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United States District Court, N.D. California, San Jose Division

October 18, 2005.

NATIONAL SEMICONDUCTOR (MAINE), INC., a Delaware corporation, formerly known as Fairchild Semiconductor Corporation; and SCHLUMBERGER TECHNOLOGY CORPORATION, a Texas corporation, Plaintiffs,
NCH CORPORATION, a Delaware corporation, Defendant.

The opinion of the court was delivered by: RONALD WHYTE, District Judge

National Semiconductor (Maine), Inc. and Schlumberger Technology Corporation (collectively "National") have sued NCH Corporation ("NCH") for alleged groundwater contamination. NCH moves to dismiss National's fourth cause of action for violation of the Hazardous Substance Account Act ("the HSAA"), Cal. Health & Safety Code §§ 25300 et seq. NCH also moves for sanctions under Federal Rule of Civil Procedure 11 ("Rule 11"). National opposes the motions. The court has read the moving and responding papers and considered counsels' arguments. For the reasons set forth below, the court grants NCH's motion to dismiss and denies NCH's motion for sanctions. I. BACKGROUND

This case concerns alleged groundwater contamination on two parcels of land in Sunnyvale: the Arques Parcel and the Kifer Parcel. FAC ¶ 1. According to National, NCH has operated a chemical blending plant at the Kifer Parcel since 1967. Id. at ¶ 9. National contends that NCH's activities caused industrial solvents to migrate from the Kifer Parcel to the Arques Parcel. Id. at ¶¶ 10-11. National asserts that NCH has not taken adequate remedial measures to stop this migration. Id. at ¶ 11.

  National alleges that the California Regional Water Quality Control Board ("the Regional Board") issued a series of Orders to NCH, including (1) a Site Cleanup Requirement Order on September 17, 1997, (2) a Notice of Violation on September 28, 1998, and (3) a revised Site Cleanup Requirements Order on October 18, 2000. Id. at ¶¶ 12-15. National claims that its predecessor, Fairchild Semiconductor Corporation ("Fairchild"), owned the Arques Parcel until 1972, when it sold the land to Hewlett-Packard Corporation ("HP"). Id. at ¶ 16. National contends that both Fairchild and HP have taken environmental remedial actions at the Arques Parcel. Id. According to National, despite the fact that the Regional Board's Orders name NCH as a responsible party, NCH has contributed nothing to this effort. Id. at ¶ 19. National's fourth cause of action seeks treble damages under Cal. Health & Safety Code § 25359.4.5 ("section 25359.4.5").


  A. Motion to Dismiss

  Dismissal under Federal Rule of Civil Procedure Rule 12(b)(6) is proper only when a complaint exhibits either a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court must accept the facts alleged in the complaint as true. Id. "A complaint should not be dismissed `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.'" Gilligan v. Jamco Dev.Corp., 108 F.3d 246, 248 (9th Cir. 1997) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

  B. Statutory Interpretation

  The California Supreme Court has explained that a court construing a statute must start with its plain meaning and only examine extrinsic sources if necessary to resolve an ambiguity: [W]e first examine the words of the respective statutes: `If there is no ambiguity in the language of the statute, then the Legislature is presumed to have meant what it said, and the plain meaning of the language governs. Where the statute is clear, courts will not interpret away clear language infavor of an ambiguity that does not exist.' If, however, the terms of a statute provide no definitive answer, thencourts mayresort to extrinsic sources, including the ostensible objects to be achieved and the legislative history.

 People v. Coronado, 12 Cal. 4th 145, 151 (1995) (quoting Lennane v. Franchise Tax Bd., 9 Cal. 4th 263, 268 (1994)). At the same time, however, a court may disregard "[t]he literal meaning of the words of a statute . . . to avoid absurd results. . . ." County of Sacramento v. Hickman, 66 Cal. 2d 841, 849, n. 6 (1967).

