In Re: Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation

Filing 4254

MEMORANDUM OPINION AND ORDER re: (453 in 1:04-cv-04968-SAS, 4233 in 1:00-cv-01898-SAS-DCF) MOTION For Inclusion of Shell and BP in Remand Order . filed by Orange County Water District. For the foregoing reasons, OCWD's motion to include the BP and Shell Defendants in the Remand Order is DENIED. The Clerk of the Court is directed to close the motion (Dkt. No. 453). The parties are directed to submit a proposed Remand Order to the Court, consistent with this Order, by September 30, 2015. SO ORDERED. (As further set forth within this Opinion.) (Signed by Judge Shira A. Scheindlin on 8/26/2015) Filed In Associated Cases: 1:00-cv-01898-SAS-DCF, 1:04-cv-04968-SAS(ajs)

Atlantic Richfield Company (“ARCO”), BP West Coast Products LLC, and BP
Products North America, Inc. (collectively, the “BP Defendants”), and Shell Oil
Company, Equilon Enterprises LLC, and Texaco Refining and Marketing Inc.
(collectively, the “Shell Defendants”)1 on the ground that OCWD’s claims against
them were precluded under the doctrine of res judicata by judgments resolving
substantially similar lawsuits filed years earlier by the Orange County District
Attorney (“OCDA”).2 On December 18, 2014, the Court granted in part and
denied in part a separate, omnibus summary judgment motion brought by all of the
defendants in OCWD’s lawsuit, identifying a material factual dispute over whether

1

When referring to both the BP Defendants and the Shell Defendants,
collectively, I frequently use the term “defendants” for ease of reading (unless I
otherwise indicate “defendants” to apply to all of the defendants in the action).
The BP Defendants and Shell Defendants comprise only a small subset of all the
defendants in this case.
2

See In re MTBE, 46 F. Supp. 3d 440 (S.D.N.Y. 2014) (the “Res
Judicata Opinion”). For the factual background of defendants’ res judicata
argument, relevant to this Opinion, see id. at 443-46. The important point is that
OCDA, which this Court held to be in privity with OCWD, settled MTBE-related
claims, including nuisance claims, with defendants in the early 2000s. The Orange
County Superior Court entered substantially similar final judgments as to both the
BP Defendants and the Shell Defendants (the “Consent Judgments”), which by
their terms constituted “‘final and binding judgment[s], release[s], resolution[s][,]
and settlement[s] of all claims, violations[,] or causes of action that were alleged’”
in the OCDA’s original complaints, “‘or could have been asserted based on the
facts alleged’” in those complaints. Shell and BP Defendants’ Opposition to
OCWD’s Motion for Inclusion of Shell and BP in Remand Order (“Def. Mem.”) at
8-9 (quoting Consent Judgments).
2

MTBE plumes – formed by defendants’ MTBE releases – are presently continuing
to migrate towards drinking-water wells.3
Now, all that is left to decide before remanding this case to the Central
District of California for trial is OCWD’s instant motion, which asks the Court to
include the BP and Shell Defendants in the Remand Order on the theory that the
Res Judicata Opinion does not bar claims for continuing nuisance.4 For the reasons
stated below, OCWD’s motion is DENIED.
II.

DISCUSSION
To decide OCWD’s motion, the Court must resolve the inherent

tension between a continuing nuisance cause of action, which can effectively be
renewed as “a separate claim” for “every continuation of the nuisance,”5 and the
preclusive effect of the Consent Judgments, which provided comprehensive
releases of claims asserted in the OCDA’s original complaints. Those complaints
included both continuing and permanent nuisance claims for the ongoing migration

3

See In re MTBE, 67 F. Supp. 3d 619, 633 (S.D.N.Y. 2014).

4

See Memorandum of Law in Support of Plaintiff Orange County
Water District’s Motion for Inclusion of Shell and BP in Remand Order (“Pl.
Mem.”) at 1.
5

Mangini v. Aerojet-General Corp., 12 Cal. 4th 1087, 1093 (1996).
3

of MTBE from defendants’ stations.6 Pursuant to the Consent Judgments resolving
OCDA’s claims, defendants implemented “Plume Delineation Programs” designed
to combat the potential ongoing migration of MTBE plumes.7 Nonetheless,
OCWD argues that res judicata cannot apply to its continuing nuisance claims,
which it contends are future claims that were never covered by the Consent
Judgments’ specific releases of OCDA’s “‘past or present claims, violations, or
causes of action that were or could have been asserted.’”8
A.

Applicable Law
1.

