Law and the Environment

Bankrutpcy Judge Appoints Mediator to Address Asbestos Claims in the Asarco Bankruptcy Proceeding

As the Asarco bankruptcy continues to generate issues in the environmental-bankruptcy interface, the bankruptcy court judge in Corpus Christi, Texas has appointed Louisiana bankruptcy judge to mediate in the long-standing alter ego dispute over asbestos-related

personal injury claims that bankrupt mining behemoth Asarco LLC has been fending off for years.

Asarco's subsidiaries face over 95,000 asbestos-related claims. Some of those claims, however, have been made against Asarco directly.  In an attempt to reduce its liability, Asarco filed an adversary complaint against its also-bankrupt subsidiaries seeking a declaratory judgment that it was not liable to them for the asbestos or other claims, according to court documents. The plaintiffs have alleged that Asarco is the alter ego of its subsidiaries.

To handle the alter ego dispute and asbestos claims, Asarco had submitted its own proposal last week for a mediator.  With his Thursday order, however, Schmidt rejected that suggestion, and appointed the Louisiana bankruptcy judge as mediator over these claims.

Asarco has until November 12th of this year to file its plan, and until January 14 to solicit approval from its creditors.

Asarco Asks Bankruptcy Court to Dismiss $68 Million Claim Filed by State of Texas

From EnergyLaw360

By Christine Caulfield , christine.caulfield@portfoliomedia.com

Wednesday, Sep 19, 2007 --- Bankrupt copper mining company Asarco LLC has urged a bankruptcy court to quash a $68 million claim by Texas officials for environmental damage to the state's coast, a claim it argues was filed too late.

In an objection lodged with the court on Friday, Asarco said the damage claim filed in July 2006 by the Texas attorney general on behalf of the state's natural resource trustees was barred by the statute of limitations.  The claim, just one of scores against the bankrupt copper producer for environmental damage, relates to the company's Corpus Christi facility, which processed mineral ore in the production if zinc.

The Tucson, Ariz.-based company, which no longer operates the facility, argues the state was aware of the release of toxins from the site more than three years before making a claim to the court.  Claims under the Comprehensive Environmental Response, Compensation and Liability Act, otherwise known as Superfund, have a three-year statute of limitations, and that statute begins to run on discovery of a possible claim, Asarco told Judge Richard Schmidt.

“The Trustees had knowledge of the alleged release and losses well before July 14, 2003, three years prior to filing a claim,” the company said.  The state's knowledge was outlined in the attorney general's own proof of claim and expert report, Asarco told the court, both of which contained surveys, notices, memoranda and orders from the state warning the site was releasing dangerous metals into the Corpus Christi harbor and bay.

“It is undisputed that the state possessed knowledge of the alleged loss and its connection the alleged releases of hazardous substances at the site long before 2003,” said Asarco.

Even assuming the court were to rule that the claim was not time-barred, all portions of the state's claim relating to damage that occurred before the December 1980 effected date of Superfund were barred, the company added.  Last month, Judge Schmidt approved a $31 million settlement between Asarco and the federal government over cleanup at its hazardous California Gulch smelter site in Leadville, Colorado.

The settlement resolved a $200 million lawsuit brought by U.S. environment officials and the state of Colorado more than 20 years ago. The site, which encompasses the entire town of Leadville and an 11-mile stretch of the Arkansas River, was added to the U.S. Environmental Protection Agency's national priority list as a hazardous wasteland in 1983.  In approving the settlement, Judge Schmidt ignored the protests of Asarco's parent company, Asarco Inc., which earlier this month asked the court for an order forcing the company to seek its consent before entering into settlements “over the parent's strong protest.”

The company had slammed Asarco's haste in settling the California Gulch claims, saying the debtors had entered into an agreement despite expert analysis showing the claims were highly inflated.

“Alarmingly, the California Gulch settlement may be just the first of many settlement seeking to resolve the environmental claims that are the subject of the ongoing estimation proceeding and that are asserted in the aggregate amount of over $6.77 billion,” said the company, which lost power over Asarco in December 2005, when the court approved a corporate governance stipulation which shook up the board of directors and effectively excluded it from participation in governance matters.

Asarco, which has been active in mining, smelting and refining for over a century, still faces environmental claims at nearly 100 other sites. Those claims have been asserted by the federal government, state governments, Indian tribes and private parties.  The company also faces more than 95,000 asbestos-related personal injury claims, court documents have revealed, with the total value of all claims estimated to be potentially as high as $25 billion.  Asarco filed for Chapter 11 protection on Aug. 9, 2005, listing assets and liabilities in excess of $100 million.

Suit against Company Sued for Allegedly Misrepreseting Sustainable Harvesting Plan Halted by Bankruptcy Proceeding

June 28 (Bloomberg) -- Timberland owner Pacific Lumber Co. and its subsidiary Scotia Pacific Co. will be in court today to halt prosecution of a lawsuit against their affiliate Maxxam Inc. and Charles Hurtitz who heads the companies.

     The lawsuit in question was filed in California by two individuals suing in the names of the State of California and the U.S. government under laws allowing citizens to prove in court that someone made a false claim against the government.  The suit rests on an arrangement that Palco made with California to swap 7,000 acres of old-growth forests for $390 million cash, other timber acreage, and approval of a plan for sustainable timber harvesting.  The plaintiffs say that Palco is liable for not disclosing faulty methodology in the sustainable harvesting plan. Both the U.S. and California governments declined to join the lawsuit.

     The Chapter 11 filing by Palco stopped the lawsuit automatically. In papers filed in the U.S. Bankruptcy Court in Corpus Christi, Texas, Palco is asking Bankruptcy Judge Richard Schmidt today to stop the lawsuit against Maxxam and Hurwitz.  Palco says that proceeding with the suit against Maxxam and Hurwitz will have the practical effect of deciding the entire case, even though the companies in Chapter 11 would not technically be taking part.

     Palco, Scotia Pacific and four affiliates filed Chapter 11 petitions January 18 just before a $27 million payment came due on $714 million in notes secured by timber acreage in Humboldt County, California. Maxxam acquired the companies in a 1986 leveraged buyout.

     The case is Scotia Pacific Co. LLC, No. 07-20027, Bankruptcy Court, Southern District Texas (Corpus Christi).