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United States v. Domestic Indus., Inc.

ELR Citation: 29 ELR 20544
Nos. Civ. A. 2:97CV884, 32 F. Supp. 2d 855/(E.D. Va., 01/06/1999)

The court holds that a company that allegedly sold the United States a lesser grade oil than required under contract specifications and then charged it for the higher grade oil is liable under the Resource Conservation and Recovery Act (RCRA) for violating oil management regulations. The court first holds that material facts remain in dispute as to whether the company violated the False Claims Act (FCA) and, thus, summary judgment is inappropriate as to the FCA claims. There are material facts in dispute as to whether one of the company employees acted within the scope of his employment when he carried out the alleged scheme to submit false claims to the United States. There is also a material question of fact as to whether the company or its president actually knew or should have known that the claims submitted were false.

The court next holds that the company is liable under RCRA. The company is in the business of marketing oil. Moreover, the United States presented overwhelming and convincing evidence that at least some portion of the oil marketed and delivered by the company was actually used or splash blended, either of which qualifies the oil as used oil under RCRA and its regulations. Whether the company knew of the alleged illegal RCRA activities occurring at its facilities is immaterial because RCRA provides for strict liability. In addition, the court accepts the RCRA presumption that the oil delivered and marketed by the company was off-specification of RCRA standards. Further, there is no genuine dispute as to the fact that the oil marketed by the company was intended for and used for heating purposes, and that the company never attempted to meet the requirements for marketers of used oil. The court then holds that the company violated RCRA standards and regulations for the storage of hazardous wastes. The company owned and operated a tank in which it stored hazardous waste, and, by its own admission, the company did not comply with RCRA regulatory procedures for storage of hazardous wastes. The court, however, will determine the appropriate penalty for the company's RCRA violations at a later date following the resolution of the remaining claims. And whether the president is liable for violations of RCRA claims and what penalties are appropriate if he is found liable must also be resolved at a later date.

Next, the court holds that summary judgment is inappropriate on the FCA claims as to other parties involved in the allegedly fraudulent transactions. Material issues of genuine fact exist as to these parties' knowledge, or deliberate lack of knowledge, and their involvement with the daily operations of the company and its alleged scheme to deliver off-specification oil to the United States. The court then dismisses the company's third-party claims for contribution and indemnity under RCRA against its suppliers. Last, the court declines to exercise jurisdiction over the third-party claims under state law absent some viable federal claim.

Counsel for Plaintiff
Craig P. Wittman, Ass't U.S. Attorney
U.S. Attorney's Office
101 W. Main St., Ste. 8000, Norfolk VA 23510
(757) 441-6331

Counsel for Defendants
J. Gray Lawrence Jr.
Faggert & Frieden
1435 Crossways Blvd., Ste. 200, Chesapeake VA 23320
(757) 424-3232