Lewis v. Russell ( 2019 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 ----oo0oo---- 9 10 CHARLES H. LEWIS and JANE W. No. 2:03-cv-02646 WBS AC LEWIS, 11 Plaintiffs, 12 MEMORANDUM & ORDER RE: JOINT v. MOTION FOR GOOD FAITH 13 SETTLEMENT ROBERT D. RUSSELL; IRENE 14 RUSSELL; BEN J. NEWITT; the Estate of PHILLIP NEWITT, 15 Deceased; JUNG HANG SUH; SOO JUNG SUH; JUNG K. SEO; THE DAVIS 16 CENTER, LLC; MELVIN R. STOVER, individually and as trustee of 17 the Stover Family Trust; STOVER FAMILY TRUST; RICHARD ALBERT 18 STINCHFIELD, individually and as successor trustee of the Robert 19 S. Stinchfield Separate Property Revocable Trust; ROBERT S. 20 STINCHFIELD SEPARATE PROPERTY REVOCABLE TRUST; THE BARBARA 21 ELLEN STINCHFIELD TESTAMENTARY TRUST; WORKROOM SUPPLY, INC., a 22 California corporation; SAFETY- KLEEN CORPORATION, a California 23 corporation; the CITY OF DAVIS; JENSEN MANUFACTURING COMPANY; 24 VIC MANUFACTURING COMPANY; MARTIN FRANCHISES INC., aka/dba 25 MARTINIZING DRY CLEANING, 26 Defendants. 27 28 Plaintiffs Charles and Jane Lewis brought this action 1 under, inter alia, the Comprehensive Environmental Response, 2 Compensation, and Liability Act (“CERLCA”), 42 U.S.C. § 9601 et 3 seq. against the above captioned defendants in 2003. (See Second 4 Amended Compl. (“SAC”) (Docket No. 197).) Before the court is a 5 joint motion for Good Faith Settlement and Order Dismissing and 6 Barring Claims. (Docket No. 551.) 7 I. Background 8 Defendant Robert D. Russell operated a dry cleaning 9 business at 670 G Street, in Davis, California (“the Site”) from 10 1964 to 1971. (Id. ¶ 29.) In 1971, defendants Ben and Phillip 11 Newitt (“Newitts”) took over the business and leased the dry 12 cleaning operation to Charles and Jane Lewis in 1975. (Id. ¶¶ 13 33-34.) The Lewises1 then purchased the business in 1977 and 14 operated it until August 1996. (Id. ¶ 34.) The Lewises later 15 leased the dry cleaning business to defendants Jung Hang Suh, Soo 16 Jung Suh, and Jung K. Seo (“Suhs”) from August 1996 to May 2005.2 17 (Id. ¶ 36.) 18 In February 1999, the California Regional Water Quality 19 Control Board, Central Valley Region (“Control Board”) advised 20 1 Charles and Jane Lewis have passed since bringing this 21 action. References to the “Lewises” now includes the estate of 22 Charles H. Lewis and Robert Zehnder as the personal representative of Charles Lewis. 23 2 The Suhs are not parties to the settlement. The Suhs 24 have not participated in the litigation since filing their cross- claims in 2004. (Decl. of Jennifer Hartman King (“King Decl.”) ¶ 25 6 (Docket No. 551-1).) The Settling Parties’ claims against the 26 Suhs were discharged in 2010 after the Suhs filed bankruptcy. (Id. ¶ 8.) The City of Davis obtained summary judgment on the 27 cross-claims the Suhs asserted against the city in February 2018. (Id. ¶ 7.) 28 1 the Lewises that the chemical tetrachloroethene, also known as 2 perchlorate (“PCE”), had been discovered in the soil and 3 groundwater at and around the Site. (Id. ¶ 29, 40.) The Lewises 4 contend that Russell, the Newitts, and the Suhs permitted the 5 sudden and accidental releases of PCE onto the Site and adjacent 6 properties while they were operating the dry cleaning business. 7 (Id. ¶ 43.) Additionally, the Lewises allege the City of Davis 8 (“City”) caused or contributed to the release of PCE. (Id. ¶ 43- 9 44.) 10 In October 2002, the Control Board issued a Cleanup and 11 Abatement Order No. R5-2002-0721 (the “Order”) commanding the 12 current and former owners and operators of the Site to 13 investigate the extent of the contamination and prepare a plan to 14 remedy it. (Id. ¶ 42.) Despite the Order, the Lewises alleged 15 the captioned defendants failed to participate in the 16 decontamination efforts. (Id. ¶ 45.) Consequently, the Lewises 17 brought this action seeking to recover costs and contribution 18 under CERCLA; statutory contribution and indemnity pursuant to 19 Carpenter-Presley-Tanner Hazardous Substance Account Act, 20 California Health and Safety Code § 25363(e); breach of contract; 21 equitable indemnity and contribution; negligence; and declaratory 22 relief. (See SAC at 21-23.) 23 After years of investigation, the Control Board 24 approved a Data Gap Investigation Report and Source Area 25 Remediation Plan (“Remediation Plan”) in 2015. (Decl. of 26 Jennifer Hartman King (“King Decl.”) ¶ 25-26 (Docket No. 551-1).) 