pleading federal environmental and toxic tort...

Pleading Federal Environmental

and Toxic Tort Claims Navigating Pleading Standards Amid Differing Court Decisions,

and Overcoming Other Procedural Challenges

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TUESDAY, JANUARY 22, 2013

Presenting a live 90-minute webinar with interactive Q&A

Kevin Haroff, Partner, Marten Law, San Francisco

Gregory M. Gotwald, Partner, Plews Shadley Racher & Braun, Indianapolis

Brianna Schroeder, Plews Shadley Racher & Braun, Indianapolis

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FOR LIVE EVENT ONLY

Pleading Federal Environmental and Toxic Tort Claims

Navigating Pleading Standards Amid Differing

Court Decisions and Overcoming Other Procedural Challenges

Gregory M. Gotwald Brianna J. Schroeder

PLEWS SHADLEY RACHER & BRAUN LLP January 22, 2013

4

Background

• Common Law Pleading

– (emphasis on procedure over substance)

• Code Pleading

– (hypertechnical scheme that abolished common-law form of action)

• Federal Rules Pleading

– (adopted in 1938 to relax strict code pleading rules)

5

Background

• “Notice Pleadings”

– Coined by Conley v. Gibson, 355 U.S. 41 (1957).

– Complaint must give “fair notice” of:

• the plaintiff’s claim

and

• the grounds upon which it rests.

6

Background

• “Notice Pleadings”

– Conley v. Gibson, 355 U.S. 41 (1957).

• “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his which would entitle him to relief.”

7

• “Notice Pleadings” have changed.

• Conley overruled by Twombly & Iqbal.

• The “no set of facts” standard is no longer the standard.

• It is now a “plausibility” standard.

8

Bell Atl. Corp. v. Twombly

• Plaintiffs alleged Bell Atlantic’s “parallel behavior” violated Sherman Act.

• Under the Act, parallel behavior alone falls short of establishing offense.

9

Twombly (cont’d)

• Under the Act, an allegation of parallel conduct requires some factual setting.

• Complaint must provide plausible grounds to infer an agreement.

10

Twombly (cont’d)

• What are plausible grounds?

– Not a probability requirement.

• A complaint may proceed even if actual proof of those facts is improbable, and recovery is remote and unlikely.

– Need to allege enough facts to raise reasonable expectation that discovery will reveal evidence of illegal activity.

• Without factual enhancement, the complaint stops short of line between possibility and plausibility.

11

Twombly (cont’d)

• Conley’s “no set of facts” should be retired.

• This is not requiring Rule 9 heightened pleading.

• Need to “nudge” claim across line from conceivable to plausible.

12

Ashcroft v. Iqbal

• Iqbal was detained after 9/11.

• Alleged he was designated person of “high interest” and mistreated because of his race, religion, or national origin in violation of 1st and 5th Amendment.

• Alleged defendants Ashcroft and Mueller were behind his mistreatment.

13

Iqbal (cont’d)

• Iqbal needed to plead that each defendant acted with discriminatory purpose.

• He needed to plead that the defendant took action or made a decision “because of” not merely “in spite of” adverse effects on identifiable group.

14

Iqbal (cont’d)

• The Court’s review of the complaint:

– Court should assume veracity of well-pleaded “factual” allegations.

– Pleadings that are no more than conclusions are not entitled to assumption of truth.

– Evaluates whether complaint contains sufficient “factual” matter to state a claim to relief that is “plausible” on its face.

15

Iqbal (cont’d)

• Well-pleaded facts:

– “‘[L]abels and conclusions’ or ‘a formulaic recitation of the elements’” is not enough”.

– “‘[N]aked assertions’ devoid of factual enhancements” will not do”.

– Legal conclusions are not considered facts.

16

Iqbal (cont’d) • Plausibility

– It is a “context specific task”.

– Courts should utilize “experience and common sense”.

– It exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged”.

17

Iqbal (cont’d) • Plausibility

– It is not a “probability” requirement.

– It is more than a “possibility” requirement.

– However, if facts are “‘merely consistent with a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’”

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Iqbal (cont’d)

• “Consistent with”

– Parallel behavior in Twombly was consistent with illegal agreement, but there was an “obvious alternative explanation” and no factual enhancement.

