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Orange County Water District v. Mag Aerospace Industries, Inc.

California Court of Appeals, Fourth District, First Division

June 1, 2017

ORANGE COUNTY WATER DISTRICT, Plaintiff and Appellant,
v.
MAG AEROSPACE INDUSTRIES, INC., Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of Orange County, No. 04CC00715 Kim G. Dunning, Judge. Affirmed.

          Connor, Fletcher & Hedenkamp, Edmond M. Connor and Douglas A. Hedenkamp; Miller & Axline, Duane C. Miller, Michael D. Axline and Justin Massey for Plaintiff and Appellant.

          Higgs Fletcher & Mack, John Morris and Alexis S. Gutierrez for Defendant and Respondent.

          HALLER, J.

         The Orange County Water District (the District) appeals a judgment in favor of MAG Aerospace Industries, Inc. (MAG) following a bench trial on the District's claims under the Carpenter-Presley-Tanner Hazardous Substances Account Act (HSAA; Health & Saf. Code, § 25300 et seq.) and the Orange County Water District Act (OCWD Act; West's Ann. Wat. Code App. (2016 ed.) ch. 40) and for declaratory relief (Code Civ. Proc., § 1060) and summary adjudication of the District's common law claims for negligence, nuisance, and trespass. The District contends: (1) the trial court erred during the bench trial by granting MAG's motion for judgment under Code of Civil Procedure section 631.8 on the District's HSAA claim; (2) the trial court erred under Code of Civil Procedure section 1048, subdivision (b) by scheduling a bench trial on the District's equitable claims before a jury trial on the District's legal claims, thereby depriving the District of its right to trial by jury; (3) the trial court erred by granting declaratory relief in favor of MAG in the absence of a request by MAG; and (4) the trial court erred by applying Evidence Code section 412 to discount the conclusions of the District's expert witness. The District does not challenge the judgment on its claim under the OCWD Act.

         For reasons we will explain, we affirm. Although the trial court may have used an incorrect causation standard under the HSAA, any such error was harmless in light of the trial court's factual findings, which the District does not challenge and which foreclose the District's claim under the correct causation standard. The trial court also did not abuse its discretion under Code of Civil Procedure section 1048 by adhering to California's longstanding "equity first" rule and holding a bench trial on the District's equitable claims before scheduling a jury trial on the District's legal claims. The District's remaining contentions are similarly unavailing because the District has not established any prejudicial error in the court's declaratory judgment or its application of Evidence Code section 412.

         FACTUAL AND PROCEDURAL BACKGROUND

         The District is a public entity established by the California Legislature and empowered to manage, replenish, regulate, and protect groundwater supplies within its boundaries. (OCWD Act, §§ 1, 2.) The District has the power to "[t]ransport, reclaim, purify, treat, inject, extract, or otherwise manage and control water for the beneficial use of persons or property within the district and protect the quality of groundwater supplies within the district." (Id., § 2, subd. (6)(j).) In furtherance of these goals, the District may "commence, maintain, intervene in, defend, and compromise... any and all actions and proceedings... to prevent... diminution of the quantity or pollution or contamination of the water supply of the district...." (Id., § 2, subd. (9).)

         In 2004, the District filed this lawsuit against MAG and several other defendants to address current and threatened groundwater contamination in northern Orange County. In its operative first amended complaint (FAC), the District alleged that MAG owned and operated an industrial site at 1300 East Valencia Drive in Fullerton, California (the Valencia site). The District alleged that MAG and other owners and operators at the Valencia site released hazardous wastes there, including the volatile organic compound PCE (tetrachloroethylene or perchloroethylene). The release of hazardous waste had caused or threatened to cause contamination to groundwater within the District's geographic area. The District alleged injury in the form of investigation and remediation costs to address this contamination and threatened contamination, as well as the ongoing threat to public health, natural resources, and the environment posed by the hazardous waste releases. To recover its costs and address this threat, the District alleged causes of action against all defendants, including MAG, under the OCWD Act and the HSAA and under common law theories of negligence, nuisance, and trespass. The District also alleged a cause of action for declaratory relief, which claimed "[a]n actual controversy exists concerning who is responsible for abating actual or threatened pollution or contamination of groundwater within the District by [volatile organic compounds]" and sought "adjudication of the respective rights and obligations of the parties." The District sought compensatory and punitive damages, attorney fees, costs, an order finding defendants liable for the full cost of remediation, an order declaring the contamination a nuisance and compelling defendants to abate it, and any other proper relief.

         During a status conference, the court announced its intention to bifurcate trial on the District's claims, with an initial bench trial on the District's equitable claims (under the OCWD Act and the HSAA and for declaratory relief) and a subsequent jury trial on the District's legal claims (for negligence, nuisance, and trespass). The District urged the court to try its legal claims first in front of a jury and expressed concern that holding a bench trial first would impair its right to a jury trial on its legal claims. The court acknowledged the District's right to a jury trial but confirmed its inclination to hold a bench trial first.

         The bench trial began in February 2012. The District presented testimony from various percipient and expert witnesses. After the District's case-in-chief, MAG moved for judgment under Code of Civil Procedure section 631.8. The District opposed. Following a hearing, the court tentatively granted MAG's motion but allowed the District to reopen its case. (Code Civ. Proc., § 631.8, subd. (a).) The District presented additional testimony, after which MAG renewed its motion. The court granted the motion, finding in MAG's favor on the District's claims under the OCWD Act and the HSAA and for declaratory relief.[1]

         In its statement of decision, the court recited the procedural history of the District's lawsuit, made factual findings based on the evidence presented a trial, and issued conclusions of law. The court found that the Valencia site had been used for industrial purposes since 1965. Some of these uses involved PCE, and testing in 1988 confirmed PCE contamination in the soil at the site.

