Source: http://lawreaves.com/2008/09/10/somo-v-chevron/
Timestamp: 2019-04-23 06:29:58+00:00

Document:
APPEAL from a judgment of the Superior Court of San Diego County, William S. Cannon, Judge. Reversed and remanded with directions.
“clean condition” as required by the lease. In granting summary judgment, the trial court ruled as a matter of lease interpretation that Chevron had no contractual duty to remediate any contamination, and also that the statute of limitations had run on plaintiffs’ tort causes of action for negligence, negligence per se, and permanent nuisance.
On appeal, plaintiffs contend the court erred in granting summary judgment due to (1) its erroneous lease interpretation and improper consideration of the evidence, including the court’s consideration of subjective opinion testimony of a former Chevron employee; and (2) the existence of triable issues of material fact as to whether the statute of limitations barred their tort causes of action. Plaintiffs further contend the court abused its discretion by refusing to shorten time for, and then taking off calendar, their motion for leave to amend their complaint to allege, inter alia, a continuing nuisance. Finally plaintiffs contend the court erred by denying their motion to compel production of certain discovery.
We conclude the court erred by interpreting the lease as a matter of law in view of ambiguity in the relevant language and the existence of conflicting extrinsic evidence relevant to its interpretation. We hold that although the plaintiffs’ tort causes of action accrued in October 1995, there are triable issues as to whether defendants should be estopped from asserting a statute of limitations defense. We further hold the trial court erred in rejecting plaintiffs’ efforts to bring a motion for leave to amend a second amended complaint, and that its discovery order is not supported by substantial evidence. We reverse the judgment and remand with directions set forth below.
County had opened a case on the site.1	Chevron’s consultant removed fuel impacted soils before it replaced the underground storage tanks in 1995. After County opened its case, Chevron continued to conduct site assessment and monitoring on the property.
In April 2004, plaintiffs purchased the property. The lease term ended in February 2005. That month, after unsuccessfully attempting to purchase the station improvements, plaintiffs sued Chevron seeking declaratory and injunctive relief. Plaintiffs alleged that after purchasing the property, they learned it had been contaminated by fuel and other petroleum products, and sought an injunction in part to prevent Chevron from demolishing the property improvements because the demolition would deprive them of the opportunity to fully investigate the extent of the contamination. Eventually, plaintiffs and Chevron stipulated that Chevron had the right to remove the improvements. By December 2005, Chevron had removed all station improvements including the underground storage tanks, compacted the soil, and removed the surrounding fence.
only to the removal of buildings, equipment and structures, the removal or sand-filling of underground storage tanks, and the restoration of the property to a flat, level condition free from deconstruction debris. It maintained that filling tanks with sand would not be an option if environmental concerns were at issue. Alternatively, Chevron argued that to the extent the parties’ intent and industry custom were relevant to interpret the lease, it presented evidence demonstrating that the language in paragraph 6 of the lease was intended to mean that on the lessor’s request Chevron would remove the station improvements and restore the premises to a flat, compacted condition free from debris (also known as “flat-lotting”) without environmental cleanup or remediation.
Defendants relied primarily on the declaration of retired Chevron employee Ben Smith, who averred that paragraph 6 of the Chevron/Somo lease was common in ground leases entered into in the 1960’s by Standard Oil and its division, Signal Oil Company (Signal Oil). He explained the language was intended to mean that Standard Oil would restore the property to a flat, compacted condition free from debris, also known as “flat- lotting.” Smith stated that as of about 1977 in San Diego County, there was no governmental environmental oversight of the closure of retail gas station properties, and that in California, cities and counties only began requiring soil and groundwater testing for such closures in the early to mid-1980’s.
were found and County opened its case on the property, or December 1996, when Chevron advised the previous property owner of the open case.
