# Petition for Writ of Certiorari — Labour v. American States Insurance

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1997
- **Citation:** 520 U.S. 1265

## Text

c

supreme Court, U.d.

PILED

861609 MAR 41997
0.

OFFICE OF THE CLERK

IN THE
Supreme Court of the United States

OCTOBER TERM, 1996

ARTHUR A. LABOUR,

Petitioner,

VS.

AMERICAN STATES INSURANCE COMPANY
and ROYAL INSURANCE COMPANY,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

THEODORE S. WENTWORTH
Counsel of Record

JAMES D. WHITE
ROBERT S. LEWIN
Attorneys at Law

500 Newport Center Drive, Suite 740
Newport Beach, California 92660
(714) 497-3102

Attorneys for Petitioner
ARTHUR A. LABOUR

Lawyers Brief Service * Appellate Brief Printers * (213) 613-1013 * (714) 720-1510

QUESTIONS PRESENTED

1. Whether the Court of Appeals erred in upholding the
District Court's decision to grant summary judgment in favor
of two insurance carriers and against an insured, in an
environmental clean up coverage dispute over who should
pay for mandated clean up costs for subsurface soil
contamination arising from the conduct of a metals plating
business which involved long term splashing and dripping of
toxic chemicals, but where the evidence also showed that
some of the pollution damage resulted from three large,
sudden and accidental spills which would otherwise have been
covered by the insurance?

‘2 Whether the Court of Appeals erred when it failed to
follow the requirements of the United States Supreme Court
set forth in United States v. Diebold, Inc., 369 US 654, 8
L.Ed.2d 176, 82 S.Ct. 993 (1962) which requires that, at
summary judgment, lower courts must give the non-moving
party the benefit of all reasonable and logical inferences from
the facts adduced?

3. Whether the Court of Appeals erred when it failed to
follow the established and applicable California decisional law
of Montrose v. Superior Court, 6 Cal.4th 287 (1993) and
Vann v. The Travelers Companies, 39 Cal. App. 4th 1610

(1995) which require that under California law, summary
judgment must be denied unless the insurer can establish the
absence of any potential for coverage?

LIST OF ALL PARTIES

All of the parties are listed in the case caption except
Dale Carter, Alice Kazanjian, Richard Perry, Arlene Perry,
Sacramento Plating Company and RAR Marketing. Richard
Perry, Arlene Perry, Sacramento Plating Company and RAR
Marketing filed bankruptcy during the pendency of the district
court case, did not oppose the summary judgment motion, and
did not appeal from the district court's decision granting
summary judgment, although they were also insured by the
same insurance carriers under separate but identical policies of
insurance. Only Labour filed an opposition to the summary
judgment rnotion. Copies of this Petition are being served on
all parties and counsel, including counsel for Insurance
Environmental Litigation Association, a trade association of
property and casualty insures, Amicus, below.

li

TABLE OF CONTENTS

QUESTIONS PRESENTED

LIST OF ALL PARTIES

TABLE OF CONTENTS

TABLE OF AUTHORITIES

OPINIONS BELOW

BASIS FOR JURISDICTION
CONSTITUTIONAL PROVISION INVOLVED
STATEMENT OF THE CASE
REASONS FOR GRANTING THE WRIT
CONCLUSION

APPENDIX A

iil

TABLE OF AUTHORITIES
Cases

Cameron v. Vancouver Plywood Corp.,

266 F2d 535 (CAS, 1959) .......00..s00-000
Horace Mann Ins. Co. v. Barbara B.

2 7S. RURTRARERSE bpm neon monte
Intex v. United Nat. Ins. Co.

23 F3d 254 (9th Cir 1994)...
Lumbermans Mut. v. Belleville Ind.

938 F .2d 1423, 1428 (ist Cir, 1991) ..
Montrose v. Superior Court

PSE BOF CE Diese cdaccadeiicccdnctcun:
Smith v. Hughes Aircraft

22 F. 3d 1432 (9th Cir, 1993)...............
Smith v. Hughes Aircraft

783 F. Supp. 1222 (D. Ariz. 1991).......
United States v. Diebold, Inc.,

369 US 654, 8 L.Ed.2d 176, 82 S.Ct. 993

A 8 5 REAL gO PA MES RRE LI Sere St
Vann v. Travelers Companies

39 Cal. App. 4th 1610 (1995)...............

Other Authorities
Webster's New Universal Unabridged Dictionary,

Second Edition,
Simon & Schuster, 1983..........0000..000.00..

iV

Page

1]
passim
passim

12

~

13

passim

12

SUPREME COURT of the UNITED STATES
OCTOBER TERM, 1996
ARTHUR A. LABOUR, Petitioner,
v.

