Flint Hills Resources Alaska, LLC v. Williams Alaska Petroleum, Inc.
377 P.3d 959
Alaska2016Background
- Williams owned the North Pole refinery until 2004 and discovered sulfolane in onsite groundwater in 2001; sulfolane was then unregulated and later became regulated.
- Flint Hills purchased the refinery in April 2004 under a detailed Asset Sale and Purchase Agreement that allocated environmental liabilities, included indemnification procedures, and set damages caps (Environmental Cap and Aggregate Cap). Flint Hills also received Williams’s environmental files.
- After purchase, state regulators and Flint Hills’s contractor (Shannon & Wilson) repeatedly warned that sulfolane might be migrating offsite and recommended boundary (sentry) wells. Flint Hills delayed installing boundary wells until 2008.
- Boundary wells installed in 2008 confirmed that sulfolane had migrated off the refinery and contaminated nearby drinking water; Flint Hills settled a homeowner suit but sued Williams for indemnification and contribution for remediation costs in 2010.
- The superior court granted summary judgment for Williams, ruling (inter alia) that Flint Hills’s contractual indemnity claims accrued earlier and were time-barred under the three-year contract statute; on statutory claims the court applied a two-year limitations period for on-site contamination and held the Agreement’s damages cap applied; equitable claims were dismissed as barred by laches and because legal remedies were adequate.
- On appeal the Alaska Supreme Court reversed as to the accrual rule for pure contractual indemnity claims and for off-site statutory contribution claims, affirmed the two-year bar for on-site statutory claims, affirmed dismissal of equitable claims, and upheld the damages-cap application; remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does statute of limitations accrue for a pure contractual indemnity claim? | Flint Hills: accrual occurs when indemnitor refuses indemnification (so claim timely because refusal in 2010). | Williams: accrual occurs when indemnitee sustains or is found liable for the loss (earlier). | Court: accrual occurs when indemnifying party refuses indemnification; three-year contract statute applies; reversal of lower court on this point. |
| Which limitations period applies to statutory strict-liability claims under AS 46.03.822(a)? | Flint Hills: six-year trespass limitation should apply to claims for migration offsite. | Williams: two-year statute for liabilities created by statute governs. | Court: two-year period applies to contamination on the refinery (non-trespassory); six-year trespass period applies to contamination that migrated onto neighboring properties. |
| Is Flint Hills’s AS 46.03.822(j) contribution claim timely after the 2006 amendment? | Flint Hills: contribution for off-site contamination is timely (six-year window). | Williams: argued earlier notices triggered limitations. | Court: contribution claims for off-site contamination are timely under six-year rule; on-site contribution claims are barred by two-year rule. |
| Does the Agreement’s damages cap bar full recovery for environmental indemnity? | Flint Hills: damages cap does not apply to retained-environmental liabilities or Agreement is ambiguous. | Williams: Agreement unambiguously subjects Environmental Claims to the Environmental Cap and Aggregate Cap. | Court: damages cap unambiguously applies to the environmental indemnity claims; affirmed. |
Key Cases Cited
- Windel v. Mat-Su Title Ins. Agency, Inc., 305 P.3d 264 (Alaska 2013) (standard of review for summary judgment)
- ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc., 322 P.3d 114 (Alaska 2014) (contract interpretation is reviewed de novo)
- Gefre v. Davis Wright Tremaine, LLP, 306 P.3d 1264 (Alaska 2013) (discussing accrual standards and review of factual findings on accrual)
- Brannon v. Continental Casualty Co., 137 P.3d 280 (Alaska 2006) (insurance-duty-to-defend accrual principles relied on in indemnity discussion)
- Christianson v. Conrad-Houston Insurance, 318 P.3d 390 (Alaska 2014) (applying discovery/accrual rules)
- Fed. Deposit Ins. Corp. v. Laidlaw Transit, Inc., 21 P.3d 344 (Alaska 2001) (discussing private cause of action under AS 46.03.822 and limitations-period choice)
- Maddox v. Hardy, 187 P.3d 486 (Alaska 2008) (elements and accrual of AS 46.03.822 strict-liability claims)