MICHAEL R. BARRETT, District Judge.
This matter is before the Court on Plaintiff American Premier Underwriters, Inc.'s ("APU") Motion for Partial Summary Judgment on the Issue of Defendant's Indemnification Liability. (Doc. 93.) Defendant General Electric ("GE") has filed a Response in Opposition (Doc. 104), and APU filed a Reply (Doc. 141).
Plaintiff APU is the successor to the Penn Central Transportation Company ("Penn Central"). This action arises from contamination at four rail yards operated by Penn Central prior to April 1, 1976:(1) the Paoli Yard, located in Paoli, Pennsylvania; (2) the South Amboy Yard, located in South Amboy, New Jersey; (3) Sunnyside Yard, located in Long Island, New York; and (4) Wilmington Shops and related facilities, located in Wilmington, Delaware. During the period when Penn Central operated these rail yards, it owned and used passenger rail cars with transformers manufactured by GE. APU claims the GE transformers contaminated the rail yards by leaking polychlorinated biphenyls ("PCBs").
APU's Motion for Partial Summary Judgment is only directed toward the contractual indemnification claims. These claims are based upon two contracts which date back to 1971. The first contract was between GE and the New Jersey Department of Transportation ("NJDOT") for 70 Jersey Arrow II rail cars ("the NJDOT Contract"). The second contract was between GE and Southeastern Pennsylvania Transportation Authority ("SEPTA") for 144 Silverliner IV rail cars ("the SEPTA Contract"). Under separate lease agreements with NJDOT and SEPTA, Penn Central agreed to use the rail cars to service commuter rail lines in New Jersey and Pennsylvania. (See, e.g., Doc 95-1, at 3.)
Under the NJDOT and SEPTA Contracts, GE agreed to "design, construct, test, deliver and guarantee" the rail cars. Both Contracts included an indemnity provision which is virtually identical
(Doc. 95-1, at 59-60; Doc. 95-2, at 125-27.) APU claims that these indemnification provisions unambiguously require GE to indemnify APU, as successor to "the Railroad," for all costs associated with PCB contamination caused by the Jersey Arrow II and Silverliner IV rail cars.
Federal Rule of Civil Procedure 56(a) provides that summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The moving party has the burden of showing an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving part has met its burden of production, the non-moving party cannot rest on his pleadings, but must present significant probative evidence in support of his complaint to defeat the motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The mere existence of a scintilla of evidence to support the non-moving party's position will be insufficient; the evidence must be sufficient for a jury to reasonably find in favor of the non-moving party. Id. at 252, 106 S.Ct. 2505.
The parties are in agreement that New Jersey and Pennsylvania law govern APU's contractual indemnification claims.
GE argues that APU is not entitled to summary judgment for the following reasons: (1) APU's claims are untimely under Ohio's savings statute; (2) APU assigned its rights under the NJDOT and SEPTA contracts to Conrail in 1976, and therefore has no standing to assert a contract claim; (3) in the alternative, if APU did not assign its rights, its claims are subject to the exclusive jurisdiction of the United States District Court for the Eastern District of Pennsylvania under the Consummation Order that court issued in 1978 in the Penn Central bankruptcy proceeding; (4) the claims are subject to mandatory arbitration, which APU has not pursued; (5) the plain language of the indemnity provision makes clear that it does not apply to in-service events such as transformer fluid leaks; and (6) as with the CERCLA claims, APU's recoveries from collateral sources offset any possible recovery on a contract theory.
In ruling on GE's Motion for Summary Judgment on Statute of Limitations Issues,
However, GE notes that Ohio's borrowing statute, Ohio Revised Code 2305.03(B) requires this Court to apply any Ohio statute of limitation if Ohio provides a shorter period of limitation than Pennsylvania or New Jersey law. GE argues that under Ohio's savings statute, Ohio Revised Code § 2305.19(A), a party has one year to re-file any claim that is dismissed for a reason other than the merits. GE points out that APU filed suits against GE for indemnification in 1990 and 1994. (See Docs. 104-7 & 104-8.)
APU responds that Section 2305.19(A) is not applicable because APU's prior claims were asserted during the Paoli Yard tort litigation, which involved individual plaintiffs seeking personal injury tort damages allegedly caused by being exposed to PCBs while living near or working at the Paoli Yard. APU explains that its contingent claims against GE were very limited.
