US EPA v. Environmental Waste Control, Inc.
Decision Date | 06 August 1991 |
Docket Number | No. S87-55 (RLM).,S87-55 (RLM). |
Citation | 131 BR 410 |
Parties | UNITED STATES of America (EPA), Plaintiff, and Supporters to Oppose Pollution, Inc., Intervenor-Plaintiff, v. ENVIRONMENTAL WASTE CONTROL, INC., et al., Defendants. |
Court | U.S. District Court — Northern District of Indiana |
COPYRIGHT MATERIAL OMITTED
John C. Hamilton, South Bend, Ind., for Supporters to Oppose Pollution, Inc.
Christopher G. Scanlon, James W. Clark, Kevin M. Toner, Indianapolis, Ind., Thomas J. Brunner, James M. Matthews, South Bend, Ind., for non-parties Heritage Group, etc.
Note: The other plaintiff and the defendants were not involved in this proceeding and therefore no attorneys' names are supplied.
This cause returns to the court following entry of judgment (and affirmance on appeal) and the defendants' lengthy period in bankruptcy proceedings on two motions filed by plaintiff-intervenor Supporters to Oppose Pollution, Inc. ("STOP"). STOP has filed a motion to withdraw reference of Matter of Environmental Waste Control, Inc., Bankr.N.D.Ind., No. 89-30581-HCD, pursuant to 28 U.S.C. § 157(d), and also has filed a Motion for Proceedings Supplemental against several non-parties, including the Heritage Group, Resources Unlimited, Inc., Heritage Environmental Services, Inc., and Asphalt Materials, Inc. (collectively referred to as "Heritage"). As part of its response to the Motion for Proceedings Supplemental, Heritage has moved for sanctions against STOP pursuant to Federal Rule of Civil Procedure 11. STOP has cross-moved for sanctions against Heritage.
The parties fully briefed these matters and came before the court for oral argument on August 2, 1991. The court then took these matters under advisement. As is explained more fully below, the court concludes that the matters before the bankruptcy court are not such as to justify removing those issues to the district court; that STOP's motion for proceedings supplemental must be denied because the automatic stay in bankruptcy precludes some of the relief sought, and Indiana procedure and the prior cases involving STOP and Heritage preclude the rest of the relief sought; that STOP's motion for proceedings supplemental constitutes a good faith argument for the extension of existing law and so does not justify sanctions; and that Heritage's motion for sanctions was not filed for an improper purpose, and so does not justify sanctions. Accordingly, the court denies each of the motions.
The United States Environmental Protection Agency originally filed this action as a suit against Environmental Waste Control, Inc., West Holding Company, James Wilkins, and Stephen Shambaugh (collectively "EWC"), owners and operators of a hazardous waste landfill known as the Four County Landfill, under the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq. ("RCRA"). STOP, a citizens group, intervened as a plaintiff in the government's action pursuant to 42 U.S.C. § 9613(i). After thirty-one days of trial, the court permanently enjoined EWC from operating the Four County Landfill, ordered corrective action for the landfill property, and imposed substantial fines against the defendants. United States v. Environmental Waste Control, 710 F.Supp. 1172 (N.D.Ind.1989), aff'd, 917 F.2d 327 (7th Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 1621, 113 L.Ed.2d 719 (1991). The court also awarded STOP attorney fees and costs incurred in litigation as a prevailing party, in the total amount of $146,426.00. United States (EPA) v. Environmental Waste Control, Inc., 737 F.Supp. 1485 (N.D.Ind.1990).
Heritage originally was not a party to this action, but on October 10, 1989, STOP moved to vacate the judgment under Fed. R.Civ.P. 60(b) to allow STOP to amend its complaint to add Heritage members as defendants, based on its discovery of information that led STOP to believe that Heritage members were so interrelated with EWC as to render them equally liable for the RCRA violations on theories of "alter ego" or joint venture. The EPA and Heritage opposed STOP's motion. The court denied STOP's motion in March, 1990, holding that STOP's failure to engage in pretrial discovery precluded STOP from making the showing necessary to obtain relief under Rule 60(b). No appeal was taken from that ruling.
