                 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 17a0384n.06

                                           No. 16-1264
                                                                                       FILED
                          UNITED STATES COURT OF APPEALS                         Jun 30, 2017
                               FOR THE SIXTH CIRCUIT                         DEBORAH S. HUNT, Clerk

EMPLOYERS INSURANCE OF WAUSAU, et al.,                   )
                                                         )
       Plaintiffs-Appellees,                             )
                                                         )      ON APPEAL FROM THE
v.                                                       )      UNITED STATES DISTRICT
                                                         )      COURT FOR THE WESTERN
MCGRAW EDISON COMPANY,                                   )      DISTRICT OF MICHIGAN
                                                         )
       Defendant-Appellant.                              )


       Before: DAUGHTREY, MOORE, KETHLEDGE, Circuit Judges.

       KETHLEDGE, Circuit Judge. In the 1950s, the McGraw-Edison Company owned a plot
of land in Bloomfield, New Jersey (the “McGraw Bloomfield property”), where it operated two
battery factories: the Primary Battery plant and Storage Battery plant. McGraw sold the Storage
Battery plant in 1960, and later transferred the Primary Battery plant to a subsidiary called
Battery Products, Inc. Thereafter, Cooper Industries acquired McGraw and discovered that
several of McGraw’s factories, including the Primary Battery plant, had potentially contaminated
the environment. Cooper asked its insurers to cover its liabilities for the cleanup; in response,
they sued Cooper in the Western District of Michigan, seeking a declaration that the
contamination was not covered by their policies. Cooper and its insurers settled that suit in 1989.
Per their settlement agreement, Cooper released any future claims arising from contamination at
five facilities, including one in Bloomfield, which the parties called the “McGraw-Edison
Battery Products Plant facility.” Twenty years later, the United States Environmental Protection
Agency notified Cooper that the entire McGraw Bloomfield property—including both the
Primary Battery plant and Storage Battery plant—might have contributed to pollution in the
Passaic River. In 2014, Cooper’s insurers returned to federal court, arguing that the 1989
settlement agreement barred Cooper from seeking insurance coverage for the federal EPA’s
environmental claims. The district court agreed, holding that Cooper’s release of its claims for
No. 16-1264
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the “Battery Products Plant facility” included a release for any pollution migrating from the
McGraw Bloomfield property as a whole—including, therefore, the Storage Battery plant—
rather than just the Primary Battery plant. We respectfully disagree and reverse.

                                                   I.

        Thomas Edison began manufacturing batteries in New Jersey over 100 years ago. His
company, Thomas A. Edison, Inc., managed two adjacent battery plants there, located on land
straddling the line between Bloomfield and Belleville. The Primary Battery Division operated
one plant, while the Storage Battery Division operated the other. Thomas A. Edison, Inc.
thereafter merged with McGraw Electric Company, and the new McGraw-Edison Company took
over both battery divisions. In 1960, McGraw-Edison sold the Storage Battery plant to another
battery company.      Meanwhile, the Primary Battery plant continued making batteries under
McGraw’s management.

        In 1984, a heavy rainstorm caused the Primary Battery plant’s wastewater-treatment
system—also called a “lagoon” or “settling pond”—to overflow into a neighbor’s yard. The
neighbor complained to the New Jersey Department of Environmental Protection, which sent
McGraw a notice of potential contamination. The notice ordered McGraw to investigate soil and
groundwater contamination at its Belleville facility.        A year later, McGraw transferred the
Primary Battery plant to a subsidiary, Battery Products, Inc. Meanwhile, McGraw itself became
a subsidiary of Cooper Industries. Cooper, McGraw, and Battery Products, Inc. (collectively,
“Cooper”) began investigating the contamination in and around the Primary Battery plant.
Parallel government investigations revealed that several other McGraw facilities around the
country had potentially polluted the environment. In 1986, Cooper asked its insurers to cover its
investigation costs and potential liability for that pollution.

