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

Filing 149

ORDER signed by Senior Judge William B. Shubb on 11/13/15 ORDERING that granting 146 Motion for Approval of the Consent Decree between plaintiffs and Jim Dobbas, Inc. is GRANTED; all claims for contribution or indemnit against Jim Dobbas, Inc. arising out of response costs incurred at the Elmira Site are DISMISSED pursuant to 42 U.S.C. § 9613(f)(2). (Benson, A)

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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---Plaintiffs California Department of Toxic Substances
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 (“Van Over”).

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before the court is DTSC’s motion for approval of a proposed

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Consent Decree between plaintiffs and Dobbas.

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No party has filed an opposition.

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I.

Presently

(Docket No. 146.)

Factual and Procedural Background

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From 1972 to 1982, wood preserving operations at the

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Elmira Site contaminated the soil and groundwater with arsenic,

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chromium, and copper.

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144).)

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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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In 1997, C&A Products sold the Elmira Site to Dobbas and CRI.

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(Id.)

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actions and maintain the existing measures.

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(MacNicholl Decl. ¶¶ 4-5 (Docket No.

From the 1980s through 2005, the Wickes Corporation and

(Id. ¶ 6.)

These actions included excavating soil,

(Id.)

However, C&A Products continued to perform environmental

In May 2005, C&A Products filed a petition for Chapter

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11 bankruptcy.

(Id.)

It informed DTSC in November 2005 that it

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would not perform any further actions at the Elmira Site.
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(Id.)

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In 2006, DTSC requested that Dobbas and CRI carry out certain

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actions at the site.

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result, DTSC initiated and performed state-funded response

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actions from 2007 to the present, including excavating and

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backfilling soil, demolishing the groundwater extraction system,

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and monitoring groundwater.

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sold the Elmira Site to Van Over in 2011, and DTSC continues to

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monitor the site and evaluate contamination trends.

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9-11.)

Dobbas and CRI refused.

(Id. ¶ 7.)

(See id. ¶¶ 7-10.)

As a

Dobbas and CRI

(See id. ¶¶

DTSC states that, as of May 5, 2015, its unreimbursed

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response costs relating to the site exceeded $2.65 million,

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exclusive of interest.

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costs for future investigation, remediation of contaminated soil,

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and treatment of surface and groundwater could reach

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approximately $3.5 million by 2025.

(Id. ¶ 13.)

It further states that the

(Id.)

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DTSC contends in this action that Dobbas is a

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

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§ 9607(a), and is therefore jointly and severally liable for the

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costs DTSC has incurred at the Elmira Site.

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2.)

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grounds, (Docket Nos. 23-1 to 23-3, 25), and cross-claims against

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the other defendants, (Docket No. 101).

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moved for summary judgment against DTSC, asserting, among other

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things, that DTSC’s claims are barred by the applicable statute

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of limitations.

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that motion, however, Dobbas and DTSC informed the court that

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they had reached a settlement.

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lodged the proposed Consent Decree on July 15, 2015.

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135.)

(Docket No. 77 at

Dobbas has filed counterclaims against DTSC on the same

(See Docket No. 116.)

In March 2015, Dobbas

Before the court ruled on

(See Docket Nos. 122-25.)

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DTSC

(Docket No.

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II.

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.

A. Terms of the Proposed Consent Decree
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The proposed Consent Decree provides that DTSC will

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release Dobbas from liability in this action in exchange for,

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among other things, payment of $350,000.

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¶¶ 12, 22.)

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all records, documents, and other information in its possession

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

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

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generation, treatment, transportation, or disposal of hazardous

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substances in connection with the Elmira Site; (3) releases or

(See Consent Decree

Dobbas also agrees to provide DTSC with copies of

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threatened releases of hazardous substances at the Elmira Site;

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and (4) response actions conducted by any person at the Elmira

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Site.

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contribution protection pursuant to section 113(f)(2) of CERCLA,

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42 U.S.C. § 9613(f)(2).1

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agree not to file any claims against each other regarding

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response costs at the Elmira Site.

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(Id. ¶ 24.)

