Shell Oil Company v. United States

WALLACH, Circuit Judge. anniversary The seventieth of the end of active participation United States in the Second World will fall September War year. of next A of pragmatists, nation forget history we tend to our until necessi- ty our memory.1 revives To resolve this Kirk, Kirk, Cooper PLLC, Michael W. & (“Shell”), contract claim Shell Oil Co. DC, Washington, argued for plaintiffs- (“ARCO”), Atlantic Texaco, Richfield Co. appellants. him With on the brief were (“Texaco”), Inc. and Union Oil Co. of Cali- Vincent J. Colatriano and Peter A. Patter- (“Union Oil”) fornia (collectively, “the Oil son. Companies”), we must recall place into appropriate its context atmosphere Tosini,

Stephen Counsel, C. Senior Trial costs, stark victory determination for at all Branch, Litigation Commercial Civil Divi- which drove our war effort sion, Japa- after the Department Justice, United States Empire nese attacked the DC, United States Washington, argued for defendant- Naval Base at Pearl Harbor on appellee. him December With on the brief were 7,1941. Delery, Stuart F. Acting Assistant Attor- ney General, Davidson, Jeanne E. Di- Each Companies of the Oil entered into

rector, White, Jr., and Franklin E. Assis- contracts with the United provide States to tant Director. high-octane gas (“avgas”) aviation to fuel

Hilary Cairnie, LLP, S. military BakerHostetler part aircraft as of the national war DC, (“the of Washington, contracts”). for amicus curiae effort avgas pro- American Fuel & Petrochemical Manufac- duction of products resulted in waste turers. Of counsel were Richard B. spent alkylation Raile such as and “acid acid and Christopher H. Marraro. sludge.” The Oil Companies disposed of " law, lach, Partisans, problems Pirates, ‘There are no new in the and Pancho Villa: solutions!,] only forgotten and the issues How International and National Law Handled yesterday which always again arose will arise Fighters Days” Non-State in the "Good Old Rabkin, Jeremy tomorrow.’ Rabkin & Ariel Approach's Applicability 1949 and That Before Navigating Cyberspace: Legal Les- Terror,” Conflicts Emory "War on Int’l L.Rev. Sea, History sons War at 14 Chi. J. from (2010)). 552-53 (2013) (quoting Int’l L. Evan J. Wal- ¶ technology 4. It was still a new Eli J.A. 477 contracting with acid waste such however, 1930s, production late dump in the MeColl, engineer, to Shell a former Fullerton, mas- nowhere near sufficient property at real the waste site”). (“the quantities the United States and fifty sive Over MeColl California prosecute need to the war. allies would later, and the United California years compensation obtained States Government, act- In 1942 and Comprehensive to the pursuant Corpora- through Supplies the Defense Compensation, Response, Environmental (“DSC”) con- entered into tion (“CERCLA”), 42 U.S.C. Liability Act tracts with the Oil Companies. cleaning up for the costs of seq., § 9601 et (primarily three- long-term contracts were Companies filed The Oil the MeColl site. from the year) purchase avgas contracts to Claims, argu of Federal suit the Court refineries in Southern Cali- require the Gov avgas contracts ing fornia, enabled the Oil and indemnify them for the CERC ernment to refining facilities needed to the new build Federal Claims The Court of LA costs. high levels of vital to produce the summary in favor of the judgment granted effort. the war Compa and denied Government signed, contracts were At the time the summary judgment. Shell nies’ motion for war- exercised substantial the Government 108 Fed.Cl. v. United Oil Co. every almost regulatory control over time ”). (“Shell (Fed.Cl.2013) Decision Remand industry. It had petroleum of the aspect require contracts Because the product or- authority impose obligatory Compa to reimburse companies, noncompli- with private ders on “charges,” nies for their CERCLA or Gov- subject to criminal sanctions ance respect reverses with breach court Training See Selective ernment takeover. liability. of Federal The Court 1940, No. 76- Act of Pub.L. and Service however, determined, correctly Claims (1940). 885, 783, 720, 9,§ 54 Stat. ch. preclude disputes material factual accepted obligatory such Facilities that damages, summary judgment on granting govern- prioritize orders had to product remanded for accordingly that issue is and all above military ment trial. 1941, 31, May Pub.L. Act of contracts. (1941). 157, To 77-89, ch. 55 Stat. No. Background raw facilities relied on scarce the extent II and the I. War World materials, regulate could the Government Avgas Need for continuing produc- to ensure supply chains Id.; War Powers fuels, see also Second high- tion. to other available Compared 199, 77-507, 1942, ch. No. Act of Pub.L. fly faster avgas enabled aircraft octane (1942) (authorizing § of climb 56 Stat improved rates higher, and with any material or President to allocate capacity. It carrying higher payload and “in the interest facility necessary public refinery critically most needed was “the defense” the national promote II and to during War product” World needs country’s defense whenever States’ war effort.2 essential to the United Guerre, de ing Power as a Munition of navies Int’l & the transformation "At least since (1992); W. L.Q. see also John Comp. early twentieth diesel fuels in the from coal to Ide, History A Frey & H. Chandler availability petroleum century of sources of (1946), War 1 powers Administration recognized by great Petroleum products been has II, ("World War available at Evan J. their national interest.” as vital to oil.”). end, Wallach, beginning was a war of Occupy- an The Use Crude Oil shortage would create such materials authority ment’s substantial to control facilities). production only existing extended to facil- ities; it could not force companies to in- regulatory The Government entities See, vest in new e.g., ones. An Act to most relevant to the contracts were Expedite National Defense and for Other (1) the of Petroleum Office Coordinator for 76-671, Purposes, Pub.L. No. ch. (“OPC”), replaced National Defense later (1940) (authoriz- 8(b), 54 Stat. by the Petroleum Administration for War (2) Secretary (“PAW”), Navy to nation- the Office of Production (“OPM”), operate “any alize and Management existing later run manufac- replaced by then turing plant facility necessary the War Production for the (“WPB”). Board The WPB and PAW national defense” when certain conditions January were created in met) and December were (emphasis A further 1942, respectively. The primary WPB had stumbling block for the Government was authority procurement over war pro- Army contracts with the and the duction, and cooperated with the PAW to Navy subject were to annual Congres- determine petroleum requirements and set appropriations sional and thus limited to priorities national for supplying petro- one-year term. one-year Such con- industry. Subject leum to the direction of provide tracts did not long-term secu- WPB, charged the PAW was with en- rity necessary justify Compa- the Oil suring “adequate supplies petroleum of for nies’ investment new facilities. military, or other essential uses” and “[e]f- light limitations, of these the Government fectfing] proper distribution of such DSC, turned to the government-owned amounts of materials.” Exec. Order No. corporation authorized to acquire critical 9276, (Dec. 10,091, 10,092 Fed.Reg. 4, strategic materials, including avgas. 1942). The “PAW told the refiners what subsidiary The DSC was a of the Recon- make, make, how much of it to and what struction Corporation (“RFC”), Finance quality.” Frey John W. & H. Chandler government-owned another corporation. Ide, History A the Petroleum Adminis- of designation in 1941 of avgas as a (1946), tration War 219 available at for critical material enabled the RFC and its J.A.1917. sell, buy, subsidiaries to produce avgas Days Harbor, after Pearl the Govern- and to make companies loans to to con- recognized ment the need to quickly mo- struct avgas production facilities. See Act bilize avgas production, with the OPC 25, 1940, 76-664, June Pub.L. No. “ ch. essential, stating: ‘It is in the national 427, 5(1), (codified § 572, 54 Stat. at 15 interest supplies that the grades of all (1940)). § U.S.C. 606b After purchasing gasoline aviation military, for defense and avgas from the Oil Companies, the DSC essential civilian uses be increased imme- resold it to Army Navy and the at the diately to the maximum.’ J.A. 498-99 (or national price established the PAW 16) (quoting OPC Recommendation No. OPC). predecessor, (emphases Then-existing facili- ties could not produce 1943, Between required 1942 and Compa- levels Oil of avgas, necessitating construction of ad- nies entered into contracts with the DSC However, ditional facilities. the Govern- agreeing to sell quantities vast of avgas.3 avgas At least some provid- of the píete contracts such quickly possible. construction as See, ed Companies for loans expand (1942 to the Oil e.g., contract) Shell facilities, avgas production required (promising expan- "maintain work on the to use day “best efforts" to com- night”). sion (“the delivery [avgas]” new or addi- for price a base set forth The contracts E.g., J.A. 111 charges provision”). tional negotiated avgas, which was each barrel added). These (emphases price-adjust- on the each refiner based individually with Compa- ensured the Oil ment mechanisms price The base costs. production refiner’s loss-making not be forced into nies would goal permitting calculated with control, factors outside their activities and 7%. of between 6% profit estimated an and trans- the costs of materials such as subject the Rene- further Profits were or unforeseen Government-im- portation, required con- Act of which gotiation thus charges. contracts posed profits to Gov- repay tractors to excess costs, manufacturer of his “assured the 77-528, ch. Pub.L. No. ernment. profit.” J.A. 1996 a fair but moderate plus (1942). 56 Stat. (statement Legal of the Chief Counsel margin, profit the low Given Appropriations the House the PAW to various concessions contained Committee). three-year They were Companies. and the negotiation During contracts, some measure providing thus followed, pri- the Government’s years that newly-constructed avgas certainty that the avgas produc- maximum mary concern was over pay would off facilities production directed the Oil tion. The Government They also contained cost-allocation time. extraordinary Companies to “undertake Companies’ risk to limit the Oil measures often unec- which were operation modes of instance, time of unanticipated For at the avgas. onomical and producing [avgas] con- entry into their refiners’ was sub- price agreed-upon base example, the PAW 514. For tracts.” J.A. adjustment depending on ject to purchase companies ordered sometimes costs, including price supply their normal raw materials outside materials, and the other raw crude and avgas produc- maximum chain to achieve The con- of raw materials. transportation Aviation Gasoline Reimburse- tion. The DSC, to Buyer, required also tracts the Government required ment Plan taxes, fees, or existing pay “any now op- costs of such uneconomical assume the Compa- upon Oil charges imposed [the erations. manu- production, by reason of the nies] the Oil Com- arrangement between facture, delivery of storage, [av- sale or coopera- was a and the Government panies contract) (1942 Shell gas].” E.g., J.A. Companies in which Oil tive endeavor (emphasis goal to achieve the Government’s worked Relevant to the CERCLA maximizing avgas production case, required another subsection the risks of such assumed Companies for to reimburse the Oil DSC Companies The Oil production. increased taxes, fees, or “any new or additional bargain: avgas up their end of held Companies] Oil charges, ... which [the over twelve-fold production increased state, by any municipal, may required 40,000 per day barrels approximately 514,000 day law in the United States per or federal barrels 1941 to December reason to Allied success country pay by to collect or and was crucial foreign manufacture, in the war.4 sale production, war, was dissolved and the RFC avgas production the new 4. After the questionable; all relevant facilities’ usefulness was the RFC transferred which time dropped to consumption in the United States Ser- obligations to the General liabilities time, however, 70,000 day. Over barrels a Reorganization vices Administration. Companies new uses for identified the Oil (1957). Stat. 647 1 of Plan No. The DSC was dissolved these facilities. Avgas II. Production and plant). By the fertilizer late 1944 and

