Opinion
F082616
01-31-2023
CITY OF VISALIA, Plaintiff and Appellant, v. MISSION LINEN SUPPLY, INC., Defendant and Respondent.
Herr, Pedersen &Berglund, Leonard C. Herr and Ron Statler for Plaintiff and Appellant. Greben | Monroe, Jan A. Greben and Christine M. Monroe for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Tulare County No. VCU281268. Bret D. Hillman, Judge.
Herr, Pedersen &Berglund, Leonard C. Herr and Ron Statler for Plaintiff and Appellant.
Greben | Monroe, Jan A. Greben and Christine M. Monroe for Defendant and Respondent.
OPINION
MEEHAN, Acting P. J.
INTRODUCTION
This action stems from a federal case litigated in the United States District Court for the Eastern District of California (district court) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. § 9601 et seq.) (CERCLA), which involved the contamination of property at and surrounding a drycleaning business in Visalia, California, from the chemical perchloroethylene (PCE). This federal litigation (CERCLA action) culminated in a bench trial after which the district court issued a statement of decision in February 2019 entitled "FINDINGS OF FACT AND CONCLUSIONS OF LAW" (CERCLA order). (Mission Linen Supply v. City of Visalia (E.D.Cal. Feb. 5, 2019) .) Among other things, the district court concluded that City of Visalia (City) was liable to Mission Linen Supply, Inc. (Mission) for 50 percent of necessary remediation costs Mission incurred for PCE cleanup under a California Department of Toxic Substances Control (DTSC) consent decree. The district court's CERCLA order was affirmed by the Ninth Circuit Court of Appeals on June 3, 2020. (Mission Linen Supply v. City of Visalia (2020 9th Cir.) 817 Fed.Appx. 336 .)
Mission thereafter entered into at least one preliminary PCE cleanup-related contract, incurred expenses, and sought reimbursement for those expenses from City under the CERCLA order. City objected to Mission's demand for reimbursement of City's 50 percent share on the ground Mission had contracted for some of those expenses without using the public bidding procedures required under the Public Contract Code (Code). City filed a declaratory relief action in state court seeking a declaration regarding whether the public bidding procedures under the Code applied to Mission's contracts for PCE cleanup since City was liable for half of those costs under the CERCLA order. Mission sought enforcement of the CERCLA order with the district court, and removed the state declaratory relief action to federal court, asserting it was a collateral attack on the CERCLA order.
All further statutory references are to the Public Contract Code, unless otherwise indicated.
During the pendency of Mission's motion to enforce the judgment in the CERCLA action, the district court remanded the declaratory relief action on doubts it had subject matter jurisdiction and administratively dismissed without prejudice Mission's motion to dismiss that complaint. The district court also sought supplemental briefing from the parties in the CERCLA action as to whether the Code applied to Mission's PCE cleanup contracts given that City would ultimately be liable for 50 percent of Mission's necessary remediation costs. The district court decided the question in Mission's favor by order issued in October 2020, concluding the statutory provisions under the Code did not apply to Mission's private PCE cleanup contracts that City had not awarded, entered into or created. (Mission Linen Supply v. City of Visalia (E.D.Cal. Oct. 2, 2020) .) The district court also explained Mission did not stand in City's shoes with respect to PCE cleanup contracts since, under the CERCLA order, City was merely liable for Mission's costs after they had been incurred and paid by Mission-City itself would not be entering into PCE cleanup contracts nor would it be paying a contractor for any work. City did not appeal the district court's order.
After the district court's October 2020 order, Mission sought judgment on the pleadings in the state declaratory action on res judicata grounds. The trial court concluded the issues raised in City's declaratory relief action were fully litigated by the parties in the CERCLA action and were conclusively decided by the district court in the October 2020 order. The trial court determined City was barred on res judicata grounds from relitigating the matter in City's declaratory relief action, and no amendment was permitted. City appeals that order.
For the reasons discussed below, we affirm the judgment. The district court order is a conclusive determination that neither the relevant statutory provisions of the Code nor Visalia's City Charter apply to private contracts Mission enters to remediate the PCE cleanup under its consent decree with DTSC. There is no reasonable possibility City can amend the declaratory relief action and repackage the issue to avoid the doctrine of issue preclusion.
FACTUAL SUMMARY
I. The Federal CERCLA Action
Mission owns property that was contaminated by PCE through drycleaning activities and is now obligated under a consent order by DTSC to remediate the PCE plume at and surrounding Mission's property. Although PCE had not been used on the subject property since 1986, PCE had spread beyond the property's borders in a plume that coincides with City's sewer systems. As found by the district court at trial, the sewers have a number of defects that permitted the PCE to escape into the environment. Mission, its predecessor Star Laundry (who was not a party to the federal lawsuit and is insolvent), and City were all potentially liable parties under CERCLA for the PCE plume.
Upon trial, after dividing Star Laundry's orphan share of future response costs, the district court found that Mission and City were each 50 percent liable for future necessary response costs. As Mission is obligated by the DTSC to clean up the property and was the plaintiff in the action, the district court concluded that "[f]or all necessary future response costs incurred by Mission regarding the PCE plume, Mission is responsible for 50% of those future costs and the City is responsible for 50% of those future costs." (Mission Linen Supply v. City of Visalia (E.D.Cal. Feb. 5, 2019) [2019 U.S.Dist. Lexis 18567, *55].) The district court also determined City was responsible for 100 percent of any necessary repair costs to the subject sewers. The Ninth Circuit Court of Appeals affirmed in June 2020. (Mission Linen Supply v. City of Visalia (2020 9th Cir.) 817 Fed.Appx. 336 .)
