City of West Sacramento v. R & L Business Management ( 2019 )

1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 ----oo0oo---- 8 9 CITY OF WEST SACRAMENTO, No. 2:18-CV-00900 WBS EFB 10 CALIFORNIA; and PEOPLE OF THE STATE OF CALIFORNIA, 11 Plaintiffs, ORDER RE: JOINT MOTION FOR 12 GOOD FAITH SETTLEMENT v. 13 R AND L BUSINESS MANAGEMENT, a 14 California corporation, f/k/a STOCKTON PLATING, INC., d/b/a 15 CAPITOL PLATING, INC., a/k/a CAPITOL PLATING, a/k/a CAPITAL 16 PLATING; CAPITOL PLATING, INC., a dissolved California 17 corporation; ESTATE OF GUS MADSACK, DECEASED; ESTATE OF 18 CHARLES A. SCHOTZ a/k/a SHOTTS, DECEASED; ESTATE OF E. BIRNEY 19 LELAND, DECEASED; ESTATE OF FRANK E. ROSEN, DECEASED; ESTATE 20 OF UNDINE F. ROSEN, DECEASED; ESTATE OF NICK E. SMITH, 21 DECEASED; RICHARD LELAND, an individual; SHARON LELAND, an 22 individual; ESTATE OF LINDA SCHNEIDER, DECEASED; JUDY GUESS, 23 an individual; JEFFREY A. LYON, an individual; GRACE E. LYON, an 24 individual; THE URBAN FARMBOX LLC, a suspended California 25 limited liability company; and DOES 1-50, inclusive, 26 Defendants. 27 28 1 Before the court is a joint motion for a good faith 2 settlement determination filed on October 7, 2019 by the City of 3 West Sacramento and the People of the State of California 4 (“plaintiffs”), and defendant Judy Guess. (Docket No. 98.) 5 I. Background 6 This court described much of the factual and procedural 7 background to this lawsuit in its prior orders. (See Docket Nos. 8 18, 33, 44 & 63.) On August 21, 2019, plaintiffs and defendant 9 Judy Guess reached an agreement for the settlement of all claims 10 and disputes between them in this matter. (Decl. of Kenneth 11 Stone (“Stone Decl.”) ¶ 3 (Docket No. 98-1); see also Stone Decl. 12 Ex. 1 (“Settlement Agreement”) (written agreement setting forth 13 the terms of the settlement) (Docket No. 98-4).) Plaintiffs have 14 alleged the following claims against Judy Guess: (1) violation of 15 the Resource Conservation and Recovery Act (“RCRA”) § 7002(a), 42 16 U.S.C. § 6972(a)(1)(B); (2) violation of the Comprehensive 17 Environmental Response, Compensation and Liability Act (“CERCLA”) 18 § 107(a), 42 U.S.C. § 9607(a); (3) violation of The Gatto Act, 19 California Health & Safety Code §§ 25403-25403.8; (4) violation 20 of The Porter-Cologne Water Quality Control Act, California Water 21 Code § 13304(c); (5) public nuisance; (6) trespass; (7) statutory 22 indemnity; and (8) declaratory relief. (See Third Am. Compl. 23 (“TAC”) (Docket No. 45).) The TAC alleges that Guess owned the 24 property during the time that contaminants were disposed of at 25 the property. (Id. ¶ 94.) 26 The settling parties now move for a good faith 27 settlement determination and an order barring all claims against 28 1 them for contribution and indemnity. Pursuant to the settlement 2 agreement, Guess will pay $50,000.00 to the City. (See 3 Settlement Agreement § 3.1.) The settling parties also request 4 that the court dismiss all claims between them with prejudice. 5 Defendants John Clark and R&L Business Management filed a 6 statement of non-opposition to defendant Guess’ motion for a good 7 faith settlement determination. (See Docket Nos. 98 & 108.) 8 II. Discussion 9 A. Applicable Law 10 1. State Law Claims 11 The settling parties have settled claims brought under 12 both state and federal law. “When a district court . . . hears 13 state law claims based on supplemental jurisdiction, the court 14 applies state substantive law to the state law claims.” Mason & 15 Dixon Intermodal, Inc. v. Lapmaster Int’l LLC, 632 F.3d 1056, 16 1060 (9th Cir. 2011) (citation omitted). California state 17 settlement law, here codified in California Code of Civil 18 Procedure Section 877, constitutes substantive law. See id. 19 Section 877.6 “is the procedural mechanism for implementing 20 [Section] 877” and making the determination of a good faith 21 settlement. See Coppola v. Smith, No. 1:11-CV-1257 AWI BAM, 2017 22 WL 4574091, at *2 (E.D. Cal. Oct. 13, 2017). Therefore, the 23 court will apply California settlement law to the state law 24 claims at issue between the settling parties. See Mason & Dixon, 25 632 F.3d at 1060. 26 2. CERCLA Claim 27 For plaintiffs’ CERCLA claim, courts review settlements 28 1 and generally enter contribution and indemnity bars if the 2 settlement is “procedurally and substantively fair, reasonable, 3 and consistent with CERCLA’s objectives.” Arizona v. City of 4 Tucson, 761 F.3d 1005, 1012 (9th Cir. 2014) (citation and 5 internal quotation marks omitted). This court has an independent 6 obligation to scrutinize the terms of the agreement. Id. The 7 court must find that the agreement is roughly correlated with 8 some acceptable measure of comparative fault that apportions 9 liability among the settling parties according to a rational 10 estimate of the harm potentially responsible parties have done. 11 Id. 12 3. Gatto Claim 13 Liability under the Gatto Act turns on liability under 14 CERCLA. The Gatto Act provides that “if a local agency 15 undertakes action to investigate property or clean up . . . a 16 release of hazardous material, the responsible party shall be 17 liable to the local agency for the costs incurred in the action.” 