Law and the Environment

“Know when to hold ‘em, know when to fold ‘em”: When to Disclose All in an Environmental Criminal Investigation

Kenny Rogers sang a song years ago with the lines “Know when to hold ‘em, know when to fold ‘em.” While referring to a poker game and a life lesson, I was reminded of the song in a recent criminal investigation a client was facing.  In these investigations, you always have to decide how much you will volunteer versus waiting on specific requests from environmental criminal investigators or attorneys.Making the decision on how much to volunteer is a true judgment call.

In some cases, like the one I just worked on, you have to decide if the facts demonstrate a clear lack of criminal intent or knowing violation in the case of most state and environmental statutes.  Some are based on strict liability or negligence, but most are “knowing” violations.  The line between civil and criminal enforcement is often largely a matter of enforcement discretion by environmental agencies or attorneys, prosecutors, agency attorneys, or district attorneys.

Evaluating the facts and circumstances, and how they may be perceived by the individuals involved is critical.  Different people will see matters differently.  One sees something as a mistake, others as an intentional, knowing act.

Sometimes this may mean federal and state agencies, sometimes two or three.  Occasionally, a local city or county investigator may want to be involved.  In addition to environmental agencies, in Texas EPA and the Texas Commission on Environmental Quality, you may face review by wildlife agencies such as the US Fish and Wildlife Service or the Texas Department of Parks and Wildlife.

In the right case, it can be productive to disclose the facts and make facilities available for tour by the investigators.  It can be effective to avoid a criminal investigation to disclose all and push for a decision that the matter should be referred to civil enforcement representatives, rather than being investigated by the criminal side of the agency house.

Often a rather early meeting and provision of documents and information may gain great confidence from the criminal investigators that the parties under review acted in good faith, but for whatever reason violated the law, even causing environmental damage.  Avoiding the criminal investigation can be more important for reputation of the entity and potentially even stock price.  Criminal environmental investigations tend to gain focus by the media and reverberate through the Internet and social media.  A turn from the criminal to the civil can avoid much of the damaging reputational impact.  For some parties that work with the government, criminal investigations can result in debarment from federal, state, or local contracts—with even greater damage than any fine.

When an event occurs that leads to a criminal investigation, a rapid legal analysis and strategy development is crucial.  Sometimes, it makes a significant difference if the alleged violator acts quickly and presents information and explanation before any subpoena or other request for information is received.  

The pro-active disclosure strategy does not fit every case. Sometimes waiting for any requests for information or documents is the best strategy.  Every instance must be considered based on its unique facts and actions by the entity’s or contractor’s employees.  

You have to “know when to hold ‘em, know when to fold ‘em.” I have found that in the right case, the full disclosure approach can turn a potentially damaging criminal investigation into a civil settlement of a small penalty.  

Debris and Contaminated Soil from Construction Site Can Lead to Major Problems and Expense

A few years ago, I received a call from a bankruptcy trustee, who said he had a environmental problem he was struggling to resolve.  It seems a company had developed a “mulch business” that had ultimately led to bankruptcy, and liquidation at that.  What may be surprising to some is the waste involved seems so innocuous at first thought.

The problem related largely to construction debris.

Construction debris and wood waste (including trees and branches) had been collected by the mulching company and placed over several acres.  The owner ultimately took the money to receive the material, but then abandoned the site and never mulched or did anything else with the material.  The city was very concerned about the growth of vermin and a substantial potential fire hazard.  Home and business owners nearby were very concerned. 

I was engaged by the trustee and the city to attempt to identify potentially liable parties who had brought the waste to the site or whose waste was brought there.  The owner had left all of the records for everyone who brought material, and we were preparing to file suit against all of those parties to try to recover the costs of addressing the acres of waste.

The city was able to get the Texas legislature to appropriate several million dollars, and the lawsuit was never filed--all those developers, building owners, contractors, and subcontractors lucked out. But they are not and will always be so lucky.

In another case, I represented a landowner whose land had become the dumping ground without their permission.  One trucker illegally dumped on it, and then within a short time, the word got out, and several acres were covered with wood, shingles, bricks, and soil.  What other wastes may have been mingled in or what contaminants were in soil was unknown.

The lesson is that construction waste can become a significant potential liability for the owner of the project or the contractors and subcontractors.  

Other cases have involved disposal of contaminated soil on an unknowing person’s land, who is looking for fill, or who, like my client, may not have wanted any material placed on their land.   

Recently, one my clients had a subcontracting trucking firm dump soil excavated from an area where contamination from a former underground storage tank had been located.  The soil had to be excavated for construction of a building.  The soil was supposed to go to a landfill, but the environmental consultant engaged to monitor the contractor and subcontractors noted several waste manifests did not come back from the designated landfill with signatures or any weight tickets. 

