Flake v. Schrader-Bridgeport Int'l, Inc.

RAY FLAKE, et al, Plaintiffs-Appellants, v. SCHRADER-BRIDGEPORT INTERNATIONAL, INC., fka SCHRADER AUTOMOTIVE INC. TOMKINS PLC, and ARVINMERITOR, INC., Defendants-Appellees and LEWIS EDWARD KILMARX, et al. Defendants.

No. 11-5522

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

FILED: August 15, 2013

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 13a0757n.06

ON APPEAL FROM THE UNITED

STATES DISTRICT COURT FOR

THE MIDDLE DISTRICT OF

TENNESSEE

Before: COOK and STRANCH, Circuit Judges; and LAWSON, District Judge.^*

COOK, Circuit Judge. Throughout the 1960s and '70s, Schrader Automotive dumped thousands of gallons of trichloroethylene ("TCE"), a hazardous toxic waste, at various sites in Dickson, Tennessee. Schrader used TCE to degrease machinery at a plant that it operated in DicksonCounty (the "Dickson Plant"). The TCE contaminated Dickson's groundwater, injuring the health and property values of plaintiffs-appellants.

Bringing several state law causes of action, plaintiffs sued defendants-appellee entities, which comprised of (1) Schrader's present corporate incarnation, Schrader-Bridgeport International, Inc. ("SBI"); (2) its current owner, Tomkins Limited; and (3) its former owner, Meritor, Inc.² The district court dismissed Tomkins for lack of personal jurisdiction and granted summary judgment in favor of SBI and Meritor. Plaintiffs appeal both decisions, and we AFFIRM.

I.

This case's lengthy history spans Tennessee state court, federal bankruptcy court, and federal district court. After defendants removed the case, the district court consolidated the suits of three groups of plaintiffs—the Flakes, the Armstrongs, and a group of parents from Dickson, Tennessee (the "Adkins plaintiffs"). The Flakes are a married couple who purchased land in Dickson that contained a natural spring. After buying the property in 2002, they discovered that TCE contaminated the spring, upending their plans to bottle and sell the spring's water. Another married couple, the Armstrongs, own land in Dickson; they too claim TCE-contaminated water diminishedtheir property's value. Finally, the Adkins plaintiffs are the parents of 13 children who live or have lived in Dickson County. According to their complaint, each child suffers from a "serious, congenital deformit[y]." They attribute these birth defects to the fact that the mothers of the children used TCE-contaminated water from wells around Dickson County for domestic purposes during their pregnancies.

Plaintiffs now seek to hold SBI and its series of owners, Meritor and Tomkins, liable for the Dickson Plant's pollution as successors-in-interest. Because these claims require an examination of Schrader Automotive's incorporation and changes in ownership, we begin by tracing the corporate history by which Schrader Automotive, an unincorporated division of Connecticut-based Scovill, became SBI, a subsidiary of international holding company Tomkins.

A. Schrader's History and Scovill's Responsibility for the Dickson Plant

From beginnings as a button manufacturer—it supplied buttons to soldiers fighting in the War of 1812—Scovill grew into a major brass company. Seeking to acquire companies that consumed brass, Scovill purchased Schrader Automotive, a valve manufacturer, in the 1920s. Scovill operated Schrader Automotive as one of its six unincorporated divisions. From the Dickson Plant's startup in 1964 to its shutdown in March 1985, Scovill operated the plant through Schrader Automotive.

Seven months after Scovill closed the Dickson Plant, and around the time that allegations of TCE contamination began to surface, Scovill decided to divest itself of Schrader Automotive by spinning the division off into a separate corporation—SBI. In October 1985, Scovill achieved this by executing an agreement that transferred all of the assets and liabilities of Schrader Automotive to the newly incorporated SBI (the "Transfer Agreement"). [Transfer Agreement, 925 ECF No. 92-5.]

Under the Transfer Agreement, SBI gained all of the assets of the former Schrader Automotive. [See Transfer Agreement § 1.] In return, SBI (1) indemnified Scovill against any liabilities arising from the former Shrader Automotive's business and (2) assumed all of the liabilities of Schrader Automotive, including those stemming from the Dickson Plant. [See Transfer Agreement § 3, sch. 6.]

A few months later, Scovill sold the newly incorporated SBI to Meritor. In March 1986, Meritor executed an agreement with Scovill to purchase SBI (the "Purchase Agreement"). In an attempt to insulate Meritor from liability relating to the Dickson Plant, the Purchase Agreement provided that, as of the transaction's closing, SBI would not own the Dickson Plant and that Meritor would not be assuming any liability for the plant's operation:

Exclusion of Dickson Plant. As of the Closing Date, the Company [SBI] and the Company Subsidiaries will not own, and the Balance will not include the Dickson, Tennessee plant formerly operated by the Schrader Automotive Division, and, in any event, Buyer [Meritor] is not assuming any liability or obligation arising out of or relating to the business and operations of the Dickson, Tennessee plant of theSchrader Automotive Division, and all liabilities (whether direct or indirect, joint or several, absolute or contingent, matured or unmatured, secured or unsecured) associated with the Dickson, Tennessee plant.