AMERICAN STATES INSURANCE COMPANY
and ROYAL INSURANCE COMPANY, Respondents

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

Petitioner Arthur Labour hereby respectfully prays that
a writ of certiorari issue to review the judgment and opinion
of the United States Court of Appeals for the Ninth Circuit
entered in this action on October 25, 1996. A timely petition
for rehearing was denied by the Ninth Circuit Court of
Appeals on December 4, 1996.

OPINIONS BELOW

The decision of the District Court is reported as
American States Ins. Co. v. Sacramento Plating, Inc., 861 F.
Supp. 964, 94 Daily Journal DAR 12868. The Decision of the
Court of Appeals was issued on a "Not For Publication" basis.
The decision of the Court of Appeals and the Order on the
Petition for rehearing are set forth in Appendix A to this
Petition.

BASIS FOR JURISDICTION

The judgment and opinion of the United States Court
of Appeals for the Ninth Circuit was entered in this action on
October 25, 1996. A timely petition for rehearing was denied
by the Ninth Circuit Court of Appeals on December 4, 1996.
This Court has jurisdiction to review the judgment of the
Court of Appeals pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISION INVOLVED

The United States Constitution, Amendment V
provides:

"No person shall .. . be deprived of life,
liberty, or property, without due process
oflaw...".

.
4

STATEMENT OF THE CASE

Basis of Federal Jurisdiction in the District Court
And Facts Material to Consideration
Of the Questions Presented

Subject matter jurisdiction in the District Court was
properly based on diversity of citizenship under 28 U.S.C. §
1332. Plaintiff American States Insurance Co. was an Indiana
cotporation. Defendants were all California residents. Cross-
Defendant Royal Insurance Company was an_ Illinois
corporation.

I
Introduction

It is the contention of Petitioner/Appellant Labour that
the District Court and the Court of Appeals below failed to
follow California substantive law, as determined by the
California Supreme Court in Montrose v. Superior Court, 6
Cal. 4th 287 (1993) and as further demonstrated in Vann v.
Travelers Companies, 39 Cal. App. 4th 1610 (1995). At
issue in the case below, which was decided on summary
judgment, was the question of whether, under the facts of the
case, insurance coverage for environmental pollution damages
was excluded by certain exclusionary language of certain
commercial general liability policies issued in the early and
mid-1980's.

1

Federal Courts of Appeal will follow state appellate
court decisions absent compelling evidence that the State's Supreme
Court would decide differently. Intex v. United Nat. Ins. Co. 23 F3d 254
(9th Cir 1994).

The facts demonstrated that pollution of the soil below
the concrete slab floor of a metals plating shop arose from
four causes. One cause was the long term and gradual
dripping and splashing of toxic chemicals onto the shop floor
during normal operations. It is not disputed that pollution
from this cause would not be covered under the applicable
insurance policies. However, the evidence also clearly
demonstrated that there were three additional and at least
equally significant causes; causes for which insurance
coverage should properly have been provided. These three
additional causes arose from three large, isolated, infrequent,
sudden and accidental incidents where the contents of
chemical tanks containing hundreds of gallons of pollutants
were also accidentally spilled and discharged onto the shop
floor. The evidence showed that the shop floor was so
degraded that it permitted the spills to escape into the soils
beneath the slab floor. The insurance carriers and the District
Court below at summary judgment denied insurance coverage
to Petitioner/Appellant Labour for the three large sudden and
accidental spills and refused to treat the three incidents as
covered events because the regular business practices at the
shop involved long term use and spillage of toxic chemicals.
The Court of Appeals affirmed.

