City of West Sacramento, et al., v. R and L Business Management et al

Filing 44

ORDER signed by Senior Judge William B. Shubb on 11/15/2018 GRANTING 37 Motion to Dismiss. Plaintiffs have 20 days from the date this Order is signed to file a Third Amended Complaint. This will be the last time plaintiffs are given leave to amend. (Huang, H)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 ----oo0oo---- 9 10 11 CITY OF WEST SACRAMENTO, CALIFORNIA; and PEOPLE OF THE STATE OF CALIFORNIA, Plaintiffs, 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 No. 2:18-cv-900 WBS EFB MEMORANDUM AND ORDER RE: MOTION TO DISMISS v. R AND L BUSINESS MANAGEMENT, a California corporation, f/k/a STOCKTON PLATING, INC., d/b/a CAPITOL PLATING, INC., a/k/a CAPITOL PLATING, a/k/a CAPITAL PLATING; CAPITOL PLATING INC., a dissolved California corporation; ESTATE OF GUS MADSACK, DECEASED; ESTATE OF CHARLES A. SCHOTZ a/k/a SHOTTS, DECEASED; ESTATE of E. BIRNEY LELAND, DECEASED; ESTATE OF FRANK E. ROSEN, DECEASED; ESTATE OF UNDINE F. ROSEN, DECEASED; ESTATE of NICK E. SMITH, DECEASED; RICHARD LELAND, an individual; JOHN CLARK, an individual; ESTATE OF LINDA SCHNEIDER, DECEASED; JUDY GUESS, an individual; JEFFREY A. LYON, an individual; GRACE E. LYON, an individual; THE URBAN FARMBOX LLC, a suspended California limited liability company; and DOES 1-50, inclusive, Defendants. 28 1 1 The City of West Sacramento, California (“the City”) 2 and the People of the State of California initiated this action 3 to address toxic levels of soil and groundwater contamination in 4 the environment within the City. 5 Richard Leland’s Motion to Dismiss the Second Amended Complaint. 6 (Docket No. 37.) 7 I. 8 9 Before the court is defendant Factual and Procedural Background This court’s prior two orders dismissing complaints as against defendant Richard Leland (Docket Nos. 18 & 33) describe 10 the parties and detail much of the procedural and factual 11 background to this lawsuit. 12 September 4, 2018, the court granted defendant Richard Leland’s 13 motion to dismiss in full and gave plaintiffs twenty days to file 14 an amended complaint. 15 In its most recent order issued on (Docket No. 33.) On September 20, 2018, plaintiffs filed the Second 16 Amended Complaint, which alleges the following causes of action 17 against Leland: (1) violation of the Resource Conservation and 18 Recovery Act (“RCRA”) § 7002(a), 42 U.S.C. § 6972(a)(1)(B); (2) 19 violation of the Comprehensive Environmental Response, 20 Compensation and Liability Act (“CERCLA”) § 107(a), 42 U.S.C. § 21 9607(a); (3) violation of The Gatto Act, California Health & 22 Safety Code §§ 25403-25403.8; (4) statutory indemnity; and (5) 23 declaratory relief and costs allegedly incurred in response to 24 soil and ground water contamination at and around the property. 25 (Second Am. Compl. (“SAC”) (Docket No. 34).) 26 Leland moves to dismiss the SAC against him in full. 27 28 2 Defendant Richard 1 II. Discussion 2 A. 3 On a Rule 12(b)(6) motion, the inquiry before the court Legal Standard 4 is whether, accepting the allegations in the complaint as true 5 and drawing all reasonable inferences in the plaintiff’s favor, 6 the plaintiff has stated a claim to relief that is plausible on 7 its face. 8 plausibility standard is not akin to a ‘probability requirement,’ 9 but it asks for more than a sheer possibility that a defendant See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The 10 has acted unlawfully.” 11 when the plaintiff pleads factual content that allows the court 12 to draw the reasonable inference that the defendant is liable for 13 the misconduct alleged.” 14 “labels and conclusions” will not survive a motion to dismiss. 15 Id. (internal quotation marks and citations omitted). Id. “A claim has facial plausibility Id. A complaint that offers mere 16 B. 17 Plaintiffs contend that Leland qualifies an “operator” 18 under CERCLA and RCRA1 such that he is liable for his individual 19 conduct in causing the alleged contamination.2 20 21 22 CERCLA and RCRA Claims 1 Both parties agree that the legal analysis under CERCLA and RCRA for operator liability should be the same considering that the term is defined identically in the two statutes. (See Pls.’ Opp’n to Mot. to Dismiss at 5 (Docket No. 40); Mot. to Dismiss Pls.’ SAC at 11.) 23 2 24 25 26 27 28 Plaintiffs also argue in their papers that Leland should be liable as an owner (Pls.’ Opp’n to Mot. to Dismiss at 2, 5) and that the court should pierce the corporate veil and hold Leland individually liable for the purportedly wrongful acts of the corporate defendants (SAC ¶ 57). At oral argument, however, plaintiffs’ counsel abandoned these two theories, and for good reason. To be liable as an “owner” for CERCLA purposes, the individual must be an absolute owner of the property where 3 1 CERCLA defines “owner or operator” as “any person 2 owning or operating such facility” but excludes any “person, who, 3 without participating in the management of a vessel or facility, 4 holds indicia of ownership primarily to protect his security 5 interest in the vessel or facility.” 