City of Los Angeles v. San Pedro Boat Works

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

CITY OF LOS ANGELES, 
Plaintiff/Counter-Defendant/
Appellant,
v.
SAN PEDRO BOAT WORKS, a No. 08-56163
California corporation, D.C. No.
Defendant,  2:02-cv-07986-
and ABC-JWJ
BCI COCA-COLA BOTTLING OPINION
COMPANY OF LOS ANGELES, a
Delaware corporation,
Defendant/Counter-Claimant/
Appellee.

Appeal from the United States District Court
for the the Central District of California
Audrey B. Collins, Chief District Judge, Presiding

Argued and Submitted
November 2, 2009—Pasadena, California

Filed March 14, 2011

Before: Ronald M. Gould and Carlos T. Bea, Circuit Judges,
and Donald W. Molloy,* District Judge.

Opinion by Judge Bea

*The Honorable Donald W. Molloy, United States District Judge for the
District of Montana, sitting by designation.

3501
3504 LOS ANGELES v. SAN PEDRO BOAT WORKS

COUNSEL

Rockard J. Delgadillo, Thomas A. Russell, Kenneth F. Matt-
feld, San Pedro, California, for the plaintiff-appellant.

William F. Sullivan, Matthew J. Sanders, D. Scott Carlton,
Los Angeles, California; Stephen D. Kinnaird, Washington,
D.C., for the defendant-appellee.
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3505
OPINION

BEA, Circuit Judge:

This case calls on us to determine, in the first instance,
whether the holder of a revocable permit to use real property
is an “owner” of that real property for purposes of imposing
liability under the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”) for the clean-
up of hazardous substances disposed on that property by oth-
ers. A common sense reading of the statute and existing state
law persuade us that this permittee, as the holder of a posses-
sory interest, cannot be such an “owner” under CERCLA, and
we so hold.

The City of Los Angeles (“the City”) appeals from the dis-
trict court’s grant of partial summary judgment in favor of
BCI Coca-Cola Bottling Company of Los Angeles (“BCI
Coca-Cola”). The City sued BCI Coca-Cola on ten counts
arising from environmental contamination caused by opera-
tion of the San Pedro Boat Works located at Berth 44 in the
Port of Los Angeles (“Berth 44”). The City seeks reimburse-
ment for the expense of cleaning up hazardous substances dis-
posed of at Berth 44. The parties do not dispute whether
hazardous substances were released at Berth 44; they were.
The disagreement is over who should pay the clean-up costs.

Under CERCLA, BCI Coca-Cola must pay if and only if it
or its predecessor-in-interest—Pacific American1 —was an
“owner or operator” of the boatworks when the hazardous
1
BCI Coca-Cola bought all of Pacific American’s assets and assumed
all of its liabilities in 1993. Hence, if Pacific American were liable under
the law—including liability as an “owner” under CERCLA—BCI Coca-
Cola would be so liable. The alleged disposal of hazardous substances
occurred during Pacific American’s tenure as permittee, so although BCI
Coca-Cola is the named defendant for purposes of this appeal, all the rele-
vant actions or omissions were those of its predecessor-in-interest, Pacific
American.
3506 LOS ANGELES v. SAN PEDRO BOAT WORKS
substances were disposed at Berth 44. See CERCLA, 42
U.S.C. §§ 9601-9675 (2006).2 In a separate decision, the dis-
trict court held that Pacific American, and thus BCI Coca-
Cola, was not an “operator” of the boatworks at Berth 44. The
City, for reasons unexplained by the record, did not appeal the
district court’s ruling on “operator” liability. We therefore
focus our analysis on the district court’s determination that
Pacific American, and thus BCI Coca-Cola, was not an owner
of the boatworks for purposes of CERCLA.

Because the definitions Congress provides in CERCLA for
“owners” and “operators” are mere tautologies,3 this court has
looked to the common law—including the state law of the
property’s location—for guidance in other cases when impos-
ing CERCLA liability on possessors and owners of various
property interests. See Burlington N. & Santa Fe Ry. Co. v.
United States, 129 S. Ct. 1870, 1881 (2009) (“Congress
intended the scope of liability to ‘be determined from tradi-
tional and evolving principles of common law.’ ”) (quoting
United States v. Chem-Dyne Corp., 572 F. Supp. 802, 808
(S.D. Ohio 1983); Long Beach Unified Sch. Dist. v. Dorothy
B. Godwin Cal. Living Trust, 32 F.3d 1364, 1368 (9th Cir.
1994) (looking to the common law, including California com-
mon law, to determine whether an easement holder is an
“owner” under CERCLA). Under California law, the holder
of a revocable permit, like the easement holder in Long
Beach, has only a possessory interest in the real property gov-
erned by the permit, an interest “which exists as a result of
2
CERCLA imposes liability on “any person who at the time of disposal
of any hazardous substance owned or operated any facility.” 42 U.S.C.
§ 9607(a)(2). “The remedy that Congress felt it needed in CERCLA is
sweeping: everyone who is potentially responsible for hazardous-waste
contamination may be forced to contribute to the costs of [the environ-
mental] cleanup.” United States v. Bestfoods, 524 U.S. 51, 56 n.1 (1998)
(quoting Pennsylvania v. Union Gas Co., 491 U.S. 1, 21 (1989) (plurality
opinion of Brennan, J.)).
3
Congress defines the term “owner and operator” to mean: “any person
owning or operating [a] facility.” 42 U.S.C. § 9601(20)(A)(ii).
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3507
possession, exclusive use, or a right to possession or exclusive
use of land unaccompanied by the ownership of a fee simple
or life estate in the property.” Bd. of Supervisors v. Archer,
96 Cal. Rptr. 379, 386 (Cal. App. 1971) (emphasis added).
Given this common law distinction between ownership inter-
ests and possessory interests, and the juxtaposition of “owner”
and “operator” in CERCLA—where “operator” liability has
been construed expansively in this circuit and others—we
conclude that Congress intended to give “owner” its common
law meaning. We here hold that “owner” liability under CER-
CLA does not extend to holders of mere possessory interests
in land, such as permittees, easement holders, or licensees,
whose possessory interests have been conveyed to them by
the owners of real property, which owners continued to retain
power to control the permittee’s use of the real property.

