Asarco and Union Pacific (“UP”) reached an agreement regarding various issues, including Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) claims relating to various disposal sites. Part of the agreement stated that Asarco released UP for “any and all damages, losses, expenses, costs, liabilities, claims demands, suits, causes of action, and complaints, of any kind, character or description, in law or in equity, whether known or unknown, arising out of or in any way connected with” claims for “contribution and indemnity for past and future response costs under CERCLA incurred” by UP at the Coeur d’Alene CERCLA Site (the “Site”). In Asarco v Union Pacific, the 9th Circuit said this release was not limited to costs incurred by UP but also released claims for costs incurred by Asarco at the Site.

Ambiguous Agreement
Asarco sued UP for contribution under CERCLA, claiming it incurred CERCLA costs at the Site. In an earlier ruling, the 9th Circuit ruled the language was ambiguous and ordered the district (trial) court to conduct a trial to determine the parties’ intent in reaching this agreement. The 9th Circuit said the key part could be read to be limited to claims involving costs incurred only by UP but also could be read to extend to claims based on Asarco incurring the costs, as these costs could come within the broad language of “arising out of or in any way connected with” costs incurred at the Site by UP. Both interpretations are reasonable according to the 9th Circuit.

The agreement is subject to Texas law. Under Texas law, an agreement that can support two different reasonable interpretations is ambiguous. If an agreement is unambiguous, interpreting it is for the court as a matter of law. If the court determines the agreement is ambiguous, interpretation is an issue of fact that the fact finder must resolve, based on determining the intent of the parties. In many American cases, the fact finder is a jury; in CERCLA cases, the fact finder is the district court judge.

When agreements are unambiguous, courts generally look only to the text of the agreement to interpret it. When agreements are ambiguous, courts can look at evidence of the circumstances surrounding formation and implementation of the agreement to determine the intent of the parties.

Parties Intended to Release Asarco’s Claims
After a 13-day trial, the district court judge found as a matter of fact the parties intended the agreement to release costs incurred by Asarco at the Site and dismissed the case. On appeal, the 9th Circuit agreed.

While Asarco argued to the district court and the 9th Circuit that interpretation should be limited to the text of the agreement, the 9th Circuit said this position was contrary to its earlier ruling that the agreement was ambiguous. Among the evidence of circumstances that showed the parties intended to release claims for costs Asarco incurred, the 9th Circuit cited correspondence between the parties that the agreement was to be a “mutual release.” Also, Asarco failed to list a contribution claim against UP in Asarco’s draft plan of reorganization in its bankruptcy proceeding, which Asarco prepared after the agreement with UP.

For a copy of the 9th Circuit opinion: