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City of San Diego v. National Steel & Shipbuilding Co.

United States District Court, S.D. California

September 5, 2014

CITY OF SAN DIEGO, Plaintiff,
v.
NATIONAL STEEL & SHIPBUILDING COMPANY; et al., Defendants. AND RELATED CROSS-ACTIONS AND COUNTERCLAIMS

ORDER

WILLIAM Q. HAYES, District Judge.

The matters before the Court are the Ex Parte Motion for Clarification and Correction of Oversights and Omissions in the Court's July 11, 2014 Order (ECF No. 436) filed by the City of San Diego and the Joint Ex Parte Motion of San Diego Unified Port District and National Steel and Shipbuilding Company for Correction and Clarification of the Court's July 11, 2014 Order (ECF No. 429). The Court will also address certain objections raised by the San Diego Unified Port District (ECF No. 434) and the City of San Diego (ECF Nos. 427, 437, 442) to proposed bar orders submitted by the parties pursuant to the Court's July 11, 2014 Order. (ECF Nos. 424, 426, 431).

I. Background

On October 11, 2013, Defendants San Diego Gas & Electric Company ("SDG&E") and BAE Systems San Diego Ship Repair Inc. and Southwest Marine, Inc. (collectively "BAE") filed a Joint Motion for Order Confirming Good Faith Settlement and Barring Claims, based on the settlement between SDG&E and BAE ("Settlement 1"). (ECF No. 354). On November 4, 2013, Defendant United States Navy (the "Navy") filed a Motion for Order Determining Good Faith Settlement and Barring Claims, based on the settlement between the Navy, BAE, and National Steel and Shipbuilding Company ("NASSCO") ("Settlement 2"). (ECF No. 366). On November 5, 2013, Defendant NASSCO filed a Motion for Determination of Good Faith Settlement between NASSCO and United States of America, based on Settlement 2. (ECF No. 367). On November 5, 2013, BAE filed a Motion for Determination of Good Faith Settlement and Partial Claims Bar, based on Settlement 2. (ECF No. 368). On November 6, 2013, NASSCO and San Diego Unified Port District (the "Port District") filed a Joint Motion for order Confirming Settlement Between NASSCO and the Port District Barring and Dismissing Claims, based on the settlement between NASSCO and the Port District ("Settlement 3"). (ECF No. 370). The City of San Diego (the "City") opposed each of these motions (collectively "Good Faith Settlement Motions")).[1] (ECF Nos. 382, 383, 389, 392, 393).

On July 11, 2014, the Court issued an Order ("July 11, 2014 Order") finding that the three Settlement Agreements entered into between various Defendants were entered into in good faith and were fair, reasonable, and consistent with the purposes of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601-9675, and the Uniform Comparative Fault Act ("UCFA"), 12 U.L.A. 126 (1996). (ECF No. 423). The Court found that the proportionate share method, section 6 of the UCFA, was "an equitable method of apportioning fault." Id. at 20. For each settlement, the Court found that the settling parties (SDG&E, the Navy, and the Port District) could request bar orders barring contribution-based claims by non-settling parties because the settling parties had discharged their contribution obligations to the claimants, BAE and NASSCO. The Court therefore found that BAE and NASSCO's claims against non-settling parties were reduced by the equitable share of the settling parties' obligations, and noted that such claimants "bear[] the risk that [they have] settled with a responsible person for too little." Id. at 19-20.

The Court ordered that the "Moving Parties shall prepare proposed orders that are consistent with this Order and file them on the docket within ten (10) days from the date this Order is filed." (ECF No. 423 at 428). The Court ordered that "[a]ny objections shall be filed within ten (10) days from the date(s) the proposed orders are filed." Id.

The Navy (ECF No. 424), SDG&E (ECF No. 426), NASSCO (ECF No. 428), the Port District (ECF No. 431), and BAE (ECF No. 432) each submitted proposed bar orders (collectively "the Moving Parties"). The City objected to all five proposed bar orders. (ECF Nos. 427, 437, 440, 441, 442). The Port District objected to SDG&E's proposed bar order, which pertains to Settlement 1, and NASSCO and BAE's proposed bar orders, which pertain to Settlement 2. (ECF Nos. 434, 447, 448). Campbell objected to BAE's proposed order, which pertains to Settlement 2. (ECF No. 446). The Navy objected to BAE and NASSCO's proposed bar orders, which pertain to Settlement 2. (ECF No. 443, 444).

