Sierra Northern Railway v. City of Fort Bragg

Background

Sierra Northern Railway owns the property at issue, and its affiliate Mendocino Railway operates it. The property includes the Mill Pond. The Railways alleged that untreated stormwater from the City of Fort Bragg flows into the pond through Maple and Alder Creeks and that the pond contains dioxins and furans at concentrations above applicable water-quality standards. They alleged that 80 to 95 percent of the pollutants entering the pond through stormwater came from the City’s untreated municipal stormwater.

The operative complaint asserted ten claims: recovery of response costs under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); declaratory relief under CERCLA section 113(g)(2); contribution under CERCLA section 107 or section 113; an unlawful-taking claim under 42 U.S.C. § 1983; state-law contribution and indemnity; continuing nuisance; inverse condemnation; negligence; continuing trespass; and state-law declaratory relief.

The City moved to dismiss and to strike the request for joint and several liability. The Railways opposed the motion and asked the court to recognize three documents issued by the California Department of Toxic Substances Control: a Site Investigation and Remediation Order and two amendments.

Judicial Notice

The court granted the Railways’ request to take judicial notice of the existence of the three state-agency orders. Judicial notice allows a court to accept a fact without requiring ordinary proof when the fact is not reasonably disputed or can be accurately determined from a reliable source. The court did not accept as established any potentially disputed facts contained in the orders.

CERCLA Section 107 Claim

A CERCLA section 107 claim for recovery of response costs requires allegations that the plaintiff incurred necessary cleanup or removal costs, that those costs resulted from a release of a hazardous substance, and that the defendant falls within CERCLA’s liability provisions.

The City argued that the Railways had not alleged that they incurred recoverable response costs. The Railways argued that they had alleged incurred legal fees and that CERCLA does not require physical cleanup work to have begun. The court agreed that some attorney fees closely tied to actual cleanup can qualify as necessary response costs and that investigation or testing costs can qualify even without physical cleanup. But it held that the complaint did not identify a specific cognizable category of response costs that the Railways had already incurred. The complaint referred generally to costs the Railways “have faced and will face” and “have incurred and will incur,” making it unclear which costs had already been paid and which were future costs. The court dismissed the section 107 claim with leave to amend.

CERCLA Section 113 Contribution Claim

The court explained that a CERCLA section 113 contribution claim may arise during or after certain civil actions, or after an administrative or court-approved settlement resolving liability to the United States or a state. The Railways argued that the state agency’s order and amendments constituted an administrative settlement because they added the Railways as respondents and required response actions.

The court rejected that argument at the pleading stage. The document was titled a “Site Investigation and Remediation Order,” not a settlement; it was executed by a Department of Toxic Substances Control branch chief rather than by the parties; and it ordered the Railways to perform specified actions without indicating that they agreed to do so or received consideration in return. The document also did not use the words “settle” or “settlement.” The court therefore dismissed the CERCLA section 113 claim with leave to amend, while noting that it appeared doubtful the Railways could allege facts showing a qualifying settlement or civil action.

The City also argued that the Railways could not pursue both CERCLA section 107 cost recovery and section 113 contribution. The court declined to adopt that argument as a categorical rule because Ninth Circuit precedent allows a plaintiff to assert both types of claims, and the court concluded that a later Supreme Court decision had not displaced that precedent.

Declaratory Relief

The Railways agreed that their CERCLA declaratory-relief claim depended on their other CERCLA claims. Because the court dismissed those claims, it dismissed the CERCLA declaratory-relief claim with leave to amend.

Motion to Strike

The City asked the court to strike the Railways’ request for joint and several liability under Federal Rule of Civil Procedure 12(f), which permits striking redundant, immaterial, impertinent, or scandalous material. The court denied that request. It held that the City mischaracterized the cited Supreme Court decision and also observed that the complaint sought joint liability, not joint and several liability.

Disposition

Judge Tigar granted the Railways’ request for judicial notice, limited to the existence of the three agency orders. He granted the City’s motion to dismiss with respect to the CERCLA section 107 claim, the CERCLA section 113 contribution claim, and the CERCLA declaratory-relief claim, in each instance granting leave to amend. He denied the City’s motion to strike. Any amended complaint was due within 28 days and could address only the deficiencies identified in the order.