SAN FRANCISCO (CN) - Companies fighting over the ongoing cleanup of contaminated Sacramento soil and groundwater must return to the drawing board, the 9th Circuit ruled Thursday.
The dispute arises from the industrial dry-cleaning and laundry operations Petrolane subsidiary Valley Industrial Services conducted at site in Sacramento it later sold in 1983.
Texas Eastern Overseas assumed the subsidiary's liability by virtue of merger and faced a lawsuit in 2000 after the new owner of the Sacramento property, Ameripride, discovered that the soil was contaminated with the hazardous substance, polychloroethylene.
Though AmeriPride settled with Chromalloy and Petrolane for $500,000 and $2.7 million respectively, its case against Texas Eastern, or TEO, eventually went to a bench trial.
By this time, AmeriPride had already paid $8.2 million to the owners of neighboring properties whose property was also contaminated.
U.S. District Judge Lawrence Karlton ultimately found that AmeriPride incurred $15.5 million in damages, including the $8.2 million settlement AmeriPride paid but not the $3.25 million AmeriPride obtained from Chromallow and Petrolane.
Apportioning the amount equally, the court said Ameripride and TEO were each responsible for $7.7 million, with TEO owing prejudgment interest to make up for AmeriPride's many years bearing the response costs.
A three-judge panel of the 9th Circuit vacated that ruling Thursday, finding the court must explain which equitable factors it considered in allocating costs to the settling parties.
It must also to determine the extent to which AmeriPride reimbursed its neighbors for necessary response costs, and it must apply the appropriate interest provisions to determine when interest began to accrue on the costs AmeriPride paid, according to the 30-page opinion.
Although courts have adopted the proportionate-share approach per the Uniform Contribution Among Tortfeasors Act in previous cases involving nonsettling defendants, "we cannot read federal common law into a statute if we determine it is contrary to congressional intent," Judge Sandra Ikuta wrote for the court.
"There are strong indications that Congress did not intend to require district courts to apply the UCFA proportionate share approach in cases involving litigation among private parties," Ikuta added.
At trial, Ikuta said, "the district court declined to determine the proportionate share of both the settling and nonsettling parties, in contravention of the UCFA methodology," and TEO did not have a chance to present an argument regarding the fairness of the court's allocation.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.