Diamond X Ranch, LLC v. Atlantic Richfield Company

Filing 224

ORDER denying Diamond X's ECF No. 144 Motion to Dismiss; denying Park Livestock's ECF No. 182 Motion to Dismiss. Signed by Judge Miranda M. Du on 8/26/2016. (Copies have been distributed pursuant to the NEF - KR)

1
2
3
4
5
UNITED STATES DISTRICT COURT

6

DISTRICT OF NEVADA

7

***

8
9
10

DIAMOND X RANCH LLC,,

Case No. 3:13-cv-00570-MMD-WGC

Plaintiff,

ORDER

v.

11
12
13
14

(Motions to Dismiss - ECF Nos. 144, 182)

ATLANTIC RICHFIELD COMPANY,
Defendants.
I.

SUMMARY

15

This case arises from the alleged contamination of Plaintiff Diamond X Ranch

16

LLC’s (“Diamond X”) property by drainage from the Leviathan Mine in Alpine County,

17

California (“the Mine”). Defendant Atlantic Richfield Company (“ARCO”) asserts

18

counterclaims and third-party claims. Before the Court are Diamond X’s motion to

19

dismiss (“Diamond X’s Motion”) and Third-Party Defendant Park Livestock Company’s

20

motion to dismiss (“PLC’s Motion”). (ECF Nos. 144, 182.) The Court has reviewed the

21

briefs related to these motions and supplemental briefs related to Diamond X’s Motion.

22

(ECF Nos. 155, 160, 185, 193, 212, 215.) The Court also heard argument on July 18,

23

2016. For the reasons discussed below, the Motions are denied.

24

II.

BACKGROUND

25

Diamond X owns more than 1700 acres of property in Douglas County, Nevada,

26

and Alpine County, California (“the Property”). (ECF No. 175 at 7.) Plaintiff alleges that

27

the Property has been contaminated by acid mine drainage (“AMD”) flowing from the

28

Mine. (Id. at 3-8.) Between 1953 and 1962, The Anaconda Company, Defendant’s

1

wholly-owned subsidiary, owned and operated the Mine as an open-pit sulfur mine. (Id.

2

at 3.) No entity has operated the Mine since 1962. (Id.)

3

In 1997, the United States Environmental Protection Agency (“EPA”) began to

4

take action at the Mine under the Comprehensive Environmental Response,

5

Compensation, and Liability Act (“CERCLA”). (Id. at 3-4.) The EPA listed the Mine on

6

the National Priorities List in May 2000, and it identified ARCO and the State of

7

California as potentially responsible parties (“PRPs”). (Id. at 4.) The EPA issued a

8

Unilateral Administrative Order (“UAO”) against ARCO in November 2000 (“2000 UAO”)

9

and a second UAO against ARCO in June 2008 (“2008 UAO”) (collectively “UAOs”).

10

(ECF No. 144 at 3; ECF No. 146 at Exhs. 1 and 2.1) The UAOs again identified ARCO

11

as a PRP and required ARCO to initiate a Remedial Investigation and Feasibility Study

12

(“RI/FS”) of contamination from the Mine and to prepare and perform a RI/FS based on

13

a Statement of Work (“SOW”). (ECF No. 144 at 4; ECF No. 146 at 5, 57.) The purposes

14

of the UAOs were (1) to determine the nature and scope of contamination from the site

15

and its threat to public health and the environment, and (2) to determine and evaluate

16

alternatives to effectively remediate the contamination through a feasibility study (ECF

17

No. 146 at 6, 58.) Under the SOW, ARCO was required to conduct a “phased”

18

evaluation to determine the available remedial approaches and to then compile this

19

information into a report. (Id. at 100.)

20

Plaintiff asserts that the open-pit mining and releases of AMD at the Mine has

21

contaminated the Property as well as Bryant Creek, 2 a tributary downstream of the Mine

22

which provides water for flood irrigation on the Property. (ECF No. 175 at 7-8.) Diamond

23

X alleges that the release of hazardous substances from the Mine have caused it to

24

incur response costs as defined under CERCLA section 9601(25). (Id. at 14.) Diamond

25
26
27
28

1

Diamond X requests the Court to take judicial notice of the UAOs and the
Alpine Decree. (ECF No. 146.) PLC similarly asks the Court to take judicial notice of
these documents along with a Special Use Application and Report. (ECF No. 184.) The
Court grants both requests as these documents are matters of public record.
2

Plaintiff is the only entity that has water rights on Bryant Creek. (ECF No. 119

at 8.)
2

1

X asserts eight claims against ARCO, including a claim for recovery of its response

2

costs under CERCLA section 107(a), 42 U.S.C. § 9607(a) (“Section 107(a)” or “§

3

107(a)”). (Id.)

4

In response, ARCO asserts two counterclaims against Diamond X, which

5

function as third-party claims against PLC, under CERCLA sections 107(a) and

6

113(f)(1) (“Section 113(f)(1)” or “§ 113(f)(1)”). (ECF No. 179 at 26-29.) ARCO also

7

asserts a counterclaim/third-party claim against Diamond X and PLC for declaratory

8

relief under CERCLA section 113(g)(2) and 28 U.S.C. § 2201. (ECF No. 179 at 30.)

9

The gist of ARCO’s allegations are that Diamond X and PLC (collectively, “Third-Party

10

Defendants”) actively operated the irrigation system on the Property, including

11

determining “if, when, where and how much water containing hazardous substances

12

was placed and deposited on the Diamond X Property.” (Id. at 21.) ARCO further

13

alleges that the Third-Party Defendants undertook maintenance activities related to the

14

irrigation ditches “with the intent to dispose of the sediment and hazardous substances

15

on the Diamond X Property and on other properties.” (Id. at 22.)

