White Lion Holdings, LLC v. State ( 2015 )

ACCEPTED
01-14-00104-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
5/26/2015 8:21:49 PM
CHRISTOPHER PRINE
CLERK
IN THE COURT OF APPEALS
FIRST DISTRICT OF TEXAS AT HOUSTON
___________________________________________________________
FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS
NO. 01-14-00104-CV 5/26/2015 8:21:49 PM
CHRISTOPHER A. PRINE
___________________________________________________________
Clerk
WHITE LION HOLDINGS, L.L.C.
Appellant
vs.
THE STATE OF TEXAS
Appellee
___________________________________________________________
On Appeal from
th
The 98 District Court of Travis County, Texas
Trial Court No. D-1-GV-06-000627 and D-1-GV-13-001068
___________________________________________________________
APPELLANT’S APPENDIX (Part 3) TO
MOTION TO SUPPLEMENT THE RECORD;
MOTION FOR REHEARING AND
MOTION FOR RECONSIDERATION EN BANC
Jacqueline Lucci Smith Joan Lucci Bain
TBA #: 00786073 TBA #: 01548020
LUCCI SMITH LAW PLLC BAIN & BAIN PLLC
10575 Katy Freeway, Suite 470 10575 Katy Freeway, Suite 405
Houston, Texas 77024 Houston, Texas 77024
Tel.: 832-494-1700 Tel.: 713-629-6222
Fax: Fax: 713-629-6226
Email: JLS@LucciSmithLaw.com JBain@BainandBainlaw.net
Part 1
Appendix 1: State of Texas Motion for Summary Judgment
against Bernard Morello in Cause No. D-1-GV-06-000627 in
the 353rd District Court of Travis County, Texas.
Part 2
Appendix 2: Morello’s Response to Motion for Summary
Judgment with Exhibits A-K in Cause No. D-1-GV-06-000627
in the 353rd District Court of Travis County, Texas.
Appendix 3: Order Granting Final Summary Judgment
against Morello in Cause No. D-1-GV-06-000627 in the 353rd
District Court of Travis County, Texas.
Part 3
Appendix 4: Morello’s Motion for New Trial with Exhibits
A-K in Cause No. D-1-GV-06-000627 in the 353rd District
Court of Travis County, Texas.
Appendix 4: Morello’s Motion for New Trial with Exhibits A-K
in Cause No. D-1-GV-06-000627 in the 353rd District Court of
Travis County, Texas.
CAUSE NO. D-1-GV-06-000627
STATE OF TEXAS; § IN THE DISTRICT COURT
PLAINTIFF §
§
V. § OF TRAVIS COUNTY, TEXAS
§
BERNARD MORELLO, §
DEFENDANT § 353RD JUDICIAL DISTRICT
DEFENDANT’S MOTION FOR NEW TRIAL
Pursuant to Texas Rule of Civil Procedure 329(b), Defendant files this, his Motion for
New Trial, and shows the following:
I. BACKGROUND
A. THE HISTORY OF THE PROPERTY
This case is a statutory enforcement action originally filed jointly against Defendants
White Lion Holdings, LLC (“White Lion”) and Bernard Morello (“Morello”) for violations of
Texas Water Code section 7.101 relating to property located at 2010 Spur 529 in Rosenberg,
Texas (“Property”). The Property was purchased out of bankruptcy by White Lion. The
Property was originally owned by Vision Metals, Inc. (“Vision”). While the Property was
owned by Vision, it became contaminated and, on January 12, 1988, Vision received a permit
from the Texas Commission on Environmental Quality (“TCEQ”) for an Industrial Waste
Management Site (Permit No. HW-50129-001). A Compliance Plan (CP-50129) was issued on
the same day to address the monitoring and cleanup of the contaminated groundwater at the
Property.
Vision subsequently entered into modifications of the Compliance Plan (on March 15,
1995 and November 16, 1999) before filing for bankruptcy in 2000. (Ex. B.) For the three
years prior to the bankruptcy, Vision was wholly noncompliant with its permit and the
Compliance Plan. (Ex. A at 105:10-14.)
1
Morello does not own the Property nor has he agreed in his individual capacity to be
responsible for the prior owner’s contamination of the property or its clean up. Rather, White
Lion is the sole owner of the Property and improvements and Morello’s only connection to the
Property is as the sole member of the LLC.
B. MORELLO SUBSEQUENTLY OBTAINS THE PURCHASE RIGHTS FOR THE
PROPERTY AND TRANSFERS SAME TO WHITE LION; WHITE LION PURCHASES
THE PROPERTY IN APRIL 2004
On February 27, 2004, after successfully bidding on the Property at a bankruptcy
auction, Morello entered into a contract to purchase the Property (hereinafter referred to as the
“Purchase Agreement”). (Exhibit C.) On April 5, 2004, Morello assigned any and all of his
rights in the Purchase Agreement to White Lion. (Ex. D.) Closing on the sale of the Property
occurred on April 6, 2004 between Vision and White Lion, with Vision conveying the property
directly to White Lion via Special Warranty Deed recorded under Fort Bend County Clerk
document number 2004042731. (Ex. E.) Therefore, Morello was never the owner of the
Property, and White Lion is the only owner of the Property after Vision.
C. WHITE LION SUBSEQUENTLY TAKES TRANSFER OF THE COMPLIANCE PLAN
AND ITS OBLIGATIONS FROM VISION
As mentioned supra, the Property was subject to a Compliance Plan (CP-50129) dating
back to 1988 for contamination caused by Vision. Effective June 23, 2004, Plaintiff transferred
CP-50129 and its rights and obligations from Vision to White Lion. (Ex. A at 32:11-17.)
Moreover, and as part of the Purchase Agreement, the financial assurance provided to the TCEQ
by Vision under CP-50129 was included in the purchase and assigned to White Lion. (Ex. A at
35:11-13.) The facts, therefore, clearly show that title to the Property transferred directly to
White Lion from Vision and that White Lion, not Morello, was substituted as the sole obligor
under the compliance plan.
2
D. AFTER WHITE LION’S PURCHASE OF THE PROPERTY, MUCH OF THE
INFRASTRUCTURE RELATED TO CP-50129 WAS REMOVED OR DESTROYED BY
THIRD PARTIES
The Purchase Agreement in bankruptcy specifically excluded personal property, such as
pipe manufacturing machinery and other items. (Ex. A at 21-22.) This personal property was
sold separately in the bankruptcy auction. (Id.) Accordingly, White Lion was required to allow
thirty-eight independent, additional buyers of the personal property on site, to remove the
personalty they had purchased. (Id. at 51:15-17.) Many of these buyers and their contractors
caused major damage to the Property, particularly the electrical, water, air, and gas systems. (Id.
at 107:13-21.) Although White Lion closely monitored the removal process and attempted to
protect the Property as much as possible, (Id. at 56-57), extensive damage was done to the
utilities and infrastructure:
The Corrective Action System, the system itself, the functioning -- these are just
fixtures here. This is just a pipe that runs into the ground. All the internet work
that runs it is all gone. It was damaged at the time that the buyers were there. The
equipment was gone. The pipes were cut. Electricity was cut. I've already went
over all that. It was destroyed.
(Id. at 107:13-21.) Following the conclusion of the removal process, the Property resembled a
“war zone.” (Id. at 51:24-25.)
E. GIVEN THE SCOPE AND COST OF REPAIRS, WHITE LION WAS UNABLE COMPLY
WITH THE REMEDIAL ELEMENTS OF CP-50129 OR POST PROOF OF FINANCIAL
ASSURANCE
With repair estimates at over $1 million (id. at 53:18-21), White Lion did not have the
financial ability to replace the utilities and remediation system that were destroyed by the
personal property buyers, much less the additional funds to continue with the Compliance Plan.
(Id. at 25-26, 48-49, 51-52, 55, 65-67, 70, 79-81, 93-94, 99-101, 103, and 107-108.) Moreover,
White Lion was unable to afford the premium for financial assurance required under the Texas
3
Administrate Code. (Id. at 40:14-18.) Given that the damage to the remediation infrastructure
was beyond White Lion’s control and could not have been prevented by its due diligence,
substantial compliance with C-50129 and the financial assurance requirement was impossible.
F. PLAINTIFF FILES SUIT AGAINST WHITE LION AND SUBSEQUENTLY ADDS
MORELLO IN HIS INDIVIDUAL CAPACITY
Plaintiff filed suit against White Lion on April 14, 2006, seeking injunctive relief and
statutory penalties related to White Lion’s failure to comply with CP-50129 and the related
financial assurance requirements. On January 22, 2007, Plaintiff joined Morello in his individual
capacity. On August 23, 2013, the State obtained an interlocutory summary judgment against
White Lion. As part of the Motion for Summary Judgment, the State asked the Court to sever
White Lion as a party, thereby converting the interlocutory judgment into a final one. The
Plaintiff waited until after that case was fully briefed and submitted on appeal, to seek a second
summary judgment against Morello in his individual capacity for the same conduct. This Court
granted said motion and entered a final summary judgment on April 14, 2015. It is now apparent
that the State used an improper severance to lay a trap for this Court to enter a separate judgment
against Morello in order to secure a double recovery. For the reasons set forth below, Morello
now moves the Court for a new trial in this case.
II. STANDARD ON MOTIONS FOR NEW TRIAL
The purpose of a motion for new trial is to give the trial court an opportunity to examine
assigned errors, and allow those errors to be cured by granting a new trial. Mushinski v.
Mushinski, 621 S.W.2d 669, 670-71 (Tex. Civ. App.—Waco 1981, no writ); Townsend v.
Collard, 575 S.W.2d 422, 423-24 (Tex. Civ. App.—Fort Worth 1978, no writ).
Motions for new trials must identify specifically the action upon which the movant
complains so that the objection can be clearly identified and understood by the court. TEX. R.
4
CIV. P. 321. As discussed below, Morello is moving for a new trial on the specific grounds,
which include: (1) an improper application of the law resulting in entry of judgment against
Morello in his individual capacity; (2) an improper application of the law granting the severance
of White Lion, which led to a double recovery for the same acts; (3) an improper application of
the law based on the State’s judicial admission; and (4) newly discovered evidence requiring a
new trial. Because the Court has no discretion in applying the law to the facts of the case, its
prior rulings on the first three grounds constitute reversible error and for which no discretion
exists to deny Morello a new trial. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992)
(orig.proceeding). As for Morello’s newly-discovered evidence ground, the Court has discretion
in its ruling on same. However, the facts demonstrate that a failure to grant the requested new
trial would constitute and arbitrary and unreasonable ruling reversible on appeal. See id.
III. AUTHORITY AND ARGUMENT
A. THE COURT’S JUDGMENT AGAINST MORELLO IN HIS INDIVIDUAL CAPACITY
CONSTITUTES REVERSIBLE ERROR UNDER TEXAS LAW
“Corporations, by their very nature, cannot function without human agents.” Holloway v.
Skinner, 898 S.W.2d 793, 795 (Tex. 1995). Therefore, and “[a]s a general rule, the actions of a
corporate agent on behalf of the corporation are deemed the corporation’s acts” so that no
liability attaches to corporate officers and directors. Id. This same liability principle applies
where managers or members act on behalf of limited liability companies. See Shook v. Walden,
368 S.W.3d 604, 621 (Tex. App.—Austin 2012, pet. denied).
One exception to this principle occurs where the plaintiff pierces the corporate veil based
upon allegations that a defendant is the alter ego of the corporation. See Karl and Kelly Co., Inc.
v. McLerran, 646 S.W.2d 174 (Tex. 1983) (per curiam). Plaintiff neither pleaded, argued, nor
proved alter ego liability so that this exception does not apply. A second exception occurs where
5
the corporate agent engaged in fraudulent or tortious acts. See Miller v. Keyser, 90 S.W.3d 712,
717 (Tex. 2002). This is the exception on which Plaintiff relied, but the conduct complained of
is effectively a breach of contract, and the State has failed to plead or prove of any tort or fraud
committed by Morello. As discussed below, Plaintiff duped the Court into applying this
exception and committing reversible error by granting summary judgment.
1. BASED ON THE CASES CITED BY THE STATE, THE COURT’S GRANT OF
SUMMARY JUDGMENT IMPOSING PERSONAL LIABILITY AGAINST
MORELLO IS REVERSIBLE ERROR.
Texas law recognizes that a corporate agent/officer may be liable for acts carried out on
behalf of the corporation only upon a showing that the individual was engaged in fraudulent
or tortious acts. Where there is no evidence that the corporate agent engaged in fraudulent or
tortious acts there can be no liability imposed on the agent. Indeed, the Supreme Court has
emphasized the importance of maintaining “a clear distinction . . . between individual liability as
distinguished from that of the corporate employer.” Holloway v. Skinner, 898 S.W.2d 795, 798
(Tex. 1995).
The State’s conclusory interpretation of its cited cases on agent liability was misleading.
(Pl’s MSJ at p. 20-21.) The development of the applicable law is critical to the understanding of
the limitation of agent liability, and, in an attempt to fully inform the Court, a full discussion of
these cases follows.
a. KARL AND KELLY COMPANY V. MCLERRAN: CORPORATE
OFFICERS/AGENTS ONLY LIABLE UNDER ALTER EGO THEORY
In Karl and Kelly Company Inc. v. McLerran, the Texas Supreme Court addressed the
issue of personal liability of corporate officers. See 646 S.W.2d 174 (Tex. 1983) (per curiam).
In that case, the plaintiffs purchased a new home from Karl and Kelly Company and
subsequently sued both the company and its officers (Karl Simon and James Kelly) under the
6
DTPA for construction defects. Id. at 174. When defendants failed to appear for trial, the court
entered a post-answer default judgment in favor of plaintiffs. Id.
Following affirmance by the Dallas Court of Appeals, the Supreme Court granted writ of
error. In reversing, the Supreme Court impliedly held that liability as to corporate agents such
Karl and Kelly was only proper upon pleading and proof that such agents were the alter ego of
the corporation. Id at 174.
b. LIGHT V. WILSON: IMPLIEDLY OVERRULING MCLERRAN BY
HOLDING THAT CORPORATE AGENTS MAY ALSO BE LIABLE FOR
THEIR OWN TORTIOUS MISCONDUCT
In Light v. Wilson the plaintiff contracted with Goldstar Builders for construction of a
new home and deposited a substantial deposit with Goldstar for same. See 663 S.W.2d 813 (Tex.
1984). When Goldstar failed to take any action to begin construction, plaintiff sent a demand to
Goldstar and its sole owner—Glen Light—for return of their money. Id. Light responded with a
letter refusing to return the deposit. Id. Light’s bases for refusing to return the deposit were that:
(1) the delays in construction were due to the plaintiffs’ inability to obtain financing and (2)
Goldstar had spent too much money on the project to allow a refund. Id. at 814.
Plaintiffs subsequently filed suit against Goldstar and Light alleging fraud, conversion,
and DTPA violations and obtained a verdict on the DTPA claim. Id. Following affirmance by
the intermediate court of appeals, the Supreme Court granted writ of error and reversed as to
liability against Light. Id. at 815. In so doing, the Court noted that the plaintiffs had not pleaded
or proved alter ego and that “[t]herefore, there being no finding of fact that Light violated the
Deceptive Trade Practices Act, cannot be personally liable.” Id. Thus, the Light court impliedly
overruled McLerran by holding that corporate agents could be found individually liable for their
own tortious misconduct as well as under an alter ego finding.
7
c. LEYENDECKER & ASSOCIATES V. WECHTER: AFFIRMING LIGHT
AND UPHOLDING CORPORATE AGENT LIABILITY FOR HIS
TORTIOUS ACTS
In Leyendecker & Associates, Inc. v. Wechter, plaintiffs contracted for the construction of
a townhome in Houston. See Leyendecker v. Wechter, 683 S.W.2d 369, 371 (Tex. 1984).
During negotiations for the home, a Leyendecker agent advised that the plaintiffs could buy a
corner lot which was slightly larger (2,475 square foot) than the standard lot in the development.
Id. at 372. Plaintiffs’ subsequently paid Leyendecker additional money in exchange for such lot.
Id. Following closing, however, plaintiffs discovered that the actual size of their lot did not
include the 2,475 additional square foot. Id. Plaintiffs subsequently complained to the Greater
Houston Builders Association regarding the lot size discrepancy as well as certain building
defects. Id. Chris Hilliard later responded on behalf of Leyendecker by falsely accusing the
Plaintiffs of urging Leyendecker to make fraudulent insurance claims. Id.
Plaintiffs subsequently sued Leyendecker for misrepresentation of the lot size and
construction defects, and Leyendecker and Hillard for libel in connection with the false statement
regarding insurance claims. Id. As to the libel claim, Plaintiff’s obtained a judgment which the
court of appeals affirmed. On writ of error, the Supreme Court considered Leyendecker’s
contention that “an employee who commits a tort while acting within the scope of his
employment is not liable to the party injured.” Id. at 375. Disagreeing, the Court cited to Light
for the proposition that “[a] corporation’s employee is personally liable for tortious acts which
he directs or participates in during his employment.” Id. (emphasis added). After noting
Hilliard’s affirmative and tortious act of “penn[ing] the libelous letter”, the Court affirmed.
Consistent with its decision in Light, the Court thus affirmed the individual liability of a
corporate agent based on his active, tortious conduct.
8
d. WETZEL V. BARNES: REAFFIRMING THAT COURTS MAY IMPOSE
PERSONAL LIABILITY ON CORPORATE AGENTS WHERE AGENT
ENGAGES IN AFFIRMATIVE TORTIOUS CONDUCT
In Wetzel v. Barnes, the Supreme Court again visited the issue of personal liability for
corporate officers. See 691 S.W.2d 598 (Tex. 1985). In that case, the plaintiffs entered into a
contract with Barnes/Seagraves Development Company for the purchase of a remodeled home.
See id. at 599. In connection with the contract, Michael Barnes and Patrick Seagraves made
affirmative representations that the plumbing and air conditioning complied with local building
code specifications. Id. After plaintiffs purchased the home they discovered that these systems
did not function properly and brought suit against the corporation and Barnes/Seagraves
individually for making false and misleading representations in violation of the DTPA. Id. at
599-600.
Following a bench trial, the court found for plaintiffs with the court of appeals reversing
and rendering judgment for defendants. Id. at 599. On writ of error, however, the Supreme
Court reversed the court of appeals judgment and affirmed the judgment of the trial court. With
respect to the individual liability of Barnes and Seagraves, the Supreme Court noted that the
record “contain[ed] evidence as to statements of both men upon which the trial judge could have
relied in concluding that they each made oral misrepresentations.” Id. at 601. Citing to Light,
the Court then held that “there can be individual liability on the part of a corporate representative
for misrepresentations made by him.” Id. Thus, and consistent with the precedent in Light, the
Court again affirmed the individual liability of a corporate agent based on commission of
tortious conduct. Id.
9
e. MILLER V. KEYSER: REAFFIRMING LIGHT AND WEITZEL AND
HOLDING THAT A CORPORATE AGENT IS PERSONALLY LIABLE
ONLY FOR HIS OWN FRAUDULENT OR TORTIOUS ACTS
Miller v. Keyser involved another case under the DTPA brought by plaintiffs against a
home builder. See 90 S.W.3d 712, 717 (Tex. 2002). In that case, the plaintiffs purchased a
home from D. B. Interests, Inc., a builder in Pearland, Texas. Id. at 715. DBI’s sales agent
handling all negotiations for the sale was Barry Keyser. Id. During negotiations, Keyser
correctly represented to plaintiffs that the back 20 feet of the lot on which their home was to be
built was encumbered by an easement. Id. However, Keyser concurrently misrepresented that
this portion of the lot could be fenced in as part of the yard. Id. After plaintiff purchased the lot
and constructing a home on same, they fenced in the entire tract including the easement. Id.
Subsequently, the Brazoria County Drainage District enforced its easement rights and required
plaintiffs to remove the infringing portions of the fence at their own cost. Id.
Plaintiff subsequently brought suit against DBI and Keyser for fraud and
misrepresentations in violation of the DTPA. Id. The trial court later dismissed plaintiffs’
claims against DBI as untimely so that plaintiffs’ proceeded to trial against Keyser. Id. After the
jury found Keyser liable for misrepresentations, the intermediate court of appeals relied upon the
Court’s previous decision in McLerran and held that a corporate agent acting within the scope of
his employment could not be personally liable under the DTPA. Id.
On petition for review, the Supreme Court began by reviewing the McLerran, Light, and
Barnes decisions. Id at 717. After considering the facts of each, the Court agreed that its
decision in Light overruled McLerrran and held that “if there is evidence that the [corporate]
agent personally made misrepresentations, then that agent can be held personally liable.” Id.
The Court then concluded as follows: “Our holdings in Light and Weitzel comport with Texas'
10
longstanding rule that a corporate agent is personally liable for his own fraudulent or tortious
acts.” Id. (emphasis added). Based on this holding, the Court noted that Keyser had personally
violated the DTPA through various false, misleading, and deceptive acts and remanded the case
back to the court of appeals. Id. at 720.
2. BASED ON THE KEYSER LINE OF CASES, THE COURT’S GRANT OF
SUMMARY JUDGMENT IMPOSING PERSONAL LIABILITY AGAINST
MORELLO WAS REVERSIBLE ERROR
Applying these principles to the present case leads to the conclusion that summary
judgment against Morello for White Lion’s violations was error. First, Plaintiff neither alleges in
its petition nor argues in its summary judgment motion that Morello committed any type of fraud
in this matter. In order for Morello to be liable in his individual capacity, then, the acts forming
the basis of Morello’s alleged liability must sound in tort. But Plaintiff’s own summary
judgment motion forecloses this possibility. Specifically, Plaintiff states the following in its
motion:
Morello asserts that compliance with the Compliance Plan
has been caused by or otherwise rendered impractical by third
parties. This matter is not a tort action. This is a statutory
enforcement action brought against Morello as operator and sole
decision maker of White Lion . . . .
(Pl’s MSJ at p. 29, emphasis added.) Based on the authorities cited above, this admission by the
State conclusively establishes that summary judgment against Morello individually is improper
and is reversible error.
In an attempt to avoid the requirement that Morello have committed fraud or a tort,
Plaintiff argues that “the actions are viewed, not in the context of a tort, but in the context of
whether such actions amount to causing, suffering, allowing, or permitting a violation of law” as
set forth in Texas Water Code section 7.102. (Pl’s MSJ Reply at 5.) But under Keyser, actual
11
tortious conduct is required to impose personal liability on a corporate agent. As noted by Texas
courts, this is not an arbitrary requirement but one based on the policy of preventing tortious
acts: “[t]he purpose of individual liability in the corporate setting is to prevent an individual from
using the corporate structure or agency law as a blanket to insulate himself from liability from
his otherwise tortious conduct.” See Physio GP, Inc. v. Naifeh, 306 S.W.3d 886, 889 (Tex.
App.—Houston [14th Dist.] 2010, no pet.). Holding Morello individually liable for White
Lion’s administrative code violations runs counter to this policy because such liability is not of a
tortious character.
Moreover, Texas’ cannons of construction prohibit the Court from construing the above-
referenced language of the Water Code as imposing individual liability on corporate
agents/officers such as Morello. Statutes that authorize a penalty are strictly construed. In re
Hecht, 213 S.W.3d 547, 572 (Tex. Spec. Ct. Rev. 2006) (citing Cain v. State, 882 S.W.2d 515,
519 (Tex. App.—Austin 1994, no writ)). A civil statue that is penal in nature must be couched in
such explicit terms that the party upon whom the statue is to operate may, with reasonable
certainty, ascertain what the statue requires to be done and when it must be done. Mo. K. & T.
Ry. Co. of Texas v. State, 100 S.W. 766, 767 (Tex. 1907). If such explicit terms are not present,
there is no opportunity for a person charged with the duty to protect himself by the performance
of it according to the law. Id.
In the present case, Texas Water Code § 7.102 is penal in nature as it authorizes civil
penalties. But there is nothing in the wording or the legislative history of sections 7.101 and
7.102 of the Texas Water Code that changes the law on principal, agent liability. As such, the
liability imposed by the statue must be strictly construed with the existing law (i.e., it did not
create new liability for individuals acting in as an agent for a company). If the statutes are
12
interpreted, as the State wants this Court to interpret them, then Mr. Morello had no opportunity
to protect himself when he acted as the agent of White Lion.
In conclusion, the trial court’s imposition of personal liability against Morello constitutes
a failure to analyze or apply the law correctly, which in turn constitutes an abuse of discretion.
See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding)). Accordingly, the
Court should grant Morello a new trial in this matter.
B. PLAINTIFF IS JUDICIALLY ESTOPPED FROM OPPOSING MORELLO’S MOTION
FOR NEW TRIAL
Even assuming that individual liability against Morello was proper as Plaintiff contends,
Plaintiff is nevertheless judicially estopped from taking the position that Morello (or White Lion
for that matter) is liable for violations of the Water Code or non-compliance with the compliance
plan. Judicial estoppel precludes a party from adopting a position inconsistent with one that was
successfully maintained in an earlier proceeding. Pleasant Glade Assembly of God v. Schubert,
264 S.W.3d 1, 6 (Tex. 2008). The elements of judicial estoppel in Texas are: (1) a prior
inconsistent statement made in a judicial proceeding; (2) which was successfully maintained in
the prior proceeding; (3) which was not made in advertently or by mistake, or pursuant to duress;
and (4) which was deliberate, clear, and unequivocal. Andrews v. Diamond, Rash, Leslie &
Smith, 959 S.W.2d 646, 650 n. 2 (Tex. App.—El Paso 1997, writ denied). As discussed below,
Morello has established each of these elements requiring a new trial.
In its Motion for Summary Judgment, Plaintiff took the following legal position:
Morello’s only means to defeat summary judgment in this matter is
to demonstrate that he has taken steps to ensure compliance.
