Opinion
No. C-07-03756 RMW.
September 28, 2007
Defendant Olin Corporation ("Olin") moves to dismiss the fifth (public nuisance) and seventh (common law equitable indemnity) claims from plaintiff Santa Clara Valley Water District's ("SCVWD") complaint. In addition, Olin moves to strike various allegations from the complaint.
The court has read the moving and responding papers and considered arguments of counsel presented at a hearing on September 28, 2007. For the reasons set forth below, the court GRANTS Olin's motion to dismiss without prejudice and GRANTS IN PART and DENIES IN PART its motion to strike as follows:
1. Olin's motion to strike paragraph 38 of SCVWD's complaint is GRANTED with leave to amend.
2. Olin's motion to strike paragraph 50 of SCVWD's complaint is GRANTED with leave to amend.
3. Olin's motion to strike paragraph 63 of SCVWD's complaint is DENIED as moot.
4. Olin's motion to strike paragraph 70 of SCVWD's complaint is GRANTED with leave to amend.
5. Olin's motion to strike paragraph 83, subparagraph 4 of SCVWD's complaint is GRANTED with leave to amend.
6. Olin's motion to strike SCVWD's jury demand is DENIED with leave to amend.
7. The court orders, on its own motion, paragraph 31 stricken with leave to amend.
SCVWD is given twenty (20) days to amend its complaint.
I. BACKGROUND
A. Factual Allegations
Plaintiff SCVWD is a groundwater management agency established by the California State Legislature. Compl. ¶¶ 13, 14; see also Cal. Water Code App. § 60-1, et seq. Its jurisdiction includes the Llagas Subbasin, a groundwater basin extending fifteen miles from Morgan Hill to the southern border of Santa Clara County. Compl. ¶ 26. SCVWD monitors this basin, and has discovered a massive, 10-mile plume of perchlorate contamination, affecting hundreds of drinking water wells. Id. ¶¶ 4, 26. Perchlorate is a hazardous chemical that affects the thyroid gland. Id. ¶ 5.
SCVWD alleges that the source of the perchlorate contamination is a signal flare manufacturing facility owned by Olin at 425 Tennant Avenue in Morgan Hill. Id. ¶ 1. Olin allegedly dumped waste containing perchlorate into unlined pits on its site, where the perchlorate migrated into the groundwater. Id. ¶¶ 1, 20. Olin also left poured wastewater into open-air sumps, allowing perchlorate to soak into the soil. Id. ¶ 21. Olin operated the facility from 1956 to 1988, then leased it to another company which ran the plant until 1996. Id. ¶ 18. When Olin tried to sell the property, a potential purchaser tested the site and found perchlorate concentrations of 14,000 ppb in the soil and 2,600 ppb in the groundwater. Id. ¶ 25. Further testing revealed the perchlorate contamination had spread into the Llagas Subbasin. Id. ¶ 26. Despite knowing about the spreading perchlorate, Olin failed to respond, leaving SCVWD to sample wells throughout the basin and supply bottled drinking water to more than 1,500 homes and businesses, at a cost of over $4 million. Id. ¶¶ 27, 29.
II. ANALYSIS
A. Olin's Motion to Dismiss
1. Fifth Claim — Public Nuisance
SCVWD's fifth claim for relief alleges that Olin's perchlorate contamination is a public nuisance, as defined in California Civil Code Sections 3479 and 3480. Compl. ¶¶ 59, 60. Olin moves to dismiss, arguing that SCVWD lacks standing to bring a public nuisance claim for damages. SCVWD opposes the motion, arguing that California Code of Civil Procedure Section 731 authorizes its suit.
Olin further argues that SCVWD lacks standing to pursue a claim for abatement of a public nuisance. The complaint does not request abatement, but the "costs of abatement." See Compl. ¶¶ 61-64. SCVWD explicitly disclaims seeking injunctive relief — "it seeks damages." Opp. at 2, fn. 1.
