Summary
examining the legislative history of § 3334 and concluding that the provision was "intended to eliminate financial incentives for trespass by eradicating the benefit associated with the wrongful use of another's land"
Summary of this case from C & C Props. v. Shell Pipeline Co.Opinion
No. B155019
June 9, 2005 [CERTIFIED FOR PARTIAL PUBLICATION]
Pursuant to California Rules of Court, rules 976(d) and 976.1, this opinion is certified for partial publication. The portions directed to be published are the Introduction, Facts, part 4 of Shell's Appeal, and the Disposition.
Appeal from the Superior Court of Los Angeles County, No. BC150161, Wendell Mortimer, Jr., Judge.
Bright and Brown, James S. Bright, Maureen J. Bright and Brian L. Becker for Plaintiff and Appellant.
Caldwell, Leslie, Newcombe Pettit, Michael R. Leslie, Mary Newcombe, Cara A. Horowitz, Andrew Esbenshade, Sandra L. Tholen; Greines, Martin, Stein Richland and Feris M. Greenberger for Defendant and Appellant.
Mayer, Brown, Rowe Maw and Gregory R. McClintock for Western States Petroleum Association as Amicus Curiae on behalf of Defendant and Appellant.
OPINION
INTRODUCTION
When respondent Watson Land Company (Watson) discovered groundwater and soil contamination under its land (the Watson Center), it claimed that appellant Shell Oil Company (Shell), among others, was responsible. A jury awarded Watson $3,915,851 for the cost of cleanup of contamination caused by the leakage of leaded gasoline from pipelines Shell was operating under the Watson Center. Additionally, the jury found that Shell derived a $14,275,237 benefit when it failed to clean up the contamination and awarded that amount to Watson pursuant to Civil Code section 3334. Shell appeals and urges reversal on the following grounds: (1) Because Atlantic Richfield Company (ARCO) settled with Watson and agreed to pay for the entire clean-up of the Watson Center, ARCO was the real party in interest and Watson lacked standing to sue; (2) at a minimum, ARCO should have been joined as a coplaintiff at trial as an indispensable party; (3) Watson's evidence of causation was based on inadmissible evidence; and (4) the 1992 amendment to Civil Code section 3334 allowing a plaintiff to recover the benefits obtained by a trespasser should not have been applied because Shell was not benefited when its pipelines leaked. Therefore, even if there was causation, the judgment must be reduced by $14,275,237.
Watson challenges two orders on cross-appeal. According to Watson: (1) the trial court improperly denied a motion for sanctions against Shell for bad faith conduct under Code of Civil Procedure section 128.7, and (2) the trial court erroneously gave Shell a credit for the litigation costs ARCO agreed to pay Watson through settlement and then reduced Watson's recoverable costs by half.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
In part 4 of Shell's appeal, we hold that for the purposes of Civil Code section 3334, Shell did not obtain any benefits when its pipelines leaked onto the Watson Center. As a consequence, the judgment in favor of Watson must be reduced by $14,275,237. In the unpublished portion of this opinion, we explain that Watson's cross-appeal, and the rest of Shell's appeal lack merit. As modified, the judgment is affirmed in all other respects.
FACTS
The Watson Center is a fully developed commercial and industrial park with over 50 lots, most of which have been improved with buildings. Watson leases those buildings to various tenants. ARCO owns a refinery (the ARCO Refinery) across the street from the Watson Center and uses it for processing, storing and transporting crude oil, gas and petroleum products. There are two major pipeline corridors that run under the Watson Center. The first is commonly referred to as the "Utility Way Pipeline Corridor," and the second is commonly referred to as the "DWP Pipeline Corridor." At times relevant to this appeal, Shell operated pipelines in both of those corridors.
The Utility Way Pipeline Corridor is a portion of the Watson Center that is subject to a pipeline easement held by Shell.
The DWP Pipeline Corridor is property owned by the Los Angeles Department of Water and Power. The corridor cuts through the Watson Center.
In 1996, Watson sued, inter alia, Shell and ARCO pursuant to 11 causes of action, including trespass and nuisance. The first amended complaint alleged: Since some time prior to 1977, the operations of ARCO contaminated the groundwater beneath the ARCO Refinery. ARCO has been actively recovering free-floating petroleum product and removing contamination from the groundwater beneath the ARCO Refinery. In 1985, ARCO began conducting its remediation efforts under order of the Los Angeles Regional Water Quality Control Board (RWQCB). The RWQCB directed ARCO to create a subsurface barrier to prevent the migration of groundwater contamination to the Watson Center. Based on ARCO's remediation efforts and its representations, Watson believed that the contamination had not migrated to the Watson Center. However, in 1995, a prospective tenant at the Watson Center conducted an environmental site investigation and discovered contamination. In 1996, Watson engaged an independent environmental consulting firm to investigate the contamination and its sources. The ARCO Refinery and three other offsite properties were found to be likely contributors to the groundwater contamination. As well, Watson learned that the Shell pipelines running beneath the Watson Center may also be contributors.
