United States v. Stringfellow

No. CIV 83-2501 JMI (C.D. Cal. January 9, 1990)

The court holds that the special master properly directed the verdict after finding California liable for pre-1980 activities under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for cleanup costs at the Stringfellow site. The court holds that by consenting to the trial before the special master on the liability issue, the parties consented to his complete disposition of the matter, which may include granting a directed verdict. The special master had authority to issue the order and to direct the verdict in favor of defendant, who had the burden of proof. The court holds that the special master correctly concluded from the record that the state conceived of and negligently selected, investigated, and designed the site. The state sent an inexperienced geologist who conducted a 40-minute visual inspection, and conducted no soil, core, or other tests in deciding to locate the waste site at Stringfellow's quarry. The court next holds that the special master correctly found that the state negligently failed to remedy the site after it became aware of actual and potential leakage and overflow. Moreover, the court holds that the special master correctly found that the state is an operator, generator, and owner under CERCLA. The state went beyond its mere regulatory capacity by regularly visiting the site, hiring employees, making operational decisions, and controlling waste dumping.

[Previous cases in this litigation are published at 14 ELR 20381, 20799, 20385, and 20388, 15 ELR 20402, 16 ELR 20458, and 17 ELR 20559 and 21134.]

Counsel for Plaintiffs
Donald Robinson
Office of California Attorney
3580 Wilshire Blvd., Ste. 600, Los Angeles CA 90010
(213) 736-2214

Counsel for Third-Party Defendants
Maira Barnette
Stell, Levine & Bookman
727 W. Seventh St., Ste. 1010, Los Angeles CA 90017
(213) 627-2577

[20 ELR 20656]

Ideman, J.:

Order Overruling State of California's Objections to the Special Master's Order on Directed Verdict

IT IS HEREBY ORDERED:

1. Plaintiff STATE OF CALIFORNIA's (hereinafter State) objections to the Special Master's Order on Directed Verdict are hereby OVERRULED and the Order is hereby AFFIRMED.

2. The State objects to the directed verdict for six different reasons, each of which will be dealt with below: (A) the Special Master lacks the authority to make such an order; (B) the Special Master can't direct a verdict in favor of the party with the burden of proof; (C) the Special Master can't find that certain facts are established as a matter of law; (D) the Special Master erroneously concluded that the State is an "Operator;" (E) the Special Master erroneously concluded that the State is a "Generator;" and (F) the Special Master erroneously concluded that the State is an "Owner."

3. CERCLA § 107(a) liability is established by proving four elements. The first two elements have been established, Stringfellow site is a "facility" and a "release" or "threatened release" of a "hazardous substance" has occurred. United States v. Stringfellow, 661 F.2d 1953, 1059 [17 ELR 21134] (C.D. Cal. 1987). The parties have stipulated to the existence of the third element, i.e. that "response costs" have been incurred. Therefore, the last element, at issue at the fact finding hearing, was whether the State is a "person," as defined by the statute. Thus, the State must fall into at least one of the categories listed in the statute cited below. This last element will be discussed in sections D, E, and F below.

4. CERCLA liability can be attributed to the "persons" defined by 42 U.S.C. § 9607(a) which states in part:

Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section —

(1) the owner and operator of a vessel or a facility,

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed or,

(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, or hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substance, shall be liable for . . .

42 U.S.C. § 9607(a). Furthermore, CERCLA provides the only defenses available to a person who would be otherwise liable. These defenses include acts of God, acts of war, acts of third parties who don't have a relationship with the person if certain requirements exist, or a combination thereof. 42 U.S.C. § 9607(b).

5. The Supreme Court has held that "the language of CERCLA as amended by SARA clearly evinces an intent to hold States liable in damages in federal court." Pennsylvania v. Union Gas Co., U.S. , , 109 S. Ct. 2273, 2280 [19 ELR 20974] (1989). SARA excludes from liability the following states:

. . . government[s] which acquired ownership or control involuntarily through bankruptcy, tax delinquency, abandonment, or other circumstances in which the government involuntarily acquires title by virtue of its function as sovereign. The exclusion provided under this paragraph shall not apply [20 ELR 20657] to any State or local government which has caused or contributed to the release or threatened release of a hazardous substance from the facility, . . .

