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Mt. Hope Asphalt Corp. - Ruling, June 22, 1994

Ruling, June 22, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

Consolidated Hearing In the Matter of Alleged Violation of Articles 19 and 27 of the New York Environmental Conservation Law and Parts 201 and 360 of Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York, and Proceedings to Revoke All Permits Now Held by and Deny All Applications for Permits Filed by,

MT. HOPE ASPHALT CORP., a/k/a
MOUNT HOPE ASPHALT CORP.

and

JAY BOYLE, PAUL ABRAMS AND FRANK PETROSKY,
Individually, and In Their Capacity as Officers of MT. HOPE ASPHALT CORP., a/k/a
MOUNT HOPE ASPHALT CORP,

Respondents.

RULING ON PREHEARING MOTIONS

By motion dated April 1, 1994, Respondents in this consolidated proceeding seek (i) a summary finding that the Verified Complaint herein should be dismissed; and (ii) a summary determination that Staff's combined notice of intent to revoke Respondent Mt. Hope's permit to construct a rehydration chamber, revocation of Mt. Hope's Beneficial Use Determination and denial of Mt. Hope's application for a permit to operate an air contamination emission source, was improper.

In response, Staff has filed papers in opposition, and additionally by its own motion dated April 15, 1994, has sought dismissal of Respondents' affirmative defenses, set forth in Respondents' amended answer. Replies and memoranda have been filed by the parties concluding with Staff's reply affidavit, received by this Office on April 29, 1994.

However, at the request of the parties, a determination on these motions was held in abeyance since May 9, 1994 to allow further settlement negotiations to occur. By telephone conference on May 31, 1994, the parties stated that negotiations had not produced a settlement. The parties renewed their respective motions for pre-hearing relief.

Background

Respondent Mt. Hope Asphalt Corp., a/k/a Mount Hope Asphalt Corp. ("Mt. Hope") has operated a facility at Nugent Drive, Calverton, New York using virgin materials to produce hot asphalt, for approximately 22 years. In or about August, 1991, Respondents sought and obtained a beneficial use determination ("BUD") and a permit to construct an afterburner referred to as Emissions Point [EP] 2, to upgrade the Mt. Hope facility for use of petroleum contaminated soil in hot asphalt production.

On January 14, 1993 to resolve certain violations and obtain authority to continue operating its air contamination emission source EP 2, Respondent Mt. Hope entered into a consent order with the Department (Consent Order #1-5074-92-06). The Consent Order required, among other things, the construction of a rehydration chamber, EP4. In July, 1993, Respondents sought and obtained a permit to construct the rehydration chamber as part of the facility upgrade (permit issued July 19, 1993, indicating an expiration date of July 18, 1994).

On September 15, 1993 Staff issued a combined Notice of Intent to Revoke Mt. Hope's Permit to Construct the EP4 rehydration chamber, revocation of Mt. Hope's BUD and denial of Respondent's application for a Permit to Operate EP2 (a modified facility including the afterburner and rehydration chamber, which was intended to process petroleum contaminated soil in the production of asphalt [hereinafter, "the combined notice"]).

The combined notice letter identifies five factors upon which Staff based its notice:

  1. violation of Permit to Construct (EP2) permit condition requiring only use of petroleum contaminated soil from sites identified by a Departmental spill number on 39 occasions;
  2. violation of Permit to Construct permit condition (EP2 afterburner) requiring maintenance and quarterly submittal of records to Staff, which submittals failed to identify 39 instances of receipt of contaminated soil at the facility;
  3. that commission of the two above referenced violations rendered the Beneficial Use Determination invalid on those dates, and therefore constituted operation without a solid waste management facility permit on those dates, in violations of ECL Article 27 and 6 NYCRR 360 ("Part 360");
  4. failure to comply with audit requirements imposed by the January 14, 1993 Consent Order; and
  5. Respondents' history of non-compliance, including a July 18, 1991 Consent Order; the January 14, 1993 Consent Order; and six criminal simplified informations issued to L.L.H. Recycled Aggregates (a company which shares ownership and operations with Respondent Mt. Hope).

By letter dated October 1, 1993, pursuant to 6 NYCRR 621 and 624 Respondents sought a hearing to review Staff's combined Notice of Intent to Revoke the EP4 permit to construct, BUD Revocation and Denial of Mt. Hope's application for a permit to operate EP2.

