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California River Watch v. Fluor Corp.

United States District Court, N.D. California

April 3, 2017

CALIFORNIA RIVER WATCH, Plaintiffs,
v.
FLUOR CORPORATION, Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION TO ENFORCE SETTLEMENT AGREEMENT Re: Dkt., 309

          JOSEPH C. SPERO CHIEF MAGISTRATE JUDGE.

         I. INTRODUCTION

         This environmental action was originally brought as a citizen‘s suit and involved past and present owners of a property ("the TSG Property") that is currently owned by The Shiloh Group ("TSG"). Fluor Corporation ("Fluor") is a former owner and operated a wood products manufacturing and treatment business on the property between 1956 and 1969. On January 14, 2016, Fluor and TSG entered into an agreement settling claims related to the allocation of responsibility for investigating and removing hazardous substances from the property. The parties agreed on the record that the undersigned would retain jurisdiction to decide any disputes that arose in the implementation of the settlement agreement and consented to the jurisdiction of the undersigned magistrate judge in that regard.[1] Presently before the Court is Fluor‘s Motion to Enforce Settlement Agreement and Enjoin Violations of Release and for Sanctions ("Motion"). A hearing on the Motion was held on March 31, 2017. For the reasons stated below, the Motion is GRANTED in part and DENIED in part.

         II. BACKGROUND

         A. Fluor's Operations on the Property and Subsequent Investigation and Remediation Efforts

         Between 1956 and 1969, Fluor owned portions of the TSG Property, where it operated a wood products manufacturing and treatment business. Declaration of Thomas M. Donnelly ("Donnelly Decl."), Ex. B (Consent Order) at 3. In 1969, Fluor sold the property and the business to Ecodyne Corporation. Id. Subsequent owners included Ecodyne and various Ecodyne subsidiaries. Id. at 6-7. TSG acquired the property in 1987 and is the current owner. Id. at 7.

         In 1989, the California Department of Toxic Substances Control ("DTSC") issued a Consent Order (Docket No. HAS 88/89-027), which was amended in 1991 (together, the "Consent Order"), requiring Fluor to investigate and remediate releases of hazardous substances at a portion of the TSG Property known as "the Pond Site, "where Fluor had conducted dip treatment operations using lead, creosote and pentachlorophenol. Id. at 1. In response, Fluor investigated conditions at the Pond Site and designed a remedy that eventually was approved by DTSC. See id., Ex. C (Remedial Design and Implementation Plan Addendum ("RDIP Addendum")), approved April 19, 2016. Fluor is in the process of implementing the remedy-which involves the excavation and offsite disposal of contaminated soil- and expects the excavation to be complete in the second quarter of 2017.

         On July 15, 2015, DTSC and Fluor entered into a Voluntary Cleanup Agreement ("VCA") for the remainder of the TSG Property, excluding the Pond Site and another portion of the property (the "Tower Site") being addressed by Ecodyne under supervision of the North Coast Regional Water Quality Control Board. Id., Ex. D (VCA). The purpose of the VCA was "to investigate the release or threatened release of any hazardous substances at or from the Site under the oversight of DTSC."Id. at 1. Fluor and TSG agreed that Fluor would perform this investigation in lieu of Fluor serving TSG with a demand for inspection under Federal Rule of Civil Procedure 34(a)(2). Id., Ex. I (June 3, 2015 Hearing Tr.) at 3:15-4:2. Among the conditions of the agreement between Fluor and TSG were: 1) that Fluor‘s work plan for the environmental assessment would be reviewed and approved by DTSC; 2) that the work plan would be reasonably related to the discovery of hazardous substances on the property; and 3) that TSG would not be permitted to "comment on, or contact the DTSC in any way regarding the investigation or the plan . . . before its completion."Id.

