Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

New Castle County v. Hartford Acc. and Indem. Co.

filed: April 30, 1991; As Corrected May 9, 1991. Second Correction.

NEW CASTLE COUNTY
v.
HARTFORD ACCIDENT AND INDEMNITY COMPANY, A CORPORATION OF THE STATE OF CONNECTICUT, HOME INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW HAMPSHIRE, NEW HAMPSHIRE INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW HAMPSHIRE, CONTINENTAL CASUALTY COMPANY, A CORPORATION OF THE STATE OF ILLINOIS, UNITED STATES FIRE INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW YORK, INSURANCE COMPANY OF NORTH AMERICA, A CORPORATION OF THE STATE OF PENNSYLVANIA, CONTINENTAL INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW HAMPSHIRE, UNITED STATES LIABILITY INSURANCE COMPANY, A CORPORATION OF THE STATE OF PENNSYLVANIA, NATIONAL UNION FIRE INSURANCE COMPANY, A CORPORATION OF THE COMMONWEALTH OF PENNSYLVANIA, TWIN CITY FIRE INSURANCE COMPANY, A CORPORATION OF THE STATE OF MINNESOTA, AETNA CASUALTY AND SURETY COMPANY, A CORPORATION OF THE STATE OF CONNECTICUT, AND ZURICH INSURANCE COMPANY, A SWISS CORPORATION CONTINENTAL CASUALTY COMPANY ("CNA"), APPELLANT



On Appeal From the United States District Court for the District of Delaware; D.C. Civil No. 85-436.

Becker, Nygaard, Circuit Judges and Edward D. Re, Chief Judge, Court of International Trade.*fn*

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge

I. INTRODUCTION

These consolidated appeals present important questions about the meaning of the "pollution exclusion" and "as damages" clauses found in post-1970 comprehensive general liability ("CGL") insurance policies. These issues frequently recur in cases involving insurance coverage of environmental damage caused by the discharge of pollutants -- a genre of litigation that has become a staple of many federal courts' dockets.

The standard CGL policy provides coverage for "all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage . . . caused by an occurrence."*fn1 An "occurrence" is an "accident" that, during the policy period, results in damage "neither expected nor intended from the standpoint of the insured." The standard CGL policy also contains an exclusionary clause, known as the "pollution exclusion," which disclaims coverage "for bodily injury or property damage arising out of the discharge, dispersal, release or escape" of pollutants. This exclusion, however, is not absolute; it contains an exception providing for coverage where the bodily injury or property damage results from a "discharge" of pollutants that is "sudden and accidental."

These appeals arise from a declaratory judgment action brought in 1985 by New Castle County, Delaware (the "County") in the district court for the District of Delaware against twelve insurance companies that had issued CGL policies to the County.*fn2 The County sought a declaration of the carriers' duties under their respective policies to defend and indemnify it in three underlying lawsuits. These suits originated from the County's operation of and the discharge of pollutants from the Tybouts Corner landfill, which served from 1969 until 1971 as the County's primary location for the disposal of solid wastes. The three underlying lawsuits allege, in essence, that the landfill has poisoned local residents' drinking water.

When the Llangollen landfill, which the County had used as its municipal waste disposal site since 1960, neared its capacity in 1968, the County, after some preliminary investigation, concluded that a sanitary landfill remained the best means available to dispose of solid waste materials and chose Tybouts Corner as the successor site. This location was selected due to its proximity to the County's population center, the potential for land reclamation, and the prospects for long-term use. County officials also predicted that the operation of a landfill at Tybouts Corner would have minimal environmental impact.*fn3

Little was known in 1968 about the environmental danger posed by sanitary landfills. At that time, the primary concerns raised by landfills were "direct-contact environmental problems" -- i.e., "vectors, such as rodents and seagulls, blowing paper, odors, and keeping the waste covered."*fn4 Few then recognized the extent to which landfills above the water table threaten to pollute the underlying aquifers through the discharge of "leachate."*fn5 By 1985, however, leachate emanating from Tybouts Corner and allegedly contaminating neighboring drinking wells had become a multi-million dollar headache for the County, prompting the County to turn to its insurance carriers for financial relief.

In response to the County's declaratory judgment action, the insurers raised a number of different defenses based on the terms and exclusions of their policies and on the facts and circumstances of the County's management of the Tybouts Corner landfill. After extensive discovery, the district court issued two decisions denying defendants' motions for summary judgment.

