Free Supplement/Amendment - District Court of Colorado - Colorado

Case 1:01-cv-01807-MSK-MJW

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Case No.: 01-cv-01807-MSK-MJW BANK ONE, NA, (Successor to Bank One, Colorado, N.A.) and BANK ONE TRUST COMPANY, N.A., as Trustee of the Frank G. Jamison Marital Trust and the Frank G. Jamison Family Trust, Plaintiffs, v. C.V.Y. CORPORATION, d/b/a Your Valet Cleaners and JOHNNY ON THE SPOT, INC. Defendants. _____________________________________________________________________ BOULDER CLEANERS, INC. and JOHN'S CLEANERS, INC. Cross-Plaintiffs, v. C.V.Y. CORPORATION, d/b/a Your Valet Cleaners, Cross-Defendant.

SUPPLEMENT TO RESPONSE (Doc. # 499) AND OBJECTION TO PROPOSED ORDER APPROVING SETTLEMENT AGREEMENT WITH CONTRIBUTION PROTECTION (DOC. # 492-2) AND REQUEST FOR ALTERNATIVE ORDER _____________________________________________________________________ Cross-Plaintiffs Boulder Cleaners, Inc. and John's Cleaners, Inc., by and through their undersigned counsel, supplement their Response and Objection to Joint Motion for Approval of Settlement Agreement with Contribution Protection (Doc. # 499), specifically object to the language of the proposed Order Approving Settlement Agreement With Contribution Protection as over broad and prejudicial to their cross-claim (Doc. # 492-2),

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and request the entry of an alternative proposed Order, as submitted herewith. INTRODUCTION Boulder Cleaners and John's Cleaners (collectively "BCI/JCI") have a cross-claim pending in this case against CVY Corporation ("CVY") for breach of a September 27, 1991 (effective September 30, 1991) Agreement to defend and indemnify Boulder Cleaners with respect to Plaintiffs' claims in this case. After Boulder Cleaners settled with Plaintiffs in 2002, litigation of the cross-claim was stayed following a Law and Motion Hearing on April 14, 2005, pending the outcome of Plaintiffs' claims against CVY and Johnny on the Spot, Inc. ("JOS"). Plaintiffs and CVY and JOS have now settled and seek the entry of an Order Approving Settlement Agreement With Contribution Protection (Doc # 492-2) which is unnecessarily broad and prejudicial to cross-claimants. CVY's stated intent is to use the Settlement Agreement and Order Approving Settlement Agreement With Contribution Protection (Doc # 492-2), to impair or otherwise affect BCI/JCI's cross-claim for defense and indemnification under the above referenced Agreement, as asserted herein or in the State Court matter pending in Denver District Court, BCI/JCI v. John J. Yelenick, et al., Case # 2003 - CV - 0215.1 In Response therefore, in order to protect their position in the litigation, BCI/JCI have no choice but to ask the Court for entry of an alternative Order that clarifies the scope of the contribution bar. Pursuant to CERCLA, contribution is barred as to matters addressed by the

settlement. If the August 30, 2007 Settlement Agreement is construed to its broadest extent, matters addressed in the settlement could include (1) "alleged releases of

In conferring with undersigned counsel, CVY/JCI's attorney candidly conceded that he plans to assert the Contribution Bar Order to preclude BCI/JCI's defense and indemnity cross-claim.

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perchloroethylene from and at the property," (2) claims that are in any way related to the site or the subject matter of the lawsuit, (3) the payment by the insurance companies of defense costs in the lawsuit, and (4) other matters as limited only by the ingenuity/creativity of CVY's attorneys. Presented either here, or more likely to a State Court Judge, entry of the presently proposed Order (Doc. # 492-2) is highly prejudicial, creating unnecessary legal issues that BCI/JCI should not have to be spending money to address. Thus, BCI/JCI request that any Order granting Contribution Protection be modified to clarify that the Order does not preclude and is not intended to impact or impair the BCI/JCI cross-claim for defense and indemnification under the September 27, 1991 Agreement effective September 30, 1991, as asserted herein or in the State Court matter pending in Denver District Court, BCI/JCI v. John J. Yelenick, et al., Case # 2003 - CV - 0215. ARGUMENT BCI/JCI's cross-claim against CVY for defense and indemnification is of paramount importance. The Plaintiffs brought claims against BCI/JCI under which they sought to hold BCI/JCI jointly and severally liable for millions of dollars stemming from environmental contamination at the property from 1967 through 1991. CVY had a clear contractual duty to defend BCI/JCI with respect to these claims, which it breached. BCI/JCI have expended substantial legal fees and costs in defending against and ultimately settling those claims. BCI/JCI are now entitled to recover those fees and costs from CVY via their cross-claim, and BCI/JCI are ready to have their day in Court on these issues. There are at least two ways in which CVY might use the Settlement Agreement to impair BCI/JCI's cross-claims. First, CVY/JOS seek the entry of contribution protection 3

