                                                                                             April 12 2016


                                          DA 15-0464
                                                                                          Case Number: DA 15-0464

                  IN THE SUPREME COURT OF THE STATE OF MONTANA

                                          2016 MT 90



ASARCO LLC, a Delaware corporation,

              Plaintiff and Appellant,

         v.

ATLANTIC RICHFIELD COMPANY, a
Delaware Corporation,

              Defendant and Appellee.


APPEAL FROM:            District Court of the First Judicial District,
                        In and For the County of Lewis and Clark, Cause No. BDV 2015-07
                        Honorable Jeffrey M. Sherlock, Presiding Judge

COUNSEL OF RECORD:

                For Appellant:

                        Rachel H. Parkin, Dylan McFarland, Milodragovich, Dale & Steinbrenner,
                        P.C., Missoula, Montana

                        Gregory Evans, Laura G. Brys, McGuirewoods LLP,
                        Los Angeles, California

                For Appellee:

                        Randy J. Cox, Randy J. Tanner, Boone Karlberg P.C., Missoula, Montana

                        Shannon Wells Stevenson, Davis Graham & Stubbs LLP,
                        Denver, Colorado


                                                    Submitted on Briefs: March 9, 2016
                                                               Decided: April 12, 2016


Filed:

                        __________________________________________
                                          Clerk
Justice Beth Baker delivered the Opinion of the Court.

¶1     Asarco LLC appeals the order of the First Judicial District Court, Lewis and Clark

County, granting Atlantic Richfield Company’s motion for judgment on the pleadings

and dismissing Asarco’s claims. We restate the issue on appeal as follows:

       Whether the District Court correctly determined that claim preclusion bars
       Asarco’s claims.

¶2     We affirm.

                 PROCEDURAL AND FACTUAL BACKGROUND

¶3     For over one hundred years, Asarco and its predecessors operated a lead smelting

facility in East Helena, Montana (the Site). From 1927 to 1972, Atlantic Richfield’s

predecessor operated a zinc fuming plant on land leased from Asarco at the Site.1 In

1972, Atlantic Richfield sold the zinc fuming plant and related property to Asarco.

Under the 1972 sale agreement (1972 Agreement), Atlantic Richfield agreed to

indemnify Asarco for liabilities arising out of Atlantic Richfield’s operations at the Site.

Additionally, the 1972 Agreement’s terms contained a disclosure clause in which Atlantic

Richfield agreed to deliver all relevant documents and records to Asarco and a

representation clause in which Atlantic Richfield represented and warranted that it had

delivered all the information required by the disclosure clause.

¶4     In 1984, due to extensive contamination of the soil, surface water, and

groundwater at the Site and the surrounding area, the Environmental Protection Agency

(EPA) added the Site and surrounding area to the National Priorities List under the

1
  Atlantic Richfield refers to itself and its predecessor, the Anaconda Company, as “Atlantic
Richfield” and we will do the same.


                                             2
Comprehensive Environmental Response, Compensation, and Liability Act of 1980

(CERCLA), commonly known as “Superfund.” The EPA requested information from

Asarco and Atlantic Richfield regarding their operations at the Site because it had

identified both as potentially responsible for the contamination. The EPA ultimately

determined that Asarco was obligated to fund and conduct cleanup efforts at the Site

based on the information provided by the parties.

¶5     In the 1990s the EPA and Asarco entered into several consent decrees regarding

Asarco’s responsibility to remediate contamination at the Site. In 2005, Asarco filed for

Chapter 11 bankruptcy protection. During its bankruptcy proceeding, Asarco entered

into two settlements with the State and federal governments regarding its environmental

liabilities at the Site.   To date, Asarco has paid approximately $138 million for

remediation at the Site.

¶6     In June 2012 Asarco filed a complaint against Atlantic Richfield in the United

States District Court for the District of Montana. Asarco sought contribution—pursuant

to CERCLA—from Atlantic Richfield for costs incurred in cleaning up the Site. Asarco

claimed that Atlantic Richfield was responsible, in part, for the Site’s contamination due

to the zinc fuming plant’s operation. Asarco therefore asserted that Atlantic Richfield

was liable under CERCLA for its equitable share of costs related to the Site’s cleanup.

