Showing how administrative claims can derail coexistent judicial actions, a federal court in California asked three California cities to first exhaust their administrative claims seeking state compensation for the cities’ treatment of polychlorinated biphenyls (PCBs) in stormwater discharge before they can sue Monsanto Co. in court for tort damages. San Jose v. Monsanto Co., No. 5:15-cv-03178 (N.D. Cal. Aug. 4, 2017). The court will freeze the cities’ tort actions against Monsanto until February 8, 2018, when the state agency will have a chance to hear the cities’ administrative claims. These claims seek state reimbursement for complying with PCB discharge standards that the state made more stringent in 2015 without providing funding assistance.

Three California cities, San Jose, Oakland, and Berkeley, operated municipal stormwater and runoff systems under permits. The permits mandated limitations on PCB discharges, which a regional water quality control board made stricter in 2015. The heightened standard necessitated compliance expenses from the cities. The cities filed claims before the California Commission on State Mandates, arguing that the permit obligations constituted unfunded state mandates for which the state should reimburse the cities for compliance. The cities also sued Monsanto Company, Solutia Inc., and Pharmacia LLC (collectively “Monsanto”), which produced PCBs, in federal court for public nuisance and equitable indemnity. On motion from Monsanto, the court dismissed both claims in the original complaints, but granted the cities’ leave to amend the nuisance claim.

The cities amended their complaints in September 2016, alleging only public nuisance. Monsanto again moved to dismiss or stay the case, arguing that the cities had not exhausted their administrative remedies. The cities countered that the administrative relief sought before the state Commission would be unrelated to the federal cases, which were based on public nuisance. It further contended that no administrative process would be available for a public nuisance claim.

The court ruled against the cities. It found that the cities, in both the judicial and the administrative proceedings, sought “damages to compensate them for the cost of complying with state-mandated permit obligations – for instance, costs associated with retrofitting their stormwater systems to filter out PCBs.” The court therefore concluded that there was “substantial overlap between the costs the cities seek to recover in their [administrative] test claims and in their federal actions.” It ordered the lawsuits to be stayed until February 2018. Parties were instructed to file a joint status report and appear for a status conference after the state Commission hosted a hearing on the administrative claims in January 2018.