United States: Tenth Circuit Finds CERCLA Contribution Claim Not Barred By Bankruptcy Approval Of A Settlement Estimating Liability For The Site

Last Updated: June 23 2017
Article by Whitney Jones Roy

Asarco LLC v. Noranda Mining, Inc., 844 F.3d 1201 (10th Cir. 2017). In a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) contribution action, the Tenth Circuit ruled that a mining company, whose liability for a contaminated site had been resolved in a settlement agreement approved by the bankruptcy court, could still seek contribution against other potentially responsible parties (PRPs), claiming that it overpaid its fair share of cleanup costs for the site. Id. at 1208. The Tenth Circuit also determined that contribution claims are permitted even against a party to a prior consent decree so long as the claims were not specifically resolved by the consent decree. Id. at 1211–12.

Asarco, a mining, smelting, and refining company, filed an action against Noranda in 2013 seeking contribution under CERCLA for two related sites near Park City, Utah, known as the Lower Silver Creek/Richardson Flat Site (Site), which were contaminated by lead and silver ore mining operations that had taken place at the Site for more than one hundred years. The district court granted Noranda's summary judgment motion in its entirety. Id. at 1204. The district court found that judicial estoppel barred Asarco's claims, relying on statements Asarco made years earlier in bankruptcy proceedings concerning its liability for the Site. Id. at 1208. The district court also found that a consent decree between Noranda and the Environmental Protection Agency regarding pre-2006 claims at a portion of the Site protected Noranda from liability for Asarco's contribution claim here. Id. at 1211. The Tenth Circuit Court of Appeals reversed. Id. at 1204.

Asarco filed for Chapter 11 bankruptcy in 2005. Four years later, the bankruptcy court approved a comprehensive settlement agreement in which Asarco agreed to pay $1.79 billion to resolve numerous claims at contaminated sites, including $7.4 million to resolve claims at the Site. Id. at 1204–05. In reviewing the settlement agreement, the bankruptcy court acknowledged it was bound by two different legal standards: (1) Bankruptcy Rule 9019(a), which directs the court to approve a settlement when it is "fair, equitable, and in the best interests of the estate," and (2) CERCLA, which requires the court to ensure that settlements are procedurally and substantively fair, "reflect a reasonable compromise of the litigation," and roughly correlate to a reasonable estimate of the parties' liability. Id. The bankruptcy court found the evidence submitted by Asarco demonstrated that the $7.4 million settlement was fair under both Bankruptcy Rule 9019(a) and CERCLA and approved the settlement. Id. at 1206. The bankruptcy court also approved a reservation of rights by Asarco preserving claims against non-settling parties related to the Site. Id.

The Tenth Circuit rejected Noranda's first argument that Asarco was judicially estopped from claiming it had overpaid its share of cleanup costs at the Site because Asarco previously told the bankruptcy court that $7.4 million was a fair and reasonable estimate of Asarco's share of liability at the Site. Id. at 1209. Asarco's positions were not clearly inconsistent because Asarco had told the bankruptcy court that the $7.4 million figure represented Asarco's joint and several liability share, although it failed to artfully articulate this point on one occasion before the bankruptcy court. Id. at 1208–09. Furthermore, the settlement could not establish an exact dollar amount for Asarco's liability because settlements before a full trial on the merits are necessarily estimates and account for some uncertainty in the viability of the claims. Id. The Tenth Circuit concluded that judicially estopping a party from pursuing contribution claims in the future based upon an estimate of liability for settlement purposes would discourage settlements and conflict with CERCLA's policy encouraging settlements. Id. at 1209.

Additionally, the Tenth Circuit concluded that the bankruptcy court was not duped or otherwise misled by Asarco's statements, noting that Asarco did inform the bankruptcy court that $7.4 million represented joint and several liability for the Site and that the bankruptcy court specifically permitted Asarco to preserve its contribution rights against other potentially responsible parties. Id. at 1209–10. Furthermore, the Tenth Circuit rejected Noranda's argument that allowing the contribution claim would give Asarco an unfair advantage. Id. at 1210–11. The court distinguished this situation from those in which a debtor "conveniently" forgets to inform the court of key information because there was no evidence that Asarco attempted to deceive the bankruptcy court. Rather, Noranda's argument was based upon one vaguely worded sentence that Asarco had correctly clarified elsewhere. Id.

The Tenth Circuit rejected Noranda's second argument that its prior consent decree with the EPA barred Asarco from seeking contribution. Id. at 1211–12. The consent decree barred only those claims against Noranda for the matters specifically identified therein. The Tenth Circuit determined that the claims asserted in Asarco's complaint were different, both geographically and temporally, from the claims resolved in the consent decree, and thus were not barred. Id.

Finally, the Tenth Circuit rejected Noranda's third argument that Asarco could not, as a matter of law, establish it overpaid for the Site. Id. at 1212. The court concluded that the evidence Asarco submitted to the bankruptcy court for settlement approval did not conclusively determine Asarco's exact share of liability for the Site. Further, the court found that Asarco had raised a genuine issue of material fact and should be permitted to present evidence as to why it overpaid for the Site. Id.

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