORB CORP.,
formerly Hatfield Auto Transport, Inc.; BOR CORP, formerly
Johnston Auto Auction, Inc.; BOR CORP, formerly Dothan
Auto Exchange, Inc.; AUCTION ADVISORS, LTD.; LOUIS
STERN; JAMES K. WOLOSOFF; THE EVANS
PARTNERSHIP, d/b/a Evans Shure Construction Company;
ADDRESS O GRAPH, INC.; ARIES CORPORATION;
ASTLETT; BARD PARKER, a division of Becton-Dickinson
and Company; BECTON-DICKINSON AND COMPANY;
DIGITAL ELECTRONIC SYSTEM, INC.; EQUITAMATICS,
INC.; EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES, EQUITABLE LIFE COMPANY; GOOD
HUMOR CORPORATION; HONEYWELL, INC.;
INTERNATIONAL BUSINESS MACHINE CORP;
INFORMATICS, INC.; MEMOREX CORPORATION;
PHILLIPS PETROLEUM COMPANY; RAPIDATA, INC.;
RICOH CORPORATION; SINGER COMPANY, THE
SINGER COMPANY; SPERRY RAND CORPORATION;
STERLING SOFTWARE, INC.; STANDARD PUBLISHING
CO.; CONRAC CORPORATION; JOHN DOE;
CORPORATIONS 1-10; PINE BROOK BUILDING SUPPLY,
CO., INC.; LOUIS MALACHOWSKY; ROBERT
MALACHOWSKY; MACY'S EAST, INC.; DRAGHI A.W.
GROUND PRODUCTS CO.; ANTON COMPANY, A NEW
JERSEY LIMITED PARTNERSHIP; GEORGE O'CONNOR;
RUTH ANN O'CONNOR; OKON CORPORATION;
CALDWELL TRUCKING COMPANY,
Third-Party Defendants
vs.
HAROLD BERNSTEIN; HENRY FULOP; JOSEPH A.
KEATING; ESTATE OF FRANCIS L. CARTER; JOHN DOES
A THROUGH Z; JOHN ROES A THROUGH Z; ABC
CORPORATIONS AND/OR PARTNERSHIPS A THROUGH
Z,
Fourth-Party Defendants
The Pullman Company, Rexon Technology
Corporation and Mark IV Industries, Inc.,
Appellants
_______________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civ. No. 95-cv-01690)
District Judge: Honorable Dennis M. Cavanaugh
____________
Argued May 2, 2005
Before: NYGAARD, AMBRO and WEIS, Circuit Judges.
(Filed: August 31, 2005)
____________
Gregory J. Coffey, Esquire (ARGUED)
Coffey & Associates
465 South Street
Morristown, New Jersey 07960
Greiner & Chadsey
5687 Main Street
Williamsville, New York 14221
Of Counsel:
Deborah J. Chadsey, Esquire
Gregory J. Coffey, Esquire
On the Brief:
Gregory J. Coffey, Esquire
Deborah J. Chadsey, Esquire
Richard J. Deweand, Esquire
Attorneys for Appellants, The Pullman Company, Rexon
Technology Corporaiton and Mark IV Industries.
H. Curtis Meanor, Esquire (ARGUED)
J. Barry Cocoziello, Esquire
Steven R. Tombalakian, Esquire
Podvey, Sachs, Meanor, Catenacci, Hildner & Cocoziello
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
Attorneys for Appellee, Caldwell Trucking PRP Group.
_______________
OPINION
WEIS, Circuit Judge.
In this appeal we conclude that the text of a retention
of liabilities provision in a stock purchase agreement requires
assumption of CERCLA responsibilities by the seller, rather than
simply indemnification. We also decide that prejudgment interest
and the cost of an experimental treatment process are reasonable in
a contribution suit under CERCLA section 113. 42 U.S.C. § 9613.
I.
