Huntsman Advanced Materials LLC v. OneBeacon America Insurance Company et al
Filing
200
MEMORANDUM DECISION AND ORDER - IT IS HEREBY ORDERED: Hartfords Motion for Intervention (Dkt. 190 ) is GRANTED. Signed by Judge B. Lynn Winmill. (jd)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
HUNTSMAN ADVANCED
MATERIALS LLC,
Case No. 4:08-CV-00229-E-BLW
MEMORANDUM DECISION AND
ORDER
Plaintiff,
v.
ONEBEACON AMERICA
INSURANCE COMPANY and SPARTA
INSURANCE COMPANY, formerly
known as AMERICAN EMPLOYERS’
INSURANCE COMPANY,
Defendant.
INTRODUCTION
Pending before the Court is a motion to intervene filed by First State Insurance
Company, Hartford Accident and Indemnity Company, Hartford Underwriters Insurance
Company f/k/a New York Underwriters Insurance Company, Nutmeg Insurance
Company, and Twin City Fire Insurance Company (collectively, Hartford). (Dkt. 190.)
The motion is fully briefed and at issue. For the reasons below, the Court will grant the
motion.
MEMORANDUM DECISION AND ORDER - 1
BACKGROUND
1.
Factual Background
On February 27, 2004, the U.S. Forest Service notified Huntsman Advanced
Materials LLC (Huntsman) that it was a Potentially Responsible Party under CERCLA
Section 107(a) (USDAFS claim). Dkt. 1. In the USDAFS claim, the Forest Service
asserted that Huntsman and its predecessors at the North Maybe Phosphate Mine Site had
conducted mining operations that resulted in the release or threatened release of
hazardous substances or contaminates. (Dkt. 88-1.)
Since February 23, 2010, pursuant to CERCLA Section 106(a), Huntsman has
been subject to a Unilateral Administrative Order requiring it conduct a Remedial
Investigation/Feasibility Study (RI/FS) of the West Ridge Operable Unit at the North
Maybe Mine Site. (Dkt. 75-3.) Though it was initially anticipated that the RI/FS would be
completed within two and a half years, it has taken much longer. (Dkt. 81.) The remedial
investigation — conducted pursuant to statute “to collect data necessary to adequately
characterize the site for the purpose of developing and evaluating effective remedial
alternatives” — was completed in 2016. (See 40 C.F.R. § 300.430(d)(1); Dkt. 191 at 2.)
Baseline risk assessments and the feasibility study — conducted to determine whether
and what remedial action is necessary — remain ongoing. (See 40 C.F.R. §
300.430(e)(1); Dkt. 173 at 4.) At present, the targeted completion date of the feasibility
study is January 2022. (Dkt 185.)
MEMORANDUM DECISION AND ORDER - 2
Huntsman is the successor in interest of commercial general liability insurance
policies purchased from OneBeacon American Insurance Company (OneBeacon) in the
1960s and 1970s. (Dkt. 1 at 4.) Huntsman tendered a claim to OneBeacon on January 21,
2005 seeking defense and indemnity with respect to Huntsman’s environmental liabilities
arising out of the USDAFS claim. (Dkt. 1 at 8.) OneBeacon denied coverage in 2007. Id.
at 9. Huntsman is also the successor in interest of commercial general liability insurance
policies purchased from Hartford in the 1970s and 1980s. (Dkt. 190-1 at 8.) Huntsman
notified Hartford of the USDAFS claim; in 2006, Hartford denied coverage. (Dkt. 191-1
at 2.)
2.
Procedural History
The underlying case involves an action brought May 27, 2008, by Huntsman
against OneBeacon, seeking a declaratory judgment of OneBeacon’s duty to defend and
indemnify Huntsman with respect to Huntsman’s liabilities arising out of the USDAFS
Claim. (Dkt. 1.) In 2012, Hartford was brought into this action via OneBeacon’s ThirdParty Complaint. (Dkt. 134.) After a confidential settlement between the insurers relating
solely to defense costs for the USDAFS Claim, Hartford was dismissed from this action.
(Dkt. 160.)
On February 19, 2010, Judge Downes, writing for this Court, issued a stay on all
issues of indemnity in this action, pending the completion of the RI/FS. (Dkt. 81.) At that
time, it was expected that the RI/FS would be completed within two and a half years and
would determine whether evidence of contamination and its source existed. Id. at 6-7.