(MSJ at p. 24.)
At the time of the hearing, the State had convinced this Court to strike the affidavits of
David Heslep (Ex. H), and Wayne Crouch (Ex. I) – a decision this Court has since reversed.
13
(Ex’s J, K). Those affidavits contain evidence that White Lion (and Morello as its Member) did
in fact take corrective action and that the TCEQ was aware of and approved of the action being
taken. Because the State has judicially admitted that steps toward compliance defeated its
motion, it is bound by that admission.1 Further, because Morello presented uncontroverted
evidence that White Lion had taken appropriate steps towards compliance, summary judgment
should have been denied on the basis of the State’s admission. This statement was successfully
maintained by Plaintiff given that it obtained an order granting summary judgment. Moreover,
the statement was not made by accident or mistake, and was deliberate, clear and equivocal.
Specifically, and in response to the motion, Morello submitted the affidavits of David
Heslep (Morello’s Resp., Ex. H) and Wayne Crouch (Morello’s Resp., Ex. I), and both affidavits
were admitted into evidence over the objections of the Plaintiff. The Heslep affidavit establishes
that Heslep, on behalf of White Lion, forwarded to Ms. Elanor Wehner of the TCEQ a draft
memo outlining steps that White Lion intended to implement to comply with CP-50129. Id.
Attached to the affidavit is an email from Wehner acknowledging receipt of the plan and her
statement that “[w]hat I can say is that overall I like the progression/sequencing of the tasks
referenced in the memo.” Id. The Crouch affidavit similarly shows steps taken by Morello to
comply with CP-50129, including Crouch’s statements and evidence showing that Morello had
retained Crouch to perform groundwater testing, that Crouch had done such testing, and that the
results showed that the Property was moving toward compliance with CP-50129. Id.
Given this proof, Morello clearly established that he had taken steps to ensure compliance
with CP-50129. Plaintiff admitted in its summary judgment motion that Morello could defeat
the motion by demonstrating that he had taken steps to ensure compliance. Accordingly,
Plaintiff is now estopped from arguing otherwise. The uncontroverted evidence establishes that
1
Presumably, this is why the Plainitff moved to strike the affidavits.
14
White Lion had in fact taken steps to ensure compliance, therefore summary judgment was
improper and this Court should grant a new trial.
C. THE COURT’S ORDER SEVERING PLAINTIFF’S CLAIMS AGAINST WHITE LION
FROM THOSE AGAINST MORELLO WAS REVERSIBLE ERROR REQUIRING A NEW
TRIAL
Texas Rule of Civil Procedure 41 governs a trial court’s authority to sever claims. Rule
41 states that “[a]ny claim against a party may be severed and proceeded with separately.” TEX. R.
CIV. P. 41. It is significant that Rule 41 only allows severance of claims, not severance of parties.
Rule 41 also requires that a trial court order severance before the controversy is submitted.
Separate claims may be severed by order of the court on motion of any party or on its own
initiative at any stage of the action, but before the time of submission to the trier of fact, on such
terms as are just. TEX. R. CIV. P.41.
Severance of a claim is proper if (1) the controversy involves more than one cause of
action; (2) the severed claim is properly the subject of a lawsuit; and (3) the severed claim is not
so interwoven that it involves the same facts and issues. Guar. Fed. Savs. Bank v. Horseshoe
Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (emphasis added). If the claim a party seeks to
sever does not meet all three prongs, then the claim may not be severed, and to do so amounts to
an abuse of discretion. Nicor Exploration Co. v. Florida Gas Transmission Co., 911 S.W.2d 479,
482 (Tex. App.– Corpus Christi 1995, writ denied) (“By severing [one plaintiff’s action from the
action of another plaintiff], the trial court effectively severed a party, instead of a cause of
action.”).
The controlling reasons to grant a severance are to do justice, avoid prejudice and to
further convenience the parties. Nicor Exploration Co., 911 S.W.2d at 482. If a claim against
multiple parties involves the same facts and issues, none of these objectives are met – they are
15
thwarted. If a claim involving an indivisible injury is severed, the facts and issues relating to
each particular entity's liability for their part in the injuries is the same. “[T]o divide [such a
suit] into two suits would produce two trials focused on the same facts and same injury, and
could potentially lead to undue repetition, confusion and prejudice to the interests of both the
plaintiffs (who could be either over or under compensated) and the defendants (who could face
unduly low or high fractional shares of the total liability for damages).” Santos v. Holzman,
No. 13-02-662-CV, 2005 WL 167309, at *4 (Tex. App.-Corpus Christi Jan. 27, 2005, pet.
denied) (mem. op.), citing Jones v. Ray, 886 S.W.2d 817, 822 (Tex. App. – Houston [1st
Dist.] 1994, orig. proceeding). See also, Levetz v. Sutton, 404 S.W.3d 798, 801 (Tex. App. –
Dallas, 2013, pet. denied) (reversing order of severance because the facts were interwoven and the
severance did not avoid prejudice or further convenience.). Therefore, a trial court may not
simply sever a party from the cause of action; it should sever only complete and discrete claims
from one another. Id.
1. THE TRIAL COURT IMPROPERLY SEVERED A PARTY—WHITE LION
HOLDINGS—NOT A CAUSE OF ACTION, EXPOSING MORELLO AND
WHITE LION TO DUPLICATE PENALTIES FOR THE IDENTICAL CONDUCT.
In this case, the trial court abused its discretion by granting the State’s Motion to Sever
the summary judgment against White Lion Holdings when the State did not meet its burden of
proof on summary judgment to demonstrate it was entitled to severance.
As noted by the Supreme Court in Guranty Federal, the third severance factor requires a
showing that the severed claims are not so interwoven with the other claims that they involve the
same facts. See 793 S.W.2d at 658. Among other reasons, the claims in a case are considered
interwoven when their severance would result in two or more separate judgments that, taken in
the abstract, would either: (1) undercompensate the plaintiff (because the respective juries could
16
each find the other defendant fully liable and thus each award plaintiff nothing), or (2) over
compensate the plaintiff (because the respective juries could each find their respective defendant
fully liable and enter two verdicts imposing a double recovery). In situations such as this
presenting the prospect of double recovery for the plaintiff or double jeopardy for the defendant,
severance is improper because the third Guaranty Federal factor cannot be met. See Jones, 886
S.W.2d at 821-22.
In the present case, Plaintiff’s suit consisted of two claims. The first was that White Lion
failed to comply with CP-50129 rendering it in violation of Texas Water Code section 7.102.
Plaintiff’s second claim was that White Lion failed to acquire financial assurance in the amount
of $574,000 in violation of the Texas Administration Code. Plaintiff asserted the exact claims
against Morello in his individual status and sought the exact amount of damages from both
Defendants. In fact, the Court—in two separate and enforceable judgments (this cause and cause
number D-1-FV-13-001068)—awarded Plaintiff the same damages against each defendant, thus
allowing the Plaintiff a double recovery. (Ex. H.) Notably, the Plaintiff waited until its motion
for summary was granted against White Lion and obtaining severance before filing an identical
motion for summary judgment against Morello, individually. In short, the Plaintiff’s actions
make it clear that its intent all along was to place Morello in double jeopardy. Thus, and for the
same reasons noted by the Jones court, severance of Plaintiff’s claims against White Lion and
Morello was an abuse of discretion.
2. IMPROPER SEVERANCE IN THIS CASE RESULTS IN AN EXCESSIVE FINE IN
VIOLATION OF THE TEXAS AND UNITED STATES CONSTITUTIONS
Article I, section 13 of the Texas Constitution provides, "[e]xcessive bail shall not be
required, nor excessive fines imposed, nor cruel or unusual punishment inflicted." TEX. CONST.
ART. I, § 13. The term “fines” has been defined as including civil penalties. See Pennington v.
17
Singleton, 606 S.W.2d 682, 690 (Tex. 1980). Generally, prescribing fines is a matter within the
discretion of the legislature. A fine is not unconstitutionally excessive, and courts may not
override the legislature’s discretion, “except in extraordinary cases, where it becomes so
manifestly violative of the constitutional inhibition as to shock the sense of mankind.” Id.
(quoting State v. Laredo Ice Co., 96 Tex. 461, 73 S.W. 951, 953 (1903)).
Here, the State used the trial court’s severance of the State’s Claim’s against Morello’s
company, White Lion Holding’s LLC, as a mechanism to impose double liability for the same
conduct on both Morello and White Lion. After the Court granted summary judgment against
White Lion, it severed White Lion from the case in violation of Rule 41’s prohibition against
severing a party instead of a claim, and further in violation of the Rule’s prohibition against
severance after submission to the trier of fact. The State then sought a second summary
judgment against Morello in his individual capacity for the identical conduct, thus accomplishing
a double recovery for a single act through improper severance. The State even conceded in oral
argument before the Court that Morello “is White Lion.” (Ex. G at 10:14).
Assuming without conceding that any penalty is justified in this case, the State should
have been limited to one penalty against the responsible party, whether it was White Lion or
Morello. By severing White Lion, the State avoided a finding on a critical issue central to both
motions – who is the responsible party? Even if the State could argue that the corporate veil
should be pierced (which Morello denies), at most it would have been entitled to joint and
several liability against Morello and White Lion, not a double recovery.
18
3. THE IMPROPER SEVERANCE VIOLATES THE EQUAL PROTECTION, AND DUE
COURSE OF LAW PROVISIONS OF THE TEXAS CONSTITUTION, AND THE
DUE PROCESS AND EQUAL PROTECTION PROVISIONS OF THE U.S.
CONSTITUTION.
In its two judgments, the Court has now awarded over $760,4942 in fines against Morello
and White Lion after stipulating that the civil penalties should only be $50 per day (five times
the purchase price of the Property). Yet, Morello and White Lion have both consistently
maintained inability to pay the fine and to conduct the remediation the state is demanding.
Furthermore, by denying the continuance requested by Morello and White Lion, the Court
awarded a penalty that new evidence proves to be unjustified.
Where the amount of a penalty imposed by a State agency is so high that it effectively
deprives a citizen of the ability to litigate his defense to such penalty, it is unconstitutional. See
R. Communications Inc. v. Sharp, 875 S.W.2d 314, (Tex. 1994) (holding that conditioning a
taxpayer's right to initiate judicial review on the payment of taxes or the posting of a bond equal
to twice the alleged tax obligation violates the open courts mandate of the Texas Bill of Rights.
TEX. CONST. art. I, § 13. Taxes cannot be raised by means that make meaningless our
constitutional guarantees.). While this case does not present an open courts question, it does
present an unconstitutional denial of due process and equal protection under state and federal
law.
2
The
Court awarded Plaintiff $325,600 in civil penalties and $40,800 in attorneys’ fees against
White Lion in cause no D-1-FV-13-000627. (Ex. I.) The Court awarded Plaitniff $367,250 in
civil penalties and $26,844 in attorneys’ fees. Morello asks this Court to take judicial notice of
the contents of its final judgment in this case.
19
D. THE COURT SHOULD GRANT MORELLO A NEW TRIAL BASED ON NEWLY
DISCOVERED EVIDENCE
1. THE GRANT OF A NEW TRIAL BASED ON NEWLY-DISCOVERED
EVIDENCE IS WITHIN THE SOUND DISCRETION OF THE TRIAL COURT
A party seeking a new trial on grounds of newly-discovered evidence must demonstrate
to the trial court that (1) the evidence has come to its knowledge since the trial, (2) its failure to
discover the evidence sooner was not due to lack of diligence, (3) the evidence is not cumulative,
and (4) the evidence is so material it would probably produce a different result if a new trial were
granted. Waffle House, Inc. v. Williams, 313 S.W.3d 796, 813 (Tex. 2010). Denial of a motion
for new trial is reviewed for abuse of discretion.
a. NEWLY-DISCOVERED EVIDENCE ESTABLISHES THAT CP-502129
AND ITS REMEDIATION OBLIGATIONS WAS BASED ON
PLAINTIFF’S ERRONEOUS DETERMINATION OF THE AFFECTED
AQUIFER
Prior to White Lion’s ownership of the Property, Vision utilized the premises as a steel
tube manufacturing facility. (Pl’s MSJ at 7.) This usage ultimately caused groundwater
contamination at the premises due to elevated levels of heavy metals and other compounds. (Id.
at 8.) Vision subsequently discovered the contamination and reported same to the State which
then instituted CP-50129 to remediate same. (Id. at 8-9.) CP-50129 called for Vision to
implement an extensive cleanup and monitoring system consisting of: (1) placing additives in the
Property’s wastewater impoundments; (2) capping such impoundments with four feet of clay and
vegetative covering; (3) implementation and maintenance of a groundwater monitoring program
and system to test the effectiveness of CP-50129, (4) installation of a network of wells (21 total)
to monitor groundwater flow and contaminants; (5) installation of a network of recovery wells
for extraction of contaminated groundwater; (6) submission of semi-annual and annual reports to
Plaintiff, and other requirements. (Id. at 9-10.)
20
In short, CP-50129 created massive financial and regulatory obligations for Vision and
subsequently, White Lion. These onerous remediation and monitoring requirements of CP-
50129 were all premised on Plaintiff’s error that the contaminated ground water plume beneath
the Property potentially fed into the Upper Chicot aquifer—which is used for agricultural or
human use. (Ex. F.)
In December 2014, White Lion retained David Heslep and his firm of WDIA
Environmental Solutions, LLC, to assess the Property and prepare a proposal for modification of
and compliance with CP-50129. (Ex. F.) Heslep is a licensed professional geologist for the
State of Texas with significant project management experience and technical expertise in
environmental matters. (Id.) In particular, Heslep has been involved with numerous
groundwater remediation projects at sites in at least 8 states. (Id.) In his efforts to bring the
Property into compliance with CP-50129, Heslep discovered that the aquifer beneath the
Property is actually the Brazos River Alluvial Aquifer—a fact which greatly reduces any risk
from the plume beneath White Lion’s property. Id.
As noted by Heslep, had TCEQ’s experts properly identified the aquifer at the time CP-
50129 was renewed in 1999, “the current pump and treat system required by the Compliance
Plan would not have been necessary and that a natural attenuation system would have been
appropriate for remediating the contamination at the [Property].” Id. In short, the entire basis of
the Compliance Plan, and the corresponding obligations, were “not necessary to protect the
public health and environment.” Id. Indeed, Mr. Heslep makes clear that “[h]ad this error not
been perpetuated by the State, a less stringent, less expensive plume monitoring system would
have been appropriate.” Id.
This evidence came to light after trial. Where a trial occurs by summary judgment,
21
courts hold that the evidence must not have been discovered prior to the ruling on summary
judgment. See Indus. Clearinghouse, Inc. v. Jackson Walker, L.L.P., 162 S.W.3d 384, 389 9Tex.
App.—Dallas 2005, pet denied.). The Court issued its letter ruling on April 6, 2015. As noted
supra, Heslep discovered the evidence on April 11, 2015. (Ex. F.) Morello discovered the
evidence on that same day. (Ex. H.) Accordingly, the first requirement for a new trial based on
newly-discovered evidence has been satisfied.
b. MORELLO’S FAILURE TO DISCOVER THE NEW EVIDENCE WAS
NOT DUE TO LACK OF DILIGENCE ON HIS PART
The second element that must be satisfied for a new trial based on newly discovered
evidence is that the party’s failure to discover the evidence sooner was not due to lack of
diligence. Waffle House, 313 S.W.3d at 813. Evidence of a party’s due diligence in procuring
new evidence is properly adduced by affidavit or testimony. See Edwards v. Edwards, 418
S.W.3d 757, 761 (Tex. App.—El Paso 2013, no pet.) (“The trial court is not privy to a plaintiff's
efforts at due diligence, and as such, it must be apprised of such by sworn affidavit or testimony .
. . .”). Finally, whether a party acts with sufficient diligence in discovering the evidence in
question is a matter left to the discretion of the court. See Benz Group v. Barreto, 404 S.W.3d
92, 97 (Tex. App.–Houston [1st Dist.] 2013, no pet.); Allseas USA, Inc. v. PS Fabricators,
L.L.C., 2012 WL 7849219. *9 (Tex. App.—Corpus Christi 2012, no pet.) (“Whether Allseas
acted with sufficient diligence was a factual matter best left to the trial court's discretion.”).
Finally, and as noted by the Texas Supreme Court, diligence is defined as “such diligence that an
ordinarily prudent and diligent person would exercise under similar circumstances.” Strickland
v. Lake, 163 Tex. 445, 357 S.W.2d 383, 384 (1962).
Applying this definition of diligence, it becomes clear that Morello satisfies the second
prong of the inquiry. The evidence in question involves the underground aquifer potentially
22
affected by the plume under White Lion’s Property which was misidentified by at least two sets
of experts in this case. Specifically, Plaintiff’s and Vision’s environmental experts mistakenly
identified the aquifer in 1988, and again in 1998-99, as the Upper Chicot. (Ex. F.) In his
affidavit, Heslep mentions that he only discovered the correct aquifer at issue after long inquiry
into hydrological surveys which provided the key. (Id.)
Clearly, and given that trained geologists misidentified the aquifer at issue, this evidence
was not discoverable by a layperson such as Morello. As established by his sworn deposition
testimony, Morello repeatedly testified that he: (1) does not hold himself out as an environmental
law expert (Ex. A at 16); (2) knows nothing about wastewater, groundwater, or groundwater
recovery systems (Id. at 68, 70); (3) considers groundwater related issues to be “way over [his]
head” (Id. at 70); (4) considers issues related to CP 50129 as “not my area of expertise” (Id. at
82-83). In his affidavit, Morello goes further, stating that “I have no education or practical
experience with environmental compliance issues, and I had no reason to question any of the
underlying geological or hydrological bases for the compliance plan.” (Ex. H.) Taken together,
and considering the Strickland court’s definition of diligence, Morello cannot be found to have
lacked reasonable diligence in procuring the newly-discovered evidence. In fact, it would be
unreasonable to find or expect Morello to have discovered the evidence sooner than he did.
Accordingly, Morello has satisfied the second requirement for a new trial based on newly-
discovered evidence.
c. THE EVIDENCE IS NOT CUMULATIVE
The third element that must be satisfied for a new trial based on newly discovered
evidence is that such evidence is not cumulative of any other evidence in the case. Waffle
House, 313 S.W.3d at 813. The test for determining whether evidence is cumulative asks “not
23
merely whether the evidence to be adduced from the two witnesses is similar, but also whether
the excluded testimony would have added substantial weight to the offering parties' case.” Sims
v. Brackett, 885 S.W.2d 450, 454 (Tex. App.—Corpus Christi, 1994, no writ). In the present
case, there can be no argument that the newly-discovered evidence is not cumulative as it is
contrary to Plaintiff’s evidence/theory relating to the relevant aquifer and adds substantial weight
to Morello’s case (as discussed more in the next factor). Indeed, the issue of the plume
potentially affecting the Brazos River Alluvium Aquifer appears nowhere in the record in this
case. Accordingly, Morello has satisfied the third requirement for a new trial based on newly-
discovered evidence.
d. THE NEWLY-DISCOVERED EVIDENCE WOULD HAVE
ELIMINATED THE NEED FOR THE TRIAL BELOW
The final element that must be satisfied for a new trial based on newly discovered
evidence is that the evidence is so material it would probably produce a different result if a new
trial were granted. Waffle House, 313 S.W.3d at 813. Based on testimony from the Heslep
affidavit, this test is met. On this point, Heslep states as follows:
In essence, the Upper Chicot was erroneously identified as far back as
1988 as a potentially affected aquifer despite the fact that the Upper Chicot
generally flows south/southeast, while the flow of the aquifer under the Vision
Metals/White Lion facility is to the north. This error was carried forward
thereafter in all reports and proposed plans and adopted by the TCEQ and its
predecessor. The State failed to detect the error, and required the more stringent
pump and treat system based on the error. Had this error been detected by the
State, a less stringent, less expensive monitored natural attenuation plan would
have been appropriate. A monitored natural attenuation plan would have been
much cheaper to install, maintain, and operate than the existing system.
It is my opinion that a monitored natural attenuation plan would have been
found appropriate for the site from the start of White Lion's ownership of the site,
had the correct aquifer been identified by the State.
(Ex. E, emphasis added.)
24
In summary, and had Plaintiff correctly determined that the aquifer below the Property
was the Brazos River Alluvium Aquifer, CP-50129 would have had vastly different and less
expensive remedial and monitoring provisions. In his affidavit, Morello states that White Lion’s
failure to comply with CP-50129’s remediation and monitoring requirements was due to
financial inability. (Ex. L; Ex. H). Morello also states that Heslep had previously estimated the
costs of a monitored natural attenuation plan (as would have been proper had Plaintiff identified
the proper aquifer at issue), and that White Lion could have financially borne such a burden.
(Id.) In short, there would have been a completely different result in this case and likely no case
at all. Accordingly, Morello satisfied the fourth requirement for a new trial based on newly-
discovered evidence.
IV. CONCLUSION
WHEREFORE, for the reasons provided above, Morello respectfully requests that the
Court vacate its summary judgment of April 14, 2015 and grant him a new trial in this matter.
Morello also requests any and all other and further relief to which he may be entitled.
25
Respectfully submitted,
LAPEZE & JOHNS, P.L.L.C.
By:___________________________
Keith W. Lapeze
Texas Bar No. 24010176
Taylor L. Shipman
Texas Bar No. 24079323
601 Sawyer Street, Suite 650
Houston, Texas 77007
Tel. (713) 739-1010
Fax. (713) 739-1015
keith@lapezejohns.com
taylor@lapezejohns.com
ATTORNEYS FOR DEFENDANT
26
CERTIFICATE OF SERVICE
A copy of this documents was served on all counsel of record in accordance with the
Texas Rules of Civil Procedure on May 14, 2015.
____________________________________
Keith W. Lapeze
27
EXHIBIT A
EXHIBIT
A
rnard Morello - 9/19/2014
6
1 (Friday, S embe r 1 9 , 2 0 1 4, 1: 11 p. rn. )
2 PRO C E E DIN G S
3 BERNARD MORELLO,
4 having taken an oath to tell the t , the whole truth,
5 nothing but truth, was exarni and testified as
6 11ows:
7 EXAMINATION
8 BY MR. PRITZLAFF:
9 Q. Good morning. My name is Craig Pritzlaff.
10 I'm a lawyer representing the State of Texas, with the
11 Attorney General's Office, here on behalf of the Texas
12 Commission on Environmental Quality, TECQ. We've met
f`` 13 before, haven't we?
14 A. Yes.
15 Q. Can you please state your full name for the
16 record?
17 A. Bernard J. Morello.
18 Q. And the " J" is for?
19 A. Joseph.
20 Q. And your current address, please?
21 A. 5100 San lipe, Number 78, Houston, Texas
22 77056.
23 Q. That's the same address of White Lion
24 Holdings, LLC?
25 A. Yes.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
7
1 Q. Your counsel is here, participating by
~ 2 telephone, correct?
3 A. Yes.
4 Q. Have you been to a deposition before?
5 A. Yes.
6 Q. SO you know how this works; but just as a
7 reminder, this is similar to as if we were in a
8 courtroom, but it's much less for.mal. I'm going to be
9 asking you a series of questions; and as you can see,
10 the court reporter is here, taking down everything that
11 we say. And you understand everything is going to be
12 taken down and recorded by the court reporter?
13 A. Yes.
14 Q. To help her out, let's try not to a talk over
15 each other. Respond "yes" or "no." She cannot record a
16 head nod or an "uh-huh" or a "huh-uh." Do you
17 understand that?
18 A. Uh-huh.
19 (Laughter. )
20 Q. (BY MR. PRITZLAFF) Okay. Yes. Again, let's
21 not talk over ourselves.
22 The notes that the court reporter is
23 taking down, you will have an opportunity to make
24 changes to that, to review it, and to sign off of on
25 that. Do you understand?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
8
1 A. Okay. Yes.
2 Q. The transcript can then be used as evidence.
3 Do you understand that?
4 A. Yes.
5 Q. You understand you have taken a sworn oath
6 today to answer each question in this deposition
7 truthfully and honestly?
8 A. Yes.
9 Q. You understand that it's just as if we were
10 before a jury or a Court and that testimony can be used
11 in court if necessary?
12 A. Yes.
'~
~:;
'-'
;-`` -
13 Q. If you don't understand me at any time --
14 MR. PRITZLAFF: Or, Mary, if you can't
15 hear me at any time --
16 Q. (BY MR. PRITZLAFF) just ask me to repeat
17 or speak up. And can we have an understanding that if
18 you ask a question, we can agree you've understood it
19 and have heard the question?
20 A. Yes.
21 Q. Now, I'll arrange -- at any point in time if
22 you need to take a break, please just let us know; and
23 we'll take a break. And the restroom facilities are out
24 in the hall; or if you need to speak with your counsel,
25 we can set you up in a room as well.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
9
1 A. Okay.
~
~:~-~ 2 Q. Is there anything you need right now before we
3 get going?
4 A. No.
5 Q. Are you on any medication or under the
6 influence of any kind of drug that might influence your
7 ability to testify truthfully or honestly?
8 A. No.
9 Q. Do you have any physical, mental, or emotional
10 ~pair.ment that might prevent you from answering
11 truthfully and honestly today?
I L" A. No.
13 Q. Did you meet with anyone in preparation for
14 your deposition?
15 A. No.
16 Q. Did you review any documents in preparation
17 for your deposition?
18 A. No.
19 (Exhibit 1 marked.)
20 MS. KOKS: Craig, this is Mary. I'm
21 hoping that the documents you are going to refer to -- I
22 may have them; I may not. I have some of the records in
23 this case. If you could just tell, you know, verbally
24 which ones they are exactly, then, I can see if I've got
25 it so I can look at it as well.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
10
1 MR. PRITZLAFF: Understood. I've marked
~ 2 the Notice of Deposi tion as Exhibi t 1.