Caldwell Trucking Company provided liquid waste
disposal service at its premises in Fairfield, New Jersey. From
1948 to 1974, the waste was deposited in several lagoons on the
site, but, beginning in 1975, it was stored in tanks and from there
taken to ocean disposal facilities.
Defendant Rexon had plants in Fairfield and Wayne,
New Jersey where it manufactured electronic components and
fuses for military applications. These activities involved the use of
de-greasing substances, which are classified as hazardous
materials. Beginning in 1960, Caldwell Trucking provided Rexon
with waste disposal for all types of materials in the septic tanks on
its properties.
The EPA listed the Caldwell property on the National
Priorities List of Superfund Sites in 1983 and issued Records of
Decisions in 1986 and 1989, calling for remediation of the
contamination present there. Caldwell Trucking and nine other
firms (the “Caldwell Group” or “Group”) acceded to a consent
decree in 1994 providing for remediation and reimbursement to
federal and state governments for previously incurred expenses.
The Group, the plaintiff here, sought contribution from the many
customers of the Caldwell Trucking Company. Most of the claims
were settled, but because of a dispute over the interpretation of an
agreement between defendants Rexon and the Pullman Company,
the claim involving them continued.
At various times, Rexon’s stock had been owned by
several parent companies.1 Relevant to the case at hand was the
purchase by defendant Pullman Corporation in October of 1984 and
the sale of all of the stock to a new parent corporation in April
1989. The new parent corporation continued operations using the
Rexon name until Rexon was dissolved on June 30, 1995. In the
interest of clarity, we will use the name of Rexon, despite its
varying parentage, to designate the manufacturing entity found to
have contributed to the pollution.
II.
On April 6, 1995, the Caldwell Group filed this suit
against Pullman Company, Rexon and the other alleged responsible
entities. Rexon’s registered agents in New Jersey and Delaware
1
(1) REDM Corporation/Industries (sole shareholder of Rexon)
- formed in 1958; went public in 1960; (2) Pullman purchased
REDM, and became the indirect owner of Rexon, in 1984; (3)
Little Falls Acquisition purchased REDM, and became the
indirect owner of Rexon, in 1989; (4) REDM later merged with
Rexon, and Little Falls became Rexon’s direct shareholder.
were served with process on April 17, 1995 and May 30, 1995,
respectively.
The District Court entered summary judgment on
liability in favor of the Caldwell Group against Rexon and Pullman.
The critical dispute in that phase of the case was the interpretation
of a provision in the 1989 stock purchase agreement assigning
responsibility for environmental claims against Pullman and Rexon.
The District Court defined the issue as whether Pullman was
directly liable or whether it was “merely limited to an exclusive
indemnification of Rexon.”
Particularly important to the District Court’s ruling is
paragraph § 1.05, captioned “Seller’s Retention of Certain
Liabilities,” in which Pullman “agrees to assume and become liable
for, and pay, perform and discharge and to indemnify....” As the
District Court construed the agreement, the parties intended to
attribute direct liability to Pullman for a wide range of costs
associated with violations of, or noncompliance with,
“Environmental Laws as of or prior to the closing date” of the sale
in 1989.
The Caldwell Group’s claims and the judgment in its
favor are not based on the parent/subsidiary relationship between
Pullman and Rexon, but rather on Pullman’s contractual
assumption of responsibility. The District Court pointed out that
Rexon had become responsible for its dumping from 1962 to 1982
at the Caldwell site, even though the damage had not become
manifest until 1986, three years before the sale. The Court ruled
that the contractual provision made Pullman directly liable to the
Caldwell Group for Rexon’s obligations.
Following the entry of summary judgment on liability
against Rexon and Pullman, the Court conducted a bench trial to
determine the amount of damages. In extensive findings of fact, the
Court considered such matters as the appropriate remediation, the
proper costs, and the ingredients in the waste generated by Rexon.
These factors led to an allocation of expenses among the other
waste generators and Rexon.
