California Department of Toxic Substances Control et al v. Jim Dobbas, Inc. et al

Filing 139

MEMORANDUM AND ORDER RE: MOTION FOR ORDER APPROVING CONSENT DECREE signed by Senior Judge William B. Shubb on 8/24/15 ORDERING that plaintiffs' motion for approval of the Consent Decree be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that all claims for contribution or indemnity against West Coast Wood Preserving, LLC arising out of response costs incurred at the Elmira Site be, and the same hereby are, DISMISSED pursuant to 42 U.S.C. § 9613(f)(2). (Becknal, R) R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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CALIFORNIA DEPARTMENT OF
TOXIC SUBSTANCES CONTROL and
the TOXIC SUBSTANCES CONTROL
ACCOUNT,
Plaintiffs,

CIV. NO. 2:14-595 WBS EFB
MEMORANDUM AND ORDER RE: MOTION
FOR ORDER APPROVING CONSENT
DECREE

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v.
JIM DOBBAS, INC., a
California corporation;
CONTINENTAL RAIL, INC., a
Delaware corporation; DAVID
VAN OVER, individually;
PACIFIC WOOD PRESERVING, a
dissolved California
corporation; and WEST COAST
WOOD PRESERVING, LLC, a
Nevada limited liability
company,
Defendants,
AND RELATED COUNTERCLAIMS AND
CROSS-CLAIMS.
----oo0oo----

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Plaintiffs California Department of Toxic Substances

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Control and the Toxic Substances Control Account (collectively
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“DTSC”) brought this action under the Comprehensive Environmental

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Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42

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U.S.C. §§ 9601 et seq., to recover cleanup costs incurred at 147

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A Street in Elmira, California (the “Elmira Site”) from

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defendants Jim Dobbas, Inc. (“Dobbas”), Continental Rail, Inc.

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(“CRI”), Pacific Wood Preserving Corporation (“PWP”), West Coast

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Wood Preserving, LLC (“WCWP”), Collins & Aikman Products, LLC

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(“C&A Products”), and David van Over.

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motion for approval of a proposed consent decree between

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plaintiffs and WCWP.

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Before the court is DTSC’s

opposition.

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(Docket No. 137.)

No party has filed an

As early as 1972, PWP conducted wood preserving

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operations at the Elmira Site.

(Decl. of Peter MacNicholl

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(“MacNicholl Decl.”) ¶ 5 (Docket No. 137-2).)

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resulted in contamination of soil and groundwater at the site

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with arsenic, chromium, and copper.

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1979, PWP sold the Elmira Site to the Wickes Corporation.

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5.)

These operations

(Id. ¶ 4.)

On September 12,

DTSC alleges that WCWP is a successor to PWP.

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(Id. ¶

(Id.)

From the 1980s through 2005, the Wickes Corporation and

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its successor, C&A Products, took various actions at the Elmira

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Site to address environmental contamination under the oversight

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of DTSC.

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installing asphalt caps over contaminated soils, constructing a

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drainage system, installing a groundwater extraction and

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treatment system, and performing groundwater monitoring.

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On March 20, 1997, C&A Products sold the Elmira Site to Dobbas

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and CRI.

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environmental actions and maintain the existing measures.

(Id. ¶ 6.)

(Id.)

These actions included excavating soil,

(Id.)

However, C&A Products continued to perform

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On May 17, 2005, C&A Products filed a petition for

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Chapter 11 bankruptcy.

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that it would not perform any further actions at the Elmira Site.

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(Id.)

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certain actions at the site.

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As a result, DTSC initiated state-funded actions beginning around

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November 9, 2006.

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(Id.)

It informed DTSC in November 2005

In 2006, DTSC requested that Dobbas and CRI carry out
Dobbas and CRI refused.

(Id. ¶ 7.)

(Id. ¶¶ 7-8.)

DTSC performed response actions from 2007 to the

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present, including excavating and backfilling soil, demolishing

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the groundwater extraction system, and monitoring groundwater.

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(See id. ¶¶ 8-10.)

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contamination trends.

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5, 2015, its unreimbursed response costs relating to the site

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exceed $2.65 million, exclusive of interest.

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further states that the costs for future investigation,

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remediation of contaminated soil, and treatment of surface and

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groundwater could reach approximately $3.5 million over the next

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ten years.