        That same year, the insurers sued Cooper in federal court in Michigan, seeking a
declaration that the relevant insurance policies did not cover Cooper’s liability for the pollution.
Cooper responded by filing a “Counterclaim and Crossclaim.” In Count III of the Counterclaim,
Cooper explained that it was seeking coverage for its liability “for contamination allegedly from
[McGraw’s] Battery Products Plant in Bloomfield, New Jersey[.]”             Cooper described the
“Battery Products Plant” as a factory that manufactured “battery products” and that “McGraw
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ha[d] owned and operated” since 1959. Cooper also alleged that, after 1959, contamination had
been “introduced into settling ponds on the Battery Products site” and had thereafter entered
New Jersey’s groundwater.        Over the next three years, the New Jersey Department of
Environmental Protection continued to investigate the Primary Battery plant for environmental
contamination. Eventually, the investigation also included two lagoons on the adjacent land,
where McGraw’s Storage Battery plant had been. When Cooper and the Department discovered
contamination in those lagoons, Cooper agreed to clean them up.

       Cooper and its insurers settled the insurers’ declaratory-judgment lawsuit and Cooper’s
counterclaim in 1989. Per the settlement agreement, the insurers paid Cooper an undisclosed
sum of money and Cooper released any future claims arising from “[t]he McGraw-Edison
Battery Products Plant facility located in Bloomfield, New Jersey and anything released,
escaping, or migrating . . . from the site including contamination of the groundwaters of the State
of New Jersey as described in [Count III of] the Counterclaim and Cross-Claim[.]” Elsewhere in
the agreement, the parties specified that Michigan law governed the agreement’s interpretation
and that “any dispute” over its terms “shall be commenced and resolved in the United States
District Court for the Western District of Michigan, Southern Division.” In December 1989, the
district court incorporated the settlement agreement into its order of dismissal.

       Twenty years later, the federal EPA notified Cooper that the McGraw Bloomfield
property, including both the Primary Battery plant and Storage Battery plant, might have
polluted the Passaic River. Cooper sued its insurers in New Jersey state court, claiming an
entitlement to coverage for the environmental contamination. The insurers then returned to
federal court in Michigan, seeking a declaration that, per the 1989 settlement agreement, Cooper
had released its insurance claims. Cooper conceded that it had released any claim for coverage
that involved contamination escaping from the Primary Battery plant (which Battery Products,
Inc., had operated in the 1980s). But Cooper argued that the agreement permitted its claims for
any contamination originating from the Storage Battery plant. Cooper also argued that the
district court should abstain from hearing the case because of the pending New Jersey lawsuit.

       The district court rejected Cooper’s abstention argument and granted the insurers’ motion
for declaratory relief, reasoning that “the only fair way” to interpret the term “McGraw-Edison

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Battery Products Plant facility” as used in the settlement agreement was as a reference to the
entire McGraw Bloomfield property, including the Storage Battery plant. This appeal followed.

                                                  II.

                                                  A.

       As an initial matter, Cooper argues that the district court should not have exercised
jurisdiction over this declaratory-judgment action. We review that decision for an abuse of
discretion. See Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir. 2008). A federal
court should abstain from ordering declaratory relief if doing so would amount to “[g]ratuitous
interference” with a pending state-court action that involves the same state-law issues and the
same parties as the federal action.       Id. at 559 (citations omitted); see Brillhart v. Excess
Insurance Co. of America, 316 U.S. 491, 495 (1942).

       Cooper argues that the district court should have left the issue in this case—i.e., whether
the settlement agreement released Cooper’s pending claims for insurance coverage—for the New
Jersey court to decide. But the settlement agreement itself includes a mandatory forum-selection
clause, which states that “any dispute” over the agreement’s terms “shall be commenced and
resolved” in federal court in the Western District of Michigan. Cooper has neither challenged
the validity of that clause nor explained why it “should not be enforced.” See Smith v. Aegon
Cos. Pension Plan, 769 F.3d 922, 929 (6th Cir. 2014). Hence the court did not abuse its
discretion in exercising its jurisdiction per the clause’s terms here.

                                                  B.