II. Declaratory Judgment Action, Tulare County Superior Court
In November 2019, City filed a complaint for declaratory relief in Tulare County Superior Court alleging that Mission intended to award a bid for initial phases of the PCE cleanup to one of three contractors without placing that project out to public bid as required under the Code. City further maintained Mission "intends to award all future work on the cleanup in a similar manner, inviting favored contractors to bid on a project that involves public works and public funds to the exclusion of the public," and that Mission believes this is lawful under the Code and the Visalia City Charter. City alleged the PCE cleanup is a public works project to be paid in part by City, which renders it subject to the competitive bidding procedures of the Code and the City Charter, and sought a declaration to that effect.
On December 30, 2019, Mission removed the declaratory relief action to the federal district court (City of Visalia v. Mission Linen Supply, Inc. (U.S. Dist. Ct., E.D.Cal., Dec. 30, 2019) No. 1:19-cv-1809-AWI-EPG) on the basis of federal question jurisdiction, primarily on the theory the state declaratory relief action was a collateral attack on the CERCLA order. Mission also filed a motion to dismiss the action, and City filed a motion to remand.
On May 20, 2020, the district court granted City's motion to remand. The court reasoned the declaratory relief action contained no CERCLA cause of action, and it was insufficient to constitute a collateral attack on the CERCLA order. The district court remanded the case for lack of subject matter jurisdiction and administratively denied Mission's motion to dismiss without prejudice to refiling it in state court.
III. Motion to Enforce the CERCLA Order in the CERCLA Action
Meanwhile, in the original CERCLA federal action, Mission filed a motion to enforce the CERCLA order, asserting City was trying to avoid paying its allocated shared of the cleanup expenses. Mission sought an order requiring City to pay its share of expenses Mission had incurred related to monitoring and remedial planning efforts to clean up the PCE plume; Mission claimed City was refusing to do so on the ground that all the costs were invalid because they were incurred in a manner that did not conform to necessary bidding procedures for public works projects under the Code. Mission also requested an order requiring City to complete the sewer repair work before completion of the pilot study or explain why that work could not be completed on time. Finally, Mission asserted City should be ordered to pay its share of any further remediation costs.
City argued it was not refusing to pay its share for necessary work, but was instead seeking a declaration in the state declaratory relief action regarding whether the funds used for this apparent public works project (the PCE cleanup) should be subject to the public bidding procedures of the Code and City Charter. As for the sewer repairs, City maintained the bidding process was ongoing and a contract would likely be awarded in 2020.
By order dated May 12, 2020 (and before the declaratory relief action was remanded), the district court sought supplemental briefing from the parties on whether the remediation costs incurred by Mission were invalid under the Code and/or the City Charter. As for remediation costs not yet incurred by Mission, the district court explained it could not hold the CERCLA order was affected by City's refusal to acknowledge a proposed cost or its objection to any response cost that had yet to be incurred. The district court explained the CERCLA order recognized that the DTSC and Mission entered into a consent order, "meaning that DTSC looks to Mission to clean up the property." As the DTSC obligated Mission to clean up the property, the district court had declared City was liable for 50 percent of further necessary response costs incurred by Mission. Once Mission incurred such a cost, it could request that City voluntarily pay its share. If City refused, then Mission could attempt to recover City's 50 percent share through further court action. Therefore, until City refused to pay an incurred necessary further response cost, the district court would not issue an order for City to pay future costs not yet incurred. As for the sewer repairs, the district court sought an update in the supplemental briefing.
On October 2, 2020, after additional briefing was submitted, the district court ruled on Mission's motion to enforce the judgment. As an initial matter, the district court expressly declined to avoid discussion of the Code in deference to the pending state declaratory judgment action. The parties "clearly disagree about the applicability of the ... Code to not only the contracts for the feasibility study" (an incurred cost), "but also to any other contract that Mission may make in furtherance of remediating the PCE plume."
The district court explained "[t]he positions of the parties implicate practically every other necessary response cost that Mission may incur. If the Court were to not address the issue now, the issue would not necessarily be finally decided for years. Even if the [state declaratory judgment action] is decided by the Superior Court tomorrow, there are still appeals that may be taken. While the California Courts proceed to resolve the issue, Mission would be unable to recover for most if not all further necessary response costs. The [CERCLA] Order could have little force for years. This would likely stall and hinder a timely cleanup of the PCE plume.. The fact of the matter is that there is a necessary response cost at issue, Mission is attempting to enforce the [CERCLA] Order with respect to that cost, and the parties have briefed their positions regarding the . Code. The matter is ripe for decision in this Court. In order to further a central goal of CERCLA, and to avoid rendering the [CERCLA] Order largely a nullity for an unknown period of time, the Court will resolve Mission's motion."
The district court recognized City was "attempting to determine whether the . Code would apply to the feasibility study and other contracts made by Mission as part of the cleanup/remediation process ordered by the DTSC and implicating the [CERCLA] Order .. The parties admit there is no law that discusses application of the . Code in a CERCLA matter like this one, nor are there analogous cases in the CERCLA context. Therefore, this motion represents uncharted territory for CERCLA cases."
To decide the question, the district court interpreted and analyzed the applicable provisions of the Code, concluded the statutory language only extended to contracts a public entity awarded, entered into or created, and applied that legal interpretation to conclude Mission's feasibility contract was not subject to the Code; City was ordered to pay its share of the disputed incurred costs-which, at that point, was limited to the costs of a feasibility study. This order was not appealed.
IV. Postremand Proceedings in the Declaratory Judgment Action
Meanwhile, upon remand of the state declaratory relief action to Tulare County Superior Court in May 2020, Mission filed a demurrer in July 2020-before the district court issued its final October 2020 order on Mission's motion to enforce the judgment in the CERCLA action.
