In Re: Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation
Filing
3391
FILING ERROR - WRONG EVENT TYPE SELECTED FROM MENU - MOTION for Settlement Memorandum of Points and Authorities in Support of Motion for Order Determining Good Faith Settlement. Document filed by Petro-Diamond, Inc. Filed In Associated Cases: 1:00-cv-01898-SAS -DCF, 1:04-cv-04968-SAS(Langa, Brian) Modified on 5/17/2011 (db).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MDL NO. 1358 (SAS)
Master File No. 1:00-1898
In re: Methyl Tertiary Butyl Ether
(“MTBE”)
Products Liability Litigation
DEFENDANT PETRODIAMOND
INCORPORATED’S
MEMORANDUM OF POINTS
AND AUTHORITIES IN
SUPPORT OF MOTION FOR
ORDER DETERMINING
GOOD FAITH SETTLEMENT
This Document Relates To:
Orange County Water District v. Unocal
Corp., et al. 04 Civ. 4968 (SAS)
DEFENDANT PETRO-DIAMOND INCORPORATED’S MEMORANDUM
OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR
ORDER DETERMINING GOOD FAITH SETTLEMENT
Defendant Petro-Diamond Incorporated (“PDI”) respectfully submits the
following memorandum of points and authorities in support of its motion for an
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order determining the good faith of the Settlement Agreement and Release between
Plaintiff Orange County Water District (the “District”) and PDI (“Settlement
Agreement”).
Respectfully submitted,
DATED: May 16, 2011
By:
/s/
Brian D. Langa
(pro hac vice)
Demetriou, Del Guercio, Springer &
Francis, LLP
801 South Grand Avenue, Suite 1000
Los Angeles, California 90017
Tel: (213) 624-8407
Fax: (213) 624-0174
E-mail: blanga@ddsffirm.com
Attorneys for Petro-Diamond
Incorporated
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TABLE OF CONTENTS
MEMORANDUM OF POINTS AND AUTHORITIES ............................... 1
I.
BACKGROUND ..................................................................................... 1
A.
B.
II.
Case History.................................................................................. 1
Settlement Between the District and PDI................................... 5
DISCUSSION.......................................................................................... 5
A.
California Code Of Civil Procedure § 877.6 Permits The
Court To Determine The Good Faith Of a Settlement
Reached By One Of Several Named Defendants....................... 5
B.
The Settlement Between The District And PDI Was Made
In Good Faith And Meets The Standards Governing This
Determination ............................................................................... 6
1.
2.
The settlement is a rough approximation of PDI’s
proportionate liability.......................................................... 9
3.
The amount paid in settlement is reasonable. ................. 18
4.
The allocation of proceeds among plaintiffs does not
apply to this settlement. ..................................................... 19
5.
The settlement reflects recognition that PDI should
pay less in settlement than after trial. .............................. 19
6.
The financial condition and insurance policy limits
of PDI are not relevant to the settlement. ........................ 20
7.
C.
A rough approximation of the District’s total
potential recovery. ............................................................... 8
Neither fraud, collusion, nor tortious misconduct
played a role in the negotiations between the District
and PDI.............................................................................. 20
Any Party Challenging The Settlement Bears The Burden
of Proving Lack of Good Faith ................................................. 21
1
D.
III.
The Court Should Direct Entry of Judgment Pursuant to
FRCP 54(b) Regarding the Court’s Determination of a
Good Faith Settlement ............................................................... 21
CONCLUSION ..................................................................................... 23
2
TABLE OF AUTHORITIES
Federal Cases
Agway, Inc. Employees’ 401(k) Thrift Inv. Plan v. Magnuson
409 F. Supp. 2d 136 (N.D.N.Y. 2005) ................................................... 22
AmeriPride Servs., Inc.
No. CIV. S-00-113-LKK JFM, 2007 U.S. Dist. LEXIS 51364
(E.D. Cal. 2007)...................................................................................... 22
Bottoms v. Levin Enters. Inc.
No. C-99-4598 MMC, 2001 U.S. Dist. LEXIS 13434
(N.D. Cal. 2001) ..................................................................................... 22
Continental Airlines, Inc. v. Goodyear Tire & Rubber Co.
819 F.2d 1519 (9th Cir. 1987) ................................................................ 21
Methyl Tertiary Butyl Ether Products Liability Litigation
578 F. Supp. 2d 519 (S.D.N.Y. 2008) .................................................... 10
Methyl Tertiary Butyl Ether Products Liability Litigation
591 F.Supp.2d 259 (S.D.N.Y. 2008) ........................................................ 3
Shawmut Bank N.A. v. Kress Assocs.
33 F.3d 1477 (9th Cir. 1994) .................................................................... 6
State Cases
Abbott Ford, Inc. v. Superior Court
741 P.2d 124 (Cal. 1987).................................................................... 9, 10
El Escorial Owners' Assn. v. DLC Plastering, Inc.
65 Cal.Rptr.3d 524 (Cal.Ct.App. 2007).................................................. 10
Erreca’s v. Superior Court
24 Cal.Rptr.2d 156 (Cal.Ct.App. 1993).................................................... 6
Heppler v. J. M. Peters Co.
87 Cal. Rptr. 2d 497 (Cal. Ct. App. 1999)...................................... 7, 9, 19
Regan Roofing Co. v. Superior Court
27 Cal.Rptr.2d 62 (Cal.Ct.App. 1994).................................................... 10
Rutgard v. Haynes
61 F. Supp. 2d 1082 (S.D. Cal. 1999) .................................................... 19
Tech-Bilt, Inc. v. Woodward- Clyde & Assocs.
698 P.2d 159 (Cal. 1985)................................................................. passim
Torres v. Union Pacific R.R. Co.