Waste Products Companies were unable to reuse the vast spent alkylation amounts of ordinary of an Avgas gasoline consists refineries, acid at their own ultimately base, petroleum blended with distillates dumped much of it at the McColl site. Alkylate and chemical additives. is the Although dumping burning acid waste (at prevalent most additive an amount of war, were common before the the lack of 40%) produced by alkylation, 25% to and is reprocessing transportation facilities and a process purity that uses 98% sulfuric (and options resulting bottleneck of acid catalyst. acid impor- Because of the waste) dumping necessitated and burning effort, tance of to the war the WPB larger quantities of acid waste than ever directed most available sulfuric acid to av- before. gas production. dumped waste at the

Spent alkylation acid byproduct is a McColl site from 1942 shortly until after alkylation, and has a lower acid content the war ended. Approximately 12% of the than sulfuric During acid. the relevant acid, waste spent alkylation was and anoth- period, time spent alkylation acid could be er 82.5% (1) was acid sludge resulting from reprocessed to its former 98% acid chemical (2) treatment of petroleum other percentage, process used to pe- other products. remaining troleum 5.5% was products, like motor acid gasoline and (3) kerosene, sludge arising from treatment of Govern- discarded as waste. benzol, ment-owned Treating petroleum other which the products Govern- with spent ment was held alkylation liable in the acid further diluted CERCLA liti- gation. Only (i.e., acid content until it became non-benzol waste sludge,” “acid spent alkylation which had acid levels of acid and the between 35% and remain- sludge) 65%. acid is at issue in this case. Shell contributed most of the acid waste at Predictably, success the McColl site—at least 60%. ARCO in increasing avgas production resulted in 20%, contributed 10% to and also relied on a corresponding increase in sulfuric acid disposal methods, burning. such as consumption, which increased five-fold dumped Texaco no until waste almost the from 1941 to 1944.5 reprocess Facilities to war, end of the and instead burned its acid spent alkylation acid did not increase sludge waste until late 1944. Some of apace, however. The Government twice Union sludge Oil’s reprocessed rather applications refused to construct new acid than dumped. facilities, processing and one of the facili- ties that did exist Allies operate victory Europe failed to achieved at its on 8, design May capacity. Moreover, Japan 1945. officially the scarcity of surrendered 2, (and September available 1945. railroad tank cars United States WPB’s Government no longer required refusal to make transportation huge quantities acid priority) avgas, waste a meant the terminated the Oil Com- panies avgas were unable contracts 1945 or transport soon thereafter. acid sludge for reprocessing or other uses. III. McColl Litigation CERCLA (acid J.A. 565-66 sludge could be used as fertilizer, but the scarcity of railroad tank years later, 1991, Over 45 the United prevented cars transporting acid sludge to States and brought California a CERCLA 5. The increase in sulfuric acid use did processing that used far less sulfuric avgas production match the increase in be- previously acid than had necessary. been Companies cause the Oil discovered a method Litigation recov of Federal Companies the Oil IV. Court Claims against action site. cleaning the McColl up the costs of er of Federal entered The Court Claims Companies, held district court the Oil summary judgment of the Oil favor jointly and sev parties, were among respect con- Companies with to breach of they waste erally liable for acid liability holding damages, tract site, States dumped at the McColl United required was to reimburse I), F.Supp. {Shell v. Shell Oil Co. Companies for 100% of their non- the Oil (C.D.Cal.1993), then allocated but costs. Co. v. benzol CERCLA Shell Oil cleanup to the Govern 100% of the costs States, (2010); 439, 442 United Fed.Cl. “arranger” disposal, as an ment States, v. Shell Oil Co. United 93 Fed.Cl. (Shell II), v. Shell Oil Co. United States (2010). appeal, On court found this (C.D.Cal.1998); F.Supp.2d presiding judge trial had a conflict of (ex 9607(a)(3) (1994) 42 U.S.C. see also arising from own- interest his wife’s stock “any person tending liability parent com- ership Corp., Chevron contract, agreement, or otherwise who pany plaintiffs-appellants Texaco treatment, ar disposal for arranged Oil. Shell Oil Co. v. United Union transporter transport for ranged with for (Fed.Cir.2012). 672 F.3d Be- treatment, hazardous sub disposal or judge’s himself cause the failure to recuse stances”). affirmed the The Ninth Circuit error, harmless court vacated was not liability, but reversed the Companies’ Oil with that the and remanded instructions States, holding the allocation to the United reassigned judge. to a case be different “arranger” States not an Id. acid the non-benzol waste. United States remand, the Court of Federal Claims On (Shell III), Oil Co. Shell summary judgment in favor of the granted (9th Cir.2002) (“No court has Decision, 108 Shell Remand Government. arranger party who imposed liability on at 422. It three Fed.Cl. held there were possessed, owned or and never had never Compa- why reasons independent duty dispose any authority to control or were not entitled to reimbursement nies issue.”) (in of, the hazardous materials First, it held under the contracts. quotation and citation omit ternal marks costs incurred the CERCLA ted). “charges” were within Companies meaning of the new additional remand, court Following the district Id. at in the contracts. breach of transferred Second, required even if of Fed- contract counterclaim to the Court reimbursement, found the Oil court § 1631. pursuant Claims to 28 U.S.C. eral any valid claim when Companies released voluntarily The Oil dismissed “all oth- were terminated and the contracts Complaint preju- the transferred without were settled in the mid-to-late er issues” dice, their reme- exhausted administrative Finally, the court held 1940s. Id. 436. with the General Administra- dies Services other- Companies if the Oil had that even to the Settlement pursuant tion Contract based on valid indemnification claims wise (“CSA”), 78-395, Pub.L. No. Act of contracts, Anti-Deficiency (1944) (codified at 41 ch. 58 Stat. 694 Id. at such indemnification. Act barred (2006)), seq. § and filed a et U.S.C. 437. in of Federal Complaint new the Court Claims, of Federal Claims denied seeking for The Court reimbursement judg- summary motion Companies’ for costs. Oil CERCLA promise ment for reason that there the additional reimburse- over disputed taxes, were facts how much of the ment or “any for new additional at the fees, non-benzol waste McColl site was charges” or imposed the Oil Com- of’ the Oil dumped “by reason panies, exceptions with certain not rele- manufacture, “production, sale or delivery” E.g., para- vant here. The two J.A. 446-48. avgas. Id. at graphs following provision require “any pay existing Government to now tax- Companies timely The Oil filed this ap- es, fees, charges,” or and describe the peal. jurisdiction pursuant This court has obligation Government’s the event of a 1295(a)(3)(2012). to 28 U.S.C. disagreement regarding the contractor’s exemption. Discussion entitlement to an E.g., (with provide 111-12. The avgas contracts appeal, Companies On challenge some insignificant wording variations independent each of the three bases for brackets): marked in They the trial court’s decision. further genuine contend no dispute there is that Taxes.

