Orange Cnty. Water Dist. v. Arnold Eng'g Co.

• Decision Date: 19 December 2018
• Docket Number: D070763
• Citation: 31 Cal.App.5th 96,242 Cal.Rptr.3d 350
• Parties: ORANGE COUNTY WATER DISTRICT, Plaintiff and Appellant, v. The ARNOLD ENGINEERING COMPANY, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

31 Cal.App.5th 96

242 Cal.Rptr.3d 350

ORANGE COUNTY WATER DISTRICT, Plaintiff and Appellant,

v.The ARNOLD ENGINEERING COMPANY, Defendant and Respondent.

D070763

Court of Appeal, Fourth District, Division 1, California.

Filed December 19, 2018

Certified for Partial Publication.^*

Connor, Fletcher & Hedenkamp, Edmond M. Connor, Douglas A. Hedenkamp, Irvine; Miller & Axline, Duane C. Miller, Michael D. Axline, Sacramento, and Justine Massey for Plaintiff and Appellant.

Musick, Peeler & Garrett, Steven J. Elie, Los Angeles, Donald E. Bradley, Costa Mesa, and Cheryl A. Orr, Los Angeles, for Defendant and Respondent.

HALLER, J.

The Orange County Water District (the District) appeals a postjudgment order awarding The Arnold Engineering Company (Arnold) approximately $615,000 in costs of proof under Code of Civil Procedure section 2033.420 based on the District's failure to admit certain fact-specific requests for admission (RFAs) during discovery.¹ The District contends the trial court erred in making the award because (1) the District had reasonable grounds to believe it would prevail on the matters at issue under section 2033.420, subdivision (b)(3), and (2) even if it did not, Arnold did not adequately substantiate its costs with admissible evidence.

We conclude the court abused its discretion in awarding costs for certain RFAs because the District reasonably relied on percipient witness testimony, undisputed scientific testing, and the opinions of a qualified expert in denying the RFAs. The court did not err with respect to other RFAs, which covered matters the District did not pursue at trial. We further conclude that certain evidence, in the form of expert witness invoices, was inadequate to support an award under the circumstances here because it did not distinguish between recoverable and nonrecoverable costs. We will therefore reverse the order and remand for the court to make a new award consistent with this opinion.²

FACTUAL AND PROCEDURAL BACKGROUND

The District's Allegations and Arnold's Discovery Requests

The District is a public entity established by the California Legislature and empowered to manage, replenish, regulate, and protect groundwater supplies within its boundaries. (West's Ann. Wat. Code App. (2016 ed.) ch. 40, §§ 1, 2.) It brought this action to recover expenses associated with the North Basin Groundwater Protection Project (NBGPP), a proposed $200 million effort intended to address groundwater contamination in northern Orange County, California caused by volatile organic compounds (VOCs) and other chemicals. The District named as defendants a number of current and former owners and operators of industrial sites in the project area, including Arnold, that it believed were responsible in some way for VOC contamination in groundwater.

VOCs can be used in industrial solvents and cleaners. The primary VOCs at issue in this litigation include tetrachloroethylene (also known as perchloroethylene or PCE), trichloroethylene (TCE), 1,1-dichloroethylene (1,1-DCE), and 1,1,1-trichloroethane (1,1,1-TCA). The last chemical, 1,1,1-TCA, breaks down over time into 1,1-DCE and acetic acid. The detection of 1,1-DCE in soil or groundwater can therefore be evidence of past 1,1,1-TCA contamination. Another chemical, 1,4-dioxane, was commonly added to 1,1,1-TCA as a stabilizer.

Arnold owned and operated an industrial site at 1551 East Orangethorpe Avenue in Fullerton from 1960 through 1984. Arnold admitted using 1,1,1-TCA, but it contended that none of its operations resulted in VOC releases into the environment and none of its operations resulted in VOC contamination of groundwater. It denied using PCE or TCE at all.

After more than six years of litigation, and six months before trial, Arnold served RFAs on the District asking it to admit that (1) Arnold did not release PCE, TCE, 1,1,1-TCA, or 1,4-dioxane during its business operations at the site; (2) Arnold did not release PCE, TCE, 1,1,1-TCA, or 1,4-dioxane that caused contamination of groundwater in the North Basin area; and (3) Arnold did not contribute to VOC contamination in soil or groundwater in the area surrounding its site. The District denied these RFAs.

Evidence Revealed in Pretrial Discovery

Documents produced in discovery showed that Arnold applied for and obtained permits to operate a number of vapor degreasers and dip tanks (or "strippers") at its site. VOC solvents can be used in degreasers and strippers. A number of the documents produced in discovery identified 1,1,1-TCA as a VOC solvent used by Arnold, including one that described a 550-gallon above-ground storage tank for that chemical. Other documents did not specify any solvent.³

Arnold also operated one or more clarifiers. Although clarifiers do not themselves make use of VOC solvents, they can be a source of VOC discharge into the environment because they may process VOC-contaminated wastewater generated by other activities.

