United States District Court, Western District of New York
August 16, 1991
PUROLATOR PRODUCTS CORP., PLAINTIFF,
ALLIED-SIGNAL, INC., DEFENDANT.
The opinion of the court was delivered by: Larimer, District Judge.
DECISION AND ORDER
This action involves a dispute between two companies as to
their respective liability for clean-up costs for hazardous
substances that were deposited at a manufacturing facility in
Elmira, New York. Both companies, or their predecessors, had
some connection with the premises. There were two agreements,
however, with indemnification provisions, that must be
interpreted to determine whether and under what circumstances
liability may be shifted from one party to another.
Plaintiff, Purolator Products Corp. ("Purolator"), brought
this action under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et
seq., to recover "response" costs incurred in connection with a
federally-mandated investigation and cleanup of chemical wastes
generated by the corporate predecessor of defendant,
Allied-Signal, Inc. ("Allied"), and a declaratory judgment that
Allied is liable for such costs.
Allied has moved for summary judgment dismissing the
complaint. Also pending before the court is Purolator's
cross-motion for partial summary judgment on liability only.
Purolator was known prior to 1989 as Facet Enterprises, Inc.
Facet was a wholly-owned subsidiary of Bendix Corporation from
1975 to April 1, 1976, when Bendix divested Facet. Allied was
known as Allied Corporation until 1987. Allied acquired Bendix
As part of its Motor Components Division, Bendix ran an
automotive parts factory in Elmira, New York from 1929 to 1975.
Bendix allegedly disposed of hazardous substances there.
Bendix created Facet in 1975 in response to a Federal Trade
Commission antitrust order. In 1976, Bendix transferred the
Elmira plant to Facet, which continued to run the plant.
After the Environmental Protection Agency listed the plant on
its National Priorities List in 1982, Facet and Allied entered
into an administrative consent order with the EPA in May 1986.
Pursuant to that order, Facet undertook its own investigation
of the site, and concluded that Bendix had disposed of
hazardous substances there. Purolator alleges that the EPA is
expected to choose a remedy for cleaning up the site and to
direct Purolator and Allied to effect the remedy. Purolator
claims that it has been complying with the EPA's order, but
that Allied has refused to take any action or to pay for any of
the studies or other costs involved. Purolator has allegedly
spent over $600,000 so far in connection with the study.
Count I of the complaint is based on § 113(f) of CERCLA,
42 U.S.C. § 9613(f), which provides for "contribution from any
other person who is liable or potentially liable" under §
9607(a). Section 9607(a) states that the owner or operator of a
facility at which substances were disposed of is liable for
"necessary costs of response incurred by any other person" as a
result of the disposal. Purolator seeks a judgment on Count I
declaring Allied liable for, and directing it to pay,
Purolator's response costs relating to the Elmira investigation
and cleanup. At this point, Purolator seeks judgment on
liability only, with damages to be determined at a later date.
Count II states that, relying on the 1975 purchase agreement
between Bendix and Facet and a 1979 agreement between Bendix
and Facet relating primarily to a settlement of certain pension
liabilities, Allied has demanded indemnification from Purolator
for environmental liability costs at sites other than Elmira.
These costs apparently relate to chemicals generated at Elmira
and disposed of elsewhere prior to Facet's creation in 1975. On
this count, Purolator seeks a judgment declaring that it is not
liable to indemnify Allied under the Bendix-Facet agreements or
for any other reason.
In its answer, Allied contends that CERCLA liability was
included in the indemnification provision in the 1975 and 1979
agreements. Allied claims that although the agreements did not
expressly refer to environmental liability, the indemnity
provisions are broad enough to require indemnification for all
expenses incurred by Allied in connection with the clean-up.
Allied's answer asserts three counterclaims, the first two of
which are based on Allied's allegation that the 1975 and 1979
agreements require Facet to indemnify Bendix for any expenses
resulting from claims against Bendix connected with the assets
that were transferred to Facet. Allied maintains that
environmental liabilities were implicitly included in these
Allied's first counterclaim seeks a declaratory judgment that
Allied is entitled to complete indemnification from Purolator
for all environmental liabilities related to the assets
transferred from Bendix to Facet in 1975. In the second
counterclaim, Allied requests damages for Purolator's alleged
breach of the indemnity agreements.
The third counterclaim alleges that Allied has incurred
response costs in connection with the EPA order regarding the
Elmira plant. Allied seeks indemnity for these costs from
Purolator under 42 U.S.C. § 9613(f).
SUMMARY JUDGMENT MOTIONS
In its motion for summary judgment, Allied relies upon the
1975 and 1979 agreements. The 1975 agreement stated that
pursuant to the FTC order requiring Bendix to transfer certain
of its assets to a new company, Bendix transferred
all of Bendix' right, title and interest in and to
the Assets, including, without limitation, the
(a) Bendix' Motor Components Division, the
principal plant and offices of which are located
at 18th Street at Oakwood, Elmira, New York,
exclusive of the portion thereof directly involved
in or related to the manufacture or sale of
bicycle brakes, certain assets of which excluded
portion are listed in Exhibit C attached hereto .
