Petition for Writ of Certiorari — The v. BNFL, Inc. (No. 06-656)
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S
vereme Court U.S.
06-65 6NoV 7- 2006
—_—— _—— DERC-O Fem ereae
Iu the
Supreme Court of the Anited States
THE COY/SUPERIOR TEAM,
Petitioner,
V.
BNEL, INC.,
Respondent.
On Petition for a Writ of Certiorari to the United
States Court of Appeals for the Sixth Circuit
PETITION FOR WRIT OF CERTIORARI
WILLIAM P. SNYDER
Counsel of Record
KRAMER Rayson, LLP
800 S. Gay STREET
SuiTeE 2500 PLAzA TOWER
P.O. Box 629
KNOXVILLE, TN 37901
(865) 525-5134
Counsel for Petitioner
Becker Gallagher - Cincinnati, OH - Washington, D.C. - 800.890.5001
i
QUESTIONS PRESENTED
Whether § 107(e)(1) of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.
§ 9607(e)(1), prevents the transfer of liability for hazardous
wastes at a CERCLA cleanup site from the owner of the
wastes to anyone.
Whether title to and liability for asbestos wastes was
transferred from the owner, BNFE, to a demolition/salvage
subcontractor, Coy/Superior, under a subcontract both parties
agreed would not include or involve asbestos.
li
PARTIES TO THE PROCEEDING AND
CORPORATE DISCLOSURE STATEMENT
Petitioner, the Coy/Superior Team, is a partnership of
Coy Consiruction, LLC, a wife and husband company, and
Superior Abatement Corp., a privately held New Jersey
corporation. Neither has a parent corporation and there is no
publicly held company that owns 10% or more of the interest
or stock in either company.
The Respondent is BNFL, Inc., a Delaware corporation.
iil
TABLE OF CONTENTS
I DP has ei 5 os wo a ek bk ew i
Parties to the Proceeding and Corporate
Disclosure Statement
NF EC ie a NE AO RRS Re Bie We ily Ray alge toca» ii
ae Or ee 5h re ee ee ill
Ree Se RO oo 5 oS a ee we es bee Vv
SI TN sk Se Ee a ree 1
weet OF DINO Sa boi Ve ee l
Statutory Provision Involved ...............-.. l
ene CEO GRO 5 oi Se a ee eee es 2
Reasons for Granting the Petition ............... 7
I. THE COURT SHOULD DETERMINE THAT
LIABILITY FOR HAZARDOUS WASTES
UNDER CERCLA CAN NOT BE
TRANSFERRED UNDER 42 ~-. US.
DS TCE ain $C ee eae eee ee ee ce 9
Il. THE COURT SHOULD FIND THAT THE
PARTIES DID NOT INTEND TO ENTER INTO
AN AGREEMENT ‘TRANSFERRING TO
COY/SUPERIOR TITLE TO OR LIABILITY
FO Acta WEES 6 ee Seek ieee 17
ea tae Sn a Sl Re PRN SOI fa Pe TAR a be Na 20
iV
Appendix
Appendix A: 8/9/06 Circuit Court Order ........ la
Appendix B: 4/3/06 Circuit Court Opinion ...... 3a
Appendix C: 6/17/04 District Court Findings of Fact
and Conclusions of Law and Order........... 24a
Appendix D: 2/18/04 District Court Memorandum
SL EIU 56 bo ES Ba ee eS 45a
Appendix E: 1/28/04 District Court Memorandum
SE SIE os ovis ee teens es 64a
Vv
TABLE OF AUTHORITIES
Cases
3550 Stevens Creek Associates v. Barclays Bank,
GS Fae te Ce FO ree ie es 4
Amland Properties Corp. v. Aluminum Co. of America,
701 Y, COOD. Tee the; Wid. WFO) be ccc he is 14
Artesion Water Co. v. Government of New Castle County,
Dt Foe Oe Ce hi FIRE) oo os epee sn whe 11
Beazer East v. Mead Corp..,
cE BO te OTe got ae |S ga eae a nee 8
Commander Oil Corp. v. Barlo Equipment Corp..,
SAT Oe Pee ER, OP oe Fo is ole We ee 16
Harley-Davidson, Inc. v. Ministar, Inc.,
Oi Oa SE tT CW. 19986 cE 8, 10
In re Custom Cools Laurel,
258 B.R. 597 (Bkrtcy W.D. Pa. WS ee ee 12
Elf Atochem North America v. U.S.,
866 F. Supp. 868 (E.D. Pa. 1994) ............ 11
Exxon Corp. v. Hunt,
475 U.S. 355, 106 S. Ct. 1103,
Oe ac ee hi he ee es RR eee 10
Internationat Clinical Laboratories, Inc. v. Stevens,
OP: Bape. 466(8.D: AY. 199) woe os ee 14
vi
John S. Boyd Co. v. Boston Gras Co., -
POR Te Ce USE 8s Cee Rae ees 8
Jones-Hamilton Co. v. Beazer Materials and Services, Inc..,
Ora F.2e Gee GW: TO 3 eck eae i ck ci 8
Kelley v. E.P.A.,
15 F.3d 1100 (D.C. Cir. 1994) ............ . 16
Nieko v. EMROMarketing Co.,
Pia Fae tare COCR C. T98E) . is ie ccees 13
Pinney v. Tarpley,
686 S.W.2d 574 (Tenn. App. 1984) ........... 12
Purolator Products Corp v. Allied Signal, Inc.,
772 F. Supp. 124 (W.D. N.Y. 1991) ......\ PE Ey
Southland Corp. v. Ashland Oil, Inc.,
696 F. Supp. 994 (D. N.J. 1988) ............. 17
U.S. v. Aceto Agr. Chemicals Corp..,
Ora Fe tate ee OW. TOO os ooo wees 14
United States v. Bestfoods,
524 U.S. 51, 118 S. Ct. 1876,
Ae bas Gs Ee CLD oo ko eee ews 11, 15, 16
United States v. Hardage,
O85 F.26 1427 GC" Cer. 1993) 2. Se Se a a
Velsicol Chemical Corp. v. Reilly Indus.,
67 F. Supp. 893 (E.D. Tenn. 1999), summarily aff'd,
Sam FO Boe COG. BD oi ce we ees
Vii
Wiegman & Rose Intern. Corp. v. NL Industries,
730 F, Sapp. 937 (0. D. Cal. 1990) 2... 5 ees 14
Statutes |
SO Wass BD SAPRED 5 REELS 7 ee aoe wes l
Oe AO a eee Eteach ae ee 2
GE Ua BOR Nos MS Cho web eee cee 15
RULC (ee 15
Re Ua SPOTS eek pees cee 15
G2 tio 6 Sr os a Se eee passim
Other Authority | :
54 Fed. Register 48184, November 21, 1989 ....... 2
baO CAPS. ats SOO 6 6 be ei SRA ees 11
Blacks Law Dictionary, Fifth Ed. 1979 ........... 13
l
OPINION BELOW
The ruling of the United States Court of Appeals for the
Sixth Circuit filed April 3, 2006, reversing in part the
decision of the District Court, is reported at 174 Fed. Appx.
901, 2006 U.S. App. LEXIS 8314, and is reproduced at App.
B.
The decision of the United States District Court for the
Eastern District of Tennessee granting Coy/Superior’s
(Petitioner) motion for partial summary judgment dated
January 28, 2004, is reproduced at App. E. The decision of
the District Court dated February 18, 2004, granting BNFL’s
Motion for Summary Judgment on two counts and parts of a
third is reproduced at App. D.
STATEMENT OF JURISDICTION
This Court’s jurisdiction is invoked under 28 U.S.C.
§ 1254(1).
The Sixth Circuit’s opinion was filed April 3, 2006.
Petitioner’s Petition for Rehearing and Suggestion for
Rehearing En Banc was filed on April 17, 2006. It was
denied on August 9, 2006. (App. A, 1a).
-
STATUTORY PROVISION INVOLVED
The relevant statutory provision is the Comprehensive.
Environmental Response, Compensation and Liability Act, 42 -
U.S.C. § 9607(e)(1).
(e) Indemnification, hold _ harmless, etc.,
agreements or conveyances, subrogation rights.
2 ‘
(1) No indemnification, hold harmless, or similar
agreement or conveyance shall be effective to transfer
from the owner or operator of any vessel or facility or
from any person who may be liable for a release or
threat of release under this section, to any other
person the liability under this section. Nothing in this
subsection shall bar any agreement to insure, hold
harmless, or indemnify a party to such agreement for
any liability under this section.
STATEMENT OF THE CASE
This case arises from the performance of a demolition and
salvage subcontract at a Department of Energy (DOE) facility
in Oak Ridge, Tennessee. 7
Among the DOE facilities in Oak Ridge is a uranium
enrichment plant known as the K-25 plant. The plant was
closed during the 1980s. In the 1990s, decommissioning and
demolition activities began.
In November 1984, the K-25 plant and other DOE
facilities in Oak Ridge were placed on ihe National Priorities
List. (54 Fed. Register 48184, November 21, 1989). On
January 1. 1992, DOE entered into a Federal Facilities
Agreement (FFA) with the U.S. Environmental Protection
Agency (EPA) and the Tennessee Department of Environment
and Conservation (TDEC) for the cleanup of DOE’s Oak
Ridge facilities under § 120 of CERCLA, 42 U.S.C. § 9620
DOE developed an Action Memorandum for the cleanup
of the K-25 Plant and several removal actions approved by
EPA and TDEC. Among them was a plan to decommission
and decontaminate three large process buildings at the K-25
Plant. At about the time that plan was developed, DOE
3
renamed the K-25 Plant as the East Tennessee Technology
Park (ETTP).
Among the projects DOE undertook under the FFA was
a 1997 contract with BNFL to decommission and
decontaminate the three large process buildings. Included in
that contract was the demolition of two electrical switchyards
that were next to and had served the three process buildings.
BNFL did not demolish the switchyards itself. It sought
bids for various parts of the switchyards from demolition
firms that were to receive as part of their compensation the
value of any scrap metal they expected to salvage - primarily
copper.
In November 1999, BNFL issued a request for proposals
(RFP) for demolition of one of the switchyards, the K-792
switchyard. The RFP sought bids for demolishing the
switchyard and allowing the subcontractor to keep, and sell,
salvageable metal that had value. Coy/Superior bid $89,000,
and got the job. :
The subcontract was entered into on January 6, 2000. It
contained provisions specific to the work as well as what
appeared to be boiler plate clauses.
Included in the demolition work Coy/Superior was to do
in the K-792 switchyard was the dismemberment of four
synchronous condensers, weighing approximately 200 tons
each, resting on pedestals 20 feet above the ground. As
Coy/Superior began to cut the condensers apart on the
pedestals and after the pieces were on the ground, asbestos
was discovered in parts of the condensers. BNFL had the
asbestos removed, as it was required to do under the
subcontract, and Coy/Superior continued cutting the
4
condensers into yet smaller pieces suitable for hauling away
by truck.’ Coy/Superior hauled the cut-up pieces of the
condensers to a site a mile away which Coy Construction had
leased for final demolition activities. The site was still on
ETTP. The site is referred to as the Portal 10 site.
Soon after depositing the condensers’ pieces at the Portal
10 site, Coy/Superior was asked by a potential buyer of
insulated copper wiring to confirm there was no asbestos in |
the insulation. Coy/Superior had samples of the insulation
sent to a laboratory. The laboratory reported that asbestos was
present. Coy/Superior immediately notified BNFL, DOE and
the regulatory authorities._BNFL did extensive sampling on
its own at the Portal 10 site and had the samples analyzed by
a laboratory of its choosing. The results confirmed the
presence of asbestos.
BNFL directed Coy/Superior to develop a remediation
plan for cleaning up and disposing of the asbestos at the portal
10 site. BNFL offered to assist Coy/Superior in transferring
the asbestos to-a DOE landfill on DOE’s reservation, a
landfill used by BNFL for disposal of asbestos found as the
condensers were being cut up at the switchyard site.
When asbestos was found in parts of the condensers as
they were being demolished in the switchyard, the parties
agreed on what Coy/Superior’s compensation should be for
the copper that could not be salvaged from those parts.
Agreement could not be reached on the compensation due
Coy/Superior for the copper that could not be salvaged from
' The classification of asbestos as a hazardous waste under
CERCLA is explained well. 3550 Stevens Creek Associates v.
Barclays Bank, 915 F.2d 1355, 1360 (9" Cir. 1990).
5
the asbestos-laden parts at the Portal 10 site. Eventually, this
litigation ensued. The asbestos-laden material was allowed by
the parties to lay at the Portal 10 site.
The suit filed by Coy/Superior against BNFL contained
many claims. One, however, was considered the central claim
by the parties and the district court. It is also the one on
which the Sixth Circuit’s decision centered, and the one
which is the primary subject of this petition. The issue: Who
owned the asbestos wastes taken by Coy/Superior from the
switchyard site? The district court and the Sixth Circuit
focused on whether ownership of the wastes was transferred
under Section 1.1.13 of the subcontract, set out below. That
focus and the resulting decision of the Sixth Circuit is the
basis for the primary issue advanced in this petition. A
companion issue, and one also advanced in this petition, is
whether ownership of the asbestos could have been passed
under the subcontract in any event since the parties agreed
asbestos was excluded from this subcontract.
In a motion for partial summary judgment, Coy/Superior
asked the district court to issue a declaratory judgment that
Coy/Superior did not own the asbestos. Coy/Superior did not
ask for a judgment declaring who did own the asbestos, only
that Coy/Superior did not own it. Responsibilities for cleanup
and disposal were considered to flow from such a declaration.
Coy/Superior informed the district court that it believed this
was the key issue in the suit. BNFL agreed.
BNFL took the position that it owned the asbestos waste
and that it had passed title, liability and all regulatory
responsibility to Coy/Superior under a boiler plate provision
of the subcontract. That provision is C.1. 13, which provided
as follows:
6
C.1. 13 Regulatory Responsibilities
The Subcontractor(s) shall assume total regulatory
responsibility, liability, and title to the wastes and
recyclable material upon loading onto the
Subcontractor’s vehicle at the ETTP site. Any wastes
and/or by-products generatea during shipment,
storage, disposal and/or other management of the
waste shall be the responsibility of the Subcontract(s)
and shall be disposed via approved disposal methods
and procedures.
The district court granted Coy/Superior’s motion and
declared that title to the asbestos waste had not passed to
Coy/Superior, but not on the basis primarily advanced by
Coy/Superior. The district cgurt concluded that title had not
passed because the asbestos waste had not left ETTP,
something the district court determined was a requirement for
title to pass under Sec. 1.1.13 of the subcontract.
In granting~-BNFL summary judgment on another count
the district court concluded, as dicta, that if the factual
conditions had been present that would have brought Sec.
C.1. 13 into play, title and total regulatory responsibility and
liability would have passed to Coy/Superior.”
? In granting BNFL summary judgment on Coy/Superior’s fraud
count, the district court stated in effect that in addition to its réasons
for ruling on the fraud count, it would have concluded that title to
and liability for the asbestos passed to Coy/Superior under Sec.
1.1.13 of the subcontract. No analysis was made by the district
court of what was behind Sec. 1.1.13, nor was such an analysis
suggested by the Sixth Circuit. (App. D at 60a).
me
> ‘
-
The Sixth Circuit reversed the district court on its
declaratory judgment for Coy/Superior. It cast aside the
district court’s conclusion that leaving ETTP was relevant to
who had title to the asbestos wastes. It ruled, instead, that
liability, and everything that goes with it, had in fact passed
from BNFL to Coy/Superior under Sec. 1.1.13, and that
transferring liability to asbestos wastes was permitted under
42 U.S.C. § 9607(e)(1) (App. B at 15a). The Sixth Circuit
concluded that 42 U.S.C. § 9607(e)(1) does not make any:
reference to title to hazardous wastes, let alone restrict the
transfer of such title; it only governs the transfer of liability
for such wastes. (App. B at 14a.) The Sixth Circuit noted that
parties can contractually transfer liability under 42 U.S.C.
§ 9607(e)(1) by simply using an “as is” clause, even though
there was no “as is” clause in the BNFL-Coy/Superior
subcontract. The court reasoned that if liability could transfer
that easily, it certainly could be done by a clause as explicit
as C. 1.13. (App. B atTSay—
REASONS FOR GRANTING THE PETITION
Since enactment of the Comprehensive Environmental
Response, Compensation and Liability Act in 1980
(CERCLA), circuit courts and district courts in hundreds of
decisions have attempted to harmonize the two apparently
contradictory sentences of § 107(e)(1), 42 U.S.C.
§ 9607(e)(1), which establish if and under what circumstances
the liability imposed by CERCLA on the owner of a facility
may be assumed to some degree by another. The first
sentence of that section appears to contain an absolute
prohibition on the owner transferring its CERCLA liability to
another by an indemnification, hold harmless or similar
agreement. The second sentence appears to allow what is
prohibited by the first.
