SHELL OIL COMPANY, Atlantic Richfield Company, Texaco, Inc., and Union Oil Company of California, Plaintiffs–Appellants, v. UNITED STATES, Defendant–Appellee.
Before O'MALLEY, REYNA, and WALLACH, Circuit Judges. Michael W. Kirk, Cooper & Kirk, PLLC, of Washington, DC, argued for plaintiffs-appellants. With him on the brief were Vincent J. Colatriano and Peter A. Patterson. Stephen C. Tosini, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Hilary S. Cairnie, BakerHostetler LLP, of Washington, DC, for amicus curiae American Fuel & Petrochemical Manufacturers. Of counsel were Richard B. Raile and Christopher H. Marraro. Daniel M. Steinway, Baker Botts L.L.P., of Washington, DC, for amicus curiae Exxon Mobil Corporation. With him on the brief were William S. Foster, Jr., and Michael Patrick Mcgovern.
The seventieth anniversary of the end of active United States participation in the Second World War will fall on September 2 of next year. A nation of pragmatists, we tend to forget our history until necessity revives our memory.1 To resolve this contract claim by Shell Oil Co. (“Shell”), Atlantic Richfield Co. (“ARCO”), Texaco, Inc. (“Texaco”), and Union Oil Co. of California (“Union Oil”) (collectively, “the Oil Companies”), we must recall and place into its appropriate context the atmosphere of stark determination for victory at all costs, which drove our war effort after the Japanese Empire attacked the United States Naval Base at Pearl Harbor on December 7, 1941.
Each of the Oil Companies entered into contracts with the United States to provide high-octane aviation gas (“avgas”) to fuel military aircraft as part of the national war effort (“the avgas contracts”). The production of avgas resulted in waste products such as spent alkylation acid and “acid sludge.” The Oil Companies disposed of such acid waste by contracting with Eli McColl, a former Shell engineer, to dump the waste at real property in Fullerton, California (“the McColl site”). Over fifty years later, California and the United States obtained compensation from the Oil Companies pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., for the costs of cleaning up the McColl site. The Oil Companies filed suit in the Court of Federal Claims, arguing the avgas contracts require the Government to indemnify them for the CERCLA costs. The Court of Federal Claims granted summary judgment in favor of the Government and denied the Oil Companies' motion for summary judgment. Shell Oil Co. v. United States, 108 Fed. Cl. 422 (Fed.Cl.2013) (“Shell Remand Decision ”). Because the avgas contracts require the Government to reimburse the Oil Companies for their CERCLA “charges,” this court reverses with respect to breach of contract liability. The Court of Federal Claims correctly determined, however, that material factual disputes preclude granting summary judgment on damages, and that issue is accordingly remanded for trial.
Compared to other available fuels, high-octane avgas enabled aircraft to fly faster and higher, with improved rates of climb and higher payload carrying capacity. It was “the most critically needed refinery product” during World War II and was essential to the United States' war effort.2 J.A. 477 ¶ 4. It was still a new technology in the late 1930s, however, and production was nowhere near sufficient for the massive quantities the United States and its allies would need to prosecute the war.
In 1942 and 1943, the Government, acting through the Defense Supplies Corporation (“DSC”) entered into the avgas contracts with the Oil Companies. The avgas contracts were long-term (primarily three-year) contracts to purchase avgas from the Oil Companies' refineries in Southern California, and enabled the Oil Companies to build the new refining facilities needed to produce the high levels of avgas vital to the war effort.
At the time the contracts were signed, the Government exercised substantial wartime regulatory control over almost every aspect of the petroleum industry. It had authority to impose obligatory product orders on private companies, with noncompliance subject to criminal sanctions or Government takeover. See Selective Training and Service Act of 1940, Pub.L. No. 76–783, ch. 720, § 9, 54 Stat. 885, 892 (1940). Facilities that accepted such obligatory product orders had to prioritize government military contracts above all other contracts. Act of May 31, 1941, Pub.L. No. 77–89, ch. 157, 55 Stat. 236 (1941). To the extent facilities relied on scarce raw materials, the Government could regulate supply chains to ensure continuing production. Id.; see also Second War Powers Act of 1942, Pub.L. No. 77–507, ch. 199, § 301, 56 Stat 176, 178 (1942) (authorizing the President to allocate any material or facility as necessary “in the public interest and to promote the national defense” whenever the country's defense needs would create a shortage in such materials or facilities).
The Government regulatory entities most relevant to the avgas contracts were (1) the Office of Petroleum Coordinator for National Defense (“OPC”), later replaced by the Petroleum Administration for War (“PAW”), and (2) the Office of Production Management (“OPM”), later run by and then replaced by the War Production Board (“WPB”). The WPB and PAW were created in January and December 1942, respectively. The WPB had primary authority over war procurement and production, and cooperated with the PAW to determine petroleum requirements and set national priorities for supplying the petroleum industry. Subject to the direction of the WPB, the PAW was charged with ensuring “adequate supplies of petroleum for military, or other essential uses” and “[e]ffect[ing] the proper distribution of such amounts of materials.” Exec. Order No. 9276, 7 Fed.Reg. 10,091, 10,092 (Dec. 4, 1942). The “PAW told the refiners what to make, how much of it to make, and what quality.” John W. Frey & H. Chandler Ide, A History of the Petroleum Administration for War 219 (1946), available at J.A.1917.
Days after Pearl Harbor, the Government recognized the need to quickly mobilize avgas production, with the OPC stating: “ ‘It is essential, in the national interest that the supplies of all grades of aviation gasoline for military, defense and essential civilian uses be increased immediately to the maximum.’ “ J.A. 498–99 (quoting OPC Recommendation No. 16) (emphases added). Then-existing facilities could not produce the required levels of avgas, necessitating construction of additional facilities. However, the Government's substantial authority to control production only extended to existing facilities; it could not force companies to invest in new ones. See, e.g., An Act to Expedite National Defense and for Other Purposes, Pub.L. No. 76–671, ch. 440, § 8(b), 54 Stat. 676, 680 (1940) (authorizing the Secretary of the Navy to nationalize and operate “any existing manufacturing plant or facility necessary for the national defense” when certain conditions were met) (emphasis added). A further stumbling block for the Government was that contracts with the Army and the Navy were subject to annual Congressional appropriations and thus limited to a one-year term. Such one-year contracts did not provide the long-term security necessary to justify the Oil Companies' investment in new facilities. In light of these limitations, the Government turned to the DSC, a government-owned corporation authorized to acquire critical and strategic materials, including avgas.
The DSC was a subsidiary of the Reconstruction Finance Corporation (“RFC”), another government-owned corporation. The designation in 1941 of avgas as a critical material enabled the RFC and its subsidiaries to buy, sell, and produce avgas and to make loans to companies to construct avgas production facilities. See Act of June 25, 1940, Pub.L. No. 76–664, ch. 427, § 5(1), 54 Stat. 572, 573 (codified at 15 U.S.C. § 606b (1940)). After purchasing avgas from the Oil Companies, the DSC resold it to the Army and the Navy at the national price established by the PAW (or its predecessor, the OPC).
Between 1942 and 1943, the Oil Companies entered into contracts with the DSC agreeing to sell vast quantities of avgas.3 The contracts set forth a base price for each barrel of avgas, which was negotiated individually with each refiner based on the refiner's production costs. The base price was calculated with the goal of permitting an estimated profit of between 6% and 7%. Profits were further subject to the Renegotiation Act of 1942, which required contractors to repay excess profits to the Government. Pub.L. No. 77–528, ch. 247, § 403, 56 Stat. 226, 245 (1942).
Given the low profit margin, the avgas contracts contained various concessions to the Oil Companies. They were three-year contracts, thus providing some measure of certainty that the newly-constructed avgas production facilities would pay off over time. They also contained cost-allocation measures to limit the Oil Companies' risk in producing avgas. For instance, the agreed-upon base price of avgas was subject to adjustment depending on the Oil Companies' costs, including the price of crude and other raw materials, and the transportation of raw materials. The contracts also required the Buyer, DSC, to pay “any now existing taxes, fees, or charges ․ imposed upon [the Oil Companies] by reason of the production, manufacture, storage, sale or delivery of [avgas] .” E.g., J.A. 111 (1942 Shell contract) (emphasis added).
Relevant to the CERCLA charges in this case, another subsection required DSC to reimburse the Oil Companies for “any new or additional taxes, fees, or charges, ․ which [the Oil Companies] may be required by any municipal, state, or federal law in the United States or any foreign country to collect or pay by reason of the production, manufacture, sale or delivery of the [avgas]” (“the new or additional charges provision”). E.g., J .A. 111 (emphases added). These price-adjustment mechanisms ensured the Oil Companies would not be forced into lossmaking activities by factors outside their control, such as the costs of materials and transportation, or unforeseen Government-imposed charges. The avgas contracts thus “assured the manufacturer of his costs, plus a fair but moderate profit.” J.A.1996 (statement of the Chief Legal Counsel for the PAW to the House Appropriations Committee).
During contract negotiation and the years that followed, the Government's primary concern was maximum avgas production. The Government directed the Oil Companies to “undertake extraordinary modes of operation which were often uneconomical and unanticipated at the time of refiners' entry into their [avgas] contracts.” J.A. 514. For example, the PAW sometimes ordered companies to purchase raw materials outside their normal supply chain to achieve maximum avgas production. The Aviation Gasoline Reimbursement Plan required the Government to assume the costs of such uneconomical operations.
Avgas consists of an ordinary gasoline base, blended with petroleum distillates and chemical additives. Alkylate is the most prevalent additive (at an amount of 25% to 40%) and is produced by alkylation, a process that uses 98% purity sulfuric acid as a catalyst. Because of the importance of avgas to the war effort, the WPB directed most available sulfuric acid to avgas production.
Spent alkylation acid is a byproduct of alkylation, and has a lower acid content than sulfuric acid. During the relevant time period, spent alkylation acid could be (1) reprocessed to its former 98% acid percentage, (2) used to process other petroleum products, like motor gasoline and kerosene, or (3) discarded as waste. Treating other petroleum products with spent alkylation acid further diluted its acid content until it became “acid sludge,” which had acid levels of between 35% and 65%.
Predictably, the Oil Companies' success in increasing avgas production resulted in a corresponding increase in sulfuric acid consumption, which increased five-fold from 1941 to 1944.5 Facilities to reprocess the spent alkylation acid did not increase apace, however. The Government twice refused applications to construct new acid processing facilities, and one of the facilities that did exist failed to operate at its design capacity. Moreover, the scarcity of available railroad tank cars (and the WPB's refusal to make transportation of acid waste a priority) meant the Oil Companies were unable to transport acid sludge for reprocessing or other uses. See J.A. 565–66 (acid sludge could be used as fertilizer, but the scarcity of railroad tank cars prevented transporting acid sludge to the fertilizer plant). By late 1944 and 1945, the Oil Companies were unable to reuse the vast amounts of spent alkylation acid at their own refineries, and ultimately dumped much of it at the McColl site. Although dumping and burning acid waste were common before the war, the lack of reprocessing facilities and transportation options (and resulting bottleneck of acid waste) necessitated dumping and burning larger quantities of acid waste than ever before.
The Oil Companies dumped waste at the McColl site from 1942 until shortly after the war ended. Approximately 12% of the waste was spent alkylation acid, and another 82.5% was acid sludge resulting from chemical treatment of other petroleum products. The remaining 5.5% was acid sludge arising from treatment of Government-owned benzol, for which the Government was held liable in the CERCLA litigation. Only the non-benzol waste (i.e., the spent alkylation acid and the remaining acid sludge) is at issue in this case. Shell contributed most of the acid waste at the McColl site—at least 60%. ARCO contributed 10% to 20%, and also relied on other disposal methods, such as burning. Texaco dumped no waste until almost the end of the war, and instead burned its acid sludge waste until late 1944. Some of Union Oil's sludge was reprocessed rather than dumped.
The Allies achieved victory in Europe on May 8, 1945. Japan officially surrendered on September 2, 1945. The United States Government no longer required huge quantities of avgas, and terminated the avgas contracts in 1945 or soon thereafter.
Over 45 years later, in 1991, the United States and California brought a CERCLA action against the Oil Companies to recover the costs of cleaning up the McColl site. The district court held the Oil Companies, among other parties, were jointly and severally liable for the acid waste they dumped at the McColl site, United States v. Shell Oil Co. (Shell I ), 841 F.Supp. 962, 976 (C.D.Cal.1993), but then allocated 100% of the cleanup costs to the Government as an “arranger” of the disposal, United States v. Shell Oil Co. (Shell II ), 13 F.Supp.2d 1018, 1030 (C.D.Cal.1998); see also 42 U.S.C. § 9607(a)(3) (1994) (extending CERCLA liability to “any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances”). The Ninth Circuit affirmed the Oil Companies' liability, but reversed the allocation to the United States, holding the United States was not an “arranger” for the non-benzol acid waste. United States v. Shell Oil Co. (Shell III ), 294 F.3d 1045, 1056, 1058 (9th Cir.2002) (“No court has imposed arranger liability on a party who never owned or possessed, and never had any authority to control or duty to dispose of, the hazardous materials at issue.”) (internal quotation marks and citation omitted).
Following remand, the district court transferred the Oil Companies' breach of contract counterclaim to the Court of Federal Claims pursuant to 28 U.S.C. § 1631. The Oil Companies voluntarily dismissed the transferred Complaint without prejudice, exhausted their administrative remedies with the General Services Administration pursuant to the Contract Settlement Act of 1944 (“CSA”), Pub.L. No. 78–395, ch. 358, 58 Stat. 694 (1944) (codified at 41 U.S.C. § 113, et seq. (2006)), and filed a new Complaint in the Court of Federal Claims, seeking reimbursement for the CERCLA costs.
The Court of Federal Claims entered summary judgment in favor of the Oil Companies with respect to breach of contract liability and damages, holding the Government was required to reimburse the Oil Companies for 100% of their non-benzol CERCLA costs. Shell Oil Co. v. United States, 93 Fed. Cl. 439, 442 (2010); Shell Oil Co. v. United States, 93 Fed. Cl. 153 (2010). On appeal, this court found the presiding trial judge had a conflict of interest arising from his wife's stock ownership of Chevron Corp., the parent company of plaintiffs-appellants Texaco and Union Oil. Shell Oil Co. v. United States, 672 F.3d 1283, 1294 (Fed.Cir.2012). Because the judge's failure to recuse himself was not harmless error, this court vacated and remanded with instructions that the case be reassigned to a different judge. Id.
On remand, the Court of Federal Claims granted summary judgment in favor of the Government. Shell Remand Decision, 108 Fed. Cl. at 422. It held there were three independent reasons why the Oil Companies were not entitled to reimbursement under the avgas contracts. First, it held the CERCLA costs incurred by the Oil Companies were not “charges” within the meaning of the new or additional charges provision in the avgas contracts. Id. at 434. Second, even if the contracts required reimbursement, the court found the Oil Companies released any valid claim when the contracts were terminated and “all other issues” were settled in the mid-to-late 1940s. Id. at 436. Finally, the court held that even if the Oil Companies had otherwise valid indemnification claims based on the avgas contracts, the Anti–Deficiency Act barred such indemnification. Id. at 437.
The Court of Federal Claims denied the Oil Companies' motion for summary judgment for the additional reason that there were disputed facts over how much of the non-benzol waste at the McColl site was dumped “by reason of” the Oil Companies' “production, manufacture, sale or delivery” of avgas. Id. at 446–48.
The Oil Companies filed this timely appeal. This court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(3) (2012).
On appeal, the Oil Companies challenge each of the three independent bases for the trial court's decision. They further contend there is no genuine dispute that they are entitled to recover 100% of the non-benzol CERCLA costs. Each argument is addressed in turn.
This court reviews the Court of Federal Claims' contract interpretation de novo. Ford Motor Co. v. United States, 378 F.3d 1314, 1316 (Fed.Cir.2004). “Summary judgments also receive plenary review, the appellate tribunal applying the same criteria as did the trial court, with all justifiable factual inferences drawn in favor of the non-movant.” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
The parties dispute the meaning of “charges” as it appears in the new or additional charges provision. The Oil Companies contend it is a broad indemnification provision designed to reimburse the Oil Companies for all Government-imposed “expenses” or “costs,” including CERCLA response costs. The Government claims that the plain language of the contract and other contemporaneous wartime contracts show that environmental cleanup costs are not “taxes, fees, or charges” as contemplated by the avgas contracts.
[ (a) ] Buyer shall pay in addition to the prices as established in [Sections IV and V] hereof [“Price and Payment” and “Price Escalation” clauses], any new or additional taxes, fees, or charges, other than income, excess profits, or corporate franchise taxes, which Seller may be required by any municipal, state, or federal law in the United States or any foreign country to collect or pay by reason of the production, manufacture, sale or delivery of the commodities delivered hereunder. Buyer shall also pay any such taxes on crude petroleum, or the transportation thereof, to the extent such taxes result in increased cost of the commodities delivered hereunder not compensated for by [Section V] hereof.
[ (b) ] Buyer shall also pay in addition to the prices as established in [Sections IV and V] hereof, any now existing taxes, fees, or charges measured by the volume or sales price of the aviation gasoline delivered hereunder, imposed upon Seller by reason of the production, manufacture, storage, sale or delivery of such gasoline, unless Buyer or Seller is entitled to exemption from a given tax, fee or charge by virtue of Buyer's governmental status; it being understood that Buyer now believes that both Buyer and Seller are entitled to such exemption. Seller represents that the taxes, fees and charges referred to in this paragraph have not been included in its computation of costs on which the prices set forth in [Section IV] hereof are based.
[ (c) ] If in any case the parties cannot agree on the question as to whether or not Buyer or Seller is entitled to exemption from a given tax[, fee or charge ] by virtue of Buyer's governmental status, the burden shall be upon Buyer to obtain a ruling in writing from a duly constituted and authorized governmental tax authority as to such exemption. Until such ruling is obtained Buyer shall pay the amount of the tax to Seller or to the appropriate tax collecting agency or make satisfactory arrangements with such tax collecting agency.
J.A. 111–12 (Shell contract, Apr. 10, 1942); J.A. 136–37 (Shell contract, May 1, 1943); J.A. 156–57 (Union Oil contract, Dec. 31, 1942, different section numbering); J.A. 179–80 (Union Oil contract, May 1, 1943); J.A. 207 (ARCO contract, Feb. 3, 1942, bracketed language in section (c), different paragraph labeling); J.A. 227–28 (ARCO contract, Feb. 20, 1943, bracketed language in section (c)); J .A. 254 (Texaco contract, Jan. 17, 1942, different language in subsection (b), different section numbering and paragraph labeling); J.A. 278–79 (Texaco contract, Feb. 8, 1943, different language in subsection (b)) (emphases added to disputed term).
“Reading the relevant clause as a whole, including the title, ‘Taxes,’ “ the Court of Federal Claims found “it was plainly intended as a price-adjustment mechanism in the event the Oil Companies were assessed additional or unanticipated taxes as a result of their avgas production.” Shell Remand Decision, 108 Fed. Cl. at 432 (emphasis added). It accorded a “fairly narrow tax-related meaning” to “charges,” interpreting it to mean “an encumbrance, lien, or other like financial burden or liability, especially one that relates to real property.” Id. at 432–33. Such an interpretation, the trial court found, was consistent with the noscitur a sociis canon of interpretation, which “ ‘counsels that a word [be] given more precise content by the neighboring words with which it is associated.’ “ Id. at 432 (holding that “ ‘charges' [should] be ‘given more precise content’ by ‘taxes' and ‘fees' ”) (internal citation omitted).
The Court of Federal Claims found that multiple textual signals supported its narrow interpretation of “charges” as an encumbrance or lien: (1) the provisions are entitled “Taxes”; (2) they sometimes use the “umbrella identifier ‘such taxes' “ to refer to “ ‘taxes, fees, or charges,’ “ id.; and (3) the exclusions from “ ‘taxes, fees, or charges' “ are “specific types of taxes,” i.e., “ ‘income, excess profits, or corporate franchise taxes,’ “ id.