Watson and ARCO entered in a settlement agreement (the settlement agreement) with an effective date of November 1, 2000. The settlement agreement provided that Watson would continue to diligently pursue its claims against the other defendants in the case and deposit the proceeds into a cleanup fund (the cleanup fund). ARCO agreed to be responsible for the remediation of the Watson Center, subject to a specified right of reimbursement from the cleanup fund. The parties divided the Watson Center into three areas: Area A, Area B and Area C. Pursuant to the parties' agreement, ARCO was entitled to 100 percent reimbursement of cleanup expenses related to Area A, 90 percent related to Area B, and 5 percent related to Area C.
The trial court granted ARCO's motion for determination of good faith settlement with Watson. The order specified that none of the nonsettling defendants was entitled to any set-off or credit as a result of the settlement between ARCO and Watson, that Watson would seek to "recover from the remaining defendants only their proportionate shares of liability for contamination of [the Center]," and the trial court would retain jurisdiction over the cleanup fund.
Prior to trial, Shell moved to exclude evidence of remediation costs on the theory that they would be paid by ARCO and ARCO was the real party in interest. In the alternative, Shell argued that ARCO had to be joined as an indispensable party. Shell's motion was denied.
At trial, Watson expert Jeffrey Dagdigian (Dagdigian) explained that when enough gasoline contaminates soil, the gasoline will float on top of the groundwater and become a source of contamination. The gasoline slowly dissolves into the groundwater, becomes a plume, and moves in the direction of the groundwater flow. The contamination is most concentrated at the source. Then, following the second law of thermodynamics, the contamination moves from a concentrated state to a random, dissolved state.
Watson produced maps displaying three plumes of gasoline contamination: Plume A (a medium sized plume at the northern end of the Watson Center over the Utility Way Pipeline Corridor), Plume B1 (a small plume in the southern half of the Watson Center over the DWP Pipeline Corridor at 233rd Street), and Plume B2 (a large plume in the southern half of the Watson Center over the Utility Way Pipeline Corridor at 233rd Street). Dagdigian testified that he was able to verify the accuracy of the plume maps by checking and rechecking facts and figures derived from unidentified "laboratory reports." He explained that overlapping concentrations of chemicals indicate a common source and then analyzed the plumes in terms of overlapping concentrations of benzene, diisipropyl ether (DIPE), methyl tertiary butyl ether (MTBE), and lead scavengers known as ethylene dichloride (EDC) and ethylene dibromibe (EDB).
In their briefs, the parties concentrate on Plume A and Plume B2. GATX Terminals Corporation, one of the defendants below, settled with Watson and agreed to remove jet fuel from the same area as Plume B1.
According to the maps, Plume A contained concentrations of benzene, DIPE and EDC, Plume B2 contained concentrations of benzene, DIPE, EDC, and EDB, and Plume B1 contained concentrations of benzene, DIPE and MTBE. The absence of MTBE in Plume A and Plume B2 suggested to Dagdigian that the contamination in those plumes was a leaded gasoline. Further, the presence of DIPE suggested to Dagdigian, based on his research of Shell facilities, "that this gasoline came from one of those facilities." He testified that Shell's pipelines carried the type of gasoline found in those plumes.
A Shell chemist, Ileana Rhodes, testified that Shell manufactured DIPE at one of Shell's nearby refineries. Shell's quarterly reports to the Environmental Protection Agency in 1979 listed DIPE as an additive in Shell's gasoline. Rhodes acknowledged these reports. Dagdigian testified that DIPE was found at Shell facilities to the north and south of the Watson Center, and also at Morman Island, where Shell stored gasoline.
Dagdigian went on to explain that the gasoline in Plume B2 contained a mixed alkyl lead package comprised of: tetraethyl lead, methyltriethyl lead, dimethyldiethyl lead, trimethylethyl lead, and tetramethyl lead. In contrast, the only lead compound that was discovered under the ARCO Refinery was tetraethyl lead. When asked what that meant, he stated: "It means that the gasoline that was released underneath the ARCO Refinery is different than the gasoline that was released underneath the Watson Center."
Nancy Beresky (Beresky), another Watson expert, opined that the Plume B2 was caused when a Shell pipeline leaked leaded gasoline. She based her opinion on four lines of evidence. Shell transported leaded gasoline through the Utility Way Pipeline Corridor. There was no evidence that there were any other pipelines in that corridor that were used to carry the same type of material. The hot spot of the plume was centered immediately underneath the Utility Way Pipeline Corridor. Additionally, the plume was comprised of leaded gasoline that contained DIPE. The same material was found underneath the Shell refinery to the north and the one to the south. Those two refineries are interconnected via the Utility Way Pipeline Corridor.
