Chartis Specialty Insurance Company v. Aqua Sciences Engineers, Inc., No. 3:2011cv03669 - Document 117 (N.D. Cal. 2013)
Court Description: ORDER DENYING MOTION FOR SUMMARY JUDGMENT by Judge Jon S. Tigar, denying 100 Motion for Summary Judgment. (wsn, COURT STAFF) (Filed on 8/29/2013)
Download PDF
<![CDATA[
Chartis Specialty Insurance Company v. Aqua Sciences Engineers, Inc. Doc. 117 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CHARTIS SPECIALTY INSURANCE COMPANY, 8 Plaintiff, ORDER DENYING MOTION FOR SUMMARY JUDGMENT v. 9 10 AQUA SCIENCES ENGINEERS, INC., 11 United States District Court Northern District of California Case No. 11-cv-03669-JST Re: ECF No. 100 Defendant. Before the Court is Defendant Aqua Sciences Engineers, Inc.’s Motion for Summary 12 13 Judgment against Plaintiff Chartis Specialty Insurance Co. Mot., ECF No. 100. For the reasons 14 discussed below, the Court will deny the motion. 15 I. LEGAL STANDARDS 16 Summary judgment is proper when “there is no genuine dispute as to any material fact and 17 the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). See Celotex Corp. v. 18 Catrett, 477 U.S. 317, 323–24 (1986). A dispute is genuine only if there is sufficient evidence for 19 a reasonable fact finder to find for the non-moving party, and material only if the fact may affect 20 the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). The 21 Court must draw all reasonable inferences in the light most favorable to the non-moving party. 22 Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1018 (9th Cir. 2010). However, 23 unsupported conjecture or conclusory statements do not create a genuine dispute as to material fact 24 and will not defeat summary judgment. Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th 25 Cir. 2008). 26 Where the moving party bears the burden of proof at trial, that party bears the initial 27 burden of producing evidence that would entitle it to a directed verdict at trial. See C.A.R. Transp. 28 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000). Where the moving party Dockets.Justia.com 1 would not bear the burden of proof at trial, that party bears the initial burden of either producing 2 evidence that negates an essential element of the non-moving party’s claims, or showing that the 3 non-moving party does not have enough evidence of an essential element to carry its ultimate 4 burden of persuasion at trial. See Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 5 1102 (9th Cir. 2000). If the moving party does not satisfy its initial burden, then the non-moving 6 party has no obligation to produce anything, and summary judgment must be denied. If, however, 7 the moving party satisfies its initial burden of production, then the non-moving party must produce 8 admissible evidence to show there exists a genuine issue of material fact. Id. at 1102–03 9 At summary judgment, the Court applies the same evidentiary standard of proof that it would apply at trial. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255 (1986). The Court draws 11 United States District Court Northern District of California 10 all reasonable inferences in favor of the non-moving party, including questions of credibility and 12 of the weight that particular evidence is accorded. See, e.g., Masson v. New Yorker Magazine, 13 Inc., 501 U.S. 496, 520 (1992). The Court determines whether the non-moving party’s “specific 14 facts,” coupled with disputed background or contextual facts, are such that a reasonable jury might 15 return a verdict for the non-moving party. T.W. Elec. Serv. v. Pac. Elect. Contractors, 809 F.2d 16 626, 631 (9th Cir. 1987). In such a case, summary judgment is inappropriate. Anderson, 477 U.S. 17 at 248. However, where a rational trier of fact could not find for the non-moving party based on 18 the record as a whole, there is no “genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith 19 Radio, 475 U.S. 574, 587 (1986). 20 “A party asserting that a fact cannot be or is genuinely disputed must support the assertion 21 by: (A) citing to particular parts of materials in the record, including depositions, documents, 22 electronically stored information, affidavits or declarations, stipulations (including those made for 23 purposes of the motion only), admissions, interrogatory answers, or other materials; or 24 (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, 25 or that an adverse party cannot produce admissible evidence to support the fact.” Fed. R. Civ. P. 26 56(c)(1). Affidavits and declarations “must be made on personal knowledge, set out facts that 27 would be admissible in evidence, and show that the affiant