Ashley II of Charleston, L.L.C. v. PCS Nitrogen, Inc.
763 S.E.2d 19
S.C.2014Background
- A Charleston fertilizer site owned by Ross (formerly Planters) from 1906–1966 became contaminated with arsenic, lead, and acid.
- Ross sold the site to PCS in 1966; the purchase agreement contained an indemnity: Ross would "indemnify and hold harmless [PCS]" for acts/omissions by Ross occurring before closing.
- PCS later owned and operated the site and contributed to contamination; Ashley II purchased part of the site in 2003 and incurred remediation costs, suing PCS under CERCLA.
- PCS asserted contribution claims against Ross and sought contractual indemnification from Ross for attorney’s fees, costs, and litigation expenses tied to Ross’s pre-1966 conduct.
- The district court initially awarded indemnification to PCS, then vacated that order and certified whether the traditional rule barring indemnification for an indemnitee’s own negligence applies when the indemnitee’s liability is strict (CERCLA).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the "negligence rule" (no indemnity for indemnitee’s own negligence absent clear language) bars contractual indemnification where indemnitee’s liability arises in part from its own strict liability acts under CERCLA | PCS: The negligence rule should not bar enforcement of the 1966 indemnity for Ross’s pre-closing liability; PCS seeks fees tied to Ross’s pre-1966 conduct | Ross: The negligence rule prevents indemnifying PCS for costs resulting from PCS’s own culpable conduct absent clear, unequivocal language | No — the Court held the negligence rule does not bar enforcement of the indemnity in this CERCLA context given CERCLA’s strict-liability nature and the indemnity’s plain terms |
| Whether enforcement would conflict with public policy or deterrence objectives underlying the negligence rule | PCS: Enforcing the agreed allocation of pre-closing risk honors parties’ freedom to contract and serves no perverse deterrence deficit | Ross: Enforcing indemnity would undercut deterrence by absolving parties from responsibility for their own actions | The Court held deterrence rationale does not apply because CERCLA liability is status-based/strict and the indemnity is limited to pre-closing conduct; freedom to contract favors enforcement |
Key Cases Cited
- Laurens Emergency Med. Specialists, PA v. M.S. Bailey & Sons Bankers, 355 S.C. 104 (2003) (articulates the negligence rule barring indemnity for indemnitee’s own negligence absent clear language)
- S.C. Elec. & Gas Co. v. Utils. Constr. Co., 244 S.C. 79 (1964) (declines to apply the negligence rule where its deterrent purpose would not be served)
- United States v. Monsanto Co., 858 F.2d 160 (4th Cir. 1988) (explains CERCLA imposes liability regardless of traditional tort fault)
- Nurad, Inc. v. William E. Hooper & Sons, 966 F.2d 837 (4th Cir. 1992) (describes status-based nature of CERCLA liability)
- Murray v. Texas Co., 172 S.C. 399 (1934) (early South Carolina case describing deterrence purpose behind the negligence rule)