On November 2, 1987, the district court filed an opinion in which it rejected defendants' argument that the "sudden and accidental" exception to the "pollution exclusion" clause only applies to damage resulting from an "abrupt" or "brief" discharge of pollutants. See New Castle County v. Hartford Accident & Indemnity Co., 673 F. Supp. 1359 (D. Del. 1987) (" New Castle I "). The district court concluded that the meaning of the word "sudden" is ambiguous and, in accordance with Delaware insurance law, resolved this ambiguity in favor of the insured, defining "sudden" to mean "unexpected," not "abrupt." In the same opinion, the district court also rejected the insurers' argument that the "as damages" clause covers only liability imposed through legal (as opposed to equitable) actions. The court determined that "damages," as ordinarily defined, may arise from either legal or equitable actions, and that therefore the three underlying lawsuits against the County, seeking, inter alia, to compel the County to clean up the pollution from the Tybouts Corner landfill, are covered by the CGL policies.

On March 31, 1988, the district court disposed of the remaining aspects of defendants' summary judgment motions adversely to them. See New Castle County v. Hartford Accident & Indemnity Co., 685 F. Supp. 1321 (D. Del. 1988) (" New Castle II "). In particular, the district court rejected defendants' claim that the groundwater pollution arising out of the discharge of leachate from the Tybouts Corner landfill did not, as a matter of law, constitute an "occurrence" under the policies. The court held, rather, that there were genuine issues of material fact concerning the scope of the policies' coverage that necessitated a trial.

During the four years of litigation preceding trial, all of the insurance carriers except Continental Casualty Company ("CNA") settled with the County and were dismissed from the case. On October 23, 1989, following a seven-day bench trial, the district court issued its "Final Judgment and Order." See New Castle County v. Continental Casualty Co., 725 F. Supp. 800 (D. Del. 1989) (" New Castle III "). This order set forth in detail the district court's factual findings and conclusions of law. The court held, specifically, that covered "occurrences" took place during each of CNA's two policy periods, which ran from August 1, 1973, through January 1, 1975, inclusive. The court therefore imposed on CNA the duty to defend and indemnify the County in the three underlying lawsuits.

These appeals followed. CNA claims that the district court erred in holding: (1) that the pollution exclusion clause does not bar coverage for unexpected property damage caused by a gradual (and perhaps expected) discharge of pollutants; (2) that the three underlying lawsuits against the County are covered by the "as damages" clause even though those actions are, in part, equitable in nature; and (3) that the pollution damage resulting from the Tybouts Corner landfill was "neither expected nor intended from the standpoint of the insured" and thus constitutes an "occurrence" within the meaning of the policies. These issues are quite difficult and highly contentious, as evidenced by the numerous cases raising similar issues that in recent years have been vigorously litigated in state and federal courts throughout the nation. Our task is made more difficult because we must predict how the Delaware Supreme Court would resolve these perplexing issues, which are all questions of first impression under Delaware law.

Based on our reading of the "as damages" and "occurrence" clauses, we conclude that the three lawsuits against the County are included within the basic coverage provisions of CNA's CGL policies. We think that the common, everyday meaning of the word "damages" encompasses liabilities arising from both actions at law and actions in equity. Thus, we conclude that the County's liability for the cost of repairing property damage caused by pollution from Tybouts Corner landfill constitutes "damages." We acknowledge that CNA's narrower, technical definition of "damages" is a reasonable one, but the existence of alternative interpretations merely creates an ambiguity, which, under Delaware law, is construed against the insurer. We also agree with the district court's conclusion that damage is "expected" within the meaning of the "occurrence" clause if there is a "substantial probability" of damage before the policy period begins. And we think that the district court's factual finding that there was not a substantial probability of pollution damage from Tybouts Corner when CNA issued its first policy to the County is not clearly erroneous.

We next analyze whether the policies' pollution exclusion clause takes away the coverage that the above provisions provide. After examining various dictionary definitions, surveying the vast array of conflicting case law, and reviewing the drafting history of the pollution exclusion clause, we agree with the district court that the word "sudden" is ambiguous and thus should be interpreted as meaning "unexpected." Notwithstanding this general agreement as to the interpretation of the word "sudden," we are unable to affirm the district court's decision that the pollution exclusion clause does not bar coverage here.

By its own terms, the pollution exclusion clause forecloses coverage for damage caused by the discharge of pollutants, unless "such discharge, dispersal, release or escape is sudden and accidental." However, in holding that the County's claim fits within the "sudden and accidental" exception, the district court focused on whether the pollution damage was sudden and accidental. We think that the court, as the plain language of the pollution exclusion clause suggests, should have inquired whether the discharge of the pollutants from Tybouts Corner was both sudden and accidental. Based on our reading of the record facts, we believe that this shift of focus from damage to discharge may change the outcome of this case.

We therefore will reverse the district court's judgment and remand so that the district court may reconsider its treatment of the damage/discharge distinction. The district court should revisit the record and attempt to determine whether the discharge of pollutants from the Tybouts Corner landfill was unexpected and unintended. The court also may receive additional testimony in order to supplement the existing record, if this proves necessary.

