United States District Court, E.D. California
MEMORANDUM DECISION AND ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT (Docs. 74, 79, 82).
LAWRENCE J. O'NEILL, District Judge.
This case is about who bears the costs associated with the clean-up of contamination in the City of Merced, California ("the City") caused by methyl tertiary butyl ether ("MTBE") released from two gasoline service stations located at 1415 R Street and 1455 R Street ("the R Street stations") in the City. Plaintiff City of Merced Redevelopment Agency ("the RDA"), a successor agency to Merced Designated Local Authority ("the DLA") (collectively, "Plaintiff"), seeks to recover from Defendants the costs it incurred remediating that groundwater contamination, and also seeks to establish Defendants' liability for any future remediation costs. See Doc. 75 at 2.
In 2005, the City brought suit against various defendants, including Exxon,  Shell, Equilon, and Chevron, in California state court ("the City of Merced case") for "contamination of [the City's] public water supply by gasoline containing MTBE." Doc. 77, Declaration of Tracey O'Reilly ("O'Reilly Decl."), Ex. 1 (" City of Merced Compl."). The case resolved through summary judgment motions and, ultimately, an approximately four-month jury trial. See O'Reilly Decl., Exs. 2, 3.
Currently before the Court are Plaintiff's motion for partial summary judgment (Doc. 74), a motion for summary judgment brought by all Defendants (Doc. 79), and a separate motion for summary judgment brought by only Defendants Shell and Equilon (collectively, "the Shell Defendants") (Doc. 82). The Court did not set a hearing for the motions and the parties did not request one. The Court finds it appropriate to rule on the motions without oral argument. See Local Rule 230(g). For the following reasons, the Court GRANTS IN PART Defendants' motion for summary judgment (Doc. 79) and DENIES AS MOOT the remainder of the parties' motions for summary judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. Undisputed Facts.
1. Remediation at the R Street Stations.
The RDA purchased the R Street stations in the early 1990s. Doc. 108, Reply to Plaintiff's Opposition Facts and Opposition to Plaintiff's Affirmative Statement of Facts ("UF"), UF 93-94. The R Street stations are within the Merced Redevelopment Project Area ("the project area"). UF 41. Plaintiff was charged with the responsibility of maintaining and rehabilitating the project area. See Doc. 76 at ¶¶ 13-14.
Gasoline containing MTBE was released from various gasoline delivery systems in the City. Id. That gasoline eventually traveled to and contaminated the project area. Id.
In 1996, the RDA received a directive from the Department of Public Health for Merced County, the regulator of the cleanup site [near the R Street stations], to "include MTBE in the chemicals tested for in the next groundwater monitoring event." Tests following this directive detected MTBE at the site, and the RDA knew that MTBE was concentrated in a plume near the R Street Stations that was traveling North along R Street in the groundwater towards the Project Area. By the time MTBE was discovered at the R Street Stations, the RDA was authorized to proceed with remediation and was incurring costs and expenses supervising the cleanup.
In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liability Litig., 980 F.Supp.2d 417, 421 (S.D.N.Y. 2013) (" In re MTBE ") (citations omitted). Thus, "[i]t is undisputed that the RDA began incurring costs for MTBE clean-up as early as 1996, and was actively remediating MTBE contamination at the R Street Stations by and before 2002." Id. at 424.
Since then, Plaintiff has pursued numerous investigations and remediation efforts concerning contamination on the R Street stations. See UF 95-104. In doing so, Plaintiff has incurred substantial costs at its own expense. UF 104. This case, however, concerns only the costs Plaintiff incurred that are associated with efforts to remediate MTBE releases at the R Street stations since 2006. See UF 104 (citing FAC at ¶ 3); see also FAC at ¶ 28 (Plaintiff seeks damages "for past, present, and future remediation, and/or investigation costs incurred in or after August 2006")).
2. City of Merced.
In the City of Merced case, the City alleged four causes of action against Chevron, Shell, Equilon, and Exxon (among other defendants) for (1) failure to warn; (2) negligence; (3) trespass; and (4) nuisance. See City of Merced Compl. at 1. The City alleged that the defendants were liable for its claims for, among other things, their involvement in the release of MTBE-containing gasoline at the R Street stations and the resultant damages to the City's property, namely, its water systems. See id. at ¶¶ 2-3.
