NRC Envtl. Servs. v. Barnards Holdings, Inc.

Full title: NRC ENVIRONMENTAL SERVICES, INC., a Washington corporation, Plaintiff, v…

Court: United States District Court, District of Oregon

Date published: Feb 14, 2022

3:19-cv-01133-JR (D. Or. Feb. 14, 2022)

Opinion

3:19-cv-01133-JR

02-14-2022

NRC ENVIRONMENTAL SERVICES, INC., a Washington corporation, Plaintiff, v. BARNARDS HOLDINGS, INC., fka WATER TRUCK SERVICE, INC., an Oregon corporation, and BOB JONAS, an individual domiciled in Oregon, Defendants.

Jolie A. Russo, United States Magistrate Judge.

FINDINGS AND RECOMMENDATION

Jolie A. Russo, United States Magistrate Judge.

Plaintiff NRC Environmental Services, Inc. (“NRC”) and defendants Barnards Holdings, Inc, formerly known as Water Truck Service, Inc. (which was operated in conjunction with Stormwater Recycling, Inc.) (collectively “WTS”) and Bob Jonas cross-move for summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons set forth below, the parties' motions should be granted in part and denied in part.

BACKGROUND ¹

1 The Court cites to NRC's evidence except when referring to the non-duplicative information produced by defendants, and to the docket numbers of the parties' exhibits except where individually labeled and numbered. Only the facts sustained by the record are recounted herein.

NRC “is a global provider of diversified environmental, industrial and emergency response solutions, ” with “52 office locations in 15 countries.” Nepom Decl. Ex. 1 (doc. 57-2). Jonas started WTS in 1986 and incorporated it in 1998. Jonas Decl. ¶¶ 1-3 (doc. 57-1). Jonas also owns and operates several other Oregon businesses, including Dayton Ecology Composting, Inc.

I. General WTS/Stormwater Operations Under Jonas

WTS provided “environmental, infrastructure maintenance and infrastructure inspection services, including catch basin cleaning, vacuum and material handling, water transporting, sewer and pipe cleaning, and street and parking lot sweeping.” Keesee Decl. Ex. 2, at 1 (doc. 61-3).

When Jonas began operating WTS in 1986, “there w[ere]n't a lot of rules” and regulations governing the business. Pl.'s Ex. B, at 5-6 (doc. 67-2). Jonas was responsible for the company's regulatory compliance (although did not attend any classes or obtain any special training) until Jamie Hartley was hired as a salesperson sometime “between 2000 and 2006.” Id. at 4-6, 8. Hartley had a background “in the construction trade with a number of different engineers, ” including “environmental engineers.” Id. at 7. Hartley was promoted to Operations Manager and, later, became WTS' General Manager. Hartley Decl. ¶ 1 (doc. 57-6).

WTS was conducted out of two facilities - one located on Clutter Road in an unincorporated part of Washington County, Oregon (“Clutter Facility”), and the other located on Killingsworth Street in Multnomah County, Oregon (“Killingsworth Facility”). The Clutter Facility served two business endeavors - wastewater pretreatment and street sweeping² - that were conducted from a building and cement pad, respectively.

2 Defendants also handled yard debris at the Clutter Facility, but these operations were “kept separate” and do not appear to be central to this lawsuit. Jonas Decl. ¶ 5 (doc. 57-1).

The former was operated in conjunction with the Killingsworth Facility and set up “to treat wastewater generated by cleaning septic tanks, grease traps and parking lot catch basins/oil water separators.” Pl.'s Ex. J, at 4-5 (doc. 61-13). Notably, water vacuumed into WTS' trucks was taken to the Clutter Facility to undergo a physical separation process, where the solids were separated from the liquids by processing through a variety of equipment. Pl.'s Ex. B, at 24, 28-30 (doc. 59-5). The Clutter Facility was “not connected to the sanitary sewer” so the treated water was held in a tank until it was “trucked to Portland for discharge to the sanitary sewer, ” which would occur anywhere from daily to twice per week depending on the season. Id. at 30. The by-products of the separation process were taken to the Hillsboro Landfill for disposal. Id.; Jonas Decl. ¶ 6 (doc. 57-1); Pl.'s Ex. J, at 4-5 (doc. 61-13).

Concerning the latter, WTS used the Clutter Facility as an interim amenity where it would unload the street sweepings and separate out the recyclable cans/bottles and garbage; the remaining content was reloaded into drop boxes for transport to other locations (typically Dayton Ecology Composting, an Oregon Department of Environmental Quality (“ODEQ”) licensed composting facility). Jonas Decl. ¶ 4 (doc. 57-1); Hartley Decl. ¶ 5 (doc. 57-6); Pl.'s Ex. B, at 8-9, 14, 19-20 (doc. 59-5). The “small amount of non-recyclable garbage . . . would be placed into a garbage dumpster for disposal as garbage.” Hartley Decl. ¶ 5 (doc. 57-6). Street sweepings were transported away from the Clutter Facility within a couple of days. Jonas Decl. ¶¶ 4, 7 (doc. 57-1).

During “leaf season, ”³ street sweepings were directly applied to composting or soil amendment. Id. at ¶ 4; Hartley Decl. ¶ 6 (doc. 57-6). During the remainder of the year, once the street sweepings were taken from the Clutter Facility, they were screened in order to separate the inorganic material (e.g., sand, gravel, etc., otherwise known as “fines”) from the organic material (e.g., leaves and larger debris). Id. The fines were used as landfill “daily cover” or as mine reclamation cover; the organics were used for composting. Pl.'s Ex. C, at 18-19 (doc. 67-3); Jonas Decl. ¶ 4 (doc. 72-1).

3 WTS had contracts with a number of counties and municipalities for street sweeping services. Jonas Decl. ¶ 4 (doc. 57-1). The precise nature and terms of these contracts are unclear, as is the period that defines “leaf season.” Nevertheless, the Court generally presumes that this period refers to October through November of any given year.

The Killingsworth Facility was operated as a wastewater disposal facility and, at various points, a treatment facility. In August 2010, the Portland Bureau of Environmental Services (“BES”) issued WTS an industrial wastewater discharge permit for a Centralized Waste Treatment Facility, which allowed WTS to discharge water into the Portland sewer system via the Killingsworth Facility that was pretreated⁴ at the Clutter Facility (“2010 Permit”). Pl.'s Ex. D (doc. 61-7). In June 2015, BES renewed WTS' industrial wastewater discharge permit (“2015 Permit”). Keesee Decl. Ex. 1 (doc. 61-2). In particular, the 2015 Permit allowed WTS to discharge waste streams from leachate or “generated in the cleaning of oil interceptors (catch basins, oil/water separators, vaults, etc.), where the solids have been removed through treatment” at the Clutter Facility; any wastewater “delivered directly to the permittee's Portland facility from the generating source . . . shall not contain solids that can be screened out, or are readily settleable.” Id. at 4.

4 Both the Portland City Code (“PC”) and BES permits define “pretreatment” as “the reduction of the amount of pollutants, the elimination of pollutants, or the alteration of the nature of pollutant properties in wastewater in accordance with federal, state and local laws, regulations and permits prior to or in lieu of discharging or otherwise introducing such pollutants into the City sewer system.” PC § 17.34.020(S); Keesee Decl. Ex. 1, at 29 (doc. 61-2).

II. The Parties' Relationship

In 2012, NRC became a customer of WTS. Keesee Decl. ¶ 9 (doc. 67-1). Towards the end of 2016, Jonas approached NRC about purchasing WTS' operations. To that end, on September 26, 2016, defendants provided NRC with an information packet. Keesee Decl. ¶ 4 & Ex. 1 (doc. 59-1).

On January 6, 2017, the parties executed an Asset Purchase Agreement (“APA”), pursuant to which NRC purchased WTS' operations, along with all associated properties, assets, goodwill, and rights.⁵ Keesee Decl. Ex. 2, at 1 (doc. 61-3). In regard to the Killingsworth Facility, these assets included treatment equipment (“Oily-Water Systems” and a “PH System”). Id. at 1, 53; Keesee Decl. ¶ 6 (doc. 61-1).

5 Jonas and his wife retained ownership of the Clutter Facility following this transaction. Jonas Decl. ¶ 3 (doc. 57-1). NRC leased the Clutter Facility from Jonas after the APA was executed pursuant to a separate agreement (“Clutter Lease”).

Sections 2.8, 2.13, and 2.19 of the APA contain WTS' representations and warranties. Section 2.8 is entitled “Compliance with Laws” and specifies:

Since January 1, 2012, (i) the Business has been, and is currently, conducted in compliance with all applicable Law, (ii) each Seller has been, and is currently, in compliance with all applicable Law, and (iii) no Seller has received any written notice alleging any violation under any Law. No. Seller is currently liable for the payment of any claims, damages, fines, penalties or other amounts, however designated, for failure to comply with any Laws and, to the Knowledge of Sellers, ⁶ no material expenditures are or will be required to remain in compliance with such

Laws. To the Knowledge of Sellers, there is not any present or proposed requirement of any applicable Law that is due to be imposed on the Business or a Seller that is reasonably likely to increase the costs of complying with such Law or that would render illegal or restrict the operations of the Business or a Seller.

6 The APA defines “Knowledge of Sellers” as “the collective knowledge of Bob Jonas, Jamie Hartley, and Kayla Hartley, who will each be deemed to have ‘Knowledge' of a particular fact or other matter if such individual is actually aware or ought reasonably to have been aware of such fact or other matter had such individual made all usual and reasonable inquiries and all inquiries which would have been reasonable in light of each individuals' position or knowledge.” Keesee Decl. Ex. 2, at 45 (doc. 61-3).

Keesee Decl. Ex. 2, at 13 (doc. 61-3).

Similarly, Section 2.13, titled “Permits, ” states:

Schedule 2.13 contains a true and correct list of all Permits held by a Seller. Sellers hold all Permits which are required for the ownership, lease or operation of, or necessary for it to own, lease or operate, the Acquired Assets and conduct the Business. All such Permits are in full force and effect, and no Seller is in default (or with the giving of notice or lapse of time or both, would be in default) under any such Permits. There are no Legal Proceedings pending or, to the Knowledge of Sellers, threatened, that seek the revocation, cancellation, suspension or adverse modification of a Permit held by a Seller. All required filings with respect to such Permits have been timely made and all required applications for renewal thereof have been timely filed. No. consent, notice or other notification is required under any Permit as a result of the Transactions and the effectiveness of the Permits will not be affected by the consummation of the Transactions.

Id. at 18. Schedule 2.13, in turn, listed a number of business licenses, as well as a State of Oregon Construction Contractors Board license and two transportation carrier licenses. Id. at 89.

Section 2.19 pertains to “Environmental Matters”:

Sellers have been in the past and currently are, and the Business has been and continues to be conducted, in compliance in all material respects with all Environmental Laws. To the Knowledge of Sellers, no event has occurred or circumstances exists that (with or without notice of lapse of time) (a) would constitute or result in a material violation by a Seller of, or a failure on its part to comply with any Environmental Law, (b) would reasonably be expected to result in material Liability under any Environmental Law, or (c) would give rise to any material obligation on the part of the Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; Sellers have obtained and maintain all Permits relating to or required under Environmental Laws to conduct the Business (the “Environmental Permits”). Sellers are and have been in material compliance with, and have timely made all reports, submissions, filings or renewal applications required under, such Environmental Permits. A list of all Environmental Permits is set forth in Schedule 2.19.

Id. at 20. The 2015 Permit is the only permit disclosed under Schedule 2.19. Id. at 96.

