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Redevelopment Agency of the City of Stockton v. Burlington Northern and Santa FE Railway Corp.

June 30, 2009

THE REDEVELOPMENT AGENCY OF THE CITY OF STOCKTON, A PUBLIC BODY, CORPORATE AND POLITIC, PLAINTIFF,
v.
BURLINGTON NORTHERN AND SANTA FE RAILWAY CORPORATION, UNION PACIFIC RAILROAD COMPANY, AND DOES 1 THROUGH 100, DEFENDANTS.



FINDINGS OF FACT AND CONCLUSIONS OF LAW AND RELATED CROSS-ACTIONS.

The above captioned action came on for trial before the Court from February 23 to February 26, 2009. Pursuant to Federal Rule of Civil Procedure 52, the Court makes the following findings of facts and conclusions of law.

FINDINGS OF FACT

UNDISPUTED FACTS

1. The Court has jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332 and 1367.

2. Areas 3, 4 and 24 (the "Property") consist of three Street, to the east by Van Buren Street, and to the west by Lincoln Street. Amended Pretrial Order, Undisputed Fact No. 19. Area 24 is the northern most block and Area 4 is the southern most block.

Area 3 is between Areas 24 and 4. See Ex. 214, Figure 1.

3. In 1968, the State of California proposed constructing portions of Interstate Route 5 and State Route 4 that conflicted with existing railroad tracks in Stockton. Amended Pretrial Order, Undisputed Fact No. 1. The State therefore entered into an agreement ("1968 Agreement") with the Railroads' predecessors, Western Pacific, ATSF and Southern Pacific, to build substitute railroad tracks at the State's expense. Amended Pretrial Order, Undisputed Fact Nos. 2, 22; Ex. 13.

4. Under the 1968 agreement, the Railroads agreed to maintain the new tracks, roadbed and drainage. The State agreed to acquire and, by separate documents, to convey to the Railroads all rights of way necessary for the construction and operation of the substitute tracks. Amended Pretrial Order, Undisputed Fact No. 3.

5. The State of California performed the grading work on the Property, and installed an underground perforated drainage pipe, or "french drain." Amended Pretrial Order, Undisputed Fact No. 4.

6. After completion of the grading, the Railroads built the substitute tracks at the State's expense. The tracks were in use from September 11, 1970 until 1988. Amended Pretrial Order, Undisputed Fact Nos. 6, 27. The new tracks crossed Areas 24, 3 and 4 in the north-south direction, entering Area 24 in the northwest corner, arcing to the south across Area 24, and then proceeding south through the center of Areas 3 and 4. See Ex. 214, Fig. 1.

7. In 1983, the State conveyed title to the substitute tracks and underlying land to the Railroads. Amended Pretrial Order, Undisputed Fact Nos. 7, 32, 33.

8. In 1987, the Redevelopment Agency of the City of Stockton ("RAS" or the "Agency") entered into an agreement with Union Pacific, Southern Pacific, and ATSF to relocate the railroad tracks that crossed Areas 3, 4 and 24 ("1987 Agreement"). Amended Pretrial Order, Undisputed Fact Nos. 36-39; Ex. 38. In 1988, pursuant to the 1987 Agreement, the Railroads transferred their interests in the Property to the RAS. Amended Pretrial Order, Undisputed Fact Nos. 8, 38, 39.

9. The 1987 Agreement provided in part that: "AGENCY shall acquire and RAILROADS shall be relieved of any and all responsibility and liability for the removal of trackage and appurtenances on the property being transferred to AGENCY and for restoration of any surfaces." Ex. 38 at 3, Section 3.

10. On April 22, 2004, the RAS obtained a permit for the construction of the WorkNet Building on Area 3. Ex. 48. The permit required that a soil management plan be prepared prior to disturbing site soils because of the lead contamination. Ex. 48 (Conditions of Approval No. 1); Ex. 50 at SRDA 183; Tr. 294:19-295:1.

11. After the sale to Regent Weber, LLC ("Regent"), in July 2004, Regent began grading Area 3 for construction of the WorkNet building. Ex. 174 at 1, BALASEK 000626. At that time, Regent did not have a soil management plan for the site soils. Tr. 172:24-173:16. The top five to seven feet of soil in Area 3 was unsuitable for use as geotechnical fill for the foundation of the building, and Regent therefore had to remove that soil before construction. Ex. 93 at 6, SRDA 1332; Tr. 203:13-21; 217:18-218:4.

12. During development on the Property in 2004, petroleum contamination was found in the soil of Area 3 along the path of the French drain, in the groundwater under Area 3, and elsewhere on the Property. June 19, 2007 Order ("Order") at 3:14-17.

