                                                                                                                           Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-23-2001

Allied Erecting v. USX
Precedential or Non-Precedential:

Docket 00-3105




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Recommended Citation
"Allied Erecting v. USX" (2001). 2001 Decisions. Paper 85.
http://digitalcommons.law.villanova.edu/thirdcircuit_2001/85


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Filed April 23, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 00-3064 and 00-3105

ALLIED ERECTING & DISMANTLING, CO., INC.,

BRANDENBURG INDUSTRIAL SERVICE COMPANY ,
(Intervener in D.C.)

v.

USX CORPORATION

       Allied Erecting & Dismantling Co.,
       Inc., Appellant No. 00-3064

ALLIED ERECTING & DISMANTLING, CO., INC.;

BRANDENBURG INDUSTRIAL SERVICE COMPANY ,
Intervener

v.

USX CORPORATION,
       Appellant No. 00-3105

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(D.C. No. 93-cv-00575)
District Judge: The Honorable Gustave Diamond

Argued September 11, 2000

BEFORE: NYGAARD, ROTH, and GARTH, Cir cuit Judges.

(Filed: April 23, 2001)
       Christopher R. Opalinski, Esq.
        (Argued)
       Eckert, Seamans, Cherin & Mellott
       600 Grant Street, 44th Floor
       Pittsburgh, PA 15219
        Attorney for Appellant/
       Cross Appellee

       J. Michael Jarboe, Esq. (Argued)
       USX Corporation
       600 Grant Street
       Room 1501, USX Tower
       Pittsburgh, PA 15219
        Attorney for Appellee/
       Cross Appellant

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Previous litigation between appellant, Allied Erecting and
Dismantling, Co., Inc., and appellee, USX Corporation, was
settled on the eve of trial. In this suit, Allied claims that
USX violated several provisions of that settlement
agreement. The District Court granted summary judgment
in favor of USX, and Allied appeals. Many facts ar e
contested, but we have isolated those that ar e germane to
the three issues reaching us on appeal. As fully explained
below, we will reverse the District Court's judgment in two
respects, affirm the balance, and r emand the cause to the
District Court.

I. BACKGROUND

On the eve of trial for the first action br ought by Allied
against USX Corporation, the two entities enter ed into a
court-supervised Settlement Agreement. Allied claimed that
it suffered sixty-six million dollars in damages as a result
of contracts it entered into with USX to dismantle several of
USX's steelmaking facilities. The Settlement Agr eement,
which is at the heart of this controversy, pr ovided: 1) USX
would pay Allied eight million dollars; 2) Allied would be

                               2
granted all dismantling projects at USX's Fairless Works
plant; 3) Allied could bid in good faith as a primary bidder
on USX's subsequent dismantling projects; 4) Allied would
be granted "last look" rights for a period of seven years to
equal or better the most acceptable bid received by USX for
any dismantling projects; 5) Allied would be awarded
dismantling contracts at USX's Ambridge Works, Saxonburg
Works, and McDonald Works.

1. Allied's Section V Claim

Allied's first two claims arise from Section V of the
Settlement Agreement, which reads:

       Except as to any dismantling work at USX's South
       Works facility in Chicago, Illinois, Allied shall be invited
       to bid in good faith as one of U.S. Steel Gr oups'
       primary bidders on any dismantling work, of whatever
       nature or type at any steelmaking facilities, or former
       steelmaking facilities, owned by the U.S. Steel Gr oup
       consistent with and pursuant to specification and
       performance standards developed and issued by U.S.
       Steel Group for such work and, for a period of seven (7)
       years from the date of this Settlement Agr eement and
       General Release, Allied shall be offer ed an opportunity
       to equal and/or to better the most acceptable bid
       received by the U.S. Steel Group for any such further
       dismantling activity. If, within ten (10) days of r eceipt
       of bids, Allied offers in writing to per form such work on
       such terms which are equal to or better than the bid
       otherwise most acceptable to the U.S. Steel Gr oup,
       then, in such event, the work shall be awarded to
       Allied, provided, however, that Allied is then able to
       meet U.S. Steel Group performance standards then in
       effect and, further, that Allied has not been adjudicated
       to be in default under any dismantling contract with
       U.S. Steel Group then in effect at the time of such
       bidding.

Under this "last look" provision, USX issued Allied and
other dismantlers specifications for projects up for bid. The
third parties then bid on the projects subject to the
condition that "Purchaser [USX] r eserves the right to reject

                               3
any or all bids." No third party was told that Allied held the
right to review and match their final bids. For the first few
sessions, Allied formulated and submitted ear nest bids on
the projects. Formulating a bid for pr ojects such as these
can be cost and labor intensive, and Allied later determined
that instead of participating in the bidding pr ocess it would
merely review the best bid offer ed to USX and decide if it
wanted to take the job at that price.