or declarant is competent to testify on 28 the matters stated.” Fed. R. Civ. P. 56(c)(4). If a party fails to support an assertion of fact, the 2 1 Court may “(1) give an opportunity to properly support or address the fact; (2) consider the fact 2 undisputed for purposes of the motion; (3) grant summary judgment if the motion and supporting 3 materials — including the facts considered undisputed — show that the movant is entitled to it; or 4 (4) issue any other appropriate order.” Fed. R. Civ. P. 56(e). “The choice among possible orders 5 should be designed to encourage proper presentation of the record.” Adv. Cttee. Notes to 2010 6 Amendments to Fed. R. Civ. P. 56(e). However, “[w]here the evidentiary matter in support of the 7 motion does not establish the absence of a genuine issue, summary judgment must be denied even 8 if no opposing evidentiary matter is presented.” Adv. Cttee. Notes to 1963 Amendments to Fed. 9 R. Civ. P. 56(e). 10 United States District Court Northern District of California 11 II. UNDISPUTED FACTS Plaintiff Chartis Specialty Insurance Co. (f/k/a American International Specialty Lines 12 Insurance Company) (“Chartis”) filed its operative Second Amended Complaint on November 16, 13 2012, as subrogee for Lowe’s Companies, Inc. (“Lowe’s”) against Defendant Aqua Sciences 14 Engineers, Inc. Chartis claims damages arising from an environmental site assessment prepared 15 by Aqua Sciences for Lowe’s in 2008. ECF No. 66 (“SAC”) ¶¶ 6–7, 37–42. Following the 16 assessment and the purchase of the subject property, Lowe’s discovered soil contamination 17 resulting in alleged cleanup costs of $1,050,103, which sum Chartis now seeks, as subrogee for 18 Lowe’s, from Aqua Sciences. Id. ¶¶ 21–23. 19 In anticipation of purchasing real property located at 1923–2001 Arnold Industrial Way, 20 Concord, California, Lowe’s hired Aqua Sciences to perform a “Phase I Environmental Site 21 Assessment” and a “Soil and Groundwater Assessment.” Id. ¶ 6–7. Lowe’s authorized Aqua 22 Sciences to proceed with the assessments on March 5, 2008. Mot., Ex. A, ECF No. 100-1 p. 5; 23 Ex. B, ECF No. 100-2 p. 7. Aqua Sciences delivered its soil and groundwater “Phase II” 24 assessment to Lowe’s on March 20, 2008, and its initial Phase I assessment on March 21, 2008. 25 Id. ¶¶ 9, 11; Mot., Ex. C, ECF No. 100-3 (“Phase I Report”); Ex. D, ECF No. 100-4 (“Phase II 26 Report”). The final Phase I Report was delivered to Lowe’s on April 4, 2008. Phase I Report p. 1. 27 28 The objective of the Phase I assessment was “to identify, to the extent feasible, recognized environmental conditions (RECs) in connection with the subject property(s).” Phase I Report 3 1 § 2.1. The purpose of the Phase II assessment was “to determine if subsurface soil and/or 2 groundwater pollution exists at the property in (a) areas where former underground storage tanks 3 (USTs) were located, (b) areas of the site historically used for vehicle and equipment storage, and 4 (3) areas where poor handling of drummed oils and paints have resulted in stained surfaces.” 5 Phase II Report § 1.0. The Phase II Report states: “[Aqua Sciences] completed this work at the 6 request of a prospective purchaser of the property.” Id. Roger Bernstein was Lowe’s Director of 7 Site Development at the time the property was being developed. Mot., Ex. E, Bernstein Depo. 8 p. 9:4. Bernstein was the Lowe’s representative who signed the contracts for the two assessments. 9 Id. p. 21:8; 45:12. David Allen was the principal for, and signed the contracts for Aqua Sciences. 10 United States District Court Northern District of California 11 Mot., Ex. A, ECF No. 100-1 p. 5; Ex. B, ECF No. 100-2 p. 7. Lowe’s had been a tenant on the subject property, and entered into a contract to purchase 12 the property in February 2008, prior to hiring Aqua Sciences. Maddox Depo. p. 16–18. The 13 parties dispute, as discussed more fully below, what obligations Lowe’s had under the purchase 14 contract, but it is undisputed that a “due diligence” period following February 2008 provided 15 Lowe’s the opportunity to have the site inspected by Aqua Sciences, and to withdraw from its 16 agreement to purchase the property. 17 The site had a history of environmental contamination. The Phase I Report discusses that 18 history in detail, much of which included assessments and remedial work overseen by Aqua 19 Sciences under the site’s previous owners. Phase I Report §§ 2.2–2.5. See also Phase II Report § 20 4.8. The Second Amended Complaint itself alleges that Lowe’s was aware of the historical 21 industrial use of the site, and of “various instances of contamination.” SAC ¶ 6. 