The decisions below failed to afford Labour the benefit
of all reasonable and logical inferences from the facts adduced
and failed to follow California substantive law on the subject.
In particular, the Court of Appeals Memorandum decision
(Appendix A, pg. A-1) asserts that "uncontroverted evidence
in the record indicates (the 1981, 1984 and 1985) spills were
not unexpected". Id. at A-5. The decision also asserts that
"(t)he evidence unequivocally demonstrated that the spillage
onto the floor occurred over a long period of time."

a ee ee eee - “

(Emphasis added). Id. at A-6. As will be shown below, and
as has been argued to the Court of Appeals, had the Court of
Appeals given Labour the benefit of all reasonable and logical
inferences from the facts adduced, and had the Court fully
considered all the evidence, the Court could not have
concluded that the evidence was "uncontroverted" and
"unequivocal".

I
The Court Overlooked Montrose V. Superior Court
And Vann V. Travelers

The decisions below overlooked and failed to follow
California substantive law, as determined by the California
Supreme Court in Montrose v. Superior Court, 6 Cal.4th 287
(1993) and as further demonstrated in Vann v. The Travelers
Companies, 39 Cal. App. 4th 1610 (1995). These California
court decisions demonstrate that when considering the
propriety of awarding summary judgment in favor of a
commercial general liability carrier which has denied insurance
coverage for damages arising from pollution, the fact that
regular business practices of the insured involved long term
use and spillage of toxic chemicals" could not eliminate the
possibility that at least some of the pollution damage might

have resulted from accidental causes." (Montrose, pg. 305).
(Emphasis added). To prevail at summary judgment, under
California law, "the insurer must establish the absence" of any
potential for coverage. (Id., pg. 300). The evidence adduced,
when properly considered, does not establish the “absence of
any potential for coverage"; indeed, the Perrv Declaration
(Excerpts of Record/ Court of Appeals, Tab 67) and "tell-tale

lead"* demonstrated in a consultant's report’ proves the very
existence of a potential for coverage based on the three spills
in question. The three spills in question demonstrate that at
least some of the pollution damage resulted from these three
incidents; incidents which were "sudden and accidental", when
all the evidence is properly considered. Thus, under California
law, summary judgment should have been denied.

Although the District Court and the Court of Appeals
in the case at bar relied heavily upon the case of Smith v.
Hughes Aircraft, 22 F. 3d 1432 (9th Cir, 1993), neither
District Court Judge Shubb (in American States Ins. Co. v.
Sacramento Plating (86 F. Supp. 964) nor the Ninth Circuit
Court of Appeals in Smith v. Hughes cited or appeared to
have considered Montrose v. Sup. Ct., which had been
decided a mere four days before the Court of Appeals decided
Smith v. Hughes and six months before it was amended on
rehearing.

Furthermore, Vann v. Travelers (a case decided by the
California Court of Appeals in October of 1995 and which
cites and discusses Montrose v. Superior Court) also confirms

: Elevated levels of lead were found in the soils beneath

the concrete slab. This fact was referred to below as the "tell-tale lead"
for the following reasons; Perry took over metal plating operations at the
site in 1963; during Perry's operations, he did not use lead during his
operations from 1963 to the cessation of business in 1989; yet elevated
lead was found in the soils beneath the slab. The clear inference is that
the lead in solution escaped through the degraded slab floor, thereby
establishing that the slab floor was degraded before the three incidents in
question.

3
000713)

Excerpts of Record/ Court of Appeai, Tab 86, pg. BC

that for a court in California to properly consider a summary
judgment motion, the court must look not to whether
noncovered acts predominate... but to whether there is
any potential for liability. (pg 1613). If the evidence
shows that the pollution was caused "in part, by a condition
that developed so rapidly it could properly be described as
a "sudden" event", then summary judgment is
improper."

Of significance is the fact that the Court in Vann, when
offering an example of a "sudden and accidental" event, noted
that the words "sudden and accidental" should be given a
"common, ordinary meaning, relating to a release of toxic
materials that is short in duration, such as a burst storage
tank." (pg. 1613). In the case at bar, the evidence adduced
regarding the three spills in question showed that on two
specific occasions a storage tank liner ruptured and on the
third occasion a storage tank was inadvertently allowed to
overflow during a filling operation. In each instance,
according to the Perry Declaration, toxins were released onto
the cement floor at a specific point in time, fo wit, "Spring,
1981"; "June, 1984"; and "May, 1985". The evidence further
showed that at the time of each of the three spills in question
Perry believed the chemical spills went down the drain and
into the sewer. However, it may be inferred from the facts
adduced, (particularly from the evidence of the "tell-tale" lead
in the soil beneath the slab in higher than background levels
and the fact that lead was not used by Perry), that the cement
floor was degraded prior to the three spills in question and
thereby provided a "pollution track" through the cement to the
underlying soils.

