Citizens Development Corporation, Inc. v. San Diego, County of et al, No. 3:2012cv00334 - Document 402 (S.D. Cal. 2021)

Court Description: ORDER granting 393 Motion for Good Faith Settlement Determination and Establishment of Vallecitos LSM Settlement Trust. Signed by Judge Gonzalo P. Curiel on 2/11/2021. (jmr)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 CITIZENS DEVELOPMENT CORPORATION, INC., a California corporation, 13 14 15 16 17 18 19 20 21 Plaintiff, v. COUNTY OF SAN DIEGO, a California municipal corporation, CITY OF SAN MARCOS, a California municipal corporation, CITY OF ESCONDIDO, a California municipal corporation, VALLECITOS WATER DISTRICT, a California municipal corporation, HOLLANDIA DAIRY, INC., a California corporation, and DOES 1 through 100, inclusive, 22 Defendants. 23 AND RELATED COUNTER-ACTIONS AND CROSS-ACTIONS. 24 Case No.: 12CV00334 GPC-KSC ORDER GRANTING MOTION FOR GOOD FAITH SETTLEMENT DETERMINATION AND ESTABLISHMENT OF VALLECITOS LSM SETTLEMENT TRUST [ECF No. 393.] 25 26 27 28 12CV00334 GPC KSC Before the Court is the Motion for Good Faith Settlement Determination 1 2 (“Motion”) filed by Plaintiff and Counter-Defendant Citizens Development Corporation, 3 Inc. (“CDC”) and Defendant, Counter-Claimant, and Cross-Claimant Vallecitos Water 4 District (“Vallecitos”), as well as the Request for Judicial Notice filed by CDC and 5 Vallecitos. ECF Nos. 393, 393-3. Defendant and Counter-Claimant County of San 6 Diego (“County”), and Defendants, Counter-Claimants, and Cross-Claimants City of San 7 Marcos (“San Marcos”) and City of Escondido (“Escondido”) have filed a response 8 conditionally opposing the Motion. ECF No. 400. The Court finds this motion suitable for disposition without oral argument and 9 10 VACATES the hearing on this matter originally set for February 19, 2021 pursuant to 11 Civ. L.R. 7.1(d)(1). After considering the moving papers, declarations of counsel, the 12 Settlement Agreement and Mutual Release (“Settlement Agreement”) reached by CDC 13 and Vallecitos, the opposition thereto and supporting declarations, and the record as a 14 whole, the Court hereby finds that the Settlement Agreement was entered into in good 15 faith and is fair, reasonable, and consistent with the intent of the Comprehensive 16 Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 17 9601, et seq. and California Code of Civil Procedure (“CCP”) §§ 877 and 877.6. 18 I. 19 Background This civil action arises out of the alleged contamination of the surface water and 20 groundwater in and around Lake San Marcos (“the Lake”) and San Marcos Creek 21 (“Creek”) located in San Marcos, California. See Second Amended Complaint (“SAC”) 22 ¶¶ 1, 3, ECF No. 286. On approximately September 20, 2011, the California Regional 23 Water Quality Control Board, San Diego Region (“the RWQCB”) issued an Investigative 24 Order (“the IO”) alleging that Plaintiff CDC had released pollutants into the Lake. See 25 id. ¶ 4. In response, Plaintiff filed the present action against Defendants County, San 26 Marcos, Escondido, Vallecitos, and Hollandia Dairy (“Hollandia”), alleging that each of 27 them was responsible for the discharges that contaminated the Lake and its surrounding 28 waters. See generally Complaint, ECF No. 1; SAC ¶ 9. 1 12CV00334 GPC KSC 1 A. CDC’s allegations 2 The CDC alleges that the Lake has been contaminated by discharges stemming 3 from a wide variety of sources, including but not limited to, improper waste disposal, 4 poor or unmanaged landscaping practices, sanitary sewer overflows, septic system 5 failures, groundwater infiltration, the presence and operation of “the dam,” and other 6 “non-point source discharges” caused by storm events and dry weather conditions. SAC 7 ¶¶ 5–7. These discharges, CDC alleges, were generated by the real property that is 8 located upgradient of the Lake within the San Marcos Creek Watershed (“the 9 Watershed”), which includes property owned or operated by Defendants. Id. ¶¶ 8, 22–26. 10 Vallecitos operates a sewer system that is partially within the Watershed. ECF No. 393-8 11 (“Gumpel Decl.”) ¶ 4. 12 Based on these and other allegations, the SAC asserts seven causes of action 13 against Defendants. They include: (1) private recovery under the Comprehensive 14 Environmental Response, Compensation, and Liability Act (“CERCLA”); (2) declaratory 15 relief under federal law; (3) continuing nuisance; (4) continuing trespass; (5) equitable 16 indemnity; (6) declaratory relief under California state law; and (7) injunctive relief under 17 the Resource Conservation and Recovery Act (“RCRA”). See id. The SAC’s CERCLA 18 theory of liability is predicated on the assertion that Defendants contaminated the Lake 19 by releasing known “hazardous substances” into its watershed. Id. ¶ 50. CDC identifies 20 those “hazardous substances,” as “nitrogen, phosphorus, and nutrients found in fertilizers, 21 pesticides and sewage.” Id. ¶ 43. 22 B. Counterclaims by Vallecitos 23 Vallecitos filed counterclaims against CDC for its contamination of the Lake, 24 asserting claims for: (1) response costs under CERCLA; (2) declaratory relief under 25 CERCLA; (3) response costs under the California Hazardous Substance Account Act 26 (“HSAA”), Health & Safety Code Section 25300, et seq.; (4) declaratory relief under 27 HSAA; (5) state law contribution; (6) public nuisance; (7) negligence; (8) negligence per 28 se; (9) equitable indemnity; and (10) unjust enrichment. ECF No. 295. County, San 2 12CV00334 GPC KSC 1 Marcos, and Escondido have not asserted crossclaims against Vallecitos. ECF Nos. 292, 2 297, 298. 