672 F.3d 1283 (Fed. Cir. 2012), 2010-5161, Shell Oil Co. v. United States

Docket Nº:2010-5161.
Citation:672 F.3d 1283
Opinion Judge:O'MALLEY, Circuit Judge.
Party Name:SHELL OIL COMPANY and Atlantic Richfield Company, Plaintiffs-Appellees, v. UNITED STATES, Defendant-Appellant.
Attorney:Michael W. Kirk, Cooper & Kirk, PLLC, of Washington, DC, argued for plaintiffs-appellees. With him on the brief was David Lehn. Of counsel was Peter A. Patterson. Stephen C. Tosini, Senior Trial Counsel, Civil Division, Commercial Litigation Branch, United States Department of Justice, of Washing...
Judge Panel:Before RADER, Chief Judge, O'MALLEY, and REYNA, Circuit Judges.
Case Date:March 07, 2012
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1283

672 F.3d 1283 (Fed. Cir. 2012)

SHELL OIL COMPANY and Atlantic Richfield Company, Plaintiffs-Appellees,

v.

UNITED STATES, Defendant-Appellant.

No. 2010-5161.

United States Court of Appeals, Federal Circuit.

March 7, 2012

Page 1284

Michael W. Kirk, Cooper & Kirk, PLLC, of Washington, DC, argued for plaintiffs-appellees. With him on the brief was David Lehn. Of counsel was Peter A. Patterson.

Stephen C. Tosini, Senior Trial Counsel, Civil Division, Commercial Litigation

Page 1285

Branch, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Heather R. Cameron, Attorney, United States General Services Administration, of Washington, DC.

Before RADER, Chief Judge, O'MALLEY, and REYNA, Circuit Judges.

O'MALLEY, Circuit Judge.

This case is an appeal from a decision of the Court of Federal Claims requiring the United States to indemnify certain oil companies for environmental cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act of 1978, 42 U.S.C. § 9601, et seq. (" CERCLA" ). The Court of Federal Claims initially entered judgment in favor of all four plaintiffs in this litigation: Shell Oil Company (" Shell" ), Atlantic Richfield Company (" Arco" ), Texaco Inc. (" Texaco" ), and Union Oil Company of California (" Union Oil" ) (collectively, " the Oil Companies" ). Upon discovering that his wife had a financial interest in the parent company of Texaco and Union Oil, however, Judge Loren A. Smith: (1) vacated his 2008 and 2009 summary judgment rulings in favor of the Oil Companies; (2) sua sponte severed Texaco and Union Oil from the lawsuit and directed the clerk of court to reassign their claims to a different judge; (3) reinstated his prior summary judgment decisions with respect to Shell and Arco only; and (4) entered final judgment against the government in the total amount of $68,849,505.88. See Shell Oil Co. v. United States, 93 Fed.Cl. 439 (2010) (liability); Shell Oil Co. v. United States, 93 Fed.Cl. 153 (2010) (damages); Shell Oil Co. v. United States, No. 06cv141 (Fed.Cl. Aug. 4, 2010), ECF No. 80 (final judgment).

The government appeals from the Court of Federal Claims' decision entering final judgment in favor of Shell Oil and Arco, and seeks reversal on a number of grounds, including the trial judge's treatment of the discovered financial conflict. Because we find that the presiding judge was required to recuse himself under 28 U.S.C. § 455(b)(4), and that vacatur is appropriate in the circumstances of this case, we vacate the final judgment and the summary judgment orders on which it was premised, and remand with instructions that this case be reassigned to a different judge.

BACKGROUND

During World War II, the United States entered into contracts with several oil companies for the production of aviation fuel (" avgas" ). Production of avgas resulted in an increased production of hazardous waste which was dumped at a waste site in California (referred to as " the McColl site" ). Several decades later, after years of litigation in federal district court in California, the Oil Companies were held liable under CERCLA for the costs of cleaning up the waste dumped at the McColl site.

On February 24, 2006, the Oil Companies filed suit in the Court of Federal Claims seeking reimbursement of the CERCLA cleanup costs from the government based on certain language in the avgas contracts. Because there was extensive discovery and the parties entered into comprehensive stipulations of fact in the underlying CERCLA action, the parties agreed that no further factual development was necessary, and the case was litigated on successive summary judgment motions— one as to liability and the other relating to damages. The trial court's decisions on these summary judgment motions are the subject of this appeal.

