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CFC Rejects Taxes Clause as Basis for Recovering Environmental Remediation Costs

January 25, 2013

On January 13, the Court of Federal Claims in Shell Oil Co. v. U.S. held (1) the government was not liable for CERCLA environmental cleanup costs under the "Taxes" clause in certain World War II-era contracts; and (2) even if the "Taxes" clause had provided for indemnification, any indemnification rights were not preserved after contract termination. The "Taxes" clause and the absence of a reservation of rights to pursue indemnification in Shell is in contrast with the explicit "hold harmless" clauses in the facilities contracts cases in which the contractor reserved its rights to pursue indemnification (Ford and DuPont) and indemnification clauses authorized under Public Law 85-804, which contain explicit post-contract termination provisions.

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Stephen J. McBrady
Partner – Washington, D.C.
Phone: +1.202.624.2547
Jonathan M. Baker
Partner – Washington, D.C.
Phone: +1.202.624.2641