A 1995 crude oil pipeline spill discharged over 45,000 gallons of oil in Norwalk, California, at least fifty gallons of which escaped through a storm drain and contaminated a local creek and river. The Union Oil Company of California (Unocal) sued the Southern California Regional Rail Authority (Metrolink) and its subcontractors, seeking reimbursement of cleanup costs. A jury entered a verdict in favor of Unocal pursuant to the Oil Pollution Act of 1990 (OPA)[1] and on theories of negligence and breach of contract.[2] Both parties filed appeals to the Ninth Circuit. The Ninth Circuit upheld the jury verdict against Metrolink, affirmed the trial judge's award of pre-judgment interest to Unocal under the OPA, and denied Unocal's request for attorney's fees.

The oil spill occurred on a Metrolink construction site situated directly above a section of Unocal's pipeline and located in close proximity to a storm drain operated by the Los Angeles County Flood Control District (LACFCD). Before the spill, Unocal sent two site inspectors to mark the course of the pipeline and determine its depth in the area surrounding the storm drain. In 1995, while leveling an access road with a large Caterpillar, one of Metrolink's subcontractors punctured the pipeline approximately forty feet from the storm drain. Employees from another Metrolink subcontractor then placed plywood and a dirt mound over the inlet to divert oil from entering the storm drain and ultimately reaching Coyote Creek. Unocal representatives arrived on the scene and managed the oil spill response and cleanup efforts. However, after initial visual inspections, Unocal's agents did not know--nor were they informed--that the pool of oil was located above the storm drain and that Metrolink's subcontractors had covered the pool.

Unocal contacted LACFCD later that evening to inform them that a spill had occurred, but that no oil reached the storm drain and no waterways were affected by the spill. After several more hours of cleanup preparation, Unocal realized the oil pool was situated directly above the storm drain and called LACFCD a second time to request monitoring assistance for the planned excavation. The next day, an LACFCD crew discovered oil in both Coyote Creek and the San Gabriel River. The crew also discovered that oil had entered the storm drain inlet that was covered by Metrolink's subcontractors. Metrolink's construction manager then informed Unocal that Metrolink would pay the costs of removing the spilled oil.

Unocal submitted a formal claim to Metrolink for reimbursement of the $4.66 million in cleanup costs. After Metrolink rejected that claim, Unocal presented a written claim to the National Pollution Funds Center (NPFC)[3] for reimbursement from the Oil Spill Liability Trust Fund (Fund).[4] NPFC denied Unocal's request, prompting Unocal to sue Metrolink. Unocal also sought judicial review, under section 702 of the Administrative Procedure Act,[5] of NPFC's refusal to fund the cleanup effort. Unocal agreed to stay that cause of action pending resolution of its claims against Metrolink.

At trial, the jury found Metrolink eighty percent liable and its subcontractor twenty percent liable under the OPA.[6] Metrolink challenged that finding, arguing that Unocal was partially responsible. The Ninth Circuit reviewed de novo the district court's denial of Metrolink's motion for judgment as a matter of law and held that the jury's verdict was supported by substantial evidence. The court also held there was no abuse of discretion and affirmed the trial judge's denial of Metrolink's motion for a new trial.

The Ninth Circuit first determined the standards of liability and defenses under the OPA. The OPA designates owners and operators of pipelines as responsible parties who are strictly liable for oil discharges.[7] A responsible party may state a complete defense to liability if it establishes by a preponderance of the evidence that 1) the discharge was caused solely by a third party, 2) the responsible party exercised due care with respect to the pipeline, and 3) the responsible party took precautions against foreseeable third-party acts and their consequences.[8] If these three factors are established, "the third party who caused the spill becomes a 'responsible party,' and the owner/operator no longer bears any liability for the spill."[9]

The Ninth Circuit rejected Unocal's argument that the company could not be held liable because of the OPA's definition of "removal costs."[10] Unocal argued that because the OPA references the limitation on liability for removal costs under section 311(c) of the Clean Water Act (CWA),[11] it should not be held liable because Unocal is not a responsible party. The court disagreed, reasoning that the OPA does not contain any explicit temporal definition of cause that might distinguish between antecedent causes of a spill and the failure to contain a spill once it occurs. The court held that under the OPA, Unocal remained a responsible party as a pipeline owner/operator and that Unocal was "not relieved of its obligations by the insulating provisions of [CWA] section 1321(c)."[12] The court emphasized that Unocal's theory was incompatible with the OPA's goal of encouraging rapid private party responses because that would excuse pipeline owners and operators from participating in cleanups of their own oil and "exempts from liability those owner/operators who are foolish enough to join the cleanup efforts."[13] The Ninth Circuit concluded that because Unocal was not relieved of its duties, it bore the burden of establishing the affirmative third party defense. The court affirmed the district court because Unocal presented substantial evidence at trial to meet those burdens.