The agreement also stated that "Facet hereby assumes and
agrees to satisfy all liabilities and obligations of Bendix,
secured or unsecured (whether accrued, absolute, contingent or
otherwise) relating to or arising out of the Assets (which are
transferred hereby subject to such liabilities and
The 1979 agreement arose out of certain legal disputes
between Facet and Bendix. Purolator claims that the 1979
agreement only concerned a dispute over pension plans, but
Allied contends that the agreement was intended to be a "global
settlement" between the parties, and that Facet assumed
liability for anything not specifically excluded which related
to the transferred assets.
It is clear that a dispute over pension contributions was a
concern of the parties when they entered into the 1979
agreement. The 58-page agreement lists a number of specific
disagreements, lawsuits, and areas of potential liability
— many of which concerned pensions — which it was intended to
resolve. However, it also contains more general language,
stating, for instance, that the "parties have concluded that it
would be in their respective best interests to settle all the
disputes between them . . ."
The agreement further states in § 5.01 that Facet agreed that
the 1975 agreement
includes, but without limiting the generality
thereof, an assumption by Facet of, and an
indemnity to Bendix and Fram*fn2 against, any and
all liabilities arising out of or connected with
the assets and businesses of Bendix or Fram
divisions or subsidiaries or portions thereof
transferred to Facet pursuant to the FTC Order
Several additional paragraphs expand upon Facet's assumption of
liability, but in general they all use the "any and all"
language quoted above. It is undisputed that environmental
liability was not expressly mentioned anywhere in the
Section 5.02 of the agreement also contains the following
statement: "Bendix warrants and represents that it has caused
to be conducted a survey of the lawyers in the Bendix Office of
the General Counsel, and that it has been advised that, based
on such survey, none of such lawyers is aware of any pending or
currently threatened litigation or claim against Facet or
against Bendix or any of its subsidiaries or portions thereof
Bendix or Fram transferred to Facet," except for certain
specified claims, none of which included the environmental
claims underlying the instant case.
Allied contends that under the 1979 agreement, Facet assumed
liability for all liabilities, past, present and future,
related to the transferred assets. Allied says that the
agreement was intended to be a "global settlement" ending all
disputes over the those assets once and for all. Therefore,
Allied argues, Facet assumed liability for any other matter not
specifically addressed in the agreement, known or unknown,
relating to the assets.
Allied also alleges that Facet was aware of potential
environmental liability in connection with the Elmira site in
1979, because in 1978, county and state officials visited the
site and expressed concern over the storage and disposal of
hazardous substances. Allied states that the officials had
several contacts with Facet that year on the subject, and that
the DEC also began investigating the site before the 1979
agreement was signed.
Purolator's position is essentially two-fold: first,
Purolator contends that as a matter of federal law, the
indemnity agreements are not enforceable as to liability for
hazardous waste clean-up costs. Purolator maintains that CERCLA
bars such indemnity agreements.
Second, Purolator argues that even if indemnity agreements
are allowed under CERCLA, the agreements must explicitly refer
to environmental liability to be effective. Purolator states
that the agreements in question did not mention, and were not
intended to cover, the costs at issue in this case.
1. Indemnity Agreements Under CERCLA
Purolator's argument that CERCLA bars indemnity agreements
between liable parties
is based on § 107(e)(1) of CERCLA, 42 U.S.C. § 9607(e)(1),
No indemnification, hold harmless, or similar
agreement or conveyance shall be effective to
transfer from the owner or operator of any vessel
or facility or from any person who may be liable
for a release or threat of release under this
section, to any other person the liability imposed
under this section. Nothing in this subsection
shall bar any agreement to insure, hold harmless,
or indemnify a party to such agreement for any
liability under this section.
Purolator contends that this section prohibits indemnity
agreements between parties liable under CERCLA. The law,
however, is clearly to the contrary. For one thing, the statute
itself states specifically that it does not bar agreements to
indemnify parties for CERCLA liability. The only restriction
the statute places on such agreements is that they may not be
used to transfer liability. In other words, liable parties can
contractually shift responsibility for their response costs
among each other, but they may not thereby escape their
underlying liability to the Government or another third party.
This construction of the statute is supported by the vast
majority of the courts which have considered the question, a
fact which Purolator accepts. See, e.g., Mardan Corp. v. C.G.C.
Music, Ltd., 804 F.2d 1454 (9th Cir. 1986); Niecko v. Emro
Marketing Co., 769 F. Supp. 973 (E.D.Mich. 1991); Mobay Corp. v.
Allied-Signal, Inc., 761 F. Supp. 345, 356 (D.N.J. 1991);
Southland Corp. v. Ashland Oil, Inc., 696 F. Supp. 994, 1000
(D.N.J. 1988); Chemical Waste Mgmt., Inc. v. Armstrong World
Indus., Inc., 669 F. Supp. 1285 (E.D.Pa. 1987); FMC Corp. v.
Northern Pump Co., 668 F. Supp. 1285 (D.Minn. 1987), appeal
dismissed, 871 F.2d 1091 (8th Cir. 1988). These cases hold, and
this court agrees, that CERCLA does not allow parties to
contract out of liability vis-a-vis the Government, but does
allow them to do so vis-a-vis other private parties.
Purolator relies on the decision in AM Int'l v. Int'l Forging
Equipment, 743 F. Supp. 525 (N.D.Ohio 1990), which interpreted
the section to mean that parties cannot contractually relieve
themselves of liability under the Act, but that persons may
contract with others not already liable to provide insurance or
indemnity. In other words, liability may be contractually
expanded, but may not be reduced or simply shifted.
