Water companies celebrating ruling over pollution liability.

EARLIER this month, a Los Angeles Superior Court judge handed three local water companies and two public water agencies a "Get Out of Jail Free" card for their involvement in a lengthy legal battle involving contaminated drinking water in the San Gabriel Valley.

The utilities were dismissed as defendants in a class-action lawsuit that claimed they knowingly distributed water for 30 years to thousands of San Gabriel Valley residents who say they have a host of cancers and thyroid disorders.

Plaintiffs' lawyers are appealing the case, for the second time, to the state Supreme Court.

"I find it hard to believe that any water company that goes out and drills a well immediately downstream from a defense contractor didn't ask whether contaminants were getting into their well," said Christopher Ridout of Rose Klein & Marias LLP in Los Angeles, who represents the plaintiffs.

Meanwhile, the water companies are celebrating.

"It's a big deal and it's been very costly," said Denise Kruger, senior vice president of operations for Southern California Water, a unit of American States Water Co. "What the court has said is that if there is no standard (for determining if a toxic chemical is in the drinking water), then there is nothing to comply with. After all, we're not in the health care business."

Dan Evans, chief administrative officer at Suburban Water Systems in Covina, a unit of Southwest Water Company, said Los Angeles Superior Court Judge Carl West confirmed that the companies "complied with all applicable state and federal water quality standards."

On Aug. 6, the day after the court ruling, Southwest Water raised its dividend payout by 10.5 percent.

The other defendants dismissed from the case include California-American Water Co., part of Germany's RWE Group; the City of Pomona and Valley County Water District. Another defendant, San Gabriel Valley Water Co., was dismissed from the case earlier this year. Two small local water entities, Covina Irrigating District and California Domestic Water Co., a mutual water company, remain defendants because they are not under the jurisdiction of the California Public Utilities Commission.

Meanwhile, litigation continues against the primary polluters in the case, including defense contractor Aerojet, a unit of Sacramento-based GenCorp., which allegedly dumped the toxic chemical perchlorate and other industrial solvents into the ground while testing rocket engines at the site in San Gabriel as far back as the 1940s. Aerojet closed its factory in 1979 and the company has denied any wrongdoing.

In June, the Environmental Protection Agency notified 15 companies, including Aerojet, that it plans to file a federal lawsuit against them for failing to negotiate a settlement to clean up the groundwater in South El Monte, where the San Gabriel Valley Superfund site is located. The EPA wants the companies to pay up to $100 million.

The area was placed on a superfund list in 1984 when perchlorate and other chemicals found in rocket fuel were discovered in the underground water supply.

The water companies maintain that no perchlorate standards existed before 1997. Without any standards, they could not have violated any state or federal laws. In 1998, the state PUC launched an investigation at the urging of the water companies and found that the drinking water was safe.

But the California Supreme Court took the case up on appeal and ruled in 2002 that plaintiffs could sue the water companies. The court said that allowing a jury to determine whether the water companies had met government standards did not interfere with the regulatory power of the state PUC.

However, the court limited the liability for regulated utilities, ruling that they could not be responsible for contamination if they had delivered water that met government standards.

The lower court then devised a three-step process to determine what contamination standards existed at the time, what constituted a violation, and whether the plaintiffs could prove that the water companies had violated those standards.

The district court dismissed the water companies from the case because, in its reading of the contamination standards, no quantitative standard for maximum contaminant levels for perchlorate existed at the time.

"The thinking goes: Why pick on a defendant with the most remote exposure, when you can have the actual defendant that did the bad deeds?" said Walter Jack, an attorney with Engstrom Lipscomb & Lack in Los Angeles, which represents as many as 500 plaintiffs in the case.

Meanwhile, plaintiffs will have to continue their years-long wait for relief.

"It's absolutely unbelievable that a court would allow a defendant to dump that much stuff into the ground and not provide a remedy to those individuals who did nothing but drink their tap water," said Ridout.

Staff reporter Kate Berry can be reached at [phone], ext. 228, or at [e-mail].