# TREMONT LLC v. Halliburton Energy Services, Inc.

> District Court, S.D. Texas · March 11, 2010 · 696 F. Supp. 2d 741

URL: https://www.frixlaw.com/law-library/cases/2432141

## Case

- **Full name:** TREMONT LLC, Plaintiff, v. HALLIBURTON ENERGY SERVICES, INC., Et Al., Defendants, v. NL Industries, Inc., Third-Party Defendant
- **Court:** District Court, S.D. Texas
- **Decided:** March 11, 2010
- **Citations:** 696 F. Supp. 2d 741; 2010 U.S. Dist. LEXIS 22556; 2010 WL 936548
- **Precedential status:** Published
- **Opinion:** Opinion by Rosenthal
- **Judges:** Lee H. Rosenthal
- **Cited by:** 14 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2432141

## How later opinions describe it (automated extraction)

- finding that both Rule 56(e) and the local rules of court for that district permit a court to exercise discretion in considering supplemental evidence
- noting that there was no conflict between federal law and the potentially applicable state laws of Delaware and Texas

## Opinion text

MEMORANDUM AND OPINION
LEE H. ROSENTHAL, District Judge.
This case involves allocating responsibility for environmental remediation. The following motions are pending:
• Tremont LLC (“Tremont”) seeks partial summary judgment that Halliburton Energy Services, Inc. (“HESI”) and DII Industries, LLC (“DU”) (collectively, “Halliburton”) must indemnify Tremont for the costs and expenses it has incurred and will incur to remediate environmental contamination at three Texas locations where Gulf Nuclear, Inc. (“Gulf Nuclear” or “GNI”) manufactured, stored, repaired, and disposed of radioactive materials (the “Gulf Nuclear Sites”). (Docket Entry No. 8; 2005 Case, Docket Entry No. 247).
1
The motion includes a request for indemnification for claims raised in a related civil case filed in this district by the Environmental Protection Agency (EPA) against Halliburton, NL Industries, Inc. (“NL”), and other entities. (2005 Case, Docket Entry No. 252 at 1-2). That case is referred to as the “EPA lawsuit.”
• Halliburton has filed a third-party complaint against NL seeking indemnification or, alternatively, contribution under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). NL moves to dismiss Halliburton’s third-party complaint, or in the alternative, for summary judgment. (Docket Entry No. 19).
• NL has filed a motion to stay discovery, (Docket Entry No. 26), and a separate motion for partial summary judgment, (Docket Entry No. 56).
• Halliburton seeks a continuance of both Tremont’s motion for partial summary judgment, (Docket Entry No. 11), and of NL’s motion for partial
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summary judgment, (Docket Entry No. 58).
• Halliburton moves for leave to file under seal certain exhibits to its surreply to Tremont’s reply to Halliburton’s supplemental response to Tremont’s motion for partial summary judgment. (Docket Entry No. 63).
• Tremont has filed a motion to supplement the summary judgment record, (Docket Entry No. 70), and a sealed motion for leave to file under seal its response to Halliburton’s objection to Tremont’s supplemental evidence and its memorandum in further support of the motion to supplement the summary judgment record, (Docket Entry No. 74).
• Halliburton has filed a motion for leave to supplement the summary judgment record. (Docket Entry No. 86).
This court held hearings and heard oral argument from counsel. Based on the motions, the responses, and the replies; the present record; the arguments of counsel; and the applicable law, this court reaches the following conclusions:
• There is no genuine dispute of fact as to whether NL’s potential liability for the Gulf Nuclear Sites stems solely from NL’s former petroleum services business.
• Issue preclusion applies to the interpretation — made by an arbitration panel in an earlier arbitration — of the relevant contracts. That interpretation places the responsibility for the Gulf Nuclear Sites on Halliburton.
• This court’s own interpretation of the relevant contracts places the responsibility for the Gulf Nuclear Sites with Halliburton.
• NL transferred its petroleum services business to its subsidiary, NL Petroleum Services, Inc. (“NLPS”), in a 1988 restructuring, and then to New Baroid in a 1990 restructuring. Under both the arbitrators’ and this court’s contract interpretation, both restructurings included the transfer of all historical liabilities associated with NL’s petroleum services business, including historical liabilities arising from assets undisputedly New Baroid’s successor, Halliburton is responsible for historical liabilities associated with NL’s former petroleum services business, including historical liabilities associated with assets or operations that NL sold before the 1988 restructuring became effective.
The result of these conclusions is that this court:
• grants Tremont’s motion for partial summary judgment;
• denies Halliburton’s request for a continuance of Tremont’s motion for partial summary judgment;
• grants in part and denies in part NL’s alternative motion for summary judgment based on issue preclusion, and denies NL’s motion to dismiss as moot;
• denies NL’s motion for partial summary judgment based on contract interpretation and motion to stay discovery as moot;
• denies Halliburton’s request for a continuance to respond to NL’s motion for partial summary judgment as moot;
• grants Halliburton’s motion for leave to file exhibits under seal; grants Tremont’s motion to supplement the summary judgment record; denies Tremont’s motion for leave to file one of its responses under seal as moot; and denies Halliburton’s motion for leave to supplement the summary judgment record.
The reasons are set out in detail below. A status conference is set for March 30,
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2010, at 2:00 p.m., to discuss a schedule for resolving the remaining issues.
Table of Contents
I. Procedural Background.....................................................747
II. The Legal Standards.......................................................749
A. Summary Judgment...................................................749
B. Motions to Dismiss ....................................................750
C. Issue Preclusion.......................................................751
III. Tremont’s Motion for Partial Summary Judgment..............................751
A. The Facts Relevant to Tremont’s Motion .................................751
1. The 1988 Restructuring.............................................752
a. The 1988 Plan .................................................752
b. The Formation Agreement......................................753
c. The Cross-Indemnification Agreement............................755
d. The Assumption Agreement.....................................756
e. The Indebtedness Agreement....................................756
2. The 1990 Restructuring.............................................756
3. The Evidence in the Arbitration About the Transfer of NL’s Former Petroleum Services Business to Halliburton.........................758
a. The Affidavits of J. Landis Martin, Steven L. Watson, William Lindquist, and Harold C. Simmons.............................759
b. The SEC Information Statement.................................762
c. The New Baroid/Dresser/Halliburton Mergers.....................763
d. Testimony in the Arbitration Proceeding..........................763
i. The Arbitration Testimony of J. Landis Martin ...............764
ii. The Arbitration Testimony of William Lindquist...............766
iii. The Arbitration Testimony of Steve Watson..................767
iv. The Arbitration Testimony of Harold Simmons................768
v. The Arbitration Testimony of Ann Manix.....................768
vi. The Arbitration Testimony of John Karnes...................769
vii. The Arbitration Testimony of John Deering..................770
viii. The Arbitration Testimony of Joseph S. Compofelice...........770
4. The Sale of the McCullough Division to Western Atlas..................772
5. Western Atlas v. NL Industries, Inc..................................773
6. The Sale of Oilfield Service Facilities to Exxon.........................774
7. Tremont’s Request for Indemnification from Halliburton for the Gulf Nuclear Site Liabilities...........................................775
8. The Arbitration Panel’s Decision.....................................777
9. The Evidence as to Whether Liabilities Associated with the Gulf Nuclear Sites Are Part of NL’s Former Petroleum Services Business........................................................781
a. The McCullough Division’s Activities at the Gulf Nuclear Sites.....781
b. Shipping Slips and Receiving Logs Showing Shipments of Radioactive Material from NL and Its Subsidiaries...............782
c. Witness Statements and Testimony of Former Gulf Nuclear Employees..................................................791
d. NL Annual Reports............................................793
e. NL Board Minutes.............................................796
f. The Public Record..............................................796
g. Halliburton’s Discovery Responses...............................797
h. Use of Nuclear Materials in Petroleum Services Operations..........798
i. NL’s Nuclear Division..........................................799
j. EPA Claims Linking NL to the Gulf Nuclear Sites .................802
k. Affidavits and Declarations of Former NL Employees Stating that NL’s Connection to the Gulf Nuclear Sites Was Through Its Petroleum Services Business ...............................807
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B. Halliburton’s Request for a Continuance..................................810
1. Background and the Parties’ Arguments..............................810
2. Analysis of the Motion for Continuance...............................814
C. There Is No Dispute as to'Any Fact Material to Determining Whether NL’s Connection to the Gulf Nuclear Sites Was Only Through Its Former Petroleum Services Business ...................................815
D. Issue Preclusion.......................................................820
1. The Parties’ Contentions............................................820
2. Analysis..........................................................821
a. The Application of Issue Preclusion to an Arbitration Award.........823
b. Identity of the Issues...........................................825
c. The Issue Was Actually Litigated in the Arbitration................835
d. The Arbitration Panel’s Findings Were Necessary to Its Award.....838
E. Contract Interpretation ................................................839
IV. NL’s Motion to Dismiss.....................................................852
A. Conversion to a Motion for Summary Judgment...........................852
B. Analysis..............................................................853
V. NL’s Motion for Partial Summary Judgment..................................860
VI. NL’s Motion to Stay Discovery.............................................-. 861
VII. Conclusion................................................................862
I. Procedural Background
In the related 2005 Case, Halliburton sought to recover the money it spent investigating and remediating environmental contamination near the towns of Magnet Cove and Malvern Arkansas (the “Malvern Site”). The relevant background has been set out in previous opinions issued in the 2005 Case and is only summarized here.
Briefly, Halliburton filed the 2005 Case against the Tremont Parties—NL, Tremont, TRE Holding Corporation, and TRE Management Company—M-I, L.L.C., Milwhite Inc., and Georgia-Pacific Corporation, after entering into an Administrative Settlement Agreement in 2000 and a Consent Administrative Order in 2003 with the Arkansas Department of Environmental Quality (“ADEQ”). In April 2005, before the litigation over allocating responsibility for cleaning up the Malvern Site, TRE Management and Halliburton entered into a Cost Sharing, Cooperation, and Final Allocation Process Agreement (the “2005 Cost Sharing Agreement’,’). This 2005 Cost Sharing Agreement included a procedure to,allow the parties to cooperate in funding the response and remediation costs for the Malvern Site by “allocating on an interim basis.” The 2005 Cost Sharing Agreement also set out a procedure for the parties to reach a “Final Allocation” of “their and others’ respective shares of such past, present, and future costs, expenses, liabilities, settlements, recoveries, or unpaid shares relating to the [Malvern] Site .... ” The 2005 Cost Sharing Agreement defined “Final Allocation” as a “full, final, and binding apportionment among the Parties to the Agreement,” by agreement or by arbitration, of defined categories of costs, including future costs. Under the 2005 Cost Sharing Agreement, if mediation did not result in “Final Allocation,” the parties were required to participate in binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association and the Federal Arbitration Act.
In late 2005, Halliburton filed the 2005 Case against the Tremont Parties as prior owners and operators of the Malvern Site when hazardous substances were released,
*748
or as suecessors-in-interest to owners or operators. Halliburton also sued Georgia-Pacific, as a prior owner of the Malvern Site, and Milwhite, as a prior owner and operator of the Malvern Site. Halliburton asserted cost-recovery and contribution claims under CERCLA, 42 U.S.C. §§ 9607 (a) and 9613(f)(3)(B), contribution claims under the Arkansas Remedial Action Trust Fund Act (RATFA), ArkCode Ann. § 8-7-520, and a right to recover response and remediation costs under a state common-law unjust enrichment cause of action. Halliburton also sought a declaratory judgment that the defendants were liable for future response and remediation costs at the Malvern Site and that Tremont had to indemnify Halliburton for these costs under the contracts used to restructure the corporate predecessors-in-interest. Georgia-Pacific and Milwhite counterclaimed against Halliburton and crossclaimed against each other and against their codefendants, the Tremont Parties, seeking contribution and indemnity-
In March 2006, after the 2005 Case and a related lawsuit in Arkansas had been filed, Halliburton and the Tremont Parties entered into an agreement expanding the entities consenting to arbitrate the allocation of response and remediation costs at the Malvern Site. In this 2006 Arbitration Agreement, the parties agreed to “resolve through binding arbitration all claims between them related to the allocation of response and remediation costs incurred or to be incurred at the [Malvern] Site including the claims that have been asserted in the Texas Case or such claims that may be asserted in [a related] Arkansas Case.” The signatories to the 2006 Arbitration Agreement included HESI, DII, NL, Tremont, TRE Holding, and TRE Management. The arbitration was to be conducted under the 2005 Cost Sharing Agreement.
The arbitration between Halliburton and the Tremont Parties was conducted in two phases and resulted in two awards.
2
Among the parties to the arbitration, the arbitration panel allocated all response costs at the Malvern Site to Halliburton. This court confirmed the arbitration awards on March 31, 2008, and later entered final judgment under Federal Rule of Civil Procedure 54(b) on the claims resolved in the arbitration. Halliburton appealed the order confirming the awards and the final judgment on the confirmation order. The Fifth Circuit affirmed.
After this court confirmed the arbitration awards in the 2005 Case, Tremont filed the 2008 Case against Halliburton.
