Petition for Writ of Certiorari — City of Lodi v. Fireman's Fund Insurance

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() 021169FEB5 2003

N @priec oF 7HE-CLERK

In the

Supreme Court of the Anited States

City oF Lopi, CALIFORNIA

Petitioner,

FIREMAN'S FUND INSURANCE Co.,

UNIGARD INSURANCE Co., AND

UNIGARD SECURITY INSURANCE Co.,

4 Respondents.

On PETITION For Writ OF CERTIORARI TO THE

UNITED STATES Court OF ApPEALS For THE NINTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

RANDALL A. Hays MICHAEL C. DONOVAN

Counsel of Record CECELIA C. FUsICH

Ciry ATTORNEY BRIAN R. PAGET

Ciry oF Lopi, CALIFORNIA ASSISTANT CiTy ATTORNEYS

221 West Pine STREET ENVIsIon LAw Group, LLP

Lopi, CALIFORNIA 95240 3717 Mr. DIABLO BLVD.

(209) 333-6701 Suite 100

(20°) 333-6807 FAX LAFAYETTE, CALIFORNIA 94549

(925) 962-6900

(925) 962-6910 FAX

Counsel for Petitioner

BECKER GALLAGHER LEGAL PUBLISHING, INC.,

CINCINNATI, OHIO 800-890-5001

QUESTIONS PRESENTED

This is an action by several national liability insurance

companies challenging the validity of a municipal ordinance

enacted by the City of Lodi, California to address abatement

of a serious environmental public nuisance within its borders.

That ordisance, known as MERLO, is patterned after and

serves the same purposes as the federal and state Superfund

acts, CERCLA and the Carpenter-Presley-Tanner Hazardous

Substance Account Act or HSAA, both of which contain

Savings clauses that explicitly preserve the ability of

municipalities like Lodi to address local contaminated sites.

However, despite those savings clauses and despite the

fact that CERCLA has not been invoked at the Lodi site by

any of the limited number of parties authorized by Congress

_ to do so, the Ninth Circuit held in a published opinion that

several provisions of MERLO are preempted by CERCLA on

a theory of “conflict” preemption (if, on remand, the District

Court finds that Lodi would be a responsible party under

CERCLA were there any direct liability claims under

CERCLA § 106 or § 107 in connection with the Lodi site —

which there are not and never have been) because, in the view

of the Ninth Circuit panel, MERLO: while allowing Lodi to

impose joint and several liability on responsible parties,

somehow shields Lodi from contribution claims under federal

or state law (it clearly cannot and does not); impermissibly

allows Lodi to impose additional clean-up requirements over

and above those required for consistency with the National Oil

and Hazardous Substance Pollution Contingency Plan

(“NCP”), 40 C.F.R., Part 300; and allows prevailing parties

to recover their attorney’s fees (as is expressly authorized by

state law). As such, this petition presents the Court with

these issues for review:

(1) Does the liability scheme set forth in CERCLA

have any preemptive effect on state and loca! laws providing

for the abatement of hazardous substance contamination at a

site where CERCLA’s liability provisions have not been

invoked by a party authorized by Congress to do so?

(2) | IsMERLO preempted by CERCLA and HSAA

because it allows Lodi to impose joint and several liability?

(3) Is MERLO preempted by CERCLA because it

allows Lodi to impose more stringent clean-up requirements

than would be required by the United States acting under

CERCLA?

(4) Is MERLO preempted by CERCLA because it

allows prevailing parties to recover their attorney’s fees?

PARTIES TO THE PROCEEDING

Petitioner

Petitioner is the City of Lodi, a California

municipality. Petitioner was the Appellee in the Ninth Circuit

Court of Appeals and the Defendant in the District Court.

Respondents

Respondents are Fireman’s Fund Insurance Company,

a California corporation, Unigard Insurance Company and

Unigard Security Insurance Company, Washington

corporations doing business in California. Respondents were

the Appellants in the Ninth Circuit Court of Appeals and the

Plaintiffs in the District Court. Petitioner does not know

whether any of the Respondents is a publicly traded

corporation and, if so, whether any publicly held company

owns 10% or more of its stock.

iil

TABLE OF CONTENTS

CPRsI RIEU? WEEMEIUINEUEED Co cies eects eeeeess i

PARTIES TO THE PROCEEDING ............. il

p70 a es eee eae iV

TABLE OF CITED AUTHORITIES ............ Vill

oo soe as 66 wee eens l

STATEMENT OF JURISDICTION ............. 1

STATUTORY PROVISIONS INVOLVED cy ene l

STATEMENT OF THE CASE ... wc ees scence, 3

A. a eae ee ee ee 3

B. FOCUIR RACRBTOUME 2. et eee 5

i oo ee ere 6

REASONS FOR GRANTING THE PETITION ...... 8

The Ninth Circuit’s published opinion decided

nationally important questions of federal law in

a way that conflicts with decisions of this

Court, of other U.S. Courts of Appeal, and of

the California Supreme Court ............. 8

A. The Ninth Circuit effectively

federalized remedial environmental law

at all hazardous’ subsiance

contamination sites across the nation by

applying CERCLA’s liability scheme

to a site where CERCLA has not been

triggered by a party authorized by

eo eer te ee ee re 13

B. MERLO does not “protect Lodi from

contribution claims” and thus does not

conflict with, and is not preempted by,

HSAA or CERCLA, on that basis ..... 16

ed MERLO does not conflict with, and

thus is not preempted by, CERCLA

because CERCLA allows states and,

where authorized by state law, their

political subdivisions to impose joint

and several liability .............. 19

D. MERLO does not conflict with, and

thus is not preempted by, CERCLA

because CERCLA allows states and,

where authorized by state law, their

political subdivisions to impose

environmental clean-up requirements

and procedures that are more stringent

than those that would be required in an

action by the United States under

i Fe Perr a ae 2 ere age 24

E. MERLO does not conflict with, and

thus is not preempted by, CERCLA

because CERCLA allows prevailing

parties to recover their attorney’s fees

in proceedings brought pursuant to

other federal, state or local laws like

SE < 50a a eee ee ere eed 28

oo | PRET ee eee Tee ee ee ee 30

ng ee ee ere re err a an la

Appendix A

Fireman’s Fund Ins. Co. v. City of Lodi,

California, Order Denying Petitions for

Rehearing and Rehearing En Banc and

Modifying Opinion (9th Cir. Oct. 8, 2002) .... la

Appendix B

Fireman’s Fund Ins. Co. v. City of Lodi,

California, 302 F.3d 928 (9th Cir. Oct. 8,

SE obec bears ae dc kn ea ee 6a

Appendix C

Fireman’s Fund Ins. Co. v. City of Lodi,

California, 41 F. Supp. 2d 1100 (E.D. Cal.

ee ee ee or rae 64a

Appendix D

Unigard Ins. Co. v. City of Lodi, California,

1999 WL 33454809 (E.D. Cal. March 5,

1999)

Appendix E: Statutes Involved

MERLO, Lodi Mun. Code

Se ee ch acceescesacaes 107a

CERCLA, 42 U.S.C. §§ 9601-9675 (excerpts)

HSAA, Cal. Health & Safety Code

§§ 25300-25395.15 (excerpts) .......... 204a

TABLE OF CITED AUTHORITIES

Cases:

Acme Fill Corp. v. Althin CD Med., Inc.

1995 WL 822665 at *5 (N.D. Cal. 1995) ...... 9

American Motorcycle Association v. Superior Court

SP UW GMT 6 ccc wrt esereweees 21

Arbuthnot v. Relocation Realty Service Corp.

an) Cal. App. SE GES CISPE) 2 cece eees 19

Aviall Services, Inc. v. Cooper Industries, Inc.

Dad WO OEE CDG. BUUED cee ccceseces 18

Boyes v. Shell Oil Prods. Co.

199 F.3d 1260 (11th Cir. 2000) ............ 11

City of Merced v. Fields

997 F. Supp. 1326 (E.D. Cal. 1998) ..... 10, 22

Connecticut Indemnity Co. v. Superior Court

SP ED os eh ee 8 es oe 5

Exxon Mobil Corp. v. United States E.P.A.

217 F.3d 1246 (9th Cir. 2000) ............. 12

Figone v. Guisti

43 Cal. App. 606 (1919) ................ 17

Fireman's Fund Insurance Co. v. City of Lodi, California

302 F.3d 928 (9th Cir. 2002) .......... passim

Fireman's Fund Insurance Co. v. City of Lodi, California

BFk Foe Oak CUR CH, BOGED cc ccc ccc eces 7

Fireman’s Fund Insurance Co. v. City of Lodi, California

41 F. Supp. 2d 1100 (E.D. Cal. 1999) ..... 1, 16

Gade vy. National Solid Wastes Management Association

Pe A RO neh cb dccedactiweraies 11, 30

Gibbons v. Ogden

22 U.S. (9 Wheat) 1 6 L. Ed. 23 (1824) ....... 11

Hillsborough County v. Automated Med. Labs., Inc.

ee PO 9-6 5 o's 60-00 6 0 0 0.0 5 12

Industrial Truck Association v. Henry

yap A Bee, oe Be 11

Key Tronic Corp. v. United States

eee rere Pee 28

Li v. Yellow Cab Co.

oe A. er ar 21

Lincoln Properties, Ltd. v. Higgins |

1993 WL 217429 (E.D. Cal. 1993) ....... 9, 22

People of the State of California v. M&P Investments

No. CIV. S-00-2441-FCD-JFM (E.D. Cal.) .. . 23

Pinal Creek Group v. Newmont Mining Corp.

eee pe Fo le 21

Rice v. Santa Fe Elevator Corp.

eee ee ee eee 11

Scott v. City of Del Mar

8 Cal. App. 4th 1296 (1997) ............. 17

Sherwin-Williams Co. v. City of Los Angeles

Ee SPE PFD 6 wee eee wees 12

Stanton Road Assoc. v. Lohrey Enterprises

964 F.26 1015 (th Cur. 1993) .. 2 ee 8

Tint v. Sanborn

211 Cal. App. 3d 1225 (1989) .......... 9, 22

Unigard Insurance Company v. City of Lodi, California

1999 WL 33454809 (E.D. Cal. 1999) ....... ]

United States v. Akzo Coatings of America, Inc.

949 F.2d 1409 (6th Cir. 1991) .......... 9,27

United States v. Chapman |

146 F.3d 1166 (Sth Cir. 1998) ............ 28

United States v. City of Denver

100 F.3d 1509 (10th Cir. 1996) .......... 8, 26

Wisconsin Public Intervenor v. Mortier

Bk eg i | rn a rn 3, 4, 11

Constitutional Provisions:

California Constitution, Article 11,§7 ........ ‘2. iF

Statutes:

United States Code:

Oe ULB BS Fee nc ee ewe ere wens p

Eo ks oa a kee ee 14

a ee oe ee ee 14

er ore ee. ak oe eee es i, 14

ie ee 2 | i, 14, 15, 20, 21, 29

ee ee a ak ee ee ee 14

hie toe. |. 16, 18, 20, 21, 23

ee EE os hd as 5's wb We by Bu at

a sg A ee ea eS 27

ee kc Se oa Ok ee ee 15

ee ee, I 6 i n'y kd hw eo ew oe 2,9, 26

on ee OE kb ee ee es 2,9, 15, 26

California Civil Code:

NE ae a hk we ok 21

ES Phe gk nad ns ah ak a 22

I ic Glave tae ede eet coe a tg 19, 22

i oc edie aoe ae ee oe 19

UN ee ck ee are hig eran Gs nate 19

RRR ote irar are co emery aera a 19

ea dag oS vk ee ae ee ee 19

California Government Code:

te ie ale ty es ona el aa ee ee Cee 6

Ce Le ek ye ea ae ok wee 17, 29

NI se ee a al ook ad wa rear en oe aoe 17

eo le ing ye las Phe Sad ate gi see 29

Og. Serer apenas ear ornare a 17

California Health & Safety Code:

ek ee ee

0 SN eee ee eee ee ee 3

EE hese. ha ee ERM Oe RR ED 16

OC Sr ee eer ee ee ee re ee re 6

Regulations:

Code of Federal Regulations:

ee eee i. 2

Ss eo bis he hk ee eR Oe 27

ee ee es ev ee eee eee 27

SD bce ko ee oO ee eS : ae

ee ee ks ee hee ee ek ee 27

Ordinances:

Lodi Municipal Code:

§§ 8.24.010-8.24.090 .............. 1, 2, 28

a's gy Ea gw nk ae 2, 24

DUE 6 4 hace oh ae eee 1, 2, 10, 19, 24, 28

Secondary Authorities:

Bruce P. Howard, et al., CERCLA and Similar State

Laws: Overview and Recent Developments,

832 PLI/Corp 531, 551 (Dec.-Jan. 1993) ..... 9

Donna R. Black, Potential Environmental Liabilities

in Corporate Acquisitions, 894 PLI/Corp 543,

to ere eer 9

California Jurisprudence 3d: Actions §52 ......... 17

Restatement (Third) Torts: Apportionment of Liability § C21 22

Xli

The City of Lodi, California (“City” or “Lodi”)

respectfully petitions the Supreme Court for a writ of

certiorari to review the Ninth Circuit Court of Appeal’s

published opinion in this case.

OPINIONS BELOW

The Ninth Circuit’s opinion is reported at Fireman’s

Fund Insurance Co. v. City of Lodi, California, 302 F.3d 928

(9th Cir. 2002). (See App. B at 6a.) The District Court’s

orders from which the appeals herein were taken are reported

at Fireman's Fund Insurance Co. v. City of Ledi, California,

41 F. Supp. 2d 1100 (E.D. Cal. 1999) (see-App.C at 64a)

and Unigard Insurance Co. v. City of Lodi, California, 1999

WL 33454809 (E.D. Cal. 1999) (see App. D at 90a).

STATEMENT OF JURISDICTION

The Ninth Circuit modified its opinion and denied the

parties’ petitions for rehearing on October 8, 2002. (See

App. A at la.) On January 2, 2003, this Court extended the

time for Lodi to file a petition for a writ of certiorari to and

including February 5, 2003. (See Application No. 02A540.)

Accordingly, this petition is timely and this Court’s

jurisdiction is invoked pursuant to 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

This petition calls upon the Court to interpret and

apply the following statutory provisions:

(1) The Comprehensive Municipal Environmental

Response & Liability Ordinance (“MERLO”), Lodi

Municipal Code §§ 8.24.010-8.24.090. (See App. E at 107a.)

Of particular relevance to this petition are the provisions of

MERLO that authorize Lodi to impose joint and several

liability on responsible parties (Lodi Mun. Code

§§ 8.24.040(E)), that authorize Lodi to impose more stringent

clean-up requirements on responsible parties than would be

required under other laws (Lodi Mun. Code

§ 8.24.0030(A)(5)), and that authorize prevailing parties to

recover their attorneys’ fees in proceedings brought pursuant

to MERLO (Lodi Mun. Code §§ 8.24.010(2),

8.24.040(A)(9)(a), (c)(1), (F)).

(2) The Comprehensive Environmental Response,

Compen-sation & Liability Act (“CERCLA” or the “Federal

Superfund Act”), 42 U.S.C. §§ 9601-9675. (See App. E at

199a (excerpts only).) Of particular relevance to this petition

are CERCLA’s three savings clauses that preserve the ability

of states and their political subdivisions to respond to

contaminated sites. First, CERCLA § 114(a) states that

“[nJothing in this chapter shall be construed or interpreted as

preempting any State from imposing any additional liability or

requirements with respect to the release of hazardous

substances within such State.” (42 U.S.C. § 9614(a).)

Second, CERCLA § 302(d) states that “[nJothing in this

chapter shall affect or modify in any way the obligations or

liabilities of any person under other Federal or State law,

including common law, with respect to release of hazardous

substances or other pollutants or contaminants... .” (42

U.S.C. § 9652(d).) And third, CERCLA § 310(h) states that

“[t]his chapter does not affect or otherwise impair the rights

of any person under Federal, State, or common law... .”

(42 U.S.C. § 9659(h).)

(3) ' The Carpenter-Presley-Tanner Hazardous

Substance Account Act (“HSAA” or the “State Superfund

Act”), California Health & Safety Code §§ 25300-25395.15.

(See App. E at 204a (excerpts only).) Of particular relevance

here is HSAA’s savings clause, which provides that, with

certain exceptions not applicable here, HSAA does not “affect

or modify in any way the obligations or liabilities of any

person under any other provision of state or federal law,

including common law... .” (Cal. Health & Safety Code

§ 25366(c).) Significantly, the phrase “state law” is used in

HSAA to include municipal law: “‘A release authorized or

permitted pursuant to state law’ means any release into the

environment which is authorized by statute, ordinance,

regulation, or rule of any state, regional, or local agency or

government... .” (Cal. Health & Safety Code § 25326.)

STATEMENT OF THE CASE

A. Introduction

The Ninth Circuit’s published opinion in this case

marks the first time (to Lodi’s knowledge) that this Court’s

decision in Wisconsin Public Intervenor v. Mortier, 501 U.S.

597, 606-608 (1991) has been applied by a Circuit Court of

Appeal to CERCLA. Unfortunately, the Ninth Circuit

misapplied Mortier and effectively federalized remedial

environmental law by applying CERCLA to a non-CERCLA

site. The Court will recall that Mortier involved the issue of

whether the Federal Insecticide, Fungicide and Rodenticide

Act (“FIFRA”) preempted a municipal ordinance. (/d., at

602.) This Court in Mortier began its analysis by noting that

FIFRA expressly authorizes “State[s]” to regulate pesticides,

but makes no reference in its savings clause to political

subdivisions of states. (/d., at 606-607.) This Court went on

to find, however, that the term “State” is broad enough to

encompass political subdivisions, and that the fact that FIFRA

is silent with respect to the power of local governments

“cannot suffice to establish a clear and manifest purpose to

preempt local authority.” (Jd., at 607 (internal quotes

omitted).) “Indeed, the more plausible reading of FIFRA’s

authorization to the States leaves the allocation of regulatory

authority to the ‘absolute discretion’ of the States themselves,

including the option of leaving local regulation of pesticides

in the hands of local authorities.” (/d., at 608.)

