2 Judge Donald R. Letourneau

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IN THE CIRCUIT COURT FOR THE STATE OF OREGON

FOR THE COUNTY OF WASHINGTON

9 PACIFIC III , LLC, an Oregon limited liability company,

10 Intervenor,

I I v.

12 STATE OF OREGON, ex reI. DICK

13 PEDERSEN, DIRECTOR, DEPARTMENT OF ENVIRONMENTAL QUALITY,

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Plaintiffs,

v.

CRAlG E. BOWEN, PAMELA A. BOWEN, MICHAEL C. GIBBONS, PATRICK D. HUSKE, IRONWOOD HOMES, INC., LINKE ENTERPRISES OF OREGON, INC., tka FRONTIER LEATHER COMPANY, DONALD W.

20 NELSON, WELLS FARGO BANK, N.A. and JAMES M. WILSON,

21 Defendants.

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Case No. C I1 5183CV

INTERVENOR PACIFIC III, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

23 I. INTRODUCTION

24 Intervenor Pacific III , LLC ("Pacific IJI") responds in opposition to Plaintiff State of

25 Oregon's ("DEQ") Mot ion for Entry of Consent Judgment in a continuing effort to protect

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Page I - INTEVENOR PACIFIC 111, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNf}E NnSON STANFOHI> U .C III SW 51h Avellue. Suite 1740

]'onland. OKgon 9720-1 p. 503.4 17.7777: f. 503.417.4250

Pacific Ill 's contribution claims and rights to recover the over $ 1,200,000 in remedial action

2 costs incurred by Pacific III as a result of Pacific III partnering with the DEQ and cleaning up

3 land contaminated by polluter defendants Linke Enterpri ses of Oregon, Inc. ("Linke"), Donald

4 W. Nelson ("Nelson"), Wells Fargo Bank, N.A. , ("Wells Fargo"), and James M. Wilson

5 ("Wilson").

6 Pacific Ill 's claims and rights are the subject of a pending lawsuit filed by Pacific III

7 against Linke, Nelson, Wells Fargo and Wi lson to recover the remedial action costs Pacific III

8 incurred voluntaril y cleani ng up a portion of the old Frontier Leather Tannery Site ("Tannery

9 Site"). J The DEQ (Pac ific lII 's fo rmer cleanup partner) and the polluter defendants, however,

10 are unjustly and purposefully seeking to destroy Pacific III 's claims and rights through an overly

11 broad proposed Consent Judgment- relating to the Tannery Site and the Ken Foster Farms Site

12 ("KFF Site,,)2- so that the DEQ can receive a financial windfall (to use cntire ly within its own

13 discretion) in exchange for the polluter defcndants escaping liability to Pacific III lVilholll

14 reimbursing Pacific III the costs (or even a fraction of the costs) it incurred cleaning up their

15 mess at Tannery Site.

16 As set forth below, the proposed Consent Judgment should be rejected because it is

17 unreasonable, procedurally and substantially unfair, an unmitigated sacrifice of Pacific III 's

18 interests and contrary to the public interest in light of the particular and unique circumstances of

19 this case and the related actions of parties involved herein.

20 II. EVIDENCE RELIED UPON

21 In support of this Response in Opposition brief, Pacific III re li es on its briefing and

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I See, Pacific /11, LLC 1'. Wells Fargo. el al. , Washington County Circuit Court Case No. Cl 1203 1 CY.

2 See DEQ's Complaint in this action ("Complaint). See also July I, 20 11 proposed Consent Judgment (a copy of which is attached as Exhi bit A to Declarat ion of Bruce Gilles in Support of Plaintiff' s Moti on for Entry of Consent Judgment, ("Gilles Declaration"). The KFF site is locatcd approximately one-half mile from the Tannery Site, both of which are situatcd in Sherwood, Oregon.

Page 2 - INTEVENOR PACIFIC Ill, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

S!.INm : NELSON ST ""'fORD !.I.e J J J SW 51h Avenue. Suite 1740

POr1Jand. Oregon 97204 p. 503.4 J 7.7777: f. 503.4 J 7.4250

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affidavits of John Patrick Lucas ("Lucas Affidavit Re: Molion to Intervene") and Christopher M.

Veley ("Veley Affidavit Re: Motion to Intervene") previously submitted to the Court in support

of its Motion to Intervene and Motion to Allow Discovery; Pacific Ill 's briefing and supporting

affidavits/declarations prev iously submitted in support of Pacific Ill 's Motion to Allow

Discovery; Plaintiffs Complaint filed in this action; PlaintifF s previously fil ed Motion fo r Entry

of Consent Judgment ; the Administrative Record compi led by Plaintiff for the proposed Consent

Judgment ; the Declaration of Bruce Gilles submitted by Plaintiff in support of its Motion for

Entry of Consent; the Second Declaration of Bruce Gilles submitted in support of Plaintiffs

Motion for Entry of Consent Judgment; the originaJly proposed March 9, 2011 Consent

Judgment; the current ly proposed July 1, 20 11 Consent Judgment ; Plaintiff DEQ's Response to

Interrogatory, dated January 18,2012 (on file with Court); the February 2 1, 2012 declaration of

Christopher M. Veley submitted in support of thi s response brief("Yeley Declaration"); all other

records and papers on fil e with the Court for thi s action; Pacific Ill 's Compla int filed in Pacific

II/, LLC v. Wells Fargo, el a/., Washington County Circui t Court Case No. CI l203 1 CV; and the

points and authorities set-forth below.

III.POINTS AND AUTHORITIES

A. Rclcvant Factual and Procedural Background

To properly understand the unique facts and circumstances warranting the denial of the

DEQ's Motion for Entry of Consent Judgment, a detai led chronological iteration of the same is

warranted.

1. Pacific III and the DEQ Partnered Together to Cleanup a Specific Portion of the Old Frontier Leather Tannery Site ])olluted by Wells Fargo, Linke, Nelson, and Wilson

The Tannery Site is located at or about 15104 SW Oregon Street (formerly 12 10 NE

Page 3 - INTEVENOR PACIFIC III, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SU NDt: N .: I-SON" STANFORI> U .C 111 SW 5th A\'C1Juc, Suile 1740

I'onland, Oregon 97204 p. 503.4 17.7777: f. 503.417.4250

Oregon Street) in Sherwood, Washington County, Oregon.) The entire Tannery Site, includes

2 Tax Lots 500, 600, 602 (fonnerl y Tax Lot 503), 900, 1000, and 1100 in Section 29, and Tax Lot

3 400 in Section 28, in Township 2 South, Range I West of the Willamette Meridian, in the

4 southeast quarter of Section 29 and the southwest quarter of Section 28.4 The Tannery Site was

5 formerl y owned and operated by Linke and Wells Fargo.5 In addition to Linke, de fendants Wells

6 Fargo, Wilson and Nelson also exercised control over the operations at the Tannery Site,

7 including operations pertaining to the di sposal of hazardous substances at the Tannery Site.6

8 Linke no longer owns any property located within the Tannery Site except for Tax Lot 600,7

9 because of a Trust set up by Wells Fargo.

10 It is undisputed that hazardous substances and materials generated from the Tannery Site

11 were deposited and released on the Western HalJand on the Easlern HalJof the Tannery Sitc.8 It

12 is further alleged that hazardous substances from the Tannery Site were also transported and

13 deposited on portions of the KFF Site, including portions subsequently owned by defendant

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J See Complaint. See also July 1,2011 proposed Consent Judgment, Exhibit A to the Gi lles Declarat ion; See also Affidavit of John Patrick Lucas, dated October 11 , 20 11, previously filed in support of Paci fic Il l's Motion to [ntervene and/or for Joi nder and Motion for Consolidation of Actions ("Lucas Affidavit Re: Motion to Intervene") (a courtcsy copy of which is provided to the part ies and the judge in support of th is response brief).

4 See July 1, 2011 proposed Consent Judgment, Exhibit A to the Gilles Declaration. See Lucas Affidavit Re: Motion to Intervene. See also generally the Complaint. As discussed ill/ra, Pacific 111 perfonned cleanup acti vities, pursuant to a Prospective Purchaser Agreement with DEQ, on Tax Lots 500, 900, 1000, and 1100. Tax Lots 900, 1000, 1100 were fonnerly known as Tax Lot 400 of Sect ion 29, Township 2 South, Range I West of the Wi llamette Meridian, before being subdi vided into the aforementioned three parcels by Pacific Ill. See also Lucas Affidavit Re: Motion to Intervene.

~ See Complaint, and July 1, 201 1 proposed Consent Judgment (Exhi bit A to the Gi lles Declaration).

6 1d.

7 This is undisputed but see also July I, 20 I I proposed Consent Judgment, Exhibit A to Gilles Declaration.

S See July 1, 20 11 proposed Consent Judgment, Exhibit A to Gilles Declaration. Wh ile defendants Linke, Nelson , Wells Fargo, and Wilson deny these allegations, they are never the less willing to pay large slims of money to the DEQ (but not to Pac ific III) to resolve these allegations-and all re lated past and future liability- without having to face these issues head on at a tria l, including Pacifi c lII 's pending lawsu it.

Page 4 - INTEVENOR PACIFIC Ill , LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNm: NELSO .... STANI'OH[) [,LC III SW 5lhAvcnuc. Suile ]740

Port]lll1d, Oregon 97204 p. 50).417,7777; f. 503.417.4250

Patrick D. Huske and his business, Ironwood Homes. lnc.9

2 In 2002, Pacific III partnered with DEQ to clean up a port ion of the Tannery Site, and in

3 so doing, Pacific III entered into a Prospective Purchaser Agreement ("PPA") in conjunction

4 with Paci fic JII ' s purchase of the "Western Hair' of the Tannery Site (i.e. , Tax Lots 500, 900,

5 1000 and 1100 only) and subsequent cleanup of those parcels. lo III e:(challge for reserving all

6 rights ami causes of actioll to recover Pacific II/'s cleanup costs (including Pacific 11I 's

7 contribution claims) and for a release from liability to the DEQ (upon total completion of the

8 remedial action/cleanup), Pacific II/ executed the PPA, purchased the Western Half of the

9 Tannery Site, and then incllrred over SJ,200,OOO ill ellvironmentlll remedilll actioll costs

10 cleaning lip Ihe JIIeslem Ha/ffrom 2002 until 2008. 11 Pacific III never owned or cleaned up

11 Tax Lots 600, 602, or 400 of the Tannery Site, otherwise known as the Easlern Half of the

12 Tannery Site.

13 It is undisputed that Pacific Ill 's cleanup work included, but was not limited to, Pacific

14 III successfu lly removing extensive lead contaminated so il left from over 300,000 buried car

15 batteries that had burnt in a fire decades ago, thousands of tons of buried Chromium laced leather

16 hide splits, arsenic soil s, contaminated wells, asbestos, and an extensive cleanup of a previously

17 unknown buried rai lcar filled with highly hazardous oils and solvents.12 An April 3, 2008 "No

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10 Lucas Affidavit Re: Motion to Intervene. See Exhibit A to the Lucas Aflidav il Re: Motion to Intervene. See a/so, Adm in istrati ve Record, No. 18 (Prospecti ve Purchaser Agreement DEQ No 02·0 I between DEQ and Pac ific III), a copy of which is attached as Exhi bit A to the Lucas Affidavi t Re Motion to Intervene. For reasons unknown, the DEQ has not provided the Court with a copy of the Administrative Record.

II Id.

12 Lucas Affidav it Re: Motion to Intervene. See a/so, Admi nistrative Record , No. 54 (Frontier Leather/Ken Foster Sites - Proposed Sett lement Agreement Public Meeting (Power Point Presentat ion» and No. 6S (Front ier Leather/Ken Foster Sites - Proposed Settlement Agreement Public Meeting (Power Point Presentation» , copies of whieh are attached as Exhi bits A and B to the Veley Declaration (The Ve ley Declaration supplements the Veley Affidavit Re : Motion to Intervene - both are relied upon by Pacific In in support of its opposition to entry of the proposed consent judgment). The DEQ itself

Page 5 - INTEVENOR PACIFIC III , LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUN"': Nt:LSON STANFORI) [,I.e III SW 5th Avenue. Suite 1740

Ponland. Oregon 97204 p. 503.417.7777; f. 503.417.4250

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Further Action Lener" from the DEQ to Pacific III confinned that Pacific III completed the

required cleanup work. 13

No further cleanup work is necessary for the Western Half of the Tannery site (although

use conditions and restrictions remain in place). In fact , the DEQ has already admitted that "[a]1

the time the DEQ approved the Consent Judgment, it was not aware of any need for further

remediation on the Western Property" (aka the Western Halj). 14

2. Defendant Patrick Huske, Ironwood Homes, and the DEQ Partnered Together to Clean Up a Portion of the Ken Foster Farms Site Polluted by Wells Fargo, Linke, Nelson and Wilson

It is undisputed , or at least alleged by the DEQ, Huske and Ironwood Homes, that

hazardous substances from the Tannery Site were transported and deposited on portions of the

KFF Site by defendants Wells Fargo, Linke, Nelson and Wilson, including portions subsequent ly

owned by defendant Patrick D. Huske and hi s business, Ironwood Homes, Inc. 15 It is also

undisputed that in 2007, Ironwood Homes entered into a Voluntary Agreement with the DEQ for

ackn owlcd gcs that Paci fic IIJ complclcd clcanup which included: (J) Rcmo,'al of 4,300 Ions of Icnd and arscnic contaminated soil from fo rmer battery plant area; (2) RCmO\'1d of 2,200 Ions of animal hides; and (3) Removal of 175 tons of conta minated soil llssocia ted w ith underground storage tanks at the s ite. See Exhi bits A and B to Veley Declarat ion.

IJ ld. ; See also April 3, 2008 "No Further Action Lener" from DEQ to Plaintiff, attached as Exhibit C to the Lucas Affidav it Re: Motion to Intervene. See also, Administrative Record, No. 26 (No Further Action Determinat ion Tax Lot 500, Fonner Frontier Leather Site, Sherwood, Oregon, ECSI # 116), No. 28 (No Further Acton Determi nation Lots I and 2, Tax Lot 400. Former Front ier Leather Site, Sherwood, Oregon ECSJ # 116), and No. 34 (Conditional No Further Action Dctenni nat ion. Fonner Fronticr Leather Site, Tax Lot 1100, 15 104 SW Oregon Strect, Sherwood, Oregon, ECSI #116) (Confinni ng issuance of NFAs for Tax Lots 500, 900, 1000 and 1100 - i.e. the Western Haifofthe Tan nery Site).

14 See DEQ Response to Interrogatory, page 6, lines 10·1 2, attached as Exhibit C to the Veley Declaration.

IS See original March 9, 2011 proposed Consent Judgment, attached as Exhi bit B to the Lucas Affidavit Re: Motion to Intervene; See July 1,201 1 proposed Consent Judgment. See generally, Admin istrative Record; See a/so, Administrative Record, No. 52 (Written Comments by ECO LLC to the Oregon State Senator Larry George and Representative Matt Wingard, dated March 22, 201 1, and to the DEQ, dated March 22, 20 11), anached respectively as Exhibits D and E to the Veley Declaration. See also Exhibits A and B to Veley Declaration.

Page 6 - INTEVENOR PACIFIC 111, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF' S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNI" : N.:t.50N STAM'ORI) t t e 111 SW Slh Avenue, Suile 1740

Ponland. ~gon 97204 p. 503.417.7777: f. 503.417.4250

the completion of interim removal actions and remedial investigation on Huske' s property at the

2 KFF site relating to the some of the aforement ioned hazardous substances. 16

3 It is further undisputed, or at least alleged by Huske/lronwood Homes, that

4 Huskellronwood Homes incurred over $400,000 to clean up port ions of the KFF Site

5 contaminated by defendants Wells Fargo, Linke, Nelson and Wilson.17 Ironwood Homes

6 received its No Further Action letters in 2008 and 2009.18 Huske and Ironwood Homes

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thereafter filed suit against Well s Fargo, Linke, Nelson and Wi lson (along wi th a number of

other parties), in part to recover their cleanup costs, 19 just as Paci fic III is doing now.

3. The DEQ, Linke and Nelson Conspired to Destroy the Environmental Claims by I)arties Who Voluntarily Cleaned Up Portions of the Tannery Site and KFF Site, Including Claims by Pacific lIl, Ironwood Homes and Huske, through the Original March 9, 2011 Proposed Consent Judgment

After Paci fic III cleaned up the Western Half of the Tannery Site, and after

I-Iuskellronwood Homes cleaned up its portion of the KFF Site, the DEQ in concert and collusion

with polluter defendants Linke and Nelson, ami 10 Ihe complele exclusion alUl surprise of

Pacific III ami HlIskelIromvood Homes ,20 took action by proposing a consent judgment on

March 9, 201 1 relat ing to the entire Tannery Site (including the Western Half that Pacific III

spent over $1,200,000 cleaning up, and not simply the contaminated Eastern Half of the

16 For reasons unknown, the DEQ did not include the Voluntary Agreement in the Adm inistrative Record. Said Voluntary Agreement is referenced, however, in Administrative Record, No. 43 and 48 (No Further Action letters to Ironwood).

17 See Exhibits D and E to Veley Declaration. In fact, the DEQ itse lf acknowledges that Ironwood Homes completed contaminated soi l removal at 4 tax lots (-5,500 cubic yards), with the soil being stored in two Engineered Contaminant Cells (ESCs) at the KFF site, covered with clean so il and grass to control erosion. See Exhibits A and B to the Veley Declaration.

IS See, Admini strative Record, No. 43 and 48.

25 19 Ironwood Homes. el at. v. Wells Fargo. el al., United States District Court, Districl of Oregon, Case No. C8-0098-BR.

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Page 7 - INTEVENOR PACIFIC III , LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SU Nm; NEI.SON STANFORD LLC 111 SW 5th A\"CnllC. Suitt 1740

l'<Inland, Oreson 97204 p. 50lA I7.7777; f. 503.417.4250

Tannery),21 and the KFF Site (including the portion of the KFF site that Huske/ lronwood spent

2 over $400,000 cleaning Up).22 The end effect of the originally proposed consent judgment would

3 be to bar claims for contribution against Linke and Nelson by panies who incurred costs cleaning

4 up the contaminated property, i. e. Pacific III and HuskclIronwood Homes. 23

5 In exchange for payment of $600,000 from Linke and Nelson, the DEQ offered to

6 absolve Linke and Nelson of any and all li ability relating to the entire Tannery Site, including

7 the Western Half Pacific III spent over $1,200,000 cleaning up, and the entire KFF Site,

8 including tile porlioll of the KFF Site Ironwood Homes spent over $400,000 cleaning Up.24 By

9 doing so, the DEQ was effecti vely placing itsel f and its interests, along with Linke and Nelson,

10 ahead of Pacific II I and Huskellronwood Homes without any remuneration whatsoever to Pacific

II III or Huske/lronwood Home for the past cleanup work they voluntarily performed. The DEQ's

12 only excuse or rationale for doing this was that it needed to preserve what was left of Linke's and

13 Nelson's assets for the bene fit of the State of Oregon (as if the voluntary cleanup by Pacific III

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l() Pacific II] (a nd presumably Huskellronwood Homes) was never included, invited , or allowed to participate in the settlement negotiations between the DEQ, Linke and Nelso n, nor was Pacific In ever notified that said negotiations were taking place. See Lucas Afiidavit Re: Motion to Intervene

21 Lucas Affidavi t Re: Motion to Intervene; See original March 9, 2011 proposed Consent Judgment attached as Exhibit B to the Lucas Affidavit Re: Motion to Intervene. For reasons unknown, the DEQ did not include the original March 9, 201 I proposed Consent Judgment in the Administrati ve Record. Similarly, the current July I, 20 11 proposed consent judgment is not spec ifically listed on the Amended Ad ministrative Index, nor were the March 9, 2011 or July 1, 2011 proposed consent judgments included in the copy of the Admini strative Record produced to Pacific III counse l by the DEQ.

22 See origina l March 9, 20 II proposed Consent Judgment, EXhibit B to the Lucas Affidavit Re: Motion to Intervene. See also Exhi bits D and E to the Veley Declaration .

