Sanchez et al v. Esso Standard Oil de Puerto Rico, Inc.

Filing 477

FINDINGS OF FACT AND CONCLUSIONS OF LAW. The complaint filed by Plaintiffs is dismissed. The preliminary injunction ordered by this court on December 5, 2008, is vacated. Esso will submit, by 10/19/2010, a verified pet ition for attorneys' fees consistent with this order, and in strict compliance with the attorneys' fees lodestar method as interpreted by First Circuit case law. Sanchez and Cabrera will respond by 11/4/2010.Signed by Chief Judge Jose A Fuste on 9/29/2010.(mrj)

Sanchez et al v. Esso Standard Oil de Puerto Rico, Inc.

Doc. 477

1 2 3 4 5 6 7 8

U N IT E D STATES DISTRICT COURT D IS T R IC T OF PUERTO RICO J O R G E FRANCISCO SÁNCHEZ, et al., P la in tif f s , v. E S S O STANDARD OIL DE PUERTO R IC O , INC., D e f e n d a n t.

Civil No. 08-2151 (JAF)

9 10 11 12 13 14 15 16 17 18 19

F I N D I N G S OF FACT, CONCLUSIONS OF LAW, A N D ORDER P la in tif f s , Jorge Francisco Sánchez ("Sánchez") and Dolores Service Station and Auto P a rts , Inc., former operators of a service station under the Esso flag, bring this citizen suit a g a in st Defendant, Esso Standard Oil de Puerto Rico, Inc. ("Esso"), seeking injunctive relief a n d the imposition of civil penalties for alleged violations of the Resource Conservation and R e c o v e ry Act ("RCRA"), 42 U.S.C. §§ 6901­6992k, and federal and Commonwealth re g u la tio n s governing notification and corrective action requirements for releases from u n d e rg ro u n d storage tanks ("USTs"). (Docket No. 1.)1 Plaintiffs alleged that releases of p e tro le u m product from three USTs, formerly owned by Esso, caused the contamination of soil a n d groundwater at and near the property where they operated their service station. (Id.)

1

Unless otherwise noted, all docket and Exibit citations refer to Civil No. 08-2151.

Dockets.Justia.com

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

-2 -

E s s o asserts counterclaims for reimbursement under the federal Comprehensive E n v iro n m e n ta l Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607(a), a g a in st Plaintiffs. (Docket No. 301 at 11­13.) Esso brings an identical third-party claim under § 9607(a) of CERCLA against Jorge Luis Sánchez-Sánchez and Alicia Solano-Díaz ("the S á n c h e z Parents") as well as current property owners Ángel Manuel Sánchez-Gómez and H é c to r Benito Sánchez-Gómez ("Property Owners") (collectively "Third-Party Defendants"). (Id . at 13­16.) Additionally, Esso has raised an indemnification counterclaim against Sánchez under P u e rto Rico law based on provisions in various contracts whereby Esso supplied fuel for the o p e ra tio n of the service station. (Id. At 11­12.) Esso asserts identical third-party

in d e m n if ic a tio n claims against the Sánchez Parents, who joined Sánchez as signatories to the re le v a n t contracts with Esso. (Id. at 13­14.) O n August 5, 2010, we denied Esso's motions for summary judgment on various claims (D o c k e t No. 425),2 and we proceeded to a bench trial held from August 16 to August 19, 2010. T h e following sets forth the pertinent procedural background, as well as this court's findings of f a c t. See Fed. R. Civ. P. 52.

We also declined supplemental jurisdiction over Property Owners' counterclaims in nuisance and tort under Puerto Rico law, brought against Esso roughly nineteen months after the suit began. (Docket No. 425 at 7­8.)

2

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 I. F a c tu a l and Procedural Background

-3 -

P ro p e r t y Owners own a 0.77-acre parcel of property located at Km. 14 of northbound h ig h w a y PR-3 in the Canovanillas Ward of the Municipality of Carolina, Puerto Rico, situated a p p ro x im a te ly thirty-five feet above sea level, around 3,300 feet from the Río Grande de Loíza w a te rw a y. (Docket No. 460 at 185.) The property has been used as a gasoline-dispensing s e rv ic e station since the early 1960s. (Docket No. 22 at 1­2.) In 1985, Esso replaced Shell Oil as the gasoline and diesel supplier for Dolores service s ta tio n by executing the pertinent contracts with the Sánchez Parents. (Def. Exs. 3; 4.) Around th a t time, Esso replaced two of the three existing USTs at the service station. (Id.) O n c e the original contractual agreements between Esso and the Sánchez Parents expired, S á n c h e z joined his parents as a signatory on new contracts formed in June 1992.3 (Def. Exs. 7; 8 .) Shortly after, in August 1992, Esso removed and replaced the diesel UST located in the s o u th e a s t corner of the property with a 6,000-gallon capacity, double-walled, fiberglass UST. (S e e Docket No. 24 at 42­44.) Later, in January 1998, Esso removed and replaced the two 1 0 ,0 0 0 -g a llo n capacity USTs located on the southwest corner of the property with two 1 2 ,0 0 0 -g allon USTs, and Esso's consultant, ERTEC, prepared a report that included all available te c h n ic a l data up to that date. (Id.)

Dolores Service Station and Auto Parts, Inc. never signed a contract with Esso. Nevertheless, in January 1997, it was incorporated and started operating the service station.

3

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

-4 -

E R T E C 's "Report on Removal of Underground Storage Tanks" ("Removal Report"), d a te d May 5, 1998 (Dec. 3, 2008 Prelim. Inj. Hr'g, Pls' Ex. 2), was submitted to the E n v iro n m e n ta l Quality Board ("EQB") on May 14, 2001. (Dec. 3, 2008 Prelim. Inj. Hr'g, D e f . Ex. 9.) Eventually, Esso received a "no further action" letter from the agency releasing it f ro m conducting any further environmental studies at the site. (Def. Ex. 21.) L a te r that year, Esso contracted ERTEC to investigate the condition of the soil in the v ic in ity of the diesel UST. (See December. 3, 2008 Prelim. Inj. Hr'g, Def. Ex. 2.) Thereafter, E s s o continued to conduct additional investigative work through ERTEC, including the "Phase II environmental evaluation,"4 which culminated in the submission of a Corrective Action Plan ("C A P " ) to the EQB in 2007. (Def. Ex. 43.) The CAP was first implemented in May 2008 (D e c . 3, 2008 Prelim. Inj. Hr'g, Def. Ex. 5), and the monitoring envisioned by the CAP was in p ro g re s s when this civil action was filed. A lth o u g h the UST system currently at the site had never leaked and was not leaking on th e date suit was filed, as Sánchez readily admitted at trial, Plaintiffs filed suit on October 6, 2 0 0 8 .5 After a preliminary injunction hearing was held on December 2 and 3, 2008, which we d isc u s s in more detail below, this court ordered a Comprehensive Site Assessment ("CSA") at

In 2006, Esso employed ERTEC to evaluate the soil and groundwater conditions of the site, resulting in the Phase II Environmental Evaluation ("Phase II assessment"), dated November 14, 2006. (Def. Ex. 36.) On October 31, 2008, Esso sold all of its equipment at the service station, including the service station USTs at issue here. (Docket No. 264 at 3.)
5