- 8
The courts below seem to have settled to a degree on
rationalizing the wording of 42 U.S.C. § 9607(e})(1) by
concluding that the first sentence prohibits the transfer of
CERCLA liability by the owner to anyone, but the second
sentence allows the owner to obtain the agreement of another
to share the expense of the owner’s liability by way of an
indemnification or hold harmless agreement, or through
insurance. Harley-Davidson, Inc. v. Ministar, Inc., 41 F.3d
341, 342-43 (7" Cir. 1994); Beazer East v. Mead Corp., 341
F.3d 206, 211 (3 Cir. 1994); John S. Boyd Co. v. Boston
Gras Co. , 992 F.2d 401, 405 (1" Cir. 1993); United States v.
Hardage, 985 F.2d 1427, 1433 (10 Cir. 1993); Jones-
Hamilton Co. v. Beazer Materials and Services, Inc., 973
F.2d 688, 692 (9" Cir. 1992).
No decision of this Court has addressed the apparent
inconsistencies of the two sentences of 42 U.S.C. § 107(e)(1)
or the rationalization developed by many of the courts below.
Now, in a decision rendered by the Sixth Circuit which is
the subject of this petition, a circuit court has determined that
an owner of hazardous wastes at a CERCLA cleanup site can
transfer title to and liability for the hazardous wastes to a
demolition/salvage company under a contract provision which
the circuit court mistakenly construes as an implied
indemnity, even though an express indemnity transferring the
owner’s liability would be prohibited by 42 U.S.C. § 42
U.S.C. § 9607(e)(1).
The decision of the Sixth Circuit is so clearly contrary to
the purpose of Congress in enacting CERCLA, and deviates
so drastically from the apparent consensus adopted by most
lower courts, that this Court should grant this petition and
9
define for the lower courts, and Congress if CERCLA needs
to be amended, the meaning and limits of 42 U.S.C.
§ 9607(e)(1).
In addition, the Sixth Circuit and the district court
mistakenly concluded that title to asbestos waste could be
transferred under Sec. 1.1.13 of the subcontract when the
intent expressed by both parties was that responsibility for
asbestos was to be excluded from the work to be performed
by Coy/Superior. This conclusion, interrelated with
CERCLA, warrants review by this Court.
I. THE COURT SHOULD DETERMINE THAT
- LIABILITY FOR THE HAZARDOUS WASTES
UNDER CERCLA CAN NOT BE TRANSFERRED
UNDER 42 U.S.C. § 9607(e)(1).
The Sixth Circuit did not squarely address the issue of
whether title to the hazardous wastes passed to Coy/Superior
under Section 1.1.13 of the subcontract. Instead, the court
concluded that because liability was transferred to
Coy/Superior under Section 1.1.13, it did not have to address
the issue of title (App. B at 15a). The Court apparently
assumed that the transfer of “total liability,” the words used
in Section 1.1.13, would include title. -
After quoting 42 U.S.C. § 9607(e)(1) the Sixth Circuit
concluded -
This provision does not even make any reference to
title to hazardous wastes, let alone restrict the transfer
of such title as Coy/Superior claims. /t only governs
the transfer of liability for such wastes.
(App. B at 14a, emphasis added.)
10
* * *
Coy/Superior argues that section C.1.13 could not
transfer liability for the asbestos because such a
transfer is legally impossible. . . . However, Since
liability for the asbestos was properly transferred to
Coy/Superior, there is -no reason to determine who
had title to the asbestos-laden materials.
(Id. at 15a, emphasis added.)
An exhaustive search of reported cases has uncovered no
decision holding that liability can be transferred under
§ 9607(e)(1).
As noted above, 42 U.S.C. § 9607(e)(1) consists of two
sentences. The first contains an absolute prohibition on the
owner’s transfer to any other person the liability imposed by
CERCLA. In its barest form relevant to the issue presented
to this Court, the first sentence provides —- “No ... agreement
... Shall be effective to transfer from the owner ... to any other
person the liability imposed under this section.” The second
sentence permits the owner to be covered for his expenses in
dealing with that liability if he gets someone else to agree to
cover those expenses through one of the three means stated in
the second sentence.
Lower courts have attempted to harmonize the two
sentences of 42 U.S.C. 9607(e)(1) even though their terms are
not easy to distinguish and the legislative history is sparse.
See, e.g., Harley-Davidson, Inc. v. Minstar, Inc. supra at
343-44.
It has been recognized that CERCLA is hardly a model of
legislative clarity. Exxon Corp. v. Hunt, 475 U.S. 355, 363,
106 S. Ct. 1103, 89 L. Ed. 2d 384 (1986). “CERCLA is not
1]
a paradigm of clarity or precision. It has been criticized
frequently for inartful drafting and numerous ambiguities
attributable to its precipitous passage.” Artesion Water Co. v.
Government of New Castle County, 851 F.2d 643, 648 (3d:
Cir. 1988). All that can be done is for “... us to do the best
we can to give the term its ‘ordinary or natural meaning.’”
United States v. Bestfoods, 524 U.S. 51, 66,144-L. Ed. 2d
43, 59, 118 S. Ct. 1876 (1988).
When read together, the two sentences of 42 U.S.C.
§ 9607(e)(1) never relieve the owner of his liability, but he
can contract to have someone else to share the expense of his
liability through an indemnity or hoid harmless given by that
party, or through insurance. Elf Atochem North America v.
U.S., 866 F. Supp. 868, 870 (E.D. Pa. 1994); Purolator
Products Corp v. Allied Signal, Inc., 772 F. Supp. 124, 129
(W.D. N.Y. 1991).
This is consistent with the often quoted colloquy that
occurred in the Senate in 1980 when CERCLA was passed.
Senator Cannon characterized section 107(e)(1) as follows, a
characterization approved by Senator Randolf, one of the
bill’s sponsors.
The net effect is to make the parties to such an
agreement, which would not have been liable under
this section, also liable to the degree specified in the
agreement. It is my understanding that this section is
designed to eliminate situations where the owner or
operator of a facility uses its economic power to force
the transfer of its liability to other persons, as a cost
of doing business, thus escaping its liability under the
act all together.
126 CONG. REC. 30, 984 (1980)
12
None of the three means of sharing the expense of
CERCLA compliance, mentioned in the second sentence,
apply in the instant case. All three require expenditures to be
made by the owner in complying with CERCLA and then the
-owner seeking reimbursement from the indemnitor or
insurer’. That did not happen in this case. BNFL rebuffeted
Coy/Superior’s requests to abate and dispose of the asbestos
found after it left the switchyard. BNFL just let it lay there at
the Portal 10 site, washing its hands of the matter under
Section 1.1.13 of the subcontract.
The Sixth Circuit, upon BNFL’s urging, characterized
Section 1.1.13 of the subcontract as an indemnity which, if
true, would qualify Section 1.1.13 under 42 U.S.C.
§ 9607(e)(1) to shift financial responsibility for cleanup to
Coy/Superior. The Sixth Circuit noted that Coy/Superior
argued that Section 1.1.13 is not an indemnity agreement, but
found otherwise because Coy/Superior did “not elaborate on
this argument” and an indemnity clause does not have to be
“explicitly phrased as an indemnity clause.” (App. B 15a).
The circuit court made no analysis of its own; rather, it
concluded that if a simple “as is” clause can transfer liability,
C.1.13 can.
Section 1.1.13 does not contain an indemnity. An
indemnity is a contractual commitment to assume costs
incurred by another. Indemnity has beefi defined as a
collateral contract or assurance, by which one person engages
> INDEMNITY is defined in the text of this petition, infra.
“HOLD HARMLESS” means to fully compensate a party for all
loss or expense. Pinney v. Tarpley, 686 S.W.2d 574 (Tenn. App.
1984). “INSURANCE” is a contract whereby one party undertakes
to compensate another for a specified loss. Jn re Custom Cools
Laurel, 258 B.R. 597 (Bkricy W.D. Pa. 2001).
13
to secure another against an anticipated loss. It also denotes
a compensation given to make a person whole from a loss
already sustained. Blacks Law Dictionary at 692, Fifth Ed.
1979. Under no reading of C. 1.13 can it be concluded or
inferred that Section 1.1.13 committed Coy/Superior to
reimburse BNFL for cleanup costs BNFL had incurred. That
point-would never have been reached in any event. According
to the Sixth Circuit, under C. 1.13, total liability for the
asbestos (and title) passed immediately to Coy/Superior upon
leaving the switchyard. BNFL was through with the
hazardous wastes. After that all costs were to be incurred by
Coy/Superior; none were to be incurred by BNFL.
Alternatively, the Sixth Circuit justified its conclusion that
Section 1.1.13 was an indemnity by equating it to a simple
“as is” clause. “If a simple ‘as is’ clause can transfer liability,
certainly C.1. 13 can.” (App. B at 12). The Court cited two
of its earlier decisions for support. Neither supports the
Court’s conclusion. Nieko held that an “as is” clause can only
transfer financial responsibility, not total liability. Nieko v.
EMRO Marketing Co., 973 F.2d 1296, 1300-01 (6" Cir.
1992) Velsicol did not rely on the “as is” clause at all,
although one was contained in the real estate sales agreement.
Velsicol Chemical Corp. v. Reilly Indus., 67 F. Supp,-893,
905 (E.D. Tenn. 1999), summarily aff'd, 229 F.3d 1155 (6"
Cir. 2000)(unpublished).*
It is not clear what a “simple ‘as is’ “ clause is. An “as
is” purchase agreement, standing alone, will not transfer
* “In spite of how Tennessee courts generally interpret ‘as is’
clauses, however, this Court’s ultimate duty is to discern the parties
intentions in entering the contract.” Velsicol at 906 (Italics in
original). The court looked beyond the “as is” clause.
~
14
~
liability. Amland Properties Corp. v. Aluminum Co. of
America, 711 F. Supp. 784, 803 at 20 (D. N.J. 1989). More
expansive “as is” clauses have met the same fate. Wiegman &
Rose Intern. Corp. v. NL Industries, 735 F.Supp. 957 (N.D.
Cal. 1990); International Clinical Laboratories, Inc. v.
Stevens, 710 F. Supp. 466 (E.D. N.Y. 1989). In fact, no
decision can be found which has held that an “as is” clause,
standing alone, can transfer liability under CERCLA. The
analysis of such clauses for that purpose is unnecessary. The
first sentence of 42 U.S.C. § 9607(e)(1) prohibits the transfer
of liability, period.
Adding to the error of the Sixth Circuit in concluding that
liability passed to Coy/Superior under Section 1.1.13 of the
subcontract, was the failure of the court to attach any
significance to the fact that Section 1.1.13 specifically
transferred title to the hazardous wastes as well as liability.
Whether title to hazardous wastes can be passed under
CERCLA from the owner to another entity is an issue of first
impression not only for this Court but any court.°
Coy/Superior urged upon the Sixth Circuit that title to
hazardous waste could not pass from the owner to anyone
under CERCLA, specifically 42 U.S.C. § 9607(e)(1). The
> This case is not to be confused with those where a “sale” has been
argued to have occurred rather than a “disposal.” Those have been
described as “arranger” cases which turn on whether the hazardous
waste involved is being sold as part of a useful product. U.S. v.
Aceto Agr. Chemicals Corp., 872 F.2d 1373, 1381 (8" Cir. 1989).
Section C.1.13 of the subcontract refers only to “wastes,” as it
should. The work involved was demolition of an electrical
switchyard. No sale of a useful product was involved. if
a
15
Sixth Circuit noted that Coy/Superior cited no authority for its
position. On the other hand, the Sixth Circuit cited no
authority refuting Coy/Superior’s position. The court simply
moved on and concluded that because liability was transferred
~ to Coy/Superior under its contract with BNFL, there was no
need to address the issue of title to hazardous wastes. But if
total liability passes, title must pass as well. Both are
specifically passed by the wording of Sec. 1.1.13 of the
subcontract.
The Sixth Circuit correctly noted that “title” is not even
mentioned in 42 U.S.C. § 9607(e)(1). In fact, “title” to
hazardous wastes is not mentioned in the definitions section
of CERCLA, 42U.S.C. § 9601, or anywhere in CERCLA’s
text.
The holder of title to hazardous wastes may be determined
by referring to “owner,” a term used often in CERCLA.
“Owner” is coupled with “operator” in CERCLA by
definition, 42 U.S.C. § 9601(2)(a), and in terms of liability,
42 U.S.C. § 9607(a)(1) and (e)(1). This Court has resorted to
the dictionaries to determine CERCLA’s meaning of
“operator,” Bestfoods, supra,° as other courts have resorted
to the dictionaries to determine CERCLA’s meaning of
“owner.” As applied to a lessor/lessee arrangement, the
Second Circuit found definitions in the dictionaries that were
inconclusive for its purposes, but which were consistent in
~
° If “operator” were an issue in this case, BNFL would definitely
qualify as the operator. “To sharpen the definition for purposes of
CERCLA’s concern with environmental contamination, an operator
must manage, direct, or conduct operations specifically related to
pollution, that is, operations having to do with the leakage or
disposal of hazardous wastes, or decisions about compliance with
environmental regulations.” Bestfoods, supra, 66-67.
16
associating title with ownership. Commander Oil Corp. v.
Barlo Equipment Corp., 215 F.3d 321, 327 (2d Cir. 2000).
Many other decisions could be cited, but for little apparent
purpose. It is not known how “title” could be separated from
“ownership.”
BNFL has acknowledged it was the owner of the
hazardous wastes, asbestos, contained in the scrapped
synchronous condensers. For it to have transferred title to the
hazardous wastes to Coy/Superior runs contra to this Court’s
analysis in Bestfoods that CERCLA’s reach is sweeping,
pulling in every potentially responsible party “... regardless
of whether than person is the facility’s owner, the owner’s
parent corporation or business partner, or even a saboteur
who sneaks into the facility at night to discharge its poisons
of malice.” Bestfoods, supra, 65.
To put it another way, for BNFL to contend that it
transferred to Coy/Superior title to the hazardous wastes runs
contra to the stated purpose of CERCLA - to impose strict
liability on, among others, all prior and present owners and
operators. Kelley v. E.P.A., 15 F.3d 1100 (D.C. Cir. 1994).
Clearly, at the very heart of CERCLA is the intent of
letting no one escape liability who has or had title to
hazardous wastes. If it were otherwise owners of hazardous
wastes could unload their material on any scrap buyer or
cleanup subcontractor who does not have the resources to
handle the wastes properly, thereby rendering CERCLA
pointless.
The effect in this case would be that BNFL “sold”
hazardous wastes it owned to a demolition/scrap subcontractor
who never agreed to buy the hazardous wastes. It cannot be
imagined that Congress intended an owner of hazardous
17
wastes be allowed to sell those wastes as part of a CERCLA
cleanup.
Il. THE COURT SHOULD FIND THAT THE PARTIES
DID NOT INTEND TO ENTER INTO AN
AGREEMENT TRANSFERRING TO
COY/SUPERIOR TITLE TO OR LIABILITY FOR
ASBESTOS WASTES.
Determining whether the parties intended to transfer
liability under CERCLA for the asbestos wastes requires a
two-step inquiry. First, whether the agreement between the
parties is barred under CERCLA. Then, whether the scope
of the agreement at hand included the transfer. Southland
Corp. v. Ashland Oil, Inc. , 696 F. Supp. 994, 1000 (D. N.J.
1988); Purolator Prod. Corp v. Allied-Signal, Inc., 772 F.
Supp. 124, 128-30 (W.D. 1991).’
Perhaps another way of approaching it is to assume that if
the first sentence of 42 U.S.C. § 9607(e)(1) can be overcome,
did the parties intend to enter into one of the three types of
agreements recognized by the second sentence as being
permissible means of shifting financial responsibility -
indemnity, hold harmless, or insurance. The Sixth Circuit
referred by implication only to an indemnity. It has been
explained above why Section C.1.13 did not contain. an
indemnity.
” In both cases the validity of indemnity provisions was examined
first. The contention by Coy/Superior in this case is that no
indemnity was given to BNFL.
18
Not only was there no cost shifting agreement recognized
in 42 U.S.C. § 9607(e)(1), the parties agreed that asbestos
wastes were excluded altogether from the subcontract.
A primary rule of contract construction is that the
intention of the parties shall govern and this intention is to be
determined with a consideration of what was within the
contemplation of the parties when the contract was executed,
which in turn is to be resolved in light of all the surrounding
facts and circumstances under which the parties acted.
Velsicol Chem. Corp. v. Reilly Indus., 67 F. Supp. 2d 893,
905 (E.D. Tenn. 1999).
The Sixth Circuit recognized the proposal of Coy/Superior
accepted by BNFL contained an exclusion for asbestos-
containing materials. (App. B at 12a). The district court
elaborated on that by referring to the affidavit of Franklin
Jarvis, Coy/Superior’s general manager, stating that “[ijt was
clear from the beginning of the proposal process right on
through performance of the subcontract that asbestos was
excluded from the BNFL-CST subcontract. [Plaintiff] was
not to take it or even work on it.” (App. E at 74a). The
district court went on to note that “Larry Brede, defendant’s
representative who wrote the scope of the work for the
subcontract, agreed in deposition that defendant’s intent was
for the subcontractor to do-no asbestos work.’” (/d.)
