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Bath Petroleum Storage, Inc. and EIL Petroleum, Inc. - Ruling 2, January 9, 1998

Ruling 2, January 9, 1998

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

the proposed permit modification of
the State Pollutant Discharge Elimination System (SPDES)
Permit No. NY-0004278 to BATH PETROLEUM STORAGE, INC., a subsidiary of EIL PETROLEUM, INC.

ALJ RULINGS ON

MOTIONS TO QUASH BPSI SUBPOENA

DEC Project No.

8-4624-00008/00001

Summary

In this ruling, I grant the motions of the Coalition for Resources and Environment of the Southern Tier, Inc. (CREST) and Market Hub Partners (MHP) to quash the subpoena duces tecum of Bath Petroleum Storage, Inc. (BPSI), the permittee, that was served upon Stewart N. Thompson, a geologist with Acres International (Acres).

Background

In November 1996, Department staff initiated a permit modification with respect to BPSI's SPDES permit based upon its view that BPSI had changed operations at the facility. This proposed modification entails the reclassification of the facility from a non-significant industrial discharger to a significant minor industrial discharger, requiring the submission of monthly discharge monitoring reports. In addition, staff propose that BPSI adopt the use of a mass balance formula for sampling purposes. Staff's stated purpose for these modifications is to ensure that BPSI is meeting the parameters set forth in its permit and that its discharge conforms with water quality standards applicable to the Cohocton River. Based upon its objections to these two modifications, BPSI requested a hearing, and a legislative hearing and issues conference were held in Bath on February 13, 1997. I issued a ruling on February 25, 1997 in which I concluded that a hearing should be held on the two proposed conditions. This ruling was confirmed by Deputy Commissioner Donohue's Interim Decision of March 26, 1997. In addition, the Interim Decision confirmed my ruling to grant CREST full party status.

On or about April 8, 1997, the parties submitted lists of their witnesses.

While the hearing was scheduled for early May 1997, the hearing dates were adjourned several times as staff and BPSI entered into a period of negotiations that ended without an agreement in August 1997. While in August 1997, the staff and BPSI representative Christopher McGrath agreed that the issue of the facility's classification was no longer in issue, BPSI now maintains that it does wish to continue to challenge this status at the hearing. Accordingly, the change in classification will be heard with respect to whether the company's processes have changed to a degree mandating such modification See, Issues Ruling, p. 11, February 25, 1997. During September, staff substituted its counsel with Assistant Regional Attorney Lisa Perla Schwartz and in October, BPSI retained an attorney, Ronald Sinzheimer, to represent the company in the upcoming hearings . Also in October 1997, staff determined that it was appropriate to modify the permit further by changing the sampling location to better reflect the mixing conditions in the Cohocton River. BPSI objected to the change in sampling location and accordingly, I determined that this issue would be heard at the hearing. In addition, I agreed to allow BPSI a limited period of discovery to address solely matters related to the change in sampling location. Mr. Sinzheimer has also informed this office that BPSI made a Freedom of Information Law request of staff in August 1997. While staff provided BPSI with documents in response, staff also withheld documents and BPSI has alerted the parties and me of this situation which is the subject of another motion by BPSI. The change of counsel and the additional proposed modification also led to an adjournment of the hearing date until January 13-15, 1998.

In a conference call held on December 23, 1997, the parties discussed, among other things, BPSI's subpoena of Stewart N. Thompson and the records of Acres International and the motions by CREST and MHP to quash. A schedule was set to allow for the response of BPSI to the motions by January 6 and for replies by January 9, 1998. In my follow-up letter dated December 24, 1997, I requested that the parties serve their papers on the law firm of Wiley, Rein & Fielding representing MHP and I also shortened the time for replies to January 8 in order to better accommodate the hearing schedule. On January 7, this office received BPSI's papers in opposition to the motions to quash. By facsimile transmission, CREST filed its reply on January 8, 1998.

