Home » Case Summaries » 2011 » Redevelopment Agency of the City of Stockton v. BNSF Railway Co., 643 F.3d 668 (9th Cir. 2011)

 
 

Redevelopment Agency of the City of Stockton v. BNSF Railway Co., 643 F.3d 668 (9th Cir. 2011)

 

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Plaintiff-Appellee-Cross-Appellant the Redevelopment Agency of the City of Stockton, California (Agency) filed suit against Defendants-Appellants-Cross-Appellees BNSF Railway Company and Union Pacific Railroad Company (Railroads), seeking cost recovery and an injunction related to a contaminated parcel of land. The Railroads removed the case from California Superior Court to the United States District Court for the Eastern District of California. The district court found the Railroads liable for the contaminated property and accordingly granted the Agency damages and an injunction. The parties appealed and cross-appealed the findings of liability and the award of damages to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit reversed the district court’s findings of liability against the Railroads and remanded the case for entry of summary judgment for the Railroads.

In 1968, the State of California entered into a contract (Agreement) with several railroad companies to relocate their tracks onto a state-owned parcel (Property). In exchange for the rights-of-way necessary to operate railroad tracks on the parcel, the Railroads agreed to maintain the track, roadbed, and drainage. Accordingly, the Railroads installed a “French drain” on the Property—a buried, perforated pipe that protects soil stability by diffusing drainage water across a wide subterranean area. In the 1970s, a nearby bulk petroleum facility had several petroleum spills, including a spill of up to 6,000 gallons of diesel fuel. Unbeknownst to the Railroads, petroleum from these spills drifted beneath the Property via the French drain, contaminating much of the Property. The State did not officially transfer the Property’s deed to the Railroad until 1983. The Railroads sold the Property to the Agency in 1988, and commercial developers subsequently discovered the contamination in 2004. The Agency incurred costs of more than $1.3 million to remove contaminated soil and remediate the site.

In 2005, the Agency sued the Railroads in California Superior Court, seeking cost recovery and an injunction requiring the Railroads to remediate any remaining contamination. The Railroads removed the case to the Eastern District of California, and both parties filed cross-motions for summary judgment. In 2007, the district court granted the Agency damages after holding that the Railroads were liable for the contamination under both state nuisance law[1] and the Water Code provision of the Polanco Redevelopment Act (Polanco Act).[2] However, the district court declined to apply a third theory of liability to the Railroads under the Polanco Act’s CERCLA provision.[3] Both parties appealed the district court’s ruling on the cross-motions for summary judgment to the Ninth Circuit, which reviewed the case de novo.

The Ninth Circuit first reviewed whether the Railroads were liable for the contamination under principles of California nuisance law.[4] The court narrowed its inquiry by noting that the parties did not dispute whether the contamination itself was a nuisance, but rather if the Railroads were liable for that nuisance. The Ninth Circuit next dismissed the district court’s reasoning that the Railroads had “created or assisted in the creation of the nuisance[5] by installing the French drain, which facilitated the migration of petroleum across the Property. No precedent supported the notion that an individual assists in the creation of a nuisance merely because his actions are a but-for cause of that nuisance. The Railroads were not liable under nuisance law merely because they constructed a conduit for unrelated reasons, which happened to affect the distribution of someone else’s contamination.[6] The district court’s contrary finding “defie[d] semantics, the law, and common sense.”[7]

The Ninth Circuit then considered whether the Railroads might nevertheless be liable under nuisance law as possessors of land with an abatable artificial condition.[8] The court focused on “[w]hether the Railroads ‘should have known’ about the contamination”—a determination dependent upon whether the Railroad had a duty to inspect the land and “whether [the condition] was discoverable by a reasonable inspection.”[9] Although the petroleum contamination would not have been discoverable by a reasonable inspection of the Property’s surface, the Agency argued that the Railroads had a duty to inspect the Property’s subsurface for contamination because the nearby bulk petroleum facility was a potential source of hazardous waste. Additionally, the Agreement required the Railroads to maintain the drainage system.

The Ninth Circuit quickly dispatched the Agency’s first argument, decrying it as “untenable” that a landowner might have a duty to inspect the subsurface of his land in order to discover and control his neighbor’s pollution.[10] Such a holding, the court noted, would invert the core purpose of nuisance law: “to protect a person from his neighbor’s activities, not to render him liable for them.”[11]

The Ninth Circuit considered the Agency’s second argument to be a closer call, but nevertheless rejected it. The court acknowledged that dicta in another of its cases contemplated that a contractual obligation might heighten a landowner’s duty to investigate for contamination.[12] However, the court distinguished the contractual language in that case from the language in the Agreement. Whereas the contract in City of Los Angeles v. San Pedro Boat Works imposed an obligation to “keep and maintain [the] premises in a safe, clean, wholesome, sanitary and sightly condition,”[13] the Agreement in this case merely stated “the maintenance of all railroad facilities including track, roadbed, [and] railroad drainage . . . shall be by [the] Railroads at their expense.”[14] The court interpreted the Agreement as merely imposing an obligation to maintain certain structures on the Property—not a duty to keep the Property free from contamination. Accordingly, the court declined to impose liability under any theory of nuisance law.

