Source: http://edgcomb-law.com/author/michael-einhorn-esq/
Timestamp: 2019-04-24 07:59:56+00:00

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The Ninth Circuit issued an opinion on May 2, 2014 reversing the district court for the Central District of California regarding the admissibility of the opinion offered by the plaintiff’s expert regarding the source of perchlorate contamination in groundwater, but upholding the district court’s denial of defendant’s motion for summary judgment on statute of limitations and “economic loss rule” issues.
The appeal in City of Pomona v. SQM N. Am. Corp., Nos. 12-55147, 12-55193, 2014 U.S. App. LEXIS 8308 (9th Cir. Cal. May 2, 2014) primarily concerned the City of Pomona’s (“Pomona”) action against SQM North America Corporation (“SQMNA”), alleging SQMNA caused perchlorate contamination in the City’s groundwater. Pomona retained an expert witness who opined that that SQMNA’s imported sodium nitrate was the primary source of the perchlorate in the City’s groundwater. The district court held an evidentiary hearing to determine whether that expert opinion testimony was admissible under Federal Rule of Evidence (FRE) 702 and legal standards established in the seminal case of Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)(Daubert) and subsequent cases. The district court excluded Pomona’s expert witness testimony on this issue as unreliable. The Ninth Circuit reversed, however, finding that the district court abused its discretion.
The Ninth Circuit, however, upheld the district court’s earlier denial of defendant SQMNA’s motion for summary judgment, claiming that Pomona’s suit was barred on two grounds: (1) California’s “economic loss rule,” and (2) the three-year statute of limitations for injury to real property. SQMNA subsequently brought an in limine motion to exclude testimony by Pomona’s expert witness, who used a “stable isotope analysis” methodology to conclude that the perchlorate contamination in Pomona’s groundwater was caused by SQMNA’s sodium nitrate. The parties stipulated to dismissal of the case to permit both parties to appeal the district court’s decisions.
Daubert analysis of Pomona’s proposed expert witness testimony.
The Ninth Circuit first addressed the district court’s exclusion of Pomona’s expert witness. The expert used a stable isotope analysis methodology based on the Guidance Manual for Forensic Analysis of Perchlorate in Groundwater using Chlorine and Oxygen Isotopic Analysis (“Guidance Manual”), a compilation of 12 peer-reviewed articles describing the methodology. The expert had samples collected from Pomona’s groundwater, analyzed the isotopic composition of the perchlorate, and compared his results to a reference database of known perchlorate sources. He concluded that the samples matched SQMNA’s imported sodium nitrate and concluded SQMNA was the source of the contamination on that basis.
Under FRE 702, expert evidence is admissible if (1) the witness is qualified, (2) the opinion will help the trier of fact, (3) the opinion is based on sufficient facts or data, (4) the opinion is based on reliable principles, and (5) the expert reliably applied the principles and methods to the facts of the case. Under Daubert, the trial court must act as a gatekeeper to assure that the expert testimony is both reliable and relevant. Relevancy is determined by whether the expert’s knowledge has a connection to the issues in the case. Reliability is determined by whether expert opinion is based on scientific methodology, the validity of which is analyzed by considering several non-exclusive factors, such as whether the methods used are testable, if they have been peer reviewed or published, if there is a known error rate, and if they are generally accepted.
The district court concluded that the Pomona’s expert opinions were unreliable on several grounds, but the Ninth Circuit disagreed as to each and explained why the district court had abused its discretion in excluding the expert. First, the district court found that the opinions were not generally accepted because the procedures used were subject to further testing and refinement, as the Quality Assurance/Quality Control (QA/QC) parameters were still being refined, and because the methods were not certified by the EPA. The Ninth Circuit found that methods subject to further testing and refinement still may be “generally accepted”, and that a “‘disagreement over, not an absence of, controlling standards’ is not a basis to exclude expert testimony. City of Pomona v. SQMNA, at *14-15, quoting United States v. Chischilly, 30 F.3d 1144, 1154 (9th Cir. 1994). In particular, the Court noted that the Guidance Manual represents the most up-to-date QA/QC parameters. The Court also found that the lack of EPA certification is not a precondition to admissibility, because the stable isotope analysis is a published, peer-reviewed method and the product of inter-laboratory collaboration that began before the litigation. The Ninth Circuit stated that a party may establish that evidence is scientifically valid by “‘pointing to some objective source to show that the conclusions are based on ‘scientific method, as it is practiced by (at least) a recognized minority of scientists in the [ ] field.’” City of Pomona v. SQMNA, at *17, quoting Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1141 (9th Cir. 1997).
