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Asarco LLC v. Union Pacific Railroad Co.

United States District Court, D. Idaho

July 26, 2018

ASARCO, LLC, Plaintiff,
v.
UNION PACIFIC RAILROAD COMPANY, Defendant.

          ORDER

          Honorable Edward J. Lodge, U.S. District Judge.

         INTRODUCTION

         Plaintiff, Asarco, LLC, has brought a contribution claim against Defendant, Union Pacific Railroad Company, under § 113(f) of the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-9675. Union Pacific argues Asarco has no right to bring a contribution claim, denies it is liable under CERCLA, and contends that Asarco released any contribution claim against it in the parties' Bankruptcy Settlement.

         The Court has jurisdiction over this matter under 28 U.S.C. § 1331. On November 21, 2017, the Court completed a thirteen-day bench trial. Thereafter, the parties filed post-trial briefing. Having weighed and evaluated all of the evidence presented and fully considering the legal arguments of counsel, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52(a).

         FINDINGS OF FACT

         The following facts are relevant to the Court's ruling herein and were proven by a preponderance of the evidence at the trial.[1]

         I. Background Facts and Proceedings

         A. Coeur d'Alene Basin

         1. The “Coeur d'Alene Basin” (“CDA Basin”)[2] encompasses the watershed of the CDA River, part of the Spokane River and Lake CDA. The headwaters of the South Fork of the CDA River (“South Fork”) begin in the Bitterroot Mountain Range at the Idaho-Montana border, and the river flows westward past the town of Mullan to Wallace, Idaho, where it joins Canyon and Ninemile Creeks. The river flows past Osburn, Kellogg, Smelterville, and Pinehurst. Below Pinehurst, the South Fork joins the North Fork of the CDA River (“North Fork”), and the river empties into the 25-mile-long Lake CDA. Lake CDA is drained by the Spokane River at its northern end. (Dkt. 281.)

         2. The Bunker Hill Mining and Metallurgical Complex Superfund Site (the “Site” or “CDA Site”) is a 1, 500 square mile area located primarily in northern Idaho, in the CDA Basin. The CDA Site was listed on the National Priorities List (“NPL”) in 1983 and is assigned CERCLIS identification number IDD048340921. (Dkt. 281.)

         3. The Environmental Protection Agency (“EPA”) has divided the CDA Site into three operable units (“OU”):

a. OU1 includes the populated areas of the Bunker Hill Box (“the Box”), [3]
b. OU2 comprises the non-populated areas of the Box, and
c. OU3 extends from the Idaho-Montana border into the State of Washington and contains floodplains, populated areas, lakes, rivers, and tributaries. OU3 includes areas surrounding and including the South Fork and its tributaries, and areas surrounding and including the main stem of the CDA River down to the depositional areas of the Spokane River, which flows from Lake CDA into Washington State.

(Dkt. 281.)

         4. The CDA Site has been impacted as a result of more than 120 years of historical mining, milling, smelting, and related activities by a number of different entities at more than 100 historical mines, and ore processing facilities. (Dkt. 281.)

         5. The EPA identified jig tailings, flotation tailings, and other mining wastes as a source of hazardous substances at the CDA Basin. (Dkt. 281.)

         B. Underlying CERCLA Litigation for the Coeur d'Alene Basin

         1. In 1991, the Coeur d'Alene Tribe (“CDA Tribe”) filed a complaint asserting natural resource damages (“NRD”) claims under CERCLA against Asarco, Union Pacific, and other potentially responsible parties (“PRPs”). (Dkt. 281); Coeur d'Alene Tribe v. Asarco Inc., Case No. 3:91-cv-00342-EJL (“CDA Tribe v. Asarco”).

         2. In 1994, the United States, the State of Idaho, Asarco, and other PRPs entered into a Consent Decree, Case No. 3:94-cv-00206-EJL (“1994 Consent Decree”) addressing OU1. (Dkt. 281.)

         3. In 1996, the United States filed a separate action asserting CERCLA claims against Asarco and other PRPs. United States v. Asarco Inc., Case No. 3:96-cv-00122-EJL (“United States v. Asarco”). The United States' case was consolidated with the CDA Tribe case in 1996. (Dkt. 281.)

