THOMAS C. WHEELER, District Judge.
Plaintiffs in this contract case are well-known oil companies, Shell Oil Company, Atlantic Richfield Company, Texaco, Inc., and Union Oil Company of California. During the 1940s, at the urging of the U.S. Government, Plaintiffs entered into contracts to manufacture vast quantities of aviation fuel (called "avgas") to help assure that the United States would prevail in World War II. The production of avgas was critical to the fueling of the nation's fleet of military aircraft and unquestionably aided the war effort of the United States. However, the avgas manufacturing process yielded significant acid waste material that Plaintiffs by separate agreement deposited on real property in Fullerton, California known as the "McColl Site." Plaintiffs' avgas contracts were terminated at the end of World War II.
Many years later, under a statute known as the Comprehensive Environmental Response, Compensation, and Liability Act of 1978, 42 U.S.C. § 9601, et seq. ("CERCLA"), the U.S. Government and the State of California undertook a substantial effort to clean up the McColl Site. These clean-up efforts precipitated extensive litigation in California to determine which parties were responsible for the clean-up costs, and to what extent.
Joint Appendix ("JA") 16-17, 41-42, 61-62, 84-85, 112, 132-33, 159, 183-84, 208-09, 231-32 ("Taxes" clause from the Government avgas contracts with each plaintiff company).
Following completion of the California CERCLA litigation, Plaintiffs commenced their action in this Court on February 24, 2006, and the case was assigned to Senior Judge Loren A. Smith. Based upon extensive discovery and stipulations of fact developed in the California litigation, the parties agreed, and the Court concurred, that the case could be decided without trial. After considering cross-motions for summary judgment on liability and damages, Judge Smith ruled in Plaintiffs' favor.
In the remand proceedings, the parties again elected to file cross-motions for summary judgment, relying upon the discovery and stipulations of fact developed during the California litigation. Plaintiffs filed their motion for summary judgment on June 29, 2012, and Defendant filed its cross-motion for summary judgment on September 7, 2012. Additional response and reply briefs were filed on October 19, 2012 and November 16, 2012, and the parties submitted a Joint Appendix of relevant documents on November 20, 2012. The Court heard oral argument on December 18, 2012.
The amount at issue is $92,546,566.94, plus any additional interest and damages accruing since Plaintiffs filed their new motion for summary judgment in this Court. Of this amount, Plaintiffs' claims are allocated as follows: (a) Shell Oil Company — $54,213,778.91 (58.58 percent); (b) Union Oil Company of California — $17,528,319.78 (18.94 percent); (c) Atlantic Richfield Company — $17,528,319.78 (18.94 percent); and (d) Texaco, Inc. — $3,276,148.47 (3.54 percent).
The resolution of this dispute turns on the meaning and effect of the "Taxes" clause that existed in each of Plaintiffs' contracts. For reasons that will be explained, the Court finds that the "Taxes" clause deals only with taxes, and is not a broad indemnification clause promising that Plaintiffs will never have to pay for later-imposed liabilities such as CERCLA environmental clean-up costs. Even by inclusion of the word "charges," the "Taxes" clause cannot reasonably be interpreted as Plaintiffs would like. Moreover, the parties have stipulated that the avgas contracts in question were terminated in 1945, and that all issues relating to these contracts were settled in the late 1940s. JA 545, ¶ 609. There is nothing in the contracts to suggest that the United States would remain liable for any of the claimed costs after the contracts were terminated.
Major oil companies and the U.S. Government surely would know how to draft broad hold harmless indemnification clauses extending in perpetuity if that were their intent. The "Taxes" clause here does not accomplish that end. Words like "indemnify," "hold harmless," or any of their synonyms do not appear in the "Taxes" clause. Plaintiffs' best opportunity to obtain reimbursement of its clean-up costs was in the California CERCLA litigation, where the courts dealt directly with the proper allocation of such costs under the CERCLA statute. The "Taxes" clause in Plaintiffs' contracts does not trump the California courts' CERCLA result. Accordingly, the Court finds for the Government. Plaintiffs' motion for summary judgment is denied, and Defendant's cross-motion for summary judgment is granted.
During World War II, the U.S. Government procured large quantities of high-octane aviation gasoline ("avgas") to fuel its fleet of military aircraft. Because avgas was an essential war supply, the Government possessed the authority to compel its production from private oil companies, and even to seize refineries, had it deemed such steps necessary.
The avgas contracts were "base price" supply contracts, providing that the Government would pay the Oil Companies a fixed price per gallon of avgas, but with certain cost adjustment mechanisms built in to account for such things as fluctuations in crude oil prices. One such cost adjustment clause, entitled "Taxes," lies at the center of the present controversy. The Oil Companies believe that the terms of the "Taxes" clause require the Government to indemnify them for environmental clean-up costs incurred decades after the contracts were terminated. The Government disagrees, contending that the "Taxes" clause was meant only to create a price adjustment mechanism in the event the Oil Companies incurred unforeseen tax liabilities by reason of their production of avgas.
