This Post was primarily authored by Andrew LeDonne, a MGKF summer associate. 

On July 17, 2019, the Ninth Circuit Court of Appeals upheld a district court’s interpretation of a release agreement between ASARCO and the Union Pacific Railroad Company (“UP”)  to preclude ASARCO's claim against UP to recover cleanup costs for the Coeur d’Alene superfund site (the "CDA Site"). ASARCO LLC v. Union Pac. R.R. Co., 2019 WL 3216615 (9th Cir. July 17, 2019).  This was the second time that the Ninth Circuit had the matter before it, and dispatched it with few words -- but with enough to remind practitioners of the importance of careful wording of settlement and release agreements. 

ASARCO and UP were both involved in mining operations in the Coeur d'Alene River watershed, which was placed on the CERCLA National Priorities List in 1983.  As a result of a 2003, trial, liability for CERCLA responsibility was allocated among several Potentially Responsible Parties, but before the amount of the damages could be determined, ASARCO filed for bankruptcy protection.  In that action, both UP and the United States filed Proofs of Claim seeking damages from ASARCO for response and other costs at the CDA Site and several other superfund sites. 

In 2008, ASARCO and UP entered into a Settlement Agreement, approved by the Bankruptcy Court, which contained a "mutual release" that provided in relevant part that each released the other from " all damages, losses, expenses, costs, liabilities, claims, demands, suits, causes of action, and complaints, of any kind, character or description, in law or in equity, whether known or unknown, arising out of or in any way connected with . . . Remaining Sites Costs."  "Remaining Site Costs" was defined as "costs of response under CERCLA incurred by [UP]" at several sites including the CDA Site.  In addition, as part of a separate settlement, ASARCO agreed to allow a claim for and pay the United States approximately $482 million with respect to the CDA Site. 

In 2012, the case at bar was brought by ASARCO, alleging that the $482 million represented an overpayment of its share of liability at the CDA Site, and seeking contribution from UP.  UP moved to dismiss the case on the basis that the 2008 Settlement Agreement barred ASARCO's claim.  Despite the fact that the term “Remaining Sites Costs” referred only to claims for costs incurred by UP, the trial court dismissed ASARCO's claim, holding that "it is clear that the claim raised in the [Complaint] is precluded by the mutual release language of the [UP] Settlement.” ASARCO, LLC v. Union Pac. R.R., 936 F.Supp.2d 1197, 1204-05 (D.Idaho 2013).  On appeal, however, the Ninth Circuit did not believe it to be so "clear."  Rather, finding the language ambiguous, the Court remanded the case back to the District Court to review extrinsic evidence to determine the intent between the parties at the time the release was signed.  ASARCO LLC v. Union Pac. R.R. Co., 765 F.3d 999, 1009 (9th Cir. 2014).

On remand, following a 13-day bench trial, the district court ultimately concluded that the intent of the parties was for ASARCO to release all potential contribution claims against UP regarding the CDA Site.  ASARCO, LLC v. Union Pac. R.R. Co., 2018 WL 3599967, at *23 (D. Idaho July 26, 2018). In fact, the District Court went further, noting that the evidence indicated the intent of the agreement was to have a ‘global resolution’ of all claims between ASARCO and UP regarding the CDA Site. Id. at *22.

In a remarkably terse opinion, particularly in light of both its initial 2014 decision and the extent of the evidence presented to the District Court, the Ninth Circuit affirmed the district court’s decision.  The Court began by explaining that to overturn the lower court’s decision, it would have to conclude the lower court’s findings were clearly erroneous. ASARCO LLC v. Union Pac. R.R. Co., 2019 WL 3216615 Id. at *1 (citing In re U.S. Fin. Sec. Litig., 729 F.2d 628, 632 (9th Cir. 1984)). Under that standard, although accepting that the claim at bar was likely not contemplated by the Settlement Agreement, the Ninth Circuit upheld the trial court's decision, finding sufficient evidence from which the lower court could have plausibly arrived at its conclusion. Rejecting ASARCO’s reference to countervailing evidence, the Court noted that pointing to contrary evidence in the record does not demonstrate a finding was clearly erroneous, and an agreement can include the release of unknown and unenumerated claims. Id. (citing United States v. Frank, 956 F.2d 872, 875 (9th Cir. 1991) and Keck, Mahin & Cate v. Nat. Union Fire Ins., 20 S.W.3D 692, 698 (Tex. 2000)).

The stakes in this case were certainly high, no doubt warranting a two-week trial and two trips to the Ninth Circuit, but it bears emphasis that all of that might have been avoided with more careful attention to detail in the drafting of the Settlement Agreement. 

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