Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United Artists Theatre Circuit, Inc. v. California Regional Water Quality Control Board

California Court of Appeals, First District, Fifth Division

November 27, 2019

UNITED ARTISTS THEATRE CIRCUIT, INC., Plaintiff and Appellant
v.
CALIFORNIA REGIONAL WATER QUALITY CONTROL BOARD, SAN FRANCISCO REGION, Defendant and Appellant MOONLITE ASSOCIATES LLC, Real Party in Interest.

          Order Filed 12/18/19

          Superior Court of Alameda County, No. RG16811955, Hon. Jennifer Madden, Judge.

          Hogan Lovells US, Scott H. Reisch, Katherine B. Wellington, for Plaintiff and Appellant.

          Xavier Becerra, Attorney General, Gavin G. McCabe, Mark W. Poole and Marc N. Melnick, Deputy Attorneys General, for Defendant and Appellant.

         ORDER MODIFYING OPINION AND DENYING REHEARING

         BY THE COURT:

         It is ordered that the opinion filed November 27, 2019 be modified as follows:

         1. On page 2, replace the first sentence on the first complete paragraph with the following:

         As to the knowledge component of “permitted, ” we adopt a standard that focuses on the landlord's awareness of a risk of discharge: a prior owner may be named in a section 13304 cleanup order upon a showing the owner knew or should have known that a lessee's activity created a reasonable possibility of a discharge into waters of the state of wastes that could create or threaten to create a condition of pollution or nuisance.

         2. On page 2, replace footnote 2 with the following:

         Section 13050, subdivision (d), broadly defines “waste” to include “sewage and any and all other waste substances, liquid, solid, gaseous, or radioactive, associated with human habitation, or of human or animal origin, or from any producing, manufacturing, or processing operation....”

         3. On page 2, replace the first sentence and citation in the “Statutory Background” section with the following:

         In 1967, the Legislature created the State Water Resources Control Board (State Board) within the Resources Agency; the State Board now resides within the California Environmental Protection Agency. (§ 175; Stats. 1967, ch. 284, § 2.4, p. 1442, eff. Dec. 1, 1967; Governor's Reorganization Plan No. 1 of 1991, § 192, eff. July 17, 1991, 4 Stats.1991; see also Gov't Code, § 12080 et seq.)

         4. On page 11, at the end of the first sentence of the first complete paragraph, replace the words “of hazardous waste” with the “into waters of the state of wastes that could create or threaten to create a condition of pollution or nuisance” so the sentence reads:

         Rather than the standard adopted by the trial court or that proposed by the Regional Board, we conclude a prior owner may be named in a cleanup order as someone who has “permitted” a discharge if it knew or should have known that a lessee's activity presented a reasonable possibility of discharge into waters of the state of wastes that could create or threaten to create a condition of pollution or nuisance.

         5. On page 18, delete the word “hazardous” from the sentence “In 1980, the Legislature enacted Assembly Bill 2700 (AB 2700), which amended provisions of the Health and Safety Code and the Water Code to expand the authority of the State Director of Health Services and of regional water quality control boards to address hazardous waste control and cleanup.”

         6. On page 20, delete the word “hazardous” from the sentence “However, a true strict liability statute would impose liability on an owner whose lessee discharged hazardous waste into the state's water supply whether or not the owner knew of the tenant's activities.”

         7. On page 20, footnote 17, delete the word “hazardous” from the sentence “In the present case, UATC does not claim it took any steps to prevent discharges of hazardous wastes from the dry-cleaning operation, so we have no occasion to consider whether any such showing could provide a basis to avoid being named in a cleanup order.”

         8. On page 22, replace footnote 18 with the following:

         The Regional Board refers to statements in a Department of Justice memorandum and a Department of Fish and Game bill analysis that support their contention that section 13304, as amended by AB 2700, imposes strict liability. It unclear whether it is appropriate for this court to consider those analyses, absent any indication they were available to the full Legislature. (See Quintano v. Mercury Casualty Co. (1995) 11 Cal.4th 1049, 1062; Hutnick, supra, 47 Cal.3d at p. 465, fn. 7; but see Elsner v. Uveges (2004) 34 Cal.4th 915, 934, fn. 19 [approving consideration of enrolled bill reports].) In any event, even if it is appropriate to consider them, they do not address the meaning of the word “permitted” in section 13304.