4

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-5 -

th e site. (Docket No. 22.) The initial CSA report was submitted to this court in July 2009 (D e f . Ex. 55), and the report on the final supplemental investigative work recommended in the in itia l report was submitted in August 2010. (Def. Ex. 60.) II. T r ia l Evidence In addition to the Exhibits on the record, Carlos I. Figueroa ("Figueroa"), Esso's project m a n a g e r, was called to testify as a witness for both parties. Plaintiffs also called their expert, C a rlo s M. Belgodere-Pamies, Sánchez, and Ricardo Alvarez, a member of On-Site E n v iro n m e n ta l Inc. ("On-Site").6 In addition to Figueroa, Esso called John A. Connor and D r. Janet Kester. While we discuss the pertinent testimony throughout this Opinion and Order, w e set forth in more detail the testimony of the key witnesses in this case. A. P la in tiffs ' Witness Carlos M. Belgodere-Pamies P la in tif f s ' case rests entirely upon the proffered expert testimony of Carlos M. B e lg o d e re -P a m ie s ("Belgodere"), a geologist and self-described environmental expert. B e lg o d e re is no stranger to litigation against Esso. In fact, he acknowledged his current i n v o lv e m e n t in as many as five cases against the company. As the First Circuit noted in an u n r e la te d Esso case involving Belgodere, he consulted for Esso in the 1980s before being d ism is s e d for incompetence. Esso Standard Oil Co. v. Cotto, 389 F.3d 212, 216 (1st Cir. 2004), a f f 'g . 327 F. Supp. 2d 110 (D.P.R. 2004). He has threatened Esso executives with physical On-Site served as plaintiff's technical team for purposes of CSA implementation, while Esso employed the services of ERM. (See Pls' Ex. 7; Def. Ex. 55.)
6

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-6 -

v io le n c e and has suggested that he can control litigation through extortion. Id. This court re v ie w e d some of these threats on video (Def. Ex. 69) and can confirm the First Circuit's d e s c rip tio n of his attitude and behavior. B e lg o d e re has been found to hold a "violent animus" toward Esso. Cotto, 327 F. Supp.2d a t 123. He has threatened Esso executives that he would go to their children's school to accuse th e executives of killing children. Id. at 118. In another incident, he told an Esso attorney that s h e "didn't have the right to breathe here" and that she only had the "right to have [her] ass k ic k e d off the fucking island." (Def. Ex. 69.) Because Belgodere denied having made these s ta te m e n ts , Esso produced, and this court reviewed, this run-in on videotape. (Docket No. 456 a t 4­6.) There was no justification for Belgodere's outrageous behavior, which only confirms h is bias and lack of objectivity. In a separate incident at another site, Belgodere physically threatened Esso engineer M a rla Rivera, warning her that her "life was in danger, the more impossible you make my life, th e more difficult I will make yours." Id. He also threatened that if someone came to cut her u p , he would look the other way. Id. He further told her that "I wouldn't want to deal with your h u s b a n d , if [drug addicts] cut up your face." Id. Here again, this court reviewed the incident o n tape and can confirm Belgodere's threatening nature and behavior. The only explanation B e lg o d e re offered at trial was that he was actually protecting and warning, instead of th re a te n in g , the Esso representatives. We find this explanation to be wholly implausible.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-7 -

B e lg o d e re testified in court with the same hostile demeanor, which further evinces his inability to objectively assess any data or situation involving Esso. B e lg o d e re 's professional opinions and conduct are no better than his behavior. In this c a s e , there is compelling evidence that from the beginning he has improperly interfered with and in f lu e n c e d the work of this court-appointed environmental consultants. In one glaring example, h e unjustifiably and materially changed the conclusions drawn by the On-Site team in a draft o f its 2009 report. (Pls' Ex. 7; Def. Exs. 71; 72.) He represented himself as familiar with the E Q B Puerto Rico Underground Storage Tank Control Regulations ("EQB UST Regulations"). S e e P.R. Admin. Reg. 4362, Rules 501, 503, 601, 602(A)­(B), 603(A), 604(A)­(B), 6 0 6 (A )(1 )(3 ) (1990).7 Yet, Belgodere continuously referred to unrelated hydraulic lift tanks as U S T s despite a clear exclusion for such equipment in the EQB USTR Regulations, and despite h is own conflicting testimony that said tanks were actually above ground. See P.R. Admin. R e g . 4362, Rule 103(B)(3). He rendered the unsupported opinion that Esso had tried to pass o f f responsibility for remediation at the site by selling the tanks to Plaintiffs. Upon reviewing th e alleged support for this opinion, it is clear that no such effort ever occurred. Email e x c h a n g e s where Belgodere "reviewed" drafts of On-Site's 2009 report reveal that he changed O n -S ite 's conclusion that the hydrocarbon-contaminated area was well defined to read that said a re a was not well defined. (Docket No. 460 at 144­46.) The record is filled with other e x a m p le s of his unsupported, inaccurate opinions, as well as wholly-erroneous representations

7

For their federal counterparts, see 40 C.F.R. §280.50, -.52, -.60 to -.63, and -.65 (2010).

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

-8 -

o f the supposed factual basis for same. Perhaps tellingly, he offered no opinions to a reasonable d e g re e of certainty in his field. E s s o filed a timely motion prior to trial to exclude Belgodere based on his obvious bias a n d this court's gatekeeping function under Federal Rule of Evidence Rule 702. (Docket N o . 397.) We granted Plaintiffs the opportunity to offer Belgodere's opinions, while reserving o u r ruling on the motion. (Docket No. 407.) F a c e d with a proffer of expert testimony, the trial judge must determine at the outset w h e th e r the reasoning or methodology underlying the testimony is scientifically valid and w h e th e r the reasoning or methodology can be applied properly to the facts at issue. See Daubert v . Merrell Dow, 509 U.S. 579, 592­93 (1993). In this instance, this court patiently permitted P la in tif f s to put on their best case, which relies almost exclusively on Belgodere's testimony. E v e n without the overwhelming evidence of Belgodere's bias, the testimony offered does not s a tis f y the requirements of Rule 702 and Daubert. Instead of offering relevant testimony to a s sis t this court in exploring the findings of the site investigations, Belgodere obscured the facts a n d offered unreliable opinions. In addition, Belgodere has never published his opinions in a p e e r-re v ie w e d journal,8 his opinions were not supported by sufficient facts or data, there are no n o n -litig a tio n uses for his opinions--which are, in fact, inconsistent with actual testing at the

His curriculum vitae indicates his last publication of any sort was in 1981. It also includes a list of fourteen other cases in which he served as an expert, but it omits several cases involving Esso. (Pls' Ex. 1.)

8

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-9 -

s ite -- a n d it is apparent that his opinions are exclusively geared toward a finding of liability a g a in st Esso. T h e ample evidence of Belgodere's bias further taints his testimony. This court witnessed f irs th a n d the extraordinary animus other courts have attributed to this witness. We granted the P la in tif f s wide latitude in this bench trial to present whatever evidence they believed they had, d e s p ite the expert witness' bias. After listening to his lengthy testimony, we assumed the jury's ro le as the finder of fact in gauging "the potential bias of an expert witness." Cruz-Vazquez v. M e n n o n ite Gen. Hosp., No. 09-1758, 2010 U.S. App. LEXIS 15263, at *11 (1st Cir. July 26, 2 0 1 0 ). A f te r observing his demeanor, patiently listening to his testimony, and reviewing his re p o rts in the record, this court finds Belgodere to utterly lack credibility for any purpose. His w a s not a carelessly-mistaken presentation; it was a wrongful one. Based on the conduct he has E x ib ite d in this case and on this record--including threatening Esso representatives, m is c h a ra c te riz in g data, and improperly interfering with, and altering the work of, c o u rt-a p p o in te d technical consultants--we conclude that Belgodere is not qualified to testify a s an expert in the field of environmental science or petroleum geology under the pertinent legal s ta n d a rd s of Daubert and Rule 702. Even if we had deemed him qualified, his violent bias, s p u rio u s testimony, and impermissible conduct rendered his testimony irrelevant and unreliable. W e further find that our original reliance on Belgodere at the time of the issuance of the p re lim in a ry injunction, including the disqualification of ERTEC, was in error, motivated only

