U.S. v. Marine Shale Processors

• Decision Date: 18 April 1996
• Docket Number: No. 94-30419,94-30419
• Citation: 81 F.3d 1361
• Parties: , 26 Envtl. L. Rep. 21,000, 44 Fed. R. Evid. Serv. 340 UNITED STATES of America, et al., Plaintiffs, United States of America, Plaintiff-Appellee, Cross-Appellant, v. MARINE SHALE PROCESSORS, Defendant-Appellee, Southern Wood Piedmont Company, Intervenor-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1361

81 F.3d 1361

42 ERC 1507, 26 Envtl. L. Rep. 21,000,

44 Fed. R. Evid. Serv. 340

UNITED STATES of America, et al., Plaintiffs, United States of America, Plaintiff-Appellee, Cross-Appellant, v. MARINE SHALE PROCESSORS, Defendant-Appellee, Southern Wood Piedmont Company, Intervenor-Appellant, Cross-Appellee.

No. 94-30419.

United States Court of Appeals, Fifth Circuit.

April 18, 1996.

Henry C. Perret, Jr., Boyd A. Bryan, Perret, Doise, Daigle, Longman, Russo & Zaunbrecher, Lafayette, LA, Jerrold J. Ganzfried, Howrey & Simon, Washington, D.C., for Appellant.

John Baird King, Chief Atty., Dept. of Env. Quality, Baton Rouge, LA, for Amicus-State of La. (in support of U.S.A.).

Peter Appel, David C. Shilton, Dept. of Justice, Steven C. Silverman, Environmental Enforcement Section, Washington, DC, for U.S.A.

Christopher H. Marraro, Thomas J. Horton, Washington, DC, K. Eric Gisleson, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, LA, for Marine Shale.

Appeals from the United States District Court for the Western District of Louisiana.

Before REYNALDO G. GARZA, KING and HIGGINBOTHAM, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

This is an appeal and cross-appeal from a Rule 54(b) judgment in favor of a company attempting to clean up its hazardous waste sites. It is one of the trio of cases described in United States v. Marine Shale Processors, Inc., No. 94-30664. We vacate the judgment and remand.

I

From 1923 to 1985, Southern Wood Piedmont Company operated several wood treatment facilities designed primarily to manufacture railroad ties and telephone poles. These facilities treated wood with preservatives such as creosote and pentachlorophenol, leaving behind acres of soil contaminated with toxic wastes. Facing slackening demand, SWP in 1985 decided to close its facilities and clean up its waste sites. It sought to avoid regulation under the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901-92k, and liability under The Comprehensive Environmental Response, Compensation & Liability Act, 42 U.S.C. §§ 9601-75, by recycling its contaminated soil into a product covered by an EPA regulation known as the Product Rule. See 40 C.F.R. § 266.20(b). If SWP were successful in recycling its hazardous waste into a product covered by the Product Rule, the resulting material could be placed on the ground without violating RCRA. Relying in part on its own investigation and in part on letters from the Louisiana Department of Environmental Quality stating that Marine Shale Processors, Inc. was a legitimate recycler of hazardous waste, SWP contracted with MSP to dispose of SWP's contaminated soil.

From 1986 to 1989, ninety-five percent of the material SWP sent to MSP arrived in shipments called "campaign runs." In a campaign run, MSP earmarked one to two weeks of kiln time to process SWP's soil exclusively. Until 1989, MSP processed the other five percent of SWP's material together with whatever other material happened to be available at the time. In 1989, SWP and MSP modified their contract so as to require MSP to process SWP's material separately from all other materials. Before beginning a campaign run pre-1989 or any SWP processing post-1989, MSP purged its kiln but not its baghouses or its oxidizers.

This appeal concerns SWP's intervention in the suit described in No. 94-30419. SWP's complaint in intervention alleged that "MSP has taken delivery of certain material from [SWP] ... and, using its thermal process, has made a product from that material." The complaint in intervention further alleged that SWP's soil "[was] and at all times has been processed by MSP separately from material from other sources." SWP sought a declaratory judgment that the Product Rule exempted the material produced from its contaminated soil from RCRA regulation.