– Actions in Iqbal were consistent with discrimination, but there were “more likely explanations” for the behavior.

– Isn’t this weighing the evidence?

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Probability Plausibility Possibility

Where Are We Now?

• Plausibility, not possibility or probability, is the rule.

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Where Are We Now?

• Takeaways from Twombly & Iqbal:

– Claims must be “plausible”

• Claim-specific evaluation

• More than possible, less than probable

• Allege actual facts – Legal conclusions and bald assertions don’t count

– Need to show enough facts:

» reasonable expectation that discovery will reveal evidence of wrongdoing

» Reasonable inferences will prove your case

• Inconsistent with likely alternative explanations

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What does this mean in an environmental context?

A case study:

Z-J, Inc. v. Pfizer.

22

Z-J, Inc. v. Pfizer, Inc.

• Plaintiff brought state court action alleging various state-law claims:

– Nuisance;

– Trespass; and

– Other environmental liability claims.

• Defendant removed to federal court.

23

Z-J (cont’d) • Plaintiff alleged:

– It owned property adjacent to an open “dump” that defendant owned and used from the 1940s–70s.

– Defendant disposed of “many types of wastes” and “basically everything” from the defendant’s facility.

• Plaintiff alleged that the disposal “potentially” included various specific wastes that plaintiff suspected defendant disposed of in the dump. 24

Z-J (cont’d) • Plaintiff alleged:

– Historical test results showed elevated levels of contamination in plaintiff’s groundwater.

– Defendant entered into agreement with the state regulatory agency to remediate the dump (maintain cover and test monitoring wells).

– Despite this cleanup, waste existed on plaintiff’s property and contamination was still present into the groundwater.

– If plaintiff used its irrigation pump, it would draw contaminated water onto its property and into its pond.

25

Z-J (cont’d) • Defendant moved to dismiss pursuant to

12(B)(6).

– Defendant argued:

• Plaintiff failed to specify the exact substances in the environment.

– Only said specific substances were “potentially” there

– Did not identify any specific “hazardous” substance

• Plaintiff failed to allege that the contaminants currently existed in the plaintiff’s soil/groundwater.

26

Z-J (cont’d) • Defendant argued:

• Plaintiff failed to provide facts regarding the levels of contamination .

– Are the levels above background?

– Are the levels “actionable” under state regulatory scheme?

• Plaintiff failed to explain how the contamination on the defendant’s property caused damage on the plaintiff’s property.

27

Z-J (cont’d) • The Court said:

– “[T]he boundary between a well-pled complaint and an insufficient one…is still evolving and therefore is somewhat blurry.”

– While it is difficult to articulate why a case falls on one side or the other of the line, notice pleading is all that is required.

– Plaintiff must show that it is plausible, rather than merely speculative, that he is entitled to relief. 28

Z-J (cont’d) • The Court said:

– Agreeing to defendant’s argument would set pleading standard inconsistent with notice pleading.

– Notice pleading does not require allegations of what specific substance was released.

29

What should you allege in an environmental case to avoid a 12(b)(6) motion?

As much as possible.

30

Asarco LLC v. NL Indus., Inc. • Plaintiff filed CERCLA action against defendant

for contribution based on defendant’s alleged ownership and operation of nearby mines.

• Plaintiff alleged “owner,” “operator,” and “arranger” liability.

• Alleged contamination from mines defendant owned and operated migrated to other areas in SEMO, the contaminated area.

31

Asarco (cont’d) • Defendant argued plaintiff failed to allege

plausible theory that defendant was owner, operator, or arranger under CERCLA.

– Argued no allegation that defendant had authority to determine whether and how hazardous materials were disposed of.

– Argued no allegation of specific intent to arrange for disposal of hazardous wastes at the sites.

32

Asarco (cont’d) • Court denied motion to dismiss:

– Owner:

• Plaintiff sufficiently alleged defendant owned mine that contributed to contamination at SEMO. Mine qualifies as “facility” under CERCLA.

– Operator:

• Reading complaint as a whole and making inferences in favor of plaintiff means the allegation that the defendant operated mines and controlled the hazardous substances is clear.

33


– Arranger:

• Liberal judicial interpretation is consistent with CERCLA’s remedial scheme.

• It was sufficient that plaintiff alleged defendant operated mine and was aware of contamination migration from mine.