The Consent Decree entitles Dobbas to

(Id. ¶¶ 33-35.)

DTSC and Dobbas also

(See id. ¶¶ 27, 32.)

B. Analysis

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1. Procedurally Fair Process

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The court must first determine whether the proposed

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Consent 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 parties have an opportunity to participate.

Such a process generally involves good

See

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Section 9613(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). However,
such person “may seek contribution from any person who is not
party to [the] settlement.” Id. § 9613(f)(3)(B).
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id.; see also United States v. Cannons Eng’g Corp., 899 F.2d 79,

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87 (1st Cir. 1990).

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The settling parties represent that they engaged in

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arm’s-length settlement negotiations in which all were

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represented by counsel.

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Dobbas jointly drafted the terms of the proposed Consent Decree.

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(Id. ¶ 15.)

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reinforced by the fact that the parties reached settlement after

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Dobbas filed counterclaims against DTSC, moved for summary

(MacNicholl Decl. ¶¶ 14-15.)

DTSC and

The arm’s-length character of their negotiations is

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judgment, and put forth substantial evidence in its defense,

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indicating that both parties had the opportunity to showcase the

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strengths of their positions before they reached settlement.

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After lodging the proposed Consent Decree with the

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court, DTSC published notice of the Consent Decree in the

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California Regulatory Notice Register (2015, Volume No. 29-Z),

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pages 1210-11, and invited the public to comment on it until

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August 17, 2015.

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published such notice in a local newspaper, the Dixon Tribune,

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(id. ¶ 16, Ex. 2), and emailed notice to all parties in this

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lawsuit, (id. ¶ 16, Ex. 3).

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on, or objections to, the proposed Consent Decree.

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Since the court can find no reason to doubt the integrity of

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these steps, the court concludes that the proposed Consent Decree

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resulted from a procedurally fair process.

(MacNicholl Decl. ¶ 16, Ex. 1.)

It also

DTSC did not receive any comments
(Id. ¶ 17.)

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2. Substantively Fair and Reasonable Terms

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Next, the court must determine 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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Montrose, 50 F.3d at 746;

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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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Dobbas has agreed to pay $265,000 of the approximately

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$2.65 million that DTSC says it incurred in 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 Dobbas will not face further

The parties agreed to a

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liability for any of the $3.5 million that DTSC estimates it will

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incur by 2025.

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costs recouped by DTSC is relatively small: Dobbas will pay 10%

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of the costs that DTSC has incurred to date and approximately

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7.6% of the estimated costs it will incur by 2025.

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(See MacNicholl Decl. ¶ 13.)

The proportion of

DTSC states that Dobbas’s proportionate liability for

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response costs at the Elmira Site is approximately 20% because

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Dobbas held half of the site’s property interest, never conducted

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wood preserving operations at the site, and did not cause the

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contamination there.

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Because 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 hazardous substance releases in

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California,2 the court affords “some deference” to DTSC’s

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estimation of Dobbas’s proportionate liability of the agency’s

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(DTSC’s Mem. at 9 (Docket No. 143).

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)).
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response costs.

See City of Tuscon, 761 F.3d at 1014.

DTSC justifies discounting Dobbas’s proportionate

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liability to 10% of DTSC’s current unreimbursed costs by

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factoring in several risks that arise from continued litigation

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between the parties.

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judgment on the basis that DTSC’s claims were time-barred by the

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applicable statute of limitations.

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as this court has found in the past that DTSC’s CERCLA claims

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were in fact time-barred.

Dobbas had previously moved for summary

Such an argument was viable,

See, e.g., State of Cal. ex rel Cal.

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Dep’t of Toxic Substs. Control v. Hyampom Lumber Co., 903 F.

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Supp. 1389, 1394 (E.D. Cal. 1995).

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argument, it would not have faced any liability for DTSC’s

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response costs.

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If Dobbas prevailed on this

In addition, Dobbas had filed counterclaims against

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DTSC asserting that the agency’s direction and oversight of

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response actions at the Elmira Site contributed to the site’s

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contamination and incurred unnecessary costs.

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25 ¶¶ 11-12, 17, 26.)

