Fireman's Fund Insurance v. City of Lodi, California
Docket: Nos. 99-15614, 99-15802
Court: Court of Appeals for the Ninth Circuit; August 6, 2002; Federal Appellate Court
The consolidated appeal involves the constitutionality of the City of Lodi's Comprehensive Municipal Environmental Response and Liability Ordinance (MERLO), enacted to address hazardous waste contamination. Fireman’s Fund Insurance Company and Unigard Insurance Company, collectively referred to as 'the Insurers,' challenge the ordinance's enforcement, claiming it is preempted by the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and California's Carpenter-Presley-Tanner Hazardous Substance Account Act (HSAA). The district court ruled in favor of Lodi, prompting the Insurers to appeal. The court has jurisdiction under 28 U.S.C. 1291 and has affirmed part of the lower court's ruling while reversing another part, remanding for further proceedings.
Background information reveals that Lodi detected tetrachloroethylene (PCE), a carcinogen used in dry cleaning, in its groundwater in April 1989. Groundwater is Lodi’s only source of drinking water and crucial for agriculture in California’s Central Valley. The California Department of Toxic Substances Control (DTSC) investigated the contamination, discovering four businesses potentially responsible for the PCE contamination, including Fireman’s Fund-insured Lustre-Cal Nameplate Corporation and Unigard-insured Busy Bee Laundry. In fiscal year 1993-94, DTSC listed the 'Lodi Groundwater Site' as a hazardous waste site, which subjected it to the requirements of HSAA. Following the listing, DTSC initiated administrative actions against responsible parties, including the City of Lodi, to address the contamination.
In May 1997, Lodi and the California Department of Toxic Substances Control (DTSC) entered into a Comprehensive Joint Cooperation Agreement to jointly investigate and remediate hazardous substance contamination in the City. Under this Agreement, Lodi is designated as the lead enforcement entity, with DTSC's support for environmental enforcement actions initiated by Lodi. Lodi commits to either directly addressing the contamination or compelling potentially responsible parties (PRPs) to do so, utilizing its full regulatory authority under applicable laws, including the National Contingency Plan (NCP). The Agreement mandates Lodi to implement a municipal environmental response ordinance to enhance its existing authority.
Lodi acknowledges potential claims from DTSC related to hazardous substances linked to the City’s sewer systems and agrees to reimburse DTSC for response costs up to $1,024,549.55 if those costs are not covered by PRPs. Despite this, Lodi maintains that it is not a PRP and includes a clause in the Agreement that disclaims any admission of liability regarding the sewer system’s design, construction, or maintenance. In exchange for Lodi's reimbursement commitment, DTSC grants Lodi a covenant not to sue concerning claims related to the sewer systems and agrees to protect Lodi from contribution actions under CERCLA and California law for matters addressed in the Agreement.
On August 6, 1997, Lodi’s City Council enacted Ordinance 1650, known as MERLO, to comply with the Cooperative Agreement, establishing a comprehensive environmental liability and response framework based on CERCLA and HSAA. MERLO empowers Lodi to investigate and remediate environmental nuisances, holding potentially responsible parties (PRPs) and their insurers liable for associated costs. Key features of MERLO include the authority to demand documentation related to environmental contamination, an administrative hearing process for liability determinations, and the ability to initiate enforcement actions against PRPs. It also allows Lodi to pursue direct actions against insurers of insolvent PRPs and establishes a Comprehensive Environmental Response Fund for investigation and remediation efforts. The ordinance adopts definitions and liability principles from CERCLA and HSAA, including joint and several liability for PRPs.
The procedural history involves two challenges to MERLO: one by Unigard and another by Fireman’s Fund. In May 1998, Lodi initiated an abatement action against M.P. Investments, insured by Unigard. Subsequently, Unigard filed a lawsuit in the Northern District of California, claiming MERLO was designed to transfer Lodi’s liability for PCE contamination to insurers, and asserted that it conflicted with federal and state laws, including the Supremacy Clause, HSAA, and the Contracts Clause. The District Court determined Unigard's claims lacked sufficient connection to the Northern District and transferred the case to the Eastern District of California, where all claims except those concerning federal and state preemption and the federal Contracts Clause were dismissed before the transfer.
