USA et al v. HPI Products, Inc. et al

Filing 153

ORDER terminating Receivership Defendants' businesses. Plaintiff's motions 135 , 143 are GRANTED. Signed on 9/19/22 by District Judge Greg Kays. (Law Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
ST. JOSEPH DIVISION
UNITED STATES OF AMERICA,
THE STATE OF MISSOURI, ex rel.
ERIC SCHMITT, Attorney General,
and the MISSOURI DEPARTMENT OF
NATURAL RESOURCES,
Plaintiffs,
v.
HPI PRODUCTS, INC., ST. JOSEPH
PROPERTIES, LLC, and
WILLIAM GARVEY,
Defendants.

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No. 5:08-CV-06133-DGK

ORDER TERMINATING RECEIVERSHIP DEFENDANTS’ OPERATIONS
Receivership Defendants 1 own and operate a manufacturing and chemical production
facility in St. Joseph, Missouri. On December 23, 2008, the United States of America and the
State of Missouri (“Plaintiffs”) filed a complaint seeking civil penalties and injunctive relief arising
from Receivership Defendants’ handling of hazardous waste. ECF No. 1. The parties negotiated
a settlement and entered into a consent decree and then a modified consent decree, which were
approved by the Court on January 12, 2011, and July 27, 2011, respectively (“Consent Decree”).
ECF Nos. 34, 37. Over the last eleven years, Receivership Defendants have repeatedly failed to
meet their obligations under the Consent Decree. See Order Enforcing Judgment, ECF No. 46;
Order Holding Defendants in Contempt; ECF No. 50. In March 2018, the Court concluded that
Receivership Defendants had made no effort to comply with the Consent Decree, and entered an
order holding Receivership Defendants in civil contempt and appointing a receiver. Order Holding

Though a receivership has only been in place since January of 2022, the Court uses the term “Receivership
Defendants” throughout this Order for the sake of consistency.

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Defendants in Contempt; ECF No. 50. Receivership Defendants then made some efforts to comply
with the Consent Decree, and the parties jointly requested the Court stay the Order holding
Receivership Defendants in civil contempt and appointing a receiver, which the Court granted.
Order Granting Stay, ECF No. 52. Receivership Defendants’ efforts to comply with the Consent
Decree subsequently stalled again, and on June 15, 2021, Plaintiffs again requested the Court
appoint a receiver, freeze Receivership Defendants’ assets, and enjoin Receivership Defendants
from further generation of waste. ECF No. 79. On January 14, 2022, the Court granted that motion
and appointed “Estate of HPI Products, Inc. et al. Receivership LLC,” a limited liability company
created by Greenfield Environmental Trust Group, as Temporary Receiver. Order, ECF No. 89.
On June 27, 2022, the Temporary Receiver filed a status report (“June 27, 2022, Status Report”)
detailing the efforts taken to clean up Receivership Defendants’ properties. June 27, 2022, Status
Report, ECF No. 125. The Temporary Receiver noted that
Receivership Defendants have been unable to turn the proverbial corner during the
Receivership. Despite the Temporary Receiver’s best efforts to set the
Receivership Defendants up for success (e.g., by upgrading financial controls,
enhancing cash-flow monitoring activities, reducing operating expenses, and
confirming major customer orders), the Receivership Defendants have neither
achieved a sustainable, consistent production level nor proven to the Temporary
Receiver that they are capable of independently (i.e., without meaningful oversight)
protecting public and worker health and safety as part of their operational activities.
Id. at 13. The Temporary Receiver also noted that Receivership Defendants were unable “to
operate in a cost-effective manner,” had a “less than stellar track record relative to health and safety
matters,” and that Receivership Defendants’ “lack of responsiveness, inaccurate forecasts, and
unwillingness to improve upon or change past practices have inspired little to no confidence in
their businesses’ prospects—let alone their ability to meaningfully address environmental
obligations pursuant to the Consent Decree.” Id. at 15. These conclusions are backed up by
multiple affidavits from Kevin Snowden, the EPA Environmental Scientist who has inspected
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Receivership Defendants’ properties during the course of this litigation. See e.g., Suppl. Decl. of
Kevin D. Snowden, ECF No. 135-1. The Temporary Receiver therefore suggested that the Court
order Receivership Defendants’ businesses be wound down to protect the environment and the
health and safety of Receivership Defendants’ employees. June 27, 2022, Status Report at 14–16,
ECF No. 125.
The Court thereafter extended the Temporary Receivership until December 30, 2022, and
directed Receivership Defendants to respond to the status report.

