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Lasdon, William S. (Estate of) - Order, March 1, 1994

Order, March 1, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of a Significant Threat to the Environment at an Inactive Hazardous Waste Disposal Site, Under Article 27, Title 13, of the Environmental Conservation Law of the State of New York (the "ECL") by

ESTATE OF WILLIAM S. LASDON,
Respondent.

Index Nos. W3-006-8101 (Harriman) and W3-006-8102 (Maybrook)

ORDER

This Order satisfies obligations under 6 NYCRR 375-2.1(b)(5) and resolves an appeal of the September 1, 1992 ruling of Administrative Law Judge ("ALJ") Edward Buhrmaster. It relates to two matters involving the Estate of William Lasdon (the "Estate" or the "Respondent") [(Index Nos. W3-006-8101 (Harriman) and W3-006-8102 (Maybrook)].

Appeal of ALJ Ruling

On March 25, 1988, counsel for the Estate and the Staff of the Department ("Staff") signed a document entitled "Stipulation of Issues." The document provided that, "William S. Lasdon, i.e. his Estate, was not named in these proceedings as an owner of an inactive hazardous waste site but as a `person responsible for the disposal of hazardous wastes' at Harriman and Maybrook based on his activities as an officer and director of Nepera Chemical Company." The Staff seeks to rescind this stipulation, have a determination made that it was never effective or amend the complaint to include additional theories of liability. On September 1, 1992, ALJ Buhrmaster issued a ruling (the "Ruling") that held that the stipulation was binding and could not be rescinded without mutual consent.

There are two ways in which the effect of the stipulation can be understood. In either event, it would not bar the prosecution of actions based other theories of liability.

The stipulation may have been used to clarify the scope of the original complaints issued on or about June 5, 1987 and June 8, 1987 respectively. If viewed as such, it contains no waiver of the Staff's right to seek amendments to the complaint at a later date to add other theories of liability. In the circumstances of this case, permission to amend the complaint would appropriately be granted.

At the time the complaint was filed, the Staff had not completed its investigation and was not in possession of all the information which would support the theories of liability which it now seeks to include. It is not necessary, as implied by the Estate, that the Staff complete investigating every aspect of the case before filing a complaint. Therefore, the additional information which the Staff later gathered does constitute new information. More importantly, the Estate has failed to show how it would be prejudiced if the Staff were permitted to amend the complaint.

Alternatively, the stipulation may be viewed as an agreement that the Staff would only pursue the estate on theories of liability explicitly stated in the stipulation. In this case, the question that must be resolved is whether such a stipulation is binding on the agency decisionmaker.

At the time the stipulation was executed, the Department's rules governing the proceeding brought pursuant to ECL 27-1313 provided that stipulations must be signed by the Commissioner (former 6 NYCRR 375.10). Although there is no explicit limit on stipulations that were subject to the rule, it is reasonably inferred from the text that only stipulations that would constitute final agency action were intended to be covered. Thus, a stipulation that, for example, agrees to limit the length of the direct testimony of witnesses would not need to be signed by the Commissioner in order to be effective.

In this case, the stipulation would preclude certain theories of liability with respect to the Estate. This would have the effect of foreclosing pursuit of a cause of action under ECL 27-1313 against the Estate based on these theories. As such, I find that the stipulation is one that was intended to be covered by the terms of former 6 NYCRR 375.10.

The Estate also argues that, even if the stipulation should have required the Commissioner's signature, the Department's attorneys had the apparent authority to enter into the stipulation and should not be permitted to argue now that their action was not authorized. This argument is unpersuasive.

Reliance on the apparent authority of the Department's attorneys requires that the appearance of authority to act be traceable to the principal [see Ford v. Unity Hospital, 32 N.Y.2d 464, 473 (1973)]. Here, the Estate has not shown that the its perception of the extent of Staff authority is traceable to any action on the part of the Commissioner.

