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Columbia Falls Aluminum Co., LLC v. Atlantic Richfield Co.

United States District Court, D. Montana, Missoula Division

April 11, 2019

COLUMBIA FALLS ALUMINUM COMPANY, LLC, Plaintiff,
v.
ATLANTIC RICHFIELD COMPANY, Defendant.

          OPINION AND ORDER

          DONALD W. MOLLOY, DISTRICT JUDGE

         This action arises out of a dispute between Plaintiff Columbia Falls Aluminum Company, LLC ("CFAC") and Defendant Atlantic Richfield Company ("Arco") over the parties' respective environmental liabilities at an aluminum smelter in Columbia Falls, Montana ("the Site"). CFAC sued under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and its state analog (the Montana Comprehensive Environmental Cleanup and Responsibility Act, or "CERCA"), seeking cost recovery and contribution for its liability as the current owner of the Site. (Compl., Doc. 1.) Arco counterclaimed, (Doc. 23), and filed a motion for judgment on the pleadings, seeking dismissal of CFAC's claims based on contractual indemnity, (Doc. 33). The Court heard argument on April 10, 2019. The motion is denied.

         FACTUAL BACKGROUND

         In 1955, The Anaconda Company, Arco's predecessor, completed construction of, and began production of aluminum at, the Site. (Doc. 1 at ¶¶ 11, 12.) From 1955 to 1985, Arco produced approximately 3, 523, 501 tons of aluminum at the Site using the Hall-Heroult process. (Id. at ¶ 13.) The Hall-Heroult process is an electrolytic reduction process that dissolves alumina in a cryolite bath inside of carbon-lined cells, or "pots." (Id.) A powerful electric current is passed through the bath from an anode at the top to a cathode at the bottom, which separates the aluminum metal from the chemical solution. (Id. at ¶ 14.) This process resulted in the production of several waste streams which were discharged in various areas at the Site. (Id. at ¶¶ 15-16.) Spent "potliners" from pots that failed contained hazardous substances and were also regularly disposed at the Site. (Id. at ¶¶ 17, 18.) According to CFAC, Arco discharged waste at numerous locations during its operation of the facility. (See, e.g., Id. at ¶¶ 16-21 (describing West Landfill).)

         In 1985, Arco formed Columbia Falls Aluminum Company ("CFAC Montana"). (Id. at ¶ 45.) That same year, Montana Aluminum Investors Corp. ("Montana Aluminum") acquired Arco's assets related to the Site and purchased all of CFAC Montana's stock for $1.00 ("the Acquisition Agreement"). (Id. at ¶ 46; Doc. 23-1.) As of 1999, by subsequent mergers, CFAC is the successor-in- interest to Montana Aluminum and CFAC Montana under the Acquisition Agreement. (Doc. 1 at ¶¶ 47, 49.) CFAC operated the smelter until 2009. (Id. at ¶ 50.) According to CFAC, it and its predecessors' operation of the Site "caused substantially fewer releases or threatened releases of hazardous substances than Arco's ownership and operation." (Id. at ¶ 51.)

         On March 5, 2013, the United States Environmental Protection Agency (the "EPA") began an investigation of the Site for possible listing on the National Priorities List. (Id. at ¶ 59.) CFAC also began investigating the Site, (id.), and was in communication with the Montana Department of Environmental Quality ("Montana DEQ") regarding the Site. (Id. at ¶¶ 61-66.) On or about June 9, 2015, Arco and CFAC each received a General Notice Letter and Demand for Payment of Response Costs for the Site from the EPA. (Id. at ¶ 70.) CFAC sent a letter to the EPA on June 25, 2015, accepting the EPA's invitation to negotiate an Administrative Order on Consent to conduct a remedial investigation and feasibility study at the Site. (Id. at ¶ 72.) Arco, however, rejected the EPA's invitation to engage in negotiations. (Id. at ¶ 73.) On November 30, 2015, CFAC entered into an Administrative Order on Consent ("the Administrative Order") with the EPA concerning the Site. (Id. at ¶ 78.) Pursuant to the Administrative Order, CFAC is conducting a remedial investigation and feasibility study at the Site. (Id.) That investigation resulted in a February 2017 "Phase I" report, indicating the Site had three primary contaminant concerns: (1) cyanide, (2) fluoride, and (3) polycyclic aromatic hydrocarbons ("PAHs"), primarily in the areas of the Site used for disposal under Arco. (Id. at ¶¶ 81-118.) CFAC alleges that it has incurred at least $7 million in response costs to date, (id. at ¶ 119), and that additional costs are expected, (id. at ¶ 120). Arco has not reimbursed CFAC for any costs. (Id. at ¶ 121.) As a result, CFAC filed the present action, seeking CERLCA contribution and recovery costs from Arco.