  1. National's Fourth Cause of Action

  The HSAA provides for treble damages when a polluter ignores a clean-up order:

A responsible party who has entered into an agreement with the department and is in compliance withthe terms of that agreement, or who is in compliance withan order issued by the department, may seek, in addition to contribution, treble damages from any contribution defendant who has failed or refused to comply with any order or agreement, was named inthe order or agreement, and is subject to contribution. . . . A party seeking treble damages pursuant to this section shall show that the party, the department, or another entity provided notice, by means of personalservice or certified mail, of the order or agreement to the contribution defendant from whom the party seeks treble damages.
Cal. Health & Safety Code § 2539.4.5(a) (emphasis added). Section 2539.4.5(a) expressly defines "the department" to mean "the Department of Toxic Substances Control," not the Regional Board. See Cal. Heath & Safety Code § 25312. National does not allege that it has (1) "entered into an agreement" with or (2) "is in compliance with an order issued by" the Department of Toxic Substances Control. Thus, under the plain meaning of section 2539.4.5(a), National cannot state a cause of action for treble damages.

  National offers several reasons why, in its view, "the department" means either the Department of Toxic Substances Control or the Regional Board. National cites Lungren v. Deukmejian, 45 Cal. 3d 727 (1988) and People v. Sup. Ct., 14 Cal. 4th 294 (1996) for the proposition that courts cannot adopt a statute's literal language without examining its purpose. However, unlike this case, both Lungren and People involved ambiguous statutes. Lungren resolved whether Article V, section 5(b) of the California Constitution, which provides that a nominee for state office who "is neither confirmed nor refused confirmation by both the Senate and the Assembly within 90 days of the submission of the nomination . . . shall take office" meant that confirmation occurs if one house votes on the nomination and one fails to vote within 90 days. Lungren, 45 Cal. 3d at 734. As the court acknowledged, the provision was equally susceptible to multiple meanings. Id. at 735. People involved the issue of whether the term "present source of drinking water" included facet water. People, 14 Cal. 4th at 301-02. Like Lungren, People interpreted a phrase that gave rise to "two reasonable inferences" about its meaning. Id. at 302. Both cases thus looked to extrinsic evidence in order to shed light on a patent ambiguity. Here, on the other hand, "the department" is a defined term and does not include the Regional Board. Because section 2539.4.5(a) is not ambiguous, the court need not consider National's arguments that extrinsic evidence elucidates that "the department" means either the Department or the Regional Board. Nevertheless, the court briefly discusses each below.

  a. Overlapping Jurisdiction

  The California Department of Environmental Protection oversees both the Department and the Regional Boards. See Cal. Gov't Code § 12812. The Department primarily enforces the HSAA. See Cal. Health & Safety Code § 58000 et seq. The Regional Boards largely administers the Porter-Cologne Water Quality Control Act. See Cal. Wat. Code § 13000 et seq.

  National first contends that "in numerous provisions throughout the HSAA, the Department and the Regional Boards are treated by the Legislature as concurrent and co-equal enforcers of the act's provisions." Opp. Mot. Dism. at 9:24-26. National provides the following examples: (1) Health & Safety Code §§ 25355.2 (a) (either the Department or a Regional Board may oversee a site for long term operation and maintenance requirements); (2) id. at § 25356 (h) ("The department, or, if appropriate, the California regional water quality control board, is the state agency with sole responsibility for ensuring that required action in response to a hazardous substance release . . . at a listed site is carried out in compliance with the . . . requirements set forth in this chapter. . . ."); (3) id. at §§ 25356.1 (b) & (c) (either the Department or the Regional Board shall prepare or approve of remedial action plans at both listed and non-listed sites); (4) id. at § 25356.1 (i) (Water Code provisions governing Regional Board actions apply to actions taken by the Regional Board under the HSAA); (5) id. at § 25356.1.5 (response action requirements under the HSAA must be no less stringent than those required under the Water Code); (6) id. at §§ 25358.7 & 253587.1 (public participation requirements apply to both the Department and the Regional Board); (7) id. at § 25360 (costs incurred by Department or Regional Board are equally recoverable); (8) id. at § 25365.6 (Department or Regional Board may recover costs or damages by a lien on real property owned by the responsible party).

