United States v. Allied Chemical Corp., C-83-5898 SC.

• Decision Date: 27 April 1984
• Docket Number: No. C-83-5898 SC.,C-83-5898 SC.
• Citation: 587 F. Supp. 1205
• Court: U.S. District Court — Northern District of California
• Parties: UNITED STATES of America, Plaintiff, v. ALLIED CHEMICAL CORP., et al., Defendants.

587 F. Supp. 1205

UNITED STATES of America, Plaintiff, v. ALLIED CHEMICAL CORP., et al., Defendants.

No. C-83-5898 SC.

United States District Court, N.D. California.

April 27, 1984.

David G. Leach, Leach & Schneider, San Francisco, Cal., for Joe and Wilda D. Sobotka.

David W. Long, Ann Fingarette Hasse, John M. Smith, San Francisco, Cal., for Southern Pacific.

Barry P. Goode, Patricia L. Shanks, Robert W. Bergstrom, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for Allied Corp.

John H. Ernster, Clay M. Smith, Los Angeles, Cal., for Santa Fe Ind & Atchison.

ORDER RE DEFENDANTS' MOTIONS TO DISMISS

CONTI, District Judge.

This matter is before the court on defendant Santa Fe's motion to dismiss the fifth cause of action for failure to state a claim upon which relief may be granted and on defendant Allied Chemical Corporation's motion to dismiss the remaining four causes of action for failure to state a claim upon which relief may be granted or, in the alternative, for a more definite statement.

This action arises out of the alleged release of hazardous substances by defendants onto, or to the detriment of, property at the U.S. Naval Weapons Station in Concord. Plaintiff's complaint alleged five causes of action based on this alleged release of hazardous substances. The first cause of action is for the costs incurred or to be incurred by the government in remedying the alleged release of hazardous substances by defendants, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §§ 9601, et seq. The second cause of action is for damages to plaintiff's natural resources caused by the hazardous substances, again pursuant to CERCLA. The third cause of action is for nuisance. The fourth cause of action is for trespass. The fifth cause of action is directed to defendant Santa Fe Industries for its alleged breach of a warranty to convey a parcel of land to plaintiff free of encumbrances.

Defendant Santa Fe Industries (Santa Fe) argues that the fifth cause of action should be dismissed for failure to state a claim upon which relief may be granted because, assuming for purposes of this motion that hazardous substances were present on the land at the time of conveyance, such presence would not constitute an "encumbrance" on the land in breach of Santa Fe's warranty to plaintiff.

Plaintiff argues that the term "encumbrance" is broad enough to include the presence of hazardous substances. However, the only authorities cited have interpreted "encumbrance" to include only liens, easements, restrictive covenants and other such interests in or rights to the land held by third persons. See Evans v. Faught, 231 Cal.App.2d 698, 706, 42 Cal.Rptr. 133 (1965). Plaintiff has given no authority establishing its broad argument that any physical condition, including the presence of hazardous substances, is an "encumbrance" if "not visible or known" at the time of conveyance.

The court declines to interpret "encumbrance" as broadly as plaintiff urges. The court finds that, under current law, the term "encumbrance" does not extend to the presence of hazardous substances alleged in this case. Consequently, the fifth cause of action fails to state a claim upon which relief may be granted because the facts alleged in the complaint, even if proven, would not establish a cause of action for breach of the alleged covenant of conveyance free of encumbrances. Accordingly, Santa Fe's motion to dismiss the fifth cause of action is granted.

Defendant Allied Chemical Corporation (Allied) has, based on various arguments, moved for dismissal of the first four causes of action for failure to state a claim upon which relief may be granted.

First, Allied argues that plaintiff's first and second causes of action based on CERCLA should be dismissed because plaintiff failed to follow the notice of claim requirements of 42 U.S.C. § 9612(a).

CERCLA is a comprehensive act establishing liability for certain costs associated with the release of hazardous substances. Among other things, the Act establishes a Fund from which may be paid costs incurred in responding to a release of hazardous substances and for damages caused to natural resources by such release. 42 U.S.C. §§ 9604, 9607, 9611, 9631.

42 U.S.C. section 9612(a) provides that "all claims which may be asserted against the Fund" must first be presented to, among others, the person responsible for costs under 42 U.S.C. section 9607. Where the claim has not been satisfied within sixty days of presentation, the claimant may then "elect to commence an action in court" against the responsible party "or to present the claim to the Fund for payment." 42 U.S.C. § 9612(a).