Avgas consists of a blend of components, including alkylate. JA 383 (Stips. 8-9). During World War II, the standard method for producing alkylate consisted of mixing certain base components together in the presence of a catalyst, 98% sulfuric acid. Known as alkylation, this process yielded both alkylate and 89% spent alkylation acid. JA 383-84, 510-11 (Stips. 9, 14, 493-94). The alkylate became a component of the avgas blend. The spent alkylation acid proceeded into one of three general "streams" for reuse or disposal: (1) reuse in the acid treatment of additional avgas components; (2) reuse in the acid treatment of non-avgas products also manufactured by the Oil Companies, such as motor gasoline and kerosene; or (3) disposal. JA 511(Stip. 496), 636-37 (Gov't Liability Admis. ¶ 22). Whenever the spent alkylation acid was reused, the reuse process further diluted its acetic concentration, yielding a product of between 35% and 65% strength known as "acid sludge" that carried no further industrial utility. JA 511 (Stip. 496); JA 643 (Gov't Damages Admis. ¶ 7). At that point, the acid sludge was added to the disposal "stream."
The Oil Companies disposed of both the excess spent alkylation acid and the acid sludge in large part by contracting with Mr. Eli McColl, who arranged to dump the waste into sumps on his property in Fullerton, California (the "McColl site"). At the end of the war, the Oil Companies settled "all ... issues concerning [the avgas] contracts" with the Government, thus terminating their contractual relationships. JA 545 (Stip. 609). At approximately the same time, the Oil Companies also ceased dumping avgas-related waste at the McColl site, and, in the 1950s, McColl, with the assistance of the Oil Companies, filled in the sumps.
A few decades later, however, the acid waste began oozing up through the surface of the ground at the McColl site. The U.S. Government and the State of California jointly began removing the waste, and later brought suit against the Oil Companies to recover the clean-up costs.
Under the Comprehensive Environmental Response, Compensation, and Liability Act of 1978, 42 U.S.C. § 9601 et seq. ("CERCLA"), financial responsibility for environmental clean-up costs lies with the party or parties who caused the contamination, regardless of which entity conducts the clean-up work. However, CERCLA allows any responsible party to seek contribution from other responsible parties, and grants federal district courts broad discretion to equitably apportion clean-up costs among those who are liable.
Two categories of waste at the McColl site were at issue in the CERCLA litigation. The first of these, which accounted for approximately 5.5% of the total waste, consisted of acid sludge resulting from the treatment of government-owned benzol.
The U.S. District Court for the Central District of California separated the liability and damages portions of the proceedings, and bifurcated the Oil Companies' counter- and cross-claims from the remainder of the cost recovery phase of the litigation.
Having found both the Oil Companies and the Government liable under CERCLA for the non-benzol waste clean-up costs, the district court then held a trial to determine the proper allocation of the total clean-up costs among the parties.
The court began this analysis by emphasizing the unique nature of its task. Under CERCLA, courts resolve contribution claims according to "such equitable factors as [they] determine[] are appropriate," 42 U.S.C. § 9613(f)(1), such that the court must first choose, and only then apply, the relevant equitable factors.
Considering the first of these questions, the district court rejected both the Oil Companies' and the Government's attribution theories, and held instead that the relevant question was "[g]iven that all of the treatment of avgas stocks was going to occur as it in fact did occur irrespective of the Oil Companies' plans to make other products using spent alkylation acid, how much additional waste was created by the Oil Companies' secondary use of the acid?"
The district court then found, and weighed as additional discretionary, equitable factors favoring the Oil Companies (1) that the waste and the clean-up costs were costs of World War II, such that "the American public" should "bear the[ir] burden"; (2) that "the Oil Companies had no reasonable recourse" to their dumping practices, in part because of a governmental failure to facilitate the creation of disposal alternatives; and (3) that the Oil Companies' profits from the avgas program were not excessive, and thus did not warrant an offset in favor of the Government.
On appeal, the Ninth Circuit affirmed in part and reversed in part the district court decisions.
However, the Ninth Circuit upheld the district court's determination that the United States was 100 percent liable for the clean-up costs of the benzol waste also present at the McColl site.
On remand from the Ninth Circuit, the district court transferred the Oil Companies' indemnity counterclaims to this Court pursuant to 28 U.S.C. § 1631. The Oil Companies then voluntarily dismissed their complaint in the transferred action and filed a new complaint, thus initiating the present action. Proceeding before Senior Judge Smith, the parties cross-moved for summary judgment and received final decisions as to both liability and damages.
Summary judgment is appropriate where the evidence demonstrates that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule of the Court of Federal Claims ("RCFC") 56(a);
In considering a motion for summary judgment, a court does not weigh each side's evidence but, rather, must draw all inferences in the light most favorable to the non-moving party.
Only the clean-up costs for the non-benzol waste remain at issue in the present case. Having failed in their attempt to hold the Government liable for these costs in the California CERCLA litigation, the Oil Companies now advance a different, strictly contractual theory of liability that under the terms of the avgas contracts, they are indemnified for these costs. In response, the Government raises several defenses.
