Source: https://m.openjurist.org/81/f3d/328
Timestamp: 2020-07-02 10:13:53
Document Index: 179975542

Matched Legal Cases: ['§ 13', '§ 58', '§ 9601', '§ 58', '§ 58', '§ 1291', '§ 9613', '§ 542', '§ 601', '§ 58', '§ 58', '§ 58']

81 F3d 328 Sumitomo Machinery Corporation of America Inc v. Alliedsignal Inc | OpenJurist
81 F. 3d 328 - Sumitomo Machinery Corporation of America Inc v. Alliedsignal Inc
81 F3d 328 Sumitomo Machinery Corporation of America Inc v. Alliedsignal Inc
81 F.3d 328
42 ERC 1545, 26 Envtl. L. Rep. 20,977
SUMITOMO MACHINERY CORPORATION OF AMERICA, INC.
ALLIEDSIGNAL, INC., Appellant.
No. 95-5138.
On Appeal From the United States District Court For the District of New Jersey (D.C. Civil Action No. 91-cv-01790).
Mark J. Malone (argued), Lori D. Linskey, Stier, Anderson & Malone, Bridgewater, NJ, for Appellee.
Douglas S. Eakeley (argued), Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, for Appellant.
In 1991, Sumitomo Machinery Corporation of America ("Sumitomo") and AlliedSignal Inc. ("Allied") settled an environmental lawsuit concerning property sold to Sumitomo by a predecessor of Allied. Their respective responsibilities were delineated in an Environmental Agreement ("Agreement") which incorporated a cleanup plan approved by the New Jersey Department of Environmental Protection ("NJDEP").1 In 1994, NJDEP tightened the radioactive remediation requirements applicable to the property, effectively giving Sumitomo the choice of executing a Declaration of Environmental Restrictions and Grant of Easement ("DER") or remediating to a higher standard than originally approved. A DER attaches to the title of the land and restricts certain future uses without NJDEP approval.
By 1988, government investigation had revealed radioactive contamination on the Site. In 1984 Bendix had merged into Allied, and Allied, as successor, took the lead in formulating a remediation plan for all the land formerly owned by Bendix. Meanwhile, Sumitomo moved its operations out-of-state in 1988 and attempted to sell the Site. To do so, Sumitomo had to institute a cleanup plan approved by NJDEP. See Environmental Cleanup Responsibility Act, N.J. Stat. Ann. §§ 13:1K-6 to 13:1K-13 (West 1991) ("ECRA"), repealed and replaced by Industrial Site Recovery Act of 1993, N.J. Stat. Ann. §§ 58:10B-1 to 58:10B-20 (West Supp.1995) ("ISRA").
Unsatisfied with Allied's efforts, Sumitomo hired Dames & Moore, an environmental consulting firm, to perform various environmental tests and to draw up a cleanup plan to submit to NJDEP. In January 1991, Dames & Moore submitted an "ECRA Remedial Investigation and Cleanup Plan" ("Proposed Cleanup Plan") to NJDEP. According to the plan, radioactive contamination would be remediated to 5 pCi/gm for the first 15 cm. of soil, and 15 pCi/gm for any deeper soil ("5/15 standard").2 Dames & Moore estimated that the plan would require excavating only 300 cubic feet of dirt to remove the "hot spots" of radiation that pushed the site over the 5/15 standard.
2. PCBs in Soil ...
The proposal is acceptable provided that a deed restriction be placed on properties where elevated levels of contaminants are allowed to remain on-site.... The deed restriction shall not allow contaminated subsurface soil to be brought to the surface (0-2') above allowable levels.
App. at 475. NJDEP similarly required a DER for metals (chromium): "Should the metal results be similar to those found in the earlier samples and the chromium is found to be in the trivalent form, no remedial action other than a deed restriction shall be required." Id.
A model DER was attached to the Plan Approval. It states that by executing a DER, the owner of property "impose[s] certain restrictions upon the use and occupancy of the Property, to restrict certain activities at the Property, and ... grant[s] an easement to NJDEPE." See App. at 301; see also 24 N.J. Reg. 401 (proposed regulation N.J. Admin. Code 7:26D, Appendix A, "Model Document Declaration of Environmental Restrictions and Grant of Easement"). The owner agrees to avoid taking actions that may disturb clean soil covering contaminated land, or that may otherwise cause migration of contaminants. The easement allows NJDEP to enter onto the land, inspect its condition, and do remedial work. The DER is recorded and runs with the property until NJDEP executes and records a release. NJDEP, persons likely to suffer injury, and any citizen of New Jersey are entitled to enforce the DER. Future owners are put on notice by the recordation, and the DER itself requires the owner to notify any lessees of the DER.
