and Toxic Tort Claims Navigating Pleading Standards Amid Differing - - PowerPoint PPT Presentation

Pleading Federal Environmental and Toxic Tort Claims

Navigating Pleading Standards Amid Differing Court Decisions, and Overcoming Other Procedural Challenges

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Presenting a live 90-minute webinar with interactive Q&A

Kevin Haroff, Partner, Marten Law, San Francisco Gregory M. Gotwald, Partner, Plews Shadley Racher & Braun, Indianapolis Brianna Schroeder, Plews Shadley Racher & Braun, Indianapolis

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Pleading Federal Environmental and Toxic Tort Claims

Navigating Pleading Standards Amid Differing Court Decisions and Overcoming Other Procedural Challenges

Gregory M. Gotwald Brianna J. Schroeder PLEWS SHADLEY RACHER & BRAUN LLP January 22, 2013

4

Background

• Common Law Pleading

– (emphasis on procedure over substance)

• Code Pleading

– (hypertechnical scheme that abolished common-law form of action)

• Federal Rules Pleading

– (adopted in 1938 to relax strict code pleading rules)

5

Background

• “Notice Pleadings”

– Coined by Conley v. Gibson, 355 U.S. 41 (1957). – Complaint must give “fair notice” of:

• the plaintiff’s claim

and

• the grounds upon which it rests.

6

Background

• “Notice Pleadings”

– Conley v. Gibson, 355 U.S. 41 (1957).

• “[A] complaint should not be dismissed for failure to

state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his which would entitle him to relief.”

7

• “Notice Pleadings” have changed.
• Conley overruled by Twombly & Iqbal.
• The “no set of facts” standard is no

longer the standard.

• It is now a “plausibility” standard.

8

Bell Atl. Corp. v. Twombly

• Plaintiffs alleged Bell Atlantic’s “parallel

behavior” violated Sherman Act.

• Under the Act, parallel behavior alone falls

short of establishing offense.

9

Twombly (cont’d)

• Under the Act, an allegation of parallel

conduct requires some factual setting.

• Complaint must provide plausible grounds

to infer an agreement.

10

Twombly (cont’d)

• What are plausible grounds?

– Not a probability requirement.

• A complaint may proceed even if actual proof of

those facts is improbable, and recovery is remote and unlikely.

– Need to allege enough facts to raise reasonable expectation that discovery will reveal evidence

• f illegal activity.
• Without factual enhancement, the complaint stops

short of line between possibility and plausibility.

11

Twombly (cont’d)

• Conley’s “no set of facts” should be retired.
• This is not requiring Rule 9 heightened

pleading.

• Need to “nudge” claim across line from

conceivable to plausible.

12

Ashcroft v. Iqbal

• Iqbal was detained after 9/11.
• Alleged he was designated person of “high

interest” and mistreated because of his race, religion, or national origin in violation of 1st and 5th Amendment.

• Alleged defendants Ashcroft and Mueller

were behind his mistreatment.

13

Iqbal (cont’d)

• Iqbal needed to plead that each defendant

acted with discriminatory purpose.

• He needed to plead that the defendant took

action or made a decision “because of” not merely “in spite of” adverse effects on identifiable group.

14

Iqbal (cont’d)

• The Court’s review of the complaint:

– Court should assume veracity of well-pleaded “factual” allegations. – Pleadings that are no more than conclusions are not entitled to assumption of truth. – Evaluates whether complaint contains sufficient “factual” matter to state a claim to relief that is “plausible” on its face.

15

Iqbal (cont’d)

• Well-pleaded facts:

– “‘[L]abels and conclusions’ or ‘a formulaic recitation of the elements’” is not enough”. – “‘[N]aked assertions’ devoid of factual enhancements” will not do”. – Legal conclusions are not considered facts.

16

Iqbal (cont’d)

• Plausibility

– It is a “context specific task”. – Courts should utilize “experience and common sense”. – It exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged”.

17

Iqbal (cont’d)

• Plausibility

– It is not a “probability” requirement. – It is more than a “possibility” requirement. – However, if facts are “‘merely consistent with a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’”

18

Iqbal (cont’d)

• “Consistent with”

– Parallel behavior in Twombly was consistent with illegal agreement, but there was an “obvious alternative explanation” and no factual enhancement. – Actions in Iqbal were consistent with discrimination, but there were “more likely explanations” for the behavior. – Isn’t this weighing the evidence?