The Vann Court also noted, citing another California

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Supreme Court case, that "(a)ny doubt as to whether the facts
give rise to a duty to defend is resolved in the insured's favor"
(Vann, at page 1618, citing Horace Mann Ins. Co. v. Barbara
B., 4 Cal.4th 1076, 1081). The decisions by the courts below
in the case at bar overlooked both Montrose v. Superior Court
and Vann v. Travelers and the decisions below fail to follow
California law.

I
The Decisions Overlooked and Failed to Afford Labour
The Benefit of All Reasonable and Logical Inferences
From the Facts Adduced

The decisions below also overlooked and failed to
afford Labour the benefit of all reasonable and logical
inferences from the facts adduced. In particular, the decision
by the Court of Appeals wrongly asserts that "uncontroverted
evidence in the record indicates (the 1981, 1984 and 1985)
spills were not unexpected". The decision also wrongly
asserts that "(t)he evidence unequivocally demonstrated that
the spillage onto the floor occurred over a long period of
time." (Emphasis added). Had the Court of Appeals
considered all the evidence and had it given Labour the benefit
of all reasonable and logical inferences from the facts adduced,
the Court could not have concluded that the evidence was
"uncontroverted" and "unequivocal".

Undoubtedly, the Court of Appeals looked to
paragraph 12 of the Perry Declaration. (Excerpts of Record/
Court of Appeals, Tab 67). Paragraph 12 reads as follows:

"42. The tank content losses described
above were not reported to any governmental

a

ee ee ee ee ee a

agencies or to any insurance companies or
insurance brokers or agents. These events
were not considered insurable by me at the
time they occurred. They arose from general
business hazards which I expected to occur in
SACRAMENTO PLATING, INC.'s
operations at the Site, even thought I did not
want them to happen since replacement of any
chemical bath solutions is a_ substantial
business expense. These incidents involving
loss of tank contents as well as the daily
splashing and dripping of chemicals from the
baths during the plating of bumpers and other
processed parts were a normal part of the
business at the Site throughout the time it was
occupied by me and operated as
SACRAMENTO PLATING, INC."
(Emphasis added).

At first blush, one might interpret paragraph 12 to
mean that the three polluting events in question were
"expected" and that they were a "normal part" of business
operations. However, a careful reading of paragraph 12 and
a careful review of the other facts attested to by Perry tend to
support a contrary conclusion, as will be shown below.
Summary Judgment should be denied where an issue of fact
arises from the "countering inferences" which are permissible
from evidence accepted as true. Cameron v. Vancouver
Plywood Corp., 266 F2d 535 (CA9, 1959). It is the Perry

Declaration and this paragraph in particular that must be read
with an understanding of who the "messenger" of this message
truly was. Perry was also an insured, but filed bankruptcy and
therefore did not oppose the summary judgment motion. The

Perry Declaration is on the pleading paper of the law firm and
attorney for the one of the insurance carriers. The name of the
firm then representing the insurance carrier, (not Perry's own
attorney) is printed on the bottom of each page of Perry's
Declaration. So although one might be tempted to interpret
paragraph 12 to mean that the three polluting events in
question were "expected" and that they were a "normal part"
of business operations, a close reading of paragraph 12
together with the balance of the Perry Declaration shows that
the evidence was not "“uncontroverted" and was not
"unequivocal", as the Court of Appeal's Decision claims and
as Perry's Declaration attempts to conclude.

In this regard, in particular, the evidence shows
"countering inferences". Perry was in charge of and operated
his business at the site from 1963 to 1988 (Perry Dec., § 1).
Under Perry's supervision, the electroplating processes
occurred on a full-time daily basis for the 25 year period from
1963 to 1988. (Perry Dec., ] 5). During the electroplating
process, parts were immersed in tanks containing chemical
baths and the parts were moved by hand from bath to bath.
(Perry Dec., § 7). In moving the parts from bath to bath,
chemicals in liquid form would normaliy splash and/or drip off
the parts onto the wooden catwalk surfaces and to the
flooring. (Perry Dec., { 7). During the 25 year period of
operations by Perry, Perry could only recall three incidents
where loss of chemical bath liquids occurred (other than
during the course of daily operations). (Perry Dec., ¥ 11).