In its demurrer, Mission argued it was not subject to the Code as a matter of law because it was not a public entity within the meaning of those statutes, and, as such, City had not and could not allege Mission had entered into a contract within the meaning of the Code. The trial court overruled Mission's demurrer on August 25, 2020, reasoning that whether the Code applies to Mission's cleanup obligations under the CERCLA order was not a settled issue (as no court had yet decided the question) and, thus, City's declaratory relief claim did not, as a matter of law, fail to state a claim.
Once the district court issued its October 2020 order in the CERCLA action regarding Mission's motion to enforce the CERCLA judgment, however, Mission filed a motion for judgment on the pleadings in the state declaratory relief action on res judicata grounds. Mission argued the district court's October 2020 order had finally decided the issue of whether the Code could apply to Mission's private agreements to remediate the PCE plume. According to Mission, City's declaratory relief action sought duplicative relief, and if City were allowed to maintain its declaratory relief claim despite the district court's October 2020 order, it would constitute a collateral attack on that court's order. City opposed Mission's motion and argued the district court's order did not apply to costs not yet incurred-it involved only the feasibility contract costs. In the alternative, City sought leave to amend the complaint.
After a hearing, the trial court concluded City was precluded from relitigating whether the Code applied to Mission's PCE cleanup contacts, granted Mission's motion for judgment on the pleadings, and the complaint was dismissed without leave to amend. The trial court explained the district court had fully considered all of the assertions raised by City in its declaratory relief action because its analysis extended to any contract costs Mission incurred for necessary PCE cleanup.
As for amendment, the trial court noted it would normally be inclined to allow amendment but when City had argued for leave to amend at the hearing, it had represented the situation was "'fluid,'" there were other parties that might need to be added, and City felt it could be ordered to take certain actions by the DTSC that would then be subject to the Code. The court explained there was "literally no evidence before the court that the scenario argued by [City] is likely to happen and counsel has had an adequate opportunity to present this evidence. Second, that would be a different suit, with different parties, which may exist at a later date but doesn't appear to exist now.... The district court's order was very clear it was . its intent to resolve the issue now as leaving it to the state courts could take 'years,' and this was contrary to 'CERCLA's central purpose to facilitate expeditious and efficient cleanup of hazardous waste sites.' [Citation.] Further amendment and litigation here would be pointless in light of such unambiguous guidance from the federal court."
Judgment was thereafter entered in favor of Mission, and City timely appeals.
DISCUSSION
I. Judgment on the Pleadings Properly Granted Based on Issue Preclusion
City claims the trial court erroneously gave preclusive effect to the district court's order on an issue that is not identical to that involved in the declaratory relief action-i.e., whether the Code applied to Mission's future PCE cleanup contracts. According to City, the district court expressly refused to decide the issue of Mission's future costs not yet incurred and that issue was, therefore, neither briefed nor decided. Since the declaratory relief action extends to the applicability of the Code to Mission's future contracts for PCE cleanup, and that issue was neither briefed by the parties nor decided by the district court in the CERCLA action, the district court's October 2020 order cannot have issue-preclusive effect on City's declaratory relief action, and the motion for judgment on the pleadings was improperly granted.
Mission contends the issue before the district court was whether Mission is required to publicly bid its PCE cleanup contracts under the Code before it can seek recovery from City under the terms of the CERCLA order. According to Mission, the parties fully litigated this issue, the district court held that Mission is not subject to the Code because it is not a public entity, and the trial court correctly concluded there was nothing left to decide for purposes of the declaratory relief complaint and properly granted Mission's motion.
A. Standard of Review
A judgment on the pleadings in favor of the defendant is appropriate when the complaint fails to allege facts sufficient to state a cause of action. (Code Civ. Proc., § 438, subd. (c)(3)(B)(ii); see Barker v. Hull (1987) 191 Cal.App.3d 221, 226-228 [affirming trial court's application of collateral estoppel to grant motion for judgment on the pleadings].) A motion for judgment on the pleadings is analogous to a general demurrer, and it is reviewed under the same de novo standard. (People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777.) All properly pleaded, material facts are deemed true, but not contentions, deductions, or conclusions of fact or law. (Kapsimallis v. Allstate Ins. Co. (2002) 104 Cal.App.4th 667, 672.) Courts may consider judicially noticeable matters in the motion as well. (Ibid.)
Likewise, a trial court's application of claim and issue preclusion are reviewed de novo. (Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1507; accord, Kaur v. Foster Poultry Farms LLC (2022) 83 Cal.App.5th 320, 337.)
B. City is Precluded From Relitigating Whether the Code Applies to Mission's PCE Cleanup Contracts to Obtain Recovery From City Under the CERCLA Order
"Res judicata-law Latin for 'a thing adjudicated'-is an umbrella term encompassing issue preclusion and claim preclusion, both of which describe the preclusive effect of a final judgment [or order]." (Guerrero v. Department of Corrections &Rehabilitation (2018) 28 Cal.App.5th 1091, 1098.) Claim and issue preclusion prevent "parties from contesting matters that they have had a full and fair opportunity to litigate," and serve to protect against "the expense and vexation attending multiple lawsuits, conserve[] judicial resources, and foster[] reliance on judicial action by minimizing the possibility of inconsistent decisions." (Montana v. United States (1979) 440 U.S. 147, 153-154, fn. omitted.) Issue preclusion "bars 'successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment,' even if the issue recurs in the context of a different claim." (Taylor v. Sturgell (2008) 553 U.S. 880, 892, quoting New Hampshire v. Maine (2001) 532 U.S. 742, 748749.)
