Petition for Writ of Certiorari — Industrial Excess Landfill Inc. v. Hartford Accident & Indemnity Co.
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9420 44 JUN 131995
OFFICE OF THe CLERK
No.
IN THE
Supreme Court of the United States
October Term, 1994
INDUSTRIAL EXCESS LANDFILL INC.,
HYBUD EQUIPMENT CORPORATION and
HYMAN BUDOFF,
Petitioners,
VS.
HARTFORD ACCIDENT & INDEMNITY COMPANY,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SIXTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
Matthew Yackshaw
Counsel of Record
DAY, KETTERER, RALEY,
WRIGHT & RYBOLT
800 William R. Day Building
121 Cleveland Ave., South
Canton, Ohio 44702-1921
Telephone: (216) 455-0173
Teiecopier: (216) 455-2633
Attorney for Petitioners
Balmar Legal Publishing Services, Washington, D.C., (202) 682-9800
Nr
i
QUESTIONS PRESENTED FOR REVIEW
Should the District Court have abstained from exercising
jurisdiction?
A. Did the District Court (and Sixth Circuit) fail to follow
this Court’s precedent on when a district court should
abstain from exercising discretionary jurisdiction un-
der the declaratory judgment and diversity of citizen-
ship statutes, 28 U.S.C. §§1332 and 2201?
B. Did the District Court (and the Sixth Circuit) fail to
follow the Sixth Circuit’s own precedent and that of
other circuit courts, thereby creating a conflict in
the circuit courts?
Are the due process and equal protection clauses of Amend-
ment V of the U.S. Constitution violated when the Dis-
trict Court and the Sixth Circuit failed to follow U.S.
Supreme Court precedent, their own precedent and are in
conflict with precedent of other circuits in applying the
law applicable to review of summary judgment motions
to the facts which exist in this case?
Did the District Court err in failing to apply Rule 1004 of
the Federal Rules of Evidence to the secondary evidence
submitted in support of the existence and basic terms
and conditions of the lost or destroyed policies?
Are the Civil Rules and the due process and equal protection
clauses of Amendment V of the U.S. Constitution violated
when the District Court and Sixth Circuit dismiss sua
sponte counts one and two of Petitioner’s counterclaim?
Are the due process and equal protection clauses of Amend-
ment V of the U.S. Constitution violated when the Dis-
trict Court erroneously rules that post judgment motions
filed by Petitioners were moot and the Sixth Circuit com-
pletely failed to address the issue?
Cn A100 Sd Moe =
TABLE OF CONTENTS
Page{s]
QUESTIONS PRESENTED FOR REVIEW .... i
pe Be gee ye ck ee rr ii
TPR A Pas Ee 6 kee cc ee iv
OPINIONS DELIVERED IN THE CASE
re eI Dg gg cn ce ee ew
STATEMENT OF JURISDICTION ......... 2
CONSTITUTIONAL AND STATUTORY
go foe 8 i gO, L) Se rr 2
WEeaReeeers GO SUSE GASE. 2. i ee ep 3
ee euR eee GOD ek a ee ee 6
ARGUMENT FOR GRANTING THE WRIT... . 8
ARGUMENT FOR GRANTING THE WRIT
A. The District Court Should Have Abstained
From Exercising Declaratory Judgment
Jurisdiction And Dismissed The Case. .. . 8
B. The Granting Of A Summary Judgment In
Favor Of Hartford Constitutes A Denial
Of Due Process And Equal Protection
Under The Facts And Circumstances
eS an gee re es 8 ke 15
C. The Failure To Recognize And Apply
Rule 1004 Of The Federal Rules Of Evi-
dence Constitutes A Denial Of Due
Process And Equal Protection. ....... 19
iil
D. It Is A Violation Of The Civil Rules,
The Due Process And Equal Protection
Clauses Of The Fifth Amendment Of
The U.S. Constitution And Basic Princi-
ples Of Justice And Fair Dealing For
The District Court To Dismiss Sua
Sponte Counts One And Two Of
Defendants’ Counterclaim ......... 22
E. The District Court Erred By Denying
Petitioner’s Post Judgment Motions. .. . . 24
COR ko 6 ee ie res 25
PT AR 5 6 ee 68 8 6 we a ae A-1
oo |
iv
APPENDIX
Page[s]
Hartford Accident & Indemnity Company v.
Industrial Excess Landfill, Inc., et al.,
Case Nos. 93-3689 and 3765 (Sixth Circuit)... .. A-1
a. Per Curiam Decision filed
I ga eg ds oe Gk es A-1
b. Rehearing Order filed
PN SU ae side ce A-4
Hartford Accident & Indemnity Company v.
Industrial Excess Landfill, Inc., et al.,
Case No. 5:90CV0493 (USDC ND Ohio 1993)... ..
a. Marginal Entry Order filed
UE FR BIE 55% koi K 6d ee A-5
b. Memorandum of Opinion and Order
SEDO ONY BO ITE, oe eck ee ees A-6
c. Marginal Entry Order
> re re ar ee Te A-13
d. Order filed August 11,1992 ........ A-14
e. Memorandum of Opinion and
Ouiet tee Bay 7, 190e i A-16
f. Marginal Entry Order filed
PORE Teh 8 ee ae ORS A-25
U.S. Constitution, Amendment Five ......... A-26
MP EN als Ca ke a ne eo A-27
SUE se a Sk ie Se ee A-28
Federal Rules of Evidence, Rule 1004 ........ A-29
Hartford Interoffice Memorandum dated
I Se A-30
v
TABLE OF AUTHORITIES
Cases Page[s]
Adickes v. S.H. Kress & Company, 398 U.S. 144,
90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970) ... 17
Aetna Cas. & Sur. Co. v. Merritt, 974 F.2d 1196 (9th
Cr Re 5 es wear ae os SS 1]
Allstate Ins. Co. v. Green, 825 F.2d 1061
CREAR, FOOD 6. it ee ee 0 Os 10
Allstate Ins. Co. v. Mercier, 913 F.2d 273
CC Soe PDS WES: 10
America National Fire Ins. Co. v. Hungerford,
es *
(PRA, RPGC N 6 0's 9 See ee ee eS 1]
American Home Assurance Co. v. Evans, 791 F.2d
Ri Bt BS re ee oe ae 10
American States Ins. Co. v. Kearns, 15 F.3d 142
CO Ss Hees. vs 5 Eee Cees 11
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106
S.Ct. 2505, 91 L. Ed. 2d 202 (1986). ...... 16,17
Andrew Crispo Gallery, Inc. v. Commissioner of Inter-
nal Revenue, 16 F.3d 1336 (2nd Cir. 1994) . . . 19
Avemco v. Eaves, 67 Ohio App. 3d 563, 587 N.E.2d
SGD (Agama Oly. J50R es a ee es 20
Bituminous Casualty Corp. v. Vacuum Tanks, Inc.,
new £ek Th fe es re 19
Borden, Inc. v. Affiliated FM Ins. Co., 682 F. Supp.
927 (S.D. Ohio 1987), aff'd 865 F.2d 1267
CC Ce ae a eS ee es 11
Broz v. Winland, 68 Ohio St. 3d 521,
Gi Pu SEED bos ie wee ee 14
vi
Cases (cont’d.)
Brillhart v. Excess Ins. Co. of America, 316 U.S.
491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942). .
Bullett Trucking v. Glen Falls Insurance Company,
84 Ohio App.3d 327, 616 N.E. 2d 1123
(Montgomery Co. 1992). ww wie eee
Burroughs Wellcome Co. v. Commercial Union Ins.
Co., 632 F. Supp. 1213 (SD NY 1986) ... .
Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct.
pe Sey eee ree
Cipriani v. Sun Life Ins. Co. of America, 757 F. 2d
Fe ey WS ae
Continental Cas. Co. v. Coastal Savings Bank,
S7t rae teeta Ge SPRE) os ae cs
Continental Cas. Co. v. Fuscardo, 35 F.3d 963
eS 6 ah oe ee ee ee cw
Continental Cas. Co. v. Robsac Industries, 947 F.2d
Se Le en « Sere ee Hs
Daubert v. Merrell Dow Pharmaceuticals,
US. , 113 S. Ct. 2786, 125 L. Ed.2d 469
aE Sick ones a ee ee
F L Aerospace v. Aetna Casualty & Surety Co., 897
opr 6 ee a eee
Grand Trunk Western Railroad Co. v. Consolidated
Rail Corp., 746 F.2d 323 (6th Cir. 1984) ....
Green v. Mansour, 474 U.S. 64, 106 S. Ct. 423, 88
BS Bie). | GR eee
Page[s]
Vii
Cases (cont’d.) Page[s]
Harrington v. Vandalia-Butler Board of Education,
649 F.2d 434 (6th Cir. 1981) ......... 23
Hybud Equipment Corp. v. Sphere Drake Ins. Co.,
64 Ohio St. 3d 657, 597 N.E.2d 1096
(1992), cert. denied US. ,
113 S. Ct. 1585, 123 L. Ed. 2d 152 (1993). ... 5
Indiana Port Comm. v. Bethlehem Steel Corp., 702
eB ey To ae 23
Joslyn Mfg. Co. v. Liberty Mut. Ins. Co., 23 F.3d
Parte CSO. Re eee eee ere 19
LeForge v. Nationwide Mutual Fire Ins. Co., 82
Ohio App.3d 692, 612 N.E. 2d 1318
(Clinton Co. 1992), jur. mot. over.
66 Ohio Sts 1413 GISFS) 2 kw eee. 23
Management Investors v. United Mine Workers,
610 F. 2d 384 (6th Cir. 1979) ......... 23
Manley, Bennett, McDonald & Co. v. St. Paul
Fire & Marine Ins. Co., 791 F.2d 460
(See Ge ee oa beck ee eke e « * 10
Mass. Mut. Life Ins. Co. v. O’Brien, 5 F.3d 1117
CA a oe bee Oe re es 21
Mitcheson v. Harris, 955 F.2d 235 (4th Cir. 1992) . . 12
Moore v. Hobrook, 2 F.3d 697 (6th Cir. 1993). . . 17
National Fire Ins. Co. v. Bartolazo, 27 F.3d 518
COTE GOE Be ks dca be so Re eee 23
Nationwide Mutual Fire Ins. Co. v. Willenbrink,
924 F.2d 104 (6th Cir. 1991) ......... 10
Newark Machine Co. v. Kenton Ins. Co..,
50 Ohio St. 549, 35 N.E. 1060 (1893) .... 20
wt RD ea Ia Ne ARTS.