First, the Government contends that the contract clause relied on by the Oil Companies was not intended to create a broad, open-ended indemnification, but rather merely a price-adjustment mechanism in the event that the Oil Companies were assessed unforeseen taxes by reason of their avgas production. Second, the Government argues that any claim to the contrary is barred by the fact that, as the Oil Companies stipulated in the CERCLA litigation, "all ... issues concerning [the avgas contracts] were settled between the parties in the late 1940s," at the time of their termination. JA 545 (Stip. 609). Third, the Government argues that even if the Court could construe the contract clause in question as an indemnification agreement, such an agreement would be ultra vires under the Anti-Deficiency Act, and therefore unenforceable. Finally, the Government argues that, as a factual matter, the majority of the waste at the McColl site resulted from the manufacture of products other than avgas.
The Court will examine each of these issues in turn below.
The "Taxes" clause at the heart of the present dispute is substantially the same in each of the Oil Companies' contracts, and states as follows:
JA 16-17, 41-42, 61-62, 84-85, 112, 132-33, 159, 183-84, 208-09, 231-32.
The Oil Companies' legal theory is tethered to the very first sentence of this clause, which provides that "Buyer shall pay ... any new or additional taxes, fees, or charges, other than income, excess profits, or corporate franchise taxes, which Seller may be required by any municipal, state, or federal law in the United States, ... to pay by reason of the production, manufacture, sale or delivery of [avgas]." (emphasis added). Although the Oil Companies concede that CERCLA liability is neither a "tax" nor a "fee," they argue that such liability is a "charge" within the meaning of the clause, for two textual reasons. First, as the Oil Companies point out, the plain meaning of a "charge" includes, among many other definitions, a "cost," which CERCLA liability most certainly constitutes for the party on whom it is imposed.
In a related vein, the Oil Companies also attempt to analogize the "Taxes" provision at issue here to contract clauses that appeared in two other World War II-era government contracts which were also the subject of federal litigation.
In response, the Government offers some compelling counter-arguments. First, it asserts that the wording of the contract clauses at issue in
Reading the relevant clause as a whole, including the title, "Taxes," the Court finds that it was plainly intended as a price-adjustment mechanism in the event the Oil Companies were assessed additional or unanticipated taxes as a result of their avgas production.
Moreover, the Court also rejects the Oil Companies' argument that the word "charge" is never synonymous with a "tax," and therefore that the Court must, on pain of otherwise reading this term out of the "Taxes" clause altogether, read it as meaning a "cost or expense." Pls. Mem. at 25-26;
Of course, the mere existence of this relatively narrow definition of "charge" — i.e., an encumbrance, lien, or other like financial burden or liability, especially one that relates to real property — does not compel the conclusion that it was the one intended and understood by the parties to the avgas contracts. However, in addition to the textual signals discussed above, the canon of construction known by its Latin name noscitur a sociis also supports a narrow interpretation of the term, as it was used here. That canon "counsels that a word [be] given more precise content by the neighboring words with which it is associated."
In addition, the Court agrees with the Government that
365 F.3d at 1370.
As part of its analysis of this language, the Federal Circuit quoted with approval a test set forth by a Pennsylvania district court: "[i]n order for a pre-CERCLA indemnification clause to cover CERCLA liability, courts have held that the clause must be either `[1] specific enough to include CERCLA liability or [2] general enough to include any and all environmental liability which would, naturally, include subsequent CERCLA claims.'"
Similarly, in finding that the contract clause in
The Court agrees with the Government that the language in the "Taxes" clause here is not analogous to the language in either
Finally, the Court finds that, contrary to the Oil Companies' assertions, it is irrelevant that the word "charge" sometimes appears in the text of CERCLA decisions.
The fact that judges have sometimes employed this exceedingly common usage of the word "charge" in their CERCLA opinions does not indicate anything about the intent of the Oil Companies and the Government in the avgas contracts. Indeed, in none of the opinions cited by the Oil Companies does "charge" carry or connote any particular legal meaning. To the contrary, the opinions simply use the term in a common colloquial manner, as demonstrated by the examples cited. The existence of this general usage simply has no bearing on what the parties intended by the term "charge" in the "Taxes" clause of the avgas contracts.
Thus, for the reasons stated, the Court finds that the Oil Companies' claims of indemnification must fail as a matter of law because their CERCLA liability is not a "charge" within the meaning of the "Taxes" clause in the avgas contracts.
The Court finds that the Oil Companies' claims fail for a second, independent reason. The Oil Companies stipulated in the course of the California CERCLA litigation that the avgas contracts "were terminated in 1945 or ... shortly thereafter. Matters relating to profits from the[] [avagas] contracts, termination costs, and all other issues concerning these contracts were settled between the parties in the late 1940s." JA 545 (Stip. 609) (emphasis added). Even assuming that the Oil Companies once had colorable claims for indemnification, they have not offered any explanation for how such claims survived the contract terminations, and the Court finds that none exists.