Unfortunately, the foregoing summary does not exhaust the issues that must be addressed herein, for a number of other knotty questions are posed by these appeals. This opinion additionally considers: (1) whether we have appellate jurisdiction; (2) whether the district court erred in dismissing as untimely cross-claims filed by CNA against five co-defendant insurers that had settled with the County; and (3) whether the five co-defendant insurers, in the absence of a cross-appeal, can raise their settlements with the County as a bar to CNA's cross-claims. We first address the questions of appellate jurisdiction. Although resolution of the jurisdictional issues necessitates reference to the dispute over the validity of CNA's cross-claims, we defer discussion of that issue until the end of the opinion.

II. FACTS AND PROCEDURAL HISTORY

A detailed recitation of the relevant facts is set forth in the district court's opinion in New Castle III. See 725 F. Supp. at 803-09. We are bound by these factual findings insofar as they are not clearly erroneous. See Ram Construction Co. v. American States Insurance Co., 749 F.2d 1049, 1053 (3d Cir. 1984). Our account of the facts, therefore, is rescribed largely from the discussion of the facts in New Castle III. We have, however, supplemented the facts detailed in New Castle III where necessary to provide a full understanding of the issues presented by these appeals.

The following factual discourse is informed by two related questions: (1) whether from the County's perspective there was a "substantial probability," prior to May, 1972, that the operation of a sanitary landfill at Tybouts Corner would cause off-site property damage; and (2) whether the discharge of waste materials and other pollutants from Tybouts Corner landfill (as opposed to any resulting environmental damage) was unexpected and unintended.

A. Pre-Operation Events

As a prerequisite to operating a sanitary landfill at Tybouts Corner, the State of Delaware required the County in 1968 to comply with the permit requirements of the Delaware State Board of Health ("Board of Health") and the Delaware State Water and Air Resources Committee ("WARC"). The County also agreed to comply with the terms of a "rough draft" of proposed regulations promulgated by the Board of Health. In attempting to comply with the permit requirements and proposed regulations, the County consulted with several experts, including state officials and scientists from the University of Delaware, and conducted numerous tests. The County depended on these outside experts to provide the environmental expertise that it lacked.

The State's permit process required an extensive investigation of the proposed landfill site. The County made two sets of test borings to explore the composition of the land around Tybouts Corner. Soil profiles derived from these boring samples showed a low permeability clay layer beneath Tybouts Corner. This clay layer was critical, because it was supposed to ensure that water passing through the landfill flowed laterally, rather than downward into the aquifer. CNA asserts that the County conducted insufficient tests to determine whether a subsurface, continuous clay barrier existed. CNA notes that, before Tybouts Corner opened, the County's own expert, Clarence Turner, had advised the County that his preliminary tests were inconclusive, and that he could not make a definitive determination without further testing. CNA points out that the County neither conducted the additional testing nor forwarded Turner's report to the State. The County downplays the significance of the Turner report, contending that this "report" was merely a letter soliciting additional work.

The State also required two feet of separation between the deepest point of the landfill and the "anticipated high groundwater elevation." It was believed that this soil separation would act as a "natural filter," purifying the water from precipitation that percolated through the garbage in the landfill. At a meeting on December 9, 1968, the University of Delaware and state officials agreed that the groundwater at Tybouts Corner probably would rise about one foot above the level indicated by the test borings. CNA thus argues that the method used by the County to maintain the required two-foot separation between the refuse and groundwater -- digging to the current water table and then backfilling two feet -- plainly was inadequate. CNA maintains that, in relying on this method (which the district court described as "suspect," 725 F. Supp. at 814), the County could expect only a one foot separation after the water level rose.

In addition to the aforementioned requirements, the State required the County to maintain three wash ponds on the site, to test surface and subsurface groundwater, and to obtain permission prior to dumping chemical or toxic wastes. The State further prohibited the County from depositing wastes within 1000 feet of nearby Red Lion Creek. In connection with the permit process, the County submitted to the State "a plan of operations, topographical maps, construction plans, soils boring dates, soils laboratory reports, soils profiles, and a contract for operating the site." Id. at 805. Based on this information, and after a public hearing at which local residents aired their concern over possible pollution, the County received formal approval to operate a sanitary landfill at Tybouts Corner from the WARC on December 9, 1968, and from the Board of Health on December 23, 1968. The Board of Health specifically concluded that Tybouts Corner was "reasonably suitable for use as a landfill."*fn6 These approvals permitted the County to operate a landfill at Tybouts Corner for one year.*fn7

B. The County's Operation of the Tybouts Corner Landfill

The Tybouts Corner landfill began receiving wastes on or about January 1, 1969. On appeal, the parties dwell on only two aspects of the landfill's two-year operation: (1) the reports of the University of Delaware chronicling the gradual process of leachate migration from Tybouts Corner; and (2) CNA's allegation that the County routinely allowed chemical wastes to be dumped at the landfill without first procuring permission from the appropriate agencies.

