City of West Sacramento v. R & L Business Management

Opinion

1 2 3 4 5 6 7 10 ----oo0oo---- 11 12 CITY OF WEST SACRAMENTO, No. 2:18-CV-00900 WBS EFB CALIFORNIA; and PEOPLE OF THE 14 Plaintiff, ORDER RE: THIRD-PARTY DEFENDANT ECO GREEN’S MOTION 15 v. FOR DETERMINATION OF GOOD FAITH SETTLEMENT 16 R AND L BUSINESS MANAGEMENT, a California corporation, f/k/a 17 STOCKTON PLATING, INC., d/b/a CAPITOL PLATING, INC., a/k/a 18 CAPITOL PLATING, a/k/a CAPITAL PLATING; CAPITOL PLATING, INC., 19 a dissolved California corporation; ESTATE OF GUS 20 MADSACK, DECEASED; ESTATE OF CHARLES A. SCHOTZ a/k/a SHOTTS, 21 DECEASED; ESTATE OF E. BIRNEY LELAND, DECEASED; ESTATE OF 22 FRANK E. ROSEN, DECEASED; ESTATE OF UNDINE F. ROSEN, DECEASED; DECEASED; RICHARD LELAND, an 24 individual; SHARON LELAND, an individual; ESTATE OF LINDA 25 SCHNEIDER, DECEASED; JUDY GUESS, an individual; JEFFREY A. LYON, 26 an individual; GRACE E. LYON, an individual; THE URBAN FARMBOX 27 LLC, a suspended California limited liability company; and 28 DOES 1-50, inclusive, 1 Defendants. 2

3 ----oo0oo---- 4 On or about June 22, 2020, plaintiff City of West 5 Sacramento (“the City”) and defendant Eco Green, LLC (“Eco 6 Green”) reached an agreement for the settlement of all claims and 7 disputes between them in this matter. (Decl. of Thomas G. Trost 8 (“Trost Decl.”) ¶ 3 (Docket No. 149-1).) The settling parties 9 now move for a determination of good faith settlement pursuant to 10 California Code of Civil Procedure Sections 877 and 877.6. 11 (Docket No. 149.) 12 The settlement agreement provides for Eco Green to pay 13 $10,000.00 to the City. (Mot. at 6.) The settling parties also 14 request that the court dismiss the City’s Third Amended Complaint 15 (“TAC”, Docket No. 45) with prejudice as to Eco Green, all claims 16 between Eco Green and the City, and defendant R and L Business 17 Management’s (“R&L”) third-party complaint with prejudice as to 18 Eco Green. (Docket No. 149-2.) 19 I. Legal Standard 20 Courts review settlements of claims under the 21 Comprehensive Environmental Response, Compensation and Liability 22 Act (“CERCLA”) § 107(a), 42 U.S.C. § 9607(a), and generally enter 23 contribution and indemnity bars, if the settlement is 24 “procedurally and substantively fair, reasonable, and consistent 25 with CERCLA’s objectives.” Arizona v. City of Tucson, 761 F.3d 26 1005, 1012 (9th Cir. 2014) (citation and internal quotation marks 27 omitted). This court has an independent obligation to scrutinize 28 1 the terms of the agreement. Id. The court must find that the 2 agreement is roughly correlated with some acceptable measure of 3 comparative fault that apportions liability among the settling 4 parties according to a rational estimate of the harm potentially 5 responsible parties have done. Id. 6 The factors used to evaluate whether a CERCLA 7 settlement is fair, reasonable, and adequate are similar to the 8 factors considered in determining whether a settlement is in good 9 faith under California law. See Coppola v. Smith, No. 1:11-CV- 10 1257 AWI BAM, 2017 WL 4574091, at *3 (E.D. Cal. Oct. 13, 2017). 11 The court therefore “will make findings regarding ‘good faith’” 12 under California law “as part [of] its determination of whether 13 the settlement of the CERCLA claim[ ] is fair, adequate, and 14 reasonable.” Id. 15 Courts review the following nonexclusive factors from 16 Tech-Bilt, Inc. v. Woodward-Clyde & Associates, 38 Cal. 3d 488 17 (1985), to determine if a settlement is within a reasonable range 18 and thus in good faith under Sections 877 & 877.6: (1) a rough 19 approximation of the plaintiffs’ total recovery and the settlor’s 20 proportionate liability; (2) the amount to be paid in settlement; 21 (3) the allocation of settlement proceeds among the plaintiffs; 22 (4) a recognition that a settlor should pay less in settlement 23 than he would if he were found liable after a trial; (5) the 24 financial conditions and insurance policy limits of the settling 25 defendants; and (6) the existence of collusion, fraud, or 26 tortious conduct aimed to injure the interests of non-settling 27 defendants. See id. at 499. Ultimately, the determination is 28 left to the trial court’s discretion. Id. at 502. 1 A party opposing a motion for good faith settlement has 2 the burden of demonstrating the lack of good faith. Id. at 499 3 50; see also Cal. Civ. Proc. Code § 877.6(d). A determination 4 that the settlement was made in good faith shall bar any other 5 joint tortfeasor from any further claims against the settling 6 tortfeasor for contribution or indemnity, based on comparative 7 negligence or comparative fault. Id. § 877.6(c). 