City of Los Angeles v. Works

• Citation: 635 F.3d 440
• Decision Date: 14 March 2011
• Docket Number: No. 08–56163.,08–56163.
• Parties: CITY OF LOS ANGELES, Plaintiff/Counter–Defendant/Appellant,v.SAN PEDRO BOAT WORKS, a California corporation, Defendant,andBCI Coca–Cola Bottling Company of Los Angeles, a Delaware corporation, Defendant/Counter–Claimant/Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

635 F.3d 440

11 Cal. Daily Op. Serv. 3144

2011 Daily Journal D.A.R. 3751

CITY OF LOS ANGELES, Plaintiff/Counter–Defendant/Appellant,

v.SAN PEDRO BOAT WORKS, a California corporation, Defendant,andBCI Coca–Cola Bottling Company of Los Angeles, a Delaware corporation, Defendant/Counter–Claimant/Appellee.

No. 08–56163.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 2, 2009.Filed March 14, 2011.

Rockard J. Delgadillo, Thomas A. Russell, Kenneth F. Mattfeld, San Pedro, CA, for the plaintiff-appellant.William F. Sullivan, Matthew J. Sanders, D. Scott Carlton, Los Angeles, CA; Stephen D. Kinnaird, Washington, D.C., for the defendant-appellee.Appeal from the United States District Court for the Central District of California, Audrey B. Collins, Chief District Judge, Presiding. D.C. No. 2:02–cv–07986–ABC–JWJ.Before: RONALD M. GOULD and CARLOS T. BEA, Circuit Judges, and DONALD W. MOLLOY,^* District Judge.

OPINION

BEA, Circuit Judge:

This case calls on us to determine, in the first instance, whether the holder of a revocable permit to use real property is an “owner” of that real property for purposes of imposing liability under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) for the cleanup of hazardous substances disposed on that property by others. A common sense reading of the statute and existing state law persuade us that this permittee, as the holder of a possessory interest, cannot be such an “owner” under CERCLA, and we so hold.

The City of Los Angeles (“the City”) appeals from the district court's grant of partial summary judgment in favor of BCI Coca–Cola Bottling Company of Los Angeles (“BCI Coca–Cola”). The City sued BCI Coca–Cola on ten counts arising from environmental contamination caused by operation of the San Pedro Boat Works located at Berth 44 in the Port of Los Angeles (“Berth 44”). The City seeks reimbursement for the expense of cleaning up hazardous substances disposed of at Berth 44. The parties do not dispute whether hazardous substances were released at Berth 44; they were. The disagreement is over who should pay the clean-up costs.

Under CERCLA, BCI Coca–Cola must pay if and only if it or its predecessor-in-interest—Pacific American ¹—was an “owner or operator” of the boatworks when the hazardous substances were disposed at Berth 44. See CERCLA, 42 U.S.C. §§ 9601–9675 (2006).² In a separate decision, the district court held that Pacific American, and thus BCI Coca–Cola, was not an “operator” of the boatworks at Berth 44. The City, for reasons unexplained by the record, did not appeal the district court's ruling on “operator” liability. We therefore focus our analysis on the district court's determination that Pacific American, and thus BCI Coca–Cola, was not an owner of the boatworks for purposes of CERCLA.

Because the definitions Congress provides in CERCLA for “owners” and “operators” are mere tautologies,³ this court has looked to the common law—including the state law of the property's location—for guidance in other cases when imposing CERCLA liability on possessors and owners of various property interests. See Burlington N. & Santa Fe Ry. Co. v. United States, ––– U.S. ––––, 129 S.Ct. 1870, 1881, 173 L.Ed.2d 812 (2009) (“Congress intended the scope of liability to ‘be determined from traditional and evolving principles of common law.’ ”) (quoting United States v. Chem–Dyne Corp., 572 F.Supp. 802, 808 (S.D.Ohio 1983)); Long Beach Unified Sch. Dist. v. Dorothy B. Godwin Cal. Living Trust, 32 F.3d 1364, 1368 (9th Cir.1994) (looking to the common law, including California common law, to determine whether an easement holder is an “owner” under CERCLA). Under California law, the holder of a revocable permit, like the easement holder in Long Beach, has only a possessory interest in the real property governed by the permit, an interest “which exists as a result of possession, exclusive use, or a right to possession or exclusive use of land unaccompanied by the ownership of a fee simple or life estate in the property.” Bd. of Supervisors v. Archer, 18 Cal.App.3d 717, 96 Cal.Rptr. 379, 386 (1971) (emphasis added). Given this common law distinction between ownership interests and possessory interests, and the juxtaposition of “owner” and “operator” in CERCLA—where “operator” liability has been construed expansively in this circuit and others—we conclude that Congress intended to give “owner” its common law meaning. We here hold that “owner” liability under CERCLA does not extend to holders of mere possessory interests in land, such as permittees, easement holders, or licensees, whose possessory interests have been conveyed to them by the owners of real property, which owners continued to retain power to control the permittee's use of the real property.

