Gravel2Gavel Construction & Real Estate Law Blog
On January 3, the U.S. Court of Appeals for the Tenth Circuit issued a ruling reversing the district court’s decision that Asarco could not proceed with its claims for cost recovery at a Utah Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) mining site. The case is Asarco, LLC v. Noranda Mining, Inc.
Asarco declared bankruptcy in August 2005, and, as the Court of Appeals notes
[I]t had the dubious distinction of having the largest amount of environmental claims brought against it in any bankruptcy proceeding, totaling approximately $6.5 billion of non-duplicated proofs of claims.
In 2009, the Southern District of Texas bankruptcy court approved a comprehensive global settlement by which Asarco agreed to pay $1.7 billion to resolve claims at 52 sites in 19 states. Included in this global settlement is a group of claims described as the “Miscellaneous Federal and State Environmental Settlement Agreement,” which addressed Asarco’s CERCLA liability at the Lower Silver Creek/Richardson Flat Site located in Utah (the Miscellaneous Settlement). The Miscellaneous Settlement contemplated payment of $7.4 million.
Believing that the global settlement that the state and federal governments has negotiated with Asarco was consistent with both the U.S. Bankruptcy Code and CERCLA, the Southern District bankruptcy court approved the settlement in June 2009 as being “procedurally and substantively fair.” In particular, the Miscellaneous Settlement not only benefited the bankruptcy estate, but it was fair to both the government and other Potentially Responsible Parties (PRPs). In addition, the Miscellaneous Settlement preserved certain rights for Asarco, including any claims it might have against non-settling PRPs at these sites.
Asarco was reorganized, and the “new Asarco” has been vigorously pursuing cost recovery claims it may have against non-settling PRPs. In June 2013, Asarco filed a cost recovery lawsuit against Noranda Mining, also a PRP at the site, asserting that it has paid more than its fair share of the cleanup costs at the Lower Silver Creek site. Noranda filed a motion for summary judgment, arguing that, as a matter of law, Asarco could not proceed with this claim. One of Noranda’s chief arguments was that Asarco was “judicially estopped” from seeking contribution because it had represented to the Texas bankruptcy court that it was in fact paying its fair share of the cleanup costs when it agreed to pay $7.4 (now $8.7 million) to resolve its liability at the Lower Silver Creek site. The district court agreed, and granted summary judgment to Noranda in March 2016.
The Tenth Circuit has now reversed this ruling, holding that Noranda had not made a case for the imposition of judicial estoppel, which is a drastic remedy, and Noranda had not satisfied the required burden of proof. In addition, it concluded that summary judgment was not appropriate at this stage of the litigation because there are contested matters of fact with respect to whether or not Asarco has paid its fair share of the cleanup costs at this site. Therefore, Asarco should have an opportunity to present evidence on this issue to the court.