Esso Standard Oil (Puerto Rico) v. Mujica Cotto

• Decision Date: 30 June 2004
• Docket Number: No. CIV.03-2319 CCC JA.,CIV.03-2319 CCC JA.
• Citation: 327 F.Supp.2d 110
• Parties: ESSO STANDARD OIL COMPANY (PUERTO RICO) Plaintiff v. Esteban MUJICA COTTO, et al., Defendants
• Court: U.S. District Court — District of Puerto Rico

327 F.Supp.2d 110

ESSO STANDARD OIL COMPANY (PUERTO RICO) Plaintiff v. Esteban MUJICA COTTO, et al., Defendants

No. CIV.03-2319 CCC JA.

United States District Court, D. Puerto Rico.

June 30, 2004.

COPYRIGHT MATERIAL OMITTED

Latham & Watkins LLP, Newark, NJ, John F. Nevares & Assoc. PSC, San Juan, PR, for Plaintiff.

Quinones & Sanchez, PSC, Hector R. Diaz-Gonzalez, Esq., Adm. Auxiliar Sevicios Legales, San Juan, PR, for Defendants.

OPINION AND ORDER

ARENAS, United States Magistrate Judge.

I. INTRODUCTION

Plaintiff Esso Standard Oil Company (Puerto Rico) (hereinafter "Esso") filed the present action against defendants: (1) Esteban Mujica Cotto (hereinafter "Mujica") in his official capacity as president of the Puerto Rico Environmental Quality Board (hereinafter "EQB") and in his personal capacity; (2) Flor Del Valle Lopez ("Del Valle") in her official capacity as current vice-president of the EQB and in her personal capacity; (3) Angel Berrios Silvestre ("Berrios") in his official capacity as Associate Member of the EQB and in his personal capacity; and (4) Norman Velazquez Torres (hereinafter "Velazquez") in his official capacity as a lawyer of the EQB and in his personal capacity. (Amended Complaint, Docket No. 10.) The present action is brought under the provisions of 42 U.S.C. § 1983 for violations of rights guaranteed to Esso by the Fourteenth Amendment of the United States Constitution. Supplemental jurisdiction is alleged for claims brought under Puerto Rico law. Esso seeks declaratory and injunctive relief.

The central allegation in Esso's amended complaint is that the EQB has issued an administrative order directing Esso to investigate and cleanup soil and ground water contamination at a gasoline station located in Barranquitas, Puerto Rico. The administrative order also directs Esso to show cause why it should not be fined $75,960,000. Esso maintains that it cannot obtain a fair hearing before the EQB on the proposed penalty since it has been subjected to greatly biased adjudicative proceedings that infringe its rights under the Due Process Clause of the United States Constitution.

This matter is before the court on motion for preliminary injunction filed by Esso on March 3, 2004. (Docket No. 13.) An "Opposition to Plaintiff's Petition for Preliminary Injunction" was filed by all defendants on April 19, 2004. (Docket No. 86.) A hearing was held before me on April 27, 2004. (Docket No. 98.) Esso filed its post-hearing brief on May 12, 2004. (Docket No. 103.) A response in opposition was filed by all defendants on June 10, 2004. (Docket No. 108.) After considering the arguments of the parties, the evidence presented at the hearing and for the reasons stated below, Esso's motion for preliminary injunction is DENIED.

II. BACKGROUND

This case concerns a gasoline station located on road 156, km. 4.7, at La Vega Ward in Barranquitas, Puerto Rico (hereinafter "the station"). Carlos Rodriguez Perez (hereinafter "Rodriguez") assumed control of the station in 1971. In May, 1979, Rodriguez entered into a contract with Esso for the lease of storage tanks and for the purchase of fuel supplies. He operated the station, including its tank system, until the Barranquitas Fire Department ordered the station closed in August, 1998.

Prior to 1991, the station's fuel was stored in an underground storage tank (hereinafter "UST") system consisting of two 4,000-gallon storage tanks for premium and regular gasoline and one 2,500-gallon above-ground storage tank for diesel. In 1991, Esso replaced the UST system with two 10,000-gallon storage tanks and one 4,000-gallon above-ground tank respectively. In 1992, Rodriguez filed suit against Esso in the Puerto Rico Court of First Instance, Bayamon Superior Part alleging the loss of approximately 65,000 gallons of gasoline from the old UST system. Over the years, the claimed loss has grown to 80,000 gallons (as reported to the National Response Center in 1997) and even 100,000 gallons (as reported by the EQB in 1998).