Clearly, if only three such incidents with "large"
releases occurred over a twenty five year period, those three
incidents were not the "norm". The "norm", as Perry's
Declaration shows, was for the contents of a chemical tank to

10

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remain in the tank, except for the drips that occurred as parts
were being moved. Here, referring to the three spills in
question, the District Court noted that "large amounts"
of toxins were "infrequently" released onto the floor. (861
F. Supp. 964, 970). Lumbermans Mut. v. Belleville Ind., 938
F .2d 1423, 1428 (1st Cir, 1991) teaches that a "coverable
occurrence would be clearly identifiable as sudden and
accidental: because it would be a_ marked departure from
normal operations". (Emphasis added). Where pollution is
"part and parcel of daily conduct, there is the possibility of
infinite variations on the usual theme, polluting events are
likely to occur that are on the fringe of normal operations"
(pg. 1428) and thus a microanalysis of a continuous pattern
of pollution would result in an "ill-fated effort to distinguish
between virtually indistinguishable occurrences." (Pg. 1428).
However, the three "large" and "infrequent" spills in the case
at bar here are very much distinguishable from frequent
dripping and splashing which occurred on a daily basis. The
three spills clearly were a "marked departure from normal
operations". As the District Court noted, the three spills in
question resulted in "large amounts" of toxins being
"infrequently" released onto the floor. (861 F. Supp. 964,
970).

This is very much unlike Smith v. Hughes. The Court
of Appeals in Smith v. Hughes said that the "evidence
unequivocally demonstrates that the pollution was gradual".
The Court of Appeals would not permit Hughes to “break
down its long term practices into temporal components.” (Pg.
1438). But, unlike the case at bar, there was good reason in
Smith v. Hughes to refuse to break down the long term
practices into temporal components. Although not recited by
this Court of Appeals in its recitation of the facts in its opinion

1]

in Smith v. Hughes, that reason is found in the District Court's
decision (783 F.Supp 1222) where we learn that the proffered
events in Smith v. Hughes were not entitled to be considered
"sudden and accidental" because they were not infrequent.
The District Court's decision in Smith v. Hughes reveals that
"Hughes encountered periodic episodes where its waste
treatment plant broke down or was over-capacitated." (at 783
F. Supp 1222, 1232, Footnote 14). (Emphasis added).
WEBSTERS defines "Periodic" as "Re-occurring at regular
intervals". Thus, in Smith v. Hughes, the proffered events
were not infrequent, but rather they were "periodic episodes";
episodes "re-occurring at regular intervals". Said another
way, in Smith v. Hughes the proffered events were frequently
occurring events. Thus, the court in Smith v. Hughes rightly
rejected the proffered events in that case.

However, in the case at bar here, as contrasted to the
un-quantified but daily occurring drips and splashes, Perry
could only recall three distinct large spills over a twenty five
year period. Perry's Declaration shows that these three spills
were not a part of the long term practices; they were not
frequently repeated events. Just three events in over twenty
five years of operations by Perry can hardly be said to be
"periodic episodes", as the District Court found in Smith v.
Hughes. In the case at bar, the three events offered to justify
insurance coverage were not part of the normal operations,
they were not events which were "re-occurring at regular
intervals", they were not "periodic episodes". They were
"infrequent" events! Each was, as Lumbermans teaches (at
page 1428), "a marked departure from normal operations"!
"Infrequent" events over a 25 year period cannot fairly be
considered as "periodic"; yet that is exactly what the Courts
below in the case at bar have done.

12

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t
tee

REASONS FOR GRANTING THE WRIT

Environmental clean up is a matter of grave
importance to all. If the insurance industry does not pay their
fair share under the policies that the industry has issued across
this country, then the additional expense and added burden
will fall on us all, whether as individuals or as tax-payers. In
the case at bar, the evidence showed that there were four
main causes of the pollution; one cause was not covered by
insurance, but the other causes would warrant coverage, had
not the Court of Appeals entered a decision that conflicts with
a decision of the court of last resort of the State of California.
The Court of Appeals has departed from the accepted and
usual course of judicial proceedings and has sanctioned such
a departure by the District Court as to call for the exercise of
this Court's supervisory power.