According to Beresky, there was evidence that Plume B2 was not caused by contamination migrating from the ARCO Refinery. Points between Plume B2 and the ARCO Refinery revealed no detection of the chemicals found in Plume B2. Based on the second law of thermodynamics, it would be impossible to have high concentrations at Plume B2 and lesser concentrations between Plume B2 and the ARCO Refinery if the refinery was the source. Beresky explained that the hydrology of the area supported her position. She thought that if there was migration, "we would see some smearing in this area. We don't see that."
Continuing on to Plume A, Beresky stated that it was also caused by a leaded gasoline leak from a Shell pipeline in the Utility Way Pipeline Corridor. She based her opinion on several facts. The plume was elongated in a north and south direction and the hot spot was near the corridor. The contamination contained DIPE which, again, was the same material found at the local Shell facilities. According to Beresky, the contamination did not come from the ARCO Refinery because it was too far to migrate, and the material differed.
Charles Schmidt (Schmidt), a third Watson expert, testified regarding the results he obtained using "downhole flux" testing. He testified that "the source of the B2 Plume is [the] Shell pipeline in [the] Utility Way [Pipeline] Corridor." He reached this conclusion because his tests showed a "top-down source" for the contamination that was above the groundwater. Further, he stated that he was able to exclude the ARCO Refinery as a source. Based on other data he collected, Schmidt opined that Plume A was created by a leak from Shell's pipeline. Subsequently, Dagdigian was asked about Schmidt's downhole flux data. Dagdigian noted that soil gas was first detected at 15 feet. He agreed, when asked by counsel, that this was evidence of a "top-down pipeline leak coming from the Utility Way Pipeline Corridor."
Downhole flux is measured by lowering a chamber into the ground and taking samples of the molecules of contaminants.
The jury found that Watson failed to prove a continuing nuisance, but that it did prove a continuing trespass. According to the jury, the amount Watson should receive for remediation was $3,915,851, and the value of the benefits obtained by Shell as a result of the gasoline contamination it caused at the Watson Center from June 1, 1993, to June 30, 2001, was $14,275,237.
The trial court entered judgment in favor of Watson in the amount of $18,191,088 and awarded $87,183.22 in costs. After the denial of various posttrial motions, these appeals followed.
Upon application, we allowed Western States Petroleum Association to file an amicus curiae brief regarding the proper interpretation of the "benefits obtained" measure of damages in Civil Code section 3334.
SHELL'S APPEAL
See footnote, ante, page 69.
1. Watson has standing to sue.
Shell contends that ARCO was the real party in interest at trial because ARCO agreed to pay for the clean up and that therefore Watson lacked standing to prosecute its claims. This contention fails. We briefly survey the law. Every action must be prosecuted in the name of the real party in interest. (§ 367.) "`[T]he purpose of [section 367] is readily discernible. . . . It is to save a defendant, against whom a judgment may be obtained, from further harassment or vexation at the hands of other claimants to the same demand.' [Citations.]" ( Keru Investments, Inc. v. Cube Co. (1998) 63 Cal.App.4th 1412, 1424.) "`Generally, "the person possessing the right sued upon by reason of the substantive law is the real party in interest." [Citations.]' [Citation.]" ( Gantman v. United Pacific Ins. Co. (1991) 232 Cal.App.3d 1560, 1566.) An assignee of a claim can sue in its own name. (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 108, p. 168.) If the assignor makes a complete assignment of the beneficial interest in a claim, then the assignor no longer has standing to sue. ( Id. at § 112, p. 170.) "[I]f an assignee consents that the suit be brought by his assignor, an objection that the plaintiff is not the real party in interest will not be ground for reversal because the defendant is fully protected from future action, and the purpose of any objection to the suit upon that ground has been served. [Citations.] Moreover, if the assignment occurs after suit has been filed the action may be continued in the name of the assignor, or the court may permit the assignee to be substituted therein [citation], and a judgment in favor of the assignor under these circumstances, when no change of party plaintiff has occurred, will be sustained." ( Greco v. Oregon Mut. Fire Ins. Co. (1961) 191 Cal.App.2d 674, 687 ( Greco).) The last two sentences from Greco quoted above echo the former section 385, which was reenacted in section 368.5. (Stats. 1992, ch. 178, § 11.) The reenacted version of the statute provides: "An action or proceeding does not abate by the transfer of an interest in the action or proceeding or by any other transfer of an interest. The action or proceeding may be continued in the name of the original party, or the court may allow the person to whom the transfer is made to be substituted in the action or proceeding." Watson owns the Watson Center and was the party injured by the contamination. There is no dispute that it was the real party in interest when this action commenced. Though Watson assigned certain claims to ARCO in the settlement agreement, Watson did not assign its claim against Shell. Therefore, Watson remained the real party in interest. Even if Watson had assigned its interest in the settlement agreement, the assignment would have taken place while the case was pending and Watson would have been permitted to continue prosecuting the claim under the auspices of Greco and section 368.5. Shell's citation to Vaughn v. Dame Construction Co. (1990) 223 Cal.App.3d 144 ( Vaughn) is unavailing. The Vaughn court stated: "While ordinarily the owner of the real property is the party entitled to recover for injury to the property, the essential element of the cause of action is injury to one's interests in the property — ownership of the property is not. It has been recognized in many instances that one who is not the owner of the property nonetheless may be the real party in interest if that person's interests in the property are injured or damaged. [Citations.]" ( Id. at p. 148.) Shell argues that Vaughn applies because ARCO had a pecuniary interest in the outcome of the trial. But that interest is not synonymous with an interest in the Watson Center.
