NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 17a0384n.06

No. 16-1264

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

EMPLOYERS INSURANCE OF WAUSAU, et al.,
Plaintiffs-Appellees,

v.
MCGRAW EDISON COMPANY,
Defendant-Appellant. ) ) ) ) ) ) ) ) ) ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN

Before: DAUGHTREY, MOORE, KETHLEDGE, Circuit Judges.
KETHLEDGE, Circuit Judge. In the 1950s, the McGraw-Edison Company owned a plot of land in Bloomfield, New Jersey (the “McGraw Bloomfield prop erty”), where it operated two battery factories: the Primary Battery plant and St orage Battery plant. McGraw sold the Storage Battery plant in 1960, and later transferred the Primary Battery plant to a subsidiary called Battery Products, Inc. Thereaf ter, Cooper Industries acquiredMcGraw and discovered that several of McGraw’s factories, including the Primary Battery plan t, had potentially contaminated the environment. Cooper asked its insurers to cover its liabili ties for the cleanup; in response, they sued Cooper in the Western District of Michigan, seeking a declaration that the contamination was not covered by th eir policies. Cooper and its insu rers settled that suit in 1989. Per their settlement agreement, Co oper released any future claims arising from contamination at five facilities, including one in Bloomfield, which the parties called the “McGraw-Edison Battery Products Plant facility.” Twenty years later, the United States Environmental Protection Agency notified Cooper that the entire McGr aw Bloomfield property—including both the Primary Battery plant and Storage Battery plan t—might have contributed to pollution in the Passaic River. In 2014, Cooper’s insurers returned to federa l court, arguing that the 1989 settlement agreement barred Cooper from seek ing insurance coverage for the federal EPA’s
environmental claims. The distri ct court agreed, holding that Coope r’s release of its claims forNo. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-2- the “Battery Products Plant faci lity” included a release for a ny pollution migrating from the McGraw Bloomfield property as a whole—including, therefore, the Storage Battery plant— rather than just the Primary Battery plant. We respectfully disagree and reverse.

I.

Thomas Edison began manufacturing batteries in New Jersey over 100 years ago. His company, Thomas A. Edison, Inc., managed two ad jacent battery plants there, located on land straddling the line between Bloomfield and Bellev ille. The Primary Battery Division operated one plant, while the Storage Ba ttery Division operated the othe r. Thomas A. Edison, Inc. thereafter merged with McGraw Electric Comp any, and the new McGraw -Edison Company took over both battery divisions. In 1960, McGraw-Edis on sold the Storage Battery plant to another battery company. Meanwhile, the Primary Batte ry plant continued making batteries under McGraw’s management.

In 1984, a heavy rainstorm caused the Primar y Battery plant’s wastewater-treatment system—also called a “lagoon” or “settling pond” —to overflow into a neighbor’s yard. The neighbor complained to the New Jersey Departme nt of Environmental Protection, which sent McGraw a notice of potential contamination. The notice ordered McGraw to investigate soil and groundwater contamination at its Belleville facili ty. A year later, McGraw transferred the Primary Battery plant to a subs idiary, Battery Products, Inc. Meanwhile, McGraw itself became a subsidiary of Cooper Industries. Cooper, McGraw, and Battery Products, Inc. (collectively, “Cooper”) began investigating th e contamination in and around th e Primary Battery plant. Parallel government investigations revealed that several other McGraw facilities around the country had potentially polluted the environment. In 1986, Cooper asked its insurers to cover its investigation costs and potential liability for that pollution.

