Plaintiffs’ Knowledge of “Environmental Concerns” Not Enough to Put Them on Notice of Health Risk

In a September 24, 2013 opinion, the California Court of Appeal for the Second District revived the claims of 58 plaintiffs whose personal injury claims against Exxon Mobil were dismissed on statute of limitations grounds. 

Most of the plaintiffs in the case, Alexander v. Exxon Mobil, No. B242458, were residents of an apartment complex in an unincorporated area of Los Angeles County.  From 1924 to 1962, various Mobil Oil Corporation related-entities operated an above-ground storage tank farm adjacent to the apartment complex.  The plaintiffs alleged that hydrocarbon releases from the tank farm caused a wide range of personal injuries and property damage and asserted claims for, among other things, negligence, trespass, nuisance, public nuisance, breach of the warranty of habitability, various statutory violations, and wrongful death.

Exxon Mobil (and other defendants) asserted statute of limitations defenses based on a letter from the Los Angeles County Housing Authority that certain plaintiffs received in May 2007 and a community meeting regarding the possible closure of the apartment complex in the same year.   The letter referred to “environmental concerns” at the complex but did not mention any specific health risk to residents.  The same “concerns” were also discussed at the community meeting, although the focus of the meeting was on plans to close the apartment complex.

After several rounds of pleading, the trial court issued an order under Cottle v Superior Court, 3 Cal. App. 4th 1367 (1992), requiring the plaintiffs to submit offers of proof with their next amended complaint showing, among other things, how and when they learned of the presence of environmental contamination at the apartment complex.  After the plaintiffs filed their amended complaint (accompanied by Cottle declarations), the trial court sustained demurrers without leave to amend as to approximately 100 plaintiffs whose declarations admitted that they had received some form of notice of the contamination more than two years before filing their claims in April 2010, holding that those claims were barred by the statute of limitations and could not be saved by the discovery rule.

Fifty-eight of the dismissed plaintiffs appealed the trial court’s ruling, and the Court of Appeal reversed.  The appellate court observed that while there was no dispute as to when the plaintiffs learned of the existence of contamination at the apartment complex, the trial court erred in concluding as a matter of law that the letter from the Housing Authority and the community meeting were sufficient to put the plaintiffs on notice of their personal injury claims. 

The court reasoned that knowledge that the existence of environmental contamination was not enough to put the plaintiffs on notice of their claims.  Rather, a reasonable trier of fact might conclude the plaintiffs had no reason to suspect the contamination was capable of causing them personal injury.  The court therefore concluded that the plaintiffs could take advantage of the discovery rule to avoid dismissal of their claims on demurrer.

In reaching this conclusion, the court distinguished CAMSI IV v. Hunter Technology Corp., 230 Cal. App. 3d 1525 (1991), and Mangini v. Aerojet-General Corp., 230 Cal. App. 3d 1125 (1991), two leading cases in which appellate courts held that notice of the existence of environmental contamination foreclosed the application of the discovery rule to save time-barred property damage claims.  The  court noted that the “injury” in both of these cases “was the existence of the pollutants, which devalued their property.”  In contrast, the Alexander plaintiffs’ personal injury claims required them to link the existence of the pollutants to the alleged adverse health effects.  The information that the plaintiffs possessed in April 2008, two years before their complaint was filed, was not as a matter of law sufficient to make such a connection. 

--Chris Jensen

For more information, please contact Chris Jensen at (415) 228-5411, or cdj@bcltlaw.com

Bill Poised to Confer Polanco Act-Like Powers on Cities and Counties in California

A bill on its way to Governor Brown’s desk for signature promises to offer California’s local agencies, including cities, counties, and some housing authorities, authority and liability protection similar to that previously conferred on the former redevelopment agencies under the Polanco Redevelopment Act.  Assembly Bill 440 passed out of the state Senate on September 12, 2013 and tracks the key provisions of the Polanco Redevelopment Act, which authorized the state’s now dissolved redevelopment agencies to clean up contaminated properties and recover costs from responsible parties. 

The bill seeks to fill the gap left by the dissolution of redevelopment agencies in 2011 by enabling cities and counties to undertake environmental investigation and remediation activities on “blighted properties” located within “blighted areas,” as defined by the bill, that have been impacted by hazardous materials, in the event responsible parties fail to undertake the cleanup activities themselves. 

If  the investigation and cleanup efforts are consistent with the bill’s requirements, AB 440 protects the local agency, persons that enter into agreements with the local agency to develop or clean up the contaminated property, subsequent owners, and lenders by limiting their liability associated with the historic release of hazardous materials on the property.  The bill also allows local agencies to recover costs and attorney’s fees incurred during the investigation and cleanup activities from responsible parties.

--Nicole Martin

For more information, please contact Nicole Martin at (415) 228-5435, nmm@bcltlaw.com.

Ninth Circuit Rejects Constitutional Challenge to California’s Low Carbon Fuel Standard

On September 18, the Ninth Circuit handed a major victory to the California’s program to control greenhouse gas emissions from transportation fuels, turning aside constitutional challenges to the program brought by ethanol and petroleum industry interests in Rocky Mountain Farmers Union v. Corey (No. 12-15131).

The case arose from rulings in two separate actions in the Eastern District of California involving California’s “Low Carbon Fuel Standard.” The Low Carbon Fuel Standard is intended to reduce greenhouse gas emissions attributable to the sale of transportation fuel in California by 10 percent by 2020.  To achieve this goal, the California Air Resources Board (CARB) set “carbon intensity” standards for different fuel feedstocks, which distinguished on a geographic basis among different ethanol sources and different categories of crude oil.  The district court found that the application of Low Carbon Fuel Standards to out-of-state ethanol and crude oil production violated the Dormant Commerce Clause of the U.S. Constitution by (1) facially discriminating against out-of-state ethanol, (2) impermissibly engaging in the extraterritorial regulation of ethanol produced outside of California, and (3) having the purpose and effect of discriminating against out-of-state crude oil production.