The University of Delaware, under a contract with the County, monitored the quality of groundwater at Tybouts Corner and regularly prepared reports for the State and the County. Soon after the landfill became operational, a "slight deterioration" of the wells at Tybouts was noticed. The University, however, consistently reported that the level of contamination was "far below levels that normally constitute pollution." From 1969 to 1971, the University's reports depicted a progressive degradation of the groundwater, but concluded that, although water quality was changing, there was no significant pollution. The University's report of May 14, 1971, was typical in this regard:

In summary, there are definite indications of groundwater deterioration from landfill leachate under the landfill site. There has also been deterioration in the quality of the wash pond water as would be expected since the ponds are inter-connected, have been subject to dumping and filling, and are the recipients of much of the landfill site surface runoff. However, to date, samples taken from Red Lion Creek and Pigeon Run have not indicated any measurable deterioration due to the landfill operation.

The Board of Health and the WARC, under the permits they had issued to the County, also inspected the Tybouts Corner landfill on a regular basis.*fn8 These organizations similarly found no signs of serious contamination and thus renewed the County's permits when they expired after one year.

CNA vigorously asserts that the County, throughout the operation of the Tybouts Corner landfill, disregarded express limitations on the dumping of chemical wastes. The permits issued by the Board of Health and the WARC prohibited the dumping of chemical, toxic, and industrial wastes without prior written approval.*fn9 At trial, CNA called as witnesses a waste hauler, an on-site County supervisor, the owner of the landfill site (William Ward), and one of Ward's employees, all of whom testified that chemical wastes routinely were dumped at Tybouts. The County, CNA claims, never received permission from the Board of Health or the WARC to dump chemical wastes.*fn10

C. Post-Operation Events

The contamination problem at Tybouts Corner became evident shortly after the landfill stopped receiving wastes on July 8, 1971. Three post-operation episodes (at least with the benefit of hindsight) foreshadowed the leachate problem that would soon besiege Tybouts: (1) the "black pond incident;" (2) the discovery of a leachate problem at the Llangollen landfill; and (3) the "Winterim" report.

The same month that the Tybouts Corner landfill reached its capacity and was closed, one of the wash ponds on the site turned black, and leachate "seeps" were spotted throughout the property surrounding the landfill and along adjoining roads. These incidents prompted the University of Delaware to report in August of 1971 that "the problem at Tybouts Corner sanitary landfill did not appear to be under control." Four months later, a University professor advised the County that "leachate next to Highway 301 was flowing like a spring." The district court, however, viewed these events (which, during the course of this litigation, together have become known as the "black pond incident") with far less alarm:

A wash pond Ward established at a high elevation caused the black pond incident by increasing the water pressure on the underlying trash and accelerating the natural recharging process. The black pond incident did not indicate that Tybouts Corner would eventually pollute the underlying aquifers. In fact, the black pond, and associated surface seepages, indicated the landfill was functioning as expected. The appearance of leachate on the surface, in response to the added water of the Ward operation, indicates that the water is not escaping below, into the water table.

Id. at 815 (citations omitted).

Early in 1972, four University of Delaware undergraduate students, under the supervision of a University professor, studied several Delaware landfills, including Tybouts Corner, and prepared a report (the "Winterim report"). This report, although devoting only three quarters of a page to Tybouts, depicted a leachate problem at the site: "Leachate from [Tybouts] was seen seeping over the surface and into a pond. . . . Overflow from this pond is allowed to flow into a nearby stream. Leachate was also seeping through 150-200 feet of undisturbed sediments, and flowing into a ravine." Based on these findings, and others like them, the Winterim report concluded that "there is imminent danger of groundwater pollution at all sites observed in Delaware." (Emphasis added). This report ultimately was sent to the County and became the subject of a local newspaper article on April 1, 1972.

In May of 1972, more than three years after the Llangollen landfill had closed, the County received a letter from the Delaware Department of Natural Resources and Environmental Control ("DNREC") stating that a private well located near the Llangollen landfill was contaminated. The DNREC advised the County that its investigation had indicated that leachate from Llangollen was the most likely source of the pollution.*fn11 The County on appeal contends that, due to differences in stratigraphy, hydrogeology, and aquifer characteristics between the two landfill sites, Tybouts Corner was significantly safer than Llangollen. The County thus reasons that the discovery of contamination at Llangollen did not necessarily imply that a similar contamination problem would develop at Tybouts Corner.