Order, ECF No. 126.

Receivership Defendants filed their response on July 12, ECF No. 128, and the Temporary
Receiver filed its reply on July 22, 2022, ECF No. 130.
On July 26, 2022, the Court ordered Plaintiffs to file a brief outlining their position by
August 5, 2022, and a proposed order on or before August 12, 2022. Order, ECF No. 134.
Plaintiffs thereafter filed a motion and proposed order requesting that the Court adopt the
Temporary Receiver’s recommendation and terminate Receivership Defendants’ operations. ECF
No. 135, 143. 2 Defendants and the Temporary Receiver each filed their responses on August 19,
2022. ECF Nos. 140, 142.
Receivership Defendants understandably take issue with the Court winding down their
businesses. However, the best that could be said of Receivership Defendants is that—over the
course of the last decade—they have been on occasion minimally compliant with the Court’s
orders and with environmental, health, and safety laws. Upon review of the parties’ filings, the
Court concludes that, given the intrinsically dangerous nature of Receivership Defendants’

The Temporary Receiver requested additional clarification from Plaintiffs regarding its responsibilities moving
forward should the Court order Receivership Defendants’ businesses be wound down, the period it would be expected
continue serving as a receiver, and how its future fees and expenses would be funded. Resp., ECF No. 140. The Court
ordered Plaintiffs and the Temporary Receiver to either brief these issues or file a joint proposed order addressing the
issues. Plaintiffs and Temporary Receiver chose to file a joint proposed order, ECF No. 152.

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businesses, the health and safety of the public and the environment requires Receivership
Defendants’ businesses be wound down. As such, the Court Orders the following:
1. The Court rescinds its prior Order extending the Temporary Receiver’s appointment
until December 30, 2022, ECF No. 126. Temporary Receiver’s appointment is
extended for a period of 60 calendar days from the date of this Order for the purpose
of overseeing the orderly cessation of Receivership Defendants’ business operations in
St. Joseph, Missouri as specified below, provided that any and all such oversight will
be performed only to the extent practicable and only to the extent of available funding.
Unless otherwise ordered by the Court, after such 60-day period, the Temporary
Receiver will be relieved of its duties and responsibilities described under this Order
and prior Court Orders, and Receivership Defendants will be solely responsible for
taking actions to wind down business operations. To be clear, any activities to be
performed by the Temporary Receiver pursuant to this Order and prior Orders may, as
necessary, be performed with support from one or more third-party professionals.
2.

Temporary Receiver shall secure, or oversee Receivership Defendants’ efforts to
secure, all real properties owned by Receivership Defendants (collectively, the
“Properties”), including buildings, improvements, and equipment located thereon, in
order to prevent any unauthorized access to the Properties and to thereby prevent
trespassers’ or other individuals’ exposure to contamination and exacerbation of
hazardous conditions at the Properties. In addition to any other activities that may be
necessary to secure the Properties, Temporary Receiver and/or Receivership
Defendants shall take all steps necessary to ensure that all access points and doors,
including all garage and loading bay doors, have working locks, latches, bolts, etc., that

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restrict access except as the Temporary Receiver permits access to perform the
activities allowed by this Order. Keys to all existing locks shall be collected from all
persons possessing them, provided that Temporary Receiver shall obtain or be provided
with keys to any new locks that may be needed to secure the Properties, and provided
further that William Garvey, Mike Garvey, and/or another individual(s) with the
Temporary Receiver’s prior written approval (the “Authorized Key Holder(s)”) may
retain the keys in their possession to support Temporary Receiver’s performance of the
activities allowed by this Order. Temporary Receiver currently estimates that the costs
and expenses for the site security activities described in this paragraph will total
approximately $7,000.
3. Upon Plaintiffs’ request, and not limited to the term of the Receivership, the Temporary
Receiver, an Authorized Key Holder, or upon termination of the Receivership,
Defendants, shall provide the Plaintiffs and their representatives and contractors access
to the Properties at all reasonable times for the purposes of conducting any and all
environmental activities for the protection of public health and the environment and/or
compliance with law.
4. Receivership Defendants’ business operations relating to chemical formulation/mixing,
packaging, storage, distribution, sale and/or disposal at the Properties shall cease
immediately and permanently, except that production activities that are underway as of
the date of this Order may continue through the earlier of the date of completion of
such production activities or 7 calendar days from the date of this Order. Temporary
Receiver shall supervise all activities associated with completing production and all
such activities shall be in compliance with all applicable laws. Production may not

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occur if there are no funds to allow for oversight by the Temporary Receiver.
Temporary Receiver currently estimates that the costs and expenses for the supervisory
activities described in this paragraph will total approximately $6,000.
5.

