Browing v. Flexsteel Indus., Inc.

959 F.Supp.2d 1134

Christopher BROWING, et al., Plaintiffs

v.FLEXSTEEL INDUSTRIES, INC., et al., Defendants.

Cause No. 3:11–CV–480 JD.

United States District Court,

N.D. Indiana,

South Bend Division.

March 25, 2013.

John D. Ulmer, Yoder Ainlay Ulmer & Buckingham LLP, Goshen, IN, William C. Wagner, Rodney L. Michael, Jr., Thomas A. Barnard, Taft Stettinius & Hollister LLP, Indianapolis, IN, for Plaintiffs.

Brian E. Casey, Kelly J. Hartzler, Robert G. Devetski, Eric Robley Thomason, Barnes & Thornburg LLP, Timothy W. Woods, J. Thomas Vetne, Jones Obenchain LLP, South Bend, IN, Charles M. Denton, II, Barnes & Thornburg LLP, Grand Rapids, MI, David E. Wright, Gregory P. Cafouros, James A. Knauer, Stephen A. Starks, Kroger Gardis & Regas LLP, Indianapolis, IN, James R. Byron, Thorne Grodnik LLP, Elkhart, IN, for Defendants.

MEMORANDUM OPINION AND ORDER

JON E. DEGUILIO, District Judge.

The plaintiffs here are residents or owners in a housing development subject to severe groundwater contamination allegedly caused by the defendants' unpermitted and unlawful dumping of industrial solvents and other hazardous waste. In addition to a toxic tort suit in Indiana state court, they filed a five count complaint in this court. Counts I and II seek treble damages under the Racketeer Influenced and Corrupt Practices Act (“RICO”) for an alleged scheme of mail and wire fraud and obstruction of justice designed to conceal the violations and responsibility from the EPA and the public. Counts III and IV seek injunctive relief under the Resource Conservation and Recovery Act (“RCRA”). In Count V, plaintiff Fred Lands, who owns the site on which defendants allegedly dumped their hazardous waste, seeks damages under the Indiana Responsible Property Transfer Law (“RPTL”). The various defendants have filed motions to dismiss all of the counts. This order addresses those motions relating solely to Counts III, IV, and V [DE 65, 66, 68, 69, 71, 72, 73, 91],¹ and the RICO claims will be addressed in a separate order. For the reasons below, the Court dismisses Count III of the amended complaint but denies the motion to dismiss with respect to Counts IV, and V.

I. BACKGROUND

The plaintiffs' complaint tells a story of flagrant violations of environmental laws, substantial contamination of groundwater with toxic, carcinogenic chemicals, and a concerted cover-up effort—though the last aspect does not enter much into today's chapter. Back in 1983, David Dygert (a defendant in the RICO counts, but not in Counts III–V) and his wife purchased vacant farmland adjacent to the Meadow Farms Subdivision in Elkhart Indiana. See Redacted First Amended Complaint, DE 24, ¶ 105. They leased the property to Dygert's business, Dygert Seating, Inc., which began manufacturing activities on two adjacent tracts of land—23542 Cooper Drive and 53381 Marina Drive. Id. ¶ 107. (These, together, are referred to as “the site” throughout this order, except in Part V). The Cooper Drive facility was used for metalwork in connection with seat-manufacturing; the Marina Drive facility was used to manufacture foam seats that were attached to metal frames. Id. ¶¶ 109, 110.

In the mid–1990s, Dygert Seating began to experience financial difficulties and, in early 1997, filed for bankruptcy. Id. ¶¶ 113–119. Shortly after, Dygert Seating sold substantially all its assets and transferred the site to Flexsteel Industries, Inc.—which manufactured seating products for a range of industries and which already had a history of noncompliance with environmental laws and regulations. Id. ¶¶ 120–123. Dygert Seating was administratively dissolved three years later. Dygert, as well as his employees and co-defendants Greg Lucchese and Gerald Alexander, continued to work for Flexsteel's Dygert Seating division at the site. Id. ¶ 123. Over the next several years, defendants Flexsteel, PBD Corporation, Lux Steel, Inc., and Dylux Technology, Inc. all engaged in manufacturing on the site at one point or other. Of these companies, only Flexsteel remains. See id. ¶¶ 80–94.

From the mid–1980s until May 2007,² employees of first Dygert Seating, then Flexsteel, then PBD, Dylux, and Lux used industrial solvents, including trichloroethylene (“TCE”), methylene chloride, and 1, 1, 1 trichloroethane (TCA)—all of which are listed as hazardous wastes under RCRA—to degrease metal frames, as well as ingredients in adhesives, spot removers, and glue and silicone sprays. Id. ¶ 165–178. During this time period, Flexsteel, PBD Corp., Dylux, and Lux all “directed their employees to spray, dump and pour used TCE and other solvents and glues directly onto the ground at the Site, releasing hazardous chemicals including TCE and TCA into the subsurface soil ad ground water at the Site on multiple occasions.” Id. ¶¶ 124–126; 185–198. They also stored hazardous waste in cardboard boxes and 55–gallon drums and disposed of virtually all of it with regular trash, without making proper waste determination or ever informing their waste hauler of the hazardous nature of their waste or reporting their waste generation activities to the EPA. Id. ¶¶ 199–269.