16

Diamond X moves to dismiss ARCO’s first claim under Section 107(a) and third

17

claim for declaratory relief to the extent it is based on CERCLA section 113(g)(2). 3

18

(ECF No. 144.) PLC also seeks dismissal of the third-party claims, contending that it is

19

not a covered party under CERCLA, and adopts the same arguments raised in Diamond

20

X’s Motion in the alternative. (ECF No. 182.)

21

III.

LEGAL STANDARD

22

A court may dismiss a claim for “failure to state a claim upon which relief can be

23

granted.” Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss, a complaint must

24

contain sufficient factual matter, accepted as true, to state a claim to relief that is

25

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic

26
27
28

3

Diamond X and PLC also moved to strike the portion of the declaratory relief
claim that is based on CERCLA section 113(g)(2) if the Court grants their motions to
dismiss. (ECF Nos. 145, 183.) The Court denied these motions. (ECF No. 216.)
3

1

Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In Iqbal, the Supreme Court clarified the

2

two-step approach that district courts are to apply when considering motions to dismiss.

3

First, a district court must accept as true all well-pleaded factual allegations in the

4

complaint; however, legal conclusions are not entitled to an assumption of truth. Id. at

5

678-79. Second, a district court must consider whether the factual allegations in the

6

complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when

7

the plaintiff’s complaint alleges facts that allow a court to draw a reasonable inference

8

that the defendant is liable for the alleged misconduct. Id. at 663. Where the complaint

9

fails to “permit the court to infer more than the mere possibility of misconduct, the

10

complaint has alleged—but it has not shown—that the pleader is entitled to relief.” Id. at

11

679 (quoting Fed. R. Civ. P. 8(a)(2)) (alteration omitted). When the claims in a complaint

12

have not crossed the line from conceivable to plausible, the complaint must be

13

dismissed. Twombly, 550 U.S. at 570. A complaint must contain either direct or

14

inferential allegations concerning “all the material elements necessary to sustain

15

recovery under some viable legal theory.” Id. at 562 (quoting Car Carriers, Inc. v. Ford

16

Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)).

17

IV.

DIAMOND X’S MOTION

18

Diamond X argues that ARCO is barred from asserting a claim under Section

19

107(a) because of Diamond X’s own Section 107(a) claim and because ARCO’s

20

response costs were incurred pursuant to the EPA’s administrative orders, which

21

amount to “civil actions.”4 (ECF No. 144 at 10.) The Court will address each argument in

22

turn.
ARCO’s Section 107(a) Claim

23

A.

24

“CERCLA provides two mechanisms for private parties to recover their

25

environmental cleanup expenses from other parties.” Whittaker Corp. v. United States

26

(Whittaker II), No. 14-55385, 2016 WL 3244838, at *3 (9th Cir. June 13, 2016). First,

27
4

28

Diamond X further argues that if the Court dismisses ARCO’s Section 107(a)
claim, the Court should dismiss ARCO’s declaratory relief claim. (ECF No. 144 at 11.)
4

1

Section 107(a) provides for parties to bring “cost recovery” actions against “potentially

2

responsible parties” to recover costs, including “any . . . necessary costs of response

3

incurred by any other person consistent with the national contingency plan.” 42 U.S.C.

4

§ 9607(a); Whittaker II, 2016 WL 3244838, at *3. Second, “[s]ection 113(f)(1) authorizes

5

a contribution action to [PRPs] with common liability stemming from an action instituted

6

under § 106 or § 107(a).” United States v. Atlantic Research Corp. (“Atlantic II”), 551

7

U.S. 128, 129 (2007). Sections 107(a) and 113(f) “complement each other by providing

8

causes of actions to persons in different procedural requirements.” Id. at 139 (internal

9

quotation marks omitted). “A party uses contribution to get reimbursed for being made

10

to pay more than its fair share to someone else, and uses cost recovery to get

11

reimbursed for its own voluntary cleanup costs.” Whittaker II, 2016 WL 3244838, at *4.

12

Moreover, while PRPs can seek contribution under § 113(f)(1), they cannot

13

simultaneously seek double recovery under § 107(a). Atlantic II, 551 U.S. at 139. “[A]

14

party who may bring a contribution action for certain expenses must use the contribution

15

action, even if a cost recovery action would otherwise be available.” Whittaker II, 2016

16

WL 3244838, at *4 (citing Atlantic II, 551 U.S. 128; Kotrous v. Goss-Jewett Co. of N.

17

Cal., 523 F.3d 924, 933 (9th Cir. 2008)).

18

Diamond X asserts a claim under § 107(a) to recover clean-up costs on the

19

Property in response to hazardous waste released from the Mine.5 (ECF No. 175 at 14.)

20

Diamond X argues that ARCO’s remedy is limited to contribution under Section

21

113(f)(1) and that ARCO cannot counterclaim under § 107(a). (ECF No. 175.) ARCO

22

counters that it is seeking to recover separate costs under §§ 107(a) and 113(f), such

23

that counterclaiming under both sections is proper. (ECF No. 179.)

24

Diamond X relies primarily on Whittaker Corp. v. United States (Whittaker I), No.

25

CV 13-1741 FMO, 2014 WL 631113 (C.D. Cal. Feb. 10, 2014) to argue that ARCO

26
27
28

5

Diamond X also alleges a claim for declaratory relief under Section 113(g)(2)
seeking to ensure ARCO pays for Diamond X’s future remediation costs. (ECF No. 175
at 13.)
5

1

could only bring a § 113(f)(1) counterclaim. In June, the Ninth Circuit reversed Whittaker

2

I, finding that Whittaker could bring a claim under § 107(a). See Whittaker II, 2016 WL

3

3244838. The parties disagree as to the import of Whittaker II on ARCO’s § 107(a)

4

claim. The Court agrees with ARCO on this matter.