3
In the 2008 Case, Tremont asserts a claim for breach of contract and for contractual indemnity, “seeking] to recover from Halliburton costs and expenses that Tremont has incurred and will incur to defend, indemnify, investigate and respond to a number of environmental sites and claims that derive from the former petroleum services business of NL.” (Docket Entry No. 1 at 2, 5-7). The sites and claims for which Tremont seeks indemnity include the “Gulf Nuclear Sites” located in Odessa, Ector County, Texas; Webster, Harris
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County, Texas; and (Tavenor Street) Houston, Harris County, Texas; the Malone Service Company located in Galveston County, Texas; the Spinks Site located in Laurel, Mississippi; the Potosí and Fountain Farm Sites located in Washington County, Missouri; the ArChem-Thames Chelsea Superfund Site located in Houston, Texas; and the Olen Lee family toxic tort case located in Calcasieu Parish, Louisiana (collectively, the “Sites”).
(Id.
at 2).
In the 2008 Case, “Tremont also seeks a declaratory judgment that Halliburton is contractually liable to Tremont to indemnify and hold Tremont harmless against all costs and expenses arising out of or otherwise attributable to NL’s former petroleum services business ..., except those [liabilities] specifically retained in the 1990 Plan of Restructuring .... ”
(Id.; see also id.
at 7-8). Tremont alleges that because the arbitration panel found that Halliburton is contractually liable to indemnify Tremont for all costs and expenses arising out of NL’s former petroleum services business, issue preclusion prevents Halliburton from relitigating that issue here.
4
(Id.
at 2). Tremont also asserts a contribution claim under CERCLA.
(Id.
at 8-9).
Halliburton filed a third-party complaint against NL, asserting that as the former owner of the Sites, NL is contractually and statutorily obligated to indemnify Halliburton for all liabilities associated with the Sites. (Docket Entry No. 13). Halliburton asserts a claim for breach of contract, claiming that as part of the 1988 restructuring, NL agreed to indemnify NLPS and its successors for liability associated with operations not transferred to NLPS in that restructuring.
(Id.
at 6-7). Halliburton argues that many of the obligations arising from the Sites are attributable to operations not transferred to NLPS in 1988.
(Id.
at 7). Halliburton also seeks a declaratory judgment that NL is obligated to indemnify Halliburton for expenses arising out of businesses that NL transferred before the 1988 restructuring.
(Id.
at 8). In the alternative, Halliburton asserts a claim for contribution and cost recovery under CERCLA.
(Id.
at 8-9).
Tremont has moved for partial summary judgment that Halliburton is responsible for all costs and expenses that Tremont has incurred in connection with the Gulf Nuclear Sites. Tremont argues that it is entitled to judgment based on the relevant contracts and based on issue preclusion. NL asserts that the third-party complaint against it should be dismissed based on issue preclusion and also seeks partial summary judgment based on contractual interpretation.
These motions, and the parties’ arguments and responses, are considered below.
II. The Legal Standards
A. Summary Judgment
Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)(2). “The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact.”
Triple Tee Golf, Inc. v. Nike, Inc.,
485 F.3d 253, 261 (5th Cir.2007) (citing
Celotex Corp. v. Catrett,
477 U.S. 317, 322-25 , 106 S.Ct. 2548 , 91 L.Ed.2d 265 (1986)).
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If the burden of proof at trial lies with the nonmoving party, the movant may satisfy its initial burden by “ ‘showing’ — that is, pointing out to the district court — ’that there is an absence of evidence to support the nonmoving party’s case.”
Celotex, 477
U.S. at 325, 106 S.Ct. 2548 . While the party moving for summary judgment must demonstrate the absence of a genuine issue of material fact, it does not need to negate the elements of the nonmovant’s case.
Boudreaux v. Swift Transp. Co.,
402 F.3d 536, 540 (5th Cir.2005) (citation omitted). “ ‘A fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit under governing law.’”
Sossamon v. Lone Star State of Texas,
560 F.3d 316, 326 (5th Cir.2009) (quoting
Hamilton v. Segue Software, Inc.,
232 F.3d 473, 477 (5th Cir.2000) (per curiam)),
petition for cert. filed,
77 U.S.L.W. 3657 (U.S. May 22, 2009) (No. 08-1438). “ ‘If the moving party fails to meet [its] initial burden, the motion [for summary judgment] must be denied, regardless of the nonmovant’s response.’ ”
United States v. $92,203.00 in U.S. Currency,
537 F.3d 504, 507 (5th Cir.2008) (quoting
Little v. Liquid Air Corp.,
37 F.3d 1069, 1075 (5th Cir.1994) (en banc) (per curiam)).
When the moving party has met its Rule 56(c) burden, the nonmoving party cannot survive a summary judgment motion by resting on the mere allegations of its pleadings. The nonmovant must identify specific evidence in the record and articulate how that evidence supports that party’s claim.
See Baranowski v. Hart,
486 F.3d 112, 119 (5th Cir.2007) (citation omitted). “This burden will not be satisfied by ‘some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.’”
Boudreaux,
402 F.3d at 540 (quoting
Little,
37 F.3d at 1075 ). In deciding a summary judgment motion, the court draws all reasonable inferences in the light most favorable to the nonmoving party.
Deville v. Marcantel,
567 F.3d 156, 163-64 (5th Cir.2009) (per curiam) (citing
Hockman v. Westward Commc’ns, LLC,
407 F.3d 317, 325 (5th Cir.2004)).
B. Motions to Dismiss
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In
Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 , 127 S.Ct. 1955 , 167 L.Ed.2d 929 (2007), and
Ashcroft v. Iqbal,
— U.S. -, 129 S.Ct. 1937 , 173 L.Ed.2d 868 (2009), the Supreme Court confirmed that Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R.Civ.P. 8(a)(2).
Twombly
abrogated the Supreme Court’s prior statement in
Conley v. Gibson,
355 U.S. 41, 45-46 , 78 S.Ct. 99 , 2 L.Ed.2d 80 (1957), that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”
See Twombly,
550 U.S. at 562-63 , 127 S.Ct. 1955
(“Conley’s
‘no set of facts’ language ... is best forgotten as an incomplete, negative gloss on an accepted pleading standard ....”). To withstand a Rule 12(b)(6) motion, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.”
Twombly,
550 U.S. at 570 , 127 S.Ct. 1955 ;
see also Elsensohn v. St. Tammany Parish Sheriffs Office,
530 F.3d 368, 372 (5th Cir.2008) (quoting
Twombly,
550 U.S. 544 , 127 S.Ct. at 1974 ).
In considering a Rule 12(b)(6) motion to dismiss, a court generally must limit itself to the pleadings, with an exception. In
Collins v. Morgan Stanley Dean Witter,
224 F.3d 496, 498-99 (5th Cir.2000), the Fifth Circuit approved the district court’s consideration of documents the defendant attached to a motion to dismiss. The Fifth
*751
Circuit made it clear that such consideration is limited “to documents that are referred to in the plaintiffs complaint and are central to the plaintiffs claim.”
Scanlan v. Tex. A & M Univ.,
343 F.3d 533, 536 (5th Cir.2003) (citing
Collins,
224 F.3d at 498-99 ). When other “matters outside the pleadings” are submitted in support of or in opposition to a Rule 12(b)(6) motion to dismiss, Rule 12(b) grants courts discretion to accept and consider those materials, but does not require them to do so.
Prager v. LaFaver,
180 F.3d 1185, 1189 (10th Cir.1999);
Isquith ex rel. Isquith v. Middle S. Utils., Inc.,
847 F.2d 186 , 193 n. 3 (5th Cir.1988). A court exercises this discretion by determining whether the proffered material, and the resulting conversion from the Rule 12(b)(6) to the Rule 56 procedure, is likely to facilitate decision.
Isquith,
847 F.2d at 193 n. 3 (quoting 5C Charles A. Wright
&
Arthur R. Miller, Federal Practice and Procedure § 1366 (1969)). If the court decides to consider such material, then the court must treat the Rule 12(b)(6) motion as a motion for summary judgment under Rule 56. Fed.R.Civ.P. 12(d). If the court accepts matters outside the pleading and converts the motion to dismiss into one for summary judgment, the court must give the parties notice of the changed status of the motion and a “ ‘reasonable opportunity to present all materials made pertinent to such a motion by Rule 56.’ ”
Festa v. Local 3 Int’l Bhd. of Elec. Workers,
905 F.2d 35, 38 (2d Cir.1990) (quoting former Fed.R.Civ.P. 12(b)).
C. Issue Preclusion
The Fifth Circuit has set out the following elements for applying issue preclusion, or collateral estoppel:
Collateral estoppel precludes a party from litigating an issue already raised in an earlier action between the same parties only if: (1) the issue at stake is identical to the one involved in the earlier action; (2) the issue was actually litigated in the prior action; and (3) the determination of the issue in the prior action was a necessary part of the judgment in that action.
Petro-Hunt, L.L.C. v. United States,
365 F.3d 385, 397 (5th Cir.2004) (footnotes and citation omitted). “Collateral estoppel does not preclude litigation of an issue unless both the facts and the legal standard used to assess them are the same in both proceedings.”
Copeland v. Merrill Lynch & Co., Inc.,
47 F.3d 1415, 1422 (5th Cir.1995) (citation omitted). Issue preclusion may apply even if the claims and the subject matter of the suits differ.
Next Level Commc’ns LP v. DSC Commc’ns Corp.,
179 F.3d 244 , 250 (5th Cir.1999) (citation omitted). In addition, “ ‘[u]nlike claim preclusion, the doctrine of issue preclusion may not always require complete identity of the parties.’ ”
Id.
(alteration in original) (quoting
Meza v. Gen. Battery Corp.,
908 F.2d 1262, 1273 (5th Cir.1990)).
III. Tremont’s Motion for Partial Summary Judgment
A. The Facts Relevant to Tremont’s Motion
Tremont’s motion seeks to resolve liability for the Gulf Nuclear Sites, which include three locations — Odessa, Webster, and Houston (on Tavenor Street), Texas— at which Gulf Nuclear manufactured, stored, repaired, and disposed of radioactive materials. Liability turns on whether the transfer of certain liabilities and indemnification obligations under the 1988 restructuring of NL and the 1990 restructuring of (Old) Baroid Corporation included the liabilities associated with the Gulf Nuclear Sites. The relevant facts include the restructuring contracts and related documents, evidence that was presented to the arbitration panel, and evidence as to whether NL’s connection to the Gulf Nuclear Sites was solely through its former petroleum services business. Although
*752
this court ultimately concludes that extrinsic evidence is not necessary because the relevant agreements are unambiguous, the evidence presented to the arbitration panel is included in the factual background because it is relevant to understanding the scope of the arbitration proceedings, which is relevant to the issue preclusion analysis.
1. The 1988 Restructuring
a. The 1988 Plan
In 1988, NL entered a series of transactions under a restructuring plan (the “1988 Plan”).
(See
2005 Case, Docket Entry No. 247, Ex. 1
5
).
6
Through the 1988 Plan and related agreements, NL spun off its petroleum services business and transferred it to NLPS, which later became Baroid Corporation (“Old Baroid”).
7
NL retained its chemical business. According to an August 12, 1988 memorandum from J.L. Martin, then President and Chief Executive Officer of NL, to NL’s Board of Directors, the 1988 restructuring sought to separate the two businesses.
(See id.,
Ex. N).
8
The memorandum recommended that NLPS become a “separate, publicly-traded
*753
company, comprised of [NL’s] existing petroleum services business .... NLPS would assume the ... environmental liabilities unique to the petroleum services business.”
(Id.,
Ex. N at 7).
As Tremont points out, the 1988 Plan was an unsigned outline of the restructuring that relied on the related agreements to set out the specifics. (2005 Case, Docket Entry No. 252 at 8). Several documents were executed in connection with the 1988 restructuring in addition to the 1988 Plan. The documents included an Amended and Restated Formation Agreement (the “Formation Agreement”), an Amended and Restated Cross-Indemnification Agreement (the “Cross-Indemnification Agreement”), a General Assignment and Assumption Agreement and Bill of Sale (the “Assumption Agreement”), and an Amended and Restated Outstanding Indebtedness Agreement (the “Indebtedness Agreement”).
b. The Formation Agreement
In the Formation Agreement, dated September 16, 1988 and effective as of December 31, 1987, NL agreed to transfer to NLPS “all of its properties, assets and rights of any kind, whether tangible or intangible, real or personal,] related to its petroleum services business or Titanium Metals Corporation of America (‘TMCA’) (collectively, the ‘Assets’) .... ” (2005 Case, Docket Entry No. 247, Ex. J, § l.l).
9
*754
The Formation Agreement states that the transfer from NL to NLPS excluded the assets on an “Excluded Assets Schedule” and “all goodwill and going concern value of NL that [wa]s not associated with TMCA or the petroleum services operations of NL.”
(Id.,
Ex. J, § 1.2). The Excluded Assets Schedule includes a subheading entitled “Section 1.2,” apparently referring to Section 1.2 of the Formation Agreement.
(Id.,
Ex. J at 6). The Schedule lists: shares of the capital stock of NL Chemicals, Inc. (“NLC”) and its subsidiaries, Enenco, Inc., and Schraubenfabrik Newstadt Goetz & Cie. GmbH; a note receivable from NLC; and surplus property.
(Id.,
Ex. J at 6).
In the Formation Agreement, NLPS agreed “to assume, pay, discharge or perform when due
all liabilities and obligations, known or unknown, of NL, associated with its petroleum services business
..., including without limitation those liabilities listed on the attached Liabilities Schedule, but excluding” specifically named liabilities.