In conjunction with the more permissive “operator” liabil-
ity, this narrow construction of “owner” liability furthers Con-
gress’s intent to hold liable both the passive fee title owner of
real property who pollutes or acquiesces in another’s dis-
charge of harmful pollutants on his land, and the active (or
negligent) operator of the facility who has only a possessory
interest in the owner’s real property. Under this construction,
and in accordance with California common law, BCI Coca-
Cola—as a permittee, subject to restrictions imposed by the
landowner, City of Los Angeles, on BCI Coca-Cola’s
predecessor-in-interest—is not liable as an owner under CER-
CLA.

Further, the district court did not err in granting summary
judgment to BCI Coca-Cola on the City’s nuisance claims
because the City did not raise a triable issue of fact that
Pacific American ever had knowledge, or was put on notice,
of the environmental contamination. Nor did the district court
err in denying the City leave to amend its complaint to add a
breach of contract claim against Pacific American. Therefore,
we affirm.
3508 LOS ANGELES v. SAN PEDRO BOAT WORKS
I. Factual Background

Berth 44 is located within the Port of Los Angeles, which
is itself part of the Los Angeles Harbor. It is owned by the
City of Los Angeles and run by the Board of Harbor Commis-
sioners. The Board of Harbor Commissioners “have the man-
agement, supervision and control . . . of all navigable waters
and all tidelands and submerged lands . . . at Los Angeles
Harbor.” Charter of the City of Los Angeles (“Charter”), Art.
XI § 138. The Board of Harbor Commissioners is responsible
for issuing franchises, permits, and leases for use of the land
at the Los Angeles Harbor. Charter, Art. XI § 140(c)-(d).

In 1965, the Board of Harbor Commissioners issued Revo-
cable Permit 936 to the Los Angeles Harbor Marine Corpora-
tion (“L.A. Harbor Marine”), for the limited purpose of
operating a boatworks—a facility for the repair, maintenance,
and rebuilding of ships and boats—on Berth 44. The permit
granted possession of roughly 3 acres of land and 1.6 acres of
water at Berth 44. From 1965 to 1969, L.A. Harbor Marine
operated a boatworks at Berth 44. During this time, Pacific
American began negotiations with L.A. Harbor Marine to pur-
chase the permit. While those negotiations were ongoing,
Pacific American incorporated San Pedro Boat Works; it
became a wholly owned subsidiary corporation of Pacific
American. Pacific American and L.A. Harbor Marine agreed
on the terms of the sale, and with the City’s necessary and
prior approval, Pacific American purchased the permit in an
asset sale that closed in August 1969.

In the close of the 1969 asset sale, Pacific American con-
veyed all of its interest in L.A. Harbor Marine’s physical
assets, not including Revocable Permit 936, to its wholly-
owned subsidiary corporation, San Pedro Boat Works so that
at no time did Pacific American ever own the boatworks
assets. At closing, San Pedro Boat Works became the sole
owner of the facilities and machinery at Berth 44.
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3509
Nevertheless, Pacific American’s efforts to make San Pedro
Boat Works wholly responsible for all things related to the
boatworks on Berth 44 were not immediately successful. On
August 4, 1969, Pacific American, not San Pedro Boat
Works, accepted an assignment of Revocable Permit 936
from L.A. Harbor Marine. In April or May of 1970, Pacific
American—not San Pedro Boat Works—obtained Revocable
Permit 1076 from the Board of Harbor Commissioners to
replace Revocable Permit 936. Not until June 1970 did Pacific
American rid itself of its last direct connection to Berth 44 by
assigning Revocable Permit 1076 to San Pedro Boat Works,
which assignment was approved by the Board of Harbor
Commissioners. Thus, Pacific American was the named per-
mittee of Revocable Permits 936 and 1076 for operation of
the boatworks for approximately ten months. The parties do
not contest, however, that only San Pedro Boat Works oper-
ated the boatworks facility at all times, including during those
ten months.

In 1974, Martin Vincent purchased the facilities and
machinery of the San Pedro Boat Works. Although Pacific
American remained the named permittee on Revocable Permit
1076, Vincent assumed San Pedro Boat Works’s role as
assignee of the permit upon his purchase of San Pedro Boat
Works. In 1983, Vincent sold the assets of San Pedro Boat
Works to Billfish, Incorporated, and Revocable Permit 1076
was assigned to Billfish. Subsequently, the City and Billfish
entered into Revocable Permit 1737, replacing Revocable Per-
mit 1076. In 1993, BCI Coca-Cola purchased Pacific Ameri-
can, including Pacific American’s remaining assets and its
liabilities. BCI Coca-Cola does not dispute that it acquired all
of Pacific American’s liabilities, and therefore stands in the
shoes of Pacific American for the purposes of this case.

