Petition for Writ of Certiorari — Eaton Corp. v. City of Detroit

“01 459 SEP 1 0200H

OFFICE OP THE CLERK

IN THE

Supreme Court of the Hnited States

EATON CORPORATION,

Petitioner

Vv.

CITY OF DETROIT,

Respondent

On Petition For Writ Of Certiorari

To The United States Court of Appeals

For the Sixth Circuit

PETITION FOR WRIT OF CERTIORARI

HARRY T. QUICK

Counsel of Record

ROGER A. HIPP

ROBERT E. CAHILL

BRZYTWA QUICK & MCCRYSTAL LLC

1660 WEST SECOND STREET

900 SKYLIGHT OFFICE TOWER

CLEVELAND, OHIO 44113

(216) 664-6900

i

QUESTION PRESENTED

On the second day of this environmental trial, Eaton

Corporation and the City of Detroit engaged in a settlement

discussion, which took place on the record and in which the

District Court participated. The District Court later found that

the parties did not enter into a settlement agreement during

this discussion, and the case proceeded to trial. The Sixth

Circuit Court of Appeals reversed, finding that the parties did

enter into a binding settlement agreement. This holding raises

the following question that warrants review by this Court:

Whether the Sixth Circuit Court of Appeals improperly

substituted its own interpretation of the facts for the trial

court's, instead of applying the “clearly erroneous” standard

of review of Fed. R. Civ. P. 52(a) as construed in Anderson v.

City of Bessemer City, 470 U.S. 564 (1985).

ij

PARTIES TO THE PROCEEDING

The following individuals and entities are parties to

the proceeding in the court below:

The City of Detroit, Michigan; George Simon; Joseph Simon;

Norina Simon; Shirley Simon; Maurice Taylor; Madeline

Taylor; U.S. Group, Inc., a Michigan corporation; U.S.

Equipment Company, a Michigan corporation; and Eaton

Corporation, an Ohio corporation.

Eaton Corporation makes the following disclosure

statement pursuant to Sup. Ct. R. 29.6:

Eaton Corporation is publicly held and has no parent

corporation. No publicly held company owns 10% or more

of Eaton Corporation’s stock.

a pL Oh Ane

HARRY T. QUICK

Counsel of Record

for Eaton Corporation.

iii

TABLE OF CONTENTS

QUESTION PRESENTED

PARTIES TO THE PROCEEDING

TABLE OF AUTHORITIES

OPINIONS BELOW

JURISDICTION

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

STATEMENT OF THE CASE

REASONS FOR GRANTING THE PETITION

CONCLUSION

APPENDIX

Opinion of the Sixth Circuit Court of Appeals

Order of the Sixth Circuit Court of Appeals

Denying Petition for Rehearing

ll

iv

Al

Bl

iv

TABLE OF AUTHORITIES

Cases Page

Anderson v. City of Bessemer City, 470 U.S. 564 (1985) .. . . 4-6

Bobbie Brooks, Inc. v. International Ladies’ Garment Workers

Union, 835 F.2d 1164, 1168 (6" Cir. 1987) ............05- 5

Ciaramella v. Reader’s Digest Ass’n, 131 F.3d 320, 323 (1997) 7

Cone v. West Virginia Pulp & Paper Co., 330 U.S. 212, 216

COED ak i incd nn ncwap base ccenss dee eubesadeawsaaunen 5

Winston v. Mediafare Entertainment Corp., 777 F.2d 78, 80

et Sermon r wre Peer rrr ry errr rere 7

Higbee v. Sentry Ins. Co., 253 F.3d 994, 995 (7" Cir. 2001) .. 7

1

PETITION FOR A WRIT OF CERTIORARI

Petitioner Eaton Corporation respectfully petitions for

a writ of certiorari to review the judgment of the United States

Court of Appeals for the Sixth Circuit.

OPINIONS BELOW

The Court of Appeals’ opinion is reported at 247 F.3d

619 and is reprinted in the appendix hereto at pages Al

through A22. The Court of Appeals’ Order denying Eaton’s

petition for rehearing is reprinted in the appendix hereto at

page B1. The District Court’s opinions and orders are not

reported.

JURISDICTION

The Court of Appeals entered its judgment on April 16,

2001. Eaton filed a timely petition for rehearing on May 17,

2001, which was denied on June 11, 2001. The jurisdiction of

this Court is invoked under 28 U.S.C. § 1254(1). The

jurisdiction of the District Court was founded on 28 U.S.C.

§ 1331.

STATUTES INVOLVED

* Federal Rule of Civil Procedure 52(a)

°42US.C.§9613_

*Comprehensive Environmental Response, Compensation,

and Liability Act of 1980, Pub. L. No. 96-150

*Superfund Amendments and Reauthorization Act of 1986,

Pub. L. No. 99-499

2

STATEMENT OF THE CASE

The City of Detroit condemned and acquired certain

property in 1989. Eaton Corporation had used the property

for manufacturing operations from 1926 to 1973. The City

sued Eaton and others to recover past and future

environmental cleanup and investigation costs.

Trial commenced on March 6, 1995. Moments before

trial was going to reconvene the following day, the City’s

counsel approached Eaton’s counsel with a proposal to settle

for $1.2 million. An on-the-record discussion among the City’s

counsel, Eaton’s counsel, and the District Judge followed.

As in any complex case, several issues besides money

stood in the way of settlement. The thorniest was contribution

protection: Would the City agree to protect Eaton from future

claims by third parties? The parties and the District Court

discussed this issue at length. Eaton argued below, and the

Court of Appeals agreed, that some of these discussions were

so convoluted as to be “uninterpretable.” (App. at A10.) The

District Court proposed that the City and Eaton each submit

a proposed draft settlement agreement so that he could pick

one version in a process he called “baseball arbitration.”