they are entitled recover 100% of the (a) Buyer pay [ shall ] addition to non-benzol CERCLA costs. Each argu- prices established [Sections IV ment is in turn. addressed Payment” hereof V] [“Price clauses], any “Price Escalation” new or This court reviews the Court of fees, taxes, charges, additional or other Federal interpretation Claims’ contract de income, profits, than corporate excess or novo. Ford Motor Co. v. United taxes, franchise may which Seller (Fed.Cir.2004). 1314, 1316 “Sum required by municipal, state, any or fed- mary judgments also receive plenary re eral law the United States or view, appellate tribunal applying the foreign country collect or pay by rea- court, same criteria as did the trial with all manufacture, production, son of the sale justifiable factual inferences drawn in fa delivery of the commodities delivered vor of the non-movant.” Id. (citing Buyer pay any hereunder. shall also Liberty Inc., Lobby, Anderson v. 477 U.S. petroleum, such taxes on crude or the 242, 255, S.Ct. L.Ed.2d 202 thereof, transportation to the extent (1986)). such taxes result in increased cost of the I. Avgas Require Contracts Re- commodities delivered hereunder not Compa- compensated by

imbursement [Section hereof. V] nies’ CERCLA Costs (b) Buyer pay [ ] shall also in addition prices as established in [Sections parties dispute meaning hereof, any TV and now existing V] tax- “charges” as it appears the new or es, fees, or charges by measured additional charges provision. The Oil volume or price sales of the aviation contend is broad indemnifi- hereunder, gasoline imposed delivered provision designed cation to reimburse the upon production, Seller reason of the Oil Companies for all Government-imposed manufacture, storage, sale or delivery of “costs,” “expenses” including such gasoline, Buyer unless or Seller response costs. The Government claims tax, given entitled to from a exemption plain language the contract and charge Buyer’s fee or gov- virtue contemporaneous wartime contracts status; it being show that ernmental understood cleanup environmental costs are “taxes, fees, charges” Buyer Buyer as contem- now believes both plated by contracts. and Seller are to such exemp- entitled taxes, ity, especially one .that relates represents prop- that to real tion. Seller in this Id. at erty.” interpreta- referred to 432-33. Such an fees tion, found, in its not been included the trial paragraph have court was consistent prices on which the computation of costs with the noscitur a sociis canon of inter- “ IV] hereof are set forth which ‘counsels a pretation, [Section that word given precise by based. more [be] content (c) which neighboring words with it is associ- cannot If case [ ] ” “ (holding ‘charges’ ated.’ Id. as to or agree question whether exemp- ‘given precise more content’ Buyer [should] or is entitled to Seller ”) (internal tax[, a fee or given charge ] tion from ‘taxes’ and citation omit- ‘fees’ status, ted). Buyer’s governmental virtue of upon Buyer shall be to ob- the burden of The Court Federal Claims found writing duly a from a ruling tain supported textual nar- multiple signals governmental authorized constituted and interpretation “charges” an row as en- authority exemption. tax as to such Un- (1) provisions or cumbrance lien: are ruling Buyer til such is obtained shall (2) “Taxes”; they entitled sometimes use tax to the amount of the Seller or pay ” “umbrella identifier ‘such taxes’ or appropriate collecting agency tax “‘taxes, fees, id.; or charges,”’ refer arrangements with satisfactory make “ (3) fees, ‘taxes, the exclusions from agency. tax collecting such ” taxes,” charges’ types “specific or are “ (Shell contract, 1942); 10, Apr. 111-12