2. The trial court was not required to join ARCO as a coplaintiff.
3. Shell waived its attack on the sufficiency of the evidence to prove causation.
19 Union Carbide Corp. v. Superior Court36 Cal.3d 1521 Union Carbide Bank of the Orient v. Superior Court67 Cal.App.3d 588 Id. Alvarez v. Jacmar Pacific Pizza Corp.100 Cal.App.4th 11901206 Sprague v. Equifax, Inc. 166 Cal.App.3d 1012 Varjabedian v. City of Madera20 Cal.3d 285 295Union Carbide, that will result in multiple liability. Selma Pressure Treating Co. v. Osmose Wood Preserving Co. 221 Cal.App.3d 16011611 Id. It is not necessary that they act in concert or in pursuance of a common design, nor is it necessary that they be joined as defendants. Cicone v. URS Corp. 183 Cal.App.3d 194 212 Ibid. Unilogic, Inc. v. Burroughs Corp.10 Cal.App.4th 612624 Nwosu v. Uba 122 Cal.App.4th 12291246 Ibid. Western Aggregates, Inc. v. County of Yuba 101 Cal.App.4th 278290 Ibid. Ibid. Bernard v. Hartford Fire Ins. Co.226 Cal.App.3d 12031205presumed correct. Denham v. Superior Court2 Cal.3d 557 564353 Rodriguez v. McDonnell Douglas Corp. 87 Cal.App.3d 626 659660 Continental Airlines, Inc. v. McDonnell Douglas Corp. 216 Cal. App. 3d 388414-415he may not testify as to the details he may not under the guise of reasons bring before the jury incompetent hearsay evidence. Id.1271 People v. Reyes12 Cal.3d 486503Service Employees Internat. Union v. County of Los Angeles225 Cal.App.3d 761769 Ibid.
Shell did not ask us to consider prejudice to either Watson or ARCO. In our view, they have not been prejudiced.
In its opening brief, in connection with its argument regarding section 389, Shell adverted to "the trial court's repeated refusal to allow Shell to inform the jury of the fact that ARCO had agreed to clean up the [Watson Center] and would financially profit from any judgment against Shell, while Watson would never incur any costs or remediation obligations." Then, in its reply brief, Shell argued that reference to the settlement agreement should have been permitted. Shell never argued that the trial court committed reversible error, nor did Shell cite any law setting forth the rules for appellate review of evidentiary rulings. Because this argument is belated, and because it is not properly developed, we deem it waived.
Shell did not provide a list of these "experts."
Shell did not provide a record citation for this statement. As the court in City of Lincoln v. Barringer (2002) 102 Cal. App. 4th 1211, 1239, footnote 16 stated, " any reference in the brief must be supported by a citation, regardless of where in the brief that reference appears" so that "appellate justices and staff attorneys [can] locate relevant portions of the record expeditiously without thumbing through and rereading earlier portions of a brief." This rule is imperative in a complex case such as this one. The review process depends upon the assistance of counsel.
Shell refers us to page 1483 of the reporter's transcript. This page, as represented, does contain testimony from Dagdigian. But nowhere on this page does Dagdigian state that unnamed laboratory records conclusively establish that Shell caused Plume A and Plume B2. On this page he discusses exhibit 1513, which he caused to be prepared. That exhibit illustrated Plume A.
When asked what kind of data he reviewed, Dagdigian testified that he "looked at data relating to historical operations, use of chemicals, where they were stored, where they were used. [¶] I looked at data concerning historical evaluations, where they took actual samples of soil, ground water, soil-gas, pre-product, possibly other materials that they sampled. I look at . . . this kind of sampling data from [the Center], from the neighboring sites which I just talked about, including a few Shell gas stations. [¶] I looked at physical data, boring logs, modeling studies, let's see, free product level heights, just a plethora of stuff related to environmental characterization of these properties."
Evidence Code section 1271 provides: "Evidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule when offered to prove the act, condition, or event if: [¶] (a) The writing was made in the regular course of a business; [¶] (b) The writing was made at or near the time of the act, condition, or event; [¶] (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and [¶] (d) The sources of information and method and time of preparation were such as to indicate its trustworthiness."