BPSI's Subpoena Duces Tecum

On or about December 15, 1997, BPSI served a subpoena duces tecum on Stewart N. Thompson of Acres International Corporation requiring his attendance at the January 13 hearing to give testimony and to produce documents. Mr. Thompson is a geologist employed by Acres which is a consulting firm. A number of experts associated with Acres, including Mr. Thompson, provided affidavits in support of CREST's petition for party status in these proceedings. Mr. Thompson's affidavit addressed issues outside the scope of this permit modification proceeding such as subsidence and CREST did not name Mr. Thompson as one of its witnesses for the upcoming hearing. In response to the subpoena, CREST and Market Hub Partners requested, by letter, that BPSI withdraw the subpoena on a number of grounds. Based upon BPSI's decision not to comply with these requests, these parties moved before me for an order quashing the subpoena.

In addition to Mr. Thompson's testimony, BPSI's subpoena seeks:

copies of all documents prepared for CREST relating to BPSI.copies of correspondence between Acres and CREST. copies of correspondence between ACRES and DEC relating to BPSI. time sheets for all Acres personnel reflecting work for BPSI.copies of bills submitted for the benefit or use by CREST related to BPSI.copies of checks reflecting payment to Acres for services rendered for CREST. copies of correspondence between CREST and anyone associated with MHP. copies of underlying data utilized to prepare affidavits attached to CREST's petition. documents reflecting conversations between Acres personnel and DEC, CREST, MHP. documents relating to work performed by Acres for MHP related to BPSI.

CREST's Motion to Quash

On December 24, 1997, I received a notice of motion to quash BPSI's subpoena by CREST. And, on December 31, 1997, I received CREST's memorandum of law in support of this motion. In these papers, attorney Knauf raises many objections to the subpoena. CREST filed a reply letter brief on January 8, 1998. In these papers, Mr. Knauf argues that: the subpoena is over broad and in the nature of disclosure rather than a trial subpoena; the CPLR does not provide for expert disclosure in this manner; the time for disclosure has ended and therefore this request is untimely; the subject matter of the subpoena is irrelevant; the subpoena was procedurally improper because BPSI did not seek permission for use of this discovery device pursuant to 6 NYCRR 624.7(c), and it did not contain a provision that the ALJ may quash or modify it pursuant to 6 NYCRR 624.7(f); much of the requested material is privileged because it consists of attorney-client communications, attorney work product and/or material prepared for litigation; the subpoena is unconstitutionally vague and infringes upon the constitutional rights of CREST and its members to associate and petition for redress as guaranteed by the First Amendment, and compliance with the subpoena would be very burdensome.

Motion to Quash by Market Hub Partners

On behalf of MHP, the law firm of Wiley, Rein & Fielding filed a notice of motion on December 24, 1997 along with papers in support of the motion to quash BPSI's subpoena. MHP is developing a natural gas storage project in Tioga County, Pennsylvania and is a competitor of BPSI. Although MHP is not a party to the proceedings before the Department, it has participated in other regulatory proceedings concerning BPSI's project to develop a natural gas storage project at it facilities in Bath. MHP retains Acres and Mr. Thompson for work related to its Pennsylvania project as well as BPSI's proposal to store natural gas at its facility.

MHP objects to BPSI's subpoena on the grounds that: the subpoena is overly broad and is in fact a discovery mechanism rather than a trial subpoena; the primary focus of the subpoena -- the relationship between CREST, Acres and MHP -- is not relevant to the issues in this proceeding; the subpoena is defective pursuant to 6 NYCRR 624.7(f); the subpoena requires the production of privileged communications involving MHP's counsel that are potentially subject to attorney-client or attorney work product privileges and also contain confidential business information; the subpoena is unduly burdensome because it conflicts with a previously scheduled medical procedure of Mr. Thompson. Alternatively, MHP requests that the subpoena be modified to exclude documentation concerning MHP and that Mr. Thompson be excused from giving any testimony concerning work related to MHP.

BPSI's Position

As stated during the conference call on December 23, BPSI maintains that the information subpoenaed is relevant to the proceedings because it reflects on the credibility of the CREST experts. In the papers BPSI submitted in opposition to the motions to quash, the company stresses the ties among MHP, CREST and Acres International as the basis for the information it seeks in the subpoena. Attorney Sinzheimer states in his cover letter dated January 6 that there is an inherent conflict created by this relationship that may require the disqualification of Acres witnesses on behalf of CREST.