The Courts below failed to follow United States v.
Diebold, Inc., 369 US 654 and thus failed to afford Labour
the benefit of all reasonable and logical inferences from the
facts adduced. Furthermore, the courts below overlooked
Montrose _v. Superior Court and Vann v. Travelers and
thereby failed to follow established California law. In so
doing, the Courts below added a new and additional
requirement to the insurance contract.

CONCLUSION

While paragraph 12 of the Perry Declaration offers a
simplistic conclusion, upon which the insurance carriers have
been only too happy to have the Courts below focus, the
balance of the Perry declaration shows that there was evidence
of "countering inferences" to support the contention that the

13

three spills were not part of the normal operations and that the
pollution also resulting from these three spills was therefore
"sudden and accidental". Thus, the claim in the decision by
the Court of Appeals that the evidence is "uncontroverted"
and "unequivocal" could only be made if the Court overlooked
the evidence of "countering inferences" in the Perry
Declaration which tends to establish that the three spills were
not a part of normal operations. The Perry Declaration, when
properly considered, does not establish the "absence of any
potential for coverage", as Montrose v. Superior Court
requires to justify summary judgment in California in favor of
the carriers. Indeed, the Perry Declaration proves the
existence of coverage based on the three spills in question.
Labour deserved to have a trial in order to determine the
extent of pollution caused by the un-quantified daily drips and
splashes as compared to the pollution caused by the three
large and infrequent "sudden and accidental" polluting events
where hundreds of gallons of toxin were released into the
environment. Under California law the court must look not
to whether noncovered acts predominate ... but to
whether there is any potential for liability. (pg 1613). If
the evidence shows that the pollution was caused "in part, by
a condition that developed so rapidly it could properly be
described as a "sudden" event", then summary judgment
is improper." Simply put, the Court of Appeals below failed
to follow the law.

Although the decisions below are financially
devastating to Labour, he is just but one individual. The
decisions below, unless reversed, will fall heavily on us all.
Unless reversed, the insurance industry as a whole will now be
able to take great advantage of their insureds by citing the
District Court's published decision and asserting the claim that

14

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any amount of gradual pollution at a site from ongoing
operations will defeat any claim for coverage under the
"sudden and accidental" exception to the limited pollution
exclusion, no matter how big the accident and no matter how
unexpected the event. In the late 1970's and the 1980's the
insurance industry sold a standardized policy which claimed
they would cover damages for "sudden and accidental"
pollution. The Courts below, by their decisions in the case at
bar, have now added a new clause to those insurance contracts
in favor of the carriers. Now an insured will not only have to
show that pollution occurred as a result of a "sudden and
accidental" incident, but the insured will also have to show
that there is no evidence of any gradual pollution at the site, as
well. Let there be no mistake about it, the insurance industry
will benefit greatly from this decision; a decision which leaves
in place a summary judgment in favor of the insurers while
overlooking and ignoring established California law. This
decision strips insureds of their rights to insurance coverage
for "sudden and accidental" pollution under the policies in
question, wherever some amount of "gradual" pollution may
also have occurred.

Based on the foregoing, Petitioner/Appellant Labour
respectfully requests this Court grant relief and issue its writ
of certiorari.

Respectfully submitted,

Theodore S. Wentworth
Counsel of Record

James D. White

Robert S. Lewin

Attorneys for Petitioner

15

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
FILED
OCT 25, 1996

AMERICAN STATES ) NO. 94 - 16905
INSURANCE COMPANY )
Plaintiff - counter- ) D.C. No. CV-93-569-WBS
defendant - Appellee, )
V. )
SACRAMENTO PLATING ) Memorandum*
INC.; RICHARD PERRY;
ARLENE PERRY; DALE
CARTER; RAR
MARKETING INC;
ALICE KAZANJIAN,
Defendants, and

ARTHUR LABOUR,
Defendant -counter-
claimant- Appellant,
V.

ROYAL INSURANCE

COMPANY OF AMERICA,
Counter defendant
Appellee.