Plaintiffs opposed the motion and submitted evidentiary objections to defendants’ evidence. In particular, they asserted Smith’s interpretation of the lease and testimony as to the absence of governmental oversight lacked foundation, was speculative and constituted inadmissible opinion in part because Smith could not identify any other similar lease and had not seen one since about 1982, he was not a party to the lease and did not negotiate it on Chevron’s behalf, and he was unaware of pollution laws in California. Plaintiffs also argued their causes of action did not accrue until 2004 or 2005 because additional fuel releases had occurred. Finally, plaintiffs argued that even assuming the prior owner had actual or inquiry notice of contamination, it would not bar their claims because he was not aware of permanent or appreciable damage to the property because Chevron led him to believe the 1995 release was minor and resolved shortly thereafter. They sought leave to amend to add causes of action for continuing nuisance and trespass in the event the court found its permanent nuisance cause of action time-barred.
Chevron to fill the underground tanks with sand.2	It further agreed there was no triable issue that the three-year statute of limitations had run on plaintiffs’ remaining causes of action because the property had suffered immediate and permanent injury before February 25, 2002, three years before they filed their complaint. It rejected plaintiffs’ arguments as to tolling of the statute of limitations, pointing to the absence of evidence that all fuel contaminated soil had been removed from the premises or that Chevron made representations leading the prior owner to believe the property either was not contaminated or had been cleaned. Plaintiffs filed the present appeal.
elements of the plaintiff’s cause of action cannot be established or (2) there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subds. (o), (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851; Guz v. Bechtel National, Inc.
3With respect to these arguments, plaintiffs have moved to augment the record with several documents, including two new documents not before the trial court at the time of the summary judgment hearing: (1) a November 2003 letter from Ted Park to Sean Sullivan, counsel for the prior property owner; and (2) County’s September 19, 2007 “closure” letter. Plaintiffs assert that Park’s letter, which was produced in connection with a different lawsuit they have pending against Anderson, suggests the possibility of a new release, and County’s closure letter marks the earliest time that Chevron’s “holdover tenancy” could end. Plaintiffs provide no authority for the proposition that these matters are the proper subject of augmentation, nor do they explain with any reasoned argument or authority why the circumstances justify this court taking new evidence under Code of Civil Procedure section 909. “Augmentation does not function to supplement the record with materials not before the trial court.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.) Further, the power to take new evidence on appeal is to be used ” ‘sparingly,’ ” and is only appropriately exercised when required by ” ‘the interests of justice.’ ” (Conservatorship of Hart (1991) 228 Cal.App.3d 1244, 1257, 1259; see also Vons Companies, at p. 444, fn. 3 [requiring exceptional circumstances to take evidence under Code of Civil Procedure section 909].) Because plaintiffs have not made any showing of exceptional circumstances justifying our taking new evidence in the interests of justice, we deny the augmentation request as to these documents. The remaining documents attached to plaintiffs’ request (page 6 of the March 2007 declaration of plaintiffs’ counsel in support of plantiffs’ motion for leave to file a second amended complaint and the entirety of exhibit C, portions of the deposition of Elvin Anderson) were before the trial court but inadvertently omitted from the appendix. Chevron does not oppose augmenting the record with these items, and we grant plaintiffs’ request as to these documents.
unaccompanied by any citation to the record. Based on the assertedly deficient briefing, Chevron argues plaintiffs have not overcome the presumption of correctness that we afford to judgments and orders. Plaintiffs concede the omissions, stating they were “inadvertent.” Chevron also argues there is no record support at all for plaintiffs’ assertions that it withheld material information from the prior property owner.
statute of limitations question. Those citations (as well as the summary judgment papers themselves, which we assess de novo) permit us to analyze plaintiffs’ contentions. Further, plaintiffs repeat their arguments in their reply brief with corresponding record citations to evidence they presented in opposition to facts set forth in Chevron’s separate statement. We proceed to the merits of the statute of limitations arguments.
tanks or whatever they were doing.” Anderson’s handwritten note on the October 1995 letter reads: “10/30/95. Talked to Bauer. They are putting in new tanks and remodeling station and notices sent to all interested people. Chevron’s responsibility.” It is undisputed that after County forwarded its notice of corrective action, Chevron undertook an investigation including by installing groundwater monitoring wells on the property. Anderson testified that based on Chevron’s lack of communication, he assumed the soil had been cleaned up shortly after 1996.
