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Nos. 95-1309 & 95-1338
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Gopher Oil Co., a Minnesota *
corporation, *
*
Plaintiff-Appellant/ *
Cross Appellee, * Appeals from the United States
* District Court for the
v. * District of Minnesota.
*
Roger E. Bunker, Personal *
Representative of the Estate *
of Germaine S. Romness, *
*
Defendant-Appellee/ *
Cross Appellant. *
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Submitted: November 13, 1995
Filed: May 29, 1996
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Before HANSEN, JOHN R. GIBSON, and MURPHY, Circuit Judges.
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HANSEN, Circuit Judge.
Gopher Oil brought this declaratory judgment action seeking a
declaration that the Germaine Romness estate (the estate) is liable for a
release of hazardous substances to the extent of Gopher Oil's liability
under the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (CERCLA), as amended, 42 U.S.C. §§ 9601-9675; the Minnesota
Environmental Response and Liability Act (MERLA), Minn. Stat. Ann. §§
115B.01-115B.24 (West 1987 & Supp. 1994-95); and Minnesota common law
principles of tort and contract. The district court granted the estate's
motion to dismiss for lack of subject matter jurisdiction, concluding that
the claims were not yet ripe. We affirm in part and reverse and remand in
part.
I. BACKGROUND
The United States Environmental Protection Agency (EPA) determined
that a release of hazardous substances occurred at a dump site in Brooklyn
Park, Minnesota, and expended response costs of over $1,373,000 to clean
up the area. As authorized by CERCLA, in January 1994, the EPA demanded
reimbursement for the entire cost of the cleanup from each of ten
potentially responsible parties (PRPs), a list including Gopher Oil but not
the defendant in this suit. A representative of the EPA informed Gopher
Oil that the EPA anticipated referring this matter to the Department of
Justice and expected a CERCLA suit to be brought during the first quarter
of 1995.
Gopher Oil brought this declaratory judgment suit in September 1994,
seeking a declaration that the now-deceased owner of a predecessor
corporation actually caused the release and that the deceased owner's
estate is liable for the sum demanded by the EPA. Specifically, Gopher
Oil's complaint asserts that when the release occurred in the 1960's, the
Brooklyn Park dump site was owned and operated by a corporation known as
Gopher State Oil, whose sole shareholders were Charles and Germaine
Romness. In 1973, Bame Oil acquired Gopher State from the Romnesses
through a stock acquisition. As part of the stock transfer, the Romnesses
agreed to indemnify Bame with respect to any of Gopher State's liabilities
existing at closing. Shortly thereafter, Bame Oil distributed Gopher
State's assets to itself, assuming all liabilities, known or unknown. Bame
Oil then changed its own name to Gopher Oil.
Gopher State's owners, the Romnesses, have both died. The Germaine
Romness estate remains open, however, pending this litigation which follows
the litigation of a third-party complaint
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by Gopher Oil against the estate in state court. The state court
litigation involved a dump site near Stillwater, Minnesota, which was owned
by third parties who alleged that Gopher State Oil deposited waste oil
sludge on the site. The third-party owners and operators of the dumpsite
obtained a ruling that Gopher Oil is liable as a successor corporation for
the acts of Gopher State. See State v. Gopher Oil Co., Nos. C1-95-738 &
C2-95-733, 1995 WL 687688 (Minn. Ct. App. Nov. 21, 1995) (unpublished).
In the same litigation, Gopher Oil brought a third-party complaint against
the Romness estate, which the state district court dismissed due to
limitation periods set forth in the probate code. The Minnesota Court of
Appeals affirmed the dismissal of the third-party complaint on a different
ground, concluding that the Rommnesses' agreement to indemnify Gopher Oil
did not contemplate liability under later-enacted environmental statutes,
thus precluding Gopher Oil's indemnification claim. See State v. Gopher
Oil Co., No. C8-94-225, 1994 WL 328631 (Minn. Ct. App. July 12, 1994)
(unpublished). The Minnesota Supreme Court denied further review.