When a person or entity complies with a subpoena duces tecum for business records, Evidence Code section 1561, subdivision (a) provides that the "records shall be accompanied by the affidavit of the custodian or other qualified witness, stating in substance each of the following: [¶] (1) The affiant is the duly authorized custodian of the records or other qualified witness and has authority to certify the records. [¶] (2) The copy is a true copy of all the records described in the subpoena duces tecum, or pursuant to subdivision (e) of Section 1560 the records were delivered to the attorney, the attorney's representative, or deposition officer for copying at the custodian's or witness' place of business, as the case may be. [¶] (3) The records were prepared by the personnel of the business in the ordinary course of business at or near the time of the act, condition, or event. [¶] (4) The identity of the records. [¶] (5) A description of the mode of preparation of the records."
Shell tries in its reply brief to attack the admissibility of Schmidt's testimony for the first time. This is too late. As we have already explained, it would be unfair to Watson for us to consider a belated attack. We note, generally, that Shell's reply brief is longer than its opening brief and advances a variety of new and more detailed assaults on the judgment. We consider all new arguments, authorities and record citations set forth in the reply brief to be waived.
4. The $14,275,237 in "benefits" damages must be reversed.
The question presented is whether a gasoline leak from a pipeline constitutes "benefits" to Shell, as contemplated by Civil Code section 3334.
(1) When interpreting a statute, we must "ascertain the intent of the Legislature so as to effectuate the purpose of the law." ( Dyna-Med, Inc. v. Fair Employment Housing Com. (1987) 43 Cal.3d 1379, 1386 [ 241 Cal.Rptr. 67, 743 P.2d 1323].) We must "look first to the words of the statute themselves, giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose. A construction making some words surplusage is to be avoided. The words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible. [Citations.] Where uncertainty exists consideration should be given to the consequences that will flow from a particular interpretation. [Citation.] Both the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent. [Citations.]" ( Id. at pp. 1386-1387.) A close cousin of the foregoing quote is the rule "`that the objective sought to be achieved by a statute as well as the evil to be prevented is of prime consideration in its interpretation.' [Citations.]" ( Wotton v. Bush (1953) 41 Cal.2d 460, 467 [ 261 P.2d 256].)
Civil Code section 3334 reads: "(a) The detriment caused by the wrongful occupation of real property . . . is deemed to include the value of the use of the property for the time of that wrongful occupation, not exceeding five years next preceding the commencement of the action or proceeding to enforce the right to damages, the reasonable cost of repair or restoration of the property to its original condition, and the costs, if any, of recovering the possession. [¶] (b)(1) Except as provided in paragraph (2), for purposes of subdivision (a), the value of the use of the property shall be the greater of the reasonable rental value of that property or the benefits obtained by the person wrongfully occupying the property by reason of that wrongful occupation. [¶] (2) If a wrongful occupation of real property subject to this section is the result of a mistake of fact of the wrongful occupier, the value of the use of the property, for purposes of subdivision (a), shall be the reasonable rental value of the property."
(2) Shell's position is that though "benefits obtained" is not defined, "its plain meaning suggests that the provision acts as a disgorgement remedy forcing trespassers to give up wrongly obtained profits that accrue to the trespasser as a direct result of his or her wrongful trespass." In counterpoint, Watson contends that a benefit is obtained by any polluter who keeps money that it should have spent remediating the trespass. In our view, Shell is correct. "Benefits" are not "obtained" by reason of a wrongful occupation unless the trespass itself provided the trespasser with a financial or business advantage.
We start with the plain meaning of the statute. The word "benefits" connotes something that is advantageous, and the benefits contemplated by the statute must be obtained by reason of the wrongful occupation. In other words, a trespass must result in something advantageous for the trespasser or it does not qualify as a benefit for purposes of the statute. Here, the question is whether Shell's pipeline leakage and the resulting contamination of Watson's land can be considered something advantageous for Shell. We think not. Not only did the gasoline leakage result in a loss of product for Shell, but it meant that pipelines either had to be repaired or abandoned and replaced by different pipelines at substantial cost.
(3) We reject the notion that "benefits" include the avoidance of remediation costs. "The value of the use" is a separate component of damages from "the reasonable cost of repair or restoration of the property to its original condition." Remediation costs fall within the umbrella of the "reasonable cost of repair or restoration." If "benefits" included the cost of remediation (and the value of the use of the money saved, as Watson suggests), then the language permitting recovery of "the reasonable cost of repair or restoration" would be surplusage. (Civ. Code, § 3334, subd. (a).)
According to Watson, "[Civil Code] section 3334 was amended to eliminate the incentive to trespass, including as only one example defendants who dumped toxic waste on worthless desert properties to avoid the proper disposal costs. Obviously, those toxic dumpers did not generate a `direct profit' dumping the waste — they simply avoided a cost thereby increasing their net profits. That is exactly what Shell did here. The value to Shell of the cleanup costs it never spent is many times the amount of the cleanup costs." This analogy fails. A polluter who dumps toxic waste in the desert instead of paying to properly dispose of toxic waste gains the financial advantage of getting either free disposal or cheaper disposal. No such financial advantage accrues to the owner of a leaking pipeline, at least insofar as the owner was not using the leak to effectuate disposal or to obtain some other financial gain separate from the failure to remediate the trespass. In the absence of an advantage, there is no need to impose a special disincentive to trespass.