The Estate has not even shown that this perception is traceable to actions of the Staff itself. There is no evidence showing that the Staff explicitly or implicitly indicated that the Commissioner's signature was unnecessary or that Staff made any misrepresentation regarding its authority. The attorneys for the Estate knew that they were dealing with agents of the Department. They had a duty to inquire as to the scope of the authority of the Staff [Ford, supra; Porges v. U.S. Mortgage & Trust Co., 203 N.Y. 181, 188-189 (1911)] and apparently failed to do so. This, all in the context of a regulation which, as a matter of public record, requires stipulations to be signed by the Commissioner.

Moreover, the doctrine of apparent authority is based on the equitable doctrine of estoppel. This doctrine forecloses a party from asserting something favorable to its claim or defense by virtue of some impropriety on its part. Yet, the law is clear that estoppel is not available against a government or its agencies except where a manifest injustice of an exceptional nature exists [Med. Transporter v. Perales, 77 N.Y.2d 126 (1990); Parkview Assocs. v. City of New York, 71 N.Y.2d 274 (1988)]. The Estate has not shown that discarding the stipulation would result in such a situation.

In summary, I conclude that the stipulation does not preclude the assertion of other theories under which the Estate may be liable as a responsible party.

Issues to Be Adjudicated

Under procedures which have been made applicable to this case, an order is to be issued which, among other things, identifies the genuine and substantial issues of fact or credibility for which the Staff and the Respondent will be afforded an evidentiary hearing [6 NYCRR 375-2.1(b)(5)(i)]. In effect, this procedure is analogous to one for summary judgment in civil litigation and the standards that have been developed to determine whether summary judgment is appropriate will be applied.

In the broadest sense, the issues that are relevant to this case concern (1) whether the hazardous wastes at the two sites in question (Harriman and Maybrook) constitute significant threats to the environment; and (2) whether Respondent Estate is a responsible party.

Harriman Site

Significant Threat to the Environment

Findings of Fact

Review of the pleadings demonstrates that the following facts are not in substantial dispute:

  1. Hazardous wastes at the Harriman site exist in both the soils and in groundwater.
  2. Of these hazardous wastes, benzene, chlorobenzene, toluene, cyanide and mercury are in the groundwater in concentrations that exceed ambient groundwater standards established by the Department. Benezene, a known human carcinogen, was found in concentrations 17,000 times the ambient groundwater standard.
  3. The parking lot at the site is not an impermeable barrier to water entering the soils. It will slow down the process of water percolating through any hazardous wastes in the soils but will not reliably prevent it.

Status of Interim Remedial Measures ("IRM"s)

Respondent also argues that interim remedial measures ("IRM"s), such as pumping and treating of groundwater, which are now in place, will prevent any further migration of contaminants from the site. However, when determining whether wastes at the site constitute a significant threat to the environment, the effect of interim control measures cannot be considered. In the first instance, these measures reflect artificial site conditions since there is no assurance that the IRMs will continue. Indeed, IRMs are impermanent by their very nature.

Moreover, at sites where there are multiple potential responsible parties, the actions of some of these parties to implement IRMs should not inure to the benefit of the other parties who have elected to do nothing. The government should not be placed in a position of having to choose between taking IRMs to protect the environment and public health and leaving site conditions in a deteriorated state simply to demonstrate that there is a significant threat to the environment. Such a result is inconsistent with the remedial nature of ECL Article 27 Title 13.

Hence, when determining whether the site constitutes a significant threat to the environment, no consideration will be given to the effect that IRMs have on site conditions.

Conclusion

While there are outstanding questions of fact concerning some of the potential impacts of hazardous waste at the site, the facts detailed above demonstrate that the site conditions are a significant threat to the environment.

The hazardous wastes at the site are responsible for a significant deterioration of groundwater quality. They are causing significant violations of ambient groundwater standards. Benzene, for instance, a known human carcinogen, is present in groundwater in concentrations that exceed the ambient standard by a factor of 17,000. Thus, hazardous wastes at the site are preventing groundwater resources from being employed for their best usage, namely as a source of potable water supply (see 6 NYCRR 701.15). They also prevent use of groundwater for other purposes as well (e.g., irrigation).