         4. After 78 days of trial in the consolidated cases, on September 3, 2003, this Court issued an Order, Coeur d'Alene Tribe v. Asarco Inc., 280 F.Supp. 2d. 1094 (D. Idaho 2003), wherein it made findings of fact and conclusions of law that are relevant to the issues presented in this case. As a result, the parties have adopted the following findings of fact made in that case here:

a. Asarco and/or its predecessors in interest owned and/or operated the following mines and mills: the Tiger-Poorman Mine and Mill; Morning Mine and Mills; Last Chance Mine and Mill and Sweeney Mill; Page and Blackhawk Mines, Page Mill and Page Swamps and Impoundments; Standard-Mammoth Mine and Mills; Helena-Frisco Mine and Mill; Coeur Mine and Mill; Galena Mine and Mill and the Osburn and Galena Tailings Impoundment.
b. Due to the expansion of the railroad lines in northern Idaho, ore production in the CDA mining district started to escalate in the late 1890's. The waste product of the milling process is referred to as tailings. Depending on the method of milling being used the size of the tailings varied. Generally speaking, jig tailings are about 1/2 inch to 3/8 inch in size and floatation tailings are 1/100th of an inch in size. Floatation method dominated by 1926. Tailings were disposed of by impounding or stacking on surface soil, returned to mine as underground fill (sandfill) or discharged directly into waterway (creek or river).
c. Tailings management became a serious issue for all mining companies due to the sheer volume of tailings being released by the mines and mills.
d. After researching or estimating recovery rates and adjusting for impoundments and use of tailings as sandfill during the mining process, Dr. Bull calculated total mine tailings released into the waterways in the CDA Basin at 64, 390, 000 tons. Asarco is responsible for at least 22% of the historical total and Hecla Mining Company, Inc.[4] is responsible for at least 31% of the historical total releases of tailings which contained hazardous substances. Together these two Defendants were responsible for over one-half of the total tailings disposed of in the CDA Basin.
e. Dr. Stott used total adjusted production in the CDA Basin of 87, 126, 000 tons and Asarco responsible for 19, 482, 000 tons of the total or 22.36%. Exhibits 7258, 7259. Dr. Stott calculated 73, 069, 953 total CDA Basin tailings after adjustments for impoundments and sandfill and Asarco's share after adjustment of 16, 129, 415 tons or 22%.
f. Regardless of whether the Court relies on Dr. Bull's or Dr. Stott's calculations, the responsible percentage for Asarco remains 22%.
g. Variations exist in the amount of lead, cadmium, and zinc in the tailings, but all experts agreed tailings contain lead, cadmium, and/or zinc and such are hazardous substances under CERCLA.
h. Defendants Asarco and Hecla presented concrete evidence to support divisibility. The cause or source of the hazardous substances in the CDA Basin was the dumping of tailings into the waterways. The experts on both sides of that case agreed that a “reasonable basis” for apportioning is to consider the amount of mining waste discharged into the water-ways. All of the tailings contained lead, cadmium and/or zinc and it is the damages from these three primary metals from which the Trustees seek relief. For these reasons, the Court found divisibility based on tailings production was reasonable in that case. Asarco is responsible for contributing 22% of the tailings and Hecla is responsible for contributing 31% of the tailings.

(Dkt. 281.)

         II. Asarco's Chapter 11 Bankruptcy Proceedings

         1. On August 9, 2005, Asarco filed a voluntary petition for bankruptcy relief in the Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”), In re Asarco LLC, et al., Bankr. No. 05-21207, 2009 WL 8176641 (S.D. Tex. June 5, 2009) (the “Bankruptcy Case”); (Dkt. 281.)

         2. In the Bankruptcy Case, Asarco sought a “global” and “comprehensive” resolution of its nationwide environmental liabilities and corporate reorganization under Chapter 11 of the Bankruptcy Code. (Ex. 74); In re Asarco LLC, 2009 WL 8176641, at *1.