(Id.,
Ex. J, § 1.3 (emphasis added)). Among the liabilities expressly excluded from the transfer to NLPS were “any and all liabilities of NL specified in the Amended and Restated Outstanding Indebtedness Agreement between NLPS and NL dated September 16, 1988 ... except as provided in the Indebtedness Agreement,”
(id.,
Ex. J, § 1.4(a)), “any claims of liability
at sites or facilities or with respect to operations not transferred to NLPS pursuant to this Agreement,
including claims arising out of or relating to the offsite deposit, placement or disposal by NL of any materials of any character whatsoever generated at the sites or operations not transferred to NLPS pursuant to this Agreement,” (2005 Case, Docket Entry No. 247, Ex. J, § 1.4(c) (emphasis added)), and “any claims relating to products the manufacture of which, or accounts receivable relating thereto, not transferred to NLPS pursuant to this Agreement,”
(id.,
Ex. J, § 1.4(d)).
Under the Formation Agreement, NL was required to “transfer and deliver to NLPS good and valid title to the Assets to the extent such Assets are transferable on the Effective Date without violation of any applicable laws or agreements and in conformity with any required third-party or governmental consents or other approvals for transfer.”
(Id.,
Ex. J, § 3.1). NLPS agreed “to assume and fully pay, perform and discharge each and all of the Assumed Liabilities in accordance with their terms.”
(Id.,
Ex. J, § 3.1).
The Formation Agreement recognized that other agreements would be executed to transfer the assets and liabilities:
The transfer of the Assets and the assumption of the Assumed Liabilities shall be effected by the execution and delivery of a General Assignment and Assumption Agreement and Bill of Sale, an Assignment of Intangibles, Rights and Proceeds, a Patent Assignment, a Copyright Assignment, a Patent Quitclaim Assignment, Trademark Assignment, and Assumption of Liabilities substantially in the forms of the documents attached hereto as
Exhibit A, Exhibit B, Exhibit C, Exhibit D, Exhibit E, Exhibit F
and
Exhibit G
respectively, together with such deeds or other instruments as may be required to transfer all interest in the Assets to NLPS and for NLPS to assume all of the Assumed Liabilities.
*755
(Id.,
Ex. J, § 3.1). The Formation Agreement also required execution of the Cross-Indemnification Agreement and the Indebtedness Agreement.
(Id.,
Ex. J, § 3.4).
c. The Cross-Indemnification Agreement
The Cross-Indemnification Agreement was dated September 16, 1988 and effective as of December 31, 1987. NL and NLC agreed “to indemnify and hold NLPS harmless from, against and in respect of all indebtedness, obligations or liabilities of NLPS, of any kind and nature, whether accrued, absolute, contingent, asserted, unasserted, due to become due, known, unknown and whenever arising, which are
not expressly assumed by NLPS pursuant to the Formation,
10
and costs and expenses related thereto.” (2005 Case, Docket Entry No. 247, Ex. K, § 1.1 (emphasis added)).
11
NL and NLC also agreed to “indemnify and hold NLPS and each of its directors, officers, and employees harmless from and with respect to any and all claims, liabilities, losses, damages, costs, and expenses, including attorneys’ fees, from or related to ... (a)
all liabilities not expressly assumed by NLPS in connection with the Formation Agreement;
[and] (b) claims of liability at sites or facilities or
with respect to operations not transferred to NLPS pursuant to the Formation,
including claims arising out of or relating to the offsite deposit placement or disposal by NL or NLC on or prior to the date of this Agreement of any materials of any character whatsoever generated at the sites or by operations
not transferred to NLPS pursuant to the Formation.
”
(Id.,
Ex. K, § 1.2(a)-(b) (emphasis added)). NLPS agreed “to indemnify and hold the NL Parties [ (NL and NLC) ] harmless from, against and in respect of, the failure of NLPS to pay or otherwise perform when due the liabilities, obligations or commitments of NL assumed by NLPS pursuant to the Formation.”
(Id.,
Ex. K, § 2. 1).
In addition, NLPS agreed to:
indemnify and hold the NL Parties, their affiliates, and each of their directors, officers, and employees harmless from and with respect to any and all claims, liabilities, losses, damages, costs, and expenses, including attorneys’ fees, from or related to ... (a) all liabilities of NL assumed by NLPS pursuant to the Formation Agreement; [and] (b) claims of liability at sites or facilities or with respect to operations transferred to NLPS pursuant to the Formation, including claims arising out of or relating
*756
to the deposit, placement or disposal of any material of any character whatsoever on such sites or facilities.
(Id.,
Ex. K, § 2.2(a)-(b)).
d. The Assumption Agreement
The Assumption Agreement was dated April 11, 1988 and effective as of December 31, 1987. Under that Agreement, NL conveyed all its assets to NLPS, including NL’s right, title, and interest in contracts to which it was a party, related to its petroleum services business.
(Id.,
Ex. L at 1-2). The transferred assets included “all real property (including all property affixed thereto) now or heretofore used primarily in NL’s petroleum services business including without limitation the real property set forth in Exhibit A.”
(Id.,
Ex. L at 1). Exhibit A to the Assumption Agreement lists certain real properties, labeled by city, state, and division. A number of the properties on Exhibit A are labeled as part of the “MCC” Division,
(see
2005 Case, Docket Entry No. 247, Ex. L at 5-6), which Tremont represented during the hearing on its motion stands for NL’s McCullough Division (the “McCullough Division” or “NL McCullough”). As discussed in more detail later, the McCullough Division has been linked to waste shipments to the Gulf Nuclear Sites.
12
NLPS agreed “to perform the obligations of NL under the contracts, leases and other agreements or undertakings that [wejre included among” the assets transferred; “to pay, discharge or perform when due all of the Assumed Liabilities set forth on the Assumed Liabilities Schedule attached to the Formation Agreement”; and “to conduct, in a diligent and proper manner, any litigation arising from the Assumed Liabilities.”
(Id.,
Ex. L at 3). But the Assumption Agreement provides that NLPS did not “assume and shall not be liable for any of the Excluded Liabilities,” as defined in the Formation Agreement.
(Id.,
Ex. L at 3).
e. The Indebtedness Agreement
The parties also executed the Indebtedness Agreement, dated September 16,1988 and effective as of December 31, 1987. That Agreement notes that “NL transferred to NLPS all of its domestic and foreign petroleum services business, except for certain of NL’s obligations ... and certain other properties of NL.”
(Id.,
Ex. M at 1). NLPS agreed to “assume and unconditionally guarantee to NL: ... (b) the performance of discharge by NLPS on behalf of NL of any and all obligations, covenants and agreements of NL contained in the documents and instruments described on the Debt Schedule”; and “(c) the performance or discharge by NLPS on behalf of NL of any and all other indebtedness and obligations of NL which are attributable to NL’s petroleum services business.”
(Id.,
Ex. M, § 1(b)-(c)).
2. The 1990 Restructuring
The 1990 restructuring of NL’s former petroleum services business was effectuat
*757
ed through a 1990 Plan of Restructuring (the “1990 Plan”), effective as of August 31,1990. Under the 1990 Plan, Old Baroid (formerly NLPS) was to retain the bentonite and titanium businesses and their associated liabilities. A company called New Baroid Corporation (“New Baroid”) was to receive the “Petroleum Services Business” — a defined term — and its liabilities. The 1990 Plan states that “[NL] has heretofore indirectly owned and operated its petroleum services operations (the ‘Petroleum Services Business’) principally through its subsidiaries .... ”
(Id.,
Ex. A at 1). The 1990 Plan explains that its purpose was for Old Baroid to
“separate
the Petroleum Services Business and the Titanium and Bentonite Businesses
into two publicly-traded companies.”
(2005 Case, Docket Entry No. 247, Ex. A at 1 (emphasis added)).
Under the 1990 Plan, the parties agreed to the following arrangement:
[Old Baroid] and New Baroid shall execute a General Assignment and Assumption Agreement whereby (i) [Old Baroid] assigns to New Baroid all of its right, title and interest in all of [Old Baroid’s] properties, assets and rights, of any kind, whether tangible or intangible, real or personal, which are attributable to the Petroleum Services Business (the “Petroleum Services Assets”) and the Bentonite Business (the “Bentonite Assets”); and (ii) New Baroid assumes and agrees to discharge all indebtedness, liabilities, obligations, claims, covenants, losses, damages, costs, penalties and expenses, of any kind and nature, whether accrued, absolute or contingent, asserted or unasserted, known or unknown, and whether existing as of the date of this Plan or arising thereafter (collectively, “Obligations”), of [Old Baroid] arising out of, or which are otherwise-attributable to, the past, present or future ownership or operations of the Petroleum Services Business (the “Petroleum Services Obligations”); and (iii) [Old Baroid] endorses in blank and delivers to New Baroid certificates representing all of the outstanding capital stock of all of its direct subsidiaries engaged in the Petroleum Services Business, including without limitation the Petroleum Services Subsidiaries.
13
(Id.,
Ex. A, § 1(a)).
In addition, New Baroid and BDFI, a Petroleum Services Subsidiary, agreed to execute a General Assignment and Assumption Agreement. New Baroid would assign to BDFI all of its right, title, and interest in all of the Petroleum Services Assets and the Bentonite Assets (with a few exceptions not relevant here), and BDFI agreed to discharge all “Obligations” of New Baroid arising out of or otherwise attributable to the past, present, or future ownership of the Petroleum Services Assets.
(Id.,
Ex. A, § 1(b)). BDFI was then to transfer the Bentonite Assets to a wholly owned subsidiary, Bentonite Corporation (“BC”), which would assume all “Obligations” arising out of the Bentonite Business.
(Id.,
Ex. A, § 1(c)). BDFI would endorse in blank and deliver to New Baroid a certificate representing all the outstanding capital stock of BC.
(Id.,
Ex. A, § 1(f)). New Baroid would then endorse in blank and deliver to Old Baroid a certificate representing all the outstanding capital stock of BC.
(Id.,
Ex. A, § 1(g)). Old Baroid would then transfer to BC all its assets, other than the capital stock of New Baroid and BC, and BC would assume all “Obligations” arising out of the ownership or operation of those assets.
*758
(See
2005 Case, Docket Entry No. 247, Ex. A, § 1(h)). Old Baroid agreed to effect the merger of its wholly owned subsidiary, Tremont Corporation, into Old Baroid, and to change Old Baroid’s name to Tremont Corporation.
(Id.,
Ex. A, § 1(k)). New Baroid agreed to change its name to Baroid Corporation.
(Id.,
Ex. A, §
1(l)).
The 1990 Plan contains an Exhibit A listing various assets and obligations. The 1990 Plan states that none of the assets or obligations on that Exhibit would constitute Petroleum Services Assets or Petroleum Services Obligations.
(Id.,
Ex. A, § 2). The 1990 Plan also contains an Exhibit B and states that all the assets on that Exhibit would constitute Petroleum Services Assets.
14
(Id.,
Ex. A, § 2). The 1990 Plan further provides that as of the effective dates of the various transactions, “New Baroid shall be deemed to have acquired complete, sole and beneficial ownership of all of the Petroleum Services Assets, including without limitation, the Petroleum Services Subsidiaries, together with all of the rights, powers and privileges of [Old Baroid] incident thereto, and shall be deemed to have assumed all of the Petroleum Services Obligations.”
(Id.,
Ex. A, § 3). Old Baroid would “likewise be deemed to have acquired complete, sole and beneficial ownership of all of the outstanding capital stock of BC together with all of the rights, power and privileges of New Baroid incident thereto.” (2005 Case, Docket Entry No. 247, Ex. A, § 3).
The 1990 Plan describes the indemnity obligations assumed by both Old Baroid and New Baroid. Old Baroid would indemnify and hold New Baroid harmless from all Obligations attributable to Old Baroid’s “past, present or future operations, other than those Obligations which constitute Petroleum Services Obligations.”
(Id.,
Ex. A, § 11). Specifically, Old Baroid agreed to indemnify New Baroid for “all Obligations arising out of, or which are otherwise attributable to, sites or facilities or with respect to operations not attributable to the Petroleum Services Business, including claims arising out of or relating to the offsite deposit, placement or disposal by [Old Baroid] or the Titanium or Bentonite Businesses of any materials of any character whatsoever generated at such sites or by such operations.”
(Id.,
Ex. A, § ll(i)). New Baroid agreed to indemnify Old Baroid for Petroleum Services Obligations.
(Id.,
Ex. A, § 12). Specifically, New Baroid agreed to indemnify Old Baroid for “all Obligations arising out of, or which are otherwise attributable to, sites or facilities or with respect to operations attributable to the Petroleum Services Business, including claims arising out of or relating to the deposit, placement or disposal of any material of any character whatsoever generated at such sites or by such operations.”
(Id.,
Ex. A, § 12(i)).
3. The Evidence in the Arbitration About the Transfer of NL’s Former Petroleum Services Business to Halliburton
Tremont argues that “Petroleum Services Business” in the 1990 Plan encompassed all of NL’s historical petroleum services business. As Tremont notes, the 1990 Plan states that “The Company [Old Baroid] has
heretofore
indirectly owned and operated its petroleum services operations (the ‘Petroleum Services Business’) principally through its subsidiaries .... ”
*759
(Id.,
Ex. A at 1 (emphasis added)). Tremont points to testimony from the arbitration by John Karnes, the drafter of the 1990 Plan, stating: “ T think petroleum services business is defined as all of the activities that took place up to this time that were petroleum services operations,’ ” and that “ ‘heretofore backs and whatever forward up to this time petroleum services operations, that is petroleum services business.’”