3 MS. KOKS: Thank you.
4 MR. PRITZLAFF: And I'm handing it to
5 Mr. Morello.
6 Q (BY MR. PRITZLAFF) Mr. Morello, did you
7 receive that document?
8 A. Yes.
9 Q. Did you review that document?
10 A. Not really, no.
11 Q. Okay. On the second page of the document,
12 there's a list of instructions. Did you review that?
~
.
~ji;.i~ 13 A. No .
14 Q. Okay. On that page am I correct that it's
15 asking for various documents? Correct?
16 A. Yes. You know, I'll take that back. I think
17 these are questions that Stephen Doggett did ask me. We
18 had a conversation about these, and I think he said you
19 had all these documents or he was going to give them to
20 you. So I take that back. I didn't read this. He read
21 some of this stuff over the phone to me.
22 Q. Okay. So there are no documents that you're
23 bringing to the deposition today in response to that
24 subpoena duces tecum?
25 A. No, because, like I said, I think he said you
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
11
1 had all these documents.
~
............
:.
``~.:-: Okay. I do have one quick question.
2 Q.
3 A. Yes.
4 Q. For Number 1, it says, "A list of all White
5 Lion Holdings, LLC's members, managers, officers,
6 employees from 2004 to the present." Does such a list
7 exist?
8 A. No.
9 Q. Okay. On Number 2, "The Company Agreement for
10 White Lion Holdings, LLC." Does such a Company
11 Agreement exis t?
12 A. No.
~ i-'~_~'
13 Q. Number 3, an operating agreement between White
-, :::"- ~
14 Lion Holdings and Bernard Morello. Does such an
15 operating agreement exist?
16 A. No.
17 Q. These are self-explanatory, I think. I did
18 speak to Mr. Doggett about the deeds.
19 "All documents relating to the
20 conveyance" -- Number 6 "of any real property comprising
21 any part of the Site from Bernard Morello to White Lion
22 Holdings, LLC." Do those documents exist?
23 A. No, there is no documents.
24 Q. Number 7, "All documents relating to
25 conveyance of any real property comprising any part of
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
12
1 the Site from any person to Bernard Morello." Do any
~ 2 such documents exist?
3 A. No.
4 Q. Okay. Number 8, "All documents relating to
5 any distribution or compensation from White Lion
6 Holdings, LLC to Bernard Morello from April 2, 2004
7 until the present." Any such documents?
8 A. No.
9 Q. Number 9, "All documents relating to any loan
10 from White Lion Holdings, LLC to Bernard Morello from
11 April 2nd, 2004 to the present." Do any such documents
12 exist?
13 A. No.
14 Q. Number 10, "All documents concerning removal
15 of any part of the Corrective Action System."
16 Corrective Action System is defined as that set forth in
17 Section II of the Compliance Plan, meaning the
18 groundwater remediation system. Do any such documents
19 concerning removal of any part of that Corrective Action
20 System exist?
21 A. I don't have any other than the Compliance
22 Plan.
23 Q. Number 11, "All documents concerning operation
24 and maintenance of the Corrective Action System." Do
25 any such documents exist?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
13
1 A. No.
2 Q. "All documents concerning the financial
3 assurance mechanism for the Site." Do any such
4 documents exist?
5 A. Other than the original one from 2004 to 2005,
6 and I think you have that. I believe you do.
7 Q. There's some debate about which one I have,
8 and I can speak to your counsel to make sure I have the
9 right one. I think that covers that document.
10 (Exhibit 2 marked.)
11 Q (BY MR. PRITZLAFF) I have a document marked
12 Exhibit 2, Order. And have you seen that document?
13 A. Yes.
14 Q. Okay. And that document was an order from the
15 Court, ordering this deposition to proceed today at
16 1: 00, correct?
17 A. Correct.
18 Q. Okay. Other than yourself, is there anyone
19 else that may have relevant documents?
20 A. The lawyers.
21 Q. Other than your lawyers, is there anyone else
22 at White Lion Holdings, LLC that may have documents
23 reI evan t to this matter?
24 A. No.
"\ j
~-``'!!
25 Q. Would you say you're the record custodian for
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
14
1 Whi te Lion Holdings?
2 A. I guess you could say that, yes.
3 Q. Is anyone else at White Lion Holdings
4 responsible for maintaining records?
5 A. No.
6 Q. Since this is a deposition that may -- some of
7 this test~ony may be utilized in court, it would be
8 helpful for you to tell the jury a little bit about
9 yourself. So I would just like to go very briefly into
10 your background, and then we'll delve into the site.
11 Have you gone by any other names?
12 A. No.
~
13 Q. Where were you born?
14 A. Omaha, Nebraska.
15 Q. And what was your date of birth?
16 A. 7/21/57.
17 Q. How long did you live in Nebraska?
18 A. Probably all but the last, maybe, 15 to
19 16 years.
20 Q. Have you lived anywhere else other than
21 Nebraska and Texas?
22 A. No.
23 Q. When did you move to Texas?
24 A. Probably '98, '99 area, somewhere in there.
25 Q. Did you go to high school in Nebraska?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
15
1 A. Yes.
2 Q. Did you graduate?
3 A. Yes.
4 Q. Did you go to college or university?
5 A. Yes.
6 Q. Which college or university?
7 A. UNO, University of Nebraska Omaha.
8 Q. Did you graduate?
9 A. No.
10 Q. How many years did you complete?
11 A. Probably five, six years off and on.
12 Q. But no degree?
13 A. No degree.
14 Q. What did you study?
15 A. Business.
16 Q. Did you have any other education, formal
17 education?
18 A. Not really. I mean, I went to law school; but
19 auditing classes. That's it, just aUditing.
20 Q. Which law school was that?
21 A. Creighton University.
22 Q. In Omaha?
23 A. Yes.
24 (Reporter requests repeat.)
25 THE WITNESS: Creighton.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
16
1 MR. PRITZLAFF: C-R-E-I-G-H-T-O-N.
2 Q. (BY MR. PRITZLAFF) After your school, did
3 you -- let me step back to your law school education.
4 Did you take any courses related to environmental law or
5 environmental regulations?
6 A. No.
7 Q. In your undergraduate experience, did you take
8 any courses related to environmental science?
9 A. No.
10 Q. Environmental law?
11 A. No.
12 Q. So you would not hold yourself out as an
~ expert in environmental compliance or environmental law
"-'[:',,;
````~"
13
14 matters?
15 A. No.
16 Q. Have you ever been arrested?
17 A. No.
18 Q. After your schooling, what did you do?
19 A. Well, during schooling, I worked. That's why
20 it was five or six years; and that's why I didn't
21 graduate because I pretty much worked the whole time,
22 real estate principally.
23 Q. Did you purchase and sell properties?
24 A. No, purchase and hold properties.
~:/
- ----",
- --~
25 Q. Do you still do that today?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
17
1 A. Yes.
2 Q. Do you work in any area outside of Nebraska or
3 Texas?
4 A. No.
5 Q. Are you currently married?
6 A. No.
7 Q. Do you have any children?
8 A. No.
9 Q. Do you have any family members that have any
10 interest in White Lion Holdings?
11 A. No.
12 Q. Let's turn now to 2004 and the former Vision
D 13 Metals site. How did you learn about the sale of the
14 property?
15 A. You know, this is going back 10 or 11 years;
16 but I think there was an ad in the Houston Chronicle, I
17 believe in the real estate section. And there was an
18 auction.
19 Q. This was a bankruptcy auction, correct?
20 A. Yes.
21 Q. Did you conduct any due diligence prior the
22 purchase?
23 A. No, other than go by it.
24 Q. When I use the term "due diligence," do you
25 understand what I mean?
Integrity Legal Support Solutions
www.inteqritv-texas.com
Bernard Morello - 9/19/2014
18
1 A. Yeah, that's pretty broad.
2 Q. What does that mean to you when I say "due
3 diligence" ?
4 A. Well, due diligence, to me, is doing an
5 in-depth study and analysis of the project, the site. I
6 do a drive by, typically, before I buy a location, to
7 look at the transportation aspect of it, the social
8 economic conditions. In this case it's really not
9 important for an industrial site. It is transportation,
10 but not social economic conditions. I look at the
11 growth of an area, how the area is growing, and the
12 infrastructure that's in place.
13 Q. That's a typical type of diligence that you do
14 at other properties you purchase?
15 A. Yes.
16 Q. Do you conduct environmental analyses of any
17 of the properties?
18 A. I never have, no; but I've never bought
19 anything that had any environmental issues with it.
20 Q. Have you ever purchased any other kind of
21 industrial property?
22 A. Not -- not like this, no, no. Industrial-
23 zoned property, yes, but not -- maybe just vacant land,
24 industrial land.
25 (Exhibit 3 marked.)
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
19
1 Q (BY MR. PRITZLAFF) I'm handing you a document
~ 2 I've marked as Exhibit 3, a Real Estate Purchase
3 Agreement by and between Vision Metals and Bernard
4 Morello. Have you seen that document before?
5 A. Many years ago.
6 Q. What is your understanding of the effect of
7 this document?
8 MS. KOKS: Objection, form.
9 Q (BY MR. PRITZLAFF) You can answer if you
10 understood my question.
11 A. No, I don't understand your question.
12 Q. What is this document?
13 A. A purchase agreement.
14 Q. For what?
15 A. It's between two parties, the sale of Vision
16 Metals.
17 Q. And who are those parties?
18 A. Bernard Morello and Vision Metals.
19 Q. And which property does this purchase and sale
20 agreement concern or real estate agreement concern?
21 A. 37 acres, 25.322 acres, and 115.22, it looks
22 like. I think there's something missing here. There
23 should be another tract, too; but I don't see it.
24 Q. Is it fair to say it generally encompasses the
25 site of the for.mer Vision Metals facility that is the
Integrity Legal Support Solutions
www.inteQritv-texas.com
Bernard Morello - 9/19/2014
20
1 subject of this suit?
2 A. It encompasses, yes, the whole farmland and
3 the plant and some vacant land adjacent to the plant.
4 Q. And on page 14, is that your signature?
S A. Yes.
6 (Exhibit 4 marked.)
7 Q (BY MR. PRITZLAFF) I'm handing you an exhibit
8 marked Exhibit 4, First Amendment to Real Estate
9 Purchase Agreement. Did this document amend the real
10 estate purchase agreement that we just looked at in
11 Exhibit 3?
12 A. Yes.
13 Q. And on State Bates Number 610, is that your
14 signature?
lS A. Yes.
16 Q. Let's go through this very briefly.
17 A. Okay.
18 Q. So on the first page of this document, we have
19 the
20 MS. KOKS: Which one are you referring
21 to? I'm sorry.
22 MR. PRITZLAFF: I'm on the First
23 Amendment to Real Estate Purchase Agreement, Mary.
24 MS. KOKS: Okay. Thank you .
.J
-
" ~.
,'-
2S MR. PRITZLAFF: We marked that as
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
21
1 Number 4 .
~
- 't~ ,
l--~4;-'~
'7`` 2 MS. KOKS: I got that. Thank you.
3 Q (BY MR. PRITZLAFF) On state 605, Excluded
4 Assets, what was excluded out of the deal?
5 A. Personal property.
6 Q. Okay.
7 A. It looks like there was deposits, energy
8 futures, things like that.
9 Q. And moving to the second page of the
10 agreement, there was another amendment to Section 3.1,
11 the purchase price was reduced?
12 A. Yes.
13 Q. And on Section 6.3, referring to personal
14 property, what is that? What was the effect of that
15 amendment?
16 A. I'm not following you on that one.
17 Q. I'm on Paragraph E.
18 A. Paragraph E. Okay. They are to remove it by
19 August 1st; and if not, it will be deemed abandoned.
20 And then the company is entitled to remove property
21 thereafter.
22 Q. What kind of property?
23 A. Personal property.
24 Q. Was it personal property related to anything
25 involving the Corrective Action System, the groundwater
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
22
1 remediation system?
~
'~.:' 2 A. Some, yes.
3 Q. What parts of personal property were involved?
4 A. I think compressors, electric switch gear,
5 some of the -- I think it was called process water
6 system or something like that, where they were treating
7 groundwater onsite.
8 Q. That was part of the personal property that
9 was part of the sale?
10 A. Well, it wasn't supposed to be part of the
11 sale. We had quite a dispute on what was to be sold and
12 kept with the building and what was to be sold to other
13 parties. So it was contested.
14 Q. Okay.
15 A. Transformers, gone, that I believed stayed
16 with the building, but went with the personal property.
17 Q. Monitoring wells?
18 A. No, not monitoring wells.
19 Q. Recovery wells?
20 A. No.
21 Q. Piping from the monitoring or recovery wells?
22 A. A lot of it was destroyed.
23 Q. SO is it your testimony that piping from
24 recovery wells was destroyed by --
25 A. By third parties, yes.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
23
1 Q. Who?
2 A. Purchasers and their contractors.
3 Q. Did you specifically witness any of those
4 parties destroying parts of the Corrective Action
5 System?
6 A. Out of the 38 buyers, yes, and their
7 contractors, yes.
8 Q. Which ones?
9 A. We have lawsuits pending or we did have
10 lawsuits on several occasions and the names I don't
11 know, but I believe you have a packet of all that
12 in forma t ion.
~
..::.!f[~J<
~ ,
13 Q. Let's keep going for now .
14 A. Okay.
15 Q. Section F, what is the effect of that
16 provision?
17 A. That looks like that I have the ability or
18 the Corporation, because this was assigned to the
19 Corporation, has the ability to hire Jennifer Stevens,
20 current environmental counsel to the Company, to
21 facilitate the buyer's dealings with Environmental
22 Protection Agency, Texas Commission, with respect to
23 environmental obligations associated with real estate.
24 That should be at buyerts sole cost and expense.
25 Q. So is it fair to say they loaned you their
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
24
1 environmental lawyer to assist you with environmental
~ 2 matters?
3 A. Well, I don't know if they could have done
4 that because she was representing them; and we had a
5 dispute on several items. So I think that might be a
6 conflict of interest, anyway.
7 Q. Did you utilize her to help you at all with
8 any environmental matters?
9 A. No, other than I think she filled the forms
10 out after I had closed on the Permit and Compliance
11 Plan. That was a month or two after the closing.
12 Q. SO she helped transfer of the Permit and
~ 13 Compliance Plan after the transaction?
14 A. Yes.
15 Q. Did you retain another environmental counsel
16 to assist you?
17 A. No.
18 Q. Did you retain any other environmental counsel
19 to assist you with compliance with the Compliance Plan?
20 A. No.
21 Q. Did you retain an environmental consultant to
22 assist you?
23 A. No.
24 Q. Switching to page 3, Paragraph H,
25 Post-Closure/Corrective Action Insurance, what is the
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
25
1 effect of that provision?
2 A. I think that was the insurance that I was
3 referring to that carried over after the closing until
4 2005.
5 Q. Did you -- did White Lion renew that policy?
6 A. We tried.
7 Q. How did you try?
8 A. We contacted whoever the -- I don't remember
9 who the company was. We contacted them, and they
10 declined coverage.
11 Q. When you say "we, " who do you mean by "we"?
12 A. I contacted them.
&)
,,````-l
13 Q. What is your role at White Lion Holdings, LLC?
14 A. Manager.
15 Q. Are there any other managers at White Lion?
16 A. No.
17 Q. Are there any other officers at White Lion?
18 A. No.
19 Q. Is there any other person other than you at
20 White Lion that makes decisions for White Lion?
21 A. Well, yes, I guess you could say that.
22 Q. Who would that person or persons
23 A. Well, it would be -- I made very little
24 decisions because of the conditions that I was under at
lJ
'\. -j.
25 the time. So it was driven mainly by the conditions on
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
26
1 the ground and the damages. And I was seeking advice
~ 2 from two lawyers. One is George Bamberg, and the other
3 was Stephen Doggett, who you know.
4 Q. Were they employed by White Lion?
5 A. No.
6 Q. Did White Lion retain them as counsel?
7 A. Yes.
8 Q. Did you separately retain them as counsel
9 individually?
10 A. Not until this recent action that the State
11 has taken, no.
12 Q. But --
13 A. They never represented me if that's what
14 you're aSking. I think that's what you're asking.
15 Q. Yes.
16 A. Yeah.
17 Q. But they are not employed by White Lion?
18 A. No. They are engaged by White Lion.
19 Q. They are not part of the management, formal
20 management structure of White Lion, correct?
21 A. No.
22 Q. In ter.ms of the for.mal management structure of
23 White Lion, it's just you, correct?
»
1---':"
'-... -->
24
25
A.
Q.
Yes.
So when you say, "We tried to renew the
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
27
1 financial assurance policy," work me through that
2 decision-making process. The decision-making process
3 was just solely conducted by yourself, correct, for
4 Whi te Lion?
5 A. Right. I had contacted -- again, I don't know
6 the name 0 f the company now. It's been ten or eleven
7 years ago. And I believe this gentleman in this
8 agreement, who was -- I don't know what his title was --
9 but he was a Vision Metals officer, part of the
10 agreement that was supposed to be transferred is this
11 insurance.
12 I didn't even know what it was,
`` 13 truthfully, until recent time because this is a whole
14 new area for me; but they said I didn't have the
15 experience or the qualifications to take over the
16 post-closure insurance. And so it kind of stopped from
17 there; but, yet, the coverage was still there because it
18 was part of our agreement. But I think the company was
19 kind of saying, "Hey, wait a second. This guy doesn't
20 qua 1 i f y for it." But, ye t , Vi s ion Me tal s say s , " It's
21 part of the contract." That's what kind of transpired
22 there.
23 I had a dialogue with them; and they
24 said, "You have to have experience running these
25 facilities." And I didn't have the experience.
Integrity Legal Support Solutions
www_intp0ritv-tpx~s_rnm
Bernard Morello - 9/19/2014
28
1 Q. Did you investigate what they would require
..~
~;``
2 for the experience needed to obtain financial assurance?
3 A. They just -- no. They asked me questions, you
4 know, like if I ran a facility. I said, "No. This is
5 the first time. I'm a real estate in
6 vestor." So, no, I did not -- it didn't go any further
7 than that.
8 Q. Did you seek out to retain anyone to assist
9 you that might have that type of experience?
10 A. Other than at the time at that time it was
11 Mr. Bamberg who was representing me because this was all
12 part of the closing, no, I didn't. He was the attorney
:D 13 that handled the transaction.
(Exhibit 5 marked.)
14
15 Q (BY MR. PRITZLAFF) Hold that one there for a
16 moment. We'll come back to it.
17 A. Okay.
18 Q. It's bringing me down a trail right now. I've
19 marked as Exhibit 5 a document, Permit for Industrial
20 Solid Waste Management Site. Have you seen this
21 document before?
22 A. Yes.
23 Q. This is the hazardous waste and solid waste
24 permit for the site, correct?
25 A. Yes.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
29
1 (Exhibit 6 marked.)
2 Q (BY MR. PRITZLAFF) I'm also handing you a
3 document that's been marked Exhibit 6, Compliance Plan
4 for Industrial Waste Management Site. Have you seen
5 this one before?
6 A. Yes.
7 Q. This document covers the remediation system at
8 the site, correct?
9 A. Yes.
10 Q. And it specifically covers the solid waste or
11 hazardous waste impoundments that were for.merly part of
12 the wastewater treatment plant system at the site,
i} 13 correct, the closure of those units?
14 A. Yeah. I don't know about wastewater.
15 Wastewater, to me, is sewage. So I'm not ...
16 Q. When I say "impoundments at the site, " you
17 know what I'm speaking of, correct?
18 A. The pits or the caps.
19 Q. The closed pit area.
20 A. The closed pits, yes.
21 Q. And the groundwater beneath it has been
22 contaminated with heavy metals that leach from those
23 pi ts, correct?
24 A. I believe it's stabilized. I think that was
25 the purpose of it, yes.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
30
1 Q. And there's a network of monitoring wells
r~ 2 stationed about the site, correct?
3 A. Yes.
4 Q. To monitor the groundwater beneath the site?
5 A. Yes.
6 Q. And there also used to be a system of recovery
7 wells to draw groundwater out of that site, correct?
8 A. Yes.
9 Q. Please turn to page 20 of 24 of the Compliance
10 Plan, Section XI, Financial Assurance.
11 A. Yes.
12 Q. Are you there?
~
"- ....
,;.``:::
~-" 13 A. Yes.
14 Q. How much financial assurance does this
15 Compliance Plan require for that property?
16 A. It shows 574,000 upon issuance.
17 Q. How much financial assurance had Vision Metals
18 had in the policy that you were attempting to have
19 transferred?
20 A. I think it was about the same amount.
21 Q. Did you were you aware of this provision?
22 A. No -- you mean at the time I purchased or
23 after the fact? I guess I need for you to expand on
24 that question a little bit.
25 Q. When did you become aware of this provision?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
31
1 A. After the auction and when this issue of
2 environmental things came up, after I scratched my ear
3 at the auction.
4 (Exhibit 7 marked.)
5 Q (BY MR. PRITZLAFF) I have here what's been
6 marked as Exhibit Number 7, entitled Compliance Plan
7 Application. Have you seen this before?
8 A. Yes.
9 Q. And on page 5, is that your signature?
10 A. Yes.
11 Q. And the last two pages contain a letter and
12 enclosure signed by Jennifer Stevens, before-mentioned
31 13 Vision Metals' environmental counsel, basically just
14 transmitting the document and payment for this transfer
15 of the Permit and Compliance Plan, correct?
16 A. Yes.
17 Q. So when you said earlier that she helped you,
18 this basically was her only step, was a formality of
19 assisting you to transact this application to
20 transfer
21 A. She didn't help me. She was representing the
22 seller, not my interest.
23 Q. Okay.
24 A." Yeah. This occurred after the closing of the
,):'.
\,
2S property.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
32
1 Q. And she was just facilitating the transfer of
~ 2 the permit for both parties?
3 A. I think that's a fair statement, yes.
4 (Exhibit 8 marked.)
5 Q (BY MR. PRITZLAFF) I have a document that's
6 been marked here as Exhibit 8, a transmittal letter from
7 TCEQ to Bernard Morello. Have you seen this before?
8 A. It's been a long time. That's who it's
9 addressed to. So I assume I've seen it ten, eleven
10 years ago.
11 Q. And attached to it are two sheets confirming
12 the transfer of both the Permit 50129 and the Compliance
~ -'~
\-f-.'/``~\
13 Plan 50129 to White Lion Holdi.ngs, LLC, correct?
14 A. Yes.
15 Q. And that's effective July 23, 2004 for both
16 the Compliance Plan and the Permit, correct?
17 A. Yes.
18 Q. Did the TCEQ contact you concerning the
19 financial assurance?
20 A. Well, yeah, I would assume there's probably
21 something in that letter. So that's one way of contact,
22 yeah. I would say yes.
23 I don't understand. Do you mean like a
24 telephone call?
25 Q. Do you recall a telephone call from TCEQ?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
33
1 A. Well, I had a dialogue with an Ellie Weinert
2 from TCEQ. So we may have talked about it at the time.
3 Q. Was this after the permit was transferred?
4 A. We had several conversations up until the time
5 the State filed a lawsuit, and she said she couldn't
6 talk to me anymore. And I haven't had a conversation
7 with her since then. I don't know the gist of the
8 conversation that far back.
9 Q. At least as of July 23rd, 2004, you were aware
10 of the financial assurance obligations at the site,
11 correct?
12 A. Yes, I believe it was in place at that time.
13 (Exhibit 9 marked.)
14 Q (BY MR. PRITZLAFF) I'm handing you a document
15 that's been marked Exhibit 9, correspondence from TCEQ
16 to Bernard Morello, Sole Manager of White Lion Holdings,
17 LLC, dated September 20th, 2004. It's been a long time,
18 but do you recall this letter?
19 A. Not really, you know. It's been ten years
20 ago. Not specif ics about it. I mean, I can read it;
21 and it might bring some memories.
22 Q. Why don't you go ahead and take some time to
23 review it?
24 A. Okay.
\
,
~
--.,
-:'
25 MS. KOKS: While he's doing that, Craig,
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
34
1 can you tell me again what it is? I was trying to write
2 all this down. It's a letter dated what?
3 MR. PRITZLAFF: September 20th, 2004,
4 RE: Financial Assurance, site.
5 MS. KOKS: Thank you.
6 MR. PRITZLAFF: State Bates Number 626,
7 627.
8 A. Okay. I read it.
9 Q (BY MR. PRITZLAFF) Does that refresh your
10 recollection of events?
11 A. Yeah. It looks like she was responding to a
12 letter that I had forwarded to her.
13 Q. The letter references the prior, in-place
14 Vision financial assurance, does it not?
15 A. Yes.
16 Q. And is it fair to say that the TCEQ advised
17 you there on page 2 that, "We understand that financial
18 assurance for this permit and compliance plan currently
1~ is in effect through an insurance policy issued by
20 Zurich North America Insurance to the previous facility
21 owner, Visions Metals, Inc. However, as we stated
22 in our August 27th, 2004 letter to you, White Lion, as
23 the new owner and operator, is required to establish
24 financial assurance with" -- probably should be
25 "within" -- "six months of the ownership change. To
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
35
1 date, this has not been done."
2 Further down in the letter, "Please
3 provide adequate financial assurance, as is required
4 under 30 TAC, Chapter 37, Subchapter P, by October 6th,
5 2004."
6 Is that an accurate reading of those
7 provisions of the letter?
8 A. Yes, uh-huh.
9 Q. Did you -- did White Lion provide financial
10 assurance by October 6th, 2004?
11 A. Yes. Because of the financial insurance that
12 I assumed through the purchase, yes. I believe it
~ 13 expired January of 2005, I think it was.