18 Cal. Health & Safety Code § 25403.5. A responsible party 19 includes “those described in Section 107(a) of CERCLA.” Id. 20 Because good-faith settlement determinations turn on the 21 apportionment of liability among the defendants, see infra, the 22 court will apply the same standard as that for plaintiffs’ CERCLA 23 claim. 24 4. Porter-Cologne Water Quality Control Act Claim 25 The Porter-Cologne Water Quality Control Act “derives 26 from the common law of nuisance.” Wells Fargo Bank, N.A. v. 27 Renz, 795 F. Supp. 2d 898, 918 (N.D. Cal. 2011) (citing City of 28 1 Modesto Redevelopment Agency v. Superior Court, 119 Cal. App. 4th 2 28, 37 (2004)).1 Because “the relevant question for purposes of 3 liability is whether the defendant created or assisted in the 4 creation of the nuisance,” id. at 918, a state law claim, the 5 court will apply the same standard as that for plaintiff’s state 6 law claims. 7 5. RCRA Claim 8 The settlement agreement bars all claims against Guess 9 for contribution and indemnity. Defendants, however, have “no 10 right to contribution under RCRA.” Tyco Thermal Controls LLC v. 11 Redwood Indus., No. C 06-07164 JF PVT, 2010 WL 3211926, at *12 12 (N.D. Cal. Aug. 12, 2010). “The primary relief available to a 13 private party under RCRA is a mandatory injunction.” Gilroy 14 Canning Co., Inc. v. Cal. Canners and Growers, 15 F.Supp.2d 943, 15 945 (N.D.Cal.1998). RCRA “is not principally designed to . . . 16 compensate those who have attended to the remediation of 17 environmental hazards.” Meghrig v. KFC W., Inc., 516 U.S. 479, 18 483. Congress did not provide for such a remedy and this court 19 “declines to ‘engraft’ a contribution or indemnity action onto 20 RCRA.” Tyco, 2010 WL 3211926 at *12 (quoting U.S. v. Domestic 21 Indus., Inc., 32 F. Supp. 2d 855, 872 (E.D. Va. 1999)). This 22 court therefore need not consider defendant’s liability under 23 plaintiff’s RCRA claim in its good-faith settlement 24 1 The Act permits a contribution claim to be brought 25 against “[a]ny person who has discharged or discharges waste ... or who has caused or permitted, causes or permits, or threatens 26 to cause or permit any waste to be discharged or deposited where 27 it is, or probably will be, discharged into the waters of the state and creates, or threatens to create, a condition of 28 pollution or nuisance.” Cal. Water Code § 13304(a). 1 determination. 2 In short, the court will apply California law to plaintiffs’ 3 state law and Porter-Cologne Act claims and the CERCLA standard 4 to plaintiffs’ CERCLA and Gatto Act claims. 5 B. Legal Standard – Tech-Bilt Factors 6 Ultimately, the factors considered in determining 7 whether a settlement is in good faith under California law are 8 similar to the factors used to evaluate whether a CERCLA 9 settlement is fair, reasonable, and adequate. See Coppola, 2017 10 WL 4574091, *3. As such, the court “will make findings regarding 11 ‘good faith’” under California law “as part [of] its 12 determination of whether the settlement of the CERCLA claim[ ] is 13 fair, adequate, and reasonable.” Id. 14 California Code of Civil Procedure Sections 877 and 15 877.6 govern the determination of whether a proposed settlement 16 is in “good faith” under state law. Courts review the following 17 nonexclusive factors from Tech-Bilt, Inc. v. Woodward-Clyde & 18 Associates, 38 Cal. 3d 488 (1985), to determine if a settlement 19 is within a reasonable range and thus in good faith under 20 Sections 877 & 877.6: (1) a rough approximation of the 21 plaintiffs’ total recovery and the settlor’s proportionate 22 liability; (2) the amount to be paid in settlement; (3) the 23 allocation of settlement proceeds among the plaintiffs; (4) a 24 recognition that a settlor should pay less in settlement than he 25 would if he were found liable after a trial; (5) the financial 26 conditions and insurance policy limits of the settling 27 defendants; and (6) the existence of collusion, fraud, or 28 1 tortious conduct aimed to injure the interests of non-settling 2 defendants. See id. at 499. Ultimately, the determination is 3 left to the trial court’s discretion. Id. at 502. 4 A determination that the settlement was made in good 5 faith shall bar any other joint tortfeasor from any further 6 claims against the settling tortfeasor for contribution or 7 indemnity, based on comparative negligence or comparative fault. 8 Cal. Civ. Proc. Code § 877.6(c). 