15
(2005 Case, Docket Entry No. 252 at 13 n. 2).
a. The Affidavits of J. Landis Martin, Steven L. Watson, William Lindquist, and Harold C. Simmons
J. Landis Martin, a current Halliburton board member and a member of Halliburton’s audit committee, was involved in the 1990 restructuring and was the chairman of New Baroid at the time of the 1990 Plan. He executed an affidavit in October 2005. The affidavit was included in the evidence submitted to the arbitration panel. The affidavit states: “The goal or purpose of the restructuring was to separate Baroid Corporation’s petroleum services business, including the historical operations of NL Industries, Inc., from Baroid Corporation’s titanium metals business, the Titanium Metals Corporation (‘TI-MET’).” (2005 Case, Docket Entry No. 247, Ex. O, ¶ 6).
16
Martin also states that “the revised intent and purpose of the 1990 Plan of Restructuring of Baroid Corporation was to transfer TIMET and Baroid’s bentonite business to a new separate entity, and leave with Baroid Corporation all other businesses and liabilities, including all of Baroid’s petroleum services businesses and liabilities.”
(Id.,
Ex. O, ¶ 11). Martin explains that “[a]t no point, in any planning or implementation of the 1990 Plan of Restructuring of Baroid Corporation, did we ever contemplate or intend that old Baroid Corporation would retain any historical environmental liabilities of the petroleum services business of NL Industries, Inc.”
(Id.,
Ex. 0, ¶ 13). Instead, Martin states that “[t]he intent and purpose of the 1990 Plan of Restructuring ... was to have New Baroid Corporation (which I understand is now controlled by Halliburton), take responsibility for all liabilities associated with the past, present and future operations of the petroleum services business of NL Industries, Inc., including the historical barite mining liabilities of the petroleum services business and all environmental liabilities associated therewith.”
(Id.,
Ex. O, ¶ 19).
In a 2007 affidavit that was also submitted to the arbitration panel, Martin explains his understanding that historical obligations associated with the Petroleum Services Business transferred to New Baroid, including obligations relating to leases that had been terminated even before the 1988 restructuring. Martin states:
*760
With regard to leases that were terminated prior to the 1988 Restructuring, it was my understanding that any liability relating to such leases, or liability deriving out of any operations or disposal on such formerly leased property, was transferred to New Baroid Corporation — even if the lease was terminated prior to 1988. To clarify, if a parcel of leased property was used in the NL petroleum services business in the 1940s at Magnet Cove for mining operations or disposal, and the lease for such property was terminated by NL in 1965, any liability for any petroleum related operations or contractual liabilities in the leases were to be transferred to New Baroid Corporation via the 1988 and 1990 Plans of Restructuring.
(Id.,
Ex. P, ¶3).
17
Martin explains that he had the same
*761
understanding about historical liabilities arising from property sold before the 1988 restructuring:
My understanding with regard to owned property that was sold prior to 1988 is the same. That is, if the property was used in the historical operations of NL’s petroleum services business — and even if no longer owned by 1988 — -all liability with regard to that property that derived from historical petroleum services operations or disposal was to be transferred and assumed by New Baroid Corporation.
(Id.,
Ex. P, ¶ 4).
Tremont points to similar testimony by other witnesses in the arbitration that the 1990 restructuring was intended to separate the Petroleum Services Business from the titanium and bentonite businesses, including separating their historical liabilities and obligations.
(See
2005 Case, Docket Entry No. 247, Ex. Q,
18
¶ 6 (affidavit of Steven L. Watson, dated July 26, 2007, describing his understanding that “New Baroid Corporation was responsible for all claims relating to the historical petroleum services business of NL begun in
*762
1926, and not just the current assets owned in 1988”);
id.,
Ex. R, ¶ 6 (affidavit of William Lindquist, dated July 26, 2007, stating the same);
id.,
Ex. S, ¶ 5 (affidavit of Harold C. Simmons, dated July 26, 2007, stating the same)).
19
b. The SEC Information Statement
Tremont also points to the cover letter accompanying Baroid Corporation’s Securities and Exchange Commission Information Statement in October 1990. The letter explains the 1990 transactions, as follows:.
The Board of Directors of [Old] Baroid Corporation (the ‘Company’) has unanimously approved the separation of the Company’s petroleum services businesses and its titanium metals and bentonite mining businesses into two publicly-traded companies. In connection with the separation, you are receiving, er each share of Company Common Stock which you now own, one share of common stock in a newly formed company, which will operate the petroleum seiwices businesses and will bear the name “Baroid Corporation.” You will continue to own stock in the Company, which will conduct the titanium metals and bentonite mining business, and will change its name to “Tremont Corporation.”
(Id.,
Ex. T at l).
20
The Information Statement continues: “[Old Baroid] has contributed to New Baroid all of [Old Baroid’s] assets attributable to its petroleum services businesses, including all of the stock of its petroleum services operating subsidiaries, and New Baroid has assumed all of [Old Baroid’s] liabilities attributable thereto.”
(Id.,
Ex. T at 2). The Information Statement also states that “New Baroid was incorporated in 1990 and is the succes
*763
sor to the NL petroleum services business begun in 1926.”
(Id.,
Ex. T at 5).
Tremont also points out that the Form 10 filed with the SEC about the 1990 transactions clarifies that all liabilities Old Baroid assumed in its indemnification agreement with NL were assumed by New Baroid in the 1990 restructuring.
{See
2005 Case, Docket Entry No. 252 at 16). A draft of the Form 10 states that “New Baroid assumed
certain of
the [Old Baroid’s] obligations under the NL/Company Indemnification Agreement in connection with the Distribution.” (2005 Case, Docket Entry No. 247, Ex. U at 3 (emphasis added)). The SEC told New Baroid that this language was vague and needed clarification.
{See id.,
Ex. V at 3 (“The ‘certain of the company’s obligations’ referred to in the penultimate sentence of the first full paragraph on page 71 should be explained.”)). The revised Form 10 states that New Baroid would take on all petroleum services obligations that Old Baroid had assumed under the Cross-Indemnification Agreement.
{See id.,
Ex. U at 5 (“New Baroid assumed
all of
[Old Baroid’s] obligations under the Indemnification Agreement attributable to [Old Baroid’s] petroleum services business.” (emphasis added))).
New Baroid’s listing application to the New York Stock Exchange similarly explains the 1990 transactions, as follows:
Effective August 31, 1990, [New Baroid] and [Old] Baroid entered into a Plan of Restructuring ... pursuant to which, among other things, (i)[01d] Baroid will contribute to [New Baroid] all of [Old] Baroid’s assets attributable to its petroleum services businesses, including all of the stock of its petroleum services operating subsidiaries, and [New Baroid] will assume all of [Old] Baroid’s liabilities attributable thereto ....
{Id.,
Ex. W at l).
21
c. The New Baroid/Dresser/Halliburton Mergers
A subsidiary of Dresser Industries, Inc. (“Dresser”) merged with New Baroid in 1993 and 1994.
(See
2005 Case, Docket Entry No. 274, Ex. M). Dresser assumed all New Baroid’s obligations in 1997.
(See
2005 Case, Docket Entry No. 247, Ex. B;
id.,
Ex. Y at 2). Halliburton is the successor-in-interest to New Baroid,
(see id.,
Ex. Z at 1;
id.,
Ex. Y at 3). Halliburton asserts that in the New Baroid/Dresser merger, New Baroid failed to disclose liabilities related to the McCullough Division or the Gulf Nuclear Sites, despite a representation that there were no undisclosed material liabilities.
(See
2005 Case, Docket Entry No. 274 at 13-14). Halliburton also argues that around the time of the Dresser/Baroid merger, NL agreed to indemnify New Baroid for losses arising from a lawsuit captioned
Western Atlas v. NL,
evidencing NL’s understanding that it, not Halliburton was responsible for historical liabilities arising from the former petroleum services business assets or operations not transferred in 1988.
(Id.
at 12-13).
d. Testimony in the Arbitration Proceeding
Tremont has submitted testimony from the arbitration proceeding that obligations and liabilities associated with NL’s former petroleum services business, including historical liabilities, were transferred from NL to Old Baroid, from Old Baroid to New
*764
Baroid, from New Baroid to Dresser, and from Dresser to HESI.
i. The Arbitration Testimony of J. Landis Martin
Martin testified as follows:
Q There’s been some dispute in this case that I can tell you about. Essentially the Halliburton side has said that just current liabilities were being moved forward. Do you have an understanding as to whether — is that correct? Was it supposed to be just current liabilities or was it all the historical — what was going to happen in your mind, in your discussions with Mr. Simmons and the executive team, as to the historical environmental liabilities of the petroleum service business?
A Both the — all the historical liabilities would go with Baroid Corporation, the ones relating to the Baroid — the oil field services business.
Q Is there any doubt about that in your mind? Is that something—
A No.
Q That was clear to everyone?
A I thought I made it clear to everyone, yes. It certainly was clear to me.
(2005 Case, Docket Entry No. 247, Ex. AA, Testimony of J. Landis Martin at 11:3—21).
22
Martin further testified:
*765
Q In connection with your discussions with Mr. Simmons and your intent, did you have discussions with Mr. Simmons about what was going to happen to the historical environmental liabilities that were created under NL with regard to petroleum service business that was part of NL historically from 1926 till the time of the 1988 transaction and then what happened thereafter?
A Well, as I said before, when we spun off Baroid Corporation, we intended to put the petroleum services assets and liabilities, you know, all of them in that company, and we had originally intended to spin TIMET out and keep all those assets there. So what we wanted to do in creating a new company that was going to be spun off in the reverse transaction was putting all the historical petroleum service assets and liabilities.
(Id.,
Ex. AA, Testimony of J. Landis Martin at 16:15-17:7). Martin also testified that he discussed this understanding with
*766
Simmons, the board members, and the employees and attorneys involved in the deal. (Id, Ex. AA, Testimony of J. Landis Martin at 17:8-18:5). Martin further testified that Dresser understood that it was receiving the historical liabilities of NL’s petroleum services business as part of the merger with (New) Baroid.
(Id.,
Ex. AA, Testimony of J. Landis Martin at 36:19-37:3).
23
ii. The Arbitration Testimony of William Lindquist
William Lindquist, an executive involved in the 1988 and 1990 restructurings, explained the transfer of the historical environmental liabilities, as follows:
Q. [D]id you and the rest of the people understand that NL’s petroleum services business had historical environmental liabilities from the time it was formed in 1926 going forward to what was then that present day? A. I did.
Q. In your involvement with the 1988 transaction, did you have an understanding as to what was supposed to happen with all of those historical petroleum services business obligations from 1926 to the then present time?
A. Yeah. The goal was to spin off the historical business of the petroleum services, so it included both the historical assets of petroleum services businesses as well as the liabilities.
Q. Were you ever involved in any decision or did you ever hear any discussion where anybody told you that historical environmental liabilities of the barite mining business were supposed to stay on the NL side of the equation?
A. No.
Q. Did you hear that with regard to anything else in terms of environmental liabilities that related to the historical petroleum services business?
A. No. Any liabilities that were historically related to the petroleum services business went to the [Old] Baroid side of the spinoff.
Q. Was the exact opposite true, and that is with regard to the chemical business, was the chemical business and all of its liabilities to be retained by the NL side?
A. That’s correct. It’s a spinoff, and what you particularly do is you separate the two lines of businesses.
*767
Q. Is it true — -was it your understanding that the company that was then called [Old] Baroid, would today be called Tremont, was going to give NL a contractual indemnification for all of those historical petroleum services liabilities?
A. Yes.
Q. And is that your understanding as to the way the transaction was carried out?
A. Yes.
Q. Did anybody tell you anything to the contrary?
A. No.
(Id.,
Ex. BB, Testimony of William Lindquist at 84:13-86:14). Lindquist further testified:
Q. Okay. And you said that when New Baroid was formed, that the assets were to go to Tremont and the liabilities were to go to New Baroid. Do you remember that?
A. I don’t. I think what I said was the historical — the petroleum services historical assets and liabilities went to petroleum services, went to New Baroid, and the historical assets and liabilities of Bentonite went to old— stayed with Old Baroid as well as the TIMET stock and then the surplus properties.
(Id.,
Ex. BB, Testimony of William Lindquist at 185:20-186:6).
iii. The Arbitration Testimony of Steve Watson
Steve Watson, a senior executive involved in the 1988 and 1990 restructurings, testified similarly:
Q [W]hat was the discussion about what was supposed to happen with the historical liabilities of the petroleum service business in the 1988 transaction?
A Okay. The separation was to completely separate these businesses and both of them had been in the business for a very long period
of
time. Probably close to 100 years.'
Both petroleum service-I’m not sure if it’s 100, but it was a very long period of history.
The chemical business, the titanium dioxide business had been in business for almost 100 years now.
So there was [sic] long, long histories with these businesses in their respective markets.
The concept was is [sic] that it’s a separation, and everything to do with petroleum service went this way, and everything to do with the chemicals business went this way.
And most — what I started saying was some of it was fairly easy because some of these businesses, and there are sub-businesses to some of this, like petroleum service had many subsidiaries. So those were pretty easy because they were already captured inside of another corporation that was a subsidiary.
