Opinion ID: 579513
Heading Depth: 2
Heading Rank: 1

Heading: Did the District Court Err in Granting Summary Judgment in Favor of Beazer?

Text: 13
14 CERCLA's provision regarding indemnity clauses is truly murky: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. 15 42 U.S.C. § 9607(e)(1). As the district court noted in its opinion, courts around the country have reached different interpretations of this language. This court has held that enforcement of indemnification clauses does not frustrate public policy as expressed in CERCLA. Mardan Corp. v. C.G.C. Music, Ltd., 804 F.2d 1454, 1459 (9th Cir.1986). In Mardan, we reasoned that CERCLA policy would not be frustrated because all responsible parties would remain fully liable to the government, although they would be free to enter into private contractual arrangements essentially tangential to the enforcement of CERCLA's liability provisions. Id. Thus enforcement of the indemnification agreement would not violate public policy under CERCLA.
16 J-H argues that a question of fact remains as to whether it agreed to indemnify Beazer for environmental liability under the Agreement. It asserts that the district court erred in not considering the statements of J-H co-chairman James Black that J-H promised to comply only with workman's compensation laws, overtime laws, labor laws, and industrial health and safety laws, and agreed to indemnify Beazer only for liability arising out of J-H's failure to comply with such laws. 17 Under California law, whether a contract is ambiguous is a question of law. Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866, 871 (9th Cir.) (applying California law), cert. denied, 444 U.S. 981, 100 S.Ct. 483, 62 L.Ed.2d 407 (1979). When interpreting a contract, even when the document is unambiguous on its face, a judge is required to give at least a preliminary consideration [to] all credible evidence offered to prove the intention of the parties. Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 69 Cal.Rptr. 561, 565, 442 P.2d 641, 645 (1968); see also Brobeck, Phleger & Harrison, 602 F.2d at 871 ([T]he trial judge must receive relevant extrinsic evidence that can prove a meaning to which the language of the contract is 'reasonably susceptible.' ). However, after considering the evidence, the court may then exclude it if it tend[s] to prove a meaning of which the language [of the contract] is not reasonably susceptible. Thomas Drayage, 69 Cal.Rptr. at 565 n. 7, 442 P.2d at 645 n. 7; see also Brobeck, Phleger & Harrison, 602 F.2d at 871. If the court finds that the language of the contract is not reasonably susceptible to the suggested interpretation, and excludes the evidence, [t]he case may then be disposed of by summary judgment. Brobeck, Phleger & Harrison, 602 F.2d at 871. 18 The question here, then, is whether an agreement under which J-H agrees to indemnify Beazer for liability arising from J-H's violation of all applicable Federal, State and local laws, ordinances, codes, rules and regulations is reasonably susceptible to the meaning that it in truth refers only to all workman's compensation laws, overtime laws, labor laws, and industrial health and safety laws. J-H contends that, in this context, where J-H was to supply labor and facilities, and Beazer was to supply materials and expertise, this meaning is reasonable. We reject this argument: had the parties chosen to limit the scope of the indemnification clause in the manner J-H suggests, they would surely have made this clear in the Agreement. Cf. Blumenfeld v. R.H. Macy & Co., 92 Cal.App.3d 38, 154 Cal.Rptr. 652, 656 (1979) (refusing to admit extrinsic evidence suggesting one particular cause of action was not assigned, where agreement explicitly assigned all claims against third parties). 19 Thus, the district court did not err in refusing to consider the evidence J-H submitted. There was therefore no issue of fact as to the interpretation of the indemnity clause to preclude summary judgment. However, because issues of fact remained as to the scope of Beazer's involvement in the disposal of the toxic substances, we find the district court erred in granting summary judgment in favor of Beazer. 20
21 J-H does not contest the district court's finding that it was obligated to indemnify Beazer for any liability Beazer incurred as a result of J-H's illegal acts. However, J-H claims that even if the indemnity provision can be read to apply to the violation of environmental laws, it requires that J-H indemnify Beazer only for damages Beazer incurs as a result of J-H's violation of laws, not Beazer's violation of laws. J-H therefore claims the district court erred in granting Beazer's motion for summary judgment because the court ignored this language in the agreement. 22 The language of the agreement and the evidence submitted by the parties suggest that the district court erred on this issue. The agreement requires J-H to indemnify Beazer for liability Beazer incurs as a result of J-H's own actions. There remains an issue of fact as to the level of Beazer's participation in waste disposal, and thus as to its own liability. 23 At the outset, the agreement recognized the possibility of spillage of the materials Beazer provided and of which it retained ownership; such materials would apparently include the toxic chemicals at issue. J-H officers testified that J-H relied on Beazer for information and instructions on the handling of Beazer's chemicals. Additionally, evidence suggests that Beazer's consultant, Dr. Stutz, may have been actively involved in the production process at J-H. J-H submitted the deposition testimony of several of its employees, who described Stutz' participation in the production of Beazer's materials. In particular, these employees described Stutz' supervision and awareness of the procedures for rinsing the tote bins returned by customers--procedure which resulted in the introduction of hazardous chemicals into the evaporation pond from which contamination occurred. 24 On the basis of evidence before the district court when it ruled on the summary judgment motions, a jury could reasonably find Beazer itself was responsible, at least to some extent, for the contamination for which J-H became subject to CERCLA liability. Thus, because it ignored language in the agreement limiting J-H's duty to indemnify to Beazer's liability arising out of J-H's own illegal acts, and failed to consider evidence indicating the existence of issues of material fact, the district court erred in granting summary judgment in favor of Beazer. 25