U.S. v. Power Engineering Co.

Decision Date24 November 2000
Docket NumberNo. CIV.A. 97-B-1654.,CIV.A. 97-B-1654.
Citation125 F.Supp.2d 1050
PartiesUNITED STATES of America, Plaintiff, v. POWER ENGINEERING COMPANY, Redoubt, Ltd. and Richard J. Lilienthal, Defendants.
CourtU.S. District Court — District of Colorado

John F.X. McBride, John Joseph Zodrow, Zodrow, et al., P.C., Denver, CO, for Power Engineering Co., Redoubt, Ltd.

Robert T. McAllister, McAllister & Murphy, P.C., Denver, CO, for Richard J. Lilienthal.


BABCOCK, Chief Judge.

Plaintiff moves for partial summary judgment on the question whether Defendants must post financial assurances under Colorado regulations. Plaintiff concedes that there are genuine issues of material fact regarding the proper amount of those financial assurances and, accordingly, summary judgment is inappropriate on that question. Defendants cross-move for summary judgment. The motions are adequately briefed, and argued. For the reasons set forth below, I grant Plaintiff's motion, and deny Defendants' motion. Jurisdiction exists under 28 U.S.C. § 1331.


The following facts are undisputed unless otherwise noted. From approximately 1968 to the present, Defendants have operated a metal refinishing/chrome electroplating business at 2525 South Delaware Street in Denver, Colorado (Facility). The business specializes in stripping and refinishing crankshafts, connecting rods, and rod journals for large diesel engines used in heavy equipment. The process of stripping produces thirteen different waste streams and more than 1000 kilograms of hazardous waste per month as defined under the Resource Conservation and Recovery Act (RCRA). See 42 U.S.C. § 6901 et seq. The wastes in these streams that exceed the regulatory toxicity standards include arsenic, lead, mercury, and hexavalent chromium contaminated material.

In 1986, Defendant Power Engineering Company (PEC) notified the Colorado Department of Public Health and the Environment (CDPHE) that it was a generator of four different types of hazardous waste, but neither listed chromium as a constituent part of the waste generated, nor indicated that Defendant PEC treated, stored, or disposed of the wastes at its South Delaware Street facility. In 1992, the CDPHE learned of a discharge into the Platte River of high levels of hexavalent chromium. Soon thereafter, the CDPHE began a series of compliance evaluation inspections that continued through 1994. As a result of these inspections, the CDPHE discovered that Defendant PEC had been treating, storing, and disposing of hazardous wastes without either the proper state or federal permits, or attaining "interim status" under 42 U.S.C. § 6925(e)(1) which allows continued operations during the pendency of an application for a federal permit. In addition, the CDPHE learned that chromium emanating from Defendant PEC's place of business had contaminated groundwater both under, and under areas outside of, its place of business. On March 10, 1993, Defendant PEC notified the CDPHE that in addition to one of the wastes identified in its 1986 notification, it also generated five other hazardous wastes. On June 11, 1993, the CDPHE issued a notice of violation to Defendant PEC indicating that it had been improperly treating storing, and disposing of hazardous wastes.

In July 1994, the CDPHE issued an Initial Compliance Order, but stayed its execution so as to discuss the order with Defendants. These discussions took place from September 1994 to June 1996. In June 1996, the CDPHE issued a Final Administrative Compliance Order which requires Defendant PEC to: (1) immediately comply with applicable hazardous waste laws; (2) refrain from the treatment, storage, and disposal of hazardous wastes without obtaining Interim Status or the proper permit(s); (3) properly manage wastes; (4) submit for review and approval plans for weekly inspections of hazardous waste containers; (5) submit a complete 1990/1991 Biennial Report reflecting all hazardous wastes generated, treated, stored, and disposed of during those years; (6) submit an updated 1992/1993 Biennial Report including waste codes applicable to off-site disposal; (7) implement the "Removal Plan for Chrome Contaminated Stockpiled Soils"; (8) submit for review and approval a soil characterization and groundwater sampling work plan; (9) submit for review and approval a corrective measure study plan evaluating remedial alternatives to prevent, mitigate, and remediate the releases from the Facility; and (10) within thirty days of CDHPE approval of the corrective measure study, implement the remedial alternative.

