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United States v. Keystone Sanitation Co.

ELR Citation: 26 ELR 20587
Nos. No. 1:CV-93-1482, 903 F. Supp. 803/(M.D. Pa., 08/14/1995) defendants' transfer of assets preliminarily enjoined

The court preliminarily enjoins the transfer of assets by a corporate landfill owner and related defendants in a U.S. Environmental Protection Agency (EPA) cost recovery action under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The related defendants include a golf course company to which the landfill owner's principal stockholders transferred assets of the landfill owner, and family trusts that hold shares in the golf course company. EPA sued these entities, and companies that arranged for waste to be transported to the landfill, to recover past and future costs of responding to contamination at the site. The "arrangers" seek an injunction to prevent the landfill owner and related parties from dissipating assets that may be subject to a CERCLA judgment. The court first holds that it has the authority to enjoin a defendant from dissipating assets on the grounds that the injunction is necessary to ensure the defendant's ability to satisfy a money judgment against it. The encumbrance must be reasonably related to the amount of the ultimate potential judgment. This requirement, however, does not encompass a precise calculation of each party's ultimate CERCLA liability. The court rejects the suggestion that judicial review of EPA's record of decision for the site must be completed before any assets are encumbered. The court next holds that the arrangers have shown a reasonable likelihood that they and the landfill owner and related parties will be held strictly, jointly, and severally liable for the $11.9 million remedy EPA designed for the site, that the landfill owner and related parties will be assessed a significant share of that amount in a contribution action, and that a judgment will be assessed against the cash and other assets the landfill owner and related parties possess. The court finds that the arrangers are likely to succeed in showing that the landfill owner and related parties have transferred and will continue to transfer assets to avoid paying a potential CERCLA judgment absent injunctive relief and that the arrangers are likely to suffer irreparable harm by being saddled with the landfill owner and related parties' share of liability if injunctive relief is not granted. This harm outweighs any harm to the landfill owner and related parties through a reasonably tailored injunction. Also, it is in the public interest to locate and preserve a reasonable pool of the landfill owner and related parties' assets to satisfy any judgment against them.

The court next grants the arrangers' motion to amend their cross-claim to assert a state-law claim of fraudulent conveyance. The court finds no prejudice or futility in allowing the amendment, and allowing the amendment is within the scope of Fed. R. Civ. P. 15. In addition, the court joins the family trusts, the golf course company, and the children of the landfill owner's principal stockholders as cross-claim defendants on the fraudulent conveyance claim. The court enjoins the golf course company from repaying loans to the principal stockholders in the landfill owner or paying large sums that may be due on their employment contracts with the golf course company. The court also enjoins the transfer of any other assets of the golf course company to the principal stockholders, their children, or any other entity outside the ordinary course of business. The court further enjoins any increase in salaries from the golf course company or the family trusts to members of the family of the landfill owner's principal stockholders without the court's permission. The court next holds that the waste management company that acquired assets from the landfill owner must submit each claim for payment from the landfill owner to the court for approval. The court will not enter a blanket order on the company's behalf. The court denies the landfill owner and related parties' motion to continue a stay of orders requiring them to produce attorneys' billing statements. And the court refuses to excuse the arrangers from posting a bond for the preliminary injunction.

[Related decisions are published at 25 ELR 20579 and 21430.]

Counsel for Plaintiff
Daniel Dertke
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Robert Hoffman
Reed, Smith, Shaw & McClay
213 Market St., Harrisburg PA 17108
(717) 234-5988