City of Visalia v. Mission Linen Supply, Inc., CASE NO. 1:19-CV-1809 AWI EPG

CITY OF VISALIA, Plaintiff v. MISSION LINEN SUPPLY, INC.,a California corporation, and DOES 1-100 inclusive, Defendant

CASE NO. 1:19-CV-1809 AWI EPG

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

May 19, 2020

ORDER ON PLAINTIFF'S MOTION TO REMAND AND DEFENDANT'S MOTION TO DISMISS AND ORDER REMANDING MATTER TO THE TULARE COUNTY SUPERIOR COURT

(Doc. Nos. 5, 13)

This action was removed from the Tulare County Superior Court on December 30, 2019, and was related to Mission Linen, Inc. v. City of Visalia, 1:15-CV-0672 AWI EPG, a CERCLA case. In this case, Plaintiff the City of Visalia ("the City") seeks a declaration that remediation projects at a property contaminated with perchloroethylene ("PCE"), and subject to a remediation order by the California Department of Toxic Substances Control ("DTSC"), are subject to the competitive bidding procedures mandated by the California Public Contracts Code and the City Charter. Currently before the Court is Defendant Mission Linen Supply, Inc. ("Mission")'s motion to dismiss and the City's motion to remand. For the reasons that follow, the City's motion will be granted, and Mission's motion will be denied without prejudice to refiling in state court.

BACKGROUND

On February 5, 2019, following a bench trial, this Court issued a Findings of Fact and Conclusions of Law ("February 5 Order") pursuant to Rule 52(a)(1) in Mission Linen, Inc. v. City of Visalia, 1:15-CV-0672 AWI EPG ("the Mission Linen Case"). See Doc. No. 176 in Case 1:15-CV-0672 AWI EPG. The Mission Linen Case involved PCE contamination of property owned by Mission. See id. Mission was obligated under a consent order by the DTSC to cooperate and to remediate the PCE plume/the property. See id. PCE contamination was the result of dry-cleaning activities that had been conducted by Mission and its predecessor. See id. Although PCE had not been used on the subject property since 1986, the Court found that PCE had spread beyond the property's borders. See id. The PCE plume coincided with the City's sewer systems, which contained a number of defects that permitted the PCE to "escape" into the environment. See id. The Court concluded that Star Laundry (an insolvent predecessor entity that was not a party), Mission, and the City were potentially responsible parties under CERCLA for the PCE plume. See id. After dividing the orphan share of Star Laundry, the Court found that Mission and the City were each 50% liable for future response costs. See id. The Court specifically declared, "For all necessary future response costs incurred by Mission regarding the PCE plume, Mission is responsible for 50% of those future costs and the City is responsible for 50% of those future costs."¹ Id. The City has appealed this order, but an opinion from the Ninth Circuit has not yet issued. Therefore, the Court's Findings and Conclusions and declarations made in the February 5 Order remain controlling and in place.

In late November 2019, the City filed a complaint for declaratory relief in the Tulare County Superior Court. See Doc. No. 1 at Exhibit A ("the Complaint"). The complaint alleges that remediation expenses for the property have been estimated between $3 and $5 million. See id. at ¶ 5. The complaint states that the "City does not by this action challenge or otherwise ask for a different allocation; that issue was determined and is being reviewed in the Courts of the United States. Regardless of the outcome of its appeal, City is informed and believes that its share of costs for the cleanup will exceed $25,000. This action has [sic] seeks no relief from or under [the February 5 Order]." Id. The Complaint alleges that whether Mission puts the remediation project to bid, the bid will not be public but will be steered towards preferred contractors. See id.at ¶ 12. The Complaint explains that, on information and belief, Mission intends to award a bid for the initial phases of the cleanup to one of three contractors as part of a process that did not place the project out to public bid. See id. at ¶ 13. The contract will require payment of public funds in excess of the minimum required to trigger the application of the California Public Contracts Code. See id. The Complaint avers that Mission intends to award all future work on the cleanup in a similar manner, i.e. inviting bids from favored contractors on a project that involves public works and public funds but without a public bid. See id. at ¶ 14. Under the cause of action for declaratory relief, the Complaint states that the February 5 Order is an instrument on which Mission Linen seeks to hold the City liable to pay public moneys for a share of all work on the cleanup of the PCE plume. See id. at CA ¶ 2.² The Complaint then explains that an "actual controversy has arisen regarding the rights and obligations of the parties with respect to one another regarding their properties and as those rights and obligations affect a watercourse [groundwater under the property]: City alleges that the cleanup is a public works project subject to the competitive bidding procedures of the Public Contracts Code and the Charter of the City of Visalia." CA ¶ 3. Mission denies that it must follow the rules of the Public Contracts Code and the City Charter. CA ¶ 4. "A declaration of the rights and duties of these parties in the premises is necessary, requiring a determination of whether the cleanup work to be paid in part by City is subject to competitive bidding procedures of the Public Contracts Code." CA ¶ 5. The Complaint prays for costs, attorneys' fees, and "an order declaring that the cleanup for which City is in part obligated to pay under the February 5 Order are subjected to the competitive bidding processes of the Public Contracts Code and the [City Charter] and must be put out for bid as they require." Complaint's Prayer.

