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February 2011

PCB Clean Up Litigation: The EPA's $5M Boost to Bay Area Cities

The manufacturing of PCBs has been banned since 1979, but a 2010 study by the San Francisco Estuary Institute estimates there are at least 72 locations around the San Francisco Bay containing PCB levels high enough to pose health risks.  To alleviate the burden on local agencies in their cleanup efforts, the U.S. Environmental Protection Agency recently awarded a $5 million grant to Bay Area cities to identify PCB sources. 

Although the grant alleviates some of the financial burdens of conducting investigations and abatement, it will not cover all the costs cities will have to bear.  Consequently, cities will likely pursue responsible parties who could be held liable for remediation and response costs, including current and past property owners, tenants, and operators of PCB-contaminated properties.  Cities participating in the project include San Jose, Oakland, Richmond, Palo Alto, Sunnyvale, Milpitas, and San Carlos. 

In the February 18 issue of the Daily Journal, San Francisco Partner Mordecai Boone authored an article updating the litigation outlook. 

Recent Gordon & Rees Victory in City Environmental Litigation:  The City of Modesto et al. v. The Dow Chemical Co., et al. (SFSC Case Nos. 999643 & 999345) is an example of a case in which a city filed a lawsuit against operators of contaminated sites.  In 1997, the City of Modesto conducted an environmental investigation and testing of its numerous city-owned properties for contamination.  The results indicated that the properties were contaminated with PCEs, among other chemicals.  In 1998, the City sued over 15 defendants to recoup costs and damages relating to the abatement of toxic chlorinated solvents, including perchloroethylene (PCE). 

Gordon & Rees tried the first phase of the case, representing a successor to a former dry cleaning equipment manufacturer.  The trial lasted from February to May 2006.  Phase I involved the City's bellwether claims as to five sites and plaintiffs' wells.  Gordon & Rees successfully moved for a non-suit, arguing that there was insufficient evidence from which a jury could conclude that it was more probable than not that the alleged contamination was caused by the client.  The City was successful in obtaining verdicts in the Phase I jury trial against five other defendants.  The compensatory damages awarded was approximately $3 million, along with punitive damages against three of the five defendants for $100 million, $75 million, and $75,000.  The $100 million and $75 million awards were reduced to approximately $7 million and $5 million, respectively.

From September 2008 to April 2009, the second phase of the case was tried, involving the remaining claims and over 20 sites.  After the close of evidence, the court granted defendants' joint directed verdict motion on property damage, which eliminated all but two site groups (comprised of four dry cleaner locations) on the basis that the City had failed to submit sufficient evidence that it suffered any injury to its property interests. 

The court also granted Gordon & Rees's directed verdict and non-suit motions relating to claims at one remaining site group.  With regard to the City's failure to warn claims, the court held that the City presented insufficient evidence that it was scientifically known or knowable to the firm's client's predecessor at the time it issued its use and disposal instructions that PCE was a groundwater contaminant or that separator water discharged to sewers by dry cleaners could cause groundwater contamination.  Finally, the Court granted Gordon & Rees's nonsuit motion regarding the City's remaining design defect claims as to the remaining site group, based on the City's failure to prove causation as to the firm's client.

Whether intended or not, actions similar to the City of Modesto case are likely to result in the future as a result of the EPA grant.  As Bay Area cities identify sources of PCB contamination, it is likely that cities will attempt to hold past and current owners and operators of contaminated sites responsible for remediation and response costs.