On appeal, the Oil Companies argue that “charges” should be interpreted to mean “costs,” including CERCLA costs. Appellants' Br. 20–21 (quoting, inter alia, Black's Law Dictionary 265 (9th ed.2009) (“charge” means “[p]rice, cost or expense”); Black's Law Dictionary 311 (3d ed.1933) (“charges” means “[t]he expenses which have been incurred, or disbursements made, in connection with a contract, suit, or business transaction”)). According to the Oil Companies, the “new or additional taxes, fees, or charges” mentioned in the avgas contracts “clearly refer to different classes of payments,” whereas encumbrances or liens (as the trial court interpreted “charges”) do not refer to payment, “but rather to obligations or burdens often attached to property, usually for the purpose of securing a payment.” Appellants' Br. 27.
The Government apparently agrees that the trial court's interpretation of “charges” is incorrect. It does not defend the Court of Federal Claims' interpretation of “charges” as “an encumbrance or lien,” but instead states that “ ‘charge’ plainly connotes an amount paid to receive a privilege, product, or service.” Appellee's Br. 29. It nonetheless argues charges cannot mean “costs,” because another part of the avgas contracts uses “costs” in a different context. Id. at 23 (citing J.A. 111 (“Buyer shall also pay any such taxes on crude petroleum or the transportation thereof, to the extent such taxes result in increased cost of the commodities delivered hereunder.”)). The Government contends this shows the parties “necessarily ascribed different meanings to the [words charges and costs].” Id.
The Government nevertheless argues that “charges” cannot include CERCLA costs, because “the word ‘charge’ appears nowhere in CERCLA, with the exception of its use in the context of ‘person in charge,’ 42 U.S.C. §§ 9603, 9604, and one discussion of a party ‘sought to be charged’ for ‘natural resource damage.’ 42 U.S.C. § 9607(f)(1).” Appellee's Br. 29. The Government further observes that “the district court and appellate CERCLA cases underpinning this matter wholly lack the word ‘charge’ “ (with exceptions not relevant here), and argues that “one need look no further than those cases to determine that the CERCLA response costs here have not been held to be ‘charges' under any definition of that term.” Id. at 31.
Contrary to the Government's arguments, CERCLA costs are “charges” within the meaning of the relevant contract provision: The avgas contracts promise reimbursement of “any new or additional ․ charges” the Government imposes on the Oil Companies “by reason of the production, manufacture, sale or delivery of [avgas].” See, e.g., J.A. 111 (emphasis added). CERCLA is a federal law requiring responsible parties to pay the “costs of removal or remedial action,” 42 U.S.C. § 9607(a)(4)(A) (emphasis added), and is thus a charge (i.e., cost) imposed by a federal law. The plain language of the new or additional charges provision thus requires the Government to indemnify the Oil Companies for CERCLA costs incurred “by reason of” the avgas contracts. The Government's search for exactitude in the CERCLA context is beside the point.
The Government argues that other textual indicators in the avgas contracts require limiting the scope of indemnification. For instance, it argues the new or additional charges provision only extends to charges imposed by “duly constituted and authorized governmental tax authorit[ies].” Appellee's Br. 35 (internal quotation marks and citation omitted) (modification in original). The “duly constituted ․ tax authority” language is located two paragraphs after the new or additional charges provision, and addresses when “the parties cannot agree ․ whether or not Buyer or Seller is entitled to exemption ․ by virtue of Buyer's governmental status” (“the exemption provision”). See, e.g., J.A. 112. In such cases, “the burden shall be upon Buyer to obtain a ruling in writing from a duly constituted and authorized governmental tax authority as to such exemption.” J.A. 112 (emphasis added).
The Government nevertheless argues that indemnification is improper because the promise to pay for new or additional charges cannot encompass environmental liability. See Appellee's Br. 18 (“[T]he ‘Taxes' clause lacks any language that could be construed to cover environmental remediation resulting from the oil companies' own decisions to dump acid waste.”). It argues the avgas contracts are distinguishable from the World War II procurement contracts in DuPont and Ford Motor Co., where this court required CERCLA indemnification. See E.I. Du Pont de Nemours & Co. v. United States, 365 F.3d 1367 (Fed.Cir.2004); Ford Motor Co., 378 F.3d at 1314. The indemnification provision in DuPont, for example, agreed “ ‘to 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,’ “ as long as the loss resulted from performance under the contract and did not result from the negligence of DuPont corporate officers or representatives. DuPont, 365 F.3d at 1372 (citation omitted) (emphases removed). This court held DuPont's “hold harmless” provision “ ‘show[ed] an intent to allocate all possible liabilities among the parties,’ “ and that “ ‘CERCLA liability must be included among the future unknown liabilities which the parties allocated between themselves.’ “ Id. at 1373 (quoting Elf Atochem N. Am. v. United States, 866 F.Supp. 868, 870 (E.D.Pa.1994)). The procurement contract in Ford Motor Co. required reimbursement of “allowable costs,” including “ ‘loss or destruction of or damage to property as may arise out of or in connection with the performance of the work under this contract,’ “ which this court held covered CERCLA liability. Ford Motor Co., 378 F.3d at 1319.
The Government argues the avgas contracts contain neither a “hold harmless” provision, as in DuPont, nor an “allowable costs” provision, as in Ford Motor Co. As the Government concedes, however, “no ‘special words' are required to create a promise of indemnification.” Appellee's Br. 37 (quoting Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 334 (5th Cir.1981)). While it is true that the language in the avgas contracts differs from the contract language in DuPont and Ford Motor Co., the relevant portions of the latter contracts also differed from one another. The proper question is whether the avgas contracts require the Government to pay the Oil Companies' CERCLA charges. Indemnification is required by the contracts' promise to pay for “any” government-imposed “charges” incurred “by reason of” the avgas contracts, and it is immaterial whether the new or additional charges provision is identical to the provisions in DuPont and Ford Motor Co.
The Government further argues the new or additional charges provision “does not contemplate indemnity for damages sounding in tort,” and therefore cannot require CERCLA indemnification. Appellee's Br. 34. It relies on a statement in DuPont that “CERCLA evolved from the doctrine of common law nuisance.” DuPont, 365 F.3d at 1373. Contrary to the Government's argument, DuPont supports requiring CERCLA indemnification in this case. In DuPont, the Government argued the contract's “hold harmless” provision did not require reimbursement for CERCLA liability because CERCLA was not foreseeable at the time the contract was entered into. Id. This court rejected that argument, holding there was “no basis in the law for reading a limitation of foreseeability” into the contract, which “evidence[d] ․ that indemnification was available for all claims, foreseeable or not.” Id. In the alternative, the DuPont court noted the Government's concession that nuisance liability would have been foreseeable, and observed that “CERCLA evolved from the doctrine of common law nuisance.” Id.
As in DuPont, the avgas contract's new or additional charges provision requires reimbursement for even unforeseeable charges. The relevant provision in DuPont made no mention of new or additional charges, yet was nonetheless found to encompass unforeseeable CERCLA liability. The avgas contracts' promise to reimburse for “new or additional” charges must similarly extend to “all claims, foreseeable or not.” See id. The DuPont court's alternative reasoning, based on nuisance liability, is irrelevant to the interpretation of the new or additional charges provision.
The Government offers other contemporaneous contracts as extrinsic evidence that the new or additional charges provision does not require CERCLA indemnification. It relies on Government contracts with Humble Oil and DuPont that contain both a “hold harmless” clause and a promise to reimburse for applicable taxes and charges. See J.A. 889–90, 898–99 (Humble Oil contract June 1, 1944); J.A. 845, 850 (DuPont contract Nov. 28, 1940). The Government argues these contracts provide “powerful evidence” that the new or additional charges provision “[was] never intended to provide the sort of indemnity that the oil companies seek.” Appellee's Br. 26.
The Government has not established ambiguity in the relevant provision, in the absence of which it is improper to rely on extrinsic evidence. See Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040 (Fed.Cir.2006) (en banc) (“If the provisions are clear and unambiguous, they must be given their plain and ordinary meaning, and we may not resort to extrinsic evidence to interpret them.”) (internal quotation marks and citation omitted). The Government's argument is also unpersuasive since the taxes clauses in the DuPont and Humble contracts are not the same as the new or additional charges provision in the avgas contracts. The Humble and DuPont contracts promise reimbursement for “[a]ll applicable taxes, and other proper charges,” J.A. 850, and “any applicable Federal, State or local taxes, assessments or charges,” respectively. J.A. 889. They do not extend to “new or additional” government-imposed charges, and are, in fact, more analogous to the avgas contract's promise to pay for “any now existing taxes, fees, or charges.” See J.A. 111. The Humble and DuPont contracts thus provide no reason to narrow the otherwise plain meaning of the new or additional charges provision.
Even assuming the taxes provision in the Humble and DuPont contracts extends to CERCLA liability, it is not coextensive with the “hold harmless” clause. The latter applies to losses arising from destruction of property, whether or not it is Government imposed, whereas the former applies to Government-imposed charges, whether or not loss to property was otherwise incurred. Because the taxes provision and the “hold harmless” provision require indemnification for different types of risks, the fact that both appear in the same contract does not render either provision “ ‘superfluous[ ] or redundant,’ “ as the Government contends. See Appellee's Br. 28 (quoting Medlin Constr. Grp., Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed.Cir.2006)).
Finally, to the extent extrinsic evidence is considered, it confirms that the parties intended “charges” to mean “costs.” See TEG–Paradigm Envt'l, Inc. v. United States, 465 F.3d 1329, 1338 (Fed.Cir.2006) (citing Coast Fed. Bank, 323 F.3d at 1040) (“Although extrinsic evidence may not be used to interpret an unambiguous contract provision, we have looked to it to confirm that the parties intended for the term to have its plain and ordinary meaning.”). Communications between the parties used “charges” interchangeably with “costs,” referring to, inter alia: (1) “the estimated charge for raw materials,” (2) “[i]nvestment charges,” (3) “interest charges,” and (4) “overhead charges. ” J.A.1955–56 (emphases added); see also J.A.1964 (a letter from Standard Oil to the PAW stating “this proposed additional charge for tank car or tank truck shipping reflects quite accurately the additional cost to Seller and its Suppliers of tank car or tank truck shipping as compared with barge and tanker shipping”) (emphases added).10 This usage confirms that the parties intended the new or additional charges provision to extend to Government-imposed costs, such as CERCLA liability.