Defendant PEC did not appeal this order, but also failed to implement its requirements. Consequently, the CDPHE issued an Administrative Penalty Order assessing civil penalties of $1.13 million. When Defendant PEC also failed to comply with the Administrative Penalty Order, the CDPHE brought suit in state court on August 1, 1997 seeking to force Defendant PEC to comply with both the Final Administrative Compliance Order, and the Administrative Penalty Order. See Plaintiff's Cross-Motion for Summary Judgment, Ex. A. On March 22, 1999, a Colorado state court held that the Final Administrative Compliance Order, and the Administrative Penalty Order are enforceable as a matter of law. See id., Ex. D.

Although the CDPHE had the authority to demand financial assurances, the Final Administrative Compliance Order did not require them. Plaintiff asked the CDPHE to enforce the financial assurance requirements of the RCRA and corresponding Colorado regulations with respect to Defendants. Plaintiff also informed the CDPHE that if it did not, Plaintiff would seek its own enforcement action. See Plaintiff's Response, Ex. 8 (letter dated August 26, 1996 informing the CDPHE that its actions with respect to Defendant PEC had not been "timely and/or appropriate," and that unless the CDPHE so acted, Plaintiff would seek to enforce the RCRA itself); Plaintiffs Motion for Summary Judgment, Ex. 25 (affidavit of Carol Rushin, Assistant Regional Administrator, Office of Enforcement, Compliance and Environmental Justice, EPA, that subsequent to the August 26, 1996 letter Plaintiff informed the CDPHE that its failure to seek financial assurances was inappropriate). Because the CDPHE failed to so act, and because Plaintiff believed Defendant Lilienthal was seeking to divest himself of, or otherwise insulate, his assets and might "leave the country, declare bankruptcy, or liquidate Defendant PEC," Plaintiff filed this action on August 1, 1997. Plaintiff alleged eight claims: (1) treatment of hazardous waste without a permit or interim status; (2) disposal of hazardous waste without a permit or interim status; (3) shipment of hazardous waste to an unpermitted facility; (4) improper container management; (5) storage of hazardous waste without a permit or interim status; (6) failure to provide employee training; (7) failure to have a hazardous waste contingency plan; and (8) illegal operations (failure to have a groundwater monitoring program, failure to have a closure plan, failure to minimize releases of hazardous waste, and failure to obtain and provide financial assurances for closure and postclosure). Plaintiff also alleged that Power Engineering has failed to comply with CDPHE's Administrative Compliance Order.

After a preliminary injunction hearing at which Walter Avramenko, a CDPHE employee, testified that Colorado supports Plaintiff's action to obtain financial assurances, I granted Plaintiff's motion for preliminary injunction on June 10, 1998, and ordered Defendants to "provide financial assurance in the amount of $3,500,000 pursuant to 6 COLO. CODE REGS. 1007-3 § 266 and all applicable subparts." U.S. v. Power Engineering Co., 10 F.Supp.2d 1145, 1165 (D.Colo.1998). On July 22, 1998, Defendants appealed my June 10, 1998 ruling. On August 17, 1998, after a dispute over the form the financial assurances would take, I ordered Defendants to post "a surety bond guaranteeing payment into a closure and/or post closure trust fund" pursuant to 6 COLO. CODE REGS. 1007-3 § 266.14(f). U.S. v. Power Engineering Co., 10 F.Supp.2d 1165, 1172 (D.Colo.1998). On September 24, 1998, I modified the August 17, 1998 Memorandum Opinion and Order so that Defendants could provide financial assurances in accordance with any subpart of Section 266 if Plaintiff so agreed.

On October 15, 1998, Defendants filed a Show Cause Submittal arguing that "they are not able to obtain financial assurances in the amount of Three Million Five Hundred Thousand Dollars because there is no third party willing to extend credit to Defendants to secure the obligations of a third party financial institution issuing such financial assurances." Plaintiff opposed the Show Cause Submittal, and moved to both hold Defendants in contempt, and impose sanctions. On November 24, 1998, Defendants moved to modify the preliminary injunction. In that motion, Defendants claimed that the $3,500,000 estimate of the cost of remediation undertaken at the May 11-13, 1998 hearing was inaccurate. Instead, Defendants claimed that "[b]ased upon the work performed by PEC and its consultants after the May hearing, the information now available to PEC, and the current plans for remediation of contaminated groundwater and soils," the cost of remediation would only be $575,500. Defendants thus moved to modify my June 10, 1998 Memorandum Opinion and Order to require Defendants to provide financial assurances of only $575,500.

On February 25, 1999, Plaintiff moved for partial summary judgment on the question of the liability of Defendants. On March 17, 1999, Defendant...

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