United States v. Ekco Housewares, Inc.

26 ELR 21124 | Environmental Law Reporter | copyright © 1996 | All rights reserved


United States v. Ekco Housewares, Inc.

No. 5:92CV1245 (N.D. Ohio September 23, 1993)

The court holds that a bakeware manufacturing company violated the Resource Conservation and Recovery Act (RCRA) and a consent agreement by failing to establish financial assurance for closure, and violated the agreement by failing to establish financial assurance for postclosure and failing to obtain liability coverage. The company maintained a wastewater surface impoundment containing hazardous wastes on its property but never submitted a Part A permit application, and thus did not receive interim status to operate a hazardous-waste facility. The U.S. Environmental Protection Agency (EPA) entered into a consent agreement with the company to resolve RCRA violations at the site. The agreement required the company to comply with financial responsibility requirements. The court first finds that the agreement unambiguously required the company to provide financial assurance for closure, financial assurance for postclosure, and liability coverage at the time it submitted its closure plan for the facility on August 15, 1988, and that it did not fully comply with the agreement's requirements until September 9, 1992, and March 1993, respectively. The court next holds that the company is an owner or operator of a hazardous-waste facility subject to RCRA's interim status requirements, because it was in existence on November 19, 1980, and discharged contaminated water, which was hazardous waste pursuant to the contained-in rule, not the invalid mixture rule, back to the surface impound without treatment after 1980. This activity constituted storage or disposal after the RCRA deadline. Further, the company actively managed the pre-RCRA hazardous waste after the RCRA deadline by discharging millions of gallons of groundwater used as noncontact cooling water back into the surface impound and pumping groundwater from the surrounding aquifer. The court next holds that the company was required to comply with financial assurance for closure under 40 C.F.R. § 265.143, but did not do so until September 9, 1992. Any representations that Ohio EPA officials made purporting to extend and/or waive this requirement are insufficient to remove the company's liability, but are to be considered as mitigating circumstances when assessing damages. The court next denies summary judgment on the U.S. claim that the company was required to establish postclosure financial assurance under 40 C.F.R. § 265.145, because it is unable to ascertain whether hazardous wastes were "stored" or "disposed of" at the surface impound before RCRA. The court also denies summary judgment on the U.S. claim that the company was required to provide liability coverage for sudden and nonsudden accidents pursuant to 40 C.F.R. § 265.147, given the factspecific nature of the pertinent case law and the lack of direction from the appropriate regulations.

[Subsequent opinions in this litigation are published at 24 ELR 21560 and 25 ELR 21468. Briefs are digested at ELR BRIEFS & PLEADS. 66376.]

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

Counsel for Defendant
John P. Dean
Willkie, Farr & Gallagher
1155 21st St. NW, Ste. 600, Washington DC 20036
(202) 328-8000

[26 ELR 21124]

Matia, J.:

Memorandum of Opinion and Order

The above-captioned matter is before the court upon defendant Ekco's Motion for Partial Summary Judgment and plaintiff United States of America's Motion for Partial Summary Judgment as to Liability. The United States Environmental Protection Agency ("U.S. EPA") brings the instant action for Ekco's alleged failure to establish financial assurance and liability coverage required under both the 1987 Partial Consent Agreement and Order ("PCAO"), entered into by the parties for Ekco's Massillon bakeware manufacturing facility, and the Resource Conservation and Recovery Act ("RCRA"). For the following reasons, plaintiff United States' Motion for Partial Summary Judgment as to Liability is granted in part and defendant Ekco's Motion for Partial Summary Judgment is denied in its entirety.

The United States seeks judgment relying both upon Ekco's alleged contractual assumption of financial responsibility requirements in the 1987 PCAO and financial responsibility requirements imposed directly upon owner/operators under RCRA. The 1987 PCAO entered into between the parties required Ekco to "comply with the financial responsibility requirements for closure until closure has been certified pursuant to 40 C.F.R. 265.140 through 40 C.F.R. 265.151." Ekco also allegedly failed to comply with RCRA regulations requiring financial responsibility for closure of the plant's surface impoundment under 40 C.F.R. § 265.143, financial responsibility for postclosure care (40 C.F.R.§ 265.145), and liability coverage for sudden and nonsudden accidental occurrences arising from operation of the facility (40 C.F.R. § 265.147).