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-1 0 -

b y Belgodere's unchallenged testimony at the time of the preliminary injunction hearing. B e lg o d e re , assisted by counsel, deceived this court and took advantage of Esso's unpreparedness to litigate the issues fully at that time. For the foregoing reasons, we give no credibility to B e lg o d e re 's testimony. B. D e fe n d a n t's Expert John A. Connor, P.E., P.G., B.C.E.E. J o h n A. Connor ("Connor") is a registered professional engineer, licensed professional g e o s c ie n tis t, and diplomate of the American Academy of Environmental Engineering. (Def. E x . 58 at 4.) He is president of GSI Environmental Inc., in Houston, Texas, and holds a M.S. in Civil Engineering from Stanford University. (Id.) He has thirty years of professional e x p e rie n c e in environmental engineering, specializing in the areas of environmental site in v e stig a tio n and remediation, human and ecological risk assessment, and corrective action d e s ig n . (Id.) E s s o called Connor to testify as an expert on the issues of its compliance with RCRA, w h e th e r any contamination at the site could pose an "imminent and substantial endangerment to health or the environment" under the RCRA citizen-suit provision, 42 U.S.C. § 6972 (a )(1 )(B ), and the nature of waste characterization. C o n n o r described Plaintiffs' suggestion that any contamination from the site could travel to the river as a "profound, fundamental error" in hydrogeology. Plaintiffs' expert Belgodere h a d either confused or conflated hydraulic conductivity with groundwater velocity. As stated b y Connor in his report, this error suggests "a fundamental misunderstanding, or unsound

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

-1 1 -

a p p lic a tio n , of widely-understood principles of groundwater flow and raises questions as to the re lia b ility of technical opinions expressed by On-Site/Belgodere." (Def. Ex. 58 at 16.) In fact, C o n n o r testified that the benzene contamination at the site is both small in size and slow m o v in g , as it moves no more than twenty-two feet per year. (Docket No. 460 at 185.) A d d it i o n a l ly, as Connor testified, the contamination has been dissipating in concentration, p re c lu d in g any threat to the aquifer or river. (Id. at 185­86.) A d d itio n a lly, specific testing was conducted for an alleged spill of used oil from a h yd ra u lic lift, as Connor explained, and the testing for Oil Range Organics, also known as M in e ra l Range Organics, detected no evidence of such a spill. (See also, Def. Ex. 36 at 17.) C o n n o r also testified as to why the presence of Diesel Range Organics ("DRO") in soil samples n e a r monitoring well MW-302 did not signal the need for further delineation of potential DRO c o n ta m in a tio n .9 First, he testified, the risk of DRO in soil dissolving into and contaminating g ro u n d w a te r constitutes the primary concern regarding DRO soil contamination, but the n o n -d e te c t results for DRO in the water taken from that well had foreclosed the possibility of w a te r contamination. (Docket No. 460 at 202­04.) Second, he testified, at such a depth the D R O concentrations were too low to be mobile, or to spread into surrounding soil. (Id. at 203.) W e denied Plaintiffs' motion to strike Connor's testimony as an expert (Docket No. 459 a t 39), and we find his testimony credible, relevant, and persuasive.

"Delineation" entails identifying and mapping the spatial extent and boundaries of a contamination plume, or a subterranean concentration of a contaminant in groundwater or soil.

9

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 C. D e fe n d a n t's Expert Dr. Janet Kester, Ph.D., DABT

-1 2 -

D r. Janet Kester ("Dr. Kester") is a Ph.D. toxicologist and an expert in evaluating human h e a lth exposure and risk assessment, and has performed risk assessments under a variety of re g u la to ry regimes in the Americas and beyond. (Def. Ex. 59 at 3.) She is Board Certified in to x ic o lo g y by the American Board of Toxicology. (Id.) Esso offered Dr. Kester's expertise to a d d re ss whether "imminent and substantial endangerment to health or the environment" existed u n d e r the standard found in the RCRA citizen-suit provision, 42 U.S.C. § 6972(a)(1)(B). A f te r reviewing the data from Esso's Phase II site assessment and the results of the courto rd e re d CSA, Dr. Kester concluded: (1) there is no evidence of any pathway for human e x p o s u re to petroleum constituents released from USTs or other sources at the site; (2 ) petroleum-related compounds in the soil or groundwater are not present at levels that could p o s e any risk of adverse health effects, even if regular exposure through some hypothetical p a th w a y occurred; and (3) there is no evidence that organic lead compounds or total lead, which w e re either not found or found below applicable regulatory standards, pose any risk of adverse h e a lth effects at this site. (See Def. Ex. 59 at 10.) W e find Dr. Kester's report, opinions, and testimony to be credible and persuasive. P la in tif f s offered no credible evidence to the contrary.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 III. RCRA

-1 3 -

P la in tif f s brought claims under 42 U.S.C. § 6972. This section provides, in pertinent p a rt, as follows: [ A ]n y person may commence a civil action on his own behalf­ ( 1 ) ( A ) against any person . . . who is alleged to be in violation of a n y permit, standard, regulation, condition, requirement, p ro h ib itio n , or order which has become effective pursuant to [ R C R A ]; or (1 )(B ) against any person . . . who has contributed to or who is c o n trib u tin g to the past or present handling, storage, treatment, t r a n s p o rta tio n , or disposal of any solid or hazardous waste which m a y present an imminent and substantial endangerment to health o r the environment. 4 2 U.S.C. § 6972(a)(1)(A)­(B). T h e s e two subsections (respectively "§ 6972(a)(1)(A)" and "§ 6972(a)(1)(B)") allow a p la in tif f to pursue relief under two different scenarios. U n d e r § 6972(a)(1)(A), the court may grant relief to address only an ongoing violation o f RCRA. See Sánchez v. Esso Standard Oil Co., 572 F.3d 1, 7 (1st Cir. 2009). Plaintiffs c o n te n d that Esso is in continuing violation of two different sets of RCRA regulations. First, P la in tif f s contend that Esso is in violation of numerous Puerto Rico EQB standards pertaining to the investigation, reporting, and cleanup of spills of petroleum products from USTs under

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

-1 4 -

S u b c h a p te r IX of RCRA.1 0 Second, Plaintiffs contend that Esso is in violation of standards a p p lic a b l e to the owners and operators of RCRA-regulated treatment, storage, and disposal f a c ilitie s under Subchapter III of RCRA.1 1 U n d e r § 6972(a)(1)(B), the court may grant relief to address past or present regulated c o n d u c t regarding waste that may give rise to an "imminent and substantial endangerment to h u m a n health or the environment." 42 U.S.C. § 6972(a)(1)(B). An imminent and substantial e n d a n g e rm e n t exists only when "a reasonable prospect that a serious, near-term threat to human h e a lth or the environment exists." Me. People's Alliance & Natural Res. Def. Council v. M a llin c k ro d t, Inc., 471 F.3d 277, 279 (1st Cir. 2006). The "mere presence" of contaminants in the environment "is alone not enough to constitute an imminent and substantial e n d a n g e rm e n t." Id. at 282. An imminent and substantial endangerment does not exist "if the ris k of harm is remote in time, speculative in nature, and de minimis in degree." Smith v. P o tte r, 187 F. Supp. 2d 93, 98 (S.D.N.Y. 2001) (quoting Wilson v. Amoco Corp., 989 F.Supp. 1 1 5 9 , 1172 (D. Wyo. 1998)). A. § 6972(a)(1)(A) Claim 1. S u b c h a p te r IX

U n d e r Subchapter IX, regulating USTs, the EPA has promulgated regulations mandating th a t owners and operators of USTs notify environmental regulators of releases from USTs,

10

Subchapter IX of RCRA regulates USTs. See 42 U.S.C. §§ 6991­6991m.

