Settle or Try the Case?

Posted on November 14, 2011 by John Barkett

Every Superfund allocation action involves a “settle or try” decision at some point.  Occasionally, I find an allocation decision where the outcome did not seem to justify the investment in litigation costs and fees and ask, “why didn’t this case settle?”

State of New York v. Solvent Chemical Co., Inc. et al., 685 F. Supp. 2d 357 (W.D.N.Y. 2010) is such a case.   There were three parties involved in the allocation: Solvent Chemical Co., Inc. (Solvent), E.I. du Pont de Nemours & Company (DuPont), and Olin Corporation (Olin).  Costs associated with four separate media were allocated: soils; the A-Zone shallow groundwater; the B-Zone bedrock groundwater; and the “hot spot” groundwater contamination.

The total response costs were $9,124,328.  This chart breaks down the response costs for each of these four media and shows the proposed allocation of Solvent’s expert and the resulting dollars that Solvent would recover:

 

The parties had a one-day settlement conference with a magistrate judge.  They could not reach agreement.  The case was then tried with the following outcome:

 

A comparison of the dollars claimed against the final judgment is shown below:

 

Between the settlement conference and the final judgment was a 19-day trial.  The district court heard from 10 witnesses live and 24 witnesses through their depositions.  There were 1,200 trial exhibits.  The parties made post-trial submissions followed by oral summations over three days in November 2008.  The district court judge took 15 months to issue its decision.

Viewed solely from an economic perspective, Olin was in a no-win situation.  I assume that its litigation fees and costs were much greater than its final allocation.  Why didn’t Solvent and Olin reach a settlement?  One has to believe that if the parties could have gamed out long before the trial the judgment against Olin less Solvent’s Olin-related litigation costs, they would have found a basis to settle.

In DuPont’s case, I will guess that Solvent put more faith in its allocation expert than it turns out, the judge did.  Parties have to remember than judges are instructed by CERCLA to do equity.   Advocacy rarely equals equity. 

The district court refused to allocate DuPont or Olin any future costs in part because a state regulatory official testified that such costs related to a contaminant linked only to Solvent’s operations.  Hence, I assume that, after litigation fees and costs, Solvent lost money.

As a mediator, I always tell parties, “I don’t care if you don’t settle, but I do care if you don’t settle and at the courthouse you wish you could turn back the clock to settle when you had the chance.”   Only the parties and the magistrate judge know why settlement did not occur, but unless the parties had taken extreme positions during settlement effectively forcing the trial, this seems like a case where a lack of foresight was costly.



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