Continuing Nuisance

Under California law, “‘[e]very repetition of [a] continuing nuisance
is a separate wrong,’ subject to a new and separate limitation period, ‘for which the
person injured may bring successive actions for damages until the nuisance is
abated, even though an action based on the original wrong may be barred.’”9
6

See Def. Mem. at 2-4.

7

Id. at 5 n.5.

8

Pl. Mem. at 8 (emphasis added) (quoting Consent Judgments).

9

Capogeannis v. Superior Ct., 15 Cal. Rptr. 2d 796, 800 (Cal. Ct. App.
1993) (quoting Phillips v. City of Pasadena, 27 Cal. 2d 104, 107 (1945)). Accord
Mangini v. Aerojet-General Corp., 230 Cal. App. 3d 1125, 1147 (1991) (noting
that “land may be subject to a continuing nuisance even though defendant’s
offensive conduct ended years ago . . . because the ‘continuing’ nature of the
nuisance refers to the continuing damage caused by the offensive condition, not to
4

Throughout this MDL, the Court has often confronted the continuing
nuisance/permanent nuisance distinction in evaluating the timeliness of a claim –
the context in which the distinction most often arises.10 But the Court has not
addressed the res judicata impact of a consent judgment on continuing nuisance
claims, nor did OCWD raise that issue in its opposition to defendants’ res judicata
summary judgment motion.11
On this point, California law is somewhat unclear – only a small
handful of cases discuss, even in general terms, the intersection between
continuing nuisance claims and res judicata, and no California court has analyzed
this issue in the context of a consent judgment. The Ninth Circuit provides some

the acts causing the offensive condition to occur”).
10

See, e.g., In re MTBE, 676 F. Supp. 2d 139, 152 & n.77 (S.D.N.Y.
2009) (“With respect to a permanent nuisance, the statute of limitations begins to
run on the creation of the nuisance and bars all claims after its passage, while each
repetition of a continuing nuisance is considered a separate wrong which
commences a new period in which to bring an action for recovery based upon the
new injury.”).
11

Accordingly, in its Res Judicata Opinion, this Court stated:
“Defendants also note, and the District does not dispute, that both the BP
Defendants and the Shell Defendants stopped adding MTBE to gasoline made in
California upon or before entering into final judgments in the prior actions. Thus,
the District has not suffered any new MTBE-related harm subsequent to the entry
of the final judgments in the prior proceedings that would give rise to a new action
not covered by the settlements.” In re MTBE, 46 F. Supp. 3d at n.72.
5

guidance. In Arcade Water District v. United States, plaintiff filed an
administrative complaint under the Federal Tort Claims Act for contamination to a
well.12 When that complaint was dismissed as time-barred, plaintiff commenced a
lawsuit in federal district court against the United States, which was dismissed with
prejudice.13 However, the Ninth Circuit reversed on the premise that plaintiff had a
right to “elect whether to proceed under a theory of permanent or continuing
nuisance.”14 Under the latter theory, plaintiff’s claim was timely, and the court
noted that res judicata could not bar “further actions for damages accruing after
resolution of one permanent nuisance claim.”15 Similarly, in Levy v. Wells Fargo
Asset Securities Corp. – an unpublished state appellate court decision – the court

12

See 940 F.2d 1265, 1266-67 (9th Cir. 1991).

13

See id.

14

Id. at 1269.

15

Id. Defendants point to a more recent Ninth Circuit case, in which the
court held that a consent judgment between a district attorney and a defendant that
resolved all claims arising from petroleum releases at three service stations
precluded a second lawsuit alleging that the same releases were causing continuing
harm. See Northern Cal. River Watch v. Humboldt Petroleum, Inc., 162 Fed.
App’x 760, 762 (9th Cir. 2006). However, that opinion did not address the
distinction between permanent and continuing nuisance claims because no such
claims were brought – plaintiffs sued under RICO and the Business and
Professions Code.
6

held that a limited default judgment in a preliminary suit for nuisance16 did not bar
a second suit for continuing nuisance against a different defendant.17
2.

Interpretation of Consent Judgments and Res Judicata

Neither Arcade nor Levy dealt with the specific issue here: the
preclusive effect of a consent judgment that specifically resolved claims for
continuing and permanent nuisance, on a later-filed continuing nuisance claim
arising from the same contamination.18 Both OCWD and defendants therefore
dispute the breadth of the Consent Judgements’ release provisions.
As a general matter, “[c]ontract principles apply when interpreting a

16

The court did not specify whether the nuisance cause of action in the
preliminary suit was for permanent nuisance or continuing nuisance.
17

No. DO61617, 2013 WL 5786104, at *5 (Cal. Ct. App. Oct. 28,
2013). In Arcade, the first action was not a formal lawsuit, but an administrative
complaint, and in Levy, the defendant in the second suit was not named in the prior
suit. Here, by contrast, the defendants shielded by res judicata are the same
defendants with whom OCDA settled in the prior lawsuits.
18