203 Cal. Rptr. 825 (Cal. Ct. App. 1984)................................................... 9
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Statutes and Regulations
28 U.S.C. §1407.................................................................................................. 1
3 California Civil Procedure Before Trial, § 50.16, p. 2395 (4th ed. 2010)..... 19
California Code of Civil Procedure § 877 .......................................................... 6
California Code of Civil Procedure § 877.6 ....................................................... 6
California Code of Civil Procedure § 877.6(b)................................................... 6
California Code of Civil Procedure § 877.6(c)................................................... 6
California Code of Civil Procedure § 877.6(d)............................................. 6, 21
Federal Rule of Civil Procedure 54(b).................................................. 21, 22, 23
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MEMORANDUM OF POINTS AND AUTHORITIES
I.
BACKGROUND
A.
Case History
On May 6, 2003, the Orange County Water District (“District”) initiated this
action in Orange County Superior Court, Case No. 03CC00176, against numerous
defendants for alleged “compensatory damages and all other damages” associated
with methyl tertiary butyl ether (“MTBE”) and/or tertiary butyl alcohol (“TBA”) in
groundwater and to allegedly “protect the quality of the common water supplies of
the District,” (the “Litigation”). See, Third Amended Complaint, Orange County
Water Dist. v. Unocal Corp. et al., Case No. 04-CV-4968-SAS, Southern District,
New York (Filed April 2, 2008, Docket No. 27). The District alleges causes of
action for strict liability, negligence, trespass, nuisance, Orange County Water
District Act Claim, and declaratory and injunctive relief. The District also claims
fraud and conspiracy as to certain refiners and manufacturers related to the use of
MTBE in gasoline in California beginning in or about 1986 until the end of 2003.
The Litigation was transferred to the United States District Court, Southern
District of New York by the Judicial Panel on Multidistrict Litigation, pursuant to
§1407 of title 28 of the United States Code, and now is part of MTBE MDL 1358.
On October 29, 2004, the District filed its Second Amended Complaint naming
Petro-Diamond Incorporated (“PDI”) in place of DOE 6. PDI was named as a
“Supplier Defendant” and “MTBE Refiner and Suppler Defendant” as opposed to a
“Refiner Defendant” or “Owner/Operator Defendant.”
PDI operates a petroleum products distribution terminal located in the Port
of Long Beach, Los Angeles County, California. Declaration of Brian D. Langa in
Support of PDI Motion for Order Determining Good Faith Settlement, filed
concurrently herewith at ¶6, hereafter “Langa Decl.” PDI does not manufacture or
refine gasoline or MTBE, and it does not own or operate any gasoline station sites.
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Id. Thus, PDI believes that the only potential basis of liability asserted by the
District that could involve PDI is a products liability theory. Under such a theory,
the District would contend that every entity in the chain of commerce for gasoline
with MTBE that contributed to the alleged contamination is liable for the
“defective” MTBE product, even a middleman distributor such as PDI.
Accordingly, to establish liability against PDI, at a minimum, the District must
prove that product once owned by PDI reached a station which then leaked that
product to groundwater. However, there are no records that indicate product once
owned by PDI was transported to any of the 150 stations on the District’s February
20, 2009 plume list (“Plume List”).
PDI does sell product that may be transported to station sites in Orange
County. PDI’s sales occur in a limited number of manners. 1 First, PDI may
contract with an independent contractor trucking company to directly deliver the
PDI product to PDI customers who operate station sites (“Direct Deliveries”). PDI
has records dating back to 1996 identifying this product’s station site destination.
There are no records of Direct Deliveries to any of the 150 station sites on the
Plume List. Langa Decl., ¶8.
Second, PDI posts a price, typically daily or even more frequently, and
wholesale customers direct their trucks to the PDI terminal in Los Angeles County
and load from the PDI terminal’s truck racks (“Wholesale Sales”). This practice is
not unlike a customer filling up at the corner station upon recognizing the posted
price is a good deal. These customers, (so-called “jobbers”), fill up and take the
product to destinations unknown to PDI. Indeed, as competitors with PDI’s Direct
Deliveries, the Wholesale Sales’ purchasers guard such destination information
1
In addition, third parties may utilize PDI’s port and/or terminal to offload, store,
and pass through their product; PDI does not take title to such product and does not
believe it could be liable in this matter for such product.
2
from PDI. PDI is not aware of any records of Wholesale Sales indicating PDI
product with MTBE was taken to a station site on the Plume List. Langa Decl. ¶9.
Third, PDI may sell product via pipeline or in tankage to refiners or others in
Los Angeles County (“Head of Pipe Sales”). For the most part, these are sales in
which PDI takes a position on a product in the Los Angeles market with a delivery
location at Kinder Morgan (“KM”) Watson in Los Angeles County. (KM Watson
is not a terminal; it is a hub in the KM distribution system from which product can
be transported via the KM pipelines or other pipelines to eventually reach a
terminal from which a truck would take the product to a station site.) PDI has no
knowledge of where the purchaser is sending the product in the intrastate and
interstate KM system, much less at which gas station that product will end up.
Finally, there are no records of the endpoint destination of other similar sales, e.g.,
sales in commingled tankage or via proprietary pipeline to a refiner.2 Langa Decl.,
¶10.