The AM Int'l decision is clearly the minority view and, in my
judgment, an erroneous one. I believe that the statute quite
clearly authorizes indemnity agreements.
In addition, the legislative history of CERCLA indicates that
the Act permits private indemnity agreements although the
parties remain liable to the Government. A major goal which
Congress sought to achieve in enacting CERCLA was "to provide
for liability of persons responsible for releases of hazardous
waste" and to "establish a Federal cause of action in strict
liability to enable the Administrator [of the EPA] to pursue
rapid recovery of the costs incurred" by the Government in
responding to hazardous waste problems. H.R.Rep. No. 96-1016,
Part I, 96th Cong., 2d Sess. 1, 17 (1980), 1980 U.S. Code Cong.
& Admin. News p. 6119.
These and other statements in the legislative history do not
suggest that the liability imposed under the Act was meant to
be punitive, but that it was intended "to provide a mechanism
for prompt recovery of monies expended" by the Government and
"to induce such potentially liable persons to pursue
appropriate environmental response actions voluntarily."
Id. at 33, U.S.Code Cong. & Admin.News 1980, p. 6136; see also
Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86,
91 (3d Cir. 1988) (CERCLA views response liability as a
remedial, rather than a punitive, measure), cert. denied,
488 U.S. 1029, 109 S.Ct. 837, 102 L.Ed.2d 969 (1989).
There is no reason to suppose that allowing indemnity
agreements among potentially liable parties would interfere
with these goals, so long as the parties remain liable to the
Government. The allocation of liability between the parties
would have no effect on the Government's ability to recover its
Moreover, Purolator's contention that the statute is meant to
ensure that "polluters pay," so that they cannot force other
parties to bear the costs of responding to hazardous waste
problems, conflicts with Purolator's own interpretation of the
statute as authorizing insurance agreements. An insurance
agreement between a liable party and an otherwise non-liable
party would allow the liable party to shift the response costs
just as effectively as an indemnity agreement between two
The court also disagrees with Purolator's interpretation of
§ 9607(e)(2), which states:
Nothing in this title, including the provisions of
paragraph (1) of this subsection, shall bar a
cause of action that an owner or operator or any
other person subject to liability under this
section, or a guarantor, has or would have, by
reason of subrogation or otherwise against any
Under Purolator's interpretation of this section, an indemnity
agreement would not bar the indemnitor from bringing an action
for contribution against the other party regardless of the
indemnity agreement. Such a result would be inconsistent with
the express authorization in § 9607(e)(1) of insurance, hold
harmless, and indemnity agreements; to state that such
agreements would not bar a contribution action between the
parties to the agreement would of course nullify the
In my view, the intent of this section is to allow parties to
bring an action to enforce their contractual rights to
indemnification or contribution, notwithstanding the language
of § 107(e)(1). Thus, if a party that is the beneficiary of an
indemnity agreement is sued by a CERCLA claimant, that party
may seek indemnification from the other party to the agreement.
This language ensures that Section 107(e)(1) will not be
interpreted to abrogate such contractual agreements. See
Niecko, 769 F. Supp. at 989; Versatile Metals, Inc. v. Union
Corp., 693 F. Supp. 1563, 1573 (E.D.Pa. 1988); Southland Corp.,
696 F. Supp. at 1000 (CERCLA's liability provisions do not
abrogate parties' contractual rights); Chemical Waste Mgmt.,
669 F. Supp. at 1293.
I conclude, therefore, that CERCLA does not prohibit private
parties from entering into indemnity agreements. Such
agreements do not absolve the parties of liability as to the
Government. They may, however, form the basis of an action to
obtain indemnification, and they may also be asserted as a
defense in an action between the parties to the agreement.
2. Scope of the 1975 and 1979 Agreements
The next issue — whether the particular agreements in the
case at bar cover CERCLA liability — raises several questions.
First, there is Purolator's contention that an indemnity
agreement must explicitly refer to environmental or
"CERCLA-like" liability in order to encompass CERCLA liability.
Allied claims that a broad agreement covering "any and all"
liability does include CERCLA claims.
To some extent, both parties are correct. The case law on
this subject, though not completely uniform, indicates that a
settlement agreement which shows that the parties intended to
resolve all their disputes involving any type of claim includes
CERCLA claims, even if the agreement is framed in general terms
and does not specifically refer to CERCLA or to environmental
liability. See, e.g., Mardan Corp., 804 F.2d 1454; Mobay Corp.,
761 F. Supp. at 358 n. 15; Rodenbeck v. Marathon Petroleum Co.,
742 F. Supp. 1448 (N.D.Ind. 1990); FMC Corp., 668 F. Supp. 1285.
However, if the agreement appears to be limited to specific
disputes or particular types of liability, CERCLA liability
will be excluded unless the agreement contains a clear,
unambiguous reference to such liability. See, e.g., Mobay, 761
F. Supp. at 357-58; Southland, 696 F. Supp. 994, 1002.
This rule is consistent with policies relating to the
construction of indemnity agreements in general, particularly
in situations involving fault on the part of the indemnitee.
