No end in sight in clean-up suit
Any notion that a long-running legal
battle over soil and groundwater contamination was nearing a
conclusion was dispelled last month when the city broadened its
lawsuit.
The city of Lodi, CA, revised its failing,
four-year-old lawsuit to include 153 companies, businesses and
property owners. Included in the expanded list are at least
nine drycleaning companies. They join another cleaner, Jack
Alquist and Guild Cleaners, who was among the 15 original
defendants in the lawsuit the city filed in 2000.
The newly added defendants include some
who are deceased as well as their relatives. A shopping mall
and its owners is named because a drycleaning business is on
its property even though the site has not been identified by
state environmental agencies as polluted. Yet another defendant
is named in the suit as a “business entity of a form
presently unknown.”
Joining drycleaners on the list of
defendants are automotive companies, the local school district,
printers and various types of manufacturing companies. Nearly
all downtown Lodi companies that used certain types of
chemicals over the past 70 years are named. Each defendant is
being asked to clean up individual sites to which they are
connected.
Many of the newly listed defendants have
been involved in the four-year-old court battle, having been
brought into the case when the original defendants alleged
others were responsible for some of the contamination in
question.
Contamination was found in Lodi’s
drinking water back in the mid-1980s. 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 clean-up. That was the first
of many millions the city has spent on the case since then.
In assuming a lead role in the clean-up,
the city agreed to pursue legal action against potentially
responsible parties (PRPs) to enforce clean-up and to recover
the city’s legal costs. The strategy was to get the other
PRPs to pay for 100 percent of the clean-up, as well as pay for
the city’s litigation costs and attorney’s fees.
The city received a $16 million loan from
Lehman Brothers to finance the lawsuit. With an interest rate
reported as high as 25 percent, the city now owes Lehman
roughly $25 million and counting on that loan.
The goal was to shift the clean-up costs
to insurance companies. But after the city filed its lawsuit in
2000, the defendants and their insurance 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 Spring, MD, headquarters.
The California Regional Water Quality
Control Board has agreed that leaking sewers contributed to the
contamination. In a Clean-up Abatement Order (CAO) issued this
spring, the board said it had determined that past operations
of drycleaning facilities and a printing plant resulted in
discharge of perc to the soil and to city sewer lines which
subsequently leaked more perc to the soil and groundwater.
Meanwhile, the city’s legal strategy
was unraveling. In December of last year, 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 Brothers and suggested that the Wall Street
firm should forgive the debt owed by the city. 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.
At a June 4 hearing, Judge Damrell gave
the city, which is now represented by the San Francisco firm
Folger, Levin & Kahn, two months to revise its lawsuit,
which it did, just before the deadline, with 153 defendants
named. The city has budgeted another $2.2 million for legal
fees related to the case in the coming months.
The city has also taken action against its
former attorney and has filed suit against Lehman Brothers
seeking to get out of paying back the loan plus interest.
Lehman has counter-sued the city to collect the debt. The San
Joaquin County District Attorney’s Office and the FBI
were reportedly investigating potential criminal wrong-doing.
Despite millions spent, little has been
accomplished to solving the problem. The Regional Water Quality
Control Board noted in its Clean-up Abatement Order (CAO) that
Guild Cleaners has done investigation and some clean-up work,
while the city has performed a citywide initial investigation
and some groundwater monitoring, but there is still much
clean-up work to be done.
The CAO, which was issued to the City of
Lodi, Guild Cleaners, Odd Fellow Hall Association of Lodi, the
estate of Dwight Alquist, the Lodi News Sentinel and the
Beckman Capital Corp., makes all dischargers responsible for
the clean-up of groundwater and soil and establishes a time
schedule to do the work.
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