Lewis, et al v. Russell, et al

Filing 375

MEMORANDUM AND ORDER signed by Judge William B. Shubb on 2/28/12 ORDERING that the Settlement between Newitt and Lewis is APPROVED. All claims for contribution or indemnity against Newitt arising out of the clean-up of the propterty are barred. All c laims for contribution or indemnity against Lewis arising out of the conterclaim asserted against him by Newitt are barred. All Claims asserted by Lewis against Newitt in the Sac be are DISMISSED with prejudice. All Counter-claims asserted by Newitt against Lewis are DISMISSED with prejudice. All Crossclaims asserted by Newitt are DISMISSED with prejudice. (Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo---11
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CHARLES H. LEWIS and JANE W.
LEWIS,

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NO. CIV. S-03-2646 WBS CKD

Plaintiffs,
v.

MEMORANDUM AND ORDER RE: MOTION
FOR ORDER APPROVING SETTLEMENT
AND BARRING CONTRIBUTION CLAIMS

ROBERT D. RUSSELL; IRENE
RUSSELL; BEN J. NEWITT; the
Estate of PHILLIP NEWITT,
Deceased; JUNG HANG SUH; SOO
JUNG SUH; JUNG K. SEO; THE DAVIS
CENTER, LLC; MELVIN R. STOVER,
individually and as trustee of
the Stover Family Trust; EMILY
A. STOVER, individually and as
trustee of the Stover Family
Trust; STOVER FAMILY TRUST;
RICHARD ALBERT STINCHFIELD,
individually and as successor
trustee of the Robert S.
Stinchfield Separate Property
Revocable Trust, and as trustee
of the Barbara Ellen Stinchfield
Testamentary Trust; ROBERT S.
STINCHFIELD SEPARATE PROPERTY
REVOCABLE TRUST; THE BARBARA
ELLEN STINCHFIELD TESTAMENTARY
TRUST; WORKROOM SUPPLY, INC., a
California corporation; SAFETYKLEEN CORPORATION, a California
corporation; the CITY OF DAVIS;
JENSEN MANUFACTURING COMPANY;
VIC MANUFACTURING COMPANY;
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MARTIN FRANCHISES INC., aka/dba
MARTINIZING DRY CLEANING,

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Defendants.
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AND RELATED COUNTER, CROSS,
AND THIRD PARTY CLAIMS.

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/

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----oo0oo----

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Charles H. Lewis and Jane W. Lewis (the “Lewises”)

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brought this action pursuant to the Comprehensive Environmental

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Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C.

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§§ 9601-9675, for recovery of costs incurred removing hazardous

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substances from a piece of real property located in Davis,

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California (“Property”).

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and defendant and counter-complainant Ben J. Newitt now request

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that the court approve the settlement they have reached.

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I.

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Charles Lewis, the surviving plaintiff,

Factual and Procedural Background
This multi-party litigation concerns the contamination

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of the Property with tetrachloroethene (“PCE”), a chemical

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allegedly released through the operation of a dry cleaning

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facility on the Property.

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(Docket No. 197).)

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managers of the Property during the relevant time period, the

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operators of the dry cleaning facility, the entities that

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supplied and removed the PCE, and the manufacturers of the

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equipment used in dry cleaning operations at the Property.

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id. ¶¶ 7-25; First Am. Third Party Compl. (“FATPC”) ¶¶ 1-2

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(Docket No. 198).)

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litigation because of its alleged role in maintaining the

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underground sewer system that services the Property.

(See Second Am. Compl. (“SAC”) ¶ 40

The parties include the alleged owners and

(See

The City of Davis is also a party to the

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(SAC ¶ 22.)

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Since the filing of the original complaint in 2003, the parties

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have filed numerous counterclaims, crossclaims, and third-party

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claims for contribution pursuant to 42 U.S.C. § 9613(f).

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In February 1999, the California Regional Water

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Quality Control Board, Central Valley Region (“RWQCB”), informed

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the owners and operators of the Property that it had discovered

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PCE in the soil and groundwater at the Property.

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The RWQCB then issued a Cleanup and Abatement Order on October 2,

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2002, instructing the current and past owners and operators of

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the Property to investigate the extent of the PCE contamination

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and to prepare work plans to address the contamination.

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42.)

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incurred costs in carrying out the activities ordered by the

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RWQCB.

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(SAC ¶ 40.)

(Id. ¶

Thereafter, some of the parties, including the Lewises,

(Id. ¶¶ 42, 46.)
The Lewises filed the Complaint in this action on

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December 9, 2003, seeking various forms of declaratory relief and

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asserting claims for cost recovery and contribution, 42 U.S.C. §§

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9607, 9613; contribution and/or indemnity, Cal. Health & Safety

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Code § 25363(e); equitable indemnity and contribution;

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negligence; and breach of contract.