  However, this argument cuts both ways: the fact that the Legislature saw fit to define the Regional Boards' powers and responsibilities in several sections of the HSAA — but not section 2539.4.5(a) — suggests that the Legislature could have included the Regional Board in the statute but chose not to do so. Under the maxim "expressio unius est exclusio alterius," "[t]he expression of some things in a statute necessarily means the exclusion of other things not expressed." Gikas v. Zolin, 6 Cal. 4th 841, 852 (1993). Thus, National fails to convince the court that the Legislature did not intend to make section 2539.4.5(a) the exclusive province of the Department.

  b. Inconsistencies Within the HSAA

  National next asserts that "[t]here are several places where the Legislature's intent to include the Regional Board is manifest in the provision, but references to the Regional Board are mysteriously dropped midway through the provision, creating obviously absurd results." Opp. Mot. Dism. at 11: 8-10. For example, National notes that Health & Safety Code 25356.6 governs arbitration under the HSAA, and refers to both the Department and the Regional Board. However, for no apparent reason, the statute excludes the Regional Board from a key provision:

The department, the California regional water quality control board, any party to the arbitration decision, or any party substantially affected by the arbitration decision may petition the panel to modify the apportionment of liabilityin an arbitration decision. Upon a showing of a material change in the facts known to the parties to the arbitrationdecision at the time it was issued, the panel shall modify the apportionment of liability specified in the arbitration decision, as appropriate, to reflect these changed facts. Upon a showing of a material change in the facts known to the department at the time it issued the final remedial action plan, or the discovery of new facts, the department or regional board shall modify the remedial action plan, as appropriate, to reflect new or additional facts. The arbitration panel shall then modify its arbitration decision to reflect any modification of the remedial action plan made by the department.
Cal. Health & Safety Code § 25356.6(b) (emphasis added). National correctly notes that the statute illogically appears to require both the Department and the Regional Board to modify a plan only if the Department discovers new facts. National claims that similar deficiencies exist in Health & Safety Code § 25356.1 (referring to the Department and the Regional Board throughout, except in subsection (h)(3) where only the Department may determine that certain requirements may be waived); and id. at § 25365.6 (enabling both the Department and the Regional Board to recover costs through a lien but exempting only the Department from ownership liability).

  National's argument is unpersuasive. Unlike these provisions, which begin by referring both to the Department and the Regional Board and only then inexplicably stop referring to the Regional Board, section 2539.4.5(a) never mentions the Regional Board. Thus, while National's examples may represent the inadvertent exclusion of an agency, the court is not convinced that the same is true for section 2539.4.5(a).

  c. Section 2539.4.5(a)'s Legislative History

  National next argues that section 2539.4.5(a)'s legislative history reveals that it applies both to the Department and the Regional Board. National notes that the Department drafted section 2539.4.5(a), but the Legislature altered it to "reduce[] the extent to which [it] . . . focused on the Department." Opp. Mot. Dism. at 13:20-21. For example, the Legislature eliminated the Department's request to approve or deny claims for treble damages and expanded the class of agency mandates that could give rise to such damages. National's Request for Judicial Notice ("RJN") Ex. 1, Tab 1.

  However, section 2539.4.5(a)'s legislative history indicates that the Legislature enacted the treble damages provision to compensate for a key difference between the Porter-Cologne Act and the HSAA. The Department receives one-half of any treble damage award under section 2539.4.5(a). See Cal. Health & Safety Code § 2539.4.5(b). As the statute's legislative history reveals, this is because the Porter-Cologne Act permits joint and several liability, while the HSAA does not. Compare Union Oil Co. of California, 1990 Cal. ENV LEXIS 23 at *11, Order No. WQ92-3 (SWRCB 1990) (noting that the Regional Boards "consider all dischargers jointly and severally liable for dischargers of waste") with Cal. Health & Safety Code § 25363(a) ("any party found liable for any costs or expenditures recoverable under this chapter who establishes by a preponderance of the evidence that only a portion of those costs or expenditures are attributable to that party's actions, shall be required to pay only for that portion"). Joint and several liability makes "each liable party . . . individually responsible for the entire obligation," and thus permits the Regional Board to be more certain that it will recover full damages. See Black's Law Dictionary 377 (1996). Section 2539.4.5(a)'s legislative history indicates that the Legislature intended the treble damages provision to give the Department — and only the Department — an especially potent enforcement mechanism. See RJN Ex. 1, Tab 3, at 3 ("[w]ithout potential joint and several liability, there is little leverage to persuade a [responsible party] to clean[] up more than its perceived proportionate share"). Accordingly, section 2539.4.5(a)'s legislative history suggests that the Legislature had a rational basis for permitting treble damages under only the HSAA.