Here, the Ninth Circuit correctly found “that Mortier’s

reasoning regarding FIFRA is equally applicable to CERCLA.

Like FIFRA, CERCLA anticipates that states will enact

supplemental remedial environmental legislation. Moreover,

like FIFRA, the CERCLA savings clauses refer only to

‘State[s],’ while CERCLA specifically refers to both states

and political subdivisions in other provisions.” (Fireman’s

Fund Ins. Co. v. City of Lodi, California, 302 F.3d 928, 942

(9th Cir. 2002).)

However, the Ninth Circuit failed to faithfully follow

the reasoning of Mortier and instead limited the application of

CERCLA’s savings clauses to the doctrine of “field”

preemption. That left the Ninth Circuit free to essentially

ignore CERCLA’s savings clauses during its “conflict”

preemption analysis. (See Fireman’s Fund Ins. Co. v. City of

Lodi, California, 302 F.3d 928, 952, n.26 (9th Cir. 2002).)

And that, in turn, may be why the Ninth Circuit applied

CERCLA’s liability scheme to the Lodi site even though

CERCLA’ liability scheme has not been invoked at the Lodi

site. The Ninth Circuit, in essence, held that Lodt-is barred

from obtaining by municipal law any benefit (such as the

ability to impose joint and several liability or to recover its

attorneys’ fees) that it would not be able to obtain under

CERCLA even though CERCLA’s liability scheme has not

been triggered at this site by any of the limited number of

parties authorized by Congress to do so. That in itself is an

extraordinary departure from traditional preemption

jurisprudence and over twenty years of jurisdictional

jurisprudence under CERCLA. But what is worse is that the

Ninth Circuit’s decision is already being applied by the

District Court in a related case to possibly preempt California

State public nuisance law as well as MERLO. After all, if, as

the Ninth Circuit held, CERCLA bars municipalities from

obtaining benefits under municipal law that they would not be

able to obtain under CERCLA, then why wouldn’t CERCLA

similarly bar municipalities (or anyone else) from obtaining

4 2

benefits under state law that they would not be able to obtain

under CERCLA? The Ninth Circuit’s decision has, therefore,

left Lodi and other local governments throughout the nation

with only one option for responding to environmental public

nuisances — CERCLA’s liability scheme. As such, its

decision has, contrary to three express congressional

commands, effectively preempted and federalized the entire

field of hazardous substance site remediation (despite its

holding to the contrary).

B. Factual Background

The City of Lodi is faced with, as the California

Supreme Court put it, “an environmental public nuisance

amounting to . . . a tremendous and serious groundwater

contamination problem within Lodi’s city limits.”

(Connecticut Indemnity Co. v. Superior Court, 23 Cal. 4th

807, 814 (2000) (internal quotes omitted).) That

contamination, first detected in 1989, was caused by releases

of toxic chemicals, principally tetrachloroethylene (“PCE” or

“perc”) and tricholoethylene (“TCE”), into the environment

over many decades by dozens of dry cleaners and other

businesses in Lodi. The contamination poses a serious and

imminent threat to the public health, welfare, and the

environment, especially given that Lodi’s groundwater is its

sole source of drinking water.

In 1996, Lodi entered into negotiations with the

California Environmental Protection Agency’s Department of

Toxic Substances Control (“DTSC”) to clarify the parties’

mutual roles and responsibilities for responding to the

contamination. Those negotiations culminated in 1997 when

Lodi and the DTSC entered into a comprehensive joint

cooperative agreement (“Cooperative Agreement”). In that

Cooperative Agreement, Lodi settled its potential liability, if

any, related to “leaks” from its sewers of hazardous

substances that had been placed there by others. Also, Lodi

was designated the “lead enforcement entity” for the site and

charged with the responsibility, in full cooperation and

communication with DTSC, of diligently prosecuting

appropriate environmental enforcement actions against

responsible parties to compel their prompt and comprehensive

investigation into, and clean-up of, the contamination.

Later that same year, 1997, the Lodi City Council

enacted MERLO as required by the Cooperative Agreement.

MERLO was designed to give Lodi the appropriate legal tools

to properly discharge its responsibilities as the lead

enforcement entity at the site. Basically, MERLO creates

environmental investigatory tools and a _ remedial

environmental response and liability scheme much like its

federal and state counterparts, CERCLA and HSAA.'

a Procedural History

In 1998, Fireman’s Fund Insurance Company

(“Fireman’s Fund”), Unigard Insurance Company and

Unigard Security Insurance Company (collectively,

“Unigard”), insurers of various potentially responsible parties

at the Lodi site, brought two separate actions challenging

MERLO on a variety of grounds, including federal and state

law preemption. The District Court ruled in favor of Lodi in

- both cases.

Fireman’s Fund and Unigard (collectively, the

“Insurers”) then separately appealed those rulings to the Ninth

Circuit Court of Appeals. After being consolidated and

extensively brie,ed, the appeals were argued and submitted on

' It should be noted that, in California, municipal ordinances

are state law, albeit not “general laws” of the state, and a violation

of them may be prosecuted by city authorities in the name of the

“people of the State of California.” (Cal. Gov. Code § 36900(a).)

April 7, 2000. Then, on October 30, 2001, in a published

decision, the Ninth Circuit partially affirmed and partially

reversed the District Court’s rulings. (See Fireman’s Fund

Ins. Co. v. City of Lodi, California, 271 F.3d 911 (9th Cir.

2002).) In November 2001, the Insurers filed petitions for

rehearing. On December 28, 2001, the Ninth Circuit

requested that Lodi respond to the Insurers’ petitions. Lodi

did so on January 18, 2002. The Ninth Circuit then withdrew

its opinion’ on April 17, 2002, and issued a new published

opinion on August 6, 2002. The parties again petitioned for

rehearing. The Ninth Circuit denied those petitions and

modified its published opinion for the final time on October

8, 2002.

Briefly, the Ninth Circuit held that MERLO is

preempted in several respects by state and federal law under

the doctrine of conflict preemption. Specifically, the Ninth

Circuit held that, “[i]f the district court finds [on remand] that

Lodi is a PRP [i.e., a responsible party], MERLO is

preempted [by CERCLA and HSAA] to the extent that it

protects Lodi from contribution claims by other PRPs” and

“to the extent that it legislatively insulates Lodi from bearing

its share of responsibility by imposing joint and several

liability on other PRPs.” (Fireman’s Fund Ins. Co. v. City of

Lodi, California, 302 F.3d 928, 946-47 (9th Cir. 2002).)

Likewise, “[i]f the district court finds that Lodi is indeed a

PRP, it [also] may not legislate for itself a litigation advantage

by granting itself the right to collect attorney’s fees” that

would not be available to it under CERCLA. (/d., at 952-53.)

Regardless of whether or not Lodi is found to be a PRP, the

Ninth Circuit also held “that MERLO’s provisions dealing

with cleanup procedures are preempted by CERCLA . . . to

the extent that they permit Lodi to order use of procedures

? The Ninth Circuit had amended its opinion on January 8,

2002.

more stringent than the NCP.” (J/d., at 951-52.) And,

finally, the Ninth Circuit held that, “[bJecause . . . the

‘invalid provisions are easily severable from the remainder of

the ordinance,’ the balance of MERLO[’s] . . . provisions. . .

remain viable and are not preempted by either state or federal

law. ...” (Id., at 957.)

REASONS FOR GRANTING THIS PETITION

The Ninth Circuit’s published opinion

decided nationally important questions of

federal law in a way that conflicts with

decisions of this Court, of other U.S. Courts

of Appeal, and of the California Supreme

Court.

Before addressing how the Ninth Circuit’s decision

conflicts with decisions of other federal aad state courts and

drastically curtails the traditionally-broad police power of

municipalities to effectively respond to local environmental

public nuisances that threaten the public health, welfare and

the environment, it might be useful to briefly review the law

of preemption as well as the three complimentary statutory

schemes that deal with the clean-up of hazardous waste sites

at the federal, state, and local level, and that are relevant to

this petition, namely CERCLA, HSAA, and MERLO.

In response to the national outcry over the

environmental disasters at Love Canal, the Chem-Dyne site

and elsewhere, Congress enacted CERCLA in 1980 “to

provide a mechanism for the prompt and efficient cleanup of

hazardous waste sites.” (See United States v. City of Denver,

100 F.3d 1509, 1511 (10th Cir. 1996) .) CERCLA’s two

overriding objectives are to facilitate the timely cleanup of

hazardous waste sites and to make polluters pay for the

necessary remedial costs to address the conditions that they

caused. (Stanton Road Assoc. v. Lohrey Enterprises, 984

F.2d 1015, 1019 (9th Cir. 1993).) In enacting CERCLA,

Congress designed the statute to serve as an umbrella of

response, compensation and liability authorities that federal,

state, and local governments (and, to some extent, private

parties) could utilize to address environmental contamination.

The text of CERCLA makes clear that Congress envisioned

a partnership between various levels of government in

addressing the complex and costly problems associated with

hazardous waste remediation, and that Congress anticipated

that states would enact supplemental environmental remedial

legislation. (See CERCLA §§ 114(a), 302(d), 310(h), 42

U.S.C. §§ 9614(a), 9652(d), 9659(h).) As such, it has been

correctly held that “CERCLA sets a floor, not a ceiling, for

environmental protection.” (United States v. Akzo Coatings

of America, Inc., 949 F.2d 1409, 1454 (6th Cir. 1991).)

HSAA, which is commonly referred to in California

as the “State Superfund Act,” mirrors CERCLA in many

respects. (Acme Fill Corp. v. Althin CD Med., Inc., 1995

WL 822665 at *5 (N.D. Cal. 1995).) Like CERCLA, HSAA

“imposes cleanup obligations and provides private cost

recovery rights substantially identical to those obligations

imposed and rights granted under CERCLA.” (Donna R.

Black, Potential Environmental Liabilities in Corporate

Acquisitions, 894 PLI/Corp 543, 546 (June-July 1995).)

HSAA also relies on CERCLA’ definition of PRPs. (Bruce

P. Howard, et al., CERCLA and Similar State Laws:

Overview and Recent Developments, 832 PLI/Corp 531, 551

(Dec.-Jan. 1993).) However, HSAA differs from CERCLA

in that “HSAA liability may be apportioned according to

fault,”* whereas liability under CERCLA may be joint and

> It should be noted, however, that, under California public

nuisance law, liability for indivisible harms is joint and several.

(See e.g., Lincoln Properties, Ltd. v. Higgins, 1993 WL 217429,

at *25 (E.D. Cal. 1993); Tint v. Sanborn, 211 Cal. App. 3d 1225,

several where warranted. (/d.)

MERLO is modeled on both CERCLA and HSAA,

and was, as previously noted, enacted by the Lodi City

Council with the full cooperation and encouragement of the

DTSC. MERLO incorporates many of the standards

employed by CERCLA and HSAA. For example, MERLO

uses a similar definition of who is considered a liable or

“responsible party” as that used by CERCLA and HSAA (see

Lodi Mun. Code § 8.24.040(A)(1)), and, like CERCLA, the

scope of liability under MERLO is joint and several (see Lodi

Mun. Code § 8.24.040(F)). Lodi enacted MERLO to assist

the City of Lodi—the governmental entity most familiar with

and intimately connected to the site—in responding to the

contamination in order to protect the public health, welfare

and the environment.

In sum, CERCLA, HSAA, and MERLO are

complimentary statutory schemes that work together to

authorize their respective levels of government to obtain

appropriate injunctive relief and cost recovery in responding

to environmental contamination. CERCLA’s primary concern

is the expenditure and recovery of federal funds expended to

respond to environmental concerns arising from hazardous

substance sites. HSAA’s concern is the proper expenditure

and recovery of state funds expended to respond to hazardous

substances released into the environment. And, MERLO’s

concern is the proper expenditure and recovery of municipal

funds expended to respond to environmental public nuisances.

With those three complimentary statutory schemes in

mind, the discussion can now turn to the general principles

applicable to preemption claims. As to preemption by federal

1227-34 (1989); City of Merced v. Fields, 997 F. Supp. 1326,

1332-33, 1335-37 (E.D. Cal. 1998).)

law, under the Supremacy Clause of the United States

Constitution, state or local laws that “interfere with, or are

contrary to the laws of Congress” are preempted and are

therefore invalid. (Gibbons v. Ogden, 22 U.S. (9 Wheat) 1,

211, 6 L. Ed. 23 (1824).) “Congressional intent governs

[the] determination of whether-ederal law preempts state law.

If Congress so intends, ‘[p]re-emption . . . is compelled

whether Congress’ command is explicitly stated in the

statute’s language or implicitly contained in its structure and

purpose.” (Boyes v. Shell Oil Prods. Co., 199 F.3d 1260,

1267 (11th Cir. 2000), quoting Gade v. National Solid Wastes

Management Association, 505 U.S. 88, 96 (1992) (plurality).)

(Fireman's Fund Ins. Co. v. City of Lodi, California, 302

F.3d 928, 941 (9th Cir. 2002).)

This Court has recognized three types of federal

preemption: express preemption, where the statute contains

“explicit pre-emptive language” ; field preemption, “where the

scheme of federal regulation is so pervasive as to make

reasonable the inference that Congress left no room for the

States to supplement it”; and conflict preemption, “where

compliance with both federal and state regulations is a

physical impossibility, or where state law stands as an

obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.” (Gade v. National

Solid Wastes Management Association, 505 U.S. 88, 96

(1992) (plurality).) “Although these categories provide a

useful analytic framework, they are not ‘rigidly distinct.’”

(Industrial Truck Association v. Henry, 125 F.3d 1305, 1309

(9th Cir. 1997).)

“When considering [preemption], ‘[courts] start with

the assumption that the historic police powers of the States

were not to be superseded by the Federal Act unless that was

the clear and manifest purpose of Congress.’” (Wisconsin

Pub. Intervenor v. Mortier, 501 U.S. 597, 604 (1991),

quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230

(1947).) Moreover, courts are “highly deferential” to local

legislation in areas such as environmental regulation, which

“traditionally has been a matter of siate authority.” (Exxon

Mobil Corp. v. United States Environmental Protection

Agency, 217 F.3d 1246, 1255 (9th Cir. 2000).) Finally, for

“purposes of the Supremacy Clause, the constitutionality of

local ordinances is analyzed the same way as that of statewide

laws.” (Hillsborough County v. Automated Med. Labs., Inc.,

471 U.S. 707, 713 (1985) (internal citations omitted).)

As to preemption of local laws by state law,

California’s preemption doctrine is based on Article 11, § 7

of the California Constitution, which states that “[a] county or

city may make and enforce within its limits all local, police,

sanitary, and other ordinances and regulations not in conflict

with general laws.” (Cal. Const., Art. 11, § 7; Sherwin-

Williams Co. v. City of Los Angeles, 4 Cal. 4th 893, 897

(1993).) The California Supreme Court has held that State

law is “in conflict with,” or preempts, local law if the local

law “duplicates, contradicts, or enters an area fully occupied

by general law, either expressly or by legislative implication.”

(Sherwin-Williams, 4-Cal. 4th at 897.) As the court

explained:

Local legislation is “duplicative” of general

law when it is coextensive therewith.

Similarly, local legislation is “contradictory”

to general law when it is inimical thereto.

Finally, local legislation enters an area that is

“fully occupied” by general law when the

Legislature has expressly manifested its intent

to “fully occupy” the area, or when it has

impliedly done so. . . .

(Id. at 897-98 (internal quotations and citations omitted).)

Thus, with the exception of the concept of preemption by

duplication which has no federal analogue, California’s

preemption law is substantially similar to federal preemption

law.

With this general background on the applicable law in

mind, the discussion can now turn to the substance of the

Ninth Circuit’s decision, where the Ninth Circuit went so

very wrong in its analysis, and why this Court’s review of

that decision is so very important to the City of Lodi and to

other municipalities throughout the country.

A. The Ninth Circuit effectively federalized

remedial environmental law at all hazardous

substance contamination sites across the

nation by applying CERCLA’s liability

scheme to a site where CERCLA has not

been triggered by a party authorized by

Congress to do so.

Initially, it is crucial for this Court to understand that

the Ninth Circuit effectively federalized remedial

environmental law at hazardous substance contamination sites

across the nation by applying CERCLA’s liability scheme to

a site where CERCLA’ liability scheme has not been invoked

by any of the limited number of governmental or non-liable

private parties authorized by Congress to invoke it. Although

CERCLA authorizes a limited number of different persons to

undertake a number of different actions to address releases or

threatened releases of hazardous substances into the

environment by facilities, none of those actions have been

undertaken here in connection with the Lodi site:

° Although many years ago the U.S. Environmental

Protection Agency elected to conduct some very

limited sampling and file review at and in connection

with the Lodi site, it elected not to propose listing the

site on the National Priorities List (“NPL”) and has

not commenced any further removal or remedial

actions at the Lodi site pursuant to CERCLA § 104(a),

42 U.S.C. § 9604(a), nor has it commenced any action

to recover any of the very limited response costs it

incurred at the Lodi site pursuant to CERCLA

§ 107(a), 42 U.S.C. § 9607(a), or any other statute or

regulation.

The federal government-is not using its information

gathering authority to investigate or monitor the

contamination at the Lodi site pursuant to CERCLA

§ 104(b) or (e), 42 U.S.C. § 9604(b), (e).

The federal government has not listed the Lodi site on

the NPL _ established pursuant to CERCLA

§ 105(a)(8)(B), 42 U.S.C. § 9605(a)(8)(B).

No one has made a claim, valid or otherwise, against

the federal Superfund for reimbursement of response

costs incurred at the Lodi site pursuant to CERCLA

§ 112(a), 42 U.S.C. § 9612¢a).

No authorized agency of the United States has issued

an administrative abatement action order against any

responsible parties at the Lodi site pursuant to

CERCLA § 106(a), 42 U.S.C. § 9606(a).

The federal government has not brought a civil action

against any responsible parties seeking injunctive

relief with respect to the Lodi site pursuant to

CERCLA § 106(a), 42 U.S.C. § 9606(a).