On April 28, 1995, Eaton submitted to the City and the

District Court a proposed settlement agreement that reflected

Eaton’s understanding of the March 7, 1995 discussions. The

City balked at Eaton’s proposed settlement, and on July 24,

1995, Eaton moved to re-set the matter for trial. On July 27,

1995, the City filed a Motion for Entry of Settlement Judgment.

The District Court held a hearing on August 8, 1995,

regarding the issue of settlement. After extensive testimony

and argument from both sides, the District Court determined

that the parties had not entered into an enforceable settlement

3

agreement on March 7, 1995. In making this determination,

the District Court carefully considered all available evidence

and determined that: (1) the parties had never reached

agreement regarding material settlement terms, and (2) the

District Court was unable to ascertain the terms of the

purported settlement agreement. (R. 260, 08/05/95 hearing

transcript.)

The District Court re-set the case for trial. The City

filed a motion to certify an interlocutory appeal, which the

District Court denied, holding, “Clearly the Parties

contemplated a definitive agreement before their litigation was

to be concluded. Absent a definitive agreement, there was no

settlement.” (R. 180, Order Denying Plaintiff's Emergency

Motion for Certification for Interlocutory Appeal.) The case

was tried to the Court during August and September 1995.

After trial the City appealed the District Court's

finding that no settlement occurred on March 7, 1995. The

Sixth Circuit’s opinion includes a partial reconstruction of the

March 7, 1995 settlement conference transcript. In the Sixth

Circuit’s synopsis, the discussions of contribution went like

this: the City’s counsel raised the issue of contribution

protection; the District Court interrupted; counsel for Eaton

asked for the point to be repeated; the City’s counsel

responded with a statement that the Sixth Circuit concedes

was “uninterpretable;” the District Court attempted to clarify;

the City’s counsel tried to “get back to the point he was about

to make when interrupted by the court;” and Eaton’s counsel

said, “That's correct.” (App. A8-A10.) On this convoluted

partial record the Sixth Circuit found that the District Court

clearly erred in finding no meeting of the minds took place on

the issue of contribution protection.

3

REASONS FOR GRANTING THE PETITION

I. This Court should grant certiorari to clarify the

respective roles of the District Court and the Courts

of Appeals in deciding issues of fact.

Although “A petition for a writ of certiorari is rarely

granted when the asserted error consists of erroneous factual

findings or the misapplication of a properly stated rule of

law,” Sup. Ct. R. 10, review in this instance is appropriate to

clarify the respective roles of District Courts and the Courts of

Appeals in resolving issues of fact. This Court has not

hesitated to intervene where, as here, a Court of Appeals has

substituted its own interpretation of facts for the District

Court's.

The instant case is similar to Anderson v. City of

Bessemer City, 470 U.S. 564 (1985), in which this Court granted

certiorari to review the Fourth Circuit Court of Appeals’

application of the “clearly erroneous” standard of review. In

Anderson, this Court instructed that:

If the district court’s account of the evidence is

plausible in light of the record viewed in its

entirety, the court of appeals may not reverse

it even though convinced that had it been

sitting as the trier of fact, it would have

weighed the evidence differently. Where there

are two permissible views of the evidence, the

factfinder’s choice between them cannot be

clearly erroneous.

470 U.S. at 573-574.

In the instant case, the Court of Appeals’ decision did

not discuss in any detail or cite any authority concerning the

5

standard of review being applied. Eaton believes, based on

the opinion’s descriptions of the District Court’s findings as

“clearly erroneous,” (App. at A4 and A19) that the Court of

Appeals was purporting to apply the “clearly erroneous”

standard of Fed. R. Civ. P. 52(a) as construed in Anderson.

This is the correct standard.' However, the Court of Appeals’

decision simply cannot be squared with that standard, since

there was ample evidence to support the District Court's

carefully considered findings on the issue of settlement.

The person who was in the best possible position to

determine whether a meeting of the minds occurred was the

District Judge, who participated directly in the March 7, 1995

talks and who conducted a separate evidentiary hearing about

those talks in the context of the case as a whole. The

interaction between counsel, what counsel said, how it was

said, and to whom it was directed “calls for the judgment in

the first instance of the judge who saw and heard the

witnesses and has the feel of the case which no appellate

printed transcript can impart.” Cone v. West Virginia Pulp &

Paper Co., 330 U.S. 212, 216 (1947).

In reviewing the transcript of the March 7, 1995

settlement discussions, the Court of Appeals did not consider

the record in its entirety, but rather keyed in on certain out-of-

context phrases in a strained effort to find a meeting of the

minds. The Court of Appeals’ partial reconstruction of the

settlement talks (App. at A8-A10) reads more like a one-sided

argument of why the District Court could have found a

meeting of the minds than a convincing demonstration of why

the Court of Appeals’ interpretation is the only rational one.

'E.g., Bobbie Brooks, Inc. v. International Ladies’ Garment Workers Union, 835

F.2d 1164, 1168 (6" Cir. 1987) (affirming district court's decision regarding

settlement validity and enforceability under “clearly erroneous” standard).

6

By relying on its own interpretation of a cold

transcript, without deference to the District Court's findings,

the Court of Appeals invaded the province of the District

Court as fact-finder. As this Court stated in Anderson:

The rationale for deference to the original

finder of fact is not limited to the superiority of

the trial judge’s position to make

determinations of credibility. The trial judge’s

major role is the determination of fact and with

experience in fulfilling that role comes

expertise. Duplication of the trial judge’s

efforts in the court of appeals would very likely

contribute only negligibly to the accuracy of

fact determination at a huge cost in diversion of

judicial resources. In addition, the parties to a

case on appeal have already been forced to

concentrate their energies and resources on

persuading the trial judge that their account of

the facts is the correct one; requiring them to

persuade three more judges at the appellate

level is requiring too much.

