U.S. v. Montrose Chemical Corp. of California, s. 1-3

Citation50 F.3d 741
Decision Date21 March 1995
Docket Number93-55876,8-9,Nos. 93-55824,11,Nos. 1-5,Nos. 1-3,5-7,14-23,D,26-29 and 32-35,s. 1-3,s. 1-5,s. 93-55824
Parties, 25 Envtl. L. Rep. 20,703 UNITED STATES of America; State of California, ex rel. Department of Fish & Game, State Lands Commission; and Department of Parks & Recreation, Plaintiffs-counter-defendants-third-party-defendants-Appellees, v. MONTROSE CHEMICAL CORPORATION OF CALIFORNIA; Chris-Craft Industries, Inc.; Stauffer Management Company; ICI American Holdings, Inc.; Atkemix Thirty-Seven, Inc.; Rhone-Poulenc Basic Chemicals Company, Defendants-counter-claimants-cross-claimants-Appellants, v. CITY OF LOS ANGELES; County of Los Angeles; City of Long Beach; Orange County Municipalities and Sanitation District in Orange County; Ventura County Municipalities and Sanitation Districts in Ventura County; San Bernardino County Municipalities, Water & Sanitation Districts, Third-party-defendants-Appellees, and DDT Industrial; PCB Industrial; Los Angeles County Sanitation District and other County Sanitation District of Los Angeles County, Defendants-Appellees. UNITED STATES of America; State of California, ex rel. Department of Fish & Game, State Lands Commission, and Department of Parks & Recreation, Plaintiffs-Appellees, v. MONTROSE CHEMICAL CORPORATION OF CALIFORNIA, Defendant, and CITY OF LOS ANGELES; The Cities of Alhambra; Arcadia; Artesia; Azusa, et al.; The Cities of Agoura Hills; Avalon; Beverly Hills; Burbank, et al.; County of Los Angeles; Los Angeles County Flood Control District; Los Angeles County West Mosquito Abatement District, et al.; City of Long Beach; The Cities of Anaheim; Brea; Buena Park; Costa Mesa, et al.; Orange County Sanitation Districts, and 13-14; Costa Mesa Sanitary District; Garden Grove Sanitary District; Midway City Sanitary District, et al.; The Cities of Oxnard; Port Hueneme; San Buenaventura; Thousand Oaks; Ventura Regional Sanitation District; City of Camarillo; Camarillo Sanitary District; Channel Islands Beach Community Service District, et al.; The Cities of Chino; Fontana; Montclair; Ontario; Upland; Cucamonga County Water District;
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Karl S. Lytz (argued), Kristine L. Wilkes and David J. Barrett, Latham & Watkins, San Diego, CA, for appellant Montrose Chemical Corp. of California.

Charles B. Cohler, Lasky, Haas, Cohler & Munter, San Francisco, CA, for appellant Westinghouse Elec. Corp. (on the briefs).

Andrea Nervi Ward (argued), U.S. Dept. of Justice, Environment & Natural Resources Div., Washington, DC, for plaintiffs-appellees.

Lloyd S. Guerci (argued), Mayer, Brown & Platt, Washington, DC; and Wesley G. Beverlin, Knapp, Marsh, Jones & Doran, Los Angeles, CA, for appellees Los Angeles County Sanitation Districts.

Appeals from the United States District Court for the Central District of California.

Before: GIBSON *, HUG, and HAWKINS, Circuit Judges.

HAWKINS, Circuit Judge:

We consider here the fairness and reasonableness of a settlement in an environmental action brought under CERCLA. 1 Appellants challenge the settlement (involving other parties) because, they claim, the district court did not have sufficient information before it to properly determine whether the decree--which provided for a $45.7 million settlement with the Los Angeles County Sanitation District and approximately 150 local governmental entities--was "reasonable, fair, and consistent with the purposes that CERCLA is intended to serve." See United States v. Cannons Engineering Corp., 899 F.2d 79, 85 (1st Cir.1990) (quoting H.R.Rep. No. 253, Pt. 3, 99th Cong., 1st Sess. 19 (1985), reprinted in 1986 U.S.Code Cong. & Admin.News 3038, 3042).

Because we find that the district court could not adequately evaluate the fairness and reasonableness of the proposed consent decree without having before it at least an estimate of the projected total natural resource damages at issue in this case, we vacate the district court's approval of the consent decree and remand the matter for the court to determine whether--in light of the governments' best estimate of projected total natural resource damage, as well as the numerous other factors properly considered in the evaluation of a settlement of this type--the proposed consent decree is fair, reasonable and consistent with the objectives of CERCLA.