3 C. Procedural History 4 This action was initially filed on February 8, 2012, approximately nine years ago. 5 ECF No. 1. On January 8, 2014, the Court ordered a stay in the lawsuit to permit the 6 parties to pursue mediation of their claims. ECF No. 94. By 2017, the mediation had not 7 resulted in settlement, and the parties continued with discovery through September 2019, 8 at which point Magistrate Judge Crawford stayed discovery pending settlement 9 discussions. See ECF No. 348. By February 24, 2020, the parties had reached a 10 settlement regarding claims by and against Hollandia, and the Magistrate Judge lifted the 11 stay of discovery with respect to the remaining claims between CDC and the remaining 12 Defendants. ECF No. 362. On May 5, 2020, the Court granted the Joint Motion for Good Faith Settlement 13 14 Determination and Establishment of Hollandia LSM Settlement Trust, in which all 15 Parties joined. ECF No. 384. As a result, Hollandia was to pay $1.5 million to the 16 designated trust for the implementation of investigative and remedial actions, and all 17 claims filed by and against Hollandia in this matter were dismissed with prejudice. Id.; 18 ECF No. 363-4 at 266–87.1 Claims against Hollandia for contribution or indemnity were 19 also barred, except for claims expressly excluded in the settlement agreement. ECF No. 20 384. 21 The remaining parties have proceeded with discovery. Expert discovery has not 22 yet closed due to extensions sought by the parties in light of the COVID-19 pandemic. 23 ECF No. 391. In November 2020, CDC and Vallecitos (collectively “Movants”) reached 24 a settlement and filed this Motion for Good Faith Settlement Determination on December 25 14, 2020. ECF No. 393. All other remaining parties (County, San Marcos, and 26 27 28 1 All citations to particular pages of electronically filed documents, including exhibits, refer to the page numbers provided by the CM/ECF system. 3 12CV00334 GPC KSC 1 Escondido, or collectively “Opposing Parties”) jointly filed a conditional opposition, 2 stating that they would oppose the Motion if the Court does not apply the “proportionate 3 share” approach to account for this settlement in determining the scope of the Opposing 4 Parties’ potential liability. 5 II. 6 Legal Standard To approve of a consent decree under CERCLA, “a district court must conclude 7 that the agreement is procedurally and substantively ‘fair, reasonable, and consistent with 8 CERCLA’s objectives.’” United States v. Coeur d’Alenes Co., 767 F.3d 873, 876 (9th 9 Cir. 2014) (quoting United States v. Montrose Chem. Corp. of Cal., 50 F.3d 741, 748 (9th 10 Cir. 1995)). Courts have applied the same standard to the review of settlement 11 agreements. See San Diego Unified Port Dist. v. Gen. Dynamics Corp., No. 07-CV- 12 01955-BAS-WVG, 2017 WL 2655285, at *6 (S.D. Cal. June 20, 2017). 13 In approving a settlement between fewer than all of the parties in a multiparty 14 litigation, a federal court may enter a bar order precluding subsequent claims for 15 contribution and indemnity by non-settling parties. See Heim v. Heim, No. 5:10-CV- 16 03816-EJD, 2014 WL 1340063, at *4 (N.D. Cal. Apr. 2, 2014). “[C]ourts review 17 settlements and generally enter contribution and indemnity bar orders in CERCLA cases 18 if the settlement is fair, reasonable, and adequate.” Coppola v. Smith, No. 1:11-CV-1257 19 AWI BAM, 2017 WL 4574091, at *2 (E.D. Cal. Oct. 13, 2017) (collecting cases); 20 AmeriPride Services Inc. v. Valley Indus., 2007 WL 1946635, at *2 (E.D. Cal. July 2, 21 2007), (citing United States v. Western Processing Co., Inc., 756 F. Supp. 1424, 1432–33 22 (W.D. Wash. 1990)) (“Under federal law, particularly in CERCLA cases such as this, 23 district courts have approved settlements and entered bar orders.”). Similarly, under 24 California law, in a case with multiple tortfeasors a court must make a determination that 25 any settlement was entered into in “good faith” before the other alleged joint tortfeasors 26 will be barred from seeking contribution or indemnity from the settling party. Cal. Code 27 Civ. P. §§ 877, 877.6; see also Mason & Dixon Intermodal, Inc. v. Lapmaster Int’l LLC, 28 632 F.3d 1056, 1061 (9th Cir. 2011) (courts sitting in diversity apply Sections 877 and 4 12CV00334 GPC KSC 1 2 877.6, as substantive California law, to good faith settlement determinations). In determining whether a settlement was reached in good faith under Section 877 3 and 877.6, a court must consider the factors laid out in Tech-Bilt, Inc. v. Woodward- 4 Clyde & Assocs., 38 Cal. 3d 488 (1985), including: (1) “a rough approximation of the 5 plaintiffs’ total recovery and a settlor’s proportionate liability”; (2) “the amount paid in 6 settlement”; (3) “a recognition that a settlor should pay less in settlement than if found 7 liable after a trial”; (4) “the allocation of settlement proceeds among plaintiffs”; (5) “the 8 financial conditions and insurance policy limits of settling defendants”; and (6) evidence 9 of “collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling 10 defendants.” Tech-Bilt, 38 Cal. 3d at 499. An opposing party must “demonstrate . . . that 11 the settlement is so far ‘out of the ballpark’ in relation to these factors as to be 12 inconsistent with the equitable objectives of the [joint tortfeasor] statute.” Id. at 499–500. 13 An evaluation of the factors is to be made based on the information available at the time 14 of settlement. Id. at 499. The court has discretion in determining whether a settlement is 15 made in good faith. Id. at 502. 16 Although courts have taken different approaches to determining whether the 17 settlement of CERCLA claims is fair and reasonable, a number of courts in the Ninth 18 Circuit have “borrowed” from California law the legal framework for determining 19 whether a settlement has been entered into in good faith within the meaning of California 20 Code of Civil Procedure Sections 877 and 877.6 and as explained in Tech-Bilt. See 21 Heim, 2014 WL 1340063, at *3; Santa Clarita Valley Water Agency v. Whittaker Corp., 22 No. 2:18-CV-06825-SB (RAOx), 2020 WL 8125638, at *2 (C.D. Cal. Nov. 16, 2020); 23 see also Lewis v. Russell, No. 2:03-CV-02646 WBS AC, 2019 WL 5260731, at *3 (E.D. 24 Cal. Oct. 17, 2019) (“The factors used to evaluate whether a CERCLA settlement is fair, 25 reasonable, and adequate parallel those used to determine whether a settlement is in good 26 faith under California law.”). Other courts have applied the Tech-Bilt factors in 27 combination with settlement factors drawn from federal common law in cases involving 28 both CERCLA and California state law claims. E.g., San Diego Unified Port Dist., 2017 5 12CV00334 GPC KSC 1 WL 2655285, at *6–10; Cooper Drum Cooperating Parties Grp. v. Am. Polymers Corp., 2 No. CV 19-03007-AB (FFMx), 2020 WL 2504331, at *5–8 (C.D. Cal. May 13, 2020). “CERCLA specifies an approach for allocating liability to a nonsettling defendant . 