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It continues to monitor the site and evaluate
(Id. ¶ 11.)

DTSC states that, as of May

(Id. ¶ 13.)

It

(Id.)

DTSC contends in this action that WCWP is a responsible

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party pursuant to section 107(a) of CERCLA, 42 U.S.C. § 9607(a),

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and is therefore jointly and severally liable for the costs DTSC

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incurred at the Elmira Site.

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for summary judgment, asserting, among other things, that DTSC’s

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claims are barred by the applicable statute of limitations and

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that WCWP is not the corporate successor to PWP.

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79.)

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DTSC informed the court that they had reached a settlement.

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Docket No. 120.)

On December 15, 2014, WCWP moved

(See Docket No.

Before the court ruled on that motion, however, WCWP and

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(See

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I.

Discussion

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“In order to approve a CERCLA consent decree, a

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district court must conclude that the agreement is procedurally

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and substantively ‘fair, reasonable, and consistent with CERCLA’s

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objectives.’”

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(9th Cir. 2014) (quoting United States v. Montrose Chem. Corp. of

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Cal., 50 F.3d 741, 748 (9th Cir. 1995)).

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approval of a consent decree must provide “evidence sufficient to

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evaluate the terms of an agreement.”

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Arizona v. City of Tucson, 761 F.3d 1005, 1011-12

Parties seeking

Id. at 1012.

“Fair” and “reasonable” are comparative terms.

Id.

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Accordingly, the court’s “obligation to independently scrutinize

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the terms of [such agreements]” must involve, among other things,

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“comparing the proportion of total projected costs to be paid by

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the [settling parties] with the proportion of liability

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attributable to them.”

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747) (quotation marks omitted).

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the equation any reasonable discount for litigation risks, time

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savings, and the like . . . .”

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abuses its discretion where it does not fulfill its obligation to

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engage in this comparative analysis.”

Id. at 1008 (quoting Montrose, 50 F.3d at
The court must then “factor into

Id. at 1012.

“A district court

Id.

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“[W]here state agencies have environmental expertise

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they are entitled to ‘some deference’ with regard to questions

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concerning their area of expertise.”

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of Bangor v. Citizens Commc’ns Co., 532 F.3d 70, 94 (1st Cir.

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2008)).

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areas outside their expertise, such as their interpretation of

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CERCLA’s requirements.

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///

Id. at 1014 (quoting City

State agencies are not entitled to deference regarding

Id. at 1014-15.

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A. Terms of the Proposed Consent Decree

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The proposed Consent Decree provides that DTSC will

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release WCWP from liability in this action in exchange for, among

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other things, payment of $350,000.

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23.)

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sells its business, in which case the full amount will be due

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within sixty days of the completion of the sale.

(See Consent Decree ¶¶ 13,

The payment will be made in three installments, unless WCWP

(Id. ¶ 23.)

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WCWP further agrees to provide DTSC with copies of all

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records, documents, and other information in its possession that

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relate to (1) the ownership, operation, or control of the Elmira

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Site; (2) the purchase, storage, use, handling, generation,

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treatment, transportation, or disposal of hazardous substances in

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connection with the Elmira Site; (3) releases or threatened

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releases of hazardous substances at the Elmira Site; and (4)

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response actions conducted by any person at the Elmira Site.

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(Id. ¶ 25.)

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The Consent Decree provides for contribution protection

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pursuant to section 113(f)(2) of CERCLA, 42 U.S.C. § 9613(f)(2).1

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(Consent Decree ¶¶ 36-39.)

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or assert claims against each other in connection with the

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subject matter of DTSC’s First Amended Complaint or for response

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costs related to the Elmira Site.

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///

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DTSC and WCWP also agree not to sue

(See id. ¶¶ 29-31, 35).

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Section 113(f)(2) provides, in relevant part, “[a]
person who has resolved its liability to the United States or a
State in an administrative or judicially approved settlement
shall not be liable for claims for contribution regarding matters
addressed in the settlement.” 42 U.S.C. § 9613(f)(2).
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B. Analysis

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1. Procedurally Fair Process

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The court turns first to whether the proposed Consent

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Decree is the “product of a procedurally fair process.”

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Montrose, 50 F.3d at 746.

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faith, “arm’s length” negotiations among experienced counsel,

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during which all the parties have an opportunity to participate.

