California Supreme Court to Decide Issues of Preemption and Primary Jurisdiction in Mass Tort Groundwater Contamination Cases
May 14, 2001
The California Supreme Court is set to decide whether various state courts in
Los Angeles County, California, can continue to exercise jurisdiction over water
utilities regulated by the California Public Utilities Commission (PUC) as well
as non-regulated municipal wholesale water purveyors and industrial businesses
not regulated by the PUC in eight underlying mass tort actions. In Hartwell
Corporation v. The Superior Court, 74 Cal.App.4th 837, mod. 75 Cal.App.4th
706a) (1999), approximately 800 plaintiffs, represented by two different
plaintiffs’ firms, filed actions in various state courts located in Los
Angeles County, seeking personal injury and property damages based on
allegations that regulated public utilities and non-regulated water and
industrial businesses caused contamination of their drinking water. Thereafter,
the PUC instituted an investigation into the quality of the water served by
these regulated utilities.
In their complaints, plaintiffs, who are long-time residents of various
cities throughout Los Angeles County, California, identified tricholoroethylene
(TCE), perchloroethene (PCE), perchlorate (rocket fuel), carbon tetrachloride (CTC)
and other organic solvents as the contaminants fouling their water, soil and the
air. Plaintiffs blame both the regulated and non-regulated water companies for
delivering contaminated drinking water alleging personal injury, wrongful death,
fear of cancer, risk of cancer and medical monitoring. Plaintiffs blame the
nonregulated industrial businesses for contaminating the groundwater through
improper disposal of toxic substances, which then traveled into the drinking
water distribution system, causing the same harm alleged against the water
companies.
In March 1998, the PUC filed an order instituting investigation (OII #1) to
inquire into the quality of the water served by the regulated water companies in
the relevant areas of Los Angeles County, California. The OII specifically
described its task as "investigating the operations and practices of the
named defendant public utilities, their compliance with the PUC’s standards
and policies regarding water quality, and whether those standards and policies
regarding water quality continue to be adequate to protect the public health and
safety with respect to substances such as TCE, PCE, CTC and other volatile
organic compounds (VOCs)."
The defendants regulated by the PUC responded to the PUC’s intervention by
seeking outright dismissals. The non-regulated defendants filed demurrers and
requested a stay of all court proceedings pending the PUC’s investigation. It
was the defendants’ position that the PUC’s exertion of its jurisdiction
over the water quality issues and its pending investigation was primary thereby
preempting the state court’s jurisdiction at least until the PUC completed its
investigation. Plaintiffs, on the other hand, challenged the jurisdiction of the
PUC to conduct its proposed investigation; however, in its first opinion, the
PUC decided it had such jurisdiction. Plaintiffs did not appeal the portion of
the PUC’s decision concerning its assertion of jurisdiction to the California
Supreme Court, rendering this question final.
The various trial courts responded with conflicting orders in response to the
PUC’s intervention and the defendants’ demurrers, summary motions and
requests for stays. One trial court granted the stay requests and deferred
ruling on the demurrers pending completion of the PUC’s investigation. Another
trial court sustained the demurrers by the regulated utilities, but overruled
the demurrers and denied the stay requests by both the nonregulated water
providers and the industrial businesses. As a result of these conflicting
rulings, writs to the Court of Appeal were taken and granted. Because two court
clerks working for the Second Appellate District were plaintiffs in these cases,
the consolidated writs and appeal were transferred north to San Francisco,
California, from Los Angeles to the First Appellate District, Division Five of
the California Court of Appeal.
The Court of Appeal rendered its decision on September 29, 1999. It held that
the trial court actions are preempted insofar as they seek remedies against the
regulated utilities, but not preempted insofar as they state causes of
action against nonregulated water providers and industrial businesses. Regarding
its holding with respect to the regulated utilities, the court reasoned that the
legislature invested the PUC with jurisdiction over the quality of water
provided by regulated utilities. Citing San Diego Gas & Electric Co. v.