[Purchase Agreement § 2.20, 925 ECF No. 92-7.] A schedule to the Purchase Agreement listing SBI's real properties omits the Dickson Plant. [Purchase Agreement, sch. 2.4C, 925 ECF No. 87-21.]

Scovill also agreed to unwind SBI's obligations to indemnify Scovill for the Dickson Plant's pollution. To this end, the Purchase Agreement required Scovill to do two things: First, it required Scovill to release SBI from any indemnity obligation arising out of the 1985 Transfer Agreement. [Purchase Agreement § 5.8.] To satisfy this requirement, Scovill and SBI amended the 1985 Transfer Agreement to rescind any indemnity obligation running from SBI to Scovill. Second, the Purchase Agreement required Scovill to indemnify Meritor and SBI for liability arising from pre-closing events (including the Dickson Plant's pollution). [Purchase Agreement § 4.2.] At the closing date of the 1986 Purchase Agreement, Scovill certified that it fulfilled its pre-closing obligations and attested to the truth of its representations in the Purchase Agreement—including Section 2.20's guarantee that Scovill retained the Dickson Plant and its liabilities. [Closing Certificate, 925 ECF No. 87-7.]

Following this sale, SBI underwent two more acquisitions and a merger—ultimately ending in the hands of defendant Tomkins. In 1995, Meritor sold SBI to KSCH Holdings, Inc. The next year, SBI merged with Bridge Products, Inc. and assumed its current name—Schrader-BridgeportInternational, Inc. Two years after that, KSCH Holdings sold SBI's parent company to Tomkins, a British holding company.

All the while, Scovill remained responsible for the Dickson Plant. After the 1986 Purchase Agreement, Scovill continued to pay the water bill and maintain insurance on the Dickson Plant, and it listed the plant as a covered facility in its Pollution Liability policies from 1984 to 1993. [Statement of Undisputed Material Facts ¶¶ 19-21, 925 ECF No. 86.] In 1988, Scovill exercised its option as lessee to purchase the Dickson Plant from Dickson County, and sold the plant to Tennsco a few months later.

Even after the sale of the Dickson Plant to Tennsco, Scovill remained responsible for the plant's waste and continued to respond to its environmental fallout. [Real Property Purchase Agmt. § 25, 925 ECF No. 87-4.] Both the Environmental Protection Agency ("EPA") and the Tennessee Department of Environment and Conservation corresponded exclusively with Scovill—not SBI, Meritor, or Tomkins—about the plant's toxic effluence. [Hudnut Aff. ¶ 3.g, 925 ECF No. 87-18; Statement of Undisputed Material Facts ¶¶ 17-18.] In 1990, the EPA ordered Scovill to investigate the extent of the Dickson Plant's pollution and to develop and execute a plan to remedy the affected land. [EPA Consent Order, 925 ECF No. 87-26.] From the time the EPA issued that order until 2004, Scovill spent over $11 million cleaning the TCE pollution. [Scovill Disclosure Stmt. 16, 00925 ECF No. 98-2.]

B. Plaintiffs' Settlement and Proceedings in the District Court

In early 2004, both the Flakes and the Armstrongs filed complaints against Scovill, SBI, Meritor, and several others, in the Circuit Court of Dickson County. The plaintiffs brought a variety of state-law claims, including trespass, negligence, and state statutory claims for ultra-hazardous activity. A few months after plaintiffs filed suit, Scovill filed for bankruptcy. [Saltire's Bankruptcy Petition, 925 ECF No. 16-6.] In December 2004, the Adkins plaintiffs filed their own complaint in Dickson County, asserting the same claims as the Flakes and Armstrongs.

The day after the Adkins plaintiffs filed their complaint, all three groups of plaintiffs filed proofs of claim in Scovill's chapter 11 case seeking damages for the TCE contamination. In re Saltire Indus., Inc., No.04-15389 (Bankr. S.D.N.Y. Mar. 29, 2007) (stipulation and order approving settlement). SBI then removed the plaintiffs' state actions to federal court, on the ground that plaintiffs' claims "related" to Scovill's pending bankruptcy proceedings. See 28 U.S.C. § 1334(b) (conferring federal jurisdiction to cases "related to a case under title 11").

In March 2007, plaintiffs settled their claims with Scovill for an aggregate of $1.5 million and the bankruptcy court entered a Stipulation and Order Approving the Settlement. In re Saltire Indus., Inc., No.04-15389, at ¶ 1 (Bankr. S.D.N.Y. Mar. 29, 2007) (stipulation and order approving settlement). In return, the plaintiffs released Scovill from "any and all claims" related to the TCE litigation. Id.¶ 4. The Settlement Agreement attempted to...