### 1998 D e c i sion s O p inion s of the U nit e d

S t a t e s C our t of Appe al s for the Thir d C ir c uit

7-22-1998 

# K opp e rs C o I nc v

. Aetn a C slt y & S ur et y

P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 97-3432

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w

. v i l l a no v a

. e du/thir dc ir c uit_1998

Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no v a

U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. I t h as be e n a c c e pt e d for inclusion in 1998 D e c i sion s b y a n a uthor i z e d a dmini s tr a t or of V i l l a no v a

U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. F or mor e infor m a t ion, p le as e c on t a ct Be n j a min

. C a rl s on@l a

w

. v i l l a no v a

. e du

. 

### R e c omme nde d C it a t ion

" Koppe r s C o I nc v

. Ae tn a C slt y & S ur e t y " (1998). 1998 D e cisio n s

. P a pe r 167.
h tt p://d i g it alc ommon s .l a

w

. v i l l a no v a

. e du/thir dc ir c uit_1998/167Filed July 22, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-3432

KOPPERS COMPANY, INC.,

Appellant

v.

THE AETNA CASUALTY AND SURETY COMPANY; ZURICH INSURANCE COMPANY; THE TRAVELERS INDEMNITY CO.; THE AMERICAN HOME ASSURANCE COMPANY; COMMERCIAL UNION INSURANCE COMPANY; THE HOME INSURANCE COMPANY; UNDERWRITERS AT

LLOYD'S OF LONDON

On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 85-cv-02136)

Argued, Monday, April 27, 1998

BEFORE: ALITO, RENDELL and GARTH, Circuit Judges

(OPINION FILED AS A NOT-FOR-PUBLICATION OPINION ON JULY 22, 1998)

Joseph W. Montgomery, III (Argued) Jones, Day, Reavis & Pogue

500 Grant Street - 31st Floor Pittsburgh, PA 15219

Attorneys for AppellantHershel J. Richman

Jennifer R. Clarke

Fred H. Nemeth Dechert, Price & Rhoads

1717 Arch Street
4000 Bell Atlantic Tower Philadelphia, PA 19103

Peter M. Page Kathleen A. McQueeny
Brian D. Bossert Blatt, Hammesfahr & Eaton 333 West Wacker Drive, Suite 1900 Chicago, IL 60606

Martin R. Baach Bruce R. Grace (Argued) Duane K. Thompson Baach, Robinson & Lewis One Thomas Circle, Suite 200 Washington, DC 20005-5803

Attorneys for Appellee, Underwriters at Lloyd's of London

OPINION OF THE COURT

GARTH, Circuit Judge.

The issue we must decide in this appeal is whether an excess insurer (here, INA) was an indispensable par ty under Rule 19(b) of the Federal Rules of Civil Proc edure so as to cause the dismissal of certain of the Appella nt's claims when INA was not joined in this action again st
various other excess insurers. We hold that INA was not an indispensable party and accordingly that the claims should
not have been dismissed. We therefore reverse.

I.

Appellant Koppers Company, Inc. ("Koppers") appeals the district court's dismissal of its claims against Ap pellees, certain underwriters from Lloyd's of London and cer tain

2London market insurance companies (hereinafter, "th e

London Insurers"), pertaining to seven (7) insuranc e policies that the London Insurers issued to Koppers to provide coverage for various environmental property damages that occurred from 1960-65 (hereinafter, "t he 1960-65 policies"). The district court dismissed th e claims relating to these policies because Koppers failed t o join two other insurers -- Indemnity Insurance of North Amer ica and Insurance Company of North America (collectivel y, "INA") -- as indispensable parties pursuant to Rule 19(b) of
the Federal Rules of Civil Procedure.

II.

As we have set forth the facts of the underlying di spute in an earlier opinion, see Koppers Co., Inc. v. Aet na Cas. & Sur. Co., 98 F.3d 1440, 1444 (3d Cir. 1996), we rec ite only the facts pertinent to the issues before us here.

