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Nos. 95-1309 & 95-1338

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Gopher Oil Co., a Minnesota *

corporation, *

*

Plaintiff-Appellant/ *

Cross Appellee, * Appeals from the United States

* District Court for the

v. * District of Minnesota.

*

Roger E. Bunker, Personal *

Representative of the Estate *

of Germaine S. Romness, *

*

Defendant-Appellee/ *

Cross Appellant. *

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 Submitted: November 13, 1995

 Filed: May 29, 1996 

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Before HANSEN, JOHN R. GIBSON, and MURPHY, Circuit Judges.

_____________

HANSEN, Circuit Judge.

Gopher Oil brought this declaratory judgment action seeking a

declaration that the Germaine Romness estate (the estate) is liable for a

release of hazardous substances to the extent of Gopher Oil's liability

under the Comprehensive Environmental Response, Compensation, and Liability

Act of 1980 (CERCLA), as amended, 42 U.S.C. §§ 9601-9675; the Minnesota

Environmental Response and Liability Act (MERLA), Minn. Stat. Ann. §§

115B.01-115B.24 (West 1987 & Supp. 1994-95); and Minnesota common law

principles of tort and contract. The district court granted the estate's

motion to dismiss for lack of subject matter jurisdiction, concluding that
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the claims were not yet ripe. We affirm in part and reverse and remand in

part. 

I. BACKGROUND

The United States Environmental Protection Agency (EPA) determined

that a release of hazardous substances occurred at a dump site in Brooklyn

Park, Minnesota, and expended response costs of over $1,373,000 to clean

up the area. As authorized by CERCLA, in January 1994, the EPA demanded

reimbursement for the entire cost of the cleanup from each of ten

potentially responsible parties (PRPs), a list including Gopher Oil but not

the defendant in this suit. A representative of the EPA informed Gopher

Oil that the EPA anticipated referring this matter to the Department of

Justice and expected a CERCLA suit to be brought during the first quarter

of 1995. 

Gopher Oil brought this declaratory judgment suit in September 1994,

seeking a declaration that the now-deceased owner of a predecessor

corporation actually caused the release and that the deceased owner's

estate is liable for the sum demanded by the EPA. Specifically, Gopher

Oil's complaint asserts that when the release occurred in the 1960's, the

Brooklyn Park dump site was owned and operated by a corporation known as

Gopher State Oil, whose sole shareholders were Charles and Germaine

Romness. In 1973, Bame Oil acquired Gopher State from the Romnesses

through a stock acquisition. As part of the stock transfer, the Romnesses

agreed to indemnify Bame with respect to any of Gopher State's liabilities

existing at closing. Shortly thereafter, Bame Oil distributed Gopher

State's assets to itself, assuming all liabilities, known or unknown. Bame

Oil then changed its own name to Gopher Oil. 

Gopher State's owners, the Romnesses, have both died. The Germaine

Romness estate remains open, however, pending this litigation which follows

the litigation of a third-party complaint
Gopher Oil sought here to avoid the probate limitations 1

problems encountered in the Stillwater dump site litigation by

filing a timely probate claim within four months of receiving the

EPA's demand letter, in accordance with Minn. Stat. § 524.3-803,

and filing this declaratory judgment action within 60 days of the

estate's disallowance of the claim, in accordance with Minn.

Stat. § 524.3-806(a). 

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by Gopher Oil against the estate in state court. The state court

litigation involved a dump site near Stillwater, Minnesota, which was owned

by third parties who alleged that Gopher State Oil deposited waste oil

sludge on the site. The third-party owners and operators of the dumpsite

obtained a ruling that Gopher Oil is liable as a successor corporation for

the acts of Gopher State. See State v. Gopher Oil Co., Nos. C1-95-738 &

C2-95-733, 1995 WL 687688 (Minn. Ct. App. Nov. 21, 1995) (unpublished).