Separately, by Notice of Hearing and Verified Complaint dated September 17, 1993 Staff initiated an enforcement action against Respondents under 6 NYCRR 622, alleging violations by Respondents as summarized above. Respondents filed an Answer, dated October 6, 1993, asserting two affirmative defenses. By motion dated April 15, 1994, Staff sought dismissal of Respondents' affirmative defenses. On November 10, 1994, upon joint motion of Staff and Respondents, the two actions were consolidated into a single action, to proceed under 6 NYCRR 622.

By letter dated March 17, 1994, Respondents notified the Office of Hearings of a substitution of counsel representing Respondents. With consent of the ALJ, on April 4, 1994, Respondents' new counsel filed an Amended Answer, pleading five affirmative defenses. At the same time, Respondents also filed a motion seeking dismissal of the Complaint and a summary determination that Staff's Notice of Intent to Revoke, Revocation and Denial were improperly issued. Staff has filed an affirmation and memorandum of law in opposition to Respondents' motion to dismiss the Complaint, and both parties have filed replies.

In response to the Amended Answer, Staff renewed its motion to dismiss by filing an amended motion to dismiss Respondents' affirmative defenses seeking dismissal of all five of Respondents' affirmative defenses. As the parties have pointed out, Respondents have reiterated claims asserted as affirmative defenses in their motion to dismiss the Complaint. Accordingly, those claims are addressed in the context of analyzing Staff's motion to dismiss affirmative defenses.

Staff's Motion to Dismiss Affirmative Defenses

Respondents' first third and fourth affirmative defenses are based upon the same grounds asserted in their motion to dismiss Staff's Complaint (first affirmative defense, failure to follow condition precedent of Consent Order; third affirmative defense, res judicata; and fourth affirmative defense, failure to revoke the BUD [and consequently, that the alleged violations of Articles 27 and 6 NYCRR Part 360 have not occurred]).

The Consent Order

Respondents assert as their first affirmative defense (also as a basis for dismissal of the Verified Complaint), that provisions for stipulated penalties set forth in the January 14, 1993 Consent Order (Consent Order or Order) terminated Staff's authority to enforce against Respondents under authority of the ECL and limited Staff's enforcement authority to seeking stipulated penalties as set forth in the Consent Order.

The provision of the Consent Order cited by Respondents as limiting Staff's enforcement prerogatives (Decretal Paragraph Thirteen) specifically provides that the stipulated provisions apply only to violation of the Consent Order. Respondents cite no other language of the Consent Order which would otherwise limit Staff's enforcement prerogatives.

Staff's Verified Complaint is not based upon violation of the Consent Order, and therefore resolution of those allegations is not within the stipulated penalty provision of the Order. Instead, the Complaint allegations are based upon separate and distinct statutory authority. The January 14, 1993 Consent Order is not a bar to the present enforcement action. Therefore, this affirmative defense (and theory for dismissal of the Complaint) is rejected.

Res Judicata

Respondents assert as a third affirmative defense (also as a basis for dismissal of the Verified Complaint), that the doctrine of res judicata operates as a bar to Staff's enforcement action. Broadly speaking, the doctrine of res judicata ("a matter adjudged") represents the policy of avoiding duplicative litigation where there is no good reason for duplication. It is a common law doctrine which must be applied on a case-by-case basis. See, generally, Siegel, New York Practice [Second Ed., 1990].

In the present action, Respondents assert that the same series of transactions which form the basis of the Complaint also form the basis of the Consent Order and that Staff had knowledge of the facts underlying allegations stated in the Complaint prior to execution of the Consent Order. Analysis of the record shows this is not so.

The eighth "Whereas" paragraph of the Consent Order addressed and resolved violations of failing to submit reports required by Special Condition 5 of the Permit to Construct EP2, from October 30, 1991 to May 8, 1991 (the Consent Order reiterates this reporting requirement in Compliance Schedule "A").

Complaint paragraph B6 alleges that Respondents violated ECL Article 19 and 6 NYCRR 201.2(d) by the receipt and/or processing at the facility of petroleum contaminated soil originating in New Jersey which did not have a Departmental spill number, as required by Special Condition 5 of the EP2 Permit to Construct. Complaint paragraph B7 alleges that, from approximately November 13, 1991 to approximately September 17, 1992, Respondents failed to maintain logs which contained entries for each of the 39 shipments of New Jersey soil identified in paragraph B6, and failed to submit such logs to the Department on a quarterly basis. These charges, alleging receipt and processing of petroleum contaminated soil originating in the State of New Jersey, address matters separate and distinct from the reporting requirement sought to be addressed as one component of the Consent Order.

