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Valbruna Slater Steel Corp. v. Joslyn Manufacturing Co.

United States Court of Appeals, Seventh Circuit

August 8, 2019

Valbruna Slater Steel Corporation, et al., Plaintiffs-Appellees, Cross-Appellants,
Joslyn Manufacturing Company, et al., Defendants-Appellants, Cross-Appellees.

          Argued May 16, 2019

          Appeals from the United States District Court for the Northern District of Indiana, Fort Wayne Division. No. l:10-cv-00044-JD - Jon E. DeGuilio, Judge.

          Before Bauer, Hamilton, and St. Eve, Circuit Judges.


         This case is about an on-and-off, decades-long effort to stop an Indiana steel mill's pollution. Valbruna Slater Steel purchased the mill (or the "site") in 2004, and it quickly got to work on needed, but costly, cleanup efforts. Valbruna then sued Joslyn Manufacturing Company, which last operated the site in 1981, to recover costs under both the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and Indiana's Environmental Legal Actions statute (ELA).

         Joslyn's fault is undisputed; its operation of the site started the pollution problems. But Joslyn defended itself in the district court on claim-preclusion, statute-of-limitations, and contribution grounds. The district court decided the CERCLA claim was not precluded, but the ELA claim was. It also decided the suit was timely. The district court, however, did impose equitable contribution on Valbruna, requiring it to pay for a quarter of the past and future costs incurred during the site's cleanup. Joslyn appeals and Valbruna cross-appeals. We affirm across the board.

         I. Background

         Joslyn, [1] a steel manufacturer, owned and operated the site, located in Fort Wayne, Indiana, from 1928 to 1981. Joslyn's operation polluted nearby soil, sludge, and, as a result, groundwater. In 1981, Joslyn sold the site to Slater Steels Corporation through an Asset Purchase Agreement. After acquiring the site, Slater set to work with cleanup efforts. Slater did so, the record suggests, upon pressure from regulators and to bring the site into compliance with the Resource Conservation and Recovery Act of 1976. See 42 U.S.C. § 6901 et seq.

         From 1981 to 1987, Slater excavated sludge and contaminated soil from two areas on the site: an impoundment area and a waste pile. The excavation, however, did not remove all contaminates. In 1988, Slater signed an agreement with the EPA, which permitted monitoring of the site until the Indiana Department of Environmental Management (IDEM) could certify the closure of the polluted areas. In 1991, Slater undertook more work, this time capping the excavated impoundment area with a concrete lid to prevent runoff. Slater also implemented a ground-water detection program. IDEM then issued a certification of completion for the work Slater had started, though IDEM recognized that more work was ongoing and necessary at the site.

         Slater repeatedly tried to get Joslyn to pay for the cleanup work it had done, to no avail. In 1988 and again in 1994, Slater sent Joslyn a demand letter explaining that Joslyn was responsible for the cleanup under their agreement. Joslyn disagreed, telling Slater that it had assumed responsibility for the costs. Slater escalated its demand in 1999. With another demand letter, it sought costs not just per the agreement, but under CERCLA and the ELA statute as well. Joslyn again declined to pay for the cleanup.

         The dispute headed to court. In 2000, Slater sued Joslyn in an Indiana state court seeking (1) indemnification under the agreement and (2) costs under the ELA statute. Slater did not bring a CERCLA claim in its state-court suit-nor could it. Federal courts have exclusive jurisdiction over CERCLA claims. 42 U.S.C. § 9613(b).

         Slater's state-law claims ultimately failed. First, in 2001, the trial court ruled that the ELA statute-enacted in 1998- could not be retroactively enforced. (Later, in different litigation, the Indiana Supreme Court supported retroactive application. See Cooper Indus., LLC v. City of South Bend, 899 N.E.2d 1274, 1285 (Ind. 2009). But for Slater's purposes, its ELA claim was over.) Then, in 2003, Slater filed for bankruptcy and stopped cooperating in discovery. When it failed to produce its environmental manager for a deposition, Joslyn moved to dismiss for want of prosecution under Indiana Trial Rule 41(E). The trial court granted that motion in 2005.

