Supporters to Oppose Pollution, Inc. v. Heritage Group, s. 91-1247

• Decision Date: 05 October 1992
• Docket Number: 91-1728 and 91-2884,Nos. 91-1247,s. 91-1247
• Citation: 973 F.2d 1320
• Parties: , 23 Fed.R.Serv.3d 697, 23 Envtl. L. Rep. 20,005 SUPPORTERS TO OPPOSE POLLUTION, INC., Plaintiff-Appellant, v. The HERITAGE GROUP, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1320

973 F.2d 1320

35 ERC 1531, 23 Fed.R.Serv.3d 697, 23

Envtl. L. Rep. 20,005

SUPPORTERS TO OPPOSE POLLUTION, INC., Plaintiff-Appellant, v. The HERITAGE GROUP, et al., Defendants-Appellees.

Nos. 91-1247, 91-1728 and 91-2884.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 25, 1991.

Decided Aug. 28, 1992.

Rehearing and Rehearing En Banc Denied Oct. 5, 1992.

Andrew B. Baker, Jr., Asst. U.S. Atty., Dyer, Ind., Clifford D. Johnson, Asst. U.S. Atty., South Bend, Ind., Anna Thode, Maria Cintron Silva, Washington, D.C., Thomas C. Jacobs, E.P.A., Region 5, Office of the Regional Counsel, Chicago, Ill., Robert Oakley, F. Henry Habicht, Frank Bentkover, Dept. of Justice, Land & Natural Resources Div., Washington, D.C., for E.P.A.

John C. Hamilton (argued), Doran, Blackmond, Ready, Hamilton & Williams, South Bend, Ind., Charles M. Tebbutt, Syracuse, N.Y., for plaintiff-appellant.

James H. Pankow, Jones, Obenchain, Ford, Pankow & Lewis, South Bend, Ind., George W. Pendygraft, George Plews, Peter M. Racher, Plews & Shadley, James M. Matthews, Christopher G. Scanlon (argued), Kevin M. Toner, James W. Clark, Maureen F. Bernard, Baker & Daniels, Indianapolis Ind., Thomas J. Brunner, Jr., Baker & Daniels, South Bend, Ind., for defendants-appellees.

Before CUMMINGS, FLAUM, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

Environmental Waste Control, Inc., operated the Four County Landfill in Indiana--poorly. The Environmental Protection Agency sued EWC under the Resource Conservation and Recovery Act of 1976 (RCRA), 42 U.S.C. §§ 6901-87, and obtained an order requiring EWC to close the dump, take some corrective action, and pay a fine of $2.8 million. EPA v. Environmental Waste Control, Inc., 710 F.Supp. 1172 (N.D.Ind.1989), affirmed, 917 F.2d 327 (7th Cir.1990).

EWC has not paid the fine; it never could have paid such a sum. It is a thinly capitalized firm, almost a one-man band. (That man is Stephen W. Shambaugh, its CEO and half owner; James A. Wilkins owns the other half.) Even thinly capitalized firms have some working funds. Beginning in 1986 EWC borrowed money from firms affiliated with The Heritage Group, which to protect its investment did some supervision, but not enough to keep Shambaugh within the bounds of the law. Needless to say, Heritage has lost its investment. An entity calling itself Supporters to Oppose Pollution (StOP) believes that Heritage, having propped up EWC, should dig deeper into its pockets to pay for the cleanup. StOP apparently is willing to litigate perpetually in support of this position; the number of its lawsuits and the district judge's enthusiasm for them have been inversely related.

I

As a co-plaintiff in the EPA's action against EWC, StOP tried at the last minute to add Heritage as a defendant, contending that Heritage is EWC's alter ego under Indiana law. The EPA opposed the addition of Heritage, fearing that more parties would delay the suit. Heritage added that it is distinct from EWC, which ran the landfill without Heritage's aid between 1978 and 1986; neither Shambaugh nor Wilkins is employed by or an investor in Heritage. The district court rebuffed StOP's effort, in large measure because StOP, having neglected discovery, could not prove its claims of linkage. StOP did not appeal from the district court's order keeping Heritage out of the original suit. StOP has nonetheless tried four more times to involve Heritage, and we have appeals from three of these four additional efforts.

Congress authorized private citizens to enforce RCRA through litigation, 42 U.S.C. § 6972, and StOP filed such a suit, which we call SOP I. (StOP represents persons living close to the garbage, which has at least the potential to injure them, so the Constitution permits it to litigate. Compare Lujan v. Defenders of Wildlife, --- U.S. ----, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992), with Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978).) Section 6972 requires a would-be champion to try negotiation before litigation. To be precise, "[n]o action may be commenced under subsection (a)(1)(B) of this section prior to ninety days after the plaintiff has given notice of the endangerment to ... any person alleged to have contributed" to the handling or storage of the waste. 42 U.S.C. § 6972(b)(2)(A)(iii). StOP ignored this rule, mailing Heritage a notice on July 14, 1989, and filing the complaint on July 24. StOP dismissed SOP I under Fed.R.Civ.P. 41(a) on November 17, 1989, shortly after Hallstrom v. Tillamook County, 493 U.S. 20, 110 S.Ct. 304, 107 L.Ed.2d 237 (1989), reiterated that § 6972 requires pre-suit notice, and not just a stay of the litigation.