Accordingly, in consideration of the factors contained in 6 NYCRR 375-1.4(b), I conclude that facts which are not in substantial dispute show that hazardous wastes disposed of at the site and coming from the site are currently resulting in significant environmental damage and that it is reasonably foreseeable that these wastes will continue to result in significant environmental damage in the future. Based on this conclusion, I find that the hazardous wastes at the site constitute a significant threat to the environment [6 NYCRR 375-1.4(a)(2)].

Responsible Party

All of the Staff's allegations concerning whether the Respondent is a responsible party are premised on the Respondent being the owner or operator of the site or any portion thereof at the time any hazardous waste disposal occurred [see 6 NYCRR 375-1.3(u)(2)]. The two components - (1) owner and operator status; and (2) when hazardous waste disposal occurred - will be addressed separately.

Owner or Operator Status

The alleged liability of the Estate as an owner and operator of the Harriman site is based on a number of legal theories. These theories are reviewed below, together with an analysis as to what genuine and substantial issues of fact or credibility, if any, are presented.

1. William Lasdon personally owned three parcels of the Harriman site during the period from March 25, 1942 to August 7, 1942. No issue of his ownership status is presented during this period.

2. During the period from August 7, 1942 to September 28, 1945, the same three parcels were owned by Nodsal Realty Corporation ("Nodsal"). Nodsal was owned by Harriman Chemical Company ("Harriman Chemical"), a New Jersey limited partnership. During this period, William Lasdon was a general partner of Harriman Chemical.

William Lasdon would be liable as an owner of the site if the corporate entity, Nodsal, can be disregarded. The corporate form may be disregarded under existing case law if certain factors are present. Among the factors that are considered are whether any assets exist apart from personal funds; whether the corporation has any purpose other than serving as a conduit for personal investment; and whether the corporation has any traditional characteristics such as maintenance of corporate books and management by designated officers and directors [Lasidi, S.A. v. Financiera Avenida, S.A., 73 N.Y.2d 947 (1989)]. Courts have also disregarded the corporate entity and held an individual personally liable where the individual controlled the corporate entity without corporate formalities; where the corporate entity was undercapitalized; where the individual commingled corporate funds with his own; and where the individual operated the corporate entity for his own personal purposes [Planned Consumer Marketing, Inc. v. Coats & Clark, Inc., 127 A.D.2d 355, (1st Dept., 1987)].

The pleadings demonstrate that Nodsal was incorporated but do not provide enough information to be dispositive on this question. Therefore, there is a substantial issue of fact as to whether the corporate entity Nodsal can be disregarded under established principles of law.

3. During the period September 28, 1945 to May 3, 1957 the same three parcels were owned by Pyridium Corporation ("Pyridium") or its successor, Nepera Chemical Co. Inc ("Old Nepera"). Until January 4, 1950 the company was operating as Pyridium and thereafter as Old Nepera.

From May 25, 1948, until May 3, 1957, two additional parcels were owned by Pyridium or its successor, Old Nepera. The five parcels together constitute the Harriman site as defined in the complaint. From the beginning of this period until December 1956, William Lasdon was the principal shareholder, president and chairman of the board of directors of Pyridium and Old Nepera.

William Lasdon would be liable as an owner of the site if either of the corporate entities, Pyridium or Old Nepera, could be disregarded according to the principles discussed above. However, the undisputed facts demonstrate that these corporate entities cannot be disregarded. For instance, the record shows that both corporations issued stock, appointed officers and directors and observed the corporate formalities (e.g., board meetings were held and resolutions were adopted). Therefore, I conclude that Respondent is not liable on this theory.

4. During the period March 25, 1942 through May 3, 1957, Pyridium or its successor, Old Nepera, were operators of the site or a portion of the site identified above as either owned by William Lasdon, Nodsal, Pyridium or Old Nepera. Although the corporate entities, Pyridium and Old Nepera, cannot be disregarded, William Lasdon is potentially liable as an operator of the site. At all relevant times, William Lasdon was the principal shareholder, president and chairman of the board of directors of Pyridium and Old Nepera.

There are few cases that have been decided under ECL 27-1313 or its implementing regulations (6 NYCRR Part 375). However, the relevant portion of their provisions relating to the identification of "responsible parties" are virtually identical to those found in the Comprehensive Environmental Response, Compensation and Liability Act, 42 USC 9601 et.seq. ("CERCLA"). Therefore, the decisional law which interprets the CERCLA provisions may be applied, as acknowledged by the parties in the pleadings.

