Justia Contracts Opinion SummariesArticles Posted in Environmental Law
Scott Fetzer Co. v. American Home Assurance Co.
The Supreme Court affirmed the judgment of the court of appeals in this dispute arising out of environmental-cleanup and remediation work at two Superfund sites in Bronson, Michigan, holding that Restatement (Second) 193 does not govern the choice-of-law analysis for bad faith claims.Scott Fetzer Company filed this action asserting a breach of contract claim against certain insurance companies, including Travelers Casualty and Surety Company, alleging breaches of certain insurance contracts. Fetzer also asserted a tort claim against each company, arguing that they had acted in bad faith when handling his claims. As to Travelers, an administrative judge concluded that Ohio law applied to a discovery dispute concerning Scott Fetzer's bad faith claim. The court of appeals affirmed, determining that Ohio law governed the bad-faith discovery dispute because the cause of action was a tort. In affirming, the court applied the choice-of-law rules set forth in section 145 of the Restatement. Travelers appealed, arguing that section 193 governs the choice-of-law analysis for bad faith claims because they arise out of insurance contracts. The Supreme Court affirmed, holding that the court of appeals correctly ruled that the choice-of-law analysis applicable to a bad-faith claim as provided by section 145. View "Scott Fetzer Co. v. American Home Assurance Co." on Justia Law
Gold Coast v. Crum & Forster Spclt
Gold Coast Commodities, Inc. makes animal feed using saponified poultry and plant fats at its Rankin County, Mississippi facility. Because its production process involves, among other things, old restaurant grease and sulfuric acid, Gold Coast is left with about 6,000 gallons of oily, “highly acidic,” and “extremely hot” wastewater each week. The City of Brandon, Mississippi, told a state agency that it believed Gold Coast was “discharging” that “oily, low-pH wastewater” into the public sewers. As a result, the Mississippi Department of Environmental Quality launched an investigation. Two months before the Department’s investigation, Gold Coast purchased a pollution liability policy from Crum & Forster Specialty Insurance Company. After the City filed suit, Gold Coast—seeking coverage under the provisions of its Policy—notified the insurer of its potential liability. But Crum & Forster refused to defend Gold Coast. The insurer insisted that because the Policy only covers accidents. The district court agreed with Crum & Forster—that the City wasn’t alleging an accident. The Fifth Circuit affirmed. The court wrote that here, the Policy is governed by Mississippi law. In Mississippi, whether an insurer has a duty to defend against a third-party lawsuit “depends upon the policy's language.” The district court found that the “overarching” theme of the City’s complaint, regardless of the accompanying “legal labels,” is that Gold Coast deliberately dumped wastewater into the public sewers. The court agreed with the district court and held that Gold Coast isn’t entitled to a defense from Crum & Forster. View "Gold Coast v. Crum & Forster Spclt" on Justia Law
The Samuel J. Heyman 1981 Continuing Trust for Lazarus S. Heyman v. Ashland LLC
At issue in this appeal was a breach-of-contract dispute involving a stock purchase agreement for the sale of all the shares of stock of International Specialty Products Inc. (“International Specialty”). The selling shareholders were nine trusts and RFH Investment Holdings LLC (the “Heyman Parties”). The purchaser was Appellee Ashland Inc., a leading global specialty chemical company. International Specialty had two wholly owned subsidiaries that went with the sale, Appellee ISP Environmental Services Inc. and Appellee Chemco LLC (“Chemco”). ISP Environmental owned a property known as the Linden property, which for years had been home to chemical manufacturing operations and had an extensive environmental history. As part of the transaction, the parties agreed that the Heyman Parties would keep the Linden property. At the time of closing on the Stock Purchase Agreement, ISP Environmental caused the Linden property to be transferred to Appellant Linden Property Holdings LLC, the Heyman Parties’ designated entity for that purpose. A dispute arose between the parties as to who was responsible for the Linden property’s pre-closing, environmental liabilities. The parties agreed the Heyman Parties assumed responsibility in the agreement for the environmental contamination on the property itself. They disagreed as to who was responsible for environmental contamination to areas that were not part of the Linden property but were contaminated because of the activities on the Linden property. Ashland claimed that under the agreement, the Heyman Parties were responsible for all of the liabilities. The Heyman Parties claimed they never assumed any liability in the agreement for the off-site liabilities. The Superior Court agreed with Ashland and found that the Heyman Parties assumed responsibility in the agreement for the Linden property’s off-site environmental liabilities. The Delaware Supreme Court concluded, however, that under the unambiguous language of the agreement, the Heyman Parties assumed liability only for the Linden property’s on-site environmental liabilities, and assumed no liability for the property’s off-site liabilities. View "The Samuel J. Heyman 1981 Continuing Trust for Lazarus S. Heyman v. Ashland LLC" on Justia Law
O’Brien’s Response Management, L.L.C. v. BP Exploration & Production, Inc.
