Western Properties Service Corp. v. Shell Oil Co.

• Citation: 358 F.3d 678
• Decision Date: 13 February 2004
• Docket Number: No. 01-55676.,01-55676.
• Parties: WESTERN PROPERTIES SERVICE CORPORATION, an Arizona corporation, Plaintiff-Appellee, v. SHELL OIL COMPANY, a Delaware corporation; Union Oil Company, a California corporation; Texaco, Inc., a Delaware corporation; Atlantic Richfield Company, a Delaware corporation, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

358 F.3d 678

WESTERN PROPERTIES SERVICE CORPORATION, an Arizona corporation, Plaintiff-Appellee, v. SHELL OIL COMPANY, a Delaware corporation; Union Oil Company, a California corporation; Texaco, Inc., a Delaware corporation; Atlantic Richfield Company, a Delaware corporation, Defendants-Appellants.

No. 01-55676.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 8, 2002 — Pasadena, California.

Filed February 13, 2004.

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Peter R. Taft, Munger, Tolles & Olson LLP, Los Angeles, CA, for the appellants.

Jaclyn C. Taner, Federal Deposit Insurance Corporation, Washington, DC, for the appellee.

Appeal from the United States District Court for the Central District of California; Carlos R. Moreno, District Judge, Presiding. D.C. No. CV-94-04695-CM.

Before Andrew J. KLEINFELD and Susan P. GRABER, Circuit Judges, and Susan R. BOLTON,^* District Judge.

Opinion by Judge Kleinfeld.

OPINION

KLEINFELD, Circuit Judge:

This is a CERCLA contribution case.¹ The appellants were found to have arranged, during the early years of World War II, for the disposal of wastes from aviation fuel production.

FACTS

The property at issue, near Corona, in Riverside County, California, was once a ranch owned by the Wardlows. Gravel had been excavated from the property in 1938 for a nearby dam, leaving four gravel pits. For $2,000, the Wardlows sold the right to dump "acid tar" — petroleum waste consisting in substantial part of sulfuric acid — into those pits. Oil refineries, for over a decade by then, had been going farther and farther afield from their Long Beach locations for disposal sites because the stink of acid tar was notoriously offensive to neighbors. This sludge could be smelled from almost a mile away. Burning did not solve the problem, and the fumes were so bad that they killed flowers and fruit trees. Runoff from the waste made farmland useless and killed fish in nearby streams.

Among the central difficulties in this case is that it is hard to say what the facts are, as the parties could find no living person who knows what happened, and documentary evidence supports nothing more than inferences. The actions giving rise to the claim were performed (if indeed they were) in 1941 and 1942.

Elma Wardlow, who survived into this litigation, might have been a good source of information. But when plaintiff Western Properties' attorneys attempted to talk to her in the mid '90s, "she was in an Arizona rest home, infirm, and completely unable to respond to questions (Mrs. Wardlow's daughter was present during the efforts to talk with her)."² Years before, she had written that "[a] man named Carl Bliss with the sand and gravel company is the one who made arrangements for the dumping. He is deceased."³ She noted in the same letter that the sulfuric acid sludge came from "an oil company (name unknown) in Long Beach." Contemporaneous reports identify the Wardlows' customer or customers only as "ethyl gasoline refining operations" in Wilmington, California.⁴

By the end of January 1942, the first of the four pits was full, and the neighbors were protesting the stink and the threat to their water supplies. County supervisors directed the county attorney to draw up an ordinance they could pass to prevent further dumping. In February, the county attorney wrote a memorandum to the board of supervisors saying that he had met with "Mr. [Eli] McColl, representing the major oil companies and connected with the Refiners' Committee on Waste Disposal."⁵ They agreed that in the future no Riverside County site would be used without approval of the County Health Officer and the Pollution Control Department of the California Division of Fish and Game. The memorandum does not state which oil companies McColl represented or which ones had been dumping sludge in the pits provided by the Wardlows. By June of 1942, McColl had arranged for a different site, and the dumping at the Wardlow site had ended. McColl died before this litigation began, so he could not identify which oil companies' wastes he had arranged to have dumped in the Wardlows' gravel pits.