J.A. ‘income, i.e., profits, corporate excess (Shell ” contract, 1943); 1,May J.A. 136-37 taxes,’ franchise id. (Union 31, contract, 156-57 Oil Dec. J.A. appeal, Companies argue that On 1942, numbering); different section J.A. interpreted to mean “charges” should be (Union contract, 1, 1943); May 179-80 “costs,” including Appel- CERCLA costs. (ARCO contract, 1942, Feb. J.A. alia, Br. 20-21 inter Black’s (quoting, lants’ (c), in section different language bracketed (9th ed.2009) Dictionary Law (ARCO labeling); J.A. paragraph 227-28 ex- (“charge” “[p]rice, means cost or contract, Feb. bracketed lan- (3d Dictionary Law pense”); Black’s (Texaco (c)); in section J.A. 254 guage ed.1933) expenses means (“charges” “[t]he contract, 17, 1942, language Jan. different incurred, which have been or disburse- (b), in subsection different section number- made, contract, in connection with a ments paragraph labeling); 278-79 transaction”)). suit, According or business (Texaco contract, Feb. different addi- Companies, the “new or (b)) add- language (emphases subsection taxes, fees, charges” tional mentioned term). disputed toed “clearly to differ- refer whole, “Reading relevant clause as a classes of whereas encum- payments,” ent ‘Taxes,’ title, including the the Court (as the trial inter- or liens court brances in- plainly found “it Federal Claims “charges”) payment, not refer preted do price-adjustment mechanism tended as often obligations “but rather burdens Companies were as- in the event the Oil usually pur- property, attached to unanticipated sessed additional or taxes Appellants’ pose securing payment.” production.” their avgas a result of Shell Br. 27. (em- Decision, 108 Fed.Cl. at 432 Remand apparently agrees nar- “fairly It accorded a phasis “charges” interpretation trial court’s in- meaning” “charges,” row tax-related encumbrance, incorrect. It does not defend Court “an terpreting to mean lien, interpretation liabil- Federal or other like financial burden or Claims’ lien,” “charges” “an or common or meaning “charges” encumbrance but as “costs “ ‘charge’ plainly instead con- expenses,” states because Government’s paid privi- notes an amount receive a proposed own definition accords with that lege, product, Appellee’s or Br. service.” meaning, interprets “charges” this court argues charges 29. It nonetheless cannot mean “costs.”7 “costs,” part mean because another of the The Government argues nevertheless “costs” in a contracts uses different “charges” cannot include CERCLA (citing 111 (“Buyer context. Id. at 23 costs, “the word ‘charge’ appears because pay any shall also such taxes on crude CERCLA, with nowhere the exception petroleum transportation thereof, or the ‘person its use the context of the extent such taxes result increased 9603, 9604, §§ charge,’ U.S.C. and one cost of the commodities delivered hereun- party ‘sought discussion of a to be charged’ der.”)). The Government contends this damage.’ ‘natural resource 42 U.S.C. parties “necessarily shows the ascribed dif- 9607(f)(1).” Appellee’s Br. 29. The meanings charges [words ferent to the Government further observes that “the Id. costs].” appellate district court and CERCLA It pro- is unclear how the Government’s underpinning wholly cases this matter lack posed charges definition of as “an amount (with ‘charge’ exceptions word paid to privilege, product, receive a or here), argues relevant that “one need plain service” differs from the meaning of look no further than those cases to deter- Dictionary “costs.” See Black’s Law 397 mine that response the CERCLA costs (9th ed.2009) (defining “cost” as “[t]he here have not been held to be ‘charges’ amount paid charged or for something; any under definition of that at term.” Id. price or expenditure. Cf. Expense”). 31. Moreover, argu- the Government’s earlier Contrary to the ar Government’s ments to the Federal Court of Claims con- guments, “charges” CERCLA costs are ceded that the new additional charges meaning within the of the relevant con (with provision covers costs excep- “new provision: tract The avgas contracts here) pertinent imposed tions not by au- promise “any reimbursement of new thorities at level of ‘by charges” additional the Government reason of production, manufacture or ’6 imposes Companies on the “by [avgas].” sale of reason Defendant’s Motion to manufacture, production, of the at sale or de- Complaint Dismiss the Shell Oil Co. See, (em- (2010) livery [avgas].” e.g., 93 Fed.Cl. 153 J.A. 111 (No. 06-CV-141), phasis ECF No. 7 (emphasis is a federal law omitted). added) (citation In light requiring responsible parties to pay the proposed 6. Even "charges” if the Government's defini- definition of as an encumbrance "costs,'' synonymous plainly tion is not with Dissenting Op. lien. By at 1305. never- liability includes CERCLA costs: "[T]he costs concluding theless that the new or additional " at 'amount[s]' issue were only provision covers 'Taxes' and service[s],’ 'paid specifically to receive ... 1305-06, items,” id. tax-related the dissent removal of hazardous substances from gives parties' no effect to the inclusion McColl Site and remediation of their effects.” Constr., "charges” provision, in that Metric Reply Br. 4. Admin., Space Inc. v. Nat’l Aeronautics & (Fed.Cir.1999) ("Courts prefer meaning. The dissent different offers no It interpretation gives ... an of a agrees application with the trial court's effect interpretation, to all its terms and leaves no noscitur a sociis canon but adopt appear meaningless.”). does not trial court’s action,” argues The that the as- 112. Government or remedial of removal “costs added), 9607(a)(4)(A) the sociation in ARCO contracts between (emphasis U.S.C. cost) fees, “taxes, (i.e., by charges” “govern- or a imposed charge a is thus authority” finding of the mental tax necessitates plain language law. The a federal “charges” imposed limited to taxes charges provision thus additional new or contracts, other six indemnify by to such bodies. The requires Government however, a only imposed by in- refer to taxes costs Companies for CERCLA authority,” omitting “governmental contracts. tax “by of’ curred reason any charges. To the extent con- for exactitude fees Government’s search language, can from such point. clusion be drawn context is beside the CERCLA charges” “fees express of or exclusion argues that other tex- The Government suggests that the in most of contracts re- in the tual indicators recognized fees and taxes were not parties limiting scope indemnification. quire by imposed limited to tax authori- taxes instance, addi- argues the new or For ties.8 only to charges provision extends tional “duly imposed by constituted charges Moreover, contrary no conclusion tax governmental authorities].” authorized reconciled with the new or addi could be (internal quotation Br. marks Appellee’s issue, which charges provision tional omitted) (modification origi- and citation applies charges “required expressly nal). ... tax au- “duly constituted state, in the any municipal, or law federal para- is located two thority” language country,” any foreign States or charges after the new or additional graphs clearly limited to laws enforced and is not when “the and addresses provision, (emphasis by tax authorities. J.A. Buyer or agree ... whether cannot added). interpret the contract “We must exemption ... vir- is entitled to Seller meaning to all of gives in a manner that (“the Buyer’s governmental tue of status” and makes sense.” McAbee provisions See, 112. provision”). e.g., J.A. exemption Constr., Inc. v. United cases, upon “the burden shall In such (Fed.Cir.1996). It make would from a ruling writing a Buyer to obtain weight to give determinative little sense govern- duly constituted and authorized separate provi in a phrase appears a exemp- authority as to such mental tax contracts, and sion, minority in a (emphasis tion.” J.A. scope plain contradicts the which a proposing After language. exemption provision is not relevant relevant meaning “charges” that includes Only meaning “charges.” broad proper to the costs, has the Government exemption provisions the contracts’ two of contracts) of the contract portions that other (the exemption shown refer to ARCO indemnify- from the Government tax, e.g., exempt J.A. “given charge,” a fee costs for CERCLA only 207; contracts refer remaining of the contracts.9 tax,” imposed as result given e.g., “exemption from "taxes, referring charges” as fees and text contend Nor does the Dissenting Op. at 1304-05. taxes.” See differ- "such should be construed ARCO contracts former, Supreme respect With to the ently contracts that lack than placed recently emphasized that it "has "charges” imposed by a tax au- Court reference titles, especially weight headings and thority. on” less appar- when their “under-inclusiveness LLC,-U.S.-, Lawson v. FMR great weight on other ent.” places dissent 9. The 1158, 1169, (2014). L.Ed.2d 158 including signals,” S.Ct. the title "textual heading the "fees” ("Taxes”) omits portions Because the "Taxes” and other argues required The Government nevertheless Motor Co. reimbursement of “al- “ costs,” indemnification is improper including because lowable destruc- ‘loss or promise pay damage property may new additional tion of or arise encompass out perform- cannot' environmental of or connection with the (“[T]he contract,’ liability. ance the work Appellee’s Br. 18 under this which this court any language lacks held covered CERCLA ‘Taxes’ clause that Co., liability. Ford Motor F.3d at could construed cover environmental 378 1319. resulting compa remediation from the oil waste.”). own to dump nies’ decisions acid argues avgas The Government con argues It contracts are distin tracts contain neither a “hold harmless” II guishable procure from the World War DuPont, provision, as in nor an “allowable ment contracts in DuPont and Ford Motor provision, costs” inas Ford Motor Co. As Co., required where this court CERCLA concedes, however, the Government “no indemnification. See E.I. Du Pont de ‘special required words’ are to create a States, Nemours & Co. v. United 365 F.3d promise of Appellee’s indemnification.” (Fed.Cir.2004); Co., 1367 Ford Motor 378 Br. (quoting 37 Corbitt v. Diamond M. provi 1314. The indemnification Co., (5th Drilling 654 F.2d Cir. DuPont, sion in for example, agreed “‘to 1981)). While it is true that language loss, hold against any [DuPont] harmless in contracts differs from the expense (including expense litigation), language contract in DuPont and Ford damage (including damage to per third Co., Motor portions the relevant of the death, bodily sons because of injury or latter contracts also differed from one an property injury destruction or other question other. The proper is whether ” wise) whatsoever,’ kind as long as the avgas require the Govern performance the loss resulted under ment pay CERCLA the contract did not result from the charges. Indemnification is required by negligence corporate of DuPont officers or promise the contracts’ pay “any” representatives. DuPont, 365 F.3d at government-imposed “charges” incurred (citation omitted) (emphases re “by contracts, reason of’ the and it moved). This court held DuPont’s “hold is immaterial whether new or addition “ provision harmless” an ‘show[ed] intent provision al charges pro identical to the possible to allocate all among liabilities visions DuPont and Ford Motor Co. ” “

parties,’ and that liability ‘CERCLA must be among included the future un argues The Government further the new known liabilities which the parties provision allocat or charges additional “does not ed between themselves.’ Id. at contemplate indemnity for damages sound- (quoting tort,” N. Atochem Am. v. United require therefore cannot Elf States, (E.D.Pa. F.Supp. Appellee’s indemnification. Br. 1994)). procurement It Ford relies on a statement DuPont "charges” Moreover, (1947)). are also reciting addressed aside from charges new or provision, reasoning, additional it is un- trial court's the Government’s " der-inclusive. It is 'but a briefing shorthand rely refer- this court did not on title general subject clause, ence to the matter’ of the of the "Taxes” nor on the references

