Huntsman Advanced Materials LLC v. OneBeacon Am. Ins. Co.

HUNTSMAN ADVANCED MATERIALS LLC, Plaintiff, v. ONEBEACON AMERICA INSURANCE COMPANYand SPARTA INSURANCE COMPANY, formerly known asAMERICAN EMPLOYERS' INSURANCE COMPANY, Defendant.

Case No. 4:08-CV-00229-E-BLW

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO

August 2, 2019

MEMORANDUM DECISION AND ORDER

INTRODUCTION

Pending before the Court is a motion to intervene filed by First State Insurance Company, Hartford Accident and Indemnity Company, Hartford Underwriters Insurance Company f/k/a New York Underwriters Insurance Company, Nutmeg Insurance Company, and Twin City Fire Insurance Company (collectively, Hartford). (Dkt. 190.) The motion is fully briefed and at issue. For the reasons below, the Court will grant the motion.

BACKGROUND

1. Factual Background

On February 27, 2004, the U.S. Forest Service notified Huntsman Advanced Materials LLC (Huntsman) that it was a Potentially Responsible Party under CERCLA Section 107(a) (USDAFS claim). Dkt. 1. In the USDAFS claim, the Forest Service asserted that Huntsman and its predecessors at the North Maybe Phosphate Mine Site had conducted mining operations that resulted in the release or threatened release of hazardous substances or contaminates. (Dkt. 88-1.)

Since February 23, 2010, pursuant to CERCLA Section 106(a), Huntsman has been subject to a Unilateral Administrative Order requiring it conduct a Remedial Investigation/Feasibility Study (RI/FS) of the West Ridge Operable Unit at the North Maybe Mine Site. (Dkt. 75-3.) Though it was initially anticipated that the RI/FS would be completed within two and a half years, it has taken much longer. (Dkt. 81.) The remedial investigation — conducted pursuant to statute "to collect data necessary to adequately characterize the site for the purpose of developing and evaluating effective remedial alternatives" — was completed in 2016. (See 40 C.F.R. § 300.430(d)(1); Dkt. 191 at 2.) Baseline risk assessments and the feasibility study — conducted to determine whether and what remedial action is necessary — remain ongoing. (See 40 C.F.R. § 300.430(e)(1); Dkt. 173 at 4.) At present, the targeted completion date of the feasibility study is January 2022. (Dkt 185.)

Huntsman is the successor in interest of commercial general liability insurance policies purchased from OneBeacon American Insurance Company (OneBeacon) in the 1960s and 1970s. (Dkt. 1 at 4.) Huntsman tendered a claim to OneBeacon on January 21, 2005 seeking defense and indemnity with respect to Huntsman's environmental liabilities arising out of the USDAFS claim. (Dkt. 1 at 8.) OneBeacon denied coverage in 2007. Id. at 9. Huntsman is also the successor in interest of commercial general liability insurance policies purchased from Hartford in the 1970s and 1980s. (Dkt. 190-1 at 8.) Huntsman notified Hartford of the USDAFS claim; in 2006, Hartford denied coverage. (Dkt. 191-1 at 2.)

2. Procedural History

The underlying case involves an action brought May 27, 2008, by Huntsman against OneBeacon, seeking a declaratory judgment of OneBeacon's duty to defend and indemnify Huntsman with respect to Huntsman's liabilities arising out of the USDAFS Claim. (Dkt. 1.) In 2012, Hartford was brought into this action via OneBeacon's Third-Party Complaint. (Dkt. 134.) After a confidential settlement between the insurers relating solely to defense costs for the USDAFS Claim, Hartford was dismissed from this action. (Dkt. 160.)

On February 19, 2010, Judge Downes, writing for this Court, issued a stay on all issues of indemnity in this action, pending the completion of the RI/FS. (Dkt. 81.) At that time, it was expected that the RI/FS would be completed within two and a half years and would determine whether evidence of contamination and its source existed. Id. at 6-7.However, given the long and ongoing delay in completing the RI/FS, on November 5, 2018, this Court partially lifted the stay to allow discovery with an eye toward OneBeacon filing a motion of summary judgment on the issue of liability. (Dkt. 185.)

Hartford now seeks intervention as of right and permissive intervention. (Dkt. 190.) Huntsman opposes intervention on the grounds that Hartford's proposed counterclaim fails to present an actual case or controversy as required by the Declaratory Judgment Act and asserts the issue is thus not ripe for adjudication. (Dkt. 191.) The Court will address the merits of these arguments below.