470 U.S. at 574-575.

The instant case, like Anderson, may be a case in which

both the District Court and the Court of Appeals arrived at

logical and plausible interpretations of an ambiguous record.

But Anderson holds that it is in precisely such cases that the

District Court's findings must control. This Court should

grant certiorari to clarify the respective roles of the District

Court and the Courts and Appeals in deciding issues of fact.

7

II. This Court should grant certiorari to advance the

federal policy of encouraging voluntary settlements.

Eaton recognizes that there is a strong federal interest

in promoting voluntary settlements. “By the same token,

judges must resist the temptation to dismiss a case

prematurely before a settlement has truly been finalized.”

Higbee v. Sentry Ins. Co., 253 F.3d 994, 995 (7 Cir. 2001)

(reversing finding that agreement in principle reached during

settlement conference constituted binding settlement, where

agreement in principle left material issues unresolved).

When courts strain too hard to find settlement

agreements, they discourage settlement in future cases. If oral

settlement discussions become a game of “gotcha” in which

every passing expression of assent may be scrutinized on

appeal for evidence of a meeting of the minds, parties and

their counsel would be wise to avoid oral settlement

negotiations altogether lest they be trapped into premature

settlements.

The Second Circuit Court of Appeals recognized this

danger in Ciaramella v. Reader’s Digest Ass’n, 131 F.3d 320

(1997). One of the parties to that case urged the Second Circuit

to adopt a federal rule of decision that an oral settlement is

binding whenever the parties agree on all material terms -

even if one of the parties does not intend-to bind itself until

written terms are negotiated and executed.

The Second Circuit rejected this suggestion as contrary

to federal policy: “Enforcing premature oral settlements

against the expressed intent of one of the parties will not

further a policy of encouraging settlements. People may

hesitate to enter into negotiations if they cannot control

whether and when tentative proposals become binding.” 131

F.3d at 323. See also Winston v. Mediafare Entertainment Corp.,

€

¥

:

8

777 F.2d 78, 80 (2™4 Cir. 1985) ("Because of this freedom to

determine the exact point at which an agreement becomes

binding, a party can negotiate candidly, secure in the

knowledge that he will not be bound until execution of what

both parties consider to be final document [sic].").

The Court of Appeals’ finding that the parties’

tentative settlement discussions constituted a binding

settlement agreement not only works an injustice in the

instant case, but also discourages settlement of future cases.

This Court should grant certiorari to advance the federal

policy of encouraging voluntary settlements.

CONCLUSION

For the foregoing reasons, this Petition for a Writ of

Certiorari should be granted.

Respectfully submitted,

\\ 4 | " () me re. * S40

Harry T\ Quick

Counsel of Record

Roger A. Hipp

Robert E. Cahill

Brzytwa Quick & McCrystal LLC

1660 West Second Street

900 Skylight Office Tower

Cleveland, Ohio 44113

(216) 664-6900

September 10, 2001

Te <TR NT EI ee NS OE OARS ee, P ARS As BOW I oie inde Leite

Al

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

99-1073

The CITY OF DETROIT,

Plaintiff-A ppellee,

Nos. 99-1073/1128

v.

GEORGE SIMON; JOSEPH SIMON;

NORINA SIMON; SHIRLEY

SIMON; MAURICE TAYLOR;

MADELINE TAYLOR; U.S.

GROUP, INC., A MICHIGAN

CORPORATION; U.S. EQUIPMENT

COMPANY, A MICHIGAN

CORPORATION,

Defendants-Appellants,

EATON CORPORATION, an Ohio

corporation,

Defendant.

99-1128

THE CITY OF DETROIT ’

Plaintiff-Appellant,

Vv.

A2

(GEORGE SIMON; JOSEPH SIMON;

NORINA SIMON; SHIRLEY

SIMON; EATON CORPORATION,

AN OHIO CORPORATION,

Defendants-Appellees,

MAURICE TAYLO&; MADELINE

TAYLOR; U.S. GROUP, INC., A

MICHIGAN CORPORATION;

U.S. EQUIPMENT COMPANY, A

MICHIGAN CORPORATION,

Defendants.

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 91-75348 - Avern Cohn, District Judge.

Argued: Nov. 28, 2000.

Decided and Filed: April 16, 2001.

Before: NELSON, SILER, and CLAY, Circuit Judges.

COUNSEL

ARGUED: Robert Charles Davis, DAVIS LAW GROUP, Mt. ~

Clemens, Michigan, Eric J. Magnuson, RIDER, BENNETT,

EGAN & ARUNDEL, Minneapolis, Minnesota, for

Defendants. Ruben Acosta, FINK, ZAUSMER & KAUFMAN,

Detroit, Michigan, for Plaintiff. ON BRIEF: Robert Charles

Davis, DAVIS LAW GROUP, Mt. Clemens, Michigan, Patrick

F. Gordon, James H. Russell, WINSTON & STRAWN,

hrs os

DEE ELA EELS BOAR ELESD ESIRDA B, Doih WE aah Ses D ee HO ASRIA De ete ek Tene

tai

A3

Chicago, Illinois, Harry T. Quick, MARTINDALE, BRZYTWA

& QUICK, Cleveland, Ohio, for Defendants. Ruben Acosta,

FINK, ZAUSMER & KAUFMAN, Detroit, Michigan, for

Plaintiff.

OPINION

DAVID A. NELSON, Circuit Judge.

