Court Opinion

ID: 4156248
Source: CourtListenerOpinion
Date Created: 2017-03-28 21:05:25.154184+00
Date Added: 2024-06-11T14:27:07.710506
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CLEAN HARBORS, INC.
Plaintiff,

C.A. NO. N15C-07-081 MMJ CCLD

V.

UNION PACIFIC CORPORATION,

Defendant.

Submitted: January 11, 2017
Decided: March 28, 2017

Upon Defendant Union Paciflc Corporation’S Motion for Summary Judgment
DENIED

Upon Defendant Union Paciflc Corporation’s Motion for Partial Summary
Judgment Against Clean Harbors’ Damages Claim
GRANTED IN PART, DENIED IN PART

Upon Union Paciflc Corporation’s Motion In Limine To Exclude The Expert
Opinions of Stan V. Smith
GRANTED

OPINION

Ann L. Al-Bahish, Esq. (Argued), Jackson Gilmour & Dobbs, P.C., Norton A.
Colvin, Jr., Esq., Mitchell C. Chaney, Esq., Colvin, Chaney, Saenz & Rodriguez,
LLP, James W. Semple, Esq., Cooch and Taylor, PA., Attorneys for Union Paciflc
Corporation

Gary S. Matsko, Esq. (Argued), Christopher J. Marino, Esq. (Argued), Paul L.
Feldman, Esq., Davis Malm & D’Agostine, P.C., Richard L. Renck, Esq.,
Christopher M. Winter, Esq., Jaret P. Hitchings, Esq., Duane Morris LLP,
Attorneys for Plaintiff Clean Harbors, Inc.

JOHNSTON, J.

PROCEDU`RAL CONTEXT

This litigation arises from an alleged breach of an environmental indemnity
provision (“Indemnity”) in a Stock Purchase Agreement (“SPA”). On July 9,
2015, Clean Harbors, Inc. (“Clean Harbors”) filed breach of contract and breach of
implied covenant of good faith and fair dealing claims against Union Pacific
Corporation (“UPC”). Clean Harbors seeks to recover remediation costs for
contamination pursuant to the Indemnity.

The Court will address three motions: UPC’s Motion for Summary
Judgment; UPC’s Motion for Partial Summary Judgment Against Clean Harbors’
Damages Claim; and UPC’s Motion in Limine to Exclude the Expert Opinions of
Stan V. Smith.

STATEMENT OF FACTS

UPC’s subsidiary, USPCI, Inc., owned and operated a licensed hazardous
waste facility located in Wichita, Kansas (the “Wichita Facility”) from 1988-1994.
UPC transferred the Wichita Facility to Laidlaw, Inc. and Laidlaw Transportation,
Inc. (“Laidlaw”) through the SPA in 1994. Safety-Kleen, Inc. succeeded Laidlaw
and Clean Harbors succeeded Safety-Kleen. Clean Harbors has owned and

operated the Wichita Facility since 2002.

Relevant SPA Provisions
The SPA includes a choice of law provision that designated Delaware law to
govern the SPA. Section 8. lO(a) of the SPA contains the Indemnity.

From and after the HWMA Closing, and subject to the limitations in
this Section 8.10(a), Union Pacific shall reimburse, indemnify, defend
and hold harmless Laidlaw Inc., Laidlaw, HWMA, Clive and the
Subsidiaries from, against, and in respect of 80% of all Environmental
Liabilities that may be imposed upon, asserted against or incurred by
Laidlaw Inc., Laidlaw, HWMA, Clive or any Subsidiary and which (i)
are attributable to a Third Party Claim, (ii) arise out of or in
connection with acts or omissions occurring prior to the HWMA
Closing Date, (iii) are incurred with respect to the HRI Wichita
facility located in Wichita, Kansas, and (iv) are not attributable to a
change in Environmental Laws occurring after the HWMA Closing
Date. Union Pacific shall not have any liability under this Section
S.l()(a) until the aggregate of all Environmental Lz'abilities covered
under this Section 8.10(a) exceeds $2,000,000 and then only to the
extent of 80% of such excess and only with respect to amounts spent
within 20 years after the HWMA Closing Date.