Under federal case law, it is clear that personal liability as an operator can extend to corporate officers, directors and shareholders under certain circumstances, even where the traditional piercing of the corporate veil is unavailable [U.S. v. Northeastern Pharmaceutical and Chemical Co. ("NEPACO"), 579 F. Supp. 823 (W.D. Mo. 1984), aff'd in part revs'd in part 810 F.2d 726 (8th Cir. 1986) cert. den. 484 U.S. 848 (1987)]; U.S. v. Allied Chemical Corp., 587 F.Supp. 1205 (N.D. Cal. 1990)]. Such persons have been held personally liable based on several criteria. Most important are those that relate to the amount of control and authority the person has in the corporation (NEPACO, supra), the degree to which the person is responsible for managing waste disposal operations [U.S. v. Wade, 546 F.Supp. 785 (E.D. Pa. 1983); NEPACO, supra; U.S. v. Ward, 618 F.Supp. 884 (D.C.N.C. 1985); Lincoln Properties Ltd. v. Higgins, 823 F.Supp. 1528 (E.D. Cal. 1993)] and the ability to prevent and control the damage caused by the disposal of hazardous waste [U.S. v. Mobil Oil Corp., 464 F.2d 1124 (5th Cir. 1972); Kelly v. Arco Industries Corp., 723 F.Supp. 1214 (W.D. Mich. 1989)].

At all relevant times, William Lasdon was the principal shareholder, president and chairman of the board of directors of Pyridium. The company was a closely held family business and he was involved in and made all major decisions affecting the company.

While the above facts may prove to be adequate to find William Lasdon personally liable based on the principles discussed above, this determination would better be made with a further development of record on other relevant factors. Further inquiry is necessary concerning the degree to which he knew of, should have known of or controlled waste disposal activities at the site, assuming they are shown to have occurred during his tenure. If no direct connection between William Lasdon and waste disposal is made, the pervasiveness of his control over all corporate activities will also need to be further developed on the record.

When Hazardous Waste Disposal Occurred

During the entire period in question, from March 25, 1942 until May 3, 1957, there is a substantial issue of fact and credibility concerning whether any hazardous wastes were disposed of at the site. This issue has two aspects to it. First, it is undisputed that during the period from September 28, 1945 to May 3, 1957, solid wastes were burned in the so-called burn pit. There is a fact issue concerning any of those solid wastes were hazardous and, if so, whether any residues were also hazardous wastes. The second fact question is whether there was hazardous waste disposal in any other area of the site during the entire period from March 25, 1942 to May 3, 1957.

Maybrook Site

Jurisdictional Issue

As a threshold question, the Estate has raised the issue of whether the materials disposed of at the Maybrook site are definitionally "hazardous wastes." In order to be a hazardous waste, a substance must first meet the definition of "waste" [ECL 27-1301(1)]. The definition of "waste" excludes "...solid and dissolved material in ... industrial discharges which are point sources subject to permits under article seventeen of this chapter" [ECL 27-1301(5)].

Respondent points out that an arm of the New York State Department of Health, the Water Pollution Control Board, issued a permit to Old Nepera which authorized and permitted the discharge of waste-like materials into the lagoons at the Maybrook site. The Respondent maintains that this permit is the predecessor of the one now issued pursuant to ECL Article 17. It further maintains that this permit was in effect during the entire time that William Lasdon was associated with Old Nepera.

Since this question was raised in the Respondent's answer as an affirmative defense, the Staff has not had an opportunity to address this question. Therefore, the Staff will be given an opportunity to file a response brief. A subsequent order will then resolve this issue.

Significant Threat

Findings of Fact

Once again, a review of the pleadings shows that many of the relevant facts are not in substantial dispute.