Page 1286

First, on February 2, 2008, the court granted the Oil Companies' motion for partial summary judgment on liability, finding that the avgas contracts contained " open ended indemnification agreements" and that the " reimbursement clause of the contracts encompasses costs for the CERLCA cleanup as those costs were ‘ charges' and ‘ by reason of production of the avgas." Shell Oil Co. v. United States, 80 Fed.Cl. 411, 417-19 (2008). The Oil Companies subsequently moved for summary judgment with respect to the amount of recoverable damages. On March 31, 2009, the court granted, in part, Plaintiffs' motion for summary judgment as to damages and awarded $84,536,763.65 collectively to Plaintiffs. Shell Oil v. United States, 86 Fed.Cl. 470, 475 (2009).

On April 22, 2009, the government filed a motion for reconsideration asking the court to revisit its decision with respect to the remediation of property damage. The court denied the motion on September 28, 2009.

On October 30, 2009, the trial court entered final judgment awarding the sum of $87,344,345.70 to the Oil Companies as follows:

• Shell Oil: $51,166,317.71• Union Oil: $16,543,019.08

• Arco: $16,543,019.08

• Texaco: $3,091,989.83.

On November 16, 2009,1 the trial judge conducted a telephone conference and informed the parties that, when he was entering final judgment in this case, he realized that his wife had inherited 97.59 shares of stock in Chevron Corporation, which is the parent corporation for Texaco and Union Oil. He explained that his wife inherited the shares in 2004, prior to the initiation of this lawsuit. Transcript, Shell Oil v. United States, No. 06 cv141 (Fed.Cl. Dec. 7, 2009), ECF No. 60 at 4:9-16. The judge then indicated that he initially did not discover the conflict because he " was particularly focused on Shell" and was looking for " conflict between Chevron and ownership in Shell or Texaco rather being a part of Shell." Id. at 3:6-10; 5:21-24.

During the telephone conference, the judge did not identify the specific date on which he became aware of the conflict or whether he had sought a formal advisory opinion on the issue. Instead, he indicated that he " consulted with the various technical powers that be in the judiciary and looked at some of the material" and determined the appropriate resolution was to " break Texaco out of this case, vacate all the orders as they relate to Texaco" and have the clerk's office reassign Texaco to a different judge.2 Id. at 3:13-4:1. The trial judge noted, however, that if the parties had a mutually agreeable alternative he would consider it. Both parties asked for more time to analyze the issue.

On December 10, 2009, the government filed a Motion for Relief from Judgment and for Recusal pursuant to Rule 60(b) of the Rules of the Court of Federal Claims. In that motion, the government argued that recusal was mandatory and unwaivable under 28 U.S.C. § 455(b)(4), and that the presiding judge was required to recuse himself from the entire proceeding, not just with respect to individual parties. The government further argued that the court's orders as to Shell Oil and Arco would still have an unfair preclusive effect with respect to the claims by Texaco and Union Oil given the identity of issues between the Oil Companies.

Page 1287

During the course of briefing on the Rule 60(b) motion, the government obtained a copy of the judge's financial disclosure statement for the calendar year 2008. That disclosure report, which the judge signed and certified on May 15, 2009, disclosed an interest in " Chevron Texaco Stock." See Exhibit-2008 Financial Disclosure Form, Shell Oil, No. 06cv141 (Fed.Cl. Jan. 7, 2010), ECF No. 66-1.

On December 28, 2009, before briefing on the government's Rule 60(b) motion was complete, the government appealed the court's October 30, 2009 final judgment to this court. The government has explained that it filed the appeal at that time to avoid expiration of the time to appeal the court's judgment.

On February 2, 2010, the judge issued an order indicating that, in light of the government's appeal, he no longer had jurisdiction to rule on the government's pending Motion for Relief from Judgment and Recusal. In the order, the trial judge stated that:

the Government could restore jurisdiction by withdrawing its appeal, in which case the Court would vacate its earlier decisions with respect to Texaco and Union Oil. The Government could then appeal the Shell Oil and Atlantic Richfield portions of the decision. The case almost solely focuses on the facts in Shell's case. It could also then re-litigate the Texaco and Union Oil cases before another judge.

Order, Shell Oil, No. 06cv141 (Fed.Cl. Feb. 2, 2010), ECF No. 71 at 2. Accordingly, the government filed a motion in this court to remand.

On May 19, 2010, this court granted the government's motion to remand the...

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