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Taracorp, Inc. v. NL Industries

January 11, 1996






Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 94 C 4721--William T. Hart, Judge.

Before FLAUM, EASTERBROOK, and D. WOOD, Circuit Judges.

FLAUM, Circuit Judge.



Taracorp, Inc. ("Taracorp") sued NL Industries, Inc. ("NL") for indemnification of certain environmental clean-up liabilities under their March 4, 1985 Agreement. Exercising its diversity jurisdiction, the district court granted summary judgment for NL. The district court found that the language of the Agreement unambiguously excluded the type of claim Taracorp was making and noted that the extrinsic evidence offered confirmed this conclusion. We reverse.


Taracorp, a Georgia corporation with its principal place of business in Atlanta, Georgia, owns and operates scrap metal and metal fabricating businesses throughout the country. NL, a New Jersey corporation with its principal place of business in Houston, Texas, formerly owned substantial assets in the metal industry, including several lead smelting facilities. In 1979 Taracorp purchased three lead smelting plants from NL, which were located in Granite City, Illinois; McCook, Illinois; and St. Louis Park, Minnesota. The disputed liability in this case involves the St. Louis Park facility.

From 1979 to 1982, Taracorp operated the St. Louis Park plant in the same manner as NL had been operating the plant. In fact, Taracorp assumed NL's role in a Battery Processing Agreement (dated August 18, 1978) with Union Scrap Iron & Metal ("Union Scrap"). Under the Battery Processing Agreement, Taracorp (and previously NL) would purchase spent batteries and then have them shipped directly to one of Union Scrap's three locations, all located within five miles of the St. Louis Park facility. Union Scrap would then break apart the batteries and send the lead plates to Taracorp for smelting. The Battery Processing Agreement clearly states that the batteries and the battery plates remain at all times "the sole and exclusive property of [Taracorp]" (originally NL). This relationship with Union Scrap continued until 1982, when Taracorp shut down the St. Louis Park plant.

In the early 1980's, the United States Environmental Protection Agency ("EPA") asserted several environmental claims against NL and Taracorp regarding the St. Louis Park facility. In October of 1981, the EPA placed the St. Louis Park site on the National Priorities list for Superfund ranking. In 1983 the EPA expanded the boundaries of the listed St. Louis Park site to include an adjoining auto scrap yard site, the "Golden Property." By 1984 the EPA and the Illinois Environmental Protection Agency ("IEPA") were also investigating environmental contamination at Taracorp's Granite City, Illinois lead smelting facility.

Taracorp filed a Chapter 11 bankruptcy petition in 1982. As part of Taracorp's Plan of Reorganization, Taracorp entered into an Agreement on March 4, 1985 (the "Agreement") with NL and the IEPA regarding responsibility for the environmental hazards at the Granite City and St. Louis Park sites. *fn1 The IEPA was involved only in the Granite City negotiations (since St. Louis Park is in Minnesota). The parties agree that the interpretation of this Agreement determines the result in this case; hence the relevant provisions of the Agreement will be quoted here at some length.

The first section of the Agreement, which appears to function as a kind of preamble, states as follows:

The parties hereto are desirous of effecting a means for allocating costs and responsibility with respect to certain environmental claims by IEPA and others against [Taracorp] and NL, all relating to facilities sold by NL to [Taracorp] pursuant to Agreement dated August 22, 1979. NL has agreed with all parties hereto to assume certain responsibilities regarding the investigative and remedial costs relating to these matters and [Taracorp] has agreed to provide consideration to or for the benefit of IEPA and NL in conjunction therewith.

Twelve of the Agreement's twenty-four sections exclusively address the Granite City facility. Only one section is exclusively addressed to the St. Louis Park plant. The Granite City sections establish that Taracorp is to set up a subsidiary corporation, the "New Corporation," to which all the assets of the Granite City plant are to be transferred. The New Corporation is then to "assume exclusive responsibility and be solely liable for all of [Taracorp's] liability for payment of all investigative and ...

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