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How Businesses Can Benefit From RCRA’s Citizen Suit Provisions

Posted on - 08/29/2007
by JHP

After years of saving your hard earned cash, you finally achieved one of the great American dreams; you bought your own business. With your experience in the metal finishing industry, you financed and purchased a business called Platers and Coaters. Platers and Coaters has been owned and operated as a sole proprietorship by the same person for 15 years at the same location. The financial data on the company looks good. The previous owner is able to make a fantastic profit while undercutting his competitors' prices substantially. The previous owner told you, "If you know how to work the business, you can make a lot of money."

After the purchase, the previous owner agrees to teach you how to run the business by working with you for a few weeks. During this time, you notice that the previous owner dumps what you suspect to be hazardous waste out the back door into a ditch. You ask the previous owner if this is legal. His reply is, "You want to make money, don't you?" You immediately contact an environmental consultant to determine if what the previous owner was doing was legal. Unfortunately for your cash flow, the environmental consultant informs you that you must cease these illegal disposal practices. You immediately contract with a waste disposal company to dispose of your hazardous waste. The previous owner learns of your decision to handle your waste properly and informs you that by doing so you will never make a profit unless you substantially raise your prices, which will drive away business.

Unfortunately for you, the previous owner is correct. Given what you paid for the business and the cost of waste disposal, you can barely make the payments on the purchase of the business and the waste disposal with the business that you keep after raising your prices. You based your decision to purchase the business on a net profit that did not include waste disposal, mainly because the previous owner neglected to mention that his waste disposal practices were free, but highly illegal.

Along with disposing of your hazardous wastes legally, your environmental consultant recommends a soil and groundwater analysis to determine if any of the previous owner's activities have affected the property you bought as part of the business. After installing a single groundwater well, you learn that the soil and groundwater are severely polluted, and will costs up to two million dollars to cleanup. You now realize that your great American dream has become a great American nightmare. Faced with certain bankruptcy, you approach the previous owner and ask him to take back the business. The previous owner refuses and states that you bought the business and property "as is" without any warranty.

Distraught, you seek the assistance of an attorney who practices environmental law. You explain to the attorney that you really do not care if the property is cleaned up provided the attorney can force the previous owner to pay for your losses and take back the business. Your attorney explains that while that may seem like good logic, and you may not think you have any interest in getting the property cleaned up, this should be your biggest worry. The previous owner operated the facility for 15 years, which caused significant pollution to the soils and the groundwater. You have owned and operated the facility for less than one year. Under the Superfund laws, since you are the owner of a facility from which a release of a hazardous substance has occurred, you are jointly and severally liable for the cleanup even though the waste was deposited by the previous owner. Since the previous owner is now an elderly person, if he were to die, and his estate was settled before you filed a lawsuit against him to cleanup the property, you could be forced to pay for the entire cleanup. Therefore, your attorney advises that you do something quickly to force the previous owner to pay for the cleanup while he is still alive and still has the money from your purchase of the business to pay for the cleanup.

Your attorney advises you that your best approach is to proceed with a citizen suit against the previous owner pursuant to the Resource Conservation and Recovery Act (RCRA) under 42 U.S.C. § 6972 (a)(1)(b). You cringe at the thought of a citizen suit action and ask if these are the same types of actions pursued by overzealous environmental groups for technical violations of the law just to generate fees for lawyers. Your attorney explains that these citizen suit laws are abused sometimes, but occasionally, someone such as yourself needs help with enforcing the law against a wrongdoer, and the only economical way to do it is to pursue a citizen suit against the wrong-doer.

You ask your attorney what would happen if you agreed to proceed with a citizen suit, and he explains. Most Federal environmental laws provide for citizen enforcement by private parties who have been harmed by the wrongful activity of another. These lawsuits are called citizen suits because the laws authorize a citizen to step into the role of the attorney general for purposes of enforcing the environmental laws. Specific to your situation, RCRA allows a citizen to proceed in court against any past or present generator of hazardous waste who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment. Essentially, as your attorney explains, congress intended the citizen suit provision of RCRA to be analogous to the common law tort of public nuisance.

To be entitled to relief, your attorney explains that you must be able to prove (1) the existence of "discarded material," hazardous waste in this case; (2) that the previous owner contributed to the disposal of the waste; and (3) that the situation may present an eventual, significant risk to public health or the environment.

Regarding the requirement that the situation may present an eventual, significant risk to public health or the environment, your attorney explains that the courts have interpreted this requirement to mean a threatened or potential harm and does not require proof of actual harm. When one is endangered, harm is threatened; no actual injury need ever occur. Furthermore, a determination of "imminence" does not require a showing that actual harm will occur immediately so long as the risk of threatened harm is present. Finally, the word "substantial" does not require quantification of the risk if there is some cause for concern that someone may be exposed to risk. Since your facility has severely contaminated groundwater, your attorney explains that you should have no problem meeting this requirement, especially after you inform him that there are drinking water wells in the area that may already be impacted.

You tell your attorney that as a result of paying hazardous waste disposal fees, you are "financially impaired" and cannot afford to finance a major lawsuit. Your attorney smiles sheepishly and states that the beauty of forcing someone to do a cleanup under the RCRA citizen suit provision is that if you win, they have to pay your legal fees. Therefore, given the specific facts in your case, you risk very little in allowing the attorney to pursue the case for you.

You ask your attorney what you are likely to get if you win your case. Your attorney informs you that, as generally happens in citizen enforcement lawsuits under anti-pollution laws, RCRA authorizes awards of litigation costs, including attorney's fees and expert witness fees, to the substantially prevailing party. The court is also empowered to issue orders against anyone who has illegally disposed of hazardous waste to take such other action as may be necessary o abate the imminent hazard created thereby. Therefore, since your attorney considers your case a sure winner, he is willing to be somewhat forgiving about requiring you to pay your legal fees up front, since he will recoup all of the legal fees reasonably necessary in pursuing your claim from the previous owner at the end of the litigation.

Regarding your other damages, your attorney explains that he will add claims for violations of state environmental laws, as well as claims for fraud, nuisance, trespass, negligence, and whatever else he can think of before filing the complaint to try to recoup your losses. However, even if you lose on these claims, at least you will be getting the real estate cleaned up by the person who caused the problem, and by filing the lawsuit now, you can be assured that the previous owner will be able to pay for the cleanup, instead of you.

My advice to anyone considering buying an ongoing business is to have adequate legal and environmental representation before the purchase. Despite the best of advice, however, even the most careful business person can face substantial liabilities due to past conduct, human error, bad luck, and the acts and omissions of others, including previous owners. In such situations, it is only natural to seek to shift, share, and otherwise minimize those liabilities, ideally while someone else is still capable of paying. Not only does bringing such suits early ensure that you are not foreclosed by the statute of limitations which could forever bar any recover, it also ensures that the facts are still fresh in the minds of witnesses, and it ensures that your conduct can be distinguished from that of prior owners. RCRA's citizen suit provision is a good way for businesses facing substantial cleanup cost to shift not only the cost of the cleanup to the responsible party, but also to shift the cost of the litigation to get the cleanup performed to the other party. While awarding attorneys fees as part of an environmental citizen suit makes most business people shudder, remember that the previous owner in this case made his fortune by violating the hazardous waste disposal laws, thus allowing him to set his prices below the competition which drove his competitors who tried to comply with the law, such as yourself, out of business.

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