THE ILLINOIS POLLUTION CONTROLlLnJii'''n.,-"

T-TOWN DRIVE THRU, INC.,

Petitioner,

ILLINOIS ENVIRONMENTAL

PROTECTION AGENCY,

Respondent.

)

PCB No. 07-085

)

(LUST Appeal)

)

Pursuant to 35

ILL. ADM. CODE

§§

101.500(d) and 101.516(a), petitioner

Town Drive Thru, Inc. ("Petitioner") submits this response to the cross-motion for

summary judgment contained

in the

Response to Petitioner's Motion for Summary

Judgment and Respondent's Cross-Motion for Summary Judgment

("Cross-

Motion") filed by the Illinois Environmental Protection Agency ("Agency").

The Cross-Motion relies on the same record as summarized in

Petitioner's

Motion for Summary Judgment

filed September 12, 2007 ("Petitioner's Motion").

However, the Cross-Motion makes several factual misstatements

in characterizing

that record. For example, at 2 it states that Petitioner's consultant, United Science

Industries ("USI"), "sought reimbursement

of $8,109.02 for analyses performed by

Tek-Lab." That is not so. USI charged Petitioner $8,109.02 for a bundle of

services,

of which the analyses performed by Tek-Lab were only a part, and the

remainder

of which were performed by US!.

See

Petitioner's Motion at 12-16.

Similarly, the Cross-Motion, again at

2, claims "there was no invoice in the

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Electronic Filing, Received, Clerk's Office, October 12, 2007

application ... documenting that these costs had been billed to T-Town". Again,

this

is incorrect. As shown in Petitioner's Motion at 2-3, Petitioner submitted

two

invoices which it had received from USI for this work.

Next the Cross-Motion (at

3) misrepresents the rulemaking record when it

contends

Mr. Clay warned that the Agency would still need subcontractor invoices.

When one consults the transcript cited, one learns that the comments cited arose

from a question raised

by one Brad Schumacher regarding a proposal that all

contractors prove they had paid subcontractors

(Transcript

Proceedings Held

August

2004,

R04-22A (Aug. 20, 2004) at 87 (Exhibit P attached hereto). Mr.

Clay agreed to respond in the afternoon.

Id.

at 88. After lunch, he offered his

answer, saying proof of the amount paid

to the subcontractor was necessary for

proof of the contractor's handling charge

(id.

at 104-05). After Mr. Schumacher

asked a follow-up question

(id.

at 105-06), Mr. Clay went on to concede, on the

page immediately prior to the excerpts the Agency offers, that "to be honest, one

of the reasons this provision

is in there is because we received complaints from

subcontractors that said I'm not getting paid"

(id.

at 107). Although the Agency

thus saw requiring subcontractor information to

be a way of assuring that

subcontractors were being paid,

on First Notice the Board limited its approval of

required subcontractor data to situations where the contractor was seeking a

handling charge

on the subcontractor charges

(see

Exhibit

attached hereto, at

72). And

35 ILL. ADM. CODE

732.601 (b)(1 0), as enacted, provided that a

complete application for payment required proof of subcontractor costs

only

when

handling charges were requested.

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Electronic Filing, Received, Clerk's Office, October 12, 2007

The Agency told the Board, in the very transcript at issue, that "[w]ith the

new streamlining process" many documents "will no longer be submitted to the

Agency", specifically citing subcontractor invoices. Exhibit N to Petitioner's Motion

at 45. Moreover, it specifically cited "the difficulty of enumerating every cost that

may be associated" with a task area

in proposing broad, lump-sum amounts which

would "streamline" the process. Exhibit G to Petitioner's Motion at

30. Yet now it

suggests that every such sub-cost must be itemized, proven and added up (Cross-

Motion at 3-4). The quotation from

Mr. Clay is ambiguous at best, unintelligible at

worst, and the example

he cited ($19 per foot for drilling done by a subcontractor)

is one where all the services in the Subpart H price are performed by the

subcontractor

(see

35 ILL. ADM. CODE

732.820(a)).

In such a case, the

contractor

is entitled to handling charges, not to compensation for its own

additional services which are a part of the bundled price. The attempt to apply

Mr.

Clay's unclear and self-contradictory statements

to the current situation makes no

sense in light of the Agency's many clear statements to the contrary, set forth in

Petitioner's Motion at 10-11, 17-19. Proof of a subcontractor's charges is relevant

only

in situations where the contractor is seeking a handling charge on those

charges - which

is not the situation here. And merely citing language about

"mandatory documents" (Cross-Motion at

3) does not turn what clearly were not

regarded

as "mandatory documents" into mandatory documents.

Because the services provided by Teklab are only a part of those covered

E.g.,

"that's what we would expect

from the subcontractor.