That same year, the insurers sued Cooper in federal co urt in Michigan, seeking a
declaration that the relevant in surance policies did not cover Cooper’s liabili ty for the pollution. Cooper responded by filing a “Counterclaim and Crossc laim.” In Count III of the Counterclaim, Cooper explained that it was seeking coverage for its liability “for contamination allegedly from [McGraw’s] Battery Products Plant in Bloomfi eld, New Jersey[.]” Cooper described the “Battery Products Plant” as a factory that ma nufactured “battery produ cts” and that “McGrawNo. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-3- ha[d] owned and operated” since 1959. Cooper al so alleged that, after 1959, contamination had been “introduced into settling ponds on the Battery Products sit e” and had thereafter entered New Jersey’s groundwater. Over the next th ree years, the New Jersey Department of Environmental Protection continued to investigat e the Primary Battery plant for environmental contamination. Eventually, the investigation also included two lagoons on the adjacent land, where McGraw’s Storage Battery plant had been . When Cooper and the Department discovered contamination in those lagoons, C ooper agreed to clean them up.

Cooper and its insurers settled the insurers ’ declaratory-judgment lawsuit and Cooper’s counterclaim in 1989. Per the settlement agreemen t, the insurers paid Cooper an undisclosed sum of money and Cooper released any future claims arising from “[t]he McGraw-Edison Battery Products Plant facility located in Bloomfield, New Jersey and anything released, escaping, or migrating . . . from the site includi ng contamination of the groundwaters of the State of New Jersey as described in [Count III of] th e Counterclaim and Cross-Cl aim[.]” Elsewhere in the agreement, the parties specified that Mich igan law governed the agreement’s interpretation and that “any dispute” over its terms “shall be commenced and resolved in the United States
District Court for the Western District of Mi chigan, Southern Division.” In December 1989, the district court incorporated the settlement ag reement into its order of dismissal.

Twenty years later, the federal EPA no tified Cooper that the McGraw Bloomfield property, including both the Primar y Battery plant and Storage Battery plant, might have polluted the Passaic River. Cooper sued its insu rers in New Jersey st ate court, claiming an entitlement to coverage for the environmental c ontamination. The insurers then returned to federal court in Michigan, seeki ng a declaration that, per the 1989 settlement agreement, Cooper had released its insurance claims. Cooper concededthat it had released any claim for coverage
that involved contamination es caping from the Primary Battery plant (which Battery Products, Inc., had operated in the 1980s). But Cooper argued that the agreement permitted its claims for any contamination originating from the Storage Ba ttery plant. Cooper also argued that the district court should abstain from hearing the case because of the pending New Jersey lawsuit.

The district court rejected Cooper’s absten tion argument and granted the insurers’ motion for declaratory relief, reasoning that “the only fa ir way” to interpret the term “McGraw-EdisonNo. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-4- Battery Products Plant facility” as used in the settlement agreement was as a reference to the entire McGraw Bloomfield propert y, including the Stor age Battery plant. This appeal followed.

II.

A.
As an initial matter, Cooper argues that th e district court shoul d not have exercised jurisdiction over this de claratory-judgment action. We revi ew that decision for an abuse of
discretion. See Scottsdale Ins. Co. v. Flowers , 513 F.3d 546, 554 (6th Ci r. 2008). A federal
court should abstain from orderi ng declaratory relief if doing so would amount to “[g]ratuitous interference” with a pendi ng state-court action that involves the same state-law issues and the same parties as the federal action. Id. at 559 (citations omitted); see Brillhart v. Excess Insurance Co. of America , 316 U.S. 491, 495 (1942).

Cooper argues that the district court s hould have left the issue in this case— i.e. , whether the settlement agreement releas ed Cooper’s pending claims for insurance coverage—for the New Jersey court to decide. But the settlement ag reement itself includes a mandatory forum-selection clause, which states that “any dispute” over th e agreement’s terms “shall be commenced and
resolved” in federal court in the Western Distri ct of Michigan. Cooper has neither challenged the validity of that clause nor expl ained why it “should not be enforced.” See Smith v. Aegon
Cos. Pension Plan , 769 F.3d 922, 929 (6th Cir. 2014). He nce the court did not abuse its discretion in exercising its jurisdic tion per the clause’s terms here.