The California Code of Civil Procedure permits two types of public nuisance actions. See Cal. Code Civ. Proc. § 731. The section's first sentence allows any "person whose property is injuriously affected, or whose personal enjoyment is lessened by a nuisance" to pursue both abatement and damages. The section's second sentence allows certain state actors to pursue injunctive relief on the public's behalf. See Selma Pressure Treating Co. v. Osmose Wood Preserving Co., 221 Cal. App. 3d 1601, 1614 (1990). The term "person" in the first sentence of section 731 includes "governmental units" suing as property owners. Id. at 1616. Fitting its desired remedy, SCVWD invokes only the first half of the statute.
The issue is whether SCVWD owns an affected property interest. SCVWD points to its authorization to manage the groundwater and "act as steward of the streams, creeks, reservoirs, and underground aquifers of Santa Clara County[.]" Compl. ¶ 16. In Selma Pressure Treating, the California Court of Appeal held that the State (not a regional management agency) had a property interest in California's waters. 221 Cal. App. 3d at 1616-1618. The California Court of Appeal has since disavowed this reasoning, holding that "the State's power under the Water Code is the power to control and regulate use; such a power is distinct from the concept of 'ownership' as used in the Civil Code and in common usage." State v. Superior Court of Riverside County, 78 Cal. App. 4th 1019, 1030 (2000). Further, "[t]he State 'owns' the groundwater in a regulatory, supervisory sense, but it does not own it in a possessory, proprietary sense." Id. at 1033.
Nothing in SCVWD's complaint can be construed as alleging that SCVWD has a property interest in the Llagas Subbasin groundwater. Because SCVWD has not alleged that it owns property "injuriously affected" by Olin's conduct, it lacks standing to sue under the first sentence of section 731. Accordingly, Olin's motion to dismiss SCVWD's fifth claim is granted. Moreover, it appears under California law that it may be difficult for SCVWD to assert a property interest in the affected groundwater. Nevertheless, this court should not pass on matters of state law without thorough briefing, and therefore the fifth claim is dismissed without prejudice. SCVWD has twenty (20) days to amend its complaint.
2. Seventh Claim — Equitable Indemnity
SCVWD's seventh claim for relief requests equitable indemnity for costs incurred in responding to the pollution and for costs in defending numerous lawsuits. Compl. ¶ 73. Olin moves to dismiss, arguing that equitable indemnity cannot apply here because SCVWD has not alleged that it was a joint tortfeasor with Olin.
Well-established California law cabins the doctrine of equitable indemnity to the context of jointly and severally liable tortfeasors' duties to each other. See Stop Loss Insurance Brokers, Inc. v. Brown Toland Medical Group, 143 Cal. App. 4th 1036, 1040 (2006); Leko v. Cornerstone Building Inspection Service, 86 Cal. App. 4th 1109, 1115 (2001) ("Joint and several liability is a prerequisite of equitable indemnity."). The doctrine stems from concern for a tortfeasor who must pay damages disproportionate to the harm they caused, and allows one tortfeasor to sue the other for indemnity. Leko, 86 Cal. App. 4th at 1115. Absent joint and several tort liability owed by both Olin and SCVWD to a third party, SCVWD cannot maintain an action for equitable indemnity.
SCVWD's complaint makes scant mention of its own tort liability. The only allegation related to equitable indemnity is that "the District has been required to defend itself in numerous lawsuits in which the District has been named as defendant." Compl. ¶ 73. Notice pleading requires more. See Fed.R.Civ.P. 8(a). SCVWD's complaint lacks any statement of the claim showing that it is entitled to relief. Accordingly, Olin's motion to dismiss SCVWD's seventh claim will be granted
SCVWD's only opposition to this motion is that it should be denied because SCVWD has adequately alleged facts to state a claim under "the 'tort of another' doctrine." SCVWD wrongly conflates equitable indemnity with the "tort of another" doctrine. While both doctrines involve three parties (a tortfeasor, a claimant, and a third party), the two doctrines involve different relationships between the parties and are distinct legal concepts. Equitable indemnity sorts out the relationship between joint and several tortfeasors with respect to the harm they did to a third party and is a claim for recovery. See Leko, 86 Cal. App. 4th at 1115. The "tort of another" doctrine is wholly different as it is not a claim for relief, but merely a theory of tort damages. Sooy v. Peter, 220 Cal. App.3d 1305, 1309-10 (1990). The damages arising from the "tort of another" are the legal expenses incurred by the claimant in litigation with a third party that results from the tortfeasor's harm to the claimant. Id. at 1310; see also Burger v. Kuimelis, 325 F. Supp. 2d 1026, 1041 (N.D. Cal.) (J. Walker) (explaining Prentice v. N. Am. Title Guar. Corp., 59 Cal. 2d 618 (1963)). The Sooy court explained the theory of recovery by comparing the legal fees incurred against the third party to "medical fees [that] would be part of the damages in a personal injury action." Sooy, 220 Cal. App. 3d at 1310. California courts have generally awarded these third-party litigation costs as damages only in cases that "involve a clear violation of a traditional tort duty between the tortfeasor [and the claimant]." Id. Accordingly, SCVWD cannot plead a claim under the "tort of another" doctrine because no such claim exists. To recover on a "tort of another" theory of damages, SCVWD must allege some tort committed by Olin against SCVWD that resulted in SCVWD's third party legal expenses.