"[C]ontracts indemnifying a party
against his own negligence are generally disfavored,"
Quintel Corp. v. Citibank, N.A. 596 F. Supp. 797, 801 (S.D.N Y
1984), and "are subject to close judicial scrutiny." Niagara
Frontier Transp. Auth. v. Tri-Delta Constr., 107 A.D.2d 450,
451, 487 N.Y.S.2d 428 (1985), aff'd, 65 N.Y.2d 1038, 494
N YS.2d 695, 484 N.E.2d 1047 (1985).*fn3 For that reason,
indemnification of a party for its own negligence is
permissible, but only where it appears to have been the clear
and unmistakable intent of the parties. Quintel, 596 F. Supp. at
801; Arocho v. Town of Brookhaven, 71 A.D.2d 635, 418 N.Y.S.2d
474 (1979), aff'd, 51 N.Y.2d 778, 432 N.Y.S.2d 697,
412 N.E.2d 384 (1980) (emphasis added). While CERCLA liability is strict,
and is not based on negligence, I believe that the policy
behind the rule regarding negligence is also applicable here.
The question, then, is relatively simple: are the indemnity
agreements in the case at bar broad enough to include CERCLA
liability? At the outset, it appears beyond dispute that the
agreements do not expressly refer to environmental claims.
Thus, if the agreements are to be applied to CERCLA claims, it
can only be by virtue of their broad, inclusive wording.
Having reviewed the agreements, I find that the indemnity
provisions are broad enough to encompass CERCLA liability
insofar as such liability relates to or arises out of the
assets transferred to Facet in 1975. The 1975 agreement states
that "Facet hereby assumes and agrees to satisfy all
liabilities and obligations of Bendix, secured or unsecured
(whether accrued, absolute, contingent or otherwise) relating
to or arising out of the Assets (which are transferred hereby
subject to such liabilities and obligations)." There is no
suggestion in this language, or anywhere else in the agreement,
that the effect of this clause was limited to particular claims
or types of liability. Facet clearly agreed to take the assets
along with any liabilities that might attach to them.
The 1979 agreement is similarly worded. Although much of the
agreement deals with various income tax and pension plan
disputes, those sections do not in any way limit or contradict
the broad indemnity agreement in § 5.01, in which Facet stated
that it had assumed "any and all liabilities" arising out of
the transferred assets. The sections dealing with pensions
mostly concern specific obligations which the parties undertook
to resolve the pension problems. However, to the extent that
litigation or claims arose out of the assets transferred to
Facet, § 5.01 makes clear that Facet assumed all liability.
A number of statements in the agreement show that the parties
deliberately made the language broad. For example, § 5.01(a)
stated that the 1975 indemnity agreement "includes, but without
limiting the generality thereof, an assumption by Facet of, and
an indemnity to Bendix and Fram against, any and all
liabilities arising out of or connected with the assets and
businesses" transferred to Facet pursuant to the FTC order
(emphasis added). The 1975 agreement was also mentioned in §
7.02, in which Facet stated that it "reaffirms, accepts the
validity of and covenants that it has performed or will
perform" certain specified agreements, including the 1975
agreement. In addition, § 5.01(b) states that Facet agreed to
pay "all obligations and liabilities, whether firm or
contingent, arising out of or connected with the assets and
businesses . . ., or resulting from any and all acts and
omissions" by those businesses (emphasis added).
These statements plainly go well beyond pension disputes, and
extend to all types of liability.
The agreement's provisions concerning particular lawsuits,
when read in their entirety, do not mean that the indemnity
agreement only applied to those actions. The agreement stated
that the parties would take certain actions regarding this
litigation "[w]ithout limiting the generality of Section 5.01
and in the interest of settling all disputes between Bendix and
Facet" (emphasis added). The specific references to these
actions, then, must be read as exceptions to § 5.01's general
indemnity clause. In other words, Facet agreed in § 5.01 to
assume liability for all claims relating to the transferred
assets which were not specifically dealt with elsewhere in the
agreement. See Mardan Corp., 804 F.2d 1454 (plaintiff's
argument that release related only to certain accounting issues
was belied by broad language of the documents, which stated
that "the parties are desirous of settling all the aforesaid
claims and any other issues between them"); Rodenbeck,
742 F. Supp. 1448 (rejecting plaintiff's claims that release
cancelled only particular prior agreements that were specified
in release, since plain language of release made it abundantly
clear that release barred all claims of any kind).
In view of the breadth of its terms, the fact that the
indemnity agreement was entered into prior to the enactment of
CERCLA does not prevent its being applied to CERCLA liability.
Although parties could not be expected to have foreseen CERCLA
before it was enacted, an agreement which is broad enough to
encompass any and all claims, or which clearly refers to
environmental liability, has been held to cover CERCLA
liability. See Mobay, 761 F. Supp. at 357-58; Southland, 696
F. Supp. at 1002; Levine, Spreading Costs for Cleaning Up
Contaminated Property: Contribution and Indemnification Under
CERCLA, N.Y.S.Bar J., July/Aug. 1991, at 41, 44.
To say that the indemnity agreements are broad enough to
include CERCLA liability does not end the matter, however,
since the agreements refer to liability which "relates to,"
"arises out of," or is "connected with" the transferred assets.
Thus, a determination of whether the response costs at issue
here are included within the agreements depends on what assets
were transferred to Facet in 1975, and on the degree to which
those costs arise out of the assets.
A particular disagreement in this regard relates to
Purolator's contention that much of the waste generated at
Elmira came not from the transferred segments of the Motor
Components Division, but from Bendix's bicycle brake and
carburetor businesses. Prior to 1975, the brake business was
moved to Mexico, and the carburetor business was discontinued.