The OCDA complaints state that “‘[(1)] [a]s MTBE contamination
migrates away from the source . . . it becomes far more difficult if not impossible
to abate, thereby changing the nuisance from continuing to permanent,’” [(2)] that
“‘[e]ach site where MTBE . . . contaminates or threatens to contaminate []
groundwater or drinking water supplies constitutes a separate and continuing
nuisance subject to abatement,’” and [(3)] that “‘[a]ny site where MTBE . . .
contamination has migrated off-site . . . to a location . . . where such contamination
is not subject to abatement constitutes a permanent nuisance.’” Def. Mem. at 3
(quoting OCDA complaints).
7

release.”19 Courts “should adopt that construction which will make the contract
reasonable, fair[,] and just . . . [and] should avoid an interpretation which will
make the contract unusual, extraordinary, harsh, unjust[,] or inequitable [] or which
would result in absurdity.”20 “To be effective, [a release] must be clear,
unambiguous, and explicit in expressing the intent of the subscribing parties.”21 In
determining the parties’ intent, it is well-settled policy in California that consent
judgments “conclude[] all matters put into issue by the pleadings” unless parties
“agree to restrict [their] scope by expressly withdrawing an issue from the consent
judgment.”22

19

Cohen v. Five Brooks Stable, 159 Cal. App. 4th 1476, 1483 (2008).
Accord Benedek v. PLC Santa Monica, LLC, 104 Cal. App. 4th 1351, 1356 (2002)
(“If an ambiguity as to the scope of the release exists, it should normally be
construed against the drafter.”).
20

Wright v. Coberly-West Co., 250 Cal. App. 2d 31, 35-36 (1967)
(citations omitted).
21

Benedek, 104 Cal. App. 4th at 1356.

22

Ellena v. State, 69 Cal. App. 3d 245, 260 (1977). Accord Villacres v.
AMB Indus. Inc., 189 Cal. App. 4th 562, 589 (2010) (“If parties intend to leave
some things open and unsettled their intent to do so should be made manifest.”).
Pointing to a related settlement in the Cresenta Valley case, which included the
word “future” in the release provision, OCWD urges the Court to interpret the
Consent Judgments in accord with the statutory construction principle of expressio
unius est exclusio alterius (the expression of one thing is the exclusion of another).
See Pl. Mem. at 8; Reply Memorandum in Support of Plaintiff Orange County
Water District’s Motion for Inclusion of Shell and BP in Remand Order (“Reply
Mem.”) at 7 (citing White v. Western Title Ins. Co., 40 Cal. 3d. 870, 881 n.4
8

Further, “[i]t is well established that if the plaintiff receives an
injunction against the defendant which requires the defendant to abate the
nuisance, the plaintiff can recover past and present damages, but not future
damages, since the abatement order will terminate the nuisance for the future.”23
Finally, as noted in the Res Judicata Opinion, California courts have embraced the
relatively expansive “‘primary right’ theory,” whereby later claims that address the
“same primary right” at issue in the prior suit are precluded, regardless of how the
claims are styled.24
B.

The Consent Judgments Preclude OCWD’s Continuing Nuisance
Claims
This dispute boils down to whether California’s continuing nuisance

law, which frequently breathes life into otherwise outdated nuisance claims, trumps
the language of consent judgments that were designed to release those claims. I

(1985)). However, central to the holding in White – which addressed the
interpretation of an insurance policy – was the notion that “the court may not look
to the words of the policy alone, but must also consider the reasonable expectations
of the public.” White, 40 Cal. 3d at 881.
23

Alexander v. McKnight, 7 Cal. App. 4th 973, 979 (1992) (citations and
quotation marks omitted). In this case, defendants posit that the Consent
Judgments, pursuant to which Plume Delineation Programs were established to
address existing MTBE contamination and migration, “are properly viewed as
containing abatement injunctions.” Def. Mem. at 12.
24

Villacres, 189 Cal. App. 4th at 576.
9

conclude that the Consent Judgments must prevail. OCWD’s position is not
unreasonable – under California law, a plaintiff may bring a claim for continuing
nuisance every day until the nuisance is abated.25 But the cases permitting that
course of action, such as Arcade and Levy, are inapposite because the preclusive
lawsuits at issue here specifically asserted claims for both continuing and
permanent nuisance and were resolved favorably for plaintiff pursuant to consent
judgments that expressly released those claims. OCWD even acknowledges that it
is possible to settle “‘future continuing nuisance claims arising out of conditions
that existed prior to settlement,’” hence the need to interpret the language of the
Consent Judgments.26 By contrast, the Arcade plaintiff’s initial administrative
complaint was dismissed rather than settled, and in Levy, the two suits contained
no overlap in defendants, with the first suit culminating in a default judgment
against defendants not named in the second suit and not addressing plaintiff’s
request for injunctive relief.27

