California Department of Toxic Substances Control v. Dee M. McLemore Trust

Background

The California Department of Toxic Substances Control sued several defendants under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to recover cleanup costs and obtain declaratory relief related to contamination at property in Oakland. Hard Chrome Engineering, Inc. leased the property from Dee M. McLemore from 1972 to 1988 and from the Dee M. McLemore Trust from 1988 to 2005. Hard Chrome operated a metal- and chromium-plating business there and generated hazardous substances, some of which went directly onto the ground.

After the Trust could no longer comply with a state investigation and cleanup order, the Department took over the investigation and remediation. The Department alleged that it had incurred approximately $2,459,409 in response costs, excluding interest. The amended complaint alleged that Cheryl Plato McLemore was individually liable under CERCLA both as a trustee and as a beneficiary, as well as liable in a representative capacity. Her motion challenged only the claims against her individually.

Individual Liability as a Trustee

The court explained that CERCLA limits a trustee’s liability for acts taken as a trustee to the assets of the trust. That limitation does not protect a person who acts in a beneficiary capacity and benefits from those acts, or a beneficiary and fiduciary who receives excessive benefits as a fiduciary.

The court held that merely being a beneficiary—or receiving distributions or other benefits from a trust—is not enough to trigger full individual liability. The complaint had to allege that McLemore performed a specific act as a beneficiary that was also an act connected to the contamination. Because the complaint alleged no such act, the court held that it failed to state a claim for McLemore’s individual liability as a trustee and granted the motion to dismiss on that issue.

Individual Liability as a Beneficiary

The court considered whether a trust beneficiary can be an “owner” of contaminated property for purposes of CERCLA. It looked to common law, including California law, and noted that beneficiaries have an equitable interest in trust property but do not hold full title to it.

The court held that trust beneficiaries do not constitute owners for purposes of CERCLA liability. It therefore held that the allegations against McLemore in her individual beneficiary capacity failed to state a claim and granted the motion to dismiss on that issue.

Request for Judicial Notice

McLemore asked the court to take judicial notice of an amended trust agreement submitted with her motion. Judicial notice allows a court to accept certain facts or documents without treating them as disputed evidence. The court declined to consider the agreement at the motion-to-dismiss stage because it was outside the pleadings and would require examining facts on an incomplete record. The request for judicial notice was denied, and the evidence attached to the supporting declaration was excluded from consideration.

Disposition

The order states that, to the extent described above, the motion to dismiss was granted. The order did not state that the dismissal was with or without prejudice. It addressed McLemore’s individual liability as a trustee and beneficiary and did not rule on her separate representative-capacity liability.