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CALDWELL TRUCKING PRP GROUP v. SPAULDING COMPOSITE

July 12, 1995

CALDWELL TRUCKING PRP GROUP, Plaintiff,
v.
SPAULDING COMPOSITES CO., INC., individually and as successor to Mycalex Corporation, AETNA CASUALTY & SURETY CO., ALLSTATE INSURANCE CO., as successor to Northbrook Insurance Co., AMERICAN CENTENNIAL INSURANCE CO., AMERICAN HOME INSURANCE CO., EMPLOYERS INSURANCE OF WAUSAU, GREENWICH INSURANCE CO., as successor to Harbor Insurance Company, INDUSTRIAL UNDERWRITERS INSURANCE CO., LIBERTY MUTUAL INSURANCE CO., LEXINGTON INSURANCE CO., INC., CERTAIN UNDERWRITERS AT LLOYDS OF LONDON, CERTAIN LONDON MARKET DEFENDANTS, MUTUAL FIRE, MARINE AND INLAND INSURANCE CO., NATIONAL UNION FIRE INSURANCE CO., NEW ENGLAND REINSURANCE CORP., NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTEE ASSOCIATION, JOHN DOE 1-50, Defendants. SPAULDING COMPOSITES CO., INC., Cross-Claim Plaintiff, v. AETNA CASUALTY & SURETY CO., ALLSTATE INSURANCE CO., as successor to Northbrook Insurance Co., AMERICAN CENTENNIAL INSURANCE CO., AMERICAN HOME INSURANCE CO., EMPLOYERS INSURANCE OF WAUSAU, GREENWICH INSURANCE CO., as successor to Harbor Insurance Company, INDUSTRIAL UNDERWRITERS INSURANCE CO., LIBERTY MUTUAL INSURANCE CO., LEXINGTON INSURANCE CO., INC., CERTAIN UNDERWRITERS AT LLOYDS OF LONDON, CERTAIN LONDON MARKET DEFENDANTS, MUTUAL FIRE, MARINE AND INLAND INSURANCE CO., NATIONAL UNION FIRE INSURANCE CO., NEW ENGLAND REINSURANCE CORP., NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTEE ASSOCIATION, JOHN DOE 1-50, Cross-Claim Defendants. NEW ENGLAND INSURANCE CO., Counterclaim and Cross-Claim Plaintiff, v. SPAULDING COMPOSITES CO., INC., AETNA CASUALTY & SURETY CO., ALLSTATE INSURANCE CO., as successor to Northbrook Insurance Co., AMERICAN CENTENNIAL INSURANCE CO., AMERICAN HOME INSURANCE CO., EMPLOYERS INSURANCE OF WAUSAU, GREENWICH INSURANCE CO., as successor to Harbor Insurance Company, INDUSTRIAL UNDERWRITERS INSURANCE CO., LIBERTY MUTUAL INSURANCE CO., LEXINGTON INSURANCE CO., INC., CERTAIN UNDERWRITERS AT LLOYDS OF LONDON, CERTAIN LONDON MARKET DEFENDANTS, MUTUAL FIRE, MARINE AND INLAND INSURANCE CO., NATIONAL UNION FIRE INSURANCE CO., NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTEE ASSOCIATION, JOHN DOE 1-50, Counterclaim and Cross-Claim Defendants.



The opinion of the court was delivered by: WILLIAM G. BASSLER

 BASSLER, DISTRICT JUDGE:

 The PRP Group seeks contribution from Spaulding to cover past and future costs of cleaning up the Caldwell Trucking site. In addition, the PRP Group brings a direct action for damages and a declaration of coverage against Spaulding's insurers. Spaulding has cross-claimed for damages and a declaration of coverage against the same insurers. Numerous motions are before the Court for resolution.

 Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendants, Liberty Mutual Insurance Company ("Liberty"), Employers Insurance of Wausau ("Wausau"), American Centennial Insurance Company ("American Centennial"), American Home Assurance Company ("American Home"), Lexington Insurance Company ("Lexington"), National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union), New England Insurance Company ("New England"), Industrial Underwriters Insurance Company ("Industrial Underwriters"), Certain Underwriters at Lloyd's, London ("Lloyd's"), Certain London Market Insurance Companies ("London Market"), Allstate Insurance Company ("Allstate"), and Aetna Casualty & Surety Company ("Aetna") *fn1" move to dismiss counts five and six of Plaintiff, the Caldwell Trucking PRP Group's Complaint for failure to state a claim upon which relief can be granted.

 Several of these Defendants have also moved to dismiss the Complaint under the doctrine of forum non conveniens or alternatively, to transfer this action to the United States District Court for the Western District of New York pursuant to 28 U.S.C. § 1404(a).

 In addition, Defendants Wausau, Liberty, New England, American Home, Industrial Underwriters, American Centennial, Lloyd's, London Market, Aetna and Allstate move to dismiss the Cross-Claim asserted by Spaulding Composites, Co. Inc. ("Spaulding"), for failure to state a claim upon which relief can be granted. Additionally, several Defendants move to dismiss those claims asserted by Spaulding related to contamination at a site in Tonawanda, New York, for improper joinder under Federal Rule of Civil Procedure 13(g). These Defendants also reiterate their request to transfer this action to the Western District of New York pursuant to 28 U.S.C. § 1404(a).

 This Court possesses jurisdiction over this action to recover cleanup and response costs incurred to remediate hazardous substance contamination at the Caldwell Trucking site pursuant to 42 U.S.C. §§ 9607, 9613 and 28 U.S.C. § 1331. The Court possesses supplemental jurisdiction over Plaintiff's claims based upon New Jersey law under 28 U.S.C. § 1367.

 For the reasons set forth in the Opinion below, Defendants' motions to dismiss counts five and six of Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) are granted. Defendants' motions to dismiss for forum non conveniens are denied. Defendants' motions for transfer to the Western District of New York are also denied.

 Defendants Wausau, Liberty, New England, American Home, Industrial Underwriters, American Centennial, Lloyd's, London Market and Allstate's motions to dismiss Spaulding's Cross-Complaint are granted. The motions to transfer the Cross-Complaint to the Western District of New York filed by these Defendants are denied. These same Defendants' motions to dismiss those claims asserted by Spaulding related to contamination at a site in Tonawanda, New York, for improper joinder under Federal Rule of Civil Procedure 13(g) are denied.

 On this motion to dismiss, the Court must accept all of Plaintiff's factual allegations as true. Conley v. Gibson, 355 U.S. 41, 48, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). Between approximately 1958 and 1973, Caldwell Trucking Company transported lead-containing wastes allegedly generated by Spaulding and its predecessor in interest, Mycalex Corporation, and deposited them at the site. Compl. PP 10, 20.

 Since February, 1993, Spaulding has been involved in a bankruptcy proceeding in the United States Bankruptcy Court, Central District of California, case no. 93-16711-CA. Compl. P 52. In September, 1993, the PRP Group filed a proof of claim form for damages already incurred and those anticipated in connection with cleaning up the Caldwell Trucking site. Compl. P 53.

 On May 17, 1994, Defendant, Liberty, filed a complaint in the United States District Court for the Western District of New York against Nortek, Inc. ("Nortek") and Monogram Industries, Inc. ("Monogram"), Spaulding's former corporate parents, that were named, with Spaulding, as coinsureds under policies issued by some of the Defendant insurers. In the Western District of New York action, Liberty sought a declaratory judgment that its policies issued to Nortek, Monogram, and Spaulding, did not provide coverage for environmental contamination at either the Caldwell Trucking or Tonawanda site. Before filing the New York action, Liberty did not obtain relief from the automatic stay triggered by Spaulding's bankruptcy petition.