  1. Hazardous wastes at the site exist in both the soils and in groundwater.
  2. Of these hazardous wastes, benzene, chlorobenzene, toluene and xylene are in the groundwater in concentrations that exceed ambient groundwater standards established by the Department.
  3. The lagoons at the site were never lined or capped and therefore their contents are exposed to the natural elements. Under these conditions, rainwater that does not run off the site would be free to infiltrate into the contaminated soils and percolate through to groundwater.
  4. There is overland flow of site surface water towards both the Otterkill and Beaverdam Brook, both of which are protected water bodies.

Conclusions

There are outstanding questions of fact concerning some of the potential impacts of hazardous waste 1 For the sake of ease of discussion, the materials at the site are referred to as hazardous wastes even though it is acknowledged that the definitional issue is outstanding. at the Maybrook site. However, the facts detailed above demonstrate that these hazardous wastes are a significant threat to the environment.

The hazardous wastes at the site are responsible for a significant deterioration of groundwater quality. They are causing significant violations of ambient groundwater quality standards and thus preventing groundwater resources from being employed for their best usage, namely as a source of potable water supply (see 6 NYCRR 701.15). They also prevent use of groundwater for other purposes as well (e.g., irrigation).

Hazardous wastes have also been detected in on-site sediment and soils in significant concentrations. They are not contained and there are demonstrated pathways for these contaminants to migrate into protected surface water bodies and groundwater.

In consideration of the factors contained in 6 NYCRR 375-1.4(b), I conclude that facts which are not in substantial dispute show that hazardous wastes disposed of at the site and coming from the site are currently resulting in significant environmental damage and that it is reasonably foreseeable that these wastes will continue to result in significant environmental damage in the future. Based on this conclusion, I find that the hazardous wastes at the site constitute a significant threat to the environment [6 NYCRR 375-1.4(a)(2)].

Responsible Party

All of the Staff's allegations concerning whether the Respondent is a responsible party are premised on the Respondent being the owner or operator of the site or any portion thereof at the time any hazardous waste disposal occurred [see 6 NYCRR 375-1.3(u)(2)]. The two components - (1) owner and operator status; and (2) when hazardous waste disposal occurred - will be addressed separately.

Owner or Operator Status

The alleged liability of the Estate as an owner and operator of the Maybrook site is based on two legal theories. These theories are reviewed below, together with an analysis as to what genuine and substantial issues of fact or credibility, if any, are presented.

  1. The first theory is identical to the third theory of liability discussed with respect to the Harriman site, i.e. that the corporate entity (in this case Old Nepera) can be disregarded and that therefore William Lasdon should be considered the owner of the site at all relevant times. Since the facts pertaining to this theory in the context of the Maybrook site are no different from those above, no further discussion is required here. This theory cannot be sustained.
  2. The second theory is similar to the fourth theory of liability discussed with respect to the Harriman site, i.e. that the nature of William Lasdon's role in Old Nepera as principal shareholder, president and chairman of the board of directors makes him liable as an operator of the site.

In the case of the Maybrook site, the facts differ from the Harriman site. The Maybrook site was purchased by Old Nepera on October 22, 1952. The site was continuously owned by Old Nepera through May 3, 1957.

Disposal began at the Maybrook site on November 7, 1952. A permit to operate four waste lagoons was issued to Old Nepera by the Water Pollution Control Board on January 13, 1953. The permit authorized the discharge of industrial waste effluent generated at Harriman to the groundwater.

From the date that the Maybrook site was purchased by Old Nepera until December 1956, William Lasdon was the principal shareholder, president and chairman of the board of directors of Pyridium and Old Nepera. The Maybrook site, one of only two sites owned by Old Nepera, was purchased for the sole purpose of serving as a disposal area for wastes generated at the corporation's operating site (Harriman). It became necessary to acquire the site when the previous disposal site, owned by a third party in New Jersey, became unavailable.

William Lasdon's roles with respect to Old Nepera make it inconceivable that he was not well aware of the reason for the Maybrook site's purchase and subsequent use. Regardless of whether he oversaw the details of waste disposal, he must have understood that the Harriman facility needed to dispose of its hazardous waste in order to operate. Further, given William Lasdon's role with respect to Old Nepera, it is inconceivable that he was not involved in the decision to buy the Maybrook site, the only site owned by the company apart from the site of its operating plant, or that he did not know that the sole purpose of the site was to dispose of industrial wastes generated at Harriman.

