The opinion of the court was delivered by: CAHN
In 1985, Chemical Waste Management, Inc. commenced an action in this court seeking to recover under the liability provisions of the Comprehensive Environmental Response, Compensation, and Liability Act for response costs incurred or to be incurred by it for a clean-up of the Lyncott Landfill in New Milford, Pennsylvania. Chemical Waste Management, Inc. v. Armstrong World Industries, Civil Action No. 85-1703 (the " CERCLA litigation"). Several defendants in that action, generators of hazardous wastes that were deposited at the landfill, filed third-party complaints naming, among others, the three plaintiffs in the case at bar, Lyncott Corporation, Lyncott Holdings, Inc., and Richard Valiga, and Waste Management, Inc., a defendant here, as third-party defendants in the CERCLA litigation. Thereafter, plaintiffs cross-claimed against defendant Waste Management in the CERCLA litigation and filed a separate complaint for declaratory judgment pursuant to 28 U.S.C. §§ 2201-02. That declaratory judgment action is now before me. Since it is essentially identical to the cross-claims, my opinion in the CERCLA litigation, reported at 669 F. Supp. 1285 (E.D. Pa. 1987), is incorporated herein as background material.
Plaintiffs seek a determination of their rights under two agreements executed in settlement of certain related state and federal court litigation involving the Lyncott facility. The question plaintiffs present to the court is whether or not the agreements entitle the plaintiffs to indemnification against the claims of the third-party plaintiffs in the CERCLA litigation and attorney's fees and costs incurred in that litigation. The case was tried to the court on December 14, 1987, on which date I held defendants' motion for an involuntary dismissal under Federal Rule of Civil Procedure 41(b) in abeyance. Upon consideration of the evidence, briefs, and arguments of counsel, I now grant this motion on the ground that upon the facts and the law the plaintiffs have shown no right to indemnification. Nevertheless, as clarified in part D of this Opinion, I also hold that the agreements are not irrelevant to the allocation of response costs in the CERCLA litigation and should be given effect under a theory other than indemnification. I make the following findings of fact and conclusions of law pursuant to Federal Rules of Civil Procedure 41(b) and 52(a).
1. Plaintiff Lyncott Corporation ("Lyncott"), is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania with its principal place of business in Philadelphia, Pennsylvania.
2. Plaintiff Lyncott Holdings, Inc. ("Lyncott Holdings"), is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania with its principal place of business in Philadelphia, Pennsylvania.
3. Plaintiff Richard E. Valiga ("Valiga"), is an individual who resides at 19 Fort Royal Isle, Ft. Lauderdale, Florida and is the sole shareholder, officer and director of Lyncott Holdings. Lyncott is a wholly-owned subsidiary of Lyncott Holdings.
4. Defendant Chemical Waste Management, Inc. ("CWM"), is a corporation organized and existing under the laws of the State of Delaware with its principal place of business in Oak Brook, Illinois.
5. Defendant Waste Management, Inc. ("WM"), is a corporation organized and existing under the laws of the State of Delaware with its principal place of business in Oak Brook, Illinois.
6. On November 14, 1980, Waste Management of Pennsylvania ("WMPA"), a subsidiary of WM, entered into an asset purchase agreement (the "Purchase Agreement") with Old Stabatrol, the owner and operator of the Lyncott Landfill in Susquehanna County, Pennsylvania (the "Lyncott site"). Pursuant to the Purchase Agreement, WMPA acquired all the assets, rights, and properties of Old Stabatrol, including the right to operate the Lyncott site, all permits for the Lyncott site, and the stock of Lyncott. According to the Purchase Agreement, WMPA did not assume any of the liabilities or obligations of Old Stabatrol except those designated on Schedule H of the Purchase Agreement relating to certain tax liabilities, financial liabilities on Old Stabatrol's consolidated balance sheet as of August 31, 1980, and liabilities arising out of the ordinary course of Old Stabatrol's business from August 31, 1980 until the date of closing. Subsequent to the acquisition, Lyncott became a wholly owned subsidiary of WMPA, which in turn changed its name to Stabatrol Corporation ("Stabatrol") and became a wholly owned subsidiary of CWM. Old Stabatrol changed its name to the Metzval Corporation ("Metzval") and subsequently dissolved.
7. After the acquisition of the Lyncott site, the Pennsylvania Department of Environmental Resources ("DER") discovered several violations of the DER permit and Pennsylvania environmental laws. The DER issued an order in 1981 halting all waste disposal activities and requiring certain remedial measures at the site. Over the next three years, CWM and Lyncott engaged in extensive negotiations with the DER to develop an appropriate remedial plan. Finally, in 1984 CWM, Lyncott and the DER settled their differences through a stipulation entered into in litigation captioned Commonwealth of Pennsylvania, Department of Environmental Resources and Susquehanna County, George Campbell and The Concerned Citizens of New Milford v. Chemical Waste Management, Inc. and Lyncott Corporation, Commonwealth Court of Pennsylvania, No. 2137CD 1982 ("the Stipulation"). Pursuant to the Stipulation, CWM and Lyncott agreed to be responsible for implementation of specified response actions at the Lyncott site.
8. On June 26, 1981, following the DER's initial order, Stabatrol filed suit against Old Stabatrol and its former owners in the United States District Court for the Middle District of Pennsylvania. The suit alleged that Old Stabatrol and its former owners had made fraudulent misrepresentations concerning the acquired assets and breached their warranties under the Purchase Agreement. The suit sought rescission or reformation of the Purchase Agreement, restitution of monies and compensatory damages. A second action in equity was commenced on February 12, 1982 in the Court of Common Pleas of Montgomery County, Pennsylvania. It also alleged fraud and misrepresentation and sought rescission of the Purchase Agreement and restitution.
9. Plaintiffs and defendants were among the parties who began negotiations to settle these two lawsuits in late December 1984 and early January 1985. Valiga acted as plaintiffs' principal in the negotiations.
10. Valiga testified that during the settlement negotiations, plaintiffs initially sought to have a general indemnity for claims made by third parties relating to the site included in the settlement agreement. This request was denied by the defendants in early March 1985.
11. Valiga further testified that on March 27, 1985, an oral settlement agreement was reached among the parties. Two days later, on March 29, 1985, he was informed that CWM had commenced the CERCLA litigation.
12. Upon learning of the CERCLA litigation, Valiga and his negotiating team reviewed the draft language of the settlement papers that were being finalized for execution. Based on that review, they decided that it was not necessary to press for a revision of the draft language, even in light of the threat of third-party claims by the generators in the CERCLA litigation.
13. A rider to the draft agreement addressing plaintiffs' potential role in the CERCLA litigation may have been prepared by plaintiffs' lawyers. However, no further request for an indemnification clause or a general release was ever in fact made to the defendants. The issue was not brought up again, and plaintiffs made no effort to confirm with defendants their understanding of the agreement on the issue of indemnity for suits by third parties.
14. On April 1, 1985, plaintiffs and defendants were among the parties who entered into a written settlement agreement (the "Settlement Agreement"). The Settlement Agreement parties were: Stabatrol, WM, CWM (Stabatrol, WM and CWM being collectively referred to herein as the "Waste Management Group"), Metzval, Darbron Corporation ("Darbron"), 1533 North Fletcher Corporation ("1533"), Park L. Metzger ("P. Metzger"), Valiga, and Lee L. Metzger ("L. Metzger") (P. Metzger, Valiga and L. Metzger being referred to collectively herein as "Shareholders"; Metzval, Darbron, 1533 and the ...