       Cooper argues that the district court wrongly interpreted the settlement agreement to
release its insurance claims for pollutants migrating from anywhere on the McGraw Bloomfield
property, rather than from only the Primary Battery plant. We review de novo the district court’s
interpretation of the settlement agreement. See Solo v. United Parcel Serv. Co., 819 F.3d 788,
794 (6th Cir. 2016) (citing Port Huron Educ. Ass’n v. Port Huron Area Sch. Dist., 550 N.W.2d
228, 237 (Mich. 1996)).

       Michigan “law presumes that . . . the actual words used in the contract” embody the
parties’ intent. City of Grosse Pointe Park v. Mich. Mun. Liab. & Prop. Pool, 702 N.W.2d 106,

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124 (Mich. 2005). Thus, we start with the contract’s text to determine if its terms, standing
alone, are unambiguous. In the settlement agreement, Cooper released its insurance claims for
“[t]he McGraw-Edison Battery Products Plant facility located in Bloomfield, New Jersey and
anything released, escaping, or migrating . . . from the site including contamination of the
groundwaters of the State of New Jersey as described in [Count III of] the Counterclaim and
Cross-Claim[.]” The parties now dispute the meaning of the term “McGraw-Edison Battery
Products Plant facility” as used in the agreement.

       According to Cooper, the term “Battery Products Plant facility” refers to only the Primary
Battery plant—the factory that McGraw transferred to its wholly owned subsidiary, Battery
Products, Inc., in 1985. The settlement agreement supports this position. Per the agreement,
Cooper released its insurance claims for several other “Plant facilities” across the country, and
the contracting parties named each one according to the McGraw division that had managed it.
Besides those sites, the agreement also lists, in Exhibit C, over 30 other McGraw facilities where
Cooper was aware of potential claims for environmental contamination. Each facility is named
after the entity or division operating it, with names including the “Service Division Facility,” the
“Bussman Facility,” and the former “Toastmaster” and “Worthington” facilities. These names
show that the contracting parties had a convention for identifying the facilities in the agreement
based on the entities that operated them. Under that convention, the Battery Products Plant
facility refers to the Primary Battery plant, which Battery Products, Inc. operated, and which
does not include the Storage Battery plant.

       Moreover, the settlement agreement incorporates the Counterclaim by reference, and
Cooper’s description of the “Battery Products Plant” in the Counterclaim confirms that the
settlement’s release encompassed only contamination escaping from the Primary Battery plant.
In the Counterclaim, Cooper describes the Battery Products Plant as the property that “McGraw
has owned and operated” since 1959. At the time Cooper filed the Counterclaim, the Primary
Battery plant was the only Bloomfield factory that fit that description. Cooper also used lower-
case letters to write the phrase “battery products” when describing how the Battery Products
Plant “engaged in the manufacture of battery products.” But Cooper capitalized the term when
referring to the “Battery Products site.” Capitalization indicates that a phrase “is a proper noun
designating ‘a particular person, place, or thing.’” In re B.A.D., 690 N.W.2d 287, 292 (Mich. Ct.

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App. 2004) (citation omitted). And the only particular entity to which “Battery Products” could
refer in the Counterclaim is Battery Products, Inc. See id. The settlement agreement’s explicit
reference to the Counterclaim thus indicates that the agreement was likewise using “Battery
Products” as shorthand for Battery Products, Inc.

       Despite all these proofs that the “Battery Products Plant facility” referred to the Primary
Battery plant, the insurers argue that the settlement agreement and the counterclaim
unambiguously refer to the entire McGraw Bloomfield facility. They make two basic arguments.
First, they contend that the settling parties could not have been referring only to land owned by
Battery Products, Inc., because the settlement agreement neither mentions Battery Products, Inc.
by name nor includes the word “Inc.” when referring to the Battery Products Plant facility.
Rather, the insurers say, “Battery Products” is a generic reference to the batteries produced by
the entire McGraw Bloomfield property, which until 1960 included the Storage Battery plant.
But nowhere else in the settlement agreement did the contracting parties name a facility after the
products it made, much less refer to those products as a proper noun. And the parties did not
specify what type of corporate entity operated some of the other facilities referenced in the
agreement, including the “Worthington” and “Bussman” facilities. Yet entities with those names
plainly operated those facilities. The insurers provide no explanation for why the parties would
depart from their convention when naming the Battery Products Plant facility but nowhere else.
Moreover, no reasonable drafter who meant to refer to both the Primary Battery and Storage
Battery plants would have named the Bloomfield facility after “Battery Products”—a phrase
identical to the name of an entity managing only the Primary Battery plant.