Allied claims that USX violated the terms of Section V
through its relationship with Allied's ar ch-rival,
Brandenburg Industrial Services Company, Inc. Because
the litigation soured Allied and USX's working relationship,
USX awarded most of its dismantling projects thereafter to
Brandenburg. As a result of this close working relationship,
Brandenburg prepared most of the specifications for the
projects on which Allied held the "last look" right. Because
Brandenburg prepared these specifications, Allied argued, it
held an "unquestioned and substantial advantage over the
other bidders for this work." Within one bid, Brandenburg
offered to forgive $379,500 that USX owed for developing
the project specifications if USX granted the project to
Brandenburg. Allied was unable to compete with an offer
that included debt forgiveness, and ther efore claims that
such dealings between USX and Brandenburg materially
varied the terms of the project specifications and violated
Allied's last look rights.

2. Allied's Fraudulent Inducement Claim

Allied next claims that it was fraudulently induced into
accepting Section V of the Settlement Agreement. Allied
claims that USX stated during the settlement bar gaining
process that USX would be preparing the specifications for
the projects on which Allied would bid pursuant to Section
V. This statement led Allied to believe that its last look
rights would not be undercut by a competitor who prepared
the specifications and could therefor e offer a discount by
including the price of the preparations in the bid. At the
time USX allegedly made these statements to Allied, USX
had already retained Brandenburg to prepare specifications
for two of the projects on which Allied intended to bid.

                               4
Brandenburg subsequently used this leverage to outbid
Allied on one of the projects.

3. Allied's Saxonburg Claim

Allied expected to quickly raze the Saxonbur g Works
plant, liquidate its materials for a substantial pr ofit, and
thereby recoup some of its losses associated with the
litigation. Section IV of the Settlement Agr eement reads, in
part:

       1) That all dismantling by Allied shall be per formed at
       no cost to USX;

       2) That the dismantling specification will not include
       the provision for . . . any environmental remediation
       (including any remediation and/or removal of asbestos)
       by Allied, it being understood and agreed that any . . .
       environmental remediation shall be for USX's account;

       3) All ferrous and non-ferrous scrap pr oduced at the
       dismantling projects shall belong to Allied.

The project, however, became complicated by a steel
manufacturing byproduct known as "sinter dust."
According to Allied,

       work in and around the dust was far mor e difficult
       than anticipated because . . . [the sinter dust] impacted
       the way facilities were dropped, the dust had to be
       cleaned from the scrap generated during the
       dismantling before the scrap could be dismantled and
       processed, and, when the dust was dry it became
       airborne and impacted visibility, [and] while it was wet,
       it congealed into a soupy mush that significantly
       slowed the work.

In addition to the general difficulties Allied experienced in
dismantling a plant full of beams, girders, and equipment
caked with the dust, Allied discovered that some of the dust
contained lead and therefore posed health risks to its
employees working amidst more than 16,000 tons of the
material. Allied notified USX of the hazar d and reminded
USX of the relevant terms governing the Saxonburg work:

                               5
       If during the course of the demolition project an
       environmental condition is discovered that requires
       remediation, other than asbestos, the contractor shall
       notify the purchaser and the purchaser shall be
       responsible for any necessary remediation. The
       contractor shall not be entitled to any additional
       compensation resulting from any delays due to the
       remediation process.

To protect its workers, Allied outfitted them with
protective clothing, respirators, and decontamination
showers. The cost of these safety measures diminished
Allied's anticipated profit, and the cumbersome gear
rendered the workers less productive. USX instructed Allied
to remove the lead infected dust surrounding the sinter
machines, and Allied loaded and hauled the dust to an off-
site hazardous dump. USX paid Allied for this service.
Allied also offered to load and haul the remaining sinter
dust for $4 per ton. USX agreed to the price and ultimately
paid Allied to move 16,438 tons of the non-leaded dust to
a dump site.

Allied, however, claims that it perfor med remedial work
beyond and distinct from "loading and hauling." Allied
contends that Section IV of the Settlement Agr eement
protected it from having to perfor m environmental
remediation, and thus seeks to recover"the additional
unanticipated costs it incurred in remediating the
Saxonburg facility of this sinter dust in the form of delay
and disruption damages."