6 42 U.S.C. § 9601 20(A)(ii). Given the circular definition of “operator” in the 7 statute, the Supreme Court clarified that “under CERCLA, an 8 operator is simply someone who directs the workings of, manages, 9 or conducts the affairs of a facility.” United States v. 10 Bestfoods, 524 U.S. 51, 66 (1998). 11 in the CERCLA context “must manage, direct, or conduct operations 12 specifically related to pollution, that is, operations having to 13 do with the leakage or disposal of hazardous waste, or decisions 14 about compliance with environmental regulations.” 15 The Ninth Circuit has further interpreted operator liability to 16 extend to any party with “authority to control the cause of the 17 contamination at the time the hazardous substances were released In other words, an operator Id. at 66-67. 18 19 20 21 22 23 24 25 26 27 28 hazardous substances were disposed of. See City of Los Angeles v. San Pedro Boat Works, 635 F.3d 440, 448–51 (9th Cir. 2011). As a lessee, Leland would not be liable, because under California law, “[a] leasehold is not an ownership interest unlike the possession of land in fee simple.” Auerbach v. Assessment Appeals Bd. No. 1., 39 Cal. 4th 153, 163 (2006) (citation omitted). Similarly, plaintiffs’ allegations as to piercing the corporate veil are identical to those in the original and first amended complaints, which the court determined were “no more than a recitation of the elements, and ‘[c]onclusory allegations of ‘alter ego’ status are insufficient to state a claim.’” (Docket No. 18 (quoting Gerritsen v. Warner Bros. Entm’t Inc., 116 F. Supp. 3d 1104, 1136 (C.D. Cal. 2015).) The court is unaware of any authority suggesting that Leland would be subject to liability on a theory of piercing the corporate veil solely because he is a shareholder of a closely held corporation. 4 1 into the environment.” 2 Dev. Corp., 976 F.2d 1338, 1341 (9th Cir. 1992); see also San 3 Pedro, 635 F.3d at 452 n.9 (restating this interpretation of 4 operator liability). 5 Kaiser Aluminum & Chem. Corp. v. Catellus Plaintiffs rely on three separate allegations in their 6 complaint to support a theory of operator liability.3 7 plaintiffs allege that Leland “was responsible for approving 8 purchase orders for chemicals and supplies, arranging for 9 delivery of the chemicals and supplies, and creating invoices for First, 10 the plating operation at the Property.” 11 plaintiffs contend that Leland “was responsible for waste 12 permitting and environmental compliance,” which “included 13 obtaining permits for the transportation of hazardous material.” 14 (SAC ¶ 46.) 15 lease the property suggests he had authority to control the 16 source of contamination. (SAC ¶ 52.) Second, Third, plaintiffs argue that Leland’s authority to (Pls.’ Opp’n to Mot. to Dismiss at 8.) 17 18 19 20 21 22 23 24 25 26 27 28 3 Leland’s status as President of Stockton Plating, Inc. is insufficient by itself to establish operator liability. Plaintiffs must show that Leland was personally involved with or personally responsible for the “operations specifically related to pollution” in order to establish operator liability. See Seattle Times Co. v. LeatherCare, Inc., No. C15-1901 TSZ, 2018 WL 3873562, at *30, --- F. Supp. 3d ---- (W.D. Wash. Aug. 15, 2018) (citing Bestfoods, 524 U.S. at 66–67). The authority to control test does not compel a different result, because it considers “a defendant’s actual conduct as evidence of the authority to control.” Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 842 (4th Cir. 1992); see also Kaiser Aluminum, 976 F.2d at 1341–42 (adopting the Fourth Circuit’s authority to control test as stated in Nurad). To hold otherwise test would make every President, CEO, or Board of Directors responsible for operations related to pollution, a result not contemplated by Bestfoods. See Bestfoods, 524 U.S. 69–70 (“[I]t cannot be enough to establish liability here that dual officers and directors made policy decisions and supervised activities at the facility.”). 5 1 Plaintiffs’ first two allegations are based on 2 information and belief. 3 information and belief, conclusory allegations asserted on such a 4 basis are insufficient to state a claim. 5 Corr. & Rehab., 727 F.3d 917, 927 (9th Cir. 2013) (citing Iqbal, 6 556 U.S. at 686). 7 dismiss if it “tenders naked assertions devoid of further factual 8 enhancement.” 