Vili
Cases (cont’d.) Page[s]
Ohio Farmers Ins. Co. v. Cochran, 104 Ohio St. 427,
Sy Uae Es os ke kk ae 21
Omaha Property & Casualty Ins. Co. v. Johnson,
923 F.2d 446 (6th Cir. 1991) ......... 10
Owens Illinois, Inc. v. Aetna Cas. and Sur. Co.,
990 F.2d 865 (6th Cir. 1993) ......... 19
Portland Retail Druggist Assn. v. Kaiser Foundation
Health Plan, 662 F.2d 641 (9th Cir. 1981)
cert. denied 469 U.S. 1229, 105 S. Ct. 1230,
GA Ties a RD bn ew la ee ee a 23
Public Service Comm’n v. Wycoff Co., 344 U.S. 237,
73S. C.256, F7 82d. 291 CI962) ww ee 8
Ranes v. Paul Revere Life Ins. Co., 32 F.3d 1393
SNE ls BD eA ee i a CR Wore 2 21
Remington Arms, Inc. v. Liberty Mut. Ins. Co.,
810 F. Supp. 1420 (Del. 1992) ........ 19
Routman v. ADP, 873 F.2d 970 (6th Cir. 1989)... . 22
Samuels v. Mackell, 401 U.S.. 66, 91 S. Ct.
fo ig A eT ss | 9
Servants of Paraclete v. Great American Ins. Co.,
857 F. Supp. 822 (N.M. 1994) ........ 19,21
Sherwin-Williams Co. v. Certain Underwriters at
Lleyd’s London, 813 F. Supp. 576
ak ce. Eo ee ee 11
State Automobile Mut. Ins. Assn. v. Lind, 122 Ohio
ee Ree Gt Os, | 21
State of New York v. Blank, 820 F. Supp. 697
(N.D.N.Y. 1993), aff'd in pertinent part, 27
& & gs te | er 19
ix
Cases (cont’d.) Page[s]
Sur v. Glidden-Durkee, 681 F.2d 490
Ce ES a ee a Oe 21
Thoen v. United States, 765 F.2d 1110
te + Ree er 9 ee eee 23
United States Fidelity and Guaranty Co. v. Star Fire
Coals, Inc., 856 F.2d 31 (6th Cir. 1988) .... 11
Winbourne v. Eastern Airlines, 632 F.2d 219
(20g See + Fo Peet Pe ee 23
Yashon v. Gregory, 737 F.2d 547 (6th Cir. 1984),
cert. denied 486 U.S. 1032, 108 S.
Ct. 2015, 100 L. Ed. 2d 602 (1988) ...... 23
Younger v. Harris, 401 U.S. 37, 91 S. Ct. 746, 27
Lgiat PONTE fi Cece Od wie ie elk 9
Zimmerman Leasing Co. v. Williams, 64 Ohio App.3d
623, 582 N.E.2d 631 (Lorain Cty. 1989) .... 20
CONSTITUTIONAL PROVISIONS, STATUTES,
REGULATIONS AND RULES
U.S. Constitution, Amendment V ......... Z
La Ae Oe, i 8 Se ws 13
RE 6 en ke 3
ae We OE ba ee ee 3
Rule 56 of the Federal Rules of Civil Procedure .. = passim
Rule 1004(1) of the Federal Rules of Evidence . . 19,20
SS Wane 8 i as es ne ee ees 7
Ohio Revised Code Chapter2721 ......... 14
Ohio Revised Code § 3929.06 ........... 14
No.
IN THE
Supreme Court of the United States
October Term, 1994
INDUSTRIAL EXCESS LANDFILL INC.,
HYBUD EQUIPMENT CORPORATION and
HYMAN BUDOFF,
Petitioners,
VS.
HARTFORD ACCIDENT & INDEMNITY COMPANY,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
SIXTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
OPINIONS DELIVERED IN THE CASE BY
THE COURTS BELOW
1. Hartford Accident & Indemnity Company v. Industrial
Excess Landfill, Inc., et al., Case Nos. 93-3689 and 3765 (6th
Cir.).
a. Per Curiam Opinion filed January 27, 1995.
b. Rehearing Order filed March 15, 1995.
2. Hartford Accident & Indemnity Company v. Industrial
Excess Landfill, Inc., et al., Case No. 5:90CV0493 (USDC ND
Ohio).
2
a. Marginal Entry Order filed September 30, 1991.
b. Memorandum of Opinion and Order filed
February 14, 1992.
c. Marginal Entry Order filed July 21, 1992.
d. Order filed August 11, 1992.
e. Memorandum of Opinion and Order filed May 10, 1993.
f. Marginal Entry Order filed June 10, 1993.
All of the foregoing are included in the Appendix, infra.
STATEMENT OF THE GROUNDS ON WHICH THE
JURISDICTION OF THE COURT IS INVOKED
1. The per curiam opinion of the United States Court of
Appeals for the Sixth Circuit in Hartford v. IEL is dated January
27, 1995.
2. The Sixth Circuit denied a rehearing in Hartford v. IEL
by order filed March 15, 1995.
3. Jurisdiction of this Court is invoked pursuant to 28
U.S.C. §1254(1).
CONSTITUTIONAL AND STATUTORY
PROVISION INVOLVED
Amendment V of the Constitution of the United States.
28 U.S.C. §1332
28 U.S.C. §2201
l.
de
de
All of the foregoing provisions are set forth in the Appendix, infra.
a Sr
3
STATEMENT OF THE CASE
Hartford Accident and Indemnity Company (“Hartford”)
filed its complaint for declaratory judgment commencing this
case against Industrial Excess Landfill, Inc., Hybud Equipment
Corporation, and Hyman Budoff (“Petitioners”) in the United
States District Court for the Northern District of Ohio (“the
District Court”), Case No. 5:90CV0493.! Generally, Hartford
sought a declaratory judgment under 28 U.S.C. §2201 that it was
not obligated to provide a defense or indemnity to the Petitioners
under five comprehensive general liability insurance policies”
for a civil Superfund case that had been filed against the Peti-
tioners (and others) by the United States, which is styled United
States v. Industrial Excess Landfill, Inc., et al., Case No.
5:89CV 1988 (USDC ND Ohio) (“the USEPA case”). Hartford
claimed diversity jurisdiction under 28 USC §1332. The com-
plaint was amended to include a civil Superfund case filed
against the Petitioners (and others) by the State of Ohio in 1991,
which is styled State of Ohio v. Industrial Excess Landfill, Inc.,
et al., Case No. 5:91CV2559 (USDC ND Ohio) (“the OEPA
case”).
Petitioners timely filed motions to dismiss the complaint
and amended complaint challenging the jurisdiction of the Dis-
trict Court and arguing that U.S. Supreme Court, Sixth Circuit
and other circuit court precedent required abstention and dis-
missal under the facts presented by this case. The District Court
issued Marginal Entry Orders denying the motions to dismiss
without any opinion, comment or explanation. Appendix, infra
at A-5 and A-13.
In accordance with Rule 29.1 of the Revised Rules of the Supreme
Court of the United States, Petitioners state that Hybud Equipment Corpora-
tion is a wholly owned subsidiary of Hybud Waste Industries, Inc. Industrial
Excess Landfill, Inc. has no parent company or subsidiaries.
The five insurance policies can be logically divided into two groups:
the 1968-1971 policies and the 1981-1985 policies. The reason for the
important distinction between the two groups boils down to the fact that the
1968-1971 policies did not and could not contain a pollution exclusion.
4
Petitioners timely filed answers to the complaint and
amended complaint, denying that Hartford was entitled to the
declaratory judgment it sought, and included with each answer
a counterclaim against Hartford claiming that Hartford was
liable to Petitioners for breach of contract (Count One) and that
Hartford breached the duty of good faith owed to Petitioners as
Hartford’s insureds (Count Two).? Petitioners also included a
jury demand.
Hartford filed a motion to dismiss counts two and three of
the counterclaim and an answer to count one of the counterclaim.
The District Court denied Hartford’s motion to dismiss count
two of the counterclaim, but granted the motion as to count three
of the counterclaim. As to count two, the District Court con-
cluded “that the counterclaim states facts which, if proven, may
establish that Plaintiff [Hartford] breached the alleged duty of
good faith.” Appendix, infra at A-8. No further motions were
ever filed as to the counterclaim.
Hartford filed its motion for partial summary judgment on
the “lost or destroyed policies” issue,+ claiming that because
Petitioners did not have the policies they could not satisfy their
burden of proof. Petitioners denied that they had any burden of
proof, but filed documents opposing the motion which included
four affidavits and 60 documents establishing the existence and
essential terms and conditions of the lost or destroyed policies.
In addition, Petitioners argued that Hartford had waived and/or
was estopped from denying coverage under those policies.
Hartford filed its motion for partial summary judgment on
the pollution exclusion as to the 1981-1985 policies based on
3 The counterclaim also included a cause of action based on the negli-
gent and/or intentional infliction of severe emotional distress. The dismissal
of that cause of action is not part of the appeal.
4
The so-called “lost or destroyed policies” are three successive com-
prehensive general liability insurance policies issued by Hartford to Petition-
ers between 1968 and 1971.
sd Ra peed es Dar ae ERA AN ta a PR REN SIE OF
5
collateral estoppel effect from Hybud Equipment Corp. v.
Sphere Drake Ins. Co., 64 Ohio St. 3d 657, 597 N.E.2d 1096
(1992), cert. denied USS. » 1413'S. Ct. 15865, 123.L.
Ed. 2d 152 (1993) (hereafter “Hybud v. Sphere Drake case”).
Petitioners opposed the motion because there were questions of
fact about whether there were pollution exclusions in those
policies and, if there were, whether the underlying facts (which
had not yet been determined) implicated the exclusions.
On May 7, 1993, without any hearing, the District Court
issued its Memorandum of Opinion and Order granting both of
Hartford’s motions for partial summary Judgment. The District
Court included in its decision a sua sponte dismissal of Peti-
tioners’ counterclaim. Appendix, infra at A-16.
As to the 1981 - 1985 policies, the District Court held that
the Hybud v. Sphere Drake case acted as collateral estoppel. As.
to the 1968-1971 policies, the District Court held that Petitioners
did not provide “any evidence of the specific coverages, condi-
tions, terms or definitions of the policies at issue” (Emphasis
added). Accordingly, Petitioners were determined not to have
met their burden of showing they would be covered under the
policies.
Petitioners timely filed their Motion for Reconsideration,
Motion to Amend the Findings in Judgment, Motion to Revise
the Decision, Motion to Alter or Amend Judgment, and Motion
for Relief from Judgment or Order (“post judgment motions”),
all pursuant to Rules 52, 54, 59 and 60 of the Federal Rules of
Civil Procedure. On June 10, 1993, the District Court denied
“as moot” the post judgment motions. Appendix, infra at A-25.
On January 27, 1995, the United States Court of Appeals
for the Sixth Circuit (“Sixth Circuit”) affirmed the District
Court’s decision in a three page per curiam opinion which
basically adopted the opinion of the District Court. Appendix,
infra at A-1.
6
After denial of their Motion for Rehearing filed in the Sixth
Circuit (Appendix, infra at A-4), Petitioners hereby petition the
Supreme Court of the United States for a Writ of Certiorari to
review the merits of various substantial constitutional and other
important and highly controversial issues raised by this case.
STATEMENT OF FACTS
This case involves two distinct sets of comprehensive
general liability insurance policies issued by Hartford to Peti-
tioners. The first was a series of three policies effective between
August 27, 1968 and August 27, 1971 (“the 1968-1971 poli-
cies”). The second was effective between August 31, 1981 and
June 30, 1985 (“the 1981-1985 policies”). Both sets of policies
were issued through Ostrov Insurance Agency, Inc. (“Ostrov’’),
an agent for Hartford.
Neither Hartford nor Petitioners produced the original or a
copy of the 1968-1971 policies in the District Court. Petitioners
did produce ample evidence that their copies of the policies had
been lost or destroyed. Hartford failed to provide any evidence
as to whether or not it had the originals or copies of the
1968-1971 policies, or even to describe its efforts to locate the
policies. Hartford merely made bare, unverified allegations that
it did not have the policies.