5

In Whittaker II, the Ninth Circuit addressed the issue of whether Whittaker was

6

limited to a contribution action against other polluters or whether instead Whittaker

7

could seek a cost recovery action under § 107(a). Whittaker settled prior claims that

8

Castaic Lake Water Agency (“Castaic Lake”) had asserted under CERCLA in 2007. See

9

Whittaker II, 2016 WL 3244838, at *2. In the settlement, Whittaker reimbursed Castaic

10

Lake for the costs to remove perchlorate pollution from its water well sites and for

11

purchased water costs. Id. at 2. The agreement settled costs between Whittaker and

12

Castaic Lake, but it did not require Whittaker to clean up the source of the

13

contamination at the Bermite Site. Id. In 2013, Whittaker sued the United States to

14

recover expenses associated with remediating the Bermite Site under § 107. Id. In

15

Whittaker I, the district court dismissed Whittaker’s § 107(a) claim, holding that

16

Whittaker’s claim needed to be brought under § 113(f)(1). See Whittaker I, 2014 WL

17

631113, at *11.

18

The Ninth Circuit reversed, reasoning that Whittaker was now seeking to recover

19

“a different set of expenses [ ] for which Whittaker was not found liable” under the

20

settlement agreement with Castaic Lake. See Whittaker II, 2016 WL 3244838, at *8.

21

The court rejected the government’s argument that a party who has been sued in a §

22

107 cost recovery action for expenses related to pollution at a site should be limited to a

23

contribution action for all of their expenses at that site. Id. Thus, the court held that

24

Whittaker was not required to bring a claim for contribution under §113(f)(1) against the

25

government because it is seeking § 107(a) claim “to recover expenses that are separate

26

from those for which Whittaker’s liability is established or pending.” Id. at *9.

27

Similarly here, ARCO alleges that its counterclaim seeks to recover costs that

28

are separate from those that Diamond X seeks to recover in its § 107(a) claim. ARCO’s
6

1

operative pleadings allege as follows with respect to its § 107(a) claim:

2

45. Atlantic Richfield has incurred, and will continue to incur in the

3

future, necessary response costs to, among other things, investigate,

4

evaluate, and remediate the contamination allegedly associated with the

5

Leviathan Mine site, including the Diamond X Property, in a manner

6

consistent with the NCP, 40 C.F.R. Part 300 et seq.

7

46. Diamond X and Park Livestock are liable to Atlantic Richfield

8

under CERCLA section 107(a), 42 U.S.C. § 9607(a), for response costs

9

incurred by Atlantic Richfield in connection with the Diamond X Property.

10

47. Atlantic Richfield has not otherwise brought, or been sued in, a

11

civil action under CERCLA sections 106 or 107(a) for the response costs it

12

has incurred or will incur in connection with the Diamond X Property.

13

(ECF No. 179 at 28.) ARCO contends, and Third-Party Defendants do not dispute, that

14

ARCO’s § 107(a) claim seeks to recover (1) costs outside of Diamond X's claim, (2)

15

costs from other parties (i.e., PLC), (3) costs ARCO “has itself incurred,” and (4) costs

16

incurred under the UAOs related to the Property. (ECF No. 155 at 7.)

17

“Not all of a party's expenses related to remediating a site fall within the scope of

18

contribution.” Whittaker II, 2016 WL 3244838, at *5. Accepting ARCO’s allegations as

19

true, which the Court must under Rule 12(b)(6), ARCO has incurred expenses that are

20

outside the scope of contribution and the scope of Diamond X’s Section 107(a) claim for

21

which liability has not been established. ARCO is therefore not barred from seeking cost

22

recovery under Section 107(a).
The EPA’s Orders

23

B.

24

Under CERCLA, PRPs can seek contribution from any other person “who is

25

liable or potentially liable under [§ 107(a)] of this title, during or following any civil action

26

under [§ 106] of this title or under [§ 107(a)] of this title.” 42 U.S.C. § 9613(f)(1)

27

(emphasis added). Diamond X reasons that because the UAOs amount to a “civil

28

action,” ARCO’s procedural circumstances preclude it from asserting a claim under
7

1

Section 107(a). Diamond X relies primarily on U.S. v. Atlantic Research Corporation

2

(Atlantic II), 551 U.S. 128, and PCS Nitrogen, Inc. v. Ross Development Corporation,

3

104 F.Supp.3d 729 D.S.C. 2015). (ECF No. 144 at 9-10.) ARCO responds that

4

Diamond X’s argument is not supported by the majority of courts who have considered

5

this issue. (ECF No. 155 at 10-11.)

6

As an initial matter, the Court disagrees with Diamond X’s interpretation of

7

Atlantic II, which Diamond X relies upon to argue that “enforcement actions,” such as

8

UAOs, are civil actions. (ECF No. 144 at 9; ECF No. 160 at 7-8.) Diamond X cites to the

9

Supreme Court holding that PRPs who “have been subject to §§ 106 or 107

10

enforcement actions are still required to use § 113, thereby ensuring its continued

11

vitality.” See Atlantic II, 551 U.S. at 134 (quoting Atlantic Research Corp. v. United

12

States (“Atlantic I”), 459 F.3d 827, 836-37 (8th Cir. 2006)) (emphasis added). Although

13

Diamond X notes the conflicting interpretations of this statement, it asserts this is

14

persuasive authority regarding whether the EPA’s UAOs amount to a “civil action”

15

pursuant to § 113(f)(1). (ECF No. 160 at 7 n. 5.) While the quoted statement appears to

16

include UAOs as “civil actions” under § 113(f)(1), this conclusion ignores the case’s

17

procedural posture. In that case, Atlantic Research had “commenced suit [against the

18

United States] before, rather than during or following, a CERCLA enforcement action.”

19

Atlantic I, 459 F.3d at 835 (internal quotation marks omitted). Atlantic Research thus

20

could not bring a § 113(f) action but instead had to rely on a § 107 claim to recover its

21

cleanup costs. Id. In this context, “enforcement action” appears synonymous with

22

CERCLA claims under §§ 106 or 107 because the court was not evaluating a previous

23

administrative order or action. Since Atlantic Research sued the United States prior to

24

any CERCLA enforcement action, the case never addressed what constitutes a §

25

106(a) civil action.

