BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: AB 2748 ----------------------------------------------------------------- |Author: |Gatto | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |6/2/2016 |Hearing | 6/29/2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Rachel Machi Wagoner | | | | ----------------------------------------------------------------- SUBJECT: Environmental disaster: release of claims: statute of limitations: attorneys' fees. ANALYSIS: 1) Existing law provides that an obligation is extinguished by a release given to the debtor by the creditor, upon a new consideration, or in writing, with or without new consideration. A general release does not extend to claims the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. 2) Under this bill, a partial or interim payment or reimbursement, made in connection with an environmental disaster by the responsible polluter or any agent or entity related to the responsible polluter to any recipient, does not release the polluter from liability to the recipient for any claim related to the environmental disaster or for any future claim by the recipient against the polluter, or for both current and future claims. 3) This bill prohibits any such partial or interim payment or reimbursement from being conditioned upon the recipient's agreement to release the polluter from liability for any current or future claim. AB 2748 (Gatto) Page 2 of ? 4) This bill would allow such a payment or reimbursement to any recipient to be credited against the liability of the polluter, agent, or entity to the recipient for any current or future claim that is related to the environmental disaster. 5) Under this bill, a temporary or final settlement of any kind made in connection with an environmental disaster by the responsible polluter or any agent or entity related to the responsible polluter, to any claimant, would release the responsible polluter, agent, or entity from liability to the claimant only for acts, omissions, or injuries that are believed by the claimant to have occurred prior to the date of the settlement, and would not release any claim that is unknown to the claimant at the time of the settlement, occurs subsequent to the settlement, or that is unrelated to the environmental disaster. 6) The bill makes any agreement in violation of those prohibitions that is entered into on or after February 1, 2017, void as a matter of law and against public policy. 7) Existing law establishes statutes of limitations for civil actions for injury or illness or wrongful death based upon exposure to a hazardous material or toxic substance other than asbestos, as specified. For injury or illness, the statute of limitations is 2 years from the date of injury, or 2 years after the plaintiff becomes aware of, or reasonably should have become aware of, an injury, the physical cause of the injury, and 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. For wrongful death, the statute of limitations is no later than either 2 years from the date of the death of the plaintiff's decedent, or 2 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. AB 2748 (Gatto) Page 3 of ? 8) This bill, notwithstanding the above provision, establishes a statute of limitations of 3 years for specified civil actions for injury, illness, or wrongful death based upon exposure to a hazardous material or toxic substance other than asbestos. 9) Under existing law, except as attorneys' fees are specifically provided for by statute, the measure and mode of compensation of attorneys is left to the agreement of the parties. 10)This bill authorizes the courts, in any action for private nuisance against an environmental polluter defendant arising out of an environmental disaster for which the defendant has been adjudged civilly liable, upon motion, to award reasonable attorneys' fees to a prevailing plaintiff against the defendant. 11)This bill would limit the application of its provisions to the Porter Ranch area, as defined, or contamination surrounding the Exide Technologies facility in the City of Vernon. Background Two sites of significant environmental contamination have featured repeatedly in the media this year: the release of natural gas from an underground storage facility in Porter Ranch, and the environmental impacts related to decades-long operation of a battery recycling facility in Vernon. The leak at Porter Ranch, first detected on October 23, 2015, came from one of 115 wells connected to the fifth largest underground natural gas storage facility in the United States. Southern California Gas Company, who owns the facility, made several attempts to stop the leak, but was unsuccessful in its efforts until February 18, 2016, by which time almost 100,000 tonnes of methane had escaped into the atmosphere. Concerns over the health impacts from the release led to the evacuation of 11,000 residents and a declaration of a state of emergency by Governor Brown. According to the BBC, "[a]t its peak, the flow doubled the rate of methane emissions from the entire Los Angeles basin," and the "impact on the climate is said to be the equivalent of the annual emissions AB 2748 (Gatto) Page 4 of ? of half a million cars." The scale of the leak makes it the largest in U.S. history, and, according to researchers, "had a far bigger warming effect than the BP oil spill in the Gulf of Mexico in 2010." The contamination resulting from smelter operations in the City of Vernon by Exide Technologies, by contrast, continued over a significantly longer period of time. Exide melts down more than 22 million batteries each year, to recycle and reuse the lead in them. It's run the Vernon facility since 2000, but one company or another has been doing the same work there for more than 90 years. For nearly three decades, the Department of Toxic Substances Control allowed the plant to operate on interim permit status. The South Coast Air Quality Management District has cited the plant at least 41 times since 2003, often for excessive lead emissions, and the District reported in March of 2013 that "arsenic emissions from the plant created an elevated risk of cancer in an area stretching from Boyle Heights to Huntington Park. More recently, as reported by the Los Angeles Times, "[as] demands to close the plant mounted from community groups and elected officials, the company revealed in 2014 it was under federal criminal investigation," and in March of 2015, "the