Chevron Environmental Management Company et al v. BKK Corporation et al

Filing 181

FINDINGS and RECOMMENDATIONS Approving Settlement Agreement and Dismissing Defendant (L.W. Potter, Inc.) with Prejudice [Doc. 179]. Referred to Judge O'Neill; Objections to F&R due within 15 days after being served with these Findings and Recommendations. signed by Magistrate Judge Barbara A. McAuliffe on 10/10/2013. (Herman, H)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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CHEVRON ENVIRONMENTAL
MANAGEMENT COMPANY
AND CHEVRON USA,

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FINDINGS AND RECOMMENDATIONS
APPROVING SETTLEMENT
AGREEMENT AND DISMISSING
DEFENDANT WITH PREJUDICE

Plaintiff,

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Case No. 1: 11-cv-1396-LJO-BAM

v.
BKK CORPORATION, et al.,

(Doc. 179)

Defendants.

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/

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INTRODUCTION

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Before the Court is Plaintiffs Chevron Environmental Management Company and Chevron

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USA’s (collectively “Chevron”) Motion for Good Settlement Determination. (Doc. 179). In this

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Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) action,

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Chevron moves for a good faith settlement determination pursuant to California Code of Civil

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Procedure Section 877.6 with Defendant L.W. Potter, Inc. (“L.W. Potter” or “Settling Party”). (Doc.

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179). The Court deemed the matter suitable for decision without oral argument pursuant to Local Rule

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230(g), and vacated the hearing scheduled for October 11, 2013. For the reasons discussed below, this

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Court recommends that Chevron’s Motion for Good Faith Settlement Determination should be

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GRANTED.

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BACKGROUND

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Chevron is the owner of EPC Eastside Disposal Facility (the “Site”), which is located on

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Round Mountain Road in Kern County, fifteen (15) miles northeast of Bakersfield, California. Pl.’s

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Complaint at ¶ 1, Doc. 1. From approximately 1971 to 1985, the Site was operated as a waste disposal

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facility. During this time, the Site received millions of gallons of oil and non-oil waste that was later

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disposed of in unlined impoundments. After site testing, the State of California determined that clean-

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up of the Site was necessary.

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As an effort to coordinate clean-up efforts with responsible parties, Chevron executed an

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Imminent and Substantial Endangerment Determination and Consent Order. The Remedial Action

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Plan for the Site was approved on February 1, 2008 by the Department of Toxic Substances Control.

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The Remedial Plan stemming from the Consent Order requires substantial remedial efforts,

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construction and long-term monitoring of the site. Chevron has paid and is currently paying the

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response costs associated with the investigation and cleanup of the EPC site.

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On August 22, 2011, Chevron filed this cost recovery action under the CERCLA, 42 U.S.C. §§

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9601-9675; alleging CERCLA causes of action, as well as contribution and/or indemnity claims

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against a number of defendants in response to releases or threatened release of hazardous substances at

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the Site. Complaint at ¶ 1. In its Complaint, Chevron alleges that the total cost of clean-up exceeds

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$17,000,000 and that it is entitled to contribution and/or indemnity of the response costs from the

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named Defendants, as each are strictly, jointly and severally liable for all past and future response

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costs associated with the investigation and cleanup at the Site. Complaint at ¶ 41.

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In October 2011, Chevron began settlement negotiations with the named Defendants in order

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to reduce the significant defense costs involved with this litigation as well as costs related to each

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Defendants’ apportionment of joint and several liability. See Complaint at ¶¶ 31-42. The potential

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share of liability for each Defendant, and Chevron, was calculated by Chris Wittenbrink, President of

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CR Consulting, Inc., a management consulting firm that specializes in resolution of environmental

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disputes and litigation.

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Wittenbrink’s calculations was the initial estimated amount of cleanup costs, $16,830,000. See Id. at

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¶ 3. Mr. Wittenbrink subtracted the total amount of settlements received at the time of the calculation,

See Wittenbrink Decl. at ¶¶ 1-2, Ex. 2, Doc. 179.

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The basis for Mr.

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$3,883,445.00, as well as the financial contribution made by the owner, $1,910,138.00. Id. at ¶ 3. Mr.

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Wittenbrink created a formula for liability based on each transporter’s and each generator’s relative

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share of oil and non-oil volumes, as shown in operational records and manifests. Id. at ¶ 4. He then

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allocated 10% of the unrecovered costs to the transporters and 90% to the generators and thereafter

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calculated the relative share according to the enumerated formula, taking into account the oil and non-

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oil related volumes, the toxicity premium, and a premium for avoidance costs and indemnity from

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Chevron. Id. at ¶¶ 3-6. Mr. Wittenbrink then assigned an approximate cost of clean-up for each

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Defendant, which Chevron used in its settlement negotiations.

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Most of the original defendants have since entered into settlement agreements with Chevron.