22 In addition to preparing the Phase I and II assessments, Aqua Sciences also prepared a soil 23 management plan for Lowe’s, which addressed how remediation efforts would proceed, should 24 soil contamination be discovered in the future. Maddox Depo. pp. 24:13–25:7. The soil 25 management plan was required for governmental approval of the project. Id. p. 24:10. 26 Lowe’s also sought a “No Further Action” letter from the California Regional Water 27 Quality Control Board, which the parties agree is a letter from that regulatory agency stating that 28 the property meets certain environmental requirements, though it does not guarantee that 4 1 remediation will not be required in the future. See Maddox Depo. p. 20:2–6. 2 All of Aqua Sciences’ invoices were paid in full. Following receipt of the final Phase I 3 Report, Lowe’s waived the “due diligence” period and closed escrow. Allen Depo. pp. 53:11– 4 54:5; 55:22–56:2. The Second Amended Complaint alleges, and Defendant does not dispute, that 5 in May 2009, in the process of redevelopment of the property, contaminated soil was discovered 6 three feet below the ground surface during excavation. SAC ¶¶ 21, 22, Exs. E, F. Lowe’s 7 submitted a claim for the cleanup costs to Chartis, and Chartis paid Lowe’s $1,050,103. Id. ¶ 23. 8 Lowe’s had paid Aqua Sciences $59,245 for the Phase I and II assessments. 9 III. EVIDENTIARY OBJECTIONS Aqua Sciences objects to exhibits 5, 7–10, 14, 16, 24, and 26 to the declaration of 11 United States District Court Northern District of California 10 Stephanie Montgomery on the grounds that the declarant lacks personal knowledge sufficient to 12 authenticate and introduce those documents, and to exhibits 12, 13, 17–23, 25, 27, 29, and 30 as 13 having been offered without any authentication. Aqua Sciences further objects to each of those 14 exhibits, “to the extent applicable,” on hearsay grounds. ECF No. 106 pp. 12–13. 15 Rule 56(c)(4) provides: “An affidavit or declaration used to support or oppose a motion 16 must be made on personal knowledge, set out facts that would be admissible in evidence, and 17 show that the affiant or declarant is competent to testify on the matters stated.” Fed. R. Civ. P. 18 56(c)(4). An affidavit’s failure to be set forth on personal knowledge renders the facts within the 19 declaration inadmissible. Block v. City of Los Angeles, 253 F.3d 410, 419 (9th Cir. 2001) (abuse 20 of discretion to consider fact set forth in affidavit not made on personal knowledge at summary 21 judgment). 22 However, “[t]o survive summary judgment, a party does not necessarily have to produce 23 evidence in a form that would be admissible at trial, as long as the party satisfies the requirements 24 of Federal Rules of Civil Procedure 56.” Block, 253 F.3d at 418–19 (citing Celotex, 477 U.S. at 25 324). The Court’s focus at summary judgment is not on the form of the evidence submitted, but 26 on whether its content would be admissible. For example, hearsay evidence attached to an 27 affidavit may be considered at summary judgment if the out-of-court declarant could present the 28 evidence through direct, admissible testimony at trial. Fraser v. Goodale, 342 F.3d 1032, 1036 5 1 (9th Cir. 2003) (citing Hughes v. United States, 953 F.2d 531, 543 (9th Cir. 1992) (because 2 contents of diary were recitations of events within declarant’s personal knowledge, reliance on 3 diary at summary judgment was permissible even if diary itself was inadmissible at trial). 4 “[U]nauthenticated documents cannot be considered in a motion for summary judgment” 5 because “authentication is a ‘condition precedent to admissibility.’” Orr v. Bank of Am., NT & 6 SA, 285 F.3d 764, 773 (9th Cir. 2002) (quoting Fed. R. Evid. 901(a)). However, unlike facts set 7 forth in affidavits themselves, documents submitted at summary judgment may be authenticated 8 by any manner authorized by the Federal Rules of Evidence, not just through personal knowledge. 9 See Las Vegas Sands, LLC v. Nehme, 632 F3d 526, 532–533 (9th Cir. 2011). “Once the trial judge determines that there is prima facie evidence of genuineness, the evidence is admitted, and 11 United States District Court Northern District of California 10 the trier of fact makes its own determination of the evidence’s authenticity and weight.” Orr, 285 12 F.3d at 773 n. 6. “If a party fails to properly support an assertion of fact or fails to properly address another 13 14 party’s assertion of fact as required by Rule 56(c), the court may: (1) give an opportunity to 15 properly support or address the fact; (2) consider the fact undisputed for purposes of the motion; 16 (3) grant summary judgment if the motion and supporting materials — including the facts 17 considered undisputed — show that the movant is entitled to it; or (4) issue any other appropriate 18 order.” Fed. R. Civ. P. 56(e)(1)–(4). Chartis’ opposition attaches without comment, declaration, or attempt at authentication, 19 20 exhibits 3, 12, 13, 17–23, 25, 27, 29, and 30. Of those, several bear a stamp indicating they were 21 exhibits to depositions conducted in this case. Nothing in Plaintiff’s opposition, however, serves 22 as “evidence sufficient to support a finding that the matter in question is what its proponent 23 claims.” Orr, 285 F.3d at 773. 