Bay Corrugated Container, Inc. v. Gould, Inc.

NOT RECOMMENDED FOR PUBLICATION
File Name: 15a0244n.06
No. 14-1237 FILED
Apr 07, 2015
DEBORAH S. HUNT, Clerk
UNITED STATES COURTS OF APPEALS
FOR THE SIXTH CIRCUIT
BAY CORRUGATED CONTAINER, INC., )
)
Plaintiff-Appellant, )
)
v. )
)
ON APPEAL FROM THE
GOULD, INC., )
UNITED STATES DISTRICT
)
COURT FOR THE EASTERN
Defendant-Appellee, )
DISTRICT OF MICHIGAN
)
GOULD ELECTRONICS, INC., )
Intervenor-Appellee.
BEFORE: SILER, BATCHELDER, and ROGERS, Circuit Judges.
ROGERS, Circuit Judge. In 1999, Bay Corrugated Container filed a petition in federal
district court to force Gould, Inc. to comply with the terms of a 1994 consent judgment. In early
2000, the district court appointed a mediator to resolve the dispute. From then until 2009,
however, the district court heard nothing of the case. Rather than bringing the stalled
proceedings to the district court’s attention, Bay used the nine-year delay to negotiate a
settlement with a third-party and to wait out the result of a related bankruptcy proceeding.
When, in 2009, Bay finally moved the district court to resolve Bay’s still-pending petition to
enforce the consent judgment, the district court denied Bay’s motion and dismissed Bay’s
petition for—among other things—failure to prosecute. The district court could properly
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
attribute fault to Bay’s taking nine years to return to Court, and could also find prejudice to
Gould, Inc. from the resultant unavailability of evidence. The district court therefore did not
abuse its discretion in dismissing Bay’s petition under Rule 41(b).
In 1973, Gould, Inc. sold Bay a manufacturing plant in Monroe, Michigan. Eighteen
years later, Bay brought a CERCLA action against Gould, Inc. for contaminating the area around
the Monroe plant. Although GNB Batteries—one of Gould, Inc.’s corporate spinoffs—had
purchased Gould, Inc.’s battery division in 1984, GNB denied liability for the contamination, so
Gould, Inc. wound up defending the litigation. See GNB Inc. v. Gould, Inc., No. 90-C-2413,
1990 WL 207429, at *2 (N.D. Ill. Nov. 30, 1990). At the same time, Gould, Inc. engaged GNB
in litigation to determine whether and to what extent GNB had assumed Gould, Inc.’s
environmental liabilities when it purchased Gould, Inc.’s battery division. Id. at *1.
In 1994, Gould, Inc.’s litigation with Bay appeared to come to an end when Gould, Inc.
and its soon-to-be corporate successor, Gould Electronics, signed a Settlement Agreement and
Mutual Release. Bay Corrugated Container, Inc. v. Gould, Inc., No. 2:91-cv-70170 (hereafter
“Dist. Ct. R.”), doc. # 126-4. Pursuant to the Agreement, Gould, Inc. and Gould Electronics
agreed to pay for investigation and remediation of the contaminated site. Id. The district court
incorporated the terms of the Agreement into a consent judgment entered on August 2, 1994.
Dist. Ct. R., doc. # 126-3.
A year later, the Seventh Circuit resolved Gould, Inc.’s litigation with GNB, holding that
GNB assumed all of Gould, Inc.’s environmental liabilities when GNB purchased Gould, Inc.’s
battery division. GNB Battery Techs., Inc. v. Gould, Inc., 65 F.3d 615 (7th Cir. 1995).
Notwithstanding that decision, the 1994 consent judgment against Gould, Inc. and Gould
Electronics remained in effect. Neither Gould, Inc. nor Gould Electronics, however, completed
-2-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
the required investigation and remediation of the Monroe site. Thus, in 1999, Bay filed a
petition to force Gould, Inc.—but not Gould Electronics—to comply with the terms of the
consent judgment. Dist. Ct. R., doc. # 34, at 2 (sealed). In early 2000, after a status conference
and a hearing, the district court appointed a mediator to resolve the dispute. From then until
2009, however, the court heard nothing of the case—nothing from the mediator and nothing from
Bay or Gould, Inc. Bay Corrugated Container, Inc. v. Gould, Inc., No. 91-CV-70170, 2014 WL
256266, at *1 (E.D. Mich. Jan. 23, 2014).