BACKGROUND
1. The Lawsuit

In a two-count complaint filed in 1990, the United States and the State of California ("the governments") sued several corporations and the County Sanitation District No. 2 of Los Angeles County ("LACSD") seeking natural resource damages and response costs under CERCLA.

The governments' first claim for relief sought damages pursuant to 42 U.S.C. Sec. 9607(f)(1) for destruction of, injury to, or loss of natural resources in the waters off the coast of Los Angeles. Those waters include the San Pedro Channel and the area surrounding the Palo Verdes Peninsula, the Los Angeles-Long Beach Harbors, and the waters off Santa Catalina Island and the Channel Islands. The governments allege that natural resource damages in these areas were caused by the release of hazardous substances, including DDT and PCBs. The The second claim for relief, brought by the United States on behalf of the EPA, sought recovery of response costs for clean-up of the Montrose Chemical manufacturing site in Torrance, California. Only those corporations associated with the Montrose site were defendants under the second claim.

release of these hazardous substances dates back to the late 1940s.

2. The Parties
(a) The Corporate Defendants

The natural resource damages claim identified nine separate corporate defendants charged with releasing DDT and PCBs into the affected areas. These nine defendants fall into three distinct groups: the Montrose Defendants, Westinghouse, and the Potlatch-Simpson Defendants.

(i) The Montrose Defendants

Montrose Chemical Corporation of California ("Montrose") operated a DDT manufacturing plant in Torrance, California from 1947 to 1982. Montrose allegedly disposed of process waste containing DDT through ocean dumping, discharge into the sewer collection system operated by LACSD, surface water runoff from its plant site into the Los Angeles/Long Beach Harbors, and aerial dispersal of waste from its manufacturing operations. The governments claim that Montrose released as much as 5,500,000 pounds of DDT into the affected areas. See U.S. v. Montrose Chemical Corp. of California, 793 F.Supp. 237, 240 (C.D.Ca.1992) (Montrose I ). 2

(ii) Westinghouse

Westinghouse Electric Corporation ("Westinghouse") is also identified as a defendant. Westinghouse operated an electrical transmission equipment maintenance and repair plant in Los Angeles from the late 1950s until its recent closing. The governments charged Westinghouse with the release of wastewater containing PCBs into the LACSD and, in turn, into the Pacific Ocean. LACSD reports indicate that Westinghouse discharged as much as 38,000 pounds of PCBs into the LACSD system. Id.

(iii) The Potlatch-Simpson Defendants

Potlatch Corporation, which operated a paper manufacturing plant in Pomona, California from 1952 to 1979, was charged with releasing wastewater containing PCBs into the LACSD system. Simpson Paper Company purchased the Potlatch facility in 1979 and continued Potlatch's wastewater disposal practices. The governments estimate that the Potlatch-Simpson defendants released as much as 4,500 pounds of PCBs into the affected areas. Through a consent decree similar to the one at issue in this appeal, the Potlatch-Simpson defendants settled with the governments in 1992.

(b) LACSD

The governments also named LACSD as a defendant. LACSD is a publicly-owned sewage system that discharges treated effluent into the Pacific Ocean. The governments allege that LACSD received wastewater from the Montrose, Westinghouse and Potlatch-Simpson defendants and did not remove all the DDT and PCBs from the wastewater it discharged.

(c) The Third-Party Local Government Entity Defendants

In response to the governments' lawsuit, the corporate defendants filed third-party claims against 150 local government entities. The local government entities are cities, counties and other governmental bodies that, according to the corporate defendants, discharge various substances, including pollutants, into the affected area. Specifically, the corporate defendants allege that the local governmental entities owned or used sanitation systems and storm runoff systems that

discharged wastewater into the ocean, or otherwise engaged in activities (such as mosquito abatement) that may have resulted in the discharge of hazardous substances, like DDT, into the environment.

3. The Special Master and Settlement Discussions

The district court appointed Harry V. Peetris, a retired Los Angeles Superior Court Judge, to act as Special Master for the lawsuit to supervise all non-dispositive pretrial proceedings and to conduct and supervise settlement negotiations. The Special Master divided the defendants into four groups for purposes of settlement discussions: (1) Montrose, (2) Westinghouse, (3) Potlatch-Simpson, and (4) LACSD and the 150 third-party local governmental entities. Each of the four groups met separately with the governments and the Special Master, and the defendants were prohibited by a confidentiality order from discussing among themselves the substance of their settlement negotiations. See Montrose I, 793 F.Supp. at 241.

At the Special Master's instruction, the governments created and...

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