United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION FOR DETERMINATION OF GOOD FAITH SETTLMENT AND BARRING OF CLAIMS; GRANTING MOTION FOR SUMMARY JUDGMENT [RE: DKT NO. 192, 201]
EDWARD J. DAVILA, District Judge.
The Heim family commenced this Action against a number of defendants seeking contribution for contamination at 1350 Freedom Blvd, Watsonville California ("the Property") from chlorinated solvents, including Perchloroethylene ("PCE"). Third-Party Plaintiff Maxine Heim ("Third-Party Plaintiff") and her now deceased husband owned and operated a dry cleaning business at the Property from approximately 1970 to 1996. As part of the dry cleaning operations, PCE was used. In June of 1996, Third-Party Plaintiff sold the property to Mark Heim, who has continuously owned the Property and has operated a dry cleaning business ever since. The dumping of PCE down the drain and into the sewer caused soil and groundwater contamination at and surrounding the Property. PCE erodes materials commonly used to build sewer pipes. PCE is toxic by inhalation, by prolonged or repeated contact with the skin or mucous membranes, or when ingested. Exhibit D, PR0004, Docket Item No. 214. Vapor inhalation can cause narcosis, anesthesia, or irritation of the eyes, nose and skin. Id . Excessive exposure to PCE can cause Jaundice and biochemical changes indicative of liver injury and can sensitize the heart making it predisposed to the development of serious or even fatal rhythm disturbances. Id . The Regional Water Quality Control Board named Maxine Heim a responsible party for environmental cleanup at the Property. Third Amended Complaint ("TAC") ¶ 13, Docket Item No. 141. As a result, she has incurred related cleanup costs. Id.
Third-Party Plaintiff filed a third party complaint against Multimatic LLC and the Kirrberg Corporation, formerly known as Multimatic Corporation (together referred to herein as "Multimatic Parties") and American Laundry Machinery, Inc. ("ALMI") under federal claims pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (Claims 1 and 2), and under state law claims for Negligence and Negligence Per Se (Claims 4 and 5), Nuisance (Claims 9 and 10), Common Law Contribution, Indemnity, and Porter-Cologne Contribution (Claims 6, 7, 8, and 11), California Health & Safety Code §25300 (Claim 3), Strict Products Liability (Claim 13), and Declaratory Relief (Claim 12). TAC ¶ 61-130, Dkt. No. 141. Third-Party Plaintiff dismissed her Fourth, Fifth and Thirteenth claims voluntarily. Plaintiff's Response at 22, Docket Item No. 214. Multimatic sold the dry cleaning equipment that Third-Party Plaintiff used for the dry cleaning business. ALMI designed, manufactured and sold equipment used at the Property, namely the Ajax Model 218 Vapor Adsorption Unit, Serial # XXXXXXXXXXX ("Ajax") that Third-Party Plaintiff used for the dry cleaning business from 1983 to 1994. TAC ¶ 58, Dkt. No. 141. According to Third-Party Plaintiff, the "sole purpose" of the Ajax was to catch and process PCE vapor fumes, the primary chemical at issue in this case and one typically used by dry cleaners, created by other dry cleaning machines. Pl.'s Resp. at 1, Dkt. No. 214.
On or about July 9, 2013, Multimatic Parties, Third-Party Plaintiff and Mark Heim individually and on behalf of the Estate of Donald T. Heim, (collectively referred herein as "Settling Parties"), participated in mediation with mediator Timothy Gallagher, Esq. Def.'s Mot. for Determination of Good Faith Settlement ("MDGFS") at 2, Docket Item No. 192. After a full day of mediation, Settling Parties agreed to settle the matter for a total sum of $450, 000. Declaration of Thomas Vandenburg ("Vandenburg Decl.") ¶ 7, Docket Item No. 158. In exchange for payment, the Plaintiffs are to release all claims against Multimatic Parties arising from or related to claims asserted in this Action, and all claims related to the alleged contamination of the Property. MDGFS at 3, Dkt. No. 192. Settling Parties also agree to bear their respective costs and fees incurred during the course of litigation. Vandenburg Decl., Ex. A. In a motion filed November 6, 2013, the Multimatic Parties request the court approve the settlement.