Second, the district court held that the expert’s methods had not been tested by others and were not subject to retesting. The Ninth Circuit disagreed, holding that “[t]he test under Daubert is whether the method ‘can be or has been tested’” and that “under Daubert’s testability factor, the primary requirement is that ‘someone else using the same data and methods . . . be able to replicate the results.” City of Pomona v. SQMNA, at *21-22, quoting Cooper v. Brown, 510 F.3d 870, 880-81 (9th Cir. 2007) and Zenith Elecs. Corp. v. WH-TV Broad. Corp., 395 F.3d 416, 419 (7th Cir. 2005). The Ninth Circuit found that the district court erred because (1) several laboratories have tested the Guidance Manual methods used by the expert; and (2) another laboratory may retest the expert’s procedures. SQMNA argued that Pomona’s expert did not follow the procedures properly and did not independently verify his test results with a separate lab. The Ninth Circuit found that attacks on an expert’s alleged failure to strictly adhere to protocol and on the expert’s results do not bar their admission, but go to the weight of the evidence and are therefore questions for a jury. The court also noted that the alleged protocol defect was described as an “optional” step by the Guidance Manual. The Ninth Circuit stated that “expert evidence is inadmissible where the analysis ‘is the result of a faulty methodology or theory as opposed to imperfect execution of laboratory techniques whose theoretical foundation is sufficiently accepted in the scientific community to pass muster under Daubert.’” City of Pomona v. SQMNA, at *24-25, quoting Chischilly, 30 F.3d at 1154. Accordingly, the Ninth Circuit found that the district court’s misapplication of law was an abuse of discretion.
Third, the district court ruled that the expert’s opinion was unreliable because the reference database of known perchlorate sources on which he relied was too small to identify SQMNA as the source of contamination with an acceptable rate of error. SQMNA had proffered a rebuttal expert in support of its “reliability” argument. Pomona’s expert responded that: (1) the reference database was sufficient; (2) that the rebuttal expert’s opinion was based on outdated publications; and (3) the area from which SQMNA imported sodium nitrate is well known and characterized. The Ninth Circuit characterized this as a disagreement between two credible experts that would be best settled by a “battle of the experts before the fact finder, not by judicial fiat.” City of Pomona v. SQMNA, at *29. In addition, the Ninth Circuit stated that Daubert does not require absolute certainty, so the reference database does not need to include “every source of perchlorate in the world.” Id., at *28. Accordingly, the Court held that the district court abused its discretion by resolving a matter properly left to a jury, and reversed the exclusion of Pomona’s expert.
In its motion for summary judgment, defendant SQMNA argued that Pomona’s damages are barred by the economic loss rule. Under California’s economic loss rule, a party that suffers only economic harm, rather than injuries to person or property other than the allegedly defective product, may not recover under tort theories. Economic losses include damages for inadequate value, cost of repair, cost of replacement of defective products, and lost profit. The Ninth Circuit affirmed the district court’s denial of SQMNA’s motion on these grounds, finding that Pomona properly alleged damage to its property, distinct from economic loss due to SQMNA’s sodium nitrate fertilizer as the allegedly defective product in the case. The Court noted that “California and federal courts have held that pollution of groundwater is damage to property” and that a Pomona’s right to use the groundwater confers it with standing to bring the lawsuit. City of Pomona v. SQMNA, at *31-32, 34.
The district court also denied SQMNA’s summary judgment motion on statute of limitations grounds. California Code of Civil Procedure (CCP) § 338(b) provides a three year limitations period for injury to real property, which starts to run when the last essential element of the cause of action occurs. On this point, the Ninth Circuit found that “[w]hen the last element to occur is damage, the limitations period starts upon the occurrence of ‘appreciable and actual harm, however uncertain in amount, that consists of more than nominal damages.’” City of Pomona v. SQMNA, at *35. The Court noted that the test for when this occurs in groundwater contamination cases is not well defined in California courts. Accordingly, the Ninth Circuit adopted an analysis formed by a federal district court in New York, which had applied California law and found that “appreciable harm occurs when the contamination ‘caused or should have caused’ the party to act in response to the contamination.” City of Pomona v. SQMNA, at *36, quoting In re MTBE Prods. Liab. Litig., 475 F. Supp. 2d 286, 293-95 (S.D.N.Y. 2006).
