U.S. v. County of Muskegon

• Decision Date: 16 December 1998
• Docket Number: No. 1:97-CV-486.,1:97-CV-486.
• Citation: 33 F.Supp.2d 614
• Parties: UNITED STATES of America, et al., Plaintiffs, and City of Whitehall, et al., Intervenor Plaintiffs, and City of Roosevelt Park, et al., Added Plaintiffs, v. The COUNTY OF MUSKEGON, Defendant, and S.D. Warren Company, et al., Intervenor Defendants.
• Court: U.S. District Court — Western District of Michigan

33 F.Supp.2d 614

UNITED STATES of America, et al., Plaintiffs and City of Whitehall, et al., Intervenor Plaintiffs and City of Roosevelt Park, et al., Added Plaintiffs, v. The COUNTY OF MUSKEGON, Defendant and S.D. Warren Company, et al., Intervenor Defendants.

No. 1:97-CV-486.

United States District Court, W.D. Michigan, Southern Division.

December 16, 1998.

W. Francesca Ferguson, Asst. U.S. Attorney, Michael H. Dettmer, U.S. Attorney, Grand Rapids, MI, Francis J. Biros, U.S. Dept. of Justice, Environment & Natural Resources Div., Environmental Enforcement Section, Washington DC, Lois J. Schiffer, Environmental & Natural Resources Div., U.S. Dept. of Justice, Washington, DC, for U.S., plaintiff.

John C. Scherbarth, Asst. Atty. General, Jennifer M. Granholm, Atty. General, Natural Resources Div., Lansing, MI, for State of Michigan, plaintiff.

Robert S. Engel, Robert S. Engel Law Offices, Muskegon, MI, for City of Roosevelt Park, plaintiff.

James M. Rose, Rose & Rose, Montague, MI, for Whitehall Tp. and Montague Tp., plaintiffs.

Stephen C. Corwin, Williams, Hughes, Corwin & Sininger, LLP, Muskegon, MI, for County of Muskegon, defendant.

Michael B. Ortega, Reed, Stover & O'Connor, PC, Kalamazoo, MI, for City of Whitehall, City of North Muskegon, City of Montague, Muskegon Chartered Tp., Dalton Tp City of Muskegon, Laketon Tp. and City of Norton Shores, intervenor-plaintiffs.

G. Thomas Johnson, Parmenter & O'Toole, Muskegon, MI, for Egelston Tp, intervenor-plaintiff.

Dennis J. Donohue, Warner, Norcross & Judd, LLP, Grand Rapids, MI, for S.D. Warren Co., Burdick & Jackson Laboratories, ESCO, Howmet Corp., Lomas, Inc., Agrevo U.S.A. Co., Sun Chemical Corp., CWC Textron, Genesco, Inc., Dana Corp., Kaydon Cistom Bearings and Lorin Industries, Inc., intervenor-defendants.

OPINION RE MOTION FOR ENTRY OF CONSENT JUDGMENT AND MOTION TO LIMIT DISCOVERY

HILLMAN, Senior District Judge.

This case originally was brought by the United States against the County of Muskegon. The government's complaint alleges unlawful exceedances of the effluent limits of the county's permit issued by the Environmental Protection Agency ("EPA") under the Clean Water Act (the "NPDES permit"), as well as for failures to comply with EPA administrative orders. The county denied liability on the basis of its inability to comply both with the federal requirements of its permits and its contracts with various local governmental units and industrial users of the system.

Shortly after the action was filed, certain of the local governmental units with contracts with the county sought leave to intervene in the action and to file a three-count complaint against the county. Count I of the intervenor plaintiffs' complaint alleges violations of the county's NPDES permit for failure to enforce the Industrial Pretreatment Program, and violation of 40 C.F.R. § 401 et seq. for failure to operate the system in compliance with the Federal Water Pollution Control Act (the "Clean Water Act" or "CWA"). Count II alleges a number of violations of the grant provisions of the Clean Water Act, 33 U.S.C. § 1284(b) and the implementing regulations, 40 C.F.R. §§ 35.2100-2350. Count III alleges contract and common law rights of access to the waste water treatment system on the part of the local units.

Thereafter, certain industrial users of the system filed a motion to intervene as party defendants. The court allowed intervention by both intervening plaintiff local units and intervening defendant companies. Intervening plaintiffs also moved to add the remaining local units who have contract rights under the system. That motion also was allowed.

This matter is now before the court on the joint motion of defendant County of Muskegon and the intervening and added plaintiffs (collectively, the "local units" or "intervening plaintiffs") for entry of a consent decree to resolve the complaint of the intervening plaintiff local units. The motion is strenuously opposed by intervening defendant industrial users.