The defendants successfully moved for summary judgment on the City's nuisance claim. See Doc. 84-3, Ruling on Defendants' Motions for Summary Judgment and Summary Adjudication ("the MSJ Ruling"), at 9. The court found that it could decide the defendants' motion "by determining whether [the City] has proved affirmative conduct by a specific Defendant in creating or assisting in the creation of the alleged nuisance at a specific site." Id. The court found that the City failed to do so. Id. The court reasoned that "[j]ust placing a defective product in the stream of commerce without an adequate warning is not enough to prove a nuisance" because "[a] more direct nexus between the defendant and the alleged injury is required." Id. (citing City of Modesto Redevelopment Agency v. Superior Court, 119 Cal.App.4th 28 (2004) (" City of Modesto ")).
The court found that the defendants "operated refineries and terminals that may have supplied gasoline containing MTBE to third party jobbers" at the 1455 R Street station. See id. at 10; id. at 10 n.5. The court also found "some of the defendants allegedly owned the sites or the [underground storage tanks ("USTs")]" at the 1415 R Street station, but "the actual operation [at both stations] was by third parties." Id.
The court held:
Under California law, this type of alleged conduct is not sufficient for defendants to be liable for nuisance and trespass claims as to any of the sites. Rather, Plaintiff must show a defendant either affirmatively instructed the gas station operation to dispose of the MTBE in an improper or unlawful manner or show the defendant manufactured or installed the disposal system.... There is no showing in this case that defendants' conduct in causing any contamination was active, affirmative or knowing as required by law. Plaintiff asserts the allegations in the complaint regarding representations allegedly made by the defendants that the gasoline was safe and promoting its use along with their supplying the defective product are sufficient to allow them to proceed on their nuisance claims. This court disagrees. Those allegations are not tied to a specific Defendant or site, and at the summary judgment stage are not sufficient to support these causes of action.
In this case, similar to some of the defendants in City of Modesto, the Defendants supplied the defective product without warning of its dangers or how to properly dispose of it, but that failure to warn was not an activity directly connected with leakage or disposal of the MTBE gas.
Id. For this reason, the court held that the City's nuisance claim failed. See id. Accordingly, the court granted the defendants summary judgment on their nuisance claim. Id.
The case proceeded to trial on the City's strict liability claim. UF 28; O'Reilly Decl., Ex 2. Following the close of the City's case, the court granted Shell's motion for nonsuit as to the 1455 R Street station on the ground that there was no evidence that Shell gasoline had been delivered to the station. See UF 28.
The court instructed the jury that, "[t]o make a claim against a particular Defendant for a particular service station site, the City must prove... that gasoline containing MTBE refined, distributed, or sold by the particular Defendant was sold and delivered to the particular service station." O'Reilly Decl., Ex. 6 at 1. On February 9, 2012, the jury returned its special verdict. Doc. 87, Ex. 22; see also O'Reilly Decl., Ex. 3 at 8, 11, 17. The court entered judgment on the jury's special verdict based on the merits. Doc. 87, Ex. 23; see also UF 31-32. The judgment was fully satisfied, and there are no pending appeals in the case. UF 32-33.
B. Stipulated Facts.
The parties stipulate to the following facts:
Plaintiff asserts claims concerning the 1415 R Street station against Exxon, Shell, and Equilon only.
Plaintiff asserts claims concerning the 1455 R Street station against Chevron and Tesoro.
None of the Defendants owned the 1455 R Street station.
Mobil Oil Corp. sold 1415 R Street in 1984 to private individuals, who then sold to other private individuals in 1995, who have held a 100% ownership interest since then.
The R Street stations are within the project area.
The jury in City of Merced found: (1) gasoline containing MTBE was spilled or leaked from the R Street stations; (2) gasoline containing MTBE refined, distributed or sold by Chevron was delivered to 1455 R Street and was spilled or leaked from that station; (3) gasoline containing MTBE refined, distributed or sold by Exxon was delivered to 1415 R Street and was spilled or leaked from that station.
Doc. 86, Ex. 2, Stipulation of Facts ("Stip. of Facts"), at 14-15.