         9. On page 29, at the end of the first sentence of the first complete paragraph, replace the words “hazardous wastes” with “wastes that could create or threaten to create a condition of pollution or nuisance” so the sentence reads:

         Contrary to the Regional Board's contention that the term “permitted” in section 13304 imposes only the limited burden of showing an owner was aware of the general activity that resulted in a discharge, Laube supports the position that before an owner can be said to have “permitted” harm resulting from a lessee's conduct, there must be some basis to conclude that the owner was aware or should have been aware of the reasonable possibility that harm would occur-in this case the discharge of wastes that could create or threaten to create a condition of pollution or nuisance.

         10. On page 29, footnote 20, delete the word “hazardous” from the sentence “The section 13304 context differs and supports a construction of ‘permitted' that permits a Regional Board to name an owner in a cleanup order where, in the language of Laube, the owner had ‘the obligation to be diligent' because it knew or should have known that a lessee's activity made the discharge of hazardous wastes ‘reasonably possible.' ”

         11. On page 30, delete the word “hazardous” from the sentence “To the contrary, the public has a strong interest in preventing the discharge of hazardous wastes and would benefit from greater vigilance on the part of property owners.”

         12. On page 31, in the first paragraph replace the sentence “The public has a strong interest in the cleanup of hazardous wastes and relieving owners of liability shifts the costs to others or, if there are no solvent other responsible parties, to the public.” with the following:

         The public has a strong interest in waste cleanup and relieving owners of liability shifts the costs to others or, if there are no solvent other responsible parties, to the public.

         13. On page 37, delete the word “hazardous” from the sentence “Thus, Stuart can be read to require a showing that a prior owner or lessor knew or should have known about the risk of hazardous waste discharge.”

         14. On page 39, replace the first sentence of the first complete paragraph with the following:

         We construe “permitted” in section 13304 to mean that a prior owner may be named in a cleanup order if it knew or should have known that a lessee's activity created a reasonable possibility of discharge into waters of the state of wastes that could create or threaten to create a condition of pollution or nuisance.

         15. On page 39, at the end of the first sentence of the second paragraph in the “Conclusion” section, replace the words “hazardous wastes” with “wastes that could create or threaten to create a condition of pollution or nuisance” so the sentence reads:

         The Regional Board's interpretation comes close to writing “permitted” out of the statute by imposing liability under a cleanup order absent any knowledge, actual or constructive, that a lessee's activity created a risk of discharge of wastes that could create or threaten to create a condition of pollution or nuisance.

         16. On page 40, delete the word “hazardous” from the sentence “Construing section 13304 to authorize regional boards to name such owners in cleanup orders elevates their interest in mitigating the risk of discharges of hazardous wastes by lessees-and landowners are in a position to prevent such discharges.”

         17. On page 40, in the last sentence of footnote 28, replace the word “hazardous” with the word “waste” so the sentence reads:

         It is more consistent with the Legislature's goal of environmental protection to encourage caution by and impose responsibility on landowners who should know waste discharges are reasonably possible.

         18. On page 42, footnote 30, delete the word “hazardous” from the sentence “Arguably, under Ohio v. Kovacs (1985) 469 U.S. 274 and its progeny, the Regional Board's Cleanup Order is a claim because it directs an entity no longer in possession of the subject property to clean-up hazardous waste deposited before the bankruptcy confirmation date.”

         19. On page 47, in the final paragraph on the page, replace the words “hazardous waste discharges” with the “discharges of wastes that could create or threaten to create a condition of pollution or nuisance” so the sentence reads:

         The parties are not similarly situated: while it is reasonable to hold a landowner responsible for what it permits to take place on its property, it is not reasonable to expect the regional boards to track bankruptcy proceedings involving all landowners who have leased to dry cleaners (and every other business that might present a risk of discharges of wastes that could create or threaten to create a condition of pollution or nuisance).