The Court directed that Pullman should contribute an
8.05% allocation share amounting to $1,873,560.08 and entered
judgment in favor of the Caldwell Group for that amount against
Pullman, Rexon and Mark IV Industries,2 jointly and severally, plus
prejudgment interest and attorneys’ fees.
Pullman, Rexon and Mark IV Industries have
appealed, alleging numerous errors in the District Court
proceedings. Pullman contends that, under the stock purchase
agreement, it did not indemnify Rexon or assume its liabilities other
than those existing at its own premises, that Caldwell has no right
to a direct action, and that the allocation was erroneous. Morever,
it is asserted that the cost of one of the remedial means used should
not have been permitted, that no prejudgment interest is
appropriate, and that because it had been dissolved, Rexon was not
amenable to suit.
III.
Interpretation of the retention of liabilities language
in the 1989 stock purchase agreement is a critical issue in this
appeal because the District Court ruled that Pullman’s liability was
based on a contractual obligation. Although federal law underlies
the cause of action, state law applies to interpreting a contract that
affects CERCLA liability. See, e.g., United States v. USX Corp.,
68 F.3d 811, 826 n.30 (3d Cir. 1995); Beazer E., Inc. v. Mead
Corp., 34 F.3d 206, 215 (3d Cir. 1994). Here, section 11.10 of the
stock purchase agreement provides that New Jersey law applies.
Paragraph 1.05 of the agreement, captioned
“[Pullman] Retention of Certain Liabilities,” reads in pertinent part:
“Anything contained herein or in any other document,
instrument or agreement to the contrary notwithstanding,
[Pullman] agrees to assume and become liable for, and to
pay, perform and discharge and to indemnify [Rexon] and to
hold [Rexon] harmless from and against any and all
liabilities and obligations with respect to the following:
* * * (c)(2) any and all liabilities and obligations (including
without limitation, any liabilities or obligations to third
parties for any consequential or punitive damages) arising
out of or relating to . . . (B) any actual or alleged violation of
2
Mark IV had assumed various liabilities of Pullman in 1996.
or non-compliance by [Rexon] with any Environmental
Laws as of or prior to the Closing Date (including without
limitation, Superfund liabilities or similar liabilities for other
sites . . .).” 3
Pullman concedes that there has been no dispute that
Rexon’s “disposal arrangements with Caldwell Trucking were of
a nature or character as to give rise to an allegation of an ‘actual or
alleged violation of or non-compliance’ by Rexon.” Appellant’s
Brief at 60.
Under section 107 of CERCLA, 42 U.S.C. §
9607(c)(1), Rexon may not divest itself of liability for its pollution
activity. See, e.g., Horsehead Indus., Inc. v. Paramount
Commc’ns, Inc., 258 F.3d 132, 135 (3d Cir. 2001); Hatco Corp. v.
W.R. Grace & Co. - Conn., 59 F.3d 400, 404 (3d Cir. 1995);
Beazer E., Inc., 34 F.3d 210-11. Although it may not escape
liability to the government, a participant in a contamination activity
may secure contribution from other responsible parties or
indemnification. See, Section 113 of CERCLA, 42 U.S.C. §
9613(f); Horsehead Indus., 258 F.3d at 135; New Jersey Tpk.
Auth. v. PPG Indus., Inc., 197 F.3d 96, 104 (3d Cir. 1999); Hatco
Corp., 59 F.3d at 404; Beazer E., Inc., 34 F.3d at 210-11.
Although its argument is not clear, Pullman appears
to contend that the retention of liabilities clause would apply if
Rexon paid its share of remediation expenses incurred by the state
or federal governments pursuant to section 107, but not if those
costs had been incurred by polluters themselves.