After the state trial court had dismissed Gopher Oil's third-party
complaint in the Stillwater dump site litigation on the basis of probate
limitations, Gopher Oil brought the present federal declaratory judgment
action against the estate relating to the Brooklyn Park dump site.1 Count
one of this suit alleges that the estate is a responsible party under
CERCLA to the extent of Gopher Oil's CERCLA liability, and count two sets
forth the same claim under MERLA. Count three seeks a declaration that the
estate has primary tort liability to the extent of Gopher Oil's liability
to
1
Gopher Oil sought here to avoid the probate limitations
problems encountered in the Stillwater dump site litigation by
filing a timely probate claim within four months of receiving the
EPA's demand letter, in accordance with Minn. Stat. § 524.3-803,
and filing this declaratory judgment action within 60 days of the
estate's disallowance of the claim, in accordance with Minn.
Stat. § 524.3-806(a).
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the EPA or any other party because the Romnesses were the active owners at
the time of the release. Count four alleges that
4
Gopher Oil is entitled to indemnity based upon the indemnity agreement
executed by the Romnesses in the 1970's when Bame Oil acquired Gopher
State. Thus, this declaratory judgment action involves the same parties,
the same indemnification agreement, and most of the same claims as the
third-party complaint in the Stillwater dump site litigation.
The district court granted the estate's motion to dismiss all four
counts for lack of subject matter jurisdiction, concluding that the claims
were not ripe because there was no actual controversy. Specifically, the
court stated as follows:
It is apparently clear that the plaintiff did receive the
letter almost a full year ago which warned it that it would be
a potentially liable party. The plaintiff then commenced this
suit in expectation that it would be named a defendant based on
approximately ten months later a telephone call warning it
again. In order to bring its claims in this court, however,
the plaintiff must allege an actual controversy.
The mere possibility of being named a defendant as
responsible party does not constitute the actual controversy
which is required. This Court recognizes that the EPA, and the
United States on its behalf, for any number of reasons, may
well and yet decline to sue Gopher Oil, or they may select yet
another among the ten, or others beyond those listed as
potential defendants. They may also defer simply on the fact
that this case is too small or any one of a number of reasons,
which they seem to be able to come up with at a moment's notice
and somehow the cases do not get sued. In the event they are
to be sued, those are another issue, but this Court at this
time cannot find the requisite immediacy, and in this Court's
view there is little hardship to the plaintiff in withholding
the Court's consideration.
(Tr. on Def.'s Mot. to Dismiss, Appellant's Addend. at 26-27.)
During the hearing, the district court also alternatively granted
partial summary judgment to the estate on the ground that the doctrine of
collateral estoppel bars the MERLA claim, the tort
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claim, and the indemnity claim due to the prior state court litigation.
However, the district court explicitly declined to rule alternatively on
the CERCLA claim, which was not litigated in the Minnesota state court
suit.
Gopher Oil appeals the dismissal of its complaint for lack of
jurisdiction. The estate cross appeals, arguing that the complaint also
should have been dismissed because Gopher Oil's assumption of Gopher
State's liabilities bars the claims and the complaint fails to state a
cause of action under CERCLA, MERLA, or principles of contractual
indemnity. At oral argument before this court, the parties disclosed that
Gopher Oil had entered into a tolling agreement with the Department of
Justice to facilitate discussions and possible settlement of the
government's demand for reimbursement. The agreement states that "the
United States may terminate settlement negotiations and commence suit at
any time." (Tolling Agreement at 3.) More recently, we received notice
that on March 25, 1996, the government filed a CERCLA cost-recovery suit
against Gopher Oil and four other potentially responsible parties, but not
including the Romness estate.