Again, a comparison to the indemnification claims in
In
Similarly, the termination agreement between Ford and the Government expressly provided that Ford maintained the right to recover costs "which are based upon responsibility of the Contractor to Third Parties ... and which involve costs reimbursable under the Contract ... but which are not now known."
At oral argument in this case, counsel explained that neither party was able to locate the Oil Companies' termination agreements with the Government. Tr. Oral Arg. at 54. However, while the Court lacks direct evidence of the terms of these agreements, during the course of the California CERCLA litigation the Oil Companies stipulated that:
JA 545 (Stip. 609). The Oil Companies do not disavow this stipulation, but instead attempt to evade its consequences by changing the subject. Pointing to the language in the "Taxes" clause that the Government was to "pay ... any new or additional taxes, fees, or charges ...[,]" the Oil Companies argue that "[f]ar from limiting the duration of potential government liability," this language "in no way distinguishes between new charges imposed during the Oil Companies' performance and new charges imposed later." Pls. Mem. at 27 (emphasis added). Thus, according to the Oil Companies, "CERCLA costs are no less `new or additional' charges because Congress passed CERCLA long after the Oil Companies delivered the much-needed avgas," and the Government's liability for the CERCLA "charges" is, by its plain terms, without temporal limitation.
For reasons already explained, the Court disagrees that the term "charges," as it appears in the avgas contracts, can fairly be read to encompass CERCLA liability. Even if it did, however, the Oil Companies still have failed to explain how their claims of indemnification survive the contract terminations. There is no suggestion that the Oil Companies preserved their rights as the plaintiffs in
"One who has a contractual right against another has the power to discharge such rights and the other's duty by executing a release[,]" which is "an instrument terminating one's rights under a contract and bar[ring] the later assertion of claims with respect to that contract."
The Oil Companies stipulated that the parties terminated the avgas contracts in the mid- to late 1940s, at which time "matters relating to profits," as well as "all other issues concerning these contracts," were "settled." While the Court does not have the actual termination agreements before it, the Oil Companies have offered no evidence or argument that this "termination" and "settle[ment]" differed in any material way from a general release. Indeed, the wording of the stipulation indicates essentially a general release. In the absence of any evidence that the Oil Companies preserved their purported indemnification rights from the settlement of "all issues" related to the contract, the Court is without any basis to find that anything was left unsettled.
Accordingly, the Court finds that the Oil Companies' claims must fail by reason of their admission that "all issues" related to the avgas contracts were settled following the close of the war.
Finally, the Court finds that the Oil Companies' claims must fail for a third independent reason. Even if the parties had intended the "Taxes" clause to operate as a broad indemnification clause, and even if the companies' indemnification rights had been preserved after the contract terminations, any such "rights" would have been ultra vires under the Anti-Deficiency Act ("ADA"). The version of the ADA in effect in the 1940s at the time the parties executed the avgas contracts provided, in relevant part:
Pub. L. No. 59-28, 34 Stat. 27, 49 (1906), 31 U.S.C. § 665 (1940) (current version at 31 U.S.C. § 1341). Thus, as the Federal Circuit explained in
The Oil Companies do not dispute that, as a general matter, the ADA bars open-ended indemnification clauses in government contracts. However, they argue that in the case of the avgas contracts, the purported indemnifications were authorized by (1) the First War Powers Act of 1941, as implemented by various Executive Orders; (2) the National Defense Act of 1916; and (3) a June 1941 amendment to the charter of the DSC, the public corporation designated as the purchaser of avgas during World War II. The Court will discuss each of these theories separately below. For the reasons set forth below, the Court finds that none of these sources provided the requisite ADA waiver that would have allowed the Government to indemnify the Oil Companies.
Title II of the First War Powers Act ("FWPA" or "Title II"), enacted in 1941, granted the President the power to:
Pub. L. No. 77-354, § 201, 55 Stat. 838, 839 (1941) (repealed 1966), JA 286 (emphasis added).
The Oil Companies argue, and the Court agrees, that the plain language of Title II authorized the President to delegate to designated agencies the ability to waive, among other "provisions of law relating to the making, amendment, or modification of contracts," the anti-deficiency limitations of the ADA. Just as plainly, however, this provision was not self-executing, but required an affirmative act by the President, "deem[ing]," "as a matter of public record under regulations," that "such action would facilitate the prosecution of the war[.]" Thus, the question is whether President Roosevelt ever exercised his authority under Title II to waive the ADA in a manner relevant to the avgas contracts. Recognizing as much, the Oil Companies point to several Executive Orders, each of which the Court will discuss below. As the Court will explain, it disagrees that any of the cited Executive Orders waived the anti-deficiency limitations with respect to the avgas contracts.
The first "regulation" advanced by the Oil Companies as a relevant exercise of President Roosevelt's authority under Title II is Executive Order 9001 ("E.O. 9001"), issued on December 27, 1941. 6 Fed. Reg. 6787, JA 244. In E.O. 9001, President Roosevelt expressly invoked the FWPA to "hereby order," among other things:
As noted, the public corporation tasked with purchasing avgas for the Government during World War II was the Defense Supplies Corporation, or DSC. Incorporated in 1940, DSC originally was housed within the Federal Loan Agency and then transferred, in February 1942, to the Department of Commerce.