In April 1991, Sumitomo sued Allied under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.A. §§ 9601-9675 (West 1994), to recover response costs for remediating the site. In September 1991, a month after NJDEP approved Sumitomo's plan, the parties settled the suit, and each parties' responsibilities were laid out in the Agreement. Overall, the Agreement shifted the responsibility and costs of cleaning Sumitomo's land onto Allied. The cleanup was to proceed according to the Proposed Cleanup Plan as modified by the Plan Approval.
NJDEP approved the Plan Addendum, but under the more stringent requirements of ISRA, which had been enacted after the Plan Approval. The new legislation established two remediation standards, residential and nonresidential. See § 58:10B-12(c)(1). The residential remediation standard refers to contaminant levels that do not exceed the health risk level appropriate for residential use, as determined by the agency. The nonresidential standard refers to a higher risk level appropriate for uses that are not residential. If a cleanup plan proposes to remediate real property to nonresidential standards, ISRA requires a DER to restrict use of the property to non-residential uses and other uses compatible with the extent of contamination and, in addition, restricts any activities that may bring contaminants above ground. See § 58:10B-13(a)(2).
The NJDEP agrees with your position that the radiological criteria for this site should be 5 pCi/gm above background in the first six inches of soil and 15 pCi/gm in any subsequent six inch layer for [various radiological contaminants]....
However, the NJDEP does not agree with your proposal regarding the issue of unrestricted use. Be advised that, in accordance with P.L.1993, c. 139, an institutional and/or an engineering control, in the form of a Declaration of Environmental Restriction, will be required if any concentrations will remain in the soils greater than 5 pCi/gm. This will ensure that any affected soils will not be disturbed. "Unrestricted use" will be approved when soil concentrations are less than 5 pCi/gm throughout the soil column.
App. at 202. In effect, NJDEP had changed the residential standard applicable to Allied's cleanup from 3 pCi/gm to 5 pCi/gm, but had not altered ISRA's statutory DER requirement. Thus, Allied could still remediate to the 5/15 standard in the Proposed Cleanup Plan and Plan Approval, but Sumitomo would have to agree to execute a DER. Alternatively, Allied could remediate the entire soil column to 5 pCi/gm.
Despite continued efforts by Allied, NJDEP did not change its standards any further. Sumitomo would not execute a DER for the 5/15 standard, so Allied requested the district court to determine, on an expedited basis, whether Sumitomo must do so under the Agreement. By its terms, the Agreement is governed by the laws of New Jersey, and the parties did not argue otherwise. After reviewing the parties' briefs and affidavits accompanying the motion, the district court ruled for Sumitomo, finding that under New Jersey law, the Agreement unambiguously did not obligate Sumitomo to enter into the DER, and to the contrary, placed the burden of regulatory change upon Allied. This appeal followed.
Under 28 U.S.C. § 1291, we have jurisdiction to entertain an appeal from the final order of the district court. The original suit was brought under the Comprehensive Environmental Response, Compensation, and Liability Act, which vests original and exclusive jurisdiction in federal district courts. See 42 U.S.C. § 9613(b) (1994). In the consent order filed in conjunction with the settlement, the district court retained jurisdiction to enforce the Agreement and properly heard Allied's motion.
When resolving a contract dispute, the initial determination is whether the contract is ambiguous concerning the dispute between the parties, an issue of law afforded plenary review. See Teamsters Indus. Emp. Welfare Fund v. Rolls-Royce, 989 F.2d 132, 135 (3d Cir.1993).
A contract is ambiguous "where the contract is susceptible of more than one meaning." Briggs v. United Shoe Machinery Corp., 92 N.J.Eq. 277, 287, 114 A. 538, 542 (Err.& App.), cert. denied, 254 U.S. 653, 41 S.Ct. 149, 65 L.Ed. 459 (1920). In American Cyanamid Co. v. Fermenta Animal Health Co., 54 F.3d 177 (3d Cir.1995), we had occasion to consider how a New Jersey court would determine whether there is "more than one meaning":
Evidence of the circumstances is always admissible in aid of the interpretation of an integrated agreement. This is so even when the contract on its face is free from ambiguity. The polestar of construction is the intention of the parties to the contract as revealed by the language used, taken as an entirety; and, in the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain are necessarily to be regarded....
[Atlantic Northern Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301, 96 A.2d 652, 656 (N.J.1953).]