II. DISCUSSION

A. The Enforceability of Section V

The District Court "declared [Section V] a nullity and
unenforceable as against public policy as practiced to date."
Allied contends that Section V does not offend the common
law consensus and therefore cannot be voided as against
public policy. We agree.

"It has long been settled," the District Court stated, "that
a court will not become an aid in the enforcement of

                               6
contractual provisions where to do so would violate public
policy." The Court recited 19th and early 20th century
caselaw, beginning with Veazy v. Allen , 66 N.E. 103, 173
N.Y. 359 (1903):

       There are . . . phases of public policy which are as
       enduring and immutable as the law of gravity. One of
       them is that, as applied to the law of contracts, courts
       of justice will never recognize or uphold any
       transaction which in its object, operation, or tendency
       is calculated to be prejudicial to the public welfare.
       That sound morality and civic honesty are
       cornerstones of the social edifice is a truism which
       needs no reinforcement by argument. It may therefore
       be taken for granted that whenever our courts ar e
       called upon to scrutinize a contract which is clearly
       repugnant to sound morality and civic honesty, they
       need not look for a well fitting definition of public
       policy, nor hesitate in its practical application in the
       law on contracts.

"The rule is," the Court continued as it cited the
Pennsylvania Supreme Court in Kuhn v. Buhl , 96 A. 977,
984 (1916), "that courts having in their view public
interests, will not lend their aid to the enfor cement of an
unlawful contract." The Court drew its dir ect authority from
Pittsburgh Dredging and Constr. Co. v. Monongahela and
Western Dredging Co., 139 F . 780, 784 (Circuit Court,
W.D.Pa. 1905), which stated that "[v]iewed from that
standpoint of morals, square dealing, and commercial
integrity, combinations for collusive, misleading, biddings,
wherever made, cannot be approved; yet to enforce rights
based on an agreement to make such bids is to make the
law an active agent to accomplish such deceptive
purposes."

       Regarding Section V of the settlement Agr eement, the
       Court found that the evil tendency of the contract was
       or would be to perpetrate a fraud on the thir d-party
       bidders and to deny one bidder on each project the
       natural consequence of the bidder's endeavors . . . This
       potential fraud has been and would continue to be
       perpetrated on innocent third parties by using the
       court and the confidentiality of the settlement

                                7
       agreement to keep this practice undisclosed as to both
       the victims and the public. The injury to competition
       may not be immediate in any particular project, but if
       this arrangement were to be carried into ef fect
       repetitively, over the seven-year period, it is clear that
       it would have an injurious effect on competition by
       denying certain of those third parties what should
       otherwise have been awarded to them for their honest
       work and labor in formulating the bids.

Stating that Section V "contains the tendency to work fraud
on the innocent third party bidders, repugnantly distorts
the natural consequences of bona fide competition, and
uses the court to shelter this state of affairs from
detection," the Court held that the "pr ovision is, indeed,
void as against public policy." Further, the Court refused to
shift the blame for the illegality of Section V to USX
because Allied could have genuinely participated in the
bidding process and demanded that USX disclose Allied's
last look right to the other bidders. The Court was unwilling
to find that Allied was victimized by this pr ovision because
it concluded that Allied chose not to participate in the
bidding process on several of the projects, unfairly
benefitted from having others shoulder the expense of
drafting the specifications, and unscrupulously viewed the
bids of its rivals without their consent. The Court also
refused to allow its supervisory approval of the Settlement
Agreement to validate Section V, concluding that it was
Allied's failure to genuinely participate in the bidding and
inform other bidders of its last look rights that rendered it
infirm.

When ruling on the grounds of pubic policy, a court must
speak for a "virtual unanimity" that can "be found in
definite indications in the law." Muschany v. United States,
324 U.S. 49, 451 (1945); Mamlin v. Genoe, 340 Pa. 320, 17
A.2d 407 (1941). We cannot find such a consensus. To the
contrary, the state of the law on this issue is entirely
unclear, as "last look" and "first r efusal" rights are typically
found unproblematic in a variety of contexts. See Crivelli v.
General Motors Corp., 215 F.3d 386 (3r d Cir. 2000)
(permitting right of first refusal for automobile franchisor);
Transmission Access Policy Group v. Federal Energy

