City Of San Jose v. Monsanto Company et al

Filing 144

ORDER GRANTING 123 DEFENDANTS' MOTION TO STAY. Signed by Judge Edward J. Davila on 8/4/2017. (ejdlc2S, COURT STAFF) (Filed on 8/4/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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CITY OF SAN JOSE,

Case No. 5:15-cv-03178-EJD

Plaintiff,
ORDER GRANTING DEFENDANTS’
MOTION TO STAY

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United States District Court
Northern District of California

v.
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MONSANTO COMPANY, et al.,

Re: Dkt. No. 123

Defendants.
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CITY OF OAKLAND,
Plaintiff,

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Case No. 5:15-cv-05152-EJD
Re: Dkt. No. 98

v.
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MONSANTO COMPANY, et al.,
Defendants.

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CITY OF BERKELEY,

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Plaintiff,

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Case No. 5:16-cv-00071-EJD
Re: Dkt. No. 89

v.
MONSANTO COMPANY, et al.,
Defendants.

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Case No.: 5:15-cv-03178-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO STAY

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In these related cases, Plaintiffs City of San Jose, City of Oakland, and City of Berkeley

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(the “Cities”) seek damages from Defendants Monsanto Company, Solutia Inc., and Pharmacia

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LLC (“Monsanto”) arising from Monsanto’s production of environmental contaminants called

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polychlorinated biphenyls (“PCBs”). The Cities allege that Monsanto’s PCBs pollute the San

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Francisco Bay (the “Bay”) through stormwater and dry weather runoff from the Cities, forcing the

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Cities to spend money to reduce PCB discharge in order to comply with state and federal

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regulations.
Before the Court is Monsanto’s motion to dismiss or stay the Cities’ first amended

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complaints for failure to exhaust administrative remedies. Case No. 15-cv-3178, Dkt. No. 123;
Case No. 15-cv-5152, Dkt. No. 98; Case No. 16- cv-71, Dkt. No. 89 (together, “MTD”).

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United States District Court
Northern District of California

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Monsanto’s motion will be GRANTED because the Cities are simultaneously seeking the same

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relief before this Court and before the California Commission on State Mandates (the

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“Commission”). As discussed below, the Cities’ actions in this Court will be stayed until after the

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Cities’ next hearing before the Commission.

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I.

BACKGROUND
The Cities’ allegations are largely identical, with some variations regarding their use of

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captured stormwater and their trusteeship of public land. Case No. 15-cv-3178, Dkt. No. 91; Case

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No. 15-cv-5152, Dkt. No. 81; Case No. 16-cv-71, Dkt. No. 71 (“FACs”).1
The Cities operate municipal stormwater and dry weather runoff systems, which collect

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runoff and discharge it into the Bay. Id. ¶ 13. The Cities are required to obtain Municipal Regional

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Stormwater Permits from the San Francisco Bay Regional Water Quality Control Board. Id. ¶ 13.

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Each of the Cities has received such a permit, which includes limits on the amount of PCBs the

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Cities may discharge into the Bay through stormwater. Id. ¶¶ 14–15. In 2015, the Water Quality

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Control Board imposed a stricter PCB limit, which forced the Cities to spend money to meet the

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For a more detailed discussion of the factual and procedural background of the Cities’ actions,
see this Court’s order on Monsanto’s previous motion to dismiss. Case No. 15-cv-3178, Dkt. No.
121; Case No. 15-cv-5152, Dkt. No. 96; Case No. 16-cv-71, Dkt. No. 87.
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Case No.: 5:15-cv-03178-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO STAY

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new requirements. Id. ¶¶ 17–19. The Cities seek damages from Monsanto arising from their permit

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compliance costs.
In their original complaints, the Cities alleged causes of action against Monsanto for public

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nuisance and equitable indemnity. Case No. 15-cv-3178, Dkt. No. 1; Case No. 15-cv-5152, Dkt.

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No. 1; Case No. 16-cv-71, Dkt. No. 1. This Court granted Monsanto’s motions to dismiss, finding

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that (1) the Cities lacked standing to claim public nuisance because they failed to show that they

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have a property interest in polluted stormwater, and (2) the Cities did not state a claim for

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equitable indemnity because their costs arose from regulatory requirements rather than from an

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adverse judgment. Case No. 15-cv-3178, Dkt. No. 85; Case No. 15-cv-5152, Dkt. No. 66; Case

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No. 16-cv-71, Dkt. No. 56. The Court granted leave to amend only as to the cause of action for

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United States District Court
Northern District of California

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nuisance. Id.

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The Cities filed their FACs on September 13, 2016, each bringing a single cause of action

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for public nuisance. Monsanto again moved to dismiss. Case No. 15-cv-3178, Dkt. No. 103; Case

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No. 15-cv-5152, Dkt. No. 81; Case No. 16-cv-71, Dkt. No. 71. This Court denied the motion but

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invited Monsanto to a file a motion to dismiss (or, alternatively, to stay) on the basis that the Cities

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have failed to exhaust their administrative remedies. Case No. 15-cv-3178, Dkt. No. 121; Case

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No. 15-cv-5152, Dkt. No. 96; Case No. 16-cv-71, Dkt. No. 87. That motion is now before the

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Court.

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II.

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LEGAL STANDARD
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of claims

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alleged in the complaint. Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.