It would be

from the consuftanf'

(emphasis added).

-3-

Electronic Filing, Received, Clerk's Office, October 12, 2007

by the Subpart H lump sum, the Agency's demand for documentation of Teklab's

charges and its attempt to limit reimbursement to those amounts are improper.

The Agency told the Board

in the rulemaking that a reimbursement application

properly could include merely "an invoice with a minimum amount of information to

document the costs requested for reimbursement (e.g., the task performed, the

amount charged for the task, and the date the task was conducted)."

Comments

of the Illinois Environmental Protection Agency,

R04-22A (Sep. 23, 2005) at 19

(Exhibit

to Petitioner's Motion). Petitioner clearly provided

more than

that here.

See Petitioner's Motion at 2-4.

In this regard, Rezmar Corp. v. IEPA, PCB 02-91 (Apr. 17, 2003), and

Malkey v. IEPA, PCB 92-104 (Mar. 11, 1993), cited

the Cross-Motion, are

inapposite because both arose before the Agency and Board adopted the bundle-

of-services, lump-sum approach. Case decisions cannot be divorced from the

regulations being applied; if the Agency wanted to maintain the approach applied

under those cases it ought not to have proposed the "streamlining" lump-sum

approach. Similarly, the invocation of "generally accepted accounting practices"

(Cross-Motion at 4) cannot be relied upon to require documentation of matters

which the regulations,

as a matter of law, have made irrelevant. If IRS regulations

and

an employer policy permit reimbursement for use of one's car at the rate of 30

cents a mile, "generally accepted accounting practices" do not call for the

accountant to demand that the employee produce evidence

he has been making

timely payments

on the car, changing the oil, and paying a garage for tune-ups.

Petitioner seeks only the amount that has been determined to be

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Electronic Filing, Received, Clerk's Office, October 12, 2007

reasonable by both the Board and the Agency in passing Subpart H.

See

Petitioner's Motion at 7-8, 11, 18-19. The Agency repeatedly stated that if a

budget had been approved for such amounts, they would be paid upon submission

of a simple invoice for same.

Id.

at 9-11,18-19. The lump-sum bundling principle

was expressly applied to analysis costs where some of the services were

performed by the contractor and others by

an outside lab.

Id.

at 14-15. Petitioner

submits that the Agency is estopped to repeal in this underhanded fashion

the

regulations which it insisted upon so vigorously and so long

in 2004-06.

Conclusion

For the foregoing reasons and for those stated in Petitioner's Motion,

petitioner T-Town Drive Thru, Inc. prays that the Board deny the Agency's Cross-

Motion and grant the Petitioner's Motion for summary judgment.

October

2007

T-TOWN DRIVE THRU, INC.

John

1. Hund!ey

Mandy

L. Combs

THE SHARP LAW FIRM, P.C.

P.O. Box 906 - 1115 Harrison

Mt. Vernon, IL 62864

618-242-0246

Counsel for Petitioner T- Town Drive Thru, Inc.

The plethora of cases where the Agency has raised this issue (with an aggregate value of

$145,000 and rising) demonstrates that

in fact the Agency's error here is not an isolated

occurrence and that a repeal of the rule

is in fact being applied. See

Petitioner's Motion to

Consolidate

filed herein Sept. 12,2007.

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Electronic Filing, Received, Clerk's Office, October 12, 2007

I, the undersigned attorney at law, hereby certify that

served the foregoing

document upon

all persons entitled to same by causing copies to be deposited in

the United States Post Officemailboxat14thandMainStreets.Mt.Vernon.IL.

before 6:00 p.m. this date, in envelopes with proper first-class postage affixed,

addressed

as follows:

Dorothy

M. Gunn, Clerk

Illinois Pollution Control Board

James

Thompson Center

100 West Randolph Street

Suite 11-500

Chicago,

IL 60601

James

G. Richardson, Esq.

Illinois Environmental Protection Agency

1021 N. Grand Ave. East

Springfield,

IL 62702

Hon. Carol Webb

Illinois Pollution Control Board

1021 N. Grand Ave. East

P.O. Box 19274

Springfield,

IL 62794

October 1 2007

John

Hundley

Mandy

L. Combs

THE SHARP LAW FIRM, P.C.

P.O. Box 906 - 1115 Harrison

Mt. Vernon, IL 62864

618-242-0246

Counsel for Petitioner T- Town Drive Thru, Inc.

MandyCombs\USI\T-Town/SummJ udg Resp.doc

-6-

Electronic Filing, Received, Clerk's Office, October 12, 2007

for my handling for my time to go get those bids for

the scope of work? Because I'm a person who is

using a subcontractor with the indirect financial

interest.