Because SCVWD failed to allege any joint and several tortfeasor relationship between itself and Olin, it cannot recover on its equitable indemnity claim. SCVWD's seventh claim is therefore dismissed without prejudice. SCVWD has twenty (20) days to amend its complaint.
B. Olin's Motion to Strike
Rule 12(f) allows the court to strike "any insufficient defense or any redundant, immaterial impertinent or scandalous matter." Fed.R.Civ.P. 12(f). Striking pleadings is "long disfavored," and only appropriate where allowing the improper matter to linger in the pleadings will prejudice the moving party. Sapiro v. Encompass Ins., 221 F.R.D. 513, 518 (N.D. Cal. 2004).
1. Paragraph 38 — "State"
Olin moves to strike paragraph 38 from SCVWD's complaint, which reads in whole, "The District constitutes a 'State' within the meaning of CERCLA Section 107(a)(4)(A), 42 U.S.C. Section 9607(a)(4)(A)." Under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), various parties can recover the costs of remedial actions. See 42 U.S.C. § 9607(a)(4)(A)-(B). Recovery depends on the party complying with the national contingency plan ("NCP"). Id. If a party is "the United States Government or a State or an Indian tribe," its actions are presumed to comply with the NCP and the burden is on the defendant to demonstrate that the government is not entitled to their remediation costs. Washington State Dept. of Transp. v. Washington Natural Gas Co., 59 F.3d 793, 799-800 (9th Cir. 1995) (" WSDOT"). On the other hand, any other party must prove that their actions were consistent with the NCP to entitle them to their costs. Id. Because whether SCVWD is a "State" under CERCLA affects the burden of persuasion going forward, it would prejudice Olin were it to wrongly persist in the pleadings.
The Ninth Circuit interprets the term "State" in CERCLA to mean "the organized government of a state includ[ing] state administrative departments and agencies." Id. at 800. In dictum, the Ninth Circuit suggested that "a municipality, a local government with authority over a limited area, is a different type of government than a state-wide agency that is part of the organized government of the state itself." Id. at 800, fn. 5. The Ninth Circuit has not further clarified whether a "municipality" falls within the definition of "State," but has held that the California Department of Toxic Substances Control falls within the meaning of "State." See Fireman's Fund Ins. Co. v. City of Lodi, 302 F.3d 928, 950 (9th Cir. 2002).
CERCLA's definition of "person" bolsters the Ninth Circuit's dictum in WSDOT. Unlike "States," "any other person" may only recover costs under CERCLA if their actions are consistent with the NCP. 42 U.S.C. § 9607(a)(4)(B). CERCLA defines "person" as "an individual, firm, corporation, association, partnership, consortium, joint venture, commercial entity, United States Government, State, municipality, commission, political subdivision of a State, or any interstate body." 42 U.S.C. § 9601(21). Subsection (a)(4)(A) carves out a different presumption for a subset of "persons" — namely, the United States, "States," and Indian tribes, and therefore excludes the rest of the set of "persons," namely any "municipality" or "political subdivision of a State." This differentiation implies that a municipality cannot fall within the definition of a "State" for the purposes of (a)(4)(A).