Superior Court (Covalt), 13 Cal. 4th
893 (1996), both the regulated and non-regulated defendants argued that the PUC’s
investigation preempted the state court’s jurisdiction pursuant to section
1759 of the Public Utilities Code. Section 1759 provides in relevant part that
"no court . . . except the Supreme Court and the court of appeal, . . .
shall have jurisdiction to review, reverse, correct, or annul any order or
decision of the commission . . . or to enjoin, restrain, or interfere with the
commission in the performance of its official duties . . ." While section
2106 of the Public Utilities Code provides for state court damage actions
against the PUC regulated utilities, section 1759 bars any such state court
action if the affect of those lawsuits would be to undermine a broad existing
PUC policy. However, the appellate court reasoned that section 1759 preempts
state court damage actions against only the regulated utilities, in effect
immunizing them from these civil lawsuits; it held that the defendants not
regulated by the PUC may not benefit from PUC preemption since they are not
regulated by the PUC.
On December 15, 1999, the California Supreme Court granted defendants’
petition for review. Briefing was completed in June 2000, the parties await oral
argument. The nonregulated defendants argued that the PUC investigation into
water quality preempts the field so as to deprive the trial courts of
jurisdiction. The nonregulated defendants also argued that section 1759 applies
to subject matter jurisdiction encompassing all defendants. Plaintiffs, on the
other hand, argue that section 1759 only applies to parties regulated by the PUC.
There are essentially three circumstances in which the defense of preemption
is asserted:
- Express preemption is said to exist when the applicable law or
regulation contains an explicit preemption provision.
- Implied preemption is said to exist when the applicable law or
regulation may be sufficiently comprehensive to create the inference that its
drafters intended to occupy an entire field of regulation.
- Conflict preemption is said to exist when the applicable law or
regulation does not entirely displace a given field, however the other law or
regulation actually conflicts with it.
See Mich. Canners and Freezers v. Agr. Marketing and Bargaining Board, 467
U.S. 461, 469, 104 S. Ct. 2518, 2523, 81 L. Ed. 2d 399 (1984).
The nonregulated defendants’ main argument is preemption, which would get
them totally out of the cases. Their secondary argument is primary
jurisdiction. The doctrine of primary jurisdiction is applicable where a
claim is originally cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which, under a
regulatory scheme, have been placed within the special competence of an
administrative body; in such a case the judicial process is suspended pending
referral of such issues to the administrative body for its views. See (Farmers
Ins. Exchange v. Superior Court (1992) 2 Cal. 4th 377, 390 [6 Cal. Rptr. 2d
487, 826 P.2d 730] (Farmers Ins. Exchange), quoting United States v. Western
Pac. R. Co. (1956) 352 U.S. 59, 63-64 [77 S. Ct. 161, 164-165, 1 L. Ed. 2d
126].) The important caveat concerning this doctrine is that it does not
permanently foreclose judicial action; it provides the appropriate
administrative agency with an opportunity to initially act in the matter if it
chooses to do so.
The doctrine of primary jurisdiction doctrine advances two related policies:
- judicial efficiency by permitting courts to take advantage of
administrative expertise
- uniform application of regulatory laws
Farmers Ins. Exchange, supra, 2 Cal. 4th at 391. In determining whether
to apply the doctrine, courts generally look to four factors:
- whether the question at issue is within the conventional experience of
judges or whether it involves technical or policy considerations within the
agency’s particular field of expertise
- whether the question at issue is particularly within the agency’s
discretion
- whether there exists a substantial danger of inconsistent rulings
- whether a prior application to the agency has been made
National Communications Assoc., v. American Telephone and Telegraph Co., 46
F.3d 220, 222-23 (2d Cir. 1995).
In November 2000, the PUC completed its initial investigation (OII #1),
finding the water served by all regulated utilities for the past 25 years was
not only safe, but in compliance with all of the requirements established by the
Department of Health Services (DHS). The PUC recommended a second investigation
to look into the quality of water served in the relevant basin prior to the
enactment of the MCLs and ALs for the 25 years prior to 1979 (OII #2) The
nonregulated defendants have asked the California Supreme Court to take judicial
notice of the PUC’s final decision. A decision from the California Supreme
Court is expected sometime this year.