Los Angeles Unified School District v. Cronimet Corporation et al

Filing 142

MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court hereby GRANTS Defendants Ron Donn and United Alloys Inc.'s 136 , Flask Chemical Corporations's 138 , and United Alloys and Metals Inc.'s Motion for Determination of a Good Faith Settlement Agreement 139 . (Made JS-6. Case Terminated.) Court Reporter: Laura Elias. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:12-CV-5033-CAS (RZx)

Title

LOS ANGELES UNIFIED SCHOOL DISTRICT V. UNITED ALLOYS
INC., ET AL.

Present: The Honorable

Date

JS-6

December 9, 2013

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Laura Elias
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiff:

Attorneys Present for Defendants:

Barru Groveman

Jordan Grotzinger
William Funderburk, Jr.

Attorneys Present for Intervenor
Emilio Macasinag
Proceedings:

RON DONN AND UNITED ALLOYS INC’S MOTION FOR
DETERMINATION OF GOOD FAITH SETTLEMENT AND
BARRING OF CLAIMS (Dkt. 136, filed November 8, 2013)
FLASK CHEMICAL CORPORATIONS’S MOTION FOR
APPROVAL OF GOOD FAITH SETTLEMENT AND ORDER
BARRING CONTRIBUTION (Dkt. 138, filed November 8, 2013)
UNITED ALLOYS AND METALS INC.’S MOTION FOR
ORDER DETERMINING GOOD FAITH SETTLEMENT (Dkt.
139, filed November 8, 2013)

I.

INTRODUCTION AND BACKGROUND

On June 8, 2012, plaintiff Los Angeles Unified School District filed suit against
defendants Cronimet Corporation, Ron Dunn, United Alloys, Inc. (“UA”), and United
Alloys and Metals, Inc (“UAM”). Dkt. 1. The parties then engaged in settlement
discussions. Plaintiff filed a First Amended Complaint (“FAC”) on January 7, 2013,
naming defendant Flask Chemical Corporation (“Flask”) in place of Cronimet
Corporation. Dkt. 32. Plaintiff filed the operative Second Amended Complaint (“SAC”)
on July 2, 2013. Dkt. 87. Plaintiff seeks to recover damages suffered in response to
alleged contamination migrating onto a school site located at 664 East 56th Street, Los
Angeles, from defendants’ property located at 900 East Slauson Avenue, Los Angeles
CV-90 (06/04)

TENTATIVE CIVIL MINUTES - GENERAL

Page 1 of 5

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

JS-6

Case No.

2:12-CV-5033-CAS (RZx)

December 9, 2013

Title

LOS ANGELES UNIFIED SCHOOL DISTRICT V. UNITED ALLOYS
INC., ET AL.

(“UA property”). Plaintiff has been conducting an investigation and remediation of the
school site to identify and remove alleged contaminants existing at and beneath the
school site, primarily consisting of volatile organic compounds (“VOCs”). SAC ¶ 3.
On September 9, 2013, the parties informed the Court that the plaintiff had reached
a settlement with all parties. Dkt. 125. On November 8, 2013, Ron Donn and UA filed a
motion for a determination of a good faith settlement and barring of claims. Dkt. 136.
That same day, Fireman’s Fund Insurance Company (“Fireman’s”), on behalf of its
insured, the now defunct Flask, also filed a motion for approval of good faith settlement
and for an order barring contribution. Dkt. 138. Finally, also on November 8, 2013,
UAM filed a motion for a determination of a good faith settlement and barring of claims.
Dkt. 139. No oppositions have been filed to any of these motions. On December 9,
2013, the Court held a hearing. After considering the parties’ arguments, the Court finds
and concludes as follows.
II. BACKGROUND
A. Factual Background
Plaintiff acquired the school site on East 56th Street in 1991 by eminent domain,
and since August 2000, it has been conducting site assessment and remediation of the
school site. SAC ¶¶ 13-14.
According to plaintiff, defendant Flask operated a chemical distribution facility at
the UA property from approximately 1969 to 1979. Id. ¶ 17. In 1979, defendant UA
purchased the property, which it then used for receiving and processing and resale of high
grade metals such as zirconium, nickel, titanium, and copper. Id. ¶ 19. As early as 1992,
UA suspected that the UA property may be contaminated. Id. ¶ 20. UA hired Green
Environmental, an environmental engineer, to conduct a Phase I site assessment of the
UA property. This investigation found PCE and TCE contaminants in the soil at multiple
locations in the UA property. Id. Subsequent investigations conducted in 1993 and 1994
confirmed the presence of these contaminants. Id.
In or about 2002, UAM purchased all of UA’s assets, including all of the
equipment on the UA property, which was previously owned by UA; however, according
CV-90 (06/04)

TENTATIVE CIVIL MINUTES - GENERAL

Page 2 of 5

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

JS-6

Case No.

2:12-CV-5033-CAS (RZx)

December 9, 2013

Title

LOS ANGELES UNIFIED SCHOOL DISTRICT V. UNITED ALLOYS
INC., ET AL.

