Legal Updates - 2010 to 2011
Safe Drinking Water and Toxic Enforcement Act (“PROP 65”)
“Wood dust” listed as a chemical known to cause cancer under Prop 65.
Businesses with 10 more employees that use substances known to cause cancer or reproductive toxicity must provide warning signs or labels to all those who could potentially be exposed. The penalties for failing to provide such warnings are substantial, at up to $2,500 per day per violation; and any member of the public may prosecute a Prop 65 violation.
The State of California’s Office of Health Hazard Assessment (“OEHHA”) has recently added “wood dust” to the list of substances known to the State of California to cause cancer or reproductive toxicity in response to a recent case, entitled Sierra Club v. Schwarzenegger, 2009 WL 1747955 (Cal. Superior June 11, 2009). In that case, the superior court agreed with environmental and labor organizations who asserted that substances listed in California Labor Code sections 6382(b)(1) and 6382(d) (including wood dust) should be listed as substances known to the State to cause cancer or reproductive toxicity under Prop 65.
The inclusion of “wood dust” under Prop 65 is likely to affect many businesses, particularly in construction related industries. While the OEHHA did not define “wood dust,” the U.S. Occupational Safety and Health Administration (OSHA) has defined wood dust as “pulverized wood wastes, or the dusts from cutting, shaping, drilling, sanding, or general handling of wood.” OSHA’s definition of wood dust includes “finely divided wood particles, powdered wood, sawdust, wood flour, hardwood dust, wood shavings, softwood dust, and wood dust.” Similarly, Cal-OSHA guidance has previously defined wood dust as “wood particles resulting from processing or handling of woods.”
Any company with 10 or more employees whose operations may cause exposure to wood dust should take action to ensure that proper warnings are provided to those exposed.
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NATIONAL ENVIRONMENTAL POLICY ACT (“NEPA”)
The Wilderness Society v. U.S. Forest Service, 630 F.3d 1173 (9th Cir. 2011) U.S. Court of Appeals, Ninth Circuit
Ninth Circuit abandons its application of the “federal defendant” rule which had barred private parties from intervening as a matter of right in NEPA cases.
Conservation groups sought declaratory and injunctive relief challenging the U.S. Forest Service’s designation of certain roads and trails for motor vehicle use as a violation of NEPA, primarily due to the failure to prepare an Environmental Impact Statement and to consider reasonable alternatives. Recreation groups moved to intervene in an attempt to counter the conservation groups’ claims. The District Court denied the recreation groups’ motion to intervene claiming that the “federal defendant” rule barred such an intervention.
The Ninth Circuit reversed. The court noted that Federal Rule of Civil Procedure (“FRCP”) 24(a)(2) generally requires a court, upon timely motion, to permit intervention of right by anyone who claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may, as a practical matter, impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest. In contrast to FRCP 24(a)(2), the Court noted that the so-called “federal defendant rule” categorically precludes private parties and state and local governments from intervening of right as defendants on the merits of NEPA actions. The court explained that the rationale for the “federal defendant” rule is that private parties lack a “significantly protectable” interest warranting intervention of right under FRCP 24(a)(2), because NEPA is a procedural statute that binds only the federal government. In choosing to abandon the application of the “federal defendant” rule in NEPA cases, the court reasoned that the rule is inconsistent with 24(a)(2), which only requires the intervenor to claim an “interest relating to the property or transaction that is the subject of the action.” The court went on to explain that the “federal defendant” rule mistakenly focuses on the underlying legal claim instead of the property or transaction that is the subject of the lawsuit. Accordingly, the court held that a private party seeking to intervene in a NEPA case will demonstrate a “significantly protectable” interest if it can show that it is an “interest [that] is protectable under some law” and that “there is a relationship between the legally protected interest and the claims at issue.”
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INSURANCE
Ameron Int'l Corp. v. Insurance Co of the State of Pennsylvania, 50 Cal.4th 1370 (2010) California Supreme Court
California Supreme Court extends insurers’ duty to defend obligations to quasi-judicial administrative proceedings.
Ameron, a subcontractor, filed a complaint with the Department of Interior Board of Contract Appeals (IBCA) based upon a determination made by a contracting officer of the U.S. Department of the Interior’s Bureau of Reclamation (Bureau). A hearing was held before the IBCA, in which witnesses testified and were cross-examined. The parties then settled the matter and Ameron sought reimbursement from its insurers for settlement and defense costs under various comprehensive general liability policies and excess/umbrella policies. Some of the policies failed to define “suit,” while others defined the term as a “civil proceeding.” The majority of insurers refused coverage or offered reduce amounts, claiming that their duty to defend did not extend to adjudicative proceedings like the one before the IBCA. Ameron sued to compel payment under the insurance policies.