However, while the parties agree that E.O. 9001 applied to DSC, they vigorously dispute the consequences of this fact. The Oil Companies focus on the last line of the above-quoted passage, authorizing designated agencies to enter into contracts "without regard to the provisions of law relating to the making, performance, amendment, or modification of contracts." In the Oil Companies' view, as a law "relating to the making, performance, amendment, or modification of contracts," the ADA is plainly a qualifying "provision of law," and hence waived by operation of E.O. 9001 (and its statutory enabler, the FWPA). Pls. Mem. at 45-47. The Government, on the other hand, points out that even as E.O. 9001 delegated expanded contracting authority to the designated agencies, it also expressly restricted such authority to "the limits of the amounts appropriated therefor." The Government therefore argues that, far from waiving ADA prohibitions against open-ended indemnification clauses, E.O. 9001 expressly affirmed them. Gov't Mem. at 27-28.
The Oil Companies do not address this limiting language directly, but instead argue that the Government's position is precluded by operation of a contemporaneous formal opinion issued by then-Attorney General Francis Biddle. Pls. Mem. at 45-47. This opinion, issued on August 29, 1942, was prepared in response to an inquiry from the Secretary of War as to whether, pursuant to the FWPA and E.O. 9001, his agency could conduct its contracting activity without regard to a discrete set of statutes. 40 Op. Att'y Gen. 225, JA 307-16 ("Biddle Opinion"). This list included, inter alia, "[t]he act of March 3, 1933 ... concerning foreign-made, foreignmined, or foreign-produced goods," "[t]he act of June 25, 1938 ... concerning purchases of blind-made goods," and "[t]he act of January 12, 1895 ... requiring that Government printing, etc., be done at the Government Printng Office." JA 313-14. Notably, this list did not include the ADA.
Although the Oil Companies recognize that the Biddle Opinion does not mention the ADA, they latch on to the Opinion's response to the third of these examples — which involved certain specific kinds of indemnity for a dredging contractor — and argue that this portion of the opinion "definitively establishes" that by signing E.O. 9001, President Roosevelt "authorize[ed] indemnification agreements with war contractors." Pls. Mem. at 46. The Oil Companies make the separate argument that, at a minimum, the Biddle Opinion demonstrates that the Roosevelt administration understood this to be the case, and that the Court therefore owes "substantial deference" to Attorney General Biddle's position. The Court disagrees with both of these propositions, for the following reasons.
First, the Court does not believe that the dredging example can reasonably bear such a broad interpretation. This example posited "a firm contract on a lump-sum basis to do certain dredging," entered into by the War Department prior to the attack on Pearl Harbor. JA at 316. As the Secretary explained:
The Court, however, declines to read the Biddle Opinion so broadly. First, as the Government points out, the indemnification in the dredging example was limited to the cost of equipment and potential Workmen's Compensation liability, and hence was much different in kind from the type of open-ended, all-purpose liability the Oil Companies contend was promised here. Whether or not that distinction is material,
Moreover, to the extent that the Biddle Opinion arguably could be read as interpreting E.O. 9001 to authorize open-ended indemnification agreements, the Court further holds that such an interpretation is contrary to the plain language of E.O. 9001. At least two other courts have reached similar conclusions. First, in
Like the Oil Companies here, the plaintiff in
Fifteen years later, when these issues resurfaced in identical form in
The Court agrees with and adopts the sound analysis of both
The Oil Companies also argue that President Roosevelt separately waived the ADA, again pursuant to his authority to do so under the FWPA, by means of Executive Order 9024 ("E.O. 9024"). Issued on January 16, 1942, E.O. 9024 established the War Production Board ("WPB"). Simultaneously, E.O. 9024 granted the WPB Chairman the power to, inter alia, "[d]etermine the policies, plans, procedures, and methods of the several Federal departments, establishments, and agencies in respect to war procurement and production, including purchasing, contracting, specifications, and construction[.]" 7 Fed. Reg. 329, 330 ¶ 2(b) (Jan. 16, 1942), JA 246-47. By letter dated February 13, 1942, WPB Chairman Harold I. Ickes then delegated to the Office of the Petroleum Coordinator the responsibility to "determine the price at which aviation gasoline is to be purchased, the capacity of the particular refiner to perform[,] and the technical details of the particular contract." JA 305. By the same letter, Chairman Ickes also delegated to DSC (and another agency not relevant here) the residual responsibility to determine "the other terms and the form of such [avgas] contracts."