Further, as we explain below, Chevron’s representations as to its responsibility for the problem do not go to accrual of the limitations period, but to the fairness of its reliance on a limitations argument; i.e., whether Chevron should be estopped from asserting the statute of limitations against plaintiffs. Absent application of equitable tolling or estoppel to assert the statute of limitations, plaintiffs’ causes of action for negligence and permanent nuisance, first filed in April 2006, are barred as untimely filed.
Plaintiffs contend Chevron should be estopped from asserting the statute of limitations because it concealed the nature, extent and duration of the contamination from all of the “interested parties” and, in particular, misled Anderson to believe that the contamination was minor and would be remedied by 2002. Again, plaintiffs rely on Anderson’s deposition testimony.
under the lease,” assurances on which Anderson relied to conclude Chevron would “take care” of any problems. Anderson’s lease with Chevron provided that Chevron would, on the lease’s termination, restore his property to a “level and clean condition,” bolstering the reasonableness of Anderson’s reliance and understanding. Indeed, after making these representations, Chevron undertook to comply with County’s required investigation by removing impacted soil and installing groundwater monitoring wells. In response to plaintiffs’ showing, Chevron argued that these were merely additional “irrelevant” facts, and that Anderson’s subjective belief that Chevron would take responsibility was irrelevant. We disagree.
supra, 25 Cal.4th at p. 856; Code Civ. Proc., § 437c, subd. (c).) Further, the question is not whether Anderson believed the property had been cleaned, but instead, whether he reasonably believed Chevron would assume responsibility for any environmental obligations and relied on that representation to forego filing suit. The inferences reasonably drawn from Anderson’s testimony permit the jury to reach such a conclusion, which would render it unreasonable to expect Anderson to bring an action against Chevron while Chevron was actively undertaking to investigate the contamination, clean up impacted soils, and monitor the situation. In sum, plaintiffs raise triable issues of material fact as to whether Chevron should be estopped to rely on its statute of limitations argument that plaintiffs’ tort causes of action accrued in 1995 or 1996 when County disclosed the release of petroleum hydrocarbons to Anderson.
meaning of the words “restore” and “clean”; it ignored case law interpreting the word “restore” to mean that Chevron was required to remediate pollution on the property and was a holdover tenant until doing so; and the court made an improper factual determination on the ambiguity in the lease terms, a question that was not properly resolved on summary judgment. Plaintiffs further argue the court erred as a matter of law by failing to interpret the lease in light of antipollution laws existing at the time of the lease signing, with which Chevron agreed to comply. Plaintiffs maintain the trial court erred by admitting the subjective opinion testimony of Ben Smith as to Chevron’s intent or the specialized meaning of the lease language. Finally, plaintiffs argue the court erred by misinterpreting the lease to allow Chevron to leave the property in an unmarketable condition due to pollution, requiring Chevron to be deemed a nonconsensual holdover tenant.
To the extent Chevron proffered Smith’s declaration as extrinsic evidence of the parties’ mutual intent, it was not competent evidence. Smith admitted in his deposition that he did not negotiate or draft the language of the lease at issue, and thus he had no personal knowledge of the parties’ intent at the time the lease was executed. (Accord, General Motors Corporation v. Superior Court (1993) 12 Cal.App.4th 435, 442 (General Motors).) Further, ” ‘ “[i]t is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation.” ‘ [Citation.] ‘The parties’ undisclosed intent or understanding is irrelevant to contract interpretation.’ ” (Cedars-Sinai, supra, 137 Cal.App.4th at p. 980; Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., supra, 109 Cal.App.4th at p. 956.) Smith’s subjective understanding of the meaning of lease terms, absent evidence it was communicated to the other parties to the lease, is irrelevant to contract interpretation. (Founding Members, at pp. 956, 960; Winet v. Price, supra, 4 Cal.App.4th at p. 1166, fn. 3.) The trial court erred in overruling plaintiffs’ objections to his conclusions on these grounds.