II. DISCUSSION
We review de novo a dismissal for lack of subject matter
jurisdiction. Christopher Lake Dev. Co. v. St. Louis County, 35 F.3d 1269,
1273 (8th Cir. 1994). The Declaratory Judgment Act provides that when an
"actual controversy" exists, any federal court may declare the rights and
other legal relations of any interested party. 28 U.S.C. § 2201. Thus,
to seek a declaratory judgment, the plaintiff's claim must be ripe. The
doctrine of ripeness is basically a matter of timing, which requires (1)
"a sufficiently concrete case or controversy within the meaning of Article
III of the Constitution," and also, (2) "prudential considerations must
justify the present exercise of judicial power." Christopher Lake Dev.
Co., 35 F.3d at 1272-73. In other
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words, to satisfy the actual controversy requirement of the Declaratory
Judgment Act, there must exist "`a substantial controversy between the
parties having adverse legal interests, of sufficient immediacy and reality
to warrant the issuance of a declaratory judgment.'" Caldwell v. Gurley
Refining Co., 755 F.2d 645, 649 (8th Cir. 1985) (quoting Maryland Cas. Co.
v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)) (other citation
omitted). "A live dispute must exist between the parties at the time of
the court's hearing." Id. at 650.
The district court concluded that the government's threat of suit in
this case was too speculative to create an actual controversy between
Gopher Oil and the estate and that withholding a decision at this time
would result in little hardship to Gopher Oil. We agree with the district
court's assessment that the MERLA and the tort liability claims (counts II
and III) are not ripe for declaratory judgment because no actual
controversy exists. No facts indicate an immediate threat of either MERLA
or tort liability. The district court properly dismissed these claims for
lack of subject matter jurisdiction.
Given the latest developments in this case, however, we disagree with
the district court's assessment that the CERCLA and contractual indemnity
claims (counts I and IV) are not ripe. The complaint seeks a declaration
that the prior owners caused the release of hazardous substances and are
liable to the EPA to the extent of Gopher Oil's existing liability. The
estate argued that there was no actual controversy because Gopher Oil had
not itself incurred response costs and the government had not yet brought
a cost-recovery action against Gopher Oil. This argument is no longer
valid.
The terms of CERCLA governing the timing of review prohibit judicial
review of challenges to remedial action of the EPA until after the EPA has
filed an action to recover response costs. 42
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U.S.C. § 9613(h)(1). See also Voluntary Purchasing Groups, Inc. v. Reilly,
889 F.2d 1380, 1389 (5th Cir. 1989) ("until the government initiates a
cost-recovery action, a potential responsible party cannot obtain judicial
review of the agency action") (internal quotations omitted). Because the
EPA now has initiated a cost-recovery action pursuant to 42 U.S.C. § 9607,
this suit to determine liability between Gopher Oil and the estate is ripe
for adjudication. While ripe, we leave to the district court to determine
whether CERCLA's objective of avoiding piecemeal litigation would be best
served if the subject matter of this declaratory judgment action were in
some way or manner determined in conjunction with the government's cost-
recovery action. See Voluntary Purchasing Groups, 889 F.2d at 1390 (noting
that one of CERCLA's objectives is to avoid piecemeal litigation).
Accordingly, while the district court may not have had subject matter
jurisdiction at the time of the hearing, the present posture of the case
presents a ripe CERCLA claim. We recognize that significant problems may
exist concerning the sufficiency of the CERCLA claim, as suggested in the
estate's cross appeal. Nevertheless, given our conclusion that this claim
is now ripe, we express no opinion on the issues raised in the cross
appeal, leaving them instead to be considered in the first instance by the
district court with a view toward avoiding piecemeal litigation.
We next consider the indemnity claim. Gopher Oil seeks indemnity
from the Romness estate on the basis of the 1973 contractual indemnity
agreement that the Romnesses signed when Bame Oil purchased Gopher State.
"[T]he question of CERCLA liability and the interpretation of any
indemnification agreement among the parties liable for the clean-up are
inextricably related." GNB Battery Tech., Inc., v. Gould, Inc., 65 F.3d
615, 621 (7th Cir. 1995). We conclude that the contractual indemnity
claim, like the CERCLA claim, is ripe. As a result, we must consider the
district
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court's alternative grant of summary judgment on the indemnity claim.