Section 6.1 sets forth the applicable statutes of limitations related to Sections 2.8, 2.13, and 2.19:

All of the representations and warranties of Buyer and Seller Parties set forth in this Agreement will survive the Closing and will terminate on the date that is 18 months after the Closing Date except . . . the representations and warranties set forth in . . . Section 2.19 [will] survive the Closing until 60 days following the expiration of the statute of limitation applicable to matters covered thereby (after giving effect to any waiver or extension thereof granted by the applicable party). Notwithstanding the preceding sentence, any representation or warranty in respect of which indemnity may be sought under this Agreement will survive the time at which it would otherwise terminate pursuant to the immediately preceding sentence if written notice of the inaccuracy or breach thereof giving rise to such right of indemnification has been given prior to such time.

Id. at 30.

Section 7.1 prescribes the requirements for providing written notice of a claim.: “All notices and communications hereunder will be deemed to have been duly given and served . . . by email” to the following address: earlybirdmom03@yahoo.com. Id. at 33. A copy must be sent to counsel, but “will not constitute notice to [defendants].” Id.

Finally, the APA states that New York law governs “any disputes arising under or related hereto (whether for breach of contract, tortious conduct or otherwise).” Id. at 35.

III. Proceedings Before This Court

NRC filed this action on July 22, 2019, alleging the following claims: (1) breach of Sections 2.8, 2.13, and 2.19 of the APA; (2) negligent misrepresentation; and (3) mutual or unilateral mistake. NRC's claims are premised on the fact that both the Clutter and Killingsworth Facilities were operating without the proper land use and zoning permits prior to and at the time of the APA, which ultimately resulted in NRC being precluded from operating the Clutter Facility and incurring significant costs to make the Killingsworth Facility compliant. NRC's third claim was subsequently withdrawn in light of the parties' partial settlement.

On January 27, 2020, several months prior to the close of discovery, defendants moved for summary judgment. On February 18, 2020, NRC filed a Fed.R.Civ.P. 56(d) motion. On February 19, 2020, this Court granted NRC's Rule 56(d) request and deferred consideration of defendants' motion until after discovery was complete. On November 30, 2020, the parties collectively filed three summary judgment motions as to liability, as well as three evidentiary issues. Briefing was completed in regard to these motions on January 29, 2021. On February 4, 2021, the parties jointly requested a judicial settlement conference. On March 8, 2021, a settlement conference was held with U.S. Magistrate Judge Coffin; the case did not settle.

STANDARD OF REVIEW

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show “that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(a). Substantive law on an issue determines the materiality of a fact. T. W. Elec. Servs., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324.

Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T. W. Elec., 809 F.2d at 630.

DISCUSSION

Defendants assert summary judgment is warranted as to NRC's claims, citing myriad reasons and evidence that purportedly absolve them from liability, some of which are based on a mischaracterization of the law or facts, or are simply not borne out by the record. Plaintiff, in turn, raises a number of arguments as to why it should prevail on some of its claims. Given the parties' litigation tactics (which render any comprehensive attempt to resolve the merits of this case impractical, despite extensive briefing), the Court's analysis is limited to issues that are dispositive.

I. Evidentiary Objections

Defendants argue the testimony of one of NRC's experts, Anne Skinner, is inadmissible under Fed.R.Evid. 702 and improperly based on irrelevant hearsay. Defs.' Resp. to First Mot. Summ. J. 1-4 (doc. 65). Concerning the latter, defendants assert that NRC cannot rely on the statements Washington County made to Skinner during her 2018 investigation because they do not concern WTS' pre-APA activities.

NRC contends that certain declaratory statements made by Hartley are not based on personal knowledge, irrelevant, or lack a proper foundation, such that they are inadmissible under Fed.R.Evid. 602 and/or Fed.R.Evid. 701. Pl.'s Resp. to Am. Mot. Summ. J. 2-5 (doc. 67). In addition, NRC “objects to defendants' mischaracterization of Robert Ransdell's testimony and defendants' improper inference that NRC knew of defendants' failure to complete the conditional use application for the Killingsworth Facility and defendants' history with the Killingsworth Facility's history prior to upgrading the treatment system at the Killingsworth Facility.” Pl.'s Reply to Second Mot. Summ. J. 3-4 (doc. 70).

A. Defendants' Objection

Pursuant to Rule 702:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. Thus, in evaluating admissibility, the trial court must determine whether expert testimony has “a reliable basis in the knowledge and the experience of [the relevant] discipline, ” as well as the reasonableness of applying that testimony to draw conclusions about the matter to which it is directed. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 592-93 (1993).

A witness's specialized knowledge, however, does not automatically invoke Rule 702. See Bank of China v. NBM LLC, 359 F.3d 171, 181 (2d Cir.2004) (“[t]he fact that [the witness] has specialized knowledge, or that he carried out the investigation because of that knowledge, does not preclude him from testifying pursuant to 701, so long as the testimony was based on the investigation and reflected his investigatory findings and conclusions, and was not rooted exclusively in his expertise”). Where a witness with specialized knowledge provides percipient testimony about matters that are “‘common enough to require . . . a limited amount of expertise, ” his or her testimony falls within Rule 701. United States v. Figueroa-Lopez, 125 F.3d 1241, 1245 (9th Cir.1997) (citations and internal quotations omitted).

While Skinner's professional background certainly qualifies her as an expert, her declaration is limited to her work for NRC investigating land uses for the Clutter Facility and what she observed during that process. Skinner Decl. ¶¶ 7-12 (doc. 59-9). In the course of her investigation, Skinner personally reviewed public records and communicated with Washington County staff concerning whether the Clutter Facility had any land use approvals. Id.; Pl.'s Ex. D, at 4-5 (doc. 59-7). She ultimately discovered that “the Clutter Road Property had no land use approvals filed with Washington County.” Skinner Decl. ¶¶ 7-12 (doc. 59-9). Skinner's testimony is therefore admissible.⁷ See Morin v. State Farm Fire & Cas. Co., 453 F.Supp.2d 173, 175-76 (D. Me. 2006) (witness with specialized knowledge could testify as to the “facts he observed during the course of his investigation” under Rule 701).

7 Even assuming Rule 702 governed Skinner's testimony, defendants' objection largely goes to weight as opposed to admissibility, which is “for a jury, not a trial judge, to evaluate.” Boydstun v. U.S. Bank Nat'l Assoc., 187 F.Supp.3d 1213, 1216 (D. Or. 2016); see also Robinson v. GEICO Gen. Ins. Co., 447 F.3d 1096, 1100 (8th Cir. 2006) (“[g]aps in an expert witness's qualifications or knowledge generally go to the weight of the witness's testimony, not its admissibility”); Kennedy v. Collagen Corp., 161 F.3d 1226, 1231 (9th Cir. 1998) (“[d]isputes as to the strength of an expert's credentials, faults in his use of a particular methodology, or lack of textual authority for his opinion, go to the weight, not the admissibility, of his testimony”). The remaining aspects of Skinner's testimony are sufficiently fact-based to be of assistance to the trier of fact; any purported deficiencies can be challenged through cross-examination and presentation of contrary evidence. See Daubert, 509 U.S. at 595-96 (even where an expert is expected to deliver “shaky” testimony, admission of the testimony may be proper as “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking” such evidence); see also Pineda v. Ford Motor Co., 520 F.3d 237, 243 (3d Cir. 2008) (Rule 702 “has a liberal policy of admissibility”) (citation and internal quotations omitted).

This is especially true considering Skinner's testimony is wholly consistent with the other evidence of record, which reveals that the Clutter Facility was not zoned for a “Solid Waste Transfer Station” and defendants never applied for any Washington County permits. Defendants' evidentiary objection is denied.

B. NRC's Objection

NRC's objections are well-taken to the extent that Hartley's testimony is either irrelevant or lacks adequate support. For instance, Hartley's sworn statements concerning WTS' superior business model or NRC's operations after he stopped working for NRC as a salesperson have no bearing on any fact of consequence in this case. See Perez-Denison v. Kaiser Found. Health Plan of the N.W., 868 F.Supp.2d 1065, 1088-89 (D. Or. 2012) (denying an evidentiary objection as moot where “the evidence moved against does not change the [court's] recommendation” regarding summary judgment). Likewise, the Court does not rely on opinions or legal conclusions that lack an adequate factual foundation or are not borne out by the record. See Bogner v. R & B Sys., Inc., 2011 WL 1832750, *3 (E.D. Wash. May 12, 2011) (court “is not bound by [a declarant's] legal conclusions”; disputed issues of material fact can “not [be] created by simply averring that an act ‘was [a legal violation or]' declaring that one's versions of events is ‘consistent' with one's theory of the case . . . declarations [must only be considered] for the facts contained therein”).

Concerning Randsell's testimony, nothing in the record reflects that NRC learned of the Portland Bureau of Development Services' (“BDS”) conditional use review requirements for wastewater treatment and residual solid waste production prior to October 2017. Nepom Decl. Ex. 7, at 42-43 (doc. 65-1); Ransdell Decl. ¶¶ 6-7 & Ex. 1 (doc. 70). To the extent they conflict, the Court relies on the actual documentary evidence and sworn statements in the record in lieu of either parties' recapitulation and/or characterization of that evidence. See Cascadia Wildlands v. Bureau of Land Mgmt., 2012 WL 6738275, *3 n.6 (D. Or. Dec. 21, 2012) (the court “is capable of independently resolving conflicts in the record and questions of admissibility”) (citation omitted).

II. Negligent Misrepresentation Claim

Defendants contend summary judgment is proper on NRC's negligent misrepresentation claim because the parties' “transaction was an arms length commercial transaction, with no special relationship” and NRC “is the ‘big environmental company'” that, if anything, enjoys disparate bargaining power. Defs.' Am. Mot. Summ. J. 31-33 (doc. 57).

NRC counters that the special relationship determination is fact-specific and can arise in the context of a commercial relationship. Pl.'s Resp. to Am. Mot. Summ. J. 29 (doc. 67). NRC relies on the fact that it was “a customer of WTS and Stormwater for years prior to the transaction at issue” and was approached by defendants “about purchasing their operations, ” which were reported to be “properly permitted” and capable of “support growth into additional areas, ” including the food and marijuana industries. Id. at 29-30.

Under New York law, “[a] claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information” J.A.O. Acquisition Corp. v. Stavitsky, 168 N.Y.3d 144, 148, 831 N.Y.S.2d 364, 863 N.E.2d 585 (2007). Concerning the first element, a showing “of trust or confidence between the parties which creates a duty for one party to impart correct information to another” is required, such as “in the context of a layperson's reliance on a professional.” Presnall v. Analogic Corp., 2018 WL 4473337, *9 (S.D. N.Y. Sept. 18, 2018) (citation and internal quotations omitted). As a result, arm's length business transactions typically do not generate a special relationship that gives rise to liability in tort. See, e.g., Kimmell v. Schaefer, 89 N.Y.2d 257, 263-64, 652 N.Y.S.2d 715, 675 N.E.2d 450 (1996); MBIA Ins. Corp. v. Countrywide Home 22 Loans, Inc., 87 A.D.3d 287, 296-97, 928 N.Y.S.2d 229 (1st Dep't 2011); Fleshman v. Wells Fargo Bank, N.A., 27 F.Supp.3d 1127, 1132 (D. Or. 2014).

Here, the majority of NRC's arguments speak to the second and third elements. But the fact that defendants made material misrepresentations/omissions regarding their operations and NRC relied on these facts does not support the presence of a special relationship. Yet, in the absence of a special relationship, it is not clear that defendants' purported conduct violated an independent legal duty sufficient to sustain a tort. See Hargrave v. Old Nursery, Inc., 636 F.2d 897, 899 (2d Cir. 1980) (“if the only interest at stake is that of holding the defendant to a promise, the courts have said that the plaintiff may not transmogrify the contract claim into one for tort”).

