City of Pomona v. Sqm North America Corporation ( 2023 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 28 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CITY OF POMONA, No. 22-55219
Plaintiff-Appellee, D.C. No.
2:11-cv-00167-RGK-JEM
v.
SQM NORTH AMERICA MEMORANDUM*
CORPORATION,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
R. Gary Klausner, District Judge, Presiding
Argued and Submitted March 14, 2023
Pasadena, California
Before: BRESS and MENDOZA, Circuit Judges, and ERICKSEN,** District
Judge.
After the third trial in this case, the jury found SQM North America
Corporation (SQMNA) liable for importing, distributing, or selling defectively
designed sodium nitrate fertilizer that contaminated the City of Pomona’s
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Joan N. Ericksen, United States District Judge for the
District of Minnesota, sitting by designation.
(Pomona) water supply with perchlorate. The jury awarded Pomona $48.1 million
in damages for costs that Pomona did and would incur in bringing its drinking
water supply into compliance with the maximum contaminant level (MCL) for
perchlorate set by the State of California. The district court denied SQMNA’s
Rule 50(b) renewed motion for judgment as a matter of law and motion for a new
trial on multiple grounds. SQMNA appeals, arguing that it is entitled to judgment
as a matter of law because there was no evidence of a design defect and that it
should be granted a new trial because Pomona’s claims are time-barred, Pomona’s
harm as a bystander was not foreseeable, and the jury’s damages award was
excessive.
We have jurisdiction under 28 U.S.C. § 1291. We find no error in the jury’s
finding of liability and therefore reject SQMNA’s arguments for judgment as a
matter of law and a new trial based on failure to provide evidence of design defect,
statute of limitations, and foreseeability. However, because we find error in the
district court’s denial of SQMNA’s motion for a new trial or remittitur based on
excessive damages, we vacate the district court’s judgment and remand for further
proceedings.
We review the denial of a Rule 50(b) motion de novo and the jury’s verdict
for substantial evidence. Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002).
Arguments not properly raised in a party’s pre-verdict Rule 50(a) motion, but
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raised in the post-verdict Rule 50(b) motion, are reviewed for plain error. E.E.O.C.
v. Go Daddy Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009). The denial of a
motion for a new trial is reviewed for abuse of discretion; we reverse only if there
is no evidence in the record that supports the verdict, or the district court made a
mistake of law. Id. at 962.
1. SQMNA claims it is entitled to judgment as a matter of law because
Pomona did not present any evidence of a design defect, which, according to
SQMNA, can be done only through expert testimony. We disagree and find no
error in the district court’s denial of SQMNA’s Rule 50(b) motion.1
In a prior appeal, we determined that Pomona must prove its design defect
claim under California’s risk-benefit test because “the technical and scientific
nature of the contamination at issue” was outside the experience of ordinary
consumers. City of Pomona v. SQM N. Am. Corp., 694 F. App’x 477, 478 (9th Cir.
2017). Under the risk-benefit test, “expert testimony is proper to assist the finder
of fact in deciding if a product is defective.” Howard v. Omni Hotels Mgmt. Corp.,
136 Cal. Rptr. 3d 739, 757 (Ct. App. 2012). And, where causation is beyond
1
SQMNA raised six new, additional arguments in its Rule 50(b) motion, two of
which were preserved on appeal: (1) Pomona’s claims are time barred by the
statute of limitations, and (2) Pomona failed to show foreseeability. These issues
were not properly raised in SQMNA’s Rule 50(a) motion, so they are reviewed
only for plain error. As discussed below, these arguments fail under the less
deferential abuse of discretion standard. So, they also fail under plain error review.
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common experience, “expert testimony is required to establish causation.” Stephen
v. Ford Motor Co., 37 Cal. Rptr. 3d 9, 17 (Ct. App. 2005). Because Pomona
offered both evidence on design defect and extensive expert testimony on
causation, we find substantial evidence supports the jury’s verdict and agree with
the district court.
To show design defect, Pomona offered deposition testimony from multiple
executives from SQM, SQMNA’s parent company. The jury could glean from
their testimony that while SQM had the ability to produce sodium nitrate fertilizer
with less than 0.1 percent perchlorate, it consistently produced fertilizer with
“maximum” 0.5 percent perchlorate. Pomona also introduced evidence that
sodium nitrate fertilizer produced from the 1930s through the 1950s typically
contained between 0.2 and 0.5 percent perchlorate. Pomona thus met its
evidentiary burden on the question of design defect by showing—based on
admissions from company witnesses—that SQM could have produced fertilizer
with perchlorate levels below 0.1 percent but chose not to. Given the nature of the
product defect (an excess amount of a harmful chemical) and concessions from the
defendant that the jury could construe as strong evidence of an acknowledged
design defect, SQMNA has not identified California authority requiring that
Pomona additionally provide expert testimony on the question of design defect, as
opposed to causation.