 In an Amended Stipulation, filed on July 11, 1994, the Bankruptcy Court modified the automatic stay to permit the PRP Group and the EPA to maintain actions in the United States District Court for the District of New Jersey or other appropriate forum for "declaratory relief against the Insurers to recover insurance proceeds from the applicable policies . . . ." Compl. Exh. 1 P 1. In addition, Spaulding purportedly assigned "any and all choses in action and causes of action arising out of or relating to the Caldwell Trucking site" to the PRP Group. Compl. P 55B, Exh. 1 P 2.

 Furthermore, under the terms of the Amended Stipulation, up to $ 75,000 of any recovery by the PRP Group against Spaulding's insurers was designated for payment of Plaintiff's attorneys' fees incurred in this action as well as the Bankruptcy case. Thereafter, Spaulding possessed a financial interest in any net recovery by the PRP Group that exceeded $ 1 million. Compl. Exh. 1 P 12. Spaulding would receive 5% of any net recovery by the PRP Group between $ 1 million and $ 3.5 million, or 10% of any net recovery above $ 3.5 million. Compl. Exh. 1 P 12b.

 Pursuant to the Amended Stipulation, on July 25, 1994, the PRP Group filed this action, naming the insurers of Spaulding and its predecessor, Mycalex, directly as defendants. *fn2" Plaintiff contends that this direct action against the Defendant insurance companies is authorized by the valid assignment of the insurance policies through the Amended Stipulation entered by the Bankruptcy Court. Compl. P 63 (Count V). Additionally, Plaintiff asserts that this direct action against Spaulding's insurance carriers is authorized by the New Jersey Spill Compensation and Control Act ("Spill Act"), N.J.S.A. § 58:10-11.s. Compl. P 66 (Count VI).

 In response, Spaulding cross-claimed against the remaining Defendants, Spaulding's insurers, for declaratory judgment. Spaulding seeks a declaration that the Defendant insurers are obligated under the insurance policies to indemnify Spaulding for any liability arising from environmental contamination at the Caldwell Trucking site in New Jersey, and another site, located in Tonawanda, New York. Moreover, Spaulding seeks a declaration that under the policies, the Defendant insurers are obligated to defend Spaulding against the PRP Group's claims.

 Subsequently, on August 1, 1994, the Bankruptcy Court issued a preliminary injunction, enjoining Liberty from prosecuting the New York action and denying Liberty's request for relief from the automatic stay. On September 14, 1994, the Bankruptcy Court declared the action commenced by Liberty in the Western District of New York void. Liberty has appealed this decision. In spite of the Bankruptcy Court's ruling, several Defendants request this Court to transfer this action to the Western District of New York, to be consolidated with Liberty's action against Nortek and Monogram, an action which has been declared void.

 II. DISCUSSION

 A. Standards Governing Motion to Dismiss

 Federal Rule of Civil Procedure 12(b)(6) allows a party to move for a dismissal based upon the pleader's "failure to state a claim upon which relief can be granted." Since the long-established federal policy of civil litigation is to decide cases on the proofs, district courts generally disfavor Rule 12(b)(6) motions. Melo-Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965); Panek v. Bogucz, 718 F. Supp. 1228, 1229 (D.N.J. 1989).

 In deciding a motion to dismiss for failure to state a claim, all allegations in the pleadings must be accepted as true and the plaintiff must be given the benefit of every favorable inference that can be drawn from those allegations. See Conley v. Gibson, 355 U.S. 41, 48, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 n.1 (3d Cir. 1987); Markowitz, 906 F.2d at 103. "All the rules require is a short and plain statement of the claim that gives the defendant fair notice of the plaintiff's claim and the grounds upon which it rests." Conley, 355 U.S. at 47.

 Rule 12(b)(6) does not countenance "dismissals based on a judge's disbelief of a complaint's factual allegations." Neitzke v. Williams, 490 U.S. 319, 326-27, 104 L. Ed. 2d 338, 109 S. Ct. 1827 (1989). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974).

 Accepting the facts in the pleadings as true and giving them all reasonable inferences, a court must dismiss under Rule 12(b)(6) "if as a matter of law 'it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Neitzke, 490 U.S. at 326-27.