With Temporary Receiver’s oversight, Receivership Defendants shall, within 3
business days of the date of this Order, notify all persons and businesses owning raw
materials, inventory, and/or products stored or otherwise present at or on any of the
Properties that those persons and/or businesses may arrange to pick up such materials,
inventory, and/or products, provided that any pick-up arrangements shall be on terms
and conditions acceptable to Temporary Receiver, including payment by persons and
businesses of the costs and expenses associated with making such materials, inventory,
and/or products available for safe and efficient retrieval. Retrieval of such materials,
inventory, and/or products shall occur within 30 calendar days of the above-described
notification. Receivership Defendants shall, within 3 business days of providing the
above-mentioned notices, provide Temporary Receiver with a copy of each notice
given. Within 15 business days of notification in this Paragraph, the Receivership
Defendants will provide the Temporary Receiver a list all persons and businesses
owning raw materials, inventory, and/or products stored or otherwise present at or on
any of the Properties that have responded to Receivership Defendants’ notice.
Temporary Receiver will assist Receivership Defendants in arranging and facilitating
pick-ups in a manner that is efficient and protective of human health and the
environment, including by endeavoring to retain key personnel (subject to prior
consultation with Temporary Receiver and Temporary Receiver’s prior written
approval for any such retention(s)) in support of pick-up activities. Any pick-up

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activities must be approved by EPA. Temporary Receiver currently estimates that the
costs and expenses for the material/inventory/product-return activities described in this
paragraph will total at least $20,000.
6. Upon the expiration of the 30-day period within which materials and products may be
picked up, any raw materials or finished products not claimed within that period will
be deemed “waste” under 40 C.F.R. Part 261 and the Resource Conservation and
Recovery Act, 42 U.S.C. § 6901 et seq. The notice provided by Receivership
Defendants pursuant to Paragraph 5 shall inform persons and businesses owning raw
materials, inventory, and/or products stored or otherwise present at or on any of the
Properties that the failure to retrieve same may cause such persons and businesses to
be liable for disposal costs.
7. All unpaid or to-be-incurred costs associated with activities required by this and
previous Court Orders, including the fees and expenses of Temporary Receiver accrued
to date and to be accrued during the extended Temporary Receivership,3 shall be funded
by revenue generated from operations and, as appropriate, from the remaining escrow
funds, with the Plaintiffs’ approval. Temporary Receiver may submit a fee application
to the Court for its fees and expenses that have been incurred in recent months.
Temporary Receiver currently estimates that its fees and expenses for the extended
Temporary Receivership will total approximately $25,000. To be clear, Temporary
Receiver’s duties and responsibilities described in this Order are only required to the
extent of available funding, and no provision of this Order or previous Orders shall
require the Temporary Receiver to expend or risk its own personal funds or otherwise
Temporary Receiver will be submitting a fee application to seek the Court’s approval for its fees and expenses that
have been incurred in recent months.

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incur any personal financial liability in the performance of any of its duties or the
exercise of any of its authorities as Temporary Receiver hereunder, or in the exercise
of any of its rights or powers.
8. Revenue received to date or to be received for the duration of the extended Temporary
Receivership, including revenue in satisfaction of current accounts receivable or
generated from the sale of unclaimed raw materials, inventory, or products, or from
products in production as of the date of this Order, as well as the proceeds, if any, of
any Receivership Assets that are liquidated during the extended Temporary
Receivership, shall, at the termination of the Temporary Receivership, unless needed
to fund the Temporary Receiver’s fees and expenses, and upon the Court’s review and
approval, be made available to Plaintiffs for performance of activities in furtherance of
Consent Decree compliance.
9. The parties shall file status updates every thirty days, beginning thirty days from the
date of this Order.
IT IS SO ORDERED.
DATED: September 19, 2022

/s/ Greg Kays
GREG KAYS, JUDGE
UNITED STATES DISTRICT COURT

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