23 See ORS 465.325(6)(b) ("A person who has resolved its liability to the state in an ad mini strati ve or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentia lly liable persons unless its tenns so provide, but it reduces the potentia l liabi lity of the others by the amount of the settlement.") (emphasis added); See also ori ginal March 9, 20 11 proposed Consent Judgment, Exhibit B to the Lucas Affidav it

24 See original March 9, 20 II proposed Consent Judgment, Exhibit B to the Lucas Affidavit Re: Motion to Intervene.

Page 8 . INTEVENOR PACIFIC Ill , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF' S MOTION FOR ENTRY OF CONSENT JUDGMENT

S U '''DI:: NELSON STAN"~'ORI) U .C 111 SW 5th A' "l:lluc. Suile 1740

I'orl lllnd, Oregon 97204 p. 503 .'1 J 7.7777: f. 503.'117.4250

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and Huskellronwood was not already a benefit to the State)?5

Of the $600,000 [he DEQ was [0 cOllec[, i[ further alleged over $393,000 in remedial

action costs itself at the Tannery Site and the KFF Site (less than what both Pacific III and

Huskellronwood Homes individually incurred),26 leaving just over $200,000 for further cleanup

and administrative costs, after the DEQ reimbursed itself. However, the originally proposed

consent j udgment Gust li ke the currently proposed consent judgment) provided the DEQ with

sole discretion as to the use of the funds, and as to the nature and extent of any remedial action, if

any, it chose to perform on the Eastern Haljofthe Tannery Site and the KFF Site. According to

Section 3.0. of the original March 9, 20 11 proposed Consent Judgment:

All moneys in the Account27, including interest earned on the

Account shall be used by the DEQ as it deems appropriate for perfonning or paying for investigation, removal, or remedial actions at the Facility, paying DEQ's oversight costs incurred in connection with such actions, paying DEQ's costs of administrating the Account, and reimbursing outstanding DEQ remedial action costs at the Facil ity. Any remaining funds in the Account after implementation of remedial action at the Facility may be used by the DEQ in its sole discretion. 23

The only parties that seemingly would have benefited from the originall y proposed Consent

Judgment were the DEQ, Linke and Nelson, all to the unmitigated sacrifice of the interests of

2S Notw ithstanding the unfa irness of the DEQ's act ions, it has never produced evidence regarding the assets of Linke or Nelson, nor the verified, absolute extent of available insurance covering the acts of Linke and Ne lson (and which wou ld be available for cleanup or reimbursing Pacific III or Huskellronwood Homes the remedial action cost those parties incurred cleaning up the mess on the Western Half of the Tannery Site and the Huske/ lronwood Homes portion of the KFF Site). The Administrative Record is completely devoid of this information.

26 See original March 9, 2011 proposed Consent Judgment, Exhibit B to the Lucas Affidavit Re: Motion to Intervene.

27 The "Account" wou ld be a site-specific account within the Hazardous Substances Remedial Action Fund, dedicated to use at the DEQ's sole discretion to fund investigation, removal, or remedial actions at the Tannery and KFF Sites.

Page 9 - INTEVENOR PACIFIC III , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

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Pacific III and HuskelIronwood Homes in favor of an alleged "public interest" (as if the

vol untary cleanup by Pacific III and Huskell ronwood was not already a benefit to the State).

4. Pacific III and HuskefIronwood Homes Object to the Original March 9, 2011 Proposed Consent Judgment On Grounds it Bars Their Claims Against Linke and Nelson, The DEQ Ignores Pacific Ill's Objections, :md Pacific HI Files Suit Against the Polluter Defendants

In April , 201 1, Paci fic III immediately objected upon first learning of the DEQ's and

defendants' settlement scheme and proposed consent judgment.29 Until then, however, Pacific

III had no idea of the DEQ's intent to destroy Pacific Ill 's contribution claims (the same claims

Pacific III expressly reserved in its Prospective Purchaser Agreement with the DEQ).

Specifically, Pacific lII 's counsel contacted the DEQ and then fonnally objected in writing to the

DEQ with respect to the original March 9, 20 11 proposed consent judgment. Pacific III objected

because it would have barred Pacific Ill 's contribution claims by the DEQ purposefu ll y (and in

an abuse of discretion) including the Western Half of the Tannery Site and the remedial action

perfonned by Pacific III in the mailers addressed portion of the Consent Judgment, and not

simply the contaminated Eastern Halfand the KFF site.3o

Pacific Ill 's objections, however, fell on deaf ears.3l Huskellronwood Homes also

17 objected,32 but unfortunately, the aligned interests of Pacific 1II and Huske/ lronwood Homes

18 were severed thereafter when the DEQ and Huskell ronwood Homes, along with polluter

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28 See original March 9, 20 11 proposed Consent Judgment, Exhibit B to the Lucas Affidavit Re: Motion to Intervene.

29 See Lucas Affidavit Re: Motion to Intervene; See Veley Affidavit Re: Motion to Intervene and Exhibit C attached thereto.

30 Veley Affidavit Re: Motion to Intervene. Lucas Affidavi t Re: Motion to Intervene. See ORS 46S.32S(6Xb) ("A person who has resolved its liabi lity to the state in an admin istrative or judicia lly approved settlement shall not be liable for claims for contribution regarding matters addressed in the set1lement. Such settlement does not discharge any of the other potentially liable persons unless its terms so prov ide, but it reduces the potential liability of the others by the amount of the sen lernent.")

3L Veley Affidavit Rc: Motion to Intervene. Lucas Affidavit Re: Motion to Intervene.

Page 10 - INTEVENOR PACIFIC III , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNDE Nt: t.50N STA,WORI> !.I.e 111 SW 5th Avenue, Suile 1740

]'onland. Oregon 97204 p. 503.4 17.7777; f. 503.417.4250

defendants Wells Fargo, Linke, Nelson and Wilson began to negotiate in secret a way to pay

2 Huskellronwood Homes, obtain morc money for the Consent Judgment, and to cont inue to keep

3 Pacific III from being reimbursed for the over $1,200,000 in remedial action costs it incurred.

4 These secret negotiations-to the complete exclusion of Pacific III- ultimately lead to the

5 current July 1, 20 11 Consent Judgment which is virtually identical to the original consent

6 judgment except for adding additional money and parties who Pacific 111 will be barred from

7 pursuing contribution claims against.

8 On April 7, 2011, Pacific III filed suit against polluter defendants Wells Fargo, Linke,

9 Nelson and Wilson asserting claims for cost recovery and contribution under Oregon's

10 environmental statutes to recover the more than $1,200,000 in remedial action costs Pacific UI

I I incurred. )) Whi le Pacific III ' s cost recovery claims were dismissed, Pacific 1I1's contribution

12 claims against the polfllter defelldants remai" active, with trial currelltly scitedilled for May

13 29,2012. The DEQ and the defendants named in the consent judgment, including Wells Fargo,

14 Linke, Nelson and Wilson, however, are doing everYlhing possible to have the Consent

15 Judgment approved before Pacific Ill 's contribution claims are decided by th is Court at trial (this

16 includes their opposing Pacific Ill ' s request to intervene and to conduct discovery in this action).

17 Pacific III ' s contribution claims arise under the Oregon's Environmental Cleanup laws,

18 and specifically Oregon Revised Statutes, Chapter 465, entitled "Hazardous Waste and

19 Hazardous Materials 1.,,)4 While ORS 465.325(6)(b) is what provides contribution protection to

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32 See Exhib its D and E to the Ve ley Declaration.

33 See, Pacific III. LLC v. Wells Fargo Balik, Nafiol1al Association. el ai , Washington County Circuit Court Case No. C 112031 CV. A copy of Pacific Ill ' s Complaint in that action is attached as Exhibit E to the Veley Affidavit Re: Motion to Intervene.

34 See ORS 465.257( 1), which reads in re levant part, "[a)ny person who is liable or potentially liable under ORS 465.255 lTlay seek contribution from any other person who is liable or potentially liable under ORS 465.255." Pacific III is admitted ly a potentially liable party under ORS 465.255( IXb) (only because it purchased the property subject to a PPA with knowledge of prior re leases of hazardous substance, but Plaintiff did not cause, contribute to, or exacerbate any release at the property). Polluter defendants

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the settling parties, any such contribution protection ollly extends to "mallers addressed" in the

2 settlement, as defined exclusively by the DEQ and settling parties.35 The DEQ's original March

3 9, 20 11 proposed Consent Judgment (as well as the current July I, 20 11 proposed Consent

4 Judgment) was unjustly overbroad and without any remuneration to Pacific III for the over

5 $1,200,000 in remedial action costs it incurred cleaning up the Weslern Half of the Tannery

6 Site.36

7 More specifically, the original March 9, 2011 proposed Consent Judgment (and the

8 current July I , 201 1 proposed Consent Judgment) includes the enlire Tannery Site in the

9 "malters addressed" definition in the Consent Judgment and this therefore includes the Western

10 HalJthat Pacific 111 already cleaned up, along with the contaminated Eastern Halfof the Tannery

II Site. 31 However, it is undisputed that only the Eastern HalJofthc Tannery Site, and portions of

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Linke, Nelson, Well s Fargo and Wi lson are liable panies under ORS 465.255(1)(b) and (d), and potentia lly (e). See also ORS 465.325(6)(c)(B), wh ich reads in relevant pan, "[a] person who has resolved its liability to the state for some or a ll of a removal or remedia l action or for some or a ll of the costs of such in an ad ministrative or judicially approved sett lement may seek contribution from any person who is not a party to the settlement ... [.]" Plaintiff contribution rights also arise under ORS 465.325(6)(a), and under ORS 465.425(6)(c)( B) (Pacilic III sett led its liabi lity with the state through the PPA with respect to its purchase of the propeny and c lean up required under the PPA).

H See ORS 465.325(6)(b) (<<A person who has resolved its liability to the state in an administrative or judicially approved sett lement shall not be liable for cla ims for contribution regard in g, matters addressed in the sett lement. Such settlement does not di scharge any of the other potentially liable persons unless its tenus so provide, but it reduces the potential liability of the others by the amount of the settlement.") (emphasis added). The forego ing contribution bar is vi rtually identical to the contribution bar provided by the federal Comprehensive Environmental Responsibi li ty, Compensation, and Liability Act, 42 U.S.c. § 9601 , et seq. ("CERCLA") (which Oregon ' s environmenta l laws are modeled after) for federal consent decrees (aka consent judgments). See, 42 U.S.C. § 96 I 3(t)(2) ("A person who has resolved its liabiliry to the Un ited States or a State in an administrative or judic ially approved settlement shall not be liable for claims for contribution regardi ng matters addressed in the sett lement. Such settlement does not di scharge any of the other potentially liable persons unless its Icnns so provide, but it reduces the potential liability of the others by the amount of the settlement."). See also Lucas Affidavi t.

36 See original March 9, 201 1 proposed Consent Judgmen t, Exhibit B to the Lucas Affidavit Re: Motion to Intervene; See current July 1, 2011 proposed Consent Judgment, attached as Exhibit A to the Gilles Declaration.

31 See ori ginal March 9, 20 II proposed Consent Judgment, Exhibit B to the Lucas Affidav it Re: Motion to Intervene, and current July 1, 2011 proposed Consent Judgment, Exhibit A to the Gi lles Declaration. The "matters add ressed" port ion also includes the KFF s ite. As set forth in the July 1, 20 11 proposed

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SUNDE I'InsoN STANFORD I,I,C 111 sw 5th A\·C1Iuc. Suite 1740

Port land. Oregon 97204 p. 50HI7.7777: r. 50H I7.4250

the KFF site, allegedly need further investigation and remedial action (i.e., clean up). From

2 Pacific lI1 ' s perspective, and as a matter of fairness, reasonableness and public interest, the

3 proposed Consent Judgment should only include the KFF site and the Eastern Half of the

4 Tannery Site. The proposed Consent Judgment should not include the Western Half of the

5 Tannery Site or any remedial act ion perfonned by Pacific Ill.

6 It is important to note that the decision as to what will be included- and what would not

7 be included-in the "matters addressed" was not made by the legislature . Nevertheless, the

8 DEQ and the settling parties continually blame (or rather incorrectly attempt to hide behind) the

9 legislature for barring Pacific Ill ' s claims although nothing could be further from the truth.