provision, place ‘not meant to take the portions of the to "such taxes.” Like " provisions above, detailed of the (quoting text.’ Id. the contract discussed these textual Co., Trainmen v. & plain scope Balt. Ohio R. 331 U.S. indicators do not alter 519, 528, charges provision. S.Ct. 91 L.Ed. new or additional argues pro- these contracts from the doctrine evolved that “CERCLA DuPont, 365 vide that the new or “powerful common law nuisance.” evidence” Contrary to the Govern- F.3d at 1373. provision “[was] additional never requir- supports DuPont argument, ment’s indemnity the sort provide intended to indemnification this case. ing CERCLA Appellee’s companies the oil seek.” DuPont, argued the the Government Br. 26. “hold harmless” did contract’s The Government has not established require reimbursement for CERCLA ambiguity provision, in the in the relevant liability CERCLA was fore- because rely which it improper absence of was en- at the time the contract seeable Bank, evidence. See Coast Fed. extrinsic rejected tered into. Id. This court FSB v. holding was “no basis in argument, there (en (“If (Fed.Cir.2003) banc) provisions the reading law a limitation of foresee- the for unambiguous, they are clear and must be contract, ability” “evi- into which given plain ordinary meaning, their indemnification was denee[d] may and we not resort to extrinsic evi- claims, all foreseeable or not.” available for them.”) (internal quota- interpret dence to alternative, the DuPont court Id. omitted). tion marks and citation The noted Government’s concession that unpersua- is also argument Government’s liability nuisance would have been foresee- sive in the DuPont since taxes clauses able, and observed that “CERCLA evolved are and Humble contracts not same as from doctrine of common law nui- charges provision or additional new sance.” Id. The Humble and Du- avgas contracts. DuPont, avgas As contract’s new promise for Pont contracts reimbursement requires charges provision or additional taxes, applicable proper and other “[a]ll for even unforeseeable reimbursement 850, charges,” “any applicable J.A. charges. provision in Du- The relevant Federal, taxes, State or local assessments new additional Pont made no mention of or They charges,” respectively. J.A. 889. to en- charges, yet was nonetheless found gov- do not “new or additional” extend to compass liability. unforeseeable CERCLA are, fact, ernment-imposed charges, and avgas to reimburse promise contracts’ contract’s analogous more to for “new or additional” must simi- “any tax- promise pay existing for now claims, larly to “all extend foreseeable or es, fees, 111. The charges.” See J.A. DuPont alter- not.” See id. The court’s pro- contracts thus Humble and DuPont reasoning, liabili- native based on nuisance the otherwise vide no reason to narrow ty, interpretation is irrelevant meaning the new or additional plain charges provision. new or additional charges provision. contempo- offers other Government assuming provision the taxes Even evidence raneous contracts as extrinsic contracts ex- the Humble and DuPont charges provi- new additional liability, it is coex- tends to CERCLA require indemnifi- sion does clause. with the “hold harmless” tensive cation. It relies on Government contracts arising applies The latter losses with Humble Oil and DuPont that contain it or not property, destruction of whether prom- clause and a both “hold harmless” the for- imposed, whereas taxes and applicable ise to reimburse Government-imposed (Humble applies mer 889-90, charges. See J.A. 898-99 1944); 845, property or not loss to 1, charges, whether 850 Oil contract June 1940). (DuPont the tax- incurred. Because otherwise contract Nov. Admin., the “hold harmless” & pro Space es Inc. v. Nat’l Aeronautics (Fed.Cir.1999) indemnification require vision for different F.3d (quoting risks, appear the fact that both types States, Corp. Mfg. Hol-Gar v. United (Ct.Cl.1965)) not render (“‘[T]he the same contract does either F.2d lan “ redundant,’ provision ‘superfluousf or ] guage of a contract must be given that Appel contends. the Government meaning that would be derived from the Br. (quoting Grp., Medlin Constr. lee’s by reasonably intelligent person contract (Fed. v. Harvey, Ltd. 449 F.3d acquainted contemporaneous with the cir Cir.2006)). ”). cumstances.’ World War II and- the stark necessity avgas produc increased Finally, to the extent extrinsic evidence tion are the surrounding circumstances considered, confirms that the formation of the contracts. The “charges” mean intended “costs.” See Envt’l, Government was in a position of near- TEG-Paradigm Inc. v. United authority refineries, (Fed.Cir.2006) complete existing over Bank, 1040) cooperation but (citing needed the Coast Fed. production to construct (“Although may new facilities to extrinsic evidence not be extraordinary an meet the interpret unambiguous avgas. used demand for provision, Companies agreed we have looked to it The Oil to confirm parties profits that the intended for the term contracts’ low in for to return the its plain ordinary have and meaning.”). assumption Government’s of certain risks parties Communications between the Companies’ used outside the Oil control. See “charges” “costs,” interchangeably with supra Background re- I. Part The CERCLA (1) to, ferring inter alia: “the charges estimated in this case are one such risk. materials,” (2) charge for raw “[finvest- The Oil could have contem (3) ment charges,” charges,” “interest and plated such charges CERCLA at the time (4) (em- charges.” “overhead J.A.1955-56 they contracts; indeed, entered into the (a added); phases see also J.A.1964 letter dumping the acid waste at the McColl site from Standard Oil to the stating PAW expressly permitted. was J.A. proposed “this charge (Eli ¶492 additional for tank permit McColl had a from the car tank shipping or truck quite reflects waste.). City dump of Fullerton to the accurately the additional cost to Seller and These circumstances confirm that the new Suppliers its of tank car or tank truck charges or provision additional must be shipping compared barge with and interpreted require to reimbursement for added).10 (emphases tanker shipping”) Companies’ the Oil arising CERCLA costs usage This confirms that parties the in- avgas production. The Court Fed tended the or charges pro- new additional holding contrary eral the Claims’ vision extend to Government-imposed accordingly reversed. costs, such liability. as CERCLA II. The Court Federal Claims Erred context which the contracts were in Holding Companies’ the Oil Con- simply formed further confirms that the tractual Claims Were Released charges provision new additional re- quires reimbursement of the Court Compa- of Federal Claims denied Constr., nies’ CERCLA costs. See Metric reimbursement claims objects objected-to helpful The United States this the material is for context 10. Appendix pages material located at Joint background, this court nowhere accords and 2011 to which was not weight. it determinative Although court before trial in this case. A.R.S. they (quoting were den. Id. at 35 Inc. reason the additional for (1962)). States, 71, 76 contracts were Ct.Cl. released when in the mid-to-late and settled terminated responds that The Government the new stipulated in the parties 1940s. The additional did not “re- con- litigation that expiration main force after termi- or, in in 1945 terminated tracts “were contracts,” nation of the “[s]uch [ARCO], shortly thereafter. case of Ap- inferred.” permanence should relating to from these profits Matters 23; Br. pellee’s (quoting see also id. Con- contracts, costs, and all other termination Ice v. United sumers Co. concerning these contracts were issues (Ct.C1.1973) (describing “a 1166-67 late parties settled between into a judicial parties reluctance lock 640. 1940s.” J.A. long given rights obligations set of Federal Claims relied The Court of periods without some clear or indefinite reasoning Ford Motor Co. DuPont and actually that this intended indication Companies’ claims did not parties”)). stipulation parties’ and settlement the termination survive release, adequate prove Govern- avgas contracts. In both underlying contends, stipulation ment because Co., Ford this court DuPont and Motor that ‘all other issues concern- “admits no contrac- held there was release ing these were settled between indemnification claim because tor’s late Appellee’s in the 1940s.’ underlying terminating the agreement ¶ 609). (quoting Br. 43 expressly War II contract reserved World of Federal The Court Claims DuPont, claims. future indemnification holding Government met erred 1370; Co., F.3d Ford Motor at prove “Once the facts release. burden case, party neither established, the defendant of breach are Companies’ the Oil termi- could locate pleading proving of and has burden agreements, the Court of Fed- nation and legally that excus any affirmative defense Compa- that “the Oil eral Claims reasoned E. Stockton Water Dist. performance.” es argument no or nies have offered evidence (Fed. States, 1344, 583 F.3d 1360 v. United this and ‘settle[ment]’ ‘termination’ Cir.2009) (internal quotation marks and ci way gener- material from a any differed in omitted); see R. Ct. Fed. Cl. tation also Decision, 108 al release.” Shell Remand 8(c)(1) (“In a pleading, to a responding at Fed.Cl. 436. any avoid affirmatively must state party appeal, Companies argue the Oil On defense, ... including ance or affirmative stipulation says nothing at all about “[t]he release.”). proving of burden “[T]he a re- Companies executed whether the Oil validity is on applicability and of release otherwise) (general part lease or as Inc., A.R.S. 157 at the defendant.” Ct.Cl. settlement, or execute they if did [the] upon by The facts 76. two relied release, encompassed a whether it such and settlement Government—termination claims for excepted future reimbursement its satisfy all burden claims—do ” ‘taxes, fees, charges.’ Appellants’ Br. Companies’ claims prove release of un- The contend this Oil indemnification. for CERCLA finding certainty fatal to the trial court’s Companies brought these release, general a because the Govern- “ CSA, (as defendant) which meant claims under burden ment bore ‘the and final settle “speedy equitable ensure validity applicability proving war con- release,”’ of claims under terminated meet that bur- ment a and failed to 1298 (2006) production § (emphasis part, avgas 101 least from the