A thorough review of the record does not evince that NRC and defendants shared the type of business relationship that would give rise to a duty on the part of Jonas or Hartley to impart correct information. The transaction in question was conducted by two sophisticated commercial parties: NRC held itself out as a global leader in environmental/industrial services and, over the past three decades, Jonas owned and operated a number of local businesses. Critically, NRC does not proffer any argument or evidence demonstrating it was not capable of or responsible for its own due diligence in regard to the assets underlying the APA.

There are a dearth of facts concerning NRC's claim of a long-standing relationship between the parties; however, the evidence that does exist merely shows that NRC was one of WTS' many customers in the years leading up to the APA. See Presnall, 2018 WL 4473337 at *9-10 (despite the parties' prior course of dealing, no special relationship existed in light of the “lengthy” contract negotiations “undertaken by sophisticated parties, ” denoting the “large body of New York authority that has concluded that a ‘special relationship' does not arise in a typical commercial transaction”). Nothing in the record reflects the presence of a fiduciary-like relationship between the parties, or otherwise suggests NRC ceded any decision-making authority to defendants or that defendants had a duty to act with NRC's best interests in mind. Defendants' motion should be granted as to NRC's negligent misrepresentation claim.

III. Breach of Sections 2.8 or 2.13 of the APA

Defendants seek summary judgment on NRC's breach of contract claims under Sections 2.8 and 2.13 of the APA on the basis that they are untimely in regard to both the Killingsworth and Clutter Facilities. NRC maintains notice of all claims was properly given and, in any event, “[d]efendants had actual notice of the breaches of the APA within the 18-month period.” Pl.'s Resp. to Am. Mot. Summ. J. 7 (doc. 67).

As specified above, Sections 6.1 and 7.1 of the APA govern the timeliness of NRC's claims. Under their plain language, any purported liability for breach of Section 2.8 or 2.13 expired 18 months after January 6, 2017 - or on July 6, 2018 - unless “written notice of the inaccuracy or breach thereof” was provided prior to that date via email to defendants' counsel and the earlybirdmom03@yahoo.com address. Keesee Decl. Ex. 2, at 30, 33 (doc. 61-3).

It is undisputed that the only Notice of Claim relevant to this lawsuit was sent to these parties on June 7, 2018. Both Jonas and his counsel explicitly concede that “a copy of said letter was also sent by email to [Jonas'] wife's email address, which is the email address referred to for the Seller under the Asset Purchase Agreement.” Jonas Decl. ¶ 3 (doc. 57-1); Pl.'s Ex. B, at 6-7 (doc. 59-5). In light of this evidence, any intimation that the Notice of Claim was not sent in compliance with Section 7.1 is specious. Indeed, contrary to defendants' assertion, Section 7.1 cannot reasonably be read as being breached if “Attn: Bob Jonas” was not included in the correspondence. Rather, this provision unambiguously states that written notice is “deemed to have been duly given and made if . . . delivered by email” to the designated address, which is precisely what occurred in this case. Keesee Decl. Ex. 2, at 33 (doc. 61-3).

This is especially true considering that: (1) neither the physical address for Jonas nor WTS' counsel included the “Attn: Bob Jonas” language, suggesting that this designation was only required when physical mail concerning the APA was sent to WTS' corporate address to indicate the particular person to which it was directed; and (2) defendants' counsel responded to the Notice of Claim on June 15 and July 6, 2018 (copying Jonas in each instance) - i.e., within 18 months of January 6, 2017 - but did not object or otherwise suggest NRC's notice was deficient under the APA. Id.; Park Decl. Exs. 2-3 (doc. 43); see also Thor 725 8th Ave. LLC v. Goonetilleke, 138 F.Supp.3d 497, 509-10 (S.D. N.Y. 2015), aff'd, 675 Fed.Appx. 31 (2d Cir. 2017) (“strict compliance with contractual notice provisions need not be enforced where the adversary party does not claim the absence of actual notice or prejudice by the deviation”) (collecting cases); Smith v. Realty USA Capital Dist. Agency, Inc., 2012 WL 1958902, *4 (N.Y. Sup. Ct. May 29, 2012) (contractual notice occurred where the defendants' attorney received informal notice and did not object to the contractual deviation at the time).

As such, the resolution of this issue hinges not on the provision of written notice, but rather on the contents of that notice. To that end, the Notice of Claim stated, in relevant part:

Pursuant to the Agreement, Buyer acquired, among other things, all of Sellers' rights to operate the wastewater treatment facility located at 8828 NE Killingsworth Street, Portland, Oregon 97220 (the “Wastewater Treatment Facility”) , including Sellers' rights to the City of Portland Environmental Services Wastewater Discharge Permit, No. 437.008 (the “Wastewater Permit”). Among other things, Sellers failed to conduct the Business in compliance with applicable Law, including by knowingly conducting waste-related activities at the Wastewater Treatment Facility without obtaining required authorization from the proper Governmental Entity. Subsequent to the Closing, Buyer received notice from the City of Portland Bureau of Environmental Services (the “PBES”) that the Wastewater Treatment Facility is not, and never has been (including before and after Closing), zoned for waste-related activities and that in order to

obtain authorization for such activities a “Conditional Use” permit would be required. The PBES has provided Buyer documentation that indicates Sellers were aware of such non-compliance prior to the Closing and that Sellers had previously initiated, but failed to complete, the “Conditional Use” application process in 2011 . The non-compliance with respect to the Wastewater Treatment Facility has resulted in a significant amount of Losses, including lost profits resulting from business interruptions caused by Buyer's inability to operate the Business in the manner represented by Sellers at the time of Closing . . .

Sellers, among other things, represented at the time of the Closing that (a) they held all Permits necessary to operate the Acquired Assets (including the Waste Treatment Facility) and conduct the Business and (b) no Consent was required to be obtained with respect to any Permit (including the Wastewater Permit) in connection with the entry into the Agreement. Subsequent to the Closing, the PBES notified Buyer that (a) Buyer does not, and Sellers never did (whether before or after the Closing), hold the Permits necessary to operate the Acquired Assets (including the Waste Treatment Facility and a Development Review Permit) and conduct the Business and (b) the Wastewater Permit was not transferrable and that Buyer is required to submit a new permit application . Buyer has invested significant capital into attempting to obtain the necessary Permits (including the Wastewater Permit and Development Review Permit) and to transfer the Wastewater Permit and has suffered significant Losses, including lost profits resulting from business interruptions caused by Buyer not having the Permits necessary to operate the Acquired Assets and conduct the Business.

Park Decl. Ex. 1 (doc. 43) (emphasis added).

This correspondence clearly put defendants on notice of NRC's claims under Sections 2.8 and 2.13 related to the Killingworth Facility.⁸ However, it was insufficient to furnish notice regarding NRC's claims concerning the Clutter Facility. In fact, the Notice of Claim exclusively broaches the Killingsworth Facility and City of Portland permitting issues related thereto, and is completely silent as to the Clutter Facility, WTS' street sweeping operations, or any issues with Washington County land use or zoning regulations. While the Notice of Claim broadly refers to “a Development Review Permit, ” this appears solely in the context of BES' authority and the 2015 Permit. Tellingly, defendants' subsequent communications regarding the Notice of Claim were limited to the Killingsworth Facility and there is no evidence NRC attempted to clarify the scope of its claims despite defendants' request for “further information.” Park Decl. Exs. 2-3 (doc. 43). In other words, the record demonstrates that neither party contemporaneously read NRC's written notice as advising defendants of an “inaccuracy or breach” related to the Clutter Facility.

8 Defendants' assertion that Sections 2.8 and 2.13 are “very specific, ” presumably negating Section 2.19, is unpersuasive. Defs.' Am. Mot. Summ. J. 21 (doc. 57); but see Defs.' Reply to Am. Mot. Summ. J. 23 (doc. 72) (“[i]f Section 2.19 is read as WTS believes was intended, to apply only to laws that strictly deal with Environmental Matters, it is a more specific provision”). Section 2.8 - which governs any law - and Section 2.13 - which governs any permit - cannot reasonably be read as less broad than Section 2.19 - which governs laws and permits solely for “Environmental Matters.” See Muzak Corp. v Hotel Taft Corp., 1 N.Y.2d 42, 46 (1956) (“the specific provision controls”); see also Aramony v United Way of Am., 254 F.3d 403, 413 (2d Cir. 2001) (it is “unreasonable to treat” a general “clause as overriding the specificity of [a more] detailed” clause). In defendants' own words, Sections 2.8 and 2.13 are “all encompassing, ” whereas Section 2.19 plainly is not. Defs.' Am. Mot. Summ. J. 21 (doc. 57).

To the extent NRC maintains defendants should have known the intent behind the Notice of Claim was to apprise of breaches related to both facilities, since “the Clutter Treatment System is part of the Killingsworth Facility, ” its argument is unavailing. Pl.'s Resp. to Am. Mot. Summ. J. 8-9 (doc. 67). NRC is correct that the Killingsworth and Clutter Facilities comprised a centralized wastewater treatment plant in relation to the regulation of discharges into the Portland sewer pursuant to the 2015 Permit. But the record before the Court otherwise reflects that these facilities were distinct both geographically and in terms of what was required to operate them legally. To wit, NRC separately moves for summary judgment as to each facility, representing that the “equipment and operations at the Killingsworth Facility have no bearing on NRC's motion” related to the Clutter Facility. Pl.'s First Mot. Summ. J. 1 n.1 (doc. 59). Accordingly, NRC failed to timely furnish written notice of its Clutter Facility claims under Sections 2.8 and 2.13 of the APA, such that defendants' motion should be granted in this regard.

IV. Breach of Section 2.19 of the APA

To prevail on a breach of contract claim under New York law, a plaintiff must prove “(1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages.” Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994); see also CBS Inc. v. Ziff-Davis Pub. Co., 75 N.Y.2d 496, 503-04, 553 N.E.2d 997, 1001 (1990) (“[t]he express warranty is as much a part of the contract as any other term . . . and the right to indemnification depends only on establishing that the warranty was breached”).

NRC is “not seeking [summary] judgment on its damages . . . as the amount of its damages is disputed by Defendants.” Pl.'s First Mot. Summ. J. (doc. 59); Pl.'s Second Mot. Summ. J. 13 n.14 (doc. 61). As such, the sole issue is defendants' purported liability.

A. Preliminary Issues

The Court must resolve two issues common to both facilities before reaching the substantive merits of NRC's motion. Namely, defendants argue land use and zoning regulations do not qualify as Environmental Matters within the purview of Section 2.19, and that no liability can be sustained absent proof of “a ‘zoning violation.'” Defs.' Am. Mot. Summ. J. 18-24 (doc. 57); Defs.' Resp. to First Mot. Summ. J. 9-12, 22-31 (doc. 65).

i. Scope of Section 2.19 of the APA

Under New York law, a contract is interpreted to give effect to the intent of the parties as expressed by its language, which “is a matter of law for the court to decide.” Morgan Stanley Grp. Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir. 2000) (citations and internal quotations omitted). Where the parties' intent is “clearly and unambiguously set forth, effect must be given to the intent as indicated by the language used.” Int'l Klafter Co., Inc. v. Cont'l Cas. Co., Inc., 869 F.2d 96, 99 (2d Cir. 1989) (citation and internal quotations omitted). “A contract is unambiguous when the contractual language has a definite and precise meaning about which there is no reasonable basis for a difference of opinion.” Keiler v. Harlequin Enters. Ltd., 751 F.3d 64, 69 (2d Cir. 2014).