                               8
Regulatory Comm'n, 225 F.3d 667 (D.C. Cir . 2000)
(permitting right of first refusal for utilities costumers);
Handelsman v. Bedford Village Assocs., 213 F.3d 48 (2d
Cir. 2000) (permitting right of first refusal granted to real
estate partnership pursuant to settlement agr eement);
Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204
F.3d 867 (9th Cir. 2000); U.S. v. Cochran, 109 F.3d 660
(10th Cir. 1997) (finding the failur e to disclose last look in
securities bidding not fraudulent); Castle Rock Cellular of
Oregon v. Castle Rock Cellular of Oregon, 76 F.3d 1003 (9th
Cir. 1996) (finding implied covenant of good faith violated
by agreement to purchase shell company in attempt to
avoid first refusal provisions of partnership agreement);
Pincus v. Pabst Brewing Co., 893 F .2d 1544 (7th Cir. 1990);
Schultze v. Chevron Oil Co., 579 F .2d 776 (3d Cir. 1978);
CBS, Inc. v. Capital Cities Comm., 301 Pa. Super . 557, 448
A.2d 48 (1982); Sun Oil Co. of Pa. v. Bellone , 292 Pa. Super.
341, 437 A.2d 415 (1981). Considering the wide acceptance
of last look rights, the District Court's policy analysis
contradicts common law consensus and is ther efore
unsupportable. In addition, Section V was an element of
the court-supervised agreement to settle the pr evious
litigation. The principles of this agreement were met with
approval by the trial judge presiding over that litigation,
and this authorization further militates against the
argument that there exist a virtual anonymity against last-
look rights.

The District Court's reliance on Pittsbur gh Dredging was
misplaced. In that case, the plaintiff and defendant both
were bidders on a dredging project let by a non-party. See
Pittsburgh Dredging, 139 F. at 780. The two bidders agreed
to submit bids within a few cents of one another and to
split the work regardless of which bidder received the
contract. See id. at 781. The company letting the project,
which was not informed of this arrangement, r ejected both
bids. One bidder then submitted a new bid and r eceived the
dredging project, but did not shar e the work. See id. The
other bidder sued to enforce the sharing agr eement, but the
District Court found it void as against public policy, holding
that "combinations for collusive, misleading biddings,
wherever made, cannot be approved." Id. at 784.

                               9
Pittsburgh Dredging is distinguishable from the instant
case, which involves not an agreement between two bidders
without notice to the company letting the pr oject, but
rather an agreement between the party letting the project
and one bidder. There was no collusive or misleading
bidding. The bidding process remained competitive in that
every bidder made its best bid and USX expressly reserved
to itself the unfettered right and discr etion to select the
"most acceptable" bid from the most acceptable bidder and
to reject any and all bids for any reason. Although Allied
did perhaps have some advantage by being able to match
the best bid, it by no means was guaranteed the pr oject
over other bidders. Unlike the agreement in Pittsburgh
Dredging, Section V does not involve collusive price fixing
by bidders and therefore does not pr ovide a basis for
rejection as against public policy.

The District Court loosely referred to antitrust principles
in its opinion, and Allied argues on appeal that because
Section V constitutes neither a per se nor a rule of reason
violation of the Sherman Act, it cannot violate public policy.
Allied relies primarily on Sitkin Smelting & Refining Co. v.
FMC Corp., 575 F.2d 440 (3d Cir. 1978).

Because we have already held that, irrespective of the
Sherman Act, Section V does not violate general principles
of public policy, we need not discuss Allied's Sher man Act
argument. We note in passing, however , that we do not
believe that Section V violates the Sherman Act. We ruled
in Sitkin, a case involving a similar last look right exercised
by a dismantling company, that the parties "desir ed to find
the market price rather than influence the market price,"
and that, therefore, the contract did not violate the
Sherman Act. Sitkin, 575 F.2d at 447. We believe that Allied
and USX had similar intentions in drafting Section V , and,
therefore, we are confident that there has been no Sherman
Act violation.

In sum, we conclude that the District Court err ed by
finding Section V unenforceable as contrary to public
policy. We will remand for the District Court to determine
if USX must pay damages to Allied for breach of contractual
obligations under Section V.

                               10
B. Fraudulent Inducement

The fraudulent inducement claim contains thr ee sub-
issues. First, does Nocito v. Lanuitti, 402 Pa. 288, 167 A.2d
262 (1961), provide the controlling standard or was Nocito
subsequently modified by Tilghman v. Dollenberg, 418 Pa.
604, 213 A.2d 324 (1965)? Second, if Nocito requires
parties to return consideration in or der to bring their
fraudulent inducement claim, then is Allied entitled to an
exception to this rule akin to that affor ded in Greenan v.
Ernst, 393 Pa. 321, 143 A.2d 32 (1957)? Third, is Allied's
fraudulent inducement claim barred because the
statements made by USX prior to formalizing the
Settlement Agreement pertain to future pr omises and thus
are not actionable under a theory of fraudulent
inducement?

