Argued and Submitted, October 11, 2013, Pasadena, California
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Appeal from the United States District Court for the Central District of California. D.C. No. 2:11-cv-00167-RGK-VBK. R. Gary Klausner, District Judge, Presiding.
Victor M. Sher (argued), and Todd E. Robins, Esther L. Klisura, and Jed J. Borghei, Sher Leff, LLP, San Francisco, California; Arnold M. Alvarez-Glasman and Andrew L. Jared, Alvarez-Glasman & Colvin, City of Industry, California, for Plaintiff-Appellant/Cross-Appellee.
Michael K. Johnson (argued), and R. Gaylord Smith, Malissa Hathaway McKeith, and Lisa Willhelm Cooney, Lewis Brisbois Bisgaard & Smith, LLP, San Franscisco, California, for Defendant-Appellee/Cross-Appellant.
Before: Harry Pregerson and Richard C. Tallman, Circuit Judges, and Michael H. Simon, District Judge.[*] Opinion by Judge Simon.
SIMON, District Judge
After excessive levels of the chemical perchlorate were found in a city's water system, the city undertook to investigate
the source of that contamination and remediate. Using a methodology known as " stable isotope analysis," a scientist hired by the city determined that the most likely dominant source of the perchlorate found in the city's groundwater was sodium nitrate that had been used as fertilizer. The sodium nitrate had been imported in large quantities from Chile several decades earlier and had been used as fertilizer over a substantial period of time. The city sued the company that imported the sodium nitrate into the United States. Before trial, the district court held an evidentiary hearing under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and excluded the city's expert witness. The parties then entered into a conditional stipulated dismissal to facilitate the appeal of the district court's evidentiary ruling, among other issues. Because the district court abused its discretion by not allowing a jury to resolve contested but otherwise admissible expert testimony, we reverse the district court's order of exclusion, affirm the district court's denial of the defendant's motion for summary judgment on other issues, and remand for trial.
The City of Pomona, California (" Pomona" ), administers a public water system. Pomona receives its water from the Chino Basin aquifer using a set of 14 wells that connect to Pomona's groundwater treatment facility. In 2007, the Chino Basin aquifer was found to have levels of the chemical perchlorate in excess of the Maximum Contaminant Level (" MCL" ) of six parts per billion (" ppb" ) permitted by the California Department of Public Health (" CDPH" ).
CDPH regulates contaminants in drinking water through several standards, including MCLs and Action Levels. MCLs are legally enforceable numerical standards, statutorily defined as " the maximum permissible level of a contaminant in water." Cal. Health & Safety Code § 116275(f). CDPH has the power to suspend or revoke a municipality's water system operating permit for failure to comply with an MCL. Id. § 116625(a). Action Levels (known as " Notification Levels" after 2004) are non-regulatory advisory levels for contaminants. Id. § 116455(c)(3). The only action required when a contaminant exceeds an Action Level, but remains below an MCL or when no MCL has been set, is notification to CDPH. Id. § 116455(a)(2).
In 1999, the CDPH set the perchlorate Action Level at 18 ppb. At this time, consistent with its responsibility under California law, Pomona began monitoring perchlorate levels in its groundwater and reporting these levels to the CDPH. In 2002, the CDPH reduced the perchlorate Action Level to four ppb. Pomona continued to monitor perchlorate levels. In 2007, CDPH established a perchlorate MCL of six ppb. In response to the MCL, Pomona immediately took steps towards compliance, including shutting off wells, purchasing water from other sources, and blending well water with non-well water to reduce the levels of perchlorate. Pomona also began shifting its existing nitrate removal processes to perchlorate removal and hired an engineer to identify a long-term solution for compliance with the MCL.
On October 15, 2010, Pomona filed this lawsuit against SQM North America Corporation (" SQMNA" ) to recover the cost of investigating and remediating perchlorate contamination in the groundwater in and around Pomona, California. Pomona alleges that SQMNA's importation of natural sodium nitrate from the Atacama Desert in Chile for use as a fertilizer was the primary source of Pomona's perchlorate contamination.