25

See Levy, 2013 WL 5786104, at *5. In this case, the Court has held
that there is a material dispute of fact over the abatability of the nuisance. See In re
MTBE, 824 F. Supp. 2d 524, 545 (S.D.N.Y. 2011).
26

Pl. Mem. at 2 (quoting Moulton v. U.S. Steel Corp., 581 F.3d 344, 350
(6th Cir. 2009)).
27

See Levy, 2013 WL 5786104, at *2. As noted above, the second suit
was brought against a party not named in the original suit.
10

Here, the Consent Judgments resolving OCDA’s claims for
continuing and permanent nuisance provided injunctive relief against the same BP
and Shell defendants named in OCWD’s action in the form of Plume Delineation
Programs, which were implemented to address the same ongoing contamination
giving rise to OCWD’s instant continuing nuisance claims.28 That relief leaves
little doubt as to the parties’ intent in negotiating a resolution of OCDA’s
lawsuits.29 Nor does the broad language of the Consent Judgments leave any doubt
as to the parties’ intent. The Consent Judgments stated that they constituted “‘final
and binding judgment[s], release[s], resolution[s][,] and settlement[s] of all claims,
violations[,] or causes of action that were alleged’” in the OCDA’s original
complaints, “‘or could have been asserted based on the facts alleged’” in those
complaints.30
At bottom, OCWD is in privity with OCDA, which unambiguously
released continuing nuisance claims against defendants in exchange – among other

28

See Def. Mem. at 5 n.5. Indeed, the injunctive relief to which
defendants agreed in the Consent Judgments was premised on the conclusion that
MTBE may already have been part of a migrating plume at the relevant sites. See
id.
29

This reason alone counsels against awarding OCDA or its privies,
such as OCWD, future damages. See Alexander, 7 Cal. App. 4th at 979.
30

Def. Mem. at 8-9 (quoting Consent Judgments).
11

things – for their implementation of programs designed to address the same
contamination on which OCWD bases its continuing nuisance claims here. On
these facts, to permit OCWD to maintain continuing nuisance claims against
defendants would defeat the purpose of consent judgments, which “conclude[] all
matters put into issue by the pleadings” unless the parties “agree to restrict [their]
scope by expressly withdrawing an issue.”31 The absence of the word “future” in
the Consent Judgments’ release of “past and present claims” does not constitute an
express withdrawal – nothing in the Consent Judgments suggests, even remotely,
that OCDA intended to reserve the right, for itself or its privies, to assert new
continuing nuisance claims for the harm defendants specifically agreed to address
via the Plume Delineation Programs. The contrary interpretation of the Consent
Judgments that OCWD advances would create the very type of unfair and absurd
result that courts strive to avoid when construing contracts.32
III.

CONCLUSION
For the foregoing reasons, OCWD’s motion to include the BP and

Shell Defendants in the Remand Order is DENIED. The Clerk of the Court is
31

Ellena, 69 Cal. App. 3d at 260.

32

See Wright, 250 Cal. App. 2d at 35-36 (citations omitted). It would
also remove any and all incentives for a defendant to settle a lawsuit involving
continuing nuisance claims.
12

- Appearances Liaison Counsel for Plaintiffs:
Robin Greenwald, Esq.
Robert Gordon, Esq.
Weitz & Luxenberg, P.C.
180 Maiden Lane
New York, NY 10038
[phone]
Counsel for OCWD:
Michael Axline, Esq.
Miller, Axline, & Sawyer
1050 Fulton Avenue, Suite 10
Sacramento, CA 95825
[phone]
Liaison Counsel for Defendants:
Peter John Sacripanti, Esq.
James A. Pardo, Esq.
McDermott Will & Emery LLP
50 Rockefeller Plaza, 11th Floor
New York, NY 10020
[phone]
Counsel for Shell Defendants:
Richard E. Wallace, Jr., Esq.
Peter C. Condron, Esq.
Amanda Gilbert, Esq.
Sedgewick LLP
29 K Street, N.W.
Harbourside — Suite 500
Washington, D.C. 20007
[phone]
-14-

Counsel for BP Defendants:
Matthew T. Heartney, Esq.
Lawrence A. Cox, Esq.
Stephanie B. Weirick, Esq.
Arnold & Porter LLP
777 South Figueroa Street
Los Angeles, CA 90017
[phone]

-15-