The facts pertinent to the instant motions for summary judgment are as follows. Ekco is the owner/operator of a bakeware manufacturing facility at 359 State Avenue Extension, Massillon, Ohio. As part of its manufacturing process, Ekco generated various waste products, some of which were discharged into a surface impoundment. Between 1980 and 1983, Ekco pumped groundwater from on-site, utilized the water as contact coolant, degreaser filter spray, and spray booth wastewater, and discharged the wastewater from its operation into the surface impoundment. Sampling of surface impoundment sludge indicated cadmium concentrations above 1.00 mg/l, chromium, lead, and the presence of trichloroethane ("TCA") and trichloroethylene ("TCE").

In compliance with Section 3010 of RCRA, Ekco notified the U.S. EPA in 1980 that the Massillon facility was generating hazardous wastes. However, Ekco did not submit Part A of its required application for permit to store, treat, or dispose of hazardous wastes under 42 U.S.C. § 6925 and 40 C.F.R. § 270.10. As a result of its failure to submit the Part A Application for Permit by November 19, 1980, Ekco did not receive interim status under 42 U.S.C. § 6925.

U.S. EPA filed an Administrative Complaint, Findings of Violations, and Compliance Order against Ekco on November 5, 1986. The Findings of Violations included storage of spent halogenated solvents (TCA and TCE) that were cadmium toxic and failure to comply with financial responsibility requirements under 40 C.F.R. §§ 265.140-.151 and the equivalent Ohio regulations, O.A.C. §§ 3745-66-40 through 50.

U.S. EPA and Ekco entered into the PCAO partially resolving the above Administrative Complaint. The PCAO required Ekco to submit a closure plan within 90 days of the effective date of the PCAO. Ekco received a 90-day extension for submission of the PCAO, and eventually submitted a closure plan to U.S. EPA on August 15, 1988.

The PCAO, paragraph B(5), also required Ekco to: comply with the financial responsibility requirements for closure until closure has been certified, pursuant to 40 C.F.R. § 265.110 through 40 C.F.R. § 265.151. At the time of submission of the closure plan for the surface impoundment pursuant to paragraph B(1), no documentation of Ekco's compliance with the above-quoted financial responsibility requirements was submitted with the closure plan on August 15, 1988.

The Ohio Environmental Protection Agency ("OEPA"), which was charged with responsibility for overseeing the Ohio RCRA program, disapproved the Ekco closure plan. An adjudication hearing challenging the denial of its closure plan was requested by Ekco.

American Home Products ("AHP"), former owner of the Ekco Massillon facility, submitted a Letter of Credit and Standby Trust Agreement on June 28, 1990, to document financial responsibility for closure and postclosure under 40 C.F.R. §§ 265.143 and .145. The Letter of Credit was inadequate in part for failing to name Ekco as the beneficiary of the Letter of Credit and Trust. By September 1992, AHP on behalf of Ekco corrected the deficiencies in the 1988 Letter of Credit and Trust.

In an attempt to satisfy the liability coverage requirement under 40 C.F.R. § 265.147, Ekco subsequently submitted its general liability policy for the Massillon facility, which contained an exclusion for pollution-related claims. In the fall of 1992, Ekco submitted documentation of liability coverage via a corporate guarantee. After OEPA delineated several deficiencies, Ekco submitted documentation to [26 ELR 21125] OEPA sufficient to demonstrate liability coverage under 40 C.F.R. § 265.147 in March 1993.

The United States seeks judgment as a matter of law as to the following: (1) violation of the 1987 PCAO; (2) violation of RCRA for failure to establish financial assurance for closure and postclosure care under 42 C.F.R. §§ 265.143 and .145, and violation of RCRA for failure to establish and maintain liability coverage for sudden and nonsudden accidental occurrences in accordance with 40 C.F.R. § 265.147. Ekco seeks summary judgment only as to § 265.147 liability coverage voluntarily assumed in the PCAO or required under RCRA.