The prior adjudication Mission asserts has issue-preclusive effect here arose in a CERCLA action over which the federal district court exercised federal-question jurisdiction. The issue-preclusive effect of a federal court judgment "is determined by federal common law." (Taylor v. Sturgell, supra, 553 U.S. at p. 891, citing Semtek Intl Inc. v. Lockheed Martin Corp. (2001) 531 U.S. 497, 507-508.) "For judgments in federal-question cases ... federal courts participate in developing 'uniform federal rule[s]' of res judicata, which [the United States Supreme] Court has ultimate authority to determine and declare." (Taylor v. Sturgell, supra, at p. 891.)
Under federal common law, four conditions must be met for issue preclusion to apply: "'(1) the issue at stake was identical in both proceedings; (2) the issue was actually litigated and decided in the prior proceedings; (3) there was a full and fair opportunity to litigate the issue; and (4) the issue was necessary to decide the merits.'" (Janjua v. Neufeld (9th Cir. 2019) 933 F.3d 1061, 1065, quoting Oyeniran v. Holder (9th Cir. 2012) 672 F.3d 800, 806, as amended May 3, 2012; accord, Vargas-Colon v. Fundacion Damas, Inc. (1st Cir. 2017) 864 F.3d 14, 26; Cayuga Nation v. Tanner (2d Cir. 2021) 6 F.4th 361, 374.)
1. Elements of Issue Preclusion Are Met
City's argument is not expressly constructed around the issue-preclusion elements, but more generally asserts that whether the Code applies to Mission's future cleanup contracts was neither briefed by the parties nor decided by the federal court in its October 2020 order; City's argument can be understood to implicate, directly or indirectly, each element necessary for issue preclusion. Considering City's argument in the context of each of the issue-preclusion requirements, we agree with the trial court that this doctrine applies and the motion was properly granted.
In its state declaratory relief claim, City alleges that Mission's PCE cleanup activities constitute a public works project that will be paid in part by City and is subject to the competitive bidding procedures of the Code; that Mission denies it must follow these statutory provisions in awarding contracts for the cleanup; and City seeks a declaration of the rights and duties of the parties as to whether the cleanup work to be paid in part by City is subject to the competitive bidding procedures of the Code.
This very issue was presented to the district court when City opposed Mission's demand for half the costs of a feasibility study incurred as part of the PCE cleanup costs. Among other things, in May 2020, the district court "ordered th[e] parties to file supplemental briefing regarding the possible application of the California Public Contract[] Code and the City Charter to the February Order/CERCLA and the other costs sought by Mission." In that same order, the district court declined Mission's request for an order that City pay its share of future necessary response costs because those costs had not yet been incurred and were not ripe for an enforcement order in light of City's liability to Mission for actually incurred necessary response costs under the CERCLA order and the applicable procedural methods available to enforce that CERCLA judgment.
After inviting supplemental briefing, City argued Mission was attempting to put a public entity on the hook for potentially millions of dollars, and its concern was whether the Code applied to the contract for the feasibility study and the other expenses that fall under the CERCLA order. City explained that contracts that fail to follow the requirements of the Code are void and public funds expended pursuant to such contracts are subject to recovery suits by taxpayers against contractors. City framed the question to the district court as whether Mission has authority to commit City to what might be an unlawful expenditure under the Code if public bidding procedures are not utilized for those expenses. City argued the cleanup area around Mission is a "'public works contract'" under section 1101 because it involves the repair of a public improvement, and City's expenditure for such cleanup is government money. City argued Mission was ignoring the kind of cleanup work to be done, ignoring the stated objectives of the Code, and ignoring that it had essentially become an actor who stands in City's shoes when selecting contractors to be paid with public money for public works contracts.
Based on the parties' arguments, the district court concluded their disagreement about the applicability of the Code extended not just to the contract for the feasibility study, "but also to any other contract that Mission may make in furtherance of remediating the PCE plume." Despite the pendency of the declaratory relief action, which presented the same allegations by City, the district court found it was not appropriate to avoid discussing application of the Code in favor of allowing the issue to be litigated in the declaratory relief action. The district court explained that because the positions of the parties "implicate practically every other necessary response cost that Mission may incur," the district court could not wait for the issue to be decided in the declaratory relief action. The district court reasoned that "[e]ven if the [declaratory relief action] is decided by the Superior Court tomorrow, there are still appeals that may be taken. While the California Courts proceed to resolve the issue, Mission would be unable to recover for most if not all further necessary response costs. The [CERCLA] order could have little force for years. This would likely stall and hinder a timely cleanup of the PCE plume," and a central goal of CERCLA-to facilitate expeditious and efficient cleanup of hazardous waste sites-would be undermined.
The district court then went on to analyze and interpret the relevant sections of the Code, considering both the parties' arguments and the allegations in the declaratory relief complaint. Based on the complaint, the district court explained it understood City "to contend that [section] 20164 of the Public Contract[] Code is a bidding process that would apply to Mission during the cleanup effort," and because this section is part of article IV of the Code, City was contending that article IV of the Code applied to contracts made by Mission as part of the cleanup effort. The district court interpreted the statutory language and rejected this argument, noting that the plain language of section 20160, which dictated the application of article IV provisions, applied only to contracts awarded by cities. Thus, by the plain language of section 20160, none of the provisions in article IV of the Code could have any application to Mission's contracts- specifically, the feasibility contract.
The district court also determined that even though some of Mission's PCE cleanup expenses-i.e., the feasibility contract-might come within the broad definition of a "'public works contract'" contained in section 1101, that statute had to be read in conjunction with section 1100.7, which states in relevant part that "'[t]his code is the basis of contracts between most public entities in this state and their contractors and subcontractors.'" The district court interpreted the language of section 1101 through the lens of section 1100.7 and concluded that the "'public works contract'" definition could not be read as referring to any agreement, but rather as "'any agreement' between 'most public entities in this state and their contractors and subcontractors.'" (Fn. omitted.) The district court concluded the feasibility study could not qualify as a public works contract under the Code because it was not an agreement between a public entity and a contractor.