It remains unclear precisely which portions of RCRA Subchapter III, Plaintiffs contend Esso is violating.

11

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-1 5 -

in v e stig a te such releases, and perform corrective action to address them. See generally 40 C .F .R . § 280. The EPA has delegated the responsibility of administering this program in Puerto R ic o to EQB. See 40 C.F.R. § 282.102(a). Pursuant to this delegation, the EQB developed and e n a c te d the EQB UST Regulations on November 7, 1990. See Sánchez, 572 F.3d at 6­7. The E Q B UST Regulations is the functional equivalent of the EPA's regulations. Compare 40 C .F .R . § 280, with P.R. Admin. Reg. 4362, Rules 501­608. A lth o u g h at various times in this case Plaintiffs alleged violations of numerous UST re g u la tio n s , at trial they concentrated on three such allegations: (1) Esso's alleged failure to re p o rt and to clean up an alleged spill of hydraulic oil from the above-ground reservoir tank and lin e s attached to a truck lift on the west side of the facility under EQB UST Regulation 504 ; (2 ) Esso's alleged failure to "fully delineate" under EQB UST Regulation 606 the identified b e n z e n e groundwater contamination and Total Petroleum Hydrocarbon ("TPH") soil c o n ta m in a tio n identified on the southeast portion of the site; and (3) Esso's allegedly-unlawful i m p le m e n ta tio n of a CAP before EQB approved that plan under EQB UST Regulation 607. N e ith e r the law nor the facts support these allegations. 2. E Q B UST Regulation 504

In suggesting that a release of hydraulic oil from the above-ground lift tank implicates R u le 504, Plaintiffs patently misapply the law. In suggesting that a release of hydraulic oil o c c u rre d at this site, they misconstrue the facts.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-1 6 -

E Q B UST Regulation Rule 504 and its federal counterpart require owners and operators o f UST systems to take immediate action (within 24 hours) to address spills and overfills of p e tro le u m products. See 40 C.F.R. § 280.53; P.R. Admin. Reg. 4362, Rule 504. Like all UST ru le s , these requirements do not apply to "[e]quipment or machinery that contains regulated s u b s ta n c e s for operational purposes such as hydraulic lift tanks and electrical equipment tanks." 4 0 C.F.R. § 280.10(b)(3); P.R. Admin. Reg. 4362, 103(B)(3). Thus, these rules would not apply to any alleged release as a matter of law. Moreover, the definition of UST expressly excludes a n y "[s]torage tank situated in an underground area (such as a basement, cellar, mineworking, d rif t, shaft, or tunnel) if the storage tank is situated upon or above the surface of the floor. The te rm . . . `UST' does not include any pipes connected to any [such tank]." 40 C.F.R. § 280.12 (d e f in in g "Underground Storage Tank or UST"); P.R. Admin. Reg. 4362, Rule 105 (same). T h e testimony relating to this tank established that it was a tank holding hydraulic oil, in sta lle d on the floor of a subsurface pit. (Docket No. 460 at 10.) Thus, it is not a UST subject to these rules as a matter of law. Finally, as established in the testimony of Esso's

e n v iro n m e n ta l expert, Connor, soil and groundwater sampling in the vicinity of this tank found n o evidence to indicate that a leak of hydraulic oil occurred. (Docket No. 460 at 205­06.) 3. E Q B UST Regulation 606

P la in tif f s contend that Esso previously and continuously failed to "fully delineate" b e n z e n e and TPH contamination allegedly caused by leaks from Esso-owned USTs on the s o u th e a s t portion of the site, in violation of Rule 606 of the EQB UST Regulations ("Rule 606")

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-1 7 -

a n d its federal counterpart. See 40 C.F.R. § 280.65; P.R. Admin. Reg. 4362, Rule 606. As b e f o re , this argument fails both as a matter of law and as a matter of fact. W e must first note that Plaintiffs have failed to meet their burden of establishing that any re le a s e ever occurred from an Esso-owned UST. The tanks at this site have had a complicated o w n e rs h ip history. Regarding the tanks located on the southeast portion of the station, where b e n z e n e and TPH have been found, we must consider three separate operating periods. First, f ro m around the 1960s to 1985, Shell owned the gasoline tanks at the service station. (Docket N o . 460 at 109­110.) Moreover, either Shell or someone else owned a diesel tank on the s o u th e a s t portion of the property from the 1960s until 1992. (Docket No. 24 at 45.) The e v id e n c e also suggests that for some period of that time there were one or more gasoline tanks lo c a te d in that southeast area. (Docket No. 458 at 121.) In 1992, Esso replaced the existing d ie s e l tank with a new, state-of-the-art tank that remains in place to this day. (Docket No. 24 a t 45.) Plaintiffs provided no credible evidence that a release ever occurred from this new tank. In d e e d , the testimony of Esso's experts and witnesses as to the operation, construction, and te c h n o lo g ic a l superiority of its tanks lead this court to conclude that any release from a UST in th is area--if one occurred --is most likely to have occurred from tanks that were never owned o r operated by Esso. E v e n had we concluded that the identified contamination was caused by a release from a n Esso-owned tank, we find that Esso was in compliance with Rule 606 and federal re q u ire m e n ts as of the time that Plaintiffs filed suit. The evidence clearly establishes that Esso

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-1 8 -

h a d sufficiently delineated and begun corrective actions at this site well before this action c o m m e n c e d . (See Docket No. 458 at 104­10.) Indeed, Esso had already filed and had started to implement a CAP under EQB supervision. Esso representative Figueroa testified about his re g u la r communications with the EQB regarding the CAP, and explained that Esso was p ro c e e d in g with the remediation plan, interrupted only by the filing of this suit. C o n tra ry to Belgodere's apparent belief, the rules do not provide a deadline by which d e lin e a t i o n must be completed, nor do they require that sites be delineated absolutely and c o m p le te ly. Rather, as described by Esso's expert, Connor, the rules outline a practical a p p ro a c h to investigating site conditions, which includes site-specific data needs and risk-based d e c is io n making to help guide appropriate investigations and cleanups. Were we to adopt P l a i n ti f f s ' interpretation, every single owner and operator of a UST facility would be in " c o n tin u in g violation" of Rule 606 until investigation is completed--a process that can take m a n y years. A review of the case law does not reveal a single instance in which a court has ta k e n such an extreme position by punishing parties that are actively engaged in investigation a n d cleanup activities. Rather, the courts have reserved such treatment only for parties that flout a g e n c y requirements by refusing to conduct such activities when directed to do so. See, e.g., C o ll. Park Holdings, LLC v. RaceTrac Corp., 239 F. Supp. 2d 1334, 1348 (N.D. Ga. 2002) (h o ld in g party refusing to submit and implement required CAP to be in continuing violation of S u b c h a p te r IX requirements).