BP retained the Responders (O’Brien’s and NRC) for nearly $2 billion to assist with the cleanup of the Deepwater Horizon oil spill. Thousands of the Responders' workers filed personal injury lawsuits against BP, which were consolidated and organized into “pleading bundles.” The B3 bundle included “all claims for personal injury and/or medical monitoring for exposure or other injury occurring after the explosion and fire of April 20, 2010.” In 2012, BP entered the “Medical Settlement” on the B3 claims with a defined settlement class. The opt-out deadline closed in October 2012. The Medical Settlement created a new type of claim for latent injuries, BackEnd Litigation Option (BELO) claims. After the settlement, plaintiffs could bring opt-out B3 claims if they did not participate in the settlement, and BELO claims if they were class members who alleged latent injuries and followed the approved process. Responders were aware of the settlement before the district court approved it but neither Responder had control over the negotiations, nor did either approve the settlement.In 2017, BP sought indemnification for 2,000 BELO claims by employees of the Responders. The Fifth Circuit held that BP was an additional insured up to the minimum amount required by its contract with O’Brien’s; the insurance policies maintained by O’Brien’s cannot be combined to satisfy the minimum amount. O’Brien’s is not required to indemnify BP because BP materially breached its indemnification provision with respect to the BELO claims. View "O'Brien's Response Management, L.L.C. v. BP Exploration & Production, Inc." on Justia Law
Wisconsin Central LTD v. Soo Line Railroad Co.
In 1987, Central purchased certain Soo assets, including LST rail lines. Soo agreed to retain liability and indemnify Central for “all claims for environmental matters relating to ownership of the Assets or the operation of LST that are asserted” within 10 years of closing, after which Central would assume all liability and indemnify Soo. Years later, contamination was discovered in a former Ashland industrial area, now Kreher Park, which contains a railroad right-of-way purchased by Central under the Agreement. The Wisconsin Department of Natural Resources (WDNR) identified an old factory as the likely source; its owner, Northern, named as a potentially responsible party (PRP), undertook to shift responsibility to the railroads. Central kept Soo apprised of the situation. Central sent notification to Soo in 1997 that it was seeking indemnification for environmental matters, including at Kreher Park. Soo did not agree to indemnify or defend.In 2002, the EPA designated the area as a Superfund site (CERCLA, 42 U.S.C. 9601). In 2011, the EPA issued PRP notices to Central, Soo, Northern, and others. Northern sued Central, Soo, and the city for its cleanup expenses. The EPA cited evidence that the railroads engaged in activities contributing to the contamination. The railroads settled the EPA and Northern claims for $10.5 million.In breach of contract litigation between the railroads, the district court granted Soo summary judgment, finding that no claim had been asserted during the claim period. Central then argued that it should not be responsible for the portion of the environmental claims attributable to operations and land not purchased by Central. The court rejected the argument and awarded Soo $10,799,427, prejudgment interest, and $1,776,764 for attorneys’ fees. The Seventh Circuit affirmed. No “claim” was asserted against the railroads during the Agreement’s claim period; Northern never threatened litigation and the WDNR did not take any action that imposed any legal duties or impending legal peril on either railroad. The operation of the railroad business, not just the ownership of the assets, was identified by the EPA as contributing to the contamination; the claims are within the scope of the indemnification clause. View "Wisconsin Central LTD v. Soo Line Railroad Co." on Justia Law
EPLET, LLC v. DTE Pontiac North, LLC
In 2007, GM sold a power plant to DTEPN, which leased the land under the plant for 10 years. DTEPN agreed to sell utilities produced at the plant to GM, to maintain the plant according to specific criteria, and to address any environmental issues. DTEPN’s parent company, Energy, guaranteed DTEPN’s utility, environmental, and maintenance obligations. Two years later, GM filed for bankruptcy. GM and DTEPN agreed to GM’s rejection of the contracts. DTEPN exercised its right to continue occupying the property. An environmental trust (RACER) assumed ownership of some GM industrial property, including the DTEPN land. DTEPN remained in possession until the lease expired. RACER then discovered that DTEPN had allowed the power plant to fall into disrepair and contaminate the property.The district court dismissed the claims against Energy, reasoning that RACER’s allegations did not support piercing the corporate veil and Energy’s guaranty terminated after GM rejected the contracts in bankruptcy.The Sixth Circuit reversed. Michigan courts have held that a breach of contract can justify piercing a corporate veil if the corporate form has been abused. By allegedly directing its wholly-owned subsidiary to stop maintaining the property, Energy exercised control over DTEPN in a way that wronged RACER. DTEPN is now judgment-proof because it was not adequately capitalized by Energy. RACER would suffer an unjust loss if the corporate veil is not pierced. Rejection in bankruptcy does not terminate the contract; the contract is considered breached, 11 U.S.C. 365(g). The utility services agreement and the lease are not severable from each other. Energy guaranteed DTEPN’s obligations under the utility agreement concerning maintenance, environmental costs, and remediation, so Energy’s guaranty is joined to DTEPN’s section 365(h) election. View "EPLET, LLC v. DTE Pontiac North, LLC" on Justia Law
Taylor Energy Co. LLC v. United States