         MAG leased the Valencia site from 1989 through 2002. For six of these years, MAG used PCE there as well in an above-ground, concrete facility. MAG engaged a service to dispose of spent chemicals. Prior to the end of MAG's lease, the owner of the Valencia site engaged a consultant to conduct another round of environmental testing. This testing again found PCE in the soil, but, as the trial court explained, "the sampling confirmed that concentrations of PCE decreased as the samplings went deeper, to the point that the contaminant could no longer be detected." The lowest detected depth of PCE contamination was 80 feet below grade, and samplings at 90, 100, and 110 feet below grade revealed the absence of PCE.

         The testing showed that the groundwater under the Valencia site began approximately 120 feet below grade. It also showed, in the words of the trial court, that there was "no direct pathway of PCE from the soil surface to the groundwater" and that "a continuous stiff layer of nonpermeable silts and clays at about 70 to 80 feet below ground surface" further impacted any such potential pathway.

         The testing consultant installed five groundwater monitoring wells at the Valencia site. One well, located near the site of a degreaser where MAG used PCE, detected PCE in the groundwater below the Valencia site. Other wells detected another volatile organic compound in the groundwater, trichloroethylene (TCE). Neither MAG nor its predecessor used TCE at the Valencia site.

         Based on these results, the Regional Water Quality Control Board for the Santa Ana Region (RWQCB) requested further testing after MAG left the site. This testing confirmed that the concentrations of PCE in the soil at the Valencia site were largely stable. The testing consultant concluded there was no need for remediation at the Valencia site. It also concluded that offsite facilities located at higher elevations than the Valencia site released various volatile organic compounds, including PCE, and that these "releases reached groundwater and contributed to the reported contamination and pollution beneath" the Valencia site.

         The RWQCB issued a closure report concluding that the Valencia site " 'does not appear to pose a current, significant threat to the beneficial uses of groundwater. Therefore... no further action with respect to soil and groundwater investigation or remediation at this time is necessary.' " The District received a copy of the closure report as well as the testing consultant's reports on the Valencia site.

         Drawing on these facts, which we take from the trial court's statement of decision and which the District does not challenge on appeal, the court made the following conclusions: (1) "Noticeably absent from the [District's] case-in-chief (and rebuttal case) was any evidence of a causal connection between the shallow sub-surface PCE findings-apparently in place well before MAG operated at the Valencia [site]-and the (already contaminated) groundwater." (2) "At the close of its case, the District had not offered any credible evidence that observed PCE contamination from the shallow soil at the Valencia [site] (from whatever source) did or would at any time in the future migrate to the groundwater." (3) "[T]he evidence clearly establishes that the PCE in the groundwater below the Valencia [site] migrated there from multiple offsite sources." (4) "[T]he District failed to present evidence establishing its prima facie case that the Valencia [site] or MAG's operations at the Valencia [site] caused or threatened to cause groundwater contamination or pollution which required the District to incur remediation or clean-up costs."

         The trial court determined that the District had not carried its burden of proof on its claims under the OCWD Act or the HSAA. As to the HSAA, the trial court wrote, "A necessary element of establishing liability... is proof that a release or threatened release 'caused' plaintiff to incur response costs. Consequently, the plaintiff must establish a causal link between the release for which a defendant is responsible, and the response costs incurred by plaintiff." The trial court explained, "there was no documented release of any [volatile organic compound], including PCE, by MAG.... Even if there were such a documented release, there is no evidence of a vertical pathway showing that PCE migrated from the surface to the groundwater." It concluded, "Because there is no viable, admissible evidence that MAG caused a release of PCE into the environment, MAG cannot be liable under the HSAA."

         The court criticized the District's claim for declaratory relief as imprecise. However, to the extent the District was seeking a declaration that MAG was responsible for future remediation costs, the court declined to do so "because the District offered no evidence regarding its anticipated future costs relating to MAG's activities." The court also repeated its conclusion that "the District's evidence failed to demonstrate that MAG could have or did cause groundwater contamination or pollution, or that its conduct threatened to cause contamination or pollution at the Valencia [site] in the future.... As a result, the District's Declaratory Relief Count and the requested relief are premised on inconclusive information." The court's heading for this section stated, "The District failed to establish a justiciable controversy between itself and MAG." (Some capitalization omitted.)

         Six months later, MAG filed a motion for summary adjudication of the District's remaining claims for negligence, nuisance, and trespass. MAG argued that those claims were predicated on the same theories and evidence offered by the District during the bench trial and were therefore deficient for the same reasons. The District opposed, contending that the standards on summary judgment and on MAG's earlier motion for judgment were different. On reply, MAG argued that the court's factual findings following the bench trial on the District's equitable claims were binding on the District's remaining legal claims, thereby requiring summary adjudication of the latter claims. The court granted MAG's motion, finding that the dispositive factual issues had already been resolved against the District and those findings precluded recovery by the District on its remaining claims.

         The court entered judgment in favor of MAG and against the District on all of the District's claims. The judgment included a declaration "that [MAG] has no liability to [the District] for damages, response costs, or other costs claimed ...


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