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-1 9 -

E s s o was in the midst of investigating and cleaning up this site under the direct s u p e rv is io n of EQB and in full compliance with applicable standards when Plaintiffs filed suit. T h e re f o re , Esso cannot be said to have been in continuing violation of Rule 606 or its federal c o u n te rp a rt. 4. E Q B UST Regulation 607

C o n tra d ic tin g their Rule 606 argument, Plaintiffs contended at trial that Esso was in v io la tio n of Rule 607 of the EQB UST Regulations ("Rule 607") for failing to wait for EQB a p p ro v a l before implementing the CAP. However, Rule 607 plainly permits that "owners and o p e ra to rs may, in the interest of minimizing environmental contamination and promoting more e f f e c tiv e cleanup, begin cleanup of soil and groundwater before the corrective action plan is a p p ro v e d " under certain conditions such as those Esso has met or is committed to meeting. 40 C .F .R . § 280.66(d); P.R. Admin. Reg. 4362, Rule 607(D). (See also Docket No. 458 at 1 4 1 ­ 4 2 .) Accordingly, Esso's pre-implementation of its CAP is not a violation of RCRA. 5. S u b c h a p te r III

P la in tif f s have generically argued that Esso violated RCRA Subchapter III by allowing le a k s of hydraulic oil, gasoline, or diesel from Esso-owned tanks to occur. According to P la in tif f s , this constitutes illegal disposal of solid and hazardous waste without a permit. We n o te at the outset, however, that Plaintiffs have failed to establish that any such release occurred f ro m Esso-owned or operated equipment.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 B. § 6972(a)(1)(B)

-2 0 -

P la in tif f s failed to carry their burden to establish an imminent and substantial e n d a n g e rm e n t to health or the environment. Plaintiffs set forth no credible evidence of an im m in e n t and substantial endangerment to human health, relying instead on Belgodere's u n s u p p o rte d testimony that any levels exceeding a Maximum Contaminant Level ("MCL") or s o il screening level constitute such a threat. Aside from his being patently unqualified to testify a s to such matters, Belgodere's assertions are simply wrong. As the First Circuit has made a b u n d a n tly clear, the "mere presence" of contamination alone cannot support a claim of im m in e n t and substantial endangerment. See Mallinckrodt, 471 F.3d at 282. Indeed, faced with s im ila r arguments, other courts have noted that the exceedance of a regulatory standard cannot in and of itself prove imminent and substantial harm. See Orange Env't, Inc. v. Cnty of Orange, 8 6 0 F. Supp. 1003, 1028­29 (S.D.N.Y. 1994). F u rth e rm o re , without a current or likely future pathway of exposure to humans, c o n ta m in a tio n cannot be said to be causing an imminent and substantial endangerment to their h e a lth . See Interfaith Comm. Org. v. Honeywell Int'l, Inc., 399 F.3d 248, 260 n.5 (3d Cir. 2 0 0 5 ) (noting that the existence of a pathway for current or future exposure is an implicit re q u ire m e n t in a finding of imminent and substantial endangerment). A s the unrefuted testimony of Dr. Kester established, no such exposure pathway exists, a s no potentially actionable soil contamination can be found at the ground surface and as the g ro u n d w a te r with identified contamination is not used for drinking purposes. (Docket No. 459

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14

-2 1 -

a t 60­62.) Moreover, as Connor explained, no such pathway is likely ever to exist, as the p lu m e , or area of groundwater contamination, is small, diminishing rapidly in concentration, s ta b le , and in a shallow area not now or likely ever to be used for drinking water purposes.1 2 F o r the same reasons as outlined above, Plaintiffs failed to establish the potential for an im m in e n t and substantial endangerment to the environment at this site. Once again, it is not e n o u g h for Plaintiffs to prove only that contamination is present at the site. Rather, as the First C irc u it held in Mallinckrodt, Plaintiffs are required to produce additional evidence quantifying th e potential risk to the environment posed by the identified contaminants. While "imminence" d o e s not require that the "harm necessarily will occur or that the actual damage will manifest its e lf immediately," it must, nevertheless, be of the "kind that poses a near-term threat." M a llin c k ro d t, 471 F.3d at 288. This threat was neither a short-term nor a long-term possibility. T h e testimony of Dr. Kester and Connor, as outlined above in Part II.B­ C. refutes any s u g g e s tio n that there has existed or will ever exist the type of "serious" harm to the environment n e c e s sa ry to support a claim of imminent and substantial endangerment.

Connor estimates that the benzene concentration in the slow-moving groundwater would only be able to extend another 400 feet from the source. He testified that benzene would not pose an imminent or substantial harm to human health or the environment, as the nearest potential drinking water lies 3,000 feet away, and the Río Grande de Loíza, the closest "ecological receptor," is 2,500 feet away. (Def. Ex. 55 at 23.)

12

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 IV . In ju n c tiv e Relief

-2 2 -

T h is court entered a preliminary injunction upon Plaintiffs' motion on December 5, 2008. (D o c k e t No. 22.) Plaintiffs' support for its injunction rested almost entirely upon the testimony o f its expert Belgodere. Now that this court has conducted a full trial on the merits and e v a lu a te d the credibility of Belgodere's testimony in the context of this record as it stands today, w e find that the Plaintiffs, in particular their expert, misled this court with inaccurate re p re s e n ta tio n s about the site and the proper application of the EQB regulations, and with false te s tim o n y about the extent of contamination and risks associated with the contamination. In fact, evidence adduced at the 2010 trial shows that Belgodere withheld relevant in f o rm a tio n about the site's USTs during the preliminary injunction hearing, despite our direct re q u e st for any reports pertinent to the issues at the hearing. (Dec. 3, 2008 Prelim. Inj. Hr'g, D o c k e t No. 24 at 26.) Belgodere withheld the fact that he had contemporaneously concluded th a t the site's USTs were not leaking, in a November 2008 report to Plaintiffs' insurer. (Def. E x . 48.) Rather than providing that report, Belgodere misrepresented its contents, claiming it m e re ly confirmed that the tanks were in operation. (Docket No. 41 at 28.) A s Sánchez readily conceded at trial, the current gasoline USTs, installed in 1992 and 1 9 9 8 , do not leak and have never leaked. Nevertheless, Belgodere testified at the preliminary in ju n c tio n hearing that he "cannot tell you that, as of today, the underground storage tanks are n o t leaking or the lines are not leaking or the pumps are not leaking." (Docket No. 24, 49-50.)

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-2 3 -

P la in tif f s presented other evidence at the preliminary injunction hearing through B e lg o d e re that has also proven to be false. There is simply no credible evidence that any c o n ta m in a tio n from the site could reach the Río Grande de Loíza River, nearly 3,300 feet away. T h e re is likewise no credible evidence that the contamination poses any health risk to the people o f Puerto Rico. Now that a full factual record has been developed and presented at trial, it is c le a r that Plaintiffs wrongfully procured injunctive relief based upon false testimony. It is axiomatic that a party may not seek equitable relief with unclean hands. As this c o u rt has already held, "if it is determined that Esso has been wrongfully enjoined in this case, E s s o may be damaged in an amount approximating the cost of the assessment." (Docket No. 264 a t 23.) Plaintiffs posted a security bond pursuant to court order in the amount of $100,000. (Id. a t 25.) The cost of the assessment, based on the invoices from the two court-appointed c o n s u lta n ts who conducted it, is $448,501.48. (Def. Exs. 61; 62.) Plaintiffs never made any re p re s e n ta tio n of hardship with respect to securing their injunction. (Docket No. 264 at 23.) S e e k i n g extraordinary relief, such as a costly environmental site assessment, is not w ith o u t risk. Esso had already conducted a Phase II environmental assessment of the site. In f a c t, Plaintiffs relied on that assessment to establish to its insurer that the USTs were not le a k in g . (Def. Ex. 48.) The costly CSA, conducted pursuant to the injunction, merely c o n f irm e d the findings of the earlier Phase II assessment and the related work that had been c o m p le te d at the site prior to the preliminary injunction hearing. (See Def. Exs. 51; 55.) F u rth e rm o re , to analyze the CSA data, review the reports, and expose Belgodere's bad science