         There is no change in the judgment.

         Appellant's petition for rehearing is denied.

          SIMONS, J.

         Under Water Code section 13304, [1] a prior owner of property may be required to participate in the cleanup of wastes discharged from its property that resulted in ground water contamination, if that person “caused or permitted” the discharge. The San Francisco Bay Regional Water Quality Control Board (Regional Board) named United Artists Theatre Circuit, Inc. (UATC) in a section 13304 cleanup order addressing waste discharges from dry cleaning operations at a shopping center owned by UATC in the 1960s and 1970s. UATC filed a petition challenging its inclusion in the order, and the trial court concluded the Regional Board had erred.

         On appeal, both the Regional Board and UATC agree that the word “permitted” contains a knowledge component, but they disagree on the degree of knowledge required to establish a prior owner's liability for a cleanup resulting from a tenant's activities. Furthermore, UATC argues that even if it would otherwise be subject to a cleanup order, its liability was discharged in a bankruptcy reorganization proceeding commenced in the year 2000. Each of these matters are issues of first impression in California.

         As to the knowledge component of “permitted, ” we adopt a standard that focuses on the landlord's awareness of a risk of discharge: a prior owner may be named in a section 13304 cleanup order upon a showing the owner knew or should have known that a lessee's activity created a reasonable possibility of a discharge of wastes into waters of the state that could create or threaten to create a condition of pollution or nuisance (hereafter “hazardous wastes”).[2] This test is informed by the Legislature's express intent to “exercise its full power and jurisdiction to protect the quality of waters in the state.” (§ 13000.) We further conclude that, even assuming the Regional Board's entitlement to a cleanup order was a claim within the meaning of bankruptcy law, it was not discharged in UATC's bankruptcy proceeding because it did not arise before confirmation of reorganization.

         Background

         Statutory Background

         In 1967, the Legislature created the State Water Resources Control Board (State Board) within what was then the Resources Agency and is now the California Environmental Protection Agency. (§ 175; Stats. 1967, ch. 284, § 2.4, p. 1442, eff. Dec. 1, 1967.) In 1968, the Assembly Committee on Water suggested that the State Board “establish a task force to develop a comprehensive review of the Water Quality Control Act....” (Assem. Daily J. (May 13, 1968) pp. 3003-3005.) The State Board responded by convening a Study Panel that produced in March 1969 a report entitled “Recommended Changes in Water Quality Control[:] Final Report of the Study Panel to the California State Water Resources Control Board” (Study Panel Report).[3] The report explained that the Study Panel was composed of leaders in relevant fields and representatives of statewide organizations and state agencies “with responsibility or interest in water quality or water quality control.” (Study Panel Report, at pp. iv-v.)

         The Study Panel Report contained an “Appendix A” consisting of “recommended changes” to several California codes, including the Water Code. (Study Panel Report, March 1969, Appendix A.) Appendix A also included various explanatory notes with respect to particular proposed provisions. In 1969, the Legislature adopted the Study Panel's recommendations in Assembly Bill 413 (1969 Reg Sess.). (See Stats. 1969, ch. 482, pp. 1045-1088.)[4] The changes included replacing Division 7 of the Water Code with a new Division 7, to be known as the Porter-Cologne Water Quality Control Act (Porter-Cologne Act). (Stats. 1969, ch. 482, §§ 17-18, pp. 1051-1052, see § 13020.) An entry in the Assembly Journal makes clear the Legislature's reliance on the work of the Study Panel. In particular, the Assembly Committee on Water reported that, “Except for the comments set out below, the notes contained under the various sections of Assembly Bill No. 413 as set out in corresponding sections in Appendix A [of the Study Panel Report] reflect the intent of the Assembly Committee on Water in approving the various provisions of Assembly Bill No. 413.” (Assembly Journal, May 5, 1969, pp. 2677-2678.)