Neither the federal government, the State of

California, nor any Indian tribe has brought a civil

action against any responsible parties to recover

response costs or natural resource damages incurred at

the Lodi site pursuant to CERCLA § 107(a), 42

U.S.C. § 9607(a). In fact, the State covenanted not to

pursue such CERCLA claims against Lodi in the

Cooperative Agreement.

e The City of Lodi has not brought a civil action against

any responsible parties to recover its response costs

incurred at the [Lodi site pursuant to any provision of

CERCLA, including CERCLA § 107(a), 42 U.S.C.

§ 9607(a).* Also, Lodi covenanted not to pursue such

CERCLA claims against the State in the Cooperative

Agreem.nt.

° No innocent private party has brought a civil action

against any responsible parties to recover its response

costs incurred at the Lodi site pursuant to CERCLA

§ 107(a), 42 U.S.C. § 9607(a).

e The federal government has not entered into a consent

decree or any other settlement with any responsible

parties to perform any response actions at the Lodi site

pursuant to CERCLA § 122, 42 U.S.C. § 9622.

e No person has brought a citizen suit against “any

person . . . who is alleged to be in violation of any

standard, regulation, condition, requirement, or

order” promulgated under CERCLA in connection

with the Lodi site pursuant to CERCLA § 310(a), 42

U.S.C. § 9659(a).

Put simply, no governmental agency, federal, state, local, or

that of an Indian tribe, i enforcing CERCLA’s provisions at

the Lodi site, nor have the Insurers identified any provision of

* It should be noted that the case law is unclear as to whether

Lodi, if it were a responsible party, could maintain such an action

under CERCLA.

CERCLA with which they must comply pursuant to any order

or request of any such agency. (See Fireman’s Fund Ins. Co.

v. City of Lodi, California, 41 F. Supp. 2d 1100, 1111-12

(E.D. Cal. 1999).) With that in mind, the discussion can now

turn to the four aspects of MERLO that the Ninth Circuit held

conflicted with, and thus were preempted by, either or both

CERCLA or HSAA.

B. MERLO dees not “protect Lodi from

contribution claims” and thus does not

conflict with, and is not preempted by,

HSAA or CERCLA on that basis.

First, the Ninth Circuit apparently agreed with the

Insurers’ inaccurate assertion that, “under MERLO, Lodi

cannot be sued for contribution” since it held that, if Lodi is

a responsible party, “MERLO is preempted to the extent that

it protects Lodi from contribution claims”:

If the district court finds that Lodi is a PRP,

MERLO is preempted to the extent that it

protects Lodi from contribution claims by

other PRPs. CERCLA permits a PRP who

incurs response costs to bring suit to recover

those costs from any other PRP. Thus, in

theory, Fireman’s Fund’s or Unigard’s insured

could remediate the Lodi site and then sue the

City pursuant to CERCLA § 113(f) or HSAA

§ 25356(e) for contribution in the amount of

Lodi’s fair share of the costs. If Lodi is

indeed a PRP, it cannot simply legislate away

this potential contribution liability under state

and federal law. For these reasons, we find

that MERLO is preempted to the extent that it

legislatively insulates Lodi from contribution

liability under state and federal law.

(Fireman’s Fund Ins. Co. v. City of Lodi, California, 302

F.3d 928, 946 (9th Cir. 2002) (footnotes omitted). )

The panel’s holding is entirely premised on the

mistaken assumption that Lodi is not subject to contribution

claims by parties held liable pursuant to MERLO. Lodi is

and always has been subject to such claims under applicable

federal and state law, and MERLO, as local legislation, does

not and cannot shield Lodi from such claims.

First, despite Lodi’s “broad municipal authority to

address local environmental nuisances” (see Fireman’s Fund,

302 F.3d at 942, citing Cal. Const., Art. 11, § 7, Cal. Gov.

Code §§ 38771, 38773), in California, it is generally the

province of the Legislature to create private rights of action;

other levels of government in California generally do not

possess that power unless expressly conferred upon them by

the Legislature.” And no such power has been expressly

conferred in regard to private rights of action for contribution.

Indeed, the State of California fully occupies the field of

contribution and has a well-developed system of statutory and

common law rules related to contribution. That is why (to

Lodi’s knowledge) there are no locally-created rights to

contribution created by local law in the absence of express

legislative authorization in California. Put simply, the Lodi

City Council, in enacting MERLO, chose not to include in it

> Under California law, a violation of a municipal ordinance

can, of course, serve as the basis of a negligence per se claim or a

nuisance per se claim. (See e.g., Figone v. Guisti, 43 Cal. App.

606, 609 (1919) (negligence per se); Scott v. City of Del Mar, 58

Cal. App. 4th 1296, 1305-1306 (1997); Cal. Gov. Code §§ 38771-

38775.) Moreover, under appropriate circumstances, California

law allows a private right of action to be judicially implied from

local legislation that does not expressly create a private right of

action. (See 1 California Jurisprudence 3d: Actions § 52.)

any contribution provisions creating for private parties causes

of action against other private parties because it had

reservations about its very authority to do so. However, by

not enacting a private cause of action for contribution in

MERLO, Lodi never held itself out as even conceivably

having the authority to opt out of California’s generally-

applicable statutory and common law rules of contribution.

In fact, it has always been Lodi’s position that any

party subjected to joint and several liability under MERLO

may maintain an action in contribution to apportion that

liability among other jointly and severally liable parties,

including Lodi, pursuant to any applicable federal or state law

contribution authorities.°

In sum, even if Lodi had the power to opt out of

otherwise applicable rules of contribution (and it does not!),

it has not sought, in MERLO, to do so. Indeed, nothing in

MERLO purports to protect Lodi from contribution claims or —

to insulate Lodi from contribution liability, and Lodi has

never taken the position that it does. On the contrary, Lodi

has repeatedly acknowledged in this and other related cases in

both federal and state court that parties held liable under

MERLO remain free to assert contribution claims against

others pursuant to any applicable federal or state law.

° It is an open question whether liable defendants can use

CERCLA § 113(f) contribution claims to apportion their non-

CERCLA joint and several liability. (See Aviall Services, Inc. v.

Cooper Industries, Inc., 312 F.3d 677 (Sth Cir. 2002).) But

assuming they can, MERLO does nothing to interfere with that —

a party held jointly and severally liable pursuant to MERLO would

simply have such liability equitably apportioned among other such

jointly and severally liable parties pursuant to CERCLA § 113(f).

Indeed, all of California’s generally-applicable

statutory and common law rules regarding contribution (see

e.g., Cal. Civ. Code § 1432; Cal. Civ. Proc. Code §§ 877,

877.6, 881, 882)’ remain wholly unaffected by MERLO. For

instance, anyone held liable under MERLO has the right to

assert contribution claims against anyone they wish, including

Lodi, pursuant to California Civil Code § 1432, which

provides, “a party to a joint, or joint and several obligation,

who satisfies more than his share of the claim against all, may

require a proportionate contribution from all the parties joined

with him.” MERLO cannot and does not abrogate or impair

this or any other right to contribution that is or may be

available to parties held liable pursuant to MERLO.

os MERLO does not conflict with, and thus is

not preempted by, CERCLA because

CERCLA allows states and, where

authorized by state law, their political

subdivisions to impose joint and several

liability.

Next, the Ninth Circuit held that the provision of

MERLO that allows Lodi to impose joint and several liability

on responsible parties (Lodi Mun. Code § 8.24.040(E))

conflicts with, and thus is preempted by, CERCLA if, on

remand, the District Court determines that Lodi would be a

responsible party under CERCLA:

7 Some of these statutes (Cal. Civ. Proc. Code §§ 877, 877.6)

apply by their terms to tort actions involving joint tortfeasors.

However, they have also been applied by state courts, by analogy,

to statutory public nuisance actions involving jointly responsible

parties. (See e.g., Arbuthnot v. Relocation Realty Service Corp.,

227 Cal. App. 3d 682 (1991).)

Our circuit has held that a PRP may not

bring a CERCLA § 107 cost recovery action,

and instead may bring only a claim for

contribution under CERCLA § 113(f). This

means that a PRP does not have a claim for the

recovery of the totality of its cleanup costs

against other PRPs, and a PRP cannot assert a

claim against other PRPs for joint and several

liability. In support of our decision in Pinal

Creek, we noted that allowing a party

responsible for part of the contamination to

impose joint and several liability on other

PRPs would result in unfair cost shifting and

guarantee inefficiency, potential duplication,

and prolongation of the litigation process in a

CERCLA case. We have not recognized any

exception to Pinal Creek for municipal PRPs

and we decline to do so now.

Thus, if the district court determines

that Lodi is a PRP, Lodi may not escape its

share of responsibility by imposing all of the

costs of cleanup on others. Allowing it to do

so would interfere with CERCLA’s PRP cost

allocation scheme, and would implicate the

same policy concerns relied upon by this court

in Pinal Creek in rejecting a § 107 cost

recovery action for PRPs. For these reasons,

we find that MERLO is preempted to the

extent that it legislatively insulates Lodi from

bearing its share of responsibility by imposing

joint and several liability on other PRPs.

(Fireman’s Fund Ins. Co. v. City of Lodi, California, 302

F.3d 928, 946-47 (citations omitted).)

This holding by the Ninth Circuit is again premised on

the same mistaken assumption — that MERLO somehow

shifts Lodi’s alleged liability, if any, onto others. It does not

and cannot do that.

Moreover, it is clear from the passage quoted above

that the Ninth Circuit felt constrained to choose between, on

the one hand, a system of pure joint and several liability (in

which the plaintiff can fully “escape its share of responsibility

by imposing all of the costs of cleanup on others”) and, on the

other hand, a system of pure several liability (in which all of

the responsible parties, including the plaintiff, are only liable

for their fair share of the cleanup costs). Those two liability

systems may be the only choices available to a court in its

interpretation of CERCLA § 107 and § 113(f) given

CERCLA’s structure, text and legislative history, and given

the current development of federal common law. (See e.g.,

Fireman’s Fund, supra,302 F.3d at 946-47; Pinal Creek

Group v. Newmont Mining Corp., 118 F.3d 1298, 1301-1303

(9th Cir. 1997).) However, those are certainly not the only

choices available to a court in its interpretation of state and

municipal laws.

For instance, California, like many states, has

judicially adopted a “pure” comparative responsibility system

(see Li v. Yellow Cab Co., 13 Cal. 3d 804, 823 (1975)) in

which responsible parties can be held jointly and severally

liable for an entire indivisible harm reduced by the plaintiff’s

Share of responsibility. (See e.g., American Motorcycle

Association v. Superior Court, 20 Cal. 3d 578, 586-90

(1978); see Cal. Civ. Code § 1431 (“An obligation imposed

upon several persons . . . is presumed to be joint, and not

several. . . .”).)® Jointly and severally liable parties who

® Such joint and several liability extends only to economic

damages; liability is several, not joint, for non-economic damages.

satisfy more than their fair share of responsibility can obtain

contribution from other responsible parties including the

plaintiff. (Cal. Civ. Code § 1432.) Moreover, courts in

California retain broad equitable authority to reallocate

“orphan shares” (i.e., the liability of other parties who are

insolvent, judgment-proof, immune from liability or simply

not before the court) among all of the responsible parties

including the plaintiff. (See e.g., Restatement (Third) Torts:

Apportionment of Liability, § C21(a) (“[I]f a defendant

establishes that a judgment for contribution cannot be

collected fully from another defendant, the court reallocates

the uncollectible portion of the damages to all other parties,

including the plaintiff, in proportion to the percentages of

comparative responsibility assigned to the other parties.”)

(emphasis added).)

MERLO does not purport to abrogate, impair or alter

California’s comparative responsibility system, and Lodi has

never argued that it does. MERLO does not and cannot

“legislatively insulate Lodi from bearing its share of

responsibility” or allow Lodi to “escape its share of

responsibility by imposing all of the costs of cleanup on

others.” Rather, it simply follows California’s generally-

applicable comparative responsibility system. Thus, the type

of liability that attaches under MERLO is the same as, for

example, the type of liability that would attach under

California public nuisance abatement law. (See e.g:, Lincoln

Properties, Ltd. v. Higgins, 1993 WL 217429, at *25 (E.D.

Cal. 1993) (holding dry-cleaning-tenant-defendants jointly and

severally liable pursuant to California public nuisance law

despite also holding landlord-plaintiff liable); Tint v. Sanborn,

211 Cal. App. 3d 1225, 1227-34 (1989) (holding that

California’s comparative responsibility system applies to

nuisance actions); City of Merced v. Fields, 997 F. Supp.

(Cal. Civ. Code § 1431.2.)

1326, 1332-33, 1335-37 (E.D. Cal. 1998) (holding that liable

municipality is limited to contribution claims under CERCLA,

but can assert joint and several liability claims under

California public nuisance law).)

It would be one thing if the Ninth Circuit’s decision

were expressly limited to municipal ordinances like MERLO;

if it were, liable municipalities could simply bring joint and

several liability claims pursuant to state law, instead of local

law. Unfortunately, the Ninth Circuit’s decision is not

expressly limited to local law. In fact, the District Court has

already interpreted it in a related case (People of the State of

California and City of Lodi v. M&P Investments, et al., No.

CIV. S-00-2441-FCD-JFM (E.D. Cal.)) as compelling the

conclusion that, if Lodi is held to be a responsible party on

remand, then it can only maintain several (not joint and

several) claims pursuant, not to MERLO, but to California’s

long-standing public nuisance abatement law. In other words,

the Ninth Circuit’s decision is being interpreted by the

District Court as having entirely wiped out California’s

comparative responsibility system as it applies in

environmental contamination cases involving liable plaintiffs

in favor of CERCLA § 113(f)’s pure several liability system.”

Put simply, when a plaintiff, even a state or municipality, is

alleged to be a liable party, at a hazardous substance

contamination site, any other liability system conflicts with,

and thus is preempted by, CERCLA’s pure several liability

system. As such, the allegedly liable plaintiff is limited to

bringing contribution claims to impose several (not joint and

® There does not appear to be any reason why the impact of

the Ninth Circuit’s decision would stop at California’s borders.

The decision would appear to wipe out the liability systems in all

of the thirteen states within the Ninth Circuit as they apply to

environmental contamination cases involving liable plaintiffs in

favor of CERCLA’s pure several liability system.

several) liability regardless of whether the liability being

asserted arises under CERCLA, MERLO, or any other state

or municipal law.

D. MERLO does not conflict with, and thus is

not preempted by, CERCLA because

CERCLA allows states and, where

authorized by state law, their political

subdivisions to impose environmental

clean-up requirements and procedures that

are more stringent than those that would be

required under CERCLA.

Next, the Ninth Circuit also held that “[t]o the extent

that MERLO § 8.24.030(A)(5) permits Lodi to order

abatement that is more stringent than the NCP, we find that it

is preempted for the same reasons that MERLO’s burden of

proof [on the “divisibility of harm” affirmative defense] is

preempted.” (Fireman’s Fund Ins. Co. v. City of Lodi,

California, 302 F.3d 928, 951 (9th Cir. 2002).) As to

MERLO’s burden of proof on the “divisibility of harm”

affirmative defense, MERLO § 8.24.040(E) requires a liable

defendant attempting to avoid the imposition of joint and

several liability to demonstrate by clear and convincing

evidence that the harm is divisible in order to apportion the

harm for which it can be held liable, whereas CERCLA only

requires such proof be made by a preponderance of evidence.

The Ninth Circuit held that this provision of MERLO is

preempted for the following reasons:

Potential purchasers of abandoned or

underutilized contaminated properties are often

deterred from purchasing and cleaning up

these properties by exposure to unbounded and

uncertain liability. Many initiatives have been

instituted by California and the federal

government to expedite the cleanup of these

“Brownfields” and . . . [s]uch [c]leanups.. .

have come to achieve some level of

predictability, thus allowing for a reasonable

estimate of exposure to liability and of the

costs involved in taking on a cleanup. Such

certainty, to the extent it is available, greatly

encourages prospective purchasers to

rehabilitate contaminated property and put it

back into productive use. ... [4] [If we were]

[t]o allow literally thousands of different local

governments to impose their own liability

schemes (such as Lodi’s) that [are more

onerous than CERCLA’s] . . . the risk of

overly strict and uncertain liability would

thereby be compounded, thwarting CERCLA’s

goals. [{] On the other hand, municipal

liability schemes equal to or less onerous than

that imposed by CERCLA do not foster

uncertainty or discourage cleanup but could, in

many instances, make rehabilitation of

contaminated property more feasible, thus

furthering the objective of Congress.

(Fireman’s Fund, supra, 302 F.3d at 948-49 (citations

omitted).)

The Ninth Circuit’s holding that Lodi can require

clean-up procedures that are less stringent, but not more

stringent, than the National Oil and Hazardous Substances

Pollution Contingency Plan (“NCP”), 40 C.F.R. Part 300,"°

sites must be consistent with the NCP. The NCP is a plan

promulgated by the U.S. Environmental Protection Agency that

“specifies the roles” of the federal, state, and local governments “in

responding to hazardous waste sites, and establishes the procedures

is Clearly erroneous, and presents another issue of exceptional

national importance. While the desire to “achieve some level

of predictability, thus allowing for a reasonable estimate of

exposure to liability and of the costs involved in taking on a

cleanup” is laudable, that was not Congress’ intent in enacting

CERCLA. Rather, Congress clearly intended CERCLA to be

an optional set of supplementary environmental response,

compensation and liability authorities that do not require

anyone (except perhaps the U.S. Environmental Protection

Agency in certain circumstances where it chooses to act) to do

anything unless and until those authorities are properly

invoked by a governmental entity or private party expressly

authorized by Congress to do so. Absent such invocation,

CERCLA neither sets a floor nor a ceiling for environmental

protection.

That fact is unmistakable given CERCLA’s multiple

savings clauses. For example, CERCLA § 302(d) states that

“[njothing in this chapter shall affect or modify in any way

the obligations or liabilities of any person under other Federal

or State law, including common law, with respect to release

of hazardous substances or other pollutants or

contaminants. .. .” (42 U.S.C. § 9652(d).) Similarly,

CERCLA § 310(h) states that “[t]his chapter does not affect

or otherwise impair the rights of any person under federal,

State, or common law, except with respect to the timing of

review as provided in section 9613(h),” a CERCLA provision

that is not at issue here. (42 U.S.C. § 9659(h).)

