Arcuri v. Chevron USA Products

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_____________________
No. 99-30463
_____________________

DOMINICK ARCURI, JR.; ET AL.,
Plaintiffs,
versus

CHEVRON USA PRODUCTS COMPANY;
ET AL.,

Defendants.

ESSEX INSURANCE COMPANY,
Plaintiff-Appellee,

versus

DAVID WALLINGTON; ET AL.,

Defendants,

DAVID WALLINGTON; BARBARA
WALLINGTON; PATRICIA HUGHES,
doing business as Barpat, Inc.; BARPAT,
INC.,
Defendants-Appellants.
 _______________________________________________________
Appeal from the United States District Court for
the Eastern District of Louisiana
(USDC No. 98-CV-3094-C)
_______________________________________________________
May 17, 2000
Before REAVLEY, DAVIS and BARKSDALE, Circuit Judges.

REAVLEY, Circuit Judge:*
Barbara Wallington, David Wallington, Patricia Hughes, and Barpat, Inc. (the
“Wallingtons”), appeal the judgment in favor of Essex Insurance Company declaring

there to be no coverage of the Wallingtons’ claims. We affirm.

Dominick Arcuri, Jr., the Estate of Sam Arcuri and the Estate of Dominick Arcuri

(the “Arcuris”) own a parcel of real property in LaPlace, Louisiana where a service
station was operated for a number of years. Three underground storage tanks (“USTs”)

were installed on the property in 1946 by Humble Oil, the predecessor of Chevron, to

store gasoline for the station. In 1950 two service bays were constructed over the USTs.

At some point the USTs were no longer used for gasoline and the Arcuris began using
them to store waste oil. Sometime between 1951 and 1966 the Arcuris ceased to use the

USTs altogether. Unable to remove five inches of petrochemicals from the bottom of the

USTs, the Arcuris filled them with water.
In the 1990's the property was no longer used as a service station and a tenant of
the Arcuris converted the service bay structure into a bar, which was later rented by the

Wallingtons. The Wallingtons operated a bar there until a 1996 complaint to the
Louisiana Department of Environmental Quality resulted in a determination that the

*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.

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ground beneath the bay was contaminated with benzene and other chemicals. The
Wallingtons were forced to close the bar and the USTs had to be removed, resulting in

the partial destruction of the structure.
The Wallingtons sued the Arcuris and Chevron in Louisiana state court claiming
damages for personal injuries resulting from exposure to toxic fumes and economic losses

from the closure of their business (the “State Court Lawsuit”). The Wallingtons also
named Essex as a defendant under the Louisiana law permitting direct actions against
insurers because Essex insured the Arcuris under Commercial General Liability policies.

After the Arcuris settled with the Wallingtons, Essex attempted to remove the action to

Federal Court on diversity jurisdiction but the case was remanded on the basis that, under

28 U.S.C. § 1332(c)(1), insurance companies sued in direct actions are deemed citizens
of the same state as the insured, even if the insured is not a party defendant to the suit.

The Arcuris sued Chevron and Essex for indemnity for the claims of the

Wallingtons and for the Arcuris’ own personal injuries resulting from exposure to

chemicals from the USTs (the “Arcuri Lawsuit"). This lawsuit was removed to Federal
Court by Chevron. Essex brought a federal lawsuit against the Wallingtons and the

Arcuris for interpleader, declaratory judgment and injunctive relief (the “Essex Lawsuit”).

The Arcuri Lawsuit was consolidated with the Essex Lawsuit and the district court
granted summary judgment to Chevron and Essex on all claims.
On appeal, the Wallingtons assert that the district court lacked subject matter

jurisdiction, that the district court erred in ruling that the pollution exclusion barred
coverage and that the district court should have abstained or declined to hear the

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declaratory judgment action.1
JURISDICTION

The Wallingtons’ first point of appeal asserts that the district court lacked subject
matter jurisdiction to hear this lawsuit. The Wallingtons argue that the prior ruling
remanding the State Court Lawsuit operates as law of the case, rendering Essex a citizen

of Louisiana for this lawsuit and destroying diversity jurisdiction. The district court
remanded the State Court Lawsuit pursuant to 28 U.S.C. § 1332(c)(1), which provides:
“[I]n any direct action against an insurer ... to which action the insured is not joined as a

party-defendant, such insurer shall be deemed a citizen of the State of which the insured

is a citizen.” By its own terms, this statute only applies to direct actions. Because the

case at bar is a declaratory judgment action and not a direct action, § 1332(c)(1) is
inapplicable. The doctrine of law of the case is also inapplicable because the remand

order was granted in the State Court Lawsuit, which is a different lawsuit from the case at

bar. The district court had diversity jurisdiction because Essex and Chevron are diverse

from the Arcuris and the Wallingtons, who are Louisiana citizens. The argument of the
Wallingtons about the propriety of interpleader can have no effect on this holding.