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1995). Dismissal “is proper only where there is no cognizable legal theory or an absence of

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sufficient facts alleged to support a cognizable legal theory.” Navarro v. Block, 250 F.3d 729, 732

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(9th Cir. 2001). The complaint “must contain sufficient factual matter, accepted as true, to ‘state a

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claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). District courts have “discretion to decline

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jurisdiction, or to stay proceedings,” pending exhaustion of administrative remedies. Morrison-

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Case No.: 5:15-cv-03178-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO STAY

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Knudsen Co. v. CHG Int’l, Inc., 811 F.2d 1209, 1223 (9th Cir. 1987).

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III.

DISCUSSION
In 2010, the City of Alameda filed a test claim with the Commission, contending that its

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permit obligations constituted an unfunded state mandate for which the City was entitled to

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reimbursement from the State. Defs.’ Supp. Request for Judicial Notice Ex. 37, Case No. 15-cv-

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3178, Dkt. No. 123; Case No. 15-cv-5152, Dkt. No. 99; Case No. 16-cv-71, Dkt. No. 90.2
Berkeley and Oakland joined as co-claimants, and San Jose filed a similar claim. Id. Exs.

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11, 38. The Cities’ claims were consolidated in 2016 and are currently pending before the

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Commission. Id. Ex. 15. As the parties indicated during the hearing on this motion, the next
hearing before the Commission on the Cities’ consolidated test claims is scheduled for January 26,

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United States District Court
Northern District of California

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2018. The Cities filed their federal actions in 2015 and 2016.
Monsanto argues that the Cities’ cases before this Court must be dismissed (or, at a

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minimum, stayed) because the Cities have failed to exhaust their administrative remedies. MTD

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9–12. “[W]here an administrative remedy is provided by statute, relief must be sought from the

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administrative body and this remedy exhausted before the courts will act.” Abelleira v. Dist. Ct. of

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Appeal, Third Dist., 17 Cal. 2d 280, 292 (1941). The California Legislature established the

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Commission “as a quasi-judicial body to carry out a comprehensive administrative procedure for

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resolving claims for reimbursement of state-mandated local costs.” MTD at 10 (quoting

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Redevelopment Agency v. Comm’n on State Mandates, 43 Cal. App. 4th 1188, 1193 (1996)). In

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their test claims before the Commission, the Cities seek to recover their permit compliance costs

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on the theory that the permits constitute unfunded state mandates. Monsanto argues that the Cities

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are seeking the same relief in their actions before this Court. See, e.g., FACs ¶ 16 (“Plaintiff has

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spent money in efforts to reduce PCBs from stormwater and dry weather runoff to comply with

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these state-mandated TMDL goals.”); id. ¶ 18 (“The City has incurred and will continue to incur

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costs to comply with the new, stricter TMDL requirements in order to reduce PCBs from

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Monsanto’s request for judicial notice is GRANTED.
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Case No.: 5:15-cv-03178-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO STAY

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stormwater and dry weather runoff.”). Because relief for the Cities’ claims is available from the

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Commission, Monsanto argues, the Cities must exhaust their test claims before their federal

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actions can proceed.
In response, the Cities argue that the relief they seek before the Commission is unrelated to

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the relief they seek in their federal actions. The Cities argue that their federal actions seek tort

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damages under a public nuisance theory. See, e.g., Pls.’ Opp’n to Defs.’ Mot. to Dismiss 3 (“The

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Cities seek to recover tort damages for the contamination of their properties including the past and

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future costs of removing PCBs from their stormwater systems, because Monsanto’s PCBs are

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toxic, cannot be contained to their original application, and do not biodegrade.”). No
administrative process exists to adjudicate public nuisance claims. Id. at 4 (“Nowhere does the

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United States District Court
Northern District of California

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Code establish an administrative process for a public nuisance claim.”). Accordingly, the Cities

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argue that they are free to pursue different theories in each forum, and there is no requirement to

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exhaust their administrative claims before they can pursue tort claims in federal court.
The Court finds that there is substantial overlap between the costs the Cities seek to

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recover in their test claims and in their federal actions. In both, the Cities seek damages to

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compensate them for the cost of complying with state-mandated permit obligations—for instance,

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costs associated with retrofitting their stormwater systems to filter out PCBs. Compare FACs ¶ 16

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(“Plaintiff has spent money in efforts to reduce PCBs from stormwater and dry weather runoff to

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comply with these state-mandated TMDL goals.”), with RJN Ex. 37 at 1–2 (“The City of Alameda

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[and its co-claimants] seek[] the Commissioner’s approval of claims to recover costs associated

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with obligations mandated by a handful of provisions of the Municipal Regional Stormwater

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Permit issued . . . by the California Regional Water Quality Control Board,” including

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“stormwater pollution controls”). Although the Cities frame their federal actions as claims for

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public nuisance, the Cities seek the same recovery for the same injury before the Commission. As

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such, the Cities must exhaust their administrative remedies before they can seek relief from the

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courts.

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Case No.: 5:15-cv-03178-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO STAY

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IV.

CONCLUSION
Monsanto’s motion to stay is GRANTED. The Cities’ actions are STAYED until February

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8, 2018. The parties shall appear for a status conference at 10:00 a.m. on February 8, 2018. The

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parties shall file a joint status report, not to exceed five pages of text, by February 1, 2018.

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IT IS SO ORDERED.
Dated: August 4, 2017
______________________________________
EDWARD J. DAVILA
United States District Judge

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United States District Court
Northern District of California

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Case No.: 5:15-cv-03178-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO STAY