Ohio's savings statute, Ohio Revised Code § 2305.19, provides:
Ohio Rev.Code § 2305.19(A). The Ohio Supreme Court had explained that "[t]he savings statute applies when the original suit and the new action are substantially the same." Children's Hospital v. Ohio Dept. of Public Welfare, 69 Ohio St.2d 523, 433 N.E.2d 187, 188 (1982). Ohio courts have explained that "[a] new complaint is substantially the same as the original complaint for purposes of the saving statute when the new complaint differs only to the extent that it adds new recovery theories based upon the same factual occurrences stated in the original complaint." Stone v. N. Star Steel Co., 152 Ohio App.3d 29, 786 N.E.2d 508, 512 (2003) (and cases cited therein); see also Lanthorn v. Cincinnati Ins. Co., 2002 WL 31768796, *4 (Ohio Ct. App. Dec. 5, 2002) ("Whether a new action is substantially the same as an original action for purposes of the savings statute does not always depend on whether the original action set forth the same legal theories as those asserted in the new complaint. Instead, the question largely turns on whether the original complaint and the new complaint contain similar factual allegations so that it can reasonably be said that the party or parties were put on fair notice of the type of claims that could be asserted.").
GE argues that APU does not have standing to bring a claim under the NJDOT and SEPTA Contracts because APU assigned the Contracts to Conrail in 1976.
The parties have explained that in the early 1970s, Penn Central and other major railroads in the Northeast entered bankruptcy. Congress responded, and created Conrail for the purpose of operating certain properties owned by the bankrupt railroads.
On March 30, 1976, the Reorganization Trustees, on behalf of Penn Central, executed a "Bill of Sale and Assignment" which conveyed to Conrail: real property (including the four railyards involved here), leases, equipment, contracts, and other properties necessary for Conrail to operate Penn Central's railway. (Doc. 104-4.) GE relies on two provisions of the Bill of Sale. The first provision is Schedule E, which applies to executory contracts and agreements:
(Doc. 104-4, at 19.) GE also relies on Schedule H, which applies to rights, powers, franchises, privileges and immunities:
(Id. at 33.) GE argues that these provisions do not carve out the indemnity provisions of the NJDOT and SEPTA Contracts, and therefore Penn Central conveyed its rights under those indemnity provisions to Conrail.
APU responds that while the NJDOT and SEPTA Contracts were not expressly included or excluded from the Bill of Sale, the plain language of Schedule E provides that assignment is limited to contracts "to which Grantors or their predecessors in interest are or were parties ..." (Id. at 19.) APU points out that neither Penn Central nor its Reorganization Trustees were parties to the NJDOT and SEPTA Contracts.
However, Schedule H is broadly written. Under this provision, Penn Central conveys "all rights, powers, franchises, licenses, easements, privileges and immunities... which are used or useful in the provision of rail services."
Relying on other language found in Schedule H, APU argues that a distinction should be made between events occurring before and after Conrail took over operations on April 1, 1976. APU cites to the provision in Schedule H which states: "Grantee [Conrail] assumes no other liabilities or obligations of any kind of Grantor [Penn Central] arising out of or in connection with the foregoing rights, powers, franchises, licenses, easements, privileges or immunities or any property which is the subject thereof, which have accrued prior to the date of delivery hereof or which thereafter arise out of events which have occurred prior thereto." (Id. at 33.) APU points out that its CERCLA liability was imposed retroactively for contamination which occurred before April 1, 1976, and it retained the right to seek indemnification for liability which arose before that date.
While APU is correct to note the distinction between events which occurred before and after April 1, 1976, the plain language of the provision cited by APU is clear that this distinction is in reference to "liabilities or obligations ... which have accrued prior to the date of delivery hereof or which thereafter arise out of events which have occurred prior thereto." (Id.) The indemnity provision in the NJDOT and SEPTA Contracts cannot be read by this Court to create a liability or obligation on the part of APU, but instead provides
APU argues that even if the Bill of Sale and Assignment conveyed or assigned Penn Central's third-party beneficiary rights under the NJDOT and SEPTA Contracts to Conrail, Conrail expressly assigned those rights back to APU on November 8, 2004 in the Paoli Rail Yard Settlement Agreement. (Doc. 96-3, at 35.) APU points to the language in the Paoli Rail Yard Settlement Agreement which states that Conrail assigns "any and all claims relating to the Paoli Rail Yard Site, if any, against General Electric Company." (Id. at 39.) GE responds that this argument is "correct as far as it goes," but posits that APU has already been made whole for its Paoli-related expenses and cannot maintain a contract indemnity claim based on these same expenses. This argument goes to the merits of APU's claim, which GE raises in its Motion for Summary Judgment on the Merits.
GE argues that what remains of APU's contractual indemnification claims is subject to the exclusive jurisdiction of the United States District Court for the Eastern District of Pennsylvania, which was the Reorganization Court in the Penn Central bankruptcy proceeding.