While the policies themselves were not made part of the
record of this case in the District Court, there was an overwhelm-
ing amount of evidence produced by Petitioners establishing the
existence and basic terms and conditions of the 1968-1971
policies. The affidavits of four witnesses, who all had personal
knowledge of the insurance matters pertaining to Petitioners
during 1968 to 1971, affirmed that Hartford had issued insur-
ance policies to the Petitioners which provided comprehensive
general liability (“CGL”) insurance coverage to Petitioners.
Two of these witnesses were Hartford’s own agents and author-
ized representatives at that time. In addition to the testimony of
abled ane Ss ui
. a ats ctiaton piaitin agentes
7
the these four witnesses, Petitioners also produced 60 separate
documents generated during 1968 to 1971 that establish and
corroborate that Hartford had indeed issued CGL insurance
policies to the Petitioners. These documents included 33 cer-
tificates of insurance, numerous endorsements, correspondence,
statements of account, bills, and premium adjustment state-
ments, all of which were issued by Hartford to Petitioners.
In addition to all of the foregoing evidence which was
obtained through Petitioners’ own sources, Petitioners also of-
fered as evidence of coverage a Hartford interoffice memoran-
dum dated December 14, 1988 in which Hartford employees
explicitly admitted the existence of the policies and that they
provided coverage to Petitioners for the claims of the USEPA
and OEPA. This document is so important and conclusive as to
all issues related to the 1968-1971 policies that it is included as
part of the Appendix, infra at A-30.
Petitioners also produced a specimen policy, which, ac-
cording to Hartford’s own agent, contains the same or substan-
tially the same language that would have been used in insurance
policies issued by Hartford during 1968-1971. There was no
pollution exclusion contained in the 1968-1971 policies.
As to the 1981-1985 policies there was conflicting evi-
dence of record as to exactly what were the terms and conditions
of each policy, particularly as to whether or not a pollution
exclusion endorsement was part of those policies.
The underlying lawsuits for which Petitioner sought its
declaratory judgment were civil complaints filed by the United
States and the State of Ohio for declaratory judgment relief and
a money judgment under §107 of the Comprehensive Environ-
mental Response, Compensation and Liability Act of 1980
(CERCLA), 42 U.S.C. §9607, as amended by the Superfund
Amendments and Reauthorization Act of 1986.5 The underly-
5
The OEPA complaint also includes several other statutory and com-
mon law causes of action.
8
ing complaints do not allege when, how often, or how the release
and threats of releases about which the governments complain
occurred. Very little discovery has taken place to date in con-
nection with these cases.
Because of the way both the USEPA and Ohio EPA cases
have been managed, Petitioners have had little opportunity to
take discovery of either the United States or the State of Ohio
concerning the nature of the “releases or threat or releases” of
pollution alleged in the underlying complaints. Without this
discovery, it is impossible to make any determination as to
whether the releases or pollution alleged by the United States
and State of Ohio are “sudden and accidental” within the mean-
ing of those terms as they have been interpreted by the Supreme
Court of Ohio in the Hybud v. Sphere Drake case.
ARGUMENT FOR GRANTING THE WRIT
A. The District Court Should Have Abstained From Exercis-
ing Declaratory Judgment Jurisdiction And Dis-
missed The Case.
First and foremost, this case involves important issues
about the proper exercise of federal jurisdiction. The failure to
abstain from exercising jurisdiction here led the lower courts to
an erroneous interpretation and application of state law to the
issues presented by the case. This starkly highlights why federal
courts should not become involved in cases of this nature in the
first place.
In Green v. Mansour, 474 U.S. 64, 72, 106 S. Ct. 423, 428,
88 L.Ed.2d 371 (1985), this court said:
... [T]he declaratory judgment statute “is an enabling
Act, which confers a discretion on the courts rather
than an absolute right upon the litigant.” Public Serv-
ice Comm’n v. Wycoff Co., 344 U.S. 237, 241, 73 S.
Ct. 236, 239, 97 L.Ed. 291 (1952). The propriety of
issuing a declaratory judgment may depend upon
4
3
7
}
5
4]
3
3
5
Wi tel Bina Sa ce Naa mF EAA OE BAIS
9
equitable considerations, see Samuels v. Mackell, 401
U.S.. 66, 73, 91 S. Ct. 764, 768, 27 L.Ed.2d 688
(1971), and is also “informed by the teachings and
experience concerning the functions and extent of
federal judicial power.” Wycoff, supra, 344 U.S. at
243, 73 S. Ct., at 240; cf. Younger v. Harris, 401 U.S.
37, 44-45, 91 S. Ct. 746, 750-51, 27 L.Ed.2d 669 (1971).
But the court failed to identify and discuss exactly what a lower
federal court should consider in determining whether to exercise
jurisdiction over a declaratory judgement action. The District
Court failed to follow even those limited instructions, and it gave
no explanation of its reason for doing so. The equitable consid-
erations at work here all favor the federal courts declining to
exercise jurisdiction to determine whether a declaratory judg-
ment should have been issued.
Because this Court in the past has not identified clearly the
“equitable considerations” referred to in Green v. Mansour or
identified the “teachings and experience” there is a lack of
uniformity in the lower courts concerning these factors and
numerous conflicting results in the lower courts in cases of this
nature. These are important and compelling reasons for this
Court to hear this case, determine whether jurisdiction was
properly exercised here, and clearly state the principles and
factors which should be considered (or not considered) by a
lower court in deciding whether or not to exercise jurisdiction
in a case of this nature.
In Green v. Mansour this Court referred to “equitable
considerations” and “the teachings and experience concerning
the functions that extend over federal judicial power’, but failed
to identify and discuss exactly what a lower federal court should
consider in determining whether to exercise jurisdiction over a
declaratory judgment action. This has led to a hodgepodge of
cases in the lower courts in which different principles are being
defined and applied in different cases. There is a clear conflict
10
in the circuits concerning whether or not declaratory judgment
jurisdiction should be exercised where a case involves matters
of purely state insurance law interpretation. Because of the
tremendous recent activity in all of the lower federal courts
concerning when a federal court should exercise declaratory
judgment in a dispute concerning the interpretation and appli-
cation of insurance policy provisions to a given set of facts, it is
critical that this Court promulgate clear guidelines to the lower
courts so that there can be a uniformity in result on this crucial
question of when a federal court should exercise discretionary
jurisdiction in a case involving the interpretation and application
of insurance policy provisions. This would have the salutary
effect of providing to the lower federal courts the considerations
and factors that must or should be taken into account in deter-
mining where and when scant federal judicial resources should
be spent in issuing a declaratory judgment in matters involving
insurance disputes. This would also let the state courts be the
primary arbiters of issues of state law and discourage the forum
shopping that currently takes place.
The disarray in which these matters currently exist is no
better illustrated than the situation which presently exists in the
Sixth Circuit where differing results without apparent reconcili-
ation are common place. For example, all of the following cases
involve situations where the Sixth Circuit decided that absten-
tion was appropriate in an insurance dispute or that the issue of
abstention ought to be explicitly further addressed by the lower
court: Nationwide Mutual Fire Ins. Co. v. Willenbrink, 924 F.2d
104 (6th Cir. 1991); Omaha Property & Cas. Ins. Co. v.
Johnson, 923 F.2d 446 (6th Cir. 1991) (2-1 decision); Allstate
Ins. Co. v. Mercier, 913 F.2d 273 (6th Cir. 1990); Allstate Ins.
Co. v. Green, 825 F.2d 1061 (6th Cir. 1987); Manley, Bennett,
McDonald & Co. v. St. Paul Fire & Marine Ins. Co., 791 F.2d
460 (6th Cir. 1986); American Home Assurance Co. v. Evans,
791 F.2d 61 (6th Cir. 1986). See also Grand Trunk Western
Railroad Co. v. Consolidated Rail Corp., 746 F.2d 323 (6th Cir.
Lee Cees ES Te tar
Pe eee mE ery
1]
1984). These cases stand in stark contrast to other Sixth Circuit
cases in which a district court and/or the Sixth Circuit exercised
jurisdiction to decide important issues of state law in the context
of a declaratory judgment action involving insurance issues.
See, for example, FL Aerospace v. Aetna Cas. & Sur. Co., 897
F.2d 214 (6th Cir. 1990); and U.S. Fidelity and Guaranty Co. v.
Star Fire Coals, Inc., 856 F.2d 31 (6th Cir. 1988). See also
Sherwin-Williams Co. v. Certain Underwriters at Lloyd’s Lon-
don, 813 F. Supp. 576 (N.D. Ohio 1993); and Borden, Inc. v.
Affiliated FM Ins. Co., 682 F. Supp. 927 (S.D. Ohio 1987), aff’d
865 F.2d 1267 (6th Cir. 1989). As to this latter group of cases,
there was no discussion whatsoever concerning the question of
whether jurisdiction should have been asserted. Apparently all
of the parties involved there were satisfied with having the
federal court exercise jurisdiction in those cases. This is not a
satisfactory way of proceeding in as much as jurisdiction is a
critical threshold issue in every case which must be satisfied. It
must be satisfied at the outset of each litigation or the case should
not proceed in federal court. The existence of jurisdiction ought
not be the subject of implicit stipulation.
This hodgepodge of case law and results in the Sixth Circuit
is also found in other circuits where a similar inconsistency in
analysis and results may be found. For example, in the Ninth
Circuit a panel of judges recently raised the issue sua sponte and
determined that the district court should not have exercised
declaratory judgment jurisdiction and accordingly remanded the
case with instructions to dismiss. See America National Fire
Ins. Co. v. Hungerford, F.3d , 1995 WL 242286
(9th Cir. 1995). This case followed the heels of American States
Ins. Co. v. Kearns, 15 F. 3d 142 (9th Cir. 1994) and Aetna Cas.
& Sur. Co. v. Merritt, 974 F.2d 1196 (9th Cir. 1992) where the
Ninth Circuit refused to dismiss insurance disputes. Preceding
those cases was Continental Cas. Co. v. Robsac Industries, 947
F.2d 1367 (9th Cir. 1991), where the Ninth Circuit decided that
that district court should not have exercised declaratory judg-
12
ment jurisdiction. This patchwork of inconsistent cases, as
illustrated by the Sixth Circuit and Ninth Circuit, may be found
in one form or another in virtually all of the other circuits,
whether at the circuit court level or within each circuit’s district
courts. The relatively recent vintage of all these cases shows
that this issue pervades the lower courts at this time. See also
Continental Cas. Co. v. Fuscardo, 35 F.3d 963 (4th Cir.
1994)(2-1 decision that abstention is appropriate); Continental
Casualty Co. v. Coastal Savings Bank, 977 F.2d 734 (2nd Cir.
1992) (abstention not appropriate); and Mitcheson v. Harris,
955 F.2d 235 (4th Cir. 1992) (2-1 decision for abstention).
The current situation leads to the epitome in denial of equal
protection and due process because the ultimate decision about
whether a federal court will hear or not hear a particular case
would seem to depend upon the particular judge or panel to
whom the case is assigned, some appearing to favor the exercise
of jurisdiction and some appearing to favor dismissal of cases
of that nature. The exercise of federal jurisdiction should not
depend upon the “luck of the draw”. It should depend upon legal
and equitable principles that have been well defined and for
which guidance is clearly given so that a relatively uniform
administration of law is accomplished. The exact opposite
would appear to be the situation at the present time, especially
as illustrated by this very case.
