Asarco v Noranda: Uncertainty in Remediation Costs Means a Settlement can be Fair and Unfair.

In Asarco, LLC v Noranda Mining, Inc., 2017 WL 24609 (10th Cir. 2017), the court held that Asarco could proceed with a contribution claim against Noranda, in part because  there was no necessary inconsistency between (1) Asarco’s representations to the bankruptcy court that its settlement with EPA was fair and equitable and (2) Asarco’s claim in the contribution action that in its settlement with EPA, it paid more than its fair share of the remediation costs.

Asarco is a mining company is a mining company that filed for Chapter 11 bankruptcy in 2005.   Approximately $6.5 billion dollars worth of environmental claims were brought against it and, after years of negotiation, a comprehensive settlement was reached, whereby, Asarco agreed to pay approximately $1.79 billion dollars to resolve environmental claims.  In seeking court approval of the settlement, Asarco produced evidence that the settlement was fair and equitable.

In 2013, the reorganized Asarco brought a contribution claim against Noranda alleging that in settling environmental claims arising out of the Lower Silver Creek/Richardson Flat site, it paid more than its fair share of the remediation costs.  Noranda moved for summary judgment in part based on the doctrine of judicial estoppel – arguing Asarco could not tell one court that the amount paid was fair and equitable and then tell another court that the amount was more than its fair share.  The district court granted the motion and the 10th Circuit reversed.

The court’s reasoning was based in part on the uncertainty inherent in environmental cleanup costs.  Due to that uncertainty, it is not unusual for a party to settle for an amount that it believes is more than its fair share and then seek contribution from others alleging that it paid more than its fair share.

The result does not necessarily mean that the same settlement figure can be fair and equitable in one context and more than their fair share in another.  It does mean, however, that because estimates of future cleanup costs can vary so greatly, Asarco will have the opportunity to prove that it paid more than its fair share in a settlement that it asserted to be fair.

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