Opinion ID: 2973669
Heading Depth: 3
Heading Rank: 3

Heading: 1.13 Regulatory Responsibilities

Text: The Subcontractor(s) shall assume total regulatory responsibility, liability, and title to the wastes and recyclable material upon loading onto the Subcontractor’s vehicle at the ETTP site. Any wastes and/or by-products generated during shipment, storage, disposal and/or other management of the waste shall be the responsibility of the -7- Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL Subcontractor(s) and shall be disposed via approved disposal methods and procedures. Coy/Superior has argued that BNFL’s reliance on this contract provision is inapposite because it does not govern hazardous waste, title to and liability for hazardous waste could not legally be transferred to Coy/Superior, BNFL did not have authority to transfer title of the hazardous waste to Coy/Superior, and even if the contract provision could transfer title and liability it would not do so until the condensers were loaded onto vehicles for transportation off the ETTP. The district court focused its analysis on the argument that section C.1.13 should be read to transfer title only when the materials were loaded onto Coy/Superior’s vehicle for their ultimate removal from the ETTP, and not upon loading simply to be moved to Coy/Superior’s worksite at Portal 10. The district court determined that section C.1.13 was ambiguous as to precisely when title and environmental liability transferred because both possible interpretations were reasonable. The district court further determined that BNFL drafted the subcontract, the ambiguity was latent, and Coy/Superior relied on its interpretation in submitting its bid. Consequently, the district court applied the doctrine of contra proferentem and enforced Coy/Superior’s supposed interpretation of the provision. An order was entered declaring that BNFL was owner of and responsible for the asbestos-laden condenser remnants located at the Portal 10 worksite. In its cross-appeal, BNFL challenges the district court’s conclusion that Coy/Superior relied on its interpretation of section C.1.13 that title to and liability for asbestos waste materials would not be transferred to Coy/Superior until those materials were loaded onto Coy/Superior’s vehicles for the purpose of removing them from the ETTP. BNFL points to the well-settled rule that “where -8- Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL a contractor seeks recovery based on his interpretation of an ambiguous contract, he must show that he relied on this interpretation in submitting his bid.” Lear Siegler Management Servs. Corp. v. United States, 867 F.2d 600, 603 (Fed. Cir. 1989). The burden of proving reliance on the claimed interpretation thus falls on the contractor. Fruin-Colnon Corp. v. United States, 912 F.3d 1426 (Fed. Cir. 1990). BNFL asserts that Coy/Superior did not offer any evidence at all to support its claim that it relied on any interpretation of section C.1.13 at the time it prepared its bid. BNFL points out that Coy/Superior has consistently maintained that title to and liability for the asbestos wastes could not and did not transfer to Coy/Superior at any point in time in spite of the language of section C.1.13. The only time Coy/Superior has departed from this argument is in a brief, unsupported argument in its summary judgment motion that under section C.1.13 “title would pass when loaded on vehicles for shipment off ETTP to a disposal site.” The district court focused on this statement. Even though Coy/Superior did not point to evidence which established reliance on this interpretation, the district court examined the evidence before it and was satisfied that there was evidence of such reliance. The evidence the district court pointed to in support of its finding of reliance primarily consisted of references indicating that Coy/Superior did not intend to do any asbestos work as part of the project. Coy/Superior’s accepted proposal, as well as certain testimony, does indicate that Coy/Superior did not believe asbestos work would be part of the deal. However, that does not establish that at the time it submitted its bid Coy/Superior was relying on its interpretation that under section C.1.13, title to and liability for any asbestos wastes would not be passed to Coy/Superior until the materials were loaded for ultimate delivery off of the ETTP. There is no testimony, -9- Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL evidence, or even allegation from Coy/Superior that at the time it submitted its bid that was its understanding of section C.1.13. Coy/Superior does not even attempt to argue this point on appeal. BNFL is correct that the district court erred in applying the doctrine of contra proferentem because Coy/Superior did not establish the necessary element of reliance. The district court’s application of the doctrine of contra proferentem rendered it unnecessary for the district court to address Coy/Superior’s primary argument that section C.1.13 could not transfer title to or liability for the asbestos waste to Coy/Superior at any point in time. However, the district court did address, and reject, this argument in the context of granting summary judgment in favor of BNFL on Coy/Superior’s fraud claim. Since summary judgment on the fraud claim has also been appealed, the contours of Coy/Superior’s argument have been fully developed both before the district court and on appeal. Therefore, this court is in a position to address the issue instead of remanding to the district court to reconsider the cross motions for summary judgment on the declaratory judgment claim. The district court found that the language of section C.1.13 of the subcontract, which provides that “[plaintiff] shall assume total regulatory responsibility, liability and title to the waste . . .” clearly and unambiguously shifted all the responsibility for the asbestos to Coy/Superior. Coy/Superior claims that this holding was error because federal law prohibits BNFL from effectively transferring title to or liability for the asbestos to another party. Section 107(e)(1) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) states the following: - 10 - Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section. 