27 28 1 On March 15, 2019, the “Settling Parties”3 agreed, without 2 admitting liability or wrongdoing, to mutually release, with 3 prejudice, existing and future claims against each other related 4 to the existing contamination at the Site. (Id. at ¶ 15.) In 5 exchange for this mutual release, the Settling Parties agreed to 6 fund The Davis Center Remediation Project Trust (“Trust”) to 7 cover the costs of the Site’s decontamination. (Settlement 8 Agreement and Mutual Release (“Settlement Agreement”) at 3 9 (Docket No. 551-2).) The Lewises, The Davis Center, and Potter- 10 Taylor have collectively agreed to pay a total of $1,740,000.00. 11 (Id.) The City will not contribute funds to the Trust. (King 12 Decl. ¶ 34.) 13 The settling parties also entered into an Agreement and 14 Covenant Not to Sue (“Covenant”) with the Control Board to 15 memorialize the agency’s approval of the decontamination plan, 16 document the mutual release of claims, and serve as an 17 administrative settlement under § 9613(f)(2) of CERCLA. (King 18 Decl. ¶¶ 37-38.) 19 The Settlement and Covenant are contingent upon this 20 court finding the terms of the Settlement were reached in good 21 faith. Consequently, the Settling Parties now jointly seek a 22 23 3 These parties include the City; the “Landowners,” specifically The Davis Center, LLC, Emily A. Stover, individually 24 and as Trustee of the Stover Family Trust and as Personal Representative for Melvin Stover (Deceased), and Richard Albert 25 Stinchfield, individually and as Trustee of the Robert S. Stinchfield Separate Real Property Trust and as Trustee of the 26 Barbara Ellen Stinchfield Testamentary Trust; the “Potter Taylor” 27 entities, including Potter Taylor & Co., Potter, Long, Adams & Taylor Ltd., Potter-Taylor, Inc., Potter Taylor & Scurfield, 28 Inc.; and the Lewises. (King Decl. ¶ 15.) 1 determination that the settlement was reached in good faith and 2 an order dismissing all claims against them, and barring all 3 future contribution and indemnity claims, with prejudice. (Joint 4 Mot. for Good Faith Settlement at 3 (Docket No. 551).) 5 II. Discussion 6 A. Applicable Law 7 The settling parties have settled claims brought under 8 both state and federal law. Accordingly, the court must evaluate 9 the “good faith” of each settlement pursuant to its applicable 10 law. See Mason & Dixon Intermodal, Inc. v. Lapmaster Int’l LLC, 11 632 F.3d 1056, 1060 (9th Cir. 2011) (citation omitted) (“When a 12 district court . . . hears state law claims based on supplemental 13 jurisdiction, the court applies state substantive law to the 14 state law claims.”). 15 Under federal law, one of CERCLA’s “core principles” is 16 to “foster settlement through its system of incentives and 17 without unnecessarily further complicating already complicated 18 litigation.” AmeriPride Servs. v. Tex. E. Overseas, Inc., 782 19 F.3d 474, 486 (9th Cir. 2015) (quoting Chubb Custom Ins. Co. v. 20 Space Sys./Loral, Inc., 710 F.3d 946, 971 (9th Cir. 2013)). 21 District courts retain discretion to determine the most equitable 22 method of accounting for settlements in private-party 23 contribution actions. Id. at 487 (citing 42 U.S.C. § 24 9613(f)(1)). Ultimately, the court is must find that the 25 agreement is roughly correlated with some acceptable measure of 26 comparative fault that apportions liability among the settling 27 parties according to a rational estimate of the harm the 28 potentially responsible parties have done. Arizona v. City of 1 Tucson, 761 F.3d 1005, 1012 (9th Cir. 2014) (citations and 2 internal quotation marks omitted). While the courts may consult 3 “model acts” like the Uniform Comparative Fault Act (“UCFA”) and 4 the Uniform Contribution Among Tortfeasors Act (“UCATA”), they 5 are under no obligation to do so.4 AmeriPride Servs., 782 F.3d 6 at 486. 7 An order barring claims is “appropriate to facilitate 8 settlement, particularly in a CERCLA case.” Tyco Thermal 9 Controls LLC v. Redwood Indus., No. C06-07164 JF (PVT), 2010 WL 10 3211926, at *5 (N.D. Cal. Aug. 12, 2010) (citing AmeriPride 11 Servs. Inc. v. Valley Indus. Servs., Inc., Nos. CIV. S-00-113-LKK 12 JFM, S-04-1494-LKK/JFM, 2007 WL 1946635, at *2 (E.D. Cal. July 2, 13 2007)). The contribution bar in § 9613(f)(2) applies to parties 14 who have resolved their liability in relation to the government. 