Costner v. URS Consultants, Inc.

• Decision Date: 30 September 1998
• Docket Number: No. 97-4310,97-4310
• Parties: , 28 Envtl. L. Rep. 21,493 Pat COSTNER, United States ex rel.; Sharon Golgan; Carolyn Lance; Debra Litchfield; Becky Summers; Kenny Brown; Edward Campbell; Don Daniel; Jeffrey Foot; Clifton Garry; David Hermanson; Michael Shelton; Arkansas Peace Center; Vietnam Veterans of America, Arkansas State Council, Inc., Plaintiffs/Appellees, v. URS CONSULTANTS, INC.; Morrison Knudsen Corporation, Defendants/Appellants, MRK Inclineration, Inc.; Defendant, Vertac Site Contractors, Defendants/Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 667

153 F.3d 667

47 ERC 1129, 28 Envtl. L. Rep. 21,493

Pat COSTNER, United States ex rel.; Sharon Golgan; Carolyn Lance; Debra Litchfield; Becky Summers; Kenny Brown Edward Campbell; Don Daniel; Jeffrey Foot; Clifton Garry David Hermanson; Michael Shelton; Arkansas Peace Center Vietnam Veterans of America, Arkansas State Council, Inc. Plaintiffs/Appellees, v. URS CONSULTANTS, INC.; Morrison Knudsen Corporation, Defendants/Appellants, MRK Inclineration, Inc.; Defendant, Vertac Site Contractors, Defendants/Appellants.

No. 97-4310.

United States Court of Appeals, Eighth Circuit.

Submitted June 12, 1998.

Decided Aug. 17, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Sept.

30, 1998.

Mary E. Bosco, Washington, DC, argued (Charles R. Nestrud and Michael T. Jackson, Little Rock, AR, and John Martin, Washignton, DC, on the brief), for URS Consultants, Inc.

Charles Nestrud, Little Rock, AR, argued, for Vertac Site and Morrison Knudsen Corp.

Mick G. Harrison, Berea, KY, argued (Gregory Ferguson, Little Rock, AR, on the brief), for Pat Costner.

Before WOLLMAN and MURPHY, Circuit Judges, and DOTY, ¹ District Judge.

WOLLMAN, Circuit Judge.

This is a qui tam action brought on behalf of the United States by relators ² pursuant to the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733 (1983 & Supp.1998). The complaint alleges that URS Consultants, Inc., Morrison Knudsen Corporation, and Vertac Site Contractors engaged in a pattern of knowingly submitting false claims for payment of funds under their contracts to perform hazardous waste treatment and disposal services at the Vertac Chemical Plant site in Jacksonville, Arkansas. The United States has declined to intervene. Defendants appeal from an order by the district court denying their motions to dismiss. We affirm in part, reverse in part, and remand.

I.

From 1948 to 1987, the Vertac site was home to various chemical, herbicide, and pesticide production facilities. ³ Throughout the years, chemical waste from such activity was deposited in landfills and stored in drums or barrels above ground with little or no attention to human health or environmental consequences. As a result, the site became extremely contaminated with dioxin and other highly toxic chemicals. The United States Environmental Protection Agency (EPA) has placed the site on the Superfund National Priorities List.

A.

In 1979, after the Centers for Disease Control concluded that the Vertac site constituted a significant risk to public health, Vertac Chemical and its predecessor, Hercules, entered into a compact with the EPA and the Arkansas Department of Pollution Control and Ecology (the state) to take certain remedial and preventative measures. Although Vertac Chemical substantially complied with these measures, dioxin levels continued to rise in the environment surrounding the site, particularly in the Rocky Branch and Bayou Meto tributaries. In 1980, a federal district court issued a preliminary injunction ordering the company to undertake further remedial actions to arrest leakage of toxic chemicals from its disposal sites. See United States v. Vertac Chem. Corp., 489 F.Supp. 870, 888-89 (E.D.Ark.1980) (Vertac I ). In 1982, Vertac Chemical entered into a consent decree with the EPA and the state. A negotiated remedial plan was subsequently approved and enforced by the district court. See United States v. Vertac Chem. Corp., 588 F.Supp. 1294 (E.D.Ark.1984) (Vertac II ); United States v. Vertac Chem. Corp., 671 F.Supp. 595, 610-13 (E.D.Ark.1987) (Vertac III ), vacated, 855 F.2d 856 (8th Cir.1988) (table).