26

Diamond X relies on PCS Nitrogen as well, but that case reflects the minority

27

view that a UAO is equivalent to a “civil action” under § 113(f)(1). See PCS Nitrogen,

28

104 F. Supp. 3d at 742 (stating that “at least one district court, however, considered a
8

1

UAO to be a civil action under § 113(f)(1)”).6 In contrast, the majority of courts have held

2

that UAOs under § 106(a) do not constitute a “civil action” for the purposes of §

3

113(f)(1). See Emhart Industries, Inc. v. New Eng. Container Co., Inc., 478 F. Supp. 2d

4

199, 203 (D.R.I. 2007) (stating that the “court will follow the majority of courts in

5

concluding that § 113(f)(1) is unavailable for parties who are merely subject to

6

administrative

7

apportionments of liability”) (internal quotation marks omitted); Raytheon Aircraft Co. v.

8

United States, 435 F. Supp. 2d 1136, 1142 (D. Kan. 2006) (holding that a UAO pursuant

9

to § 106 was not a “civil action” for the purposes of a § 113(f)(1) claim for contribution);

10

Blue Tee Corp. v. ASARCO, Inc., No. 03-5011-CV-SW-F-JG, 2005 WL 1532955, at *4-5

11

(W.D. Mo. June 27, 2005) (dismissing a § 113(f)(1) contribution claim because a UAO

12

was not a “civil action” under §§ 106 or 107); United States v. Taylor, 909 F. Supp. 355,

13

365 (M.D.N.C. 1995) (stating a PRP which conducts remediation cannot bring a

14

contribution action when it has been “subjected to a [§] 106 administrative order”); In re

15

FV Steel & Wire Co., 331 B.R. 385 (Bankr. E.D. Wis. 2005) (finding administrative

16

orders do not qualify as a “civil action” under CERCLA); Pharmacia Corp. v. Clayton

17

Chemical Acquisition LLC, 382 F. Supp. 2d 1079, 1088-89 (S.D. Ill. 2005) (holding

18

neither a UAO nor an Administrative Order by Consent (“AOC”) qualified as a “civil

19

action” under § 113(f)(1)). The Court agrees with these courts.

orders, as opposed

to final consent

decrees,

judgments,

or

20

For civil actions in the Ninth Circuit, a final judgement “ends the litigation on the

21

merits and leaves nothing for the court to do but execute the judgement.” Williamson v.

22

UNUM Life Ins. Co. of Am., 160 F.3d 1247, 1250 (9th Cir. 1998) (citations and internal

23

quotation marks omitted). However, the UAOs at issue here do not share the same

24

characteristics as a “civil action” in terms of scope, finality, and opportunity to appeal.

25

Several aspects of the UAOs suggest that they lack the scope and finality of a

26
6

27
28

The PCS Nitrogen court appears to only briefly discuss this issue in concluding
that “PCS has nonetheless met one of the statutory triggers for a § 113(f)(1) claim
because it brings the instant action following a civil action under § 107(a)[.]” PCS
Nitrogen, 104 F. Supp. 3d at 743.
9

1

“civil action.” The UAOs’ phased RI/FS study, requiring ongoing evaluations by the EPA

2

and ARCO to determine the final remediation plan, does not have the same definitive

3

scope or finality as a judgment in a “civil action.” While the EPA would eventually use

4

the RI/FS report to determine the extent of ARCO’s remediation work, this process

5

appears more incremental and less finalized than a “civil action.” The EPA’s explicit

6

reservation of right in the UAOs to bring action against ARCO pursuant to § 107 for

7

additional response costs, or to require ARCO to conduct additional cleanup under §

8

106, suggests that the UAOs cannot be considered a final judgment. (See ECF No. 146

9

at 83.) The 2008 UAO was filed after ARCO apparently failed to comply with the 2000

10

UAO, further suggesting that a UAO does not have the finality of a “civil action.” Under

11

the 2008 UAO, the EPA provided that they could unilaterally carry out the order or seek

12

judicial enforcement of the order under § 106, which further shows that the UAOs do not

13

share the characteristic of finality found in “civil actions.” (Id. at 84.) Since the UAOs did

14

not settle ARCO’s liability with respect to the site or determine a final course of action

15

for the cleanup, the UAOs cannot be considered to have the same preclusive effect as a

16

judgment in a “civil action.” Thus, the UAOs do not appear to have the same scope or

17

finality as a “civil action.”

18

The UAOs do not provide the same appellate rights commensurate with a “civil

19

action.” The 2000 UAO gave ARCO an opportunity to confer with the EPA within 10

20

days of signing the order. (Id. at 85.) But it required that “[t]he purpose and scope of the

21

conference shall be limited to issues involving the implementation of the response

22

actions required by this Order and the extent to which [ARCO] intends to comply with

23

this Order.” (Id.) This conference was not a proceeding that allowed ARCO to present

24

evidence to challenge the order. (Id.) And ARCO was prohibited from seeking review of

25

the order or resolution of its potential liability. (Id.) ARCO was also given 20 days from

26

the effective date of the order to give the EPA written notice of its compliance. (Id. at

27

70.) While ARCO had the opportunity to present facts and defenses under §§ 106(b)

28

and 107(c)(3) during this time, after the deadline passed ARCO had to unequivocally
10

1

commit to perform the order or be considered in violation of the UAO. (Id.) These limited

2

opportunities to contest the UAOs can hardly be considered appeals analogous to those

3

available for “civil actions.” See Fed. R. App. P. 3. As a result, ARCO had no meaningful

4

way to present defenses that would either modify the UAOs or absolve ARCO of

5

liability, which are procedural measures that would be available to a defendant in a “civil

6

action.”