10 While ORS 465.325(6)(b) is what provides contribution protection (aka amnesty) to the settling

11 parties, any such contribution protection only extends to "maltel'S addressed" in the settl ement,]8

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Consent Judgment at page 17, Ins 17·20, " Matters Addressed for the purposes of the consent judgment means a ll in vestigation, removal , and remedial actions taken or to be taken and all remova l and remedial acti on costs incurred or to be incurred at or in connection with a release of hazardous substances at the Facility." (emphasis added). " Facility" is defined on Page 7, Ins 14· 17, of the proposed Consent Judgment : "Facility" . .. means (a) the "Tannery Site" , (b) the " KFF Site"; and (c) the full extent of existing known or unknown contamination by hazardous substances of any med ia on, above, or below the Tannery Site or the KF F Site, or that have migrated, may have migrated, or hereafter migrates to anywhere from th e Tannery Si te or the KFF Site." (emphasis added). Finally, "Tannery Site" is defined on page 4, In s. 3·5 of the proposed Consent Judgment as Tax Lots SOD, 600, 602, 900, 1000, 1100 in Section 29, and Tax Lot 400 in Section 28." (emphasis added). Thus, the "matters addressed" incl udes the remedia l action taken by Pacific Ul on Tax Lots 500, 900, 1000, and 1100 and the remedial action costs Pacific UI incurred as a result of its remedia l action. See also original March 9, 2011 proposed Consent Judgment (Exhibit B to the Lucas Affidavit Re: Motion 10 Intervene) with identica l overly broad language and defin itions as to Matters Addressed, Facility, and Tannery Site.

Ji See ORS 465 J 2S(6Xb) ("A person who has resolved ils liabi li ty to the state in an administrative or judic ia lly approved settlement shall not be liable for claims for contribution regardin g maners addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its tenns so provide, but it reduces the potentia l liabil ity of the others by the amount of the settlement." ) (emphasis added). The foregoing contribution bar is virtually idenlicalto Ihe contributi on bar prov ided by the federal Comprehensive Environmental Responsibility, Compensation, and Liability Act, 42 U.S.C. § 960 I , el seq. ("CERCLA ") (which Oregon 's environmental laws are modeled after) for federal consent decrees (aka consent judgments). See, 42 U.S.C. § 96 I 3(f)(2) ("A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contri bution regarding matters addressed in the senlement. Such senlement docs not discharge any of the other potentially liable persons un less its temlS so provide, but il reduces the potential liability of the others by the amount of the settlement.") .

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as defined exclusively by the DEQ and settling parties.39 Simply put, the decisio n as to what will

be included-and what would not be included-in the "'matters addressed" was nOf made by the

legislature. Instead, the deci sion was voluntarily, purposefully and unreasonably made so lely by

the DEQ and the settling part ies to the unmitigated and involuntary sacrifi ce of Pacific III.

5. The DEQ Withdrew the Originally Proposed Consent Judgment, Proposed a New Consent Judgment on July I , 2011 With Additional Polluter Defendants (Wells Fargo and Wilson), and Continues to Inappropriately Include the Western Half of the Tannery Site in the Consent Judgment

Following the commentary period for the origi nal March 9, 20 11 pro posed consent

Judgment, the DEQ and the parties to the Huskellronwood Homes li tigation comm enced secret

negotiations in an effort to obtain addit ional funds and parties to a new consent judgment. Upon

completion of their secret negotiations, the DEQ, in concert and co ll usion with the polluter

defendants Linke, Nelson, Well s Fargo and Wi lson (as well as Huske/ lronwood Homes)

proposed a new Consent Judgment on Jul y 1,2011 which was virtually identical to the orig inally

proposed March 9, 20 11 consent judgment, except for joining po lluter defendants Well s Fargo

and Wilson as additional settling parties who would receive protection agai nst Pacific Ill 's

contribution claims, and adding additional monies to the settlement amount (no ne of which wi ll

be paid to Pacific III , and without engaging Pacific III in any settlement negotiations).4o Per the

negotiations and ultimate settlement agreement, Huskellronwood Homes would a lso be

reimbursed its remedial action costs by the polluter defendants in a companion sett lement

agreement to the Consent Judgment.41 Pacific III understands that Huskell ronwood has already

39 See Footnote 37, supra, and the defin itions contained therein.

40 Lucas Affidav it Re: Motion to Intervene. Compare the ori ginal March 9, 2011 proposed Consent Judgment (Exhibit B to the Lucas Affidavit Re: Motion to Intervene) to the current July 1, 2011 proposed Consent Judgment (Exhibit A to the Gilles Declaration).

41 See Gilles Declaration, Exhibit B, page 10.

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been paid.

2 Once again, the newly proposed Consent Judgment inappropriately included the entire

3 Western Half of the Tannery Site, and not just the Easfern Half that allegedly remained

4 contaminated.42 The Western Half was included even though the polluter defendants Well s

5 Fargo, Linke, Nelson and Wilson would not be paying any money whatsoever with respect to the

6 Western Half or any portion of the over $1,200,000 in remedial act ion costs Pacific III incurred

7 cleaning up their mess.4)

8 As before, Pacific III was never invited, notified of, or otherwise allowed to participate in

9 any settlement negotiations with the DEQ and the polluter defendants with respect to the new

10 July 1,2011 proposed Consent Judgment. As if the originall y proposed Consent Judgment was

II not enough in temlS of cutting off the amlS of Pacific III 's contribution claims against Linke and

12 Nelson, the newly proposed Consent Judgment cut Pacific Ill 's legs off by add ing the deep

13 pockets of Wells Fargo and Wi lson to the mix of parties who would receive amnesty from

14 Pacific Ill's contribution claims (which at that point, were in active litigation with Linke, Nelson,

15 Wells Fargo and Wilson). In fact, documents recently produced by defendant Linke in Pacific

16 Ill 's contribution action,44 confinn that by at least July, 2009 Gust one-year after Pacific III

17 completed its cleanup activities), the DEQ was secretly seeking money from the polluter

18 defendants for the eastern half of the Tannery Site and the KFF Site, to the severe detriment of

19 Pacific III.45 Specifically, from the very beginning, the DEQ was offering to include, or

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~ 2 See July 1, 20 11 proposed Consent Judgment, Exhibit A to the Gilles Declaration (here inafter, the use of the "proposed Consent Judgment" or "consent judgment" refers to the July I, 201 1 proposed Consent Judgment currently before the Court for review).

~3 Jd. See also Lucas Affidavit Re: Motion to Intervene . See also Footnote 37, supra (defin itions of "Matters Addressed", "Facility" and "Tannery Site" set forth in the proposed Consent judgment).

44 Pacific Ifl. LLC v. Linke Enterprises of Oregon. et al., Case No. C 11 203! CV, Exhibit E to the Veley Affidavit Re: Motion to Intervene.

4S See Exhibits A and B to the Declaration of Christopher M. Veley in Support of Intervenor Pacific III, LLC's Reply Brief in Support of Motion to Allow Discovery ("Veley Reply Declaration") (Said Veley

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otherwise negate, the polluter defendants' "responsibility for past response costs" incurred by

Pacific III for the Western Half, in exchange for reso lving the DEQ's dispute with the polluter

defendants relating to the eas/ern half of the Tannery Site and the KFF Site.46 Pacific III 's

fonner partner, the DEQ, kept all of thi s hidden from Pacific 111.47

Pacific III objected in writing to proposed Consent Judgment, but Pacific Ill 's objections

once again fell on deaf ears.48 The DEQ's scant response to Pacific III 's objections explained

nothing and dodged the issue that the DEQ and the settling parties- not the legislature-have

ignored Pacific Ill 's rights. The DEQ's purported position- for ignoring Pacific Ill 's rights and

in detennining that "public comments did not disclose facts or considerations indicating that the

proposed consent judgment is inappropriate, improper, or inadequate as to warrant withholding,

withdrawing or modifying the proposed consentjudgment"- was limited to the following:

DEO's Response [to Pacific Ill 's Objections): Pacific III also asserted its claim tllat DEQ would breach the PPA in a lawsuit against the DEQ and settling parties. Pacific Ill, LLC v. Wells Fargo Bank, el 01. , Washington Co. Circuit Court Case No. C1 1203 1CV. On August 8, 201 1, the coun ruled that Pacific 111 had failed to state a claim against DEQ and its action against DEQ should be dismissed. DEQ's position before the court was that entry of the proposed consent judgment is consistent with the DEQ's rights against other liable parties for cleanup at the Frontier Leather site, and that contribution protection is granted by statute to parties settling with DEQ.49

20 No further explanation or reasoning was given as to why the DEQ concluded it was fair,

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Rep ly Declaration is not being filed since it was already filed with the Court but cou rtesy copies are being provided to a ll counse l and the judge with the submission ofthis response brief).

461d.

47 See Lucas Affidavit Re: Motion to Intervene.

48 Ve ley Affidavit Re: Motion to Intervene and Exh ibit D attached thereto; Lucas Affidav it Re: Motion to Intervene.

49 Gilles Declaration, Exhibit S, page 10. See also, Gilles Declaration, Exhibit B, page 4.

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reasonable and equitable to include the clean Western Half of the Tannery Si te in the proposed

Consent Judgment (and any remedial action perfonned by Pacific III on that portion of the site)

and ultimately destroy Pacific Ill 's claims in the process.

Of the $2,600,000 the DEQ was to collect under the newly proposed Consent Judgment,

the DEQ again a ll eged over $393,000 in remedial action costs it incurred that it would reimburse

itself off the top, leaving $2,207,000 for the DEQ. so And just as the ori ginally proposed consent

judgment did, the new July 1, 201 1 proposed Consent Judgment provided the DEQ with so le

discretion as to the use of the funds, and as to the nature and extent of any remedial action it

chose to perfonn, ifany, on the Eastern Ha(fofthe Talmery Site and the KFF Site. According to

Section 3.E. of the original Ju ly 1,2011 proposed Consent Judgment:

Upon receipt of payment fTom OOOJ pursuant to Section 3, DEQ shall deposit the payment into a site-specific account within the Hazardous Substances Remedial Action Fund dedicated to use at OEQ's sole discretion to fund investigation, removal, or remedial action at the Facility. All moneys in the site-specific account, including interest earned on the Accowlt shall be used by the OEQ as it deems appropriate for perfonning or paying for invest igation , removal , or remedial act ions at the Facility, paying DEQ's oversight costs incurred in connection with such actions, paying DEQ's costs of administrating the Account, and reimbursing outstanding OEQ remedial action costs at the Facility. Any remaining funds in the Account after implementation of remedial action at the Facility may be used by the DEQ in its sole discretion . S I

The proposed Consent Judgment also provides the option for the OEQ to purchase Tax Lot 600

(contained within the Eastern HalJo fthe Tannery Site) for a mere $50, who can then tum around

and sell the property (presumably for more than $50) and use that money for anything it wants

50 See July 1, 20 I I proposed Consent Judgment, Exhi bit A to Gil les Declaration.

SI Jd. (emphas is added).

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for its own internal benefit. 52 It would al so allow the DEQ to force the buyer, through a

2 Prospective Purchaser Agreement, for example, to pay to clean up the property, even though the

3 DEQ would have already received funds fo r cleanup through the proposed Consent Judgment.

4 Presently, it is undisputed that there are no offi cial plans set in place with respect to

5 specific fu rther invest igation or remediation at the Eastern Half of the Tannery Site or KFF Site.

6 Any such plans are still undecided and could very like ly lead to a cash-windfall to the DEQ

7 without any remuneration to Paci fic III. From a fac tual standpoint, the DEQ's estimates as to

8 potential costs have been wide ly inconsistent, and are suspicious to say the least. For example,

9 in its August 26, 20 11 Memorandum, the DEQ estimated remedial action costs for the Eastern

10 Half of the Tannery Site at $540,000 to $2,600,000. 53 At the same time, however, the DEQ also

11 stated that the "DEQ expects that the $2 .6 million [it collects from the Consent Judgment] will

12 be adequate to fund cleanup of both sites to protective standards as well as reimburse DEQ's

13 outstanding remedial action costS.,,54 If this stands true, it is unknown how the DEQ wiil

14 reimburse itself $390,000 from the $2,600,000 and then remedime the Easfern Half and the KFF

15 Site if it est imated it could cost $2,600,000 to remediate the Eastern Halfalone. On the fli p side,

16 however, the $2,600,000 payment could result in a cash windfa ll for the DEQ if its remedial

17 action costs for the Eastern Half are only $540,000 on the low-end as estimated above, or

18 $550,000 as it estimated in 2007.55 Thus, with no plan yet in place, it is entirely possible from a

19 factual standpoint that the DEQ- with its sole discretion as to the use of funds and ability to

20 purchase and sell Tax Lot 60056- will be left with an enonnous cash-windfall, while Pacific 111

21 will be left without any abil ity to recover the over $1,200,000 is spent cleaning up the Western

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52 Id.

53 Gi lles Declarat ion, Exhibit B, page 7.

54 Gilles Declaration, Exhibit S , page I I.

55 See Veley Declaration, Exhi bit F.

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Halfunder its agreement with the DEQ.

6. In Light of the DEQ Failing to Provide Any Rationale for Including the Westem Half of the Tannery Site, the Court Allowed Pacific III to Issue an Interrogatory to the DEQ

Although highly opposed by the DEQ and polluter defendants Wells Fargo, Linke,

Nelson and Wilson, the Court allowed Pacific 1lI to conduct discovery through an interrogatory

to the DEQ in the following Court authori zed fonn:

"Explain why the Western Property. and the remedial action perfonned by Pacific III and remedial action costs incurred by Paci fic III at the Western Property, were included in the Consent Judgment and the definiti ons contained therein when (1) the

Western Property was prev iously remediated by Pacific III to " no further action" status under the PPA; (2) the Consent Judgment does not identi fy any environmental cleanup, removal or remedial

action to be taken at the Western Property; (3) no money paid by the Consent Judgment Paying Parties will be used to remediate any portion of the Westem Property; (4) no money paid by the Consent Judgment Payi ng Part ies wi ll be used to reimburse Pacific III for the remedial action costs it incurred at the Western Property; and (5) the Eastern Property and KFF site are the onl y properties

identifi ed in the Consent Judgment to be remediated with monies paid by the Consent Judgment Paying Parties."s7

As discussed fu rther in the Argument section below, the DEQ confi nned in its

interrogatory response that it-as a matter of hi storical practice-has carved 0 111 contribution

protection for a portion of the property included in the consent j udgment pellliillg further action

by the polluter defendants as a condi tion precedent to contribution protection (for example,

completing remediation of the contaminated carved out property or complying with agreement

S6 (coupled with the DEQ's ability to detenn ine the level of cleanup, i.e. write iI'S own ru les)

S7 A copy of th e DEQ's Interrogatory Response is attached as Exhibit C to the Veley Declaration. Per the Interrogatory approved by the COllrt, the DEQ "Director shall include in his answer an appl ication of the statutory criteria and factors set forth in DRS 465.325." Id.

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with or order by DEQ with respect to the carved out property, or in thi s instance by analogy,

payment of past remedial action costs of panies like Pacific 111).58

In facl, the DEQ has hi storicall y carved out property similar to the Western Half property

pending further action by the poll uter defendants, while providing for contribution protection for

other property included in the consent judgment (similar to the Eastern Half and the KFF Site

here) for which the consent judgment settlement funds went towards (similar to funds here which

will allegedly be used to clean up the Eastern Half and the KFF Site).59 This is exactly what

Pacific III sought from the beginning but the DEQ and the polluter defendants refused to

negotiate with Pacific III, thereby forcing Pacific III to li tigate its claims.

The six consent judgments-complete copies of which are attached as Exhibits G through

L to the Veley Declaration-read in relevant part, and confiml the historical "carve outs," as

follows:

9. Contribution Actions

A. The parties agree that this Consent Judgment is a judicial senlement within the meaning of ORS 465.325(6)(b), pursuant to which Defendant has resolved its liability to the Slale of Oregon regarding Matters addressed for the Faci lity to the ex tent provided in Sect ion 7. Effective upon satisfaction of the payments required under Subsections 3.A and 3.B above, Defendant shall not be liable for claims for contribution regarding Matters Addressed for any portion of the fac ility other thall the Uplauds portiolls of the Facility. Effective upon entry of thi s Consent Judgment by the Court, amI subject thereafter to Defendallt 's satisfactory performance llIuler lilly

existing or future DEQ agreement, order, NFA, or cOllse"t judgmellf related to remedial actioll at Uplallds portiolls of

58 See Exhibit C to Veley Declaration (DEQ's Interrogatory Response) and the six 2008 Consent Judgments submitted ex parle by the DEQ attached as Exhibit F to said Interrogatory (See Consent Judgments Nos. 3 through 6). Complete copies of the aforementioned Consent Judgments Nos. 3 through 6 are attached as Exhibits G through L to the Ve ley Declaration .

59 See Exhibits G through L of the Ve ley Declaration.

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the Facility alld 'he reservations ill Subsectioll 7.B, De/elida,,! shalf 1101 be liable for claims for contributioll regardillg Mailers Addressed for the Uplautls portiolls of the Facility.

Despite the DEQ's past carving out of property simi lar to the Western Half (as shown

above), it nevertheless arbitrarily and unreasonably refuses to carve out the Western Hal/in the

current Consent Judgment despite having the power to do so. Under the factual circumstances of

thi s case, its failure to do so is an abuse of discretion.

B. ARG UMENT

1. Nature, Scope, and Standard of Review Applied to the Proposed Consent Judgment

There are no specific provisions in Oregon 's Envi ronmental Cleanup Law (ORS Chapter

465), and no Oregon case law, setting forth the scope of review to be applied by the trial court in

determining whether to approve a proposed consent judgment filed pursuant to DRS 465.325.

Oregon 's Environmental Cleanup Laws, first adopted in 1987, including its settlement

provisions, are modeled federal Comprehensive Environmental Responsibility, Compensation,

and Liability Act, 42 U.S.c. § 9601, el seq. ("CERCLA"). It is undisputed that because

Oregon 's Environmental Cleanup Laws are modeled after CERCLA, including the sett lement

provisions, that federal decisions under CERCLA provide appropriate guidance for the Court

here .60

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60 Newell v. WeslolI, 150 Or App 562, 571-72 (1997) (ci ting Badger v. Pail/SOli /Ilveslmelli Co .. Inc. 31 1 Or 14, 21 (1991) (" In situations involving Oregon laws in large measu re drawn from a federal counterpart, it is appropriate to look for guidance to federal court decisions interpreting s imilar federal laws"); See also, Cale/lus Developmel1l Corporatioll v. L.D. McFarlalld Compau)', 910 F Supp 1509, 1516 (D. Or. 1995) (" Because the interpretation of cost recovery scheme under federa l CERCLA similarly applies to the interpretat ion of the Oregon CERCLA statute").

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a. " Informed Discretion" is the Core Principal Applied by the Reviewing Trial Court

It is universally agreed upon that a review of a consent decree61 is committed to the

informed discretion of the trial courl.62 The DEQ and settling parties do not dispute thi s core

principal. Because the consent decree "places the power and prestige of the court behind

compromise, the consent decree wi ll therefore not be approved where the agreement is illegal , a

product of collusion, inequitable, or contrary to the public good,63 And when reviewing a

consent decree, the court must not "eschew any rubber stamp approval in favor of an

independent evaluation.,,64 In fact, in the CERCLA consent decree context, the court has an

"obligation to independently scrutinize the terms of a setllemenl.,,65

A tri al courts review is not limited to the administrati ve record created by the DEQ. In

fact , "a reviewing [trial] court may consider materi als supplemenlGlY 10 the administrative

record in order to determine the adequacy of the government agency's decision. ,,66 Likewise, a

reviewing court may consider additional evidence beyond the administrative record as

background infonnation to aid the court's understanding, or to detenn ine if the agency examined

61 Under federal law, a consent judgment is referred to as a consent dec ree.

62 See e.g., United States v. Hooker Chemical & Plastics COl]). , 776 F2d 410, 411 (2"d Cir. 1985); UI/ited States \/. Jones & Laughlin Steel Corp., 804 F2d 348, 35 1 (6th Cir. 1985); Officer!; for Justice v. Civil Service Commission, 688 F2d 61 5, 625-26 (9'h Cir 1982) ("The initial decision to approve or reject a settlement proposal is committed to the sound discretion of the trial judge") .

63 Kelly \/. Thomas Solvenl Company, 717 F Supp 507, 515 (1989) (ci ting to Williams v. Vllkovich.720 F2d 909, 920 (6th Cir. 1983) and United Slales v. Jacksoll , 519 F2d 11 57, 1151 (S'h Cir. 1975».

