Court Opinion

ID: 70450
Source: CourtListenerOpinion
Date Created: 2010-04-26 07:02:19+00
Date Added: 2024-06-11T09:39:20.598441
License: Public Domain

PUBLISH
              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT

                             No. 93-9278

                D. C. Docket No. 1:91-cv-1803-RLV

ATLANTA GAS LIGHT COMPANY,

                                                 Plaintiff-Appellant,

                               versus

AETNA CASUALTY AND SURETY COMPANY,
AMERICAN HOME ASSURANCE COMPANY,
AMERICAN REINSURANCE COMPANY,
ASSOCIATED ELECTRIC & GAS
INSURANCE SERVICES, LTD.,
BIRMINGHAM FIRE INSURANCE COMPANY, et al.,

                                              Defendants-Appellees.

          Appeal from the United States District Court
              for the Northern District of Georgia

                         (October 20, 1995)
Before COX, Circuit Judge, FAY, Senior Circuit Judge, and NELSON*,
District Judge.

COX, Circuit Judge:

      *
        Honorable Edwin L. Nelson, U. S. District Judge for the
Northern District of Alabama, sitting by designation.
     Atlanta Gas Light Company (AGL) appeals following the entry of

summary judgment for thirteen insurers in this declaratory judgment

action.     AGL filed this action to determine the extent of its

insurers' liability for environmental cleanup costs arising from

twelve of its former manufactured gas plants (MGPs).         Because we

conclude that no justiciable controversy existed when the complaint

was filed, we vacate the district court's entry of summary judgment

and remand with instructions to dismiss for want of jurisdiction.

I.   BACKGROUND

     AGL currently is in the business of distributing natural gas

in Georgia.     Prior to the availability of natural gas, from the

mid-1800s until sometime in the 1950s, AGL, or its predecessor

Savannah Gas, owned and operated several MGPs in Georgia and

Florida.1   MGPs produced gas from oil, coal, pine knots, and other

combustibles.    Manufactured gas became obsolete with the advent of

interstate pipelines in the 1950s, which made cheaper natural gas

readily accessible.         Because natural gas quickly became widely

available, the need for MGPs disappeared, and AGL dismantled its

plants or simply razed them and left the rubble on site.

     Gone and perhaps forgotten, the manufactured gas industry

later came back to haunt AGL.            Various byproducts of the gas

manufacturing     process    contained   hazardous   materials   such   as

benzene, toluene, xylene, and cyanide.       AGL's methods of disposing

     1
      AGL, or in some cases Savannah Gas, which merged with AGL in
1966, owned MGPs in Orlando, Sanford, and St. Augustine, Florida,
and in Athens, Augusta, Brunswick, Griffin, Macon, Rome, Savannah,
Valdosta, and Waycross, Georgia. (R. 6 at 90 Ex. C.) The St.
Augustine and Orlando sites are not at issue on appeal.

                                     2
of these byproducts were unsophisticated.             It either covered the

wastes with dirt, dumped them into unlined pits, or buried them in

brick containers, many of which were unsealed and later began to

leak.

     During their heyday, MGPs were not subject to environmental

regulations.       By the mid-1980s, though, MGPs had come under closer

regulatory scrutiny, and AGL was aware that the wastes buried on

its sites could pose environmental threats.             In 1985, the United

States Environmental Protection Agency (EPA), pursuant to the

Comprehensive Environmental Response, Compensation, and Liability

Act (CERCLA), commenced emergency cleanup operations at AGL's Rome,

Georgia site after the then owner of the site uncovered a deposit

of coal tar.       In 1988, AGL paid $75,000 to reimburse the EPA for

cleanup costs at Rome, but admitted no liability and sought no

recovery from its insurers.

     AGL      retained   environmental     counsel   after    the   EPA   raised

"concerns" about adverse effects from former MGP sites around the

country.2      AGL's lawyers in turn engaged a consulting firm, Law

Environmental, to conduct preliminary assessments of the sites

before       any   government   agencies    took     formal   action.        Law

Environmental reported to AGL that, if remediation was required,

the cost would be "in excess of several million dollars."                 (R. 54-

         2
        The EPA commissioned a national study to look into the
threats to public health and the environment posed by former MGP
sites. In 1985, the study, known as the Radian Report, concluded
that much more research was needed to ascertain the full effects of
wastes deposited at some 1500 former MGP sites around the country,
including those owned by AGL.