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Ben J. Newitt was named as one of several defendants in the

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original Complaint, (id.), and in the Second Amended Complaint

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(“SAC”) on the ground that he was an operator of the dry cleaning

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business located on the Property, (SAC ¶ 8).

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filed crossclaims naming Newitt as a cross-defendant.

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FATPC ¶ 11; Answer to Am. Compl. ¶ 150 (Docket No. 207); First

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Am. Cross-Cl. ¶ 5 (Docket No. 229).)

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crossclaims of his own against other defendants and a
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(See Compl. (Docket No. 1).)

Several defendants
(E.g.,

Newitt also filed

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counterclaim, in which he sought contribution and indemnity from

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the Lewises should he be found liable.

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(Docket No. 27); Answer to FATPC with Crosscl. ¶¶ 114-37 (Docket

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No. 226).)

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(Countercl. ¶¶ 26-29

Newitt disputes claims that he ever operated a dry

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cleaning business located on the Property.

(Ans. to SAC ¶ 8.)

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Rather, he explains that when Phillip Newitt, his now-deceased

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brother, took over the dry cleaning business in December 1971, he

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made a business loan to Phillip and held title to the dry

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cleaning equipment located on the Property only as security on

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the loan.

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brother operated the dry cleaning business until December 1975,

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for a total of four years or 9.64% of the period at issue in this

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proceeding.

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(Hunter-Cota Decl. ¶¶ 7h, g (Docket No. 364).)

His

(Id. ¶ 7a.)

Throughout the litigation, Newitt has contested his

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liability for any contamination of the Property.

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Ans. to SAC ¶¶ 95-96, 98; Statement Re: Participation in

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Settlement Process at 1:12-19 (Docket No. 215).)

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position that he is properly considered a secured creditor under

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CERCLA who is shielded from liability, (Ans. to SAC ¶ 96), and

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that his peripheral involvement with the Property was too slight

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for him to have been able to form the intent necessary to

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establish liability for the state law claims asserted against

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him, (Statement Re: Participation in Settlement Process at 5:16-

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21).

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(See, e.g.,

It is Newitt’s

Newitt and Lewis have reached a settlement that they

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now ask the court to approve.

(Docket No. 362.)

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of the proposed settlement, Newitt would pay Lewis $25,000 to be
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Under the terms

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used pursuant to the direction of the RWQCB to remediate the

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groundwater contamination at the Property.

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4.)

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with prejudice.

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SAC as against Newitt with prejudice.

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have also agreed to give each other a “broad release with regard

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to the matters asserted in the instance [sic] action and with

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regard to the Site.”

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represent that the settlement is within the reasonable range of

(Hunter-Cota Decl. ¶

Newitt would also dismiss his counterclaims against Lewis
(Id.)

Lewis, in turn, has agreed to dismiss his

(Id. ¶¶ 4-5.)

(Id. ¶ 5.)

Both parties

Both parties’ attorneys

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Newitt’s potential liability and ability to pay, noting that

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Newitt’s liability is contested, he is elderly, in ill health,

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and uninsured, and was only affiliated with the Property for four

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of the approximately forty-one years it used as a dry cleaning

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facility.

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(Id. ¶ 7.)
Under the terms of the agreement, the settlement is

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contingent upon this court issuing an order that (1) approves the

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settlement, (2) dismisses with prejudice all claims asserted by

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Lewis against Newitt in this proceeding, (3) bars contribution

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and indemnity claims against Newitt in this proceeding, (4)

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dismisses with prejudice Newitt’s counterclaims against Lewis,

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and (5) bars contribution and indemnity claims against Lewis with

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regard to the matters asserted in the Newitt counterclaims

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against Lewis.

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Approving Settlement at 2:22-3:2 (Docket No. 363).)

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also ask that the court hold that the proportionate share

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approach of the Uniform Comparative Fault Act (“UCFA”) applies

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with respect to the effect of the settlement on the liability of

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non-settling parties.

(Mem. of P. & A. in Supp. of Mot. for Order
The parties

(Not. of Mot. for Order Approving
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Settlement at 1:9-12, 24-25 (Docket No. 362).)

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While all parties received notice of the proposed

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settlement, no party has filed an opposition to it.

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II.

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Discussion
A.

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Federal Law Claims
“The initial decision to approve or reject a settlement

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proposal is committed to the sound discretion of the trial

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judge.”