The district court rejected City's assertion that Mission stands in the shoes of City when "Mission makes contracts in furtherance of remediating the PCE plume." The court explained the nature of City's liability under the CERCLA order made it responsible for costs Mission had already incurred as a result of its consent decree with the DTSC. The funds expended by Mission for that cleanup were its own private funds, not City funds. City would not be paying Mission to clean up the PCE plume or paying any contractor at all-it would be paying its liability to Mission under the CERCLA order for costs already incurred. The district court concluded Mission did not stand in City's shoes when it awarded the feasibility study-City and Mission remained separate entities.
Finally, the district court rejected City's contention the public policy objectives underpinning the bidding procedures in the Code would be thwarted if Mission were allowed to incur contract expenses for the PCE cleanup without publicly bidding those contracts before awarding them. The district court explained that since City was not a cosignee (de facto or otherwise) of any agreements made by Mission in furtherance of the cleanup effort/DTSC consent order, the Code did not apply and its goals and objectives were not implicated. Moreover, the district court observed, holding the Code inapplicable to Mission's cleanup contracts would not "somehow provide a safe harbor for unscrupulous public officials and entities to avoid the requirements of the _ Code." The court explained it could not "envision a scenario in which a public entity either loses a lawsuit or suffers a determination of liability through a court proceeding (particularly a CERCLA case), all in furtherance of a plot to favor a crony contractor and bypass the ... Code."
Turning to the issue-preclusive effect of the district court's decision on City's declaratory relief action, City argues that since the district court specifically limited the scope of its enforcement order to the feasibility study, the issue presented, briefed and decided relates only to that particular contract, not to Mission's future contracts for cleanup expenses that are at issue in the declaratory relief action.
We are unpersuaded. All of the prerequisites for the application of issue preclusion under federal law are present here. (See Paramount Aviation Corp. v. Agusta (3d Cir. 1999) 178 F.3d 132, 145, fn. omitted [court to "follow the federal rule that the law of the issuing court-here, federal law-determines the preclusive effects of a prior judgment"]; Nathanson v. Hecker (2002) 99 Cal.App.4th 1158, 1163 [California gives full faith and fair credit to a final order or judgment of a federal court by following preclusive effect of a prior judgment as determined by federal law].) The pivotal legal issue presented to the district court is identical to that underlying the declaratory relief action: whether the public bidding procedures articulated in the Code apply to Mission's PCE cleanup contracts. To test the identical nature of the issues, some federal courts examine the Restatement factors, which include whether (1) there is a substantial overlap between the evidence or argument to be advanced in the second proceeding than that advanced in the first; (2) the new evidence or argument involve the application of the same rule of law as that involved in the prior proceeding; (3) pretrial preparation and discovery related to the matter presented in the first action could reasonably be expected to have embraced the matter sought to be presented in the second; and (4) the claims involved in the two proceedings are closely related. (Howard v. City of Coos Bay (9th Cir. 2017) 871 F.3d 1032, 1041, citing Rest.2d. Judgments, § 27.)
The allegations in the declaratory relief complaint present the same underlying factual issues of legal significance and will trigger the same legal arguments regarding the Code as the district court previously examined. Further, the declaratory relief action will involve application of the same rule of law as determined by the district court- interpretation of the relevant portions of the Code. Nothing in the district court's analysis of the relevant Code sections or the nature of City's liability under the CERCLA order turned on the specific or substantive nature of the feasibility study itself. The only factual issue about the feasibility contract that was legally significant to the district court's interpretation and analysis of the Code was that Mission, and not City, had entered into the contract. That fact is identical to that pleaded in the declaratory relief action: the future PCE cleanup contracts at issue are alleged to be awarded and entered into by Mission. Any factual differences between Mission's future contracts and the feasibility study are not legally significant as to whether the Code applies or the nature of City's liability under the CERCLA order, and do not present a different or distinct issue from that decided by the district court.
An opinion issued by the Sixth Circuit Court of Appeals in United States v. Stauffer Chemical Co. (6th Cir. 1982) 684 F.2d 1174 (Stauffer II) provides a helpful illustration. In Stauffer II, the Sixth Circuit gave preclusive effect to an earlier Wyoming district court order interpreting a section of the Clean Air Act (42 U.S.C. § 7401 et seq.) (Clean Air Act) that was subsequently affirmed by the Tenth Circuit Court of Appeals in Stauffer Chemical Co. v. Environmental Protection Agency (10th Cir. 1981) 647 F.2d 1075 (Stauffer I).
Stauffer I and Stauffer II involved the Environmental Protection Agency (EPA) inspections of a chemical manufacturer's (Stauffer Chemical Company) plants in Wyoming and Tennessee. In general terms, the Clean Air Act required the EPA to conduct oversight inspections of major sources of air pollution in the country. Section 114 of the Clean Air Act (42 U.S.C. § 7414(a)(2)) allowed the EPA administrator "or his authorized representative" the right of entry to make these inspections. (Stauffer II, supra, 684 F.2d at p. 1177, fn. 1.) In both cases, the EPA attempted to conduct inspections with a team that included privately employed independent contractors who Stauffer refused to admit to its plants without first signing nondisclosure and hold harmless agreements. Also in both cases, after unsuccessful negotiations, the EPA obtained an administrative search warrant to conduct its inspections, Stauffer refused to comply with the warrant, and the parties sought court intervention in the federal district courts where the plants were located.