       Second, the insurers contend that the settlement’s release must have encompassed the
entire Bloomfield property because, when the parties settled in 1989, New Jersey’s investigation
and Cooper’s remediation included the two lagoons on the Storage Battery site. In making this
argument, however, the insurers openly rely on extrinsic evidence—which they cannot do unless
they first identify a specific contractual ambiguity that the extrinsic evidence would clarify. See
City of Grosse Pointe Park, 702 N.W.2d at 113-14. And the insurers have not tried to identify
any such ambiguity. Nor do we think that the parties incorporated the extrinsic documents by
reference into the settlement agreement. Under Michigan law, “the parties must manifest clearly
[their] intent to incorporate” external documents into a contract. NILAC Int’l Mktg. Grp. v.

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No. 16-1264
Employers Insurance of Wausau, et al. v. McGraw Edison Company

Ameritech Servs., Inc., 362 F.3d 354, 358 n.3 (6th Cir. 2004) (citing Forge v. Smith, 580 N.W.2d
876, 881 & n.21 (Mich. 1998)). And here there is no indication whatever that the parties meant
to incorporate the various documents (many of which were internal to the New Jersey
Department of Environmental Protection) that the insurers rely upon now.

       The insurers’ contention is also without merit even taken on its own terms.          The
settlement agreement expressly releases any claim for not only contamination on the Battery
Products site but also for “anything released, escaping, or migrating . . . from the site[.]”
(emphasis added). The release would therefore encompass contamination that migrated from the
Battery Products site to the Storage Battery lagoons.       That the parties knew there was
contamination on the Storage Battery property thus does not mean the release must encompass
any contamination originating from the Storage Battery Plant.

                                        *      *      *

       In summary, the settlement agreement’s reference to the “McGraw-Edison Battery
Products Plant facility” unambiguously referred to the plant operated by Battery Products, Inc.,
rather than to the Bloomfield site as a whole. The district court’s January 27, 2016 order is
therefore reversed.




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No. 16-1264
Employers Insurance of Wausau, et al. v. McGraw Edison Company

       KAREN NELSON MOORE, Circuit Judge, dissenting.                      This case asks us to
determine whether a 1989 Settlement Agreement is ambiguous. The Settlement Agreement
released insurers from coverage as to a battery manufacturing facility in Bloomfield, New Jersey.
Cooper Industries argues that the Settlement Agreement unambiguously refers only to the facility
that manufactured primary batteries, not to the adjacent facility that manufactured storage
batteries. The insurers argue that the Settlement Agreement unambiguously refers to both the
primary battery manufacturing operation and storage battery manufacturing operation because
they were part of a single facility, not two separate facilities. The district court wrote a well-
reasoned opinion concluding that the Settlement Agreement unambiguously refers to a single
facility that manufactured both primary and storage batteries. The majority has written a well-
reasoned opinion concluding that the Settlement Agreement unambiguously refers to only the
primary battery facility, not the separate storage battery manufacturing facility. I conclude that
the Settlement Agreement is ambiguous, and I would vacate the district court’s judgment and
remand for an evidentiary hearing.