(emphasis added).
Section 8.4(b) of the SPA sets forth certain indemnification procedures.

In the event an Indemnifled Party shall have a Claim against any
lndemnifying Party hereunder that involves a third party claim that
could give rise to a right of indemnification under this Agreement (a
“Third Party Claim”), the Indemnified Party shall transmit to the
lndemnifying Party a Claim Notice relating to such Third Party Claim.
During the 30-day period following receipt by an lndemnifying Party
of a Claim Notice or such shorter period (but no shorter than 15 days)
as is necessary for the Indemnified Party to respond to a complaint or
summons (the “Election Period”), an lndemnifying Party shall notify
an Indemnified Party (i) whether the lndemnifying Party disputes its
potential liability to the lndemnifled Party under this Article VIII with
respect to such Third Party Claim or (ii) if the lndemnifying Party
does not dispute its liability to the Indemnified Party, whether an

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lndemnifying Party desires, at the sole cost and expense of such

lndemnifying Party, to defend the Indemnified Party against such

Third Party Claim.

(emphasis added).
EPA and KDHE

UPC’s Resource Conservation and Recovery Act (“RCRA”) Permit became
effective on April 7, 1995. UPC obtained the RCRA Permit from the
Environmental Protection Agency (“EPA”). The RCRA Permit was necessary for
the continued operation of the hazardous waste facility at the Wichita Facility. The
RCRA Permit identified corrective actions that UPC or its successors would be
required to undertake at the Wichita Facility. The RCRA Permit was made
applicable to Laidlaw and its successors through the SPA. As a result, the RCRA
Permit was effective as to Clean Harbors.

The Wichita Facility was part of a collection of land in Northern Wichita
known as the Northern Industrial Corridor Site (“NIC”). Lands in the NIC fell
under the purview of the Kansas Department of Health and Environment
(“KDHE”). The KDHE deemed a landowner whose property was contaminated,
and contributing to the contamination of groundwater within the NIC boundaries, a
Potentially Responsible Party (“PRP”). The KDHE required PRPs to address or
clean up such contamination on their properties

The EPA, a federal agency, and the KDHE, a state agency, exercise separate,

but interrelated authority concerning remediation of environmental contamination
In this case, the two agencies were simultaneously reviewing issues relating to the
Wichita Facility. The EPA and KDHE processes and procedures are parallel, but
intertwined Clean Harbors owed certain obligations to the EPA and the KDHE,
separately.

In 1998 Laidlaw received a demand from the EPA to submit a RCRA
Facility Investigation (“RFI”) “work plan” within 120 days. An RFI’s purpose was
to identify the areas of contamination and to determine whether any affirmative
remediation would have to be completed

That same year Laidlaw received notice from the KDHE that it was a NIC
PRP. On May 28, 1998, Laidlaw provided a Claim Notice to UPC regarding the
EPA demand. On October 30, 1998, Laidlaw provided an additional Claim Notice
to UPC regarding the NIC notification

Laidlaw began work pursuant to the RFI in 1998. Laidlaw continued this
work until 2002, when Clean Harbors became the owner of the Wichita Facility.