         The VCA provided that DTSC would review and provide Fluor with "written comments on all of [Fluor‘s] as described in Exhibit C (Scope of Work) and other documents applicable to the scope of the project."Id., Ex. D (VCA) § 6. Section 6 further provided that Fluor "agrees to perform all the work required by this Agreement."Id. Under the VCA‘s Scope of Work, Fluor was required to conduct, inter alia, a Preliminary Endangerment Assessment ("PEA") "to determine whether a release or threatened release of hazardous substances exists at the Site which poses a threat to human health or the environment."Id., Ex. D (VCA) at Exhibit C. As part of the PEA, Fluor was required to complete a PEA Workplan and a PEA Report. Id. The PEA Report was required to "document whether a release has occurred or threatened release exists, the threat the Site poses to human health and the environment, and whether further action is necessary."Id. DTSC approved Fluor‘s PEA Workplan on October 27, 2015. Id., Ex. E (PEA Workplan Approval).

         On December 15, 2015, TSG and Fluor entered into a settlement agreement ("Settlement Agreement") in the instant action which became binding when it was placed on the record on that date and was subsequently embodied in a written agreement that was executed on January 14, 2016. See id., Exs. A & J. Under the Settlement Agreement (discussed further below), the parties agreed that in its PEA report to DTSC, which was due on January 29, 2016, Fluor would "describe the work performed and provide the analytical data, "but that it would not "characterize that data."Id., Ex. J, § 1.3. The parties further agreed that Fluor would recommend in the PEA report that DTSC not require any further action. Id.

         Fluor completed its investigation and submitted its PEA Report to DTSC on January 29, 2016. Carter Decl., Ex. 6. DTSC requested revisions in a letter to Fluor dated February 16, 2016. Id. At Fluor‘s invitation, TSG‘s counsel participated in two conference calls with Fluor and DTSC to address DTSC‘s request. Carter Decl., Exs. 6 & 7. Fluor submitted a final Revised PEA Report on May 31, 2016. Id., Ex. F (PEA Report). The final Revised PEA Report presented sampling data, documented evidence of releases of hazardous substances at the TSG Property, and evaluated that data against residential and commercial screening levels. Id. at 37-42. Based on the sampling results, the fact that site use is commercial and industrial (rather than residential) and the fact that TSG had recorded a deed restriction prohibiting changes in use and extraction of groundwater for potable use, the Report concluded that no further action was necessary, as the parties to the Settlement Agreement had stipulated. Id. at 45-46.

         DTSC disagreed with Fluor‘s conclusions, concluding that "the areas with contaminants exceeding both residential and commercial screening levels have not been adequately characterized and the extent of contamination determined."Id., Ex. G (September 27, 2016 DTSC Letter). It found that "[f]urther investigation [was] necessary for areas where release of hazardous materials, above the appropriate screening levels, has occurred"and that "[r]emedial action of these areas may also be required."Id. Thus, it approved the PEA Report with a number of additional conclusions "related to further site investigation."Id. DTSC "invite[d] the potential responsible parties to enter into a new or amended Voluntary Cleanup Agreement"to conduct the additional investigation and stated further that it would consider "possible enforcement actions"if the parties did not enter into such an agreement. Id. at 4.

         Fluor once again invited TSG to participate in a meeting with DTSC staff and others to address the DTSC‘s September 27, 2016 Letter. Carter Decl., Ex. 10. Instead, a conference call was held on October 11, 2016 in which both Fluor and DTSC participated. Id. Fluor responded to DTSC‘s Letter on November 21, 2016. Id., Ex. H (K. Mignone Letter). Fluor stated that by completing the PEA it had satisfied its obligations under the VCA and further informed DTSC that it did not intend to perform the additional site investigation requested by DTSC because it believed that none of the issues raised by the DTSC related to Fluor‘s former ownership or operation of the TSG Property. Id. at 1. Fluor noted that "[a]t the time [it] entered into the VCA, its counsel and consultant made it clear that it believed that some or all of what might be discovered during the Preliminary Endangerment Assessment process would be unrelated to Fluor‘s prior ownership or operations."Id. Fluor went on to address in detail the specific reasons for its conclusion that it was not responsible for the problems identified by DTSC when it approved the PEA Report. Id.

