California Department of Toxic Substances Control, Plaintiff-Appellant,
Westside Delivery, LLC; and Does 1 through 10, inclusive, Defendants-Appellees.
and Submitted March 8, 2018 Pasadena, California
from the United States District Court for the Central
District of California No. 2:15-cv-07786-SVW-JPR, Stephen V.
Wilson, District Judge, Presiding
R. Potter (argued) and Brian J. Bilford, Deputy Attorneys
General; Sarah E. Morrison, Supervising Deputy Attorney
General; Xavier Becerra, Attorney General; Office of the
Attorney General, Los Angeles, California; for
L. Murray (argued) and Tim C. Hsu, Allen Matkins Leck Gamble
Mallory & Natsis LLP, Los Angeles, California, for
Before: Susan P. Graber, William A. Fletcher, and John B.
Owens, Circuit Judges.
panel reversed the district court's summary judgment in
favor of the defendant in an action under the Comprehensive
Environmental Response, Compensation, and Liability Act of
panel held that the defendant, a purchaser of real property
at a tax sale, was not entitled to CERCLA's third-party
defense to liability for cleanup costs. The panel concluded
that the defendant had a "contractual relationship"
with the pre-tax-sale owner of the property. In addition, the
previous owner caused contamination "in connection
with" its contractual relationship with the defendant.
The panel remanded the case for further proceedings.
GRABER, Circuit Judge:
case presents a question of first impression in this circuit
concerning the reach of the third-party defense in the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA"): Does a defendant
who buys real property at a tax sale have a "contractual
relationship" with the previous owner of the property
within the meaning of CERCLA? We conclude that it does.
Because we also conclude that the previous owner caused
contamination "in connection with" its contractual
relationship with Defendant Westside Delivery, LLC, we hold
that Defendant is not entitled to CERCLA's third-party
defense. We therefore reverse the district court's grant
of summary judgment to Defendant and remand the case for
AND PROCEDURAL HISTORY
1949 to 1990, the Davis Chemical Company recycled spent
solvents at its facility in Los Angeles, California. One of
the company's owners, Ernest A. Davis, owned the property
at which the facility was located (the "Davis Chemical
Site" or "Site"). In 1986, he conveyed the
property to the Ernest A. Davis Separate Property Trust by
quitclaim deed. Following Mr. Davis' death, the property
passed to the Davis Family Trust.
October 1990, Plaintiff, the California Department of Toxic
Substances Control, ordered Davis to cease and desist all
hazardous-waste-related activities. In 1992, the United
States Environmental Protection Agency ("EPA")
conducted a preliminary assessment of the Davis Chemical Site
and noted that there was "significant spillage."
The EPA referred the Site to Plaintiff for further
investigation and remediation. A 1996 study conducted by a
group of environmental consultants revealed that the soil at
the Site contained elevated levels of several hazardous
substances. Plaintiff then investigated further and
identified former customers of Davis who might be liable for
cleanup costs under CERCLA and state law. In 2002, Plaintiff
reached an agreement with several of Davis' former
customers, requiring those customers to devise a plan to
clean up the Site. Plaintiff approved the plan in 2008.
reasons that are not readily apparent from the record, the
plan was not put into effect in 2008. Instead, Plaintiff
sought out additional parties that might be responsible for
shouldering the cost of cleanup. However, those parties were
either unable to pay or had viable legal defenses, forcing
Plaintiff to seek out alternative funding for the cleanup
meantime, Davis had failed to pay property taxes on the Site,
prompting the Los Angeles County Tax Collector to sell the
Site at a tax auction in 2009. The Site was not on the list
of "Potentially Contaminated Parcels" included in
the auction materials, but the list itself noted that it was
not exhaustive, and the auction materials warned bidders that
the onus was on them to investigate the properties. In August
2009, at the auction, Defendant submitted the highest bid on
the Davis Chemical Site. On September 17, 2009, the Tax
Collector executed a tax deed to Defendant, conveying title
to the Site. Since purchasing the Site, Defendant has not
conducted any operations there.
2010 through 2015, Plaintiff conducted cleanup efforts at the
Site. After finishing the cleanup, Plaintiff sued Defendant
under CERCLA, seeking to recover its cleanup expenses.
Defendant asserted CERCLA's third-party defense, arguing
that it was not liable because the release of hazardous
substances at the Site was caused solely by third parties
(including Davis) with whom it lacked a "contractual
relationship" within the meaning of the statute. The
district court agreed with that argument and granted summary
judgment to Defendant. Plaintiff timely appealed.
AND SCOPE OF REVIEW
review de novo the district court's grant of summary
judgment and the district court's interpretation of
CERCLA. Carson Harbor Vill., Ltd. v. Unocal Corp.,
270 F.3d 863, 870 (9th Cir. 2001) (en banc).
review of a district court's grant of summary judgment is
ordinarily limited to "the record presented to the
district court at the time [it granted] summary
judgment." Taylor AG Indus. v. Pure-Gro, 54
F.3d 555, 558-59 (9th Cir. 1995). Here, however, because we
granted several requests for judicial notice, we consider the
materials submitted by the parties in connection with those
requests as well as the record before the district court.
Lowry v. Barnhart, 329 F.3d 1019, 1024-25 (9th Cir.
answering the question whether the purchaser of real property
at a tax sale has a "contractual relationship" with
the previous private owner of the property within the meaning
of CERCLA, we will briefly sketch the outlines of CERCLA and
of California's tax-sale system. We also will discuss the
role that state law plays in our analysis. We then will
address the "contractual relationship" question and
the related issue of whether Davis' acts leading to
contamination of the Site occurred "in connection
with" its contractual relationship with Defendant.
1980, Congress enacted [CERCLA] in response to the serious
environmental and health risks posed by industrial
pollution." Burlington N. & Santa Fe Ry. Co. v.
United States, 556 U.S. 599, 602 (2009) (citation
omitted). Unlike the Clean Air Act or the Clean Water Act,
CERCLA is not a forward-looking regulatory statute that
governs regulated entities' polluting activities. Rather,
"CERCLA looks backward in time and imposes wide-ranging
liability" on parties who are in some way responsible
for contaminating a facility. Marsh v. Rosenbloom, 499
F.3d 165, 178 (2d Cir. 2007). Relevant to this case, CERCLA
allows a state that has responded to a "release" or
"threatened release" of hazardous substances at a
facility to recoup its response costs from the owner of that
facility, even if the owner had nothing to do with placing
the hazardous substances at the facility. Chubb Custom
Ins. Co. v. Space Sys./Loral, Inc., 710 F.3d 946, 956-57
(9th Cir. 2013). What matters is that the state responded to
a release or threatened release at a time when the
defendant-owner owned the facility. Cal. Dep't of
Toxic Substances Control v. Hearthside Residential
Corp., 613 F.3d 910, 911 (9th Cir. 2010).
originally provided three affirmative defenses that
otherwise-liable parties could assert to escape liability.
The defense relevant to this case is the third-party defense:
There shall be no liability . . . for a person otherwise
liable who can establish by a preponderance of the evidence
that the release or threat of release of a hazardous
substance and the damages resulting therefrom were caused
(3) an act or omission of a third party other than an
employee or agent of the defendant, or than one whose act or
omission occurs in connection with a contractual
relationship, existing directly or indirectly, with the
defendant (except where the sole contractual arrangement
arises from a published tariff and acceptance for carriage by
a common carrier by rail), if the defendant establishes by a
preponderance of the evidence that (a) he exercised due care
with respect to the hazardous substance concerned, taking
into consideration the characteristics of such hazardous
substance, in light of all relevant facts and circumstances,
and (b) ...