This is in the case of Pacific III, LLC vs Wells Fargo Bank, Oregon DEQ, et al. Pacific III, LLC and John Patrick Lucas performed extensive environmental clean-up of a former leather tannery and battery manufacturing plant known as Frontier Leather in Sherwood, Oregon. Oregon DEQ entered into a settlement agreement with the responsible parties, contrary to Pacific III, LLC contract with the State of Oregon, Department of Environmental Quality, and used Pacific III's property as a bargaining chip to settle with Wells Fargo and others. The law is very vague and the DEQ has broad "discretion" so they basically decided to confiscate 1.4 million dollars from Pacific III, LLC and claim it was in "the public interest"
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Counsel listing continues on next page February 2013 IN THE COURT OF APPEALS OF THE STATE OF OREGON PACIFIC Ill, LLC, an Oregon limited liability company, Intervenor-Appellant, v. STATE OF OREGON, ex rel. DICK PEDERSEN, Director, Department of Environmental Quality, Plaintiffs-Respondents, and CRAIG E. BOWEN; PAMELA A. BOWEN; MICHAEL C. GIBBONS; PATRICK D. HUSKE and TAMARA L. HUSKE; IRONWOOD HOMES, INC.; LINKE ENTERPRISES OF OREGON, INC., fka Frontier Leather Company; DONALD W. NELSON; WELLS FARGO BANK, N.A. ; and JAMES M. WILSON, Defendants-Respondents. Court of Appeals Case No. A151296 Washington County Circuit Court Case No. C115183CV APPELLANT’S REPLY BRIEF Appeal from the Judgment of The Washington County Circuit Court The Honorable Donald R. Letourneau, Judge Montgomery W. Cobb, OSB #831730 Stephanie Striffler, OSB #824053 Montgomery W. Cobb, llc Oregon Dept. Of Justice 1001 SW 5 Ave., Suite 1100 1162 Court St. NE th Portland, OR 97204 Salem, OR 97301 Telephone 503-625-5888 Telephone 503-378-4402 [email protected][email protected]Attorney for Appellant Attorneys for Respondents State of Oregon and Pedersen
Transcript
Counsel listing continues on next page February 2013
IN THE COURT OF APPEALS OF THE STATE OF OREGON
PACIFIC Ill, LLC, an Oregon limited liabilitycompany,Intervenor-Appellant,
v.
STATE OF OREGON, ex rel. DICKPEDERSEN, Director, Department ofEnvironmental Quality,Plaintiffs-Respondents,
and
CRAIG E. BOWEN; PAMELA A. BOWEN;MICHAEL C. GIBBONS; PATRICK D.HUSKE and TAMARA L. HUSKE;IRONWOOD HOMES, INC.; LINKEENTERPRISES OF OREGON, INC., fkaFrontier Leather Company; DONALD W.NELSON; WELLSFARGO BANK, N.A. ; and JAMES M.WILSON, Defendants-Respondents.
Court of AppealsCase No. A151296
Washington County Circuit CourtCase No. C115183CV
APPELLANT’S REPLY BRIEF
Appeal from the Judgment of The Washington County Circuit Court
The Honorable Donald R. Letourneau, Judge
Montgomery W. Cobb, OSB #831730 Stephanie Striffler, OSB #824053
Montgomery W. Cobb, llc Oregon Dept. Of Justice
1001 SW 5 Ave., Suite 1100 1162 Court St. NE th
Portland, OR 97204 Salem, OR 97301Telephone 503-625-5888 Telephone [email protected][email protected] Attorney for Appellant Attorneys for Respondents State of Oregon and Pedersen
Janet M Schroer, OSB# 813645Hart Wagner LLP1000 SW Broadway, Suite 2000Portland, OR [email protected] 503 222-4499Attorneys for Craig E. Bowen &Pamela Bowen
Stephen G. Leatham, OSB# 873820Heurlin Potter Jahn Leatham211 E. McLoughlin Blvd., 100PO Box 611Vancouver, WA [email protected] 360 750-7547Attorneys for Wells Fargo Bank andJames Wilson
Loren R. Dunn, OSB# 060350Riddell Williams PS1001 4th Ave. Plaza, Suite 4500Seattle, WA [email protected] 206 624-3600Attorneys for Linke Enterprises ofOregon, Inc. and Donald Nelson
Patrick G. Rowe, OSB# 072122Sussman Shank LLP1000 SW Broadway, Suite 1400Portland, OR [email protected] 503 227-1111Attorneys for Michael C. Gibbons
Thomas R. Benke, OSB # 922251Environmental Compliance7845 SW Capitol Hwy, Suite 8Portland, OR [email protected] 503 246-1514Attorney for Patrick D. Huske,Tamara L. Huske and IronwoodHomes, Inc.
