Neighboring Industrial Property Owners Are Granted Authority to Intervene in Remediation Action

ErtelFrom the Indiana Court of Appeals, we have Moran Electric Service, Inc.and Threaded Rod Company, Inc. vs. IDEM, City of Indianapolis, and Ertel Manufacturing.  Ertel, Moran, and Threaded Rod are the former or current owners of adjacent industrial properties located in Indianapolis.  The properties are contaminated with hazardous chemicals. There is some dispute as to whether the contaminants on the  Moran, and Threaded Rod sites originated on those sites or flowed from the Ertel site. IDEM has demanded that the properties be remediated.

In 2008, the City brought a civil action against Ertel to compel Ertel to reimburse the City for its clean-up costs. In 2009, the trial court entered summary judgment for the City and found that Ertel was liable to the City for cleanup costs.  In 2010, IDEM brought a civil action against Ertel asserting claims under IC §13-25-4 and seeking a declaration that Ertel would be responsible to IDEM for past and future costs associated with the cleanup of the hazardous substances at or flowing from the site. In July 2011, IDEM, the City, Ertel, and various insurance companies entered into an Administrative Agreed Order and a Settlement and Release Agreement.

As part of the two agreements, the insurance companies paid $1,000,000 to IDEM. The funds were placed in two escrow accounts—the first escrow account of $140,000 to reimburse IDEM for its past costs and a second escrow account of $860,000 for IDEM’s future costs. With regard to the second escrow account, IDEM agreed not to use the “funds for any purpose other than for Response Actions at or in connection with the Site.” Any funds remaining after IDEM issued the NFA Letter would be surrendered to the City.

In October 2011, the trial court approved the Ertel Settlement Agreement. In November 2012, IDEM issued the NFA Letter regarding the Ertel site. At that time, $846,000 remained in the second escrow account. In 2013, Moran filed a petition with the Indiana Office of Environmental Adjudication (“OEA”) seeking administrative review of the NFA Letter. Moran argued that, in issuing the NFA Letter regarding the Ertel site, IDEM disregarded off-site migration of the contaminants that had occurred and was continuing to occur. Threaded Rod then filed a petition to intervene in Moran’s objection to IDEM’s issuance of the NFA Letter.

In January 2013, Threaded Rod filed a petition to intervene in the civil action between IDEM and Ertel and requested a temporary restraining order. Threaded Rod argued that the contamination on the Ertel site had migrated to the Threaded Rod site, that the $846,000 was intended to be used to clean up the Ertel site and other sites impacted by the contamination on the Ertel site, and that the funds should be preserved to address concerns on the neighboring properties. According to Threaded Rod, IDEM had abdicated its responsibility to clean up contaminants emanating from the Ertel site in violation of the trial court’s October 2011 order. Moran filed a separate motion to intervene and joined in Threaded Rod’s other motions. The City also filed a petition to intervene, which the trial court granted.

The trial court denied Appellants’ requests for a temporary restraining order. IDEM argued that Appellants were not entitled to intervene in the action and that the trial court lacked subject matter jurisdiction because the exclusive jurisdiction to review IDEM’s actions rested with the administrative process pursuant to the Administrative Orders. The trial court found that it lacked subject matter jurisdiction and then ordered IDEM to release the funds in the second escrow account to the City.

The Court of Appeals concluded that the representation of Moran’s and Threaded Rod’s interests by the existing parties was inadequate. It also stated that the trial court abused its discretion by denying their motions to intervene and it erred when it determined that it did not have subject matter jurisdiction.

“The current parties of the two civil actions are IDEM, the City, Ertel, and various insurance companies. Ertel, having been released from liability, has no incentive to represent Appellants’ interests. IDEM’s and the City’s interests in issuing the NFA Letter and distributing the remaining escrowed funds to the City, also appear to conflict with Appellants’ interests in using the remaining escrowed funds to remediate Appellants’ properties,” the Court wrote.

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