In response to Pomona’s claim, SQMNA argued that Pomona had discovered perchlorate in its groundwater many years before filing the lawsuit in 2010, at least as far back as 1999. However, the Ninth Circuit focused on the date when Pomona was required to remediate the perchlorate as the trigger date for the running of the limitations period. The California Department of Public Health (“CDPH”) is required to establish Notification Levels (previously known as “Action Levels”) and state Maximum Contaminant Levels (“MCLs”) for contaminants in drinking water. See, Cal. Health & Safety Code §§ 116275, 116455. In 1999, Pomona discovered that perchlorate in its groundwater exceeded Notification Levels, which require monitoring and reporting to CDPH, but not remediation. Cal. Health & Safety Code § 116455(c)(3). In 2007, CDPH established a lower MCL of six parts per billion (ppb). Since perchlorate was detected in Pomona’s groundwater in excess of 6 ppb, Pomona was required by law to take action to investigate and remediate the contamination, which it did.
SQMNA argued that Pomona should have acted to reduce perchlorate as soon as it knew of the contamination. Pomona argued that it relied on state MCLs as a trigger to determine whether action was required. The Ninth Circuit ruled that testing and reporting requirements, without more, do not constitute “appreciable harm” under California law. Accordingly, the Ninth Circuit found there was disputed factual evidence regarding the issue of whether Pomona was required to act prior to 2007, and therefore the district court was correct in denying summary judgment on the statute of limitations issue.
Nancy Wilms, Esq. and Michael Einhorn, Esq.
In State of Arizona v. Raytheon Co.. et al., Case No. 12-15691, 2014 U.S. App. LEXIS 14993 (9th Cir. Aug. 1, 2014), the Ninth Circuit reaffirmed the requirement that district courts engage in meaningful substantive review of consent decrees under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) to determine if there is a rational relationship, based on sufficient evidence, between the proportion of liability attributable to each settling party and the proportion of total costs to be paid by such party under the agreement. Although the required review to be undertaken by the district court is based on its previous opinion in United States v. Montrose Chem. Corp. of Cal., 50 F.3d 741, 747 (9th Cir. 1995), in Arizona v. Raytheon, the Ninth Circuit addresses an issue not present in Montrose: the level of deference to be accorded a state agency where it, not EPA, is the proponent of a proposed consent decree under CERCLA. In these situations, the Ninth Circuit held the required Montrose review will necessarily involve additional scrutiny by the district court to reflect the reduced deference afforded the judgment of the particular state agency involved.
At issue in Arizona v. Raytheon are costs to clean up contamination from a landfill investigated by the Arizona Department of Environmental Quality (“ADEQ”) under CERCLA and its Arizona state law counterpart, the Arizona Water Quality Assurance Revolving Funds (“WQARF”). A group of PRPs (the “Settling Parties”) approached ADEQ regarding early settlements pursuant to CERCLA § 113(f)(2), which would provide the Settling Parties with releases of liability for contribution claims. In response, ADEQ sent early settlement offers to the Settling Parties requiring them to pay damages in exchange for ADEQ’s releasing them from liability to the state and third parties, including non-settling PRPs at the site.
To obtain judicial approval of the consent decrees, as required by CERCLA § 113(f)(2), the State of Arizona (the “State”) brought an action under CERCLA and WQARF against the Settling Parties and filed a motion seeking approval of the consent decrees. Thereafter, ADEQ sent public notice of the proposed consent decrees with the Settling Parties, to which certain non-settling PRPs (“Non-Settling Parties”) provided comments objecting to the settlement. The State then filed a motion seeking approval of the consent decrees, asserting that the liability of each Settling Party was de minimis, amounting to less than 0.2% of the $75 million estimated clean up costs.
Since non-settling PRPs may bear the costs if early settlements are disproportionately low, the Ninth Circuit has previously held that non-settling PRPs have standing to intervene to oppose entry of consent decrees in CERCLA actions because the public notice and comment procedure is insufficient on its own to protect the interests of non-settling PRPs. United States v. Aerojet Gen. Corp., 606 F.3d 1142, 1152-1153 (9th Cir. 2010). Accordingly, the district court in this case permitted the Non-Settling Parties to intervene, over the objections of the State.
After intervention, the Non-Settling Parties opposed the State’s motion for entry of the consent decrees, relying on Montrose’s holding that a district court must independently determine whether consent decrees are substantively “fair, reasonable, and consistent with CERCLA’s objectives,” and arguing that the State had not proffered sufficient evidence for the district court in this case to make such a determination. The district court disagreed; it approved the consent decrees, and the Non-Settling Parties brought an appeal to the Ninth Circuit.
