U.S. v. NCR Corp. And Appleton Papers Inc.

The federal cost recovery litigation involves a 1978 agreement between NCR and API. In that agreement, NCR sold its Appleton division to API, subject to an indemnity agreement which provided that API would take responsibility for liabilities including non-compliance with environmental laws of which the Appleton division had received notice. As of 1978, CERCLA did not exist. In 1995, NCR sued API in New York federal court regarding API's responsibility for the Fox River contamination. That court concluded that the 1978 agreement was not clear as to whether CERCLA liability was included in the indemnity. The parties then agreed to submit the matter to binding arbitration, as a result of which an arbitration panel found the contract ambiguous, and reached a decision, going beyond the contract language, assigning API 60% of expenses exceeding $75 million. After the federal government brought this CERCLA cost recovery action in 2010, API filed a summary judgment motion asserting that it had no liability under CERCLA to the federal government. The government alleged that, based on the 1978 sale agreement, API had assumed liability for the CERCLA cleanup costs. After initially agreeing with the government in a December 2011 decision, in this later decision on API's motion for reconsideration, the Federal Court granted API summary judgment. The court found the 1978 agreement did not impose CERCLA liability because a non-existent CERCLA could not have been a legal violation of which the Appleton Division had received notice. Second, because the 1978 agreement is silent on the issue of liability for future environmental laws and did not contain a broad assumption of liability, these factors suggest that API did not intend to assume such liability. Third, the court evaluated the impact of the 1978 agreement's statement that no third party was to be beneficiary of the agreement. The court found that such a clause could not by contract eliminate all government enforcement. However, the clause here provides further evidence that the agreement was not intended to make API liable to the government for future environmental laws. Finally, the court found that the arbitration panel's decision that API was responsible for a larger share of costs did not estop API from arguing here that it did not assume liability to the federal government. The arbitration panel's discussion was based on "quasi-equitable factors" regarding who should pay, but was not a decision that API had, by contract, assumed liability to the government. Therefore, the district court concluded that API was not a CERCLA liable party to the federal government.