East Orange County Water District vs. Performance Pipeline Technologies

begins with the allegations and theories in the complaint – as well as the defenses alleged in the answer because some of the issues relate to some of defendant’s affirmative defenses.

In the introductory portion of their complaint (ROA 2), plaintiffs allege that plaintiff East Orange County Water District and defendant Performance Pipeline Technologies entered into a written agreement whereby defendant would perform annual pipeline cleaning services to the local sewer systems located in plaintiff’s service area. (Complaint, ¶ 10.) Plaintiffs allege that the initial term of the agreement was from August 1, 2016 to June 30, 2017 and that plaintiff had the option to extend the term for two one-year periods. (Complaint, ¶¶ 11 and 12.) Plaintiffs allege that after plaintiff renewed the contract twice, the parties agreed to a six-month extension. (Complaint, ¶ 13.)

Plaintiffs allege that the work by defendant Performance Pipeline Technologies was to be performed as set forth in an attachment to the agreement entitled “Scope of Work.” (Complaint, ¶ 14.)

Plaintiffs allege that, on July 2, 2019, defendant Performance Pipeline Technologies was conducting sewer cleaning services in Tustin when its employees encountered roots and noted a blockage. (Complaint, ¶¶ 15 and 16.) Plaintiffs allege that, instead of immediately contacting plaintiff East Orange County Water District or conducting further investigation of the blockage as required by the contract, the employees continued to attempt to clean the sewer pipeline and complete the task that same day. (Complaint, ¶ 16.)

Plaintiffs allege that “[t]he noted blockage caused the pipeline to rupture in another location, resulting in raw sewage entering the home of the Mier family” in Tustin. (Complaint, ¶ 17.) Plaintiffs allege that the Miers were out of town and sewage flowed through the entire residence for a week, resulting in a total loss to the contents of the home. (Complaint, ¶ 18.)

Plaintiffs allege that, after the incident, plaintiff Association of California Water Agencies Joint Powers Insurance Authority reviewed the contract between co-plaintiff and defendant and determined that defendant failed to follow the sewer line cleaning specifications. (Complaint, ¶ 21.) Plaintiffs allege that plaintiff Association of California Water Agencies Joint Powers Insurance Authority tendered co-plaintiff’s defense and indemnity to defendant under the indemnity provision in the agreement. (Complaint, ¶ 22.) Plaintiffs allege that the tender of defense went unaccepted. (Complaint, ¶ 23.)

Plaintiffs allege that, as a result of the failure of defendant Performance Pipeline Technologies to notify plaintiff East Orange County Water District of the abnormalities on July 2, 2019, plaintiff covered the damages that were sustained because defendant refused to accept tender of defense and indemnity. (Complaint, ¶ 27.)

After making these allegations, plaintiffs set forth five causes of action for: (1) breach of contract; (2) breach of contractual duty to defend; (3) express contractual indemnity; (4) implied contractual indemnity; and (5) negligence.

Issue 1: Whether PPT Breached the Contract

PPT’s first issue concerns the first cause of action for breach of contract, in which plaintiffs allege that PPT was to perform work according to the Scope of Work attachment to the agreement and that it failed to perform those obligations. (Complaint, ¶¶ 31, 32, 33, and 34.)

PPT contends that the sole claimed breach is PPT’s failure to notify EOCWD by phone and email of the blockage—not any deficiency in PPT’s cleaning work. (UMF 11.) The Scope of Work contains notification provisions in Sections C and I. (UMF 1-2.) Section C, entitled “Sewer Cleaning Procedures” requires PPT to contact EOCWD by phone and email if any abnormal conditions are encountered, and all observations are to be noted on the tablet computer and entered into SEDARU. (PPT Exh. A at p.2.) Section C specifies that

abnormal conditions could be caused by defects such as heavy roots. (PPT Exh. A at p.2.)

Section I, entitled “Spill Reporting and Handling” requires PPT to immediately notify EOCWD of any non-Contractor related spills and/or any abnormal conditions in the sewers of manholes. Section I also specifies: “[t]his also includes surcharging discovered by the Contractor during their normal work. (PPT Exh. A at pp. 5-6.)