The Ninth Circuit vacated and remanded the district court’s approval of the consent decrees, concluding that the district court “failed to independently scrutinize the terms of the agreements” and “afforded undue deference to the ADEQ.” Arizona v. Raytheon, 2014 U.S. App. LEXIS 14993 at *11-12. The Ninth Circuit stated that it previously provided the proper legal standard for reviewing CERCLA agreements in Montrose, which “requires that the district court ‘gauge the adequacy of settlement amounts to be paid by settling [parties]’ by engaging in a comparative analysis” of each party’s estimated liability with its settlement amount relative to the estimated remedial costs. Arizona v. Raytheon, 2014 U.S. App. LEXIS 14993 at *18, quoting Montrose, at 747. The Ninth Circuit Court cited with approval a First Circuit opinion holding courts must determine that CERCLA agreements apportion liability based on rational estimates of comparative fault, taking into consideration how much harm each PRP has done. Arizona v. Raytheon, 2014 U.S. App. LEXIS 14993 at *15-16, citing United States v. Charter Int’l Oil Co., 83 F.3d 510, 521 (1st Cir. 1996).
Relying on these authorities, the Ninth Circuit stated that it is not enough for there to be sufficient information in the record for the district court to evaluate the adequacy of CERCLA settlements. Instead, the Ninth Circuit expressly held that the “district court must actually engage with that information and explain in a reasoned disposition why the evidence indicates that the consent decrees are procedurally and substantively ‘fair, reasonable, and consistent with CERCLA’s objectives.’” Arizona v. Raytheon, 2014 U.S. App. LEXIS 14993 at *17, citing Montrose, at 748. Without this, the Court explained, an appellate court cannot determine whether a district court abused its discretion in approving a CERCLA settlement.
Here, the Ninth Circuit found the district court did not engage in the analysis required by Montrose but simply deferred to the ADEQ’s representation that the settlements were fair and reasonable. Indeed, the district court provided only a footnote regarding the State’s estimate of remedial costs and each Settling Party’s share of liability, at the same time admitting that the State did not provide any evidence supporting its judgment or information for the court to independently confirm the Settling Parties’ entitlement to de minimis contributor status. Accordingly, the Ninth Circuit held that the district court failed to substantively assess the adequacy of the agreements and to provide a reasoned explanation for its decision. Arizona v. Raytheon, 2014 U.S. App. LEXIS 14993 at *18-19.
In support of its cursory substantive review, the district court stated in its order that it would not second guess ADEQ, holding it was required to defer to a state agency’s judgment unless it was arbitrary and capricious. The Ninth Circuit disagreed, stating that district courts should not give the same deference to a state agency, such as ADEQ, as that afforded federal agencies regarding the interpretation of federal laws such as CERCLA. Accordingly, the Ninth Circuit held that the district court in this case erred by deferring to the state’s judgment to the same decree as it would have a federal agency. The majority’s opinion expressly holds that while courts may give “some deference” to a state agency’s environmental expertise regarding issues within the scope of that expertise, the state agency is not entitled to deference concerning its interpretation of federal law, including CERCLA’s mandate. Arizona v. Raytheon, 2014 U.S. App. LEXIS 14993 at *24. The precise level of deference to be afforded a state was left undefined by the Ninth Circuit, but is to be assessed by the district court on a case by case basis and may vary from state to state. In the end, however, the Ninth’s Circuit’s decision did not turn on the deference issue, as the Court made it clear that even if the EPA had been a party to the proposed consent decrees at issue, its ruling would have been the same as the district court failed to adhere to the Montrose requirement to “independently scrutinize” the agreements at issue regardless of whether entered by a federal or a state agency.
The Arizona v. Raytheon decision is notable for its unequivocal affirmation of its nearly two decades old opinion in Montrose, but even more so for its enunciation that the required “independent scrutiny” of a settlement must now take into consideration the appropriate level of deference to be afforded the agency proponent of the consent decree at issue. Non-settling PRPs who oppose entry of a consent decree may rely on this opinion to challenge whether a district court engaged in the required Montrose analysis, including an independent substantive evaluation of the respective liabilities of the settling parties in light of their contribution to remedial costs, demanding even more stringent standards for evaluation in cases of state-sponsored settlements commensurate with a particular state agency’s entitlement to deference. As a result, the Arizona v Raytheon decision provides additional support to non-settling parties seeking to challenge entry of CERCLA settlement agreements sponsored by state agencies and, on the flip side, requires significantly more effort to be expended by settling parties to present evidence sufficient to convince the court, after independent evaluation, that their agreements should be judicially approved.