Further, PDI’s records reflect that it purchased and sold approximately
110,000 barrels total of neat MTBE to blenders or refiners from 1996 through
2003. PDI may have engaged in similar sales prior to 1996. Langa Decl., ¶11.
Although no records linking PDI product to a relevant station site have been
presented to date, it is possible such records may exist. The District has asserted
that, for example, there may be yet unproduced or undiscovered jobbers’ records
2
PDI does not believe the District could avail itself of this Court’s
commingled product theory to overcome this lack of records. This is because
PDI understands this theory is limited to manufacturers and refiners. In re:
Methyl Tertiary Butyl Ether Products Liability Litigation, 591 F.Supp.2d 259,
276 (S.D.N.Y. 2008). (“…“[m]anufacturers are in the best position to know
when products are suitably designed and properly made, as well as to diffuse
the cost of safety in design and production.” Retailers and distributors, on the
other hand, are often “innocent conduits in the sale of the product” and are held
liable only because product liability is strict.” [Emphasis added.])
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evidencing a pickup of product by the jobber from PDI’s terminal which was then
taken to a relevant station site. Similarly, a third party may have records of pre1996 Direct Deliveries from PDI to a relevant station site. Further, product
purchased by a refiner or other supplier may have been transported by the
purchaser to a relevant station site. Additionally, the District has indicated other
sites may be added to the plume list in the future, and there may be records linking
PDI to these sites. In support of this potential eventuality occurring, the District
has noted that in the Defendant Identification Response, (see, footnote 6, infra),
certain defendants in the Litigation identified PDI as a supplier of gasoline with
MTBE or of neat MTBE that may have been distributed into the District’s service
area.
With this settlement, PDI resolves all past and future, known and unknown
liability connected to, arising out, of or in any way related to: (a) the use of MTBE
or other oxygenates in gasoline, at any time and for any reason; and (b) the actual
or threatened presence of MTBE, TBA, other authorized oxygenates, gasoline,
benzene, toluene, ethylbenzene, xylenes, and/or other components of gasoline and
fuel in water or on property (including but not limited to wells, aquifers, and water
resources) accessed, accessible, managed, owned, operated, used, and/or protected
by the District (“Gasoline Contamination”).3 See, Exhibit 1 to Langa Decl.
3
PDI enters into the agreement and seeks a contribution bar both in its individual
capacity and on behalf of its successors, assigns, joint venturers, partners, parents,
subsidiaries, affiliates, predecessors-in-interest, successors-in-interest,
predecessors-in-name, successors-in-name, beneficiaries, and each of its respective
past, present, and future officers, directors, employees, partners, shareholders,
officials, board members, trustees, fiduciaries, agents, accountants, attorneys,
insurance carriers, sureties, representatives, independent contractors, consultants,
experts and advisors. This includes, but is not limited to, PDI’s subsidiary PetroDiamond Terminal Company.
4
B.
Settlement Between the District and PDI
Beginning in or about Fall of 2006, PDI’s counsel and Plaintiffs’ counsel
initiated settlement communications. Langa Decl., ¶13. Thereafter, counsel
periodically exchanged written communications and telephone calls further
discussing settlement. Id. On March 30, 2011, PDI and the District engaged in a
mediation before retired Judge Alfred G. Chinatelli, who, among other
accomplishments, has successfully mediated other MTBE matters. This mediation
culminated in the agreed upon settlement presently before the Court. Langa Decl.,
¶14.
Recognizing that the Litigation will become increasingly expensive and
time-consuming as it proceeds towards multiple trials, PDI elected to settle to
avoid the uncertainty of further litigation and incurring additional litigation related
expense. Langa Decl., ¶15. As a result of the settlement discussions, PDI has
agreed to pay the District $2,000,000 in settlement of the Litigation and forever
resolving all Gasoline Contamination claims against PDI. Langa Decl., ¶16.
The anticipated uncertainty and expense associated with preparing for any
single trial are significant. Langa Decl., ¶17. PDI does not know how many sites,
if any, to which it could or would be linked. The prospect of defending the
Litigation through trial for all potential sites to which PDI could be linked is
daunting and worth consideration for settlement. Id. In fact, this is the primary
driver of settlement for PDI.
II.
DISCUSSION
A.
California Code Of Civil Procedure § 877.6 Permits The Court To
Determine The Good Faith Of a Settlement Reached By One Of
Several Named Defendants
The issue of the good faith of a settlement is determined by the court upon
motion or other application of any party, on the basis of declarations served in
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support of the motion, any counter declarations filed in opposition, the settlement
papers, or, in the discretion of the court, upon other evidence at the hearing. Cal.
Code of Civil Procedure § 877.6(b). The burden of proof is on the party opposing
the good faith motion. Cal. C.C.P. § 877.6(d). Any party who opposes a motion
for determination of good faith settlement must demonstrate that “the settlement is
so far ‘out of the ballpark’. . . as to be inconsistent with the equitable objectives of
the statute.” Cal. C.C.P. § 877.6(d); Tech-Bilt, Inc. v. Woodward- Clyde &
Assocs., 698 P.2d 159, 167 (Cal. 1985). Whether the settlement is in good faith
pursuant to Sections 877 and 877.6 also rests in the sound discretion of the trial
court. See, Erreca’s v. Superior Court, 24 Cal.Rptr.2d 156, 166 (Cal.Ct.App.
1993). A determination by the court that the settlement was made in good faith
bars any other joint tortfeasor from any further claims against the settling tortfeasor
for equitable comparative contribution, or partial or comparative indemnity, based
on comparative negligence or comparative fault. Cal. C.C.P. § 877.6(c).
As discussed below, the settlement between the District and PDI was made
in good faith, and PDI’s request for an order determining the good faith of the
parties’ settlement should be granted.
B.