company signed an agreement with the U.S. attorney's office to close [the site] permanently." Under the terms of that agreement, "Exide and its employees [will] avoid prosecution for years of environmental crimes, including illegal storage, disposal and shipment of hazardous waste, while agreeing to pay $50 million to demolish and clean the plant and surrounding communities, including $9 million set aside for removing lead from homes." This bill would enact specified procedural changes that allow individuals harmed by these two environmental catastrophes to seek awards of attorney fees, as well as additional time to bring civil actions. This bill would also limit the ability of responsible polluters to limit their civil liability by offering litigants certain payments in advance of litigation or through settlement agreements. Comments 1) Purpose of Bill. The author states: AB 2748 (Gatto) Page 5 of ? Between the devastating Exide battery plant lead contamination disaster in Boyle Heights and the natural gas leak at the Aliso Canyon storage field, the last year has shed light on the lack of sufficient legal remedies to help victims deal with the ramifications of environmental disasters. In the case of the Aliso Canyon gas well leak, according to the Environmental Defense Fund, 96,000 metric tons of methane, a powerful climate pollutant, is estimated to have been released into the atmosphere as a result of the leak, having the same 20-year climate impact as burning nearly one billion gallons of gasoline. In the months following detection of the leak, thousands of residents were relocated to temporary housing. Many reported health issues such as headaches, nausea, nosebleeds and dizziness. At this point, it is difficult to know what the long-term effects of the nearly six-month leak on the local environment and population will be. Researchers at USC intend to study the long-term health effects of the gas leak on area residents, but given the fact that the long- term effects of the chemical exposure are largely unknown, residents of Porter Ranch may not know for years how and if they have been injured by the gas leak. Other types of environmental disasters likely bear similar threat to communities and therefore deserve the same relief. AB 2748 endeavors to provide victims of environmental disasters better access to remedies available to them through our judicial system. This legislation has taken the lessons learned as a result of these most recent environmental crises in the state, to provide legal relief to not only those who have already suffered, but also future victims of serious, catastrophic pollution. . . . The bill offers three provisions to provide key protections to those who suffered from the environmental catastrophes in the Porter Ranch area and surrounding the Exide Technologies facility in the City of Vernon: first, the proposed legislation will ensure that any temporary or final settlement made in connection with an environmental disaster shall not release any claim that is unknown to the claimant at the time of the settlement, occurs subsequent to the settlement, or that is unrelated to the environmental disaster; AB 2748 (Gatto) Page 6 of ? second, the bill will extend the current statute of limitations for civil actions for injury or illness or wrongful death based upon exposure to a hazardous material or toxic substance to three years; and third, it will authorize the court to award reasonable attorneys' fees to a prevailing plaintiff against the defendant for residents who bring private actions. 1) Good for some but not all? The author has outlined the devastation and havoc that the above environmental disasters have caused for the communities around the sites and is proposing the changes to law in this bill to protect these communities into the future. But if this is good public protection policy for the communities in these two areas, shouldn't the Legislature provide the same protections for other communities that may be similarly affected by future environmental disasters? It is unclear why this bill is limited to Porter Ranch and Exide. The committee may wish to amend the bill to make it statewide policy. Related/Prior Legislation Related Pending Legislation : SB 887 (Pavley, 2016) would provide a framework for reforming oversight of natural gas storage facilities by, among other things, mandating minimum standards for gas storage well inspections, monitoring, and testing; training of personnel; leak monitoring, planning for emergency response; developing and incorporating best practices into regulations; and an assessment of risk to determine setback distances for gas storage wells. This bill is pending in the Assembly Committee on Natural Resources. SB 1304 (Huff, 2016) authorizes the board of supervisors of a county to provide for reassessment of property destroyed or damaged by a major misfortune or calamity in an area or region subsequently proclaimed by the Governor to be in a state of emergency, and specifies that "damage" includes a diminution in the value of property as a result of environmental contamination. This bill is pending in the Assembly Committee on Revenue and Taxation. AB 1902 (Wilk, 2016) would establish a 3 year statute of AB 2748 (Gatto) Page 7 of ? limitations for commencing a civil action for injury, illness, or wrongful death based on exposure to methane, benzene, mercaptan, or any other hazardous material or toxic substance resulting from the Southern California Gas Company Aliso Canyon SS-25 gas leak, as specified. This bill is pending in the Assembly Judiciary Committee. AB 1903 (Wilk, 2016) would require the Public Utilities Commission to authorize a study by the Office of Environmental Health Hazard Assessment of the long-term health impacts of the significant natural gas leak from the Aliso Canyon natural gas storage facility located in the County of Los Angeles that started on approximately October 23, 2015, as specified. This bill is pending in the Senate Appropriations Committee. AB 1904 (Wilk, 2016) would require the Office of Environmental Health Hazard Assessment to submit a report to the Legislature, on or before January 1, 2019, that includes an assessment of the danger of odorants currently used in natural gas storage facilities in the state to public health and safety and the environment, and that identifies alternative odorants for possible use in natural gas storage facilities, as