Both parties to the subcontract recognized that asbestos
was excluded from the subcontract. It did not suddenly
become included once Coy/Superior moved the scrapped
condensers from the switchyard to the Portal 10 site. Not
only is that clear from the intention of the parties when they
entered into the subcontract, but it is clear from the actions of
the parties once asb» \»s was detected on the condenser parts
at the Portal 10 site. Woy/Superior notified BNFL and others
19
immediately. BNFL then sampled extensively at the Portal 10
site. After confirming the presence of asbestos, BNFL
directed Coy/Superior to develop a remedial action plan and
offered to help in disposing the material at a DOE disposal
site. Negotiations broke down over the compensation
Coy/Superior would receive for the scrap copper it would
have salvaged had the material been asbestos free, but the
action of both parties showed their intention not to have
Coy/Superior take any asbestos wastes no matter where or
when it was found.
Section 1.1.13 of the subcontract contained nothing that
allowed BNEFL to transfer title to and liability for the asbestos
that would be permitted under CERCLA, 42 U.S.C.
§ 9607(e)(1). Even if it did, however, the intent of the parties
to the subcontract was that asbestos was not a waste to be
worked on, transferred to, or taken by Coy/Superior. If
Section C.1.13 had any meaning it was with respect to non-
CERCLA wastes. In this instance that would have been
primarily concrete debris.
In this two-part analysis of BNFL’s attempt to transfer
liability, Coy/Superior has shown in addressing the first issue
posed in this petition that BNFL’s attempt to transfer liability
to Coy/Superior of hazardous wastes at a CERCLA cleanup
site is barred by the first sentence of 42 U.S.C. § 9607(e)(1).
Even if that obstacle could somehow be overcome, BNFL’s
attempted transfer of the hazardous wastes to Coy/Superior
fails. Not only did the parties not agree to one of the three
cost shifting agreements recognized in the second sentence of
42 U.S.C. § 9607(e)(1), the parties agreed by their words and
actions that title to and liability for the asbestos wastes was
not transferred to Coy/Superior under the subcontract at all.
20
CONCLUSION
For the foregoing reasons, the petitioner respectfully
requests that the petition for a writ of certiorari should be
granted.
~
Respectfully submitted,
William P. Snyder
Counsel of Record
Kramer Rayson LLP
800 S. Gay Street
Suite 2500 Plaza Tower
P.O. Box 629
Knoxville, TN 37901
~ (423) 525-5134
Counsel for Petitioner
la
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
Nos. 04-6001/6087
[Filed August 9, 2006]
Defendant-Appellee/Cross-Appellant.
THE COY/SUPERIOR TEAM, )
Plaintiff-Appellant/Cross-Appellee, )
)
v. )
3 )
BNEL, INC., )
)
)
BEFORE: MOORE and MCKEAGUE, Circuit Judges; and
POLSTER,’ District Judge.
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.
*“ Hon. Dan A. Polster, United States District Judge for the
Northern District of Ohio, sitting by designation.
2a
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
cases. Accordingly, the petition is denied.
ENTERED BY ORDER OF THE COURT
/s/ Leonard Green
Leonard Green, Clerk
3a
APPENDIX B
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
Nos. 04-6001, 04-6087
Defendant-Appellee, Cross-Appellant
[Filed April 3, 2006]
THE COY/SUPERIOR TEAM, )
Plaintiff-Appellant, Cross-Appellee )
)
v. )
)
BNFL, INC., )
)
)
On Appeal from the United States District Court
for the Eastern District of Tennessee
01-00634
R. Leon Jordan, District Judge
BEFORE: MOORE and McKEAGUE, Circuit Judges; and
POLSTER, District Judge.”
* The Honorable Dan Aaron Polster, United States District Judge
for the Northern District of Ohio, sitting by designation.
aH MD TIRED ORS SMT T Ree ine ne eer ser
4a
OPINION
_ McKeague, Circuit Judge. This case arises from a
subcontract to perform demolition and salvage work at a
switchyard located in the East Tennessee Technology Park
(“ETTP”). After the completion of the work the
subcontractor, Coy/Superior, sued the contractor, BNFL, for
breach of contract, negligent misrepresentation, fraud, and
declaratory judgment that BNFL is responsible for certain
-asbestos-laden materials. Both parties filed motions for
summary judgment. The district court granted the declaratory
judgment sought by Coy/Superior, but granted most of
BNFL’s motion for summary judgment on the remaining
claims. Part of the breach of contract claim survived summary
judgment and was resolved at a bench trial. Coy/Superior
timely appealed both the grant of summary judgment in favor
of BNFL and portions of the findings of fact from the bench
trial. BNFL timely cross-appealed the grant of Coy/Superior’s
motion for summary judgment on the declaratory judgment
claim. For the reasons set forth below, we reverse the district
court’s entry of summary judgment in favor of Coy/Superior
on the declaratory judgment claim and affirm the remainder
of the district court’s determinations.
I. BACKGROUND
In 1997, BNFL entered into a prime contract with the
Department of Energy (“DOE”) to decontaminate,
decommission, and recycle three former uranium processing
buildings at DOE’s East Tennessee Technology Park
(“ETTP”) near Oak Ridge, Tennessee. Under its contract
with DOE, BNFL subcontracted out most of the switchyard
demolition, scrap work, and related tasks to subcontractors
with expertise in their respective fields.
Sa -
This case centers around four synchronous condensers that
BNFL sought to have removed from the K-792 switchyard.
Large copper cable conductors ran from the condensers into
powerhouses and then continued underground through vaults
into manholes underneath process buildings. Each condenser
contained significant amounts of various metals, including
copper wiring, some of which was wrapped in insulating
material. They were constructed in the 1950’s and each
weighed approximately two hundred tons. The condensers
were raised approximately twenty feet from the ground on
concrete platforms.
In November of 1999, BNFL issued a Request for
Proposals (“RFP”) for the demolition and scrapping of the
four condensers in the K-792 switchyard, the removal of cable
and cable trays from K-791 (one of the buildings located in
the switchyard), and removal of other scrap material from the
switchyard and surrounding area. After the RFP was issued,
BNFL conducted an open bid process that included various
pre-bid meetings in which BNFL answered questions from
potential bidders. Prior to making the bids, each contractor,
including Coy/Superior, had ample opportunity to inspect the
condensers to estimate their recycle value.
Coy/Superior submitted a winning bid of $89,000. The
bid amount was lower than the anticipated cost of demolition
and was based in part on Coy/Superior’s assessment of the
salvage value of equipment/and material. A contract between
Coy/Superior and BNFL was executed on January 6, 2000.
The contract provided that Coy/Superior would receive
$89,000 and would retain all recycle value in exchange for the
dismantling and removal of the four condensers, removal of
certain cable from K-791, and removal of other scrap material
from the switchyards.
6a
At the time the subcontract was executed, BNFL had no
knowledge of the actual presence of asbestos in the
condensers. .BNFL’s statements at the pre-bid meeting
disclosed the possibility that asbestos would be encountered,
and BNFL made no warranty at the pre-bid meeting or in the
subcontract that it had performed a thorough inspection of the
condensers. The subcontract does state that “BNFL has
removed all known asbestos-containing materials.” The
subcontract also states that if Coy/Superior “encounters any
suspect materials in the execution of its work, it shall notify
the BNFL STR [Subcontract Technical Representative]
immediately.” BNFL acknowledges that it was responsible for
wastes generated and for asbestos abatement during the period
that the condensers remained at the BNFL worksite.
After executing the subcontract — but before the
condensers had been removed from the worksite —
Coy/Superior learned about certain potential asbestos by
reading operating manuals it found while working on the
_ condensers. A Coy/Superior employee informed BNFL of his
suspicion of the presence of asbestos. BNFL arranged for
testing which ultimately did indicate the presence of asbestos.
BNEL arranged for abatement of the asbestos. On March 21,
2000, shortly after BNFL first tested for asbestos in the
locations suggested by Coy/Superior, Coy/Superior asked for
additional testing in specific, designated locations on the
condensers, and again BNFL fulfilled its obligation by testing
for asbestos. In that instance, however, no asbestos was
detected.
In May of 2000, Coy/Superior loaded the pieces of the
condensers onto its vehicles and removed them from the
BNFL worksite. Coy/Superior took the large condenser pieces
to another site, known as “Portal 10,” within the ETTP that
Coy/Superior leased from a party unrelated to BNFL. While
7a
the condensers were still located at its Portal 10 worksite,
Coy/Superior became aware that ihere was additional asbestos
in the condensers. On July 13, 2000, while attempting to sell
some of the materials salvaged from the condensers,
Coy/Superior was asked by a copper buyer in Indiana to
guarantee that asbestos was not present in the wiring. Testing
revealed the presence of asbestos. Coy/Superior contacted
BNFL and notified them of the situation. Ultimately,
negotiations broke down regarding who was responsible for
properly disposing of the asbestos located at the Portal 10 site.
Other disagreements regarding the performance of the
~ subcontract surfaced as well. Coy/Superior sued BNFL for
breach of contract, negligent misrepresent. tion, fraud, and
declaratory judgment that BNFL is responsible for the
asbestos at the Portal 10 site.
BNFL moved for summary judgment on all of the claims
while Coy/Superior filed a motion for summary judgment on
its declaratory judgment claim. The district court granted
Coy/Superior’s motion for summary judgment and entered an
order declaring that BNFL “is the entity responsible for the
asbestos abatement at issue in this case.” The district court
granted BNFL’s motion for summary judgment on the
negligent misrepresentation and fraud claims and granted it in
part as to the contract claim. A bench trial was conducted to
~ determine the lone contract claim which survived. The district
judge entered findings of fact and conclusions of law stating
that BNFL breached the subcontract by allowing a third party
to remove certain copper cable from the K-791 building, but
did not breach the contract by failing to adequately test the
synchronous condensers for asbestos. Finally, the district
judge calculated damages based on the conclusion that BNFL
improperly allowed ten thousand pounds of copper cable to be
8a
removed which BNFL was entitled to under the subcontract.
Coy/Superior timely appealed and BNFL timely filed a cross-
appeal.
It. ANALYSIS
A. Standard of Review
I. Summary Judgment
This court reviews an order granting summary judgment
de novo. Johnson v. Karnes, 398 F.3d 868, 873 (6th Cir.
2005); Daniels v. Woodside, 396 F.3d 730, 734 (6th Cir.
2005); Valentine-Johnson v. Roche, 386 F.3d 800, 807 (6th
Cir. 2004). Summary judgment is proper “if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” Fed. R. Civ. P.
56(c); accord Johnson, 398 F.3d at 873; Daniels, 396 F.3d at
734; Leadbetter v. Gilley, 385 F.3d 683, 689 (6th Cir. 2004).
When deciding a motion for summary judgment, the court
must view the evidence and draw all reasonable inferences in
favor of the non-moving party. Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348,
89 L. Ed. 2d 538 (1986); Johnson, 398 F.3d at 873; Daniels,
396 F.3d at 734; Valentine-Johnson, 386 F.3d at 807. Any
direct evidence offered by the non-moving party in response
to a summary judgment motion must be accepted as true.
Muhammad v. Close, 379 F.3d 413, 416 (6th Cir. 2004) .
Nevertheless, the “mere existence of some alleged factual
dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material
fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-
9a
48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)(emphasis in
original); accord Leadbetter, 385 F.3d at 689-90; Weaver v.
Shadoan, 340 F.3d 398, 405 (6th Cir. 2003).
2. Motion to Amend
The Sixth Circuit generally reviews a district court’s
denial of a motion to amend a complaint for abuse of
discretion. Wade v. Knoxville Utils. Bd., 259 F.3d 452, 459
(6th Cir. 2001); Parry v. Mohawk Motors of Mich., 236 F.3d
299, 306 (6th Cir. 2000). However, when the denial is based
upon the district court’s legal conclusion that the proposed
amendment would be futile, i.e., that it would not withstand
a motion to dismiss, the decision is reviewed de novo. Wade,
259 F.3d at 459; Parry, 236 F.3d at 306.
3. Findings of Fact
Pursuant to Federal Rule of Civil Procedure 52(a),
findings of fact by a district judge should not be reversed
unless “clearly erroneous.” A finding of fact is clearly
erroneous when, although there is evidence to support it, “the
reviewing court on the entire evidence is left with the definite
and firm conviction that a mistake has been committed.”
Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573,
105 S. Ct. 1504, 84 L. Ed. 2d 518 (1985)(quoting United
States v. United States Gypsum Co., 333 U.S. 364, 395, 68
S. Ct. 525, 92 L. Ed. 746 (1948)); accord Gross v. Comm’r,
272 F.3d 333, 343 (6th Cir. 2001); Hamilton v. Carell, 243
F.3d 992, 997 (6th Cir. 2001). When the findings rest on
credibility determinations, Rule 52 demands even greater
deference. Anderson, 470 U.S. at 575; Hamilton, 243 F.3d at
997-98; In re Cleveland Tankers, Inc., 67 F.3d 1200, 1205 ~
(6th Cir. 1995). <
10a
B. Declaratory Judgment
The Second Amended complaint contains a request for a
declaratory judgment “to the effect that Coy/Superior is not
the owner of the asbestos-laden synchronous condensers and
has no responsibility for their disposal. . . .” The parties filed
cross motions for summary judgment on this claim. The
district court granted Coy/Superior’s motion. BNFL
challenges this ruling on cross-appeal. This is the central issue
in this case and will, therefore, be addressed first.
After dismantling the synchronous condensers,
Coy/Superior moved the pieces to its own worksite (known as
Portal 10) which was also located on the ETTP. The presence
of asbestos was discovered while the condensers were located
at the Portal 10 site. BNFL refused to take the asbestos-laden
condenser pieces back from Coy/Superior. Coy/Superior
alleges that BNFL still has title to and responsibility for the
condensers. BNFL argues that liability for the condensers and
the asbestos they contain was transferred to Coy/Superior
under the following provision of the subcontract:
C.1.13 Regulatory Responsibilities
The Subcontractor(s) shall assume total regulatory
responsibility, liability, and title to the wastes and
recyclable material upon loading onto the
Subcontractor’s vehicle at the ETTP site. Any wastes
and/or by-products generated during shipment,
storage, disposal and/or other management of the
waste shall be the _ responsibility of the
Subcontractor(s) and shall be disposed via approved
disposal methods and procedures.
lla
Coy/Superior has argued that BNFL’s reliance on this
contract provision is inapposite because it does not govern
hazardous waste, title to and liability for hazardous waste
could not legally be transferred to Coy/Superior, BNFL did
not have authority to transfer title of the hazardous waste to
Coy/Superior, and even if the contract provision could
transfer title and liability it would not do so until the
condensers were loaded onto vehicles for transportation off
the ETTP.
The district court focused its analysis on the argument that
section C.1.13 should be read to transfer title only when the
materials were loaded onto Coy/Superior’s vehicle for their
ultimate removal from the ETTP, and not upon loading
simply to be moved to Coy/Superior’s worksite at Portal 10.
The district court determined that section C.1.13 was
ambiguous as to precisely when title and environmental
liability transferred because both possible interpretations were
reasonable. The district court further determined that BNFL
drafted the subcontract, the ambiguity was latent, and
Coy/Superior relied on its interpretation in submitting its bid.
Consequently, the district court applied the doctrine of contra
proferentem and enforced Coy/Superior’s supposed
interpretation of the provision. An order was entered
declaring that BNFL was owner of and responsible for the
asbestos-laden condenser remnants located at the Portal 10
worksite.
In its cross-appeal, BNFL challenges the district court’s
conclusion that Coy/Superior relied on its interpretation of
section C.1.13 that title to and liability for asbestos waste
materials would not be transferred to Coy/Superior until those
materials were loaded onto Coy/Superior’s vehicles for the
purpose of removing them from the ETTP. BNFL points to
the well-settled rule that “where a contractor.seeks recovery
12a
based on his interpretation of an ambiguous contract, he must
show that he relied on this interpretation in submitting his
bid.” Lear Siegler Management Servs. Corp. v. United States,
867 F.2d 600, 603 (Fed. Cir. 1989). The burden of proving
reliance on the claimed interpretation thus falls on the
contractor. Fruin-Colnon Corp. v. United States, 912 F.2d
1426 (Fed. Cir. 1990).
BNFL asserts that Coy/Superior did not offer any
evidence at all to support its claim that it relied on any
interpretation of section C.1.13 at the time it prepared its bid.
BNFL points out that Coy/Superior has consistently
maintained that title to and liability for the asbestos wastes
could not and did not transfer to Coy/Superior at any point in
time in spite of the language of section C.1.13. The only time
Coy/Superior has departed from this argument is in a brief,
unsupported argument in its summary judgment motion that
under section C.1.13 “title would pass when loaded on
vehicles for shipment off ETTP to a disposal site.” The
district court focused on this statement. Even though
Coy/Superior did not point to evidence which established
reliance on this interpretation, the district court examined the
evidence before it and was satisfied that there was evidence of
such reliance.