By a 2-1 vote, the Ninth Circuit reversed all three of these rulings.  In a strongly worded opinion, Judge Gould recognized California’s authority to “create a market that recognizes the harmful costs of products with high carbon intensity,” observing that “[t]he Commerce Clause does not protect Plaintiffs’ ability to make others pay for the hidden harms of their products merely because those products are shipped across state lines.”

The panel remanded to the district court with instructions to determine whether the Low Carbon Fuel Standard’s ethanol provisions have the purpose and effect of discriminating against interstate commerce, and if not, to apply the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).  The panel also instructed the district court to apply the Pike balancing test to the standard’s crude oil provisions.

The panel affirmed the district court’s holding that the provision of the federal Clean Air Act saving California’s motor vehicle emissions standards from preemption (Section 211(c)(4)(b)) does not authorize the Low Carbon Fuel Standard under the Commerce Clause.

--Chris Jensen and Morgan Gilhuly

For more information, please contact Chris Jensen, cdj@bcltlaw.com, (415) 228-5411, or Morgan Gilhuly, rmg@bcltlaw.com, (415) 228-5460.

Third Circuit Holds That Settlement With a State Agency Is Sufficient to Give Rise to CERCLA 113(f)(3)(B) Contribution Claim

Since the Supreme Court’s decisions in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004) and United States v. Atlantic Research Corp., 551 U.S. 128 (2007), there has been continuing uncertainty about whether a CERCLA potentially responsible party (“PRP”) can bring a cause of action for contribution against other PRPs under CERCLA §113(f) where the PRP has settled with a state agency under state law, but has not resolved its liability with the U.S. EPA or a state agency via an “administrative or judicially approved settlement” under CERCLA. 

This issue, which Cooper Industries and Atlantic Research left undecided, is of importance to any PRP that has resolved its liability under state environmental laws without settling CERCLA claims and then seeks contribution for response costs.

In Trinity Industries, Inc. v. Chicago Bridge & Iron Co., 2013 WL 4418534 (3d Cir. Aug. 20, 2013), the Third Circuit  allowed such a contribution action to proceed, holding that CERCLA Section 113(f)(3)(B) “requires only the existence of a settlement resolving liability to the United States or a state ‘for some or all of a response action’” to support a PRP’s contribution claim.  Id. at *3-5.  The Third Circuit’s decision provides further insight into this important issue, but signals a circuit split that may require further clarification from the Supreme Court.

Trinity Industries, Inc. and Trinity Industries Railcar Corporation (“Trinity”) entered into a consent order with the Commonwealth of Pennsylvania naming Trinity as a “responsible person” for the release of hazardous substances at a site that it owned and had for some period used for manufacturing railcars.  The consent order required Trinity to undertake remediation of the site under the supervision of the Pennsylvania Department of Environmental Protection.  The consent order was entered under state environmental laws and did not explicitly resolve Trinity’s liability under CERCLA.  Trinity subsequently filed a contribution claim under CERCLA § 113(f)(3)(B) against a former owner of the site for a share of the remediation costs.

Persuaded by arguments of both Trinity and the United States, which filed an amicus brief in support of Trinity’s position, the court of appeals agreed that the statutory language of CERCLA § 113(f)(3)(B) does not require resolution of CERCLA liability in order to pursue a Section 113(f)(3)(B) contribution claim.  Rather, it only requires the existence of a settlement resolving liability to the United States or a state “for some or all of a response action.”  “Section 113(f)(3)(B) does not state that the ‘response action’ in question must have been initiated pursuant to CERCLA – a requirement that might easily have been written into the provision.”  Trinity Industries, 2013 WL 4418534 at *4.  The court also noted that because remediation standards established under state law were considered “applicable, relevant and appropriate” to satisfy requirements under CERCLA and that compliance with those state remediation standards relieved a party from CERCLA liability, the consent order at issue had eliminated the risk of future CERCLA enforcement actions by the government.  Id. at *5.

The Third Circuit’s decision in Trinity Industries conflicts with the Second Circuit’s holding that CERCLA § 113(f)(3)(B) only allows for contribution claims where a PRP’s liability under CERCLA has been resolved.  See, e.g., Consol. Edison Co. of N.Y., Inc. v. UGI Utils., Inc., 423 F.3d 90, 95 (2d Cir. 2005); W.R. Grace & Co. v. Zotos Int’l, Inc., 559 F.3d 85, 91 (2d Cir. 2009).  In declining to follow the Second Circuit, the Trinity Industries court notes that the Second Circuit’s Consolidated Edison decision relied on the legislative history of CERCLA § 113(f)(1) rather than Section 113(f)(3)(B).  The Third Circuit’s decision instead relied on the plain language of Section 113(f)(3)(B), and relevant legislative history, as well as Third Circuit precedent that declined to impose a requirement that a government agency specifically invoke CERCLA in its oversight activities as a condition precedent to bringing a CERCLA cost recovery action.  Trinity Indus., 2013 WL 4418534 at *4-5 (citing United States v. Rohm & Haas Co., 2 F.3d 1265 (3d Cir. 1993)). 

-- Tom Boer and Nicole Martin

For more information, please contact Tom Boer at (415) 228-5413, jtb@bcltlaw.com, or Nicole Martin at (415) 228-5435, nmm@bcltlaw.com.