Orange Cnty. Water Dist. v. Unocal Corp. (In re Methyl Tertiary Butyl Ether ("mtbe") Prods. Liab. Litig.)

IN RE: METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION

This document relates to:

Orange County Water District v. Unocal Corporation, et al.

Master File No. 1:00-1898

MDL 1358 (SAS)

M21-88

04 Civ. 4968

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 26, 2015

MEMORANDUM OPINION AND ORDER

SHIRA A. SCHEINDLIN, U.S.D.J.:

I. INTRODUCTION

This is a consolidated multi-district litigation ("MDL") relating to contamination - actual or threatened - of groundwater from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE") and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. In this case, plaintiff Orange County Water District ("OCWD"), which is charged with maintaining groundwater quality, alleges that defendants' use and handling of MTBE has contaminated, or threatened to contaminate groundwater within its jurisdiction. Familiarity with the underlying facts is presumed for the purposes of this Order.

On September 16, 2014, this Court granted summary judgment toAtlantic Richfield Company ("ARCO"), BP West Coast Products LLC, and BP Products North America, Inc. (collectively, the "BP Defendants"), and Shell Oil Company, Equilon Enterprises LLC, and Texaco Refining and Marketing Inc. (collectively, the "Shell Defendants")¹ on the ground that OCWD's claims against them were precluded under the doctrine of res judicata by judgments resolving substantially similar lawsuits filed years earlier by the Orange County District Attorney ("OCDA").² On December 18, 2014, the Court granted in part and denied in part a separate, omnibus summary judgment motion brought by all of the defendants in OCWD's lawsuit, identifying a material factual dispute over whetherMTBE plumes - formed by defendants' MTBE releases - are presently continuing to migrate towards drinking-water wells.³

Now, all that is left to decide before remanding this case to the Central District of California for trial is OCWD's instant motion, which asks the Court to include the BP and Shell Defendants in the Remand Order on the theory that the Res Judicata Opinion does not bar claims for continuing nuisance.⁴ For the reasons stated below, OCWD's motion is DENIED.

II. DISCUSSION

To decide OCWD's motion, the Court must resolve the inherent tension between a continuing nuisance cause of action, which can effectively be renewed as "a separate claim" for "every continuation of the nuisance,"⁵ and the preclusive effect of the Consent Judgments, which provided comprehensive releases of claims asserted in the OCDA's original complaints. Those complaints included both continuing and permanent nuisance claims for the ongoing migrationof MTBE from defendants' stations.⁶ Pursuant to the Consent Judgments resolving OCDA's claims, defendants implemented "Plume Delineation Programs" designed to combat the potential ongoing migration of MTBE plumes.⁷ Nonetheless, OCWD argues that res judicata cannot apply to its continuing nuisance claims, which it contends are future claims that were never covered by the Consent Judgments' specific releases of OCDA's "'past or present claims, violations, or causes of action that were or could have been asserted.'"⁸

A. Applicable Law

1. Continuing Nuisance

Under California law, "'[e]very repetition of [a] continuing nuisance is a separate wrong,' subject to a new and separate limitation period, 'for which the person injured may bring successive actions for damages until the nuisance is abated, even though an action based on the original wrong may be barred.'"⁹Throughout this MDL, the Court has often confronted the continuing nuisance/permanent nuisance distinction in evaluating the timeliness of a claim - the context in which the distinction most often arises.¹⁰ But the Court has not addressed the res judicata impact of a consent judgment on continuing nuisance claims, nor did OCWD raise that issue in its opposition to defendants' res judicata summary judgment motion.¹¹

On this point, California law is somewhat unclear - only a small handful of cases discuss, even in general terms, the intersection between continuing nuisance claims and res judicata, and no California court has analyzed this issue in the context of a consent judgment. The Ninth Circuit provides someguidance. In Arcade Water District v. United States, plaintiff filed an administrative complaint under the Federal Tort Claims Act for contamination to a well.¹² When that complaint was dismissed as time-barred, plaintiff commenced a lawsuit in federal district court against the United States, which was dismissed with prejudice.¹³ However, the Ninth Circuit reversed on the premise that plaintiff had a right to "elect whether to proceed under a theory of permanent or continuing nuisance."¹⁴ Under the latter theory, plaintiff's claim was timely, and the court noted that res judicata could not bar "further actions for damages accruing after resolution of one permanent nuisance claim."¹⁵ Similarly, in Levy v. Wells Fargo Asset Securities Corp. - an unpublished state appellate court decision - the courtheld that a limited default judgment in a preliminary suit for nuisance¹⁶ did not bar a second suit for continuing nuisance against a different defendant.¹⁷