The context in which the contracts were formed simply further confirms that the new or additional charges provision requires reimbursement of the Oil Companies' CERCLA costs. See Metric Constr., Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed.Cir.1999) (quoting Hol–Gar Mfg. Corp. v. United States, 351 F.2d 972, 975 (Ct.Cl.1965)) (“ ‘[T]he language of a contract must be given that meaning that would be derived from the contract by a reasonably intelligent person acquainted with the contemporaneous circumstances.’ ”). World War II and the stark necessity of increased avgas production are the circumstances surrounding the formation of the avgas contracts. The Government was in a position of near-complete authority over existing refineries, but needed the Oil Companies' cooperation to construct new production facilities to meet the extraordinary demand for avgas. The Oil Companies agreed to the avgas contracts' low profits in return for the Government's assumption of certain risks outside of the Oil Companies' control. See supra Background Part I. The CERCLA charges in this case are one such risk. The Oil Companies could not have contemplated such CERCLA charges at the time they entered into the contracts; indeed, dumping the acid waste at the McColl site was expressly permitted. See J.A. 605 ¶ 492 (Eli McColl had a permit from the City of Fullerton to dump the waste.). These circumstances confirm that the new or additional charges provision must be interpreted to require reimbursement for the Oil Companies' CERCLA costs arising from avgas production. The Court of Federal Claims' holding to the contrary is accordingly reversed.
The Court of Federal Claims denied the Oil Companies' reimbursement claims for the additional reason that they were released when the avgas contracts were terminated and settled in the mid-to-late 1940s. The parties stipulated in the CERCLA litigation that the avgas contracts “were terminated in 1945 or, in the case of [ARCO], shortly thereafter. Matters relating to profits from these contracts, termination costs, and all other issues concerning these contracts were settled between the parties in the late 1940s.” J.A. 640.
The Court of Federal Claims relied on DuPont and Ford Motor Co. in reasoning that the Oil Companies' claims did not survive the termination and settlement of the underlying avgas contracts. In both DuPont and Ford Motor Co., this court held there was no release of the contractor's indemnification claim because the agreement terminating the underlying World War II contract expressly reserved future indemnification claims. DuPont, 365 F.3d at 1370; Ford Motor Co., 378 F.3d at 1318. In this case, neither party could locate the Oil Companies' termination agreements, and the Court of Federal Claims reasoned that “the Oil Companies have offered no evidence or argument that this ‘termination’ and ‘settle[ment]’ differed in any material way from a general release.” Shell Remand Decision, 108 Fed. Cl. at 436.
On appeal, the Oil Companies argue that “[t]he stipulation says nothing at all about whether the Oil Companies executed a release (general or otherwise) as part of [the] settlement, or if they did execute such a release, whether it encompassed or excepted future reimbursement claims for ‘taxes, fees, or charges.’ “ Appellants' Br. 34. The Oil Companies contend this uncertainty is fatal to the trial court's finding of a general release, because the Government (as the defendant) bore “ ‘the burden of proving the validity and applicability of a release,’ “ and failed to meet that burden. Id. at 35 (quoting A.R.S. Inc. v. United States, 157 Ct. Cl. 71, 76 (1962)).
The Government responds that the new or additional charges provision did not “remain in force after the expiration or termination of the contracts,” and that “[s]uch permanence should not be inferred.” Appellee's Br. 23; see also id. (quoting Consumers Ice Co. v. United States, 475 F.2d 1161, 1166–67 (Ct.Cl.1973) (describing “a judicial reluctance to lock parties into a given set of rights and obligations for long or indefinite periods without some clear indication that this was actually intended by the parties”)). The parties' stipulation is adequate to prove release, the Government contends, because the stipulation “admits ․ that ‘all other issues concerning these contracts were settled between the parties in the late 1940s.’ “ Appellee's Br. 43 (quoting J.A. 640 ¶ 609).
The Court of Federal Claims erred in holding the Government met its burden to prove release. “Once the facts of breach are established, the defendant has the burden of pleading and proving any affirmative defense that legally excuses performance.” Stockton E. Water Dist. v. United States, 583 F.3d 1344, 1360 (Fed.Cir.2009) (internal quotation marks and citation omitted); see also R. Ct. Fed. Cl. 8(c)(1) (“In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including ․ release.”). “[T]he burden of proving the validity and applicability of release is on the defendant.” A.R.S. Inc., 157 Ct. Cl. at 76. The two facts relied upon by the Government—termination and settlement of all claims—do not satisfy its burden to prove release of the Oil Companies' claims for CERCLA indemnification.
The Oil Companies brought these claims under the CSA, which is meant to ensure “speedy and equitable final settlement of claims under terminated war contracts.” 41 U.S.C. § 101 (2006) (emphasis added), repealed and replaced by An Act To Enact Certain Laws Relating to Public Contracts, Pub.L. No. 111–350, § 6, 124 Stat. 3677, 3854 (Jan. 4, 2011); see also id. § 103(h) ( “ ‘[T]ermination claim’ means any ․ claim under a terminated war contract․”). The CSA allows posttermination indemnification claims, such as the Oil Companies' claims on the terminated avgas contracts, “ ‘so long as the expenditure arose on account of the contractor's performance under the contract, and the expenditure is not otherwise excluded from payment by other provisions.’ “ Ford Motor Co., 378 F.3d at 1320 (quoting Houdaille Indus., Inc. v. United States, 151 F.Supp. 298, 312 (Ct.Cl.1957)); see also id . at 1319 (“[T]he CSA explicitly contemplated later-arising claims, and set no period of limitations.”).
Houdaille, for example, involved a World War II procurement contract in which the Government agreed to reimburse the contractor for, inter alia, its reasonable costs and expenditures resulting from contract termination. Houdaille, 151 F.Supp. at 300. The contract was terminated in 1946, and the contractor “paid $420,212.46 more in [unemployment insurance] contributions because of its experience under [the contract] than it would have if its contribution rate was based only on the operations of its three normal peacetime plants.” Id. at 305. The Houdaille court rejected the Government's argument that “there [was] no authority” to reimburse costs “after the contract had expired,” finding the expenses were reimbursable because they “arose on account of plaintiff's operation under the contract.” Id. at 312. The court also held the contractor's indemnification claim was not barred by release, id. at 310, making it clear that a contract termination is not the same as a general release. In this case, the CERCLA costs for which the Oil Companies now seek indemnification arose, at least in part, from the production of avgas pursuant to the avgas contracts. The fact that the costs were not imposed until after the contracts were terminated does not bar the Oil Companies' CSA claims.
The Government nonetheless argues that the parties' settlement of all issues concerning the avgas contracts amounts to a general release of claims for reimbursement. It contends this case is distinguishable from DuPont and Ford Motor Co., where the Termination Agreements expressly preserved the contractor's indemnification claims. See DuPont, 365 F.3d at 1373–74 (The Termination Supplement preserved all indemnification claims and “apparently included no termination or expiration date.”); Ford Motor Co., 378 F.3d at 1319 (“The Termination Agreement ․ includes all claims ‘not now known’ arising from performance of the War Contract.”). The Government maintains there is no indication that the settlement agreements in this case include any analogous promises to allow future indemnification claims. Just as the contract in DuPont was “no longer in effect, having been supplanted by the Termination Supplement,” DuPont, 365 F.3d at 1373, the Government maintains the avgas contracts in this case are “no longer in effect,” having been supplanted by the settlement agreements of “all other issues.” Appellee's Br. 42–44. According to the Government, the terminated and settled avgas contracts cannot support any new indemnification claim; such a claim would have to be based on the settlement agreements, which are not in the record.
The parties' stipulation that “all other issues” were settled does not satisfy the Government's burden to prove a general release. See J.A. 640. A settlement between two parties may resolve all then-existing issues without discharging any and all obligations between the parties. See Restatement (Second) of Contracts § 284(1) (“A release is a writing providing that a duty owed to the maker of the release is discharged immediately or on the occurrence of a condition.”). In Ford Motor Co., for example, all issues had been settled, but not all rights were released; the parties agreed to allow future indemnification claims under the contract. 378 F.3d at 1319–20. It is the Government's burden to prove the settlement agreements released future claims under the avgas contracts, A.R.S. Inc., 157 Ct. Cl. at 76, and the Government has failed to establish the content of those settlement agreements. The Government has not shown that the termination and settlement in this case amount to a general release of the Oil Companies' claims for reimbursement of new or additional charges. The Court of Federal Claims therefore erred in holding the Oil Companies' contract claims were released.
The final independent basis for the Court of Federal Claims' grant of summary judgment in favor of the Government was that any indemnification promise broad enough to encompass future CERCLA liability was an unenforceable violation of the Anti–Deficiency Act (“ADA”).
No executive department or other Government establishment of the United States shall expend, in any one fiscal year, any sum in excess of appropriations made by Congress for that fiscal year, or involve the Government in any contract or other obligation for the future payment of money in excess of such appropriations unless such contract or obligation is authorized by law.
31 U.S.C. § 665 (1940) (now revised and codified at 31 U.S.C. § 1341) (emphasis added). “[A]bsent an express provision in an appropriation for reimbursement adequate to make such payment, [the ADA] proscribes indemnification on the grounds that it would constitute the obligation of funds not yet appropriated.” Cal.-Pac. Utils. Co. v. United States, 194 Ct. Cl. 703, 715 (1971). In Chase v. United States, for example, the plaintiff sought damages under a building lease entered into with the Postmaster General. 155 U.S. 489, 490 (1894). The Supreme Court held the Postmaster General was authorized to enter into contracts on behalf of the United States only if “authorized by law, or ․ under an appropriation adequate to its fulfil [l]ment.” Id. at 502. Because “[t]here is no claim that the lease in question was made under any appropriation whatever, ․ the only inquiry is whether the contract of lease was ‘authorized by law,’ within the meaning of the [ADA].” Id. (holding the contract was not authorized by law).
The inquiry at the Court of Federal Claims likewise centered on whether the indemnification provisions at issue were “authorized by law.” Before this court, however, the parties and amicus disagree on a preliminary question: whether the DSC was subject to the ADA in the first place. The Oil Companies argue that “DSC's contracts were not funded through appropriations,” and contend the ADA thus does not apply. Appellants' Br. 39 (citing GAO, Reference Manual of Government Corporations, S. Doc. No. 86 (1945); J.A. 420 (DSC “did not receive direct annual appropriations.”)). Amicus American Fuel & Petrochemical Manufacturers (“AFPM”) elaborates that the DSC “was funded through borrowings and retained earnings, not through Congressional appropriations and had no borrowing limit.”11 AFPM Br. 20. The Oil Companies and AFPM therefore contend that the new or additional charges provision in the avgas contracts is not subject to the ADA.
