Chartis Specialty Insurance Company et al v. United States of America

Filing 124

ORDER by Judge Edward M. Chen Granting 105 Chartis' Motion for Reconsideration. (emcsec, COURT STAFF) (Filed on 1/26/2015)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 8 CHARTIS SPECIALTY INSURANCE COMPANY, et al., No. C-13-1527 EMC 9 Plaintiffs, v. ORDER GRANTING CHARTIS’ MOTION FOR RECONSIDERATION 11 For the Northern District of California United States District Court 10 UNITED STATES OF AMERICA, (Docket No. 105) 12 13 Defendant. ___________________________________/ 14 15 Pending before the Court is Plaintiff Chartis Specialty Insurance Company’s (“Chartis”) 16 motion for reconsideration. This motion is focused on a narrow issue: Does Chartis’ subrogation 17 claim under § 112 of the Comprehensive Environmental Response, Compensation, and Liability Act 18 (“CERCLA”), 42 U.S.C. § 9612 – first asserted in the amended complaint – relate back to the filing 19 of the original complaint.1 For the following reasons, the Court finds that it does and therefore 20 GRANTS Chartis’ motion for reconsideration. 21 Federal Rule of Civil Procedure 15(c) provides, in relevant part, that an “amendment to a 22 pleading relates back to the date of the original pleading when . . . the amendment asserts a claim or 23 defense that arose out of the conduct, transaction, or occurrence set out – or attempted to be set out – 24 in the original pleading.” Fed. R. Civ. P. 15(c). The relation back doctrine is to be “liberally 25 applied” as its purpose “‘is to provide maximum opportunity for each claim to be decided on its 26 merits rather than on procedural technicalities.’” ASARCO, LLC v. Union Pacific R. Co., 765 F.3d 27 28 1 A detailed discussion of the facts underlying this action can be found at Chartis Speciality Ins. Co. v. United States, No. C13-1527, 2013 WL 3803334 (N.D. Cal. July 19, 2013). 1 999, 1005 (9th Cir. 2014) (quoting 6 Charles Alan Wright et al., Federal Practice & Procedure 2 § 1471 (3d ed. 1998). “Gone are the code pleading days when a party was ‘irrevocably bound to the 3 legal or factual theory of the party’s first pleading.’” Id. (quoting 6 Wright et al., supra, § 1471). 4 Accordingly, relation back is “proper if the original pleading put the defendant on notice of the 5 ‘particular transaction or set of facts’ that the plaintiff believes to have caused the complained of 6 injury.” Percy v. San Francisco Gen. Hosp., 841 F.2d 975, 979 (9th Cir. 1988); see also Farma v. 7 Comm’r of Correctional Servs., 253 F.3d 804 (2d Cir. 2000) (“[T]he pertinent inquiry . . . is whether 8 the original complaint gave the defendant fair notice of the newly alleged claims.’” (quoting Wilson 9 v. Fairchild Republic Co., 143 F.3d 733, 738 (2d Cir. 1998)). Resolution of Chartis’ motion for reconsideration hinges on the impact of Custom Insurance 11 For the Northern District of California United States District Court 10 Co. v. Space Systems/Loral, Inc., 710 F.3d 946 (9th Cir. 2013). In that case the Ninth Circuit held 12 that an insurer cannot bring a direct claim under CERCLA § 107(a). The Court stated that a section 13 107(a) claim “plainly applies to a person who, through his or her own actions, becomes statutorily 14 liable for, or is subject to, the costs related to the cleanup” of a contaminated site. Id. at 961-62. It 15 then held that the insurer in that case “only alleges that by virtue of reimbursing [the property 16 owner] under its Policy, it became subrogated to [the property owner’s] right to pursue a section 17 107(a) claim. But a subrogee – simply by stepping into the shoes of the insured via a reimbursement 18 – cannot be liable for response costs under CERCLA, and thus cannot itself incur response costs.” 19 Id. at 962. Accordingly, the Ninth Circuit concluded that an insurer “lacks standing to sue under 20 section 107(a) because it has not itself become statutorily liable for response costs” and “section 21 107(a) does not support an application of subrogation under that provision.” Id. at 965. Chubb also 22 spoke to the necessary requirements in asserting a subrogration claim under § 112(c). The Ninth 23 Circuit, “after reviewing the statutory language, remedial scheme, and purpose of CERCLA, along 24 with relevant case law,” held that “an insured must first make a claim to either the Superfund or a 25 potentially liable party before an insurer can bring a subrogration action under section 112(c).” 