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SMITHKLINE BEECHAM CORP. v. ROHM & HAAS CO.

June 1, 1994

SMITHKLINE BEECHAM CORPORATION, Plaintiff,
v.
ROHM AND HAAS COMPANY, Defendants



The opinion of the court was delivered by: WILLIAM H. YOHN, JR.

 Yohn, J.

 This is an action under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq. Plaintiff, SmithKline Beecham ("SKB") and defendant, Rohm and Haas Company ("R&H"), entered into a consent decree with the United States in which both parties agreed to jointly undertake at their own expense to clean up an environmentally contaminated site. Both companies owned and operated, at different times, Whitmoyer Laboratories - the business that caused the site to become contaminated.

 After entering into the consent decree, SKB sued R&H on two counts. In count I of its complaint, SKB seeks a judicial allocation of the two parties' clean up responsibilities under CERCLA. In count II, SKB asserts a contractual indemnification claim for part of the clean up based on an indemnification clause of the purchase agreement in which Beecham, a predecessor of SKB, *fn1" purchased Whitmoyer Laboratories from R&H.

 R&H has filed a motion for partial summary judgment on count II only. SKB has also filed a motion for partial summary judgment. It seeks summary judgment on counts I and II on the issue of liability only, not damages. For the reasons discussed below, the court will deny R&H's motion for partial summary judgment and grant SKB's motion for partial summary judgment, in part.

 I. BACKGROUND

 Each party has submitted lengthy recitations of the facts. The facts relevant to the present inquiry, however, are not in dispute.

 In 1978, R&H sold all the Whitmoyer Laboratories, Inc. stock to SKB. The 1978 Agreement of Purchase and Sale (the "purchase agreement"), through which SKB purchased all of the stock in Whitmoyer, contained an indemnification clause in which R&H indemnified SKB against "all material liabilities relating to the conduct of the Business prior to the First Closing Date." *fn2" Conversely, SKB agreed to indemnify R&H for all losses and liabilities "resulting from the operation of the Business by Buyer after the First Closing Date." (Pl.'s Ex. 48 at 7-11).

 During SKB's ownership of Whitmoyer Laboratories from 1978 to 1982, additional toxic waste was released into the environment at the Myerstown site. (Pl.'s Mem. at 7). In 1982, SKB sold its interest in Whitmoyer to Stafford Laboratories, Inc., a company that has since filed for bankruptcy and which has not been named as a party in this action.

 Congress enacted CERCLA in 1980. The site of the Whitmoyer plant in Myerstown was placed on the Superfund National Priorities List in June, 1986, pursuant to section 105 of CERCLA. 42 U.S.C § 9605. R&H and SKB were found to be "Potentially Responsible Parties" ("PRP's") under CERCLA with respect to the Whitmoyer site. *fn3" On September 6, 1992, the United States government settled its CERCLA liability claims against SKB and R&H by entering into a consent decree in which R&H and SKB agreed to design and implement the clean up of contamination at the Whitmoyer site and to be jointly and severally liable for that obligation. (Def.'s Ex. C). SKB has filed this suit for a judicial determination of clean up costs between the parties and for enforcement of the indemnity clause against R&H for the clean up of pre-sale contamination.

 II. DISCUSSION

 Under Federal Rule of Civil Procedure 56, the court will grant summary judgment "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56; see Celotex Corp. v. Catrett, 477 U.S. 317, 322-32, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). Any issue of material fact is genuine if the evidence could cause a reasonable jury to decide in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The court must take the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmoving party. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir. 1980).

 In count I of its complaint, SKB seeks a judicial allocation of the parties' responsibilities for clean up costs under the liability and contribution provisions of CERCLA. 42 U.S.C. §§ 9607(a) and 9613(f). SKB moved for partial summary judgment, seeking a judicial declaration that R&H is liable to SKB under CERCLA. R&H has since acknowledged its liability under CERCLA for its equitable share of the clean up costs at the Myerstown site. (Def.'s Opp'n Mem. at 1). The court, therefore, will grant SKB's motion for partial summary judgment on Count I to the extent that R&H is liable under CERCLA for its equitable share of the clean up costs.

 B. Count II

 In count II of its complaint, SKB asserts a contractual indemnification claim for part of the clean up based on an indemnification clause of the purchase agreement. R&H seeks summary judgment on count II, claiming that it did not indemnify SKB for its CERCLA liability as a matter of law. SKB has filed for partial summary judgment on count II, seeking a judicial declaration that it is indemnified by R&H under the agreement for the portion of its CERCLA liabilities caused by the conduct at Whitmoyer Laboratories before SKB bought it from R&H.

 1. Can CERCLA liability be indemnified?

 The first issue which must be addressed is whether a party may be indemnified for its CERCLA liability. Section 107(e)(1) of CERCLA states the following:

 
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 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.

 42 U.S.C. § 9607(e)(1). Courts have interpreted this section of the statute as allowing parties to shift among themselves the responsibilities for response costs, but prohibiting a party from escaping its underlying liability to the United States government or another third party. See Olin Corp. v. Consolidated Aluminum Corp., 5 F.3d 10, 14 (2d Cir. 1993); John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401, 405 (1st Cir. 1993); Purolator Products Corp. v. Allied-Signal, Inc., 772 F. Supp. 124, 129 (W.D.N.Y. 1991); Mobay Corp. v. Allied-Signal, Inc., 761 F. Supp. 345, 355 (D.N.J. 1991); Southland Corp. v. Ashland Oil, Inc., 696 F. Supp. 994, 1000 (D.N.J. 1988); Chemical Waste Management, Inc. v. Armstrong World Indus., Inc., 669 F. Supp. 1285, 1294-95 (E.D.Pa. 1987). But see Harley-Davidson, Inc. v. Minstar, Inc., 837 F. Supp. 978 (E.D. Wis. 1993) (interpreting section 9607(e) as prohibition against contractual transfer of CERCLA liability between parties). Under this section, then, responsible parties may allocate response costs among themselves while remaining jointly and severally liable to the government for the entire clean up. A contractual indemnification clause, therefore, may be applied to CERCLA liability.

 R&H argues that SKB may not seek indemnification because it was not without fault. Under New Jersey law, *fn4" a party seeking common law indemnification from another must be without fault. Adler's Quality Bakery, Inc. v. Gaseteria, Inc., 32 N.J. 55, 159 A.2d 97 (N.J. 1960). This requirement is inapplicable to the present case for two reasons. First, SKB does not seek common law indemnification, but contractual indemnification. Under New Jersey law, parties to a contract can allocate the burden of risk as to potential tort liability in any manner they choose as long as the intent to reallocate that risk is clearly expressed in the contract. If the ...


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