DNREC Inspections After the Commencement of Litigation: The Non Sequitur With Delaware Superior Court Civil Rule Regarding Discovery

May 26, 2013
by Stephanie L. Hansen

A case recently decided by the Delaware Superior Court makes it clear that the rules applying to discovery in civil lawsuits among private parties do not translate well in a case between a private party and DNREC. In DNREC v. Mike Davidson Enterprises (2013 Del. Super. LEXIS 116), the Defendant was operating a construction and demolition waste recycling facility under a DNREC Resource Recovery Facility Permit. Under one of the terms of the permit, DNREC reserved its right to enter and inspect the Defendant's facility at any time to ensure compliance with the terms of permit (a standard clause in most, if not all, DNREC permits). So, DNREC inspected the facility - a lot. Between January 2010 and May 2012, there were 14 compliance inspections. It is likely (although not stated in the case) that the number of compliance inspections was related to the continuing violations discovered by DNREC.

After the second compliance inspection, DNREC issued a Notice of Violation to the Defendant requiring the Defendant to come into compliance within 30 days. The 30 days (plus one extension) passed and DNREC determined that the Defendant was still not in compliance. So, DNREC began the march of twelve more inspections over the next two years, sampling of the waste and materials generated by the Defendant, and ultimately an Order to Cease and Desist in June 2012 when DNREC's analyses revealed the mulch being sold by the Defendant had levels of arsenic, chromium and PCBs higher than allowable under its permit.

The Defendant appealed the Cease and Desist Order to the Environmental Appeals Board ("EAB"), but while the matter was pending before the EAB, DNREC filed a 23-count civil complaint against the Defendant alleging numerous solid waste violations under the Delaware Code and the solid waste regulations. In response, the Defendant tried a novel approach and filed a motion for a protective order to, among other things, (1) enjoin DNREC from further inspections unless conducted under Rule 26 of the Delaware Rules of Civil Procedure ("Rule 26"); (2) protect under seal the identity of the Defendants customers and business relations; (3) prohibit DNREC from publishing its sampling analyses; and (4) enjoin DNREC from publishing or releasing any data or findings regarding the compliance status of the Defendant until after the litigation had been concluded.

Under Rule 26, the court can curtail discovery in a variety of ways (for instance, how it can be conducted, what is allowed to be inquired about, whether it can occur at all, etc.), the purpose being to prohibit improper discovery and restrict the use of information that a party obtains by virtue of the discovery process. On its face, it sounds like an avenue that might be availing to the Defendant, but .... not so fast. The Court found that "routine inspections of Defendant's facility, conducted pursuant to DNREC's express authority, do not implicate Rule 26 merely because litigation has commenced." Additionally, the Court found that Rule 26 "does not authorize the Court to enjoin DNREC from communicating with Defendant's customers or client base. DNREC is mandated by statute to notify the public of the release or imminent threat of a release of a hazardous substance such as arsenic" and DNREC's sampling indeed found arsenic and other hazardous substances present in the mulch generated by the Defendant. Therefore, concluded the Court, DNREC has a legal duty to inform the public and the Defendant's customers of the contamination it found and that "commencement of this litigation does not relieve DNREC of its obligation to protect public health and safety." So much for the arguments to protect under seal the identity of the Defendants customers and business relations, prohibit DNREC from publishing its sampling analyses, and enjoin DNREC from publishing or releasing any data or findings regarding the compliance status of the Defendant until after the litigation had been concluded.

So, an important point to note for attorneys representing regulated entities, DNREC is a public entity with its own requirements for disclosure under Delaware law. As a result of those disclosure requirements and the broad authority given to DNREC under the individual permit issued to the particular regulated entity, DNREC is not necessarily bound by the Delaware Rules of Civil Procedure regarding discovery.