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PolyOne Corp. v. Westlake Vinyls, Inc.

United States Court of Appeals, Sixth Circuit

September 6, 2019

PolyOne Corporation, Plaintiff-Appellant,
v.
Westlake Vinyls, Inc., Defendant-Appellee.

          Argued: August 1, 2019

          Appeal from the United States District Court for the Western District of Kentucky at Paducah. No. 5:18-cv-00107-Thomas B. Russell, District Judge.

         ARGUED:

          Josephine Mason Petrick, HANSON BRIDGETT LLP, San Francisco, California, for Appellant.

          David A. Super, BRACEWELL LLP, Washington, D.C., for Appellee.

         ON BRIEF:

          Josephine K. Mason, Gary A. Watt, Davina Pujari, Lawrence M. Cirelli, Samir J. Abdelnour, HANSON BRIDGETT LLP, San Francisco, California, Brent R. Baughman, Mark S. Riddle, BINGHAM GREENEBAUM DOLL LLP, Louisville, Kentucky, for Appellant.

          David A. Super, BRACEWELL LLP, Washington, D.C., Samuel D. Hinkle IV, Adam T. Goebel, Angela S. Fetcher, STOLL KEENON OGDEN PLLC, Louisville, Kentucky, for Appellee.

          Before: GUY, THAPAR, and NALBANDIAN, Circuit Judges.

          OPINION

          NALBANDIAN, CIRCUIT JUDGE.

         PolyOne Corporation and Westlake Vinyls have long disputed their share of the cleanup costs at a Superfund site in Kentucky. So the parties entered a settlement agreement ("Agreement") in 2007. Though that Agreement did not end the conflict, it provides some structure to the parties' recurring disputes about the cleanup costs. Under the Agreement, PolyOne must reimburse Westlake for 100% of "allocable costs," and every five years, either party may demand arbitration to modify the amount or allocation of costs.

         This appeal concerns an unusual provision in the Agreement. Under § 6.3, the judicial-relief provision, either party may file a complaint in federal court for a "de novo judicial determination" of which costs are allocable, after the arbitration panel has issued an award allocating costs. The arbitration award becomes null-and-void upon the filing of a complaint, and the Agreement prohibits either party from even admitting the arbitration award into evidence. As far as the federal court is concerned, it is as though the arbitration never happened.

         PolyOne has requested a declaration that the judicial-relief provision is invalid under the Federal Arbitration Act ("FAA") and that the Agreement's other arbitration provisions are unenforceable, along with an injunction to enjoin the most recent arbitration proceeding that began in 2017. On the merits, PolyOne has a strong case. But PolyOne's prior conduct does not align with its present position. Twice, PolyOne demanded arbitration to determine which costs are allocable. Indeed, PolyOne seeks to enjoin the very arbitration it demanded in 2017.

         We withhold judgment on whether PolyOne has waived its ability to challenge the Agreement's arbitration provisions for all time. But by demanding the 2017 arbitration that led to this litigation, PolyOne has waived its ability to obtain declaratory and injunctive relief-at least for that arbitration. We AFFIRM the district court's dismissal of PolyOne's complaint.

         I.

         This dispute is about a clause in an agreement, but the origin of that dispute is less abstract. Goodrich Corporation operated three chemical-manufacturing plants at an industrial site in Calvert City, Kentucky. In 1988, the Environmental Protection Agency designated that site a "Superfund Site" subject to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). Westlake Vinyls, Inc. v. Goodrich Corp., 518 F.Supp.2d 918, 927 (W.D. Ky. 2007). After that designation, Goodrich sold the plants to Westlake in two separate transactions-one in 1990, the other in 1997. Goodrich and Westlake executed asset transfer agreements requiring that (1) Goodrich indemnify Westlake for environmental costs attributable to Goodrich at the Calvert City plants; and (2) Westlake indemnify Goodrich for environmental costs attributable to Westlake at those same plants. After a corporate spinoff in 1993, PolyOne assumed Goodrich's rights and responsibilities under the two agreements, so PolyOne is responsible for liabilities attributable to Goodrich, and PolyOne can claim indemnification for liabilities attributable to Westlake.

         The Settlement Agreement. For four years, PolyOne and Westlake litigated their respective shares of the cleanup costs at the Calvert City site before executing the Agreement in 2007. Under the Agreement, PolyOne agreed to pay 100% of future "allocable costs" related to the environmental remediation at the three plants. But the parties seem to have expected that they would dispute which costs are allocable. Indeed, the Agreement contains a provision allowing either party to demand arbitration to determine which costs are allocable:

Either Westlake or PolyOne can request the other Party to modify the initial allocation of Allocable Costs set forth in Section 3.1 or subsequent allocations made under Section 4 by submitting to the other Party a notice of arbitration as provided for in Exhibit C to this Agreement.

(Agreement at § 4.1.) The parties may demand arbitration only once every five years. (Id.)

         But the arbitration panel does not necessarily have the last word. Under § 6.3 of the Agreement, either party may file a complaint in federal court, within 90 days after the panel issues an award, seeking a "de novo judicial determination of (1) the amount of the Allocable Costs, and/or (2) the appropriate dollar division of the Allocable Costs between the Parties." (Id. at § 6.3.) Filing a complaint is a unilateral act: under the Agreement, the non-filing party "shall not dispute a Party's right to bring a claim for judicial relief." (Id. at § 6.3(c).) Importantly, if a party files a complaint under § 6.3, the arbitration ...


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