December 20, 2019

In Brief

John R. Jacus

CERCLA

Wisconsin Central Ltd. v. Soo Line Railroad Co., No. 16-cv-04271 (N.D. Ill. Sept. 30, 2019).
The U.S. District Court for the Northern District of Illinois held that the seller of a railroad right-of-way was fully indemnified by the purchaser under an asset purchase agreement, and that the scope of the indemnity covered the seller’s costs of response with respect to land not exchanged as part of the sale. Wisconsin Central Ltd. (Buyer) entered into an asset purchase agreement (Agreement) with Soo Line Railroad Company (Seller) to purchase certain railroad assets, including a right-of-way that became part of a larger area listed as a Superfund site. The Agreement provided for the Seller’s indemnification for all environmental claims arising from the ownership of the assets or operations of the transportation division of the Seller’s company up to 10 years after the closing. For claims asserted after the 10-year anniversary of the Agreement, the Buyer indemnified the Seller for all claims related to ownership of the assets or operation of Seller’s transportation division. Following a 2014 settlement with the U.S. Environmental Protection Agency’s (EPA) in which both the Seller and the Buyer contributed equally to settle the Superfund claims, the Buyer sued the Seller seeking indemnification for the amounts the Buyer paid to settle the Superfund claims. The Seller denied its liability and filed a counterclaim asserting that the Buyer was obligated to indemnify the Seller for amounts it had contributed to settle the Superfund claims. The court held that the Buyer must indemnify the Seller because the environmental claim occurred after the 10-year anniversary. The Seller sought to recover its full $5,259,555 contribution to the Superfund settlements, but the Buyer argued that the Seller was not entitled to the full amount because the “property footprint” of the assets Buyer purchases from the Seller constituted 54.1 percent of the total acreage at issue in the Superfund site. The court held that the Buyer’s arguments failed because the Agreement did not impose any asset-specific limitation upon the indemnification provision and expressly provided for indemnification of environmental claims for the entire transportation division of the Seller. The court also awarded the Seller attorneys’ fees and prejudgment interest.

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