The EQB is an administrative agency created under the laws of the Commonwealth of Puerto Rico, specifically under the Environmental Public Policy Act, 12 P.R. Laws. Ann. § 1121 et seq, to promote conservation of the environment and the natural resources of Puerto Rico. In its enforcement capacity, the EQB has authority to issue "Orders to Do" to compel compliance with environmental statutes and regulations. Pursuant to this authority, in August, 1998, the EQB issued an order ("first order") directing Esso to empty and test the integrity of the station's UST system. Esso promptly complied, conducting a preliminary site assessment and submitting a report with its findings to the EQB. Esso reported, inter alia, (1) that a total of 1.74 gallons of fuel were found and recover from the 12 new monitoring wells that Esso had installed; (2) that the replacement UST system installed in 1991 was intact and had not leaked; and (3) that ambient and air testing revealed no adverse impact due to the alleged fuel release.

On September 8, 1998, the EQB issued another order ("second order") directing Rodriguez, Esso and the owners of the land to immediately undertake certain geophysical tests, perform a horizontal and vertical characterization of the area, place a product-gathering barrier along the banks of a river running behind the station (the Pinonas River), and prepare a soil remediation plan. Esso delivered the requested remediation plan within 48 hours and promptly submitted the work plan for the geophysical investigation.

During this time, the EQB transferred enforcement responsibilities and oversight of the station from the EQB's UST program to a special committee. The transfer was allegedly motivated by claims of corruption orchestrated by Carlos Belgodere Pamies (hereinafter "Belgodere") who worked as a consultant for Rodriguez. The committee apparently failed to give timely responses to Esso's work plan, thus delaying implementation of corrective measures. Esso's efforts to ascertain the presence of any environmental impact at the station premises and surrounding areas, were hindered by the EQB's alleged failure to approve the submitted plans despite the fact that Esso repeatedly indicated its availability and interest in resuming field investigation activities. It is also claimed that both Rodriguez and Belgodere denied or interfered with Esso's access to the station in order to resume some of the field work. Notwithstanding Esso's compliance with the first order and its demonstrated willingness to comply with the second one, a third order to do ("third order") was issued by the EQB on October 25, 1999. Said order superceded and expanded on some of the requirements of the second order.

Esso submits that it has substantially completed the site investigation and evaluation required by the third order,¹ despite the EQB's delay in approving the work plans and despite significant interference on the part of Rodriguez and Belgodere. Investigation and remediation efforts by Esso revealed and recovered about 550 spilled gallons of fuel which evidently is inconsistent with the claims made by Rodriguez and Belgodere of a spill of over 100,000 gallons.

On May 21, 2001, and despite Esso's efforts to reduce the environmental impact at the station premises, the EQB issued a show cause order in which a $75,960,000 fine was proposed against Esso.² The grounds for the show cause order are Esso's alleged failure to notify the EQB upon discovery of the product release and the failure to timely investigate, clean up and remedy the potential harm presented by said product release. The order also directed Esso to perform further remedial activities. However, it does not propose a sanction against Rodriguez even though he had complete control over the USTs and despite an EQB examiner's³ suggestion that Rodriguez should be deemed potentially responsible for the regulatory violations.

The unprecedented $76,000,000 fine proposed against Esso in this case is 500 times greater than the fines imposed nationwide for similar actions. The fine is also 5,000 times greater than the largest fine imposed by the EQB pursuant to its UST regulations. Esso moves the court to enjoin the administrative proceeding to enforce the proposed penalty, and to declare the same unconstitutional.

III. THE POSITIONS OF THE PARTIES

A. Plaintiff

Esso seeks to enjoin the administrative proceedings under which it could be the subject of an unprecedented $76,000,000 fine arguing that its right to due process of law is violated by said proceedings. The specific allegation is that the officials who decide whether this massive fine is assessed have severe and irremediable conflicts of interest. It is claimed that the co-defendants Mujica, Del Valle, and Berrios, all members of the EQB governing board, are substantially biased against Esso in different levels, which renders them incapable of providing a fair hearing in harmony with the Due Process Clause.

First, Esso contends that the EQB has a direct pecuniary interest in the outcome of the administrative proceeding creating an unconstitutionally fatal structural bias. Under the EQB's enabling act, the $76,000,000 fine would go directly into a special account administered by the EQB. 12 P.R. Laws Ann. § 1136(f), (k). Said special account is at the disposal of the board and the monies of the account may be disbursed through a payment order authorized or signed by the Chairman of the Board. 12 P.R. Laws Ann. § 1131(16)(A). According to Esso, the board members cannot fairly and constitutionally preside over an administrative proceeding to determine if Esso must pay a $76,000,000 fine which they get to spend afterwards. Esso notes that the $76,000,000 penalty is more than twice EQB's yearly budget.

Furthermore, Esso argues that the Puerto Rico Senate has exerted undue influence over the administrative proceedings rendering the process against Esso fatally...