In 1995, the City first began to investigate the soil and
groundwater at Berth 44. A variety of contaminants were dis-
covered, including volatile organic compounds, petroleum
hydrocarbons, polychlorinated biphenyls, polycyclic aromatic
3510 LOS ANGELES v. SAN PEDRO BOAT WORKS
hydrocarbons, copper, lead, mercury, and chromium. In 2002
and 2003, subsea sediment samples collected by the City from
the area surrounding Berth 44 revealed particularly high
levels of copper and zinc. The City removed the contaminated
sediments from the area in 2003 by dredging, which reduced
contaminant concentrations to levels acceptable to a multi-
agency Contaminated Sediments Task Force.

The City filed its initial complaint against BCI Coca-Cola,
Pacific American, and San Pedro Boat Works,4 among others,
on October 15, 2002, alleging the defendants were responsible
for contamination of the soil, groundwater, and sediments at
and around Berth 44, and thus were liable for the cleanup
costs. In its Fourth Amended Complaint, the City alleged
twelve claims against eight named defendants for site pollu-
tion at Berth 44. Relevant to this appeal, the City alleged three
claims against BCI Coca-Cola under CERCLA, as well as
claims for private and public nuisance under state law. The
City also moved to add a claim for breach of contract in its
Fourth Amended Complaint, but the district court denied this
motion.

In its Fourth Amended Complaint, the City advanced four
theories of CERCLA liability against BCI Coca-Cola based
on Pacific American’s relationship with Berth 44: The City
alleged (1) Pacific American was a CERCLA “owner”
because it held title to assets used at Berth 44, (2) Pacific
American was a CERCLA “owner” because it held Revocable
Permits from the City to do business at Berth 44, (3) Pacific
American was derivatively liable as an “operator” because
San Pedro Boat Works—Pacific American’s wholly-owned
subsidiary—was its alter-ego and San Pedro Boat Works was
liable as an “operator” of the boatworks at Berth 44, and (4)
Pacific American was itself an “operator” of the boatworks
business at Berth 44.
4
Defendant San Pedro Boat Works filed for bankruptcy protection in
December 2002.
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3511
The City moved for summary adjudication of its CERCLA
claims against BCI Coca-Cola, and on July 10, 2007, the dis-
trict court held: (1) there was a genuine issue of fact as to
whether Pacific American held title to assets used at Berth 44,
(2) the Revocable Permits were insufficient to establish owner
liability of Pacific American, and thus of BCI Coca-Cola as
successor-in-interest, under CERCLA, (3) Pacific American
could not be held derivatively liable for San Pedro Boat
Works’s ownership or operation of the boatyard business at
Berth 44 because San Pedro Boat Works was not the alter-ego
of Pacific American, and (4) Pacific American was not an
“operator” of the boatworks under CERCLA. The district
court submitted to a jury the first question—whether Pacific
American owned the assets of the boatyard business at Berth
44—without specific instruction as to the definition of “own-
ership.” The jury returned a special verdict that Pacific Amer-
ican did not own the assets of the boatworks. The district
court then sua sponte dismissed the City’s CERCLA claims.

The district court next granted BCI Coca-Cola’s motion for
summary judgment on the City’s state-law claims. The district
court dismissed the City’s nuisance claims on the ground that
the City failed to raise a triable issue of fact as to whether
Pacific American—BCI Coca-Cola’s predecessor, whose lia-
bilities became BCI Coca-Cola’s—had knowledge or notice
of the environmental contamination.

The district court entered final judgment in favor of BCI
Coca-Cola, holding that all of the City’s claims were prem-
ised on the theory that BCI Coca-Cola was liable as a
successor-in-interest to Pacific American, but the jury had
determined Pacific American never owned any of the assets
of the boatworks. In fact, all of the physical assets of the boat-
works were owned by the San Pedro Boat Works, before
being acquired by C. Martin Vincent in 1974. Thus, BCI
Coca-Cola’s ownership of Pacific American did not vest any
ownership of the boatworks’ assets in BCI Coca-Cola. The
City appeals on the ground that because Pacific American
3512 LOS ANGELES v. SAN PEDRO BOAT WORKS
held the revocable permit to operate the boatworks at Berth 44
for ten months in 1969-70, Pacific American was an owner of
the boatworks for purposes of CERCLA liability. The City
also appeals the district court’s denial of the City’s motion for
leave to amend its complaint to add a breach of contract claim
against Pacific American.

We review de novo the district court’s grant or denial of
summary judgment. Kendall-Jackson Winery, Ltd., v. E. & J.
Gallo Winery, 150 F.3d 1042, 1046 (9th Cir. 1998). We
review the district court’s denial of a motion for leave to
amend a complaint for abuse of discretion. DCD Programs,
Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987).

II. CERCLA Claims

The City contends on appeal that BCI Coca-Cola is liable
for the clean-up of the Berth 44 boatworks because Pacific
American possessed Revocable Permits from the City for ten
months from 1969 to 1970, and was thus an “owner” of the
physical assets of the Berth 44 boatworks when the pollution
was discharged, and BCI Coca-Cola assumed Pacific Ameri-
can’s CERCLA “owner” liability in the 1993 asset-liabilities
purchase.

[1] “CERCLA imposes the costs of the [environmental]
cleanup on those responsible for the contamination.” Best-
foods, 524 U.S. at 56 n.1 (quoting Union Gas, 491 U.S. at 7).
“The remedy that Congress felt it needed in CERCLA is
sweeping: everyone who is potentially responsible for
hazardous-waste contamination may be forced to contribute to
the costs of cleanup.” Id.

