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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2001
- **Citation:** 534 U.S. 1040

## Text

“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.,

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:

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:

Al12

-- 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

Al5

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_2473%3A1. Public record. Not legal advice.