The Superior Court dismissed Ameron’s action. The court applied the California Supreme Court’s rule developed in Foster-Gardner, Inc. v. National Union Fire Insurance Co., 18 Cal.4th 857 (1998), that when a policy fails to define “suit,” the insurer is only obligated to provide a defense when there is “a civil action commenced by [the] filing [of] a complaint.”
The Court of Appeals partially reversed the lower court’s decision and allowed recovery under those insurance policies that defined “suit” as a “civil proceeding.” However, the court reluctantly affirmed the application of Foster-Gardner to those policies that did not define the term “suit.” The court reasoned that the IBCA adjudicative administrative hearing was before a federal administrative agency, not a court of law, and therefore did not constitute a “suit.”
The California Supreme Court partially reversed the Court of Appeals’ decision and allowed recovery under the insurance policies that did not contain a definition of “suit.” The court reasoned that the IBCA adjudicative proceeding was initiated by filing of a complaint and constituted a “suit” as a reasonable insured would understand the term. The court further reasoned that the word “suit,” without further definition in a policy, is ambiguous and should be construed against the carrier and in favor of protecting the reasonable expectations of the policyholder.
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Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)
Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)
Arrow Gear Company v. Downers Grove Sanitation District, 2010 WL 5020089 U.S. Court of Appeals, Seventh Circuit
Settlement agreement for impaired property value does not bar CERCLA Section 113(b) contribution claims.
EPA brought an enforcement action against two companies, Arrow Gear Company and Precision (“Arrow”), for groundwater contamination at a commercial facility. EPA sought reimbursement for investigatory expenses already expended, which totaled $1 million. Arrow filed suit seeking contribution claims under CERCLA Section 113(b) against other polluters of the site. All parties to Arrow’s contribution suit had previously been defendants in a class action filed by nearby residents of the contaminated site. A settlement of $16 million was reached in the prior class action, and the defendants agreed to allocate the expenses among themselves using various agreements that released the defendants from any further liability for the specified claims. The agreements did not release settling defendants from claims that could arise in other litigation or in other contexts related to the same alleged contamination, and the court did not reserve jurisdiction. Based on these prior settlement agreements, the district court dismissed Arrow’s contribution claims, finding that they arose from the same facts at issue in the class action and were barred by res judicata.
The Seventh Circuit reversed. The court addressed various jurisdictional issues and then turned to the merits of the res judicata argument. The court found that res judicata did not bar Arrow’s contribution claims, despite the fact that the suit arose from the same set of facts. The court reasoned that it would have been impossible to determine the defendants’ total liability at the time the prior settlement agreements were reached in the class action, stating “[l]itigants who want to split a claim among different suits can do so” in a case where the scope of a release is limited
. <Back to Top>Ashley II Of Charleston, LLC v. PCC Nitrogen, Inc., 2010 WL 4025885 United States District Court, South Carolina
In first published decision to interpret the scope of “appropriate care” under Bona Fide Prospective Purchaser (BFPP) defense to CERCLA claims, South Carolina federal district court ruled that developer failed to exercise due care with respect to sumps, pads, debris, and a crushed rock and grave l(“ROC”) cover at the “Brownfield” site.
Brownfield site owner (Ashley) brought action against former site owner (PCS), seeking to recover remediation costs under CERCLA. PCS subsequently filed contribution claims, and Ashley asserted the BFPP defense. To qualify for the BFPP defense, Ashley needed to demonstrate by a preponderance of the evidence that it exercised appropriate care with respect to hazardous substances found at the facility by taking reasonable steps to: (i) stop any continuing release; (ii) prevent any threatened future release; and (iii) prevent or limit human, environmental, or natural resource exposure to any previously released hazardous substance. After a bench trial, the court ruled that Ashley did not carry its burden of proving that it exercised appropriate care after taking ownership of the property. The court relied primarily on three findings of fact. First, when Ashley demolished the above ground structures, it failed to clean out and fill in the sumps, leaving them exposed to the elements, which may have exacerbated contamination conditions. At trial, experts testified that Ashley should have capped, filled, or removed the sumps at the time it demolished the above ground structures. Second, the court found Ashley's failure to prevent a debris pile from accumulating on the site, investigate the contents of the debris pile, and remove the debris pile for over a year indicated a lack of appropriate care. Third, the court found that Ashley failed to adequately maintain the ROC cover on the site. The court also found that Ashley did not satisfy a second element of the BFPP defense requiring no affiliation with potentially liable parties, inclusive of contractual relationships. Ashley entered release and indemnification agreements with prior owners and the court was troubled by its subsequent efforts to discourage the EPA from recovering response costs covered by the indemnifications.