15 42 U.S.C. § 9613(f)(2). “[C]ourts review settlements and 16 generally enter contribution and indemnity bar orders in CERCLA 17 cases if the settlement is fair, reasonable, and adequate.” 18 Coppola v. Smith, No. 1:11-CV-1257 AWI BAM, 2017 WL 4574091, at 19 *3 (E.D. Cal. Oct. 13, 2017) (collecting cases). 20 California’s approach to evaluating settlements and 21 implementing contribution bars is strikingly similar. California 22 23 4 The UCFA and UCATA are model acts proposed by the National Conference of Commissioners on Uniform State Laws that 24 advocate competing methods of accounting for a settling party’s share when determining liability. AmeriPride Servs., 782 F.3d at 25 483. Courts in California have adopted the UCFA approach, others the UCATA approach, and others still simply apply §§ 877 and 26 877.6 to CERCLA claims. See Coppola, 2017 WL 4574091, at *3 27 (noting “[t]he methodology used by federal courts in California to assess [] settlements and contribution bars is not always 28 uniform”). 1 state substantive law on settlements is codified at California 2 Code of Civil Procedure Section 877. Section 877.6, the 3 procedural mechanism for implementing § 877, is intended to 4 promote the equitable sharing of costs among the parties at fault 5 and encourage settlement. Tech-Bilt, Inc. v. Woodward-Clyde & 6 Ass’n, 38 Cal. 3d 488, 494 (1985). It will “bar any other joint 7 tortfeasor or co-obligor from any further claims against the 8 settling tortfeasor or co-obligor for equitable comparative 9 contribution, or partial comparative indemnity, based on 10 comparative negligence or comparative fault.” Cal. Civ. P. § 11 877.6(c). 12 Courts are permitted to approve a settlement under § 13 877.6 if it was made in good faith. (Id.) To access whether a 14 settlement was made in good faith, courts consider the following, 15 among other practical factors: (1) a rough approximation of the 16 plaintiffs’ total recovery and the settlor’s proportionate 17 liability; (2) the amount to be paid in settlement; (3) the 18 allocation of settlement proceeds among the plaintiffs; (4) a 19 recognition that a settlor should pay less in settlement than he 20 would if he were found liable after a trial; (5) the financial 21 conditions and insurance policy limits of the settling 22 defendants; and (6) the existence of collusion, fraud, or 23 tortious conduct aimed to injure the interests of non-settling 24 defendants. Tech-Bilt, 38 Cal. 3d at 499. Ultimately, the 25 determination is left to the trial court’s discretion. Id. at 26 502. 27 The factors used to evaluate whether a CERCLA 28 settlement is fair, reasonable, and adequate parallel those used 1 to determine whether a settlement is in good faith under 2 California law. City of West Sacramento v. R & L Business 3 Management, No. 2:18-cv-900 WBS EFB, 2019 WL 2249629, at *2 (E.D. 4 Cal. May 24, 2019) (citing Coppola, 2017 WL 4574091, at *3). 5 Consequently, the court will make findings regarding good faith 6 under California law as part of its determination of whether the 7 settlement of the CERCLA claim is fair, adequate, and reasonable. 8 Id. (internal quotations and alterations omitted). 9 B. Application as to Plaintiff’s Claims 10 Tech-Bilt’s first four factors demand that the court 11 consider the amount of the settlement in proportion to the 12 settling parties’ liability, although the settlement amount need 13 only be in the ‘ballpark’.” 38 Cal. 3d at 499-500. 14 Here, the Settling Parties agree that the settlement 15 and their previous monetary contributions5 reflect the 16 proportionate shares of their alleged liability. (King Decl. ¶ 17 45.) In order to fully fund the Remediation Plan and reimburse 18 the Control Board $24,380.32 for oversight costs, the Lewises 19 have agreed to pay $487,917.00 to the Trust while The Davis 20 Center and Potter-Taylor collectively will contribute 21 $1,252,083.00. (Settlement Agreement at 3.) The Settling 22 Parties contend the settlement amount is reasonable because it 23 will fully fund the Remediation Plan and reimburse the Control 24 Board. (King Decl. ¶ 42.) Further, the Settlement appears to be 25 in the “ballpark” of the Settling Parties’ proportionate share of 26 27 5 Each of the Settling Parties previously contributed between $40,000 and $60,000 to pay for the Site investigation 28 during mediation. (King Decl. ¶ 44.) 