24 The declaration of Stephanie Montgomery states that she is employed as an analyst in the 25 Environmental Specialty Claims Department at Chartis. Montgomery Decl., ECF No. 101-4 ¶ 2. 26 According to the declaration, Montgomery handled1 the Lowe’s request for coverage for 27 Aqua Sciences misreads the phrase “in 2009 and 2010” in paragraph 2 at line 11 of the Montgomery declaration as asserting that Montgomery handled the claim in 2009 and 2010. That 1 28 6 1 contamination at the subject property. She states: “I have reviewed and am familiar with the claim 2 materials relevant to the above-referenced matter, including the materials cited herein, and can 3 attest to their authenticity as part of those materials.” Id. ¶ 2. 4 The Montgomery declaration suffices only to authenticate the documents submitted with 5 the declaration as having been found in the relevant claim file at Chartis, but not for their 6 authenticity as having been authored by any particular party, or for the facts contained therein, as 7 Montgomery does not have personal knowledge of the facts and did not author the documents or 8 act as their author’s custodian. See Orr, 285 F.3d at 773. Because the declaration does not 9 provide any facts to authenticate exhibits 5, 7–10, 14, 16, 24, and 26, either through personal 10 United States District Court Northern District of California 11 knowledge or alternative means, it fails to satisfy Federal Rule of Evidence 901. At the hearing on Defendant’s motion, the Court expressed these concerns and, pursuant to 12 Rule 56(c)(1), granted Plaintiff an opportunity to support the facts contained in its exhibits 13 properly. See ECF No. 107 (Minute Order). Plaintiff submitted two supplemental declarations. 14 Aqua Sciences submitted a “declaration in support of evidentiary objections.” 15 First, Plaintiff submitted the declaration of Thomas E. Maddox, Vice President and 16 Assistant General Counsel at Lowe’s since January 2008. ECF No. 111 ¶ 2. The Maddox 17 declaration states: “I have knowledge of the real estate transactions and the environmental issues 18 associated with, as well as the construction/redevelopment of, the Lowe’s Home Improvement 19 Warehouse site located at 1923 to 2001 Arnold Industrial Way, Concord, California.” Id. 20 Maddox authenticated: exhibit 14 as a true and correct copy of the agreement to purchase the 21 subject property executed by Lowe’s; exhibit 16 as a true and correct copy of the Phase I report 22 requirements Lowe’s gave to Aqua Sciences; and exhibit 24 as a true and correct copy of the “Soil 23 and Groundwater Management Plan” prepared for Lowe’s by Aqua Sciences, dated October 6, 24 2008, and, “upon information and belief,” submitted by Aqua Sciences to the California Regional 25 Water Quality Control Board in San Francisco. Id. ¶¶ 3–5. 26 27 28 phrase refers to “contamination discovered at [the subject property] in 2009 and 2010,” not to the time period in which she handled the claim. Her statement in deposition that she handled the claim “since January 2010” therefore does not conflict with her declaration. See Montgomery Depo., p. 9:14–16. 7 1 Second, Plaintiff submitted the supplemental declaration of Thomas Kilgore, counsel for 2 Plaintiff. ECF No. 110 ¶ 2. That declaration authenticates: exhibits 3, 5, 12, 13, 17–20, 22, 25 as 3 exhibits to the May 9, 2013 deposition of David Allen, Aqua Sciences’ corporate designee; and 4 exhibits 21, 27, 29, and 30 as exhibits to the August 22, 2012 deposition of Roger Bernstein. 5 Aqua Sciences renews its objections as to every exhibit except exhibits 5, 13, and 18. ECF 6 No. 113. First, Aqua Sciences renews its objection to the exhibits attached to the Montgomery 7 declaration (except for exhibit 5). Of those, Plaintiff has attempted to authenticate only exhibits 8 14, 16, and 24. 