The opinion of the court was delivered by: Larimer, District Judge.
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).
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
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 ...