Our court construes CERCLA liberally to effectuate the
statute’s two primary goals: “(1) to ensure the prompt and
effective cleanup of waste disposal sites, and (2) to assure that
parties responsible for hazardous substances [bear] the cost of
remedying the conditions they created. Carson Harbor Vil-
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3513
lage, Ltd. v. Unocal Corp., 270 F.3d 863, 880 (9th Cir. 2001)
(internal alterations omitted). However, in enacting CERCLA,
Congress did not “intend[ ] to impose liability on everyone
else who has any interest at all in land containing a toxic
waste facility.” Long Beach, 32 F.3d at 1369. Therefore, “we
have cautioned that ‘we must reject a construction that the
statute on its face does not permit, and the legislative history
does not support.’ ” Carson, 270 F.3d at 881 (quoting 3550
Stevens Creek Assoc. v. Barclays Bank of Cal., 915 F.2d
1355, 1363 (9th Cir. 1990)).

[2] CERCLA imposes liability on “any person who at the
time of disposal of any hazardous substance owned or oper-
ated any facility at which such hazardous substances were dis-
posed of.” 42 U.S.C. § 9607(a)(2).5 As a successor-in-interest
to Pacific American, BCI Coca-Cola is liable under CERCLA
if Pacific American was an owner of the boatworks facility.

[3] Congress did not clearly define the word “owner” in
CERCLA. Instead, Congress defined the terms “owner and
operator,” to mean “in the case of an onshore facility or an
offshore facility, any person owning or operating such facili-
ty.” 42 U.S.C. § 9601(20)(A)(ii). In short, an “owner” is “any
person owning a facility.” The Supreme Court has recognized
that this definition is entirely tautological, and thus useless.
Bestfoods, 524 U.S. at 66.

Our court has examined the meaning of the term “owner”
under CERCLA in just one case. See Long Beach, 32 F.3d at
5
“The term ‘facility’ means (A) any building, structure, installation,
equipment, pipe or pipeline (including any pipe into a sewer or publicly
owned treatment works), well, pit, pond, lagoon, impoundment, ditch,
landfill, storage container, motor vehicle, rolling stock, or aircraft, or (B)
any site or area where a hazardous substance has been deposited, stored,
disposed of, or placed, or otherwise come to be located; but does not
include any consumer product in consumer use or any vessel.” 42 U.S.C.
§ 9601(9). The parties do not dispute that the boatworks at Berth 44 is
such a facility.
3514 LOS ANGELES v. SAN PEDRO BOAT WORKS
1365. In Long Beach, the School District bought land from
the Godwin Trust. The Godwin Trust had previously leased
the land to the Schafer Brothers Transfer and Piano Moving
Company (“Schafer”), which maintained a waste pit on the
land. The School District sued the Godwin Trust and Schafer,
both of which settled, and also Mobil Oil and Powerine Oil
(“M & P”), which did not. The School District alleged M &
P were liable under CERCLA as owners or operators because
M & P held an easement to run a (non-polluting) pipeline
across the land. The pipeline had no connection to the tar-
geted waste pit. The district court granted M & P’s motion to
dismiss. Id. at 1366. We affirmed, holding that an easement
for a non-polluting pipeline was not sufficient to show M &
P were operators or owners under CERCLA. Id. at 1370.
“Having an easement does not make one an ‘owner’ for pur-
poses of CERCLA liability.” Id.

First, we noted that because CERCLA did not provide a
definition of “owner,” we should read the statute as “incorpo-
rating the common law definitions of its terms.” Id. at 1368.
Looking to California law, we found a number of state law
cases distinguishing easements—which convey only rights of
and from another in or over the land—from ownership. Id. at
1368. See, e.g., City of Hayward v. Mohr, 325 P.2d 209, 212
(Cal. App. 1958) (holding that although an easement is an “in-
terest” in land, it is only “a limited use or enjoyment of the
land in which the interest exists . . . it is not itself either land
or an estate in land”); Robinson v. Cuneo, 290 P.2d 656, 658
(Cal. App. 1955) (holding that an easement holder, unlike an
owner, “owns no part of the land itself and has no right to
exclude the owner from the use of any of the land”). From
these state law cases, we determined that the common law
definition of “owner” did not include an easement holder, and
therefore, extending CERCLA owner liability to M & P was
unwarranted. Long Beach, 32 F.3d at 1370.

[4] Long Beach establishes the rule that this court should
look to the common law—including the law of the state where
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3515
the land at issue is located—in determining whether a party
was an “owner” for purposes of CERCLA liability. Id. at
1368. Although the holding in Long Beach with regard to
easement holders is not conclusive of the issue in this case,
the case demonstrates that there is a relevant distinction, for
purposes of CERCLA owner liability, between absolute title
ownership to real property and less-than fee-title possessory
interests in real property, conveyed by the holder of fee title.

However, not all courts have followed Long Beach’s meth-
odology of looking to the common law to determine whether
a given holder of a property interest is an owner under CER-
CLA. Some district courts have determined CERCLA owner-
ship liability by examining whether the holder of that interest
(typically a lessee) possessed “site control” over the facility.
See United States v. South Carolina Recycling & Disposal,
Inc., 653 F. Supp. 984 (D.S.C. 1986), aff’d in part, vac’d in
part sub nom. United States v. Monsanto Co., 858 F.2d 160
(4th Cir. 1988).