ALMI filed a Motion for Summary Judgment, or in the alternative, a partial Summary Judgment to Plaintiff's Third Amended Third Party Complaint. ALMI also filed an Opposition Motion to the Good Faith Settlement Agreement between Settling Parties.
II. Legal Standard
a. Motion for Summary Judgment - Rule 56(b)
A party moving for summary judgment has the initial burden of producing evidence negating an essential element of the non-moving party's claims or showing that the non-moving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial. Nissan Fire & Marine Ins. Co. v. Fritz Cos. , 210 F.3d 1099, 1102 (9th Cir. 2000). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Rule 56 does not require that the relief granted to a successful movant always be dispositive of the full matter in controversy. Rule 56(b) provides that "[a] party against whom relief is sought may move at any time... for a summary on all or part of the claim." Fed.R.Civ.P. 56(b). See, e.g., First Nat. Ins. Co. v. F.D.I.C. , 977 F.Supp. 1051, 1055 (S.D. Cal. 1997) ("[T]he Court may still grant summary adjudication as to specific issues if it will narrow the issues for trial."); Baker v. Norman , 651 F.2d 1107, 1123 (5th Cir. 1981) ("In cases that involve complicated fact patterns and multiple causes of action, summary judgment may be proper as to some causes of action but not as to others, or as to some issues but not as to others, or as to some parties but not as to others[.]").
As discussed below, Third-Party Plaintiff fails to raise sufficient factual issues to defeat summary judgment.
b. Cost Recovery Pursuant to CERCLA §§113(f) & 107(a)
Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 1980 "in response to the serious environmental and health risks posed by industrial pollution." Burlington N. & Santa Fe Ry. Co. v. United States , 556 U.S. 599, 602 (2009). CERCLA was "designed to promote the timely cleanup of hazardous waste sites and to ensure that the costs of such cleanup efforts were borne by those responsible for the contamination." Id . (internal quotation marks and citation omitted). CERCLA imposes strict liability for environmental contamination upon four broad classes of covered persons: (1) the owner and operator of a vessel or a facility, (2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of, (3) any person who arranged for disposal or treatment or arranged with a transporter for transport for disposal or treatment of hazardous substances owned or possessed by such person, and (4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance. 42 U.S.C. § 9607(a). Once identified as a covered person, "an entity... may be compelled to clean up a contaminated area or reimburse the Government for past and future response costs." 42 U.S.C. § 9607(a)(4)(A)-(D) (describing the remediation and cleanup costs for which covered persons may be held liable). CERCLA further provides that a person who has incurred cleanup costs may seek contribution from any other covered person. 42 U.S.C. § 9613(f)(1).
The section giving rise to arranger liability provides, in relevant part, that liability shall be imposed on "any person who by contract, agreement or otherwise arranged for disposal... of hazardous substances owned or possessed by such person, by any other party or entity, at any facility... owned or operated by another party or entity and containing such hazardous substances...". 42 U.S.C. § 9607(a)(3). Arranger liability ensures that owners of hazardous substances may not free themselves from liability by selling or otherwise transferring a hazardous substance to another party for the purpose of disposal. Burlington N. , 556 U.S. at 608 ("[Arranger] liability would attach... if an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance."). Courts have agreed that determining whether a transaction gives rise to arranger liability is a fact-intensive inquiry. See Cal. Dep't of Toxic Substances v. Alco Pac., Inc. , 508 F.3d 930, 938 (9th Cir. 2007); Team Enterprises, LLC v. W. Inv. Real Estate Trust , 647 F.3d 901, 907 (9th Cir. 2011) (arranger liability is a fact-intensive inquiry); Wilson Rd. Dev. Corp. v. Fronabarger Concreters, Inc., 1:11-CV-84 CEJ, 2013 WL 4875071, at *7 (E.D. Mo. Sept. 11, 2013) ("[W]hether an entity is an arranger requires a fact-intensive inquiry that looks beyond the parties' characterization of the transaction as a disposal' or a sale' and seeks to discern whether the arrangement was one Congress intended to fall within the scope of CERCLA's strict-liability provisions.").
