Waste Works lawsuit for dumb-dumbs: or a busy citizens guide to the local waste war
It appeared to be a trash match made in heaven...
In December 2008, as the Rivanna Solid Waste Authority, formed in 1990 to manage the disposal of Charlottesville and Albemarle trash, began seriously struggling financially to fulfill its duties and promote recycling in our area, dumpster king Peter Van der Linde opened an $11 million state-of-the-art Materials Recovery Facility [MRF] now capable of recycling both construction/demolition debris and household trash.
Problem solved, right? With the RSWA's expertise, and Van der Linde's new facility, surely we could create one of the greenest waste disposal and recycling models in the State.
If only that were so.
Instead of working together, the two trash titans have been locked in a legal battle that has cost hundreds of thousands of dollars in legal fees and brought the community no closer to solving its waste disposal and recycling woes. As the two sides careen toward a jury trial this summer, the Hook felt it was time to distill some of what we’ve learned about the complicated lawsuit over the last year. Consider this latest offering a busy citizen's guide to better understanding the lawsuit. It might also give you some good talking points at cocktail parties! Enjoy!
In December 2007, the RSWA filed its lawsuit against Van der Linde after determining that “in excess of a million dollars” in fees had not been paid to the RSWA for city and county trash the hauler had disposed of at an RSWA-sponsored BFI transfer station in Zion Crossroads. Under an agreement between BFI and the RSWA, BFI scale attendants were supposed to ask drivers the origin of their loads to determine if they should be charged an RSWA “service contribution fee” for in-district waste.
According to RSWA director Tom Frederick, between September 2006 and August 2007, no in-district waste was reported by BFI as coming from Van der Linde. Overall, said Frederick, between November 2005 and December 2008, BFI reported that Van der Linde brought 69,500 tons (18,000 loads) of out-of-district trash across their scales, compared to only a few thousand tons of in-district trash.
“This case is about right and wrong,” Frederick wrote in an October 2009 memo defending the lawsuit. “Mr. Van der Linde knew the process of collecting the information.”
The RSWA’s theory is that Van der Linde had his drivers lie about the origins of the trash to avoid the fee, which is it sued him under provisions of the RICO act. But the RSWA also believes Van der Linde’s guilty even if it isn’t true that he had his drivers lie because he knew he had to pay the fee and didn’t. It’s what the RSWA’s lawsuit refers to as “lies of omission.”
Oddly enough, and this is an important point to remember, no one has disputed what the RSWA has tried so hard to prove–- that Van der Linde’s drivers brought thousands of tons of in-district trash to the BFI transfer station between 2005 and 2008 that was not accessed an RSWA service fee when it passed over BFI scales.
Whether you like the fee system or not, Van der Linde ended up not paying the RSWA fees he should have. So why doesn't Van der Linde just pay up? As Councilor David Brown said recently, “Figure out how much trash. Have him pay it, and let’s be done.”
If only it were that simple.
Once Upon a Time”Š
In 1998, the RSWA had to stop burying household trash at the Ivy landfill. After 30 years, the last household waste “cell” was full. The Authority continued to bury construction and demolition debris, but following a $3 million lawsuit filed by folks in Ivy alleging the aging landfill was polluting their water supply, public pressure to close the landfill mounted. Authority officials, under then-director Arthur Petrini, tried to dismiss the lawsuit, claiming the landfill was not a threat to the local water supply, but those threats were later substantiated. The landfill’s infamous “paint pits” were found to have contaminated ground water. In 2001, by order of the Virginia Department of Environmental Quality, the last waste cell at the Ivy Landfill was closed.
As a result, the RSWA lost its main source of income: the tipping fees charged for landfilling trash.
In addition, it was discovered in 2005 that 47 million gallons of contaminated liquid were trapped underground, which would leave the RSWA responsible for administering a 30-year “corrective action plan” to clean up the mess. So far, that plan has cost the City, County, and UVA (they agreed to share responsibility for the mess) over $5 million, and will cost another $12 million over the next ten years.