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(quoting Officers for Justice v. Civil Serv. Comm'n, 688 F.2d

S.E.C. v. Randolph, 736 F.2d 525, 529 (9th Cir. 1984)

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615, 625 (9th Cir. 1982)).

“Unless a consent decree is unfair,

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inadequate, or unreasonable, it ought to be approved.”

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also Stearns & Foster Bedding Co. v. Franklin Holding Corp., 947

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F. Supp. 790, 813 (D. N.J. 1996) (“In deciding whether to approve

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a proposed settlement in a CERCLA case, a district court must

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weigh the ‘fairness, adequacy and reasonableness’ of the proposed

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settlement.” (quoting United States v. Rohm & Haas Co., 721 F.

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Supp. 666, 685 (D.N.J. 1989))).

Id.; see

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The settlement proposed by Lewis and Newitt comes in a

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case that has dragged on for over eight years and in which trial

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is not set to begin for over a year more.

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clean-up cases such as this one, resolution is often achieved

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through the settlement process.

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outcome under CERCLA.

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1251, 1264 (9th Cir. 2010) (citing United States v. Atl. Research

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Corp., 551 U.S. 128, 138-39 (2007); Kotrous v. Goss-Jewett Co. of

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N. Cal., Inc., 523 F.3d 924, 930-31 (9th Cir. 2007)).

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this fact, earlier in this proceeding the court approved a stay

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of litigation pending settlement talks.

In environmental

Indeed, settlement is a favored

City of Emeryville v. Robinson, 621 F.3d

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Mindful of

(Docket No. 124.)

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Although the initial settlement process outlined by the court was

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unsuccessful, settlement between parties remains an appropriate

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route to resolution in this CERCLA action.

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Settlement with respect to Newitt is particularly

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appropriate given his age, ill health, limited ability to pay,

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and the fact that it is uncertain if he would ultimately be found

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liable at all for clean-up costs associated with the Property.

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Both parties were represented by counsel in settlement

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negotiations, and both parties’ attorneys represent that the

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terms of the settlement are the best available to settle the

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parties’ respective claims against each other.

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Decl. ¶ 8.)

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fair and reasonable one.

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(Hunter-Cota

These facts all suggest that the settlement is a

The parties to the settlement request that the court

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find that the Uniform Comparative Fault Act determines what

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effect the settlement has on the liability of the non-settling

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parties.

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private party cost recovery actions should be apportioned or

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evaluated for fairness, merely charging district courts to

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“allocate response costs among liable parties using such

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equitable factors as the court determines are appropriate.”

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U.S.C. § 9613(f)(1).

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directly addressing the issue.

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No. CIV 05-1510, 2009 WL 256553, at *3 (E.D. Cal. 2009) (noting

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that “[i]n the twenty-eight years that CERCLA has been [sic]

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existence, the Ninth Circuit has never addressed the question of

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the proper credit method for settlements between private PRPs

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under CERCLA.”).

CERCLA itself does not specify how settlements in

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Nor has the Ninth Circuit issued a decision
Adobe Lumber, Inc. v. Hellman,

In a non-CERCLA case, the Ninth Circuit has,
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however, stated that “[t]he proportionate share approach is the

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law in the Ninth Circuit.”

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(9th Cir. 2000).

In re Exxon Valdez, 229 F.3d 790, 796

Under the proportionate share approach, the liability

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of non-settling parties is reduced by the proportionate share of

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the settling party or parties’ obligations.

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WL 256553, at *3 (citing

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6, 20 (1st Cir. 2004)).

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approach of the Uniform Contribution Among Tortfeasors Act

Adobe Lumber, 2009

Am. Cyanamid Co. v. Capuano, 381 F.3d
This is in contrast to the pro tanto

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(“UCATA”), under which the liability of non-settling parties is

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reduced only by the dollar amount of the settlement.

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In re Jiffy Lube Sec. Litig., 927 F.2d 155, 161 (4th Cir. 1991)).

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Under UCFA, if the settling parties’ liability is eventually

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determined to be greater than the settlement amount, the

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plaintiff’s recovery is reduced; under UCATA, if the settling

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parties’ liability is less than the settlement amount, the

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remaining defendants must make up the deficit.

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Accordingly, under the proportionate share approach that the

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parties to the settlement request, Lewis bears the risk of an

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inadequate settlement.

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Id. (citing

Id. at *4.

The overwhelming majority of courts in the Ninth

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Circuit that have addressed the issue have applied the UCFA in

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CERCLA cases.

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cases).