In the same litigation, Gopher Oil brought a third-party complaint against

the Romness estate, which the state district court dismissed due to

limitation periods set forth in the probate code. The Minnesota Court of

Appeals affirmed the dismissal of the third-party complaint on a different

ground, concluding that the Rommnesses' agreement to indemnify Gopher Oil

did not contemplate liability under later-enacted environmental statutes,

thus precluding Gopher Oil's indemnification claim. See State v. Gopher

Oil Co., No. C8-94-225, 1994 WL 328631 (Minn. Ct. App. July 12, 1994)

(unpublished). The Minnesota Supreme Court denied further review. 

After the state trial court had dismissed Gopher Oil's third-party

complaint in the Stillwater dump site litigation on the basis of probate

limitations, Gopher Oil brought the present federal declaratory judgment

action against the estate relating to the Brooklyn Park dump site. Count 1

one of this suit alleges that the estate is a responsible party under

CERCLA to the extent of Gopher Oil's CERCLA liability, and count two sets

forth the same claim under MERLA. Count three seeks a declaration that the

estate has primary tort liability to the extent of Gopher Oil's liability

to 
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the EPA or any other party because the Romnesses were the active owners at

the time of the release. Count four alleges that 
5

Gopher Oil is entitled to indemnity based upon the indemnity agreement

executed by the Romnesses in the 1970's when Bame Oil acquired Gopher

State. Thus, this declaratory judgment action involves the same parties,

the same indemnification agreement, and most of the same claims as the

third-party complaint in the Stillwater dump site litigation. 

The district court granted the estate's motion to dismiss all four

counts for lack of subject matter jurisdiction, concluding that the claims

were not ripe because there was no actual controversy. Specifically, the

court stated as follows:

It is apparently clear that the plaintiff did receive the

letter almost a full year ago which warned it that it would be

a potentially liable party. The plaintiff then commenced this

suit in expectation that it would be named a defendant based on

approximately ten months later a telephone call warning it

again. In order to bring its claims in this court, however,

the plaintiff must allege an actual controversy.

The mere possibility of being named a defendant as

responsible party does not constitute the actual controversy

which is required. This Court recognizes that the EPA, and the

United States on its behalf, for any number of reasons, may

well and yet decline to sue Gopher Oil, or they may select yet

another among the ten, or others beyond those listed as

potential defendants. They may also defer simply on the fact

that this case is too small or any one of a number of reasons,

which they seem to be able to come up with at a moment's notice

and somehow the cases do not get sued. In the event they are

to be sued, those are another issue, but this Court at this

time cannot find the requisite immediacy, and in this Court's

view there is little hardship to the plaintiff in withholding

the Court's consideration. 

(Tr. on Def.'s Mot. to Dismiss, Appellant's Addend. at 26-27.)

During the hearing, the district court also alternatively granted

partial summary judgment to the estate on the ground that the doctrine of

collateral estoppel bars the MERLA claim, the tort
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claim, and the indemnity claim due to the prior state court litigation.

However, the district court explicitly declined to rule alternatively on

the CERCLA claim, which was not litigated in the Minnesota state court

suit. 

Gopher Oil appeals the dismissal of its complaint for lack of

jurisdiction. The estate cross appeals, arguing that the complaint also

should have been dismissed because Gopher Oil's assumption of Gopher

State's liabilities bars the claims and the complaint fails to state a

cause of action under CERCLA, MERLA, or principles of contractual

indemnity. At oral argument before this court, the parties disclosed that

Gopher Oil had entered into a tolling agreement with the Department of

Justice to facilitate discussions and possible settlement of the

government's demand for reimbursement. The agreement states that "the

United States may terminate settlement negotiations and commence suit at

any time." (Tolling Agreement at 3.) More recently, we received notice

that on March 25, 1996, the government filed a CERCLA cost-recovery suit

against Gopher Oil and four other potentially responsible parties, but not

including the Romness estate.

