Hartford Iron & Metal Inc. v. August Mack Environmental Inc.

Indiana Court of Appeals·Decided March 4, 2025·No. 24A-MI-01534·Published

Opinion

FILED

Mar 04 2025, 8:48 am

CLERK

Indiana Supreme Court

Court of Appeals

and Tax Court

IN THE

Court of Appeals of Indiana Hartford Iron & Metal, Inc., Appellant-Plaintiff

v.

August Mack Environmental Inc., et al., Appellee-Defendants

March 4, 2025

Court of Appeals Case No.

24A-MI-1534

Appeal from the Marion Superior Court The Honorable James A. Joven, Judge Trial Court Cause No.

49D13-1405-MI-17046

Opinion by Judge DeBoer

Court of Appeals of Indiana | Opinion 24A-MI-1534 | March 4, 2025 Page 1 of 20

Judges May and Tavitas concur.

DeBoer, Judge.

Case Summary [1] Since our state’s founding, the Indiana Constitution has required justice to be

administered “without delay.” IND. CONST. ART. 1, § 12. Few would have imagined that the environmental cleanup of Hartford Iron & Metal, Inc.’s (“Hartford Iron”) scrapyard in a small town in Indiana would result in a decade-long protracted legal battle fought in federal and state courts. The parties’ main stumbling block was the application of an arbitration provision in a Consultant Agreement 1 between Hartford Iron’s insurer and the remediation company, August Mack Environmental Inc. and Environmental Field Services, Inc. (collectively, “August Mack”), to which Hartford Iron was a third-party beneficiary. When Hartford Iron obstructed the remediation work, its insurer filed a federal suit against Hartford Iron, who in turn filed third-party claims against August Mack. August Mack moved to compel arbitration, but the federal district court dismissed Hartford Iron’s third-party claims based on improper venue.

1 For purposes of this opinion, the Consultant Agreement is comprised of a set of documents, including the “‘Terms and Conditions’ along with the Master Services Agreement and proposal.” Appellant’s App. Vol. 2 at 45

Court of Appeals of Indiana | Opinion 24A-MI-1534 | March 4, 2025 Page 2 of 20

[2] On May 22, 2014, Hartford Iron brought the instant suit against its insurance company and August Mack seeking state remedies for the perceived faulty environmental work at its scrapyard. Little occurred in the case between 2014 and 2017, when the trial court ordered Hartford Iron to initiate arbitration on its claims against August Mack. Again, years passed without Hartford Iron commencing arbitration, until 2023, when both parties filed competing motions to dismiss the claims. August Mack advocated for a dismissal for failure to prosecute with prejudice under Indiana Trial Rule 41(E), while Hartford Iron moved to voluntarily dismiss its claims against August Mack without prejudice under Indiana Trial Rule 41(A)(1). This latest chapter in the saga also appears to be its final one, as the trial court dismissed Hartford Iron’s claims against August Mack with prejudice pursuant to Indiana Trial Rule 41(A)(2).

[3] Hartford Iron appeals the trial court’s ruling. Stripped to its dispositive core, this case is premised entirely on a procedural determination: whether the trial court abused its discretion by dismissing Hartford Iron’s claims with prejudice after Hartford Iron failed to comply with the order to arbitrate its claims and later petitioned the trial court for a voluntary dismissal under Indiana Trial Rule 41(A)(1). Finding no abuse of discretion, we affirm the trial court’s dismissal of the case with prejudice.

Facts and Procedural History [4] Hartford Iron is a small-town, family-owned scrapyard business in its third

generation of ownership. Over the years, the scrapyard developed a series of environmental problems, most notably rainwater picking up chemicals from the scrapyard soil and flowing off the property as contaminated stormwater. In 2011, the Indiana Department of Environmental Management (“IDEM”) and the federal Environmental Protection Agency (“EPA”) brought enforcement actions compelling Hartford Iron to remediate the site, particularly the stormwater discharge problem.

[5] For decades, Valley Forge Insurance Company (“Valley Forge”) issued liability insurance policies to Hartford Iron’s scrapyard business. As a result of IDEM’s and EPA’s enforcement and various regulatory actions, Hartford Iron and Valley Forge entered into a Second Settlement Agreement 2 on December 4, 2012, obligating Valley Forge to pay for the remediation of the site and to defend against the regulatory actions. On December 12, 2012, Valley Forge hired and agreed to pay the environmental consulting firm August Mack to perform the actual site remediation work at Hartford Iron’s scrapyard. Valley Forge and August Mack entered into a Consultant Agreement, and while Hartford Iron was not a party to this agreement, Hartford Iron identified itself as a third-party beneficiary.

[6] Remediation work did not go smoothly, with Valley Forge alleging that August Mack’s work made the site’s condition worse and created new regulatory

2 In the Second Settlement Agreement, Hartford Iron and Valley Forge attempted to resolve their insurance coverage dispute.

Court of Appeals of Indiana | Opinion 24A-MI-1534 | March 4, 2025 Page 4 of 20

liabilities. On January 10, 2014, Valley Forge filed a breach of contract claim and various declaratory judgment claims against Hartford Iron in the federal district court. See Valley Forge Ins. Co. v. Hartford Iron & Metal, Inc., 1:14-CV-6- RLM-SLC, 2016 WL 2755462 (Ind. N.D. Jan. 10, 2014). In response, Hartford Iron filed twenty-one third-party claims against August Mack, blaming August Mack for defective environmental cleanup efforts and other inappropriate conduct in connection with the remediation of the scrapyard.

[7] On May 22, 2014, while the federal case was pending, Hartford Iron brought the instant suit against Valley Forge and August Mack seeking state remedies for faulty environmental work at its scrapyard. On July 22, 2014, August Mack moved to dismiss Hartford Iron’s claims and compel it to arbitration based on the arbitration clause in the Consultant Agreement to which Hartford Iron was a third-party beneficiary. Shortly thereafter, on September 9, 2014, the trial court stayed the case pending resolution of the related federal lawsuit initiated by Valley Forge.

[8] On May 12, 2016, the federal district court dismissed Hartford Iron’s third- party claims against August Mack based on improper venue. Because Hartford Iron “correctly identifie[d] itself as a third-party beneficiary and [sought] to enforce” the Consultant Agreement “on that basis[,]” the district court determined that Hartford Iron “is bound by all the contract’s provisions – including any valid and enforceable forum selection clause.” Appellant’s App. Vol. 2 at 66. The federal district court acknowledged the validity of the

Consultant Agreement’s arbitration clause to govern the dispute between Hartford Iron and August Mack but declined to “decide whether arbitration is mandatory, so the court’s conclusion that venue is improper render[ed] August Mack’s motion to compel arbitration moot.” Appellant’s App. Vol. 2 at 77.

[9] Despite the fact that Hartford Iron’s third-party claims against August Mack were dismissed in the federal district court, the state court case remained largely dormant until 2017. On January 26, 2017, the trial court partially lifted the stay for the limited purpose of holding oral argument and determining the applicability of the Consultant Agreement’s arbitration clause as it related to the dispute between Hartford Iron and August Mack. Guided by the federal district court’s analysis, on March 2, 2017, the trial court ruled that because “Hartford Iron is pursuing claims under the [Consultant Agreement] as a third-party beneficiary,” it is bound by its terms and “must arbitrate” its claims. Id. at 46, 45. In its ruling, the trial court ordered Hartford Iron to arbitrate its claims against August Mack but stayed “all proceedings in this cause” 3 pending the resolution of the federal district court’s case. 4 Id. at 47. The trial court denied

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