Both parties have relied upon the Commissioner's Decision in the matter of Steck and Philbin, et al. (Decision issued March 29, 1993) in support of their analysis on this issue. That Decision merely confirms that the legal principle of res judicata is applicable to administrative proceedings generally, and to the Department's proceedings in particular. The Decision further reiterates the well established corollary that application of res judicata is necessarily dependent upon case-by-case analysis. Therefore, the Steck and Philbin, et al. case is not determinative of a disposition in the present matter.

Respondents claim that res judicata applies because Staff had knowledge of Respondents' receipt of New Jersey shipments of petroleum contaminated soil prior to executing the Consent Order. However, whether Staff had some knowledge of Respondents' receipt of the New Jersey shipments prior to executing the Consent Order, is not dispositive of the res judicata determination. From Staff's administrative enforcement perspective, it would make sense to await review of reports required to be produced under the Consent Order.

In light of the above considerations, I find that the violations alleged in the Complaint are sufficiently distinct transactions - - i.e., reporting as compared to receipt of 39 consignments of soil - - and are not addressed by the Consent Order. Res judicata does not bar the Complaint in this action. Therefore, this affirmative defense (and basis for Respondent's motion for dismissal of the Complaint) is dismissed.

Beneficial Use Determination

Lastly, as its fourth affirmative defense (and as the final basis for its motion to dismiss), Respondents assert that since the consolidated hearing proceeds under Part 622 and Respondents have challenged Staff's revocation of the BUD, Staff carries the burden of proof on revocation of the BUD - - a burden which Staff has not yet demonstrated. Therefore, Respondents assert, Staff's allegations premised upon violation of Mt. Hope's BUD are premature.

In response, Staff asserts that validity of the BUD was extinguished by Respondents's alleged violation of conditions upon which the BUD was issued; that this occurred immediately upon Respondents' first instance of non-compliance and that this revocation continues until such time as the non-compliance is resolved.

Respondents raise procedural objections concerning the nature of the BUD both by motion to dismiss the Complaint and also in their third affirmative defense. However, these objections are not a basis for dismissal of the Complaint. Therefore, the motion to dismiss and affirmative defense regarding the BUD are converted into a request for a ruling on the nature and role of the beneficial use determination issued by Staff in this action. I take Respondents assertion of this affirmative defense to mean that Mt. Hope's receipt of the New Jersey shipments were activities contemplated within the BUD, as compared to Staff allegations that those activities require a solid waste management facility permit, pursuant to 6 NYCRR Part 360.

A BUD is a determination by Staff that a particular waste, waste stream or product made from a waste stream is a beneficial use of that waste. National Tire Compaction Service, Inc. (Commissioner Decision, June 18, 1993 [adopting findings, conclusions and recommendations of ALJ's Hearing Report regarding beneficial use determination]), cited in Respondent's Reply Memorandum of Law (at page 6). A BUD is not a permit, but instead is a determination by Staff which essentially exempts or excepts the activities or processes constituting the beneficial use from the 6 NYCRR 360 solid waste permit requirements. Therefore, it is logically inconsistent that a violation of Part 360 (or any other Departmental regulation) would affect the determination of beneficial use. As such, the BUD itself can not be violated. Instead, it is the underlying Part 360 requirements which may be violated, if the contested activities are shown to be outside those activities contemplated by the BUD. If the activities at issue are shown to be within those activities contemplated in the BUD, then no violation of Part 360 exists.

Staff's theory of automatic revocation of the BUD must be rejected. Staff cited no authority and provided no theory to support its position that the BUD was automatically revoked upon receipt of the first shipment of soil originating in New Jersey. The BUD contains no language which indicates it will be automatically revoked upon violation by Respondents. Nor does it explain how Respondents, even if they knew they were in violation of the BUD, could know that the result would be automatic revocation of the BUD. Minimal due process requires that the BUD would continue in effect at least until such time as Staff provided notice to Respondents of its determination revoking the BUD.

Staff essentially asserts that receipt of the 39 New Jersey soil shipments were outside the purview of the BUD, and Respondents assert that the contested activity is within the BUD. At hearing, the factual issues should focus on whether the contested activities were or were not contemplated within the meaning of the BUD. If so, then no Part 360 violations lie; if not, then Staff must show that the contested activities violated requirements of Part 360. Staff is directed to amend Section C of its Complaint, consistent with this ruling.