Substantial cleanup began in 1987, following Vertac Chemical's abandonment of the site. After learning that approximately 28,000 corroding and leaking drums of toxic waste had been left on the premises, the EPA initiated an emergency removal action pursuant to section 9604 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675 (1995 & Supp.1998). The state then negotiated a contract for on-site incineration of the waste with MRK Incineration, Inc., which subsequently assigned the contract to Vertac Site Contractors, a joint venture composed of MRK and MK Environmental Services, a division of Morrison Knudsen Corp. The state facilitated payment for the project from a trust fund that had been created as a result of negotiations involving the EPA, the state, and Vertac Chemical. See Arkansas Peace Ctr. v. Arkansas Dep't of Pollution Control & Ecology, 999 F.2d 1212, 1214 (8th Cir.1993) (Arkansas Peace III ). As detailed by the court in United States v. Vertac Chem. Corp.: "The United States, ADPC & E, and Vertac entered into a stipulation under which ... Vertac agreed to provide financial assurances that it would meet its environmental clean up responsibilities under the Consent Decree." 756 F.Supp. 1215, 1217 (E.D.Ark.1991) (Vertac IV ), aff'd, 961 F.2d 796, 797 (8th Cir.1992). Specifically, "Vertac agreed to put up a $6.7 million trust fund, a $4 million letter of credit for environmental cleanup of the Vertac site, and a $3.15 million disbursement from the shareholders. The money in the letter of credit was later placed in the trust fund." Vertac IV, 756 F.Supp. at 1217.

Pursuant to the agreement, the state imposed various conditions regarding the operation of the incinerator constructed by the contractors, but certified that the contractors had demonstrated the ability to satisfy state and federal regulations. In 1991, the district court approved and entered an additional consent decree. See id. at 1219. The EPA remained involved in the cleanup by monitoring air quality, handling and transporting the drums of waste to be incinerated by the contractors, and disposing of incinerator ash.

In 1992, after it became clear that the trust fund would not be sufficient to complete the cleanup, the EPA assumed primary responsibility for the site and approved a federal removal action using federal funds. ⁴ See Arkansas Peace III, 999 F.2d at 1214. When the trust fund was depleted, the state terminated its contract with Vertac Site Contractors. ⁵ Soon after, the EPA assigned general oversight authority of the site to URS Consultants, Inc. URS then entered into a contract with Vertac Site Contractors to continue incineration activities. In 1995, the EPA transported the remaining drums of toxic waste to a site in Kansas for incineration. Although incineration at the Vertac site has thus ended, cleanup activities are ongoing, including remediation of the groundwater and soil. Litigation over costs of the cleanup has continued as well. See United States v. Vertac Chem. Corp., 966 F.Supp. 1491, 1495-96 (E.D.Ark.1997) (Vertac VII ).

B.

Throughout the years, outside parties have attempted to intervene in the Vertac site cleanup. ⁶ In 1992, several environmental groups, including two of the current relators, filed suit in district court alleging violation of state and federal regulations and seeking to enjoin incineration at the site. Ultimately, the district court issued a preliminary injunction. See Arkansas Peace Ctr. v. Arkansas Dep't of Pollution Control & Ecology, 23 Envtl. L. Rep. 20807 (E.D.Ark. Mar.17, 1993) (Arkansas Peace I ). The court based its decision primarily on its finding that defendants had failed to establish that the incinerating process could achieve the required destruction and removal efficiency level on the dioxin contained in the chemical waste. See id.; 40 C.F.R. § 264.343(a)(2).

We stayed the preliminary injunction pending appeal. See Arkansas Peace Ctr. v. Arkansas Dep't of Pollution Control, 992 F.2d 145, 147 (8th Cir.1993) (Arkansas Peace II ). We later reversed the district court's grant of a preliminary injunction and ordered the case dismissed for lack of subject matter jurisdiction. See Arkansas Peace III, 999 F.2d at 1218-19. We did so because of our conclusion that the claim was barred by section 113(h) of CERCLA, which, subject to certain exceptions, generally denies jurisdiction to federal courts over challenges to removal or remedial action under section 9604 of CERCLA. See id. at 1216-18; 42 U.S.C. § 9613(h). Specifically, we held that CERCLA permitted private citizens to challenge removal or remedial actions under section 9604 only after the cleanup has been completed. See Arkansas Peace III, 999 F.2d at 1216-17. This is so even when the claim has been couched in terms of a violation of the Resource Conservation and Recovery Act (RCRA). See id. at 1217.

In 1994, a similar action, this time framed as a state nuisance suit, was filed in Arkansas state court. Defendants removed the case to federal court. The district court concluded that CERCLA conferred exclusive jurisdiction over plaintiffs' claims. It then dismissed the claims with prejudice for lack of subject matter jurisdiction under section 113(h) of CERCLA, concluding that under our holding in Arkansas Peace III, the Act barred such claims until the remedial action had been completed. In the alternative, the court dismissed the claims on grounds of res judicata. See Arkansas Peace Ctr. v. Environmental Protection Agency, No. LR-C-94-265, Amended Order at 5-6 (E.D.Ark. August 4, 1994) (Arkansas Peace IV ). Plaintiffs' appeal from that decision was voluntarily dismissed. Their motion to vacate the decision was subsequently denied. See Order at 6 (E.D. Ark. April 24, 1996) (Arkansas Peace V ). The incineration activity at the Vertac site has also been the subject of several other state court actions and administrative proceedings.

Relators filed the current action under the FCA, alleging eight counts of knowing submission of false claims for payment. The district court denied defendants' motions to dismiss on various grounds. On appeal, defendants contend that: (1) the claims are barred under principles of res judicata; (2) the claims are barred by section 113(h) of CERCLA; (3) the claims are barred by section 3730(e)(3) of the FCA; a...