MEMORANDUM DECISION AND ORDER - 3
However, given the long and ongoing delay in completing the RI/FS, on November 5,
2018, this Court partially lifted the stay to allow discovery with an eye toward
OneBeacon filing a motion of summary judgment on the issue of liability. (Dkt. 185.)
Hartford now seeks intervention as of right and permissive intervention. (Dkt.
190.) Huntsman opposes intervention on the grounds that Hartford’s proposed
counterclaim fails to present an actual case or controversy as required by the Declaratory
Judgment Act and asserts the issue is thus not ripe for adjudication. (Dkt. 191.) The Court
will address the merits of these arguments below.
LEGAL STANDARD
1. Ripe Case of Actual Controversy
Under the Declaratory Judgment Act, the court “may declare the rights and other
legal relations of any interested party seeking such declaration” so long as it is “a case of
actual controversy within its jurisdiction.” 28 U.S.C. § 2201(a). The phrase “case of
actual controversy” refers to the same cases and controversies that are justiciable under
Article III. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (citation
omitted). Thus, a case must be ripe for adjudication for the court to have subject-matter
jurisdiction. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 671 (9th Cir. 2005)
(citation omitted).
In private party contract disputes, the traditional ripeness standard inquires
whether “there is a substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a declaratory
MEMORANDUM DECISION AND ORDER - 4
judgment.” Id. (quoting Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273
(1941)). Claims involving “uncertain or contingent future events that may not occur as
anticipated, or indeed may not occur at all” are generally unripe. Chandler v. State Farm
Mut. Auto. Ins. Co., 598 F.3d 1115, 1123 (9th Cir. 2010) (citations omitted).
2. Intervention
Federal Rule of Civil Procedure 24 provides for both intervention as a matter of
right and permissive intervention. Rule 24(a)(2) permits intervention as of right when: (1)
the motion is timely; (2) the applicant claims a “significantly protectable” interest relating
to the property or transaction which is the subject of the action; (3) the applicant is so
situated that the disposition of the action may as a practical matter impair or impede its
ability to protect that interest; and (4) the applicant’s interest is inadequately represented
by the parties to the action. Wilderness Soc. v. U.S. Forest Serv., 630 F.3d 1173, 1177
(9th Cir. 2011). Generally, the court must construe Rule 24(a) liberally in favor of
intervenors, relying on “practical and equitable concerns,” rather than technical
distinctions. Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 817 (9th Cir. 2001).
Although this standard is construed liberally, “the applicant bears the burden of showing
that each of the four elements is met.” Freedom from Religion Found., Inc. v. Geithner,
644 F.3d 836, 841 (9th Cir. 2011).
Rule 24(b)(1) allows permissive intervention if: (1) the motion is timely; (2) the
applicant’s claim shares a common question of law or fact with the main action; and (3)
the court has an independent basis for jurisdiction over the applicant’s claims. Donnelly
MEMORANDUM DECISION AND ORDER - 5
v. Glickman, 159 F.3d 405, 412 (9th Cir. 1998). The court may also consider whether
“intervention will unduly delay the main action or will unfairly prejudice the existing
parties.” Id. In addition, the court can examine “the nature and extent of the intervenors’
interest,” and “whether the intervenors’ interests are adequately represented by other
parties.” Spangler v. Pasadena City Bd. of Educ., 552 F.2d 1326, 1329 (9th Cir. 1977).
Rule 24(c) requires that a motion to intervene be accompanied by a pleading
setting forth the claim for which intervention is sought. The court considers only whether
parties have alleged “a legally sufficient claim,” and not whether they are “likely to
prevail on the merits.” Williams & Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd.,
840 F.2d 72, 75 (D.C. Cir. 1988).
ANALYSIS
1.
A Single Contingency Does Not Prevent Hartford’s Claim Against
Huntsman from Being Ripe for Determination.
Huntsman contends there is no case or controversy ripe for the declaratory
judgment in Hartford’s proposed counterclaim.
First, Huntsman argues that the duty to indemnify cannot be decided until there is
a final determination of Huntsman’s liability regarding the USDAFS claim. (Dkt. 191 at
4.) This argument is an attempt to relitigate the Court’s decision to lift the stay. (See Dkt.
173.) As the Court previously found, a ripe case and controversy exists absent a final
decision from the Forest Service about the extent of Huntsman’s liability. (Dkt. 185.)