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See Montrose, 50 F.3d at 746; see also United States v. Cannons

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Eng’g Corp., 899 F.2d 79, 87 (1st Cir. 1990).

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Such a process generally involves good

The settling parties represent that they engaged in

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arms’-length settlement negotiations in which all were

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represented by counsel.

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negotiations included a day-long mediation with a neutral

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mediator experienced in environmental law.

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WCWP jointly drafted the terms of the proposed Consent Decree

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during several months of negotiations.

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(MacNicholl Decl. ¶ 14.)

Those

(See id.)

DTSC and

(Id. ¶ 15.)

The arms’-length character of their negotiations is

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reinforced by the fact that the parties reached settlement after

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WCWP moved for summary judgment and put forth substantial

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evidence in its defense.

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its own evidence, suggesting that both parties had the

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opportunity to showcase the strengths of their position before

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settlement was reached.

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DTSC vigorously opposed the motion with

DTSC lodged the proposed Consent Decree with the court

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on June 2, 2015.

(Docket No. 131-1.)

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published notice of the Consent Decree in the California

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Regulatory Notice Register (2015, Volume No. 25-Z), page 1060,

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and invited the public to comment on it by July 20, 2015.
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On June 19, 2015, DTSC

(See

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MacNicholl Decl. ¶ 16, Ex. 1.)

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local newspaper, the Dixon Tribute, (see id. ¶ 16, Ex. 2), and it

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emailed notice to all parties in this lawsuit, (see id. ¶ 16, Ex.

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3).

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Decree.

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reason to doubt the integrity of these steps, the court concludes

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the proposed Consent Decree resulted from a procedurally fair

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process.

DTSC also published notice in a

DTSC did not receive any comments on the proposed Consent

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(Id. ¶ 17.)

Accordingly, because the court can find no

2. Substantively Fair and Reasonable Terms

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Next, the court must consider whether the proposed

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Consent Decree is “substantively fair to the parties in light of

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a reasonable reading of the facts.”

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see also Cannons, 899 F.2d at 87 (“Substantive fairness

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introduces into the equation concepts of corrective justice and

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accountability: a party should bear the cost of the harm for

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which it is legally responsible.”).

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Montrose, 50 F.3d at 746;

WCWP has agreed to pay $350,000 of the approximately

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$2.65 million that DTSC says have been spent responding to

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contamination at the Elmira Site.

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covenant not to sue each other in the future for response costs

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relating to the site, meaning that WCWP will not face further

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liability for any of the estimated $3.5 million that DTSC states

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will be incurred over the next ten years.

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¶ 13.)

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total of approximately $6.15 million in costs incurred by the

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state.

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The parties agreed to a

(See MacNicholl Decl.

In short, WCWP will pay $350,000 toward an estimated

The proportion of costs recouped by DTSC is relatively
small.

WCWP will pay about thirteen percent of the costs
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incurred to date and just under six percent of the total

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estimated costs DTSC says it will incur responding to

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contamination at the Elmira Site.

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DTSC states in its supporting memorandum that WCWP’s

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proportionate liability for response costs at the Elmira Site is

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approximately one-third.

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DTSC justifies this number by pointing to its allegations that,

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unlike other defendants who merely owned the Elmira Site, WCWP

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was both an owner and operator of the site.

(DTSC’s Mem. at 9 (Docket No. 137-1).)

(Id.)

At oral

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argument today, counsel for DTSC further represented that the

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parties considered factors such as the length of time WCWP’s

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alleged predecessor PWP owned and operated the Elmira Site,

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whether WCWP had complied with any agency or court orders

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relating the site, and whether WCWP had paid for any cleanup

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costs before this lawsuit.

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DTSC is the lead agency responsible for enforcing

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California’s Hazardous Substance Account Act (“HSAA”) and for

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investigating and responding to releases of hazardous substances

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in California.2

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Accordingly, because court may afford DTSC “some deference” on

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the subject of responding to releases of hazardous substances, it

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will give deference to DTSC’s estimation that WCWP’s actions are

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See Cal. Health & Safety Code § 25354.5.