9 10 United States District Court Northern District of California 11 Aqua Sciences objects to exhibit 14 because, as the Maddox declaration states, it does not include any of the exhibits attached to the purchase agreement. That objection is overruled. Aqua Sciences objects to exhibits 16 and 24 as insufficiently authenticated because 12 Maddox declared “upon information and belief” that the Phase I requirements (exhibit 16) were 13 provided to Aqua Sciences, and that Aqua Sciences submitted exhibit 24 to the water quality 14 control board. Those objections are also overruled. Plaintiff has established the prima facie 15 genuineness of the documents, as Maddox declares they are true and correct copies of the 16 documents they purport to be — a fact within Maddox’s personal knowledge — and the Court is 17 free to consider their authenticity and weight. Orr, 285 F.3d at 773 n. 6. 18 Plaintiff does not attempt to authenticate the remaining exhibits attached to the 19 Montgomery declaration — exhibits 7–10 and 26 — and the Court therefore does not consider 20 them in deciding Defendant’s motion. 21 Aqua Sciences also renews its blanket hearsay objection to exhibits 12,17, 21,22, 25, 27, 22 29, and 30, all of which were exhibits to the Allen and Bernstein depositions. Those objections 23 are overruled. 24 Aqua Sciences objects to exhibit 19 on the grounds that Allen did not authenticate it. 25 Exhibit 19, which is figure 7 to the Phase I report Aqua Sciences itself prepared, was, in fact, 26 authenticated by Allen on page 105 of his deposition, when he authenticated the Phase I Report. 27 The objection is overruled. 28 Aqua Sciences makes the same objection with respect to exhibits 27, 29, and 30. Those 8 1 objections are also overruled. The documents, each of which were e-mail messages exchanged 2 between Allen and Bernstein, and each of which was introduced at the Bernstein deposition by 3 Aqua Sciences’ own counsel, are adequately authenticated for purposes of summary judgment. Finally, Aqua Sciences objects to the Maddox declaration as violative of this Court’s July 4 5 25, 2013 Minute Order granting Plaintiff leave to file “a declaration that addresses and attempts to 6 cure any objection that was made to any exhibit,” (emphasis added) arguing that the Court gave 7 leave only for one declaration, not two. The objection is overruled. Aqua Sciences also argues 8 that Maddox’s declaration attempts to establish additional facts because it establishes his position 9 at Lowe’s, the scope of his personal knowledge, and the knowledge he has about the documents he 10 authenticates necessary to authenticate them. That objection is also overruled. In summary, the Court sustains Aqua Sciences’ objections with respect to exhibits 7–10 United States District Court Northern District of California 11 12 and 26, and overrules them as to all others. 13 IV. 14 15 ANALYSIS Aqua Sciences moves for summary judgment on each of Chartis’ three causes of action for breach of contract, negligence, and subrogation. 16 A. Breach of Contract 17 Aqua Sciences moves for summary judgment on Chartis’ breach of contract claim on the 18 grounds that: (1) Lowe’s accepted Aqua Sciences’ performance, thereby extinguishing Aqua 19 Sciences’ obligations under the contract, (2) there is no evidence of breach; and (3) there is no 20 evidence of damages. For each of Chartis’ claims, it stands in the shoes of Lowe’s, its insured, 21 and succeeds in its rights and remedies. Chubb Custom Ins. Co. v. Space Sys./Loral, Inc., 710 22 F.3d 946, 957 (9th Cir. 2013). 23 24 1. Discharge by Performance Aqua Sciences argues that it has an absolute defense to Chartis’ breach of contract claim 25 pursuant to California Civil Code § 1473, which states: “Full performance of an obligation, by the 26 party whose duty it is to perform it, or by any other person on his behalf, and with his assent, if 27 accepted by the creditor, extinguishes it.” According to Aqua Sciences, Lowe’s accepted Aqua 28 Sciences’ performance by paying it in full for the Phase I and Phase II Reports, “extinguishing all 9 1 obligations [Aqua Sciences] owed to Lowe’s under the contracts.” ECF No. 100 p. 18. 2 Aqua Sciences substantially over-reads section 1473, which merely restates the fundamental principle that full performance under a contact discharges the obligation. See 4 generally 14A Cal. Jur. 3d Contracts § 323 (discussing performance generally). A creditor waives 5 her right to bring a claim for breach of contract only if she accepts the obligor’s performance with 6 knowledge of the defects in it. See 1 Witkin, Summary of Cal. Law (Contracts) § 857 at 944 (10th 7 ed., 2005). On the other hand, where the creditor is unaware of the defects in the obligor’s 8 performance, her acceptance of the obligor’s performance does not operate as a waiver of her 9 claim for breach of contract. See, e.g., Sparling v. Housman, 96 Cal. App. 2d 159, 163, 214 P.2d 10 837, 839 (1950); Banducci v. Frank T. Hickey, Inc., 93 Cal. App. 2d 658, 662, 209 P.2d 398, 400 11 United States District Court Northern District of California 3 (1949); 14A Cal. Jur. 3d Contracts § 347 (“The departures from the contract are not waived, and 12 the party accepting is not precluded from claiming damages, where the defects are not apparent”). 