In March of 2012, the KDHE issued its Declaration of Corrective Action
Decision (“Declaration”) and Final Corrective Action Decision For Interim
Groundwater Remediation (“NIC Decision”). The Declaration stated in relevant
part:

The Final Corrective Action Decision for Interim Groundwater
Remediation presents the corrective action selected by the Kansas

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Department of Health and Environment (KDHE) for the North
Industrial Corridor (NIC) Site located in Wichita, Kansas. . . . The
preferred remedial actions selected for groundwater remediation for
each GWU [Ground Water Unit] are as follows: For GWU-l, Source
Abatement and MNA . . . . In selecting and declaring this corrective
action, KDHE believes implementation of the remedial actions will
have a beneficial effect on health and the environment

The NIC Decision stated in relevant part:

KDHE has selected a final remedy for the Site after reviewing and
considering all information submitted during the 30 day public
comment period. . . . The Administrative Record file includes all
pertinent documents and site information that form the basis and
rationale for selecting the final remedy. . . . [T]he City of Wichita
proposed to divide the NIC Site into six groundwater units to
streamline the evaluation and eventual selection of remedial actions
for the NIC Site . . . . Groundwater Unit 1 (GWU-I) . . . Confirmed
source areas within GWU-1 include: . . . Safety-Kleen/Clean Harbors .

. Individual source abatement is central to the overall success of
any site-wide remedial action. Therefore, to highlight the importance
of this aspect, source abatement has been explicitly incorporated into
the preferred remedial strategy for each GWU. . . . On the basis of
information obtained during the RI, Alternative GWU1-2, Source
Abatement and MNA, with a groundwater extraction and treatment
contingency (e.g._, Alternative GWU1-4), may facilitate groundwater
restoration within a reasonable timeframe.

The NIC Decision listed the preferred alternative to Groundwater Unit 1 as
“GWU1-2: Source Abatement and MNA.”

In December of 2012, Clean Harbors submitted its work plan to the EPA.
On September 28, 2012, Clean Harbors submitted supplemental reports to the
EPA. The RCRA Permit was renewed the same day. The EPA then provided

comments and described steps to selecting a final remedy on March 7, 2013. On

April 11, 2013, Clean Harbors presented an opportunity to the EPA to advance
remediation under the Indemnity. On June 5, 2013, Clean Harbors met with UPC
to provide an update on the RFI. At this meeting Clean Harbors predicted certain
Corrective Measures that could be imposed by the EPA.

On October 13, 2013, the EPA responded to Clean Harbors and allowed
remediation but did not require it. On February 7, 2014, Clean Harbors submitted
a Claim Notice to UPC regarding a KDHE letter, in which KDHE requested
oversight costs from the NIC. On February 27, 2014, Clean Harbors informed the
EPA that Clean Harbors decided to excavate soils for economic reasons and asked
the EPA for an expedited approval of the interim measure

On March 4, 2014, Clean Harbors provided UPC with a Claim Notice for
reimbursement of “response costs” from the EPA. On March 25, 2014, UPC
began disputing claims. On July 31, 2014, Clean Harbors received approval of the
work plan from the EPA. On December 31, 2014, the Indemnity period ended.

STANDARD OF REVIEW

Summary judgment is granted only if the moving party establishes that there

are no genuine issues of material fact in dispute and judgment may be granted as a

matter of law.l All facts are viewed in a light most favorable to the non-moving

 

‘ super. ct. civ. R. 56(¢).

party.2 Summary judgment may not be granted if the record indicates that a
material fact is in dispute, or if there is a need to clarify the application of law to
the specific circumstances3 When the facts permit a reasonable person to draw
only one inference, the question becomes one for decision as a matter of law.4 If
the non-moving party bears the burden of proof at trial, yet “fails to make a
showing sufficient to establish the existence of an element essential to that party’s
case,” then summary judgment may be granted against that party.5
ANALYSIS
UPC’s Motion for Summary Jadgment

The dispositive question is whether Clean Harbors made a third-party claim
under the SPA that would trigger Clean Harbors’ entitlement to the costs of
remediation.

UPC concedes that the EPA and KDHE are not parties to the SPA.
Therefore, the EPA and KDHE are third parties.

Clean Harbors initiated its investigatory process upon providing its first EPA
Claim Notice to UPC on May 28, 1998. In total, Clean Harbors has provided four
Claim Notices to UPC. The May 28, 1998 Claim Notice was the first Notice.

