United States District Court, W.D. Arkansas, El Dorado Division
MEMORANDUM OPINION AND ORDER
TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE.
before the Court are cross-motions for summary judgment filed
by Plaintiff Murphy Oil Corporation ("Murphy") and
Defendant Liberty Mutual Fire Insurance Company
("Liberty"). For the reasons given below, Murphy's
motion is DENIED, Liberty's motion is GRANTED, and
Murphy's Complaint is DISMISSED WITH PREJUDICE.
September 2011, Valero Energy Corporation
("Valero") purchased an oil refinery ("the
Refinery") in Meraux, Louisiana from Murphy, pursuant to
an Asset Purchase Agreement ("APA"). See
Doc. 30-2. The following year, on July 22, 2012, a fire
occurred at the Refinery's Crude Unit, causing extensive
structural damage. After investigating the matter, Valero
concluded that the fire was caused by various acts and
omissions that Murphy had committed prior to the APA's
closing. In November of that same year, the Environmental
Protection Agency ("EPA"), informed Valero that it
would seek to impose penalties on Valero for violations of
the Clean Air Act based on the July fire.
December 2012, Valero sent Murphy a letter demanding that
Murphy indemnify Valero for the full amount of damages it had
sustained (and would sustain in the future) in connection
with the July fire, including any EPA penalties related to
that fire. See Doc. 30-4, p. 4. In that same letter,
Valero described various additional violations of
environmental law that its investigation had uncovered,
accusing Murphy of having made material misrepresentations or
omissions about those violations to Valero during the sale of
the Refinery, and demanding that Murphy indemnify it for the
various damages and penalties that it had suffered (or
expected to suffer) as a result. See id. at 4-7. The
letter's demands were explicitly premised on the
APA's indemnity provision, see Id. at 1, 3,
which states in relevant part that Murphy will indemnify
Valero for "any and all damage, loss and expense . . .
actually suffered by [Valero] to the extent arising out of:
(i) any misrepresentation or breach of warranty; ... or (iii)
any Retained Liability," see Doc. 30-2, p. 85,
§ 13.02(a); see also Id. at p. 30, §
2.04(f) (defining "Retained Liabilities" to include
"the Retained Environmental Liabilities," which are
defined in § 1.01(a) to include a wide variety of
"liabilities and obligations arising under Environmental
Law to the extent arising from the ownership or operation of
[the Refinery] prior to Closing . . . ."). Valero's
letter concluded by informing Murphy that it expected its
total indemnification claims to exceed $52, 000, 000,
demanding a response within ten business days, and
threatening to file a lawsuit before the end of 2012 unless
an agreement to toll the statute of limitations could be
reached before then. See Doc. 30-4, p. 7.
promptly notified its insurer, Liberty, of Valero's
claims against it, and asked Liberty to provide Murphy a
defense under the commercial general liability
("CGL") policy that Murphy had purchased from it
("the Policy"). Liberty declined to do so,
contending that it had no duty under the Policy to defend
Murphy against Valero's claims. See Doc. 30-7,
pp. 1, 30-33. At a general level, Liberty's
justifications were twofold. First, no lawsuit had actually
been filed yet. Second, and regardless of the first, the
policy did not provide coverage for this type of claim.
Murphy disagreed with both justifications, and continued
apprising Liberty of developments in its negotiations with
Valero over the next several years, as the two oil companies
attempted to resolve their dispute outside of court. See,
e.g., Docs. 30-9, 30-10, 30-11.
Murphy and Valero were unable to resolve their dispute, and
on February 7, 2017, Valero filed a one-count complaint
against Murphy for breach of contract in New York state court
("the New York Lawsuit"), claiming damages in
excess of $25, 000, 000. See Doc. 30-3. Murphy again
requested a defense from Liberty. See Doc. 30-8. In
November 2017, Liberty again refused, denying that it had any
duty to provide one. So the following year, Murphy filed the
instant lawsuit against Liberty in this Court, seeking a
declaratory judgment and damages for breach of contract.
See Doc. 1. Among other things, Murphy's
Complaint asks this Court to declare that the Policy requires
Liberty to provide Murphy a defense against Valero. See
Id. The Complaint also asks this Court to order Liberty
to pay for that defense and to reimburse Murphy for the
defense costs that Murphy has already incurred. See
and Liberty have filed cross-motions for summary judgment
against each other. Those motions have been extensively
briefed, see Note 1, supra, and on December
18, 2018, this Court received oral argument on them. Both
motions are now ripe for decision.
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). When, as here, cross-motions for summary
judgment are filed, each motion should be reviewed in its own
right, with each side "entitled to the benefit of all
inferences favorable to them which might reasonably be drawn
from the record." Wermager v. Cormorant Twp.
Bd., 716 F.2d 1211, 1214 (8th Cir. 1983). The Court must
view the facts in the light most favorable to the non-moving
party, and give the non-moving party the benefit of any
logical inferences that can be drawn from the facts.
Canada v. Union Bee. Co., 135 F.3d 1211, 1212-13
(8th Cir. 1997). The moving party bears the burden of proving
the absence of any material factual disputes. Fed.R.Civ.P.
56(a); Matsushita Bee. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586-87 (1986).
moving party meets this burden, then the non-moving party
must "come forward with 'specific facts showing that
there is a genuine issue for trial.'"
Matsushita, 475 U.S. at 587 (quoting then-Fed. R.
Civ. P. 56(e)) (emphasis removed). These facts must be
"such that a reasonable jury could return a verdict for
the nonmoving party." Allison v. Flexway Trucking,
Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). "The nonmoving party must do more than rely on
allegations or denials in the pleadings, and the court should
grant summary judgment if any essential element of the prima
facie case is not supported by specific facts sufficient to
raise a genuine issue for trial." Register v.
Honeywell Fed. Mfg. & Techs., LLC, 397 F.3d 1130,
1136 (8th Cir. 2005) (citing Celotex Corp v.
Catrett, 477 U.S. 317, 324(1986)).
summary judgment motion asks this Court to enter judgment in
Murphy's favor by declaring that: (1) Liberty owes Murphy
a duty to defend it against Valero's claims in the New
York Lawsuit; (2) Liberty's duty encompasses attorney
fees incurred by Murphy before the New York Lawsuit was
filed; and (3) Liberty's duty to defend is not subject to
the deductible or policy limits of the Policy. See
Doc. 28, p. 1. Of course, Liberty opposes that request, and
in its own motion asks this Court to declare that: (1)
Liberty has no duty to defend Murphy against Valero's
claims in the New York Lawsuit; (2) Liberty is not obligated
to pay for the costs and fees Murphy incurred through the
negotiations with Valero that preceded the New York
Lawsuit's filing; and (3) in any event, Liberty is not
liable for any defense costs under the Policy until Murphy
meets its deductible obligations. See Doc. 35, p. 1.
the doctrine of Erie R.R. Co. v. Tompkins, 304 U.S.
64 (1938), a federal court sitting in diversity jurisdiction
must "apply the substantive law of the forum State,
absent a federal statutory or constitutional directive to the
contrary." Salve Regina Coll. v. Russell, 499
U.S. 225, 226 (1991). The parties, and this Court, all agree
that Arkansas law governs the interpretation of the
Policy. Thus, this Court must apply governing
precedent from the Arkansas Supreme Court; and if there is no
such case that is directly on point, then this Court must
predict how the Arkansas Supreme Court ...