The Settlement Between The District And PDI Was Made In
Good Faith And Meets The Standards Governing This
Determination
Determination of the good faith of a settlement of one of several alleged
joint tortfeasors is assessed based on a variety of factors identified in Tech-Bilt, Inc
v. Woodward-Clyde & Assocs., 698 P.2d 159, 166 (Cal. 1985). Federal courts have
authority to apply the Tech-Bilt factors when ruling on such a motion. Shawmut
Bank N.A. v. Kress Assocs., 33 F.3d 1477, 1504-1505 (9th Cir. 1994). The key
consideration for the Court is whether the proposed settlement is within the
“reasonable range” of the settling defendant’s proportional share of comparative
6
liability for the plaintiff’s injuries. Tech-Bilt, 698 P.2d at 166. The Court will
balance the relevant factors to ensure that the settlement is not “so far out of the
ballpark . . . to be inconsistent with the equitable objectives of the statute.” Id. at
167.
The factors considered include:
A rough approximation of the plaintiff’s total potential recovery;
A rough approximation of the settling defendant’s proportionate
liability;
The amount paid in settlement;
The allocation of settlement proceeds among plaintiffs;
A recognition that the settling defendant should pay less in settlement
than if it were found liable at trial;
The financial condition of the settling defendant;
The insurance policy limits of the settling defendant; and
The existence of fraud, collusion, or tortious misconduct on the part of
the settling party aimed to injure the interests of the nonsettling
defendants.
Id. at 166-67. Each of these factors is evaluated on the basis of the information
available to the parties at the time the settlement is entered into, and no one factor
is determinative. Id. at 167. “The fundamental inquiry ... is whether the settling
defendant is paying the plaintiff an amount that is so far below defendant’s
proportionate share of liability as to be completely ‘out of the ballpark.’” Heppler
v. J. M. Peters Co., 87 Cal. Rptr. 2d 497, 514 (Cal. Ct. App. 1999) (quoting TechBilt, 698 P.2d at 167).
7
1.
A rough approximation of the District’s total potential
recovery.
PDI denies any liability to the District, and PDI believes (i) there is
insufficient evidence to bring PDI to any of the plume trials in that, among other
things, the District has no evidence that PDI product ever reached a relevant station
site, and PDI could succeed upon exculpatory motions or other dispositive
motions, (ii) assuming PDI was brought to a plume trial, a jury would not find it
liable, (iii) assuming a jury were to find liability for PDI, its proportionate share of
liability would be a small percentage of any total verdict, (iv) any verdict would be
further reduced by the amount attributable to other causes, such as other
contaminants, and (v) any recovery would be further reduced by the amount of any
settlements.
The settlement terms recognize that the District faces a risk of an adverse
verdict if it proceeded to trial against PDI. Langa Decl., ¶18; Declaration of Duane
C. Miller in Support of PDI Motion for Order Determining Good Faith Settlement
at ¶4, hereafter, “Miller Decl.” As set forth previously, PDI believes that, as a
middleman distributor, the District must show discrete product specifically once
owned by PDI reached the groundwater at issue. To date, PDI product has not
been shown to have been sent to a single station on the entire Plume List. Thus,
among the potential outcomes of any trial is that the District may recover nothing
with respect to its claims as to PDI.
Notably, the District’s claims against PDI represent only a small percentage
of the District’s claims in the Litigation against all current defendants, e.g., even if
PDI product was linked to a specific station, other potentially responsible parties
would include: multiple station site operators; multiple other suppliers to the
station; multiple other parties in the chain of commerce of the PDI product; and
possibly multiple other stations linked to the plume (and their respective operators,
8
suppliers, etc.). Thus, any PDI percentage would be significantly reduced based on
site-specific discovery and the inclusion of additional potentially responsible
parties. This is further discussed in section 2, infra, addressing the rough
approximation of PDI’s proportionate liability.
As to the total rough approximation amount of the District’s total recovery
in this matter, at the hearing in connection with 7-Eleven’s Motion for Good Faith
Settlement, counsel for the District noted that damages at the 7-Eleven stations,
“range from a low of a single CPT which would be $17,000 at a site up to as much
as $5 million at a site where a lot of MTBE [is located in groundwater].” March
11, 2011 Hearing Transcript; 6:17-18. One category of the costs PDI seeks to
avoid is the investigation and expert costs of determining and disputing these
damages amounts on a site by site basis over the Plume List’s 150 stations, plus
any other stations that are listed later. For purposes of the Court’s evaluation of
this Motion only, if one were to roughly approximate $2 million per station over
150 stations, then a rough approximation of the District’s total potential recovery is
$300 million.
2.
The settlement is a rough approximation of PDI’s
proportionate liability.
“[A] good faith settlement does not call for perfect or even nearly perfect
apportionment of liability.” Abbott Ford, Inc. v. Superior Court, 741 P.2d 124,
134 (Cal. 1987). The law requires only that the settlement is not “grossly
disproportionate to what a reasonable person, at the time of settlement, would
estimate the settling defendant’s liability to be.” Tech-Bilt, 698 P.2d at 167
(quoting Torres v. Union Pacific R.R. Co., 203 Cal. Rptr. 825 (Cal. Ct. App. 1984).
Again, the “fundamental inquiry ... is whether the settling defendant is paying the
plaintiff an amount that is so far below the defendant’s proportionate share of
liability as to be completely ‘out of the ballpark.’” Heppler, 87 Cal. Rptr. 2d at
9
514. Further, “it is quite proper for a settling defendant to pay less than his
proportionate share of the anticipated damages.” Abbott Ford, 741 P.2d at 134.
The Court’s evaluation of a settling defendant’s proportional liability is
based on the evidence available at the time of settlement. Tech-Bilt, 698 P.2d at
167. The limited documents exchanged in the Litigation support a finding that the
District’s and PDI’s settlement is in good faith. The amount PDI has agreed to pay
the District in settlement of the Litigation is “not completely out of the ballpark” of
a rough approximation of the District’s total recovery as to PDI. Miller Decl., ¶5.