14 Q. Do you agree that TCEQ disagreed that the
15 Zurich North American insurance policy that you believe
16 was applicable was not applicable?
17 MS. KOKS: Objection, form.
18 Q (BY MR. PRITZLAFF) If you understood that,
19 you can answer.
20 A. I think there was a question whether it was
21 applicable or was not applicable. We were having a
22 dialogue about that. That's when I called whoever
23 Zurich was represented by.
24 (Exhibit 10 marked.)
25 Q (BY MR. PRITZLAFF) I have here a document
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
36
1 marked as Exhibit 10, dated October 7th, 2004, State 630
•
*
-- 2
3
to 631. This is correspondence from TCEQ to Bernard
Morello, Sole Manager, White Lion Holdings, LLC,
4 correct?
5 A. Yes.
6 Q. Why don't you take a moment to read that?
7 A. Okay.
8 Q. What is your understanding of this letter?
9 A. Kind of a backup to the previous letter, just
10 saying that they have not received an acceptable
11 financial mechanism due on October 6th.
12 Q. Was an acceptable financial assurance
13 mechanism ever provided to TCEQ?
14 A. From my understanding, up until January of
15 2005, it was; but I don't in any way, shape, or form
16 expect to be an expert in this area. So I really don't
17 know. The purchase agreement, obviously, says it's to
18 be transferred. So I believe they had paid the policy
19 in full, and they received no refund. So it was just
20 transferred to White Lion Holdings.
21 Q. Was a copy of that transferred policy in White
22 Lion's name submitted to TCEQ?
23 A. I don't know if the lawyer, Mr. Bamberg,
24 submitted that or not -- or Jennifer Stevens. I would
25 not know that. I wouldn't have probably handled that,
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
37
1 anyway. It would have been the lawyers' responsibility
r,~ 2 to do that, I would think, at the closing or -- I
3 don't -- no, I didn't -- I didn't -- it wasn't my
4 responsibility as part of the purchase agreement to get
5 that transferred. It was my understanding it was
6 transferred.
7 Q. When you began to receive these letters from
8 TCEQ in Septeinber and October, what di.d you do to
9 inquire about the financi.al assurance?
10 A. I had a very good dialogue with the EPA out of
11 Dallas, and they were the ones that were helping me
12 along. And I asked them about this; and they said,
.~
,-f{/ 13 "Well, that's a prorated number; and that is based upon
14 many years ago when the plan was started. It was in the
15 Eighties sometime, and that should be reduced." Because
16 I didn't know anything about this. This is all new to
17 me. I didn't even know what this was about.
18 So they said, "You can get that reduced."
19 So any of the correspondence that you see, like this
20 letter here, correspondence, that was written by EPA and
21 signed by me.
22 MR. PRITZLAFF: Objection, nonresponsive.
23 Q (BY MR. PRITZLAFF) My question is: When you
24 received this correspondence from the TCEQ, how did you
25 respond to TCEQ with respect to the financial assurance?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
38
1 A. I first called up the Dallas office of EPA and
2 ask them, "What is this? What does this mean?" And
3 they would kind of explain to me what it meant. Again,
4 I think I had several conference calls with Eleanor,
5 "Ellie" Weinert; and she would kind of go through the
6 process with me, also.
7 Q. Did you investigate how much it would cost to
8 obtain financial assurance in the amount specified in
9 the Compliance Plan?
10 A. Yes. I think actually on the policy there was
11 a number -- and I don't remember but it was a huge
12 number for financial assurance. I don't know what that
1D,``
. .w
~_;;-
.
'"'it!: ~'-"
13
14
number is, but I got sort of like a dec sheet of the
policy and it showed how much the premium was.
15 Q. Who at White Lion would analyze the financial
16 ~lications of obtaining financial assurance as
17 specified in the Compliance Plan, Section XI?
18 A. I mean, I was the only one; but I didn't know
19 anything about it. So, again, I didn't know anything
20 about it. So I was just asking these other folks that I
21 mentioned at EPA and TCEQ. SO they were kind of helping
22 me along.
23 Q. Could White Lion Holdings, LLC afford to host
24 the financial assurance as specified in Section XI of
. "
J ' -``~:
"
25 the Compliance Plan?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
39
1 A. No. That's why they denied my application.
2 They sent out an application; and I was not experienced
3 enough to do this, to run an operation like this. And I
4 may be confusing that with the permit, too, because I
5 think the permit said the same thing. They waived any
6 experience at all.
7 Q. To your knowledge, did they base their
8 decision on the financial wherewithal of White Lion
9 Holdings, LLC?
10 A. They may have.
11 Q. Were you required to submit financial
12 documents to the insurance company as part of your
13 application to obtain financial assurance?
14 A. I think what I told them is probably all the
15 assets they have is just the facility, and there's a
16 loan against it. So that was it. It was new, so.
17 Q. Which company were you speaking with to obtain
18 financial assurance?
19 A. Again, I don't know. Whoever represented
20 Zurich Insurance. I don't know who that is.
21 Q. Did you investigate any other companies to
22 obtain financial assurance?
23 A. No.
24 Q. Why not?
,~
.Y
25 A. Well, you know, first, I didn't know about it;
Integrity Legal Support Solutions
www.inteqritv-texas.com
Bernard Morello - 9/19/2014
40
1 and, then, according to what they were telling me, this
~;~ 2 is a very, very specialized area of insurance. There's
3 very few people that sell that product.
4 Q. When you say "at first I didn't know about
5 it," you knew about it at least as of July 23rd, 2004,
6 correct?
7 A. I -- yeah, according to the letters, yes.
8 Yes.
9 Q. Did anyone -- strike that.
10 As the sole decisionmaker at White Lion,
11 you allowed White Lion to not provide financial
12 assurance as specified in Section XI of the Compliance
~ 13 Plan, correct?
14 A. I don't know if I can say I didn't allow. I
15 didn't even know what it is or what it's even for. It's
16 not did I allow. All I know is the premium was
17 extremely high, and I could not afford that. I was just
18 starting a new project, so.
19 Q. So as the sole decisionmaker at White Lion,
20 you, for whatever reason, permitted White Lion to not
21 obtain financial assurance, correct?
22 A. Yeah, for whatever reason. Yes.
23 Q. As the sole decisionmaker for White Lion, you
24 caused White Lion to not obtain financial assurance as
25 specified in Section XI of the Compliance Plan, correct?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
41
1 A. No.
2 MS. KOKS: Objection, form.
3 A. I think I answered it already: No.
4 Q (BY MR. PRITZLAFF) You individually allowed
5 the financial assurance at the facility to lapse,
6 correct?
7 A. No.
8 Q. You individually permitted the financial
9 assurance at the facility to lapse, correct?
10 A. No.
11 Q. Who permitted the financial insurance to
12 lapse?
13 A. I guess it would fall back on the condition
14 that I was under. I could not provide financial
15 assurance. I was not acceptable for that, for financial
16 assurance. So it's not like -- first, I didn't know
17 what it was for; secondly, I could not really afford it,
18 starting a new project; and, thirdly, the folks for both
19 EPA and TCEQ were telling me that's based upon a
20 Compliance Plan that is -- I think it was 30 or
21 32 years. And it's prorated over a period of years; so
22 that number would be drastically reduced. So those
23 elements, it's like putting somebody in a car that
24 doesn't know how to drive.
25 Q. Is it fair to say you didn't know how to drive
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
42
1 Whi te Lion?
2 A. Yeah.
3 MS. KOKS: Objection, form.
4 A. I guess so. I'd say that.
5 Q (BY MR. PRITZLAFF) Did you look at retaining
6 any consultant to assist you or advise you with respect
7 to obtaining financial assurance?
8 A. No.
9 Q. Let's go back to Exhibit 4, please.
10 A. Okay.
11 MR. PRITZLAFF: Back on Exhibit 4, Mary.
12 MS. KOKS: Thank you.
13 Q (BY MR. PRITZLAFF) Page 3, Section I,
14 Mr. Morello, why don't you take a moment to read that?
15 A. Section 5?
16 Q. "I" as in "indigo. "
17 A. Okay.
18 Q. It's entitled Utilities. Read that and tell
19 me what your understanding of that provision is.
20 A. Okay.
21 Q. You've completed reading it?
22 A. Yes.
23 Q. What is the ANTS facility?
24 A. I have no idea.
\
'.
:9
-"',-
'
25 Q. Does the term "Acid Neutralization Treatment
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
43
1 System" sound correct?
2 A. Yes.
3 Q. Do you know what the Acid Neutralization
4 Treatment System is?
5 A. I think that was the process that I referred
6 to earlier. That's what I believe it is.
7 Q. Do you know whether that ANTS facility was
8 utilized for treatment of groundwater recovered from the
9 Corrective Action System?
10 A. Yes, I believe so.
11 Q. This provision says that the buyer will agree
12 to continue to run the ANTS facility, correct?
13 A. Right.
14 Q. So this ANTS facility and the treatment system
15 associated -- which is the treatment system associated
16 with the Corrective Action System, was not part of the
17 personal property that was sold separately, correct?
18 A. No, I'm not quite sure of that. I can't say
19 "yes" or "no." I do not know that.
20 Q. But, in any event, this provision says that
21 the buyer shall continue to run the ANTS facility,
22 correct?
23 A. Right.
24 (Exhibit 11 marked.)
.)
25 Q (BY MR. PRITZLAFF) Hold that one. I have
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
44
1 here Exhibit 11.
2 MR. PRITZLAFF: Mary, Assignment of Real
3 Estate Purchase Agreement, which we marked as 11.
4 MS. KOKS: Okay. Thank you.
5 Q (BY MR. PRITZLAFF) Mr. Morello, do you want
6 to take a moment to read that and explain what this
7 document is?
8 A. This would be because at the time I showed up
9 at the auction, I didn't have a corporation; and I
10 believe the purchase agreement -- and maybe it's this
11 agreement; I'm not real sure -- allowed me to assign the
12 facility to a corporation. I believe that's what this
('
13 is. Yeah.
14 Q. Who did you assign it to?
15 A. To White Lion Holdings.
16 Q. Okay. So you initially purchased the facility
17 and then transferred your rights, duties, and
18 obligations under the real estate contract to White
19 Lion?
20 A. Right. I assigned my rights to White Lion
21 Holdings, yeah.
22 Q. I just wanted to make sure we had that on the
23 record. So when we're speaking of the duties under this
24 agreement, it's now flowing to White Lion; with you as
.J 25 sole owner?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
45
1 A. Correct.
2 Q. So now, back to Exhibit 4, which is the one
3 right in front of you.
4 A. Okay.
5 Q. Back to the amendment. Back to page 3,
6 Section I.
7 A. Okay.
8 Q. We've discussed the buyer continues to agree
9 to run the ANTS facility after closing and to continue
10 to run any and all facilities necessary to comply with
11 the environmental obligations associated with the real
12 property, correct?
13 A. Yes.
14 Q. And I want to clarify what you've stated
15 earlier with respect to the personal property. That was
16 excluded or otherwise sold separately by Vision,
17 correct?
18 A. Yes.
19 Q. Okay. This provision states that the buyer,
20 you, White Lion, would continue to run the Corrective
21 Action System, correct?
22 A. Run ANTS facility. So that's what it says,
23 ANTS.
24 Q. And continue on to that same paragraph.
)
25 " ... and to run any and all facilities necessary to
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
46
1 comply with the environmental obligations associated
~ 2 with the"
3 A. Yes, right.
4 Q. Would you agree that that includes the
5 Corrective Action System?
6 A. Yeah. But, you know, corrective action -- I'm
7 you know, a little confused. Corrective Action System,
8 Compliance Plan, I'm a little confused on the terms.
9 Q. Sure. Well, let's explore what the Corrective
10 Action System is then.
11 A. Okay.
12 Q. Let's turn to the Compliance Plan --
/1 _,~ 'f'~i.'
,:``.
13 A. Okay.
14 Q. -- which is Exhibit 6.
15 A. Okay.
16 Q. I'd refer you to page 4 --
17 A. Okay.
18 Q. -- entitled Corrective Action Systems.
19 A. Okay.
20 Q. Why don't you read through Section II for a
21 moment and then tell me when you're ready.
22 A. Okay.
23 Q. Did that help refresh your recollection of
24 what the Corrective Action System is?
)
,
, . -'
25 A. Well, yes -- not my recollection. I just -- I
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
47
1 don't know these terms you're using. I know "Compliance
2 Plan" because I see it here. Okay. Yes.
3 Q. What is your understanding of the Corrective
4 Action System?
5 A. It -- what page is that on?
6 Q. Page 4 of 24.
7 A. To install and operate a Corrective Action
8 System with groundwater monitoring background wells,
9 point of compliance wells.
10 Q. And then observation wells and other wells to
11 remediate and/or contain contaminated groundwater,
12 correct?
13 A. Yes.
14 Q. And then if you will turn to Table 2, page 23
15 of 24, do you agree that this page comprises a list of
16 those wells that are the Corrective Action System?
17 A. I believe that's what's referred to, yes.
18 Yeah.
19 Q. So in Section A there are three background
20 monitoring wells, correct?
21 A. Yes.
22 Q. And in Section B there are 13 points of
23 compliance wells, monitoring wells, correct?
24 A. According to this, yes.
25 Q. And in Section C there are five recovery
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
48
1 system wells, correct?
2 A. Yes.
3 Q. And in Section D there are 9 wells associated
4 with monitoring wells, observation wells, correct?
5 A. Yes.
6 Q. So there's approximately 26 total wells,
7 correct?
8 A. I haven't added them up, but I believe what
9 you say. I haven't added them up.
10 Q. Do you want to add them up yourself?
11 A. No. I believe you.
12 Q. If you'll note on Section C, Zone 1, RW-26 ,
J 13 Recovery Well 26
14 A. Okay.
15 Q. -- so that gets you to 26 total wells?
16 A. Yes.
17 Q. Some wells, if you'll note, have an A, B, or C
18 behind them.
19 A. Okay.
20 Q. Do you know what that means?
21 A. No, I do not.
22 Q. Do you now have an understanding of the
23 Corrective Action System, of what it involves?
24 A. Basically, yes.
25 Q. Okay. Would you agree that that system was
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
49
1 not part of the personal property sold by Vision Metals?
2 A. No, I do not agree. As I said before, the
3 utilities and the lines were cut and severed;
4 trans formers were removed. So part of this process
5 system was removed. So I think it was all linked
6 together.
7 Q. When was the process system removed?
8 A. Part of it was removed, I believe, right at
9 the time of the sale. The buyers came in there. And
10 then afterwards, whatever was kind of left is when I
11 took it down.
12 Q. What did you take down?
13 A. There was tanks and -- that's all I remember
14 were jus t 1 arge tanks.
15 Q. You yourself?
16 A. Yes.
17 Q. What equipment did you use?
18 A. We had cranes. I had help, too. I didn't do
19 it all myself, but I had cranes to take it down.
20 Q. Did you take out the monitoring wells?
21 A. No.
22 Q. Who took out the monitoring wells?
23 A. I think the monitoring wells had been damaged
24 for years. If you're referring to the wells around the
25 mounds, we didn't take them out. They were damaged over
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
50
1 the years.
~
-:~ - ~ "
. 2 Q. What did the monitoring well look like?
3 A. PVC and the metal cap over it.
4 Q. How tall was the metal cap?
5 A. I don't know. Maybe 3, 4 feet, 2 feet,
6 protruding out of the ground.
7 Q. Was it colored?
8 A. Yes.
9 Q. What color?
10 A. White and orange, I believe.
11 Q. Were they highly visible?
12 A. Yes. Oh, sure .
-
~
,,'``~-:~'
. 13 Q. They were visible onsite in 2004?
14 A. You know, I can't say in 2004 that I walked
15 back there. You could see the ones from the building,
16 yes; but it covered a fairly good-sized area. So I
17 don't know, you know, if all of them were there at that
18 time. I don't know.
19 MR. PRITZLAFF: We've been going for over
20 an hour. Do you need a break?
21 THE WITNESS: No, I'm fine.
22 MR. PRITZLAFF: Mary, are you okay?
23 MS. KOKS: Yeah, I'm all right.
24 MR. PRITZLAFF: Okay. Let's proceed for
25 a little while longer.
Integrity Legal Support Solutions
www.inteqritv-texas.com
Bernard Morello - 9/19/2014
51
1 Q (BY MR. PRITZLAFF) Tell me a little bit about
f'~.J> 2 the site itself. What was the plan for the site?
3 A. You mean once I had acquired it?
4 Q. Correct.
5 A. First, I just wanted to buy the farmland and
6 the buildings. That's what I showed up at the auction
7 for. The plan was to as soon as the this is right
8 after the closing. I believe the buyers moved in right
9 away, personal property buyers. And the goal was to get
10 the buildings empty, because they bought all the
11 personal effects, and to lease it out, lease each
12 building o~t. That was kind of the plan. That plan
,~ 13 dramat.ically changed at the end of the removal date.
14 Q. Bow so?
15 A. The buyers, the personal property buyers --
16 and I'm not saying all 38 of them because some of them
17 acted extremely responsible if they did damages. But
18 several of them did extensive damage to the utility
19 infrastructure there. It was so unsafe to use anything
20 there without shutting everything down because there was
21 open water lines. There was open gas lines. There was
22 open electrical lines, high voltage. Whatever other
23 kind of lines, whatever utilities there were, they were
24 virtually destroyed. And the way I've compared it is
25 going into a war zone; and after the war is over with,
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
52
1 things are cannibalized. I mean, that's basically what
2 it looked like after the removal process.
3 Q. Let's say in 2004, how often would you be at
4 the site?
5 A. During the removal, every day, even Saturdays
6 and Sundays.
7 Q. How engaged were you in the cleanup process?
8 A. Are we talking about cleanup or removal of
9 personal property?
10 Q. Tell me how involved you were and how you were
11 involved in sort of a general, broad sense.
12 A. Well, I was trying to protect and have the
13 buyers respect the real property. And so I was from one
14 end of the facility to the other and there was so much
15 going on and the buyers had -- which was probably the
16 worst thing -- unfettered access to the facility. They
17 had a short window, depending on what they purchased, to
18 remove it from the facility. So they took whatever
19 measures they could with total disregard for real
20 property and the buildings. They just went in there and
21 did whatever they could to get their equipment out.
22 That's all they were interested in.
23 And it wasn't up to me even though I
24 fought this. The auctioneer had control of these
25 buyers, and that's what started these damage lawsuits is
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
53
1 that they didn't want to fix. Some did. Some acted
2 real responsibly. They came to me and said, "Hey, we
3 did some damage; we'll fix it."
4 I said, "That's fantastic."
5 Others just walked away, just said,
6 "Forget it." And so after -- I don't know. It was
7 after a year or something that notices were sent out we
8 finally filed a lawsuit and proceeded, you know, to go
9 after them.
10 Along the way -- if you want me to keep
11 going here.
12 Q. Yes, please.
13 A. -- they wanted me to mitigate the damages. So
14 I was -- my plan basically for the facility was thrown
15 out because I realize when somebody buys a facility like
16 that I would have some work to do, cleanup work to do;
17 it's not tidy. The floors were not going to be where
18 you could eat off of them. So I knew there was some
19 cleanup I had to do, but we're talking major cleanup.
20 There were estimates out there well over a million
21 dollars worth of damage. That was unforeseen. I had no
22 idea that was going to happen.
23 You know, the personal property buyers
24 and the auction company were trying to pretty much get
25 rid of me so they could do their removal. And they were
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
54
1 threatening that I was interfering with them, and I was
~ 2 only trying to protect the property. And, you know, the
3 dynamics of the project and the direction of the project
4 turned 180 degrees when all that happened. And so it's
5 been a maj or struggle.
6 And I haven't wavered one bit on it from
7 day one. I'm as excited about the project today as I
8 was back then. And then when the State came down and
9 started enforcing this in 2013, that moved any of my
10 efforts to continue to now efforts to deal with the
11 State, in all honesty.
12 So I've been lacking. And the place
13 looks -- it doesn't even look like the same place that
14 it did from the time I saw it in the beginning before
15 the Company bought it. And it doesn't look anything
16 like it did after the removal. It's a totally changed
17 place. I think there has been a video that I believe
18 Mr. Doggett offered to you at one time; and, as I said,
19 it looked like a war zone. And it looks presentable.
20 That was my goal, to make it look presentable, enticing
21 for industry or storage to lease.
22 And it's been -- because I've had no
23 utilities, it has been an extremely difficult task to do
24 that. So it's been used for staging basically because
25 there is no utilities. That's it in a nutshell.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
55
1 And maybe I went on too much or didn't
~ 2 answer your question, but I don't think I've ever
3 expressed that or you maybe don't know any of the
4 background. I know your big focus is this area here,
5 but I had a huge amount of responsibilities that was
6 undertaken. And they just got larger as it progressed,
7 so.
8 Q. Anything you want to add on to that; or does
9 that encapsulate the situation as you saw it 2004, post
10 purchase to date in terms of what was going on at the
11 site?
12 A. Yeah. I mean, you know, there was no option
13 once the damages occurred ln what could be done. That
14 restricted a lot of things. I had no experience. I was
15 buying some metal buildings on a piece of ground and
16 some farmland and trying to lease it out; but I
17 probably -- after that happened, I took on something
18 much greater than I expected. And they were
19 circumstances out of my control when other people
20 damaged the property. I have high respect, myself, for
21 other people's possessions; but other people in this
22 world do not.
23 Q. Did you make any decisions for White Lion to
24 retain additional employees to help you monitor the
25 situation at the site?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
56
1 A. When you say "monitor," I don't understand
2 what you mean by that.
3 Q. Well, when you were explaining what was going
4 on and you were having to run from one point to the
5 other and people were coming into your facility with
6 unrestricted access and out of the facility, is it fair
•
7 to say that you were stretched thin, trying to monitor
8 everything going on?
9 A. Well, the buyers were trying to go back -- and
10 the auction company -- go back to the bankruptcy court,
11 saying I was interrupting the removal operations. And
12 there was a window. It depended on what you acquired
13 there as personal property; but there was a window to
14 get things out, a 30-day, 60-day, 90-day window.
15 And it was a difficult task because some
16 people's personal property was in front. This was a
17 jam-packed facility with equipment allover; and to get
18 one machine out, you had to move another machine. So
19 there was a lot of argument among the buyers of, "You've
20 got to get your machinery out so I can get mine out."
21 In the meantime, my concern was damage to
22 the facility. That was my principal concern; but they
23 were trying to get me out of the picture as much as they
24 could so they could, you know, get their possessions
25 out. I think because it was such a short window -- and
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
57
1 this is -- I'm only saying this as, I guess, in
2 hindsight, you could say. I think what happened is the
3 creditors wanted to close out the estate; and they were
4 forced to just say, "Get this stuff out." Because my
5 understanding is they had two other auctions at this
6 facility to try to sell it. I didn't attend it. I
7 didn't know about it until after. So it was a going
8 concern as a pipe manufacturer.
9 Q. Was all that work completed by August 1st,
10 2004?
11 A. August 1st? No. There was a buyer that
12 stayed longer, and they had they needed more time to
,::I 13 remove some of there equipment out of there.
14 Q. Just one buyer?
15 A. One of the buyers, yes.
16 Q. So most of the work, then, was completed by
17 August 1st?
18 A. No, there were several people that just walked
19 away. The buyer I'm referring to, they were actually
20 the buyer of the facility; but they were going to buy
21 the whole thing, lock, stock, and barrel, not as a going
22 concern, but all the machinery. And they
23 Q. They weren't the buyer, prospective purchaser?
24 A. No, no, no. They were the buyer of the real
)
25 and personal property.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
58
1 Q. I thought you were the purchaser of the
.~ ,'..::, ``
-, 2 property?
3 A. Well, what happened, the way they set it up is
4 they tried to -- wanted to maximize the estate. So they
5 auctioned it in two different ways, either as a bulk
6 bid, real and personal property, and as a bid just for
7 the real property and then a bid for that personal
8 property. And somebody else was the higher bidder. It
9 happened to be one of the associates of the buyer; but
10 there was a several-million-dollar check, I guess, that
11 came back insufficient. So that's when it fell back on
12 me. And that's kind of how that -- I was not really the
13 first buyer there. I was kind of the fallback buyer.
14 Q. You can't disagree that you're the owner of
15 the property?
16 A. White Lion is the owner of the property, yes.
17 Yes.
18 MS. KOKS: Can we clarify what we mean by
19 "the property"? I think there's been some confusion on
20 that point.
21 Q (BY MR. PRITZLAFF) What does "the property"
22 mean to you?
23 A. Well, when I had raised my hand or scratched
24 my ear, whatever you want to call it, at the auction, it
~
.)
- - -~"
25 was broken down into farmland and then vacant land and
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
59
1 then plant land. The plant encompassed 37 acres. And
2 then there was some vacant land that was a forested
3 area, I guess you would call it; it was covered in trees
4 at the time and that was adjacent to the plant. And
5 then beyond that is the farm ground.
6 Q. And the far.m ground encompasses 115 acres,
7 correct?
8 A. Yes. The farmland is owned by myself and I'm
9 not exactly sure of the acres, but I believe it's 115.
10 I believe you're probably right there.
11 Q. And so the balance of the real estate that was
12 the subject of the real estate purchase agreement stayed
13 with White Lion Holdings. The farmland component of
14 approx~tely 115 acres, you later conveyed -- or it was
1S conveyed to you specifically, Mr. Morello?
16 A. Right.
17 Q. When all of the personal property removal was
18 occurring was post-sale, mostly pre-August 2004,
19 correct?
20 A. The majority, other than some people just
21 wal ked away.
22 Q. Did you direct White Lion to retain any
23 additional personnel to assist with the oversight of the
24 personal property removal?