Since neither of these businesses was transferred to Facet,
Purolator argues, the indemnity provision could not include
liability for that waste.
Allied, however, contends that Facet assumed any and all
liability relating to the Motor Components Division (which made
the bicycle brakes and carburetors), not just liability
relating to certain product lines. The only exclusion,
according to Allied, was for personnel and certain specific
equipment directly related to the manufacture of bicycle
brakes. Furthermore, Allied says, Facet assumed all liability
relating to the real property at the site, which includes
hazardous wastes on the property, regardless of their source.
The chief document relating to this issue is the 1975
agreement, which states that Bendix conveyed to Facet
all of Bendix' right, title and interest in and to
the Assets, including without limitation, the
1. All of the assets, properties, businesses,
good will, rights, privileges and interests of
whatever nature, real, personal, tangible and
intangible, . . . of, relating to, or associated
(a) Bendix' Motor Components Division, . . .
exclusive of the portion thereof directly involved
in or related to the manufacture or sale of
bicycle brakes, certain
assets of which excluded portion are listed in
Exhibit C attached hereto . . .
Several things are noteworthy about these provisions. First,
it is clear that Bendix transferred the entire Motor Components
Division to Facet, except for certain specifically excluded
portions of the Division. To the extent that any liability
attached to the Motor Components Division, then, Facet assumed
that liability, unless it arose purely from one of the excluded
portions of the Division.
That interpretation is reinforced by the indemnity clause,
which states that "Facet hereby assumes and agrees to satisfy
all liabilities and obligations of Bendix, secured or unsecured
(whether accrued, absolute, contingent or otherwise) relating
to or arising out of the Assets (which are transferred hereby
subject to such liabilities and obligations)." This broad,
inclusive language shows that Facet assumed liability for all
of the transferred assets.
Those assets also included the real property at the Elmira
plant. The agreement provided for the transfer of "All of the
assets" of the Motor Components Division, "including, but not
limited to, . . . real and personal property . . ." The plant
and offices in Elmira which are the primary focus of this
litigation were expressly included within those assets.
Therefore, Facet assumed all liability arising out of its
ownership of the real property at Elmira.
Second, the agreement shows that anything connected with the
bicycle brake business was not transferred to Facet. I am not
persuaded by Allied's interpretation of the agreement as
meaning that only the particular pieces of equipment listed in
Exhibit C of the agreement were excluded from the transferred
assets, and that Facet nevertheless assumed liability relating
to the manufacture of bicycle brakes in general. The agreement
states that "certain assets" of the brake portion of the Motor
Components Division were listed in Exhibit C. This suggests
that the items were listed not to restrict the effect of the
bicycle brake exclusion, but only so that it would be clear
that the listed assets were considered part of the excluded
I find, therefore, that no part of the brake business was
conveyed to Facet. To the extent that any liability arose
solely out of the manufacture of bicycle brakes, Facet did not
agree to assume that liability or to indemnify Bendix.
As to the carburetor business, however, Facet did assume
liability. The 1975 agreement, and the FTC order as well,
provided that Facet received the entire Motor Components
Division, except for any portions of the Division which were
expressly excluded. By assuming all liability for the Division,
therefore, Facet assumed liability not only for the Division's
existing operations, but for its past manufacturing activities
as well. Since liability for the carburetor business was not
excluded, Facet assumed all liability connected with the Motor
Components Division's manufacture of carburetors, regardless of
whether the Division was still making carburetors in 1975.
3. Application of the Agreements to CERCLA Liability
A determination of the extent to which the indemnity
agreements cover the liability at issue here requires
consideration of the various bases for CERCLA liability. Under
CERCLA, a party may be held liable for response costs for one
of several reasons, including the party's past or present
ownership and operation of a facility at which hazardous
substances were disposed of, or a party's having arranged for
disposal of hazardous substances at a site owned by another.
42 U.S.C. § 9607(a). Liability is joint and several unless the
liable parties establish divisibility of harm and a reasonable
basis for apportionment of liability among themselves. United
States v. Monsanto Co., 858 F.2d 160
(4th Cir. 1988), cert.
denied, 490 U.S. 1106
, 109 S.Ct. 3156
, 104 L.Ed.2d 1019 (1989).
Purolator, then, is liable for response costs at the Elmira
plant because it is the current owner-operator of the plant. In
that sense, Purolator's assumption of liability for the real
property imposed no greater
obligations on Purolator than CERCLA itself.
In addition, to the extent that wastes on the site were
generated by assets transferred to Facet — in other words, by
the Motor Components Division — Purolator has also
contractually assumed liability by virtue of the indemnity
agreement. Therefore, Purolator may not seek contribution for
response costs related to any wastes on the Elmira site which
were generated by the transferred portions of the Motor
Components Division, since Purolator has agreed to indemnify
Allied for those wastes. As explained above, that includes
wastes connected with the manufacture of carburetors, since
those wastes were generated by the Motor Components Division.
Allied, of course, remains liable to the Government as the
disposer of the wastes. The point here, however, is that
Purolator has agreed to indemnify Allied for those costs and,
therefore, has no right to contribution from Allied.
