The Tenth Circuit Court of Appeals issued its opinion in ASARCO LLC v. Union Pacific Railroad Co. on Monday, June 23, 2014.
ASARCO, along with Union Pacific Railroad Corp. and Pepsi Co., operated in a four-square-mile area in Denver known as the Vasquez site, which was found to be environmentally contaminated. The EPA brought a CERCLA action against ASARCO. The CERCLA action was still pending when ASARCO filed for Chapter 11 bankruptcy in the Southern District of Texas. The EPA filed proofs of claim in ASARCO’s bankruptcy case to recover its expenses for cleaning the Vasquez site. ASARCO eventually moved for approval of a settlement agreement, in which it would agree to pay over $1.5 million to resolve its CERCLA claims at the Vasquez site and other sites, and the bankruptcy court approved the settlement on June 5, 2009. The bankruptcy plan was also approved, which reorganized ASARCO as ASARCO LLC and noted that all claims, including any pending environmental claims, would be paid in full on the effective date of December 9, 2009.
ASARCO LLC filed a lawsuit against Union Pacific and Pepsi on December 10, 2012, asserting that it paid more than its fair share for environmental remediation at the Vasquez site. ASARCO LLC brought two claims: a direct contribution claim under CERCLA, and a contribution claim as debtor-ASARCO’s subrogee under CERCLA. The magistrate judge recommended dismissal of both claims – as to the first claim, it found that the claim was untimely, as it was brought more than three years after the date the bankruptcy court approved the settlement. As to the second claim, the magistrate judge rejected ASARCO’s argument that it was a separate legal entity from debtor-ASARCO and it could not be subrogated to itself. The magistrate judge also noted that CERCLA provided the exclusive legal remedy to ASARCO’s claims. The district judge accepted the magistrate judge’s recommendations and dismissed the complaint in its entirety. ASARCO appealed to the Tenth Circuit.
ASARCO first argued that its claim was not barred by the statute of limitations. The Tenth Circuit commented that the plain language of the statute did not support ASARCO’s argument, since the statute refers to the date the judicially approved settlement is entered. The Tenth Circuit also noted that all of the case law cited by ASARCO counseled the same result, that the statute of limitations had expired prior to ASARCO’s filing of the complaint. As to the second argument, the Tenth Circuit denied that ASARCO became a separate legal entity after bankruptcy reorganization, and noted that an entity cannot become subrogated to itself. Because the direct contribution claim was time-barred and because ASARCO is not a subrogee, the Tenth Circuit affirmed the district court’s order.