7

In addition, the trigger for the three-year statute of limitations as applied to §

8

113(f)(1) claims counsels against finding a UAO to equate to a “civil action.” Section

9

113(g)(3) provides that the statute of limitations for contribution actions begin at the date

10

of “judgment” and the date of “settlement.” Cooper Indus., Inc. v. Aviall Services,

11

Inc., 543 U.S. 157, 158-59 (2004). As the Supreme Court observed in Cooper

12

Industries, “[N]otably absent from § 113(g)(3) is any provision for starting the limitations

13

period if a judgment or settlement never occurs, as is the case with a purely voluntary

14

cleanup[,]” or, plausibly, administrative orders. See id. at 167. This observation lends

15

support to a finding that a § 113(f)(1) claim is prohibited absent a lawsuit or settlement

16

under §§ 106 or 107. See Blue Tee, 2005 WL 1532955, at *4 (“ . . . it is clear a party

17

can pursue contribution under § 113(f)(1) only after being sued in a § 106 or § 107 civil

18

action . . . ”); see also Am. Premier Underwriters Inc. v. Gen. Elec. Co., 866 F. Supp. 2d

19

883, 905 (S.D. Ohio 2012) (“[T]he Court concludes that the 1996 UAO did not trigger

20

the statute of limitations for [the plaintiff’s] contribution claim.”).

21

Finally, the ongoing nature of a UAO reveals a reason for having § 113(g)(3) start

22

the statute of limitations at the date of “judgment” or “settlement” instead of the effective

23

date of the order. See Cooper Indus., 543 U.S. at 158-59; see, e.g., Am. Premier

24

Underwriters, 866 F. Supp. 2d at 905; Taylor, 909 F. Supp. at 365 (stating that a party

25

busy incurring additional cleanup costs needs a longer statute of limitations for its

26

recovery action than a party seeking a contribution claim to recuperate its fixed costs).

27
28

In sum, the Court finds that the EPA’s administrative orders such as the UAOs
are not “civil actions” under § 106(a).
11

1

V.

PLC’S MOTION

2

“The remedy that Congress felt it needed in CERCLA is sweeping: everyone who

3

is potentially responsible for hazardous-waste contamination may be forced to

4

contribute to the costs of cleanup.” United States v. Bestfoods, 524 U.S. 51, 56 n. 1

5

(1998) (quoting Pennsylvania v. Union Gas, 491 U.S. 1, 20 (1989)). Potentially

6

responsible parties under CERCLA fall into “four classes of persons”: current owner or

7

operator; former owner or operator; arranger; and transporter. Kaiser Aluminum &

8

Chem. Corp. v. Catellus Dev. Corp., 976 F.2d 1338, 1340-41 (9th Cir. 1992); 42 U.S.C.

9

§ 9607(a). 7 “[L]iability attaches . . . because . . . their actions contribute to the release of

10

contaminated material and increase the cost of remedial action.” Id. at 1343.

11

ARCO alleges that PLC falls within the latter three categories of PRPs—former

12

operator, arranger and transporter—based on its operation of the flood irrigation system

13

and its maintenance of the irrigation ditches on the Property. (See ECF No. 179 at 21-

14

22, 29.) PLC contends that ARCO fails to allege sufficient facts to establish that PLC is

15

a PRP, including that there was no “disposal” within the meaning of CERCLA. 8 (ECF

16

No. 182 at 6.) In the alternative, PLC adopts Diamond X’s arguments that ARCO’s relief

17
18
19

7

Section 9607(a) defines the four classes, in pertinent part, as follows:

27

(1) the owner and operator of a vessel or a facility,
(2) any person who at the time of disposal of any hazardous substance
owned or operated any facility at which such hazardous substances were
disposed of,
(3) any person who by contract, agreement, or otherwise arranged for
disposal or treatment, or arranged with a transporter for transport for
disposal or treatment, of hazardous substances owned or possessed by
such person, by any other party or entity, at any facility or incineration
vessel owned or operated by another party or entity and containing such
hazardous substances, and
(4) any person who accepts or accepted any hazardous substances for
transport to disposal or treatment facilities, incineration vessels or sites
selected by such person, from which there is a release, or a threatened
release which causes the incurrence of response costs, of a hazardous
substance.

28

8

20
21
22
23
24
25
26

ARCO does not allege that PLC falls within the first class of PRP.
12

1

is limited to contribution under Section 113(f)(1). (Id. at 7.) Because the Court finds that

2

ARCO has alleged sufficient facts to establish PLC’s liability as a former operator, the

3

Court will not address the other two categories of PRPs.

4

Former operators are “any person who at the time of disposal of any hazardous

5

substance owned or operated any facility at which such hazardous substances were

6

disposed of[.]” 42 U.S.C. § 9607(a)(2). Finding this definition to be circular and

7

unhelpful, the Supreme Court clarified that “under CERCLA, an operator must manage,

8

direct, or conduct operations specifically related to pollution, that is, operations having to

9

do with the leakage or disposal of hazardous waste, or decisions about compliance with

10

environmental regulations.” Bestfoods, 524 U.S. at 66-67 (emphasis added). The Court

11

found that CERCLA “must be read to contemplate ‘operations’ as including the exercise

12

of direction over the facility’s activities.” Id. at 71. This clarification followed the Ninth

13

Circuit’s earlier definition of an operator as any party with the “authority to control the

14

cause of the contamination at the time the hazardous substances were released into the

15

environment.” Kaiser Aluminum, 976 F.2d at 1341. The Ninth Circuit’s “operator”

16

definition has been held to be consistent with Bestfoods’ definition. See City of Los

17

Angeles v. San Pedro Boat Works, 635 F.3d 440, 451-52 (9th Cir. 2011); see also City

18

of Moses Lake v. U.S., 458 F. Supp. 2d 1198, 1227 (E.D. Wash. 2006); Nu-W. Min. Inc.