601 id.

6S United States v. Montrose Chemical Corporatioll o/California, 50 F3d 741 , 747 (9th C ir. 1995) (Held that distTict court abused its discretion in detemlining that CERCLA consent decree was substantively fa ir).

66 Abo Coatings 0/ America, inc., 949 F2d at 1427·28 (em phasis added).

Page 22 - INTEVENOR PACIFIC 111, LLC'S RESPONSE IN OPPOS ITION TO PLAINTIFF' S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNm : N.:LSON STA1'o'FORI) l.LC III SW 5th Avenue, Suile 1740

POflland, On:gon 97204 p. 503.417.7777; f. 503.417.4250

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all relevant factors or adequately explained its decision.67 In fact,

[i)! wi ll often be impossible, especially when highly technical matters are involved, for the court to detenninc whether the agency took into consideration all relevant factors unless it looks outside the record to detennine what matters the agency should have considered but did no1.68

Given the unique factual circumstances of thi s case, and the grave unfairness to Pacific

III , the Court should look at each and every factual aspect of this case with a fine tooth comb.

Until now, the DEQ has enjoyed the freedom from infonned d iscret ion and judicial scrutiny,

because-as the DEQ ad mits-thi s is the first time in Oregon history that the DEQ has proposed

a consent judgment where a non-settling party (here, an ignored party) intervened and objected

to the consent judgment. As counsel for DEQ noted at the October 24, 20 11 hearing, the DEQ

has been accustomed to presenting its proposed consent j udgment via a quick ex parle hearing.

In fact , each of the six consent judgments referenced in DEQ's Response to Interrogatory

(Exhibit C to Veley Declaration), and attached as Exhibits G through L to the Ve ley Declaration,

were submitted to the COllrt by mail for ex parte entry wUhoul a supporting molioll, oral

argument or questions from lite COllrl, leI alolle llll)' objection from a third_parly .69 Based on

the foregoing, the Court should engage in a detailed review of the facts and circumstances of this

case and the materials submitted in reaching its decision to approve or reject the consent

j udgment.

b. The Court Reviews the Consent Judgment with an Arbitrary and Capricious and/or Abuse of Discrction Standard

It is undisputed- notwithstanding the foregoing general principals-that the court applies

67 AscarcQ, Illc. v. EPA , 616 F.2d 1153, 11 59-60 (91h Ci r. 1980) (" It is both unreali sti c and unwise to straightjacket the reviewing court with the administrative record ... [and] The court cannot adequately discharge its duty to engage in a substantial inquiry if it is required to take the agency's word that it considered all relevant matters.").

68 1d. , at 1160.

Page 23 - INTEVENOR PACIFIC III , LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGM ENT

S U NIn: NELSON STANFORD LI .C III SW 5th Avenue, Sui le 1740

!'ortland. Oregon 972O..f p. 503.417.7177: [ 503.417.4250

additional standards when reviewing a proposed CERCLA consent decree, or here, a proposed

2 consent judgment under ORS 465.325. Specificall y, the court is to review whether the agency's

3 (here, the DEQ) decisions and determinations with respect 10 the consent decree were arbitrary

4 and capricious and/or whether the agency abused its discretion.7o If so, then the consent decree

5 must be rejected and the analysis ends.

6 Under the circumstances of this case, the admi nistrati ve record is insufficient for the

7 Court to apply the above standard because ( I) the DEQ's treatment and consideration of Pacific

8 III is minimal and conc1usory at best, (2) no explanation or justifi cation is provided in the

9 administrative record for in the decision to include the separate Western Ha!Jofthe Tannery Site

10 in the Consent Judgment and the related contribution protection afforded the po ll uter defendants,

11 and (3) notwithstanding the foregoing, the extreme and clear unfairness that the proposed

12 Consent Judgment poses to Pacific III.

13 Faced with the lack of clarity contained within the Administrative Record, the Court

14 allowed Pacific III to conduct di scovery through an interrogatory (see Fact Section No.6 above).

15 In its response, the DEQ claimed that it was the DEQ' s consistent practice to not carve out

16 property fTom its consent judgments, even though the DEQ has historically carved Ollt portions

17 of the property from contribution protection, pending further act ion by the polluter defendants.71

18 Specifically, in the six consent judgments rel ied upon by the DEQ to incorrectly support its

19 reliance on historical consistency, the DEQ carved Olll an "Uplands" portion of the property

20 where contamination originated (similar to the Western Half) while providing contribution

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69 See Exhibits C, G, 1-1, I, J, K. and L to Ve ley Declaration.

70 See, In re Tutu Water Wells, 326 F3d 201 , 207 (3'd Cir. 2003) (abuse of di scretion); U"ited Stares v. COl/nons Engineering Corporation, 899 F2d 79, 84 (1 '1 Cir. 1990) (abuse of di scretion); United Stares v. Akzo Coatings of America. I IIC. , 949 F2d 1409, 1424 (6111 Ci r. 1991) (arbi t'rary and capricious).

71 See Exhibit C to Veley Declaration (DEQ Response to Interrogatory); See Exhibits G through L to the Ve ley Declaration (Six past consent judgments-relied upon by the DEQ-where the DEQ expressly

Page 24 - INTEVENOR PACIFIC 111, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF' S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNDE NELSON STANFORD u .e III SW Sih A\'cnue, Suile 1740

POflland. Oregon 97204 p. 50H I7.7777; f. 503.417.4250

protection for downstream property where the contamination may have migrated to and fo r

2 which the po ll uters paid to clean Up. 72 In the fonner consent judgments prepared by and agreed

3 to by the DEQ, the polluter defendants could only obtain contri bution protection for the

4 "Uplands" only upon the sat is/acIDlY pelformance of additioualllclS related to the carved Olll

5 Uplands property, including remedial action. In review, those past six consent j udgments

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provided carve outs and contribution protection as follows:

"9. Contribution Actions

A. The parties agree that thi s Consent Judgment is a judicial settlement within the meaning of ORS 46S.325(6)(b), pursuant to which Defendant has resolved its liabi li ty to the State of Oregon regarding Matters addressed for the Facility to the extent provided in Sect ion 7. Effective upon satisfaction of the payments required under Subsections 3.A and 3.B above, Defendant shall not be liable for claims for contribution regarding Matters Addressed for any portion of the Faci li ty otller tllall the Up/am/s portious of the Facility. Effective upon entry of this Consent Judgment by the Court, all(/ subject tllereafter 10 Defendant's satisfactory pet/ormallce Ululer auy existing or future DEQ agreement, order, NF A, or cOllse1l1 judgmellt related to remedill/llctioll at Up/allds portions of the Facility amI tile reservations ill Subsectioll 7.B, Defendant shall 1I0t be Iillbie for claims for cOlltribution regarding Matters Addressed for 'lie Up/amis portiolls of tile Facility."

By analogy here, any such further act ion of the polluter defendants (if the Western Half,

were carved out), would he payment to Pacific III for its remedia l action costs by way of an

agreed settlement or payment in satisfaction of any judgment Pacific III were to obtain against

the polluter defendants in the pending Pacific II/ v. Wells Fargo, ef al. act ion, scheduled for trial

carved oul a portion of the propcrty subject to thc consent j udgmclll, pcnding furt her action by the 25 polluter defendants as to the carvcd out port ion or property.

26 72 Id.

Page 25 - INTEVENOR PACIFIC III, LLC'S RESPONSE IN OPPOSITION TO PLAfNTlFF'S MOTION FOR ENTR Y OF CONSENT JUDGMENT

SUNDE NEI.SON STANFORD u .e III sw Slh Avenue. Suile 1740

l'ortl1Uld. Oregon 97204 p. 503.4 11.7777: f. 50).4 11.4250

on May 29, 20 12.

2 Unfortunately. the DEQ arbitrari ly broke away from its tradition of carving out property

3 and inappropriatel y included the Western Ha/fofthe Tannery Site, knowing full we ll that it had

4 previously partnered with Paci fic III in its e fforts to clean up the Western Half(and its incurring

5 over $ 1,200,000 in remedial action costs). There is no reasonable or fair rationale for including

6 the Western Half under the circumstances of the casco Any such decision to do so was arbitrary

7 and capricious, and an extreme abuse of the di scretion given to the DEQ by the legislature.

8 Moreover, in light of the remedial action costs already incurred by Pacific III , as opposed to

9 remedial action costs not yet occurred by a third-party in the future, carving out Pacific III and

10 the Western Half from the Consent Judgment is the only reasonable decision that passes the

II arbitrary/capricious and abuse of di scretion tests.

12 The DEQ further argued in its interrogatory response that without including the Western

13 Half, it would not have been able to settle with the polluter defendants, because according to the

14 DEQ: "DEQ considered the likel ihood that no sett lement and no financing would be provided for

15 final clean-up at the Tannery and KFF Sites if the settlement did not encompass all of the hi storic

16 property.,,73 There is absolutely no support for this in the record, nor any indicat ion that bona

17 fide attempts were made to settl e with a "carve out" of the Western Property. Instead the DEQ

18 took the easiest route out, and in doing so, ignored Pacific Ill' s ri ghts it reserved unde r the

19 Prospecti ve Purchaser Agreement. So long as the DEQ is allowed to partner with a party to

20 voluntari ly clean up property, on ly to later go behind that parties' back and destroy their ri ght to

2 1 recover their cleanup costs, no one in their right mind would ever vol untaril y partner with the

22 DEQ to clean up property. And if it is the policy of the State of Oregon to encourage early,

23 vo luntary response, nothing more could be at odds with that policy than the actions of the DEQ

24 with respect to Pacific Ill .

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Page 26 - INTEVENOR PACIFIC Ill , LLC 'S RESPONSE IN OPPOS IT ION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SU NOl: N .:ISON STANFORD LLC 111 SW 51h A\"cllUc. Suilc 1740

P0r11and. Oregon 97204 p. 503.417.7777: f. 503.417.4250

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There is simply no tenable basis for not carving out Paci fi c III from the Consent

Judgment, just as there is no tenable basis for the DEQ to conspire in secret with the polluter

defendants and to completely ignore and exclude Pacific III from any and all settlement

di scussions and negotiations regarding the Tannery and KFF Sites. The DEQ's decisions in thi s

regard were arbitrary at best, and an extreme abuse of its di scretion. For these reasons alone, the

Court should reject the Consent Judgment.

