Home » Case Summaries » 2015 » ASARCO, LLC. v. Celanese Chemical Co., 792 F.3d 1203 (9th Cir. 2015)

 
 

ASARCO, LLC. v. Celanese Chemical Co., 792 F.3d 1203 (9th Cir. 2015)

 

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In this case, ASARCO brought a contribution claim against Celanese Chemical Company (CNA)[1] under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).[2] The United States District Court for the Northern District of California granted CNA’s motion for summary judgment. On appeal, the Ninth Circuit affirmed the district court’s decision.

During or after certain CERCLA civil actions, section133(f)(1) creates a right of contribution for private parties that are liable or potentially liable for cleanup costs under CERCLA.[3] One way that a contribution claim accrues for a potentially responsible party (PRP) is when that PRP is already involved in a lawsuit under section 106 (for federally required abatement actions)[4] or section 107(a) (for cleanup cost recovery by the government or a private party).[5] The other way that a contribution claim accrues is when a person has “resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement.”[6]

ASARCO was the corporate successor to a company that operated a silver and lead smelter on an industrial site (Selby Site) for many years. ASARCO operated the Selby Site and also leased tideland (State Lands) from the California State Lands Commission (CSLC) abutting the Selby Site. During this period, the property deposited smelting byproducts on the Selby Site as well as the State Lands. After being named as the likely source of lead pollution, the smelter was closed down. However, ASARCO leased a parcel of land on the Selby Site containing a sulfur dioxide plant to Virginia Chemicals, the corporate predecessor to CNA. The plant operated from 1972 to 1977. Operations occurring before and during CNA’s leasehold contaminated the soil at the Selby Site with sulfuric acid.

In 1977, after the sulfur dioxide plant shut down, Wickland Oil Company (Wickland) purchased the Selby Site from ASARCO. In 1981, Wickland leased the State Lands to build and operate a marine fuel terminal. Afterwards, Wickland became aware of the fact that the Selby Site contained hazardous substances. Eventually, EPA placed the Selby Site on the California State Superfund List. As a result, Wickland incurred cleanup costs and filed a cost-recovery suit under section 107 against ASARCO and CSLC. In 1989, Wickland, ASARCO, and CSLC entered into a judicially approved settlement agreement (Wickland Agreement), which settled the ongoing lawsuit and established a procedure for allocation past and future costs connected to events and conditions underlying the lawsuit. CSLC was a party to the Wickland Agreement–not as a government agency, but as a former owner of part of the Selby Site. Virginia Chemicals was not added as a party to the lawsuit, nor was it added to the Wickland Agreement.

In 2005, ASARCO filed for bankruptcy. At this time, Wickland’s successor-in-ownership, CSLC, and the California Department of Toxic Substances and Control responded by asserting claims for ASARCO’s share of past and future environmental costs. The parties negotiated for a plan that would assess claims for a share of past and future environmental costs. In March 2008, the Bankruptcy Court approved the agreement (2008 Bankruptcy Settlement).

In 2011, ASARCO sued CNA for contribution costs under CERLCA section 113(f)(1).[7] CNA responded by moving for summary judgment on the ground that the lawsuit was barred by the statute of limitations under section 113(g)(3)(B).[8] The district court granted CNA’s motion for summary judgment, and found that the statute of limitations applied to judicial settlements between private parties as well as between a private party and the United States or a state. Thus, the district court determined that ASARCO could not circumvent the statute of limitations because the 2008 Bankruptcy Settlement presented no new costs that were not already contemplated in the Wickland Agreement.

The Ninth Circuit reviewed de novo the district court’s grant of summary judgment and interpretation of CERCLA. The interpretation of the settlement agreement was also reviewed de novo, with deference given to any factual findings made by the district court unless they were clearly erroneous. The Ninth Circuit ultimately affirmed the district court’s decisions.

ASARCO first argued that the Wickland Agreement did not start the clock on a three-year statute of limitations. ASARCO reasoned that the three-year statute of limitations in section 113(g)(3)(B) applied to liability resolutions involving the United States or a state, and not a section 107 agreement between private parties.[9] The Ninth Circuit found that the statute of limitations under section 113(g)(3)(B) did in fact apply to private party contribution claims. The Ninth Circuit relied in part on Cooper Industries, Inc. v. Aviall Services, Inc.,[10] which held that section 113 provides two express avenues for contribution, one that starts accruing after a section 106 or section 107 suit, and one that accrues when a party or person has resolved liability with the United States or a state.[11]

The Ninth Circuit held that judicially approved settlements between private parties could trigger the section 113(g)(3)(B) statute of limitations based on the statute’s plain meaning, which did not expressly preclude settlements that do not involve the United States or a state. The Ninth Circuit went on to explain that the interpretation would not result in superfluity. The provisions that ASARCO used to support an argument of superfluity were distinct, as they conferred certain rights upon parties that settle their liability with the United States or a state. Judicially approved settlements not including the government, like the Wickland Agreement, do not confer the same rights for settlement protection. Lastly, the Ninth Circuit explained that its interpretation assures that every word in section 113(g)(3)(B) has an operative effect; otherwise, judicially approved settlements between private parties would not be affected by the statute of limitations and would never expire. Furthermore, the court was concerned that if judicially approved settlements did not start the statute of limitations clock it would encourage private parties to settle with each other rather than with the government, and render the statute of limitations provision meaningless.