Diego County in the late 1960’s and into the 1970’s. In his declaration, Smith explained that Chevron operated retail gas station operations in various ways, including by leasing the real property on which it would build and operate a station facilities, as was the case for the lease at issue. He averred: “[Paragraph 6’s] language was not intended to require any environmental cleanup or remediation of the station premises. From the 1960[‘]s until the early 1980[‘]s, closure of stations [sic] facilities in California generally did not involve any environmental cleanup or remediation. In my many years of experience with ground leases for station sites in California, I do not recall any ground leases that [Standard Oil] entered into in the late 1960[‘]s that contemplated any such environmental remediation.” Smith averred that between 1974 and 1977, he oversaw numerous station closures in San Diego including stations in which the ground leases included language similar or identical to that in Paragraph 6 of the Chevron/Somo lease, and that, in most instances, consistent with industry practice at the time, Standard Oil would fill the tanks with sand rather than remove them. He averred that this practice “reflects the fact that neither property owners nor governmental authorities were concerned at the time with potential petroleum hydrocarbon contamination.” Chevron maintains this evidence of custom and usage demonstrates that the term “clean condition” did not include environmental remediation.
in 1969. Chevron is thus left with the surrounding circumstances and other extrinsic evidence from which to demonstrate the meaning of the contract as a matter of law. On that point, Smith averred: “In California, cities and counties began requiring soil and groundwater testing in connection with the closure of gas station properties in the early to mid-1980[‘]s. Before that time, pollution caused by gas station properties was not generally a concern of property owners or governmental entities in California to the best of my recollection.” Plaintiffs objected to this portion of Smith’s declaration on grounds it lacked foundation, was speculative and inadmissible opinion. We conclude these objections had merit in view of Smith’s other deposition testimony in which he admitted he did not consider himself an expert in environmental science or other environmental matters, including governmental oversight. Smith testified that while he had knowledge relative to Chevron’s policies, procedures and operations, his first personal involvement in Chevron’s “environmental section” of handling petroleum products was in 1974, well after execution of the lease at issue.
Even if we were to assume Smith’s declaration amounted to competent extrinsic evidence, we would hold plaintiffs proffered competent conflicting extrinsic evidence that prevents a court from deciding the meaning of paragraph 6 as a matter of law. This evidence includes Smith’s own deposition admission that he understood that Chevron’s policy prior to the lease’s execution in 1969 was to comply with all city and county building standards, and other regulations and statutes (including pollution laws) in effect where it did business at any given time; the existence of nuisance or anti-pollution laws that Chevron is presumed to know and have in mind (Castillo v. Express Escrow Co.
(2007) 146 Cal.App.4th 1301, 1308; City of El Cajon v. El Cajon Police Officers’ Assn. (1996) 49 Cal.App.4th 64, 71); and Chevron’s subsequent conduct of removing impacted soil and complying with County’s investigation requirements at its own effort and expense. (Southern Pacific Tranportation Co. v. Santa Fe Pacific Pipelines, Inc. (1999) 74 Cal.App.4th 1232, 1242 [construction given to contract by parties by acts and conduct of parties with knowledge of the contract terms and before controversy arises is relevant to contract interpretation]; see also Fisher v. Allis-Chalmers Corp. (2002) 95 Cal.App.4th 1182, 1192; Southern Cal. Edison Co. v. Superior Court, supra, 37 Cal.App.4th at p. 851.) A reasonable trier of fact could conclude based on Chevron’s efforts to remediate that it understood its lease obligation was to leave the premises free from pollution. All of this extrinsic evidence is relevant to contract interpretation.
Accordingly, we cannot agree with the trial court that the contract is subject to interpretation as a matter of law regarding whether Chevron was required by paragraph 6 to merely clear the surface of the property free of construction debris, or whether it was required to remediate environmental contamination stemming from its underground storage tanks. The conflicting extrinsic evidence prevents the trial court from declaring the meaning of the lease as a matter of law. (Southern Cal. Edison, supra, 37 Cal.App. 4th at pp. 851-852.) The summary judgment must be reversed.
