U.S. v. Shaffer Equipment Co.

• Decision Date: 09 December 1993
• Docket Number: 93-1007,Nos. 92-2024,s. 92-2024
• Parties: , 24 Envtl. L. Rep. 20,706 UNITED STATES of America, Plaintiff-Appellant, v. SHAFFER EQUIPMENT COMPANY; Anna Shaffer; Berwind Land Company; Berwind Corporation; The Johns Hopkins University, Defendants-Appellees. (Two Cases) UNITED STATES of America, Plaintiff-Appellee, v. BERWIND LAND COMPANY; Berwind Corporation, Defendants-Appellants, and Shaffer Equipment Company; Anna Shaffer; The Johns Hopkins University, Defendants. , and 93-1049.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 450

11 F.3d 450

62 USLW 2404, 24 Envtl. L. Rep. 20,706

UNITED STATES of America, Plaintiff-Appellant, v. SHAFFER EQUIPMENT COMPANY; Anna Shaffer; Berwind Land

Company; Berwind Corporation; The Johns Hopkins

University, Defendants-Appellees. (Two Cases)

UNITED STATES of America, Plaintiff-Appellee, v. BERWIND LAND COMPANY; Berwind Corporation, Defendants-Appellants, and Shaffer Equipment Company; Anna Shaffer; The Johns Hopkins

University, Defendants.

Nos. 92-2024, 93-1007, and 93-1049.

United States Court of Appeals, Fourth Circuit.

Argued May 4, 1993.

Decided Dec. 9, 1993.

John Alan Bryson, U.S. Dept. of Justice, Washington, DC, argued (Vicki A. O'Meara, Myles E. Flint, Acting Asst. Attys. Gen., Roger Clegg, Deputy Asst. Atty. Gen., Ellen M. Mahan, U.S. Dept. of Justice, William A. White, Enforcement Counsel, Lisa Friedman, Associate Gen. Counsel, Marcia E. Mulkey, Regional Counsel, U.S.E.P.A., on the brief), for plaintiff-appellant.

John Hampton Tinney, Spilman, Thomas, Battle & Klostermeyer, Charleston, WV, argued (Carl L. Fletcher, Jr., Robert A. Lockhart, Allyn G. Turner, Spilman, Thomas, Battle & Klostermeyer, for appellees Berwind Corp. and Berwind Land Co.; Johnnie E. Brown, Cynthia M. Salmons, McQueen & Brown, L.C., for appellees Shaffer Equipment and Anna Shaffer; Robert G. McLusky, Patrick W. Pearlman, Jackson & Kelly, for appellee Johns Hopkins, on the brief), for defendants-appellees.

Before ERVIN, Chief Judge, and PHILLIPS and NIEMEYER, Circuit Judges.

OPINION

NIEMEYER, Circuit Judge:

In an action brought by the United States Environmental Protection Agency ("EPA") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Sec. 9601 et seq., to recover over $5 million in costs incurred in cleaning up a hazardous waste site in Minden, West Virginia, the district court found that the government's attorneys deliberately and in bad faith breached their duty of candor owed to the court during the course of proceedings. The court found that Robert E. Caron, the EPA's on-scene coordinator for the cleanup, had misrepresented his academic achievements and credentials in this and in other cases and that the government's attorneys wrongfully obstructed the defendants' efforts to root out the discrepancies and failed to reveal them once they learned of them. ¹ Finding the breaches "most egregious and disturbing," the court dismissed the action with prejudice, concluding that dismissal was "the only sanction available that is consistent with the duty of candor violations." The court also awarded the defendants attorney's fees.

On appeal, the government contends that the district court adopted an overly broad interpretation of the applicable rules of lawyer conduct and abused its discretion in imposing the most severe sanction by dismissing the action.

Having reviewed the record carefully, we affirm the district court's detailed findings of fact and its conclusion that the government attorneys violated their duty of candor. In light of the strong policy that cases be decided on their merits, however, we believe that outright dismissal is not required to punish and deter effectively the misconduct in question and to repair the wrongs done to the defendants. We therefore vacate the judgment and remand solely for the purpose of entering a sanction short of dismissal.

I

Shaffer Equipment Company, a firm in Minden, West Virginia, was engaged in the business of rebuilding electrical substations for the local coal mining industry, which involved the storing and disposing of transformers and capacitators on its property. Shaffer Equipment also modified transformers for customers, which often involved disposing of residual transformer fluid. Evidence revealed that while some of the fluid was simply poured onto the ground, the predominant practice was to store the fluid in drums and containers at the site, some of which later deteriorated and leaked fluid onto the ground. In response to a complaint, West Virginia authorities and the EPA tested soil samples from the site and discovered that the soil at the site was contaminated with polychlorinated biphenyls ("PCB's"). Because of the risk to persons in the area, the EPA regarded the site as hazardous and in need of remediation.

