Kinzua Resources, Llc, v. Oregon Department Of Environmental Quality

Facts

Kinzua Resources, LLC (P), owned the Pilot Rock Landfill site. P obtained a required permit for the site from the Department of Environmental Quality (D) to operate the site as a disposal site for an adjacent sawmill. P had to obtain financial assurance, particularly for the costs of closing the site and maintenance of the site after closure. P failed to acquire the financial assurance, resulting in a Notice of Civil Penalty by D in 2010. The penalty included a fine of $25,075, as well as an order that P secure financial assurance in accord with the relevant regulations. P never complied with the order regarding financial assurance. D issued the amended notice of civil penalty. In response, petitioner Demers, an individual, communicated with D on behalf of P. P was, at all relevant times, managed by two entities: ATR and Frontier. ATR and Frontier were the only members of P, a limited liability company. In its Restated Articles of Organization, P elected to be managed by its members. Under ORS 63.130(1), each member therefore had equal voting rights and power in the LLC. Demers, an individual, was a member of Frontier and also a shareholder and the president of ATR. The commission found that P: (1) violated ORS 459.268 when it failed to close the landfill; (2) violated OAR 340-095-0090 when it failed to obtain sufficient financial assurance; and (3) violated OAR 340-095-0050(1) when it failed to apply for a 'closure permit.' The commission assessed a penalty of $782,862 against P, most of which represented the economic gain Kinzua obtained by avoiding the costs of properly closing the site. D assigned liability beyond P to include ATR, Frontier, and Demers under ORS 459.268 and ORS 459.205. Petitioners contend that D could not hold anyone other than P liable for any violations related to closing the site under ORS 459.268 or ORS 459.205 without a finding that the person or entity managed the day-to-day operations of the site. That argument rested on a narrow reading of the word 'controlling' to mean more than having legal authority over the site. D disagreed, interpreting ORS 459.268 and ORS 459.205 to support the finding that those who control the site, legally, as well as practically, can be held liable. D concluded that Frontier, ATR, and Demers were responsible for the same violations [ as persons 'controlling' the landfill, and it assessed a civil penalty against them 'in the same amount and manner as P. D reasoned that 'controlling' includes having authority to control and found that all three petitioners met that test. Demers 'had actual control of matters relating to the landfill site and that he exercised that control.' ATR and Frontier had the authority, as the members of P, 'to control the property of the company, including the landfill.' It is undisputed that P is a limited liability company whose members are ATR Services and Frontier Resources who have the legal authority to manage and conduct P's business, and thus control the properties owned by P.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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