may not rely on an unarticulated requirement; court cannot be “left in the
dark as to what facts” agency considered; agency must “demonstrate a
rational nexus between its findings of fact and conclusion of law”);
McCann v. OLCC, 27 Or.App. 487, 503, 556 P.2d 973, rev. den. 277 Or.
99 (1977), (“an agency's reasoning [must] be rational, that is not
irrational, nonrational or fallacious”); Dach v. Employment Div., 32 Or.
App. 433, 437, 574 P.2d 684, 686 (1978)(agencies must make detailed
findings setting forth the reasons for their conclusions).
This Court has more recently declined an invitation to reject the
“substantial reason” rule in a different context:
We decline the county's invitation to abandon the substantialreason rule. The trial court's error in overlooking the county'sfailure to adequately articulate the reasons behind itsconclusions substantially affected petitioners' statutory rightto meaningful judicial review. Petitioners are ‘entitled to eventreatment by rule of law and reasonable confidence that [theyhave] received such treatment.’ McCann, 27 Or.App. at 493,556 P.2d 973 (quoting Sun Ray Dairy v. OLCC, 16 Or.App.63, 71, 517 P.2d 289 (1973)).
Salosha, Inc. v. Lane County, 201 Or. App. 138, 146, 117 P.3d 1047,
1051 (2005)(a writ of review case). Accord, Walker v. Providence Health
(Jan. 30, 2013) (rule applied in workers’ compensation case, citing
Salosha).
The Oregon Supreme Court adopted this court’s reasoning outside
the ORS 183 contested case context:
‘If there is to be any meaningful judicial scrutiny of theactivities of an administrative agency-not for the purpose ofsubstituting judicial judgment for administrative judgment butfor the purpose of requiring the administrative agency todemonstrate that it has applied the criteria prescribed bystatute and by its own regulations and has not actedarbitrarily or on an ad hoc basis-we must require that its orderclearly and precisely state what it found to be the facts andfully explain why those facts lead it to the decision it makes.Brevity is not always a virtue. The less circumscribed anagency is by the legislative grant of power to it and by its ownregulations augmenting that grant, the more detailed andprecise its explanation of its actions exercising the powersgranted to it must be.’
Green v. Hayward, 275 Or. at 707, 552 P.2d at 823 (1976) quoting The
Home Plate, Inc. v. OLCC, supra. The Green court also said:
These ‘practical reasons' seem to us equally compellingwhen we consider the need for a statement of reasons. Asthe same author has noted, the courts have tendedincreasingly to require such a statement from administrativeagencies, even in the absence of a statutory requirement. 2Davis, Administrative Law Treatise § 16.12 and 1970 Supp.at 579-587. In Roseta v. County of Washington, supra 254Or. at 170, n. 8, 458 P.2d 405, we held that the Board'sburden of proving that a rezoning was consistent with thecomprehensive plan had not been met where the record didnot contain adequate findings. As we indicated there, wewere concerned not only with findings of fact, but with theBoard's reasons for its decision.