And then there was other stuff that wasn’t and it was maybe in the wrong company or it was up at the parent company where there were other miscellaneous businesses in there that were not strictly petroleum service or chemicals. And those would have to all get sorted out, but the clearer distinction was the two big businesses, petroleum services and chemicals, that that was the dividing line. Whatever happened for the prior 100 years on one went this way and whatever happened and the other one went the other way. And that was the — that was the determination.
(2005 Case, Docket Entry No. 247, Ex. CC, Testimony of Steve Watson at 262:11-
*768
264:3). Watson testified that his understanding of the transactions came from discussions he had with Simmons and Martin. He testified that the board approved 'the 1988 restructuring based on that understanding.
(See id.,
Ex. CC, Testimony of Steven Watson at 264:11-14).
With respect to the 1990 transactions, Watson testified:
Q [D]id you have an understanding based upon your conversations with Mr. Simmons, Mr. Martin and the other people of the team as to what was going to happen to the historical liabilities of that petroleum service business other than the bentonite and the titanium assets?
A Yeah. It was intended from the very beginning, the first conversations which were back when we didn’t know we needed bentonite. We didn’t know any of this stuff. We were just going to separate the two businesses, that we would do exactly the same thing we did in 1988.
That petroleum service business and everything that was with it, assets, any assets to do with it, past, present, future, any liabilities, the business, the whole thing, the historic business, the trademarks, the good will, the name, I mean there’s trademarks and name that are valuable, anything to do with that and if it wouldn’t have been for this trade or business, five-year thing, it would have been just, well, this is easy, you just take TIMET and move it over here and whatever is left is petroleum service. It would have been very easy.
But because we had to do it in this reverse spin-off, everything got turned upside down, and effectively you had to identify the petroleum service to be moved over, but the concept — -to answer I think what your question is is the intention was exactly the same thing was supposed to happen in 1990 as happened in 1988 was all of the petroleum service business, assets, liabilities, known, unknown, contingent, future, past, whatever went over there. None of it would go over to the Titanium Metal Corporation side.
(Id.,
Ex. CC, Testimony of Steve Watson at 274:21-276:11).
iv. The Arbitration Testimony of Harold Simmons
Harold Simmons, the Chairman of NL and Tremont, testified similarly. He stated that he would not have considered the 1990 restructuring if it involved retaining the environmental liabilities for the Tremont side. He testified that no one ever told him that the historical mining environmental liabilities of NL’s petroleum services business were to stay on the Old Baroid side of the equation.
(Id.,
Ex. DD, Testimony of Harold Simmons at 103:9-15).
v. The Arbitration Testimony of Ann Manix
Ann Manix, a member of New Baroid’s board, similarly testified that New Baroid was receiving the historical liabilities associated with the petroleum services business:
Q. Prior to the time that you get to the board meeting, did you have an understanding from your conversations with Mr. Martin as to what was going to happen with the historical liabilities of NL’s petroleum services business?
A. We would keep them, and I was going to go on the board of New Baroid, so I was listening from that angle. We would keep the liabilities, we would keep the petroleum services business but we would not have the Titanium Metals business.
Q. Just for clarity, the “we” being?
*769
A. New Baroid.
(Id.,
Ex. EE, Testimony of Ann Manix at 15:12-24). However, as Halliburton points out, Manix’s testimony shows that she only had a general understanding of the parties’ intentions, even about the 1990 restructuring. (S
ee
2005 Case, Docket Entry No. 274, Ex. Q, Testimony of Ann Manix at 50:18-51:6).
vi. The Arbitration Testimony of John Karnes
John Karnes, an outside lawyer who worked on the 1990 restructuring, testified in his deposition submitted in the arbitration that “[a]U of the petroleum services related liabilities and obligations [went] along with those assets to the new—New Baroid petroleum services company.” (2005 Case, Docket Entry No. 247, Ex. FF, Deposition of John Karnes at 32:19-21).
24
He had no doubt that New Baroid was taking all the historical liabilities of the barite petroleum service business.
{Id.,
Ex. FF, Deposition of John Karnes at 33:8-16). Although Karnes was a junior associate at the time of the transactions, he testified that “the explanation [he] received from ... more senior attorneys both in Kirkland and in ... Bob Leidich’s group and all the directions [he] got were consistent with this — this clean break.”
(Id.,
Ex. FF, Deposition of John Karnes at 43:16-20). Karnes testified that “the deal was exactly what the New York Stock Exchange application says,” and that “New Baroid was getting all of the petroleum services assets and assuming all of the petroleum services liabilities.”
(Id.,
Ex. FF, Deposition of John Karnes at 44:22-25).
Karnes also testified that based on conversations with senior attorneys working on the restructuring, he understood that the indemnification agreement would give “full indemnities to NL with regard to its petroleum services business started in 1926.”
(Id.,
Ex. FF, Deposition of John Karnes at 58:19-59:4). Karnes repeated that the restructuring was intended to produce a clean separation of two businesses.
“I think consistent with what people were calling the clean break, all assets— and much of the documentation actually speaks to this — past, present and future and all liabilities related to that business past, present and future were to be— were to go over so you would have two separate companies that were as pure as possible, if you will, bentonite, titanium and — petroleum services.”
{Id.,
Ex. FF, Deposition of John Karnes at 103:21-104:3).
*770
vii. The Arbitration Testimony of John Deering
John Deering, Halliburton’s lead in-house attorney in this case and its Rule 30(b)(6) witness on contract issues in the arbitration, gave a deposition submitted in the arbitration. Deering stated that without knowing specific facts he could not speak definitively, but that he had no reason to believe that a historical liability associated with NL’s petroleum services business — assuming it was not on Exhibit A of the 1990 Plan — would not have passed to Halliburton through the restructurings. (2005 Case, Docket Entry No. 247, Ex. GG, Testimony of John Deering at 70:24-71:15).
25
viii. The Arbitration Testimony of Joseph S. Compofelice
Halliburton has submitted testimony given in the arbitration by Joseph S. Compofelice, Vice President and Chief Financial Officer of New Baroid. His testimony contradicts what other witnesses stated in the excerpts from the arbitration transcript Tremont submitted. Compofelice testified that the intent of the 1990 Plan was to spin off a “clean petroleum services security that represented only the current operations of the petroleum services activities of Tremont .... ” (2005 Case, Docket Entry No. 274, Ex. R, Testimony of Joseph Compofelice at 27:24-28:5). Compofelice testified that by “clean petroleum services security,” he meant “[a] business that represented the current operations and did not include potential liabilities associated with discontinued operations.”
(Id.,
Ex. R, Testimony of Joseph Compofelice at 28:13-20).
Compofelice described his recollection of the intent of the 1990 restructuring: “[A]ll liabilities not associated with the current operations that I mentioned were left behind in Old Baroid, what is now called Tremont .... ”
(Id.,
Ex. R, Testimony of Joseph Compofelice at 30:3-6). Compofelice testified that he told investors during a road-show presentation before the completion of the 1990 restructuring that “one of the unique things about New Baroid ... [was] that it represented just the current operations of Baroid Drilling Fluids, Sperry-Sun and other ongoing active operations of—of Baroid.”
(Id.,
Ex. R, Testimony of Joseph Compofelice at 37:18-22).
26
Compofelice admitted in his deposition that his recollection was inconsistent with the final documents executing the 1990 restructuring.
27
(See
2005 Case, Docket
*771
Entry No. 279, Ex. C, Testimony of Joseph Compofelice at 114:4-21). Compofelice further testified:
Q: And I want I don’t want to insult you, but is it possible that over the last 17 years — I know you’ve been a busy man, you’ve been involved in a lot of businesses, a lot of different transactions. Is it possible that the document on page 78 that I just showed you reflects a better recollection of what the party [sic] to that transaction meant than what your present recollection is?
MS. MARTINEZ: Objection. Form.
A. And this is a long time ago. And of course anybody could be wrong. But from being on the road show, going back to my original testimony, that’s what stands out. When I spoke to the substance of the transaction — when I spoke — what I recall the intent of the parties, it was no more complicated than that general recollection, that, you know, the nonoperating assets and liabilities, legacy costs, leave those behind in Tremont.
Part of the reason why that stands out in my mind is, in creating more value for all shareholders and maximizing value, a stock like New Baroid is going to trade against the yardsticks in its business, its peer group comps. And that’s what we were trying to — to earn.
Something like Tremont, the stub, so to speak, as we called it, there isn’t any sense of what that would trade for. It wasn’t going to trade for a — a meaningful multiple. And so all other things being equal, being fair to all shareholders, you want to put the value in the things that are going to trade for meaningful multiples and the things that don’t have value leave behind in the step. That’s kind of how things like this are designed. And so that’s why it just sticks out. It was the intent in my mind. And if I were asked to design a transaction like this today, to maximize value for all shareholders, that’s exactly how you would design it today.
(2005 Case, Docket Entry No. 300-1, Ex. J, Deposition of Joseph Compofelice at
*772
114:23 — 116:9).
28
4. The Sale of the McCullough Division to Western Atlas
Tremont argues that NL’s potential liability for the Gulf Nuclear Sites derives from the McCullough Division. (2005 Case, Docket Entry No. 252 at 33). The parties dispute whether liabilities associated with the McCullough Division transferred to NLPS in the 1988 restructuring because NL may have sold that division before the 1988 restructuring became effective.
On December 4, 1987, Western Atlas and NL (and some of NL’s subsidiaries) entered into an asset purchase agreement (the “Western Atlas Agreement”), in which NL sold the McCullough Division to Western Atlas.
29
(2005 Case, Docket Entry No. 247, Ex. HH).
30
The Western Atlas Agreement provides in relevant part:
Consummation of the purchase and sale of the Assets and the other transactions provided for in this Agreement shall take place ...
on December SI, 1987, commencing at 11:00 a.m., local time on such date provided such date follows expiration of the waiting period, if applicable, under the Hart^Scott Rodino Antitrust Improvements Act of 1976, or the receipt of any and all other material, requisite governmental permits, approvals and consents, or at such other date or time or other place as [Western Atlas] and the NL Parties may mutually agree upon in uniting
(such actual date of transfer is referred to as the “Transfer Date”), and all transactions provided for in this Agreement to occur on and as of the Transfer Date shall be deemed to have occurred simultaneously and to
be effective as of midnight on the Transfer Date.
(Id.,
Ex. HH, § 13(a) (emphasis added)). Under the Western Atlas Agreement, NL retained historical liabilities associated with the McCullough Division:
7.
Non-Assumed Liabilities.
Except for the liabilities specified in Section 6, [Western Atlas] is not assuming and shall not be liable to the NL Parties or any other person with respect to any debt, liability or obligation of the NL Parties or Shaffer (whether known, unknown, absolute, accrued, contingent or otherwise) including, without limitation, the following, collectively, the “Non-Assumed Liabilities”:
(f)
Litigation.
Any litigation, arbitration or regulatory, administrative or governmental proceeding or investiga
*773
tion, whether pending, threatened or hereafter instituted, to the extent it is in respect of the business and affairs of the Division
on or prior to the Transfer Date;
(g)
Violation of and Compliance with Laws.
Any violation of, alleged violation by the Division, or the Division’s failure to comply with, any foreign, federal, state or local statute, law, ordinance, rule, regulation, order or decree in respect of the business and affairs of the Division
on or prior to the Transfer Date
or in respect of the transfer of the Assets to [Western Atlas]; and
(i)
Environmental Matters.
Any debt, liability or obligation of the Division (including without limitation any cleanup or restoration responsibility or liability with respect to real property) in connection with the use, consumption, generation, treatment, storage or disposition of hazardous materials or wastes (including without limitation nuclear materials and wastes) on or before the Transfer Date or any other environmentally related claim
to the extent arising on or before the Transfer Date.
(Id.,
Ex. HH, § 7(f), (g), and (i) (emphasis added)).
5.
Western Atlas v. NL Industries, Inc.
In 1991, Western Atlas sued NL and several other NL-related entities, including New Baroid. In an internal NL memorandum dated December 13, 1991, Lourdes T. Hernandez
31
sent the petition and first amended petition in that case to Anthony Lannie, Vice President and General Counsel of Baroid Corporation. (2005 Case, Docket Entry No. 274, Ex. I). An unsigned, handwritten note attached to the letter and bearing the same date states: “Per Lourdes, this is for information only — she is to send note saying NL will handle for Baroid.”
(Id.,
Ex. I). In a January 18, 1994 letter to David B. Garten, Vice President and General Counsel of NL, Lannie stated that he was “writing to confirm [Baroid’s] understanding regarding the various active matters as to which [Baroid] is either indemnified or is indemnifying [NL] pursuant to the various agreements among Baroid, NL, and Tremont Corporation.”
(Id.,
Ex. A-2 at 1).
Western Atlas v. NL
is among the matters listed under the category “Matters as to which NL is Indemnifying Baroid.”
32
(Id.,
Ex. A-2 at 2). Garten signed the letter, indicating his agreement with the description of the various indemnifications.
(Id.,
Ex. A-2 at 3). A July 12, 1995 letter from Garten to James E. Brasher, Vice President of Western Atlas, states that NL settled the lawsuit for $1,600,000.
(Id.,
Ex. J at 1).
33
*774
6. The Sale of Oilfield Service Facilities to Exxon
On October 2, 1987, NL and Exxon Corporation executed an asset purchase agreement. NL sold Exxon assets used in the NL Treating Chemicals Division.
(See
2005 Case, Docket Entry No. 274, Ex. K). The agreement had a closing date of “November 20, 1987, or ten working days following expiration or early termination of all applicable waiting periods under the Hart-ScotWRodino Antitrust Improvements Act of 1976, whichever occurs last.”