The PCAO between the parties unambiguously sets the time for Ekco's performance. The 1987 PCAO mandates that Ekco "comply with financial responsibility requirements . . . at the time of submission of the closure plan . . ." The RCRA regulations contemplate that closure and postclosure financial responsibility requirements shall be in place before and during the closure process. See 40 C.F.R. §§ 265.143(h), .145(h), .147(e). The financial responsibility requirements are designed to ensure that funds are available in part to close a facility. United States v. T&S Brass and Bronze Works, 681 F. Supp. 314 [18 ELR 20905] (D.S.C. 1988), aff'd, 865 F.2d 1261 [19 ELR 20857] (4th Cir. 1988).

The scope of financial responsibility requirements contractually assumed by Ekco in the PCAO is a more difficult question. The court must interpret the language as a whole giving meaning to all language of the consent agreement. The court must look to the clear, unambiguous language of the consent agreement. A consent agreement is a contract between the parties. Where language in a consent agreement is clear such language shall be given its plain meaning. Ray Indus., Inc. v. Liberty Mutual Ins., 974 F.2d 754 [23 ELR 20145] (6th Cir. 1992).

Ekco's pertinent obligations under the PCAO are to "comply with the financial requirements for closure until closure has been certified pursuant to 40 C.F.R. §§ 265.140 through 265.51." The U.S. EPA argues the above language contractually obligates Ekco to provide financial assurances for closure under 40 C.F.R. § 265.143, financial assurances for postclosure under 40 C.F.R. § 265.145, and liability coverage required under 40 C.F.R. § 265.147.

In interpreting the limiting language "financial requirements for closure, until closure has been certified," the U.S. EPA relies upon the financial assurance (40 C.F.R. §§ 265.143 and .145) and liability coverage (40 C.F.R. § 265.147) regulations themselves. Each require maintenance of appropriate assurance or liability coverage until closure is certified and the administrator concludes that financial responsibility is no longer required.

After reviewing various definitions for "financial responsibility" and the regulations' use of closure as a temporal reference, the court concludes that the PCAO language includes both closure and postclosure financial assurance (§§ 265.143 and .145) and liability coverage (§ 265.147). Congress initially utilized the term "financial responsibility" when describing all standards set forth in 40 C.F.R. §§ 265.140-.150. 42 U.S.C. § 6924(a). Federal Register notices discussing the relevant § 265 regulations utilize "financial responsibility" when referring to both financial assurance (§§ 265.143 and .145) and liability coverage (§ 265.47), but use either "financial assurance" or "liability coverage" when referring to one but not the other. 47 Fed. Reg. 16544-45 (1982); 50 Fed. Reg. 33902 (1985).

After examining the above-quoted Consent language as to time of performance and scope, the court concludes that Ekco was unambiguously contractually required under the PCAO to provide financial assurance for closure under 40 C.F.R. § 265.143, financial assurance for postclosure under 40 C.F.R. § 265.143, and liability coverage under 40 C.F.R. § 265.147, upon the submission of the closure plan on August 15, 1988. Ekco did not fully comply with financial assurances and liability coverage requirements until September 9, 1992, and March 1993, respectively.

The court finds Ekco's arguments without merit including its claim that it was not an owner/operator of the Massillon facility. After numerous statements that discharges into the surface impoundment were for disposal of the waste, Ekco cannot now claim that it is not an owner/operator of a hazardous waste facility. See Ekco Reply Memo at 3 ("It is undisputed that the surface impoundment never was used for the temporary containment of wastes. Rather, all wastes placed in the surface impoundment were intended for permanent disposal there.").

U.S. EPA also seeks judgment as a matter of law apart from the PCAO obligations as to its RCRA claims for failure to establish financial assurance under 40 C.F.R. §§ 265.143 and .145 and liability coverage under 40 C.F.R. § 265.147. Ekco also seeks judgment as a matter of law as to liability coverage required under RCRA.

To recover under § 3008(a) of RCRA, the United States must establish the following: (1) Ekco is a "person" as defined in § 1004(15) of RCRA; (2) Ekco is an owner or operator of a hazardous waste treatment, storage, or disposal facility subject to interim status standards; and (3) Ekco failed to comply with RCRA requirements applicable to the facility (e.g., §§ 265.143, .145, and .147). There is no dispute that Ekco is a person under RCRA. The court will address the remaining two prerequisites to liability under RCRA.