2. Interpretation of Consent Judgments and Res Judicata

Neither Arcade nor Levy dealt with the specific issue here: the preclusive effect of a consent judgment that specifically resolved claims for continuing and permanent nuisance, on a later-filed continuing nuisance claim arising from the same contamination.¹⁸ Both OCWD and defendants therefore dispute the breadth of the Consent Judgements' release provisions.

As a general matter, "[c]ontract principles apply when interpreting arelease."¹⁹ Courts "should adopt that construction which will make the contract reasonable, fair[,] and just . . . [and] should avoid an interpretation which will make the contract unusual, extraordinary, harsh, unjust[,] or inequitable [] or which would result in absurdity."²⁰ "To be effective, [a release] must be clear, unambiguous, and explicit in expressing the intent of the subscribing parties."²¹ In determining the parties' intent, it is well-settled policy in California that consent judgments "conclude[] all matters put into issue by the pleadings" unless parties "agree to restrict [their] scope by expressly withdrawing an issue from the consent judgment."²²

Further, "[i]t is well established that if the plaintiff receives an injunction against the defendant which requires the defendant to abate the nuisance, the plaintiff can recover past and present damages, but not future damages, since the abatement order will terminate the nuisance for the future."²³ Finally, as noted in the Res Judicata Opinion, California courts have embraced the relatively expansive "'primary right' theory," whereby later claims that address the "same primary right" at issue in the prior suit are precluded, regardless of how the claims are styled.²⁴

B. The Consent Judgments Preclude OCWD's Continuing Nuisance Claims

This dispute boils down to whether California's continuing nuisance law, which frequently breathes life into otherwise outdated nuisance claims, trumps the language of consent judgments that were designed to release those claims. Iconclude that the Consent Judgments must prevail. OCWD's position is not unreasonable - under California law, a plaintiff may bring a claim for continuing nuisance every day until the nuisance is abated.²⁵ But the cases permitting that course of action, such as Arcade and Levy, are inapposite because the preclusive lawsuits at issue here specifically asserted claims for both continuing and permanent nuisance and were resolved favorably for plaintiff pursuant to consent judgments that expressly released those claims. OCWD even acknowledges that it is possible to settle "'future continuing nuisance claims arising out of conditions that existed prior to settlement,'" hence the need to interpret the language of the Consent Judgments.²⁶ By contrast, the Arcade plaintiff's initial administrative complaint was dismissed rather than settled, and in Levy, the two suits contained no overlap in defendants, with the first suit culminating in a default judgment against defendants not named in the second suit and not addressing plaintiff's request for injunctive relief.²⁷

Here, the Consent Judgments resolving OCDA's claims for continuing and permanent nuisance provided injunctive relief against the same BP and Shell defendants named in OCWD's action in the form of Plume Delineation Programs, which were implemented to address the same ongoing contamination giving rise to OCWD's instant continuing nuisance claims.²⁸ That relief leaves little doubt as to the parties' intent in negotiating a resolution of OCDA's lawsuits.²⁹ Nor does the broad language of the Consent Judgments leave any doubt as to the parties' intent. The Consent Judgments stated that they constituted "'final and binding judgment[s], release[s], resolution[s][,] and settlement[s] of all claims, violations[,] or causes of action that were alleged'" in the OCDA's original complaints, "'or could have been asserted based on the facts alleged'" in those complaints.³⁰

At bottom, OCWD is in privity with OCDA, which unambiguously released continuing nuisance claims against defendants in exchange - among otherthings - for their implementation of programs designed to address the same contamination on which OCWD bases its continuing nuisance claims here. On these facts, to permit OCWD to maintain continuing nuisance claims against defendants would defeat the purpose of consent judgments, which "conclude[] all matters put into issue by the pleadings" unless the parties "agree to restrict [their] scope by expressly withdrawing an issue."³¹ The absence of the word "future" in the Consent Judgments' release of "past and present claims" does not constitute an express withdrawal - nothing in the Consent Judgments suggests,...