The evidence the district court pointed to in support of its
finding of reliance primarily consisted of references indicating
that Coy/Superior did not intend to do any asbestos work as
part of the project. Coy/Superior’s accepted proposal, as well
as certain testimony, does indicate that Coy/Superior did not
believe asbestos work would be part of the deal. However,
that does not establish that at the time it submitted its bid
Coy/Superior was relying on its interpretation that under
section C.1.13, title to and liability for any asbestos wastes
would not be passed to Coy/Superior until the materials were
13a
loaded for ultimate delivery off of the ETTP. There is no
testimony, evidence, or even allegation from Coy/Superior
that at the time it submitted its bid that was its understanding
of section C.1.13. Coy/Superior does not even attempt to
argue this point on appeal. BNFL is correct that the district
court erred in applying the doctrine of contra proferentem
because Coy/Superior did not establish the necessary element
of reliance.
The district court’s application of the doctrine of contra
proferentem rendered it unnecessary for the district court to
address Coy/Superior’s primary argument that section C.1.13
could not transfer title to or liability for the asbestos waste to
Coy/Superior at any point in time. However, the district court
did address, and reject, this argument in the context of
granting summary judgment in favor of BNFL on
Coy/Superior’s fraud claim. Since summary judgment on the
fraud claim has also been appealed, the contours of
Coy/Superior’s argument have been fully developed both
before the district court and on appeal. Therefore, this court
is in a position to address the issue instead of remanding to
the district court to reconsider the cross motions for summary
judgment on the declaratory judgment claim.
The district court found that the language of section
C.1.13 of the subcontract, which provides that “[plaintiff]
shall assume total regulatory responsibility, liability and title
to the waste . . .” clearly and unambiguously shifted all the
responsibility for the asbestos to Coy/Superior. Coy/Superior
claims that this holding was error because federal law
prohibits BNFL from effectively transferring title to or
liability for the asbestos to another party. Section 107(e)(1) of
the Comprehensive Environmental Response, Compensation,
and Liability Act (“CERCLA”) states the following:
l4a
No indemnification, hold harmless, or similar
agreement or conveyance shall be effective to transfer
from the owner or operator of any vessel or facility or
from any person who may be liable for a release or
threat of release under this section, to any other
person the liability imposed under this section.
Nothing in this subsection shall bar any agreement to
insure, hold harmless, or indemnify a party to such
agreement for any liability under this section. on
42 U.S.C. § 9607(e)(1). This provision does not even make
any reference to title of hazardous wastes, let alone restrict
the transfer of such title as Coy/Superior claims. it only
governs the transfer of liability for such wastes. BNFL argues
that this statute permits the transfer of liability for the asbestos
to Coy/Superior as provided for in section C.1.13 of the
subcontract.
The Sixth Circuit has held that § 107(e)(1) permits parties
to contractually shift CERCLA and other environmental
liabilities by means of an indemnity agreement. Olin Corp. v.
Yeargin Inc., 146 F.3d 398, 407 (6th Cir. 1998); Niecko v.
Emro Marketing Co., 973 F.2d 1296, 1300-01 (6th Cir.
1992). Although the section does not allow a party who is
responsible for cleanup costs to escape liability vis-a-vis the
federal government, parties may still contractually allocate the
costs of environmental clean up among themselves. Niecko,
973 _F.2d at 1300-01. “However, whether a particular
agreement has shifted such liabilities is a question of state
law.” Olin, 146 F.3d at 407. Predicting Tennessee_law, the
Sixth Circuit has held that an agreement shifts environmental
liability if it “contains a clear and unambiguous reference to
such costs.” /d.
lSa
Coy/Superior acknowledges that financial responsibility
for environmental cleanup costs can be shifted contractually
through insurance, a hold harmless agreement, or an
indemnity agreement, but asserts that section C.1.13 of the
subcontract is not an indemnity agreement as argued by
BNEFL. Coy/Superior does not elaborate on this argument or
provide any support for the argument that a clause such as the
one at issue does not transfer liability because it is not
explicitly phrased as an indemnity clause. In fact, the case law
shows that parties can contractually transfer liability under
CERCLA by simply using an “as is” clause. Niecko, 973
F.2d at 1300-01; Velsicol Chemical Corp. v. Reilly Indus., 67
F. Supp. 2d 893, 905 (E.D. Ten. 1999), summarily aff'd, 229
F.3d 1155 (6th Cir. 2000)(unpublished). If a simple “as is”
clause in a real estate contract can be sufficient to transfer
environmental liability, then section C.1.13 of the subcontract
was certainly sufficient to transfer liability.
Coy/Superior argues that section C.1.13 could not transfer
liability for the asbestos to Coy/Superior because such a
transfer is legally impossible. The case law addressing
§ 107(e)(1) of CERCLA makes it clear that such a contractual
shift of liability is possible and was properly executed.
Coy/Superior does not offer any other argument except its oft-
repeated, but unsupported, mantra that title to the asbestos
could not be shifted to Coy/Superior. However, since liability
for the asbestos was properly transferred to Coy/Superior,
there is no reason to determine who had title to the asbestos-
laden materials. Since Coy/Superior’s arguments are not
sufficient to support the declaratory judgment that BNFL is
responsible for the asbestos, the district court erred when it
granted summary judgment in Coy/Superior’s favor on that
claim. BNFL is entitled to summary judgment as a matter of
law on the declaratory judgment claim.
a
-
16a
C. Motion to File Third Amended Complaint
On December 10, 2003 (four months before trial was
scheduled), Coy/Superior filed a motion for leave to file a
third amended complaint. The district court denied the motion
on the basis that the expanded allegations -of intentional
fraudulent conduct did not add a new claim or otherwise add
anything of significance. The second amended complaint
already included a fraud claim. Moreover, the district court
noted that since there was no significant difference, requiring
BNEFL to answer a third amended complaint would result in
undue prejudice and delay. Coy/Superior has noi
demonstrated that this ruling was an abuse of discretion.
After a responsive pleading has been filed, leave to amend
must be freely given when justice so requires. Fed. R. Civ. P.
15(a); Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9
L. Ed. 2d 222 (1962). Nevertheless, leave to amend “should
be denied if the amendment is brought in bad faith, for
dilatory purposes, results in undue delay or prejudice to the
opposing party, or would be futile.” Crawford v. Roane, 53
F.3d 750, 753 (6th Cir. 1995). Coy/Superior argues that
justice required granting leave to file its proposed third
amended complaint because that version of the complaint
included particular allegations of fraud which Coy/Superior
did not include in the second amended complaint because it
did not become aware of the underlying facts until November
20, 2003. BNFL points out that before granting summary
judgment on Coy/Superior’s fraud claim, the district court had
been presented with, and considered, both the newly
discovered information and Coy/Superior’s legal arguments
concerning how it affected the fraud claim. Coy/Superior
counters that the district court’s consideration of the new
information at the summary judgment stage demonstrates that
17a
the district court committed clear error when it denied the
motion to file a third amended complaint.
The district court refused to permit an amended pleading
at a late stage in the litigation where that amended pleading
did not add a new defendant or cause of action, but merely
included additional information about an existing claim which
had been revealed in the course of discovery. The second
amended complaint already stated a cause of action for fraud.
The district court correctly noted that at trial Coy/Superior
would be able to submit any evidence revealed in the course
of discovery which tended to support that cause of action.
Similarly, while considering the motion for summary
judgment as it related to the fraud claim, the district court
considered all the evidence presented including the mosi
recently discovered information. Therefore, permitting the
motion to file the proposed third amended complaint would
not have accomplished any practical purpose. In light of these
circumstances, the district court’s conclusion that permitting
the amendment would have caused undue prejudice and delay
was not an abuse of discretion.
D. Fraud
The district court granted BNFL summary judgment on
Coy/Superior’s fraud claim on the basis that Coy/Superior had
not put forth any competent evidence in support of its fraud
allegations. The district court examined each of four specific
fraud allegations individually. The only aspect of the district
court’s decision which Coy/Superior challenges on appeal is
its determination that section C.1.13 of the subcontract legally
shifted regulatory liability for the asbestos to Coy/Superior.
Since that liability shift was both legal and clearly stated in
the subcontract, the district court determined that BNFL was
entitled to judgment as a matter of law on the claim that it had
18a
fraudulently attempted to illegally shift responsibility for
disposing of asbestos to Coy/Superior. Coy/Superior’s entire
argument on appeal rests squarely on its assertion that it was
legally impossible for BNFL to shift liability for the asbestos
to Coy/Superior. Since this argument has already been
examined and rejected, there is not basis to overturn the
district court’s dismissal of the fraud claim.
E. Breach of Contract
The district court granted summary judgment in favor of
BNFL on two aspects of Coy/Superior’s breach of contract
claim. The district court rejected Coy/Superior’s arguments
that BNFL breached the terms of the subcontract by entering
into a salvage-value contract when there was no salvage value
and that BNFL breached its implied duty of good faith and
fair dealing by failing to thoroughly test the synchronous
condensers for asbestos before awarding the subcontract.
Coy/Superior appeals the ruling on-both of these issues.
The district court ruled that BNFL was entitled to
judgment as a matter of law on Coy/Superior’s first breach of
contract argument because the subcontract did not impose a
duty on BNFL to guarantee that the transaction would be
profitable for Coy/Superior. Coy/Superior argues on appeal
that it has never claimed that BNFL had a contractual duty to
ensure Coy/Superior profited from the transaction. Instead,
Coy/Superior states that it seeks the value of material that
should have been salvageable but was not. According to its
reasoning, the fact that the contract provided that
Coy/Superior would “retain all recycle value” meant that
BNFL had a duty to ensure that there was at least some -
amount of recycle value. If this argument ts truly not a claim
for a guarantee of profitability, then any amount of recycle or
salvage value which Coy/Superior received would be
19a
sufficient to discharge BNFL’s alleged duty. Coy/Superior
does not contest the fact that in the course of performing the
subcontract it recovered thousands of pounds of various
metals which it sold to scrap metal dealers. In light of the
uncontested evidence that Coy/Superior did receive at least
some salvage value, summary judgment.in BNFL’s favor on
this issue was appropriate.
Coy/Superior also challenges the district court’s grant of
summary judgment in BNFL’s favor on the claim that BNFL
breached its duty of good faith and fair dealing by failing to
thoroughly examine the synchronous condensers for asbestos
before awarding the subcontract. The district court concluded
that Coy/Superior had not provided any authority to support
such a duty. The court noted that the subcontract repeatedly
pointed out the possibility that asbestos might be present and
the court went on to observe that the presentation of asbestos
as a possibility made it clear that BNFL had not exhaustively
tested for asbestos. Since the subcontract made it clear BNFL
had not previously tested the condensers for asbestos, and
Coy/Superior did not point to any provision of law or contract
that imposed a duty to complete such testing, the district court
held that BNFL was entitled to summary judgment on this
breach of contract claim.
On appeal Coy/Superior does not squarely face the district
court’s holding that it failed to point to any source of the
alleged duty. Instead, Coy/Superior reiterates information
from the record which ultimately accomplishes nothing more
than demonstrating that BNFL should have known, and did
know, that asbestos might be present and could have tested for
it. However, the mere fact that BNFL knew of the potential
presence of asbestos and had the ability to test for it does not
give rise to a legal duty to conduct such testing. There is
nothing in contract law which prevents two parties from
20a
entering into a contract knowingly ignorant of a potentially
significant fact. The subcontract both clearly stated the
possibility that asbestos would be found in the course of the
performance of the contract and set forth in some amount of
detail the appropriate procedure to follow in that eventuality.
The district court properly granted summary judgment.
F. Negligent Misrepresentation
The district court merged the negligent misrepresentation
claim with the breach of contract claim on the basis that the
two counts involved precisely the same alleged actions and
sought the same damages. Consequently, the district court
dismissed the negligent misrepresentation claim. Coy/Superior
argues that if summary judgment had not been improperly
granted on the fraud count, the district court would not have
reached this conclusion. Coy/Superior does not provide any
other arguments assailing the district court’s merger of the
negligent misrepresentation claim with the breach of contract
claim. As discussed above, there is no basis to overturn the
district court’s grant of summary judgment on the fraud
claim. Consequently, Coy/Superior has not demonstrated any
reason to overturn the district court’s ruling on the negligent
misrepresentation claim.
G. Findings of Fact
After summary judgment was granted on most of the
claims, two claims remained to be tried. A bench trial was
held to resolve Coy/Superior’s entitlement to copper cable
which BNFL permitted a third party to remove from the K-
791 building and to determine the adequacy of BNFL’s testing
for asbestos. The district court found that Coy/Superior was
entitled to the copper cable which came from K-791, but
determined that only 10,000 pounds of cable came from that
2la
building, not the 100,000 pounds asserted by Coy/Superior.
Coy/Superior claims that the finding of fact that only 10,000
pounds of cable came from K-791 was clearly erroneous. The
district court further found that BNFL’s testing of the
condensers while they were on its site was adequate.
Coy/Superior asserts that this determination was clearly
erroneous as well.
Coy/Superior acknowledges that since it is challenging
findings of fact it must establish that the district court’s
determinations were clearly erroneous. A finding of fact is
clearly erroneous when, although there is evidence to support
it, “the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been
committed.” Anderson v. City of Bessemer City, N.C., 470
_U.S. 564, 573, 105 S. Ct. 1504, 84 L. Ed. 2d 518 (1985).
When the findings rest on credibility determinations, even
greater deference must be given. Anderson, 470 U.S. at 575.
Moreover, “where there are two permissible views of the
evidence, the factfinder’s choice between them cannot be
clearly erroneous.” EEOC v. Yenkin-Majestic Paint Corp.,
112 F.3d 831, 834 (6th Cir. 1997)(quoting Anderson, 470
U.S. at 574). Consequently, an appellant’s burden to meet the
clearly erroneous standard cannot be met merely by
demonstrating a conflict in the testimony. Franklin v. Aycock,
795 F.2d 1253, 1257-58 (6th Cir. 1986).
At the bench trial Mr. Roswech testified, based on his
observation of the weighing of the trucks which were shipping
the copper, that he witnessed approximately 100,000 pounds
of cable be removed from the worksite. Mr. Brede testified
that while approximately 100,000 pounds of copper was taken
from the site, only approximately one tenth of that amount
was from the K-791 building. Mr. Roswech testified that all
100,000 pounds he saw on the trucks must have come from
22a
the K-791 building because the copper from the other
buildings had been removed earlier. The district court
considered this conflicting testimony and determined that Mr.
Brede’s testimony was more credible because he was on-site
on a near-daily basis, and was familiar with the work taking
place in the K-791 building when the copper was being
removed.
Coy/Superior acknowledges that there was conflicting
testimony regarding the amount of copper that came out of KF -
791 and that the district court made a credibility judgment 4
determine which estimate to adopt. Yet Coy/Superior claims
that the court’s credibility determination was clearly
erroneous because photographs were introduced at trial that
showed considerable amounts of copper cable coming out of
K-791, being stored in the area, and a truck loaded with cable
as well as showing that the other buildings on the site were
open and bare. Coy/Superior claims that these photos provide
extrinsic evidence to support Mr. Roswech’s testimony which
made it clearly erroneous for the district court to adopt Mr.
Brede’s estimate which was not supported by extrinsic
evidence.
An examination of the evidence presented at the trial
reveals that the district court was forced to choose between
conflicting testimony. The photos relied upon by
Coy/Superior were simply one source the court had to look at
in order to make that determination. The photos do not
support Mr. Roswech’s testimony so clearly as to leave the
clear and definite impression that rejecting his estimate was a
mistake. Coy/Superior has fallen far short of overcoming the
considerable deference due to the district court’s credibility
determination. Pointing to evidence contrary to the district
court’s finding of fact is simply insufficient.
23a
Coy/Superior also argues that “it was clearly error for the
court to conclude that adequate testing was done on the
condensers while they were still in the switchyard.” Yet
Coy/Superior provides virtually no support or explanation for
this bare assertion. In its reply Coy/Superior argues that the
district court’s ruling on the adequacy of testing would have
to be overturned if Coy/Superior prevails on its argument that
it should have been permitted to file a third amended
complaint. However, Coy/Superior has not prevailed on that
point. There is no basis to overturn the district court’s_
finding.
iil. CONCLUSION
For the foregoing reasons, all of the district court’s
rulings challenged by Coy/Superior are AFFIRMED, the
district court’s order granting summary judgment in favor of
Coy/Superior on the declaratory judgment claim is
REVERSED, and this case is REMANDED with instructions
to enter summary judgment in favor of BNFL on the
declaratory judgment claim.