B.
Cooper argues that the distri ct court wrongly interpreted th e settlement agreement to release its insurance claims for pollutants migr ating from anywhere on the McGraw Bloomfield property, rather than from only the Primary Battery plant. We review de novo the district court’s interpretation of the settlement agreement. See Solo v. United Parcel Serv. Co. , 819 F.3d 788, 794 (6th Cir. 2016) (citing Port Huron Educ. Ass’n v. Port Huron Area Sch. Dist. , 550 N.W.2d 228, 237 (Mich. 1996)).

Michigan “law presumes that . . . the actu al words used in th e contract” embody the parties’ intent. City of Grosse Pointe Park v. Mich. Mun. Liab. & Prop. Pool , 702 N.W.2d 106,No. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-5- 124 (Mich. 2005). Thus, we start w ith the contract’s text to de termine if its terms, standing alone, are unambiguous. In the settlement agreemen t, Cooper released its insurance claims for “[t]he McGraw-Edison Battery Pr oducts Plant facility located in Bloomfield, New Jersey and anything released, escaping, or migrating . . . fr om the site including contamination of the groundwaters of the State of New Jersey as de scribed in [Count III of] the Counterclaim and Cross-Claim[.]” The parties now dispute the meaning of the term “McGraw-Edison Battery Products Plant facility” as used in the agreement.

According to Cooper, the term “Battery Products Plant facility” refers to only the Primary Battery plant—the factory that McGraw transfe rred to its wholly owned subsidiary, Battery Products, Inc., in 1985. The settlement agreement supports this position. Per the agreement, Cooper released its insurance claims for several other “Plant facilities ” across the country, and the contracting parties named each one according to the McGraw division that had managed it. Besides those sites, the agreement also lists, in Exhibit C, over 30 other McGraw facilities where Cooper was aware of potential claims for environm ental contamination. E ach facility is named after the entity or division operating it, with na mes including the “Service Division Facility,” the “Bussman Facility,” and the former “Toastmast er” and “Worthington” facilities. These names show that the contracting partie s had a convention for identifying the facilities in the agreement based on the entities that opera ted them. Under that conventi on, the Battery Products Plant facility refers to the Primary Battery plant, which Battery Pr oducts, Inc. operated, and which
does not include the Stor age Battery plant.

Moreover, the settlement agreement incorpor ates the Counterclaim by reference, and Cooper’s description of the “Bat tery Products Plant” in the C ounterclaim confirms that the settlement’s release encompassed only contamina tion escaping from the Primary Battery plant. In the Counterclaim, Cooper describes the Battery Products Plant as the property that “McGraw has owned and operated” since 1959. At the time Cooper filed the Counterclaim, the Primary Battery plant was the only Bloomfield factory thatfit that description. Cooper also used lowercase letters to write the phras e “battery products” when describing how the Battery Products Plant “engaged in the manufacture of battery pr oducts.” But Cooper capitalized the term when referring to the “Battery Products site.” Capita lization indicates that a phrase “is a proper noun designating ‘a particular pe rson, place, or thing.’” In re B.A.D. , 690 N.W.2d 287, 292 (Mich. Ct.No. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-6- App. 2004) (citation omitted). And the only particular entity to which “Battery Products” could refer in the Counterclaim is Battery Products, Inc. See id. The settlement agreement’s explicit
reference to the Counterclaim thus indicates th at the agreement was lik ewise using “Battery Products” as shorthand for Battery Products, Inc.

Despite all these proofs that th e “Battery Products Pl ant facility” referr ed to the Primary Battery plant, the insurers argue that th e settlement agreement and the counterclaim unambiguously refer to the entire McGraw Bloomfield facility. Th ey make two basic arguments. First, they contend that the settling parties coul d not have been referring only to land owned by Battery Products, Inc., because the settlement ag reement neither mentions Battery Products, Inc. by name nor includes the word “Inc.” when re ferring to the Battery Pr oducts Plant facility. Rather, the insurers say, “Batte ry Products” is a generic refere nce to the batteries produced by the entire McGraw Bloomfield property, which until 1960 included the Storage Battery plant. But nowhere else in the settlement agreement did the contracting parties name a facility after the products it made, much less refer to those pr oducts as a proper noun. And the parties did not specify what type of corporate entity operated some of the other facilities referenced in the agreement, including the “Worthington” and “Bussm an” facilities. Yet entities with those names plainly operated those facilities. The insurers provide no explanation for why the parties would depart from their convention when naming the Batte ry Products Plant facili ty but nowhere else. Moreover, no reasonable drafter who meant to re fer to both the Primary Battery and Storage Battery plants would have named the Bloomfiel d facility after “Bat tery Products”—a phrase identical to the name of an entity ma naging only the Primary Battery plant.