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Congressional intent behind CERCLA because it,

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Adobe Lumber, 2009 WL 256553, at *3 (citing

These courts have noted that the UCFA furthers the

1)
provides
for
equitable
apportionment
of
responsibility; 2) furthers settlement because no precise
dollar amount need be determined upon settlement; 3)
eliminates the need for a good faith hearing; and 4)
prevents culpable settlors from escaping liability
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(whereas under a pro tanto rule, a settlor who paid more
than his fair share would reduce the liability of
nonsettlors, a result which discourages settlement).

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Patterson Envnt’l Response Trust v. Autocare 2000, Inc., No. CIV

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F 01-6606, 2002 U.S. Dist. LEXIS 28323, at *14 (E.D. Cal. June

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28, 2002) (citing Comerica Bank-Detroit v. Allen Indus., Inc.,

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769 F. Supp. 1408, 1414 (E.D. Mich. 1991)).

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The court can find no reason that it should not also

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adopt the proportionate share approach of the UCFA in this case,

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especially since Lewis, the party who bears the risk that the

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$25,000 settlement will be less than Newitt’s ultimately

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adjudicated liability, joins in the request that the court adopt

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the UCFA.

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statement of non-opposition on the application of the UCFA, (City

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of Davis’s Not. of Non-Opp’n at 2:5-7 (Docket No. 372)),

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suggesting that doing so would not harm the interests of non-

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settling defendants.

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Additionally, the City of Davis conditions its

The settlement is also contingent upon two contribution

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bars.

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litigation, a court may review settlements and issue bar orders

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that discharge all claims of contribution by non-settling

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defendants against settling defendants.

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Litig., 546 F.3d 667, 677 (9th Cir. 2008); Franklin v. Kaypro

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Corp., 884 F.2d 1222, 1225 (9th Cir. 1989).

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have held that it is permissible to bar contribution claims

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against settling parties in a CERCLA contribution action, “in

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accordance with the federal common law as exemplified by § 6 of

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the Uniform Comparative Fault Act or § 4 of the Uniform

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Contribution Among Tortfeasors Act.”

In order to facilitate settlement in multi-party

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See In re Heritage Bond

A number of courts

Responsible Envtl.

1

Solutions Alliance v. Waste Mgmt., Inc., No. 3:04cv013, 2011 WL

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382617, at *4 (S.D. Ohio Feb. 3, 2011) (citing Stearns & Foster

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Bedding Co., 947 F. Supp. at 813; Foamseal, Inc. v. Dow Chem.,

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991 F. Supp. 883, 886 (E.D. Mich. 1998); Barton Solvents, Inc. v.

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Sw. Petro-Chem, Inc., 834 F. Supp. 342, 345-46 (D. Kan. 1993);

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Am. Cyanamid Co. v. Kino Indus., Inc., 814 F. Supp. 215, 219

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(D.R.I. 1993); Comerica Bank-Detroit, Inc., 769 F. Supp. at 1413.

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Indeed, another court in this district has noted that such an

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order is often particularly appropriate in CERCLA cases.

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AmeriPride Servs. Inc. v. Valley Indus. Servs., Inc., Nos. CIV.

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S-00-113, S-04-1494, 2007 WL 1946635, at *2 (E.D. Cal. July 2,

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2007) (citing Foamseal, Inc., 991 F. Supp. at 886).

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There are two contribution bars proposed by the

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settlement agreement.

The first would protect Lewis from

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indemnity or contribution claims that “with regard to the matters

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asserted in the Newitt counter-claims against Lewis,” (Mot. for

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Order Approving Settlement at 1:22-23), which are claims for

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indemnity or contribution from Lewis should Newitt be found

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liable.

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contribution and indemnity claims that “relate to or arise from

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the matters addressed in the action or related to the PCE

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contamination at [the Property].”

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Mot. to Approve Settlement at 1:10-12.)

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broader bar, Newitt also agrees to dismiss his crossclaims

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against the remaining defendants.

The second is a bar that would protect Newitt from

(Mem. of P. & A. in Supp. of
In exchange for this

The City of Davis wished to clarify that the proposed

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contribution bars would not bar it from seeking contribution from

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Lewis.

(City of Davis’s Not. of Non-Opp’n at 2:7-9.)
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The only

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contribution claims that Lewis would be protected from under the

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requested bar are contribution claims related to Newitt’s

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counterclaim, which in turn is a claim for indemnity or

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contribution only for Newitt’s liability.

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limited nature of this contribution bar comes from comparing it

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to the broad bar provided to Newitt, who is protected from any

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contribution or indemnity claims related to the contamination of

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the property.

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contribution from Lewis for the liability of a third party such

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as Newitt, the City of Davis is not prevented from bringing any

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contribution claims that it could have asserted without the bar.

