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73 F.3d 738, 41 ERC 1961, 26 Envtl. L. Rep. 20,570


(Cite as: 73 F.3d 738)

208k27 k. In General. Most Cited Cases


United States Court of Appeals, (Formerly 208k3)
Seventh Circuit. Illinois law provides that indemnity agreements must
TARACORP, INC., Plaintiff-Appellant, be set forth in clear and explicit language so that in-
v. demnitor's obligations are manifest.
NL INDUSTRIES, INC., Defendant-Appellee.
No. 95-1876. [3] Indemnity 208 31(5)

Argued Sept. 27, 1995. 208 Indemnity


Decided Jan. 11, 1996. 208II Contractual Indemnity
Rehearing and Suggestion for Rehearing En Banc 208k31 Construction and Operation of Con-
Denied Feb. 13, 1996. tracts
208k31(5) k. Liberal or Strict Construction.
Reorganized debtor sued company from whom it Most Cited Cases
purchased scrap processing facilities for indemnifica- (Formerly 208k6)
tion of certain environmental cleanup liabilities. The Indemnity agreements are not favored in Illinois and
United States District Court for the Northern District must be strictly construed against indemnitee.
of Illinois, William T. Hart, J., granted summary
judgment for company, finding that indemnity [4] Indemnity 208 33(6)
agreement excluded arranger liability under
CERCLA. Debtor appealed. The Court of Appeals, 208 Indemnity
Flaum, Circuit Judge, held that agreement obligated 208II Contractual Indemnity
company to indemnify debtor for environmental li- 208k33 Particular Cases and Issues
ability with respect to purchased facility, including 208k33(6) k. Environmental Law. Most
arranger liability under CERCLA for battery- Cited Cases
breaking activities. (Formerly 208k8(2.1))
Under Illinois law, language in indemnity agreement
Reversed and remanded with directions. by which seller agreed to indemnify buyer of scrap
processing facility for all obligations, responsibilities
West Headnotes and liabilities, costs and expenses asserted against
buyer “related to” environmental hazards “associated
[1] Indemnity 208 31(1) with” facility could not reasonably be understood to
mean same thing as language in second indemnity
agreement by which seller agreed to indemnify buyer
208 Indemnity for environmental hazards or contamination “located
208II Contractual Indemnity
at, on, or near” second facility; language of first pro-
208k31 Construction and Operation of Con-
vision was relational whereas language of second
tracts provision was locational, and it was reasonable to
208k31(1) k. In General. Most Cited Cases
infer that parties intended language to mean different
(Formerly 208k6) things. Comprehensive Environmental Response,
Illinois interprets indemnity agreements according to Compensation, and Liability Act of 1980, §
general principles of contract law.
107(a)(3), 42 U.S.C.A. § 9607(a)(3).

[2] Indemnity 208 27 [5] Contracts 95 152

208 Indemnity
95 Contracts
208II Contractual Indemnity
95II Construction and Operation
208k26 Requisites and Validity of Contracts

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73 F.3d 738, 41 ERC 1961, 26 Envtl. L. Rep. 20,570


(Cite as: 73 F.3d 738)

