UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

____________________________________

)

UNITED STATES OF AMERICA, )

)

Plaintiff, )

) No. 04 C 4138

v. )

) Judge George M. Marovich

) 

CAPITAL TAX CORPORATION, )

STEPHEN J. PEDI, and )

WILLIAM LERCH, )

)

Defendants. )

 )

____________________________________)

)

CAPITAL TAX CORPORATION, )

)

Cross-Plaintiff, )

) 

v. )

) 

) 

STEPHEN J. PEDI, and )

WILLIAM LERCH, )

)

Cross-Defendants. )

____________________________________)

MEMORANDUM OPINION AND ORDER

Plaintiff the United States of America (“United States” or the “government”) filed suit

against defendants Capital Tax Corporation (“Capital Tax”), Stephen J. Pedi (“Pedi”) and

William Lerch (“Lerch”) asserting claims arising under the Comprehensive Environmental

Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-9675. Before the

Court is the government’s motion to approve a consent decree between the government and

defendant Pedi. For the reasons set forth below, the Court approves the consent decree.
-2-

I. Background

The Court has already found each defendant liable to the government on Count I,

pursuant to CERCLA §§ 107(a) and 113(g)(2). The Court has also granted the government

summary judgment with respect to damages as to defendants Lerch and Capital Tax. The Court

found Capital Tax and Lerch each to be jointly and severally liable to the government in the

amount of $2,681,337.79. The Court found Capital Tax to be liable to the government for civil

fines in the amount of $230,250.00 and found Lerch to be liable to the government for civil fines

in the amount of $220,500.00 and civil penalties in the amount of $23,100.00.

In the consent decree, in order to resolve the claims against him, Pedi agrees to pay the

government $330,000.00 by December 31, 2007. Pedi also agrees to pay interest on that amount

from thirty days after the date of entry of the consent decree until the date of payment. The

government agrees to release a lien it holds over Pedi’s property. The government also agrees

not to sue Pedi under §§ 106(a) or 107(a) of CERCLA with respect to the removal action at the

Site at issue in this case. The government reserves its right to pursue Pedi for, among other

things, criminal liability, liability for future releases at the Site and liability for releases outside

of the Site. The consent decree also gives the government certain access rights to portions of the

Site owned or controlled by Pedi.

II. Discussion
-3-

Before signing a consent decree, the Court must satisfy itself that the decree is

reasonable. Donovan v. Robbins, 752 F.2d 1170, 1177 (7th Cir. 1985). In Donovan, the Seventh

Circuit explained:

A federal judge has the full powers of an equity judge. So if third parties

complain to him that the decree will be inequitable because it will harm them

unjustly, he cannot just brush their complaints aside. Even if no third party

complains, the judge has to consider whether the decree he is being asked to sign

is lawful and reasonable, as every judicial act must be. 

* * *

Although a judge thus must, before signing an equity decree that either affects

third parties or imposes continuing duties on him, satisfy himself that the decree

is reasonable (‘fair, reasonable and adequate,’ in the usual formulation, but we

think ‘reasonable’ sums it up fairly and adequately) how deeply the judge must

inquire, what factors he must take into account, and what weight he should give

the settling parties’ desires will vary with the circumstances. The flexible

character of the decision makes generalization difficult; but it is safe to suggest

that the limitations of judicial competence and the desirability of encouraging outof-court settlements in order to lighten the judicial caseload create a presumption

in favor of approving the settlement.

Donovan, 752 F.2d at 1177 (internal citations omitted).

The proposed consent decree in this case requires Pedi to pay the EPA $330,000.00 plus

interest. By agreeing to pay $330,000.00 plus interest, Pedi will avoid the fate of the other two

defendants, each of whom has been found jointly and severally liable to the government in the

amount of $2,681,337.79. Pedi also avoids any additional civil fines and punitive damages. 

The amount for which the government is willing to settle with Pedi is based on his ability

to pay. Pedi is 74 years old and works as a roofing contractor. The government put forth

evidence that Pedi needs the income from his work as a roofing contractor to pay his living

expenses. 

Pedi’s only assets are four pieces of property, which the government believes he

fraudulently transferred. Accordingly, they have included those assets in determining his ability
-4-

to pay. The government put forth evidence that two of the pieces of property could not be sold

to raise settlement proceeds. First, Pedi has little equity in his home due to a mortgage and

necessary repairs. Second, the government concluded that Pedi could not sell a second property

because it is the site of his business, and he needs to operate his business in order to pay his

living expenses. The government put forth evidence that Pedi is expecting a distribution

payment of $250,000.00 with respect to a third property. Finally, the government concluded that

Pedi could sell or mortgage a fourth property, which has a market value of approximately

$95,000.00.