¶7     In June 2014, following extensive discovery between the parties, Atlantic

Richfield moved for summary judgment on the ground that Asarco’s claims were

untimely under CERCLA’s statute of limitations. The federal district court agreed that

the claims were time-barred and granted Atlantic Richfield’s motion for summary


                                            3
judgment in August 2014. Asarco LLC v. Atl. Richfield Co., 73 F. Supp. 3d 1285, 1296

(D. Mont. 2014) (hereafter Asarco I). Asarco I is currently on appeal to the U.S. Ninth

Circuit Court of Appeals.

¶8       Following the federal court’s grant of summary judgment in Asarco I, Asarco

commenced the present action against Atlantic Richfield in the First Judicial District

Court.    Asarco’s complaint alleged the following claims under state law: breach of

contract, breach of the covenant of good faith and fair dealing, fraud, negligent

misrepresentation, and constructive fraud. Asarco claimed that it learned the basis for its

state-law claims during discovery in Asarco I. Asarco claimed further that it was entitled

to indemnification from Atlantic Richfield for Atlantic Richfield’s “share of the claims,

liabilities, damages, losses, costs and expenses attributable to the Claims, including

attorneys’ fees and costs, that arose out of or resulted from [Atlantic Richfield’s]

construction, ownership and operation” of the zinc fuming plant at the Site. Asarco

premised its state-law claims on Atlantic Richfield’s alleged breach of the 1972

Agreement.

¶9       In March 2015 Atlantic Richfield moved for judgment on the pleadings pursuant

to M. R. Civ. P. 12(c) (Rule 12(c)) on the ground that the doctrine of claim preclusion

barred Asarco’s claims. The District Court issued its order in June 2015 following

briefing and oral argument. The District Court determined: that Asarco could have

amended its complaint in Asarco I to include its state-law claims; that the federal district

court would have had supplemental jurisdiction over the state-law claims; that it was not

clear whether the federal district court would have refused to continue exercising


                                             4
supplemental jurisdiction over the state-law claims after dismissing Asarco’s CERCLA

claim; and that the elements of claim preclusion were met. Accordingly, the court

granted Atlantic Richfield’s motion and dismissed the matter. Asarco appeals.

                               STANDARD OF REVIEW

¶10    A district court’s decision on a Rule 12(c) motion for judgment on the pleadings is

a conclusion of law that we review de novo for correctness. Firelight Meadows, LLC v. 3

Rivers Telephone Coop., Inc., 2008 MT 202, ¶ 12, 344 Mont. 117, 186 P.3d 869. A Rule

12(c) motion is appropriate when the moving party establishes that no material issues of

fact exist and that it is entitled to judgment as a matter of law. Firelight Meadows, LLC,

¶ 9. In evaluating a Rule 12(c) motion, a court must assume that all of the well-pleaded

factual allegations in the nonmovant’s pleadings are true and that all contravening

assertions in the movant’s pleadings are false. Firelight Meadows, LLC, ¶ 11. Because

“[a]ll exhibits and materials referred to in a pleading are incorporated into the pleading,”

a court may consider any such exhibits and materials in deciding a Rule 12(c) motion.

Firelights Meadows, LLC, ¶ 15. Furthermore, only “well-pleaded factual allegations” are

assumed to be true for purposes of deciding a Rule 12(c) motion; questions of law are

“legal determination[s] for a court to decide based upon well-established legal

precedent.” Firelights Meadows, LLC, ¶ 18. A district court’s application of claim

preclusion presents an issue of law that we review de novo for correctness. Brilz v.

Metro. Gen. Ins. Co., 2012 MT 184, ¶ 13, 366 Mont. 78, 285 P.3d 494.




                                             5
                                    DISCUSSION

¶11   Whether the District Court correctly determined that claim preclusion barred
      Asarco’s claims.

¶12   In its order, the District Court first observed that Asarco’s state-law claims were

not raised in Asarco I. The court noted that the doctrine of claim preclusion applies

equally to claims that could have been raised in the first action. The District Court

therefore analyzed several issues pertinent to its conclusion that Asarco’s state-law

claims could have been raised in Asarco I and therefore were barred by claim preclusion.

¶13   The District Court first found that Asarco discovered the grounds underlying its

state-law claims during discovery in Asarco I; therefore, the court concluded that Asarco

could have amended its Asarco I complaint to include those claims pursuant to Fed. R.

