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California Department of Toxic Substances Control v. Jim Dobbas, Inc.

United States District Court, E.D. California

September 16, 2014

JIM DOBBAS, INC., a California corporation; CONTINENTAL RAIL, INC., a Delaware corporation; DAVID VAN OVER, individually; PACIFIC WOOD PRESERVING, a dissolved California corporation; and WEST COAST WOOD PRESERVING, LLC, a Nevada limited liability company, Defendants, AND RELATED COUNTERCLAIMS AND CROSS-CLAIMS.


WILLIAM B. SHUBB, District Judge.

Plaintiffs California Department of Toxic Substances Control ("DTSC") and the Toxic Substances Control Account ("TSCA") brought this action under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. §§ 9601 et seq., to recover cleanup costs from defendants Jim Dobbas, Inc. ("Dobbas"), Continental Rail, Inc., Pacific Wood Preserving, West Coast Wood Preserving, LLC ("WCWP"), and David van Over. Dobbas, van Over, and WCWP answered the Complaint. Dobbas's Answer includes counterclaims alleging that plaintiffs are liable to it for mismanaging the cleanup. Plaintiffs now move to dismiss Dobbas's counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief can be granted and to strike several portions of the Answer filed by Dobbas pursuant to Rule 12(f).

I. Factual and Procedural History

In 1972, Pacific Wood Preserving began conducting wood preserving operations at a facility in Elmira, California (the "Elmira facility"). (Compl. ¶¶ 13-14.) In 1979, Pacific Wood Preserving dissolved and was allegedly succeeded by WCWP, which relocated its wood preserving operations to Bakersfield, California. (Id.) From 1979 to 1982, Collins & Aikman Products Company ("CAPCO"), a successor to the Wickes Corporation, conducted wood preserving operations at the Elmira facility. (Id. ¶ 15.) In 1997, CAPCO sold the Elmira facility to Dobbas and Continental Rail, which in turn sold it to van Over in 2011 for two dollars. (Id. ¶¶ 19, 26.)

Plaintiffs allege that the operators of the Elmira facility released numerous hazardous substances, including arsenic, chromium, copper, and other constituents of wood preserving chemicals. (Id. ¶ 16.) Between 1980 and 2005, CAPCO took a number of remedial actions under the oversight of DTSC, including excavating soil, installing an asphalt cap over contaminated soils, constructing a drainage system over contaminated areas of the site, monitoring groundwater, and installing a groundwater extraction and treatment system. (Id. ¶ 17.) In 2005, CAPCO declared bankruptcy and ceased remediation efforts. (Id. ¶ 21.)

In 2006, DTSC allegedly requested that Dobbas and Continental Rail resume remediation efforts at the Elmira facility. (Id. ¶ 22.) Plaintiffs allege that, while Dobbas agreed to perform certain remedial actions, both Dobbas and Continental Rail "failed and refused to perform most of the actions formerly conducted by [CAPCO] to address contamination at, around, and/or beneath the site." (Id. ¶ 23.) After Dobbas and Continental Rail sold the Elmira facility to van Over in 2011, DTSC issued an Imminent or Substantial Endangerment Determination Order and Remedial Action Order requiring Dobbas, Continental Rail, and van Over to conduct additional remediation activities. (Id. ¶ 27.) All three of those defendants allegedly failed to comply with these orders. (Id. ¶ 28.) As a result, plaintiffs have taken "response" actions from November 2005 to present at the Elmira facility, including efforts to repair and restart the groundwater extraction and treatment system, groundwater monitoring, investigation of soils, and implementation of the Removal Action Workplan. (Id. ¶ 29.) Plaintiffs allege they have incurred over $2.2 million in response costs as a result of defendants' failure to comply with their orders. (Id. ¶¶ 29-31.)

Plaintiffs brought this action seeking cost recovery under CERCLA, 42 U.S.C. § 9607, declaratory relief under CERCLA, 42 U.S.C. § 9613(g), and damages, injunctive relief, and civil penalties under the Hazardous Substance Account Act ("HSAA"), Cal. Health & Safety Code §§ 25300 et seq. Dobbas and van Over timely answered the Complaint, demanded a jury trial and attorney's fees, and asserted numerous affirmative defenses. (Docket Nos. 23, 24.) In addition, Dobbas filed a counterclaim against DTSC alleging that it mismanaged cleanup efforts at the Elmira facility and seeking cost recovery and contribution under CERCLA, contribution and indemnity under HSAA, and declaratory relief under CERCLA and the Declaratory Judgment Act, 28 U.S.C. § 2201. (Docket No. 23.) Plaintiffs now move to dismiss Dobbas's counterclaim pursuant to Rule 12(b)(6) for failure to state a claim on which relief can be granted and to strike portions of Dobbas's Answer pursuant to Rule 12(f). (Docket No. 27.)

