Company That Settled CERCLA Liability in Bankruptcy Can Pursue Contribution Claim

Bankruptcy Law & Judicial Estoppel

In January, the U.S. Court of Appeals for the 10th Circuit reversed a District Court’s ruling that a company that settled its CERCLA liability with the federal government in a bankruptcy proceeding was barred from seeking contribution against another PRP.  Instead, the 10th Circuit ruled in Asarco v. Noranda Mining, Inc., No. 16-4045 (10th Cir. 1/3/17), that Asarco is allowed to pursue a claim against another PRP for contribution for amounts Asarco overpaid in its settlement with EPA.

Asarco filed for Chapter 11 bankruptcy in 2005.  In 2009, a global settlement agreement with EPA under which Asarco paid $1.79 billion to resolve its liability at 52 sites was approved by the bankruptcy court.  The amount of $7.4 million was allocated to Asarco’s liability at the Lower Silver Creek/Richardson Flat Site in Park City, Utah.  Asarco sued Noranda, another PRP at the site, for contribution.  Noranda moved for summary judgment, which was granted, contending that Asarco was judicially estopped from seeking contribution.  Noranda argued that Asarco represented to the bankruptcy court that the $7.4 million settlement “was fair both to the government and to the bankruptcy estate because that amount represented only Asarco’s proportionate share of liability for the Site.”  Noranda argued that Asarco benefited from that representation to the bankruptcy court, and could not now change its position to contend that it overpaid its share of liability in order to recover contribution from Noranda.

The 10th Circuit rejected Noranda’s argument, holding that Asarco’s positions were not clearly inconsistent and that Asarco would not gain an unfair advantage by pursuing the claim against Noranda.  The case could be instructive to any entities seeking to settle their CERCLA liabilities in a bankruptcy proceeding—they should avoid representation in the bankruptcy proceeding that the settlement is a fair estimate of their site liabilities.

For more information on the Asarco case or on the intersection of CERCLA with bankruptcy law, contact Steve O’Day or Andy Thompson.

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