In Asarco v. Noranda Mining Inc., (2017) No. 16-4045, the Tenth Circuit federal court of appeals has ruled that a bankruptcy court’s approval of an environmental settlement as “fair” does not preclude the bankrupt from seeking additional compensation from other alleged polluters.
Asarco, a mining company accused of contributing to pollution of, among other places, a property near Park City, Utah, filed for a Chapter 11 reorganization bankruptcy. In the bankruptcy, Asarco settled, for $8.7 million, environmental claims against the company regarding the Utah site. The Bankruptcy Court, in approving the settlement, found it to be a “fair” approximation of the company’s liability.
Asarco subsequently sued another company (Noranco), alleging that the latter had also contributed contamination to the Utah site and should pay Asarco back for part of the $8.7 million settlement. Noranda argued that the lawsuit should be barred because Asarco had already agreed in the bankruptcy proceeding that its settlement was a fair approximation of the company’s liability.
The Tenth Circuit held that, despite this agreement, Asarco could pursue a claim for contribution against Noranda. The Court said that, while Asarco agreed its settlement was fair, that agreement did not mean that Asarco was agreeing to the $8.7 million being the exact amount of its responsibility, Asarco had also, as part of the settlement, specifically reserved its right to seek contribution against others.
The Asarco ruling means that at least some Courts will recognize the right of a bankrupt party that has settled its environmental debts in the bankruptcy proceeding nonetheless to have civil litigation rights to attempt to get back at least part of the settlement from others. This development may encourage companies to seek bankruptcy protection to settle environmental claims, with the knowledge that the companies can still make civil monetary claims after the settlement is made.