A recent ruling in the U.S. District Court for the Eastern District of California granted a motion to dismiss a case involving soil and groundwater contamination allegedly resulting from the release of hazardous substances at a property once occupied by a metal plating facility.
The case filed by the city of West Sacramento and the state of California accused defendants R & L Business Management and Richard Leland and Sharon Leland of violating the Gatto Act, which provides California cities and agencies authority to force the cleanup of contaminated property.
Jad Davis, a top Los Angeles environmental attorney and a partner in Kutak Rock, recently discussed the case with the Northern California Record and why U.S. District Judge William B. Shubb granted R & L Business Management's motion to dismiss the complaint for failure to state a claim based on the Gatto Act.
“The first amended complaint does include a rarely alleged claim – the Gatto Act that replaced the repealed Polanco Redevelopment Act,” Davis said.
KutakRock Partner Jad Davis http://www.kutakrock.com
The Gatto Act is a powerful statutory tool that public entities may utilize to spend money cleaning up the contamination on a blighted property and allows the entities to sue responsible parties for reimbursement of such costs, Davis said.
“The Gatto Act has unique immunities afforded to the entities for such work,” he added.
Though the plaintiff’s complaint is commonly alleged, the judge’s ruling is not shared, according to Davis.
“Judge Shubb’s ruling granting the Leland defendants’ Rule 12 motion to dismiss is a somewhat surprising because federal courts seem to be less and less likely to grant Rule 12 motions merely on the basis that plaintiffs’ complaints fail to allege sufficient facts to establish the elements of the asserted claims,” Davis said.
Instead, federal courts in reviewing Rule 12 motions accept all the allegations as being true and seem more often to liberally draw all reasonable inferences in favor of the plaintiffs, Davis said.
“Here, Judge Shubb went beyond the plain language of the statutorily defined terms of owner and operator, and he relied upon case law interpreting those statutorily defined terms,” Davis said. “Judge Shubb could have applied the plain language of the statutory definitions and given plaintiffs’ the benefit of liberally drawing all reasonable inferences in favor of plaintiffs’ allegations.”
Rather, Shubb strictly applied the case law interpretations of the statutorily defined terms of owner and operator in relation to the Lelend defendants’ relationship to the site, he said.
Shubb determined that the plaintiffs appeared "to rely on the Lelands’ status as shareholders to impose liability on them as owners," according to his ruling.
Davis said the first amended complaint properly alleges the required legal elements to each alleged cause of action.
“However, Judge Shubb ruled that the first amended complaint was weak in that it did not allege specifically how the Leland defendants owned and operated the site,” Davis said.
It is apparent that the plaintiffs, West Sacramento and the state, correctly alleged the legal elements of each claim, but did not further investigate the case law interpreting the statutorily defined terms, such as owner and operator, which was an analysis that Judge Shubb performed in ruling on defendants’ motion, according to Davis.
“Had plaintiffs included the case law interpretations of the statutorily defined terms of owner and operator, then plaintiffs may have alleged additional facts in the first amended complaint that may have been sufficient to defeat defendants’ motion,” Davis said.
Shubb’s ruling permits the plaintiffs to amend the first amended complaint, Davis said. It appears likely that plaintiffs will review the case law cited in the ruling, investigate the known facts about the Lelands' control and activities at the site, and then insert the required allegations to sufficiently address the deficiencies in the plaintiffs’ factual allegations as identified by Shubb, Davis added.
The case provides guidance with little to no precedential value, according to Davis. “It does provide guidance to lawyers practicing environmental law in that Judge Shubb clearly sets for his requirements for pleading common causes of action, such as CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act),” he said, adding such guidance can be used by lawyers drafting such complaints and preparing their own Rule 12 motions to similar complaints.
Guidance and precedent set aside, the Gatto Act cause of action is rarely asserted; and yet, a powerful statutory tool available to public entities with neglected contaminated properties that need to be redeveloped, according to Davis.
“If this lawsuit is successful, then perhaps other public entities will appreciate the utility of the Gatto Act,” Davis said.