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Clean Harbors Inc. v. Union Pacific Corp.

Superior Court of Delaware

March 28, 2017

CLEAN HARBORS, INC. Plaintiff,
v.
UNION PACIFIC CORPORATION, Defendant.

          Submitted: January 11, 2017

         Upon Defendant Union Pacific Corporation's Motion for Summary Judgment

         DENIED Upon Defendant Union Pacific Corporation's Motion for Partial Summary Judgment Against Clean Harbors' Damages Claim GRANTED IN PART, DENIED IN PART

         Upon Union Pacific Corporation's Motion In Limine To Exclude The Expert Opinions of Stan V. Smith GRANTED

          Ann L. Al-Bahish, Esq. (Argued), Jackson Gilmour & Dobbs, P.C., Norton A. Colvin, Jr., Esq., Mitchell C. Chaney, Esq., Colvin, Chaney, Saenz & Rodriguez, LLP, James W. Semple, Esq., Cooch and Taylor, PA., Attorneys for Union Pacific Corporation

          Gary S. Matsko, Esq. (Argued), Christopher J. Marino, Esq. (Argued), Paul L. Feldman, Esq., Davis Malm & D'Agostine, P.C., Richard L. Renck, Esq., Christopher M. Winter, Esq., Jaret P. Hitchings, Esq., Duane Morris LLP, Attorneys for Plaintiff Clean Harbors, Inc.

          OPINION

          JOHNSTON, J.

         PROCEDURAL CONTEXT

         This litigation arises from an alleged breach of an environmental indemnity provision ("Indemnity") in a Stock Purchase Agreement ("SPA"). On July 9, 2015, Clean Harbors, Inc. ("Clean Harbors") filed breach of contract and breach of implied covenant of good faith and fair dealing claims against Union Pacific Corporation ("UPC"). Clean Harbors seeks to recover remediation costs for contamination pursuant to the Indemnity.

         The Court will address three motions: UPC's Motion for Summary Judgment; UPC's Motion for Partial Summary Judgment Against Clean Harbors' Damages Claim; and UPC's Motion in Limine to Exclude the Expert Opinions of Stan V. Smith.

         STATEMENT OF FACTS

         UPC's subsidiary, USPCI, Inc., owned and operated a licensed hazardous waste facility located in Wichita, Kansas (the "Wichita Facility") from 1988-1994. UPC transferred the Wichita Facility to Laidlaw, Inc. and Laidlaw Transportation, Inc. ("Laidlaw") through the SPA in 1994. Safety-Kleen, Inc. succeeded Laidlaw and Clean Harbors succeeded Safety-Kleen. Clean Harbors has owned and operated the Wichita Facility since 2002.

         Relevant SPA Provisions

         The SPA includes a choice of law provision that designated Delaware law to govern the SPA. Section 8.10(a) of the SPA contains the Indemnity.

From and after the HWMA Closing, and subject to the limitations in this Section 8.10(a), Union Pacific shall reimburse, indemnify, defend and hold harmless Laidlaw Inc., Laidlaw, HWMA, Clive and the Subsidiaries from, against, and in respect of 80% of all Environmental Liabilities that may be imposed upon, asserted against or incurred by Laidlaw Inc., Laidlaw, HWMA, Clive or any Subsidiary and which (i) are attributable to a Third Party Claim, (ii) arise out of or in connection with acts or omissions occurring prior to the HWMA Closing Date, (iii) are incurred with respect to the HRI Wichita facility located in Wichita, Kansas, and (iv) are not attributable to a change in Environmental Laws occurring after the HWMA Closing Date. Union Pacific shall not have any liability under this Section 8.10(a) until the aggregate of all Environmental Liabilities covered under this Section 8.10(a) exceeds $2, 000, 000 and then only to the extent of 80% of such excess and only with respect to amounts spent within 20 years after the HWMA Closing Date.

(emphasis added).

Section 8.4(b) of the SPA sets forth certain indemnification procedures.
In the event an Indemnified Party shall have a Claim against any Indemnifying Party hereunder that involves a third party claim that could give rise to a right of indemnification under this Agreement (a "Third Party Claim"), the Indemnified Party shall transmit to the Indemnifying Party a Claim Notice relating to such Third Party Claim. During the 30-day period following receipt by an Indemnifying Party of a Claim Notice or such shorter period (but no shorter than 15 days) as is necessary for the Indemnified Party to respond to a complaint or summons (the "Election Period"), an Indemnifying Party shall notify an Indemnified Party (i) whether the Indemnifying Party disputes its potential liability to the Indemnified Party under this Article VIII with respect to such Third Party Claim or (ii) if the Indemnifying Party does not dispute its liability to the Indemnified Party, whether an Indemnifying Party desires, at the sole cost and expense of such Indemnifying Party, to defend the Indemnified Party against such Third Party Claim.

(emphasis added).

         EPA and KDHE

         UPC's Resource Conservation and Recovery Act ("RCRA") Permit became effective on April 7, 1995. UPC obtained the RCRA Permit from the Environmental Protection Agency ("EPA"). The RCRA Permit was necessary for the continued operation of the hazardous waste facility at the Wichita Facility. The RCRA Permit identified corrective actions that UPC or its successors would be required to undertake at the Wichita Facility. The RCRA Permit was made applicable to Laidlaw and its successors through the SPA. As a result, the RCRA Permit was effective as to Clean Harbors.

         The Wichita Facility was part of a collection of land in Northern Wichita known as the Northern Industrial Corridor Site ("NIC"). Lands in the NIC fell under the purview of the Kansas Department of Health and Environment ("KDHE"). The KDHE deemed a landowner whose property was contaminated, and contributing to the contamination of groundwater within the NIC boundaries, a Potentially Responsible Party ("PRP"). The KDHE required PRPs to address or clean up such contamination on their properties.

         The EPA, a federal agency, and the KDHE, a state agency, exercise separate, but interrelated authority concerning remediation of environmental contamination. In this case, the two agencies were simultaneously reviewing issues relating to the Wichita Facility. The EPA and KDHE processes and procedures are parallel, ...


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