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

Background

The California Department of Toxic Substances Control sued under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to recover costs from the cleanup of contaminated real property in Oakland. Hard Chrome Engineering, Inc. operated a metal- and chromium-plating business at the property from 1972 to 2005. The operations involved chemicals including chromic and sulfuric acid, and hazardous substances were deposited into the ground or emitted into the air and around the property.

Hard Chrome initially leased the land from Dee M. McLemore and later leased it from the Dee M. McLemore Trust. In 2005, the Department issued an order requiring the trust to investigate and remediate the release of hazardous substances. In 2008, Cheryl Plato McLemore informed the Department that the trust could no longer comply, allegedly because it lacked sufficient assets. The Department then took over the investigation and remediation, began physical construction of a remedy in 2013, and had spent $3,541,975.74, including interest and legal fees, as of September 30, 2020.

After limited motion practice, the court referred the parties to mediation before Magistrate Judge Kandis Westmore. The Department and the trust reached an agreement, and the Department moved for approval of the proposed consent decree after a public-comment period. The opinion states that no public comments were received and that the briefing was unopposed.

Proposed Consent Decree

The proposed decree required the trust to liquidate its real and non-real property. From its non-real assets, the trust would pay the Department $1,450,000 plus the portion of proceeds exceeding $1,750,000. The trust would also sell the contaminated property and pay the Department the net sale proceeds up to $300,000, plus half of the proceeds above that amount if the sale exceeded $400,000.

Before the sale, the trust’s executors would record a land-use covenant. The covenant would limit the property to commercial or industrial uses with Department oversight, prohibit interference with the Department’s cleanup work, restrict groundwater use, and require maintenance of the existing foundation and interior concrete floor to contain remaining hazardous substances. The trust and future property owners could negotiate with the Department to update those restrictions as needed.

Court’s Analysis

The court explained that a CERCLA consent decree must be fair, reasonable, and consistent with the statute’s objectives. Fairness includes both procedural fairness—whether the bargaining process was candid, open, and balanced—and substantive fairness—whether liability is allocated on a rational basis. Reasonableness considers the practical realities of litigation, and the settlement must advance Congress’s goal of cleaning the environment efficiently.

The court found no procedural defect. Magistrate Judge Westmore supervised mediation, both parties were represented by counsel, and the Department published the proposed settlement for public comment from October 27 through December 2, 2020, without receiving comments.

The court also found the settlement substantively fair. It viewed the case as involving two relevant defendants: the trust, which owned the land, and Hard Chrome, which polluted it. Because the Department had an actual cleanup bill rather than only an estimate of future costs, the court concluded that the trust’s payment—described as slightly more than $1,750,000—represented approximately half of the cleanup bill and a fair division of the publicly funded costs. The opinion also states that the Department had moved for a default judgment against Hard Chrome for its share.

The court found the settlement reasonable because it addressed costs already paid by the public and imposed restrictions intended to support continued cleanup, prevent use of contaminated water, contain pollution beneath the concrete foundation, and prevent residential use. The court gave some deference to the Department’s expertise regarding whether the restrictions would protect public health, while noting that the Department was not entitled to the same level of deference that the Environmental Protection Agency would receive in this context.

Finally, the court concluded that the settlement accounted for the trust’s circumstances. Although it reimbursed only half of the public cleanup cost, the total bill exceeded the value of the trust’s assets, including the property. The settlement payment represented approximately 80 percent of the trust’s liquidated assets while leaving adequate assets to support Ms. McLemore. The court concluded that prolonged litigation would reduce the funds available to both the public and Ms. McLemore.

Ruling

Judge William Alsup granted approval of the proposed consent decree. The court held that the decree was fair, reasonable, and consistent with CERCLA’s objectives, and that it would resolve the dispute while holding the landowner responsible for hazardous conduct at the property. The order did not state that the court entered a judgment against Hard Chrome; it stated only that the Department had moved for a default judgment against that defendant.