As denoted above, under Section 2.19, defendants represented and warranted that they “have been in the past and currently are . . . in compliance in all material respects with all Environmental Laws” and “no event has occurred or circumstances exists that (with or without notice of lapse of time) [that] would constitute or result in a material violation by a Seller of, or a failure on its part to comply with any Environmental Law, . . . or to bear all or any portion of the cost of, any remedial action of any nature; Sellers have obtained and maintain all Permits relating to or required under Environmental Laws to conduct the Business.” Keesee Decl. Ex. 2, at 20 (doc. 61-3).

“Environmental Law” is defined in the APA as “any Law which relates to or otherwise imposes Liability or standards of conduct relating to environmental, health or safety matters [including but not limited to] any Law governing the use, storage, disposal, cleanup, generation, treatment, transportation or remediation of Hazardous Substances.” Id. at 36, 44 (emphasis added). “Law, ” by extension, is defined as “any provision of any federal, state, local, foreign, international, municipal or administrative order, constitution, law, common law and the law of equity, ordinance, license, permit, regulation, rule, Order, code, plan, statute or treaty of and the departmental or regulatory policies and guidelines of, a Governmental Entity.” Id. at 45. And “Permit” means “any permit, license, approval, Order, concession, clearance, registration, certificate, franchise, qualification, Consent or authorization issued by a Governmental Entity.” Id. at 46.

Thus, pursuant to the APA's unambiguous language, defendants represented and warranted that their operations complied with all rules and regulations (including those relating to permits) pertaining to health, safety, or the environment. As a result, land use and zoning laws fall within the ambit of Section 2.19. While land use and zoning laws may serve a number of purposes, it is beyond dispute that they exist, at least in part, to ensure that property is managed and developed safely and conscientiously, for the benefit of the public and surrounding environment. For instance, the Portland Zoning Code and Washington County Community Development Code (“CDC”) each identify protection of health, safety, and their citizens' general welfare as express goals. PC § 33.10.010; CDC § 102; see also Nepom Decl. Ex. 39, at 65 (doc. 57-5) (defendants' expert, William Cox, testifying that Washington County solicited “information that they find necessary to assure that their environmental protections are complied with”).

Furthermore, the fact “WTS' disposal of street sweeping debris was not, to their knowledge, hazardous to the environment” or that NRC represented to ODEQ it was “managing all solid waste in an environmentally responsible manner” is inconsequential given that Section 2.19 is not limited, by its own terms, to environmental hazards and instead applies to laws/permits regulating health and safety. Defs.' Am. Mot. Summ. J. 23 (doc. 57). Reading Section 2.19 in accordance with defendants' proffered interpretation would impermissibly render the “health or safety” language meaningless or superfluous.

ii. Relevance of Lack of a Formal Violation

As NRC correctly observes, “the sole focus for determining summary judgment is Defendants' activities prior to and on the date of the APA.” Pl.'s Reply to First Mot. Summ. J. 1 (doc. 71). As such, the fact that NRC “was never subject to a County enforcement action” after January 6, 2017, is immaterial to whether liability exists in relation to defendants' purported breaches. Defs.' Resp. to First Mot. Summ. J. 9 (doc. 65).

Similarly, the fact that defendants would have been entitled to notice and a hearing before “determination of a land use violation” is immaterial to whether liability exists under Section 2.19. Id. at 11. Defendants did not represent and warrant that no enforcement action had been initiated against them. Rather, defendants affirmatively attested to following all rules and regulations relating to health, safety, and the environment prior to and as of January 6, 2017. Keesee Decl. Ex. 2, at 20 (doc. 61-3).

Defendants' related argument that they did not need to obtain any permits absent a violation notice or enforcement action cannot be reconciled with the applicable regulations, or the written correspondences of ODEQ, the City of Portland, or Washington County. See, e.g., Nepom Decl. Ex. 17, at 61 (doc. 57-3) (BES indicating that WTS “should have gone through a Land Use Review before it began [treating septage] at the NE Killingsworth site”) (emphasis added); Pl.'s Ex. O, at 5 (doc. 67-15) (Washington County instructing Jonas that “waste materials [could not be brought] on to the property for composting without first obtaining permits from DEQ, METRO, and Washington County”) (emphasis added); see also Pl.'s Ex. C, at 9-11 (doc. 67-3) (defendants' expert, Christopher Rich, testifying that ODEQ expects anyone operating a solid waste facility in Oregon to apply for a solid waste permit and the fact an operator does not subjectively believe it requires a permit is not an excuse for failure to comply with regulations applicable to those operations); Nepom Decl. Ex. 35, at 17-19 (doc. 57-5) (Skinner testifying that companies in violation of Washington County's land use laws are “operat[ing] illegally”).

It would be both anomalous and contrary to reason to allow a company operating unlawfully to avoid liability under these circumstances simply because it avoided being caught. See Superior Plus U.S. Holdings, Inc. v. Sunoco, Inc., 2014 WL 2462549, *5 (S.D. N.Y. June 2, 2014) (that a government agency did not cite the defendant when it operated the asset “does not mean the violations did not exist at that time”). Defendants' motion is denied as to these issues.

B. Killingsworth Facility

NRC argues that defendants breached Section 2.19 of the APA in regard to the Killingsworth Facility by failing to obtain a permit from BDS once it began processing and treating wastewater onsite circa 2014, which resulted in the production of sludge and solids in need of disposal. Pl.'s Second Mot. Summ. J. 6-13 (doc. 61). Conversely, defendants contend summary judgment is appropriate because BES and BDS “thoroughly vetted” the issue and determined no permit was required merely for the disposal or nominal treatment of wastewater.⁹ Defs.' Resp. to Second Mot. Summ. J. 1-3 (doc. 66). In addition, defendants maintain no solid waste was generated onsite after 2011 (beyond “a de minimus amount” from pH adjustment) and that BES was aware of WTS' operations at all relevant times. Id. at 4-6.

9 Defendants initially represented that they “did not process any solid waste at the Killingsworth Facility and did not generate any residual solid waste in its handling of wastewater at the Killingsworth Facility.” Defs.' Am. Mot. Summ. J. 25 (doc. 57). However, defendants seemingly pivoted from this position when confronted with NRC's summary judgment evidence. Likewise, NRC, in subsequent briefing, maintains that disputed issues of material fact exist in regard to the Killingsworth Facility. See, e.g., Pl.'s Resp. to Am. Mot. Summ. J. 6, 10 (doc. 67).

i.Regulatory Backdrop

Title 17 of the Portland City Code governs public improvements, including sanitary and storm water collection systems, and Title 33 governs planning and zoning. BES is responsible for the application and enforcement of Title 17 and has authority to “develop and require permits, authorizations, inspections and other forms of review and approval.” PC §§ 3.13, 17.32, 17.34. ¹⁰BDS is responsible for the application and enforcement of Title 33, including land use approvals and permits related to the Portland Zoning Code, which applies to all land within the city. PC §§ 3.30, 33.10.

10 The parties have not cited to any PC or CDC changes that would substantively impact this case, such that the Court cites to the versions in effect immediately prior to and at the time of the APA.

Accordingly, BES is the agency that regulates the discharge of pretreated wastewater from the Killingsworth Facility, whereas BDS is the agency that regulates the land use of the Killingsworth Facility based on the property's zoning. In other words, under the Portland City Code, neither BDS nor BES oversight singularly relieves a permittee from its obligations to comply with all other applicable local, state, or federal laws. See, e.g., PC §§ 17.34.050(C), 33.10.040(A); see also Keesee Decl. Ex. 1, at 7, 21 (doc. 61-2) (2015 Permit required WTS to “comply with all other applicable City, State and Federal regulations”).

At some unspecified time after the 2010 Permit, defendants began treating and discharging septage and grease-trap wastewater at the Killingsworth Facility. In July 2011, BDS determined these operations violated Title 33 of the Portland City Code and advised defendants to “[c]ease the waste-related use at this property” or obtain a conditional use review and corresponding permit

(“CUP”). Pl.'s Ex. E, at 1 (doc. 61-8). In November 2011, BDS instructed defendants that they could continue disposal operations without obtaining a CUP as follows:

[D]isposal of the excess storm water runoff which is typically pulled from catch basins, underground electrical or underground storm vaults, storm swales, oil/water separators, and leachate (typically storm water from the land fill/dump) is allowed without a Conditional Use Review and will not be viewed as a waste-related use if no treatment occurs on the site. The trigger for requiring a Conditional Use Review all depends on whether or not the material is receiving treatment at the site. If the treated stormwater is simply transported to this site and meets acceptable levels for disposal into the sanitary sewer system without further treatment, then no Conditional Use Review would be required and this would not be considered a Waste Related Use. If any of the wastewater creates additional residual waste, it will then be viewed as a Waste-Related Use and will require a Conditional Use Review.

Nepom Decl. Ex. 25 (doc. 57-4) (emphasis added); Pl.'s Ex. F, at 1 (doc. 61-9). Defendants elected to stop processing septage at the Killingsworth Facility rather than comply with the city's conditional use requirements, representing to BDS that “[r]esidual waste will not be generated on site; separation will occur [at the Clutter] facility.” Id.

In February 2012, BDS inspected the Killingsworth Facility to confirm it was simply a “discharge point-of-compliance” and that “[a]ll of the processing equipment ha[d] been sold and removed from the property.” Nepom Decl. Ex. 26 (doc. 57-4); Pl.'s Ex. G (doc. 61-10). Throughout 2012 and 2013, BDS reiterated that WTS was “only allowed to dispose of treated stormwater” at the Killingsworth Facility pursuant to the BES permit: “anything that creates residual waste” or “required disposal of materials cleaned out on this site to the landfill” is a waste-related use, as was “the transfer of solid or liquid waste from off-site to disposal.” Nepom Decl. Exs. 27-28 (doc. 57-4); Pl.'s Ex. H (doc. 61-11); see also Nepom Decl. Ex. 33 (doc. 57-4) (BDS confirming in July 2018 that it had “previously determined the disposal of stormwater at the site without treatment of it was not . . . a waste-related use [but] [w]e don't yet know if [NRC is] treating the stormwater to create residual waste [in which case] a CU is required”).

In August 2013, BDS inquired about a new container at the Killingsworth Facility identified as a “Denbeste DB 208 Phase Separator, ” which BDS was concerned was intended to separate solids and liquids. Pl.'s Ex. I (doc. 61-12) Defendants advised BDS the Killingsworth Facility operated as an equipment showroom for Denbeste tanks, and that the tanks onsite were empty (except for those used solely to store wastewater prior to discharge) and not used for onsite processing. Id.

In October 2013, BDS issued a Notice of Zoning Violation to WTS in association with “[w]aste related activities on the site (NRC paint solids disposal) without the required Conductional Use Review for a waste-related use.” Nepom Decl. Ex. 1, at 5 (doc. 65-1). This notice advised:

Waste-related uses are characterized by uses that received solid or liquid wastes from others for disposal on the site or for transfer to another location, uses that collect sanitary wastes, or uses that manufacture or produce goods from the biological decomposition of organic material . . . Land Use Review records shows that there is no approved Conditional Use Review at this site.

Previous determinations and information to you identified that as long as no treatment of liquids or solids was occurring at the site, the use would not fall into a waste-related use category. Based on that determination, you ceased all processing of septage to separate solid wastes. As long as no treatment occurs for the liquids introduced to the City's sanitary/storm system at this discharge point, this is not characterized as a waste related use .

On August 2nd and 3rd, we received a report and subsequent evidence that NRC was cleaning out and disposing of liquids and solid wastes from their tanker truck. This included pumping out their truck into a drop box to allow the pain solids to settle and dry which then required disposal off-site at a landfill. This is considered processing of solid waste and therefore constitutes a waste-related use at this site.

Id. at 6 (emphasis added). WTS immediately ceased allowing NRC to engage in this activity at the Killingsworth Facility. Id.