The district court submitted interrogatories to the jury. The jury returned answers to some of these questions and found itself unable to agree on others. The interrogatories relevant to this appeal, together with the jury's answer if any, are set out below:

1. Was MSP entitled to a recycler exemption from the requirement of a permit as an operator of an incinerator of hazardous waste? (unable to answer)

2. Were all of the hazardous wastes accepted by MSP beneficially used or reused or legitimately recycled? (unable to answer)

2(a). Were all of the hazardous wastes accepted by MSP prior to August 21, 1991, beneficially used or reused or legitimately recycled? (unable to answer)

3. Was the material produced by MSP from Southern Wood Piedmont Company's waste a "product" produced for the general public's use? (yes)

4. Did the waste material received by MSP from Southern Wood Piedmont Company undergo a chemical reaction in the course of processing the material so as to become inseparable by physical means? (yes)

5. Was the material produced by MSP from waste other than Southern Wood Piedmont Company's waste a "product" produced for general public's use? (unable to answer)

6. Did the waste material produced by MSP from waste other than Southern Wood Piedmont Company's waste undergo a chemical reaction in the course of processing the material so as to become inseparable by physical means? (unable to answer)

Because the jury found itself unable to answer interrogatories 1, 2, 2(a), 5 and 6, among others, the district court declared a mistrial. Based on the jury's affirmative answers to interrogatories 3 and 4, SWP moved for the entry of judgment under Fed.R.Civ.P. 54(b). District court judge Duplantier obliged and entered an order stating in relevant part:

[A]ll material produced by Marine Shale Processors, Inc. from Southern Wood Piedmont Company materials processed separately from other materials satisfies all criteria of 40 C.F.R. § 266.20(b) and corresponding Louisiana regulations, and, as such, is not subject regulation as a hazardous waste.... (emphasis added)

SWP objects to the emphasized portion of the district court's judgment. On appeal, SWP asks this court to modify the judgment to read as follows:

[A]ll material produced by Marine Shale Processors, Inc. from Southern Wood Piedmont Company materials satisfies all criteria of 40 C.F.R. § 266.20(b) and corresponding Louisiana regulations, and, as such, is not subject to regulation as a hazardous waste....

The dispute on this issue focuses on the fact that MSP often mixed metal-bearing baghouse dust with material emerging from its kiln in a slagging process. Because MSP did not clean its baghouses before processing SWP waste, the material produced from the processing of SWP's contaminated soil was mixed with quantities of toxic metals from other sources.

On cross appeal, the United States contends that the district court erred in entering a Rule 54(b) judgment for several reasons. The United States first attacks the judgment in favor of SWP on the ground that the district court improperly entered judgment when the jury had been unable to answer the question of whether MSP was engaged in a process of legitimate recycling. Second, the United States contends that the district court erred in holding that MSP had obtained an express exemption from the Louisiana Department of Environmental Quality as required by Louisiana Regulations operating in lieu of the federal Product Rule. See 42 U.S.C. § 6926(b). Third, the United States argues that the court gave erroneous jury instructions addressed to interrogatory 3. Finally, the United States contends that the district court abused its discretion on certain evidentiary rulings.

We discuss the issues raised by the United States' cross appeal first. Because we agree with the United States on some of the contentions in its cross-appeal, we vacate and remand. Given our disposition of the United States' cross-appeal, we do not reach the questions posed by SWP's appeal. On remand, the district court may choose to structure additional or substitute interrogatories so as to eliminate any dispute springing from the ambiguity in the language of questions three and four.

II

The United States argues that the district court improperly entered a Rule 54(b) judgment in the absence of a jury resolution on the question of whether MSP was engaged in a process of legitimate recycling. According to the United States, the federal Product Rule ¹ exempts a product produced for the general public's use only if the product emerges from a process of legitimate, as opposed to sham, recycling. Because the jury failed to answer interrogatories 1, 2, and 2(a), the United States argues, it failed to determine the analytically prior issue of whether MSP was engaged in legitimate recycling. Thus, the district court abused its discretion by entering a Rule 54(b) judgment when the jury had not decided all issues relating to the SWP declaratory judgment.

40 C.F.R. § 261.6(a)(2) declares that "recyclable materials used in a manner constituting disposal" are "not subject to [regulation as listed or characteristic wastes] but are regulated under subpart[ ] C ... of part 266." The Product Rule appears in Subpart C of part 266; this regulation provides Products produced for the general public's use that are used in a manner that constitutes disposal and that contain recyclable materials are not presently subject to regulation if the recyclable materials have undergone a chemical reaction in the course of producing the products so as to become inseparable by physical means and if such products meet the [treatment standards for land disposal] for each recyclable material (i.e. hazardous waste) that they contain.

40 C.F.R. § 266.20 (alterations added). Accordingly, in order to be exempt from regulation under the Product Rule, a substance must (1) be produced for the general public's use, (2) used in a manner that constitutes disposal, (3) contain recyclable materials, (4) have undergone a chemical reaction during the production process so as to be inseparable by physical means, and (5) meet...