Civ. P. 15(a), which governs amendments to pleadings. The court concluded further that

the federal district court would have exercised supplemental jurisdiction over Asarco’s

state-law claims pursuant to 28 U.S.C. § 1367(a) because those claims were part of the

same case or controversy as its CERCLA claim. The court next noted that under 28

U.S.C. § 1367(c), a federal court may continue to exercise supplemental jurisdiction over

a claim if the court has dismissed the federal claims. Relying on the Restatement

(Second) of Judgments § 25 and decisions from the Ninth Circuit, the court determined

that it was unclear whether the federal district court would have declined to exercise

continuing jurisdiction over the state-law claims after dismissing Asarco’s CERCLA

claim on summary judgment. Finally, the court determined that the subject matter and

the issues were the same in both actions because “[b]oth actions concern [Atlantic



                                           6
Richfield’s] operation of the East Helena zinc fuming plant, its alleged pollution of the

ground and water in that area, and its attempted concealment of those operations.” The

District Court concluded that claim preclusion barred Asarco’s state-law claims, granted

Atlantic Richfield’s motion for judgment on the pleadings, and dismissed the case.

¶14    Asarco contends that the District Court erred in several respects. First, Asarco

asserts that the court incorrectly presumed that the federal district court would have

continued to exercise supplemental jurisdiction over its state-law claims following the

federal court’s dismissal of the CERCLA claim on summary judgment. Next, Asarco

contends that it did not have knowledge of its fraud claims in sufficient time to raise them

in federal court prior to the court’s summary judgment ruling in Asarco I. Finally,

Asarco argues that the subject matter and issues in both cases are different. Therefore, it

asserts that claim preclusion is inappropriate.

¶15    Claim preclusion bars a party from “relitigating claims that were or could have

been raised” in a previous action in which a final judgment was reached. Brilz, ¶ 18.

The doctrine embodies “a judicial policy that favors a definite end to litigation.”

Baltrusch v. Baltrusch, 2006 MT 51, ¶ 15, 331 Mont. 281, 130 P.3d 1267 (citations

omitted). Claim preclusion deters “plaintiffs from splitting a single cause of action into

more than one lawsuit, thereby conserving judicial resources and encouraging reliance on

adjudication by preventing inconsistent judgments.” Baltrusch, ¶ 15 (citations omitted).

Claim preclusion applies if the following elements are met:

       (1) the parties or their privies are the same in the first and second actions;
       (2) the subject matter of the actions is the same; (3) the issues are the same
       in both actions, or are ones that could have been raised in the first action,


                                              7
       and they relate to the same subject matter; (4) the capacities of the parties
       are the same in reference to the subject matter and the issues between them;
       and (5) a valid final judgment has been entered on the merits in the first
       action by a court of competent jurisdiction.

Brilz, ¶ 22. Here, it is undisputed that the parties are the same, that the capacities of the

parties are the same, and that the federal district court entered a final judgment on the

merits in Asarco I. Thus, the elements in dispute are whether the actions involve the

same subject matter and, if so, whether the issues in the instant case are ones that could

have been raised in the first action.

¶16    Asarco argues that the subject matter of the cases is different because “the federal

case is about contamination, while the very different state case is about concealment.”

The federal case, Asarco asserts, related to “whether [Atlantic Richfield] released

contaminates at the [Site], what type of contaminates it released, how much of these

contaminates it released, and accordingly how much it should contribute to the clean up

costs.” On the other hand, Asarco contends, the instant case relates to “what documents

and   information     were    withheld   by       [Atlantic   Richfield],   what   affirmative

misrepresentations and misstatements were made by [Atlantic Richfield], and whether

such withholdings and misstatements violated the terms of the 1972 Agreement.” In

other words, Asarco claims that the federal case concerned Atlantic Richfield’s conduct

prior to the sale of its zinc fuming plant and the instant case concerns Atlantic Richfield’s

conduct after selling its zinc fuming plant. Asarco contends further that the “level of

technicality,” the witnesses necessary to each case, and when the claims accrued




                                              8
underscores the differences between both cases. Finally, Asarco alleges that the “state

law claims are based on facts independent of the previous federal court action.”