The district court held that the doctrine of collateral estoppel
prohibits the relitigation of the indemnity claim because the state court
judgment determined the claim adversely to Gopher Oil. Gopher Oil contends
that collateral estoppel does not apply because the state court considered
contractual indemnity only in the context of MERLA liability, not CERCLA
liability.
We review a grant of summary judgment de novo, applying the same
standard as the district court. See Shannon v. Ford Motor Co., 72 F.3d
678, 681 (8th Cir. 1996). Summary judgment is appropriate where there is
no genuine dispute of material fact and the movant is entitled to judgment
as a matter of law. Fed. R. Civ. P. 56(c). See also Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). We accord full faith and credit to
state court judgments, giving them the same preclusive effect in federal
court as they would have in state court. See 28 U.S.C. § 1738; see also
Teleconnect Co. v. Ensrud, 55 F.3d 357, 361 (8th Cir. 1995). Accordingly,
we look to the law of Minnesota to determine the preclusive effect of the
state court third-party complaint.
In Minnesota, collateral estoppel, or issue preclusion, "applies
where (1) the issue was identical to one in a prior adjudication; (2) there
was a final judgment on the merits; (3) the estopped party was a party or
in privity with a party to the prior adjudication; and (4) the estopped
party was given a full and fair opportunity to be heard on the adjudicated
issue." Johnson v. Consolidated Freightways, Inc., 420 N.W.2d 608, 613
(Minn. 1988). Collateral estoppel is a flexible doctrine in Minnesota
which allows consideration of "whether its application would work an
injustice on the party against whom estoppel is urged." Id. at 613-14.
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The Minnesota Court of Appeals addressed the merits of Gopher Oil's
claim that it is entitled to indemnity from the estate for liability under
environmental laws. The court of appeals affirmed the state trial court's
dismissal of Gopher Oil's indemnity claim, holding as follows:
The liabilities at issue in this case arise under environmental
laws enacted ten years after the agreement was executed. They
were neither contemplated by the parties nor covered by the
agreement. The qualifying phrase "existing at closing" clearly
limits Gopher State's liability.
State v. Gopher Oil Co., No. C8-94-225, slip op. at 3 (Minn. Ct. App. July
12, 1994) (App. A-128). Gopher Oil correctly asserts that the Minnesota
Court of Appeals was referring to Minnesota's environmental laws (MERLA),
not CERCLA, when it determined that the environmental liabilities at issue
were not contemplated by the indemnity agreement. Although CERCLA
liability was not raised in the state court proceedings, we conclude that
the state court's interpretation of the indemnity agreement applies with
equal force to CERCLA liability. The court of appeals specifically
determined that the language of the indemnity agreement limits Gopher
State's (and thus the estate's) liability by the phrase, liabilities
"existing at closing." The state court held that this limiting phrase
precludes liability under later enacted environmental laws such as MERLA,
enacted ten years after the agreement. Likewise, this determination
necessarily dictates that the phrase, "existing at closing," also precludes
liability under the environmental laws of CERCLA, enacted seven years after
the agreement.
The intent of the indemnity agreement with regard to later enacted
environmental laws is the identical issue that was fully litigated by
Gopher Oil in the state court third-party complaint, and the issue was
finally determined on its merits adversely to Gopher Oil. Thus, the
district court correctly granted summary
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judgment on the ground that collateral estoppel bars relitigation of the
indemnity issue.
III. CONCLUSION
Accordingly, we affirm the district court's dismissal of the MERLA
and tort claims for lack of jurisdiction, and we affirm the district
court's grant of summary judgment on the indemnity agreement claim. We
reverse the dismissal of the CERCLA claim in light of the recently filed
government cost-recovery suit and remand it for further consideration,
without expressing any views on the merits or sufficiency of the CERCLA
claim.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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