9 any of the factual predicates to support plaintiffs’ conclusion While facts may be alleged on Blantz v. Cal. Dep’t of A complaint will not survive a motion to Iqbal, 556 U.S. at 678. The SAC does not detail 10 that Leland was responsible for environmental compliance or that 11 he arranged for delivery of chemicals to the property.4 12 these allegations read like conclusions because they simply plead 13 requirements for a person to be an operator under CERCLA. 14 also id. at 662 (“[T]he tenet that a court must accept a 15 complaint’s allegations as true is inapplicable to threadbare 16 recitals of a cause of action’s elements, supported by mere 17 conclusory statements.” (citing Bell Atl. Corp. v. Twombly, 550 18 U.S. 544, 555 (2007))). 19 Instead, See None of Leland’s statements that plaintiffs rely on 20 support these allegations. 21 Leland had knowledge after-the-fact about environmental 22 contamination at the property, not that he had control over the 23 source of the contamination. 24 plaintiffs provide a factual basis for these two allegations, Those statements merely show that (See SAC ¶¶ 46, 63–64.) Until 25 26 27 4 Nor does the complaint suggest that the necessary facts are “peculiarly within the possession and control of the defendant.” See Soo Park v. Thompson, 851 F.3d 910, 928 (9th Cir. 2017) (citations omitted). 28 6 1 they cannot support a theory of operator liability that can 2 survive a motion to dismiss.5 3 allegations would have to directly connect Leland to operations 4 at the site specifically related to pollution. 5 To be sufficient, any additional Finally, Leland’s mere status as a lessee of the 6 property cannot support a theory of operator liability. 7 court previously observed, this allegation does not demonstrate 8 that Leland participated in the disposal of hazardous wastes or 9 that he “had the authority to control the cause of contamination As this 10 at the time the hazardous substances were released into the 11 environment.” 12 lease does not necessarily imply control of “operations 13 specifically related to pollution.” 14 66. Kaiser Aluminum, 976 F.2d at 1341. Execution of a See Bestfoods, 524 U.S. at 15 Accordingly, the court will grant Leland’s motion to 16 dismiss plaintiffs’ CERCLA and RCRA claims based on “operator” 17 liability. 18 B. 19 Plaintiffs’ third and fourth causes of action are state State Law Claims 20 law claims that, as the court’s two prior orders indicated, 21 require plaintiffs to allege facts indicating that Leland owned 22 or operated the facility, or that he created the alleged 23 5 24 25 26 27 28 Even if plaintiffs have established that Leland directed deliveries to the property, that is not enough to establish that Leland had the authority to control what was delivered to the West Sacramento facility. The allegations in the complaint indicate that the West Sacramento facility was billed separately for all chemicals and supplies necessary for its operations, which casts doubt over the theory that the headquarters directed what happened at the facility. (See SAC ¶ 51.) 7 1 contamination. 2 as such all state law claims will be dismissed. Plaintiffs have failed to carry that burden, and 3 C. 4 Plaintiffs also request declaratory relief, contending 5 that because they have alleged a CERCLA claim, they are entitled 6 to declaratory relief under 42 U.S.C. § 9613(g)(2). 7 absence of a valid claim for recovery under CERCLA, declaratory 8 relief is unavailable. 9 993, 1005 (E.D. Cal. 2013) (Ishii, J.) (holding the same). 10 Declaratory Relief In the See Coppola v. Smith, 935 F. Supp. 2d IT IS THEREFORE ORDERED that Leland’s Motion to Dismiss 11 Plaintiffs’ Second Amended Complaint (Docket No. 37) be, and the 12 same hereby is, GRANTED. 13 Plaintiffs have twenty days from the date this Order is 14 signed to file a Third Amended Complaint, if they can do so 15 consistent with this Order.6 16 plaintiffs are given leave to amend. 17 opportunities to amend their complaint as to this defendant and 18 the court has clearly stated the deficiencies in plaintiffs’ 19 complaint each time. This will be the last time Plaintiffs have had three 20 21 22 23 24 25 26 27 28 6 The court rejects plaintiff’s request to permit this case to proceed to discovery so that plaintiffs can gather more facts to properly amend their complaint. The purpose of a motion to dismiss is to determine whether plaintiffs have stated a claim “such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011); see also Iqbal, 556 U.S. at 678–79 (“Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.”). Until plaintiffs can survive a motion to dismiss, the court will not permit discovery as to defendant Richard Leland. 8 1 Dated: November 15, 2018 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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