It is only when CERCLA’s response or liability

scheme is properly invoked that CERCLA becomes applicable

and acts to set a floor, not a ceiling, for environmental

for making cleanup decisions.” (Fireman’s Fund Ins. Co. v. City

of Lodi, 302 F.3d 928, 949 (9th Cir. 2002), citing United States v.

Denver, 100 F.3d 1509, 1511 (10th Cir. 1996).)

protection. (See e.g., United States v. Azco Coatings of

America, Inc., 949 F.2d 1409, 1454 (6th Cir. 1991)

(“CERCLA sets a floor, not a ceiling, for environmental

protection.”).) That fact is made clear by the third of

CERCLA’s savings clauses, CERCLA § 114(a), which

provides that “[njothing in this chapter shall be construed or

interpreted as preempting any State from imposing any

additional liability or requirements with respect to the release

of hazardous substances within such State.” (42 U.S.C.

§ 9614(a) (emphasis added).) That fact is emphasized

throughout CERCLA including, for example, CERCLA

§ 121(d)(2), which allows for the use of “more stringent”

State laws to govern clean-up requirements under CERCLA.

(42 U.S.C. § 9621(d).)

In fact, the NCP itself also makes perfectly clear that

a State’s or municipality’s “applicable or relevant and

appropriate” clean-up requirements (commonly referred to as

“ARARs”) may be required under CERCLA if they more

stringent than the federal requirements. (40 C.F.R. §§ 300.5

(“Only those state standards that are . . . more stringent than

federal requirements may be applicable” or “relevant and

appropriate.” ) (emphasis added); 300.400(g) (same); see also

40 C.F.R. §§ 300.700(c)(5)(iii) (“applicable requirements of

federal or state law may not be waived by a private party”),

300.700(c)(5)(vi) (“private party removal actions must always

comply with the requirements of applicable law”), 300. 180(d)

(encouraging states “to use their authorities to compel

potentially responsible parties to undertake response

actions” ).)

E. MERLO does not conflict with, and thus is

not preempted by, CERCLA because

CERCLA allows prevailing parties to

recover their attorney’s fees in proceedings

brought pursuant to other federal, state or

local laws like MERLO.

Finally, the Ninth Circuit also held, without citing to

any authority whatsoever, that the provision of MERLO that

authorizes prevailing parties to recover their attorney’s fees

(Lodi Mun. Code § 8.24.040(F); see also Lodi Mun. Code

§§ 8.24.010(2), 8.24.040(A)(9)(a), (c)(1)), conflicts with, and

thus is preempted by, CERCLA:

We need not decide if a city is the “State” for

purposes of recovering its attorney fees under

CERCLA, because, in any case, a city that is

also a PRP should not be able to avail itself of

this litigation advantage. If the district court

finds that Lodi is indeed a PRP, it may not

legislate for itself a litigation advantage by

granting itself the right to collect attorney’s

fees.

(Fireman’s Fund Ins. Co. v. City of Lodi, 302 F.3d 928, 953

(9th Cir. 2002).) j

However, it remains an open question whether a

municipality such as Lodi would be entitled to recover

attorney’s fees under CERCLA. In Key Tronic Corp. v.

United States, 511 U.S. 809 (1994), this Court held that

CERCLA § 107(a)(4) does not permit a “private party” to

recover her attorney’s fees. (Key Tronic, 511 U.S. at

817-19.) However, in United States v. Chapman, 146 F.3d

1166 (9th Cir. 1998), the Ninth Circuit held that CERCLA

§ 107(a)(4) permits “the government” to recover its attorney’s

fees. (Chapman, 146 F.3d at 1175-76.) In Fireman’s Fund,

however, the Ninth Circuit declined to reach the question of

whether a municipality is a “private party” or the “State”

(i.e., the government) for purposes of CERCLA § 107(a)(4).

(Fireman’s Fund, 302 F.3d at 953.) Without resolving that

question, the basis for its ruling that MERLO conflicts with

CERCLA is something of a mystery.

In any event, regardless of whether Lodi would be

barred from recovering its attorney’s fees in an action under

CERCLA, in the context of this case, CERCLA certainly does

not preempt Lodi’s authority pursuant to state law to recover

its attorney’s fees in an action under a municipal ordinance

such as MERLO."' As noted previously, CERCLA has not

been triggered at the Lodi site. No one authorized to invoke

CERCLA’s response, compensation or liability schemes at the

Lodi site has done so. There are no orders or requests from

any federal or state agency pursuant to CERCLA with which

the Insurers or, for that matter, any of the parties at the Lodi

Site, are required to comply. As such, the only way in which

any of the provisions of MERLO discussed above could

'' California law expressly authorizes municipalities to, by

ordinance, “declare what constitutes a nuisance” (Cal. Gov. Code

§ 38771), “establish a procedure for the abatement of a nuisance”

(Cal. Gov. Code § 38773.5(a)), and “provide for the recovery of

attorneys’ fees in any action, administrative proceeding, or special

proceeding to abate a nuisance” (Cal. Gov. Code § 38773.5(b)).

“If the ordinance provides for the recovery of attorneys’ fees, it

shall provide for recovery of attorneys’ fees by the prevailing

party, rather than limiting recovery of attorneys’ fees to the city if

it prevails.” (/d.) But in no event “shall an award of attorneys’

fees to a prevailing party exceed the amount of reasonable

attorneys’ fees incurred by the city... .” (/d.) The California

Legislature has thus clearly defined who can recover, how much

they can recover, and under what circumstances they can recover

their attorneys’ fees in proceedings involving municipal ordinances

like MERLO.

“conflict” with CERCLA is if they “stand as an obstacle to

the accomplishment and execution of the full purposes and

objectives of Congress.” (Gade v. National Solid Wastes

Management Association, 505 U.S. 88, 96 (1992) (plurality).)

Unfortunately, the Ninth Circuit lost sight of that and chose

instead to strictly apply CERCLA to the Lodi site as if it were

a site subject to CERCLA’s liability scheme.

CONCLUSION

For the reasons set forth above, the City of Lodi,

California respectfully requests that this Court grant its

petition for writ of certiorari.

Respectfully submitted,

February 5, 2003 RANDALL A. HAYS

“CITY ATTORNEY

CITY OF LODI, CALIFORNIA

by: Brian R. Paget

Assistant City Attorney

ENVision Law Group, LLP

3717 Mount Diablo Boulevard

Suite 100

Lafayette, California 94549

(925) 962-6900 ~

(925) 962-6910 fax

Counsel of Petitioner

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

[Filed August 6, 2002]

[Amended October 8, 2002]

Nos. 99-15614, 99-15802

Nos. CV. 98-1489 FCD-JFM, CV. 98-1712 FCD-JFM

Fireman’s Fund Insurance Co..,

Plaintiff-Appellant,

CITY OF LODI, CALIFORNIA,

Defendant-Appellee.

UNIGARD INSURANCE COMPANY, ET AL.,

Plaintiffs-Appellants,

CiTy OF LODI,

Defendant-Appellee.

Nm eee eee eee Se”

Order Denying Petitions for Rehearing,

Filed 8/06/02, Amended 10/08/02

Before: PREGERSON, D.W. NELSON, Circuit

Judges and MOSKOWITZ, District Judge. '

PREGERSON, Circuit Judge.

ORDER DENYING PETITIONS FOR

PANEL REHEARING / REHEARING EN BANC,

GRANTING REQUEST FOR JUDICIAL NOTICE,

AND AMENDING OPINION

The panel has voted unanimously to deny the petitions

for rehearing filed August 20, 2002, by Fireman’s Fund,

August 23, 2002, by Unigard, and August 26, 2002, by Lodi.

Judge Pregerson has voted to deny the petitions for rehearing

en banc filed by the same parties on the dates listed above.

Judge Nelson and Judge Moskowitz recommend denying the

“petitions for rehearing en banc. The petitions for rehearing en

banc were circulated to the full court and no judge requested

a vote on the petitions.

Lodi’s motion for judicial notice in support of its

petition for rehearing is GRANTED. The petitions for

rehearing and rehearing en banc are DENIED. The parties

_ Shall not file any further petitions for rehearing and rehearing

‘en banc.

This court’s opinion filed on August 6, 2002 and

The Honorable Barry Ted Moskowitz, United States

District Judge for the Southern District of California,

sitting by designation.

Order Denying Petitions for Rehearing,

Filed 8/06/02, Amended 10/08/02

reported at 2002 WL 1792612 is hereby amended as follows:

At page *17, append a new footnote 26 as follows

after sentence “We hold, therefore, that MERLO’s provisions

dealing with cleanup procedures are preempted by CERCLA

only to the extent that they permit Lodi to order use of

procedures more stringent than the NCP”:

Lodi argues that MERLO’s provisions

allowing it to order abatement procedures

: more stringent than the NCP can not be

i preempted by CERCLA because of

CERCLA’s multiple savings clauses. Lodi’s

argument does not recognize the difference

between field preemption and _ conflict

preemption. We have indeed held that

CERCLA’s savings clauses make it clear that

CERCLA does not preempt the field of

hazardous waste cleanup. See Section III(B)(1)

supra. As this opinion makes it clear,

municipalities such as Lodi may exercise

significant powers of self-protection in

regulating hazardous waste cleanup.

However, the powers of municipalities are not

unlimited. Where municipal legislation comes

into conflict with CERCLA, we find the

municipal legislation to be preempted, just as

other circuits have found conflict preemption

in other circumstances, notwithstanding the

same savings clauses cited by Lodi. See, e.g.,

Bedford Affiliates, 156 F.3d at 426-7 (holding

application iof certain State law remedies was

Order Denying Petitions for Rehearing,

Filed 8/06/02, Amended 10/08/02

preempted by CERCLA and reasoning that

CERCLA “does not expressly preempt state

law” but where State or local laws “Stands as

an obstacle to the accomplishment and

execution of the full purpose and objectives of

Congress,” it is preempted); Reading, 115

F.3d at 1117 (holding that CERCLA

preempted application of certain contribution

and restitution remedies “because the state law

remedies obstruct the intent of Congress. ..[by

thwarting] the efficient resolution of

environmental disputes”); Sherwin-Williams,

151 F.3d at 618 (holding that the purpose of

CERCLA’s savings clause is “merely to nix an

inference that the statute in which [they]

appear[] is intended to be the exclusive remedy

for harms caused by violation of the statute, “

and holding application of certain provisions of

State law preempted by CERCLA).

Lodi also points out that the NCP

alludes to standards that are more stringent

than federal requirements. First, the context

in which “more stringent” requirements occur

in the NCP is far removed from the concerns

at issue in this case.

Second, Lodi cites to sections of the

NCP mentioning more stringent State

requirements. We have rejected the Insurers’

arguments that by referring to States but not

political subdivisions in the text of CERCLA,

Order Denying Petitions for Rehearing,

Filed 8/06/02, Amended 10/08/02

Congress intended to leave room for

supplemental State legislation but to prohibit

all supplemental municipal legislation.

However, this does not mean that Lodi can

assume thé mantle of the “State” or the

breadth of the States’s powers ion all

circumstances. We _ have previously

distinguished between local governmental

unites, such as municipalities, and “States”

with regard to various applications of

CERCLA. See Wash. State Dept. of Transp.,

59 F.3d at 800-1; Norton Sound, 138 F.3d at

1284. Our holding her concerns cleanup

procedures promulgated by municipalities and

other local government entities.

At page *23, append a new footnote 30 as follows

after sentence “For the foregoing reasons we AFFIRM IN

PART, REVERSE IN PART, and REMAND for further

proceedings consistent with this opinion and with instructions

to the district courts to determine if Lodi is a PRP”:

Fireman’s Fund and Unigard argue that

Lodi is a PRP as a matter of law as a result of

its agreement with the DTSC. This issue has

not been fully briefed on appeal and we leave

it to the district court to consider this argument

in the first instance.

SO ORDERED.

APPENDIX B

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

[Filed August 6, 2002]

[Amended October 8, 2002]

Nos. 99-15614, 99-15802

No. CV. 98-1489 FCD-JFM, 98-1712 FCD-JFM

Fireman’s Fund Insurance Co.,

Plaintiff-Appellant,

CITY OF LODI, CALIFORNIA,

Defendant-Appellee.

UNIGARD INSURANCE COMPANY, ET AL.,

ee ee ee ee ee a ee ee, ee ee, ee, ee ae, ee

Plaintiffs-Appellants,

CITY OF LODI, :

Defendant-Appellee. | :

ooo

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

Before: PREGERSON, D.W. NELSON, Circuit

Judges and MOSKOWITZ, District Judge.'

PREGERSON, Circuit Judge.

This consolidated appeal of two separate actions

requires us to consider the constitutionality of an innovative

municipal ordinance enacted by the City of Lodi, California

("Lodi" or "the City") to remedy hazardous waste

contamination within its borders. Fireman's Fund Insurance

Company ("Fireman's Fund"), Unigard Insurance Company,

and Unigard Security Insurance Company ("Unigard")

(collectively "the Insurers") appeal from the district court's

judgments in favor of Lodi in the Insurers' separate but

related actions for declaratory and injunctive relief. Both

Fireman's Fund and Unigard filed suit to prevent Lodi from

enforcing the local ordinance, named the Comprehensive

Municipal Environmental Response and Liability Ordinance

("MERLO" or "the Ordinance"), which permits the City to

investigate and remediate the hazardous waste contamination

of its soil and groundwater.

The Insurers allege that MERLO is preempied by the

federal Comprehensive Environmental Response,

Compensation and Liability Act ("CERCLA"), 42 U.S.C. §§

9601-9675, and by various state laws including California's

Carpenter-Presley- Tanner Hazardous Substance Account Act,

("HSAA"), Cal. Health & Safety ("H & S") Code §§

' The Honorable Barry Ted Moskowitz, United States

District Judge for the Southern District of California,

sitting by designation.

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

25300-25395.15.2 We have jurisdiction pursuant to 28

U.S.C. § 1291, and we affirm in part, reverse in part, and

remand for further proceedings consistent with this opinion.

BACKGROUND

A. The Contamination of Lodi's Water

Lodi first detected the presence of tetrachloroethylene

("PCE"), in its groundwater in April 1989. PCE is a known

carcinogen that is often used as a dry-cleaning agent.°

Groundwater is Lodi's sole source of drinking water

and the primary source of water for agricultural use in

California's Central Valley.

In 1993, the Department of Toxic Substances Control

("DTSC") of the California Environmental Protection Agency

began investigating Lodi's PCE contamination. DTSC is the

Pursuant to a sunset clause, the original Carpenter-Presley-

Tanner Hazardous Substance Account Act, also known as

the California Superfund, became inoperative on January

1, 1999. HSAA, Cal. H & S Code § 25395. The

reenacted HSAA went into effect on May 26, 1999,

without a sunset clause. Actions and agreements pursuant

to the previous version of HSAA are governed by the

reenacted taw. See 1999 Ch. 23 § 3.

. See Central Valley Regional Water Quality Control Board,

"Dry Cleaners--A Major Source of PCE in Ground

Water," pp. 20-21, March 27, 1992.

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

state agency responsible for ensuring that California's public

health and environment are protected from the harmful effects

of hazardous substances. See Cal. H & S Code §§ 25312,

25313, 25350-25359.8. DTSC is authorized to oversee the

cleanup of hazardous waste sites by issuing remedial orders

and by entering into agreements with "potentially responsible

parties" ("PRPs" or "RPs") to facilitate remediation.

DTSC's investigation revealed that four small

businesses were potentially responsible for the

PCE-contaminated waste-water that migrated throughout Lodi

by land disposal, sewer lines, and city water wells. One

business, Lustre-Cal Nameplate Corporation ("Lustre Cal")--a

manufacturer of color anodized and etched aluminum

nameplates and labels--is insured by defendant Fireman's

Fund. Another business, Busy Bee Laundry & Cleaners

("Busy Bee")--a dry cleaner--was a tenant of M & P

Investments, which is insured by defendant Unigard. As a

result of its investigation, DTSC listed the "Lodi Groundwater

Site" as a state hazardous waste site beginning in fiscal year

1993-94.‘ This is significant because listed sites are subject

to the "procedures, standards, and other requirements" of

HSAA. Cal. H & S Code § 25356(d). After it listed the Lodi

Groundwater Site, DTSC began an HSAA-authorized

administrative action against selected PRPs, including Lodi,

to address the soil and groundwater contamination.°

. See Cal. H & S Code §§ 25355-6 (describing California's

listing procedures).

. The federal Environmental Protection Agency ("EPA") has

never employed federal resources to initiate a comparable

administrative proceeding at the federal level. The EPA

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

B. Lodi's Investigation and Remediation Strategy

In May 1997, Lodi and DTSC entered into a

"Comprehensive Joint Cooperation Agreement" ("Cooperative

Agreement" or "Agreement").° Under the Agreement, DTSC

and Lodi agree to "coordinate and cooperate in a single and

consolidated effort" to timely investigate and remediate the

hazardous substance contamination affecting the City.

Consistent with this joint effort, DTSC designates Lodi the

"lead enforcement entity" in the cleanup of hazardous

substances in and around the City. In exchange, Lodi agrees

to "actively seek the input ... of DTSC in the settlement of

any environmental enforcement actions" brought by the City

pursuant to the Cooperative Agreement, and DTSC agrees

"not to independently prosecute any claims [against PRPs]

has also never listed the Lodi Groundwater Site on the

National Priorities List ("NPL"), a list of those sites that

the EPA has determined are most in need of remediation.

See 42 U.S.C. § 9605(a)(8)(B) (2001). Only NPL listed

sites are eligible to receive federal Superfund dollars. See

40 C.F.R. § 300.425(b)(1).

DTSC had the authority to enter into the Cooperation

Agreement under HSAA. As the Agreement itself states,

DTSC entered into the Agreement "pursuant to its authority

as set forth in Chapters 6.5 and 6.8 of the California Health

and Safety Code [the HSAA], as well as its inherent

governmental authority to resolve claims within its

jurisdiction." See also Cal. H & S Code §

25355.5(ay1)(C) (authorizing DTSC to enter into

"agreements" with PRPs or “other parties"); Cal. H & S

Code § 25358.3.