Clean Harbors informed UPC that RCRA had issued a demand to Clean Harbors to

 

231a/chart v. Davies, 602 A.zd 56, 58_59 (Dei. 1991).
3 super. ct. civ. R. 56(¢).

4 Wooten v. Kiger, 226 A.2d 23 8, 239 (Del. 1967).

5 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

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submit a work plan for an RFI. The second Claim Notice was on October 30,
1998. The purpose of this Claim Notice was to inform UPC of the NIC work being
conducted by Clean Harbors. On February 7, 2014, Clean Harbors provided UPC
with a third Claim Notice regarding KDHE’s requested oversight costs. On March
4, 2014, Clean Harbors gave UPC the fourth Claim Notice. This Notice addressed
EPA’s requested “response costs.”

On March 29, 2012, KDHE released the NIC Decision. KDHE required
groundwater remediation as a corrective action. On July 31, 2014, the EPA sent a
letter to Clean Harbors, approving Clean Harbors’ Interim Remedial Measures
work plan.6

Clean Harbors performed the remediation approved by the EPA. The work
was completed by Clean Harbors’ affiliates Clean Harbors expedited the work in
order to invoice UPC in time to meet the December 31, 2014 indemnification
cutoff. Clean Harbors requested indemnification from UPC in the form of costs
plus markups.

Section 8.4 of the SPA provides that the Indemnified Party shall transmit a
Claim Notice to the lndemnifying Party “[i]n the event an Indemnified Party shall
have a Claim against any lndemnifying Party hereunder that involves a third party

claim that could give rise to a right of indemnification under this Agreement (a

 

6 At this time, the EPA’s Facility Inspection (pursuant to the RCRA) had not yet been completed.
This inspection related to the 1995 RCRA Permit.

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“Third Party Claim”) . . . .” (Emphasis added.) Here, Clean Harbors’ investigation
and remediation efforts resulted from the involvement of the EPA and the KDHE.
lt is undisputed that the EPA and the KDHE are not parties to the SPA. As such,
the EPA and the KDHE are third parties. The EPA and the KDHE approved a
remediation plan. This remediation plan qualifies as at least an interim measure.

The Court finds as a matter of law that Clean Harbors’ remediation work is
an Environmental Liability pursuant to Section 8.10(b) of the SPA. Section
8.10(b) of the SPA provides that “Union Pacific shall . . . indemnify . . . Laidlaw,
Inc., Laidlaw, HWMA, Clive and the Subsidiaries . . . in respect of 80% of all
Environmental Liabilities that may be . . . incurred by Laidlaw, Inc., Laidlaw,
HWMA, Clive or any Subsidiary as a result of a requirement under Environmental
Laws . . . .” The remediation work is attributable to a Third Party Claim pursuant
to Section 8.10(a) of the SPA because the work resulted from the involvement of
the EPA and the KDHE.

Therefore, Clean Harbors is entitled to indemnification of the amounts spent
prior to December 31, 2014, as provided by Section 8.10(a) of the SPA.

Nevertheless, the Court finds that genuine issues of material fact exist that
must be resolved by the finder of fact. These issues include: (1) the reasonableness
of the extent of remediation performed by Clean Harbors; (2) whether Clean

Harbors complied with the SPA 8.4 Claims Notice Provisions; and (3) the amount

of indemnification that UPC owes Clean Harbors

THEREFORE, UPC’s Motion for Summary Judgment is hereby DENIED.

UPC’s Motion for Partial Summary Judgment on Damages

The Court must decide whether Clean Harbors is entitled to more than its
direct out-of-pocket costs either in the form of profits or lost opportunity costs

lt is undisputed that Clean Harbors used internal resources and outside
vendors to investigate and perform remediation work to eliminate environmental
contamination at the Wichita Facility. Clean Harbors’ internal remediation
projects were managed by “Discounted Operations,” a department of Clean
Harbors that acts as the project manager. Discounted Operations agreed to pay
other divisions of Clean Harbors for services performed in furtherance of
remediation work. However, no actual money changed hands between Discounted
Operations and these branches Instead, the payment was debited from Clean
Harbors’ reserve account for environmental liabilities Neveitheless, the amounts
charged by Clean Harbors to UPC included a value above the direct costs of
remediation.

