Otay Land Co. v. U.E. Ltd., L.P., D068347

• Decision Date: 26 September 2017
• Docket Number: D069029,D068347
• Citation: 15 Cal.App.5th 806,225 Cal.Rptr.3d 119
• Court: California Court of Appeals Court of Appeals
• Parties: OTAY LAND COMPANY, LLC et al., Plaintiffs and Appellants, v. U.E. LIMITED, L.P., et al., Defendants and Appellants.

15 Cal.App.5th 806

225 Cal.Rptr.3d 119

OTAY LAND COMPANY, LLC et al., Plaintiffs and Appellants,

v.U.E. LIMITED, L.P., et al., Defendants and Appellants.

D068347

D069029

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

Filed September 26, 2017

Shoecraft Burton, Robert D. Shoecraft and Devin T. Shoecraft, San Diego, for Plaintiffs and Appellants.

Xavier Becerra, Attorney General, Sally Magnani, Assistant Attorney General, Susan Fiering and Andrew Wiener, Deputy Attorneys General, for amicus curiae on behalf of Plaintiffs and Appellants.

Lewis Brisbois Bisgaard & Smith, R. Gaylord Smith, Thomas A. Teschner and Brittany H. Bartold, San Diego, for Defendants and Appellants U.E., Limited, L.P., U.E. Limited, LLC, John T. Knox and Rose Patek.

Gatzke Dillon & Balance, Stephen F. Tee and Stephen A. Sunseri, Carlsbad, for Defendants and Appellants Baldwin Builders, The Otay Ranch, L.P. and Sky Vista, Inc.

O'ROURKE, J.

I.INTRODUCTION

These consolidated appeals involve a property where a shooting range had been operated for decades (the Property), its remediation by Plaintiffs Otay Land Company, LLC (OLC) and Flat Rock Land Company, LLC (FRLC) (collectively, Plaintiffs), and their efforts to recover remediation costs from former owners under the Carpenter-Presley-Tanner Hazardous Substances Account Act (HSAA; Health & Saf. Code, § 25300 et seq. ).¹ Defendants are former owner United Enterprises, Inc. (UEI) and its successors, including United Enterprises, Ltd. (UEL) (together, UE Defendants or UE), and former owner Baldwin Vista Associates, L.P. (now The Otay Ranch, L.P.) and certain of its general partners (together, Baldwin Defendants or Baldwin) (collectively, Defendants). Plaintiffs also asserted common law claims for continuing nuisance and continuing trespass, including in subsequent lawsuits that have been consolidated with this action.²

The case proceeded to a bench trial. The trial court's Statement of Decision addressed issues regarding whether Plaintiffs had a private right of action, liability, defenses, the allocation of costs, and cost reductions, each in the alternative, and held Plaintiffs should take nothing. The court entered judgment for Defendants. Defendants moved for attorney fees and costs, which the court denied.

Plaintiffs appeal from the judgment. The gravamen of their appeal is that the trial court erred in its interpretation and application of the HSAA. We agree, and as our analysis will reflect, several of these issues involve novel questions of law under the HSAA. We affirm certain rulings, reverse the judgment in all other respects, and remand with directions.

Defendants appeal from the court's denial of their fee and cost motions. In light of our reversal of the judgment, these appeals are moot.

II.FACTUAL AND PROCEDURAL BACKGROUND

A. Factual overview

Stephen Birch founded the predecessor to UEI, which purchased the Otay Ranch land encompassing the Property. In 1965, UEI opened a commercial shooting range on the Property, and the range remained in operation until 1978. In 1970, white fill material was used to build additional skeet and trap fields. Some, but not all, lead shot was recovered, and the only efforts to address target debris were to chop and cover it. In addition, the range was "disked" at various points (i.e., a tool known as a disk was used to cut through the ground and turn soil over). In 1986, UEI became a limited partnership (UEL), and the Estate of Mary Marshall Rand Birch Patrick (Stephen Birch's daughter) was one of the limited partners.

In 1988, UEL sold part of the Otay Ranch land to Baldwin, and the Estate received a promissory note encompassing the Property. A lessee reopened the range in 1990, and it remained operational until 1997. Again, some, but not all, lead shot was recovered, and no target debris was reclaimed. Baldwin also contracted with companies that used the land for wood chipping operations, the latter of which left a wood pile upon its departure.

The Estate took title to the Property in 1997, after Baldwin defaulted on its payment obligations and provided deeds in lieu of forfeiture. The Estate contacted Baldwin about the wood pile, and Baldwin hired a contractor to clean the wood pile to the surface. In 2003, OLC transferred the Property to FRLC, a wholly owned subsidiary. OLC and FRLC began the remediation process, during which it was determined the soil contained lead and polynuclear aromatic hydrocarbons (PAH's) attributable to the target debris, and that perchlorate on the site was from the white material.

