Pantry, Inc. v. Stop-N-Go Foods, Inc. (777 F. Supp. 713, 1991)

MEMORANDUM ENTRY DISCUSSING COURT’S DISPOSITION OF DEFENDANTS’ MOTIONS TO DISMISS COUNTS III, IY AND Y OF PLAINTIFF’S AMENDED COMPLAINT

TINDER, District Judge.

Each of the matters discussed below is before the court on defendants’ motions to dismiss, filed May 30, 1989 and August 5, 1991.

I. Motion to Dismiss Count III

Count I of plaintiff’s complaint states a claim for damages resulting from defendants’ breach of a purchase agreement. Count III, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 (Supp. 1990) (the “Act”), requests a declaratory judgment that the defendants breached the purchase agreement. Defendants move the court, to dismiss count III because they argue the declaratory judgment claim is inappropriately raised given the remedy provided by the breach of contract claim.

Although the Act allows a party to request declaratory relief and other relief in the same action, the court may use its discretion to determine whether declaratory relief is “appropriate” when other adequate remedies are available. Fed.R.Civ.P. 57. When declaratory relief and another remedy are substantially similar, the court may exercise its discretion to dismiss the declaratory judgment claim. Newton v. State Farm Fire & Casualty Co., 138 F.R.D. 76 (E.D.Va.1991).

The Newton court considered an issue similar to that presented in this matter when deciding whether to dismiss plaintiffs’ declaratory judgment claim. Plaintiffs claimed that defendant breached their duty under an insurance contract; in addition, plaintiffs requested a declaration of their rights under the insurance policy. The thrust of both claims was that the defendant insurance company owed plaintiffs coverage for their loss. The court reasoned that determination of the breach of contract claim would effectively resolve any questions related to an interpretation of the insurance contract. Id. at *77. Thus, the declaration of rights under the contract was not a legal issue with “sufficient immediacy and reality” to justify continuance of the declaratory judgment portion of the suit. Id.

In sum, the court held that the suit presented factual questions more appropriately considered under a breach of contract theory, because declaratory relief would not terminate the dispute as to whether the plaintiffs insurance claim required payment from the defendant. Id. Although the superfluous declaratory judgment claim would not cause any material harm, the Newton court found that allowing it to “linger” would be unnecessary, would not promote judicial economy, would confuse the issues at trial and promote piecemeal consideration of the issues. Id. at n. 5. Given these considerations, the court used its discretion to dismiss the declaratory judgment claim.

In this case, the declaratory judgment claim is inappropriately raised because the plaintiff may be fully compensated if it prevails on the breach of contract claim. Plaintiffs argument that the cost of remediation is sufficiently inestimable to require trial of an additional legal theory is unpersuasive. Plaintiff may prove its damages as in any other breach of contract action requiring estimation of future losses. Determination of the breach of contract claim will sufficiently and effectively resolve the issues presented in this matter.

Therefore, defendants’ motion to dismiss count III of plaintiffs complaint will be granted.

II. Motion to Dismiss Count IV

Count IV of plaintiffs complaint seeks the equitable relief of rescission. Plaintiff claims the parties entered the Purchase Agreement under a mutual mistake and that defendants’ material, substantial breach goes to the heart of the parties’ agreement. Defendants move to dismiss count IV because defendants claim plaintiff may not request a legal remedy (count I) and an inconsistent equitable remedy (count IV) in the same action.

Defendants’ argument contradicts [F.R.C.P.] 8(e)(2) and also mistakes the time at which a party must elect between alternative or inconsistent remedies. Plaintiff has sufficiently stated independent claims for breach of contract and for rescission. Rule 8(e)(2) allows a party to plead alternative theories of relief; therefore, both of these independent claims may be stated in a single complaint. Defendants have cited no authority to support their statement of a “long-settled rule that a claim for an equitable remedy may not be maintained when the plaintiff has an adequate remedy at law.” Reply Brief at 6. Of course, at some point both claims cannot be “maintained”; however, that point is not met when the matter is in the pleading stage.

