(CN) — The Ninth Circuit on Thursday reversed a federal jury’s 2018 decision and ordered it to rehear liability and damages claims in a case where it stopped short of awarding damages to a California city whose groundwater was polluted by a chemical company’s fertilizer.
In a 2018 trial in Los Angeles, a federal jury found that fertilizer imported to California in the 1930s and 1940s by SQM North America was responsible for contaminated groundwater in Pomona, a city 30 miles east of Los Angeles.
The city of Pomona sued for $30 million in damages after claiming the company, a subsidiary of Chilean chemical company Sociedad Química y Minera, manufactured and negligently disposed of sodium nitrate fertilizer which polluted the city’s wells.
The fertilizer, typically used for citrus orchards, contained perchlorate which is a chemical often used as a propellant in rocket fuel.
When humans are exposed to large quantities of the chemical, they can develop hyperthyroidism, according to the Centers for Disease Control and Prevention.
California has only regulated the chemical as a contaminant since 2006.
Attorneys for the chemical company argued it could not have contemplated future strict regulations and that it was previously impossible to manufacture the chemical with lower levels of perchlorate.
The company also claimed large quantities of the fertilizer would have been scarce during the World War II era due to diversion of nitrate for munitions manufacturing.
While the federal jury found SQM fertilizer was the source of perchlorates in Pomona’s groundwater wells, it decided the chemical’s benefits in the 1940s outweighed its risks at the time.
On appeal, attorneys for the city argued that during the trial the jury was incorrectly instructed to consider whether the company had knowledge of any product defects at the time of its use.
The Ninth Circuit panel agreed, writing in its majority decision Thursday that California law requires jurors to consider product risks that were not and could not have been known.
“We conclude that the district court misstated the law when it departed from California’s pattern jury instructions and instructed the jury to weigh the risks and benefits of the design of SQM’s fertilizer at the time the product was in use,” the unpublished decision said. “This error was not harmless.”
The decision – penned by U.S. Circuit Judge Kim Wardlaw, a Bill Clinton appointee, and U.S. District Judge Matthew F. Kennelly, sitting by designation, said the chemical company failed to establish harmlessness.
A spokesperson for the city did not immediately respond to a request for comment.
U.S. Circuit Judge Kenneth Lee, a Donald Trump appointee, dissented, writing that the panel may be unfairly stretching its application of the California law requiring jurors to consider risks beyond the context of a product’s manufacture date.
“And under that rule, SQM in 2020 may be held liable for its use of perchlorate in the 1930s and 1940s, even though no one at that time knew that its use was harmful,” Lee wrote.
Lee wrote that the matter should be taken up by the California Supreme Court but his colleagues on the panel disagreed.
The panel ordered the same Los Angeles jury to rehear the case on all issues before U.S. District Judge Gary Klausner.
The issues in question include whether there existed a “mechanical feasibility of a safer alternative design” when SQM produced the chemical in the mid-20th century.
“While Pomona argues that the jury’s finding that SQM’s fertilizer was a ‘substantial factor’ in causing harm to the city’s water supply should be retained, that issue is too intertwined with the issue of damages, which the jury did not reach at the second trial because it found no liability,” the decision said.
This was the second time the Ninth Circuit gave Pomona a lifeline in the matter after circuit judges found that Klausner was prejudiced when he declined to allow a federal jury to listen to a chemical expert’s testimony during a 2015 trial.
Attorneys for SQM North America did not immediately respond to a request for comment.