Redevelopment Agency of The City of Stockton v. Bnsf Ry. Co.

• Decision Date: 28 June 2011
• Docket Number: 09–17640.,Nos. 09–16585,09–16739,s. 09–16585
• Citation: 643 F.3d 668
• Parties: REDEVELOPMENT AGENCY OF the CITY OF STOCKTON, Plaintiff–Appellee–Cross–Appellant,v.BNSF RAILWAY COMPANY; Union Pacific Railroad Company, Defendants–Appellants–Cross Appellees.Redevelopment Agency of the City of Stockton, Plaintiff–Appellee–Cross–Appellant,v.BNSF Railway Company; Union Pacific Railroad Company, Defendants–Appellants–Cross Appellees.Redevelopment Agency of the City of Stockton, Plaintiff–Appellee–Cross–Appellant,v.BNSF Railway Company; Union Pacific Railroad Company, Defendants–Appellants–Cross Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

643 F.3d 668

11 Cal. Daily Op. Serv. 7982

2011 Daily Journal D.A.R. 9655

REDEVELOPMENT AGENCY OF the CITY OF STOCKTON, Plaintiff–Appellee–Cross–Appellant,

v.BNSF RAILWAY COMPANY; Union Pacific Railroad Company, Defendants–Appellants–Cross Appellees.Redevelopment Agency of the City of Stockton, Plaintiff–Appellee–Cross–Appellant,

v.BNSF Railway Company; Union Pacific Railroad Company, Defendants–Appellants–Cross Appellees.Redevelopment Agency of the City of Stockton, Plaintiff–Appellee–Cross–Appellant,

v.BNSF Railway Company; Union Pacific Railroad Company, Defendants–Appellants–Cross Appellees.

Nos. 09–16585

09–16739

09–17640.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 14, 2011.Filed June 28, 2011.

Morgan Gilhuly (argued), John F. Barg, Donald Sobelman, Barg Coffin Lewis & Trapp, LLP, San Francisco, CA, for defendants-appellants-cross-appellees BNSF Railway Company and Union Pacific Railroad Company.William D. Brown (argued), Scott E. Patterson, Christine J. Gracco, Brown & Winters, Cardiff–by–the–Sea, CA, for plaintiff-appellee-cross-appellant Redevelopment Agency of the City of Stockton.Kevin M. Fong, Margaret Rosegay, Pilsbury Winthrop Shaw Pittman LLP, San Francisco, CA, for amicus curiae California Council for Environmental and Economic Balance.Benjamin G. Shatz, Fred L. Main, Manatt, Phelps & Phillips, LLP, Los Angeles, CA, for amicus curiae California Chamber of Commerce.Appeal from the United States District Court for the Eastern District of California, John A. Mendez, District Judge, Presiding. D.C. No. 2:05–cv–02087–JAM–JFM.

Before: M. MARGARET McKEOWN ^* and RICHARD C. TALLMAN, Circuit Judges, and ARTHUR J. TARNOW,^** Senior District Judge.

OPINION

TALLMAN, Circuit Judge:

Appellants BNSF Railway Company and Union Pacific Railroad Company (“the Railroads”) formerly maintained railroad tracks on a parcel of land in Stockton, California, that was contaminated by petroleum. The petroleum was spilled at a nearby industrial site and migrated onto the property via an underground french drain the Railroads had installed in order to remove water from the roadbed. We consider whether the Railroads are liable for the contamination of the property under the law of nuisance or under California's Polanco Redevelopment Act (“Polanco Act”), Cal. Health & Safety Code § 33459 et seq. We hold that they are not.

There is no evidence that the Railroads actively or knowingly caused or permitted the contamination as required for nuisance liability and liability under the Polanco Act's Water Code provision. Nor were the Railroads “owners” of the property under the Polanco Act's CERCLA provision when the contamination occurred. Because the record establishes no genuine issue of material fact as to the Railroads' liability, the Railroads are entitled to summary judgment. Therefore, we need not reach any of the damages issues on appeal or cross-appeal.

I

In 1968, in order to make room for the construction of a freeway interchange between Interstate 5 and State Highway 4 in Stockton, California, the State of California entered into a contract (“the Agreement”) with several railroad companies, predecessors-in-interest to the Railroads, to relocate existing railroad track from the proposed interchange site to a nearby State-owned parcel (“the Property”). Under the Agreement, the Railroads planned and approved grading and drainage improvements to the Property made by the State, including the installation of a “french drain” underneath the new roadbed. The french drain, a buried perforated pipe, was designed to improve soil stability by facilitating drainage. After these improvements were completed, the Railroads laid track on the Property. The Railroads agreed to maintain the track, roadbed and drainage, and the State agreed to convey to the Railroads all rights-of-way necessary for track operation. Although the Railroads began running trains over the track in 1970, the State did not actually transfer the deed to the underlying land to the Railroads until 1983.

In 1988, the Railroads sold their interest in the Property to Appellee, the Redevelopment Agency of the City of Stockton (“the Agency”), which planned to develop the site. In 2004, the Agency sold a portion of the Property known as “Area 3” to a commercial developer (while retaining those portions known as “Area 4” and “Area 24”) and indemnified the developer for costs incurred due to any then-existing contamination discovered on the site. When site excavation began in preparation for development, petroleum contamination was found in the soil along the path of the french drain and in the groundwater. Testing indicated that the contamination was at least twenty years old, and its likely source was determined to be the nearby L & M bulk petroleum facility (“the L & M Site”) where there had been several spills in the early 1970s, including a spill of up to 6,000 gallons of diesel fuel in 1974. It is undisputed that the french drain served as a preferential pathway through which the petroleum contamination migrated underground onto the Property.

After the contamination was discovered in July 2004, the developer and the Agency began to work with environmental consultants and regulators to develop a remediation workplan for Area 3. The Agency sent notices to the Railroads requesting that they prepare remedial action plans for Areas 3, 4, and 24, but the Railroads did not respond to any of them. In the fall of 2004, a trench approximately 300 feet long, 18 to 20 feet deep, and 15 to 20 feet wide was excavated on Area 3 to remove contaminated soil. The Agency incurred costs of over $1.3 million for this work, plus additional costs of nearly one-half million dollars for investigation and remediation work on Areas 4 and 24 between 2005 and 2008.

On September 29, 2005, the Agency sued the Railroads in California Superior Court, seeking cost recovery and an injunction requiring the Railroads to remediate any remaining contamination at the Property. The Agency alleged that the Railroads were liable for the contamination under the Polanco Redevelopment Act as well as the common law of nuisance. The Railroads removed the action to the United States District Court for the Eastern District of California under diversity jurisdiction. The Railroads and the Agency filed cross-motions for summary judgment. On June 19, 2007, the district court ruled that the Railroads were liable for the contamination under the law of nuisance and under the Polanco Act's Water Code provision,¹ but not under the Polanco Act's CERCLA provision. See Cal. Health & Safety Code § 33459(h). The Agency was awarded over eight hundred thousand dollars in damages and an injunction. The parties appeal and cross-appeal as to the findings of liability and the damages award.

II

We have jurisdiction under 28 U.S.C. § 1291. We review de novo a district court's ruling on cross-motions for summary judgment. Trunk v. City of San Diego, 629 F.3d 1099, 1105 (9th Cir.2011). We view the evidence in the light most favorable to the nonmoving party and determine “whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law.” Id. (citation omitted). When the district court disposes of a case on cross-motions for summary judgment, we may review both the grant of the prevailing party's motion and the corresponding denial of the opponent's motion. Id.; see Jones–Hamilton Co. v. Beazer Materials & Servs., Inc., 973 F.2d 688, 694 n. 2 (9th Cir.1992).

III

California law defines a nuisance, in part, as “[a]nything which is injurious to health ... or is indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property....” Cal. Civ.Code § 3479. To qualify as a nuisance “the interference must be both substantial and unreasonable.” People ex rel. Gallo v. Acuna, 14 Cal.4th 1090, 1105, 60 Cal.Rptr.2d 277, 929 P.2d 596 (1997) (emphasis in original); see also San Diego Gas & Elec. Co. v. Superior Court, 13 Cal.4th 893, 938–39, 55 Cal.Rptr.2d 724, 920 P.2d 669 (1996). It is undisputed that the soil and groundwater contamination in this case constitutes a nuisance. See California v. Campbell, 138 F.3d 772, 776 (9th Cir.1998) (citing Carter v. Chotiner, 210 Cal. 288, 291, 291 P. 577 (1930)); Selma Pressure Treating Co. v. Osmose Wood Preserving Co. of Am., 221 Cal.App.3d 1601, 1619, 271 Cal.Rptr. 596 (1990). The question is whether the Railroads are liable for it.

At the outset, we clarify how the concept of “unreasonableness” plays into nuisance liability. The Railroads invoke Lussier v. San Lorenzo Valley Water District, 206 Cal.App.3d 92, 253 Cal.Rptr. 470 (1988), for the proposition that nuisance liability requires an unreasonable act. See id. at 101, 253 Cal.Rptr. 470 (noting that nuisance liability can arise “only for such interferences as are intentional and unreasonable or result from negligent, reckless or abnormally dangerous conduct” (internal quotation marks and citation omitted)). However, this proposition confuses the concept of an unreasonable interference, which is required for nuisance liability, with an unreasonable or negligent act, which is not. An intentional but not unreasonable act can give rise to nuisance liability if it creates an unreasonable interference. See id. at 105–06, 253 Cal.Rptr. 470; Shields v. Wondries, 154 Cal.App.2d 249, 255, 316 P.2d 9 (1957) (noting that a private nuisance may result from “skillfully directed efforts,” such as the non-negligent construction of improvements on one's property, which nonetheless infringe upon a neighbor's property rights).

If the Railroads created or assisted in the creation of the nuisance on the Property by installing and maintaining the french drain, they are liable, regardless of whether the installation and maintenance of the french drain was conducted in a reasonable manner...