Green v. Hayward, 275 Or. at 706-07, 552 P.2d at 822-23.
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In other contexts and jurisdictions as well, the requirement that an
agency articulate the reasons for its decision appears to be universal:
The agency's position, moreover, must be both discernibleand clear, see Phelps Dodge Corp. v. NLRB, 313 U.S. 177,196-97, 61 S.Ct. 845, 853-54, 85 L.Ed. 1271 (1941); see alsoNiedert Motor Service, Inc. v. United States, 583 F.2d 954,962 (7th Cir.1978); and failure of the Interstate CommerceCommission to address arguments pertinent to the grant ofthe certificate or to adequately explain its reasons for itsaction requires that the Commission's action be set aside.Humboldt Express, Inc. v. ICC, 567 F.2d 1134(D.C.Cir.1977); see also Pitre Bros. Transfer, Inc. v. UnitedStates, 580 F.2d 140 (5th Cir.1978). This analyticalframework is a precondition for effective judicial review,especially where the expertise of the agency is useful inexplaining the underlying premises for the policies beingpresented, and is essential if the courts are to approachprecision in their task of determining whether the agency isfollowing a reasoned decisionmaking process.
G.I. Trucking Co. v. United States, 708 F.2d 1421, 1423 (9th Cir. 1983).
In Marsh v. Oregon Natural Res. Council, 490 U.S. 360, 378, 109 S. Ct.
1851, 1861, 104 L. Ed. 2d 377 (1989) the Court held that meaningless
review “would be contrary to the demand that courts ensure that agency
decisions are founded on a reasoned evaluation of the relevant factors.”
“A satisfactory explanation of agency action is essential for
adequate judicial review, because the focus of judicial review is not on
the wisdom of the agency's decision, but on whether the process
employed by the agency to reach its decision took into consideration all
the relevant factors.” Asarco, Inc. v. U.S. Envtl. Prot. Agency, 616 F.2d
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1153, 1159 (9th Cir. 1980). This point is the opposite of DEQ’s argument
that because it went through the motions, it must have considered all the
relevant factors. On the contrary, DEQ must offer a “satisfactory
explanation” of its action so that a court can determine whether DEQ
truly considered all the relevant factors.
The reasoned explanation requirement should apply to consent
judgments under ORS 465.325. “Petitioners are ‘entitled to even
treatment by rule of law and reasonable confidence that [they have]
received such treatment.’” Salosha, supra,
DEQ failed to show that it followed the statutory requirement that a
key element of the settlement - the exclusion of Pacific III - was in the
public interest.
3. Scope of DEQ Discretion – Discretion is notPermission to Act Capriciously
Beginning at p. 21 of the Answering Brief, DEQ argues that the
Circuit Court was required to defer to its discretion. But agency
discretion is not unfettered. Discretion does not relieve DEQ of its
obligations to act fairly, in the public interest and to afford parties
adequate process. Nor does discretion relieve DEQ of its obligation to
explain the reasons supporting its exercise of discretion.
ORS 465.325, providing that consent judgments be entered in
Circuit Court requires that some process accompany that proceeding. In
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this case, DEQ started that process by filing a complaint. The power and
thus the process of the Circuit Court was invoked. That process included
a review by the Circuit Court of DEQ’s proposed consent judgment. To
afford interested parties an opportunity to ensure that the consent
judgment complied with the statutes, the Circuit Court needed adequate
information.
The Circuit Court then could have determined whether DEQ had
exercised its discretion in a manner that satisfied the statute. That is
deference. But deference is not capitulation; nor is deference
unquestioning.
DEQ says (Ans. Br. 25) that fairness and reasonableness are not
standards that appear in Oregon law. DEQ is wrong about that, aside
from the irony that DEQ disavows those terms used in the same
CERCLA cases that DEQ relies upon. This Court holds, “Petitioners are
‘entitled to even treatment by rule of law and reasonable confidence that
[they have] received such treatment.” McCann, 27 Or.App. at 493.