10a

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

without the full cooperation of ... Lodi." Lodi also agrees

either to clean up the contamination itself or to compel PRPs

to do so.

In furtherance of remediation, the Agreement, at

section VI.(A)(1), requires Lodi to:

utiliz[e], as appropriate, the full range of its

remedial and regulatory injunctive and cost

recovery authority under federal, state and

municipal law, to compel the complete, timely,

competent, cost-effective performance of the

Work in full compliance with federal, state and

local law, specifically including the NCP,’ as

appropriate. These enforcement efforts will

include ... the prompt enactment and

enforcement of a comprehensive municipal

environmental response ordinance which shall

enact into municipal law additional legal

authorities to appropriately supplement the

City of Lodi's already extensive environmental

response authority under federal, state and

local law....(emphasis added). The Agreement

: Under CERCLA, the cleanup of listed hazardous waste

sites must be consistent with the National Contingency Plan

("NCP")--a plan promulgated by the EPA that "specifies

the roles" of the federal, state, and local governments "in

responding to hazardous waste sites, and establishes the

procedures for making cleanup decisions." United States

v. City of Denver, 100 F.3d 1509, 1511 (10th Cir. 1996);

see 40 C.F.R. § 300 et seq.

i ta ik nl ae rn Orn a el

= sh as nate P er bi a Sirk ain

. oy 4

lla

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

further states that DTSC retains its authority

under HSAA to oversee Lodi's investigation

and remediation efforts, and to review and

approve any remediation plan developed by the

City.

Lodi acknowledges, as part of the Agreement, that

DTSC "may have certain claims against the City of Lodi

relating to the released Hazardous Substances, which arise

from or relate to the City of Lodi's design, construction,

operation or maintenance of the commercial, industrial and

residential storm and sanitary sewer systems operated by the

City." In light of this acknowledgment, Lodi agrees to

reimburse DTSC for past and future response costs not to

exceed $1,024,549.55, if those costs are not reimbursed by

PRPs as a result of Lodi's investigation and remediation

efforts. Nevertheless, Lodi continues to deny being a PRP.

Indeed, the Cooperative Agreement between DTSC and Lodi

specifically includes a section entitled "No Admission of

Liability," in which Lodi expressly disclaims any admission

of liability "arising from or relating to the City of Lodi's

design, construction, maintenance, or operation of sanitary

and storm sewer systems... ."

In consideration for Lodi's agreement to reimburse

DTSC, DTSC grants Lodi a “covenant not to sue with respect

to claims arising from . . . Lodi's design, construction,

operation or maintenance of any storm or sanitary sewer

systems." DTSC also agrees to protect Lodi from

contribution actions under CERCLA, 42 U.S.C. § 9613(f)(2),

and California's contribution statute, Cal. Code Civ. Pro. §

877, for "matters addressed" in the Cooperative Agreement.

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

On August 6, 1997, Lodi's City Council enacted the

"comprehensive municipal environment response and liability

ordinance" as required by the Cooperative Agreement.

Ordinance 1650--commonly known as MERLO--is the subject

of this suit. It sets forth a comprehensive remedial liability

scheme modeled on CERCLA and HSAA. MERLO

specifically provides Lodi with municipal authority to

investigate and remediate existing or threatened environmental

nuisances affecting the City, and to hold PRPs or their

insurers liable for the cost of the City's nuisance abatement

activities. See generally MERLO §§ 8.24.010- 8.24.090.°

? On November 17, 1999, Lodi's City Council repealed

Ordinance 1650 and reenacted an amended version of

MERLO as Ordinance No. 1684. The amended version of

MERLO became effective on December 17, 1999.

Because we apply the law in effect at the time of decision,

we must decide the issues raised in these related appeals

based on the current version of MERLO. See Bradley v.

Richmond Sch. Bd., 416 U.S. 696, 711, 94 S.Ct. 2006, 40

L.Ed.2d 476 (1974). Although the reenacted version of

MERLO became effective while the Insurers’ appeals were

pending before this court, neither party has moved to

dismiss the present appeals as moot. Moreover, our

analysis of the two versions of MERLO reveals that

Ordinance No. 1684 is substantially similar to the original

version of MERLO. Indeed, with two exceptions, the

Insurers argue that Lodi has merely repealed one

preempted ordinance and replaced it with a second

ordinance that is similarly preempted. Cf. Public Serv. Co.

of Colorado v. Shoshone- Bannock Tribes, 30 F.3d 1203,

1205-06 (9th Cir.1994). Thus, the core disputes between

the parties remain.

Furthermore, the reenacted MERLO specifically provides

13a

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

In order to facilitate this effort, MERLO: (1)

authorizes Lodi to demand the production of documents

related to environmental contamination or to any PRP's ability

to pay for investigation and abatement, id. § 8.24.050; (2)

creates an administrative hearing process subject to judicial

review to resolve liability issues, id. at § 8.24.060; (3)

authorizes Lodi to initiate municipal enforcement actions

against PRPs, id. at § 8.24.080; (4) authorizes Lodi to bring

direct actions against insurers of insolvent PRPs that would

resolve the PRP's liability and the insurers’ coverage

obligations in one proceeding, id. at § 8.24.090(B); and (5)

creates a "Comprehensive Environmental Response Fund" to

be used for the investigation and abatement of environmental

nuisances in and around Lodi, id. at § 8.24.070.

that any action taken under the original MERLO "shall

remain in effect" under the reenacted version of the

Ordinance. The reenacted MERLO also provides that any

changes made to the Ordinance as a result of the

amendments apply retroactively to all proceedings initiated

under the original MERLO. Finally, the general “savings

clause" in Lodi Municipal Code § 1.01.080, which was

enacted in 1985 well before Lodi adopted either version of

MERLO, further establishes the continuing viability of any

remedial enforcement actions initiated by Lodi before it

repealed and reenacted MERLO.

Accordingly, we hold that the controversy between

the Insurers and Lodi is still "live" and that the repeal and

reenactment of MERLO did not moot the Insurers’ claims

at issue in this appeal. We express no opinion, however,

_ on whether the reenacted version of MERLO may moot or

otherwise impact some of the issues to be considered by the

district court for the first time on remand.

14a

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

MERLO is modeled on both CERCLA and HSAA,

and it incorporates many of the standards employed by

CERCLA and HSAA. For example, MERLO utilizes the

CERCLA and HSAA definition of who may be considered a

PRP, see MERLO § 8.24.040(A)(1), and, like CERCLA,

imposes joint and several liability on PRPs. See MERLO §

8.24.040(E).

inl Procedural History of the Present Actions

As set forth above, this consolidated appeal involves

two separate but related challenges to MERLO--one brought

by Unigard, and a second brought by Fireman's Fund.

k. The Origins of the Unigard and Fireman's

Fund Actions

In May 1998, Lodi filed an abatement action pursuant

to its authority under MERLO against Unigard's insured, M

& P Investments. Three weeks later, Unigard filed the

present action in United States District Court for the Northern

District of California. In its complaint, Unigard alleges that

Lodi adopted MERLO in order to shift its own liability for the

PCE contamination to the insurers of other PRPs. Unigard's

complaint further alleges that MERLO: (1) violates the

Supremacy Clause of the United States Constitution because

it is preempted by CERCLA; (2) violates Article 11 of the

California State Constitution because it is preempted by

HSAA and California Insurance Code § 11580; and (3)

violates the Contracts Clause of the United States

Constitution.

15a

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

Finding that Unigard's claims "have an insufficient

connection to the Northern District of California," the District

Court transferred the action to the Eastern District of

California. All of Unigard's claims were dismissed prior to

the transfer, with the exception of the federal and state

preemption claims, and the federal contracts clause claim.

In August 1998, Fireman's Fund filed a similar

declaratory and injunctive relief action against Lodi in the

United States District Court for the Eastern District of

California. In addition to naming Lodi as a defendant,

Fireman's Fund also named: (1) Lodi's Mayor, Jack

Sieglock, in his official capacity; (2) MERLO Enforcement

Officers Richard C. Prima, Jr. and Fran E. Forkas in their

official capacities; (3) Lodi City Attorney Randall A. Hays

in his official and individual capacities; and (4) Michael C.

Donovan and Zevnik Horton Guibord & McGovern, LLP

(collectively, the "Law Firm"), private attorneys acting as

assistant city attorneys for Lodi, in their official and

individual capacities.’ Like Unigard's complaint, the

Fireman's Fund complaint alleges, inter alia, that MERLO:

(1) violates the Supremacy Clause of the United States

Constitution; (2) violates Article 11 of the California State

Constitution because it is preempted by HSAA and California

Insurance Code § 11580; and (3) impairs Fireman's Fund's

right to contract under both the United States Constitution and

the California State Constitution.

, Additional individual defendants Steven H. Doto, John R.

Till, Bret A. Stone, and Adam L. Babich were dismissed

without prejudice by stipulation of the parties on September

21, 1998.

16a

- 9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

On August 24, 1998, Fireman's Fund, joined by

Unigard, moved for a preliminary injunction prohibiting Lodi

from enforcing MERLO. While the Insurers' preliminary

injunction motion was pending, Lodi and its officers moved,

in both actions, to dismiss the Insurers’ complaints pursuant

to Federal Rule of Civil Procedure 12(b)(1) for lack of subject

matter jurisdiction, and Federal Rule of Civil Procedure

12(b)(6) for failure to state a claim. At the same time,

Fireman's Fund filed a motion for partial summary judgment

and for a permanent injunction to enjoin Lodi from enforcing

MERLO.

After extensive briefing by all parties, the district

court held a joint hearing on all motions in both cases on

December 4, 1998. Following the hearing, the district court

issued two written decisions, one in each action.’

2. The Unigard Decision

In an unpublished decision, the district court found

Unigard's claims ripe for review because "the content of

[MERLO] is clear as are the City's intentions to enforce the

Ordinance against Unigard.". Unigard Ins. Co. v. City of

Lodi, No. Civ. S. 98-1712-FCD-JFM at *5 (E.D.Cal. Mar.

5, 1999). The district court also found that Unigard has

standing to bring the present action, id. at 6, and that MERLO

is not preempted by CERCLA, id. at 6- 13. Finally, the

district court abstained under the Pullman abstention

e We note that the district court did an admirable job in

sorting through the varied and difficult issues raised in this

highly complex case.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

doctrine'’ from deciding whether MERLO was preempted by

state law. Jd. at 14-15. Based on these rulings, the district

court granted Lodi's motion to dismiss Unigard's federal

preemption claim and dismissed without prejudice Unigard's

state preemption and federal contracts clause claims. Unigard

timely appeals the district court's rating concerning only the

federal preemption issue.

a The Fireman's Fund Decision

In a published opinion, the district court dismissed

Fireman's Fund's claims against the individual defendants in

their official capacities as "duplicative of the claims against

the City." Fireman's Fund Ins. Co. v. City of Lodi, 41

F.Supp.2d 1100, 1106 (E.D.Cal.1999). The district court

also held that the defendants sued in their individual capacities

are entitled to qualified immunity. Jd. at 1107. The rulings

on the remaining issues--including ripeness, standing, and

federal and state preemption--were identical to those rulings

in the Unigard action. /d. at 1107-13. The district court

found that: (1) Fireman's Fund's claims are ripe; (2)

Fireman's Fund has standing to bring the instant action; and

(3) MERLO is not preempted by CERCLA. Again, the

" The Pullman abstention doctrine derives its name from the

case of Railroad Commission of Texas v. Pullman Co., 312

“= U.S. 496, G1 S.Ct. 643, 85 L.Ed. 971 (1941), and is "an

equitable doctrine that allows federal courts to refrain from

deciding sensitive federal constitutional questions when

state law issues may moot or narrow the constitutional

questions." The San Remo Hotel v. City of San Francisco,

145 F.3d 1095, 1104 (9th Cir.1998). Pullman abstention

is discussed in greater detail at Section III.A. infra.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

district court abstained from deciding whether MERLO is

preempted by HSAA based on the doctrine of Pullman

abstention.

Based on these rulings, the district court denied

Fireman's Fund's motion for partial summary judgment and

a permanent injunction, dismissed the individual defendants

and the Law Firm from the action, dismissed the federal

preemption claim against Lodi, and abstained from ruling on

the state preemption claim. The district court dismissed the

state preemption and remaining constitutional claims without

prejudice.

Fireman's Fund timely appeals the district court's

rulings concerning federal and state preemption, and the

district court's dismissal of the official capacity claims against

the individual defendants.

II.

STANDARD OF REVIEW

We review de novo a district court's decision to grant

or deny a motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(6). Gonzalez v. Metropolitan Transp.

Auth., 174 F.3d 1016, 1018 (9th Cir.1999). In reviewing the

complaint, all factual allegations “are taken as true and

construed in the light most favorable to [p]laintiffs." Epstein

v. Washington Energy Co., 83 F.3d 1136, 1140 (9th

Cir. 1996).

Similarly, we review de novo whether this case meets

the requirements of the Pullman abstention doctrine.

Martinez v. Newport Beach City, 125 F.3d 777, 780 (9th

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

Cir.1997). The district court has no discretion to abstain in

cases that do not meet the requirements of the abstention

doctrine being invoked. /d.

Iil.

ANALYSIS

On appeal, Fireman's Fund asserts that the district

court erred in abstaining from deciding whether MERLO is

preempted by various state laws, and Fireman's Fund and

Unigard argue that MERLO is in fact preempted by state and

federal law. We find that the district court erred in abstaining

from deciding whether MERLO is preempted by state law.

Because the state law preemption analysis resembles the

federal preemption analysis, we consider whether MERLO is

preempted by federal law in conjunction with the state law

preemption question. We conclude by finding that although

a few sections of MERLO are preempted by state and federal

law under the doctrine of conflict preemption, the majority of

the Insurers' preemption arguments lack merit.

In addition, Fireman's Fund appeals the district court's

decision dismissing its official capacity claims against three

individual defendants. We agree with Fireman's Fund and

reinstate those claims.

A. ABSTENTION

Three factors must be present before a district court

may abstain under the Pullman doctrine: "(1) the complaint

must involve a ‘sensitive area of social policy’ that is best left

to the states to address; (2) 'a definitive ruling on the state

issues by a state court could obviate the need for [federal]

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constitutional adjudication by the federal court';'? and (3) ‘the

proper resolution of the potentially determinative state law

issue is uncertain.’ " Cedar Shake and Shingle Bureau v. City

of Los Angeles, 997 F.2d 620, 622 (9th Cir. 1993) (quoting

Kollsman v. City of Los Angeles, 737 F.2d 830, 833 (9th

Cir.1984)). Ifa court invokes Pullman abstention, it should

stay the federal constitutional question "until the matter has

been sent to state court for a determination of the uncertain

state law issue." Erwin Chemerinsky, Federal Jurisdiction,

§ 12.2.1, at 737 (3d ed. 1999).

” We have held that Pullman abstention is not appropriate

when the federal question at stake is one of federal

preemption because preemption is not considered a

“constitutional issue." Hotel Employees and Rest.

Employees Int'l Union v. Nevada Gaming Comm'n, 984

F.2d 1507, 1512 (9th Cir. 1993) ("Pullman abstention is not

appropriate because preemption is not a constitutional

. issue."). But see International Bhd. of Elec. Workers,

Local Union No. 1245 v. Public Serv. Comm'n of Nev.,

614 F.2d 206 (9th Cir. 1980) (invoking Pullman abstention

in a case involving preemption under the National Labor

Relations Act). In this case, however, the district court

properly addressed the merits of the Insurers’ federal

preemption claims, and invoked Pullman abstention only to

avoid reaching Fireman's Fund's additional claims for

relief based on the Due Process, Equal Protection, and

Contracts Clauses of the U.S. Constitution.

EE LN OO ER

5 ' Both Fireman's Fund and Lodi agree that the even if the

; district court did not err in abstaining, it erred in dismissing

: the Fireman's Fund's remaining federal and _ state

constitutional claims; the district court instead should have

stayed the action and retained jurisdiction over the

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9h Circuit Opinion, Filed 8/06/02, Amended 10/08/02

As to the first factor, we do not believe that "the

complaint . . . involve[s] a sensitive area of social policy that

is best left to the states to address." Cedar Shake and Shingle

Bureau, 997 F.2d at 622 (internal quotation omitted).

Although the interpretation of a local ordinance that enables

the City to pay for hazardous waste remediation is

undoubtedly an area of "serious local concern," as the district

court held, it cannot be said that states should be left to

address the coordination of such remediation alone. The

federal government has definitively entered the field of

hazardous waste remediation by enacting CERCLA.

Moreover, the text of CERCLA makes clear that Congress

envisioned a partnership between various levels of

government in addressing the complex and costly problems

associated with hazardous waste remediation. See, e.g., 42

U.S.C. §§ 9614(a), 9652(d), 9659(h). The exact contours of

such a partnership, though indeed a sensitive area of social

policy, need not be resolved by states in isolation. We

therefore find that the district court erred in concluding that

the first Pullman abstention factor has been satisfied.

The third Pullman abstention factor is also lacking.

As set forth above, this factor requires us to find that "the

proper resolution of the potentially determinative state law

issue is uncertain." Cedar Shake and Shingle Bureau, 997

F.2d at 622 (internal quotation and citation omitted). The fact

that a state court has not ruled on the precise issue at stake in

this case does not mean that the proper resolution of the state

remaining federal claims pending resolution of the relevant

state law issues in state court. See International Bhd. of

Elec. Workers, 614 F.2d at 213.

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law issue is "uncertain." Wis. v. Constantineau, 400 U.S.

433, 439, 91 S.Ct. 507, 27 L.Ed.2d 515 (1971); see also

Pearl Invest. Co. v. City & County of San Francisco, 774

F.2d 1460, 1465 (9th Cir.1985) (holding that uncertainty for

Pullman abstention means that a federal court cannot predict

with any confidence how a state's highest court would decide

an issue of state law).