24a
APPENDIX C
IN THE UNITED STATES DISTRICT COURT |
FOR THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
No. 3:01-CV-634
[Filed June 17, 2004]
THE COY/SUPERIOR TEAM, )
Plaintiff, )
)
v. )
)
BNFL, INC., )
Defendant. )
)
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The court tried this civil action without a jury on April 6,
7, and 8, 2004. In this case, plaintiff seeks an award of
damages for breach of contract. Specifically, plaintiff seeks
compensation for the loss of 100,000 pounds of recyclable
copper cable that it was purportedly due under the parties’
subcontract. Also, plaintiff seeks damages resulting from
defendant’s alleged miscommunication and/or negligence
relating to certain asbestos testing.
25a
Following trial, the parties filed proposed findings of fact
and conclusions of law. Having considered those filings along
with the testimony at trial and the exhibits introduced into
evidence, the court now issues its findings of fact and
conclusions of law pursuant to Federal Rule of Civil
Procedure 52(a).
I.
Findings of Fact
Plaintiff is a partnership between Coy Construction
Company, LLC, and Superior Abatement, Inc., formed for
the purpose of doing demolition and salvage work in Oak
Ridge, Tennessee, at the East Tennessee Technology Park
(“ETTP”). Defendant is a prime contractor with the
Department of Energy, authorized by the United States
government to award subcontracts for the demolition of
certain buildings and switchyards at ETTP.
In November 1999, defendant issued a Request for
Proposals (“RFP”) for demolition of ETTP’s K-792
switchyard, which consisted in part of Buildings K-791N, K-
791, and K791S, along with four mammoth synchronous
condensers. Plaintiff was the winning bidder for this project.
Section C.1.2 of the RFP provided that the demolition
subcontractor (plaintiff) would remove from the switchyard,
inter alia, cable and the synchronous condensers. This
language was included in the parties’ subcontract, at § C.1.2.
26a
A. Copper Cable'
1. The Subcontract
By Pre-Bid Meeting and Clarifications notes dated
December 6, 1999, defendant stated that “Non-ferrous metals
in K-791N and K-791S will be removed by a separate
subcontractor. All will remain in K-791. This includes cable.”
This language was subsequently incorporated into § C.1.4 of
the parties’ subcontract. Defendant’s Subcontracts Manager,
Larry Brede, testified that “non-ferrous metals” are all metals
other than steel. [Tr. 257].
By Response to Subcontractor Questions dated December
14, 1999, defendant further qualified the scope of work as
follows:
‘All accessible control cable and associated cable tray
in Buildings K-791, K-791N, and K-791S; aluminum
and galvanized conduits in Buildings K-791N and K-
7918S, and control cables in the tunnels between K-791
and K-791N, and K-79!S will be removed by others
prior to mobilization of the subcontractor. Control
cable in K-791 that requires utility removal for access
will be removed by the demolition subcontractor.
This language was also subsequently incorporated into
§ C.1.4 of the parties’ subcontract.
' Because the cable and cable trays at issue were valuable only for
the copper contained therein, the court’s findings and conclusions
will use the words “copper” and “cable” interchangeably when
discussing the K-791 demolition.
27a
On December 20, 1999, defendant also contracted with A-
Line E.D.S. (“A-Line”) for the removal of scrap materials at
ETTP. The A-Line subcontract provided at § C.1.4 that A-
Line would, among other things, “Remove all accessible
control cable, cable trays, aluminum conduit, and galvanized
conduit. . . . Removal includes K-79in, K-791, K-791s, and
the connector tunnels between each building.” The term
“accessible” is not defined therein.
Nor is “accessible” defined in the subcontract between
plaintiff and defendant. At page 9 of its proposed findings and
conclusions, plaintiff concedes that all cable in K-791N and
K-791S was “accessible.” As for the cable in building K-79]
and its connecting tunnels, Mr. Brede expressed defendant’s
position that cable was “accessible” unless it required utility
removal for access or could not be safely removed. Plaintiff
however, through a more plain-language reading of the term,
contends that cable was “accessible” only if it could be
removed without partial demolition of the structure, such as
the holes that were torn into the walls of K-79! by A-Line in
order to remove cable from that building and the connecting
tunnels.
2. Cable Removal
According to the A-Line weekly reports generated by Mr.
Brede, A-Line began removing cable from K-791N on
January 5, 2000. That task was completed around January 18,
2000. A-Line removed cable from K-791S on January 17-19,
2000. Mr. Brede’s weekly reports further reveal that on
January 18, 2000, A-Line opened a hole in the east wall of K-
791 “to allow access for pulling cable” from the tunnels. A-
Line opened a similar hole in the opposite end of the building
on January 28, 2000. A-Line removed cable from K-791 and
28a
its connecting tunnels from January 26 through February 2,
2000. [Pl. ex. 23].
In late January 2000 (citing § C.1.4 - “All will remain in
K-791. This includes cable.”), plaintiff's Project Manager
John Roswech objected to A-Line’s removal of cable from K-
791. [Def. ex. 2]. “After review and discussion,” Mr. Brede
concluded that “all the cable in K791 [belongs] to BNFL for
removal by A-Line under subcontract.” [Pl. ex. 23]. Mr.
Brede also concluded that plaintiff was not entitled to the
cable because plaintiff had not yet “mobilized.” [Tr. 28].
Mr. Roswech testified that A-Line removed an estimated
100,000 pounds of cable from K-791 and the tunnels. The
witness explained how he arrived at this estimate.
A-Line came to me in February [2000] and asked if
they could utilize our truck scale to weigh the tractors
and trailers of copper that were coming out of the
switchyard. They wanted to not overload them. They
wanted to put approximately 20 tons [sic.] -
approximately that is the legal weight for them to
traverse the highways. I agreed and knowing we had
an issue about them taking the contract, the copper out
of the building and the contract issue. . . . In that
process being with, my witness there I witnessed five
or so trailer loads of copper go off site from the
switchyard. .. .
[Tr. 46]. Mr. Roswech further testified, without explanation,
that the cable from K-791N and K-791S was “removed
earlier.” [Tr. 90-93]. He estimated that A-Line removed a
total of 150,000 pounds of cable, with approximately two-
thirds of that total coming from K-791, plus a negligible
amount coming from the tunnels. [Tr. 90-91].
29a
Mr. Brede, however, estimated that a total of 100,000
pounds of cable came out of the tunnels and the three
buildings, with ten percent of that amount coming out of K-
791. [Tr. 286]. This estimate was based on personal
observation. Mr. Brede worked closely with plaintiff, was on-
site on a near-daily basis, and was familiar with the work
taking place in the K-791 buildings.
Plaintiff introduced a July 28, 2000 purchase contract
indicating a price of 81.5 cents per pound for copper. Mr.
Roswech testified that there was minimal fluctuation in the
price of copper between February and July 2000. Defendant
submitted evidence of lower price offers, but Mr. Roswech
pointed out that these offers were rejected by plaintiff because
of their lower value.
3. Mobilization
“Mobilization,” as used in § C.1.4 of the subcontract, is
defined at § 1.9 as occurring when plaintiff has
accomplished the following:
1. Mobilized labor, equipment, tools, and materials to
the site;
2. Supervisors and workers have successfully
completed required training, are present at the site,
have required PPE [personal protective equipment},
and are ready to start work;
3. Permits, plans, and other required information (See
Subsection L.3) has been submitted to BNFL, and
approved as applicable;
30a
4. Performance bond and insurance cértificates have
been submitted;
5. The Enhanced Work Planning session(s) have been
completed and EWP document(s) have been approved.
According to Mr. Brede, defendant did not allow plaintiff to
begin work until February 7, 2000. Although other elements
of “mobilization” were completed prior to that date, plaintiffs
EWP was not approved until February 7, 2000, and its safety
plan was not approved until either February 2 or February 7,
2000. [Tr. 261, 380}.
B. Asbestos
Plaintiff's successful subcontract bid amount was lower
than the anticipated cost of the work. The bid was based in
part on plaintiff's assessment of the salvage value of copper
wiring present within the synchronous condensers.
Plaintiff's accepted proposal contains an exclusion for
asbestos-containing materials. The subcontract, at § C.1.3,
states that defendant “has removed all known asbestos-
containing materials.” Section C.1.4 notes the possibility of
asbestos or PCB contamination of major equipment, but
provides that the contaminants “can be removed.” Section
C.1.3 further states that if plaintiff “encounters any suspect
materials in the execution of work” it should immediately
notify defendant. Similarly, § C.1.4 provides that if plaintiff
“finds suspect asbestos . . . during building demolition,” it is
to notify defendant for removal.
The condensers were massive instruments sitting more
than twenty feet in the air upon pedestals. Each condenser
weighed between 175 and 220 tons. The condensers were
3la
intact when plaintiff began its demolition work in late
February 2000.
According to Mr. Roswech, manuals for the condensers
were discovered on-site in March 2000 by plaintiff's site
superintendent, Billy Jones. After reviewing the manuals, Mr.
Roswech learned that asbestos could be present within the
condensers. Mr. Roswech testified that he then notified
defendant of the potential presence of asbestos.
I notified Mr. Brede [and others] at the site that I had
found the manuals and they had asbestos and I wanted
to fulfill our contractual obligations to notify BNFL
that asbestos, so the manuals say, was used in the
manufacturing in the fifties.
We had a toolbox, or a site meeting, at Portal 8 in the
switchyard around March 15". . . . We had a meeting,
I laid the manuals out on a car hood or the back of a
pickup truck and opened the manuals and showed
them the page where it says asbestos was utilized.
Armed with that information I fulfilled my contractual
obligations as a project manager by alerting our client
that asbestos was used.
I left the site and Larry Brede and John Rast and Billy
Jones worked out that they were going to bring in
somebody from BNFL’s staff to test the synchronous
32a
condensers and that they would need access to gain up
to that height.
No [I did not personally observe the subsequent
testing conducted on March 16]. I wasn’t on the site.
I was on site, but not physically at the point, I came
after they had left. |
~ What I learned several days later from my
superintendent, Billy Jones, was that asbestos was in
the exciters [starters]. I looked at the condensers from
the ground and I looked at the synchronous condensers
that were in the adjoining switchyard that were taken
apart and I remember saying to Billy Jones who would
ever believe that after testing asbestos was only on one
part. I never seen a report. I was never provided with
a report or a written report . . . until September of
2000... .
[Tr. 55-58].
Mr. Roswech testified that Billy Jones was never shown
the written results of the March 16 testing, which indicated
precisely where testing had been done on various condensers
(made by different manufacturers) throughout the worksite.
{[Tr. 99]. Having, on March 15, shown defendant a manual
page indicating that asbestos could be present somewhere
within plaintiff's massive condensers, Mr. Roswech felt that
he had “no further responsibility” to notify defendant if he
came across areas of suspect asbestos during the process of
33a
actual demolition. [Tr. 96].” In addition, Mr. Roswech stated
that it was “[nJot my job” to inquire as to what parts of the
massive condensers had or had not been tested for asbestos.
[Tr. 100].
Mr. Roswech testified that no further asbestos testing was
requested or performed in March 2000. [Tr. 61]. Acting
under the assumption that asbestos was not present anywhere
other than on the exciters (which defendant abated) plaintiff
demolished its condensers and removed them to its Portal 10
worksite. Plaintiff later learned that the condensers’ copper
wiring was in fact insulated with asbestos, significantly
impairing any salvage value.
According to the deposition testimony of Billy Jones, one .
condenser part was on the ground during the March 16
testing. [Pl. ex. 35, p. 38]. The remaining condensers
remained intact high in the air upon pedestals. [Pl. ex. 35, p.
38-40}. Mr. Jones acknowledged that Mr. Brede provided
him with the written asbestos testing results. [Pl. ex. 35,
p.41]. The test result show precisely where sampling did, and
did not, occur. [Pl. ex. 26].
Mr. Jones “may have [also] had a general conversation” -
with Mr. Brede, but he does not “recall any other mention of
any more sampling being done or to be done.” [Pl. ex. 35, p.
42-43]. He also does not recall that Mr. Brede told him the
condensers were asbesios-free. [Pl]. ex. 35, p. 50]. “I don’t
recall anyone ever saying anything to that nature. Other than
* The manual page that Mr. Roswech claims to have shown Mr.
Brede provides that insulation “usually consists of varnish-
impregnated cotton fibre, cotton tape or paper . . . [or] varnish-
impregnated mica, asbestos, or giass.” [Pl. ex. 31, p.37]; [Tr. 94].
34a
the statement. . .that says all known asbestos has been
removed.” /d. Mr. Jones testified that plaintiff then proceeded
to demolish the condensers, assuming but “not knowing
whether. . . there was asbestos or not.” [Pl. ex. 35, p. 115].
Mr. Jones testified that he was told by John Roswech - not by
Mr. Brede or any other representative of defendant - that no
further asbestos was present. [Pl]. ex. 35, p. 115-16].
The court also heard testimony from Brady Riggs. Mr.
Riggs testified that he performed the March 16, 2000
condenser asbestos sampling at the request of defendant’s
Subcontract Technical Representative John Rast. [Tr. 161].
Mr. Riggs stated that he took one sample from the condenser
part that had already been removed. [Tr. 164]. He also took
one sample from an exposed area on a condenser but did not,
and could not, sample from internal condenser areas that were
not yet accessible. [Tr. 171-72]. Mr. Riggs was accompanied
by an employee of plaintiff when he was lifted into the air to
perform sampling on the intact condenser. [Tr. 225]. In
describing the area that was sampled on the intact condenser,
John Rast testified that
It [was] all they [plaintiff] had open. They ran into
something they suspected. When they run into
something they suspect they come and get us and we
get the sampler out there and he takes a sample of
whatever the suspect materiai is.
(Tr. 226}.
Lastly, Mr. Brede testified regarding the March 2000
asbestos testing. He stated that John Roswech showed him an
unspecified picture, which may or may not have been part of
an operating manual, that referenced the potential presence of
asbestos. [Tr. 290]. “As a result of talking with John
35a
[Roswech] we determined that there was a possibility for
some material in the exciters that contained asbestos.” [Tr.
290}. Mr. Brede ordered sampling for the following day and
temporarily stopped work on the exciters “[b]ecause that was
where Mr. Roswech had identified there was possible asbestos
material.” [Tr. 291].
Mr. Brede denied being shown page 37 of the operating
manual. [Tr. 291]. He testified that if he had been shown that
page he would have ordered more thorough sampling. [Tr.
291-92]. Mr. Brede also stated that he timely shared the
written test results with either Billy Jones or John Roswech
and allowed work to resume on the exciter areas that did not
test positive for asbestos. [Tr. 296-98]. Mr. Brede testified
that, at John Roswech’s request, one more sample was taken
on March 21, 2000. [Tr. 296-97]. That sample came back as
non-asbestos. [Tr. 296]. No additional sampling was done
prior to plaintiff's demolition and removal of the condensers.
“Our expectation was that any time they identify that material
they ask us, they tell us, we sample it and then react
accordingly. Those are the only samples that we were asked
to take.” [Tr. 297]. Mr. Brede testified that potential asbestos
identification was
{t]he subcontractor’s responsibility because [the
condenser] wasn’t open and we couldn’t see the
inside. Their subcontract required them to open it. As
it was being disassembled, it was their responsibility ,
if they identified any potential asbestos material, to
notify us and we would take appropriate action based
on what that material was. We would sample it and it
either was or wasn’t asbestos. If it was asbestos, we
would clean it up.
(Tr. 299-300].
36a
Il.
.
Conclusions of Law
Plaintiff bears, by a preponderance of the evidence, the
following burden of proof: “first, it must establish the nature.
and extent of [defendant’s] breach of contract; second, it must
prove that it suffered some damage; and, third, any damage
must be proved with sufficient certainty so that the
determination of the amount of damage would not be pure
speculation.” Hughes-Groesch Constr. Corp., VABCA No. .
5448, 00-1 BCA 4 30,912; see also Baldwin-Lima-Hamilton
Corp., ENGBCA No. 2601, 66-1 BCA 4 5623.’
A. Asbestos
The court concludes that defendant did not breach the
subcontract - through negligence, miscommunication, or
otherwise - in its testing of the synchronous condensers.
Plaintiff is accordingly not entitled to damages on that claim.
Plaintiff's theory, as presented through the testimony of
Mr. Roswech, is that defendant informed Billy Jones that the
synchronous condensers were completely free of asbestos,
> The parties’ subcontract contains, at § H.44, a choice of law
provision providing that the document shall be interpreted under
“the laws of United States Government Contracts as set forth by
statute and regulations, and decisions by the appropriate courts and
Board of Subcontract Appeals.” The court has previously
concluded that this provision should instead read “Boards of
Contract Appeals.” The _Coy/Superior Team v. BNFL, No. 3:01-
CV-634, slip op. at 6 (E.D. Tenn. Jan. 28, 2004). Pursuant to
§ H.44, where precedent is unavailable from the above authorities,
the court should then look to Tennessee law.
37a
other than in the exciters. Based on this misrepresentation,
plaintiff claims that it unknowingly demolished the condensers
in their asbestos-tainted state, thereby destroying the
salvageable nature of the copper wiring contained therein. In
light of the evidence presented to the court, plaintiff's version
of the facts is simply not credible.