3 4 . . when the federal or state government has incurred recoverable response costs and 5 enters into a settlement agreement,” but it “does not specify how a settlement agreement 6 between two private parties[2] affects the liability of nonsettling parties.” AmeriPride 7 Servs. Inc. v. Texas E. Overseas Inc., 782 F.3d 474, 486 (9th Cir. 2015) (citing 42 U.S.C. 8 § 9613(f)). A district court therefore has discretion in choosing to follow the pro tanto 9 approach, under which “the settlement does not discharge the nonsettling tortfeasors but 10 reduces the injured party’s claims against them by the dollar value of the settlement,” or 11 the proportionate share approach, under which “the settlement does not discharge the 12 nonsettling tortfeasors but reduces the injured party’s claims against them by the amount 13 of the settling tortfeasor’s proportionate share of the damages,” depending on which 14 would be the “most equitable method” in a given case. Id. at 483–84, 487–88 (citing 15 Uniform Contribution Among Tortfeasors Act (“UCATA”) § 4; Uniform Comparative 16 Fault Act (“UCFA”) § 6). A court therefore may also consider these “competing 17 methods of accounting for a settling party’s share when determining the amount of a 18 nonsettling defendant’s liability” when determining whether a settlement is fair and 19 reasonable under CERCLA. See Coppola, 2017 WL 4574091 at *3 (quoting AmeriPride, 20 782 F.3d at 483). 21 III. Discussion 22 A. Request for Judicial Notice and Objection to Evidence 23 Movants filed a request for judicial notice and an objection to the Expert Report of 24 Robert Bell (“Bell Report”) filed by the Opposing Parties. ECF Nos. 393-3, 401-2. 25 \\\ 26 27 28 No party contends that any of the public entities in this case qualify as a “state government” for the purposes of CERCLA. 2 6 12CV00334 GPC KSC 1 i. Judicial notice 2 Federal Rule of Evidence 201 provides that a court “may judicially notice a fact 3 that is not subject to reasonable dispute,” either because it is (1) “generally known within 4 the trial court’s territorial jurisdiction” or (2) “can be accurately and readily determined 5 from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). A 6 court can therefore “take judicial notice of matters of public record,” but “cannot take 7 judicial notice of disputed facts contained in such public records.” Lee v. City of Los 8 Angeles, 250 F.3d 668, 689 (9th Cir. 2001); Khoja v. Orexigen Therapeutics, Inc., 899 9 F.3d 988, 999 (9th Cir. 2018). “Just because [a] document itself is susceptible to judicial 10 notice does not mean that every assertion of fact within that document is judicially 11 noticeable for its truth.” Khoja, 399 F.3d at 999. A court therefore must identify what 12 facts it is judicially noticing from a document. Id. Accordingly, the requesting party 13 should accordingly identify what facts within the document it seeks to have judicially 14 noticed. See Capaci v. Sports Research Corp., 445 F. Supp. 3d 607, 617 (C.D. Cal. 15 2020) (“Because defendant does not identify which facts within the exhibits it asks the 16 court to judicially notice nor does it explain why the court can judicially notice those 17 facts, the court denies defendant’s request for judicial notice.”); Riley v. Chopra, No. CV 18 18-3371 FMO (SKx), 2020 WL 5217154, at *2 (C.D. Cal. June 19, 2020) (finding 19 requesting party’s arguments “unpersuasive” given party’s failure to identify what facts 20 were to be judicially noticed). 21 Movants seek judicial notice of fifteen documents. ECF No. 393-3. They include 22 documents from the Court’s docket (id. ¶¶ 1, 6, 7, 10, 13, 14); interrogatory responses 23 (id. ¶ 11); the Remedial Investigation/Feasibility Study Report Upper San Marcos Creek 24 Watershed and Lake San Marcos (“RI/FS”) and related attachments (id. ¶¶ 2, 3, 9); RI/FS 25 certifications by the remaining Parties (id. ¶ 4); the San Diego Regional Water Quality 26 Control Board Approval of the RI/FS (id. ¶ 5); an order of the RWQCB (id. ¶ 8); and a 27 report titled Lake San Marcos, A Lake Management and Rehabilitative Investigation 28 prepared by Orville P. Ball and Associates (“Ball Report”) (id. ¶ 12). 7 12CV00334 GPC KSC 1 First, the Court notes that it has no need to judicially notice the existence of its own 2 orders or the parties’ filings in this case. See Tuan Nguyen v. Aurora Loan Servs., LLC, 3 No. SA-CV-11-1638-AG (ANx), 2011 WL 13234276, at *2 (C.D. Cal. Dec. 5, 2011) 4 (“[T]he Court need not take judicial notice of filings on its own docket or orders it has 5 previously issued”); Nanavati v. Adecco, 99 F. Supp. 3d 1072, 1075 (N.D. Cal. 2015) 6 (declining to take judicial notice of complaint). The Court accordingly DENIES AS 7 MOOT Movants’ request to take judicial notice of these filings. 8 As for Movants’ request that the Court take judicial notice of the City of San 9 Marcos’s responses to Hollandia’s interrogatories, they have not explained whether they 10 seek judicial notice of the existence of these interrogatory responses or particular facts 11 within the responses. The content of the interrogatory responses are neither “generally 12 known within the trial court’s territorial jurisdiction” nor “can be accurately and readily 13 determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. 