Therefore, under the principles articulated above, I conclude that during his tenure as principal shareholder, president and chairman of the board of directors of Old Nepera, William Lasdon was an operator of the site.

When Hazardous Waste Disposal Occurred

If the definitional exemption for the materials disposed of at the Maybrook site is inapplicable, there is also no issue concerning the fact that hazardous wastes were disposed of at the site during the time period in question. In such a case, William Lasdon would be a responsible party.

NOW, THEREFORE, HAVING CONSIDERED THIS MATTER, IT IS ORDERED THAT:

  1. The September 1, 1992 ruling of ALJ Buhrmaster is overturned. The Staff may attempt to show that William Lasdon was an owner and/or operator of either site based on any legal theory that it can support.

Determination of Issues

  1. I make the following findings and conclusions with respect to the genuine issues presented by the pleadings. Where a genuine issue of fact or credibility is found, a hearing will be held where the Staff and Respondent will be afforded an opportunity to present evidence and to cross-examine witnesses.
    1. There is no substantial issue of fact or credibility about whether the hazardous wastes disposed of at the Harriman site constitute a significant threat to the environment. Based on the facts cited above, I find that they do constitute a significant threat to the environment.
    2. There is no substantial issue of fact or credibility about William Lasdon's ownership of a portion of the Harriman site from March 25, 1942 to August 7, 1942.
    3. There is a substantial issue of fact and credibility about whether, under applicable principles of law, the corporate form of Nodsal can be disregarded. If it can, William Lasdon, as a general partner of Harriman Chemical Company, the sole owner of Nodsal, would an owner of the portion of the Harriman site from August 7, 1942 to September 28, 1945.
    4. There is no substantial issue of fact or credibility about whether, under applicable principles of law, the corporate form of either Pyridium or Old Nepera can be disregarded. The corporate forms of both corporations must be respected and accordingly William Lasdon cannot be held to be an owner of the Harriman site or any portion thereof from September 28, 1945 to May 3, 1957.
    5. There is a substantial issue of fact and credibility about whether, under applicable principles of law, William Lasdon was an operator of the Harriman site from March 25, 1942 to May 3, 1957.
    6. There is a substantial issue of fact and credibility about whether hazardous wastes were disposed of at the Harriman site from March 25, 1942 to May 3, 1957.
    7. There is no substantial issue of fact or credibility about whether the materials alleged to be hazardous wastes and which were disposed of at the Maybrook site constitute a significant threat to the environment. Based on the facts cited above, I find that they do constitute a significant threat to the environment.
    8. There is no substantial issue of fact or credibility about whether, under applicable principles of law, the corporate form of either Pyridium or Old Nepera can be disregarded. The corporate forms of both corporations must be respected and accordingly William Lasdon cannot be held to be an owner of the Maybrook site or any portion thereof from October 22, 1952 to May 3, 1957.
    9. There is no substantial issue of fact or credibility about whether, under applicable principles of law, William Lasdon was an operator of the Maybrook site from October 22, 1952 to May 3, 1957. I find that he was an operator of the site during this time period.
    10. There is no substantial issue of fact or credibility about whether the materials alleged to be hazardous wastes were disposed of at the Maybrook site during the period October 22, 1952 to May 3, 1957.
  2. There is a legal issue about whether the materials that were disposed of in the lagoons at the Maybrook site were "wastes" within the definition of ECL 27-1301(5). The Staff will be afforded an opportunity to file a reply brief solely to address this issue. The reply will be due fifteen (15) business days after the service of this Order.
  3. Edward Buhrmaster is designated as the ALJ for the hearing that will be held.
  4. The hearing shall commence at 10:00 A.M on April 5, 1994 at the Tarrytown sub-office of the Department, 200 White Plains Road, Fifth Floor, Tarrytown, N.Y. unless modified by ALJ Buhrmaster.
  5. Upon receipt of the record of the hearing, ALJ Buhrmaster shall submit a hearing report to me within sixty (60) days.

NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION

/s/
LANGDON MARSH
EXECUTIVE DEPUTY COMMISSIONER
Dated: March 1, 1994
Albany, New York

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