C. This Case.
Plaintiff filed this case in the Superior Court for the County of Merced on April 7, 2008. Doc. 87, Ex. 25 at 1. Plaintiffs alleged five causes of action against Defendants for (1) cost recovery under the Polanco Redevelopment Act, Cal. Health & Safety Code §§ 33459-33459.8 ("the Polanco Act"); (2) products liability; (3) negligence; (4) trespass; and (5) nuisance. Id. Defendants removed the case to this Court on May 21, 2008, pursuant to § 1503 of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (codified in various sections of Titles 16 and 42 of the United States Code) (Doc. 2 at 1), which provides that "claims and legal actions... related to allegations involving actual or threatened contamination of [MTBE] may be removed to the appropriate United States district court." Plaintiffs do not dispute that Defendants' removal to this Court was appropriate.
On July 11, 2008, the case was transferred to the United State District Court for the Southern District of New York as part of a multidistrict litigation, MDL No. 1358, In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liability Litig. ("the MDL case") . See Doc. 26. On March 4, 2013, Plaintiff filed a First Amended Complaint ("the FAC")-currently the operative complaint-in the MDL in order to substitute the DLA as the plaintiff. O'Reilly Decl., Ex. 26. Plaintiff alleged the same five causes of action as in its original complaint. Id.; see also In re MTBE, 980 F.Supp.2d at 419.
In 2013, Defendants moved for summary judgment on all of Plaintiff's claims except its Polanco Act claim on the ground that they were barred by the applicable statute of limitations. See id. In August 2013, the MDL court granted Defendants' motion for summary judgment on all of Plaintiff's claims (except their Polanco Act claim) on the ground they were time-barred. Id. The MDL court further found that "[b]ecause the limitations issue also precludes [Plaintiff's] claims of nuisance and trespass, Defendants' motion on those grounds is MOOT." Id. Thus, the MDL court did not reach the merits of those claims.
On March 7, 2014, the MDL court transferred the case back to this Court. See Doc. 29 at 1. Accordingly, the only claim currently pending before the Court is Plaintiff's Polanco Act claim.
a. Plaintiff's Polanco Act Claim.
Under California law, Plaintiff is entitled to rehabilitate and clean up blighted property in areas known as "redevelopment projects." See generally Cal. Health & Safety Code § 33131(a) (California redevelopment agencies are authorized to "prepare and carry out plans for the improvement, rehabilitation, and redevelopment of blighted areas"). The Polanco Act provides, in part, that California redevelopment agencies, such as Plaintiff, may pursue "responsible parties" to recover the costs incurred in remediating contamination within a redevelopment area. See Cal. Health & Safety Code § 33459.4(a) ("any responsible party or parties shall be liable to the redevelopment agency for the costs incurred in the [remediation] action").
The R Street stations are within the project area, Stip. of Facts at 1, and Plaintiff was charged with its remediation. FAC at ¶ 1. Plaintiff alleges that Defendants are liable for the release of MTBE-containing gas from the R Street stations. See id. at 7-8. Plaintiff claims that, "[a]s a direct result of the Defendants' acts... the project area, including soil, groundwater, and improvements, has been contaminated, and will continue to be contaminated with... MTBE... which create a public health hazard unless abated." Id. at ¶ 34. In response, Plaintiff "initiate[d] a... program" to remediate the "contamination in the project area and to restore the project area at significant expense, loss, and damages." Id. Plaintiff asserts that, to date, it has "expended more than $5 million... in remediating MTBE from the R Street Stations, " which it "seeks to recover... pursuant to [the Polanco Act], which provides a statutory cause of action not available to the City." Doc. 75 at 2-3. In sum, Plaintiff's Polanco Act claim seeks to recoup the costs Plaintiff has incurred in remediating the damage caused by MTBE-containing gasoline released from the R Street stations.
b. Plaintiff's Motion for Partial Summary Judgment.