¶17    The subject matter element of claim preclusion “is concerned with whether the

two actions arise from the same underlying basis.” Touris v. Flathead Cnty., 2011 MT

165, ¶ 17, 361 Mont. 172, 258 P.3d 1 (citing Wiser v. Mont. Bd. of Dentistry, 2011 MT

56, ¶¶ 12-13, 360 Mont. 1, 251 P.3d 675; State ex rel. Harlem Irrigation Dist. v. Mont.

Seventeenth Judicial Dist. Ct., 271 Mont. 129, 133-34, 894 P.2d 943, 945 (1995)); Olsen

v. Milner, 2012 MT 88, ¶ 23, 364 Mont. 523, 276 P.3d 934. The parties’ pleadings make

clear that concealment of contamination from Atlantic Richfield’s zinc fuming plant is at

the heart of both cases.

¶18    In its briefing on appeal, Asarco asserts that Asarco I’s subject matter concerned

“the contamination that resulted from [Atlantic Richfield’s] ownership and operation of

its zinc fuming plant at the East Helena site.” In its first amended complaint in Asarco I,

referenced in Asarco’s complaint in the instant case, Asarco asserted:

       [Atlantic Richfield] (including through its corporate predecessors) owned
       and operated a zinc fuming facility adjacent to the East Helena site. . . .
       These operations lead to disposals or discharges of lead, arsenic, copper,
       zinc, cadmium and other hazardous substances into the soil, surface water
       and groundwater of the Helena Valley. Asarco’s East Helena Settlements
       have paid to remediate these metals.

Because Atlantic Richfield was responsible for the release of hazardous substances from

its zinc fuming plant, Asarco asserted that it was entitled to contribution from Atlantic

Richfield for the claims Asarco paid to remediate the contamination at the Site arising out

of the zinc fuming plant’s operation by Atlantic Richfield. In its response in opposition



                                            9
to Atlantic Richfield’s motion for summary judgment in Asarco I—again referenced in

Asarco’s complaint in the instant case—Asarco alleged:

       [Atlantic Richfield] responded to information requests and demands for
       payment from EPA stating that it never released any hazardous substances
       at the site. Contrary to those sworn statements, [Atlantic Richfield’s]
       records reveal 45 years of massive, unreported releases of arsenic. . . .
       [Atlantic Richfield] employees now admit that [Atlantic Richfield] wrongly
       kept this record of pollution from the EPA.

Asarco alleged further that the EPA looked solely to Asarco to remediate the Site’s

contamination because the EPA was “[u]naware of [Atlantic Richfield’s] misconduct.”

¶19    In its pre-trial proposed conclusions of law in Asarco I, attached to Atlantic

Richfield’s answer in the instant case, Asarco asserted that “[i]n formulating an allocation

for contribution, the court may consider factors other than the actual amounts contributed

to the Site.” One factor Asarco cited was “the degree of cooperation by the parties with

Federal, State, or local officials to prevent any harm to public health or the environment.”

During a deposition in Asarco I, attached to Atlantic Richfield’s answer in the instant

case, Asarco’s counsel brought up this cooperation factor and asked whether certain

documents “should have been provided to the United States in response” to the EPA’s

request for information regarding Atlantic Richfield’s historical waste disposal practices

at the Site. Asarco’s counsel made clear that the purpose of his questions relating to

Atlantic Richfield’s response to the EPA’s information request was “to determine

whether [Atlantic Richfield] co-operated [sic]” with the EPA. In other words, Asarco

was attempting to demonstrate in Asarco I that Atlantic Richfield’s failure to cooperate

with the EPA by not disclosing certain documents relating to contamination at the Site



                                            10
violated CERCLA and therefore justified reimbursing Asarco for costs related to the

Site’s clean-up. The pleadings demonstrate that Asarco’s CERCLA contribution claim in

Asarco I arises, in part, from Atlantic Richfield’s alleged concealment of contamination

from the zinc fuming plant.