tracts.” U.S.C. added), Act repealed replaced by An pursuant avgas contracts. The fact Relating Laws to Public To Enact Certain imposed that the costs were not until after Contracts, 111-350, § No. Pub.L. were does contracts terminated (Jan. 4, 2011); Stat. see also id. Companies’ bar the Oil CSA claims. 103(h) (“ claim’ means ‘[TJermination argues Government nonetheless ... claim under a war terminated parties’ settlement of all issues contract....”). postter CSA allows concerning contracts amounts to claims, mination indemnification such as general release of claims for reimburse- claims the terminat distinguish- ment. It contends ease is “ contracts, long expen ed ‘so as the Co., from able DuPont and Ford Motor diture arose on account of the contractor’s Agreements where the Termination ex- contract, performance under the pressly preserved the contractor’s indem- expenditure is not otherwise from excluded DuPont, nification claims. See 365 F.3d at payment provisions.’ Mo Ford (The Supplement 1373-74 Termination Co., tor at (quoting Houd preserved all indemnification claims and Indus., aille Inc. v. United “apparently included no termination ex- (Ct.Cl.1957)); F.Supp. see also id. date.”); Co., piration Motor Ford (“[T]he CSA explicitly contemplat (“The at 1319 Agreement Termination claims, ed later-arising period and set no limitations.”). includes all claims ‘not now known’ arising Contract.”). performance of the War Houdaille, example, involved The Government maintains is no in- there procurement World War II contract agreements dication that the settlement agreed which the Government to reim- any analogous this case include promises alia, for, burse the contractor inter to allow future indemnification claims. expenditures reasonable costs and result- Just the contract in DuPont was “no Houdaille, ing from contract termination. effect, longer in F.Supp. having supplanted by at 300. The been DuPont, terminated in contractor the Termination Supplement,” $420,212.46 “paid more in [unemployment 365 F.3d at main- contributions ex- insurance] because of its tains the this ease are perience under than it [the contract] would effect,” longer having “no sup- been only have if contribution was rate based planted by the agreements settlement on operations the of its three normal “all other Appellee’s issues.” Br. 42-44. peacetime plants.” Id. at 305. The Houd- Government, According the to the termi- rejected aille court the ar- Government’s nated and settled contracts cannot gument that authority” “there no [was] to support any claim; new indemnification reimburse costs the contract had “after a such claim to would have be based on the expired,” the finding expenses were reim- agreements, settlement which not in are they bursable because “arose on account the record. plaintiffs operation under the contract.” stipulation parties’ The “all Id. at 312. court The also held con- satisfy other issues” were settled does not tractor’s indemnification claim not was to a prove gen the Government’s burden release, by 310, making barred id. at A eral release. See J.A. 640. settlement clear that a contract termination is not parties may between two resolve all then- general case, as a In same release. this existing discharging any the CERCLA costs for issues without which the Oil Com- arose, panies now seek indemnification at all obligations parties. and between the (1940) (now (Second) § 665 revised and 31 U.S.C. Contracts Restatement 1341) 284(1) (“A (emphasis § is writing providing a codified at 31 U.S.C. release duty to the maker of the owed express provision that a an “[A]bsent or on discharged immediately release for ade appropriation an reimbursement condition.”). In of a Ford the occurrence quate payment, [the such ADA] make Co., had been example, for all issues Motor proscribes grounds indemnification on the released; settled, rights all were but not obligation it would constitute indemni- agreed allow future parties yet appropriated.” not Cal.-Pac. funds contract. 378 claims under the fication States, v. Utils. Co. United Ct.Cl. It at 1319-20. is the Government’s (1971). Chase United agree- prove settlement burden un example, plaintiff sought damages claims under the released future ments building der lease entered into with the a Inc., contracts, A.R.S. 157 Ct.Cl. at 490, 15 U.S. Postmaster General. 155 has failed es- (1894). 174, 39 L.Ed. 234 The Su S.Ct. of those settlement tablish content General preme Court held Postmaster has not The Government agreements. enter into contracts on was authorized to that the termination settlement shown only if “author behalf of the States release of general case amount law, ... by appropriation ized under an claims for reimburse- Companies’ adequate fulfil[l]ment.” to its Id. charges. new or additional The ment of no claim Because “[t]here S.Ct. erred in of Federal Claims therefore Court question under that the lease was made Companies’ contract claims holding whatever, any only appropriation were released. contract of lease inquiry is whether the law,’ the mean by was ‘authorized within Erred III. The Court of Federal Claims con (holding Id. [ADA].” of the Anti-Deficiency Act Holding law). tract was not authorized Indemnifi- Barred the Oil Claims cation of Federal inquiry at Court The independent final basis for the on whether the Claims likewise centered grant of sum- of Federal Claims’ Court provisions at issue were indemnification in favor of the Government mary judgment court, law.” Before this “authorized indemnification promise was that disagree however, amicus enough encompass future CERC- broad whether the question: preliminary liability LA an unenforceable violation ADA in the first subject DSC was (“ADA”). Anti-Deficiency Act place. argue through were funded “DSC’s provides, in relevant ADA the ADA contend appropriations,” part: Br. 39 apply. Appellants’ thus does department executive other Gov- No GAO, Govern- Reference Manual of (citing establishment of the United ernment (1945); No. Corporations, S. Doc. ment any in one fiscal expend, States shall (DSC an- “did not receive direct J.A. 420 any appropria- in of year, sum excess American nual Amicus appropriations.”)). for fiscal by Congress made that tions Manufacturers Petrochemical Fuel & year, or the Government involve (“AFPM”) the “was elaborates that DSC the obligation fu- retained borrowings and through funded of such payment money ture of excess ap- through Congressional earnings, such contract or appropriations unless lim- borrowing had no and by propriations obligation is authorized law. Companies provision. They it.”11 AFPM Br. 20. The Oil relevant maintain the au- thority granted and AFPM therefore contend that the new to the President in the provision Act, charges or additional the av- delegated First War Powers and to subject is not the gas contracts ADA. through implementing the Executive DSC 9001, Orders and authorized the av- preliminary question This the —whether gas charges contracts’ new or additional subject to the ADA—was DSC provision. Claims, of raised before the Court Federal applicabil- both assumed where the parties agree Both that Title II of the only ity disputed the ADA and whether Act, 1941, First Powers enacted in War provision the indemnification was author- granted power the “au- President the pursuant ized to the ADA. Shell Re- any department agency” thorize en- Decision, at By mand 108 Fed.Cl. 438. ter into would otherwise below, failing to raise issue this the Oil ADA, violate the “whenever he such deems Companies argument waived their that the prosecution action would facilitate the ADA is the inapplicable to DSC. See Har- 77-354, 593, the war.” No. Pub.L. ch. Inc., Corp. 1241, ris v. Ericsson (1941). 201, 838, § par- Stat. (Fed.Cir.2005). Like Court the however, disagree, ties whether the Presi- Claims, Federal this court assumes the delegated authority dent to the DSC applies ADA and limits inquiry the to in Executive Orders 9024 and In 9001. whether pro- the relevant indemnification Executive Order President Roosevelt by vision was “authorized law.” “authority invoked the vested [him] the and Constitution statutes the United Companies argued Oil before the States,” to grant establish the WPB and trial court that the ADA did not bar recov- to, the power WPB Chairman the inter ery, the new because or additional alia, policies, plans, proce- “[d]etermine by” was “authorized the First dures, and methods of several Federal implementing War Act Powers Execu- establishments, departments, agencies tive 9001. Orders The Court of procurement respect war produc- Federal “that Claims held none of these tion, purchasing, provided requisite including contracting, sources ADA waiver specifications, have and construction.” would allowed the 7 Fed. ¶ 2(b) (Jan. 1942). Reg. In indemnify Companies.”12 Shell Decision, 13, 1942, February letter, Remand 108 Fed.Cl. at 437. On WPB Chair- appeal, man then Companies delegated contend to the the au- OPC Court of wrongly required thority Federal Claims “to price determine prove them to an ADA [avgas] “waiver” when which purchased, the ca- only requires ADA pacity particular authorization for the perform refiner to RFC, 1447-48; which the DSC awas subsid- J.A. see also J.A. 1443-44 iary, capitalized (DSC $500 $6 with million in borrowed over billion and earned capital enough repay approximately stock subscribed $4.8 billion war.). primarily by but was back otherwise funded debt after 1429; earnings. and retained see also 15 (cid:127) (1940). § U.S.C. Claims, The RFC was author- 12. Béfore the Court-of Federal subsidiary ized to charter a “on such terms requisite contended also may and conditions as [the RFC] determine.” provided by authorization was the National (1940). August 15 U.S.C. 606b Defense Act of 1916 and a June 1941 amend- DSC, DSC, vesting RFC chartered with au- ment to the Shell charter Remand Decision, thority money "to borrow and issue its se- 108 Fed.Cl. at but do not raise obligations arguments appeal. cured or unsecured therefore.” these 120(a) (1946) (emphasis add- particular the U.S.C. the technical details of and ed). expressly did contract,” DSC the The CSA not mention delegated to the and ADA, this but court nonetheless rea- the other authority “to determine contracting the “bestowal of soned that [avgas] con- and form such terms any provisions authority ‘notwithstanding J.A. 400. tracts.” in chap- of law other than contained this By invoking authority authorize ter’ was sufficient to indemnifi- States,” Executive “statutes the United DuPont, to pursuant cation the ADA. to the au delegates the WPB Order although Similarly, Execu- Act the First War Powers to thority under expressly tive state Order does other provisions authorize indemnification (and, that in the Chairman of the WPB Moreover, by the ADA. barred wise DSC) turn, can expend unappropriated delegating DSC Chairman’s letter ADA, in it funds otherwise violation “the other authority to determine delegation contracting au- broad [avgas] con terms and the form such thority impliedly invokes Presi- authority to tracts” transfers authority under First Pow- dent’s War objec Contrary to the Government’s DSC. bypass ers Act to the ADA’s restrictions. does not tion that Executive Order 9024 of Federal Claims therefore Court contracting, clearly it directs the mention holding the ADA rendered erred in policies, to direct “the WPB Chairman the indemnification unenforcea- and with re procedures, methods” plans, ble. production, “to and spect procurement war argues The Government nevertheless specifi including purchasing, contracting, subject prior at all the DSC was times cations, delega construction.” This Executive Order which stated: “No authorize the indemnifi tion is sufficient to make involve agency expenditures shall the ADA. provisions at issue under cation in any contract or other Government Indeed, DuPont found that a court money obligation payment for the future provision in the was sufficient similar CSA currently in of the amount available excess prohibited indemni- to authorize otherwise ap- apportionments therefor under the so portion agreements. The relevant fication Appellee’s revised.” Br. proved or of the CSA stated: 1940)) 2,849 (Aug. Fed.Reg. (quoting 5 have au- contracting agency