This is an environmental protection case in which the

plaintiff (the City of Detroit) thought it had reached a

settlement with one of the corporate defendants (Eaton

Corporation) during the second day of trial. When the trial

court was advised that Eaton and the city had resolved their

differences, the terms of the settlement were placed on the

record in open court. Some weeks later, however, Eaton

denied that there had been a meeting of the minds with

respect to the scope of the "contribution protection" (i.e.,

indemnification against demands for contribution among

tortfeasors) that Eaton was to receive from the city. The city's

position was and is that the record contains a clear expression

of agreement on the scope of such protection.

Professing itself unable to determine precisely what the

parties had come to agreement on, the trial court denied a

motion by the city for entry of a settlement judgment. The

case was eventually tried to completion, and a final judgment

was entered on all claims.

Upon review, we conclude that the trial court erred in

declining to hold Eaton to the settlement it had said it was

accepting. The record, as we read it, shows that the city's

lawyer adequately clarified the scope of the agreed

contribution protection. The record further shows that

A4

Eaton's lawyer explicitly acknowledged that the clarification

was correct. Insofar as the district court subsequently found

that the record did not manifest a meeting of minds, we are

satisfied that the court's finding was clearly erroneous.

Both the city and the remaining defendants challenge other

aspects of the final judgment as well. Unpersuaded, we shall

reject these challenges.

I

For a period of several decades ending in 1973, as we

understand the uncontested facts, subsidiaries or corporate

predecessors of Eaton Corporation owned and occupied a tract

of industrial real estate located at the intersection of French

Road and Grinnell Avenue in the City of Detroit. There were

several buildings on the site, including a factory, a warehouse,

_a garage, a boiler house, and some office buildings.

Various firms occupied the property before and after Eaton's

occupancy. Different occupants disposed of different

hazardous wastes on the site. The contaminants included

polychlorinated biphenyls ("PCBs"), petroleum, and petroleum

by-products such as ethyl benzene, toluene, and xylene.

During a period that ended in 1989 the property was

occupied by defendant U.S. Equipment Co., a wholly-owned

subsidiary of defendant U.S. Group, Inc. The latter corporation

is connected with defendants George, Joseph, Norina and

Shirley Simon. It will be convenient for us to refer to the

Simons, U.S. Equipment, and U.S. Group collectively as "the

Simon group."

The City of Detroit acquired the real estate by condemnation

in 1989. The purpose of the city's acquisition was to clear

A5

flight paths for a municipal airport located on the far side of a

railroad track that runs next to the property.

The city demolished the factory and other buildings, cleaned

up the PCBs, and, through consultants, made a detailed

survey of the remaining contaminants. The city then brought

the instant lawsuit against the Simon group, Eaton, General

Motors Corporation (a sometime lessee of the property) and

others. The relief sought included both recovery of the

environmental cleanup and investigation costs already

incurred by the city and entry of a declaratory judgment with

respect to future remediation costs. The city's claims were

based in part on the Comprehensive Environmental Response

Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.

("CERCLA"), and the former Michigan Environmental

Response Act ("MERA"), M.C.L. §§ 299.601, et seq., NOW

recodified in Part 201 of the Michigan Natural Resources and

Environmental Protection Act, M.C.L. §§ 324.20101, et seq.

("NREPA").

In 1994 the city moved for partial summary judgment on a

claim that the Simon group was responsible for all of the PCB

cleanup costs. The district court granted the motion,

ultimately awarding the city $156,619.91 for reimbursement of

its costs plus attorney fees. .General Motors was dismissed

with the acquiescence of the city.

On March 6, 1995, the case went to trial on the remaining

claims against the Simon group and Eaton. Shortly before the

trial was to resume the next day, the court was informed that

Eaton and the city had reached a settlement. The terms of the

settlement were promptly memorialized, at the court's request,

in proceedings conducted on the record. With the reader's

indulgence, we shall describe these proceedings in some

detail.

A6

After stating his understanding that there had been a

resolution of the dispute between the city and Eaton, but no

resolution of the dispute between the city and the Simon

Group, the trial judge turned to the city for an account of what

was being agreed to. Mr. David H. Fink, one of the lawyers

representing the city, responded as follows:

"The terms of the settlement with Eaton will be a full and

final settlement in the dispute between the City of Detroit

and the Eaton Corporation would be the following:

One, the payment by [E]aton of $1.2 million cash; that is, no

trust funds or anything. It would be one straight payment

of $1.2 million.

Two, the City of Detroit would provide contribution

protection with respect to any claims brought in the past or

in the future with respect to this site by the *623 City of

Detroit. That, of course, would include the pending claims

against the Simons but would also include any other claim

that might be brought by the City of Detroit against any other

parties. They would have contribution protection.

There would not be any guarantee of indemnification as to third-

party claims. The City is not aware of any third-party claims

that have been brought or threatened in any way with

respect to the site with the exception of issues related to EPA

and EPA has long since given up with respect to the Simon

defendants." (Emphasis supplied.)

Mr. Fink went on to describe two obligations to be assumed

by Eaton: an obligation to cooperate with the city on a

statutory claim not directly relevant here, and an obligation to

cooperate on the city's claims against other parties. More

specifically, as far as the latter obligation was concerned, Mr.

Fink explained that Eaton was agreeing not to object to the

city's working with experts initially retained by Eaton, it being

understood that Eaton would not have to incur further costs

in this connection.

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A7

At this point, the transcript shows, Mr. James H. Russell,

environmental litigation counsel for Eaton, asked for

permission to confer with "co- counsel." (Mr. Russell may

have been referring here to Eaton house counsel Sharon

O'Flaherty, or lead trial counsel Harry T. Quick, or both.)

After an off-the-record discussion between counsel,. Mr.

Russell went directly to the expert witness point; he offered

no objection or other comment regarding Mr. Fink's

explanation of the scope of the protection Eaton would receive

against claims for contribution among tortfeasors.

What Mr. Russell said was this:

"We do not expect a problem in the operation of the last

point that Mr. [F]ink has just identified. I don't know that

we're prepared to put that into the agreement.