The Wyoming district court was the first to decide the dispute in June 1980, and concluded the phrase "authorized representative" in section 114 of the Clean Air Act (42 U.S.C. § 7414(a)(2)) did not include private contractors, particularly competitors with a conflict of interest or an axe to grind who may be interested in obtaining Stauffer's trade secrets. (Stauffer II, supra, 684 F.2d at pp. 1179 [detailing the district court's order underlying Stauffer I].) The Tenth Circuit Court of Appeals reviewed the district court's statutory interpretation de novo and affirmed in May 1981. (Stauffer I, supra, 647 F.2d at pp. 1079-1080.)
The federal district court in Tennessee issued a decision in April 1981, nearly a year after the Wyoming district court's order, holding that the term "'authorized representative'" in section 114(a)(2) of the Clean Air Act (42 U.S.C. § 7414(a)(2)) did include private contractors. (Stauffer II, supra, 684 F.2d at p. 1179.) The district court refused to quash the warrant obtained by the EPA, and Stauffer appealed. (Ibid.) In July 1982, a panel of the Sixth Circuit Court of Appeals concluded Stauffer II was governed by the doctrine of collateral estoppel (i.e., issue preclusion) because the same parties had litigated the identical issue resulting in a decision in favor of Stauffer in federal district court in Wyoming, which was affirmed. (Id. at pp. 1179-1181.) The Sixth Circuit observed the only difference between the two cases was they arose at Stauffer's plants in different locations, and concluded there was no valid reason why the issues should be relitigated a second time. (Id. at pp. 1179-1180.) The appellate court held the EPA was barred from relitigating the issues with Stauffer, and the district court's order was reversed and remanded with instructions to enter a judgment in favor of Stauffer. (Id. at p. 1181.) The United States Supreme Court affirmed. (United States v. Stauffer Chemical Co. (1984) 464 U.S. 165, 174.)
Stauffer I and Stauffer II did not involve the same plants, the same privately employed inspection personnel, or the same search warrants, but the legal issue under the Clean Air Act and the legally significant fact that the EPA sought to conduct its inspections with private-company personnel whom Stauffer refused to admit in both cases were identical. City's argument here, that the issue before the district court was not identical to the declaratory relief action because it did not consider Mission's future cleanup contract expenses, is akin to contending Stauffer I's interpretation of the Clean Air Act could have no preclusive effect in Stauffer II because it involved different warrants at different plants with different private-company inspection personnel. Like the factual differences between Stauffer I and Stauffer II, the factual distinctions between the feasibility study contract and any of Mission's future cleanup contracts have no legal significance to the district court's interpretation of the relevant provisions of the Code. The legal issue presented to the district court is identical to the issue presented in (and dispositive of) the declaratory relief action: whether the Code applies to Mission's PCE cleanup costs for which City will be liable for its share.
We are similarly unpersuaded by City's contention that, because the district court declined to issue an order that City pay all of Mission's future costs, the applicability of the Code as to those future contracts was not fully briefed or actually decided by the district court. (See Janjua v. Neufeld, supra, 933 F.3d at p. 1066 ["an issue is actually litigated when an issue is raised, contested, and submitted for determination"].) Again, drawing on Stauffer I and Stauffer II as an illustration, this argument is similar to an assertion that the legal issue decided in Stauffer II was not actually litigated in Stauffer I because neither the parties nor the court in Stauffer I framed or applied their analyses to other inspections the EPA might conduct with private-company personnel at a different Stauffer location in the future. Those facts were not at issue and simply had no legal significance to the statutory interpretation issue presented. Similarly, here, while the feasibility study was the only cost at issue before the district court, the legal issue presented involved the statutory interpretation of the Code, which extends and applies to any of Mission's cleanup contracts. That issue was disputed by the parties and decided by the district court.
Moreover, the district court's order makes clear the parties' briefing and disagreement extended not just to the applicability of the Code to the contract for the feasibility study, "but also to any other contract that Mission may make in furtherance of remediating the PCE plume." The court noted it understood City "is attempting to determine whether the ... Code would apply to the feasibility study contract and other contracts made by Mission as part of the cleanup/remediation process ordered by the DTSC and implicating the [CERCLA] order." City makes no assertion it was unable to present an argument about future costs that would have somehow affected the district court's statutory interpretation or analysis of the issue.
Finally, the district court's interpretation of the Code, which included whether Mission stood in City's shoes under the Code for purposes of cleanup contracts, was necessary to its decision as this was the centerpiece of City's objection to paying the feasibility contract costs. (Howard v. City of Coos Bay, supra, 871 F.3d at p. 1041 [issue preclusion requires issue was necessary to decide the merits].)
The matter at issue in the declaratory judgment action is identical: whether Mission's PCE cleanup contracts (that City did not award, enter into or create) are subject to the bidding procedures of the Code. This issue was briefed by the parties in the CERCLA action, City had a full and fair opportunity to litigate the issue-particularly as the district court had before it the declaratory relief allegations and considered those along with City's arguments in its briefs; and the applicability of public bidding procedures under the Code to Mission's PCE's cleanup contracts was necessarily (and expressly) decided by the district court.
2. No Merit to City's Other Bases to Avoid Issue Preclusion
City argues the district court's concern about waiting for the declaratory relief action to be resolved was not a correct basis for the superior court to grant the motion for judgment on the pleadings. It appears City refers to the trial court's statement in its written ruling that it was clear the district court intended its October 2020 order to apply to all cleanup costs incurred by Mission because the district court noted that if it left the parties' disagreement about the Code to be decided by the superior court in the declaratory relief action, it might be years before appeals were resolved and would hinder the cleanup efforts. City argues the Code should not be "obviated by the possibility that a litigant might appeal the decision on the statute's application ...."