Koppers is a large manufacturing company based in Pittsburgh, Pennsylvania. In the 1980s, federal and state agencies brought claims against Koppers based on environmental contamination at approximately 150 pl ant and disposal sites. Although Koppers had purchased insurance from several insurance companies, all of the insurers initially denied coverage for these claims when Koppers sought indemnification. Accordingly, in 198 5, Koppers sued its two (2) primary comprehensive insu rers for breach of contract in federal court, based upon diversity of citizenship.

In 1988, Koppers amended its complaint to sue other primary insurers and several excess insurers. Exces s insurers -- such as the London Insurers in this cas e -- are insurers who contract to provide coverage only when the amount of the claim is beyond that of a primary ins urer. In amending its complaint, however, Koppers decided no t to sue INA (an excess insurer) because INA is a Pennsy lvania company and joining it to the instant action would have defeated complete diversity. Thus, instead of suing INA in a

3federal forum, Koppers initiated suit in Pennsylvan ia state

court over the same insurance claims.1

In July 1994, the London Insurers filed a Motion to Dismiss claims pertaining to the 1960-65 policies b ecause Koppers failed to join INA pursuant to Rule 19 of t he
Federal Rules of Civil Procedure. The London Insure rs claimed that the relationship between the coverage that they provided and the coverage that INA provided concerning the 1960-65 policies made INA an indispe nsable party to the federal suit.

On October 20, 1994, without comment, the district court granted the London Insurers' Motion to Dismis s. Koppers filed a Motion for Reconsideration, but the district court denied that motion on March 24, 1995. As a re sult, Koppers brought suit against the London Insurers re lating to the 1960-65 policies by adding them as defendant s in the state court action against INA.

After the initial dismissal of Koppers' claims agai nst the London Insurers pertaining to the 1960-65 policies, all of the defendant insurers except for the London Insure rs settled with Koppers before trial. Thus, following the dismissal and settlement, the only remaining claims in the case were those against the London Insurers for the period

from the 1940s to 1959 and 1966 to the 1970s. See Koppers, 98 F.3d at 1444.

In April-May 1995, the district court conducted a t rial over Koppers' claims against the remaining defendan ts (the London Insurers) but the court limited the scope of that trial to policies that provided coverage from late 1953 until January 1960. The district court further limited th e scope of the trial to only eighteen of the contaminated s ites. Following a three week trial, the jury awarded Kopp ers $70

million. See id.

___________________________________________________ ______________

1. During the period in question, Koppers' primary insurance carrier was Aetna which was liable for $50,000 for each occurre nce. As an excess carrier, INA then became liable for $1,000,000 per occurrence. The
London Insurers thus became liable for amounts in e xcess of $1,050,000.

4On July 20, 1995, pursuant to Rule 54(b), the distr ict

court certified as final for interlocutory appeal t he part of its judgment relating to the claims litigated at th e jury trial, noted above. Although Koppers cross-appealed, it di d not challenge the district court's decision to dismiss the 1960- 65 policy claims against the London Insurers.

On appeal, in reversing the district court's method of apportioning liability, we commented that

the district court would not need to determi ne whether the non-settling pre-1971 policies were trig gered because the London Insurers concede -- again st their interests -- that all of Koppers' policies u p to 1971 (the date from which pollution exclusion clauses have appeared in all the policies) were triggered

.

Id. at 1456. In addition, in a footnote, we suggest ed that INA was not a necessary party for a proper adjudica tion of the claims involved in this dispute:

We recognize that some of Koppers' insurers are not part of this action because they are non-div erse with the plaintiff. Under [Gould Inc. v. Continen tal Gas, 585 A.2d 16 (Pa. Super. Ct. 1991)], however, the se insurers need not participate in the case in order fo r the district court to determine their apportioned shares of liability for purposes of reducing the judgment agains t the London Insurers. See 585 A.2d at 19 (stating that court need only look at policies' terms and limits). Of course, any determination that these policie s were triggered would not be binding or preclusive against the absent insurers in future litigation bec ause they are not parties here. We note also that the London Insurers' interests are aligned with those o f the absent insurers: each would like to prove that the absent insurers' policies were not triggered. For t he London Insurers, such a determination would increas e the settling insurers' shares (thereby decreasin g the London Insurers' liability), and the absent insurers would naturally like to avoid a determinatio n of liability in the first place.