In August 1998, Fireman’s Fund initiated a declaratory and injunctive relief action against Lodi in the U.S. District Court for the Eastern District of California, naming various defendants including Lodi's Mayor and several city attorneys. The complaint asserted that Lodi's MERLO ordinance violated the Supremacy Clause, was preempted by the HSAA and California Insurance Code, and infringed on Fireman’s Fund’s contracting rights. On August 24, 1998, Fireman’s Fund, along with Unigard, sought a preliminary injunction to prevent Lodi from enforcing MERLO. Lodi and its officials subsequently moved to dismiss the complaints for lack of subject matter jurisdiction and failure to state a claim. Concurrently, Fireman’s Fund filed a motion for partial summary judgment and a permanent injunction against MERLO.
A joint hearing occurred on December 4, 1998, resulting in two written decisions. In the Unigard decision, the court found Unigard's claims ripe for review, confirmed its standing, and ruled that MERLO was not preempted by CERCLA, while abstaining from addressing state law preemption. Consequently, Unigard's federal preemption claim was dismissed, and the state preemption and federal contracts clause claims were dismissed without prejudice.
In the Fireman’s Fund decision, the court dismissed claims against individual defendants in their official capacities as redundant to the claims against the city and granted qualified immunity to those sued individually. Similar to Unigard, the court found Fireman’s Fund's claims ripe and confirmed standing, stating MERLO was not preempted by CERCLA while abstaining from ruling on HSAA preemption. The court denied Fireman’s Fund’s motion for summary judgment, dismissed claims against the individual defendants and the Law Firm, and dismissed both the federal preemption claim against Lodi and the state preemption claims without prejudice. Fireman’s Fund appealed the dismissals concerning federal and state preemption and the claims against the individual defendants in their official capacities.
The standard of review for a district court's decision on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is de novo, with all factual allegations taken as true and viewed favorably towards the plaintiffs. The same de novo standard applies to evaluating the applicability of the Pullman abstention doctrine, which requires specific criteria to be met for a district court to abstain. Fireman’s Fund contends that the district court incorrectly abstained from determining whether the MERLO is preempted by state laws, asserting that it is preempted by both state and federal law. The court found that the district court erred in abstaining regarding state law preemption, as the analysis for state law is similar to that of federal law. While some sections of MERLO are preempted by state and federal law due to conflict preemption, the majority of the Insurers’ arguments lack merit. Additionally, Fireman’s Fund's claims against three individual defendants in their official capacities were dismissed by the district court, but the appellate court reinstated these claims. Regarding Pullman abstention, three criteria must be met: the case must involve a sensitive social policy area best left to states, a definitive ruling by a state court must potentially eliminate the need for federal constitutional adjudication, and the resolution of the state law issue must be uncertain. The court concluded that the case does not involve a sensitive area of social policy warranting state-only resolution, noting that the federal government, through CERCLA, has a significant role in hazardous waste remediation, thus rejecting the district court's conclusion on the first criterion for Pullman abstention.
The third Pullman abstention factor is not met, as the resolution of the relevant state law issue is not uncertain despite a lack of state court rulings on the specific matter. The court asserts that the MERLO is largely consistent with state law, allowing California municipalities to enact ordinances for hazardous waste remediation. Even if some MERLO provisions are preempted, the majority would remain valid, and the district court was incorrect in abstaining from addressing Fireman’s Fund’s state law preemption claim. The court will now consider the merits of both federal and state preemption analyses.
Fireman’s Fund contends that MERLO is preempted by state and federal law. Under the Supremacy Clause, state laws conflicting with federal laws are invalidated based on congressional intent, which can be explicitly or implicitly expressed. California’s preemption doctrine allows local regulations unless they conflict with general laws. The California Supreme Court defines conflict as local laws that duplicate, contradict, or are fully occupied by general law.
Regarding field preemption, CERCLA includes savings clauses preserving state regulatory authority in hazardous waste cleanup. These clauses affirm that CERCLA does not preempt state authority, as it allows states to impose additional liabilities or requirements related to hazardous substance releases. Despite this, the insurers argue that MERLO is preempted by the combined impact of CERCLA and HSAA, claiming that these federal laws together occupy the field, as CERCLA allows only states—not municipalities—to impose additional cleanup requirements.