II. DISCUSSION

We review de novo a dismissal for lack of subject matter

jurisdiction. Christopher Lake Dev. Co. v. St. Louis County, 35 F.3d 1269,

1273 (8th Cir. 1994). The Declaratory Judgment Act provides that when an

"actual controversy" exists, any federal court may declare the rights and

other legal relations of any interested party. 28 U.S.C. § 2201. Thus,

to seek a declaratory judgment, the plaintiff's claim must be ripe. The

doctrine of ripeness is basically a matter of timing, which requires (1)

"a sufficiently concrete case or controversy within the meaning of Article

III of the Constitution," and also, (2) "prudential considerations must

justify the present exercise of judicial power." Christopher Lake Dev.

Co., 35 F.3d at 1272-73. In other
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words, to satisfy the actual controversy requirement of the Declaratory

Judgment Act, there must exist "`a substantial controversy between the

parties having adverse legal interests, of sufficient immediacy and reality

to warrant the issuance of a declaratory judgment.'" Caldwell v. Gurley

Refining Co., 755 F.2d 645, 649 (8th Cir. 1985) (quoting Maryland Cas. Co.

v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)) (other citation

omitted). "A live dispute must exist between the parties at the time of

the court's hearing." Id. at 650.

The district court concluded that the government's threat of suit in

this case was too speculative to create an actual controversy between

Gopher Oil and the estate and that withholding a decision at this time

would result in little hardship to Gopher Oil. We agree with the district

court's assessment that the MERLA and the tort liability claims (counts II

and III) are not ripe for declaratory judgment because no actual

controversy exists. No facts indicate an immediate threat of either MERLA

or tort liability. The district court properly dismissed these claims for

lack of subject matter jurisdiction.

Given the latest developments in this case, however, we disagree with

the district court's assessment that the CERCLA and contractual indemnity

claims (counts I and IV) are not ripe. The complaint seeks a declaration

that the prior owners caused the release of hazardous substances and are

liable to the EPA to the extent of Gopher Oil's existing liability. The

estate argued that there was no actual controversy because Gopher Oil had

not itself incurred response costs and the government had not yet brought

a cost-recovery action against Gopher Oil. This argument is no longer

valid.

The terms of CERCLA governing the timing of review prohibit judicial

review of challenges to remedial action of the EPA until after the EPA has

filed an action to recover response costs. 42
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U.S.C. § 9613(h)(1). See also Voluntary Purchasing Groups, Inc. v. Reilly,

889 F.2d 1380, 1389 (5th Cir. 1989) ("until the government initiates a

cost-recovery action, a potential responsible party cannot obtain judicial

review of the agency action") (internal quotations omitted). Because the

EPA now has initiated a cost-recovery action pursuant to 42 U.S.C. § 9607,

this suit to determine liability between Gopher Oil and the estate is ripe

for adjudication. While ripe, we leave to the district court to determine

whether CERCLA's objective of avoiding piecemeal litigation would be best

served if the subject matter of this declaratory judgment action were in

some way or manner determined in conjunction with the government's costrecovery action. See Voluntary Purchasing Groups, 889 F.2d at 1390 (noting

that one of CERCLA's objectives is to avoid piecemeal litigation). 

Accordingly, while the district court may not have had subject matter

jurisdiction at the time of the hearing, the present posture of the case

presents a ripe CERCLA claim. We recognize that significant problems may

exist concerning the sufficiency of the CERCLA claim, as suggested in the

estate's cross appeal. Nevertheless, given our conclusion that this claim

is now ripe, we express no opinion on the issues raised in the cross

appeal, leaving them instead to be considered in the first instance by the

district court with a view toward avoiding piecemeal litigation. 

We next consider the indemnity claim. Gopher Oil seeks indemnity

from the Romness estate on the basis of the 1973 contractual indemnity

agreement that the Romnesses signed when Bame Oil purchased Gopher State.

"[T]he question of CERCLA liability and the interpretation of any

indemnification agreement among the parties liable for the clean-up are

inextricably related." GNB Battery Tech., Inc., v. Gould, Inc., 65 F.3d

615, 621 (7th Cir. 1995). We conclude that the contractual indemnity

claim, like the CERCLA claim, is ripe. As a result, we must consider the

district
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court's alternative grant of summary judgment on the indemnity claim. 