The question remains whether SCVWD is more like a "State" or a "municipality." A "municipality" is "[a] city, town, or other local political entity formed by charter from the state and having the autonomous authority to administer the state's local affairs." Black's Law Dictionary (8th ed. 2004). The Ninth Circuit's dictum in WSDOT suggested that a municipality is "a local government with authority over only a limited area." 59 F.3d at 800, fn. 5. Whether an entity falls within the definition of "State," and may avail itself of (a)(4)(A), or "municipality," and be relegated to (a)(4)(B), therefore turns on the extent of its authority. A state-wide agency like the Washington State Department of Transportation or the California Department of Toxic Substances Control falls within the former, while entities lacking state-wide authority fall under the latter. SCVWD's authority stops at the edge of Santa Clara County. Cal. Water Code App. § 60-2. Accordingly, it is not a state-wide agency, but a local political entity that falls outside the definition of "State" in CERCLA, and therefore the court grants Olin's motion to strike paragraph 38 from SCWVD's complaint.
This understanding accords with the Ninth Circuit's interpretation of the term "State" in a different federal statute where it held that, "a local government unit, though established under state law, funded by the state, and ultimately under state control, with jurisdiction over only a limited area, is not a 'State.'" United States ex rel. Norton Sound Health Corp. v. Bering Strait School Dist., 138 F.3d 1281, 1284 (9th Cir. 1998).
SCVWD calls the court's attention to an unpublished order of our sister court in the Southern District of California holding that the San Diego Unified Port District falls within the definition of a "State" under CERCLA. San Diego Unified Port District v. TDY Indus., Inc., No. 03-cv-1146-B, slip op. at 14 (S.D.Cal. May 14, 2004). That court did not adopt the "state-wide" distinction in WSDOT, and its reasoning would extend "State" status to many entities better understood as "municipalities," which CERCLA distinguishes from "States." This court therefore chooses not to follow that reasoning.
2. Punitive Damages
Olin next moves to strike various references to punitive damages because SCVWD's remaining claims are equitable in nature. Improper prayers for relief are proper subjects for a motion to strike. See Bureerong v. Uvawas, 922 F. Supp. 1450, 1479 fn. 34 (C.D. Cal. 1996). SCVWD requested punitive damages generally in its prayer for relief (Compl. ¶ 83, subp. 4), in connection with its claim for reimbursement under the California Water Code (¶ 50), in connection with its claim for public nuisance (¶ 63), and in connection with its claim for common law restitution (¶ 70).
a. The Reimbursement Claim
SCVWD's reimbursement claim flows from California Water Code Section 13304(c)(1). That section allows any government agency to recover "to the extent of the reasonable costs actually incurred in cleaning up the waste, abating the effects of the waste, supervising cleanup or abatement activities, or taking other remedial action." California law permits punitive damages for statutory violations "unless a contrary legislative intent appears." Commodore Home Systems, Inc. v. Superior Court, 32 Cal. 3d 211, 215-17 (1982) (explaining Cal. Civ. Code § 3294).
Olin argues that the text of section 13304(c)(1) demonstrates such a contrary legislative intent by only providing relief "to the extent of the reasonable costs actually incurred." SCVWD opposes, arguing that sections 13350(j) and 13385(g) indicate that "remedies under the Water Code are 'in addition to, and do not supersede or limit, any and all other remedies, civil or criminal.'" SCVWD selectively quotes those provisions of the Water Code to exclude the limitation that precedes the quoted sections of both 13350(j) and 13385(g), namely that "[ r] emedies under this section are in addition to, and do not supersede or limit, any other remedies, civil or criminal." See Cal. Water Code §§ 13350(j) 13385(g) (emphasis added). Section 13304 is a distinct section from 13350 and 13385, and it lacks an "any other remedies" clause. This absence indicates a legislative intent to limit recovery under 13304 to its plain text, namely, "to the extent of the reasonable costs actually incurred." Moreover, section 13304(c)(2) provides a method for imposing a lien for "the amount of the costs" on the affected property, making no mention of any other damages. Combined, the plain text of 13304(c)(1) and (c)(2) and the absence of an "any other remedies" clause from section 13304 indicates a "contrary legislative intent" that prevents SCVWD from recovering punitive damages under its reimbursement claim. Accordingly, the court grants Olin's motion to strike paragraph 50 from SCVWD's complaint with prejudice.
