ASARCO LLC v. Atl. Richfield Co.

• Decision Date: 12 April 2016
• Docket Number: No. DA 15–0464.,DA 15–0464.
• Citation: 2016 MT 90,383 Mont. 174,369 P.3d 1019
• Parties: ASARCO LLC, a Delaware corporation, Plaintiff and Appellant, v. ATLANTIC RICHFIELD COMPANY, a Delaware Corporation, Defendant and Appellee.
• Court: Montana Supreme Court

383 Mont. 174

369 P.3d 1019

2016 MT 90

ASARCO LLC, a Delaware corporation, Plaintiff and Appellant,

v.ATLANTIC RICHFIELD COMPANY, a Delaware Corporation, Defendant and Appellee.

No. DA 15–0464.

Supreme Court of Montana.

Submitted on Briefs March 9, 2016.

Decided April 12, 2016.

For Appellant: Rachel H. Parkin, Dylan McFarland, Milodragovich, Dale & Steinbrenner, P.C., Missoula, Montana, Gregory Evans, Laura G. Brys, McGuirewoods LLP, Los Angeles, California.

For Appellee: Randy J. Cox, Randy J. Tanner, Boone Karlberg P.C., Missoula, Montana Shannon Wells Stevenson, Davis Graham & Stubbs LLP, Denver, Colorado.

Justice BETH BAKER delivered the Opinion of the Court.

¶ 1 Asarco LLC appeals the order of the First Judicial District Court, Lewis and Clark County, granting Atlantic Richfield Company's motion for judgment on the pleadings and dismissing Asarco's claims. We restate the issue on appeal as follows:

Whether the District Court correctly determined that claim preclusion bars Asarco's claims.

¶ 2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 For over one hundred years, Asarco and its predecessors operated a lead smelting facility in East Helena, Montana (the Site). From 1927 to 1972, Atlantic Richfield's predecessor operated a zinc fuming plant on land leased from Asarco at the Site.¹ In 1972, Atlantic Richfield sold the zinc fuming plant and related property to Asarco. Under the 1972 sale agreement (1972 Agreement), Atlantic Richfield agreed to indemnify Asarco for liabilities arising out of Atlantic Richfield's operations at the Site. Additionally, the 1972 Agreement's terms contained a disclosure clause in which Atlantic Richfield agreed to deliver all relevant documents and records to Asarco and a representation clause in which Atlantic Richfield represented and warranted that it had delivered all the information required by the disclosure clause.

¶ 4 In 1984, due to extensive contamination of the soil, surface water, and groundwater at the Site and the surrounding area, the Environmental Protection Agency (EPA) added the Site and surrounding area to the National Priorities List under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), commonly known as "Superfund." The EPA requested information from Asarco and Atlantic Richfield regarding their operations at the Site because it had identified both as potentially responsible for the contamination. The EPA ultimately determined that Asarco was obligated to fund and conduct cleanup efforts at the Site based on the information provided by the parties.

¶ 5 In the 1990s the EPA and Asarco entered into several consent decrees regarding Asarco's responsibility to remediate contamination at the Site. In 2005, Asarco filed for Chapter 11 bankruptcy protection. During its bankruptcy proceeding, Asarco entered into two settlements with the State and federal governments regarding its environmental liabilities at the Site. To date, Asarco has paid approximately $138 million for remediation at the Site.

¶ 6 In June 2012 Asarco filed a complaint against Atlantic Richfield in the United States District Court for the District of Montana. Asarco sought contribution—pursuant to CERCLA—from Atlantic Richfield for costs incurred in cleaning up the Site. Asarco claimed that Atlantic Richfield was responsible, in part, for the Site's contamination due to the zinc fuming plant's operation. Asarco therefore asserted that Atlantic Richfield was liable under CERCLA for its equitable share of costs related to the Site's cleanup.

¶ 7 In June 2014, following extensive discovery between the parties, Atlantic Richfield moved for summary judgment on the ground that Asarco's claims were untimely under CERCLA's statute of limitations. The federal district court agreed that the claims were time-barred and granted Atlantic Richfield's motion for summary judgment in August 2014. Asarco LLC v. Atl. Richfield Co., 73 F.Supp.3d 1285, 1296 (D.Mont.2014) (hereafter Asarco I ). Asarco I is currently on appeal to the U.S. Ninth Circuit Court of Appeals.

¶ 8 Following the federal court's grant of summary judgment in Asarco I , Asarco commenced the present action against Atlantic Richfield in the First Judicial District Court. Asarco's complaint alleged the following claims under state law: breach of contract, breach of the covenant of good faith and fair dealing, fraud, negligent misrepresentation, and constructive fraud. Asarco claimed that it learned the basis for its state-law claims during discovery in Asarco I . Asarco claimed further that it was entitled to indemnification from Atlantic Richfield for Atlantic Richfield's "share of the claims, liabilities, damages, losses, costs and expenses attributable to the Claims, including attorneys' fees and costs, that arose out of or resulted from [Atlantic Richfield's] construction, ownership and operation" of the zinc fuming plant at the Site. Asarco premised its state-law claims on Atlantic Richfield's alleged breach of the 1972 Agreement.