In response to the other arguments of MHP and CREST, BPSI argues that these parties have not demonstrated that any of the requested documents are privileged. Specifically, BPSI maintains that items such as bills and time sheets are not privileged because they contain collateral information to which the privileges of attorney-client and attorney work product are not applicable. And, BPSI states that any materials that went between CREST and MHP or other third parties would not be protected by any privilege as such release would constitute a waiver of any claim of confidentiality. And, BPSI argues that CREST has no proprietary interest in materials relating solely to MHP and likewise, MHP has no such interest in documents concerning CREST. BPSI posits that the work product doctrine is inapplicable to materials that were not prepared specifically for the upcoming proceedings and that the attorney-client privilege does not extend to the facts contained in such communications. In response to the claims of CREST and MHP that the subpoena was procedurally invalid, BPSI maintains that the subpoena is the appropriate vehicle to ensure that these documents be made available for ruling as to their use at hearing. In addition, BPSI states that the omission of the notice to quash "should not vitiate the validity of the subpoena" due to lack of prejudice to the parties. With respect to the breadth of the subpoena, BPSI argues that it subpoenaed Mr. Thompson in his capacity as managing partner of Acres rather than as a geologist and his availability was not relevant because another employee of Acres could substitute.

Discussion

Section 624.7(f) of 6 NYCRR provides that any attorney of record in a proceeding has the power to issue subpoenas. A subpoena must give notice that the ALJ may quash or modify the subpoena pursuant to the standards set forth under CPLR Article 23. Pursuant to 6 NYCRR 624.8(b)(1)(v), the ALJ has the authority to quash and modify subpoenas.

In New York, expert testimony may not be subpoenaed. Gilley v. the City of New York, 69 NY2d 509, 511-512 (1987). Upon request, as part of disclosure, parties are required to provide the identity of their expert witnesses, the expert's qualifications, the subject of the testimony and a summary of the basis for the expert's opinion. Section 624.(b) references CPLR 3101(d)(1) with respect to witness disclosure. CPLR 3101(d). In the BPSI subpoena, the permittee is seeking primarily information concerning the relationship among CREST, Acres International, and MHP, which is not expert testimony except to the extent that it seeks the underlying data related to the affidavits that accompanied CREST's petition for party status.

The subject of the subpoena raises the threshold question, however, of the relevancy of the subpoenaed materials/testimony to the hearing. As stated above, the issues in this proceeding are the applicability of the mass balance formula, the change in industrial classification, and the appropriateness of the change in sampling location. As also noted above, during the conference call of December 23, attorney Sinzheimer stated that the materials requested in the subpoena related to the credibility of CREST's witnesses. At the legislative hearing and issues conference, Mr. McGrath, on behalf of BPSI, expressed the view that CREST's consultants were paid by BPSI's competitor MHP and thus, their opinions should be given little weight. A number of other speakers maintained that MHP was behind CREST's efforts and that the competition by MHP was the real motivation for DEC's proposals to modify BPSI's SPDES permit. However, I found in my ruling that CREST's petition for party status was supported by individuals residing in the community who may be affected by BPSI's activities and therefore, had adequate environmental interest pursuant to 6 NYCRR 624.5(b)(I), (d)(iii). BPSI did not appeal any aspect of this February 25, 1997 issues ruling.

No party has disputed that the Acres experts are retained by MHP. In fact, in its motion papers to quash BPSI's subpoenas, MHP states that Acres has been retained specifically to examine activities by BPSI. It is a routine practice for parties to retain experts for remuneration to present their positions during litigation. The fact that they are paid by a party is not surprising and cannot serve alone as a basis to question the credibility of an expert's testimony. Here, the fact that a competitor has paid consultants who are participating in these proceedings on behalf of an intervenor is also alone insufficient to find CREST's witnesses suspect or without merit. BPSI's decision to raise the relationship of the CREST witnesses to MHP in this proceeding may be appropriate to a degree. However, any expert's testimony must be evaluated primarily based upon the expert's qualifications and whether the facts and analysis presented are borne out by the evidence as a whole. Since the relationship among CREST, MHP and BPSI is marginal to the issues of the correctness of sampling location, industrial classification, and the application of the mass balance formula, the subject of BPSI's subpoena is largely irrelevant to these proceedings. With respect to Mr. Sinzheimer's comments regarding a conflict raised by the participation of Acres International experts, I fail to see any. Again, it appears routine that consulting companies may work for competitors in the same industry. I am unaware of any conflict that is raised by such actions. Assuming such conflict exists, this administrative proceeding is not the forum to resolve it. And, to the extent it has any relevance, I find that due to the fact that there is no contest as to the status of these experts, the admission of any of the subpoenaed material would be merely cumulative and tangential and therefore, will not be allowed. See, 6 NYCRR 624.8(b)(x).