The County nonetheless hired a private consultant, Edward H. Richardson Associates ("Richardson"), to test for similar pollution at Tybouts Corner. Richardson submitted three reports to the County between March of 1974 and March of 1975. These reports stated that the Tybouts Corner landfill was leaching, but that groundwater deterioration was not yet problematic.*fn12

D. The Three Underlying Lawsuits Against the County

On May 14, 1976, the DNREC notified the County that the well of Sarah Wagner, which was located several hundred feet from the Tybouts Corner landfill, was contaminated. The DNREC stated that its data revealed that the landfill was the probable source of the contaminants. Since 1976, the following three lawsuits have been filed against the County in connection with the alleged contamination resulting from its operation of the Tybouts Corner landfill.

In United States v. New Castle County, No. 80-489 (D. Del. filed Oct. 4, 1980) (the " USA action"), the Environmental Protection Agency ("EPA") sued the County under the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6973, and the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. §§ 9604, 9606, 9607, 9613. The EPA, which had added Tybouts Corner to its Superfund list, sought to require the County to abate the contamination caused by Tybouts and to pay "response costs" -- i.e., the costs of cleaning up the landfill. The USA action eventually was settled. Under the terms of the settlement, the County agreed to pay $385,440, during 1984, to install an alternate water supply for residents around the landfill. The County also agreed to pay 35.9% of the total future costs of cleaning up the site. The County's share of the total cleanup costs currently is estimated at $7.18 million. See 725 F. Supp. at 809.

In Wagner v. New Castle County, No. 82-7008 (Del. Ch. filed Nov. 10, 1982), Sarah Wagner sued the County and other defendants for injunctive relief and damages, alleging that her drinking well was being contaminated by leachate from the Tybouts Corner landfill. Wagner averred that: "The waste which was deposited, dumped or otherwise placed on and into the landfill is creating a leachate that is percolating downward through the soil and is entering the underlying groundwater."

Finally, in Andrews v. New Castle County, No. 84-124 (D. Del. filed Mar. 2, 1984), thirty-nine residents living within a one mile radius of the Tybouts Corner landfill brought a class action against the County and other defendants, contending that the actual and threatened release of pollutants from Tybouts Corner contaminated and threatens to contaminate their drinking water. These plaintiffs seek a permanent injunction against defendants' continued discharge of pollutants into the groundwater, as well as compensatory and punitive damages.

E. The Insurance Coverage Litigation

Faced with the prospect of substantial liability, the County turned to its insurance carriers to defend and indemnify it in the foregoing suits.*fn13 When the twelve insurance carriers that had issued CGL policies to the County refused to provide coverage, the County filed the present action for declaratory judgment.*fn14 The County sought a declaration of these insurers' obligations to defend and indemnify it in the three actions arising from the Tybouts Corner landfill and in two actions that concerned the Llangollen landfill.*fn15 The insurance carriers filed answers denying coverage of the claims and asserting affirmative defenses. Several insurers also filed counterclaims and cross-claims.

After extensive discovery in the form of document production and depositions, CNA and seven other insurers (the remaining four had settled with the County) moved for summary judgment, contending that they had no duty to defend and indemnify the County with respect to claims for pollution emanating from the two landfills. The district court issued two opinions denying these motions. On November 2, 1987, the court in New Castle I rejected two of the arguments advanced by the insurers as grounds for summary judgment. First, the district court held that the policies' pollution exclusion clause, which bars coverage for damages resulting from discharges of pollutants that are neither sudden nor accidental, did not exclude liability for the claims against the County. 673 F. Supp. at 1362-64. Second, the district court held that the policies' provision restricting coverage to "sums which the insured shall become legally obligated to pay as damages " also did not preclude coverage. Id. at 1365-66.

On March 31, 1988, the district court in New Castle II addressed the remaining grounds for summary judgment. Of particular relevance to this appeal, the district court rejected CNA's assertions that the damage arising from Tybouts Corner did not constitute an "occurrence" under the policies, and that the County had failed to give timely notice to CNA as required by the policies. See 685 F. Supp. at 1334.*fn16 The district court held that there were disputed issues of material fact concerning the "occurrence" issue that required a trial -- in particular, whether and when the pollution damage was "expected." Id. at 1335.

Prior to trial, all of the defendant insurers except for CNA settled their disputes with the County and were dismissed from the case. On October 23, 1989, following a seven-day bench trial, the district court in New Castle III filed findings of fact and conclusions of law. The court held that CNA owed a duty to defend and indemnify the County in the three underlying actions because covered "occurrences" took place during each of CNA's two policy periods.*fn17 More specifically, the district court found CNA liable under both of the $1 million CGL policies it had issued, as well as under the first of the two $5 million excess policies it also had issued. CNA is thus obligated to indemnify the County for all liability up to $7 million, and, in addition, to defend the County in the three underlying lawsuits.

