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Travelers Indemnity Co. v. Northrop Grumman Corp.

United States District Court, S.D. New York

February 27, 2014

TRAVELERS INDEMNITY CO., et al., Plaintiffs,
v.
NORTHROP GRUMMAN CORP., et al., Defendants, and CENTURY INDEMNITY CO., eventual successor in interest to INSURANCE CO. OF NORTH AMERICA, Nominal Defendant.

OPINION & ORDER

KATHERINE B. FORREST, District Judge.

This action was commenced in April 2012 by Travelers Indemnity Co. and various affiliated companies (together, "Travelers") against Northrop Grumman Corp. and Northrop Grumman Systems Corp. (together, "Northrop" or "Grumman"), and Century Indemnity Co. ("Century"), eventual successor in interest to Insurance Company of North America ("INA"), as nominal defendant. Together, Travelers and Century issued insurance policies to Northrop spanning a period from 1950 to 1985. Pending before the Court are various motions for summary judgment by Travelers and Century. This Opinion relates to Travelers' motion for summary judgment with respect to the Bethpage Community Park ("BCP") (ECF No. 387). The Court deals with the other motions in separate Opinions.

For the reasons set forth below, Travelers' motion as to the Bethpage Community Park is GRANTED.

The facts to which this Court refers in connection with its decisions herein are undisputed by competent evidence unless otherwise noted.

I. FACTS

A. Facts Relevant to This Motion

Northrop concedes that, around 1948, it began constructing disposal "impoundments" or pits within the parcel of land that became the BCP for disposing of toxic waste. (Northrop Grumman's Responses to "Travelers' Statement of Undisputed Material Facts Pursuant to Local Rule 56.1" ("NGC 56.1") ¶ 135.) Northrop states that it used these disposal areas to contain two kinds of wastes: (1) sludge from the industrial wastewater treatment plant and (2) waste oils that may have contained small amounts of residual and used TCE, other solvents, and/or PCBs. (Id.) Northrop asserts that while it certainly knew it was placing these contaminants in the designated disposal area, it believed that it was complying with applicable law and did not intend or expect that the materials would contaminate the soil or groundwater. (Id. ¶¶ 136-37.) Because Northrop believed that its disposal practices on the site contained the contaminants, it did not intend or expect them to create environmental harm or environmental releases. (Id. ¶ 137.)

Northrop states that, in the pre-1962 time period, it used TCE for many manufacturing purposes. (Id. ¶ 149.) Grumman recycled TCE on the premises. (Id. ¶ 150.) However, a former employee testified at his deposition that Grumman placed only waste oil and used paint-booth rags into the area that would ultimately become the BCP. (Id. ¶ 151.) Northrop concedes that the liquid waste described by this former employee most likely contained waste oils from which small amounts of TCE could no longer be reclaimed, still bottoms also containing small amounts of TCE, or sludge resulting from the TCE distillation process relating to Grumman's recycling efforts. (Id. ¶ 152.) In addition, one area of what became the BCP was used as a fire training area, which involved placing waste oil and possibly TCE or other solvent residues into a four-foot-deep "impoundment" and igniting them for training exercises approximately three times per year. (Id. ¶ 153.) Grumman's practices with respect to TCE conformed to guidance documents published by a variety of entities. (Id. ¶ 154.)

According to Northrop, representatives of the New York State Department of Health (NYSDOH) told them that, after the sludge placed onto the site dried, a certain chemical "should not be soluble." (Id. ¶ 138.) Neither NYSDOH nor the Nassau County Department of Health ("NCDOH") objected to the method of placing the sludge in the "impoundments." (Id. ¶ 139.) Moreover, based on its own tests, Grumman believed the sludge to be inert and non-toxic. (Id. ¶ 140.)

In 1962, Grumman donated this 18-acre parcel from its Bethpage, Long Island facility (the "Bethpage Facility" or "BF") to the Town of Oyster Bay. (Id. ¶ 164.) After Grumman donated the land, the Town undertook a substantial excavation and building project that included bringing in substantial amounts of fill. (Id. ¶ 166.) Among the recreational facilities that the Town established on the site was an ice rink. (Id.) Northrop concedes that the fill used by the Town's contractor was non-toxic material. (Id. ¶ 167.)