Watson does not attribute any such intent to Shell.
Our interpretation is in harmony with the salutary purpose of the 1992 amendment that introduced the "benefits obtained" measure of damages to Civil Code section 3334.
The origins of the amendment can be found in resolution No. 5-9-91, which was passed by the Conference of Delegates of the State Bar of California in the summer of 1991. In writing to the legislative counsel for the State Bar, the resolution's author explained that the resolution "provides a definition for the `value of the use' which eliminates Section 3334's economic incentive to dump" toxic waste when the rental value is cheaper than the cost of disposal. "The `value of the use' would be `the greater of the reasonable rental value or the benefits obtained by the trespasser by reason of the trespass.' The measure of damages would take into account the benefit obtained by the trespass — the cost saved by not properly disposing the pollutants."
Those connected to Assembly Bill No. 2663 (1991-1992 Reg. Sess.), the bill prompted by resolution No. 5-9-91 and sponsored by the State Bar to amend Civil Code section 3334, discussed the purpose of the bill in a variety of ways and used the following language: (1) "trespassers [have] earned significant business revenue (benefits) from using the land to dispose of toxic wastes" (Amelia V. Stewart, legis. representative of State Bar of Cal., letter of support for Assembly Bill No. 2663 to Assemblyman Phillip Isenberg, Chair of the Assembly Judiciary Com., Mar. 19, 1992); (2) "potential polluters would be required to disgorge the benefits obtained from any such wrongful occupation" (Michael D. Schwartz, letter of support for Assembly Bill No. 2663 to Amelia V. Stewart, legis. representative of the State Bar of Cal., Mar. 20, 1992); (3) "the law should be clear that the damages recoverable in such cases is the economic benefit to the trespasser, if that is the greater value" (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 2663 (1991-1992 Reg. Sess.)); (4) "the law should encourage proper disposal of toxic wastes. [¶] By statutorily allowing recovery of `the benefits (profits) obtained by the occupier by reason of trespass,' courts in trespass actions will have the discretion to assess damages comparable to the benefit to the wrongful trespasser that is dumping toxic wastes" (Assem. Com. on Judiciary, 3d reading analysis of Assem. Bill No. 2663 (1991-1992 Reg. Sess.)); (5) "in some cases trespassers find it to their advantage to intentionally use another's land, reap large benefits for that act, and then pay a relatively small amount of damages for the trespass" and that "polluters may find it cheaper to dump the waste on someone else's desert land and pay relatively minor damages for that trespass, than to pay the fees for the proper disposal of the waste" (Sen. Com. on Judiciary, com. on Assem. Bill No. 2663 (1991-1992 Reg. Sess.), as amended May 27, 1992, p. 2).
(4) This history demonstrates that the Legislature intended to eliminate financial incentives for trespass by eradicating the benefit associated with the wrongful use of another's land. This intent would not be furthered by applying the "benefits obtained" measure of damages to a trespass for which there was no financial or business advantage. In such a case, a plaintiff is limited to recovering under the other measures of damages contemplated by the statute, i.e., the reasonable rental value of the property and the cost of restoration and recovery. Thus, the $14,275,237 "benefits" damages awarded by the jury must be reversed.
WATSON'S CROSS-APPEAL
See footnote, ante, page 69.
1. Sanctions. During trial, on May 31, 2001, Shell moved to exclude evidence of Schmidt's scientific method and analysis on the theory that his method was not generally regarded as reliable in the scientific community and was inadmissible pursuant to People v. Kelly (1976) 17 Cal.3d 24 ( Kelly). The trial court set the motion to be heard on June 4, 2001. On that date, Watson filed a motion seeking sanctions under the auspices of section 128.7. Watson claimed that the Kelly motion was filed in bad faith and caused Watson to incur $29,500 in expenses, plus $1,450 to prepare a motion for sanctions under section 128.7. The trial court denied the Kelly motion and the motion for sanctions. Watson contends that the trial court abused its discretion when it declined to grant sanctions against Shell. In response, Shell contends that the motion lacked merit and that it was procedurally barred because it did not satisfy the safe harbor provision in section 128.7, subdivision (c)(1). Because we agree with Shell that the motion was procedurally barred, we need not discuss the merits. In its reply, Watson argues that Shell waived the procedural bar by not raising it below. However, if the facts are undisputed, then a party may raise a legal argument for the first time on appeal. ( Nippon Credit Bank v. 1333 North Cal. Boulevard (2001) 86 Cal.App.4th 486, 500.) Whether an appellate court considers the matter is discretionary. (See Gonzalez v. State Personnel Bd. (1995) 33 Cal.App.4th 422, 431.) Here, the relevant facts are undisputed and we opt to reach Shell's argument. Section 128.7 permits a party to move for sanctions for bad faith tactics. In 2001, subdivision (c)(1) provided in relevant part: "Notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court unless, within 30 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected." (§ 128.7, subd. (c)(1).) Because Watson filed its sanctions motion the same day the Kelly motion was heard, it failed to provide Shell with an opportunity to withdraw the challenged papers. As a result, section 128.7 could not be lawfully applied. (See Goodstone v. Southwest Airlines Co. (1998) 63 Cal.App.4th 406, 424.) Watson contends that this result is unfair because, due to the timing of events, it was denied of the opportunity to move for sanctions. But there is no indication in the record that Watson sought an order from the trial court shortening the safe harbor time, which would have been permitted by the statute. Because Watson did not avail itself of that option, it cannot complain about unfairness. In the final analysis, however, whether the result was unfair to Watson is not a proper consideration. Quite simply, we have no power to rewrite the statute. That power lies with the Legislature. On this record, we cannot conclude that the trial court abused its discretion. (See Guillemin v. Stein (2002) 104 Cal.App.4th 156, 167 [setting forth the standard of review].)
