Stanton Road Associates v. Lohrey Enterprises
| Decision Date | 28 January 1993 |
| Docket Number | No. 91-15729,91-15729 |
| Citation | 984 F.2d 1015 |
| Parties | , 61 USLW 2472, 23 Envtl. L. Rep. 20,540 STANTON ROAD ASSOCIATES, Plaintiff-Appellee, v. LOHREY ENTERPRISES, Electronic Valet Systems, Inc., David Lohrey, Nathan Pang, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Robert H. Bunzel, Bartko, Tarrant & Miller, San Francisco, CA, for defendants-appellants.
Steven L. Hock, Thelen, Marrin, Johnson & Bridges, San Francisco, CA, for plaintiff-appellee.
Appeal from the United States District Court for the Northern District of California.
Before: SNEED, ALARCON and CANBY, Circuit Judges.
Appellants Lohrey Enterprises, Inc., Electronic Valet Systems, Inc., David Lohrey, and Nathan Pang (collectively, "Lohrey") appeal from the award of attorneys' fees to Stanton Road under section 107(a)(4)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. § 9607(a)(4)(B). Lohrey also seeks reversal of the order requiring it to pay $1,100,000 in monetary damages to Stanton Road Associates ("Stanton Road") for deposit in an escrow account to fund the clean-up of Stanton Road's property.
This case presents us with two novel issues. First, we must decide whether Congress has explicitly authorized attorneys' fees to private litigants as part of the response costs incurred in cleaning up property contaminated by a hazardous substance. We are also confronted with the question regarding whether a district court may order a party found liable for contamination to pay monetary damages for deposit in an escrow account to fund the future clean-up of the contamination.
We conclude that Congress has not expressly provided for an award of attorneys' fees to private parties seeking to recoup response costs under CERCLA. We further hold that the order that Lohrey pay $1,100,000 in monetary damages to Stanton Road constitutes an award of future response costs in violation of CERCLA. We reverse the award of attorneys' fees and vacate the order requiring Lohrey to pay $1,100,000 to Stanton Road as monetary damages to fund a future response action.
Lohrey owned and operated a dry cleaning plant on property contiguous to Stanton Road's property. While the dry cleaning plant was in operation, the hazardous chemical perchlorethelene was allowed to spill onto the adjoining alley. The chemical contaminated Stanton Road's property. Stanton Road brought this action seeking declaratory relief and response costs under CERCLA, and damages under pendent state law claims alleging trespass, negligence, and nuisance.
At trial, Stanton Road introduced expert testimony that the clean-up of Stanton Road's property would cost between $775,000 and $1,100,000. Stanton Road also introduced evidence that the minimum amount of funding necessary for an environmental firm to undertake the clean-up would be $1,100,000. Lohrey did not offer any evidence at trial to contradict Stanton Road's testimony regarding the estimated cost of the proposed remediation.
The district court found Lohrey liable for the contamination. The court awarded Stanton Road $77,374 in response costs, $389,925 in damages under the state law claims, and $126,198 in attorneys' fees under CERCLA. Lohrey was also ordered to pay Stanton Road $1,100,000 to fund the clean-up of Stanton Road's property. That portion of the order provides as follows:
Defendants, jointly and severally, are ordered to pay to Stanton the additional sum of one million one hundred thousand dollars ($1,100,000). Stanton shall deposit said sum in an interest bearing escrow trust account ("Cleanup Escrow") established to implement the remediation of 860 Stanton Road as expeditiously as possible by the environmental consulting firm PES Environmental, Inc. ("PES"). Defendants shall have no control over the Cleanup Escrow fund, other than to monitor the expenditures therefrom. Payments from the Cleanup Escrow fund for cleanup services rendered shall be paid out as invoices are received and work is reviewed and approved by PES principals. Copies of said invoices shall be provided to a party to be designated jointly by all defendants.
The Cleanup Escrow will terminate upon written certification from PES that the 860 Stanton Road property has been remediated in accordance with all relevant regulatory cleanup levels and requirements.
If unused funds remain in the Cleanup Escrow at the time of termination, such funds will be distributed as follows:
First, all unused funds shall be paid out to Stanton in order to satisfy any money damages awarded to Stanton in this judgment that remain unpaid as of the date of the termination of the escrow.... In the event all monetary damages awarded Stanton have been satisfied in full upon termination of the Cleanup Escrow, all remaining sums shall be paid out to defendants on a pro rata basis according to the percentage that each defendant paid funds into the original Cleanup Escrow.
