Opinion
Civil No. 99-1761-AS.
January 14, 2002
OPINION and ORDER
This action was filed in late 1999 by the City of Portland (the "City") against the Boeing Company and Cascade Corporation (collectively "Defendants") seekingover six million dollars in damages resulting from Defendants' contamination of a portion of the City's water supply. Almost a year later, the City asserted an additional 15 million dollars in lost revenues caused by the decision of the Tualatin Valley WaterDistrict (the "District") and the Powell Valley Road Water District to purchase the majority of its water from alternative sources ("Additional Damages"). Defendants now seek summary judgment on the Additional Damages asserting that the City has failed to establish the necessary causal relationship.
Originally, Defendants sought summary judgment against the claim for lost revenues generated by a decrease in business from both the District and Powell Valley Road Water District. However, in their reply, Defendants concede that a genuine issue of material fact exists with regard to the Powell Valley Road Water District and they have withdrawn their summary judgment motion with regard to those lost revenues. The reference to Additional Damages will be limited to those attributed to the District's decision to seek alternative water sources.
BACKGROUND
The City owns and operates a large well field in East Multnomah County which it uses primarily as an emergency back up and a supplement to the Bull Run River (the "Wells"). The Wells are located near property owned and operated by Defendants (the "Facilities"). In the mid-1980's, groundwater contamination was discovered on the Facilities near the Wells. While none of the Wells was contaminated, the existence of contamination in the groundwater prevented Plaintiffs from utilizing the Wells to capacity, forcing them to obtain alternative water supplies and impose water restrictions, and caused Plaintiff to incur substantial costs in responding to the immediate threat to Plaintiff's water supply.
The groundwater contamination had its biggest effect on the City in 1992 when a drought coupled with the City's inability to use the Wells made it impossible for the City to meet its obligations to its wholesale customers, including the District (the "Drought"). As a result, the City was forced to ease its contractual minimum purchase requirements which, in turn, allowed the District to purchase its water from alternative sources without suffering a severe penalty.
The Additional Damages demanded by the City represent the revenues lost when the District elected to purchase the majority of its water from alternative sources despite the fact that the City had adequate water to provide the District with its needs for the post-Drought period. Prior to and during the Drought, the District purchased virtually 100% of their water from the City. Subsequent to the Drought, the District purchased a portion, and then a majority, of its water from alternative sources. The City estimates that from 1994 to 2000, it lost $2. 8 million in revenue as a result of the District's purchase of water from alternative sources. The City projects that it will lose an additional $11. 6 million over the remaining five years of the District's contract with the City for the purchase of the water.
Defendants argue that the City has failed to establish that the restrictions on water imposed during the Drought was not the reason the District decided to obtain water from alternative sources. Defendants submit that the District had made the decision to seek alternative water sources prior to the Drought based on concerns that the pipeline supplying the water from the City was not able to handle the increased capacity expected from the population growth in the area served by the District and a desire to secure a water source on the west side of the Willamette River that provided better quality water. The City argues that, while the District may have had a number of reasons for obtaining an alternative water source, the decrease in supply of water from the Wells, and the City's decision to decrease or eliminate minimum purchase requirements as a result of the Drought, played a significant part in the District decision to use other water sources after the Drought.
LEGAL STANDARD
Rule 56 of the Federal Rules of Civil Procedure allows the granting of summary judgment: if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). "[T]he requirement is that there be no genuine issue of material fact." Anthes v. Transworld Systems, Inc., 765 F. Supp. 162, 165 (Del. 1991) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)) (emphasis in original).
The movant has the initial burden of establishing that no genuine issue of material fact exists or that a material fact essential to the nonmovant's claim is absent. Celotex v. Catrett, 477 U.S. 317, 322-24 (1986). Once the movant has met its burden, the onus is on the nonmovant to establish that there is a genuine issue of material fact. Id. at 324. In order to meet this burden, the nonmovant "may not rest upon the mere allegations or denials of [its] pleadings," but must instead "set forth specific facts showing that there is a genuine issue for trial. " Fed.R.Civ.P. 56(e); see Celotex, 477 U.S. at 324.