While Bay was attempting to enforce the consent judgment against Gould, Inc., Bay was
also negotiating with GNB to determine whether GNB would undertake to conduct investigation
and remediation at the Monroe facility. Those negotiations concluded in October 2000 when
Bay and Exide Technologies—which had acquired and merged with GNB earlier that year—
completed an Outline of Settlement Agreement. Dist. Ct. R., doc # 120-6, at 5-7. The Outline of
Settlement Agreement provided that Exide would conduct additional investigation and
remediation at the Monroe facility, but did not mention the 1994 Settlement Agreement and
Mutual Release between Bay and Gould, Inc. and Gould Electronics. Id.
In 2002, Exide filed for Chapter 11 bankruptcy. In the course of the ensuing bankruptcy
proceeding, Exide rejected the 2000 Outline of Settlement Agreement it had entered into with
Bay. Exide’s rejection of the Outline of Settlement Agreement led Bay to file a proof of claim in
the bankruptcy proceeding, seeking damages from Exide based on Exide’s rejection of the
Outline of Settlement Agreement. See Dist. Ct. R., doc. # 122, at 4.
While awaiting the results of the Exide bankruptcy proceedings, Bay was simultaneously
negotiating with Gould Electronics, in hopes that Gould Electronics would assume Exide’s
obligations under the Outline of Settlement Agreement. According to Gould Electronics, Bay
-3-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
and Gould Electronics twice met with a mediator in 2002, but were unable to agree on the terms
of an assumption. Id. It also appears that, between 2002 and 2006, Bay and Gould Electronics
discussed, on a handful of occasions, Gould Electronics’ assuming Exide’s obligations under the
Outline of Settlement Agreement. Dist. Ct. R., doc. # 149-7, at 7-11. In early 2006, negotiations
between Gould Electronics and Bay ceased altogether. Id. at 11.
Bay took no further action in the matter until 2009, when it asked the district court to
resolve Bay’s still pending 1999 petition to enforce the 1994 consent judgment against Gould,
Inc. Dist. Ct. R., doc. # 118. The petition did not mention Gould Electronics. After asking Bay
and Gould, Inc. to explain “why the court has heard nothing from the parties over the course of
the past nine years,” Dist. Ct. R., doc. # 119, at 2, the district court eventually dismissed Bay’s
petition on two grounds. First, the district court concluded that Bay’s agreements with GNB had
absolved Gould, Inc. of any liability for contamination at the Monroe facility. Bay Corrugated
Container, Inc. v. Gould, Inc., No. 91-CV-70170, 2009 WL 3032723, at *3 (E.D. Mich. Sept. 18,
2009). Second, the district court held that, even were Gould, Inc. still liable under the 1994
consent judgment, Bay’s petition would be dismissed under Federal Rule of Civil Procedure
41(b). Id. The district court entered a judgment dismissing Bay’s case in September 2009, Dist.
Ct. R., doc. # 125, and subsequently denied Bay’s motion for reconsideration. Dist. Ct. R., doc.
# 139.
Bay appealed the district court’s dismissal of its 1999 petition, prompting Gould
Electronics to move to intervene as a defendant. Dist. Ct. R., doc. # 130. The district court
granted Gould Electronics’ motion. Dist. Ct. R., doc. # 139, at 2. On appeal, this court reversed
the district court’s judgment, holding that, “it cannot be determined from the record whether
there has been a novation and whether, as the district court determined, Gould, Inc. is no longer
-4-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
liable to Bay. Likewise, the district court’s summary dismissal under Rule 41(b) does not allow
us to review the appropriateness of the decision.” Bay Corrugated Container, Inc. v. Gould, Inc.,