LEGAL STANDARD

1. Ripe Case of Actual Controversy

Under the Declaratory Judgment Act, the court "may declare the rights and other legal relations of any interested party seeking such declaration" so long as it is "a case of actual controversy within its jurisdiction." 28 U.S.C. § 2201(a). The phrase "case of actual controversy" refers to the same cases and controversies that are justiciable under Article III. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (citation omitted). Thus, a case must be ripe for adjudication for the court to have subject-matter jurisdiction. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 671 (9th Cir. 2005) (citation omitted).

In private party contract disputes, the traditional ripeness standard inquires whether "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratoryjudgment." Id. (quoting Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)). Claims involving "uncertain or contingent future events that may not occur as anticipated, or indeed may not occur at all" are generally unripe. Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1123 (9th Cir. 2010) (citations omitted).

2. Intervention

Federal Rule of Civil Procedure 24 provides for both intervention as a matter of right and permissive intervention. Rule 24(a)(2) permits intervention as of right when: (1) the motion is timely; (2) the applicant claims a "significantly protectable" interest relating to the property or transaction which is the subject of the action; (3) the applicant is so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest; and (4) the applicant's interest is inadequately represented by the parties to the action. Wilderness Soc. v. U.S. Forest Serv., 630 F.3d 1173, 1177 (9th Cir. 2011). Generally, the court must construe Rule 24(a) liberally in favor of intervenors, relying on "practical and equitable concerns," rather than technical distinctions. Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 817 (9th Cir. 2001). Although this standard is construed liberally, "the applicant bears the burden of showing that each of the four elements is met." Freedom from Religion Found., Inc. v. Geithner, 644 F.3d 836, 841 (9th Cir. 2011).

Rule 24(b)(1) allows permissive intervention if: (1) the motion is timely; (2) the applicant's claim shares a common question of law or fact with the main action; and (3) the court has an independent basis for jurisdiction over the applicant's claims. Donnellyv. Glickman, 159 F.3d 405, 412 (9th Cir. 1998). The court may also consider whether "intervention will unduly delay the main action or will unfairly prejudice the existing parties." Id. In addition, the court can examine "the nature and extent of the intervenors' interest," and "whether the intervenors' interests are adequately represented by other parties." Spangler v. Pasadena City Bd. of Educ., 552 F.2d 1326, 1329 (9th Cir. 1977).

Rule 24(c) requires that a motion to intervene be accompanied by a pleading setting forth the claim for which intervention is sought. The court considers only whether parties have alleged "a legally sufficient claim," and not whether they are "likely to prevail on the merits." Williams & Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd., 840 F.2d 72, 75 (D.C. Cir. 1988).

ANALYSIS

1. A Single Contingency Does Not Prevent Hartford's Claim Against Huntsman from Being Ripe for Determination.

Huntsman contends there is no case or controversy ripe for the declaratory judgment in Hartford's proposed counterclaim.

First, Huntsman argues that the duty to indemnify cannot be decided until there is a final determination of Huntsman's liability regarding the USDAFS claim. (Dkt. 191 at 4.) This argument is an attempt to relitigate the Court's decision to lift the stay. (See Dkt. 173.) As the Court previously found, a ripe case and controversy exists absent a final decision from the Forest Service about the extent of Huntsman's liability. (Dkt. 185.)

Second, Huntsman argues that there is not a ripe case or controversy to adjudicate because Huntsman has not yet asserted a claim for indemnity against Hartford. (Dkt 191 at 2.) While Huntsman has not yet sued Hartford, Huntsman indicated in its own briefing that Huntsman notified Hartford of the USDAFS claim and, in 2006, Hartford denied coverage. (Dkt. 191-1 at 2.)

With respect to Huntsman's second argument, the caselaw provides guidance on when a ripe case or controversy exists between an insurer and its insured. "A dispute between an insurer and its insureds over the duties imposed by an insurance contract satisfies Article III's case and controversy requirement." Gov't Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (citations omitted). Although Huntsman contends no dispute exists until the insured asserts a claim for indemnity against the insurer in court, the caselaw does not support this argument.

Rather, the caselaw indicates that an insured need not have filed an action for contract damages or equitable relief for an actual controversy to exist under the Declaratory Judgment Act. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937); MedImmune, Inc., 549 U.S. at 1227. The Ninth Circuit has held that a ripe dispute exists when an insurer faces "the possibility of having to honor a policy no longer in force." MedImmune, Inc., 549 U.S. at 1223. Similarly, in Aetna Cas. & Sur. Co. v. Gen. Dynamics Corp., the...