95II(A) General Rules of Construction Cited Cases


95k151 Language of Instrument (Formerly 208k8(2.1))
95k152 k. In General. Most Cited Cases Seventeen-page agreement amongst reorganized
When parties to same contract use such different lan- Chapter 11 debtor, company from which debtor pur-
guage to address parallel issues, it is reasonable to chased scrap processing facilities, and Illinois Envi-
infer that they intend language to mean different ronmental Protection Agency (IEPA) regarding re-
things. sponsibility for environmental hazards at two facili-
ties was single contract, and thus, two indemnity pro-
[6] Statutes 361 209 visions governing two separate facilities could be
determined to have different scopes based on differ-
361 Statutes ences in language used in provisions; fact that IEPA
participated in negotiations regarding one facility but
361VI Construction and Operation
361VI(A) General Rules of Construction not second facility did not alter conclusion that con-
tract was unitary.
361k204 Statute as a Whole, and Intrinsic
Aids to Construction
361k209 k. Same or Different Lan- [10] Indemnity 208 33(6)
guage. Most Cited Cases
When interpreting statutes to determine intent of leg- 208 Indemnity
islatures, courts assume that same words have same 208II Contractual Indemnity
meaning in given act and that choice of substantially 208k33 Particular Cases and Issues
different words to address analogous issues signifies 208k33(6) k. Environmental Law. Most
different approach. Cited Cases
(Formerly 208k8(2.1))
[7] Contracts 95 143.5 Preamble-like language in agreement amongst reor-
ganized Chapter 11 debtor, third party, and Illinois
95 Contracts Environmental Protection Agency (IEPA) regarding
responsibility for environmental hazards at two scrap
95II Construction and Operation
processing facilities purchased by debtor from third
95II(A) General Rules of Construction
95k143.5 k. Construction as a Whole. Most party which noted that “parties hereto are desirous of
effecting a means for allocating costs and responsibil-
Cited Cases
ity with respect to certain environmental claims by
Meaning of separate contract provisions should be
considered in light of one another and in context of IEPA and others against [debtor] and [third party]”
did not indicate that parties intended only to address
entire agreement.
particular, then-existing environmental claims and
did not preclude third party's liability to indemnify
[8] Contracts 95 143.5 debtor for arranger liability under CERCLA; pream-
ble-like language could not reasonably be read in
95 Contracts such broad manner, and, even standing alone, provi-
95II Construction and Operation sion did not specifically limit scope of agreement to
95II(A) General Rules of Construction then-existing environmental claims, and there was no
95k143.5 k. Construction as a Whole. Most contract language that would support such reading.
Cited Cases
Under Illinois law, court is obliged to read contracts [11] Indemnity 208 33(6)
as coherent whole, at least where doing so is possible.
208 Indemnity
[9] Indemnity 208 33(6) 208II Contractual Indemnity
208k33 Particular Cases and Issues
208 Indemnity 208k33(6) k. Environmental Law. Most
208II Contractual Indemnity Cited Cases
208k33 Particular Cases and Issues (Formerly 208k8(2.1))
208k33(6) k. Environmental Law. Most Fact that specific environmental claims provide occa-

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(Cite as: 73 F.3d 738)

sion for entering into indemnity agreement, by itself, 149EIX Hazardous Waste or Materials
implies little about prospective scope of that agree- 149Ek436 Response and Cleanup; Liability
ment. 149Ek447 k. Contribution and Indemnity;
Allocation of Liability. Most Cited Cases
[12] Indemnity 208 33(6) (Formerly 208k8(2.1))
Agreement amongst reorganized Chapter 11 debtor,
208 Indemnity third party, and Illinois Environmental Protection
208II Contractual Indemnity Agency (IEPA), as part of plan of reorganization,
obligating third party to indemnify debtor for all
208k33 Particular Cases and Issues
208k33(6) k. Environmental Law. Most debtor's CERCLA liability at scrap processing facil-
Cited Cases ity that debtor had purchased from third party, in-
cluded indemnification for arranger liability under
(Formerly 208k6)
In event of any conflict between general preamble- CERCLA for battery-breaking activities at site pur-
suant to battery processing agreement. Comprehen-
like language in agreement amongst reorganized
sive Environmental Response, Compensation, and
Chapter 11 debtor, third party, and Illinois Environ-
mental Protection Agency (IEPA) regarding respon- Liability Act of 1980, § 107(a)(3), 42 U.S.C.A. §
9607(a)(3).
sibility for environmental hazards at two scrap proc-
*740Malcolm H. Brooks (argued), Marc L. Fogel-
essing facilities purchased by debtor from third party
and indemnity provision in agreement relating to one berg, Clifton A. Lake, McBride, Baker & Coles, Chi-
cago, IL, for Plaintiff-Appellant.
facility, specific indemnity language would prevail
over general introductory language.
Reed S. Oslan (argued), David S. Chipman, Kirkland
& Ellis, Chicago, IL, for Defendant-Appellee.
[13] Indemnity 208 33(6)
Before FLAUM, EASTERBROOK, and DIANE P.
208 Indemnity
WOOD, Circuit Judges.
208II Contractual Indemnity
208k33 Particular Cases and Issues
208k33(6) k. Environmental Law. Most FLAUM, Circuit Judge.
Cited Cases
(Formerly 208k8(2.1)) Taracorp, Inc. (“Taracorp”) sued NL Industries, Inc.
That agreement amongst reorganized Chapter 11 (“NL”) for indemnification of certain environmental
debtor, third party, and Illinois Environmental Pro- clean-up liabilities under their March 4, 1985
tection Agency (IEPA) regarding responsibility for Agreement. Exercising its diversity jurisdiction, the
environmental hazards at two scrap processing facili- district court granted summary judgment for NL. The
ties purchased by debtor from third party referred to district court found that the language of the Agree-
environmental pollution associated with “facility,” ment unambiguously excluded the type of claim Ta-
rather than with “business” or “business operations” racorp was making and noted that the extrinsic evi-
at facility did not demonstrate that indemnity provi- dence offered confirmed this conclusion. We reverse.
sions were intended to apply only to environmental
contamination actually on that property; property- I.
specific approach could not be reconciled with one of
the agreement's two cited exceptions to indemnity Taracorp, a Georgia corporation with its principal
provision that excluded coverage for damages arising place of business in Atlanta, Georgia, owns and oper-
out of air emissions and actions arising from activi- ates scrap metal and metal fabricating businesses
ties of debtor which were unrelated to regular con- throughout the country. NL, a New Jersey corpora-
duct of business at facility. tion with its principal place of business in Houston,
Texas, formerly owned substantial assets in the metal
[14] Environmental Law 149E 447 industry, including several lead smelting facilities. In
1979 Taracorp purchased three lead smelting plants
149E Environmental Law from NL, which were located in Granite City, Illi-
nois; McCook, Illinois; and St. Louis Park, Minne-

