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Asarco, LLC v. Noranda Mining, Inc.

United States Court of Appeals, Tenth Circuit

January 3, 2017

ASARCO, LLC, a Delaware limited liability company, Plaintiff - Appellant,
NORANDA MINING, INC., a Delaware corporation, Defendant-Appellee.


          Gregory Evans (Laura G. Brys of McGuireWoods, LLP, Los Angeles, California; David C. Reymann and Cheylynn Hayman of Parr, Brown, Gee & Loveless, P.C., Salt Lake City, Utah, with him on the briefs), for Plaintiff - Appellant.

          Jeffrey C. Corey (Richard J. Angell, Zack L. Winzeler, and Alan S. Mouritsen of Parsons Behle & Latimer, with him on the brief), Salt Lake City, Utah, for Defendant - Appellee.

          Before KELLY, GORSUCH, and HOLMES, Circuit Judges.

          KELLY, Circuit Judge.

         Plaintiff-Appellant Asarco, LLC appeals from the district court's entry of summary judgment against it in its contribution action against Noranda Mining, Inc., under Section 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9613(f) (2012). See Asarco, LLC v. Noranda Mining, Inc. (Noranda), No. 2:12-CV-527-TC-DBP, 2016 WL 1317493 (D. Utah Mar. 31, 2016). The district court held that Asarco was judicially estopped from pursuing its claim because of representations it made to a bankruptcy court concerning its settlement agreement with the EPA for the site in question. Id. at *12, *16. It also found, as a matter of law, that Asarco could not establish that it paid more than its fair share of costs for the site. Id. at *15-16. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we reverse and remand.


          A. Asarco's Settlement Agreement and Reorganization Plan

         Asarco is an integrated mining, smelting, and refining company that filed for Chapter 11 bankruptcy in August 2005. Because of its long history of mining in the United States, it 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 claim. In re ASARCO LLC (Asarco I), No. 05-21207, 2009 WL 8176641, at *3-4 (Bankr.S.D.Tex. June 5, 2009). In 2009, after years of negotiations and hearings, the bankruptcy court approved a comprehensive settlement agreement, by which Asarco agreed to pay approximately $1.79 billion to resolve environmental claims at 52 sites in 19 states. Id. at *8. Although the agreement was negotiated on a global basis, it was divided into five independent settlement groupings of related sites. Id. The last of these groupings, the Miscellaneous Federal and State Environmental Settlement Agreement ("Miscellaneous Agreement"), settled for a combined $94.6 million. Id. at *9. It contained settlements for 26 sites in 12 states, including the site at issue in this appeal: the Lower Silver Creek / Richardson Flat Site ("Site"). Id. at *1, *54. It settled for $7.4 million. Id. at *54.

         In reviewing Asarco's proposed global settlement agreement, the bankruptcy court explained that it was bound by two different legal standards. First, Bankruptcy Rule 9019(a) gave the bankruptcy court discretion to approve a compromise or settlement plan. Id. at *9 (citing Fed.R.Bankr.P. 9019(a)). The court noted that it should approve a settlement when doing so is "fair, equitable, and in the best interests of the estate." Id. at *10 (citation omitted). Under this standard, the court "need not resolve disputed issues but should apprise itself of the relevant facts and law so that it can make an informed and intelligent decision as to the reasonableness of the settlement." Id. (citation omitted).

         The second governing legal standard was CERCLA itself. See id. at *36-39. Under CERCLA, the bankruptcy court was tasked with reviewing the settlement agreement to ensure it was "fair, reasonable, and consistent with CERCLA." Id. at *37 (citations omitted). The court explained that because CERCLA encourages settlement, and because this proposal was the product of years of arm's-length negotiation between the estate, the DOJ, and the EPA, its review of the settlement proposal was necessarily limited. Instead of reviewing the settlement proposal de novo, its task was to ensure the settlement was procedurally and substantively fair - that it "reflect[ed] a reasonable compromise of the litigation." Id. at *38 (citation omitted).

         Specifically, the court continued, "[t]o be fair to other non-settling responsible parties, a settlement should recover at least an amount 'roughly correlated with[] some acceptable measure of comparative fault, ' apportioning liability 'according to rational (if necessarily imprecise) estimates' of fair shares of liability for a given facility." Id. (second alteration in original) (quoting United States v. Cannons Eng'g Corp., 899 F.2d 79, 87 (1st Cir. 1990)). "Although the settlement should have 'some reasonable linkage' to the proportionate share of the settling parties, '[r]easonable linkage' does not mean that the agency must choose 'the best or even the fairest method of apportioning liability.'" Id. (alteration in original) (citation omitted) (quoting United States v. Wallace, 893 F.Supp. 627, 633 (N.D. Tex. 1995)).

         To meet these standards, Asarco and the EPA presented the bankruptcy court with evidence that the settlement agreements were fair and equitable, both to the estate and its creditors (i.e., that the estate was not paying out substantially more than it owed) and under CERCLA (i.e., that the government was recovering enough to meet the public interest in cleanup of the environmental sites and that other Potentially Responsible Parties ("PRPs") would not be saddled with liability far beyond their comparative fault). The bankruptcy court received testimony from 47 witnesses and admitted nearly 1700 exhibits into evidence. Id. at *2.

         One of those who offered testimony in support of the settlement was Donald A. Robbins, the recently retired director of environmental services for Asarco. See 1 Aplt. App. 93 ("Robbins Declaration"). Mr. Robbins submitted an 18-page declaration to the bankruptcy court detailing why he thought the global settlement agreement should be approved under Bankruptcy Rule 9019. Regarding the Miscellaneous Agreement, he explained that the federal and state governments' claims for these 26 sites totaled about $220 million, that Asarco estimated the total cost of remediation to range from $54.2 million to $149.5 million, and that the proposed settlement would resolve all the claims for around $95 million. Id. at 95-96, 96 n.3. He also discussed the reasons why either Asarco or the government would be willing to settle for more or less than what each believed the true cost of remediation would be. For example, he noted that there were many uncertainties that generally applied to all of the proposed settlements, including the existence and viability of other PRPs and the possibility that Asarco would be found jointly and severally liable for the full costs of remediation. Id. at 98-99. He concluded: "On the whole, I believe that there is a reasonable linkage between the settlement reached and ASARCO's fair share of responsibility at all of these sites." Id. at 99.

         Mr. Robbins then discussed 23 of the Miscellaneous Agreement sites individually, providing the amount the government initially sought, the range of Asarco's projections of remedial costs, and other issues that might affect Asarco's liability for each site. Id. at 101-10. Regarding the Site at issue, he wrote:

The Lower Silver Creek/Richardson Flat[] site encompasses two distinct, but related areas: the Richardson Flat[] tailing impoundment and the downstream watershed. The area is close to Park City, Utah. EPA initially sought $607, 000 to remediate only the tailings impoundment. In a late filed claim, EPA later sought $46, 400, 000 in future remedial costs related to the downstream watershed. ASARCO estimated that future remedial costs would range between $3, 600, 000 and $17, 200, 000 for [the] tailings impoundment and approximately $22, 500, 000 for the watershed. The proposed settlement is for $7, 400, 000. The key issues at the Lower Silver Creek site are:
• Joint and several liability: Whether ASARCO would be liable for 100% of the response costs. I understand that there may be other PRPs associated with this site, and the settlement amount reflects only ASARCO's share of the response costs;
• The volume of contaminated material at the Lower Silver Creek area that needs to be treated and the response plan for treating that material is uncertain; and
• Whether the excusable neglect doctrine applies to the government's ...

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