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Arizona v. City of Tucson

United States Court of Appeals, Ninth Circuit

August 1, 2014

STATE OF ARIZONA, Plaintiff-Appellee,
v.
CITY OF TUCSON, Intervenor-Plaintiff--Appellee,
v.
ASHTON COMPANY INCORPORATED CONTRACTORS AND ENGINEERS; BALDOR ELECTRIC COMPANY; DON MACKEY OLDSMOBILE CADILLAC, INC.; DUNN-EDWARDS CORPORATION; DURODYNE, INC.; FERSHA CORPORATION; FLUOR CORPORATION; GENERAL DYNAMICS CORPORATION; GOODYEAR TIRE & RUBBER COMPANY; LOCKHEED MARTIN CORPORATION; HOLMES TUTTLE FORD, INC.; INDUSTRIAL PIPE FITTINGS, LLC; TUCSON FOUNDRY & MANUFACTURING INCORPORATED; ROWE ENTERPRISES INCORPORATED; PIMA COUNTY COMMUNITY COLLEGE DISTRICT; ROLLINGS CORPORATION; TEXTRON INCORPORATED; ABB INCORPORATED; COMBUSTION ENGINEERING INCORPORATED; TEXAS INSTRUMENTS, INC.; TUCSON DODGE INCORPORATED; WARNER PROPELLER & GOVERNOR COMPANY, LLC; FLUOR ENTERPRISES, INC., Defendants-Appellees,
v.
RAYTHEON COMPANY; PIMA COUNTY, Intervenors-Appellants, UNIVERSITY OF ARIZONA; ARIZONA BOARD OF REGENTS; TOMKINS INDUSTRIES, INC.; TUCSON AIRPORT AUTHORITY; TUCSON ELECTRIC POWER COMPANY, Intervenor-Defendants--Appellants

Argued and Submitted, San Francisco, California: February 10, 2014.

Counsel Amended August 6, 2014.

Page 1006

[Copyrighted Material Omitted]

Page 1007

Appeal from the United States District Court for the District of Arizona. D.C. No. 4:10-cv-00634-CKJ. Cindy K. Jorgenson, District Judge, Presiding.

Environmental Law

The panel affirmed in part and reversed in part the district court's order approving consent decrees in an action under the Comprehensive Environmental Response Compensation and Liability Act.

The panel reaffirmed that a district court has an obligation to independently scrutinize the terms of CERCLA consent decrees by, among other things, comparing the proportion of total projected costs to be paid by the settling parties with the proportion of liability attributable to them. The panel concluded that the district court properly declined to issue declaratory relief regarding intervening parties' future CERCLA liability because the intervenors did not request such relief in their complaints. The panel further held that the district court erred in entering the parties' proposed CERCLA consent decrees, because the court failed to independently scrutinize the terms of the agreements, and in so doing, afforded undue deference to the Arizona Department of Environmental Quality.

Judge Callahan concurred in part and dissented in part. She agreed with Part I of the majority's decision where it concluded that the district court properly denied the intervenors' request for declaratory relief. She dissented from Part II of the majority's decision because she would conclude that the district court properly approved the proposed consent decrees.

Jennifer B. Anderson (argued), Kevin D. Neal, Lori L. Voepel, and Erin E. Richardson, Jones, Skelton & Hochuli, PLC., Phoenix, Arizona; Harlan C. Agnew, Pima County Attorney's Office, Tucson, Arizona; Cynthia T. Kuhn, Kuhn Young Law Firm, PLLC, Tucson, Arizona; Charles A. Bischoff, Jorden Bischoff & Hiser, PLC, Scottsdale, Arizona; James J. Dragna and Denise G. Fellers, Bingham & McCutchen, Los Angeles, California; James Francis Murphy, Adler Murphy & McQuillen LLP, Chicago, Illinois; and Robert M. Jackson, Honigman Miller Schwartz & Cohn, Detroit, Michigan, for Intervenor--Defendants--Appellants.

Jeffrey Cantrell (argued), Tom Horne, Tamara Huddleston, and Anthony Young, Office of the Arizona Attorney General, Phoenix, Arizona, for Plaintiffs-Appellees.

