Chip Bowles Discusses Why ASARCO Decisions Aren’t Just About Legal Fees Anymore with ABI Journal
Partner Chip Bowles continued the story of the ASARCO LLC bankruptcy in a new “Toxins-Are-Us” column for The ABI Journal. The story is perhaps the largest environmental-driven proceeding in history, and Bowles addresses two cases and the important matter of the impact the settlement had on Comprehensive Environmental Response and Compensation and Liability Act of 1980 (CERCLA) contribution claims. He uses two cases as examples.
Really Most Sincerely Polluted: ASARCO LLC v. Celanese
The first case, ASARCO LLC v. Celanese involves the clean-up of a 66-acre site on San Pablo Bay in California, known as the “Shelby Site,” which had three separate sources of pollution: a “slag pile” from a lead and silver smelting site, pollution from a sulfur-dioxide plant, and marine fuel termination contamination, known as the “terminal.”
Following the sale of the Shelby site to Wickland Oil Co., the California Department of Health Services (DHS) identified the presence of toxic metals and forced Wickland to incur clean-up costs, which then led Wickland to file a cost-recovery suit against ASARCO and the California State Land Commission seeking contribution of $400,000 and a declaration that the parties were liable for all other response costs. Wickland, ASARCO and the California State Land Commission entered into a pre-petition settlement agreement.
Three years following the 2008 approval of settlement between parties originally involved, ASARCO filed suit against (among others) Celanese, seeking contribution for clean-up costs related to the Shelby site, even though knowledge about the sulfur-dioxide plant was never addressed in the pre-petition agreement. Celanese moved for summary judgment on the grounds that the contribution suit was time barred as it was filed more than three years after the pre-petition agreement was approved, which was granted.
After appeal, the Ninth Circuit affirmed the district court’s original decision, holding “that any contribution claim for particular remedial costs is subject to a three-year statute of limitation [s] once liability for a potentially responsible party (PRP) becomes recognized through a judicially approved settlement.”
The Ninth Circuit also held that the post-petition agreement’s mere “fixing” of the amount for clean-up liability was neither a new cost nor gave rise to a new claim for the purpose of asserting a new claim under CERCLA.
We Are Not in Bankruptcy Anymore: ASARCO LLC v. Noranda Mining Inc
In the second case, ASARCO LLC v. Noranda Mining Inc. ASARCO was identified as partially responsible for contamination at a large site near Park City, Utah (the “Richardson site”). During ASARCO’s bankruptcy case, ASARCO sought and obtained bankruptcy court approval of a settlement agreement in June 2009 with the EPA, under which ASARCO paid the EPA $7.4 million in return for the U.S. not asserting CERCLA liability against ASARCO, enabling ASARCO to resolve a potential environmental liability of more than $3.6 billion for $1.1 billion.
After the approval of the settlement agreement, ASARCO filed suit against Noranda Mining Inc. under CERCLA § 113 seeking contribution for clean-up costs. Noranda moved to dismiss the suit by two separate summary-judgment motions: one based on judicial estoppel (the “estoppel motion”), and the other based on defenses to the asserted contribution claim (the “contribution motion”). The district court initially ruled that the plan reservation effectively preserved ASARCO’s environmental claims, but then dismissed the complaint, holding that ASARCO was “barred by the doctrine of judicial estoppel and by the fact that ASARCO could not — as a matter of law — establish that it paid more than its fair share of cleanup costs due to its judicial admissions in the bankruptcy.”
Bowles explains how the above cases demonstrate that “settlement of environmental claims, while excellent for resolving costly and complex litigation, can greatly limit a responsible party’s ability to pursue contribution claims against other polluters,” and to “make sure that you understand the full consequences of resolving your environmental disputes.”