1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-5-1995

Hatco v WR Grace

Precedential or Non-Precedential:

Docket 94-5276

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Recommended Citation

"Hatco v WR Grace" (1995). 1995 Decisions. Paper 181.

http://digitalcommons.law.villanova.edu/thirdcircuit_1995/181
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ____________ 

 No. 94-5276 

 ____________ 

 HATCO CORPORATION, 

 Appellee

v. 

 W.R. GRACE & CO.--CONN., a Corporation 

 of the State of Connecticut, 

 Defendant and Third-Party Plaintiff

v. 

 ALLSTATE INSURANCE COMPANY (as successor to Northbrook 

Excess and Surplus Company); AMERICAN EMPLOYERS' 

INSURANCE COMPANY; CERTAIN UNDERWRITERS AT LLOYD'S, 

LONDON AND THE LONDON MARKET COMPANIES; COMMERCIAL 

UNION INSURANCE COMPANY; CONTINENTAL CASUALTY COMPANY; 

PACIFIC EMPLOYERS INSURANCE COMPANY; UNIGARD SECURITY 

INSURANCE COMPANY, 

 Third-Party Defendants

and 

 COMMERCIAL UNION INSURANCE COMPANY, 

 Third-Party Defendant and Fourth-Party Plaintiff

v. 

 MARYLAND CASUALTY COMPANY, 

 Fourth-Party Defendant and Fifth-Party Plaintiff

v. 

 AMERICAN CENTENNIAL INSURANCE COMPANY; EVANSTON 

INSURANCE COMPANY; FIRST STATE INSURANCE COMPANY; 

GIBRALTAR CASUALTY COMPANY; HARTFORD CASUALTY INSURANCE 

COMPANY; CERTAIN UNDERWRITERS AT LLOYD'S, LONDON AND 

THE LONDON MARKET COMPANIES; MIDLAND INSURANCE COMPANY; 

RELIANCE INSURANCE COMPANY; REPUBLIC INSURANCE COMPANY; 

ROYAL INDEMNITY COMPANY; TRANSPORT INDEMNITY, a/k/a 

MISSION AMERICAN INSURANCE COMPANY; TWIN CITY FIRE 

INSURANCE COMPANY, 

 Fifth-Party Defendants

 W.R. GRACE & CO.--CONN., Appellant
 ____________ 

 APPEAL FROM THE UNITED STATES DISTRICT COURT 

 FOR THE DISTRICT OF NEW JERSEY 

 (D.C. Civ. No. 89-cv-01031) 

 ____________ 

 Argued January 25, 1995 

 Before: MANSMANN, HUTCHINSON, and WEIS, Circuit Judges

 Filed July 5, l995 

 ____________ 

Anthony J. Marchetta, Esquire (ARGUED) 

Robert G. Rose, Esquire (ARGUED) 

Elizabeth J. Sher, Esquire 

PITNEY, HARDIN, KIPP & SZUCH 

P.O. Box 1945 

Morristown, NJ 07962-1945 

Attorneys for Appellant

Aubrey M. Daniel, III, Esquire (ARGUED) 

Paul Mogin, Esquire 

Evan J. Roth, Esquire 

Eric M. Braun, Esquire 

Dane H. Butswinkas, Esquire 

Stephen D. Sencer, Esquire 

WILLIAMS & CONNOLLY 

725 12th Street, N.W. 

Washington, DC 20005 

Robert M. Goodman, Esquire 

CARPENTER, BENNETT & MORRISSEY 

3 Gateway Center 

Newark, NJ 07102 

Attorneys for Appellee

 ____________ 

 OPINION OF THE COURT 

 ____________ 

WEIS, Circuit Judge. 
 In this case, the buyer of a chemical plant has sued 

the seller under state law and the Comprehensive Environmental 

Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 

U.S.C. §§ 9601-9675, for costs incurred in abating contamination 

at the site. The district court, applying federal common law, 

held that the sale agreement between the parties did not clearly 

relieve the seller from a duty to contribute and, after a trial, 

entered judgment for the buyer. We conclude that state law 

governs the interpretation of the contract and requires 

consideration of extrinsic evidence to resolve ambiguities. We 

agree with the district court that the parties are not entitled 

to a jury trial under CERCLA. Accordingly, we will vacate the 

judgment in favor of the buyer and remand for a hearing on the 

contractual issues. 

 In 1959, W.R. Grace & Co.--Conn. acquired a chemical 

manufacturing business in Fords, New Jersey. Grace owned and 

operated the plant until 1978 when it sold the operation to the 

straw-parties that, in turn, transferred the business to Hatco 

Corporation, whose sole shareholder was and is Alex Kaufman.1

 Kaufman had worked at the Fords site for over twenty 

years and served as the president of Grace's chemical division 

there from 1962 until the sale in 1978. At the time of the sale, 

the site was polluted by the manufacturing operations that had 

 

1. The parties have made no distinction between Hatco and its 

corporate predecessors to whom Grace had originally sold the 

plant. We will therefore treat Hatco as if it were the original 

purchaser. 
been carried on over the years. Additional contamination 

occurred during the subsequent years when Hatco owned the 

facility. 

 Under pressure from state authorities, Hatco undertook 

cleanup operations at the site and then sued for reimbursement of 

sums expended, alleging liability against Grace under CERCLA and 

the New Jersey Spill Compensation and Control Act ("Spill Act"), 

N.J. Stat. Ann. §§ 58:10-23.11 to -23.24. Contending that Hatco 

had assumed responsibility for cleanup in the 1978 agreement of 

sale, Grace moved for summary judgment. Hatco filed a crossmotion on the same issue. The district court denied Grace's 

motion on that issue and granted Hatco's, concluding that the 

agreement, as a matter of law, did not unambiguously shield Grace 

from Hatco's claim for reimbursement. 

 In a nonjury trial, the district court found both Grace 

and Hatco responsible under the New Jersey Spill Act and CERCLA. 

The court apportioned the cleanup costs between the two companies 

based on a number of factors and entered judgment in favor of 

Hatco and against Grace in the amount of $9,269,892.41, plus 

prejudgment interest of $2,919,885.75, for a total of 

$12,189,778.16. The proceedings before the district court have 

been chronicled in a series of published opinions.2

 

2. Hatco Corp. v. W.R. Grace & Co.--Conn., 859 F. Supp. 769 

(D.N.J. 1994); Hatco Corp. v. W.R. Grace & Co.--Conn., 849 F. 

Supp. 987 (D.N.J. 1994); Hatco Corp. v. W.R. Grace & Co.--Conn., 

849 F. Supp. 931 (D.N.J. 1994); Hatco Corp. v. W.R. Grace & Co.--

Conn., 836 F. Supp. 1049 (D.N.J. 1993), modified, 849 F. Supp. 

987 (D.N.J. 1994); Hatco Corp. v. W.R. Grace & Co.--Conn., 801 F. 

Supp. 1334 (D.N.J. 1992); Hatco Corp. v. W.R. Grace & Co.--Conn., 

801 F. Supp. 1309 (D.N.J. 1992). 
 Although unresolved claims between the parties remain 

(including potential insurance coverage), the court entered final 

judgment pursuant to Fed. R. Civ. P. 54(b). Grace has appealed, 

raising a number of issues, one of which we find is dispositive 

of this appeal. 

I. 