Now, all the RSWA had to do was figure out a way to dispose of area waste without the old landfill income. Piece of cake!
Waste War Fun Fact: After the Ivy Landfill closed, the RSWA appears to have had trouble finding a permanent director. Arthur Petrini left in 2001 and was replaced by interim director Cole Hendrix, who was replaced by permanent director Larry Tropea, who lasted just 18 months. It wasn’t until May 2004 that the RSWA found its current director, Tom Frederick, who replaced interim director Lonnie Wood, the RWSA’s current director of finance.
The Big Haulers take over
In 1997, before the last trash bag was buried, the RSWA contracted with two big haulers, Waste Management and BFI. Waste Management would haul trash collected at the Ivy landfill site–- which would be re-named the Ivy Materials Utilization Center and be converted into a transfer station–- and take it to one of their landfills in Virginia. BFI would accept area trash at its transfer station in Zion Crossroads just off 250 East, which, as the fates would determine, was just yards away from where Peter Van der Linde would one day build his Materials Recovery Facility, and haul it to a landfill near Richmond.
Okay, waste disposal problem solved. But what about generating some income?
The RSWA decided on a fee system. In addition to paying a per-ton tipping fee at the two transfer stations, which would cover what Waste Management and BFI charged, private haulers and the City of Charlottesville (which offers its residents trash pick-up) would be charged an RSWA “service contribution fee,” which was basically a tax on each ton of local area trash brought to the two transfer stations. However, under the RSWA’s agreement with Waste Management and BFI, the two big haulers would be exempt from paying the fee. For, as Frederick would explain to the RSWA Board in 2007, Waste Management and BFI “wanted advantages” for their services.
Waste War Fun Fact: BFI, the big hauler who originally owned the Zion Crossroads transfer station, was acquired by Allied Waste and Allied Waste was later acquired by Republic Services. BFI and Allied Waste trucks can still be seen around town hauling waste, but it is all owned now by Republic Services, who must now defend itself in the current lawsuit. So, we’ll use the term “BFI/Allied/Republic” to identify the company through time, and because those involved in the story often use different company names.
City refuses to pay
Van der Linde wasn't the first to complain about unfairness in the new fee system, or to fight the RSWA over it. That would be the City of Charlottesville. Under protest, the city refused to pay the fee starting it 2001, claiming it was unfair because UVA and county residents who contracted with the two big haulers were exempt. They also said it was unfair to smaller, private haulers, who had to pay the fee when their larger competitors did not. The city racked up $2 million in unpaid fees until an agreement was hammered out in 2007, whereby the city would be exempt from the fee by contracting with either Waste Management or BFI/Allied/Republic, and pay a percentage, along with the county, of the cost of collecting area waste based on some bizarre population formula in the Agreement.
The city would also fork over the $2 million, let the RSWA keep $750,000 it gave them over the disputed period to keep them afloat, and the RSWA would forgive $1 million in penalties the city accrued for not paying.
“Customers of Allied Waste don’t pay a service contribution fee, and we won’t either,” then Mayor David Brown proudly told the Daily Progress. “That’s what we’ve been wanting.”
Waste War Fun Fact: BFI/Allied/Republic takes Charlottesville’s curbside recyclables and transfers them to a MRF in Chester, Virginia. Today, despite the fact that Van der Linde’s MRF is just yards away, the city still pays BFI/Allied/Republic to haul its curbside recyclables nearly 90 miles away.
In return, the RSWA promised to come up with a plan to support itself by June 2010. Oddly enough, the support agreement would seem to have been an acknowledgment of the faulty fee system, but the RSWA continued to keep it in place. Or so they thought.
