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Seventh Circuit Upholds Superfund Indemnification Agreements

Winter 1995

The Seventh Circuit Court of Appeals effectively dispelled concerns regarding the validity of Superfund indemnification agreements between private parties when it recently overruled the decision of the District Court for the Eastern District of Wisconsin in the case of Harley Davidson, Inc. v. Minstar, Inc & AMF Inc. In the Fall of 1993 the Eastern District shocked the regulated community by ruling that private party indemnification agreements designed to transfer or shift Superfund liability are invalid under the Superfund law and called into question the enforceability of environmental indemnification provisions contained within private party buy-sell agreements.

On November 30, the Seventh Circuit expressly overruled the Eastern District and held that the federal Superfund law does not outlaw private party indemnification agreements. The Seventh Circuit agreed with the majority of the courts which have examined this issue and concluded that while a company cannot use an indemnification agreement to divest itself of liability vis-a-vis a regulatory agency, the agreement will be recognized in the parties’ negotiations to allocate costs among themselves. Private parties who have negotiated for Superfund indemnification protection as part of their buy-sell agreements can breathe easier in the wake of this ruling.

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