Thus, the relevant authorization and delegation here proceeded in steps. First, as discussed above, the FWPA authorized the President to delegate to agencies of his choosing the ability to enter into procurement contracts without regard to normal legal constraints. Second, in an arguable (but not explicit) exercise of at least some of that statutory power, President Roosevelt delegated to the WPB Chairman the authority to set governmental "policy" with respect to "contracting" for "war procurement and production." Finally, Chairman Ickes re-delegated to DSC the authority to set all terms of the avgas contracts that were unrelated to price, the Oil Companies' production capacity, or "technical details."
The question is at what point in this process, if ever, a waiver of the ADA occurred. According to the Oil Companies, the magic moment occurred at step two, by means of E.O. 9024's delegation to the WPB Chairman of the authority to set governmental "policy" with respect to "contracting" for "war procurement and production." In addition, the Oil Companies repeatedly characterize the residual contracting authority that this officer re-delegated to DSC at step three (that is, to set "other" terms in the avgas contracts, not related to price, the Oil Companies' production capacity, or "technical details"), as a power "without limitation." Pls. Mem. at 42-44. Putting these two contentions together, the Oil Companies argue that DSC possessed "all power, without limitation, to `determine' on behalf of the United States contract terms with respect to war procurement and production of [a]vgas."
The Court disagrees. As noted, the FWPA did grant authority to the President to designate, at his option, agencies that could bypass normal contracting restrictions. However, in contrast to E.O. 9001, E.O. 9024 did not invoke the FWPA or employ any language demonstrating an intent to allow covered agencies to bypass any subset of contracting restrictions, much less anti-deficiency restrictions. Instead, E.O. 9024 simply granted the WPB Chairman the authority to set "policy" with respect to "contracting." It is a long jump, and one this Court declines to take, from this unadorned language to the proposition that general "policy-making" authority necessarily includes the power to waive the ADA — or, for that matter, any other federal statute. Thus, even assuming that Chairman Ickes re-delegated the full extent of the "policy-making" authority conferred to him by E.O. 9024 to DSC, there is no evidence that this authority included the ability to waive the ADA.
The Court's conclusion is, moreover, bolstered by the fact that both E.O. 9001 as well as yet another Executive Order — E.O. 8512, issued on August 13, 1940 — expressly reaffirmed the anti-deficiency principles of the ADA as they applied to wartime contracting. The Court has already discussed E.O. 9001 above and need not repeat that analysis here. However, E.O. 8512 mandated that "[n]o agency shall make expenditures or involve the Government in any contract or obligation for the future payment of money in excess of the amount currently available therefor under the apportionments so approved or revised." 6 Fed. Reg. 2849 (Aug. 13, 1940).
The Oil Companies attempt to evade the plain meaning of this directive (as well as the similar anti-deficiency language found in E.O. 9001) by arguing that the later-issued E.O. 9024 overrode the relevant portions of these two prior Executive Orders. Pls. Reply at 31. However, while E.O. 9024 stated that "any provisions" of any prior Executive Order "conflicting with this Order are hereby superseded," 7 Fed. Reg. at 330, JA 247, the Court does not read the anti-deficiency language of either E.O.'s 8512 or 9001 as "conflicting" with E.O. 9024's simple grant to the WPB Chairman of the authority to set "policy" with respect to "contracting." Especially in light of E.O. 9024's silence with respect to the ADA (as well as other contracting limitations), the Court sees no basis to construe that Order's grant of general "policy-making" authority to the WPB Chairman as in any way creating a material conflict with the anti-deficiency language in E.O.'s 8512 and 9001.
Finally, the Court notes that, contrary to the Oil Companies' assertions,
The Ninth Circuit rejected this argument, emphasiz ing that "[e]ven if there were a serious question about whether the Rubber Reserve acted ultra vires in making the contract ... it would make no difference, because in this case the contract [itself] was not enforced. It was merely considered as a factor in the equitable allocation of response costs."
The Oil Companies argue that the language in E.O. 9024 granting the WPB Chairman the authority to make "policy" with respect to "contracting" is "considerably broader" than the corresponding language in E.O. 9246 (i.e., the Rubber Reserve Order). Pls. Mem. at 45. Therefore, they contend, if the Rubber Reserve Order sufficed to allow the Rubber Reserve to indemnify its contractors, it must follow a fortiori that E.O. 9024 similarly authorized the DSC to do the same. Pls. Reply at 30-31.
Even assuming the Oil Companies are correct that E.O. 9024 is "considerably broader" than E.O. 9246, the Court is not bound or persuaded by
The Oil Companies also argue that the purported indemnification agreements were independently authorized by the National Defense Act of 1916 ("NDA"), Pub. L. No. 64-85, 39 Stat. 166, in conjunction with Executive Order 9040 ("E.O. 9040"), 7 Fed. Reg. 527 (Jan. 24, 1942), JA 248.
Enacted during World War I, Section 120 of the NDA authorized the President to "place an order" with any supplier for any "product or material as may be required" for the furtherance of war efforts. Pub. L. No. 64-85, 39 Stat. at 213. The Act further made compliance with such an order "obligatory" on both the supplier and "the responsible head or heads thereof," on penalty of "imprisonment for not more than three years and by fine not exceeding $50,000."