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sota. The disputed liability in this case involves the U.S.C. § 9607(a)(3), and were therefore li-
St. Louis Park facility. able to reimburse the government for its re-
sponse costs.
From 1979 to 1982, Taracorp operated the St. Louis
Park plant in the same manner as NL had been oper- The first section of the Agreement, which appears to
ating the plant. In fact, Taracorp assumed NL's role in function as a kind of preamble, states as follows:
a Battery Processing Agreement (dated August 18,
1978) with Union Scrap Iron & Metal (“Union The parties hereto are desirous of effecting a means
Scrap”). Under the Battery Processing Agreement, for allocating costs and responsibility with respect
Taracorp (and previously NL) would purchase spent to certain environmental claims by IEPA and oth-
batteries and then have them shipped directly to one ers against [Taracorp] and NL, all relating to facili-
of Union Scrap's three locations, all located within ties sold by NL to [Taracorp] pursuant to Agree-
five miles of the St. Louis Park facility. Union Scrap ment dated August 22, 1979. NL has agreed with
would then break apart the batteries and send the lead all parties hereto to assume certain responsibilities
plates to Taracorp for smelting. The Battery Process- regarding the investigative and remedial costs re-
ing Agreement clearly states that the batteries and the lating to these matters and [Taracorp] has agreed to
battery plates remain at all times “the sole and exclu- provide consideration to or for the benefit of IEPA
sive property of [Taracorp]” (originally NL). This and NL in conjunction therewith.
relationship with Union Scrap continued until 1982,
when Taracorp shut down the St. Louis Park plant. Twelve of the Agreement's twenty-four sections ex-
clusively address the Granite City facility. Only one
In the early 1980's, the United States Environmental section is exclusively addressed to the St. Louis Park
Protection Agency (“EPA”) asserted several envi- plant. The Granite City sections establish that Tara-
ronmental claims against NL and Taracorp regarding corp is to set up a subsidiary corporation, the “New
the St. Louis Park facility. In October of 1981, the Corporation,” to which all the assets of the Granite
EPA placed the St. Louis Park site on the National City plant are to be transferred. The New Corporation
Priorities list for Superfund ranking. In 1983 the EPA is then to “assume exclusive responsibility and be
expanded the boundaries of the listed St. Louis Park solely liable for all of [Taracorp's] liability for pay-
site to include an adjoining auto scrap yard site, the ment of all investigative and remedial clean-up costs
“Golden Property.” By 1984 the EPA and the Illinois relating to contamination located at, on, or near [Ta-
Environmental Protection Agency (“IEPA”) were racorp's] Granite City, Illinois Facility....”
also investigating environmental contamination at
Taracorp's Granite City, Illinois lead smelting facil- The Agreement limits the Granite City environmental
ity. liability of the New Corporation/Taracorp to
$500,000, not including ground water contamination
Taracorp filed a Chapter 11 bankruptcy petition in claims and costs relating to current or future opera-
1982. As part of Taracorp's Plan of Reorganization, tions of the Granite City facility, which would remain
Taracorp entered into an Agreement on March 4, the sole responsibility of the New Corporation. The
1985 (the “Agreement”) with NL and the IEPA re- Agreement consistently (five times) designates the
garding responsibility for the environmental hazards environmental pollution connected with the Granite
at the Granite City and St. Louis Park sites.FN1 The City plant as “contamination located at, on, or near
IEPA was involved only in the Granite City negotia- [Taracorp's] Granite City Facility.” Three of the ref-
tions (since St. Louis Park is in Minnesota). The par- erences further note that the contamination referred to
ties agree that the interpretation of this Agreement is that which “originated from” the Granite City facil-
determines *741 the result in this case; hence the ity. The Granite City provisions conclude by estab-
relevant provisions of the Agreement will be quoted lishing NL's obligation to indemnify and hold harm-
here at some length. less Taracorp and the New Corporation for all federal
environmental liabilities “with respect to alleged en-
FN1. The EPA maintained that Taracorp and vironmental hazards located at, on or near the Granite
NL had “arranged for” the disposal or treat- City Facility.” FN2
ment of hazardous substances under 42