The di scussion does not end here, however, because the Consent Judgment also fails to

meet to the additional mandatory requirements that it be reasonable, procedurally and

substantively fair, and in the public interest (as discussed below).

c. The Consent Judgment Must be Reasonable, Procedurally and Substantively Fair, and Consistent with the Environmental Law's Objectives

In addition to reviewing the proposed consent decree under an arbitrary and capricious,

and/or abuse of discretion standard, the Court also reviews the consent decree to determine

whether it meets the mandatory condition precedents of being (I) reasonable; (2) procedurally

and substantially fair; and (3) adequate for the purposes it serves, i.e. , consistent with the

objectives of CERCLA (or here, wiullhe similar objectives of Oregon's Environmental Cleanup

Laws to clean·up contaminated property and to ensure the consent judgment is in the public

interest, among other things).74 The DEQ and polluter defendants ignore thi s mandatory and key

review standard.

III

/II

73 Veley Declaration, Exhibit C, page 10

74 E.g. , MOlltrose Chemical Corporation o/Califomia, 50 F3d at 743 (9th Cir. 1995) (Held that district court abused its di scretion in detennining that CERCLA consent decree was substantive ly fa ir); Callnolls , 899 F2d at 85; III re Tulu Water Wells CERCLA Litigation 326 F3d 20 1, 207 (3'd Cir. 2003); See also. United States v Aerojel General Corp., 606 F3d 1142, 1150·5 1 (2010).

Page 27 - INTEVENOR PACIFIC III , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNDE N n SON STANFORD U £ I II SW 5th Avenue, Suite 1740

I'ortland. Oregon 9 7204 p. 503.417.7777; f. 503.4 17.4250

I. The Consent Judgmenl is Unreasonable

2 "The evaluation of a consent decree 's reasonab leness will be a multifaceted exercise,,,75

3 and includes, but is not limited to, examining whether the settl ement includes satisfactory

4 compensation of the pub lic for anticipated costs of clean up, the relative strengths of the parties'

5 litigating positions, and the risks of litigat ion. 76

6 The DEQ alleges and argues that the " payment under the proposed Consent ludgment is a

7 reasonable settlement amount, based on: (a) infonnation disclosed to DEQ regarding insurance

8 coverage and these amounts; (b) infonnation disclosed to DEQ regardi ng available assets of

9 private individual settling parties; (c) estimates of likely costs of final remedies; and (d) DEQ

10 avoiding cost of litigation for cleanup enforcement or cost recovery."n The DEQ asserts these

11 arguments, however, without any support or evidence whatsoever in the record other than the

12 foregoing conclusions. The DEQ has not offered any evidence, let alone any support in the

13 Administrative Record, regarding the " insurance coverage and these amounts" of any of the

14 parties, nor has it provided Pacific III or the Court with "infonnation ... regarding available assets

15 of private individual settling parties." With respect to " likely costs af fina l remedies," the DEQ

16 "has not yet se lected a final remedy fo r the remainder of the Tannery Site [i. e. the Eastern HalfJ

17 or for the parcels comprising the KFF Site.,,78 Thus, it is unknown whether the settlement

18 amounts are reasonable in thi s regard.

19 Likewise, based on the DEQ's own inconsistent estimates, a wind-fall or short-fall is

20 quite possible. As discussed above, for example, the DEQ has estimated remedial action costs

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7S Canl/QIIS, 899 F2d at 89.

76 Id. , at 89-90.

71 Pla int iff's Motion for Entry of Consent Judgment, page 8; Gilles Declaration, Exhibit B, page 4.

78 Th is is undisputed, but see, for example, Plaintiff' s Motion for Entry of Consent Judgment, page 8.

Page 28 - fNTEVENOR PACIFIC Ill , LLC'S RESPONSE IN OPPOSITION TO PLAfNTIFF'S MOTION FOR ENTRY OF CONSENT J UDGMENT

S U NDE NEI-SON Sl'ANI'OIUJ LLC III SW 5111 A.'enuc. Suite 1740

I'onhmd. Oregon 97204 p. 503.4 17.7777: f. 503.411.4250

for the Eastern Half of the Tannery Site at $540,000 to $2,600,000.79 At the same time,

2 however, the DEQ also stated that the "DEQ expects that the $2.6 million [it collects from the

3 Consent Judgment] will be adequate to fund cleanup of bot" sites to protecti ve standards as we ll

4 as reimburse DEQ's outstanding remedial action costs."so (f thi s stands true, it is unknown how

5 the DEQ will reimburse itself$390,000 from the $2,600,000 and then remediate the Eastern Haif

6 and the KFF Site if it estimated it could cost $2,600,000 to remediate the Eastern Half alone. On

7 the flip side, however, the $2,600,000 payment could result in a cash windfall for the DEQ if its

8 remedial action costs for the Eastern Half are only $540,000 on the l o\V~end as estimated above,

9 or $550,000 as it estimated in 2007.81 With no plan yet in place, it is entirely possible from a

to factual standpoint that the DEQ could be left with either an enonnous cash wi nd· fall or short·

11 fa ll. A cash wind· fa ll with no remuneration to Pacific III would be contrary to the public

12 interest, and a far cry from declaring the Consent Judgment settlement as being reasonable.

13 Likewise, a cash short· fa ll , particularly in light of the extremely deep pocketed polluter

14 defendant Well s Fargo, would be anythi ng but reasonable.

15 With respect to lit igation strengths and risks, the DEQ has not d isclosed its strengths and

16 weaknesses with respect to its claims against the polluter defendants. This infonnat ion is not

17 included in the Administrative Record or in any of the documents offered by the DEQ in support

18 of its motion. Pacific 1II agrees, however, that there are certainly ri sks 10 any litigation regarding

19 environmental contamination clai ms, but the DEQ has s imply fa llen short in providing ev idence

20 to meet the strengths, weaknesses, and ri sks face t of the reasonableness test.

2 1 Lastl y, Pacific III does not argue that obtaining money to clean up contaminated property

22 is unreasonable, but the means and methods employed by the DEQ and polluter defendants to

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19 G illes Declarat ion, Exhibit B, page 7.

so G illes Declaration, Exhibit B, page II.

11 See Veley Declaration, Exhibit F.

Page 29 - lNTEVENOR PACIFIC Ill , LLC' S RESPONSE TN OPPOSIT ION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

S U NOE NELSON STANFORO l.tC III SW 5th Avenue. Suite 1740

Portland. CreSon 97204 p. 503.4 17.7777: f. 503.417.4250

this end are completely unreasonable. This is particul arl y true because Pacific III voluntaril y

2 incurred remedial action costs and expressly reserved those claims in its Prospective Purchaser

3 Agreement to recover those costs in the future . The DEQ ignores Pacific Ill 's past remediation

4 and benefit to the public, and instead, seeks to destroy Pacific III for its own selfish interest Gust

5 as it tried to do with Huske/Ironwood Homes in the ori ginal March 9, 20 11 proposed Consent

6 Judgment). While it may be reasonable to provide contribution protection against the claims of a

7 recalcitrant potent iall y responsible party (i.e. one who refuses to engage in seulement

8 negotiations or to contribute to remedial aClion), the same does nol ring true with respect to a

9 cooperative, voluntary responder such as Paci fi c 111 who has cooperated and attempted to

} 0 negotiate only to be rebuked by the very parties who control the lenns of the Consent Judgment.

11 2. The Consent Judgment is Extremely Unfair

12 Fairness is evaluated not just from the consent decree signatories ' standpoint, but from

13 the non-parties standpoint as well (i.e., fTom Pacific Ill 's standpoint).82 When reviewing whether

14 a consent decree is "procedurall y fair ," the court looks to the "negotiation process and attempt to

15 gauge its candor, openness, and bargaining balance. ,,83 These procedural considerations include

16 whether non-settli ng parties had an opportunity to participate in the negotiations (Pacific III had

17 no such opportunity and was specifically excluded from any and all negotiations), and whether

18 the settlement was negotiated in good faith .&4 In fact, allowing a non-senling party, such as

19 Pacific III , an opportu nity to participate in consent judgment-related negotiation, and to join the

20 settlement, is cri tical in the Court finding procedural fairness.85 In the absent of the foregoing,

21 the Consent Judgment fail s to meet the mandatory procedural fairness standard, notwithstanding

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82 Abo Coatings of America, fIlC., 949 F2d at 1435.

Sl Call1lolls, 899 F2d at 87.

M Id., at 86-87.

8S See, Jd., al87.

Page 30 - INTEVENOR PACIFIC III , LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SU 1'10F. N F.I.sON STANFORD LLC II I SW 5th Avenue. Suite 1740

]'ortlnnd. Oregon 97204 p. 503.417.7777: f. 503.4 17.4250

the unfairness of the DEQ not carving out the Western HaJffrom contribution protection absent

2 further action by the po ll uter defendants (i.e. remuneration of Pacific III 's remediation cost

3 through settlement or sati sfaction of an award against them in the Pacific III v. Wells Fargo, ef

4 al. action currently scheduled for trial on May 29, 20 12). Here, it is undisputed that Paci fic III

5 was purposefully ignored and was not afforded the opportunity to participate in the consent

6 judgment settlement negotiations and that its requests for remuneration and to join the consent

7 judgment settlement were rebuked. In light of the foregoing, the Court should reject the consent

8 j udgment on the basis it is procedurally unfair.

9 When evaluating "substanti ve fairness" of the consent decree, the "concepts of corrective

10 justice and accountability [come into play]: a party should bear the cost of the hann fo r which it

11 is legally responsible.,,86 Accordingly, substantial fairness includes an examination of whether

12 the amount paid by a settling polluter defendant is proportionate to its contribution to the

13 contamination problem and hann the polluter has done (the polluter defendants will not be

14 paying any money whatsoever with respect to the contamination they caused at the Western Half

15 of the Tannery Site if the consent judgment is approved).87 Here, as di scussed above, a final

16 remedy has not yet been chosen for the Eastern Halfofthe Tannery Site or for the KFF Site, and

17 the cost estimates vary greatly (and are non-existent or vague at best, with respect to the KFF

18 site). The DEQ has not provided evidence or factual support that the amounts paid by the

19 settling defendants are proportionate to their contribution to the contamination and hann done by

20 each polluter defendant. Vague and unsupported conclusions in thi s regard are insufficient to

21 support a finding of substantive fairness.

22 III

23 III

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25 86 /d..at87.

26 87 Cannons. 899 F2d at 87.

Page 3 I - INTEVENOR PACIFIC III , LLC'S RESPONSE IN OPPOSITION TO PLAfNTIFF 'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNIH: NU.sON S1""N~·ORO L1.C I II SW 51h Avenue. Suile 1740

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3. Under the Circumstances, the Consent Judgment is at Odds with the Objectives of Oregon's Environmental Laws as Established by the Legislature

Settlements are found to be consistent with the legislative goals of CERCLA if they

promote early completion of cleanup activities and ease the burden on the government by

providing provide rather than public funding for cJeanup.88 While it may be the Oregon

legislative intent to provide for early clean up and to ease the burden on the DEQ, the

contamination at hand has been present for decades, and the DEQ waited decades to do anything

about it. Now, in an effort to play "catch up" and do something about (he contamination, the

DEQ has unreasonably used Pacific III as a pawn to obtain funding from the polluters in

exchange for Pacific Ill 's contribution claims which are currently being lit igated in Pacific III v.