26 Chubb, 710 F.3d at 971. A “claim” is defined under CERCLA as a “demand in writing for a sum 27 certain.” 42 U.S.C. § 9601(4). 28 2 1 Chubb had a major impact on the proceedings in this action. In the original complaint, filed 2 in December 2012 (three months before the Chubb decision issued), Chartis and Whittaker both 3 asserted a § 107 claim against the United States. See Complaint ¶¶ 63-88. A mere one week after 4 the Chubb decision came out, the parties stipulated to the filing of an amended complaint that sought 5 to “clarify” Chartis’ § 107 claim and add, for the first time, a subrogation claim under § 112. Docket 6 No. 27, at 2. Further, Whittaker made a formal written demand on the United States on March 28, 7 2013 (two weeks after the Chubb decision). Ultimately, this Court (in addressing the United States’ 8 motion to dismiss the amended complaint), found that Chubb required dismissal of Chartis’ section 9 107 claim. See Chartis, 2013 WL 3803334, at *10-11. The United States contends that because Whittaker did not make a written demand on the 11 For the Northern District of California United States District Court 10 United States until after the original complaint was filed, Chartis’ subrogration claims under 12 § 112(c) did not exist at the time of the original complaint. Accordingly, it contends relation back is 13 improper. While not without logical force, the Court finds the argument unpersuasive. 14 Here, it is undisputed that the amended complaint and the original complaint both arise out 15 of the same factual dispute – the alleged responsibility of the United States for environmental 16 contamination at the affected site. Further, Chartis has been a plaintiff in this action from the 17 beginning – having first asserted a claim under § 107 of CERCLA in the original complaint. See 18 Complaint ¶¶ 63-88. In fact, the original complaint expressly alleges that Chartis was the “subrogee 19 of Whittaker.” Id. ¶ 5. Accordingly, there can be no reasonable dispute that the United States was 20 on notice not only of the underlying dispute, but Chartis’ involvement as the property owner’s 21 subrogee. Hence, the core requirements of and policy consideration underlying Rule 15(c) relations 22 back are satisfied. The subsequent decision in Chubbs does not change this fact. Moreover, it is 23 noteworthy that Chartis has been diligently seeking to pursue its claims, promptly responding to the 24 guidance provided by the Chubb decision. See ASARCO, 765 F.3d at 1005 (relation back doctrine is 25 to be liberally applied and is designed to “provide maximum opportunity for each claim to be 26 decided on its merits rather than on procedural technicalities” (citation omitted)). Until its insured 27 made a claim for a sum certain, there was nothing more that Chartis could do. While it is true that 28 technically, Chartis had no right to sue under § 112 at the time of the complaint, to deny relations 3 1 back when all the basic requisites of relations back are met would exalt the form over substance and 2 revert to old code pleading which Rule 15(c) was designed to eschew. 3 Accordingly, the Court GRANTS Chartis’ motion for reconsideration. This Court’s July 19, 4 2013 order on the United States’ motion to dismiss is hereby modified to provide that Chartis may 5 proceed on its § 112(c) subrogration claims for payments made by Chartis within three years of the 6 December 12, 2012 filing of the original complaint. Any payments made by Chartis more than three 7 years prior to December 12, 2012 remain time barred. 8 This order disposes of Docket Number 105. 9 IT IS SO ORDERED. 11 For the Northern District of California United States District Court 10 12 Dated: January 26, 2015 13 _________________________ EDWARD M. CHEN United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4

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