When a matter is in the pleading stage, a plaintiff may plead alternative legal and equitable theories of relief because it is unclear which remedy will be supported by the evidence. A party must elect between inconsistent forms of relief when both forms of relief become ripe to choose between them. The axiomatic rule that equitable relief may not be granted when adequate legal relief exists does not affect the viability of either type of claim at the pleading stage. Media General, Inc. v. Tanner, 625 F.Supp. 237 (W.D.Tenn.1985) (dismissal of count seeking inconsistent legal and equitable claims due to failure to elect remedy would not be appropriate at pleading stage). Count I and count IV each state claims upon which relief may be granted. Thus, a motion to dismiss count IV on grounds of inconsistency must fail.

III. Motion to Dismiss Count V of Amendment Complaint

After the Indiana Legislature amended an environmental statute during the 1991 General Assembly, plaintiff amended its complaint to add a claim under the new law. Effective July 1,1991, an amendment to the Underground Storage Tank (“UST”) chapter of Indiana’s environmental statutes allows a current UST owner to voluntarily clean-up a contaminated site and then seek contribution from the person who owned the UST at the time the release occurred. Ind.Code Ann. § 13-7-20-21(b) (Burns Supp.1991). In addition, the amendment allows the current owner to recover attorneys’ fees arising from the contribution action. Prior to the amendment, the statute allowed a current owner to recover from the prior owner only after the state required the current owner to take a corrective action.

Plaintiff added count Y to the complaint, which claims the amendment allows the plaintiff to recover all response costs associated with remediating contaminated sites purchased from the defendant. Defendant moved to dismiss count Y for failure to state a claim. Defendant argued that the amendment cannot apply retroactively to create new liability. The petroleum releases at issue occurred prior to the effective date of the amendment; further, plaintiff incurred and claimed response costs prior to the effective date of the amendment. Defendants argue that the amendment does not contain any language indicating that the legislature intended the amendment to apply retroactively; therefore, because Indiana law presumes prospective application of statutes, plaintiff has failed to state a valid claim under the amendment. For the reasons below, defendants’ motion to dismiss count V is denied; however, plaintiff's claim under the amendment is limited to response costs and attorneys’ fees incurred after the effective date of the amendment.

A. Indiana Law Regarding Retroactive Application of Statutes

The analysis below proceeds against a backdrop of statements made by Indiana courts regarding retroactive application of statutes. Indiana law has firmly and consistently held that a statute is presumed to operate prospectively only, unless the statute explicitly states otherwise. Manns v. State Dept. of Highways, 541 N.E.2d 929 (Ind.1989); Gosnell v. Indiana Soft Water Serv., Inc., 503 N.E.2d 879 (Ind.1987); International Fidelity Ins. Co., Inc. v. State, 567 N.E.2d 1161 (Ind.Ct.App.1991); Rogers v. R.J. Reynolds Tobacco Co., 557 N.E.2d 1045 (Ind.Ct.App.1990); Bailey v. Menzie, 505 N.E.2d 126 (Ind.Ct.App.1987). Retroactive application is the exception; laws are applied prospectively absent strong and compelling reasons. Arthur v. Arthur, 519 N.E.2d 230, 231 (Ind.Ct.App.1988), aff'd, 531 N.E.2d 477 (Ind.1988).

Indiana courts adhere to a strict rule of construction against retroactive operation and will prohibit such unless the legislature’s intention to have the statute apply retroactively is unequivocally and unambiguously shown by necessary implication. Turner v. Town of Speedway, 528 N.E.2d 858, 863 (Ind.Ct.App.1988). Under certain conditions statutes may be applied retroactively if the legislature so intended but yet failed to indicate in the language.

A statute must be so construed as to make it effect the purpose for which it was enacted, and if necessary to that end, it will be applied to past as well as to future transactions, although it does not in terms so direct, unless to do so will impair some vested right or violate some constitutional guaranty.

Connecticut Mut. Life Ins. Co. v. Talbot, 14 N.E. 586, 589, 113 Ind. 373, 378 (1887); Standard Accident Ins. Co. v. Miller, 170 F.2d 495, 497 (7th Cir.1948); Hiatt v. Howard, 8 N.E.2d 136, 138, 104 Ind.App. 167, 171 (1937). Thus, Indiana law prohibits impairment of vested rights under any circumstance, yet allows retroactive application of an amendment if it is clear the legislature intended the amendment to operate upon prior conduct.