With respect to wastes at the site which were generated by
any businesses that were not transferred to Facet, such as the
bicycle brake business, Purolator is liable to the Government
for response costs. However, that liability arises solely out
of Purolator's status as the current owner of the site. Since
Purolator did not assume liability for the brake business,
"disposer" liability remains with Allied and Purolator is not
precluded from seeking contributions as to these costs. There
is nothing in the indemnity agreements that prevents Purolator
from seeking contribution from Allied for costs relating to
those wastes, based on Allied's role in having created the
condition that led to the costs being incurred.
This result is consistent both with the policies underlying
CERCLA and with the previously-discussed principles relating to
agreements indemnifying a party for its own fault. In drafting
CERCLA's liability provisions, Congress sought to spread the
costs of hazardous waste cleanup among responsible parties.
Chemical Waste Mgmt., 669 F. Supp. at 1291. In addition, while
CERCLA extends liability to a broad array of parties, it also
expressly allows a liable person "to seek contribution from
other potentially liable parties, when the person believes that
it has assumed a share of the cleanup or cost that may be
greater than its equitable share under the circumstances."
42 U.S.C. § 9607; H.R.Rep. No. 253(I), 99th Cong., 1st Sess. 1,
80, reprinted in 1986 U.S.Code Cong. & Admin.News pp. 2835,
2861-62. This combination of widespread liability coupled with
an express right of contribution reflects Congress' desire to
balance the Government's interest in promptly recovering its
costs with an equitable apportionment of cleanup costs among
current and prior owners. United States v. A & F Materials Co.,
Inc., 578 F. Supp. 1249, 1256 (S.D.Ill. 1984); H.R.Rep. No.
99-253(III), 99th Cong., 2d Sess. 15-16 (1986), reprinted in
1986 U.S.Code Cong. & Admin.News pp. 3038, 3038-39.
It is true that Congress left parties free to allocate
liability contractually among themselves. The allowance of
private indemnity agreements, however, does not mean that the
court may not also consider public policy concerns in
interpreting such agreements. Rather, Congress' intention to
promote the spreading and equitable allocation of costs serves
as a useful guide in applying the agreement to CERCLA
liability, particularly since the parties themselves did not
expressly address the issue in the agreement.
As stated, Congress was concerned not just with spreading
liability to the greatest number of parties, but with doing so
in an equitable manner which would reflect the relative
culpability of the parties. To the extent that wastes were
generated by any businesses that were not transferred to Facet,
therefore, the indemnity agreement should not be given an
expansive reading, and Purolator may seek contribution for
response costs related to those wastes.
Allocation of those costs remains to be decided. The
legislative history of CERCLA suggests certain criteria upon
which this allocation may be based, including:
(1) the ability of the parties to demonstrate
that their contribution to a discharge,
release or disposal of a hazardous waste can be
(2) the amount of the hazardous waste involved;
(3) the degree of toxicity of the hazardous
(4) the degree of involvement by the parties in
the generation, transportation, treatment,
storage, or disposal of the hazardous waste;
(5) the degree of care exercised by the parties
with respect to the hazardous waste concerned,
taking into account the characteristics of such
hazardous waste; and
(6) the degree of cooperation by the parties
with Federal, State, or local officials to prevent
any harm to the public health or the environment.
H.R.Rep. No. 253(III), 99th Cong., 1st Sess. 19 (1985),
reprinted in 1989 U.S.Code Cong. & Admin.News pp. at 2835,
3042. These criteria have been used by other courts in
contribution cases to apportion damages. See, e.g., United
States v. Northernaire Plating Co., 20 E.L.R. 20200 (W.D.Mich.
1989); Amoco Oil Co. v. Dingwell, 690 F. Supp. 78, 86 (D.Me.
1988), aff'd, 884 F.2d 629
(1st Cir. 1989).
In the case at bar, further factual development is necessary
before these factors can be evaluated. The precise
apportionment of damages, therefore, must await further proof
concerning the amount of damages, the nature and source of the
hazardous waste as well as the other circumstances relevant to
an equitable apportionment of response costs.
4. The "Warranty" Clause
Purolator claims that in the 1979 agreement, Bendix warranted
that it was aware of no pending or threatened claims involving
any of the transferred assets, and that Bendix did not disclose
the existence of any environmental claim. Purolator argues that
if Bendix knew of the potential liability in 1979, it breached
its warranty that no pending or potential claims existed. In
the alternative, Purolator argues that if Bendix did not know
of that liability, the indemnity agreement is void on the
ground of mutual mistake.
Allied denies that Bendix breached its warranty, since Bendix
only said that it was not aware of any pending or currently
threatened claims. Bendix, Allied argues, did not warrant that
no claims would arise in the future.
Allied also contends that the failure to disclose CERCLA or
other environmental liability could not have harmed Facet in
any event, since the record shows that Facet itself knew about
the problems at Elmira before 1979. Facet, Allied claims,
simply misjudged the scope of those problems. Purolator denies
this, and claims that any environmental problems that had come
up at that time were minor, were not the same problems that
gave rise to this lawsuit, and seemed to have been resolved by
the time the 1979 agreement was signed. Purolator claims that
only in 1981 did Facet discover the problems associated with
Bendix's disposal of hazardous substances at Elmira.
I am not persuaded by Purolator's arguments in this regard.