  d. California's Site Designation Program

  National argues that "the Legislature also granted the Regional Board express authority to act in the shoes of the Department when it is designated as the administering agency under California's Unified Agency Review program." Opp. Mot. Dism. at 15:19-21 (emphasis in original). The Unified Agency Review program permits a responsible party to apply to have a single agency supervise remediation. See Cal. Health & Safety Code § 25262. Once the state has granted such an application, the administering agency "ha[s] sole jurisdiction over all activities that may be required to carry out a site investigation and remedial action," including the power to "[a]dminister all [applicable] state and local laws, ordinances, regulations, and standards. . . ." Id. at § 25264(a). National's application to have the Regional Board oversee remediation is pending. According to National, once the state grants its application, "the Regional Board [will] act[] with the same authority as the Department . . . and its orders should be equivalent to orders issued by the Department for the purposes of the treble damages provision of the HSAA." Opp. Mot. Dism. at 16:16-19; RJN Ex. 6.

  National's argument lacks merit. Nothing in the statute suggests that designating the Regional Board as administering agency under the site designation program transforms previous orders issued by the Regional Board into orders issued by the Department. In addition, although the statute confers specific powers upon the administering agency, these do not include the power to issue orders. See Cal. Health & Safety Code § 25264(a) (noting only that administering agency may "[i]ssue permits"). Thus, even if the state does designate the Regional Board as the agency in charge of remediation at the Arques Parcel, National fails to persuade the court that this will imbue the Regional Board with a host of new enforcement powers.

  e. Coordination Between the Department and the Regional Boards

  Finally, National claims that "the extensive coordination and cooperation between the Department and the Regional Boards makes a cleanup order issued by a Regional Board tantamount to one issued by the Department." Opp. Mot. Dism. at 16:25-26. National cites several Memoranda of Understandings between the Department and the Regional Boards, which include policy statements such as "[n]either agency will take enforcement actions that are not compatible or complimentary to the enforcement actions of the other agencies." Memorandum of Understanding Between the Department of Health Services and the State Water Resources Control Board, The Regional Water Quality Control Boards for the Cleanup of Hazardous Waste Sites, August 1, 1990, RJN Ex. 4, at 11 ("the MOU").*fn1

  However, the MOU says nothing about one agency's ability to assume another agency's powers. Instead, National's cited language simply requires both agencies not to contradict the other's enforcement actions. Moreover, the MOU makes clear that the Department and Regional Boards must continue to act "within their respective authorities, jurisdiction, and expertise." MOU at 5. Because the MOU does not suggest that the Regional Board may step into the Department's shoes whenever it would be pragmatic to do so, the court rejects National's assertion.

  B. Motion for Sanctions

  NCH moves for Rule 11 sanctions against National for asserting its fourth cause of action. Rule 11 empowers courts to award sanctions against parties who make baseless factual or legal contentions. Rule 11 exempts, however, "nonfrivolous argument[s] for the extension, modification, or reversal of existing law or the establishment of new law." Here, no case of which this court is aware has interpreted section 2539.4.5(a). Thus, National's fourth cause of action, at worst, constitutes a non-frivolous attempt to break new ground interpreting an exceedingly complex statute. The court denies NCH's motion for sanctions. III. ORDER

  For the foregoing reasons, the court grants NCH's motion to dismiss National's fourth cause of action with prejudice and denies NCH's motion for sanctions.


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