                                      3
529 at 6.)   But when AGL presented Law Environmental's findings to

the   Georgia    Department        of   Natural       Resources,     Environmental

Protection Division (GEPD), GEPD advised AGL that the sites posed

no threats to public health or drinking water.                    As a result, AGL

concluded that it was unlikely that further cleanup of the sites

would be required, or that third parties would file actions for

reimbursement of cleanup costs.

      State and federal agencies eventually grew less tolerant of

former MGP sites.       In March, 1990, the EPA revised the "toxicity

characteristics"       used   to   identify         hazardous   wastes   under   the

Resource Conservation and Recovery Act (RCRA), by adding benzene,

a common component of MGP wastes, to the formula used to determine

"toxicity" of wastes.         See Toxicity Characteristic Revisions, 55

Fed. Reg. 11,798 (1990) (codified at 40 C.F.R. scattered pts.).

The change was significant because the new regulation made it more

likely    that   MGP    sites      would       be    considered    environmentally

dangerous. By the fall of 1990, one regional EPA administrator had

taken the position that MGP sites no longer qualified for exemption

under RCRA, and the EPA added three MGP sites owned by other

utilities to the National Priorities List (NPL) under CERCLA.3

      3
      The NPL includes those environmentally hazardous sites that
pose the greatest danger to public health or the environment. See
42 U.S.C. § 9605(a)(8) (1988). Once the EPA affirmatively includes
a site on the NPL, federal "Superfund" dollars can be used for site
remediation. 40 C.F.R. § 300.425(b)(1) (1994). The former MGPs at
issue in this litigation have never been placed on the NPL,
although other MGP sites have been listed.       See Amendment to
National Oil and Hazardous Substances Contingency Plan; National
Priorities List, 48 Fed. Reg. 40,658 (1983) (adding Pine Street
Barge Canal Site, Burlington, Vt.; Brodhead Creek, Stroudsberg,
Pa.).

                                           4
     In June, 1990, the current owner of AGL's Sanford, Florida

site informed AGL that the Florida Department of Environmental

Regulation (FDER) had completed a preliminary assessment of the

site and had recommended additional screening.            No cleanup was

ordered, but by October, 1990, FDER had broadened its investigation

of former MGPs to include twenty-three additional sites (not owned

by AGL) throughout Florida.

     Based on these developments, AGL concluded that it should

conduct   more   "formal"    investigations    of   the    environmental

conditions at its former MGPs.          In early 1991, AGL engaged an

insurance archaeologist to search for and review insurance policies

that AGL had purchased since the 1940s that potentially covered

environmental cleanup costs.       A few of the policies afforded a

modest amount of direct coverage which began at the first dollar of

loss by AGL.4     Most of the policies were excess comprehensive

general liability policies, triggered only when AGL's self-insured

retention and any underlying layers of coverage (a combined amount

of up to thirty million dollars) were exhausted.

     On April 16, 1991, AGL sent notice to twenty-three insurers

that had issued policies to AGL of their potential liability for

costs of cleanup at AGL's MGP sites.          At the time, AGL's only

comprehensive    cleanup   cost   estimate--Law   Environmental's   1986

figure "in excess of several million dollars"--was well below the

     4
      Zurich Insurance Company was AGL's direct insurer, issuing
policies that required no deductibles or self-insured retentions.
The Zurich policies ranged from $10,000 to $25,000 of aggregate
coverage. (R. 42 at 379.)

                                    5
amounts required to implicate many if not all of the excess

liability policies.    When AGL mailed notice to its insurers, AGL

had incurred no cleanup costs for which it sought reimbursement; no

environmental agency had ordered a cleanup at any of AGL's sites;