The Oil Companies argued before the trial court that the ADA did not bar recovery, because the new or additional charges provision was “authorized by” the First War Powers Act and implementing Executive Orders 9024 and 9001. The Court of Federal Claims held “that none of these sources provided the requisite ADA waiver that would have allowed the Government to indemnify the Oil Companies.” 12 Shell Remand Decision, 108 Fed. Cl. at 437. On appeal, the Oil Companies contend the Court of Federal Claims wrongly required them to prove an ADA “waiver” when the ADA only requires authorization for the relevant provision. They maintain the authority granted to the President in the First War Powers Act, and delegated to the DSC through implementing Executive Orders 9024 and 9001, authorized the avgas contracts' new or additional charges provision.
Both parties agree that Title II of the First War Powers Act, enacted in 1941, granted the President the power to “authorize any department or agency” to enter into contracts that would otherwise violate the ADA, “whenever he deems such action would facilitate the prosecution of the war.” Pub.L. No. 77–354, ch. 593, § 201, 55 Stat. 838, 839 (1941). The parties disagree, however, whether the President delegated this authority to the DSC in Executive Orders 9024 and 9001. In Executive Order 9024, President Roosevelt invoked the “authority vested in [him] by the Constitution and statutes of the United States,” to establish the WPB and grant the WPB Chairman the power to, inter alia, “[d]etermine the policies, plans, procedures, and methods of the several Federal departments, establishments, and agencies in respect to war procurement and production, including purchasing, contracting, specifications, and construction.” 7 Fed.Reg. 329, 330 ¶ 2(b) (Jan. 17, 1942). In a February 13, 1942, letter, the WPB Chairman then delegated to the OPC the authority “to determine ․ the price at which [avgas] is to be purchased, the capacity of the particular refiner to perform and the technical details of the particular contract,” and delegated to the DSC the authority “to determine ․ the other terms and the form of such [avgas] contracts.” J.A. 400.
By invoking authority from the “statutes of the United States,” Executive Order 9024 delegates to the WPB the authority under the First War Powers Act to authorize indemnification provisions otherwise barred by the ADA. Moreover, the Chairman's letter to the DSC delegating the authority to determine “the other terms and the form of such [avgas] contracts” transfers that authority to the DSC. Contrary to the Government's objection that Executive Order 9024 does not mention contracting, it clearly directs the WPB Chairman to direct “the policies, plans, procedures, and methods” with respect “to war procurement and production, including purchasing, contracting, specifications, and construction.” This delegation is sufficient to authorize the indemnification provisions at issue under the ADA.
Each contracting agency shall have authority, notwithstanding any provisions of law other than contained in this chapter, (1) to make any contract necessary and appropriate to carry out the provisions of this chapter; (2) to amend by agreement any existing contract, either before or after notice of its termination, on such terms and to such extent as it deems necessary and appropriate to carry out the provisions of this chapter; and (3) in settling any termination claim, to agree to assume, or indemnify the war contractor against, any claims by any person in connection with such termination claims or settlement.
41 U.S.C. § 120(a) (1946) (emphasis added). The CSA did not expressly mention the ADA, but this court nonetheless reasoned that the “bestowal of contracting authority ‘notwithstanding any provisions of law other than contained in this chapter’ “ was sufficient to authorize indemnification pursuant to the ADA. DuPont, 365 F.3d at 1375. Similarly, although Executive Order 9024 does not expressly state that the Chairman of the WPB (and, in turn, the DSC) can expend unappropriated funds otherwise in violation of the ADA, it is a broad delegation of contracting authority that impliedly invokes the President's authority under the First War Powers Act to bypass the ADA's restrictions. The Court of Federal Claims therefore erred in holding that the ADA rendered the indemnification provision unenforceable.
The Government nevertheless argues the DSC was at all times subject to prior Executive Order 8512, which stated: “No agency shall make expenditures or involve the Government in any contract or other obligation for the future payment of money in excess of the amount currently available therefor under the apportionments so approved or revised.” Appellee's Br. 46 (quoting 5 Fed.Reg. 2,849 (Aug. 15, 1940)) (internal quotation marks omitted). Although Executive Order 9024 provides that all prior “conflicting” Executive Orders “are hereby superseded,” the Government argues the terms of Executive Order 9024 do not conflict with Executive Order 8512, whose prohibition thus remained in effect. To the contrary, however, Executive Order 9024 delegates the President's general contracting authority to the WPB “[b]y virtue of the authority vested in [the President] by the ․ statutes of the United States.” Such statutes include the First War Powers Act's authority to enter into contracts that would otherwise violate the ADA. Delegating authority to bypass the ADA conflicts with Executive Order 8512, which prohibited contracts in excess of then-current appropriations. Executive Order 8512 thus does not control in this case.
Because the new or additional charges provision was authorized by the First War Powers Act, as delegated to the DSC through Executive Order 9024 and the WPB Chairman's letter, there is no need to consider whether the President also delegated such authority under Executive Order 9001. The Court of Federal Claims' holding that the ADA prohibited reimbursement of new or additional charges is therefore reversed.
Each of the three independent bases for denying the Oil Companies' reimbursement claims has been reversed, making it appropriate to enter summary judgment in favor of the Oil Companies with respect to breach of contract liability. The sole remaining issue is whether the Court of Federal Claims correctly determined that genuine disputed facts prevented granting summary judgment with respect to damages.
The Court of Federal Claims found there were “factual questions” regarding “what portion of the non-benzol waste [ (i.e., the spent alkylation acid and the non-benzol acid sludge) ] was created ‘by reason of’ the avgas program.” Shell Remand Decision, 108 Fed. Cl. at 448. On appeal, the Oil Companies argue this court should award 100% of their CERCLA costs on the ground that the Government is collaterally estopped from arguing that anything less than 100% of the non-benzol acid waste was due to the avgas contracts.
The Oil Companies rely on the decision of the district court in the CERCLA litigation, which found “that 100 percent of the non-benzol waste at the McColl Site is attributable to the avgas program.” Shell II, 13 F.Supp.2d at 1026. The Oil Companies argue the district court's attribution “finding is binding on the Government as a matter of issue preclusion.” Appellants' Br. 56 (quoting United States v. Mendoza, 464 U.S. 154, 158 (1984) (“[O]nce a court has decided an issue of fact or law necessary to its judgment, that decision is conclusive in a subsequent suit based on a different cause of action involving a party to the prior litigation.”)). The district court's finding was not final, however, but rather was reversed by the Ninth Circuit. Shell III, 294 F.3d at 1048–49. The Ninth Circuit instead held the Government was not an “arranger” for the non-benzol waste, and thus did not reach the question of how much non-benzol waste was attributable to the avgas program. Id. The final decision in Shell III thus did not resolve the attribution issue and cannot serve as the basis for issue preclusion. See Laguna Hermosa Corp. v. United States, 671 F.3d 1284, 1288 (Fed.Cir.2012) (issue preclusion requires, inter alia, that “resolution of the issue was essential to a final judgment in the first action”) (internal quotation marks and citations omitted).
The Oil Companies contend the district court's nonbenzol attribution analysis was necessary to the Ninth Circuit's holding because the Ninth Circuit affirmed the district court's apportionment analysis with respect to the benzol waste. This argument confuses the district court's attribution holding (based on the factual question of how much acid waste was caused by the avgas program) with its apportionment holding. In the latter, the district court identified multiple reasons why 100% of the waste for which the Government was an “arranger” (both the benzol and non-benzol waste) should be equitably apportioned to the Government: (1) it would properly place the costs of war on society as a whole, and (2) it would reflect the Government's role in limiting reprocessing facilities and access to tank cars. Shell II, 13 F.Supp.2d at 1027. The Ninth Circuit affirmed this apportionment analysis with respect to the benzol waste.
This equitable apportionment holding is distinct from the issue of attribution relevant in this case: how much of the acid waste dumped at the McColl site was “by reason of” the avgas program. The Ninth Circuit did not rely on or incorporate the district court's attribution holding with respect to the non-benzol waste, and instead stated “[t] he undisputed facts indicate that the Oil Companies ․ dumped acid waste from operations other than avgas production at the McColl site.” Shell III, 294 F.3d at 1062 (emphasis added). In short, the prior CERCLA litigation does not preclude the Government from challenging the amount of acid waste attributable to the avgas contracts.
Absent collateral estoppel, the Oil Companies do not contest the trial court's finding of a genuine dispute regarding how much of the acid waste at the McColl site resulted from the avgas contracts, nor does this court discern any error. See, e.g., J.A. 569 (“Kerosene and lubricating oils were also acid treated” and “produced acid sludge.”); J.A. 572 (The McColl site “contains acid sludge resulting from the treatment of civilian and military petroleum products.”). The case is remanded for the Court of Federal Claims to determine how much acid waste at the McColl site was “by reason of” the avgas contracts.
For the foregoing reasons, this court reverses the Court of Federal Claims' grant of summary judgment with respect to breach of contract liability, and remands for a trial on damages.
The majority concludes that a “Taxes” clause in several contracts for high-octane aviation gas (“avgas”) should be broadly interpreted to require the United States to indemnify the Oil Companies for a CERCLA judgment covering restoration efforts of the McColl acid waste site more than fifty years after the completion of the contracts. I do not interpret the “Taxes” clause as a general indemnification clause that captures production-related costs. For this and the other reasons set forth below, I respectfully dissent .
“Contract interpretation is a question of law, which [the court] review [s] without deference.” 1st Home Liquidating Trust v. United States, 581 F.3d 1350, 1355 (Fed.Cir.2009); Teg–Paradigm Envtl., Inc. v. United States, 465 F.3d 1329, 1336 (Fed.Cir.2006). “In the case of contracts, the avowed purpose and primary function of the court is the ascertainment of the intention of the parties.” Alvin Ltd. v. U.S. Postal Serv., 816 F.2d 1562, 1565 (Fed.Cir.1987). Contract interpretation begins with the language of the written agreement, which must be given “[its] ordinary meaning unless the parties mutually intended and agreed to an alternative meaning.” Harris v. Dep't of Veterans Affairs, 142 F.3d 1463, 1467 (Fed.Cir.1998). We may not resort to extrinsic evidence “to create an ambiguity where a contract was not reasonably susceptible of differing interpretations at the time of contracting.” Metric Constructors, Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed.Cir.1999); see also Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1038 (Fed.Cir.2004) (en banc).
a) Buyer shall pay in addition to the prices as established in Sections IV and V hereof, any new or additional taxes, fees, or charges, other than income, excess profits, or corporate franchise taxes, which Seller may be required by any municipal, state, or federal law in the United States or any foreign country to collect or pay by reason of the production, manufacture, sale or delivery of the commodities delivered hereunder. Buyer shall also pay any such taxes on crude petroleum, or the transportation thereof, to the extent such taxes result in increased cost of the commodities delivered hereunder not compensated for by Section V hereof.