34


– Contribution:

• Plaintiff alleged enough to support claim, despite defendant’s argument that plaintiff only paid its fair share of the remediation.

• This isn’t summary judgment.

35

Additional Cases • J&P Dickey Real Estate Family L.P. v.

Northrop Grumman Guidance & Elecs. Co., Cause No. 2:11cv37, 2012 U.S. Dist. LEXIS 36497(W.D.N.C. Mar. 19, 2012).

– Allowed state law claim because complaint specifically identified chemicals and stated they exceeded the compliance standards

36

Additional Cases • J&P Dickey (cont’d)

– Court dismissed CERCLA claim.

– Plaintiff failed to properly plead that response costs were consistent with NCP.

• Complaint stated: Plaintiffs “incurred response costs that are consistent with the National Contingency Plan. Such response cost included but are not limited to, expenses for testing of ground water and soil and surveillance.”

• Court said this was “a formalistic recitation of the elements of a CERCLA claim.”

37

Additional Cases • Hinds Invs., L.P. v. Angioli, 654 F.3d 846 (9th

Cir. 2011). – Plaintiff sought RCRA liability for dry cleaning

equipment manufacturer.

– Alleged manuals recommended disposing PCE in sewers and equipment was designed to do so.

– Court said insufficiently alleged that defendants “contributed to” contamination.

– Need to allege defendant exercised control of or was actively involved in the disposal process.

38

Additional Cases • BancorpSouth Bank v. Envtl. Operations, Inc.,

Cause No. 4:11CV9 HEA, 2011 U.S. Dist. LEXIS 117010 (E.D. Mo. Sept. 30, 2011).

– Plaintiff (a bank with ownership interest in the contaminated property) sought CERCLA liability from remediation designer and contractors.

– Plaintiff alleged that the defendants improperly spread contamination around the site.

39

Additional Cases • BancorpSouth (cont’d)

– Plaintiff alleged:

• Defendants knew there were hazardous substances on site; and

• Deliberately disturbed and re-released contaminants on the site.

– Plaintiff did not specifically identify which defendant did what (just generally alleged “Defendants”).

– Court found complaint sufficient.

40

Additional Cases • United States v. Halliburton Energy Servs.,

Cause No. H-07-3795, 2008 U.S. Dist. LEXIS 17476, *11 (S.D. Tex. Mar. 5, 2008) – Complaint alleged CERCLA “arranger” liability.

• Defendant “either directly or as a successor in interest to [several corporate entities] ‘by contract, agreement, or otherwise arranged for disposal or treatment of hazardous substances owned or possessed by [the Defendants or its predecessors].”

– Court found this sufficient to survive 12(b)(6). 41

Additional Cases • Halliburton (cont’d)

– Court held certain allegations were conclusory.

– Plaintiffs also alleged:

• the timing (1971 through 1993);

• the location (the specific site);

• the conduct (storage, reworking, and repair of items containing radioactive materials); and

• predecessor liability information (states of incorporation and business aliases).

42

Additional Cases • Vill. of Riverdale v. 138th St. Joint Venture,

527 F. Supp. 2d 760, 766 (N.D. Ill. 2007).

– Plaintiff filed RCRA claim against many defendants, but did not allege specific actions to specific defendants.

– Court held complaint was sufficient.

43

Additional Cases • Riverdale (cont’d)

– “[C]omplaint does not contain any specific factual allegations explaining how each of the several of the Defendant’s actions contributed to the imminent and substantial endangerment to health or the environment; it does not need to do so at this stage of the litigation.”

– “[I]t is sufficient that Riverdale has identified each of the Defendants as a possible contributor to the solid waste, the release of which may present an imminent and substantial endangerment to health of Riverdale inhabitants or the environment in general.”

44

Additional Cases • Gregory Vill. Partners, L.P. v. Chevron U.S.A.,

Inc., 805 F. Supp. 2d 888 (N.D. Cal. 2011). – Plaintiff filed CERCLA claim against former

owner.

– Complaint alleges: • “[Chevron] is responsible for these Releases as a

former owner/operator of a Facility, the Chevron Property, at the time of the Releases, pursuant to 42 U.S.C. § 9607(a)(2).”

– Court said this phrase is a “legal conclusion”.