14 Evid. 201(b); see also Lil’ Man In The Boat, Inc. v. City & Cty. of San Francisco, No. 17- 15 CV-00904-JST, 2019 WL 8263438, at *2 (N.D. Cal. Nov. 6, 2019) (quoting Hawkins v. 16 California, No. 1:09-cv-01705-LJO-MS (PC), 2015 WL 2454275, at *2 (E.D. Cal. May 17 22, 2015)) (“Discovery documents are not generally appropriate candidates for judicial 18 notice.”); Huntzinger v. Aqua Lung Am., Inc., No. 15-CV-1146-WQH-AGS, 2018 WL 19 325024, at *5 (S.D. Cal. Jan. 8, 2018) (“The Court declines to take judicial notice of any 20 discovery responses in this litigation because they are not the proper subject of judicial 21 notice.”). 22 The Court also finds that the content of the RI/FS report and attachments, RI/FS 23 certification letters, and the Ball Report are not proper subjects for judicial notice. 24 Movants have not explained how the information contained in the reports or attachments 25 “can be accurately and readily determined from sources whose accuracy cannot 26 reasonably be questioned.” Fed. R. Evid. 201(b). The RI/FS report indicates that it was 27 authored by a Daniel B. Stephens & Associates, Inc. ECF No. 393-11. Movants 28 therefore have not established that the RI/FS, its attachments, or letters supporting the 8 12CV00334 GPC KSC 1 RI/FS alternatives submitted by the parties are records of an administrative body, as they 2 appear to suggest in their request for judicial notice. ECF No. 393-3 ¶¶ 2, 3, 4 9. In 3 support of their request for judicial notice of the Ball Report, Movants cite cases for the 4 proposition that the Court can take judicial notice of its own records and prior court 5 proceedings. ECF No. 393-3 ¶ 12. The Ball Report is not a Court record. 6 However, the Court will take judicial notice of the San Diego Regional Water 7 Quality Control Board Approval of the RI/FS, for the fact that the report was approved. 8 “Judicial notice is appropriate for records and reports of administrative bodies.” United 9 States v. 14.02 Acres of Land More or Less in Fresno Cty., 547 F.3d 943, 955 (9th Cir. 10 2008) (citation omitted); see also Comm. to Protect our Agric. Water v. Occidental Oil & 11 Gas Corp., 235 F. Supp. 3d 1132, 1153 (E.D. Cal. 2017) (taking judicial notice of state 12 agency publications). The Court does not take judicial notice of the RWQCB order at 13 this time because it is not necessary for the resolution of this motion. 14 However, just because the Court does not judicially notice of some documents 15 does not mean it cannot consider them in its good faith settlement determination. To 16 obtain a good faith settlement determination, the settling parties must present some basis 17 for their claim that the settlement was entered into in good faith, Brehm Communities v. 18 Superior Court, 88 Cal. App. 4th 730, 736 (2001), as modified (May 22, 2001)), which 19 can be rebutted by evidence presented by the parties opposing settlement, Tech-Bilt, 38 20 Cal. 3d at 499–500 (citing Cal. Code Civ. P. § 877.6(d)) (noting that parties opposing 21 settlement bear the ultimate burden of showing a lack of good faith). As County, San 22 Marcos, and Escondido have not objected to the Court’s consideration of the evidence, 23 the Court finds that it is appropriate to consider the reports and other documents Movants 24 provide in support of the Motion, although it will not take judicial notice of the facts 25 within them except as noted above. 26 ii. Evidentiary objection 27 Movants contend that the Bell Report cannot be considered in determining whether 28 this settlement was agreed to in good faith for two reasons. First, Movants argue that the 9 12CV00334 GPC KSC 1 Bell Report is inadmissible and irrelevant because Mr. Bell’s opinions were not available 2 at the time of settlement. Second, Movants argue that the Bell Report is inadmissible as 3 expert opinion under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). 4 In Tech-Bilt, the court noted that “practical considerations obviously require that 5 the evaluation be made on the basis of information available at the time of settlement.” 6 Tech-Bilt, 38 Cal. 3d at 499. A court’s task is to determine whether the settlement figure 7 is “grossly disproportionate to what a reasonable person, at the time of the settlement, 8 would estimate the settling defendant’s liability to be.” Id. (quoting Torres v. Union 9 Pacific R.R. Co., 157 Cal. App. 3d 499, 509 (1984)) (emphasis added); cf. Cahill v. San 10 Diego Gas & Elec. Co., 194 Cal. App. 4th 939, 968 (2011) (affirming good faith 11 settlement determination made on the basis of information available at the time of 12 settlement in April 2009, even though by January 2010, the time of the good faith 13 settlement determination hearing, plaintiff had developed a new theory of causation that 14 could have rendered settling defendants at greater risk of liability). “What is brought out 15 about the underlying liability picture during subsequent discovery or trial after that 16 settlement is not relevant to the ‘good faith’ settlement issue because it could not have 17 been a matter affecting the ‘good faith’ of the settlor at the time of the settlement.” 18 Fisher v. Superior Court, 103 Cal. App. 3d 434, 444 (1980). At the same time, parties 19 must have the ability to present evidence to oppose the settlement. Tech-Bilt, 38 Cal. 3d 20 at 499. Further, “the hallmark of evidence available at the time of settlement is not only 21 what the settling parties actually contemplated or actually presented to the court in 22 seeking a good faith determination; available evidence also encompasses what the parties 23 should have known.” Singer Co. v. Superior Court, 179 Cal. App. 3d 875, 896 (1986) 24 (emphasis in original). Thus, an expert declaration rebutting the evidence relied upon by 25 the settling parties or interpreting evidence available at the time of settlement, even 26 though drafted after the time of settlement, would likely be appropriately considered by 27 the Court. However, a declaration undertaking completely new and original analysis, 28 supplying information that settling parties