A federal appeals panel has, for now, vacated a $48.1 million verdict the city of Pomona won over allegations SQM North America polluted the public water supply with fertilized chemicals.
The U.S. Ninth Circuit Court of Appeals issued its ruling on the matter April 28, the latest in a lengthy series of decisions in litigation between the municipality and mining company. The panel consisted of Ninth Circuit Judges Daniel Bress and Salvador Mendoza, as well as Joan Ericksen, a federal judge from Minnesota, who sat by designation. The order was issued under Ninth Circuit Rule 36-3, which restricts its use as precedent.
The ruling vacated and remanded a verdict reached under U.S. District Judge Gary Klausner following the third trial on the same dispute. The root of the case is Pomona’s allegations SQM imported, distributed or sold nitrate with design defects that introduced the chemical known as perchlorate to the city water supply. The jury’s award covered damages and costs for making its water compliant with the state’s maximum contaminant levels.
Following the verdict, SQM asked Klausner for either judgment as a matter of law or a new trial, then appealed his denial of those requests. The Ninth Circuit panel rejected the company’s arguments regarding judgment as a matter of law, as well as its request for “a new trial based on failure to provide evidence of design defect, statute of limitations and foreseeability,” according to the opinion, but said Klausner was wrong to deny its request based on the issue of potentially excessive damages.
“To show design defect, Pomona offered deposition testimony from multiple executives from SQM,” the panel said. “The jury could glean from their testimony that while SQM had the ability to produce sodium nitrate fertilizer with less than 0.1 percent perchlorate, it consistently produced fertilizer with ‘maximum’ 0.5 percent perchlorate. Pomona also introduced evidence that sodium nitrate fertilizer produced from the 1930s through the 1950s typically contained between 0.2 and 0.5 percent perchlorate. Pomona thus met its evidentiary burden on the question of design defect by showing — based on admissions from company witnesses — that SQM could have produced fertilizer with perchlorate levels below 0.1 percent but chose not to.”
The panel also agreed Pomona sufficiently established causation through expert testimony and rejected SQM’s argument the city’s claims are time-barred, saying that would only be the case had Judge Klausner made a mistake of law. Pomona originally filed its lawsuit Oct. 15, 2010, and it could not sue if a jury found appreciable harm to the water supply before Oct. 15, 2007. Although Pomona did engage in perchlorate treatment in 2006, the panel said, the timeliness issue was — as during the first trial in 2014 — determined to be a factual dispute suitable for the jury when Pomona successfully argued the pre-2007 perchlorate abatement was ancillary to its nitrate treatment.
SQM’s arguments about whether Pomona adequately alleged the company should’ve been able to assess contamination risks also failed as they had in earlier trials, the panel said. Even if SQM could show the legal questions were distinct from earlier outcomes, the panel said the jury still could’ve found Pomona has standing to sue as an entity entitled to protection from the risk of defective fertilizer sales.
However, SGM prevailed on its damages position, first by noting Pomona’s expert said the city would spend only $30.2 million on perchlorate abatement. The jury’s award of an additional $18 million, the panel said, wasn’t supported by evidence. The panel further rejected Judge Klausner’s reasons for denying SQM’s motion for remittitur or a new trial, writing he “erred in relying on a figure that represented treatment of both perchlorate and nitrate in justifying the jury’s damages award.”
The panel noted the evidence clearly supports awarding $30.2 million, and although Pomona did advance theories regarding the total of $48.1 million, it found the record doesn’t yet support the full amount.
“We believe the district court is in the best position to evaluate the evidence, and on remand, it may determine that the evidence supports the jury’s award for reasons other than those the district court previously gave,” the panel wrote, adding a reminder the new trial could be limited to damages without reopening the issue of liability.