ASARCO, LLC v. Union Pacific Railroad Co.
765 F.3d 999 (2014)
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Rule of Law:
When a settlement agreement's release provision is ambiguous, meaning it is reasonably susceptible to more than one interpretation, its interpretation presents a question of fact that cannot be resolved on a motion to dismiss. Furthermore, an amended pleading relates back to the date of the original pleading, even if it adds allegations expressly disclaimed in the original, so long as the new claim arises from the same conduct, transaction, or occurrence.
Facts:
- For nearly a century, Asarco, LLC ('Asarco') and Union Pacific Railroad Co. ('Union Pacific') both participated in mining operations in Idaho’s Coeur d’Alene River watershed.
- In 1983, the Environmental Protection Agency (EPA) listed the area as a Superfund site under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) due to extensive environmental harm.
- Following litigation, a court found Asarco at least 22 percent responsible for the contamination.
- In 2005, Asarco filed for Chapter 11 bankruptcy. In the bankruptcy proceedings, Union Pacific filed a claim for approximately $52 million in CERCLA response costs it had paid at the Coeur d'Alene site.
- In 2008, Asarco and Union Pacific entered into a settlement agreement (the 'UP Settlement') to resolve Union Pacific's claims. This agreement contained a mutual release for all claims 'arising out of or in any way connected with... Remaining Sites Costs,' which were specifically defined as 'costs of response under CERCLA incurred by UP.'
- The United States also filed a claim in Asarco's bankruptcy for over $2 billion in cleanup costs at the same site.
- In 2009, Asarco and the United States entered a separate settlement (the 'US CDA Settlement'), under which Asarco agreed to pay approximately $482 million to resolve its liability to the government for the Coeur d'Alene site.
Procedural Posture:
- In Asarco's bankruptcy case, a settlement between Asarco and the United States ('US CDA Settlement') was judicially approved on June 5, 2009.
- On June 5, 2012, Asarco filed a contribution action against Union Pacific in the U.S. District Court for the District of Idaho, the court of first instance.
- Asarco subsequently filed a First Amended Complaint (FAC) as of right, which expanded the geographical definition of the site at issue.
- Union Pacific filed a motion to dismiss the FAC under Federal Rule of Civil Procedure 12(b)(6), arguing the claim was barred by the statute of limitations and a prior settlement agreement.
- The district court found the claim was timely but granted the motion to dismiss, concluding that Asarco's action was barred by the mutual release provision in the 2008 UP Settlement.
- Asarco, as appellant, appealed the district court's dismissal to the United States Court of Appeals for the Ninth Circuit, where Union Pacific was the appellee.
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Issue:
Does a settlement agreement's mutual release provision, which releases claims 'arising out of or in any way connected with' defined response costs 'incurred by' Union Pacific, unambiguously bar a subsequent contribution claim by Asarco for response costs it incurred through a separate settlement with the U.S. government?
Opinions:
Majority - Carney, District Judge
No, the settlement agreement does not unambiguously bar Asarco's contribution claim. The agreement is ambiguous because its specific definition of released costs can be reasonably interpreted as not covering the costs Asarco now seeks to recover. First, the court found Asarco's claim was timely. The amended complaint 'related back' under Federal Rule of Civil Procedure 15(c) because it shared a common core of operative facts with the original, despite expanding a previously excluded geographic area. The original complaint was also timely filed on the third anniversary of the settlement date, as Federal Rule of Civil Procedure 6(a)'s 'anniversary method' of time computation applies to CERCLA's statute of limitations. Second, turning to the settlement agreement, the court held that dismissal under Rule 12(b)(6) based on a release is only proper if the release is unambiguous. Here, the 'mutual release' provision discharged Asarco from claims connected with 'Remaining Sites Costs,' which were explicitly defined as costs 'incurred by UP.' Asarco's current contribution claim is for costs it incurred when settling with the United States, not costs incurred by Union Pacific. Because the provision is reasonably susceptible to Asarco's interpretation (that it only released claims related to UP's costs) as well as Union Pacific's broader interpretation, the contract is ambiguous. This ambiguity creates a disputed issue of fact that cannot be resolved on a motion to dismiss.
Analysis:
This decision reinforces that the interpretation of an ambiguous contract is a question of fact ill-suited for resolution on a motion to dismiss, requiring courts to deny dismissal when an affirmative defense like 'release' depends on such a contract. The ruling also clarifies the liberal application of the 'relation back' doctrine under Rule 15(c), holding that an amendment can relate back even if it contradicts a disclaimer in the original complaint, prioritizing substance over procedural technicalities. Legally, the case serves as a crucial reminder for contract drafters that specific, defined terms will likely be interpreted to limit the scope of general phrases, meaning broad 'in any way connected with' language can be constrained by a narrow definition elsewhere in the agreement.
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