Harmon Industries, Inc. v. Browner, 97-0832-CV-W-3.

• Decision Date: 25 August 1998
• Docket Number: No. 97-0832-CV-W-3.,97-0832-CV-W-3.
• Citation: 19 F.Supp.2d 988
• Parties: HARMON INDUSTRIES, INC., Plaintiff, v. Carol M. BROWNER, et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

Page 988

19 F.Supp.2d 988

HARMON INDUSTRIES, INC., Plaintiff, v. Carol M. BROWNER, et al., Defendants.

No. 97-0832-CV-W-3.

United States District Court, W.D. Missouri, Western Division.

August 25, 1998.

Terry J. Satterlee, Susan M. Honegger, Alok Ahuja, Lathrop & Gage L.C., Kansas City, MO, for Plaintiff.

James C. Bohling, U.S. Attorney's Office, Kansas City, MO, Eric G. Hostetler, U.S. Dept. of Justice, Washington, DC, for Defendants.

ORDER REVERSING THE FINAL DECISION OF THE ENVIRONMENTAL APPEALS BOARD

SMITH, District Judge.

Pending are the parties' cross-motions for summary judgment (Doc. # 27 & 33). Oral argument on the parties' cross-motions for summary judgment was held on Wednesday, June 17, 1998. For the reasons set forth in this Order, after consideration of the arguments, the parties' briefs and the administrative record, Plaintiff's Motion is granted in part and denied in part and Defendants' Motion is granted in part and denied in part.¹

I. BACKGROUND

The Plaintiff, Harmon Industries, Inc. ("Harmon"), filed this action to obtain review of a final order of the Environmental Protection Agency ("EPA") assessing a civil penalty of $586,716 against Harmon under the Resource Conservation and Recovery Act ("RCRA"). The EPA contends that from 1973 to 1987, Harmon's employees disposed of thousands of gallons of hazardous solvents at its Grain Valley, Missouri manufacturing facility.² In approximately November of 1987, Harmon's management discovered the disposal practice, halted it and conducted a Phase I investigation. In June 1988, the discontinued disposal practice was reported to the Missouri Department of Natural Resources ("MDNR"). MDNR conducted its own investigation and clean up ensued. On September 30, 1991, EPA filed an administrative complaint, compliance order and notice of opportunity for hearing against Harmon Electronics, Inc. The First Amended Complaint filed on October 29, 1993, requested $2,343,706 in civil penalties.

On March 5, 1993, while the EPA Administrative Complaint was pending, Harmon and MDNR entered into a state-court consent decree in which MDNR acknowledged full satisfaction, released all RCRA claims and waived any claim for monetary penalties in recognition of Harmon's voluntary self-reporting and prompt action. The decree required Harmon to perform certain further acts but did not impose any civil penalty. On December 15, 1994, the Administrative Law Judge ("ALJ") issued an order in the EPA proceeding finding Harmon liable for a civil penalty to $586,716. Harmon appealed the ALJ's decision to EPA's three-judge Environmental Appeals Board ("EAB"). On March 24, 1997, the EAB affirmed the ALJ's initial decision and the $586,716 penalty. This action was filed on June 6, 1997, challenging the EPA's final order.

II. STATEMENT OF FACTS

The following relevant background facts are not in dispute unless otherwise noted. Harmon Industries, Inc. assembles and manufactures control and safety equipment for use in the railroad industry. Harmon is the successor by merger to Harmon Electronics, Inc., the respondent named in EPA's administrative complaint. Harmon operates an assembly facility in Grain Valley, Missouri, where it assembles circuit boards for railroad equipment. From 1973 until December of 1987, Harmon's employees used organic solvent, contained in small jars at their work stations, to clean soldering flux from the equipment being assembled at the Grain Valley facility. Use of the organic solvents for this purpose was a common practice in the industry at the time. Until November of 1987, Harmon's employees collected solvent residues remaining in the bottoms of the jars in 3 to 5 gallon pails. Every 1-3 weeks, one of Harmon's maintenance workers would dispose of the spent solvents by throwing them out the back door of Harmon's assembly plant onto the ground.³ Harmon contends the great majority of the solvents evaporated after they were thrown out the back door. Approximately 30 gallons of the solvent residues were dumped onto the ground at the facility per month from 1973 to 1987.