Paragraph 1.05 does not support such a construction
because its language is far more sweeping. Subparagraph (c)(2)
refers to “[a]ny and all liabilities and obligations . . . arising out of
or relating to . . . (B) any actual or alleged violation of or non-
compliance by [Rexon] with any Environmental Laws as of or
prior to the Closing Date (including without limitation, Superfund
3
We note that the stock purchase agreement also contained a
$100,000 deductible. At oral argument, the parties indicated
that, depending on the outcome of the case, they could reach an
agreement as to an appropriate offset against the judgment.
liabilities or similar liabilities for other sites . . .).” The text does
not include a limitation applicable only to matters brought under
section 107.
Pullman’s concession that Rexon was a perpetrator
under the terms of section 107, a conclusion that is overwhelming
here, establishes that there was a breach of the environmental laws.
The record demonstrates that the violations occurred before 1989,
when the stock purchase agreement was signed. Indeed, the EPA
had put the Caldwell property on the National Priorities List in
1983, before Pullman purchased Rexon.
As an alternative basis for exculpation, Pullman
argues that the retention of liability provision applies only to
contamination that Rexon inflicted on its own sites in Fairfield and
Wayne and not to pollution on Caldwell’s property. As Pullman
states in its brief, “To the extent the parties intended to impose
liability on Pullman for contribution at third party disposal sites,
the language of the Agreement would have been specific.”
Appellant’s Brief at 59.
Pullman’s interpretation, however, is foreclosed by
the wording in subparagraph (c)(2), which extends responsibility
to “Superfund liabilities or similar liabilities for other sites . . ..”
The agreement’s language itself is broad enough to cover all of
Rexon’s environmental liabilities. However, some extrinsic
evidence was received.
After initial consideration of Caldwell’s motion for
summary judgment, the District Court ruled that the contract was
“ambiguous on the amount of liability Pullman agreed to assume
and the type of environmental violation that is within the purview
of the parties 1989 [Stock Purchase Agreement].” It was only after
hearing oral argument on the ambiguity issue that the Court
granted the Caldwell motion for judgment and found Pullman
directly liable. The record is opaque on whether, as both parties
argue, the extrinsic evidence was a factor considered by the
District Court in reaching its conclusion on liability.
In its memorandum accompanying the order for
judgment, the District Court did not mention any extrinsic evidence
that it might have considered in reaching its decision. However,
because both parties here have raised the subject and there has
been no objection to the introduction of extrinsic evidence, we will
comment on it briefly.
The deposition testimony of John C. Bennett, counsel
for the Rexon purchaser in 1989, detailed the negotiations and
drafting leading to the final agreement. He expressed his primary
concern at that time that Pullman retain liability for all of Rexon’s
environmental problems as well as provide indemnity. In addition,
the bank financing the purchase insisted that Pullman assume,
rather than simply indemnify, Rexon for its environmental
responsibilities.
The extrinsic evidence strongly supported the District
Court’s conclusion that the agreement covered all of Rexon’s
environmental liability problems. We are persuaded that the
District Court did not err in construing the agreement to encompass
Rexon’s liability as a supplier of waste to Caldwell Trucking in
addition to contamination that might exist at the Fairfield and
Wayne premises.
Section 1.05 of the stock purchase agreement has a
more expansive scope than a mere indemnification provision. It
provides that Pullman will “assume and become liable for” and
“hold [Rexon] harmless from and against any and all liabilities . .
. with respect to the following: . . ..”
In Bouton v. Litton Indus., Inc., 423 F.2d 643, 651
(3d Cir. 1970), we construed a contract for the sale of the assets of
a business and distinguished between indemnity and assumption
provisions. We observed, “one who assumes a liability, as
distinguished from one who agrees to indemnify against it, takes
the obligation of the transferor unto himself . . ..” Id. See also
Hatco Corp., 59 F.3d at 406.
The agreements in Bouton and Hatco were
interpreted under New York law. See Hatco Corp., 59 F.3d at 405;
Bouton, 423 F.2d at 650-51. The parties have accepted New Jersey
law as applicable here, but they have not cited instances in which
the law of New Jersey would vary from that of New York in
differentiating between indemnity against, and assumption of,
liability.