In approving a prior good faith settlement in this MDL, this Court stated that
“the means of allocating liability in these cases remains highly contested.” In re
Methyl Tertiary Butyl Ether Products Liability Litigation, 578 F. Supp. 2d 519,
528 (S.D.N.Y. 2008). Indeed, and as this Court recognized in overruling
objections to a global MDL settlement in 2008, “...there is no evidentiary basis for
estimating the individual liability of each defendant in these cases, making [the
objecting defendant’s suggested allocation] purely hypothetical.” Id. at 529.
PDI asserts that it is paying $2 million more than its proportionate share of
liability. PDI makes this assertion based upon the limited evidence related to PDI
available at this stage of the litigation. In connection with this description of the
limited evidence below, PDI offers the following basis of allocation for the Court’s
evaluation of the settlement:4
4
This allocation is not binding and is utilized only for this Court’s evaluation. In
keeping with the parameters set by Tech-Bilt, with regards to complex multiparty
cases, "a trial court may have to use 'rough categories' to initially determine good
faith settlement allocations" El Escorial Owners' Assn. v. DLC Plastering, Inc. 65
Cal.Rptr.3d 524, 536 (Cal.Ct.App. 2007): see also Regan Roofing Co. v. Superior
Court 27 Cal.Rptr.2d 62, 73 (Cal.Ct.App. 1994). This flexibility is necessary in
complex multiparty cases, because "the allocations may involve some degree of
overlap." and "in some cases, 'complete precision of allocation' may be achieved
only at trial." El Escorial, at 536. The court would reserve the right of other parties
to challenge those allocations at a later date. Id.
10
a. Stations on the Plume List alleged by the District to be linked to PDI
and potentially linked to Litigation Defendants who indicated they
have purchased product from PDI, (although such Defendants have
not identified any stations to which such PDI product may have been
taken). [134 stations] - $1,800,000.
b. Stations on the Plume List not linked to the Litigation Defendants
who indicated they have purchased product from PDI.5 [16 stations] $100,000.
c. Other potential stations or bases of liability - $100,000
Langa Decl., ¶19. These categories are more fully described below and further in
paragraphs 19 through 22 of the concurrently submitted Declaration of Brian D.
Langa.
On February 20, 2009, the District produced the Plume List of 150 station
sites associated with 87 Bellwether plumes. PDI is not aware of any records
indicating that product once owned by it reached a station site on the Plume List.
(The District noted that discovery and additional sampling is ongoing such that
additional plumes and stations may be added to the litigation.) The District’s
present case against PDI is set forth in the District’s August 18, 2010 Responses to
PDI’s Second Set of Interrogatories (“District Responses”); the District Responses
list 27 stations. However, these District Responses are limited to examining those
stations associated with the District’s five selected focus plumes. (For example,
the District alleges PDI is linked to all ARCO stations, but the District Responses
do not list all ARCO stations on the Plume List; it lists only those ARCO stations
that the District alleges are linked to the five District selected Focus Plumes.6)
5
This distinction is based solely upon PDI’s review of the Plume List station site
names. PDI is not aware of whether discovery into the historic and/or actual owner
and operators of these stations has occurred.
6
The Court adopted a procedure in which Plaintiff selected five plumes and
11
Still, from its review of the District Responses and these specified station names,
PDI understands those stations to which the District presently alleges a link with
PDI.7 There are 134 of these stations on the Plume List. Langa Decl. ¶¶20-22.
PDI allocates $1.8 million to these stations resulting in $13,432.83 per station.
The remaining stations not yet linked to a defendant in this matter, (pursuant
to PDI’s review of the Plume List), numbers 16 stations. Langa Decl. ¶¶20-22.
PDI allocates $100,000 to these stations resulting in $6,250 per station.
PDI allocates more to the first category because there is a potential triable
issue of fact as to some of these stations that arguably may survive a PDI Motion
for Summary Judgment. As explained below, PDI does not believe there is. PDI
allocates less to the second group of stations because any alleged link is entirely
speculative. When and if discovery proceeds as to these stations, there is a remote
possibility that evidence sufficient to withstand a PDI Motion for Summary
Judgment may arise, but PDI believes such is doubtful. With respect to both sets
of stations, PDI knows there are no Direct Deliveries to these stations from 1996 to
2003.
With respect to the third category, PDI is not certain what links could arise,
but PDI is resolving all Gasoline Contamination claims. For example, as explained
below, the District implies liability to PDI for its use of the KM system and the
Defendants selected five plumes, with the goal that these plumes would be set for
trial. These ten plumes are referred to as the Focus Plumes. The District
Responses appear limited only to the District’s selected five Focus Plumes.
7
In the District Responses, the District alleges links between PDI and stations
associated with the following: G&M, USA Gasoline, Unocal, Thrifty, Texaco,
Shell, Conoco, 7-Eleven, Valero, and Ultramar. Although the District does not list
any specific Chevron station, it implies PDI would be linked to such stations
because Chevron utilizes the KM system. Ostensibly, this would be due to PDI
“head of the pipe” sales at the KM Watson facility in Los Angeles County. Given
this tenuous link, PDI also necessarily includes Exxon-Mobil stations in this
analysis since PDI may have sold product to this entity at KM Watson facility.
12
lease of a Chem-Oil tank in Los Angeles County. PDI does not believe any such
alleged transactions create a triable issue. The District also alleges that its
investigation for MTBE plumes and alleged stations from which such releases
occurred is ongoing. Accordingly, PDI allocates a portion of its settlement
($100,000) to this category.
a.
Based upon the limited information available, PDI does not believe
there is a triable issue linking PDI to any specific station.
PDI herewith addresses the “evidence” produced to date allegedly linking
PDI to relevant stations. As set forth herein, PDI’s proportionate liability is
minimal because PDI does not believe there is evidence to create a triable issue of
fact connecting PDI to a station on the Plume List.