¶20    Asarco asserts that the instant case’s subject matter nonetheless differs from that

of Asarco I because this case concerns Atlantic Richfield’s “concealment of schematics

and design documents it was under an obligation to disclose, and its affirmative

misrepresentations to Asarco, and to the EPA.” In its state court complaint, Asarco

asserts that Atlantic Richfield deceived the EPA by “not disclos[ing] any of its own

releases of hazardous substances at the Site in response to [the EPA’s] requests [for

information regarding Atlantic Richfield’s historical waste disposal practices]. [Atlantic

Richfield] represented that it operated a closed circuit, noncontact cooling system [at the

zinc fuming plant].” Asarco asserts further that Atlantic Richfield’s modification of the

cooling system contributed to the Site’s contamination. Asarco’s breach of contract

claim alleges that Atlantic Richfield “failed to supply Asarco with copies of all

authorizations, permits, plans, drawings, design, records, and licenses, which showed its

release and discharge of hazardous substances into the environment during [Atlantic

Richfield’s] ownership and operation of the” zinc fuming plant.         Its breach of the

covenant of good faith and fair dealing claim alleges that Atlantic Richfield “wrongfully

withheld the Contamination Documents and actively concealed its contamination of the

environment during its ownership and operation of the [zinc fuming plant] as a pretext to

avoid its contractual obligations.”   Asarco’s factual allegations demonstrate that its


                                            11
claims of “concealment” and “affirmative misrepresentations” arise from the Site’s

contamination during Atlantic Richfield’s ownership and operation of the zinc fuming

plant.    Moreover, Asarco’s indemnification claim alleges that Atlantic Richfield is

obligated to indemnify Asarco for Atlantic Richfield’s “share of the claims, liabilities,

damages, losses, costs and expenses attributable to the Claims . . . that arose out of or

resulted from [Atlantic Richfield’s] construction, ownership and operation of the” zinc

fuming plant. Asarco therefore is seeking the same relief it sought in Asarco I—that

Atlantic Richfield was “liable for [its] equitable share[ ] of any overpayment incurred by

Asarco” in remediating contamination at the Site.

¶21      Based on our review of the pleadings and their incorporated exhibits and

materials, we conclude that the subject matter is the same in both cases because both

cases “arise from the same underlying basis”—Atlantic Richfield’s responsibility for

contamination at the Site that allegedly resulted from its ownership and operation of the

zinc fuming plant. Touris, ¶ 17; Olsen, ¶ 23.

¶22      Asarco’s contentions ring somewhat hollow when considering its representation

during oral argument on the motion for judgment on the pleadings. Asarco stated that if

the Ninth Circuit Court of Appeals were to reverse the federal district court’s decision in

Asarco I, it “would seek removal” of its state-law claims to the federal district court. In

other words, Asarco acknowledged that it would seek to have the federal district court

exercise supplemental jurisdiction over its state-law claims. 28 U.S.C. § 1367 governs

supplemental jurisdiction and provides federal courts with “supplemental jurisdiction

over all other claims that are so related to claims in the action within such original


                                            12
jurisdiction that they form part of the same case or controversy.” 28 U.S.C. § 1367(a). In

determining whether a federal court has the authority to exercise supplemental

jurisdiction over state-law claims, the United States Supreme Court looks to whether the

federal claims and the state-law claims “derive from a common nucleus of operative

fact.” E.g., DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 351, 126 S. Ct. 1854, 1866

(2006); City of Chi. v. Int’l College of Surgeons, 522 U.S. 156, 165, 118 S. Ct. 523, 529

(1997); United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138 (1966).

In seeking to remove the instant case to the federal district court, Asarco therefore would

have to demonstrate that its claims in both cases “derive from a common nucleus of

operative fact.” See DaimlerChrysler Corp., 547 U.S. at 351, 126 S. Ct. at 1866.

¶23    In like manner, our claim preclusion precedent counsels that the issues in two

actions are the same, or relate to the same subject matter, when “[t]here is a common

nucleus of operative facts underlying” the claims in both cases. Brilz, ¶ 25. Whether the

subject matter is the same in both cases requires similar analysis. Brilz, ¶ 23 (analyzing

whether the issues in two cases are the same and concluding that “claim preclusion

applies where the second suit arises from the same underlying basis or subject matter as

the first suit”). As shown above, the pleadings demonstrate that “there is a common

nucleus of operative facts underlying” both actions—Atlantic Richfield’s alleged acts,

and concealment of those acts, that produced contamination at the Site. Brilz, ¶ 25.

Accordingly, we conclude that the issues in both cases relate to the same subject matter.