In South Carolina Recycling, the district court of South
Carolina held that a lessee could be an owner under CERCLA.6
Id. at 999. There, the president of the lessee negotiated a ver-
bal lease with the owners to use the site to store raw chemi-
cals. Individuals associated with the lessee began storing
waste at the site, but did not do so as employees of the lessee.
Eventually, these individuals formed a new corporation to
manage the waste operations. That entity assumed the lease
two years after the verbal lease was formed. The entity con-
tinued to store hazardous waste on the property for six more
6
District courts from several circuits have followed South Carolina
Recycling’s reasoning and evaluated the degree of site control in deciding
whether to impose owner liability on lessees. See, e.g., Delaney v. Town
of Carmel, 55 F. Supp. 2d 237, 258-59 (S.D.N.Y. 1999); Castlerock
Estates, Inc. v. Estate of Markham, 871 F. Supp. 360, 367 (N.D. Cal.
1994); Burlington N. R.R. v. Woods Indus., Inc., 815 F. Supp. 1384,
1391-92 (E.D. Wash. 1993); United States v. A & N Cleaners & Launder-
ers, Inc., 788 F. Supp. 1317, 1333 (S.D.N.Y. 1992)).
3516 LOS ANGELES v. SAN PEDRO BOAT WORKS
years. The district court held the lessee was liable as an owner
under CERCLA because it “maintained control over and
responsibility for the use of property and, essentially, stood in
the shoes of the property owners.” Id. at 1003. The court
explained that “site control is an important consideration in
determining who qualifies as an ‘owner’ under [CERCLA].”
Id.

In the only circuit court decision to address the liability of
a lessee under CERCLA’s owner provision, the Second Cir-
cuit held that lessees could be liable as owners only in the rare
case where the lessee was a de facto owner, and expanded the
site-control test into a five-factor test for determining de facto
ownership. Commander Oil Corp. v. Barlo Equip. Corp., 215
F.3d 321, 330-31 (2d Cir. 2000). In that case, Commander Oil
bought two lots. Lot 1 was clean office space; Lot 2 was a
polluted petrol depot. Commander Oil leased clean Lot 1 to
Barlo Equipment and polluted Lot 2 to Pasley Solvents &
Chemicals. A few years later, Commander Oil reorganized the
leases, so that it leased both lots to Barlo and Barlo then sub-
let polluted Lot 2 to Pasley. The local Department of Health
discovered the pollution on Lot 2 and ordered Commander
Oil to clean that Lot. Commander Oil then sued Barlo and
Pasley for contribution under CERCLA. The district court
held Barlo was an “owner,” by virtue of the consolidated
lease, and ordered Barlo to pay one-fourth of the clean up
costs. Id. at 325-26.

The Second Circuit reversed, holding owner liability
applied only to lessees when the lessee was a de facto owner,
such as in the case of “the proverbial 99-year lease.” Id. at
330. The Second Circuit held Barlo “did not possess sufficient
attributes of ownership” for owner liability. Id. at 331.

Commander Oil identified five factors to consider in deter-
mining de facto ownership:

(1) whether the lease is for an extensive term and
admits of no rights in the owner/lessor to determine
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3517
how the property is used; (2) whether the lease can-
not be terminated by the owner before it expires by
its terms; (3) whether the lessee has the right to sub-
let all or some of the property without notifying the
owner; (4) whether the lessee is responsible for pay-
ment of all taxes, assessments, insurance, and opera-
tion and maintenance costs; and (5) whether the
lessee is responsible for making all structural and
other repairs.

Id. at 330-31.

[5] Instead of applying a nebulous and flexible analytical
framework such as “site control” or Commander Oil’s five-
factor balancing test—tests which do not clearly call out what
an investor in land can expect and which factors are them-
selves susceptible to endless manipulation in litigation—we
follow our court’s methodology in Long Beach. Looking to
common law, including California common law, we find that
the holder of a permit for specific use of real property is not
the “owner” of that real property, where, as here, the fee title
owner retained power to control the permittee’s use of the real
property. Instead, such a permittee holds merely a possessory
interest in the land, comparable to the interest of a licensee or
easement holder. As the California Court of Appeals has held,
a “possessory interest [is] an interest in real property which
exists as a result of possession, exclusive use, or a right to
possession or exclusive use of land unaccompanied by the
ownership of a fee simple or life estate in the property,”
which ownership interest is retained by the fee title owner of
the real property. Archer, 96 Cal. Rptr. at 386 (emphasis
added) (internal quotation marks, alterations, and citations
omitted). Such a possessory interest “may be a leasehold
interest or the interest of either an easement holder or a mere
permittee or licensee,” and “may exist as the result of a grant,
among others, of a leasehold estate, a profit a prendre, or any
other legal or equitable interest of less than freehold. Id
(emphasis added).
3518 LOS ANGELES v. SAN PEDRO BOAT WORKS
[6] California state courts have consistently distinguished
between possessory interests, such as a revocable permit, and
title ownership.7 As the Supreme Court of California recently
reiterated with regard to a lease (which, as the facts of this
case show, usually confers greater property interests than does
a revocable permit):

Notwithstanding the fact that a lease is a present pos-
sessory interest in land, there is no question that as
a nonfreehold estate it is a different species of inter-
est from a freehold estate in fee simple . . . . A lease-
hold is not an ownership interest, unlike the
possession of land in fee simple . . . It is for that rea-
son that common parlance refers to the “owner” of
a freehold estate, encumbered or unencumbered, but
to the “holder”of a lease; the freeholder is seised of
land, whereas the leaseholder is not.