should not reasonably have known about at the 10 12CV00334 GPC KSC 1 time of settlement, may not be appropriately considered “information available at the 2 time of the settlement.” Tech-Bilt, 38 Cal. 3d at 499. The Bell Report—presented here as comprising both the initial expert report, dated 3 4 December 18, 2020, and rebuttal report, dated January 27, 2021—had not been provided 5 at the time the settlement was reached or the Motion was filed. ECF No. 400-2 (“Bell 6 Report”). The question, therefore, is whether the Bell Report merely offers a competing 7 analysis of the information available at the time of settlement, or whether it should be 8 considered new evidence that could not have been factored in to the determination of 9 “what a reasonable person, at the time of the settlement, would [have] estimate[d] the 10 settling defendant’s liability to be.” Id. There is reason to conclude that some of the 11 information in the Bell Report was not available at the time of the settlement. In 12 particular, Bell’s opinion leading to his calculation that Vallecitos is responsible for 35% 13 of the phosphorous contamination, is based on original analysis and modeling, which do 14 not appear to be bases for the RI/FS or other prior investigations of contributions to the 15 Site. See Bell Report at 38–44. However, other parts of the Bell Report cited by 16 Opposing Parties, such as those that question the frequency of Vallecitos’s inspection of 17 its pipes or the location of its pipes with respect to the water table, appear to be based on 18 information regarding Vallecitos’s own practices and publicly available information from 19 the RWQCB, which presumably were available to the parties at the time of settlement. 20 See id. at 94. Accordingly, whether the information in the Bell Report as a whole should 21 be considered available at the time of the settlement is not clear. 22 Therefore, for the purposes of its analysis below, the Court presumes the 23 admissibility of the Bell Report and considers it in conjunction with the other evidence 24 provided.3 25 \\\ 26 \\\ 27 28 3 Thus, the Court does not reach Movants’ arguments under Daubert. 11 12CV00334 GPC KSC 1 B. Good Faith Settlement Determination Under Tech-Bilt 2 i. Settlement terms 3 Under the terms of the settlement, Vallecitos has agreed to pay $1 million towards 4 remediation costs. ECF No. 393-9 (“Settlement Agreement”) at 4. Additionally, 5 Vallecitos has agreed to pay $83,035.88 towards additional investigative and regulatory 6 oversight costs. Id. at 3–4. In exchange, the settlement agreement provides for dismissal 7 with prejudice of claims by and against Vallecitos in this action, and is conditioned on the 8 Court entering an order barring claims for contribution and indemnity relating to the 9 Site.4 Id. at 6–7. Movants do not contend that the settlement value should be considered 10 greater than the amount allocated to remediation and investigative and oversight costs. 11 ii. Approximation of potential recovery and proportionate liability and recognition 12 that settling defendant should pay less than should it proceed to trial 13 To meet the standard of “good faith,” the amount of the settlement must be “within 14 the reasonable range of the settling tortfeasor’s proportional share of comparative liability 15 for the plaintiff’s injuries.” Tech-Bilt, 38 Cal. 3d at 499; see also Torres v. Union Pac. R. 16 Co., 157 Cal. App. 3d 499, 509 (1984) (holding that “a co-defendant’s settlement price 17 cannot be grossly disproportionate to his fair share of the damages”). The Court must 18 therefore determine the approximate potential total recovery, and Vallecitos’s 19 approximate share of the potential liability. 1. Approximation of potential total recovery 20 In determining the total potential recovery for the purposes of evaluating a 21 22 settlement under Tech-Bilt, the court makes a “rough approximation of what plaintiff 23 would actually recover.” West v. Superior Court, 27 Cal. App. 4th 1625, 1636 (1994). 24 Plaintiff’s claim for damages is not determinative. Id. Under CERCLA, “a private party may ‘recover expenses associated with cleaning 25 26 up contaminated sites.’” City of Colton v. Am. Promotional Events, Inc.-W., 614 F.3d 27 28 4 In this order, the term “Site” has the same meaning as used in the Settlement Agreement. 12 12CV00334 GPC KSC 1 998, 1002 (9th Cir. 2010) (quoting United States v. Atl. Research Corp., 551 U.S. 128, 2 131 (2007)). Movants contend that the approximate total remediation costs would 3 amount to $12,424,217.85 in present-day dollars, based on the five preferred alternatives 4 for the remediation of the Lake set forth in the RI/FS. ECF No. 393-1 (citing RI/FS at 5 242). Opposing Parties state that CDC’s recovery claim totals at least $23,308,440. ECF 6 No. 400 at 13. However, Opposing Parties do not indicate that they actually consider 7 CDC likely to recover its entire claim for damages, and have not otherwise identified 8 what they regard as CDC’s approximate potential recovery. Indeed, one of the reports 9 filed by Opposing Parties estimates the response costs to be significantly lower than those 10 proposed by CDC’s expert and much closer to the RI/FS calculation of the costs for the 11 preferred alternatives. ECF No. 400-1 at 30. For the purposes of this Motion, the Court 12 therefore accepts the remediation costs figure provided by Movants based on the RI/FS as 13 a “rough approximation of what plaintiff would actually recover”5 for response costs.6 14 West, 27 Cal. App. 4th at 1636. 