This case presents an extremely good vehicle for this Court
to entertain this important recurring issue and provide guidance
to the lower courts including those courts involved in the deci-
sions related to this case. This case involves a situation where
this very issue was raised from the outset by Petitioners. The
District Court without any analysis whatsoever simply denied
Petitioners’ motions to dismiss. The Sixth Circuit, without the
benefit of any analysis or consideration of relevant factors by
which it could determine whether the District Court’s exercise
of jurisdiction had been proper, simply rubber stamped the
13
District Court’s decision on this issue. Thus, these issues have
yet to be squarely addressed in this case.
In light of the clearly conflicting results within and among
the circuits and the failure of the lower courts in this case to pay
these important issues any consideration whatsoever, this case
presents a unique opportunity for this Court to speak out on the
| issue of the proper exercise of declaratory judgment jurisdiction,
: provide lower courts in this case and in the many other insurance
q
disputes currently pending or which may be filed in the future
clear guidance on when such cases should be entertained and
when they should be dismissed.
Although there probably is no one factor that should be
considered as conclusive in making a determination of this
nature, there do appear to be certain critical factors that would
seem to militate in favor of abstention and dismissal; they are:
1. If there is no federal question in the case and the issues
are ones of state law.
tN
The case involves insurance law, an area that Congress
has expressly left to the states through the McCar-
ran-Ferguson Act (15 U.S. §1011-12).
3. Where the state courts have an overriding interest in
deciding questions of state law and are best situated
to handle such issues. This is especially true where
the issues are close and the state precedent is
skimpy.
4. Where the filing of the case constitutes a blatant race
i to the courthouse in response to a claim presented
by the insureds in the hope of preempting any state
court proceeding.
5. Where there are available state remedies for the resolu-
tion of defense and coverage issues.
6. Where the case will result in piecemeal litigation.
14
7. Where the record is devoid of facts about the underly-
ing actions.
8. Where the sole basis of jurisdiction is diversity of citi-
zenship.
9. Where an insurer has been guilty of failing to give
proper notice and other misconduct prior to the fil-
ing of the motion.
10. Where a superior alternative remedy exists in the
form of an action for indemnity after the conclusion
of the underlying lawsuits.
If the preponderance or all of the foregoing factors exist, then a
district court should decline to exercise jurisdiction.
If these principles were to be applied to the facts and
circumstances presented by this case then dismissal should have
been granted. There are no federal questions in this case. The
case involved solely insurance law issues, which are purely state
law issues. The issues in the case are close and the state
precedent is skimpy. The insurer filed the lawsuit before the
insureds even received notice of the insurer’s positions. Ohio
Revised Code Chapter 2721 provides a meaningful response to
any need for a declaratory judgment on the part of the insurer
by permitting an action in state court and eliminates any need to
seek it in the federal courts.
Hartford failed to join the United States, the State of Ohio,
or any of the cross claimants in the underlying cases. Thus, they
will not be bound by any determination of the issues in this case.
If plaintiffs were to obtain judgments against the Petitioners in
the underlying actions, their rights against Petitioners’ insurance
carriers will still have to be determined in supplemental proceed-
ings under Ohio Revised Code § 3929.06. See Broz v. Winland,
68 Ohio St. 3d 521, 629 N.E.2d 395 (1994). Thus, this a classic
situation of piecemeal litigation.
15
There have been no determinations made and little discov-
ery taken in the underlying actions. It is very hard if not
impossible for insurance policies to be applied in the absence of
factual determinations. As shown by the complaint the sole
basis of jurisdiction is diversity jurisdiction.
Hartford failed to give proper notice of denial of Petition-
ers’ claim of defense and indemnity. It is undisputed that
Petitioners did not receive the denial letter from Hartford until
after the lawsuit was filed. Thus Petitioners had no chance to
evaluate Hartford’s position or react in any manner.
Last, the insurer could file an action after the conclusion of
the underlying lawsuits.
Despite all of these equitable considerations in favor of
dismissal of this case, the District Court and Sixth Circuit
refused to dismiss the case and proceeded to consider the merits.
This shows what disarray presently exists in the lower courts
concerning when declaratory judgment jurisdiction should be
exercised. It is critical for this Court to correct the situation
which exists in this case and provide important guidance to the
lower courts for the many other cases of a similar nature. It has
now been more than 50 years since this Court entertained a
question concerning the use of declaratory judgment jurisdiction
in an insurance dispute, Brillhart v. Excess Ins. Co. of America,
316 U.S. 491, 62 S. Ct. 1173, 86 L. Ed. 1620 (1942). It is now
appropriate for this Court to revisit this active and controversial
issue.
B. The Granting Of A Summary Judgment In Favor Of
Hartford Constitutes A Denial Of Due Process And
Equal Protection Under The Facts And Circum-
stances Presented.
In an effort to breathe renewed life into the use of Civil
Rule 56, this Court expounded at length about summary judg-
ment practice in the companion cases of Celotex Corp. v.
16
Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed.2d 265 (1986),
and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct.
2505, 91 L. Ed.2d 202 (1986). In the years following the
issuance of these decisions,many cases have been decided on
summary judgmeni thereby conserving scarce judicial resources
while reaching fair decisions as expeditiously as possible. How-
ever, the pendulum, as evidenced by this case, has swung too
far to encouraging summary judgment. This Court needs to
remind the lower courts here and others of the rules related to
summary judgment practice and how they should be applied.
This case presents just such an occasion.
The first rule of importance here is that of burden of proof.
Civil Rule 56 provides that the burden of proof is upon the
moving party. Nevertheless, the District Court clearly and
explicitly placed the burden of proof upon Petitioners rather than
on Hartford as the moving party. Hartford completely failed to
meet its burden of proof as a moving party or a plaintiff who
filed the lawsuit.
Hartford failed to produce any summary judgment evi-
dence that the 1968-1971 policies did not exist or that they did
not provide comprehensive general liability insurance coverage
for the Petitioners. Hartford failed to establish that it had no
record of the policies being issued to Petitioners for those
periods, that it could not reconstruct the policies from its own
or other’s records, or that it did not have form policies that would
have been used for comprehensive general liability insurance
policies issued during 1968 to 1971. Indeed, Hartford did not
even establish that it looked for the policies. Hartford failed to
offer any evidence or even suggest that the 60 documents and 5
affidavits establishing the particulars of the 1968-1971 policies
were either false or erroneous.
As to the 1981-1985 policies, Hartford failed to produce a
copy of those policies attested to by anyone. Hartford’s copy of
what it claimed to be the policies were not in summary judgment
17
form as required by Civil Rule 56. Thus, it should not have been
given any consideration by the District Court. Moore v. Hol-
brook, 2 F.3d 697, 699 (6th Cir. 1993).
The second important rule for summary judgment practice
is that the evidence of the non-movant is to be believed, and all
justifiable inferences are to be drawn in his favor. See Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513,
91 L. Ed. 2d 202 (1986); Adickes v. S.H. Kress & Company, 398
U.S. 144, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). The District
Court failed to apply this rule despite the fact that the evidence
submitted by the non-movant, in this case Petitioners, was
extensive if not overwhelming on the issues of the existence and
basic terms and conditions of the 1968-1971 policies.
The affidavits of four witness, who all had personal knowl-
edge of insurance matters pertaining to Petitioners during 1968-
1971, affirmed that Hartford had issued insurance policies to
Petitioners which provided comprehensive general liability in-
surance to Petitioners. Two of these witnesses (Saul A. Ostrov
and Patricia Jacobson) were Hartford’s own agents and author-
ized representatives at that time. In addition to the testimony of
these four witnesses, Petitioners also produced 60 separate
documents generated during 1968 to 1971 that establish and
corroborate that Hartford had indeed issued CGL insurance
policies to the Petitioners. These documents included 33 cer-
tificates of insurance, numerous endorsements, correspondence,
statements of account, bills, and premium adjustments state-
ments, all of which were issued by Hartford to Petitioners.
In addition to all of the foregoing evidence which was
obtained through Petitioners’ own sources, Petitioners also of-
fered as evidence of coverage a Hartford interoffice memoran-
dum dated December 14, 1988 in which Hartford employees
explicitedly admitted the existence of the policies and that they
provided coverage to Petitioners for the claims of the USEPA
and the OEPA. This document is so important and conclusive
18
as to all issues related to the 1968 - 1971 policies that is quoted
here in part and appears in totality in the Appendix, infra at A-30,
hereto:
As we discussed, we are accepting coverage for the
periods of August 27, 1968 through August 27, 1971
... [T]he hard evidence of the certificates of insur-
ance are proof. The certificates bear valid Hartford
policy numbers, and also list limits of liability.
I also checked with Lynn Thoreson who worked in
the Akron office in the early 70’s. She did remember
that we insured Budoff when she first started, and she
handled several claims with them.
* * *
Lynn and I discussed this and we are convinced that
we would lose any battle over the insurance issue
should we decide to fight it. The certificates of insur-
ance, along with the agent’s testimony and our lack
of ability to prove that the policies didn’t exist, cou-
pled with Lynn’s recognition that we did insure them
back in the early 70’s would certainly do us in.
Petitioners also produced a specimen policy that contains
the same or substantially the same language that would have
been used in insurance policies issued by Hartford during 1968-
1971. There was no pollution exclusion contained in the 1968-
1971 policies.
While there is no dispute concerning the existence of the
1981-1985 policies, there is a disputed fact concerning whether
a pollution exclusion endorsement was contained in the policies.
The certified copy of the policy which was received by Petition-
ers after requests had been made to Hartford’s agent, did not
include a pollution exclusion endorsement. Prior to receipt of
the second policy, Petitioners had no knowledge of the pollution
exclusion endorsements claimed by Hartford, nor had Petition-
19
ers ever previously consented to any attempt by Hartford to
include them in the CGL insurance policies which were pur-
chased from Hartford by Petitioners.
Instead of following summary judgment rules and accept-
ing this evidence and finding there to be questions of fact for
trial, the lower courts disregarded this evidence and granted
summary judgment in favor of Hartford. This problem as well
as the foregoing problem constitutes such blatant violations of
basic summary judgment rules and practice that it amounts to a
violation of due process and equal protection of law.
C. The Failure To Recognize And Apply Rule 1004 Of The
Federal Rules Of Evidence Constitutes A Denial Of
Due Process And Equal Protection.
Rule 1004 of the Federal Rules of Evidence provides the
circumstances under which other evidence of the contents of a
writing is admissible where the original writing is not available.
Rule 1004 is one of the recognized exceptions to the Best
Evidence Rule (Rule 1002). Rule 1004 comes into play in many
cases where original writings are not available such as when the
writing has been lost or destroyed. It is of particular importance
where an old insurance policy cannot be located. This is fre-
quently the case in insurance coverage disputes. See, for exam-
ple, Owens Illinois, Inc. v. Aetna Cas. and Sur. Co., 990 F.2d
865 (6th Cir. 1993); Joslyn Mfg. Co. v. Liberty Mut. Ins. Co., 23
F.3d 1212 (7th Cir. 1994); Bituminous Cas. Corp. v. Vacuum
Tanks, Inc., 975 F.2d 1130 (Sth Cir. 1992); Remington Arms,
Inc. v. Liberty Mut. Ins. Co., 810 F. Supp. 1420 (Del. 1992);
Servants of Paraclete v. Great American Ins. Co., 857 F. Supp.
822 (N.M. 1994); and State of New York v. Blank, 820 F. Supp.
697 (N.D.N.Y. 1993) aff’d in pertinent part 27 F.3d 783 (2nd
Cir. 1994). See also Andrew Crispo Gallery, Inc. v. Commis-
sioner of Internal Revenue, 16 F.3d 1336 (2nd Cir. 1994). The
age of these cases shows that this issue is a hot issue at this time
in the lower courts.
