Court ruling opens door for county to pursue old-landfill companies

ORIGINALLY WRITTEN JERRY ENGLER
A 29-page Kansas Supreme Court decision regarding responsibility for the closure of the old county landfill southwest of Marion was hand delivered to the Marion County Commission Monday by Topeka attorneys representing the county in solid waste matters.

The attorneys, Jim Kaup and Steve Pigg, met with commissioners twice through the regular business session for a total of 50 minutes.

The decision, released Friday, both reverses and remands for further consideration a case first awarded to the plaintiff, he Kansas Department of Health and Environment, in district court. That ruling placed total responsibility for the closing-estimated to cost more than $600,000-on the Marion County Board of Commissioners.

The Supreme Court’s decision at first could appear to go against the county because it assigns liability to it as guarantor for closure and post-closure requirements at the landfill.

But the Court said it also held that the county doesn’t have title to the waste at the landfill site, and the county is not liable for any nuisance at the landfill.

Of further importance were two holdings of the court that said the district court erred in judgments that apparently allowed companies involved to escape claims by the county against them.

Those companies included Marion County Landfill Inc., whose stockholders are members of the Grosse family, relatives of Tom Grosse who began the landfill operation, and MSW Inc., operated by Russell Mills of Derby, the attorney for MCLI.

The Court said MSW “is a creature” of Mills.

The Court said, “While we do not definitively decide the issue of whether the transfer by MCLI to the west 80 acres to MSW was a fraudulent transfer, the record on appeal suggests that the district court should have permitted the county to pursue its claims against MSW.”

An earlier court review notes this 80 acres as part of an original 160 acres held in the landfill that, as real estate with value, should have been part of the financial guaranty held by MCLI for the county to insure closure and post-closure costs.

Pigg said the Court review and directives practically tells the county who to go after for financial guarantee on the landfill.

“And we will,” he said.

One county official who preferred not to be identified said the Court’s outline of the case shows the county commission has not been “the villain” some people made it out to be.

In its consideration of potential fraud, the Court said at the time of transfer of the 80 acres, Mills was aware of a KDHE order to MCLI to complete closure of the landfill, and that MCLI was “substantially insolvent,” with assets of $1,061-a reason KDHE said it was going after the county as the responsible solvent party.

The Court further stated, “The sale of real estate appeared to be part of a scheme to deplete assets of MCLI through the land transfers in addition to distributions to shareholders. The record suggests the consideration (payment for the real estate) was past legal fees generated by Mills-a question of fact upon remand. Finally, the transfers between MCLI and the MCLI shareholders and MSW appear to be unusual transactions…. (T)he record on appeal suggests that the district court should have permitted the county to pursue its claims against MSW.”

On remand, the Kansas Supreme Court said the district court should consider that “the record in this case overwhelmingly supports the finding that the use of the corporate entity promoted injustice or fraud. The county made its most persuasive argument with respect to this last factor, the Court noted.

“In this factually difficult, convoluted case, it appeared transactions were made with the result that the county was faced, not as the party primarily responsible, but as guarantor…. The county made a credible case that the MCLI veil should be pierced.

“MCLI shareholders admitted that they knew of the liabilities that MCLI was facing with the closure and post-closure costs. Nevertheless, the corporation continued to make distributions throughout 1996.

“MCLI distributed $14,000 to shareholders in 1995 and $70,000 to shareholders in 1996. To a certain extent, these distributions are traceable to the sale of part of the west 80 acres to MSW. Without the transfer, this property would have been available to MCLI to complete its closure and post-closure obligations.”

The Court said the original KDHE permit in 1976 for the landfill covered 160 acres, with Tom Grosse owning the west 80 acres which came to include 30 acres, with the actual landfill cells, and his nephew, Jack Grosse, owning the east 80 acres.

MCLI, with its shareholders descendants of Tom Grosse, the Court said, operated the landfill until October 1996, after which it transferred the west 80 acres with the exception of the 30 acres with the cells, to MSW.

The Court said Jack Grosse transferred the east 80 acres to the heirs of Tom Grosse, who subsequently transferred them to MSW.

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