(Id.,
Ex. K, § 1.5). There is no evidence in the record of the actual closing date.
In the section on indemnification, NL agreed to:
indemnify, defend and hold [Exxon] or its designees harmless from and against any and all claims, damages, obligations, liabilities or losses ... that [Exxon] or its designees shall incur or suffer after the Closing Date which arise out of and result from any liability or obligation of [NL] or its affiliates (other than Assumed Liabilities) or breach of any representation or warranty or failure by [NL] to perform any of the covenants or agreements of [NL] in this Agreement, or in any schedule or exhibit to this Agreement.
(Id.,
Ex. K, § 8.1(a)). NL also agreed to:
indemnify, defend and hold [Exxon] and its designees harmless from and against any claim of a third party ... against [Exxon] or its designees or against the Purchased Assets ... which arises out of and results from any condition, event or activity relating to the business of the Division
existing or occurring on or prior to the Closing Date.
Said claims of third parties include, without limitation, those arising from environmental and industrial health events occurring on or prior to the Closing Date, and resulting from: (A) any emission, dispersal, discharge, release, leak, escape, or concentration of any solid, liquid or gaseous material or effluent or pollutant from the Purchased Assets on or prior to the Closing Date; (B)
any generation, storage or disposal of waste material on the real property conveyed, or elsewhere, prior to Closing;
and (C) illness, disease, bodily injury or disability, including death, at any time resulting therefrom, arising out of or in the course of employment, or incidental thereto, or arising out of operation of the Purchased
*775
Assets by [NL] or its affiliates on or prior to the Closing Date; whether or not on the Closing Date any such claim, damage, obligation, liability, or loss is fixed, accrued, absolute, contingent or otherwise, and whether known or unknown, asserted or unasserted, due or to become due.
(Id.,
Ex. K, § 8.1(b) (emphasis added)).
34
7. Tremont’s Request for Indemnification from Halliburton for the Gulf
Nuclear Site Liabilities
On July 6, 2007, NL demanded that Tremont provide a defense and indemnity for liabilities associated with the Gulf Nuclear Sites, explaining that “the potential liability for these Sites relates to NL’s former petroleum services business.” (2005 Case, Docket Entry No. 247, Ex. KK).
35
On the same date, Tremont de
*776
manded that Halliburton provide a defense and indemnity for the Gulf Nuclear Sites, explaining that “the potential liability for these Sites relates to NL Industries, Inc.’s former petroleum services business.”
(Id.,
Ex. LL). Halliburton’s senior vice-president responded to Tremont’s request for indemnification on July 20, 2007, stating that based on Halliburton’s investigation, “NL’s potential liability relating to Gulf Nuclear arose from the activities of NL’s former division, NL McCullough.”
(Id.,
Ex. MM at 1). Halliburton asserted that “the assets of NL McCullough were sold by NL to Western Atlas ... in 1987, prior to the 1988 Amended and Restated Formation Agreement.”
(Id.,
Ex. MM at 1). Halliburton argued that the Formation Agreement excluded certain liabilities from the transfer to NLPS, including “ ‘any claims of liability at sites or facilities or with respect to operations not transferred to NLPS pursuant to this agreement, including claims arising out of or relating to the offsite deposit, placement or disposal by NL of any materials of any character whatsoever generated at sites or operations not transferred to NLPS pursuant to this Agreement.’ ”
(Id.,
Ex. MM at 1). Halliburton concluded that “[s]inee the operations of NL McCullough were not transferred to NLPS pursuant to the Formation Agreement, and since the potential liability [Tremont] ha[d] tendered to Halliburton for indemnity is the result of NL McCullough’s offsite deposit, placement or disposal practices, [Halliburton did] not agree that this liability was transferred to NLPS pursuant to the 1988 Formation Agreement.”
(Id.,
Ex. MM at 2).
On November 9, 2007, the EPA brought the EPA lawsuit against HESI, DII, and NL, among others, under CERCLA. The EPA sought costs it incurred in conducting removal actions as a result of releases and threatened releases of hazardous substances from the Gulf Nuclear Sites. The EPA complaint alleges that HESI succeeded to all the liabilities at the Gulf Nuclear Sites of several companies, including Baroid, and that DII succeeded to all Dresser’s liabilities at the Gulf Nuclear Sites. (2005 Case, Docket Entry No. 247, Ex. OO, ¶¶ 6, 16). The complaint further alleges that “NL McCullough was a division of NL Industries, Inc.,” and that NL or HESI is responsible for NL’s liabilities at the Gulf Nuclear Sites.
(Id.,
Ex. OO, ¶¶ 18, 19). The complaint alleges that “Halliburton, DII, and NL sent radioactive wastes, including americium, cesium, radium, cobalt, zinc, tritium, scandium, gadolinium, iridium, and/or iodine, directly to the Odessa Site for storage and/or processing prior to disposal”; that they sent radioactive wastes “directly to the Webster Site[,] and certain of those wastes were transferred to the Odessa Site for processing and/or storage prior to disposal”; and that “[t]he practice at the Odessa Site was to compact and repack many of the radioac
*777
tive wastes prior to offsite disposal.”
(Id.,
Ex. OO, ¶¶ 60-62).
Tremont tendered the defense of the EPA lawsuit to Halliburton in a November 12, 2007 letter.
36
(See id.,
Ex. PP). Halliburton refused. Halliburton argued that under the Cross-Indemnification Agreement, NLPS agreed to indemnify NL only for liabilities, obligations, or commitments assumed by NLPS under the Formation Agreement.
(Id.,
Ex. QQ at 2). Halliburton noted that the Formation Agreement provided that NLPS would not assume liabilities associated with sites, facilities, or operations not transferred to NLPS under that Agreement, “ ‘including claims arising out of or relating to the offsite deposit, placement or disposal by NL of any materials of any character whatsoever generated at sites or operations not transferred to NLPS pursuant to this Agreement.’ ”
(Id.,
Ex. QQ at 2). As it had in rejecting Tremont’s previous demand for defense and indemnification, Halliburton stated that NL’s potential liability for the Gulf Nuclear Sites arose out of the operations of the McCullough Division, and that NL had transferred all facilities and operations associated with that Division to Western Atlas in December 1987, almost one year before the Formation Agreement was executed. (2005 Case, Docket Entry No. 247, Ex. QQ at 2). Halliburton again asserted that because of the Western Atlas transfer, the McCullough Division could not have been transferred from NL to NLPS in 1988.
(Id.,
Ex. QQ at 2)
37
Tremont and NL entered into a joint defense agreement with Halliburton. Tremont and NL agreed that Halliburton’s lawyers could represent the interests of both Halliburton and NL in the EPA lawsuit.
(Id.,
Ex. TT). The parties reserved their indemnification claims relating to the Gulf Nuclear Sites.
(See id.,
Ex. TT, ¶ 4). Tremont represents that it is not seeking reimbursement for past fees that it agreed to cover under the joint defense agreement. Tremont instead asks this court to find that Halliburton is responsible for NL’s liabilities arising from the Gulf Nuclear Sites so that Tremont can avoid incurring additional costs and expenses from those Sites. (2005 Case, Docket Entry No. 252 at 40).
8. The Arbitration Panel’s Decision
Halliburton argued in the arbitration that it was not liable for NL’s petroleum services activities at the Malvern Site be
*778
cause some of the relevant leases had terminated before the restructurings, making them “surplus real property” excluded from the 1990 transfer to New Baroid. The arbitration panel rejected that argument. The panel stated that “the clear intent of both plans of restructuring [was] to 1) spin-off the pre-existing petroleum services business of the transferors in 1988 and 1990, respectively, and 2) transfer responsibility for all historical liabilities associated with the operations of that business.” (2005 Case, Docket Entry No. 247, Ex. D at 19).
The panel found:
[T]he conclusion is inescapable that the leased properties and licenses of NL, and subsequently “Old” Baroid, were indeed an integral part of the petroleum services business of NL, and the resultant liabilities and obligations were assumed by NLPS and New Baroid, respectively, as a result of the plans of restructuring. Those plans included not only the transfer of the assets and operations of the transferors’ petroleum services business, but also the associated past and future liabilities and obligations.
(Id.,
Ex. D at 19). The panel explained:
Whether leases had expired or were terminated prior to 1988 is not determinative of whether the historical liabilities associated with the leased property were assumed by NLPS, and later New Baroid.... [I]ndemnification for such historical liability is not dependent upon the actual transfer or assignment of a lease covering leased property which had been used as part of the operations of the petroleum services business of NL prior to 1988.
(Id.,
Ex. D at 20). The relevant heading in the final arbitration award states: “A Finding Of Responsibility For Indemnification For Historical Liabilities Associated With Leased Properties Does Not Require Proof That Leases And License Agreements Were Actually Assigned Or Transferred To Anyone As Part Of The 1988 And 1990 Restructurings.”
(Id.,
Ex. D at 20).
The panel described Halliburton’s argument as follows:
The Halliburton Parties insist that a determination of their responsibility for the leased properties is dependent upon proof that such properties were actually transferred to NL as part of the 1988 restructuring.
The Halliburton Parties rely upon the September 1988, Amended and Restated Formation Agreement ..., executed between the parties as part of the 1988 restructuring. In particular, the Halliburton Parties point to the following provision of the Formation Agreement:
“1.4
Liabilities Not Assumed.
The parties agree that NLPS will not assume or be liable for any of the following liabilities or obligations ...:
(c) Any claims of liability at sites or facilities or with respect to operations not transferred to NLPS pursuant to this Agreement, ...”
In the absence of proof that leased properties were actually transferred or assigned to NL in 1988, the Halliburton Parties claim that any obligation of HESI, as the successor to New Baroid, to indemnify NL and Tremont does not extend to any claims of liabilities at sites or facilities or with respect to operations associated with the leased properties.
(Id.,
Ex. D at 20 (emphasis added) (second and third omissions in original) (footnote and internal arbitration record citations omitted)). Halliburton advanced this same argument in rejecting Tremont’s demand for indemnification for the Gulf Nuclear Sites.
*779
The arbitration panel rejected Halliburton’s argument:
As stated above, the Panel disagrees. An assumption of indemnification obligations and successor liability for historical liabilities associated with the transferred petroleum services business
is not dependent upon an actual physical transfer or assignment of an associated lease, or real estate for that matter.
This is made clear by an examination of the other relevant contract terms.
(Id.,
Ex. D at 20-21 (emphasis added)).
The panel pointed out that in the Formation Agreement, NLPS agreed “ ‘to assume, pay, discharge or perform when due all liabilities and obligations, known or unknown, of NL, associated with its petroleum services business that in the Cross-Indemnification Agreement NLPS agreed to indemnify and hold NL harmless from “ ‘[cjlaims of liability at sites of facilities or with respect to the operations (i.e., petroleum services business)
38
transferred to NLPS pursuant to the Formation, including claims arising out of or relating to the deposit, placement or disposal of any material of any character whatsoever on such sites or Facilities; and that in the Indebtedness Agreement NLPS agreed “ ‘to assume and unconditionally guarantee to NL ... the performance or discharge by NLPS on behalf of NL of any and all other indebtedness and obligations of NL which are attributable to NL’s petroleum services business.’ ” (2005 Case, Docket Entry No. 247, Ex. D at 21-22 (first and second omissions in original) (citations omitted)). Considering the language from the relevant contracts, the panel concluded:
In the Panel’s view, there is
no question that NL effectively transferred all assets and operations, existing and historical liabilities, associated with its petroleum services business to NLPS in 1988. The assumption by NLPS of liabilities and obligations associated with that petroleum services business was truly comprehensive.
There is nothing to suggest that such historical liabilities and obligations, even those related to expired or canceled leases on leased properties associated with the petroleum services business, were not transferred to and assumed by NLPS. On the contrary, the opposite conclusion is unavoidable.
(Id.,
Ex. D at 22 (emphasis added)).
The panel found that “[t]he same conclusion [wa]s also warranted as a result of the 1990 Restructuring.”
(Id.,
Ex. D at 22). The panel elaborated:
After the 1988 Restructuring, NLPS changed its name to Baroid Corporation (i.e., “Old Baroid”) and subsequently transferred all of the petroleum services business to New Baroid under the 1990 Plan. Under that Plan, Old Baroid not only assigned to, and New Baroid assumed, all of Old Baroid’s “properties, assets and rights, of any kind, whether tangible or intangible, real or personal, which [were] attributable to the Petroleum Services Business (the “Petroleum Services Assets”) ...,” but New Baroid also assumed and agreed:
“ ‘to discharge all indebtedness, liabilities, obligations, claims, covenants, losses, damages, costs, penalties and expenses, of any kind and nature, whether accrued, absolute or contingent, asserted or unasserted, and whether existing as of the date of this Plan or arising thereafter (collectively, “Obligations”), of [old Baroid] arising out of, or which are otherwise
*780
attributable to, the past, present or future ownership or operations of the Petroleum Services Business
As part of the Plan, Old Baroid’s subsidiary Baroid Drilling Fluids, Inc. (“BDFI”), assumed and agreed “to discharge all Obligations of New Baroid arising out of, or which [were] otherwise attributable to, the past, present or future ownership or operations of such Petroleum Services Assets.” According to the recorded Certificate of Assistant Secretary of Halliburton Energy Services, Inc., BDFI was dissolved on October 30, 1997, and effective November 1, 1997, the assets of BDFI became part of the Baroid Division of Dresser Industries Inc., which merged with Halliburton N.C. Inc., effective September 28, 1998. The surviving company was Dresser Industries, Inc. (“DU”) and effective January 31, 1999, the assets of Dresser Energy Group of Dresser Industries Inc. (including its Baroid Division), were contributed to HESI.