Defendant argues that failure to allege that claim was made pursuant to 42 U.S.C. section 9612(a) results in failure to state a claim under CERCLA. The court agrees.

Plaintiff argues that section 9612(a) does not apply to court actions commenced by the government pursuant to 42 U.S.C. section 9607. Although this is a matter of first impression and there is some support for plaintiff's argument, the court finds that the claims procedure required by section 9612(a) does govern actions by the government pursuant to section 9607.

42 U.S.C. section 9612(a) requires "all claimants" to first make a claim in writing to the responsible party before instituting court action or presenting a claim to the Fund for payment. "Claimant" is defined as "any person who presents a claim for compensation under this chapter." 42 U.S.C. § 9601(5). "Person" is defined to include the U.S. government. 42 U.S.C. § 9601(21). A claim under section 9607 is a claim within chapter 103, the chapter referred to in section 9601(5).

Although there is some support for the argument that the government should be treated differently than private claimants for purposes of section 9612(a), the language of the Act itself does not support that argument. Section 9607(g) provides:

Each department, agency, or instrumentality of the executive, legislative, and judicial branches of the Federal Government shall be subject to, and comply with, this chapter in the same manner and to the same extent, both procedurally and substantively, as any nongovernmental entity, including liability under this section.

This provision would seem to require that the federal government comply with section 9612(a), just as any other claimant must comply with that section.

Consequently, the court finds that a claim by the government under section 9607 is governed by section 9612(a). Because notice of claim pursuant to section 9612(a) is a prerequisite to bringing suit under section 9607, plaintiff must allege compliance with section 9612(a) in order to state a claim upon which relief may be granted under section 9607.

In its opposition to this motion, plaintiff alleges that it did comply with the requirements of section 9612(a). Plaintiff states that it sent a "claim" to Allied on October 7, 1983, more than sixty days before filing the complaint herein.

Although the complaint as presently drafted fails to state a claim under CERCLA, the court deems it appropriate to allow plaintiff to amend its complaint to allege compliance with 42 U.S.C. section 9612(a). Leave to amend shall be freely given when justice so requires. Fed.R.Civ.P. 15(a). The decision whether to permit amendment is committed to the sound discretion of the trial court. See Halet v. Wend Investment Co., 672 F.2d 1305, 1310 (9th Cir.1982).

In the circumstances of this case, the court finds that it is just and proper to allow plaintiff to amend its complaint to allege that it presented a claim to Allied in accordance with 42 U.S.C. section 9612(a) by the letter dated October 7, 1983. Accordingly, the court hereby deems the complaint amended to insert such an allegation. See City of Philadelphia v. Stepan Chemical Co., 544 F.Supp. 1135, 1143-44 (E.D. Pa.1982). Because the complaint is now amended to insert the necessary allegation of compliance with 42 U.S.C. section 9612(a), the first and second causes of action do not, on this ground, fail to state a claim upon which relief may be granted.

Allied, in its papers on this motion, admits that it received the October 7, 1983, letter which plaintiff asserts constitutes its "claim" to defendant pursuant to section 9612(a). Defendant argues, however, that that letter is deficient notice of plaintiff's claim because it fails to demand a sum certain for response costs and damages as required by sections 9601(4) and 9612(a).

42 U.S.C. section 9612(a) requires the claimant to present a "claim" to the responsible party before instituting court action under the code provisions. A "claim" is defined as a "demand in writing for a sum certain." 42 U.S.C. § 9601(4). Defendant argues that plaintiff's October 7, 1983, letter is deficient as a "claim" because it does not demand a set amount of money.

Under the circumstances of this case, the court finds that plaintiff's October 7, 1983, letter substantially complied with the requirements for a proper "claim." The letter (attached to plaintiff's opposition to this motion) was in writing and presented more than sixty days before the complaint was filed. The letter stated that the government had done extensive testing and discovered various hazardous substances on property surrounding Allied's plant. The letter stated that the government considered Allied liable because "the records clearly indicate a causal connection between Allied's operations and the presence of hazardous wastes." The letter further stated that the government considered Allied responsible "on a continuing basis for remedial measures to mitigate, abate, and remove the hazardous contaminants."

It is undisputed that the letter makes no demand for any particular sum of money. However, the letter states that Allied is responsible "on a continuing basis" for "remedial measures." This language logically puts Allied on...