Wells Fargo, e/ aJ.

It can hardly be said that a consent judgment under the factual circumstances of this case,

coupled with the DEQ's departure from carving ow its fonner partner, Pacific III , furthers the

ultimate goals of the Oregon's statutory cleanup scheme. IftJle DEQ were allowed to abuse its

discretion as it has here by destroying the contribution rights of a vol untary responder such as

Pacific III , the future is bleak for any further voluntary responders to take action because they

will have no guarantee, or valid reservation of rights, to recover their cleanup costs from the

polluters. The DEQ comes to the table with unclean hands because it could have easily avoided

the increased costs this litigation brings by simply inviting and including Pacific III in settlement

di scussions with the consent judgment parties prior to the original March 9, 2001 proposed

Consent Judgment with Linke and Nelson, and prior to (and after) the current July 1,2011

proposed Consent Judgment. Instead, the DEQ and the polluter defendants dug their heals in,

and have attempted everything possible to destroy Pacific Ill 's rights to recover its remedial

Page 32 - lNTEVENOR PACIFIC III , LLC 'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNDE Nn.sON STANFORD LLC 111 SW 5th A\'cnuc. Suile 1740

Ponland. Oregon 97204 p. 503.417.7777; r. 503.4 J 7.4250

action costs. In fact , the DEQ and the polluter defendants continue to refuse to engage Pacific III

2 in any meaningful dialogue or settlement discussions to resolve this matter. It is the DEQ and

3 the polluter defendants who have placed increased burdens on the Stale, nol Pacific Ill.

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d. The Court Also Reviews the DEQ's Actions to Determine Whether it Complied with Statutory Condition Precedents

It is undisputed that in addition to the above review standards, the trial court will also

review the proposed consent judgment to determine whether the DEQ complied with statutory

condition precedents, and specificall y whether the DEQ properly determined that:

(I) The scnlement is in the public interest;89 (2) The settlement will expedite effecti ve removal or remedial action;90 (3) The settlement will minimize litigation;91 (4) The settlement will be consistent with the rules adopted under DRS 465.400;92 (5) The covenant not to sue is in the public interest ;93 (6) The covenant not to sue will expedite effective removal or remedial action consistent with cleanup rules;9-l (7) The settli ng defendants are in full compliance with the consent judgment;95 (8) The removal or remedial action has been approved by the Director;96 and (9) Public comments did not di sclose facts or considerations indicating that the proposed consent judgment is inappropriate, improper, or inadequate so as to warrant withdrawing, withholding or modifying the consent judgment.97

While Pacific III does not dispute that cleaning up contaminated property serves a

significant public benefit, the means and methods upon which the DEQ and poll uter defendants

88 Kelly v. Tholl/as Solvenr Company, 717 F Supp 507, 518 (W.D. Mich. 1989); Un ired Slales v. Rohm & Hass Co., 721 F. Supp. 666, 680 (D.NJ. 1989).

89 ORS 465.325(1)

'J(j Id.

9 1 Id.

" ORS 465.325(1).

93 ORS 465.325(7)(aXA) an (d).

" ORS 465.325(7)(a)(8).

" ORS 465.325(7)(aXC).

" ORS 465.325(7)(a)(D).

" ORS 465.325(4)(d) (emphasis added).

Page 33 - INTEVENOR PACIFIC III , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF' S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNIl( NELSON ST ANmRl> Ll.C III SW 51h Avellue. Suite 1740

Portland. Or~gon 97204 p. 503.417.7777: r. 503.41 7.4250

1 are going about it are 1101 in the public interest. In fact , their methods are direct ly contrary to the

2 public interest and Oregon's environmental cleanup laws as a whole. As a matter of common

3 sense, the legislature cou ld not have possibly intended the DEQ to entcr into agreements with

4 voluntary responders, such as Pacific III , to then exclude them from subsequent negot iations and

5 consent judgments with the polluters. Simply put, the DEQ confuses "public benefit" with

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"public interest."

Pacific III agrees that the consent judgment will li kely expedite removal or remediation

action, but only if the DEQ does not further abuse its discretion and cleans up the contaminated

property completely Gust as Pacific III did with respect to the Western Halfofthe Tannery Site).

However, the methods employed by the DEQ and the polluter defendants are contrary to the

public interest.

From a factual standpoint, it hard to reconcil e what exactly the DEQ has approved in

tenns of remedial action on the Eastern Half of the Tannery Site and the KFF Site. In fact, the

DEQ admits that it "has not selected a fina l remedy for the remainder of the Tannery Site of for

the remaining parcels comprising the KFF Site.,,98 Likewise, as discussed above, the estimated

costs set forth by the DEQ have varied widely for the Eastern Half of the Tannery Site, and are

vague or nOll-existent for the KFF Site. The DEQ did , however, select a final remedy for the

Western HalJo fthe Tannery Site when it entered into the Prospective Purchaser Agreement with

Pacific III in 2002 and then again when it issued the final No Further Action letter to Pacific III

in 2008.

With respect to minimizing litigation, the proposed Consent Judgment will indeed

voluntari ly minimize the Huskell ronwood Homes litigation and reimburse Huske/ Ironwood

Homes its remedial action costs through a side-settlement. Unfortunatel y, it will also minimize,

98 This is undisputed, but see, for example, Plaint ifrs Mot ion for Elllry of Consent Judgment, page 8.

Page 34 - INTEVENOR PACIFIC III , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

51.11"0.: N ELSON STANFOII.J) LtC III SW 51h A\'cnuc. Suite 1740

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or rather completely destroy, Pacific Ill ' s litigation against the polluter defendants to recover the

costs it incurred cleaning up the Weslern Ha/fofthe property. In doing so, Wells Fargo, Linke,

Nelson, and Wilson unjustly escape liability for their fair share of remedial action costs for the

Tannery Site (they are paying ZERO for the contamination al the Western Half that Pacific III

cleaned up for them). To this end, Paci fic III is, and always has been, open to creative so lutions

to resolve these issues on a global scale, but the DEQ and the consent judgment defendants have

continually refused to negotiate or to entertain any such solution beyond the unreasonable,

unfair, and contrary to public interest, Consent Judgment they propose.

Lastly, the DEQ has only offered the vague conclusion that Pacific Ill ' s objections did

not disclose facts or considerations indicating that the proposed consent judgment was

inappropri ate, improper or inadequate. Again, the DEQ unjustly blames the legislature for the

contribution protection while offering no explanation or reasonable basis for using Pacific Ill ' s

claims relating to one piece of property (i.e. the western half of the Tannery Site) as bait to

obtain money to clean up separate property (i.e. the eastern ha/fofthe Tannery Site and potions

of the KFF Site). The Administrative Record was completely devoid of any rational basis, and

the DEQ's Response to Interrogatory onl y shows that it has the discretion to carve Oll( Upland

property such as the Western HalJofthe Tannery Site, but the DEQ simply refuses.

IV. CONCLUSION

Based on the foregoing facts and arguments set forth in this brief, no just reason exists to

allow the currently proposed Consent Judgment to be entered because it is unreasonable, unfair,

and contrary to the public interest in its current form. The only fair result is to reject the

proposed Consent Judgment and allow the parties to commence negotiations and entertain

11/

Page 35 - INTEVENOR PACIFIC III , LLC' S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUN!)': NU.50N STANFORD !.I.e III SW 51h AI·cnuc. Sui le 1740

Ponland. Oregon 97204 p. 503.417.7777; f. 503.4 17.4250

creative solutions with evelyone's interests in mind. Therefore, Pacific III respectfully requests

2 that the Court deny Plaintiff's Motion for Entry of Consent Judgment.

3

4 DATED this 2 1 day of February, 2012.

5 SLiNDE NELSON STANFORD LLC

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BY:ChriS~~ 004125 chris@slindene lson.com Nicholas J. Slinde, OSB No. 003900 nick@slindenelson.com (503) 417-7777 Of Attorneys for Pacific III , LLC

Page 36 - INTEVENOR PACIFIC II I, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF' S MOTION FOR ENTRY OF CONSENT JUDGMENT

SUNm: NELSON $TANFORI) I.l.e J J J SW 5th Avenue, Suite 1740

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CERTIFICATE OF SERVICE

I certify that I have served a true and correct copy of the attached INTERVENOR

PACIFIC III, LLC'S RESPONSE IN OPPOSITION TO PLAINTIFF'S MOTION FOR

ENTRY OF CONSENT JUDGMENT on the following person(s) on the date below by the

method of service so indicated:

Tom Spooner Spooner & Much 530 Center Street NE, Suite 722 Salem, OR 9730 I Allorney Jor Craig E. Bowell & Pamela Bowen (Overnight FedEx aud email)

Oarsee Sta ley Kurt Burkholder Department of Justice IS 15 SW 5th Ave., Suite 410 Portland, OR 9720 1 Allomey for 'he Oregon DeparllllellI of El1vironmelllal QualifY (/-Iol1d-De/ivclY aud email)

Patrick Rowe & George W. McKallip, Jr. Sussman Shank 1000 SW Broadway, Suite 1400 Portland, OR 97205 Attorney for Michael C. Gibbons (Halld-Delivery and email)

DATED thisd-l day of February , 2012

Page I - CERTIFICATE OF SERVICE

Stephen LCalham Hcurlin, Polter, Jahn, Leatham & Hohmann, PS 21 1 E. McLoughlin Blvd Vancouver, WA 98663 Al10rney for Wells Fargo Balik alld James Wilsoll (Halld-Delivery alld email)

Loren Dunn Riddell Williams PS 1001 41b Ave., Suite 4500 Seatt le, WA 98154 Allomeyfor Li/lke Ellferprises of Oregon. fllc. and DOl/aid Nelsol/ (Overnight FedEx alld email)

Thomas Benke Environmental Compliance 7845 Capitol Hwy, Suite 8 Portland, OR 97219 Auomey for Patrick D. Hllske. Tamara L. HlIske a1ld Ironwood Homes, fllc. (Halld-Delivery and email)

SLINDE NELSON STANFORD LLC

By:~...L~H.~--::-:::~~cc=co---Christopher e\ey, OSB No. 004125 or Attorneys for Intevenor Pacific Ill , LLC

SU N!>!:; N n ,SON ST,\ NFORI) l. l.e III SW 5th Avenue. Suite J 740

Ponland. Oregon 97204 p. 503.417.7777: f. 503.417.4250