AmeriPride Serv. v. Texas Eastern Overseas

When determining the allocation of contribution costs in multi-party litigation, where some of the parties have settled, the district court has discretion in determining the most equitable approach, but the court must explain its methodology.

Valley Industrial Services, Inc. (“VIS”) was the operator of an industrial dry cleaning business in Sacramento, California for seventeen years. VIS used a hazardous substance called perchloroethylene as a solvent for its cleaning purposes. Eventually the chemical was released into the environment. While the chemical was unknowingly leaking into the underground, VIS merged into another company called Texas Easter Overseas, Inc. (“TEO”), and was eventually sold to AmeriPride Services, Inc. (“AmeriPride”). AmeriPride eventually discovered the leak, reported the problem to the authorities, and began a clean-up operation. AmeriPride filed a complaint against VIS, TEO, and two other involved parties seeking to recover contribution for the clean-up costs. Two of the parties settled with AmeriPride, but TEO brought suit. The district court ruled that TEO was liable for a portion of the costs, and held that TEO was to pay the total cost of clean-up, minus the settlement claims that had already been paid. On appeal, the Ninth Circuit disagreed with the district court’s method for allocation of damages, and explained that the district court is not bound by the tests of other circuits to determine contribution in these types of cases. The panel further noted, in regards to settlements, the lower court has great discretion in determining the most equitable approach to take. However, in this case, the district court did not properly explain the methodology it used to come to its conclusion. Therefore, the panel was unable to determine if the district court abused its discretion. VACATED and REMANDED.