F. The Significant Post-Trial Events

The district court's order of October 23, 1989 (the "October 23rd Order"), which accompanied its opinion in New Castle III, was styled as a "Final Judgment and Order."*fn18 When entered, the district court's October 23rd Order "'ended the litigation on the merits,'" Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S. Ct. 1133, 1136, 99 L. Ed. 2d 296 (1988) (citation omitted), and hence was final and appealable under 28 U.S.C. § 1291.*fn19 Therefore, under Fed. R. App. P. 4(a)(1), CNA had until November 22, 1989, (thirty days after the district court entered its October 23rd Order) to file a notice of appeal.*fn20

On November 1, 1989, within ten days of the October 23rd Order, CNA served a paper entitled "Motion for Reargument," challenging the order on the grounds that: (1) CNA was not liable for excess coverage because the County had not shown that the underlying policy limits were exhausted; and (2) the County's recovery should have been reduced by the amounts received from other insurers. Although CNA did not specify the procedural basis for its motion for reargument, the district court concluded that it was a motion under District of Delaware Local Rule 3.3.*fn21 On November 20, 1989, the district court denied CNA's motion for reargument in all respects.

One day later, CNA filed cross-claims pursuant to a stipulation entered into by the parties on February 14, 1986, (the "February 1986 Stipulation") against five co-defendant insurers, all of which previously had settled with the County. CNA represents that, as a consequence of its cross-claims and its motion for reargument, it had two reasons for believing that the original November 22nd deadline for filing an appeal had been postponed. First, because there now were claims remaining to be decided in the case (CNA's newly asserted cross-claims), CNA believed that the October 23rd Order no longer was "final" for purposes of 28 U.S.C. § 1291. To obtain appellate review of the district court's October 23rd Order and earlier decisions, CNA thus moved to certify the October 23rd Order as a final judgment under Fed. R. Civ. P. 54(b). Second, CNA thought that, even if the October 23rd Order remained final, its motion for reargument had tolled the time for filing an appeal until December 20, 1989 -- thirty days after the district court denied its motion for reargument. This is because CNA believed that its motion for reargument was, functionally, a motion to alter or amend the judgment pursuant to Fed. R. Civ. P. 59(e).*fn22 Under Fed. R. App. P. 4(a)(4),*fn23 a timely Rule 59(e) motion suspends the appeal time, which begins to run anew upon the entry of an order granting or denying the motion. See Rankin v. Heckler, 761 F.2d 936, 942 (3d Cir. 1985).

At this juncture, recognizing that the district court had styled its October 23rd Order a "final" order, and that, even as tolled by its motion for reargument, an appeal might have to be filed by December 20, 1989, CNA advised the court that, unless its Rule 54(b) motion were decided by December 20th, it would be forced to file a protective appeal. To avoid filing such an appeal, CNA moved for expedited consideration of its Rule 54(b) motion. The district court denied the request for expedited consideration, and CNA therefore filed a protective notice of appeal ("appeal number 89-3814") on December 12, 1989.

On December 29, 1989, the district court denied CNA's Rule 54(b) motion, holding that CNA's cross-claims were untimely under the parties' February 1986 Stipulation, and that Rule 54(b) was, as a result, inapplicable. See New Castle County v. Continental Casualty Co., 728 F. Supp. 324 (D. Del. 1989) (" New Castle IV "). To challenge what it understood to be the dismissal of its cross-claims, CNA filed a second notice of appeal ("appeal number 90-3012") on January 8, 1990. That same day, the district court, unbeknownst to CNA, entered an order (the "January 8th Order") formally dismissing CNA's cross-claims for the reasons set forth in New Castle IV. CNA thus filed a third notice of appeal ("appeal number 90-3030") on January 22, 1990.

III. APPELLATE JURISDICTION

The County contends that none of CNA's three notices of appeal confers jurisdiction upon us to consider the district court's October 23rd Order and earlier decisions.

A. Appeal Number 89-3814

The County maintains that appeal number 89-3814, which was filed on December 12, 1989, was untimely because the district court entered its "final" judgment on October 23, 1989, and the time to file an appeal thus expired thirty days later, on November 22, 1989. This argument is premised on two related contentions. The County insists that: (1) CNA's motion for reargument did not toll the time for appeal because it was made pursuant to Fed. R. Civ. P. 60(b),*fn24 not Rule 59(e); and (2) the district court's October 23rd Order remained "final" and appealable under § 1291, despite CNA's assertion of cross-claims on November 21, 1989.