Staff's motion to dismiss this affirmative defense is denied. At hearing, Respondents may pursue an affirmative defense to demonstrate either that the contested activities were within the authority of the BUD, or alternatively, that the contested activities were consistent with the requirements of ECL Article 27 and 6 NYCRR 360.

Remaining Affirmative Defenses and Other Relief Sought

Respondents' second affirmative defense, alleging that the EP2 permit to construct requirement that the facility only receive petroleum contaminated soil from within New York State, raises a federal constitutional issue regarding restraint of interstate commerce. Such claims are not amenable to review in the administrative forum, but instead must be pursued in a court of competent jurisdiction.

Respondents' fifth affirmative defense claims that the individual Respondents are misjoined in this proceeding. Respondents' pleadings are not sufficient because Respondents have stated no facts or provided any explanation to support their conclusory claim. Further, Respondents concede in their affidavit in opposition to Staff's motion, that this fifth "affirmative defense" is not really an affirmative defense, but instead is merely intended to place Staff on notice of the purported misjoinder. Respondents move to withdraw this affirmative defense upon Staff's continued objection to it. In light of Staff's continued objection, I deem this affirmative defense withdrawn.

Respondents seek a ruling that Staff's combined notice was improper. Respondents assert that because Staff's first three reasons for revocation/denial are essentially identical to the allegations set forth in the Complaint, if its motion to dismiss is successful, then a determination should summarily issue, that these reasons for revocation/denial are improper. However, since this ruling does not recommend dismissal of the Complaint, Respondents' argument fails regarding the combined notice. Further I reject as inapposite, Respondents' argument in opposition to Staff's fourth and fifth reasons for revocation/denial.

Lastly, the previously scheduled conference telephone call of June 28, 1994 at 10 a.m. will address the issue of Staff's request for adjournment of a hearing in this action, pending a disposition on the criminal case.

Summary of Rulings

  1. Respondents' motion to dismiss the complaint is denied:
    1. The Complaint allegations are not based upon authority of the Consent Order, but are based upon separate and distinct statutory authority. The January 14, 1993 Consent Order is not a bar to the present enforcement action;
    2. The violations alleged in the Complaint are sufficiently distinct transactions from those addressed by the Consent Order - - i.e., "reporting" as compared to receipt of 39 consignments of petroleum contaminated soil. The doctrine of res judicata does not bar the present enforcement action.
    3. Respondents' motion to dismiss regarding the BUD is converted into a request for a ruling on the nature and role of the BUD in this action.
    4. The BUD is analogous to an exemption or exception from waste handling requirements. As such, the BUD itself can not be violated. At hearing, the issue should focus on whether the contested activities were or were not contemplated within the meaning of the BUD. If so, then no Part 360 violations lie. If not, then Staff must show that the contested activities violated requirements of Part 360. Staff is directed to amend Section C of its Complaint, consistent with this ruling.
    5. Staff's motion to dismiss Respondents' fourth affirmative defense is denied. At hearing, Respondents may pursue an affirmative defense to demonstrate either that the contested activities were within the authority of the BUD, or alternatively, that the contested activities were consistent with the requirements of ECL Article 27 and 6 NYCRR 360.
  2. Staff's motion to dismiss affirmative defenses is granted with respect to the first (consent order as limiting relief) and third (res judicata), which assert the same claims made by Respondents in their motion to dismiss the complaint.
  3. Respondents' second affirmative defense raises a federal constitutional issue and therefore may not be reviewed in the administrative forum.
  4. Respondents' motion to withdraw their fifth affirmative defense, regarding misjoinder of parties, is granted.
  5. Respondents' motion for a summary determination that staff's combined notice was improper, is denied. Because this ruling does not recommend dismissal of the Complaint, Respondents' first three arguments seeking a summary determination that Staff's combined notice was improper, fail. Respondents' two other arguments asserting improper notice of revocation/denial are rejected as inapposite.

/s/
Administrative Law Judge
June 22, 1994
Albany, New York

To: Sanford Strenger, Esq.
Farrell, Fritz, Caemmerer, Cleary
Barnosky & Armentano, P.C.
Attorneys for Respondents
EAB Plaza
Uniondale, New York 11556-0120

Lori Riley
Regional Attorney
NYSDEC Region 2
SUNY Campus - Building 40
Stony Brook, New York 11790-2356

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