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the settlement amount the possibility that DTSC’s negligently

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selected or implemented response actions may have inflated the

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agency’s asserted unreimbursed costs.

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(E.g., Docket No.

DTSC and Dobbas presumably factored into

Moreover, both parties face costly and time consuming

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discovery from continued litigation.

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additional time for discovery in opposing WCWP’s motion for

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summary judgment, (see Docket No. 107 at 17-20), it is likely

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that DTSC would have required additional discovery in opposing

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Dobbas’s summary judgment motion as well.

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cutoff set by the court’s Pretrial Scheduling Order is March 30,
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Since DTSC requested

Because the discovery

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2016, (Docket No. 20 at 2-3), early settlement also saves DTSC

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and Dobbas at least four months of additional discovery,

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research, and related costs and eliminates the parties’ costs of

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going to trial in this case.

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Dobbas wish to free themselves from these burdens by settling

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their claims.

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discounted Dobbas’s proportional liability based on these

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factors.

It is reasonable that DTSC and

The court thus finds it reasonable that DTSC

Dobbas’s status as the second defendant3 to settle in

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this case also justifies a discount from its estimated

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proportional liability.

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liability scheme, the government may find it appropriate to offer

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relatively favorable terms to early settlers, thereby encouraging

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other parties to settle based on the possibility that late

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settlers and non-settlers bear the risk that they might

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ultimately be responsible for an enhanced share of the total

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claim.”4

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2d 902, 909 (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.”).

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“Given CERCLA’s joint and several

United States v. Fort James Operating Co., 313 F. Supp.

CERCLA enables this strategy through 42 U.S.C.

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§ 9613(f)(2).

“The statute immunizes settling parties from

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liability for contribution and provides that only the amount of

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the settlement--not the pro rata share attributable to the

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The court approved a consent decree between DTSC and
WCWP on September 2, 2015. (Docket Nos. 139, 141.)
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settling party--shall be subtracted from the liability of the

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nonsettlors.”

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reasonable for DTSC to discount Dobbas’s proportionate liability

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and provide Dobbas favorable terms to leverage the remaining

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defendants’ comparatively greater liability in resolving the

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claims against them.

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Cannons, 899 F.2d at 91.

It would thus be

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 determine 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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parties who are legally responsible for the contamination at

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issue.

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Dobbas’s accountability at length above, the court sees no need

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to reiterate the same points here except to note that, by

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requiring Dobbas to pay for a portion of DTSC’s cleanup costs,

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the Consent Decree advances that objective.

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F.2d at 90 (noting “consideration of the extent to which consent

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decrees are consistent with Congress’ discerned intent involves

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matters implicating fairness and reasonableness” and that the

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approval criteria “were not meant to be mutually exclusive”).

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See

This includes holding accountable the

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

Having addressed

See Cannons, 899

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) (citation omitted).

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Dobbas’s settlement of their claims and counterclaims at the

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pretrial stage advances this purpose and increases the pressure

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on the remaining defendants to reach a settlement.

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899 F.2d at 92.

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

See Cannons,

Lastly, CERCLA was intended to give regulators “the

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tools necessary for a prompt and effective response to . . .

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hazardous waste disposal.”

Cannons, 899 F.3d at 90.

The court

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does not find this objective directly relevant here because the

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proposed Consent Decree focuses on recovering response costs that

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DTSC has already expended responding to contamination.

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the Consent Decree may indirectly advance this objective because

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funds from the settlement reinforce DTSC’s ability to respond

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promptly and effectively to contamination.

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to use state funds with the knowledge that similar consent

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decrees may be used to bypass the uncertainties of litigation and

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recover those expenses in the future.

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However,

It also enables DTSC

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 between plaintiffs and Jim Dobbas,

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Inc. (Docket No. 146) be, and the same hereby is, GRANTED.

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IT IS FURTHER ORDERED that all claims for contribution
or indemnity against Jim Dobbas, Inc. arising out of response
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costs incurred at the Elmira Site be, and the same hereby are,

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DISMISSED pursuant to 42 U.S.C. § 9613(f)(2).

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Dated:

November 13, 2015

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