Insurers argue that Congress intended CERCLA to allow supplemental state legislation while prohibiting municipal legislation, citing the statute's reference to "states" but not "political subdivisions." This interpretation contradicts the Supreme Court's decision in Wisconsin Public Intervenor v. Mortier, which found that the term "State" under FIFRA includes political subdivisions, despite the absence of explicit language regarding local authority. The Court determined that silence on local government power does not imply a clear intent to preempt it. Similarly, CERCLA's language suggests that states can enact supplementary environmental legislation, and while it refers only to "States" in its savings clauses, it specifies both states and political subdivisions in other areas. California has allowed municipalities to regulate hazardous waste, supported by constitutional and legislative frameworks that empower local governments to address environmental issues. HSAA also endorses local ordinances for environmental protection, defining "state law" to include municipal regulations. The text of CERCLA indicates an expectation for local governments to take independent remedial actions. In the absence of explicit preemption, it is presumed that Congress did not intend to restrict local self-protection powers. Therefore, CERCLA allows both states and their subdivisions to enact hazardous waste regulations, provided these do not conflict with its objectives.
Insurers claim that seven specific provisions of the Municipal Environmental Resource Liability Ordinance (MERLO) are preempted by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Hazardous Substance Account Act (HSAA) under the doctrine of conflict preemption. Conflict preemption occurs when compliance with both federal and state laws is impossible or when state law obstructs federal objectives. The challenged MERLO sections include provisions related to natural resource damage compensation, liability schemes for potentially responsible parties (PRPs), burden of proof for liability defenses, cleanup standards, cost definitions for abatement actions, information gathering from PRPs, and direct actions against insurers.
Regarding natural resource damages, the Insurers argue that MERLO's provision allowing Lodi to recover damages is preempted because CERCLA and HSAA require a state designation for local governments to seek such damages. They assert that Lodi, lacking this designation, cannot pursue recovery for natural resource damages. However, the argument is rejected based on CERCLA and HSAA provisions that allow states and their authorized representatives to recover damages. The court concludes that Lodi does not claim the right to sue under CERCLA or HSAA but argues that these federal laws do not eliminate other legal avenues, including common law claims, for municipalities to recover damages. Therefore, Lodi maintains the authority to enact local ordinances like MERLO to protect its interests in natural resources held in trust, independent of any federal delegation.
Municipalities cannot sue as parens patriae to protect natural resources since their powers are derived from the state, but they can sue to protect proprietary interests aligned with their residents' interests. Lodi is authorized under state law to protect its proprietary interest in natural resources from environmental damage and can pursue recovery under the Maryland Environmental Resources and Land Use Ordinance (MERLO) for damages caused by contamination, as neither the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) nor the Hazardous Substance Accountability Act (HSAA) preempt this action. The court finds that under MERLO, the City can impose joint and several liability on potentially responsible parties (PRPs) for cleanup costs incurred, but such liability may conflict with CERCLA and HSAA if Lodi is found to be a PRP itself.
Under CERCLA, PRPs are subject to joint and several liability for costs incurred due to environmental harm, allowing any defendant to be held fully liable regardless of their actual contribution to contamination. Although CERCLA initially did not provide for a contribution claim, amendments in 1986 established an explicit right to contribution, allowing PRPs to recover costs proportional to their share of liability. In contrast, while HSAA allows PRPs to seek contribution for incurred response costs, its liability framework does not impose joint and several liability; instead, a liable party can limit their liability to the portion of costs attributable to their actions.
Liability under the Hazardous Substance Account Act (HSAA) is determined based on fault. Insurers argue that the MERLO statute conflicts with both CERCLA and HSAA by preventing Lodi from being sued for contribution as a potentially responsible party (PRP) for incurred response costs. This argument is based on the assumption that Lodi is a PRP, but it has not been officially designated as such by the EPA or California's Department of Toxic Substances Control (DTSC). The document expresses skepticism about Lodi’s PRP status, particularly given prior case law indicating that municipal sewer operators may not automatically be considered PRPs due to unavoidable leakage.
The district court is tasked with determining Lodi's PRP status. If Lodi is found to be a PRP, MERLO would be preempted from shielding it from contribution claims under federal and state laws. CERCLA allows a PRP to seek recovery from other PRPs for their fair share of cleanup costs. If Lodi can be classified as a PRP, it cannot evade potential liability simply through state legislation.