Plaintiffs contend the trial court abused its discretion by denying their ex parte request to shorten time, and then when they filed a timely noticed motion, by taking the motion off calendar. They point out that the court ignored their request for leave to amend asserted in opposition to Chevron’s motion for summary judgment. In response, Chevron maintains plaintiffs made a “tactical” decision to plead a permanent nuisance, and they “had no right to change that election on the eve of the summary judgment hearing.” It argues plaintiffs never filed a timely motion for leave to amend but rather brought only procedurally improper ex parte applications for leave to file their second amended complaint, which the trial court was within its discretion to deny. Further, Chevron maintains that even if the trial court should have permitted the motion to go forward, it would have had the discretion to deny it on grounds of plaintiffs’ unwarranted delay in bringing the motion and resulting prejudice to it.
date for filing such a motion. However, in its opposition to plaintiffs’ ex parte application to set a hearing date, Chevron had taken a contrary position so as to convince the trial court any such motion would be untimely, asserting: “This case is set for trial on April 30, 2007, making March 29, 2007 the last day for hearing any non-discovery motion.” Chevron argued that plaintiffs’ attempt to set a hearing for its motion was simply a “back- door attempt to obtain a different result in [the trial court’s] absence . . . .” Under the circumstances, the trial court had no sound basis for refusing to set plaintiffs’ motion for hearing on timeliness grounds (or vacating the hearing date already granted to plaintiffs for that matter). In that respect, its orders were an abuse of discretion.
Chevron has not explained in any meaningful way how plaintiffs exercised unwarranted delay presenting their proposed amended complaint. Referring us only to plaintiffs’ first amended complaint, it asserts without explanation that plaintiffs “had been aware of the facts forming the basis of their claims of a continuing nuisance since, at the latest, the filing of the [first amended complaint] in April 2006.” This bare assertion does not compel a finding of delay. And unlike the parties in Huff v. Wilkins (2006) 138 Cal.App.4th 732, on which Chevron relies, plaintiffs’ counsel explained that new facts demonstrated intentional conduct by Chevron; counsel provided a detailed explanation as to the parties’ discovery efforts and how plaintiffs gleaned these facts through depositions that had taken place in January and February 2007 after Chevron’s environmental consultant had finally produced documents in December 2006. Even Adel Somo’s deposition was not conducted until November 2006. We are not persuaded that plaintiffs’ requests for leave to amend should be rejected for unwarranted delay.
To provide the foundational facts for its claims of privilege and work product protections Chevron ultimately relied on three declarations: two from Chevron employees Peter Martin and Dana Thurman, and one from its outside counsel, Stefan Teichert, submitted as part of a supplemental showing.
“referenc[e]” advice or communication with counsel (e.g., CUSA document Nos. 03274-03288, 03292-03294, 03375-03384), and communications between SECOR employees and Chevron outside counsel (e.g. CUSA document Nos. 03289-03291, 03295-03297, 03300-03317).
We face the assertion of attorney-client privilege over corporate communications involving two third-party entities, Staubach and SECOR, raising the question of whether disclosure of otherwise confidential attorney-client communications to those entities (or in SECOR’s case, direct communications with Chevron’s outside counsel), or their participation in communications with Chevron counsel, constitutes a waiver of the privilege. We also are presented with claims of privilege over communications solely between Staubach (or SECOR) representatives that were either copied to Chevron’s in- house counsel or that which assertedly “reflect” legal advice. The latter presents questions similar to those raised in Zurich American, supra, 155 Cal.App.4th 1485.
Plaintiffs contend Chevron did not meet its burden to establish that the SECOR and Staubach documents it withheld are subject to any attorney-client privilege. Citing McCaugherty v. Siffermann (N.D. Cal. 1990) 132 F.R.D. 234 (McCaugherty), as well as Zurich American and 2,022 Ranch, supra, 113 Cal.App.4th 1377, they maintain the privilege does not apply when the communications with the attorney are for business purposes or compliance with regulatory requirements and not to generate legal advice. Plaintiffs argue Smith’s and Thurman’s declarations do not establish that Chevron’s in- house attorneys were providing legal advice or doing anything more than acting as negotiators or giving business advice, and there is no indication by Chevron’s in-house attorneys that they were doing more than those kinds of tasks. Plaintiffs assert that each document and deposition question must be analyzed to determine the predominant purpose of the attorney’s work to determine if legal advice was given.