DEQ admits (Ans. Br. 26) that consent judgments are subject to
review for abuse of discretion. That review necessarily includes review
for arbitrariness and capriciousness because arbitrary or capricious
actions are an abuse of discretion.
At Ans. Br. 26-27, DEQ lists reasons on which it based its decision
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that the settlement and consent judgment were in the public interest.
Fine reasons they may be, so far as they go. But DEQ does not explain
how the settlement amount is reasonable in view of the objections raised
by Pacific III. DEQ does not explain this fundamental and basic element
of any settlement.
DEQ’s faint mouthings of conclusory brush-off in its memorandum
(Op. Br. 9; SER 9-10) do not adequately address Pacific III’s objections,
nor do they provide a meaningful basis for the Circuit Court to review
DEQ’s exercise of discretion.
The statutes’ provisions for a bar to contribution claims against
parties to consent judgments do not require DEQ to bar those claims. In
fact, in this case, DEQ invited in other parties who had actual and
potential contribution claims. The only party with such a claim that DEQ
did not invite to the negotiations was Pacific III. That was an arbitrary
decision, on this record. Even if DEQ is not required to explain why
every potential party is not invited to participate, it has such an obligation
in this case because Pacific III is the party who performed the major
clean-up, and because DEQ must address its potentially ulterior and
improper motive - to retaliate against or financially squeeze an opponent
in other litigation. Such a motive would render DEQ’s decision an abuse
of discretion, unless it can be eliminated or explained.
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DEQ argues that its negotiations with the bank were “delicate.” But
there is no evidence of that.
The public has an interest in having the responsible parties pay
Pacific III not merely so that justice is done, but also so that Polluting
Parties are paying for the consequences of their contamination of the
environment.
III. REPLY ON SECOND ASSIGNMENT OF ERROR
DEQ contends that Pacific III sought “extensive discovery.” Pacific
III did not seek extensive discovery in the Circuit court, nor does it do so
here. Pacific III in this court argues for limited discovery along the lines
allowed in ERISA cases (Op. Br. 23-27). Below, Pacific III argued for
discovery that would hardly be considered extensive by civil litigation
standards. Contrary to DEQ’s hyperbole, Pacific III has presented a
thoughtful proposal for the discovery to be allowed in consent decree
proceedings and adheres to it.
Meaningful judicial scrutiny of the activities of an administrative
agency is “not for the purpose of substituting judicial judgment for
administrative judgment but for the purpose of requiring the
administrative agency to demonstrate that it has applied the criteria
prescribed by statute and by its own regulations and has not acted
arbitrarily or on an ad hoc basis.” Green v. Hayward, 275 Or. at 707, 552
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P.2d at 823. To the extent discovery in a particular proceeding is
necessary to make that determination, the trial court judge should have
the discretion to order it or allow it.
Discovery allowed under this discretionary standard should be
consistent with the Oregon Rules of Civil Procedure and should have the
benefit of the parties’ give and take.
The denial of discovery is not harmless error for two reasons. We
don’t know what the discovery would have revealed, and it deprived
Pacific III of a procedural right. An order which substantially affects a
party's statutory right to meaningful judicial review is not harmless error.
Salosha, 201 Or. App. at 146, 117 P.3d at 1051.
IV. STRAW MEN AND OTHER FALLACIES
DEQ resorts to straw men, which, admittedly, are much easier to
argue with, although irrelevant. Unfortunately, DEQ also makes
assertions which are frankly false.
Ans. Br. 27 argues with the false premise that Pacific III contends
here that the settlement breaches the PPA, that DEQ was required to
include Pacific III in negotiations, and that the settlement did not include
Pacific III’s property. Pacific III contends that DEQ has failed to explain
those important issues, and is required to do so. If it cannot, then they
are indicators that the consent judgment is not in the public interest, is
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unfair and unreasonable.