specified. This bill is pending in the Senate Committee on Rules. AB 1905 (Wilk, 2016) would require the Secretary of the Natural Resources Agency, on or before July 1, 2017, to commission an independent scientific study on natural gas injection and storage practices and facilities. This bill was held under submission by the Assembly Committee on Appropriations. AB 2153 (C. Garcia, 2016) would, among other things, require a manufacturer of lead-acid batteries to remit to the State Board of Equalization a manufacturer battery fee of $1 for each lead-acid battery it sells for deposit into the Lead-Acid Battery Cleanup Fund, as specified, and would provide for certain credits against liability for a person who remits manufacturer battery fees if that person is held responsible by any court, regional board, agency, or any other authority for certain hazardous substance violations. This bill is pending in the Senate Committee on Environmental Quality. Prior Legislation : SB 93 (de León, Chapter 9, Statutes of 2015) requires the AB 2748 (Gatto) Page 8 of ? Director of Finance to transfer up to $176,600,000 as a loan from the General Fund to the Toxic Substances Control Account for the Department of Toxic Substances Control to use for activities related to the lead contamination in the communities surrounding the Exide Technologies facility in the City of Vernon. SB 380 (Pavley, Chapter 14, Statutes of 2016) among other things, continues a moratorium on injection of natural gas at the Aliso Canyon gas storage facility until specified criteria are met, requires the feasibility of the storage facility to be addressed and requires the California Public Utilities Commission, with input from others, to determine the amount of gas necessary at the facility for safety, regional reliability and to ensure just and reasonable rates. AB 118 (Santiago, Chapter 10, Statutes of 2016) appropriates $176,600,000 from the Toxic Substances Control Account in the General Fund to the Department of Toxic Substances Control for activities related to the cleanup and investigation of lead-contaminated properties in the communities surrounding the Exide Technologies facility in the City of Vernon, including job training activities, and actions taken to pursue all available remedies against potentially responsible parties. DOUBLE REFERRAL: This measure was heard in Senate Judiciary Committee on June 21, 2016. It passed out of committee with a vote of 4-2. SOURCE: Author SUPPORT: California Coastal Protection Network California Labor Federation California League of Conservation Voters Clean Water Action Coalition for Clean Air Consumer Attorneys of California Courage Campaign Environmental Justice Coalition for Water Environmental Working Group Food and Water Watch Natural Resources Defense Council AB 2748 (Gatto) Page 9 of ? Sierra Club California State Building and Construction Trades Council, AFL-CIO Trust for Public Land Wholly H2O OPPOSITION: American Chemistry Council American Insurance Association California Chamber of Commerce California Independent Petroleum Association California League of Food Processors California Manufacturers and Technology Association California Metals Coalition California Railroad Industry Chemical Industry Council of California Civil Justice Association of California National Federation of Independent Business Western Plant Health Association Western Plastics Association Western States Petroleum Association ARGUMENTS IN SUPPORT: A coalition of environmental groups, writing in support, states: [c]urrently, polluters that cause environmental disasters can condition any sort of aid on a waiver of liability for their harms. This limits the relief of those who have been wronged at their most desperate hour. When a person is forced out of their home and has nowhere to turn, it is unconscionable to condition an offering of shelter by a guilty polluter on a waiver of the right to sue. This bill does not, however, limit the ability for parties to reach a final settlement once a claim is actually brought to court and is consistent with a preference for settlements being reached where justice is best served. Another issue is that final settlements can lead to a waiver of any future claims that arise from the disaster. Families should not surrender future claims for unforeseen harms that arise later when settling current claims. Settling for a harm to personal property today should not be contingent on waiving a future claim for health problems a family may discover later AB 2748 (Gatto) Page 10 of ? on. This is not reopening claims that have already been settled, but rather it is not allowing polluters to escape liability because citizens seek a settlement today, not contemplating the horrific problems that may arise later. ARGUMENTS IN OPPOSITION: A coalition of business groups, writing in opposition, states: Release clauses are one of the primary incentives for defendants to settle disputes and avoid prolonged, expensive litigation. Indeed, California law and case law both recognize the ability for parties to contract to extinguish claims (See, e.g., Civil Code §1541). The Civil Code also states that a general release does not extend to claims which the person granting the release does not know or suspect to exist in his or her favor at the time of executing the release (Civil Code §1542). Notwithstanding this provision, parties to a dispute are permitted to agree to waive the protections of Civil Code Section 1542, which must be accompanied by evidence that the releasing party intended to release unknown claims. (McCray v. Casual Comer, Inc. (C.D. Cal. 1992) 812 F.Supp. 1046). It is critical to preserve litigants' ability to waive Section 1542 to maximize the potential to settle potential litigation. Indeed, when a business settles a claim with a party, the business should have certainty that the same party will not sue the business the day after a settlement is reached regarding a claim that could have been raised at the time of settlement. Yet, AB 2748 would essentially assure such an outcome, thereby eliminating the incentive to settle. . . . Parties should be permitted to enter into a mutually agreeable settlement to avoid prolonged litigation and thus promote the long-held California policy to encourage settlement over litigation; however, AB 2748 attempts to dictate contractual provisions and, in doing so, will guarantee an influx of litigation. -- END --