Santa Clarita Valley Water Agency v. Whittaker Corp.

99 F.4th 458

SANTA CLARITA VALLEY WATER AGENCY, Plaintiff-Appellee, v. WHITTAKER CORPORATION, Defendant-Appellant,andDoes, 1-10, inclusive, Defendant, v. Keysor-Century Corporation, a California corporation; Saugus Industrial Center, LLC,

a Delaware limited liability company, Third-party-defendants.

Santa Clarita Valley Water Agency, Plaintiff-Appellant, v. Whittaker Corporation, Defendant-Appellee,andDoes, 1-10, inclusive, Defendant, v. Keysor-Century Corporation, a California corporation; Saugus Industrial Center, LLC,

a Delaware limited liability company, Third-party-defendants.

No. 22-55727

No. 22-55754

No. 22-56043

United States Court of Appeals, Ninth Circuit

Argued and Submitted January 11, 2024 Pasadena, California

Filed April 15, 2024

Appeal from the United States District Court for the Central District of California Stanley Blumenfeld, Jr., District Judge, Presiding, D.C. No. 2:18-cv-06825-SB-RAO

Jennifer L. Meeker (argued), Frederic A. Fudacz, and Byron Gee, Nossaman LLP, Los Angeles, California; Daniel P. Costa, Gurnee Mason Rushford Bonotto & Forestiere LLP, Roseville, California; Patrick J. Richard and Ilse C. Scott, Nossaman LLP, San Francisco, California; for Plaintiff-Appellee.

Mark E. Elliott (argued) and Stephanie Amaru, Pillsbury Winthrop Shaw Pittman LLP, Los Angeles, California; Shelby L. Dyl and Michael A. Warley, Pillsbury Winthrop Shaw Pittman LLP, Washington, D.C.; Fred Blum, Bassi Edlin Huie & Blum LLP, San Francisco, California; Christopher J. Dow, Edlin Gallagher Huie & Blum, San Francisco, California; Thomas J. Salerno, Stinson LLP, Phoenix, Arizona; Reynold L. Siemens, Covington & Burling LLP, Los Angeles, California; for Defendant-Appellant.

Before: Richard C. Tallman, Consuelo M. Callahan, and Mark J. Bennett, Circuit Judges.

OPINION

TALLMAN, Circuit Judge:

Whittaker Corporation ("Whittaker") and the Santa Clarita Valley Water Agency ("SCVWA" or "Agency") cross-appeal a $68 million judgment in favor of the Agency entered by the Honorable Stanley Blumenfeld, Jr., following a combined 11-day jury and bench trial for state tort causes of action and a finding of liability under the federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. We have jurisdiction under 28 U.S.C. § 1291.

Whittaker challenges the jury award on a number of grounds, but it does not appeal the finding of liability under CERCLA. It argues that: (1) the district court abused its discretion by permitting SCVWA to assert restoration costs as a measure of damages for the first time after the close of discovery, (2) SCVWA did not adequately establish that the groundwater treatment facilities are an appropriate measure of damages, and (3) the jury award of costs was not reasonable. After carefully reviewing the record, we hold that none of Whittaker's arguments are availing, and thus we affirm the jury award against Whittaker.

SCVWA cross-appeals the district court's denial of (1) injunctive relief under the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6901 et seq., (2) a finding of liability for certain incurred response costs under CERCLA, (3) declaratory relief under CERCLA, (4) prejudgment interest on a category of response costs, and (5) attorneys' fees. We hold that the district court's denial of relief under RCRA, prejudgment interest, and attorneys' fees were proper, and thus we affirm. However, we hold that the district court erred in denying SCVWA a finding of liability against Whittaker for one category of incurred response costs under CERCLA, and by denying SCVWA declaratory relief under CERCLA. We reverse and remand so the district court may amend its judgment to address these two narrow issues.

I. FACTS

SCVWA is a public water agency in northern Los Angeles County that was formed in 2018 when the California legislature combined four entities that had previously supplied water to the over 300,000 residents of Santa Clarita Valley. SCVWA supplies water to its customers primarily through a combination of local groundwater pumped from wells and surface water purchased from the State Water Project (which moves water from Northern to Southern California by way of aqueducts). The Agency pumps groundwater from two aquifers—a shallow aquifer called the Alluvium, and a deeper, larger aquifer underlying the Alluvium called the Saugus Formation. SCVWA operates several supply wells: at issue in this case are Saugus 1 ("S-1"), Saugus 2 ("S-2"), V-201, and V-205 (collectively, "wells"). The wells all pump water from the Saugus Formation. S-1 and S-2 were installed in 1988, V-201 in 1989, and V-205 in 2004.