J.A. 111–12 (Shell Oil Co. Contract, Apr. 10, 1942) (emphasis added).
The majority's conclusion that CERCLA liability is covered by this clause hinges on an isolated interpretation of the word “charges.” The majority engages in a lengthy discussion of the plain meaning of “charges” and concludes that it is synonymous with “costs.” Maj. Op. at 17–19. The majority then proceeds to hold that the “Taxes” clause requires the Government to reimburse the Oil Companies for costs of any and all type, regardless of how they were incurred, as long as those costs arise “by reason of” the production and delivery of avgas.
Such an interpretation ignores the contractual character and import of the “Taxes” clause. When read as a whole, the contract signals that the parties, at the time they entered into the contract, intended the “Taxes” clause to be read as a price-adjustment mechanism covering unexpected tax-related burdens. First, the clause is titled “Taxes.” Second, the clause uses the term “such taxes” several times to refer back to the broader category of “taxes, fees, or charges.” Third, the specific exclusions from “taxes, fees, or charges” are all income and related taxes, including “income, excess profits, [and] corporate franchise taxes.” Finally, the clause provides that the payment of “new or additional taxes, fees, or charges” will be in addition to the prices established in the “Price and Payment” (Section IV) and “Price Escalation” (V) clauses of the contract. The term “charges” should thus be interpreted consistently and in harmony with the broader operation of the “Taxes” clause as a price-adjustment mechanism.
The majority summarily dismisses these textual signals in favor of an isolated and overly-broad interpretation of the singular term “charges” to conclude that “[t] he plain language of the new or additional charges provision” must encompass CERCLA liability. Maj. Op. at 19. In doing so, the majority ignores the trial court's use of the noscitur a sociis canon of interpretation, which “is just an erudite (or some would say antiquated) way of saying what common sense tells us to be true: ‘[A] word is known by the company it keeps.’ “ James v. United States, 550 U.S. 192, 222 (2007) (Scalia, J., dissenting) (alteration in original) (quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307 (1961)). Indeed, contract terms must be construed, not in isolation, but as a whole and in a way that gives effect to the surrounding context. NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed.Cir.2004) (noting that a contract must “be considered as a whole and interpreted so as to harmonize and give reasonable meaning to all of its parts”); Metric Constructors, 169 F.3d at 752 (“Before arriving at a legal reading of a contract provision, a court must consider the context and intentions of the parties.”). “The context and subject matter of a contract may indicate that an ordinary word or phrase has an unusual meaning in a given sentence.” 11 Richard A. Lord, Williston on Contracts § 32:6 (4th ed. 1999 & Supp.2009). “[I]t is questionable whether a word has a meaning at all when divorced from the circumstances in which it is used.” E. Allen Farnsworth, Contracts 454 (4th ed.2004). Here, the majority's interpretation ignores the plain meaning of the text, fails to give harmony to the contracts as a whole, and is overall unreasonable.
For example, the majority dismisses, in a footnote, any reliance on the title of the clause (“Taxes”) as evidence of the clause's fairly narrow tax-related meaning. Maj. Op. at 20 n. 9. The majority notes that the Supreme Court tends to “place[ ] less weight on” captions, headings and titles when construing statutory provisions. Id. (quoting Lawson v. FMR LLC, No. 12–3, 2014 WL 813701, at *10 (U.S. Mar. 4, 2014)). This principle, which is often used when “the [statutory] text is complicated and prolific,” nevertheless recognizes that a heading can be a helpful “ ‘short-hand reference to the general subject matter’ of the provision.” Lawson, 2014 WL 813701, at *10 (quoting Trainmen v. Baltimore & Ohio R. Co., 331 U.S. 519, 528 (1947)). Hence, Supreme Court precedent supports a finding that the parties intended for the “general subject matter” of this clause to cover “Taxes” and tax-related items.
World War II and the stark necessity of increased avgas production are the circumstances surrounding the formation of the avgas contracts. The Government was in a position of near-complete authority over existing refineries, but needed the Oil Companies' cooperation to construct new production facilities to meet the extraordinary demand for avgas.
Maj. Op. at 26 (emphasis original). The majority concludes that “[t]hese circumstances confirm that the new or additional charges provision must be interpreted to require reimbursement for the Oil Companies' CERCLA costs arising from avgas production.” Id. The majority thus justifies its broad interpretation of the “Taxes” clause not on the language of the clause itself but on a weighing of the equities in light of the wartime circumstances, subject matter not in the record before us and certainly not reflected by the terms of the contract. I believe that reliance on unsupported historical and social anecdotes should not trump the plain meaning of the contract terms and, in this case, transform a straightforward “Taxes” clause into a catch-all indemnification provision. See, e.g., City of Oxnard v. United States, 851 F.2d 344, 347 (Fed.Cir.1988) (noting that the contract language is the best evidence of the parties' intent and should take precedence over any “subjective intent of one of the parties, if contrary to the unambiguous and reasonable text of the written contract”).
In order for a pre-CERCLA indemnification clause to cover CERCLA liability, courts have held that the clause must be either  specific enough to include CERCLA liability or  general enough to include any and all environmental liability which would, naturally, include subsequent CERCLA claims.
Here, nothing in the plain language of the avgas contracts indicates that the parties intended for the “Taxes” clause to “allocate [generally] all possible liabilities” among themselves, much less to allocate specifically the risks of environmental liability. Id. The “Taxes” clause is devoid of any language that resembles the broad indemnification provisions considered by our decisions in DuPont and Ford Motor Co. See DuPont. 365 F.3d at 1367; Ford Motor Co. v. United States, 378 F.3d 1314, 1314 (Fed.Cir.2004). In DuPont, we held that the Government's agreement “to hold [DuPont] harmless against any loss, expense ․ or damage ․ of any kind whatsoever ” was sufficient to include CERCLA liability. 365 F.3d at 1372 (emphasis added). In Ford Motor Co., we similarly held that CERCLA liability was covered by a provision requiring reimbursement of all “allowable costs,” including “loss or destruction of or damage to property as may arise out of or in connection with the performance of the work under this contract.” 378 F.3d at 1319 (emphasis added). No such provision exists in this case.
Yet, the majority's entire analysis rests on the conclusion that a term requiring payment of “charges” or “costs” is sufficient to require broad indemnification. Maj. Op. at 22. But the “Taxes” clause lacks any reference to concepts indicating that the parties intended to enter into a broad indemnity provision; terms like “loss,” “damage,” “liability,” “destruction,” “indemnify,” “hold harmless,” and “injury” are nowhere to be found. Although I agree with the majority that no “special words” are required to give effect to a promise of indemnification, id., that does not mean that the contract can be devoid of any objective indicia of the parties' intent to generally allocate liability between them. See, e.g., City of Oxnard, 851 F.2d at 347. In my view, the avgas contracts lack any evidence of such intent.
If history serves a purpose in this case, it is to show that in the 1940s, as today, avgas production results in byproducts, some of which are wastes. Waste created in the production of petrochemicals represents a cost on the producer, in this case the Oil Companies. That the contracts are silent on who bears the cost related to the production and disposal of avgas-related byproducts indicates that the parties intended the cost to be borne by the Oil Companies.
Indeed, the plaintiffs in this case are sophisticated companies that “surely would know how to [negotiate and] draft broad hold harmless indemnification clauses extending in perpetuity if that were their intent,” even during wartime. Shell Remand Decision, 108 Fed. Cl. at 425. Our previous decisions in DuPont and Ford Motor Co. provide evidence of this very fact. The Oil Companies' best opportunity to recover their clean-up costs from the Government was through the CERCLA litigation in California, and they should not now be allowed to recover by fitting a square peg into a round hole. The majority errs by interpreting a straightforward “Taxes” clause as a catch-all indemnification provision. Therefore, I must dissent.
1. “ ‘There are no new problems in the law, only forgotten solutions[,] and the issues which arose yesterday will always arise again tomorrow.’ “ Jeremy Rabkin & Ariel Rabkin, Navigating Conflicts in Cyberspace: Legal Lessons from the History of War at Sea, 14 Chi. J. Int'l L. 197, 198 (2013) (quoting Evan J. Wallach, Partisans, Pirates, and Pancho Villa: How International and National Law Handled Non–State Fighters in the “Good Old Days” Before 1949 and That Approach's Applicability to the “War on Terror,” 24 Emory Int'l L.Rev. 549, 552–53 (2010)).
2. “At least since the transformation of navies from coal to diesel fuels in the early twentieth century availability of sources of petroleum products has been recognized by great powers as vital to their national interest.” Evan J. Wallach, The Use of Crude Oil by an Occupying Power as a Munition de Guerre, 41 Int'l & Comp. L.Q. 287, 287 (1992); see also John W. Frey & H. Chandler Ide, A History of the Petroleum Administration for War 1 (1946), available at J.A. 431 (“World War II, from beginning to end, was a war of oil.”).
3. At least some of the avgas contracts provided for loans to the Oil Companies to expand avgas production facilities, and required the Oil Companies to use “best efforts” to complete such construction as quickly as possible. See, e.g., J.A. 97, 106 (1942 Shell contract) (promising to “maintain work on the expansion day and night”).
4. After the war, the new avgas production facilities' usefulness was questionable; avgas consumption in the United States dropped to 70,000 barrels a day. Over time, however, the Oil Companies identified new uses for these facilities. The DSC was dissolved in 1945, and the RFC was dissolved in 1957, at which time the RFC transferred all relevant liabilities and obligations to the General Services Administration. See Reorganization Plan No. 1 of 1957, 71 Stat. 647 (1957).
5. The increase in sulfuric acid use did not match the increase in avgas production because the Oil Companies discovered a method of processing avgas that used far less sulfuric acid than had previously been necessary.