In support of this argument, City makes an unopposed request that we take judicial notice of Mission's notice of its motion filed with the district court to enforce the CERCLA order and the district court's Case Management/Electronic Case Files docket in the CERCLA case. The request for judicial notice of these documents is granted. (People v. Hardy (1992) 2 Cal.4th 86, 134-135 [granting undisputed motion for judicial notice of documents in federal lawsuit under Evid. Code, §§ 452, 459].)
The district court was well aware of City's declaratory relief action and that the same issue with respect to whether public bidding procedures applied to Mission's cleanup contracts was pending in that case. Indeed, the district court noted in its October 2020 order that City had argued in its supplemental briefing there was "no need for the Court to address the issue further because the issue is currently pending in the [declaratory relief action]." In response to this argument, the district court explained that because City's objection based on application of public bidding procedures under the Code extended to all contracts Mission would undertake in furtherance of remediating the PCE plume, waiting for the state court to determine the issue first would hamper and delay Mission's cleanup work and effectively undermine a key goal of CERCLA: to facilitate expeditious and efficient cleanup of hazardous waste sites. For these reasons, the district court concluded it was inappropriate to defer a decision on this issue for resolution in the state court action.
We understand the trial court's notation about the district court's reasoning in this regard was meant to underscore the identical nature of the issue before the district court as compared to what was at issue in the declaratory relief action and why the district court elected not to wait on the state court's resolution of that issue. The identical nature of the issue in the two actions was of central importance to whether City's declaratory relief action is barred under the doctrine of issue preclusion, and the trial court appropriately considered it. City's argument that allowing the state court to decide the issue would not actually delay Mission's cleanup work is irrelevant. The district court decided the issue first, and its decision precludes City from relitigating this issue in its declaratory relief action.
City also asserts there appeared to be some concern stated in the trial court's order that City would not pay the feasibility costs if the state court took up the issue in the declaratory relief action, but City was very clear in its trial court briefs it would pay those feasibility costs. Although City does not refer to any specific portion of the trial court's order, we note the trial court admonished City to "accept financial responsibility for its portion of toxic liability as determined by the district court" and to "stop pursuing litigation to limit the application of that judgment, such as the case at issue here."
Again, we find the trial court's emphasis in this regard was intended to stress how the district court had already resolved the identical issue and that there was no reason to relitigate it again in the declaratory relief action, especially since the point of the district court taking up the issue first was to resolve it expeditiously.
As for City's assertion that public policy militates in favor of a state court determination of the application of the Code to Mission's PCE cleanup contracts, the district court addressed City's public policy concerns regarding application of the Code.The district court explained that since the Code is not applicable to Mission's PCE cleanup contracts, the Code's "goals and objectives are not implicated." (Fn. omitted.) Moreover, the district court noted, the fact that the Code was not applicable, especially in a CERCLA case such as this, did not present a realistic concern that it would "somehow provide a safe harbor for unscrupulous public officials and entities to avoid the requirements of the ... Code."
Mission filed a motion to strike portions of City's reply brief that discuss the public policy underlying the competitive bidding procedures of the Code and why amendment should be granted on the issue of public policy, asserting this argument is raised for the first time in the reply brief. City filed a brief in opposition, arguing it had noted the public policy issue in its opening brief, and Mission had raised the issue of public policy in its responsive brief. "Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument." (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.) To the extent the reply brief contains points not raised in the opening brief, we will disregard them. We therefore deny the motion to strike the reply brief as unnecessary. (See Granite Construction Co. v. American Motorists Ins. Co. (1994) 29 Cal.App.4th 658, 667-668, fn. 8.)
To the extent City argues public policy militates against application of the doctrine of issue preclusion, the argument is undeveloped and unsupported. And, in any event, such an argument has been largely foreclosed by the United States Supreme Court. (Federated Department Stores, Inc. v. Moitie (1981) 452 U.S. 394, 401 (Moitie) [explaining "[t]here is simply 'no principle of law or equity which sanctions the rejection by a federal court of the salutary principles of res judicata"; public policy as basis to refuse application of doctrine of res judicata by Court of Appeals was misplaced, particularly given the strong public policy in favor of application of the doctrine of res judicata].)
3. Nothing Left For the Superior Court to Decide in Declaratory Relief Action
The declaratory relief action presents no new legally significant facts that would alter the district court's analysis of whether the Code applies to Mission's future contracts. City's complaint alleges that Mission intends to enter into contracts to complete the PCE cleanup and seeks a declaration whether the bidding procedures described in the Code apply to such contracts. The district court's interpretation of the Code clearly determined contracts Mission awarded and entered into for PCE cleanup purposes, to which City was not a party, do not implicate the Code or its provisions. The doctrine of issue preclusion bars relitigation of this issue.
City's declaratory relief complaint also references the City Charter, although City makes no argument about the City Charter in its appellate briefs. While any argument about the City Charter was forfeited, it is also without merit. (See Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 ["When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived."].) The district court noted the parties had not presented any separate argument with respect to the City Charter and concluded the parties intended their arguments regarding the Code to apply to the City Charter. The district court concluded its basic analysis regarding the Code would apply to the City Charter. Since City had not awarded, created, or entered into the feasibility study contract, the City Charter has no application to or effect on it. The district court's analysis and resolution of the issue applies with equal force to all Mission's cleanup contracts that City does not award, enter into, or create; and it is only Mission's cleanup contracts that are at issue in the declaratory relief complaint.
