Seventh Circuit: Railroad company's claims within scope of indemnification clause.

Byline: Michaela Paukner, mpaukner@wislawjournal.com

The Seventh Circuit Court of Appeals has ruled that a railroad company should be held responsible for paying for the cleanup of contamination in a park on Lake Superior.

A three-judge panel ruled in Wisconsin Central LTD v. Soo Line Railroad Co. on Wednesday. Wisconsin Central asked the court to review whether it should have to indemnify Soo Line for contamination discovered at Kreher Park in Ashland about 30 years ago.

In 1987, Wisconsin Central entered into an agreement that called for the purchase of rail lines from Soo Line. The agreement allocated responsibility for future environmental liabilities, and Soo Line agreed to retain liability and indemnify Wisconsin Central for claims for environmental matters within 10 years of closing the deal.

A few years into the agreement, local and state authorities discovered contamination near one of the lines in Kreher Park on the shore of Lake Superior.The Wisconsin Department of Natural Resources issued a potentially responsible party letter to Northern States Power Company, which then started a campaign to place some of the blame for contamination on Wisconsin Central.

In 1997, Wisconsin Central notified Soo Line that it was seeking indemnification for various environmental matters, including at Kreher Park. Soo Line did not agree to indemnify or defend Wisconsin Central.

The legal battle over cleanup responsibility continued. In 2012,Northern Statessued the two railroads and the city of Ashland for the expenses it incurred toremediate the park.The railroadssettled the claims for $10.5 million plus interest. Each railroad company paid half the amount.

The railroads theneach sought indemnification from the other. The district court awarded summary judgment to Soo Line for damages, attorneys' fees and costs, finding that no claim had been asserted against the railroads during the claim period.

On appeal, the two companies disputed when a claim was first asserted, and how much of the cost of defending and settling the matter was related to the rail lines and their operation.

Judges Kenneth Francis Ripple, Michael B. Brennan and Amy J. St. Eve reviewed and decided the case. They agreed with the district court's conclusion that no claim was asserted against the railroads during the agreement's 10-year claim period and that Wisconsin Central is responsible for the entirety of the railroads' settlement with the Environmental Protection Agency.

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