Prior to November of 1987, Harmon's management was unaware of this manner in which Harmon employees disposed of the residues of the solvents used in its assembly operations. Harmon's management assumed that employees used the solvents until depleted, and that, since the liquid was highly volatile and in such small quantities, any remainder simply evaporated. During a routine safety inspection in November of 1987, Harmon's personnel manager learned that maintenance employees had been emptying the contents of a small pail, kept at the end of an assembly bench, out the back door. Thereafter, Harmon's management ordered the maintenance employees to stop the method of disposal and ordered an investigation.

In December of 1987, Harmon changed its assembly process to a state of the art technology using a nonhazardous cleaning material to remove flux from equipment being assembled. As a result, Harmon ceased generating hazardous waste. Harmon contends that the change to its assembly process had an initial cost exceeding $800,000 and has ongoing annual costs of approximately $125,000. Harmon hired consultants to investigate the effects of the disposal practice on the soils and groundwater at the site. In May of 1988, one of Harmon's consultants, International Technology Corporation ("ITC"), analyzed the data previously collected, and issued its "Phase I Report." The report found that freon, TCA, toluene, methylene chloride and xylene were present in the soil but the contamination did not appear to present a danger to human health or the environment.

On June 27, 1988, Harmon met with MDNR, discussed the investigation and provided a copy of the Phase I Report to MDNR. MDNR is the state agency authorized by EPA to administer the RCRA hazardous waste program in Missouri. The State of Missouri was authorized to administer its own hazardous waste program on November 20, 1985. Since first authorizing the State of Missouri to implement RCRA's hazardous waste program, EPA has taken no action to withdraw the state's authorization pursuant to RCRA § 3006(e), 42 U.S.C. § 6926(e).

After the meeting with Harmon, MDNR oversaw the investigation and the cleanup of Harmon's facility. The EPA received copies from MDNR of some of Harmon's reports and plans to MDNR, but the EPA denies receiving all the reports. Prior to Harmon's voluntary notification to MDNR in June 1988, neither MDNR nor EPA were aware of the discontinued solvent disposal practice, or of the contamination of the soil at the immediate disposal area. Following further investigations approved by MDNR, Harmon's consultant, ITC, issued a "Phase II Report." The Phase II report concluded that, since the environmental risk presented by the discontinued disposal practice was low, a viable option would be to leave the organic compounds in the ground with a very small risk of future environmental problems. This conclusion was based upon the fact that (1) health concerns to either humans or aquatic life from chemical exposure were virtually nonexistent or within safe levels; and (2) neither the surface water nor the limited groundwater at the site exhibited any detrimental effects. In approximately July of 1992, Harmon submitted to MDNR its consultant's report summarizing the results of its even more extensive Phase III investigation. The Phase III report concluded that Harmon's discontinued solvent disposal practice "did not pose a threat to human health or the environment, based on: the low levels of contamination in the soil and groundwater; the absence of exposure pathways to reasonable groundwater receptor organisms; and the lack of both groundwater resources and water well users in the area." Initial Decision at 19.

Harmon submitted a closure report to MDNR on February 1, 1996. MDNR approved the report on June 10, 1996, and issued Harmon a post-closure permit on July 31, 1996. Harmon contends its investigation at the site cost over $1.4 million, excluding attorney's fees and other indirect costs as of the EPA administrative hearing in January of 1994. Harmon anticipated additional environmental costs of over $500,000 during the 30-year post-closure period. MDNR required Harmon to comply with RCRA's financial assurance and liability requirements. Financial assurance regulations are designed to insure that there will be sufficient funds to properly close a facility. Liability insurance regulations are designed to lessen the risk of uncompensated injuries from operation of hazardous waste disposal facility. Harmon's financial insurance instrument was executed on November 22, 1991. Harmon deposited approximately $190,000 into a trust account to secure the performance of closure and post-closure work at the site. The trust had a value of $310,000 at the time of the administrative hearing in January of 1994.

In the fall of 1991, Harmon's insurance agent inquired into obtaining sudden and non-sudden accidental insurance coverage for the facility. The agent found that there were only two "reasonably solvent and solid" insurance companies issuing environmental liability coverage; however, that coverage did not satisfy RCRA requirements. Accordingly, Harmon requested a variance from RCRA's liability insurance requirements from MDNR on November 25, 1991, and again on February 25, 1992. At the time of the execution of the state-court consent decree on March 5, 1993, Harmon had no insurance coverage for environmental liability. The consent decree states that "Harmon must provide MDNR documentation on a semi-annual basis that it is continuing to attempt to obtain liability insurance." The decree further provides that "MDNR, pursuant to its enforcement discretion, shall not bring an enforcement action against Harmon." As required by the state-court consent decree, Harmon's insurance agent made further efforts to obtain the required liability insurance coverage for...