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And, as required, Pomona presented expert testimony that established
causation. Pomona’s expert, Dr. Sturchio, testified that 88 percent of the
perchlorate in Pomona’s groundwater was derived from SQMNA’s Chilean
sodium nitrate fertilizer. Dr. Sturchio testified that if SQMNA’s fertilizer “had
roughly 75 percent less perchlorate in it when it was sold, that the amount of
perchlorates in Pomona’s groundwater would be a lot lower and it would not
exceed the MCLs level.” This testimony, among other evidence presented at trial,
adequately supports the jury’s conclusion that SQMNA’s fertilizer’s design caused
the excess perchlorate in Pomona’s water.
2. Next, SQMNA argues the district court abused its discretion in
denying its motion for a new trial because Pomona’s claims are time-barred. But
because the district court did not make a mistake of law and there is evidence in
the record to support the jury’s findings, SQMNA’s statute of limitations argument
fails.
Under California law, a plaintiff must bring a claim for injury to real
property within three years from the occurrence of “appreciable and actual harm.”
Davies v. Krasna, 535 P.2d 1161, 1169 (Cal. 1975); Cal. Civ. Proc. Code § 338(b).
Because Pomona filed this lawsuit on October 15, 2010, if Pomona had suffered
appreciable harm before October 15, 2007, its claims would be time-barred. But
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the jury found that Pomona did not suffer appreciable harm to its right to use its
water before October 15, 2007, such that Pomona’s claim was timely.
The district court did not make a mistake of law in denying SQMNA’s
motion for a new trial on the statute of limitations issue. SQMNA argues that the
“undisputed evidence at trial established that Pomona first ‘took . . . steps to
investigate, clean up, abate, and/or remediate’ perchlorate in its water no later than
early 2006.” This is a familiar argument, and we reach the same outcome here as
we did in City of Pomona v. SQM North America Corporation (“Pomona I”), 750
F.3d 1036, 1053 (9th Cir. 2014). In Pomona I, SQMNA argued that Pomona’s
pre-2007 treatment of perchlorate barred Pomona’s claims. But there, because
Pomona presented testimony that any perchlorate treatment was ancillary to its
nitrate treatment, we held that there was a triable issue of fact on SQMNA’s statute
of limitations defense, and that SQMNA could not demonstrate Pomona’s claims
were time-barred as a matter of law. Id. at 1051–53. Here, SQMNA argues that it
is entitled to a new trial because Pomona contracted to build water treatment
facilities to remove perchlorate before 2007. However, Christopher Diggs,
Pomona’s Water Resources Director, testified that those facilities were intended to
treat nitrate, even though they may have incidentally removed perchlorate. Like in
Pomona I, SQMNA’s argument is based on disputed facts. The district court did
not err in leaving that dispute to the jury.
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And there is other evidence supporting the jury’s finding that the harm
began after October 15, 2007. Diggs testified that Pomona’s harm began when it
became unable to sell its water on October 18, 2007. The jury considered
competing evidence—a 2006 letter from Pomona detailing its contract with an
engineering firm to treat nitrate and perchlorate, and Diggs’s testimony—and
found that Pomona did not suffer appreciable harm to its right to use water before
the adoption of the MCL in 2007 necessitated perchlorate remediation. Because
there was evidence to support the jury’s verdict, we agree with the district court
that SQMNA is not entitled to a new trial on this ground.
3. SQMNA also moved for a new trial arguing that Pomona was a
“bystander,” not a “purchaser,” meaning that—according to SQMNA—Pomona
could recover only if its injury was reasonably foreseeable. And, according to
SQMNA, Pomona’s injury was not reasonably foreseeable in the 1930s and 1940s,
decades before California began regulating perchlorate in drinking water. In
denying SQMNA’s motion for a new trial, the district court upheld the verdict
because the jury may have (1) determined Pomona was not a bystander but a
“consumer,” or (2) found that Pomona was a bystander, but that the harm was
foreseeable. We agree with the district court that SQMNA is not entitled to relief
on its foreseeability argument.
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First, to the extent that SQMNA argues that Pomona was required to show
that the risks of perchlorate contamination were foreseeable, its argument is
foreclosed by the law of the case. In City of Pomona v. SQM North America
Corporation (“Pomona III”), we determined that “[u]nder California law, the jury
must determine ‘through hindsight’ whether ‘the risk of danger inherent in the
challenged design outweighs the benefits of such design.’” 801 F. App’x 488, 490
(9th Cir. 2020) (quoting Barker v. Lull Eng’g Co., 573 P. 2d 443, 454 (Cal. 1978)).
We further recognized that “[t]his rule allows jurors to consider risks that were not,
and could not have been, known to the manufacturer at the time of manufacture.”
Id. Our prior decision controls: this jury was not required to find that Pomona’s
injury was reasonably foreseeable in the 1930s and 1940s to find SQMNA liable.