20
This Court has not previously had an occasion to interpret
and provide guidance on Rule 1004. Where this Court has been
presented an appropriate occasion for interpreting a rule of
evidence, it has not hesitated to accept the case for a full hearing
and decision on the merits. See, for example, Daubert v. Merrell
Dow Pharmaceuticals, U.S. , 113 S. Ct. 2786, 125
L. Ed.2d 469 (1993) (interpreting Rule 702). Just such an
occasion is present here with respect to Rule 1004.
In its summary judgment ruling on the 1968-1971 policies,
the District Court said that there was not “any” evidence of the
terms and conditions of the missing policies. The Sixth Circuit
did not add anything to the District Court’s analysis of this issue
in its affirmance.
While it is true that none of the policies were produced to
the District Court (because Petitioners’ copies had been lost or
destroyed), there was ample other or secondary evidence pro-
duced about the basic terms and conditions of the policies. This
other or secondary evidence consisted of five affidavits and 60
documents, all of which established the essential terms and
conditions of an insurance contract under Ohio law: (1) subject
matter to be insured, (2) risk insured against, (3) commencement
and period of risk undertaken by the insurer, (4) amount of
insurance, and (5) premium and time at which it is to be paid.
Newark Machine Co. v. Kenton Ins. Co., 50 Ohio St. 549, 35
N.E. 1060 (1893); Avemco v. Eaves, 67 Ohio App. 3d 563, 587
N.E.2d 900 (Adams Cty. 1990); and Zimmerman Leasing Co.
v. Williams, 64 Ohio App.3d 623, 582 N.E.2d 631 (Lorain Cty.
1989).
The lower courts’ failure to accord any significance to the
affidavit and documentary evidence concerning the lost or de-
stroyed policies completely emasculates the significance of Rule
1004(1) of the Federal Rules of Evidence which plainly provides
for the admission and consideration of secondary evidence of a
writing where the originals have been lost or destroyed. There
21
are numerous Cases which provide that other evidence is admis-
sible to establish the contents of an insurance policy where the
original has been lost or destroyed. See, for example, Cipriani
v. Sun Life Ins. Co. of America, 757 F. 2d 78 (3rd Cir. 1985);
Burroughs Wellcome Co. v. Commercial Union Ins. Co., 632 F.
Supp. 1213 (SD NY 1986); and Servants of Paraclete v. Great
American Ins. Co., 857 F. Supp. 822 (NM 1994). These cases
and many others addressing this issue clearly say that the
question of whether or not a party has offered sufficient evidence
to prove the contents of a lost writing is a matter for the trier of
fact to decide. Instead, the lower courts here decided the ques-
tion as a matter of law and in derogation of the Federal Rules of
Evidence.
Prior to this case, there was no precedent for deciding a lost
or destroyed policies case by summary judgment rather than at
trial. Moreover, this evidence establishes waiver and estoppel
against Hartford. Under Ohio law, the issue of waiver and
estoppel of an insurance company is ordinarily a question of
fact. State Automobile Mut. Ins. Assn. v. Lind, 122 Ohio St. 500,
172 N.E. 361 (1930); Ohio Farmers Ins. Co. v. Cochran, 104
Ohio St. 427, 135 N.E. 537 (1922). In accord, Ranes v. Paul
Revere Life Ins. Co., 32 F.3d 1393 (9th Cir. 1994)(applying
Washington law); Mass. Mut. Life Ins. Co. v. O’Brien, 5 F.3d
1117 (7th Cir. 1993)(applying Illinois law); Sur v. Glidden-
Durkee, 681 F.2d 490, 495-6 (7th Cir. 1982)(applying Indiana
law); and, generally, 44 Am. Jur. 2d, Insurance § 2050 and cases
cited therein.
22
D. It Is A Violation Of The Civil Rules, The Due Process
And Equal Protection Clauses Of The Fifth Amend-
ment Of The U.S. Constitution And Basic Principles
Of Justice And Fair Dealing For The District Court
To Dismiss Sua Sponte Counts One And Two Of De-
fendants’ Counterclaim.
At the end of its Memorandum of Opinion filed May 7,
1993, the District Court sua sponte “dismissed” Petitioners’
counterclaim. Hartford had made no motion for summary judg-
ment related to the counterclaim. Previously, the District Court
had denied Hartford’s motion to dismiss count two of the
counterclaim. Hartford never filed any motion to dismiss as to
count one of the counterclaim.
The sua sponte dismissal of the counterclaim was proce-
durally and substantively defective and constituted error. The
Sixth Circuit did comment that the District Court’s action was
not in compliance with Civil Rule 56(c) in that the action was
taken without notice and an opportunity to be heard, but af-
firmed the dismissal because it believed that the counterclaim
was based solely on the same facts that gave rise to the summary
judgment.
Petitioners had no knowledge that their counterclaim was
under review. No motion was pending addressing the counter-
claim. Petitioners had no opportunity to defend their counter-
claim. The District Court, and ultimately the Appeals Court,
completely ignored the procedural safeguards of Civil Rule 56.
Before summary judgment may be granted against a party,
Civil Rule 56(c) mandates that the party opposing summary
judgment be afforded notice and a reasonable opportunity to
respond to all issues to be considered by the District Court.
Routman v. ADP, 873 F.2d 970, 971 (6th Cir. 1989). The Sixth
Circuit failed to follow its precedent that where a district court
is contemplating entering summary judgment sua sponte against
23
one of the parties, that party is entitled to unequivocal notice of
the court’s intentions. Routman v. ADP, supra at 972; Yashon
v. Gregory, 737 F.2d 547, 552 (6th Cir. 1984), cert. denied 486
U.S. 1032, 108 S. Ct. 2015, 100 L. Ed. 2d 602 (1988); and
Harrington v. Vandalia-Butler Board of Education, 649 F.2d
434, 436 (6th Cir. 1981). The whole purpose behind this rule is
to give a party a reasonable opportunity to respond to all issues
to be considered by the District Court. Other circuit courts
uniformly agree with these basic principles. See, for example,
National Fire Ins. v. Bartolazo, 27 F.3d 518 (11th Cir. 1994)
Thoen v. United States, 765 F.2d 1110, 1114 (Fed. Cir. 1985);
Indiana Port Comm. v. Bethlehem Steel Corp., 702 F.2d 107,
111 (7th Cir. 1983) and cases cited therein; and Portland Retail
DruggistAssn. v. Kaiser Foundation Health Plan, 662 F.2d 641,
645 (9th Cir. 1981), cert. denied 469 U.S. 1229, 105 S. Ct. 1230,
84 L. Ed. 2d 368 (1985). Several circuits, including the Sixth
Circuit, have linked these procedural requirements to the con-
stitutional due process right to be heard. Management Investors
v. United Mine Workers, 610 F. 2d 384, 390 (6th Cir. 1979);
Thoen v. United States, supra at 1114; and Winbourne v. Eastern
Airlines, 632 F.2d 219, 224 (2nd Cir. 1980).
The rulings of the lower courts failed to consider the
conceded fact that Hartford did owe some contractual duties
under the 1981-1985 policies. Regardless of the outcome of the
defense and coverage issues under those policies for the under-
lying EPA cases, Hartford owed Petitioners the duty of good
faith throughout. Bullett Trucking v. Glen Falls Insurance
Company, 84 Ohio App.3d 327, 616 N.E. 2d 1123 (Montgomery
Co. 1992); LeForge v. Nationwide Mutual Fire Ins. Co., 82 Ohio
App.3d 692, 612 N.E. 2d 1318 (Clinton Co. 1992), jur. mot.
over. 66 Ohio St.3d 1413 (1993). Hartford produced no evi-
dence whatsoever that it met that standard of good faith, let alone
undisputed evidence that would entitle it to summary judgment.
Many of the specific grounds of bad faith set forth in the
counterclaim, which the District Court previously found suffi-
24
cient to overcome a motion to dismiss, did not depend upon the
finding that there was a specific duty to defend or to provide
coverage for the underlying cases.
Clearly, Petitioners’ rights under the Federal Rules of Civil
Procedure and the due process and equal protection clauses of
the U.S. Constitution were violated by the District Court’s sua
sponte ruling on the counterclaim. Petitioners had no notice that
their counterclaim was under attack, and no opportunity to
respond to any arguments that the counterclaim should be
disposed of on summary judgment. It was fundamentally unfair
to dismiss the counterclaim under those circumstances.
E. The District Court Erred By Denying Petitioner’s Post
Judgment Motions.
On June 10, 1993, the District Court denied “as moot”
Defendants’ post judgment motions. The District Court simply
used a rubber stamp to make this ruling. It is apparent from this
that the District Court did not reach the merits of the post
judgment motions. The District Court apparently believed that
it lacked jurisdiction to entertain the motions on their merits
because a notice of appeal had been filed. The Sixth Circuit
completely failed to address this issue in its opinion and instead
commented on a few matters other than this issue and otherwise
adopted and incorporated the District Court’s opinion which
preceded this rubber stamp ruling.
The lower courts were wrong in failing to consider this
issue On its merits. The post judgment motions contained newly
discovered evidence directly impacting upon the District
Court’s summary judgment analysis. After the District Court
made its summary judgment rulings, Ostrov personnel again
reviewed their records for copies of the 1968-1971 policies.
While those policies could not be found, Ostrov did find a copy
of a specimen policy that contained the same or substantially the
same language as the language of the 1968-1971 policies. This
specimen policy constitutes further evidence of the “specific
25
coverages, conditions, terms or definitions” which the District
Court said it needed to have to declare rights and duties under
the 1968-1971 policies. The failure to even consider this motion
on the merits violates the civil rules and basic notions of due
process and equal protection.
CONCLUSION
For all the foregoing reasons, Petitioners respectfully re-
quest that the Petition for a Writ of Certiorari be granted and this
case be accepted for a review of the merits of all of the foregoing
issues.
Respectfully submitted,
Matthew Yackshaw
Counsel of Record
DAY, KETTERER, RALEY,
WRIGHT & RYBOLT
800 William R. Day Building
121 Cleveland Ave., South
Canton, Ohio 44702-1921
Telephone: (216) 455-0173
Attorney for Petitioners
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APPENDIX
Hartford Accident & Indemnity Company v.
Industrial Excess Landfill, Inc., et al.,
Case Nos. 93-3689 and 3765 (Sixth Circuit)
a. Per Curiam Decision filed
tn. . SE as
b. Rehearing Order filed
WO Oe Se
Hartford Accident & Indemnity Company v.
Industrial Excess Landfill, Inc., et al.,
Case No. 5:90CV0493 (USDC ND Ohio 1993)
a. Marginal Entry Order filed
September 30,1991 ........
b. Memorandum of Opinion and Order
filed February 14,1992 ......
c. Marginal Entry Order
d. Order filed August 11,1992 ...
e. Memorandum of Opinion and
Order filed May 7,1993......
f. Marginal Entry Order filed
| a ade ee
Hartford Interoffice Memorandum dated
ee Se
i a i
Min, Se. oe
a ae
a a a oo
Page[s]
A-1
A-]
A-4
oe
a,
ot
a
a intent
A-1
(Decided January 27, 1995)
Nos. 93-3689/2765
United States Court Of Appeals
FOR THE SIXTH CIRCUIT
HARTFORD ACCIDENT AND
INDEMNITY CoO.,
Plaintiff-Appellee,
V.
INDUSTRIAL EXCESS LANDFILL, INC., et al.