Having reviewed the proposed consent judgment, motions and attachments filed by the parties, and having heard oral argument, I conclude that the joint motion of the county and local units should be granted and that the consent judgment should be entered.

I. BACKGROUND

In 1970, defendant county and various local units entered into an intergovernmental "Access Rights Agreement" through which the parties established the Muskegon County Wastewater Management System ("MCWMS" or "the system"). (Movants' Ex. C.) In their agreement, the parties sought to construct a county-wide wastewater management system that would treat the sewerage of all of the local units. In exchange, the local units pledged their full faith and credit to repay certain bonds that would be issued for construction and operation of the system. Shortly thereafter, in 1973, service agreements were executed between the county and the various local units, as well as between the county and certain large corporate users, in order to repay the operational costs of the system.¹

The governmental bonds contemplated in the Access Rights Agreement and service agreements were issued in the amount of $16 million. In addition to this bond funding, the original construction of the system was financed by certain Clean Water Act grants, in the amount of approximately $24 million. The system was constructed and began operations in approximately 1975. An improvement to increase the capacity of the system was begun in 1989 and substantially completed in 1992. That improvement was financed by an additional $23 million in bonds payable by the local units and an additional $23 million in Clean Water Act grant monies.

Intervening plaintiff local units allege that by accepting federal and state grant monies under the Clean Water Act, the system became obligated to operate in compliance with its permit issued under the National Pollution Discharge Emissions Permit System ("NPDES permit"). Under federal rules, the county is obligated to have in place certain Industrial Pretreatment Programs ("IPP"). These IPP requirements are found in the Code of Federal Regulations and State Administrative Code, 40 C.F.R. 401 et seq. The intervening plaintiffs contend that the county has failed to comply with the IPP regulations. In addition, intervenors contend that the CWA grant regulations limit how grant assistance may be used for reserve capacity and require that the principal purpose of the project be treatment of domestic waste water. See 40 C.F.R. 35.2125. Intervening plaintiffs contend that, in light of state court interpretations of the agreement, the principal purpose of the system has been wrongfully converted to the treatment of industrial waste.

Each of the various service agreements, samples of which are included as exhibits by the parties, incorporated Exhibit D to the intergovernmental Access Rights Agreement between the county and the local units. Each service agreement contains the following language:

Attached hereto as Exhibit D and by this reference made a part hereof are regulations which govern discharges to the System. In accordance with the procedures set forth therein, the County may amend or repeal any such regulations, or promulgate new regulations if reasonably required for the proper functioning of the System and/or to achieve equity among users thereof; and, provided, however, that any such regulations or amendments thereto shall not be more stringent than those required by state and federal agencies; and provided further, that if any such amendment, repeal or promulgation shall have the effect of barring from the System any portion of the Waste Materials of any contractee or party served by a Contractee, any guarantee of such Contractee or party shall be proportionately reduced.

Intervenor Defendants' Ex. D, ¶ 8.

Exhibit D to the Access Rights Agreement contained Uniform Concentration Limits ("UCLs") on the levels of all discharges from all users, but allowed the county director to exercise discretion to accept variations. See Movants' Ex. E. In addition, Section III-B to Exhibit D provides:

It is the intent and purpose of the System to provide the maximum possible service to each Contractee and person served by the System, consistent with the preservation of public health and safety, the fulfillment of obligations under state and federal law, the successful functioning of the System and fairness to all parties.

As noted, paragraph 8 of the service agreements and section X of Exhibit D authorized the county to develop new regulations. Exercising those provisions, in 1980, the county unilaterally amended the regulations in Exhibit D to replace the UCL limitations and discretionary variations with a limitation based on an amount which "may cause or does cause interference" with the system.² See Movants' Ex. F: Amendments to Exhibit D (incorporating amendments of 1980, 1985, and 1992). The 1980 Amendments to Exhibit D continued the right in paragraph 8 of the service agreements for the county to further amend the Exhibit D regulations, consistent with the overall functioning of the system in conjunction with federal and state requirements. See Exhibit D to Service Agreements, and Amendments to Exhibit D.

In 1994, the county adopted an ordinance purporting to replace Exhibit D and the 1980 Amendments to Exhibit D in order to implement future restrictions upon discharges into the system. That ordinance placed discretion in the county, as operator of the system, to limit discharges. A group of industrial users filed suit against the county in Muskegon County Circuit Court, seeking to enjoin the county from implementing the ordinance, and contending that the companies had contract rights under the service agreements that were violated by the 1994 regulations. The Muskegon County Circuit Court held that the service agreements, including Exhibit D and Amendments to Exhibit D, constituted contracts,...