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pursuant to CERCLA, § 113(f)(2). This section allows a settling defendant to be protected from claims for contribution "regarding matters addressed in the settlement." 42 U.S.C. § 9613(f)(2). BCI/JCI's cross-claim against CVY is for contractual defense and indemnity, rather than for statutory contribution, so the cross-claim should not be affected by the contribution bar. In fact, the Courts have specifically held that contractual indemnity claims are not precluded or affected by CERCLA's contribution bar. See, e.g., Acme Fill Corp. v. Althin CD Medical, Inc., 1995 WL 822664, *9 (N.D. Cal. 1995) (contribution bar under CERCLA applies to state law claims not based on contractual indemnity); Allied Corp. v. Frola, 730 F Supp. 626, 639 (D.N.J. 1990) (although it forecloses contribution claims, CERCLA does not restrict the right to common law indemnification), abrogated on other grounds, Kemp Industries, Inc. v. Safety Light Corp., 1994 WL 532130 (D.N.J. 1994). Nonetheless, CVY/JOS have included broad language in the proposed Order Approving Settlement Agreement With Contribution Protection (Doc # 492-2) in an attempt to prejudice BCI/JCI's cross-claim. Indeed, the language in the proposed Order (Doc. # 492-2) is quite broad and would be expected to prejudice BCI/JCI if presented to a different Judge of this Court or worse, a State Court Judge in Denver District Court Case # 2003 CV - 0215. To address this issue and simplify other issues, counsel for BCI/JCI asked CVY to simply agree it will not use the Settlement Agreement in any way to defend against BCI/JCI's cross-claim, either here or in State Court. CVY's counsel has refused, stating that CVY will likely take the position in the future that the contribution bar precludes BCI/JCI's defense and indemnity claim. This position should absolutely fail for lack of legal support (see, e.g., cases supra). Certainly CVY/JOS can have no good faith basis for even asserting that a 4

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contribution bar can preclude the BCI/JCI claim for breach of a contractual duty to defend and indemnify. CVY itself has taken the position that, state law claims for contractual indemnity are not claims for contribution under CERCLA. The legal elements of the indemnity cross-claim are different from a CERCLA contribution claim, as they are distinct causes of action. The indemnity cross-claim arises out of a contract and provides for damages which are different from the damages available with a CERCLA contribution claim. Reply in Support of Motion for Reconsideration (Doc. # 290). CVY/JOS have stated this correct proposition in multiple prior pleadings. See, Doc. # 215, 230, & 276. Noting that, "Ordinarily this argument would carry the day for objectors," the Court acknowledged that the cross-claims asserted by CVY/JOS were indemnification claims as distinct from contribution claims but were moot because CVY could only seek indemnification to the extent it was found liable for damages caused by BCI/JCI and the Court's earlier "proportionate fault" ruling insulated CVY from liability. (Doc. # 236, 351 & 458).

CVY/JOS's earlier argument that the BCI/JCI cross-claim arose from a property agreement that had no connection with the primary claims brought by the Plaintiffs and did not even arise from the same transaction or occurrence giving rise to the lawsuit, further demonstrates that the cross-claim cannot be precluded by contribution bar arising from a settlement of the suit. (Doc. # 27, 151 & March 26, 2003 Order on Pending Motions, p. 5). Despite the obvious flaws in CVY's position, BCI/JCI still must ensure there is nothing in any eventual Order Approving Settlement Agreement With Contribution Protection that will unfairly strengthen CVY's argument. 2
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BCI/JCI also have claims for contractual defense and indemnity pending against the CVY shareholders in Colorado State Court. The concerns stated herein apply equally, if not more, to the protection of those claims. The State Court Judge will not have had the involvement of this Court in the proceedings surrounding the Settlement

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The issue of whether CVY's duty to defend was triggered by Plaintiffs' Complaint has not been finally decided by this Court or the State Court. Boulder Cleaners takes the position ­ consistent with settled Colorado law -- that CVY's duty to defend is triggered by what is contained within the four corners of Plaintiffs' Complaint. See, e.g., Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo. 1999); Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1086 (Colo. 1991). Because Plaintiffs alleged in their Complaint that BCI/JCI was jointly and severally liable with CVY/JOS for contamination at the site from 1967 forward, CVY's duty to defend was unquestionably triggered by Plaintiffs' Complaint. CVY breached the duty to defend by failing to accept BCI/JCI's tender of its defense. Faced with the potential for joint and several liability for millions of dollars, or an Order to clean up the property, and mounting legal fees, BCI/JCI determined its interests were best served by the early settlement it reached with Plaintiffs in 2002. By failing to defend BCI/JCI prior to the settlement, CVY has lost the right to argue that any or all of the money BCI/JCI paid in settlement pertained to contamination occurring after 1991. See, Burlington Northern R.R. Corp. v. Stone Container Corp., 934 P.2d 902, 90607 (Colo. App. 1997) (to be entitled to indemnity after failure to defend, party need only show that underlying claim was settled in good faith and reasonably). Thus, CVY is responsible for both BCI/JCI's defense and settlement costs. Contrary to established Colorado precedent (see, e.g., cases supra), CVY contends that the duty to defend and indemnify turns on the apportionment of the parties' actual