Plaintiffs contend further that even assuming Chevron showed its counsel did more than provide negotiating or business advice, it did not establish that Staubach or SECOR were hired for legal purposes or that either entity was acting as a necessary intermediary for any legal purpose, including a legal purpose for which Chevron’s counsel was consulted. Finally, plaintiffs contend Chevron waived any possible privilege because there is no evidence indicating either Staubach or SECOR’s communications were intended or understood to be confidential.
Referring to Evidence Code section 951,8 Chevron responds that for purposes of application of attorney-client privilege, a client includes authorized representatives or agents, and that in the corporate context, the privilege attaches to those third persons or consultants, like Staubach and SECOR, whose participation “is reasonably necessary to assist the corporation or its attorneys in achieving the purpose of the legal consultation.” For this position, it relies primarily on McCaugherty, supra, 132 F.R.D. 234 and INA, supra, 108 Cal.App.3d 758, as well as federal authorities that assertedly follow INA (Bank of the West v. Valley National Bank (N.D. Cal. 1990) 132 F.R.D. 250, and In re Bieter Co. (2d Cir. 1994) 16 F.3d 929, 936-937). Chevron argues it met its burden to establish preliminary facts showing the documents fell within the attorney-client privilege, providing a presumption of confidentiality that plaintiffs did not rebut.
8Evidence Code section 951 provides in part: “As used in this article, ‘client’ means a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity . . . . ” There is no indication in Chevron’s privilege log that any Staubach representative ever directly contacted Chevron’s outside counsel for any matter. Thus, under this definition, Staubach cannot fall within the definition of client at least with respect to preserving communications with Chevron’s outside counsel.
McCaugherty, supra, 132 F.R.D. 234 does not support Chevron’s position. There, two individuals were hired by the Federal Asset Disposition Association (FADA), a wholly-owned subsidiary of the Federal Savings and Loan Insurance Corporation (FSLIC), as consultants to help arrange for the sale of a bank in receivership (FSB).
Here, unlike Bieter, Chevron made no particularized showing about the roles of Staubach or SECOR with respect to their duties on Chevron’s behalf; indeed the declarations from Chevron representatives contain conclusory and generalized statements that these companies were retained to act as Chevron’s agents for business (real estate or lease related) or environmental compliance purposes. Chevron’s evidentiary showing does not indicate the sort of intimate involvement by Staubach and SECOR in Chevron affairs that would avoid a waiver of the attorney-client privilege.
Londquist or Dana Thurman (e.g., SEC document Nos. 03270, 03276-03288), notes taken by SECOR representatives that purportedly reflect attorney work product (e.g., SEC document Nos. 03268, 03269), and communications between SECOR personnel and Chevron outside counsel (e.g., SEC document Nos. 03290-03291, 03295-03297, 03300-03310, 03312-03317).
Plaintiffs challenge Chevron’s assertion of work product protection on similar grounds as it challenged its assertion of privilege: that Chevron did not show its in-house attorneys were performing legal services with regard to their communications, and that such protection is not available when the attorney provides non-legal services. Chevron’s sole response is that there is no evidence in the record that Chevron’s counsel were performing non-legal services. As we have stated, however, it is Chevron’s burden to establish application of work product protection on a document by document basis. (Wellpoint Health Networks, Inc. v. Superior Court (1997) 59 Cal.App.4th 110, 124; 2,022 Ranch, supra, 113 Cal.App.4th at p. 1397.) In the face of the existing declarations showing that Staubach and SECOR were retained for business or regulatory purposes and the absence of any declarations of Chevron’s in-house counsel clarifying their role, we conclude Chevron’s bare assertion is insufficient and that work product protection has been waived.
and order Chevron to produce the documents that are the subject of plaintiffs’ motion to compel and answer deposition questions posed to Londquist to the extent they do not ask him to disclose advice given to him by counsel concerning how he should respond to questions during the deposition. Plaintiffs shall recover their costs on appeal.
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