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California Sportfishing Protection Alliance v. The Shiloh Group, LLC

United States District Court, N.D. California

July 24, 2017

THE SHILOH GROUP, LLC, et al., Defendants.


         Plaintiff California Sportfishing Protection Alliance (“Plaintiff”), a non-profit environmental organization, filed this citizen suit against Defendants The Shiloh Group, LLC (“TSG”) and Thomas Nelson (“Nelson”) (collectively “Defendants”) seeking to enforce the Clean Water Act (“CWA”). According to Plaintiff, Defendants own and operate a large industrial park that unlawfully discharges polluted storm water associated with industrial activities in violation of the CWA.

         Defendants now move to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Motion to Dismiss (“MTD”) [Docket No. 8]. Plaintiff opposes the motion to dismiss, and also moves for leave to file a First Amended Complaint (“FAC”) pursuant to Federal Rule of Civil Procedure 15. Motion to Amend (“MTA”) [Docket No. 29]. Having considered the parties' submissions as well as oral argument, and for the reasons stated below, the court DENIES Defendants' motion to dismiss, and GRANTS Plaintiff's motion to amend.


         In response to Defendants' motion to dismiss, Plaintiff submitted its opposition brief and also filed a motion for leave to amend the complaint, along with a proposed FAC. Given that the motion to dismiss and motion for leave to amend are heavily intertwined, and in light of the fact that the court grants leave to file the FAC, the court sets forth the relevant facts based on the FAC, the exhibits attached to the FAC, and judicially noticeable documents. In the interests of clarity and judicial efficiency, the court will analyze the sufficiency of the allegations in the FAC rather than the complaint. For the purposes of adjudicating these motions, the court accepts the allegations in the FAC as true, except with respect to the analysis of the jurisdictional issue of mootness, as discussed below.

         The court discusses the CWA in more detail below, and sets forth this brief background to provide context for the relevant facts. The CWA is intended to “restore and maintain the chemical, physical, and biological integrity of the Nation's waters.” 33 U.S.C. § 1251(a). To that end, Section 301(a) of the CWA prohibits the “discharge of any pollutant” into navigable waters from any “point source” unless certain statutory exceptions apply. See 33 U.S.C. §§ 1311(a), 1362(12). “One such exception is for discharges by entities or individuals who hold [National Pollutant Discharge Elimination System, or NPDES] permits.” Nat. Res. Def. Council, Inc. v. County of Los Angeles, 673 F.3d 880, 891 (9th Cir. 2011), rev'd on other grounds sub nom. Los Angeles Cty. Flood Control Dist. v. Nat. Res. Def. Council, Inc., 568 U.S. 78 (2013); see also 33 U.S.C. § 1342. For storm water discharge, a permit is required only if the discharge falls into one of five categories. See 33 U.S.C. § 1342(p)(2)(A) through (E) (listing the five categories of storm water discharges that are subject to the permit requirement). One of these categories is storm water associated with “industrial activity.” See 33 U.S.C. § 1342(p)(2)(B). The relevant EPA regulation, 40 C.F.R. § 122.26(b)(14), defines “storm water discharge associated with industrial activity [as] the discharge from any conveyance that is used for collecting and conveying storm water and that is directly related to manufacturing, processing or raw materials storage areas at an industrial plant.” The regulation sets forth categories of facilities which are considered to be engaging in “industrial activity, ” and identifies those industrial activities mainly by “Standard Industrial Classification” codes, otherwise known as SIC codes.

         Defendants own and operate a 31-acre industrial park located at 930 Shiloh Road in Windsor, California (the “Facility”). FAC ¶¶ 10, 51 [Docket No. 37-1]. Defendants lease industrial lots at the Facility to approximately 60-80 tenant businesses. FAC ¶ 10. Industrial activities occur throughout the Facility and contribute to polluted storm water discharges. Id. ¶¶ 51-54, 61-64. These industrial activities include or have included fencing installation, wood pallet construction, structural rebar assembly, auto repair, and trucking operations. Id. ¶ 51. The industrial activities fall under a number of SIC codes, see 40 C.F.R. § 122.26(b)(14), depending on which businesses are operating at the Facility at a given time. FAC ¶ 52; see also First 60-Day Notice at 3-4 (Ex. A to FAC) (listing SIC codes for the industrial activities occurring at the Facility as of June 25, 2015) [Docket No. 29-2].

