F is for Fraud – S is for Shame – and D is for Dupont

A federal District Court judge on Thursday ruled that 113 Pompton Lakes residents can not sue Dupont for poisoning their homes with toxic chemicals. As sought by Dupont, the judge dismised the federal court case and issued an injunction blocking a state court lawsuit that had been filed as well.

Jim O’Neill at the Bergen Record wrote the story today, see: Pompton Lakes residents barred from suing DuPont

Basically, the case was thrown out because the judge found that a 2004 Settlement Agreement of a prior lawsuit included a broad liability waiver. The judge found that residents had waived their right to sue for vapor intrusion, despite the fact that they were not aware that vapor intrusion was a problem.

How could residents knowingly waive liability for risks and damages they weren’t even aware of and when information about vapor intrusion may have been witheld from them?

The judge ignored case precedent that would allow residents to sue Dupont. The opinion noted:

In general, settlement agreements will be honored absent a demonstration of fraud or other compelling circumstances.

In our view, the fact that people were poisoned in their homes for decades by a major corporate polluter demonstrates pretty “compelling circumstances”. Furthermore, there are serious questions of possible fraud, particularly in light of the chronology of events, as outlined below.

Essentially, just months after the ink was dry on the liability waivers and immediately after the binding arbitration cases all ended in March 2007, the vapor intrusion problem in Pompton Lakes was suddenly “discovered”.

We are to believe this was mere coincidence. Right. 

If this decision is allowed to stand, it will provide economic incentives to polluters to withold information about toxic risks from regulators, courts, and the public. 

I just find the whole story extremely hard to believe – the timing alone stinks out loud.

Here’s a copy of the decision– so you can read it for yourself.

Follow the chronology of the case closely, in light of the facts that:

• In 1984, Congress passed landmark legislation to amend RCRA, creating the Corrective Action Program that mandates cleanups at RCRA facilities;
• Dupont is a RCRA facility and groundwater at the Dupont site was known to be polluted by volatile organic chemicals in 1988;
• Dupont was legally bound to investigate and cleanup massive soil and groundwater pollution at their Pompton Lakes site under a 1992 EPA RCRA Corrective Action permit and a 1988 Administrative Consent Order (ACO) with the NJ DEP;
• US EPA first adopted RCRA Corrective Action Vapor Intrusion Guidance in December 2001;
• The December 2001 EPA Guidance was updated and replaced by 2002 RCRA Vapor Intrusion Guidance
• A February 2002 DEP memo warned the NJ DEP Commissioner about risks from vapor intrusion and flaws in DEP regulation:

Indoor Air from Contaminated Groundwater

The issue is relatively new as it relates to vapors from dissolved constituent plumes entering homes at above chronic levels. This issue is not an isolated incident (Wall Township) and has become an issue across the country. As more cases of this type surface it may cause the protectiveness of sites with natural attenuation remedies and the protectiveness of the groundwater quality standards to be re-evaluated.

• Based on this 2002 warning, NJ DEP adopted its own Vapor Intrusion Guidance in 2003 and updated it in 2005

The objective of the 2002 EPA RCRA Vapor Intrusion Guidance was:

The draft guidance (Evaluating the Vapor Intrusion to Indoor Air Pathway From Groundwater and Soils) examines a single exposure pathway–the “vapor intrusion pathway.” It is intended to be a screening tool to aid users in determining whether a vapor intrusion pathway is complete and, if so, whether the completed pathway poses an unacceptable risk to human health. A complete pathway means that humans are exposed to vapors originating from site contamination.

Vapor intrusion is no new discovery – the fundamental physics and chemistry are 100 years old.

By the mid 1980’s, the chemical industry fully understood the nature and magnitude of the legal liability, risks to human health, and huge cleanup costs associated with vapor intrusion, as well as the implications of EPA RCRA Corrective Action cleanup requirements.

To reduce these huge cleanup costs and legal liabilities the chemical industry adopted a strategy to attack EPA RCRA regulations.

The industry strategy was adoted in 1988 and known as “The RCRA Corrective Action Project“. Dupont was a promient player in that project.

Here’s an industry document we obtained that lays out this strategy behind “The RCRA Corrective Action Project”:

The RCRA Corrective Action Project was established in 1988 by a group of concerned Fortune 50 companies in the wake of EPA’s earliest draft corrective action regulatory proposals. Current Project members include BP, Chevron, Dow Chemical, E.I. duPont de Nemours & Co., Inc., General Electric Company, General Motors Corporation, Sunoco Inc., U.S. Steel, United Technologies Corporation, and Waste Management, Inc.

The RCRA Corrective Action Project has two main purposes. One is to advocate cleanup standards and procedures that achieve environmental benefits in a risk-based and cost-effective manner. The second is to provide unique opportunities to stay informed on critical issues and strategies through informed discussions with each other and with senior EPA and state leadership and staff, as well as through special presentations at Project meetings.

Project Goals

Throughout the 1980s and mid-1990s, both public debate and governmental action were dominated by the Superfund program. Many companies have calculated, however, that their prospective costs and liabilities for remediation of contaminated sites will be far greater under RCRA than under Superfund. Actual cleanup activity moved more slowly under RCRA, which allowed government staff to become committed to a number of policies and practices that are detailed, rigid, and unrealistic. This created critical needs for regulatory officials and industry representatives to work together constructively to make adjustments so that RCRA corrective action will be flexible, practical, and achievable. RCAP has played a major role in meeting that need.

So, in light of all this history, are we now to believe that Dupont knew absolutely nothing about vapor intrusion in Pompton Lakes until 2008?

Are we to believe that scientists and lawyers at one of the world’s largest and most sophisticated chemical companies did not know until 2008 that vapor intrusion resulted or would would result from the plume?

If Dupont’s lawyers and scientists did NOT consider the RCRA compliance obligations and the contingent liability associated with VI, then they were incompetent. If they did, then they are liars for failing to disclose that information.

And aside from EPA RCRA regulatory requirements, if Dupont scientists and lawyers ignored or were unaware of vapor intrusion risks, then they failed to honor their fiduciary duty to shareholders and comply with SEC full disclosure obligations (SEC requires disclosure of contingent liability).

So, in light of this chronology, let’s now consider applying the elements of fraud.

The elements of a cause of action for fraud are: (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.

Homework for the legal eagles out there:

1) During this tortuous 25 year cleanup and litigation saga, are we to believe that Dupont never made any representations – or withheld materially relevant facts – about vapor intrusion?

2) That no false or misleading representations were made, including omission of facts?

3) that Dupont lawyers and scientists always told the truth, the whole truth, and nothing but the truth about what they knew about vapor intrusion?

4) that Dupont didn’t have  a huge economic stake in disclosing vapor intrusion information to regulators and the public?

That Dupont had no interest in having the plaintiffs agree to a liability release that was broad enough to apply to vapor intrusion, and thus  an incentive and motive to mislead and have people to act in reliance on incomplete or false information about vapor intrusion risks?

That there’s not one written document in Dupont files about any of this that could emerge during discovery?

5) that regulators, the public, and plaintiffs acted in reliance on information provided by Dupont?

6) that no harm occured?

Food for thought – and appeal and criminal investigation, in our view.