KFD Enterprises Inc v. City of Eureka

Filing 641

ORDER by Judge Samuel Conti granting in part and denying in part 620 ERI's Motion for Settlement; granting 621 Multimatic's Motion for Settlement (sclc2, COURT STAFF) (Filed on 11/6/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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KFD ENTERPRISES, INC.,
Plaintiff,

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v.

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CITY OF EUREKA, et al.

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Defendants.

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AND RELATED COUNTER AND CROSS
CLAIMS

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Case No. 08-04571-SC
ORDER RE: MOTIONS FOR
DETERMINATION OF GOOD FAITH
SETTLEMENT

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I.

INTRODUCTION
Plaintiff KFD Enterprises, Inc. ("KFD") brings this action

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against a number of parties seeking contribution for contamination

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of a property located at 2907 E Street, Eureka, California (the

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"Property").

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Resolutions, Inc. and Cardno USA, Inc. (collectively "ERI"), as

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well as Multimatic LLC and the Kirreberg Corporation (collectively,

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"Multimatic").

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respective settlement agreements.

KFD recently reached a settlement with Environmental

ERI and Multimatic now move for approval of their
ECF No. 620 ("ERI Mot."), 621

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("Multimatic Mot.").

Defendant City of Eureka ("Eureka") opposes

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both motions.

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Multimatic Mot."). 1

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without oral argument per Civil Local Rule 7-1(b).

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set for the below, Multimatic's motion is GRANTED and ERI's motion

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is GRANTED in part and DENIED in part.

ECF Nos. 626 ("Opp'n to ERI Mot."), 630 ("Opp'n to
This matter is appropriate for resolution
For the reasons

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II.

BACKGROUND
KFD commenced dry cleaning operations on the Property, which

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United States District Court

For the Northern District of California

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included use of PCE, on or about 1980.

During this time, KFD used

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Multimatic's dry cleaning equipment.

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hydrocarbon and volatile organic compound contamination was

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discovered on the Property, primarily PCE and TCE.

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which owned the Property from 1964 through 1979, investigated the

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contamination and hired ERI to install monitoring wells on the

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Property.

On or about 1998, petroleum

Union Oil,

In or around 2008, KFD brought suit against several parties,

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including Eureka, as well as Union Oil, Unocal, and Chevron

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(collectively, "Union Oil"), alleging that they had contributed to

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the contamination on the Property.

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asserted state law claims and claims under the federal

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Comprehensive Environmental Response, Compensation, and Liability

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Act ("CERCLA"), 42 U.S.C. § 9601 et seq.

Among other things, KFD has

ERI was brought into the action via a third-party complaint,

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and KFD later named ERI as a direct defendant in the case.

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KFD

alleges that ERI's monitoring wells contributed to the

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The movants have filed replies in support of their motions. ECF
Nos. 628 ("Reply ISO ERI Mot."), 633 ("Reply ISO Multimatic Mot.").

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contamination on the Property, and that ERI was acting as Union

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Oil's agent when it installed the monitoring wells.

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also filed a cross-complaint against Union Oil.

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Multimatic, alleging that its dry cleaning equipment contributed to

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the contamination on the Property.

Eureka has

KFD also sued

KFD and ERI reached a settlement agreement on or around June

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6, 2013.

The key terms of the settlement are as follows: ERI will

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pay KFD $450,000 in exchange for a release of all claims by KFD

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arising out of or related to the action, or related to the

United States District Court

For the Northern District of California

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monitoring wells installed by ERI at the Property.

This includes a

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release of KFD's claims against Union Oil relating to the

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monitoring wells installed by ERI, but not ERI's other claims

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against Union Oil.

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KFD.

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any third-party claims relating to its claims against ERI in the

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instant action.

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claims relating to the monitoring wells installed by ERI.

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the settlement agreement, KFD and ERI shall bear their own costs

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and attorney's fees.

ERI will execute a mutual release in favor of

KFD will provide indemnity to ERI and hold it harmless from

This indemnity extends to Union Oil as to the
Under

On or around May 7, 2013, KFD also reached a settlement

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agreement with Multimatic.

The key terms of that settlement are as

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follows: Multimatic will pay KFD $650,000.

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forever discharge Multimatic from any and all claims, whether known

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or unknown.

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prejudice.

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respective costs and attorney fees.

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KFD will release and

KFD will dismiss its lawsuit against Multimatic with
The settling parties have agreed to bear their

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III. DISCUSSION
ERI and Multimatic now move for approval of their settlements

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with KFD.

Non-settling Defendant Eureka objects to the proposed

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settlements on two grounds: (1) to the extent the settlements are

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governed by state law, Eureka contends that they are not in good

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faith, and (2) Eureka contends that ERI's settlement with KFD

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should not affect Eureka's cross-complaint against Union Oil.

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A.

Choice of Law

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Eureka asks the Court to determine whether state or federal

United States District Court

For the Northern District of California

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law applies to the settlements.

