ELR Citation: ELR 21238
No(s). 94-5276 (3d Cir. Jul 5, 1995)

The court holds that extrinsic evidence is admissible under New York law on whether the buyer of a chemical plant intended to release the seller from environmental liabilities arising in the "ordinary course of the Chemical business," and that the seller is not entitled to a jury trial on its Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) §§107 or 113(f) claims. The court finds that the sale agreement provides that its terms are to be interpreted under New York law, and that under that state's law the agreement is more accurately characterized as a "release" rather than an "indemnity" contract. The seller, as the party invoking the release and contending that the agreement's terms are unclear, has the burden under New York law of producing evidence bearing on ambiguity. The buyer has the burden of persuasion on the release's effect, because it is seeking to limit the effect of the agrcement's terms. The court next holds that the district court erred in not allowing the admission of extrinsic evidence on the meaning of the agreement's phrase "ordinary course of the Chemical Business," and on the agreement's definition of "Chemical Business." The court holds that the "ordinary course" phrase, together with the agreement's exclusion of liability for a specific environmental claim, creates an ambiguity as to the extent of the environmental liabilities included in the agreement's scope. Consequently, extrinsic evidence must be admitted to properly discern the parties' intent. The court also finds ambiguous the agreement's provision that the buyer would assume "other liabilities and obligations" that two of the buyer's corporate officers have "actual present personal knowledge and awareness" of. The court notes that although the extent of those individual's knowledge is disputed, given their previous employment with the seller, they were both probably aware of actual or potential environmental problems existing at the site. The court finds that further proceedings are necessary to determine the extent to which the buyer's corporate officers were aware of the liabilities at the time the buyer acquired the chemical plant. The court next holds that the seller is not entitled to a jury trial on its CERCLA §107 claim for restitution because restitution is a form of equitable relief. The court next holds that the seller is not entitled to a jury trial on its §113(f) claim for contribution. Contribution was an equitable remedy at common law, §113(f) makes reference to equity and "equitable factors," and the court assumes that Congress knew that juries are not a feature of equitable trials. The court agrees with the district court's reasoning that because the precipitating claims under §107 are primarily equitable in nature, a claim for contribution under §113(f)(1) is also essentially equitable. Moreover, the references in §113(f)(1) to "equitable" factors indicate that the statutory action for contribution is a flexible remedy that may be based on circumstances not cognizable in nor readily adaptable to an action at law.

Counsel for Appellee
Aubrey M. Daniel III
Williams & Connolly
725 12th St. NW, Washington DC 20005
(202) 434-5000

Counsel for Appellant
Anthony J. Marchetta
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945, Morristown NJ 07962
(201) 966-6300

Before Mansmann, Hutchinson, and Weis, JJ.