Additionally, the insurers contend that MERLO's provision allowing Lodi to impose joint and several liability on other PRPs conflicts with CERCLA, which does not permit a PRP to seek total cleanup cost recovery from other PRPs but rather allows for contribution claims. Prior rulings emphasize that allowing one PRP to impose joint and several liability could lead to unfair cost shifting and inefficiencies in litigation.
The court has not recognized any exceptions to the Pinal Creek precedent for municipal Potentially Responsible Parties (PRPs), affirming that if Lodi is deemed a PRP, it cannot shift its cleanup responsibilities to others. Allowing such a shift would disrupt the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cost allocation framework and the policy considerations that informed the Pinal Creek decision. Consequently, the Municipal Environmental Response Liability Ordinance (MERLO) is preempted if it seeks to exempt Lodi from its share of liability by imposing joint and several liability on other PRPs. Conversely, if Lodi is found not to be a PRP, MERLO’s liability provisions do not conflict with CERCLA, permitting a non-PRP to impose joint and several liability on identified PRPs.
Furthermore, MERLO imposes a higher burden of proof on PRPs seeking to apportion liability, requiring "clear and convincing evidence" of divisible harm, unlike CERCLA and the Hazardous Substance Account Act (HSAA), which require only a preponderance of the evidence. This higher burden is incompatible with CERCLA principles, as it could hinder the timely cleanup of hazardous waste sites—an essential aim of the statute. The fear of liability has been recognized as a significant barrier to the investigation and remediation of contaminated sites, deterring potential purchasers from taking on cleanup responsibilities due to concerns over uncertain liability. This situation has been noted by Congress and various studies, which highlight the detrimental effect of stringent liability frameworks on property revitalization efforts.
California and federal initiatives aim to expedite the cleanup of Brownfields and reduce the associated costs and burdens, thereby promoting the return of these properties to beneficial use. Cleanups under federal and California law have gained predictability, allowing for reasonable assessments of liability and cleanup costs, which encourages prospective purchasers to rehabilitate contaminated properties. Recent developments in environmental insurance, spurred by evolving case law and legislation, have improved certainty regarding environmental risks, potentially facilitating early settlements among responsible parties (PRPs) and redirecting focus to site cleanup instead of prolonged litigation.
Allowing numerous local governments to create their own liability schemes, such as Lodi's requirement for PRPs to prove their contribution to harm by clear and convincing evidence, could lead to increased uncertainty and discourage cleanup efforts, as this standard is more stringent than that under CERCLA. Approving such a standard could result in a proliferation of onerous liability schemes across California, counteracting the goals of CERCLA. Conversely, municipal liability schemes that are equal to or less burdensome than CERCLA's standards can enhance the feasibility of property rehabilitation.
The court concludes that Lodi’s clear and convincing evidence requirement for apportioning liability conflicts with CERCLA and is therefore preempted, irrespective of whether Lodi is designated as a PRP. Additionally, the insurers argue that aspects of the local regulation MERLO concerning cleanup standards conflict with CERCLA and the National Contingency Plan (NCP).
Under CERCLA, cleanup of hazardous waste sites must align with the National Contingency Plan (NCP), which outlines the roles of federal, state, and local governments in cleanup efforts and sets procedures for decision-making. Only costs incurred in accordance with the NCP are recoverable under CERCLA. The burden of proving consistency with the NCP varies: when the plaintiff is the government or a tribal entity, there is a presumption of consistency, shifting the burden to the defendant to disprove this. Conversely, other entities must demonstrate their compliance with the NCP to recover costs.
The Hazardous Substance Account Act (HSAA) incorporates the NCP standard, mandating that response actions comply with federal regulations under the NCP. Insurers argue that provisions in the Municipal Environmental Response Law (MERLO) preempt CERCLA because MERLO allows the city of Lodi to recover necessary response costs while providing a presumed consistency with cleanup standards. This presumption is claimed to mirror that of CERCLA for government entities, despite MERLO not explicitly referencing the NCP.
