Garland v. Central Valley Regional Water Quality Control Board

No. C067130 (2012 DJDAR 14745) (October 24, 2012)

A regional water board fined Garland, through an Administrative Civil Liability order, for discharging sediment-laden water into an ephemeral stream without a permit. The Board claimed the sediment would ultimately end up in “the waters of the United States,” thereby subjecting Garland to liability under the Clean Water Act.  The Board conservatively estimated at least 641,000 gallons of such stormwater flowed off a residential construction site being developed by Garland. Garland challenged whether the drainages were “waters of the United States.”

The trail court ruled in favor of the Board, and the Court of Appeal affirmed. The ACL order found the ephemeral drainages to be navigable waters. The Board alternatively found the drainages eventually connected with navigable waters. The Court relied on the latter point (to avoid having to distinguish among the various, hard-to-apply rules that came out of different camps in the Supreme Court plurality decision of Rapanos in 2006). The Court also concluded Garland failed to respond to that basis for the order and had conceded liability.

Prepared by John Reaves

Preserve Wild Santee v. City of Santee

No. B231411 (2012 DJDAR 14541) (4^th Dist., Div. 1) (October 19, 2012)

Various groups challenged the EIR for the proposed Fannita Ranch project in Santee. They successfully argued to the trial court that the EIR failed to show that the fire safety impacts were less than significant. The court found them prevailing plaintiffs and awarded fees. The trial court disagreed with all other arguments of Petitioners. While the appeal was pending, the trial court ordered the EIR be decertified.

The Court of Appeal affirmed and reversed in part. The Court found the following to be the key winning arguments by Petitioners.

First, the EIR failed to specify guidelines in a draft habitat plan mitigation measure that would be implemented by the developer to protect the habitat of the Quino, an endangered butterfly. The EIR improperly left such management to the discretion of the preserve manager based upon prevailing environmental conditions. The Court held the formulation of mitigation measure could not be left to a future time.

Second, the EIR included a water supply assessment, which differed substantially from the assessment prepared by the local water district. The court concluded such discrepancy could not be explained by counsel but had to be presented to the public and decision-makers to comply with CEQA’s informational requirements. While such assessment requires a discussion of existing and planned future supplies, the Court noted the “ultimate question” is “whether the EIR adequately addresses the reasonably foreseeable impacts of supplying water to the project, not whether the EIR establishes a likely source of water.” Moreover, the EIR failed to discuss the uncertainty of future supplies created by a 2007 court ruling which might affect the amount of water from the State Water Project obtained by a wholesale water district supplying water to southern California. Finally, the EIR failed to explain the source of potable water to fill a 10-acre lake at the project. If stormwater were insufficient, then there was an unresolved issue as to how much groundwater could be used, given the potential to adversely impact riparian habitat.

As for attorney fees, the Court agreed Petitioners were the prevailing party. Defendant’s challenge to the mode of calculation by the trial court lacked merit insofar as defendant had failed to ask for a Statement of Decision.

Prepared by John Reaves

Voices for Rural Living v. El Dorado Irrigation District

No. C064280 (2012 DJDAR 13777 (October 4, 2012)

An Irrigation District and tribe made an agreement for a large amount of water to be piped to at tribe to support a desired casino. The District first concluded that an earlier LAFCO decision limiting water supplies to 40 residential lots was unconstitutional. The District then concluded the project was exempt from CEQA as a small construction project. Petitioners challenged on both fronts.

The trial court agreed with Petitioner, and the Court of Appeal affirmed. First, the District lacked the power to decide whether another agency exercised its powers in a constitutional manner. Second, the small project exemption under CEQA may not apply if there are “unusual circumstances.” The Court noted small construction projects include a single-family residence, small commercial structures, utility improvements, etc. The Court concluded the sheer amount of water to be provided the casino was unusual enough; moreover, the casino was so large it required its own freeway interchange. When compared to other types of projects that are commonly exempt, this project was unusual and required CEQA compliance.

Prepared by John Reaves

Coalition for Clean Air v. City of Visalia. No. F062983 (2012 DJDAR 13043) (5^th Dist.)(September 14, 2012)

Visalia approved a large facility without environmental review after filing a notice that the project was exempt from CEQA. Petitioners challenged such claim, and the trial court ruled they were barred by the statute of limitations because it was filed more than 35-days after the NOE was filed.