I mean, how do I get paid?

(By Mr. Clay) In that case, I think you

would be entitled to that lump sum as if the owner

and operator were paying for the subcontractor. And

then, you know, that's sort of a business decision.

That's a decision you're

lllC>hLll.Y, that you want, in

your case, your company to do the work as opposed to

the low bidder.

MS. DAVIS:

Okay.

HEARING OFFICER TIPSORD:

Go ahead.

MR. SCHUMACHER:

Brad Schumacher.

QUESTIONS BY MR. SCHUMACHER:

I didn't get an answer.

If I sent in my

reimbursement claim, I am not going to have any

waivers, cancelled checks, affidavit, because I

haven't paid my contractor yet.

So are you going to

deny my claim? Or how does that work? Obviously,

we're going to pay our subcontractor, but what if my

terms are 90 days, I submit a claim, and you're

going to not process the claim because I don't have

the waivers? Or backups that I'm paying the

Keefe Reporting Company

(618) 244-0190

Electronic Filing, Received, Clerk's Office, October 12, 2007

subcontractor?

MR. CLAY:

Can I respond to that this

afternoon?

HEARING OFFICER TIPSORD:

Sure.

MR. CLAY: Let us discuss it.

MR. SCHUMACHER:

Thanks.

HEARING OFFICER TIPSORD:

Mr. Truesdale?

QUESTIONS BY MR. TRUESDALE:

One more question. It's related to what

Mr. Goodwin talked about earlier and about the TACO.

You mentioned before, Doug, that you

don't expect that there will be deed restrictions or

other environmental land use controls required for

sites that use the Tier 2 objectives. And

Mr. Walton referred to the PNA background analysis

for metropolitan areas, for instance.

What if an owner/operator did soil

removal at a site after issuance of an SRN based on

background PNA data, and that soil was subsequently

moved to a site outside of the metropolitan area, or

in a case where a Tier 2 inhalation objective was

calculated based on site-specific moisture content

and that soil was subsequently excavated and spreads

to the soil where the physical characteristics

Keefe Reporting Company

(618) 244-0190

Electronic Filing, Received, Clerk's Office, October 12, 2007

much they're going to force sites within that

community to clean up relative to groundwater.

If a community does not want to have that

ordinance, and that is certainly our -- that is

certainly their option. Many communities have

seen that there was a benefit to having

projects move forward, be cleaned up, you know,

when they have that groundwater ordinance in

place.

HEARING OFFICER TIPSORD:

I don't think

we're going to get done with the Agency.

would hope we'd get done before lunch, but it's

now 12:15. We have been at it for about 2

hours and 15 minutes.

So I think we need to go

ahead and take a lunch break. We'll break one

hour. We'll come back promptly in one hour and

continue with the Agency at that time. Thanks.

(Lunch break.)

HEARING OFFICER TIPSORD:

Let's go ahead

and go back on the record.

Mr. Clay has indicated that they have a

response to, I think, Mr. Schumacher's

question.

Go ahead, Mr. Clay.

104

MR. CLAY:

Yeah.

As we stated, there's

Keefe Reporting Company

(618) 244-0190

Electronic Filing, Received, Clerk's Office, October 12, 2007

canceled checks, a waiver or affidavit would be

acceptable to payment, but I mean, it's part of

the handling charge. In reading the definition

of handling charge, it's for interest. And so

it's presumed or expected that the prime would

pay their subcontractors, and reimbursement and

then get reimbursed from the Agency.

So I mean, that's, you know, like I said,

part of the -- in the definition of handling

charges interest.

MR. SCHUMACHER:

Can I?

HEARING OFFICER TIPSORD:

Sure.

Do you

have a follow-up? Sure.

QUESTIONS BY MR. SCHUMACHER:

105

Even, say, we paid our subcontractors

within 30 days.

When I do the cleanup, I want to

immediately submit the remediation and all the

reimbursement.

I don't want to wait 30 days to get

a waiver of lien, you know, if I'm paying on that.

Is there any way that I can go ahead and submit the

claim, and is there any way that I -- say the

comptroller is going to give us a check within, you

know, we get the letter in a month and a half or two

months, and then I have that time frame that before

Keefe Reporting Company

(618) 244-0190

Electronic Filing, Received, Clerk's Office, October 12, 2007

I get paid, before the comptroller actually issues a

check. Could I submit the waiver of liens?

Because, say, you know, if it takes a hundred days

to get paid, and I pay my subcontractor in 30 days

or 60 days, and I can get the waiver of liens, I

have that time frame to get that waiver of liens to

the EPA or to somebody before the check is actually

106

cut. That will at least show that, hey, I did pay

all my subcontractor. Here's a waiver of lien.