G&M Oil Company, Inc. (“G&M”) - G&M’s September 15, 2004
Defendant Identification Response8 identifies PDI as one of three suppliers
to G&M that provided product to G&M within the boundaries of Orange
County; the person who verified this statement has since passed away.
8
In 2003, the District propounded “Plaintiff’s Preliminary Set of Interrogatories
Re: Defendant Identification.” The District received discovery responses from
most of the then defendants, (“Defendant Identification Response”), and many
defendants identified PDI, (among scores of other entities), as a supplier of product
that may have been sent to unspecified stations in Orange County. PDI did not
learn of these Defendant Identification Response prior to 2010. PDI was not a
party when this discovery occurred, and this discovery was not cited in District
discovery responses to PDI prior to 2010. In July 2010, the District first provided
to PDI these 2003 and 2004 Defendant Identification Responses. Fact discovery
closed in August 2010, so PDI has not had an opportunity to investigate these
parties’ statements in discovery. PDI is unaware of any records indicating that
such sales resulted in formerly owned PDI product reaching a station from which
there has been a release of gasoline with MTBE. Most of the District’s “evidence”
against PDI relates to these vague, general Defendant Identification Responses.
PDI contends such evidence does not establish a triable issue, and in any event, is
inadmissible as to PDI since it was not timely identified to PDI.
13
PDI’s records date back to1996, and it has no records of sales to G&M.
Recently, G&M reviewed all of its records and confirmed it had no records
of purchases from PDI. Further, there is testimony and records that the
G&M stations at issue had branding agreements for all relevant periods and
could not receive product from PDI. Langa Decl., ¶27. Thus, PDI does not
believe there is a triable issue that PDI product reached the G&M stations
which the District alleges G&M operated and from which a release occurred.
USA Gasoline- USA Gasoline’s August 30, 2004 Defendant Identification
Response identifies PDI as one of three terminals from which it received
product that may have been delivered into Orange County. USA Gasoline
has not produced any records identifying dates of deliveries or stations that
accepted such deliveries, and PDI is informed and believes no records exist
identifying a sale of PDI product to any of the USA Gasoline stations on the
Plume List. Id.
Ultramar, Inc., Valero Energy Corporation, Valero Marketing and Supply
Company, Valero Refining and Marketing Company, and Valero Refining
Company-California (collectively, “Valero”) - In its Defendant
Identification Responses, Valero identified PDI as one of 80 entities from
which it acquired neat MTBE from 1997 to 2003 for use at a refinery from
which it supplied product into the relevant area. (Valero states the sales with
PDI were from 2000 to 2003; PDI’s records reflect it sold neat MTBE to
Valero in 1997.) Langa Decl., ¶27. PDI does not believe that this creates a
triable issue linking PDI product to a release at any specific station. The
District also notes that PDI stored MTBE for Ultramar at its facility from
1996 to 2002. However, this is in connection with a terminalling agreement,
and PDI did not take title to the product. Accordingly, PDI does not believe
14
it could be liable under a products liability theory. The District notes that, in
connection with a terminalling agreement, during a flush exchange to move
Ultramar’s MTBE from the PDI facility to Ultramar’s Wilmington Refinery,
“a limited amount of PDI product will end up in the refinery or in Ultramar
pipelines.” This may be a correct statement, but PDI believes this would be
a de minimis amount and does not create a triable issue linking PDI product
to a release at any specific station.
7-Eleven- OCWD’s Discovery Responses note that 7-Eleven identified
Ultramar as a supplier of gasoline containing MTBE. Based upon the
alleged link between PDI and Ultramar, the District alleges a link between
PDI and 7-Eleven. PDI believes this does not create a triable issue linking
PDI product to a release at any specific station. Langa Decl., ¶27.
ConocoPhillips Company (“Conoco”)- Conoco’s August 30, 2004
Defendant Identification Responses provides a table of entities which,
“supplied ConocoPhillips with MTBE blended gasoline which may have
ultimately been delivered into one or more of the geographic areas listed in
Plaintiffs’ [California] Complaints.” The table lists 36 entities, including
PDI, but it does not specify which entities are linked to which geographic
areas; i.e., it does not specify which entities apply to which Complaints. PDI
sold product to Conoco “head of the pipe,” but PDI has no knowledge where
such product ultimately went. Langa Decl., ¶27. Because of this, the
District alleges a link between PDI and the Unocal stations on the Plume
List. PDI does not believe that this creates a triable issue linking PDI
product to a release at any specific station.
15
Shell Oil Company, Equilon Enterprises LLC, and Texaco Refining and
Marketing Inc. (collectively, “Shell”) - In its 2004 Defendant Identification
Responses, Shell asserted that PDI sold it product that “may” have had
MTBE at a location from which Shell, from time to time, transports into
Orange County. PDI sold product to Shell “head of the pipe,” but PDI has
no knowledge where such product ultimately went. Langa Decl., ¶27.
Shell also identified PDI as one of 41 suppliers of neat MTBE. The District
Responses assert also that Valero provide Shell with product, and link PDI
to Shell through the alleged Valero connection above. PDI does not believe
that this creates a triable issue linking PDI product to a release at any
specific station.
Union Oil Company of California (“Unocal”) – Unocal’s August 30, 2004
Defendant Identification Responses identify PDI as one of 78 suppliers of
gasoline containing MTBE for delivery into the Orange County service area.
Unocal’s responses note various specific months from 1991 to 1997 during
which it purchased fuel product from PDI, (often just one month a year but
ranging up to 7 months in 1996). PDI’s records indicate these refer to “head
of the pipe” transactions. Langa Decl., ¶27. Because of this, the District
alleges a link between PDI and Unocal stations. PDI does not believe that
this creates a triable issue linking PDI product to a release at any specific
station.