         A. United States' Proofs of Claim and Settlement with Asarco

         1. The United States of America (“Government”) filed two (2) relevant Proofs of Claim (“POCs”) against Asarco addressing the CDA Site. (Ex. 3, 6.) The second POC, filed July 13, 2006, claimed that Asarco should be held jointly and severally liability for claims relating to OU3 for approximately $2.5 billion in 2008 dollars; $2.0537 billion of which was for response costs. (Dkt. 281); (Ex. 6.)

         2. On January 30, 2007, Asarco filed a motion to estimate all of its environmental liabilities so that it could formulate a plan of reorganization and disclosure statement. (Dkt. 281); (Ex. 8.)

         3. On May 7, 2007, the United States filed a “General Background Brief” explaining certain provisions of CERCLA and its operation, arguing that liability is presumptively joint and several. (Dkt. 281); (Ex. 10.)

         4. Asarco opposed the imposition of joint and several liability, arguing it should only be responsible for 22% of the total claims at the CDA Site, and disputed the United States' estimated damages calculations for OU3 of $2.5 billion, arguing Asarco's total liability for all past and future response costs and NRD associated with the CDA Basin should not exceed $120.5 million. (Ex. 17, 22.)

         5. Paul Ammann, the United States' retained cost expert, submitted an expert report, rebuttal report, and proffer in the Bankruptcy Court's estimation hearing which calculates the cost to remedy OU3 for the next 100 years would be approximately $2.56 billion, with $2.0537 billion of that total being response costs. (Ex. 15, 20, 26.)

         6. Jeffrey Zelikson and Richard White, Asarco's retained experts, also submitted expert reports and proffers in the estimation hearing. (Ex. 16, 24, 25.) Mr. Zelikson estimated the gross expected Net Present Value (“NPV”) cost for past and future environmental response actions at the CDA Site to be $522.50 million, with Asarco's divisible 22% share of total response costs at ¶ 3 to be between $114.95 million and $143.35 million. (Ex. 25.)

         7. On October 9 through 12, 2007, the Bankruptcy Court held four days of hearings to estimate the Government's POCs for the CDA Site. (Dkt. 281.)

         8. The Bankruptcy Court never issued a ruling on the Government's POCs or an estimation with respect to the CDA Site. (Dkt. 281); (Ex. 72.)

         9. On March 14, 2008, Asarco filed a motion requesting a procedure be established to resolve the environmental claims filed by PRPs - either by disallowance, contribution protection, or estimation. (Ex. 47.) Asarco represented it had reached an agreement in principle with the majority of the creditor constituencies holding claims on the structure of a plan of reorganization and stated that it needed to resolve the environmental claims made by PRPs in anticipation of confirmation of a plan of reorganization. (Ex. 47.)

         10. On July 31, 2008, Asarco and the United States entered into a Settlement Agreement Regarding Residual Environmental Claims for the CDA, Omaha, Nebraska, and Tacoma, Washington Sites wherein the parties set Asarco's OU3 liability at the CDA Site at $482, 143, 000. (Ex. 54.) The agreement was subject to approval of a plan of reorganization. (Ex. 54.)

         11. Also in July 2008, the Asarco-Debtor entities in the bankruptcy proceeding (“Debtors”) filed a proposed plan of reorganization. (Ex. 72); In re Asarco LLC, 2009 WL 8176641, at *2.

         12. On October 20, 2008, however, the Bankruptcy Court suspended all proceedings on the Debtor's proposed plan of reorganization; thus, the 2008 proposed settlement agreement with the United States was never finalized. (Ex. 72); In re Asarco LLC, 2009 WL 8176641, at *2.

         13. On March 12, 2009, Asarco filed a motion asking the Bankruptcy Court to approve five independent settlement agreements including the Amended Settlement Agreement and Consent Decree Regarding Residual Environmental Claims for the CDA Site (“CDA Settlement”). (Dkt. 281); (Ex. 71, 72.)

         14. Under the CDA Settlement, Asarco agreed to pay $482, 143, 000 to resolve its OU3 CERCLA liabilities to the Government at the CDA Site as well as a resolution of Asarco's liability under the 1994 Consent Decree. (Dkt. 281); (Ex. 72.)

         15. The $482, 143, 000 Asarco paid to resolve its OU3 CERCLA liabilities to the Government pursuant to the CDA Settlement included NRD and response costs incurred or to be incurred by the Government and is not inconsistent with the National Contingency Plan (“NCP”). (Dkt. 281.)