MEMORANDUM DECISION AND ORDER - 6
Second, Huntsman argues that there is not a ripe case or controversy to adjudicate
because Huntsman has not yet asserted a claim for indemnity against Hartford. (Dkt 191
at 2.) While Huntsman has not yet sued Hartford, Huntsman indicated in its own briefing
that Huntsman notified Hartford of the USDAFS claim and, in 2006, Hartford denied
coverage. (Dkt. 191-1 at 2.)
With respect to Huntsman’s second argument, the caselaw provides guidance on
when a ripe case or controversy exists between an insurer and its insured. “A dispute
between an insurer and its insureds over the duties imposed by an insurance contract
satisfies Article III’s case and controversy requirement.” Gov’t Employees Ins. Co. v.
Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (citations omitted). Although Huntsman
contends no dispute exists until the insured asserts a claim for indemnity against the
insurer in court, the caselaw does not support this argument.
Rather, the caselaw indicates that an insured need not have filed an action for
contract damages or equitable relief for an actual controversy to exist under the
Declaratory Judgment Act. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937);
MedImmune, Inc., 549 U.S. at 1227. The Ninth Circuit has held that a ripe dispute exists
when an insurer faces “the possibility of having to honor a policy no longer in force.”
MedImmune, Inc., 549 U.S. at 1223. Similarly, in Aetna Cas. & Sur. Co. v. Gen.
Dynamics Corp., the Eighth Circuit held that an insured’s clear demand for payment of
defense and indemnity costs and an insurer’s dispute of those demands constituted a “live
justiciable controversy between the parties sufficient to invoke the jurisdiction of the
MEMORANDUM DECISION AND ORDER - 7
court” even though the insured had not brought suit against the insurer. 968 F.2d 707,
709-11 (8th Cir. 1992).
The caselaw further makes clear that a ripe controversy can exist even when
contingencies are present. In an insurer’s action for declaratory judgment, the United
States District Court for the Northern District of Georgia held in that a justiciable
controversy arose from the “possibility or conjecture of a future lawsuit arising from
insured’s refusal to accept denial of coverage.” Am. Ins. Co. v. Evercare Co., 299 F.
Supp. 2d 1355, 1359 (N.D. Ga. 2010). See also Assoc. Indem. Corp. v. Fairchild Indus.,
Inc., 961 F.2d 32, 35 (2d Cir. 1992) (citation and internal quotation marks omitted)
(“That the liability may be contingent does not necessarily defeat jurisdiction of a
declaratory judgment action. Rather, courts should focus on the practical likelihood that
the contingencies will occur[ ]. Indeed, litigation over insurance coverage has become the
paradigm for asserting jurisdiction despite future contingencies that will determine
whether a controversy ever actually becomes real.”).
Huntsman contends that it should be permitted to choose whether and under which
policies to seek coverage from Hartford for some or all of the liability arising out of the
USDAFS claim. This is unpersuasive because although Huntsman has not sued Hartford
for coverage, it has notified Hartford of the USDAFS claim and Hartford has denied
coverage. Unlike the cases in which claims were unripe because insurers had not yet
denied coverage, in this instance, both parties have already indicated their positions on
Hartford’s liability. Since the parties have taken these adverse positions, the Court need
MEMORANDUM DECISION AND ORDER - 8
not wait for Huntsman to sue Hartford. The single contingency in this case — whether
Huntsman will eventually sue Hartford — is exclusively within Huntsman’s control and
will almost assuredly occur. See, e.g., Century Indem. Co. v. Marine Grp., LLC, 848 F.
Supp. 2d 1229, 1235 (D. Or. 2012) (“A claim is ripe where there is substantial likelihood
that the dispute will reach the [additional] policies.”). The claim is therefore appropriate
for adjudication under the Declaratory Judgments Act. Accordingly, the Court finds that a
justiciable case and controversy exists, satisfying Article III and the Declaratory
Judgment Act.
2.
Hartford is Entitled to Intervene.
Huntsman does not truly dispute that intervention is appropriate here. Hartford has
established that it is entitled to intervention as a matter right or, in the alternative,
permissive intervention.
A.
Intervention as of Right
As discussed above, Rule 24(a)(2) permits intervention as a matter of right when:
(1) the motion is timely; (2) the applicant claims a “significantly protectable” interest
relating to the property or transaction which is the subject of the action; (3) the applicant
is so situated that the disposition of the action may as a practical matter impair or impede
its ability to protect that interest; and (4) the applicant’s interest is inadequately
represented by the parties to the action. Wilderness Soc., 630 F.3d, at 1177. In the light of
the Ninth Circuit’s policy of liberal intervention and the minimal showing Hartford must
make, as well as the equitable principles behind permitting a party with a significant,
MEMORANDUM DECISION AND ORDER - 9
practical interest in the case to intervene, the Court finds that Hartford meets all the
requirements for intervention as of right.
