Good-faith settlement allocates liability by fault, not contract

A geotechnical contractor and a developer entered into a contract for services in the construction of a building. The geotechnical contractor’s contract included a contractual limited liability provision capping his liability exposure to the developer at $50,000 and shifting any greater losses caused by the geotechnical contractor to the developer to absorb without recovery. Before grading the site, the geotechnical contractor reported the property’s soil had a low potential for destructive expansion. After the final grading and before foundations were prepared, the geotechnical contractor revised his report to state the property’s soil had a high potential for destructive expansion. After being informed of the revised report on soil conditions, the general contractor proceeded with construction and finished the building. Later, soil expansion caused significant damage to the building. The developer sued the geotechnical contractor, the general contractor, the architect, and others whose work also contributed to the damages caused by soil conditions. The geotechnical contractor settled with the developer for $50,000 based solely on the contractual ceiling for liability to the developer under the limited liability provision, a negligible fraction of the geotechnical contractor’s responsibility for the construction defects. The geotechnical contractor and the developer then sought to have the settlement declared a good-faith settlement, which would have barred all other parties from sharing in the responsibility for the defective workmanship. The other parties claimed the geotechnical contractor’s settlement was in violation of the good-faith settlement law since a good-faith settlement required that liability of the geotechnical contractor be proportionate to his fault. The geotechnical contractor claimed the settlement was in good-faith since the limited liability clause in his contract protected him from further liability. A California appeals court held the settlement was a violation of good-faith settlement law since the settlement did not allocate liability proportionate to fault among all responsible parties and would have shifted the responsibility for all amounts in excess of the $50,000 settlement onto the remaining parties jointly responsible.[TSI Seismic Tenant Space, Inc. v. The Superior Court of San Diego County (April 2, 2007) __CA4th___]

Socio-economic impact of project modifications require CEQA review

A city approved the application of a development project based on a mitigated negative declaration (MND) which analyzed the environmental impact of specific square footage for improvement of various small box retail uses. After the approval became final, the size of the project improvements was increased more than 5% and retail use significantly increased to accommodate a single supercenter. While acknowledging the total square footage had increased, the city planners justified the increase as having no impact on the environment by labeling it non-income producing footage for storage and employees. The city approved the project change without ordering a supplemental CEQA review to address the impact additional retail space and use as a supercenter would have on the local traffic and regional urban decay beyond those analyzed in the original MND. A citizens’ group sought to have the city’s approval of the project revoked, claiming the city violated the environmental standards by approving the project change without a supplemental environmental impact review. The city claimed that a supplemental CEQA review was not necessary since the portions used as storage and employee space should not be considered retail space, thus there was no net change in the project’s overall size or impact on the environment. A California appeals court held the city must address the impact this increase in retail use will have on local traffic congestion and urban decay in surrounding cities before the project could continue since the city presented no substantial evidence that traffic and urban decay would not result in a significant effect on the environment due to the supercenter use.[American Canyon Community United For Responsible Growth v. City of American Canyon et al (2006) 145 CA4th 1062]

Mobilehome rent increased due to base year below-market rent

The owner of a mobilehome park petitioned the city for a base-year rent increase to adjust for below-market rents actually charged tenants during the base year. An allowable rent increase would be collectible from tenants if the owner’s net operating income increased during the base year due to a base year rent increase. The rent control ordinances allowed for an adjustment to reflect fair market value rent based on rents in comparable properties. Appraisers for the owner and the rent control board agreed the owner’s base-year rents were too low, but disagreed on just how much they should be increased to reflect fair market value rent. The rent control board denied the base-year rent adjusted to fair market value claiming the owner did not show “unique circumstances” which caused his rents to be below-market during the base year. The owner claimed he was entitled to the base rent increase since he had met the city’s requirements by giving proof that the base rents were below-market value, and he was not required to show any special circumstances which caused the condition to exist. A California appeals court held the owner was entitled to an adjustment in the base-year rent since he had only to abide by the city’s mobilehome rent control ordinance calling for an adjustment to fair market rents without any special burden of proving extraordinary or special circumstances existed which brought about the below-market rents in his rentals during the base year.[Stardust Mobile Estates v. City of San Buenaventura (February 22, 2007) __CA4th___]

Potentially responsible party recovers cleanup costs under CERCLA

A research company retrofitted rocket motors for the United States government. Fuel burned in the retrofitting process contaminated soil and groundwater at the site. The company voluntarily cleaned the site and sought to recover some of its costs by suing the United States government, a potentially responsible party (PRP), under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Under CERCLA, PRPs are liable for “…necessary costs of response incurred by any other person.” The government claimed the company, also a PRP, was not entitled to bring an action for reimbursement under CERCLA since “incurred by any other person” refers to non-PRPs, thus excluding the company from a recovery. The company claimed it was entitled to recovery under CERLA since the “any other person” wording does not intend to exclude PRPs. The United States Supreme Court held the company was entitled to seek recovery of its cleaning costs from the government since the plain and natural meaning of CERCLA does not exclude PRPs. [United States v. Atlantic Research Corp. (2007) __ US __]         

BLM employees’ exercise of powers not extortion

A property owner granted an easement across his property to the Bureau of Land Management (BLM). The BLM failed to record the easement and the property was sold to a new owner who took title to the property free of the easement. The BLM asked the new owner to regrant the easement without compensation, but the new owner refused. In an attempt to convince the new owner to regrant the easement, the BLM stopped maintaining the road across federal land leading to the new owner’s property, cancelled his right-of-way access to public roads, and cancelled his grazing permit over federal lands, among other things. The new owner sought to bring an action against individual employees of the BLM under the Racketeer Influenced and Corrupt Organizations Act (RICO), claiming the BLM employees launched the series of retaliatory acts in an attempt to extort an easement from him. The BLM claimed RICO did not apply since, because the government was the exclusive beneficiary of their acts and the individual BLM employees received no personal gain, the acts did not meet the common law definition of extortionate. The United States Supreme Court held the new owner has no cause of action under RICO since the BLM’s acts did not qualify as extortionate since the BLM employees received no private gain. [Wilkie v. Robbins (2007) __ US __]