         According to Plaintiff, as owners and operators of the Facility, Defendants maintain and control the Facility's common infrastructure including its ditches and pipes, and thereby control the discharges of storm water associated with industrial activities that flow from the Facility into waters covered by the CWA. FAC ¶¶ 54-64. The Facility discharges polluted storm water associated with the industrial activities in a number of ways. For example, the Facility has multiple subsites containing polluted soil from past industrial activities. Id. ¶ 54. Although some of these subsites are the subject of environmental remediation efforts, they remain exposed to storm water and storm water flows. Id. ¶ 54. Additionally, the Facility has ditches and pipes that collect and combine storm water from different parts of the Facility, see Id. ¶ 57, and a paved road that runs throughout the Facility on which storm water collects and flows north into the Pruitt Creek. Id. ¶ 58. Moreover, because the Facility does not have “essential structural controls such as grading, berming, and roofing” to prevent storm water from coming into contact with contaminants and pollutants created by the industrial activities when it rains, id. ¶ 73, storm water flows across materials associated with industrial activities, becomes contaminated, and leaves the Facility. Id. The polluted storm water discharges from the Facility through concrete conveyances into the Pruitt Creek, which joins Pool Creek and Windsor Creek, both of which drain into Mark West Creek, which drains into the Russian River. Id. ¶¶ 50-51, 64; see also First 60-Day Notice at 4.

         Starting in 2002, Defendants maintained a permit for the Facility's storm water discharges under California's statewide general permit for industrial activities (“General Permit”). See FAC ¶ 65; December 9, 2002 Receipt of Notice of Intent (Ex. B to Pltf's RJN) [Docket No. 17]. Under the General Permit, a permit holder must comply with three requirements: “1) discharge prohibitions; 2) Storm Water Pollution Prevention Plan (“SWPPP”) requirements; and 3) monitoring and reporting requirements, including the requirement to prepare an annual report.” FAC ¶ 31.

         According to Plaintiff, although Defendants continuously have maintained coverage under the General Permit since 2002, they have failed to comply with the General Permit requirements, notwithstanding their expressed intent to abide by them. Plaintiff claims that Defendants have repeatedly and consistently exceeded discharge prohibitions, receiving water limitations, and effluent limitations, and have failed to develop and implement adequate SWPPPs. See First 60-Day Notice at 4-13; see e.g., FAC ¶¶ 68, 73-78.

         On September 7, 2016, in order to address these and other violations of General Permit requirements, Plaintiff served Defendants with a 60-Day Notice of its intention to file a private citizen lawsuit to enforce the CWA. See First 60-Day Notice.

         On November 7, 2016, in response to Plaintiff's First 60-Day Notice, Defendants submitted a Notice of Termination (“NOT”) of their coverage under the General Permit to the California State Water Resources Control Board (“SWRCB”). See November 7, 2016 NOT (Ex. B to Defs' First RJN) [Docket No. 8-4].

         A day later, on November 8, 2016, Plaintiff filed this citizen suit alleging four claims under the CWA for discharging polluted storm water associated with industrial activity in excess of the limits set forth in the General Permit, and for failing to implement the plans required under the General Permit necessary to reduce and/or prevent the discharge of pollutants in storm water discharges associated with industrial activity.

         On December 9, 2016, Plaintiff served Defendants with its Second 60-Day Notice, alleging that Defendants violated the CWA by unlawfully discharging storm water associated with industrial activities without a required permit. See Second 60-Day Notice (Ex. B to FAC) [Docket No. 29-3].

         On December 21, 2016, Defendants moved to dismiss the complaint on the ground that the action is moot because Defendants terminated their coverage under the General Permit prior to the filing of the lawsuit, and therefore could no longer be held liable under the CWA for violating the General Permit as alleged in the complaint. Defendants also moved to dismiss the complaint on the ground that it failed to state a claim. According to Defendants, as passive landlords who merely own a facility, they are not liable under the CWA for the pollution created by tenants.