First, Hartford’s application is timely considering (1) the stage of the proceedings
at which intervention is sought; (2) prejudice to the other parties, and (3) the reason for
and length of any delay. See United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th
Cir. 2004). Here, Hartford promptly filed its motion to intervene early in the proceedings
after the stay was lifted. There is no prejudice. Nor was there any delay in filing that must
be explained.
Next, Hartford has a significant protectable interest that the disposition of this
action may impair its ability to protect. A “significant protectable interest,” requires only
that Hartford: (1) assert an interest that is protected by law, and (2) demonstrate a
“relationship” between that interest and the claims against OneBeacon. State of
California v. United States, 450 F.3d 436, 441 (9th Cir. 2006). A party’s impaired ability
to protect its interest is put in practical rather than legal terms and is satisfied “whenever
disposition of the action would put the applicant at a practical disadvantage in protecting
its interest.” Portfolio FB-Idaho, LLC v. Fed. Deposit Ins. Corp. as Receiver for First
Bank of Idaho, No. 1:10-CV-377-BLW, 2010 WL 5391442, at *2 (D. Idaho Dec. 17,
2010).
Here, Hartford’s interest in its possible coverage obligations is protected by law
and related to OneBeacon’s claim. As a coinsurer of Huntsman and a party sharing in
Huntsman’s defense costs for the underlying USDAFS Claim, Hartford’s interest could,
MEMORANDUM DECISION AND ORDER - 10
as a practical matter, be impaired or impeded by the ultimate remedy sought by
OneBeacon. Undoubtedly, if the Court were to make a coverage determination for
OneBeacon, Hartford’s interest would be impaired as a coinsurer of Huntsman and
cofunder of Huntsman’s defense.
Finally, the existing parties inadequately represent Hartford’s interest. In
determining the adequacy of representation, the court considers whether: (1) the interest
of a present party is such that it will undoubtedly make all of a proposed intervenor’s
arguments; (2) the present party is capable and willing to make such arguments; and (3) a
proposed intervenor would offer any necessary elements to the proceeding that other
parties would neglect. Arakaki v. Cateyano, 324 F.3d 1078, 1086 (9th Cir. 2003). The
burden on proposed intervenors in showing inadequate representation is minimal. Id.
In this action, OneBeacon’s likely course of defense would not make all of
Hartford’s arguments. Nor, is OneBeacon capable and willing to make such arguments,
because OneBeacon’s policies are distinct from Hartford’s policies and have significant
differences in their terms. Hartford’s policies thus require separate representation.
Similarly, Huntsman’s position on Hartford’s coverage obligations is adverse to
Hartford’s, making it unlikely that Huntsman will capably and willingly make arguments
representing Hartford’s interests in this action.
B.
Permissive Intervention
In the alternative to intervention as of right, Rule 24(b) allows permissive
intervention if: (1) the intervenor shares a common question of law or fact with the main
MEMORANDUM DECISION AND ORDER - 11
action; (2) its motion is timely; and (3) the court has an independent basis for jurisdiction
over the applicant's claims. Fed. R. Civ. P. 24(b)(2); Donnelly, 159 F.3d at 412. The
Court may use its discretion as to whether allowing an intervention will “unduly delay or
prejudice” the rights of the original parties. Fed. R. Civ. P. 24(b)(3).
The Court finds that Hartford meets all the requirements for permissive
intervention. As demonstrated above, the motion is timely. The Court has an independent
basis for jurisdiction under 28 U.S.C. § 1332. As a coinsurer of Huntsman, Hartford
disputes the same issue of coverage for the same underlying claims that OneBeacon
currently disputes. If Hartford sued Huntsman separately, it would most likely bring
similar or identical claims and rely on similar or identical facts. Hartford therefore shares
a common question of law or fact with the present action. The Court does not believe that
Hartford’s participation will delay or prejudice the proceedings.
ORDER
IT IS HEREBY ORDERED:
1.
Hartford’s Motion for Intervention (Dkt. 190) is GRANTED.
DATED: August 2, 2019
_________________________
B. Lynn Winmill
U.S. District Court Judge
MEMORANDUM DECISION AND ORDER - 12
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