The District Court for the Central District of California recently held in an unpublished opinion that a party cannot bring a CERCLA § 107(a) cost recovery action for response costs which relate to a common liability shared with an earlier § 107(a) action against that party. Instead, the party can only pursue a § 113(f) contribution claim regardless of whether the specific costs for which it seeks recovery are the same as those sought from the party in the earlier cost recovery action.
In Whittaker Corp. v. United States, Case No. CV 13-1741 FMO, 2014 U.S. Dist. LEXIS 23918 (C.D. Cal. Feb. 10, 2014), plaintiff Whittaker Corporation (“Whittaker”) brought two § 107(a) cost recovery claims alleging owner and arranger liability against the defendant United States of America (the “Federal Government”) for response costs incurred to clean up contamination in the soil and groundwater at a former military munitions manufacturing site (the “Site”). According to Whittaker’s first amended complaint (“FAC”), Whittaker voluntarily performed and incurred costs for interim remedial efforts at the Site under the oversight of the California Department of Toxic Substances Control (“DTSC”). Whittaker alleged that it entered into a voluntary consent order (the “Consent Order”) with DTSC in 1994 related to such efforts. In 2002, DTSC issued an Imminent and Substantial Endangerment Determination and Order and Remedial Action Order (“Endangerment Order”) for Whittaker to remediate the site, which provided, in part, that Whittaker remain subject to the Consent Order. Whittaker alleged that neither Order was entered into subject to CERCLA or a court order.
In 2000, Whittaker itself was subject to § 107(a) cost recovery claims brought by a group of water agencies and companies in the area of the Site (collectively, the “Water Purveyors”) for reimbursement of costs expended by the Water Purveyors to respond to groundwater contamination in certain off-Site production wells (the “Water Purveyor Action”). This action was eventually settled in 2007 (the “Water Purveyor Settlement”). Whittaker alleged that its subsequent FAC against the Federal Government sought response costs outside the scope of the Water Purveyor Action.
Section 113(f)(1) authorizes a contribution action to PRPs [potentially responsible parties] with common liability stemming from an action instituted under § 106 or § 107(a). And § 107(a) permits cost recovery (as distinct from contribution) by a private party that has itself incurred cleanup costs. Hence, a PRP that pays money to satisfy a settlement agreement or a court judgment may pursue § 113(f) contribution. But by reimbursing response costs paid by other parties, the PRP has not incurred its own costs of response and therefore cannot recover under § 107(a).
United States v. Atlantic Research Corp., 551 U.S. 128, 139 (U.S. 2007).
The Federal Government brought a motion to dismiss Whittaker’s FAC, arguing that Whittaker was limited to contribution actions as a PRP with common liability stemming from the § 107(a) claims in the Water Purveyor Action. Whittaker countered that it still possessed § 107(a) claims because no § 113(f) claim was available for response costs outside the scope of the Water Purveyor Action. According to Whittaker, the Water Purveyors’ complaint related only to the reimbursement of costs the Water Purveyors incurred addressing their contaminated off-Site wells, not on-Site remediation. Whittaker argued that § 113(f)(1) permits a suit “only where the PRP is suing another party in contribution to force that party to share in the exact costs that were the subject of a §§ 106 or 107 settlement or judgment.” Whittaker, at *14. It further argued that some response costs incurred at the Site pre-date the Water Purveyors’ claims, and therefore such costs sought by Whittaker from the Federal Government could not possibly have resulted from the Water Purveyor Settlement.
The District Court disagreed with Whittaker, and held that nothing in the text of § 113(f)(1) limits recovery under a contribution action to the scope of the previous cost recovery action against the plaintiff. Indeed, the Court held “[a] party’s procedural circumstances, not the nature of its alleged costs, will determine whether a party may pursue a contribution action under § 113(f)(1).” Whittaker, at *21-22. The District Court found that the allegations by the Water Purveyors in their complaint “implicated the entire cleanup of the Site,” as the Water Purveyors had alleged that Whittaker’s activities at the Site caused releases of hazardous substances on and off the Site, so that the Water Purveyors incurred response costs for which Whittaker was liable under § 107(a). Relying on the Supreme Court’s decision in Atlantic Research that “§ 113(f)(1) permits suit before or after the establishment of common liability,” the District Court found that a § 113(f)(1) contribution action was available to Whittaker for all response costs to remediate the Site at the time that the Water Purveyor Action was filed, since the Federal Government and Whittaker shared a common liability for the claims in the Water Purveyor Action. “Here, [Whittaker] meets the procedural circumstances of § 113(f)(1), and its remedy for the costs it seeks ‘during or following’ the [Water Purveyor Action] is a contribution claim under § 113(f)(1).” Whittaker, at *22. Accordingly, the District Court held that Whittaker’s § 107(a) cost recovery claims could not survive a Motion to Dismiss and dismissed its FAC, which did not seek relief under § 113(f)(1), with prejudice.