The Supreme Court recognized that "CERCLA does not specifically define what it means to arrang[e] for' disposal of a hazardous substance." Burlington N. , 556 U.S. at 610. Giving the phrase its "ordinary meaning, " the Court explained that "the word arrange' implies action directed to a specific purpose." Id . (citing Merriam-Webster's Collegiate Dictionary 64 (10th ed. 1993)). Consequently, "an entity may qualify as an arranger... when it takes intentional steps to dispose of a hazardous substance." Id . The Court reasoned:
[w]hile it is true that in some instances an entity's knowledge that its product will be... discarded may provide evidence of the entity's intent to dispose of its hazardous wastes, knowledge alone is insufficient to prove that an entity "planned for" the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.
In Team Enterprises , 647 F.3d at 909, a manufacturer of a dry cleaning machine used to recycle PCE was deemed not to be liable as an arranger under CERCLA. The Ninth Circuit held that in order to satisfy the intent requirement and hold a company liable as an arranger under CERCLA, a plaintiff must prove that the company selling a product "uses and/or generates a hazardous substance as part of its operation" and entered into the relevant transaction with the " specific purpose of disposing of a hazardous substance." Id . (emphasis added). The Plaintiff's argument that the defendant's instruction manual directed users to pour wastewater into a pail was held to be "insufficient to establish control because instruction manuals are akin to recommendations, and therefore, do not control the actions of the purchaser. Id. at 910 (emphasis added).
c. Good Faith Settlement
Courts within the Ninth Circuit have borrowed from the California Code of Civil Procedure § 877.6 when analyzing whether a settlement has been reached in good faith and, in turn, whether a contribution bar should attach for federal causes of actions. See e.g., Federal Savings & Loan, Ins. Co. v. Butler , 904 F.2d 505, 511 (9th Cir. 1990); see also KB Gardena Bdlg., LLC v. Whittaker Corp., 2012 WL 273888, at *2 (C.D. Cal. Jan. 30, 2012). Cal. Civ. P. § 877.6 permits a court to approve a settlement if it determines that the settlement was made in good faith. Tyco Thermal Controls LLC v. Redwood Indus. , 2010 WL 3211926 (N.D. Cal. Aug. 12, 2010). "A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault." Cal. Civ. P. § 877.6(c). "[A] tort defendant who has entered into a good faith settlement within the meaning of section 877.6, subdivision (c) is absolved of any further liability... including claims seeking total equitable immunity." Far W. Fin. Corp. v. D & S Co. , 46 Cal.3d 796, 817 (Cal. 1988). Subdivision (c) applies only if the court finds that "the amount of the settlement is within the reasonable range of the settling tortfeasor's proportional share of comparative liability for the plaintiff's injuries." L.C. Rudd & Son v. Superior Court , 52 Cal.App.4th 742, 747 (Cal.Ct.App. 1st Dist. 1997) (internal citation omitted). Should any party challenge a settlement, the burden is on that party to show that the settlement was not made in good faith. Fisher v. Superior Ct. , 103 Cal.App.3d 434, 447-49 (1980).
"Under federal law, particularly in CERCLA cases such as this, district courts have approved settlements and entered bar orders." AmeriPride Services Inc. v. Valley Indus. , 2007 WL 1946635, at *2 (E.D. Cal. July 2, 2007), (citing United States v. Western Processing Co., Inc. , 756 F.Supp. 1424, 1432-33 (W.D. Wash. 1990)). "Such an order is appropriate to facilitate settlement, particularly in a CERCLA case." Id., (citing Foamseal, Inc. v. Dow Chemical , 991 F.Supp. 883, 886 (E.D. Mich. 1998)). "Within the Ninth Circuit, a court's authority to review and approve settlements and to enter bar orders has been expressly recognized." Id., (citing Franklin v. Kaypro Corp. , 884 F.2d 1222 (9th Cir. 1989) (approving settlement of claims and entering bar orders in the context of federal securities laws)); see also Federal Savings and Loan Ins. Corp. v. Butler , 904 F.2d 505, 511 (9th Cir. 1990).
The Court unequivocally has the authority to review settlements and enter bar orders that discharge all federal and state law claims of contribution by non-settling defendants. See AmeriPride Services Inc. , 2007 WL 1946635, at *3; see, e.g., Federal ...