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California v. Randtron

Citation: 30 ELR 20189
No. No. CIV-S-98-0620 DFLDAD, 69 F. Supp. 2d 1264/(E.D. Cal., 10/12/1999)

The court holds that a consent decree entered in federal court between the city of Lodi, California, and the primary insurer of a dissolved California corporation that polluted the city's groundwater does not preclude the city from bringing suit in state court to reach the corporation's other insurance assets for the same groundwater pollution. The court first holds that it has the power to determine the preclusive effect of the consent decree. The court incorporated the decree in a final judgment, and the decree provides for continuing jurisdiction over disputes arising from the settlement. The plain text of the consent decree indicates that the parties contemplated future actions by the city against the corporation. The city's state court complaint seeks to recover insurance assets left unexhausted by the consent decree and is, therefore, consistent with the terms of the decree. Consequently, this action can reasonably be viewed as an action to stop the corporation from breaching the terms of the consent decree. The court next holds that the city's suit is not barred by the Anti-Injunction Act. Under the relitigation exception, a federal court may prevent states from litigating an issue previously presented to and decided by the federal court. This exception applies to this case because a settlement can limit its own preclusive effect. Moreover, the consent decree released the city's claims against the corporation only to the extent that they applied to the primary insurer, but otherwise reserved the city's claims regardless of whether they are distinct from the claims asserted in the original federal suit. In addition, the corporation's assertion of res judicata in the state court proceeding is inconsistent with the limitations on claim preclusion established in the consent decree. The court finally holds that the consent decree is not unfair.

Counsel for Plaintiffs
Michael C. Donovan
Envision Law Group
Desco Plaza II
3687 Mount Diablo Blvd., Ste. 312, Lafayette CA 94549
(650) 372-5100

Counsel for Defendants
Brooks M. Beard
Morrison & Foerster
425 Market St., San Francisco CA 94105
(415) 268-7000