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California Department of Toxic Substances Control v. Dee M. McLemore Trust

United States District Court, N.D. California

November 1, 2019

DEE M. McLEMORE TRUST, CHERYL PLATO McLEMORE, in her individual and representative capacities, JOHN McKENNA, in his representative capacity, JAMES TODD RUSSELL, in his representative capacity, HARD CHROME ENGINEERING, INC., Defendants.




         In this civil action to recover response costs and declaratory relief under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), one defendant moves to dismiss the amended complaint as it pertains to her individual liability pursuant to FRCP 12(b)(6). To the extent stated below, the motion to dismiss is Granted.


         The present action centers around the contamination of real property in Oakland. From 1972 to 1988, Hard Chrome Engineering, Inc. leased property from Dee M. McLemore. From 1988 to 2005, HCE leased the same property from the Dee M. McLemore Trust. HCE operated a metal- and chromium-plating business on the leased property. It generated approximately fifty pounds of hazardous substances per month, some of which went directly onto the ground. The leased property is referred to as the Hard Chrome Engineering real property (Amd. Compl. ¶¶ 2, 8, 12, 13, 15, 16).

         In 1992, Dee M. McLemore died. His surviving spouse, defendant Cheryl McLemore, became a co-trustee of the Trust, as well as a designated beneficiary. She has received money or other benefits from the Trust (Dkt. No. 38 at 3).

         In 2005, under the authority of California Health and Safety Code § 25358.3, the California Department of Toxic Substances Control, plaintiff in the present action, executed an Imminent and Substantial Endangerment Determination and Consent Order that required the Trust to investigate and remediate the release of hazardous substances at and from the Hard Chrome Engineering real property. In 2008, however, McLemore informed the Department that the Trust could no longer comply with the I&SE Order, allegedly due to insufficient assets in the Trust. The Department then took over the investigation and remediation. It approved a removal action workplan in 2012 and began physical on-site construction of a remedy in 2013. The Department has incurred approximately $2, 459, 409 in response costs, excluding interest (Amd. Compl. ¶¶ 18, 20-23, 28).

         In February 2019, the Department brought suit against multiple defendants pursuant to CERCLA, 42 U.S.C. § 9601 et seq., to recover the response costs including interest and to seek declaratory relief (Dkt. No. 1). In July, the Department filed the first amended complaint which alleges defendant McLemore is liable in both her representative capacity and in her individual capacity under CERCLA, both as a trustee and as a beneficiary (Amd. Compl. ¶¶ 9, 34, 35). McLemore now seeks to dismiss the first amended complaint to the extent that she is sued in her individual capacity (Dkt. No. 38). In her motion to dismiss, McLemore appended and requests judicial notice of the Amended Trust Agreement, dated June 1989, which amended an earlier trust agreement, dated October 1988, that created the Trust (Dkt. Nos. 39-40). Plaintiff objects to the request for judicial notice (Dkt. No. 43-1). This order follows full briefing and a hearing.


         1. FRCP 12(b)(6).

         Congress enacted CERCLA in 1980 “in response to the serious environmental and health risks posed by industrial pollution.” United States v. Bestfoods, 524 U.S. 51, 55 (1998). CERCLA has two primary goals: (1) to ensure the prompt and effective cleanup of waste disposal sites; and (2) to ensure the parties responsible for the release bear the cleanup costs - not the public. City of L.A. v. San Pedro Boat Works, 635 F.3d 440, 447 (9th Cir. 2011). To effectuate these purposes, CERCLA § 107(a) imposes liability on responsible parties for costs the federal government or a state incurs when responding to the release of hazardous substances. Under CERCLA, responsible parties include current owners or operators, owners or operators at the time of the disposal of the hazardous substances, arrangers, and transporters. Carson Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d 863, 881 (9th Cir. 2001).

         In the instant motion, McLemore does not dispute her representative liability as a trustee. She contends, however, that the complaint fails to state a claim against her in her individual capacity as either a trustee or as a beneficiary under CERCLA § 107. As shown below, this order finds the complaint fails to allege McLemore's individual liability as a trustee or as a beneficiary.

         A. Individual Liability as a Trustee.

         Under CERCLA, trustees are liable for clean-up costs for contamination caused by their acts as trustees. A 1996 amendment, however, limits the extent of such liability to the assets of the trust. A proviso to that amendment clarifies that its limitation would not protect (i) those who act in a capacity other than a fiduciary or in a beneficiary capacity and, in that capacity, benefit, or (ii) those who are a beneficiary and fiduciary ...

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