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Environment
Newsletter - Third Quarter 2004
 
In this Issue...
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Court Ruling Allows WWII Contractor To Recover Its CERCLA Costs From Federal Government
 
 July 15, 2004
 
Amy L. Edwards- Washington

In April 2004 the U.S. Court of Appeals for the Federal Circuit handed down an important victory to a federal contractor who performed services for the federal government during World War II. In E.I. DuPont de Nemours v. U.S., 365 F.3d 1367 (2004), the court determined that the federal government must reimburse DuPont the cleanup costs it incurred under CERCLA to remediate contamination left behind at the Morgantown Ordnance Works (MOW) plant that it had built and operated for the government during World War II.

In 1984, the Environmental Protection Agency (EPA) listed the MOW site on the National Priorities List. Dupont subsequently spent more than $1.3 million in fees to investigate and remediate the site pursuant to a consent order with the EPA.

Dupont’s claims were based upon a broad indemnification clause contained in its 1940 contract with the government. This clause provided, among other things, that “all work ... is to be performed at the expense of the Government and that the Government shall hold [Dupont] harmless against any loss, expense (including expense of litigation), or damage (including damage to third persons because of death, bodily injury or property injury or destruction or otherwise) of any kind whatsoever arising out of or in connection with the performance of the work . ... “ 365 F.3d at 1370 (quoting from the MOW Contract, Article III-A(8) [emphasis added]).

The U.S. Court of Appeals ruled that this broad indemnification provision had been reconfirmed by the Contract Settlement Act in 1944. The Court also determined that Dupont’s claim was not abrogated by the Anti-Deficiency Act (ADA), 31 U.S.C. 1341, or the predecessors to that statute. The ADA generally prohibits the use of open-ended indemnification clauses in government contracts without specific appropriations or statutory authority. According to the court, this case was the first of its kind to examine the enforceability of an open-ended indemnification provision in light of the ADA. The court concluded that, “even if the government lacked authority, by virtue of the ADA or otherwise, to make the indemnification commitment it made in the 1940 MOW Contract, its express agreement in the 1946 Termination Supplement to maintain its indemnification obligation was authorized to the extent the [Contract Settlement Act] precludes application of the ADA.” 365 F.3d at 1376-7.

This decision should be helpful to other government contractors who performed services for the federal government during World War II and who are now paying a substantial price in terms of CERCLA cleanup costs.

For more information, contact Amy L. Edwards via e-mail at amy.edwards@hklaw.com or call toll free, 1-888-688-8500.

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