Id. n.21.

5Prompted by our intimation that INA was not an

indispensable party, Koppers moved to reinstate the dismissed claims pertaining to the 1960-65 policies

. Essentially, then, Koppers requested the district c ourt to
reconsider its earlier decision which had dismissed the claims pertaining to the 1960-65 policies on the gr ounds that INA was an indispensable party. On June 10, 19 97,
the district court denied this motion from the benc h, ruling:

I think that's the law of the case[.] It cou ld have been appealed at the time the rest of this case w ent up and therefore, I'm going to deny the motion to r einstate any claims. I'm not going to listen to any argum ents, I'm just going to just deny it.

Tr. June 10, 1997, at 2.

Thereafter, Koppers moved for certification under R ule 54(b). Complying with the requirements set forth in AllisChalmers Corp. v. Philadelphia Elec. Co., 521 F.2d 360 (3d Cir. 1975), the district court granted that motion on July 15, 1997, and at the same time formally denied Kopp ers'
Motion to Reinstate the claims that had been dismis sed.

III.

As a threshold matter, we must address a motion by the London Insurers urging this Court to dismiss the in stant appeal for lack of appellate jurisdiction.

The London Insurers contend that the dismissal of t he 1960-65 claims ("the dismissal order") becamefinal and appealable when the district court entered a final judgment over the litigated claims on July 20, 1995. The Lon don Insurers claim that the dismissal order merged with the final judgment at that time. Thus, they argue that Koppers should have appealed the dismissal order then, and by failing to do so, Koppers waived its right to appea l that dismissal at the present time.

Koppers counters that this Court does have appellat e jurisdiction as there was no appealable order conce rning the dismissal of the 1960-65 policies until the dis trict court certified this issue under Rule 54(b). Koppers poin ts out that the appeal of the July 20, 1995 judgment conce rned

6different policies than those at issue here as the present

appeal specifically addresses the dismissed claims. Furthermore, Koppers argues that as there is still no final judgment over all of the claims in the instant case , the "merger rule" does not apply.2 We agree.

Rule 54(b) provides:

When more than one claim for relief is prese nted in an action, whether as a claim, counterclaim, cr oss-claim, or third-party claim, or when multiple parti es are involved, the court may direct the entry of a final judgment as to one or more but fewer than al l of the claims or parties only upon an express deter mination that there is no just reason for delay and u pon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designate d, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties sh all not terminate the action as to any of the claims or parties,
and the order or other form of decision is s ubject to revision at any time before the entry of jud gment adjudicating all the claims and the rights a nd liabilities of all the parties.

Fed. R. Civ. P. 54(b) (emphasis added). As the Rule 54(b) certification pertaining to the July 20, 1995 order did not encompass the claims involving the 1960-65 policies , the Rule 54(b) certification did not -- indeed, could n ot -- implicate those claims.3 Contrary to what the Londo n Insurers argue, there was no final order from which Koppers could have appealed. Thus, Koppers did not waive its right to appeal this issue.

___________________________________________________ ______________

2. Under the "merger rule," prior interlocutory ord ers merge with the final judgment in a case, and the interlocutory ord ers (to the extent that they affect the final judgment) may be reviewed on appeal from the final order. See In re Westinghouse Sec. Litig., 90 F.3d 696, 706 (3d Cir. 1996).

3. The July 20, 1995 order concerned only eighteen (18) sites and insurance policies providing coverage from 1953-60. See Order July 20,

1995 at 2-4.

7The London Insurers have not brought to the Court's

attention nor have we found any cases that have hel d that a district court could not enter a Rule 54(b) certi fication under delayed circumstances such as those present i n this matter. Accordingly, we conclude that this Court ha s appellate jurisdiction over the instant matter.4

Accordingly, we now address the merits of the dispu te at hand -- whether, in fact, INA was an indispensable party under Rule 19(b) of the Federal Rules of Civil Proc edure.5 We exercise plenary review over a district court's determination that a party's joinder is necessary u nder Rule 19(a). See Janney Montgomery Scott, Inc. v. Sh epard Niles, Inc., 11 F.3d 399, 404 (3d Cir. 1993). We re view a district court's ruling that a party is indispensab le under Rule 19(b), however, for abuse of discretion. See i d. at 403.