First, the language of the releases is broad enough to include
all claims, known and unknown. Obviously any party undertaking
a broad assumption of liability wants to know as much as it can
about what claims exist or might arise. Nevertheless, where the
language of an indemnity agreement is all-inclusive, it must be
given effect. Mardan Corp., 804 F.2d 1454; Rodenbeck,
742 F. Supp. 1448.
Facet contends that it "was only willing to indemnify Bendix
if Bendix disclosed the existence of all action [sic] or
potential claims that might trigger the indemnity provision."
Jackson Affidavit p. 3. Had Facet only agreed to indemnify
Bendix only for certain known, identified claims, however, the
parties could easily have limited the indemnity provisions
accordingly. Instead, the parties made the agreement applicable
to "all obligations and liabilities, whether firm or
contingent, arising out of or connected with the assets and
businesses . . ." 1979 Agreement § 5.01(b).
Second, the agreement stated only that Bendix's lawyers were
not "aware of any pending or currently threatened litigation
or claim against Facet or against Bendix or any of its
subsidiaries or portions thereof Bendix or Fram transferred to
Facet." As Purolator itself readily acknowledges, the CERCLA
claim underlying the instant case was not "pending or currently
threatened" in 1979. Purolator has repeatedly asserted in its
arguments to the court on other points that in 1979
neither party knew of, or could have anticipated, CERCLA
liability at the Elmira plant or at any of the other sites at
issue in this case. Purolator's contention on this point that
Bendix knew of and concealed this liability thus contradicts
its own arguments.
Moreover, aside from the fact that CERCLA did not exist in
1979, Purolator has offered no evidence suggesting that Bendix
was aware in 1979 of any actual claims which were not disclosed
to Facet. Even if Bendix knew of the presence of the hazardous
wastes which are the subject of the CERCLA claims, that does
not translate into knowledge of a "pending or currently
Finally, the record establishes that Facet itself was aware
of the potential for environmental liability in 1979. Purolator
does not dispute the fact that Facet knew in 1979 that there
had been environmental problems at the site. A September 8,
1978 Chemung County Health Department memorandum listed the
Facet plant as a "potentially hazardous landfill" site. The
report states that Facet had been asked to search out certain
data concerning the location and types of waste which had been
disposed of at the site.
Facet responded to this request in a letter dated September
11, 1978, in which Facet identified three areas which had been
used for "disposal of plating waste, oil sludge, and grinding
waste." Gitlen Affidavit Ex. 4. In one area, Facet stated, "All
types of liquids and solid wastes were dumped. . . . It
contains old containers, wood, metal, cinder block, and general
solid waste along with various chemicals." Id.
In September 1978, the Division of Environmental Health of
the New York State Department of Health listed the Facet plant
on a "`Hot Spots' Identification" list. The landfill on the
site was said to contain "Plating wastes, solvents and
sludges." Gitlen Affidavit Ex. 6.
The DEC then inspected the sites. A letter from the DEC to
Facet dated January 23, 1979, directed Facet to come up with a
plan for collecting and treating leachate discharges from the
three disposal areas. In a June 1, 1979 letter to the DEC,
Facet outlined its plan for handling the wastes.
Purolator argues that these problems were not the same ones
that gave rise to the instant case. The important point,
though, is that Facet knew that there were problems at the site
when it entered into the October 1979 indemnity agreement. By
agreeing to a broad, inclusive assumption of liability with
respect to the transferred property at a time when the
environmental problems were not fully resolved, Facet assumed
environmental liability for the site.
Furthermore, Facet knew when it entered into the indemnity
agreement that there were potential environmental liabilities
that could arise in the future. In an Annual Report from Facet
to the SEC dated November 15, 1976, Facet stated the following:
Facet is subject to various federal, state and
local laws and regulations relating to plant
safety and air and water pollution. . . . Facet
cannot predict the effect of future environmental
protection or plant safety legislation or
Gitlen Affidavit Ex. 12 at 12. Thus, Purolator cannot claim
that its CERCLA liability was altogether unforeseeable.
Although Facet could not have anticipated the enactment of
CERCLA itself, the very unpredictability of the exact course of
environmental regulation should have made Facet aware of the
potential consequences of entering into a broad indemnity
agreement for a site which was known to contain hazardous
wastes. Facet was not a small business, but a large,
which was capable of assessing the risk of future liability. It
chose to take that risk as part of its settlement with Bendix.
Purolator also argues that if Bendix did not know of the
impending liability for the wastes in question in 1979, the
indemnity agreement is void on the ground of mutual mistake.
This argument fails for several reasons. For one thing, the
parties' unawareness of CERCLA's future enactment is not a
mistake capable of voiding the agreement. As discussed above,
a broad indemnity agreement can include CERCLA liability
regardless of whether the agreement was entered into prior to
CERCLA's enactment. Mobay, 761 F. Supp. at 357-58.
The alleged unawareness of the particular wastes at issue
here also does not void the agreement. First, it appears that
at least some of the wastes which were the subject of the 1986
EPA consent order were the same, or of the same type, as the
wastes which New York State investigated in the 1970s. The
1978-79 correspondence between Facet and the DEC reveals that
the landfills were known to contain, among other things,
plating waste, oil sludge, and grinding waste. Gitlen Affidavit
Ex. 4. The plating waste was known to have resulted from
operations using chrome, tin, copper, zinc, and cadmium.