Governor Jerry Brown recently signed into law Assembly Bill 227 (Gatto) to provide a two-week grace period to address certain alleged violations of failure-to-warn requirements under Proposition 65.
vehicle exhaust at primarily non-commercial parking garages.
Prop. 65 was passed in 1986. By its own terms, amendments to Prop. 65 require a two-thirds supermajority vote of the Legislature and it has therefore been difficult to reform. AB 227, which amends Cal. Health and Safety Code Section 25249.7, was approved on September 11, 2013 on a 75-0 vote and signed into law on October 5, 2013, making it the first substantial amendment to Prop. 65 in 15 years.
In PCS Nitrogen Inc. v. Ashley II of Charleston, the Fourth Circuit (“Court”) affirmed the U.S. District Court for the District of South Carolina’s rulings addressing CERCLA liability at a former fertilizer manufacturing site. In doing so, the court outlined legal standards for multiple CERCLA issues. Significantly, the Court held that CERCLA’s structure and purpose prohibits a zero share apportionment to a current owner or operator. Yet, it affirmed a zero share allocation to a current owner and operator. Additionally, the Court held that CERCLA’s Bona Fide Prospective Purchaser defense (“BFPP”) was unavailable where the defendant delayed in filling sumps.
The current owner of the site at issue in this case, Ashley II of Charleston, Inc. (“Ashley”) brought a CERCLA § 107(a) cost recovery suit against PCS Nitrogen, Inc. (“PCS”), a potential successor to a former operator of the site. PCS counterclaimed under CERCLA § 113(f), and brought third-party contribution actions against other PRPs who, in turn, filed CERCLA §113(f) contribution claims against one another. The district court bifurcated the case, and found in the first bench trial that, through an acquisition agreement, PCS assumed CERCLA liabilities for the site and was therefore a PRP. In the second bench trial, the district court found that some of the other parties, including Ashley, were liable as PRPs, and allocated shares of the response costs among them. Certain parties appealed to dispute whether and to what amount each is liable for response costs at the site.
Robin Hood Container Express (“RHCE”), one of the third-party defendants subject to a CERCLA 113(f) contribution action, argued that the Supreme Court case of Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 129 S. Ct. 1870 (2009) supported the award of a zero-share of liability to it. In Burlington, the Supreme Court held that “[w]hen two or more persons acting independently cause[e] a distinct or single harm for which there is a reasonable basis for division according to the contribution of each, each is subject to liability only for the portion of the total harm that he has himself caused.” Id., at 614. RHCE was a former owner that had conducted excavation and was the current operator at the site. RHCE argued that no disposal of hazardous substances occurred during its operation, and therefore a reasonable basis existed to apportion it a zero-share of the harm.
The Court assumed that apportionment arguments are available to a party sued for contribution under CERCLA § 113, without deciding the issue (the Court noted that some courts have limited apportionment arguments to parties subject to joint and several actions brought under CERCLA § 107). The Court then held that as a current owner or operator, RCHE could not use individual share apportionment to apportion itself a zero-share harm. The Court explained that such a rule would eliminate the express defenses and exemptions Congress created for innocent landowners, which all require more than a mere showing that no disposal occurred during a current owner or operator’s tenure at the site. See, e.g., id. § 9601(20)(D), 35(A) (involuntary acquisition exemption); id. §§ 9601(35), 9607(b)(3) (defense for innocent landowners); id. §§ 9601(40), 9607(r) (bona fide prospective purchaser exemption); id. § 9607(q) (contiguous property owner exemption).
The Court then evaluated the district court’s allocation of liability to the various parties. The Court noted that CERCLA § 113(f), which governs contribution actions among PRPs, provides that a court “may allocate response costs among liable parties using such equitable factors as the court determines are appropriate.” 42 U.S.C. 9613(f)(1). The Court upheld the district court’s allocation, finding that the allocation “was among the reasonable conclusions supported by the evidence.” (Citations omitted). Notably, the court confirmed a zero-share allocation to the City of Charleston, a current owner and operator of the site. The Court did not discuss why its award of a zero-share allocation under CERCLA § 113(f) to a PRP that failed to qualify for CERCLA’s express defenses and exemptions did not run afoul of the structure and purpose of CERCLA.
