Fina, Inc. v. Arco

No. 98-41021 (200 F.3d 266, 49 ERC 2089) (5th Cir. January 4, 2000)

The court holds that indemnity provisions in sales agreements between the original owner, intermediate owner, and current owner of a Texas oil refinery are unenforceable and do not bar the current owner's Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) claims against the original and intermediate owners. The court first holds that Delaware law applies in interpreting [30 ELR 20256] and assessing the enforceability of the indemnity provision between the current owner and the intermediate owner. The indemnity agreement specifies that it is governed by Delaware law. Further, the Delaware law that requires an indemnification provision to clearly and unequivocally state that it covers the claims at issue is not contrary to Texas law.

The Court then holds that the indemnity agreement between the current and intermediate owners is unenforceable as applied to the prospective CERCLA liability at issue because it fails to satisfy the clear and unequivocal test. The indemnity agreement between the current and intermediate owners purports to cover all claims arising from the refinery's operation. However, the indemnity provision gives no indication that the parties considered the issue of indemnifying the intermediate owner for the consequences of its own negligence. There is no reference in the indemnity agreement to the intermediate owner's own negligence, and the use of the all claims language is insufficient to satisfy the clear and unequivocal test. Further, the clear and unequivocal test is applicable to indemnification for the CERCLA strict liability claims at issue. Similarly, the clear and unequivocal test is not only applicable to indemnification for prospective liabilities caused by future acts of the indemnitee. Therefore, the current owner is not barred by the indemnity provision from pursuing its claims against the intermediate owner.

The court also holds that the indemnity provision between the current owner and the original owner is not enforceable under Texas law as applied to claims based on strict liability. Under Texas law, an indemnification provision is unenforceable as applied to strict liability claims unless that provision expressly states that it covers such claims. The indemnity at issue makes no mention of strict liability claims.

The full text of this decision is available from ELR (9 pp., ELR Order No. L-158).

Counsel for Plaintiffs
Frederick W. Addison III
Locke, Liddell & Sapp
2200 Ross Ave., Ste. 2200, Dallas TX 75201
(214) 740-8000

Counsel for Defendant
D. Allan Jones
Orgain, Bell & Tucker
470 Orleans St., Beaumont TX 77701
(409) 838-6412

[30 ELR 20256]

[NO TEXT IN ORIGINAL]