US v. Louisiana Pacific Corp.

• Decision Date: 28 November 1995
• Docket Number: Crim. A. No. 95-CR-215-B.
• Citation: 908 F. Supp. 835
• Parties: UNITED STATES of America, Plaintiff, v. LOUISIANA PACIFIC CORPORATION, Dana Dulohery, and Robert Mann, Defendants.
• Court: U.S. District Court — District of Colorado

908 F. Supp. 835

UNITED STATES of America, Plaintiff, v. LOUISIANA PACIFIC CORPORATION, Dana Dulohery, and Robert Mann, Defendants.

Crim. A. No. 95-CR-215-B.

United States District Court, D. Colorado.

November 28, 1995.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Henry L. Solano, United States Attorney, John Haried, Brenda Taylor, Assistant U.S. Attorneys, Denver, CO, for Plaintiff.

Patrick J. Burke, Law Office of Patrick J. Burke, Denver, CO, Elliott R. Peters, Keker & Van Nest, San Francisco, CA, for Defendant Louisiana Pacific.

John M. Richilano, Dean S. Neuwirth, Denver, CO, for Defendant Dulohery.

Michael R. Enwall, Barbara K. Grant, Boulder, CO, for Defendant Mann.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

Defendants Louisiana Pacific Corporation (LPC), Dana Dulohery and Robert Mann (defendants) move pursuant to Fed. R.Crim.P. 12(b)(2) to dismiss counts one through thirty-one of the indictment. In Count I defendants are charged with conspiracy to violate § 7413(c)(2) of the Federal Air Pollution and Control Act, 42 U.S.C. § 7401 et. seq. (the Clean Air Act or CAA) and 18 U.S.C. § 1001. Counts 2 through 21 charge defendants with violation of 42 U.S.C. § 7413(c)(2)(C) (tampering with a monitoring device and method) and 18 U.S.C. § 2 (aiding and abetting). Counts 22 through 27 charge defendants with violation of 42 U.S.C. § 7413(c)(2)(A) (false statements under the CAA) and 18 U.S.C. § 2. Defendants LPC and Dulohery are charged in counts 28 through 31 under § 7413(c)(2)(A) and 18 U.S.C. § 2 with making false statements concerning phenolic formaldehyde (resin) exceedances of two percent of board weight.

Defendants LPC and Dulohery are charged in counts 32 through 55 with mail fraud in violation of 18 U.S.C. §§ 1341 and 2, and LPC is charged in count 56 with wire fraud in violation of 18 U.S.C. §§ 1341 and 2. The underlying scheme alleged in counts 32 through 56 is that LPC and Dulohery falsely represented to LPC customers through use of the American Plywood Association (APA) trademark on the Montrose mill's oriented strand board (OSB) products and in LPC advertising and marketing materials that these products had been subjected to continuing quality assurance testing and auditing in conformance with APA procedures and standards. In fact, the government alleges, LPC and Dulohery routinely submitted nonrepresentative, specially manufactured OSB samples to APA for testing instead of samples of OSB sold to LPC customers. I will refer at times to counts 1 through 31 as the CAA counts, counts 28 through 31 as the resin counts and counts 32 through 56 as the APA counts.

Defendants jointly move to sever the CAA counts from the APA counts. Mann moves that his trial on the CAA counts be severed. Defendants also move to strike portions of the indictment. The motions are briefed and argued. For the reasons that follow I will grant in part and deny in part the motion to dismiss and sever for trial the CAA counts remaining from the APA counts. Mann's severance motion will be denied as moot. The motion to strike will be held in abeyance pending further briefing.

I.

LPC manufactures OSB at its Montrose mill, also referred to as the Olathe Plant. During the manufacturing process pine and aspen are sent to a "wafer dryer" which combusts wood and sawdust to produce a hot exhaust gas that dries the chips, which are then mixed with resins and hot-pressed into OSB. Pollutants are emitted into the air as a result of this process. As such, the Montrose mill qualifies as a stationary source under the CAA. 42 U.S.C. § 7411(a)(3).

On January 26, 1988 the Colorado Department of Health (CDH) issued LPC an emission permit (the '88 permit) for the Montrose mill. The '88 permit limits visible emissions to 20% opacity. To meet this standard, the permit required the Montrose mill to use pollution control technology known as an electrified filter bed (EFB) to filter out particles before discharging the emissions into the atmosphere. The CDH requires that a source meet the 20% opacity limitation 95% of operating time to be considered "in compliance."

To monitor compliance with the emission limitation the permit imposed the following condition:

A continuous opacity monitoring system COMS, approved by the Division, shall be installed to measure and record the opacity of emissions being discharged to the atmosphere. The monitoring system shall be located, calibrated, maintained and operated in accordance with methods and procedures approved by the Colorado Air Quality Control Regulations. Excess emission reports shall be filed on a quarterly basis in a format approved by the Division. Defendants Motion to Dismiss, Exh. 1.

