This Week At The Ninth: Playing Hooky And Cleanup Costs

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This week, the Court considers a public employee’s claimed First Amendment right to speak about an investigation into his misconduct, and whether a prior action for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 barred a subsequent action for recovery of cleanup costs.

The Court holds that public employers may restrict their employees’ ability to speak about individual personnel disputes during misconduct investigations.

The panel: Judges M. Smith, Forrest, and Sung, with Judge M. Smith writing the opinion.

Key highlight: “[T]he communication restriction complained of by Roberts does not violate the First Amendment because it did not limit Roberts’ ability to speak about matters of public concern. Rather, it merely barred him personally from discussing his own alleged violation of SUB policies— a matter of private, personal concern—with potential witnesses or fellow SUB employees.”

Background: Plaintiff Todd Roberts worked for the Springfield Utility Board (SUB). One morning, he emailed a manager to say he would be missing work to prepare his children for the beginning of the school year. That same morning, he also sent a separate email to a coworker, saying: “I’m looking at your boat’s slip right now headed to the Pig N Pancake.” SUB put Roberts on paid leave while it investigated whether he had been dishonest. It sent him notices prohibiting him from discussing the matter with other employees or potential witnesses while the investigation was ongoing. Following the investigation, it terminated Roberts.

While the investigation was ongoing, Roberts sued SUB, its counsel, and certain employees, claiming they had violated his First Amendment rights by prohibiting him from speaking about the investigation. The district court granted the defendants’ motion for summary judgment.

Result:  The Ninth Circuit affirmed. As the Court explained, when evaluating the restrictions a public employer places on its employees’ job-related speech, the Court first looks to “whether the employee spoke as a citizen on a matter of public concern,” and, if so, “whether the relevant government entity had an adequate justification for treating the employee differently from any other member of the general public.” Here, the Court concluded, Roberts’ claim failed at the first step, as it did not involve a matter of public concern. Rather, any restrictions SUB had placed on Roberts related only to his “individual personnel dispute.” The Court emphasized that “nothing in Defendants’ instructions barred him from speaking about any alleged mismanagement at SUB or other topics that would potentially relate to a matter of public concern.”

The Court holds that a final judgment resolving a contribution claim under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) between two prior owners of environmentally contaminated real property did not bar a subsequent purchaser, who took title with full knowledge of the condition of the land and that judgment, from pursuing a CERCLA cost recovery claim against a prior owner released under the earlier judgment.

The panel: Judges Hawkins, Bea, and Nguyen, with Judge Hawkins writing the opinion, and Judge Bea writing a concurrence.

Key highlight: “CERCLA expressly contemplates successive cost recovery actions because § 107 permits recovery only of those costs already incurred. . . Indeed, CERCLA mandates that district courts enter declaratory judgments as to future liability and dictates that those liability determinations will be binding in subsequent actions involving later-incurred costs.”

Background: In the 1970s and 80s, Norma and Edgar Beard owned property in California (the “Property”) that they leased to Etch-Tek, a manufacturing company owned by Edgar, that released the hazardous substance tetrachloroethylene (“PCE”) into the soil and groundwater. They subsequently sold the Property to Mayhew Center, LLC, which used it for office and storage space. Later, an adjacent property owner, Walnut Creek Manor, which ran a retirement community, sued Mayhew and Etch-Tek for contaminating Walnut Creek’s property, asserting claims including for CERCLA cost recovery. Walnut Creek won and obtained a jury verdict against Mayhew for past and future damages. Mayhew then sued Norma Beard for contribution alleging that Etch-Tek discharged pollutants, including PCE, into the property’s soil during its manufacturing operations. Mayhew’s action was consolidated with Walnut Creek’s action for purposes of settlement, and the parties reached a Settlement Agreement. Under the Settlement Agreement, Norma Beard’s insurer agreed to provide $400,000 to Walnut Creek in satisfaction of the jury’s award of past damages and costs, and the insurer, Norma, and Mayhew collectively contributed $1,150,000 to an escrow account for future damages. The Escrow Agreement only allowed disbursements to be made for remediation of the Walnut Creek Manor property and a certain portion of the Mayhew Center property that was along the boundary with the Walnut Creek Manor property. Following the settlement, the district court approved and entered a stipulated order that dismissed the Mayhew Action with prejudice and entered a stipulated order and injunction in the Walnut Creek Action that directed Mayhew to cleanup and abate all PCE in soil vapor, soil, and groundwater at and beneath the Walnut Creek Manor remediation area. Mayhew failed to remediate all contamination in the remediation area, was held in contempt, defaulted on its mortgage, and its property was placed in state court receivership. In 2016, GP Vincent was formed for the purposes of purchasing, cleaning up, and developing the Property. Once GP Vincent obtained the Property, it sued the Beard Estates, Etch-Teck, Mayhew, and others for CERCLA cost recovery, contribution under the California Land Reuse and Revitalization Act, and declaratory relief regarding future response costs. The Beard Estates and Etch-Tek moved to dismiss the claims on the basis of claim preclusion. The district court granted the motion, concluding that the claims were the same as the ones resolved in Mayhew’s prior action because they both regarded the Property’s PCE contamination. GP Vincent appealed.

Result:  The Ninth Circuit reversed and remanded. The Court explained that res judicata applies if earlier litigation (1) reached a final judgment on the merits; (2) involved the same claim or cause of action as the later lawsuit, and (3) involved the same parties or their privies. Here, although the Mayhew Action had ended in a final judgment on the merits, the claims were not the same. The prior action’s litigation resolved CERLA liability to remediate the Walnut Creek Manor property rather than the Property at issue here. The Mayhew Action sought contribution for liability imposed by the Walnut Creek Manor Action judgment, which pertained to the damage to and remediation of Walnut Creek Manor’s property. Although the Mayhew complaint purported to also seek cost recovery for expenses related to PCE under and emanating from the Mayhew Center property, the Settlement Agreement and stipulated injunction order focused on the Walnut Creek Manor property. GP Vincent’s recovery claims, in comparison, regard the costs GP Vincent has incurred remediating the contamination of the Property itself and seek to assess strict liability for those costs. Because the Court concluded that the claims were not the same, it did not need to decide whether GP was in privity with Mayhew. The Court noted, however, that the district court had erred in determining on the pleadings that the judgment against Norma Beard, the sole defendant in the Mayhew Action, also barred any claims against Edgar Beard and Etch-Tek because although non-party preclusion may apply where the non-party is adequately represented by someone with the same interests who was a party to the prior litigation, that is a fact-intensive inquiry best made outside a Rule 12(b)(6) motion.

Judge Bea concurred in the judgment to reverse the district court’s dismissal on grounds of res judicata but did so on the ground that GP Vincent was not in privity with the prior owner, Mayhew Center, and thus res judicata did not bar GP Vincent’s action. Judge Bea explained that an owner of a polluted plot of land cannot pass on its liability for remediation of pollution on that land under CERCLA to a future owner by mere transfer of title and so a future owner is not precluded from maintaining a cost-recovery action to recoup its remediation costs even when the prior owners were previously embroiled in CERCLA litigation over the same polluted land.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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