2. Costs.
Watson submitted a cost bill for $189,285.70, and then revised it to claim $179,695.78. The trial found that the total costs were $174,366.45 and then ordered "that the entire cost bill be reduced by fifty percent. The settlement agreement with ARCO states that ARCO is required to reimburse Watson for fifty percent of its litigation costs. A double recovery of costs is precluded under California law. [Citation.]" According to Watson, the trial court erred when it cut the costs in half and awarded only $87,183.22. We disagree. The key to this issue is the settlement reached between Watson and ARCO and the trial court's order determining that the settlement was in good faith. Before we delve into our analysis, a quick recapitulation of the law is in order. When a release is given in good faith, it does not discharge any other joint tortfeasors from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, or in the amount paid for it, whichever is greater. (§ 877, subd. (a).) Sections 877 and 877.6 together provide that "`while a good faith settlement cuts off the right of other defendants to seek contribution or comparative indemnity from the settling defendant, the nonsettling defendants obtain in return a reduction in their ultimate liability to the plaintiff.' [Citation.] Section 877, subdivision (a) thus operates to reduce claims against other joint (as opposed to several) tortfeasors. [Citation.]" ( Regan Roofing Co. v. Superior Court (1994) 21 Cal.App.4th 1685, 1700 ( Regan Roofing).) If litigation costs are part of a settlement, a nonsettling defendant is entitled to an offset. ( Id. at p. 1709.) If, however, costs are not part of a settlement, then a nonsettling defendant is not entitled to an offset. ( Reed v. Wilson (1999) 73 Cal.App.4th 439, 445.) We now turn to the settlement agreement and Watson's related admissions. Part 13 of the settlement agreement required ARCO to pay Watson $1.5 million and, further, stated: "The payment by ARCO to Watson under this [part] 13 is in settlement and partial satisfaction of the damages which Watson attributes to ARCO only." In Watson's cross-appellant's opening brief, it states that as of the "Effective Date," which was defined in the settlement agreement as November 1, 2000, "Watson's total litigation expenses were approximately $3 million. . . . This amount . . . includes . . . expenses such as attorneys' fees and expert fees. Watson and [ARCO] agreed to include in the Settlement Agreement a mechanism by which Watson would recoup those litigation expenses. Pursuant to the Settlement Agreement and within days after the Settlement Agreement was entered into, [ARCO] reimbursed Watson in the amount of $1.5 [m]illion in partial satisfaction of unspecified expenses incurred by Watson." This is a concession that the payment of $1.5 million was for litigation costs. A similar concession appeared in Watson's opposition to Shell's motion to tax costs. These concessions may be taken as admissions by Watson. (See Mangini v. Aerojet-General Corp. (1996) 12 Cal.4th 1087, 1097-1098.) Therefore, we view part 13 of the settlement agreement as a mechanism by which ARCO agreed to compensate Watson for half its pre-Effective Date litigation costs. The settlement agreement gave Watson the chance to recoup the other half of its pre-Effective Date litigation costs through parts 17 and 18 of the settlement agreement. Part 17 of the settlement agreement provided that money payable to Watson from any defendant after the Effective Date shall be paid into the cleanup fund and that the fund shall be maintained for at least 10 years. Part 18, subsection 18.1, entitled Watson to be reimbursed from the cleanup fund for pre-Effective Date litigation expenses that were not already reimbursed. Subsequent litigation expenses fell under part 15 of the settlement agreement. That part provided, in relevant part, that "ARCO shall be obligated to reimburse Watson for fifty percent (50%) of all of the litigation costs and expenses actually incurred by Watson for Watson to pursue the claims of Watson in the Watson Lawsuit from and after the Effective Date." The next piece of the puzzle is the applicability or inapplicability of sections 877 and 877.6. The parties do not indicate whether a trier of fact, be it the trial court or the jury, ever determined whether ARCO and Shell were joint tortfeasors. Nonetheless, ARCO sought the protection of sections 877 and 877.6, and those sections only apply to joint tortfeasors. Moreover, part 7, subsection 7.1, of the settlement agreement provided: "ARCO shall obtain an order from the Court determining that the terms and conditions of settlement set forth in this Agreement constitute a good faith settlement under the provisions of . . . section 877.6, or in the alternative, obtain an order determining that the provisions of . . . section 877.6 are inapplicable to the settlement set forth in this Agreement." The trial court's order stated, inter alia, "Arco's settlement with Watson