 Under CERCLA, 42 U.S.C. § 9607(e), "agreements to 

indemnify or hold harmless are enforceable between [private] 

parties but not against the government." Smith Land & 

Improvement Corp. v. Celotex Corp., 851 F.2d 86, 89 (3d Cir. 

1988); accord Beazer East, Inc. v. Mead Corp., 34 F.3d 206, 211 

(3d Cir. 1994), cert. denied, 115 S. Ct. 1696 (1995). Although 

these private agreements cannot nullify a party's underlying 

CERCLA liability, they are effective to shift the ultimate 

financial loss. Beazer, 34 F.3d at 211; Mardan Corp. v. C.G.C. 

Music, Ltd., 804 F.2d 1454, 1459 (9th Cir. 1986). 

 Grace contends that it is not required to reimburse 

Hatco for cleaning up the Fords site because in the agreement of 

sale between the parties, Hatco assumed the obligation of 

satisfying any environmental obligations. Following its earlier 

opinion in Mobay Corp. v. Allied-Signal, Inc., 761 F. Supp. 345 

(D.N.J. 1991), the district court held that in order to create a 

duty to indemnify under federal common law, "an unmistakable 

intent to do so must be expressed in unambiguous terms or be 

clearly implied." Hatco Corp. v. W.R. Grace & Co.--Conn., 801 F. 

Supp. 1309, 1318 (D.N.J. 1992). 
 However, some months after this appeal was taken, we 

held that agreements among private parties inter se addressing 

the allocation of responsibility for CERCLA claims are to be 

interpreted by incorporating state, not federal, law. Fisher 

Dev. Co. v. Boise Cascade Corp., 37 F.3d 104, 109 (3d Cir. 1994); 

Tippins, Inc. v. USX Corp., 37 F.3d 87, 91 n.4 (3d Cir. 1994); 

Beazer, 34 F.3d at 215. We have also decided that, given 

appropriate language, a pre-CERCLA agreement can be effective for 

claims arising after the statute became effective. Fisher, 37 

F.3d at 110; Beazer, 34 F.3d at 211. 

 The sale agreement before us provides that its terms 

are to be interpreted by the laws of New York. Under that 

state's law, the assignment of the burden of proof depends upon 

whether the agreement in question is characterized as a "release" 

or as an "indemnity" contract. Compare, e.g., Structural 

Painting Corp. v. Travelers Indemnity Co., 451 N.Y.S.2d 875, 876 

(N.Y. App. Div. 1982) (burden of establishing intent of parties 

is assigned to releasor) with Walsh v. Morse Diesel, Inc., 533 

N.Y.S.2d 80, 83 (N.Y. App. Div. 1988) (burden of establishing 

intent of parties is assigned to indemnitee). 

 In the case before us, the district court and the 

parties on appeal have used the terms "release" and "indemnity" 

interchangeably. Under the Mobay standard, perhaps that made no 

difference, but it is otherwise under Beazer. As we remarked in 

a CERCLA context, the effect of a release is to shield the 

beneficiary of that agreement from liability rather than to shift 
its responsibility to another as is the case of a contract to 

indemnify. Fisher, 37 F.3d at 112. 

 New York law specifies that an indemnity agreement be 

strictly construed and that a clear and unmistakable intent to 

indemnify be manifested in the contract. Heimbach v. 

Metropolitan Transp. Auth., 553 N.E.2d 242, 246 (N.Y. 1990). If 

the parties' intent is not clear from the writing, the court must 

consider extrinsic evidence. Commander Oil v. Advance Food Serv. 

Equip., 991 F.2d 49, 51 (2d Cir. 1993) (applying New York law); 

Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 430 (2d 

Cir. 1992) (applying New York law); General Mills, Inc. v. 

Filmtel Int'l Corp., 599 N.Y.S.2d 820, 822 (N.Y. App. Div. 1993). 

 However, under state law, the agreement here may be 

more accurately characterized as a release. "To constitute a 

release, a writing must contain an expression of a present 

intention to renounce a claim." Carpenter v. Machold, 447 

N.Y.S.2d 46, 46-47 (N.Y. App. Div. 1982) (citation omitted). 

"No particular form need be used in drafting a release . . . ." 

Pratt Plumbing & Heating, Inc. v. Mastropole, 414 N.Y.S.2d 783, 

784 (N.Y. App. Div. 1979). Indeed, "[a]ny words may be used, as 

long as they manifest the releasor's intent to discharge. The 

parties' intent will determine the scope of a release." Bank of 

Am. Nat'l Trust & Sav. Ass'n v. Gillaizeau, 766 F.2d 709, 713 (2d 

Cir. 1985) (applying New York law) (citations omitted). 

 Releases are governed by principles of contract law. 

Mangini v. McClurg, 249 N.E.2d 386, 389 (N.Y. 1969). Whether an 

agreement is ambiguous is a question of law for the court, W.W.W. 
Assocs., Inc. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990), 

to be determined by looking to the document as a whole rather 

than to sentences or clauses in isolation. Williams Press, Inc. 

v. State, 335 N.E.2d 299, 302 (N.Y. 1975). If an ambiguity in 

the document prevents a firm conclusion that an agreement is a 

release, extrinsic evidence may be introduced to resolve that 

question of fact. Gillaizeau, 766 F.2d at 713-15; see also Green 

v. Lake Placid 1980 Olympic Games, Inc., 538 N.Y.S.2d 82, 84 

(N.Y. App. Div. 1989) (circumstances sufficient to raise issue of 

fact as to parties' intent permit extrinsic evidence as aid to 

interpretation of a release). 

 A factor to be considered in determining whether an 

agreement is a "release" or an "indemnity" is the type of claim 

asserted in the litigation. "An action for the breach of an 

indemnity agreement does not arise until [a party] has suffered 

damage by reason of the breach." Eliseo v. Stan Margolin 

Assocs., Inc, 572 N.Y.S.2d 831, 831-32 (N.Y. App. Div. 1991) 

(citation omitted).3 

 In Bouton v. Litton Indus., Inc., 423 F.2d 643 (3d Cir. 

1970), we interpreted New York law in construing a contract for 

the sale of a business and distinguished between agreements of 

indemnity and those of assumption. We held that the language of 

 

3. Although a claim for indemnity does not arise until the prime 

obligation to pay has been established, some third-party actions 

may be commenced in the interest of judicial economy before they 

are technically ripe. Mars Assocs., Inc. v. New York City Educ. 

Constr. Fund, 513 N.Y.S.2d 125, 133 (N.Y. App. Div.), appeal 

dism'd as interlocutory, 514 N.E.2d 391 (N.Y. 1987). 
the contract was "that of assumption not of indemnification" and 

that "one who assumes a liability, as distinguished from one who 

agrees to indemnify against it, takes the obligation of the 

transferor unto himself . . . ." Id. at 651. 

 Although various canons may dictate that an ambiguous 

agreement is to be construed against one of the parties,4 such 

rules are of little consequence when the agreement in question 

has been "negotiated at arm's length between the representatives 

of two sophisticated business entities." Hogeland v. Sibley, 

Lindsay & Curr Co., 366 N.E.2d 263, 266 (N.Y. 1977). 

 The burden of proof rests on the releasor to establish 

that general language in the document was meant to be limited "or 

otherwise does not represent the intent of the parties." 