In May 2014, BES inspected the Killingsworth Facility, during which it noted an oil/water separator as an added pretreatment system and that treatment sludge was taken to JC Biogas for disposal. Pl.'s Ex. J, at 1 (doc. 61-13).; see also Pl.'s Ex. B, at 11-13 (doc. 61-5) (after first denying any “deal[ings] with” the oil/water separators onsite at the Killingsworth Facility, Jonas acknowledged that WTS “used them for a short period of time” due to some “high oil, ” and properly cleaned and maintained them).

In May 2015, BES again inspected the Killingsworth Facility, during which it observed the presence of “pH Adjustment” equipment and oil/water separators, which were “filled w[ith] floating oil [and] need[ed] to be pumped.” Pl.'s Ex. K, at 2 (doc. 61-14); Pl.'s Ex. L, at 3 (doc. 61-15); see also Pl.'s Ex. B, at 7-8 (doc. 61-5) (Jonas acknowledging that pH treatment occurred at the Killingsworth Facility and he “wouldn't be surprised” if there were drums of caustic acid left onsite for that purpose). Defendants were instructed by BES at that time that “[a]ll wastewater containing settleable solids must go through [the Clutter Facility] first.” Pl.'s Ex. L, at 3 (doc. 61-15). Shortly thereafter, BES issued the 2015 Permit.

In May 2017, NRC obtained its own industrial wastewater discharge permit from BES for the Killingsworth Facility. Nepom Decl. Ex. 15 (doc. 57-2).

ii. WTS' Operations

The Killingsworth Facility operations observed by BES in 2014 and 2015 were consistent with WTS' internal documents. Namely, WTS' October 2015 “Waste Acceptance and Treatability Plan” for the Killingsworth Facility (which was furnished to NRC in December 2016) provided for pH adjustment treatments, which entailed the use of oil/water separators, as follows:

Treatments will be performed in batches. Each batch will be between 16, 000 and 18, 000 gallons in volume [and] consists of a circulating mix/measure/feed system. Agitation of the batch tank is achieved using 3 eductors mounted near the end of the circulation pump return piping. The batch tank is circulated using a 140-GPM centrifugal pump. Complete mixing of the batch tank generally occurs in less than one hour . . . A drum of 25% sodium hydroxide is staged next to the batch tank, with an 8-GPH chemical feed pump mounted on a shelf above it for injection of alkali into the batch tank. The feed of sodium hydroxide to raise the pH is controlled using LMI DP5000 controller mounted to the wall next to the chemical injection pump . . . Once pH of the tank is within discharge range, WTS operator begins manual discharge of batch tank to oil/water separator. From oil/water separator, sample is discharge to municipal sewer.

Keesee Decl. Ex. 3, at 6 (doc. 61-4).

Although defendants address their operations at length prior to 2013, they do not attempt to refute or distinguish NRC's evidence concerning the installation of tanks and treatment equipment at the Killingsworth Facility during 2014 and 2015.¹¹ In fact, Jonas acknowledged during his deposition that oil/water screens and pH processing chemicals were present and used at the Killingsworth Facility during WTS' operations. Pl.'s Ex. B, at 11-19 (doc. 61-5); Defs.' Reply to Am. Mot. Summ. J. 17-18 (doc. 72). Moreover, the APA included this treatment equipment as part of the sale and BES documented it onsite during an inspection that occurred on January 10, 2017, four days after the APA was executed.¹² Keesee Decl. ¶ 6 (doc. 61-1); Keesee Decl. Ex. 2, at 1, 53 (doc. 61-3); Pl.'s Ex. M (doc. 61-16). As such, there is no dispute defendants were both cleaning out and disposing of solids generated from pH treatments and oil/water separators at the Killingsworth Facility. According to BDS' express instructions, these acts required a CUP.¹³ Pl.'s Ex. F, at 1 (doc. 61-9); Nepom Decl. Ex. 1, at 5-6 (doc. 65-1); see also Nepom Decl. Ex. 28 (doc. 57-4) (BDS confirming in December 2013 “that the trigger for requiring a Conditional Use Review all depends on whether or not the material is receiving treatment at the site”).

11 There is also evidence that, in December 2016, defendants accepted “waste fire foam” from NRC directly at the Killingsworth. Keesee Decl. Ex. 1 (doc. 61-1). Jonas states he has “mixed ‘fire foam' - it is water mixed with ‘dishwashing type' soap [that] does not produce residual solid waste.” Jonas Decl. ¶ 4 (doc. 72-1). There is no other information in the record concerning the components of this substance.

12 NRC relied on the presence of this equipment in formulating its own “Waste Acceptance and Treatability Plan” for the Killingsworth Facility in January 2017. Nepom Decl. Ex. 16 (doc. 57-3); Nepom Decl. Ex. 17, at 40-41 (doc. 57-3); see also Nepom Decl. Ex. 31, at 83 (doc. 57-4) (BES denoting in July 2019 that, “[s]tructurally, NRC operating [the Killingsworth Facility] identically to the former WTS facility”).

13 Although there is some indication that, under the 2015 Permit, WTS was allowed to treat leachate “from landfills that accept non-RCPA solid waste” on a “case-by-case basis, ” as well as “certain wastewaters” containing no “screenable or readily settleable solids” provided “specific conditions were met, ” there is no evidence defendants' processing activities at the Killingsworth Facility during 2014 and 2015 were limited to organic wastewater or wastewater with no screenable solids, neither of which presumably would contain oil. See, e.g., Nepom Decl. Ex. 19, at 75 (doc. 57-3); see also Id. at 49, 79 (“oily wastewater is pretreated at WTS' site in Wilsonville” and “organic wastewater [typically] does not contain solids”). Given these gaps in the record, summary judgment is especially improper. See Anderson, 477 U.S. at 255 (summary judgment may be denied “in a case where there is reason to believe that the better course would be to proceed to a full trial”).

As NRC correctly notes, defendants “have not set forth any evidence that: (1) prior to installing the treatment system at Killingsworth, they notified Portland BDS they were adding this equipment; (2) they inquired whether this equipment would require conditional use review to lawfully operate; or (3) they filed a conditional use review application with the City of Portland.” Pl.'s Second Mot. Summ. J. 13 (doc. 61); see also Keesee Decl. ¶¶ 7-11 (doc. 61-1) (NRC was unaware of any information or directives from BDS limiting the Killingsworth Facility's operations solely to the discharge of pretreated wastewater).

The 2015 Permit did not relieve WTS from separately complying with BDS' requirements. Only BDS had the authority to permit the land use of the Killingsworth Facility through a conditional use review. As a result, the fact that BES periodically inspected the Killingsworth Facility and apparently deemed the additional treatment measures sufficient to allow discharge of the resulting wastewater into the Portland sanitary sewer does not resolve the question of whether a CUP was required. BES' own regulations make clear that its authority was limited to the city's sewer system. See, e.g., PC § 17.34.050(A); Keesee Decl. Ex. 1, at 28 (doc. 61-2).

Aside from the fact that BDS' rules and correspondences do not appear to provide an exemption for “de minimus” treatment activities or residual solid waste production, both parties' experts testified that oil is regulated as a solid waste. Pl.'s Ex. F, at 1 (doc. 61-9); Pl.'s Ex. C, at 23-24 (doc. 67-3); Glathar Dep. 134:6-25 (doc. 67-18); see also Keesee Decl. Ex. 1, at 30 (doc. 61-2) (2015 Permit defining “solid waste” as “[a]ny garbage, refuse, or sludge from a waste treatment plant, water supply treatment place, or air pollution control facility including solid, liquid, semisolid, or contained gaseous material resulting from industrial, commercial, mining, and agricultural operations, and from community activities”).

In any event, NRC's evidence creates the inference that WTS' treatment activities resulting in residual solid waste at the Killingsworth Facility were more significant. Compare Pl.'s Ex. B, at 13-14 (doc. 61-5) (Jonas testifying that the oil/water separators generated “[a] very small amount of oil” - i.e., “one teaspoon”); Hartley Decl. ¶¶ 4-5 (doc. 57-6) (no wastewater except leachate was processed at the Killingsworth Facility, “[t]he amount of settled materials at the bottom of the tanks was extremely minimal, ” and “[p]robably 99% or more of the waste water did not need any PH adjustment at Killingsworth”), with Keesee Decl. Ex. 3 (doc. 61-4) (2015 “Waste Acceptance and Treatability Plan” suggesting pH treatment and the corresponding use of oil/water separators was a regular part of WTS' business at the Killingsworth Facility); Pl.'s Ex. B, at 16-17 (doc. 61-5) (Jonas acknowledging BES' May 2015 inspection revealed “more than just a tiny bit of oil” that would have been vacuumed out by “an 80-barrel truck . . . and haul[ed] away” for disposal at Orrco); Keesee Decl. ¶ 6 (doc. 61-1); Keesee Decl. Ex. 2, at 1, 53 (doc. 61-3) (NRC was told by Hartley that residual solid waste was produced at the Killingsworth Facility); see also Pl.'s Ex. B, at 18-19 (doc. 61-5) (Jonas testifying that adjusting for pH caused solids to settle out, which then needed to be “suck[ed] out [of the tanks], put [in] a drop box, ” and then disposed of at “the right landfill”).

Because disputed issues of material fact exist concerning whether defendants engaged in treatment activities or generated residual solid waste at the Killingsworth Facility, both parties' motions should be denied.

C. Clutter Facility

NRC asserts that WTS' street sweeping, and stormwater pretreatment operations did not comply with ODEQ's or Washington County's rules and regulations concerning zoning and solid waste.¹⁴ Pl.'s First Mot. Summ. J. 9-23 (doc. 59); Pl.'s Resp. to Am. Mot. Summ. J. 10-19 (doc. 67).

14 NRC also argues that defendants altered existing buildings and constructed new buildings at the Clutter Facility, in further violation of Section 2.19 of the APA and Washington County's development requirements. Pl.'s First Mot. Summ. J. 12 (doc. 59). Jonas acknowledged that the WTS facilities “leased to NRC when they bought the business” were remodeled and added to, and defendants do not address or otherwise contest this aspect of NRC's motion in its briefs. Pl.'s Ex.

While defendants do not address their pretreatment activities in great detail, they otherwise maintain their street sweeping activities were “excluded from [ODEQ] regulation” in light of how the materials were ultimately being disposed. Defs.' Am. Mot. Summ. J. 8-12 (doc. 57). Defendants further contend “[O]DEQ does not regulate facilities on an absolute basis, so that if some material from Clutter had gone straight to Waste Management, it doesn't mean a solid waste permit would be needed.” Id. at 12. Alternatively, defendants rely on a number of defenses that purportedly rendered the Clutter Facility's operations legally compliant.

i. Regulatory Backdrop

Two agencies and three categories of regulations are potentially implicated by WTS' operations at the Clutter Facility.

a. Washington County

The CDC governs land use in Washington County and sets standards and requirements for “any person developing or using land or a structure” therein. CDC § 103. Significantly, “[l]and within the unincorporated portion of Washington County may be used . . . only as the Comprehensive Plan and this Code permit.” Id.

A development permit to alter a property's use or the use of a building or structure on the property is mandatory: “no person shall engage in or cause a development to occur, as defined in Section 106-57, without first obtaining a development permit through the procedures set forth in this Code.” CDC §§ 106-1.2, 201-1. Thus, any human-made change to real estate or its use, including changing the use of the land or a building, construction, or installation, first requires a development permit from Washington County. CDC §§ 106-57, 201-1.

B, at 5, 31 (doc. 59-5); see generally Defs.' Resp. to First Mot. Summ. J. (doc. 65). Defendants therefore failed to go beyond the pleadings and identify facts which show a genuine issue for trial, such that summary judgment is appropriate in regard to this issue.