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 A. CERCLA

-2 4 -

in the On-Site reports, Esso was forced to spend $64,322.50 to employ the services of GSI E n v iro n m e n ta l and Newfields for the services of experts Connor and Dr. Kester, respectively. N o w that the trial on the merits has been completed and it is clear that the injunction was w ro n g f u lly obtained, Plaintiffs are left with the result of the equitable relief they sought. In to ta l, Esso will recover a grand total of $512,823.98 from Plaintiffs for the combined costs of th e CSA and expert services.1 3 Plaintiffs are hereby ordered to surrender the security bond of $ 1 0 0 ,0 0 0 and an additional $412,823.98 to Esso. V. E s s o 's Counterclaims

E s s o has counterclaimed for cost recovery under CERCLA against Plaintiffs; Esso has a ls o brought an identical third-party claims against Third-Party Defendants as the owners and o p e ra to rs of the service station and surrounding operations. (Docket No. 301 at 11­16.) In the c o u rse of investigating this site, the court, prompted by Plaintiffs, required Esso to sample for c h lo rin a te d solvent contamination in various locations. The testimony established that

c h lo rin a te d solvents were not present in any of the petroleum products ever stored in Essoo w n e d equipment or USTs. (Docket No. 460 at 82­83.) Rather, such materials are commonly p re s e n t in products used for auto repair and maintenance and other similar industrial uses, such
13

The grand total of $512,823.98 includes the following items: 1) $140,246.45 for On-Site's investigations for the CSA; 2) $308,255.03 for ERM's CSA investigations; 3) $49,922.50 for the services of Connor and GSI Environmental in analyzing the CSA data; and 4) $14,400 for the services of Dr. Kester and Newfields in analyzing the CSA data.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-2 5 -

a s degreasing and parts washing. (Id.) Accordingly, any such contamination at the site must h a v e been released by someone other than Esso. Esso seeks to recover only the $128,871.93 in c u rre d to address these chlorinated solvent releases at the site. C E R C L A Section 107 allows Esso to recover necessary costs1 4 incurred in response to re le a s e s of hazardous substances from the owners and operators of the station and associated p ro p e rty. See 42 U.S.C. § 9607(a). The station and other businesses located on the property a re facilities under CERCLA. See 42 U.S.C. § 9601(9) (defining "facility" to include buildings, s tru c tu re s , equipment, and containers). Cis-1,2-Dichloroethylene, a chlorinated solvent

c o m p o u n d found in Esso's investigations, is a CERCLA hazardous substance. See 40 C.F.R. § 302.4 (listing 1,2-Dichloroethylene as a hazardous substance). The evidence at trial

e s t a b lis h e d that chlorinated solvent contamination was found in trace amounts in soil and g ro u n d w a te r samples on the western side of the station--a location where other tenants c o n d u c te d auto repairs, tire retreading, and other maintenance activities that commonly employ p ro d u c ts containing chlorinated solvents. (See Docket No. 460 at 221­22.) These undisputed f a c ts lead us to conclude that Plaintiffs and Third-Party Defendants are the current owners or o p e ra to rs of the facilities from which these chlorinated solvents were released. N e ith e r Third-Party Defendants nor Plaintiffs provided evidence that their contribution to this contamination was divisible. Accordingly, Plaintiffs and Third-Party Defendants are jo in tly and severally liable to Esso for the costs necessarily incurred by Esso in responding to As a preliminary matter, we find that the costs of this work were necessary to address the potential for chlorinated solvent contamination that Plaintiffs identified as a concern.
14

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-2 6 -

th is release. See 42 U.S.C. § 9607(a); United States v. Davis, 261 F.3d 1, 44 (1st Cir. 2001) (c itin g Acushnet Co. v. Monasco Corp., 191 F.3d 69 (1st Cir. 1999) (holding that CERCLA d e f e n d a n ts bear the burden of proof to disprove joint and several liability)). W e must also evaluate whether Esso incurred its costs in a manner consistent with the N a tio n a l Contingency Plan ("NCP"). See 42 U.S.C. § 9607(a)(4)(B). To do so, we must d e te rm in e whether Esso substantially complied with the applicable requirements of the NCP. S e e 40 C.F.R. § 300.700(c)(3)(I). Esso incurred these costs while conducting court-mandated re m o v a l actions including investigation and site characterization. See 42 U.S.C. § 9601(23) (d e f in in g removal to include investigation of releases). Because the planning period for these re m o v a l actions did not exceed six months, they are properly considered "time-critical" removal a c tio n s to which only minimal NCP requirements apply. See 40 C.F.R. § 300.415(4) (outlining p ro c e d u ra l requirements applicable to removal actions for which the planning period exceeds s ix months). This work was conducted with the full knowledge of the EQB under the auspices o f Esso's continuing CAP obligations. This fact alone is enough to support a finding of NCP c o n s is te n c y. See City of Bangor v. Citizens Comm. Co., 532 F.3d 90, 91 (1st Cir. 2008) (h o ld in g that the fact that a response action was "carried out under the approval and monitoring o f the appropriate state environmental agency" is often enough to prove NCP consistency even f o r more formal remedial actions). Copies of the work plans and all results were filed with E Q B , and thereby made available for public review.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

-2 7 -

T h e costs were properly accounted for by Esso and, in part, were approved as reasonable b y this court. We also accept as reasonable and appropriate the methodology used by Esso to id e n tif y and segregate these costs from other costs incurred at the site. Accordingly, we find th a t Esso has incurred these costs in a manner consistent with the NCP, and we hold Plaintiffs a n d Third-Party Defendants jointly and severally liable to Esso in the amount of $128,871.93. (S e e Docket No. 458 at 127­29 (explaining calculation of costs).) Of course, we cannot permit E s s o to receive a double recovery--we have already awarded them the costs for the entire courto rd e re d site assessment, which includes $128,871.93, the isolated cost of the chlorinated s o lv e n ts . B. C o n tr a c tu a l Indemnity D u rin g trial, Esso submitted the contracts that set forth the scope of its contractual re la tio n s h ip with Sánchez and the Sánchez Parents. (Def. Exs. 3; 4; 7; 8.) In these contracts, S á n c h e z and the Sánchez Parents, jointly referred to here as "The Retailer," agreed to: a s su m e [ ] the risk and exclusive liability, and agree[d] to hold h a rm le s s ESSO, from any and all claims for injuries, loss, or d a m a g e of any class or kind, to person or property, by anyone who s u f f e rs or alleges the same, as a result of: ( a ) The condition or use of the leased station, with all of its e d if ic e s , improvements, and equipment, or the operation thereof by t h e Retailer during the term of this lease or any renewal or e x te n s io n hereof, regardless of whether it is due to a hidden or e v id e n t defect, except, however, when the Retailer has sent a w ritte n notification to ESSO about a defective condition for whose re p a ir ESSO is responsible under this lease and as long as the R e ta ile r has taken all reasonable precautions to prevent the

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 o c c u rre n c e of injuries, deaths, losses, and damages attributable e x c lu s iv e ly and directly to such defective condition. (b ) The negligence or conduct of the Retailer, its agents, c o n tra c to rs , or employees, even if manifested inside or outside of th e station, or of any other person who penetrates the premises u p o n express or implicit invitation from the Retailer. (c ) The breach by the Retailer, its agents, servants, or employees o f any provision of this lease.