to plaintiff, UA continues to own the UA property and leases it to UAM. Id. ¶ 23. Both
before and after the acquisition and lease of the property to UAM, plaintiff alleges that
defendants UA and Ron Donn, President of UA, knew of the contamination at the UA
property that was migrating towards the school site. Id. ¶ 24. Despite their purported
knowledge of the contamination that was migrating towards the school site, defendants
did nothing to remedy the problem and stop the spreading of VOCs. Id. ¶ 22.
B. The Proposed Settlements
By these settlements, plaintiff will recover approximately $4,450,000. UA and
Ron Donn will pay $2,150,000, Fireman’s will pay $2,000,000, and UAM will pay
$300,000. In exchange therefor, LAUSD will fully release and discharge the defendants
from all liability associated with the contamination from the UA property. Additionally,
LAUSD will agree to defend and indemnify Fireman’s from certain groundwater
contamination claims that may be attributable to Flask, in an amount not to exceed
$1,000,000. Osmus Decl. ¶ 7.
III. LEGAL STANDARD
California Code of Civil Procedure Section 877.6 provides in pertinent part that:
(a)(1) Any party to an action in which it is alleged that two or more parties are joint
tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the
issue of the good faith of a settlement entered into by the plaintiff or other claimant
and one or more alleged tortfeasors or co-obligors, upon giving notice in the
manner provided in subdivision (b) of Section 1005.
...
(c) A determination by the court that the settlement was made in good faith shall
bar any other joint tortfeasor or co-obligor from any further claims against the
settling tortfeasor or co-obligor for equitable comparative contribution, or partial or
comparative indemnity, based on comparative negligence or comparative fault.

CV-90 (06/04)

TENTATIVE CIVIL MINUTES - GENERAL

Page 3 of 5

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

JS-6

Case No.

2:12-CV-5033-CAS (RZx)

December 9, 2013

Title

LOS ANGELES UNIFIED SCHOOL DISTRICT V. UNITED ALLOYS
INC., ET AL.
(d) The party asserting the lack of good faith shall have the burden of proof on that
issue.

Cal. Code Civ. P. 877.6.
Typically, a defendant is entitled to a finding of good faith settlement if the
settlement complies with the factors set forth in Tech-Bilt, Inc. v. Woodward-Clyde &
Assocs., 38 Cal. 3d 488 (Cal. 1985). In that case, the California Supreme Court set forth
the following factors for evaluating a settlement: (1) rough approximation of plaintiff’s
total recovery and the settlor’s proportionate liability; (2) the amount paid in settlement;
(3) the allocation of settlement proceeds among plaintiffs; (4) a recognition that a settlor
should pay less in settlement than he would if found liable at trial; (5) the financial
conditions and insurance policy limits of the settling defendant; (6) the existence of
collusion, fraud, tortious conduct aimed to injure the interests of the nonsettling
defendants; and (7) the information available at the time of the settlement. Id. at 499.
The “burden of proof [is] on the party challenging the settlement to ‘demonstrate, if he
can, that the settlement is so far ‘out of the ballpark’ in relation to [these factors] as to be
inconsistent with the equitable objectives of the statute.’” Nutrition Now, Inc. v.
Superior Court, 105 Cal. App. 4th 209, 213 (Cal. Ct. App. 2003) (quoting Tech-Bilt, 38
Cal. 3d at 499–500).
IV. DISCUSSION
The Court finds that the defendants’ settlements with plaintiff were reached in
good faith. Applying the relevant Tech-Bilt factors confirms this result.
First, each defendant’s portion of the settlement roughly approximates their portion
of the total liability. In a related action concerning the contamination of the UA property,
United Alloys, Inc. v. Baker, CV 93-4722 CBM EX (C.D. Cal.), the court allocated onethird of the clean up costs to UA and two-thirds to Flask. United Alloys, Inc. v. Baker,
2011 WL 2749641 ¶ 206 (C.D. Cal. July 14, 2011). In the settlements here, UA is paying
slightly more ($2,150,000) than Fireman’s on behalf of Flask ($2,000,000). These
roughly equal shares are not “out of the ballpark,” Tech-Bilt, 38 Cal. 3d at 499–500,
compared to the one-third/two-thirds apportionment of liability in the Baker action,
especially because UA, as the more recent operator of the properties, may have a
CV-90 (06/04)

TENTATIVE CIVIL MINUTES - GENERAL

Page 4 of 5

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

JS-6

Case No.

2:12-CV-5033-CAS (RZx)

December 9, 2013

Title

LOS ANGELES UNIFIED SCHOOL DISTRICT V. UNITED ALLOYS
INC., ET AL.

relatively greater share of liability for the subsequent migration of contaminants than it
did for direct contamination. Similarly, UAM, which is paying only 7% of plaintiff’s
total recovery, only began operating the UA property subsequent to the alleged
contamination; UAM’s potential liability is therefore more attenuated than the liability of
either UA or Flask. Accordingly, the Court concludes that the settlement roughly
approximates each defendant’s potential liability.
Second, it appears that the settlement recognizes that LAUSD should receive less
in settlement than it could potentially receive at trial. Although LAUSD’s recovery could
potentially exceed $4,450,000 at trial, the settlements appear to reflect a reasonable
discount given the uncertainties and expenses associated with trying an environmental
contamination case. Cf. Lewis v. Russell, 2012 WL 5471824, at *5 (E.D. Cal. Nov. 9,
2012) (“[A]lthough the parties have not shown how the $30,000 settlement payment
compares to the total clean-up costs, the fact that Lewis is willing to accept that amount
while bearing the risk that it is less than what Workroom might ultimately have been
required to pay suggests that it is in the range of appropriate settlement amounts.”).
Third, Fireman’s settlement on behalf of Flask appears to exhaust the $2,000,000
per-occurrence liability limit in the Flask insurance policy. Osmus Decl. ¶ 7.
Finally, there does not appear to be any collusion, fraud, or tortious conduct. All
defendants are settling, and no defendant has objected to the settlement agreements of the
other defendants. Furthermore, the settlement was reached with the assistance of
sophisticated counsel negotiating before a mediator. See Grotzinger Decl. ¶ 4.
III.

CONCLUSION

In accordance with the foregoing, the Court hereby GRANTS the defendants’
motions for determination of a good faith settlement agreement.
IT IS SO ORDERED.
00
Initials of Preparer

CV-90 (06/04)

TENTATIVE CIVIL MINUTES - GENERAL

:

09

CMJ

Page 5 of 5