6. Even if the Government's proposed definition is not synonymous with “costs,” it plainly includes CERCLA liability costs: “[T]he costs at issue were ‘amount[s]’ the Oil Companies ‘paid to receive ․ service[s],’ specifically the removal of hazardous substances from the McColl Site and remediation of their effects.” Reply Br. 4.
7. The dissent offers no different meaning. It agrees with the trial court's application of the noscitur a sociis canon of interpretation, but does not appear to adopt the trial court's definition of “charges” as an encumbrance or lien. See Dissenting Op. at 5. By nevertheless concluding that the new or additional charges provision only covers “ ‘Taxes' and tax-related items,” id. at 6, the dissent gives no effect to the parties' inclusion of “charges” in that provision, Metric Constr., Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747, 754 (Fed.Cir.1999) (“Courts prefer ․ an interpretation of a contract that gives effect to all its terms and leaves no provision meaningless.”).
8. Nor does the Government contend the ARCO contracts should be construed differently than the other contracts that lack any reference to “charges” imposed by a tax authority.
9. The dissent places great weight on other “textual signals,” including the title of the provision (“Taxes”) and other portions of the text referring to “taxes, fees and charges” as “such taxes .” See Dissenting Op. at 4–5. With respect to the former, the Supreme Court recently emphasized that it “has placed less weight on” headings and titles, especially when their “under-inclusiveness ․ is apparent.” Lawson v. FMR LLC, 134 S.Ct. 1158, 1169 (2014). Because the “Taxes” heading omits the “fees” and “charges” that are also addressed by the new or additional charges provision, it is under-inclusive. It is “ ‘but a shorthand reference to the general subject matter’ of the provision, ‘not meant to take the place of the detailed provisions of the text.’ “ Id. (quoting Trainmen v. Balt. & Ohio R. Co., 331 U.S. 519, 528 (1947)). Moreover, aside from reciting the trial court's reasoning, the Government's briefing to this court did not rely on the title of the “Taxes” clause, nor on the references to “such taxes.” Like the other portions of the contract discussed above, these textual indicators do not alter the plain scope of the new or additional charges provision.
10. The United States objects to this and other material located at Joint Appendix pages 914 to 2003 and 2011 to 2026, which was not before the trial court in this case. Although the objected-to material is helpful for context and background, this court nowhere accords it determinative weight.
11. The RFC, of which the DSC was a subsidiary, was capitalized with $500 million in capital stock subscribed by the United States, but was otherwise funded primarily by debt and retained earnings. J .A. 1429; see also 15 U.S.C. § 602 (1940). The RFC was authorized to charter a subsidiary “on such terms and conditions as [the RFC] may determine.” 15 U.S.C. § 606b (1940). In August 1940, the RFC chartered the DSC, vesting it with authority “to borrow money and issue its secured or unsecured obligations therefore.” J.A. 1447–48; see also J.A. 1440, 1443–44 (DSC borrowed over $6 billion and earned enough to repay approximately $4 .8 billion back after the war.).
FN12. Before the Court of Federal Claims, the Oil Companies also contended that the requisite authorization was provided by the National Defense Act of 1916 and a June 1941 amendment to the charter of the DSC, Shell Remand Decision, 108 Fed. Cl. at 437, but do not raise these arguments on appeal.. FN12. Before the Court of Federal Claims, the Oil Companies also contended that the requisite authorization was provided by the National Defense Act of 1916 and a June 1941 amendment to the charter of the DSC, Shell Remand Decision, 108 Fed. Cl. at 437, but do not raise these arguments on appeal.
1. I do not interpret the “Taxes” clause as allowing the Oil Companies to recover their CERCLA costs, I do not address the Court of Federal Claims's conclusion that recovery is also precluded by general release and the Anti–Deficiency Act.


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In the Roman Catholic Church’s campaign against heresy on the European continent in the late Middle Ages, ecclesiastical courts used the oath ex officio, by which suspects were required to swear to answer truthfully all questions that might be posed, without knowing the accusers, the charges, or the evidence. Refusal to take the oath resulted in condemnation as guilty, and acquiescence posed great risks of self-incrimination or punishment for perjury. Because perjury courted eternal damnation even if temporally unpunished, the oath was a powerful incentive for self-incrimination.
At about the same time, ecclesiastical courts in England, exercising jurisdiction over many secular offenses as well as church matters, sometimes imposed the oath ex officio and, more menacingly, in the sixteenth and seventeenth centuries so did the Court of High Commission (focused on heresy but able to impose civil as well as spiritual penalties) and the Court of Star Chamber (a secular court focused on political as well as criminal offenses). These courts also acknowledged, however, an opposing principle, nemo tenetur prodere seipsum (or nemo tenetur seipsum accusare)—no man should be compelled to betray (or accuse) himself. This principle arose not so much as a right of the accused as a means of requiring a credible basis for charges beyond the suspect’s own words; it stood in opposition to the obligation to answer under the oath ex officio but was restricted in application and not a sure safeguard.
The courts of High Commission and Star Chamber were abolished in 1641 and the oath ex officio died out, but criminal defendants in common-law courts still faced aggressive pretrial questioning by magistrates and trial questioning by prosecutors and judges; at neither point were they under oath, but their words (or refusal to speak) could be used against them. Although the practice of trial questioning gradually died out, the absence of defense attorneys meant that the only defense available was to speak on one’s own behalf. An effective right to silence did not begin to emerge in England until the late eighteenth century, when trial procedures began to be revolutionized and a norm of excluding involuntary confessions (if only because they might be untrue) began to take hold.
Similar conditions prevailed in the American colonies, including the conflict between the ex officio and nemo tenetur principles. Heightened antipathy to British mechanisms of oppression, including use of the oath ex officio in prerogative courts, led all the newly independent states in the years after 1776 to embody in constitution, bill of rights, or common law some explicit or implicit recognition of a right not to incriminate oneself. When the Bill of Rights was added to the new federal constitution, there was no significant debate over inclusion of the Fifth Amendment provision that ‘‘No person . . . shall be compelled in any criminal case to be a witness against himself.’’ These state and federal provisions formalized rather than reformed best current procedure, however, and did not entail the privilege against self-incrimination as we know it. They precluded torture and some other coercive forms of interrogation, and incriminating interrogation under oath—but unlike witnesses, defendants were not under oath at trial. They remained subject to an expectation that the innocent could and would defend themselves, and official pretrial pressures to confess and use of the products thereof were not seen as a violation of rights. The federal constitutional guarantee, moreover, would not apply against the states—which conduct the vast majority of criminal trials—until 1964.
Although the accused had to defend themselves in court if they lacked counsel, they could not testify under oath in any American jurisdiction until 1864 (because they were not considered disinterested parties). By 1900, the federal government and every state but Georgia had passed laws allowing (but not requiring) defendants to testify, and most of the new statutes stipulated that no adverse inferences could be drawn from a decision not to do so. (A century later, the Court would affirm that those are constitutional rights as well.) Counsel was now much more readily available, and defendants who could afford them could therefore exercise a genuine right to silence at trial.
The privilege forbade compulsion to testify under oath, but the use of incriminating statements gained through pretrial interrogation was another matter. Courts determined the admissibility of such statements on the basis of their trustworthiness, an assessment resting in large part on their voluntariness. Because pretrial questioning gradually passed out of the hands of magistrates and became the responsibility of newly developing police departments, however, trial judges had only partisan accounts of interrogations and tended to give the benefit of the doubt to police— who had both the incentive and the opportunity to use coercive methods to obtain confessions.
Without reference to the Fifth Amendment, the Supreme Court held in Hopt v. Utah Territory that threats, inducements, or promises could render a confession involuntary in federal court; in 1897, it casually announced that the Fifth Amendment embodied the federal standard of admissibility but then ignored that approach for several decades. More significantly, the Court ruled in Boyd v. United States that the enforced production of private papers violated the Fifth Amendment and in Counselman v. Hitchcock that the privilege could be asserted not only at a criminal trial but in other forums where testimony could be compelled, because such testimony could later be introduced at trial. Counselman also held that incriminating testimony could be compelled only with a grant of complete immunity from prosecution for the offense in question (transactional immunity).
Early in the twentieth century, the Court held that the privilege is restricted to natural persons and cannot be asserted by corporations, labor unions, or other collective entities. It reiterated the view that (like the rest of the Bill of Rights) the Fifth Amendment privilege against self-incrimination did not apply to the states and added that the Fourteenth Amendment guarantee of due process (which does apply to the states) did not include the privilege. By mid-century it was clear that where it does apply, the privilege is not automatic and must be formally invoked. Defendants in criminal trials have an absolute right not to testify, but witnesses in any forum may assert the privilege only when their answers would present a realistic risk of incrimination, either directly or by providing a link in a chain of evidence or a lead to further evidence. Even if the requested information would be incriminating, it is not privileged if the individual does not face criminal liability, as when immunity has been granted or the statute of limitations has expired. The privilege may not be invoked to avoid any noncriminal consequences, however undesirable, but it is available even to those who maintain complete innocence, because they could be prosecuted on the basis of appearances. Consistently with the nemo tenetur principle, it protects individuals from being compelled to incriminate themselves, but not from the compulsion of evidence against them from any other source.
In the latter half of the twentieth century, the Court carved out various other exceptions to the testimonial privilege, first by elaborating the older idea that the privilege does not apply to records that a general regulatory statute requires individuals or organizations to keep. It then refused to expand the nemo tenetur principle by holding in Schmerber v. California and subsequent cases that the prohibition of compulsion to be a witness against oneself extends only to testimonial or communicative evidence and offers no protection against the compelled production of physical evidence such as blood samples, fingerprints, DNA samples, and even utterances for the purpose of voice recognition.
Drawing on the narrow and literal conception of the privilege in Schmerber, the Court undercut the Boyd case’s protection of private papers in Fisher v. United States and subsequent cases, holding that there is no protection against a subpoena for (or search and seizure of) voluntarily prepared private papers because no communicative act has been compelled. The contents of such papers thus enjoy no protection, but where the act of producing them would itself be incriminating, they cannot be subpoenaed without a grant of immunity for the act of production (but not for the contents). The Court also significantly modified the Counselman decision by holding in Kastigar v. United States that transactional immunity provides more protection than the Fifth Amendment requires and that immunity from the use of testimony and any evidence directly or indirectly derived therefrom—use and derivative use immunity—is all that is required for the compulsion of incriminating testimony. That formulation, the Court concluded, is congruent with the Fifth Amendment privilege as enforced by the exclusionary rule, under which compelled statements and evidence derived therefrom may not be introduced as evidence against the person whose rights were violated, but he or she may still be prosecuted.