19

Probability Plausibility Possibility

Where Are We Now?

• Plausibility, not possibility or probability, is

the rule.

20

Where Are We Now?

• Takeaways from Twombly & Iqbal:

– Claims must be “plausible”

• Claim-specific evaluation
• More than possible, less than probable
• Allege actual facts

– Legal conclusions and bald assertions don’t count – Need to show enough facts: » reasonable expectation that discovery will reveal evidence of wrongdoing » Reasonable inferences will prove your case

• Inconsistent with likely alternative explanations

21

What does this mean in an environmental context?

A case study: Z-J, Inc. v. Pfizer.

22

Z-J, Inc. v. Pfizer, Inc.

• Plaintiff brought state court action alleging

various state-law claims:

– Nuisance; – Trespass; and – Other environmental liability claims.

• Defendant removed to federal court.

23

Z-J (cont’d)

• Plaintiff alleged:

– It owned property adjacent to an open “dump” that defendant owned and used from the 1940s–70s. – Defendant disposed of “many types of wastes” and “basically everything” from the defendant’s facility.

• Plaintiff alleged that the disposal “potentially”

included various specific wastes that plaintiff suspected defendant disposed of in the dump.

24

Z-J (cont’d)

• Plaintiff alleged:

– Historical test results showed elevated levels of contamination in plaintiff’s groundwater. – Defendant entered into agreement with the state regulatory agency to remediate the dump (maintain cover and test monitoring wells). – Despite this cleanup, waste existed on plaintiff’s property and contamination was still present into the groundwater. – If plaintiff used its irrigation pump, it would draw contaminated water onto its property and into its pond.

25

Z-J (cont’d)

• Defendant moved to dismiss pursuant to

12(B)(6).

– Defendant argued:

• Plaintiff failed to specify the exact substances in the

environment.

– Only said specific substances were “potentially” there – Did not identify any specific “hazardous” substance

• Plaintiff failed to allege that the contaminants

currently existed in the plaintiff’s soil/groundwater.

26

Z-J (cont’d)

• Defendant argued:
• Plaintiff failed to provide facts regarding the levels of

contamination .

– Are the levels above background? – Are the levels “actionable” under state regulatory scheme?

• Plaintiff failed to explain how the contamination on

the defendant’s property caused damage on the plaintiff’s property.

27

Z-J (cont’d)

• The Court said:

– “[T]he boundary between a well-pled complaint and an insufficient one…is still evolving and therefore is somewhat blurry.” – While it is difficult to articulate why a case falls

• n one side or the other of the line, notice

pleading is all that is required. – Plaintiff must show that it is plausible, rather than merely speculative, that he is entitled to relief.

28

Z-J (cont’d)

• The Court said:

– Agreeing to defendant’s argument would set pleading standard inconsistent with notice pleading. – Notice pleading does not require allegations of what specific substance was released.

29

What should you allege in an environmental case to avoid a 12(b)(6) motion? As much as possible.

30

Asarco LLC v. NL Indus., Inc.

• Plaintiff filed CERCLA action against defendant

for contribution based on defendant’s alleged

• wnership and operation of nearby mines.
• Plaintiff alleged “owner,” “operator,” and

“arranger” liability.

• Alleged contamination from mines defendant
• wned and operated migrated to other areas in

SEMO, the contaminated area.

31

Asarco (cont’d)

• Defendant argued plaintiff failed to allege

plausible theory that defendant was owner,

• perator, or arranger under CERCLA.

– Argued no allegation that defendant had authority to determine whether and how hazardous materials were disposed of. – Argued no allegation of specific intent to arrange for disposal of hazardous wastes at the sites.

32

Asarco (cont’d)

• Court denied motion to dismiss:

– Owner:

• Plaintiff sufficiently alleged defendant owned mine

that contributed to contamination at SEMO. Mine qualifies as “facility” under CERCLA.

– Operator:

• Reading complaint as a whole and making inferences

in favor of plaintiff means the allegation that the defendant operated mines and controlled the hazardous substances is clear.

33

Asarco (cont’d)

• Court denied motion to dismiss:

– Arranger:

• Liberal judicial interpretation is consistent with

CERCLA’s remedial scheme.

