posting for

Wednesday, January 21, 2004

 

by:  Keith Pearson

kpearson@firstam.com

 

RES JUDICATA/TITLE UNDERWRITING

 

The Ninth Circuit Court of Appeals has held that a settlement entered into by the California Department of Fish and Game (DFG) did not bind some claims of the City of Martinez, CA stemming from the same oil spill in City of Martinez v. Texaco Trading & Transportation, Inc. 2003 U.S. App. LEXIS 26265.

 

A private landowner granted the City an Open Space and Conservation easement in January 1997, pursuant to California's Open Space Easement Act of 1974. See Cal. Gov't Code §§ 51070-51097. The easement covered a portion of Mococo Marsh, a 650-acre wetland area along the south shore of Carquinez Strait and Suisin Bay in California. In November 1997, an oil spill was discovered in Mococo Marsh. The DFG's Office of Spill Prevention and Response ("OSPR") traced the spill to a leak in Texaco's pipeline. The spill covered four acres of the marsh before it was contained. Six months later, the Regional Board accepted Texaco's proposed remediation plan, which entailed removing the top twelve inches of Marsh soils and replacing the soil. After Texaco executed their plan, the DFG determined that the Regional Board's order should be rescinded, finding that "the cleanup and backfill [were] satisfactory." The Contra Costa County District Attorney thereafter filed a criminal misdemeanor complaint against Texaco in municipal court, alleging that Texaco had violated California Fish & Game Code § 5650(a) by unlawfully depositing crude oil into California waters. The DFG and district attorney entered into settlement negotiations. The City of Martinez was aware of these negotiations, but was told by the Deputy District Attorney that the City need not participate in the negotiations and would be free to pursue its own civil remedies after the settlement was finalized. Thus, the City did not participate in the negotiations which resulted in a civil compromise between DFG and Texaco pursuant to which the misdemeanor charge was dismissed and Texaco paid $ 138,292.80 to the DFG. The City thereafter filed its civil complaint, seeking damages and injunctive relief arising out of the November 1997 oil spill. The district court granted Texaco's motion for summary judgment, finding that the preclusive effect of the civil compromise between Texaco and the DFG barred the City from bringing its action.

 

The appeal revolved around the grant of res judicata to Texaco. Res judicata applies if: (1) the issues decided in the prior adjudication were identical to the issues raised in the present action, (2) the prior proceeding resulted in a final judgment on the merits, and (3) the party against whom the plea is raised was a party or was in privity with a party to the prior adjudication. California also recognizes a "public interest" exception to res judicata. Under the public interest exception, courts may permit relitigation of an issue of law concerning a public entity's ongoing statutory obligations that affect individuals and members of the public not specifically before the court in the first litigation.

 

The issues addressed on appeal were whether the issues were identical and whether the DFG was in privity with the City. The court held that the City and DFG were in privity regarding claims of harm to the public and that the issues were the same as the DFG litigation. Therefore, the public claims were dismissed under res judicata. The second set of claims of the City were for damage to its land. Private property damage claims were not litigated in the prior DFG litigation, and the DFG was not in privity with regards to those claims. For those reasons, the court reversed the grant of res judicata on those claims.

 

Author’s Note: Res judicata is used frequently by the title industry to gain comfort that a court has already ruled on an issue affecting property rights or ownership. As this case points out, sometimes it is not crystal clear whether or not a later court will apply res judicata. I recommend that you discuss the issue of res judicata with your counsel or manager before assuming that the determination in one lawsuit will necessarily apply to a later lawsuit.