Donalee Farmer, a former Arnold maintenance manager, testified at deposition that he was aware of Arnold's use of only one chemical, 1,1,1-TCA, in a degreaser. He was not aware of any spills of 1,1,1-TCA at the site. He did not know which chemicals were used in Arnold's stripping operations.

Dan Hopen, another former Arnold employee, testified at deposition that Arnold used PCE as a stripper. He said "stripper solution" spilled onto the floor "all the time." Hopen also testified that Arnold used "trichloroethylene" (TCE) in its degreaser. When he was asked whether he ever saw a barrel with that name on it, Hopen answered, "Yeah, I think because—didn't actually—I don't know if it said trichloroethylene or Tri-111 or something like that. It might have had both on there. I'm not certain."

Farmer was aware of only one clarifier used by Arnold, which was inside the building. He testified that Arnold did not use a clarifier at the location identified as the "South Clarifier" in subsequent investigations. A 1986 inspection, however, revealed five different clarifiers at the site, including two outside the building, i.e., the "North Clarifier" and the "South Clarifier."

In the decades after Arnold left, various entities investigated potential VOC contamination at the site. Basic testing began in 1988, about four years after Arnold ceased operation. PCE contamination, along with small amounts of TCE and 1,1,1-TCA, was discovered. In 1995, more testing revealed PCE, TCE, 1,1,1-TCA, and 1,1-DCE contamination in the shallow soil. That year, TCE and 1,1-DCE were also detected in deeper samples, down to 105 feet below ground level, which was the deepest level tested. PCE was detected down to approximately 60 feet below ground level. 1,1,1-TCA was detected only once, at a level of 60 feet below ground level. Groundwater was encountered at 115 feet below the surface, but it was not tested. Further testing in 2007 revealed extensive PCE, TCE, 1,1,1-TCA, and 1,1-DCE contamination in shallow soil at additional locations on the site.

The District retained an expert witness, Richard Waddell, to analyze the extent and impact of VOC contamination at Arnold's former site. Waddell holds a doctoral degree in geology and is a registered geologist with the State of California. He described his experience in his resume as follows: "More than 30 years of post-graduate experience which includes RCRA/CERCLA ^{[4 ]} investigations; numerical modeling of flow and contaminant fate and transport processes in porous and fractured media; hydrogeologic characterization studies of deep and shallow groundwater systems; reclamation of uranium mill tailings; geochemical studies of inorganic contaminants; conceptual design and analysis of remedial actions; and litigation support." At trial, Arnold did not challenge Waddell's qualifications as an expert.

In his expert report, dated approximately two weeks prior to the District's RFA responses, Waddell summarized Arnold's activities at the site and the contamination found there. He believed, based on the evidence, that Arnold used PCE, TCE, and 1,1,1-TCA in its operations. He opined that Arnold's stripping activities involved a risk of spillage, and he found no evidence of VOC use by any other occupant of the site. For example, in his deposition, Farmer explained that he worked for the prior occupant of the site, Ensign Carburetor, and was not aware of any use of VOCs during their occupancy. A subsequent occupant of the site used solvents in its manufacturing processes for picture frames, but there was no evidence it used any of the chemicals at issue in this litigation.

Waddell explained, "The use of PCE, TCE, and 1,1,1-TCA by [Arnold] has contaminated soils beneath the building, beneath the clarifier, and a degreaser. Soils north of the building, including on the neighboring property [Johnson Controls] to the north, were also contaminated." With respect to the Johnson Controls site, Waddell's report noted that Johnson Controls' use of solvents was "limited" and the concentrations of VOC contamination in soil at the Johnson Controls site were lower than concentrations at the Arnold site. Waddell believed VOC releases at the Arnold site had impacted the Johnson Controls site.

To assess the effect of contamination at the Arnold site on groundwater, Waddell analyzed grab samples of groundwater upgradient and downgradient of the site. (There was no groundwater contamination data for the site itself.) A "grab sample" is "a sample that's collected at a particular depth in a one-time event." Waddell found that concentrations of TCE and 1,1-DCE increased as groundwater passed under site. Waddell opined that TCE and 1,1-DCE, as well as 1,4-dioxane, had impacted groundwater as a result of VOC releases by Arnold. However, Waddell wrote it was "not clear" whether PCE had similarly impacted groundwater.

Arnold's expert witness, Jonathan Rohrer, largely disagreed with Waddell's conclusions. Further details regarding his opinions will be discussed below. At his deposition, however, Rohrer...