ELR Citation: ELR 21398
No(s). 86-1936 (D.N.J. Apr 30, 1990)

The court holds that owners of a chemical company are liable for a $1.223 million civil penalty for violations of the Resource Conservation and Recovery Act (RCRA) because they operated two surface impoundments with neither interim status nor a final permit and failed to submit a closure plan. Since 1980, the company had interim status under RCRA to operate a lined lagoon and a concrete pit. In 1985, the Environmental Protection Agency (EPA) terminated the company's interim status for failure to comply with RCRA's financial assurance requirements. Having lost interim status and lacking a final permit to operate the two impoundments, the company had no legal alternative but to cease using them and to submit a closure plan within 15 days of the loss of interim status. The company continued to operate the impoundments and sought review of EPA's decision. In 1987, the Third Circuit upheld EPA's decision to terminate the company's interim status, and the district court granted summary judgment in 1988 for the United States. At trial to assess penalties, the court first finds that the company placed arsenic-contaminated groundwater in the lined lagoon and concrete pit for 708 days after loss of interim status and failed for 515 days to submit a closure plan. The company also failed to modify its management practices to prevent runoff of contaminated stormwater and used the impoundments to avoid the expense of preventing contamination of noncontact cooling water. The court next finds that compliance with state groundwater treatment regulations did not preclude compliance with concurrent federal regulations and the EPA order. Any confusion about compliance obligations was clarified in 1986 when the state notified the company that it was not authorized to operate the two impoundments in violation of the EPA order. Moreover, the company could have complied with the EPA order and federal regulations without using the impoundments.

The court holds that the company's past behavior was in bad faith and exacerbated the risk of arsenic leaching into groundwater. RCRA does not provide guidance for determining penalties in a judicial proceeding, but RCRA §3008(a)(3) provides factors to be considered in fixing a civil penalty in an administrative action, including seriousness of the violation and evidence of good-faith efforts to comply. The company's removal of the liner from the lagoon, designed to prevent liquids in the impoundment from entering the soil and groundwater, was improper without obtaining a closure plan or notifying state or federal authorities. The company's attorney was aware of the need for an approved closure plan at the time the decision was made to remove the liner, would have informed the company of the requirement, and knowingly failed to disclose the liner's removal to the state and to the court. The removal of the liner increased the likelihood that arsenic would leach out of the soil as a result of accumulated rainfall and parking lot runoff. The company had no intention of installing a cover once the liner had been removed, despite its knowledge that a pending state administrative order required immediate installation of a cover over the impoundment after the liner's removal. The court declines to rule on the merits of placing a cover over the impoundments, because the state and EPA are entrusted to determine how the impoundments should be closed. Additionally, delays in the submission and approval of a final closure order enabled the company to defer substantial cleanup costs, which will now be underwritten by the public as part of EPA's cleanup process. The company's efforts to avoid closure have prolonged the threatened release of hazardous waste into the environment.

The court holds that the company owners are jointly and severally liable for the $1.223 million penalty. Although the owners do not have the financial resources to pay the maximum penalty under RCRA §3008(g) of $30.575 million, or $ 25,000 per day for their 1,223 days of violation, they unquestionably have the capability to pay a significant penalty. The owners' financial information demonstrates that they have a net worth of $3.1 million, including unencumbered personal and corporate assets of $1.6 million. Evidence also indicates that the owners are attempting to shield some of their assets by creating foreign trusts. Thus, consistent with the goal of deterrence and case law precedent, the court imposes a civil penalty of $1,000 per day of violation. The court notes that it must exact a penalty that makes the cost of polluting as unacceptable a business cost as the arsenic contamination at the company's facility is an unacceptable social cost.

[The district court's previous decision is published at 19 ELR 20160.]

Counsel for Plaintiff
Carrick Brooke-Davidson
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendant
Antoinette R. Stone
Fox, Rothschild, O'Brien & Frankel
2000 Market St., 10th Fl., Philadelphia PA 19103
(215) 299-2000