45

Additional Cases • Gregory (cont’d)

– Court also noted no “clear” allegations that:

• Releases occurred during period of Chevron’s ownership; or

• Releases “actually affected” plaintiffs’ property – There were allegations that contamination migrated offsite

and entered the sewer.

46

Additional Cases • Pateley Assocs. I, LLC v. Pitney Bowes, Inc.,

704 F. Supp. 2d 140, (D. Conn. 2010).

– Court found sufficient facts alleged to find the defendant (a lessee of the site):

• a “de facto” owner under CERCLA; and

• an operator under CERCLA.

47

Additional Cases • Town & Country Co-op, Inc. v. Akron Prods. Co., No. 1:11-CV-2578, 2012

U.S. Dist. LEXIS 66128 (N.D. Ohio 2012) (explaining allegations required to survive a 12(b)(6) motion on a RCRA claim).

• Raritan Baykeeper, Inc. v. NL Indus., No. 09-cv-4117 (JAP), 2013 U.S. Dist. LEXIS 2628 (D.N.J. Jan. 8, 2013) (finding Plaintiffs alleged a “plausible” CWA claim by sufficiently alleging facts that the improper discharges continued to occur while the defendant was the lessee of the site).

• Gregory Vill. Partners, L.P. v. Chevron U.S.A., Inc., No. C 11-1597 PJH, 2012 U.S. Dist. LEXIS 32644 (N.D. Cal. 2012) (discussing allegations required to satisfy the “imminent and substantial endangerment” requirement of RCRA claim and various state-law claims).

48

Plaintiffs’ Pointers • Allege facts:

– Give enough information to put defendant on notice.

• Be careful with legal conclusions: – There are not considered facts.

• Are your facts inconsistent with likely alternative explanations?

• Avoid federal court? – Rely on state-law claims.

49

Questions?

Do not hesitate to contact either of us with additional questions: [email protected] or [email protected].

50

mailto:[email protected]

mailto:[email protected]

Pleading Federal

Environmental and Toxic Tort

Claims

Kevin T. Haroff, Esq.

MARTEN LAW PLLC

1/21/2013 MARTEN LAW PLLC | SAN

FRANCISCO 51

Strafford Environmental Litigation Webinar - January 22, 2013

Overview

• Evolving Ninth Circuit standards.

• Case study: Chubb v. Space Systems/Loral.

– District court proceedings.

– Status on appeal.

• Special issues.

– Standing.

– Scienter.

– Timeliness.

1/21/2013 MARTEN LAW PLLC | San

Francisco 52

Evolving Ninth Circuit Standards

• Pre-Twombly notice pleading under Rule 8(a).

• Balistreri v. Pacifica Police Dep’t., 901 F.2d 696 (9th Cir. 1990).

• “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.”


Francisco 53

Mendiondo v. Centinela Hosp. Med. Ctr.

• 521 F.3d 1097 (9th Cir. 2008).

• Citing Twombly: “The complaint need not contain detailed factual allegations, but it must provide more than ‘a formulaic recitation of the elements of a cause of action.’”

• Plaintiff must “give the defendant fair notice of what the … claim is and the grounds upon which it rests.

• Preserving notice pleading rule from Balistreri.


Francisco 54

Starr v. Baca, 633 F.3d 1191

(9th Cir. 2011) • Majority: “difficult to know” when to apply

Twombly-Iqbal v. notice pleading standard.

• Two prongs of analysis under Rule 8(a)(2):

– First, “allegations in a complaint or counterclaim must be sufficiently detailed to give fair notice to the opposing party of the nature of the claim;”

– Second, “the allegations must be sufficiently plausible that it is not unfair to require the opposing party to be subjected to the expense of discovery.”


Francisco 55

Case Study: Chubb v. SS/Loral

• CERCLA case filed on September 23, 2009.

• Former Ford Aerospace facility in Palo Alto.

• Discovery of soil and groundwater

contamination during development activities.

• Current owner asserted claim for response

costs under environmental liability policy.

• Insurance company sought recoupment of

monies paid to settle policy claim.


Francisco 56

Chubb’s Original Complaint

• Claim to recover insurance payments as response costs under section 107(a).

• Claim for contribution under section 113(g).

• Claim to assert insured’s recovery rights through subrogation under section 112(c).

• Ancillary state law claims.