Defendants-Appellants.
ON APPEAL FROM THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN
DISTRICT OF OHIO
BEFORE: LIVELY, JONES and DAUGHTREY, Circuit
Judges.
PER CURIAM. The plaintiff, Hartford Accident and
Indemnity Company, brought this diversity action in the district
court seeking a declaratory judgment that it was not liable to its
insureds, defendants Industrial Excess Landfill, Inc., Hybud
Equipment Corp., and Hyman Budoff, under five comprehen-
sive policies issued by the plaintiff at various times over a
16-year period. Invoking their rights under the policies, the
defendants had called upon Hartford to defend and indemnify
them in a consolidated CERCLA action brought by the United
States Environmental Protection Agency and the Ohio Environ-
mental Protection Agency that was then pending in federal
court. The district court granted summary judgment to Hartford
on all the policies at issue in the declaratory judgment suit and,
sua sponte, dismissed certain counterclaims by the defendants.
A-2
We find no merit to the issues raised by the defendants on appeal,
and we therefore affirm.
Indeed, our review of the record, the briefs, and the district
court’s memorandum opinions in this case convinces us that the
district court’s judgment was correct in its essential aspects. We
further conclude that the judgment should be affirmed for the
reasons given by the district court, without the necessity of
further written explication on those issues covered in the court’s
opinion.
Two additional matters require comment, however. One
is a jurisdictional question not raised below and, therefore, not
treated in the district court’s opinion. The defendants insist that
under well-settled Sixth Circuit precedent, district courts should
decline to exercise diversity jurisdiction in declaratory judgment
actions involving insurance disputes but no federal questions.
Here, they contend, there is no federal question and the case
involves insurance law, an area of litigation and resolution best
left to the states. We note, however, that all of the cases cited
by the defendants in support of abstention involved concurrent
state court actions giving rise to, among other things, the possi-
bility of conflicting or inconsistent rulings on the same issue.
Here, both the declaratory judgment action and the under-
lying action were pending in the Northern District of Ohio. As
for the substantive issue of law raised in the declaratory judg-
ment action, i.e., whether the pollution exclusion clause in the
Hartford insurance policies applied to the facts pleaded in the
CERCLA action, that question had already been determined as
a matter of state law by the Ohio Supreme Court in its opinion
in Hybrid Equipment Corp. v. Sphere Drake Ins. Co., 64 Ohio
St. 3d 657, 597 N.E.2d 1096 (1992), cert. denied, 113 S..Ct.
1585 (1993), involving the same facts, the same insureds, and
the same pollution exclusion clause at issue in this case. We
conclude that the declaratory judgment action, having been
litigated to this point, should not be dismissed for lack of
A-3
jurisdiction. In reaching this determination, we are guided by
the standards set out in Allstate Ins. Co. v. Green, 825 F.2d 1061.
1063 (6th Cir. 1987).
One other issue raised on appeal requires at least a brief
comment. Although it appears that in dismissing the defen-
dants’ counterclaims sua sponte, the district judge was not in
compliance with Rule 56(c) of the Federal Rules of Civil Pro-
cedure, it further appears that this action was taken without
notice and an opportunity to be heard because the counterclaims
were based solely on the same facts that gave rise to the summary
judgment in the plaintiff’s favor. Under these circumstances,
we cannot say that the order of dismissal constituted reversible
error.
The judgment of the district court is AFFIRMED.
A-4
Decided March 15, 1995
Nos. 93-3689/2765
United States Court Of Appeals
FOR THE SIXTH CIRCUIT
HARTFORD ACCIDENT & INDEMNITY COMPANY,
Plaintiff-Appellee,
Vv.
INDUSTRIAL EXCESS LANDFILL, INC., ET AL.,
Defendants-Appellants.
ORDER
BEFORE:LIVELY, JONES, and DAUGHTREY, Circuit
Judges.
The court having received a petition for rehearing en banc,
and the petition having been circulated not only to the original
panel members but also to all other active judges of this court,
and no judge of this court having requested a vote on the
suggestion for rehearing en banc, the petition for rehearing has
been referred to the original hearing panel.
The panel has further reviewed the petition for rehearing
and concludes that the issues raised in the petition were fully
considered upon the original submission and decision of the
case. Accordingly, the petition is denied.
ENTERED BY ORDER OF THE COURT
(s/ Leonard Green
Leonard Green, Clerk
Granted: ___ Filed April 30, 1991
SS oo ee
_/s/ John M. Manos _
U.S. District Judge
In The United States District Court
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY COMPANY,
>
Plaintiff,
VS.
INDUSTRIAL EXCESS LANDFILL, INC., et al.,
Defendants.
Case No. 5:90CV0493
Judge Manos
DEFENDANTS’ MOTION TO DISMISS
Defendants Hybud Equipment Corp. (“Hybud”), Hyman
Budoff (“Budoff”) and Industrial Excess Landfill, Inc. (“IEL”)
(collectively referred to as “Defendants”), hereby move this
Court, pursuant to Rule 12 of the Federal Rules of Civil Proce-
dure, to dismiss this case because the Court lacks subject matter
jurisdiction, the complaint fails to state a claim upon which relief
can be granted, Plaintiff failed to join all necessary and proper
parties and the Court should abstain from exercising jurisdiction
over this case. More specifically, the complaint should be
dismissed for the following reasons:
1. An “actual controversy” within the meaning of 28
U.S.C. §2201 does not exist between the parties;
A-6
(Filed February 14, 1992)
In The United States District Court
FOR NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY CO.,
Plaintiff,
vs.
INDUSTRIAL EXCESS LANDFILL, INC., et al.,
Defendants.
Case No. 1:90CV0493
Judge Manos
MEMORANDUM OF OPINION
On March 19, 1990, plaintiff, Hartford Accident & Indem-
nity Co., filed the above-captioned case against defendants,
Industrial Excess Landfill, Inc., Hybud Equipment Corp., and
Hyman Budoff, seeking a declaration of the rights and liabilities
of the parties under several insurance contracts. Jurisdiction is
appropriate pursuant to 28 U.S.C. §1332. From 1981 through
1985, plaintiff issued several general liability insurance policies
to the defendants. On October 13, 1989, the United States filed
a complaint against the defendants herein and others seeking
recovery of response costs incurred in the clean-up of a hazard-
Ous waste site in Stark County, Ohio. That case was captioned
United States v. Industrial Excess Landfill Inc. et al., No.
5:89CV1988 (hereinafter “USEPA”). After receiving the
USEPA complaint, defendants requested that plaintiff indem-
nify and defend them. Plaintiff filed this action seeking a
determination of whether it has a duty to act on behalf of the
defendants in the USEPA action. On October 10, 1991, the
A-7
defendants filed a counterclaim alleging that plaintiff’s refusal
to provide coverage constitutes a breach of the insurance con-
tracts (Count I), breach of the duty of good faith (Count II), and
negligent or intentional infliction of emotional distress (Count
III). On November 12, 1991, plaintiff filed a motion to dismiss
Counts II and III of the counterclaim. For the following reasons,
the motion is denied as to Count II and granted as to Count III.
Pursuant to Fed. R. Civ. P. 12(b)(6), the court may dismiss
any count for “failure to state a claim upon which relief can be
granted.” Dismissal pursuant to Rule 12(b)(6) is appropriate
only if no set of facts would entitle the counterclaimants to relief.
See Conley v. Gibson, 355 U.S. 41 45-46, 78 S. Ct. 99, 102
(1957); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct.
2229, 2232 (1984). In considering this motion to dismiss, the
court must interpret the facts in the light most favorable to the
parties opposing the motion in order to determine whether any
set of facts would entitle them to relief. Meador v. Cabinet for
Human Resources, 902 F.2d 474 (6th Cir.), cert. denied, 111 S.
Ct. 182 (1990).
II.
Count Il of the counterclaim alleges that plaintiff breached
the duty of good faith it owes to the defendants by refusing to
pay, defend, or attempt to settle the claims in the USEPA action.
“Bad faith involves a conscious or deliberate wrongdoing with
an actual intent to mislead, deceive, or breach a known duty.”
Miller v. Kronk, 519 N.E.2d 856 (Ohio App. 1987) (citing
Wasserman v. Buckeye Union Cas. Co., 290 N.E.2d 837, 840
(Ohio 1972)). An insurance company owes its policy-holders a
duty to exercise good faith in defending and settling claims
brought against them. Centennial Ins. Co. v. Liberty Mut. Ins.
Co., 404 N.E.2d 759 (Ohio 1980). Under Ohio law, a policy-
holder may sue an insurance company which demonstrates bad
A-8
faith with respect to the settlement of third-party claims. Cen-
tennial Ins. Co. v. Liberty Mut. Ins. Co., 404 N.E.2d 759 (Ohio
1980); Slater v. Motorist Mut. Ins. Co., 187 N.E.2d 45 (Ohio
1962); Hart v. Republic Mutual Ins. Co., 87 N.E.2d 347 (Ohio
1949).
Defendants allege the following facts in support of this
counterclaim:
(a) Plaintiff failed and refused to make . . . any investiga-
a
(b) Plaintiff refused to give any reasonable interpretation
to the provisions in the policies or any reasonable
application of such provisions to Defendants’
claims and has acted to protect its own financial in-
terest therein at the expense of Defendants’ rights.
(c) Plaintiff has failed to provide Defendants any reason-
able or justifiable basis for denying Defendants’
claims....
(d) Plaintiff has unreasonably delayed the handling of all
of Defendants’ claims resulting in prejudice to De-
fendants.
(e) Plaintiff failed and refused to defend Defendants at
critical stages of the underlying claims when Plain-
tiff knew or should have known that Defendants
lacked the resources to fully and completely defend
themselves.
(f) Plaintiff failed and refused to provide any settlement
dollars or authorization at critical stages . . . [even
though] Plaintiff knew or should have known that
to do so would increase Defendants’ liability expo-
sure.
A-9
(g) Plaintiff has made numerous false and erroneous as-
sertions about Defendants as part of its attempt to
avoid its obligations.
(h) Plaintiff’s refusal to renew its policies with Defen-
dants was in retaliation for Defendants’ claims.
(i) Plaintiff’s conduct has forced Defendants to seek
legal redress.
(j) Plaintiff offered to provide a partial defense to Defen-
dants when Defendants were in a vulnerable posi-
tion, in an attempt to avoid its absolute nondivisible
duty to defend.
(k) Although Plaintiff has paid some defense costs, it in-
itially and for a significant period of time paid nothing
when it knew it was obligated to provide a defense.
(1) Plaintiff filed this lawsuit before giving any timely
and proper notice to Defendants.
Counterclaim at 4 33.
The court concludes that the counterclaim states facts
which, if proven, may establish that plaintiff breached the
alleged duty of good faith. Accordingly, the motion to dismiss
is denied as to Count II.
Ill.
Defendants allege that plaintiff intentionally or negligently
inflicted severe emotional distress by refusing to pay, defend,
or attempt to settle the claims against the defendants in the
USEPA action.
In order for defendants to prove intentional infliction of
emotional distress, they must show by a preponderance of the
evidence each of the following four elements:
1. the plaintiff’s conduct was extreme and outrageous;
2. the conduct was intentional or reckless;
A- 10
3. the defendants suffered emotional distress as a result
of the conduct, and
4. the emotional distress was severe.
Yeager v. Local Union 20, et al., 453 N.E.2d 666 (Ohio 1983).