25 A. No.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
60
1 Q. You mentioned White Lion was then embroiled
2 or brought a series of lawsuits against some of the
3 entities involved with the removal of the properties,
4 correct?
5 A. Right.
6 Q. Did any of those suits concern specifically
7 strike that question, and let me start over.
8 Did any of those lawsuits specifically
9 address any of those entities that were sued causing
10 White Lion to not comply with the Permit or the
11 Compliance Plan?
12 A. Yes.
13 Q. In which lawsuits was that claim specifically
14 made?
15 A. Any lawsuits -- and I don't have the names of
16 the parties -- but any lawsuits that stated in there
17 about the utilities or damage to utilities. And this
18 keeps in my mind a professional and workmanlike manner.
19 Those are the parties that we filed lawsuits against,
20 and I don't have specific names for you.
21 Q. Was a specific claim made based upon -- for
22 interference with White Lion's ability to comply with
23 the Permit or Compliance Plan?
24 A. I don't know how the lawsuit was framed. I
25 don't know that. Again, that was ten years ago. I
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
61
1 don't know. I can't answer that.
2 Q. Was a specific suit filed against any entity
3 for damage done to the Corrective Action System?
4 A. I don't know if it's ever mentioned the word
5 "Corrective Action System" in the lawsui ts. I can't say
6 that because I haven't seen those for years. I don't
7 know.
8 Q. Has any of those lawsuits concerned damage to
9 a moni toring well?
10 A. Again, that's the same answer. I don't know.
11 I haven't seen those lawsuits for years. So I don't
12 know.
13 Q. Do any of those lawsuits concern damage to a
14 recovery well?
15 A. Same answer. I don't know.
16 Q. Did you specifically see a party remove a
17 monitoring well?
18 A. No, not -- no.
19 Q. Did you specifically see any person remove any
20 monitoring well at the site?
21 A. Well, when you say "remove," I don't know
22 maybe you can explain what you mean by "remove."
23 Q. You previously described the monitoring wells
24 on the site as a 3-foot yellow box sticking out of the
25 ground?
Integrity Legal Support Solutions
www.inteqritv-texas.com
rnard Morel - 9/19/2014
62
1 A. Right.
~
!1i,'4i
"
2 Q. Did you see anyone remove any of those ye``ow
3 boxes?
4 A. I can say that I saw it damaged. I t nk it
5 Ils back to the ent, is what I'm trying to t to.
6 Did y intenti ly damage them? No, I don't t nk
7 so. No.
8 Q. Did you notify TCEQ of this damage?
9 A. No.
10 Q. Why not?
11 A. I didn't even know I had to.
12 MR. TZLAFF: Why don't we take a
.]) 13 break? We've been going for over an hour and a half.
14 MS. KOKS: That's e with me. Thank
15 you, guys. I'm going to put you on mute so that you
16 don't hear any background noise.
17 MR. PRITZLAFF: 's reconvene in
18 ten minutes. Is that too much time or too little?
19 THE WITNESS: No, that's fine.
20 MS. KOKS: That's fine. I'll tell you
21 what, I'll just call back in.
22 MR. PRITZLAFF; Okay. I'm going to leave
23 the line open.
24 MS. KOKS: Okay. I'll call back
25 MR. PRITZLAFF: Okay.
Int ty Legal Support Solutions
www.intearitv-texas.com
Bernard Morello - 9/19/2014
63
1 (Off the record from 2:43 to 2:54 p.m.)
2 MR. PRITZLAFF: Okay. We're back on the
3 record. And, Mary, you're still on, right? I just want
4 to make sure.
5 MS. KOKS: I am, yes. Thank you.
6 Q (BY MR. PRITZLAFF) Did you insure the site?
7 A. Yes.
8 Q. In what name did you insure the site?
9 A. I believe it was -- liability was Bernard
10 Morello and White Lion, I believe.
11 Q. SO the policy is just for the broad liability
12 coverage, correct?
13 A. Yes.
14 Q. It was both in your name, Mr. Morello, as well
15 as White Lion Holdings?
16 A. I believe so. You're talking about what --
17 you know, I don't know what year you're talking about.
18 Q. Initially, in 2004.
19 A. I don't know. Now, I know because I renewed
20 the policy; and both names are on there. It's for
21 liability. And I don't know back then. I can't answer
22 that.
23 Q. Okay. Since you purchased the facility, the
24 for.mer Vision Metals site, has anyone else had control
25 of that site?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
64
1 A. What do you mean by "control"?
2 Q. What would you say "control" means?
3 A. Possession.
4 Q. Has anyone else had possession of the
5 facility?
6 A. Yes.
7 Q. Who?
8 A. Tenants.
9 Q. From what time periods?
10 A. I don't know the first tenant I had there what
11 the time period was, but the last tenant is just moving
12 out now. So I don't know.
1l
-'r:i``;
, '\'``-~
, "
13 Q.
A.
Has anyone else operated the site?
There's really no operation going on. It's
14
15 not a manufacturing facility. So I think that's what
16 you mean. I'm not sure. Maybe you can explain.
17 Q. Well, let's go about it a different way. How
18 often are you at the faci1.ity?
19 A. Most weekdays and oftentimes on Saturday.
20 Q. How many hours do you spend out there?
21 A. Probably, a guess it varies a lot, but
22 sometimes 60, 80 hours a week.
23 Q. How long have you been out there from 60 to
24 80 hours a week?
,) " - ~
25 A. Since I started.
Integrity Legal Support Solutions
www.inteqritv-texas.com
Bernard Morello - 9/19/2014
65
1 Q. When did you start?
2 A. Right after I got possession of it, after the
3 buyers were finished removing.
4 Q. Since April of 2004 to the present?
5 A. No. They were in there, still, up until
6 August or so, whatever it was, when the last buyer moved
7 out. And then tenants moved in; and they have
8 possession of the property, separate areas, you know.
9 Q. So since at least some point in 2004 to the
10 present, you've been at the site 60 to 80 hours a week?
11 A. Pretty much so, yes.
12 Q. Who at White Lion is responsible for making
fD
. ,,,,,:;.,To..
\.<{;-Jo-
13 decisions about what transpires on the site?
14 A. Today or back then? I don't understand what
15 you mean by that, for the timeframe.
16 Q. Let's say in the '04, '05 timeframe.
17 A. Not many decision were being made back then
18 because of the condi tions out there. Decisions like
19 areas to clean up, if that's what you mean, or
20 mitigating damages of this buyer or mitigating damages
21 of that buyer. It kind of all ebbed and flowed with how
22 much each party involved in the lawsuits were banging on
23 Mr. Doggett's door, saying, "He's not mitigating his
24 damages." So I'd move over there. It was kind of back
25 and forth. I was kind of allover the place, trying to
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
66
1 satisfy, you know, different areas and trying to get the
2 place presentable for tenants.
3 Q. Who at White Lion is responsible for making
4 environmental compliance decisions?
5 A. I guess I would be. I guess you could say me;
6 but under the conditions, it's hard to make decisions.
7 Q. Is there anyone at White Lion that could have
8 made those decisions other than you?
9 A. No.
10 Q. Who at White Lion is responsible for complying
11 with the Compliance Plan?
12 A. White Lion.
13 Q. Anyone other than you at White Lion that would
14 be responsible for compliance with the Compliance Plan?
15 A. There is nobody else. I'm the shareholder of
16 White Lion. So that's all there is.
17 Q. Who made the decision at White Lion to stop
18 monitoring the groundwater wells?
19 A. That was, I guess you could say, third-party
20 buyers and contractors, their actions.
21 Q. How did third-party buyers or contractors
22 prevent White Lion from taking a sample from a
23 monitoring well in the Compliance that's part of the
24 Corrective Action System?
~" ..
\jJ
.
25 A. I don't think they prevented sampling. I'm
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
67
1 talking about the groundwater treatment.
2 Q. So none of those third parties would have
3 could have or did let me restate it completely.
4 None of those third parties prevented
5 White Lion from taking any monitoring sample -- any
6 groundwater sample from any monitoring well on the
7 facility, correct?
8 A. No.
9 Q. But it's your testimony that the third-party
10 contractors interfered with White Lion's ability to
11 operate the recovery wells?
12 A. The pump and treat system, yes.
13 Q. Do you know which company would have prevented
14 White Lion from continuing to maintain and operate the
15 pump and treat system?
16 A. Principally the ones we sued based on the
17 utilities' and, again, I don't have those names at all.
18 Q. How much power does it take to run the pump
19 and treat system?
20 A. No idea.
21 Q. Have you ever tried to repair the pump and
22 treat system?
23 A. No.
24 Q. Who at White Lion made the decision to not
25 repair the pump and treat system?
Integrity Legal Support Solutions
www_~ntpnr~tv-tpx``_rnm
Bernard Morello - 9/19/2014
68
1 A. There's nothing to repair if there's nothing
~
''l~ _
~'':IC
" 2 there. It's gone.
3 Q. Who made the decision to not replace the pump
4 and treat system if it was gone, at White Lion?
5 Let me res ta te the whole thing. Who at
6 White Lion made the decision not to replace the pump and
7 treat system if it was gone?
8 A. The pump and treat system, as I understand it,
9 was a massive system. So it was -- you know, there was
10 no option to replace it.
11 Q. Isn't it true White Lion never intended to
12 operate the pump and treat system?
13 A. No.
14 Q. Did White Lion attempt to transfer the
15 wastewater permit at the site to White Lion from Vision
16 Metals?
17 A. Wastewater? I'm not quite sure about
18 wastewater. I don't know anything about that.
19 Q. Bow did White Lion intend to handle the
20 groundwater recovered from the pump and treat system?
21 A. I don't know because I didn't know anything
22 about it. You're asking me questions, and I'm not an
23 expert in this area. So I don't know.
24 Q. Did White Lion ever retain expertise to advise
25 it on how to comply with the Compliance Plan?
Integrity Legal Support Solutions
www.inteqritv-texas.com
Bernard Morello - 9/19/2014
69
1 A. Yes.
2 Q. When?
3 A. I think it was 2013.
4 Q. Note on Exhibit 7 --
5 MR. PRITZLAFF: And, Mary, we've marked
6 as Exhibit 7 the Compliance Plan application.
7 MS. KOKS: Thank you.
8 Q (BY MR. PRITZLAFF) Note on page 2, Section 4,
9 and then right above Section 5, it says, "Wastewater
10 Permit Numbers." Do you see that?
11 A. Yes.
12 Q. And what does it say in bold?
13 A. "TPDES 01237 (Not being transferred to new
14 owner; Vision Metals will terminate.)"
15 Q. That bolded part is something that you typed
16 in, correct?
17 A. No.
18 Q. Who typed it in?
19 A. Whoever prepared this. I didn't prepare this.
20 I don't know.
21 Q. Who prepared this for you?
22 A. I have no -- I have no idea. I don't know.
23 Q. Did you review this before you signed it?
24 A. I can't say ten or eleven years ago I did
25 that. I don't know.
Integrity Legal Support Solutions
www.inteQritv-texas.com
Bernard Morello - 9/19/2014
70
1 Q. If groundwater was being removed from the
2 recovery system, how did White Lion intend to collect
3 that material?
4 A. You know, it's way over my head because I
5 don't understand. I'm not an expert in this area. So
6 it's hard for me to answer. If I was an expert in here,
7 I could answer; but I don't know. I simply don't know.
8 Q. You, as the sole decisionmaker for White Lion,
9 did not obtain the expertise needed to comply with the
10 Compliance Plan, correct?
11 A. Yes.
12 Q. Why was that decision made?
"3
- --.(:~-
~ -~,
13 A. Because there was limited resources. There
14 was many other fires I was trying to put out on the
15 site, and this was just one of multiple things that I
16 had to deal with. So I guess it was prioritized.
17 Q. So you, as the sole decisionmaker for White
18 Lion, because of financial reasons, allowed White Lion
19 to not comply with the Compliance Plan?
20 A. No, that's not true. I think what it is, is
21 unforeseen circumstance came up that didn't allow
22 resources at all to be focused in this area. Because I
23 didn't hear a thing from the State I figured, well, it
24 mustn't be that important.
25 Q. When you say you didn't hear a thing from the
Integrity Legal Support Solutions
www.inteoritv-texas.com
rnard Morello - 9/19/2014
71
1 State, what do you mean by that?
2 A. Well, I ink about -- shortly after I
3 ed it, they led a lawsuit from probably 2005 or
4 so -- or maybe it was in 2004; I'm not sure I
5 didn't hear from them until you t engaged in really
6 of any significant substance until you got engag last
7 whatever it was, e of last year. So I was just
8 busy ting out other fires, as I said there, and
9 figured it mustn't important e I didn't ar
10 much of anything.
11 Q. So you, as the sole decisionmaker of White
12 Lion, determined that if the State was not contacting
13 you, it was not worth complying with the Compliance
14 Plan, correct?
15 No, no. That's not what I said.
16 Q. If there was a groundwater pump and treat
17 system on the property -- and you do not dispute that
18 you knew it was on the property, correct?
19 A. Yes.
20 Q. What does "pump and treat" mean to you?
21 A. Pump groundwater and treat it, like a
22 treatment plant. That's how I would guess.
23 Q. How did White Lion intend to treat the
24 groundwater?
25 A. I have no idea.
Integrity Legal Support Solutions
www.inteqrit exas.com
Bernard Morello - 9/19/2014
72
1 Q. Did you make any affirmative decision for
2 White Lion to engage a company to assist it with
3 treating groundwater at the site?
4 A. No, other than just getting the EPA to assist
5 me. That was it.
6 Q. So you, as the sole decisionmaker of White
7 Lion, knew pump and treat meant pump water out and treat
8 it, correct?
9 A. I know it today. Did I know it back then?
10 No.
11 Q. When was the first time you, as the sole
12 decisionmaker of White Lion, read the Compliance Plan?
.~
...:.-;;::-
,-
13 A. Probably last year when this all started.
14 Q. When did you, as the sole decisionmaker of
15 White Lion, first read the Permit?
16 A. Same time, last year.
17 Q. Who at White Lion was onsite when TCEQ would
18 come to visi t the property?
19 A. I would have been.
20 Q. Who at White Lion interacted with TCEQ when
21 TCEQ would call Whi te Lion?
22 A. You mean the people that came out? Is that
23 what you mean, or are you talking about -- I'm
24 misunderstanding.
25 Q. Yeah, it was a terrible question.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
73
1 A. Okay.
r~
:
'~ ,
2 Q. When TCEQ would send White Lion a letter, who
3 at White Lion was responsible for responding to that
4 correspondence?
5 A. They would address it to me. So, obviously, I
6 would respond.
7 Q. Was there any other person at White Lion who
8 would have been charged with the responsibility of
9 responding to TCEQ?
10 A. No.
11 (Exhibit 12 marked.)
12 Q (BY MR. PRITZLAFF) I have here a document
19 13 that's been marked as Exhibi t 12, correspondence from
14 TCEQ to Bernard Morello, White Lion Holdings, LLC, dated
15 October 14th, 2004. Why don't you take a moment to read
16 that.
17 A. Okay.
18 Q. Earlier I believe you testified that TCEQ
19 wasn't involved early on in the site, correct?
20 A. No, they were -- I think I had a dialogue with
21 them early on the site -- in the purchase of it, early
22 on.
23 Q. SO is it fair to say TCEQ was involved in the
24 site and in dialogue with you since you purchased it?
IJ 25 A. Up until the time the lawsuit was filed, I had
Integrity Legal Support Solutions
www.intearitv-texas.com
Bernard Morello - 9/19/2014
74
1 a dialogue; but after that, no dialogue at all.
2 Q. So you agree that TCEQ was involved -- was in
3 communication with you concerning compliance at the site
4 since at least April of 2004?
5 A. Yeah. If that's what the date of the letter
6 is, yes.
7 Q. What is your understanding of this letter as
8 you have read it?
9 A. Well, again, I don't know all these
10 terminologies in here. They are basically responding to
11 correspondence that I sent them; and then, they are
12 wanting me to submit a response by April 27th. And,
,:'3) 13 basically, this letter was shipped off to EPA; and then
14 EPA wrote a letter. And they'd send it back to me, and
15 I'd sign it. That's why there's all the technical terms
16 in the letters to TCEQ. I just signed the letter.
17 Q. Did you specifically respond with the
18 infor.mation that TCEQ asked for in this letter April
19 14th, 2004 letter?
20 A. You know, I don't know anything about this.
21 So it's hard for me to say if I responded appropriately.
22 I don't know because I don't know anything about this.
23 This is so out of my knowledge, my sphere of knowledge
24 that I don't know. You know, I can't answer that. You
25 know, I can't answer that.
Integrity Legal Support Solutions
www.inteqritv-texas.com
rnard Morel 0 - 9/19/2014
75
1 Q. Do you reoa`` TCEQ coming out to visit your
1) 2 property in 2004?
3 I'm not sure if it was 2004 or 2005; I do
4 remember that a gentleman carne out, yes.
5 (Exhibit 13 marked.)
6 Q (BY MR. PRITZLAFF) I'm handing you a document
7 marked as Exhibit 13, correspondence from TCEQ to
8 Bernard Morello, so~e manager of White Lion Ho~dings,
9 LLC, dated December 14th, 2004. Why don't you take a
10 moment to review that letter.
11 A. Okay.
12 Q. You're the on~y person at White Lion that
13 would have met the TCEQ inspector at the site, right?
14 Right.
15 Q. It's a long time ago. Do you reoa~l meeting
16 Mr. Arnett on November 12, 2004?
17 Yes, I remember him cifically.
18 Q. What do you reca~l about that inspection and
19 your visit with Mr. Arnett?
20 A. I do not want to answer that because he
21 confided in me. So all I can say is he wal around
22 place. He and I walked around the facility.
23 Q. He confided in you?
24 A. Well, it this way: He said some things to
25 me at he said, "Just keep s between you and I.n
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
76
1 And that was it. So I kept it at that.
2 Q. What was the substance of this confidence?
3 A. Again, it's -- he said, "This is all about
4 politics. This agency is extremely political." And
5 let's leave it at that.
6 Q. But the purpose of his visit was not to
7 discuss politics, correct?
8 A. No. He was just -- because I wasn't
9 experienced in this area, I think he was trying to
10 educate me and give me some advice.
11 Q. What was he looking at when he was visiting
12 your facili ty?
13 A. We just walked around. I don't know what
14 specifically he was looking at. I don't know.
15 Q. Do you recall receiving this letter?
16 A. Not specific to this letter, but that is me on
17 there.
18 Q. Do you have any reason to suspect you did not
19 receive it?
20 A. No, I'm quite sure I received it.
21 Q. Bow did you respond when you received this
22 letter?
23 A. I don't know back then how I responded.
24 Typically, what I would do is fax it to EPA; and then
)
25 EPA would respond back for me. And so that's typically
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
77
1 what transpired. I don't know if it did on this letter
'-'7\
Iy 2 specifically, but ...
3 Q. Now, EPA is a Federal government agency,
4 correct?
5 A. Yes.
6 Q. Is EPA the permittee at the site?
7 A. No. I think that was a big problem that TCEQ
8 had is because they were --
9 MR. PRITZLAFF: Objection, nonresponsive.
10 THE WITNESS: Okay.
11 Q (BY MR. PRITZLAFF) Is EPA the named permittee
12 of the Compliance Plan?
13 A. No.
14 Q. Who is?
15 A. White Lion Holdings.
16 Q. Was this -- was any of the correspondence that
17 you received from TCEQ directed to the Environmental
18 Protection Agency?
19 A. No. I think they were just trying to help.
20 Q. These letters were directed to you, correct?
21 A. Yes.
22 Q. As sole manager of White Lion Holdings,
23 correct?
24 A. Yes.
)
25 Q. Whose responsibility was it to respond to the
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
78
1 correspondence from TCEQ when it was directed to Bernard
2 Morello, Sole Manager of White Lion Holdings, LLC?
3 A. Well, I just saw in here this is going back to
4 2001 on here. I didn't even own it in 2001.
5 Q. Where are you referring? On Section 2 there,
6 on State page 830
7 A. Yeah.
8 Q. -- Summary of Investigation Findings,
9 discussing recordkeeping and annual reporting procedures
10 applicable to generators. And what is your
11 understanding of the reference to years prior to your
12 ownership?
13 A. You know, I don't know. It says recovered
14 ground waters for those years based on amount generated.
15 You know, again, I don't know anything about this. I
16 can assume what it means. It means how much gallons
17 they pumped out of the ground. Again,_~Qis is not my
18 area of expertise.
19 Q. You're an extremely intelligent person
20 correct? You've been very successful in your career,
21 correct?
22 A. I don't want to answer that.
23 Q. Do you understand that this is talking about
24 recovery of water, groundwater?
,)
l. '. ~
25 A. Yes.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
79
1 Q. Does that not imply continued obligations to
2 recover groundwater if the prior facility was reporting
3 what groundwater it recovered?
4 A. Well, I see that here, yeah. I see where
5 you're corning from wi th that, yes.
6 Q. Would that not have been a reasonable
7 interpretation of this letter in December of 2004?
8 A. Yes.
9 Q. As the sole decisionmaker at White Lion, you
10 individually allowed White Lion to disregard its
11 compliance obligations, did you not?
12 A. No.
1D
-.-,.
13 Q. Then who did?
\ 'J~·1'
14 A. The circumstances that White Lion was
15 surrounded in at the time.
16 Q. Did you ever respond to TCEQ in response to
17 this December 2004 letter or any other letter that you
18 received, or White Lion received, from TCEQ about these
19 circumstances and those circumstances causing an
20 inability of White Lion to comply?
21 A. I may have had some conversation with Ellie
22 Weinert and maybe Mr. Arnett on the phone. I don't
23 know. That's a long time ago.
24 Q. Can you specify an exact time and place of
) --
25 those telephone calls?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
80
1 A. No, no, no. I know I had a dialogue with
2 Ellie and Bruce.
3 Q. You've been involved in real estate
4 transactions for almost four decades, correct?
5 A. Pretty close.
6 Q. Documenting things in paperwork is ~ortant
7 in real estate transactions, is it not?
8 A. Well, you mean closing documents? I don't
9 understand what you mean.
10 Q. If you're going to enter is a contract,
11 generally you embody that into a written document,
12 correct?
13 A. Yeah. You keep it in an archive file, yes.
14 Q. If someone objects to some provision, that's
15 generally embodied in some kind of correspondence,
16 correct?
17 A. Every circumstance is different. I assume
18 that would happen, yes.
19 Q. Would you not have deemed it wise for White
20 Lion to have responded to correspondence from TCEQ
21 telling it that it's in violation of various
22 requirements?
23 A. I can't say that I did or did not respond
24 because I had not only written letters but there was
25 also telephone calls, telephone conversations, and then
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
81
1 site visits.
2 Q. Let's look at Exhibit 6 again, Compliance
3 Plan, on page 14, Section B, Reporting Requirements,
4 Section 2. Did White Lion ever submit a report, as
5 referenced in this section, on January 21st and
6 July 21st of each year?
7 A. No.
8 Q. Who made that decision for White Lion to not
9 submi t those reports?
10 A. Well, first of all, I didn't read this until
11 last year. So I wouldn't have known to submit the
12 plans.
13 Q. So it was you, correct?
14 A. That I didn't submit, yeah. If you don't know
15 something, you can't submit something.
16 Q. You transferred -- you instructed White Lion
17 and had White Lion transfer the permit to White Lion,
18 correct?
19 A. I instructed? No. No, I didn't instruct. I
20 signed the document. I didn't prepare the document, no.
21 I don't know who prepared the document.
22 Q. You signed the application to transfer,
23 correct?
24 A. Yes.
\;, )
'~ :-
25 Q. Each the Permit and the Compliance Plan?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
82
1 A. Yes.
1)
,,'
,~ 2 Q. If you entered into a contract with someone to
3 purchase a piece of property and the other party
4 refused, later, after you signed the contract, to give
5 you the property because they said they never read the
6 contract, would you agree with that?
7 MS. KOKS: Objection, form.
8 Q (BY MR. PRITZLAFF) You can answer if you
9 understand the hypothetical.
10 A. Why don't you re-ask it? I don't understand
11 the question.
12 Q. Sure. If you entered into a contract with
/~ 13 someone to buy something and you both signed the
14 contract and that someone then, later, refuses to give
15 you what you contracted to purchase and they say, "Well,
16 I never read it, so I don't need to do it, " would you
17 say, "Okay. Sure. Fine"?
18 A. No, I wouldn't.
19 Q. Is it reasonable for you, as the sole
20 decisionmaker of White Lion, to not have read a
21 Compliance Plan that's in White Lion's name until 2013,
22 nine years after the Per.mit and Compliance Plan were
23 transferred to White Lion?
24 MS. KOKS: Objection, form.
,)
25 A. If I knew what -- even if I read it, I
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
83
1 wouldn't know what it meant, anyway, because this is not
~ 2 my area of expertise. Now, I have learned in the last
3 year; but prior to that, no.
4 Q. (BY MR. PRITZLAFF) TCEQ came out at other
5 t~es to your facility, correct?
6 A. Yes.
7 Q. Do you recall when?
8 A. I think this Mr. Bruce -- whatever his last
9 name is -- Bruce Arnett came out again, to follow up;
10 and I don't know when he came out. But he did come back
11 out.
12 (Exhibit 14 marked.)
13 Q (BY MR. PRITZLAFF) I have here a document
14 that's been marked as Exhibit 14, correspondence from
15 TCEQ to Bernard Morello, Registered Agent, White Lion
16 Holdings, LLC, dated June 26th, 2008. Do you want to
17 read through that and let me know when you're finished?
18 A. Okay.
19 Q. Do you recall meeting Mr. Elijah Gandee on
20 January 4th, 2008?
21 A. Yes.
22 Q. Do you recall what Mr. Gandee looked at when
23 he visited the facility in 2008?