(emphasis added).
The judgment was entered on April 15, 1991. Lohrey filed a timely notice of appeal. It did not seek a stay of the judgment until May 29, 1992. The district court denied the motion.
The district court did not indicate in its judgment whether the monetary damages were awarded pursuant to CERCLA or under the pendent state law claims. In an attempt to clarify the basis for the award of monetary damages, we issued an order requesting the district court to enter an order indicating whether its award was based on state law or CERCLA. In response, the district court informed us that it awarded Stanton Road $1,100,000 under both CERCLA and state law.
Lohrey contends that the district court erred in awarding attorneys' fees to Stanton Road. They argue that CERCLA does not authorize attorneys' fees in private response cost actions. We review the district court's interpretation of CERCLA de novo. Idaho v. Howmet Turbine Component Co., 814 F.2d 1376, 1378 (9th Cir.1987).
Stanton Road contends that a private litigant may recover attorneys' fees under CERCLA as "necessary costs of response" pursuant to 42 U.S.C. § 9607(a)(4)(B). Section 9607(a) provides in pertinent part:
[A]ny person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of ... shall be liable for ... any other necessary costs of response incurred by any other person consistent with the national contingency plan.
42 U.S.C. § 9607(a). Section 101(25) defines "response" as "remove, removal, remedy, and remedial action, ... includ[ing] enforcement activities related thereto." 42 U.S.C. § 9601(25) (emphasis added). Stanton Road maintains that an action by a private litigant to recover response costs is an "enforcement activity" within the meaning of the statute.
The question whether CERCLA authorizes private parties to recover attorneys' fees as enforcement costs is a matter of first impression in this circuit. The Eighth Circuit has concluded that CERCLA authorizes private parties to recover attorneys' fees as "necessary costs of response." General Elec. Co. v. Litton Indus. Automation Sys., Inc., 920 F.2d 1415, 1421-22 (8th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1390, 113 L.Ed.2d 446 (1991). The Eighth Circuit reasoned that a "private party cost-recovery action ... [under section 107(a)(4)(B) ] is an enforcement activity within the meaning of the statute." Id.
While we characterized an action to recover costs under section 107(a)(4)(B) in Cadillac Fairview/California, Inc. v. Dow Chem. Co., 840 F.2d 691, 694 (9th Cir.1988) as a private response action, we were not required to consider in that matter whether CERCLA authorizes a private party to recover its attorneys' fees. In Cadillac Fairview, we held that a private litigant may initiate an action pursuant to section 107(a) to recover the costs of testing for contamination and employing a guard service in responding to the hazardous substances, without waiting for governmental action concerning the contaminated site. Id. at 694-95.
The district courts in this circuit disagree on the question whether response costs include attorneys' fees incurred by private litigants. Compare Pease & Curren Refining, Inc. v. Spectrolab, Inc., 744 F.Supp. 945, 952 (C.D.Cal.1990) () with Santa Fe Pac. Realty Corp. v. United States, 780 F.Supp. 687, 695 (E.D.Cal.1991) ().
Under the American Rule, a prevailing party may not recover attorneys' fees. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975). In Alyeska, the plaintiffs temporarily halted construction of an oil pipeline in Alaska. Id. at 242, 95 S.Ct. at 1614. The Court of Appeals for the District of Columbia awarded attorneys' fees to the plaintiffs. Id. at 245, 95 S.Ct. at 1615. The court reasoned that the plaintiffs had vindicated "important statutory rights of all citizens" and had insured that the governmental process had functioned properly. Id. Thus, they were entitled to attorneys' fees to encourage private parties to undertake litigation that benefits the public. Id. at 245-46, 95 S.Ct. at 1616.
The Supreme Court reversed. The Court instructed that under the American Rule, a prevailing party cannot recover attorneys' fees in the absence of congressional authority. Id. at 269, 95 S.Ct. at 1627. The Court stated that it was up to Congress to "carve out specific exceptions" to the general rule against providing attorneys' fees to the prevailing litigant. Id. The Court reasoned that a court is not
free to fashion drastic new rules with respect to the allowance of attorneys' fees to the prevailing party in federal litigation or to...
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