Section 8.7 of the SPA provides: “The amount of any Claim shall be reduced
by any . . . other benefit received by the Indemnified Party as a result of any Claim.
The Indemnified Party shall have the obligation to reasonably mitigate the losses to

the lndemnifying Party from any Claim.” Section 8.10 of the SPA provides that

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the Indemnity only applies to “amounts spent” by Clean Harbors

This case is analogous to Crain Brothers., Inc. v. Daqaesne Slag Prodacts
Company.7 ln Crain, the United States Court of Appeals for the Third Circuit
found that lost profits only may be recovered when lost profits are proved with
reasonable certainty.8 Crain, the indemnitee, sought damages for lost profits it
allegedly incurred for work it self-performed Crain argued that “if an independent
contractor . . . performed this work for Crain, an item of profit would properly have
been included in the charge.”9 However, the Court held that “Crain was out-of-
pocket only the cost of the operation.”lo The Court went on to find that “Crain
[was] entitled to be compensated fully for its losses and expenses as a result of the
accident in suit, not to make a profit on the mishap.”ll

ln this case, discovery has closed. The Court finds that there is no record
evidence of actual specific lost opportunities Recovery of lost profits and
opportunities is not appropriate in this situation Profits and markups do not
qualify as “amounts spent” pursuant to Section 8.10(a) of the SPA. Mitigation of

damages resulted in reduced remediation costs, which qualified as an “other

benefit” under Section 8.7 of the SPA.

 

7 273 F.zd 948 (3rd cir. 1959).
8 1a at 950.

9 Id. at 952.

‘0 la at 953.

“ 1a

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THEREFORE, UPC’s Motion for Partial Summary Judgment Against
Clean Harbors’ Damages Claim is hereby GRANTED IN PART, The measure of
damages, which may not include markups, lost profits, or lost opportunities
remains a question of fact.

UPC’s Motion in Limine to Exclude the Expert 0pini0ns of Stan V. Smith

Clean Harbors offers Dr. Smith as an expert witness in the field of
economics The summary of Dr. Smith’s intended testimony concerns opportunity
costs, and an explanation to the jury of the economic principles that support the
Service Providers charging an amount higher than their direct out-of-pocket costs

The Court has found that Clean Harbors may not recover markups, lost
profits, or lost opportunities as damages

THEREFORE, UPC’s Motion in Limine to Exclude the Expert Opinions of
Stan V. Smith is hereby GRANTED.

CONCLUSION

UPC’s Motion for Summary Judgment is hereby DENIED. The Court finds
that Clean Harbors is entitled to indemnification of the amounts spent prior to
December 31, 2014, pursuant Section 8.10(a) of the SPA. The Court finds that
genuine issues of material fact exist, including: (1) the reasonableness of the extent
of remediation performed by Clean Harbors; (2) whether Clean Harbors complied

with the SPA 8.4 Claims Notice Provisions; and (3) the amount of indemnification

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that UPC owes Clean Harbors

UPC’s Motion for Partial Summary Judgment Against Clean Harbors’
Damages Claim is hereby GRANTED IN PART. UPC may not recover lost
profits, or markups, or lost opportunity costs However, the Court finds that the
measure of damages is a question of fact.

The Court has found that Clean Harbors may not recover markups, lost
profits, or lost opportunities as damages THEREFORE, UPC’s Motion in
Limine to Exclude the Expert Opinions of Stan V. Smith is GRANTED.

IT IS SO ORDERED.

 

Th olnerable¢f¢lary M. Johnston

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