IV.

The London Insurers contend that INA is a necessary (and indispensable) party and thus that the distric t court properly dismissed the claims pertaining to the 196 0-65 policies. The London Insurers claim that they canno t be held liable to pay on their excess policies unless and until

___________________________________________________ ______________

4. Along the same lines, the London Insurers also a rgue that because Koppers failed to appeal the district court's dismi ssal of the claims pertaining to the 1960-65 policies, Koppers did not preserve this issue
and the district court's dismissal became the law o f the case. This argument fails for the very reasons that we conclud e that this Court has appellate jurisdiction. As the initial Rule 54(b) c ertification did not encompass the dismissal of the claims pertaining to the 1960-65 policies, Koppers could not have raised this issue in the pri or appeal. Cf. United States v. U.S. Smelting Co., 339 U.S. 186, 198-99 ( 1950) (holding that the law of the case did not bar appeal despite part y's failure to raise issue in a prior interlocutory appeal, although par ty could have raised issue in that prior appeal). Moreover, the district court's reference to

"law of the case" cannot bind this Court on appeal. See Messenger v. Anderson, 225 U.S. 436, 444 (1912).

5. In response to the London Insurers' Motion to Di smiss for lack of appellate jurisdiction, Koppers filed a Motion for Attorneys' Fees and Costs incurred in opposing that motion in this Cour t. Koppers has not furnished us with a basis for granting its motion f or fees and costs. We will therefore deny Koppers' motion.

8the underlying insurers -- including INA -- have pa id or

have been held liable to pay the full amount of the ir underlying policies. The London Insurers submit tha t their policies are "directly excess to [the INA policies] and contingent upon their liability under them," Appell ee's Br. at 20, and that payment or liability under the unde rlying policies is a condition precedent to any obligation s that the London Insurers might incur. In support, the London Insurers point to the following passage quoted from the issued policies:

[L]iability shall attach to the Underwriters only after the Underlying Umbrella Insurers have paid o r have been held liable to pay the full amount of t heir respective ultimate net loss liability . . .

.

App. 343 (Policy No. 60/473/3 at 1). Thus, the Lond on Insurers maintain that the district court could not impose liability upon them without INA being a party to th e litigation at hand. The London Insurers rely upon C ity of Littleton v. Commercial Union Assurance Company, 13 3 F.R.D. 159 (D. Colo. 1990) (holding that absent pri mary insurers were indispensable parties when defendant excess insurers' policies were dependent upon whether the primary insurers' policies provided coverage), in s upport of their argument that underlying insurers are indispe nsable parties in cases involving excess insurers.

In response, Koppers asserts that the district cour t erred in determining that INA was an indispensable party under Rule 19(b) because INA is not, in fact, a necessary party under Rule 19(a). See Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 405 (3d Cir. 1993 ) (stating that a court's determination that a party is necess ary is a "necessary predicate" to its determination that a p arty is indispensable). Contrary to the London Insurers' po sition, Koppers claims that the London Insurers' policies a re not contingent upon nor dependent upon INA's obligation s under its insurance policies, as the London Insurer s' policies do not incorporate the terms of INA's poli cies and do not make the London Insurers' obligations to pay contingent upon whether INA pays its claims. Indeed
, Koppers argues that the plain language of the polic ies establishes that the London Insurers' liability is

9independent from any liability incurred by INA. To the

extent that the London Insurers assert otherwise, K oppers submits that the London Insurers improperly rely up on cover notes rather than provisions in actual polici es.6

