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Polyone Corporation v. Westlake Vinyls, Inc.

United States District Court, W.D. Kentucky, Paducah

May 30, 2018

POLYONE CORPORATION, PLAINTIFF
v.
WESTLAKE VINYLS, INC., DEFENDANT

          MEMORANDUM OPINION

          Thomas B. Russell, Senior Judge United States District Court

         This matter is before the Court on Defendant Westlake Vinyls, Inc.'s (“Westlake”) Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), [R. 25], and Plaintiff PolyOne Corporation's (“PolyOne”) Objection to Submission of Evidence in Support of Westlake's Motion to Dismiss, [R. 35]. PolyOne responded to Westlake's Motion to Dismiss, [R. 27], and Westlake replied, [R. 36]. Westlake responded to PolyOne's Objection. [R. 38.] This matter is now ripe for adjudication. For the reasons stated herein, Westlake's Motion to Dismiss, [R. 25], is GRANTED. Westlake's previous Motion to Dismiss, [R. 10], is DENIED AS MOOT. PolyOne's Objection, [R. 35], is DENIED AS MOOT. PolyOne's Motion to Strike Westlake's Motion to Dismiss and Request to Remove Incorrectly Filed Documents, [R. 20], is DENIED AS MOOT.

         BACKGROUND

         The factual allegations as set out in the Amended Complaint, [R. 23], and taken as true are as follows.[1] At the center of this case is a vinyl chloride monomer (VCM) manufacturing facility in Calvert City, Marshall County, Kentucky (“the Facility”). [R. 23 at 2-3 (Amended Complaint).] The VCM facility contains three different chemical manufacturing areas: (1) the Chlorine Plant, which produces chlorine gas; (2) the Ethylene Plant, which manufactures ethylene; and (3) the EDC/VCM Plant, which manufactures ethylene dichloride (EDC) and VCM, the final product of the facility. [Id. at 3.]

         A. Westlake Acquires the Facility

         On or about March 1, 1990, Westlake Vinyls, Inc. purchased the EDC/VCM Plant from Goodrich Corporation pursuant to a Master Conveyance Agreement (“the 1990 Agreement”). [Id.] Under that agreement, Westlake assumed ownership of the EDC/VCM Plant and became responsible for operating and maintaining it. [Id.] The 1990 Master Conveyance Agreement includes mutual indemnity provisions in which Goodrich will indemnify Westlake

from and against any and all loss, cost, damage, claim, judgment, fine, penalty, debt, liability or expense . . . which results from or arises out of or occurs in connection with . . . any injury, sickness, disease or death of any person, damage to any property or remediation of any soil, surface water and/or groundwater resulting from or attributable to events occurring or any condition existing prior to the Closing Date and arising from or in any way incident to the ownership, use and/or operation of the VCM Plant prior to the Closing Date . . ..

[Id. (quoting 1990 Master Conveyance Agreement § 8.2(c))]. Also, it states that Goodrich shall hold Westlake harmless

“from and against any and all loss, cost, damage, claim, judgment, fine, penalty, debt, liability or expense . . . which results from or arises out of or occurs in connection with . . . the Retained Liabilities, " which are defined as "all liabilities and obligations . . . with respect to or arising out of the EDC or VCM business conducted by Goodrich at the Calvert City complex, or the ownership, possession or use of the Assets, or the employment or compensation of any of the employees, prior to the Closing” . . ..

         [Id. at 4 (quoting 1990 Master Conveyance Agreement §§ 1.4(b), 8.2(a)).] The 1990 Master Conveyance Agreement also includes a provision that Westlake shall hold Goodrich harmless

from and against any Liability which results from, arises out of or occurs in connection with . . . any injury, sickness, disease or death of any person, damage to any property or remediation of any soil, surface water and/or groundwater resulting from or attributable to events occurring from and after the Closing Date and arising from or in any way incident to the ownership, use and/or operation of the VCM Plant after the Closing Date

[Id. at 3 (quoting 1990 Master Conveyance Agreement § 8.3(c)).] Also, it states that Westlake will indemnify Goodrich “against any Liability which results from, arises out of or occurs in connection with . . . any assigned or assumed liability or obligation of Buyer contained herein.” [Id. at 4 (quoting 1990 Master Conveyance Agreement § 8.3(a)).]

         On or about August 15, 1997, Westlake purchased the Ethylene and Chlorine Plants, also known as the CA&O Plant, from Goodrich pursuant to a Purchase and Sale Agreement (“the 1997 Agreement”). [Id.] Under that agreement, Westlake assumed ownership of the CA&O Plant and responsibility for operating and maintaining it. [Id.] The Purchase and Sale Agreement contained mutual indemnity provisions similar to those of the 1990 Master Conveyance Agreement. [Id.] Under the Purchase and Sale Agreement, Goodrich shall hold Westlake harmless

from and against any and all loss, cost, damage, claim, judgment, fine, penalty, debt, liability or expense . . . which results from or arises out of or occurs in connection with . . . any injury, sickness, disease or death of any person, damage to any property or the investigation or remediation of any soil, surface water and/or groundwater resulting from or attributable to events occurring or any condition existing prior to the Closing Date and arising from or in any way incident to the ownership, use and/or operation of the CA&O Plant by BFG prior to the Closing Date