BFI fails to collect fees
About a year after Frederick took charge, it was discovered that the fee system was not being correctly implemented at the BFI/Allied Waste transfer station. In 2005, the RSWA discovered that BFI/Allied/Republic managers at the Zion Crossroads transfer station were “completely unaware” of their legal obligation to collect an RSWA service contribution fee. The RSWA threatened legal action if BFI/Allied/Republic did not start collecting the RSWA fee, which involved asking each driver that crossed their scales the origin of their trash. [We’ll call it the “magic question” because it was the only way to determine if the hauler should be charged the RSWA fee.] If the trash came from within the city or county, the hauler was charged the RSWA tipping fee rate, which was $62 per ton in 2005, and which included the service fee. If the trash came from outside the RSWA service area, then BFI/Allied/Republic could charge their own tipping fee of $46 per ton.
Why doesn’t BFI/Allied/Republic owe the RSWA money?
Good question. While Brown and Frederick have expressed concern about the “million dollars” that Van der Linde allegedly owes the RSWA, no elected officials have expressed concern about the loss of RSWA fees caused by the above oversight. It’s unclear why or how long managers at the BFI transfer station had not been collecting the RSWA fee [the Hook has requested detailed information about this period from the RSWA, but the RSWA had not released that information by press time], but the reaction of area haulers when BFI/Allied/Republic suddenly began implementing the fee system in the Fall of 2005 was one of complete surprise, indicating that they had never before paid such a fee.
Haulers freak out
At the time, BFI/Allied/Republic’s tipping fee was $46 per ton, what most private haulers had been used to paying, but when the $16 service fee was added for waste originating in the city or county, it went up to $62 literally overnight.
Robert Bobbit of Culpeper-based Efficient Roll-Off & Recycling wrote to BFI/Allied/Republic, unaware that the RSWA was behind the fee increase, saying he found it "totally outrageous" that he was sent an invoice with a "30 percent higher per ton rate" and was expected to pay it without notice.
Later, when Bobbit learned about the RSWA fee arrangement, he wrote the RSWA to complain about the BFI/Allied/Republic exemption.
Bobbit was issued an apology for the lack of notice, as well as a $5,208.29 credit, but such gestures would not be lavished upon Van der Linde, who made no secret of his antipathy for deal.
Waste War Fun Fact: The city recently signed a five-year contract with Waste Management to haul household waste. Under the terms of the contract, all waste must be taken to RSWA-sponsored transfer stations, leaving city residents without the option of having their household trash recycled at Van der Linde’s facility.
Van de Linde sues first
Like Bobbit, Van der Linde was shocked by the sudden implementation of the fee system, and like the City of Charlottesville, felt it was unfair that BFI/Allied/Republic and Waste Management should be exempt from paying. To save his business, he said, Van der Linde would file a lawsuit against the RSWA, claiming the fee system was unconstitutional.
In 2006, Van der Linde filed his lawsuit in federal court, not because he thought the service contribution fee was unfair (he has said he would have been fine with it if everyone had to pay it), but because he thought that BFI/Allied/Republic and Waste Management’s exemption was unfair. In November 2007, on appeal, a three judge panel dismissed Van der Linde’s case because they felt he should have “challenged Authority policy through the political process, not by filing a lawsuit in federal court.” The decision, said the court’s opinion, was “unaffected” by the Authority’s decision to implement a waste collection plan that “incidentally might result in the monopolization of the waste collection market.”
Waste War Fun Fact: According to Van der Linde, the “documents” that the RSWA and Councilor Brown have said he destroyed were available pieces of paper in the trucks of his drivers on which they wrote down the location of containers they were dispatched to pick up. Historically, Van der Linde claims, these “documents” were always discarded. The RSWA, relying on testimony from ex-Van der Linde driver Richard Wade Kendrick (see Kendrick Fun Fact), claims these were official business documents, called “Field Tickets,” that Van der Linde destroyed because they recorded where every trash load he picked up came from. RSWA lawyer Jonathan Blank has called these Field Tickets the "Rosetta Stone" that will prove how much local trash Van der Linde disposed of without being charged.
Magic question vanishes?