Section 200 of the CDC sets forth the procedures for reviewing development proposals. CDC § 200. “The Director's or Hearings Officer's written approval shall be the Development Permit for any Type I, Type II, or Type III decisions.” CDC § 106-58. Type I development actions do not encompass discretionary land use decisions and apply to “permitted uses or development governed by clear and objective review criteria.” CDC §§ 202-1.1, 202-1.2. Type I development actions are decided by the Director “without public notice or hearing.” CDC § 202-1.3.

Type II development actions “are presumed to be appropriate in the District” and “generally involve uses or development for which review criteria are reasonably objective, requiring only limited discretion.” CDC § 202-2.1. Type II proposals are also decided by the Director and require a public notice and comment period for interested persons. CDC § 202-2.3.

“Type III actions involve development or uses which may be approved or denied, thus requiring the exercise of discretion and judgment when applying the development criteria contained in this Code or the applicable Community Plan.” CDC § 202-3.1. The CDC contemplates Type III actions may have significant impacts and complex development issues, and gives the Director authority to impose conditions on the use “to mitigate impacts or ensure compliance with this Code and the Comprehensive Plan.” Id. As a result, Type III actions “shall be decided by the Hearings Officer or Planning Commission after a Public Hearing.” CDC § 202-3.3.

In addition to development, the CDC separately regulates certain types of business activities, including “Solid Waste Transfer Stations.” A “Solid Waste Transfer Station” is defined as:

an enclosed building which serves as a receiving station for solid waste delivered by commercial garbage haulers and/or the general public. The transfer station is an interim storage and transfer point between the collection route and a disposal

site. A solid waste transfer station may provide for processing and recycling of solid waste.

CDC §§ 430-129, 430-129.1, 430-129.2, 430-129.3, 430-129.4, 430-129.5, 430-129.6. “Solid waste” means “waste that contains recoverable or recyclable materials, and materials that are not capable of being recycled or recovered for future use” and/or “useless or discarded material commonly disposed of by residential and non-residential generators after some level of source separation and recycling has occurred.”¹⁵ CDC §§ 106-195.1, 106-195.2, 106-195.3.

15 The Washington County Code of Ordinances (“WC”) contains analogous provisions. See WC § 8.20.020(M) (“solid waste” is “all putrescible and nonputrescible wastes, whether in solid or liquid form . . . and includes garbage, rubbish, ashes, sewage sludge, street refuse, industrial wastes, swill, demolition, and construction wastes”); WC § 8.20.020(E) (“liquid waste” is “waste oil, septic tank pumpings, liquid industrial wastes, and other similar materials”); see also WC § 8.20.010 (purpose of this code is “[t]o protect the health, safety, and welfare of the people of the county”).

In June 2016, the Washington County Department of Health and Human Services responded to an odor complaint relating to the Clutter Facility. Pl.'s Ex. O, at 5 (doc. 67-15). At the site, Washington County “detected an odor of what smelled like anaerobic rotting yard debris” on a portion of the property leased to a third-party landscaping company. Id. Washington County “advised [the] company [that it] could not bring waste materials . . . on to the property for composting without first obtaining permits from DEQ, METRO, and Washington County.” Id. It also separately informed Jonas that “composting as it was currently being done was not an allowed use of his property without first obtaining the appropriate permits.” Id. The complaint was closed in July 2016 following a subsequent site visit at which no yard debris or odor was observed. Id.

b. Oregon Department of Environmental Quality

The ODEQ is the chief environmental regulatory agency for the State of Oregon. Accordingly, the ODEQ also regulates solid waste transfer stations as “disposal sites, ” which are defined as:

land and facilities used for the disposal, handling or transfer of or energy recovery, material recovery, and recycling from solid wastes, including but not limited to dumps, landfills, sludge lagoons, sludge treatment facilities, disposal sites for septic tank pumping or cesspool cleaning service, transfer stations, energy recovery facilities, incinerators for solid waste delivered by the public or by a collection service, composting plants and land and facilities previously used for solid waste disposal at a land disposal site[.]

OAR § 340-090-0010(11). An ODEQ permit is required to operate “disposal sites.” Or. Rev. Stat. §§ 459.205, 459.245. And “solid waste” is defined as

all useless or discarded putrescible and nonputrescible materials, including but not limited to garbage, rubbish, refuse, ashes, paper and cardboard, sewage sludge, septic tank and cesspool pumpings or other sludge, useless or discarded commercial, industrial, demolition and construction materials, discarded or abandoned vehicles or parts thereof, discarded home and industrial appliances, manure, vegetable or animal solid and semisolid materials, dead animals and infectious waste.

Or. Rev. Stat. § 459.005(24).

ODEQ was unaware of WTS' existence until May 2016 when it received an inquiry from Multnomah County concerning whether Multnomah County needed an ODEQ permit to temporarily stockpile street sweepings. Pl.'s Ex. N, at 9-10 (doc. 67-14). Multnomah County included WTS as part of its inquiry because WTS “does the reuse.” Id. at 8; see also Jonas Decl. ¶ 9 (doc. 72-1) (“about once a year, WTS, as a transporter, was engaged by [Multnomah] County to transport the County's street sweepings to a landfill”). ODEQ asked Multnomah County to reach out to defendants to determine the confines of their operations and “if their facility needs a permit as well.” Pl.'s Ex. N, at 7 (doc. 67-14). Despite repeated requests for information, Jonas was completely unresponsive. Id. at 4-7. ODEQ indicated that it would perform a site visit at WTS' “facility in the next few months[, ] sooner” if possible, explaining “[u]nfortunately some of these companies fall through the cracks permit-wise.” Id. at 5-6.

In January 2017, approximately two weeks after the APA was executed, Multnomah County notified ODEQ that NRC had bought WTS. Nepom Decl. Ex. 2 (doc. 57-2). ODEQ responded that it would “reach out to NRC” and clarified Multnomah County would not need an ODEQ permit to send inorganic fines “to a mine reclamation location” if the tested street sweeping “levels are below the clean fill levels . . . But we would still need to figure something out for the organics portion as that would not meet the definition for clean fill.” Id. at 1-2.

In June 2018, ODEQ inspected the Clutter Facility to “follow up on an odor complaint as well as to determine if site activities required a DEQ solid waste permit.” Nepom Decl. Ex. 3 (doc. 57-2). ODEQ described NRC's activities as follows:

The wastewater treatment process is conducted inside a building. The process was not running during the site visit. According to NRC, they are updating the process. Wastewater accepted [consists] of catch basin liquids and solids from cleaning and maintenance of stormwater components. Solids generated from the process are disposed on at Hillsboro Landfill. Liquids are sent to NRC's facility on NE Killingsworth in Portland for additional treatment and discharge into the city of Portland's sewer system . . . DEQ observed a large pile of street sweeping debris onsite. DEQ also observed several smaller pules. According to NRC personnel, the pile is separated into an organics fractions from the larger debris. The larger debris is sent to Hillsboro Landfill for disposal.

Id. ODEQ informed NRC “that site activities would likely require a solid waste permit”:

These activities include the accumulation and separation of street sweeping debris as well as wastewater pretreatment. Wastewater pre-treatment activities that are covered under a separate wastewater treatment permit are not typically required to obtain a DEQ solid waste permit. However, the wastewater treatment activities conducted at this facility are not regulated under a wastewater pretreatment permit.

Id.; see also CDC §§ 430.127, 127.1 (ODEQ solid waste disposal sites allowed within Washington County). As such, ODEQ instructed NRC that both facets of operations at the Clutter Facility - i.e., “the accumulation and separation of street sweeping debris” and “wastewater pretreatment” - were subject to additional permitting requirements.

In August 2018, ODEQ issued a written notice to NRC apprising it that the Clutter Facility needed “a solid waste transfer station permit.” Nepom Decl. Ex. 8, at 18 (doc. 57-2); Nepom Decl. Ex. 11 (doc. 57-2). “[T]he site operations that require a permit are the street sweeping collection and segregation and the wastewater treatment (since the activity is not regulated under a pre-treatment permit to a POTW).”¹⁶ Nepom Decl. Ex. 11 (doc. 57-2).

16 A “POTW” is a “Publicly Owned Treatment Works, which includes any devices and systems, owned by a State or municipality, used in the collection, transportation, storage, treatment, recycling and reclamation of wastewater.” PC § 17.34.020(R).

In September 2018, ODEQ informed NRC that unprocessed street sweepings “are not considered clean fill” and “organics from street sweepings are not an approved compost feedstock” - i.e., they “would likely require a DEQ beneficial use determination or other approval, ” which was “unlikely [to be] granted” given the presence of “PAHs, pesticides, and other contaminants in street sweepings.” Nepom Decl. Ex. 5 (doc. 57-2).

In December 2018, ODEQ issued a Warning Letter to NRC for violating Or. Admin. R. 340-093-0050(1) “by operating an unpermitted solid waste disposal” site related to street sweepings “since 2017.” Nepom Decl. Ex. 8, at 18-19 (doc. 57-2); Nepom Decl. Ex. 13 (doc. 57-2); see also Nepom Decl. Ex. 20 (doc. 57-4) (NRC stating to ODEQ: “[a]s you are aware, it currently appears as if the [Clutter Facility] is not zoned properly to allow us to obtain a Solid Waste permit at the site”).

In June 2019, NRC entered into a Mutual Agreement and Final Order with Washington County, pursuant to which NRC agreed to pay a fine and “relocate [its] solid waste activities from the [Clutter] Facility to a new location that can be permitted by DEQ.”¹⁷ Nepom Decl. Ex. 8, at 19-22 (doc. 57-2).

17 NRC subsequently ceased operations entirely at the Clutter Facility. It retrofitted the Killingsworth Facility and resumed wastewater pretreatment activities therein with regulatory oversight. See, e.g., Nepom Decl. Ex. 38, at 41-46, 48-50, 52 (doc. 57-5); Nepom Decl. Exs. 4-5 (doc. 65-1). After viewing multiple properties, NRC was unable to find a suitable location from which to legally operate street sweeping operations, “clos[ing] this business line.” Nepom Decl. Ex. 8, at 40 (doc. 57-2).

ii. WTS' Street Sweeping Operations

As indicated above, defendants' street sweeping operations consisted of collecting street sweepings from customers using sweeping vehicles, unloading the collected street sweepings at the Clutter Facility, removing trash and recyclables from the street sweepings, loading the remaining organic and inorganic materials into drop boxes, leaving the drop boxes at the Clutter Facility from one to three days, and hauling the sweepings to other locations for disposal and/or further separation and reuse.

Jonas stated under penalty of perjury that WTS “tested the ‘fines' regularly, approximately two times per year, ” and to his knowledge, “all of WTS' tests of the fines met the standards for ‘clean fill.'” Jonas Decl. ¶ 4 (doc. 57-1). Jonas also testified that separating the organic from inorganic material “never occurred at the Clutter Facility” - rather, Jonas had “a set of portable screens” that he transported from location to location, although this type of screening usually took place at Dayton Ecology Composting. Id. at ¶¶ 4, 7. Although Jonas and Hartley did not attempt to quantify the amount of recyclable bottles and cans, they did estimate the amount of materials that “would be treated as garbage . . . was very small, and would only be a small fraction of 1% of the total street sweeping debris.” Id.; Hartley Decl. ¶ 5 (doc. 57-6). In other words, defendants maintain that its street sweeping operations did not need an ODEQ permit because the vast majority of the materials ultimately disposed of - i.e., fines and organic materials - were recyclable and therefore not “solid waste.”