24 A. I think he did the same thing that Mr. Arnett
,~
J He walked around -- both of us walked around the
25 did.
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
84
1 facility.
2 Q. Did he discuss with you the outstanding
3 violations that are attached to this correspondence?
4 A. I don't know if he did at that time. I think
5 this probably came after his site visit, so.
6 Q. The monitoring wells were visible on the site
7 in 2008, correct?
8 A. I think so, yes.
9 Q. But the system was not operational, correct?
10 A. Right.
11 Q. Do you recall Mr. Gandee returning to the
12 site?
13 A. Yes.
14 (Exhibit 15 marked.)
15 Q (BY MR. PRITZLAFF) I have a document that's
16 been marked Exhibit 15, correspondence from TCEQ to
17 Bernard Morello, White Lion Holdings, LLC, dated
18 February 14, 2014. I'll let you read that document for
19 a moment.
20 A. Okay.
21 Q. Do you recall this visit by Mr. Gandee of
22 July 29th, 2013?
23 A. Yes.
24 Q. During this visit, the monitoring wells were
,)
25 all gone, correct?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
8S
1 A. I don't know if they were or not.
,) 2 Q. Well, let's look on the summary of violations.
3 A. Okay.
4 Q. Number 4.
5 A. Okay.
6 Q. Why don't you read through that a moment and
7 tell me when you're done.
8 A. Okay.
9 Q. Do you dispute anything that's written there
10 in that Section 4 of this letter?
11 A. I wouldn't know either way. You know, we
12 walked around the whole facility; and, you know, he
_~ 13 asked me some questions and proceeded on.
14 Q. Well, let's look at his statement here in
lS Section 4, the second paragraph, third sentence.
16 "Furthermore, none of the above-ground portions of the
17 wells nor any bumper guards nor metal protective casings
18 were observed during the investigation." Do you dispute
19 that?
20 A. No.
21 Q. So somet~e between 2008 and this site
22 inspection in July of 2013, the bumper guards, metal
23 protective casings of the wells, were removed. Who
24 removed them?
2S A. Well, I think they were damaged; and then once
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
86
1 they get shredded up, you just pick up the pieces.
2 Mowers would hi t them constantly.
3 Q. Shredded by what?
4 A. By your shredders.
5 Q. What shredders?
6 A. Mowers, shredders, equipment that shreds the
7 vegetation.
8 Q. Shredded solid steel well casings, is that
9 your testimony, by a lawnmower?
10 A. No, I'm saying plastic, PVC plastic. There
11 was metal housings around it. I think it was just sheet
12 metal, I believe, sheet metal housings; and they were
13 rusted off. Several of them were that way for -- you
14 know, again, I didn't walk around the whole facility
15 back in 2004; but I think several of them were gone or
16 deteriorated back then.
17 Q. Who was responsible at White Lion for ensuring
18 that those monitoring well casings would not be
19 destroyed; anyone other than yourself?
20 A. Yeah -- no, no, there is not.
21 Q. Okay.
22 (Exhibit 16 marked.)
23 Q (BY MR. PRITZLAFF) I have here a document
24 that we've marked as Exhibit 16, which is a series of
25 four photographs.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
87
1 A. Right.
~
'''" ,~' ,
2 Q. Do these photographs accurately represent what
3 we're talking about when we refer to monitoring well
4 covers?
5 A. Yes, yes.
6 Q. And the gauge of the steel is accurate as it's
7 shown, correct?
8 A. It's very thin steel; and it's all rusted at
9 the bottom where it hi t the soil, yeah.
10 Q. And i.t's --
11 A. Just like it's shown here in these pictures.
12 I don't know when these were taken, but that's what they
13 look like. Maybe there's a date on it here. I can't
14 see it on this photo.
15 (Exhibit 17 marked.)
16 Q (BY MR. PRITZLAFF) In any event, that's a
17 reasonable approx~ation, representation, of what the
18 moni.toring wells generally look like, correct?
19 A. Yes.
20 Q. I have here now another exhibit marked 17,
21 which is a series of four pictures which I believe are
22 date stamped, generally showing the site around the
23 impoundments, correct?
24 A. Yes.
25 Q. And none of those protective caps are visible,
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
88
1 correct?
r~i9
[:--..c-
2 A. No.
3 Q. You see nice, green, mowed fields, correct?
4 A. Yeah. If there's not a lot of obstacles,
5 that's correct.
6 Q. I seem to recall -- and please correct me if I
7 get this test~ony wrong -- but I believe you stated at
8 some point earlier that you wanted to make the property
9 more enticing for a prospective purchaser, correct?
10 A. Presentable so people would be interested in
11 leasing, yes.
12 Q. Did you use the word "enticing"?
13 A. I don't know. If I used that term, are you
14 saying?
15 Q. Did you use that term?
16 A. I don't know if I used it or not.
17 Q. In any event, a property without all of those
18 monitoring wells on it is certainly more enticing, is it
19 not?
20 A. The way these pictures look, yes, I will agree
21 with you. Yes. Comparison of the two, yes, that looks
22 much better.
23 Q. Isn't it true you wanted those wells removed?
24 A. No.
\
J:~'~-.
25 Q. Would you, when you were at the site during
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
89
1 any of the 60 to 80 hours a week every week for the last
(.~ 2 10 years, observe the mowers?
3 A. I have seen hit them and damage them before,
4 but that's kind of an occurrence that happens. That
5 happens on the buildings, too, anything that's in the
6 way.
7 Q. You didn't go out and chop them down yourself?
8 A. No.
9 Q. Did you direct someone to go chop those down?
10 A. No.
11 Q. You allowed them to be chopped down, correct?
12 A. No.
13 Q. You allowed them to not be replaced, correct?
14 A. I think we are in the process of doing that
15 now.
16 Q. When was the first t~e you noticed a
17 monitoring well had been -- one of those metal casings
18 has been removed?
19 A. I didn't know how many of them were out there,
20 so I couldn't tell you. I don't know when they were
21 first removed.
22 Q. When was the first time you noticed one that
23 you knew where it was was gone?
24 A. I really didn't count monitoring wells.
25 That's not something I did. I seldom actually would go
Integrity Legal Support Solutions
www.inteqrity-texas.com
rnard Morello - 9/19/2014
90
1 k in this area, as I had no reason to.
f':~
-, .
~ "..J.~
,
2 Q. Did you ever see a monitorinq well qet
7'
3 destroyed?
4 A. Not destroyed but damaged, yes, and chewed up,
5 yes.
6 Q. Tell me how
7 A. The well is still there. It's just the cover
8 is gone.
9 Q. Tell me a specific instance of when you
10 observed that.
11 A. I don't know a specific instance. I don't
12 know.
})
.,-~?~,-
13 Q. Who hired the mowers to qo out on your site?
14 A. I would have hired them.
15 Q. Did you enter into a contract with the mowers?
16 A. I don't know if I had a contract or it was
17 just a verbal agreement. I don't know.
18 Q. When you say "I," was that you, Mr. Morello?
19 A. No. It was my capacity as White Lion
20 lding's manager.
21 Q. Does anyone else at White Lion make
22 contractinq decisions?
23 A. Make cont ing decisions? No, I would say
24 , no.
)
25 Q. In any event, at some point in time, you would
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
91
1 have noticed a monitoring well had been damaged or
r'j"
. 't
':"'"
.;~
2 destroyed by a mower or some other event, correct?
3 A. Right, the closer they were to the buildings,
4 which I'd look out; but stuff on the other side, I
15 seldom go back there to pits or mounds.
6 Q. As the sole decisionmaker for White Lion, you
7 allowed White Lion not to replace those wells, correct?
8 A. My understanding, the wells are still there;
9 just the head or the top is not there. The well is
10 still there.
11 Q. You, as the sole decisionmaker of White Lion,
12 allowed the wells to not be replaced, correct -- or
13 repaired, correct?
14 A. They have been -- some have been repaired,
15 yes. I believe there was a new one put in last year;
16 maybe more than one. I'm not sure.
17 Q. In any event, at the site, the Corrective
18 Action System is in a complete and total state of
19 disrepair, correct?
20 A. Yes.
21 Q. And you, as the sole decisionmaker of White
22 Lion, permitted White Lion to not replace or repair that
23 Corrective Action System, correct?
24 A. If you could, explain a timeframe for me. I
)
25 mean, that's a broad question. Is it from 2004 to 2013
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
92
1 or 2013 to 2014?
2 MR. PRITZLAFF: Would you read back my
3 question to him?
4 I'll object as nonresponsive.
5 (The material was read as requested.)
6 A. But what I'm saying is: Is there a time frame
7 you're saying there or what?
8 Q. (BY MR. PRITZLAFF) In 2013, at the t~e of
9 the TCEQ inspection, you would agree that the Corrective
10 Action System was in a complete and total state of
11 disrepair, correct?
12 A. Yes.
13 Q. And you, as the sole decisionmaker of White
14 Lion, permitted White Lion to not repair or replace the
15 Corrective Action System, correct?
16 A. In 2013, no, that is not correct.
17 Q. What about in '12?
18 A. No.
19 Q. As the sole decisionmaker of White Lion -- let
20 me restart this.
21 Is it fair to say that in 2004, the
22 Corrective Action System was non-functional?
23 A. In 2004, yes, that's correct.
24 Q. Is it fair to say from 2004 to the present,
)
25 the Corrective Action System has not been operational?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
93
1 A. Correct.
2 Q. As the sole decisionmaker of White Lion, you
3 have allowed White Lion to keep the Corrective Action
4 System non-functional, correct?
5 A. Yes.
6 Q. As the sole decisionmaker for White Lion, you
7 have permitted White Lion to not repair the Corrective
8 Action System, correct?
9 A. No. I have corrected it last year. We've
10 taken action now on it.
11 Q. Is it your test~ony that that Corrective
12 Action System today is fully functional?
13 A. No.
14 Q. So as the sole decisionmaker of White Lion,
15 through today, since White Lion has owned the property,
16 you have permitted White Lion to not operate the
17 Corrective Action System by allowing it to be repaired?
18 A. The Corrective Action System is gone. It's
19 all -- there is no pump and treat. All that facility is
20 gone, and that's all part of this. This is still here.
21 It's underground, but the pump and treat system is gone.
22 Q. So as the sole decisionmaker of White Lion,
23 you have permitted the Corrective Action System to be
24 gone?
25 A. I have permitted it -- no, I have not
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
94
1 permitted it to be gone. It's like you're asking me
'~ 2 would I like to have somebody run into my car. No, I
3 would not like to have somebody run into my car.
4 Q. But you permitted White Lion, in your capacity
5 as sole decisionmaker, to not repair it, correct?
6 A. Based on the circumstance, yes, that's
7 correct; but I'm trying to get it repaired.
8 MR. PRITZLAFF: Let's take a short break.
9 THE WITNESS: Okay.
10 MR. PRITZLAFF: Mary, let's just take
11 about five minutes. Okay?
12 MS. KOKS: That sounds fine.
13 MR. PRITZLAFF: I have it at 12:50 -- or
14 2:50 right now.
15 MS. KOKS: You mean 3:50?
16 MR. PRITZLAFF: Is it 3:50?
17 MS. KOKS: Yeah.
18 THE WITNESS: Daylight Savings Time.
19 MR. PRITZLAFF: You're correct.
20 MS. KOKS: Okay.
21 (Off the record from 3:51 to 3:59 p.m.)
22 MR. PRITZLAFF: Mary, are you ready?
23 MS. KOKS: Yes, sir, I am. Go ahead.
24 Q (BY MR. PRITZLAFF) What happened to the
25 wellheads when they were damaged?
Integrity Legal Support Solutions
www.inteqritv-texas.com
Bernard Morello - 9/19/2014
95
1 A. You mean the shredded portion of them?
2 Q. Any portion of the them.
3 A. Thrown in a dumpster.
4 Q. Who did that?
5 A. Probably I did or some temporary help I had.
6 Q. So you would have picked up the pieces and
7 thrown them away yourself?
8 A. Or temporary helpers, clean up after the
9 mowers or whatever.
10 Q. You said yourself that some of these wells
11 were damaged when you purchased the property or shortly
12 thereafter, correct?
13 A. Well, I said I didn't see all the wells
14 because I didn't walk all the way around the back of
15 them or whatever; but, yes, I saw pictures here in 2004
16 or so where they were kind of deteriorated.
17 Q. And one of your purposes for this property was
18 to clean it up and make it enticing to tenants and/or on
19 a prospective purchaser, correct?
20 A. To lease it out, look respectable and
21 presentable, yes.
22 Q. And if you saw, like on Exhibit 16, a piece of
23 rusted wellhead sticking up out of the ground, that's
24 not very presentable, is it?
25 A. No, it really isn't.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
96
1 Q. Would you have directed someone to remove it?
f':~ 2 A. No.
3 Q. Would you have directed someone to paint them?
4 A. No.
5 Q. If it was unpresentable to the property, why
6 would you not have directed its repair?
7 A. Well, up until last year, I didn't really know
8 the function of the whole system.
9 Q. If you didn't know the function of the whole
10 system, is it reasonable to say you would have directed
11 it to be removed?
12 A. No.
<~
;,~!}-'
13 Q. Did you know what those wells shown in
14 Exhibit 16 were before 2013?
15 A. They were protective covers for pvc.
16 Q. Did you know what the pvc was for?
17 A. A well.
18 Q. Did you think to inquire why the well was
19 there?
20 A. No. I mean, it's part of this Corrective
21 Action System.
22 Q. But you said you didn't know about the
23 Corrective Action System before 2013?
24 A. I didn't know the functioning of the
25 Corrective Action System.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
97
1 Q. Look at Exhibit 6 again, the Compliance Plan.
2 A. Okay.
3 Q. Mr. Morello, turn toward the back, states page
4 564. It's a map, Attachment A, Sheet 304.
5 A. Okay.
6 MR. PRITZLAFF: Mary, did you hear that?
7 MS. KOKS: Yeah, I'm trying to track that
8 down myself.
9 MR. PRITZLAFF: Okay.
10 Q (BY MR. PRITZLAFF) Have you reviewed that
11 picture?
12 A. Yeah. I've reviewed it, uh-huh.
'L)
:;``'
13 Q. What does it mean to you?
14 A. Well, it's one that Mr. Couch came out and
15 identified different locations of these wells.
16 Q. Remind me who Mr. Couch is.
17 A. He's an environmental consultant.
18 Q. When did you retain Mr. Couch?
19 A. Last year.
20 Q. Who does he work for?
21 A. White Lion Holdings.
22 Q. Who hired h"lln.?
23 A. I did.
24 Q. But this map was not prepared by Mr. Couch,
])
25 correct?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
98
1 A. No.
2 Q. Do you understand that this map shows the
3 approx~te locations of each well associated with the
4 Corrective Action System?
5 A. I do now.
6 Q. At what point did you obtain that knowledge or
7 understanding of what this map means?
8 A. When I read this plan.
9 Q. Which you said before was 2013?
10 A. That's correct.
11 Q. When you look at this map today and you think
12 back to all the time that you've been on this property,
J) 13 which is considerable over the years, do you recall
14 seeing monitoring wells in the approximate locations
15 demonstrated on this map?
16 A. Yes, sure.
17 Q. But it never occurred to you, as the sole
18 manager and decisionmaker of White Lion, to investigate
19 what those yellow protrusions from the ground pertained
20 to?
21 A. Well, I knew it's all part of the system.
22 Q. So you knew it was part of the system?
23 A. Yes.
24 Q. You knew it was part of the system as early as
'-
)
'
25 2004?
Integrity Legal Support Solutions
www.inteqrity-texas.com
Bernard Morello - 9/19/2014
99
1 A. Yes.
r~
- ,-
-'~)
2 Q. You knew that all of those wells were parts of
3 a network of groundwater monitoring and recovery wells,
4 correct? As early as 2004 you knew that?
5 A. Well, put it this way: I didn't know the --
6 how they operated and how they functioned. Put it that
7 way. I knew they were part of an entire system, a
8 network; but I'm not ...
9 Q. You may not understand the engineering or the
10 technical science behind the operation of each well
11 A. Right.
12 Q. -- but you knew, from looking at the site,
])" >;.
,"
:_,'<,-
13 from the point in time you purchased it to today, that
14 those wells were part of some network of monitoring,
15 correct?
16 A. Yes.
17 Q. And you understood that that network of
18 monitoring related to contaminated groundwater at the
19 facility, right?
20 A. I knew there were issues; but I didn't know
21 anything about them, put it that way.
22 Q. But you knew that the system related somehow
23 to some environmental issue at the site, correct?
24 A. Yes, yes.
)
25 Q. And, yet, as the sole decisionmaker of White
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
100
1 Lion, you affirmatively allowed that system to fall into
2 disrepair?
3 A. No. Again, it goes back to intent. Would I
4 want somebody to purposely hit my vehicle? No. Things
5 happen.
6 Q. When someone hits your vehicle, the reasonable
7 response is to have it repaired, correct?
8 A. Unless it's totalled.
9 Q. As the sole decisionmaker for White Lion, it's
10 reasonable if you see a system on your site that's
11 attached to a Compliance Plan, that it should be
12 repaired, correct?
13 A. No, I think -- no. It's all interworked
14 together.
15 Q. So it's not reasonable to repair it?
16 A. No. I'm saying it's all interconnected. It's
17 like, going back to the car analogy, just because you
18 have an engine, it doesn't mean you can drive the car
19 around. You have to have a transmission. You have to
20 have a rear end. You have to have metal around it and
21 seats. That's what I'm saying. It was all
22 interconnected.
23 Q. Did you ever investigate how much it would
24 have cost to repair or rehabilitate a monitoring well?
-'
""
25 A. No.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
101
1 Q. TCEQ has been in contact off and on with you
2 since 2004 when you took possession of the property,
3 correct?
4 A. Yes.
5 Q. We've talked about that. It never occurred to
6 you, as the sole decisionmaker of White Lion, to alert
7 TCEQ of the status of those wells?
8 A. No.
9 Q. It never occurred to you when TCEQ visited
10 your property to look at those wells, to discuss what
11 you needed to do to get the Corrective Action System
12 back into compliance?
13 A. Did they discuss it with me? Again, that's a
14 conversation that was a long time ago. I don't know the
15 specifics; but you have to understand, there was some
16 different fires I'd been putting out --
17 Q. I'll stop you there.
18 A. It was important. I don't mean to say it
19 wasn't important, but there was many other fires there
20 and many other responsibilities at that facility that
21 were on a much higher priority than this. The system
22 was destroyed in the beginning and the resources were
23 limited and very thin and so a person can only do so
24 much unless you're Exxon Mobil.
25 Q. How does White Lion get its funding?
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
102
1 A. I lend the company money.
"~
,~r'
.c 2 Q. Are there documents that record the lending?
3 A. No.
4 Q. Does White Lion keep books?
5 A. Yes.
6 Q. Who keeps those books?
7 A. I keep the books.
8 Q. Is anyone else responsible for keeping those
9 books?
10 A. No.
11 Q. You're the only person at White Lion. So do
12 you keep minutes of decisions made?
J9
:~:-\~
13 A. No, I don't even have meetings.
14 Q. Where are the books kept for White Lion?
15 A. In our office -- it isn't really books. You
16 pay something, and that's it. How much you have and how
17 much goes out.
18 Q. What other sources of income other than you
19 does Whi te Lion have?
20 A. I'm not a source of income for them at all.
21 Q. What other sources of financial resources --
22 strike that.
23 From what sources does White Lion receive
--- 24 revenues from?
) -.
25 A. Rent, scrap. That's it.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
103
1 Q. When did income from rent begin to come into
r-J 2 White Lion?
3 A. I don't have the dates; but it was way after
4 the purchase, in recent years I will say.
5 Q. After 2008?
6 A. Yes, I would say so.
7 Q. After 2009?
8 A. Yes, I would say so.
9 Q. After 2010?
10 A. I don't know. I don't have the exact -- I
11 don't want to say yes because I don't know, but it's in
12 more recent years.
'J)
_$h~
-'"."'--
13 Q. When did revenues from scrap begin to come in
14 to White Lion?
15 A. Probably in the beginning.
16 Q. Did the revenue from -- so scrap was the only
17 revenue for White Lion until the lease revenues came in,
18 correct?
19 A. Yes.
20 Q. Was the revenue of scrap sufficient to cover
21 White Lion's debts and obligations?
22 A. No.
23 Q. Did White Lion receive loaned monies from any
24 other person other than you?
25 A. No.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
104
1 Q. Did White Lion receive financing from any
2 other entity other than you?
3 A. Yes.
4 Q. Such as financial institutions?
5 A. Yes.
6 Q. You previously stated that there was a
7 priority system that you had in your decision-making
8 process for all of the various tasks and steps that
9 needed to be accomplished by White Lion at the property,
10 correct?
11 A. Yes, yes.
12 Q. How were those priorities -- what was the
13 decision how did you make that decision to
14 prioritize? What factors did you consider?
15 A. A lot of it had to do with the damages that
16 were done to the facility, and I think I said this
17 before: The buyers kept complaining that I wasn't
18 mitigating my damages. So I would get a call from
19 Mr. Doggett, saying, "Work on this area." This place
20 looked like a mess, a war zone, at the time I acquired
21 it afterwards, after the tenants -- not the tenants --
22 the buyers and contractors left.
23 So I had a plan to clean up, and that
24 plan changed dramatically because of the damages. So I
)
25 was trying to appease the buyer's concern on mitigating
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
105
1 the damages. And so I was kind of allover the map.
2 It's a large facility. I was trying to satisfy this and
3 satisfy that, and I was moving around that area.
4 And I know probably what you're going to
5 say is, "Well, why didn't you appease the State of
6 Texas?" It's because I didn't hear from them. It seem
7 like it was a big subject; and, obviously, since
8 testing, the conditions there have improved
9 dramatically.
10 Q. So the correspondence that TCEQ sent to you in
11 2004 did not qualify, in your mind, as concern of the
12 State of Texas?
13 A. No, because it was in noncompliance three and
14 a half years before I bought it; and nothing was done.
15 Q. The Notice of Violation that you received in
16 December of 2004, which I've marked as Exhibit 13, did
17 not qualify as a concern --
18 A. First of all, I didn't know --
19 Q. of the company?
20 A. I didn't understand any of it. I've said
21 that before.
22 Q. What does the term "Notice of Violation" mean
23 to you?
24 A. Well, I understand that. I'm not stupid. I
)
25 know what a Notice of Violation is. It's a violation.
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
106
1 But you have to understand that area, and that's not my
``
, ``\,:';'
.,,:~-' 2 thing.
3 Q. In subsequent months, TCEQ corresponded with
4 you further concerning the violations that they
5 observed, correct, through 2005, correct?
6 A. Did they correspond with me? Yes, we had a
7 dialogue.
8 Q. And they threatened to bring an enforcement
9 action against you, correct?
10 A. If that's what the letter says, but I saw
11 those enforcement letters now in the files of the
12 previous owner; and nothing was ever done. I didn't
~ 13 think it was that important, and they were an
14 experienced operator. I'm not.
15 Q. You're saying one of your decision prongs in
16 your decisionmaking matrix was that the State didn't
17 care. That's just not true, is it?
18 MS. KOKS: Objection, form.
19 MR. PRITZLAFF: I'll move on.
20 Q (BY MR. PRITZLAFF) And then, the State
21 ult~tely -- TCEQ referred the matter to the Attorney
22 General's Office, and a civil suit was filed. When the
23 civil suit was filed, at that point in time, did the
24 decisionmaking matrix for you raise any higher?
,)
25 A. I don't think you're understanding. You're
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
107
1 acting like I intentionally did something. There's so
I~ 2 much a human being can do. And that's a very large
3 facility; and under the conditions I was in -- it was
4 not planned to be this way -- but under the conditions I
5 was in, unless you had unlimited resources and unless
6 you had expertise in this area, nobody else could have
7 done any different than what I did. And that is try to
8 make the best of the situation you're in, and that's
9 what I've tried to do all along.
10 Q. But you've said before that the Corrective
11 Action System is gone.
12 A. It is.
13 Q. It does not exist; and that occurred under
14 your watch, correct?
15 A. The Corrective Action System, the system
16 itself, the functioning -- these are just fixtures here.
17 This is just a pipe that runs into the ground. All the
18 internet work that runs it is all gone. It was damaged
19 at the time that the buyers were there. The equipment
20 was gone. The pipes were cut. Electricity was cut.
21 I've already went over all that. It was destroyed.
22 Q. And you, as the sole decisionmaker of White
23 Lion, made a conscious decision not to repair and
24 replace the Corrective Action System because it would
25 have cost too much money out of your own pocket,
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
108
1 Mr. Morello, right?
2 A. No.
3 MS. KOKS: Objection, form.
4 A. No.
S Q. (BY MR. PRITZLAFF) Who receives distributions
6 from White Lion?
7 A. No one.
8 Q. Does White Lion file its own tax returns?
9 A. Yes.
10 Q. No one other than you could have made a
11 decision for White Lion to repair the Corrective Action
12 System, right?
13 A. To answer that, my hands were tied.
14 MR. PRITZLAFF: Object as nonresponsive.
lS I'll have the question read back to you.
16 (The material was read as requested.)
17 Q (BY MR. PRITZLAFF) That's a yes-or-no
18 question.
19 A. No.
20 MR. PRITZLAFF: I have no further
21 questions. Thank you for your time.
22 THE WITNESS: Sure.
23 MS. KOKS: I'll reserve mine to the time
24 of trial.
)':
,:-~
2S MR. PRITZLAFF: Mary, thank you for
Integrity Legal Support Solutions
www.integrity-texas.com
rnard Morello - 9/19/2014
109
1 rticipati by telephone.
2 MS. KOKS: Oh, I appreciate you allowing
3 me to do so.