Plaintiff does not move for summary judgment on its Polanco Act claim. Rather, Plaintiff moves for partial summary judgment that Defendants "are collaterally estopped from disputing facts determined in the City of Merced special verdict." Doc. 75 at 2. Specifically, Plaintiff seeks to preclude Defendants "from arguing that their MTBE gasoline was not released from the R Street Stations." Id. at 8 (emphasis in original). Plaintiff requests that the Court find that, due to the jury's findings in City of Merced, a series of facts are now beyond dispute. See Doc. 78 at 2 (collectively, "Plaintiff's proposed facts"). Exxon and Chevron opposed Plaintiff's motion for summary judgment. See Doc. 96.
c. Defendants' Motion for Summary Judgment.
Defendants move for summary judgment on Plaintiff's Polanco Act claim. Doc. 80 at 7. Defendants argue that they are entitled to summary judgment for two reasons: (1) Defendants are not "responsible parties" under the Polanco Act, id. at 16, and (2) the RDA failed to provide proper notice to Defendants of its remediation efforts, as required under the Polanco Act. Id. at 25.
Defendants assert that, "[u]nder the Polanco Act, only those who took affirmative steps that caused contamination are liable [ i.e., are responsible parties'], and here, the undisputed facts clearly prove, Defendants took no such actions." Id. Defendants maintain they "did not own or operate the gasoline stations at issue, did not instruct the owners or operators to release MTBE gasoline into the environment, and did nothing else to cause the release of MTBE gasoline at these stations." Id. Accordingly, Defendants assert they are not "responsible parties" under the Polanco Act and, therefore, are not liable for the project area's remediation costs incurred by Plaintiff. Id.
Defendants argue that, in any event, Plaintiff "lacks statutory authority to require any alleged responsible parties pay for the remediation" because Plaintiff failed to comply with the Polanco Act's notice requirements. Id. at 25-26. Specifically, Defendants assert that Plaintiff failed to comply with the Polanco Act's requirement that "a redevelopment agency provide all responsible parties with notice at least 60 days before implementing a remedial action plan." Id. at 25 (emphasis in original) (citing Cal. Health & Safety Code § 33459.1(b)(2); Redevelopment Agency of the City of San Diego v. Salvation Army, 103 Cal.App.4th 755, 759, 771-72 (2002)).
Plaintiff contends that Defendants are "responsible parties" under the Polanco Act because of their involvement in the creation of a nuisance-the release of MTBE-containing gasoline-at the R Street stations. Doc. 101 at 16-22. Plaintiff also contends that the DLA in fact gave notice to Defendants in compliance with the Polanco Act's notice requirements. Id. at 26. Further, Plaintiff argues that, even if the DLA did not give proper notice to Defendants, Defendants "waived their notice argument." Id. at 27.
d. The Shell Defendants' Motion for Summary Judgment.
The Shell Defendants move for summary judgment on Plaintiff's Polanco Act claim. Doc. 83 at 7-8. The Shell Defendants argue that, based on City of Merced, they cannot be liable on the claim. See id. According to the Shell Defendants, Plaintiff's Polanco Act claim is premised on a finding that Shell gasoline was released at the R Street stations. Id. at 16. But, because "Shell was exonerated of all culpability for releases of MTBE gasoline at both R Street service stations" by the City of Merced jury, the Shell Defendants argue that Plaintiff is precluded from re-litigating the issue of whether Shell gasoline was released at the R Street stations. Id. at 7. According to the Shell Defendants, the City of Merced jury's findings preclude a finding that they are "responsible parties" under the Polanco Act and, therefore, res judicata bars Plaintiff's claim. Id. at 6.
Plaintiff opposed the Shell Defendants' motion for summary judgment for four primary reasons. Doc. 93 at 5.
First, there is no privity between [the DLA] and [the City], who was the sole plaintiff in [ City of Merced ].... Second, [the City] could not have prosecuted in City of Merced the Polanco Act claim being pursued by the DLA in the instant case. Third, the injuries suffered and the relief sought by the DLA are different than the injuries suffered and the relief sought by [the City] in City of Merced. Fourth, the DLA's claims involve factual issues not involved in-and therefore not litigated in- City of Merced.
Id. Plaintiff also asserts that the Shell Defendants waived their res judicata argument because they failed to plead it as an affirmative defense. Id. at 23.
III. STANDARD OF DECISION
Summary judgment is appropriate when the pleadings, disclosure materials, discovery, and any affidavits provided establish that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A material fact is one that may affect the outcome of the case under the applicable law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine "if the evidence is such that a reasonable trier of fact could return a verdict in favor of the nonmoving party." Id.