42 U.S.C. § 9601(20)(D).

6. Rule 53 of the Federal Rules of Civil Procedure allows the district court to appoint a special master to hear complicated jury trials and in certain other situations. Fed. R. Civ. P. 53(b); see also, Mobil Oil Corp. v. Altech Industries, Inc., 117 F.R.D. 650 (C.D. Cal. 1987). Furthermore, "[t]he order of reference to the master may specify or limit the master's powers . . . . Subject to the specifications and limitations stated in the order, the master has and shall exercise the power to regulate all proceedings in every hearing before the master and to do all acts and take all measures necessary or proper for the efficient performance of the master' studies under the order." Fed. R. Civ. P. 53(c).

In Mobil Oil, the parties stipulated that the Special Master would make recommendations and then the Court would approve the jury instructions, take the verdict, enter a judgment, and rule on any post-judgment motions. Mobil Oil, at 656-61.

7. Rule 50 of the Federal Rules of Civil Procedure allows a court to grant a motion for directed verdict upon motion and such an order "is effective without any assent of the jury." Fed. R. Civ. P. 50(a). In Catts Co. v. Gulf Ins. Co., 723 F.2d 1494 (10th Cir. 1983), the Court held that a "verdict may be directed if the evidence supports one position only and supports no reasonable inferences which sustain the position of the party against whom the verdict is directed. [Cite omitted.]" Id. at 1501. In Catts, the parties stipulated to a jury trial before the special master who later granted a directed verdict. The Tenth Circuit affirmed the district court's approval of the directed verdict. Id. at 1502.

8. In the case at bar, the Reference Order for the fact finding hearing limited the scope of the hearing to the issue of liability of the State of California under CERCLA, prior to 1980. This Court further noted that since the United States was not a party to the Defendants' counterclaims, "the jury's verdict shall not have a res judicata and/or collateral estoppel effect as against the United States." Amended Order, March 21, 1989.

(A) The Special Master lacks the authority to make such an order.

The State asserts that the Reference Order did not permit the Special Master to make final rulings and issue a directed verdict.

The Defendants assert that by failing to specify via a stipulation similar to that in Mobil Oil, supra, the State consented to the Special Masters complete control of the proceedings pursuant to Rules 50 and 53.

On March 16, 1989, the Special Master informed the parties of the possibility of stipulating as in Mobil Oil. The parties never acted on this suggestion, and thus, by consenting to the trial before the Special Master on the liability issue, the parties consented to his complete disposition of the matter. See, Catts, supra (special master entered a directed verdict). Furthermore, the State itself filed a motion for a directed verdict during the same proceeding.

The Reference Order does make reference to a jury trial, but does not on its face indicate that the procedures of the jury trial are any different than other jury trials (in which a judge may issue a directed verdict). The State's concern that the Order is not subject to review by this Court seems completely ridiculous since the objections now before the Court are causing such a review. Thus, it appears that the Special Master did have the authority to hear the jury trial and to render an Order on Directed Verdict as an "exercise [of] the power to regulate all proceedings in every hearing before the master and to do all acts and take all measures necessary or proper for the efficient performance of the master's duties under the order." Therefore, the State's objection is overruled.

(B) The Special Master can't direct a verdict in favor of the party with the burden of proof.

The State contends that the Special Master cannot direct a verdict in favor of the party who has the burden of proof. Furthermore, the State contends that the Special Master is limited in how he can view the evidence for ruling on a directed verdict motion.

"[T]he standard for a directed verdict under Federal Rule of Civil Procedure 50(a)[] is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict." Anderson v. Liberty Lobby, Inc., 477 U.S. 2505, 2511 (1986). The Supreme Court further states that the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 2512.

The standard does not change even if the party with the burden of proof is making the motion. The Ninth Circuit affirmed a directed verdict in favor of the plaintiffs bearing the burden of proof "when the evidence, taken most favorably to the losing party, and all justifiable inferences therefrom are insufficient to support a contrary finding. [Cite omitted.] But if no substantial evidence will support a contrary conclusion, a directed verdict is required, even in an antitrust case. [Cite omitted.]" Oltz v. St. Peter's Community Hosp., 861 F.2d 1440, 1446 (9th Cir. 1988); see also, Los Angeles Memorial Coliseum Comm'n v. N.F.L., 726 F.2d 1381 (9th Cir.), cert, denied, 469 U.S. 990 (1984).