¶24    Because the subject matter is the same and the issues in both cases relate to

Atlantic Richfield’s alleged concealment of its contamination, we consider whether


                                            13
Asarco could have raised in Asarco I the claims it advances here. Asarco first asserts that

the District Court erred by not applying the “fraud exception” to claim preclusion.

Asarco contends that its claims cannot be barred by claim preclusion because Atlantic

Richfield “fraudulently concealed the information giving rise to Asarco’s state law

claims, and thereby prevented Asarco from timely bringing such claims under the federal

court’s supplemental jurisdiction during the CERCLA litigation.” Asarco alleges that it

“did not have the information necessary to fully realize the ramifications of [Atlantic

Richfield’s] fraudulent conduct and the existence of state law claims until May 1, 2014.”

By that point, Asarco contends, “discovery had closed, expert deadlines had passed and

expert disclosures had been made, and the deadline to amend pleadings had long since

passed.” Consequently, Asarco contends that it did not have sufficient time to raise its

state-law claims in Asarco I.

¶25    Atlantic Richfield counters that Asarco’s suggested rule “would allow a plaintiff

with both state and federal claims arising from the same facts to file only its federal

claims in a federal court action, wait to see if those claims were successful, and, if not,

turn around and file its state claims in a state court action.” Atlantic Richfield contends

that “Asarco had ample means in the federal court to develop its allegations of fraud and,

in fact, did develop the very evidence it now wants to bring in Montana’s courts.”

Accordingly, Atlantic Richfield claims that Asarco could have added its state-law claims

under “the federal court’s liberal rules of amendment.”

¶26    The law of claim preclusion “reflects the expectation that parties who are given

the capacity to present their ‘entire controversies’ shall in fact do so.” Brilz, ¶ 24


                                            14
(quoting Restatement (Second) of Judgments § 24 cmt. a). As such, claim preclusion

bars a party from litigating claims that “could have been litigated in the first action.”

Brilz, ¶ 21 (citing Wiser, ¶ 17; Somont Oil Co. v. A & G Drilling, Inc., 2008 MT 447,

¶ 11, 348 Mont. 12, 199 P.3d 241) (emphasis in original).             Consequently, claim

preclusion may bar a party “from litigating a matter that has never been litigated and that

may involve valid rights to relief. The rationale here is to force parties to raise such

matters in their first suit in the interest of judicial economy and avoiding the expense and

vexation of multiple suits.” Brilz, ¶ 21.

¶27    Asarco’s assertion that the District Court erred by not applying claim preclusion’s

“fraud exception” is misplaced. We have not recognized a blanket “fraud exception” to

claim preclusion. In fact, we recently concluded that a party’s fraud claims were barred

by claim preclusion because those claims could have been raised in the first action.

Estate of Kinnaman v. Mt. West Bank, N.A., 2016 MT 25, 382 Mont. 153, 365 P.3d 486

(concluding that a party was “barred from reopening issues [including fraudulent

inducement, constructive fraud, and actual fraud] that were or should have been

determined in the prior suit”).

¶28    We are unpersuaded by Asarco’s further assertions that it did not have sufficient

time to raise its state-law claims in Asarco I. Asarco alleges that it knew the facts

underlying its claims on May 1, 2014; the federal district court entered its summary

judgment order in Asarco I on August 26, 2014. The District Court found that despite

Asarco’s “allegations of fraud and concealment, it is fairly clear that Asarco knew

generally of [the facts underlying its state-law claims] in March 2013 and at least by


                                            15
February 2014.” Even taking Asarco’s factual representation as true, the facts that form

the basis of its complaint in the instant action—e.g., the contractual relationship between

the parties, the Site’s alleged contamination by Atlantic Richfield’s zinc fuming plant,

Asarco’s payments to clean up the Site, and Atlantic Richfield’s concealment of facts and

misrepresentations to Asarco and the EPA—were known to Asarco more than three

months before the federal district court’s final judgment on the merits in Asarco I.

Because the subject matter of both cases arose from the same underlying basis, the

federal district court could have exercised supplemental jurisdiction over Asarco’s state-

law claims in Asarco I. See 28 U.S.C. § 1367(a) (providing that a federal court may

exercise supplemental jurisdiction over state-law claims “that are so related to claims in

the action within such original jurisdiction that they form part of the same case or

controversy”).