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argues that the Court should reject the settlements because they

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violate section 877(a) of the California Code of Civil Procedure,

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which provides that any settlement shall reduce the claims against

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other non-settling defendants in the amount stipulated by the

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settlement, or in the amount of consideration paid for it,

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whichever is greater.

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not attempted to provide a credit to non-settling defendants.

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Eureka also contends that the settlements are far too low in light

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of ERI and Multimatic's role in the alleged contamination, and as a

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result, Eureka's potential liability will be disproportionately

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increased.

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If state law applies, Eureka

Eureka contends that ERI and Multimatic have

ERI and Multimatic argue that Eureka's concerns are misplaced

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because their settlements with KFD are governed not by section 877,

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but by federal common law and the proportionate share principles of

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the Uniform Comparative Fault Act ("UCFA").

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claim of the releasing person against other persons is reduced by

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the amount of the released person's equitable share of the

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obligation."

UCFA § 6.

Under the UCFA, "the

Thus, each defendant is liable for its

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equitable share of the total liability, regardless of the

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settlements by other defendants.

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The Court finds that the claims at issue are governed by the

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proportionate share approach of the UCFA.

None of the parties

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appears to object to this approach.

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California have repeatedly adopted the UCFA approach in other

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multi-party CERCLA cases, including those which also involved

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pendant state law claims.

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Indus. Servs., Case No. CIV. S-00-113-LKK JFM, 2007 U.S. Dist.

Moreover, federal courts in

See, e.g., AmeriPride Servs. v. Valley

United States District Court

For the Northern District of California

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LEXIS 51364, at *10-11 (E.D. Cal. July 2, 2007); City of Oakland v.

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Keep on Trucking Co., Case No. C-95-03721-CRB, 1998 U.S. Dist.

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LEXIS 20213, at *12 (N.D. Cal. Dec. 21, 1998).

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Since the effect of settlement agreements is governed by

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federal law, Eureka's state law objections to the settlements are

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OVERRULED.

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B.

Union Oil

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The KFD-ERI settlement also resolves claims asserted against

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Union Oil as they relate to monitoring wells installed by ERI:

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"Releasors further do hereby and forever release and discharge

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Union Oil . . . from all Claims relating to the monitoring wells at

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the Property installed by ERI . . ."

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argues that the KFD-ERI settlement cannot resolve Eureka's cross-

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complaint against Union Oil because neither Eureka nor Union Oil

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were parties to the settlement, and KFD has no standing to release

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Eureka's claims.

Reyna Decl. Ex. H.

Eureka

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ERI responds that "all indemnity and contribution claims

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involving the ERI monitoring wells should be barred, because to do

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less, would render the settlement not completely approved and would

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not result in a full claims bar."

Reply at 3.

This argument is

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predicated on the unfounded assumption that the Court is obligated

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to approve a complete settlement.

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Eureka's argument that the settling parties lack standing to

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dismiss Eureka's claims against Union Oil.

Moreover, ERI has yet to address

ERI further argues that because the UCFA applies to the

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settlement, KFD, not Eureka, bears the risk from any perceived

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underpayment under the settlement.

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is entirely possible that the proposed ERI-KFD settlement could

The Court is not convinced.

United States District Court

For the Northern District of California

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prejudice Eureka's right to seek indemnification or contribution

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from Union Oil with respect to one or more of the other claims or

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cross-claims filed against Eureka in this matter.

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explanation, the Court declines to allow ERI and KFD to

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unilaterally dismiss Eureka's claims against Union Oil.

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represents, application of the UCFA will protect Eureka from any

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potential underpayments, then ERI, KFD, and Eureka should have no

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It

difficulty reaching a settlement on this issue.

If, as ERI

Accordingly, the Court finds that ERI and KFD's settlement

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Without further

does not affect Eureka's claims as they pertain to Union Oil.

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IV.

CONCLUSION

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For the foregoing reasons, Multimatic's motion is GRANTED.

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The settlement agreement between KFD and Multimatic is approved

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under the applicable federal and state laws.

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UCFA apply with respect to the effect of the KFD-Multimatic

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settlement as to both federal and state law claims.

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asserted in this action by KFD against Multimatic are hereby

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DISMISSED with prejudice.

The provisions of the

All claims

All claims against Multimatic relating

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to the facts of this action, including, but not limited to,

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contribution and indemnity claims that have been or could have

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been, asserted by any person or entity, in this action or

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otherwise, whether such claims are or could be brought pursuant to

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federal or state law, are hereby BARRED.

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against Multimatic in this action are hereby DISMISSED with

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prejudice.

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All pending cross-claims

ERI's motion is GRANTED in part and DENIED in part.

If KFD

and ERI still wish to proceed with their settlement, they shall

United States District Court

For the Northern District of California

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submit a proposed order consistent with the guidance set forth

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above.

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electronic filing system within ten (10) days of the signature date

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of this Order.

The proposed order shall be filed via the Court's

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IT IS SO ORDERED.

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November 6, 2013

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UNITED STATES DISTRICT JUDGE

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