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California Dep't of Toxic Substances Control v. Estate of McDuffee

April 28, 2010

CALIFORNIA DEPARTMENT OF TOXIC SUBSTANCES CONTROL, PLAINTIFF,
v.
ESTATE OF HERBERT S. MCDUFFEE, JR., DECEASED, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER AND RELATED CROSS-CLAIMS, COUNTERCLAIMS, and THIRD-PARTY ACTIONS

On April 1, 2010, Plaintiff California Department of Toxic Substances Control (the "Department") filed a motion for approval and entry of the proposed Consent Decree (the "Consent Decree") in this cost recovery action brought by the Department under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") 42 U.S.C. §§ 9601 et seq., and California statutory and common law, against a number of defendants. The Department and the settling defendants also seek an order declaring that the settlement was made in good faith under California Code of Civil Procedure sections 877 and 877.6. These parties further seek an order barring claims against the settling parties for contribution or indemnity arising out of the settled claims under 42 U.S.C. § 9613 and § 113(f)(2).

This case involves the alleged release or threatened release of hazardous substances in, at, around, beneath, and from a tract of land located at the intersection of White Rock and Kilgore Roads in Rancho Cordova, Sacramento County, California, Assessor's Parcels Number 072-0260-006 ("Parcel A"), 072-0260-031 ("Parcel B"), and 072-0260-032 ("Parcel C") (collectively, the "Site"). The Department's Third Amended Complaint (the "Complaint") seeks, inter alia, recovery of response costs incurred or to be incurred by the Department in monitoring, assessing, and evaluating the alleged release and threatened release of hazardous substances from the Site and in removing, remediating, and overseeing the removal and remediation of hazardous substances at the Site; and declaratory relief regarding the defendants named in the Complaint's alleged liability for future response costs with respect to the Site. The defendants in this action consist of parties who are alleged to be liable because they arranged for disposal or treatment of hazardous substances at the Site ("Arranger Defendants"), and parties who are alleged to be liable based on their ownership or operation of the Site ("Owner/Operator Defendants").

Several of the defendants in this action filed counterclaims against the Department, the Department acting as the State of California, or the State of California based on the actions of the California Highway Patrol, the California Department of Transportation, the California Department of General Services and its other political subdivisions. The California Highway Patrol, the California Department of Transportation, and the California Department of General Services have actively participated in this litigation and the settlement negotiations as Arranger Defendants. These three state agencies (the "State Agency Defendants") are signatories to the Consent Decree.

Magistrate Judge Gregory G. Hollows presided over the settlement conference held on May 29, 2009 in which the parties agreed to the Consent Decree. The agreement was reached on the Consent Decree subject to a 30-day time period (ending June 29, 2009) for any party to inform Magistrate Judge Hollows by email that it did not have the authority to agree to the Consent Decree.

MOTION FOR APPROVAL AND ENTRY OF CONSENT DECREE

"A consent decree is essentially a settlement agreement subject to continued judicial policing." U.S. v. State of Oregon, 913 F.2d 576, 580 (9th Cir. 1990) (quotations omitted). "Before approving a consent decree, a district court must be satisfied that it is at least fundamentally fair, adequate and reasonable." Id. A CERCLA consent decree should be approved when it is: "procedurally and substantively fair, reasonable, and consistent with the statute's objectives." Arizona ex rel. Arizona Dep't of Env. Quality v. ACME Laundry & Dry Cleaning Co., Inc., No. CV-09-01919-PHX-FJM, 2009 WL 5170176, at *1 (D. Ariz. Dec. 21, 2009) (citing U.S. v. Montrose Chem. Corp. of California, 50 F.3d 741, 746-48 (9th Cir. 1995)); see also U.S. v. Cannons Eng'g Corp., 899 F.2d 79, 84 (1st Cir. 1990).

"To measure procedural fairness, a court should ordinarily look to the negotiation process and attempt to gauge its candor, openness, and bargaining balance." Cannons, 899 F.2d at 86. "Substantive fairness introduces into the equation concepts of corrective justice and accountability: a party should bear the cost of the harm for which it is legally responsible." Id. at 87. In determining whether a settlement is reasonable, courts look to whether the proposed settlement will be effective in ensuring a cleanup of the property, whether it satisfactorily compensates the public for the costs of cleanup, and whether the settlement reflects the relative strengths of the parties' bargaining positions. Id. at 89-90. Finally, the settlement should be consistent with the purposes of CERCLA, two of which are: (1) to create a prompt and effective response to hazardous waste problems; and (2) to ensure that the cost of remedying the hazardous waste problem is paid for by those who caused the problem. Id. at 90-91.

Here, the parties have made the required showing that the settlement documented in the Consent Decree is procedurally and substantively fair, reasonable, and consistent with the purposes of CERCLA. The settlement was the result of arm's-length negotiations conducted under the supervision of the Magistrate Judge, in which all parties had the opportunity to participate. Additionally, the settlement reflects a "reasonable method of weighing comparative fault" based on the information available to the settling parties at the time of settlement. Id. at 88. The Consent Decree provides that $2,510,000 shall be paid to the Department through the settlement and that this payment is expected to "be enough money to complete the remedial actions" at the Site, ensuring that taxpayer funds will not be needed for such remedial actions. (Amador Decl. 4:20-124.) Although this payment does not include the Department's oversight costs, which are estimated to total $846,140.04, the Department has the ability to seek these costs from other non-settling parties and to apply any unused funds obtained in the proposed settlement to cover these costs. Finally, the proposed Consent Decree promptly and effectively responds to the hazardous waste problem, using funds from a large group of defendants who are allegedly responsibly for causing the problem. Therefore, the proposed Consent Decree is approved as procedurally and substantively fair, reasonable, and consistent with the purposes of CERCLA.

The parties also seek an order "barring contribution claims and actions" for the "Matters Addressed" in the Consent Decree under CERCLA section 113(f), codified as 42 U.S.C. § 9613(f), which provides:

A person who has resolved liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement.

42 U.S.C. § 9613(f)(2). Under this section, "[c]ontribution protection is conferred on the settling parties at the time the settling parties enter into the agreement." U.S. v. Colorado & E. R.R. Co., 50 F.3d 1530, 1538 (10th Cir. 1995). Therefore, the settling parties' request for an order barring contribution claims for the "Matters Addressed" in the Consent Decree is granted.

MOTION FOR DECLARATION OF GOOD FAITH AND BAR ORDER

The parties also seek a declaration that the settlement was reached in good faith and an order barring claims for contribution and indemnity under California law. Section 877.6 of ...


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