         On February 8, 2017, Plaintiff moved for leave to file the FAC. Like the original complaint, the FAC alleges that Defendants violated the CWA by failing to comply with the requirements of the General Permit by discharging storm water associated with industrial activities. Compare FAC ¶¶ 80-104 with Compl. ¶¶ 57-81. In addition, the FAC alleges in the alternative that Defendants violated the CWA by failing to obtain permit coverage for discharges of storm water associated with industrial activities. See, e.g., FAC ¶¶ 71, 105-09.


         A. Rule 12(b)(1)

         A motion to dismiss filed pursuant to Rule 12(b)(1) is a challenge to the court's subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). A court will dismiss a party's claim for lack of subject matter jurisdiction “only when the claim is so insubstantial, implausible, foreclosed by prior decisions of th[e Supreme] Court, or otherwise completely devoid of merit as not to involve a federal controversy.” Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89 (1998) (citation and quotation marks omitted). When reviewing a 12(b)(1) motion, the court sculpts its approach according to whether the motion is “facial or factual.” White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). A facial challenge asserts that “the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). By contrast, a factual attack disputes “the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.” Safe Air for Everyone, 373 F.3d at 1039. A factual challenge permits the court to look beyond the complaint, without “presum[ing] the truthfulness of the plaintiff's allegations.” White, 227 F.3d at 1242 (citation omitted). Even the presence of disputed material facts “will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) (citations omitted).

         In moving to dismiss Plaintiff's action as moot under Rule 12(b)(1), Defendants contest the truthfulness of Plaintiff's allegations that they violated the CWA by discharging polluted storm water associated with industrial activities in excess of the limits in the General Permit. Defendants submit extrinsic evidence which purportedly establishes that Defendants were not covered by the General Permit at the time the complaint was filed. Defendants argue that this renders the lawsuit moot. Accordingly, Defendant's jurisdictional attack is factual in nature. The court therefore does not “presume the truthfulness” of Plaintiff's allegations, White, 227 F.3d at 1242, and may look beyond Plaintiff's complaint to resolve the jurisdictional dispute. Roberts, 812 F.2d at 1177.

         B. Rule 12(b)(6)

         A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock Inc., 349 F.3d 1191, 1199-200 (9th Cir. 2003). When reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation omitted), and may dismiss the case “only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citation and quotation marks omitted).

         When a complaint presents a cognizable legal theory, the court may grant the motion if the complaint lacks “sufficient factual matter to state a facially plausible claim to relief.” Id. (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)). A claim has facial plausibility when a “plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted).

         For purposes of Rule 12(b)(6) review, the court reviews documents incorporated into the complaint, as well as judicially noticeable material. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Knievel v. ESPN, 393 F.3d 1068, 1076-77 (9th Cir. 2005) (incorporation by reference); Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1016 n.9 (9th Cir. 2012) (judicial notice). The court may also consider “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading.” Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).

         C. Leave to Amend

         Under Federal Rule of Civil Procedure 15(a), leave to amend should be granted as a matter of course, at least until the defendant files a responsive pleading. Fed.R.Civ.P. 15(a)(1). After that point, Rule 15(a) provides generally that leave to amend the pleadings before trial should be given “freely . . . when justice so requires.” Fed.R.Civ.P. 15(a)(2). “This policy is to be applied with extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (quotation omitted). In the absence of an “apparent reason, ” such as undue delay, bad faith or dilatory motive, prejudice to the opposing party, futility of the amendments, or repeated failure to cure deficiencies in the complaint by prior amendment, it is an abuse of discretion for a district court to refuse to grant leave to amend a complaint. Foman v. Davis, 371 U.S. 178, 182 (1962); Lockheed Martin Corp. v. Network Sols., Inc., 194 F.3d 980, 986 (9th Cir.1999). These factors do not “merit equal weight, ” and “it is the consideration of prejudice to the opposing party that carries the greatest weight.” Eminence Capital, 316 F.3d at 1052. “Granting leave to amend does not necessarily mean that the underlying allegations ultimately have merit.” FlatWorld Interactives LLC v. Apple Inc., 12-CV-01956-WHO, 2013 WL 6406437, at *3 (N.D. Cal. Dec. 6, 2013). “Rather, ‘[a]bsent prejudice, or a strong showing of any of the remaining [ ] factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend.'” Id. (quoting Eminence Capital, 316 F.3d at 1052).