HSAA is the state analogue to CERCLA. See Coppola v.
Smith, 935 F. Supp. 2d 993, 1011 (E.D. Cal. 2013) (Ishii, J.)
(“Although the HSAA is not identical to CERCLA, the HSAA
expressly incorporates the same liability standards, defenses,
and classes of responsible persons as those set forth in CERCLA.”
(citations omitted)); Castaic Lake Water Agency v. Whittaker
Corp., 272 F. Supp. 2d 1053, 1084 n.40 (C.D. Cal. 2003) (“HSAA
creates a scheme that is identical to CERCLA with respect to who
is liable.” (citations and internal quotation marks omitted)).
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responsible for approximately one-third of the agency’s response

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costs.

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See City of Tuscon, 761 F.3d at 1014.
This does not mean the court may defer to DTSC’s

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representations that the Consent Decree is substantively fair.

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See id. at 1014-15 (stating that a state agency is not entitled

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to deference concerning its interpretation of CERCLA’s mandate).

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Through CERCLA, “Congress intended that those responsible for

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problems caused by the disposal of chemical poisons bear the

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costs and responsibility for remedying the harmful conditions

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they created.”

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Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074, 1081 (1st

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Cir. 1986)).

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cleanup costs, as DTSC says it is, the parties must contemplate a

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substantial discount for “litigation risks, time savings, and the

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like” to arrive at the thirteen percent of costs so far incurred-

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-and six percent of total costs--that WCWP will actually pay

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pursuant to their agreement.

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1012.

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a discount next.

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Cannons, 899 F.2d at 90-91 (quoting Dedham Water

If WCWP is responsible for one-third of DTSC’s

See City of Tucson, 761 F.3d at

The court will therefore evaluate factors justifying such

The record supports several risks for DTSC from

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continued litigation against WCWP.

WCWP highlighted at least two

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of these risks in its motion for summary judgment.

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that it is not a corporate successor to PWP, and therefore cannot

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be held liable for contamination caused at the Elmira Site by

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PWP.

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barred by the applicable statute of limitations.

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idle argument, as this court has found CERCLA claims brought by

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DTSC to be time-barred in the past.

WCWP argued

The motion also contended that DTSC’s claims are time-

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This was not an

See, e.g., State of Cal. on

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Behalf of Cal. Dep’t of Toxic Substances Control v. Hyampom

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Lumber Co., 903 F. Supp. 1389, 1394 (E.D. Cal. 1995).

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prevailed on either of these arguments, it would not have faced

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any liability for DTSC’s response costs.

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Had WCWP

In addition, WCWP and several other defendants have

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filed counterclaims against DTSC asserting that the agency’s

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direction and oversight of response actions at the Elmira Site

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contributed to the site’s contamination and incurred unnecessary

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costs.

(See WCWP’s Counterclaim ¶ 7 (Docket No. 67).)

For

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example, WCWP alleges that DTSC knew or should have known that

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the installation of a groundwater extraction and treatment system

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would not remedy contamination at the site but approved its use

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in 1983 nonetheless.

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groundwater system in 2010, incurring additional and allegedly

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unnecessary costs.

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the unreimbursed response costs asserted by DTSC were inflated by

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the agency’s reckless or negligent selection of response actions.

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(See id. ¶ 27.)

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into the parties’ settlement amount.

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(Id.)

DTSC later demolished the

(Id. ¶¶ 15-18.)

These allegations suggest

This possibility will presumably have factored

Both parties also face costly and time consuming

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discovery from continued litigation.

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motion for summary judgment requested additional time pursuant to

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Federal Rule of Civil Procedure 56(d) for discovery related to

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WCWP’s relationship to PWP and the Elmira Site.

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at 17-20 (Docket No. 107).)

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fact that additional subjects for discovery remained at the time

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the parties reached a settlement.

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DTSC’s opposition to WCWP’s

(See Pls.’ Opp’n

The record therefore supports the

Moreover, the discovery cutoff set by the court’s
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Pretrial Scheduling Order is March 30, 2016.

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Scheduling Order at 2-3 (Docket No. 20).)

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DTSC and WCWP at least six months of further discovery.

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eliminates the costs of pretrial research, pretrial filings, and

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ultimately, bringing these claims to trial.

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whether to approve the settlement, the court finds it entirely

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reasonably that DTSC and WCWP would wish to free themselves from

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these burdens by settling their claims.

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reasonable to discount WCWP’s proportional liability based on

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(See Pretrial

Early settlement saves
It also

In considering

It is also entirely

these savings.