Mangini, 249 N.E.2d at 390; see also Olin Corp. v. Consolidated 

Aluminum Corp., 5 F.3d 10, 16 n.4 (2d Cir. 1993) (applying New 

York law); Mardan, 804 F.2d at 1462 (applying New York law). 

"[T]he burden of proof is not a necessary concomitant of the 

burden of pleading" an affirmative defense. Hill v. St. Clare's 

Hosp., 490 N.E.2d 823, 830 (N.Y. 1986) (citations omitted). 

"Thus the burden of proof as to the validity of a release is on 

the defendant who pleads it, but a releasor who seeks to limit 

 

4. For example, in New York, an ambiguous contract usually is 

construed most strongly against the drafter when the other party 

has had no voice in the preparation. Jacobson v. Sassower, 489 

N.E.2d 1283, 1284 (N.Y. 1985). By contrast, a release is 

construed most strongly against the releasor. Mt. Read Terminal, 

Inc. v. LeChase Constr. Corp., 396 N.Y.S.2d 959, 960 (N.Y. App. 

Div. 1977). 
the effect of a release because of a claimed mutual mistake has 

the burden of proof on that issue." Id. (citations omitted). 

II. 

 With this survey of New York law, we now turn our 

attention to the dispute at hand. The relevant language in the 

agreement is: "[Hatco] hereby assumes and agrees to . . . 

discharge" certain obligations of Grace. The agreement has been 

invoked by Grace, which has not expended any sums for cleanup and 

makes no claim for them. Hence, Grace has no basis for indemnity 

at this point, but in reality is seeking to shield itself from 

Hatco's claim for reimbursement. 

 Hatco is attempting to recover sums it spent to meet 

Grace's asserted liability. However, if the agreement is 

enforceable, it acts to relieve Grace from payment for matters 

that Hatco had taken over itself when the parties executed the 

assumption agreement in 1978. Indeed, as the district court 

pointed out, to the extent a document of that nature "prevents a 

purchaser from asserting a CERCLA claim against the seller, the 

agreement can be viewed as a `release.'" Hatco, 801 F. Supp. at 

1317. We are in accord with this comment of the district court, 

and we shall treat the agreement as a release. 

 In diversity cases, the burden of proof is a matter of 

substantive law, Blair v. Manhattan Life Ins. Co., 692 F.2d 296, 

299 (3d Cir. 1982), and is not controlled by Fed. R. Civ. P. 

8(c), which governs releases pled as affirmative defenses. See

Palmer v. Hoffman, 318 U.S. 109, 117 (1943). We recognize that 

the present dispute is not a diversity case, but because the 
parties here have chosen to have their agreement interpreted in 

accordance with New York law, we will apply that state's 

substantive law on the burden of proof. See Olin, 5 F.3d at 16 

n.4; Mardan, 804 F.2d at 1462. Because it contends that the 

terms of the agreement are unclear, we conclude that the proper 

course is to require Grace to bear the burden of producing 

evidence bearing on ambiguity. Hatco, though, as the releasor 

seeking to limit the effect of the release, bears the burden of 

persuasion on the effect of that agreement. 

 In reviewing the agreement, the district court used a 

very strict criterion articulated as simply, "No clear 

expression, no indemnity." Hatco, 801 F. Supp. at 1321. In 

other words, the district court opined that matters extrinsic to 

the agreement are irrelevant to the indemnity inquiry. However, 

when a writing is ambiguous, New York cases require the admission 

of extrinsic evidence to establish or disprove the intent of the 

parties. 

 The assumption agreement that Hatco executed 

specifically incorporated the sale agreement and read in 

pertinent part: 

 "1. [Hatco] hereby assumes and agrees 

to pay and discharge in due course all 

liabilities of [Grace] attributable to the 

Chemical Business listed in Exhibit A to this 

instrument, and [Hatco] hereby assumes and 

agrees to perform and fulfill all obligations 

of [Grace] attributable to the Chemical 

Business . . . . 

 2. [Hatco also] agrees to indemnify 

[Grace] and to save and hold [Grace] harmless 

from and against any and all damage, 

liability, [or] loss . . . arising out of or 
resulting from any failure by [Hatco] duly to 

perform or fulfill any agreement set forth in 

this instrument." 

 Liabilities and obligations of Grace attributable to 

the chemical business and assumed by Hatco were defined in 

relevant part as follows: 

 "(b) [Hatco assumes] the following 

obligations and liabilities existing on the 

date of the Closing, or in the case of those 

described in clause (iv), arising thereafter 

. . . : 

 (i) obligations with respect to sales 

orders accepted by the Chemical Business, 

other than Excluded Liabilities; 

 (ii) obligations for goods and services 

ordered by the Chemical Business, other than 

Excluded Liabilities; 

 (iii) liabilities and obligations with 

respect to capital expenditures described in 

any Request for Capital Appropriation 

approved in accordance with [Grace's] 

customary procedures by the management of the 

Chemical Business, or any management group of 

[Grace] senior thereto; 

 (iv) other obligations and liabilities 

arising in the ordinary course of the 

Chemical Business, whether prior to or after 

the date of the Closing, other than Excluded 

Liabilities; 

 (v) other liabilities and obligations 

of which Alex Kaufman or David G. Seabrook[5] 

has actual present personal knowledge and 

awareness at the date of the Sale Agreement, 

other than Excluded Liabilities; 

 

5. Seabrook served as a financial analyst at the Fords plant at 

one time and as one of the principal negotiators for Hatco in its 

purchase of the facility in 1978. 
 (vi) other liabilities and obligations 

which do not exceed $5,000 per item and 

$50,000 in the aggregate, other than Excluded 

Liabilities." (emphasis added). 

 The "Excluded Liabilities" that Hatco did not assume 

were listed in specific detail and fell into a number of 

categories, including two pending law suits, a potential personal 

injury claim, and the "[a]lleged pollution of Sling Tail Brook on 

or about May 31, 1977." 

 "Chemical business" was defined as "that business 

presently conducted by [Grace] comprising the manufacture and 

sale of plasticisers and synthetic lubricants . . . at Fords, New 

Jersey." The sale agreement tracked the language and 

specifications set out in the assumption agreement. 

A. 

 Grace contends that the pollution at the Fords site is 

included within the phrase "other obligations and liabilities 

arising in the ordinary course of the Chemical Business" and thus 

is within the scope of clause (iv). The district court rejected 

that argument and relied on Haynes v. Kleinewefers & Lembo Corp., 

921 F.2d 453 (2d Cir. 1990) for support. In that case, the Court 

of Appeals for the Second Circuit found that contractual 

provisions -- identical in some respects to those of the case at 

hand but in an indemnity setting -- were unambiguous. In Haynes, 

the purchaser of a business sought to recover amounts it had paid 

to settle the personal injury claim of its employee who was 

injured by a defective machine previously owned by the seller. 
The Court held that the purchaser was entitled to indemnity 

because the injury did not occur "in the ordinary course of 

business," a factor that the contractual language required as a 

prerequisite to absolving the seller. 

 The Haynes court, relying on the general rule of 

construction, ejusdem generis, concluded that "[f]ollowing an 

enumeration of particular classes `other' must be read as `other 

such like,' and includes only others of like kind and character." 

Id. at 457 (quoting Black's Law Dictionary 992 (5th ed. 1979)). 