Following the Pennsylvania Supreme Court's decision in
Nocito, the District Court held that to maintain an action
for fraud based on the Settlement Agreement, Allied "must
either elect to `disaffirm the contract and offer to return . . .
the consideration for [the] release or to affirm the voidable
contract and waive the fraud.' " Nocito , 402 Pa. at 289.
Allied did not return the consideration. The District Court
therefore considered Allied's failur e to tender all
consideration it received under the Settlement Agreement
an affirmation of the contract and a waiver of its fraudulent
inducement claim. We agree.

Allied argues, however, that the rule set out in Nocito was
sharpened by the Pennsylvania Supreme Court four years
later in Tilghman v. Dollenberg. Regarding the allegedly
fraudulent sale of stocks, Tilghman stated:

       A party who has been induced by fraud to pur chase
       stock may, if he does so promptly, rescind the contract
       and sue for the entire purchase price of the stock.
       Where, however, [as] is in the instant case, the plaintiff
       does not rescind the contract but elects to stand on it,
       he may not recover the entire purchase price, but only
       the difference between the real value of the property
       purchased at the time of the sale and what was paid
       for it . . . The affirmance of a contract induced by fraud
       of the seller does not extinguish the right of the

                               11
       purchaser, and is not a waiver of the fraud, nor does it
       bar the right of the purchaser to recover damages for
       the fraud.

418 Pa. at 610, 213 A.2d at 326-27. According to this more
recent ruling by Pennsylvania's highest court, Allied argues
that affirmation of a contract only bars a party from
rescinding the contract and does not pr eclude it from
pursuing its allegation of fraud. Although this
interpretation appears to be at odds with Nocito, Allied
claims it merely clarifies the rule by distinguishing
attempts to rescind fraudulent contracts fr om attempts to
enforce them. Allied argues that because it does not seek to
rescind the Settlement Agreement, it has not waived its
fraudulent inducement claim by failing to retur n the
consideration it received. We ar e not convinced.

As Tilghman indicates, a party can affirm a contract over
a period of time without waiving a claim to fraudulent
inducement. The affirmance will, however , bar rescission of
the contract. See Emery v. Third Nat'l Bank of Pittsburgh,
314 Pa. 544, 548, 171 A. 881, 883 (1934) ("An affirmance
of the contract by the vendee, with such knowledge, merely
extinguishes his right to rescind the sale. His other
remedies remain unimpaired. The vendor can never
complain that the vendee has not rescinded."); Miller v.
Central Trust & Savings Co., 285 Pa. 472, 486, 132 A. 579,
585 (1926) ("Affirmance of the contract is not a waiver of
the fraud; nor does it bar the right to recover; it does bar
a subsequent rescission.").

Not rescinding a contract and failing to r eturn
consideration are distinct legal matters fr om the affirmance
issue addressed in Tilghman, and, as Nocito indicates,
failing to return consideration does waive the right to
pursue a fraudulent inducement claim. Thus, a party can
affirm a contract and perform according to its terms for a
period of time, but once fraudulent inducement is alleged
the party must either return consideration or abandon the
claim. See Dempsey v. Associated Aviation Underwriters,
141 F.R.D. 248 (E.D.Pa. 1992), af f 'd, 977 F.2d 567 (3d
Cir.1992); Hess v. Evans, 288 Pa. Super. 180, 181, 431
A.2d 347, 348 (1981) (stating that "plaintif fs cannot
proceed in this matter by alleging that the r elease was

                               12
obtained as the result of fraud and misr epresentation and
at the same time retain the consideration that was paid to
them"). Allied attempts to conflate the per mission Tilghman
grants to parties to pursue fraudulent inducement claims
even if they have at some point affirmed the contract with
the distinct proposition that a party needs only to return
consideration if it wishes to rescind the contract through
the fraudulent inducement claim. Affirming a contract at
some point in its history is not the equivalent of not seeking
to rescind a contract in light of a fraudulent inducement
claim.

Alternatively, Allied claims that if parties are required to
return consideration in order to bring fraudulent
inducement claims, then it is entitled to an exception under
Greenan v. Ernst, 393 Pa. 321, 143 A.2d 32 (1957). The
Greenan Court allowed a party in an "insecure financial
condition" to retain the consideration while maintaining a
claim for fraudulent inducement. There is a considerable
difference, the Greenan Court wrote, between "cases
seeking to set aside a conveyance of real estate or the sale
of a business and the present case in which plaintiff seeks
an accounting which may find the defendant owing her
additional funds." 393 Pa. at 321, 143 A.2d at 32. Greenan,
therefore, provides a rare exception in an equitable
proceeding where the refund of consideration was merely a
matter of accounting.