It is important for present purposes to note that extrinsic evidence of the negotiations, conduct and other circumstances of the parties is important to a court's analysis of whether an agreement is ambiguous only to the extent, if any, that such evidence provides "objective indicia that, from the linguistic reference point of the parties, the terms of the contract are susceptible of different meanings." Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3d Cir.1980). That is, extrinsic evidence is permitted because the law recognizes that the meaning of words can depend on context, and what may seem unambiguous without context (or in the context that the judge may hypothesize, based on his or her own experience) may be ambiguous when understood from the "linguistic reference point of the parties." Id. See 3 Arthur L. Corbin, Corbin on Contracts § 542 (1960). Cf. 4 Samuel Williston & Walter H.E. Jaeger, A Treatise on the Laws of Contracts § 601, at 310-11 (3d ed.1961).
Id. at 181-82. We now turn to the Agreement to ascertain whether it is susceptible to more than one meaning.
(3) the conduct of any work at the Site or compliance with requirements that may be imposed by the NJDEPE or other federal, state or local governmental authorities relating to or arising from such Existing Environmental Conditions, including, but not limited to, the posting of required financial assurances, (the "Work").
App. at 269 (emphasis added). It also undertook the risk and cost of more stringent regulations:
5. Implementation of Cleanup Plan. ... If new, more stringent laws or regulations are enacted which require additional work to be performed at the Site with respect to such Existing Environmental Conditions, ALLIED-SIGNAL shall comply with such laws or regulations to the extent required by the NJDEPE....
6. Cooperation in Sale or Lease of Site. ALLIED-SIGNAL shall cooperate fully with SUMITOMO in the event of a sale or lease of all or a portion of the Site.... SUMITOMO shall provide any such purchaser or lessee with a copy of this Agreement and any "Declaration of Environmental Restrictions and Grant of Easement" ("Deed Restrictions") which the NJDEPE may impose or require for the Site. SUMITOMO or any such purchaser or lessee shall fully comply with the terms of such Deed Restrictions which limit utilization of the Site. ALLIED-SIGNAL shall comply with the terms of such Deed Restrictions that are applicable to its conduct of the Work and shall pay for any portion of the Work required by the NJDEPE as part of any "Deed Restrictions."
Id. at 273-74 (emphasis added).
ISRA gives the owner of contaminated property a choice between a DER or a more stringent remediation standard. Property may be remediated to a standard less stringent than the residential soil remediation standard if a DER is executed, see § 58:10B-13(a), but NJDEP may not impose a DER without the consent of the owner. See § 58:10B-12(h)(3). If the owner does not consent, he or she is required to remediate to the residential soil remediation standard. See § 58:10B-13(b). While ISRA may properly be viewed as a more "stringent law" within the meaning of Paragraph 5 of the Agreement, its imposition of a DER as a condition of utilizing a less strict standard continues the practice that existed prior to ISRA.
If "imposed or required" were read throughout the Agreement to exclude any regulations or laws imposed in the form of alternatives, Allied could not be required to remediate to the more stringent standard. Paragraph 1(b)(3) states that Allied will pay "all costs ... arising from ... compliance with requirements that may be imposed by the NJDEPE," and Paragraph 5 states that Allied will comply with "more stringent laws or regulations," but only "to the extent required by the NJDEPE." (emphasis added). Here, NJDEP required either that a radiological DER be executed or that the entire soil column be remediated to the residential standard. Just as the radiological DER was not absolutely imposed on Sumitomo, neither was the more stringent standard absolutely imposed on Allied. If we followed Sumitomo's reading of "imposed or required" to its logical conclusion, DERs would fall outside the scope of the Agreement.
When a contract is ambiguous, the "fact-finder must attempt to discover what the contracting parties ... intended [the disputed provisions] to mean." Teamsters Indus. Emp. Welfare Fund, 989 F.2d at 136. In order to make such a determination, "objective evidence in support of [the competing] interpretation[s] should be considered by the fact finder." Mellon Bank, 619 F.2d at 1011. When there is a material conflict in the extrinsic evidence concerning the objective context of the contract, the trier of fact has no choice but to conduct an evidentiary hearing and resolve the conflict. On remand, the district court will hear all relevant extrinsic evidence the parties wish to tender, will resolve any conflict in that evidence, and will make findings of fact with respect to the intent of the parties.
Honorable William A. Norris, United States Circuit Judge for the Ninth Circuit, sitting by designation
In 1994, the New Jersey Department of Environmental Protection and Energy ("NJDEPE") shortened its name to New Jersey Department of Environmental Protection
"pCi/gm" stands for picocuries per gram, a standard of radiological activity