 Ordinarily, when a court relies upon matters outside of the pleadings in deciding a motion to dismiss, it must convert the motion to dismiss into a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(c). An exception to this rule, however, permits a Court to consider documents, such as contracts, that are referred to in the complaint, as well as public records, to which the public has "unqualified access." E.g., Pension Benefit Guaranty Corp. v. White Consolidated Industries, Inc., 998 F.2d 1192, 1196-97 (3d Cir. 1993). In reliance upon these exceptions, the Court has considered insurance policies, referred to in the complaint, as well as copies of pleadings and other materials filed in other courts. Although the parties submitted additional materials and certifications, the Court has not relied upon them.

 B. Defendants' Motions to Dismiss

 In the Complaint and opposition papers, Plaintiff asserts two grounds for this direct action against the Defendant insurers: (1) the New Jersey Spill Act, N.J.S.A. § 58:10-11.s; and (2) the allegedly valid assignment of the policies by Spaulding in the Amended Stipulation entered in Bankruptcy Court.

 According to the Defendant insurers, both of the alleged bases of the PRP Group's Complaint are invalid. First, the Defendants argue, the New Jersey Spill Act does not authorize a direct action against them because they are not insurers of a "major facility" that have provided "evidence of financial responsibility" within the meaning of N.J.S.A. § 58:10-23.11d5. Second, the Defendants contend that Spaulding's alleged assignment of its rights under the insurance policies to the PRP Group, embodied in the Amended Stipulation entered by the Bankruptcy Court, is invalid.

 With respect to the motions to dismiss Spaulding's Cross-Complaint, Defendants rely upon two arguments. First, Defendants contend that the "action against company" provisions of the policies prevent both Spaulding and the PRP Group, as Spaulding's assignee, from pursuing claims against the insurers in this action. Alternatively, Defendants reiterate their arguments that the assignment is invalid. The Defendant insurers argue that they cannot be expected to defend Spaulding against the PRP Group's claims, when under the terms of the Amended Stipulation, Spaulding has a right to a percentage of the recovery ultimately obtained from the insurers by the PRP Group. Spaulding maintains that its assignment to the PRP Group of any right to recovery under the policies does not relieve the Defendant insurers of their policy obligation to provide a defense.

 Since the Defendant insurers' motions to dismiss the PRP Group's Complaint and Spaulding's Cross-Complaint both turn upon this Court's interpretation of the "action against company" provisions of the policies, the Court will first address count VI of the PRP Group's Complaint, which asserts claims under the New Jersey Spill Act. N.J.S.A. §§ 58:10-23.11-58:23.11f7 (1992 and Supp. 1995).

 
1. The New Jersey Spill Act Does Not Authorize A Direct Action By the PRP Group Against Spaulding's Insurers.

 As a general rule, the common law prohibits actions by a third party against an insurer absent some statutory or contractual provision permitting direct action. Manukas v. The American Ins. Co., 98 N.J. Super. 522, 524, 237 A.2d 898 (App. Div. 1968). For example, N.J.S.A. § 17:28-2 prohibits an injured third party from maintaining a direct action against an insurer unless the injured party first obtains a judgment and execution against the insured is returned unsatisfied because of either bankruptcy or insolvency. N.J.S.A. § 17:28-2 (1994); accord Dransfield v. Citizens Casualty Co., 5 N.J. 190, 74 A.2d 304 (1950). If the PRP Group obtained a judgment against Spaulding that could not be executed because of Spaulding's bankruptcy, section 17:28-2 could authorize a direct action by the PRP Group against the Defendant insurers.

 In order to avoid the delay of obtaining a judgment against Spaulding and waiting for the judgment to be returned unsatisfied because of Spaulding's bankruptcy, the PRP Group relies upon another statutory exception to the common law rule prohibiting direct action against insurers, the New Jersey Spill Act ("Spill Act"). ...


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