Auerbach v. Assessment Appeals Bd. No. 1., 137 P.3d 951,
956 (Cal. 2006)8 (quoting Pac. Sw. Realty Co. v. Cnty. of Los
7
This distinction is frequently discussed in the context of assessing real
property taxes. Under California law, ad valorem property taxes may be
assessed against owners of real property or against parties with a “posses-
sory interest” in real property, where possessory interest is defined as
“[p]ossession of, claim to, or right to the possession of land or improve-
ments that is independent, durable, and exclusive of rights held by others
in the property, except when coupled with ownership of the land or
improvements in the same person.” Cal. Rev. & Tax Code § 107(a).
8
Auerbach raised the question whether the lessee of a retail building
was the “owner” of that building for property reassessment purposes.
Proposition 13, adopted in 1978, limited the amount that the assessed
value of real property could be increased, unless ownership of the property
changed hands. Auerbach, 137 P.3d at 952. In Auerbach, Tommy Hilfiger
had a ten-year lease for a retail building on Stanley Anderson’s real prop-
erty. Id. When Anderson and his wife died, ownership of the real property
transferred into a trust benefitting their grandchildren, and the assessment
board moved to increase the assessed value of the property. Id. The grand-
children received a $1 million grandparent-grandchild reassessment exclu-
sion, which they tried to apply only toward the increased value of the land,
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3519
Angeles, 820 P.2d 1046, 1051 (Cal. 1991); see also Dirs. of
Fallbrook Irr. Dist. v. Abila, 106 Cal. 355, 362 (1895)
(“ ‘Owner,’ in its general sense, means one who has full pro-
prietorship in and dominion over property. In Bouvier’s Law
Dictionary it is said that: ‘The word ‘owner,’ when used
alone, imports an absolute owner.’ ”).

California is not alone in recognizing this distinction; other
common law courts have held that a mere possessory interest
in the use or enjoyment of real property, such as a permit,
does not constitute “ownership.” See, e.g., Peoples Gas,
Light, and Coke Co. v. Harrison Cent. Appraisal Dist., 270
S.W. 3d 208, 212 (Tex. App. 2008) (“Texas courts have gen-
erally defined taxable ‘owner’ as the individual or entity hold-
ing legal title to the property or holding an equitable right to
obtain legal title.”); Stansbury v. MDR Dev., L.L.C., 871 A.2d
612, 620 (Md. App. 2005) (“[T]he owner of land in fee holds
all of the complex elements of a single right, a bundle of
sticks, if you will, which include not only the right to use the
surface, but so much of the superjacent airspace as he can use,
as well as the subjacent reaches below.”) (quoting Macht v.
Dep’t of Assessments of Baltimore City, 266 Md. 602, 605
(1972); Mesa Verde Co. v. Montezuma Cnty. Bd. of Equaliza-
tion, 898 P.2d 1, 11 (Colo. 1995) (holding that the United
States “owned” the real property at issue, while the permittees
and lessees held only a “possessory interest” in the land);
Spanish River Resort Corp. v. Walker, 497 So. 2d 1299, 1301
(Fla. App. 1986) (holding that an “owner enjoy[s] all of the
sticks which constitute the bundle of rights that is fee owner-
ship of real estate”) (internal quotation omitted).

claiming that they did not own the retail building leased by Hilfiger. Id.
at 953. In response to this claim, the California Supreme Court affirmed
the ruling of the Court of Appeal that Hilfiger, the lessee, was not the
owner of the retail building, and thus, the reassessment exclusion must be
divided between the increased value of both the land and the retail build-
ing. Id. at 958.
3520 LOS ANGELES v. SAN PEDRO BOAT WORKS
This interpretation of the term “owner” is particularly
appropriate in the context of imposing CERCLA liability.
After all, if Congress intended to impose no-fault, no-cause
liability on the holder of a mere possessory interest in real
property, the least it could do is speak clearly. In establishing
“owner” liability, Congress did not say “de facto owner,” or
“possessor,” or “person with some incidents or attributes of
ownership,” as it has in other legislation. See , e.g., 26 U.S.C.
§ 2042(2) (stating that a life insurance policy can be included
in the decedent’s gross estate for estate tax purposes as if
owned by the decedent, if the decedent possessed “incidents
of ownership” in the insurance policy). Instead it used the
unmodified term “owner” which, as the Supreme Court of
California noted in Abila, “when used alone, imports an abso-
lute owner.” 106 Cal. at 362 (internal quotations omitted).

[7] The logic of this well-recognized distinction between
holders of possessory interests, in this case a permittee, and
owners is made manifest by the narrow bundle of rights
Pacific American in fact enjoyed during its ten-month posses-
sion of the revocable permits to operate the Berth 44 boat-
works. For example, the two revocable permits possessed by
Pacific American in 1969 and 1970 could be terminated by
the City, at its pleasure, with thirty and ninety days notice
respectively. Pacific American could not convey the permit to
another entity without permission of the City, nor could it
change the use of the installations on the land from boatworks
to commercial development without the City’s prior written
approval. Nor could Pacific American pledge the land and
structures to a lender to secure a loan. Each of these core attri-
butes of ownership were absent in the bundle of rights which
Pacific American enjoyed as a holder of revocable permits. In
light of the common law distinction between ownership and
possessory interests, and the minimal rights Pacific American
possessed as the holder of revocable permits, it seems clear to
us that the term “owner”—as used in CERCLA—does not
encompass such a permittee.
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3521
Moreover, this construction of “owner” liability best serves
Congress’s intent in enacting CERCLA. Given the permissive
“authority to control” standard for operator liability adopted
by this circuit,9 “owner” liability need not be unduly expanded
to resolve situations the other liability hook was intended to
address. In conjunction with “operator” liability, the CER-
CLA framework holds liable both the passive title owner of
real property who acquiesces in another’s discharge of harm-
ful pollutants on his real property or pollutes the land himself
(“owner liability”), and the active (or negligent) operator of
the facility who holds only a possessory interest in the real
property but is in fact responsible for the discharge (“operator
liability”). Congress struck this balance between two comple-
mentary forms of liability, and this court should uphold that
legislative judgment. See Virginian Ry. Co. v. Sys. Fed’n No.
40, 300 U.S. 515, 551 (1937) (affirming that a court “cannot
ignore the judgment of Congress, deliberately expressed in
legislation.”).