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FN2. The express exceptions to this indem- 27, 1985.FN4 In 1990, however, the EPA notified Ta-
nity obligation, which are listed in the racorp that it was considered to be a “potentially re-
Agreement, are not relevant to this case. sponsible party” (“PRP”) under the Comprehensive
Environmental Response, Compensation and Liabil-
Only section eight of the Agreement deals exclu- ity Act (“CERCLA”) for environmental contamina-
sively with the St. Louis Park facility. The parties tion caused by Union Scrap's battery-breaking activi-
agree that the IEPA played no role in the drafting of ties at its Washington Avenue North location (“Union
this section. The section provides that, upon the ful- Scrap I”). The EPA claimed that Taracorp had “ar-
fillment of two specific pre-conditions,FN3 Taracorp ranger” liability under § 107(a)(3) of CERCLA (42
“will, on the Effective Date of the Plan of Reorgani- U.S.C. § 9607(a)(3)) for clean-up of environmental
zation, transfer to NL by deed ... all of [Taracorp's] contamination at the site, which had resulted (in part)
assets at the St. Louis Park Facility, said transfer be- from the breaking up of Taracorp's batteries for its St.
ing limited to the form of ownership interest received Louis Park plant. The EPA sued Taracorp and many
by [Taracorp] from NL on August 22, 1979....” others on this theory later that year. In 1993, the EPA
Agreement section 8(c) establishes NL's indemnifica- notified Taracorp that it was also considered a PRP
tion responsibilities with respect to the St. Louis Park for the cost of remediation at Union Scrap's 15th
plant and is the provision upon which Taracorp bases Avenue North site (“Union Scrap III”). And in 1994,
this lawsuit. It reads as follows: the Minnesota Pollution Control Authority
(“MPCA”) notified Taracorp that it was liable to re-
FN3. The two pre-conditions are as follows: imburse the State of Minnesota for environmental
1) that a claim for environmental damage, response costs at Union Scrap's Plymouth Avenue
filed by the Minnesota Pollution Control location (“Union Scrap II”).
Agency in Taracorp's Chapter 11 proceed-
ings, will either have been withdrawn or FN4. By 1988 NL had completed cleaning
dismissed, and 2) that a security interest in up the St. Louis Park site, as well as the ad-
the St. Louis Park facility, held by Citizens jacent Golden Property.
and Southern National Bank, will either
have been canceled or conveyed to Tara- Taracorp sought dismissal from the Union Scrap I
corp. Since the transfer to NL occurred, and case, claiming that the CERCLA claim was barred by
neither party has informed us of any con- its 1985 discharge in bankruptcy. The bankruptcy
tinuing legal issue with respect to these court had set a July 5, 1983 deadline for the filing of
claims, we assume these matters have been claims against Taracorp. Taracorp argued that since
resolved. the St. Louis Park facility had been shut down since
1982, no new claims could have arisen since 1982.
Upon conveyance of [the St. Louis Park Facility to Taracorp also argued that because the EPA had not
NL], NL shall bear the responsibility for all inves- filed a claim or even a “contingent claim” in Tara-
tigative and remedial clean-up costs associated corp's bankruptcy proceedings, the CERCLA ar-
with said Facility and shall indemnify [Taracorp] ranger liability claim was barred. The bankruptcy
for all obligations, responsibilities and liabilities, court handling the Union Scrap I case saw things
costs and expenses asserted against it related to en- differently and held that the CERCLA claim was not
vironmental hazards associated with said Facility, barred, since the CERCLA claim did not “arise” until
excluding, however, any costs and expenses relat- after the confirmation of Taracorp's Plan of Reor-
ing to (i) damages claimed or incurred by private ganization. United States v. Union Scrap Iron &
parties arising out of air emissions which may have Metal, 123 B.R. 831, 838 (D.Minn.1990).FN5 NL,
occurred as a result of [Taracorp's] operation of who was also facing possible CERCLA arranger li-
such Facility after August 22, 1979, (ii) actions ability in the litigation, supported the EPA's position
arising from activities of [Taracorp] which activi- regarding Taracorp (i.e., the position ultimately taken
ties were unrelated to the *742 regular conduct of by the court) and further argued that even if Taracorp
the business at the St. Louis Park Facility.... dropped out of that case, NL's own contribution and
indemnity claims against Taracorp should survive. Id.
Taracorp was discharged from bankruptcy on June at 834-35. Taracorp did not appeal the decision, and