As we have explained before, “[u]nder New Jersey
law, courts should interpret a contract considering ‘the objective
intent manifested in the language of the contract in light of the
circumstances surrounding the transaction.’” SmithKline Beecham
Corp. v. Rohm & Haas Co., 89 F.3d 154, 159 (3d Cir. 1996)
(quoting Dome Petroleum Ltd. v. Employers Mut. Liab. Ins. Co. of
Wis., 767 F.2d 43, 47 (3d Cir. 1985)). Thus, “[w]e cannot ignore
the express language of the contract.” SmithKline Beecham Corp.,
89 F.3d at 161 (citing Commc’ns Workers of Am., Local 1087 v.
Monmouth County Bd. of Soc. Servs., 476 A.2d 777, 782 (N.J.
1984)). As we pointed out earlier, the text of section 1.05
demonstrates the broad nature of Pullman’s assumption.
Pullman insists that it agreed only to indemnify
Rexon rather than stand in its shoes and assume the obligation.
Pullman points out that, in the usual indemnity situation, the
indemnitor is liable to the indemnitee only after a judgment has
been entered against it, and until that has occurred, no
responsibility exists. See, e.g., McGlone v. Corbi, 279 A.2d 812,
817 (N.J. 1971); Harley Davidson Motor Co., Inc. v. Advance Die
Casting, Inc., 678 A.2d 293, 295 (N.J. Super. Ct. App. Div. 1996).
Accordingly, Pullman argues that, as indemnitor, it cannot be sued
directly.
Although Pullman is correct in its description of the
two-step operation of an indemnity agreement, there is more
involved here. Rexon is a party to this suit and its defense has
been financed by Pullman. It is obvious, therefore, that it had
notice of the claim and participated in the proceedings establishing
liability on the part of both Rexon and Pullman. In effect, the two-
step process that ordinarily would be accomplished by the use of
third-party complaints was consolidated into one. In the
circumstances of this case and its status at this juncture, we do not
find that to be reversible error.
Even were we to focus entirely on the
“indemnification” language, that would not change the result in
this case. Pullman would still have been required to indemnify
Rexon for “Superfund liabilities or similar liabilities for other
sites.” Under New Jersey law, ambiguities in an indemnification
agreement are generally construed against the indemnitee. See
SmithKline Beecham Corp., 89 F.3d at 161 n.3 (citing Ramos v.
Browning Ferris Indus., 510 A.2d 1152, 1159 (N.J. 1986)).
However, here, as in SmithKline Beecham Corp., “the Agreement
was negotiated at arms length between the representatives of
sophisticated business entities.” SmithKline Beecham Corp., 89
F.3d at 161 n.3. The scope of the retained responsibilities is the
same under both theories of assumption and indemnification.
We note also that the agreement includes “hold
harmless” language. See generally Fisher Dev. Corp. v. Boise
Cascade Corp., 37 F.3d 104, 113 n.3 (3d Cir. 1994) (explaining
that “[i]n a hold-harmless agreement, one party agrees ‘to hold the
other without responsibility for . . . liability arising out of the
transaction involved.’”) (quoting Black’s Law Dictionary 731 (6 th
Ed. 1990)).
In Carvalho v. Toll Bros. & Developers, 675 A.2d
209, 215 (N.J. 1995), the Supreme Court of New Jersey explained
that “interpretation and enforcement of hold harmless agreements
should be governed by the intention of the parties in providing for
insurance and the division of risk.” In Eaton v. Grau, 845 A.2d
707, 712 (N.J. Super. Ct. App. Div. 2004), the Superior Court of
New Jersey held that a hold harmless agreement protected “against
both plaintiff’s liability to third parties and actual losses sustained
by her.” Although the addition of the hold harmless language adds
strength to the Group’s position here, we need not determine if it
is to be interpreted as equivalent to “assume” under New Jersey
law.