4 (Deposition adjourned at 4:22~p.m.)
5 --000--
6
7
8
9
10
11
12
:~
. ~$'f~"
13
14
15
16
17
18
19
20
21
22
23
24
25
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
112
1 CAUSE NO. D-I-GV-06-000627
-~
r ;.>.{F:"
--, .,
2 STATE OF TEXAS, IN THE DISTRICT COURT
3 Plaintiff,
4
v. TRAVIS COUNTY, TEXAS
5
BERNARD MORELLO,
6
Defendant. 353RD JUDICIAL DISTRICT
7
8
REPORTER'S CERTIFICATION
9
ORAL DEPOSITION OF BERNARD MORELLO,
10
Taken on September 19, 2014
11
12 I, Debbie D. Cunningham, Certified
13 Shorthand Reporter in and for the State of Texas, hereby
14 certify to the following:
15 That the witness, BERNARD MORELLO, was
16 duly sworn by me, and that the transcript of the oral
17 deposition is a true record of the testimony given by
18 the witness i
19 That the deposition transcript was
20 submitted on OC:f-ob er 2.. 201L{ to the witness
21 or to the attorney for the witness for examination,
22 signature, and return to me by
23 That the amount of examination time used
24 by each party at the deposition is as follows:
25 BY MR. PRITZLAFF: 02:51:32
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
113
1 BY MS. KOKS: 00:00:00
2 That pursuant to information given to the
3 deposition officer at the t~e said test~ony was taken,
4 the following includes counsel for all parties of
5 record:
6
COUNSEL FOR PLAINTIFF:
7 .
OFFICE OF THE ATTORNEY GENERAL OF TEXAS
8 Environmental Protection Division
P.O. Box 12548
9 Austin, Texas 78711-2548
(T) 512.475.4138 I (F) 512.320.0911
10 By: Craig Pritzlaff, Esq.
craig.pritzlaff@texasattorneygeneral.gov
11
12
COUNSEL FOR DEFENDANT: (VIA SPEAKERPHONE)
".~
",-. ,~
.,~,- :~t~; 13
,:``~- '"
MUNSCH, HARDT, KOPF & HARR, P.C.
14 700 Milam Street, Suite 2700
Houston, Texas 77002-2806
15 (T) 713.222.4030 I (F) 713.222.5830
By: Mary W. Koks, Esq.
16 mkoks@munsch.com
17
18 I further certify that I am neither
19 counsel for, related to, nor employed by any of the
20 parties or attorneys in the action in which this
21 proceeding was taken, and further that I am not
22 financially or otherwise interested in the outcome of
23 the action.
24 Further certification requirements
25 pursuant to Rule 203 of TRCP will be certified to after
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
114
2
3 2014.
4
5
6 i.
7 Texas CSR
Expiration:
8 INTEGRITY LEGAL SUPPORT SOLUTIONS
3100 West Slaughter Lane, Suite 101
9 Austin, Texas 78748
www.integrity-texas.com
10 512-320-8690; FIRM # 528
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Integrity Legal Support Solutions
www.integrity-texas.com
Bernard Morello - 9/19/2014
115
1 FURTHER CERTIFICATION UNDER RULE 203, TRCP
2 The original deposition/errata sheet was / was not
3 returned to the deposition officer on --------------------;
4 If returned, the attached Changes and Signature
5 page contains any changes and the reasons therefor;
6 If returned, the original deposition was delivered
7 to MR. PRITZLAFF, Esq., Custodial Attorney;
8 That $ - - - - - - is the deposition officer's
9 charges to the Plaintiff for preparing the original
10 deposition transcript and copies of exhibits, if any;
11 That the deposition was delivered in accordance
12 with Rule 203.3, and that a copy of this certificate was
,. ., 13 served on all parties shown herein on
14 and filed with the Clerk.
15 Certified to by me on
16
17
18
19 :1.
Debbie D. Cunningham, C
20 Texas CSR 2065
Expiration: 12/31/2014
21 INTEGRITY LEGAL SUPPORT SOLUTIONS
3100 West Slaughter Lane, Suite 101
22 Austin, Texas 78748
www.integrity-texas.com
23 512-320-8690; FIRM # 528
24
'"
J --.'
25
Integrity Legal Support Solutions
www.integrity-texas.com
EXHIBIT B
EXHIBIT
B
EXHIBIT C
EXHIBIT
C
EXHIBIT D
EXHIBIT
D
EXHIBIT E
EXHIBIT
E
EXHIBIT F
STATE OF TEXAS
COUNTY OF HARRIS
Before me, the undersigned, on this day personally prepared David H. Heslep, who being
duly sworn, deposed and said:
"I am David H. Heslep 1 am a licensed professional geologist in the State of Texas,
license # 6414. Attached hereto are:
Exhibit Item Date
A My qualifications -----------
B Services Agreement between 12115/14
White Lion Holdings L.L.c.
and WDIA
C Draft Memorandum- 12/15/14
Steps to Achieve Compliance
D Emails between me and 118115
E. Weimer at TCEQ
E Emails between me and 2/11115
Welmer
F U.S. Geological Survey (Brazos 2007
River Alluvium Aquifer)
"The facts contained in this affidavit are true of my own personal knowledge.
"All of the exhibits are true and conect copies ofthe originals, and are incorporated
herein by reference for all purposes. My qualifications are attached in Exhibit A.
"I have been hired by Bernard Morello on behalf of White Lion Holdings [WLH] to
assess the status of the property formerly owned by Vision Metals, fOllTIulate a plan to modify
the existing Compliance Plan and Pennit, and to implement that plan. See the attached Services
Agreement, Exhibit B. My initial proposal is embodied in Exhibit C (Draft Memorandum-Steps
to Achieve Compliance). I have been in communication with TCEQ as evidenced by Exhibits D
and E. WLH has been moving forward to implement the plan and has plugged and abandoned
old wells and installed new monitoring wells. I have personally been at the WLH site and
scheduled and monitored the work that is being done.
"Part of my proposal included a proposed deep monitor well into the second groundwater
unit on the south side ofthe monitoring area. See Exhibit E. However, TCEQ's Eleanor Wehner
asked that this well be placed on the north side of the monitoring area because she said records
showed that the water flow was to the north rather than the south. In Exhibit E in the Google
earth Untitled Map, my proposed well to the south is shown by the white box in the center of the
page with the words "Proposed Deep Well Location". Eleanor Wehner's proposed well to the
north is shown by the hatched circle with the letters "MW 26" with an arrow pointing north.
"I became puzzled as to why the flow of the targeted aquifer was to the north, rather than
the south, since the Upper Chi cot aquifer which had been identified as the potentially affected
aquifer, flows south.
"Based on my training and experiences, my knowledge of the WLH site, and my review
of the Semi Annual Reports for the Vision Metals/White Lion Holdings facility, the 1999 pennit
renewal application, and a geologic study perfonned by the United States Geological Survey at
the request of the Texas Water Development Board regarding the Brazos River Alluvium
Aquifer, I came to the conclusion on April 11, 2015, that a major error had been made in the
geologicallhydrological analysis as it pertains to the former Vision Metals - White Lion
Holdings, LLC site.
"I reviewed the 1999 pennit renewal application and noticed it was incomplete. Only
"renewal" was checked, but at the back of the package are attachments labeled as Class 3
Modification to the pennit pertaining to recovery wells thus changing the compliance plan. It
also appears the geologic assessment and description have been carried over from the initial
permit. After reviewing this and monitoring reports dated in 2003, they all show groundwater in
the lower groundwater unit identified as Zone 2 flowing in a northerly direction. The geology
and aquifer is described in the renewal application as being part of the Upper Chi cot aquifer. It
is widely published the Chi cot flows in a south to southeast direction toward the Gulf of Mexico.
Since all the reports indicated a northerly flow at the Vision Metals site, this raised the question
as to why? Upon further research of the aquifers in Texas, the aquifer identified as the Brazos
River Alluvium Aquifer was identified as being located in the vicinity of the property. Further
research revealed a study done by the USGS in cooperation with the Texas Water Development
Board titled Hydrogeologic Characterization ofthe Brazos River Alluvium Aquifer, Bosque
County to Fort Bend County, TX [the report] that revealed that that aquifer had been identified
many years before and numerous studies have been done on it. The report provided detailed
figures and by using those figures with identifiable features of the Brazos River, it was
determined the Vision Metals/White Li9n property is situated on top of the Brazos River
Alluvium aquifer, not the Upper Chicot aquifer. The report further documents groundwater flows
in the Brazos River Alluvium aquifer to the north as it does on the Vision MetalslWhite Lion
property. The report states the aquifer is primarily used for.irrigation purposes with some
domestic uses based on location and water quality. "'Given this information, it became apparent
that further investigation was needed to accurately identify Zone 2.
"I also reviewed:
1. the current compliance plan and permit for the White Lion facility, and
2. the 1988 compliance plan.
"In reviewing everything, it is clear that the flow of the aquifer which was potentially
subject to contact with the plume at the WLH facility was to the north. The flow of the Upper
Chicot aquifer is to the south. This did not make sense so I re-reviewed the U.S. Geological
Survey maps and Texas Water Development maps for the area in question. I also determined that
the WLH site has intermittent sand lenses which is typical of the Brazos River Alluvial Aquif6f,
and not typical of the Chi cot Aquifer. All things considered, it is my opinion that the reason the
actual flow of the aquifer at the WLH facility was to the north was b~cause it was the Brazos
River Alluvial Aquifer, not the Upper Chicot Aquifer. I have shared my fmdings with Eleanor
Wehner at TCEQ, and she indicated she agreed with my opinion regarding the identification of
the Brazos River Alluvial Aquifer.
"The fact that the actual aquifer potentially affected is the Brazos River Alluvial Aquifer
greatly reduces any risk from the WLH plume. It is my opinion that had the proper aquifer been
identified by Vision Metals experts and the TCEQ expeIj:s when the permit came up for renewal
in 1999, that the current pump and treat system required by the Compliance Plan would not have
been necessary and that a monitored natural attenuation plan would have been appropriate for
remediating the contamination at the WLH facility. This is a much lower level of remediation
than the current plan and would have resulted in much lower financial assurance and much lower
installation, operation, and maintenance costs. The pump and treat remediation plan continued in
effect in 1999 was not necessary at that time to protect the public health and environment.
"At this time there is no way to know why this mistake was made, but the mistake was a
major reason the pump and treat remediation plan remained in place in 1999. Both Vision Metals
and TCEQ failed to detect the error. The error in the original geological analysis as to which
aquifer was involved was carried over in the 1999 analyses. The result of the error is that a much
more involved and stringent remediation system was put into place than was necessary.
"In essence, the Upper Chicot was erroneously identified as far back as 1988 as a
potentiallya.ffectedaquiferdespite the fact that the Upper Chicot generally flows
south/southeast:. while the flow of the aquifer under the Vision MetalslWhite Lion facility is to
the north. This error was carried forward thereafter in allreportsa:nd proposed plans and adopted
by the TCEQ' and its predecessor. The State failed to' detect the error, and required the more
stringent pump and treat system based on the error. Had this error been detected by the State, a
less stringent, less expensive monitored natural attenuation plan would have been appropriate. A.
monitored natural attenuation plan would have been much cheaper to install, maintain, and
operate than the existing system.
"It is 11;1Y opiniontha1: a monitored natural attenuation plan would have been found
appropriateforthe site from the start of White Lion's ownership of the site, had the cortect
aquifer been identified by the State." .
David H. Heslep
Sworn to and subscriber this 13 day of May 2015.
",,\``II1(jI', SARAH DELeON
liJ::A;J:;;~ Notary Public. S,tate of Texas
;: :..~)"S
c~·,«``
My cornrnisSlon Expires
\~;;,... ·,:'+·l June 16. 2018
~",~:",\"'\;
Notary Public
State of Texas
EXHIBIT G
1
1 REPORTER 'S RECORD
2 VOLUME 1 OF 1
3 CAUSE NO. D-1-GV-06-000627
4
5 STATE OF TEXAS ) IN THE 353RD JUDICIAL
)
6 VS. )
)
7 WHITE LION HOLDINGS , LLC AND)
BERNARD MORELLO )
8 ) DISTRICT COURT OF
)
9 )
)
10 ) TRAVIS COUNTY, TEXAS
11
12
13 * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
14 REPORTER 'S RECORD
15
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
16
17
18 BE IT REMEMBERED , on the 19th day of
19 February , 2015, the following proceedings came on to be
20 heard in the above-entitled and numbered cause before the
21 Honorable Rhonda Hurley, Judge presiding , held in Austin,
22 Travis County, Texas.
23 Proceedings reported by machine
24 shorthand .
25
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629 EXHIBIT
G
2
1 APPEARANCES
2
3
4 FOR THE PLAINTIFF :
5 MR. CRAIG PRITZLAFF
Assistant Attorney General
6 P. O. Box 12548
Austin, Texas 78711-2548
7 Phone No. 512-475-4138
Fax No. 512-320-0911
8
FOR THE DEFENDANT :
9
MR. KEITH LAPEZE AND
10 MR. STEPHEN A. DOGGETT
(Lapeze & Jones, PLLC)
11 601 Sawyer
Suite 650
12 Houston , Texas 77007
Phone No. 713-739-1010
13 Fax No. 713-739-1015
14
ALSO PRESENT :
15
MR. DAVID TERRY
16 Staff Attorney for TCEQ
17
18
19
20
21
22
23
24
25
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
3
1 INDEX
2 VOLUME 1
3 HEARING
4 FEBRUARY 19, 2015 Page Vol.
5 Argument by the Plaintiff ----------------- 4 1
6 Argument by the Defendant ----------------- 20 1
7 Rebuttal Argument by the Plaintiff -------- 33 1
8 Reporter 's Certificate -------------------- 37 1
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
4
1 P R O C E E D I N G S
2 February 19, 2015
3 THE COURT: All right, this is cause number
4 GV-06-000627. Would you state your appearances , please,
5 for the record.
6 MR. PRITZLAFF : Your Honor, Craig Pritzlaff
7 with the State of Texas and the Attorney General 's
8 Office.
9 MR. TERRY: David Terry, staff attorney for
10 the Texas Commission on Environmental Quality .
11 MR. LAPEZE: Keith Lapeze and Stephen
12 Doggett for Mr. Morello and Mr. Morello is personally
13 here as well.
14 THE COURT: All right and this is the
15 state's motion for summary judgment .
16 MR. PRITZLAFF : Yes, Your Honor. We're
17 here on the state's motion for summary judgment . This is
18 an environmental enforcement case involving the sole
19 owner, sole manager , sole employee and sole director , who
20 through deliberate inaction and deliberate actions
21 caused, allowed , or permitted his company to blatant ly
22 violate laws governing --
23 THE COURT REPORTER : Please slow down. I'm
24 not understanding your words.
25 THE COURT: And would that company be White
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
5
1 Lion Holdings ?
2 MR. PRITZLAFF : White Lion Holdings , LLC.
3 THE COURT: Okay, go ahead.
4 MR. PRITZLAFF : Under Mr. Morello 's watch
5 and after suit was filed in this case the entire
6 groundwater treatment and monitoring system at the
7 facility was removed. This is a blatant violation of
8 TCEQ laws, and especially the Compliance Plan pertaining
9 to this site.
10 For over a decade now Mr. Morello has
11 refused to accept the law, he's refused to accept the
12 requirements to comply, and refused to address the
13 contaminated groundwater on his property .
14 In short, his goal when he acquired this
15 property , which is a former heavy manufacturing facility ,
16 was to clean it up. And by clean it up, I don't mean
17 clean up the environmental issues, but clean it up to
18 make it more enticing for prospective purchasers and/or
19 lessors.
20 The presence of a large groundwater
21 mediation system on the property was not enticing and was
22 also costly and expensive to maintain .
23 In the end by avoiding his obligations for
24 so long, by not taking one single drop of groundwater out
25 of the ground, by not sampling a single drop of
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
6
1 groundwater for almost 10 years, by not repairing a
2 single groundwater monitoring well, by not repairing a
3 single groundwater monitoring well, by failing to report
4 anything to the State of Texas for almost a decade, he's
5 avoided those costs of compliance for almost a decade.
6 As we will discuss today, in this kind of
7 case when you have a corporate representative , the only
8 corporate representative that participate s in, directs ,
9 and with knowledge and assents to, agrees to, that
10 corporate individual casts aside his corporate shield and
11 could be held individually liable.
12 The state has already obtained final
13 judgment against its company White Lion, LLC back in
14 September on summary judgment . And we believe summary
15 judgment is appropriate in this case, Your Honor.
16 Now, it may be apparent from the briefing ,
17 which is voluminous , that it appears that this is a very
18 complex case. And to some extent it is. But I think I
19 can simplify things today for you.
20 I offer to you the following road map. Of
21 course you can -- I'll drive you wherever you need me to
22 go in this case, but I thought I would first discuss the
23 site and the regulations that apply to the site. And
24 then discuss Mr. Morello 's role in why the state believes
25 he should be held personally liable.
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
7
1 I would also like to finally address his
2 primary defense , which is third party interference , and
3 with that we'll turn to the facility and its background .
4 This facility is a heavy manufacturing
5 facility that operated for nearly four decades in Fort
6 Bend County in the small town of Rosenberg, which is just
7 west of Houston , Texas.
8 As part of the manufacturing process the
9 facility generated a hazardous wastewater stream
10 consisting of acid waste and heavy metal runoff,
11 wastewater. That acid waste was run through a series of
12 huge impoundments on the facility .
13 Those impoundments collected this hazardous
14 wastewater and became hazardous themselves because it
15 stored hazardous waste. The facility changed its
16 operations and proceeded to close those units. There's a
17 federal law in place called the Resource Conservation and
18 Recovery Act, RCRA, which governs cradle-to-grave
19 management of hazardous waste.
20 Texas was delegated authority to implement
21 that program in the state of Texas and it requires , among
22 other things, when hazardous waste units are closed they
23 obtain a permit.
24 Former owner and operator obtained a permit
25 to close those units. And contemporaneous with that
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
8
1 closure they discovered the groundwater beneath those
2 units was contaminated .
3 The TCEQ then issued a Compliance Plan.
4 That Compliance Plan addressed investigation of that
5 groundwater , and then later after a treatment protocol
6 was set in place, it also addressed treatment and
7 monitoring that groundwater . It is this Compliance Plan
8 that's the subject of this suit.
9 Can you see this? Should I move it up
10 further ?
11 THE COURT: Yeah. Okay, that's good. You
12 can come on up.
13 MR. LAPEZE: That's fine. I just wanted to
14 see what it was. Thanks, Judge.
15 MR. PRITZLAFF : So here's the facility in
16 general . It may be difficult -- do you want me to bring
17 it up closer to you?
18 THE COURT: I can see pretty well. If you
19 are going to point it out I'm fine.
20 MR. PRITZLAFF : If you see these dots, what
21 the Compliance Plan contemplated is drilling a series of
22 21 monitoring wells all over the facility . Those
23 monitoring wells are intended for the owner and operator
24 to be able to sample the groundwater regularly .
25 There's also five wells here in the
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
9
1 impound ment that allow for the recovery of groundwater .
2 That's treated onsite. There's an onsite treatment
3 system called the ANTS, Acid Neutralization Treatment
4 System. There's five of those recovery wells on the site
5 as well.
6 As you can see, they're located all over
7 the facility . The plan also requires regular monitoring
8 and maintenance of those wells. Bi-annual groundwater
9 samples must be taken and reports filed with the state on
10 at least a semiannual basis.
11 The permittee under the Compliance Plan is
12 also required to provide financial assurance in the
13 amount of $574,000. That's to guarantee performance of
14 the remedy through the life of the plan, which is set for
15 at least 30 years, but it could go on longer if
16 contamination remains at the facility .
17 Former owners and operators of the site
18 went bankrupt in 2000, declared Chapter 11 bankruptcy and
19 then this facility was spun out. The last groundwater
20 samples taken of the former owners and operators was in
21 2003.
22 THE COURT: What do you mean by spun off?
23 MR. PRITZLAFF : The asset was sold.
24 THE COURT: Okay.
25 MR. PRITZLAFF : And the last groundwater
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
10
1 report filed with the state was in 2004, which is the
2 year Mr. Morello came in and purchased the facility .
3 It's February 2004 that Mr. Morello entered
4 into a purchase and sale agreement . He initially agreed
5 to purchase the facility for $650,000. Later negotiated
6 an amendment to that plan, which dropped the purchase
7 price down to $150,000 for, among other reasons , assuming
8 all the other liabilities at the facility .
9 He then formed White Lion Holdings , LLC and
10 transferred his rights and obligations under the
11 purchase and sale agreement to White Lion, and then the
12 property was deeded to White Lion.
13 Let's discuss Mr. Morello 's role at the
14 facility at White Lion. Quite simple, he is White Lion.
15 He's the only employee . He's the only decision maker,
16 the only person responsible for making environmental
17 compliance decision s, and most importantly , the only
18 person that could direct and ensure White Lion would
19 comply and manage the groundwater .
20 In the beginning things were good. Mr.
21 Morello applied for and transferred the Compliance Plan
22 over to his company . That was approved on July 23rd,
23 2004. That's one of the dates that's important here.
24 For counsel 's benefit , I'm writing the
25 date.
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
11
1 Later that month he wrote a letter to TCEQ
2 requesting more time to address maintenance issues with
3 some of the recovery wells that were already present at
4 the facility .
5 He requested more time to conduct the
6 latest round of groundwater samples , and more time to
7 study whether another remedy may be applicable at the
8 facility .
9 Would you like to see a copy of that
10 letter?
11 THE COURT: It's up to you.
12 MR. PRITZLAFF : This is in Exhibit L of the
13 state's motion. His words, "Due to the property transfer
14 and the permit transfer , the first half of 2004
15 semiannual sampling event was not performed . These
16 extenuating circumstances precluded submission of the
17 semiannual Compliance Plan report. However , the next
18 scheduled report due January 20th, 2005 will be
19 submitted . The laboratory of QA/QC issues you raised in
20 your April 27th, 2004 letter will be addressed in the
21 January 2005 report submittal . I'm presently exploring
22 other authorized handling methods for the recovered
23 groundwater as an alternative to the handling methods
24 specified in the existing Compliance Plan. I'm
25 respectfully requesting TCEQ initially provide an
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
12
1 additional 120 days to comply."
2 TCEQ granted an extension . Mr. Morello
3 thereafter ignored his own words. In late August in one
4 of his last acts to engage with the TCEQ, Mr. Morello
5 also asked for a delay to provide financial assurance
6 until January 12th, 2005 because the former owner and
7 operator already had a financial assurance policy in
8 place.
9 However the TCEQ's rules required that the
10 new owner must independently provide financial assurance
11 within six months of acquiring ownership . And this is
12 the TCEQ response which I believe is Exhibit N.
13 30 Texas Administrative Code, Section
14 305.64(g) is very clear that a new owner must
15 independently provide its own financial assurance within
16 six months, no later than six months after acquiring the
17 facility .
18 Mr. Morello was explained this, and he
19 failed to respond . So that's the other key date. That
20 was the date by which I believe White Lion obtained the
21 facility by a meeting on April 6th. Six months after
22 that was October 6th. That was the date by which
23 financial assurance had to be provided .
24 The reasons were multi why the rule was
25 expressed . The reasons for the rule are sound. One, the
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
13
1 prior owner and operator is no longer at the facility .
2 Two, in this case, the prior owner and operator his
3 bankrupt.
4 There are also no assurances that Mr.
5 Morello 's plans to revise the Compliance Plan would
6 comport with the rules, and he was explained that in that
7 correspond ence, and told in the interim he still needed
8 to comply with the Compliance Plan.
9 Mr. Morello didn't like those responses and
10 he ignored them. In fact, ignore, ignore, ignore is this
11 case, and that's what the company did thereafter .
12 In his deposition Mr. Morello admitted --
13 that was September 19th, 2014 -- that the facility was in
14 complete noncompliance with the Compliance Plan, and had
15 not provided financial assurance , September 19th.
16 We have two counts in this case. One,
17 complete total violation of the Compliance Plan as a
18 whole. And two, failure to provide financial assurance .
19 3,710 days for the first count times the minimum penalty
20 established in Section 7.102 of the Water Code, there's a
21 penalty for that count of $185,500.00.
22 The second count regarding financial
23 assurance, that's 3,653 days, times a minimum penalty set
24 in Section 7.102 of the Water Code, $50 per day. It's
25 $181,750.00.
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
14
1 The state's also seeking its attorney 's
2 fees in the amount of $26,844.00.
3 Let's now look and examine further why Mr.
4 Morello , himself , should be held personally responsible
5 in this case.
6 To be clear the state's not seeking to
7 pierce the corporate veil. It's seeking civil penalties
8 for Mr. Morello 's actions to cause, allow, and permit the
9 violations as set forth in 7.102 of the Water Code.
10 Here's the full text of the statute , Your
11 Honor. I've also included Section 7.101, which is policy
12 description that we cited in our brief, primarily because
13 defense counsel in their response objected to our
14 citation to that. But the operative cause of action is
15 7.102 for the civil penalty .
16 In the case of personal participation of a
17 corporate representative , courts will disregard the usual
18 corporate shield when an individual directs , participates
19 in, or has knowledge of and assents to the wrongful acts.
20 In this case the wrongful act is a violation of the
21 statute .
22 As the court held in Malone Service s, a
23 case involving corporate representatives were held liable
24 for directing or participating in violations of a permit
25 prohibiting disposal of waste into an on-site
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
15
1 impound ment.
2 The Court held the proper mechanism for
3 courts to look at are the actions of the individual s, not
4 as defendants have purported , to see whether they're
5 acting within the scope of their employment . That's
6 already presumed .