Agreement. Instead, he will potentially be presented with a bare Settlement Agreement or Order approved by this Court containing language that CVY will argue precludes or otherwise impairs BCI/JCI's cross-claims. Even the broad language in the proposed Order submitted by the parties concerning the scope of contribution protection would be troubling if presented to the State Court Judge with no other background.

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liability under CERCLA. CVY contends there is no duty to defend or indemnify absent a showing that CVY's predecessor, Purus, Inc., contaminated the property prior to September 1991, and that BCI/JCI's defense and settlement costs related solely to the preSeptember 1991 contamination by Purus, Inc. Because of the stays in this case and the State Court case, no Court has yet ruled on the issue of whether the timing of the contamination, or the allocation of settlement dollars, has any bearing on CVY's duty to defend (and indemnify) BCI/JCI.3 Until a Court rules, consistent with Colorado precedent, that these issues are immaterial to CVY's duty to defend and indemnify, BCI/JCI must ensure there is nothing in the record, including in a court-approved Settlement Agreement or Contribution Bar Order issued pursuant thereto, that can later be used to preclude, impact or impair the BCI/JCI cross-claim for defense and indemnification under the September 1991 Agreement, either here, or perhaps more problematic, in State Court. If the issue is not resolved now, BCI/JCI will be further forced to fund additional needless litigation, only compounding the harm caused by CVY's failure to provide a defense in the first instance. CONCLUSION For the reasons stated, BCI/JCI must object to the proposed Order Approving Settlement Agreement With Contribution Protection (Doc # 492-2). An alternative Order should simply say that "All contribution claims against the Settling Defendants relating to any matter addressed in the Settlement Agreement . . . are hereby barred." Thereafter, the Order would acknowledge that "BCI/JCI's cross-claims and state law claims are not a matter addressed in the Settlement Agreement." See, Proposed Order, Exhibit 1,
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By their concurrently filed Motion to Adopt Briefing Schedule, BCI/JCI seek a prompt resolution of this legal issue.

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attached. While the actual language of any Order will be worked out by the Court with input from the parties, BCI/JCI ultimately request that any Order granting Contribution Protection be modified to clarify that the Order does not preclude and is not intended to impact or impair the BCI/JCI cross-claim for defense and indemnification under the September 27, 1991 Agreement effective September 30, 1991, as asserted herein or in the State Court matter pending in Denver District Court, BCI/JCI v. John J. Yelenick, et al., Case # 2003 CV - 0215.4 See, Second Proposed Order, Exhibit 2, attached. In the event the Court chooses not to adopt the suggested language, BCI/JCI respectfully ask the Court to add clarifying language to any Order so that CVY (and its shareholders) are unable to force BCI/JCI into needless expensive litigation either here, or more likely in State Court, over the meaning of the contribution bar and what, if any, impact it has on BCI/JCI's cross-claim and State Court claims. DATED this 24th day of October, 2007. Respectfully submitted,

s/ Scott Jurdem Scott Jurdem, No. 7840 BUCHANAN, JURDEM & CEDERBERG, P.C. Eighteenth Street Atrium 1621 18th Street, Suite 260 Denver, Colorado 80202 Telephone: (303) 297-2277 Facsimile: (303) 297-2233 E-Mail: [email protected]
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As another alternative, the Order itself could state" "This Order does not preclude and is not intended to impact or impair the BCI/JCI cross-claim for defense and indemnification under the September 27, 1991 Agreement effective September 30, 1991, as asserted herein or in the State Court matter pending in Denver District Court, BCI/JCI v. John J. Yelenick, et al., Case # 2003 - CV - 0215."

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[email protected] ATTORNEYS FOR CROSS-PLAINTIFFS BOULDER CLEANERS, INC. & JOHN'S CLEANERS, INC. CERTIFICATE OF SERVICE I hereby certify that on October 24, 2007, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Max K. Jones , Jr [email protected],[email protected] Scott Jurdem [email protected],[email protected] C. Michael Montgomery [email protected],[email protected],[email protected] Jonathan William Rauchway [email protected],[email protected] Laura J. Riese [email protected],[email protected]

s/ Susan M. Avery Susan M. Avery BUCHANAN, JURDEM & CEDERBERG , P.C. 1621 18th Street, Suite 260 Denver, CO 80202 Telephone: (303) 297-2277 Facsimile: (303) 297-2233 E-Mail: [email protected]

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