As a consequence of these transactions, the Panel has determined that HESI has succeeded to, and is responsible for, indemnity obligations owed by New Baroid to Old Baroid and Old Baroid successors in connection with the petroleum services business, including those obligations assumed by BDFI.
{Id.,
Ex. D at 22-23 (alterations and omissions in original) (internal arbitration record citations omitted)).
The panel reached a similar conclusion in rejecting Halliburton’s argument that licenses and leasehold interests were not “property, assets, or rights” and therefore excluded from the definition of Petroleum Services Assets under the 1990 Plan. The panel stated:
In keeping with the Panel’s findings above, however, even if expired leases and license agreements did not constitute “property, assets and rights, of any kind,” transferred under the Plan, one cannot conclude that historical liabilities and obligations associated with such instruments were not undertaken and assumed by New Baroid and BDFI, or that they did not agree to indemnify Old Baroid and its affiliates for such liabilities.
(Id.,
Ex. D at 24). The panel noted that “although BDFI agreed to assume and discharge all ‘Obligations’ of New Baroid related to the ‘Petroleum Services Assets,’ New Baroid separately agreed to the comprehensive assumption and discharge of Old Baroid’s ‘Obligations’ of virtually any conceivable kind related to ‘past, present or future ownership or operations of the Petroleum Services Business.’ ”
(Id.,
Ex. D at 24). The panel also noted that “[t]he assumption and discharge obligations of New Baroid ..., defined as ‘Petroleum Services Obligations,’ were also the subject of New Baroid’s indemnification of Old Baroid under the [1990] Plan,” and concluded that based on the indemnification language in that Plan, “it [wa]s irrefutable that New Baroid indemnified Old Baroid for historical liabilities arising out of or otherwise attributable to past, present or future ownership or operations of the petroleum services business.” (2005 Case, Docket Entry No. 247, Ex. D at 25). The panel concluded that “[l]iabilities or obligations associated with expired leases or license agreements would constitute such ‘Obligations,’ and trigger HESI’s successor indemnification obligations.”
{Id.,
Ex. D at 25).
This court confirmed the panel’s awards and entered judgment on the claims resolved in the arbitration.
(See
2005 Case, Docket Entry Nos. 239, 277). The Fifth Circuit affirmed.
See Halliburton Energy Servs., Inc. v. NL Indus. Inc.,
306 Fed.Appx. 843 (5th Cir.2009) (unpublished) (per curiam).
*781
9. The Evidence as to Whether Liabilities Associated with the Gulf Nuclear Sites Are Part of NL’s Former Petroleum Services Business
A threshold issue is whether NL’s sole involvement with the Gulf Nuclear Sites was through its former petroleum services business. This court granted the parties additional time to conduct discovery on this issue, which is critical to resolving Tremont’s motion. If NL’s liabilities associated with the Gulf Nuclear Sites stem solely from its former petroleum services business, this court can decide Tremont’s motion based on the application of issue preclusion and contract interpretation. If, however, the liabilities associated with the Gulf Nuclear Sites can be traced to any of NL’s business operations other than its petroleum services business, Tremont’s motion must be denied because even if this court were to decide the legal disputes over issue preclusion and contract interpretation in Tremont’s favor, that would not entitle Tremont to full indemnity for the Gulf Nuclear Site liabilities.
The parties have presented evidence on this issue. That evidence is set out and analyzed below.'
a. The McCullough Division’s Activities ¿t the Gulf Nuclear Sites
Tremont has submitted EPA documents and waste manifests showing that the McCullough Division shipped wastes for disposal or recycling to Gulf Nuclear.
(See
2005 Case, Docket Entry No. 247, Ex. II).
39
Tremont contends that these documents show that NL used the Gulf Nuclear Sites to dispose of or recycle wastes generated by NL’s petroleum services business. (2005 Case, Docket Entry No. 252 at 34).
40
Tremont has also submitted a
*782
May 25, 2007 letter from the U.S. Department of Justice Environmental and Natural Resources Division discussing a proposed settlement for the Gulf Nuclear Sites with potentially responsible parties.
41
(2005 Case, Docket Entry No. 247, Ex. JJ).
42
That letter states that “the United States has obtained information from GNI records and witnesses]”] statements to establish that NL McCullough had a significant connection with the GNI facilities at Webster and Odessa.”
(Id.,
Ex. JJ at 1). The letter states that “[t]he United States is continuing to research activities at the Tavenor facility” in Houston.
(Id.,
Ex. JJ at 1).
b. Shipping Slips and Receiving Logs Showing Shipments of Radioactive Material from NL and Its Subsidiaries
In addition to the EPA documents and waste manifests of the McCullough Division that Tremont submitted, Halliburton has submitted shipping slips and receiving
*783
logs for Gulf Nuclear.
(See
Docket Entry No. 50, Ex. 18). Halliburton asserts that these documents create a fact question as to whether NL’s operations other than petroleum services were involved in shipping waste to Gulf Nuclear.
(See
Docket Entry No. 50 at 5). As Halliburton points out, Gulf Nuclear’s records show shipments received from “NL Industries,” “N.L. MWD,” “NL McCullough,” and “NL Tech” in 1980 and 1985.
(See
Docket Entry No. 41, Ex. 14 at 5-9).
43
Tremont responds that the shipping slips and receiving logs Halliburton submitted as Exhibit 18 to its supplemental response demonstrate that the connection between NL and the Gulf Nuclear Sites stems only from NL’s former petroleum services business. (Docket Entry No. 52 at 3). Tremont points out that the shipper’s address in the shipping slip in page 1 of Halliburton’s supplemental Exhibit 18 is 3000 North Belt, Houston, Texas.
(Id.).
This is the “North Belt facility,” which Tremont asserts was the headquarters of NL’s petroleum services business.
(Id.).
Tremont states that the North Belt facility was transferred to Halliburton as a result of the restructurings and mergers that began in 1988.
(Id.).
Tremont submitted a recent photograph of the entrance to the facility at the North Belt address, showing a sign with Halliburton’s name.
(Id.,
Ex. A).
44
Tremont points out that page 2 of Halliburton’s supplemental Exhibit 18 is a memorandum of a bill of lading. (Docket Entry No. 52 at 3). Tremont notes that the shipping address appears to have previously stated “NL McCullough,” but this has been crossed out and “System Tech.” has been inserted in its place.
(Id.).
Tremont asserts that the receiving party’s address is the truck entrance for the North Belt facility that Halliburton acquired as a result of the restructurings
45
(See id.
at 4;
see also id.,
Ex. B).
46
Tre
*784
mont argues that this shows that System Tech, was located at the headquarters of NL’s former petroleum services business. (Docket Entry No. 52 at 4). Tremont asserts that page 3 of Exhibit 18 is the packaging slip that accompanied the memorandum of bill of lading, and notes that the shipping address is also the truck entonce for the North Belt facility.
(Id.).
Similarly, Tremont argues that page 4 of Exhibit 18 (a certificate of leak test), and page 5 of Exhibit 18 (a source certification certificate), both show the customer as System Tech, at the address that is now the truck entrance for Halliburton’s North Belt facility.
(Id.).
With respect to page 6 of Halliburton’s supplemental Exhibit 18 (a receiving log), Tremont points out that the entry for NL lists the materials received as “camera castings,” which Tremont asserts were used in the petroleum services business to “view down into oil wells.”
(Id.
at 4-5). Tremont submitted a statement by Paul Nixon, a former Gulf Nuclear employee, explaining that Gulf Nuclear’s “radiography lab manufactured primary ‘pigtails,’ which are a type of sealed source that connects to a cable with the camera attached.” (Docket Entry No. 41, Ex. 11 at 3). It is not clear from Nixon’s statement that the “pigtails” were used specifically in oil wells. Halliburton points to the deposition of Elick Acree, the former president of Gulf Nuclear, who testified that camera castings were used in the radiography field, not the oil service field.
(See
Docket Entry No. 62, Ex. D, Deposition of Elick Acree at 442:12-443:11). Acree testified as follows:
Q. ... I saw camera castings listed on one of these documents. What’s that?
A. What?
Q. Camera casting. Do you know what that is?
A. Yes. Uranium camera casting, yes.
Q. Did GNI accept those for disposal?
A. Probably. Yes. If it’s there, I did not. I was looking more at the address. I did not catch uranium casting in my search there.
Q. But in general.
A. In general, that would be okay.
Q. What were camera castings used for?
A. Shielding of iridium-192 sources.
Q. Were they used in deep-well viewing or what were they used for?
A. I don’t know of an application as far as a shielding in a wire line tool or anything like that. If you said uranium casting for shielding, I would think of those radiography sources.
Q. But it was something that you used in the petroleum services?
A. In the radiography field. Not in the oil service field, but the radiography field.
(Id.,
Ex. D, Deposition of Elick Aeree at 442:12-443:11). Halliburton argues that the fact that NL sent camera castings to Gulf Nuclear on at least one occasion,
(see id.,
Ex. E (receiving log for Gulf Nuclear stating that NL sent camera castings as waste)), is evidence that NL has a connection to Gulf Nuclear outside its petroleum services business, (Docket Entry No. 62 at 10).
The excerpt from Acree’s deposition shows only his understanding that camera castings were used in the radiography field. The excerpt does not discuss whether radiography could be a subset of petroleum services operations. At least one plausible reading of Acree’s testimony is that although he did not know of an independent use of camera castings in the oil services field, he thought they could be used for radiography purposes within that field. Acree’s testimony does not address whether NL used camera castings in any
*785
part of its business other than its petroleum services business. His testimony does not create an issue of material fact.
47
With respect to page 7 of Halliburton’s supplemental Exhibit 18, Tremont argues that the only NL entities named on this receiving log are NL MWD (“measurement-while-drilling”) and NL McCullough, both part of NL’s historical petroleum services business. (Docket Entry No. 52 at 5). With respect to page 8 of Halliburton’s supplemental Exhibit 18 (a receiving log stating that NL shipped depleted uranium), Tremont points out that depleted uranium was used in the petroleum services business, that the radioactive material identified in the NL McCullough/Gulf Nuclear shipping tickets/nexus documents in-eludes depleted uranium, and that depleted uranium has been used by wireline logging companies such as NL McCullough.
(Id.
at 6 (citing Docket Entry No. 41, Ex. 38 (Stephen Prensky,
Recent Advances in Well Logging and Formation Evaluation,
Worldoil.com — Online Magazine, Mar. 2008))).
Halliburton responds that the fact that depleted uranium may have been used by wireline logging companies does not mean that it is not used for other purposes. (Docket Entry No. 62 at 8). Halliburton points out that depleted uranium was used by NL’s nuclear division.
(Id.
at 8 (citing
id.,
Ex. C at 15 (NL’s 1972 annual report, noting that NL’s nuclear division handled depleted uranium);
id.,
Ex. F))
48
Halli
*786
burton asserts that the depleted uranium listed in the receiving log as being received from NL creates a fact issue as to whether the depleted uranium came from NL’s petroleum services business or whether it came from one of NL’s other divisions.
49
*787
(Docket Entry No. 62 at 8).
Finally, with respect to page 9 of Halliburton’s supplemental Exhibit 18 (a receiving log listing NL Tech as a customer), Tremont points out that NL Tech’s address is now the truck entrance for Halliburton’s North Belt facility. (Docket Entry No. 52 at 6).
*788
In response to Tremont’s arguments, Halliburton argues that its ultimate ownership of the North Belt facility does not establish as a matter of law that the cesium and americium listed on Exhibit 18’s shipping slips and receiving logs had no connection to NL other than through its petroleum services business. (Docket Entry No. 62 at 7). Halliburton asserts that its supplemental Exhibit 18 creates a fact issue as to whether NL used its North Belt facility in connection with its nuclear division or with its other non-petroleum services divisions.
(Id.).
To rebut this argument, Tremont has submitted the sworn declaration of Mark Morrison, formerly NL’s Radiation Services Officer in Texas. Morrison states that the North Belt facility was used only for NL’s petroleum services business:
Beginning in June 1986, I was employed by the petroleum services business of NL Industries, Inc. (“NL”) as the Radiation Safety Officer for NL for the State of Texas. At all times, I worked at the headquarters of NL’s petroleum services business located at 3000 North Beltway located in Houston, Texas. To the best of my knowledge, the only operations at the 3000 North Belt facility were petroleum services business operations. To the best of my knowledge, no non-petroleum services business operations of NL were conducted at the 3000 North Belt facility.
(Docket Entry No. 68, Ex. B, ¶ 2).
50
Mor
*789
rison also states that he is not aware of any NL business, other than the petroleum services business, having any connection to the Gulf Nuclear Sites.
51
(Id.,
,Ex.
*790
B, ¶ ll).
52
Tremont has also submitted the affidavit of Patrick M. Murray, who worked for NL, then Old Baroid, then New Baroid, then Dresser, and then Halliburton Company. Murray’s affidavit explains that the North Belt facility was used only for NL’s petroleum services business:
During the time period set forth above, I was employed at the 3000 North Belt facility located in Houston, Texas. The operations at the 3000 North Belt facility were petroleum services business operations. No non-petroleum services business operations of NL were conducted at the 3000 North Belt facility. The information technology business or research and development units that were located at the 3000 North Belt facility related solely to the petroleum services business, and were considered part of the historical petroleum services business of NL, and as noted above, were consolidated and became my responsibility when I became President of Sperry-Sun.
