Karras v. Teledyne Industries, Inc.

• Decision Date: 25 March 2002
• Docket Number: No. 99CV0996BTMJAH.,99CV0996BTMJAH.
• Parties: Stath KARRAS, as Trustee of the Chatham Site PRP Group Trust Fund, et al., Plaintiffs, v. TELEDYNE INDUSTRIES, INC., et al. Defendants.
• Court: U.S. District Court — Southern District of California

191 F.Supp.2d 1162

Stath KARRAS, as Trustee of the Chatham Site PRP Group Trust Fund, et al., Plaintiffs, v. TELEDYNE INDUSTRIES, INC., et al. Defendants.

No. 99CV0996BTMJAH.

United States District Court, S.D. California.

March 25, 2002.

COPYRIGHT MATERIAL OMITTED

James J. Dragna, Daniel W. Nugent, Tiffany Hedgpeth, McCutchen, Doyle, Brown & Enerson, LLP, Los Angeles, CA, for Defendants.

Steven P. McDonald, Cordon T. Baesel, Stephanie E. Kish, Luce, Forward, Hamilton & Scripps, LLP, San Diego, CA, for Plaintiffs.

ORDER DENYING MOTION FOR SUMMARY JUDGMENT

MOSKOWITZ, District Judge.

Defendants Teledyne Industries and Teledyne Holdings, LLC (collectively, "TDY") filed this motion for summary judgment on August 23, 2001. For the reasons discussed below, TDY's motion is DENIED.

I. BACKGROUND

This is an action for recovery of clean up costs under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601, et seq. Plaintiffs are Stath Karras, as Trustee of the Chatham Site PRP Group Trust Fund and Stath Karras, as Trustee of the Chatham Site PRP Group RAP Trust Fund ("Plaintiffs" or "Plaintiff trusts"). Plaintiffs initiated suit against various defendants seeking contribution for costs plaintiffs allegedly incurred while investigating and cleaning up contamination at the Chatham Brothers Barrel Yard in Escondido, California.

The material facts are undisputed.¹ In late 1991, the California Department of Toxic Substances Control ("DTSC") issued a demand to potentially responsible parties ("PRPs") to reimburse DTSC for almost $8,000,000 in past response costs incurred at the Chatham Site. In 1992, a group of the PRPs ("PRP Group") entered into an Imminent and Substantial Endangerment Order ("Consent Order") with DTSC, which required the PRP Group to perform work on the Site and develop a Remedial Action Plan ("RAP"). The PRP Group executed the Chatham Site PRP Group Trust Agreement ("Trust Agreement") on October 27, 1992 to perform the work outlined in the Consent Order. Following a lawsuit brought by DTSC on November 18, 1998, the PRP Group entered into a Consent Decree with DTSC, approved by the Court in 1999, to implement remedies at the Site. The PRP Group executed the Chatham Site PRP Group RAP Trust Agreement ("RAP Trust Agreement") on December 8, 1998 to perform the work outlined in the Consent Decree. Grantors of the Trust Agreement and RAP Trust Agreement are parties to the Consent Order and Consent Decree with DTSC.

The Trust Agreements contain similar language relating to the purpose of the trust, grantor contributions to the fund, termination of the fund, and express powers of the trustee. The Grantors have not assigned their CERCLA claims or obligations to the Trusts. However, the stated purpose of the RAP Trust Agreement is:

to obtain, hold, invest, and disburse funds, in trust, for the benefit of the Grantors in such a manner as to satisfy the obligations of Grantors pursuant to the RAP Consent Order and RAP Site Participation Agreement with respect to removal and remediation of alleged environmental contamination at the Site and resolution, in part, of the Grantors' alleged liability for remediation of environmental contamination at the Site and, further, to enter into contracts and agreements as directed by the Executive Committee. To fulfill this purpose, the Trustee shall thoroughly familiarize himself with the terms of the RAP Consent Order and the RAP Site Participation Agreement.

The Grantors are obligated to make payments into the Trust funds pursuant to the Site Participation Agreement, which sets forth the manner in which the Grantors will comply with the Consent Order and Consent Decree. The Trusts are funded by payments from the grantors, escrow accounts and settling third parties. Upon termination of the Consent Order and Consent Decree, the Trustee must liquidate the assets of the Fund and distribute the remaining trust property to the grantors, subject to limitations set forth in paragraphs 4.4 and 6.11 of the Trust Agreements.

The Trustee has sole power to perform certain functions, such as to hold, invest and manage the Trust assets, pay administrative costs of the Trusts, retain the services and pay compensation to an accountant, attorney or investment advisor. In addition, the Trustee is required by law to perform his fiduciary obligations pursuant to Cal. Prob.Code §§ 16000-07, 16045-54. To date, the Trustee has used assets of the Trusts to pay DTSC for response costs, as well as contractors and environmental consultants for assessment and removal/remediation of hazardous substances. (Karras Decl., Exh. 3-8.)