• February 23, 2010 – order granting motion to dismiss with leave to amend, citing Twombly/Iqbal.


Francisco 57

First Amended Complaint (FAC)

• Asserted section 107 claim as section 112 subrogation claim in single cause of action.

• June 23, 2010 dismissal: “plain reading of [s]ection 112 requires plaintiffs to plead that the compensation was paid for damages or costs resulting from a CERCLA violation.”

• Plaintiff failed to “connect the dots” between insurance payments, insured’s response costs and “alleged CERCLA violations.

1/21/2013

MARTEN LAW PLLC | San

Francisco 58

Second Amended Complaint (SAC)

• Asserted section 112(c) claim that did not invoke section 107.

• December 7, 2010 dismissal:

– Construing section 112 remedy to require prior “claim” against Superfund or private parties.

– Absent allegations of prior “claim,” section 112 subrogation cause of action not sustainable.

– State law claims not reached (but could be dismissed under state statute of limitations).


Francisco 59

Third Amended Complaint (TAC)

• Asserted separate section 107 (couched as a subrogation claim) and section 112 claims.

• April 20, 2011 dismissal (with prejudice): – Section 107 claim cannot be couched as a

subrogation claim in light of section 112.

– Section 112 claim misconstrues the statute.

– Supplemental state law claims dismissed under applicable statute of limitations.

– Judgment for defendants.


Francisco 60

Chubb v. SS/Loral – Appeal

• Appellant’s issue No. 1: “Did the district court err by failing to apply the ‘plausibility’ standard in dismissing Chubb’s claims.”

• Governing precedent – Mendiondo.

• Appellant’s argument:

– Plausibility standard does not require a plaintiff to establish the legal merits of a claim.

– Plausibility standard does not require a plaintiff to allege facts constituting evidentiary proof of a claim.

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Francisco 61

Chubb v. SS/Loral - Status

• Oral argument on November 8, 2012.

• Pleading standard issue not specifically addressed in oral argument.

• Question – Will the court choose to avoid decision on merits of underlying claims (CERCLA and state law) by deciding case based on sufficiency of pleadings?


Francisco 62

Special Issues - Standing

• Standing in environmental cases.

– Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 (1992) – requirement of injury in fact.

– Summers v. Earth Island Institute, 129 S. Ct. 1142 (2009) – reiterating Lujan standing requirements.

– Monsanto v. Geertson Seed, No. 09–475, 561 U. S. __ (2010) – reasonable probability of harm test.

– Implications for citizen suit litigation.


Francisco 63

Special Issues - Scienter

• Goliad Cnty. v. Uranium Energy Corp., No. V-08-18, 2009 WL 1586688 (S.D. Tex. June 5, 2009). – Citizen suit claim that defendant’s failure to properly seal

and plug exploratory boreholes supported an “inference” of intent to convert the boreholes into underground injection wells requiring a permit under SDWA.

– Plaintiff sought to characterize this allegation as a factual one that the court was obliged to accept as true.

– Court rejected characterization - allegation “more accurately characterized as a conclusion of law, which the Court is not mandated to, and does not, accept as true,” citing Iqbal.


Francisco 64

Special Issues - Scienter

• Hinds Investments LP, et al., v. Team Enterprises, Inc., et al., No. 07-0703, 2010 U.S. Dist. LEXIS 48554 (E.D. Cal. Apr. 21, 2010). – Plaintiffs alleged arranger liability under CERCLA

§ 107(a) because it provided guidance to users of its equipment to discharge PCE-containing process wastewater to sewers rather than to “environmentally sound options.”

– Allegations insufficient in light of Burlington Northern and Santa Fe Railway Co. v. United States, 129 S.Ct. 1870 (2009).

1/21/2013


Francisco 65

Other Issues

• Timeliness and application of statutes of limitations as a defense.

• Implications of decision in Chubb v. SS/Loral.


Francisco 66

Conclusion

• Find the gap between facts alleged and

elements that must be satisfied to

sufficiently plead a claim.

• Look for conclusory statements or

formulaic recitation of the elements of a

claim.

• Mere possibility is not plausibility.


Francisco 67

Kevin Haroff Marten Law PLLC | San Francisco

[email protected]

1/21/2013 MARTEN LAW PLLC | SAN

FRANCISCO 68

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