Anderson Bros., Inc. v. St. Paul Fire & Marine Insurance Co.

729 F.3d 923

ANDERSON BROTHERS, INC., an Oregon corporation, Plaintiff–Appellee,State of Oregon, Intervenor–Appellee,

v.ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Minnesota Insurance Company, Defendant–Appellant.

Nos. 12–35346, 12–35454.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 9, 2013.

Filed Aug. 30, 2013.

Seth Row (argued), Parsons, Farnell, & Grein, LLP, Portland, OR, for Plaintiff–Appellee Anderson Brothers, Inc.

David B. Thompson (argued), Senior Assistant Attorney General, Salem, OR, for Intervenor–Appellee State of Oregon.

Thomas A. Gordon (argued) and Andrew Moses, Gordon & Polscer, LLC, Portland, OR, for Defendant–Appellant St. Paul Fire and Marine Insurance Company.

Laura A. Foggan, Wiley Rein LLP, Washington, D.C., for Amicus Curiae Complex Insurance Claims Litigation Association.

Appeal from the United States District Court for the District of Oregon, Michael W. Mosman, District Judge, Presiding. D.C. No. 3:11–cv–00137–MO.

Before: ALEX KOZINSKI, Chief Judge, and STEPHEN REINHARDT, and MARSHA S. BERZON, Circuit Judges.

OPINION

REINHARDT, Circuit Judge:

The Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”), establishes a retroactive strict liability regime that imposes joint and several liability upon past and current landowners or operators of properties or facilities from which hazardous substances have been released or disposed into the environment. Plaintiff–Appellee Anderson Brothers, Inc., (“Anderson”) received two letters from the Environmental Protection Agency (“EPA”) notifying Anderson of its potential liability under CERCLA for environmental contamination of the Portland Harbor Superfund Site. The first letter required Anderson to submit an extremely detailed response to a questionnaire about its activities at its properties, under threat of severe civil penalties. The questionnaire required Anderson to respond to questions that necessarily established its liability under CERCLA. The second formally identified Anderson as a potentially responsible party (“PRP”) and “encourage[d]” it to participate in settlement negotiations with other PRPs.

Anderson's general liability insurer, Defendant–Appellant St. Paul Fire and Marine Insurance Co. (“St. Paul”), declined to provide Anderson with a legal defense. Under the comprehensive general liability policies in question, St. Paul has a duty to defend Anderson against “suits” for activitiescovered by the comprehensive general liability policies. St. Paul did not consider the letters sent to Anderson to be “suits” because they were not filed in a court of law. In light of CERCLA's unique liability regime, which is designed to promote settlement with the EPA instead of litigation, the district court held that both letters were “suits.”

We affirm.

I

Anderson is an Oregon corporation that owned and leased property, falling within the boundaries of the Portland Harbor Federal Superfund Site (“the Site”). St. Paul issued two comprehensive general liability policies (“the Policies”) to Anderson,¹ providing coverage for damages arising from “occurrences” that happened between January 1979–80 and January 1980–81, respectively. St. Paul's relevant obligations under the Policies, which include a duty to defend Anderson, are as follows:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of: ... property damage to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such ... property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient....

(Emphasis added.)

The EPA listed the Site as a “Superfund” site in December 2000.²See65 Fed.Reg. 75179, 75182 (Dec. 1, 2000). On or around January 18, 2008, Anderson received a letter from the EPA, issued pursuant to Section 104(e) of CERCLA, 42 U.S.C. § 9604(e) (“the 104(e) Letter”). The 104(e) Letter stated that the EPA “seeks [Anderson's] cooperation” in its investigation of the release of hazardous substances at the Site, and explained that EPA was seeking information from “current and past landowners, tenants, and other entities believed to have information about activities that may have resulted in releases or potential threats of releases of hazardous substances to the Site.” The 104(e) Letter enclosed an extensive 82–question “Information Request” seeking, inter alia: information about Anderson's ownership of and operations at any property within the Site; specific physical, environmental, and structural descriptions of each property Anderson leased or owned within the Site; and detailed descriptions of Anderson's current and former activities at the Site, including its use of drainage and sewage lines, its handling and disposal of any hazardous substances and soils, and its use of groundwater. The 104(e) Letter also informed Anderson that “[w]hile EPA seeks your voluntary cooperation ... compliance with the Information Request is required by law” and failure to respond could result in an enforcement action and civil penalties of $32,500 per day of noncompliance.

Anderson tendered the 104(e) Letter to St. Paul, and requested that St. Paul provide a legal defense and indemnity pursuant to its contractual duty to defend. St. Paul declined to provide a defense.

In November 2009, Anderson received a second letter from the EPA entitled “General Notice Letter for the Portland Harbor Superfund Site” (“the General Notice Letter”). The General Notice Letter explained that under sections 106 and 107 of CERCLA, 42 U.S.C. §§ 9606–9607, parties identified by the EPA as PRPs may be required to take action to clean up environmental contamination as ordered by the EPA, to reimburse the EPA for its own expenditures in cleaning up the Site, and to pay damages for any harm to natural resources caused by contamination at the Site. It continued:

EPA has evaluated information in connection with the investigation of the Site performed to date and believes that Anderson Brothers, Inc. and Specialty Truck Parts³ may be a PRP with respect to the Site.... EPA has reason to believe that hazardous substances have been or are being released from the facility(ies) located at [properties owned and leased by Anderson] in Portland, Oregon, into the ‘study area’ for [the Site]....

The General Notice Letter also “encourage[d] communication between [Anderson], other PRPs, and EPA” and enclosed a list “of PRPs identified to date for the Site.” The letter urged Anderson to communicate with a “Convening Group” in which “PRPs work together to allocate the cleanup costs and work through intra-party issues to prepare for future negotiations with EPA for performance of the cleanup and reimbursement of response costs after EPA has issued its Record of Decision for the [Site.]” Participation in the Convening Group “will avoid litigation and significant transaction costs to you and your company.” The General Notice Letter was a form letter, identical to the one sent out to all PRPs at the Site.

Anderson tendered the General Notice letter to St. Paul, again requesting that St. Paul provide a legal defense under its contractual duty to defend. St. Paul again refused to provide a defense.

II

Anderson sued St. Paul in district court, alleging that St. Paul breached its duty to defend under the Policies by refusing to provide Anderson with a legal defense in response to each of the two letters. After the parties filed cross-motions for summary judgment, the State of Oregon intervened on Anderson's behalf in order to defend the constitutionality of the Oregon Environmental Cleanup Assistance Act, which provides a legislatively-imposed definition of “suit” in comprehensive general liability policies, as discussed below.

The district judge granted Anderson's motion for partial summary judgment from the bench, concluding that both letters triggered St. Paul's duty to defend. The parties stipulated to the resulting damages in order to obtain a final judgment. St. Paul appealed.

Anderson then moved for attorney's fees pursuant to Or.Rev.Stat. § 742.061. The district court granted Anderson's motion in part, awarding slightly less fees than it had requested. St. Paul filed a timely notice of appeal of the attorney's fee award, acknowledging that the award should be reversed only in the event that this court were to reverse the district court's judgment on the merits. We consolidated the appeals.

III

The primary question before us is whether the 104(e) Letter and the General Notice Letter are “suits” under Oregon law within the meaning of the Policies' duty to defend. If either letter was a “suit,” St. Paul had a duty to defend Anderson, although that duty would be invoked later if only the second letter caused it to commence. Otherwise, St. Paul acted within its rights in refusing to provide Anderson with a defense.

A

The Policies here are standard-form comprehensive general liability policies. See Susan J. Miller & Philip Lefebvre, 1 Miller's Standard Insurance Policies Annotated 421.5 (2013 Supp.) (replicating the 1973 standard form comprehensive general liability policy that was in use when the Policies were issued). Identical policies were issued by insurers nationwide at the time the Policies were purchased. Because the EPA is engaged in Superfund remediation projects across the nation, it comes as no surprise that the question whether a letter from the EPA initiating proceedings under CERCLA constitutes a “suit” has been widely litigated. This question has divided state courts as well as federal courts applying contract law of the several states.

Although the legal question here is one of state contract law, the nature of the federal CERCLA regime is...