IV.
Defendants also contend that Rexon was not
amenable to suit because it was “dead and buried” when the
judgment was entered. This argument is based on an order in a
tangentially related criminal matter, where the District Court for
New Jersey on February 23, 1995 directed that Rexon dissolve
itself by August 21, 1995.
As noted earlier, the suit before us was filed on April
6, 1995. Rexon was served with process in April and May 1995
and its certificate of dissolution was not filed until June 30, 1995.
Pullman points out that Rexon’s facilities in Wayne and Fairfield
had ceased operations in September, 1994, the bank had attached
the remaining assets, and by June 30, 1995 Rexon had liquidated.
Consequently, Pullman argues that Rexon no longer existed.
Although defendants may be correct that by June 30,
1995 Rexon was tottering on the edge of its grave, it still had
enough spark of life remaining in May 1995 to file a motion for
reduction of the fine imposed in the criminal case. Moreover,
Rexon was one of several plaintiffs who initiated a coverage suit
against their insurers in October 2002, years after it was allegedly
“dead and buried.” We conclude that the suit against Rexon was
permissible. See In re: RegO Co., 623 A.2d 92 (Del. Ch. 1992).
Rexon was neither dead nor buried alive and the judgment against
it is valid.
V.
The defendants also contend that the Caldwell Group
is not entitled to recover because it is a third-party beneficiary
excluded from recovery by the terms of the 1989 stock purchase
agreement. Paragraph 11.03 of the contract reads:
“Successors and Assigns. The terms
and conditions of this agreement shall
inure to the benefit of and be binding
upon the respective successors and
assigns of the parties hereto, provided
that no person, firm, or entity . . .
other than the parties hereto, their
respective successors and assigns shall
be deemed a beneficiary of any of the
represen ta tions, w a rra ntie s or
covenants contained herein.”
The general, boilerplate language, however, must
yield to the specific direction of Paragraph 1.05 that “[a]nything
contained herein . . . to the contrary notwithstanding, [Pullman]
agrees to assumes . . . all liabilities . . . with respect to . . . [those]
arising out of or relating to . . . alleged violation[s] of . . .
Environmental Laws . . . including Superfund liability . . ..”
Whatever doubt may exist after review of the language in the
contract was resolved by the extrinsic evidence that made clear the
parties’ intention to have Pullman assume all of Rexon’s
environmental liabilities.
VI.
The dispute over the interpretation of the contract is
focused on the conflict between two parties, but the damages
aspect of the case is far more diffuse. The number of defendants
from whom contribution was sought exceeded one hundred. This
aggregation included entities and individuals who had supplied
substantial contaminates as well as those who had contributed little
or none.
Early in the litigation, the District Court approved an
intensive alternative dispute resolution process including mediation
as a way to apportion responsibility. As a result, large numbers of
claims amounting to about 20% of the total damages were settled.
In the instance of the Carborundum Company, a major polluter, the
parties stipulated its share of responsibility at approximately 20%.
Allocation of responsibility for contamination at a
site where numerous entities contribute various amounts and
various degrees of concentration of waste over various periods of
time is an obviously difficult task. In this case, both parties
produced expert testimony. Based on evaluation of the witnesses’
presentation and the available data, the District Court concluded
that the evidence offered by the Caldwell Group was more
persuasive.
Caldwell’s presentation considered the beginning
point to be 60% of the total damages after eliminating the 20%
allocated to Carborundum Company and the 20% attributed to
settled claims. Rexon contends that the base point should have
been the total amount of waste received by the Trucking Company.
The District Court accepted the 60% solution as reasonable under
the circumstances. We do not differ with that assessment.
