Opinion ID: 597450
Heading Depth: 3
Heading Rank: 2

Heading: Effect of the Release

Text: 28 Having determined that a release can be effective to allocate among responsible parties the financial burden of CERCLA clean-up liability, we now turn to the specific language of the release at issue in this appeal, to determine whether it operates to allocate the cost among these parties. The district judge, applying Ohio law, concluded that the release was effective to bar AMI's state cause of action. If the district court correctly comprehended Ohio law, then we will need to reverse the judgment awarded AMI on its CERCLA cause of action, since Ohio law controls our inquiry concerning the effectiveness of this particular release. 6 See Mardan, 804 F.2d at 1460. However, we are unable to agree with the district court's holding, since we conclude that Ohio's view of the law of mutual mistake in the context of releases of this nature may prevent our giving effect to the release to the extent that it would bar unanticipated environmental claims. Consequently, while we disagree with the basis of the district court's holding that the release is valid under Ohio law, the result of our conclusion that it may be invalid under Ohio law ultimately could be the affirmance of the court's holding that the release cannot be given effect to bar AMI's CERCLA claims for reimbursement for the money it expended to clean up defendants' facility. 29 In disposing of AMI's state claims, the district court cited American Druggists' Ins. Co. v. Equifax, Inc., 505 F.Supp. 66, 68 (S.D.Ohio 1980), for the proposition that anticipatory releases are valid under Ohio law. 7 30 While we do not disagree with the district court's statement of the general rule of Ohio law concerning the effect of anticipatory releases, we cannot agree that it necessarily follows that the release in question was effective under the circumstances of this case. That is because Ohio courts have carved out an important exception to the general rule. In Sloan v. Standard Oil Co., 177 Ohio St. 149, 203 N.E.2d 237 (1964), the Ohio Supreme Court held that verbatim terms of a general release are not controlling under circumstances where the parties to a release did not actually intend to discharge all liability. The court set out the Ohio rule for avoiding releases in the syllabus to that opinion: 31 1. A release may be avoided where the releasor can establish by clear and convincing evidence that it was executed by mutual mistake, as between himself and the release, of a past or present fact material to the release, as where there was a mutual mistake as to the existence of any injury of the releasor, unless it appears further that the parties intended that claims for all injuries, whether known or unknown at the time of the execution of the release, be relinquished. 32 2. Whether the parties to a release actually intended to discharge all liability is a question of fact for the trier of the facts. 33 3. The terms of a release cannot circumvent the powers of equity to correct mistakes. 34 Id. at 149, 203 N.E.2d at 238 (citation omitted). The court went on to point out that [t]he dispositive inquiry in each case is what did the parties intend? ... Because intent is a question of fact, it is necessary in each case to examine all the circumstances surrounding the execution of the release. Id. at 152-53, 203 N.E.2d at 240. 35 The Ohio Supreme Court set out factors to be considered in determining the intent of the parties: 36 Certain factors have been judicially recognized as aids whereby the intent of the parties at the time the release was executed may be determined. Stated favorably to the party seeking rescission or cancellation, these factors are: The absence of bargaining and negotiating leading to settlement; the releasee is clearly liable; absence of discussion concerning [the type of injuries suffered]; the contention that the injuries were in fact unknown at the time the release was executed is reasonable; an inadequate amount of consideration received compared with the risk of the existence of unknown injuries; haste by the releasee in securing the release; and the terms of the release exclude the injuries alleged. 37 Id. at 153, 203 N.E.2d at 240 (citations omitted). In Sloan, the plaintiff was in a car accident and had experienced only headaches and a stiff neck prior to signing a release and receiving a check for the cost of repairing his car; twelve months after the accident, the plaintiff underwent an operation for a ruptured cervical disc that was found to have resulted from the automobile accident. The court held that because the settlement represented the cost of the plaintiff's car repairs and neither party realized or discussed the possibility that the plaintiff had sustained a severe personal injury at the time the release was signed, the release did not bar plaintiff's claim for the personal injury despite contract language indicating that the plaintiff discharged and released the defendant from all liability, claims, demands, controversies, damages, actions, and cause of action whatsoever, either in law or equity, which the undersigned ... have or may have, now or hereafter by reason of or in any wise incident to or resulting from the accident hereinbefore mentioned. Id. at 150, 203 N.E.2d at 238-38. 38 In a factually similar case, the Ohio Court of Appeals in Woyma v. Ciolek, 11 Ohio App.3d 288, 465 N.E.2d 486 (1983), reached the same conclusion, upholding a $22,500 jury award to compensate the plaintiff for a latent injury that resulted in severe neck, arm, and shoulder pain, dizzy spells, and the inability to stand up straight, but which was undiagnosed and unknown at the time the plaintiff signed a release and received $15 to compensate her for three days of headaches and neck pain. The release in that case stated that it was to terminate all claims for both known and unknown injuries and damages [of] whatever nature, including all future developments thereof, in any way growing out of or connected with or which may hereafter in any [way] grow out of or be connected with said accident.... Id. at 290, 465 N.E.2d at 488. In applying the factors set out in Sloan, that court emphasized that the negotiations centered on subjects other than the plaintiff's personal injuries, and did not appear to involve any attempts to bargain or negotiate a sum for the relinquishment of all future physical injury claims. Instead, [plaintiff and defendant's insurance company] only discussed the medical bills already incurred. Id. 39 These opinions demonstrate that under Ohio case law, even where a release contains unambiguous language that purports to bar claims based on unknown future causes, the release will not be effective where evidence clearly indicates that, at the time they signed the release, the parties had neither foreseen nor considered the specific cause which later gave rise to the claim. 40 The record before us supports the district court's determination that the source of the environmental hazard was the dilapidated state of the facility's roof and the absence of a sprinkler system. These conditions largely came about near or after the time of the release and, in any case, came well after the possession and ownership of the facility and all the equipment were fully transferred to defendants. The OEPA's intervention did not begin until nearly two years after the release was signed. However, upon the state of the record, we are unable to say whether, at the time the release was executed, the parties contemplated environmental claims or circumstances that would give rise to such claims. The fact that the events causing the harm upon which liability is predicated had not occurred at the time of the signing of a release is strong evidence that the parties did not intend the release to bar such liability. See Swenson v. Ewy, 54 Ohio St.2d 470, 475, 377 N.E.2d 519, 523 (1978). 41 Accordingly, we must remand this cause to the district court in order that a record may be developed that will permit the court to address the criteria set out by the Ohio Supreme Court in Sloan and to determine whether the evidence clearly and convincingly establishes that the parties did not intend the release to cover liability for environmental damage in general or the CERCLA cleanup costs in particular.