Van der Linde chose to “eat” the $16 fee rather than pass it on to his customers, hoping to keep them, and figuring this would be a “slower way to bleed.” But it was only a matter of time before he went under. This is when Van der Linde claims that BFI/Allied/Republic stopped asking his drivers where their trash was coming from.
“It saved me,” said Van der Linde, giving the RSWA its proof that he knew he wasn’t being charged the fee, “because when they didn’t ask, I was charged the old Allied rate.”
Why would BFI/Allied/Republic stop asking the magic question?
Republic Services representatives have refused to comment on the lawsuit, but Van der Linde’s theory is that they eventually felt constricted by the RSWA agreement. While it initially allowed them to undercut the competition, it made it difficult to raise their tipping fee rates. Since the RSWA controlled the pricing of tipping fees for area waste, if BFI/Allied/Republic wanted to raise its $46 per ton tipping fee to, say, $52 per ton, $6 of the $16 per ton RSWA service fee would now come out of their own pocket.
However, the RSWA did not control how much BFI/Allied/Republic could charge out-of-area customers. While Van der Linde might have felt “saved” only having to pay $46 per ton in 2006 when he alleges BFI/Allied/Republic scale attendants didn’t ask the magic question, that quickly changed as BFI/Allied/Republic added various fees and raised its tipping fee rates for out of area trash beginning in 2006.
Initially, BFI/Allied/Republic announced it was adding a $5 per load environmental fee and a $3 per ton fuel recovery fee, bringing the tipping fee to $54 per ton for out-of-area trash. Still, that was less than the RSWA charged. But BFI/Allied/Republic later raised the tipping fee to $58 per ton, which, if you add the two fees, comes to $66 per ton. Now, since the RSWA tipping fee remained at $62, Van der Linde was paying more when BFI/Allied/Republic didn’t ask the magic question. And, of course, BFI/Allied/Republic was making more. In April 2007, BFI/Allied/Republic raised rates yet again, to $69 per ton if one include the two fees.
Frederick has confirmed that BFI/Allied/Republic raised tipping fees between July 2006 and November 2008, but has insisted that the rate was never greater than the $62 per ton fee for RSWA service area trash. However, Van der Linde says that Frederick was talking about the base rate increase, which did not include the additional environmental and fuel charge fees for out-of-area trash.
Others have suggested there was simply a “don’t ask, don’t tell” situation going on between private haulers like Van der Linde and BFI/Allied/Republic because nobody much liked the RSWA’s fee system. As one hauler put it, "In exchange for that money, they [RSWA] do nothing. They don't even touch the garbage. I really have a problem with that."
RSWA searches for a smoking gun
Meanwhile, as Van der Linde continued to play dumb at the BFI/Allied/Republic scale station [He claims he chose not to say anything even after he was paying more to dispose of out of area trash because he didn’t want to get in the middle of something going on between the RSWA and BFI/Allied/Republic. However, he did hire a private investigator to make hours of audio/visual recordings showing BFI/Allied/Republic scale attendants not asking the magic question, suspecting it would be an issue later], RSWA officials began to notice sharps drops in Van der Linde’s in-district tonnages and began to suspect foul play.
Oddly enough, in the RSWA's lawsuit complaint, a BFI/Allied/Republic manager is quoted as saying that "several haulers" were being dishonest about declaring the true origin of their trash loads, though Van der Linde would be the only hauler who would get sued.
Waste War Fun Fact: "People were trying to use our agency to irritate Mr. Van der Linde," said Valley Department of Environmental Quality Waste Manager Graham Simmerman, who was in charge of issuing Van der Linde's DEQ permits for both his construction and demolition and household trash recycling operations. According to Simmerman, numerous anonymous complaints were made about Van der Linde’s facility, starting from the day he broke ground, all of them unfounded. Simmerman called the anonymous complaints “extremely frustrating” because his agency had to diligently investigate each one.
