Citizen's group or disguised competitor?

WASHINGTON--(BUSINESS WIRE)--Sept. 18, 1996--In 1995, in a highly unusual lawsuit, Home Depot alleged that Rickel Home Centers, a closely held competitor based in South Plainfield, N.J., used smear tactics by CREATING A CITIZENS' FRONT GROUP in a concerted effort to block Home Depot from opening stores.

It appears that this same strategy has been used again, this time by competitors of KEYSTONE CEMENT in Bath, Pa., but with a new twist. These straw-man citizens' groups are now filing lawsuits as part of some corporations competitive strategy in the battle for marketshare.

KEYSTONE CEMENT has reached an agreement with the PENNSYLVANIA ENVIRONMENTAL ENFORCEMENT PROJECT INC. ("PEEP"), to dismiss litigation involving the resource recovery activities of its operations in Bath.

PEEP had sought to enjoin the company from utilizing hazardous waste as a fuel supplement in its cement operation, asserting that the permitted process presented an "imminent and substantial endangerment" to human health and the environment.

Although the terms of the settlement are confidential, Keystone will not have to change any of its production methods or cement kiln dust management practices as a result of the settlement. Moreover, PEEP is barred by court order from again raising the claims brought in its complaint.

In a hearing on May 24, 1996, counsel for PEEP claimed that "the site represents and imminent and substantial endangerment to public health and the environment" and that the testimony of their experts would convince the judge of that.

Despite PEEP's early claims that it had evidence of "imminent and substantial" endangerment from Keystone's operations, the settlement ended a flurry of pleadings in which PEEP first sought an indefinite delay of the preliminary injunction hearing that it asked for, then sought to withdraw its preliminary injunction motion altogether.

The settlement came two days after Keystone's counsel asked Judge Van Antwerpen to impose sanctions against PEEP for insisting on a hearing, then attempting to withdraw its motion after months of discovery, and hours after United States Magistrate Judge Arnold Rapoport denied PEEP's request to stay his order that PEEP supply the results of tests performed by its consulting experts to Keystone.

After PEEP withdrew its preliminary injunction motion, Company President Gary Pechota said that he was not surprised. "Keystone has maintained all along that this is a safe operation and that these allegations are without merit."

Keystone has maintained in the past that this lawsuit was an attempt to use the court system to accomplish what the plaintiffs were not been able to accomplish regulatorily. WHILE PEEP STYLED ITS ACTION AS A "CITIZEN SUIT," KEYSTONE STATED THAT THE LAWSUIT WAS NOT ABOUT THE HEALTH AND SAFETY OF CITIZENS, BUT INSTEAD CONCERNED ECONOMICS AND MARKETSHARE IN THE RESOURCE RECOVERY INDUSTRY.

From the start, Keystone maintained that CERTAIN COMMERCIAL INCINERATORS WERE FUNDING THE LITIGATION. Cement kilns like Keystone compete with commercial incinerators for hazardous waste fuels. In deposition testimony, one PEEP member admitted that PEEP denied membership to individuals who opposed all commercial incineration of hazardous waste.

Keystone was represented in this matter by Christopher Marraro, Eberhard "Chip" Pfaller and Gilbert Keteltas of Howrey & Simon.

Marraro attributes the settlement and dismissal of PEEP's claims to a tailored discovery strategy keyed to PEEP's assertions that it had evidence to support its claims of imminent and substantial endangerment.

"From the start, PEEP implied that it already had evidence to support its allegations of endangerment to human health and environment. PEEP's request for injunctive relief opened the door to an aggressive discovery program to make PEEP show its hand on these allegations," Marraro said.

This strategy paid off when Magistrate Judge Rapoport ordered PEEP, over PEEP's objections, to release the results of tests performed by PEEP's non-testifying consulting experts. Keystone's early discovery revealed that PEEP had conducted human health and environmental sampling involving its members and their homes, but did not provide the results of that sampling to its members.

Keystone pursued this data and PEEP opposed its production on the basis that the tests at issue were performed by non-testifying consulting experts and were, therefore, immune from production. Judge Rapoport rejected PEEP's request to withhold these test results from Keystone.

After receiving the disputed test results, Keystone issued a statement that "it is now clear that those sample results do not support PEEP's claims." In addition to these tests, PEEP's experts conduct a two-day site sampling inspection and took nearly 100 samples of the cement kiln dust, soil and water at the facility.

After reviewing those results, Keystone concluded that "the results of the tests conducted by PEEP's own laboratory all are favorable to Keystone."

CONTACT: Howrey & Simon

Christopher Marraro, Esq., 202/383-6749

or

Jaffe Associates

Richard Levick, 301/530-2753