1. The Rule 59(e) Versus Rule 60(b) Issue

"Unlike a Rule 59(e) motion, a Rule 60(b) motion does not toll the time for appeal of the judgment." Sanders v. Clemco Industries, 862 F.2d 161, 169 (8th Cir. 1988); see also Fed. R. App. P. 4(a)(4). Since CNA did not formally designate its motion for reargument under the Federal Rules of Civil Procedure, we must attempt to determine the precise character of the motion by means of its content. See Turner v. Evers, 726 F.2d 112, 114 (3d Cir. 1984). The County argues that, because CNA's motion sought to re-open the trial record and to offer evidence in support of new legal arguments, it was, in substance, a Rule 60(b) motion. We disagree.

We believe that CNA's motion for reargument is, for several reasons, best viewed as a Rule 59(e) motion to alter or amend judgment. A motion filed within ten days of the entry of judgment that questions the correctness of the judgment generally is treated as a Rule 59(e) motion. See 9 J. Moore, B. Ward, & J. Lucas, Moore's Federal Practice para. 204.12[1], at 4-72 to 4-74 (2d ed. 1991). Indeed, under our jurisprudence, the first post-judgment bite at the apple ordinarily is construed as a Rule 59(e) motion -- assuming it is timely served. See Turner, 726 F.2d at 114; First Jersey National Bank v. Dome Petroleum Ltd., 723 F.2d 335, 337 (3d Cir. 1983); Non-Punitive Segregation Inmates v. Kelly, 589 F. Supp. 1330, 1335 (E.D. Pa. 1984), aff'd, 845 F.2d 1014 (3d Cir. 1988).*fn25 The County does not dispute either that CNA's motion for reargument was served within ten days of the October 23rd Order, or that this motion was CNA's first post-judgment bite at the apple.

These persuasive factors are reinforced by the district court's statement that CNA made its motion for reargument under District of Delaware Local Rule 3.3. The language of this Rule essentially tracks that of other local rules providing for motions for "reconsideration."*fn26 We have held on several occasions that, for purposes of the timeliness of an appeal, a motion styled as a "motion for reconsideration" is the "functional equivalent" of a Rule 59(e) motion. See Federal Kemper Insurance Co. v. Rauscher, 807 F.2d 345, 348 (3d Cir. 1986); Venen v. Sweet, 758 F.2d 117, 122 (3d Cir. 1985); Richerson v. Jones, 572 F.2d 89, 93 (3d Cir. 1978). Furthermore, Local Rule 3.3 uses language very similar to that found in Rule 59(e); specifically, both require the motion to be "served" within ten days. Few rules make timeliness dependent on service, as opposed to filing. In sum, we think that timely motions pursuant to District of Delaware Local Rule 3.3, like motions for reconsideration pursuant to other local rules, should be treated as Rule 59(e) motions. We therefore conclude that CNA's motion for reargument was the functional equivalent of a Rule 59(e) motion and tolled the time for filing an appeal until December 20, 1989.*fn27

2. The Jurisdictional Effect of CNA's Cross-Claims

This conclusion does not obviate the need to address the effect of CNA's cross-claims on the "finality" of the October 23rd Order. As a predicate to its claim that appeal number 89-3814 was filed out of time, the County argues that CNA's cross-claims could not strip the October 23rd Order of its "finality," retroactively converting the order into an interlocutory decision in a multiple party case. Because we have held that CNA's motion for reargument had the tolling effect of a Rule 59(e) motion, it now is settled that CNA's time for appeal did not lapse until December 20, 1989 -- eight days after appeal number 89-3814 was filed. Nonetheless, if, when CNA filed its notice of appeal, the October 23rd Order no longer was a "final" order appealable under § 1291, then appeal number 89-3814 suffers from a different defect -- namely, prematurity. To determine whether the October 23rd Order retained its "finality," despite CNA's cross-claims, we must explore the basis for these cross-claims.

CNA's cross-claims, we believe, are based on a good-faith construction of paragraph 3(c) of the parties' February 1986 Stipulation.*fn28 That paragraph provides that any insurer may file cross-claims against any other insurer within thirty days of when the first insurer is held to owe any duty to the County.*fn29 CNA contends that it was not found to owe a duty to the County until the district court decided New Castle III, and that it filed its cross-claims within the next thirty days. Regardless of whether CNA's reading of the February 1986 Stipulation and of the district court's decisions is accurate, it is, at the very least, plausible. Therefore, once CNA asserted its cross-claims, colorable claims remained to be decided in this case. The October 23rd Order was, as a result, no longer this litigation's "final" decision.*fn30 Rather, the district court's January 8th Order dismissing CNA's cross-claims -- irrespective of whether it was correctly decided -- was (quite literally) the "final" judgment in this case. We thus conclude that appeal number 89-3814 was premature in that it was taken prior to the district court's January 8th Order.*fn31

