O'NEIL v. QLCRI, INC., Civ. A. No. 88-0704

• Decision Date: 29 October 1990
• Docket Number: 88-0705 P.,Civ. A. No. 88-0704
• Citation: 750 F. Supp. 551
• Parties: James E. O'NEIL, Attorney General, R.I. as he functions under the Rhode Island Environmental Advocacy Statute, and Robert L. Bendick, Jr., in his capacity as Director of the Rhode Island Department of Environmental Management, Plaintiffs, v. Q.L.C.R.I., INC., Bernard R. Dutra, David F. LaRoche, The LaRoche Grantor Income Trust, David L. Brodsky, P. Alan Ryan, Carolyn Rose, a/k/a Carolyn McElroy, Paul Buff, Davisville Credit Union and Suffolk Bank, Defendants.
• Court: U.S. District Court — District of Rhode Island

750 F. Supp. 551

James E. O'NEIL, Attorney General, R.I. as he functions under the Rhode Island Environmental Advocacy Statute, and Robert L. Bendick, Jr., in his capacity as Director of the Rhode Island Department of Environmental Management, Plaintiffs, v. Q.L.C.R.I., INC., Bernard R. Dutra, David F. LaRoche, The LaRoche Grantor Income Trust, David L. Brodsky, P. Alan Ryan, Carolyn Rose, a/k/a Carolyn McElroy, Paul Buff, Davisville Credit Union and Suffolk Bank, Defendants.

Civ. A. Nos. 88-0704, 88-0705 P.

United States District Court, D. Rhode Island.

October 29, 1990.

Betsy Grossman de Leiris, Newport, R.I., Timothy M. Boudewyns, Portsmouth, R.I., for plaintiff.

S. Paul Ryan, East Providence, R.I., for Save the Bay, Inc.

Michael Rubin, Sr. Asst. Atty. Gen., Charles P. Messina, Kendra Beaver, Dept. of Env. Mngt., Providence, R.I., for Robert Bendick — plaintiff in 88-0705.

Barry Kusinitz, Martin Aisenberg, Temkin & Miller, Providence, R.I., for LaRoche & Q.L.C.R.I., and LaRoche Grantor Income Trust.

Thomas H. Quinn, Jr., Providence, R.I., for Dutra and Alofson.

Matthew F. Medeiros, Jeffrey C. Schreck, Flanders & Medeiros, Providence, R.I., for 3rd party defendants.

James L. Paradise, Middletown, R.I., pro se.

Kenneth R. Tremblay, Tremblay & Gorton, Portsmouth, R.I., for Edward and Norma DeArruda.

Matthew Medeiros, Flanders & Medeiros, Providence, R.I., for Suburban Land Co.

John Voorhees, Tillinghast, Collins & Graham, Providence, R.I., for Davisville Credit Union.

William Y. Chaika, Chaika & Chaika, Cranston, R.I., for Carolyn Rose and Paul Buff.

Stephen B. Lang, Providence, R.I., for P. Alan Ryan.

Gerald J. Petros, Hinckley, Allen Snyder & Comen, Providence, R.I., for Suffield Bank.

MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

The background of this case is set out in this Court's opinion and order of May 18, 1990, Friends of Sakonnet v. Dutra, 738 F.Supp. 623 (D.R.I.1990), and need not be repeated here. Currently before the Court are three motions involving defendant Davisville Credit Union (Davisville): 1) defendant's motion to dismiss; 2) plaintiff's motion to amend the complaint; and 3) plaintiff's motion to compel discovery.

I. Motions to Dismiss and Amend

Davisville is involved in this case because it granted two mortgages on the land that is the subject of this case and because it currently holds a mortgage on the land. Plaintiff, the Attorney General, alleges three types of claims against Davisville. In the original complaint, plaintiff alleges that "if the Davisville Credit Union forecloses upon the land under the Ryan mortgage and fails to halt the discharge, Davisville Credit Union, or its successors, will violate" federal and state statutory and common law and that Davisville's present mortgage interest is subject to a 1979 Department of Environmental (DEM) Management order. In its amended complaint, plaintiff alleges that Davisville aided and abetted violations of federal and state statutory and common law.

A complaint should not be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). The issue must be resolved in the light most favorable to the plaintiff with any doubt resolved in his behalf. Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). Therefore, the Court must deny a motion to dismiss if the allegations of the complaint permit relief to be granted on any theory, even one not expressly stated therein. Adams v. Bell, 711 F.2d 161, 187 (D.C.Cir.1983), cert. denied, 465 U.S. 1021, 104 S.Ct. 1272, 79 L.Ed.2d 678 (1984).

Fed.R.Civ.P. 15(a) encourages a lenient approach to motions to amend: "leave shall be freely given when justice requires." It is within a court's discretion to grant or deny a motion to amend, Johnston v. Holiday Inns, Inc., 595 F.2d 890, 896 (1st Cir.1979), based on the balancing of several factors, including futility, delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previously allowed amendments, and most importantly, prejudice to the opposing party. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). If there is no prejudice, leave to amend in most cases should be granted. See e.g., Corey v. Look, 641 F.2d 32, 38 (1st Cir.1981).