Conduct is considered “extreme and outrageous” if it exceeds
all possible bounds of decency and would not be tolerated in a
civilized community. /d. at 671 (quoting Restatement of the
Law 2d, Torts (1965) 73, Section 46, comment d.). An act is
reckless if it is done with “conscious disregard for a great and
obvious harm.” Schellhouse v. Norfolk & Western Ry. Co., 575
N.E.2d 453, 457, n. 2 (Ohio 1991) (quoting Preston v. Murty,
512 N.E.2d 1174 (Ohio 1987)).
The counterclaim does not allege operative facts to support
the allegation that the plaintiff intended to inflict emotional
distress on the defendants. Plaintiff's refusal to defend the
USEPA claims cannot be the basis for an emotional distress
claim. It has not yet been determined whether plaintiff was
obligated to participate in the USEPA defense. It sought to
determine whether such a duty existed by filing this suit. This
court finds that defendants plead no facts which, if proven,
would amount to the “outrageous” conduct necessary to assert
an intentional infliction of emotional distress claim.
In order to assert a claim for negligent infliction of emo-
tional distress, the defendants must allege they were bystanders
Or witnesses to a sudden negligently caused event and were
traumatized by the distressing occurrence. Paugh v. Hanks, 451
N.E.2d 759 (Ohio 1983); Burris v. Grange Mut. Companies, 545
N.E.2d 83, 90-91 (Ohio 1989); Bartlett v. Daniel Drake Memo-
rial Hospital, 1991 WESTLAW 149565 (Ohio App. Hamilton
Cty. 1991). The counterclaim does not allege facts to support
any element of this claim. For these reasons, the motion to
dismiss 1s granted as to Count III.
A- ll]
IV.
This court concludes that the counterclaim adequately
pleads a claim for breach of the duty of good faith, but does not
adequately plead a claim for intentional or negligent infliction
of emotional distress. Accordingly, plaintiff's motion to dis-
miss is denied as to Count II and granted as to Count III.
IT IS SO ORDERED.
/s/John M. Manos
UNITED STATES DISTRICT JUDGE
A-12
(Filed February 14, 1992)
In The United States District Court
FOR NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY CO.,
Plaintiff,
VS.
INDUSTRIAL EXCESS LANDFILL, et al.,
Defendants.
Judge John M. Manos
Case No. 1:90CV0493
ORDER
Pursuant to the Memorandum of Opinion issued in the
above-captioned case this date, this court concludes that the
counterclaim adequately pleads a claim for breach of the duty
of good faith, but does not adequately plead a claim for inten-
tional or negligent infliction of emotional distress. Accordingly,
plaintiffs motion to dismiss Counts II and III of the counter-
claim is denied as to Count II and granted as to Count III.
IT IS SOQ ORDERED.
/s/John M. Manos
UNITED STATES DISTRICT JUDGE
Granted: __ Filed July 21, 1992
Denied: X
| Js/ John M. Manos _
U.S. District Judge
In The United States District Court
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY COMPANY,
Plaintiff,
VS.
INDUSTRIAL EXCESS LANDFILL, INC., et al.,
Defendants.
Case No. 1:90CV0493
Judge Manos
DEFENDANTS’ MOTION TO DISMISS
AMENDED COMPLAINT
Defendants Hybud Equipment Corp., Hyman Budoff and
Industrial Excess Landfill, Inc. (“Defendants”), hereby move
this Court, pursuant to Rules 12 and 15 of the Federal Rules of
Civil Procedure, to dismiss the amended complaint for the
following reasons:
1. The amended complaint is not ripe for adjudication.
2. An “actual controversy” within the meaning of 28
U.S.C. §2201 does not exist between the parties;
A- 14
(Filed August 11, 1992)
In The United States District Court
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY CO.,
Plaintiff,
VS.
INDUSTRIAL EXCESS LANDFILL, et al.,
Defendants.
Case No. 1:90CV0493
Judge Manos
ORDER
On March 19, 1990, plaintiff, Hartford Accident & Indem-
nity Co., filed the above-captioned case against defendants,
Industrial Excess Landfill, Inc., Hybud Equipment Corp., and
Hyman Budoff, seeking a declaration of the rights and liabilities
of the parties under several insurance contracts. On October 13,
1989, the United States filed United States v. Industrial Excess
Landfill Inc. et al., No. 5:89CV1988 (hereafter “USEPA”’),
against the defendants and others seeking recovery of response
costs incurred in the clean-up of a hazardous waste site in Stark
County, Ohio. After receiving the complaint, defendants re-
quested that plaintiff indemnify and defend them. Plaintiff filed
this action seeking a determination of whether it has a duty to
act on behalf of the defendants in the USEPA action. On June
23, 1992, defendants moved for a continuance of the trial date
and for a stay of discovery until the USEPA action is finally
determined by trial or settlement.
A-15
The motion for a continuance is granted. The motion to
Stay discovery is denied.
IT IS SO ORDERED.
/s/John M. Manos
UNITED STATES DISTRICT JUDGE
A- 16
(Issued May 7, 1993)
In The United States District Court
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY CO.,
Plaintiff,
VS.
INDUSTRIAL EXCESS LANDFILL INC., et al.,
Defendants.
Case No. 1:90CV0493
Judge M. Manos
MEMORANDUM OF OPINION
On March 19, 1990, plaintiff, Hartford Accident & Indem-
nity Co. (Hartford), filed the above-captioned action against
defendants, Industrial Excess Landfill, Inc., Hybud Equipment
Corp., and Hyman Budoff, seeking a declaration of the rights
and liabilities of the parties under several insurance contracts.
Jurisdiction is appropriate pursuant to 28 U.S.C. § 1332.
On April 29, 1992, Hartford filed a First Amended Com-
plaint. On July 31, 1992, the defendants filed an amended
answer and counterclaim. On July 2, 1992 and October 27,
1992, plaintiff filed motions for partial summary judgment. For
the following reasons, plaintiff’s motions for partial summary
judgment are granted and defendants’ counterclaim is dis-
missed.
A-17
Defendants owned and operated the Industrial Excess
Landfill in Stark County, Ohio. On October 13, 1989, the
United States filed a complaint against them and others seeking
recovery of response costs incurred in the clean-up of a hazard-
ous waste site. !
On December 19, 1991, the State of Ohio also filed a
complaint based on federal and state environmental laws.2
Hartford filed this declaratory action after defendants re-
quested that it defend and indemnify them in the USEPA action.
Defendants hold a number of insurance policies issued by
Hartford. These policies cover the time periods 1968-19713
and August 31, 1981 to June 30, 1985.4 From June 30, 1985
to June 30, 1987 defendants were insured by the Sphere Drake
Insurance Company.
On October 10, 1991, defendants filed a counterclaim in
which they allege that Hartford’s refusal to provide coverage
constitutes breach of the insurance contracts (Count 1), breach
of the duty of good faith (Count II) and negligent or intentional
infliction of emotional distress (Count III).
On April 29, 1992, Hartford filed its First Amended Com-
plaint for a declaratory judgment stating that it is not obligated
to defend or indemnify the defendants for the USEPA action
under the 1981-1985 policies (Count I) or the 1968-1971 poli-
cies (Count II) nor for the State of Ohio action under the
1981-1985 (Count III) or 1968-1971 (Count IV) policies.
On July 24, 1992, Hartford moved for partial summary
judgment on the 1968-1971 policies. It asserts that there is no
coverage because the defendants cannot produce proof of the
existence or terms of the policies.
On October 27, 1992, Hartford moved for partial summary
judgment for the 1981-1985 policies. It contends that because
of the “pollution exclusion” clauses it has no duty to defend or
A- 18
indemnify in the USEPA or State of Ohio actions. It further
contends that the defendants are collaterally estopped from
asserting that the “pollution exclusion” clauses do not apply to
its coverage.
Il.
Summary judgment is appropriate “if the pleadings, depo-
sitions, answers to interrogatories, and admissions on file, to-
gether with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(c).
The party moving for summary judgment bears the initial
burden of production under Rule 56. The burden may be
satisfied by presenting affirmative evidence that negates an
element of the non-movant’s claim or by demonstrating “an
absence of evidence to support the non-moving party’s case.”
Celotex Corp. v. Catrett, 477 U.S. 317, 325,106 S. Ct. 2548,
2554 (1986).
If the movant meets this burden, the non-movant must “set
forth the specific facts showing that there is a genuine issue for
trial.” Fed. R. Civ. P. 56(e). The substantive law identifies
which specific facts are material. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986). To avoid
summary judgment, the non-movant must “make a showing
sufficient to establish the existence of an element essential to the
party’s case, and on which that party will bear the burden of
proof at trial.” Celotex, 477 U.S. at 322, 106 S. Ct. at 2552.
| The USEPA action, United States of America v. Industrial Excess
Landfill, Inc., et al., No. 5:839CV1988 (N.D. Ohio) is pending.
> The State of Ohio action, State of Ohio v. Industrial Excess Landfill,
Inc. et al., No. 91CV2559 (N.D. Ohio), has been consolidated with the
USEPA action and is pending.
Policies 45 C 6777390, 45 C 678909 and 45 C 680280.
Policies 45 CBP 132102 and 45 CBP NH0404.
| a Ps Ree
PREPS R Rat ARDY RE OE Nr
1 RRR ern eee
a7 is i: i a ak
A-19
“The evidence of the non-movant is to be believed, and all
justifiable inferences are to be drawn in his favor.” Anderson,
477 U.S. at 256, 106 S. Ct. at 2513 (citing Adickes v. Kress &
Co., 398 U.S. 144, 158-59 (1970)). However, the non-movant
must “do more than simply show that there is some metaphysical
doubt as to the material facts.” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356
(1986). “[T]}he mere existence of some alleged factual disputes
between the parties will not defeat an otherwise properly sup-
ported motion” for summary judgment. Anderson, 477 U.S. at
247-48, 106 S. Ct. at 2510.
III.
A.
On October 27, 1992, Hartford filed a Motion for Partial
Summary Judgment. It contends that the defendants’ 1981-
1985 insurance policies contain a pollution exclusion clause that
bars coverage. It further contends that the Supreme Court of
Ohio decided this issue and partial summary judgment should
be granted under the doctrine of collateral estoppel.
The policies in question are comprehensive general liabil-
ity policies and they include a “Standard Pollution Exclusion.”
The exclusion is set forth as follows:
This insurance does not apply:
(f) to bodily injury or property damage arising out of
the discharge, dispersal, release or escape of smoke,
vapors, soot, fumes, acids, alkalis, toxic chemicals,
liquids or gases, waste materials or other irritants,
contaminants or pollutants into or upon land, the
atmosphere or other water course or body of water;
but this exclusion does not apply if such discharge,
dispersal, release or escape is sudden and accidental.
A - 20
On September 16, 1992, the Supreme Court of Ohio de-
cided Hybud Equipment Corp. et al. v. Sphere Drake Insurance
Co., Ltd., 64 Ohio St.3d 657, 597 N.E.2d 1096 (1992). The
Hybud case involved the same insureds, coverage for the same
underlying event and the same policy language as here.>
The Court in Hybud held that the language in the pollution
exclusion clause is not ambiguous and that the term “sudden”
limits liability to damages caused only by an abrupt release, not
damage from pollution that “occurred over an extended period
of time.” Hybud, 597 N.E.2d at 1103.