The reason is that the experts that Mr. Fink would wish to

have are independent contractors; they are outside experts."

The court then proposed a way of resolving the expert

witness problem, if it was a problem, and Mr. Russell

responded to the court's proposal by saying "[w]e have no

objection."

Mr. Fink, on behalf of the city, then returned to the subject of

contribution protection:

"Your Honor, the only item on the list that I see that will

require any ‘fl [e]shing out' in the agreement itself is the

form of the contribution protection and I just want to be

clear from the City's p[er]spective and that is that we would

expect that any claims brought against Eaton that arise from

a claim brought by the City, that the defense of that claim

would be tendered to the City of Detroit and the City would

have to affirm, as it would, as to the absolute guarantee to

provide that contribution protection brought by the City of

Detroit but then that the City would, of course, having taken

A8&

on that responsibility, would control the defense of the

claim." (Emphasis supplied.)

At this juncture the court offered a suggestion with regard to

the final wording of the agreement with respect to such claims:

"Well, let me suggest this: If there is any dispute, that is to

say, as to the wording of this portion of the agreement you

will each submit your respective draft to the Court and the

Court will choose between the two." (Emphasis supplied.)

Adding that he envisioned the possibility that "there may be

a dispute over the phraseology” of this portion of the

agreement, the judge described his proposal for resolving any

such dispute as "baseball arbitration." Mr. Russell, speaking

on behalf of Eaton, said that the court's suggestion was "fine

with us." Mr. Fink indicated that the suggestion was

acceptable to the city as well, "as long as the Court did not find

what I stated on the record is objectionable."

The judge assured Mr. Fink that "| don't find it objectionable."

Mr. Fink explained that he wanted "to avoid any

misunderstanding on the record." In response, the court asked

Mr. Russell if he agreed in principle with what Mr. Fink had

said. Mr. Russell answered in the affirmative: “In principle,

yes." Mr. Russell then repeated that Eaton had no problem

with the court's "baseball arbitration" suggestion.

The transcript continues as follows:

"MR. FINK: Your Honor, experience suggests to me is the

best thing at this point would be to be candid with the Coust

about where the disagreement fell at one point {in the

settlement negotiations] to be sure that the-

THE COURT: All right, go ahead.

MR. FINK: At one point in discussions among Counsel

there was a suggestion that--by opposing counsel--that

contribution protection might involve the City reimbursing

A9

Eaton for the cost of defending claims under the

circumstances--"

The trial court, unfortunately, did not allow Mr. Fink to finish

his sentence. Cutting Mr. Fink off as he was starting to

describe what Eaton had suggested about contribution

protection, the court said "No, that's not part of this. That's

not contribution protection."

The court's interjection evoked the following response:

"MR. FINK: The City, obviously, would be only able to

control the defense if it accepted liability and it must accept

liability in any kind of contribution action that may arise from

City action. Then we do have an agreement." (Emphasis

supplied.)

Turning to Mr. Russell, the court asked if he had any

problem with what Mr. Fink had said. The following

exchange ensued:

"MR. RUSSELL: I'm sorry, I missed the first part of it and I

wonder if he would be good enough to repeat it?

MR. FINK: Contribution protection is any claim brought

against us by anyone, the Simons or anyone else in

connection with this, would be tendered by us to the

plaintiff under the contribution protection. Plaintiff then

wants the right to control that litigation.

That's the nature of contribution protection, they want to be

immunized from any affect of any contribution other party."

Eaton's brief on appeal characterizes this particular statement

as “uninterpretable." The characterization strikes us as apt.

The trial judge, however, thought he understood what Mr.

Fink was trying to say:

"THE COURT: What Mr. Fink is saying is that if you incur

any expense as a consequence of being named, other than

A10

expenses relating to any alleged breach of the City's

obligation, they're your own.

MR. RUSSELL: We agree with that.

THE COURT: Isn't that what you said?

MR. FINK: If I didn't, I should have.

MR. RUSSELL: That's fine."

Evidently wanting to get back to the point he had been about

to make when interrupted by the court, Mr. Fink then spoke

as follows:

"MR. FINK: There was one thing that was said by Mr.

Russell; I don't think it was intentionally excluded but |

want to be clear. He referenced ‘any claim brought against

Eaton.' Any claim brought against Eaton arising from a claim

brought by the City of Detroit. It's not indemnification

through any third-party to be filed." (Emphasis supplied.)

These words, it seems to us, are far from uninterpretable.

They are entirely consistent with what had already been said

several times, and, taken in context, we believe their meaning

is clear. Mr. Fink was obviously saying that the city would

protect Eaton against any claim for contribution that arose

from a claim the city was asserting against the party seeking

contribution. Mr. Fink was also saying that the city would not

indemnify Eaton against third- party claims that did not arise

from claims asserted by the city.

Mr. Fink's clarity on this point is fully matched by the clarity

of the response given by counsel for Eaton:

"MR. RUSSELL: That's correct." (Emphasis supplied.)

"That's correct," we take it, means what it says. We do not

interpret Mr. Russell's response as meaning "that's not

correct." Yet on April 28, 1995, a little over seven weeks after

telling the court and counsel that Mr. Fink was correct in his

description of what the parties were agreeing to, Mr. Russell

All

sent Mr. Fink a letter asserting that "[t]he form of protection

Eaton would receive was never clarified by the City..."

Tendered with the April 28 letter was a proposed settlement

agreement containing an indemnity provision so broad as to

be irreconcilable, in our judgment, with the agreement in

principle memorialized in the March 7 transcript.