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Illustration of the

As the City of Davis could not ask for

In considering whether to approve the settlement, the

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court notes that it is entirely reasonable that Newitt would wish

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to free himself from the burden of litigation by settling the

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claims between Lewis and himself.

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that Lewis would wish to accept certain payment from a defendant

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whose liability is uncertain and who has a limited ability to

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pay.

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settlement payment compares to the total clean-up costs, the fact

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that Lewis, who bears the risk that $25,000 ultimately proves

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inadequate, contends that it is a reasonable settlement payment

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suggests that it is an adequate amount.

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the proposed settlement and the court can find no reason not to

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find it a fair, reasonable, and adequate one.

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It is also entirely reasonable

Although Lewis and Newitt did not explain how the $25,000

B.

No party has objected to

State Law Claims
Although some courts asked to approve an agreement such

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as this one that would settle both CERCLA and state law claims

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have considered exclusively federal law, Acme Fill Corp., 1995 WL
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822664, at *9, others have considered both federal and state law,

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AmeriPride Servs. Inc., 2007 WL 1946635, at *3-4.

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California law, parties to a settlement in an action with

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multiple tortfeasors may petition the court to make a

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determination that the settlement was entered into in good faith.

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See Cal. Civ. Proc. Code §877.6(a).

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if non-settling parties are afforded an opportunity to respond to

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the request for good faith determination.

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Code § 877.6(a)(2).

Under

A hearing need not be held

See Cal. Civ. Proc.

In determining whether a settlement agreement has been

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made in good faith, California courts consider “(1) a rough

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approximation of plaintiffs' total recovery and the settlor's

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proportionate liability; (2) the amount paid in settlement; (3)

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the allocation of settlement proceeds among plaintiffs; and (4) a

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recognition that a settlor should pay less in settlement than he

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would if he were found liable after a trial.”

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Intermodal, Inc. v. Lapmaster Int’l LLC, 632 F.3d 1056, 1064 (9th

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Cir. 2011) (quoting Tech–Bilt, Inc. v. Woodward-Clyce Assocs., 38

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Cal. 3d 488, 499 (1985)) (internal quotation marks omitted).

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“Other relevant considerations include the financial conditions

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and insurance policy limits of settling defendants, as well as

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the existence of collusion, fraud, or tortious conduct aimed to

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injure the interests of non-settling defendants.”

Mason & Dixon

Id.

In this case, there is no suggestion of collusion or

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fraud.

As noted above, although the parties have not shown how

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the $25,000 settlement payment compares to the total clean-up

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costs, the fact that Lewis is willing to accept that amount while

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bearing the risk that it is less than what Newitt might
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ultimately have been required to pay suggests that it is in the

2

range of appropriate settlement amounts.

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section 877, any party challenging a settlement bears the burden

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of establishing that the proposed settlement amount is “so far

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‘out of the ballpark’ that the equitable objectives of § 877 are

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not satisfied.”

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C 06-07164, 2010 WL 3211926, at *13 (N.D. Cal. Aug. 12, 2010)

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(citing Tech-Bilt, 38 Cal. 3d at 499-500).

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even attempted to make such a showing.

Additionally, under

Tyco Thermal Controls LLC v. Redwood Indus., No.

No party here has

Furthermore, under California Code of Civil Procedure

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11

section 877.6(a)(2), “[i]f none of the nonsettling parties files

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a motion within 25 days of mailing of the notice, application,

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and proposed order, or within 20 days of personal service, the

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court may approve the settlement.”

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settling parties received notice of the settlement, but none have

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objected to the agreement.

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18

As previously noted, non-

Accordingly, the court finds that the settlement was
entered into in good faith.

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IT IS THEREFORE ORDERED that:

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(1) The settlement between Newitt and Lewis is

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approved;
(2) Section 6 of the UCFA is adopted as the law in this

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case for the purpose of determining the legal effect of the

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settlement agreement on the liability of the non-settling

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defendants;

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(3) All claims for contribution or indemnity against

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Newitt arising out of the clean-up of the Property be, and hereby

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are, barred;
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(4) All claims for contribution or indemnity against

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Lewis arising out of the counterclaim asserted against him by

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Newitt be, and hereby are, barred;

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5

(5) All claims asserted by Lewis against Newitt in the
SAC be, and hereby are, DISMISSED with prejudice.

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7

(6) All counter-claims asserted by Newitt against Lewis
be, and hereby are, DISMISSED with prejudice; and

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(7) All crossclaims asserted by Newitt be, and hereby
are, DISMISSED with prejudice.
DATED:

February 28, 2012

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