The Wardlows sold the property in 1946 to some people named Thomas, and it came to be known as Thomas Ranch. The sludge was still conspicuously present. The gravel pits had become acid filled tar pits that ate cows. One local paper reported that "[a]s the years passed a crust of varying thickness formed over the top.... Animals that ventured too far out upon this crust disappeared forever into the gooey pits and cattle were lost in that manner on a number of occasions."⁶ In 1955, the Thomases tried burning the waste, which created a "sensational fire that burned throughout the day and into the night."⁷ The resulting clouds and columns of black smoke attracted more than 600 curious viewers from far and near.⁸

After mesne conveyances, Western Properties, the development arm of a failed savings and loan, acquired Thomas Ranch and became involved in remediation discussions with state and local authorities. In 1986, the California Department of Health Services declared the migration of hazardous substances from the pits an actual or threatened release, constituting a nuisance, and ordered Western Properties to conduct an environmental response. Western Properties eventually did so, at a cost of about $5 million.

In July 1994, Western Properties filed the complaint in this case seeking "recovery of response costs and contribution, under § 107 and § 113 respectively," as well as declaratory relief under § 113(g)(2), of CERCLA.⁹ The complaint also sought relief under California Health & Safety Code § 25363(e), which parallels CERCLA. The complaint named several oil companies, appellants and others. Claims against some of the defendants were dismissed. The oil companies counterclaimed against Western Properties under § 107(a) and § 113(f)(1) for "contribution and/or indemnity."

In 1998, both sides moved for summary judgment. The court denied both motions and ruled that the defendants' equitable defenses could not be asserted "under § 107 because the allowance of equitable defenses is contrary to Congress' intent to impose strict liability."¹⁰ In September 1998, the district court conducted a four-day liability trial, which focused on whose sludge had been dumped. The district court acknowledged the weakness of the evidence but found by a preponderance of the evidence that, more likely than not, the remaining defendants had arranged for their sludge to be dumped in the Wardlows' gravel pits and were therefore liable for the cleanup expenses. After a subsequent eight-day damages-and-allocation trial in May 2000, the district court found that Western Properties had incurred $5,002,903 in costs. It imposed 100% of these costs on the oil companies, jointly and severally, and none on Western Properties, on the theory that Western Properties was a non-polluting innocent landowner. The oil companies appeal.

ANALYSIS

I. Jurisdiction.

The oil companies argue that the district court lacked jurisdiction to award damages for remediation against them, because there was no prior civil action against Western Properties pursuant to CERCLA §§ 106 or 107(a).¹¹ They cite the Fifth Circuit's decision in Aviall Services, Inc. v. Cooper Industries, Inc.¹² In Aviall, the plaintiff amended its complaint, dropping the § 107(a) cost-recovery claim and adding a § 113(f)(1) contribution claim. A three-judge panel held that "a party can seek a § 113(f)(1) contribution claim only if there is a prior or pending federal § 106 or § 107(a) action against it."¹³ Aviall was reheard en banc, and the Fifth Circuit repudiated the original panel's holding.¹⁴ The en banc court held that "a PRP [potentially responsible party] may sue at any time for contribution under federal law to recover costs it has incurred in remediating a CERCLA site,"¹⁵ not just "during or following" § 106 or § 107(a) litigation.¹⁶ The en banc majority pointed out that several circuit courts have allowed a party to seek contribution absent a CERCLA action against it, albeit where the issue was not contested.¹⁷ Our circuit has similarly allowed such contribution actions.¹⁸ On January 9, 2004, the Supreme Court granted certiorari.¹⁹

The Fifth Circuit original panel's textual interpretation is plausible, but so is the interpretation of the en banc court. No doubt the Supreme Court decision in Aviall will address the varying views on the subject.²⁰ Our view is consistent with the en banc decision in the Fifth Circuit but does not rely on it. This case may be distinguishable because the plaintiffs here brought both a § 107(a) action and a § 113(f)(1) action.

We begin our analysis of the jurisdictional question with the statutory text. Section 113(f)(1) provides, in relevant part:

Any person may seek contribution from any other person who is liable or potentially liable under section 107(a), during or following any civil action under section 106 or under section 107(a).... Nothing in this subsection shall diminish the right of any person to bring an action for contribution in the absence of a civil action under section 106 or section 107.²¹

At first glance, these two sentences seem to conflict. They can be understood as consistent, however, both being permissive. The better reading of the second quoted sentence is that a § 106 or a § 107(a) action is not a necessary condition for bringing a § 113(f)(1) action, despite the arguably contrary implication of the phrase "during or following any civil action under section 106 or under section 107" in the first sentence. Thus read, the second sentence prevents us from reading into the first sentence a restrictive "only" before "during or following," and expressly declares that contribution can be sought before a § 106 or a § 107(a) judgment.²² This second sentence, serving as a savings clause, still allows for contribution actions where a judgment or...