With respect to some of his functions, the Trustee takes direction from the Executive Committee, which is elected by the PRP Group. For example, the Executive Committee directs the Trustee to "institute and defend litigation on behalf of or in the name of the Grantors." Furthermore, the Executive Committee directs the Trustee to execute contracts and agreements.

In an Order dated December 3, 1999, this Court dismissed plaintiffs' common law claim for equitable indemnity and upheld Plaintiffs' claim for contribution and declaratory judgment under section 113 of CERCLA, 42 U.S.C. § 9613. The Order also clarified that plaintiffs cannot maintain an independent CERCLA section 107 claim for cost recovery because section 107 claims are limited to innocent parties, stating that, here, plaintiffs are "undeniably PRPs." The Order did not dismiss plaintiffs section 107 claims even though plaintiffs were found to be PRPs, not innocent parties, since a CERCLA section 113 claim for equitable contribution is grounded on the imposition of liability identified in section 107(a).

II. DISCUSSION

TDY argues that it is entitled to summary judgment because plaintiffs have not incurred response costs as required by CERCLA sections 107 and 113, are not the real parties in interest pursuant to Fed. R.Civ.P. 17(a), and lack standing.

A. Cost recovery actions under CERCLA

Section 107(a) of CERCLA, 42 U.S.C. § 9607(a), authorizes suits against certain statutorily defined responsible parties to recover costs incurred in cleaning up hazardous waste disposal sites. Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298 (9th Cir.1997). Section 107(a) establishes that PRPs shall be liable for:

(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan;

(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan....

42 U.S.C. § 9607(a)(4)(A) & (B).

CERCLA provides two ways for parties to recover environmental response costs. The section 107(a) cost recovery provision permits the government or an "innocent" private party to recoup cleanup costs from PRPs. PRPs are held jointly and severally liable under this cost recovery provision. See, e.g., M & M Realty Co. v. Eberton Terminal Corp., 977 F.Supp. 683 (M.D.Pa.1997) (noting that every court that has faced the issue has concluded that an innocent landowner can sue other PRPs for joint and several liability).

The other method of recovering environmental response costs involves section 113(f)(1), the contribution provision. It allows a PRP to seek contribution from other PRPs if it assumed a disproportionate share of the cleanup costs. Under section 113(f)(1) and 113(g), courts have the discretion to allocate liability for past costs and enter a declaratory judgment for future costs. CERCLA's claim for contribution creates several-only liability. Pinal Creek Group, 118 F.3d at 1303. Claims for contribution only occur between coliable parties. Id. at 1306. In further distinction, the statute of limitations for cost recovery actions is six years, whereas it is three years for contribution actions. See 42 U.S.C. § 9613(g)(2), (3). However, a PRP's contribution action finds implicit recognition in section 107; section 113 merely regulates its implementation. Id. at 1305 n. 7. Thus, plaintiffs asserting actions for both cost recovery and contribution must demonstrate that they have "incurred" necessary response costs. See Boeing Co. v. Cascade Corp., 207 F.3d 1177, 1182 (9th Cir.2000) ("CERCLA provides that a party that releases a hazardous substance is liable for another's response costs, but only if its release caused the other party to incur those response costs ....").

The Ninth Circuit explained the rationale for CERCLA's requirement that private parties "incur" response costs prior to obtaining cost recovery or contribution in In re Dant & Russell, Inc., 951 F.2d 246 (9th Cir.1991). In that case, the Court of Appeals reversed the district court's award of future response costs in a CERCLA action between two liable parties, noting that plaintiffs may obtain a declaratory judgment on liability for future response costs under section 113(g), so long as they have actually incurred some costs. Dant & Russell, 951 F.2d at 249. The court explained the policy behind the "incur costs" requirement:

These sections envision that, before suing, CERCLA plaintiffs will spend some money responding to an environmental hazard. They can then go to court and obtain reimbursement for their initial outlays, as well as a declaration that the responsible party will have continuing liability for the cost of finishing the job.

... [A]ctual cleanup is encouraged by requiring plaintiffs to incur response costs before they can recover them. Since CERCLA places no strings on the award of response costs, allowing recovery for future costs absent any binding commitment to incur these costs would leave no incentive to complete the cleanup.

Id. However, the Dant & Russell court also stated that the "case provides no occasion for defining what `incurred' means— only what it does not mean." Id.

B. CERCLA's Incur Costs Requirement

TDY argues that the Trusts have...