II. Motion to Dismiss

When considering a motion to dismiss a counterclaim under Rule 12(b)(6), the court uses an identical standard as that for dismissal of a claim. The court must accept the allegations in the claim as true and draw all reasonable inferences in favor of the claimant. See Scheuer v. Rhodes , 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer , 468 U.S. 183 (1984); Cruz v. Beto , 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a claimant must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). This "plausibility standard, " however, "asks for more than a sheer possibility that a defendant has acted unlawfully, " and where a counterclaim pleads facts that are "merely consistent with a defendant's liability, " it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Twombly , 550 U.S. at 557).

A. Dobbas's CERCLA Counterclaims

Dobbas's first and second counterclaims seek cost recovery and contribution from DTSC pursuant to §§ 9607 and 9613 of CERCLA. In order to assert such a claim, Dobbas must allege that DTSC was (1) "the owner and operator of a vessel or a facility, " (2) a "person who at the time of disposal owned or operated any facility at which such hazardous substances were disposed of, " (3) a "person who... arranged for disposal or treatment... of hazardous substances, " or (4) a "person who accepts or accepted any hazardous substances for transport...." 42 U.S.C. § 9607(a). Dobbas asserts its counterclaims on the theory that DTSC mismanaged cleanup efforts at the remediation sites and is therefore liable as an "operator" under § 9607(a)(2). (Dobbas's Countercl. at 2-4.)

In light of the tautological definition provided by Congress, [1] the Supreme Court gave CERCLA's use of the term "operator" an expansive meaning: "someone who directs the workings of, manages, or conducts the affairs of a facility." United States v. Bestfoods , 524 U.S. 51, 66 (1998). In the context of CERCLA, the Court stated that "an operator must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." Id . Several courts have found that government entities may fall within the scope of this language. See United States v. Township of Brighton , 153 F.3d 307, 315 (6th Cir. 1998) ("[A] government entity, by regulating the operation of a facility actively and extensively enough, can itself become an operator."); FMC Corp. v. United States Dep't of Commerce , 29 F.3d 833, 840 (3rd Cir. 1994) (en banc) ("[T]he government can be liable when it engages in regulatory activities extensive enough to make it an operator of a facility....").

Whether a government entity's involvement in remediation efforts subsequent to the emission of hazardous substances at a facility renders it an "operator" of the facility thus depends on whether it managed, directed, or conducted operations there.[2] Courts have struggled with the level of control necessary to support operator liability, some settling on a narrower "actual control" standard, see Brighton , 153 F.3d at 313-14 (requiring "affirmative acts" from a purported operator), while others have adopted a broader "authority to control" standard, see Nurad Inc. v. William E. Hooper & Sons Co. , 966 F.2d 837, 842 (4th Cir. 1992) (requiring only the existence of authority to act). The Ninth Circuit has yet to crystalize the scope of post-Bestfoods operator liability, but it has noted the expansive reach of the term. See City of Los Angeles v. San Pedro Boat Works , 635 F.3d 440, 444 (9th Cir. 2011).

DTSC points to several cases employing a narrow definition of "operator, " including Long Beach Unified Sch. Dist. V. Dorothy B. Godwin Cal. Living Trust, 32 F.3d 1364, 1367 (9th Cir. 1994) (requiring an operator to "play an active role in running the facility, typically involving hands-on, day-to-day participation") and United States v. Dart Indus., Inc. , 847 F.2d 144, 146 (4th Cir. 1988) (requiring "hands-on" activities). These stricter constructions would help DTSC's contention that it falls outside the scope of operator liability. However, all these cases predate the Supreme Court's more-recent formulation in Bestfoods-the formulation this court must follow.

Several courts have dismissed claims against state agencies when there were no allegations that the state agency had any involvement with the facility other than remedial cleanup efforts. See, e.g., Dart Indus. , 847 F.2d at 146; Stilloe v. Almy Bros. , 782 F.Supp. 731, 736 (N.D.N.Y. 1992); United States v. W. Processing Co. , 761 F.Supp. 725, 731 (W.D. Wash. 1991). But, again, these cases rest on the pre-Bestfoods understanding of the term "operator." See Dart Indus. , 847 F.2d at 146 (requiring "hands on" activities that contributed to the release of hazardous waste); Stilloe , 782 F.Supp. at 735-36 (relying on pre-Bestfoods cases); W. Processing Co. , 761 F.Supp. at 730-31 (relying on pre-Bestfoods cases). Accordingly, these cases lack persuasive force here.

Dobbas alleges sufficient facts to survive a motion to dismiss under Bestfoods. It claims that DTSC and its predecessor agency, the California Department of Health Services ("DHS"), have been involved in cleanup efforts at the Elmira facility for over three decades. (Countercl. ¶ 6.) During that time, Dobbas states that DTSC and DHS issued multiple remedial action plans that selected and implemented response actions at the Elmira ...

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