On January 24, 1942, President Roosevelt issued E.O. 9040, delegating to the WPB Chairman the authority to "[p]erform the functions and exercise the powers" vested in the President by the NDA. 7 Fed. Reg. 527 ¶1(c), JA 248. E.O. 9040 further provided that the WPB Chairman "may exercise the powers, authority, and discretion conferred upon him by this or any other Order through such officials or agencies and in such manner as he may determine; and his decisions shall be final."
First, the Oil Companies emphasize the provision in the NDA stating that the President's powers under that Act were "in addition to the present authorized methods of purchase or procurement." According to the Oil Companies, this language shows:
Pls. Reply at 39-40 (quoting the NDA). The bald contortions to the actual language of the NDA present in this interpretation, however, need hardly be identified. The only reasonable meaning of the Act's statement that the powers created therein were "in addition to the present authorized methods of purchase or procurement" is that the Act did not in any way abridge the Government's existing procurement powers. This proposition, however, bears no logical relation to the quite different proposition advanced by the Oil Companies that the Act somehow abolished existing procurement constraints (such as the ADA). In other words, the Oil Companies' argument here is made possible only by an overt substitution of meanings. To borrow their phrasing, the "plain terms" of the Act in fact "expanded the President's purchase and procurement authority" not beyond existing "constraints," but rather beyond existing "methods," a different matter altogether.
Second, the Oil Companies quote extensively from a 1931 Supreme Court takings case,
Seizing on this passage, the Oil Companies argue that "[t]he only difference between this case and
The problem with this argument, as the Government points out, is that
The Court rejects this analogy. The relevant question here is not, as the Oil Companies imply, whether the Government's purported power to indemnify its private suppliers of war materials can or should somehow be conceived of as a "lesser" power than that which it admittedly possessed to seize private property in order to ensure the production of the same materials. Nor is the Government's seizure authority relevant in any way to the actual facts of the avgas program, where, as the Ninth Circuit stated in
294 F.3d at 1050;
The Oil Companies' final ADA argument is that the statute was independently waived by DSC's enabling charter, as amended in July 1941. The DSC charter amendment in question enumerated a list of the "objects, purposes, and powers" of DSC. Amendment to the Charter of the Defense Supplies Corporation, July 9, 1941, JA 331. These included "[t]o produce, acquire, carry, sell, or otherwise deal in strategic and critical materials ...,"
Once again, the Oil companies attempt to build an argument through selective quotation. Specifically, seizing on only the highlighted language in the above passage, they posit that "[t]he DSC, therefore, was expressly authorized by law to perform `all acts and things whatsoever,' including specifically, `without limitation, the power ... to make contracts." Pls. Mem. at 52 (emphasis added).
Plainly, the phrase "all things whatsoever" and the "without limitation" qualifier are used in the above passage to indicate that the subsequent list of powers possessed by DSC was not exhaustive. The argument advanced by the Oil Companies, that "without limitation" somehow specifically described the scope of the DSC's contracting authority and bypasses the ADA, is without merit, and the Court need not consider it further.
Notwithstanding the Court's holding that the Oil Companies' indemnification claims fail as a matter of law for the multiple reasons discussed above, the Court will also address one remaining area of contention raised by these proceedings: whether the non-benzol waste was dumped at the McColl site "by reason of" the Oil Companies' "production, manufacture, sale or delivery" of avgas.
As noted, the language in the "Taxes" clause on which the Oil Companies rely for their indemnification claims provides that "Buyer shall pay ... any new or additional taxes, fees, or charges ... which Seller may be required by any [government] ... to pay by reason of the production, manufacture, sale or delivery of [avgas]." (emphasis added). Thus, had the Oil Companies been able to demonstrate that CERCLA liability was a "charge" within the meaning of the "Taxes" clause, they still would have been required to demonstrate that all or some of these "charges" were incurred "by reason of" the companies' avgas production. The Oil Companies contend that the Government is collaterally estopped from arguing against the presence of the necessary causal relationship by the outcome of the CERCLA litigation. In the alternative, they argue that the factual record before the Court establishes this relationship beyond any "genuine issue" that would preclude entry of summary judgment in their behalf. Pls. Mem. at 30-40. The Government disagrees on both counts, contending that a majority of the acid waste at the McColl site resulted from the production of non-avgas products, and that
Under the doctrine of issue preclusion (sometimes known as collateral estoppel), a litigant is barred from relitigating a factual or legal issue that has already been raised and decided in a prior proceeding. This doctrine applies where "(i) the issue previously adjudicated is identical with that now presented, (ii) that issue was actually litigated in the prior case, (iii) the previous determination of that issue was necessary to the end-decision then made, and (iv) the party precluded was fully represented in the prior action."