13. The French drain served as a preferential pathway for the petroleum contamination, which would have taken a different course were it not for the drain. Were it not for the French drain, the Property would not have become contaminated with petroleum. Order at 3:17-22.

14. Testing [in 2005], showed that the petroleum contamination was at least twenty years old. Order at 4:1-2.

15. Certain other contaminants, including lead, arsenic and hydrocarbons called PAHs, subsequently were also found on the Property. Order at 4:2-4.

16. The likely source of the petroleum contamination was the nearby L&M petroleum facility that ceased operations in 1982, and at which there were a number of spills in the early 1970s, including a spill of 3,000 to 6,000 gallons of diesel fuel in 1974. Order at 4:5-11.

17. The Agency first sent corrective action notices to the Railroads requesting that they prepare remedial action plans for Area 3 on August 25, 2004. Order 5:1-3.

18. In late 2004 and early 2005, the Agency sent the Railroads similar notices about Areas 4 and 24. Order at 5:5-6.

19. The Railroads did not respond to any of the Agency'snotices prior to the filing of the Complaint in this action. Order 5:6-7. 3

AREA 3

20. Area 3 is the former City block bounded to the north by the former Main Street, to the south by the former Market Street, to the east by Van Buren Street, and to the west by Lincoln Street.

Ex. 214, Fig. 1.

21. The RAS owned Area 3 from 1988 until June 15, 2004, when it sold Area 3 to Regent. Amended Pretrial Order, Undisputed Fact No. 41. Regent planned to build an office building known as WorkNet on Area 3. The terms of sale to Regent were set forth in a Disposition and Development Agreement ("DDA") dated February 24, 2004. Ex. 45. One of the terms of the DDA was that the RAS would indemnify Regent for costs incurred as a result of contamination present on Area 3 as of the date of sale. Id. at 27-29, SRDA 2508-10.

22. On March 15, 1999, the Agency sued the owners and operators of nearby petroleum bulk storage plants, including the L&M facility, and a paint manufacturing facility in Area 2A to the west of Areas 3 and 24. In the action, which was entitled The Redevelopment Agency of the City of Stockton v. Union Oil Company of California, San Mateo County Superior Court Case No. 410753, the Agency sought damages for contamination of Area 2A and its vicinity as a result of releases of fuels from the L&M facility, a Unocal facility, and the Morton Paint Company.

23. With respect to the properties immediately to the west of Areas 3 and 24, the Agency obtained settlements with Alco Industries, Inc. and Union Oil Company of California in which the Agency was paid $2.6 million.

24. Wallace-Kuhl ("WK"), who was working for Regent, was doing a geotechnical investigation for foundation design on Area 3 and was on site observing excavation of material when contaminated soil was encountered on July 16, 2004. (Tr. 128:20-129:10)

25. A representative from WK's environmental group visited the site and collected 4 initial soil samples which revealed that the suspect soil was in fact contaminated with hydrocarbons. (Tr. 129:11-18)

26. On July 23, 2004, Regent began excavating the petroleum contaminated soil. (Tr. 221:17-21, 347:1-10, 418:3-15) The French drain, a perforated 12" pipe, was discovered at approximately four and one half feet below ground surface after a backhoe had been brought in to investigate the extent of the contamination. (Tr. 129:22-130:6, 202:14-203:1)

27. On July 29, 2004, WK met with Regent and the Agency. The California Department of Toxic Substances Control ("DTSC") and Regional Water Quality Control Board ("RWQCB" or "Regional Board") were also notified in order to get a work plan in place to further the excavation/investigation/remediation. (Tr. 130:23-131:12)

28. WK submitted a work plan for further investigation to the RWQCB on August 2, 2004. Ex. 51. At that time, WK estimated that Regent would excavate an additional 2,500 cubic yards of petroleum contaminated soil. Ex. 51 at 1, SRDA 173. WK submitted a Revised Site Investigation Workplan to the RWQCB on September 14, 2004.

Ex. 71. At that time, WK estimated that Regent would excavate an additional 3,000 cubic yards of petroleum contaminated soil. Id. at 4, SRDA 348. Ultimately, Regent excavated a total of 8,000 cubic yards of soil. Tr. 151:18-22.

29. RWQCB staff approved the Revised Site Investigation Workplan with conditions on September 24, 2004. Ex. 78. In a letter to WK, RWQCB staff wrote that the cleanup goals for Area 3 would be "non-detect or background" concentrations, but did not specify whether those cleanup goals would apply to soil or groundwater. Id. at 2, SRDA 365. The approval letter also directed ...


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