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Green with litigation: recyclers face new legal challeges

Keywords: Tags  California Sportfishing Protection Alliance, CSPA, Chico Scrap Metal Inc., environmental lawsuit, Jim Crenshaw, Kim Scott, scrapyards, recyclers Theresa Cannata

Environmental lawsuits targeting metal recyclers and auto wreckers are working their way across the country like a flu epidemic, and the only apparent trend is that the symptoms will worsen. Companies targeted in court claim the cases are nothing more than financial fishing expeditions, while those bringing the cases contend they have an environmental responsibility.

A landmark decision by a federal appeals court dealt a blow to recyclers and suggests that more legal action will follow.

In 2010, the California Sportfishing Protection Alliance (CSPA) sued Chico, Calif.-based Chico Scrap Metal Inc., alleging that the recycler’s three facilities were violating the Clean Water Act by discharging polluted waters.

The case was thrown out by the U.S. District Court because a local district attorney was already pursuing legal action against the company, but the 9th Circuit Court of Appeals reversed the dismissal in July, ruling that private groups may take legal action when the state does not.

“We hold (it) does not apply because the state has commenced no action in court ‘to require compliance’ with the stormwater permit and because the state has commenced no administrative penalty action,” the appeals court said.

Similar litigation has been filed by Inland Empire Waterkeeper, Los Angeles Coastkeeper, Orange County Coastkeeper, San Francisco Baykeeper and Ventura CoastKeeper in California, Chesapeake Bay Foundation and Baltimore Harbor Waterkeeper in Maryland and Keyport, N.J.-based Raritan Baykeeper. This year, the CSPA has filed 12 cases, settled 24 and has 16 pending, and federal records reportedly show that over the years it has filed more than 220 environmental lawsuits.

Chico Scrap environmental safety coordinator and manager Kim Scott questioned the validity of the cases sheerly on the volume of lawsuits being filed. “After successfully suing in the Bay Area, the CSPA moved north and sued us, the city of Chico and the local landfill,” Scott said. “CSPA spends its time going to local water boards, trolling, reading reports and looking for any exceedances. An exceedance is simply a guideline for best management practices; it is not a violation of the law.”

CSPA president Jim Crenshaw confirmed that it does look at local water board reports in search of violators. However, the majority of cases are launched after tips from scrapyard employees who actively contact the nonprofit group, he said.

Chico Scrap has spent $300,000 defending itself. “You need proof of harm to try a case. We are defending ourselves (because) there is no proof and no specific examples of anyone or anything actually harmed,” Scott said. “Unfortunately, they just have to make an allegation and you are stuck in court.”

Moneys awarded to the CSPA go to pay legal fees and to the Rose Foundation for Communities and the Environment, an Oakland, Calif.-based nonprofit environmental advocacy group. “The bottom line is, if there weren’t polluters we wouldn’t be suing them,” Crenshaw said. “We don’t make the laws but we are helping to enforce them, and this will be ongoing.”

Crenshaw said that CSPA’s efforts have resulted in money being distributed to other fishing and environmental organizations. “We don’t make any money. It goes to attorneys or to the Rose Foundation to do a restoration project. Sometimes you can’t do a restoration project, so you do something else,” he said.

CSPA’s 2011 income tax filing indicates that its revenue totaled $1.5 million, including $14,543 in membership fees. The organization spent $1.2 million in legal fees, contributed $37,200 to the Rose Foundation and $35,000 to two other foundations. The Rose Foundation’s tax filing for the same year shows its revenue totaled $3.8 million, and it listed grants including one for $46,720 to the CSPA.

Crenshaw noted that the CSPA has no paid positions. The Rose Foundation, however, does pay its leadership: Its executive director earned $91,250 in 2011, with an additional $40,362 in other compensation.

An attorney for Chico Scrap, Therese Cannata of San Francisco-based law firm Cannata, Ching & O’Toole LLP, said the recycler was proactive when state regulators first called for possible environmental improvements.

Chico Scrap identified some areas where stormwater management improvements were needed when the U.S. Environmental Protection Agency, along with the California Regional Water Quality Control Board, inspected the facility, she said.

The recycler immediately worked and corrected each area of concern, and no fines were assessed over the initial inspection because the company acted in good faith.

Chico Scrap said it reached out to the CSPA, which was threatening to sue, to indicate that it had satisfied the concerns, Cannata said. “A few days later, without calling, inquiring or inspecting, CSPA filed this lawsuit.”

Cannata was critical of the environmental group’s tactics.

“CSPA engages in tactics of false accusations, and threaten fines, penalties and having to pay CSPA’s attorneys’ fees if the company loses the case. It is, quite frankly, a well-executed bluff,” she said.

Cannata said the appeals court decision means she has to defend her client, which is compliant and has done nothing wrong. “Chico Scrap has repeatedly advised CSPA that there are no violations of the Clean Water Act to pursue here. Chico Scrap has done exactly what is required under California’s general permitÑit samples, tests and reviews data with its consultants to continually evolve and improve its stormwater discharges,” she said.

Each lawsuit filed by the CSPA contains the same language and contends it has been forced to take action because the federal EPA and state agencies have turned a blind eye to alleged environmental violations. The lawsuits ask the court to force a company to gain compliance and seek fines of $32,500 per day per violation for all violations occurring between March 15, 2004, and Jan. 12, 2009, and $37,500 per day per violation for all violations since. At $32,500 per day, a potential penalty could top $11.8 million a year.

Actual outcomes have been far less, but still pricey. In June, the CSPA settled with Santa Rosa Stainless Steel Fabricators Inc. for $68,000, which included $25,000 in legal and investigatory fees, $35,000 to the Rose Foundation and $8,000 to a CSPA compliance monitoring fund.

Santa Rosa Stainless Steel bookkeeper Debbie Ferronato said the company settled to avoid litigating the matter.

“When you are a small company like us it hurts everyone. It has been a big circle of injustice. We did nothing wrong, but settled because it would cost too much too fight,” she said.

Cannata acknowledged that many companies decide to settle rather than drag the matter through court. “The only way a defendant can get attorney’s fees if they win is to prove bad faith, and that is very hard to do. Litigating is very expensive, so most make a decision to just settle. It is cheaper in the long run to pay money than to litigate,” she said.

The mindset of the state of California makes it difficult to fight these issues, Cannata said. “We are dealing with a terribly written law that has not been reformed, and if you dare to criticize you are not ‘green.’”

A company facing litigation from any environmental group throughout the country should insist on a settlement agreement and not a consent order, she said.

“In a settlement agreement you don’t agree to set effluent limitations, whereas in a consent order you establish specific guidelines that you will be held accountable to,” she said.

Cannata, who has handled many such cases, said that settlements should be modest in nature. “A nominal settlement ranging from $15,000 to $25,000, depending on the size of the company, is enough,” she said.

As for the Chico Scrap case, Cannata is confident the company will prevail in court for numerous reasons, noting that the recycler’s stormwater does not flow into a waterway.

“The stormwater ends up on agricultural land and is exempt, as it does not meet navigable waters,” she said, and the company will be shown to be engaging in best management practices.

In Cannata’s opinion, the CSPA is more of a business these days than an environmental group. “It had a decent mission years ago, but they have essentially lost their way. They sue everyone but offer no program for advising. Where is the program where people can call CSPA for advice?”

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