• It was sufficient that plaintiff alleged defendant
• perated mine and was aware of contamination

migration from mine.

34

Asarco (cont’d)

• Court denied motion to dismiss:

– Contribution:

• Plaintiff alleged enough to support claim, despite

defendant’s argument that plaintiff only paid its fair share of the remediation.

• This isn’t summary judgment.

35

Additional Cases

• J&P Dickey Real Estate Family L.P. v.

Northrop Grumman Guidance & Elecs. Co., Cause No. 2:11cv37, 2012 U.S. Dist. LEXIS 36497(W.D.N.C. Mar. 19, 2012).

– Allowed state law claim because complaint specifically identified chemicals and stated they exceeded the compliance standards

36

Additional Cases

• J&P Dickey (cont’d)

– Court dismissed CERCLA claim. – Plaintiff failed to properly plead that response costs were consistent with NCP.

• Complaint stated: Plaintiffs “incurred response costs

that are consistent with the National Contingency

• Plan. Such response cost included but are not

limited to, expenses for testing of ground water and soil and surveillance.”

• Court said this was “a formalistic recitation of the

elements of a CERCLA claim.”

37

Additional Cases

• Hinds Invs., L.P. v. Angioli, 654 F.3d 846 (9th
• Cir. 2011).

– Plaintiff sought RCRA liability for dry cleaning equipment manufacturer. – Alleged manuals recommended disposing PCE in sewers and equipment was designed to do so. – Court said insufficiently alleged that defendants “contributed to” contamination. – Need to allege defendant exercised control of or was actively involved in the disposal process.

38

Additional Cases

• BancorpSouth Bank v. Envtl. Operations, Inc.,

Cause No. 4:11CV9 HEA, 2011 U.S. Dist. LEXIS 117010 (E.D. Mo. Sept. 30, 2011).

– Plaintiff (a bank with ownership interest in the contaminated property) sought CERCLA liability from remediation designer and contractors. – Plaintiff alleged that the defendants improperly spread contamination around the site.

39

Additional Cases

• BancorpSouth (cont’d)

– Plaintiff alleged:

• Defendants knew there were hazardous substances
• n site; and
• Deliberately disturbed and re-released contaminants
• n the site.

– Plaintiff did not specifically identify which defendant did what (just generally alleged “Defendants”). – Court found complaint sufficient.

40

Additional Cases

• United States v. Halliburton Energy Servs.,

Cause No. H-07-3795, 2008 U.S. Dist. LEXIS 17476, *11 (S.D. Tex. Mar. 5, 2008)

– Complaint alleged CERCLA “arranger” liability.

• Defendant “either directly or as a successor in

interest to [several corporate entities] ‘by contract, agreement, or otherwise arranged for disposal or treatment of hazardous substances owned or possessed by [the Defendants or its predecessors].”

– Court found this sufficient to survive 12(b)(6).

41

Additional Cases

• Halliburton (cont’d)

– Court held certain allegations were conclusory. – Plaintiffs also alleged:

• the timing (1971 through 1993);
• the location (the specific site);
• the conduct (storage, reworking, and repair of items

containing radioactive materials); and

• predecessor liability information (states of

incorporation and business aliases).

42

Additional Cases

• Vill. of Riverdale v. 138th St. Joint Venture,

527 F. Supp. 2d 760, 766 (N.D. Ill. 2007).

– Plaintiff filed RCRA claim against many defendants, but did not allege specific actions to specific defendants. – Court held complaint was sufficient.

43

Additional Cases

• Riverdale (cont’d)

– “[C]omplaint does not contain any specific factual allegations explaining how each of the several of the Defendant’s actions contributed to the imminent and substantial endangerment to health or the environment; it does not need to do so at this stage of the litigation.” – “[I]t is sufficient that Riverdale has identified each of the Defendants as a possible contributor to the solid waste, the release of which may present an imminent and substantial endangerment to health of Riverdale inhabitants or the environment in general.”

44

Additional Cases

• Gregory Vill. Partners, L.P. v. Chevron U.S.A.,

Inc., 805 F. Supp. 2d 888 (N.D. Cal. 2011).

– Plaintiff filed CERCLA claim against former

• wner.