         LEGAL STANDARD

         "After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). "A judgment on the pleadings is properly granted when, assuming the truth of the allegations in the non-moving party's pleadings, the moving party is entitled to judgment as a matter of law." Rubin v. United States, 904 F.3d 1081, 1083 (9th Cir. 2018). As with a motion under Rule 12(b)(6), a successful Rule 12(c) motion must show either that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support its theory. Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989); Balistreri v. Pacifica Police Dep % 901 F.2d 696, 699 (9th Cir. 1988). The determination of a Rule 12(c) motion is limited to the pleadings, see Fed. R. Civ. P. 12(d), including attached documents, see Fed. R. Civ. P. 10(c); United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

         ANALYSIS

         Parties may contractually assign CERCLA and other environmental liabilities to other private individuals through an indemnification agreement. 42 U.S.C. § 9607(e)(1); seeMardan Corp. v. C.G.C. Music, Ltd., 804 F.2d 1454, 1459 (9th Cir. 1986). Here, Arco argues that the parties have done so in the Acquisition Agreement, foreclosing the present lawsuit. Because the Acquisition Agreement is attached to the Answer, (see Doc. 23-1), it can be considered for the purposes of the present motion. See Ritchie, 342 F.3d at 908.

         I. Applicable Law

         State law "provide[s] the general content of federal law" on the scope of contractual indemnity under CERCLA. See Mardan Corp., 804 F.2d at 1460; see also Jones-Hamilton Co. v. Beazer Materials & Servs., Inc., 973 F.2d 688, 692 (9th Cir. 1992). Montana law therefore governs the interpretation of the contract provisions at issue here. (See Doc. 23-1 at § 13(h).) Under Montana law, an indemnity agreement is interpreted like any other contract and a court's job "is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted.'" Ohio Farmers Ins. Co. v. JEM Contracting, Inc., 386 P.3d 613, 616 (Mont. 2016) (quoting Mont. Code Ann. § 1-4-101). "The role of a court interpreting a contract provision is to ascertain and effectuate the parties' mutual intentions[, ]" which is reflected in "[t]he clear and explicit language of the contract." A.M. Welles, Inc. v. Mont. Materials, Inc., 342 P.3d 987, 989 (Mont. 2015). "To the extent that there is ambiguity, indemnity clauses generally should be liberally construed in favor of the party intended to be indemnified." Id. (internal quotation marks omitted). "[A]n ambiguity exists only if the language is susceptible to at least two reasonable but conflicting meanings." Mary J. Baker Revocable Tr. v. Cenex Harvest States, Co-ops, Inc., 164 P.3d 851, 857 (Mont. 2007). "[I]f the language of a contract is ambiguous, a factual determination must be made as to the parties' intent in entering into the contract." Id. "[E]vidence of the circumstances under which the contract was made and the matter to which it relates may [also] be considered." Id. "However, such evidence ... is not admissible to add to, vary, or contradict the terms of the contract." Id.

         II. The Acquisition Agreement

         The Acquisition Agreement contains cross-indemnification provisions allocating the respective obligations of Seller (Arco) and Buyer (CFAC) for liability relating to the Site before and after it was sold. (See Doc. 23-1.) Section ...


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