Nee ee ee le ese es ss

Appeal from the United States District Court
for the Eastern District of California
William B. Shubb, District Judge, Presiding
Argued and Submitted September 16, 1996
San Francisco, California

A-]

Before: BEEZER and THOMPSON, Circuit Judges, and
GILLMOR, ** District Judge.

Arthur A. Labour appeals the district court's entry of
summary judgment for American States Insurance Company
("ASI") and Royal Insurance Company ("Royal") in an action
for declaratory judgment and breach of contract arising out of
ASI's and Royal's refusal to provide coverage under several
comprehensive general liability policies for costs associated
with Labour's compliance with an "Imminent and Substantial
Endangerment Determination and Order" issued by the
California Environmental Protection Agency Department of
Toxic Substances Control ("Cal-EPA Order") regarding
environmental pollution on Labour's Property. The district
court held that the "qualified pollution exclusions" found in the
relevant ASI and Royal policies precluded coverage as a
matter of law. We have jurisdiction pursuant to 28 U.S.C. §
1291. We conclude that the district court properly exercised
jurisdiction over this matter, and we affirm as to all other
issues raised on appeal.

I.
Royal asserts that Labour waived his nght to challenge
the summary judgment decision on appeal by filing a statement
of nonopposition to Royal's motion in the proceedings below.

_ This disposition is not appropriate for publication and
may not be cited to or by the courts of this circuit except as
provided by Ninth Circuit Rule 36-3.

” Honorable Helen Gillmor, United States District Judge
for the District of Hawaii, sitting by designation.

Where, as here, Labour consented to entry of summary
judgment by the district court, "we have ‘followed the practice
of looking at the language of the consent judgment and other
evidence in the record to determine whether a party may
appeal following an order entered by consent.' " Paracor
Finance, Inc. v. General Elec. Capital Corp., 1996 WL
552678 *15 (9th Cir. 1996) (quoting Blair v. Shanahan, 38
F.3d 1514, 1521 (9th Cir. 1994), cert. denied, -- U.S. --, 115
S.Ct 1698 (1995)); Shores v. Sklar, 885 F.2d 760, 762 (11th
Cir. 1989), cert. denied, 493 U.S. 1045 (1990). It is apparent
from the record that at least Labour and the district court
believed that Labour had reserved the right to appeal from
Royal's summary judgment, id., and Labour in fact exercised
this right in a timely fashion by filing his notice of appeal on
October 14, 1994, 30 days after the district court's September
14, 1994 entry of such judgment. See Fed.R.App.Proc. 4(a).
We therefore conclude that Labour did not waive his right to
appeal from the district court's entry of summary judgment in
Royal's favor.'

Il.
Before reaching the merits of Labour's appeal, we

: Although less than clear, Royal appears to assert that

Labour did not file a timely notice of appeal from the district courtis entry
of judgment for ASI. ASI has not raised this issue. Even if ASI had,
however, it should be resolved in Labour's favor. ASI's judgment, dated
August 29, 1994, does not contain an express determination that there
was no reason for delay, and it does not expressly direct entry of a final
judgment. It therefore became final when the district court disposed of
Labour's remaining crossclaims against Royal by judgment entered
September 14, 1994. As discussed in the text above, Labour filed a notice
of appeal on October 14, 1994, 30 days after entry of final judgment. The
appeal was timely. See Kreines v. U.S., 959 F.2d 834, 836 (9th Cir.
1992).

A-3

consider whether the district court abused its discretion by
exercising jurisdiction over the case. In deciding whether a
district court abuses its discretion by entertaining a declaratory
relief action, we consider whether "there are ‘circumstances
present to warrant an exception’ to the general rule that the
action belongs in state rather than federal court." Employers
Reinsurance Corp. v_Karussos, 65 F.3d 796, 799 (9th Cir.
1995) (quoting American National Fire Insurance Co. v.
Hungerford, 53 F.3d 1012, 1019 (9th Cir. 1995)). In the
instant case, the district court expressly weighed the factors
bearing upon the discretionary exercise of federal court
jurisdiction, and decided to retain the declaratory relief action.
We conclude that the circumstances of this case did not
obligate the district court to exercise its discretion to decline
jurisdiction over the declaratory relief claims, especially in
light of Labour's breach of contract counter-claims and cross-
claims against ASI and Royal, respectively. Dismissal of the
declaratory relief claims would have resulted in piecemeal
litigation because the breach of contract claims would still be
pending before the court. See Maryland Casualty Co. v.
Knight, F.3d --, --, 1996 WL 544213 *4. In addition,
dismissal at this stage will frustrate the interests of judicial
economy because, as discussed below, the district court
correctly decided the case on the merits. See id.