The district court held that the doctrine of collateral estoppel

prohibits the relitigation of the indemnity claim because the state court

judgment determined the claim adversely to Gopher Oil. Gopher Oil contends

that collateral estoppel does not apply because the state court considered

contractual indemnity only in the context of MERLA liability, not CERCLA

liability. 

 

We review a grant of summary judgment de novo, applying the same

standard as the district court. See Shannon v. Ford Motor Co., 72 F.3d

678, 681 (8th Cir. 1996). Summary judgment is appropriate where there is

no genuine dispute of material fact and the movant is entitled to judgment

as a matter of law. Fed. R. Civ. P. 56(c). See also Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). We accord full faith and credit to

state court judgments, giving them the same preclusive effect in federal

court as they would have in state court. See 28 U.S.C. § 1738; see also

Teleconnect Co. v. Ensrud, 55 F.3d 357, 361 (8th Cir. 1995). Accordingly,

we look to the law of Minnesota to determine the preclusive effect of the

state court third-party complaint. 

In Minnesota, collateral estoppel, or issue preclusion, "applies

where (1) the issue was identical to one in a prior adjudication; (2) there

was a final judgment on the merits; (3) the estopped party was a party or

in privity with a party to the prior adjudication; and (4) the estopped

party was given a full and fair opportunity to be heard on the adjudicated

issue." Johnson v. Consolidated Freightways, Inc., 420 N.W.2d 608, 613

(Minn. 1988). Collateral estoppel is a flexible doctrine in Minnesota

which allows consideration of "whether its application would work an

injustice on the party against whom estoppel is urged." Id. at 613-14. 
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The Minnesota Court of Appeals addressed the merits of Gopher Oil's

claim that it is entitled to indemnity from the estate for liability under

environmental laws. The court of appeals affirmed the state trial court's

dismissal of Gopher Oil's indemnity claim, holding as follows:

The liabilities at issue in this case arise under environmental

laws enacted ten years after the agreement was executed. They

were neither contemplated by the parties nor covered by the

agreement. The qualifying phrase "existing at closing" clearly

limits Gopher State's liability. 

State v. Gopher Oil Co., No. C8-94-225, slip op. at 3 (Minn. Ct. App. July

12, 1994) (App. A-128). Gopher Oil correctly asserts that the Minnesota

Court of Appeals was referring to Minnesota's environmental laws (MERLA),

not CERCLA, when it determined that the environmental liabilities at issue

were not contemplated by the indemnity agreement. Although CERCLA

liability was not raised in the state court proceedings, we conclude that

the state court's interpretation of the indemnity agreement applies with

equal force to CERCLA liability. The court of appeals specifically

determined that the language of the indemnity agreement limits Gopher

State's (and thus the estate's) liability by the phrase, liabilities

"existing at closing." The state court held that this limiting phrase

precludes liability under later enacted environmental laws such as MERLA,

enacted ten years after the agreement. Likewise, this determination

necessarily dictates that the phrase, "existing at closing," also precludes

liability under the environmental laws of CERCLA, enacted seven years after

the agreement. 

The intent of the indemnity agreement with regard to later enacted

environmental laws is the identical issue that was fully litigated by

Gopher Oil in the state court third-party complaint, and the issue was

finally determined on its merits adversely to Gopher Oil. Thus, the

district court correctly granted summary
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judgment on the ground that collateral estoppel bars relitigation of the

indemnity issue.

III. CONCLUSION

Accordingly, we affirm the district court's dismissal of the MERLA

and tort claims for lack of jurisdiction, and we affirm the district

court's grant of summary judgment on the indemnity agreement claim. We

reverse the dismissal of the CERCLA claim in light of the recently filed

government cost-recovery suit and remand it for further consideration,

without expressing any views on the merits or sufficiency of the CERCLA

claim. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.