Simmerman, who calls Van der Linde's facility "the cleanest in the region," said he suspected the calls were from players in the trash business because Van der Linde's facility is "upsetting the status quo" by diverting waste "away from the RSWA and BFI."
“RSWA is not obligated to try to prove if the driver's information is correct, but the Authority is obligated to obtain that information.”
Speaking to the RSWA Board in December 2007, that’s how Frederick characterized the nature of the magic question and how the fee system worked. At the same time, however, he had already set out to prove that the information provided by Van der Linde’s drivers was incorrect.
“We are not convinced his [Van der Linde’s] business is actually moving to other counties,” RSWA director Frederick wrote in a March 2006 email to board member Mark Graham. “But I need more evidence before making this an issue. Can you help?”
Indeed, Graham had County building inspectors keep track of Van der Linde’s distinctive orange containers. Frederick also had his recycling manager, Bruce Edmonds, search for and photograph dozens of Van der Linde containers at sites in the city. Frederick and finance director Lonnie Wood also sent emails to Board members Judy Mueller and Mike Gaffney asking for help.
Waste War Fun Fact: Former Van der Linde driver and convicted felon Richard Wade Kendrick, who claims that Van der Linde told he and other drivers to lie, and who is serving as the RSWA main witness in its RICO case against Van der Linde–- indeed, it was Kendrick’s claim of a conspiracy that prompted the RSWA to amend the lawsuit under RICO, and it was Kendrick who brought the RSWA the “document” that they later accused Van der Linde of destroying–- was recently convicted of attempting to extort $90,000 from Van der Linde. Kendrick sent Van der Linde a letter in April demanding the money in cash for “legal fees” or else he would go to the RSWA and tell them that the drivers had been told to lie. Kendrick also suggested that he had been offered much more money from the RSWA. At his trial, Kendrick continued to insist that Van der Linde’s drivers were told to lie, but he could find no other Van der Linde drivers to corroborate his story. It took the jury 55 minutes to convict Kendrick, who was given a year in jail.
Van der Linde, of course, finds this amusing. “Did they think this was my plan for defrauding the RSWA? Saying all my loads came from Fluvanna or Nelson County or somewhere else for months on end with all my glow-in-the-dark orange containers all over the city and county?”
The RSWA, however, did not question the wisdom of the crime, preoccupied as they were with cracking the case. “Are you getting any data from the County that can be used to find any ’smoking guns’?” Frederick asked Wood in an email.
Eventually, Wood did supply what the RSWA believes to be a smoking gun. As mentioned, relying on records from BFI/Allied/Republic, the RSWA determined that Van der Linde’s drivers brought thousands of tons of in-district trash to the BFI/Allied/Republic transfer station that was not assessed an RSWA fee. Remember, despite being the biggest dumpster rental business in the area, between September 2006 and August 2007, no in-district waste was reported by BFI/Allied/Republic as coming from Van der Linde.
But the question is...
Waste War Fun Fact: How much is the lawsuit for? The RSWA lawsuit was originally for $3.5 million, but when it was amended under the RICO Act, two of the counts under the statute allow for the tripling of the damage award, which means it could cost Van der Linde over $20 million if he’s found guilty.
Whose fault is it that the fees weren't collected? And who owes who?
"He [Van der Linde] said to Mr. McNair in the Hook article that he was “saved” when BFI stopped asking the question," continued Frederick in his October 2009 memo. " Even if you believe that BFI stopped asking the question, what was he “saved” from? He was “saved” from paying a fee he knew he had to pay.”
However, according to Van der Linde, it’s actually the RSWA who owes him and other haulers money.
Councilor Brown has said that Van der Linde was “confronted with not having paid his bill,” but that’s not technically true. First of all, the RSWA has never handed Van der Linde a bill because they have no way of figuring out what he owes. In fact, both Brown and RSWA lawyer Kurt Krueger have asked Van der Linde to figure that out himself and pay what he owes.