We now consider the appeal on its merits.

Ill
We review de novo a grant of summary judgment.
Jesinger v. Nevada Federal Credit Union, 24 F.3d 1127, 1130
(9th Cir. 1994). We must determine, viewing the evidence in
the light most favorable to the nonmoving party, whether there
are any genuine, disputed issues of material fact and whether

A-4

the district court correctly applied the relevant substantive

law. Id.

On appeal, Labour contends that the district court
erred in concluding that the evidence of the three tank spills in
1981, 1984 and 1985 did not raise a triable issue of fact as to
whether a "sudden and accidental" discharge caused part of
the contamination at the Property. The relevant ASI and
Royal policies contain qualified pollution exclusions which
exclude from coverage all claims for injury or damage caused
by a discharge, dispersal, release or escape of pollutants (a
"discharge"), but except from this exclusion injury or damage
caused by "sudden and accidental" discharges. Under
California law, a "sudden and accidental" discharge is one that
is abrupt, unexpected and unintended. See, e.g., Shell Oil Co.
yv. Winterthur Swiss Ins. Co., 12 Cal.App.4th 714, 755, 15
Cal.Rptr.2d 815 (1993). Gradual pollution is unambiguously
excluded from coverage. ACL Technolouies. Inc._v.
Northbrook Property & Casualty Ins. Co., 17 Cal.App.4th
1773, 1787, 22 Cal.Rptr.2d 206 (1993).

The insured has the burden of proving a claim is
covered under an exception to an exclusion, Aeroquip Corp.
v. Aetna Casualtv Surety Co.. Inc., 26 F.3d 893, 894-95 (9th
Cir. 1994), and Labour presented no evidence from which it
could be inferred that the soil contamination was caused by a
"sudden and accidental" discharge. Even if the concrete floor
was degraded prior to 1981, as Labour would have us infer,
the three tank spills in 1981, 1984 and 1985 did not involve
soil contamination caused by an abrupt, unexpected and
unintended discharge. The uncontroverted evidence in the
record indicates that these spills were not unexpected, and that
at least one of these spills resulted from corrosion -- a

A-5

condition that was not abrupt, but rather occurred over time
due to lack of maintenance. In addition, the occasional tank
spills onto the floor occurred in the context of daily drippings
and spills of toxic liquids onto the floor over many years. The
district court, therefore, correctly applied Smith v. Hughes
Aircraft, 22 F.3d 1432 (9th Cir. 1994). Labour's effort to
break down their long term electroplating practices in handling
the chemical fluids into temporal components must be
rejected. Id. at 1438. The evidence unequivocally
demonstrated that the spillage onto the floor occurred over a
long period of time.

We conclude that the district court properly entered
summary judgment in favor of ASI and Royal. Labour's
proffered evidence of the three tank spills did not raise a
triable issue of fact regarding coverage under any ASI or
Royal policy.

AFFIRMED.

A-6

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
FILED
DEC 4, 1996
AMERICAN STATES ) NO. 94 - 16905
INSURANCE COMPANY _ )
Plaintiff - counter- ) D.C.No. CV-93-569-WBS
defendant - Appellee, )
V. )
SACRAMENTO PLATING ) ORDER
INC.; RICHARD PERRY;
ARLENE PERRY; DALE
CARTER; RAR
MARKETING INC;
ALICE KAZANJIAN,
Defendants, and

ARTHUR LABOUR,
Defendant -counter-
claimant- Appellant,
V.

ROYAL INSURANCE

COMPANY OF AMERICA, )

Counter defendant _)

Appellee. )
Before: BEEZER and THOMPSON, Circuit Judges, and
GILLMOR, ** District Judge.

The petition for rehearing is denied.

)
)
)
)
)
)
)
)
)
)
)
)

+6 Honorable Helen Gillmor, United States District Judge
for the District of Hawaii, sitting by designation.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0552%3A1. Public record. Not legal advice.