is a good faith settlement within the meaning of . . . [section] 877 and [section] 877.6 precluding any claim for contribution or indemnity against ARCO by any non-settling defendant." Impliedly, the trial court found that ARCO and the nonsettling defendants were joint tortfeasors for purposes of the ruling and order under sections 877 and 877.6. Undaunted by the trial court's implied findings, Watson contends that the trial court's ruling was barred by the collateral source rule set forth in Pacific Gas Electric Co. v. Superior Court (1994) 28 Cal.App.4th 174. Under that rule, if a plaintiff receives some compensation for its injuries from a source wholly independent of the tortfeasor, the tortfeasor is not entitled to an offset. ( Id. at p. 178.) "The most obvious examples of sources not considered wholly independent of the tortfeasor are a cotortfeasor and a cotortfeasor's insurance carrier." ( Id. at p. 180.) While Watson readily admits that Shell would be entitled to an offset if it was a joint tortfeasor, Watson states: "ARCO and Shell are not joint tortfeasors, as each of them caused separate and distinct harms to Watson's property interests as a result of unrelated oil and gas refining operations in the vicinity of the Watson Center." In our view, Watson is barred from claiming that ARCO and Shell were not joint tortfeasors. Watson gained a benefit by settling with ARCO, and that settlement was conditional on an order determining the settlement to be in good faith or an order determining that sections 877 and 877.6 were inapplicable. Watson obtained what it desired, i.e., a ruling that satisfied part 7, subsection 7.1 of the settlement agreement. Having obtained that benefit, Watson cannot elude the consequences. There are no cases directly on point, but our holding is consistent with the policies that underlie the doctrines of waiver and estoppel. (See Telles Transportation. Inc. v. Workers' Comp. Appeals Bd. (2001) 92 Cal.App.4th 1159, 1166-1167 ["under general civil litigation principles, `where a deliberate trial strategy results in an outcome disappointing to the advocate, the lawyer may not use that tactical decision as the basis to claim prejudicial error'"]; JRS Products, Inc. v. Matsushita Electric Corp. of America (2004) 115 Cal.App.4th 168, 178 ["fairness is at the heart of a waiver claim"]; and Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 403 [stating that where "`a party by his conduct induces the commission of error, he is estopped from asserting it as a ground for reversal' on appeal" and that "the doctrine rests on the purpose of the principle, which is to prevent a party from misleading the trial court and then profiting therefrom in the appellate court"].) Because the settlement agreement requires ARCO to cover half of Watson's pre- and post-Effective Date litigation costs, and because ARCO and Shell were impliedly treated as joint tortfeasors for purposes of the trial court's order determining that Watson entered into its settlement with ARCO in good faith, the trial court properly applied Regan Roofing and reduced Watson's costs. Watson suggests that the trial court's decision to reduce Watson's costs conflicts with the good faith determination order. That order specifies that "[n]one of the non-settling defendants is entitled to any set-off or credit as a result of the settlement between ARCO and Watson" and that at trial "Watson will seek to recover from the remaining defendants only their proportionate share of liability for contamination on the [Watson Center]." On the surface of the two orders there is a potential conflict because the latter order gives Shell a set-off or credit even though the prior order prohibited any set-offs or credits. But this conflict fades away when the good faith determination order is scrutinized. The trial court had no intention of permitting Watson to obtain a double recovery. Instead of permitting the nonsettling defendants to obtain a set-off or credit, Watson was limited to seeking to recover only the proportionate shares of the nonsettling defendants' liability for the contamination. Properly understood, the portion of the good faith determination order proscribing any set-off or credit only pertained to findings of liability. It did not apply to costs. Rather, it was designed to honor the allocation of liability in the settlement agreement. However, there was no similar provision in the order for costs. Therefore, the way for the trial court to honor the cost allocation in the settlement agreement was to apply Regan Roofing.
DISPOSITION
The damages are reduced to $3,915,851. As modified, the judgment is affirmed. The parties shall bear their costs on appeal.Doi Todd, Acting P.J., and Nott, J., concurred.
Retired Associate Justice of the Court of Appeal, Second Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
The petition of appellant Watson Land Company for review by the Supreme Court was denied September 28, 2005. Baxter, J., did not participate therein.