PPT contends it did not breach the notice provisions because, although Mike McCusker encountered a surcharge (backup) at manhole 1130 on July 2, 2019, he did not observe any emergency condition or overflow at the surface. (UMF 4.) Further, PPT presents testimony that McCusker successfully cleared the blockage and relieved the surcharge that day. (UMF 5.) PPT also entered notation in the Sedaru system regarding the surcharge on that date. (UMF 12.)

In opposition, Plaintiffs raise triable issues of fact as to whether notice by way of the Sedaru system was sufficient to comply with the terms of the contract. The contract is ambiguous as to the method by which PPT is to notify EOCWD of “surcharging discovered by the Contractor during their normal work” as referenced in Section I. PPT contends EOCWD directed PPT at a preconstruction meeting that the preferred method of communication for reporting conditions encountered during cleaning was through the Sedaru software. EOCWD raises triable issues as to whether such a meeting occurred, what the expectations were, and whether anyone who allegedly attended the meeting on behalf of EOCWD would have authority to orally modify the agreement. (UMF 7 and Pl. Response to UMF 7; Pl. AMF 6-9.)

Further, PPT has not presented any material fact indicating that the surcharge was outside the scope of the notification requirements of Section I. (See UMF 13 (addressing Section C only).)

Accordingly, summary adjudication of Issue 1 is DENIED.

Issue 2: Whether PPT’s Conduct was a Substantial Factor in Causing Harm

PPT’s second issue asks for a determination that Plaintiffs’ first cause of action for breach of contract fails because Plaintiffs cannot establish that PPT was a substantial factor in causing the damage to the Miers residence.

The declarations and evidence offered in opposition to the motion must be liberally construed, while the moving party's evidence must be construed strictly, in determining the existence of a “triable issue” of fact. (D'Amico v. Board of Med. Examiners (1974) 11 Cal.3d 1, 21.)

In support of this issue, PPT relies, in part, on the opinions of its retained expert, Jerry Miles. However, Miles’ opinions are based, in part on, inadmissible case specific hearsay contained in the Sedgwick Report. (See People v. Veamatahau (2020) 9 Cal. 5th 16.) This report was apparently prepared by a third party claim adjuster and its contents do not fall within any hearsay exception. It is not, as PPT contends, a party admission. Further, PPT has not authenticated the report. The attempt by counsel to authenticate the document by declaring the report “a true and correct copy of the Sedgwick Claims Adjuster Report, produced by Plaintiff in discovery and Bates-stamped EOCWD 000058-91” is insufficient. (See PPT Exh. H, Rayfield Decl. ¶ 13.)

Thus, because PPT cannot establish its material facts Nos. 25 and 33, PPT has not met its burden as to this issue.

Further, even if the Court were to consider the opinions that are based on the Sedgwick report, Plaintiffs have raised triable issues of fact. Plaintiffs submit testimony from EOCWD Operations Supervisor Justin Davis, who testified that he is experienced with two residential spills. Davis further testified that when the topography of the area involves hills and slopes, and a surcharge event is observed, it is major cause for concern which would cause him to investigate further. (Davis Depo. at 96:19-99:2) He also testified

that when there is a surcharge on a steep incline hill you have to be careful because sewage can enter someone’s home if they don’t have a backflow device. (Davis Depo. at 73:12-22.) Plaintiffs submitted evidence that Mike McCusker, the PPT representative who handled the work at issue, testified that he saw a surcharge. (Pl.’s AMF 11.)

Accordingly, summary adjudication of Issue 2 is DENIED.

Issue 3: Whether PPT Exercised Reasonable Care

PPT’s third issue asks for a determination that Plaintiffs’ fifth cause of action for negligence fails because PPT exercised reasonable care in its cleaning operations.

Plaintiffs have raised triable issues of fact as to this issue. PPT includes as a material fact that PPT returned to the site with a root saw to ensure the pipe was completely clear of roots. (UMF 37.) In opposition, Plaintiffs present evidence that there is no documentation of this in PPT’s internal notes, and no evidence of “tick marks” on the pipe. (Pl.’s response to UMF 37.)

Additionally, Plaintiffs have raised triable issues as to PPT’s material fact No. 40, regarding Miles’ opinion that PPT followed both industry standards and the contract’s Scope of Work Requirements. Miles testified in deposition that he did not take into consideration Section I of the contract’s definition of surcharge. (UMF 40 and Pl.’s response to UMF 40.)

Accordingly, summary adjudication of Issue 3 is DENIED.