Yet the uncontroverted evidence of record establishes that “material generated from the routine street sweeping activities for government entities” and brought to the Clutter Facility (and subsequently transported to other locations) was “solid waste.” Glathar Decl. ¶ 7 (doc. 67-19); see also Defs.' Am. Mot. Summ. J. 10 (doc. 57) (“street sweepings, when commingled, could be ‘solid waste'”).

In fact, ODEQ informed Jonas in September 2013:

street sweepings from cities who routinely collect the debris from streets and gutters and storm drains . . . is a solid waste and has no use in composting since it is mostly inorganic material (sand, gravel, dirt, litter . . .). This issue has come up over and over as far as street sweepers wanting to find some inexpensive way to dispose of a solid waste other than at the landfill.

Glathar Decl. Ex. 1 (doc. 67-19) (emphasis added). Accordingly, Jonas was instructed that he could not take street sweepings (except during leaf season) to Dayton Ecology Composting because “it is outside the scope of the compost permit.” Id. ODEQ reiterated “this is not a new issue, and there is a history as to why this material is regulated, ” and asked Jonas to apply for a Beneficial Use Determination “[i]f you choose to continue to accept this material.” Id.

Similarly, in February 2014, Jonas received an ODEQ notice related to Dayton Ecology Composting explicitly advising that street sweepings could not be held at an interim facility absent a Beneficial Use Determination:

On a previous inspection I noted that a pile of street sweepings was present on the site. WTS has contracts with various cities to conduct street sweeping. Approved feedstocks for composting can include leaves from street cleanup. It does NOT include dirt, gravel and other debris that is swept from catch basins, streets or parking lots during times of the year when leaf cleanup is not occurring. This material is a regulated solid waste that requires proper disposal at a permitted landfill or other approved site. Street sweepings are known to contain petroleum hydrocarbons, metals, litter and other pollutants. If the material is

to be used for any other purpose, a Beneficial Use Determination (BUD) would need to be completed by DEQ. This would require submittal of a BUD application to DEQ that characterizes the material through sampling and/or other means and includes the proposed end use of the material. This information would then be evaluated by DEQ staff.

I sent Bob several emails about street sweepings not being allowed at the site and also included this information in a previous inspection report.

This material cannot be brought to this or any other site for stockpiling or use (including as a base for the composting area) without some sort of plan and approval from DEQ.

During this inspection, the pile of sweepings remained on the site and Bob said that it had been screened to remove debris and was to be used between windrows to level the areas. This is a violation of solid waste rules as explained above. The material needs to be removed from the site and disposed of properly and no more material brought in without specific approval from DEQ.

Pl.'s Ex. D, at 4 (doc. 67-4) (emphasis added). ODEQ's report subsequently repeated that street sweepings “are not allowed to be used as a feedstock or for any other purpose on the site (including storage) without proper testing and a BUD issued by DEQ, ” and screening them to remove organics from inorganics is “a violation of the solid waste rules.” Id. at 5.

While Dayton Ecology Composting is neither a party to this lawsuit nor covered by the APA, these correspondences incontrovertibly establish that, at least as of 2014, defendants reasonably should have known non-leaf season street sweepings, whether stowed temporarily at the Clutter Facility or otherwise, were regulated as solid waste and subject to ODEQ oversight if not disposed of at a landfill (and irrespective of where the organic and inorganic materials ended up after separation). Cf. Pl.'s Ex. J (doc. 67-10) (ODEQ observing that “Jonas [is] cooperative when faced with enforcement but it does not seem to dissuade him from repeating similar actions, pursuing similar businesses and repeating similar violations at a variety of locations or even at some of the same locations”); see also Glathar Decl. ¶¶ 7, 10 (doc. 67-19) (a facility that moves street sweepings from a smaller vehicle to a larger “unit for transport to a final disposal location meets the definition of a transfer station [and] is subject to solid waste regulations”) (internal quotations omitted); Rich Decl. Ex. B, at 14 (doc. 72-3) (ODEQ “Clean Fill Determination Standards” specifying “clean fill that is mixed with solid waste is considered a solid waste”).

That ODEQ notified a third-party, after the APA was executed, that a permit was not required to send tested, qualifying inorganic fines to a mine reclamation location does not resolve the issue of what defendants had cause to believe prior to January 6, 2017, or whether the Clutter Facility complied with all “Environmental Laws” as of that date. Notably, the record establishes that defendants continued to temporarily store commingled street sweepings containing organics and inorganics at the Clutter Facility, and directly transport those materials to Dayton Ecology Composting until it was temporarily shut down in May 2016.¹⁸

18 In May 2016, ODEQ ordered Dayton Ecology Composting to “immediately cease accepting all feedstock types, ” including leaves from street sweepings. Pl.'s Ex. K (doc. 67-11). ODEQ did not authorize Dayton Ecology Composting to resume operations until August 2017. Pl.'s Ex. M (doc. 67-13). While defendants maintain they did not separate the organic from inorganic material at the Clutter Facility, defendants neglected to furnish any information concerning the other locations at which they engaged in these activities. See Defs.' Reply to Am. Mot. Summ. J. 9 (doc. 72) (merely denoting that “Jonas owned other properties, and the screen which WTS used to screen the material was a portable screen”).

It is equally undisputed that defendants engaged in some form of trash screening at the Clutter Facility, which resulted in landfill disposal. While defendants once again essentially claim a “de minimus” exception exists concerning these activities, the record suggests that the amount of disposable landfill material from the non-leaf season street sweepings surpassed the exceedingly small quantities endorsed by Jonas. See Nepom Decl. Ex. 37, at 29-32 (doc. 57-5) (Rich testifying that ODEQ does “not [regulate facilities] on an absolute pure basis . . . the question is, how far do you go before everything is a transfer station”).

Significantly, NRC has produced evidence that, in May 2014, defendants completed applications to dispose of street sweepings “processed through [a] trommel screen” at the Riverbend Landfill. Pl.'s Ex. E, at 3-4 (doc. 67-5). The proposed disposable materials were identified as sand, light gravel, pine needles, dirt, and trash (i.e., the inorganics from the sweepings) - with defendants specifying that “dirt and trash” comprised 25% of each load. Id. Waste Management classified these sweepings for “[d]isposal only” and identified the management method as direct landfill. Id.; Keesee Decl. Ex. 2 (doc. 67-1); Pl.'s Ex. F (doc. 67-5); see also Glathar Decl. ¶ 9 (doc. 67-19) (material that is disposed of by “direct landfill” is finally disposed of at the landfill and not “use[d] as alternate daily cover”). And defendants' own records show they discarded “street sweepings” under this Waste Management profile.¹⁹ Pl.'s Exs. G & H (doc. 67).

19 Defendants assert, for the first time in their reply, that some street sweeping materials did not go through the Clutter Facility and instead went directly to the Riverbend Landfill for disposal “since it wasn't worth the cost of transporting and handling the material.” Defs.' Reply to Am. Mot. Summ. J. 10 (doc. 72); Jonas Decl. ¶ 4 (doc. 72-1). As addressed herein, the record is equivocal concerning whether the Waste Management profile at issue was generated in reference to those activities, the Clutter Facility's activities, erroneously, or otherwise, especially in light of defendants' belated admission that a more significant portion of its non-leaf season street sweepings ended up at the landfill.

Although defendants assert that Waste Management committed “paperwork errors” by attributing WTS' wastewater pretreatment operations (which did involve a trommel screen and direct disposal at the landfill) to WTS' street sweeping operations, these documents are consistent with other portions of the record. Defs.' Reply to Am. Mot. Summ. J. 10 (doc. 72). Namely, a Metro inspection report from July 2016 reflects Hartley's comment that defendants screened street sweepings at the Clutter Facility and brought the screened material to “Riverbend Landfill for disposal.”²⁰ Pl.'s Ex. I, at 1-2 (doc. 67-9); but see Jonas Decl. ¶ 4 (doc. 72-1) (“WTS did not screen sweepings and send the material to landfill for disposal as waste”).

20 Metro ultimately determined that the Clutter Facility “is located outside of the Metro jurisdictional boundary and therefore is not subject to Metro's facility authorization requirements.” Pl.'s Ex. O, at 3 (doc. 67-15).

Even if, as defendants contend, Waste Management completed these forms in error, the extent of the inaccuracies is not clear. For instance, the inorganics listed for disposal clearly pertain to defendants' street sweeping operations, as opposed to its pretreatment activities. Consistent with these forms, ODEQ's 2013 correspondence to Jonas identified street sweeping as “mostly inorganic material (sand, gravel, dirt, [and] litter)” that is not recyclable or compostable. Glathar Decl. Ex. 1 (doc. 67-19). Moreover, the solids from WTS' pretreatment activities were disposed of under separate Waste Management profiles for de-watered sludge. Keesee Decl. Ex. 1, at 40-42 (doc. 59-2).

The record does not definitively demonstrate that defendants' street sweeping operations were exempted or excluded from ODEQ's oversight or BUD requirements.²¹ In particular, genuine disputes exist concerning the extent of WTS' processing/screening of street sweepings at the Clutter Facility, as well as the amount of material defendants disposed of at a landfill after the non-leaf season street sweepings left the Clutter Facility, thereby precluding summary judgment.

21 While NRC maintains defendants' street sweeping operations also fell within the CDC's definition of a Solid Waste Transfer Station, there is no evidence of any processing or separating of street sweepings occurring at the Clutter Facility within an enclosed building. In fact, NRC's briefing is wholly silent as to this requirement.

iii. WTS' Wastewater Pretreatment Operations

Based on defendants' own characterization of WTS' wastewater pretreatment activities, the Clutter Facility appears to qualify as a “Solid Waste Transfer Station” under the CDC and solid waste “disposal site” under Oregon law.

Indeed, defendants do not meaningfully brief this topic - rather, they tersely conclude, without any discussion of the law or evidence, that the Clutter Facility's operations “do not fall within the CDC definition of a Solid Waste Transfer Station” because “it is not A) a receiving station or B) receiving solid waste or C) (receiving) from commercial garbage haulers or D) (receiving from the general public, and E) (most of the 15 operations) are not in an enclosed building.” Defs.' Resp. to First Mot. Summ. J. 5 (doc. 65); see also Justice v. Rockwell Collins. Inc., 117 F.Supp.3d 1119, 1134 (D. Or. 2015), aff'd, 720 Fed.Appx. 365 (9th Cir. 2017) (“if a party fails to counter an argument that the opposing party makes in a motion, the court may treat that argument as conceded”) (citation and internal quotations and brackets omitted); Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1116 (9th Cir. 2003) (“conclusory allegations, unsupported by facts, are insufficient to survive a motion for summary judgment”). Defendants also broadly claim that they were “not handling ‘solid waste'” - incorporating by reference the arguments raised in their own summary judgment motion, which either address ODEQ's authority and WTS' street sweeping operations, or the 2015 Permit. Defs.' Resp. to First Mot. Summ. J. 5-8 (doc. 65) (citing Defs.' Am. Mot. Summ. J. 8-18 (doc. 57)).

Defendants' position is somewhat confounding given their own description of activities and the pretreatment facility itself. Jonas expressly acknowledged that commercial trucking comprised approximately 35% of WTS' business (with street sweepings/landscape debris and the “catch-basin cleanings” accounting for the remaining 30% and 35%, respectively). Pl.'s Ex. B, at 21, 27 (doc. 59-5). He also testified that these trucks brought wastewater directly into a building within the Clutter Facility, where it was unloaded and treated - specifically, the solid waste was separated from the liquid and subsequently transported to the landfill for disposal. Id. at 23-28. Given this description, there can be no sincere dispute concerning whether the solids from the oily wastewater pretreated at the Clutter Facility qualify as a useless or discarded material. In fact, the schematic for the Clutter Facility's pre-APA pretreatment operations diagrams a “Vacuum Truck w/Waste, ” a “Receiving Pit Where Truck Dumps, ” and various forms of screening equipment that separate out the “Solids [which] go to [a] dumpster for transport to landfill.” Pl.'s Ex. B, at 35 (doc. 59-5).

