Changes in Pleading Requirements: Bolstering
Defense Advantages by Using Potential Plaintiff
Problems with the Iqbal-Twombly Standard
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Kevin Haroff | Shook Hardy & Bacon LLP | San Francisco
ACI Chemical Products and Environmental Litigation Conference
Chicago – April 28-29, 2010
• Bell Atlantic Corp. v. Twombly, 550 U.S. 554 (2007) (abrogating
Conley v. Gibson, 355 U.S. 41 (1957))
– Under Rule 12(b)(6), moving party no longer required to
demonstrate, beyond a doubt, that the plaintiff can prove “no
set of facts” in support of a claim for relief. Id. at 561.
– Plaintiff must to allege specific facts establishing the cause of
action. Id. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286
(1986)). The mere recitation of legal elements and legal
conclusions is insufficient. Id. at 563 (citing Sanjuan v. American
Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir.
• Ashcroft v. Iqbal, 129 S. Ct. 1937, 1953 (2009): Twombly
“expounded the pleading standard in all civil actions.”
Two Pronged Analysis
• In Iqbal the Court set adopted a two-pronged approach by which courts
were to review the sufficiency of allegations in a complaint. Gordon v. City
of Moreno Valley, --- F.Supp.2d ----, 2009 WL 3088557 (C.D.Cal. Aug. 31,
• First, a court reviews the complaint and discounts any allegations
therein that amount to little more than “threadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements.” 129 S.Ct. at 1949. A complaint must include “more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.”
• Next, the court examines the remaining allegations to determine whether
they “state a plausible claim for relief,” with the understanding that
such allegations are accepted as being true and any reasonable inferences
that arise therefrom are to be accorded in the pleader's favor. Id. at 1950.
• A claim is plausible, as opposed to merely possible, if its factual
content “allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. at 1949
Chubb v. Space Systems / Loral
• Involves a forty-seven-acre tract in Palo Alto, California (“the Site”).
• Owned and occupied by Ford Aerospace & Communications
Corporation from approximately 1959 until 1990 “to manufacture
and/or build satellites.”
• Ford Motor sold the assets of Ford Aerospace to Space
Systems/Loral, Inc. (“SS/L”).
• Sun bought a twelve-acre parcel of the Site from Ford Aerospace -
owned and operated that parcel, which included a building and an
adjoining parking lot, until June 2002.
• In June 2002, Taube-Koret (“TK”) purchased the twelve-acre parcel
from Sun and obtained an environmental liability insurance policy
from Chubb to cover costs incurred during future site development.
• In 2003, the parcel was divided into a four-acre parcel and an eight-
acre parcel, the latter of which TK owns today.
Environmental and Insurance Claims
• Following acquisition of the eight-acre parcel TK “was named as a
discharger [of hazardous substances] with respect to the Site by the
California Regional Water Quality Control Board (“RWQCB”).
• After incurring costs in responding to the RWQCB‟s requirements,
TK “made claims pursuant to an insurance policy issued by Chubb,
for costs and defense costs incurred and to be incurred in
connection with the investigation, defense, and clean up of
hazardous substances on and around” the eight-acre parcel.
• In response to the claims, Chubb “made payments on behalf of [TK]
in an amount in excess of $2,400,000 . . . for such costs and
defense costs incurred and to be incurred in connection with the
investigation, defense, and clean up of hazardous substances.”
The Original Complaint
• Chubb brought an action on September 23, 2009, in U.S. District
Court for the Northern District of California (San Jose Division)
against Fort Motor, SS/L, Sun and other PRPs.
• Causes of action:
– CERCLA 107(a) cost recovery.
– CERCLA 113(f) contribution.
– CERCLA 112(c) subrogation.
– CERCLA 113(g)(2) declaratory relief.
– Ancillary state law claims for contractual and equitable
subrogation, statutory indemnity under the California Water
Code and HSAA, equitable indemnity, attorneys fees.
– No state common law tort causes of action.
– No claims against TK.
Rule 12(b)(6) Motions to Dismiss
• All defendants (except SS/L) filed motions to dismiss.
• Common argument: plaintiff as a general matter failed to comply
with basic pleading standards under Twombly and Iqbal.
– Allegations consisted mostly of recitations of statutory elements
of claims under CERCLA and state laws.
– The few specific facts alleged were insufficient to support a
plausible basis for relief.
• Some issues specific to individual parties.
– Ford Motor: no CERCLA 107(a)(1) liability as owner/operator
based on relationship with Ford Aerospace (successor or direct)
under United States v. Bestfoods, 524 U.S. 51 (1998)
• Two prong test in Iqbal is not required, merely a suggestion.
• CERCLA is special: “Plaintiff seeks recovery of environmental
clean up costs paid, from those responsible for causing the
environmental pollution–which is wholly consistent with [sic]
legislative purpose of CERCLA,” and that “[n]owhere does CERCLA
require the level of factual specificity demanded by Defendants.”
Plaintiff’s Argument (Cont.)
• Cited Ascon Properties v. Mobil Oil, 866 F.2d 1149, 1153 (9th Cir
1989), for proposition that “a plaintiff need not allege the particular
manner in which a release or threatened release of hazardous
substance had occurred in order to establish a prima facie case
• Maintained that Ascon still is good law even after Twombly and
Iqbal because the court “did not rely upon a literal read of Conley[
v. Gibson‟s] „no set of facts‟ language abrogated in Twombly,” but
rather “keenly understood that conclusory allegations were
insufficient to state a claim entitling one to relief.”
• Court rejected argument out of hand and applied Twombly/Iqbal.
CERCLA Claims Dismissed
• No standing to recover insurance payments to TK as
environmental response costs under CERCLA § 107(a), citing Cal.
Department of Toxic Substances v. City of Chico, 297 F. Supp. 1227
(E.D. Cal. 2004) and Am. Int‟l Spec. Lines Co. v. United States, 2005
WL 680159 (N.D. Cal. Mar. 24, 2005).
• Subrogation claim under CERCLA § 112(c) was not ripe for
adjudication because Chubb failed to establish that TK had been
made whole by Chubb‟s payments, again on the basis of the City of
Chico and Am. Int‟l Spec. Lines decisions.
• CERCLA § 113(f) contribution claim was insufficient because it had
not been asserted during or following a civil action under
CERCLA §§ 106 or 107(a), citing Cooper Industries v. Aviall
Services Inc., 543 U.S. 157 (2004).
• Declaratory relief claim under CERCLA § 113(g)(2) not sustained
because it depended on viability of other CERCLA claims.
State Law Claims Dismissed
• Claims for equitable and contractual subrogation, and for statutory
indemnity under the HSAA, neither ripe nor sufficient to show that
– TK had incurred recoverable environmental response costs or
– Ford Motor at least would be liable for those costs.
• No independent basis for indemnity under Cal. Water Code §13350.
• Claim for equitable indemnity failed to allege joint and severable
liability among the parties, citing Stop Loss Ins. Brokers, Inc. v.
Brown & Toland Medical Group, 143 Cal. App. 4th 1036 (2006) and
Aetna Life & Cas. Co. v. Ford Motor Co., 50 Cal. App. 3d 49 (1975).
First Amended Complaint
• More facts.
• Combined CERCLA 107(a) (cost recovery) and 112(c) subrogation
• Dropped claims for CERCLA 113 contribution and declaratory relief.
• Dropped Water Code claim.
• Added three state common law claims:
– Trespass and nuisance (completed v. continuing).
– Strict liability.
• Answer or otherwise respond by Monday (May 3).
Kevin Haroff | Shook Hardy & Bacon LLP | www.shb.com
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