[8] Thus, applying the methodology of Long Beach, we
hold that Pacific American, as a holder of the revocable per-
mits described, was not an “owner” of the boatworks at Berth
44 for the purposes of CERCLA liability. Accordingly, BCI
Coca-Cola, which purchased Pacific American’s assets and
liabilities, is not liable to the City of Los Angeles—the fee
title owner of Berth 44 at all relevant times—for the costs of
the environmental cleanup under CERCLA.10
9
Under Kaiser Aluminum & Chem. Corp. v. Catellus Dev. Corp., 976
F.2d 1338 (9th Cir. 1992), CERCLA “operator” liability has been expan-
sively interpreted by this court to extend to any party with the “authority
to control the cause of the contamination at the time the hazardous sub-
stances were released into the environment.” Id. at 1341. The Fourth Cir-
cuit adopted the same “authority to control” standard in Nurad, Inc. v.
William E. Hooper & Sons Co., 966 F.2d 837 (4th Cir. 1992).
10
We need not reach the broader question whether any other property
interest less than absolute title to real property—such as a lease—is suffi-
cient to expose the holder of that interest to “owner” liability under CER-
3522 LOS ANGELES v. SAN PEDRO BOAT WORKS
III. Nuisance

The City brought claims against BCI Coca-Cola for public
and private nuisance under California law. The district court
granted summary judge for BCI Coca-Cola because the City
failed to raise a triable issue regarding whether Pacific Ameri-
can knew or should have known of the pollution at Berth 44.

[9] California nuisance law follows the Restatement
approach to public and private nuisance. See People ex rel.
Gallo v. Acuna, 929 P.2d 596, 604 (Cal. 1997) (explaining
California follows the Restatement in defining a public nui-
sance as the substantial and unreasonable interference with a
public right); San Diego Gas & Elec. Co. v. Superior Court,
920 P.2d 669, 696-97 (Cal. 1996) (following the Restate-
ment’s definition of a private nuisance as requiring substantial
and unreasonable interference with plaintiff’s enjoyment of
his land).

CLA. We suggest, without deciding, that Congress intended to limit
“owner” liability to those individuals possessing all of the proverbial
“sticks in the bundle of rights,” including fee title to the real property. For
the reasons provided above, we believe Congress intended to apply this
historical meaning despite some efforts to expand the traditional interpre-
tation of ownership. See, e.g., Pacific Coast Joint Stock Land Bank of San
Francisco v. Roberts, 16 Cal. 2d 800, 805 (1940) (“The term ‘owner’ is
generic and being of general application is therefore frequently applied to
one having an interest in or claim upon property less than the absolute and
unqualified title.”); but see Auerbach, 137 P.3d at 956 (“Notwithstanding
the fact that a lease is a present possessory interest in land, there is no
question that as a nonfreehold estate it is a different species of interest
from a freehold estate in fee simple . . . .” )(quoting Pacific Southwest, 820
P.2d at 1051). However, we need not address the question of leases here
because the revocable permits at issue conferred far fewer rights to the
permittee than those granted to a typical lessee, such as those provided by
the proverbial “99-year lease” at issue in Commander Oil. 215 F.3d at
330. As discussed supra at 3520, Pacific American’s revocable permits
vested fewer rights in the real property than did the lease in Commander
Oil, and thus our result is not at odds with that of the Second Circuit.
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3523
[10] The Restatement sets forth two provisions detailing
the requirements for nuisance liability:

A possessor of land upon which a third person car-
ries on an activity that causes a nuisance is subject
to liability for the nuisance if it is otherwise action-
able, and

(a) the possessor knows or has reason to know that
the activity is being carried on and that it is causing
or will involve an unreasonable risk of causing the
nuisance, and

(b) he consents to the activity or fails to exercise
reasonable care to prevent the nuisance.

Restatement (Second) of Torts § 838 (1979).

A possessor of land is subject to liability for a nui-
sance caused while he is in possession by an abat-
able artificial condition on the land, if the nuisance
is otherwise actionable, and

(a) the possessor knows or should know of the con-
dition and the nuisance or unreasonable risk of nui-
sance involved, and

(b) he knows or should know that it exists without
the consent of those affected by it, and

(c) he has failed after a reasonable opportunity to
take reasonable steps to abate the condition or to
protect the affected persons against it.

Id. at § 839 (1979). The City contends Pacific American knew
or should have known of the pollution at Berth 44.