We find it fairly clear that MERLO as a whole is

consistent with state law, and that municipalities in California

may enact local ordinances that allow them to take an active

role in remediating local hazardous waste contamination. See

Section III.B.2.d. infra. Even if the state court were to find,

as we do infra, that a few specific provisions of MERLO are

preempted, such a finding would invalidate only those specific

provisions. The bulk of MERLO would remain in effect, as

would our obligation to consider Fireman's Fund's federal

constitutional claims. Pullman abstention is therefore

inappropriate.

Because there is no discretion to abstain in cases that

do not meet the requirements of the abstention doctrine being

invoked, Martinez, 125 F.3d at 780, we hold that the district

court erred in abstaining from ruling on Fireman's Fund's

state law preemption claim. We proceed now to the merits of

the federal and state preemption analysis.

B. PREEMPTION

Fireman's Fund argues that MERLO is preempted by

state law. In addition, both Fireman's Fund and Unigard

argue that MERLO is preempted by federal law.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

Under the Supremacy Clause of the United States

Constitution, state laws that "interfere with, or are contrary

to the laws of Congress" are preempted and are therefore

invalid. Gibbons v. Ogden, 22 U.S. (9 Wheat) 1, 211, 6

L.Ed. 23 (1824). "Congressional intent governs our

determination of whether federal law preempts state law. If

Congress so intends, '[p]re-emption . . . is compelled whether

Congress' command is explicitly stated in the statute's

language or implicitly contained in its structure and purpose."

Boyes v. Shell Oil Prods. Co., 199 F.3d 1260, 1267 (11th

Cir.2000) (quoting Gade v. National Solid Wastes Mgmt.

Ass'n, 505 U.S. 88, 96, 112 S.Ct. 2374, 120 L.Ed.2d 73

(1992) (plurality)).

California preemption doctrine is based on Article XI,

section 7 of the California Constitution, which states that "[a]

county or city may make and enforce within its limits all

local, police, sanitary, and other ordinances and regulations

not in conflict with general laws." Cal. Const., art. XI, § 7

(emphasis added); Sherwin-Williams Co. v. City of Los

Angeles, 4 Cal.4th 893, 16 Cal.Rptr.2d 215, 217, 844 P.2d

534 (1993). The California Supreme Court has held that State

Law is "in conflict with" or preempts local law if the local

law "duplicates, contradicts, or enters an area fully occupied

by general law, either expressly or by legislative implication."

Sherwin- Williams, 16 Cal.Rptr.2d at 217, 844 P.2d 534.

1. Field Preemption

As the Insurers acknowledge, CERCLA contains three

separate savings clauses to preserve the ability of states to

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

regulate in the field of hazardous waste cleanup. First,

CERCLA § 114(a) states that "[n]othing in this chapter shall

be construed or interpreted as preempting any State from

imposing any additional liability or requirements with respect

to the release of hazardous substances within such State." 42

U.S.C. § 9614(a). Second, CERCLA § 302(d) states that

"{njothing in this chapter shall affect or modify in any way

the obligations or liabilities of any person under other Federal

or State law, including common law, with respect to release

of hazardous substances or other pollutants or

contaminants...." 42 U.S.C. § 9652(d). And third, CERCLA

§ 310(h) states that "[t]his chapter does not affect or otherwise

impair the rights of any person under Federal, State, or

common law, except with respect to the timing of review as

provided in section 9613(h)," a CERCLA provision that is not

at issue in the present case. 42 U.S.C. § 9659(h). Based on

these provisions, this court has held that "CERCLA does not

completely occupy the field of environmental regulation."

ARCO Envtl. Remediation, LLC v. Dep't of Health and Envtl.

Quality, 213 F.3d 1108, 1114 (9th Cir.2000).

Notwithstanding this precedent, the Insurers argue that

MERLO is preempted by the combined impact of CERCLA

and HSAA under the doctrine of field preemption. According

to the Insurers, CERCLA and HSAA, together, occupy the

field because CERCI_A explicitly authorizes states, but not

municipalities, to impose additional requirements regarding

the cleanup of hazardous substances. The Insurers’ argument

is based on the premise that, by referring to states but not

political subdivisions in the text of the statute, Congress

intended CERCLA to leave room for supplemental state

legislation but to prohibit supplemental municipal legislation.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

This argument is contrary to the Supreme Court's

ruling in Wisconsin Public Intervenor v. Mortier, 501 U.S.

597, 111 S.Ct. 2476, 115 L.Ed.2d 532 (1991), contrary to the

language of the statute itself, and contrary to reason. In

Mortier, the Supreme Court considered whether the Federal

Insecticide, Fungicide and Rodenticide Act ("FIFRA")

preempted a local ordinance adopted by the city of Casey,

Wisconsin. /d. at 602, 111 S.Ct. 2476. The Court began its

analysis by noting that FIFRA expressly authorizes "State[s]"

to regulate pesticides, but makes no reference in the savings

clause to political subdivisions of states. /d. at 606-07, 111

S.Ct. 2476. The Court went on to find, however, that the

term "State" is broad enough to encompass political

subdivisions, and that the fact that FIFRA is silent with

respect to the power of local governments "cannot suffice to

establish a clear and manifest purpose to preempt local

authority." Jd. at 607, 111 S.Ct. 2476 (internal quotation

omitted). As the Court explained:

The exclusion of political subdivisions cannot

be inferred from the express authorization to

the "State[s]" because political subdivisions are

components of the very entity the statute

empowers. Indeed, the more plausible reading

of FIFRA's authorization to the States leaves

the allocation of regulatory authority to the

"absolute discretion" of the States themselves,

including the option of leaving local regulation

of pesticides in the hands of local authorities.

Id. at 608, 111 S.Ct. 2476.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

We find that Mortier's reasoning regarding FIFRA is

equally applicable to CERCLA. Like FIFRA, CERCLA

anticipates that states will enact supplemental remedial

environmental legislation. Moreover, like FIFRA, the

CERCLA savings clauses refer only to "State[s],"_ while

CERCLA specifically refers to both states and political

subdivisions in other provisions. Compare 42 U.S.C. §

9614(a) (referring only to "State[s]"), with 42 U.S.C. §

9606(a) (referring to "a State or local government"). ©

Indeed, here California has exercised its discretion to

permit municipalities to regulate hazardous waste remediation

in some circumstances. The California Constitution provides

Lodi and other cities with broad municipal authority to

address local environmental nuisances, Cal. Const., Art. XI,

§ 7, and the California Legislature has adopted numerous laws

authorizing political subdivisions to adopt ordinances for the

protection of the environment. See, e.g., Cal. Gov't Code §

38771 (West 2001) (providing cities with the authority to

determine what constitutes a public nuisance); Cal. Gov't

Code § 38773 (West 2001) (granting cities the authority to

provide for the abatement of public nuisances).

In addition, the text of HSAA contemplates the ability

of cities to adopt parallel municipal environmental ordinances.

HSAA defines an authorized release into the environment as

including a release "which is authorized by statute, ordinance,

or rule of any state, regional, or local agency or government."

Cal. H & S Code § 25326 (emphasis added). HSAA's

savings clause provides that with certain exceptions not

applicable here, HSAA does not "affect or modify in any way

the obligations or liabilities of any person under any other

provision of state or federal laws." Cal. H & S Code § 25366

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

(emphasis added). Significantly, the phrase "state law" is

used in § 25326 to include municipalities. See Cal. H & S

Code § 25326 ("A ‘release authorized or permitted pursuant

to state law' means any release into the environment which is

authorized by statute, ordinance, regulation, or rule of any

state, regional, or local agency or government ...").

Finally, the text of CERCLA indicates that Congress

anticipated remedial actions undertaken by local governments

independent of CERCLA's own provisions:

In addition to any other action taken by a State

or local government, when the President

determines that there may be an imminent and

substantial endangerment to the public health

or welfare or the environment because of an

actual or threatened release of a hazardous

substance from a facility, he may require the

Attorney General of the United States to secure

such relief as may be necessary to abate such

danger or threat [proceeding under the

provisions of CERCLA]....

42 U.S.C. § 9606(a) (emphasis added).

In the absence of a strong indication to the contrary,

we adhere to the presumption that Congress did not intend

CERCLA to "den[y] local communities throughout the Nation

significant powers of self-protection." Mortier, 501 U.S. at

621, 111 S.Ct. 2476 (Scalia, J., concurring); see also

Western Oil and Gas Assoc. v. Monterey Bay Unified Air

Pollution Control Dist., 49 Cal.3d 408, 261 Cal.Rptr. 384

393-94, 777 P.2d 157 (1989) ("In view of the long tradition

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

of local regulation and the legislatively imposed duty [on local

governments] to preserve and protect the public health,

preemption may not be lightly found."). Accordingly, we

hold that CERCLA permits both states and their political

subdivisions to enact hazardous waste regulations and pursue

additional remedies, as long as those remedies do not conflict

or interfere with "the accomplishment and execution of

[CERCLA's] full purpose and objective... ."_ Indus. Truck

Ass'n v. Henry, 125 F.3d 1305, 1309 (9th Cir.1997).

2. Conflict Preemption

The Insurers next assert that CERCLA and HSAA

preempt seven specific portions of MERLO under the doctrine

of conflict preemption. We will find federal conflict

preemption where “compliance with both the federal and state

regulations is a physical impossibility," or when the state law

stands as "an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress." California

Fed. Sav. and Loan Ass'n v. Guerra, 479 U.S. 272, 281, 107

S.Ct. 683, 93 L.Ed.2d 613 (1987). Similarly, we will find

conflict preemption under California law when a local

ordinance prohibits conduct that is expressly authorized by

state statute or authorizes conduct that is expressly prohibited

by state general law. Sports Comm. Dist. v. County of San

Bernardino, 113 Cal.App.3d 155, 159, 169 Cal.Rptr. 652

(1980).

The Insurers challenge the following seven sections of

MERLO as preempted: (a) the MERLO section permitting

Lodi to be compensated for damage to its natural resources;

(b) MERLO's general liability scheme, including the sections

of MERLO that provide for the joint and several liability of

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9th Circuit Opinion, Filed 8/06/02, Amended-_10/08/02

PRPs, and the sections setting forth the contribution rights of

PRPs; (c) MERLO's burden of proof for establishing a

defense to liability; (d) the MERLO sections addressing the

cleanup standard set forth in the NCP; (e) the MERLO

sections defining "abatement action costs" to permit Lodi to

recover attorney's fees and interest; (f) the MERLO section

authorizing Lodi to gather certain information from PRPs and

their insurers; and (g) the MERLO section permitting Lodi

to bring direct actions against insurers of PRPs.

(a) Natural Resource Damages

MERLO states that PRPs shall be liable for

"[djamages for injury to, destruction of, or loss of natural

resources, including the reasonable costs of assessing such

injury, destruction, or loss resulting from the environmental

nuisance." MERLO § 8.24.040(A)(9)(c) (emphasis added).

The Insurers contend that this provision is preempted by state

and federal law because "under CERCLA and ... HSAA, a

State must designate a city as its authorized representative

before a city may seek natural resource damages." According

to the Insurers, because Lodi has not been designated the

"authorized representative" of the State of California, it

cannot recover for damages to its natural resources. We

disagree.

CERCLA provides states, federal agencies, and Indian

Tribes with a federal cause of action to sue for damages to

natural resources that they hold in trust for the public. See 42

U.S.C. §§ 9607(a)(4)(C), (f)(1). Specifically, CERCLA states

that:

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

In the case of an injury to, destruction of, or

loss of natural resources under [107(1)(4)(C) ]

liability shall be to the United States

Government and to any State for natural

resources within the State or belonging to, =

managed by, controlled by or appertaining to

such State.... The President, or the authorized

representative of any State, shall act on behalf

of the public as trustee of such natural

resources to recover for such damages.

42 U.S.C. § 9607(f)(1). Similarly, under HSAA, the

Governor of California or an "authorized representative" of

the State may recover natural resources damages. Cal. H &

S Code § 25352(c).

It is unnecessary for us to determine whether a

municipality may recover under CERCLA for damage to its

natural resources in the absence of being designated the

authorized representative of a state.'* Lodi does not assert that

” Several district courts in other circuits have addressed this

question, however. In the wake of the 1996 SARA

amendments to CERCLA, these district courts have

uniformly held that a municipality may not bring a

CERCLA cause of action "as a public trustee" of a state's

natural resources unless the municipality has been

appointed by the governor of its respective state. See, e.g.,

Borough of Sayreville v. Union Carbide Corp., 923

F.Supp. 671, 680-81 (D.N.J.1996); Borough of Rockaway

v. Klockner & Klockner, 811 F.Supp. 1039, 1049-51

(D.N.J.1993); City of Toledo v. Beazer Materials &

Servs., Inc., 833 F.Supp. 646, 652 (N.D.Ohio 1993); City

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

MERLO permits the City to sue for damages to its natural

resources under CERCLA or HSAA. Rather, Lodi asserts that

because "neither CERCLA nor . . . HSAA purport to

abrogate other causes of action, including common law

actions, for damage to natural resources, including natural

resources held in trust by ... municipalities," Lodi remains

free to enact local ordinances such as MERLO that permit the

City to recover for damage to such resources. We agree.

Notwithstanding any authority under CERCLA or

HSAA that Lodi may acquire by delegation, Lodi retains its

independent authority to protect its proprietary interest in

natural resources held in trust by the City. We have held that

although municipalities may not "sue as parens patriae [to

protect their natural resources] because their power is

derivative [of the state and] not sovereign," municipalities

may " ‘sue to vindicate such of their own proprietary interests

as might be congruent with the interests of their inhabitants. '

" Colorado River Indian Tribes v. Town of Parker, 776 F.2d

846, 848-49 (9th Cir.1985) (quoting /n re Multidistrict

Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122, 131 (9th

Cir.1973))(explaining that the concept of parens patriae is

derived from authority invested in the English Sovereign to

protect the interest of his subjects and has devolved in this

country only to the states and federal government, whereas

municipalities, which lack sovereignty, do retain authority to

vindicate such of their own proprietary interests as are

congruent with the interests of their inhabitants) (emphasis

of Heath v. Ashland Oil, Inc., 834 F.Supp. 971, 976-77

(S.D.Ohio 1993); Town of Bedford v. Raytheon Co., 755

F.Supp. 469, 471- 73 (D.Mass.1991).

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

added). Consistent with this holding, we find that Lodi

retains its authority under state law to protect its proprietary

interest in its natural resources from damage. Moreover, to

the extent that natural resources owned or held in trust by

Lodi are damaged by environmental contamination, we find

that nothing in CERCLA or HSAA prevents the City from

suing under MERLO to recover for damage to such resources.

Likewise, allowing the City to do so does not conflict

with either state or federal law. A finding of liability for

natural resource damage under MERLO would not make

compliance with CERCLA or HSAA impossible. See Indus.

Truck Ass'n, 125 F.3d at 1309 (explaining that court will find

federal conflict preemption when "it is impossible to comply

with both state and federal requirements"). Nor would it

"stand as an obstacle to" accomplishing and executing the

goals of CERCLA and HSAA. 7d. (stating that courts will

find federal conflict preemption when "state law stands as an

obstacle to the accomplishment and execution of the full

purpose and objectives of Congress").

We therefore find that MERLO § 8.24.040(A)(9)(c) is

not preempted by state or federal law.

(b) MERLO's Liability Scheme

The Insurers next allege that the provisions of

MERLO providing for recovery of cleanup costs from PRPs

conflict with and are therefore preempted by CERCLA and

HSAA. MERLO allows the City, once it has incurred cleanup

costs, to impose joint and several liability on PRPs for the

entire amount of its costs. See MERLO § 8.24.040. At the

same time, MERLO fails to provide a mechanism whereby

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

PRPs may impose on the City its fair share of costs incurred

(whatever that fair share might be). Under the facts of this

case, we agree that portions of this liability scheme are

preempted if the district court finds that Lodi is a PRP.

Section 107 of CERCLA permits the government or a

private party who has incurred response costs to bring suit

against a PRP to recover those costs. See 42 U.S.C. § 9607.

Applying federal common law principles, we have interpreted

Section 107 as imposing joint and several liability on PRPs

whenever the harm caused to a site is indivisible. Atchison,

Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159

F.3d 358, 362 (9th Cir.1998). Importantly, because liability

is joint and several, a defendant PRP in a cost-recovery action

under Section 107 may be held fully liable for the entire

clean-up costs at a site, despite the fact that the defendant PRP

was in fact responsible for only a fraction of the

contamination.

Moreover, as originally enacted, CERCLA did not

provide PRPs with an express cause of action for

contribution. See Centerior Serv. Co. v. Acme Scrap Iron &

Metal Corp., 153 F.3d 344, 348 (6th Cir.1998). Without a

claim for contribution, any individual PRP could be singled

out as a defendant in a Section 107 cost-recovery action and

required to reimburse the Section 107 plaintiff for response

costs far in excess of the defendant PRP's pro rata share.

Because such a result appeared inequitable, many courts

recognized an implicit right to contribution under Section 107,

where a PRP was subject to joint and several liability and

incurred response costs in excess of its fair share. See, e.g.,

Mardan Corp. v. C.G.C. Music Ltd., 804 F.2d 1454, 1457 &

n. 3 (9th Cir. 1986).

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

In 1986, Congress amended CERCLA by passing the

Superfund Amendments and Reauthorization Act of 1986

("SARA"), 42 U.S.C. §§ 9601-9675. Among other additions,

SARA added CERCLA § 113(f), which explicitly recognizes

a claim for contribution. Pinal Creek Group v. Newmont

Mining Corp., 118 F.3d 1298, 1300 (9th Cir.1997). "A

PRP's contribution liability [under CERCLA § 113(f) ]

correspond[s] to that party's equitable share of the total

liability. . . ." Jd. at 1301. Thus, CERCLA § 107 and

CERCLA § 113 provide different remedies: a defendant in a

§ 107 cost-recovery action may be jointly and severally liable

for the total response cost incurred to cleanup a site, whereas

a defendant in a § 113(f) contribution action is liable only for

his or her pro rata share of the total response costs incurred

to cleanup a site.

Like CERCLA, HSAA explicitly authorizes any PRP

that has incurred response costs to seek contribution from any

other PRP. Cal. H & S Code § 25363(e). However, "unlike

liability under CERCLA, liability under HSAA is not truly

joint and several. Any person found liable for costs under [

] HSAA who establishes by a preponderance of the evidence

that only a portion of those costs or expenditures are

attributable to that person's actions will be required to pay

only for that portion." Bancroft-Whitney, California Civil

Practice, Environmental Litigation, § 3:85 (1993); see also

Cal. H & S Code § 25363(a). Liability under HSAA is

therefore apportioned according to fault.

The Insurers first argue that MERLO conflicts with

CERCLA and HSAA because "CERCLA and HSAA allow

any PRP that has incurred response costs to seek contribution

from any other PRP," whereas under MERLO, Lodi cannot

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

be sued for contribution.

This conflict preemption argument is rooted in the

Insurers' assumption that Lodi is a PRP. To date, however,

Lodi has not been administratively adjudged a PRP by either

the federal EPA or California's DTSC. Nor has a court

adjudged Lodi a PRP. While we decline to decide whether

Lodi is a PRP on the record before us, we note that it is

doubtful whether Lodi may be considered a PRP merely as a

result of operating its municipal sewer system. See Lincoln

Prop., Ltd. v. Higgins, 823 F.Supp. 1528, 1539-44

(E.D.Cal. 1992) (holding that a municipal operator of a sewer

system that leaked hazardous waste could rely on a third-party

defense to avoid liability under CERCLA). But see Westfarm

Assocs. v. Wash. Suburban Sanitary Comm'n, 66 F.3d 669,

675-80 (4th Cir. 1995) (holding that a municipal operator of a

sewer system is liable for the acts of a third party that

discharges hazardous waste into the system). See also Robert

M. Frye, Municipal Sewer Authority Liability Under

CERCLA: Should Taxpayers Be Liable For Superfund Cleanup

Costs?, 14 Stan. Envtl. L.J. 61 (1995) (criticizing the

Westfarm decision and arguing that municipalities should not

bear CERCLA liability for operating sewer systems because

some leakage from sewers is unavoidable and the parties

dumping chemicals into the sewer, not the operator of the

sewer, is the responsible party). We remand to the district

court the question of whether Lodi is a PRP.

If the district court finds that Lodi is a PRP, MERLO

is preempted to the extent that it protects Lodi from

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

contribution claims by other PRP's.'* CERCLA permits a

PRP who incurs response costs to bring suit to recover those

costs from any other PRP. Thus, in theory, Fireman's Fund's

or Unigard's insured could remediate the Lodi site and then

sue the City pursuant to CERCLA § 113(f) or HSAA §

25356(e) for contribution in the amount of Lodi's fair share

of the costs. If Lodi is indeed a PRP, it cannot simply

legislate away this potential contribution liability under state

and federal law. For these reasons, we find that MERLO is

preempted to the extent that it legislatively insulates Lodi

from contribution liability under state and federal law.'®

Next, the Insurers allege that MERLO conflicts with

CERCLA because under MERLO § 8.24.040, Lodi may

impose joint and several liability for the entire clean-up cost

onto any one PRP, whereas CERCLA does not permit "a PRP

such as Lodi to impose joint and several liability on other

PRPs."

- We note that our holding is not inconsistent with the

reasoning of other circuits that have held that litigants may

not invoke state statutes in order to escape the application

of CERCLA's provisions in the midst of hazardous waste

litigation. See, e.g., PMC, Inc. v. Sherwin- Williams Co.,

151 F.3d 610, 617-18 (7th Cir.1998); Bedford Affiliates v.

Sills, 156 F.3d 416, 426-27 (2d Cir.1998); In re Reading

Co., 115 F.3d 1111, 1117 (3d Cir.1997).

” In so holding, however, we do not consider whether Lodi

may be entitled to contribution protection as a result of the

Cooperative Agreement between Lodi and California's

DTSC.

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Oth Circuit Opinion, Filed 8/06/02, Amended 10/08/02

Our circuit has held that a PRP may not bring a

CERCLA § 107 cost recovery action, and instead may bring

only a claim for contribution under CERCLA § 113(f). Pinal

Creek, 118 F.3d at 1301. This means that a PRP "does not

have a claim for the recovery of the totality of its cleanup

costs against other PRPs, and a PRP cannot assert a claim

against other PRPs for joint and several liability." /d. at

1306. In support of our decision in Pinal Creek, we noted

that allowing a party responsible for part of the contamination

to impose joint and several liability on other PRPs would

result in unfair cost shifting and "guarantee[ ] inefficiency,

potential duplication, and prolongation of the litigation

process ina CERCLA case." /d. at 1303 (quoting T H Agric.

& Nutrition Co. v. Aceto Chem. Co., 884 F.Supp. 357, 361

(E.D.Cal.1995)). We have not recognized any exception to

Pinal Creek for municipal PRPs and we decline to do so now.

Thus, if the district court determines that Lodi is a

PRP, Lodi may not escape its share of responsibility by

imposing all the costs of cleanup on others. Allowing it to do

so would interfere with CERCLA's PRP cost allocation

scheme, and would implicate the same policy concerns relied

upon by this court in Pinal Creek in rejecting a § 107 cost

recovery action for PRPs. /d. For these reasons, we find that

MERLO is preempted to the extent that it legislatively

insulates Lodi from bearing its share of responsibility by

imposing joint and several liability on other PRPs.

On the other hand, if the district court finds that Lodi

is not a PRP, MERLO's liability scheme does not come into

conflict with CERCLA because under CERCLA, a non-PRP

may impose joint and several liability on whatever PRPs it

can locate. Therefore, if Lodi proves not to be a PRP it may

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9h Circuit Opinion, Filed 8/06/02, Amended 10/08/02

invoke MERLO's liability scheme without coming into

conflict with CERCLA.

Establishing a Defense to Liability

MERLO requires a defendant PRP seeking to

apportion its liability to demonstrate by clear and convincing

evidence that the harm is divisible, see MERLO §

8.24.040(E), whereas CERCLA and HSAA require a PRP to

demonstrate only by a preponderance of the evidence that the

harm is divisible. See 42 U.S.C. § 9607(b) and Cal. H & S

Code § 25363(a). In other words, in order to avoid liability

for the entire cleanup, under MERLO a defendant must prove

by clear and convincing evidence its proportional

responsibility for the hazardous wastes being cleaned.

For the same reasons that Lodi cannot legislatively

insulate itself from contribution liability as a PRP under

CERCLA, it cannot foist its share of liability onto others by

imposing on fellow PRPs a higher burden of proof for

apportionment.

Even if the district court finds that Lodi is not a PRP,

this particular provision of MERLO conflicts with CERCLA

and is preempted because it stands as "an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress." California Fed. Sav., 479 U.S. at

281, 107 S.Ct. 683. A fundamental purpose and objective of

CERCLA is to encourage the timely cleanup of hazardous

waste sites. Stanton Road Assoc. v. Lohrey Enter., 984 F.2d

1015, 1019 (9th Cir.1993). One of the greatest obstacles to

the cleanup of properties that are, or are perceived to be,

39a

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

contaminated by hazardous substances is the risk of uncertain

or overly strict regulatory demands. See generally U.S.

Envtl. Prot. Agency, Handbook Of Tools For Managing

Federal Superfund Liability Risks at Brownfields And Other

Sites, EEPA Publication Number EPA 330-B-98-001

(Nov.1998); see also U.S. Conference of Mayors, Recycling

America's Land, A National Report on Brownfields

Redevelopment--Volume 3 7 (2000) (tracing inability to clean

up many contaminated sites to overly aggressive liability

schemes); Nat'l Governors Ass'n, New Mission for

Brownfields 13 (2000) (finding "specter of liability" as

impediment to investigating and remediating soil and

groundwater contamination). Congress, too, has recognized

the widespread belief that "fear of prolonged entanglement

in{onerous] liability schemes" has become an impediment to

cleanup of contamination. S.Rep.No. 107-2, at 2 (2001)

(accompanying the Brownfields Revitalization And

Environmental Restoration Act of 2001 (codified in scattered

sections of 42 U.S.C.)).

Potential purchasers of abandoned or underutilized

contaminated properties are often deterred from purchasing

and cleaning up these properties by exposure to unbounded

and uncertain liability.'’ See generally California Center For

Land Recycling, Strategies For Promoting Brownfield Reuse

We note that MERLO's application is not limited to

contaminated drinking water. It sweeps broadly,

encompassing all types of environmental contamination that

may result from the releases at issue here, and

encompassing virtually all other instances of environmental

contamination affecting Lodi or its environs. MERLO §

8.24.010(7).

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

In California (1998); see also S.Rep.No. 107-2, at 3. Many

initiatives have been instituted by California and the federal

government to "expedite the cleanup of these ‘Brownfields’,

and reduce the cost and burden of returning such properties to

beneficial use." Bancroft-Whitney § 3.80. Cleanups

conducted pursuant to federal and California law have come

to achieve some level of predictability, thus allowing for a

reasonable estimate of exposure to liability and of the costs

involved in taking on a cleanup. See, e.g., Robert P.

Dalquist, Making Sense Of Supelocation Decisions: The

Rough Justice Of Negotiated And Litigated Allocations, 31

Envtl. L. Rep. 11098, 11098-99 (2001). Such certainty, to

the extent that it is available, greatly encourages prospective

purchasers to rehabilitate contaminated property and put it

back into productive use."* See, e.g., S.Rep.No. 107-2, at 4.

Moreover, environmental insurance, which was driven

from the market by CERCLA's joint and several and

retroactive provisions, has recently become available again

because evolving case law and more recent state and federal

legislation have restored a degree of certainty to exposure to

environmental risk. See, e.g., California Center For Land

Recycling, Creating Vibrant Communities: Redeveloping

” It is important to remember that in many instances there is

no solvent responsible party available to pay for site

cleanup, and no insurance funds to be tapped. Such sites

are often located in inner city neighborhoods, and overly

ambitious liability requirements disproportionately

discourage economic development in areas that need it

most. See California Center For Land Recycling,

Strategies For Promoting Brownfield Reuse In California

(1998).

4la

9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

California's Brownfields § 5 (2002); see also, Marialuisa S.

Gallozzi & Alice V. Stevens, /ntroduction To Environmental

Risk Policies, SG006 ALI-ABA 549 (2002). The availability

of environmental insurance may allow early settlement, even

among large groups of PRP's, thus allowing energy and

resources to be directed at site cleanup rather than protracted

litigation. Creating Vibrant Communities § 5.

To allow literally thousands of different local

governments to impose their own liability schemes (such as

Lodi's) that make it more difficult to apportion liability than

under CERCLA would foster uncertainty and discourage site

cleanup. Indeed, Lodi's requirement that a PRP prove by

clear and convincing evidence that it caused a divisible

portion of the harm is greater than the burden of proof

required by CERCLA or HSAA, greater than that normally

required in a civil case (preponderance of the evidence), and

seems both inefficient and inequitable. If we were to approve

Lodi's standard of proof, other California cities could follow,

adopting hundreds of different liability schemes all more

onerous than CERCLA. The risk of overly strict and

uncertain liability would thereby be compounded, thwarting

CERCLA's goals.

On the other hand, municipal liability schemes equal

to or less onerous than that imposed by CERCLA do not

foster uncertainty or discourage cleanup but could, in many

instances, make rehabilitation of contaminated property more

feasible, thus furthering the objective of Congress.

We hold therefore that MERLO's requirement that a

defendant PRP seeking to apportion its liability must

demonstrate by clear and convincing evidence that the harm

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

is divisible is in conflict with CERCLA and is preempted.

We reach this conclusion regardless of what determination the

district court ultimately makes on the question of whether

Lodi is, or is not, a PRP.

(d) The National Contingency Plan ("NCP")

Standard

The Insurers next argue that the portions of MERLO

dealing with the cleanup standard set forth in the National

Contingency Plan ("NCP") conflict with CERCLA §

107(a)(4)(B) and HSAA § 25356, both of which address the

NCP. See MERLO 8§ 8.24.030-040.

Under CERCLA, the cleanup of listed hazardous

waste sites must be consistent with the NCP, which is a plan

promulgated by the EPA that "specifies the roles" of the

federal, state, and local governments "in responding to

hazardous waste sites, and establishes the procedures for

making cleanup decisions." United States v. City of Denver,

100 F.3d 1509, 1511 (10th Cir.1996). Only costs incurred in

accordance with the NCP may be recovered under CERCLA.

The burden of establishing that the cleanup process is

consistent with the NCP depends on whether the plaintiff in

a CERCLA action is the government or "any other person":

"While the United States government, or a [S]tate or Indian

tribe, can obtain ‘all costs of removal or remedial action ...

not inconsistent with the [NCP],' any other person can obtain

‘other necessary costs of response ... consistent with the

[NCP].' " Wash. State Dept. of Transp. v. Wash. Natural Gas

Co., 59 F.3d 793, 799 (9th Cir.1995) (quoting 42 U.S.C. §

9607(a)(2), (a)(4)(A)-(B)) (emphasis added). Thus, where

"the United States government, a [S]tate, or an Indian tribe is

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

seeking recovery of response costs, consistency with the NCP

is presumed," and the burden is on the defendant to rebut the

presumption of consistency by establishing that the plaintiff's

response action was arbitrary and capricious. /d. (emphasis

added). "In contrast, any ‘other person’ seeking response

costs under [CERCLA] must prove that its actions are

consistent with the NCP." Id. (emphasis added).

HSAA incorporates the NCP standard by reference.

Under HSAA, "[a]ny response action taken or approved

pursuant to this chapter shall be based upon, and be no kss

stringent than ... [t]he requirements established under federal

regulation pursuant to [the NCP]." Cal. H & S Code §

25356.1.5(a)(1).

The Insurers argue that the provisions of MERLO

addressing the NCP are preempted for two reasons. First, the

Insurers argue that MERLO conflicts with CERCLA because

it permits Lodi to recover from PRPs any "necessary cost of

response incurred by the city" that are "not inconsistent with

the requirements of this chapter." MERLO §

8.24.040(A)(9)(b) (emphasis added). Thus, MERLO provides

for the City a presumption of consistency with cleanup

standards. The Insurers allege that even though this provsion

of MERLO does not specifically reference the NCP,"” itwas

- In fact, the original version of MERLO--Ordinance 1650--

specifically stated that Lodi may recover all costs "not

inconsistent with the NCP." The Insurers allege that Lodi

specifically amended MERLO so that the revised version

of the ordinance--Ordinance 1684--omits any referetce to

the NCP and instead permits the City to recover allcosts

"not inconsistent with the requirements of this chapter."

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

crafted to provide Lodi "the identical presumption of

consistency with the NCP that CERCLA ... reserve [s] for the

United States, States, and Indian Tribes."

We have previously distinguished between local

governmental units, such as municipalities, and "States" as

defined by CERCLA, 42 U.S.C. § 9607(a)(4)(A). See Wash.

State Dept. of Transp., 59 F.3d at 800-01; United States ex

rel. Norton Sound Health Corp. v. Bering Strait School Dist.,

138 F.3d 1281, 1284 (9th Cir.1998). Whether a municipality

standing on its own is entitled to a presumption of consistency

with the NCP in the context of cost recovery conducted

pursuant to CERCLA is undecided in this circuit.” We need

not decide this issue today. In this case the Cooperative

Agreement between Lodi and the DTSC prominently declares

According to the Insurers, this amendment "masks rather

than eliminates the problem."

However, local governments are entitled to the

presumption of consistency when performing cleanups

pursuant to one of several California code sections. For

example, the Polanco Redevelopment Act provides that

municipal redevelopment corporations performing cleanups

under the provisions of the Act are afforded the

presumption of consistency. As the district court in City of

Emeryville v. Elementis Pigments, Inc., 2001 WL 964230

(N.D.Cal.), correctly stated, "the [Polanco] Act provides

that municipal redevelopment agencies that clean up

property under state supervision may recover their costs to

the extent that the DTSC could recover under CERCLA.

Under CERCLA, state agencies such as the DTSC are

considered "states" and are thus eligible to recover under

Section 107(a)(4)(A)." Jd. at *11 (citation omitted).

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

in several places that the cleanup of the Lodi Groundwater

Site shall be conducted in a manner “not inconsistent with the

NCP." In the Cooperative Agreement, DTSC has assumed an

oversight role’' and designated the City of Lodi as "the lead

enforcement entity." DTSC and Lodi's§ "joint

responsibilities" under the Agreement include ensuring

“cost-effective performance of the Work." In essence, the

Cooperative Agreement makes the DTSC responsible for

ensuring an efficient, reasonable, and cost-effective cleanup.

Lodi, acting with DTSC oversight, is therefore entitled to the

presumption of consistency under CERCLA afforded to state

agencies such as DTSC. See Wash. State Dept. of Transp., 59

F.3d at 800-01 (holding that a state agency is entitled to

presumption of consistency under CERCLA § 9607(a)(4)(A)).

Contrary to the Insurers’ contentions, this presumption

of consistency would not allow Lodi to escape any

responsibility it should rightly bear if the district court finds

that Lodi is a PRP. Rather, it encourages a more expeditious

cleanup by affording Lodi, "acting in close cooperation,

coordination and communication with DTSC,"_ the

presumption that the cost of selected cleanup mechanisms are

recoverable from other PRPs to the extent that other PRPs

“: As contract interpretation is a matter of law, we interpret

the Cooperative Agreement to require DTSC to act with

Lodi in a consolidated effort, providing the oversight,

consultation, and cooperation necessary and appropriate to

ensure that the Lodi Groundwater Site is remediated in a

timely, competent, and cost-effective manner. In exchange

for its ongoing and substantial services, DTSC will receive

the consideration enumerated in the Cooperative

Agreement.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

are adjudged to be responsible parties. This arrangement

should direct energy and resources toward cleaning up the

site, rather than toward paying lawyers to build a case for the

recoverability of costs. We hold, therefore, that even if Lodi

proves to be a PRP, it is entitled to the presumption of

consistency with the NCP afforded by the Cooperative

Agreement with respect to matters addressed in the

Agreement.