SQMNA tries to distinguish Pomona III, arguing that Pomona III did not
discuss bystander liability. To the extent this argument is distinguishable from the
issue we addressed in Pomona III, it nonetheless fails because the jury could have
found that Pomona was a foreseeable bystander because Pomona was “within the
ambit of those entitled to protection from the risk created by the distribution and
sale” of the defective fertilizer. Johnson v. Standard Brands Paint Co., 79 Cal.
Rptr. 194, 198 (Ct. App. 1969).
4. Finally, SQMNA contends that the damages award of $48,128,378 is
excessive, warranting remittitur or a new trial. Pomona’s damages expert testified
8
at trial that the total cost of perchlorate abatement would be $30,280,802—
approximately $18 million less than what the jury awarded. In a diversity action,
we apply state law to determine whether the damages award is excessive. See
Gasperini v. Ctr. for Humans., Inc., 518 U.S. 415, 438 n.22 (1996). Under
California law, a damages award must be supported by sufficient evidence. See
Behr v. Redmond, 123 Cal. Rptr. 3d 97, 111–12 (Ct. App. 2011), as modified (Mar.
25, 2011). A jury may award damages beyond those explicitly requested by the
prevailing party so long as the award is supported by the evidence. See J.P. v.
Carlsbad Unified Sch. Dist., 181 Cal. Rptr. 3d 286, 304 (Ct. App. 2014). We must
uphold the jury’s damages award “whenever possible” and only interfere only if
“the verdict is so out of line with reason that it shocks the conscience and
necessarily implies that the verdict must have been the result of passion and
prejudice.” Seffert v. Los Angeles Transit Lines, 364 P.2d 337, 344 (Cal. 1961).
Here, while we do not foreclose the jury’s damages award, we vacate and remand
because the district court’s reasons for upholding the damages award are infirm.
In denying SQMNA’s motion for remittitur or a new trial, the district court
gave two reasons the jury could have awarded $48.1 million in damages: (1)
Pomona’s expert, Peter von Bucher, testified that his estimate was based on “very
conservative assumptions,” and (2) SQMNA’s expert, Dr. Robert Trussell, testified
that the annual cost of treating perchlorate by running Pomona’s existing anion
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exchange plants (AEPs)—AEP 1 and AEP 2—in “perchlorate mode” was
$1,884,273, which would total more than $75 million over the 40-year period on
which Von Bucher based his estimates. Neither of these justifications withstands
scrutiny.
Von Bucher testified that his damages estimate was the “high end of the
range of estimates that [he] prepared” based on “a number of very conservative
assumptions that . . . will protect the City going into the future.” This testimony
suggests that Von Bucher’s assumptions may have been “conservative” in that they
resolved doubts in favor of Pomona, not against it. While Von Bucher’s testimony
supports a $30.2 million award, the district court’s reasoning does not sufficiently
justify how it supports the $48.1 million award.
The district court further erred in finding that Dr. Trussell, SQMNA’s
expert, offered a damages estimate far greater than the one offered by Pomona’s
expert. The $1,884,273 figure the district court relied upon represents the total
cost of operating AEP 1 and 2 to treat perchlorate and nitrate (plus the cost of
paying for AEP 3). Based on the jury’s liability determination, SQMNA was liable
for treating perchlorate, not nitrate; the district court should have considered the
net cost of using AEP 1 and 2 to treat perchlorate over what it would cost to treat
nitrate. Therefore, the district court erred in relying on a figure that represented
treatment of both perchlorate and nitrate in justifying the jury’s damages award.
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Because the district court’s reasoning for upholding the jury’s damages
award is not supported by the record, we are unable to evaluate whether the verdict
was properly supported by the evidence as a whole, see Behr, 123 Cal. Rptr. 3d at
111–12 or “out of line with reason.” Seffert, 364 P.2d at 344. We therefore
conclude that the district court erred in its denial of SQMNA’s motion for a new
trial or remittitur with respect to damages. It is clear the evidence supports an
award of $30.2 million, and we note Pomona offers theories to support the $48.1
million award that have not been addressed by the district court. But the district
court did not provide reasons supported by the evidence to uphold the jury’s
damages award in denying SQMNA’s motion for a new trial or remittitur. We
believe the district court is in the best position to evaluate the evidence, and on
remand, it may determine that the evidence supports the jury’s award for reasons
other than those the district court previously gave.
If the district court concludes the award is unsupported, it may order
remittitur or a new trial. In the event that a new trial is necessary, we remind the
district court that it may order a new trial limited to damages if it determines “the
issue of damages is so distinct and independent of the others . . . that it can be
separately tried.” Gasoline Prod. Co. v. Champlin Ref. Co., 283 U.S. 494, 499
(1931). Because we find no error in the jury’s liability determination, we suggest
the district court consider this option. See Wharf v. Burlington N. R.R. Co., 60
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F.3d 631, 638 (9th Cir. 1995) (new trial limited to damages permitted when it
would not “work injustice”); see also Gasoline Prod. Co., 283 U.S. at 499 (where
the verdict on a cause of action is free from error and is clearly distinct from the
other issues, “it need not be disturbed.”).
VACATED and REMANDED.
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