         The Porter-Cologne Act finds and declares “that the people of the state have a primary interest in the conservation, control, and utilization of the water resources of the state, and that the quality of all the waters of the state shall be protected for use and enjoyment by the people of the state.” (§ 13000.) The Act further declares “that activities and factors which may affect the quality of the waters of the state shall be regulated to attain the highest water quality which is reasonable, considering all demands being made and to be made on those waters and the total values involved, beneficial and detrimental, economic and social, tangible and intangible.” (Ibid.) Moreover, the Act declares “that the health, safety and welfare of the people of the state requires that there be a statewide program for the control of the quality of all the waters of the state; that the state must be prepared to exercise its full power and jurisdiction to protect the quality of waters in the state from degradation originating inside or outside the boundaries of the state... and that the statewide program for water quality control can be most effectively administered regionally, within a framework of statewide coordination and policy.” (Ibid.; see also City of Burbank v. State Water Res. Control Bd. (2005) 35 Cal.4th 613, 619 (Burbank); San Diego Gas & Electric Co. v. San Diego Regional Water Quality Control Bd. (2019) 36 Cal.App.5th 427, 434-435 (San Diego Gas & Electric); Building Industry Assn. of San Diego County v. State Water Resources Control Bd. (2004) 124 Cal.App.4th 866, 875 (Bldg. Indus. Assn. of San Diego).)

         The Porter-Cologne Act directs the State Board to “formulate and adopt state policy for water quality control” and identifies and describes nine regional water quality control boards. (§§ 13140, 13200, 13201.) “[T]ogether the State Board and the regional boards comprise ‘the principal state agencies with primary responsibility for the coordination and control of water quality.' (§ 13001.)” (Burbank, supra, 35 Cal.4th at p. 619.) Among the various powers of the regional boards is the power to issue a waste “cleanup and abatement order.” (§ 13304.) Section 13304, subdivision (a) currently[5] provides in part, “A person who has discharged or discharges waste into the waters of this state in violation of any waste discharge requirement or other order or prohibition issued by a regional board or the state board, or who has caused or permitted, causes or permits, or threatens to cause or permit any waste to be discharged or deposited where it is, or probably will be, discharged into the waters of the state and creates, or threatens to create, a condition of pollution or nuisance, shall, upon order of the regional board, clean up the waste or abate the effects of the waste, or, in the case of threatened pollution or nuisance, take other necessary remedial action, including, but not limited to, overseeing cleanup and abatement efforts.” A “regional board may expend available moneys to perform any cleanup, abatement, or remedial work... that, in its judgment, is required by the magnitude of the endeavor or the urgency for prompt action to prevent substantial pollution, nuisance, or injury to any waters of the state.” (§ 13304, subd. (b)(1).) In that event, “the person or persons who discharged the waste, discharges the waste, or threatened to cause or permit the discharge of the waste... are liable to that governmental agency to the extent of the reasonable costs actually incurred in cleaning up the waste, abating the effects of the waste, supervising cleanup or abatement activities, or taking other remedial action.” (§ 13304, subd. (c)(1).)

         The Porter-Cologne Act authorizes persons aggrieved by actions of a regional board to “petition the state board to review such action.” (§ 13320, subd. (a); see also Barry, supra, 194 Cal.App.3d at p. 171.) The State Board's decision may be reviewed in the superior court by way of a petition for writ of mandate. (§ 13330.)

         The Shopping Center and Dry Cleaner

         The Moonlite Shopping Center (the Center) is located on El Camino Real in Santa Clara, California. The Center has several large tenant spaces and twenty-five smaller tenant spaces. Saratoga Creek is located to the east of the Center.

         UATC (then United California Theaters, Inc.) began construction of the Center in 1960 and it opened in 1962. UATC owned the Center until 1975, and was the master lessor until 1978. Real party in interest Moonlite Associates, LLC (Moonlite) has owned the Center since 1977.

         For 35 years, from 1962 until 1997, a drycleaner (Moonlite Cleaners) continuously operated at the Center, under a number of different owners. The dry cleaner used “transfer” machines that used perchlorethylene (aka “tetrachloroethylene” and “PCE”) as the cleaning solvent. The machines, which were effectively banned in 1998, required the manual transfer of clothes soaked with PCE from the washer to the dryer.