2. Vallecitos’s estimated proportionate liability 15 The Court turns to each parties’ contentions regarding Vallecitos’s approximate 16 17 proportionate liability. Movants argue that the apportionment of liability between all 18 parties would likely be determined based upon the “Gore Factors,” and that consideration 19 of those factors would militate in favor of the settlement because Vallecitos makes only 20 21 5 22 23 24 Opposing parties do note in a footnote that the RWQCB has not yet considered what permanent remedy to approve, and thus that future cost of the remedy is not clear and “the CERCLA claim may not be ripe for adjudication.” ECF No. 400 at 5 n.1. However, the Court’s determination of whether a settlement was agreed upon in good faith rests on the facts available at the time of the settlement, and opposing parties do not approximate a different amount that CDC is likely to recover. Opposing Parties also include CDC’s claims for lost business and lake expenses in their calculation of CDC’s claimed damages, but do not explain to what extent these claimed damages should be considered in the “rough approximation of what [CDC] would actually recover.” Opposing Parties also reference CDC’s RCRA claim. However, several courts have found the RCRA does not provide a right to contribution, which would render Sections 877 and 877.6 inapplicable to the settlement of those claims. See, e.g., Tyco Thermal Controls LLC v. Redwood Indus., No. C 06-07164 JF PVT, 2010 WL 3211926, at *12 (N.D. Cal. Aug. 12, 2010). 6 25 26 27 28 13 12CV00334 GPC KSC 1 minor contribution to the Lake contamination and has maintained a high degree of care. 2 ECF No. 393-1 at 22–23. Opposing Parties do not address what standard would apply to 3 determine each party’s proportionate share of liability but argue that Vallecitos’s 4 proportionate share of liability is much larger than Movants suggest, given the Bell 5 Report’s opinion that 35 percent of the phosphorous7 arriving at the lake came from 6 Vallecitos’s sewer system. ECF No. 400 at 16. Under CERCLA, “the court may allocate response costs among liable parties using 7 8 such equitable factors as the court determines are appropriate.” 42 U.S.C. § 9613(f)(1). 9 Some courts consider the Gore Factors, named after a proposed amendment to CERCLA 10 that was rejected by Congress. Boeing Co. v. Cascade Corp., 207 F.3d 1177, 1187 (9th 11 Cir. 2000). “The Gore Factors are: ‘(1) the ability of the parties to demonstrate that their 12 contribution to a discharge, release or disposal of a hazardous waste can be distinguished; 13 (2) the amount of the hazardous waste involved; (3) the degree of toxicity of the 14 hazardous waste involved; (4) the degree of involvement by the parties in the generation, 15 transportation, treatment, storage, or disposal of the hazardous waste; (5) the degree of 16 care exercised by the parties with respect to the hazardous waste concerned, taking into 17 account the characteristics of such hazardous waste; and (6) the degree of cooperation by 18 the parties with Federal, State, or local officials to prevent any harm to the public health 19 or the environment.’” TDY Holdings, LLC v. United States, 885 F.3d 1142, 1146 n.1 (9th 20 Cir. 2018) (quoting Kerr-McGee Chem. Corp. v. Lefton Iron & Metal Co., 14 F.3d 321, 21 326 n.4 (7th Cir. 1994)). However, district courts are not limited to consideration of 22 these factors and can allocate response costs using other equitable factors as they deem 23 appropriate. Boeing, 207 F.3d at 1187. Movants contend that all of the Gore Factors indicate Vallecitos would be 24 25 26 27 28 7 Opposing Parties’ response argues that Vallecitos is responsible for 35 percent of the loading within the Watershed. The Court notes that the Bell Report’s findings discuss only Vallecitos’s potential phosphorous contributions, whereas the RI/FS indicates that the Lake also has other contaminants in need of remediation in addition to phosphorous. RI/FS at 285–92. 14 12CV00334 GPC KSC 1 equitably allocated only a small percentage of the costs. ECF No. 393-1 at 22. 2 Specifically, they argue that, relevant to the second factor, the RI/FS concluded that 3 Vallecitos Sanitary Sewer Spills (“SSOs”) contributed only minor amounts of nutrient to 4 the Creek and Lake compared to other Watershed contributors. Id. Movants also argue 5 that (1) the RI/FS found that groundwater was likely a minor source of nutrient 6 contribution to the Lake and (2) significant exfiltration of sewage from Vallecitos’s pipes 7 into the groundwater is unlikely due to the high water table within two miles of the Lake, 8 suggesting that exfiltration from Vallecitos’s pipes did not significantly contribute to the 9 nutrient load of the Lake. Id. at 22–23. Additionally, as to the third and fifth Gore 10 Factors, Movants contend that it is undisputed that Vallecitos is not responsible for urban 11 surface water runoff discharges into the Watershed and that Vallecitos has established a 12 high degree of care. Id. at 23. Movants argue that the $1 million settlement amount 13 constitutes about 8% of the total estimated cost to implement over 30 years the five 14 preferred remedial alternatives proposed in the RI/FS, which is “more than adequate” 15 considering Vallecitos’s potential share of liability. Id. 16 Opposing Parties do not contend that Vallecitos SSOs are responsible for 17 significant contamination to the Lake, but instead argue that exfiltration from Vallecitos’s 18 pipes is a much greater source of nutrient contribution than represented by Movants. 