ELR Citation: ELR 21366
No(s). C-92-20677 RMW (N.D. Cal. May 7, 1993)

The court rules that the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) §§103(c) and 107(a) do not preclude assertion of equitable defenses, especially a defense based on execution of a release from liability. The plaintiff, a real estate development company that purchased contaminated property, brought suit for cleanup costs against the property's sellers, waste transporters, and the successor-in-interest to an alleged waste generator under CERCLA §107(a), Resource Conservation and Recovery Act (RCRA) §7002(a)(1)(B), and state law. The defendants moved to dismiss. The court first turns to the defendant sellers' motion to dismiss the complaint in its entirety based on a release executed between the sellers and the plaintiff. The court first rules that because the plaintiff incorporated the release by reference into its complaint, the court may consider it without converting the defendants' motion to dismiss into a motion for summary judgment under Federal Rules of Civil Procedure 12(6). Next, the court holds that state law governs construction of the release, following Mardan Corp. v. C.G.C. Music, Ltd., 17 ELR 20209 (9th Cir. 1986). The court holds that equitable defenses may be asserted in CERCLA actions, especially defenses such as release or indemnification, despite restrictive language in §107(a) and (b). The same logic applies to a CERCLA §103(c) "refusal to limit liability" for polluters who fail to provide notice of contamination to the U.S. Environmental Protection Agency.

Applying California law, the court holds that a party may seek to invalidate a release if the party was induced to enter into it by fraud or economic duress. The court rules that the plaintiff has not pleaded facts to show fraud or economic duress. The court grants the sellers' motion to dismiss but grants the plaintiff leave to amend its complaint to specify facts showing fraud or economic duress.

Next, the court addresses the alleged generator's motion to dismiss the plaintiff's RCRA §7002(a)(1)(B) claim. The court rules that §7002(a)(1)(B) deals with past or current "violators of RCRA" that have created current and continuing endangerment to the environment. Although the plaintiff has cleaned up the site, the plaintiff has alleged a continuing endangerment and alleged that a state agency's order requires ongoing monitoring to prevent potential endangerment. The court rules that these allegations suffice to state a cause of action for injunctive relief. The court, however, rules that §7002(a)(1)(B) does not imply a private cause of action for restitution of cleanup costs and grants the defendant's motion to dismiss the plaintiff's claim for restitution under RCRA.

The court next dismisses the plaintiff's claim for attorneys fees under CERCLA §107(a), following controlling Ninth Circuit precedent. The court also dismisses the plaintiff's claim for attorney fees under state law. The California law at issue allows recovery of fees for public interest cases in which the necessity and cost to a plaintiff in bringing a private enforcement action outweighs the plaintiff's stake in the action. The court holds that the plaintiff acted primarily to obtain private profit, not to pursue any public benefit, and that the cost of pursuing the action is not out of proportion to the plaintiff's stake in it.

Counsel for Plaintiff
Craig S. Ritchey, Jean K. McCown
Blase, Valentine & Klein
1717 Embarcadero Rd., P.O. Box 51050, Palo Alto CA 94303
(415) 857-1717

Michael C. Donovan, J. Martin Robertson
Ware & Freidenrich
400 Hamilton Ave., Palo Alto CA 94301
(415) 328-6561

Counsel for Defendant
Martin H. Kresse, Christian Volz
McKenna & Cuneo
One Market Plaza
Steuart St. Tower, 27th Fl., San Francisco CA 94105
(415) 267-4000