(Docket Entry No. 65, Ex. C, ¶ 4).
Tremont also supplemented its motion with shipping records Halliburton produced on November 10, 2009.
(See
Docket Entry No. 80, Ex. E). Tremont contends that these additional documents show that Halliburton has the radioactive materials that were tested by Gulf Nuclear for NL MWD in the past. (Docket Entry No. 80 at 7). For example, Tremont points out that the same radioactive source was tested by Gulf Nuclear for NL MWD in September 1987, then for Sperry-Sun in November 1990 (after the 1988 restructuring), then for Sperry-Sun in April 1991 (after the 1990 restructuring), and then for Sperry-Sun in November 1996 (after the merger of Dresser into Halliburton).
53
(Id.
at 7-8).
*791
Halliburton argues that Tremont’s position “ignores the relevant inquiry — which is what former NL division the sources are linked to.” (Docket Entry No. 82 at 2-3). Halliburton also argues that “[t]he issue raised in the Motion for Partial Summary Judgment is whether NL or HESI is responsible for NL McCullough liabilities after a series of restructurings, sales and purchases in the 1980s and 1990s.”
(Id.
at 3). Halliburton contends that “[t]he bulk of NL’s potential Gulf Nuclear liability appears to be associated with NL McCullough ...that “NL McCullough was sold to Western Atlas prior to the 1988 and 1990 Plans of Restructuring,” that “NL retained the liabilities associated with NL McCullough,” and that “Tremont wholly fails to establish whether the sources allegedly in HESI’s possession are linked to (1) Sperry Sun, a division of Baroid Corporation acquired by Dresser or (2) NL McCullough, a division HESI never acquired.”
(Id.
at 3). Halliburton argues that “[b]e-cause Tremont fails to establish HESI’s current possession of any NL McCullough sources, the evidence attached to [Tremont’s] Reply falls far short of proving that HESI must indemnify NL for McCullough’s potential Site liabilities as a matter of law.”
(Id.).
As discussed in more detail below, the fact that Halliburton did not acquire the McCullough Division did not prevent it from assuming the liabilities associated with that Division if those liabilities were part of NL’s former petroleum services business. Halliburton’s possession of radioactive materials that were tested by Gulf Nuclear for NL’s former petroleum services business supports Tremont’s assertion that Halliburton succeeded to the part of NL’s business that sent radioactive waste to the Gulf Nuclear Sites. In addition, the evidence that Halliburton possesses the same sources that NL sent through its MWD Division to the Gulf Nuclear Sites is contrary to Halliburton’s argument that the MWD Division was not part of NL’s petroleum services business and that Halliburton did not acquire liabilities associated with that Division,
c. Witness Statements and Testimony of Former Gulf Nuclear Employees
Tremont has submitted witness statements obtained by the EPA in its investigation of the Gulf Nuclear Sites. As Tremont notes, none of these statements indicate that any division of NL was involved in the Gulf Nuclear Sites other than the McCullough Division. (Docket Entry No. 41 at 5-8;
see also id.,
Exs. 8-12).
One of the individuals who gave a statement, Paul Nixon, was subsequently deposed by the United States Department of Justice in the EPA lawsuit. Nixon worked for Gulf Nuclear from 1976 to 1991.
(Id.,
Ex. 11 at 1). Halliburton’s attorney in this case was present at the deposition. Nixon testified that he was not aware of NL having any connection to any of the Gulf Nuclear Sites other than through its petroleum services business.
(See
Docket Entry No. 65, Ex. D, Deposition of Paul Nixon at 156:19-23).
54
Similarly, Lynn Williams, apparently a longtime employee of Gulf Nuclear, testified in his deposition in the EPA lawsuit that he was not aware of any connection between NL and the Gulf Nuclear Sites other than through NL’s petroleum services business. (Dock
*792
et Entry No. 67, Ex. A, Deposition of Lynn Williams at 298:10-16).
55
Tremont has also submitted deposition testimony of Michael Jaschek, a former Gulf Nuclear employee. Jaschek testified that he was not aware of any NL business other than the petroleum services business having any connection with the Gulf Nuclear Sites. (Docket Entry No. 68, Ex. H, Deposition of Michael Jaschek at 495:21-496:1). Jaschek also testified that he was not aware of Gulf Nuclear and NL doing any type of business together other than well logging-type businesses.
56
(Id.,
Ex.
*793
H, Deposition of Michael Jaschek at 496:2-5).
57
d. NL Annual Reports
Tremont has submitted NL’s annual reports for many of the years between 1969, when the McCullough Division was acquired and integrated into the Baroid Division, through 1987, when the McCullough Division was sold to Western Atlas.
(See
Docket Entry No. 41, Ex. 33).
58
The annual reports show that NL considered the McCullough Division to be part of its petroleum services business. For example, the 1969 annual report states:
In July, certain assets of the McCullough Tool Company of Houston and Los Angeles were acquired for $7.5 million. This company has an excellent line of
services to meet the needs of the petroleum industry.
With the talents and skills of McCullough’s people integrated into the Baroid Division, National Lead now provides one of the most complete lines of
oil field products and services.
(Id.,
Ex. 33, NL’s 1969 Annual Report at 2 (emphasis added)). As another example, the 1976 annual report states:
Baroid’s McCullough Services provides over 100 cased-hole wireline logging and perforating services, including operations such as
nuclear logging
and bullet and jet perforating. These
services may be used on a well while being drilled, for completion of a well, for recompleting after a well has been in operation for some time, and during workover operations.
For example,
McCullough Services may provide nuclear and electronic logs ivhich provide up-to-date information about a wide range of downhole conditions,
such as formation depths and porosity, cement bonding, zone-to-zone seepage, stuck pipe, and casing wear. McCullough also provides an efficient line of perforating guns and accessory equipment used in well completion. These perforators are used to literally shoot holes in the hydrocarbon-bearing formations of a well, thus allowing the well to produce more oil or gas, assuring peak production.
(Id.,
Ex. 33, NL’s 1976 Annual Report at 11 (emphasis added)). A photograph on the same page of the 1976 annual report shows an oil rig, and contains a caption stating: “More than 100 wireline logging and perforating services are available from Baroid’s McCullough Services operations. McCullough’s self-contained units are for both land and offshore work.”
(Id.,
Ex. 33, NL’s 1976 Annual Report at 11).
The annual reports for 1977, 1978, 1979, 1980, 1981, 1982, 1983, 1984, 1985, 1986,
59
*794
and 1987 also list or describe the McCullough Division as part of NL’s “petroleum services” operations.
60
The McCullough Division is not listed under the “chemicals” operations or the “metals” operations.
61
The 1987 annual report notes that NL’s “operations are principally in two business segments — chemicals, conducted by NLC, and petroleum services, conducted by NLPS.”
62
The report describes the sale of NL McCullough as a sale of part of NL’s petroleum services operations:
NLPS supplies a wide range of products, services and equipment to assist the petroleum industry in discovering and producing oil and gas economically. The
petroleum services segment
during 1987, 1986, and 1985 included five business units currently operated by NLPS — Baroid (drilling fluids and related specialized engineering services), NL Sperry-Sun (steering tools and directional drilling services), Measuremenb-While-Drilling, NL Shaffer (pressure control) and NL Atlas Bradford (premium connections); and four business units sold in 1987 — NL Hycalog, NL Acme Tool, NL Treating Chemicals and
NL McCullough.
(Id.,
Ex. 33, NL’s 1987 Annual Report at F-18 (emphasis added)).
The 1979 annual report describes the McCullough Division’s services as follows:
NL McCullough provides
four primary wireline services,
cased hole logging, perforating, pipe recovery services and open hole logging. Cased hole logging,
used in oil and gas well completion
and workover, provides information about well conditions such as depth and porosity of oil and gas formations, the condition of the cementing between the casing and formation, the extent of seepage between oil and water bearing sands and the condition of the casing itself. Data is gathered with various sensing devices and is analyzed at the well site.
Perforating services, provided by McCullough,
promote the flow of oil and gas into the well from the formation.
As wells remain in production, additional perforation is required to tap new petroleum-bearing formations after initial formations have been depleted. This unit also performs pipe recovery services when the operations’ normal recovery techniques are ineffective.
*795
To meet steadily increasing needs for more sophisticated wireline services, McCullough has expanded manufacturing capacity by more than 75% during the past two years. During the latter part of 1979, McCullough began construction of a new 120,000 square foot manufacturing facility. In addition, 1979 research and development expenditures increased approximately 50%.
With the acquisition of Basin Surveys and Petrolog, NL also achieved one of its major strategic objectives, to provide open hole logging services. Open hole logging provides information to drillers about downhole conditions such as geological data,
the presence of oil and gas formations,
and downhole pressures. Results from NL’s open hole logging units have exceeded expectations, and it is NL’s intention to broaden the scope of these units both technically and geographically to meet the oil industry’s future needs.
(Id.,
Ex. 33, NL’s 1979 Annual Report at 8 (emphasis added)).
The annual reports confirm that Basin Surveys and Petrolog, other potential connections to the Gulf Nuclear Sites, were part of NL’s petroleum services operations.
63
The annual reports also confirm that NL’s “Measurement-While-Drilling” or “MWD” Division, which Halliburton asserts is linked to the Gulf Nuclear Sites, was part of NL’s petroleum services operations.
64
For example, the 1980 annual report, in a section labeled “NL Petroleum Services,” states:
Current DST projects center on the development of three state-of-the-art Measurement-While-Drilling (MWD) systems. The Downhole Recording System allows an evaluation of the formation and pressures whenever the drill string is removed from the hole. Another MWD system, identified for further prototype development, is Mud Pulse Telemetry which will give NL added capability in directional drilling safety services. The third, a Wire Telemetry System, utilizes sophisticated technology to effect a continuous high-speed data link between a bottom-hole sensor package and read-out equipment on the surface.
(Docket Entry No. 41, Ex. 33, NL’s 1980 Annual Report at 14). The 1984 annual report states:
NL’s major
petroleum service research and development effort is focused on developing measurement-while-drilling (MWD) products,
which is a generic name for products that continuously collect downhole geological and drilling information from sensors located directly above the drill bit.
Product development is aimed at the two major segments of the MWD market: directional MWD, which provides information on bit position, and multi-sensor MWD, which provides formation and
*796
drilling information in addition to directional data.
In 1984, the first of NL’s MWD products, the Recorded Lithology Logging System (RLL), was fully commercialized through the SperrySun/Baroid Logging Systems Division. This product continuously gathers downhole formation measurements, which are recorded for processing when the drill bit is retrieved for bit replacement or other reasons. This tool has been widely accepted by customers who recognize its unique capability to read formations through all different types of drilling fluids.
NL also introduced a second generation MWD tool, the NL Mud Pulse Telemetry System (MPT). This tool adds to the sensors used in the RLL the ability to gather additional information such as temperature, pressure, and highly accurate bit location data. It also has the capability to transmit this data continuously to the surface in a real time mode. This system will be fully commercial by the end of 1985.
Funding levels to implement full commercialization of the RLL and MPT and to develop subsequent generations of MWD systems are continuing, despite broad weakness in the petroleum service industry. In contrast to general industry trends, MWD services are notably supply constrained, enjoying strong worldwide demand.
(I'd, Ex. 33, NL’s 1984 Annual Report at 7 (emphasis added)).
e. NL Board Minutes
Tremont has submitted the minutes of NL’s executive committee meeting from November 2,1977. The minutes state that an appropriation request of over $3 million was approved for
“PETROLEUM SERVICES;
NL Baroid Division; Baroid & McCullough .... ” (Id, Ex. 34 at 1). The minutes from a December 9, 1977 meeting of NL’s executive committee note approval of appropriation requests for “petroleum services,” including a request for over $1.5 million for
“NL Baroid Division, McCullough Services;
....” (Id, Ex. 35 at 1). The minutes from a May 24, 1978 meeting of the executive committee of NL’s board of directors state: “The Chairman said that the first order of business was to consider an appropriation request of Petroleum Services for $1,746,450 for the construction of 18 replacement wireline trucks at NL McCullough, Houston, Texas.” (Id, Ex. 36 at 1).
f. The Public Record
Tremont points out that in
Fontenot v. AWI, Inc.,
923 F.2d 1127 (5th Cir.1991), the Fifth Circuit referred to the McCullough Division as an “oil field service company.”
65
The
Fontenot
case stated:
Fontenot started with N.L. McCullough, an oil field service company, in 1971 .... At some point between 1971 and 1988, Western Atlas acquired N.L. McCullough. With the acquisition, Fontenot became an employee of Western Atlas, continuing his work as a wireline operator. At the time of the accident in 1988, Fontenot was still working as a wireline operator for Western Atlas, and held the title “Pipe Recovery Specialist”.
(Docket Entry No. 41, Ex. 37 at 2). Tremont also points out that in another case,
*797
an entity called McCullough-Baroid Petroleum Service NL Industries was the appellant.
See McCullough-Baroid Petroleum Serv. NL Indus. v. Sexton,
618 S.W.2d 119 (Tex.Civ.App.-Corp

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2432141. Public record. Not legal advice.