EPA v. CHEMISPHERE, INC. (I. JONES)

Case summary

CHEMISPHERE INC., FILE A VOLUNTARY PETITION FOR BANKRUPTCY IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DI- STRICT OF ILLINOIS ON MARCH 20, 1986. ON THE SAME DAY CHEMI SPHERE PARTNERS AND CHARLES W. MCKIEL, JR., THE PRESIDENT OF CHEMISPHERE, INC. AND GENERAL PARTNER OF CHEMISPHERE PART- NERS, ALSO FILED FOR BANKRUPTCY. ON NOVEMBER 20, 1987, U.S. EPA INTERVENED IN THE CHEMISPHERE, INC. BANKRUPTCY BY FILING OBJECTIONS TO THE DISCLOSURE STATEMENT FILED BY CHEMISPHERE, INC. ON OCTOBER 23, 1987. A HEARING WAS HELD BEFORE THE BANKRUPTCY COURT ON NOVEMBER 25, 1987. AT THIS HEARING, THE COURT RULED ON A PRIOR MOTION BY THE U.S. TRUSTEE TO CONVERT BOTH THE CHEMISPHERE, INC. AND CHEMISPHERE PARTNERS BANKRUPT CIES FROM CHAPTER 11 TO CHAPTER 7. THIS EFFECTIVELY REMOVED MCKIEL FROM CONTROL OF THE ASSETS OF CHEMISPHERE, INC. AND CHEMISPHERE PARTNERS. AT THIS HEARING, THE JUDGE ALSO HEARD ARGUMENTS FROM U.S. EPA ON OUR OBJECTION TO CHEMISPHERE, INC.'S DISCLOSURE STATEMENT. THE COURT DENIED THE PROPOSED DISCLOSURE STATEMENT. THE COURT ALSO ORDERED U.S. EPA TO SUBMIT ITS CLAIMS WITHIN 28 DAYS, BY DECEMBER 23, 1987,WITH OBJECTIONS TO SUCH CLAIMS TO BE FILED BY JANUARY 13, 1988. U.S. EPA IS CLAIMING THAT ITS REMOVAL COSTS ARE POST-PETI- TION ADMINISTRATIVE COSTS. TO SUCCEED U.S. EPA MUST SHOW THAT (1) CHEMISPHERE, INC. IS A LIABLE PARTY AND (2) THAT THE THE I. JONES RECYCLING SITE IS PROPERTY OF THE ESTATE. U.S. EPA WILL ALSO BE CLAIMING PENALIES RESULTING FROM THE FACT THAT CHEMISPHERE, INC. DID NOT COMPLY WITH THE ADMINI- STRATIVE ORDERS ISSUED ON OCTOBER 14, 1986, AND SEPTEMBER 3, 1987. CHEMISPHERE, INC., AS A GENERAL PARTNER OF I. JONES PARTNER- SHIP, WAS CLEARLY A LIABLE PARTY AT THE TIME I. JONES RECYCL ING STARTED OPERATING THE FACILITY. IT WOULD CONTINUE TO BE LIABLE PARTY UNDER SECTION 107(A)(2) OF CERCLA AS AN OWNER/ OPERATOR OF A FACILITY AT THE TIME OF DISPOSAL OF HAZARDOUS SUBSTANCES. WHETHER THE I. JONES RECYCLING SITE CAN BE CHARACTERIZED AS PROPERTY OF THE ESTATE IS A FACTUAL DETERMINATION WHICH WILL DEPEND ON SEVERAL FACTORS. THE FIRST BEING WHETHER THE DECEMBER 16, 1985 AGREEMENT ALLEGEDLY CHANGING THE STRUCTURE OF THE I. JONES PARTNERSHIP HAS AN EFFECT AS TO THIRD PAR- TIES. THIS AGREEMENT WAS NEVER FILED AS REQUIRED UNDER ILLINOIS LAW. THE OTHER IMPORTANT FACTOR IS WHETHER CHEMIS- PHERE, INC., THROUGH ITS PRESIDENT AND MAJOR STOCKHOLDERS CONTINUED TO MAINTAIN A RELATIONSHIP WITH THE SITE SO THAT IT COULD BE CONSIDERED TO HAVE REMAINED GENERAL PARTNER. AS MENTIONED, ADMINISTRATIVE ORDERS WERE ISSUED ON OCTOBER 14, 1986, AND SEPTEMBER 3, 1987. THESE ORDERS WERE ISSUED TO I. JONES RECYCLING AND ITS VARIOUS PARTNERS, INCLUDING CHEMISPHERE, INC., UNDER THE AUTHORITY VESTED IN U.S. EPA PURSUANT TO SECTION 106(A) OF CERCLA. THESE ORDERS WERE NOT COMPLIED WITH AND U.S. EPA INITIATED REMOVAL ACTIONS AT THE SITE PURSUANT TO ITS AUTHORITY UNDER SECTION 104 OF CERCLA. SECTION 106(B) OF CERCLA, 42 USC SECTION 9606(B), PROVIDES THAT REFUSAL TO COMPLY WITH THESE ORDERS CAN SUBJECT THOSE RECEIVING THEM TO CIVIL PENALTIES OF UP TO $5,000 PER DAY OR PUNITIVE DAMAGES IN AN AMOUNT OF UP TO THREE TIMES THE AMOUNT OF ANY COST INCURRED BY THE GOVERNMENT AS A RESULT OF THEIR FAILURE TO TAKE PROPER ACTION. U.S. EPA HAS SPENT APPROXIMATELY THREE MILLION DOLLARS FROM SUPERFUND IN CLEANING UP THIS SITE. A THIRD REMOVAL ORDER WAS ISSUED JULY 27, 1988 TO GENERATOR PRPS AND NON-BANKRUPT OWNER/OPERATORS. A GROUP OF GENERATORS HAS GIVEN NOTICE OF INTENT TO COMPLETE THE FINAL PHASE FOR THE CLEAN-UP AT AN ESTIMATED COST OF $2-5 MILLION.

Defendants (2)

• CHEMISPHERE PARTNERSNamed in complaintNamed in settlement
• CHEMISPHERE, INC.Named in complaintNamed in settlement

Facilities (1)

• ALLEN COUNTY DETENTION CENTER

  3651 N CLINTON ST, FT WAYNE, IN, 46805

  Registry ID: 110000748923

Statutes cited

• CERCLA 107 — Superfund

Enforcement conclusions (1)

• CHEMISPHERE, INC. (I. JONES)entered 1991-03-06

  Primary law: CERCLA

Timeline (7 milestones)

• 1987-11-19Referred To Headquarters
• 1987-12-17Referred To Dept Of Justice
• 1987-12-17Complaint Filed With Court
• 1991-03-06Final Order Entered
• 1991-03-06Concluded
• 1991-03-06Enforcement Action Closed
• 1991-03-06Final Order Lodged