On appeal from Superior Court of New Jersey, Law Division, Camden County.
Approved for Publication March 24, 1995
Before Judges Gaulkin, Baime and Rodriguez. The opinion of the court was delivered by Baime, J.A.D.
The opinion of the court was delivered by: Baime
Geppert Brothers, Inc. (Geppert) appeals from a summary judgment requiring it to indemnify Curtis T. Bedwell & Sons, Inc. (Bedwell) for costs associated with a hazardous waste clean up conducted under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. § 9601 to 9675). The principal issue is whether CERCLA prohibits enforcement of indemnification agreements allocating financial responsibilities for the risk of environmental harm. An ancillary issue is whether the indemnitee's independent obligation to pay environmental damage claims under CERCLA's strict liability provisions bars it from obtaining indemnification under a restrictive type agreement which limits the indemnitor's obligation to losses arising out of its own acts.
We hold that indemnification agreements allocating the risks associated with CERCLA claims are enforceable between the contracting parties but not against the government. We also conclude that a party, whose liability under CERCLA is passive or constructive only, is entitled to indemnification under an agreement limiting the indemnitor's obligation to losses resulting from its own acts.
The salient facts are not in dispute. Bedwell contracted with the City of Philadelphia to construct a new waste treatment facility. In order to complete the project, Bedwell agreed to demolish the existing holding tanks and dispose of the resulting debris. Bedwell subcontracted these duties to Geppert. The agreement required Geppert to remove and dispose of the tanks and their contents. Article 8 of the contract provided that Geppert would indemnify Bedwell for all losses and expenses "imposed by law" arising out of its performance of the agreement.
Geppert subsequently arranged to dispose of the Philadelphia waste materials at the Gloucester Environmental Management Services (GEMS) landfill in Gloucester Township, New Jersey. The landfill had been ordered by the Department of Environmental Protection and Energy (DEPE) to cease operations. Because GEMS needed "covering materials," Geppert was able to dispose of the Philadelphia debris at a very favorable rate. Geppert transported approximately 1,000 truckloads of Philadelphia waste materials to the GEMS site. Bedwell was not involved in the agreement between Geppert and GEMS and took no part in the disposal operations.
In order to receive payment, Geppert wrote a letter to Bedwell confirming its obligation to indemnify Bedwell regarding its disposal of the Philadelphia waste materials at the GEMS landfill. The letter specified that its obligation under Article 8 of the contract included indemnifying Bedwell for Geppert's "actions in depositing [the Philadelphia debris] at the GEMS landfill site."
In 1984, the DEPE instituted an action in the Chancery Division in which it sought to compel GEMS to rectify the environmental damage caused by its landfill operations. GEMS filed a third party complaint naming the Township of Gloucester as a defendant. In turn, the Township named the City of Philadelphia, Bedwell, and Geppert as third party defendants. The suit was then removed to the United States District Court.
The federal case was settled in 1989. All defendants in that action agreed to establish a trust fund for the clean up of the GEMS landfill. Bedwell contributed to the fund, and then instituted this action to compel Geppert to indemnify it pursuant to Article 8 of the contract. The parties filed cross-motions for summary judgment. The Law Division granted Bedwell's motion and denied that of Geppert. This appeal followed.
We briefly comment on Geppert's preliminary argument that the court below erroneously applied New Jersey law rather than that of Pennsylvania. Both Bedwell and Geppert are Pennsylvania corporations and the subcontract was entered in that ...