[Id. at 4 (quoting 1997 Purchase and Sale Agreement § 8.2(c)).] Also, Goodrich will indemnify Westlake

"from and against any and all loss, cost, damage, claim, judgment, fine, penalty, debt, liability or expense . . . which results from or arises out of or occurs in connection with . . . the Retained Liabilities, " which are defined as "all liabilities and obligations . . . with respect to or arising out of the use, operation or ownership of the CA&O Plant, or the ownership, possession or use of the Assets, or the employment or compensation of any of the employees, prior to the Closing"

[Id. at 5 (quoting 1997 Purchase and Sale Agreement §§ 1.4(d), 8.2(a)).] Also, it states that Westlake shall hold Goodrich harmless

from and against any Liability which results from, arises out of or occurs in connection with . . . any injury, sickness, disease or death of any person, damage to any property or the investigation or remediation of any soil, surface water and/or groundwater resulting from or attributable to events occurring from and after the Closing Date and arising from or in any way incident to the ownership, use and/or operation of the CA&O Plant by Westlake after the Closing Date.

         [Id. at 4 (quoting 1997 Purchase and Sale Agreement § 8.3(c)).] Furthermore, Westlake agreed to indemnify Goodrich “from and against any Liability which results from, arises out of or occurs in connection with . . . any assigned or assumed liability or obligation of Westlake contained herein.” [Id. at 5 (quoting 1997 Purchase and Sale Agreement § 8.3(a)).]

         Under the 1990 Master Conveyance Agreement and the 1997 Purchase and Sale Agreement, Goodrich remained responsible for compliance with the 1989 Resource Conservation and Recovery Act (RCRA) permit applicable to environmental investigation and remediation at the facility. [Id.] Thus, the 1990 and 1997 agreements require Westlake to also indemnify Goodrich for certain costs resulting from or attributable to its operations of the facility subsequent to those agreements. [Id.]

         B. PolyOne's Assumption of Goodrich's Liabilities

         In 1993, Goodrich divested itself of the assets of its vinyl division in order to create Geon Corporation. [Id. at 2.] In August of 2000, Geon merged with M.A. Hanna Company-forming PolyOne Corporation. [Id.] Although PolyOne never owned or operated the Facility, it inherited certain liabilities of the former Goodrich vinyl division, such as Goodrich's environmental liabilities associated with the EDC/VCM Plant, the CA&O Plant, and the RCRA permit under the 1993 Separation Agreement between Goodrich and Geon and the related Amended and Restated Assumption of Liabilities and Indemnification Agreement (“1993 ALIA”). [Id. at 5.]

         The 1993 ALIA also provides that “Goodrich shall make available to Geon to the extent it can . . . the benefit of any assumption of liability or indemnification provision in any agreement with third parties with respect to liabilities assumed by Geon hereby.” [Id. at 6 (quoting the 1993 ALIA).] In other words, PolyOne interprets this to mean that PolyOne may prosecute, on behalf of Goodrich, any claims Goodrich may have against third parties for contractual indemnity under the 1990 Agreement and the 1997 Agreement. [Id.] However, it also obligates PolyOne to pay Goodrich's liabilities for indemnification of Westlake under the 1990 Agreement and 1997 Agreement. [Id.]

         C. Environmental Conditions at the Facility

         PolyOne alleges that from the time of Goodrich's operations up until present day, releases of EDC, mercury, and other chemicals have occurred at the Facility. [Id.] Both the Kentucky Department of Environmental Protection (KDEP) and the U.S. Environmental Protection Agency (EPA) began investigating these releases of chemicals in the late 1970s and early 1980s. [Id.] ¶ 1986, Goodrich began installation of a network of groundwater extraction wells at the Facility, known as the Plantwide Corrective Action Program, or PCAP, which still operates today. [Id.] The PCAP extracts groundwater which is then “pumped to a steam stripper to remove EDC and other chemicals of concern present in groundwater due to both Goodrich's and Westlake's chemical releases at the Plant.” [Id.] PolyOne alleges that although Westlake has operated the steam stripper, or C-Stripper, since 1990, it charges Goodrich for the cost of that operation pursuant to a 1990 Manufacturing Services and Support Agreement between Westlake and Goodrich and a 1997 Environmental Services Agreement between Westlake and Goodrich. [Id. at 7.] Furthermore, PolyOne claims that, despite releasing large amounts of “EDC and other chemicals that have contributed to soil and groundwater contamination, ” Westlake has never paid for the operation of the PCAP or environmental investigation and remediation at the Facility. [Id.]

         D. Prior Litigation Leading to the 2007 Settlement Agreement

         In 2003, litigation ensued between Westlake, Goodrich, and PolyOne when Goodrich concluded that Westlake should have to pay a share of the costs of the release of chemicals allegedly caused by Westlake's operations. [Id. at 7.] The parties filed a flurry of actions based on the indemnity provisions in the 1990 Master Conveyance Agreement, 1997 Purchase and Sale Agreement, 1993 Separation Agreement, and 1993 ALIA. [Id. at 7-8.] Four years later, the parties reached a settlement pursuant to the 2007 Settlement and Release Agreement, (“2007 ...


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