Mr. Roswech testified that defendant (presumably through
Mr. Brede) misinformed Billy Jones. Mr. Jones, however,
testified that no representative of defendant ever told him that
the condensers had been fully tested or were asbestos-free.
Instead, Mr. Jones testified that he received that information
from Mr. Roswech himself.
Mr. Jones also acknowledged that he was provided with
written test results showing what portions of the condensers
had, and had not, been tested. Further, the evidence reveals
that employees of plaintiff were present when Mr. Riggs
conducted his testing. In addition, it is clear that the mammoth
condensers were largely intact at the time of testing. Although
condensers in an adjoining switchyard were apparently in a
more advanced state of demolition, those condensers were not
necessarily manufactured by the same company. In light of
these facts, it is simply not credible for plaintiff to have
believed that thorough testing had been performed on its
condensers in March 2000. Instead, plaintiff should have
“been aware that defendant had tested only where the massive
machines were individually accessible for sampling.on the
testing dates.
Further, the court concludes that §§ C.1.3 and C.1.4
placed upon plaintiff the duty to remain vigilant throughout
the demolition process. Those subcontract provisions called
for plaintiff to notify defendant whenever it encountered
suspect matezials during demolition. Instead of remaining
38a
vigilant, however, Mr. Roswech merely showed defendant a
single page from a manual and then, as Mr. Roswech
repeatedly admitted at trial, completely washed his hands of
any further responsibility.
In sum, plaintiff has not proven that defendant breached
its obligations under the subcontract, including testing,
abating, and communication of test results. Plaintiff is entitled
to no damages on this claim.
B. Copper Cable
1. Breach
Section C.1.4 of the subcontract provides that “Non-
ferrous metals [including copper] in K-791N and K-791S will
be removed by a separate subcontractor. All will remain in K-
791 [for the demolition subcontractor to remove]. This
includes cable.” (Emphasis added). Section C.1.4 then
conflicts the above-cited language by going on to provide that
“[a]ll accessible control cable and associated cable tray in
Buildings K-79/, K-791N, and K-791S . . . and control cables
in the tunnels . . . will be removed by others prior to
mobilization of the subcontractor.” (Emphasis added). The
court concludes that these two provisions create ambiguities
which must be construed in favor of plaintiff as the non-
drafting party.
A contractual provision is ambiguous if it is subject to
more than one reasonable interpretation. See Fry
Communications, Inc. v. United States, 22 Cl. Ct. 497, 503
(1991). The court need not determine which reading is better
or “most reasonable,” so long as both interpretations are in
fact reasonable. /d. at 505-06. In such cases, the doctrine of
contra proferentem accepts the interpretation of the non-
39a
drafting party, provided that the ambiguity is latent and the
non-drafting party relied on its interpretation in submitting its
bid. /d. at 503.
The court concludes that the term “accessible,” as used in
§ C.1.4, is ambiguous in both meaning and scope. The term
is not defined. In meaning, it could describe - as defendant
argues - cable requiring utility removal for access or cable
that could not be safely removed. Or - as plaintiff argues - the
term could describe cable that did not require removal of
walls or other partial demolition to gain “access.”* In scope,
the term could - as defendant argues - modify only that cable
existing inside the buildings. Or - as argued by plaintiff - the
term could modify both the cable inside the buildings and the
cable in the tunnels. ,
These ambiguities are latent in nature. A contractual.
ambiguity ts latent unless it contains “a gross discrepancy, an
obvious error in drafting, or a glaring gap.” Fry
Communications, 22 Cl. Ct. at 509. The phrase “accessible”
does not on its face create the “sort of glaring uncertainty that
would clearly warn plaintiff to seek clarification in advance,
particularly where § C.1.4 also provides that all cable would
remain inside building K-791 for plaintiff to remove. See
King-Bole, Inc. DOTCAB No. 1810, 87-1 BCA 4 19,652.
Lastly, plaintiff's reliance on its interpretation is
illustrated in two ways. The anticipated salvage value of the
cable inside both K-791 and the tunnels was a factor in the
‘ The reasonableness of plaintiff's interpretation is bolstered by the
language of Mr. Brede’s own weekly reports, wherein he noted
that A-Line had opened a hole in the east wall of K-791 “to allow
access for pulling cable” from the tunnels. (Emphasis added).
40a
contract amount bid by plaintiff. Mr. Roswech’s January 2000
objections to A-Line’s removal further illustrate plaintiff's
reliance. Accordingly, the court concludes that defendant
breached § C.1.4 by permitting A-Line to tear holes in K-79]
to remove otherwise “inaccessible” cable from that building
and the connecting tunnels.”
2. Mobilization
The court concludes that plaintiff did not “mobilize” until
after A-Line had removed the cable from K-791 and the
tunnels. As defined by § C.1.9, mobilization did not occur
until February 7, 2000, which was the date plaintiff's EWP
documents were approved. However, the court cannot agree
with defendant’s contention that this mobilization date bars
plaintiffs entitlement to the disputed copper. Section C.1.4 of
the parties’ subcontract, as discussed, only allows A-Line to
remove “accessible” cable, regardless of plaintiff's
mobilization date. Because A-Line was also permitted to
remove “inaccessible” cable, plaintiff's mobilization date does
not act as a bar to recovery.
3. Damages
As for the amount of cable lost by plaintiff, the court
credits the 10,000 pound estimate of Mr. Brede. The court
has considered Mr. Roswech’s estimate of 100,000 pounds
> Defendant elicited testimony from Marian Jarvis, an owner of
Coy Contraction, that in June 2000 Ms. Jarvis signed a waiver
releasing additional or outstanding claims relating to the
subcontract. Defendant did not, however, introduce the waiver into
evidence. The court is therefore unable to determine that the waiver
bars plaintiff from asserting its present claim regarding the K-791
cable.
4la
but, on the whole, finds Mr. Brede to be the more credible
witness. As discussed, Mr. Brede worked closely with
plaintiff, was on-site on a near-daily basis, and was familiar
with the work taking place in the K-791 buildings.
Mr. Roswech testified, based on his observation of the
weighing of A-Line’s trucks, that he witnessed approximately
100,000 pounds of cable removed from the worksite. Mr.
Brede agreed that 100,000 pounds were removed from the K-
791 complex, but opined that only one-tenth of that total came
from the K-791 building itself. Mr. Roswech testified that all
100,000 pounds came from the K-791 building and tunnels
because the K-791N and K-791S copper had been “removed
earlier.” However, Mr. Roswech did not explain to the
court’s satisfaction why A-Line would have wanted to weigh
the trucks containing K-791 and tunnel copper, but not the
trucks containing K-791N and K-791S copper.
Accordingly, the court views Mr. Brede’s estimate as the
most persuasive indication of the amount of copper removed
from the K-791 building by A-Line. Because Mr. Roswech
testified that only an unspecified and minimal amount of cable
was removed from the tunnels, plaintiff has not met its burden
of proof as to damages for the tunnel copper. Accordingly,
plaintiff is entitled to compensation for only the 10,000
pounds of copper cable taken from the K-791 building.
The court credits the July 2000 purchase contract,
indicating a price of 81.5 cents per pound for copper, as an
essentially uncontroverted measure of damages. Mr.
Roswech’s testimony was that there was minimal fluctuation
in the price of copper between February and July 2000. While
defendant submitted evidence of lower price offers, plaintiff
rejected those offers because of their lower value. Plaintiff is
42a
therefore entitled to $8,150.00 in damages, which reflects
10,000 pounds multiplied by 81.5 cents per pound.
In summary, for the reasons stated herein, the court
concludes and specifically finds that plaintiffis entitled to
damages of $8,150.00, plus interest from July 28, 2000 - the
date of plaintiff's contract for the sale of scrap copper.
Further, as ordered from the bench, defendant is to abate any
asbestos-containing material at the Portal 10 worksite that is
economically feasible to abate. Plaintiff will retain any
recyclable material remaining after the abatement. The parties
are to agree upon an independent expert to determine the cost-
effectiveness of abatement at the Portal 10 site. The standard
to be used is whether it is more cost-effective than not to
abate. Defendant may use its current abatement subcontractor
to perform the actual abatement. Defendant is responsible for
the proper disposal of any material that cannot be cost-
effectively abated, and plaintiff is entitled to no compensation
for any such material.
An order consistent with these findings of fact and
conclusions of law will be entered.
ENTER:
s/ r
United States District Judge
43a
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
~
No. 3:01-CV-634
THE COY/SUPERIOR TEAM, )
Plaintiff, )
)
v. )
)
BNEL, INC., )
Defendant. )
)
ORDER
Upon consideration of the evidence produced at the
nonjury trial held April 6, 7, and 8, 2004, and for the reasons
set forth in the findings of fact and conclusions of law filed
contemporaneously with this order, it is ORDERED that
plaintiff is entitled to damages of $8,150.00, plus interest
~ from July 28, 2000. Further, as ORDERED from the bench,
defendant shall abate any asbestos-containing material at the
Portal 10 worksite that is economically feasible to abate.
Plaintiff will retain any recyclable material remaining after the
abatement. The parties shall agree upon an independent expert
to determine the cost-effectiveness of abatement at the Portal
10 site. The standard to be used is whether it is more cost-
effective than not to abate. Defendant may use its Current
abatement subcontractor to perform the actual abatement.
Defendant is responsible for the proper disposal of any
material that cannot be cost-effectively abated, and plaintiff is
entitled to no compensation for any such material.
44a
IT IS SO ORDERED.
ENTER:
s/Leon Jordan
United States District Judge
45a
APPENDIX D
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
No. 3:01-CV-634
[Filed February 18, 2004]
THE COY/SUPERIOR TEAM,
Plaintiff,
BNEFL, INC.,
)
)
)
Vv. )
)
)
Defendant. )
)
MEMORANDUM OPINION
This civil action is agaim before the Court on “Defendant’s
Renewed Motion for Swimmary Judgment” [doc. 88], which
seeks summary judgment on all four counts of plaintiffs
second amended complaint (“complaint”). By prior order
{[doc. 118], defendant’s motion was denied as to count two
only, and “Plaintiff Coy/Superior’s Motion for Se~™mary
Judgment on Its Claim for a Declaratory Judgment” [d-x. 92],
relating only to count two, was granted.
46a
This memorandum opinion will address the remaining
counts of plaintiffs complaint - counts one, three, and four.’
For the reasons provided below, defendant’s motion will be
granted as to counts three and four, and will be granted in
part and denied in part as to count one.
I.
Factual Background
The parties’ contractual background was set forth in the
court’s prior memorandum opinion [doc. 117] and will be
repeated herein only as relevant to the claims now at issue.
The court’s factual narrative will, of course, focus on the
specific facts presented by plaintiff purporting to demonstrate
a genuine issue for trial. See AT&T Co., Fed. Sys. Advanced
Techs., DOTCAB No. 2479, 93-3 BCA 4 26,088.
In 1997, defendant entered into a prime contract with the
Department of Energy (“DOE”) io “decontaminate,
decommission, and recycle” three former uranium processing
buildings at DOE’s East Tennessee Technology Park
(“ETTP”) near Oak Ridge, Tennessee. The present
controversy arises from the disassembly and removal of four
mammoth synchronous condensers from ETTP.
The condensers were initially a part of defendant’s
subcontract with IDM Environmental Corporation (“IDM”).
Daniel Quinn, who plaintiff identifies as IDM’s project
manager, testified that IDM found operating manuals for the
' These counts claim breach of contract, negligent
misrepresentation, and fraud. Each claim is based upon multiple
theories.
47a
condensers in “a van full of file cabinets . . . among hundreds
of other information [sic] about various other equipment
around our part of the project.” Defendant’s employee John
Rast, who worked on “requests for proposals” (“RFP”),
acknowledged that a manual was in defendant’s possession
during the time he worked on RFPs. A cited excerpt from one
manual states that large synchronous machines “usually have
Class B insulation,” which is elsewhere described as
“consist[ing] mainly of varnish-impregnated mica, asbestos,
or glass.”
IDM performed no dismantling of the condensers before
BNFL terminated their subcontract. IDM did, however, cut
a hole in one of the condensers large enough for “two or
three” people to enter. Plaintiff acknowledges that IDM
performed no asbestos testing on the condensers’ contents.”
Mr. Quinn testified that “a lot” of wiring around the
switchyard tested positive for asbestos.
Several condensers (not the ones now in controversy) were
then added to a subcontract between defendant and an entity
known as “ATI.” According to the deposition, of David
Miller, who plaintiff identifies as ATI’s project manager, the
ATI subcontract provided that any hazardous materials,
including asbestos, discovered in condenser disassembly could
be returned to defendant at any time for proper disposal. Mr.
Miller testified that defendant did not take exception to that
? Plaintiff's project manager, John Roswech, testified that due to
the size of the openings he “assumed” defendant had sampled the
condenser contents. However, Mr. Roswech also acknowledged
that prior to the parties’ subcontract formation the condensers were
“sitting intact on pedestals some twenty feet in the air.”
48a
subcontract provision, which he assumed reflected “standard
operating procedure.”
Following the termination of IDM’s subcontract, the four
synchronous condensers presently at issue became part of a
January 6, 2000 subcontract between plaintiff and defendant
for the demolition and removal of a switchyard. Plaintiff is a
partnership between Coy Construction, LLC, a Tennessee
company, and Superior Abatement, Inc., a New Jersey
corporation. Plaintiff submitted a winning bid of $89,000.00.
The bid amount was lower than the anticipated cost of the
work and was purportedly based in part on plaintiffs
assessment of the salvage value of copper wiring present
within the synchronous condensers.
Plaintiff's accepted proposal contains an exclusion for
asbestos-containing materials. The subcontract, at § C.1.3,
states that defendant “has removed all known asbestos-
containing materials.” The “BNFL Response to Subcontractor
Questions - No. 1” portion of the subcontract notes the
possibility of asbestos or PCB contamination of major
equipment, but provides that the contaminants “can be
“removed.” Section C.1.3 further states that if
plaintiff” encounters any suspect materials in the execution of
work” it should immediately notify defendant. Similarly,
§ C.1.4 provides that if plaintiff “finds suspect asbestos . . .
during building demolition,” it is to notify defendant for
removal.’
* In contrast with the ATI subcontract provision allowing return of
asbestos-containing materials, § C.1.13 of defendant’s contract
with plaintiff provides that:
[Plaintiff] shall assume total regulatory responsibility,
liability, and title to the wastes and recyclable material
-
49a
Defendant’s employee Larry Brede was responsible for
overseeing plaintiff's work. He also served as an “interface”
between plaintiff and defendant. Mr. Brede testified that
defendant’s intent was for plaintiff to notify it if asbestos was
found during demolition, and defendant would then call in its
abatement contractor.
On approximately December 28, 1999, a report was
received by Jerry Truitt, who Mr. Brede identified as “a
subcontractor to [defendant].” The.report stated that “the
olack fibrous wrap [of an ETTP synchronous condenser other
than those now at issue] contains asbestos[.]” The condensers
at EL YP are approximately fifty years old, were made by
various manufacturers, and have been “tweaked” over the
years.
Plaintiff began work in February 2000. Mr. Roswech
states that he had a conversation with Mr. Brede, allegedly in
March 2000, in which Mr. Roswech showed Mr. Brede “the
paragraph [from the condenser manuals] that stated that there
may be asbestos used in the synchronous condensers
manufacture.” According to the affidavit of William Jones,
plaintiff's former ETTP Superintendent, Mr. Roswech
“pointed out to {defendant’s] official or officials that the
manual indicated asbestos may be in the insulation of wiring
upon loading onto [plaintiff's] vehicle at the ETTP site.
Any wastes and/or by-products generated during shipment,
Storage, disposal and/or other management of the waste
shall be the responsibility of [plaintiff] and shall be
disposed via approved disposal methods and procedures.
In its prior memorandum, the court construed § C.1.13 as shifting
asbestos responsibility to plaintiff at the point of removal from the
East Tennessee Technology Park. [doc. 117].
50a
in the condensers.” According to Mr. Brede, however, Mr.
Roswech only brought to his attention a manual page with “a
note on there that said asbestos with the exciters [otherwise
known as “starters”].” Therefore, according to Mr. Brede,
defendant was not specifically asked to performed asbestos
testing on the condensers’ internal contents.
Brady Riggs was formerly employed as a sampler at the
ETTP site. According to his affidavit, Mr. Riggs was
contacted on March 16, 2000, by defendant’s employee Mr.
Rast. Mr. Riggs was purportedly told “that samples needed to
be taken from some synchronous condensers to see if asbestos
was present.” Mr. Riggs states that Mr. Rast did not direct
him to sample specific areas (namely the wiring) of the
condensers and did not show him the operating manual. Mr.
Riggs therefore took only “grab samples” of exposed areas
and did not sample the wiring within the condensers.