       In its opinion concluding that the Settlement Agreement unambiguously referred to the
entire battery manufacturing operation, the district court said:

       The first and most obvious problem is that the term the parties used is not the
       phrase that Cooper wants it to be. The parties referred simply to “Battery
       Products,” and not to “Battery Products, Inc.” The term is capitalized, but not
       defined anywhere else in the papers, and so the term must glean meaning from the
       overall context of its use. Reading into the term the corporate entity limits that
       Cooper urges is not warranted by the text or context. Second, the most natural
       referent for the term “Battery Products” is the 1984 notice letter, which is the
       triggering event for coverage purposes. And at that time the corporate entity
       “Battery Products, Inc.” did not even exist. . . . [T]hird and most important, the
       overall point of the whole settlement was to prepare a comprehensive
       identification of insurance exposures, and then divide them by site into released
       sites or on-notice sites. Reading the Agreement as Cooper urges would disrupt
       that design by effectively creating a third possibility: namely, a site that everyone
       knew was contaminated, and that the parties described in 25-year-old language on
       either the “Settled Site” or “On Notice” site exhibit, but that parties today are now
       describing in somewhat different words. On this record there is no basis to do so.

R. 400 (Opinion at 13) (Page ID #2887).

       The majority opinion provides a different analysis:


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Employers Insurance of Wausau, et al. v. McGraw Edison Company

       Cooper released its insurance claims for several other “Plant facilities” across the
       country . . . . Each facility is named after the entity or division operating it, with
       names including the “Service Division Facility,” the “Bussman Facility,” and the
       former “Toastmaster” and “Worthington” facilities. These names show that the
       contracting parties had a convention for identifying the facilities in the agreement
       based on the entities that operated them. Under that convention, the Battery
       Products Plant facility refers to the Primary Battery plant, which Battery Products,
       Inc. operated, and which does not include the Storage Battery plant. . . .
       Moreover, . . . [i]n the Counterclaim, Cooper describes the Battery Products Plant
       as the property that “McGraw has owned and operated” since 1959. At the time
       Cooper filed the Counterclaim, the Primary Battery plant was the only Bloomfield
       factory that fit that description. Cooper also used lower-case letters to write the
       phrase “battery products” when describing how the Battery Products Plant
       “engaged in the manufacture of battery products.” But Cooper capitalized the
       term when referring to the “Battery Products site.” . . . The settlement
       agreement’s explicit reference to the Counterclaim thus indicates that the
       agreement was likewise using “Battery Products” as shorthand for Battery
       Products, Inc.

Maj. Op. at 5–6.

       The central dispute between these two analyses of the Settlement Agreement is the
meaning of the term “Battery Products.” In the above excerpt, the district court emphasizes that
the term most likely refers to a 1984 letter written before the corporate entity Battery Products,
Inc. existed. The district court also emphasizes that defining “Battery Products” to mean the
facility eventually owned by Battery Products, Inc., rather than the entire facility that
manufactured both primary and storage batteries, would undermine the purpose of the Settlement
Agreement, which was “to prepare a comprehensive identification of insurance exposures, and
then divide them by site into released sites or on-notice sites.” R. 400 (Opinion at 13) (Page ID
#2887). The majority opinion, by contrast, emphasizes that the Settlement Agreement referred to
other facilities based on the entities the operated them, and that Battery Products, Inc. operated
the battery products manufacturing facility but not the storage battery manufacturing facility.
The majority also emphasizes that the capitalization of “Battery Products” indicates that the term
is short for Battery Products, Inc., not a general reference to the products manufactured at the
facility. Each of these opinions makes a convincing case for the wisdom of its proposed
interpretation of the term “Battery Products” in the Settlement Agreement. Neither makes a
convincing case that the other interpretation is an impermissible construction of the term.


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       A contract is unambiguous when it “fairly admits of but one interpretation.” Allstate Ins.
Co. v. Goldwater, 415 N.W.2d 2, 4 (Mich. Ct. App. 1987). This Settlement Agreement “fairly
admits of” two interpretations. Id. Therefore, this Settlement Agreement is ambiguous. When a
contract is ambiguous, the district court must hold an evidentiary hearing. See RE/MAX Int’l,
Inc. v. Realty One, Inc., 271 F.3d 633, 646 (6th Cir. 2001). Because the Settlement Agreement is
ambiguous, the district court abused its discretion by failing to hold an evidentiary hearing.

       I concur with the majority’s judgment that the district court properly exercised
jurisdiction over the declaratory-judgment action. I disagree with the majority’s view that the
contract is unambiguous, and I would remand for an evidentiary hearing.                Therefore, I
respectfully dissent.




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