Making a Polluter Pay Up: US v Casmalia

The Story:

McCutcheon Doyle, a member of the Casmalia Steering Committee, retained Nic Smith in U.S. v Casmalia, a case in which the EPA was suing to obtain funds for the cleanup of a Superfund site.

Site Description and History

The Casmalia Resources Superfund Site is a 252-acre inactive commercial hazardous waste treatment, storage and disposal facility located in Santa Barbara County, 1.2 miles north of the town of Casmalia. Between 1973 and 1989, the site's owners and operators (Casmalia Resources, Hunter Resources and Kenneth H. Hunter, Jr.) accepted approximately 5.6 billion pounds of waste at its ninety-two waste management facilities that included landfills, ponds, shallow wells, disposal trenches and treatment units. The industrial and commercial waste material included sludge, pesticides, solvents, acids, metals, caustics, cyanide and non-liquid polychlorinated biphenyls (PCBs). More than 10,000 companies and government entities sent waste to Casmalia during this period.

Facing multiple regulatory enforcement actions, the site's owners and operators stopped taking shipments of waste material in 1989. In 1991, they abandoned efforts to properly close and clean up the site. The conditions at the site presented imminent and substantial endangerment to human health and the environment. So, from 1992 to 1996, the EPA, using Superfund authorities, took emergency actions to stabilize the site, including installing and operating systems for collecting, treating and disposing of contaminated subsurface liquids, controlling the flow of storm water and stabilizing the landfills.

During Casmalia's operation, the facility had accepted waste material from thousands of private businesses and government agencies. One of the EPA's major responsibilities is to create an equitable process to ensure that each of the Potentially Responsible Parties pays its share of total site costs for clean up as well as future improvements and maintenance of the site. The estimate of these costs in this case was $271.9 million. The EPA finances these costs through legal settlements with the generators of the waste disposed of at Casmalia, as well as with the site's owners and operators. In 1996, the EPA settled with fifty-four of the largest contributors of waste to the site. These fifty-four companies and municipalities formed the Casmalia Steering Committee ("CSC"). The CSC members had generated almost half of the waste disposed of at the site. The EPA also negotiated with a group of over 750 Casmalia customers that sent relatively small amounts of waste to the site (under 2.8 million pounds each).

In 2000, 432 of these entities, called de minimus contributors, settled with the EPA. Additional settlements with this group are expected as time goes on. A third group of Casmalia customers, consisting of "large waste generators," was contacted in February 2000, and negotiations are ongoing to establish their contribution to the site cleanup. In December 2001, the EPA also negotiated a settlement with the State of California regarding the state's liability for wastes that various state departments and agencies had shipped to Casmalia.

Finally, the EPA was also a customer of the Casmalia site, and its liability is being determined.

The Case:

The former owners and operators are, of course, expected to apply their own resources to the site's cleanup as well. To that end, in 1997, the United States filed suit in federal district court against Casmalia Resources, Hunter Resources and Kenneth H. Hunter, Jr., the facility owners and operators. Kenneth Hunter, a former owner of the site, tried to get out early by making a de minimis offer to the EPA. The EPA's attorneys, as well as members of the Casmalia Steering Committee, however, wanted to know if he was really as broke as he claimed to be.

Nic Smith began work on the case by reviewing a special database that lists owners of property based upon WHERE the tax bill is sent. This is a particularly interesting way of assessing what someone holds, especially when you may only know the person's name. It is very helpful in uncovering possible unrecorded partnerships, joint ventures, etc. Using that database, Nic uncovered a number of oil and gas producing properties that belonged to Hunter.

Bolstered by that find, Nic then reviewed local business newspaper archives, court records and fictitious business names and found that Hunter was involved in a number of companies, including Hunter Dos Tres Corporation, Hunter Edison Oil Company and The Hunter Trust, etc. From that beginning, Nic was able to discover Hunter's ownership interest in a golf course and restaurant, along with other assets.

In the end, we were able to show that Hunter not only was not "broke," but he actually had abundant resources from which to pay for his share of the cleanup. In February 2002, the EPA announced a proposed settlement in the amount of almost $7 million, resolving the liability of the Estate of Kenneth H. Hunter, Jr., Casmalia Resources, Hunter Resources and other parties.

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