Asarco, LLC v. Atlantic Richfield Co.

Asarco, LLC v. Atlantic Richfield Co., 2016 MT 90 (April 12, 216) (Baker, J.) (5-0, aff’d)

Issue: Whether the district court correctly held that claim preclusion bars Asarco’s claims.

Short Answer: Yes.

Affirmed

Facts: Atlantic Richfield (AR) sold a zinc fuming plant and related property in East Helena to Asarco in 1972. In the sales agreement, AR agreed to indemnify Asarco for liabilities arising out of AR’s operations at the site, and to deliver all relevant documents to Asarco. It also represented and warranted that it had delivered all information required by the disclosure clause.

In 1984, the property and surrounding area were designated a Superfund site under CERCLA. The EPA identified both AR and Asarco as potentially responsible parties, ultimately determining that Asarco was obligated to pay for the cleanup. The EPA and Asarco entered into several consent decrees in the 1990s, and in 2005, Asarco filed for Chapter 11 bankruptcy protection. During that time, Asarco entered into two settlements with the state and federal governments regarding its environmental liabilities at the site. To date, it has paid approximately $138 million for remediation at the site.

In 2012, Asarco filed suit against AR in Montana federal court seeking contribution under CERCLA for costs incurred in cleanup. In June 2014, AR moved for summary judgment on the ground that Asarco’s claims were barred by CERCLA’s statute of limitations. The federal court agreed and granted AR’s motion in August 2014. That case is on appeal to the Ninth Circuit.

Subsequently, Asarco filed this suit in state court, alleging tort and contract claims against AR, all of which were premised on AR’s alleged breach of the 1972 sale agreement. It claimed it learned of the basis for these claims during discovery in the federal case, and that it was entitled to indemnification from AR for all claims and expenses arising out of the operation of the zinc fuming plant.

Procedural Posture & Holding: In March 2015, AR moved for judgment on the pleadings on the ground that all of Asarco’s claims were barred by the doctrine of claim preclusion. The district court found the elements of claim preclusion were met, and granted AR’S motion. Asarco appeals, and the Supreme Court affirms.

Reasoning: The doctrine of claim preclusion applies to claims that could have been raised in the first action. The district court found that Asarco could have amended its complaint in the federal case to include the state-law claims, and that the federal court would have exercised supplemental jurisdiction because the claims were part of the same case or controversy. Additionally, the district court noted that a federal court may continue to exercise supplemental jurisdiction over a state law claim even after the federal court has dismissed the federal claims. Finally, the district court found that the subject mater and issues were the same on both actions.

It is undisputed here that the parties are the same, that the capacities of the parties are the same, and that the federal district court entered a final judgment on the merits. The elements in dispute are whether the actions involve the same subject matter, and if so, whether the issues in this case could have been raised in the federal case. Based on the parties’ pleadings, the Supreme Court holds that “concealment of contamination from Atlantic Richfield’s zinc fuming plant is at the heart of both cases.” ¶ 17.

The issues in two actions are the same when there is a common nucleus of operative facts underlying the claims in both cases. Applying that test here, the Court concludes the issues in the federal case and this case both relate to the same subject matter.

Asarco could have raised the state-law claims in the federal case. It alleges it knew the underlying facts on May 1, 2014, and the federal district court did not enter its summary judgment order until August 26, 2014. Although the deadline to amend its pleadings as a matter of course had passed, Asarco could have moved for leave to amend, and under the Federal Rules of Civil Procedure, leave is to be freely given when justice requires it. In the Ninth Circuit, a presumption exists in favor granting motions to amend. Thus, Asarco could have raised these issues in its federal case.

Claim preclusion would not apply if it could be shown that the federal court would have clearly decline to maintain supplemental jurisdiction over the state-law claims, but the Court refuses to speculate, noting that the only reason the question arises here is because Asarco did not give the federal court an opportunity to decide for itself.