On July 21, 2014, the Port District and NASSCO filed the pending Joint Ex Parte Motion for Correction and Clarification of the Court's July 11, 2014 Order ("the Port District and NASSCO's Motion for Clarification"). (ECF No. 429). On July 30, 2014, the City filed an opposition. (ECF No. 439). On July 30, 2014, the Navy filed a response in support of the Port District and NASSCO's Motion for Clarification. (ECF No. 445). On August 8, the Port District and NASSCO filed a reply. (ECF No. 456).

On July 28, 2014, the City filed the pending Ex Parte Motion for Clarification and Correction of Oversights and Omissions in the Court's July 11, 2014 Order ("the City's Motion for Clarification"). (ECF No. 436). On August 1, 2014, the Navy filed an opposition. (ECF No. 450). On August 8, 2014, SDG&E filed an opposition. (ECF No. 454). On August 8, 2014, the Port District and NASSCO filed a joint opposition. (ECF No. 455). On August 8, 2014, BAE filed an opposition. (ECF No. 457).

II. The Pending Motions for Clarification (ECF Nos. 429, 436)

Both motions seek clarification on whether the City's "cost recovery" claims are subject to a bar order pursuant to the Settlement Agreements. (ECF No. 429 at 3-13; ECF No. 436 at 8). The City seeks clarification on three additional issues. First, the City seeks clarification on whether the Port District may maintain its cross-claims in relation to South Yard against non-settling parties. (ECF No. 436 at 8-9). Second, the City seeks clarification on whether claims related to discharges from the Municipal Separate Storm Water System ("MS4") system may be subject to a claims bar pursuant to Settlement 3. Id. at 9-10. Finally, the City seeks clarification on whether a claims bar can only cover "South Yard" claims pursuant to Settlement 3. Id. at 11.

A. The City's Cost Recovery Claims

The City has identified two cost recovery claims: its First Claim for Cost Recovery pursuant to CERCLA section 107(a) and its Seventh Claim for Cost Recovery pursuant to California Water Code section 13304. (ECF No. 1. at 31-33, 37-38; ECF No. 393 at 21-22; ECF No. 439 at 3). The July 11, 2014 Order did not specifically address whether the City's cost recovery claims were subject to SDG&E and BAE's proposed bar order.

With respect to Settlement 2, the Court found that "the Navy's proposed bar order bars claims for contribution and indemnity' and not cost recovery claims. To the extent the City has cost recovery claims against the Navy that are not based on contribution or indemnity, such claims are not covered by the requested bar." Id. at 38-39. Similarly, with respect to Settlement 3, the Court found that "the parties' proposed order bars claims for contribution and indemnity' and not cost recovery." Id. at 47.

I. Contentions of the Parties

The City contends that the July 11, 2014 order contains an oversight, by omitting discussion of the City's cost recovery claims as to Settlement 1, but discussing the City's cost recovery claims as to Settlements 2 and 3. (ECF No 436 at 8). The City also contends that the nature of the City's cost recovery claims should be determined by a motion seeking reversal of the Court's July 11, 2014 Order or a motion for summary judgment. (ECF No. 439 at 8-9).

NASSCO and the Port District seek clarification because the Port District and NASSCO "specifically included a reference to cost recovery' in [their proposed bar order] to assure that all contribution claims under CERCLA for the parties' alleged common liability for the contamination and cleanup of the Site would be barred, " but the Court found that "the parties' proposed order bars claims for contribution and indemnity' and not cost recovery." (ECF Nos. 429 at 7, 423 at 47).