There is ambiguity in the circuit regarding whether municipalities can claim a presumption of consistency under CERCLA. However, in this case, a Cooperative Agreement between Lodi and the Department of Toxic Substances Control (DTSC) states the cleanup will be conducted in a manner consistent with the NCP, assigning DTSC oversight and Lodi as the lead enforcement entity. This arrangement grants Lodi the presumption of consistency under CERCLA, similar to state agencies like DTSC, ensuring a cost-effective cleanup process.
A state agency is entitled to a presumption of consistency under CERCLA, which allows Lodi, if found to be a Potentially Responsible Party (PRP), to recover cleanup costs from other PRPs while still being accountable for its responsibilities. This presumption fosters a more efficient cleanup process by promoting cooperation with the Department of Toxic Substances Control (DTSC) rather than focusing on legal disputes over cost recoverability. Although Lodi may order remediation that is either more or less stringent than the National Contingency Plan (NCP) under the Municipal Environmental Response and Liability Ordinance (MERLO), its ability to impose more stringent requirements is preempted by CERCLA. However, MERLO does not allow for less stringent requirements at the Lodi Groundwater Site, which is subject to HSAA regulations that mandate adherence to the NCP standards. Beyond this specific site, California cities can create local environmental response ordinances as long as they do not conflict with CERCLA or HSAA. Such local regulations can be particularly effective for managing smaller contaminated sites. Furthermore, under MERLO, Lodi has the authority to recover attorney's fees and other abatement action costs from any PRP involved.
Abatement action costs, as defined by MERLO, encompass all legal, technical, administrative fees, and other financing costs incurred by the City in performing or preparing for abatement actions related to PCE contamination. MERLO allows the City to recover attorney’s fees associated with these cleanup efforts. However, Supreme Court precedent from Key Tronic Corp. v. United States establishes that private parties cannot recover attorney’s fees under CERCLA, while United States v. Chapman clarifies that the federal government, states, or tribes can recover reasonable attorney’s fees as part of their response costs if they prevail.
The discussion raises the question of whether a city, like Lodi, qualifies as a "State" under CERCLA for attorney fee recovery. If Lodi is determined to be a potentially responsible party (PRP), it cannot legislate for itself a recovery advantage. Conversely, if Lodi is not a PRP, it may seek to recover attorney’s fees under its municipal liability scheme, subject to the reasonableness standard set by the court. The presumption of consistency with CERCLA does not extend to attorney’s fees for Lodi, as recovery for states derives from specific provisions in CERCLA that do not apply in the same manner to non-state litigants. Lodi's attorney’s fees incurred in its defense and enactment of a municipal ordinance have not facilitated cleanup progress. The Cooperative Agreement does not grant Lodi a right to recover its attorney’s fees in this case, nor does it imply that such recovery is warranted based on the circumstances presented.
Lodi aims to recover costs associated with a financing strategy to avoid burdening its ratepayers with initial principal and interest costs. The Insurers contend that Lodi seeks to pass on interest costs of 25 to 30 percent as part of the cleanup financing. The determination of whether these costs are recoverable as "necessary costs of response" will be left to the district court, depending on Lodi's status as a potentially responsible party (PRP). If Lodi is not a PRP, the court will assess the recoverability of costs under its own established standards.
The Insurers also challenge Lodi's information-gathering authority under the Municipal Environmental Response and Liability Ordinance (MERLO), claiming it conflicts with federal (CERCLA) and state (HSAA) regulations. Lodi's Section 8.24.050 allows for the compulsion of documents and testimony to investigate environmental nuisances and determine necessary abatement actions. The Insurers argue this provision improperly assumes powers reserved for the EPA and DTSC. However, Lodi maintains that it possesses independent authority to enact information-gathering measures under its police powers, as affirmed by California law. This includes the ability to issue legislative subpoenas, which has been upheld by the California Supreme Court. Lodi's actions under MERLO do not conflict with state or federal law, as compliance with MERLO does not impede adherence to CERCLA or HSAA, nor does it obstruct the legislative goals of these federal statutes.
MERLO’s information-gathering provisions are upheld as not preempted by CERCLA or HSAA. However, regarding direct actions against insurers under MERLO, Lodi can initiate such actions against a potentially responsible party’s (PRP) insurer without needing a final judgment against the insured first. Insurers argue that this provision is preempted due to a conflict with California Insurance Code § 11580, which mandates that direct actions against insurers can only occur after securing a judgment against the insured for bodily injury, death, or property damage.