13 Aqua Sciences has not met its burden of establishing as a matter of law that Lowe’s was aware of 14 the alleged defects in Aqua Sciences’ performance, and so Aqua Sciences is not entitled to 15 summary judgment on this theory. 16 17 18 Because Aqua Sciences has not established as a matter of law that Lowe’s was aware of the alleged defects in the reports, it is not entitled to summary judgment on that basis. 2. Evidence of Breach 19 The elements of a breach of contract action are: (1) a contract, (2) the plaintiff’s 20 performance or excuse for non-performance, (3) breach, and (4) damages. Reichert v. General 21 Ins. Co., 68 Cal. 2d 822 (Cal. 1968). The Second Amended Complaint asserts that Aqua Sciences 22 breached the contracts for the Phase I and II assessments by failing to execute the contracts “in a 23 responsible . . . fashion consistent with the needs and purposes of the project.” SAC ¶ 27. In 24 particular, Chartis alleges that Defendant failed to identify the presence of “hazardous substances 25 or petroleum products” on the property. Id. According to Chartis, Aqua Sciences “represented to 26 Lowe’s that ‘the property is suitable for commercial redevelopment,’ despite the fact that the Site 27 was contaminated.” Id. ¶ 28. 28 Aqua Sciences argues that Chartis cannot establish the element of breach because nothing 10 1 in the record establishes that Aqua Sciences failed fully to perform under the contracts. 2 Aqua Sciences first points to testimony by Roger Bernstein, the Director of Site 3 Development, and Thomas Maddox, a Lowe’s Vice President and Assistant General Counsel, in 4 which they stated that Aqua Sciences was paid in full because it complied with the terms of the 5 contract, and that they were not aware of any breach. See Bernstein Depo. p. 46:15–18 (Q: “[Y]ou 6 never had cause to find that the terms of the contract had not been met?” Bernstein: “I don’t 7 believe I did.”); Maddox Depo. p. 22:13–16 (Q: “Have you ever communicated to any third party 8 outside of Lowe’s that ASE breached its contracts to Lowe’s?” Maddox: “No, I have not.”). This testimony is not helpful to Chartis. It is undisputed that the contamination underlying 10 this suit was discovered in May 2009. It is therefore not surprising that Bernstein and Maddox did 11 United States District Court Northern District of California 9 not know at the time the invoice was paid whether Aqua Sciences had negligently performed the 12 contracts, and their statements do not demonstrate that Aqua Sciences complied with its 13 obligations under the contracts. 14 Second, Aqua Sciences relies on the testimony of Chartis’ expert, Timothy Wood, who 15 was asked whether he believed Aqua Sciences committed professional malpractice. He responded 16 “I have not made that opinion.” Wood Depo. p. 5:18–20. The fact that Chartis’ expert did not 17 opine that Aqua Sciences “committed professional malpractice” does not mean that Aqua Sciences 18 performed its contract in all material respects, or that Wood thought that Aqua Sciences’ 19 performance was within industry norms. In fact, as set forth below, Wood opined that Aqua 20 Sciences did not adequately disclose its knowledge of site conditions in its reports to Lowe’s. 21 Aqua Sciences also claims that Wood testified repeatedly that he had no criticism of 22 several documents prepared by Aqua Sciences. That argument exaggerates Wood’s testimony. 23 Wood opined as follows as to the “overall work done by [Aqua Sciences] on this project”: “I 24 certainly have an opinion about how [Aqua Sciences’] long-term historical involvement, 25 knowledge of the site conditions and contemplation of what was coming, and that that was not 26 accurately portrayed in the Phase I.” Reply, ECF No. 106, Ex. C (“Wood Depo. II”) p. 49:6–16 27 (emphasis added). Taken as a whole, the excerpts of Wood’s deposition submitted by the parties 28 do not establish that Aqua Sciences satisfied its contract obligations; rather, they give rise to a 11 1 2 dispute of material fact over whether Aqua Sciences’ work was satisfactory. Third, Aqua Sciences argues that Lowe’s awareness of prior environmental contamination 3 precludes Chartis’ breach