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the litigation eventually settled.FN6 Taracorp paid undertake this obligation and argued against
$100,000 as its share of the settlement.FN7 Taracorp's position in the bankruptcy pro-
ceeding.
FN5. The court rested its analysis on the
finding that liability for CERCLA clean-up FN7. Taracorp expended $150,107.32 de-
costs is not “incurred” until after the EPA fending the case.
actually begins spending money. Hence the
EPA does not have the kind of claim that *743 Regarding the Union Scrap II litigation, Tara-
could be asserted in a bankruptcy proceed- corp has paid $60,050 as its share of a proposed set-
ing until after it undertakes actual clean-up tlement.FN8 The amount of Taracorp's liability and its
efforts or at least recognizes the need for defense costs for the MPCA's 1994 claim regarding
such efforts (allowing it to assert a contin- Union Scrap II are not yet established.
gent claim). Union Scrap, 123 B.R. at 835-
36. The court's analysis focussed on the FN8. Taracorp asserts that it has paid
goals of CERCLA and the impracticality of $60,500 in the settlement and that it has thus
requiring the EPA to anticipate future envi- far expended $5,823.33 in defending the
ronmental contamination discoveries (with claim.
corresponding clean-up costs) and file pro-
spective claims in every bankruptcy pro-
ceeding involving an individual or organiza- Taracorp has sued NL for indemnification, under the
tion that may eventually be found to be a re- Agreement, for its liability and expenses for these
sponsible party under CERCLA. Id. at 837- Union Scrap claims. The district court, after compar-
38. While the court noted that “[t]he parties ing the Granite City indemnity provision with the St.
see a fundamental conflict between the goals Louis Park indemnity provision, found that the
of the Bankruptcy Act and the Agreement clearly established that NL was not obli-
CERCLA/Superfund legislation,” id. at 835, gated to indemnify Taracorp for its St. Louis
the court never actually considered the goals Park/Union Scrap environmental liability, since the
of the Bankruptcy Act or offered any reason contamination at the Union Scrap sites was not “at,
for finding that the goals of CERCLA (in- on, or near” the St. Louis Park site. The court con-
cluding broad-based liability and efficient cluded: “While the phrase ‘associated with’ may not
administration) trump the goals of the Bank- be as precise as the phrase ‘at, on, or near’, the entire
ruptcy Act (which presumptively include fi- context of the agreement supports reading ‘associated
nality and the minimization of new claims with’ to mean ‘at, on, or near’ the St. Louis Park Fa-
post-confirmation of a reorganization plan). cility.” While the court found no need to resort to
extrinsic evidence, as the Agreement was unambigu-
ous, it also determined that “the extrinsic evidence
FN6. It is a puzzlement why Taracorp did supports a narrow reading of the [St. Louis Park]
not simply appeal the decision of the bank- indemnification clause.” The court declared that the
ruptcy court. In a totally separate case, we Agreement was designed to address problems of con-
have since criticized the Minnesota bank- tamination “originating at” the two lead smelting
ruptcy court's decision and rejected the “ne- facilities. Consequently, the court granted NL's mo-
cromantic definition of ‘incurred’ ” upon tion for summary judgment and denied Taracorp's
which it was based. GNB Battery Technolo- motion for summary judgment.
gies, Inc. v. Gould, Inc., 65 F.3d 615, 623
(7th Cir.1995). Hence we believe that Tara-
corp should have appealed the bankruptcy II.
court's decision at that time and avoided this
suit altogether (and the need for NL to in- We review the district court's grant of summary
demnify anything). On the other hand, there judgment de novo. Smith v. Shawnee Library Sys., 60
is no injustice in now holding NL to its obli- F.3d 317, 320 (7th Cir.1995). Summary judgment is
gation to indemnify Taracorp for this same appropriate only where there is no genuine issue of
CERCLA liability, since NL contracted to material fact and the moving party, here NL, is enti-
tled to judgment as a matter of law. FED.R.CIV.P.