         In 2004, with the state suit pending, Valbruna purchased the site at a competitive bankruptcy auction. It paid $6.4 million. Before finalizing the deal, and apparently recognizing the ongoing pollution hazards, Valbruna negotiated with IDEM. Valbruna and IDEM agreed to a Prospective Purchase Agreement (PPA). Under the PPA, both parties agreed to put down $500, 000 each, the total of which would go toward cleanup if Valbruna won the auction.

         After Valbruna won the auction, its purchase contract granted Valbruna the right to intervene in Slater's pending state-court suit. Valbruna never did so. Valbruna, instead, set out to perform more cleanup in 2005, as the PPA required. IDEM approved Valbruna's cleanup plan, but the plan budgeted to (and ultimately would) deplete more than the $500, 000 Valbruna set aside. In 2007, with work ongoing, IDEM again reviewed the site, and ordered even more cleanup.

         Upset with how much the cleanup cost, Valbruna filed this suit in 2010 against Joslyn in federal court. Valbruna claimed cost recovery pursuant to § 107 of CERCLA, 42 U.S.C. § 9607(a), and the ELA statute, Ind. Code §§ 13-30-9-2-3. Valbruna also sought a declaratory judgment regarding Joslyn's liability. Joslyn counterclaimed for contribution under § 113(f). 42 U.S.C. § 9613(f). Valbruna did not cause the pollution, Joslyn admitted, but under § 107(a)(1), a facility's owner, like Valbruna, may be liable for cleanup costs.

         Joslyn moved to dismiss on claim-preclusion grounds, citing the earlier state-court suit between it and Slater. The district court converted that motion to one for summary judgment. It granted the motion with respect to the ELA claim, concluding that Slater and Valbruna were in privity, but it denied the motion on the CERCLA claim. The court explained, in a revised ruling, that because CERCLA is an exclusively federal claim there could be no claim preclusion based on the failure to raise it in an earlier state-court suit.

         Joslyn then tried to defeat the CERCLA claim on a different ground. It filed a motion for summary judgment arguing that the claim was time-barred because it was brought more than six years after the start of "remedial action" -Slater's earlier cleanup, according to Joslyn. 42 U.S.C. § 9613(g)(2). The district court disagreed. In a thorough opinion, the district court decided, as a matter of law, that Slater's cleanup was "removal" and therefore the relevant limitations period had not tolled. Compare id. § 9613(g)(2)(A) (time limits for removal actions) with (B) (time limits for remedial actions). Joslyn attempted to amend its answer, adding the claim-preclusion and statute-of-limitations defenses for which it had already filed summary-judgment motions. The magistrate judge granted Joslyn leave to amend but struck the defenses, concluding that the district court's earlier decisions settled that those defenses did not apply as a matter of law. Joslyn asked for reconsideration, which the magistrate judge denied.

         Joslyn was undeterred. It filed another motion for summary judgment, without first seeking leave as the court had told it to. Again, Joslyn argued its already-stricken claim-preclusion and statute-of-limitations defenses. Valbruna then sought a declaration that Joslyn was liable under § 107(a) of CERCLA. The district court denied Joslyn's successive motion and granted Valbruna's motion, finding that there was no question that Joslyn, as the initial polluter, was liable.

         That left only two issues: damages and contribution under CERCLA. The case went to a bench trial in two phases on those issues. As for damages, after trial the district court concluded that Valbruna had incurred $2, 029, 871.09 in costs while remediating the site. It then reduced that amount by $500, 000, believing that it would be unfair for Valbruna to recover that sum twice, as it had been contemplated in Valbruna's purchase price and the PPA. As for contribution, the district court apportioned liability for past and future costs: 75% for Joslyn, 25% for Valbruna. The district court justified Valbruna's share by citing its assumed risk in purchasing an old metal-production site with well-known pollution problems.

         Joslyn appealed and Valbruna cross-appealed.

         II. Discussion

         The parties on appeal continue their dispute over who should pay what for the site's costly clean up. The answer turns on issues of preclusion, timeliness, and the district court's discretion in equitably allocating costs. We will address those issues and the parties' appeals in turn.

         A. ...

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