– Complaint alleges:

• “[Chevron] is responsible for these Releases as a

former owner/operator of a Facility, the Chevron Property, at the time of the Releases, pursuant to 42 U.S.C. § 9607(a)(2).”

– Court said this phrase is a “legal conclusion”.

45

Additional Cases

• Gregory (cont’d)

– Court also noted no “clear” allegations that:

• Releases occurred during period of Chevron’s
• wnership; or
• Releases “actually affected” plaintiffs’ property

– There were allegations that contamination migrated offsite and entered the sewer.

46

Additional Cases

• Pateley Assocs. I, LLC v. Pitney Bowes, Inc.,

704 F. Supp. 2d 140, (D. Conn. 2010).

– Court found sufficient facts alleged to find the defendant (a lessee of the site):

• a “de facto” owner under CERCLA; and
• an operator under CERCLA.

47

Additional Cases

• Town & Country Co-op, Inc. v. Akron Prods. Co., No. 1:11-CV-2578, 2012

U.S. Dist. LEXIS 66128 (N.D. Ohio 2012) (explaining allegations required to survive a 12(b)(6) motion on a RCRA claim).

• Raritan Baykeeper, Inc. v. NL Indus., No. 09-cv-4117 (JAP), 2013 U.S.
• Dist. LEXIS 2628 (D.N.J. Jan. 8, 2013) (finding Plaintiffs alleged a

“plausible” CWA claim by sufficiently alleging facts that the improper discharges continued to occur while the defendant was the lessee of the site).

• Gregory Vill. Partners, L.P. v. Chevron U.S.A., Inc., No. C 11-1597 PJH,

2012 U.S. Dist. LEXIS 32644 (N.D. Cal. 2012) (discussing allegations required to satisfy the “imminent and substantial endangerment” requirement of RCRA claim and various state-law claims).

48

Plaintiffs’ Pointers

• Allege facts:

– Give enough information to put defendant on notice.

• Be careful with legal conclusions:

– There are not considered facts.

• Are your facts inconsistent with likely

alternative explanations?

• Avoid federal court?

– Rely on state-law claims.

49

Questions?

Do not hesitate to contact either of us with additional questions: ggotwald@psrb.com or bschroeder@psrb.com.

50

Pleading Federal Environmental and Toxic Tort Claims

Kevin T. Haroff, Esq. MARTEN LAW PLLC

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Strafford Environmental Litigation Webinar - January 22, 2013

Overview

• Evolving Ninth Circuit standards.
• Case study: Chubb v. Space Systems/Loral.

– District court proceedings. – Status on appeal.

• Special issues.

– Standing. – Scienter. – Timeliness.

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Evolving Ninth Circuit Standards

• Pre-Twombly notice pleading under Rule 8(a).
• Balistreri v. Pacifica Police Dep’t., 901 F.2d 696

(9th Cir. 1990).

• “Dismissal under Rule 12(b)(6) is appropriate
• nly where the complaint lacks a cognizable

legal theory or sufficient facts to support a cognizable legal theory.”

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Mendiondo v. Centinela Hosp. Med. Ctr.

• 521 F.3d 1097 (9th Cir. 2008).
• Citing Twombly: “The complaint need not contain

detailed factual allegations, but it must provide more than ‘a formulaic recitation of the elements

• f a cause of action.’”
• Plaintiff must “give the defendant fair notice of

what the … claim is and the grounds upon which it rests.

• Preserving notice pleading rule from Balistreri.

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Starr v. Baca, 633 F.3d 1191 (9th Cir. 2011)

• Majority: “difficult to know” when to apply

Twombly-Iqbal v. notice pleading standard.

• Two prongs of analysis under Rule 8(a)(2):

– First, “allegations in a complaint or counterclaim must be sufficiently detailed to give fair notice to the opposing party of the nature of the claim;” – Second, “the allegations must be sufficiently plausible that it is not unfair to require the

• pposing party to be subjected to the expense
• f discovery.”

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Case Study: Chubb v. SS/Loral

• CERCLA case filed on September 23, 2009.
• Former Ford Aerospace facility in Palo Alto.
• Discovery of soil and groundwater

contamination during development activities.

• Current owner asserted claim for response

costs under environmental liability policy.

