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U.S. Court of Appeals Panel Unanimously Affirmed Court’s Summary Judgment
The United States Court of Appeals for the Fifth Circuit in New Orleans has affirmed the grant of summary judgment by the United States District Court for the Southern District of Texas in our clients’ favor in Pamela Gale Johnson, Chapter 7 Trustee of the Estate of Stoller Chemical Co., Debtor, Plaintiff v. Southwire Company, Gaston Copper Recycling Corp., Bruce E. Betterton, Hy-Tex Marketing, Inc. Arthur G. Heinel, and Robert D. Weaver, Civil Action No. H-94-3074 (June 16, 2000), aff’d (Pamela Gale Johnson (Trustee of Stoller Bankruptcy Estate) v. Gaston Copper Recycling Corporation, Southwire Company, and Bruce E. Betterton, et al., Fifth Cir. No. 00-20655, Dec. 3, 2001). The Bankruptcy Trustee, as plaintiff, had claimed that the cause of Stoller Chemical’s bankruptcy was the failure of Gaston Copper Recycling Corporation to “manifest” (as required by environmental laws and regulations) shipments in September/October 1991 of “baghouse dust” containing not only high quantities of zinc, but also substantial quantities of lead, and other waste, from the GCRC plant in Gaston, South Carolina to Stoller Chemical Company’s fertilizer manufacturing plant in Jericho, South Carolina.
GCRC, Southwire and Betterton pled guilty to certain environmental misdemeanor charges, as the material (in view of its lead, and other waste content) should have been accompanied by a manifest identifying the shipments as hazardous waste. Defendants had believed the shipments did not require such label, based on an exemption for “reclamation.” (Stoller had a large contract to ship zinc micronutrient fertilizer to Bangladesh, for which it wanted the baghouse dust.) The court found Stoller’s processes did not amount to reclamation and Stoller’s manager pleaded guilty to environmental felonies, including a felony charge based on Stoller’s acceptance unmanifested hazardous waste. The Trustee sought to hold the defendants liable for Stoller’s bankruptcy on the theory that publicity resulting from the execution of a search warrant at the Stoller facility and the search for evidence of environmental wrongdoing by Stoller triggered a series of events for Stoller, including negative publicity, loss of customers, loss of suppliers, and an adverse OSHA investigation resulting in substantial penalties, all leading to the inability of Stoller to continue operating, and filing for protection under the bankruptcy laws. After the trial court had thrown out most of the theories relied upon by the Trustee, and following discovery, which showed, in fact, that Stoller’s claims were without support, the trial court ruled that in accepting the unmanifested baghouse dust from GCRC, Stoller was in pari delicto (i.e., equally guilty) with GCRC because Stoller knew, or should have known, that the baghouse dust should have been manifested as hazardous waste. The United States Court of Appeals three-judge panel unanimously affirmed the trial court’s Summary Judgment.
SGR lawyers working on the case included litigation partners James Bratton and Tom Barton.