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City of Pomona v. SQM North America Corp.

United States Court of Appeals, Ninth Circuit

August 7, 2017

City of Pomona, Plaintiff-Appellant,
v.
SQM North America Corporation, Defendant-Appellee.

          Argued and Submitted May 10, 2017 Pasadena, California

         Appeal from the United States District Court for the Central District of California, No. 2:11-cv-00167-RGK-VBK R. Gary Klausner, District Judge, Presiding

          Susannah Weaver (argued), Donahue & Goldberg LLP, Washington, D.C.; Esther L. Klisura, Kathleen S. Kizer, SL Environmental Law Group, San Francisco, California; Robert S. Chapman, Sauer & Wagner, Los Angeles, California; Andrew L. Jared, Assistant City Attorney; Arnold M. Alvarez-Glasman, City Attorney; Office of the City Attorney of the City of Pomona, Pomona, California; for Plaintiff-Appellant.

          R. Gaylord Smith (argued), Lann G. McIntyre, Michael K. Johnson, and Malissa Hathaway McKeith, Lewis Brisbois Bisgaard & Smith LLP, San Diego, California, for Defendant-Appellee.

          Anthony Z. Roisman, Weathersfield, Vermont; Ned Miltenberg, National Legal Scholars Law Firm P.C., Washington, D.C.; Kevin J. Madonna, Kennedy & Madonna LLP, Hurley, New York; for Amicus Curiae Law Professors Stephen A. Saltzburg, Michael M. Martin, and Joëlle Anne Moreno.

          Before: J. Clifford Wallace, Morgan Christen, and Paul J. Watford, Circuit Judges.

         SUMMARY [*]

         Expert Testimony

         The panel vacated the district court's judgment, which found that SQM North America Corporation was not liable for causing perchlorate contamination in the City of Pomona's water system, and held that the district court abused its discretion by limiting the testimony of one of the City's experts and failing to make sufficient findings before admitting the testimony of one of SQM's experts.

         Dr. Neil Sturchio developed a methodology for collecting and analyzing perchlorate isotopes from groundwater, and he concluded that most of the perchlorate in the City's water had come from the Atacama Desert in Chile. The City filed this products-liability action, alleging that SQM's importation of perchlorate-containing fertilizer products from the Atacama Desert caused the contamination in the City's water supply.

         First, the panel addressed the district court's denial of the City's motion to update Dr. Sturchio's report, which resulted in the exclusion of any testimony regarding post-2011 developments in Dr. Sturchio's research. The panel held that in denying the City's motion, the district court identified the correct legal standard. The panel held, however, that the district court applied the legal standard in an "illogical" manner, and thus committed an abuse of discretion. The panel further held that the district court's exclusion of Dr. Sturchio's testimony was prejudicial.

          Second, the panel considered the district court's denial of the City's motion to exclude the testimony of SQM's alternative source expert, Dr. Richard Laton, who opined that the perchlorate at issue might have flowed from hundreds of potential alternative sources other than SQM's fertilizer. The panel held that the manner in which the district court denied the City's Daubert motion as to Dr. Laton constituted an abuse of discretion. Specifically, the panel held that the district court's failure to make any findings regarding the efficacy of Dr. Laton's expert opinions constituted an abdication of the district court's gatekeeping role, and was necessarily an abuse of discretion. The panel also held that based on the circumstances presented by the case, the City did enough to preserve its objection. Finally, the panel held that the erroneous inclusion of Dr. Laton's testimony, combined with the erroneous partial exclusion of Dr. Sturchio's testimony, was prejudicial.

         On remand, the panel directed the district court to allow Dr. Sturchio to update his expert report, and testify to the state of stable isotope research up to the present. The panel also directed the district court to make findings regarding the scientific reliability of Dr. Laton's proposed opinions, and hold a Daubert hearing if deemed necessary.

          OPINION

          WALLACE, Senior Circuit Judge.

         After a seven-day trial, a jury found SQM North America Corporation (SQM) not liable for causing perchlorate contamination in the City of Pomona's (Pomona) water system. Pomona now appeals from that judgment. We have jurisdiction pursuant to 28 U.S.C. § 1291. We hold that the district court abused its discretion by limiting the testimony of one of Pomona's experts and failing to make sufficient findings before admitting the testimony of one of SQM's experts. These errors, in combination, were prejudicial. Accordingly, we vacate the district court's judgment and remand for a new trial.[1]

         I.

         Pomona owns and operates a public water system to provide its residents with clean drinking water. The State of California regulates the quality of that water by imposing maximum contaminant levels (MCL), which limit the amount of a given chemical that can be present in the water. In 2007, California established that the MCL for perchlorate, a chemical that interferes with the ability of the thyroid gland to produce hormones, would be six parts per billion. Shortly thereafter, Pomona discovered that fourteen of its wells possessed perchlorate levels in excess of the MCL. In response, Pomona shut down non-compliant wells, purchased water from other sources, and took other steps to remedy the perchlorate contamination in its drinking water.