B. The Amendment

The 1991 amendment to Ind.Code § 13-7-20-21 changed the UST laws to allow a private party to take voluntary corrective action and then seek contribution from the person who owned or operated the UST at the time the release occurred.

(b) A person who:

(1) Pays to the state the costs described under subsection (a); or

(2) Undertakes corrective action resulting from a release from an underground storage tank, regardless of whether the corrective action is undertaken voluntarily or under an order issued under section 19 or 20 of this chapter;

shall receive a contribution from a person who owned or operated the underground storage tank at the time the release occurred. A person who brings a successful action to receive a contribution from an owner or operator shall also receive reasonable attorney’s fees and court costs from the owner operator.

Ind.Code § 13-7-20-21(b) (Supp.1991). Formerly, a current owner could recover response costs from a third party if (1) the state ordered the current owner to undertake corrective action, and (2) the release was caused solely by the acts or omissions of that third party. The amendment allows a current owner (or any other person) to undertake corrective action voluntarily and then seek contribution. In sum, the amendment removes the intermediate step of a state-issued corrective action order.

Two relevant issues are raised by this amendment. The first issue is whether the amendment applies to releases that occurred prior to the effective date of the statute. If the answer to that question is affirmative, then a second issue is raised: whether a party who undertakes voluntary corrective action may use the amendment to recover response costs incurred prior to the effective date of the amendment, July 1, 1991.

C. Amendment Applies to Any Petroleum Release, Including Releases that Occurred Prior to Effective Date of Amendment

The State of Indiana may require a current owner or operator to remediate a site contaminated by a release that occurred prior to the effective date of the original statute. Public Law 172 of 1987 added Chapter 20 to Indiana’s Environmental Management Article; Chapter 20 regulated UST’s and gave the Commissioner of the Department of Environmental Management the authority to require an owner or operator to undertake correct action to remediate a release of a regulated substance. Ind.Code § 13-7-20-19 (Supp. 1991).

It is clear from the purpose of the statute that the Commissioner had the authority to order corrective action for releases occurring prior to the effective date of the statute. The statute was intended to identify responsible parties and provide an effective method for the state to remediate existing hazardous conditions caused by petroleum releases. The definition of “owner” indicates that the statute was intended to reach back retrospectively to assess liability for prior releases against pri- or responsible parties. Ind.Code § 13-7-20-4 (Supp.1991) (providing that the “owner” of a UST not in use as of November 1, 1984 is considered the “owner” of record). If the statute were to operate prospectively only, then it would have been phrased quite differently. The statute would have been phrased to include only those who create such messes in the future and/or those who acquire such messes in the future, rather than those who “own” them now.

An analogy to interpretations of the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., is apposite because Indiana’s UST statutes follow the same remedial principles established by CERCLA. Although CERCLA provisions contain no explicit statement providing retroactive application, it clearly the rule in federal courts that congress intended CERCLA to apply retroactively. See, e.g., U.S. v. Northeastern Pharmaceutical and Chemical Co., Inc., 810 F.2d 726 (8th Cir.1986); U.S. v. Shell Oil Co., 605 F.Supp. 1064 (D.Colo.1985). Indiana’s UST laws fill a gap in CERCLA. A petroleum release is not affected by CERCLA, because petroleum does not qualify as a “hazardous substance” under CERCLA. Indiana’s UST laws, drafted in the same language and spirit of CERCLA, were intended to provide a mechanism for effectively administering remediation of sites contaminated by petroleum releases.

Given that CERCLA applies retroactively to provide liability for contamination occurring prior to its effective date, Indiana’s UST laws apply retroactively also. Any other construction would completely diminish the effectiveness of the remedial scheme established by environmental laws. Sites contaminated by petroleum releases that occurred prior to 1987 are no less hazardous than more recently contaminated sites. It is illogical to hold that the state does not have the authority to order corrective action if the owner could prove that the land was contaminated prior to 1987. The statute was intended to apply to any site contaminated by petroleum releases, regardless whether the release occurred after the effective date of the statute.

