White Lion Holdings, LLC v. State

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.)

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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.

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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

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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.

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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

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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.

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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.

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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.

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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'

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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

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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.

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(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.

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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.

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Bernard Morello - 9/19/2014

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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?

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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.

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Bernard Morello - 9/19/2014

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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.

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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

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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

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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?

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Bernard Morello - 9/19/2014

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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

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Bernard Morello - 9/19/2014

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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?

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Bernard Morello - 9/19/2014

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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.

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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?

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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?

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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.)

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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

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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

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1 Number 4 .

~

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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

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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.

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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

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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

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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.

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,,~~~~-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

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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

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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.

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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.

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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.

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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?

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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.

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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?

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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,

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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

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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

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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,

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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?

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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?

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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;

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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?

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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

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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

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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

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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?

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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

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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

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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

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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

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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

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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.

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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,

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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

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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

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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.

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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?

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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

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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.

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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

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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.

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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

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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?

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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.

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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 si

This text is long and has been trimmed here. Open the source document for the complete record.