The Court also upheld the district court’s holding that Ashley was a PRP due to its status as a current site owner. Ashley argued that CERCLA’s bona fide prospective purchaser (“BFPP”) exemption (CERCLA §§ 101(40) and 107(r)) applied and protected Ashley from liability. To qualify for the BFPP exemption, a party has the burden of demonstrating by a preponderance of the evidence that it has not impeded performance of a response action, and that it meets eight other criteria in CERCLA § 101(40)(A)-(H).
One of the eight BFPP criteria is that a party must demonstrate that it exercised “appropriate care with regard to hazardous substances” at the site. 42 U.S.C 9601(40)(D). The court held that “appropriate care” under CERCLA’s BFPP provision is at least as stringent as “due care” under CERCLA’s innocent landowner defense (CERCLA § 107(b)(3)). The Court borrowed from the due care jurisprudence to inform it of what reasonable steps were necessary to demonstrate “appropriate care” and stated the inquiry is whether a party “took all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would have taken in light of all relevant facts and circumstances.” (Citations omitted). The Court held that under the above inquiry, Ashley’s delay in filling in sumps when related aboveground structures were demolished showed that it failed to exercise appropriate care. Thus, Ashley did not qualify for the BFFP exemption.
A pharmaceutical waste hauling bill, AB 1442 (Wieckowski), was chaptered into law on September 29, 2012 and went into effect on January 1, 2013. AB 1442 amends California’s Medical Waste Management Act (MWMA), to define “pharmaceutical waste” and permit its transportation by generators or common carriers, provided that certain requirements are met.
Prior to AB 1442, the MWMA required that all medical waste be hauled by a registered hazardous waste handler, unless the hauler obtained an approved limited-quantity exemption. Pharmaceutical drugs could be hauled by common carrier, but pharmaceuticals designated as waste (such as expired drugs) were classified as medical waste and required to be shipped as hazardous waste. AB 1442 changes existing law to allow, if specific requirements are met, the transport of pharmaceutical waste through self-transport or common carrier in certain situations where: (1) unwanted pharmaceuticals are sent into reverse distribution, or (2) generators of pharmaceutical waste transport it for consolidation prior to treatment and disposal.
AB 1442 defines “pharmaceutical waste” as any “pharmaceutical” that is “waste,” as those terms are defined in pre-existing provisions of the MWMA. The pre-existing definition of “pharmaceutical” includes prescription and over-the-counter drugs, but exempts all drugs that fall within the definition of hazardous waste by the Resource Conservation and Recovery Act (RCRA) or the California Radiation Control Law (RCL) (these statutes have their own transportation requirements for qualifying pharmaceuticals). Whether or not particular pharmaceutical waste is classified as a RCRA or RCL hazardous waste depends on a number of factors, such as ignitability, corrosivity, reactivity, and toxicity. AB 1442 does not modify the transportation requirements for pharmaceuticals that are regulated by RCRA or the RCL.
AB 1442 exempts unwanted pharmaceuticals from the definition of “pharmaceutical waste” if they are being sent to a properly-licensed reverse distributor. Accordingly, unwanted pharmaceuticals now may be sent into reverse distribution by self-transport or common carrier. One caveat is that if the unwanted pharmaceuticals are sent to a reverse distributor located within California, the reverse distributor must be a permitted medical waste transfer station. Reverse distribution is the practice of pharmaceutical dispensers returning pharmaceuticals to their manufacturer, or an agent of their manufacturer. Under California law, a reverse distributor is defined as every person who acts as an agent for pharmacies, drug wholesalers, manufacturers, and other entities by receiving, inventorying, and managing the disposition of outdated or unsalable drugs. The drugs may be unwanted and returned for various reasons, such as oversupply, expiration, recall, shipping error, or damage.
AB 1442 also allows pharmaceutical waste that is being transported for consolidation before treatment and disposal to be self-transported or transported by common carrier where specific requirements are met. Where the requirements are met, the generator of pharmaceutical waste may self-transport it to “a parent organization or another health care facility for the purpose of consolidation before treatment and disposal.” Or, if the requirements are met, the generator may contract with a common carrier “to transport the pharmaceutical waste to a permitted medical waste treatment facility or transfer station.” The requirements for the “consolidation” classification include, but are not limited to, providing notices and confirmations among the transporting entities and reporting discrepancies to enforcement agencies. Generators are also required to be properly registered and/or have prepared medical waste management plans pursuant to various statutes depending on the status of the generator.