The Court of Appeal reversed, finding that when a NOE is filed before a project is approved, the filing date does not start the statute of limitations. The approval of the project marks the date, and Petitioners had timely filed their action.

Prepared by John Reaves

Native Village of Kivalina v. ExxonMobil Corp.

2012 DJDAR 13325 (September 21, 2012)

(9th. Cir. 2012)

The Kivalina tribe sued major oil, energy, and utility companies, alleging they had emitted massive amounts of greenhouse gases, which was causing global warming and threatening their survival in the Arctic Circle. Specifically, they alleged sea ice, which normally protected them from powerful winter storms, had been thinning over decades, which, in turn, had allowed storm surges to cause massive erosion to the shoreline on which they lived. They sued under federal common law, claiming global warming constituted a substantial and unreasonable interference with public rights. They also alleged defendants had conspired to mislead the public about the science of global warming.

The district court rejected the claim on several bases, and the Ninth Circuit affirmed on one.

The Ninth Circuit examined U.S. Supreme Court cases dealing with federal common law, which is often invoked to address interstate pollution issues. The Court said common law is not available when Congress has enacted legislation that speaks directly to the issue, as opposed to whether there are generally applicable laws. The Supreme Court previously held in American Electric Power Co., Inc. v. Connecticut, 131 S.Ct. 2527 (2011) that the Clean Air Act (“CAA”) already provides a means for the EPA to regulate greenhouse gases from stationary sources.  Further, the Supreme Court later held in Massachusetts v. EPA, 549 U.S. 497 that Congress had acted in the CAA to empower the EPA to regulate greenhouse gases. Thus, the Court had determined that Congress had spoken directly to the issue by legislation. Therefore, the CAA displaced federal common law, including any remedies.

Prepared by John Reaves

California Association of Sanitation Agencies v. State Water Resources Control Board

No. A127207 (1st Dist., Div. 4) (August 30, 2012); 2012 DJDAR 12309

A group of Sanitation Districts and the City of Vacaville challenged the State Water Resources Control Board’s approval of the Central Valley Regional Water Quality Control Board’s Water Quality Control Plan in which the Regional Board approved beneficial use designations for the Sacramento and San Joaquin River Basins, including tributaries that did not come under specific review (Basin Plan).

The state must enact regulations that comply with the Clean Water Act (CWA) in order to get and maintain EPA delegation of authority to issue NPDES permits for wastewater discharges under the CWA. A water quality standard must designate the beneficial uses of the water and water quality criteria to protect those uses. Moreover, the Boards must consider past, present, and future probable uses as well as economic considerations.

The 1975 Basin Plan attributed unlisted tributaries with the uses for which the Board attributed the receiving body in a footnote (Tribu

tary rule). A revision in 1995, however, removed that reference and clarified its position; further, it gave the Regional Board discretion to consider the attribution of a tributary on a case-by-case basis. The EPA disapproved of the action, but because the EPA did not craft more stringent regulations, the 1995 Plan remained in effect and was at issue in the present case.

In the interim, in 1988, the state implemented Prop 65, which required all waters of the state to be considered suitable, or potentially suitable, for drinking water supplies (State Board Resolution 88-63). That was incorporated by reference into the Basin Plan.

The City of Vacaville operated its sewage plant as authorized by a NPDES permit, which allowed the discharge of treated water into a creek (tributary). There was also agricultural runoff, so the tributary, as a result, could be dominated by effluent at certain times of the year. The Vacaville operation was four miles from the Delta. The Regional Board issued Vacaville a more stringent NPDES permit in 2001, which made the discharge subject to municipal and domestic water supply (MUN) and cold freshwater habitat standards (COLD) (in essence, making the tributary rule apply with regard to certain chemicals and pesticides). The city petitioned the State board for review, which approved the decision, but which also concluded the 1995 Plan did not dedesignate the uses that had already been designated in the 1975 footnote. So tributaries still had designations even if they had not yet come under specific review. The State Board noted the particular tributary at issue here did not seem likely to be appropriately designated as MUN and COLD, and directed the Regional Board to initiate basin plan amendments.

The city then sought judicial review. The trial court ruled in favor of the Boards. The Court of Appeal affirmed. First, the plaintiff made a timely challenge to the 1995 Basin Plan because suit was filed within three years of the 2001 permit that made the Plan applicable to plaintiff.

