ELR Citation: ELR 20047
No(s). 94-1956 (7th Cir. Sep 6, 1995)

The court holds that under Illinois law, the purchaser of a battery business must indemnify the seller against liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for waste the battery business generated at sites other than those purchased in the transaction. Under an assumption agreement executed at the time of sale, the purchaser agreed to assume any and all obligations and liabilities of any nature of the seller relating to the businesses and operations of the battery divisions incurred by the seller or the divisions before the date of the agreement. The court first holds that it has subject matter jurisdiction over the purchaser's action requesting a declaration that it is not a potentially responsible party under CERCLA §107(a) for the hazardous wastes the seller disposed of at facilities the purchaser did not acquire. The complaint presumes the possibility of a federal cause of action by the seller under CERCLA §§107(a) and 113(f)(1). Also, because the purchaser has sufficiently alleged that the seller seeks to impose CERCLA liability on it, there is an adequate basis for a case or controversy to exercise jurisdiction. The court next rejects the purchaser's contention that because the district court failed to enter a final order declaring the rights of the parties and because litigation for additional relief is pending in the district court, this court lacks appellate jurisdiction. Reading the judgment with the district court's accompanying opinion, it is clear that the district court finally declared the rights of the parties. Also, the pendency in the district court of an action for additional relief under 28 U.S.C. §2202 does not make the declaratory judgment of the district court nonfinal.

Turning to the merits and applying Illinois law, the court holds that the district court did not err in determining that the assumption agreement alone unambiguously transferred all of the seller's battery division liabilities to the purchaser. The court holds that the agreement's language was sufficiently broad to encompass any CERCLA liabilities that might arise. The court rejects the purchaser's contention that the agreement should be interpreted to encompass only prospective CERCLA liabilities relating to the particular battery plants and assets conveyed by the seller, because such an interpretation conflicts with the plain language of the agreement. The court holds that the existence of three specific exemptions in the agreement indicates that the parties intended to exempt only the situations that they specifically itemized. The court also rejects the purchaser's contention that use of the word "incurred" in the agreement limits its liability in that liabilities are not "incurred" under CERCLA until there is a release or threatened release of hazardous substances from a facility and the release or threatened release has required the expenditure of response costs. Such a reading is impermissible because it would render the rest of the agreement's language meaningless. The court holds that the word "incurred" can be interpreted only as referring to actions that would give rise to liability. Because the acts giving rise to CERCLA liability had already occurred at the time of sale, the language and structure of the agreement require that the agreement encompass all environmental liabilities transferred at purchase, whether they were known or not, and whether they had been identified and responded to or not.

The court next rejects the purchaser's contention that because they were entered into simultaneously, the assumption agreement, which was effective December 31, 1983, and amended April 6, 1984, must be read in conjunction with a bill of sale effective January 1, 1983, and a purchase agreement executed in December 1983. Because the documents were not executed at the same time, they should not be interpreted together. Moreover, the purpose of the bill of sale was to transfer all tangible and intangible property and assets associated with the battery business, whereas the assumption agreement was intended to transfer obligations and liabilities of the seller. The court next holds that the district court did not err in considering parol evidence regarding the knowledge, and not the intent, of some of the individuals involved on the purchaser's side of the transaction. The knowledge of these persons is highly relevant and probative on the issue of intent. The district court had every right to probe why the purchaser failed to insert any language specifically absolving it from liability even though its personnel were intimately involved in the transaction and were aware of the environmental liability potential. The court rejects the purchaser's argument that because a preliminary investigation by the seller did not address former battery sites that might have contained potential environmental problems, the intent of the parties must have been to limit transfer of environmental liabilities. The district court was entitled to assign significant weight to a letter from a law firm advising the purchaser about the potential environmental problems arising out of the purchase. Thus, the court finds no error in the district court's consideration and interpretation of extrinsic and parol evidence offered in regard to the agreement.

Counsel for Plaintiffs
Donald B. Hilliker, Roseann Oliver
Pope, Cahill & Devine
311 S. Wacker Dr., Ste. 4200, Chicago IL 60606
(312) 362-0200

Counsel for Defendant
Irene Savanis, Paul W. Schroeder
Jones, Day, Reavis & Pogue
77 W. Wacker Dr., Chicago IL 60601
(312) 782-3939

Before FLAUM, RIPPLE, AND GARZA,^* Circuit Judges.