-2 8 -

(D e f . Exs. 4; 8.) Esso argues that the above provisions require Sánchez and the Sánchez Parents to indemnify Esso for costs incurred to address the environmental conditions at the site, and a tto rn e ys ' fees Esso has expended on its own behalf in this case. (Docket No. 458 at 21­22.) A s we have already assessed the costs of the ERM and On-Site site assessments and the services o f GSI and Newfields against Plaintiffs ($512,823.98); the battle now shifts to attorneys' fees a n d litigation costs. The total sum of costs Esso seeks are summarized as follows: C oncept O 'N e ill & Borges O 'N e ill & Borges additional costs B a k e r Botts C u r r e n t Total T o ta l Amount $433,818.07 $ 17,242.62 $ 6 8 2 ,0 1 8 .2 8 $ 1 ,1 3 3 , 0 7 8 . 9 7

U n d e r Puerto Rico law, contractual obligations have the force of law between the c o n tra c tin g parties and must be fulfilled as agreed, so long as these obligations are legal, valid, a n d without defect. 31 L.P.R.A. § 2994; see also 31 L.P.R.A. § 3372. Whenever one of the c o n tra c tin g parties fails to comply with its obligations under the contract, the prejudiced, nonb re a c h in g party may judicially demand fulfillment of such obligations and payment of interest.

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-2 9 -

3 1 L.P.R.A. § 3052. Accordingly, the courts may not relieve a litigant of its obligations to c o m p ly with a contractual agreement, but must, instead, ascertain the parties' obligations p u rs u a n t to their agreement and enforce them as the law relevant and applicable to the litigation. M ye rs v. Benus Silva, 208 F. Supp. 2d 155, 160 (D.P.R. 2002); Hennes v. Sun Life Assurance C o ., 291 F. Supp. 670, 673 (D.P.R. 1968). M o re o v e r, one of the basic principles of Puerto Rico contract law is that "[t]he c o n tra c tin g parties may make the agreement and establish the clauses and conditions which they m a y deem advisable, provided they are not in contravention of law, morals, or public order." 3 1 L.P.R.A. § 3372 (official translation). Under Puerto Rico law, the parties may generally " b a rg a in for a `hold harmless' agreement that indemnifies the indemnitee for varying degrees o f liability.... If the parties' intent is clear, these provisions will be upheld so long as the court f in d s no breach of duty to the public." R.L. Meyers III & D.A. Perelmann, Risk Allocation T h ro u g h Indemnity Obligations in Construction Contracts, 40 S.C. L. Rev. 989, 990­991 (1 9 8 9 ), cited approvingly in Torres Solís v. Autoridad de Energía Eléctrica de P.R., 136 D.P.R. 3 0 2 , 313­16 (1994) (holding an indemnity clause enforceable). In the present case, the pertinent contractual provisions do not allow Esso to seek in d e m n if ic a tio n . Although the agreement does allow Sánchez and the Sánchez Parents to in d e m n if y Esso in the event of third-party claims against Esso, indemnification for costs in a s u it between the contracting parties falls beyond the scope of the agreement. The language of th e provision itself reveals that the parties intended for Sánchez and the Sánchez Parents to

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11

-3 0 -

in d e m n if y Esso for "any and all claims for injuries, loss, or damage of any class or kind, to p e rs o n or property, by anyone who suffers or alleges the same, as a result of" the conditions or o p e ra tio n s of the service station. (Def. Ex. 4 at 8.) A common-sense reading leads us to c o n c lu d e that this provision referred to claims brought by third parties for injuries suffered in c o n n e c tio n with the service station, not claims by Esso for costs incurred in defending a suit b e tw e e n the parties.15 T h e language indicates that Sánchez and the Sánchez Parents agreed to hold Esso h a rm le s s for any third-party claims against it, not to pay for costs of environmental remediation o r the costs of defending a suit between the two parties. (See also Docket No. 369-1 at 2.)16 A s a result, Esso has no basis to recover the costs above under its indemnity claim. However, w e do find that Esso, as the prevailing party, has alternate means to recover its litigation costs.

Esso referred to this agreement as an "indemnity" provision throughout the trial. "Although this word can imply any right to reimbursement, it commonly presumes a tripartite arrangement, in which A recovers from B for losses to C. Longport Ocean Plaza Condo., Inc. v. Robert Cato & Associates, Inc., 137 Fed. Appx. 464, 466­67 (3d Cir. 2005) (No. 03-3814, 03-3882) (citations omitted) (holding broad indemnity clauses did not require plaintiff to reimburse defendant for fees in plaintiff's action against defendant); see also Penthouse N. Ass'n. v. Lombardi, 461 So. 2d 1350, 1353 (Fla. 1984) (citations omitted) (rejecting similar claim for attorneys' fees under indemnity provision governed by Florida law, explaining that if plaintiffs had been "successful in their litigation, they would nevertheless have [had] to satisfy their own judgment in addition to paying the [defendant's] costs"). Docket No. 369-1 is a certified translation of a Puerto Rico case involving Esso, a similar station owner-plaintiff, and a similar hold-harmless clause. There, the court refused to enforce the holdharmless clause in a manner that would hold Esso harmless for damage caused by gasoline leaks. See Rodriguez Perez v. Esso Standard Oil Co., No. KLAN20020590 at 1037 (P.R. Ct. App. May 27, 2003).
16

15

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 V I. C o s ts and Attorneys' Fees

-3 1 -

E s s o may be able to recover costs under Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, or this court's inherent power to sanction. We will discuss each option in turn, but we f irs t discuss our findings of fact regarding the conduct of Plaintiffs' litigation team over the c o u rse of this suit. A. F in d in g s Regarding the Conduct of Plaintiff's Litigation Team A lth o u g h Plaintiffs might have begun the suit earnestly believing in the validity of their c la im s , we find that Plaintiffs and their attorney, Orlando Cabrera, should have known by mid2 0 0 9 that their claims were frivolous, unreasonable, and lacking a factual foundation. With the p o s s ib le exception of certain benzene concerns, after the completion of the August 3, 2009, c o u rt-o rd e re d CSA reports, and certainly by the time of the August 2010 supplemental report, P la in tif f s should have realized they could not meet the legal standards to pursue their claims u n d e r 42 U.S.C. § 6972(a)(1). In 2008, Plaintiffs and their expert offered predictions of massive contamination at the s ite , emphasizing the dangers of potential lead contamination in the soils and groundwater. (D o c k e t No. 41 at 40.) Seven months and hundreds of thousands of dollars later, a far less m e n a c in g picture materialized.1 7 The July 24, 2009, ERM report and the August 3, 2009, On-

During cross-examination, Belgodere admitted that in 2008, he "told the Court that the biggest concern [he] had about this site was lead," but that they've since "tested for lead and they haven't found any lead in excess of the MCL." (Docket No. 460 at 64­66.)