The EPA approached Anna Shaffer, the sole proprietor of Shaffer Equipment, and Berwind Land Corporation, the owners of the contaminated land, requesting that they undertake a cleanup of their land. Shaffer indicated that she did not have the resources to undertake a cleanup, and Berwind Land Corporation denied responsibility. The EPA accordingly undertook to clean up the site beginning in December 1984. It designated Robert E. Caron as the "On-Scene Coordinator."

The methodology initially chosen by the EPA to remedy the site's contamination was a new technology recommended by Caron, described as a "solvent extraction method," by which contaminated soil is washed on site in methanol to extract the PCB's. The method is designed to avoid transportation of contaminated soil to a remote landfill for disposal. Although the EPA expended over $1 million in implementing its solvent extraction plan at the site, the technique failed to achieve sufficient success to justify its continued use, and Caron directed abandonment of the method about a year after it was begun. Ultimately, the EPA removed 4,735 tons of contaminated soil to a hazardous waste dump in Alabama, as well as 23 drums of capacitators, 24 drums of transformer fluid, 32 drums of transformer flush, and 31 transformers. Over 200 truckloads were required for the transportation. The site and the Shaffer Equipment office building were thereafter restored, cleanup facilities were destroyed, and excavations were backfilled and graded. The entire cleanup was completed by December 1987, and the total cost, including the expenses incurred for the failed solvent extraction method, was ultimately reported by the EPA to be over $5 million.

In December 1990, the United States commenced this action under CERCLA to recover its response costs from the defendants. Following discovery, the district court established a schedule for filing summary judgment motions and for trial. After all summary judgment motions were filed, but before trial, the court received a letter dated January 31, 1992, from the Assistant United States Attorney whose appearance had been entered for the United States in the case, which stated:

A serious problem has arisen with regard to the testimony of a material EPA witness in the above-referenced action. The United States Attorney's Office has been advised that an investigation has been commenced by the appropriate governmental authorities. As a result of the pendency of those investigations and information provided to the United States by counsel for the defendants the United States is unable to proceed in good faith with the litigation of this action until further inquiry is made. We are, therefore, filing the attached Motion for a Stay of all proceedings in this action and respectfully request that the Court allow us a period of sixty days to evaluate this case in light of this information.

As it was later disclosed to the court, the EPA On-Scene Coordinator, Caron, had misrepresented his academic credentials and qualifications in this case and others, and this information had not been brought promptly to the attention of counsel for the defendants and the court.

The court granted the stay and directed the United States to conduct its investigation and to report by March 13, 1992, whether the United States wished to continue prosecuting the case. When the government reported that it would continue with the case, counsel for defendants filed a motion to dismiss the action for bad faith conduct.

After receiving the relevant documents about the charges, the district court conducted a two-day hearing directed largely to receiving the testimony of the attorneys involved. Based on conduct that began in September 1991 and which continued through January 1992, the court found that the government's attorneys repeatedly and deliberately violated their duty of candor to the court by failing to disclose Caron's misrepresentations, by obstructing defendants' efforts to discover them, and by continuing the litigation and filing court papers dependent on an administrative record developed largely by Caron. The district court's findings of fact relevant to government misconduct are reported fully at United States v. Shaffer Equipment Company, 796 F.Supp. 938, 942-49 (S.D.W.Va.1992), and therefore we repeat only those necessary to our discussion.

When the defendants first scheduled the deposition of Caron for September 12, 1991, an EPA assistant regional counsel, Charles Hayden, reviewed Caron's academic credentials. Caron was unable to produce his college diploma (allegedly because his mother failed to mail it to him), but he stated that he had received an undergraduate degree from Rutgers University in 1978 and had taken courses at Drexel University, Trenton State College, and Brookdale Community College. As it was later discovered, Caron in fact did not complete his class work for a degree from Rutgers and never attended any classes at any of the other schools.

On the morning of September 12, prior to the deposition, Hayden learned that Caron had not formally received a degree from Rutgers and so advised J. Jared Snyder, a Department of Justice attorney representing the government at the deposition. At the deposition, however, Caron testified, in the presence of Snyder, that he had completed all of the requirements for a degree at Rutgers and that the only reason he had not received his diploma was a question of paperwork. Caron also testified that he had continued taking courses at Drexel for a masters degree. He stated that his bachelors degree work was in environmental science and that his masters degree work was in organic...