In conjunction with the more permissive “operator” liability, this narrow construction of “owner” liability furthers Congress's intent to hold liable both the passive fee title owner of real property who pollutes or acquiesces in another's discharge of harmful pollutants on his land, and the active (or negligent) operator of the facility who has only a possessory interest in the owner's real property. Under this construction, and in accordance with California common law, BCI Coca–Cola—as a permittee, subject to restrictions imposed by the landowner, City of Los Angeles, on BCI Coca–Cola's predecessor-in-interest—is not liable as an owner under CERCLA.

Further, the district court did not err in granting summary judgment to BCI Coca–Cola on the City's nuisance claims because the City did not raise a triable issue of fact that Pacific American ever had knowledge, or was put on notice, of the environmental contamination. Nor did the district court err in denying the City leave to amend its complaint to add a breach of contract claim against Pacific American. Therefore, we affirm.

I. Factual Background

Berth 44 is located within the Port of Los Angeles, which is itself part of the Los Angeles Harbor. It is owned by the City of Los Angeles and run by the Board of Harbor Commissioners. The Board of Harbor Commissioners “have the management, supervision and control ... of all navigable waters and all tidelands and submerged lands ... at Los Angeles Harbor.” Charter of the City of Los Angeles (“Charter”), Art. XI § 138. The Board of Harbor Commissioners is responsible for issuing franchises, permits, and leases for use of the land at the Los Angeles Harbor. Charter, Art. XI § 140(c)-(d).

In 1965, the Board of Harbor Commissioners issued Revocable Permit 936 to the Los Angeles Harbor Marine Corporation (“L.A. Harbor Marine”), for the limited purpose of operating a boatworks—a facility for the repair, maintenance, and rebuilding of ships and boats—on Berth 44. The permit granted possession of roughly 3 acres of land and 1.6 acres of water at Berth 44. From 1965 to 1969, L.A. Harbor Marine operated a boatworks at Berth 44. During this time, Pacific American began negotiations with L.A. Harbor Marine to purchase the permit. While those negotiations were ongoing, Pacific American incorporated San Pedro Boat Works; it became a wholly owned subsidiary corporation of Pacific American. Pacific American and L.A. Harbor Marine agreed on the terms of the sale, and with the City's necessary and prior approval, Pacific American purchased the permit in an asset sale that closed in August 1969.

In the close of the 1969 asset sale, Pacific American conveyed all of its interest in L.A. Harbor Marine's physical assets, not including Revocable Permit 936, to its wholly-owned subsidiary corporation, San Pedro Boat Works so that at no time did Pacific American ever own the boatworks assets. At closing, San Pedro Boat Works became the sole owner of the facilities and machinery at Berth 44.

Nevertheless, Pacific American's efforts to make San Pedro Boat Works wholly responsible for all things related to the boatworks on Berth 44 were not immediately successful. On August 4, 1969, Pacific American, not San Pedro Boat Works, accepted an assignment of Revocable Permit 936 from L.A. Harbor Marine. In April or May of 1970, Pacific American—not San Pedro Boat Works—obtained Revocable Permit 1076 from the Board of Harbor Commissioners to replace Revocable Permit 936. Not until June 1970 did Pacific American rid itself of its last direct connection to Berth 44 by assigning Revocable Permit 1076 to San Pedro Boat Works, which assignment was approved by the Board of Harbor Commissioners. Thus, Pacific American was the named permittee of Revocable Permits 936 and 1076 for operation of the boatworks for approximately ten months. The parties do not contest, however, that only San Pedro Boat Works operated the boatworks facility at all times, including during those ten months.

In 1974, Martin Vincent purchased the facilities and machinery of the San Pedro Boat Works. Although Pacific American remained the named permittee on Revocable Permit 1076, Vincent assumed San Pedro Boat Works's role as assignee of the permit upon his purchase of San Pedro Boat Works. In 1983, Vincent sold the assets of San Pedro Boat Works to Billfish, Incorporated, and Revocable Permit 1076 was assigned to Billfish. Subsequently, the City and Billfish entered into Revocable Permit 1737, replacing Revocable Permit 1076. In 1993, BCI Coca–Cola purchased Pacific American, including Pacific American's remaining assets and its liabilities. BCI Coca–Cola does not dispute that it acquired all of Pacific American's liabilities, and therefore stands in the shoes of Pacific American for the purposes of this case.

In 1995, the City first began to investigate the soil and groundwater at Berth 44. A variety of contaminants were discovered, including volatile organic compounds, petroleum hydrocarbons, polychlorinated biphenyls, polycyclic aromatic hydrocarbons, copper, lead, mercury, and chromium. In 2002 and 2003, subsea sediment samples collected...