         16. In addition, as a condition of the CDA Settlement, Asarco was relieved of all obligations to perform work under pending consent decrees, unilateral administrative orders, or administrative orders on consent regarding OU3 and several other sites, including penalties. (Dkt. 281.)

         17. Under the terms of the CDA Settlement, the parties agreed that Asarco's CDA owned properties would be placed in an environmental custodial trust, the Successor Coeur d'Alene Custodial and Work Trust (the “Work Trust”). The Work Trust was to own and take title to the properties and perform all work approved by the EPA in satisfaction and fulfillment of Asarco's CERCLA liability at the CDA Site. (Ex. 72.)

         18. The EPA is the sole beneficiary of the Work Trust. (Ex. 72.)

         19. Asarco retains no ownership or interest in the CDA owned properties. (Ex. 72.)

         20. The Work Trust was funded by $359.179 million of the total amount Asarco paid under the settlement. Those funds were applied to two subaccounts: 1) a General W ork Account of $330.25 million to perform work at the CDA Site selected by the EPA and 2) a Specialized Work Account of $28.929 million to be used to perform work selected by the EPA as part of its comprehensive remedy at the CDA Site and prioritized by the Department of the Interior (“DOI”) and United States Department of Agriculture/Forest Service (“USDA/FS”) as co-Natural Resource Trustees. (Ex. 72.)

         21. Upon the completion of the environmental actions and reimbursement of any costs relating to the CDA Site, the settlement agreement provides that any remaining funds in the Work Trust will be transferred first in accordance with instructions from the Department of Justice to other custodial trusts established pursuant to the global environmental settlement agreements in the Reorganized Cases with remaining remediation or restoration to be performed and needing additional funding and, second, to the Superfund. (Ex. 72.)

         22. The remainder of Asarco's settlement payment was distributed as follows: $41.464 million towards past costs and future oversite costs at the CDA Site, $14 million for administrative expenses, and $67.5 million for NRD. (Ex. 72.)

         23. On March 16, 2009, the Debtors filed another proposed plan of reorganization which was amended several times. (Ex. 76); In re Asarco LLC, 2009 WL 8176641, at *3.

         24. On May 15, 2009, Asarco's Parent entity, Asarco Incorporated, (“Parent”) filed a competing plan of reorganization. (Ex. 81); In re Asarco LLC, 2009 WL 8176641, at *3.

         25. On June 5, 2009, the Bankruptcy Court approved the CDA Settlement. (Dkt. 281); (Ex. 74, 75.)

         26. In August 2009, the Bankruptcy Court issued a Report and Recommendation recommending confirmation of the Parent's Plan of Reorganization. (Ex. 82, 83.)

         27. On November 13, 2009, the Texas District Court issued an Order confirming the Bankruptcy Court's Report and Recommendation and approving the Parent's Plan for Reorganization. (Ex. 84.)

         28. Asarco fully funded the CDA Settlement when the Bankruptcy Court approved the Parent's Confirmed Plan of Reorganization (“Confirmed Plan”) which became effective on December 9, 2009 and provided the funding for the CDA Settlement payout. (Dkt. 281); (Ex. 82, 84.)

         B. Union Pacific's Proofs of Claim and Settlement with Asarco

         1. On July 31, 2006, Union Pacific filed a POC in the Bankruptcy Case which it later amended on May 14, 2007. (Ex. 5, 11.) Union Pacific's POCs asserted a CERCLA §107 claim seeking an allowance for payment of response costs incurred at various Superfund sites, including the CDA Site, as well as allegedly outstanding freight charges. (Dkt. 281); (Ex. 5, 11.) The total amount of Union Pacific's POCs was for $360 million with $52, 037, 129 being claims for response costs at the CDA Site. (Ex. 11.)

         2. From mid-2007 to September of 2008, Union Pacific and Asarco engaged in negotiations related to both of Union Pacific's POCs. (Dkt. 281.) During that time, the parties exchanged letters, emails, phone calls, offers, and draft agreements wherein they each expressed their intention to reach a global and ...


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