Judge Refuses to Toss Suit Against Navy Contractor Accused of Environmental Fraud

U.S. Navy contractor Tetra Tech EC failed in its bid to get several lawsuits accusing it of falsifying soil tests for a radioactive cleanup project tossed out of court.

The former Hunters Point shipyard in San Francisco in October 2018. (Courthouse News photo / Nicholas Iovino)

SAN FRANCISCO (CN) — A federal judge on Wednesday refused to dismiss several lawsuits against a U.S. Navy contractor accused of fudging soil samples to conceal radioactivity at a former shipyard and site of one of the largest redevelopment projects in San Francisco history.

U.S. District Judge James Donato largely rejected Navy contractor Tetra Tech EC’s motions to dismiss four lawsuits brought by Bayview Hunters Point residents, police officers who worked at the site for years and real estate developers who built homes on the property. He granted the contractor’s motion to dismiss the residents’ lawsuit with leave to amend.

The dispute stems from accusations that Tetra Tech EC, a wholly owned subsidiary of Tetra Tech Inc., ordered workers to destroy post-cleanup soil samples that “had some of the highest radioactive readings” and replace them with samples from other areas of the site while avoiding “radioactive hot spots.”

The Hunters Point shipyard in the city’s Bayview neighborhood was home to top-secret nuclear tests from 1946 to 1969 and a place where ships returning from hydrogen bomb tests were decontaminated, both potential sources of radioactive waste.

In a 9-page ruling issued Wednesday night, Donato jettisoned Tetra Tech’s argument that it could not be sued on claims it violated certain state laws because the “federal enclave” doctrine bars such claims for conduct that occurred on federal property. Tetra Tech said it could only be sued for such violations if the state laws in question were in effect when the U.S. Navy took control of the site in the early 1940s.

The state law claims include negligent and intentional infliction of emotional distress, survival actions for deceased family members, negligent or intentional interference with prospective economic advantage and California Proposition 65, which requires warning labels for chemicals that could cause cancer or other health problems.

Donato accused Tetra Tech of oversimplifying the issue and failing to acknowledge the myriad factual disputes that must be resolved, including when each part of the site was acquired by the Navy, what the geographic boundaries are for each section and where the company’s alleged misconduct occurred.

“It is unclear if, when, and for which of these areas the federal government affirmatively accepted exclusive jurisdiction, not to mention any possible reservations of rights made by the state of California,” Donato wrote.

In fighting a lawsuit brought by real estate developer Five Point Holdings and its affiliates, Tetra Tech said claims of negligence, negligent hiring, and negligent and intentional interference with prospective economic advantage are barred by a two-year statute of limitations.

Tetra Tech said the two-year clock started ticking in December 2016 when Five Point acknowledged in a securities filing that allegations of fraud against a Navy contractor involved in the shipyard cleanup project could lead to government investigations and delay its real estate development plans.

The judge found it plausible that Five Point did not have full knowledge of the allegations until documents on the criminal sentencing of a former Tetra Tech supervisor convicted of falsifying records were unsealed in May 2018. Five Point sued Tetra Tech less than two years later, in February 2020.

“It is unclear that the speculative and contingent statements in the SEC filing contradict plaintiffs’ factual complaint allegations,” Donato wrote, adding the dispute should be resolved at a later stage of litigation after more evidence is gathered and presented.

Turning to a complaint brought by former and current Hunters Point residents, Donato scolded both sides for taking a “kitchen sink” approach to both their claims and subsequent motions to dismiss. He also chastised both sides for what he perceived as “significant lapses in civility and professionalism” in their written arguments and called the lack of decorum unacceptable and threatened to slap sanctions on lawyers and their clients.

“All parties and counsel are advised that further breakdowns in civility, and wasteful litigation tactics that unreasonably multiply proceedings, will face sanctions, potentially including monetary sanctions, evidence, issue or defense preclusion, and professional conduct sanctions,” Donato wrote.

Donato rejected Tetra Tech’s argument that the residents’ claims should be dismissed because they “failed to sue indispensable parties,” such as the U.S. Navy and Environmental Protection Agency. However, the judge dismissed claims under California’s unfair competition and false advertising laws because the residents did not show that they lost money or property as a result of Tetra Tech’s alleged misconduct.

He also granted the residents’ request to amend their Proposition 65 claims to show they have complied with the required 60-day notice of intent to sue. The judge gave the residents 30 days to fix those flaws in an amended complaint.

Tetra Tech spokesman Sam Singer did not immediately return an email requesting comment.

Seven whistleblowers have accused Tetra Tech of falsifying soil tests that were supposed to verify the decontamination of part of a 400-acre site where more than 10,000 homes are slated to be built in one of the largest redevelopment projects in San Francisco history.

In 2018, the U.S. government opted to prosecute three whistleblower complaints against Tetra Tech. Last fall, Donato said in court that he would reject Tetra Tech’s bid to dismiss those lawsuits as time-barred.

After whistleblowers came forward with accusations that Tetra Tech falsified reports during a six-year cleanup project, the EPA released an audit in December 2017 finding that 90% to 97% of soil samples in two areas of the site were potentially compromised or purposefully falsified.

Tetra Tech was paid more than $250 million in contracts for its work on the Hunters Point project from 2006 to 2012, according to the U.S. Navy.

This story has been corrected to note the residents’ lawsuit has been dismissed with leave to amend and that the judge scolded both parties over the “kitchen sink” approach.

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