         The parties submitted several requests for judicial notice (“RJNs”) in conjunction with these motions. Defendants filed four RJNs, which collectively request that the court take judicial notice of Exhibits A through U. See Defs' RJN No. 1 [Docket No. 8-2] (Ex. A through Ex. C); Defs' RJN No. 2 [Docket No. 20-6] (Ex. D through Ex. R); Defs' RJN No. 3 [Docket No. 24] (Ex. S and Ex. T); Defs' RJN No. 4 [Docket No. 36-1] (Ex. U). Plaintiff filed one RJN requesting that the court take judicial notice of Exhibits A through D. See Pltf's RJN [Docket No. 17].

         A. Legal Principles

         Federal Rule of Evidence 201 permits a court to take judicial notice of facts not subject to reasonable dispute and “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). “[A] court may take judicial notice of ‘matters of public record.'” Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (citing Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986), abrogated on other grounds by Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104 (1991)).

         A court may also take judicial notice of “records and reports of administrative bodies.” Mack, 798 F.2d at 1282. However, when courts take judicial notice of administrative records, only the existence of the documents themselves including the findings therein are judicially noticeable, and not the contents of the documents for the truth of the matters asserted. See, e.g., Lacayo v. Donahoe, No. 14-CV-04077-JSC, 2015 WL 993448, at *10 (N.D. Cal. Mar. 4, 2015) (taking judicial notice of documents in ruling on a motion to dismiss “only . . . [as to] the existence of the administrative proceedings and the agency's findings, ” and not “credit[ing] the truth of any fact recounted or matter asserted in the documents”).

         Courts cannot take judicial notice of the contents of documents for the truth of the matters asserted therein when the facts are disputed, as they are here for certain exhibits. See, e.g., Lee, 250 F.3d at 689-90 (district court appropriately took judicial notice of the fact of the extradition hearing, that the waiver of extradition was signed, and that the defendant purportedly waived his right to challenge his extradition, but erred by taking judicial notice of the disputed fact of the validity of the waiver); see also Daghlian v. DeVry Univ., Inc., 461 F.Supp.2d 1121, 1146-47 (C.D. Cal. 2006) (taking judicial notice of the existence of administrative reports including their contents, but not “for their truth” due to a disputed issue of fact); Ctr. for Envtl. Health v. Vilsack, No. 15-CV-01690-JSC, 2015 WL 5698757, at *5 (N.D. Cal. Sep. 29, 2015) (taking judicial notice of the existence of USDA's Program Handbook in ruling on a motion to dismiss, but declining to take “judicial notice of the substance of the Program Handbook for the truth of any matter asserted within the Program Handbook, including the disclaimer as to the legal effect of the ‘guidance' contained therein”).

         B. Defendants' RJNs

         Applying these principles, the court grants Defendants' request for judicial notice as to Exhibit A, O, P, and U because they are matters of public record, and contain facts not subject to reasonable dispute that are capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Exhibits A and O are selected portions of California's General Permit for Storm Water Discharges Associated with Industrial Activity, Order No. 2014-0057-DWQ, NPDES No. CAS000001 (“General Permit”). Exhibit P is a selected portion of the Federal Register from November 16, 1990, Vol. 55, No. 222, pp. 48006-7. Exhibit U is the North Coast Regional Water Quality Control Board (“NCRWB”) Order No. RI-2007-0006 entitled “Waste Discharge Requirements for In-Situ Treatment of Contaminated Soil for Ecodyne Corporation” (“NCRWB Waste Discharge Order”).

         The court grants Defendants' request as to Exhibits C, M, and S but only as to the existence of the documents, the dates they were submitted, and the existence of the contents therein. The court declines to take judicial notice of the contents for the truth of the matters asserted, because those facts are disputed. Exhibits C, M, and S are letters from a public agency. See (last accessed on July 24, 2017). Exhibit C is the November 30, 2016 Letter from Paul Keiran of the NCRWB regarding Defendants' November 7, 2016 NOT (“November 30, 2016 NCRWB Letter”). Exhibit M is the January 5, 2017 Letter from Mona Dougherty of the NCRWB regarding ...

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