ELR Citation: ELR 20703
No(s). s. 93-55824, -55876 (9th Cir. Mar 21, 1995)

The court vacatesand remands a district court's approval of a proposed consent decree settling the U.S. and California's Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) claims against a publicly owned sewage system and 150 local governmental entities for natural resource damages and response costs resulting from the discharge into the Pacific Ocean of wastewater containing hazardous substances. The court holds that the district court abused its discretion in approving the settlement, because there is no evidence on the record from which the district court could have made any determination with respect to the governments' estimates of responsibility and damage. Notably absent from the special master's report is any reference to the governments' estimates—preliminary or otherwise—of the potential total natural resource damages. Nor did the special master provide the district court with the governments' damage estimates at the hearing on the motion for approval of the consent decree. In such an informational vacuum, the fairness or reasonableness of the $45.7 million settlement simply cannot be measured. And although the district court was entitled to rely on the special master's recommendation to approve the consent decree, this reliance cannot take the place of the court's obligation to scrutinize independently the settlement's terms. The court therefore vacates the district court's approval of the consent decree and remands for an independent evaluation to determine whether it is reasonable, fair, and consistent with CERCLA's purposes. In conducting that evaluation, the district court, in addition to considering any other relevant factors, should determine the proportional relationship between the $45.7 million the settling defendants are to pay and the governments' current estimate of total potential damages. The district court should evaluate the fairness of that relationship in light of the degree of liability attributable to the settling defendants. Moreover, the nature of the liability of the various defendants is of considerable relevance in determining whether the settlement is fair, reasonable, and consistent with the public interest. Finally, the district court should factor into the equation any reasonable and justifiable discounts for litigation risks and time savings.

[The district court's decision is published at 24 ELR 20357. Other decisions in this litigation are published at 22 ELR 21327 and21333, 24 ELR 20452, and 25 ELR 20809.]

Counsel for Plaintiffs
Andrea N. Ward
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Karl S. Lytz, Kristine L. Wilkes
Latham & Watkins
701 B St., Ste. 2100, San Diego CA 92101
(619) 236-1234.

Before Gibson,^* Hug, and Hawkins, JJ.: