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TDY Holdings, LLC v. United States

United States Court of Appeals, Ninth Circuit

October 4, 2017

TDY Holdings, LLC; TDY Industries, LLC, Plaintiffs-Appellants,
v.
United States of America; United States Department of Defense; Ashton B. Carter, in his official capacity as Secretary of Defense, Defendants-Appellees.

          Submitted May 8, 2017 Pasadena, California

         Appeal from the United States District Court for the Southern District of California Cathy Ann Bencivengo, District Judge, Presiding Argued and D.C. No. 3:07-cv-00787-CAB-BGS

          Randall M. Levine (argued), Douglas A. Hastings, and Bryan M. Killian, Morgan Lewis & Bockius LLP, Washington, D.C.; James J. Dragna, Morgan Lewis Bockius LLP, Los Angeles, California; for Plaintiffs-Appellants.

          Rachel E. Heron (argued), Dustin J. Maghamfar, Mark A. Rigau, Lewis M. Barr, Ellen J. Durkee, and Aaron P. Avila, Environment and Natural Resources Division, United States Department of Justice, Washington, D.C., for Defendants-Appellees.

          Eric B. Wolff, Alexander M. Fenner, and Mark W. Schneider, Perkins Coie LLP, Seattle, Washington; Shane R. Swindle, Perkins Coie LLP, Phoenix, Arizona; for Amicus Curiae National Defense Industrial Association.

          Before: J. Clifford Wallace, Morgan Christen, and Paul J. Watford, Circuit Judges.

         SUMMARY[*]

         CERCLA

         The panel reversed the district court's judgment in favor of the United States in an action brought by a plaintiff military contractor under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), seeking contribution from the government for its equitable share of the cleanup costs of plaintiff's aeronautical manufacturing plant located in San Diego, California.

         CERCLA imposes strict liability on potentially responsible parties ("PRP") for the cleanup costs of an environmental hazard. Plaintiff and the federal government were PRPs for the cleanup at issue, and plaintiff argued that the district court abused its discretion when it allocated all of the cleanup costs to plaintiff.

         The panel rejected plaintiff's suggestion that the district court erred by misconstruing the concept of "fault, " or misunderstanding CERCLA's strict liability statutory scheme. The panel further held the district court did err, however, in its analysis and application of the two most on-point decisions - United States v. Shell Oil Co., 294 F.3d 1045 (9th Cir. 2002), and Cadillac Fairview/California, Inc. v. Dow Chem. Co., 299 F.3d 1019 (9th Cir. 2002) - that considered how CERCLA cleanup costs should be allocated between military contractors and the federal government. The panel held that the district court erred in concluding that Shell Oil and Cadillac Fairview were not comparable, and in allocating zero percent of clean-up costs to the government, particularly in light of the parties' prior course of dealings and the government's requirement that plaintiff use two of the hazardous chemicals at issue. The panel remanded for additional proceedings.

         Judge Watford concurred. He agreed that the record did not support allocating 100% of the clean-up costs to plaintiff, but in his view the record did support something close to that.

          OPINION

          CHRISTEN, CIRCUIT JUDGE:

         Plaintiffs-Appellants TDY Holdings, LLC, TDY Industries, LLC, and its predecessor, the Ryan Aeronautical Company (collectively, TDY), operated a forty-four-acre aeronautical manufacturing plant located in San Diego, California, from 1939 to 1999. TDY derived between 90 and 99 percent of its business from military contracts with the U.S. government. Over time, certain chemical substances used in the course of manufacturing operations were released, contaminating the soil and groundwater in and around the plant and requiring TDY to incur substantial remediation expenses. In 2007, TDY filed a complaint under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), seeking contribution from the government for its equitable share of the cleanup costs. After a twelve-day bench trial, the ...


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