One of the two samples taken from plaintiff's condensers
tested positive for the presence of asbestos in “[b]lack fibrous
insulation surrounding a coil unit on a synchronous
condenser.” Mr. Brede states that he showed the test results
to Mr. Jones. Mr. Jones denies that he was shown the test
results. Mr. Brede then concluded that defendant’s abatement
contractor should perform asbestos removal only on the
exciters. No further abatement was performed on the
condensers’ contents as a result of Mr. Riggs’ testing.
According to Mr. Jones, defendant then “gave us clearance to
go ahead with cutting the bodies of the synchronous
condensers into sections . . . . We did that, not knowing that
we were cutting into wire insulated with asbestos.”
After cutting the condensers into moveable pieces,
plaintiff transported them to its Portal 10 worksite within
ETTP. Plaintiff subsequently conducted additional testing.
Sla
The parties agree that this testing showed the presence of
asbestos. Defendant then took the position that, because
plaintiff had moved the condensers from their original
location, defendant was absolved of abatement responsibility
under § C.1.13 of the parties’ agreement.‘
The subcontract contains, at § H.44, a choice of law
provision providing that the document shall be interpreted
under “the laws of United States Government as set forth by
statute and regulations, and decisions by the appropriate
courts and Board of Subcontract Appeals.”° Pursuant to
§ H.44, where precedent is unavailable from the above
authorities, the court should then look to Tennessee law.
II.
The Complaint
In count one (breach of contract), plaintiff alleges that
defendant “breached the terms of the subcontract by entering
into a salvage-value contract with [plaintiff] when there was
no salvage value in the equipment available for salvage.
[Defendant] should have known that there was no salvage
value in the equipment [due to the presence of asbestos as
indicated by the operating manuals in defendant’s possession]
* In its prior memorandum and order, the court ruled otherwise.
[doc. 117, 118].
> The court’s research has failed to uncover the existence of a
“Board of Subcontract Appeals.” The court concludes that this
provision should instead read “Boards of Contract Appeals.”
52a
prior to award of the subcontract[.]”° Count one goes on to
allege that defendant breached its duty of good faith and fair
dealing: (1) “by not thoroughly examining the synchronous
condensers in advance of awarding the subcontract”; and (2)
“when it learned before [plaintiff] started cutting the
synchronous condensers into parts that asbestos was there but
did not inform [plaintiff].”’
Count three (negligent misrepresentation) alleges that
defendant “negligently misrepresented the fact that the
synchronous condensers, other than those parts known as the
exciters, were free of asbestos and that [plaintiff] could cut the
synchronous condensers into sections and pieces for
removal.” Count three is based in part on defendant’s alleged
breach of its alleged duty to search for and review the
operating manuals.
In count four (fraud), plaintiff accuses defendant of
making “fraudulent misrepresentations of fact and
conceal{ing}] matters it had a duty to disclose, all for the
° The complaint also alleges that defendant breached the contract by
allowing another subcontractor to remove 100,000 pounds of
copper, with an expected salvage value of $78,000.00, that
constituted “a significant portion of [plaintiff's] bid and bargain.”
In open court on January 28, 2003, counsel advised the court that
the 100,000 pounds of copper are still at issue. Neither party’s
summary judgment motion addresses this aspect of their dispute.
The court accordingly assumes that the removed copper remains a
contested issue for trial.
” Count one also seeks damages of “$100,00.00 if it has to dispose
of the asbestos containing material.” The court’s prior
memorandur .nd order has resolved that issue, ruling that the
abatement is not plaintiffs responsibility.
53a
purpose of inducing [plaintiff] to commit to a subcontract
illegally shifting to [plaintiff], unknown to [plaintiff],
responsibility for disposing of . . . asbestos{.]” Plaintiff goes
on to allege that defendant “perpetrated a fraud” by “callously
or intentionally” failing to warn plaintiff “of the dangers and
regulatory obligations it would be subject to in taking
possession of asbestos.” Plaintiff further contends that
defendant, with knowing falsity, stated that it would abate all
asbestos, with “[nJjo time limits or location limits” given,
when it in fact “had no intention of performing as
promised{.]” Lastly, plaintiff contends that it was “duped” by
defendant’s “fraudulent concealment” of the terms of its
subcontract with IDM. ‘
Ill.
Summary Judgment Standard
Pursuant to Federal Rule of Civil Procedure 56(c),
summary judgment shall be granted if “the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.” Brill Bros., Inc.,
ASBCA No. 42573, 93-2 BCA 4 25,795. The movant may
discharge its burden by demonstrating that the non-moving
party has failed to establish an essential element of that party’s
case for which it bears the ultimate burden of proof. Centex
Bateson Constr. Cu., Inc., VABCA No. 4613, 97-1 BCA
q 28, 915.
After the moving party has made its initial showing, the
burden shifts to the non-moving party to present specific facts
demonstrating a genuine issue for trial. AT&T Co., Fed. Sys.
Advanced Techs., DOTCAB No. 2479, 93-3 BCA { 26,088.
54a
“Factual disputes that are irrelevant or unnecessary will not
be counted.” Transitional Hous., Inc., DOTCAB No. 2634,
96-1 BCA 4 28,036 (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed.2d 202
(1986)). In order to defeat a motion for summary judgment,
the non-moving party must present significantly probative
evidence in support of its complaint. Joe E. Woods, Inc.,
DOTCAB No. 2777, 98-1 BCA 4 29,370 (quoting Liberty
Lobby, 477 U.S. at 249-50, 106 S. Ct. at 2511). The non-
movant’s evidence is to be believed, and all justifiable
inferences are to be drawn in that party’s favor. Centex
Bateson Constr. The court determines whether the evidence
requires submission to a jury or whether one party must
prevail as a matter of law because the issue is so one-sided.
Joe E. Woods, Inc. (quoting Liberty Lobby, 477 U.S. at 251-
52, 106 S. Ct. at 2512).
IV.
Count One
The presence of genuine issues of material fact dictates
that defendant’s motion must be denied in part as to count
one. The parties’ course of conduct relating to the discovery
and abatement of asbestos is framed by §§ C.1.3 and C.1.4 of
the subcontract. If plaintiff encountered “suspect materials,”
including asbestos, it was to notify defendant who would
arrange for the removal of the materials. Through the
deposition testimony of Mr. Roswech and the affidavit of Mr.
Jones, plaintiff has presented probative evidence that
defendant breached its contractual duty. This evidence,
_ viewed 4 2% most favorable light, indicates that in March
2000 piaineit’ notified defendant of specific locations -
including the wiring insulation - where asbestos was
suspected. This evidence, if believed, demonstrates that
55a
defendant failed to adequately test, abate, and/or communicate
the results of its testing. Accordingly, a genuine issue of
material fact exists as to plaintiff's breach of contract claim.
Defendant’s motion will, however, be granted as to the
remaining breach of contract theories. As outlined above,
plaintiff also alleges that defendant: (1) “breached the terms
of the subcontract by entering into a salvage-value contract
when there was no salvage value in the equipment available
for salvage|;]” and (2) breached its duty of good faith and fair
dealing “by not thoroughly examining the synchronous
condensers in advance of awarding the subcontract[.}”
In support of the first of these claims, plaintiff cites three
pieces of evidence. Plaintiff first points to the affidavit of its
own project manager, Mr. Roswech. Mr. Roswech states in
conclusory fashion that defendant “knew” that plaintiff
expected the subcontract to generate “salvageable material of
significant value[.]” Mr. Roswech’s unsupported claim as to
another party’s knowledge is of no evidentiary value. See
Fed. R. Evid. 602 (Evidence must be based on personal
knowledge.). Further, even if Mr. Roswech’s statement was
of any relevance, defendant’s “knowledge” of plaintiff's
“expectation” hardly establishes a contractual duty to
guarantee profitability.
The next evidence cited by plaintiff is § C.1.2 of the
subcontract, which provides that plaintiff “shall retain ail
recycle value” in the synchronous condensers. This evidence
likewise is not probative of a contractual guarantee of
profitability. Plaintiff admittedly submitted its bid based on its
own assessment of potential recycle value. Subcontract
§§ C.1.2 through C. 1.4 repeatedly point out the potential
presence of additional asbestos and make plaintiff
“responsible for verifying the existing conditions.” Plaintiff
56a
is a partnership of construction and abatement professionals.
Its repeated attempts to characterize itself as an
unsophisticated entity ring hollow. See Peters, PSBCA No.
999, 83-2 BCA { 16,694 (“Equity does not relieve from hard
bargains simply because they are such.”) (quoting Columbia
Ry., Power & Light Co. v. City of Columbus, 249 U.S. 399,
414, 39S. Ct. 3491 354, 63 L. Ed. 669 (1919)).
Lastly, plaintiff points to defendant’s prime contract with
DOE, which establishes what would happen if equipment such
as synchronous condensers sold for a hisher-than-expected
value. Plaintiff states that”[o]bviously DOE thought [the
condensers] had value.” Again, what another party “thought”
does not establish a contractual duty whereby defendant
guaranteed plaintiff's profitability. Defendani did not breach
the subcontract by “entering into a salvage-value contract
when there was no salvage value[.]” See Pirate’s Cove
Marina, IBCA No. 1018-2-74, 75-1 BCA { 11,109 (“The
agreement does not guarantee the appellant against loss, nor -
does it guarantee it a profit.”). Summary judgment will be
granted on this claim.
Summary judgment will also be granted on the theory that
defendant breached its duty of good faith and fair dealing “by
not thoroughly examining the synchronous condensers in
advance of awarding the subcontract[.], “Every contract
imposes upon each party a duty of good faith and fair dealing
in its performance[.}” Norman v. GSA, GSBCA No. 15070,
02-2 BCA 4 32,042 (citation omitted). This implied duty does
not, however, “confer on a party any rights or grounds for
recovery other than those that are contractually based.” /d.
The concept of good faith and fair dealing is not “an
overflowing cornucopia of wished-for legal duties.” Id.
(citation omitted). Instead, good faith and fair dealing “must
S7a
attach to a specific substantive obligation mutually,assented to
by the parties.” /d. (citation omitted).
In support of this claim plaintiff argues only that defendant
“should have” reviewed the manuals and performed thorough
advance testing. This position is the absolute opposite of the
subcontract into which plaintiff freely entered. The
subcontract repeatedly notes that additional asbestos may be
present. Obviously, that meant that defendant had not
thoroughly tested the condensers or any other material.
Plaintiff can point to no “specific substantive contractual
obligation” to locate asbestos in advance because no such
substantive obligation existed. Defendant cannot be liable for
failing to do something it was not contractually or legally
obligated to do - neither testing nor combing through manuals
present in “a van full of file cabinets . . . among hundreds of
other information [sic] about various other equipment|.]” Jd.
Summary judgment will accordingly be granted on this claim.
V.
Count Three
In support of its negligent misrepresentation count,
plaintiff again points to defendant’s alleged pre-contract duty
to perform a “diligent-search”. for asbestos. As discussed
immediately above, defendant had no such duty. To the extent
that count three relies on that duty, count three fails.
~ The remainder of plaintiff's negligent misrepresentation
claim is based on the March 2000 exchanges between Mr.
Brede, Mr. Roswech, and Mr. Jones, in which defendant
allegedly misinformed plaintiff as to the results of asbestos
testing. As discussed above, there exists a genuine issue of
58a
material fact on this Claim. Nonetheless, the court will grant
summary judgment on count three.
The tort of negligent misrepresentation has been
recognized in the contract See, e.g., Active Fire Sprinkler
Corp., GSBCA_No. 5461, 85-1 BCA 4 17, 868. However,
claims for negligent misrepresentation in contractual
performance are frequently treated as claims for breach of
contract. See, e.g., RIM Adver., GPOBCA No. 38-94, 1997
WL 742429. The court is persuaded to do so in the present
case.
Counts one and three, as they relate to the March 2000
testing, address identical acts and damages. The only
substantiated “negligent misrepresentation” - that Mr. Brede
miscommunicated the test results - is fully encompassed
within plaintiffs surviving breach of contract claim. To allow
this case to proceed under both legal theories would serve
only to confuse the jury at trial. Defendant’s summary
judgment motion will accordingly be granted as to all
negligent misrepresentation theories raised in count three.*
VI.
Count Four
Defendant’s summary judgment motion will also be
granted as to plaintiffs fraud claims. Initially, the court notes
the general rule that allegations of fraud are typically not
® The court stresses that this ruling should in no way be construed
as prohibiting plaintiff from introducing evidence at trial relating to
defendant’s purported negligence.
59a
appropriate for disposition at the summary judgment stage.
See, e.g., Fowler v. Happy Goodman Family, 575 $.W.2d
496, 499 (Tenn. 1978) (affirming grant of summary judgment
on guestion of fraud). “Nevertheless, it is incumbent upon the
party asserting fraud, when confronted by a motion for
summary judgment, to produce some competent and material
evidence legally sufficient to support his claim or defense.”
Id. “Evidence merely inviting the fact-finder to guess at
([defendant’s] intent would not be competent.” American
Cable Corp. v. ACI Mgmt., Inc., No. M1997-00280-COA-R3-
CV, 2000 WL 1291265, at *5 (Tenn. Ct. App. Sept. 14,
2000) (affirming grant of summary judgment on question of
fraud).
Plaintiff offers no competent evidence supporting its
contention that defendant falsely stated it would abate asbestos
when it in fact “had no intention of performing as promised.”
Summary judgment will accordingly be granted on that
theory. See id.; see also Joe E. Woods, Inc., DOTCAB No.
2777, 98-1 BCA 4 29,370 (non-movant must present
significantly probative evidence in support of its claim).
Plaintiff also claims that defendant fraudulently and
“illegally shift{edj] to [plaintiff], unknown to [plaintiff]
responsibility for disposing of . . . asbestos[.]” Plaintiff
contends that subcontract § C.1.13 is rendered inoperative by
the Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”). This theory is without merit. -
The Sixth Circuit has recognized “the basic principle that
parties may skift CERCLA and other environmental liabilities
by means of an indemnity agreemert.” Olin Corp. v. Yeargin
Inc., 146 F.3 d 398, 407 (6" Cir. 1998). “{WJhether a
particular agreement has shifted such liabilities is a question
of state law.” Jd. Predicting Tennessee law, the Sixth Circuit
60a
has held that an agreement shifts environmental liability if it
“contains a clear and unambiguous reference to such costs.”
Id.
Section C.1.13 “contains a clear and unambiguous
reference to such costs.” Although the court has found the
provision ambiguous as to when liability shifted, there is no
doubt that the subcontract “clearly and unambiguously” shifts
environmental responsibility at some point.’ Section C.1.13
“clearly and unambiguously” provides that “[plaintiff] shall
assume total regulatory responsibility, liability, and title to the
wastes ... Any wastes and/or by-products generated during
sninment, storage, disposal and/or other management of the
waste shall be the responsibility of [plaintiff] and shall be
disposed via approved disposal methods and procedures.”
This language is sufficient to shift CERCLA liability, Olin,
146 F.3d at 407, and is clearly present in plaintiff's
subcontract.
It will not do, for a man to enter into a contract, and,
when called upon to respond to its obligations, to say
that he did not read it when he signed it, or did not
know what it contained. If this were permitted,
contracts would not be worth the paper on which they
are written. But such is not the law.
Beasley v. Metro. Life Ins. Co., 229 S.W.2d 146, 148 (Tenn.
1950) (quoting Upton v. Tribilcock, 91 U.S. 45, 50, 23 L.
Ed. 203 (1875)).
—
° As discussed, the court has construed § C.1.13 as shifting
asbestos responsibility to plaintiff at the point of removal from the
East Tennessee Technology Park, thereby adopting plaintiff's
proposed construction. [doc. 117].
61a
Plaintiff next claims that defendant fraudulently failed to
warn of the presence of asbestos and “the dangers and
regulatory obligations” related thereto. Again, the court notes
that subcontract §§ C.1.2 through C.1.4 repeatedly point out
the potential presence of asbestos. Any claim that defendant
failed to warn of the presence of asbestos is without merit.
Beasley, 229 S.W.2d at 148. Further, the court again notes
that plaintiff is a partnership of construction and abatement
_ professionals. Any claim that defendant failed to warn an
abatement professional- of “the dangers and regulatory
obligations” of asbestos is equally without merit.'°
Lastly, plaintiff claims that defendant “fraudulently
concealed the existence and benefits” of the terms of its
subcontract with ATI. “[I]t is incumbent upon the party
asserting fraud, when confronted by a motion for summary
judgment, to produce some competent and material evidence
legally sufficient to support his claim[.]” Fowler v. Happy
Goodman Family, 575 S.W.2d 496, 499 (Tenn. 1978).
Plaintiff offers no evidence that defendant “fraudulently”
concealed terms negotiated between it and another entity.
More importantly, plaintiff cites no contractual or legal
authority requiring defendant to disclose the terms of an
agreement with a third party. This claim accordingly fails.