19 Relying on the Bell Report, Opposing Parties argue that 914 kilograms per year or 35 20 percent of the phosphorous loading within the Watershed is attributable to Vallecitos’s 21 leaky sewers. ECF No. 400 at 7, 11. Opposing Parties further state that evidence 22 undermines Movants’ assertion that a hydrostatic barrier would prevent exfiltration from 23 most of Vallecitos’s pipes. Id. at 12. Opposing Parties also contend that Vallecitos has 24 not taken a high degree of care in preventing these phosphorous contributions, as 25 evidenced by Vallecitos’s ten-year inspection cycle. Id. 26 The Court reiterates its concern that at least some of the findings of the Bell Report 27 constitute evidence that was not available in November 2020, when the settlement 28 between Movants was reached. But even when taking the Bell Report into account, there 15 12CV00334 GPC KSC 1 appears to be a legitimate dispute as to Vallecitos’s contributions to the contamination of 2 the Lake and Creek. Based on the evidence presented by all parties, Vallecitos’s level of 3 contribution of phosphorous through exfiltration is still far from definitively established, 4 as both sides’ experts hotly contest the methodology relied upon by the opposite side’s 5 expert to calculate the likelihood of exfiltration from Vallecitos’s pipes. ECF No. 401-2 6 at 6–8; ECF No. 400 at 12. Further, the RI/FS’s conclusion that groundwater was likely 7 not a significant contributor to the nutrient loading to the Lake, as well as the absence of 8 any discussion of exfiltration from the RI/FS—the result of a multiyear undertaking 9 engaged in by all parties that examined numerous potential sources of contamination to 10 the Lake and Creek—reinforces the possibility that Vallecitos could ultimately be found 11 to have contributed only a small proportion of the contamination. See RI/FS at 232. As 12 Tech-Bilt suggested, the Court will not adopt an interpretation of “good faith” that 13 “would tend to convert the pretrial settlement approval procedure into a full-scale mini- 14 trial.” Tech-Bilt, 38 Cal. 3d at 499. The Court therefore need not definitively determine 15 which side’s experts will carry the day, so long as evidence supports Movants’ assertion 16 that the settlement amount is within the range of Vallecitos’s potential liability. 17 The Court therefore finds that based on the information available at the time of 18 settlement, $1 million, or approximately 8% of the total approximate recovery, is “within 19 the reasonable range of [Vallecitos’s] proportional share of comparative liability for” 20 remediation costs. Tech-Bilt, 38 Cal. 3d at 499. Even if the Court considers the Bell 21 Report and determines that Vallecitos may ultimately be found responsible for a greater 22 proportion of the discharge of phosphorous, the fact that the 8% figure is at the lower end 23 of the range of possible recovery is not inconsistent with the Tech-Bilt factors. Tech-Bilt, 24 38 Cal. 3d at 499 (courts determining good faith should recognize “that a settlor should 25 pay less in settlement than he would if he were found liable after a trial”); Abbott Ford, 26 Inc. v. Superior Court, 43 Cal. 3d 858, 874 (1987) (“[A] ‘good faith’ settlement does not 27 call for perfect or even nearly perfect apportionment of liability.”). 28 The Court therefore finds that Opposing Parties have not met their burden of 16 12CV00334 GPC KSC 1 showing that the approximately $1 million provided for in the settlement agreement 2 would be “so far ‘out of the ballpark’” of Vallecitos’s potential share of liability that the 3 settlement would be inequitable. Tech-Bilt, 38 Cal. 3d at 499–500. 4 iii. Other Tech-Bilt factors 5 Opposing Parties do not argue that the other Tech-Bilt factors, such as the 6 allocation of the settlement proceeds, the financial condition and insurance policy limits 7 of Vallecitos, or the possibility of collusion, fraud, or tortious conduct weigh against a 8 good faith settlement determination. Additionally, upon independent review, the Court 9 finds that Movants have demonstrated that these factors support a finding that the 10 settlement was entered into in good faith. There is no issue regarding allocation because 11 the settlement is mainly to be allocated to remedial actions at the Site, while the 12 remaining will be put towards investigative and regulatory oversight costs. Vallecitos 13 also states it is directly paying a significant portion of the settlement from pooled self- 14 insurance funds due to coverage disputes, and that the settlement is fair considering the 15 limited private insurance funds available. ECF No. 393-1 at 24–25. Lastly, the Court is 16 satisfied that the settlement agreement is the result of arm’s-length negotiations over the 17 course of nearly a decade of litigation, and that there is no evidence that Movants 18 engaged in any collusion, fraud, or other tortious conduct in coming to this agreement. 19 Accordingly, the Court finds that upon review of the Tech-Bilt factors, the 20 21 22 23 settlement agreement was arrived at in good faith. C. Determination of Whether Settlement is Fair, Reasonable, and Consistent with Purposes of CERCLA Courts have often approved of settlements and bar orders upon determination that 24 “the proposed settlement is fair, reasonable, and consistent with the purposes that 25 CERCLA is intended to serve,” drawing from the standard courts apply in evaluating 26 proposed consent decrees under CERCLA. Cooper Drum, 2020 WL 2504331, at *4 27 (quoting Rev 973, LLC v. Mouren-Laurens, No. CV 98–10690 DSF (Ex), 2016 WL 28 9185139, at *1 (C.D. Cal. July 1, 2016)); see also United States v. Montrose Chem. Corp. 17 12CV00334 GPC KSC 1 of Cal., 50 F.3d 741, 746 (9th Cir. 1995); Coppola, 2017 WL 4574091, at *2. Here, for 2 the reasons set forth more fully above, the settlement is substantively and procedurally 3 fair. See San Diego Unified Port Dist., 2017 WL 2655285, at *6–7 (citing Arizona v. 4 City of Tucson, 761 F.3d 1005, 1012 (9th Cir. 2014)). The settlement was arrived at after 5 years of litigation and mediation, and sufficient formal discovery and independent 6 investigation had occurred at the time of settlement to provide Movants with a basis from 7 which they could approximate Vallecitos’s proportionate share of liability. Cf. id. 8 (“[B]ecause all of the parties had ample opportunity to investigate the contamination and 9 because they negotiated the settlement at arm’s length, the Court concludes the settlement 10 is procedurally fair.”). The settlement also minimizes prejudice to the non-settling parties 11 because the amount to be paid by Vallecitos is within the range of its likely ultimate 12 proportionate share of the fault for the Lake contaminants, based on the available 13 evidence. See City of Tuscon, 761 F.3d at 1012 (“[I]n order to approve a CERCLA 14 consent decree, a district court must find that the agreement is “based upon, and roughly 15 correlated with, some acceptable measure of comparative fault, apportioning liability 16 among the settling parties according to rational (if necessarily imprecise) estimates of 17 how much harm each [potentially responsible party] has done.”). 