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56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, Deposit Co. v. Rosenmutter, 614 F.Supp. 348, 351
106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The (N.D.Ill.1985).
parties agree that Illinois law governs our interpreta-
tion of the Agreement and its indemnity provisions. [4] The March 4, 1985 Agreement establishes the
boundaries of NL's obligation to indemnify Taracorp
Summary judgment in a diversity contract case such for environmental liabilities associated with two dif-
as this one should be considered as follows: ferent facilities: the Granite City facility and the St.
Louis Park facility. The language describing NL's
First, it is necessary to look to the plain language of indemnification duties for the two plants, however, is
the provision at issue. Reviewing Illinois law, this quite different. With regard to the Granite City facil-
Court has noted that “[t]he starting point must be ity, NL agreed to indemnify Taracorp for environ-
the contract itself. If the language of the contract mental hazards or contamination “located at, on, or
unambiguously provides an answer to the question near” the Granite City facility. This “located at, on,
at hand, the inquiry is over.” .... If the plain lan- or near” language appears repeatedly in the Agree-
guage of the contract is ambiguous, then “the court ment sections describing NL's indemnification re-
must go on to declare [the contract's] meaning.” .... sponsibilities with regard to Granite City environ-
If the court finds that a contract is ambiguous and mental liability. The Agreement further notes that the
that extrinsic evidence is undisputed, then the in- Granite City environmental contamination contem-
terpretation of the contract remains a question of plated is that which “originated from” the Granite
law for the court to decide.... However, if the par- City plant.
ties dispute the extrinsic evidence on an ambiguous
contract, then a fact-finder must be called upon to [5] When it comes to the single section on the St.
determine the intent of the parties. Louis Park plant, on the other hand, the Agreement
contains much broader language. NL agreed to in-
Lumpkin v. Envirodyne Indus., 933 F.2d 449, 456 demnify Taracorp “for all obligations, responsibilities
(7th Cir.) (internal citations omitted), cert. de- and liabilities, costs and expenses asserted against
nied,502 U.S. 939, 112 S.Ct. 373, 116 L.Ed.2d 324 [Taracorp] related to environmental hazards associ-
(1991); see also LaSalle Nat'l Bank v. Service Mer- ated with the [St. Louis Park] Facility” (emphasis
chandise Co., 827 F.2d 74, 78 (7th Cir.1987) (inter- added).FN9 The St. Louis Park provision contains no
preting Illinois contract law as providing that “[i]f the “located at, on, or near” language and no mention of
language of the contract unambiguously provides an pollution having “originated from” that facility.
answer to the question at hand, the inquiry is over”); While the language of the Granite City provision is
City of Clinton v. Moffitt, 812 F.2d 341, 344 (7th locational, the language of the St. Louis Park provi-
Cir.1987). sion is relational. And when parties to the same con-
tract use such different language to address parallel
[1][2][3] Illinois interprets indemnity agreements issues (i.e., indemnification obligations regarding two
according to its general principles of contract law. different facilities), it is reasonable to infer that they
Charter Bank v. Eckert, 223 Ill.App.3d 918, 166 intend this language to mean different things.FN10Cf.
Ill.Dec. 282, 288, 585 N.E.2d 1304, 1310 (1992) Thompson v. Amoco Oil Co., 903 F.2d 1118, 1121
(“An indemnity agreement is to be construed as any (7th Cir.1990) (“Unless a contrary intent is evident,
other contract, and under the rules of contract con- words used in one sense in one part of a contract are
struction, the intention of the parties is the paramount deemed of like significance in another part.”) (quot-
concern.”); Higgins v. Kleronomos, 121 Ill.App.3d ing Cedar Park Cemetery Ass'n v. Village of Calumet
316, 76 Ill.Dec. 913, 916, 459 N.E.2d 1048, 1051 Park, 398 Ill. 324, 75 N.E.2d 874, 880 (1947)). Thus
(1982). Yet Illinois law also provides that indemnity we reject the district court's conclusion that the St.
agreements must be set forth in clear and explicit Louis Park “associated with” language can reasona-
language, so that the indemnitor's obligations are bly be understood to mean the same thing as the
manifest. *744Charter Bank, 166 Ill.Dec. at 288, 585 Granite City “located at, on, or near” language.FN11
N.E.2d at 1310. Moreover, since indemnity agree-
ments are not favored in Illinois, they must be strictly FN9. There are two specific exceptions to
construed against the indemnitee. Id. Fidelity and this broad liability, which will be discussed

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(Cite as: 73 F.3d 738)