17

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-3 2 -

S i te report revealed soil and groundwater lead concentrations well below 400 milligram per k ilo g ra m , the EPA recommended screening levels for lead in residential site soils. (See Docket N o . 459 at 63.) W h ile tests for TPH found that monitoring wells MW-208 and MW-211 had c o n c e n tra tio n s of DRO above the EQB screening guidelines, the 2009 ERM report determined th a t neither well was located near any USTs and that the DRO was, in fact, "likely attributed to a near surface release of petroleum hydrocarbons related to the operation of the mechanical s h o p [unaffiliated with Esso] adjacent to and west of MW-208," instead of to any USTs. (Def. E x . 55 at 30­31.) The 2009 On-Site report repeated these findings but did not mention the lo c a tio n of the monitoring wells in relation to USTs, and offered no explanation regarding a p o te n tia l source of the DRO. (Ptfs. Ex. 2 at 5.) However, the On-Site report did offer, as the f irs t bulleted point in its "Conclusions" section, that "[v]irtually all of the groundwater below th e Service Station is impacted with gasoline constituents," before announcing that the " h yd ro c a rb o n contamination laboratory results indicate that the vertical and horizontal extent h a s not been determined." (Id. at 23­24.) A f te r the 2009 results failed to support the bulk of their allegations, Plaintiffs clung to th e few findings of contamination that could plausibly sustain their claims; including a benzene c o n ta m in a tio n plume, which Belgodere attempted to convince the court were unstable in c o n c e n tra ti o n and location.1 8
18

(Docket No. 456 at 54­55.)

As discussed above, such

In their complaint, Plaintiffs alleged that 2006 water samples revealed "dissolved concentrations of benzene as high as 2,800." (Docket No. 1 at 8.) Groundwater benzene concentrations

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

-3 3 -

u n s u p p o rte d allegations of a mysterious, ever-moving benzene plume made by an unreliable w itn e ss alone cannot sustain a § 6972(a)(1)(B) claim. Cabrera should have reviewed the f in d in g s in conjunction with the § 6972(a)(1) standards. He should have realized then that p la in tif f s could not continue suit, instead of continuing to submit misleading and inflammatory re p o rts to the court. E a rlie r this year, this court denied Esso's motion to dismiss, in part because of Plaintiffs' c o n tin u e d allegations of leaks from USTs previously owned by Esso. (Docket No. 279 at 12 (" [ O ]w n e r s and operators of USTs are subject to other rules that impose ongoing duties.").) Y e t, even after the 2009 CSA report, no potential contamination was ever found to indicate a p a s t or present leak from any Esso-owned USTs. In fact, in November 2008, Belgodere a u th o re d a report for Plaintiffs for insurance purposes, which concluded that "at the time Esso tra n s f e rre d the ownership of the USTs to TOTAL Petroleum, there were no active releases of p e tro le u m products into the facility soils or groundwater." (Def. Ex. 50 at 5.) Moreover, at tria l, Sánchez informed this court that he knew of no leaks from the current tanks. (Docket N o . 460 at 118.) Through a reasonable inquiry into the facts, or even by asking his client d ire c tly, Cabrera could have determined that the claims surrounding UST leaks were baseless. U n f o rtu n a te ly, not only did Belgodere and Cabrera continue to focus on imaginary UST leaks,

were lower in 2010 than in 2009. (See Pls' Ex. 2 at App. B; Def. Ex. 23; 55). As of the 2010 report, however, the highest benzene level found was .5 ug/L, well under the EPA MCL of .005 mg/L. (Id.)

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-3 4 -

b u t they also continued to obscure the picture at trial by repeatedly referring to a hydraulic oil ta n k , most likely situated above ground, as a "UST." (Docket No. 458 at 26­30.)1 9 B y August 3, 2009, it should have been become clear that they could not bring a p la u sib le RCRA claim. Although we perceived no animus or bad faith in Sánchez initially, we d o find that Plaintiffs' litigation team frivolously, vexatiously, and unreasonably continued the litig a tio n , despite a year's worth of contrary factual findings to indicate their claims were g ro u n d le s s . Belgodere in particular, with his blatant animus toward Esso, ignored and twisted f a c ts in order to protract the litigation. We find that Plaintiffs, within a reasonable time after th e August 3, 2009, On-Site report, should have become aware that they could show neither a c o n tin u in g actionable ongoing violation nor any imminent and substantial endangerment to h e a lth or the environment. B. F e d e r a l Rule of Civil Procedure 11 W e must determine whether the conduct described above in Section IV.A. violates F e d e ra l Rule of Civil Procedure 11. "On its own, the court may order an attorney, law firm, or p a rty to show cause why conduct specifically described in the order has not violated Rule 1 1 ( b ) ." Fed. R. Civ. P. 11(c). Rule 11 prohibits filing documents with the court for any

" im p ro p e r purpose," offering "frivolous" arguments, or asserting "factual allegations without `e v id e n tia ry support' or the `likely' prospect of such support." Young v. City of Providence, 4 0 4 F.3d 33, 39 (1st Cir. 2005). Rule 11 sanctions seek to "deter dilatory and abusive tactics More baffling was Belgodere's nearly-incoherent testimony indicating that said hydraulic fluid tank was actually situated above the ground. (Docket Nos. 456 at 22; 460 at 10.)
19

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-3 5 -

in litigation and to streamline the litigation process by lessening frivolous claims or defenses." C ru z v. Savage, 896 F.2d 626, 630 (1st Cir. 1990). The First Circuit has acknowledged that R u le 11 is "not a strict liability provision;" and that a "lawyer who makes an inaccurate factual re p re s e n ta tio n must, at the very least, be culpably careless." Young, 404 F.3d at 39. The a tto rn e y or party who signs the pleadings represents that the claims and facts within are " w a rra n te d by existing law." Fed. R. Civ. P. 11(b)(2). This imposes upon the party or attorney " a n affirmative duty to conduct a reasonable inquiry into the facts and the law before filing." B u s . Guides, Inc. v. Chromatic Commc'ns.. Enters., 498 U.S. 533, 551 (U.S. 1991). "[T]he a p p lic a b le standard is one of reasonableness under the circumstances." Id. A n argument will not qualify as frivolous under Rule 11 if it is "warranted by existing la w or by a nonfrivolous argument for the extension, modification, or reversal of existing law o r the establishment of new law." Id. In other words, a merely "hopeless" argument, brought in good faith, does not violate Rule 11. Obert v. Republic W. Ins. Co., 398 F.3d 138, 146 (1st C ir. 2005). P la in tif f s ' arguments, testimony, and filings in the present case, however, ignored the law a n d distorted the facts, thus exceeding the bounds of mere hopelessness. See id. ("In this case, th e show cause order was prompted not by a concern that the [relevant] motion was objectively h o p e le s s and so wasted a few hours but by what were perceived to be deliberate m is r e p r e s e n ta tio n s ." ) .

Civil No. 08-2151 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

-3 6 -

P la in tif f s not only ignored the relevant facts, results of the CSA reports, and the law, but a ls o forced Esso to expend large sums of money to continue conducting site-assessment reports. B y 2010, when those reports failed to find any serious problems at the site, plaintiffs and their e x p e rt attempted to convince this court that a mere "snapshot" assessment would not suffice to d e lin e a te contamination at the site, and that further monitoring was required. (Docket No. 456 a t 14.) Furthermore, as discussed above, Plaintiffs misrepresented both law and facts at trial. W h ile an attorney should hire an expert witness for technically-complex litigation with the o b je c tiv e of vigorous advocacy on behalf of the client, the attorney and expert must also ensure th e y do not cross the line from persuasion into deception in pursuit of that objective. U n f o rtu n a te ly, Cabrera allowed Belgodere to insert himself into the court-appointed in v e stig a tio n team, as Belgodere's signature in On-site's 2009 and 2010 reports can d e m o n s tra te . On Cabrera's watch, Belgodere's egregious conduct, such as tampering with the c o n c lu s io n s in On-Site's 2010 report, went too far. Beyond his obvious bias and hatred of Esso, a simple legal database search could have revealed to Cabrera that other courts have already c o n d e m n e d Belgodere's behavior and attitude in similar litigation. See e.g., Cotto, 389 F.3d 2 1 2 , 216 (1st Cir. 2004). C a b re ra should have made a reasonable inquiry into Belgodere's backg