• Insurance company sought recoupment of

monies paid to settle policy claim.

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Chubb’s Original Complaint

• Claim to recover insurance payments as

response costs under section 107(a).

• Claim for contribution under section 113(g).
• Claim to assert insured’s recovery rights

through subrogation under section 112(c).

• Ancillary state law claims.
• February 23, 2010 – order granting motion to

dismiss with leave to amend, citing Twombly/Iqbal.

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First Amended Complaint (FAC)

• Asserted section 107 claim as section 112

subrogation claim in single cause of action.

• June 23, 2010 dismissal: “plain reading of

[s]ection 112 requires plaintiffs to plead that the compensation was paid for damages or costs resulting from a CERCLA violation.”

• Plaintiff failed to “connect the dots” between

insurance payments, insured’s response costs and “alleged CERCLA violations.

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Second Amended Complaint (SAC)

• Asserted section 112(c) claim that did not

invoke section 107.

• December 7, 2010 dismissal:

– Construing section 112 remedy to require prior “claim” against Superfund or private parties. – Absent allegations of prior “claim,” section 112 subrogation cause of action not sustainable. – State law claims not reached (but could be dismissed under state statute of limitations).

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Third Amended Complaint (TAC)

• Asserted separate section 107 (couched as a

subrogation claim) and section 112 claims.

• April 20, 2011 dismissal (with prejudice):

– Section 107 claim cannot be couched as a subrogation claim in light of section 112. – Section 112 claim misconstrues the statute. – Supplemental state law claims dismissed under applicable statute of limitations. – Judgment for defendants.

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Chubb v. SS/Loral – Appeal

• Appellant’s issue No. 1: “Did the district court err

by failing to apply the ‘plausibility’ standard in dismissing Chubb’s claims.”

• Governing precedent – Mendiondo.
• Appellant’s argument:

– Plausibility standard does not require a plaintiff to establish the legal merits of a claim. – Plausibility standard does not require a plaintiff to allege facts constituting evidentiary proof of a claim.

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Chubb v. SS/Loral - Status

• Oral argument on November 8, 2012.
• Pleading standard issue not specifically

addressed in oral argument.

• Question – Will the court choose to avoid

decision on merits of underlying claims (CERCLA and state law) by deciding case based

• n sufficiency of pleadings?

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Special Issues - Standing

• Standing in environmental cases.

– Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 (1992) – requirement of injury in fact. – Summers v. Earth Island Institute, 129 S. Ct. 1142 (2009) – reiterating Lujan standing requirements. – Monsanto v. Geertson Seed, No. 09–475, 561 U. S. __ (2010) – reasonable probability of harm test. – Implications for citizen suit litigation.

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Special Issues - Scienter

• Goliad Cnty. v. Uranium Energy Corp., No. V-

08-18, 2009 WL 1586688 (S.D. Tex. June 5, 2009).

– Citizen suit claim that defendant’s failure to properly seal and plug exploratory boreholes supported an “inference”

• f intent to convert the boreholes into underground

injection wells requiring a permit under SDWA. – Plaintiff sought to characterize this allegation as a factual

• ne that the court was obliged to accept as true.

– Court rejected characterization - allegation “more accurately characterized as a conclusion of law, which the Court is not mandated to, and does not, accept as true,” citing Iqbal.

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Special Issues - Scienter

• Hinds Investments LP, et al., v. Team Enterprises,

Inc., et al., No. 07-0703, 2010 U.S. Dist. LEXIS 48554 (E.D. Cal. Apr. 21, 2010).

– Plaintiffs alleged arranger liability under CERCLA § 107(a) because it provided guidance to users of its equipment to discharge PCE-containing process wastewater to sewers rather than to “environmentally sound options.” – Allegations insufficient in light of Burlington Northern and Santa Fe Railway Co. v. United States, 129 S.Ct. 1870 (2009).

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Other Issues

• Timeliness and application of statutes of

limitations as a defense.

• Implications of decision in Chubb v. SS/Loral.

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Conclusion

• Find the gap between facts alleged and

elements that must be satisfied to sufficiently plead a claim.

• Look for conclusory statements or

formulaic recitation of the elements of a claim.

• Mere possibility is not plausibility.

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Kevin Haroff Marten Law PLLC | San Francisco kharoff@martenlaw.com

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