In the instant case, the Special Master states in his Order that he has "examined the evidence in the light most favorable to the State and drawing all reasonable inferences in favor of the State, and without weighing the credibility of the witnesses, determined that there can be but one reasonable conclusion as to the verdict; no reasonable jury could find otherwise but that the State is liable under CERCLA § 107(a), 42 U.S.C. § 9607(a)." Order, October 6, 1989.

Provided that the evidence can only reasonably result in one outcome, the Special Master can properly direct a verdict in favor of Defendants. The documentary evidence clearly indicates that the State is liable under CERCLA. Thus, this objection is overruled.

The State contends that several facts which the Special Master found to be established could not be so established in light of the evidence.

i) The State conceived of an negligently selected the site:

The evidence in the case contained testimony from the State's witness, Mr. Fox (a geologist for the State), that he conducted a site study to find appropriate areas for such a waste site. The Stringfellow site was one of the areas located and "studied" by Mr. Fox. The local officials supported this choice, but the State made the final decision.

Mr. Stringfellow testified that a geologist from the State approached him regarding use of his quarry as a waste site. The State informed him that it would conduct all the necessary geological tests to insure the fitness of the site. Mr. Fox conducted the fitness study by visual observations and wrote a report recommending the site. No other study was done by any other governmental body. Stringfellow agreed to let the State open the site based on the report.

The site did not actually contain the bottom layer of impermeable rock and other physical requirements for such a hazardous waste dump. The State's investigation did not include taking soil samples, core samples, or other tests which would have shown that the site was not proper. The testimony of Mr. Fox and Mr. Stringfellow is amply supported by letters, photographs showing that the site was improper, and other documentary evidence. Thus, it [sic] the Special Master correctly concluded that the State conceived of and negligently selected the Stringfellow site and this objection is overruled.

ii) The State negligently investigated the site:

The negligent investigation of the site is described above. Mr. Fox, at the time he made the study, was a neophyte geologist with the State. He had only had a one hour class in geology. Mr. Fox spent only 33-40 minutes on the site and failed to make any subsurface investigations. The necessary types of tests were known and available to geologists at the time of the study in 1955. No other studies were made and this one study is unreasonable as a matter of law, given the nature of the waste to be stored at the site.

At the hearing, the State's own witness, Mr. Brown, testified that "each individual site must be carefully investigated in the field before a final decision can be made . . . ." The State failed to follow the advice of its own expert witness. Thus, the Special Master correctly found that the State negligently investigated the site and the objection is overruled.

iii) The State negligently designed the site:

According to the evidence, the State told Mr. Stringfellow that it would design the waste site. The site is in a box canyon with one [20 ELR 20658] open end, which is [sic] faces a down gradient. Assuming that the canyon was underlain with impermeable rock as a result of the negligent study (as it turned out, the underlying rock was fractured and permeable, as subsurface tests would have shown), the State believed that it could just finish damming up the open end to create an enclosed site. Part of the month [sic] was already dammed by a natural barrier.

The natural barrier had an underground stream through which hazardous waste escaped the site. Again, a more thorough study of the site would have shown that the barrier was insufficient. Therefore, the State unreasonably relied upon the natural barrier.

The evidence shows that a letter was sent to Mr. Stringfellow indicating that the State would supervise the construction of an impervious dam. Apparently, State officials were on the site almost daily during construction of the dam to insure that it was as the State had indicated. Mr. Brown and other State engineers determined where the dam should be located and its dimensions. These dimensions proved to be inadequate and later waste overflowed during the rainy season.

Additionally, the only well which monitored ground water and possible seepage was not set in an adequate place, but over 3,000 feet down gradient. Also, there was only one monitoring well sunk. The State's own Mr. Fox recommended placement of additional wells. It seems readily apparent that more than [sic] one well is reasonably required when it [sic] objective is to monitor hazardous waste seeping into ground water. Thus, the Special Master properly found that the State negligently designed the site and the objection is overruled.

iv) The State negligently failed to remedy the site:

Finally, the State failed to act remedially when it became aware of potential hazards. The State recognized that it had a mandatory duty to act as of 1975 and the jury found so also. Mr. Anderson, a Regional Water Quality Control Board officer, testified that the State had funds available to abate the problem. In 1973, Mr. Franks had informed Mr. Anderson of potential problems and Anderson described the site as a "time bomb" in 1975. All this knowledge is documented by memorandum and letters.