Advocates of the bill, including the City of San Jose and the County of Alameda, recommended passage of AB 1442, claiming the bill will make it more likely that pharmaceutical waste will be disposed of properly because use of self-transport or common carriers in reverse distribution will reduce the cost to recover the pharmaceutical waste.
 Cal. Health & Safety (“H&S”) Code §§ 117600 – 118360.
 H&S Code § 117748(a), referencing H&S Code §§ 25124 and 117747.
 H&S Code § 117748(b), referencing Cal. Bus. & Prof. Code §§ 4040.5, 4160 and 4161.
Supreme Court denies petition by Solutia, Inc. to address whether a party to a consent decree may file a cost recovery action under CERCLA Section 107(a).
On October 9, 2012, the U.S. Supreme Court denied the petition of Solutia, Inc. and Pharmacia Corporation to review a March 6, 2012 ruling by the Eleventh Circuit which affirmed a grant of summary judgment and held that parties subject to a consent decree are limited to filing claims for contribution under CERCLA § 113(f), and may not file claims for cost recovery under CERCLA § 107(a). Solutia Inc. v. McWane, Inc., 672 F.3d 1230 (11th Cir. Ala. 2012).
Plaintiffs Solutia and Pharmacia were parties to a partial consent decree (PCD) entered into with the U.S. Environmental Protection Agency (EPA) related to contamination caused by production of polychlorinated bipheyls (PCBs) at a plant near downtown Anniston, Alabama. Plaintiffs sued several defendants as potentially responsible parties (PRPs) for the contamination, seeking to recover cleanup costs incurred by plaintiffs and contribution under CERCLA §§ 107(a) and 113(f), respectively.
These two provisions of CERCLA – §107(a) and § 113(f) – have been the focus of several Supreme Court decisions attempting to define which remedies are available under CERCLA in different situations. In United States v. Atlantic Research Corp., 551 U.S. 128 (U.S. 2007) and Cooper Indus. v. Aviall Servs., 543 U.S. 157 (U.S. 2004), the Supreme Court held that cost recovery actions under CERCLA § 107(a) are complementary to, yet distinct from, contribution actions under CERCLA § 113(f). Cleanup costs incurred voluntarily and directly by a party are recoverable under CERCLA § 107(a), which imposes joint and several liability on the defendants. Atlantic Research Corp., 551 U.S. at 138-139. By contrast, CERCLA § 113(f) permits contribution actions after a party is forced to reimburse a third party, such as where it has been sued under CERCLA §§ 106 or 107, or entered into a settlement with a Federal or State agency or private parties to resolve its liability. Id., at 138; Aviall, 543 U.S. at 166. Under § 113(f) contribution actions, a defendant potentially responsible party (“PRP”) is liable only for its equitable share of response costs.
But the Supreme Court in Atlantic Research expressly left open the question of whether a party that incurs direct cleanup costs pursuant to a consent decree following a CERCLA lawsuit under § 106 or § 107 may bring an action to recover those costs under § 107(a), or whether its remedy is limited to § 113(f) contribution claim. Atlantic Research, 551 U.S. at 139 n. 6. This issue was presented as a matter of first impression to the Eleventh Circuit in Solutia Inc. v. McWane, which held that parties subject to a consent decree are limited to filing claims for contribution under CERCLA § 113(f), and may not file claims for cost recovery under CERCLA § 107(a). Solutia Inc. v. McWane, Inc., 672 F.3d at 1236-1237.
Certain defendant PRPs sued by Solutia and Pharmacia plaintiffs had settled their liability in a separate settlement agreement with EPA (the “Settling Defendants”). CERCLA § 113(f)(2) provides that “[a] person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement.” 42 U.S.C. § 9613(f)(2). Accordingly, the plaintiffs’ CERCLA §113(f) contribution claims against the Settling Defendants were precluded by §113(f)(2). The Eleventh Circuit reasoned that permitting § 107(a) cost recovery claims by plaintiffs against Settling Defendants would undermine the structure of CERCLA and thwart the contribution protection given to settling PRPs, discouraging future settlements. Solutia Inc. v. McWane, Inc., 672 F.3d at 1236.
In Team Enterprises, LLC v. Western Investment Real Estate Trust, No. 10-16916, 2011 U.S. App. LEXIS 15383 (9th Cir., Cal. July 26, 2011), the Ninth Circuit held that the manufacturer of a machine used in the dry cleaning process may not be held liable for contribution to environmental cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or on State law nuisance and trespass claims.

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