The party seeking summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted). The exact nature of this responsibility, however, varies depending on whether the issue on which summary judgment is sought is one in which the movant or the nonmoving party carries the ultimate burden of proof. See Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007); Cecala v. Newman, 532 F.Supp.2d 1118, 1132 (D. Ariz. 2007). If the movant will have the burden of proof at trial, it must demonstrate, with affirmative evidence, that "no reasonable trier of fact could find other than for the moving party." Soremekun, 509 F.3d at 984. In contrast, if the nonmoving party will have the burden of proof at trial, "the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case." Id. (citing Celotex, 477 U.S. at 323).
If the movant satisfies its initial burden, the nonmoving party must go beyond the allegations in its pleadings to "show a genuine issue of material fact by presenting affirmative evidence from which a jury could find in [its] favor." FTC v. Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009) (emphasis in original). "[B]ald assertions or a mere scintilla of evidence" will not suffice in this regard. Id. at 929; see also Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) ("When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.") (citation omitted). "Where the record as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'" Matsushita, 475 U.S. at 587 (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).
In resolving a summary judgment motion, "the court does not make credibility determinations or weigh conflicting evidence." Soremekun, 509 F.3d at 984. That remains the province of the jury or fact finder. See Anderson, 477 U.S. at 255. Instead, "[t]he evidence of the [nonmoving party] is to be believed, and all justifiable inferences are to be drawn in [its] favor." Id. Inferences, however, are not drawn out of the air; the nonmoving party must produce a factual predicate from which the inference may reasonably be drawn. See Richards v. Nielsen Freight Lines, 602 F.Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).
To succeed on a Polanco Act claim, a plaintiff must establish:
(1) the property is located within a redevelopment project area (Health & Saf. Code, § 33459.1, subd. (a)(1)); (2) the presence of a release of a hazardous substance within the project area ( ibid. ); (3) reimbursement is sought from a defendant who is a "[r]esponsible party" ( id., § 33459, subd. (h)); (4) the redevelopment agency has provided the responsible party with a 60-day notice requesting a remedial action plan for the property ( id., § 33459.1, subd. (b)(2)); (5) the responsible party failed to submit a remedial action plan or failed to submit a plan the redevelopment agency could approve ( ibid. ); (6) the redevelopment agency reached agreement on a remedial action plan with a regulatory agency overseeing the redevelopment project ( id., § 33459.1, subd. (a)(1)); and (7) the redevelopment agency incurred costs to remedy or remove the hazardous substance as necessary to implement the approved plan ( id., § 33459.4, subds. (a) & (c)).
Salvation Army, 103 Cal.App.4th at 765. At issue in this case is whether Defendants are "responsible parties" and whether Plaintiff provided them with appropriate notice of its remedial action plan at the R Street stations.
A. Whether Plaintiff Gave Adequate Notice Under the Polanco Act.
As a threshold matter, Defendants argue that they are entitled to summary judgment because Plaintiff failed to comply with the Polanco Act's notice requirements. Doc. 80 at 25. Defendants assert that Plaintiff's failure to comply with this notice requirement renders Plaintiff without statutory authority to bring its claim and, thus, this Court has no jurisdiction over the claim. See id. at 25-26.
Defendants do not provide-and the Court is unaware of-any case holding that the Polanco Act's 60-day notice requirement (Cal. Health & Safety Code §§ 33459.1(a)(1) & (b)(2)) is jurisdictional. In Salvation Army, 103 Cal.App.4th at 765, the court indicated that the notice requirement is one of seven elements that a plaintiff must satisfy to prevail on a Polanco Act claim. Although the court described the notice requirement as a "condition precedent" that a plaintiff must satisfy to recover on Polanco Act claim, id. at 771-72, the court did not indicate that the notice requirements must be satisfied before a court has jurisdiction over a Polanco Act claim. See id. Rather, a plaintiff's failure to comply with the notice requirements may preclude the plaintiff's recover under the Polanco Act. See id.; see also Anaheim Redevelopment Agency v. Union P. R.R. Co., No. G028913, 2003 WL ...