Diamond X Ranch LLC v. Atl. Richfield Co.

DIAMOND X RANCH LLC,, Plaintiff, v. ATLANTIC RICHFIELD COMPANY, Defendants.

Case No. 3:13-cv-00570-MMD-WGC

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

August 26, 2016

ORDER

(Motions to Dismiss - ECF Nos. 144, 182)

I. SUMMARY

This case arises from the alleged contamination of Plaintiff Diamond X Ranch LLC's ("Diamond X") property by drainage from the Leviathan Mine in Alpine County, California ("the Mine"). Defendant Atlantic Richfield Company ("ARCO") asserts counterclaims and third-party claims. Before the Court are Diamond X's motion to dismiss ("Diamond X's Motion") and Third-Party Defendant Park Livestock Company's motion to dismiss ("PLC's Motion"). (ECF Nos. 144, 182.) The Court has reviewed the briefs related to these motions and supplemental briefs related to Diamond X's Motion. (ECF Nos. 155, 160, 185, 193, 212, 215.) The Court also heard argument on July 18, 2016. For the reasons discussed below, the Motions are denied.

II. BACKGROUND

Diamond X owns more than 1700 acres of property in Douglas County, Nevada, and Alpine County, California ("the Property"). (ECF No. 175 at 7.) Plaintiff alleges that the Property has been contaminated by acid mine drainage ("AMD") flowing from the Mine. (Id. at 3-8.) Between 1953 and 1962, The Anaconda Company, Defendant's wholly-owned subsidiary, owned and operated the Mine as an open-pit sulfur mine. (Id. at 3.) No entity has operated the Mine since 1962. (Id.)

In 1997, the United States Environmental Protection Agency ("EPA") began to take action at the Mine under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). (Id. at 3-4.) The EPA listed the Mine on the National Priorities List in May 2000, and it identified ARCO and the State of California as potentially responsible parties ("PRPs"). (Id. at 4.) The EPA issued a Unilateral Administrative Order ("UAO") against ARCO in November 2000 ("2000 UAO") and a second UAO against ARCO in June 2008 ("2008 UAO") (collectively "UAOs"). (ECF No. 144 at 3; ECF No. 146 at Exhs. 1 and 2.¹) The UAOs again identified ARCO as a PRP and required ARCO to initiate a Remedial Investigation and Feasibility Study ("RI/FS") of contamination from the Mine and to prepare and perform a RI/FS based on a Statement of Work ("SOW"). (ECF No. 144 at 4; ECF No. 146 at 5, 57.) The purposes of the UAOs were (1) to determine the nature and scope of contamination from the site and its threat to public health and the environment, and (2) to determine and evaluate alternatives to effectively remediate the contamination through a feasibility study (ECF No. 146 at 6, 58.) Under the SOW, ARCO was required to conduct a "phased" evaluation to determine the available remedial approaches and to then compile this information into a report. (Id. at 100.)

Plaintiff asserts that the open-pit mining and releases of AMD at the Mine has contaminated the Property as well as Bryant Creek,² a tributary downstream of the Mine which provides water for flood irrigation on the Property. (ECF No. 175 at 7-8.) Diamond X alleges that the release of hazardous substances from the Mine have caused it to incur response costs as defined under CERCLA section 9601(25). (Id. at 14.) DiamondX asserts eight claims against ARCO, including a claim for recovery of its response costs under CERCLA section 107(a), 42 U.S.C. § 9607(a) ("Section 107(a)" or "§ 107(a)"). (Id.)

In response, ARCO asserts two counterclaims against Diamond X, which function as third-party claims against PLC, under CERCLA sections 107(a) and 113(f)(1) ("Section 113(f)(1)" or "§ 113(f)(1)"). (ECF No. 179 at 26-29.) ARCO also asserts a counterclaim/third-party claim against Diamond X and PLC for declaratory relief under CERCLA section 113(g)(2) and 28 U.S.C. § 2201. (ECF No. 179 at 30.) The gist of ARCO's allegations are that Diamond X and PLC (collectively, "Third-Party Defendants") actively operated the irrigation system on the Property, including determining "if, when, where and how much water containing hazardous substances was placed and deposited on the Diamond X Property." (Id. at 21.) ARCO further alleges that the Third-Party Defendants undertook maintenance activities related to the irrigation ditches "with the intent to dispose of the sediment and hazardous substances on the Diamond X Property and on other properties." (Id. at 22.)