Under our holding in Cape May Greene, Inc. v. Warren, 698 F.2d 179 (3d Cir. 1983), however, this defect is not necessarily fatal. The plaintiff in Cape May Greene filed its notice of appeal while a cross-claim between two defendants still was pending. This cross-claim was dismissed, however, before we took any action on the merits of plaintiff's appeal. Id. at 184. We recognized that, strictly speaking, plaintiff's notice of appeal was premature. Nonetheless, we treated plaintiff's appeal as ripening on the date that the cross-claim was dismissed and thus determined that there was appellate jurisdiction. Id. at 185.*fn32 This reasoning applies with equal force to appeal number 89-3814. Although CNA filed this appeal while its cross-claims still were pending, these cross-claims were dismissed before we took any action on the appeal. According to Cape May Greene, therefore, appeal number 89-3814 ripened on January 8, 1990, the date on which the district court dismissed CNA's cross-claims.

We believe, however, that appeal number 89-3814 is superfluous because it was superseded by a subsequent and adequate notice of appeal (number 90-3030), see infra [Slip Op.] at 38-40, which also challenges the district court's October 23rd Order and earlier decisions. Secure in our understanding that appeal number 89-3814 does, at all events, supply an alternative basis for reaching the merits, we will nonetheless, in the interest of judicial economy, decline to exercise jurisdiction over CNA's first appeal and will dismiss it.*fn33

B. Appeal Number 90-3030

Appeal number 90-3030, which was filed on January 22, 1990, clearly was taken from a "final" order -- i.e., the district court's January 8th Order formally dismissing CNA's cross-claims.*fn34 The County basically concedes as much, but asserts that the language used by CNA in appeal number 90-3030 was insufficient to encompass the issues raised by its first two appeals. It contends, in particular, that CNA's third appeal was inadequate under Fed. R. App. P. 3(c)*fn35 and 3d Cir. R. 8(1).*fn36 These rules both refer appellants to Form 1 of the appendix of forms set forth in the Federal Rules of Appellate Procedure. Form 1 contains blank spaces in which an appellant is supposed to write the date of the order from which he or she is appealing. The County infers from this form that a notice of appeal, in order to pass muster, must set forth the dates of the challenged orders. Because CNA referred to only one order by date (the January 8th Order) in its third notice of appeal, the County argues that this third appeal did not properly raise for review the district court's October 23rd Order and earlier decisions. We disagree.

The County's argument is contrary to the language and spirit of Fed. R. App. P. 3(c) and 3d Cir. R. 8(1). Both rules provide that Form 1 is only a suggested form -- not a required one. Moreover, under the law of this circuit, informality of form does not provide grounds for dismissing an appeal.*fn37 Appeal number 90-3030 challenges "the Order Dismissing CNA's Cross-Claims dated January 8, 1990 and all prior orders, decisions, rulings, opinions, and judgments of the Court in this action." We think that, under the circumstances (CNA filed appeal number 90-3030 on the heels of two prior notices of appeal that listed by date the orders from which CNA now appeals), CNA's intent to appeal the district court's October 23rd Order and earlier decisions fairly can be inferred from the reference to "all prior orders." We therefore hold that appeal number 90-3030 properly raises for our consideration all of the district court's prior decisions in this case. See Drinkwater, 904 F.2d at 858.

One final jurisdictional point remains to be considered. As we will discuss at length below, see infra at 1203-05, we believe that CNA's cross-claims were timely filed under the parties' February 1986 Stipulation. We therefore will reverse the district court's January 8th Order dismissing those cross-claims without prejudice. Once CNA's cross-claims are reinstated, this case again becomes an action involving multiple parties with other claims remaining to be decided. A question thus arises whether we should remand this case to the district court for possible Rule 54(b) certification before reaching the merits of CNA's appeals. In our view, such a time consuming step is unnecessary here.

We think that our determination that CNA's cross-claims were improperly dismissed by the district court neither deprives the January 8th Order of its "finality" nor impairs our jurisdiction to reach the merits of CNA's appeals. The district court's January 8th Order, as we explained supra [Slip Op.] at 38, was final under § 1291 because it ended the litigation. We know of no case that says that an order that is "final" when an appeal is taken can be rendered non-final by a later decision of the appellate court.*fn38 Furthermore, given our decision that a timely appeal was taken from a "final" order, we think that 28 U.S.C. § 2106 affords us broad discretion to consider the district court's orders in their entirety.*fn39 We can conceive of no compelling ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.