42 U.S.C. § 9607(e). This provision does not even make any reference to title of hazardous wastes, let alone restrict the transfer of such title as Coy/Superior claims. It only governs the transfer of liability for such wastes. BNFL argues that this statute permits the transfer of liability for the asbestos to Coy/Superior as provided for in section C.1.13 of the subcontract. The Sixth Circuit has held that § 107(e)(1) permits parties to contractually shift CERCLA and other environmental liabilities by means of an indemnity agreement. Olin Corp. v. Yeargin Inc., 146 F.3d 398, 407 (6th Cir. 1998); Niecko v. Emro Marketing Co., 973 F.2d 1296, 1300-01 (6th Cir. 1992). Although the section does not allow a party who is responsible for cleanup costs to escape liability vis-a-vis the federal government, parties may still contractually allocate the costs of environmental clean up among themselves. Niecko, 973 F.2d at 1300-01. “However, whether a particular agreement has shifted such liabilities is a question of state law.” Olin, 146 F.3d at 407. Predicting Tennessee law, the Sixth Circuit has held that an agreement shifts environmental liability if it “contains a clear and unambiguous reference to such costs.” Id. Coy/Superior acknowledges that financial responsibility for environmental cleanup costs can be shifted contractually through insurance, a hold harmless agreement, or an indemnity agreement, but asserts that section C.1.13 of the subcontract is not an indemnity agreement as argued by BNFL. Coy/Superior does not elaborate on this argument or provide any support for the argument that a - 11 - Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL clause such as the one at issue does not transfer liability because it is not explicitly phrased as an indemnity clause. In fact, the case law shows that parties can contractually transfer liability under CERCLA by simply using an “as is” clause. Niecko, 973 F.2d at 1300-01; Velsicol Chemical Corp. v. Reilly Indus., 67 F. Supp. 2d 893, 905 (E.D. Ten. 1999), summarily aff’d, 229 F.3d 1155 (6th Cir. 2000) (unpublished). If a simple “as is” clause in a real estate contract can be sufficient to transfer environmental liability, then section C.1.13 of the subcontract was certainly sufficient to transfer liability. Coy/Superior argues that section C.1.13 could not transfer liability for the asbestos to Coy/Superior because such a transfer is legally impossible. The case law addressing § 107(e)(1) of CERCLA makes it clear that such a contractual shift of liability is possible and was properly executed. Coy/Superior does not offer any other argument except its oft-repeated, but unsupported, mantra that title to the asbestos could not be shifted to Coy/Superior. However, since liability for the asbestos was properly transferred to Coy/Superior, there is no reason to determine who had title to the asbestos-laden materials. Since Coy/Superior’s arguments are not sufficient to support the declaratory judgment that BNFL is responsible for the asbestos, the district court erred when it granted summary judgment in Coy/Superior’s favor on that claim. BNFL is entitled to summary judgment as a matter of law on the declaratory judgment claim. C. Motion to File Third Amended Complaint On December 10, 2003 (four months before trial was scheduled), Coy/Superior filed a motion for leave to file a third amended complaint. The district court denied the motion on the basis that the expanded allegations of intentional fraudulent conduct did not add a new claim or otherwise - 12 - Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL add anything of significance. The second amended complaint already included a fraud claim. Moreover, the district court noted that since there was no significant difference, requiring BNFL to answer a third amended complaint would result in undue prejudice and delay. Coy/Superior has not demonstrated that this ruling was an abuse of discretion. After a responsive pleading has been filed, leave to amend must be freely given when justice so requires. Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962). Nevertheless, leave to amend “should be denied if the amendment is brought in bad faith, for dilatory purposes, results in undue delay or prejudice to the opposing party, or would be futile.” Crawford v. Roane, 53 F.3d 750, 753 (6th Cir. 1995). Coy/Superior argues that justice required granting leave to file its proposed third amended complaint because that version of the complaint included particular allegations of fraud which Coy/Superior did not include in the second amended complaint because it did not become aware of the underlying facts until November 20, 2003. BNFL points out that before granting summary judgment on Coy/Superior’s fraud claim, the district court had been presented with, and considered, both the newly discovered information and Coy/Superior’s legal arguments concerning how it affected the fraud claim. Coy/Superior counters that the district court’s consideration of the new information at the summary judgment stage demonstrates that the district court committed clear error when it denied the motion to file a third amended complaint. The district court refused to permit an amended pleading at a late stage in the litigation where that amended pleading did not add a new defendant or cause of action, but merely included additional information about an existing claim which had been revealed in the course of discovery. The second amended complaint already stated a cause of action for fraud. The district court - 13 - Nos. 04-6001, 04-6087 Coy/Superior Team v. BNFL correctly noted that at trial Coy/Superior would be able to submit any evidence revealed in the course of discovery which tended to support that cause of action. Similarly, while considering the motion for summary judgment as it related to the fraud claim, the district court considered all the evidence presented including the most recently discovered information. Therefore, permitting the motion to file the proposed third amended complaint would not have accomplished any practical purpose. In light of these circumstances, the district court’s conclusion that permitting the amendment would have caused undue prejudice and delay was not an abuse of discretion.