Taylor's leases for the Outer Continental Shelf (OCS), set to expire in 2007, incorporated Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1301, regulations. They required Taylor to leave the leased area “in a manner satisfactory to the [Regional] Director.” Taylor drilled 28 wells, each connected to an oil platform. In 2004, Hurricane Ivan toppled Taylor’s platform, rendering the wells inoperable. Taylor discovered leaking oil but took no action. In 2007, Taylor was ordered to decommission the wells within one year. Taylor sought extensions. The government required Taylor to set aside funds for its decommissioning obligations. For Taylor to receive reimbursement, the government must confirm the work was conducted “in material compliance with all applicable federal laws and . . . regulations" and with the Leases. The resulting Trust Agreement states that it “shall be governed by and construed in accordance with the laws of" Louisiana. Taylor attempted to fulfill its obligations. The government approved a departure from certain standards but ultimately refused to relieve Taylor of its responsibilities.Taylor filed claims involving Louisiana state law: breach of the Trust Agreement; request for dissolution of the trust account based on impossibility of performance; request for reformation for mutual error; and breach of the duty of good faith and fair dealing. The Federal Circuit affirmed the dismissal of the complaint. OCSLA makes federal law exclusive in its regulation of the OCS. To the extent federal law applies to a particular issue, state law is inapplicable. OCSLA regulations address the arguments underlying Taylor’s contract claims, so Louisiana state law cannot be adopted as surrogate law. View "Taylor Energy Co. LLC v. United States" on Justia Law
New Hanover County Board of Education v. Stein
In this complaint seeking to have the Attorney General preliminarily and permanently enjoined from distributing monies received pursuant to an agreement between the Attorney General and Smithfield Foods, Inc. and several of its subsidiaries regarding the operation of hog farms to any recipient other than the Civil Penalty and Forfeiture Fund, the Supreme Court held that the payments contemplated by the agreement did not constitute penalties for purposes of N.C. Const. art. IX, 7.In their complaint, Plaintiffs argued that payments made pursuant to the agreement constituted penalties under article IX, section 7 and that the Attorney General lacked the authority to enter into the agreement. The trial court entered summary judgment in favor of the Attorney General, concluding that even if Smithfield and its subsidiaries had entered into the agreement in hope of avoiding future penalties, the payments made under the agreement were not penalties, forfeitures or fines collected for any breach of the penal laws of the State. The court of appeals reversed, concluding that genuine issues of material fact existed precluding summary judgment. The Supreme Court reversed, holding that the payments contemplated by the agreement did not constitute penalties for purposes of article IX, section 7. View "New Hanover County Board of Education v. Stein" on Justia Law
Atlantic Casualty Insurance Co v. Garcia
After the Garcias bought their Lake Station Property in 2004, it was used as an automobile repair shop and a day spa. It previously was used as a dry cleaning facility and contained six underground storage tanks: four were used for petroleum-based Stoddard solvent, one was used for gasoline, and the last for heating oil. In 1999, the dry cleaning company reported a leak from the Stoddard tanks to the Indiana Department of Environmental Management (IDEM). In 2000, a site investigation was conducted and five groundwater monitoring wells were installed. IDEM requested additional information and testing in 2001 and 2004. The Garcias claim they had no knowledge of the preexisting environmental contamination before insuring with Atlantic. A 2014 letter from Environmental Inc. brought the contamination to the Garcias’ attention. The Garcias hired Environmental to investigate and learned that Perchloroethylene solvent and heating oil still affected the property. Atlantic obtained a declaration that its Commercial General Liability Coverage (CGL) policies did not apply. The Seventh Circuit affirmed, reading a “Claims in Process” exclusion to preclude coverage for losses or claims for damages arising out of property damage—known or unknown—that occurred or was in the process of occurring before the policy’s inception. View "Atlantic Casualty Insurance Co v. Garcia" on Justia Law
Exelon Generation Acquisitions, LLC v. Deere & Company
When Exelon Generation Acquisitions purchased Deere & Company’s wind energy business, it agreed to make earn-out payments to Deere if it reached certain milestones in the development of three wind farms that were underway at the time of the sale. Included in the sale was a binding power purchase agreement Deere secured from a local utility to purchase energy from the wind farm once it became operational. One of the three projects at issue in this appeal, the Blissfield Wind Project (in Lenawee County, Michigan) could not come to fruition because of civic opposition. Exelon managed to acquire another nascent wind farm from a different developer (Gratiot County, Michigan). Exelon managed to persuade the local utility to transfer the power purchase agreement there. The Gratiot County site was successful. Deere learned of Exelon’s success with the new site (and use of the power purchase agreement) and sue to recover the earn-out payment. Deere argued the earn-out payment obligation traveled from the Lenawee County farm to the Gratiot County farm. Exelon denied that it relocated the project, instead, it was prevented from developing the Blissfield farm by forces beyond its control. The Superior Court sided with Deere’s interpretation of the power purchase agreement, and ordered Exelon to pay the earn-out. The Delaware Supreme Court disagreed with this interpretation of the purchase agreement and reversed. View "Exelon Generation Acquisitions, LLC v. Deere & Company" on Justia Law