The court thus construed the phrase "other obligations and 

liabilities arising in the ordinary course of business" as 

including matters similar to those previously enumerated in the 

same paragraph -- such as orders for sales that had been accepted 

by the seller, orders for goods or services, and capital 

expenditures. Id. at 458. Because those categories were quite 

dissimilar to an incident resulting in personal injury, the court 

held that the employee's claim was not included among the 

obligations that the buyer had undertaken. The language of the 

agreement "fail[ed] to establish clearly an unmistakable intent 

to assume an obligation to indemnify." Id. 

 Even assuming that personal injury to an employee does 

not arise in the ordinary course of business, we nevertheless 

differ with the district court's view that Haynes governs the 

case at hand. There are two crucial factors that set the present 

dispute apart from that in Haynes. First, disposal of waste in 

the operation of a chemical plant is very much a function of the 

day-to-day operation of the business. Second, unlike the lack of 
a relevant intimation of personal injury claims in the Haynes

agreement, in the one at hand, there is a specific and important 

reference to at least one environmental claim -- the Sling Tail 

Brook pollution incident. 

 If one substitutes the phrase "Alleged pollution of 

Sling Tail Brook on or about May 31, 1977" for the term "Excluded 

Liabilities" in every instance where that term appears in 

paragraph (b), the facially appealing argument that clause (iv) 

relates only to "accepted sales orders, ordered goods and 

services, and capital expenditures" falls apart. We conclude 

that the phrase "ordinary course of the Chemical Business," 

together with the reference to an environmental claim in the 

excluded liabilities section, creates an ambiguity as to the 

scope of the assumption agreement. Consequently, extrinsic 

evidence must be admitted to properly discern the intent of the 

parties. 

 To bolster its argument, Grace sought to show that 

during the negotiations for sale, Hatco attempted to include in 

the agreement express language excluding environmental liability, 

but that Grace refused to do so. Although the district court 

held that extrinsic evidence was not permissible, it nevertheless 

did review Grace's contention and reasoned that it "improperly 

[sought] to reverse the burden of expression of intent." Hatco, 

801 F. Supp. at 1321. The court concluded that the burden of 

manifesting a clear expression of intent must fall on Grace. Id. 

However, as we have set out in our discussion of New York law, 

the burden of demonstrating the intent of the parties falls on 
Hatco because it is the releasor attempting to limit the effect 

of the release. 

B. 

 The district court also reviewed Hatco's contention 

that the agreement's definition of "Chemical Business," in 

referring to "business presently conducted," would not include 

claims arising from manufacturing operations that had been 

discontinued some time before the sale. The court remarked that 

although it agreed with Hatco's position on the point, "Grace's 

arguments at best lead to the conclusion that the meaning of 

`Chemical Business' is ambiguous . . . ." Id. We agree that an 

ambiguity exists, and on this point also, extrinsic evidence 

should have been admitted. 

C. 

 Clause (v) provides that Hatco would assume "other 

liabilities and obligations of which Alex Kaufman or David G. 

Seabrook has actual present personal knowledge and awareness at 

the date of the Sale Agreement." The extent of those 

individuals' actual knowledge is disputed, but there seems to be 

little doubt that they were both aware of actual or potential 

environmental problems in 1978. As noted earlier, Hatco 

unsuccessfully sought to insert in the agreement specific 

disclaimers of liability for such risks. 

 The district court concluded that CERCLA liabilities 

did not exist at the time of the sale and, therefore, clause (v) 

did not establish that Hatco had assumed them. As the court 

viewed the situation, "liability" necessarily indicated "a legal 
relationship between the liable party and the party to whom it is 

liable." Id. at 1322. According to the court, "No such legal 

relationship existed . . . until [the] enactment of CERCLA." Id. 

Thus, the existence of facts necessary for CERCLA liability in 

the court's view was not "sufficient to constitute knowledge of 

`liabilities.'" Id. 

 This reasoning is not consistent with the court's 

earlier pronouncement that a broad assumption of environmental 

liability pre-dating CERCLA would be effective for post-CERCLA 

claims. Id. at 1317-18. That conclusion was clearly correct. 

See Fisher, 37 F.3d at 110-11 n.1; Beazer, 34 F.3d at 211; 

Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d 303, 309-10 

(3d Cir. 1985).6 In those cases, as well as in the one here, 

 

6. See also Joslyn Mfg. Co. v. Koppers Co., 40 F.3d 750, 754-55 

(5th Cir. 1994) (two leases dated 1942 and 1949 were sufficiently 

broad so as to transfer responsibility for cleanup costs, "even 

though environmental liability . . . was not specifically 

contemplated at the time of contracting") (applying Louisiana 

law); Kerr-McGee Chem. Corp. v. Lefton Iron & Metal Co., 14 F.3d 

321, 326-27 (7th Cir. 1994) (1972 agreement was sufficiently 

broad so as to transfer responsibility for cleanup costs, 

agreement covered claims of "pollution or nuisance," and state 

environmental statute was enacted two years before the parties 

contracted) (applying Illinois law); Olin, 5 F.3d at 15-16 (1974 

agreement was sufficiently broad so as to transfer responsibility 

for cleanup costs "even to future unknown liabilities") (applying 

New York law); John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401, 

407 (1st Cir. 1993) (1959 agreement was narrow so as to preclude 

transfer of responsibility for cleanup costs because agreement 

only related to "existing" liabilities, but apparently made no 

mention of environmental liabilities) (applying Massachusetts 

law); United States v. Hardage, 985 F.2d 1427, 1435 (10th Cir. 

1993) (1972 and 1977 agreements to transport hazardous waste were 

sufficiently broad so as to transfer responsibility for cleanup 

costs, and yet sufficiently narrow so as to preclude crossindemnification) (applying Oklahoma law); AM Int'l, Inc. v. 

International Forging Equip. Corp., 982 F.2d 989, 997 (6th Cir. 

1993) (1979 agreement, but remand was necessary to determine 
"[n]o such legal relationship existed . . . until [the] enactment 

of CERCLA," but despite that chronology, pre-CERCLA agreements 

were held effective. 

 The district court also commented that "Grace seems to 

forget that the CERCLA liabilities in issue were its liabilities 

to begin with." Hatco, 801 F. Supp. at 1321. Although these 

environmental liabilities were obviously attributable to Grace 

before the sale in 1978, we find the court's statement to be 

irreconcilable with its later conclusion that these identical 

liabilities were not "existing" on the closing date. See id. at 

1322. Indeed, the first step in determining whether Hatco 

assumed Grace's liabilities is whether Grace had any liabilities 

to be assumed. 

 The court similarly remarked that "[w]ithout a 

statutory or common law basis to impose responsibility, . . . it 

is too far of a stretch to characterize the existence of the 

facts as a `liability.'" Id. But Grace had already incurred 

potential environmental liabilities under state and federal law 

before the closing date of the 1978 assumption agreement.7 Grace 

(..continued) 

whether parties contemplated environmental liabilities despite 

the fact that the agreement apparently made no mention of 

environmental liabilities) (applying Ohio law); Polaroid Corp. v. 

Rollins Envtl. Servs. (NJ), Inc., 624 N.E.2d 959, 966 (Mass. 

1993) (1976 agreement was sufficiently broad so as to transfer 

responsibility for cleanup costs, and "the parties were aware of 

changing [environmental] regulations and strict liability was a 

tenable claim") (applying New Jersey law). 