Heritage also has been named as defendants in three other actions brought by STOP and related to the RCRA claims in this cause.
STOP brought its first complaint against Heritage on July 24, 1989 ("STOP I"), seeking imposition of the same liabilities and obligations upon Heritage that were imposed upon the EWC in this action, pursuant to RCRA, 42 U.S.C. § 6972(a)(1)(A). On November 17, 1989, STOP voluntarily dismissed "STOP I" and simultaneously filed another action ("STOP II") against the Heritage Group alleging the same claims as in "STOP I". The court summarized the complaint in "STOP II" as follows:
The court dismissed "STOP II" on July 31, 1990, finding that it lacked subject matter jurisdiction over the citizens group's claims in Count II of STOP's complaint, because the EPA was diligently prosecuting the same claims against the EWC that STOP brought against Heritage in "STOP II". Accordingly, the court found that STOP had failed to allege a claim upon which relief might be granted, pursuant to 42 U.S.C. § 6972(b)(1)(B). The court dismissed Count I in "STOP II" because STOP had failed to give the ninety-day nonadversarial notice required under 42 U.S.C. § 6972(b)(2)(A); see also Hallstrom v. Tillamook County, 493 U.S. 20, 110 S.Ct. 304, 107 L.Ed.2d 237 (1989).
On August 10, 1990, STOP served notice of its intent to file another action against Heritage; "STOP III" was filed on November 29, 1990. That complaint alleged imminent endangerment pursuant to 42 U.S.C. § 6972(a)(1)(B), and alleged "that EWC and the original defendants turn out to have been little more than puppets; the real operator of the Landfill was the Heritage Group, acting through three, or more, of its several constituent corporate members."
Heritage moved to dismiss "STOP III", again arguing that STOP had not provided the ninety-day nonadversarial notice period and further that the doctrine of res judicata barred the suit. On March 29, 1991, the court granted the defendants' motion on Heritage's first grounds for dismissal and, in anticipation of subsequent actions by STOP, went on to consider the res judicata issue as well. Supporters to Oppose Pollution, Inc. v. The Heritage Group, et al., 760 F.Supp. 1338, 1342 (N.D.Ind.1991). Heritage argued that "STOP III" should be barred because the claims raised in that cause had been finally adjudicated in the EPA's RCRA action against the EWC—this case. 760 F.Supp. at 1342. The court agreed with Heritage's position, finding that the "STOP III" complaint sought to hold Heritage liable for the costs of the relief ordered in the EPA suit. 760 F.Supp. at 1345. Accordingly, STOP's third attempt to hold Heritage liable for the court's judgment against the EWC failed on the defendants' 12(b)(6) motion.
The court's rulings in "STOP II" and "STOP III" are on appeal; in a post-hearing memorandum, STOP informed the court that the Seventh Circuit has scheduled oral argument in those cases for September 25, 1991.
Meanwhile, in the bankruptcy court, each of the defendants collectively referred to as EWC filed Chapter 11 petitions on April 10, 1989, shortly after judgment was entered in this cause. Those bankruptcy proceedings remain pending as of this date. As of approximately March 29, 1991, EWC appeared to have the following remaining assets: $400,000.00 in available cash; $500,000.00 in the form of an anticipated tax refund; and approximately $400,000.00 in uncollected accounts receivable. EWC states that it presently has considerably less than $400,000.00 in assets and that collection of any accounts receivable is unworkable without incurring additional debts. In any event, EWC's debts, including present and future obligations for corrective action pursuant to the March, 1989 judgment in this cause, greatly exceed its assets.
Based on this anticipated deficit, debtor EWC moved to dismiss the bankruptcy proceedings on April 23, 1991. The bankruptcy court has scheduled a hearing on the debtor's motion to dismiss for August 12, 1991. As an alternative, STOP, the United States Trustee, and other parties have moved to convert the proceedings to those for straight liquidation under Chapter 7 and further have pursued the possibility of setting up an operating trust, through which a number of potentially responsible parties for the landfill might deposit funds to cover EWC's debts and the costs of corrective action.
On April 23, 1991, STOP filed its motion for proceedings supplemental to execution against Heritage in this court, and...
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