An issue of fact is material if, under the substantive law of the case, resolution of the factual dispute could affect the outcome of the case. Anderson, 477 U.S. at 248. Factual disputes are genuine if they "properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party. "Id. at 250. On the other hand, if after the court has drawn all reasonable inferences in favor of the nonmoving party, "the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (citations omitted).
DISCUSSION
Defendants have presented sufficient evidence to support their contention that the District obtained additional water from alternative sources for reasons unrelated to the Drought or the minimum purchase waivers. Accordingly, the sole issue before the court is whether the City has presented sufficient evidence to create a genuine issue of material fact on the issue of whether the contamination of the groundwater by Defendants had any effect on the District's decision.
In mid-1991, the Wolf Creek Highway Water District, the City's largest wholesale customer ("Wolf Creek") and the Metzger Water District ("Metzger") merged to form the District. Prior to the merger, Wolf Creek and Metzger each entered into 25-year contracts with the City under which the City agreed to sell them its surplus water. The contracts provided that the City was required to "furnish water at a normal volumeand pressure to the City and its inhabitants before selling water" to Wolf Creek or Metzger and that "no liability for damages shall attach to City hereunder on account of any failure to accurately anticipate availability of water supply, or because of an actual failure of supply due to inadequate run-off or occurrence beyond the reasonable control of the City. "The contracts also had a provision requiring Wolf Creek and Metzger to purchase a minimum amount of water from the City or pay a penalty based on the percentage of water purchased from alternative sources. The District inherited these contracts, which will expire in late 2004 and early 2005.
While the District was not formed until 1991, the court will refer to Wolf Creek and Metzger as the District prior to 1991 because their interests and issues were nearly identical.
In the mid-1980's, it became apparent to the City and the District that the population growth within the City as well as in the area the District served was so great that the demand for water from these areas would exceed the capacity of the City's existing facilities by the year 1995. The District was formed, in part, as a response to the need to obtain additional water resources. The directors of the District felt that because both water districts were seeking additional water resources, the merger would assist them in finding, funding and operating the new water sources. Both the District and the City considered the expansion of the Joint Water Commission's Barney Reservoir in Washington County as a possible component in their potential water supply options.
The District's involvement in the Barney Reservoir dates back to 1989 when the District expressed an interest in becoming a partner in the Joint Water Commission (the "Commission"). Both the City and the District occasionally sat in on the Commission's planning of the expansion of the Barney Reservoir and both expressed support for the expansion. At a meeting in March, 1990, representatives of the City acknowledged that the District had been invited to join the Commission and participate in the expansion of the Barney Reservoir.
In the spring of 1990, the City approached the District and asked if they could find alternative water supplies in case the City was short because of the contamination of the Wells. In June 1990, the City followed up this request by providing materials to the District indicated that "the contamination seeping into the backup water supply system may limit the amount of water the City can pump from the Wells. "Additionally, the reports noted that fears that pulling too much water from the Wells could spread contamination were forcing the City to change the way it draws water from the wells. As a result of the request, the Districtreconfigured its delivery system to allow it to obtain water from the existingBarney Reservoir.
In September 1990, the Commission prepared a memorandum outlining the opportunity for the District to join as a 15% share member. The memorandum explained that the District's participation was dependent on the Commission's obtaining permission to raise the dam for the expansion of the Barney Reservoir and that final assurances were not expected for 18 to 24 months.
In October and November 1991, the District purchased 53,205,240 ccf of water from the Commission out of the Barney Reservoir. The fall rains were late that year and the City was unable to meet the District's needs based, in part, on the restrictions imposed on the Wells by the contamination. The District also turned on a couple of wells that it owned but rarely used. As a result, the District reduced its purchases from the City by about 124 million gallons of water during that time period.
