Court Opinion

ID: 620968
Source: CourtListenerOpinion
Date Created: 2012-01-17 15:05:09+00
Date Added: 2024-06-11T17:50:54.504811
License: Public Domain

File Name: 12a0060n.06
                  NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

                                           No. 09-2310
                                                                                          FILED
                          UNITED STATES COURT OF APPEALS                             Jan 17, 2012
                               FOR THE SIXTH CIRCUIT
                                                                               LEONARD GREEN, Clerk

BAY CORRUGATED CONTAINER, INCORPORATED,

       Plaintiff-Appellant,                                         ON APPEAL FROM THE
                                                                    UNITED STATES DISTRICT
v.                                                                  COURT FOR THE EASTERN
                                                                    DISTRICT OF MICHIGAN
GOULD, INCORPORATED,

       Defendant,

GOULD ELECTRONICS, INC.,

       Intervenor-Appellee.

                                                     /

BEFORE:        MARTIN, SUHRHEINRICH, and COLE, Circuit Judges.

       BOYCE F. MARTIN, JR., Circuit Judge. This case arises out of a consent judgment entered

by the district court in 1994 in which Gould, Inc. and Gould Electronics, Inc. agreed to pay for

environmental investigation and remediation of property sold by Gould, Inc. to Bay Corrugated

Container, Inc. In 1999, Bay filed a petition to enforce the consent judgment and Gould, Inc. moved

to dismiss. In its petition, Bay acknowledged that Gould, Inc.’s successor, GNB, Inc. (now Exide

Technologies), had assumed Gould, Inc.’s responsibilities under the settlement agreement. The

parties entered mediation and Bay entered into a settlement with Exide. In 2009, Bay filed a “Notice

Requesting Resolution of Petition to Enforce Consent Judgment.” After soliciting status updates and
No. 09-2310
Bay Corrugated Container, Inc. v. Gould, Inc.
Page 2

holding a non-evidentiary hearing, the district court granted Gould, Inc.’s motion to dismiss. Relying

on a determination by the Seventh Circuit that GNB assumed all of Gould, Inc.’s environmental

liabilities when it purchased Gould, Inc.’s battery business in 1984, and Bay’s mediated settlement

agreement with Exide, the district court determined that Gould, Inc. had no liability in this matter.

In the alternative, the district court ruled that the “nine years of inactivity” in this case warranted

dismissal under Federal Rule of Civil Procedure 41(b) and Eastern District of Michigan Local Rule

41.2. Bay moved the district court to reconsider its dismissal; the district court denied Bay’s motion.

In this same order, the court allowed Gould Electronics to respond to Bay’s motion for

reconsideration and to intervene for purposes of appeal. The district court also allowed Gould

Electronics to intervene on appeal. Bay appeals, arguing that dismissal of the petition was error. We

REVERSE.

       Bay argues that Gould, Inc. remains liable to Bay under the 1994 settlement and judgment.

Bay also argues that Bay’s negotiation of the mediated settlement with Exide, in addition to other

acknowledgments of GNB’s assumption of Gould, Inc.’s liabilities, does not show that Bay released

Gould, Inc. Gould, Inc.’s continued liability to Bay depends upon whether there has been a novation

that substituted Gould, Inc.’s liability with that of GNB or Exide. The resolution of this issue

depends upon whether Bay’s discussions and negotiations with GNB and Exide actually

extinguished its agreement with Gould, Inc. or whether GNB and Exide merely assumed Gould,

Inc.’s obligations.

       Under Michigan law, “[t]he elements of a novation require the creditor’s intention both that

the new debtor assume the obligation and that the old debtor be released.” Imperial Hotels Corp.
No. 09-2310
Bay Corrugated Container, Inc. v. Gould, Inc.
Page 3

v. Dore, 257 F.3d 615, 622 (6th Cir. 2001) (citing Harrington-Wiard Co. v. Blomstrom Mgf. Co.,

131 N.W. 559, 563-64 (Mich. 1911)). Consent to a novation “is not to be implied merely from the

performance of the contract or the payment of money by the substitute, for that might well consist

with the continued liability of the original party.” Harrington-Wiard Co., 131 N.W. at 563 (citation

omitted). “The circumstances surrounding a series of transactions may be considered, in addition

to the text of any written instruments, in determining whether the parties reached a novation that

extinguished the liability of one debtor and substituted for it the liability of another.” Imperial

Hotels Corp., 257 F.3d at 620.

        The district court based its dismissal on “its conclusion that [Gould, Inc.] has no liability for

the contamination at issue because its liability transferred to GNB” and Bay’s “extremely long period

of inactivity warranted dismissal for lack of prosecution.” The district court thus implicitly found

or assumed that there had been a novation of Gould, Inc.’s liability to Bay, transferring it to GNB

or Exide. However, we find the record contains insufficient facts to support this conclusion.

        We hold that it cannot be determined from the record whether there has been a novation and

whether, as the district court determined, Gould, Inc. is no longer liable to Bay. Likewise, the district

court’s summary dismissal under Rule 41(b) does not allow us to review the appropriateness of the

decision. For the foregoing reasons, we REVERSE the district court’s dismissal of the case and its

denial of the motion for reconsideration, and REMAND for further proceedings consistent with this

opinion.