Chevron U.S.A. (“Chevron”) - Chevron’s Defendant Identification
responses reference a disk identifying customers from whom Chevron may
have purchased gasoline with MTBE product that may have entered the
District service area. PDI could not obtain a copy of that CD, but PDI may
have sold product “head of the pipe” to Chevron. Langa Decl., ¶27.
16
Chevron also identified PDI as an entity that sold it neat MTBE in October
1992. However, the District’s Responses do not identify the above. Instead,
the District’s only assertion linking PDI and Chevron is that Chevron utilizes
the Kinder-Morgan system. (See, footnote 5, above.) PDI does not believe
that this creates a triable issue linking PDI product to a release at any
specific station.
Atlantic Richfield Company, BP Products North America, Inc., and BP West
Coast Products, LLC (collectively, “ARCO”) - The District’s Responses
state ARCO utilized the Kinder Morgan Orange County Terminal and thus
allege a link between PDI and ARCO stations. It is not clear to PDI how
this alleged fact implies liability to PDI. PDI may have sold product “head
of the pipe” to ARCO. Langa Decl., ¶27. PDI does not believe that this
creates a triable issue linking PDI product to a release at any specific station.
Tesoro- The District’s Responses discussing PDI’s ties to Tesoro are unclear
with respect to PDI liability. The responses cite various evidence indicating
PDI purchased product from Tesoro. However, PDI believes the District
must, at a minimum, link product once owned by PDI to a relevant station
site. Since Tesoro is upstream in these alleged transactions, PDI does not
believe that this creates a triable issue linking PDI product to a release at any
specific station.
Kinder Morgan system- The District’s Responses note that PDI utilized the
Kinder Morgan distribution system. It is correct that most of PDI’s “head of
the pipe” related sales resulted in product in which PDI was in the chain of
title being introduced to or within the KM system. Such product is sold to
be delivered at KM Watson in Los Angeles County. (Notably, many KM
17
customers “book out” certain product purchases and sales on the
marketplace, so many PDI sales involved product that never entered the KM
system.) In all of the remaining PDI head of pipe transactions, PDI has no
knowledge of where the actual product went. In fact, the purchaser likely
has no such knowledge, and PDI does not believe it can be traced throughout
the KM interstate and intrastate system, much less to a specific station.
Langa Decl., ¶27. PDI did utilize the truck racks at various KM terminals
on an extremely limited basis,9 but PDI knows the endpoint for all truck
sales from those terminals because it is used these terminals only for Direct
Deliveries. Id. PDI does not believe that this creates a triable issue linking
PDI product to a release at any specific station.
ChemOil- The District’s Responses allege that PDI leased tankage at the
ChemOil terminal in Los Angeles County, and this terminal is adjacent to
the KM Carson terminal. PDI is unsure how this creates liability in this
matter. PDI does not believe that this creates a triable issue linking PDI
product to a release at any specific station.
3.
The amount paid in settlement is reasonable.
PDI denies any liability to the District and believes a jury would not find it
liable in this action. PDI also desires to end the continued expense associated with
the defense of the protracted Litigation. Furthermore, uncertainty remains as to
whether the District would prevail on a product defect theory against a distributor
and, if so, whether and how much a jury might award. As such, and for the reasons
discussed above, the settlement is reasonable and is not “completely out of the
ballpark” of the reasonable range of PDI’s proportional share of comparative
9
Typically, it makes little fiscal sense for PDI to utilize the KM terminal rather
than PDI’s own terminal.
18
liability at the time of settlement. Heppler v. J. M. Peters Co., 87 Cal. Rptr. 2d
497, 514 (Cal. Ct. App. 1999) (quoting Tech-Bilt, 698 P.2d at 167).
Notwithstanding that for the past three years PDI has been in only this single
MDL case without any connection to a specific station, the Litigation has been
costly and time-consuming for PDI. Langa Decl., ¶23. Because of the nature of
MDL proceedings, where rulings, law and motion, and discovery is generally
applicable to many or all cases, PDI has had to monitor developments in MDL
cases to the extent proceedings, including motion practice and discovery, bear on
its alleged liability (i.e. issues such as UST, fate and transport, health effects, etc.).
Id. Further, because PDI has not definitively been linked to a single station site
and is instead generally alleged to most every site, it must monitor discovery
relating to all station sites in this matter. Langa Decl., ¶23. The settlement amount
is reasonable based on the information available, the ever rising litigation costs, the
District’s assessment of its total potential recovery and PDI’s assessment of its
proportionate liability at the time of settlement. Id.
4.
The allocation of proceeds among plaintiffs does not apply to
this settlement.
The District is the only party bringing this action. As such, allocation of
settlement proceeds among multiple plaintiffs does not apply. See Miller Decl., ¶3.
5.
The settlement reflects recognition that PDI should pay less in
settlement than after trial.
“The uncertainty and expense of litigation make a settlement for less than
the total potential liability sometimes in the best interest of the plaintiff.” 3 Cal.
Civ. Proc. Before Trial, § 50.16, p. 2395 (4th ed. 2010); see Rutgard v. Haynes, 61
F. Supp. 2d 1082, 1089 (S.D. Cal. 1999) (“...even if it could be shown that
Defendant’s settlement was less than the amount of a possible judgment against
him at trial, this settlement amount is still appropriate as plaintiffs avoided the risks
19
and costs of going to trial, where their proof against Defendant might have failed,
or the amount of damages awarded might have been markedly less.”). The parties’
settlement was reasonable at the time of settlement and reflects recognition by both
parties that the Litigation will be complicated and protracted and that it is difficult
and often entirely speculative to predict what damages, if any, a court may impose
upon an upstream distributor that provided product which may have been released
to the environment, even if it can be proved. Moreover, recovery could be delayed
and further complicated by possible appeals from any judgment. Of course, the
cost of the extensive litigation activities in any number of trials could well exceed
the amount of the settlement. All of these considerations are brought to bear in
assessing whether this settlement is in a “ballpark” range.