19

v. U.S., 768 F. Supp. 2d 1082, 1089 (D. Idaho 2011); Wells Fargo Bank, N.A. v. Renz,

20

795 F. Supp. 2d 898, 915-16 (N.D. Cal. 2011). Moreover, as the City of Los Angeles

21

court noted, “operator liability has been construed expansively in this circuit and others.”

22

City of Los Angeles, 635 F.3d at 444 (internal quotation marks omitted). Accordingly, in

23

determining operator liability, courts evaluate (1) whether the operation is “specifically

24

related to pollution,” and (2) whether the operator’s activities are considered a

25

“disposal.” See City of Moses Lake, 458 F. Supp. 2d 1198; Roberts v. Heating

26

Specialist Inc., No. 3:12-CV-01820-SI, 2014 WL 3845877, at *11 (D. Or. Aug. 5, 2014);

27

Steadfast Ins. Co. v. United States, No. CV 06-4686 AHM (RZx), 2009 WL 3785565, at

28

*3 (C.D. Cal. Nov. 10, 2009).
13

1

1.

Operation Specifically Related to Pollution

2

ARCO alleges that PLC’s operation was specifically related to pollution because

3

of PLC’s operation of the flood irrigation system and maintenance of the irrigation

4

ditches. (ECF No. 179 at 21-22.) In terms of the operation of the irrigation system,

5

ARCO asserts that PLC operated and had the authority to operate the flood irrigation

6

system on the Property allowing Bryant Creek waters to flow and be transported onto

7

the Property by way of irrigation ditches. (ECF No. 179 at 21.) ARCO states that “in

8

operating the irrigation system on the Diamond X Property, [PLC] determined if, when,

9

where and how much water containing hazardous substances was placed and

10

deposited on the Diamond X Property.” (Id.) ARCO further alleges that PLC “had

11

complete authority to control the placement, deposition, and disposal of water

12

containing hazardous substances on the Diamond X Property, and exercised that

13

authority through operation of the irrigation system.” (ECF No. 179 at 21-22.) In terms of

14

maintenance, the gist of ARCO’s allegations is that PLC carried out maintenance

15

activities involving “the removal of sediment containing hazardous substances from and

16

around the irrigation ditches and movement to and placement, deposition, and

17

discarding of the sediment and hazardous substances” that “resulted in the moving,

18

spreading, and release or threatened release of hazardous substances” on the Property

19

and surrounding properties. (Id. at 22.) According to ARCO, “Diamond X and [PLC]

20

carried out these maintenance activities related to the irrigation ditches on the Diamond

21

X Property and on other properties, with the intent to dispose of the sediment and

22

hazardous substances on the Diamond X Property and on other properties.” (Id.)

23

Accepting these allegations as true and construing “operator” “expansively,” City

24

of Los Angeles, 635 F.3d at 444, ARCO has sufficiently alleged facts to establish

25

operator liability to satisfy Kaiser Aluminum’s definition of “operator,” assuming the flood

26

irrigation system meets the disposal requirement under the statute.

27

In Kaiser Aluminum, the City of Richmond hired Ferry & Son to excavate and

28

grade a portion of property that it had purchased from the defendant’s predecessor for a
14

1

proposed housing development. 976 F.2d at 1339. Ferry & Son spread some of the

2

displaced soil, which contained hazardous materials, over other parts of the property

3

during its excavation activities. Id. at 1339-40. The defendant asserted a third-party

4

complaint for contribution against Ferry & Son, alleging that “Ferry exacerbated the

5

extent of the contamination by extracting the contaminated soil from the excavation site

6

and spreading it over uncontaminated areas of the property.” Id. at 1340. The court

7

found that these allegations were sufficient to show Ferry & Son had “control over this

8

phase of the development” such that it was an “operator” within the meaning of section

9

9607(a). Id. at 1342.

10

ARCO asserts similar allegations that PLC “determined if, when, where and how

11

much water containing hazardous substances was placed and deposited” on the

12

Property. (ECF No. 179 at 21.) According to ARCO, by its operations of the flood

13

irrigation system, PLC “had complete authority to control the placement, deposition, and

14

disposal of water containing hazardous substances” on the Property. (Id. at 21-22.)

15

ARCO makes similar allegations about PLC’s role in carrying out maintenance activities

16

involving the irrigation ditches that resulted in discarding of hazardous substances on

17

the Property. (Id. at 22.) Accepting these allegations as true, ARCO has sufficiently

18

alleged that PLC’s operations on the Property were “specifically related to pollution.”

19

PLC contends that the activities related to flood irrigation are associated with

20

ranching, not managing or disposing of hazardous substances. (ECF No. 182 at 11.)

21

Specifically, PLC refutes ARCO’s allegations that “opening the irrigation system

22

headgates” and “periodic maintenance of the irrigation ditch” are operations related to

23

hazardous waste disposal. (Id.) However, the same characterization may be ascribed to

24

the activities in Kaiser Aluminum—Ferry & Son were excavating and grading for a

25

proposed housing development, not managing disposal of hazardous substances.

26

PLC relies on Redevelopment Agency of City of Stockton v. Burlington Northern

27

and Santa Fe Ry. Corp., to argue that it does not qualify as an “operator” under

28

CERCLA.

Redevelopment Agency of City of Stockton v. Burlington N. and Santa Fe
15

1

Ry. Corp., CIV S05-02087 DFLJFM, 2007 WL 1793755 (E.D. Cal. June 19, 2007), aff'd

2

in part, rev'd in part sub nom. Redevelopment Agency of City of Stockton v. BNSF Ry.