'° The court further notes the “BNFL Response to Subcontractor
Questions - No. 1” portion of the subcontract. Therein, plaintiff
asked multiple questions relating to specific environmental dangers
(“Have all the radioactive contaminants been removed . . . ? Is the
paint lead based . . . ? Has applicable roofing material been tested
for hazardous/regulated materiais; if so, are the analytical results -
available? . . . Is there non-asbestos between the inner and outer
skin of building and what is the insulation material?”). Plaintiff
evidently had the opportunity to inquire about asbestos testing of
the synchronous condensers and simply failed to do so.
62a
VII.
Conclusion
For the reasons stated herein, defendant’s motion for
summary judgment will be denied solely as to plaintiff's
breach of contract allegation relating to the disputed March
2000 asbestos testing. Defendant’s motion will otherwise be
granted as to counts one, three, and four. An order consistent
with this opinion will be entered.
ENTER:
/s/ Leon Jordan
Leon Jordan
United States District Judge
63a
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
No. 3:01-CV-634
[Filed February 18, 2004]
THE COY/SUPERIOR TEAM, )
Plaintiff, )
) 7
v. )
)
BNFL, INC., )
Defendant. J
)
ORDER
For the reasons stated in the memorandum opinion filed
contemporaneously with this order, “Defendant’s Renewed
Motion for Summary Judgment” [doc. 88] is DENIED IN
PART as to count one only. Defensiant’s motion is otherwise
GRANTED as to counts one, three, and four.
ENTER:
/s/ Leon Jordan
Leon Jordan
United States District Judge
APPENDIX E
IN THE UNITED STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
No. 3:01-CV-634
[Filed January 28, 2004]
THE COY/SUPERIOR TEAM,
Plaintiff,
V.
BNEL, INC.,
)
)
)
)
)
)
Defendant. )
)
MEMORANDUM OPINION
This civil action is now before the court on “Defendant’s
Renewed Motion for Summary Judgment” [doc. 88] and
“Plaintiff Coy/Superior’s Motion for Summary Judgment on
Its Claim for a Declaratory Judgment” [doc. 92]. Defendant
seeks summary judgment on all counts of plaintiffs second
amended complaint. Plaintiff seeks summary judgment only
65a
on count two, relating to the core issue of asbestos disposal
responsibility .'
Plaintiff has filed a response to defendant’s motion [doc.
80], to which defendant has submitted a reply [doc. 91],
which then generated a supplemental brief from plaintiff [doc.
104], to which defendant submitted a response [doc. 115].
Defendant has also responded to plaintiffs summary judgment
motion [doc. 94}, and plaintiff has submitted a reply [doc.
96].
This memorandum opinion will address only count two of
the second amended complaint. For the reasons stated herein,
plaintiffs motion will be granted. Defendant’s motion will be
denied in part, as to count II only. The remaining issues
raised in defendant’s summary judgment motion will be
addressed in a subsequent memorandum opinion.
I.
Factual Background
In 1997, defendant entered into a prime contract with the
Department of Energy (“DOE”) to “decontaminate,
decommission, and recycle” three former uranium processing
buildings at DOE’s East Tennessee Technology Park
(“ETTP”) near Oak Ridge, Tennessee.’ The present asbestos
dispute arises from a January 6, 2000 subcontract between
plaintiff and defendant for the demolition and removal of an
~
a
' The remainder of the complaint raises claims of breach of
contract, negligent misrepresentation, and fraud.
? ETTP is a DOE installation formerly known as K-25. The prime
contract involves buildings K-29, K-31, and K-33.
66a
adjoining switchyard (K-792) which served one of the
processing buildings.’ Plaintiff is a partnership between Coy
Construction, LLC, (“Coy”) a Tennessee company, and
Superior Abatement, Inc., a New Jersey corporation, formed
for the purpose of entering into the subcontract with
defendant.
Plaintiff submitted a winning bid of $89,000.00 to
demolish K-792. The bid amount was lower than the
anticipated cost of demolition and was purportedly based in
part on plaintiff's assessment of the salvage value of
equipment and materials. Plaintiff's accepted proposal
contains an exclusion for asbestos-containing materials.
The parties agree that their subcontract was drafted by
defendant. That document, at § C.1.3, states that defendant
“has removed all known asbestos-containing materials.” The
“BNFL Response to Subcontractor Questions - No. 1” portion
of the subcontract notes the possibility of asbestos or PCB
contamination of major equipment, but provides that the
contaminants “can be removed.” Section C.1.3 further states
that if plaintiff “encounters any suspect materials in the
execution of work” it should immediately notify defendant
Similarly, § C.1.4 provides that if plaintiff “finds suspect
asbestos . . . during building demolition,” it is to notify
defendant for removal.
Defendant acknowledges its contractual responsibility to
abate any asbestos discovered in materials remaining on the
work site. The parties disagree, however, as to the parameters
> The switchyard served building K-33. Contained within K-792
were buildings K-791, K-791N, and K-791S.
67a
of “the work site.” Section C.1.13 of the subcontract
provides:
[Plaintiff] shall assume total regulatory responsibility,
liability, and title to the wastes and recyclable material
upon loading onto [plaintiffs] vehicle at the ETTP site.
Any wastes and/or by-products generated during
shipment, storage, disposal and/or other management
of the waste shall be the responsibility of [plaintiff]
and shall be disposed via approved disposal methods
and procedures.
Plaintiff interprets § C.1.13 as shifting responsibility at the
time of loading onto plaintiff's vehicle for final removal from
ETTP. Defendant, however, contends that responsibility
shifted at the time materials were first loaded onto plaintiff's
vehicle for any reason.
The present controversy arises from the removal of four
synchronous condensers from K-792. In March 2000, plaintiff
discovered operating manuals on site for the condensers. The
manuals allegedly reference the presence of asbestos in the
condensers. Plaintiff notified defendant, those asbestos
abatement subcontractor (“AAS”) then took samples for
testing.
Soon after receiving the test results, defendant informed
plaintiff that asbestos had been found in the exciters, or
starters, of the condensers.‘ The AAS removed the asbestos
and disposed of it. According to the complaint, defendant at
that time knew or should have known that further asbestos
‘ The parties disagree as to whether and how additional testing ~~
results were communicated.
68a
was present in the condensers. Plaintiff alleges that it
proceeded with demolition based upon defendant’s
misrepresentations, and withholding of test results.
After cutting the condensers into smaller pieces, plaintiff
moved them to Portal 10, another location within ETTP that
plaintiff had leased for the purpose of conducting salvage
operations. In July 2000, while negotiating to sell salvaged
copper, plaintiff learned of the presence of additional asbestos
in the condensers. Plaintiff notified defendant of this
discovery. Citing § C.1.13, defendant disclaimed
responsibility.
The asbestos-tainted condenser sections remain at
plaintiffs ETTP salvage area pending resolution of the parties’
dispute.” Under count II of the second amended complaint,
plaintiff asks for a declaratory judgment that defendant is the
party responsible for the disposal and/or storage of the
disputed condenser sections.° Plaintiff contends that asbestos
° At oral argument on January 28, 2003, plaintiff's counsel advised
the court that the sections remain at the salvage area despite the
expiration of plaintiff's lease. _
® The Declaratory Judgment Act allows the court to “declare the
rights and other legal relations of any interested party seeking such
declaration.” 28 U.S.C. § 2201(a). In determining whether a
declaratory judgment is warranted, the court should consider the
following factors:
1. Whether the judgment would settle the controversy;
2. Whether the declaratory judgment action would serve a
useful purpose in clarifying the legal relations at issue;
69a
abatement remains defendant’s responsibility under §§ C.1.3
and C.1.4 of the subcontract, while defendant argues that
responsibility passed to plaintiff upon the condensers’ removal
from the K-792 site, pursuant to § C.1.13.’
The subcontract contains, at § H.44, a choice of law
provision which provides that the document shall be
interpreted under “the laws of United States Government
3. Whether the declaratory remedy is being used merely for the
purpose of “procedural fencing” or “to provide an arena for a
race for res judicata”;
4. Whether the use of a declaratory action would increase the
friction between our federal and state courts and improperly
encroach on state jurisdiction; and
5. Whether there is an alternative remedy that is better or more
effective.
Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6" Cir. 2000)
(citation omitted).
The Court does not find the third or fourth factors applicable
to the present case. As for the remaining considerations, the
alternative remedy of court-ordered mediation has already been
attempted without success. A declaratory judgment would serve the
useful purpose of clarifying what the parties agree is “the central
issue in this case,” thereby resolving at least part of the present
controversy in advance of trial.
’ Plaintiff also raises various theories relating to the Comprehensive
Environmental Response, Compensation and Liability Act
(“CERCLA”): Because this controversy can be decided on the
plain language of the parties’ subcontract, the court need not
address plaintiff's CERCLA arguments.
70a
Contracts as set forth by statute and regulations, and decisions
by the appropriate courts and Board of Subcontract Appeals. es
Pursuant to § H.44, where precedent is unavailable from the
above authorities, the court should then look to Tennessee
law.
Il.
Summary Judgment Standard
Pursuant to Federal Rule of Civil Procedure 56(c),
summary judgment is appropriate when “the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.” Brill Bros.,-Inc.,
ASBCA No. 42573, 93-2 BCA 4 25,795. The movant may
discharge its burden by demonstrating that the non-moving
party has failed to establish an essential element of that party’s
case for which it bears the ultimate burden of proof. Centex
Bateson Constr. Co., Inc., VABCA No. 4613, 97-1 BCA 4
28, 915.
After the moving party has made its initial showing, the
burden shifts to the non-moving party to present specific facts
demonstrating a genuine issue for trial. AT&T Co., Fed. Sys.
Advanced Techs., DOTCAB No. 2479, 93-3 BCA 4 26,088.
“Factual disputes that are irrelevant or unnecessary will not
be counted.” Transitional Hous., Inc., DOTCAB No. 2634,
96-1 BCA 428,036 (quoting Anderson v. Liberty Lobby, Inc.,
® The court’s research has failed to uncover the existence of a
“Board of Subcontract Appeals.” The court concludes that this
provision should instead read “Boards of Contract Appeals.”
or Tla~
477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed.2d 202
(1986)). In order to defeat a motion for summary judgment,
the non-moving party must present significantly probative
evidence in support of its complaint. Joe E. Woods, Inc.,
DOTCAB No. 2777, 98-1BCA { 29,370 (quoting Liberty
Lobby, 477 U.S. at 249-50, 106 S. Ct. at 2511) The non-
movant’s evidence is to be believed, and all justifiable
inferences are to be drawn in that party’s favor. Centex
Bateson Constr. The court determines whether the evidence
requires submission to a jury or whether one party must
prevail as a matter of law because the issue is so one-sided.
Joe E. Woods, Inc. (quoting Liberty Lobby, 477 U.S. at 251-
52, 106 S. Ct. at 2512).
iil.
. Analysis
i, * Prep ages
As noted, the parties differ in their interpretation of
§ C.1.13 which, in material part, provides that plaintiff “shall
assume total regulatory responsibility, liability, and title to the
wastes and recyclable material upon loading onto [plaintiff's]
vehicle at the ETTP site” (emphasis added). After cutting the
condensers into smaller pieces, plaintiff moved them to Portal
10, within the ETTP, for salvage operations. Defendant
argues that § C.1.13 shifted asbestos responsibility to plaintiff
upon loading onto plaintiff's vehicle for any reason. Plaintiff,
however, contends that § C.1.13 addresses the point at which
materials are loaded for their ultimate removal from the
ETTP, not merely for transportation within the site.
A contractual provision is ambiguous where subject to
more than one _ reasonable interpretation. Fry
Communications, Inc. v. United States, 22 Cl. Ct. 497, 503
(1991) The court need not determine which reading is better
72a
or “most reasonable,” so long as both interpretations are in
fact reasonable. Jd. at 505-06. In such cases, the doctrine of
_ contra proferentem accepts the interpretation of the non-
drafting party, provided that the ambiguity is latent and the
non-drafting party relied on its interpretation in submitting its
bid. Id. at 503.
The court finds each party’s subcontract interpretation
reasonable. Defendant’s reading technically tracks § C.1.13’s
language, while plaintiff's interpretation is more consistent
with defendant’s asbestos responsibility as repeated
throughout the subcontract.’ In the court’s mind, it is certainly
reasonable to read the subcontract, as a whole, as drawing a
line of responsibility at the point of ultimate removal from the
ETTP site, rather than at the initial point of movement within
Erie”
° See, e.g., § C.1.3 (providing that if plaintiff “encounters any
suspect materials in the execution of work” it should immediately
notify defendant); “BNFL Response to Subcontractor Questions -
No. 1” (noting the possibility of asbestos, but providing that it “can
be removed”); § C.1.4 (If plaintiff “finds suspect asbestos . . .
during building demolition,” it is to notify defendant for removal.).
© Interestingly, the subcontract in its summary § C.1.1, states that
“(wjork is located at the BNFL Inc. site, East Tennessee
Technology Park (ETTP), Portal 8, Perimeter Road, Oak Ridge,
Tennessee”. This summary labels the K-792 work site that housed
the condensers as the “BNFL Inc. site,” a subcomponent of the
greater ETTP. Section C.1.10 references both “the BNFL Inc.
Switchyard site” and as “the BNFL Inc. ETTP Site.” “ETTP site”
is also used in vehicle security portion of § C.1.10, in apparent
reference to the greater ETTP. At § C.1.11, the initial work site is
again called “the BNFL work site.” If defendant indeed intended
for asbestos responsibility to shift at the point of loading at the
smaller “BNFL Inc. site” instead of at the greater “ETTP site,” it
73a
The court further finds the ambiguity to be latent in
nature. A contractual ambiguity is latent unless it contains a
“gross discrepancy, an obvious error in drafting, or a glaring
gap.” Fry Communications, 22 Cl. Ct. at 509. The phrase
“upon loading onto [plaintiff's] vehicle at the ETTP site” does
not on its face create the sort of glaring uncertainty that would
clearly warn a party to seek clarification in advance. See
King-Bole, Inc. DOTCAB No. 1810, 87-1 BCA 4 19,652.
“Contractors should not have to engage in a treasure hunt of
the contract specifications . . . in order to glean the true
meaning” of the document. Worsham Constr. Co., Inc.,
GSBCA No. 5469-R, 80-2 BCA 4 14,644. =
Lastly, the asbestos-containing materials exclusion
contained in plaintiff's accepted proposal illustrates plaintiff's
reliance at the time it prepared its bid. See Fry
Communications, 22 Cl. Ct. at 509-10. In the same two-page
document, at § 2.2, plaintiff discloses its intention to
eventually remove materials to its leased salvage site “to
complete site demolition of all buildings.” Additionally,
could have easily and clearly said so. See Fry Communications, 22
Cl. Ct. at 506 (“[B]y including a few extra words, [defendant]
could have made its purported intention crystal clear.”).
Defendant argues, in the alternative, that the meaning of
“ETTP site” is irrelevant because the operative phrase of § C.1.13
is the “loading onto [plaintiff's] vehicle.” According to defendant,
responsibility for asbestos abatement shifted to plaintiff upon the
“loading onto [plaintiff's] vehicle,” regardless of where that
loading took place. The court disagrees. Under defendant’s
interpretation, abatement responsibility would shift when plaintiff
moved materials by “vehicle” but would remain with defendani if
plaintiff were to move the material in buckets, wheelbarrows, <arts,
etc. Defendant’s interpretation would lead to an absurd result.
~
74a
plaintiff has submitted the affidavit of Franklin Jarvis, Coy
Construction’s general manager, as evidence of its reliance.
Jarvis states that “[i]t was clear from the beginning of the
proposal process right on through performance of the
subcontract that asbestos was excluded from the BNFL-CST
subcontract. [Plaintiff] was not to take it or even work on it.”
Larry Brede, defendant’s representative who wrote the scope
of the work for the subcontract, agreed in deposition that
defendant’s “intent was for the subcontractor to do no
asbestos work.”
Accordingly, under the doctrine of contra proferentem,
§ C.1.13 must be construed against the defendant as the
drafting party. Plaintiff is therefore entitled to summary
judgment on count II of its second amended complaint. An
order consistent with this opinion will be entered.
ENTER:
/s/ Leon Jordan
Leon Jordan
United States District Judge
75a
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
No. 3:01-CV-634
{Filed January 28, 2004]
THE COY/SUPERIOR TEAM, )
Plaintiff, )
)
v. )
)
BNEFL, INC., )
Defendant. )
)
ORDER
For the reasons stated in the memorandum opinion filed
contemporaneously with this order, “Plaintiff Coy/Superior’s
Motion for Summary Judgment on Its Claim for a Declaratory
Judgment” [doc. 92] is GRANTED and “Defendant’s
Renewed Motion for summary Judgment” [doc. 88] is
DENIED IN PART as to count two only. Pursuant to the-
parties’ subcontract, defendant is the entity responsible for the
asbestos abatement at issue in this case.
The remainder of “Defendant's Renewed Motion for
Summary Judgment” will be addressed in a subsequent
memorandum opinion and order.
T6a
ENTER:
/s/ Leon Jordan
Leon Jordan
United States District Judge
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.