The Court noted that the USEPA complaint alleged that the
insureds had either disposed of or accepted different forms of
waste materials in the landfill over an extended period of time,
and that the resulting injuries and damage had been caused by
the waste deposited. The Court further noted that “a review of
the [USEPA] complaint show[s] that there was never any alle-
gation that the release or discharge of the waste happened
abruptly or instantaneously.” Hybud at 1103.
Under Ohio law, an issue is barred from relitigation under
the doctrine of collateral estoppel if a party pleads and proves
three elements:
(1) mutuality of parties;
(2) the issue was actually tried and decided and necessary
to the final judgment in the prior suit; and
(3) the issue is identical to the issue involved in the prior
suit.
Dwyer v. City of Middleton, 733 F.Supp. 262, 267 (S.D. Ohio
1989); see also Gilbraith v. Hixson, 32 Ohio St.3d 127, 512
N.E.2d 956 (1987).
The defendants in this declaratory action are the same
parties that litigated the application of the pollution exclusion
clause as plaintiffs in Hybud. Although Hartford is not the
| |
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A- 21
insurer in Hybud, the mutuality element is not necessary if the
party against which collateral estoppel is asserted has clearly
had its day in court on the specific issue sought to be relitigated.
Goodson v. McDonough Power Equipment, Inc., 2 Ohio St.3d
193, 443 N.E.2d 978 (1983). Because the defendants actually
litigated the application of the pollution exclusion clause, the
element of mutuality is established.
The Ohio Supreme Court’s decision in Hybud is a final
judgment and the application of the pollution exclusion clause
was necessary to that judgment. The language in the clause in
Hybud is identical to the language in this action and the disputed
coverage (indemnity for the costs and damages of the USEPA
action) is the same.
Therefore, the defendants are precluded from relitigating
the issue whether the pollution exclusion clause bars coverage
for the USEPA action under the doctrine of collateral estoppel.
B.
In their brief, Hartford contends that it should be granted
summary judgment on the 1981-1985 policies for claims arising
out of the State of Ohio action. It contends that Hybud is
controlling and the State of Ohio action is based on the same
events or occurrences as the USEPA action.
Defendants respond that the State of Ohio complaint is
broader than the USEPA complaint and that it includes theories
of common law nuisance and ultrahazardous activity that imply
“sudden and accidental” occurrences. However, the State of
Ohio complaint arises from the same set of operative facts as the
USEPA complaint and alleges that the pollution discharges
were done systematically over an extended period of time. It
contains no allegations that the release or discharge of the waste
happened abruptly or instantaneously. Therefore, Hartford is
> The Sphere Drake policies contained the same “Standard Pollution
Exclusion” as the Hartford policies.
A- 22
not liable under the 1981-1985 policies for the State of Ohio
complaint.
C.
On July 2, 1992, Hartford moved for partial summary
judgment on the issue of the “Lost or Destroyed Policies.” It
contends that summary judgment should be granted on the
1968-1971 policies because defendants cannot prove coverage.
Neither party has been able to produce a policy for 1968-
1971. However, defendants have provided some evidence that
Hybud Equipment Co. held comprehensive general liability
policies from Hartford for 1968-1971, including affidavits from
defendant Hyman Budoff and Saul Ostrov (Vice President of
Ostrov Insurance Agency, the insurance broker) claiming the
existence of the policies. Mr. Ostrov attests that the policies
were in his company’s files and seven years after their expiration
were regularly destroyed. Defendants also have produced cer-
tificates of insurance, statements of accounts, statements of
premium adjustment and general correspondence relating to the
policies. However, this secondary evidence relates only to
Hybud Equipment Co. as the insured and not Industrial Excess
Landfill, Inc. or Hyman Budoff, and does not describe the terms
or conditions of coverage.
The nature of an insurer’s obligation is not altered or
impaired because an original or a complete copy of the policy
cannot be produced. See Couch on Insurance 2d, Evidence, §
79:6. However, when an original is lost or destroyed the party
seeking to enforce the policy has the burden of proving its
issuance and the terms it contained. /d.; Lynd v. Sandy & Beaver
Valley Farmers Mut. Ins. Co., 103 Ohio App. 408, 145 N.E.2d
453 (1957). Therefore, under Ohio law, “in order to recover . . .
the express terms and conditions relied on must be proven, for
the policy and contract are the basis of the insurer’s obligation
and measure of its liability.” Lynd, 145 N.E.2d at 456. The
ee ae oe 7
A - 23
defendants’ certificates, affidavits and documents do not pro-
vide any evidence of the specific coverages, conditions, terms
or definitions of the policies at issue. “Absent the actual terms
of a contract, it is impossible for a trial court to declare a party’s
rights and duties under the contract.” Kleem v. Nationwide
Insurance Co., 1983 WL 2622 at 2 (Ohio App. 8th Dist. 1983).
Defendants have not met their burden of showing that under the
terms and conditions of the alleged policies they would be
covered. Therefore, as to the 1968-1971 policies, summary
judgment is appropriate.
Since Hartford is not liable, defendants’ counterclaim is
without merit.
Accordingly, Hartford’s motions for partial summary judg-
ment are granted and defendants’ counterclaim is dismissed.
IS SO ORDERED.
/s/John M. Manos
UNITED STATES DISTRICT JUDGE
A- 24
(Filed May 7, 1993)
In The United States District Court
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY CO.,
Plaintiff,
VS.
INDUSTRIAL EXCESS LANDFILL INC., et al.,
Defendants.
Case No. 1:90CV0493
Judge John M. Manos
ORDER
ORDER
Pursuant to the Memorandum of Opinion issued in the
above-captioned case this date, plaintiff's motions for partial
summary judgment are granted and defendants’ counterclaim is
dismissed.
IT IS SO ORDERED.
/s/John M. Manos
UNITED STATES DISTRICT JUDGE
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In The United States District Court
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
HARTFORD ACCIDENT & INDEMNITY COMPANY,
Plaintiff,
vs.
INDUSTRIAL EXCESS LANDFILL INC., et al.
Defendants.
Case No. 5:90CV0493
Judge John M. Manos
DEFENDANTS’ MOTION FOR
RECONSIDERATION, MOTION
TO AMEND THE FINDINGS AND JUDGMENT,
MOTION TO REVISE THE DECISION, MOTION TO
ALTER OR AMEND JUDGMENT, AND MOTION
FOR RELIEF FROM JUDGMENT OR ORDER
; Now come defendants, Hybud Equipment Corporation,
Hyman Budoff, and Industrial Excess Landfill, Inc. (“Defen-
dants”) and move this Court, pursuant to Rules 52, 54, 59 and
60 of the Federal Rules of Civil Procedure, for an order from
this Court reconsidering, amending and/or altering the Memo-
randum of Opinion and Order issued May 7, 1993, and Judg-
ment entered May 10, 1993, for all the reasons set forth in the
attached Memorandum of Law.
Granted: Issued June 10, 1993
Denied: Y as moot _
Ls/ John M. Manos _
U.S. District Judge
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U.S. Constitution, Amendment 5
No person shall be held to answer for a capital, or otherwise
infamous crime, unless on a presentment or indictment of a
Grand Jury, except in cases arising in the land or naval forces,
or in the Militia, when in actual service in time of War or public
danger; nor shall any person be subject for the same offence to
be twice put in jeopardy of life or limb; nor shall be compelled
in any criminal case to be a witness against himself, nor be
deprived of life, liberty, or property, without due process of law;
nor shall private property be taken for public use, without just
compensation.
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28 U.S.C. § 1332(a)
$1332. Diversity of citizenship; amount in controversy; costs
(a) The district courts shall have original jurisdiction of all civil
actions where the matter in controversy exceeds the sum of value
of $50,000, exclusive of interest and costs, and is between --
(1) Citizens of different States;
(2) citizens of a State and citizens or subjects of a foreign
State;
(3) citizens of different States and in which citizens or
subjects of a foreign state are additional parties; and
(4) a foreign state, defined in section 1603(a) of this title
[28 USCS § 1603(a)], as plaintiff and citizens of a
State or of different States.
For the purposes of this section, section 1335, and section 1441,
an alien admitted to the United States for permanent residence
shall be deemed a citizen of the State in which such alien is
domiciled.
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28 U.S.C. §2201(a)
§2201. Creation of remedy.
(a) In a case of actual controversy within its jurisdiction. except
with respect to Federal taxes other than actions brought under
section 7428 of the Internal Revenue Code of 1986 [ 26 USCS
§7428], a proceeding under section 505 or 1146 of title 11, or
in any civil action involving an antidumping or contervailing
duty proceeding regarding a class or kind of merchandise of a
free trade are a country (as defined in section 516A(f)(10) of the
Tariff Act of 1930 [19 USCS § 1516a (f)(10)]), as determined
by the administering authority, 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.
Any such declaration shall have the force and effect of a final
judgment or decree and shall be reviewable as such.
(1)
(2)
(3)
(4)
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Federal Rules of Evidence, Rule 1004
Rule 1004. Admissibility of Other Evidence of Contents
The original is not required, and other evidence of the contents
of a writing, recording, or photograph is admissible if --
Originals lost or destroyed. All originals are lost or
have been destroyed, unless the proponent lost or
destroyed them in bad faith, or
Original not obtainable. No original can be ob-
tained by any available judicial process or proce-
dure; or
Original in possession of opponent. At a time when
an original was under the control of the party
against whom offered, that party was put on notice,
by the pleadings or otherwise, that the contents
would be a subject of proof at the hearing, and that
party does not produce the original at the hearing; or
Collateral matters. The writing, recording, or photo-
graph is not closely related to a controlling issue.
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THE HARTFORD
INTEROFFICE MEMORANDUM
DATE: December 14, 1988
TO: Al Platteis, Supervisor
SEICO, Home Office Claims
FROM: Lou Antonelli, Supervisor
Cleveland Local Claims
SUBJECT: Claim Numbers: 734 LP 04168 (State of Ohio)
734 LP 32767 (U.S. EPA)
Our Insured: Budoff Iron & Metal
Attached please find a letter I recently sent to defense
counsel regarding the above cases.
I have also paid our pro-rata share, which is 35.15% of the
total billing.
As we discussed, we are accepting coverage for the periods
of August 27, 1968 through August 27, 1971. The agency who
supplied us with certificates of insurance has been our agent for
many years, at least since the mid-40’s, and has a good reputa-
tion. They produce quite a bit of business for us in their area.
In fact, they still are the agent for the insured, and Hartford does
write Automobile coverage with them. They will testify that the
insured did have General Liability coverage with The Hartford
for the above period, and the hard evidence of the certificates of
insurance are proof. The certificates bear valid Hartford policy
numbers, and also list limits of liability.
I also checked with Lynn Thoreson who worked in the
Akron office in the early 70’s. She did remember that we
insured Budoff when she first started, and she handled several
A- 3]
claims with them. She is the only one in the office who would
remember this, as no one in the Claim Department was here at
that time, nor was anyone in the Casualty Underwriting Depart-
ment here at that time.
I tried to run IM06’s, however I was told that the computers
did not have information going that far back. I tried looking in
the abstract drawers as well, however we only keep those for ten
years, thus they have been destroyed.
Lynn and | discussed this and we are convinced that we
would lose any battle over the insurance issue should we decide
to fight it. The certificates of insurance, along with the agent’s
testimony and our lack of ability to prove that the policies didn’t
exist, coupled with Lynn’s recognition that we did insure them
back in the early 70’s would certainly do us in.
We have working agreements on all of the other files, and
now we can add these two to the list. The attorney has a copy
of our proposed agreement which he is to circulate among all
the carriers for the signatures so that we can formalize things.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.