As explained in the factual background section of this opinion, after conducting an extensive analysis of the avgas program, the trial court in Shell II determined that, as a factual and equitable matter, "100 percent of the non-benzol waste at the McColl site [was] attributable to the avgas program" (as opposed to, and distinct from, the Oil Companies' secondary use of the spent alkylation acid to treat non-avgas products). 13 F. Supp. 2d at 1026. The district court then determined, and weighed in favor of the Oil Companies, a group of additional equitable factors, among them that, in the district court's estimation, the waste and its clean-up costs were war costs, such that "the American public" should "bear the[ir] burden," and that "the Oil Companies had no reasonable recourse" to their dumping practices as a result of the Government's failure to create or facilitate disposal alternatives.
As also explained in the factual background section, on review the Ninth Circuit reversed the district court's holding as to the Government's liability for any of the non-benzol clean-up costs. In reaching this conclusion, the Ninth Circuit emphasized that the United States was only the end purchaser, not the manufacturer, of the avgas; that it never owned any of the raw materials or intervening products; that it "did not even know that the Oil Companies had contracts to dispose of their waste at the [McColl] site"; that the Oil Companies "voluntarily entered into the contracts and profited from the sale[s]"; and that the Government "was aware that waste was being produced, but did not direct the manner in which the companies disposed of it." 294 F.3d at 1056-59. Accordingly, the Ninth Circuit held that "[b]ecause the United States is not liable as an arranger, the question of allocation of liability for the non-benzol waste between the United States and the Oil Companies ...is moot." 294 F.3d at 1049.
However, the Ninth Circuit also upheld the district court's determination that the United States was 100 percent liable for the clean-up costs of the benzol waste at the McColl site "for the same reasons that avgas sludge is fully allocable to the Government."
In the present case, the Oil Companies argue that, although the district court's findings with respect to the non-benzol waste were mooted by the appellate court, those same findings were "necessary to the judgment allocating 100 percent of the benzol-related cleanup costs to the government." Pls. Mem. at 33. Thus, the Oil Companies contend that these findings — and in particular, that "100 percent of the non-benzol waste at the McColl site [was] attributable to the avgas program" — should be given preclusive effect on the question of whether the Oil Companies incurred the non-benzol-related clean-up costs "by reason of" their avgas production. Pls. Mem. at 31 (quoting
It is true, as the Oil Companies point out, that the Ninth Circuit found the district court to be "entirely justified" in extending its reasoning regarding the non-benzol waste to the separate category of the benzol waste. However, it is also true that the majority of the relevant findings there were generalized, such that they could logically apply to both the non-benzol and benzol waste alike. Examples of such generalized findings include, for example, the district court's holding that the clean-up costs were properly conceived of as war costs and should therefore be broadly shared by the public, and that "the Oil Companies had no reasonable recourse" to their dumping practices as a result of certain governmental actions or inaction.
Thus, the district court's finding that "100 percent of the non-benzol waste at the McColl site [was] attributable to the avgas program," fails, at a minimum, the third requirement of collateral estoppel, that the previous determination of the issue in question was "necessary to the end-decision then made."
Having made this determination, the question then presented is whether this Court, acting on a blank slate, would have found all or some of the Oil Companies' CERCLA liability to have been incurred "by reason of" their avgas production. While the Court will not engage in a lengthy analysis of this issue, it finds that, had it been necessary for the Court to reach this question, further proceedings would have been necessary for the Court to reach a final determination. Setting aside the question of what level of causation this phrase connotes, the issue of what portion of the non-benzol waste was created "by reason of" the avgas program raises factual questions that are simply not adequately answered by the evidence or stipulations currently before the Court.
For example, the Government has introduced evidence that various oil companies, including but not limited to the Plaintiffs (or their predecessors-in-interest) in this action, successfully disposed of acid waste by means other than dumping — such as reprocessing or burning — throughout the course of the war. JA 512-14 (Stips. 500-12). However, the facts in the record do not necessarily allow the Court to extrapolate the extent to which the Oil Companies had, as an overall matter, access to reprocessing facilities, nor about their ability to safely (if not cleanly) burn any remaining acid waste that could not be reprocessed. Conversely, the Oil Companies point to a few instances in which certain Plaintiffs sought federal permission to build additional acid reprocessing facilities, but were denied or frustrated in these plans. JA 452-53, 456-57, 461-67, 635. Similarly, were it to resolve the question of what portion of the Oil Companies' CERCLA costs were incurred "by reason of" their avgas production, the Court would desire additional information about these events, the proposed capacities of the never-built facilities, and their likelihood of completion within a time frame relevant to the use of the McColl site.
In any event, the Court reiterates that resolution of these questions (among other similar ones) is not, in the end, necessary to its disposition of this matter. To the contrary, the Court has found three other, independent bases for dismissing the Oil Companies' claims as a matter of law and entering judgment in favor of the Government. Consequently, the Court need not further address or require the evidentiary proceedings that would be necessary to resolve the "by reason of" factual issue.
Based upon the foregoing, the Court DENIES the Oil Companies' motion for summary judgment, and GRANTS the Government's cross-motion for summary judgment. The Clerk of Court is directed to enter judgment in favor of the Government. No costs.
IT IS SO ORDERED.
At any rate, doctrines of judicial deference are inapplicable where the original text in question is unambiguous,