[11] The City contends Pacific American had actual
knowledge that San Pedro Boat Works was discharging pollu-
3524 LOS ANGELES v. SAN PEDRO BOAT WORKS
tants based on the testimony of a San Pedro Boat Works
employee named Klaus Korte, who testified San Pedro Boat
Works routinely scraped off toxic paint from the hulls of
boats during the period when Pacific American held the
Revocable Permits. Neither Korte nor anyone else has testi-
fied he told Pacific American of this practice, nor was there
any evidence presented that such hull scraping was observed
by any employees or agents of Pacific American. The City’s
contention that Korte’s knowledge should be imputed to
Pacific American fails because San Pedro Boat Works’s
employee’s knowledge can be imputed to San Pedro Boat
Works only, not to Pacific American. See W. R. Grace & Co.
v. W. U.S. Indus., Inc., 608 F.2d 1214, 1218-19 (9th Cir.
1979) (holding the knowledge of an agent ordinarily is
imputed to his principal); Laird v. Capital Cities/ABC, Inc.,
80 Cal. Rptr. 2d 454, 460 (Cal. App. 1998) (“[T]here is a
strong presumption that a parent company is not the employer
of its subsidiary’s employees.”). The City provides no expla-
nation why we should deviate from the ordinary rule that an
employee’s knowledge may be imputed only to his employer,
and not to the employer’s parent company. Nor does the City
address the district court’s holding on summary adjudication
that San Pedro Boat Works was not an alter-ego of Pacific
American, a ruling that the City has not appealed. Therefore,
we hold the district court did not err to the extent it held the
City proffered no evidence that Pacific American had actual
knowledge of the pollution caused by San Pedro Boat Works.

The City also contends Pacific American should have
known, had Pacific American fulfilled its duty to investigate,
that the boatworks was polluting or contaminating Berth 44
because the Revocable Permit obligated Pacific American to
“keep and maintain said premises in a safe, clean, wholesome,
sanitary and sightly condition.” The City contends Pacific
American’s obligation that it “keep and maintain” the prem-
ises in good condition and free of pollution shows that it had
a duty to investigate. See Restatement (Second) Torts § 839
cmt. I. Unfortunately for the City, § 839 applies only when
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3525
the defendant is “in possession” of the subject property.
Pacific American may have had the right to possess the boat-
works at Berth 44 for those ten months in 1969-70 under the
Revocable Permits, but it was not “in possession” of the boat-
works; San Pedro Boat Works was.11 Hence, § 838, which
refers to land which is leased to a third party, applies. Under
§ 838, Pacific American must have a “reason to know” of the
pollution, which implies Pacific American must have been
presented with some information that would make a reason-
able person further investigate the issue. The City has not
proffered evidence that Pacific American had a reason to
know of the contamination.

[12] As Pacific American did not know or have reason to
know of the pollution or contamination, it cannot be liable for
public or private nuisance.

IV. Amendment of the Complaint

The district court denied the City’s 2006 motion for leave
to file a Fourth Amended Complaint to the extent the City
sought to add another cause of action for breach of contract.
The district court also denied the City’s motion for reconsid-
eration and imposed sanctions against the City. The City
appeals the district court’s decision to deny the City’s motion
for leave to amend.

We review the district court’s denial of a motion for leave
to amend a complaint for abuse of discretion. DCD Programs,
833 F.2d at 186. When reviewing a district court’s decision
for abuse of discretion, “[w]e first look to whether the trial
11
It is unclear from the record whether San Pedro Boat Works’ opera-
tion of the Berth 44 boatworks during the ten months in 1969-70 that
Pacific American held the unassigned revocable permits in its own name
was the result of a formal sub-let of the permit by Pacific American to San
Pedro Boat Works, or instead was part of an informal agreement between
the parent and subsidiary corporations.
3526 LOS ANGELES v. SAN PEDRO BOAT WORKS
court identified and applied the correct legal rule to the relief
requested. Second, we look to whether the trial court’s resolu-
tion of the motion resulted from a factual finding that was
illogical, implausible, or without support in inferences that
may be drawn from the facts in the record.” United States v.
Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc).

Federal Rule of Civil Procedure 15(a)(2) states: “The court
should freely give leave [to amend a pleading] when justice
so requires.” But “the district court’s discretion to deny leave
to amend is particularly broad where plaintiff has previously
amended the complaint.” Ascon Props., Inc. v. Mobil Oil Co.,
866 F.2d 1149, 1160 (9th Cir. 1989).

The district court found that the City unduly delayed seek-
ing amendment. The claim arose in March 2003 when the
City was served with San Pedro Boat Works’s counterclaim.
At a minimum there was a three-year delay. The City explains
its delay as necessary in light of settlement negotiations in the
related litigation. Even if that were established, no reason
appears why the City could not have named BCI Coca-Cola
in its contract claim in its Third Amended Complaint.

[13] More importantly, the City does not sufficiently refute
the district court’s finding that the contract claim would
impose undue prejudice on BCI Coca-Cola by forcing BCI
Coca-Cola to revisit extensive discovery. BCI Coca-Cola had
already conducted five of six depositions of key witnesses
before the City sought leave to amend its complaint for the
fourth time. BCI Coca-Cola proffered evidence that it would
be necessary to re-depose each of those witnesses, and to
review thousands of pages of discovery, to investigate the
Revocable Permits’ intent, scope, and course of performance
with respect to claims the terms and conditions in question
had been breached by BCI Coca-Cola. BCI Coca-Cola has
also shown it would be necessary to revisit its discovery to
investigate affirmative defenses such as waiver, estoppel,
laches, or ratification.
 LOS ANGELES v. SAN PEDRO BOAT WORKS 3527
[14] Under these conditions, the district court did not
abuse its discretion in denying the City leave to amend its
complaint by adding a breach of contract action against BCI
Coca-Cola.

Conclusion

We affirm the district court’s decision granting summary
judgment to BCI Coca-Cola on the City’s CERCLA and nui-
sance claims. Pacific American, and thus BCI Coca-Cola,
lacked the necessary possessory interests in Berth 44 to estab-
lish liability under either theory. Further, the district court did
not abuse its discretion in denying the City’s motion to file its
Fourth Amended Complaint.

AFFIRMED.