The District Court refused Allied's request for two
reasons. First, Allied failed to demonstrate that it was in an
"insecure financial condition." Second, the District Court
considered the situation in Greenan , where returning
consideration would prohibit the plaintif f from "maintaining
herself and pursuing an action," to be distinct from Allied's
predicament. We agree with the District court. Although
Allied's arguments reasonably demonstrate that returning
consideration would be difficult and perhaps imprudent, it
would not leave Allied in the "insecurefinancial condition"
required by Greenan. W e are bound by Pennsylvania law,
and although returning consideration may cause Allied a
substantial difficulty, it has not established that it would
cause it to fall into an insecure financial condition.

                               13
In conclusion, the District Court properly granted USX's
motion for summary judgment on Allied's fraudulent
inducement claim. Thus, we need not reach USX's
argument that Allied's fraudulent inducement claim is
barred because the statements made by USX befor e
formalizing the Settlement Agreement pertain to future
promises. In the event Allied does retur n consideration and
continues to press its fraudulent inducement claim, the
District Court will address USX's contention.

C. The Saxonburg Claim

Section IV of the Settlement Agreement states, in part,
"that the dismantling specification will not include the
provision for . . . any environmental r emediation (including
any remediation and/or removal of asbestos) by Allied, it
being understood and agreed that any . . . environmental
remediation shall be for USX's account . . . ." The terms
governing the dismantling of the Saxonbur g Plant
specifically provide that if "during the course of the
demolition project an environmental condition is discovered
that requires remediation, other than asbestos, . . . [then]
the purchaser shall be responsible for any necessary
remediation."

Allied argues that any "handling" of the sinter dust
should be considered a form of envir onmental remediation.
Although USX paid Allied to load and haul the dust, Allied
argues that it should be paid for the distinct service of
vacuuming, cleaning, and otherwise removing the dust from
the materials at the plant. Allied thus seeks to r ecover "the
additional unanticipated costs it incurred in r emediating
the Saxonburg facility of this sinter dust . .." Allied argues
that the District Court improperly granted summary
judgment against it on this claim because ther e is a
genuine issue of material fact as to whether Allied
performed environmental remediation beyond the loading
and hauling for which it was paid. We agr ee.

As we have held, "the fundamental object   in interpreting
a contract is to ascertain the intent of   the parties."
Compass Tech., Inc. v. Tseng Labs., Inc.   , 71 F.3d 1125,
1131 (3d Cir. 1995); see also Fineman v.   Armstrong World

                               14
Indus., Inc., 980 F.2d 171, 215-216 (3d Cir. 1992) (stating
that the task of the court "must be to interpr et the
language of the settlement agreement in accor dance with
the intention of the parties at the time of contracting"). If
the parties' "intent can be cleanly extracted fr om the clear
and unambiguous words that the parties have used, it is
equally conventional wisdom that they are held to those
words contained in the contract." Compass Tech., 71 F.3d
1125. If, however, the meaning of contractual terms is not
transparent, then the "clear waters become murkier." Id.

If the contractual terms are facially ambiguous, then "the
court should hear the evidence presented by both parties
and then decide whether there are objective indicia that,
from the linguistic reference point of the parties, the terms
of the contract are susceptible of differ ent meanings." Id.
(citations omitted). In making this determination, the court
"must consider the words of the contract, the alternative
meaning proffered by the challenging party, and the nature
of the evidence that party could provide." Id. at 1132. "If the
contract as a whole is susceptible to more than one
reading, the fact finder resolves the matter," but if "it is
unambiguous and can be interpreted only one way, the
court interprets the contract as a matter of law." Pacitti v.
Macy's, 193 F.3d 766, 773 (3d Cir . 1999).

Not surprisingly, the intended meanings of the ter ms
"environmental remediation" and"loading and hauling" are
entirely disputed by the parties. As we have held,
"[s]ummary judgment may be granted based on the
interpretation of a contract only if the contract is so clear
that it can be read only one way." Battaglia v. McKendry,
233 F.3d 720, 721 (3d Cir. 2000) (citations omitted). We
must therefore determine if Allied's work with the dust,
beyond and distinct from its loading and hauling, could
reasonably be considered to be a for m of environmental
remediation.