18 Additionally, the settlement furthers the purposes of CERCLA. “[O]ne of the core 19 purposes of CERCLA is to foster settlement through its system of incentives and without 20 unnecessarily further complicating already complicated litigation.” Chubb Custom Ins. 21 Co. v. Space Sys./Loral, Inc., 710 F.3d 946, 971 (9th Cir. 2013) (quoting California Dep’t 22 of Toxic Substances Control v. City of Chico, Cal., 297 F. Supp. 2d 1227, 1235 (E.D. Cal. 23 2004)); see also San Diego Unified Port Dist., 2017 WL 2655285, at *5 (“[O]ne of 24 CERCLA’s purposes is to encourage settlement through providing contribution 25 protection—that is, preventing settling parties from being later sued for contribution by 26 other joint tortfeasors.”). After approximately nine years of litigation, mediation, and 27 settlement discussions, this purpose of CERCLA is certainly served by settlement at this 28 stage of proceedings. And as noted above, the $1 million Vallecitos has agreed to pay 18 12CV00334 GPC KSC 1 towards remediation of the Lake and Creek approximates its proportionate share of 2 liability and thus furthers the purpose of ensuring potentially responsible parties are 3 allocated an equitable share of response costs. See 42 U.S.C. § 9613(f). 4 5 The Court therefore finds that the settlement is fair, reasonable, and adequate, and is consistent with the purposes of CERCLA. 6 D. Method of Accounting for Settlements 7 “[A] a district court has discretion under § 9613(f)(1) to determine the most 8 equitable method of accounting for settlements between private parties in a contribution 9 action.” AmeriPride, 782 F.3d at 487. Courts typically choose between the pro tanto 10 approach and the proportionate share approach, “competing methods of accounting for a 11 settling party’s share when determining the amount of a nonsettling defendant’s liability.” 12 Id. at 484. 13 Here, the terms of the settlement agreement do not provide for any particular 14 method of accounting. See ECF No. 393-9 at 7. Movants also did not request that the 15 Court apply the pro tanto approach in their moving papers. See ECF No. 393-1. Instead, 16 Movants raised the issue on reply, ECF No. 401, and Opposing Parties thus had no 17 opportunity to respond. Accordingly, because the Court “need not consider arguments 18 raised for the first time in a reply brief,” the Court will not consider whether the pro tanto 19 approach must be followed here. See Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 20 2007). However, Opposing Parties have also failed to adequately demonstrate that the 21 proportionate share approach would be the most equitable method of accounting at this 22 juncture. As noted above, the Court finds the settlement is in good faith, fair, and 23 reasonable because the agreement requires Vallecitos to pay an amount not 24 incommensurate with its likely proportionate liability. Thus, based on the information 25 available at the time of the settlement, the Court finds that the settlement would not 26 unfairly prejudice Opposing Parties regardless of what method of allocation applies. 27 28 Therefore, it is sufficient at this stage for the Court to find that settlement is not conditioned on the Court’s adoption of any particular method of accounting. The Court 19 12CV00334 GPC KSC 1 thus does not reach the issue of what method of accounting would be the most equitable. 2 IV. Conclusion 3 The Court hereby ORDERS as follows: 4 1. The Motion is GRANTED; 5 2. The Settlement Agreement and Mutual Release (“Settlement Agreement”) 6 reached by the Parties with respect to Vallecitos Water District which is the 7 subject of the Motion is in good faith, fair, reasonable, and consistent with 8 the intent of the Comprehensive Environmental Response, Compensation, 9 and Liability Act (“CERCLA”), 42 U.S.C. § 9601, et seq. and California Code of Civil Procedure (“CCP”) §§ 877 and 877.6; 10 3. 11 Pursuant to the Settlement Agreement, CERCLA, and CCP § 877, et seq., 12 the Parties and their respective insurers and public agency liability pools are 13 hereby discharged from all liability for claims for contribution or indemnity 14 arising from any alleged past negligence, act, omission, or misconduct of 15 Vallecitos Water District in connection with the Site and the subject matter 16 of this litigation. This discharge of liability shall not apply to any claims by 17 and between the Parties which were expressly excluded from the releases 18 they granted to each other as set forth in section 4.B.(ii) of the Settlement 19 Agreement. 4. 20 All claims, counterclaims and cross-claims asserted in the action by CDC 21 and the Public Entities8 against Vallecitos Water District, and all claims, 22 counterclaims and cross-claims asserted in the action by Vallecitos Water 23 District against CDC and the Public Entities, are hereby dismissed with 24 prejudice, with the Parties each bearing their own attorneys’ fees and costs. 5. 25 The Vallecitos LSM Settlement Trust shall be established as either a “Designated Settlement Fund” or a “Qualified Settlement Fund” pursuant to 26 27 28 8 County, San Marcos, Escondido are hereinafter collectively referred to as the “Public Entities.” 20 12CV00334 GPC KSC 1 Section 468B of the Internal Revenue Code, 26 U.S.C. § 468B, and the 2 regulations promulgated pursuant thereto and codified at 26 C.F.R. § 3 1.468B, and in accordance with the terms and conditions of the Settlement 4 Agreement. 5 6 IT IS SO ORDERED. 7 8 Dated: February 11, 2021 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 12CV00334 GPC KSC

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