The same day it dismissed SOP I, StOP filed SOP II, asserting that 90 days had passed since the notice mailed on July 14. The district judge dismissed SOP II because Heritage still had not received the 90 days of non-adversarial time that the statute contemplates. 1990 WL 258383, 1990 U.S.Dist. LEXIS 18127. StOP argued that because it appended a claim that the landfill violates a permit or regulation under RCRA advance notice is not necessary. (StOP originally claimed that it was proceeding under § 6973, but only the EPA may enforce that statute. The district judge corrected the mis-citations when denying StOP's post-judgment motion. Although some confusion lingers in the parties' briefs, we treat SOP II as pursuing a claim under §§ 6924 and 6925.) The district judge replied that private parties are not authorized to invoke this branch of RCRA if the EPA has commenced and is diligently pursuing an action. 42 U.S.C. § 6972(b)(1)(B). Judge Miller held that the EPA had prosecuted the original action against EWC diligently and obtained substantial relief. If as StOP contends Heritage really is the alter ego of EWC, then relief already runs against Heritage and the EPA may claim the fruits of victory; if Heritage is not EWC's alter ego, then StOP has no claim on the merits. So it loses either way. StOP's appeal of this order is No. 91-1247.

The judgment dismissing SOP II was entered on August 1, 1990. On August 10 StOP served another notice on Heritage, and it filed suit (SOP III ) on November 20. This suit met the fate of SOP II, as the judge reiterated his holding that RCRA gives the adversary 90 non-adversarial days before suit on the claim StOP raised. Because StOP's motion to reconsider the dismissal of SOP II was pending, Heritage had yet to receive any non-litigious time. 760 F.Supp. 1338 (1991). Judge Miller gave an alternative ground: claim preclusion (res judicata), for StOP was presenting a new legal theory in support of the same relief sought or obtained in the original suit. The appeal from this judgment is No. 91-1728.

Meanwhile EWC filed for bankruptcy, having insufficient assets to clean up the waste. StOP is among its creditors, having been awarded attorneys' fees in EPA v. EWC, 737 F.Supp. 1485 (1990). In SOP IV the group asked the judge to remove the bankruptcy case to district court (he declined) and attempted to commence supplemental "enforcement" proceedings against Heritage. Judge Miller found these barred by 11 U.S.C. § 362, the automatic stay in bankruptcy, because StOP, as a creditor, was trying to reach assets of the estate. 131 B.R. 410 (1991). To the extent StOP was trying to enforce a claim by the EWC estate against Heritage for contribution or indemnity, it is the wrong party. The claim belongs to EWC's trustee, not to creditors. And to the extent StOP was trying to add Heritage as a party, it was renewing a request the district judge had rejected in the same case. Once again the district judge invoked res judicata to clean up any residue. StOP's appeal from the judgment in SOP IV is No. 91-2884.

II

On the appeal of SOP II, plaintiff contests only the district court's conclusion that the EPA's action against EWC blocks a private action, under §§ 6924, 6925, and 6972(a)(1)(A), to enforce permits and regulations issued under RCRA. This is a subject on which notice is necessary, see § 6972(b)(1)(A), but the suit may follow immediately on the giving of notice. Private litigation under these sections is forbidden, however, if the EPA "has commenced and is diligently prosecuting a civil or criminal action in a court of the United States ... to require compliance with such permit, standard, regulation, condition, requirement, prohibition, or order." 42 U.S.C. § 6972(b)(1)(B). Notice that this statute refers to an action to "require compliance with such permit [or] regulation"--not an action against the private party's chosen adversary, but an action to require compliance. Judge Miller concluded that the EPA had filed, diligently pursued, and won, an action to require compliance with EWC's permit and federal regulations.

StOP does not challenge this conclusion so much as it contends that even though the EPA prevailed, the risk continues. EWC closed the dump, so no new hazardous materials are being deposited. But because EWC ran out of money to clean up the wastes, the risk to groundwaters continues. It is to curtail this risk that it must be allowed to bring in new, deep-pocket defendants, StOP insists. This approach supposes, however, that § 6972(b)(1)(B) applies only when the EPA has succeeded by the private party's definition of success. The statute does not require that the EPA succeed; it requires only that the EPA try, diligently.

Section 6972(b)(1)(B) belongs to a genre common to environmental laws under which citizen suits serve as goads to both the EPA and polluters without displacing the federal agency as the principal enforcer. When describing a similar provision in the Clean Water Act, the Supreme Court observed that citizen suits may supplement but not supplant public litigation. Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Foundation, Inc., 484 U.S. 49, 60, 108 S.Ct. 376, 378, 98 L.Ed.2d 306 (1987). It gave a telling...