The language of the contracting documents pr ovides little
assistance in defining the terms "envir onmental
remediation" or "loading and hauling." The contracts do not
indicate what type of work will constitute envir onmental
remediation, nor do they define what types of materials can
be remedied. The relevant language simply states that "any

                               15
environmental remediation (including any r emediation
and/or removal of asbestos)" will be paid by USX. The
parenthetical clause provides a small clue into the intended
meaning of the term remediation, since the statement that
"remediation and/or removal of asbestos" will be paid by
USX could reasonably be interpreted to distinguish between
remediation and removal. This could r easonably be found
to imply that remediation is not simply r emoval, but rather
entails other work required to remedy the situation.
Although this language provides only scant support for
Allied's position, it is more convincing than USX's circular
arguments that claim, for example, that "[s]ince Allied could
not show that it performed any envir onmental remediation
at Saxonburg, its remediation claim could not survive." By
considering common and industry uses of these disputed
terms, however, we can gain a mor e secure interpretive
foothold.

The first question is whether sinter dust is the type of
material that could reasonably requir e environmental
remediation. As Allied correctly asserts, sinter dust is
considered a form of residual waste under the Pennsylvania
Solid Waste Management Act. This tells us little, however,
because the Act defines residual waste as"any garbage,
refuse, or other discarded material or waste resulting from
industrial operations . . . provided that it is not hazardous."
35 P.S. S 6018.103. Under this definition, any harmless
industrial byproduct could be considered r esidual waste,
and surely all such benign materials do not r equire
environmental remediation.

Allied also makes the following argument: 1) asbestos is
identified as requiring environmental r emediation in Section
IV; 2) both asbestos and sinter dust are classified as
residual waste under the Pennsylvania Solid W aste
Management Act; 3) USX agreed to pay Allied to handle and
remove asbestos; therefore 4) USX should pay Allied for all
costs incurred as a result of handling and removing sinter
dust. Such an argument commits fallacies of equivocation
and undistributed middle.1
_________________________________________________________________

1. The argument can be restated to demonstrate its fallacies:

                               16
Allied was not required to take any pr ecautions to control
the sinter dust's movement in the environment, nor was it
required to obtain any sort of per mit or authorization to
execute the dismantling project. Allied did, however,
institute safety precautions for its workers in accordance
with OSHA regulations. Further, Allied was not permitted to
backfill the dust on the Saxonburg site, which suggests
that sinter dust merits special environmental consideration.
Instead, the unleaded sinter dust was ultimately deposited
in an approved and regulated landfill, and this
distinguishes it from ordinary nontoxic waste. In light of
these considerations, we believe that sinter dust could
reasonably be considered a material that r equired
environmental remediation.

The second question is whether Allied's activities of
cleaning the beams, equipment, and other materials of the
sinter dust, as distinguished from loading and hauling,
_________________________________________________________________

       1. X belongs to category Z.

       2. Y belongs to category Z.

       2.a. X is the same as Y (implicit sub-conclusion)

       3. A contracted the removal of X

       4. A contracted the removal of Y

Informally, such an argument presents an example of equivocation.
From this we can distill the following syllogism:

       1. All X are Z

       2. All Y are Z

       3. All Y are X

This presents a formal fallacy of the undistributed middle, since Z, the
middle term, is not distributed in either the minor or the major premise.
The same error is committed in the following ar gument:

       1. All women are humans

       2. All men are humans

       3. All women are men

See generally RUGGERO ALDISERT, LOGIC FOR LAWYERS (1997).

                                 17
could be considered environmental r emediation. According
to the Pennsylvania Land Recycling and Envir onmental
Remediation Act of 1995, actions undertaken to "clean-up,
mitigate, correct, abate, minimize, eliminate, control or
prevent a release of a regulated substance into the
environment in order to protect the present or future public
health, safety, welfare or the environment" are considered
forms of environmental remediation. 35 P.S. S 6026.103.
Allied's removal of sinter dust from the Saxonburg Plant's
structures could reasonably be consider ed a necessary step
in the process of "cleaning-up," "controlling," and
"correcting" the problem.

The question of whether the process of r emoving the dust
from the raw materials constitutes a remedial activity
distinct from the remedial activity of loading and hauling,
however, is more difficult. Although r emoving the dust from
the material facilitates the job of loading and hauling the
dust, it is unclear that simply moving the dust fr om the
beams or equipment on its way to be gathered for removal
itself constitutes remedial work. By removing the dust from
the equipment Allied could reasonably be considered to
have performed an important service that prepared the
dust to be properly disposed of.

