Bay Corrugated Container, Incorporated v. Gould, Incorporated

File Name: 12a0060n.06
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
No. 09-2310
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
BAY CORRUGATED CONTAINER, INCORPORATED,
Plaintiff-Appellant,
v.
GOULD, INCORPORATED,
Defendant,
GOULD ELECTRONICS, INC.,
Intervenor-Appellee.
ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE EASTERN
DISTRICT OF MICHIGAN
/
BEFORE: MARTIN, SUHRHEINRICH, and COLE, Circuit Judges.
BOYCE F. MARTIN, JR., Circuit Judge. This case arises out of a consent judgment entered
by the district court in 1994 in which Gould, Inc. and Gould Electronics, Inc. agreed to pay for
environmental investigation and remediation of property sold by Gould, Inc. to Bay Corrugated
Container, Inc. In 1999, Bay filed a petition to enforce the consent judgment and Gould, Inc. moved
to dismiss. In its petition, Bay acknowledged that Gould, Inc.’s successor, GNB, Inc. (now Exide
Technologies), had assumed Gould, Inc.’s responsibilities under the settlement agreement. The
parties entered mediation and Bay entered into a settlement with Exide. In 2009, Bay filed a “Notice
Requesting Resolution of Petition to Enforce Consent Judgment.” After soliciting status updates and

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No. 09-2310
Bay Corrugated Container, Inc. v. Gould, Inc.
Page 2
holding a non-evidentiary hearing, the district court granted Gould, Inc.’s motion to dismiss. Relying
on a determination by the Seventh Circuit that GNB assumed all of Gould, Inc.’s environmental
liabilities when it purchased Gould, Inc.’s battery business in 1984, and Bay’s mediated settlement
agreement with Exide, the district court determined that Gould, Inc. had no liability in this matter.
In the alternative, the district court ruled that the “nine years of inactivity” in this case warranted
dismissal under Federal Rule of Civil Procedure 41(b) and Eastern District of Michigan Local Rule
41.2. Bay moved the district court to reconsider its dismissal; the district court denied Bay’s motion.
In this same order, the court allowed Gould Electronics to respond to Bay’s motion for
reconsideration and to intervene for purposes of appeal. The district court also allowed Gould
Electronics to intervene on appeal. Bay appeals, arguing that dismissal of the petition was error. We
REVERSE.
Bay argues that Gould, Inc. remains liable to Bay under the 1994 settlement and judgment.
Bay also argues that Bay’s negotiation of the mediated settlement with Exide, in addition to other
acknowledgments of GNB’s assumption of Gould, Inc.’s liabilities, does not show that Bay released
Gould, Inc. Gould, Inc.’s continued liability to Bay depends upon whether there has been a novation
that substituted Gould, Inc.’s liability with that of GNB or Exide. The resolution of this issue
depends upon whether Bay’s discussions and negotiations with GNB and Exide actually
extinguished its agreement with Gould, Inc. or whether GNB and Exide merely assumed Gould,
Inc.’s obligations.
Under Michigan law, “[t]he elements of a novation require the creditor’s intention both that
the new debtor assume the obligation and that the old debtor be released.” Imperial Hotels Corp.

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No. 09-2310
Bay Corrugated Container, Inc. v. Gould, Inc.
Page 3
v. Dore, 257 F.3d 615, 622 (6th Cir. 2001) (citing Harrington-Wiard Co. v. Blomstrom Mgf. Co.,
131 N.W. 559, 563-64 (Mich. 1911)). Consent to a novation “is not to be implied merely from the
performance of the contract or the payment of money by the substitute, for that might well consist
with the continued liability of the original party.” Harrington-Wiard Co., 131 N.W. at 563 (citation
omitted). “The circumstances surrounding a series of transactions may be considered, in addition
to the text of any written instruments, in determining whether the parties reached a novation that
extinguished the liability of one debtor and substituted for it the liability of another.” Imperial
Hotels Corp., 257 F.3d at 620.
The district court based its dismissal on “its conclusion that [Gould, Inc.] has no liability for
the contamination at issue because its liability transferred to GNB” and Bay’s “extremely long period
of inactivity warranted dismissal for lack of prosecution.” The district court thus implicitly found
or assumed that there had been a novation of Gould, Inc.’s liability to Bay, transferring it to GNB
or Exide. However, we find the record contains insufficient facts to support this conclusion.
We hold that it cannot be determined from the record whether there has been a novation and
whether, as the district court determined, Gould, Inc. is no longer liable to Bay. Likewise, the district
court’s summary dismissal under Rule 41(b) does not allow us to review the appropriateness of the
decision. For the foregoing reasons, we REVERSE the district court’s dismissal of the case and its
denial of the motion for reconsideration, and REMAND for further proceedings consistent with this
opinion.

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