7. The parties both limit their discussion of environmental 

liabilities to those arising under New Jersey as well as federal 

law. 
was responsible under state common-law and statutory provisions 

for the abatement of the environmental harm to the Fords site 

resulting from past hazardous waste disposal practices. In 

State, Dep't of Envtl. Protection v. Ventron Corp., 468 A.2d 150, 

163 (N.J. 1983), the Supreme Court of New Jersey pointed out that 

"the Spill Act [did] not so much change substantive liability as 

it establishe[d] new remedies for activities recognized as 

tortious both under prior statutes and the common law." See also

Leo v. Kerr-McGee Chem. Corp., 37 F.3d 96, 101 & n.8 (3d Cir. 

1994) (citing T & E Indus., Inc. v. Safety Light Corp., 587 A.2d 

1249 (N.J. 1991)); Polaroid Corp. v. Rollins Envtl. Servs. (NJ), 

Inc., 624 N.E.2d 959, 965-67 (Mass. 1993) (applying New Jersey 

law). Because the waste disposal practices at the Fords site 

threatened the public health and the environment by leaching 

chemicals into potential sources of drinking water, corresponding 

responsibility for cleanup existed on the date of closing under 

federal theories as well. See, e.g., United States v. Price, 688 

F.2d 204, 214 (3d Cir. 1982); United States v. Solvents Recovery 

Serv. of New England, 496 F. Supp. 1127 (D. Conn. 1980). 

 The Mardan court's view of New York law is also 

pertinent: "[I]f the injury is known, and the mistake [of the 

parties] is merely as to the consequence, future course, or 

sequelae of a known injury, then the release will stand." 

Mardan, 804 F.2d at 1463 (internal quotation omitted) (applying 

New York law); see also Purolator Prods. Corp. v. Allied-Signal, 

Inc., 772 F. Supp. 124, 137 (W.D.N.Y. 1991) (applying New York 

law). In the circumstances here, it is of no practical 
importance whether Grace's obligation to clean up the site would 

be imposed by CERCLA, another federal statute, the common law, or 

a New Jersey statute. In any event, the process would require 

the expenditure of substantial sums of money, and it is that 

reimbursement which Hatco seeks here. We, therefore, do not 

accept the district court's restrictive view of the term 

"liabilities" as found in paragraph (b) of Exhibit A to the 

assumption agreement. 

 The circumstances of the sale from Grace to Hatco are 

unique in that Kaufman, the owner of Hatco, had been in charge of 

Grace's activities at the Fords facility for many years before 

the transfer of ownership. It may be an exaggeration, but it 

makes the point to say that the buyer knew more about the plant 

and its operations than did the seller. 

 Kaufman's knowledge as of the closing date was 

discussed at length by the district court in its findings of fact 

after the trial. The court found that Kaufman had been highly 

regarded by Grace as an organic chemist. Hatco v. W.R. Grace & 

Co.--Conn., 836 F. Supp. 1049, 1077 (D.N.J. 1993). He had been 

employed by Grace's predecessor in a number of capacities and, at 

one point, had been in the research and development laboratory 

that was responsible for product developments and improvements in 

the manufacturing processes. He became plant manager and 

acquired familiarity with waste disposal practices at the 

facility. In 1960, at his request, an engineering expert 

submitted a report on the waste water disposal practices at 

Fords. 
 In 1962, Kaufman became president of the division that 

operated the facility and began to spend more of his time 

acquiring new business, rather than taking a particularly active 

part in running the day-to-day operation of the Fords plant. Id. 

at 1078. However, he was regularly informed of any contacts with 

governmental agencies on environmental matters, other 

environmental problems at the facility, and the plant's pollution 

control expenditures. Id. at 1079. He received monthly reports 

on whether the Grace chemical division had been involved in any 

government proceedings pertaining to enforcement of environmental 

laws. 

 As of 1978 at the latest, Kaufman was aware of the 

increasing activity of governmental agencies in coping with the 

environmental consequences of past and present chemical 

manufacturing activities. He was kept advised of impending 

legislation, including such federal statutes as the Toxic 

Substances Control Act, 15 U.S.C. §§ 2601-2629, and understood 

that those involved in the chemical business had to be concerned 

about environmental regulations. 

 These findings offer compelling reasons for determining 

the extent of Kaufman's knowledge at the time of the closing. 

Seabrook also had worked for some time at the plant before its 

sale to Hatco, and his knowledge, too, is a crucial issue. 

Without further proceedings to adequately develop those facts, 

the court will be unable to decide the meaning of clause (v). 

D. 
 To resolve the ambiguities that we have discussed, it 

will be necessary that the matter be remanded to the district 

court so that it may conduct a hearing at which extrinsic 

evidence may be produced in order to determine the full scope and 

effect of the assumption agreement. However, before concluding, 

we must determine whether this case must be tried to a jury. 

III. 

 Grace contends that it was entitled to a jury trial on 

its CERCLA claims. The procedural aspects of the jury trial 

issue in this record are somewhat blurred. Rather than exploring 

the complexities, we shall assume that Grace was entitled to rely 

on the jury trial demand originally made by Hatco on the CERCLA 

claims.8 The district court denied Grace's requests, concluding 

that cost-recovery actions and claims for contribution under 

CERCLA, 42 U.S.C. §§ 9607(a)(4) and 9613, are equitable in 

nature. Hatco v. W.R. Grace & Co.--Conn., 859 F. Supp. 769, 774 

(D.N.J. 1994). The district court ruled that cost-recovery suits 

are actions for restitution and are not triable to a jury. 

 42 U.S.C. § 9607(a)(1)(B) provides that the owner or 

operator of a facility is liable for "necessary costs of response 

incurred by any other person consistent with the national 

 

8. It is questionable whether Grace's demand for a jury trial on 

its "counterclaim" was appropriate. The assumption agreement is 

properly characterized as a release that should have been pleaded 

as an affirmative defense. It is not a separate claim. See

Owens-Illinois, Inc. v. Lake Shore Land Co., 610 F.2d 1185 (3d 

Cir. 1979). See also Fed. R. Civ. P. 8(c) (a defense improperly 

pleaded as a counterclaim may be treated by the court "as if 

there had been a proper designation"). 
contingency plan." Judicial construction of this section 

originally created an implied right of contribution. See Key 

Tronic Corp. v. United States, 114 S. Ct. 1960, 1965 (1994). 

However, a subsequent amendment to CERCLA (SARA), 42 U.S.C. 

§ 9613(f)(1) provides that "[a]ny person may seek contribution 

from any other person who is liable or potentially liable under 

section 9607(a) . . . during or following any civil action under 

[that section]." The court is permitted to allocate response 

costs under section 9613(f)(1) "using such equitable factors as 

the court determines are appropriate." As the Supreme Court 

said, sections 9607 and 9613 provide "similar and somewhat 

overlapping remed[ies]." Key Tronic, 114 S. Ct. at 1966. 