A COMS uses a beam of light to measure the amount of light dispersed by the emission of pollutants. These emissions are read and graphically charted at six minute intervals. Each quarter LPC was required to file these COMS reports with the CDH. Any emission in excess of the 20% limit received a code explaining the cause of the exceedance. Excusable excesses included # 9—testing, # 10—monitor failure, # 12—upset conditions, and # 14—cleaning EFB. The excusable exceedances were deducted from the total time for noncompliance to determine whether the 95% compliance requirement was achieved.

In 1989 LPC received several Notices of Violation (NOVs) from the CDH stating that LPC had violated the 20% opacity limitation. Based on these NOVs, the CDH issued two orders for compliance to LPC. To resolve the compliance orders and NOVs, LPC and the CDH entered into a settlement agreement (the 1990 agreement). Pursuant to the 1990 agreement, LPC agreed to hire an independent contractor to conduct EPA Method 9 opacity readings on a weekly basis. Defendant's Motion to Dismiss, Exh. 1, p. 6, ¶ 4. A Method 9 observation is a visual opacity reading made by an individual certified by the state. During the term of the 1990 agreement, penalties would be assessed based on observations from either the independent contractor or the CDH. Defendant's Motion to Dismiss, Exh. 1, p. 7. ¶ 5. These observations were the "sole means by which the Division may enforce wafer dryer opacity violations at the Olathe plant." Defendant's Motion to Dismiss, Exh. 1, p. 8. The 1990 agreement required LPC to "use its best efforts to maintain its wafer dryers in full compliance with the opacity regulations." Id. It did not address or alter the conditions of the '88 permit.

LPC was issued a second permit on January 21, 1992 (the '92 permit) which canceled the '88 permit. The '92 permit does not require a COMS. Instead, it requires the installation of a camera system to monitor visual impacts of the facility's plume. Plaintiff's Response, Exh. 11, ¶ 8.

During the term of the '88 permit the government alleges that the defendants knowingly falsified the COMS reports and tampered with the COMS equipment to achieve low opacity readings. While neither admitting nor denying these allegations, the defendants assert that counts 1-27 of the indictment must be dismissed because the 1990 agreement dropped the COMS requirement and the COMS reporting requirements are not part of the Colorado State Implementation Plan (SIP). Therefore, they contend these COMS requirements are not federally enforceable. Defendants argue that counts 28-31 must be dismissed because there is no resin reporting requirement in the permit, the 1990 agreement, or the SIP. In essence, then, the defendants contend counts 1 through 31 do not charge federal crimes. Defendants also assert that, in any event, counts 20, 21 and 25 through 27 must be dismissed because the conduct constituting the violation occurred after the issuance of the 1992 permit which did not require COMS reports. Finally the defendants contend that counts 1 through 31 must be dismissed because the reporting requirements were unconstitutionally vague or, in the alternative, they were immaterial as a matter of law.

II.

In addition to the charge of conspiracy to violate §§ 7413(c)(2)(A) and (C) of the Clean Air Act and 18 U.S.C. § 1001 defendants are charged with numerous independent tampering and false reporting violations of § 7413(c)(2)(A) and (C) of the CAA. Section 113(c)(2)(A) and (C) provide:

Any person who knowingly—(A) makes a false material statement, representation, or certification in, or omits material information from, or knowingly alters, conceals, or fails to file or maintain any notice, application, record, report, plan, or other document required pursuant to this chapter to be either filed or maintained (whether with respect to the requirements imposed by the Administrator or by a State); (C) falsifies, tampers with, renders inaccurate, or fails to install any monitoring device or method required to be maintained or followed under this chapter shall upon conviction, be punished by a fine pursuant to title 18, or by imprisonment for not more than 2 years, or both.

The Government alleges that defendants knowingly falsified COMS reports and knowingly tampered with the COMS at the Montrose mill causing it to measure and record falsely low values for opacity on the strip charts that were filed with the CDH. The defendants assert that the COMS reporting requirements are not federally enforceable because they are not part of the SIP. Moreover, the defendants argue that the conditions imposed on LPC are state-imposed requirements which exceed federal requirements and are, therefore, enforceable only under state law pursuant to C.R.S. § 25-7-105(8) (1984). The question is whether the CDH's COMS monitoring and reporting requirements were imposed pursuant to authority delegated under the CAA to the CDH so as to render them federally enforceable.

A. Delegation of Authority to State under the CAA.

The Clean Air Act provides for a dual federal-state scheme to protect and enhance the nation's air quality. 42 U.S.C. § 7401(b). The Administrator of the Environmental Protection Agency (The...