Koppers also claims that INA's policy is not an "Underlying Umbrella Policy" and is not identified as such, so that the London Insurers' obligations are not de pendent upon nor contingent upon INA's policy being paid. R ather, Koppers argues that the London Insurers' policies p rovide coverage only in excess of what is provided by INA' s policies. As a result, Koppers contends that INA is not a necessary nor an indispensable party to the instant dispute, as the London Insurers' obligations can be determined fairly and properly without INA being a party. Indeed, Koppers points to this Court's earlier obse rvation that the district court could determine the scope o f the London Insurers' liability without INA being a part y to the instant litigation. See Koppers, 98 F.3d at 1456 n. 21. Accordingly, Koppers argues that complete relief ca n be granted in INA's absence, INA will not be prejudice d by the adjudication of the present matter, and that the Lo ndon Insurers run no risk of incurring multiple or incon sistent obligations as a result of INA's absence.

Subsection (a) of Rule 197 addresses the issue of w hether

___________________________________________________ ______________

6. Cover notes are documents that a broker issues t o an insured to notify the insured that an insurance policy has bee n obtained as is in effect. See Decl. Michael Jackson at 3 (P 6). As th e cover note is not issued by the insurers but rather by an insurance b roker, "insurers in the London Market typically do not recognize a cove r note as binding upon them." Id.

7. Rule 19 governs the joinder of parties. It provi des:

(a) Persons to be Joined if Feasible. A pers on who is subject to service of process and whose joinder will no t deprive the court of jurisdiction over the subject matter of the action shall be joined

as a party in the action if (1) in the person's absence complete
relief cannot be accorded among those already parti es, or (2) the person claims an interest relating to the subject o f the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impe de the person's ability

to protect that interest or (ii) leave any of t he persons already parties

10a party should be joined as a "necessary" party. Se e

Janney, 11 F.3d at 404. Subsection (b) concerns the issue of whether a party is an "indispensable" party. In reviewing a district court's determination pursuant to Rule 1 9, we must first determine whether a party is a necessary party to the dispute. See id. If the party is determined to be a necessary party but cannot be joined because such j oinder would defeat diversity, it must then be determined whether the absent party is an indispensable party. See id.

Rule 19(a) states that a party is necessary if eith er (1) the present parties will be denied complete relief in t he absence of the party to be joined, or (2) the absent party will suffer some loss or be put at risk of suffering such a los s if not joined. As Rule 19(a) is stated in the disjunctive, if either subsection is satisfied, the absent party is a nece ssary party that should be joined if possible. Under Rule 19(a)(1), we first address whether the parties can be afforde d complete relief in the absence of the non-joined pa rty. We hold that they can.

___________________________________________________ ______________

subject to a substantial risk of incurring d ouble, multiple, or otherwise inconsistent obligations by reason of the claimed
interest. If the person has not been so joined, the co urt shall order that

the person be made a party. If the person should join as a plaintiff

but refuses to do so, the person may be made a d efendant, or, in a proper case, an involuntary plaintiff. If th e joined party objects

to venue and joinder of that party would render the venue of the
action improper, that party shall be dismissed from the action.

(b) Determination by Court Whenever Joinder not Feasible. If a person as described in subdivision (a)(1)-(2 ) hereof cannot be made a party, the court shall determine whether i n equity and good conscience the action should proceed among t he parties before it,

or should be dismissed, the absent person being thus regarded as indispensable. The factors to be considered by the court include: first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provision s in the judgment, by

the shaping of relief, or other measures, the pr ejudice can be lessened or avoided; third, whether a judgment render ed in the person's absence will be adequate; fourth, whether th e plaintiff will have

anadequate remedy if the action is dismissed f or nonjoinder.

Fed. R. Civ. P. 19 (West 1998).

11In order to determine whether the parties can be af forded

complete relief in the absence of INA, we turn to t he contract provisions which governed the 1960-65 poli cies. Policy No. 60/473/2 is the "Umbrella Policy" upon w hich all of the disputed policies at issue rely to define th e scope and the terms of the London Insurers coverage and liabi lity. See Decl. Michael Jackson at 4-7. Policy No. 60/473/2 explicitly provides:

Nothing herein shall be construed to make th is policy subject to the terms, conditions, and limita tions of
other insurance.