and no then-owners of MGP sites, adjacent property owners, or other

third parties had filed claims against AGL for recovery of any

cleanup costs.5

II.   PROCEDURAL HISTORY

      This litigation began on April 17, 1991, the day after AGL

mailed notice to its insurers and before the insurance companies

received the notice.    AGL filed a declaratory judgment action to

determine the extent of its insurance coverage should cleanup costs

be incurred or third party property damage actions arise because of

hazardous wastes located on its former MGP sites.       AGL sought

judicial guidance as to both the insurers' duty to defend AGL in

third party actions and their duty to indemnify AGL for losses

incurred.6

      5
      Although the owner of the Sanford, Florida site had notified
AGL that AGL would be a potentially responsible party with respect
to any cleanup costs incurred, when AGL mailed the notice, FDER had
ordered no remedial action with respect to the site.
      6
      On October 1, 1991, AGL filed an amended complaint, adding a
claim for breach of contract. AGL claimed that the insurers had
breached their agreement to defend AGL and indemnify its losses
caused by AGL's MGP sites. AGL also based the contract claim on
its allegation that the insurers had refused to honor their
"obligation to defend and/or indemnify other utility companies"
with respect to other MGP sites under policies like those issued to
AGL. (R. 6-90 at 15-16.) On appeal, both AGL and the insurance
companies refer to this case solely as a declaratory judgment
action, and the record gives no hint that the contract claim was
pursued beyond the allegations raised in the amended complaint. We
therefore treat AGL's claim for breach of contract as abandoned and

                                 6
     In early 1993, after nearly two years of pretrial motions and

discovery, twelve of the insurance companies7 moved for summary

judgment on the ground that AGL had given them untimely notice.

They contended that AGL should have given notice after it became

aware of the concerns about MGPs first raised in the 1980s.

Another insurer, General Reinsurance, filed a separate motion for

summary judgment asserting that the policy it issued to AGL was

missing and that AGL could not prove the policy's contents through

secondary evidence.

     The district court made no determination as to the existence

of a justiciable case or controversy;8 it proceeded to address the

merits of the summary judgment motions. The court found that AGL's

notice to each and every one of the twelve insurers was late as a

matter of law.   But the court, applying Georgia law, held that

proof of prejudice was required before an insurer could avoid

liability due to late notice.   The court found that none of the

insurers had been materially prejudiced by the timing of AGL's

notice and granted summary judgment only as to those few insurers

do not discuss it further.
          7
         Of the twenty-three insurers originally named in the
complaint, ten companies had already been dismissed at various
stages of the litigation.
      8
       AGL briefed the issue of justiciability for the court in
July, 1993, over two years after the complaint was filed. (R. 52-
502 at 7.)     But the court did not address the issue before
proceeding to the merits of the case.

                                7
that had issued policies explicitly making compliance with their

notice provisions "conditions precedent" to liability.9

      The next month, this court decided Canadyne-Georgia Corp. v.

Continental Ins. Co., 999 F.2d 1547 (11th Cir. 1993). The district

court interpreted Canadyne to hold that Georgia law did not require

proof of prejudice for an insurer to be able to avoid liability

when an insured failed to comply with policy notice provisions.

The district court then modified its summary judgment order to

include all the insurance companies, regardless of their ability to

show prejudice or condition precedent language in AGL's policies.

The court also granted summary judgment to General Reinsurance

because it found that AGL had produced insufficient evidence to

prove the contents of the missing policy.

      The district court entered a judgment in October, 1993, which

ordered that AGL "take nothing, that judgment be entered in favor

of the defendants, and that the action be . . . dismissed."        (R. 58

at   587.)     No   declaratory   judgment   defining   the   rights   and

obligations of the parties to these insurance contracts was ever

entered.10

      9
      The court did not examine each of the 200 policies at issue
to see which ones contained condition-precedent language, but
instead relied upon the parties to figure out which insurers would
be granted summary judgment and which ones would have to show
prejudice. (R. 54-529 at 7-8.)
          10
       The judgment tracked Fed. R. Civ. P. Form 32, which was
designed to apply to cases involving claims for money damages.
Such a judgment is insufficient to afford declaratory relief. If
the district court meant to "declare" that AGL's insurers had no
liability for these potential losses, the court should have entered
an explicit declaratory judgment to that effect.      See American
Inter-Fidelity Exchange v. American Re-Insurance Co., 17 F.3d 1018,

                                    8
III. CONTENTIONS OF THE PARTIES

      AGL's principal arguments on appeal focus on the district

court's conclusion that the notice to AGL's insurers was late. AGL

contends that it was error for the court to conclude that notice

was required under any of the subject policies when AGL only had

enough information to know of "potential" exposure to liability.

AGL also takes issue with the district court's conclusion that

Canadyne interprets Georgia law to mean that insurers need not show

prejudice from late notice, whether or not timely notice is made a

condition precedent to liability. AGL argues that the court should

have found that the timing of its notice was reasonable under the

circumstances.