¶ 9 In March 2015 Atlantic Richfield moved for judgment on the pleadings pursuant to M.R. Civ. P. 12(c) (Rule 12(c) ) on the ground that the doctrine of claim preclusion barred Asarco's claims. The District Court issued its order in June 2015 following briefing and oral argument. The District Court determined: that Asarco could have amended its complaint in Asarco I to include its state-law claims; that the federal district court would have had supplemental jurisdiction over the state-law claims; that it was not clear whether the federal district court would have refused to continue exercising supplemental jurisdiction over the state-law claims after dismissing Asarco's CERCLA claim; and that the elements of claim preclusion were met. Accordingly, the court granted Atlantic Richfield's motion and dismissed the matter. Asarco appeals.

STANDARD OF REVIEW

¶ 10 A district court's decision on a Rule 12(c) motion for judgment on the pleadings is a conclusion of law that we review de novo for correctness. Firelight Meadows, LLC v. 3 Rivers Telephone Coop., Inc., 2008 MT 202, ¶ 12, 344 Mont. 117, 186 P.3d 869. A Rule 12(c) motion is appropriate when the moving party establishes that no material issues of fact exist and that it is entitled to judgment as a matter of law. Firelight Meadows, LLC, ¶ 9. In evaluating a Rule 12(c) motion, a court must assume that all of the well-pleaded factual allegations in the nonmovant's pleadings are true and that all contravening assertions in the movant's pleadings are false. Firelight Meadows, LLC, ¶ 11. Because "[a]ll exhibits and materials referred to in a pleading are incorporated into the pleading," a court may consider any such exhibits and materials in deciding a Rule 12(c) motion. Firelight Meadows, LLC, ¶ 15. Furthermore, only "well-pleaded factual allegations" are assumed to be true for purposes of deciding a Rule 12(c) motion; questions of law are "legal determination[s] for a court to decide based upon well-established legal precedent." Firelight Meadows, LLC, ¶ 18. A district court's application of claim preclusion presents an issue of law that we review de novo for correctness. Brilz v. Metro. Gen. Ins. Co., 2012 MT 184, ¶ 13, 366 Mont. 78, 285 P.3d 494.

DISCUSSION

¶ 11 Whether the District Court correctly determined that claim preclusion barred Asarco's claims.

¶ 12 In its order, the District Court first observed that Asarco's state-law claims were not raised in Asarco I . The court noted that the doctrine of claim preclusion applies equally to claims that could have been raised in the first action. The District Court therefore analyzed several issues pertinent to its conclusion that Asarco's state-law claims could have been raised in Asarco I and therefore were barred by claim preclusion.

¶ 13 The District Court first found that Asarco discovered the grounds underlying its state-law claims during discovery in Asarco I ; therefore, the court concluded that Asarco could have amended its Asarco I complaint to include those claims pursuant to Fed.R.Civ.P. 15(a), which governs amendments to pleadings. The court concluded further that the federal district court would have exercised supplemental jurisdiction over Asarco's state-law claims pursuant to 28 U.S.C. § 1367(a) because those claims were part of the same case or controversy as its CERCLA claim. The court next noted that under 28 U.S.C. § 1367(c), a federal court may continue to exercise supplemental jurisdiction over a claim if the court has dismissed the federal claims. Relying on the Restatement (Second) of Judgments § 25 and decisions from the Ninth Circuit, the court determined that it was unclear whether the federal district court would have declined to exercise continuing jurisdiction over the state-law claims after dismissing Asarco's CERCLA claim on summary judgment. Finally, the court determined that the subject matter and the issues were the same in both actions because "[b]oth actions concern [Atlantic Richfield's] operation of the East Helena zinc fuming plant, its alleged pollution of the ground and water in that area, and its attempted concealment of those operations." The District Court concluded that claim preclusion barred Asarco's state-law claims, granted Atlantic Richfield's motion for judgment on the pleadings, and dismissed the case.

¶ 14 Asarco contends that the District Court erred in several respects. First, Asarco asserts that the court incorrectly presumed that the federal district court would have continued to exercise supplemental jurisdiction over its state-law claims following the federal court's dismissal of the CERCLA claim on summary judgment. Next, Asarco contends that it did not have knowledge of its fraud claims in sufficient time to raise them in federal court prior to the court's summary judgment ruling in Asarco I . Finally, Asarco argues that the subject matter and issues in both cases are different. Therefore, it asserts that claim preclusion is...