6.
The financial condition and insurance policy limits of PDI
are not relevant to the settlement.
PDI insurers were involved in the mediation and settlement, but negotiations
did not include consideration of insurance policy limits, and such limits were not
discussed. Langa Decl., ¶24; Miller Decl., ¶7. Moreover, the amount agreed to in
settlement was not limited in amount by the potential existence of insurance or
insurance policy limits. Id. Nor was the financial condition of PDI a factor in any
way to increase or decrease the agreed settlement amount. Id.
7.
Neither fraud, collusion, nor tortious misconduct played a
role in the negotiations between the District and PDI.
The Settlement Agreement was reached after extensive negotiations
culminating in a March 30, 2011 mediation before retired Judge Chiantelli. Langa
Decl., ¶14; Miller Decl. ¶2. There is no fraud, collusion, or tortious misconduct in
this settlement that was aimed at injuring the interests of the non-settling
defendants. Langa Decl. ¶25; Miller Decl. ¶8.
20
C.
Any Party Challenging The Settlement Bears The Burden of
Proving Lack of Good Faith
In the event a party challenges the good faith of PDI’s settlement with the
District, that party bears the burden of proving the lack of good faith. Cal. C.C.P. §
877.6(d). Again, this burden is to show that the settlement “is so far ‘out of the
ballpark’ ... to be inconsistent with the equitable objectives of the statute.” TechBilt, 698 P.2d at 167. As summarized above, this settlement meets all of the TechBilt factors needed to establish that it is within a “reasonable range” of PDI’s
potential liability given the uncertainties and unpredictability of the Litigation and
its costs, and the nature of the environmental contamination alleged and its
remedial clean-up, and the other factors that apply. The Settlement Agreement is
neither fraudulent nor collusive but was reached in arm’s-length negotiations, and
is easily within the reasonable range of PDI’s potential and comparative liability.
Langa Decl., ¶¶25-26; Miller Decl., ¶¶2, 5, 8.
D.
The Court Should Direct Entry of Judgment Pursuant to FRCP
54(b) Regarding the Court’s Determination of a Good Faith
Settlement
When multiple parties or claims are involved, the Court is empowered to
direct entry of final judgment as to some of the claims or parties. FRCP 54(b);
Continental Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 15241525 (9th Cir. 1987). In order for a party to obtain protection against alleged joint
tortfeasor liability, California law requires that a court determine that the party’s
settlement was entered into in good faith. Therefore, PDI respectfully requests that
the Court enter such a judgment pursuant to Federal Rule of Civil Procedure 54(b),
which states in relevant part:
21
When an action presents more than one claim for relief whether as a claim, counterclaim, crossclaim, or thirdparty claim - or when multiple parties are involved, the
court may direct entry of a final judgment as to one or
more, but fewer than all, claims or parties only if the court
expressly determines that there is no just reason for delay.
There is no just reason for delay here to prevent the Court entering final
judgment under Rule 54(b) determining that the Settlement Agreement was made
in good faith, which would protect PDI from any alleged joint tortfeasor claims
and effectuate the terms of the Settlement Agreement. See AmeriPride Servs., Inc.,
No. CIV. S-00-113-LKK JFM, 2007 U.S. Dist. LEXIS 51364, at *9, 11-12 (E.D.
Cal. 2007); see also Bottoms v. Levin Enters. Inc., No. C-99-4598 MMC, 2001
U.S. Dist. LEXIS 13434, at *3-4 (N.D. Cal. 2001).
One court considered the benefits of settlement over extended litigation and
stated that “the desirability of promoting settlement of litigated claims, particularly
when presented in the context of complex litigation such as that now before the
court, cannot be understated.” Agway, Inc. Employees’ 401(k) Thrift Inv. Plan v.
Magnuson, 409 F. Supp. 2d 136, 140 (N.D.N.Y. 2005). By entering judgment on
the good faith of the settlement and the corresponding bar order pursuant to Rule
54(b), the Agway court’s determination was immediately appealable, which “would
serve the desirable purpose of allowing any disgruntled non-settling defendant to
challenge this court’s approval of the settlement and the entry of a bar order on
appeal at an interlocutory stage when the parties, including significantly [the
settling defendant], would be able to determine whether it was required to remain
and participate in the litigation.” Id. at 147-48. Therefore, by entering a Rule
54(b) judgment, the Court would provide finality under the Settlement Agreement.
22
III.
CONCLUSION
For the foregoing reasons, PDI respectfully requests that the Court grant
PDI’s motion for order determining good faith settlement and enter the proposed
order and judgment pursuant to Rule 54(b), such that all pending and future claims
or cross-claims against PDI for equitable comparative contribution, or comparative
or partial indemnity, based on comparative fault or comparative negligence, be
dismissed and forever barred.
DATED: May 16, 2011
DEMETRIOU, DEL GUERCIO,
SPRINGER & FRANCIS, LLP
By:
/s/
Brian D. Langa
(pro hac vice)
Demetriou, Del Guercio, Springer &
Francis, LLP
801 South Grand Avenue, Suite 1000
Los Angeles, California 90017
Tel: (213) 624-8407
Fax: (213) 624-0174
E-mail: blanga@ddsffirm.com
Attorneys for Petro-Diamond
Incorporated
23
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document has
been served via LexisNexis File and Serve upon all counsel of record on May 16,
2011.
/s/
Brian D. Langa
24
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