 In United States v. Alcan Aluminum Corp., 964 F.2d 252 

(3d Cir. 1992), we determined that under section 9607, an alleged 

responsible party is entitled to prove that the environmental 

harm is divisible and thus is reflected in the degree of 

liability. On the other hand, section 9613(f)(1) allows more 

discretion to the court in allocating response costs, and factors 

other than liability may enter into apportionment. Id. at 270 

n.29; see also United States v. Colorado & E. R.R., 50 F.3d 1530, 

1534-38 (10th Cir. 1995) (§ 9607 establishes joint and several 

responsibility on a strict liability basis; § 9613 allocates 

amounts due on equitable considerations). Both sections are 

intertwined, and there are practical difficulties with making a 

distinction between them that would justify differing rulings on 

the availability of a jury trial. 
 As a general rule, the right to a jury trial is 

protected by the Seventh Amendment when the claim is a legal one, 

but not if it is equitable. In establishing new statutory 

remedies, Congress may provide for jury trials in addition to 

those required by the Constitution. Tull v. United States, 481 

U.S. 412, 417 n.3 (1987); Curtis v. Loether, 415 U.S. 189, 191-92 

(1974). The determination of which form of trial is applicable 

to a specific claim, however, is not always a simple one, 

particularly when the remedy is statutory and Congress has not 

stated its intention. See the discussion in Crocker v. Piedmont 

Aviation, Inc., 49 F.3d 735, 744-49 (D.C. Cir. 1995). 

A. 

 The only appellate court ruling on the right to a jury 

trial in CERCLA cases is United States v. Northeastern 

Pharmaceutical & Chem. Co., 810 F.2d 726 (8th Cir. 1987). There, 

the Court of Appeals determined that a jury trial was not 

permitted in an action brought under section 9607 by the 

government against several individuals, alleging them to be 

jointly and severally liable for response costs. Id. at 749. 

The Court observed that the government was asking for restitution 

of amounts that it had expended and as such was seeking a form of 

equitable relief. 

 Restitution is based on substantive liability having 

its origins in unjust enrichment or the restoration to a party in 

kind of his lost property or its proceeds. Crocker, 49 F.3d at 

747; see also Porter v. Warner Holding Co., 328 U.S. 395, 402 

(1946) (restitution is within the traditional equitable powers of 
the court); Restatement of Restitution § 115. Northeastern 

Pharmaceutical's holding has been widely accepted, and Grace does 

not take issue with it on this appeal. We are in agreement that 

a jury trial is not available in a claim brought under section 

9607. 

B. 

 Whether a right to a jury trial exists in a claim 

grounded in section 9613(f)(1) has not been decided by any 

appellate court, but the district courts have reached conflicting 

results on the issue.9 The statute contains no references to the 

right to juries. One district court, after performing an 

exhaustive search, found no specific comments in the legislative 

history. See American Cyanamid Co. v. King Indus., Inc., 814 F. 

Supp. 209, 212-13 (D.R.I. 1993). 

 We note that one statement in the Report of the House 

Committee on the Judiciary accompanying SARA tends to disclaim 

any congressional intent to have juries decide § 9613 matters. 

 "New subsection [9613(f)(1)] of CERCLA 

. . . ratifies current judicial decisions 

that the courts may use their equitable 

powers to apportion the costs of clean-up 

among the various responsible parties 

involved with the site. Courts are to 

 

9. Compare American Cyanamid Co. v. King Indus., Inc., 814 F. 

Supp. 209, 213-15 (D.R.I. 1993); Wehner v. Syntex Corp., 682 F. 

Supp. 39, 39-40 (N.D. Cal. 1987) with United States v. Shaner, 

No. 85-1372, 1992 WL 154618, at **2-4 (E.D. Pa. June 15, 1992) 

(unpublished opinion). 
resolve claims for apportionment on a caseby-case basis pursuant to Federal common law, 

taking relevant equitable considerations into 

account. Thus, after questions of liability 

and remedy have been resolved, courts may 

consider any criteria relevant to determining 

whether there should be an apportionment." 

131 Cong. Rec. 34,645 (1985); see also H.R. 253(III), 99th Cong., 

2d Sess. 19 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 3038, 

3041-42. 

 Finding no clear indication of congressional intent to 

grant a jury trial in either the statute or the legislative 

history, we must therefore look to the constitutional guarantee 

in the Seventh Amendment. The Supreme Court has supplied the 

formula for this largely historical review, acknowledging its 

difficulty. "`First, we compare the statutory action to 18thcentury actions brought in the courts of England prior to the 

merger of the courts of law and equity. Second, we examine the 

remedy sought and determine whether it is legal or equitable in 

nature.'" Wooddell v. International Bhd. of Electrical Workers, 

Local 71, 502 U.S. 93, 97 (1991) (quoting Chauffeurs, Teamsters & 

Helpers Local No. 391 v. Terry, 494 U.S. 558, 565 (1990)). 

 In In re Japanese Elec. Prods. Antitrust Litig., 631 

F.2d 1069 (3d Cir. 1980), we were favored with an elaborate 

historical presentation by the parties. After considering the 

various arguments, we concluded that courts determine "the legal 
or equitable nature of a suit by comparing it with suits actually 

tried in courts of common law or equity." Id. at 1083. 

 The parties here have not briefed the historical phase 

of the inquiry, and we disclaim an exhaustive survey of our own 

on whether contribution in the 18th century was an equitable or 

legal remedy. Our research, however, indicates that during the 

relevant period, contribution was an equitable remedy. In 

reviewing various texts, we have found Joseph Story's 

Commentaries on Equity Jurisprudence (2d ed. 1839) to be the most 

persuasive. Conceding that, in a few cases, a common-law remedy 

of contribution existed, the author states that the 

 "more beneficial exercise of Equity 

Jurisdiction, in cases of apportionment and 

contribution, is in cases, where . . . 

charges on real estate . . . are actually 

paid off by some of the parties in interest. 

. . . In most cases of this sort there is no 

remedy at law, from the extreme uncertainty 

of ascertaining the relative proportions, 

which different persons, having interests of 

a very different nature, quality, and 

duration, in the subject-matter, ought to 

pay." 

Id. § 483, at 461 (footnote omitted). That comment is 

particularly applicable in CERCLA claims. 

 Justice Story also referred to opinions written by the 

highly regarded authority on equity, Chancellor Kent of New York. 
Id. § 469, at 449 n.2. In Cheesebrough v. Millard, 1 Johns. Ch. 

409, 415 (N.Y. Ch. 1815), Kent wrote that "[t]he object of the 

principle of contribution is equality in the support of a common 

burden . . . ." Similarly, in Campbell v. Mesier & Dunstan, 4 

Johns. Ch. 334, 338 (N.Y. Ch. 1820), he observed that "[t]he 

doctrine of contribution is founded, not on contract, but on the 

principle, that equality of burden, as to a common right, is 

equity . . . ." 

 Chancellor Kent cited Lord Chief Baron Eyre's opinion 

in Dering v. Earl of Winchelsea, 1 Cox's Ch. Cas. 318, 321, 29 

Eng. Rep. 1184, 1185, 2 Bos. & Pull. 270 (Ex. 1787), where it is 

said, "we shall find that contribution is bottomed and fixed on 

general principles of justice, and does not spring from contract 

. . . . [T]he doctrine of equality operates more effectually in 

this Court, than in a Court of law." See also Stevens v. Cooper, 

1 Johns. Ch. 425, 430 (N.Y. Ch. 1815) ("It is a doctrine well 

established, that when land is charged with a burden, the charge 

ought to be equal, and one part ought not to bear more than its 

due proportion; and equity will preserve this equality by 

compelling the owner of each part to a just contribution.") 

(citing Harbert's Case, 3 Coke's Rep. 14, 76 Eng. Rep. 647 (Ex. 