8 II. Application 9 This court described much of the factual and procedural 10 background to this lawsuit in its prior orders. (See Docket Nos. 11 18, 33, 44, 63, 115, & 125.) 12 Plaintiffs the City and the People of the State of 13 California filed suit against defendant R&L , among others, 14 alleging, inter alia, a violation of CERCLA § 107(a). (See TAC.) 15 R&L filed an amended third-party complaint against Eco Green and 16 the County of Yolo (“the County”), seeking contribution under 17 CERCLA, 42 U.S.C. § 9613(f)(1). (Docket No. 116.) 18 The first two Tech-Bilt factors require the court to 19 examine the amount to be paid in relation to the settlors’ 20 approximate proportionate liability. Eco Green settled with the 21 City for a lump sum payment of $10,000.00. Plaintiffs contend 22 that the cost of remediation of the contamination is between 23 $700,000 and $1.2 million. (See Torst Decl. ¶ 5.) The settling 24 parties place responsibility on the settling defendant at around 25 1 percent. Although R&L did not object to the court’s use of 26 these cost figures in previous good-faith settlement 27 determinations (see Docket Nos. 70 & 108), R&L now contends that 28 the remediation will cost up to $2.2 million (Opp’n at 3). 1 Considering the evidence available, the court finds 2 that the settlement amount is appropriate under either 3 remediation cost estimate. The evidence suggests that Eco Green 4 only minimally contributed to the contamination at issue. The 5 City seeks to clean up the property located at 319 Third Street, 6 West Sacramento, California (“the Site”). Eco Green was never an 7 owner or operator of the Site. Eco Green is the current owner of 8 317 Third Street –- the property adjacent to, and directly north 9 of, the Site. R&L alleges that fill material originating in and 10 adjacent to the Site contributed to the contamination the City 11 wants R&L to remediate. These allegations are based on a 2006 12 Wallace Kuhl & Associates Environmental Site Assessment (“WKA 13 Report”) that found that fill material and lead were present in 14 the surrounding properties. (Third-Party Complaint ¶ 17 (Docket 15 No. 116).) 16 The report does not conclude or even suggest that this 17 fill material caused the contamination at the 319 property and 18 does not identify substances other than lead. (See WKA Report, 19 Ex. C (Docket No. 116).) Plaintiffs’ retained expert Dr. Anne 20 Farr instead identifies the metal plating operations conducted at 21 the Site as the source of the metals found in the adjacent 22 properties. (Farr Report at 1.) Dr. Farr also points out the 23 absence of “any site-specific analysis to determine whether fill 24 material at the Site does or does not contain elevated metal 25 concentrations” other than lead. (Farr Rebuttal Report at 3.) 26 The County’s retained expert Joseph Turner opined the same. 27 (Turner Report at 9.) Notably, Dr. Farr also reported that the 28 presence of lead on the Site “is not a driver for Site 1 investigation, nor does it affect Site remediation.” (Farr 2 rebuttal Report at 1.) Therefore, even if defendant can 3 establish that fill material from Eco Green’s property migrated 4 to the Site, Eco Green’s contribution to the remediation cost 5 appears de minimis. 6 Under the $700,000 to $1.2 million cost remediation 7 estimate, responsibility for 1 percent of the contamination is 8 equivalent to $7,000 to $12,000. A $10,000 settlement amount is 9 therefore proportionate to Eco Green’s liability. 10 Under R&L’s $2.2 million figure, the settlement amount 11 is also within an acceptable range. Under Tech-Bilt, defendant 12 bears the burden of showing that the settlement is “out of the 13 ballpark.” Tech-Bilt, 38 Cal. 3d at 499. The California Supreme 14 Court “emphasize[d] the broad parameters of the ‘ballpark’ within 15 which settlements will be deemed to be in good faith.” Id. at 16 488 n.9. When asked at the hearing what R&L would claim is a 17 fair contribution for Eco Green, R&L’s counsel reluctantly made 18 an estimate and estimated Eco Green’s liability at 3.74 percent 19 of the total exposure. If the cost of remediation ranges from 20 $700,000 to $2.2 million, the proportionate share of Eco Green’s 21 liability would be between $26,000 and $82,000. 