Ans. Br. 28-29 argues with the false premise that Pacific III
contends that the statutory scheme precluded DEQ from entering into a
consent judgment with parties from whom Pacific III might seek
contribution.
Ans. Br. 30 makes the false statement that DEQ had already
settled with Pacific III. There is no settlement with Pacific III. Pacific III is
not a polluter or responsible party.
Ans. Br. 30 makes the statement that Pacific III’s purchase of the
Tannery property was “a speculative business venture.” There is nothing
in the record to support that statement. It is irrelevant.
Ans. Br. 30, 31, argues with the false premise that Pacific III claims
in this proceeding that the settlement violates the PPA.
Ans. Br. 30-31 argues with the false premise that Pacific III asks
the court to force DEQ to prove that DEQ could not obtain more funds
from the settling parties in order to share funds with Pacific III.
Ans. Br. 32 argues with the false premise that Pacific III’s argument
amounts to a contention that the settlement and consent judgment are
unfair to Pacific III. But perhaps that argument is just reducto ad
absurdum, rather than a straw man.
Ans. Br. 36 argues with the false premise that Pacific III contends
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that the Circuit Court was required to “determine the wisdom of the
consent judgment” “de novo.”
V. CONCLUSION
The order and judgment of the Circuit Court should be reversed
and the case remanded for further proceedings.
Respectfully submitted this 8th day of February, 2013.
Montgomery W. Cobb, llc
/s/ Montgomery W. Cobb Montgomery W. Cobb, OSB# 831730
CERTIFICATE OF COMPLIANCE WITH ORAP 5.05(2)(d)
I certify that (1) this brief complies with the word-count limitation inORAP 5.05(2)(b) and (2) the word-count of this brief as described inORAP 5.05(2)(a) is 3266 words.
DATED this 8th day of February, 2013.
Montgomery W. Cobb, llc,
/s/ Montgomery W. Cobb Montgomery W. Cobb, OSB#83173Of Attorneys for Plaintiffs - Appellants
CERTIFICATE OF SERVICE
I certify that on February 8, 2013, I served a copy of Appellants’Reply Brief on:.Janet M Schroer, OSB# 813645Hart Wagner LLP1000 SW Broadway, Suite 2000Portland, OR [email protected] 503 222-4499Attorneys for Craig E. Bowen &Pamela Bowen
Stephen G. Leatham, OSB#873820Heurlin Potter Jahn Leatham211 E. McLoughlin Blvd., 100PO Box 611Vancouver, WA [email protected] 360 750-7547Attorneys for Wells Fargo Bankand James Wilson
Loren R. Dunn, OSB# 060350Riddell Williams PS1001 4th Ave. Plaza, Suite 4500Seattle, WA [email protected] 206 624-3600Attorneys for Linke Enterprises ofOregon, Inc. and Donald Nelson
Patrick G. Rowe, OSB# 072122Sussman Shank LLP1000 SW Broadway, Suite 1400Portland, OR [email protected] 503 227-1111Attorneys for Michael C. Gibbons
Thomas R. Benke, OSB #922251Environmental Compliance7845 SW Capitol Hwy, Suite 8Portland, OR [email protected] 503 246-1514Attorney for Patrick D. Huske,Tamara L. Huske and IronwoodHomes, Inc.
Stephanie Striffler, OSB# 824053Anna Marie Joyce, OSB# 013112DOJ Attorney General's Office1162 Court St. NESalem, OR [email protected] Phone 503 378-4402Attorneys for State of Oregon andPederson
by filing it with the eFiling system as to attorneys Joyce, Striffler, Rowe,Leatham, Dunn and Schroer, who are registered with the eFiling system;and upon Attorney Benke by emailing it to him at the email addressshown above.
Montgomery W. Cobb, llc
By: /s/ Montgomery W. Cobb Montgomery W. Cobb, OSB #83173Attorney for Appellants