3

Co., 643 F.3d 668 (9th Cir. 2011).9 In Redevelopment Agency, the State of California

4

installed an underground perforated pipe, or “french drain,” to facilitate drainage near

5

train tracks. Id. at *1. Following the drain installation, the defendant railroads took over

6

title to the property as well as operation and maintenance of the french drain. Id. Later,

7

the railroads sold their interest to a redevelopment agency, which then discovered

8

contamination at the drain from a nearby petroleum facility. Id. Contaminated water had

9

flowed into the drain, polluting the soil around the drain and contaminating the property

10

at the outlet of the drain. Id. The district court held that regardless of whether the

11

railroads knew about or generally operated the french drain when the contamination

12

occurred, the railroads were not “operators” under CERCLA. Id. at *5. The district court

13

relied on Bestfoods in finding that the railroads did not “‘manage, direct or conduct

14

activities specifically related to pollution’ in connection with the french drain.” Id. (quoting

15

Bestfoods, 524 U.S. at 66-67). The district court found that the “french drain never was

16

intended to serve as a conduit for hazardous materials, nor . . . did the [r]ailroads

17

[operate it] for a purpose related to pollution.” Id.

18

PLC asserts that, like the french drain, the flood irrigation ditches were not

19

designed to be conduits for hazardous waste or used for operations “specifically related

20

to pollution.” (ECF No. 193 at 5.) However, unlike the railroads, PLC’s role in the

21

operation of the irrigation ditches was more active. As alleged, “in operating the

22

irrigation system on the Diamond X Property, [PLC] determined if, when, where and

23

how much water containing hazardous substances was placed and deposited on the

24

Diamond X Property.” (ECF No. 179 at 21.) Moreover, ARCO also alleged that PLC’s

25

maintenance activities involved “movement to and placement, deposition, and

26

discarding of the sediment and hazardous substances” and were undertaken “with the

27
9

28

The district court’s decision that the railroads were not liable as “operators” was
not an issue on appeal.
16

1

intent to dispose of the sediment and hazardous substances on the Diamond X Property

2

and on other properties.” (ECF No. 179 at 22.)

3

As the Kaiser Aluminum court teaches, the court “begin[s] [its] analysis with the

4

proposition that CERCLA ‘is to be given a broad interpretation to accomplish its

5

remedial goals.” 976 F.2d at 1343 (quoting Stevens Creek Assoc. v. Barclays Bank of

6

Cal., 915 F.2d 1355, 1363 (9th Cir. 1990)). Giving meaning to this “broad interpretation”

7

and accepting ARCO’s allegations as true, PLC’s alleged management, operations and

8

control of the flood irrigation system and irrigation ditches on the Property were

9

“specifically related to pollution.”

10

2.

Disposal

11

PLC asserts that whether flood irrigation amounts to a “disposal” under CERCLA

12

is a matter of first impression and relies on the statute, case law, and exemptions to

13

liability under CERCLA to argue that flood irrigation is not a “disposal.” ARCO counters

14

that CERCLA defines “disposal” broadly to cover the activities alleged in its third-party

15

complaint.

16

CERCLA borrows the definition of “disposal” from the Solid Waste Disposal Act.

17

42 U.S.C. § 9601(29). “[D]isposal means the discharge, deposit, injection, dumping,

18

spilling, leaking or placing of any solid waste or hazardous waste into or on any land or

19

water so that such solid waste or hazardous waste or any constituent thereof may enter

20

the environment. . .” 42 U.S.C. § 6903(3). “CERCLA’s definition of ‘disposal’ expressly

21

encompasses the ‘placing of any . . . hazardous waste . . . on any land.’” Kaiser

22

Aluminum, 976 F.2d at 1342 (quoting 42 U.S.C. § 6903(3)). This includes subsequent

23

movement, dispersal, or release of hazardous substances during excavations. Id.

24

(citations and quotation marks omitted). Generally, human activity that moves

25

contaminates constitutes “disposal” under § 107(a)(2). See Carson Harbor Village, Ltd.

26

v. Unocal Corp., 270 F.3d 863, 876 (9th Cir. 2001) (en banc); Kaiser Aluminum, 976

27

F.2d at 1342. But passive activities may also be considered to be disposal. See Carson

28

Harbor, 270 F.3d at 876-77 (discussing that some courts permit “passive” activities to
17

1

constitute a “disposal” under CERCLA although it found “passive soil migration” to not fit

2

within CERCLA’s definition of “disposal”); compare Pakootas v. Teck Cominco Metals,

3

Ltd. No. 15-35228, 2016 WL 4011196, at *6-8 (9th Cir. July 27, 2016) (finding that

4

deposition of airborne hazardous waste was not a "disposal" under CERCLA). In fact,

5

the Ninth Circuit rejected the “absolute binary” of the “active/passive distinction” and

6

clarifies that courts “must examine each of the terms in relation to the facts of the case

7

and determine whether the movement of contaminants is, under the plain meaning of

8

the terms, a “disposal.” Carson Harbor, 270 F.3d at 879 (internal quotation marks

9

omitted).

10

As alleged, PLC placed and deposited water containing hazardous substances

11

on the Property, removed sediment containing hazardous materials from the ditches,

12

and placed and discarded these materials on the Property, all of which resulted in the

13

release or threatened release of hazardous substances. (ECF No. 179 at 21-22.) PLC’s

14

operation of the flood irrigation system on the Property and maintenance of the irrigation

15

ditches as alleged fall within CERCLA’s definition of “disposal”: “placing of any . . .

16

hazardous waste . . . on any land or water . . .” 42 U.S.C. § 6903(3); see Kaiser

17

Aluminum, 976 F.2d at 1342. The activities are similar to the activities found to amount

18

to “disposal” in Kaiser Aluminum—moving displaced contaminated soil to portions of the

19

property that did not contain tainted soil. Id. The express language of the statute

20

compels a finding that ARCO has sufficiently alleged activities that meet the statutory

21

definition of “disposal.”