1584); Harris v. Ingledew, 3 P. Wms. 91, 24 Eng. Rep. 981 (M.R. 

1730)); John Adams, The Doctrine of Equity 219-25 (1st ed. 

1850).10

 

10. As the Supreme Court noted in Northwest Airlines, Inc. v. 

Transport Workers Union of Am., AFL-CIO, 451 U.S. 77, 86 n.16 

(1981), the non-contribution rule of the common law is generally 

traced to Merryweather v. Nixan, 8 Term. Rep. 186, 101 Eng. Rep. 
 Although John N. Pomeroy's Treatise on Equity 

Jurisprudence § 1418, at 468 n.1 (1st ed. 1883) states that 

"jurisdiction at law has become well settled which is sufficient 

in all ordinary cases of suretyship or joint liability," he 

acknowledges that "[t]he equitable jurisdiction still remains and 

has some most important advantages." That commentary, however, 

was written several decades after that of Justice Story. As 

George E. Palmer explains in his work The Law of Restitution 

§ 1.5, at 31 (1978), enforcement of contribution claims by suits 

at law did not appear until early in the nineteenth century. 

 The nature of CERCLA claims has been noted by us in 

passing, "The contribution proceeding is an equitable one in 

which a court is permitted to allocate response costs based on 

factors it deems appropriate." Alcan, 964 F.2d at 270 n.29. In 

another context we remarked, "[T]he right of contribution from 

others is grounded in equity." Pacific Indem. Co. v. Linn, 766 

F.2d 754, 769 (3d Cir. 1985). 

 After our review of the more important authorities, we 

are of the belief that a claim for contribution of the nature 

presented in the case before us would have been entertained by a 

chancellor in equity in 1791, but not by a court at law. That 

determination is not dispositive in and of itself because the 

claims here are brought pursuant to the terms of a statute. As 

(..continued) 

1337 (K.B. 1799). Because most American courts understood that 

case as a general proscription of contribution, the early common 

law in this country prohibited contribution among joint 

tortfeasors. 
the Supreme Court has observed, where Congress provides for 

enforcement of statutory rights in a civil suit, "a jury trial 

must be available if the action involves rights and remedies of 

the sort typically enforced in an action at law." Curtis, 415 

U.S. at 195. But certainly the fact that the remedy was one 

typically granted only in equity argues against a statutory 

remedy being considered as one at law.11

 In Rex v. CIA. Pervana de Vapores, S.A., 660 F.2d 61, 

65 (3d Cir. 1981), we observed that the Seventh Amendment issue 

presented in a case must be considered in the context of the 

congressional schema in which it arises. As noted earlier, 

CERCLA's language and legislative history lack any evidence of 

intent to have the claims determined by a jury. To the contrary, 

references to equity and equitable factors do appear, and we may 

assume that Congress was well aware that juries are not a feature 

of equitable trials. It is entirely reasonable, therefore, to 

believe that Congress intended to design a remedy that would 

track traditional equity practice. Cf. Cox v. Keystone Carbon 

Co., 861 F.2d 390, 393 (3d Cir. 1988) (ERISA case) ("[W]e can 

infer that Congress knew the significance of the term equitable 

and intended that no jury be available on demand."); see also

 

11. Lord Devlin argues that the test should be whether a 

chancellor in 1791 would have exercised the power of equity to 

hear the case, not the more narrow inquiry of whether precedent 

demonstrated that such suits had actually been heard. See

Patrick Devlin, Equity, Due Process and the Seventh Amendment: A 

Commentary on the Zenith Case, 81 Mich. L. Rev. 1571 (1983). It 

would seem that Lord Devlin's approach, unfortunately, would lead 

to even more uncertainty in determining the bounds of the Seventh 

Amendment. 
Pane v. RCA Corp., 868 F.2d 631, 637 (3d Cir. 1989) (ERISA case). 

 In the case at hand, the district court reasoned that 

because the precipitating claims under section 9607 are primarily 

equitable in nature, a claim for contribution under section 

9613(f)(1) is also essentially equitable. Hatco, 859 F. Supp. at 

775. The court further relied on the fact that section 

9613(f)(1) requires a court to apportion the costs between the 

parties "using such equitable factors as the court determines are 

appropriate." Id. at 775 n.3. 

 We concur with the district court's reasoning. 

Particularly, we are impressed with the references in section 

9613(f)(1) to "equitable" factors. This is an indication that 

the statutory action for contribution is to be a flexible remedy 

that may be based on circumstances not cognizable in nor readily 

adaptable to an action at law. In sum, we are persuaded that an 

action for contribution under section 9613(f)(1) is essentially 

equitable. Accord United States v. R.W. Meyer, Inc., 932 F.2d 

568, 572 (6th Cir. 1991). Accordingly, we hold that in suits 

brought under 42 U.S.C. §§ 9607 or 9613(f)(1), the parties are 

not entitled to a jury trial. 

IV. 

 The parties have raised a number of other issues not 

related to the 1978 assumption agreement. We decline to address 

them at this juncture because the ultimate resolution of the 

assumption question could be outcome-determinative and our 

opinion on those other issues would be merely advisory. 

Accordingly, we will vacate the judgment of the district court 
and will remand for further proceedings consistent with this 

opinion. 

 Each party to bear its own costs. 

TO THE CLERK: 

 Please file the foregoing Opinion. 

 ____________________________ 

 Circuit Judge 
ADDENDUM 

 The assumption agreement between Grace and Hatco read 

as follows: 

 "HATCO CHEMICAL

 BUYER'S ASSUMPTION AGREEMENT

 . . . [P]ursuant to the Sale Agreement and 

for valuable consideration, the receipt of 

which is hereby acknowledged, 

 1. [Hatco] hereby assumes and agrees to 

pay and discharge in due course all 

liabilities of [Grace] attributable to the 

Chemical Business listed in Exhibit A to this 

instrument, and [Hatco] hereby assumes and 

agrees to perform and fulfill all obligations 

of [Grace] attributable to the Chemical 

Business listed in Exhibit A to this 

instrument. As used in this instrument, 

"Chemical Business" means that business 

presently conducted by the Chemical Division 

of the Hatco Group of [Grace] comprising the 

manufacture and sale of plasticisers and 

synthetic lubricants at a principal 

manufacturing location at Fords, New Jersey. 

For purposes of this instrument, "Chemical 

Business" does not include the business of 

purchase and resale of oxo-alcohols conducted 

by such Chemical Division, or any interest of 

[Grace] in Grace Petro-chemicals, Inc. or its 

undivided one-half interest in Oxochem 

Enterprise. 