¶29    Although, as Asarco asserts, the deadline to amend its pleadings as a matter of

course had passed, the Federal Rules of Civil Procedure provide that when a party seeks

leave to amend the party’s pleading, “leave shall be freely given when justice so

requires.” Fed. R. Civ. P. 15(a). In the Ninth Circuit, “there exists a presumption . . . in

favor of granting leave to amend,” if there is no showing of undue delay, bad faith or

dilatory motive on the part of the movant, undue prejudice to the opposing party, repeated

failure to cure deficiencies by amendments previously allowed, or futility of amendment.

Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (emphasis in

original); Brilz, ¶ 29 (analyzing Ninth Circuit policy regarding leave to amend under Fed.

R. Civ. P. 15(a) and citing Eminence Capital, LLC, 316 F.3d at 1052). “In light of this


                                            16
policy towards amendments . . . it is clear that [Asarco] could have sought to amend [its]

complaint in the federal proceeding.”       Brilz, ¶ 29.   Accordingly, we conclude that

Asarco’s claims at issue here could have been raised in Asarco I.

¶30      Finally, Asarco takes issue with the District Court’s conclusion that the federal

court would have retained supplemental jurisdiction over the state-law claims following

the court’s dismissal of the CERCLA claim in Asarco I. Asarco asserts that the general

rule under federal case law is for federal courts to not exercise continuing supplemental

jurisdiction over state-law claims when all federal claims are dismissed in advance of

trial.   Montana federal district courts, Asarco contends, adhere to this general rule.

Moreover, Asarco asserts, the language of the Restatement (Second) of Judgments § 25

“establishes that dismissal of federal claims in advance of trial is one situation in which it

is ‘clear’ that the federal court would decline to exercise supplemental jurisdiction.”

Asarco therefore alleges that the federal district court would have declined to exercise

continuing supplemental jurisdiction over its state-law claims because those claims were

not developed, additional discovery would have been required, and the state-law claims

had not been litigated in the federal forum by the time summary judgment was granted on

the CERCLA claim.

¶31      The Restatement (Second) of Judgments § 25, entitled “Exemplifications of

General Rule Concerning Splitting,” provides that claim preclusion applies even when a

party is prepared “(1) To present evidence or grounds or theories of the case not

presented in the first action, or (2) To seek remedies or forms of relief not demanded in

the first action.” Comment e illustrates an exception to this general rule:


                                             17
          A given claim may find support in theories or grounds arising from both
          state and federal law. When the plaintiff brings an action on the claim in a
          court, either state or federal, in which there is no jurisdictional obstacle to
          his advancing both theories or grounds, but he presents only one of them,
          and judgment is entered with respect to it, he may not maintain a second
          action in which he tenders the other theory or ground. If however, the court
          in the first action would clearly not have had jurisdiction to entertain the
          omitted theory or ground (or, having jurisdiction, would clearly have
          declined to exercise it as a matter of discretion), then a second action in a
          competent court presenting the omitted theory or ground should be held not
          precluded.

Restatement (Second) of Judgments § 25 cmt. e (1982). Comment e therefore illustrates

that claim preclusion would not apply in the instant case if it could be shown that the

federal district court would have clearly declined to maintain jurisdiction over Asarco’s

supplemental state-law claims following its dismissal of the CERCLA claim.

¶32       We decline to speculate whether the federal district court would have continued to

exercise supplemental jurisdiction over Asarco’s state-law claims—had Asarco raised

them—after granting Atlantic Richfield’s summary judgment motion in Asarco I. Such

speculation defeats the policy of judicial economy and “a definite end to litigation” that

the claim preclusion doctrine is intended to advance. Baltrusch, ¶ 15. The question

arises here only because the federal district court was not given the opportunity to decide

for itself whether to retain jurisdiction over Asarco’s state-law claims. Because Asarco

could have brought its state-law claims before the federal district court in Asarco I, we

conclude that the District Court correctly determined that claim preclusion bars Asarco’s

action.




                                                18
                                 CONCLUSION

¶33   We affirm the District Court’s order granting Atlantic Richfield’s motion for

judgment on the pleadings.


                                             /S/ BETH BAKER


We Concur:

/S/ MICHAEL E WHEAT
/S/ LAURIE McKINNON
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE




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