1 alleged comparative liability because the Settling Parties’ total 2 monetary contribution –- $1,740,000.00 –- exceeds their cumulative 3 liability because none of the Remediation Plan or the Control Board 4 oversight costs have been allocated to any non-settlors. (Id. ¶ 5 43.) Based on these representations, the court concludes that the 6 Settling Parties have satisfied Tech-Bilt factors one and two. 7 Similarly, the allocation of the Trust to fund the 8 Remediation Plan is appropriate because it is designed to accomplish 9 the required remedial cleanup at the Site. (Settlement Agreement at 10 3.) Accordingly, the Settling Parties have satisfied Tech-Bilt 11 factor three. 12 Under factor four, the Settling Parties estimate that, 13 in light of the complexity of this litigation and the expenses 14 incurred over almost two decades of conflict, their monetary 15 contributions toward the Settlement are less than what each party 16 would have paid had it been found liable at trial. (Id. ¶ 47.) 17 This settlement also saves the parties’ further litigation costs 18 and the court’s time. See City of West Sacramento, 2019 WL 19 2249629, at *3 (citing Coppola, 2017 WL 4574091, at *4). These 20 facts favor approving the settlement under Tech-Bilt’s fourth 21 factor. 22 The fifth and sixth Tech-Bilt factors consider the 23 settling parties’ financial ability to meet the terms of the 24 settlement and the settling parties’ potential to injure the 25 interests of non-settling defendants. 38 Cal. 3d at 499. Here, 26 the Settling Parties engaged in lengthy negotiations and 27 mediations before arriving at the settlement’s final terms. 28 (King Decl. ¶ 47.) They each evaluated their available insurance 1 policy limits and financial conditions and balanced those 2 evaluations against the facts of the case and the strength of the 3 claims against each party, and subsequently reached this 4 agreement. (King Decl. ¶ 50.) Accordingly, factor five favors 5 settlement. 6 Finally, the court must consider the settlement’s 7 potential to injure the interests of non-settling defendants. 8 Here, the only non-settling defendants are the Suhs. They have 9 not substantially participated in the litigation since filing 10 their cross-claims in 2004. (King Decl. ¶ 6.) The Settling 11 Parties’ claims against the Suhs were discharged in 2010 after 12 they filed bankruptcy, and the City obtained summary judgment on 13 the cross-claims they had asserted against it in February 2018. 14 (Id. ¶¶ 7, 8.) Attempts to engage the Suhs in settlement 15 negotiations were unsuccessful (Id. ¶ 53), and any attempt to 16 engage them in settlement could not have resulted in any 17 contribution from them because of their discharge in bankruptcy. 18 (Id. ¶ 8.) Accordingly, they do not oppose this Settlement 19 Agreement. The absence of an opposition to the settlement 20 agreement “is highly telling and is clearly indicative of 21 reasonableness and good faith.” Coppola, 2017 WL 4574091, at *5. 22 The court finds the settlement negotiations involved no 23 collusion, fraud, or tortious conduct intended to injure the non- 24 settling parties. 25 Overall, the Tech-Bilt factors favor a finding of 26 reasonableness and good faith. Accordingly, the court finds the 27 settlement was made in good faith and is fair, reasonable, and 28 adequate, and the court will approve the settlement and enter a 1 contribution and indemnity bar order. 2 IT IS THEREFORE ORDERED that the parties’ joint Motion 3 for Good Faith Settlement (Docket No. 551), be, and the same 4 hereby is, GRANTED. 5 It is further ORDERED that: 6 1. Under California Code of Civil Procedure §§ 877 7 and 877.6, and 42 U.S.C. § 9613(f), the settlement 8 agreement reached by the settling parties is in 9 good faith and is a fair, adequate, and reasonable 10 settlement; 11 2. All pending claims and cross-claims against the 12 settling parties in the above-entitled actions are 13 dismissed with prejudice; 14 3. the Covenant constitutes an administrative 15 settlement with the State for purposes of CERCLA § 16 9613 (f) (2); 17 4, Any and all claims or future claims for contribution 18 or indemnity, arising out of the facts alleged in 19 the Second Amended Complaint, and as further 20 identified and provided for in the settlement, 21 regardless of when such claims were asserted or by 22 whom, are barred. 23 | Dated: October 16, 2019 tleom ah. A. be—~ 24 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE 25 26 27 28 11