In June of 1970, Penn Central filed a petition for bankruptcy in the Reorganization Court. On August 17, 1978, the court issued its Consummation Order and Final Decree. (Doc. 92-9.) GE relies on Section 7.04 of the Consummation Order, which sets forth the Reorganization Court's "Reservation of Jurisdiction." GE specifically relies on the following language:
(Doc. 40, at 80-81.) GE cites several cases in which APU successfully argued that the exclusive jurisdiction provision of the Consummation Order must be decided by the Reorganization Court. See United States v. Am. Premier Underwriters, Inc., No. 05-12189-RWZ, 2006 WL 1888322 (D.Mass. July 10, 2006); N.J. Transit Corp. v. Am. Premier Underwriters, Inc., No. 04-6423 (D.N.J. Nov. 23, 2005) (unpublished order); Providence & Worcester R.R. v. Penn Cent. Corp., No. 88-2119-MC, 1989 WL 73308 (D.Mass. June 28, 1989).
However, the indemnity provision which forms the basis of APU's contractual indemnification claims appeared in the NJDOT and SEPTA Contracts, which was not an "agreement or matter to which [APU] is a party."
As to the contractual indemnification claims themselves, there is nothing in the record indicating that the Reorganization Court "asserted jurisdiction" over these claims. APU has argued, and GE has not disputed, that the contractual indemnification claims accrued when the final payments were made for clean up costs at the sites.
GE argues that any claim for contractual indemnification is subject to mandatory arbitration, which APU has not pursued. GE relies on Article 17 of the NJDOT and SEPTA Contracts which provides:
(Doc. 95-1, at 53-54; Doc. 95-2, at 121.) "Engineer" is defined in both Contracts as "that person who shall be the agent of [NJDOT/SEPTA] and designated as Engineer by [NJDOT/SEPTA]." (Doc. 95-1, at 39; Doc. 95-2, at 107.) "Work" is defined as "all the matters and things herein agreed to be furnished or done by or on the part of the Contractor." (Doc. 95-1, at 40; Doc. 95-2, at 108.) The scope of the Work is as follows: "Briefly described, the work to be performed by the Contractor is to design, construct, test, deliver and guarantee Electrical Multiple-Unit Commuter Railway Cars." (Doc. 95-1, at 39; Doc. 95-2, at 107.)
APU responds that the purpose of Article 17 was limited, and the role of the Engineer was to explain and interpret the contract drawings and specifications, and to make decisions regarding the fulfillment of GE's duties under the Contracts. APU points out that GE fulfilled its duties by 1976, when the Contracts were complete.
Under the Federal Arbitration Act: "A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The United States Supreme Court has described this provision as reflecting a "liberal federal policy favoring arbitration." AT & T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (quoting Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). However, the Sixth Circuit has clarified that "that no matter how strong the federal policy favors arbitration, `arbitration is a matter of contract between the parties, and one cannot be required to submit to arbitration a dispute which it has not agreed to submit to arbitration.'" Simon v. Pfizer Inc., 398 F.3d 765, 775 (6th Cir.2005) (quoting United Steelworkers, Local No. 1617 v. Gen. Fireproofing Co., 464 F.2d 726, 729 (6th Cir.1972)). "It is well settled in both commercial and labor cases that whether parties have agreed to `submi[t] a particular dispute to arbitration' is typically an `issue for judicial determination.'" Granite Rock Co. v. Int'l Broth. of Teamsters, ___ U.S. ___, 130 S.Ct. 2847, 2855, 177 L.Ed.2d 567 (2010) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002)). In this instance, the Court concludes that the parties did not agree to submit APU's contractual indemnification claims to arbitration.
To begin, the SEPTA Contract includes a provision which does not appear in the NJDOT Contract:
(Doc. 95-1, at 64.) In this respect, the two Contracts differ, in that one expresses an intent to arbitrate "decisions and interpretations of the Engineer," while the other is silent. However, for the reasons that follow, the Court concludes that this difference has no bearing on whether the APU's contractual indemnification claims fall within the scope of any agreement to arbitrate.
Both the Supreme Court of New Jersey and the Supreme Court of Pennsylvania have interpreted similar provisions which include the same language found in Article 17: "The Engineer ... shall determine in all cases the amount, quality, acceptability and fitness of the several kinds of work which are to be performed or furnished under this Contract, shall determine all questions in relation to said Work and shall decide every question which may arise relative to the fulfillment of this Contract on the part of the Contractor." As one New Jersey appellate court explained:
Terminal Const. Corp. v. Bergen County Hackensack River Sanitary Sewer Dist. Auth., 34 N.J.Super. 478, 112 A.2d 762, 767 (N.J.Super.Ct.App.Div.1954) (see also cases cited therein).