In 1943, Whittaker's predecessor landowner, Bermite Powder Company ("Bermite"), began producing munitions and explosives on a 996-acre site located in Santa Clarita, California ("Site"). Bermite operated at the Site until 1967, when Whittaker acquired the property and continued producing munitions and explosives from 1967 until 1987. The manufacturing operations of both companies at the Site required the extensive use of a variety of toxic chemicals and solvents. The chemicals included perchlorate and the volatile organic compounds ("VOC") perchloroethylene ("PCE") and trichloroethylene ("TCE"). Perchlorate, PCE, and TCE are hazardous substances.

Both companies disposed of large volumes of perchlorate, PCE, and TCE into the ground through improper waste disposal practices such as dumping the chemicals onto the ground and burying them under the ground. Hazardous waste has been found in the soil and groundwater beneath the Site. Investigations of the contamination began in the 1990s and found that perchlorate and VOCs were released in the same areas across the Site and generally followed the same pathway as groundwater. These hazardous substances from the Site have migrated underground into the Saugus Formation and travelled offsite through groundwater pathways.

Perchlorate and VOCs have important differences that characterize their migratory pathways through groundwater. Perchlorate is an anion, which means that it dissolves in water. Plumes of perchlorate will migrate through groundwater at roughly the same speed as the water itself. VOCs, on the other hand, are hydrophobic, meaning that they tend to stick to organic matter such as soil rather than dissolve in water. This results in plumes of VOCs migrating through groundwater at much slower speeds than perchlorate. Because of these characteristics, to date, perchlorate has migrated much further and faster through the Saugus Formation than VOCs.

By way of background, there are a number of treatment options that can make contaminated water potable. It can be treated with a filtration system to remove the contaminants. Contaminated water can be blended with clean water to dilute the contaminants to levels safe for human consumption or discharge into natural waterways. Or a combination of treatment and blending can be utilized to remove contamination. Additionally, containment wells can be used to pump contaminated water out of the aquifer for treatment and disposal, which serves to reduce the migration of the contaminants downgradient.

A. Wells S-1 & S-2

Perchlorate was first discovered in groundwater extracted from S-1 and S-2 in 1997. The Agency's predecessor informed the California Division of Drinking Water ("DDW") of the contamination and took the wells out of service. DDW allowed the wells to reopen following installation of a perchlorate treatment facility known as the Saugus Perchlorate Treatment Facility ("SPTF"). Pursuant to a 2007 settlement agreement between Whittaker and SCVWA, Whittaker was required to cover the cost of the SPTF, as well as pay for replacement water to compensate SCVWA for the lost pumping capacity.

The SPTF treats the water at both S-1 and S-2 for perchlorate; however, during the installation of the treatment facility, VOCs were detected in the wells. Because of the presence of the hazardous contaminants, DDW classified the Saugus Formation as an "extremely impaired" groundwater source, which triggered heightened permitting obligations. One of these obligations requires SCVWA to deliver water from S-1 and S-2 with a non-detect level ("NDL") of VOCs; the NDL is one-tenth of the maximum contaminant level ("MCL") established for drinking water. For SCVWA to meet this obligation it must blend the water treated at the SPTF with contaminant-free water to the point that VOCs are not detected. SCVWA purchases water from the State Water Project to blend with the treated water until it meets the NDL criteria for VOCs. In 2010, following the completion of the treatment system, SCVWA regained its drinking water permit from DDW and resumed using wells S-1 and S-2 to supply potable water to its customers.

B. Well V-201

In 2010, perchlorate was found in groundwater extracted from V-201 and the well was taken out of service. In 2015, Whittaker and SCVWA entered into an agreement, separate from the 2007 S-1/S-2 settlement agreement, to address the V-201 contamination issue. The new agreement required Whittaker to create a wellhead treatment facility that would "(1) contain further transport of perchlorate to downgradient wells; (2) restore potable water supply from V-201 with a Treatment System design capacity of up to 2400 [gallons per minute] . . . and (3) meet all applicable California regulatory standards."

In 2017—seven years after the contaminants were first detected in V-201—the perchlorate wellhead treatment facility came online. However, DDW has yet to reissue a drinking water permit for this well. Instead, the well is operating as a containment well; it pumps contaminated water from the aquifer, treats it, then discharges it into the Santa Clara River pursuant to a National Pollutant Discharge Elimination System ("NPDES") permit issued by the California Water Resources Control Board. SCVWA must purchase water from the State Water Project to blend with the treated water in order...