Christopher D. Thomas (argued) and Matthew L. Rojas, Squire Sanders, LLP, Phoenix, Arizona; Patrick J. Paul and Martha E. Gibbs, Snell & Wilmer LLP, Phoenix, Arizona; Eric Lukingbeal, Robinson & Cole LLP, Hartford, Connecticut; Edward A. Cohen, Thompson Coburn LLP, St. Louis, Missouri; Carla A. Consoli and Jon Weiss, Lewis and Roca LLP, Phoenix, Arizona; Richard M. Yetwin, Michael R. Urman, John C. Richardson, and John Charles Emerson Barrett, DeConcini McDonald Yetwin & Lacey, P.C., Tucson, Arizona; Randolph G. Muhlestein, Musick Peeler & Garrett, LLP, Los Angeles, California; John F. Cermak, Jr. and Sonja A. Inglin, Baker & Hostetler LLP, Los Angeles, California; Phillip F. Fargotstein and Theresa Dwyer-Federhar, Fennemore Craig PC, Phoenix, Arizona; Joel L. Herz, Law Offices of Joel L. Herz, Tucson, Arizona; Charles S. Price and Mariscal Weeks, McIntyre & Friedlander, PA, Phoenix, Arizona; Mary T. Holohan, Fluor Enterprises, Inc., Irving, Texas; Howard T. Roberts, Jr., Goering, Roberts, Rubin, Brogna, Enos & Treadwell-Rubin, P.C., Tucson, Arizona; Alan N. Bick and Heather D. Hearne, Gibson, Dunn & Crutcher LLP, Irvine, California; Jeffrey G. Baxter and Sean E. Brearcliffe, Rusing Lopez & Lizardi, PLLC, Tucson, Arizona; Dennis A. Rosen, Law Offices of Dennis A. Rosen, Tucson, Arizona; Mitchell J. Klein, Polsinell Shughart, PC, Phoenix, Arizona; Jeremy A. Lite, Quarles & Brady LLP, Tucson, Arizona; Stephen D. Hoffman, Lewis Brisbois Bisgaard & Smith, LLP, Phoenix, Arizona, for Defendants-Appellees.

Before: Consuelo M. Callahan and Milan D. Smith, Jr., Circuit Judges, and Edward R. Korman, Senior District Judge.[*] Opinion by Judge Milan D. Smith, Jr.; Partial Concurrence and Partial Dissent by Judge Callahan.

OPINION

Page 1008

M. SMITH, Circuit Judge:

In this appeal, we address a district court's obligation to scrutinize the terms of a proposed consent decree under the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601-75 (CERCLA). In so doing, we reaffirm that a district court has an " obligation to independently scrutinize the terms of [such agreements]," by, inter alia, comparing " the proportion of total projected costs to be paid by the [settling parties] with the proportion of liability attributable to them." United States v. Montrose Chem. Corp. of Cal., 50 F.3d 741, 747 (9th Cir. 1995) (internal quotation marks and emphasis omitted).

We conclude that the district court properly declined to issue declaratory relief regarding the intervening parties' (Intervenors) future CERCLA liability. We further hold that the district court erred in entering the parties' proposed CERCLA consent decrees, because the court failed to independently scrutinize the terms of the agreements, and in so doing, afforded undue deference to the Arizona Department of Environmental Quality(ADEQ). We therefore affirm in part, reverse in part, and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

This case concerns liability under CERCLA and its state law counterpart, the Arizona Water Quality Assurance Revolving Funds (WQARF), A.R.S. § 49-281-391, for cleanup costs resulting from the contamination of the Broadway-Patano Landfill Site (the Site)--a hazardous waste site in Tucson, Arizona.

In January 2009, following an extensive investigation by the ADEQ, the State of Arizona filed a petition in the United States District Court for the District of Arizona, seeking to preserve the testimony of Ernest Joseph Blankinship--an elderly witness who had extensive knowledge of the Site's contamination. During the course of the proceedings, several parties, who were potentially responsible for the Site's contamination (i.e., potentially responsible parties), approached the State seeking to enter into early settlement agreements, releasing them from additional liability under CERCLA and WQARF.

On June 18, 2010, the State sent early settlement offers to those parties who requested early agreements, and the State ultimately reached eighteen proposed agreements with twenty-two parties. The proposed agreements require the settling parties to pay specified damages to the State, in exchange for a full release of liability under CERCLA and WQARF. Consistent with Section 113(f)(2) of CERCLA, the proposed agreements further release the settling parties from any obligation to pay contribution to non-settling parties in the future. See 42 U.S.C. § 9613(f)(2).

In order to obtain judicial approval of the proposed agreements under 42 U.S.C. § 9613(f)(2), the State initiated this action against the settling parties (Defendants-Appellees), alleging liability for the Site's cleanup under CERCLA and WQARF. Shortly thereafter, the State filed public notice of its intent to enter into consent

Page 1009

decrees with the Defendants-Appellees. A number of non-settling parties filed comments objecting to the proposed consent decrees and the State filed responses.