of contract claim. See, e.g., Maddox Depo. p. 19:4–23 (testifying that 4 Lowe’s was aware of prior contamination). Similarly, Aqua Sciences argues that Lowe’s was 5 aware, prior to the close of escrow, of the “potential” that the site would require remediation. See, 6 e.g., Bernstein Depo. 52:11–14 (Q: “Lowe’s was certainly aware of the potential that there was 7 contaminated soil on this site at the time of purchase, correct?” Bernstein: “Yes.”). These facts 8 are unhelpful to Aqua Sciences. Both sides acknowledge that Lowe’s was aware of the potential 9 for contamination; it paid Aqua Sciences almost $60,000 to figure out whether there in fact was 10 United States District Court Northern District of California 11 contamination. Chartis has also submitted evidence from which a reasonable trier of fact could find that 12 Aqua Sciences knew that the intended future use of the site was commercial development. Allen 13 Depo. p. 91:1–24; Phase I Report § 2.3 (a “significant assumption” was that the primary reason 14 Lowe’s wanted the Phase I assessment was to “qualify for an LLP to CERCLA liability with 15 regard to future ownership and use of” the site). As set forth above, the basis of Chartis’ breach of 16 contract claim is that Aqua Sciences’ advice on this point was in error. See, e.g., Phase I Report § 17 9.0 (the historical and recognized environmental conditions at the site “no longer negatively 18 impact[ed] the subject site and [did] not warrant any further assessment activities”); id. § 10.0 (the 19 historical environmental conditions and other “de minimis conditions” Aqua Sciences discovered 20 at the site “are not considered to negatively impact the property”) (original emphasis); Phase II 21 Report § 7.0 (“the property is suitable for commercial redevelopment”). 22 23 24 25 3. Evidence of Damages Aqua Sciences argues that Chartis cannot establish the damages element of its contract claim for two reasons. First, Defendant argues that Lowe’s was “fully aware of the potential for environmental 26 contamination when it purchased and subsequently closed on the property.” Mot., p. 16. That 27 argument is addressed above in the context of breach. Aqua Sciences has only presented evidence 28 that Lowe’s was area of the potential for contamination. There is no evidence that Lowe’s was 12 1 aware of the specific contamination that, Chartis claims, Aqua Sciences was or should have been 2 aware of when it issued its reports. 3 Aqua Sciences also argues that because Lowe’s had already signed a purchase agreement 4 when it hired Aqua Sciences, the Phase I and II reports could not have affected Lowe’s decision to 5 buy the property, and Lowe’s could not have relied on the reports in deciding to buy it. 6 Consequently, argues Aqua Sciences, any resultant damage could not have been caused by Aqua 7 Sciences. 8 9 The Court is not persuaded. There remains a genuine issue of material fact with respect to whether Lowe’s relied on the reports in deciding to close on the property. David Allen testified that Aqua Sciences authorized Lowe’s to rely on the reports, and that he assumed Lowe’s did 11 United States District Court Northern District of California 10 because “[t]hat’s why they asked us to prepare it.” Allen Depo., pp. 43:21–44:3. Allen was also 12 aware at the time that Lowe’s was not obligated to close on the property, and that the reports were 13 prepared during a “due diligence” period that Lowe’s waived after receiving the reports. Id. pp. 14 53:11–54:5; 55:22–56:2. And the deposition testimony submitted by Chartis shows that there is at 15 least a triable issue of material fact regarding Lowe’s reliance on Aqua Sciences’ reports before 16 consummating its purchase of the site. Bernstein Depo., pp. 25:10–13 (“But what I was relying on 17 him to do was review all the previous reports, summarize them and bring to my attention any 18 issues that he thought we would have to deal with moving forward.”); id., at 110:6–8 (“And all the 19 documents [including the Phase I and II reports] needed to be reviewed and that decision needed 20 to be made prior to the end of the due diligence period.”); id., at 110:23–111:1(“Lowe’s relied on 21 ASE, but it was just all of ASE's reports and communication from the Regional Water Quality 22 Control Board with respect to the environmental issues.”). 