22

The cases that PLC relies upon support this finding. For example, PLC

23

analogizes this case to Carson Harbor for the proposition that flood irrigation is akin to

24

passive migration and not “disposal.” (ECF No. 182 at 15). However, Carson Harbor

25

involved passive migration of hazardous substances through the soil. Carson Harbor,

26

270 F.3d at 879. The court found that disposal is not limited to releases caused by

27

human conduct and may cover passive migration (although not passive soil migration)

28

occurring while the former owner possessed the property. Id. at 879-81. Here, ARCO
18

1

alleges that PLC knowingly diverted contaminated water from Bryant Creek and

2

deposited the water through a man-made irrigation system onto the Property. (ECF No.

3

179 at 21.) They also allege that PLC maintained the flood irrigation system by

4

removing contaminated sediment from the ditches and disposing the sediment

5

elsewhere on the Property. (Id.) Accepting these allegations as true, PLC’s use of

6

contaminated water to irrigate the Property, and removing sediment containing

7

hazardous substances and placing them on the Property, are not akin to the passive

8

soil migration presented in Carson Harbor. Passive migration here would be akin to PLC

9

allowing contaminated creek water to migrate onto the Property along Bryant Creek

10

without taking any action. However, here, PLC actively using polluted creek water for

11

flood irrigation and disturbed contaminated sediment as alleged in the third-party

12

complaint. Accordingly, PLC’s flood irrigation activities and maintenance of the irrigation

13

ditches cannot be considered passive migration of contaminants.

14

PLC also relies on Coppola v. Smith (Coppola I), 935 F. Supp. 2d 993 (E.D. Cal.

15

2013), to assert that disposal requires an “affirmative act of discarding” hazardous

16

waste. (ECF No. 182 13-14.) In Coppola I, the plaintiff argued that the defendant water

17

company should be a PRP because its past ownership and operation of an abandoned

18

well exacerbated a contamination plume. Coppola I, 935 F. Supp. 2d at 1021-22. The

19

court held that the plaintiff’s allegations were insufficient to constitute disposal because

20

the complaint did not allege an “affirmative act of discarding,” but the court granted

21

leave for the plaintiff to amend. Id. at 1023-24. In Coppola v. Smith (Coppola II), 19 F.

22

Supp. 3d 960 (E.D. Cal. 2014), the court found that the allegations that the water

23

company’s operation caused contaminants to be “deposited” or “leaked” into deeper

24

groundwater zones were sufficient to allege that a “disposal” had occurred at the well.

25

Id. at 973. Similarly here, ARCO alleges that PLC “deposited” contaminants on the

26

Property.

27

PLC cites to 3550 Stevens Creek Associates v. Barclays Bank of Cal., 915 F.2d

28

1355 (9th Cir. 1990), to argue that “disposal” must involve allegations of “an affirmative
19

1

act of discarding a substance as waste” and that “the act of irrigating a pasture is not

2

discarding.” (ECF No. 182 at 13.) PLC’s argument is unpersuasive. First, as discussed,

3

“disposal” as defined under CERCLA covers “discharge, deposit, injection, dumping,

4

spilling, leaking or placing.” 42 U.S.C. § 9607(a). Moreover, PLC’s analogy

5

misconstrues the holding in 3350 Stevens Creek. That case involved recovery of

6

response costs for clean-up of asbestos installed in a commercial building. 915 F.2d at

7

1356. The court found that CERCLA’s definition of “‘disposal’ pertains to ‘solid waste or

8

hazardous waste,’ not to building materials [such as asbestos materials installed in

9

building structure] which are neither.” Id. at 1361.

10

PLC relies on CERCLA’s exclusion of certain activities with recognized beneficial

11

use to argue that flood irrigation, like these exempt activities, was conducted for

12

legitimate reasons. (ECF No. 182 at 14-15.) This argument is similarly tenuous. Exempt

13

activities, such as the application of fertilizer, or irrigation return flow, either require or

14

involve the use of materials containing hazardous substance. Irrigation in and of itself

15

does not require or involve the use of water containing hazardous substances.

16

Finally, PLC argues that irrigation using water rights from Bryant Creek is

17

permitted under the Alpine Decree and therefore cannot amount to “an affirmative act of

18

discarding.” (ECF No. 182 at 13.) Applying this logic would contravene the “broad

19

interpretation” to be given to CERCLA in general and the expansive interpretation to be

20

given to the definition of “disposal” in particular. Indeed, there are legitimate activities

21

that have been found to amount to “disposal.” For example, the excavation of soil in

22

Kaiser Aluminum was also an activity otherwise permitted. The Ninth Circuit found that

23

the excavation of contaminated soil, moving it away from the excavation site and

24

spreading it over untainted portions of the property for purposes of housing

25

development amounted to “disposal” under CERCLA. Kaiser Aluminum, 976 F.2d at

26

1342. Indeed, ARCO does not merely allege that PLC utilized Alpine Decree rights, but

27

that PLC “determined if, when, where and how much water containing hazardous

28

substances was placed and deposited on the Diamond X Property.” (ECF No. 179 at
20

1

21.)

2

“‘Disposal’” has been interpreted broadly to include activities beyond the

3

introduction of hazardous waste onto property. Kaiser Aluminum, 976 F.2d at 1342.

4

Applying this broad interpretation here, the Court finds that ARCO has alleged sufficient

5

facts to satisfy CERCLA’s definition of “disposal.”

6

VI.

CONCLUSION

7

The Court notes that the parties made several arguments and cited to several

8

cases not discussed above. The Court has reviewed these arguments and cases and

9

determines that they do not warrant discussion or reconsideration as they do not affect

10
11
12
13
14
15

the outcome of the Motions to Dismiss.
It is therefore ordered that Diamond X’s motion to dismiss (ECF No. 144) is
denied.
It is further ordered that Park Livestock’s motion to dismiss (ECF No. 182) is
denied.
DATED THIS 26th day of August 2016.

16
17

MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

18
19
20
21
22
23
24
25
26
27
28
21