Next, the Insurers argue that MERLO is preempted

to the extent that it permits Lodi to order remediation that is

either more or less stringent than the NCP. Specifically, under

MERLO Lodi may order additional or more stringent

requirements than those that would or might apply under the

NCP. Similarly, MERLO § 8.24.030(A)(6) states that the

City "may order less stringent requirements " for abatement

than those that would or might apply under the NCP. See

MERLO § 8.24.030(A)(5) (emphasis added). Finally,

MERLO states that "at any site within the city which is [a

listed site under HSAA], the enforcing officer must, at a

minimum, comply with [HSAA]." MERLO § 8.24.030(A)(7).

To the extent that MERLO § 8.24.030(A)(5) permits

Lodi to order abatement that is more stringent than the NCP,

we find that it is preempted for the same reasons that

MERLO's burden of proof is preempted.

As to the claim that MERLO allows abatement less

stringent than the NCP, MERLO in fact does not permit Lodi

to order abatement less stringent than the NCP with respect to

the Lodi Groundwater Site. DTSC listed the Lodi

Groundwater Site beginning in fiscal year 1993-94. MERLO

requires that listed sites comply with HSAA, which in turn

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9th Circuit Opinion, Filed 8/06/02, Amended 1 0/08/02

requires that response actions be based upon and be no less

stringent than the NCP.” Therefore, as it applies to the Lodi

Groundwater Site, MERLO itself requires that response

actions be no less stringent than the NCP, hence MERLO

does not come into conflict with CERCLA or HSAA on this

point.”

With respect to application of MERLO beyond the

Lodi Groundwater Site, we see no reason why California

cities may not enact municipal environmental response

ordinances keying cleanup to standards other than the NCP.

Cleanups conducted pursuant to CERCLA and HSAA require

use of the NCP. However, we have held that CERCLA and

HSAA do not preempt the field of hazardous waste cleanup.

So long as a local ordinance does not come into conflict with

CERCLA or HSAA, as we have explained MERLO would in

some instances, a city may borrow or adapt the NCP as it sees

fit--or use some other procedure for making cleanup

decisions. An agreement with or authorization from the state

- MERLO § 8.24.030(A)(7) keys response actions to Cal. H

& S § 25356(c), which states that actions carried out with

regard to listed sites shall comply “with the procedures,

standards, and other requirements set forth in this chapter, "

25356(c) has been subsequently renumbered as § 25356(d).

" The Cooperative Agreement also provides that the Work on

the Lodi Groundwater Site comply with the NCP.

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Hh Circuit Opinion, Filed 8/06/02, Amended 10/08/02

is not a prerequisite to local environmental legislation.”

Local environmental legislation may be particularly useful to

California cities in dealing with smaller, marginally

contaminated sites that do not attract state or federal

involvement, and for which the extensive procedural

requirements of the NCP may unnecessarily prolong cleanup

and raise its cost. A city may compel a recalcitrant landowner

to clean up such a site using standards that make sense under

the circumstances. We hold, therefore, that MERLO's

m We should note, however, that in some instances California

law provides important advantages to municipalities that

pursue hazardous waste cleanup under authority delegated

by the state with oversight from a state agency. See, e.g.,

Cal. H & S § 25401 et seq. and § 57008 et seq. (the

California Land Environmental Restoration and Reuse Act)

(providing statutory immunity for local governments,

Owners and occupants, and lenders. who conduct site

cleanup pursuant to the terms of the Act).

We are aware of an out-of-circuit case indicating that local

regulations less stringent than CERCLA are preempted.

However, the statement in United States v. Akzo Coatings

of America, Inc., 949 F.2d 1409, 1454(6th Cir.1991), that

"CERCLA sets only a floor, not a ceiling, for

environmental protection" was not essential to the holding,

which turned on "the terms of the consent decree [at issue],

and not the language of CERCLA." /d. at 1455. In any

case, it is abundantly clear that local regulation less

onerous than CERCLA is not preempted. Indeed,

Congress has recognized that “local governments have

developed and implemented innovative and effective

brownfield programs." S.Rep.No. 107-2, at 2 (2001).

The Brownfields Revitalization And Environmental

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

provisions dealing with cleanup procedures are preempted by

CERCLA only to the extent that they permit Lodi to order use

of procedures more stringent than the NCP.”°

Restoration Act of 2001 not only recognizes these

programs but specifically recognizes the need to provide

federal funding without compelling compliance with some

burdensome and needless NCP requirements. /d.; see also

42 U.S.C. § 9604(k)(9)(A).

- Lodi argues that MERLO's provisions allowing it to order

abatement procedures more stringent than the NCP can not

he preempted by CERCLA because of CERCLA's multiple

savings clauses. Lodi's argument does not recognize the

difference between field preemption and _ conflict

preemption. We have indeed held that CERCLA's savings

clauses make it clear that CERCLA does not preempt the

field of hazardous waste cleanup. See Section III(B)(1)

supra. As this opinion makes clear, municipalities such as

Lodi may exercise significant powers of self-protection in

regulating hazardous waste cleanup. However, the powers

of municipalities are not unlimited. Where municipal

legislation comes into conflict with CERCLA, we find the

municipal legislation to be preempted, just as other circuits

have found conflict preemption in other circumstances,

notwithstanding the same savings clauses cited by Lodi.

See, e.g., Bedford Affiliates, 156 F.3d at 426-27 (holding

application of certain State law remedies was preempted by

CERCLA and reasoning that CERCLA "does not expressly

preempt state law" but where State or local law "stands as

an obstacle to the accomplishment and execution of the full

purpose and objectives of Congress," it is preempted);

Reading, 115 F.3d at 1117 (holding that CERCLA

preempted application of certain contribution and

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

restitution remedies “because the state law remedies

obstruct the intent of Congress ... [by thwarting] the

efficient resolution of environmental disputes");

Sherwin-Williams, 151 F.3d at 618 (holding that the

purpose of CERCLA's savings clauses is "merely to nix an

inference that the statute in which [they] appear[ ] is

intended to be the exclusive remedy for harms caused by

violation of the statute," and holding application of certain

provisions of State law preempted by CERCLA).

Lodi also points out that the NCP alludes to

standards that are more stringent than federal requirements.

First, the context in which "more stringent" requirements

occur in the NCP is far removed from concerns at issue in

this case.

Second, Lodi cites to sections of the NCP

mentioning more stringent State requirements. We have

rejected the Insurers’ argument that by referring to States

but not political subdivisions in the text of CERCLA,

Congress intended to leave room for supplemental State

legislation but to prohibit all supplemental municipal

legislation. However, this does not mean that Lodi can

assume the mantle of the "State" or the breadth of the

State's powers in all circumstances. We have previously

distinguished between local governmental units, such as

municipalities, and "States" with regard to various

applications of CERCLA. See Wash. State Dept. of

Transp., 59 F.3d at 800-01; Norton Sound, 138 F.3d at

1284. Our holding here concerns cleanup procedures

promulgated by municipalities and other local government

entities.

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9th Circuit Opinion, Filed 8/06/02, Amended 10/08/02

(e) Recovery of Attorney's Fees and Other

"Abatement Action Costs"

Under MERLO, Lodi may recover from any PRP

"[a]ll abatement action costs incurred by the city to

undertake, or cause or compel any responsible party to

undertake, any abatement action in compliance with the

requirements of this chapter...." MERLO § 8.24.040(A)(9)(a)

(emphasis added). MERLO defines the phrase “abatement

action costs" to include "any and all legal, technical or

administrative fees and costs and interest and other costs of

financing incurred by the [C]ity in performing or preparing to

perform an abatement action." MERLO § 8.24.010(2).

Thus, MERLO permits the City to recover any attorney's fees

it incurs in the course of its efforts to cleanup the PCE

contamination of its soil and groundwater.

In Key Tronic Corp. v. United States, 511 U.S. 809,

114S.Ct. 1960, 128 L.Ed.2d 797 (1994), the Supreme Court

held that CERCLA § 107(a)(4) does not permit a "private

party " to recover her attorney's fees. 511 U.S. at 817- 19,

114 S.Ct. 1960 (emphasis added). However, in United States

v. Chapman, 146 F.3d 1166 (9th Cir.1998), we held that

CERCLA § 107(a)(4) permits the United States Government

or a State or an Indian tribe to recover all "reasonable

attorney fees" "attributable to the litigation as a part of its

response costs" if it is the "prevailing party." Chapman, 146

F.3d at 1175- 76 (citing Key Tronic, 511 U.S. at 813, 819,

114 S.Ct. 1960) (emphasis added).

We need not decide if a city is the "State" for purposes

of recovering its attorney fees under CERCLA, because, in

any case, a City that is also a PRP should not be able to avail

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itself of this advantage.- If the district court finds that Lodi is

indeed a PRP, it may not legislate for itself a litigation

advantage by granting itself the right to collect attorney's

fees. If, on the other hand, Lodi proves not to be a PRP, we

see no reason why Lodi may not provide for recovery of

attorney's fees for itself under its municipal liability scheme.

Of course, the amount and nature of attorney's fees

recoverable is always subject to the reasonableness standard

as applied in the discretion of the district court.

We have held above that Lodi is entitled to the

presumption of consistency bestowed on States by the phrase

"not inconsistent with the national contingency plan"

contained in CERCLA, 42 U.S.C. § 9607(a)(4)(A), by virtue

of the Cooperative Agreement with the DTSC. A similar

result, however, is not called for with respect to attorney's

fees. The ability of states to recover attorney's fees under

CERCLA flows from language providing that responsible

parvies shall be liable to states for “all costs of removal or

remedial action." 42 U.S.C. § 9607(a)(4)(A). Attorney's

fees recoverable by states are included in the definition of "all

costs." Chapman, 146 F.3d at 1175. Non-State litigants are,

on the other hand, confined to recovery of "necessary costs,"

which do not include attorney's fees. 42 U.S.C. §

9607(a)(4)(B). Under the peculiar facts of this case, it does

not follow from the fact that Lodi is entitled to the

presumption of consistency, that it is also entitled to recover

"all costs."

Lodi has expended significant attorney's fees in an

attempt to escape liability through the enactment and defense

of its municipal ordinance. These efforts, so far as we can

tell, have not advanced the cleanup of the Lodi Site. Litigation

(

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costs may indeed be a part of recovering funds that are needed

to advance the cleanup. However, the ability to recover

litigation-related attorney's fees does not necessarily advance

the pace of cleanup because it may encourage ambitious

litigation. We do not interpret the Cooperative Agreement to

allow Lodi to recover its attorney's fees, nor do we

necessarily believe that it could bestow on Lodi the right to

recover all of its attorney's fees under the circumstances of

this case.

Lodi also seeks to recover costs related to a financing

scheme upon which it has embarked in order to avoid

municipal finance mechanisms that would make Lodi's

ratepayers responsible (at least initially) for principal and

interest costs. The Insurers assert that Lodi is trying to pass

on, as costs of financing the cleanup, interest costs of 25 to 30

percent. We decline to pass judgment on these costs on the

record before us, and leave it to the district court to determine

if these costs are recoverable under the standard of "necessary

costs of response" if Lodi should prove to be a PRP. If Lodi

should prove not to be a PRP, we leave it to the district court

to determine, under the standards the district court determines

to be appropriate, whether these costs are recoverable.

(f) Information Gathering Authority

The Insurers next argue that MERLO's information

gathering provision conflicts with both CERCLA and HSAA.

Section 8.24.050 authorizes Lodi to compel the production of

any documents, information, and testimony:

. . for the purposes of investigating the

nature or source of . . . an environmental

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nuisance, or for the purposes of determining

the need for abatement actions, choosing or

taking an abatement action under this chapter,

or for the purposes of determining the nature

and extent of the assets and financial resources

that are or may be available to (or available to

provide indemnity or similar benefits to) any

potentially responsible parties to undertake

abatement actions which are or may be

required pursuant to this chapter or to

reimburse the comprehensive municipal

environmental response fund for any

abatement action costs incurred or to be

incurred by the city pursuant to this chapter.

MERLO § 8.24.050(A). The Insurers assert that by this

section, Lodi has improperly "arrogated to itself"

information-gathering powers that only the EPA can provide

wnder CERCLA § 104(e), and only DTSC can provide under

HSAA § 25358. 1(a).

Notwithstanding any authority that Lodi may acquire

by delegation, Lodi has independent authority to promulgate

information-gathering legislation pursuant to its traditional

police powers. These powers include the City's authority to

gather the information reasonably necessary to discharge its

duty to protect the public health and welfare from public

nuisances. See Cal. Gov't Code § 38773.5 (a municipality's

legislative bedy may by Ordinance establish a procedure for

the abatement of a nuisance). In addition, California

Government Code § 37104 specifically authorizes city

councils to issue legislative subpoenas. Lodi's authority to

issue legislative subpoenas under MERLO and pursuant to

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California Government Code § 37104 was recently reaffirmed

by the California Supreme Court. Sze Conn. Indem. Co. v.

Super. Ct., 23 Cal.4th 807, 98 Cal.Rptr.2d 221, 3 P.3d 868

(2000).

Moreover, Lodi's decision to exercise its independent

information-gathering authority by enacting MERLO does not

conflict with either state or federal law. Compliance with an

information-gathering request under MERLO would not make

compliance with such a request under CERCLA or HSAA

impossible. See Indus. Truck Ass'n, 125 F.3d at 1309

(explaining that court will find federal conflict preemption

when "it is impossible to comply with both state and federal

requirements"). Nor would it "stand as an obstacle to"

accomplishing and executing the goals of CERCLA and

HSAA. 7d. (stating that courts will find federal conflict

preemption when "state law stands as an obstacle to the

accomplishment and execution of the full purpose and

objectives of Congress"). Finally, permitting Lodi to issue

legislative subpoenas does not prohibit conduct expressly

authorized by state statute or authorize conduct expressly

prohibited by state law. See Sports Comm. Dist., 113

Cal.App.3d at 159, 169 Cal.Rptr. 652.

For these reasons, we find that MERLO's

information-gathering provisions are not preempted by either

CERCLA or HSAA.

(g) Direct Actions Against Insurers

Under MERLO § 8.24.090(B)(1), Lodi may initiate a

direct action against a PRP's insurer before the City has

obtained a final order or judgment against the insured PRP.

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The Insurers allege that this portion of MERLO is preempted

because it conflicts with CERCLA § 108(c) and California

Insurance Code § 11580. Because we find that MERLO §

8.24.090(B)(1) conflicts with California insurance law and is

therefore preempted on this basis, we need not consider

whether it also conflicts with CERCLA.

California Insurance Code § 11580 states that every

liability insurance policy issued in California must include

"[{a] provision that whenever judgment is secured against the

insured ... in an action based upon bodily injury, death, or

property damage, then an action may be brought against the

insurer on the policy and subject to its terms and limitations,

by such judgment creditor to recover on the judgment." Cal.

Ins.Code § 11580(b)(2) (West 2001) (emphasis added).

Fireman's Fund asserts that this statute "forbids direct actions

against an insurer absent a final judgment against theinsured."

Fireman's Fund further asserts that because MERLO §

8.24.090(B)(1) authorizes direct actions against the insurers

of PRPs prior to obtaining a final judgment against the

insured, but § 11580 forbids such actions, MERLO §

8.24.090(B)(1) conflicts with and is therefore preempted by

California law. Sports Comm. Dist., 113 Cal.App.3d at 159,

169 Cal.Rptr. 652 (stating that conflict preemption under

California law includes situations in which a local statute

authorizes conduct prohibited by state law).

We begin our conflict preemption analysis with the

plain language of the statute. See Moyer v. Workmen's

Compl. Appeals Bd., 10 Cal.3d 222, 230, 110 Cal.Rptr. 144,

514 P.2d 1224 (1973). Contrary to Fireman's Fund's

contention, on its face § 11580 neither prohibits direct actions

nor purports to set forth the only circumstances under which

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one can initiate a direct action against an insurer. It simply

allows direct actions after the third-party claimant has

obtained a final judgment against the insured.

Two California Court of Appeals cases support the

conclusion that § 11580 does not set forth the exclusive set of

circumstances under which one may initiate a direct action

against an insurer. See Roberts v. Home Ins. Indem. Co., 48

Cal.App.3d 313, 317-18, 121 Cal.Rptr. 862 (1975)

("[S]Jection 11580-... is silent as to a direct action against the

insurer before judgment is obtained against the insured. That

silence does not imply a legislative policy against allowing a

claimant to pursue any rights which may have been created by

contract or by another state's direction action statute.");

Turner v. Evers, 107 Cal.Rptr. 390, 31 Cal. App.3d Supp. 11,

22 (1973) ( "[S]ection 11580, subdivision (b), is a statement

of the minimum provisions that must be included in all

liability insurance policies issued in this state.").

However, there is greater authority to suggest that §

11580 sets forth the exclusive set of circumstances under

which a third-party claimant may directly sue another

policyholder's liability insurer. See McKee v. Nat'l Union

Fire Ins. Co., 15 Cal.App.4th 282, 286-87, 19 Cal. Rptr.2d

286 (1993); Nationwide Ins. Co. v. Super. Court, 128

Cal.App.3d 711, 180 Cal.Rptr. 464, 466 (1982) (noting "the

general rule of indemnity law that ' [wJhere the terms of the

indemnity contract, or law of the state, require a judgment

against the ... [indemnitee] before direct action against the

insurer, no liability accrues as an enforceable claim against

the insurer until recovery of a final judgment against [the

indemnitee].' "); Zahn v. Canadian Indem. Co., 57

Cal.App.3d 509, i29 Cal.Rptr. 286, 288 (1976) ("It is

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fundamental that generally speaking the injured party may not

directly sue an insurer of the alleged tortfeasor."); see also

Tashire v. State Farm Fire & Cas. Co., 363 F.2d 7, 10 (9th

Cir. 1966), rev'd on other grounds,386 U.S. 523, 87 S.Ct.

1199, 18 L.Ed.2d 270 (1967) (stating that "under the law of

California ... a direct action against the insurer is not

allowable until after the claimant shall have secured a final

judgment against the insured"); Laguna Publ'g Co. v.

Employers Reinsurance Corp., 617 F.Supp. 271, 272

(C.D.Cal.1985) (quoting Tashire ).

We find these latter cases (including our own Ninth

Circuit decision) persuasive and hold that MERLO §

8.24.090(B)(1) is preempted by California Insurance Code §

11580 to the extent that it expands the ability of Lodi to bring

direct actions against a PRP's insurer

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