A reasonable distinction between "loading and hauling"
the dust and cleaning and otherwise removing the dust
from the structures in the plant can be supported by the
common usage of the terms. If, by analogy, a friend asked
you to help her "load and haul" her belongings from one
apartment to another, you might reasonably presume that
such a job entailed carrying boxes and furniture from the
apartment to a truck. You might also r easonably presume
that you were not expected to clean her belongings,
organize them, and place them in boxes. It is not plainly
evident that agreeing to load and haul materials necessarily
entails a commitment to prepare them for transport. Two
reasonable interpretations can be defended, and therefore
the terms are ambiguous. Because Allied's handling of the
dust in preparation for loading and hauling the dust may
well be characterized as remedial work, ther e is a genuine
issue of material fact that precludes summary judgment.
See Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d
1001 (3d Cir. 1980).

                               18
Beyond the four corners of the contract and the plain
meaning of the terms, the broader context of the
agreements also does not give the phrases "environmental
remediation" or "loading and hauling" definitive meanings.
First, in divining both whether the parties may have
intended "environmental remediation" to encompass the
handling, vacuuming, and cleaning of the dust and whether
USX's payment for Allied's loading and hauling the dust
included handling and cleaning costs, we remain mindful of
the circumstances under which this contract ar ose. Allied
was awarded this contract to recover losses in accordance
with the Settlement Agreement, and ther efore the project
was intended to be a lucrative undertaking for Allied. To
this end, the parties contracted for Allied to r eap all of the
profits from the job and for USX to absorb all costs
associated with environmental impediments. Any
environmental conditions that detract fr om Allied's
anticipated profits, therefore, can reasonably be considered
to breach the general spirit of the contract. Allied's claim
that it should not bear the cost of any envir onmental work
is not without basis.

Second, in the process of negotiating the ter ms under
which Allied would load and haul the dust, Allied made
clear in a letter to USX dated September 1, 1993, that its
fee did not encompass cleaning: "This price does not
include pre-cleaning of the building by hand or vacuum
removal of dusts, if required AED can perform pre-cleaning
on a T&M basis utilizing AED schedule of equipment r ental
rates and manpower charging rates attached." USX
accepted unit price but did not comment on the disclaimer.
Although it did not reply to this clarification, USX was
clearly on notice of Allied's intentions. Allied's
understanding that environmental remediation was to be
construed as a broad term was also articulated in an
affidavit by its President, John Ramun:

       In connection with the negotiation of the Settlement
       Agreement and in particular what later became Section
       IV(B)(2), I advised USX that in order to ensur e the
       profitability of the proposed pr ojects (including
       Saxonburg) Allied was agreeing to per form, USX's
       obligation with regard to `envir onmental remediation'

                                19
       covered any material that required special testing,
       handling, treatment, storage, or disposal. Allied
       intended to use mass demolition techniques in its`one
       step' process to dismantle the buildings and facilities,
       process the scrap and grade the remainingfill material.
       Any material requiring special testing, handling,
       treatment, storage or disposal would adversely impact
       our ability to efficiently generate this scrap.

"Summary judgment may be granted based on the
interpretation of a contract only if the contract is so clear
that it can be read only one way." Battaglia, 233 F.3d at
721. The meaning of the terms central to Allied's
Saxonburg claim present a genuine issue of material fact,
and therefore we must reverse on this issue.

D. Delay Damages

Allied's delay damages are precluded by Section 21.1 of
the Saxonburg Contract, which provides:

       If during the course of the demolition project an
       environmental condition is discovered that requires
       remediation, other than asbestos, the contractor shall
       notify the purchaser and the purchaser shall be
       responsible for any necessary remediation. The
       contractor shall not be entitled to any additional
       compensation resulting from any delays due to the
       remediation process.

If it is determined that the work beyond loading and
hauling the dust does indeed constitute envir onmental
remediation, then USX must pay appropriate damages.
Such payment would effectively fulfill its r esponsibility for
such remediation, and any damages beyond thatfinding
are barred by the plain language of Section 21.1.

E. USX's Counterclaims

Because we are reversing the District Court's conclusion
that Section V of the Settlement Agreement is
unenforceable, we will reinstate only USX's counterclaims
that were dismissed as a direct result of the District Court's
enforceability ruling. In light of our holding that Section V

                               20
is not void as against public policy, the District Court must
now address USX's counterclaim that Allied breached
Section V by failing to submit initial bids on certain
projects.

III. CONCLUSION

In conclusion, we will reverse and remand the Section V
and Saxonburg issues to the District Court, affirm the
District Court's order granting summary judgment on the
fraudulent inducement claim, and reinstate USX's relevant
counterclaims.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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