In a recent opinion, the Indiana Court of Appeals held that adjacent property owners could intervene in the proceedings concerning funds for remediation of off-site contamination because of their “immediate and direct interest” in Moran Electronic Service, Inc. and Threaded Rod Company, Inc. v. Commissioner, Indiana Department of Environmental Management, City of Indianapolis, Ertel Manufacturing Corp., No. 49A02-1305-MI-432 (April 21, 2014).

Ertel Manufacturing Corporation (Ertel), Moran Electric Service, Inc. (Moran Electric) and Threaded Rod Company, Inc. (Threaded Rod) are former or current property owners of adjacent properties in Indianapolis, Indiana. The properties are contaminated and IDEM has demanded that the properties be remediated. In 2011, in response to two different civil actions, Ertel, the City of Indianapolis, the Indiana Department of Environmental Management (IDEM) and various insurance companies entered into an Administrative Agreed Order and a Settlement and Release Agreement. As part of the agreements, the insurers paid $1,000,000 to IDEM for the past costs and future costs associated with the remediation of the property, including the “off-site” areas of contamination. Of the $1,000,000 paid to IDEM, $140,000 was allocated to reimburse IDEM for past costs and $860,000 was placed in an escrow account for IDEM’s estimated future costs to bring the area into “No Further Action” status. A No Further Action letter would be issued to Ertel when the remedial goals of the Administrative Agreed Order and Settlement and Release Agreement were met.

In 2012, IDEM issued a No Further Action letter regarding the Ertel site. At that time, $846,000 of the original $860,000 for future costs remained in the escrow account. In January 2013, Moran Electric filed a petition with the Indiana Office of Environmental Adjudication (OEA) seeking administrative review of the No Further Action letter issued to Ertel. Moran Electric argued that the $846,000 left in the escrow account should be preserved and used for the cleanup of the adjacent properties that were impacted by the Ertel contamination. Specifically, Moran Electric argued that “IDEM disregarded off-site migration of the contaminants that had occurred and was continuing to occur” by issuing the No Further Action letter. Threaded Rod filed a petition to intervene in Moran Electric’s objection of the issuance of the No Further Action letter.

In 2013, Threaded Rod filed a petition to intervene in the civil action between IDEM and Ertel. Moran Electric filed a separate petition to intervene but joined in Threaded Rod’s other motions. Threaded Rod argued that the Ertel site contamination had migrated off-site to Threaded Rod’s property and that the money in escrow was for the future costs of remediation for the other sites impacted by the Ertel site contamination. The trial court held that Moran Electric and Threaded Rod could not intervene because the trial court lacked subject matter jurisdiction because the issuance of the No Further Action letter review rested with the administrative process under the Administrative Orders and Procedures Act. The trial court also ordered IDEM to release the money from the escrow account to the City of Indianapolis. Moran Electric and Threaded Rod appealed the trial court’s decision.

The Court of Appeals summarized the issue as “whether the trial court properly ordered the remaining $846,000 in funds distributed to the City, which is dependent on whether IDEM properly issued a [No Further Action] Letter regarding the Ertel property.” The Court of Appeals held that IDEM’s action in issuing the No Further Action letter constituted an agency action that should have been presented to the OEA for review. Pursuant to the doctrine of primary jurisdiction; however, and because the issue of the release of the escrow funds, the Court of Appeals found that the trial court should maintain jurisdiction over entire case until OEA makes a final determination of Moran Electric and Threaded Rods petitions concerning the issuance of the No Further Action letter.

Additionally, the Court of Appeals held that Moran Electric and Threaded Rod had the right to intervene in the proceedings concerning the release of the escrow funds because they met the three-part test to intervene. The Court of Appeals reasoned that Moran Electric and Threaded Rod satisfied the three-part test to intervene because they had an “immediate and direct interest in the proceedings,” the distribution of the remaining funds would impede the protection of their properties, and because their representation by the existing parties in the proceeding was inadequate.

The Court of Appeals stayed the trial court’s decision concerning the disbursement of the escrow funds until the OEA made a final determination. Additionally, the trial court’s decision was reversed and remanded to allow Moran Electric and Threaded Rod to intervene in the proceedings.