 2. [Hatco] hereby agrees to indemnify 

[Grace] and to save and hold [Grace] harmless 

from and against any and all damage, 

liability, loss, cost or deficiency 

(including, but not limited to, reasonable 

attorneys' fees and other costs and expenses 

incident to proceedings or investigations of 

the defense of any claim) arising out of or 

resulting from any failure by [Hatco] duly to 

perform or fullfill any agreement set forth 

in this instrument." 
 Exhibit A of the assumption agreement provided the 

following: 

 "Assumed Liabilities and Obligations [By Hatco]

 The following liabilities and obligations of 

[Grace] attributable to the Chemical 

Business: 

 (a) liabilities of the Hatco Chemical 

Division of [Grace] reflected in, reserved 

against or noted on the Closing Net 

Statement, other than Excluded Liabilities; 

 and 

 (b) the following obligations and 

liabilities existing on the date of the 

Closing, or in the case of those described in 

clause (iv), arising thereafter, whether or 

not they are reflected in, reserved against 

or noted on the Closing Net Statement: 

 (i) obligations with respect to sales 

orders accepted by the Chemical Business, 

other than Excluded Liabilities; 

 (ii) obligations for goods and services 

ordered by the Chemical Business, other than 

Excluded Liabilities; 

 (iii) liabilities and obligations with 

respect to capital expenditures described in 

any Request for Capital Appropriation 

approved in accordance with [Grace's] 

customary procedures by the management of the 

Chemical Business, or any management group of 

[Grace] senior thereto; 

 (iv) other obligations and liabilities 

arising in the ordinary course of the 

Chemical Business, whether prior to or after 

the date of the Closing, other than Excluded 

Liabilities; 

 (v) other liabilities and obligations 

of which Alex Kaufman or David G. Seabrook 

has actual present personal knowledge and 

awareness at the date of the Sale Agreement, 

other than Excluded Liabilities; 

 (vi) other liabilities and obligations 

which do not exceed $5,000 per item and 

$50,000 in the aggregate, other than Excluded 

Liabilities. 
 All terms defined in the Sale Agreement 

have the same meaning in this agreement. The 

following are the Excluded Liabilities, as 

defined in the Sale Agreement: 

 `Excluded Liabilities' means the 

following liabilities and obligations of 

[Grace] attributable to the Chemical Business 

for all periods ending on or prior to the 

date of the Closing: (a) all liabilities for 

taxes, including without limitation income 

taxes, (except federal, state and local 

payroll and withholding taxes for the pay 

period which includes the date of the 

Closing, to the extent not paid by [Grace], 

provided an accrual in such amount shall be 

made in the Closing Net Amount) (b) notes and 

accounts payable to other groups, divisions 

or other units or subsidiaries or affiliates 

of [Grace], other than trade accounts payable 

arising from the purchase of goods, (c) 

liabilities against which [Grace] is 

effectively insured, without regard to any 

applicable deductible amounts, (d) product 

liabilities, including without limitation 

liabilities for personal injury, with respect 

to merchandise sold or shipped prior to the 

date of the Closing, (e) liabilities and 

obligations arising from claims asserted by 

any employee or former employee with respect 

to injury, sickness, disease or death or 

under any disability of workmen's 

compensation laws, (f) liabilities for which 

the corresponding assets are prepaid expenses 

and deferred charges, the benefit of which 

cannot be effectively transferred to [Hatco], 

(g) liabilities and obligations arising from 

claims asserted by any of the former owners 

or managers of any predecessor company, any 

portion of the business or assets of which is 

included in the Chemical Business or the 

Chemical Assets, and (h) the liabilities 

specifically described in the schedule to 

this Exhibit." 
 The schedule to Exhibit A of the assumption agreement 

provided the following: 

 "Excluded Liabilities [i.e., Those Retained By Grace]

 1. Alleged pollution of Sling Tail Brook on 

or about May 31, 1977. 

 2. Canton v. Buffalo Tank, et al., Superior 

Court of New Jersey, Middlessex County, 

Docket L-4354-77. 

 3. Potential claim by Norman Bresee for 

personal injury incurred at the Chemical 

plant in 1976. 

 4. Liloia v. E.I. duPont de Nemours & Co., 

Inc., et al., Superior Court of New Jersey, 

Essex County, Docket L-44267-76." 
Hatco Corp. v. W.R. Grace & Co.--Conn.

No. 94-5276 

HUTCHINSON, J., Concurring and Dissenting. 

 I concur in the decision to vacate the district court's 

judgment in favor of Hatco on its claim for contribution from 

Grace. I agree that the district court incorrectly applied 

federal rather than New York law to interpret the meaning of the 

ambiguous provisions in the sales agreement governing Hatco's 

responsibility for liabilities arising out of Grace's prior 

operation of its "chemical business" on the real property Hatco 

purchased. See Beazer East, Inc. v. Mead Corp., 34 F.3d 206 (3d 

Cir. 1994), cert. denied, 115 S. Ct. 1696 (1995). I respectfully 

disagree, however, with the Court's conclusion that New York law 

requires the applicable provisions of the sales agreement to be 

construed as a release rather than a promise to indemnify. I 

believe that these provisions are also ambiguous as to whether 

the parties intended to release or indemnify Grace against such 

liabilities. Indeed, Hatco's release is Grace's indemnity. 

Thus, I believe their characterization as a release or an 

indemnity is a question of fact that should be decided by the 

district court in the first instance. 

 New York law is not a model of clarity in 

distinguishing releases from agreements to indemnify. Compare

Structural Painting Corp. v. Travelers Indem. Co., 451 N.Y.S.2d 

875, 876 (N.Y. App. Div. 1982) with Walsh v. Morse Diesel, Inc., 

533 N.Y.S.2d 80, 83 (N.Y. App. Div. 1988). In New York, as 
elsewhere, a polluter seeking indemnity against the cost of 

abating its pollution must establish an unmistakable intent to 

indemnify as well as the extent of the indemnification by clear 

evidence. Heinbach v. Metropolitan Transp. Auth., 553 N.E.2d 

242, 246 (N.Y. 1990) (citations omitted). New York law, on the 

other hand, allows a releasee to establish intent to release by a 

mere "expression of a present intention to renounce a claim." 

Carpenter v. Machold, 447 N.Y.S.2d 46, 47 (N.Y. App. Div. 1982) 

(citation omitted). Moreover, once a document construed as a 

release is held to be ambiguous, the burden of proving the kinds 

of harm that are not subject to the release shifts to the 

releasor. Structural Painting, 451 N.Y.S.2d at 876. 

 Unfortunately, the uncertainty that arises in applying 

these distinctions to disputes among two or more polluters of a 

single site over payment of the cost of abating contamination 

each has contributed to seems to me likely to increase the 

already staggering transactional costs of CERCLA litigation. I 

am especially reluctant to hold, as a matter of law, that New 

York would construe an agreement like the one before us as a 

release if, as the Court indicates, it introduces the factor of 

who acts first into the process of distinguishing agreements of 

release from promises to indemnify. See Majority Op. at 11. 

This could import into CERCLA litigation an incentive for a 

polluter to delay the start of clean up lest this publicly 

responsible act may prove privately costly. Thus, I believe 

CERCLA's goal of expeditious environmental cleanup will be better 

served by interpreting provisions in ambiguous agreements for 
allocation of the cost of abating pollution among polluters as 

agreements of indemnity rather than agreements of release, when 

applicable local law makes that possible. 

 Accordingly, though I concur in the Court's mandate 

remanding this case to the district court for reconsideration of 

Hatco's claim for contribution under New York rather than federal 

common law, I would also leave the district court free to decide, 

in the first instance, whether the parties intended an agreement 

of release or one of indemnity.12

 

12. I agree with the Court that additional evidence may be 

needed on remand concerning Kaufman's and Seabrook's knowledge of 

the extent to which the site was polluted before the sale. In 

addition, I note my full agreement with the scholarly analysis 

the Court adduces to support its rejection of Grace's contention 

that it has a Seventh Amendment constitutional right to a jury 

trial on its CERCLA claims.