Defendant Ekco is an owner/operator of a hazardous waste facility subject to interim status. All facilities in existence as of November 19, 1980, which treated storage or disposal of hazardous waste, were required to attain interim status or obtain a permit. Defendant Ekco's Massillon facility was in existence on November 19, 1980, and complied with the preliminary notification requirements of § 3010(a) of RCRA. Ekco failed to submit its Part A Permit Application resulting in its failure to achieve interim status. However, facilities which failed to achieve interim status were liable to comply with the standards imposed upon interim status facilities. 40 C.F.R. § 265. Without interim status or permit, treatment, storage, or disposal of hazardous waste was prohibited under 42 U.S.C. § 6925(A).

Although defendant Ekco argues that it did not treat, store, or dispose of hazardous wasteafter November 19, 1980, the court concludes that it is an owner/operator of a hazardous waste facility. Ekco relies upon the following two related arguments: wastewaters discharged to the surface impound after November 19, 1980, were not hazardous waste; and any hazardous wastes discharged to the surface impoundment prior to 1980 were not stored or treated after the effective date of the regulations. Following Ekco's analysis further, RCRA regulations were not applicable to the surface impoundment including the disputed financial responsibility requirements.

The court finds both arguments lacking in merit. Specifically, Ekco initially claims that the wastewater "mixture" discharged to the surface impoundment after 1980 was not a hazardous waste pursuant to the D.C. Circuit's recent decision in Shell Oil Co. v. U.S. Environmental Protection Agency, 950 F.2d 741 [22 ELR 20305] (D.C. Cir. 1991). Relying upon the D.C. Circuit's analysis vacating the U.S. EPA's use of the "mixture rule," Ekco specifically claims that the U.S. EPA's only basis for classifying the wastewater as hazardous waste is unsound. U.S. EPA responds claiming that hazardous waste halogenated solvents such as TCA and TCE were introduced into the surface impound, managed and disposed of after 1980. Ekco additionally pumped groundwater from the aquifer laden with cadmium, lead, and chromium allegedly leached from the surface impound, used the pumped water with high levels of heavy metals in its noncontact cooling process, and discharged same back into the surface impound.

The court concludes that hazardous waste was discharged to the surface impound after 1980, thereby constituting storage or disposal after the RCRA deadline. Groundwater containing chromium, cadmium, lead, TCE, and TCA was used by Ekco for noncontact cooling and discharged back to the surface impound without treatment. Said discharge contained hazardous waste listed under general RCRA guidelines. A listed hazardous waste (e.g., cadmium, TCA, TCE) remains a hazardous waste until it is delisted even when listed wastes are contained in nonlisted materials such as groundwater or soil. 53 Fed. Reg. 17586 (May 17, 1988); 52 Fed. Reg. 37045-46. Contrary to Ekco's assertion, the groundwater does not fall within the Shell Oil mixture rule. The instant hazardous wastes are hazardous waste pursuant to the "contained-in" rule explained above independent of the "mixture rule."

Additionally, Ekco actively managed the pre-RCRA (November 1980) hazardous waste after the RCRA deadline. Active management of hazardous waste subjects an owner/operator to RCRA regulations. Chemical Mfgrs. Ass'n v. United States, 919 F.2d 158 [21 ELR 20365] (D.C. Cir. 1990); United States v. Clow Water Systems, 701 F. Supp. 1345 [19 ELR 20566] (S.D. Ohio 1988). Ekco physically disturbed [26 ELR 21126] the pre-RCRA hazardous wastes by discharging millions of gallons of groundwater used as noncontact cooling water back into the surface impound and pumping groundwater from the surrounding aquifer. Recent soil samples surrounding the surface impound indicated highly elevated levels of the characteristic heavy metals lead, chromium, and cadmium along with TCA and TCE. Therefore, Ekco was an owner/operator of a hazardous waste facility subject to interim status requirements under § 3006 of RCRA.