7 But the actions are viewed in the context
8 of whether to determine such actions constitute separate
9 violations by that individual .
10 The statutes are structured with, among
11 other things, this in mind. A person includes an
12 individual . That's true in DTPA cases and was true in
13 Malone Services , the statute issued there.
14 And here the issue or the evidence is
15 overwhelming Mr. Morello caused, allowed , or permitted
16 violation of the Compliance Plan and the financial
17 assurance requirements .
18 As the sole decision maker, employee and
19 person responsible , Mr. Morello was the only person that
20 could cause his company to comply.
21 Mr. Morello instead made affirmative
22 decisions to ensure White Lion ignored the law. He took
23 affirmative personal actions to remove certain components
24 of the treatment plan and monitoring system required .
25 These egregious actions took place after
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
16
1 the state filed suit in this matter, after the TCEQ
2 initiated an enforcement .
3 Let's look at his affirmative actions . I'm
4 going to focus on two here. His testimony , he said --
5 Mr. Morello explained that he was out at that site 60 to
6 80 hours a week, everyday . Incredibly , in 2006, so
7 this -- backing up a second.
8 So after the correspond ence with TCEQ that
9 we discussed earlier , and Mr. Morello failed to comply,
10 TCEQ inspected the facility in late 2004; more engagement
11 with Mr. Morello to get him to comply, more letters . He
12 continued to ignore it. TCEQ got to the end of the line
13 and could not take any further action and referred the
14 matter to the Attorney General for enforcement .
15 In 2006 this case was initially filed, and
16 Mr. Morello was added in 2007 as a defendant .
17 In late 2006, and early 2007, and this is
18 from a deposition in another case, Mr. Morello , with
19 respect to the ANTS system, which is the system that
20 would treat the contaminated groundwater , he removed it.
21 He didn't notify the state.
22 He said I was going to remove it anyway.
23 It was not broken. This had nothing to do with any third
24 party damages at the facility . This eliminated any
25 possibility of treating the groundwater at the facility .
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
17
1 Then sometime between 2008 and 2013, every
2 single groundwater well at that site was removed .
3 They're not hard to see. Every single one of those wells
4 is protected by a large yellow metal housing . You can
5 see, it's fairly thick steel. These pictures are from
6 2008. If you recall the picture , they were dotted all
7 over the site.
8 Mr. Morello 's testimony when we asked him
9 what happened to those wells, he said that mowers at the
10 site destroyed them, that he would pick up these pieces
11 and throw them away.
12 When our inspector was out there last time
13 in mid 2013, that's all that's left. Green fields and
14 open holes into the ground, which that's a whole host of
15 issues for additional contaminate migration .
16 These actions , these direct actions taken
17 by Morello allowed -- he allowed them to be taken under
18 his watch, or he took them personally himself , caused,
19 allowed , and permitted White Lion to violate the
20 Compliance Plan.
21 Mr. Morello also did a lot of inaction,
22 made a lot of decisions to not do anything , to not
23 repair, notify TCEQ, notify removal of equipment , file
24 reports . These decisions to not act constitute
25 affirmative action.
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
18
1 I think about it as perhaps we should ask
2 the question of what Morello did to comply, and it would
3 be nothing . That inaction warrants penalties in this
4 case.
5 One last point, you are going to hear most
6 likely Mr. Morello talk about third party involvement at
7 the facility . When he purchased the facility from the
8 bankruptcy , apparently other parties came in and removed
9 equipment , and he said those third parties eliminated any
10 possibility of his complying .
11 However , he testified that those third
12 parties never prevented him from taking samples from the
13 groundwater . Those wells are in place, they require no
14 power.
15 Furthermore , with respect to the recovery
16 wells, these aren't high yield wells that are coming out
17 of the ground. A few gallons per minute, if that. The
18 power required to power a small pump at those recovery
19 wells would be minimal .
20 Irregardless , even if this defense were
21 applicable , it doesn't apply. The question here is Mr.
22 Morello 's personal actions . It's not the third party's
23 obligations to comply; it's Mr. Morello .
24 Mr. Morello never notified the TCEQ of
25 these issues. By his own testimony , he said that work
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
19
1 was completed in August 2004.
2 Telling ly, in one of Mr. Morello 's
3 voluminous response exhibits , there are letters to
4 insurers . Here's an example of one of them, and they're
5 all dated around the same time; July 2005 in this case,
6 July 16th, 2004. That's actually the one I really
7 wanted, which is letters to the insurers to some of these
8 third parties with respect to potential damages at the
9 facility .
10 He then sent a letter, remember , in July
11 2009 -- or July 29th, 2004, later that month, asking for
12 more time to comply and giving assurances to TCEQ. But
13 he never ever notified TCEQ or alerted them that there
14 were some problems at the facility caused by other
15 parties .
16 If that defense even were applicable it
17 would have been waived.
18 The evidence here is so overwhelming that
19 Mr. Morello personally participated in, directed and had
20 knowledge of and assented to causing , suffering , and
21 allowing violation of the Compliance Plan.
22 Summary judgment is proper here, and civil
23 penalties should be assessed . This matter has been
24 pending for a very long time, and the facts and evidence
25 here are so very clear. Summary judgment is the proper
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
20
1 means to resolve this now.
2 I would like to reserve the balance of my
3 time for rebuttal .
4 THE COURT: All right, thank you. Not
5 much.
6 Mr. Lapeze?
7 MR. LAPEZE: Thank you for pronouncing my
8 name right. Do the best you can. We're taking this
9 record for other reasons so I have that.
10 Your Honor, just an introduction , TCEQ is
11 seeking nearly $400,000 in civil penalties against my
12 client, Mr. Morello , individually when he never
13 personally owned, never personally operated , and never
14 held a permit personally regarding this property at
15 issue.
16 The owner, operator , and permit holder in
17 this case, and of this property is and has always been
18 White Lion. I'll call it White Lion, like the '80s band.
19 That is undispute d.
20 They make -- the state makes lots of
21 arguments in their motion for summary judgment that Mr.
22 Morello owned the property . That's false. He never
23 owned it, ever.
24 Yes, he went to -- I'll explain the facts
25 in a minute. He went to a bankruptcy auction and got a
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
21
1 purchase agreement . That's like a contract to sell. He
2 never owned it, and I'll explain that in a minute, Judge.
3 The state leaves a lot of the facts out,
4 and I think these are the most facts I've ever heard
5 discussed at a summary judgment hearing , which is good
6 for us, because you know the burden of proof, Judge, but
7 let me talk about the facts for just a second. I've kind
8 of jotted them down.
9 This is what the state left out for the
10 most part. The property was owned and contaminated by
11 Vision Metals. Vision Metals entered into Compliance
12 Plan and permits for the TNRCC, now the TCEQ as you know,
13 in 1988.
14 Vision filed for bankruptcy in 2000.
15 Mr. Morello attended the bankruptcy auction , which he
16 read about in the newspaper in 2004. Decided to bid on
17 this property . And lo and behold he won the bid.
18 So he entered into a contract to sell, a
19 purchase agreement for this property that he could assign
20 it to anyone. But there are certain limitations and
21 criteria before he closed; approval by the bankruptcy
22 court, approval by the TCEQ. I think it was actually
23 approval by the bankruptcy court.
24 Before closing , Mr. Morello assigned
25 everything he had to White Lion. So White Lion is the
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
22
1 one who bought the property . White Lion's the one that
2 negotiated with the TCEQ to enter into the permit, into
3 the Compliance Plan.
4 Now, the bankruptcy trustee not only sold
5 the real property to White Lion, it sold all of the
6 equipment on the property to other third parties .
7 Remember , they're trying to get all this
8 money for the corpus of the bankruptcy . So they sold the
9 pipe making equipment , the metal rolls, and all these
10 other things to 38 individual buyers.
11 These buyers were like vultures on a dead
12 carcass . They went into this facility after the facility
13 was -- after they bought it, and they tore it to pieces;
14 removed the transformers .
15 There's no electricity on this property .
16 There has not been since 2004. They destroyed the
17 utilities . They destroyed many things. Despite the
18 state's factual statements to the contrary , they damaged
19 dramatically the remediation system that was out there.
20 These are fact issues. They caused
21 approximately 1.4 million dollars in damages . White
22 Lion's sole asset was this property .
23 When Mr. Morello purchased -- when he got
24 White Lion to purchase this property , there was no debt.
25 Immediately after all these vultures came in, third
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
23
1 parties came in and destroyed the property , it's
2 immediately 1.4 million dollars in debt.
3 This happened after the Compliance Plan was
4 entered into by White Lion. So this is what White Lion
5 is facing, immediate debt.
6 Now, what did White Lion do? Well, as any
7 lawyer would instruct White Lion to do, they started
8 suing people, started suing these third parties , saying,
9 look, you damaged the property . And the state pointed
10 this out with these exhibits .
11 So White Lion could get the money to start
12 complying with the remediation plan. 10 years of
13 litigation plus, this case is still in litigation , White
14 Lion's recovered approximately a third of the 1.4 million
15 dollars .
16 A lot of that money has gone to paying
17 lawyer's fees and whatnot on this. That's the background
18 of all this. So you have Mr. Morello as the sole
19 officer , sole employee of White Lion having to triage
20 decisions . You have a patient dying on the table trying
21 to figure out how to best handle all this.
22 None of this was expected when he bought
23 it. That's the source of our affirmative defenses in
24 this case, which we're going to talk about in a minute.
25 Now I want to go to the case's primary
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
24
1 argument at hand. And I could not have developed a
2 better exhibit than the exhibits they did. This is what
3 Mr. Pritzlaff said when he put this before you. Morello
4 is White Lion. That's his quote.
5 I agree with that. His actions were White
6 Lion's. The statute that they're talking about, 7.102
7 and 7.101, basically the same thing, talks about the
8 actions of a person.
9 Of course, a person can be defined as a
10 corporation . So the question is what is a person.
11 Well, when we look at a person we go back
12 decades of Texas case law starting in 1907 where it says,
13 the acts of a person as an agent or employee of a company
14 are the acts of the company .
15 When we look into LLC law and everything
16 else that's been cited for you in the briefing ,
17 employees , officers , whatnot cannot be held individually
18 responsible for the obligations unless you start piercing
19 the corporate veil.
20 What are the exceptions to this?
21 Exceptions to this are -- and there's lots of case law
22 that we've cited to you and the state in particular has
23 cited to you -- the employee has individually committed a
24 tort, fraud, slander , libel.
25 Another situation , and those are all the
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
25
1 cases cited, and we'll talk about Malone Services in a
2 second because that case is really good for our side of
3 this summary judgment . In the Holloway case, you are
4 talking about the terms of a contract . This is more of a
5 contract than a tort, because we're talking about things
6 that he didn't do or was obligated to do under the
7 Compliance Plan.
8 The Holloway case is great. Where it said
9 that you can't hold an individual employee liable for the
10 breach of a contract . The law doesn't allow that unless
11 you prove that employee acted in bad faith or against the
12 best interest of the company .
13 Again these are fact issues. Was it in bad
14 faith? Did he commit a tort? They didn't make any
15 allegation in their petition , we can read it, that he was
16 fraudulent , wrongful , tortious , nothing in the petition .
17 There's no allegations .
18 What their case is is that Mr. Morello ,
19 just because White Lion did it, he did it.
20 Now, in the background of all this, White
21 Lion has already been held responsible in a summary
22 judgment . Granted it's on appeal, and I know you don't
23 want to talk about the specifics , it's a little bit
24 outside the record, and I'm talking about some of the
25 things they said that were outside of the record, but
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
26
1 there are reasons they are going after this man
2 individually .
3 Now, looking at this law, this decades old
4 law, to win summary judgment , the state must prove as a
5 matter of law that Mr. Morello directed or participated
6 in tortious acts, or that his actions were not in good
7 faith or against the best interest of White Lion. That
8 is their burden. That's the case law. That's how they
9 separate Mr. Morello from White Lion.
10 Now, let's talk about the Malone Services
11 case just briefly . Malone Services , you had employees --
12 first of all, it doesn't deal with 7.102 or 7.101. It's
13 a completely different statute .
14 There are no cases interpreting 7.101 or
15 7.102 in a person. Yet employees that fraudulently sent
16 reports to the State of Texas were dumping illegally ,
17 cutting tarps -- you know, these reports were fraudulent .
18 And the statute said, thou shall not dump.
19 So it's clearly distinguishable . They were
20 committing fraud. It's a tort.
21 And the Court said quote, this is tortious
22 activity , so it falls within the elements of tort.
23 What's more important is that that case was
24 after a jury trial. The jury found those people to be
25 responsible , to be liable for their tortious acts. It
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
27
1 wasn't a summary judgment .
2 Now, the state's theory is really wrong.
3 Let me just twist this hypothetical just a bit. If we
4 listen to the state, how they want to interpret this, any
5 person that causes, suffers , allows, permits , let's say
6 I'm a shareholder , and I read my 10-Qs and 10-Ks in this
7 small independent oil and gas company that I've invested
8 in. They have obligations with the TCEQ that they report
9 on and know about it.
10 This company then puts in a 10-Q; Hey,
11 money is short because of the way oil is, and we can't
12 afford to pay for these things, so we're going to let
13 these obligations go. Just letting you know that,
14 shareholder , that we expect in a couple quarters we'll
15 have the money to start our obligations up again, which
16 is a technical violation of the law if you don't do your
17 reports or whatnot.
18 I'm a shareholder . I didn't come in with
19 my own money to help the company out. Well, technically
20 then, I caused, suffered , allowed , or permitted .
21 That's the question they asked him in his
22 deposition . His deposition is attached as an exhibit .
23 Why didn't you personally go in with your own money, Mr.
24 Morello , and pay for these things? You should have done
25 that. That's their argument .
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
28
1 This would change decades of Texas law if
2 this argument , this strict liability argument was to be
3 adopted . That's not the law in Texas.
4 In fact, the law in Texas is that for penal
5 statutes -- and this is Footnote 58 I describe d this in
6 detail in the response brief, for penal statutes , which
7 this is, it's strict construction .
8 If the Legislature wants to change the law
9 with penal statutes , then it has to make it very clear
10 and explicit in the terms. This is not very clear that a
11 person -- decades of law on agency law in Texas is
12 overrun by this. And the consequences would be dire.
13 What the state has done in this case is
14 effectively ignored these arguments and these issues.
15 There is no allegation of tortious activity , fraudulent ,
16 wrongful , like I said earlier . And again, this is
17 similar to a contract .
18 There are genuine issues of material fact
19 all through these issues. Was he acting as an agent or
20 not? All we want is our day in court on that issue, Your
21 Honor.
22 Now, let's talk about the affirmative
23 defenses . We've pled in this case affirmative defenses ,
24 third party interference , force majeure , several of these
25 other defenses, and their inability to comply, things
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
29
1 like that.
2 As you know, Judge, and you know the law,
3 they not only have to prove their case as a matter of law
4 they have to disapprove the affirmative defenses as a
5 matter of law to win.
6 Now, their argument in this case is, well,
7 for force majeure in this third party interference
8 causing you not to be able to comply because there is no
9 money, et cetera, et cetera, you had a separate
10 obligation under the Compliance Plan to let us know about
11 this, and you failed to do that. So that in and of
12 itself is a violation of the Compliance Plan.
13 Well, they make two causes of action in
14 this case. Your Honor, may I approach ?
15 THE COURT: Uh-huh.
16 MR. LAPEZE: And I just want to show it to
17 you briefly . I've highlighted the relevant portions for
18 you.
19 The first claim is failure to operate the
20 complete corrective action plan. We've been calling it
21 the Compliance Plan. And the second claim is failure to
22 provide for financial assurance .
23 The specific violation rule that they claim
24 with the corrective action plan is 30 TAC, 335.166(6).
25 The financial assurance is a completely different
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
30
1 statute , and it's an independent obligation of a
2 Compliance Plan to provide for financial assurance , 30
3 TAC 305.64(g).
4 The reason why I bring that up to Your
5 Honor, and the reason why it's important is this. Is
6 that financial assurance , not providing that, they have
7 not even addressed our affirmative defenses with any
8 argument that they have made.
9 Therefore , on the financial assurance piece
10 of their argument , they lose as a matter of law. Their
11 only argument about our affirmative defenses is regarding
12 the Compliance Plan.
13 So for their Count 1 they say, okay, their
14 affirmative defenses don't count, and this is why. They
15 never address our affirmative defenses for Count 2
16 because it's separate and apart from the Compliance Plan.
17 Now, regarding that, they never make one
18 allegation until their summary judgment that there's this
19 force majeure provision in the Compliance Plan. Not one.
20 So because they didn't plead it, they never
21 argued it before, they've waived it. They can't do it.
22 We've timely objected to that in our summary judgment
23 response .
24 Now, I just want to talk about some
25 misstatements of fact, and I talked about those briefly .
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
31
1 All throughout the summary judgment they talk about
2 7.101. That's not even mentioned in their pleadings .
3 7.102 is. So it's very confusing about whether or not --
4 what they're arguing here. But 7.101 is not a policy.
5 It is a specific statute , "thou shall not" statute .
6 Again, Morello never personally owned the
7 property . He was never personally the operator . White
8 Lion was. The notices of violation , the notices of
9 enforcement were never issued to Morello personally . He
10 was never put on notice that we're going to hold you
11 personally responsible for this.
12 The cases cited by the state, Your Honor,
13 I'd invite you to read them, they're all after bench
14 trials or jury trials.
15 The one summary judgment is where the
16 defendant got a summary judgment . No way there's a fact
17 issue on whether or not he was an agent. So we're
18 sending that back down.
19 And if you just read through the reply,
20 this case is replete with fact issues. This is a serious
21 summary judgment , Your Honor. We're talking about
22 holding my client responsible in a summary proceeding for
23 almost $400,000 after the state has received a summary
24 judgment against White Lion.
25 And these are just for fines. The state
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
32
1 states in their motion for summary judgment that the only
2 way -- and I don't understand this exactly , but I think
3 it's worth bringing up. The only way for Mr. Morello to
4 defeat it, if he shows that he is somehow starting to
5 comply with this, or he's complying with this or trying
6 to comply with the Compliance Plan.
7 Well, we did that. We added some exhibits
8 to show you, Your Honor, that environmental consultants
9 have been hired and have been working for quite awhile
10 now on this site.
11 The state doesn't mention that. As a
12 matter of fact, they try to strike those exhibits . Long
13 story short, Your Honor, all my client wants is his day
14 in court, be able to argue his points and defend himself
15 in front of a jury.
16 And last, and I received a note from my
17 co-counsel , last, but certainly not least, there are
18 arguments the state made regarding how the wells work and
19 power to operate the wells. There's nothing in the proof
20 about that. The state doesn't have any of that in their
21 proof in their summary judgment .
22 Your Honor, unless you have any questions ,
23 that is all I have, and I thank you for your time and
24 your attention . I appreciate it.
25 THE COURT: Thank you, sir. All right,
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
33
1 briefly , very brief.
2 MR. PRITZLAFF : Yes. With respect to
3 ownership , we present that not to prove up ownership .
4 It's merely contextual to show his involvement early on.
5 With respect that the contamination was
6 caused by another party, that's irrelevant . The issue
7 here and the cause of action here is for the Compliance
8 Plan which is in White Lion's name, and the rampant
9 violation of that plan. Company debt is irrelevant to
10 compliance .
11 The actions here of Mr. Morello constitute
12 affirmative action to destroy that treatment unit, all
13 the monitoring wells, taking affirmative inaction to not
14 do anything .
15 Most importantly , I need to correct a very
16 important point here. The Compliance Plan, that is not a
17 contract . It's a creature of statutory and regulatory
18 law. This is addressed in our response brief, our reply
19 brief.
20 It is a statutorily required obligation .
21 The state doesn't -- is not entering into an arms-length
22 negotiation with the defendant or with the permittee to
23 enter into that Compliance Plan. It's statutorily
24 required .
25 There's no damages action. Civil penalties
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
34
1 is the remedy for violation . The state does not need to
2 prove tort causes of action elements , bad faith, fraud.
3 The elements are set forth in Section 7.102 of the Water
4 Code. And it's not strict joint and several liability .
5 I don't know if he said that.
6 It is his individual actions , whether they
7 amount to violations of the law, and the evidence is
8 clear that they do. He participated in, directed , and
9 with knowledge assented to those violations .
10 With respect to the affirmative defenses ,
11 we've addressed those in the response brief.
12 And with respect to force majeure , which
13 was just added in their most recent answer filed a week
14 ago, it's irrelevant . It's inapplicable . Look at
15 Section 11 of the Compliance Plan, or Section 12 of --
16 Section 13 of the Compliance Plan.
17 It specifically speaks to force majeure ,
18 and it's just not relevant here. It's a red herring .
19 Even if it was applicable , he never filed any kind of
20 paperwork to that effect to raise that as an issue.
21 With respect to the consultant hired, they
22 were hired after the fact. And as admitted in his
23 deposition , the facility is in complete noncompliance as
24 of September 19th, 2014, and honestly to this day, we
25 could seek additional 151 additional days of penalty if
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
35
1 Your Honor so chose to add those on.
2 That brings us up to the last point. I
3 don't know if you wanted to address objections to those
4 affidavits now.
5 THE COURT: I'll carry those with it under
6 advisement .
7 MR. PRITZLAFF : Okay. We have two proposed
8 orders. One for the objections and one for the --
9 THE COURT: Okay.
10 MR. LAPEZE: Your Honor, we have an order
11 as well. May I approach ?
12 THE COURT: Yes.
13 MR. PRITZLAFF : Unless you have any further
14 questions , Your Honor.
15 THE COURT: I don't. Are there any
16 deadlines coming up?
17 MR. PRITZLAFF : Oh, Malone Services . May I
18 make one more point?
19 THE COURT: Yes, sir.
20 MR. PRITZLAFF : On Malone Services , he is
21 correct , Malone Services is the key case. The statutory
22 provision there is very similar to here. Any person who
23 violates a provision of a permit, and I've highlighted
24 that for you. The same definition of person as applies
25 here.
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
36
1 THE COURT: Okay.
2 MR. PRITZLAFF : And in the Court's own
3 words, when a corporate officer who participate s in or
4 directs the commission of a tort may be held personally
5 liable.
6 And it's equating the statutory violation
7 to the tort case law because this was a unique case at
8 the time. Liability is based on the agent's own actions ,
9 not his status as an agent. It cites federal court case
10 law regarding personal participation which has been
11 adopted .
12 THE COURT: Thank you, sir. Okay, you-all
13 are excused . I'll send a letter ruling.
14 (Hearing concluded .)
15
16
17
18
19
20
21
22
23
24
25
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
37
1 REPORTER 'S CERTIFICATE
2 THE STATE OF TEXAS )
3 COUNTY OF TRAVIS )
4 I, Patricia A. Day, Official Court Reporter for
5 the 98th Judicial District Court of Travis County, Texas,
6 do hereby certify the foregoing contains a true and
7 correct transcription of all portions of evidence and
8 other proceedings requested by counsel for the parties to
9 be included in this volume of the Reporter 's Record, in
10 the above-styled and numbered cause, all of which
11 occurred in open court or in chambers and were reported
12 by me.
13 I further certify that the Reporter 's Record
14 truly and correctly reflects the exhibits , if any,
15 admitted by the respective parties .
16 WITNESS MY OFFICIAL HAND this the 10th day of
17 March, 2015.
18 _/s/ Patricia A. Day
Patricia A. Day, CSR, RPR, RMR
19 Official Court Reporter
98th Judicial District Court
20 P.O. Box 1748, Austin, Texas 78767
(512) 854-9629
21 Certification No. 967
Date of Expiration of Current
22 Certification : 12/31/16
23
24
25
PATRICIA A. DAY, CSR, RPR, RMR
(512) 854-9629
EXHIBIT H
EXHIBIT
A
EXHIBIT I
EXHIBIT
A
614
615
616
617
618
619
EXHIBIT J
10:00:48 03-09-2015 1/1
5128547018
98TH DISTRICT COURT
RHONDA HURLEY KELLY DAVIS
Judge HEMAN MARION SWEA IT Court Clerk
(512) 854-9384 TRAVIS COUNTY COURTHOUSE (512) 854-5887
P. O. BOX 1748
MICHELLE ROCHE AUSTIN, TEXAS 78767 PATTY DAY
Staff Attorney FAX (512) 854-9338 Official Court Reporter
(512) 854-7839 (512) 854-9629
michelle.roche@traviscountytx.gov
DORINA COCKMAN March 9, 2015
Court Operations Officer
(512) 854-9384
Craig J. Pritzlaff Keith W. Lapeze
ASSISTANT ATTORNEY GENERAL Taylor 1. Shipman
Environmental Protection Division LAPEZE & JOHNS, PLLC
P.O. Box 12548, MC-066 60 I Sawyer Street, Suite 650
Austin, Texas 78711-2548 Houston, Texas 77077
Via Facsimile: (512) 320-0911 Via Facsimile: (713) 739-1015
Stephen A. Doggett
ATTORNEY AT LA W
201 South 11 th Street
Richmond, Texas 77469
Via Facsimile: (281) 342-8458
Re: Cause No. D-I-GV-06-000627; State of Texas v. Bernard Morello; in the 353rd Judicial
District Court, Travis County, Texas
Dear Counsel:
The State of Texas' Motion for Summary Judgment came on for hearing on February 19,2015.
Having considered the motion, response, summary judgment evidence and arguments of counsel, the
court grants the motion. The Court sustains the State's objections to the affidavits of Mr. Heslep and
Mr. Crouch.
Counsel should prepare an appropriate order, circulate to opposing counsel for approval as to
form and submit to the court for signature.
RHONDAHU EY
Judge, 98[h District Court
Travis County, Texas
EXHIBIT
cc: Velva 1. Price, District Clerk
J
EXHIBIT K
EXHIBIT
K