23 Finally, Aqua Sciences argues that Lowe’s paid a lower price than it otherwise would have 24 paid because of the potential for contamination on the property. The sole piece of evidence Aqua 25 Sciences relies upon is Bernstein’s deposition, in which, according to Aqua Sciences, Bernstein 26 testified that Lowe’s purchased the property for less than the fair market value because of the 27 potential for contamination. Mot. p. 19:14–16. But that is not what Bernstein said. At his 28 13 1 deposition, he was presented with a questionnaire that he purportedly filled out2 and gave to Aqua 2 Sciences in which he answered “yes” to two contradictory questions. The first “yes” indicated that 3 the purchase price reflected the fair market value of the property; the second “yes” indicated that 4 Lowe’s “considered whether the lower purchase price is because contamination is known or 5 believed to be present at the property.” Bernstein Depo. pp. 88:15–89:5. As Bernstein explained 6 in his deposition, however, he was not involved in analyzing the purchase of, or valuing, the 7 property. Bernstein Depo. p. 89:8–10. Again, this only indicates at best that there is a triable 8 issue of material fact. B. 9 Negligence Aqua Sciences’ motion for summary judgment on Chartis’ negligence claim suffers from 10 United States District Court Northern District of California 11 the same flaws as those discussed above. To establish its claim for professional negligence, 12 Chartis must establish (1) duty, (2) breach, (3) causation, and (4) damages. Ileto v. Glock, Inc., 13 349 F.3d 1191, 1203 (9th Cir. 2003). Aqua Sciences argues that Plaintiff cannot establish breach, 14 causation, or damages.3 On the element of breach of a duty of care, Chartis has submitted sufficient evidence to 15 16 find that there is a triable issue of material fact. For example, Chartis’ expert witness, Roger 17 Wood, opined that Aqua Sciences’ Phase I report omitted information known by Aqua Sciences 18 that it should have disclosed. This testimony is adequate to permit a reasonable trier of fact to 19 conclude that Aqua Sciences breached its duty to Lowe’s. See Wood Depo., pp. 21:21–24:18, 20 42:24-43:6.4 21 2 22 23 24 25 26 27 28 Aqua Sciences did not submit the questionnaire, which was made an exhibit at Bernstein’s deposition by Defendant. Plaintiff did submit it, but without authenticating it, and Aqua Sciences objected to the Court’s consideration of it. As discussed above, although the Court has considered the deposition testimony, it has not considered the exhibit. 3 In its reply, Aqua Sciences argues, for the first time, that Chartis has inadequately defined the duty it owed Lowe’s in preparing the report, suggesting that it may not have owed Lowe’s a duty at all (in its motion, Aqua Sciences identified Chartis’ claim as one for professional negligence, without further comment or contention). “It is inappropriate to consider arguments raised for the first time in a reply brief.” Ass’n of Irritated Residents v. C & R Vanderham Dairy, 435 F. Supp. 2d 1078, 1089 (E.D. Cal. 2006). The Court declines to consider the argument. 4 Neither party submitted Wood’s expert report, which made his deposition testimony harder to follow. But it was adequate to establish this point. 14 Addressing causation and damages, Aqua Sciences observes that “[t]he analysis of this 1 2 issue is very similar to that regarding contract damages.” Mot., p. 24:6. So is the outcome. For 3 now, it is sufficient to find that Chartis has submitted enough evidence to show some damages 4 from Aqua Sciences’ alleged negligence. The correct measure of those damages is a matter best 5 left for trial. 6 C. Subrogation 7 Plaintiff does not contest Defendant’s motion for summary judgment on its subrogation 8 claim, as it provides for no more and no less than the rights of Chartis’ insured. Chubb Custom 9 Ins. Co. v. Space Sys./Loral, Inc., 710 F.3d 946, 957 (9th Cir. 2013). It is a “common law doctrine based in equity that permits an insurer to take the place of the insured to pursue recovery 11 United States District Court Northern District of California 10 from third-party tortfeasors responsible for the insured’s loss.” Id. However, Defendant fails to 12 point to any California authority holding that subrogation is not an independent cause of action. 13 The California case Defendant does rely upon expressly discusses equitable subrogation as an 14 independent cause of action, and enumerates its elements. Fireman’s Fund Ins. Co. v. Maryland 15 Cas. Co., 65 Cal. App. 4th 1279, 1292 (1998). The Court therefore cannot grant summary 16 judgment on that claim. 17 18 19 20 21 V. CONCLUSION For the foregoing reasons, Defendant’s Motion for Summary Judgment is hereby DENIED. IT IS SO ORDERED. Dated: August 26, 2013 22 23 24 ______________________________________ JON S. TIGAR United States District Judge 25 26 27 28 15
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