The settlement agreement proposed by Eaton on April 28

would have obligated the city to indemnify Eaton against "all

claims" involving the city and/or Eaton asserted by "any or

all" persons or entities, governmental or nongovernmental, in

connection with contamination at the French Road-Grinnell

Avenue site. There was no exclusion of third-party claims not

arising from claims asserted by the city. Contrary to the

understanding reflected in the March 7 transcript, the new

proposal called for indemnification of Eaton by the city against

any such claims, as well as against contribution claims arising

from claims by the city.

The city did not sign the proffered agreement, so Eaton

moved to have the case reset for trial. A brief opposing this

motion was filed by the city, together with a motion for entry

of a settlement judgment. The city's proposed form of

judgment would have required the city to "defend and hold

Eaton harmless from and against any and all claims or

demands for contribution or lawsuits or other actions for

contribution brought against Eaton as a direct result of any claim,

demand, lawsuit or other action brought by the City in connection

with environmental contamination of the real property and

improvements located at the intersection of French Road and

Grinnell Avenue...." (Emphasis supplied.)

Eaton opposed the city's motion in a brief accompanied by

affidavits from Messrs. Russell and Quick. The Russell

affidavit contained the following averments, among others:

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-- that in the environmental legal community, as Mr. Russell

believed, "contribution protection" was widely understood

to be a term of art signifying that upon the settlement of a

CERCLA claim, all contribution liability of an alleged joint

tortfeasor is extinguished;

-- that this usage stemmed from § 113 of CERCLA (42 U.S.C.

§ 9613) (we quote the relevant statutory language in the

margin);’

-- that in settlement discussions conducted with the city's

counsel prior to March 7, 1995, Mr. Russell had made it clear

that Eaton would require broad and final protection from

future claims;

-- that Mr. Russell had used the term "contribution

protection" in formulating Eaton's settlement offers, and in

so doing he had been referring-- as he believed Mr. Fink had

been referring--"to statutory contribution protection under

§ 113 of CERCLA ...;"

-- that settlement discussions conducted under the district

court's auspices on the morning of March 7, 1995, had failed,

and the parties had been ordered back into the courtroom to

recommence trial; then, seconds before the judge re-entered

the courtroom, Mr. Fink approached Eaton's trial table and

said "We'll take the $1.2;"

-- that there was no discussion of any other component of

the settlement until the court asked Mr. Fink to summarize

the agreement; and

™A person who has resolved its liability to the United

States or a State in an administrative or judicially approved

settlement shall not be liable for claims for contribution

regarding matters addressed in the settlement. Such

settlement does not discharge any of the other potentially

liable persons unless its terms so provide, but it reduces the

potential liability of the others by the amount of the

settlement." 42 U.S.C. § 9613(f)(2).

Al3

-- that "[s]ince it was clear to both counsel for Detroit and the

Court that the settlement between Eaton and Detroit needed

to be reduced to writing, [Mr. Russell] did not regard the

comments of counsel before the Court in open court to set

forth the details of the parties' proposed settlement."

Attorney Quick's affidavit, which was much shorter, averred

in essence that

-- once settlement discussions had commenced, Mr. Quick

made it clear to the city's counsel that Eaton intended to

condition settlement upon the city's providing Eaton

“complete protection ... from any future claims by the

Michigan Department of Natural Resources, adjoining

landowners and/or subsequent purchasers of the subject

property;" and

-- Mr. Fink told Mr. Quick that the city was prohibited by

law from lending its credit so as to provide Eaton with

indemnity, but that Mr. Fink, knowing what Eaton desired,

indicated that equivalent protection could be provided with

respect to such claims.

On August 8, 1995, after hearing oral argument on the

pending motions, the district court announced from the bench

that it was granting Eaton's motion to set the case for trial and

was denying the city's motion for entry of a settlement

judgment. In explaining its thinking, the court made these

observations, among others:

"The statutes involved are complex. The distinction the

parties draw on what was said on March 7th, 1995 involve

arcane concepts of law and are based on a specialized

glossary. The City may well be right that the protection for

Eaton it agreed to was limited and that Eaton's concerns are

at best speculative and conjectural."

"On the other hand, Eaton agreed to pay $1,[2]00,000.00

with, it says, the expectation it would have peace of mind

and get on with its corporate life. For the Court to sanction

Al4

the City's view of the agreement reached on March 7th, 1995

would be inappropriate."

kk *

"For the reasons stated above, and for reasons of judicial

economy and prudence, as well as the inability of the Court

to determine precisely what the parties came to agreement

on March 7th, 1995 ... this case [must] go to trial."

The case did go to trial, a request for certification of an

interlocutory appeal having been denied, anda finaljudgment

was entered on December 10, 1998. That judgment, among

other things,

-- fixed Eaton's total liability, as of October 31, 1998, at

$301,415;

-- fixed the Simon group's liability as of that date at $80,683,

exclusive of liability for the costs associated with the cleanup

of PCBs;

-- finalized the $156,619.21 judgment against the Simon

group for PCB costs, and set the interest that had accrued

thereon through October 31, 1998, at $77,599; and

-- declared Eaton and the Simon group liable for specified

percentages of future recoverable "Response Costs" and

"Response Activity Costs," subject to the proviso that there

should be no liability for costs "[iJncurred to achieve a clean

up level in excess of the industrial clean up category in

Mich.Comp.Laws § 324.20120a(1)(d)."

The city raises two issues on appeal: (1) whether the district

court erred in refusing to enforce the settlement agreement

memorialized in the proceedings held on March 7, 1995, and

(2) whether the district court erred in limiting the defendants'

liability for future cleanup costs to those costs incurred in

achieving an "industrial clean up" as defined in NREPA. The

Simon group raises a single issue on appeal: whether a failure

by the city to comply with certain notice provisions of the

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federal National Oil and Hazardous Substances Pollution

Contingency Plan ("NCP"), 30 C.F.R. Part 300, precluded

recovery of the PCB costs. We shall address these issues in

the sequence indicated.