The Ninth Circuit next assessed the scope of the Wickland Agreement to determine if it settled the dispute between ASARCO and Wickland over the Selby Site. The court found that the terms of the Wickland Agreement encompassed work in the Virginia Chemicals-leased area, and did not differentiate between site conditions caused by Virginia Chemicals and those caused by ASARCO. The Ninth Circuit concluded that the terms of the Wickland Agreement showed that it was designed to be a complete and final determination of every agreeing party’s liability and costs incurred when cleaning the Selby Site.

ASARCO argued that the future work and associated costs contemplated by the Wickland Agreement were too uncertain under California law to be enforceable. The Ninth Circuit disagreed because the terms of the agreement clearly defined who would pay to remediate the Selby Site, and anticipated that tasks could be added to accomplish the goals of the agreement. The court held that simply because full costs were unknown did not mean that the Wickland Agreement was not comprehensive.

The Ninth Circuit next reviewed the 2008 Bankruptcy Settlement. ASARCO argued that the Wickland Agreement did not address all costs at the Selby Site, and, as a result, the 2008 Bankruptcy Settlement was a new cost. However, the 2008 Bankruptcy Settlement showed that the claims and negotiations leading up to the 2008 Bankruptcy Settlement stemmed exclusively from ASARCO’s original liability for cleanup efforts that were addressed in the Wickland Agreement. Thus the government’s mandates to pay in the 2008 Bankruptcy Settlement were not a new cost, but rather an obligation that reflected the parties’ original duties and liabilities in the Wickland Agreement. The Ninth Circuit held that “ASARCO’s new contribution claim via the 2008 Bankruptcy Settlement is for exactly the same liability ASARCO assumed in the 1989 Wickland Agreement, and is therefore time barred.”[12] After comparing the Wickland Agreement with the 2008 Bankruptcy Settlement, the Ninth Circuit concluded that the scope of the Wickland Agreement included the entirety of response costs connected with the Selby Site while the 2008 Bankruptcy Settlement merely fixed the response costs.

Lastly, ASARCO contended that, following the 2008 Bankruptcy Agreement, ASARCO should have the right to pursue a contribution claim under CERCLA section 113(f)(3)(B). First, ASARCO reasoned that costs being sought from CNA had not been contemplated in the Wickland Agreement. Second, ASARCO asserted that section 113(f)(3)(B) grants an absolute and distinct right to seek contribution following settlement with the government. The Ninth Circuit noted that the court had addressed the first argument when it found that the 2008 Bankruptcy Settlement did not result in new costs. As for the second argument, the Ninth Circuit found that no such right exists. The court reasoned that if a bankruptcy settlement with the government revived an otherwise expired CERCLA claim, it could be used to circumvent the statute of limitations. As a result, parties would find themselves tempted to use bankruptcy as a tool for reviving expired claims. The Ninth Circuit noted that ASARCO’s interpretation would discourage settlement agreements between private parties and discourage a thorough and diligent pursuit of contribution claims following judicially approved settlements.

In sum, the Ninth Circuit held that 1) a judicially approved settlement agreement between private parties to a CERCLA cost-recovery suit starts the clock on the statute of limitations in section 113(g)(3)(B), and 2) a later bankruptcy settlement that fixes the cost-recovery settlement does not revive a contribution claim that has otherwise expired.

 

 

 

 

Footnotes    (↵ returns to text)
  1. CNA Holdings, LLC was erroneously named in the suit as “Celanese Chemical Co.”
  2. Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601–9675 (2012).
  3. Id. § 9613(f)(1).
  4. Id. § 9606.
  5. Id. § 9607(a).
  6. Id. § 9613(f)(3)(B).
  7. Id. § 9613(f)(1).
  8. Id. § 9613(g)(3)(B).
  9. Id.§ 9607.
  10.  543 U.S. 157 (2004).
  11.  Id. at 166–67.
  12. ASARCO, LLC. v. Celanese Chem. Co., 792 F.3d 1203, 1214 (9th Cir. 2015).
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