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Ashley Ii of Charleston, L.L.C. v. Pcs Nitrogen, Inc.

United States District Court, D. South Carolina, Charleston Division

November 18, 2014

Ashley II of Charleston, L.L.C., Plaintiff,
v.
PCS Nitrogen, Inc., Defendant/Third-Party Plaintiff,
v.
Ross Development Corporation; Koninklijke DSM N
v.
; DSM Chemicals of North America, Inc.; James H. Holcombe; J. Holcombe Enterprises, L.P.; J. Henry Fair, Jr.; Allwaste Tank Cleaning, Inc.; Robin Hood Container Express; and the City of Charleston, Third-Party Defendants.

ORDER AND OPINION

MARGARET B. SEYMOUR, Senior District Judge.

On June 14, 2011, PCS Nitrogen, Inc. ("PCS") filed a motion for a determination of damages, requesting that the court establish a procedure to determine the amount owed by Ross Development Corporation ("Ross") to PCS under the terms of an indemnity contract. ECF No. 631. On February 24, 2012, the court issued an order (the "February 2012 order") holding that PCS is entitled to recover from Ross 45 percent of the attorney's fees, costs, and expenses that PCS spent litigating this case. ECF No. 692. On January 15, 2013, the court issued an order vacating in part the February 2012 order. ECF No. 705. The court held a status conference on February 4, 2013, at which the parties agreed to submit supplemental briefing to assist the court in delineating which of PCS's litigation costs and expenses are covered under the terms of the indemnity contract. See ECF Nos. 710, 715 & 722.

Upon review, it appeared to the court that a potentially novel question of state law could be dispositive of the issues remaining in this case. Pursuant to South Carolina Rule of Appellate Procedure 244, this court certified a question to the South Carolina Supreme Court on August 19, 2013. ECF No. 749. The certified question was:

Does the rule that a contract of indemnity will not be construed to indemnify the indemnitee against losses resulting from its own negligent acts, unless such intention is expressed in clear and unequivocal terms, apply when the indemnitee seeks contractual indemnification for costs and expenses resulting in part from its own strict liability acts?

The South Carolina Supreme Court accepted the certified question and heard arguments on March 4, 2013.

The South Carolina Supreme Court issued its opinion on July 23, 2014. ECF No. 770. The South Carolina Supreme Court answered the certified question "no, " thereby permitting PCS's indemnification claim against Ross. Id. at 1. The South Carolina Supreme Court went on to state that "the indemnification agreement was limited to any liability attributable to Ross up to the date of the 1966 closing.... The agreement did not permit indemnification from Ross for any liability (by way of negligence, strict liability or otherwise) after the 1966 closing." Id. at 5. The South Carolina Supreme Court denied a petition for rehearing on September 25, 2014.

Via text order entered on September 30, 2014, the parties were directed to submit short briefs on the effect of the decision of the South Carolina Supreme Court on the indemnification question pending before this court. ECF No. 789. The parties submitted briefs as directed on October 10, 2014. See ECF Nos. 793 & 794.

The legal conclusions stated herein below will control the calculation of damages under the contract.

I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

On July 16, 2008, Ashley II of Charleston, L.L.C. ("Ashley") filed an amended complaint against PCS seeking a declaration of joint and several liability under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") § 107 for environmental response costs at the Columbia Nitrogen Site in Charleston, South Carolina (the "Site"). ECF No. 209. Ashley also sought damages based on past response costs. Id. On August 4, 2008, PCS filed an amended answer and counterclaim. ECF No. 226. PCS asserted contribution claims under CERCLA § 113(f) against Ashley; Ross; Koninklijke DSM N.V. and DSM Chemicals of North America, Inc.; James H. Holcombe; J. Holcombe Enterprises, L.P.; J. Henry Fair, Jr.; Allwaste Tank Cleaning; Robin Hood Container Express, Inc. ("RHCE"); and the City of Charleston, South Carolina, alleging that they are potentially responsible parties. Id. PCS also asserted a claim against Ross for indemnification based on contract. Id.

On May 27, 2011, after a bench trial, the court issued a Second Amended Order in which a detailed recitation of the facts of this case can be found. ECF No. 627. The following findings of fact are pertinent here. Ross was formerly known as Planters Fertilizer & Phosphate Company ("Planters") and PCS is the successor-in-interest to Columbia Nitrogen Corporation ("CNC").[1] Id. at 3 & 9. Ross owned the Site from 1906 to 1966 and operated a phosphate fertilizer manufacturing facility on the Site during this time. Id. at 9. Ross's activities generated pyrite slag as a waste product, which is the source of a vast majority of the arsenic and much of the lead contamination at the site, as well as the high acidity. Id. at 12.

In 1966, Ross sold the Site to PCS. Id. at 14-15. The agreement to sell the Site included an indemnification provision stating:

[Ross] agrees to indemnify and hold harmless [PCS] in respect to all acts, suits, demands, assessments, pr[o]ce[e]dings and cost and expenses resulting from any acts or omission[s] of [Ross] occurring prior to the closing date and pertaining herein, provided [Ross] receives prompt notice in writing of such claims or demand and [Ross] shall have the right to litigate or contest such claim.

Id. at 14. PCS owned the Site from 1966 to 1985 and operated a fertilizer granulation plant on the Site between 1966 and 1972, as well as an acid plant between 1966 and 1970. Id. at 9 & 17. PCS's activities caused arsenic, lead, and acid contamination at the Site. Id. at 17-19. Also, between 1971 and 1981, PCS performed various demolition ...


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