Because what I don't want to

30 days, I don't

want to wait 30 more days to get in the line for

reimbursement just for a waiver of lien.

Is there any way that we can submit

them prior to getting a check? Like, would you

normally do for a normal contract -- you submit your

waiver of lien before the company pays you?

Right. And I mean, basically you need to

wait until you get a waiver of lien before you

submit the bills. And I understand what you're

saying.

But you've got to remember from the

Agency's standpoint, we're dealing with thousands of

these things.

So you're talking another review now

or at least a portion of a review to now you

Keefe Reporting Company

(618) 244-0190

Electronic Filing, Received, Clerk's Office, October 12, 2007

submitted your waiver of liens, which you already

reviewed the package and said, you know, you haven't

paid your subcontractors, at least you haven't shown

us that you paid your subcontractors.

And I mean, to be honest, one of the

reasons this provision is in there is because we

received complaints from subcontractors that said

I'm not getting paid. And we said, well, let me

look that up. And we looked it up and said, well,

we paid the owner/operators three months ago. They

are not paying the subcontractor.

107

That's not really the Agency's

responsibility? It should be the contractors, it

should be the consultant, it should be a contractor

thing. You know, the subcontractor is not getting

paid, the general, and you know, take legal action

against that person.

It's not --

No, I disagree.

I mean, we are to

reimburse corrective action costs.

If you haven't

paid your sub, then you haven't incurred that cost.

I mean, that's the way I look at it.

HEARING OFFICER TIPSORD:

Okay.

QUESTIONS BY MR. COOK:

Keefe Reporting Company

(618) 244-0190

Electronic Filing, Received, Clerk's Office, October 12, 2007

14. Should the Proposed Rule Require Proof of Payment to a Sub-Contractor Before

Allowing

Reimbursement for Handling Charges (Section 732.601(b)(10)1734.605(b)(10»?

Section 732.601 (b)(1

0)1734.605(b)(1

0) as proposed requires that the application for

reimbursement include proof

of payment to a subcontractor when handling charges are being

sought. The participants question the Agency's proposal. CW

M noted that requiring proof of

payment results in higher handling costs for the contractor and the higher costs will not be

reimbursable. Tr.4 at 36-37. PIPE asserted that by definition handling charges are due to the

contractor whether or not the subcontractor is paid by the contractor. Exh. 91 at 17.

Furthermore, PIPE noted that even

if the subcontractor has agreed to await payment until the

Agency reimburses the owner or operator, the prime contractor has incurred the costs

insurance and administration of the subcontract.

Id.

Because "of an alarming number of phone calls" to the Agency from subcontractors

claiming they have not been paid, the Agency added Section 732.601 (b)(1 0), according to Mr.

Oakley. Exh. 7 at

2. Mr. Clay pointed out that cancelled checks are not the only mechanism for

providing proof

of payment to a subcontractor, lien waivers or affidavits from the subcontractor

would be acceptable. Exh.

88 at 18. Mr. Clay testified that such proof is necessary to show that

the subcontractor was actually paid and the owner or operator

is therefore entitled to

reimbursement for handling charges.

!d.

The existing language in Section 732.606(11) includes as an ineligible cost "Handling

charges for subcontractor's costs when the contractor has not paid the subcontractor." The

language proposed by the Agency

is asking for proof that the contractor has paid the

subcontractor before allowing reimbursement. The existing language provides that handling

charges are only eligible reimbursement costs

if the contractor

paid

the subcontractor. To the

Board, it would appear that the Agency

is merely requiring proof of a prerequisite which already

exists. However,

to allay the concerns of the participants, the Board will propose language in

Sections 732.601 (b)(1 0) and 734.605(b)(1 0) which reflects the Agency's position that cancelled

checks are not the only mechanism for providing proof

of payment to a subcontractor; lien

waivers or affidavits from the subcontractor would

be acceptable. Sections 732.601 (b)(1 0) and

734.605(b)(10) will read:

Proof

of payment of subcontractor costs for which handling charges are requested.

Proof

of payment may include cancelled checks, lien waivers, or affidavits from

the subcontractor.

The Board invites additional comment on this language.

15. Should the Proposed Rule Delineate "Atypical" Situations in Section

732.8551734.855?

The Agency's original proposal at Section 732.855/734.855 included a provision that

allowed an owner or operator to seek payment for costs which exceeded the maximum rates in

Subpart H. The proposal allows for reimbursement costs which exceed the maximum if unusual

or extraordinary circumstances occur. The language as originally proposed in Section

732.855/734.855 has been moved to Section 732.860/734.860.

Electronic Filing, Received, Clerk's Office, October 12, 2007