A. Claims relating to Davisville's possible foreclosure

Davisville argues that the claims relating to actions Davisville might take in the future to foreclose on the mortgage do not present a case or controversy. For a federal court to assume jurisdiction of a case, Article III of the Constitution requires an actual case or controversy. See United States Parole Comm'n v. Geraghty, 445 U.S. 388, 395-96, 100 S.Ct. 1202, 1208-09, 63 L.Ed.2d 479 (1980); Flast v. Cohen, 392 U.S. 83, 94-95, 88 S.Ct. 1942, 1949-50, 20 L.Ed.2d 947 (1968). In addition, a federal court cannot grant relief under the Declaratory Judgment Act without an "actual controversy." 28 U.S.C. § 2201; Steffel v. Thompson, 415 U.S. 452, 458-59, 94 S.Ct. 1209, 1215-16, 39 L.Ed.2d 505 (1974). "The difference between an abstract question and a `controversy' ... is one of degree" and the issue is whether the controversy is "of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941).

Plaintiff's claims are based upon Davisville foreclosing on the mortgage in the future. Because the mortgage is in arrears, this is a distinct possibility. However, under Rhode Island law, a mortgagee who forecloses is only authorized to sell the land at public auction, R.I.G.L. § 34-11-22, although the mortgagee is permitted to then buy the land at the public auction. R.I.G.L. § 34-27-2. Therefore, plaintiffs claims are that if Davisville forecloses and if Davisville buys the property at public auction and if Davisville then does nothing to remedy the sewage problem, then Davisville will be in violation of federal and state statutory and common law. Because these claims depend on a series of contingencies, they lack the necessary "immediacy and reality" for this Court to assume jurisdiction.

These claims do not present a justiciable case or controversy; therefore, Count I, ¶ 106; Count II, ¶ 110; Count III, ¶ 114; and Count IV, ¶ 119 are dismissed.

B. Aiding and Abetting Claims

The futility of an amended claim is a proper basis for its denial. Foman v. Davis, 371 U.S. at 182, 83 S.Ct. at 230; Vargas v. McNamara, 608 F.2d 15, 18 (1st Cir.1979). This Court will begin, therefore, by analyzing the aiding and abetting claims under the same standards used in a motion to dismiss.

Plaintiff seeks to use the common law concept of aiding and abetting to find Davisville in violation of federal and state statutory and common law. The Restatement (Second) of Torts § 876 sets out the standard for aiding and abetting liability: "For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he ... (b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself...." Plaintiff alleges that Davisville's close relationship with the principals is shown by the two "straw conveyances," namely the Davisville mortgages. They allege that Davisville "collaborated in a scheme to lend money to a borrower in the name of another." Most importantly, plaintiff alleges that Davisville had "influence and control" over the principal polluters because Davisville knew of the sewage problem and could have conditioned the loans on the fixing of the sewage problem.

Davisville argues that there is no aiding and abetting liability under the "citizen suit" provision of the Federal Water Pollution Control Act (FWPCA), 33 U.S.C. § 1365. Section 1365(a) allows for suit:

(1) against any person ... who is alleged to be in violation of (A) an effluent standard or limitation under this chapter or (B) an order issued by the Administrator or a State with respect to such a standard or limitation, or

(2) against the Administrator where there is alleged a failure of the Administrator to perform any act or duty under this chapter which is not discretionary with the Administrator.

Davisville relies on a series of cases, primarily Ringbolt Farms Homeowners Ass'n v. Town of Hull, 714 F.Supp. 1246 (D.Mass.1989) and Love v. New York State Dep't of Environmental Conservation, 529 F.Supp. 832 (S.D.N.Y.1981), in support of its argument that § 1365 allows suit against only the principal polluter.

Plaintiff, in his reply brief, persuasively argues that Davisville's cases are not controlling. The cases cited by Davisville are suits against state regulators. The states have a special role under the FWPCA through the National Pollutant Discharge Elimination System (NPDES) program, see 33 U.S.C. § 1342(b). A number of cases have held that states' decisions regarding permits under NPDES are not reviewable in federal court. See American Paper Institute, Inc. v. EPA, 890 F.2d 869 (7th Cir.1989); District of Columbia v. Schramm, 631 F.2d 854 (D.C.Cir.1980); Mianus River Preservation Comm. v. Administrator, EPA, 541 F.2d 899 (2d Cir. 1976). Love and Ringbolt Farms were attempts to circumvent this series of cases and to find state agencies indirectly liable for being "in violation" under § 1365. As plaintiff's reply brief explains in great detail, the courts distinguished state agencies from direct polluters and held that plaintiffs could not reach state regulators in this fashion. See Ringbolt Farms, 714 F.Supp. at 1253; Love, 529 F.Supp. at 839. Because so much of the reasoning involved in these cases deals with the special role of the...