BILL ANALYSIS Ó
AB 1207
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Date of Hearing: January 10, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1207 (Furutani) - As Amended: January 4, 2012
As Proposed to be Amended
SUBJECT : TIME PERIOD FOR LEGAL ACTION REGARDING "TOXIC TORT"
CLAIMS INVOLVING REAL PROPERTY
KEY ISSUE : SHOULD THE ABSOLUTE STATUTE OF REPOSE FOR LATENT
CONSTRUCTION DEFECTS BAR CIVIL ACTIONS FOR PERSONAL INJURY AND
DAMAGE TO PROPERTY BY EXPOSURE TO TOXIC MATERIALS REGARDLESS OF
WHEN THE HARM WAS DISCOVERED?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This measure seeks to clarify the time period under which
victims may seek relief for certain personal injury or property
damage. Case law holds that a federal statute mandates a
"discovery rule" that precludes application of the state's
10-year statute of repose for latent construction defects with
respect to so-called toxic tort claims. Likewise under case
law, all damages for personal injury and wrongful death are not
subject to this 10-year time bar. Supporters argue that despite
these court interpretations there are ongoing misunderstandings
that could be avoided by amending the statute to make these
points more clear. Business opponents argue that the bill
unnecessarily exposes a large number of industries to an
unjustified increase in liability that is ill-advised in a
struggling economy.
SUMMARY : Exempts certain tort claims from the statute of repose
applicable to construction defect claims. Specifically, this
bill clarifies that the statute of repose regarding latent
construction defects does not apply to actions for either (1)
damages for personal injury or wrongful death; or (2) personal
injury or property damages caused or contributed to by exposure
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to any hazardous substance, pollutant, or contaminant released
into the environment.
EXISTING LAW :
1)Provides that no action may be brought to recover damages from
any person, or the surety of a person, who develops real
property or performs or furnishes the design, specifications,
surveying, planning, supervision, testing, or observation of
construction or construction of an improvement to real
property more than 10 years after the substantial completion
of the development or improvement for any latent deficiency (a
deficiency which is not apparent by reasonable inspection) in
the design, specification, surveying, planning, supervision,
or observation of construction or construction of an
improvement to, or survey of, real property or injury to
property, real or personal, arising out of any such latent
deficiency. This limitations period does not apply to actions
based on willful misconduct or fraudulent concealment. (Code
of Civil Procedure Section 337.15.)
2)Provides that this 10-year period shall commence upon
substantial completion of the improvement, but not later than
the date of one of the following, whichever first occurs: (a)
The date of final inspection by the applicable public agency;
(b) the date of recordation of a valid notice of completion;
the date of use or occupation of the improvement; (c) One year
after termination or cessation of work on the improvement.
The date of substantial completion relates specifically to the
performance or furnishing design, specifications, surveying,
planning, supervision, testing, observation of construction or
construction services by each profession or trade rendering
services to the improvement. (Code of Civil Procedure Section
337.15.)
3)Provides that an action for trespass upon or injury to real
property shall be brought within three years. (Code of Civil
Procedure section 338 (b).)
4)Provides that in any civil action for injury or illness based
upon exposure to a hazardous material or toxic substance, the
time for commencement of the action shall be no later than
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either two years from the date of injury, or two years after
the plaintiff becomes aware of, or reasonably should have
become aware of, (a) an injury, (b) the physical cause of the
injury, and (c) sufficient facts to put a reasonable person on
inquiry notice that the injury was caused or contributed to by
the wrongful act of another, whichever occurs later. Existing
law similarly provides that in an action for the wrongful
death of any plaintiff's decedent, based upon exposure to a
hazardous material or toxic substance, the time for
commencement of an action shall be no later than either (a)
two years from the date of the death of the plaintiff's
decedent, or (b) two years from the first date on which the
plaintiff is aware of, or reasonably should have become aware
of, the physical cause of the death and sufficient facts to
put a reasonable person on inquiry notice that the death was
caused or contributed to by the wrongful act of another,
whichever occurs later. (Code of Civil Procedure section
340.8.)
5)Provides pursuant to federal law that in the case of any
action brought under State law for personal injury, or
property damages, which are caused or contributed to by
exposure to any hazardous substance, or pollutant or
contaminant, released into the environment from specified
facilities if the applicable limitations period for such
action (as specified in the State statute of limitations or
under common law) provides a commencement date which is
earlier than the federally required commencement date, such
period shall commence at the federally required commencement
date in lieu of the date specified in such State statute. The
term "federally required commencement date" means the date the
plaintiff knew (or reasonably should have known) that the
personal injury or property damages were caused or contributed
to by the hazardous substance or pollutant or contaminant
concerned. (42 USCS § 9658.)
COMMENTS : The author states the reason for the bill as follows:
AB 1207 intends to correct a flaw in current law that could
be - and currently is being - interpreted to allow
corporate polluters to walk away from dangerous pollution
as long as it is concealed for ten years. If the pollution
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is not discovered, as is often the case, for ten, twenty,
thirty years or longer, the polluter gets away with it and
leaves others to deal with the health and environmental
ramifications. Correction of the Statute of Repose will
allow victims of negligent pollution to bring claims for
damages under regular statue of limitations from their
"date of discovery."