The issue of who is liable for this misplacement of affected soil, and what damages will arise for remediation costs and any property damages arises.  What about liability if the material is placed into wetlands, if there were fish kills?  Could it become a criminal matter?

The liability risks can grow, particularly if the state or federal government holds the owner liable and the construction contractor or sub contractors are unable or unwilling to cover the loss or address the issue.

 Solutions:

In representing clients preparing for and engaging in clearing, demolition, grading, and construction, I have found there are ways to try to avoid these risks and be prepared to manage them.  Some steps that can be taken to reduce the risk of incurring environmental liability for construction debris or soils management during a construction project:

•  Establish contractual provisions to address construction debris and soil management;
•  Ensure environmental laws and regulations are met;
•  Deal with safety issues for construction workers;
•  Consider environmental insurance for the project, negotiated to cover these risks;
•  Obtain indemnities from the contractor;
•  Understand what the state will allow for managing debris and affected soil on-site and off-site;
•  Develop a waste management or soil management plan, and have the state environmental agency review and, if they will, approve it;
•  Have a tracking process for hazardous and non-hazardous waste, that which must go to a landfill and to a site for unrestricted fill;
•  Engage an in-house person or outside environmental consultant to review and oversee the process to determine if waste manifests or trip tickets area coming back and are properly filled out.

Best practices in this area may save your company or entity a significant amount of money in avoiding some of the horror stories that can arise when construction debris or soil ends up in the wrong place. Trucking companies hauling debris or soil from construction sites are renowned for looking for the cheapest and easiest way of getting rid of the material.   A little preventative medicine may go a long way.

US Suprement Court in Refusing to Hear Ninth Circuit Case Adds to the Confusion over the Reach of Clean Water Act Jurisdiciton

Further fueling the confusion over the jurisdictional reach of the federal Clean Water Act, on February 20, 2007, the U.S. Supreme Court denied review of a case which considered whether the U.S. Army Corps of Engineers is authorized to restrict development on wetlands separated from adjoining streams and lakes by man-made ditches (Baccarat Fremont Developers LLC v. U.S. Army Corps of Engineers, U.S., No. 06-619, certiorari denied, 2/20/07).

Thus, an opinion by the U.S. Court of Appeals for the Ninth Circuit was allowed to stand that ruled the Corps of Engineers is not required to show a "significant hydrological and ecological connection" between wetlands and adjoining streams before it can exert authority over the wetlands (Baccarat Fremont Developers LLC v. U.S. Army Corps of Engineers, 425 F.3d 1150,(9th Cir. 2005).

In that case, the Baccarat Fremont Developers asked the Supreme Court for a ruling that the Ninth Circuit was required to issue a "redetermination" in light of Justice Anthony Kennedy's concurring opinion in Rapanos v. United States, U.S., No. 04-1034 (2006).

In Rapanos, Justice Kennedy urged that a "significant nexus" to waters of the United States must be established for jurisdiction over wetlands to exist under the act. Kennedy said a mere hydrologic connection should not be enough to establish a significant nexus in all cases. Whether an individual wetland significantly affects traditionally navigable waters should be the test, Kennedy wrote.

The government, in Rapanos, brought civil enforcement proceedings against a developer who had backfilled, without a permit, three Michigan wetlands lying near ditches that eventually emptied into traditional navigable waters.  The district court found federal jurisdiction over the wetlands because they were adjacent to waters of the United States.  The U.S. Sixth Circuit Court of Appeals affirmed, based on the hydrologic connections to the nearby ditches or the more remote navigable waters.  The Supreme Court vacated the Sixth Circuit’s opinion and remanded the case.

The Rapanos opinion was a five-to-four plurality decision, and, therefore, does not provide clear guidance to lower courts or regulated entities as to the scope of the CWA.  Justice Scalia, in an opinion joined by Chief Justice Roberts, Justice Thomas, and Justice Alito, wrote that intermittent and ephemeral streams are not covered by the CWA.   Thus, the Corps’ regulatory definition of “waters of the United States” was not a permissible construction of the statute.   Justice Kennedy wrote a concurring opinion that proposed an ambiguous test of whether a “significant nexus” exists as to waters that are, were, or may become navigable.   But Justice Kennedy provided little guidance as to how the “significant nexus” test would or should be applied in practice.

Because of the lack of clarity from the Supreme Court, lower courts have struggled with interpreting the implications of Rapanos.

The refusal to hear the Baccarat, which effectively lets the law of that case stand in the Ninth Circuit, adds to the confusion of the meaning of the Rapanos case.