In 1975, Anderson knew that waste was leaking and was unsure how far it had spread. Despite this information and warning, no abatement occurred. The State was informed that the County of Riverside would not abate and then it became the State's mandatory duty to abate. At that time, both the State's employees (Anderson and Franks) suggested the use of a clay cap and hydraulic barrier to prevent further overflow. No such action was taken by the State. Thereafter, during the rainy season, the ponds overflowed and much more waste was released. Thus, the Special Master correctly found that the State was negligent as a matter of law and the objection is overruled.

(D) The Special Master erroneously concluded that the State is an "Operator."

The State attempts to avoid liability on the theory that it has merely acted as a regulator pursuant to its police power and therefore cannot be held liable as an operator. However, it is clear from the above discussion, that the State went beyond mere regulation in regards to this site and therefore can be considered an operator. The Supreme Court has held in Pennsylvania v. Union Gas Co., supra, that the State is liable just like everyone else. Furthermore, the defenses listed in the statute do not include this defense.

An "operator" has been defined by a variety of cases by looking at the degree of control which is exercised. This control need not be day to day, but rather depends on various factors weighed as a whole. Rockwell International Corp. v. UI International Corp., 702 F. Supp. 1384, 1390-91 [19 ELR 20908] (N.D. Ill. 1988). There are eleven factors to look at: expertise and knowledge of dangers of hazardous waste, conception of idea of the site, design of the site, supervision, inspection, receipt of reports of the site, hiring or approving hiring of employees, determining operational responsibilities, control of disposal, ability to discover and abate harm, public declarations of responsibility, participation in opening and closing of site, and benefitting from the existence of the site. Id.

All these factors existed in relation to the State and the String-fellow site. Its concept and design are discussed above, as are the knowledge and ability to abate the harm. The State regularly visited the site, hiring employees and making operational decisions. The State received reports and controlled dumping at the site. The State continued to allow and supervise dumping after Mr. Stringfellow closed the site and removed himself from the picture. Additionally, the State both opened and closed the site. The State's witnesses at the hearing admitted that the State controlled the site at least from May 1976 and onwards. In 1979, the State, not Stringfellow, gave permission as to who could enter the property and what could be dumped there. Thus, the Special Master properly concluded that the State exercised sufficient control of the site to be an operator and the objection is overruled.

(E) The Special Master erroneously concluded that the State is a "Generator."

The State is clearly a "generator" since it arranged for disposal and treatment of hazardous substances at the site after Mr. Stringfellow closed it in 1972. Documents show that Mr. Anderson permitted disposal of acid in 1973 and at other times thereafter. Thus, as a matter of law, the State is a "generator" per the language of the statute. Therefore, the Special Master correctly found the State to be a "generator" and the objection is overruled.

(F) The Special Master erroneously concluded that the State is an "Owner."

The State asserts that it cannot be held liable as an "owner" under the statute because it did not hold legal title to the property.

However, as Defendants point out, the statute defines an "owner" as a "person owning . . . title or control . . ., any person who owned, operated or otherwise controlled activities . . . ." 42 U.S.C. § 9601(20)(A). The legislative history of CERCLA also shows that the term "owner" was intended "to include not only those persons who hold title to a vessel or facility but those who, in the absence of holding a title, possess some equivalent evidence of ownership." U.S. v. Maryland Bank & Trust Co., 632 F. Supp. 573, 579-80 [16 ELR 20557] (D. Md. 1986).

From the evidence discussed above and the law regarding the term "owner," it is clear that the State is an "owner" pursuant to the statute and can be held liable on this basis. Thus, the Special Master properly found that the State was an "owner" and the objection is overruled.

The Court notes that the exception from liability contained in 42 U.S.C. § 9601(20)(A) does not apply to the State in this instance because the State participated in the management of the site and held indicia of ownership. Furthermore, the State held indicia of ownership before it acquired any title by way of tax liens. Thus, this exception does not apply to the State.

9. This Court finds that the Special Master acted properly and within his authority when he issued his Order on Direct Verdict in October 1989. Therefore, the Court hereby overrules any objections to said Order by the State of California.

IT IS SO ORDERED.