AB 1207 will clarify the Legislative intent to provide a
Statue of Repose of ten years for latent construction
defects to the developers of real property. Clearly the
Legislature never intended the Statue of Repose or any
other limitations be afforded to polluters or other illegal
dischargers and it needs to be corrected to prevent further
abuse of the system. The unscrupulous use of the Statute of
Repose by polluters to protect themselves from liability
undermines most environmental laws in the State of
California and puts homeowners at financial and health
risk.
This Bill is Consistent with Well-Established Case Law Holding
That The Ten-Year Statute of Limitations For Injuries Caused By
Latent Construction Defects Does Not Apply To Claims For Injury
or Damage Arising From Exposure To Hazardous Substances.
California normally uses a two-step process in applying the
statutes of limitations to claims involving property damage
caused by a latent defect in a construction project. When a
defect is latent (i.e., not apparent from a reasonable
inspection), the statute of limitations begins to run only after
the damage is sufficiently appreciable to give a reasonable
person notice that he has a duty to pursue his remedies. This
is an example of the "discovery rule," which generally applies
in tort cases, that the time period for filing a claim does not
commence until the harm is discovered. However, Code of Civil
Procedure section 337.15 imposes an unusual further rule - an
absolute 10-year bar, based on the date of "substantial
completion," of construction, regardless of when the harm is
discovered. The interplay between these statutes sets up a
two-step process: (1) actions for a latent defect must be filed
within three years (section 338) or four years (section 337) of
discovery, but (2) in any event must always be filed within ten
years (section 337.15) of substantial completion.
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However, state law is not the last word on the subject. The
federal Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), commonly known as "Superfund," displaces
state statutes of limitations when they conflict. Section 309
of CERCLA creates a federally-mandated discovery rule for the
accrual of state law claims involving releases of hazardous
substances that cause or contribute to personal injury or
property damage. This provision of CERCLA preempts state
statutes of limitations if those state law claims are based upon
exposure to hazardous substances released into the environment
and the applicable state limitations period provides for an
earlier commencement date than federal law.
It is well settled that the discovery rule mandated by CERCLA is
inconsistent with and therefore trumps the otherwise applicable
10-year statute of repose of section 337.15. (Angeles Chemical
Company, Inc. v. Spencer & Jones (1996) 44 Cal.App.4th 112.)
"Contrary to section 309 of CERCLA, the running of the 10-year
period is triggered by the same event in every case, i.e.,
substantial completion of the construction; the date on which
the plaintiff discovers the injury and its cause - the mandatory
factor under CERCLA - plays no role at all in the commencement
of the 10-year bar. ? In other words, the operation of the
discovery rule ? is nullified by the 10-year bar. ? This result
is patently at odds with section 309 of CERCLA, a remedial
statute we must broadly construe to avoid frustrating
congressional intent. ? Consequently ? section 309 of CERCLA ?
preempts the second step in the process Żof applying California
statutes of limitation], thereby eliminating the 10-year bar of
section 337.15 in this category of cases." (Angeles Chemical
Company, Inc. v. Spencer & Jones (1996) 44 Cal.App.4th at
123-124.)
The Need For This Bill Apparently Arises Out Of Law Suits
Alleging Disturbing Acts Of Wrongdoing And Substantial Harm To
Residents Of A Housing Development In The Author's District.
The author explains that a number of lawsuits have been brought
by over 1700 plaintiffs seeking redress for the harm they
allegedly suffered as a result of toxic contamination under
their homes in and around the Carousel Housing Tract located in
the city of Carson. The contamination was allegedly left over
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from the negligent operation of an oil tank farm on the property
by Shell Oil Company, and Equilon Enterprises for many years
until 1965. The property was subsequently developed by the
Shell defendants and others who built the Carousel Housing Tract
and began to sell homes to the plaintiffs in or around 1969.
Plaintiffs allege that the Shell defendants created, failed to
remediate and allowed contamination to migrate, and then
abandoned the oil tank farm, and that the developer defendants
knew about the contamination but failed to properly remediate
the contamination and failed to disclose to the homeowners that
their homes were built over a former oil tank farm until they
were caught by California regulatory agencies. The plaintiffs
allege that toxic contamination emitted dangerous gases and
fumes that seeped into their property, exposing them to
carcinogens like benzene and potentially explosive chemicals
such as methane.
Materials supplied to the Committee from the Los Angeles
Regional Water Quality Control Board indicate that the Carousel
development at issue is an approximately 50-acre site containing
nearly 300 homes. In May 2008, the state Department of Toxic
Substances Control advised the Regional Control Board that
petroleum hydrocarbons had been found in the water and soil
adjacent to the property, leading to an investigation that
discovered elevated levels of methane and benzene in soil and
soil vapor throughout the Carousel development. Recent media
reports indicate that the Board has ordered Shell Oil to clean
the top 10 feet of soil across the entire site, although this
remediation effort unquestionably will not redress the
plaintiffs' injuries even if it is promptly and successfully
completed.