Second, the insurers contend th at the settlement’s release must have encompassed the entire Bloomfield property because, when the pa rties settled in 1989, New Jersey’s investigation and Cooper’s remediation included the two lagoons on the Storage Battery site. In making this argument, however, the insurers openly rely on ex trinsic evidence—which they cannot do unless they first identify a specific contractual ambigu ity that the extrinsic evidence would clarify. See City of Grosse Pointe Park , 702 N.W.2d at 113-14. And the insurers have not tried to identify any such ambiguity. Nor do we think that the pa rties incorporated the extrinsic documents by reference into the settlement agr eement. Under Michigan law, “the parties must manifest clearly [their] intent to incorporate” external documents into a contract. NILAC Int’l Mktg. Grp. v.No. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-7- Ameritech Servs., Inc. , 362 F.3d 354, 358 n.3 (6th Cir. 2004) (citing Forge v. Smith , 580 N.W.2d 876, 881 & n.21 (Mich. 1998)). And here there is no indication whatev er that the parties meant to incorporate the various documents (many of which were internal to the New Jersey Department of Environmental Protection) that the insurers rely upon now.

The insurers’ contention is also without merit even taken on its own terms. The settlement agreement expressly releases any claim for not only contam ination on the Battery
Products site but also for “anything released, escaping, or migrating

. . . from the site [.]” (emphasis added). The release would therefore en compass contamination that migrated from the Battery Products site to the Storage Batter y lagoons. That the pa rties knew there was contamination on the Storage Batt ery property thus does not mean the release must encompass any contamination originating from the Storage Battery Plant.

* * *

In summary, the settlement agreement’s reference to the “McGraw-Edison Battery Products Plant facility” unambiguously referred to the plant operated by Battery Products, Inc.,
rather than to the Bloomfield site as a whole. The district court’s January 27, 2016 order is
therefore reversed.No. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-8- KAREN NELSON MOORE, Circuit Judge, dissenting. This case asks us to
determine whether a 1989 Settle ment Agreement is ambiguous. The Settlement Agreement released insurers from coverage as to a battery manuf acturing facility in Bl oomfield, New Jersey. Cooper Industries argues that the Settlement Agreement unambiguously refers only to the facility that manufactured primary batteries, not to th e adjacent facility that manufactured storage batteries. The insurers argue that the Settlem ent Agreement unambiguously refers to both the primary battery manufacturing operation and st orage battery manufacturing operation becausethey were part of a single facility, not two separate facilities. The district court wrote a wellreasoned opinion concluding that the Settlement Agreement unambiguously refers to a single facility that manufactured both primary and storage batteries. Th e majority has written a wellreasoned opinion concluding that the Settlement Agreement unambiguously refers to only the primary battery facility, not the se parate storage battery manufactur ing facility. I conclude that the Settlement Agreement is ambiguous, and I w ould vacate the district court’s judgment and remand for an evidentiary hearing.