The Ninth Circuit next considered Unocal's purported negligence, rejecting Metrolink's argument that Unocal failed to foresee the possibility of a rupture. The court emphasized that Unocal's affirmative legal obligations under California law did not include measuring the depth of the pipeline.[14] Therefore, the court held the jury could reasonably have concluded that Unocal could not foresee excavation in that area because Metrolink never informed Unocal of its plans. The court also refused to disturb the jury's findings with respect to Metrolink's assertion that Unocal misled its subcontractors about the depth of the pipeline. In addition, the court rejected Metrolink's argument that Unocal's failure to obtain a full briefing constituted a lack of due care. Because fire department officials told Unocal's agents that the oil spill was fully contained, the jury reasonably concluded the blame should not fall on Unocal's shoulders. Rejecting Metrolink's argument that Unocal's assessment and inspection of the site constituted a failure to exercise due care, the court refused to overturn the jury verdict based on hindsight and Unocal's failure to locate the storm drain.

Metrolink then attempted to impose a higher standard of care on two Unocal agents. Before the spill, two Unocal agents came to the site for environmental and operations assistance; however, they failed to follow the directions in Unocal's Standard Operating Procedures Manual to obtain briefings from onsite workers and review maps and charts. The court rejected this argument, citing trial testimony that these two agents were not "environmental person[s]" and were not bound to follow the manual.[15] Therefore, the court refused to impose a higher standard of care on Unocal and held that substantial evidence supported the jury's finding that Unocal exercised due care in assessing the site. Metrolink then argued that if Unocal's agents had considered the appropriate maps and overlays they would have discovered that the storm drain was underneath the oil pool; this oversight, argued Metrolink, constituted failure to exercise due care. The court again disagreed, emphasizing that none of the maps held by Unocal's agents indicated the existence or location of the storm drain. The court also disagreed with Metrolink's assertion that Unocal negligently reported the spill's effects to LACFCD. The court concluded that Unocal acted diligently in pursuing the cleanup.

With respect to Unocal's cross-appeal, the Ninth Circuit affirmed the trial judge's award of pre-judgment interest to Unocal under the OPA.[16] The court rejected Metrolink's argument that Unocal was not a claimant entitled to interest pursuant to two sections of the OPA,[17] concluding that a responsible party who successfully asserts a complete defense may be considered a claimant. However, the court also rejected Unocal's claim that it was entitled to a higher award of pre-judgment interest--12 percent rather than the 5.87 percent--under its contract with Metrolink. Unocal relied on section 3287 of the California Civil Code,[18] which sets the legal rate of interest at ten percent,[19] or even higher if stipulated by the parties in contract.[20] The court concluded it was inequitable to apply a higher interest rate, noting that the California law refers to agreements between both parties, whereas here one party unilaterally imposed terms on the other. The Ninth Circuit affirmed the district court's award of interest at a rate of 5.87 percent.

Finally, the court considered the attorney's fees issue, rejecting Unocal's request for attorney's fees under the OPA. Although the OPA permits recovery for fees sought by the Attorney General,[21] the court refused to extend that provision to Unocal. The court dismissed Unocal's emphasis on OPA's subrogation rights,[22] concluding that the Act "does not necessarily give to the responsible party the benefit of all the rights held by the federal government."[23] The court also denied Unocal's request for attorney's fees under the "tort of another" doctrine.[24] California law permits a court to award attorney's fees to a prevailing party in an action for implied indemnity, but only when that party is required to bring or defend an action.[25] Unocal was not required to do so here. Finally, the court also rejected Unocal's "private Attorney General" argument.[26] Although California law authorizes an award of attorney's fees to a party that successfully prosecutes an action "result[ing] in the enforcement of an important right affecting the public interest,"[27] the court held that Unocal was not acting as a private Attorney General in this case. Although the purpose of the law is to encourage public interest suits that private parties would otherwise have no incentive to pursue, the court recognized that this suit's only purpose was to recover costs already paid by Unocal.

The Ninth Circuit remanded to the district court because of that court's failure to issue a declaratory judgment under the OPA.[28] Although the district court properly refused to grant Unocal's request for declaratory judgment for all future litigation, the Ninth Circuit held that the district court was required to issue a declaration identifying the responsible parties. The court also refused Unocal's request for a declaration substituting Metrolink and its subcontractors for Unocal as the generator on its hazardous waste manifests associated with the cleanup. The court emphasized that under California and federal law, every party involved in the generation, transportation, or disposal of waste must complete a shipping "manifest."[29] Unocal provided no evidence that it should no longer be considered a "generator."[30] Furthermore, the court noted that the OPA says nothing about generators, and because the jury did not consider Unocal's request, the Ninth Circuit declined that invitation.