As we have seen, Eaton represents that during the

negotiations that preceded the March7 memorialization of the

settlement, Mr. Russell used the phrase "contribution

protection" as referring to the compiete discharge of

contribution liability prescribed by 42 U.S.C. § 9613(f)(2).

Maybe so, but the phrasing of the representation strikes us as

peculiar.

We have no reason to doubt that Eaton sought the broadest

possible protection against claims for contribution. Eaton's

affidavits so indicate, and during the March 7 courtroom

colloquy Mr. Fink mentioned this as an issue over which there

had been disagreement. As will be obvious from examination

of the text of § 9613(f)(2), however (see note 1, supra ), Eaton's

assertion that both parties were understood to be referring to

"statutory contribution protection under § 113 of CERCLA [42

U.S.C. § 9613]" would mean, if true, that both parties were

misreading CERCLA. We find it curious that sophisticated

lawyers such as these should not have known what § 113 of

CERCLA actually says.

What it says is that an administrative settlement (or a

judicially approved settlement) of "liability to the United States

or a State" will protect the settling party against liability on

claims for contribution. Strictly speaking, then, "statutory

contribution protection" can exist only when the settlement is

with the federal government or a state government.

_

Al6

The city of Detroit is certainly not "the United States." And

Eaton had no reason to suppose that the city could be equated

with "a State." We know this is so because--on motion of Eaton

itself--the district court had long since entered an opinion and

order holding that "municipalities are not within the scope of

the term State..." (Emphasis supplied.) (R.E. 43,

Memorandum and Order of July 10, 1992.) There is thus no

way that the city's settlement of its environmental claims

against Eaton could have entitled Eaton to the statutory

contribution protection prescribed by CERCLA where a state

settles its CERCLA claims.

The limited availability of statutory contribution protection

does not mean, of course, that Eaton could not have asked the

city to provide extra-statutory indemnification against any and

all claims for contribution, whether stemming from claims

asserted by the city or not. Eaton obviously did ask for such

indemnification. The agreement Eaton may have wanted,

however, was not the agreement Eaton ultimately accepted.

Whether or not there had been a meeting of minds on the

scope of contribution protection prior to the proceedings

conducted an the record on the morning of March 7, 1995--and

for purposes of this opinion we shall assume that the minds of

the parties had not previously met on this issue--the March 7

transcript clearly manifests a meeting of minds at that point.

The summary of the deal placed on the record by Mr. Fink in

open court on March 7, 1995, makes it abundantly clear that

the city's commitment to hold Eaton harmless against

contribution claims advanced by other alleged tortfeasors

would be limited to situations where the other tortfeasors were

asking Eaton for exoneration in respect of claims asserted by

the city itself. Whether Eaton might still have wanted

indemnification broader than that is immaterial--for Mr. Fink

repeatedly explained, in the clearest of terms, that broader

indemnification was simply not on offer.

Al7

The city's commitment, as Mr. Fink explained without

ambiguity, would be to provide contribution protection "with

respect to any claims brought ... by the city of Detroit"--both

the pending claims against the Simon group and “any other

claim that might be brought by the city of Detroit against other

parties." Such contribution protection, Mr. Fink made clear,

would not extend to third-party claims not stemming from

demands by the city: "There would not be any guarantee of

indemnity as to third-party claims."

If Eaton was unwilling to accept this limitation, it had an

obligation to say so. Yet it voiced no objection at all. On the

contrary, when Mr. Fink repeated that the city was talking

about "any claims brought against Eaton that arise from a

claim brought by the city," Mr. Russell explicitly stated that

the company agreed, in principle, with what Mr. Fink had

said. And when, to avoid even the slightest possibility of

misunderstanding, Mr. Fink again made it clear that the

contribution protection to be provided by the city was "not

indemnification through any third-party" but was limited to

protection against "[a]ny claim brought against Eaton arising

from a claim brought by the City of Detroit," Eaton agreed

again: "That's correct," Mr. Russell said on the record.

There was nothing the least bit arcane about this. The city's

interpretation of the agreement reached on March 7, 1995, is

the interpretation to which any objective reading of the

transcript necessarily leads.

If Mr. Russell's own subjective understanding of what was

being said happened to be deficient for some reason, this

could hardly change the result. Whether the minds of the

parties are to be deemed to have met on an oral settlement

agreement is "judged by an objective standard, looking to the

express words of the parties and their visible acts." Groulx v.

A18

Carlson, 176 Mich.App. 484, 491, 440 N.W.2d 644, 648 (1989).

(Emphasis supplied.)

The express words and visible acts of the parties in the

instant case leave us with the firm conviction that there was a

mutual manifestation: of intent to accept a settlement on the

terms stated by Mr. Fink. And we are strengthened in this

conviction by the fact that house-counsel for Eaton was

present at the March 7 session and never expressed the

slightest reservation about the agreement that was being

placed on the record. See Michigan Bell Telephone Co. v. Sfat,

177 Mich. App. 506, 513, 442 N.W.2d 720, 723 (1989) ("because

defendant was present when the terms of the settlement

agreement were read in open court and he voiced no

objections thereto, we must conclude that it met with his

approval").

If Eaton's lawyers were under the impression that, as a

matter of law, Eaton could not be bound by anything said in

the courtroom because of the fact that the details of the

agreement would be fleshed out in writing later, their

impression was mistaken. See Pedder v. Kalish, 26 Mich.App.

655, 182 N.W.2d 739 (1970). Eaton was obviously not at

liberty to disavow the substance of that to which it was

agreeing in open court. Just as Eaton was not free to decide

that it would pay only $600,000 after having agreed to pay

$1,200,000, so also was it bound by its agreement to accept

limited contribution protection in lieu of the broad

contribution protection it had asked for originally.