         On November 30, 2016, TSG sent a responsive letter to DTSC challenging Fluor‘s conclusions both that its obligations under the VCA had been fulfilled and that the additional investigation DTSC required was not related to Fluor‘s past activities on the TSG Property. Id., Ex. K. TSG stated that "certain facts and conclusions stated in [Fluor‘s November 21, 2016 Letter] are not accurate, and that Fluor‘s plan to discontinue its investigation under the VCA is not reasonable."Id. at 1. Instead, TSG "request[ed] that DTSC require Fluor to address some or all of the matters discussed in the DTSC Letter rather than leave it to TSG or some other party to do so."Id. Like Fluor, TSG addressed in detail the reasons for its conclusions.

         On December 16, 2016, Fluor responded to TSG‘s November 30, 2016 Letter, rejecting TSG‘s contention that Fluor had not fulfilled its obligations under the VCA. Id., Ex. L (December 16, 2016 Letter). According to Fluor, "[t]he VCA does not contemplate an open-ended investigation of the TSG Property"but rather, merely "required that Fluor complete the PEA and obtain DTSC approval of the PEA Report, which it has done."Id. at 1-2. Fluor went on to address in detail its reasons for concluding that the various hazardous substances that were the source of DTSC‘s concerns likely did not result from Fluor‘s activities. Id. at 2-5. The letter concluded by stating that "any additional or remediation of TSG‘s Property, whether under a new VCA or an order, should be completed by TSG, its tenants, or Ecodyne."Id. at 5-6.

         Fluor also sent a letter directly to TSG on December 16, 2016. Id., Ex. M. In that letter, Fluor accused TSG of violating the broad release in the parties‘ Settlement Agreement and demanded that TSG withdraw its request to DTSC that it require Fluor to conduct further investigation outside of the Pond Site. Id.

         TSG responded with an additional letter to DTSC, dated January 4, 2017, in which it asserted that Fluor had presented "false and misleading"information and that it should be required to conduct the additional investigation required by DTSC. Id., Ex. N. TSG asserted that "[a] decision by DTSC to require TSG to investigate ore remediate . . . would impose significant expense on non-polluter TSG, would leave TSG with un-economical cost recovery claims against Fluor and/or Ecodyne"and would be "unjust, arbitrary, unsupported by and contrary to the evidence in the record . . . ."Id.

         B. The Underlying Litigation

         Plaintiff California River Watch initially brought this action against former TSG Property owner Ecodyne Corporation ("Ecodyne") and subsequently joined Fluor as a defendant. TSG then intervened to assert claims under CERCLA and state law against Fluor. TSG alleged, inter alia, that Fluor is responsible for disposals and releases of hazardous substances, including pentachlorophenol, lead, creosote, dioxin, and polynuclear aromatic hydrocarbons ("PAH"), at the TSG Property as a result of its wood treatment operations in the 1950s and 1960s. Amended Complaint (Docket No. 192) ¶12. Fluor filed a counterclaim against TSG, alleging that current and former TSG tenants are responsible for some of the contamination on the TSG Property, including the Pond Site. Docket No. 202 (Fluor Answer and Counterclaim) ¶¶ 20-21. California River Watch eventually settled its claims against Ecodyne and Fluor. Docket Nos. Nos. 104, 216. TSG voluntarily dismissed its claims against Fluor with prejudice. Docket No. 230. After Fluor and TSG settled Fluor‘s counterclaims, Fluor and TSG stipulated to dismissal with prejudice of Fluor‘s counterclaims. Docket Nos. 307, 308. In the dismissal order, the Court stated that "Chief Magistrate Judge Joseph C. Spero (or a successor judge appointed by the Court) shall retain jurisdiction to enforce the terms and conditions of the Settlement Agreement."Docket No. 307 at 1:16-18.

         C. Terms of the ...


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