The testimonial privilege came most prominently and controversially to public attention in the era of the 1950s, when events such as the spread of communism in Eastern Europe, the Korean War, and Soviet espionage concerning the atomic and hydrogen bombs brought to fever pitch a relentless investigation of communism in America that came to be known as McCarthyism. Persons suspected of disloyalty were investigated not only by grand juries but also very publicly by congressional committees such as the House Un-American Activities Committee (HUAC), the Senate Subcommittee on Internal Security, and the Senate Permanent Subcommittee on Investigations under Senator Joseph R. McCarthy (R–WI), who in 1954 was censured by the Senate for his conduct. Witnesses could claim the privilege because of the threat of prosecution under the Smith Act, but in Ullmann v. United States the Court rejected the argument that it could be used to shield them from ‘‘loss of job, expulsion from labor unions, state registration and investigation statutes, [loss of ] passport eligibility, and general public opprobrium,’’ even though these disabilities might be much more severe than the noncriminal consequences previously denied protection. In what is now generally regarded as an atmosphere of paranoid fear often leading to investigations serving little purpose beyond probing the political beliefs and unfairly sullying the reputations of their targets, witnesses granted immunity faced the choices of refusing to answer and being punished for contempt, lying, and being punished for perjury or answering truthfully and being subjected to the harsh consequences identified by William Ullmann. The very act of claiming the privilege, even if immunity was not granted and testimony was not required, branded one as probably disloyal. Many persons lost their jobs as a result, and many public and private careers were unjustifiably ruined.
The threat of punishment for contempt is not the only form of compulsion, and as the anticommunist crusade died down, the Court ruled that individuals could not be fired from public employment, prohibited from entering into business contracts with the government, stripped of political party office, or barred from the practice of law simply for asserting the privilege (but could suffer such consequences if they refused to testify under a grant of immunity). In Albertson v. Subversive Activities Control Board it struck down a statute requiring members of communist organizations to register with the government and supply information about their activities, distinguishing it from general regulatory reporting requirements not aimed at criminal suspects. In the same spirit, it also upheld the assertion of the privilege with respect to laws requiring registration of gamblers and owners of illegal firearms. The Court opted to protect other values, however, by upholding a common state requirement that persons involved in traffic accidents with property damage stop and provide other drivers with their names and addresses (California v. Byers), and a court order to a mother suspected of serious child abuse to produce the child (Baltimore City Department of Social Services v. Bouknight). It also made clear that the privilege protects only those confessions compelled by governmental action and not those resulting from such other sources of compulsion as mental illness.
State courts had typically admitted or excluded confessions on the basis of their reliability, considering their voluntariness in making that assessment, but over the next three decades (and particularly in the liberalizing era of Chief Justice Earl Warren), the Court elaborated and enforced a conception of due process in which fair treatment of suspects was the touchstone and voluntariness per se was the criterion of admissibility for confessions. It held that psychological as well as physical coercion could violate due process and gradually abandoned the approach in which the determination of whether various forms and degrees of coercion were excessive depended on the powers of resistance of the suspect in question. The scope of permissible pressure was progressively reduced to rule out techniques of intimidation, protracted and persistent questioning, deprivation of bodily needs, and similar tactics of interrogation, with the ultimate test being whether or not a suspect had confessed of his or her own free will.
The voluntariness criterion in state cases was now so close to the federal standard of not being compelled to incriminate oneself that the Court relied on the state confession cases in Malloy v. Hogan, where it incorporated the self-incrimination clause of the Fifth Amendment into the due process clause of the Fourteenth Amendment and applied it (and its associated doctrines) to the states. In a companion case applicable only within the United States, it held that persons may assert the privilege in one jurisdiction out of fear of prosecution in another, and that a grant of immunity in one jurisdiction applies to other jurisdictions as well.
A major problem remained, however, which was the difficulty trial judges had considering the admissibility of confessions encountered in determining the true nature of interrogations that had occurred in the privacy of police stations. The Court thus took another major step in Miranda v. Arizona by holding that the privilege against self-incrimination applies to coerced confessions as well as compelled testimony and devising the Miranda warnings to protect the privilege for persons undergoing custodial interrogation.
At the time of Boyd in the late nineteenth century, the rationale for the privilege seemed to be the protection of privacy, but subsequent decisions such as Schmerber and Fisher and those on collective entities and required records have undermined that conception, and there is no consensus on an alternative beyond a general desire to prohibit abusive governmental tactics. Debate over the proper scope of the privilege thus continues, with serious arguments for both expansion (such as restoring protection for private papers) and contraction (such as permitting the use of physical evidence derived from compelled statements). Controversy is compounded by uncertainty about the policy impact of constitutional doctrines. There is, for example, serious disagreement as to whether the Miranda initiative has either significantly inhibited police or substantially benefited suspects (most of whom waive their rights and talk to police). Furthermore, new issues concerning the proper scope of the privilege in the context of the war on terror are beginning to emerge. In that effort, the purpose of interrogation (of citizens and aliens, at home and abroad) may be to gather intelligence rather than evidence for prosecution, and the Court has ruled that it is not the use of coercive tactics of interrogation that violates the privilege, but only the use of the products as evidence in a criminal trial. With respect to both enduring and emerging issues, the scope and applicability of the privilege against self-incrimination will be the subject of continuing controversy.
Dolinko, David, Is There a Rationale for the Privilege against Self-Incrimination? U.C.L.A. Law Review 33 (1986): 1063–1148.
Helmholz, R. H., et al. The Privilege against Self-Incrimination: Its Origins and Development. Chicago: University of Chicago Press, 1997.
Levy, Leonard W. Origins of the Fifth Amendment: The Right against Self-Incrimination. New York: Oxford University Press, 1968.
Taylor, John B. Right to Counsel and Privilege against Self- Incrimination: Rights and Liberties under the Law. Santa Barbara, CA: ABC-CLIO Press, 2004.
Witt, John Fabian, Making the Fifth: The Constitutionalization of American Self-Incrimination Doctrine, 1791–1903, Texas Law Review 77 (1999): 825–922.

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July 13, 2017, California Supreme Court, Michael Williams v. The Superior Court of Los Angeles County: Employee with a representative case (Labor Code Private Attorneys General Act) was entitled to contact information of other employees that he sought to have represented in the case. The standard established for class actions—contact information is discoverable without any showing of good cause—applies to PAGA cases.
July 5, 2017, Ninth Circuit Court of Appeals, Gina McKeen-Chaplin v. Provident Savings Bank, FSB: Mortgage underwriters are entitled to overtime pay. The administrative employee exemption under federal law did not apply because the underwriters’ primary job duty did not relate to their employer bank’s management or general business operations. The Ninth Circuit followed the Sixth Circuit’s analysis (the underwriters do not decide if the bank should take on risk, but instead assess whether, given the guidelines provided to them from above, the particular loan at issue falls within the range of risk the Bank has determined it is willing to take), and rejected the Second Circuit (which decided that underwriters perform administrative work because they assist in the running and servicing of the bank’s business by making decisions about when the Bank should take on certain kinds of credit risk).
June 29, 2017, California Court of Appeal, Second Appellate District, Michael Shames v. Utility Consumers’ Action Network: employee could not recover attorney’s fees after prevailing at trial on an unpaid wages claim because he did not request the fees at the initiation of the case. California Labor Code 218.5 provides for attorney’s fees to the prevailing party if she “requests attorney’s fees and costs upon the initiation of the action.” Such a request was not included in either Mr. Shames’s initial complaint (first court filing) or an amended complaint.
June 22, 2017, Ninth Circuit Court of Appeals, Jose Arnulfo Arias v. Anthony Raimondo: the Fair Labor Standards Act retaliation provision applies to any person, including an individual who is not an employer. In this case, after Mr. Arias filed a case against his employer for overtime and meal and rest break violation, the employer’s attorney enlisted the services of U.S. Immigration and Customs Enforcement (“ICE”) to take Mr. Arias into custody at a scheduled deposition and then to remove him from the United States; and attempted to block Mr. Arias’s California Rural Legal Assistance attorney from representing him. The attorney could be liable because the FLSA makes it unlawful for any “person,” which includes a legal representative, to terminate or discriminate against an employee who files a FLSA complaint; and defines “employer” to include “persons” who act in the interest of the employer in relation to an employee.
June 21, 2017, California Court of Appeal, Second Appellate District, Joseph Husman v. Toyota Motor Credit Corporation: Mr. Husman had sufficient evidence that a substantial motivating factor for his termination was stereotyping related to his sexual orientation. There was a perception he was “too gay” as shown by statements made outside the termination decision: second-line supervisor observed at various times that Mr. Husman had made “a very clear statement” about his sexual orientation and should cut his hair, as well as ridiculing him for wearing a scarf as an accessory when it was not cold outside.
June 19, 2017, Ninth Circuit Court of Appeals, John Guido and Dennis Rankin v. Mount Lemmon Fire District: the federal Age Discrimination in Employment Act applies to a political subdivision of a state that employs fewer than 20 employees. The ADEA defines three distinct categories of covered employers: (1) a “person” that employs 20 or more employees, where “person” does not include a political subdivision; (2) an agent of a “person;” and (3) States and political subdivisions of States. The Sixth, Seventh, Eighth, and Tenth Circuits previously decided otherwise.
June 13, 2017, California Court of Appeal, First Appellate District, Ming-Hsiang Kao v. Joy Holiday et al.: Mr. Kao was entitled to overtime pay, penalties for Joy Holiday’s failure to provide wage statements, and a waiting time penalty for the company’s failure to pay all wages due at termination. Mr. Kao was an employee, not a “guest” pending approval of a work visa, because Joy Holiday paid Mr. Kao substantial salary and Mr. Kao performed tasks beneficial to the company. Mr. Kao was also a non-exempt employee (i.e., entitled to overtime pay) because while he was an office manager he was paid less than the equivalent of two times the minimum wage for 40 hours per week and then was demoted to non-manager status.

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