The Court agreed with the State Board’s reasoning that any change to the Basin Plan had to be done by an amendment, and that the 1975 “footnote” designation remained in effect. The Court found such designation to be reasonable because it was a “practical solution to an impossible task.” Conversely, the Court observed a blanket removal of the footnote designation would result in over 10,000 tributaries losing designation, which would result in the state being in violation of the CWA.

The Court also agreed the Regional Board is obliged to take action to amend the basin plan where there is evidence the designation is not feasibly attainable, or mandamus (a court order directing action) will lie.

Finally, Water Code section 13241 requires the Regional Boards to consider various factors when setting water quality standards, including economic considerations. The City complained the Board failed to do so here. The Court found, however, that the Board had considered economics in the 1971 and 1995 Basin Plans and could incorporate those considerations by reference here. The Court agreed with a memo by State Board counsel that concluded if economic consequences of adoption of a water quality objective were potentially significant, the regional boards must articulate why adoption of the objective would be necessary to ensure reasonable protection of beneficial uses. Here, however, the City failed to show any discussion of these issues in the record, so the Court concluded there was no basis to conclude the absence of discussion was statutorily meaningful.

Finally, the Court approved the incorporation by reference of drinking water standards promulgated by the Department of Health Services, which included provisions allowing future changes to the standards and analytical methods. The City argued that future changes prevented the Regional Board from considering the factors under section 13241. The Court disagreed that the city was without remedy; the DHS standards were and would be subject to public participation under the Administrative Procedure Act. Last, the Court held the Executive Officer of the Regional Board was empowered to choose the analytical method by which the permittee complied with the permit.

Prepared by John Reaves

State of California v. Continental Insurance Co.

California Supreme Court

No. S170560 (August 9, 2012)

California sued insurers (policy periods 1964-1976) for indemnity under first party property coverage for contamination stemming from the notorious Stringfellow acid pits. The state had overseen the construction of the hazardous waste dump, which opened in 1956, and then accepted over 30 million gallons of industrial wastes before closing in 1972. The dump ended up leaking and causing broad contamination estimated to cost up to $700 million to fix. After the state was ordered by a federal court to clean up the site, it sought property coverage for all the years that damage could have occurred.

The state argued that each year of coverage, including all policies for each year, was collectible. The insurers argued that coverage was limited to one year and one policy.

The trial court first ruled that each insurer was liable for its full policy limits due to the continuous nature of the damages. The state was entitled to “all sums” coverage, which meant the full policy limit of liability. Further, the state could recover “all sums” from any of the insurers who provided coverage – even outside of the beginning of the “occurrence” that triggered coverage because of the continuous nature of the losses – but not all of them. The trial court agreed with the insurers and held there could be no “stacking,” so the insured was not able to add up all the policies’ limit of liabilities for indemnification.

Both the Court of Appeal and Supreme Court affirmed the “all sums” ruling, and both reversed the “stacking” ruling.

In a unanimous Supreme Court decision written by Justice Ming Chin, the Court held the “continuous injury trigger” and “all sums” rule applied to the insurers’ duty to indemnify. As part of its analysis the Supreme said it is often impossible for an insured to prove what specific damage occurred in any particular policy period during a continuing loss case.

The Court said the policies left unanswered the critical question for “long-tail” injuries: “when does a continuous condition become an ‘occurrence’ for the purposes of (triggering) insurance coverage?” It noted part of the question was answered in Montrose (a third party or liability policy), which involved similar policies. That Court held “property damage that is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods.” The limitation on coverage was that the damage must occur during a policy period and result from an accident or continuous and repeated exposure to conditions (summarizing the applicable policy language).

The Court then noted its decision in Aerojet (another third party case) in which it held that an insurer on the risk when a progressive loss first manifests is liable for the entire ensuing loss. Although Aerojet involved an issue of the insurer’s duty to defend, the Court concluded the same “all sums” rule applied to the indemnity question at issue here. The fact that all policies covered the risk at some point in time was enough to trigger the indemnity obligation of all.

The insurers argued, instead, for a pro-rata rule, which would limit the insured to the proportionate damage occurring within each policy period. The Court found no such limiting language in the policies and held each insurer was liable for its full limit of liability.

Finally, the Court approved of “stacking” in the case of multiple policies over many years, which allows an insured to call upon each policy up to its full limits of liability. Again, the policies here did not contain any limiting language. The result is that an insured has a giant “über-policy” with coverage equal to the total of all policies purchased.

This case resolves a long-standing battle by insurers over the extent of available coverage to insureds. The result is a huge and proper victory for insureds.

Prepared by John Reaves