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WCWP’s status as the first party in this case to settle

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could justify another discount from its estimated proportional

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liability.

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the government may find it appropriate to offer relatively

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favorable terms to early settlers, thereby encouraging other

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parties to settle based on the possibility that late settlers and

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non-settlers bear the risk that they might ultimately be

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responsible for an enhanced share of the total claim.”3

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States v. Fort James Operating Co., 313 F. Supp. 2d 902, 909

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(E.D. Wis. 2004); see also Cannons, 899 F.2d at 92

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(“Disproportionate liability, a technique which promotes early

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settlements and deters litigation for litigation’s sake, is an

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integral part of the statutory plan.”).

“Given CERCLA’s joint and several liability scheme,

United

DTSC may have provided

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CERCLA enables this strategy through 42 U.S.C.
§ 9613(f)(2). As the First Circuit explained in Cannons, “[t]he
statute immunizes settling parties from liability for
contribution and provides that only the amount of the settlement-not the pro rata share attributable to the settling party--shall
be subtracted from the liability of the nonsettlors.” Cannons,
899 F.2d at 91.
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WCWP with favorable terms in order to leverage comparatively

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greater liability toward resolving claims against the remaining

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defendants.

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Accordingly, after conducting the required comparative

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fault analysis and considering facts in the record that justify a

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discounted settlement amount, the court concludes that the terms

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of the proposed Consent Decree are substantively fair and

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reasonable.

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3. Consistent with CERCLA’s Objectives

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Finally, the court must consider whether the proposed

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Consent Decree is consistent with CERCLA’s objectives.

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Montrose, 50 F.3d at 746.

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party that is legally responsible for contamination accountable.

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See Cannons, 899 F.2d at 90-91.

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at length above, the court sees no need to reiterate the same

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points here except to note that, by requiring WCWP to pay for a

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portion of DTSC’s cleanup costs, the Consent Decree advances that

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objective.

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the extent to which consent decrees are consistent with Congress’

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discerned intent involves matters implicating fairness and

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reasonableness” and that the approval criteria “were not meant to

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be mutually exclusive”).

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See

These objectives include holding a

Having addressed accountability

See Cannons, 899 F.2d at 90 (noting “consideration of

In addition, “one of the core purposes of CERCLA is to

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foster settlement through its system of incentives and without

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unnecessarily further complicating already complicated

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litigation.”

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710 F.3d 946, 971 (9th Cir. 2013) (quoting Cal. Dep’t of Toxic

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Substances Control v. City of Chico, 297 F. Supp. 2d 1227, 1235

Chubb Custom Ins. Co. v. Space Sys./Loral, Inc.,

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(E.D. Cal. 2004) (Karlton, J.)).

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against WCWP before going to trial therefore advances this

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purpose by securing settlement with WCWP and increasing the

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pressure on remaining parties to reach a settlement.

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Cannons, 899 F.2d at 92.

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The resolution of DTSC’s claims

See

The Cannons court also explained that CERCLA was

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intended to give regulators “the tools necessary for a prompt and

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effective response to . . . hazardous waste disposal.”

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899 F.3d at 90.

Cannons,

The court does not find this objective directly

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relevant in the instant context because the proposed Consent

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Decree focuses on recovering response costs that have already

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been expended responding to contamination.

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objective may be indirectly advanced by reinforcing DTSC’s

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ability to promptly and effectively respond to contamination

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using state funds with the knowledge, ex ante, that similar

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consent decrees may be used to bypass the uncertainties of

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litigation and recover those expenses later.

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However, this

Accordingly, because the court concludes from the

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evidence before it that the proposed Consent Decree is

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procedurally and substantively fair, reasonable, and consistent

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with CERCLA’s objectives, the court will order its approval.

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City of Tucson, 761 F.3d at 1011-12.

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See

IT IS THEREFORE ORDERED that plaintiffs’ motion for

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approval of the Consent Decree be, and the same hereby is,

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GRANTED.

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IT IS FURTHER ORDERED that all claims for contribution

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or indemnity against West Coast Wood Preserving, LLC arising out

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of response costs incurred at the Elmira Site be, and the same
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hereby are, DISMISSED pursuant to 42 U.S.C. § 9613(f)(2).

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Dated:

August 24, 2015

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