Each shall omitted). (internal Al- quotation marks thority, notwithstanding any provisions provides that though Executive Order 9024 law than contained prior “conflicting” all Executive Orders (1) chapter, any to make contract neces- hereby superseded,” “are sary carry out the appropriate argues the terms of Executive Order (2) chapter; to amend provisions of this Order do conflict with Executive contract, by agreement any existing ei- remained effect. prohibition whose thus after of its termi- however, ther before or notice contrary, To the Executive Order nation, to such extent general on such terms and con- the President’s delegates necessary appropriate authority “[b]y deems to the virtue tracting WPB carry provisions chap- of this authority [the President] out vested (3) ter; settling any termination the ... of the United States.” statutes claim, assume, Pow- indemnify the First War agree Such statutes include authority into any claims to enter against, the war contractor ers Act’s the ADA. Del- violate with such that would otherwise person connection authority the ADA con- bypass egating claims or termination settlement. tion, Order which flicts with Executive which found “that percent prohibited in excess of then-cur- non-benzol at the waste McColl Site is appropriations. rent Executive Order attributable to the program.” Shell 8512 thus does not control this case. II, 13 F.Supp.2d 1026. The Oil Compa- argue nies district court’s attribution charges additional Because new or binding “finding is on the a Government as by was authorized the First War preclusion.” matter of Appellants’ issue Act, delegated to the Powers DSC Mendoza, 56 (quoting Br. States through Executive Order 9024 and the 464 U.S. 104 S.Ct. letter, WPB Chairman’s there is no need (1984) (“[Ojnce L.Ed.2d 379 a court has to consider whether the President also del- decided an issue of fact necessary or law egated authority under Executive Or- such judgment, its that decision is conclusive in der 9001. The of Federal Court Claims’ subsequent a holding prohibited the ADA reim- suit based on different party of new additional cause action involving bursement is to the prior litigation.”)). therefore reversed. The district court’s final, however, finding was not but rather independent Each three bases for was reversed the Ninth Circuit. Shell denying reimburse- III, 294 F.3d at 1048-49. The Ninth Cir- reversed, ment claims has been making cuit instead held the Government was not appropriate to summary judgment enter waste, an “arranger” for the non-benzol respect favor of the Oil Companies with and thus did reach question of how liability. breach of contract The sole re- much waste non-benzol was attributable to maining issue whether the Court of Fed- avgas program. Id. The final decision eral correctly gen- Claims determined that III thus did not Shell resolve the attri- uine disputed prevented granting facts bution issue and cannot serve as the basis summary judgment respect with to dam- preclusion. for issue Laguna Hermo- ages. Corp.

sa v. United IV. Court of Federal (Fed.Cir.2012) (issue Claims Cor- 1288 preclusion re-

rectly Disputed Held That Facts Pre- alia, quires, inter that “resolution of the Granting vent the Oil Companies’ issue was essential to a judgment final Summary Judgment Motion on (internal action”) the first quotation marks Damages omitted). and citations The Court of Federal Claims found The Oil Companies contend the district there questions” were “factual regarding analysis court’s nonbenzol attribution was “what portion the non-benzol waste necessary to the Ninth Circuit’s holding (i.e., spent alkylation [ acid and the because the Ninth Circuit affirmed the acid sludge) ‘by non-benzol ] created apportionment district court’s analysis reason of the program.” Re- Shell respect with to the benzol waste. This Decision, mand 108 Fed.Cl. at 448. On argument confuses district court’s at- appeal, Oil Companies argue court (based holding tribution on the factual should award 100% of their CERCLA question of much how acid waste was ground costs on the that the Government caused program) with collaterally estopped arguing latter, apportionment holding. In the anything less than 100% the non-benzol multiple district court identified reasons acid waste was due to the avgas contracts. why 100% of the waste for which the Gov- (both Companies rely The Oil “arranger” the decision ernment was an the ben- waste) litiga- district court in the CERCLA zol and non-benzol should be equi- (1) liability, of contract remands to breach and to the Government: tably apportioned on on damages. the costs of war for a trial properly place it would (2) whole, would reflect society as a AND REMANDED REVERSED repro- in limiting role Government’s the access tank cars. cessing facilities and to REYNA, Judge, dissenting. Circuit II, at 1027. The Ninth F.Supp.2d Shell majority “Taxes” concludes that a analy- apportionment affirmed Circuit for high-octane in several contracts clause respect to the benzol waste. with sis broadly gas (“avgas”) should aviation be is holding equitable apportionment This the to interpreted require United States of attribution rele- from the issue distinct indemnify Companies the Oil for a CERC- much the acid in this how of case: vant judgment covering LA restoration efforts “by dumped at the McColl site was waste waste site than of the McColl acid more The Ninth avgas program. of’ the reason completion after the con- fifty years the the rely incorporate not did Circuit I do “Taxes” interpret tracts. not re- holding court’s attribution with district general a clause clause as indemnification waste, and instead to the non-benzol spect costs. captures that production-related facts undisputed indicate “[t]he stated forth For this and the other reasons set Companies dumped acid waste the Oil below, respectfully I dissent. produc- operations avgas other than from III, 294 at the McColl site.” Shell tion I. short, (emphasis at 1062 F.3d appeal the Oil following This arises litigation pre- prior does recover McColl Companies’ failure to challenging from clude the Government clean-up through site costs the CERCLA amount of acid waste attributable place litigation took California. avgas contracts. regime party allows a The CERCLA estoppel, financially clean-up Absent collateral for responsible do contest trial court’s Companies of environmental contamination costs genuine dispute how finding regarding responsible from other seek contribution 9613(f)(1). at the site much of the acid waste McColl District parties. U.S.C. contracts, nor avgas from to re- resulted thus broad discretion courts have See, equi- this court discern error. “using does contribution claims such solve (“Kerosene lubricating [they] ap- as are e.g., determine[ ] J.A. factors table Id.; “produced Boeing were also acid treated” and also Co. oils see propriate.” (The (9th site sludge.”); Corp., McColl acid Cascade Cir.2000) sludge resulting “gives acid dis- (noting “contains that CERCLA military petro fac- of civilian what treatment trict courts discretion decide considered, products.”). The case is remanded ought leum as well tors to deter those according the Court of Federal Claims costs duty to allocate factors”). at the McColl a satis- failing mine how much acid waste After to achieve con “by equita- of’ factory site was reason outcome under CERCLA’s considerations, now tracts. ble recovery ave- through different seek Conclusion In do- breach contract action. nue—a so, they the four corners reasons, breach this court foregoing For this court asking contracts their of Federal Claims’ reverses Court catch- clause as a interpret the “Taxes” judgment respect summary with grant provision. contract, Such Company’s April 10, all indemnification an in- Oil dated view, my terpretation, has no basis in 1942, representative all the language or the plain clause provides: issue here I scope overall contract. would XII. Taxes of therefore affirm the decision the Court a) Buyer shall pay addition to the and of Federal Claims hold that the “Tax- prices as established in Sections IV by es” clause intended the hereof, any Vand new or additional than nothing price-adjustment be more a taxes, fees, charges, or other than covering mechanism additional or unantic- income, profits, corporate excess or ipated by tax-related burdens assessed taxes, franchise may which Seller be avgas production.1 reason of by state, required any municipal, or question a interpretation “Contract is of federal law in the United States or law, which court] [the review[s] without any foreign country to or pay collect Liquidating deference.” 1st Home Trust v. by production, reason of the manufac- States, (Fed. United 581 F.3d 1355 ture, delivery sale or of the commodi- Cir.2009); Envtl., TEG-Paradigm Inc. v. ties delivered Buyer hereunder. States, (Fed. F.3d pay any shall also such taxes on Cir.2006). contracts, “In the ease of petroleum, crude or transporta- purpose primary avowed and function of thereof, tion extent such taxes the court is the ascertainment of the inten result increased cost of com- parties.” tion of the Alvin Ltd. v. U.S. modities delivered hereunder not Serv., (Fed.Cir. Postal 816 F.2d compensated for V 1987). Section hereof. interpretation Contract begins with language agreement, written (Shell Contract, J.A. 111-12 Apr. Oil Co. given ordinary which must be “[its] mean 10,1942) (emphasis parties mutually unless the intended majority’s conclusion that CERCLA agreed to an meaning.” alternative liability hinges is covered this clause Dep’t Affairs, Harris Veterans an isolated interpretation of the word (Fed.Cir.1998). mayWe “charges.” majority engages in a not resort to extrinsic evidence “to create lengthy the plain meaning discussion of an ambiguity a where contract was not “charges” and that it synony- concludes is reasonably susceptible of differing inter Maj. mous with “costs.” Op. at 1291-93. pretations at the time of contracting.” majority proceeds then to hold that Constructors, Metric Inc. v. Nat’l Aero requires the “Taxes” clause the Govern- Admin., Space nautics & 169 F.3d ment to reimburse the Oil Companies for (Fed.Cir.1999); see also Coast Fed. costs of and all type, regardless of how Bank, FSB v. United they incurred, long were as as those costs (Fed.Cir.2004) 1035, 1038 (en banc). “by arise production reason of’ the Under the “Taxes” clause of the avgas delivery avgas. contracts, the Government agreed to reim- interpretation ignores Such an Companies burse the Oil con- “any new or taxes, fees, tractual import additional character and of the “Tax- charges” that may imposed “by whole, reason es” of’ the clause. When as a pro- read duction, sale, delivery avgas. signals Shell parties, at the I do interpret the "Taxes” clause recovery Federal Claims’s conclusion that allowing precluded by general to recover their also release costs, I do not Anti-Deficiency address Court of Act. Constructors, contract, parts”); in- Metric 169 F.3d at they entered into the time (“Before to be “Taxes” clause read as at a arriving legal reading tended the un- covering mechanism price-adjustment a contract a court must consider provision, First, tax-related expected burdens. parties.”). intentions context and Second, is titled “Taxes.” clause subject “The of a con- context and matter taxes” uses the term “such several clause ordinary tract that an word may indicate catego- to refer back to the broader times phrase meaning an in a has unusual fees, Third, “taxes, ry charges.” Lord, given sentence.” Richard A. Wil- “taxes, fees, or specific exclusions from (4th liston on 32:6 ed. 1999 & Contracts taxes, are all income and related charges” Supp.2009). questionable whether “[I]t “income, profits, including [and] excess meaning a word at all divorced has when Finally, franchise taxes.” corporate in is from the circumstances which of “new provides payment clause that the Farnsworth, used.” E. Allen Contracts taxes, fees, charges” will or additional (4th ed.2004). Here, majority’s 454 prices be in addition established interpretation ignores meaning plain (Section IV) Payment” and “Price and text, give to the con- harmony fails to (V) “Price Escalation” clauses the con- whole, tracts as and is unreason- a overall should be “charges” tract. The term thus able. consistently harmony and in interpreted dismisses, of the “Taxes” operation with the broader example, majority For price-adjustment clause as a mechanism. footnote, of the any a reliance on the title (“Taxes”) clause as evidence of the clause’s majority summarily dismisses these The Maj. fairly meaning. narrow tax-related signals textual favor of an isolated and majority DuPont, liability based claims. charges provision interpreted must be to at gives the CERCLA President require reimbursement the Compa- Oil to power broad direct the Government to nies’ arising CERCLA costs from avgas clean up a hazardous waste site itself or to production.” majority Id. The justi- thus responsible command the parties to do so. interpretation fies its of broad the “Taxes” Indus., Cooper Servs., Inc. v. Aviall clause not the of language the clause Inc., 157, 160, 543 itself a U.S. 125 S.Ct. 160 but on the weighing equities of in (2004). light circumstances, of the wartime L.Ed.2d subject Responsible parties 548 matter may the before satisfy record' us and thus their liability CERCLA certainly not the by reflected terms of by the payments means than cash contract. I believe that reliance on unsup- governmental entities. Had the Oil Com ported historical and social anecdotes panies self-performed clean-up the efforts trump plain should not meaning of the Site, they the McColl would have even and, case, contract terms in transform less of a to argue basis that the clean-up a straightforward “Taxes” clause into a encompassed costs by are the “Taxes” See, catch-all indemnification provision. clause because the only clause covers e.g., States, City v. Oxnard United of “charges” required the contractor by was a (Fed.Cir.1988) F.2d (noting that government entity “to or pay.” collect language best evidence Here, nothing in the plain language of parties’ intent and should take pre- par- indicates any “subjective cedence over intent of one ties intended for the “Taxes” clause to if parties, contrary to the unambigu- [generally] “allocate all possible liabilities” ous and reasonable text of the written themselves, among much less allocate contract”). specifically the risks of environmental lia-