Waste War Fun Fact: Okay, for argument's sake, lets imagine a private business, say a MRF like Van der Linde’s, demanding that a customer figure out how much trash they brought in over the last two years and pay what they owe because the MRF operator doesn’t know the amount of the trash the customer brought in. Would that even be legal?
Second of all, Van der Linde did pay his bills–to BFI/Allied/Republic. And according to Van der Linde, many of those bills he paid were more than they should have been because BFI/Allied/Republic failed to obtain the correct trash origin information from his drivers, as was their obligation under the agreement with RSWA, consistently charging him a more expensive out-of-district tipping fee after their rates went up.
Theoretically then, BFI/Allied/Republic, acting as the RSWA’s agent, walked away with what should have been RSWA fees by not keeping track of Van der Linde’s trash. And who knows how many times other haulers weren’t asked the magic question?
Waste War Fun Fact: BFI/Allied/Republic was added as a third party defendant by Van der Linde’s lawyers as a way of “covering their bases,” says Van der Linde lawyer Lamar Garren, should the jury decide that Van der Linde owes the RSWA money. “If what the RSWA says is proved to be true, that Mr. Van der Linde owes them money, than it would be clear that BFI owes Mr. Van der Linde money.” That’s because BFI profited from receiving in-area waste that was recorded as coming from out of area–- especially when out of area rates became higher that RSWA service area rates–- which BFI did not have to report to the RSWA.
Basically, Van der Linde claims it was never his responsibility to monitor or enforce the RSWA’s fee system. His responsibility, he claims, was to answer truthfully about the origins of his trash when asked, and to pay the bills that were presented to him. RSWA does not dispute the fact that Van der Linde paid his RSWA service fees when BFI/Allied/Republic correctly recorded his loads as coming from the RSWA service area. Assuming he’s not found guilty of ordering his drivers to lie, Van der Linde appears to have played by the rules, while BFI/Allied/Republic did not during the time they were not collecting RSWA service contribution fees before the Fall of 2005, and alleged after that date as well, something they were contractually required to do.
And that's another thing to consider–as with a sales tax, it's the merchant's responsibility to add it to the bill. If they fail to, is the customer obligated to pay it after he has paid the bill?
“BFI’s accounting system is the culprit here,” says Van der Linde’s lawyer, Lamar Garren, “not Mr. Van der Linde.”
Actually, to bring our story full circle, some might say the real culprit was the closing of the Ivy Landfill and the flawed fee system that the RSWA had to put in place to support itself. So far, no one has disagreed with that.
But then, of course, there's the question that Frederick has posed to those who have supported Van der Linde.
"Is it okay for a business to not pay a lawful fee and let the resulting shortfall of revenues fall upon the tax payer?"
Unless an agreement is reached before June, it'll be a jury answering that question.
The Hook's waste story archives
December 19, 2009–Free Peter: Fenwick rallies support for recycler
December 17, 2009–Waste Authority says: Lawsuit ends when Van der Linde pays
December 10, 2009–Jury verdict: RSWA’s star witness convicted of attempted extortion
December 3, 2009–COVER- Tipping Point: Is Van der Linde laying waste to Waste Authority?
October 24, 2009–Trash talking: RSWA breaks silence on lawsuit
October 20, 2009–Fenwick defends Van der Linde
October 10, 2009–Blow to the flow? RSWA, Boyd distancing from monopoly talk
October 8, 2009–Council Candidates condemn RSWA lawsuit
October 1, 2009–Lawyers, Trash, and Money
September 28, 2009–Flow blow: Wasteworks may seek trash monopoly
August 17, 2009–Trash talkin': Waste war could decide the future
August 17, 2009–Don Van der Linde? Wasteworks whacks recycler with RICO
May 29, 2009–Recycle this! Van der Linde steps up tone
May 19, 2009–Dire words for Waste Authority
April 2, 2009–What a Waste: Is the trash Authority going obsolete?
February 14, 2008–Coming soon! van der Linde's amazing recycling machine