The author explains that the Superior Court judge presiding over
the Carson cases initially ruled that the three-year statute of
limitations under Code of Civil Procedure section 338(b) bars
the plaintiffs' property damage claims except with respect to
continuing nuisance or trespass, but that those continuing
nuisance or trespass claims are barred by the 10-year statute of
repose for construction defect claims pursuant to Code of Civil
Procedure section 337.15, except with regard to willful
misconduct or fraudulent concealment. The court therefore
initially granted the defendants' demurrers without leave to
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amend. Although the court was subsequently persuaded to
reconsider and withdraw its ruling, supporters of this bill
maintain that the court's initial confusion demonstrates the
need to clarify the statute.
This Bill Also Codifies Case Law Regarding Personal Injury
Claims. A separate provision of the bill would codify the
longstanding and non-controversial understanding that the
construction defect statute of repose does not apply to damages
for personal injury or wrongful death. (Martinez v. Traubner
(1982) 32 Cal. 3d 755.)
ARGUMENTS IN OPPOSITION : A group of business associations, led
by the Civil Justice Association of California, argues against
the bill, arguing:
This bill would expand the statute of limitations for
lawsuits against property owners, developers, contractors,
architects, engineers and other service providers alleging
that property was exposed to a pollutant or hazardous
substance.
Statute of limitations provide certainty and notice to both
plaintiffs and defendants about their obligations, duties,
and remedies under the law. The Code of Civil Procedure
Chapter Two, sets for a variety of time limits depending on
the allegation. The code section this bill would amend
(California Code of Civil Procedure §337.15) sets an
outside limit on property defect claims that are less
easily discovered in order to provide certainty and
encourage construction in the state (Chevron U.S.A. Inc. v.
Superior Court, 44 Cal. App.4th 1009 (1994)).
This bill would remove this outside limitation and thereby
expand the statute of limitations on personal or real
property lawsuits when there was an allegation of exposure
to a hazardous material, even if it was in relation to
remediation activities. In so doing, AB 1207 unnecessarily
exposes a large number of industries to increased
unjustified liability that may even lead to possible
bankruptcy.
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Federal and state law already provides an extensive and
interwoven framework to hold companies responsible and
mitigate actions that result in pollution or hazardous
waste. Current law allows enforcement actions through both
governmental prosecutors and in some cases even through
private citizen lawsuits.
In addition to the private citizen lawsuits that may be
brought under the myriad of federal and state environmental
laws, injured plaintiffs may sue under other existing
theories, such as negligence, strict liability, nuisance or
trespass. Significantly, the statute of limitations does
not stop a lawsuit if the pollution is willful or knowingly
caused or if the defendant is found to have had control of
the land (Code of Civil Procedure § 337.15).
Injured plaintiffs in California have a wealth of legal
options to use to seek redress. There is no need to
further extend the statute of limitations for certain
torts. This bill is both dangerous and unnecessary.
At a time when our economy is struggling to recover and
when the state needs jobs, such an unjustified increased
liability on businesses and governments is ill-advised.
Author's Clarifying Amendment. Following discussions with
opponents and the Committee, the author proposes to better
express that the intent of the bill is consistent with the
federal CERLCA statute for any cause of action brought under
state law as follows:
(g)(1)(B) Personal injury or property damages under any caused
or contributed to by exposure to any hazardous substance,
pollutant, or contaminant released into the environment,
consistent with the federal Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C section 9601
et seq .
REGISTERED SUPPORT / OPPOSITION :
Support
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The Carousel Neighbors Association of the Carousel Tract
(sponsor)
Clean Water Action
Consumer Attorneys of California
Consumer Federation of California
Sierra Club of California
Numerous individuals
Opposition
American Chemistry Council
American Council of Engineering Companies of California
American Institute of Architects, California Council
Apartment Association of Greater Los Angeles
Associated Builders and Contractors of California
Associated General Contractors
Building Owners & Managers Association of California
California Aerospace Technology Association
California Apartment Association
California Association of Bed and Breakfast Inns
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Construction and Industrial Materials Association
California Farm Bureau Federation
California Fence Contractors' Association
California - Chapter of the American Fence Association
California Forestry Association
California Hotel & Lodging Association
California Independent Oil Marketers Association
California League of Food Processors
California Manufacturers & Technology Association
California New Car Dealers Association
California Retailers Association
California Surety Federation
California Trucking Association
Chemical Industry Council of California
Citizens Against Lawsuit Abuse
Civil Justice Association of California
Commercial Real Estate Development Association, NAIOP of
California
Concrete Contractors Association, Inc.
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Construction Employers' Association
Engineering Contractors' Association
Flasher Barricade Association
International Council of Shopping Centers
International Fragrance Association, North America
Marin Builders' Association
National Federation of Independent Business
Pacific Merchant Shipping Association
San Diego County Apartment Association
Santa Barbara Rental Property Association
Western Electrical Contractors Association
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334