During the latter period of Rexon’s operations, its
waste was deposited by Caldwell Trucking into tanks on its
property instead of the lagoons, and following that to ocean
dumping facilities. Rexon argues that it should not have been
charged for any contamination once these changes in disposal
occurred. The Group, however, explains that in transferring
Rexon’s waste to tanks on the Caldwell Trucking property, some
spillage occurred, albeit unintended. To some extent based on
evidence of individuals who did the actual transportation, the
District Court took these factors into account and assessed only
10% of that waste volume to the calculation.
Rexon also takes issue with the costs of an iron
reactive barrier installed by the Caldwell Group in lieu of the pump
and treatment method recommended by the EPA. It appears from
the evidence that the iron reactive barrier method cost substantially
less and proved effective in coping with ground water pollution.
Moreover, the EPA was content to delay application of its
suggested pump and treatment method pending evaluation of the
iron reactive barrier method.
Pullman also argues that Caldwell was not entitled
to recover the cost of the iron reactive barrier because this remedial
action did not substantially comply with the National Contingency
Plan. Section 107(a)(4)(B) of CERCLA specifies that a remedy
must be “consistent with the national contingency plan” in order
for its cost to be recoverable. 42 U.S.C. § 9607(a)(4)(B).
Pullman contends that “[a]t trial, plaintiffs did not
demonstrate that the installation of the iron reactive wall was
anything more than an experimental remedy not adopted by the
EPA in its Record of Decision.” Appellant’s Brief at 85. Hence,
Pullman asserts that the remedial action failed to substantially
comply with the National Contingency Plan. However, Pullman
fails to provide any significant evidence of an inconsistency with
the National Contingency Plan beyond the status of the iron
reactive barrier as an “experimental” remedy that the EPA had not
included in its Record of Decision.
In contrast, the District Court carefully documented
the remedy’s compliance with both the National Contingency Plan
and the Consent Decree. Perhaps most importantly, in its opinion,
the District Court noted that “[t]he EPA has consented to all work
performed at the Site and has never objected to any of the work
performed by [Caldwell].” Furthermore, the iron reactive barrier
was more cost effective and had performed more effectively than
the pump and treat remedy was expected to perform. As did the
District Court, we conclude that the iron reactive barrier is
consistent with the National Contingency Plan and the cost is a
proper item of damages.
Rexon objected to other computations in the
Caldwell allocation, but we conclude that they were adequately
considered by the District Court. The records over a period of
many years were not available to document precisely the many
variables that would have been the basis for a calculation. Put
another way, the Caldwell evidence established an equitable
allocation that was reasonable under all the circumstances.
The District Court assessed prejudgment interest
against Rexon. It does not dispute the calculations nor the total
amount of this item, but maintains that no interest whatsoever
should be awarded.
The action was brought under section 113(f), which
provides for contribution from persons liable under section 107 as
liable or potentially liable. Section 107 mandates imposition of
prejudgment interest. Section 113 is silent on that point and its
lack of direction fairly leads to an interpretation that, in
contribution cases, such an award is discretionary or generally
controlled by common law.
In Bancamerica Commercial Corp. v. Mosher Steel
of Kan., Inc., 100 F.3d 792 (10 th Cir. 1996), the Court directed that
prejudgment interest be awarded in a section 113 case. See also
United States v. Consolidation Coal Co., 345 F.3d 409 (6 th Cir.
2003). A number of district courts have followed that procedure
as well. See, e.g., Allied-Signal, Inc. v. Amcast Int’l Corp., 177 F.
Supp. 2d. 713, 758 (S.D. Ohio 2001).
The argument for awarding prejudgment interest lies
in the view that when a plaintiff has been denied the use of an
ascertainable amount of money for a period of time, there is an
actual loss. Section 107 specifically recognizes the loss and we
can perceive no reason to deny recovery when the action is brought
under section 113.
Accordingly, we conclude that prejudgment interest
may be awarded under section 113, although it is not mandatory.
The Judgment of the District Court will be affirmed.
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