FRLC applied pursuant to Health and Safety Code chapter 6.65 (§ 25260 et seq., herein the Assembly Bill No. 2061 process) for the San Diego County Department of Environmental Health (DEH) to be the administering agency for the remediation.³ During this process, DEH requested review by the California Department of Toxic Substances Control (DTSC). DTSC has oversight for response actions under the HSAA (§ 25323.3), and is authorized by the HSAA to initiate such actions, order responsible parties to do so, and recover costs incurred by the state, among other things. (See §§ 25355, 25358.3, 25360.) FRLC obtained a certificate of completion pursuant to the Assembly Bill No. 2061 process.

B. Litigation

Plaintiffs initially filed suit in 2003 in federal court, asserting claims against Defendants under the Resource Conservation and Recovery Act of 1976 (RCRA, 42 U.S.C. § 6901 et seq. ); the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA, 42 U.S.C. § 9601 et seq. ); the HSAA; and on other state law grounds. In 2006, the district court granted summary judgment on the CERCLA and RCRA claims, and declined to exercise jurisdiction over the state law claims. ( Otay Land Co. v. U.E. Ltd. L.P. (S.D. Cal. 2006) 440 F.Supp.2d 1152, 1157-1158.) In 2009, the Ninth Circuit vacated the judgment on ripeness grounds. ( Otay Land Co. v. United Enterprises Ltd. (9th Cir. 2009) 338 Fed.Appx. 689, 691.)⁴

In 2006, Plaintiffs sued Defendants in San Diego County Superior Court under the HSAA and for nuisance and trespass. Defendants filed motions for summary judgment and/or adjudication, which the trial court denied. In 2013, the case proceeded to trial. The court severed the nonjury HSAA claim from the jury issues. At the close of the bench trial, the parties submitted closing briefs. The trial court directed the parties to prepare proposed statements of decision. The court adopted Defendants' proposal, and did not proceed to a jury trial.

Relevant here, the court determined: (i) Plaintiffs did not have a right of action to recover their voluntarily-incurred remediation costs; (ii) Plaintiffs failed to establish Defendants were liable, because, among other things, the range was excluded under the " ‘consumer product in consumer use’ " exception for facilities and they did not establish disposals, as needed for liability; (iii) Defendants established defenses based on the HSAA's permitted release and nonretroactivity provisions (with the nonretroactivity determinations foreclosing the need for a jury phase), the statute of limitations, and a contractual release; (iv) in an equitable allocation of liability, Plaintiffs would bear 100 percent of costs; and (v) in addition to costs being unavailable (in the absence of a right of action), many costs claimed by Plaintiffs were not recoverable for other reasons.⁵

Plaintiffs filed objections, which the trial court overruled. The court entered judgment for Defendants. Defendants filed motions for attorney fees and costs, which the court denied. Plaintiffs appealed the judgment, and Defendants appealed the fee and cost rulings.

The State of California submitted an amicus brief in the Ninth Circuit in the federal case, and we invited the Attorney General to submit an amicus brief in this appeal. The parties were invited to respond. The Attorney General submitted a brief on behalf of amicus curiae DTSC, and the parties filed briefs in response.

III.DISCUSSION

A. Overview

1. Standard of review

When we review a statement of decision, "findings on questions of fact are reviewed under the substantial evidence standard." ( Brewer v. Murphy (2008) 161 Cal.App.4th 928, 935, 74 Cal.Rptr.3d 436.) We "infer any factual findings necessary to support the judgment," unless a party filed objections. ( Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 494, 498, 61 Cal.Rptr.3d 754.) We still "review[ ] the implied factual findings under the substantial evidence standard." ( Fladeboe v. American Isuzu Motors Inc . (2007) 150 Cal.App.4th 42, 60, 58 Cal.Rptr.3d 225.) "[C]onclusions of law are subject to independent review ...." ( Brewer , at p. 936, 74 Cal.Rptr.3d 436.) Only prejudicial error is grounds for reversal. ( Soule v. Gen. Motors Corp. (1994) 8 Cal.4th 548, 573-574, 34 Cal.Rptr.2d 607, 882 P.2d 298 ( Soule ); Cal. Const., art. VI, § 13.) "[T]rial error is usually deemed harmless in California unless there is a ‘reasonabl[e] probab[ility]’ that it affected the verdict. ... ‘[P]robability’ in this context does not mean more likely than not, but merely a reasonable chance , more than an abstract possibility ." ( College Hosp. Inc. v. Superior Court (1994) 8 Cal. 4th 704, 715, 34 Cal.Rptr.2d 898, 882 P.2d 894, citation omitted ( College Hosp. ).)

As to the arguments by amicus DTSC, we accord due weight to its views. (See People v. Snyder (2000) 22 Cal.4th 304, 310, 92 Cal.Rptr.2d 734, 992 P.2d 1102 ["In its amicus curiae brief, the FPPC supports this view, which ‘because of the agency's expertise ... is entitled to great weight unless clearly erroneous or unauthorized’ "]; Cal. State Teachers' Retirement System v. County of Los Angeles (2013) 216 Cal.App.4th 41, 52, fn. 3, 156 Cal.Rptr.3d 545 [noting amicus had "special expertise in [the] area [citation] and therefore its interpretation of the meaning and legal effect of [the statute] ‘[was] entitled to consideration and respect by the courts,’ " citing Yamaha Corp....