462 F. App’x 516, 517 (6th Cir. 2012).
On remand the district ordered Gould, Inc. and Bay to “submit briefs, supported by
whatever evidentiary materials they deem appropriate, on the issues of (1) whether plaintiff’s
‘petition to enforce consent judgment’ is moot; (2) whether a novation has occurred; and
(3) whether dismissal of the complaint is appropriate for plaintiff’s lack of prosecution and/or
under the doctrine of laches.” Dist. Ct. R., doc. # 146. The district court also requested that
Gould Electronics—which the district court treated as a third-party amicus on remand, despite its
earlier order granting Gould Electronics’ motion to intervene—“submit briefing as a non-party
amicus addressing plaintiff’s arguments without prejudice to, or waiver of, [Gould Electronics’]
rights, claims or defenses in the event [Bay] seeks to make [Gould Electronics] a party to this
action in the future.” Dist. Ct. R., doc. # 147.
After considering the briefing and factual submissions, the district court once more
dismissed Bay’s 1999 petition on the ground that, in waiting nine years to rekindle its petition at
the district court, Bay had failed to diligently prosecute its claim. Bay Corrugated Container,
2014 WL 256266, at *4. The district court held that dismissal under Rule 41(b) was proper
because: (1) Bay’s delay in prosecuting its claim extended “for an inexcusably long period of
time,” during which period the district court heard nothing from Bay; (2) Bay’s delay had
prejudiced Gould, Inc. and Gould Electronics, both because the passage of time is inherently
prejudicial, and because “four witnesses with knowledge of waste disposal at the site died . . .
while Bay took no action against Gould in Court and while Bay simply observed the Exide
bankruptcy”; and (3) imposing a lesser sanction would not “do any good.” Id. at *7-*8. The
-5-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
district court expressly declined to dismiss the complaint on the ground of novation, relying
exclusively on its Rule 41(b) holding. Id. at *8. The order and judgment dismissing Bay’s 1999
petition name only Gould, Inc. as a defendant. Id. at *1; Dist. Ct. R., doc. # 156.
Bay now appeals the district court’s holding that Bay failed to diligently prosecute its
claim. Gould, Inc.’s attorney has announced that, because Gould, Inc. no longer exists, it is not
participating in the appeal. Bay Corrugated Container, Inc. v. Gould, Inc. et al., App. No. 14-
1237, doc. # 18. Gould Electronics is the only defendant to have filed a brief in this matter.
In deciding whether a district court abused its discretion in dismissing a case for failure to
prosecute, under Rule 41(b), this court considers four factors:
(1) Whether the party’s failure is due to willfulness, bad faith, or fault;
(2) whether the adversary was prejudiced by the dismissed party’s conduct;
(3) whether the dismissed party was warned that failure to cooperate could
lead to dismissal; and (4) whether less drastic sanctions were imposed or
considered before dismissal was ordered.
Knoll v. Am. Tel. & Tel. Co., 176 F.3d 359, 363 (6th Cir. 1999). In this case, all four of the Knoll
factors militate in favor of affirming the district court.
Bay’s failure to prosecute its petition diligently demonstrated “willfulness, bad faith, or
fault”—the first Knoll factor—because it showed a reckless disregard for the effect of delay on
the district court proceedings. By waiting years to recommence prosecution of its petition, Bay
allowed memories to fade, witnesses to move away or die, and documents to be lost or
destroyed. There is, moreover, no indication that the delay was not deliberate. Bay was
apparently waiting to see what would happen to its claim in Exide’s bankruptcy proceeding. We
have held that a plaintiff’s delay in prosecuting a claim evinces “willfulness, bad faith, or fault”
if it displays “a reckless disregard for the effect of [the plaintiff’s] conduct on [the district court]
proceedings.” Wu v. T.W. Wang, Inc., 420 F.3d 641, 643 (6th Cir. 2005). It is true that this court
has distinguished between mere dilatory conduct and bad faith, willfulness, or fault, and that to
-6-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
fall into the latter category a plaintiff “must display either an intent to thwart judicial proceedings
or a reckless disregard for the effect of [his] conduct on those proceedings.” Kemp v. Robinson,
262 F. App’x 687, 691 (6th Cir. 2007) (quoting Mulbah v. Detroit Bd. of Educ., 261 F.3d 586,
591 (6th Cir. 2001)). Our unpublished holding in Kemp—that a three-year delay did not reflect
such a reckless disregard—was based on a number of factors, including that “opposing counsel’s
failure to return correspondence was part of the problem.” Id. Bay at oral argument emphasized
that it should not bear responsibility for the nine-year period during which the district court heard
nothing from the parties. But Bay, the party seeking relief in the action, could be expected to be
the party to take measures when things stall. That is particularly true in this case, where the
party against which Bay currently seeks relief was not a party to the case at all until 2010.