To ascertain liability under § 3008(a), the court must finally determine which financial responsibility requirements are applicable to Ekco independent of the contractual obligations of the PCAO, and whether Ekco has complied with the statutory documentation provisions of the applicable requirements. Initially, the court concludes that Ekco was required to comply with financial assurance for closure under 40 C.F.R. § 265.143. Without interim status or final permit, treatment, storage, or disposal of hazardous waste at a facility is prohibited. 42 U.S.C. § 6925(a). After failing to submit its Part A Application for Permit, Ekco nevertheless was still subject to the financial assurance for closure regulations. 40 C.F.R. § 265.1; 50 Fed. Reg. 38946. United States v. Allegan Metal Finishing Co., 696 F. Supp. [275 (W.D. Mich. 1988] at 286 [19 ELR 20148].

Ekco did not attempt to establish financial assurance for closure until June 28, 1990, long after the RCRA deadline, when AHP submitted the above-described Letter of Credit and Trust on behalf of Ekco. The Letter of Credit's deficiencies are undisputed. On September 9, 1992, AHP finally submitted documentation correcting the deficiencies in the Letter of Credit, thereby satisfying its duty to establish financial assurance for closure. Therefore, Ekco was responsible for establishing financial assurance for closure under 40 C.F.R. § 265.143.

The court is aware of Ekco's arguments concerning the statements made by the OEPA purporting to extend and/or waive the above requirements. After careful review of the pertinent correspondence, the court concludes that any representations made by OEPA officials are insufficient to remove Ekco's liability, but are to be considered as mitigating circumstances when assessing damages.

The court is unable to find as a matter of law that Ekco was required to establish postclosure financial assurance under 40 C.F.R. § 265.145. Financial assurance for postclosure is required for disposal units. The court is unable to ascertain whether hazardous wastes were "stored" or "disposed of" at the surface impound prior to RCRA. Even Ekco is unsure whether the surface impound was for storage or disposal of pre-1980 hazardous waste and post-1980 wastewater containing hazardous waste. Ekco repeatedly refers to the surface impoundment as a disposal unit, but enumerates a new strategy for disposing of hazardous materials off-site in an August 29, 1981, letter from AHP to OEPA. Therefore, the United States Motion for Partial Summary Judgment as to Liability is denied with respect to financial assurance for postclosure under 40 C.F.R. § 265.145 at this time.

The court is also unable to find as a matter of law that Ekco was required to provide liability coverage for sudden and nonsudden accidents pursuant to 40 C.F.R. § 265.147. In part due to the factual dispute outlined above and the regulation's language requiring "operation of the facility," the court cannot apply the fact-driven case law in the area to ascertain whether liability coverage is required. Ekco argues that owner/operators had the option in 1980 of securing liability coverage for "operation of the facility" or ceasing operation (i.e., eliminating discharge of hazardous waste to surface impound under Ekco's interpretation). See In re Matter of Gordon Redd Lumber Co., No. 88-01-R (Ekco App. N). In response, U.S. EPA relies upon several cases requiring liability coverage for facilities storing hazardous waste after the interim status deadline. See United States v. T & S Brass and Bronze Works, 681 F. Supp. 314 [18 ELR 20905] (D.S.C. 1988); United States v. Clow Water Systems, 701 F. Supp. 1345 [19 ELR 20566] (S.D. Ohio 1988).

After careful review of the voluminous case law provided and intensive research, the court is unable to determine if liability coverage is required as a matter of law given the present state of the facts. The case nearest on point, Gordon Red Lumber Co., supra, involved off-site disposal of some hazardous wastes skimmed from the surface impound. Given the fact-specific nature of the pertinent case law and the lack of direction from the appropriate regulations, the court is unable to enter judgment as a matter of law for either Ekco or the United States on their individual dispositive motions as to RCRA liability coverage apart from the PCAO contractual obligations.

THEREFORE, the United States' Motion for Partial Summary Judgment is granted in part with respect to the PCAO financial assurance for closure and postclosure under 40 C.F.R. §§ 265.143 and .145, and liability coverage under § 265.147. The United States Motion for Partial Summary Judgment is also granted in part as to financial assurance for closure under RCRA, but denied as to financial assurance for postclosure and liability coverage under RCRA apart from PCAO contractual obligations.

FURTHERMORE, Ekco's Motion for Partial Summary Judgment is denied in its entirety.

IT IS SO ORDERED.


26 ELR 21124 | Environmental Law Reporter | copyright © 1996 | All rights reserved