The Ninth Circuit next examined the theories of liability under California’s Polanco Redevelopment Act,[15] which allows local redevelopment agencies to recover the cost of remediation from any “responsible party[.]”[16] The Polanco Act defines “responsible party” by reference to other statutes.[17] The term encompasses any person described under specific provisions of either section 13304(a) of the California Water Code,[18] or section 9607(a) of CERCLA,[19] as incorporated by reference in the California Health and Safety Code.[20] 

The Ninth Circuit first considered whether the Railroads were a “responsible party” under the definition drawn from the California Water Code: any person who “has caused or permitted” waste to be discharged in such a way that it may enter state waters and create a nuisance.[21] The court resolved the Railroads’ liability as a “responsible person” under this definition on the same grounds that it dismissed the district court’s nuisance ruling: the Railroads did not create a nuisance because they were not directly involved in any petroleum spills, and whatever pollution emanated from their French drain did so without their knowledge or involvement.

Having dispatched both of the district court’s rationales for holding the Railroads liable for the contamination, the Ninth Circuit finally considered the Agency’s third theory of liability, that the Railroads were a “responsible party” under the Polanco Act-CERCLA provision because they owned the Property at the time the contamination took place.[22] The district court declined to find the Railroads liable as owners under the CERCLA provision because although the Railroads were running trains on the Property while the contamination occurred in the 1970s, the Railroads did not receive the deed to the Property until 1983. On appeal, the Agency argued that despite this, the Railroads were owners under CERCLA for two reasons: the doctrine of equitable conversion rendered the Railroads “equitable owners” of the Property upon execution of the Agreement in 1968,[23] and the Railroads’ easement to operate trains over the Property constituted ownership under CERCLA.

The Ninth Circuit dismissed both of the Agency’s arguments. First, the court noted that the doctrine of equitable conversion only applies when the purchaser of land executes a valid executory land sales contract which, among other things, contains a “description of the land to be conveyed”[24] that is “sufficient to delineate the property on the ground without resort to parol evidence.” In this case, the Agreement merely conveyed “all rights of way necessary” for future railroad operation.[25] The Ninth Circuit determined that the Agreement lacked sufficient delineation of property rights to implicate the doctrine of equitable conversion because the Agreement only purported to convey a right-of-way, not a fee simple interest, and did not otherwise illuminate the extent of the Railroads’ property rights. The Ninth Circuit similarly dismissed the Agency’s argument that the Railroads’ easement made them owners under CERCLA. The court first noted that Ninth Circuit precedent does not recognize easement-holders as “owners” for purposes of CERCLA liability, because they lack title to the property at the time of contamination.[26] The court stated that, if anything, an easement-holder could be liable as an operator under CERCLA, but that the Railroads in this case would not qualify because their easement activities were neither responsible nor related to the discharge.

Accordingly, the Ninth Circuit reversed the district court’s grant of summary judgment for the Agency as to the Railroads’ liability under California nuisance law and the Polanco Act–Water Code provision issues, and upheld the district court’s grant of summary judgment for the Railroads on the Polanco Act–CERCLA provisions.


[1] Cal. Civ. Code § 3479 (West 1997).

[2] Cal. Health & Safety Code § 33459–33459.8 (West 1999).

[3] Id. § 33459 (West 1999). The Polanco Act is the corollary state Superfund statute to the federal Superfund statute, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).

[4] See Cal. Civ. Code § 3479 (West 1997).

[5] Cnty. of Santa Clara v. Atl. Richfield Co., 40 Cal. Rptr. 3d 313, 325 (Cal. Ct. App. 2006).

[6] Redevelopment Agency of the City of Stockton v. BNSF Ry. Co. (City of Stockton), 643 F.3d 668, 675 (9th Cir. 2011).

[7] Id.

[8] See Restatement (Second) of Torts § 839 (1979) (subjecting a possessor of land of liability when in possession by an abatable artificial condition on such land); see also id. § 839 cmt. f (defining “abatable physical conditions” as those that “reasonable persons would regard as being susceptible of abatement by reasonable means.”).

[9] City of Stockton, 643 F.3d at 675–76 (citing Leslie Salt Co. v. S.F. Bay Conservation and Dev. Comm’n, 153 Cal. App. 3d 605, 621 (Cal. Ct. App. 1984)).

[10] City of Stockton, 643 F.3d at 676.

[11] Id.

[12] See City of L.A. v. San Pedro Boat Works, 635 F.3d 440, 453 (9th Cir. 2011).

[13] Id.

[14] City of Stockton, 643 F.3d at 676.

[15] Cal. Health & Safety Code § 33459–33459.8 (West 1999).

[16] Id. § 33459.4(a).

[17] Id. § 33459(h).

[18] Cal. Water Code § 13304(a) (West 2009).

[19] Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. § 9607(a) (2006).

[20] Cal. Health & Safety Code § 25323.5 (West 2006).

[21] Cal. Water Code § 13304(a) (West 2009).  

[22] 42 U.S.C. § 9607(a)(2) (2006) (ascribing liability to “any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of.”).

[23] See Parr–Richmond Indus. Corp. v. Boyd, 272 P.2d 16, 22 (1954) (noting that a land sales contract renders the purchaser the equitable owner of the land).

[24] City of Stockton, 643 F.3d 668, 679 (9th Cir. 2011) (citing Corona Unified Sch. Dist. of Riverside Cnty. v. Vejar, 165 Cal. App. 2d 561, 566 (Cal. Ct. App. 1958)).

[25] City of Stockton, 643 F.3d at 679.

[26] See Long Beach Unified Sch. Dist. v. Godwin Cal. Living Trust, 32 F.3d 1364, 1370 (9th Cir.1994); see also City of L.A. v. San Pedro Boat Works, 635 F.3d 440, 451–52 (9th Cir. 2011).

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