National Clothesline

One of the longest running, most expensive and contentious clean-up cases involving drycleaners took a turn toward resolution last month.

The trouble started back in the late 1980s when contamination was found in the drinking water in the city of Lodi, CA. Investigations in the early 1990s, found areas where trichloroethylene was disposed of or where perchloroethylene from drycleaning operations was disposed to the sewer system or directly to the ground. California Regional Water Quality Board officials, in a report filed in January, said they believe perc leaked from the sewer to the soil and groundwater. A municipal water supply has been abandoned due to the contamination.

In 1997, the city paid the state Department of Toxic Substances Control $1 million in exchange for taking charge of enforcing the cleanup. Since then, the city has spent $25 million fighting the contamination case in a variety of courts. The money came from the city’s water fund, a loan from a Wall Street firm and the city’s insurer.

In assuming a lead role in the cleanup, the city agreed to pursue legal action against potentially responsible parties (PRPs) to enforce cleanup and to recover the city’s legal costs. The strategy was to get the other PRPs to pay for 100 percent of the cleanup, as well as pay for the city’s litigation costs and attorney’s fees.

In 2000, the city filed a federal suit against more than a dozen Lodi businesses in an attempt to force their insurance companies to pay for the cleanup. But the companies fought back, arguing that the city’s leaky sewers had helped spread the contamination. The precedent for that argument was set by IFI nearly 10 years ago when it was embroiled in a contamination case at its Silver Springs, MD, headquarters.

Last December, U.S. District Judge Frank C. Damrell, Jr., warned the city that its prospects in the case looked bad and the defendants had a good chance of prevailing.

Judge Damrell also raised questions about the role of Lehman Bros., which loaned the city $16 million in 1999 to bankroll the lawsuit in exchange for more than 20 percent interest on its investment. Last month, Damrell said Lehman Bros. should forgive the debt owed by the city, which has now grown to $21 million.

“I believe such an agreement to make money for lawyers and Lehman Bros. is something I would like to investigate and look into,” Damrell said. “This was more than an environmental lawsuit. It was a scheme to make money.”

Lodi had hired the Envision Law Group to file its November 2000 lawsuit against 15 businesses and property owners. Over seven years, the city paid the attorneys about $16 million and spent nearly $25 million pursuing the case.

In January, with a court date imminent, the city fired both its city attorney and the legal team that had presented it with a multi-million dollar bill. Instead of pursuing litigation, the city told Judge Damrell that it wanted to seek a settlement. The city also asked for a four-month delay in the trial while it sought that settlement.

Last month, the California Regional Water Quality Control Board tentatively ordered the city and several local businesses to begin cleaning up the pollution beneath downtown Lodi. The order is in the draft stage; it will be formally presented at a March 18 meeting.

“It is the Regional Board’s goal to have all the dischargers work together, collectively, quickly and efficiently, to resolve the pollution problem,” regional water board engineer Antonia Vorster wrote in a letter accompanying the draft.

One key difference in the regional water board’s order and the one issued by the Department of Toxic Substances Control several years ago is that the new one also includes the city among those directed to clean up the contamination.

Of those named in the draft order, only Guild Cleaners has done any cleaning up so far, Vorster wrote. Last year, Guild extracted 4,000 pounds of perc, one of the contaminants in the groundwater, according to the draft order.

In 2001, Guild Cleaners had requested oversight by the regional board for the performance of a Remedial Investigation and Feasibility Study for its area of contamination. The board undertook the oversight and now reports that Guild has nearly completed its investigations as well as constructing a pilot-scale soil vapor extraction (SVE) system and is currently pilot testing the feasibility of shallow groundwater remediation by a combination of air-sparging and SVE.