further below. (“[T]he intent of the parties to a contract must be


determined with reference to the contract as a whole,
FN10. Taracorp maintains that the explana- not merely by reference to particular words or iso-
tion behind the differing scope of the two lated phrases, but by viewing each part in light of the
indemnity provisions lies in the fact that the others.”) (citations omitted); Delta Mining Corp. v.
St. Louis Park facility had been closed since Big Rivers Electric Corp., 18 F.3d 1398, 1403 (7th
1982, while at the time of the Agreement, Cir.1994) (“[I]n construing the meaning of a contrac-
Taracorp intended to continue operating the tual term we must be mindful of the context in which
Granite City facility (making it more impor- the word is used....”).
tant for NL to cabin its liability there).
Thus while the indemnification obligation for the
FN11. It appears that the district court as- Granite City plant is limited to environmental pollu-
sumed, and that NL concedes, that unless tion that is spatially connected to the plant (“located
the “associated with”/“related to” language at, on, or near”), the St. Louis Park obligation extends
is understood as meaning “located at, on, or to all environmental contamination liability that is
near,” the Agreement's indemnity provision “associated with” or “related to” that facility. Since
does cover CERCLA “arranger” liability. the Agreement developed under the shadow of poten-
NL does not argue that the plain meaning of tial CERCLA liability (the St. Louis Park site was
the St. Louis Park indemnity provision ex- already on the EPA's National Priorities list), such
cludes CERCLA arranger liability. broad language appears to intend coverage for the
full range of CERCLA liability. See Kerr-McGee
[6][7] This principle of contract interpretation paral- Chemical Corp. v. Lefton Iron & Metal Co., 14 F.3d
lels the principle that we use when interpreting stat- 321, 327 (7th Cir.1994) (finding that broad pollution
utes to determine the intent of legislatures: we as- indemnity provision included CERCLA liability even
sume that the same words mean have the same mean- though CERCLA not enacted at time of property
ing in a given act and that the choice of substantially transfer); Harley-Davidson, Inc. v. Minstar, Inc., 41
different words to address analogous issues signifies F.3d 341, 344 (7th Cir.1994) (finding that general
a different approach. See Trustees of Iron Workers indemnity provision for liabilities “relating to” spe-
Local 473 Pension Trust v. Allied Products Corp., cific division included CERCLA claims), cert. de-
872 F.2d 208, 213 (7th Cir.) (comparing statutory use nied,514 U.S. 1036, 115 S.Ct. 1401, 131 L.Ed.2d 289
of unqualified “all” with use of “substantially all” (1995).
and “virtually all” and concluding that unqualified
“all” means 100 percent), cert. denied,493 U.S. 847, [8][9] The district court, however, looked to other
110 S.Ct. 143, 107 L.Ed.2d 102 (1989); cf. BFP v. provisions of the Agreement in concluding that in-
Resolution Trust Corp., 511 U.S. 531, ----, 114 S.Ct. demnification for St. Louis Park environmental liabil-
1757, 1761, 128 L.Ed.2d 556 (1994) (presumption ity was limited to contamination at, on, or near that
that Congress acts intentionally when particular lan- site, and NL urges us to do the same. Since we are
guage included in one section but omitted in an- obliged to read contracts as a coherent whole, at least
other); United States Nat'l Bank of Or. v. Independent where doing so is possible, Riney v. Weiss & Neuman
Ins. Agents of America, Inc., 508 U.S. 439, ----, 113 Shoe Co., 217 Ill.App.3d 435, 160 Ill.Dec. 375, 379,
S.Ct. 2173, 2185, 124 L.Ed.2d 402 (1993) (“Pre- 577 N.E.2d 505, 509 (1991); Medcom, 984 F.2d at
sumptively, ‘identical words used in different parts of 226 (interpreting Illinois contract law); Air Line
the same act are intended to have *745 the same Stewards and Stewardesses Ass'n, Local 550 v. Trans
meaning.’ ”) (internal citations omitted); Kinney v. World Airlines, Inc., 713 F.2d 319, 321 (7th
International Union of Operating Eng'rs, Local 150, Cir.1983), it is appropriate to consider other contract
994 F.2d 1271, 1276 (7th Cir.1993). This approach language that may undercut our initial determination
also accords with the basic contract principle that the that the two indemnity provisions have different
meaning of separate contract provisions should be scopes.FN12
considered in light of one another and the context of
the entire agreement. Medcom Holding Co. v. Baxter FN12. NL attempts to avoid our comparison
Travenol Lab., Inc., 984 F.2d 223, 226 (7th Cir.1993) of the two indemnity provisions by suggest-

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73 F.3d 738, 41 ERC 1961, 26 Envtl. L. Rep. 20,570


(Cite as: 73 F.3d 738)