Diamond X moves to dismiss ARCO's first claim under Section 107(a) and third claim for declaratory relief to the extent it is based on CERCLA section 113(g)(2).³ (ECF No. 144.) PLC also seeks dismissal of the third-party claims, contending that it is not a covered party under CERCLA, and adopts the same arguments raised in Diamond X's Motion in the alternative. (ECF No. 182.)

III. LEGAL STANDARD

A court may dismiss a claim for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell AtlanticCorp. v. Twombly, 550 U.S. 544, 570 (2007)). In Iqbal, the Supreme Court clarified the two-step approach that district courts are to apply when considering motions to dismiss. First, a district court must accept as true all well-pleaded factual allegations in the complaint; however, legal conclusions are not entitled to an assumption of truth. Id. at 678-79. Second, a district court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff's complaint alleges facts that allow a court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 663. Where the complaint fails to "permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not shown—that the pleader is entitled to relief." Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)) (alteration omitted). When the claims in a complaint have not crossed the line from conceivable to plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570. A complaint must contain either direct or inferential allegations concerning "all the material elements necessary to sustain recovery under some viable legal theory." Id. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)).

IV. DIAMOND X'S MOTION

Diamond X argues that ARCO is barred from asserting a claim under Section 107(a) because of Diamond X's own Section 107(a) claim and because ARCO's response costs were incurred pursuant to the EPA's administrative orders, which amount to "civil actions."⁴ (ECF No. 144 at 10.) The Court will address each argument in turn.

A. ARCO's Section 107(a) Claim

"CERCLA provides two mechanisms for private parties to recover their environmental cleanup expenses from other parties." Whittaker Corp. v. United States (Whittaker II), No. 14-55385, 2016 WL 3244838, at *3 (9th Cir. June 13, 2016). First,Section 107(a) provides for parties to bring "cost recovery" actions against "potentially responsible parties" to recover costs, including "any . . . necessary costs of response incurred by any other person consistent with the national contingency plan." 42 U.S.C. § 9607(a); Whittaker II, 2016 WL 3244838, at *3. Second, "[s]ection 113(f)(1) authorizes a contribution action to [PRPs] with common liability stemming from an action instituted under § 106 or § 107(a)." United States v. Atlantic Research Corp. ("Atlantic II"), 551 U.S. 128, 129 (2007). Sections 107(a) and 113(f) "complement each other by providing causes of actions to persons in different procedural requirements." Id. at 139 (internal quotation marks omitted). "A party uses contribution to get reimbursed for being made to pay more than its fair share to someone else, and uses cost recovery to get reimbursed for its own voluntary cleanup costs." Whittaker II, 2016 WL 3244838, at *4. Moreover, while PRPs can seek contribution under § 113(f)(1), they cannot simultaneously seek double recovery under § 107(a). Atlantic II, 551 U.S. at 139. "[A] party who may bring a contribution action for certain expenses must use the contribution action, even if a cost recovery action would otherwise be available." Whittaker II, 2016 WL 3244838, at *4 (citing Atlantic II, 551 U.S. 128; Kotrous v. Goss-Jewett Co. of N. Cal., 523 F.3d 924, 933 (9th Cir. 2008)).

Diamond X asserts a claim under § 107(a) to recover clean-up costs on the Property in response to hazardous waste released from the Mine.⁵ (ECF No. 175 at 14.) Diamond X argues that ARCO's remedy is limited to contribution under Section 113(f)(1) and that ARCO cannot counterclaim under § 107(a). (ECF No. 175.) ARCO counters that it is seeking to recover separate costs under §§ 107(a) and 113(f), such that counterclaiming under both sections is proper. (ECF No. 179.)

Diamond X relies primarily on Whittaker Corp. v. United States (Whittaker I), No. CV 13-1741 FMO, 2014 WL 631113 (C.D. Cal. Feb. 10, 2014) to argue that ARCOcould only bring a § 113(f)(1) counterclaim. In June, the Ninth Circuit reversed Whittaker I, finding that Whittaker could bring a claim under § 107(a). See Whittaker II, 2016 WL 3244838. The parties disagree as to the import of Whittaker II on ARCO's § 107(a) claim. The Court agrees with ARCO on this matter.

In Whittaker II, the Ninth Circuit addressed the issue of whether Whittaker was limited to a contribution action against other polluters or whether instead Whittaker could seek a cost recovery action under § 107(a). Whittaker settled prior claims that Castaic Lake Water Agency ("Castaic Lake") had asserted under CERCLA in 2007. See Whittaker II, 2016 WL 3244838, at *2. In the settlement, Whittaker reimbursed Castaic Lake for the costs to remove perchlorate pollution from its water well sites and for purchased water costs. Id. at 2. The agreement settled costs...