Somerset Borough v. Ott, 207 Pa. 539, 56 A. 1079, 1080 (1904). However, as the Supreme Court of Pennsylvania also explained:
Id. In addition, a later interpretation of Pennsylvania law with regards to these types of clauses was as follows:
Badgett Mine Stripping Corp. v. Pennsylvania Tpk. Comm'n, 173 F.Supp. 425, 430 (M.D.Pa.1959) (concluding that damages resulting from breaches of contract by defendant are not referable to arbitration under the arbitration provision of the contract relating to measurement and payment).
Therefore, the Court concludes that APU's claims for contractual indemnification are not subject to mandatory arbitration.
GE next argues that the plain language of the indemnity provisions in the SEPTA and NJDOT Contracts makes it clear that the indemnity provisions not apply to in-service events such as transformer fluid leaks. GE cites the language which states that the provisions apply to damage "caused by the Contractor in the manufacture, testing, inspection or repair of any of the cars, or any part thereof."
Therefore, the indemnity provisions in the SEPTA and NJDOT contracts would apply to in-service events such as transformer fluid leaks.
The parties' remaining arguments address the merits of APU's contractual indemnification claims.
APU argues that under New Jersey and Pennsylvania law, it was permitted to settle a claim for reasonable amount, and then recover that amount from an indemnitor. GE argues that the settlement amounts were not reasonable, and in addition, APU failed to give GE notice of the underlying lawsuits.
Under New Jersey law, "[a] party may be indemnified for settlement payments it makes provided that the following three criteria are met: "(a) the indemnitee's claims are based on a valid, pre-existing indemnitor/indemnitee relationship; (b) the indemnitee faced potential liability for the claims underlying the settlement; and (c) the settlement amount was reasonable." Chem. Bank of N.J. Nat'l Ass'n v. Bailey, 296 N.J.Super. 515, 524-25, 687 A.2d 316 (N.J.Super.Ct.App.Div.1997). Similarly, under Pennsylvania law, "[t]o establish a right to indemnification where a case is resolved by settlement, the party must establish that the settlement was reasonable, that the underlying claim was valid against it, that the claim is within the coverage of the agreement, and that any counsel fees were reasonable." McClure v. Deerland Corp., 401 Pa.Super. 226, 585 A.2d 19, 22 (1991).
The Court concludes that there is a genuine issue of material fact as to whether the amount in the Paoli Yard settlement was reasonable. As to the issue of notice, under Pennsylvania case law, the failure to give notice of the litigation, or the settlement, is not fatal and does not constitute a waiver of the indemnitee's right to pursue its claim. Ultramed, Inc. v. Beiersdorf-Jobst, Inc., 98 F.Supp.2d 609, 611 (M.D.Pa.1998). Instead, "if no notice is given, an indemnitee has the burden of justifying the payment of damages by offering against the indemnitor in a second action practically the same evidence relied on to establish the case
Next, GE argues that APU cannot seek indemnity for a loss that was caused in any part by APU's own negligence. Under New Jersey law "a contract will not be construed to indemnify the indemnitee against losses resulting from its own negligence unless such an intention is expressed in unequivocal terms." Mantilla v. NC Mall Associates, 167 N.J. 262, 770 A.2d 1144, 1151 (2001). Pennsylvania law is the same. Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 588 A.2d 1, 4 (1991) ("if parties intend to include within the scope of their indemnity agreement a provision that covers losses due to the indemnitee's own negligence, they must do so in clear and unequivocal language. No inference from words of general import can establish such indemnification.").
GE points out that in this instance, the NJDOT and SEPTA Contracts specifically provide that GE was not covering losses caused by APU's own negligence. GE cites to the language providing that the "indemnification shall not apply to loss, injury or damage caused by the Railroad." (Doc. 95-1, at 60; Doc. 95-2, at 126.) GE then points to evidence in the record which indicates that APU contributed to the contamination of the Paoli Yard site. For example, GE cites to testimony that APU employees spread PCB oil at the Paoli Yard site to control dust.
APU questions this testimony, and cites evidence which it claims shows that any contamination which resulted from the employees spraying or dumping oil on the site was minimal. APU argues that the evidence instead shows that the contamination came directly from the transformers. The Court concludes that there is a genuine issue of material fact on this issue.
Accordingly, the Court concludes that APU is not entitled to summary judgment on its contractual indemnification claims.
Based on the foregoing, it is hereby
Consol. Rail Corp. v. Ray, ex rel. Boyd, 693 F.Supp.2d 39, 41-42 (D.D.C.2010) (footnotes omitted).
Terminal Const. Corp. v. Bergen County Hackensack River Sanitary Sewer Dist. Auth., 112 A.2d at 776 (citations omitted).