         PCE

         In City of Modesto v. Dow Chemical Co. (2018) 19 Cal.App.5th 130 (Modesto II), [6] Division Four of this District described PCE as follows: “PCE, also known as tetrachloroethylene, is a molecule containing chlorine atoms and carbon atoms. It is also characterized as a ‘volatile halogenated organic compound,' a ‘halogenated hydrocarbon', a ‘chlorinated solvent' or a ‘chlorinated hydrocarbon.' As shorthand, it is referred to as ‘perc' or PCE. All chlorinated hydrocarbons, like all solvents other than water, are ‘toxic.' In 1978, the National Institute for Occupational Safety Hazards (NIOSH) recommended that PCE be handled as if it were a human carcinogen. In 1980 the State of California began regulating PCE as a hazardous waste. In 1984, when the Resource Conservation Recovery Administration (RCRA) was reauthorized, its regulations brought ‘small dry cleaners' under the same requirements as major hazardous waste sources, with respect to PCE.” (Modesto II, at p. 137.)

         “PCE is a colorless liquid, and is therefore difficult to see once released into soil. [¶]... PCE is particularly ‘persistent' and ‘long lived' compared to other contaminants, making it extremely difficult to accomplish complete remediation.” (Modesto II, supra, 19 Cal.App.5th at p. 137.)

         The record indicates that the dangers of dry-cleaning solvents in general, and PCE in particular, became gradually known during and after UATC's ownership of the Center. For example, in 1953, the Supreme Court made reference to a statute addressing “Dry Cleaning Equipment Employing Volatile and Inflammable Solvents.” (State Bd. of Dry Cleaners v. Thrift-D-Lux Cleaners (1953) 40 Cal.2d 436, 440.) A 1961 State Fire Marshal permit required the dry cleaner at the Center to take certain precautions against vapors from unidentified dry-cleaning solvents. In 1965 the Legislature set a specific maximum level for PCE vapor in former Health and Safety Code section 13399.5, above which would be considered a “ ‘dangerous toxic concentration.' ” (Stats. 1965, ch. 1781, § 13, p. 3974.) In 1975, the City of Santa Clara adopted an ordinance prohibiting the discharge of a variety of pollutants into the sewer system, including chlorinated hydrocarbons like PCE. In 1977, the Director of the National Institutes of Health published in the Federal Register a summary of a study regarding the “possible carcinogenicity” of PCE. (Report on Bioassay of Tetrachloroethylene for Possible Carcinogenicity, 42 Fed.Reg. 55270-55271 (Oct. 3, 1977).) In early 1978, the Environmental Protection Agency (EPA) published a list of toxic pollutants, including PCE. (Publication of Toxic Pollutant List, 43 Fed.Reg. 4108-4109 (Jan. 25, 1978).) In 1980, the EPA recognized PCE as a potential human carcinogen and adopted water quality standards for PCE. (Water Quality Criteria Documents, 45 Fed.Reg. 79318, 79340 (Nov. 28, 1980).) Other state and federal legislative and regulatory developments followed.

         It is also notable that the 1969 Study Panel Report that resulted in the enactment of the Porter-Cologne Act recognized the danger of chlorinated hydrocarbons. (Study Panel Report, at p. 41.) Specifically with reference to pesticides, the Report observed, “Extensive studies of the use of pesticides, and particularly of the chlorinated hydrocarbons, have shown alarming residual concentrations in fish and fowl across wide areas of the earth, as well as here in California. Present accumulations of these toxic, nondegradable chemicals are causing heavy mortality to some birds and perhaps in fish. These concentrations do not seem to be dangerous to people in the amounts now found in California, but there is legitimate concern for the future.” (Ibid.)

         Underlying Proceedings

         In 2004, Moonlite discovered PCE contamination in groundwater at the Center, and, in 2009, Moonlite reported the contamination to the Regional Board. Subsequent testing disclosed high PCE concentrations in soil gas, indoor air, and groundwater. Regional Board staff commented that the levels “are very significant and warrant aggressive ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.