In its opinion concluding that the Settle ment Agreement unambiguously referred to the entire battery manufacturing opera tion, the district court said:
The first and most obvious problem is that the term the parties used is not the phrase that Cooper wants it to be. The parties referred si mply to “Battery Products,” and not to “Battery Products, Inc.” The term is capitalized, but not defined anywhere else in the papers, and so the term must glean meaning from the overall context of its use. Reading into the term the corporate entity limits that Cooper urges is not warranted by the text or context. Seco nd, the most natural referent for the term “Ba ttery Products” is the 1984 no tice letter, which is the triggering event for coverage purposes. And at that time th e corporate entity “Battery Products, In c.” did not even exist. . . . [T]hird and most important, the overall point of the whole settleme nt was to prepare a comprehensive identification of insurance exposures, and th en divide them by site into released sites or on-notice sites. Reading the Agreement as Cooper urges would disrupt that design by effectively cr eating a third possibility: na mely, a site that everyone knew was contaminated, and that the part ies described in 25-year-old language on either the “Settled Site” or “On Notice” site exhibit, but that parties today are now describing in somewhat different words. On this record there is no basis to do so.
R. 400 (Opinion at 13) (Page ID #2887).
The majority opinion provides a different analysis:No. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-9- Cooper released its in surance claims for several othe r “Plant facilities” across the country . . . . Each facility is named af ter the entity or division operating it, with names including the “Service Division Facili ty,” the “Bussman Facility,” and the former “Toastmaster” and “Worthington” f acilities. These names show that the contracting parties had a c onvention for identifying the facilities in the agreement based on the entities that operated them. Under that convention, the Battery Products Plant facility refers to the Primary Battery plant, which Battery Products, Inc. operated, and which does not include the Storage Battery plant. . . . Moreover, . . . [i]n the Counterclaim, C ooper describes the Battery Products Plant as the property that “McGraw has owned and operated” since 1959. At the time Cooper filed the Counterclaim, the Primary Battery plant was the only Bloomfield factory that fit that description. Cooper also used lower-case letters to write the phrase “battery products” when describing how the Battery Products Plant “engaged in the manufacture of battery products.” But Coope r capitalized the term when referring to the “Battery Products site.” . . . The settlement agreement’s explicit reference to the Counterclaim thus indicates that the agreement was likewise using “Battery Products” as shor thand for Battery Products, Inc.
Maj. Op. at 5–6.

The central dispute between these two analys es of the Settlement Agreement is the meaning of the term “Battery Produ cts.” In the above excerpt, the district court emphasizes that the term most likely refers to a 1984 letter writ ten before the corporate entity Battery Products, Inc. existed. The district court also emphasi zes that defining “Battery Products” to mean the facility eventually owned by Battery Products, Inc., rather than the entire facility that manufactured both primary and storage batteries, would undermine the purpose of the Settlement Agreement, which was “to prepare a comprehensiv e identification of insu rance exposures, and then divide them by site into released sites or on-notice sites.” R. 400 (Opinion at 13) (Page ID #2887). The majority opinion, by contrast, emphasizes that the Settlement Agreement referred to
other facilities based on the en tities the operated them, and that Battery Products , Inc. operated the battery products manufacturing facility but not the storage battery ma nufacturing facility. The majority also emphasizes that the capitalization of “Battery Products” indicates that the term is short for Battery Products, Inc., not a genera l reference to the products manufactured at the facility. Each of these opi nions makes a convincing case fo r the wisdom of its proposed interpretation of the term “Battery Products” in the Settlement Agreement. Neither makes a convincing case that the other in terpretation is an impermissi ble construction of the term.No. 16-1264 Employers Insurance of Wausau, et al. v. McGraw Edison Company

-10- A contract is unambiguous when it “fairl y admits of but one interpretation.” Allstate Ins.
Co. v. Goldwater , 415 N.W.2d 2, 4 (Mich. Ct. App. 1987). This Settlement Agreement “fairly admits of” two interpretations. Id. Therefore, this Settlement Agreement is ambiguous. When a contract is ambiguous, the district cour t must hold an evidentiary hearing. See RE/MAX Int’l, Inc. v. Realty One, Inc. , 271 F.3d 633, 646 (6th Cir. 2001). Becau se the Settlement Agreement is ambiguous, the district court abused its discre tion by failing to hold an evidentiary hearing.

I concur with the majority’s judgment th at the district court properly exercised jurisdiction over the declaratory-ju dgment action. I disagree with the majority’s view that the contract is unambiguous, and I would remand for an evidentiary hearing. Therefore, I respectfully dissent.