DECLARATORY JUDGMENT

The Wallingtons assert that the district court erred in declining to abstain from this
case under Burford v. Sun Oil Co., 319 U.S. 315 (1943). The Wallingtons argue that the
issue of pollution exclusion clauses is a matter of vital interest to Louisiana public policy

from which the federal court should abstain in favor of determination by state courts.
While the issue of pollution exclusion clauses is undoubtedly a matter of significant

1
The Arcuris and Chevron settled their disputes prior to oral argument and the points raised
by their briefs are not before the court.

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public policy, the law of Louisiana is clearly established by Ducote v. Koch Pipeline Co.,
L.P., 730 So. 2d 432 (La. 1999) and the interpretation of insurance policies does not

present the sort of intricate system of resource regulation presented in Burford. The
district court did not abuse its discretion in declining the Wallingtons’ request to abstain
from the case.

The Wallingtons further argue that, pursuant to Wilton v. Seven Falls Co., 515
U.S. 277 (1995), the district court abused its discretion in hearing the declaratory
judgment action. In considering a request to decline to hear a declaratory judgment

action under Wilton, the question is “whether the questions in controversy between the

parties to the federal suit ... can be better settled in the proceeding pending in the state

court.” Wilton at 282 (quoting from Brillhart v. Excess Ins. Co. of America, 316 U.S.
491, 495 (1942)). One of the factors guiding the district court’s discretion is “whether

the claims of all parties in interest can satisfactorily be adjudicated in [the state court]

action.” Wilton at 283 (quoting from Brillhart at 495).

If the only case pending at the time that Essex brought the declaratory judgment
action was the State Court Lawsuit, then a better argument could be made that a federal

declaratory judgment action would constitute “indulging in gratuitous interference.” Id.

Such is not the case, however, because the Arcuri Lawsuit was already proceeding against
Essex and Chevron in federal court. The declaratory judgment action by Essex and the
consolidation with the Arcuri Lawsuit enabled all of the parties to resolve all of the

claims in one action, serving the policy of judicial efficiency. Because the consolidated
action encompassed more parties and claims than the State Court Lawsuit, the claims of
all the parties in this case could not be satisfactorily adjudicated in the state court and the

district court did not abuse its discretion.

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 INSURANCE COVERAGE
The Wallingtons contend that the district court erred in holding that the pollution

exclusion clauses excluded coverage for their claims against the Arcuris. The
Wallington’s reliance on South Central Bell Telephone Co. v. Ka-Jon Food Stores of
Louisiana, Inc., 644 So. 2d 357 (La. 1994), is misplaced. The opinion is of no

precedential value because it was vacated on rehearing. South Central Bell Telephone
Co. v. Ka-Jon Food Stores of Louisiana, Inc.,644 So. 2d 368 (La. 1994); Ducote, 730 So.
2d at 436, FN 1. The Louisiana Supreme Court has held that the scope of a pollution

exclusion clause must be determined from the terms of the clause. See Ducote at 436.

The pollution exclusion clauses at issue in this case exclude coverage for “any loss, cost,

or expense ... as a result of actual, alleged or threatened discharge, dispersal, release or
escape of pollutants...” Such language is unambiguous and provides for a total exclusion

of coverage for the claims in this case.

The claims of the Wallingtons against the Arcuris are the result of benzene and

other petrochemicals escaping from the USTs. The chemicals in question undoubtedly
fall within the policies’ definition of pollutants, which is any “solid, liquid, gaseous,

thermal, acoustic, electric, magnetic, electromagnetic irritant or contaminant, including,

but not limited to smoke, vapor, soot, fumes, fibers, radiation, acids, alkalies, toxic
chemicals or materials, and waste.” The unambiguous language of the policies excludes
these claims from coverage under the policies.

AFFIRMED

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