The analysis reveals that MERLO § 8.24.090(B)(1) conflicts with California law and is therefore preempted. The California Insurance Code does not explicitly forbid direct actions prior to a final judgment; rather, it allows them under certain conditions. Previous court rulings suggest that while § 11580 establishes minimum provisions for liability insurance policies, it does not exclusively control all circumstances under which one may sue an insurer directly. The reference to conflict preemption indicates that local statutes cannot authorize actions prohibited by state law. Ultimately, while § 11580 outlines required provisions, its silence regarding direct actions before judgment does not imply a prohibition against such claims, leaving the legal landscape open for interpretations that may allow for direct actions in other contexts.
No enforceable claim against an insurer arises until a final judgment against the indemnitee is obtained, as established in California case law. Injured parties generally cannot directly sue the insurer of a tortfeasor until after securing this judgment. The court holds that MERLO, a local ordinance, is preempted by California Insurance Code §11580, which restricts direct actions against insurers prior to this judgment.
Regarding preemption, California courts typically apply the duplication prong solely to penal ordinances. A conflict with state law arises when an ordinance duplicates state law, barring prosecution under state law for the same offense; however, this situation does not apply here. MERLO does not entirely overlap with state hazardous waste laws, thus there is no preemption by duplication.
The analysis concludes that CERCLA and HSAA do not preempt hazardous waste remediation, allowing states to enact regulations as long as they do not conflict with CERCLA’s objectives. Although MERLO is not preempted by the duplication doctrine, certain provisions regarding burden of proof for potentially responsible parties (PRPs) and more stringent abatement procedures than the National Contingency Plan (NCP) are preempted by conflict preemption. Additionally, provisions allowing Lodi to impose joint and several liability and recover attorneys' fees may also be preempted if Lodi is found to be a PRP. The ordinance's section permitting direct actions against insurers is preempted by California law. The invalid provisions are severable, allowing the remainder of MERLO, including provisions on natural resource damages and less stringent abatement procedures, to remain effective.
Claims related to hazardous waste remediation under California state law remain viable and are not preempted by state or federal law, irrespective of whether the district court identifies Lodi as a potentially responsible party (PRP). Fireman’s Fund appeals the dismissal of its claims against Lodi's municipal officers in their official capacities, arguing that these claims are essential to counter any potential Eleventh Amendment immunity defense by Lodi. The court agrees, reinstating the claims against City Attorney Randall A. Hays and Enforcement Officers Richard C. Prima Jr. and Fran E. Forkas.
The court finds that it erred in abstaining from Fireman’s Fund's state law preemption claim. It rules that the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Hazardous Substance Account Act (HSAA) do not preempt hazardous waste remediation efforts. However, certain sections of the California Model Environmental Remediation Law (MERLO) are preempted under the doctrine of conflict preemption, while other parts remain intact. The court affirms in part, reverses in part, and remands the case for further proceedings to assess if Lodi is a PRP. Each party will bear its own costs.
The original HSAA, known as the California Superfund, became inoperative on January 1, 1999, while its reenacted version took effect on May 26, 1999. Actions under the prior law are now governed by the reenacted statute. Notably, the Environmental Protection Agency (EPA) has not initiated comparable proceedings federally and has not listed the Lodi Groundwater Site on its National Priorities List, which is necessary for federal Superfund funding. The Department of Toxic Substances Control (DTSC) had the authority to enter into agreements under the HSAA to resolve jurisdictional claims with PRPs.
Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), cleanup of hazardous waste sites must align with the National Contingency Plan (NCP) established by the EPA, which outlines the roles of various governmental entities and the procedures for cleanup decisions. On November 17, 1999, Lodi’s City Council repealed and reenacted an amended version of its local ordinance, MERLO, effective December 17, 1999. The current version of MERLO is applied in ongoing appeals, as neither party has moved to dismiss the appeals as moot despite the reenactment occurring during the appeals process. The amended MERLO is largely similar to the original, with the Insurers arguing that Lodi merely replaced one preempted ordinance with another. The reenacted MERLO stipulates that actions taken under the original version remain in effect and that amendments apply retroactively to prior proceedings. A "savings clause" in the Lodi Municipal Code, established prior to MERLO's enactment, further supports the validity of any remedial actions initiated by Lodi before the amendments. Consequently, the dispute between Lodi and the Insurers remains active, and the changes to MERLO do not moot the Insurers' claims in the appeal. The document also notes that several individual defendants were dismissed without prejudice, and highlights the Pullman abstention doctrine, which allows federal courts to avoid deciding certain constitutional issues if state law can resolve the matters. Pullman abstention is not applicable here when federal preemption is at issue, as it is not classified as a constitutional question.