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The only defendants remaining in this action are Energy Production & Sales Co., Golden Gate

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Petroleum Co., Kern Front Sec.-35 Partners, L.W. Potter, Inc., MP Vacuum Truck Service, and

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MPES.1 Chevron has now reached a settlement agreement with Defendant L.W. Potter. The key

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terms of that settlement agreement are, without admitting liability and with no admission of

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wrongdoing: (1) Chevron assumes any and all obligations that the Settling Party may have to conduct

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and pay all costs related to clean-up at the Site; (2) Chevron and the Settling Party agree to mutually

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release existing or future claims related to clean up actions at the Site and Chevron further agrees to

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indemnify the Settling Party for costs incurred in connection to clean-up at the Site; and (3) the

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Settling Party agrees not to sue any other potentially responsible parties who enter into similar

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settlement agreements with Chevron. EPC Eastside Disposal Settlement Agreement, Exh. 1, Doc.

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179-1.
Chevron moves for an order approving that its settlement with L.W. Potter is in good faith

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pursuant to California Code of Civil Procedure § 877.6.
ANALYSIS

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A court sitting in diversity has discretion to determine that a settlement is in good faith

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pursuant to California Code of Civil Procedure Section 877.

Mason & Dixon Intermodal, Inc. v.

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Lapmaster Int’l LLC, 632 F.3d 1056, 1064 (9th Cir. 2011). The good faith provision of section 877

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On January 31, 2013, the Clerk of the Court entered default against Defendants Energy Production & Sales Co.,
Golden Gate Petroleum Co., and Kern Front Sec.-35 Partners, all appearing pro se. (Docs. 146-148).

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mandates that the courts review agreements purportedly made under its aegis to insure that such

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settlements appropriately balance the contribution statute’s dual objectives.”

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Woodward-Clyde & Assocs., 38 Cal. 3d 488 (Cal. 1985). The good faith provision further provides

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that when a settlement is determined by a court to have been made in good faith, the settlement “bar[s]

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any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-

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obligor for equitable comparative contribution, or partial or comparative indemnity, based on

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comparative negligence or comparative fault.” Cal. Civ. Proc. Code § 877.6(C). The party applying

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for a good faith settlement determination is required to give notice of its application to all other parties

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and to the court. Cal. Civ. Proc. Code § 877.6(a). “A settling tortfeasor’s section 877.6, subdivision

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(c) good faith settlement determination discharges indemnity claims by other tortfeasors, whether or

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not named as parties, so long as the other tortfeasors were given notice and an opportunity to be

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heard.” Gackstetter v. Frawley, 135 Cal. App. 4th 1257, 1273 (Cal. App. 2d Dist. 2006).

Tech-Bilt, Inc. v.

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To determine whether a settlement was entered into in good faith, the Courts consider the

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Tech-Bilt factors which include:(1) a rough approximation of plaintiff’s total recovery and the settler’s

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proportionate liability; (2) the amount paid in settlement; (3) a recognition that a settler should pay less

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in settlement than if found liable after trial; (4) the allocation of the settlement proceeds; (5) the

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settling party’s financial condition and the availability of insurance; and (6) evidence of any collusion,

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fraud or tortious conduct between the settler and the plaintiff aimed at requiring the non-settling

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parties to pay more than their fair share. Tech-Bilt, Inc., 38 Cal.3d at 499. “Once there is a showing

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made by the settlor of the settlement, the burden of proof on the issue of good faith shifts to the

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nonsettlor who asserts that the settlement was not made in good faith.” City of Grand Terrace v.

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Superior Court, 192 Cal. App. 3d 1251, 1261 (1987). A party opposing the settlement agreement

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“must demonstrate . . . that the settlement is so far ‘out of the ballpark’ in relation to these factors as to

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be inconsistent with the equitable objectives of the statute.” Tech-Bilt, Inc., 38 Cal.3d at 499-500.

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1.

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Terms of the Chevron-L.W. Potter Settlement Agreement
L. W. Potter has agreed to pay $450,000.00 to settle all of Chevron’s claims as to L.W. Potter.
As calculated by Mr. Wittenbrink, a rough approximation of L.W. Potter’s

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(Doc. 179 at 2).

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proportionate liability is at least $613,289.77 in estimated clean-up costs. Wittenbrink Decl. at 6-8.
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This represents less than 3% of the $16,830,000.00 in total clean-up costs.2 Wittenbrink Decl. at ¶ 3.

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Thus, the settlement amount is within the ballpark of L.W. Potter’s alleged proportionate liability.

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Further, the proposed settlement with L.W. Potter was reached after extensive settlement

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negotiations. Chevron and L.W. Potter negotiated the settlement for approximately twenty-two (22)

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months. During that time period, the parties communicated no less than five (5) times via telephone

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and exchanged no less than fifteen (15) emails regarding settlement. Finally, L.W. Potter represents

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that it does not oppose the motion for good faith settlement. Carlson Decl. at ¶ 5, Doc. 179-3.

