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In re Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation

United States Court of Appeals, Second Circuit

June 12, 2017

In re Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation
v.
Texaco Refining and Marketing, Inc., Equilon Enterprises LLC, Shell Oil Company, d/b/a Shell Oil Products US, Atlantic Richfield Company, f/k/a Arco Petroleum Company, d/b/a Arco Products Company, a/k/a Arco, BP Products North America, Inc., BP West Coast LLC, (Doe 3), Defendants-Appellees; Orange County Water District, Plaintiff-Appellant, Unocal Corporation, ConocoPhillips Company, Chevron U.S.A., Inc., d/b/a Chevron Products Company, d/b/a Chevron Chemical Company, Union Oil Company of California, Inc., Tosco Corporation, Exxon Mobil Corporation, f/k/a Exxon Corporation, d/b/a ExxonMobil Refining and Supply Company, ExxonMobil Chemical, Corporation, Exxon, CHEMICAL U.S.A., Mobile Corporation, Ultramar, Inc., Valero Refining and Marketing Company, Valero Refining Company-California, Valero Refining, Tesoro Petroleum Corporation, (Doe 4), Tesoro Refining and Marketing Company, Inc., Petro-Diamond, Inc., (Doe 6), Southern Counties Oil Co., (Doe 7), Arco Chemical Company, (Doe 201), Lyondell Chemical Company, f/k/a Arco Chemical Company G&M Oil Company, Inc., 7-Eleven, Inc., USA Gasoline Corporation, Does, 9-200, and Does 202-1000, Inclusive, Chevron Corporation, Exxon Mobile Oil Corporation, TMR Company, Chevrontexaco Corporation, Defendants.

          Argued: December 5, 2016

         Appeal from the United States District Court for the Southern District of New York. No. 04-cv-4968 -Shira A. Scheindlin, Judge.

         Plaintiff-Appellant Orange County Water District appeals from a judgment in consolidated multi-district litigation in the United States District Court for the Southern District of New York (Shira A. Scheindlin, Judge).[1] The district court granted summary judgment to Defendants-Appellees BP and Shell on the ground that the Orange County Water District's suit was barred by res judicata as a consequence of earlier consent judgments entered in California state court resolving similar suits against BP and Shell brought by the Orange County District Attorney.

          Because we conclude that the record does not sufficiently establish that the Orange County District Attorney and the Orange County Water District were in privity, we vacate the district court's res judicata determination and remand the claims against BP and Shell to the Southern District of New York for further proceedings consistent with this opinion.

          Michael D. Axline, Miller & Axline, A Professional Corporation, Sacramento, CA, for Plaintiff-Appellant.

          Matthew T. Heartney, Arnold & Porter LLP, Los Angeles, CA, Stephanie B. Weirick, Arnold & Porter LLP, Washington, D.C., Peter C. Condron, Sedgwick LLP, Washington, D.C., for Defendants-Appellees.

          Before: Parker, Raggi and Hall, Circuit Judges.

          Barrington D. Parker, Circuit Judge

         This appeal arises from contamination of groundwater in Orange County, California, from various oil companies' use of the gasoline additive methyl tertiary butyl ether ("MTBE"). This case, initially brought in 2003 in California state court, was removed to the Central District of California and transferred in 2004 to the Southern District of New York by the Judicial Panel on Multidistrict Litigation. See 28 U.S.C. § 1407. The district court transferred to the Central District of California all claims except those against BP and Shell.[2] The district court granted the defendants summary judgment on those claims. Those claims are the subject of this appeal.

          Plaintiff-Appellant Orange County Water District (the "District"), which is responsible for groundwater quality in the Orange County basin, alleged that the addition of MTBE to gasoline sold by BP and Shell and other defendants that leached from underground storage tanks contaminated, or threatens to contaminate, groundwater at more than four hundred sites within the District's jurisdiction. The District sued in 2003. Claims against BP and Shell for MTBE contamination had been brought by the Orange County District Attorney ("OCDA") in 1999 and were settled in 2002 and 2005 respectively.

         In 2015, BP and Shell moved for summary judgment on the ground that res judicata arising from the 2002 and 2005 settlements barred the District's 2003 lawsuit. The district court granted the motion, dismissed the District's claims against BP and Shell, and remanded the claims against the remaining defendants to the Central District of California for trial. See 28 U.S.C. § 1407(a).

         On appeal, the District challenges the lower court's application of res judicata on the ground that it was not in privity with the OCDA. Because, based on the record before us, we cannot conclude that the District and OCDA are in privity, we vacate the judgment and remand the district's claims against BP and Shell to the Southern District of New York for further proceedings.

         I. BACKGROUND[3]

         A. The Orange County Water District

         The District is a public corporation created by the California state legislature under the Orange County Water District Act ("the District Act") to manage, regulate, replenish, and protect the groundwater basin generally covering the northern half of Orange County. See District Act §§ 1(a); 2(6). The District provides water to more than two million users, but it is not a water retailer and does not provide water directly to the public. See Orange County Water District, What We Do, http://www.ocwd.com/what-we-do/ (last visited May 26, 2017). Nineteen water producers, including cities, other water districts, and private water companies, obtain water from the District's groundwater basin and sell it to the public. See Orange County Water District, Member Agencies, http://www.ocwd.com/working-with-us/member-agencies/ (last visited May 26, 2017).

         The District also protects various rights to water from the Santa Ana River, which is the primary source of water in the basin. See Orange County Water District, About, http://www.ocwd.com/about/ (last visited May 26, 2017). Pursuant to that obligation, the District may bring claims on behalf of the public, that is, the water users in its service areas. Orange County Water Dist. v. City of Riverside, 173 Cal.App. 2d 137, 167 (1959); see also District Act § 2(9).[4] The District also may bring claims on its own behalf under the District Act to recover costs it paid, or will pay, to remediate groundwater contamination. See District Act § 8. Finally, the District is authorized to "act jointly with or cooperate with the United States or any agency thereof, the State of California or any agency thereof, [and] any county of the State of California . . . to carry out the provisions and purposes of [the District Act]." Id. at § 2(11).

         B. The Orange County District Attorney

         The OCDA represents the people of California. Its mission is to "enhance public safety and welfare and create a sense of security in the community through the vigorous enforcement of criminal and civil laws in a just, honest, efficient and ethical manner." See Mission Statement, http://orangecountyda.org/office/mission.asp (last visited May 26, 2017). With respect to water, the OCDA is charged with protecting the people's "primary interest in the conservation, control, and utilization of the water resources of the state." Joint Appendix on Appeal ("App.") 4246 (quoting Cal. Water Code § 13000). Pursuant to this charge, the OCDA is authorized to sue on behalf of the public "to protect the public from health and safety hazards" and "prevent destruction of Orange County's groundwater resources and otherwise protect the environment." App. 4240. However, the OCDA may not prosecute a cause of action on behalf of a different public agency, such as the District. See People v. Superior Court, 224 Cal.App.4th 33, 41-44 (Cal.Ct.App. 2014).

         C. Prior ...


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