ing that “the Agreement is essentially two erty. The Agreement defines “St. Louis Park Facility”
contracts in one” and thus that “it cannot be according to Taracorp's Plan of Reorganization,
argued that one provision influences the which in turn defines the facility as being “located at
other.” Yet NL provides neither factual nor 3645 Hampshire Avenue South, Minneapolis, Minne-
legal support for this proposition. The sev- sota.” Thus NL concludes that its St. Louis Park in-
enteen-page document possesses all the demnity obligation includes only environmental con-
outward aspects of a single contract. The tamination at that address.
fact that the IEPA participated in the Granite
City, but not the St. Louis Park, negotiations This property-specific approach cannot be reconciled
does not alter the conclusion that the con- with one of the Agreement's two cited exceptions to
tract is unitary. The fact that IEPA involve- the St. Louis Park indemnity provision. These excep-
ment may have garnered a more circum- tions exclude coverage for 1) “damages claimed or
scribed Granite City indemnity obligation incurred by private parties arising out of air emis-
gives us no reason to step in and retroac- sions which may have occurred as a result of [Tara-
tively limit NL's St. Louis Park indemnity corp's] operation of [the Facility] after August 22,
obligation. 1979,” and 2) “actions arising from activities of [Ta-
racorp] which activities were unrelated to the regular
[10][11][12] NL directs us to look to section one of conduct of the business at the St. Louis Park Facil-
the Agreement, which begins by noting that “[t]he ity.” NL's property-based approach would render the
parties hereto are desirous of effecting a means for first exception superfluous, a result that fundamental
allocating costs and responsibility with respect to principles of contract law caution us to avoid. See
certain environmental claims by IEPA and others Thompson, 903 F.2d at 1121 (“we try not to interpret
against [Taracorp] and NL.” NL maintains that this contracts in a manner that would render specific con-
language indicates that the parties intended only to tractual language mere surplusage”); Dribeck Import-
address particular, then-existing environmental ers, Inc. v. G. Heileman Brewing Co., Inc., 883 F.2d
claims. This preamble-like language cannot reasona- 569, 573 (7th Cir.1989) (same for Illinois contract
bly be read in such a broad manner. Even standing law). Damage to private parties from air emissions
alone the provision does not specifically limit the does not qualify as environmental contamination of
scope of the Agreement to then-existing environ- the St. Louis Park property, so there would have been
mental claims, and NL fails to produce other contract no reason to specifically exclude it under NL's inter-
language that would support such a reading. Fur- pretation of the Agreement. Our decision in the fac-
thermore, the fact that specific environmental claims tually similar case of GNB Battery Technologies, Inc.
provide the occasion for entering into an indemnity v. Gould, Inc., 65 F.3d 615, 623 (7th Cir.1995), like-
agreement, by itself, implies little about the prospec- wise recognized the importance of heeding the lan-
tive scope of that agreement. The opening provision guage of specific liability exemptions to avoid ren-
goes more to the “why?” question, than the “how dering them superfluous-thereby effectuating the con-
much?” question. Even if there were a conflict be- tractual intent of parties.
tween the general section-one language and the St.
Louis Park section-eight language, the specific St. Although the second exemption could be consistent
Louis Park indemnity language would prevail over with either Taracorp's or NL's understanding of the
the *746 general introductory language of the first Agreement, the intention expressed by this “non-
section. Brzozowski v. Northern Trust Co., 248 regular” activities language accords with finding a
Ill.App.3d 95, 187 Ill.Dec. 814, 818, 618 N.E.2d 405, duty to indemnify for the Union Scrap claims. While
409 (1993); Medcom, 984 F.2d at 227. NL did not want to assume environmental liability
for unanticipated activities at the site (just in case
[13] NL also argues that the Agreement's references Taracorp had been involved in more than lead smelt-
to environmental pollution associated with the St. ing), the battery-breaking activities at the Union
Louis Park facility, rather than to the business or Scrap locations were well within the scope of Tara-
business operations there, demonstrate that the in- corp's St. Louis Park business. NL can hardly claim
demnity provisions were intended to apply only to surprise at this activity, since it negotiated the Union
environmental contamination actually on that prop- Scrap contracts in the first place.

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73 F.3d 738, 41 ERC 1961, 26 Envtl. L. Rep. 20,570


(Cite as: 73 F.3d 738)

If NL had wanted to limit its St. Louis Park obliga-


tion to real property contamination, it knew perfectly
well how to do so. Rather than merely using the word
“facility” (in conjunction with the broad “related to”
and “associated with” language), NL could have in-
sisted upon the language of “located at, on, or near”
(and thrown in the part about contamination “origi-
nating from” the plant), which it used so consistently
in connection with the Granite City site. Instead, NL
agreed to a broad indemnity provision, and it is stuck
with that provision.

Since we find that the Agreement unambiguously


establishes NL's obligation to indemnify Taracorp for
its St. Louis Park environmental liability, which in-
cludes CERCLA liability for battery-breaking activi-
ties at the Union Scrap sites, we do not address the
extrinsic evidence presented by the parties.

III.

[14] We conclude that the March 4, 1985 Agreement


between Taracorp and NL obligates NL to indemnify
Taracorp for all of Taracorp's St. Louis Park
CERCLA liability, including the CERCLA liability
for the Union Scrap sites. We REVERSE the decision
of the district court and REMAND with directions
that NL be ordered to indemnify Taracorp for this
liability and for expenses already *747 incurred and
for any future liability and expenses.

C.A.7 (Ill.),1996.
Taracorp, Inc. v. NL Industries, Inc.
73 F.3d 738, 41 ERC 1961, 26 Envtl. L. Rep. 20,570

END OF DOCUMENT

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.