Having held that Indiana UST laws apply retroactively, it is a simple matter to determine that the amendment applies retroactively also. Thus, Ind.Code § 13-7-20-21(b) applies retroactively to allow a person to correct a site contaminated by a pre-enactment release and seek contribution from the person who owned the site at the time of the release. The amendment merely removed a prerequisite to recovery under the former statute; a person may initiate corrective action voluntarily and recover under the statute without the state issuing a prior corrective order. The amendment cured the innocuous situation whereby a private party who voluntarily desired to remediate a site and receive contribution from the responsible party was required to wait for a corrective order prior to beginning remediation.

Nothing in the amendment suggests that it was intended to affect retroactive application of the statute. Whether the cleanup is initiated by the state or a private party, the UST laws apply retroactively to releases occurring prior to the effective date of the statute or the amendment, respectively. No vested right is upset by this construction of the amendment, because the owner of the site at the time of the contamination always faced liability under Ind.Code § 13-7-2Q-21(a). The amendment merely effects a transfer of the enforcement of the obligation, which obligation had existed in full force prior to the amendment.

Thus, count V of plaintiffs complaint states a viable claim for contribution under Ind.Code § 13-7-20-21(b).

D. Amendment Does Not Apply Retroactively to Allow Recovery of Pre-enactment Response Costs

Although the amended section of Ind.Code § 13-7-20-21 applies to releases occurring prior to the effective date of the amendment, the amendment does not allow recovery of response costs or attorneys’ fees incurred prior to the effective date of the amendment.

The amendment allows private parties to recover contribution without intermediate state involvement; therefore, the purpose of the amendment was to encourage private parties to remediate environmental hazards voluntarily. This purpose is not served by allowing a party who had previously incurred response costs to seek contribution against a prior owner. The amendment does not provide an additional theory of recovery to those parties who had previously cleaned-up release sites. Prior to the amendment, those parties were, or should have been, protected by contractual warranties.

Construing the amendment to allow recovery of pre-enactment response costs would not promote any future environmental clean-up, because the clean-up producing the pre-enactment costs would have been performed. Instead of promoting environmental clean-up, such a construction would merely provide a windfall recovery for parties who voluntarily effected remediation prior to the amendment. Section 13-7-20-21(b) was intended to effect future remediation of existing or future contamination; the purpose of the amendment was not to provide a remedy for pre-enactment costs incurred voluntarily. Given that the statute and the amendment apply retroactively precisely because the legislature intended them to promote future corrective aetion, the amendment must apply to pre-enactment response costs only.

E. Conclusion

Defendants’ motion will be granted to the extent that Count V of plaintiffs amended complaint demands contribution for costs incurred prior to the effective date of the amendment; however, defendants’ motion will be otherwise denied, because plaintiff has stated a valid claim for contribution of costs incurred after July 1, 1991.

ALL OF WHICH IS ENTERED.

ON MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff filed an amended five-count complaint against defendants July 11,1991. Count I of the amended complaint alleged that the defendants breached warranties provided in a Purchase Agreement made between the parties. Plaintiff’s motion requests partial summary judgment on the issue of liability, declaring that defendants breached certain warranty provisions in the Purchase Agreement.

I. Findings of Fact

On December 18, 1987, The Pantry, Inc. (“The Pantry”) and Stop-N-Go Foods, Inc. and Tri-state Stop-N-Go, Inc. (collectively “Stop-N-Go”) executed a Purchase Agreement relating to the sale of sixteen convenience stores (the “properties”). All of these properties have facilities for the retail sale of petroleum products, and are located in the Evansville, Indiana and Henderson, Kentucky areas.

Prior to the closing date, Stop-N-Go employed Losack, Inc. (“Losack”) to perform environmental testing at the facilities. Stop-N-Go hired Losack in response to concerns raised by The Pantry regarding the possible presence of subsurface contaminants on the properties. Losack’s test results indicated the presence of benzene, toluene, xylene and petroleum hydrocarbons in varying concentrations at each of the properties. Purchase Agreement, Appendix A. The Losack report noted that an underground pump operating at a property located in Evansville, Indiana discharged contaminated groundwater into a nearby city sewer. The pump removed groundwater to keep the water level controlled around an improperly anchored underground storage tank (“UST”) containing waste oil. Instead of performing their own testing, The Pantry demanded that the Purchase Agreement include certain warranties regarding the environmental conditions at the properties. Both parties drafted the language of the environmental warranties.