In April 1992, the City recognized that the District had made a decision to join the Commission and the Barney Reservoir expansion. At that time, the District was expected to take 25 percent of the supply capacity increment, which amounted to an estimated 8 MGD of capacity augmentation. If the United Sewerage Agency opted out of the expansion, the District would assume their share as well, for a total of 16 MGD. That same month, the City again advised its wholesale customers that the use of the Wells was still severely restricted.
On June 1, 1992, the onset of the Drought occurred. On June 2, 1992, the minutes of a District meeting indicated that the Commission had "verbally committed" to allowing the District to become a member. On June 8, 1992, the City announced its water cutback plan, which continued until September 30, 1992. On September 23, 1992, the District entered into a formal agreement to join the Commission and participate in the Barney Reservoir expansion.
It is clear from the evidence before the court that the District was interested in obtaining additional water from the Barney Reservoir expansion prior to the Drought. However, this does not necessarily mean that the Drought, or the contamination of the groundwater in the vicinity of the Wells, did not contribute to the District's ultimate decision.
Defendants have presented testimony from a number of the District's directors to the effect that the contamination of the groundwater adjacent to the Wells was not a motivator in the District's decision to join the Commission and obtain rights to water from the Barney Reservoir. The primary reason given for the District's actions was a need to develop a source of water independent from the City.
Defendants also rely on the testimony of Gene Seibel, the District's Administrator, who stated that the contamination of the groundwater adjacent to the Wells and the limitation of the use of the Wells during the drought had no impact on the District's long-term plans to find alternative water resources. The District's primary concern was the need to get "water to the Washington County Supply main so that the District could use that water to their customers. "As noted by the City, Seibel also testified that the Drought accelerated the District's decision to purchase from another water source even before the Barney Reservoir expansion was completed.
Additionally, Plaintiff presents testimony from Gary Pippin, Chief Engineer for the District, that the Drought was the final deciding factor that led the District to join the Commission and take water from the Barney Reservoir expansion. Pippin noted that the District did not invest any money in the Barney Reservoir expansion until September 1992, after the Drought, and that the final agreement between the District and the Commission was not approved until mid 1994.
The court finds that the City has raised a genuine issue of material fact on whether the TCE contamination, which was evident as early as 1990 and forced the District to purchase water from the Commission in 1991, and the Drought had any effect on the District decision to participate in the Barney Reservoir expansion. The City's evidence on this issue is very slim in light of the strong evidence presented by the District. But, viewing the evidence in the light most favorable to the City, the court must deny Defendants' motion for summary judgment on this issue.
The City has presented a much stronger case with regard to whether the contamination and the drought contributed to the District's decision to purchase water from Barney Reservoir even before the expansion was completed in 2000. Most of the evidence presented by Defendants relates specifically to the decision to participate in the Barney Reservoir expansion. However, the record establishes that the District began purchasing large amounts of water from the Commission on a regular basis well before the Barney Reservoir expansion was completed. The City has presented evidence that these pre-2000 purchases were based, at least in part, by the District's concern that the City would be unable to meet their needs as a result of the City's inability to fully utilize the Wells.
Additionally, while the evidence establishes that the City did not inform the District that it would waive the minimum purchase requirement for the District's purchases of water from the Barney Reservoir until October 3, 1994, well after the District committed to the Barney Reservoir expansion project, there is no evidence that the waiver did not affect the District's decision to purchase increasing amounts of water from the Barney Reservoir prior to the completion of the expansion project in 2000. The waiver of the minimum purchase requirement left the District free to increase its purchases from the Barney Reservoir without paying the penalties it would have been subjected to had the City not been limited in its use of the Wells as a result of the contamination in the adjacent groundwater.
CONCLUSION
Defendants' motion (#105) for summary judgment is DENIED.
IT IS SO ORDERED.