In addition, according to Northrop, an important series of Freon releases by the Town, in connection with an ice rink they had erected on the BCP, occurred "before 1986." (Northrop Grumman's Mem. of L. in Opp. to Travelers' Mot. ("NGC Opp.") 8 (citing NGC 56.1. ¶¶ 178-79).) A former Town employee testified that Freon was abruptly and accidentally released into the environment at the rink on the BCP during the 1970s and 1980s. (NGC 56.1 ¶¶ 168-74.) The employee testified that the releases were atmospheric and not onto the ground (Freon is a gas at ambient temperature). (Id. ¶ 175.) He testified that the first such release occurred in 1974, the second in 1977, the third in 1980, and the fourth in 1984. (Id. ¶¶ 170-74.)

NCG has proffered two reports in which proposed experts-neither of whom is a percipient witness-opine that Freon was not only released into the atmosphere but also onto the ground in the form of liquid before it could volatize (and turn into a gas). (Id. ¶ 175.) They also opine that these releases have substantially contributed to the plume of groundwater contamination that is emanating from the BCP and that Northrop is being compelled to clean up. (Id. ¶ 176.) One of the experts, Dr. David Langseth, has opined that "leaks and spills from the former TOB ice skating rink... are substantially commingled with [volatile organic compounds] attributable to NGC releases." (Id. ¶ 177; Scanlon Decl. Ex. 5 (Langseth Decl.), Ex. B (Langseth Rebuttal Report), at 10.) Another proposed expert, this time for Travelers, Michael Scott, has opined that as much as 50% of the mass of VOCs at the BCP "represents Freon 12 and Freon 22... which are unrelated to the disposal activities conducted by Northrop Grumman." (NGC 56.1 ¶ 180; Scanlon Decl. Ex. 118, at 33.)

On December 13, 1983, Grumman's legal department received a letter from the New York State Department of Environmental Conservation ("NYSDEC"), asserting "a claim by the State of New York... for all costs, damages and claims recoverable now and in the future under" the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). (Id. ¶ 184.) The letter stated that:

[U]nless, in a timely fashion, all investigative, removal and remedial work necessary at the site (Site #130003-Grumman Aerospace Corp. Bethpage') and its environs is performed and unless the State is reimbursed for all damages to its natural resources and for all past, present and future response, removal and remediation costs, this claim will not have been satisfied.

(Id.) This letter has been referred to as the "1983 Potentially Responsible Person Letter" or "1983 PRP Letter."

The Town built the ice rink in 1986. (See Travelers' Reply to Grumman's Response to Travelers' Statement ("Travelers' Reply 56.1") ¶¶ 2-3.)

The NYSDEC Record of Decision ("ROD") provides that Grumman must undertake remedial efforts with respect to its acts on the BCP site, and that the Town is responsible for addressing the Freon contamination. (See id. ¶ 1.)

Northrop cites testimony from a former Grumman employee, Arthur Gibson, who worked at Grumman from 1976 to 1995, for the factual point that Site No. 130003, referenced in the letter, encompassed the entire Bethpage "facility." (NGC 56.1 ¶ 186.) It is undisputed that by the time that Gibson commenced work for Grumman, the Bethpage facility no longer included the BCP site. There is no indication in the cited material that Gibson was asked whether the BCP-even though it was no longer part of Grumman's Bethpage operations-was nonetheless part of what he would call the "facility."

The 1983 PRP letter initiated a formal, adversarial administrative process against Grumman for environmental contamination at the Bethpage facility. (Id. ¶ 187.)

On January 30, 1984, Grumman's broker, Frank B. Hall, sent the 1983 PRP Letter to an address at which Travelers does not and has never conducted business. (Id. ¶ 196.) Grumman had provided this address to Hall. (Id.) Travelers has no record of receiving this letter. (See id. ¶ 199.) Northrop has stated in response that in this litigation Travelers has produced other letters that had been sent to the same erroneous address and that somehow made their way into Travelers' files. (Id. ¶ 197.)[1]

A 1990 Order on Consent by Grumman encompassed Grumman's agreement to perform a remedial investigation/feasibility study ("RI/FS") at the Bethpage facility. (Id. ¶ 189.) The Order states: "From approximately 1937 to the present, Respondent or its predecessor in interest... operated facilities on real property at Stewart Avenue, Bethpage, Town of Oyster Bay, County of Nassau." (Id.) An accompanying map includes the area of the Bethpage facility that extends to the BCP. (Id.) The Order requires that Northrop address both on and off-site contamination "attributable to ...


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