App. 275 (Condition L). In addition, Policy No. 60/ 473/2

states:

It is a condition of this policy that the po licy or policies
referred to in the attached "Schedule of Und erlying
Insurance" shall be maintained in full effec t during the currency of this policy except for any reduc tion of the aggregate limit or limits contained therein solely by payment of claims in respect of accidents an d/or occurrences occurring during the period of t his policy. Failure of the Assured to comply with the fo regoing shall not invalidate this policy but in the event of such failure, the Underwriters shall only be liable to the same extent as they would have been had the Assured comp lied
with the said condition.

App. 276 (Condition S) (emphasis added). Moreover, the loss payable clause of Policy No. 60/473/2 reads, i n pertinent part:

Liability under this policy with respect to any occurrence shall not attach unless and until the Assured, or the Assured's underlying insurer , shall have paid the amount of the underlying limit s on account of such occurrence.

App. 274 (Condition J) (emphasis added).

Our reading of the Koppers' policies requires a tot al of $1,050,000 to be paid by either Koppers or its unde rlying
insurance carrier -- in this case Aetna and INA-- b efore any liability of the London Insurers is triggered. Our understanding in this respect is that the London In surers'

12excess policy has, in effect, a $1,050,000 deductib le

amount before any payment must be made pursuant to the policy's terms. We thus conclude that insofar as li ability under the London Policies is concerned, complete re lief can be accorded to the parties present to this litigati on without the joinder of INA. Accordingly, we hold that INA i s not a necessary party under Rule 19(a)(1). In addition to the fact that complete relief is available, INA's ability to protect its interests will not be impaired or impeded by the di sposition
of the action in its absence. See Fed. R. Civ. P. 1 9(a)(1)(i). By the same token, under Rule 19(a)(2)(ii), the Lon don Insurers face no risk of multiple or otherwise inco nsistent obligations as a result of INA's absence from this action.

As we noted above, the Limits of Liability section of Policy No. 60/473/2 provides that liability does not attac h to the
London Insurers unless a claim exceeds at least $1,050,000. This provision underscores the independ ence between any liability that the London Insurers have under their policies and any liability that may result fr om INA's own policy coverage. To the extent that the London Insurers rely upon the cover notes to "stand as clear eviden ce of the fundamental structure" of the insurance coverage pr ovided by the respective excess insurance policies, such r eliance is misplaced.8 Appellee's Br. at 23. By their own term s, the cover notes became void when the actual insurance p olicies were issued. See App. 37 ("This cover note shall be automatically terminated and voided by delivery of policy or certificate of insurance to the Assured.")

As we have concluded that INA is not a necessary pa rty under Rule 19(a), INA cannot be an indispensable pa rty under Rule 19(b). See Janney, 11 F.3d at 405. Accor dingly, the district court erred in dismissing Koppers' cla ims pertaining to the 1960-65 policies for failure to j oin INA as an indispensable party.9

___________________________________________________ ______________

8. We note that under Pennsylvania law, if the lang uage of an insurance policy is ambiguous, the ambiguous language is cons trued against the
drafter. See Board of Pub. Educ. v. National Union Fire Ins. Co., 709 A.2d 910, 1998 WL 111558, at 2 (Pa. Super. Ct. Mar. 16, 1998).

9. We have considered the following issues that the London Insurers have raised on appeal and have found them to be wit hout merit: the risk

13V.

In sum, as we conclude that INA is not a necessary and therefore not an indispensable party to the instant action,
we will reverse the district court's dismissal of K oppers' claims relating to the 1960-65 policies and remand for further appropriate proceedings.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

___________________________________________________ ______________

of duplicative litigation over identical issues in both state and federal fora; reinstating the 1960-65 policy claims weighs against judicial economy as INA policies would have to be analyzed i n both state and federal courts; the district court cannot grant com plete relief because it has no jurisdiction over INA; this Court should aff irm under the doctrine of Wilton v. Seven Falls, 515 U.S. 277 (1995) (hold ing that a discretionary standard governs a district court's d ecision to stay a federal declaratory judgment action during the pend ency of parallel state court proceedings).

14