The Court concludes, based on Pedi’s ability to pay, that the consent decree is

reasonable. It requires Pedi to pay $330,000.00 plus interest, which is approximately the same

amount as his net assets. Given that Pedi cannot pay more, the Court deems the consent decree

to be reasonable.

Capital Tax’s objections

Capital Tax objects to the consent decree. Essentially, it argues that the consent decree is

unreasonable because it is inconsistent with CERCLA’s goal of making polluters pay the cost of

cleaning up their pollution. Capital Tax argues that because, in its view, Pedi is a more culpable

polluter than it, Pedi should be made to pay a larger share of the response costs. 

To be sure, the consent decree affects how much of the government’s response costs

Capital Tax will pay relative to Pedi. Absent the consent decree, Capital Tax is jointly and

severally liable for response costs in the amount of $2,681,337.79, and, if it actually pays that

amount, Capital Tax has a right of contribution against Pedi and Lerch. See 42 U.S.C. §

9613(f)(a). If the consent decree is approved, the amount for which Capital Tax is jointly and
-5-

severally liable would be reduced to $2,351,337.79, but Capital Tax would also lose its ability to

seek contribution from Pedi. See 42 U.S.C. § 9613(f)(2) (“A person who has resolved its

liability to the United States or a State in an administrative or judicially approved settlement

shall not be liable for claims for contribution regarding matters addressed in the settlement.”). 

The consent decree would not affect Capital Tax’s ability to seek contribution from Lerch.

But while it is true that the consent decree affects Capital Tax, the Court disagrees that it

affects Capital Tax in a way that is inconsistent with CERCLA. It is the very language of

CERCLA that resulted in Capital Tax’s being held jointly and severally liable, and it is the very

language of CERCLA which limits Capital Tax’s ability to seek contribution from Pedi if this

Court approves the consent decree. So the Court fails to see how approving the consent decree

could be inconsistent with CERCLA. See United States v. Southeastern Penn. Trans. Auth., 235

F.3d 817, 825 (3rd Cir. 2000) (“This consent decree does set a floor for American Premier’s

liability while setting a ceiling for the rail companies’ liability. That is part of the scheme

enacted by Congress, and the district court did not abuse its discretion by rejecting the argument

that this result made the decree unfair.”); see also United States v. DiBiase, 45 F.3d 541, 546 (1st

Cir. 1995) (“the statutory scheme contemplates that those who are slow to settle ought to bear

the risk of paying more if they are eventually found liable. Congress apparently thought that

paradigm fair, and so do we.”) (internal citations omitted). 

Furthermore, it is not clear that the consent decree affects Capital Tax in a negative way. 

When the Court considered whether to award punitive damages against Capital Tax in this case,

the Court took into account how the consent decree would affect Capital Tax’s ability to seek

contribution against Pedi. Because of that effect, the Court declined to award punitive damages,
-6-

an award which would have at least doubled the amount for which Capital Tax was jointly and

severally liable. In addition, even if Capital Tax were awarded an amount higher than

$330,000.00 against Pedi on its contribution claim, there is no evidence that Capital Tax would

be able to recover more. The government has shown that Pedi cannot pay more than

$330,000.00 plus interest. 

This brings us to Capital Tax’s other objection to the consent decree, which is that it is

not convinced that Pedi’s ability to pay is limited to $330,000.00 plus interest. But Capital Tax

has put forth no evidence that he is able to pay more. Nor has Capital Tax established that the

government should be prohibited from introducing its evidence. Capital Tax has not, for

example, shown that it requested the documents during discovery and that the government or

Pedi failed to supply the documents to Capital Tax. Nor has Capital Tax shown that the

government has any incentive to accept from Pedi anything less than what he is able to pay. 

Finally, the Court is not aware of any reason why the government would be less than diligent in

ascertaining Pedi’s ability to pay.

The Court concludes that the consent decree between Pedi and the government is

reasonable.
-7-

IV. Conclusion

For the reasons set forth above, the Court approves the consent decree. The Court also

reduces from $2,681,337.79 to 2,351,337.79 the amount of the government’s response costs for

which Capital Tax and Lerch are jointly and severally liable. 

ENTER:

 

George M. Marovich

United States District Judge

DATED: September 18, 2007