Issue 4: Whether PPT’s Conduct was a Substantial Factor in Causing Harm

PPT’s fourth issue asks for a determination that Plaintiffs’ fifth cause of action for negligence fails because, even assuming negligence, the undisputed evidence establishes that PPT's conduct was not a substantial factor in causing Plaintiff's damages.

PPT relies, in part, on UMF 33, discussed above in connection with Issue 2. As discussed above, this fact relies on inadmissible case specific hearsay and, further, Plaintiffs have raised triable issues of fact.

Summary adjudication of Issue 4 is DENIED.

Issue 5: Whether PPT’s Contractual Duty to Defend was Triggered

PPT’s fifth issue asks for a determination that Plaintiffs’ second cause of action for breach of duty to defend fails because the contractual indemnification provision was not triggered where Plaintiff's damages were not caused in whole or in part by any negligent act or omission of Defendant.

As discussed above in connection with Issue 2, Plaintiffs have raised triable issues of fact as to whether Plaintiffs’ damages were caused by a negligent act or omission of Defendant. (See also Pl.’s response to UMF 51.)

Summary adjudication of Issue 5 is DENIED.

Issue 6: Whether PPT’s Contractual Indemnity Obligation was Triggered

PPT’s sixth issue asks for a determination that Plaintiffs’ third cause of action for contractual duty to indemnify fails because the contractual indemnification provision was not triggered where Plaintiff's damages were not caused in whole or in part by any negligent act or omission of Defendant.

Summary adjudication of Issue 6 is DENIED for the same reasons discussed above in connection with Issues 2 and 5.

Issue 7: Whether the Contract Precludes the Claim for Equitable Indemnity

PPT’s seventh issue asks for a determination that Plaintiffs’ fourth cause of action for implied contractual indemnity fails because (a) the express indemnity provision precludes any claim for implied indemnity, and (b)

Defendant did not breach any duty that caused Plaintiffs’ liability.

PPT again relies, in part, on Miles’ testimony as set forth in UMF 33. For the reasons discussed above in connection with Issue 2, this is insufficient to meet PPT’s burden and Plaintiffs have raised triable issues of fact.

Further, PPT’s reliance on E. L. White, Inc. v. City of Huntington Beach, is misplaced. (E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497.) While the case does stand for the proposition that “when parties by express contractual provision establish a duty in one party to indemnify another, the extent of that duty must be determined from the contract and not from the independent doctrine of equitable indemnity,” the existence of an express indemnification agreement is not an absolute bar to implied indemnity. (Id. at 508.) The court also held that “[w]hen, however, the duty established by contract is by the terms and conditions of its creation inapplicable to the particular factual setting before the court, the equitable principles of implied indemnity may indeed come into play.” (Ibid.)

Thus, it is premature at this stage, where there are still facts in dispute, to conclude that the express indemnification agreement preempts any potential right to implied indemnity.

Accordingly, summary adjudication of Issue 7 is DENIED.

Plaintiffs’ Objections: Plaintiffs’ Objections Nos. 1-4, 6, 8-17, 19- 23, 25, and 27-28 to the Declaration of Jerry Miles, P.E. are OVERRULED. Objections Nos. 5, 7, 18, 24, 26, and 29 are SUSTAINED on the grounds that these opinions rely on case specific hearsay evidence (the Sedgwick report). As stated in PPT’s opening brief, the Sedgwick report was prepared by a third party claim adjuster. It is therefore not, as PPT contends, a party admission within the meaning of Evidence Code §1220. (See People v. Veamatahau (2020) 9 Cal. 5th 16.)

Plaintiffs’ Objections Nos. 30-33 to the Declaration of Mike McCusker are OVERRULED.

Plaintiffs’ Objections No. 34-36 to the Declaration of Jamison Rayfield are OVERRULED. Objection No. 37 is SUSTAINED for lack of authentication.

Defendant’s Objections: Defendant’s Objection No. 1 to Exhibit 4 to the Declaration of Mariel Covarrubias (Sedaru Notes, EOCWD Bates Nos. 001136 et seq.) is SUSTAINED for lack of authentication.

Defendant’s Objection No. 2 to the use of the deposition testimony of Justin Davis (Exhibit 2 to Covarrubias Decl.) as expert opinion is OVERRULED.

The Court declines to rule on the remainder of the objections as they are not material to the disposition of this motion. (CCP §437c(q).)

Defendant to give notice.