Shell Oil Company v. the United States 06-141c & 0
108 Fed. Cl. 422
Fed. Cl.2013Background
- WWII government contracts produced avgas; oil companies dumped spent alkylation acid and acid sludge at McColl site Fullerton CA.
- CERCLA cleanup litigations followed in California and then in federal courts to allocate costs among parties.
- California court initially held oil companies and government liable; Ninth Circuit reversed and remanded focusing on arranger liability and benzol vs non-benzol waste.
- On remand in the Court of Federal Claims, plaintiffs seek indemnification under the Taxes clause for CERCLA cleanup costs; government argues clause is price adjustment, not broad indemnity.
- Contracts were terminated in 1945 or shortly after; stipulations settled all issues in the late 1940s; ADA and wartime executive actions invoked to argue waivers were not valid.
- Court’s ruling: Taxes clause not a broad indemnity; indemnification rights were not preserved post-termination; ADA waivers not shown; judgment for Government; Oil Companies’ motion denied, Government’s cross-motion granted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Taxes clause covers CERCLA costs | Oil Companies argue 'charges' include CERCLA liabilities | U.S. contends 'charges' are limited to tax-like costs and CERCLA is not a tax or fee | Taxes clause not indemnity; CERCLA costs not a 'charge' under clause |
| Whether indemnification survived contract termination | Oil Companies maintain indemnity rights preserved in termination settlements | Settlement in late 1940s released all rights | Indemnity rights not preserved after termination; claims fail independent of ADA analysis |
| Whether the Anti-Deficiency Act waivers apply to open-ended indemnities | EOs and FWPA implied waiver authorize indemnification | ADA not waived by EO 9001, EO 9024, NDA, or DSC charter | No valid ADA waiver; open-ended indemnity not permitted under FWPA/E.O. 9001/9024, NDA, or DSC charter |
| Whether collateral estoppel precludes re-litigation of non-benzol waste causation | Ninth Circuit findings on non-benzol waste apply | Findings were not strictly controlling for the present case | Collateral estoppel not satisfied; prior findings not binding on current factual issue; court proceeds to independent disposition |
Key Cases Cited
- Ford Motor Co. v. United States, 378 F.3d 1314 (Fed. Cir. 2004) (indemnity language can include CERCLA liability when broad enough)
- E.I. DuPont de Nemours & Co. v. United States, 365 F.3d 1367 (Fed. Cir. 2004) (indemnity clauses must be specific or broadly cover environmental liability)
- Cadillac Fairview/California, Inc. v. Dow Chemical Co., 299 F.3d 1019 (9th Cir. 2002) (CERCLA allocation and waiver considerations in wartime contracting)
- International Paper Co. v. United States, 282 U.S. 399 (Supreme Court 1931) (takings/waiver context cited regarding wartime authority limits)