Article 13 of the Purchase Agreement contains the entirety of the warranties, covenants, and other provisions that were agreed to by the parties concerning the environmental condition of the Properties. Article 13 contains the following definition of the term “Environmental Requirements,” which is used throughout the article:

“Environmental Requirements” shall mean: federal, state, county or local statutes, laws, rules, regulations, ordinances, codes, licenses, permits or standards in effect as of the date of execution hereof imposed by any governmental authority having jurisdiction in the matter as of the date of execution hereof, relating to environmental matters, including, by way of illustration and not limitation, the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.) and the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. § 9601 et seq.).

Paragraphs C and D of Article 13 of the Purchase Agreement contain the following warranties of Stop-N-Go (referred to as the “Seller”) to The Pantry (referred to as the “Buyer”) concerning the Stores (referred to as the “Property”):

C. As of the date of closing, the real property including leased real property, which is the subject of this Agreement (the “Property”), and such Property’s use at the time of closing and prior uses by Seller, and to Seller’s knowledge any other person, to the best of Seller’s knowledge substantially comply and have at all times substantially complied with, and Seller is not in violation of and has not violated, in connection with the ownership, use, maintenance or operation of the Property in the conduct of the business related thereto, Environmental Requirements. Except for the Property suffering the Known Contamination, no corrective action, work, repairs, construction, or other expenditures with respect to the Property is required by Environmental Requirements. Except for the Property suffering the Known Contamination, no hazardous or toxic materials, substances, pollutants, contaminants, or waste have been, by Seller or to Seller’s knowledge any other person, to the best of Seller’s knowledge released into the environment or deposited, discharged, placed or disposed of at, on, or to Seller’s knowledge near the Property at levels requiring any corrective action under Environmental Requirements as defined herein, and the Property has not been used at any time by Seller as a landfill or waste disposal site, and Seller has no knowledge that the Property has been used by any person as such.

D. No notices of any violation of Environmental Requirements relating to the property of its use have been received by Seller. There are no writs, injunctions, decrees, orders or judgments outstanding and no lawsuits, claims, proceedings, or investigations pending or threatened relating to the ownership, use, maintenance or operation of the property, with the exception of the Known Contamination.

With the exception of the Property suffering the Known Contamination, Purchaser accepts the locations, tanks, and dispensing equipment in their present condition and assumes responsibility therefor as of the date of closing hereof, and agrees to hold Seller harmless from any loss, cost, damage or expense arising from or related to the existence of or operation of such gasoline storage tanks and facilities, despite the fact that changes in the Environmental Requirements may occur subsequent to the date of execution hereof, and such changes in the future may dictate action not required at the time of execution hereof, with the exception that in the event that during a period of six (6) months after the closing, corrective action is required as the result of the existence of contamination or lack of tigtness [sic] in tanks or dispensing equipment prior to the closing and delivery of possession hereunder at levels requiring corrective action, pursuant to the Environmental Requirements. Seller shall indemnify and hold Purchaser harmless from any loss, cost, damage or expense, including reasonable attorneys’ fees, resulting from and related directly to such necessity for corrective action. Such indemnity shall not relate to consequential or indirect expense or loss such as, by way of illustration and not limitation, interruption of business, loss or revenue or profit, or interference with ingress and egress to the Property, and in the event any action or proceeding is instituted to enforce any obligation hereunder relating to such indemnity, Purchaser shall have the burden of proof to establish that such corrective action is the result of contamination or such lack of tightness existing prior to the date of closing at levels requiring such corrective action pursuant to the Environmental Requirements in place as of the date of closing.

The court considers the undisputed Lo-sack test results as factually accurate. Benzene, toluene, xylene and other petroleum hydrocarbons were present in the test samples of the soil and groundwater at the Properties at or about the time of the closing of the sale in the following concentrations, shown in parts per million. (MW# refers to monitoring well samples of groundwater; B# refers to boring samples of soil; S# refers to particular samples of groundwater or soil from a given monitoring well or soil boring.)

a. 5817 Stringtown Road, Evansville, Indiana

Toluene Sample Number Benzene Total Hydrocarbons & P 3 CD

B# 1, S# 1 <0.10 O C5 A o Í-* o 05

B# 1, S# 2 3.76 05 lO cn bo to