Our conclusion is in no way undermined by the parties'

recognition that there might be future disagreement over how

the principles agreed to on March 7 should be worded in the

formal settlement agreement that was to follow. The district

court's "baseball arbitration" proposal represented a sensible

way of resolving any such disagreement. The court was

Al19

obviously not proposing to arbitrate the question of whether,

if one or the other of the parties should subsequently have a

change of heart, that which had already been agreed to in

principle could be repudiated. And what surfaced on April

28, 1995, when Eaton tendered its formal settlement document,

was not a mere disagreement over the nuances of language

intended to capture a principle on which there was still mutual

agreement; what surfaced, rather, was an apparent attempt by

Eaton to repudiate the agreement itself. The district court

clearly erred in deciding to let Eaton get away with this.

B

The city contends that the district court also erred when it

limited the defendants' total liability for future costs to what

would be necessary to reach the "industrial" cleanup level

specified in M.C.L. § 324.20120a(1)(d). Our decision with

regard to the settlement renders this issue moot as to Eaton,

but the issue remains alive as far as the Simon group is

concerned.

The city maintains that there is no statutory authority for

capping liability for future cleanup costs. Moreover,

according to the city, NREPA expressly forbids the imposition

of such a cap by providing that the "cleanup category

proposed shall be the option of the person proposing the

remedial action, subject to department approval, considering

the appropriateness of the categorical criteria to the facility."

M.C.L. § 324.20120a(1).

We are not persuaded. With a few exceptions not relevant

here, the types of response costs recoverable under CERCLA

are limited to those that are "necessary" in light of the nature

and type of property to be cleaned up. See 42 U.S.C. §

9607(a)(4)(B). Several federal courts have recognized that

recovery of environmental cleanup costs incurred to achieve

A20

a higher level than the use of the property necessitates would

violate CERCLA's requirement that recoverable response costs

be "necessary." See, e.g., G.J. Leasing Co. v. Union Electric Co.,

54 F.3d 379, 386 (7th Cir.1995); Southfund Partners III v. Sears,

Roebuck and Co., 57 F. Supp.2d 1369, 1378 (N.D.Ga.1999); M.R.

(Vega Alta), Inc. v. Caribe General Electric Products, Inc., 31

F.Supp.2d 226, 233 (D.Puerto Rico 1998).

Similarly, NREPA provides that the cleanup proposed should

be "appropriate" in light of the facility's categorical criteria, see

M.C.L. § 324.20120a(1), and it also provides that recoverable

costs must be "necessary." See M.C.L. § 324.20126a(1)(b). As

NREPA (formerly MERA) was patterned after CERCLA, it

should be construed in accordance with the federal statute.

See Freeport-McMoran Resource Partners Ltd. Partnership v. B-B

Paint Corp., 56 F.Supp.2d 823, 838 n. 7 (E.D.Mich.1999), and

Kalamazoo River Study Group v. Rockwell International, 3

F.Supp.2d 799, 803-804 (W .D.Mich.1998), rev'd on other

grounds, 228 F.3d 640 (6th Cir.2000).

The property at issue in this case has a long history of

industrial use. To require former occupants to assume

liability for cleanup costs going beyond the level necessary to

make the property safe for industrial use would be to provide

an unwarranted windfall to the beneficiary of the cleanup.

3

Finally, we come to the Simon group's argument that the

district court erred in holding the group liable for the PCB

cleanup costs, the city having failed to comply with the

National Contingency Plan before incurring those costs. The

Simon group maintains that the city failed to allow 30 days for

comment and failed to conduct a public meeting on the PCB

cleanup program, as required under 40 C.F.R. § 300.700(c)(6).

ere

A21

Whatever the merits of this argument may be, the Simon

group ignores the fact that the district court granted summary

judgment on the city's PCB claim not only under CERCLA, the

federal cost-recovery statute, but also under NREPA, the

Michigan cost-recovery statute. The Michigan Court of

Appeals has squarely held that substantial compliance with

the NCP is not a prerequisite to cost-recovery under NREPA.

See City of Port Huron v. Amoco Oil Co., 229 Mich.App. 616,

633, 583 N.W.2d 215, 223 (1998), leave to appeal denied, 610

N.W.2d 548 (Mich.2000). We defer to the Michigan court's

interpretation of Michigan law. See, e.g., Cooper v. Scroggy,

845 F.2d 1385, 1394 n. 3 (6th Cir.1988).

In its reply brief, the Simon group argues for the first time

that recovery for PCB contamination under NREPA is

foreclosed because the state statute is preempted by the Toxic

Substances Control Act, 15 U.S.C.A. § 2601 et seq. We generally

decline to address arguments presented for the first time in a

reply brief. See Aetna Cas. & Sur. Co. v. Leahey Construction

Co., 219 F.3d 519, 545 (6th Cir.2000). It would be particularly

inappropriate for us to address the Simon group's argument

under the circumstances of this case, where the argument was

never presented to the district court and is offered for the first

time after nearly a decade of litigation. See Noble v. Chrysler

Motors Corp., Jeep Div., 32 F.3d 997, 1002 (6th Cir.1994).

The judgment entered by the district court is AFFIRMED in

part and VACATED in part, and the case is REMANDED for

further proceedings not inconsistent with this opinion.

Bl

99-1128

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

The CITY OF DETROIT, ) FILED

Plaintiff-Appellant, )

) JUN 11 2001

v. )

) LEONARD GREEN,

GEORGE SIMON, ET AL., ) Clerk

Defendants-Appellees, )

) ORDER

MAURICE TAYLOR )

)

Defendants. )

BEFORE: NELSON, SILER, and CLAY, 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 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

/

Leonard Green, Clerk