On October 31, 2011, SQMNA moved for summary judgment on two grounds. First, SQMNA argued that Pomona had not suffered a compensable injury under strict products liability law based on California's " economic loss rule." Second, SQMNA argued that even if Pomona had suffered a compensable injury, Pomona's claim was barred by the applicable three-year statute of limitations. The district court denied SQMNA summary judgment on both arguments. The case then proceeded toward trial.
On January 6, 2012, the district court held a Daubert hearing to consider SQMNA's pretrial motion in limine to exclude the testimony of Dr. Neil Sturchio, Pomona's expert witness on causation. Dr. Sturchio is the director of the Environmental Isotope Geochemistry Laboratory at the University of Illinois at Chicago. Dr. Sturchio began working on Pomona's perchlorate case in April 2011, using a methodology known as " stable isotope analysis." 
Acting under the direction of Dr. Sturchio, Wildermuth Environmental, Inc. (" Wildermuth" ) collected well water samples from Pomona using methods based on the Guidance Manual for Forensic Analysis of Perchlorate in Groundwater using Chlorine and Oxygen Isotopic Analyses (" Guidance Manual " ). Wildermuth shipped those samples to Dr. Sturchio with blind labels. Dr. Sturchio analyzed the isotopic composition of the perchlorate in Pomona's groundwater using stable isotope analysis and compared the resulting information with a reference database of known perchlorate sources.
Dr. Sturchio used a four-step methodology with multiple sub-parts. Dr. Sturchio disclosed this methodology in his expert report filed in this litigation. It was also published in 2011 in the Guidance Manual, which was commissioned by the Environmental Security Technology Certification Program (" ESTCP" ) of the United States Department of Defense. The four steps described in the Guidance Manual are: (1) collection of groundwater samples; (2) extraction and purification; (3) oxygen and chlorine isotopic analyses on the purified samples; and (4) determination of probable sources by comparing the resulting isotope data to a reference database. Before the publication of the Guidance Manual, peer-reviewed articles provided abbreviated descriptions of the fundamental methods used for stable isotope analysis by Dr. Sturchio and his colleagues.
Based on this analysis, Dr. Sturchio opined that the dominant source of perchlorate in the Pomona groundwater is from the Atacama Desert in Chile and that the samples also contained minor amounts of perchlorate from other non-Atacama sources, including synthetic or indigenous natural sources. Based largely upon Dr. Sturchio's findings, Pomona argued that the perchlorate found in its groundwater had the same distinctive isotopic composition as the perchlorate imported into
southern California from Chile by SQMNA between 1927 and the 1950s.
SQMNA moved to exclude Dr. Sturchio's opinions, arguing that " stable isotope analysis" failed to satisfy Daubert and was insufficiently reliable to be received in evidence under Rule 702 of the Federal Rules of Evidence. After an evidentiary hearing, the district court granted SQMNA's motion in limine to exclude Dr. Sturchio's testimony. The district court excluded Dr. Sturchio's opinions as unreliable on the grounds that: (1) the opinions were subject to future methodological revisions and not yet certified; (2) the procedures he used had not yet been tested and were not subject to retesting; and (3) the reference database used by Dr. Sturchio was too small. Shortly thereafter, Pomona and SQMNA stipulated to a conditional dismissal with prejudice in order to facilitate review of the district court's order excluding Dr. Sturchio's testimony, among other rulings.
STANDARDS OF REVIEW
We review evidentiary rulings for abuse of discretion and reverse if the exercise of discretion is both erroneous and prejudicial. Nevada Dept. of Corr. v. Greene, 648 F.3d 1014, 1018 (9th Cir. 2011) (citation omitted). We review underlying factual determinations for clear error. United States v. Lukashov, 694 F.3d 1107, 1114 (9th Cir. 2012). We review a district court's order ...