22 Under these estimates, the settlement amount is within 23 the ballpark contemplated by the Tech-Bilt court. This is an 24 early settlement, and the court does “not have a full trial court 25 record or damage judgment with which to work.” See Miller v. 26 Christopher, 887 F.2d 902, 907 (9th Cir. 1989). As such, 27 “perfect foresight” is not the applicable standard here. Id. at 28 908. Making the kinds of findings R&L wants the court to make to 1 approximate such perfection is neither necessary nor desireable 2 on a good-faith settlement determination. Such fact-intensive 3 inquiries belong in a trial. “‘Since the point of settlement is 4 to avoid a trial,’ the district court in such circumstances must 5 exercise a good deal of discretion in attempting to gauge 6 exposure.” Id. at 907. Further settlement amounts “are often 7 discounted to reflect the cost of trial to the plaintiff and the 8 uncertainties of the trial’s outcome.” Id. Given the remaining 9 uncertainties due to early settlement, the evidence available to 10 the court on Eco Green’s liability, the “broad” range of 11 appropriate settlement amounts, and the appropriate discounts, a 12 $10,000 settlement is appropriate. 13 R&L objects and argues that Eco Green’s calculations 14 rely on inadmissible expert testimony by Eco Green’s attorney. 15 The court disagrees. As is evident above, all discussion of Eco 16 Green’s liability relies on the expert testimony of Dr. Farr and 17 Mr. Turner. Indeed, Eco Green’s attorney merely cites the 18 reports and testimony to which all parties have cited. (See 19 Trost Decl. ¶¶ 9-13.) And even if Mr. Trost had in fact 20 purported to provide expert testimony, the court does not rely on 21 Mr. Trost’s statements to find that the settlement amount is 22 reasonable. See supra. 23 Next, R&L argues that Eco Green has failed to provide 24 evidence regarding its proportionate share of liability. (Opp’n 25 at 10.) Specifically, R&L argues that Eco Green must offer an 26 expert declaration stating that the proposed settlement is within 27 a reasonable range permitted by the criterion of good faith. 28 (Id.) This is not the standard for determining what constitutes 1 sufficient evidence. Courts are merely required to make an 2 educated finding about the parties’ liability. See N. Cty. 3 Contractor’s Assn. v. Touchstone Ins. Servs., 27 Cal. App. 4th 4 1085, 1088 (2d Dist. 1994). If the evidence “support[s] a 5 critical assumption as to the nature and extent of a settling 6 defendant’s liability,” the evidence suffices. Toyota Motor 7 Sales U.S.A., Inc. v. Superior Court, 220 Cal. App. 3d 864, 871 8 (2d Dist. 1990). As discussed above, the evidence Eco Green 9 offers supports an assumption of minimal liability for the 10 contamination at the Site. Accordingly, the settlement satisfies 11 the first two Tech-Bilt factors. 12 The third factor considers the allocation of the 13 settlement proceeds among the plaintiffs. Here, plaintiffs are 14 the City and the People of the State of California. The 15 settlement proceeds go only to the City. Nevertheless, these 16 plaintiffs are closely associated. The payments would presumably 17 go toward cleaning up the contamination at the Site. In 18 remedying the property, the City would abate this nuisance to the 19 benefit of the People of the State of California. Therefore, 20 this factor favors approving the settlement. (Cf. Docket No. 113 21 (order approving good faith settlement with defendant Judy 22 Guest).) 23 The fourth factor acknowledges that settlors should pay 24 less in settlement than they would at trial. A $10,000 payment 25 represents roughly 1 percent of the estimated $1.2 million cost 26 of cleanup. Any judgments against Eco Green would be for joint 27 and several liability, which could hold it liable for a larger 28 portion of the judgment. This settlement also saves the parties 1 litigation costs and the court’s time. Therefore, this factor 2 favors approving the settlement. See Coppola, 2017 WL 4574091, 3 at *4. 4 The fifth factor accounts for the financial conditions 5 and insurance policy limits of the settling defendants. The 6 court gives serious consideration to this factor under the 7 circumstances in this case. The settling defendant has no 8 insurance assets to pay for this liability. (Trost Decl. ¶ 6). 