      Apart from the notice issue, AGL attacks the district court's

refusal to rule on the admissibility of evidence relied upon by the

insurers in their summary judgment motions, as well as the court's

disposition of AGL's discovery requests.    AGL also questions the

court's determination that AGL had not shown sufficient evidence

for a jury to determine the terms and conditions of the lost

General Reinsurance policy.   To defend their summary judgment, the

insurers argue that notice was late as a matter of law and that the

district court properly interpreted    Canadyne in reaching that

conclusion.

IV.   DISCUSSION

1020 (7th Cir. 1994) (stating that when prevailing party is
entitled to declaratory judgment, court must draft such judgment
rather than assuming that its opinion serves that purpose).

                                  9
     We do not address the parties' contentions because, at the

time AGL filed suit, no justiciable case or controversy existed

between AGL and its insurers.     Any time doubt arises as to the

existence of federal jurisdiction, we are obliged to address the

issue before proceeding further.       Vermeulen v. Renault, U.S.A.,

Inc., 985 F.2d 1534, 1542 (11th Cir. 1993); see also Ashcroft v.

Mattis, 431 U.S. 171, 172, 97 S. Ct. 1739, 1740 (1977) (raising

jurisdictional issue sua sponte).      In all cases arising under the

Declaratory Judgment Act, 28 U.S.C. § 2201 (1988),11 the threshold

question is whether a justiciable controversy exists.        Maryland

Casualty Co. v. Pacific Coal & Oil Co. , 312 U.S. 270, 272, 61 S.

Ct. 510, 512 (1941); United States Fire Ins. Co. v. Caulkins

Indiantown Citrus, 931 F.2d 744, 747 (11th Cir. 1991) (citations

omitted).    Congress   limited   federal   jurisdiction   under   the

Declaratory Judgment Act to actual controversies, in statutory

recognition of the fact that federal judicial power under Article

III, Section 2 of the United States Constitution extends only to

concrete "cases or controversies." See Tilley Lamp Co. v. Thacker,

454 F.2d 805, 807-08 (5th Cir. 1972).

     "Whether such a controversy exists is determined on a case-by-

case basis." Caulkins Indiantown Citrus, 931 F.2d at 747; see also
BP Chemicals v. Union Carbide Corp., 4 F.3d 975, 977-78 (Fed. Cir.

     11
      28 U.S.C. § 2201(a) provides, in relevant part:
     In   a   case   of   actual   controversy   within   its
     jurisdiction, . . . any court of the United States, upon
     the filing of an appropriate pleading, may declare the
     rights and other legal relations of any interested party
     seeking such declaration, whether or not further relief
     is or could be sought . . . .

                                  10
1993) (stating that difference between "definite and concrete"

dispute   and    case   not    ripe   for     litigation   is    one   of   degree,

determined by totality of circumstances).               The controversy must be

more than conjectural; the case must "touch[] the legal relations

of parties having adverse legal interests." Caulkins Indiantown

Citrus, 931 F.2d at 747 (quoting Brown & Root, Inc. v. Big Rock

Corp., 383 F.2d 662, 665 (5th Cir. 1967));                 see also Halder v.

Standard Oil Co., 642 F.2d 107, 110 (5th Cir. Unit B 1981) (stating

that district courts lack jurisdiction to express legal opinions

based on hypothetical or academic facts).

     For a controversy to exist, "the facts alleged, under all the

circumstances, [must] show that there is a substantial controversy,

between parties having adverse legal interests, of sufficient

immediacy and reality to warrant the issuance of a declaratory

judgment."      Maryland Casualty Co., 312 U.S. at 373, 61 S. Ct. at

512 (citation omitted).         The party who invokes a federal court's

authority must show, at an "irreducible minimum," that at the time

the complaint was filed, he has suffered some actual or threatened

injury resulting from the defendant's               conduct, that the injury

fairly can be traced to the challenged action, and that the injury

is likely to be redressed by favorable court disposition. Caulkins
Indiantown Citrus, 931 F.2d at 747 (citing Valley Forge College v.

Americans United, 454 U.S. 464, 472, 102 S. Ct. 752, 758 (1982)).