         In 2010, Pomona filed this products-liability action against SQM. SQM began importing fertilizer from the Atacama Desert in Chile in 1927, and from 1931 to 1968 imported a substantial portion of the Chilean nitrate (a component of that fertilizer) brought from Chile into the United States. The theory of Pomona's case is that SQM's importation of perchlorate-containing fertilizer products from the Atacama Desert, which were used in areas around Pomona's wells, caused the contamination in Pomona's water supply. Thus, Pomona sought to recover over $32 million in past and future costs associated with investigating and remediating the perchlorate contamination.

         The case progressed towards a January 2012 trial date. Unsurprisingly, the case involved several scientific experts, as the key dispute centered around whether the perchlorate from SQM's fertilizer had migrated into Pomona's wells and caused the contamination present in Pomona's water system. Five days before trial, the district court conducted a Daubert hearing to consider whether the testimony of Pomona's expert witness, Dr. Neil Sturchio, should be excluded. Dr. Sturchio, who was then the Head of the Department of Earth and Environmental Sciences at the University of Illinois at Chicago, [2] had developed a peer-reviewed methodology for collecting and analyzing perchlorate isotopes from groundwater. Dr. Sturchio's research concluded that perchlorate from the Atacama Desert in Chile has a distinct isotopic fingerprint. Thus, by analyzing the chlorine and oxygen isotopes taken from Pomona's wells, Dr. Sturchio determined that roughly ninety percent of the perchlorate present in Pomona's groundwater matched the isotopic fingerprint of perchlorate unique to the Atacama Desert. Put simply, Dr. Sturchio concluded that most of the perchlorate in Pomona's water had come from the Atacama Desert.

         Four days before trial was to begin, the district court granted SQM's motion to exclude Dr. Sturchio's testimony. In a one half-page minute order, the district court held that Dr. Sturchio's opinions had "not been generally accepted by the scientific community, " had "not been tested by other laboratories, " and that "Dr. Sturchio's reference database [was] too limited." As Dr. Sturchio was one of Pomona's key witnesses, the parties stipulated to dismiss the case and allowed Pomona to appeal the exclusion of his testimony.

         We reversed the district court's exclusion of Dr. Sturchio's expert testimony. City of Pomona v. SQM North America Corp., 750 F.3d 1036 (9th Cir. 2014) (Pomona I). We held that the "district court's ruling [was] unpersuasive because both grounds for exclusion [were] without adequate support in the record." Id. at 1047. Accordingly, we remanded the case for trial. The mandate from our court issued in December 2014.

         Upon remand, the district court ordered a status conference for January 12, 2015. At that conference, Pomona requested to reopen fact and expert discovery to reflect scientific developments that had been advanced during the three years in which the case was on appeal. The district court requested that Pomona file a written motion to reopen discovery and set trial to begin June 2, 2015, less than five months from the date of the first post-remand status conference.

         On February 9, 2015, Pomona filed its formal motion to reopen discovery. As to Dr. Sturchio, Pomona requested leave to supplement his expert report to reflect additional data concerning isotopic analysis of perchlorate that had been developed while the appeal had been pending. The motion contained a sworn declaration from Dr. Sturchio, in which he described the new developments in the science of isotopic analysis of perchlorate. Dr. Sturchio and other scientists had conducted new interlaboratory comparisons and the database sizes for their research had increased, which buttressed Dr. Sturchio's conclusions and repelled the main criticisms of his research. On March 26, 2015, the district court denied Pomona's motion to supplement Dr. Sturchio's report. The district court concluded that Pomona failed to demonstrate that the information was material and determined that updating Dr. Sturchio's report would "create back-and-forth discovery, which could delay trial."

         The case proceeded towards the June 2, 2015, trial date. Still pending, however, were the parties' motions in limine, which had been filed in 2011, before the original trial date. At that juncture, before the case made its first trip through our court, the district court had issued tentative rulings on the motions in limine. On May 29, 2015, four days before trial, the district court issued new rulings on the parties' motions in limine. Relevant for our purposes is the district court's ruling on Pomona's motion to exclude the testimony of SQM's expert, Dr. Richard Laton. Dr. Laton's proffered testimony contended that the perchlorate contamination present in Pomona's water system could have come from hundreds of alternative sources other than SQM's importation of fertilizer from the Atacama Desert. For example, Dr. Laton opined that the perchlorate in Pomona's water system could have come from "household bleach, " "swimming pools, " "septic tanks, " "photographic flash powder, " or even "fireworks." Pomona's motion asserted that Dr. Laton's testimony was unreliable under the standard set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). Before the first appeal, the district court denied Pomona's Daubert motion as to Dr. Laton, without explanation, in a ruling that was explicitly labeled as tentative. The district court's May 29, 2015, ruling on Pomona's motion to exclude Dr. Laton did not include any analysis.

         At trial, Dr. Sturchio testified to the circumstances as they existed in 2011. As the district court had denied Pomona's motion to update Dr. Sturchio's expert report, he was prohibited from testifying about the significant scientific progress that had taken place while the case had been on appeal. Furthermore, Dr. Laton testified that the perchlorate contamination could have arisen from many potential sources. After seven days of testimony and argument, the jury returned its verdict, finding that SQM's sodium nitrate fertilizer was not a substantial factor in causing harm to Pomona-a complete defense verdict in favor of SQM.

         This appeal followed, in which Pomona challenges the district court's denial of its motion to update Dr. Sturchio's expert report, which resulted in the exclusion of testimony regarding new scientific developments. Pomona also challenges the ...


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