b. The Public Nuisance Claim
The court has already dismissed SCVWD's claim for public nuisance, and therefore treats this portion of Olin's motion to strike as moot.
c. The Restitution Claim
SCVWD's sixth claim for relief is common law restitution for unjust enrichment. Compl. ¶¶ 65-70. Olin argues that because restitution is an equitable remedy, punitive damages are unavailable. California Civil Code Section 3294, however, permits punitive damages for any breach of an obligation not arising from a contract. In Ward v. Taggart, 51 Cal. 2d 736, 743 (1959), the California Supreme Court considered the argument that section 3294 does not apply to restitution for unjust enrichment because restitution is contractual in nature. The court upheld the punitive damages award because "[s]uch damages are appropriate in cases like the present one, where restitution would have little or no deterrent effect, for wrongdoers would run no risk of liability to their victims beyond that of returning what they wrongfully obtained." Id.; see also Robert L. Simmons, Handbook of California Remedies § 3.7 (1993). Olin attempts to distinguish Ward on the basis that Ward involved fraud. While the existence of fraud bears on whether awarding punitive damages is appropriate, fraud is not a prerequisite. Instead, section 3294 permits punitive damages whenever the defendant is guilty of "oppression, fraud, or malice."
SCVWD has generally alleged all three. See Compl. ¶ 31. However, under California law, "when nondeliberate injury is charged, allegations that the defendant's conduct was wrongful, willful, wanton, reckless or unlawful do not support a claim for exemplary damages; such allegations do not charge malice." Smith v. Superior Court, 10 Cal. App. 4th 1033, 1041 (1992) (quoting G.D. Searle Co. v. Superior Court, 49 Cal. App. 3d 22 (1975)). Fairness requires that Olin receive better notice than a bare allegation that "Olin's conduct was malicious, oppressive and/or fraudulent." While punitive damages are available for restitution claims in California, the complaint is devoid of any factual allegations to support the conclusory allegations of paragraph 31. Therefore, Olin's motion to strike paragraph 70 is granted without prejudice. Furthermore, the court, on its own motion, orders paragraph 31 stricken without prejudice. See Fed.R.Civ.P. 12(f).
d. The Prayer for Relief
Because SCVWD has not alleged facts necessary to support a punitive damages claim in relation to any remaining claim that permits punitive damages, Olin's motion to strike subparagraph 4 of paragraph 83 is granted without prejudice.
3. Jury Trial
Olin concedes that SCVWD's fifth claim for relief — public nuisance — would be subject to a jury trial. Mot. to Strike at 10. As discussed above, the court has dismissed that claim without prejudice and given SCVWD twenty days to amend its complaint. At this time, it is not proper for the court to determine whether SCVWD has a constitutional right to a jury trial under any of its other claims. Accordingly, Olin's motion to strike the jury demand is denied without prejudice to reasserting it later.
If Olin chooses to refile its motion to strike in the future, the court would appreciate more substantive briefing from the parties on the complex constitutional issue of whether various statutory and common law claims provide a right to jury trial.
III. ORDER
For the foregoing reasons, Olin's motion to dismiss SCVWD's fifth and seventh claims is GRANTED without prejudice and Olin's motion to strike is GRANTED IN PART and DENIED IN PART as follows:
1. Olin's motion to strike paragraph 38 of SCVWD's complaint is GRANTED with leave to amend.
2. Olin's motion to strike paragraph 50 of SCVWD's complaint is GRANTED with leave to amend.
3. Olin's motion to strike paragraph 63 of SCVWD's complaint is DENIED as moot.
4. Olin's motion to strike paragraph 70 of SCVWD's complaint is GRANTED with leave to amend.
5. Olin's motion to strike paragraph 83, subparagraph 4 of SCVWD's complaint is GRANTED with leave to amend.
6. Olin's motion to strike SCVWD's jury demand is DENIED with leave to amend.
7. The court orders, on its own motion, paragraph 31 stricken with leave to amend.
SCVWD is given twenty (20) days to amend its complaint.