As stated by CREST and MHP, BPSI has requested a large amount of material in its very broad subpoena. This subpoena is a request for disclosure rather than a trial subpoena. And, as noted by attorney Knauf, the time for disclosure has passed in this matter. See, 6 NYCRR 624.7(b)and my letter of November 3, 1997. BPSI has been involved in these proceedings for almost one year. After the issuance of the interim decision, there was ample opportunity for BPSI to make its discovery requests yet it did not do so. I cannot permit this request made so late in the proceedings and that is only related peripherally to the proceedings, to delay further this hearing that has been adjourned several times.

It appears from the categories of documents sought by BPSI that much of the requested documents, if not all, are subject to the privilege of attorney-client communication, are comprised of attorney work product and/or material prepared for litigation and/or contain trade secrets. Generally, I would agree with BPSI that the claims of CREST and MHP with respect to privilege are not sufficient to establish same. However, because this discovery request is untimely and I do not find the requested documents relevant to these proceedings, I will not burden the proceedings with a pointless exercise requiring Acres to identify each document in order to establish the privileges asserted. In addition, given the categories of documents requested by BPSI in its subpoena, there can be no question that many of the materials would be protected as next described. For example, documents prepared by Acres for CREST and correspondence relating to BPSI, would likely be comprised of material prepared for litigation that is not subject to disclosure pursuant to CPLR 3101(d). Moreover, this same privilege would attach to the data requested by BPSI that underlie the affidavits submitted by CREST as part of its petition. Documents relating to communications between Acres and MHP may be similarly privileged and as noted by MHP's attorneys, there are also documents requested that are comprised of trade secrets that are not subject to disclosure without a strong demonstration of need and perhaps also, a confidentiality agreement and/or order. Correspondence between counsel Knauf and Acres or CREST would be privileged pursuant to the attorney-client privilege, the work product exemption and possibly because it is material prepared for litigation. Thus, these records are not subject to disclosure or subpoena.

As for the time records and billing receipts sought by BPSI, these are not relevant to the proceedings. And, because many of the issues raised by CREST in the affidavits submitted in its petition were deemed irrelevant to these proceedings in the issues ruling, the data underlying them is also not germane to the hearing. As for those affidavits that are relevant, the request for data is untimely and beyond the scope of what is required by CPLR 3101(d)(1) and 6 NYCRR 624.7.

As for any documents that were generated by the Department and or sent to the Department by one of these parties, BPSI made a Freedom of Information Law request of the Department in August 1997. Based upon discussions we have held in several conference calls, I understand that staff has provided BPSI with a number of documents and is creating a list of documents that were withheld which identifies the subject of the document and the basis for denial. However, to the extent that BPSI has not been satisfied by the staff's response, there are appeal procedures set forth in 6 NYCRR 616.8 that BPSI could have availed itself of at an earlier time.

Conclusion

Based upon the above analysis, I find that BPSI's subpoena calls for information that is irrelevant to these proceedings. Moreover, the overly broad subpoena is truly an untimely disclosure device that calls for the production of materials that are most likely protected by privilege. Accordingly, I grant the motions of CREST and MHP to quash BPSI's subpoena.


/s/
By: Helene G. Goldberger
Administrative Law Judge

Dated: Albany, New York
January 9, 1998

TO: Ronald Sinzheimer, Esq.
23 Elk Street
Albany, NY 12207

Lisa Perla Schwartz, Esq.
NYSDEC - Region 8
6274 East Avon Lima Road
Avon, NY 14414

Alan J. Knauf, Esq.
Knauf & Craig, LLP
183 East Main Street
Suite 1250
Rochester, NY 14604

William B. Baker, Esq.
Wiley, Rein & Fielding
1776 K Street, NW
Washington, DC 20006

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