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The Chevron-L.W. Potter Settlement is in Good Faith

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The Court has reviewed Chevron’s motion for good faith settlement, its supporting

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declarations, the Tech-Bilt factors, and the lack of opposition. The Court finds that the settlement

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between L.W. Potter and Chevron was reached in good faith under California Code of Civil Procedure

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section 877.6. Chevron’s certificate of service indicates that all remaining named Defendants received

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notice of the motion, the accompanying settlement amount, and the supporting declarations. The

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parties have now had an adequate opportunity to perform a complete analysis of the settlement

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agreements and express any objections or opposition. To date, no party has filed objections. The

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motion is unopposed, and no party has demonstrated that the settlement agreement is unreasonable or

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inconsistent with the equitable objectives of Section 877.6. Moreover, no party has objected to the

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formula or calculations by Mr. Wittenbrink to determine the basis of liability for Chevron or L.W.

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Potter.

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Next, the Chevron-L.W. Potter settlement satisfies the Tech-Bilt factors. One of the most

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important Tech-Bilt factors is the proportion of liability. Toyota Motor Sales U.S.A., Inc. v. Super. Ct.,

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220 Cal. App. 3d 864, 871 (1990). A “settlement figure must not be grossly disproportionate to what a

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reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to

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be.” Torres v. Union Pac. R. R. Co., 157 Cal. App. 3d 499, 508 (1984). The $450,000.00 L.W. Potter

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has agreed to pay is proportionate to L.W. Potter’s potential liability as calculated by Mr. Wittenbrink.

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The Wittenbrink Declaration was executed February 8, 2012. At that time, the estimated clean-up costs totaled
$16,830,000.00. Since that time, the estimated clean-up costs have increased to $18,500,000.00 as detailed in Plaintiff’s
First Amended Complaint, filed July 1, 2013. (Doc. 169). L.W. Potter’s settlement of $450,000.00 represents less than
3% of the total estimated clean-up costs.

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Further, the Court has considered that the settlement amount is less than the amount L.W. Potter may

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have paid had it been found liable at trial. Tech-Bilt, Inc., 38 Cal. 3d at 499. With regard to the

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remaining Tech-Bilt factors, in consideration of L.W. Potter’s financial condition and insurance policy

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limits, L.W. Potter does not dispute that it has sufficient finances and insurance to pay more than the

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settlement amount on any judgment that may be entered against it at the time of trial. Finally, no

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evidence suggests that the Chevron-L.W. Potter settlement is a result of collusion, fraud, or tortious

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conduct. Indeed, the Chevron-L.W. Potter settlement was initiated during an arms-length, informed,

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and independent settlement negotiation. The settlement agreement was reached early in the litigation

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and the settlement eliminates any additional costs of discovery, motions, and trial preparation as to the

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Settling Party.

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Accordingly, the Chevron-L.W. Potter settlement agreement is a culmination of good faith

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negotiations, and no evidence has been presented to show the amount of settlement or any other matter

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in connection with the settlement is aimed at harming the non-settling defendants. Pursuant to Section

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877.6, this Court recommends that Chevron’s settlement agreement with L.W. Potter is in good faith.

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FINDINGS AND RECOMMENDATIONS

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For the reasons discussed above, this Court RECOMMENDS, that

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Chevron’s settlement with L.W. Potter, Inc. should be GRANTED as entered into in

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good faith within the meaning of California Code of Civil Procedure section 877.6 and

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therefore any and all claims for equitable comparative contribution, and partial and

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complete comparative indemnity, based on comparative negligence or comparative

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fault, against L.W. Potter, Inc. be forever barred pursuant to California Code of Civil

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Procedure §877.6 (c). (Doc. 179);

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2.

Chevron’s claims against L.W. Potter, Inc. should be DISMISSED with prejudice;

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3.

Counsel for Chevron is DIRECTED to serve a copy of this Order on all remaining

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named defendants.

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These Findings and Recommendations are submitted to the United States District Judge

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assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Rule 304 of the Local

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Rules of Practice for the United States District Court, Eastern District of California. Within fifteen
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(15) days after being served with these Findings and Recommendations, any party may file written

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objections with the court and serve a copy on all parties. Such a document should be captioned

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“Objections to Magistrate Judge’s Findings and Recommendations.” The district judge will review

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the magistrate judge’s findings and recommendations pursuant to Title 28 of the United States Code

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section 636(b)(1)(C). The parties are advised that failure to file objections within the specified time

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may waive the right to appeal the District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir.

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1991).

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IT IS SO ORDERED.
Dated:

/s/ Barbara

October 10, 2013

A. McAuliffe

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UNITED STATES MAGISTRATE JUDGE

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