<Back to Top>City of Emeryville v. Robinson, 621 F.3d 1251 U.S. Court of Appeals, Ninth Circuit, 2010
Pesticide manufacturer commenced action by filing motion to enforce court-approved settlement agreement resolving city's lawsuit to recover site contamination clean-up costs from manufacturer, under CERCLA. Following intervention by property owners of adjacent contaminated site, the District Court granted in part and denied in part manufacturer's motion for declaratory and injunctive relief. Manufacturer and the city cross-appealed. The Court of Appeals, Hall, Circuit Judge, held that:
(1) property owners were entitled to intervene as of right;
(2) settlement's CERCLA contribution bar did not apply to intervenors' pending state contribution cross-claims;
(3) good faith settlement determination did not bar intervenors' contribution claims; and
(4) manufacturer was not prevailing party entitled to award of attorney fees
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CLEAN WATER ACT ("CWA")
Barnum Timber Co. v. U.S. E.P.A., 2011 WL 383012 U.S. Court of Appeals, Ninth Circuit
Ninth Circuit holds that perceived decreased property value is sufficient to establish standing to challenge EPA’s listing of an impaired water body under Clean Water Act.
Barnum, a timber property owner and harvester, filed suit under the Administrative Procedure Act (“APA”) challenging EPA’s approval of California’s decision to retain a creek as an impaired water body under Section 303(d) of the Clean Water Act. Barnum, which operated in the creek’s watershed, alleged that it had seen its property values decline as a result of EPA’s decision. The District Court found that Barnum did not have constitutional standing and dismissed the action with leave to amend. The court reasoned that Barnum’s complaint only alleged conclusory and nonspecific claims of injury and failed to establish that the injury was caused by or connected to EPA’s approval of California’s listing of the creek under the CWA. Barnum moved to amend its complaint to add the declarations of two California forestry experts. The court denied the motion to amend, claiming that the declarations were not enough to overcome the standing issue.
The Ninth Circuit reversed. The court noted that in order to have constitutional standing, Barnum must have suffered an injury-in-fact that was fairly traceable to EPA’s decision to retain the creek as an impaired water body under the CWA. The court concluded that the two declarations submitted with Barnum’s amended complaint demonstrated a specific, concrete and particularized allegation of a reduction in property values and established an injury-in-fact. The court also found that Barnum showed a causal connection between EPA’s listing of the creek under the CWA and the alleged decreased in property values. Dissenting to the opinion, Judge Gwin noted that Barnum could not identify any particular conduct by EPA that would result in a decrease in property value
. <Back to Top>City of Arcadia v. State Water Resources Control Board, 191 Cal.App.4th 156 (2011) Court of Appeal, 4th District
Regional Water Quality Control Board’s basin plan upheld, which includes water quality objectives for storm water and urban runoff.
Cities and construction industry association (“Cities”) filed suit against the State Water Resources Control Board and the Los Angeles Regional Water Quality Control Board (“Regional Board”) for declaratory and injunctive relief, challenging the approval of the regional board’s basin plan, including water quality objectives for storm water and urban runoff. The Superior Court issued a writ of mandate vacating approval of the Regional Board’s basin plan. The writ directed the Regional Board to reopen the prior review proceeding or to conduct a public hearing on the plan’s storm water and urban runoff water quality objectives. The court also stated that the Regional Board must consider a water body’s “probable” beneficial uses when establishing water quality objectives, not the water body’s “potential” beneficial uses.
The Court of Appeal reversed, stating, "[a]s applied here, to succeed on their petition plaintiffs needed to show [the] Regional Board had imposed water quality requirements exceeding those established by the Clean Water Act…The record reflects Regional Board's actions were compelled by federal law. Absent a showing defendants sought to impose water quality objectives exceeding what federal law required, plaintiffs cannot prevail."
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