The 1986 EPA consent order states that wastes reported at the
site "include, but are not limited to, plating wastes from
electroplating operations, heavy metal sludges, solvents, and
oil sludges. The present constituents of these wastes include
zinc, nickel, cadmium, chromium," and certain other chemicals.
Reeve B. Howland Affidavit p. 5. Thus, it is clear that this
was not a wholly separate problem from those which Facet had
investigated in the late 1970s.
The EPA order also discussed the presence of other wastes,
principally trichloroethylene ("TCE"). Relying on Mangini v.
McClurg, 24 N.Y.2d 556, 301 N.Y.S.2d 508, 249 N.E.2d 386
(1969), which stated that "in resolving claims of mutual
mistake as to injury at the time of release, there has been
delineated a sharp distinction between injuries unknown to the
parties," which will permit avoidance of a release, "and
mistake as to the consequence of a known injury," which will
not, id. at 564, 301 N.Y.S.2d 508, 249 N.E.2d 386, Purolator
contends that the TCE contamination constituted an "injury"
which was unknown when the parties entered into the indemnity
I am not persuaded by this argument. When the parties entered
into the 1979 agreement, Facet knew that hazardous wastes had
been disposed of at the site. Facet also could not have been
certain that it had determined the precise extent of the
contamination; only a year earlier, Facet had reported to the
DEC that one particular landfill had been used for disposal of
"All types of liquids and solid wastes," including "general
solid waste along with various chemicals." Gitlen Affidavit Ex.
Aware of these facts, Facet agreed to assume liability for
the site. Therefore, even if Facet did not yet know of the
presence of TCE, or of the location of particular disposal
sites, Purolator cannot claim that it was mistaken as to the
existence of the "injury" underlying its CERCLA liability. The
Mangini distinction between the existence and the extent of an
injury was enunciated in the context of a personal injury case.
However, to the extent that the rule may be applied to the case
at bar, the court finds it more accurate to say that the
"injury" here is not limited to the presence of particular
chemicals or particular waste disposal sites. Rather, the
injury is the contamination from hazardous chemicals resulting
from Bendix's operation of the plant. The fact that Facet, when
it entered into the broad 1979 indemnity agreement, may not
have realized the extent of the contamination does not bar the
enforcement of the agreement. Mangini, 24 N.Y.2d at 564, 301
N YS.2d 508, 249 N.E.2d 386.
5. Liability for Other Sites
Purolator's complaint states that Allied has demanded
indemnification from Purolator for sites other than the Elmira
plant. In particular, there is a dispute over a lot across the
street from the Elmira plant
that Bendix sold to U.S. Steel in 1971, before Facet was
created. Allegedly Bendix deposited wastes on that lot that had
been generated at the Elmira plant.
Purolator seeks a declaratory judgment that Allied is liable
for response costs at the U.S. Steel site and at other sites
which were not transferred to Facet. Allied, however, claims
that Facet assumed liability for any wastes at these sites that
were generated by the Motor Components Division.
It is again important to bear in mind that liability for
these sites may arise from several different circumstances, and
attach to several different parties. First, there is the
liability of the current owner or operator, which in the case
of the Elmira lot appears to be U.S. Steel.
42 U.S.C. § 9607(a)(1). Second, there is the person who owned or operated
the facilities in question at the time of disposal of the
hazardous substances, i.e., Allied. 42 U.S.C. § 9607(a)(2).
Third, a party who disposed of the hazardous substances, or
arranged for their disposal, may be held liable.
42 U.S.C. § 9607(a)(3). Although the parties have not pointed to any
authority that would suggest that CERCLA itself makes Purolator
liable under this third category as the successor to the Motor
Components Division, Purolator has nevertheless made itself
liable under the indemnity agreements. Therefore, to the extent
that the Motor Components Division disposed of, or arranged for
the disposal of, its own wastes on any of these sites,
Purolator, having contractually assumed liability for the
Division, may be held liable.
As with the alleged bicycle brake wastes at the Purolator
plant, then, Purolator has assumed by contract some, but not
all, liability. Specifically, Purolator has agreed to indemnify
Allied for response costs arising out of the Motor Components
Division's disposal of wastes, but not for costs arising out of
Allied's past or present ownership of the remote sites that
were not transferred to Facet. The parties' indemnity
agreements, therefore, impose some liability on Purolator, but
do not prevent Purolator from seeking contribution from Allied
as to those items not covered by the indemnity agreements.
The proper allocation of these costs, of course, is a matter
that remains to be decided. As stated above, the legislative
history and case law provide some guidance for apportioning
damages, but the factors to be considered require more proof
than is currently in the record, and summary judgment on this
issue is therefore not appropriate at this juncture.
Defendant Allied's motion for summary judgment dismissing the
entire complaint is denied. As a matter of law, plaintiff,
Purolator, is not entitled to seek contribution from Allied for
all response costs but may seek contribution to the limited
extent set out in this decision. Further proof is necessary to
determine the existence of the wastes and the respective
parties' responsibility for the costs involved in removing
Purolator's cross motion for partial summary judgment is
granted to the extent that, as a matter of law, Purolator has
the right to seek contribution from Allied to the extent set
out in this decision. Whether Purolator can prove this must be
developed at trial.
The parties shall meet with Magistrate Judge Kenneth R.
Fisher to set up a schedule for completion of discovery on the
issues that are relevant to the issues remaining in the case.
IT IS SO ORDERED.