Mission removed the matter to this Court on the basis of federal question jurisdiction. Specifically, Mission removed because the Complaint allegedly is a collateral attack on the February 5 Order and implicates CERCLA's exclusivity provisions.

I. CITY'S MOTION TO REMAND Plaintiff's Arguments

The City argues that it is not making a collateral attack on the February 5 Order since the Complaint does nothing to change the fact that the City has been ordered to pay 50% of the cleanup costs. The Complaint expressly states that it seeks no relief from or under the February 5 Order, and the City recognizes that, depending on the appeal to the Ninth Circuit, it will be on the hook for some amount of the cleanup. Further, the Complaint does not challenge whether a cleanup of the property at issue will occur. There is neither a direct nor indirect attack on the February 5 Order. The Complaint simply asks the California Court to determine whether the California Public Contracts Code applies to work done on an environmental cleanup happening on public and private land in California, part of which is to be paid by a California public entity. The City states that it only needs to know, before paying potentially millions of public dollars, whether state laws ordinarily governing such expenditures should apply to the remediation costs. The question is not whether the February 5 Order is valid or invalid, the question posed by the City is whether California cities can use local businesses as proxies to hire other companies to do public projects without following the California Public Contracts Code? The February 5 Order does not address this question. Because there is no collateral attack on the February 5 Order, remand is proper, and attorneys' fees should be awarded under 28 U.S.C. § 1447(c).

Defendant's Opposition

Mission argues that this case is a collateral attack on the February 5 Order because, before paying any money, the City needs to know whether Mission must comply with the California Public Contracts Code as a prerequisite to enforcing the CERCLA Judgment against the City. The Complaint seeks relief from, interpretation of, further provisions, or modification of the February 5 Order. Paragraph 2 of the Complaint's Prayer seeks declaratory relief for a dispute under the judgment, which has the effect of writing additional provisions into the February 5 Order by requiring Mission to comply with the Public Contracts Code. That is, the City seeks a declaration that enlarges the criteria under which Mission can recover its CERCLA response costs.

Mission argues that the declaration sought by the City impacts the implementation of theFebruary 5 Order and turns on the application of state and local rules to the federal CERCLA statute. Resolution and analysis of the Complaint will require the interpretation of both the February 5 Order and CERCLA, as this declaratory action has the effect of acting as a defense to a CERCLA judgment. The Complaint essentially asks another court to address whether and how the City is responsible under the February 5 Order. However, similar issues are already pending before the Court in the Mission Linen Case through a motion to enforce the February 5 Order. If the Court were to grant the motion to remand, conflicting results between the state court and this Court's order on the pending motion to enforce judgment could result. This Court has the jurisdiction to enforce and give effect to its orders, to permit a state court to do so would waste judicial resources and create the possibility of inconsistent rulings. Additionally, even if the Court grants the City's motion, attorney's fees should not be awarded because the removal was fairly supportable.

Legal Standard

"The right of removal is entirely a creature of statute . . . ." Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32 (2002). The removal statute (28 U.S.C. § 1441) is strictly construed against removal jurisdiction. Corral v. Select Portfolio Servicing, Inc., 878 F.3d 770, 773 (9th Cir. 2017); Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010); see ...