9 Moreover, the COVID-19 pandemic has had a devastating impact on 10 Eco Green’s ownership of the real property located at 317 Third 11 Street in West Sacramento. (Declaration of Sara Lebastchi 12 (“Lebastchi Decl.”) ¶ 2 (Docket No. 170-1).) The restaurant and 13 bar operating at 317 Third Street was forced to close in early 14 March 2020. (Id. ¶¶ 2-3.) Eco Green has not been receiving any 15 rent payments from its tenant since it was ordered to close by 16 Governor Newsom, and Eco Green has no reasonable expectation that 17 it will receive any rents for the remainder of the year. (Id. ¶¶ 18 3-4.) Considering this information, this settlement may be the 19 only opportunity for Eco Green to contribute to Site remediation. 20 The settlement agreement accommodates defendant’s limited 21 financial resources and concludes the litigation for the settling 22 defendant. Therefore, this factor favors the settlement. 23 Finally, the sixth factor determines whether there is 24 any collusion, fraud, or tortious conduct aimed to injure the 25 interests of non-settling defendants. No collusion is apparent 26 here as the parties agreed to settle the case after an arm’s 27 length negotiation and with Eco Green making the settlement offer 28 to the City, which was accepted. (Trost Decl. ¶ 4.) 1 R&L again objects and speculates that the City is 2 seeking to “protect[] Eco Green’s interests.” (Opp’n at 14.) 3 Specifically, R&L believes that the City “deeded the 317 parcel 4 to Eco Green” and that “Eco Green has since developed 317, and a 5 thriving restaurant has since opened.” (Id.) “For the City to 6 turn around and sue a developer for contamination,” R&L 7 continues, “would have poisoned what had been a successful 8 transaction.” (Id.) This settlement, R&L argues, allocates all 9 the proceeds to “the same entity that deeded the property to Eco 10 Green” and “does not settle any claims” since the City did not 11 sue Eco Green. (Id.) 12 R&L offers no evidence to support its conspiratorial 13 assertions on the relationship between the settling parties. Eco 14 Green was not simply “deeded” the property from the City, but 15 rather Eco Green purchased 317 Third Street from the City in 2015 16 for fair market value. (Lebastchi Decl. ¶ 5.) There is no 17 evidence to suggest that the settlement amount is payment for any 18 kind of favor. Further, a more reasonable explanation for why 19 the City did not sue Eco Green exists: the City does not believe 20 Eco Green caused the contamination at the Site. Indeed, evidence 21 discussed above supports that inference. Finally, that the City 22 did not sue Eco Green does not preclude a settlement agreement 23 because California Code of Civil Procedure Sections 877 and 877.6 24 are applicable even in cases where a plaintiff does not directly 25 sue a settling party. Mattco Forge, Inc. v. Arthur Young & Co., 26 38 Cal. App. 4th 1337, 1347-48 (2d Dist. 1995); Widson v. 27 International Harvester Co., 153 Cal. App. 3d 45, 57 (4th Dist. 28 1984) (Sections 877 and 877.6 apply even “where the settling 1 tortfeasor is merely a cross-defendant in an action for 2 comparative or partial equitable indemnity and is not a defendant 3 in the main action itself.”). Accordingly, the court has no 4 reason to conclude that the settling parties have acted in bad 5 faith. 6 In sum, the balance of the Tech-Bilt factors weigh in 7 favor of a finding of reasonableness and good faith. There is 8 nothing else that suggests that the settlement is anything other 9 than fair, reasonable, and adequate. Accordingly, the court will 10 approve of the settlement of plaintiffs’ claims against settling 11 defendants and enter an indemnity and contribution bar order for 12 the settling defendants. 13 IT IS THEREFORE ORDERED that the settling parties’ 14 Motion for a Good Faith Settlement Determination (Docket No. 149) 15 be, and the same hereby is, GRANTED; 16 AND IT IS FURTHER ORDERED that: 17 1. Under California Code of Civil Procedure §§ 877 and 18 877.6, and 42 U.S.C. § 9613(f), the settlement agreement reached 19 by the settling parties is in good faith and is a fair, adequate, 20 and reasonable settlement as to plaintiffs’ claims against the 21 settling defendants; 22 2. No contribution or indemnity claims against Eco 23 Green arising out of plaintiffs’ Third Amended Complaint or any 24 related cross-claims or counterclaims will be allowed; 25 3. The plaintiffs’ Third Amended Complaint (Docket No. 26 45) is dismissed with prejudice as to Eco Green; and 27 / / / 28 / / / AOU 2.40° UV YY YY DWE DP UPTIOCITI Lier PR ey PAY te VI te

1 4. R&L’s Amended Cross-Claim (Docket No. 116) is 2 | dismissed with prejudice as to Eco Green. 3] Dated: guly 29, 2020 ition Ah. 1b. be— UNITED STATES DISTRICT JUDGE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12