On March 11, 2011, the State filed a motion to enter the consent decrees. The State's motion explained that the total estimated cost of remediation was $75 million, and that the State calculated the liability of the settling parties to be de minimis --0.01% to 0.2% of the total cost. Several potentially responsible parties, who were not parties to the settlements, subsequently moved to intervene in the action.[1] The district court granted these motions over the State's objection.[2]

Intervenors opposed the State's motion to enter the consent decrees. In so doing, they primarily argued that the State did not provide sufficient information for the parties or the court to determine whether the consent decrees were substantively " fair, reasonable, and consistent with CERCLA's objectives." Montrose, 50 F.3d at 748. Intervenors' brief in opposition to the motion further requested a court order declaring that the State could not, in the future, hold Intervenors jointly and severally liable for costs related to the Site's cleanup.[3]

The district court denied Intervenors' request for declaratory relief and issued a twelve-page opinion approving the consent decrees. The district court's opinion lays out the procedural background of this case and the legal framework under which proposed CERCLA consent decrees are reviewed. Although the district court recognized its obligation to independently scrutinize the terms of the settlements, the district court did not engage in a substantive analysis of the settlements' terms. In approving the consent decrees, the court declined to even discuss the parties' individual or aggregate settlement amounts, and merely deferred to the ADEQ's judgment that " the public interest is best served through entry of th[e] agreement[s]." Intervenors timely appealed.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction under 28 U.S.C. § 1291. We review a district

Page 1010

court's grant or denial of declaratory relief for abuse of discretion. Cal. Ass'n of Rural Health Clinics v. Douglas, 738 F.3d 1007, 1011 (9th Cir. 2013). We also review the approval of a consent decree for abuse of discretion. Turtle Island Restoration Network v. U.S. Dep't of Commerce, 672 F.3d 1160, 1165 (9th Cir. 2012) (citing Montrose, 50 F.3d at 746). For the following reasons, we affirm in part, vacate in part, and remand.

DISCUSSION

I. The District Court Properly Denied Intervenors' Request for Declaratory Relief

We affirm the district court's order denying Intervenors' request for declaratory relief, because this request was not properly before the district court.

Under the Declaratory Judgment Act, 28 U.S.C. § § 2201-02, " any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration . . . ." 28 U.S.C. § 2201.

A request for declaratory relief is properly before the court when it is pleaded in a complaint for declaratory judgment. Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA) Inc., 560 F.3d 935, 943 (9th Cir. 2009). Requests for declaratory judgment are not properly before the court if raised only in passing, or by motion. Id. (denying " motion for declaratory judgment" because such a motion is " inconsistent with the Federal Rules" (internal quotations marks omitted)).

Here, Intervenors' request for declaratory relief was not properly before the district court. Intervenors did not request this relief in their complaints. Rather, they requested an order regarding their future liability in their brief opposing the State's motion to enter the consent decrees. If Intervenors wish to obtain a declaratory judgment, they must either file a separate action seeking such relief, or move to amend their complaints on remand. Id.

II. The District Court Erred in Entering the Consent Decrees

We vacate and remand the district court's order approving the consent decrees, because the court failed to independently scrutinize the terms of the agreements, see Montrose, 50 F.3d at 747-48, and in so doing, afforded undue deference to the ADEQ.

A. Legal Standard

1. CERCLA

" CERCLA is a comprehensive statute that [among other things] grants the President broad power to command government agencies and private parties to clean up hazardous waste sites." Key Tronic Corp. v. United States, 511 U.S. 809, 814, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994). We have explained:

[T]he Federal Government may clean up a contaminated area itself . . . or it may [seek an injunction to] compel responsible parties to perform the cleanup . . . . Under the first option . . . the government pays for the cleanup [using Superfund money] under § 9604 and then seeks recovery for its costs from [potentially responsible parties] under § 9607. This option has an obvious drawback for the government: It must pay first and sue for recovery of costs later (often in protracted litigation). The second option--compelling [potentially responsible parties] to perform the cleanup--therefore has its advantages.

Page 1011

City of Rialto v. W. Coast Loading Corp., 581 F.3d 865, 869 (9th Cir. 2009) (internal quotations and citations omitted).

CERCLA also encourages states, localities, and private parties to assist in the cleanup of hazardous waste sites. Under Section 104, a state may enter into a contract with the Environmental Protection Agency (EPA), pursuant to which both the state and the EPA engage in cleanup efforts on a cost-sharing basis. 42 U.S.C. § 9604(c), (d). A state may also independently engage in CERCLA remediation efforts, so long as those efforts are not inconsistent with the EPA's National Contingency Plan. See New York v. Shore Realty Corp., 759 F.2d 1032, 1047-48 (2d Cir. 1985).

CERCLA imposes strict liability on certain classes of parties who are potentially responsible for a site's contamination. Burlington, 556 U.S. at 608; Anderson Bros., Inc. v. St. Paul Fire and Marine Ins. Co., 729 F.3d 923, 929 (9th Cir. 2013). Under Section 107(a), the federal government or a state can sue responsible parties for " all costs of removal or remedial action incurred by the United States Government or a State . . . ...


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