II. bility. Id. The “Taxes” clause devoid of any language that resembles Even if the broad “Taxes” clause could in- be terpreted provisions indemnification encompass by considered certain non-tax- costs, related our does Ford majority not ade- decisions DuPont and Motor quately DuPont, explain why 1367; the clause should be Co. See 365 F.3d at Ford on who related to silent bears the cost Motor F.3d Co. United (Fed.Cir.2004). DuPont, production disposal avgas-related we held byproducts indicates in- agreement “to hold that the Government’s by tended the borne cost to be loss, any ex- against harmless [DuPont] Companies. kind pense damage ... or sufficient include whatsoever was Indeed, plaintiffs this case are (em- F.3d at liability. sophisticated “surely companies would added). Co., In Ford Motor phasis we know how to draft [negotiate and] broad liability that CERCLA similarly held clauses hold harmless indemnification ex- provision requiring a reim- covered tending perpetuity if that were their costs,” of all “allowable includ- bursement intent,” during even wartime. Shell Re- damage or destruction “loss Decision, mand at 425. Fed.Cl. Our out of or in property may arise connec- in DuPont and previous decisions Ford tion work performance with the provide of this very Motor Co. evidence under at 1319 this contract.” opportunity fact. The Oil best (emphasis No such ex- clean-up to recover costs from the their ists in this case. the CERCLA through Government was California, they should litigation Yet, majority’s analysis entire rests by fitting now allowed to recover that a term requiring on the conclusion peg majori- square into a round hole. payment “charges” or “costs” is suffi- ty straightforward errs interpreting require cient broad indemnification. “Taxes” a catch-all indemnifica- clause as Maj. But the clause Op. at 1294. “Taxes” Therefore, provision. tion I must dissent. concepts indicating lacks any reference intended enter into a indemnity provision; broad terms like

“loss,” “destruction,” “damage,” “liability,” harmless,” “injury”

“indemnify,” “hold Although

are to be found. I nowhere majority that

agree “special with the no give required

words” are effect to id., indemnification,

promise of that does can that the contract be devoid mean any objective parties’ indicia of the in- generally liability

tent to allocate between Oxnard, See, City

them. e.g., view, my 347. In re PACKARD. Thomas G.

lack of such intent. any evidence 2013-1204. No. case, If history purpose serves a this Appeals, Court of States 1940s, today,

it is to show that in the Federal Circuit. avgas production byproducts, results some are wastes. Waste created of which 6,May petrochemicals repre- production case producer, sents a cost on the That the contracts are Companies. at n. 9. The notes Op. 1293-94 interpretation of the overly-broad singular “placet Supreme ] that that Court tends “charges” term to conclude “[t]he plain weight captions, headings of the new or additional on” and ti- language less provision” encompass must construing statutory provisions. when tles liability. In Maj. Op. LLC, CERCLA 12- v. FMR No. (quoting Id. Lawson — so, majority ignores trial doing 1158, 1169, 3, U.S.-, 188 134 S.Ct. of the a sociis canon court’s use noscitur (2014)). This which principle, L.Ed.2d 158 just which “is an erudite interpretation, [statutory] “the text is often used when (or antiquated) way of say some would rec- prolific,” complicated nevertheless tells us saying what common sense to be heading helpful a ognizes that a can be “ company true: word known ‘[A] sub- general ‘short-hand reference States, it keeps.’ James v. 550 United Lawson, provision.” ject matter’ of the 1586, 192, 222, 127 167 L.Ed.2d U.S. S.Ct. Trainmen v. (quoting 134 S.Ct. at 1169 (altera- (2007) (Scalia, J., dissenting) 532 519, Co., R. U.S. Baltimore & Ohio 331 original) (quoting Jarecki G.D. tion (1947)). 1387, 91 L.Ed. 1646 S.Ct. Co., 303, 307, Searle & U.S. S.Ct. Hence, precedent supports Supreme Court (1961)). Indeed, con- 6 L.Ed.2d 859 finding intended for a that construed, must not in iso- tract terms matter” clause to “general subject of this lation, in a way as a but whole and tax-related items. cover “Taxes” surrounding gives effect to the context. majority rejects Government’s Techs., States, Inc. NVT v. United to the clause comparison of the “Taxes” (Fed.Cir.2004) (noting contemporaneous terms a must as whole “be considered evi- extrinsic improper as an reliance on so interpreted as to harmonize of an “established meaning to all dence the absence give reasonable Maj. ambiguity.” Op. indemnify liability. at 1295. At the extended to CERCLA time, the itself majority same informs its previously As we have noted: interpretation broad of the “Taxes” clause a pre-CERCLA order for indemnifi- relying on heavily extrinsic evidence. cation clause to liability, cover CERCLA majority As the notes: courts have held that the clause must be II necessity World and the stark War specific either enough to

Notes

[1] include avgas production increased are the cir- liability general enough

[2] surrounding cumstances the formation to include and all environmental lia- contracts. Govern- would, bility naturally, which include in position ment of near-complete subsequent CERCLA claims. refineries, authority over existing but E.I. Du Pont de Co. v. Nemours & cooperation the Oil Companies’ needed States, (Fed.Cir.2004) new production construct facilities to (quoting Atochem N. Am. v. United Elf extraordinary meet the demand for av- (E.D.Pa. F.Supp. gas. 1994)). DuPont, weAs noted in “CERC Maj. Op. (emphasis original). at 1296 LA evolved the doctrine of common “[tjhese majority concludes that circum- law nuisance” and is thus similar to tort- stances confirm the new or additional

Case Details

Case Name: Shell Oil Company v. United States

Court Name: Court of Appeals for the Federal Circuit

Date Published: Apr 28, 2014

Citation: 751 F.3d 1282

Docket Number: 2013-5051

Court Abbreviation: Fed. Cir.