Pullman abstention is deemed inappropriate in this context as preemption does not raise a constitutional issue. Despite this, the district court addressed the merits of the Insurers' federal preemption claims and invoked Pullman abstention to sidestep Fireman's Fund's constitutional claims under Due Process, Equal Protection, and Contracts Clauses. Both Fireman's Fund and Lodi contend that even if abstention was justified, the district court erred by dismissing Fireman’s Fund's remaining claims; they argue that the court should have stayed the case while retaining jurisdiction over the federal claims pending state law resolution. Various district courts have consistently ruled post-1996 SARA amendments to CERCLA that municipalities cannot pursue CERCLA actions as public trustees of state natural resources without gubernatorial appointment. This position aligns with other circuits that assert litigants cannot use state statutes to circumvent CERCLA during hazardous waste litigation. Additionally, the discussion touches on Lodi's potential contribution protection related to its Cooperative Agreement with California’s DTSC, indicating the broad scope of MERLO, which addresses various environmental contamination issues beyond just drinking water. The Insurers claim that Lodi amended MERLO to obscure rather than resolve the issue regarding costs recoverable under the NCP, as the revised ordinance no longer references the NCP.
Local governments in California are granted a presumption of consistency when conducting cleanups under specific state code sections, notably the Polanco Redevelopment Act, which allows municipal redevelopment corporations to recover cleanup costs similar to those recoverable by the Department of Toxic Substances Control (DTSC) under CERCLA. The district court in City of Emeryville v. Elementis Pigments, Inc. affirmed this interpretation. The Cooperative Agreement mandates that DTSC collaborate with Lodi for effective site remediation, ensuring timely and cost-efficient cleanup. Compliance with the National Contingency Plan (NCP) is required under the Cooperative Agreement and relevant California statutes, including H.S. 25356, which has been renumbered to 25356(d). California law offers benefits to municipalities engaged in hazardous waste cleanup, including statutory immunity for those acting under state oversight, as seen in the California Land Environmental Restoration and Reuse Act. Although there are references to potential preemption issues regarding local regulations that are less stringent than CERCLA, it is established that CERCLA sets a baseline for environmental protection without overriding local programs that effectively address brownfields. The Brownfields Revitalization and Environmental Restoration Act of 2001 supports local initiatives by providing federal funding while not mandating strict adherence to NCP requirements. Lodi contends that its authority under MERLO to enforce stricter abatement procedures than the NCP is not preempted by CERCLA, emphasizing the distinction between field and conflict preemption, supported by CERCLA’s savings clauses which clarify that it does not preempt hazardous waste cleanup efforts.
Municipalities like Lodi have significant self-protection powers regarding hazardous waste cleanup, but these powers are limited. When municipal legislation conflicts with the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the municipal laws are preempted, a conclusion supported by various circuit court precedents. Although CERCLA does not explicitly preempt state law, it does preempt local laws that obstruct Congress's objectives. The National Contingency Plan (NCP) mentions "more stringent" state requirements, but this context does not apply to the case at hand. The argument that Congress intended to permit supplemental state legislation while barring municipal legislation is rejected. The distinction between municipalities and states regarding CERCLA applications has been established in previous cases. Moreover, claims against state officials in their official capacities are barred by the Eleventh Amendment unless seeking only prospective relief, as clarified in Ex Parte Young. The district court dismissed claims against certain municipal officers, not on qualified immunity grounds, but as duplicative of claims against the city. The issue of whether Lodi is a potentially responsible party (PRP) due to its agreement with the Department of Toxic Substances Control (DTSC) has not been fully addressed on appeal and will be left for the district court's consideration.