Therefore, the undisputed evidence establishes that the Clutter Facility was being operated as a Solid Waste Transfer Station under both the CDC and Oregon law. It is equally undisputed that, at the time NRC acquired defendants' operations on January 6, 2017, the Clutter Facility was zoned FD-20 by Washington County, meaning that a Solid Waste Transfer Station was not an allowed use. CDC §§ 308-1, 308-2, 308-3, 308-4, 308-5; Keesee Decl. ¶ 14 (doc. 59-1); see also Skinner Decl. ¶ 12 (doc. 59-9) (Washington County confirmed in 2018 that Jonas' property was not zoned for the Clutter Facility nor had it ever been properly permitted).²²

22 Defendants make much of the fact that there is no evidence Stormwater's pre-APA activities were the same as NRC's post-APA activities. Yet NRC's self-reported operations to Washington County match Jonas' description of Clutter Facility's pretreatment operations, as well as those documented in BES' pre-APA inspections. See, e.g., Keesee Decl. ¶ 11 (doc. 59-1); Pl.'s Ex. B, at 24 (doc. 59-5); Pl.'s Ex. C (doc. 59-6); Pl.'s Ex. D, at 13-14 (doc. 59-7).

In sum, even assuming WTS' street sweeping operations did not need an ODEQ permit, the fact remains that defendants' wastewater pretreatment operations, which comprised more than one-third of the overall assets covered by the APA, were not compliant with all applicable zoning and land use regulations. Accordingly, defendants materially breached Section 2.19. See Superior Plus, 2014 WL 2462549 at *7 (granting summary judgment in favor of the plaintiff for breach of the underlying APA where the defendant “fail[ed] to obtain advanced [governmental] approval”); see also New Windsor Volunteer Ambulance Corps, Inc. v. Meyers, 442 F.3d 101, 117 (2d Cir. 2006) (a breach is material if it goes to the root or essence of the agreement between the parties or touches on the fundamental purpose of the contract).

iv. WTS' Defenses

Defendants raise three primary defenses to their purported breach of Section 2.19: the 2015 Permit, their pre-existing use of the Clutter Facility prior to Washington County's re-zoning, and NRC's own material breaches of the Clutter Lease.

a. Pretreatment Operations Exempted by 2015 Permit

Defendants contend “the Clutter Pretreatment Facility was licensed as a POTW” under the 2015 Permit, such that it was “not subject to [ODEQ's] solid waste permit requirements.” Defs.' Am. Mot. Summ. J. 16-18 (doc. 57); Defs.' Reply to Am. Mot. Summ. J. 17 (doc. 72). Yet both WTS and NRC held industrial wastewater discharge permits from BES at all relevant times. BES therefore does not, and apparently cannot, prevent other agencies or regulatory bodies from imposing additional requirements on property or conduct that falls within their respective jurisdictions. In other words, while BES inspected the Clutter Facility and deemed the pretreatment processes contained therein sufficient to discharge the treated wastewater into the Portland sanitary sewer, BES explicitly lacked the authority to exempt the Clutter Facility from compliance with any other applicable local, state, or federal laws.

The 2015 Permit simply authorized WTS to discharge industrial wastewater to the City of Portland's sanitary system. It is difficult to see how one municipality's regulation of discharges into its own sanitary system could have bearing on the land use and zoning requirements for a property located outside of that municipality, in a different county. Even if the 2015 Permit exempted the Clutter Facility's wastewater pretreatment activities from ODEQ oversight, the same cannot be said in regard to Washington County (or, for that matter, WTS' street sweeping activities).

b. Pretreatment Operations Were “Grandfathered In”

Defendants assert the Clutter Facility was zoned for its operations under the MAE District when they began operating in 1994, such that their utilization of the property constituted a “permittable use” (even after the area was re-zoned FD-20 in approximately 2004) “until and unless notice of a claimed violation was given.” Defs.' Am. Mot. Summ. J. 19-20 (doc. 57); Defs.' Resp. to First Mot. Summ. J. 13-16 (doc. 65).

Initially, neither the CDC nor APA use the term “permittable use.” As set forth above, the CDC articulates uses that may be permitted through various procedures (i.e., Type I, II, or III). Via the APA, defendants did not represent that their operations could have been permitted; rather, they affirmatively warranted that their operations were, both in the past and as of the date of the APA, compliant with all “Environmental Laws” and any corresponding permitting requirements.

The CDC specifies that the purpose of the MAE District “is to provide land for farm and related uses needed to support the natural resource base and consistent with the rural character and level of services . . . For MAE uses, lands must have an approved water and sewage disposal system and adequate capacity to accommodate drainage runoff of development.” CDC § 356-1. Allowed land uses within the MAE District are subject to review by Washington County through its Type I, II, or III permitting procedures. CDC §§ 356-2, 356-3, 356-4. Specifically, a Solid Waste Transfer Station “may be permitted” if, amongst other requirements, it is approved through a Type III Procedure. CDC § 356-4; see also Nepom Decl. Ex. 6, at 25 (doc. 65-1) (Skinner testifying that the MAE District allows “waste-related uses as . . . a Type 3, or conditional use”).²³Any “uses of land not specifically authorized by Section 356” are categorized as “Prohibited Uses.” CDC § 356-5.

23 Defendants do not cite to a particular Type II use zoned within the MAE District that appears relevant to the Clutter Facility. See CDC § 356-3.1 (listing land uses that “are permitted” through “a Type II Procedure . . . subject to the specific standards” articulated). However, the same analysis would apply if defendants' pre-APA operations could be categorized as a preexisting MAE Type II use.

As such, Solid Waste Transfer Stations were not automatically allowed but rather could become permitted to operate lawfully within the MAE District, provided an application was submitted to and approved by Washington County after a public hearing. CDC § 430.129. By extension, for a Solid Waste Transfer Station to be “grandfathered in, ” it had to be lawfully established at the time of re-zoning. CDC §§ 430-127.2, 430-127.3. That is, “[a]ny Type II or III use, expansion of an existing use or change of use” that, in relevant part, was “on an existing lot” and “in compliance with all applicable” CDC standards “may be permitted” in a FD-20 District through a Type I Procedure. CDC §§ 308-2, 308-2.2, 430-129.

The CDC's permitting requirements cannot reasonably be read as anything other than mandatory. Stated differently, the fact that defendants' activities prior to the 2004 re-zoning may have been “permittable” does not categorically render that conduct “grandfathered in, ” or in compliance with all environmental laws. Had defendants complied with the CDC and obtained the necessary Type III permit to operate the Clutter Facility as a Solid Waste Transfer Station when the area was zoned MAE, they could have submitted a Type I Procedure review to continue using the facility once the area was re-zoned.²⁴ Even then, approval was not guaranteed. Yet there is no dispute that defendants never applied for any permits, outside of the 2015 Permit, related to the Clutter or Killingsworth Facilities. See, e.g., Pl.'s Ex. B, at 32-33 (doc. 59-5); Pl.'s Ex. E, at 4, 7 (doc. 59-8); Defs.' Resp. to First Mot. Summ. J. 15-16 (doc. 65); Nepom Decl. Ex. 6, at 21-22 (doc. 65-1).

24 Cox essentially confirmed these facts: because WTS' use of the Clutter Facility “was in existence” prior to the re-zoning and operating a Solid Waste Transfer Station” was “a permittable use” under the MAE District, “[a]ll they would have [needed to do was] submit . . . an application that they were operating at the time MAE was there [and] would then fall within the Type III process and go through that system for approval.” Nepom Decl. Ex. 39, at 73 (doc. 57-5).

c. Lack of Proof of Damages/Offset Under the Clutter Lease

Defendants argues that NRC made changes to its operations following the execution of the APA, such that any damages are the result of its own actions. Defs.' Resp. to First Mot. Summ. J. 18-20 (doc. 65). According to defendants, these operational changes also resulted in breaches of the Clutter Lease. Id. at 20-22; Defs.' Am. Mot. Summ. J. 33-35 (doc. 57).

As a preliminary matter, the Court finds that NRC has adequately articulated damages directly flowing from defendants' purported breaches of Section 2.19 of the APA. Further, defendants have not plead an indemnity claim under the Clutter Lease. While they raise this issue as an affirmative defense, allegations of indemnity are typically treated as an independent cause of action that must be pled and proved. See Defs.' Reply to Am. Mot. Summ. J. 27 (doc. 72) (Clutter Lease “claim [is] properly an Affirmative Defense under FRCP 8(c)(1)”); see also Fed. Deposit Ins. Corp. v. Scott, 125 F.3d 254, 259-60 (5th Cir 1997) (“indemnity is an independent claim, ” especially when used to enforce rights arising under a separate agreement) (collecting cases).²⁵

25 Defendants nevertheless argue that they mistakenly designated its Clutter Lease claim as an affirmative defense, such that it should now be construed as a counterclaim. Rule 8(c)(2) provides: “If a party mistakenly designates a defense as a counterclaim, or a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated.” Fed.R.Civ.P. 8(c)(2). The purpose of this rule is to “correct . . . technical pleading error[s].” Gallagher's NYC Steakhouse Franchising, Inc. v. N.Y. Steakhouse of Tampa, Inc., 2011 WL 6034481, *9 (S.D. N.Y. Dec. 5, 2011) (citation and internal quotations omitted). Here, defendants brought other counterclaims but did not elect, during the three-plus months between filing their Answer and moving for summary judgment, to seek amendment of those claims in order to add allegations related to the Clutter Lease. Further, the affirmative defense as alleged appears distinct from the indemnification claim defendants now seek to assert. See Answer ¶¶ 62-64 (doc. 19) (NRC's “change in operations” to the Clutter Facility caused its damages and was done without Jonas' consent under the Clutter Lease); see also Defs.' Reply to Am. Mot. Summ. J. 27 (doc. 72) (“WTS did not raise this claim to seek damages for the breach of lease unless NRC prevailed on its claims related to Clutter [Facility]”). In other words, the record suggests the designation of the Clutter Lease as an affirmative defense was a conscious choice, as opposed to a mistake, until NRC challenged it via these proceedings. See Travelers Cas. & Sur. Co. v. Dormitory Auth. State of N.Y., 735 F.Supp.2d 42, 82 (S.D. N.Y. 2010) (“summary judgment is not a procedural second chance to flesh out inadequate pleadings, ” such that “even if [the defendant] were to move for leave to amend its Counterclaims, the motion would now be denied” under Fed.R.Civ.P. 16) (citation and internal quotations omitted).

Regardless, any discussion of damages is premature given that no party seeks summary judgment as to that issue. See Superior Plus, 2014 WL 2462549 at *7 (where the plaintiff “has only moved for summary judgment on liability . . . the court need not determine the indemnification award”). The Court therefore declines to wade into the confines of the Clutter Lease and each parties' broad protestations of fault relating thereto.

RECOMMENDATION

For the foregoing reasons, defendants' Amended Motion for Summary Judgment (doc. 57) should be granted as to plaintiff's breach of contract claims under Sections 2.8 and 2.13 of the APA as they relate to the Clutter Facility, and as to plaintiff's negligent misrepresentation claim, and denied in all other respects. Plaintiff's first Motion for Summary Judgment (doc. 59) should be granted as to the Clutter Facility's unpermitted development and wastewater pretreatment operations, and denied as to the Clutter's Facility's street sweeping operations. Plaintiff's second Motion for Summary Judgment (doc. 61) should be denied. The parties' requests for oral argument are denied as unnecessary.

This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.