In January 2005, Flexsteel sold the Cooper Drive property to plaintiff Fred Lands. The purchase agreement stated that Flexsteel was not required to provide a disclosure under Indiana's Responsible Property Transfer Law, and Flexsteel did not deliver such a disclosure or otherwise inform Lands of the past disposal practices and widespread dumping of hazardous chemicals.

In August 2007, plaintiff Darlene Knoll had her tap water tested after reading an article about groundwater contamination in the newspaper. Id. ¶¶ 127–130. The results revealed TCE contamination at levels as high as 1,360 ùg/L—272 times the federal maximum containment level for TCE in groundwater. Id. ¶¶ 131, 136. Subsequent tests detected levels as high as 330 ùg/L in various plaintiffs' drinking water. Id. ¶ 135. An environmental health supervisor for the Elkhart County Health Department advised the plaintiffs to immediately stop using their water—not to drink the water, cook with it, or even bathe with it, and to use only cold water when necessary to avoid vapors. Id. ¶ 138–140. According to the Federal Agency for Toxic Substances and Disease Registry (“ATSDR”), “[o]ccupational exposure to TCE also has been associated with adult cancers such as kidney cancer, liver and biliary cancer and non-Hodgkin's lymphoma.” Id. ¶ 143.

That same month, the U.S. Environmental Protection Agency and Indiana Department of Environmental Management (“IDEM”) responded by entering into a Cooperative Agreement to investigate, monitor, and evaluate the site. See DE 67–2. IDEM tested wells throughout the area and reported to the EPA that “elevated levels of volatile organic compounds were present in 13 of the water samples,” and that “water in 10 of the wells sampled had [TCE] levels above the maximum containment level. See DE 67–5 at 3–4. IDEM provided residents with bottled waterafter the testing, and the EPA then provided carbon water filters. See DE 67–6 at 61.

The following April, IDEM conducted a site inspection to determine whether the site should be placed on the National Priorities List (“NPL”) as a “Superfund” site. See DE 67–7 at 10. In September 2008, the site inspection report concluded that “[t]he drinking water in residential wells continues to contain elevated levels of [volatile organic compounds] (some above [the federal maximum containment levels] ) prior to filters, and additional private wells have the potential to become contaminated because ground water flow is toward more residential wells which are not currently impacted.” Id. at 61–62. Within two months, the EPA had connected 26 homes, including the plaintiffs', to municipal water. See DE 67–8 at 3.

In 2009, IDEM notified EPA that it supported including the site on the NPL to “enable the U.S. EPA to determine cleanup alternatives to the impacted areas.” DE 67–8 at 2. The EPA proposed the site for listing on the NPL in April, see74 Fed. Reg. 67 at 16162–69 (Apr. 9, 2009), and finalized the determination in September, see74 Fed. Reg. 183 at 48412–21. The EPA then began conducting the investigatory phase of its “Superfund” clean-up process, known as Remedial Investigation/Feasibility Study (“RI/FS”). The latest investigatory activities shown in the record are the EPA's intention, in May 2011 to initiate field work to determine the extent and source of the ground water contamination, see DE 67–8 at 3, and an August 2011 Public Health Assessment for the Site by the ATSDR, labeling the site as a “past public health hazard, see DE 67–10 at 6. On March 6, 2012, however, the ATSDR informed residents that “[t]here is still no concern about current exposures near Lane Street because no one is known to be drinking water from contaminated private wells.” DE 67–11 at 2.

In March 2011, the plaintiffs to this action (excluding Fred Lands) filed a complaint in Elkhart Circuit Court seeking damages and injunctive relief under theories of trespass, nuisance, negligence, negligent infliction of emotional distress, punitive damages, and for relief under Indiana's Environmental Legal Action statute. DE 24 ¶ 540, 544. Two months later, they served the defendants with notice of intent to file a RCRA citizen suit in federal district court once the 90–day statutory notice period ended. Id. ¶ 545. On December 15, 2011, they filed this action to assert two citizen suit claims under RCRA against Flexsteel and Dygert Seating, over which federal courts have exclusive jurisdiction, as well as plaintiff Fred Land's diversity action under Indiana's RPTL against Flexsteel. See DE 1. On May 15, 2012, the plaintiffs filed a 130 page first amended complaint pleading two RICO claims against Flexsteel and Dygert Seating, as well as David Dygert, Greg Lucchese, Tris Gour, Gerald Alexander, PBD Corporation, Lux Steel, Inc., and Dylux Technology, Inc. See DE 18. Two days later, the...