The Navy contends that the Court already found that the City has failed to identify any cost recovery claims. (ECF No. 50 at 5). The Navy also contends that the Navy will need to maintain its section 113(f) claims against the City if the City is able to maintain its cost-recovery claims, and "[k]eeping the Navy in this litigation on such a slim reed which would contradict the finding that the Navy has now settled its responsibility for the cleanup at the site." Id. at 6. SDG&E contends that the City's cost recovery claims should be barred as "artfully pled claims that amount to claims for contribution, " just as the City's intentional tort claims were barred. (ECF No. 454 at 6). SDG&E also contends that the City's cost recovery claims are barred as a matter of law because the City was required by the State to clean up the bay and is now merely seeking contributions from other responsible parties for their fair share of the clean-up costs. Id. at 8 (citing Solutia Inc. v. McWane, Inc., 672 F.3d 1230 (11th Cir. 2012)). BAE contends that the City only sought damages for contribution in its initial disclosures and that "the City has not, and cannot, identify any category of cost recovery' damages that are separate and apart from the contribution it seeks." (ECF No. 457 at 5).

ii. Ruling of the Court

As a potentially responsible party, the City may maintain a section 107(a) claim. U.S. v. Atlantic Research Corp., 551 U.S. 128, 136 (2007) ("Consequently, the plain language of [42 U.S.C. § 9607] subparagraph (B) authorizes cost-recovery actions by any private party, including PRPs."); see also Kotrous v. Goss-Jewett Co. of N. Cal., 523 F.3d 924, 933 (9th Cir. 2008) ("We therefore conclude that Pinal Creek's holding that an action between PRPs is necessarily for contribution has been overruled."). In Atlantic Research, the Supreme Court explained that sections 107(a) and 113(f) "provide two clearly distinct' remedies." Atlantic Research, 551 U.S. at 138. "The statute authorizes a PRP to seek contribution [pursuant to section 113(f)] during or following' a suit under § 106 or § 107(a)." Id. "By contrast, § 107(a) permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under § 107(a) without any establishment of liability to a third party." Id. at 139. "[A] defendant PRP in such a § 107(a) suit could blunt any inequitable distribution of costs by filing a § 113(f) counterclaim." Id. at 140.

The Supreme Court left open the question of whether a party may recover compelled clean-up costs pursuant to section 107(a) following suit under sections 106 or 107(a). Id. at 139 n. 6 ("For instance, we recognize that a PRP may sustain expenses pursuant to a consent decree following a suit under § 106 or § 107... We do not decide whether these compelled costs of response are recoverable under § 113(f), § 107(a), or both."); see also W.R. Grace & Co.-Conn. v. Zotos Intern., Inc., 559 F.3d 85, 93 n.7 (2d Cir. 2009) ("As the Supreme Court suggested, it may well be that a party who sustains expenses pursuant to a consent decree following a suit under section 106 or section 107(a) may have a cause of action under either section 113(f), section 107(a), or both.... We need not address this issue here as Grace did not enter into the consent decree following suit."). However, one court has found that plaintiffs may maintain cost recovery claims under section 107(a), even if their clean-up efforts were the result of governmental oversight. Id. at 92 (holding that the plaintiff, who, pursuant to a New York State Department of Environmental Conservation consent order, remediated a contaminated site could "pursue necessary response costs pursuant to section 107(a) even though its expenditures were made in compliance with a consent order").

Even assuming that the City's cost recovery claims deal with the same subject matter addressed by the Settlement Agreements, the Court cannot dismiss the City's cost recovery claims because section 6 of the UCFA applies to contribution claims, not cost recovery claims. See, e.g., Ford Motor Co. v. Michigan Consol. Gas Co., No. 08-13503, ___ F.Supp.2d ___, 2014 WL 255968, at *10 (E.D. Mich. Jan. 23, 2014) (finding that a consent decree entered into between the United States and all plaintiffs was not grounds for dismissing a third-party complaint against the United States for cost recovery pursuant to section 107(a) because "[t]he inconvertible fact remains that [the third-party complaintant's] claim is not a contribution claim, but one for cost recovery" and its "alleged status as a PRP cannot bridge the gap"). To the extent Defendants contend that the City's cost recovery claims are, by their nature, claims for contribution, the Court cannot properly resolve this issue at this stage in the proceedings. See id. n. 9 ("This ruling is not on a motion for summary judgment and the Court will not become involved in the ...


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