9 C. Application as to Plaintiffs’ Claims Against the 10 Settling Defendants 11 The first two Tech-Bilt factors require the court to 12 examine the amount to be paid in relation to the settlors’ 13 approximate proportionate liability. Guess settled with the city 14 for a lump sum payment of $50,000.00. Plaintiffs contend that 15 the cost of remediation of this site is upwards of $1.2 million. 16 (See Stone Decl. ¶ 7.) The parties place responsibility on the 17 settling defendant at between 4 and 5 percent of the total 18 remediation costs because Guess “was not an active contributor to 19 hazardous substances like the plating company which operated 20 there for many years.” (Joint Notice of Settlement at 10 (Docket 21 No. 98).) Plaintiffs also maintain that there are other 22 tortfeasors who are allegedly far more liable. Id. Analyzing 23 these allegations at this stage of the proceedings, the court 24 finds that this settlement amount reasonably approximates the 25 settlors’ proportionate liability. See N. Cty. Contractor’s 26 Assn. v. Touchstone Ins. Servs., 27 Cal. App. 4th 1085, 1088 (2d 27 Dist. 1994) (holding that courts must merely make an educated 28 1 finding about the parties’ liability). Therefore, these two 2 factors favor approving the settlement as to plaintiffs’ claims 3 against the settling defendant. 4 The third factor considers the allocation of the 5 settlement proceeds among the plaintiffs. Here, plaintiffs are 6 the City and the People of the State of California. The 7 settlement proceeds go only to the City. Nevertheless, these 8 plaintiffs are closely associated. The payments would presumably 9 go towards cleaning up the contamination at the site. In 10 remedying the property, the City would abate this nuisance to the 11 benefit of the People of the State of California. Therefore, 12 this factor favors approving the settlement. 13 The fourth factor acknowledges that settlors should pay 14 less in settlement than they would at trial. A $50,000.00 15 payment represents roughly 4.2 percent of the estimated $1.2 16 million cost of cleanup. With an estimated liability between 4 17 and 5 percent, it is likely that Guess would pay more at trial. 18 This settlement also saves the parties litigation costs and the 19 court’s time. Further, any judgments against Guess would be for 20 joint and several liability, which could hold her liable for a 21 larger portion of the judgment. Therefore, this factor favors 22 approving the settlement. See Coppola, 2017 WL 4574091, at *4. 23 The fifth factor accounts for the financial conditions 24 and insurance policy limits of the settling defendants. The 25 settling defendant has no insurance assets to pay for this 26 liability. (Joint Notice of Settlement at 10 (Docket No. 98).). 27 Defendant lives on a fixed disability income, is a retired widow, 28 1 and is unable to pay more than she has offered to pay. (Id.) 2 The settlement agreement accommodates defendant’s limited 3 financial resources and concludes the litigation for the settling 4 defendants. Therefore, this factor favors the settlement. 5 Finally, the sixth factor determines whether there is 6 any collusion, fraud, or tortious conduct aimed to injure the 7 interests of non-settling defendants. No collusion is apparent 8 here. Non-settling defendants agree that this is a reasonable 9 compromise of these defendant’s alleged liability. (See Docket 10 Nos. 98 & 108.) The absence of an opposition to the settlement 11 agreement “is highly telling and is clearly indicative of 12 reasonableness and good faith.” Coppola, 2017 WL 4574091, at *5. 13 Therefore, this factor favors approval of the settlement as well. 14 In sum, the balance of the Tech-Bilt factors weigh in 15 favor of a finding of reasonableness and good faith. There is 16 nothing else that suggests that the settlement is anything other 17 than fair, reasonable, and adequate. Accordingly, the court will 18 approve of the settlement of plaintiffs’ claims against settling 19 defendants and enter an indemnity and contribution bar order for 20 the settling defendants. 21 IT IS THEREFORE ORDERED that the settling parties’ 22 Motion for a Good Faith Settlement Determination (Docket No. 98) 23 be, and the same hereby is, GRANTED. The court ORDERS as follows: 24 1. Under California Code of Civil Procedure §§ 877 and 25 877.6, and 42 U.S.C. § 9613(f), the settlement agreement reached 26 by the settling parties is in good faith and is a fair, adequate, 27 and reasonable settlement as to plaintiffs’ claims against the 28 settling defendants; 2. No contribution or indemnity claims against Defendant Guess arising out of plaintiffs’ Third Amended Complaint or any related cross-claims or counterclaims will be ° allowed; and ° 3. The Plaintiff’s Third Amended Complaint is dismissed with prejudice as to Defendant Guess. 8 Dated: October 22, 2019 - aithow A, A. WILLIAM B. SHUBB 10 UNITED STATES DISTRICT JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10