Moreover, while dilatory conduct under our case law is not inherently fatal, we have been
presented with no case coming anywhere near nine years during which the court heard nothing
from the parties. The first Knoll factor on balance weighs against Bay.
Under the second Knoll factor—prejudice to the defendant—delays are prejudicial when
they “make it difficult to secure relevant records and witnesses with sufficient memory of the
events at issue.” Carpenter v. City of Flint, 723 F.3d 700, 707 (6th Cir. 2013). At least four of
the eight witnesses Bay earlier identified as having information about Bay’s disposal practices at
the Monroe facility died between 2000 and 2009. See R. 151-9, PgID 1039; R. 151-10, PgID
1041; R. 151-11, PgID 1043; R. 151-12, PgID 1045. There is no way to reproduce these
witnesses’ recollections or to be sure that the information they would have supplied is elsewhere
available. The prejudice factor thus weighs at least somewhat against Bay.
Bay has waived any arguments it might make with respect to the third Knoll factor—
notice of the possibility of dismissal. In its brief on remand, Bay acknowledged that, “By setting
-7-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
a briefing schedule including the issue of whether this case should be dismissed pursuant to Rule
41(b), the Court has cured the defective notice condition present at the time of its prior decision.”
Dist. Ct. R., doc. # 149, at 16. Bay’s acknowledgment meant the district court never had cause
to address the sufficiency of the notice it had afforded. Issues not litigated in the trial court are
generally inappropriate for appellate consideration in the first instance. See Taft Broad. Co. v.
United States, 929 F.2d 240, 243 (6th Cir. 1991).
The fourth Knoll factor—the availability and use of less drastic sanctions—also supports
dismissal. We have said that, “in the absence of contumacious conduct, an alternate sanction that
would protect the integrity of pretrial procedures should be utilized rather than dismissal with
prejudice.” Freeland v. Amigo, 103 F.3d 1271, 1280 (6th Cir. 1997). At oral argument, however,
counsel for Bay identified only two sanctions that he believed the district court should have
utilized in lieu of dismissal with prejudice: (1) dismissal without prejudice; and (2) an order to
show cause. But, under the circumstances, neither of those “sanctions” would serve any real
purpose. Were this case dismissed without prejudice, Bay would simply re-file in district court
and start the process all over again, just as though nothing had ever gone wrong. Similarly, a
show cause order—in effect, an order from the district court admonishing Bay to file something
to expedite proceedings—gives Bay exactly what it wants in this case: an opportunity to
recommence the litigation it so long delayed, at the price of only a stern word from the district
court. Neither of the alternative sanctions Bay proposes penalizes Bay for wasting the district
court’s time and exacerbating the loss of evidence in this case. Because Bay has not suggested a
lesser sanction that would actually operate as a sanction, the district court reasonably found that
dismissal with prejudice was the only means of protecting the integrity of the judicial process at
this juncture.
-8-
No. 14-1237, Bay Corrugated Container, Inc. v. Gould, Inc., et al.
The Knoll factors reasonably support the district court’s decision to dismiss Bay’s case
under Rule 41(b). The district court’s decision was, thus, not an abuse of discretion, and that
court’s judgment is accordingly affirmed.
-9-