In article VI, section 10, the Visalia City Charter provides as follows: "In the erection, improvement, and repairing of all public buildings and works, in all street and sewer work, the installation of pipes, fire hydrants, wells, pumping plants, conduits, electric transmission lines, sub-stations, power plants; gas mains and generators, improvements and development of parks and playgrounds, and works for protection against overflow, and in furnishing any supplies, or materials for the same, when the expenditures required for the same shall exceed the amount specifically set by the State of California, from time to time covering the requirement of formal bids, the same shall be done by contract, and shall be let to the lowest responsible bidder, after notice by publication in the official newspaper by one or more insertions, the first of which shall be at least seven days before the time for opening bids; provided, that the Council may reject any and all bids presented and may re-advertise in their discretion; and provided further, that after rejecting bids, or if no bids are received, the Council may declare and determine that in its opinion the work in question may be performed better or more economically by day labor, or the materials or supplies purchased at a lower price in the open market and after the adoption of a resolution to this effect by a four-fifths vote, they may proceed to have the said work done or materials or supplies purchased without further observance of the foregoing provisions of this section; provided further, that nothing in this section shall require the care, repair or maintenance of streets or public utilities to let by contract."
As the district court has interpreted the Code and concluded it is not applicable to Mission's PCE cleanup contracts, nor is the City Charter, there is nothing left for the trial court to determine in the declaratory relief action.
II. No Abuse of Discretion in Denying Amendment of Complaint
City argues the trial court erred in refusing to permit amendment, emphasizing this was the first iteration of the complaint and City should have had at least one opportunity to cure any perceived defect. City argues it could excise any allegations that might be considered as referring to costs already incurred (i.e., the feasibility study); City could add an allegation that the only reason Mission is the primary entity on the DTSC order to clean up the property is because the DTSC contacted Mission first; and City could allege it would pay costs within a reasonable time after they were incurred by Mission.
Mission maintains none of these proposed amendments would create an actual controversy. City's proposed allegation about the circumstances in which Mission entered into the consent order with the DTSC is irrelevant-how Mission entered into that consent order does not change the fact it did so. Moreover, an allegation City would pay costs within a reasonable time achieves nothing: City is already obligated to pay Mission under the CERCLA judgment.
When the trial court denies leave to amend after granting a motion for judgment on the pleadings, that determination is reviewed for abuse of discretion. (Travelers Property Casualty Co. of America v. Engel Insulation, Inc. (2018) 29 Cal.App.5th 830, 834.) It is an abuse of discretion to deny leave to amend if there is a reasonable possibility the plaintiff could cure the defect with amendment. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) The plaintiff has the burden of proving that amendment would cure the defect. (Ibid.)
At the hearing on Mission's motion, City's counsel asserted that since the CERCLA order had been issued, City was in discussions with the DTSC about a new consent agreement that may or may not involve Mission and that the DTSC appears to expect more from City than the district court expected. City's counsel asserted the district court's ruling was based on the presumption only Mission would be paying for anything. City's counsel asserted it was "a fluid situation, and [City was] currently in discussions with DTSC."
The trial court rejected this assertion in its written order as an improper basis for amendment: there was "literally no evidence" this scenario was likely to happen, and if it did, "it would be a different suit, with different parties, which might exist at a later date ._" The trial court was correct. If, at some point, the DTSC required some remediation work be performed directly by City, and City awarded or entered into remediation contracts (like City is required to do with its own sewer system), that would have nothing to do with a contract for remediation work entered into by Mission. It is Mission's contracts for PCE remediation work that are the subject of the declaratory relief action, not contracts City might enter into or award.
Moreover, it is entirely speculative to assume Mission would have any objection as to whether the Code (and the public bidding procedures described therein) applies to contracts City enters into for remediation work City is required to perform by the DTSC. Indeed, this possibility was addressed by the district court: "The court notes that there is no dispute that any agreements that the City itself has to make as part of any cleanup effort are subject to the ... Code. [Citation.] Therefore, for the actual agreements made by the City, presumably the relevant provisions of the ... Code will be followed....."
As for City's proposed allegations explaining why Mission rather than City is the primary entity on the DTSC cleanup order, this is irrelevant. Adding allegations to explain how and why Mission entered into the consent decree with the DTSC does not change any real-world circumstances. Mission is the entity ordered by the DTSC to undertake remediation work, and City is liable under the CERCLA order to pay Mission 50 percent of the costs Mission incurs from carrying out that required PCE remediation work. Similarly, excising allegations from the complaint that encompass the feasibility costs at issue before the district court does not affect the preclusion analysis. The legal issues the district court decided and its analysis remains the same regardless which of Mission's contracts is considered.
City's assertion in its reply brief that it could amend to include allegations about why public policy requires application of the Code to Mission's private contracts is also untenable. The district court expressly rejected this public policy argument, and it is part and parcel of the issue already decided: the Code does not apply to Mission's PCE cleanup contracts. City's disagreement with the district court's consideration of the public policy issue provides no basis to relitigate the matter. (Moitie, supra, 452 U.S. at p. 398 [doctrine of res judicata applies even if prior judgment was wrong].) City's remedy for any purported error by the district court was a direct appeal of the district court's order.
Finally, City's proposal to add allegations stating its intent to pay costs within a reasonable time after they are incurred by Mission as well as the DTSC administrative costs is not availing. The district court's concerns about delays to Mission's ability to recover its further necessary response costs was why the district court did not wait for the identical issue to be resolved in the state declaratory relief action. The fact that City stands ready to satisfy, in a timely fashion, its liability under the CERCLA order does not alter the issue-preclusion analysis or affect the viability of the declaratory relief complaint.
The issue of whether the Code applies to Mission's PCE cleanup contracts was fully litigated and actually decided by the district court, and City is barred from relitigating this same issue in the declaratory relief action. None of the allegations City proposes can refashion the declaratory relief claim into one that is not barred by the doctrine of issue preclusion.
DISPOSITION
The trial court's order granting Mission's motion for judgment on the pleadings is affirmed. Mission is entitled to its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1)-(2).)
WE CONCUR: SNAUFFER, J., DeSANTOS, J.