Asarco LLC v. Goodwin, Shaw, Truslow
- Summarized by Robert Yan , Otterbourg P.C.
- 10 years 6 months ago
- Citation:
- Docket No. 13-3954-cv (2d Cir. June 25, 2014)
- Tag(s):
-
- Ruling:
- AFFIRMING the judgment of the district court dismissing a complaint by the reorganized debtor seeking contribution and subrogation from the Trustees of the residuary trusts created by the will of John D. Rockefeller Sr. (“Rockefeller”), the Court of Appeals for the Second Circuit held that the contribution claims were barred by the applicable three-year statute of limitations and that the reorganized debtor did not qualify as a subrogee of the debtor because the debtor and reorganized debtor were found to be the same legal entity.
- Procedural context:
- Appeal from an order of the United States District Court for the Southern District of New York (Griesa, J.) dismissing ASARCO LLC’s (“Asarco”) Second Amended Complaint. The Court affirmed the judgment of the district court.
- Facts:
- Predecessors of Asarco operated a smelter plant located in Everett, Washington (“Everett Smelter”) and also the Monte Cristo Mining Area (“MCMA”), which included several large mining complexes and was the former site of an ore processing and concentrating facility. Before Asarco’s operation of the Everett Smelter and MCMA (collectively, the “Sites”), the Puget Sound Reduction Company (“PSRC”) held legal title to the Everett Smelter. PSRC was alleged to have been operated by Rockefeller directly and through his agents and Rockefeller was alleged to have had interests in companies that owned or operated several mines at MCMA.
It was alleged that under Rockefeller’s ownership and operation of the Sites, substantial quantities of hazardous material and waste were discharged at the Everett Smelter. Mining wastes were also discharged at the MCMA. As a result, various hazardous substances were released into the environment and contaminated the Sites. Prior to his death in 1937, Rockefeller established a residuary trust for the primary lifetime benefit of his granddaughter, which upon her death was divided into two trusts for the benefit of her children (Rockefeller’s great-grandchildren).
Asarco filed for bankruptcy relief in August 2005 with the Bankruptcy Court for the Southern District of Texas. In that bankruptcy case, the United States, State of Washington and Port of Everett filed proofs of claim related to environmental contamination arising from the release of hazardous substances at the Sites. On April 18, 2008, the bankruptcy court approved a settlement for the Everett Smelter claims. On June 5, 2009, the bankruptcy court approved a settlement for the MCMA claims. In total, the settlements called for approximately $50.2 million to be paid to the United States, State of Washington and Port of Everett to resolve the environmental claims. On December 9, 2009, Asarco paid the $50.2 million. Asarco’s plan of reorganization went into effect on December 9, 2009.
After emerging from bankruptcy, Asarco pursued its rights under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”) to require other potentially responsible parties to reimburse it for their respective share of remediation costs. Asarco filed its original complaint against the Trustees on May 10, 2012. The complaint was amended twice, with the Second Amended Complaint filed on October 25, 2012. In the complaint (as amended), Asarco asserted claims for contribution for Rockefeller’s environmental liabilities at the Sites and claims for subrogation. The Trustees moved to dismiss the Second Amended Complaint. The district court granted the motion to dismiss.
The district court refused to impose liability on the beneficiaries of Rockefeller’s estate because under New York Estate, Powers & Trusts Law § 12-1.1(a), liability under CERCLA or for contribution could not be a “debt” of Rockefeller because CERCLA did not exist at the time of his death. The district court also rejected Asarco’s argument for liability under a theory of trust fund liability. Lastly, the district court concluded that the statute of limitations for the Everett Smelter claims and the MCMA claims expired three years after the date on which the bankruptcy court approved the respective settlements.
On appeal, the Court rejected application of a trust fund theory of liability as a matter of federal law. Longstanding precedent established that state probate law and procedures governed with respect to federal claims against decedents’ estates. The Court did not find any exception under CERCLA to displace state probate law. The Court then determined that New York Estates, Powers & Trusts Law § 12-1.1(a) was the relevant statutory provision but declined to interpret the scope of the language. Instead, the Court assumed, arguendo, that New York law would permit liability to be imposed against Rockefeller’s testamentary trusts under the circumstances of the case, and proceeded to consider the statute of limitations issues.
The Court agreed with the district court and determined that Asarco’s direct contribution claims were time-barred. Section 9613(g)(3)(B) of CERCLA provides a three-year statute of limitations for contribution claims, which is triggered upon the “entry of a judicially approved settlement.” The Court agreed with the district court’s application of the plain language of that section and concluded that the statute of limitations began to run from the respective dates the bankruptcy court approved the settlements for the Everett Smelter claims and the MCMA claims. The Court rejected the use of the effective date of Asarco’s plan of reorganization as the operative triggering date.
The Court also rejected Asarco’s argument that it was entitled to assert contribution claims as a subrogee. Asarco argued that, as a reorganized debtor, it was a separate legal entity from the former debtor in possession, and that it was a subrogee when it paid the amounts due under the settlements. If Asarco was found to be a subrogee under the provisions of CERCLA, then the Everett Smelter claims and the MCMA claims would have been within the three-year statute of limitations period. The Court examined the substance of Asarco’s plan of reorganization and found that Asarco was the same legal entity that entered bankruptcy and emerged from bankruptcy. Because Asarco paid its own debt and not that of another distinct entity, Asarco could not assert subrogation claims. “Asarco’s payment of the settlement lack[ed] the basic requirements of subrogation – the existence of a subrogee that is a distinct entity from the subrogor.” The Court agreed with the district court’s dismissal of the subrogation claims and also agreed with the district court’s conclusion that the statute of limitations for subrogation claims had no bearing on the case.
- Judge(s):
- Kearse, Jacobs, and Lynch (Circuit Judges)
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