     To determine whether AGL has met this burden, we "look to the

state of affairs as of the filing of the complaint; a justiciable

controversy     must    have   existed      at   that   time."     International

                                         11
Harvester v. Deere & Co. , 623 F.2d 1207, 1210 (7th Cir. 1980)

(citations omitted).      AGL filed its complaint before the insurance

companies received the notice of potential liability AGL mailed to

them the previous day.         The insurers not only had no chance to

respond to AGL's notice before the complaint was filed, they had no

knowledge that notice had been given. It is therefore difficult to

understand how AGL could assert that the insurance companies had

failed to defend or indemnify it for cleanup of its MGPs when the

insurers had taken no position at that time with regard to their

duties   under   AGL's    policies.        To   support   its   claims,   AGL's

complaint asserts only that the defendant insurers denied coverage

to similar utilities under similar circumstances in the past.                  In

essence, AGL filed its complaint as an anticipatory maneuver

designed to preempt whatever actions the insurers may have taken

after they received AGL's notice.

     Regardless    of    how   well-founded      AGL's    concerns    about   its

insurers   may   have    been,   speculation      based    on   the   insurance

companies' dealings with other insureds does not present a concrete

case or controversy.        At the time the complaint was filed, AGL

could claim neither actual nor threatened injury resulting from the

insurers' conduct, nor any injury traceable to the insurance

companies at all.       When AGL sought the court's guidance through a

declaratory judgment, the issues it presented were no more than

conjectural questions based on the fact that other utilities had

battled with insurers over MGP cleanup costs.

                                      12
     The district court made no determination that a justiciable

controversy existed when the complaint was filed; the record would

not support such a finding.             Not only had the insurers not yet

received notice, no one knew exactly what had to be cleaned up, who

was to undertake the cleanup, or how much the cleanup would cost.

While it is not necessary to know each of these factors with

certainty in order to seek declaratory relief, when AGL filed its

complaint, it was not clear that state and federal environmental

agencies would ever require cleanups at any of AGL's former MGP

sites.

     The       record    demonstrates    that    the    regulatory   climate   was

evolving when AGL filed suit: what actions would be required by

regulators was uncertain.             At the time the complaint was filed,

GEPD had concluded that AGL's Georgia sites posed no threat to

public health, and FDER had recommended only "additional site

screening" at the Sanford, Florida site.                No then-owner of an MGP

site had called upon AGL to reimburse them for cleanup costs or to

clean up wastes itself.             No lawsuits had been filed against AGL,

either by owners of former MGP sites or by adjacent property

owners.        With     so   many   material    facts   dependent    upon   future

contingencies, it would be impossible to resolve all the issues

relative to the timeliness of notice in a way that would do justice

to the parties.12

          12
         It appears that events that have transpired since the
complaint was filed could give rise to justiciable claims with
regard to some or all of AGL's former MGP sites, under some or all
of AGL's insurance policies. In January, 1992, the current owner of
the Sanford, Florida site actually sued AGL for recovery of

                                         13
      In vacating the trial court's disposition of this case, we

emphasize that we do not reach any issues beyond the threshold

question of justiciability.   Specifically, by finding that no case

or controversy existed at the time the complaint was filed, we do

not intimate that AGL had no responsibility under its policies to

give notice of potential liability. Nothing in this opinion should

be construed to suggest that a justiciable case or controversy must

exist before notice obligations are triggered.       Timeliness of

notice is an inquiry distinct from the question of justiciability,

to be determined by resort to Georgia, rather than federal, law.

IV.   CONCLUSION

      For the foregoing reasons, we VACATE the district court's

entry of summary judgment for all insurers who are parties to this

appeal and REMAND to the district court with instructions to

DISMISS the action as to the parties to this appeal for want of

jurisdiction.

      VACATED and REMANDED WITH INSTRUCTIONS TO DISMISS FOR WANT OF

JURISDICTION.

response costs and damages under CERCLA. (R. 52-502 at 7.) AGL
asserted in the July, 1993 brief on justiciability it filed in
district court that its total liability for the Sanford site could
top $47 million. ( Id.)      In May, 1992, AGL entered into four
consent orders with GEPD concerning the Augusta, Griffin, Savannah,
and Valdosta, Georgia sites, which require AGL to take remedial
cleanup measures at those sites.      AGL also has produced more
detailed estimates of cleanup costs (some of them in excess of the
amounts required to trigger liability under AGL's excess liability
policies) for all of its former MGP sites. (Id., Attach. 2 & 3.)
While Fed. R. Civ. P. 15(d) permits the filing of supplemental
pleadings in order to assert claims maturing after the filing of
the complaint, AGL never sought leave of court to amend its
pleadings, and no pleading setting forth these recent events was
ever filed.

                                14